<PAGE>
As filed with the Securities and Exchange
Commission on October 30, 2000
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. 15 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940
Amendment No. 13 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)
Copies of communications to:
Thomas G. MacDonald
Seward & Kissel LLP
One Battery Park Plaza
New York, New York 10004
It is proposed that this filing will become effective (check
appropriate box)
<PAGE>
immediately upon filing pursuant to paragraph (b)
X on November 1, 2000 pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)(1)
on (date) pursuant to paragraph (a)(1)
75 days after filing pursuant to paragraph (a)(2)
on (date) pursuant to paragraph (a)(2) of rule 485.
If appropriate, check the following box:
_____ This post-effective amendment designates a new effective
date for a previously filed post-effective amendment.
<PAGE>
The Alliance Stock Funds
The Alliance Stock Funds provide a broad selection of investment alternatives to
investors seeking capital growth or high total return.
Prospectus and Application
November 1, 2000
Domestic Stock Funds
> Alliance Premier Growth Fund
> Alliance Health Care Fund
> Alliance Growth Fund
> Alliance Technology Fund
> Alliance Quasar Fund
> The Alliance Fund
> Alliance Disciplined Value Fund
Total Return Funds
> Alliance Growth and Income Fund
> Alliance Balanced Shares
> Alliance Utility Income Fund
> Alliance Real Estate Investment Fund
Global Stock Funds
> Alliance New Europe Fund
> Alliance Worldwide Privatization Fund
> Alliance International Premier Growth Fund
> Alliance Global Small Cap Fund
> Alliance International Fund
> Alliance Greater China '97 Fund
> Alliance All-Asia Investment Fund
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation to
the contrary is a criminal offense.
[LOGO]Alliance Capital(R)
<PAGE>
Investment Products Offered
---------------------------
> Are Not FDIC Insured
> May Lose Value
> Are Not Bank Guaranteed
---------------------------
2
<PAGE>
TABLE OF CONTENTS
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Page
RISK/RETURN SUMMARY..................................................... 3
Domestic Stock Funds.................................................... 4
Total Return Funds...................................................... 11
Global Stock Funds...................................................... 15
Summary of Principal Risks.............................................. 22
Principal Risks by Fund................................................. 23
FEES AND EXPENSES OF THE FUNDS.......................................... 24
GLOSSARY................................................................ 27
DESCRIPTION OF THE FUNDS................................................ 28
Investment Objectives and Principal Policies............................ 28
Description of Additional Investment Practices.......................... 42
Additional Risk Considerations.......................................... 49
MANAGEMENT OF THE FUNDS................................................. 52
PURCHASE AND SALE OF SHARES............................................. 56
How The Funds Value Their Shares........................................ 56
How To Buy Shares....................................................... 56
How to Exchange Shares.................................................. 56
How To Sell Shares...................................................... 56
DIVIDENDS, DISTRIBUTIONS AND TAXES...................................... 57
DISTRIBUTION ARRANGEMENTS............................................... 58
GENERAL INFORMATION..................................................... 59
FINANCIAL HIGHLIGHTS.................................................... 59
APPENDIX A--ADDITIONAL INFORMATION ABOUT
THE UNITED KINGDOM, JAPAN, AND GREATER CHINA COUNTRIES.................. 72
The Funds' investment adviser is Alliance Capital Management L.P., a global
investment manager providing diversified services to institutions and
individuals through a broad line of investments including more than 100 mutual
funds.
RISK/RETURN SUMMARY
The following is a summary of certain key information about the Alliance Stock
Funds. You will find additional information about each Fund, including a
detailed description of the risks of an investment in each Fund, after this
Summary.
The Risk/Return Summary describes the Funds' objectives, principal investment
strategies, principal risks and fees. Each Fund's Summary page includes a short
discussion of some of the principal risks of investing in that Fund. A further
discussion of these and other risks begins on page 22.
More detailed descriptions of the Funds, including the risks associated with
investing in the Funds, can be found further back in this Prospectus. Please be
sure to read this additional information BEFORE you invest. Each of the Funds
may at times use certain types of investment derivatives such as options,
futures, forwards and swaps. The use of these techniques involves special risks
that are discussed in this Prospectus.
The Risk/Return Summary includes a table for each Fund showing its average
annual returns and a bar chart showing its annual returns. The table and bar
chart provide an indication of the historical risk of an investment in each Fund
by showing:
o how the Fund's average annual returns for one, five, and 10 years (or over
the life of the Fund if the Fund is less than 10 years old) compare to
those of a broad based securities market index; and
o changes in the Fund's performance from year to year over 10 years (or over
the life of the Fund if the Fund is less than 10 years old).
A Fund's past performance, of course, does not necessarily indicate how it will
perform in the future. As with all investments, you may lose money by investing
in the Funds.
3
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DOMESTIC STOCK FUNDS
The Domestic Stock Funds offer investors seeking capital appreciation a range of
alternative approaches to investing primarily in U.S. equity markets.
Alliance Premier Growth Fund
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OBJECTIVE:
The Fund's investment objective is long-term growth of capital by investing
predominantly in equity securities of a limited number of large, carefully
selected, high-quality U.S. companies that are judged likely to achieve superior
earnings growth.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in equity securities of U.S. companies. Unlike most
equity funds, the Fund focuses on a relatively small number of intensively
researched companies. Alliance selects the Fund's investments from a research
universe of more than 500 companies that have strong management, superior
industry positions, excellent balance sheets and superior earnings growth
prospects.
Normally, the Fund invests in about 40-60 companies, with the 25 most highly
regarded of these companies usually constituting approximately 70% of the Fund's
net assets. During market declines, while adding to positions in favored stocks,
the Fund becomes somewhat more aggressive, gradually reducing the number of
companies represented in its portfolio. Conversely, in rising markets, while
reducing or eliminating fully valued positions, the Fund becomes somewhat more
conservative, gradually increasing the number of companies represented in its
portfolio. Through this approach, Alliance seeks to gain positive returns in
good markets while providing some measure of protection in poor markets. The
Fund also may invest up to 20% of its net assets in convertible securities.
Among the principal risks of investing in the Fund is market risk. Because the
Fund invests in a smaller number of securities than many other equity funds,
your investment has the risk that changes in the value of a single security may
have a more significant effect, either negative or positive, on the Fund's net
asset value. The Fund's investments in foreign securities have foreign risk and
currency risk.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
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Since
1 Year 5 Years Inception
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Class A 23.51% 34.86% 25.01%
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Class B 24.13% 35.13% 24.98%
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Class C 27.12% 35.13% 24.98%
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Russell 1000 Growth Index 33.16% 32.41% 23.43%
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Index returns and average annual total returns are for the periods ended
December 31, 1999. Average annual total returns reflect imposition of the
maximum front-end or contingent deferred sales charges as well as conversion of
Class B shares to Class A shares after the applicable period. Inception date of
Class A and Class B shares is 9/28/92. Since inception index returns are from
month-end of applicable class inception date. Performance information for
periods prior to the inception of Class C shares (5/3/93) is the performance of
the Fund's Class A shares adjusted to reflect the higher expense ratio of Class
C shares. The average annual total return for Class C shares since its actual
inception date was 26.61%. Index return for the comparable period was 25.06%.
BAR CHART
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The annual returns in the bar chart are for the Fund's Class A shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown. Through 9/30/00, the year to date unannualized return for the Class
A shares was -4.69%.
[The following was depicted as a bar chart in the printed material]
Calendar Year End
90 n/a
91 n/a
92 n/a
93 9.98
94 -5.80
95 46.87
96 24.14
97 32.67
98 49.31
99 28.98
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best Quarter was up 31.05%, 4th quarter, 1998; and Worst Quarter was down
-12.10%, 3rd quarter, 1998.
4
<PAGE>
Alliance Health Care Fund
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OBJECTIVE:
The Fund's investment objective is capital appreciation and, secondarily,
current income.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
Under normal circumstances, the Fund invests at least 65%, and normally
substantially all, of the value of its total assets in securities issued by
companies principally engaged in health care and health care-related industries
("Health Care Industries") (companies principally engaged in the discovery,
development, provision, production or distribution of products and services that
relate to the diagnosis, treatment and prevention of diseases or other medical
disorders). Although the payment of dividends will be a factor considered in the
selection of investments for the Fund, the Fund seeks primarily to take
advantage of capital appreciation opportunities identified by Alliance in
emerging technologies and services in Health Care Industries by investing in
companies which are expected to profit from the development of new products and
services for these industries. Under normal circumstances, the Fund invests
primarily in the equity securities of U.S. companies. The Fund may invest up to
40% of its total assets in foreign securities. The Fund may invest in new,
smaller or less-seasoned companies as well as in larger, established companies
in Health Care Industries.
Among the principal risks of investing in the Fund are market risk and
industry/sector risk. Unlike many other equity funds, the Fund invests in the
securities of companies principally engaged in Health Care Industries. As a
result, certain economic conditions and market changes that affect those
industries may have a more significant effect on the Fund's net asset value than
on the value of a more broadly diversified fund. For example, the Fund's share
price could be affected by changes in competition, legislation or government
regulation, government funding, product liability and other litigation, the
obsolescence or development of products, or other factors specific to the health
care and health sciences industries. The Fund's investments in foreign
securities have foreign risk and currency risk. The Fund's investment in small-
to mid-capitalization companies have capitalization risk. These investments may
be more volatile than investments in large-cap companies.
BAR CHART AND PERFORMANCE TABLE:
There is no bar chart or performance table for the Fund because it has not
completed a full calendar year of operations.
5
<PAGE>
Alliance Growth Fund
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OBJECTIVE:
The Fund's investment objective is long-term growth of capital. Current income
is incidental to the Fund's objective.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in equity securities of companies with favorable
earnings outlooks and whose long-term growth rates are expected to exceed that
of the U.S. economy over time. The Fund emphasizes investments in large- and
mid-cap companies. The Fund also may invest up to 25% of its total assets in
lower-rated, fixed-income securities and convertible bonds and generally up to
20% of its total assets in foreign securities.
Among the principal risks of investing in the Fund is market risk. Investments
in mid-cap companies may be more volatile than investments in large-cap
companies. To the extent the Fund invests in lower-rated, fixed-income
securities and convertible bonds, your investment may have interest rate or
credit risk. The Fund's investments in foreign securities have foreign risk and
currency risk.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
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1 Year 5 Years 10 Years
--------------------------------------------------------------------------------
Class A 20.24% 25.59% 21.26%
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Class B 20.71% 25.81% 19.11%
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Class C 23.72% 25.81% 20.60%
--------------------------------------------------------------------------------
S&P 500 Index 21.03% 28.54% 18.19%
--------------------------------------------------------------------------------
Index returns and average annual total returns are for the periods ended
December 31, 1999. Average annual total returns reflect imposition of the
maximum front-end or contingent deferred sales charges as well as conversion of
Class B shares to Class A shares after the applicable period.
Performance information for periods prior to the inception of Class A shares
(9/4/90) and Class C shares (8/2/93) is the performance of the Fund's Class B
shares adjusted, in the case of Class A shares, to reflect the lower expense
ratio of Class A shares. The average annual total returns for Class A and Class
C shares since their actual inception dates were 23.58% and 20.91%,
respectively. Index returns for the comparable periods (which date from
month-end following applicable Class inception date) were 21.34% and 22.48%,
respectively.
BAR CHART
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The annual returns in the bar chart are for the Fund's Class B shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown. Through 9/30/00, the year to date unannualized return for the Class
A shares was -6.24%
[The following was depicted as a bar chart in the printed material]
Calendar Year End
90 -7.96
91 62.39
92 9.81
93 28.21
94 -1.84
95 28.65
96 22.32
97 26.22
98 27.23
99 24.71
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best Quarter was up 29.47%, 1st quarter, 1991; and Worst Quarter was down
-20.45%, 3rd quarter, 1990.
6
<PAGE>
Alliance Technology Fund
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OBJECTIVE:
The Fund's investment objective is growth of capital. Current income is
incidental to the Fund's objective.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in securities of companies that use technology
extensively in the development of new or improved products or processes. Within
this framework, the Fund may invest in any company and industry and in any type
of security with potential for capital appreciation. It invests in well-known,
established companies or in new or unseasoned companies. The Fund also may
invest in debt securities and up to 25% of its total assets in foreign
securities.
Among the principal risks of investing in the Fund are market risk and
industry/sector risk. In addition, technology stocks, especially those of
smaller, less-seasoned companies, tend to be more volatile than the overall
stock market. To the extent the Fund invests in debt and foreign securities,
your investment has interest rate risk, credit risk, foreign risk and currency
risk.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
--------------------------------------------------------------------------------
1 Year 5 Years 10 Years
--------------------------------------------------------------------------------
Class A 64.47% 37.33% 29.42%
--------------------------------------------------------------------------------
Class B 66.56% 37.56% 29.48%
--------------------------------------------------------------------------------
Class C 69.53% 37.54% 29.31%
--------------------------------------------------------------------------------
S&P 500 Index 21.03% 28.54% 18.19%
--------------------------------------------------------------------------------
Index returns and average annual total returns are for the periods ended
December 31, 1999. Average annual total returns reflect imposition of the
maximum front-end or contingent deferred sales charges as well as conversion of
Class B shares to Class A shares after the applicable period.
Performance information for periods prior to the inception of Class B and Class
C shares (5/3/93) is the performance of the Fund's Class A shares adjusted to
reflect the higher expense ratio of Class B and Class C shares. The average
annual total returns for Class B and Class C shares since their actual inception
dates were 36.18% and 36.17%, respectively. Index return for the comparable
period (which date from month-end following applicable Class inception date) was
22.17%.
BAR CHART
--------------------------------------------------------------------------------
The annual returns in the bar chart are for the Fund's Class A shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown. Through 9/30/00, the year to date unannualized return for the Class
A shares was 3.81%.
[The following was depicted as a bar chart in the printed material]
Calendar Year End
90 -3.08
91 54.24
92 15.50
93 21.63
94 28.50
95 45.80
96 19.41
97 4.54
98 63.14
99 71.78
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best Quarter was up 44.57%, 4th quarter, 1999; and Worst Quarter was down
-33.21%, 3rd quarter, 1990.
7
<PAGE>
Alliance Quasar Fund
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OBJECTIVE:
The Fund's investment objective is growth of capital by pursuing aggressive
investment policies. Current income is incidental to the Fund's objective.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund generally invests in a widely diversified portfolio of equity
securities spread among many industries that offer the possibility of
above-average earnings growth. The Fund currently emphasizes investment in
small-cap companies. The Fund invests in well-known and established companies
and in new and unseasoned companies. The Fund can invest in the equity
securities of any company and industry and in any type of security with
potential for capital appreciation. When selecting securities, Alliance
considers the economic and political outlook, the values of specific securities
relative to other investments, trends in the determinants of corporate profits,
and management capabilities and practices. The Fund also may invest in
non-convertible bonds, preferred stocks, and foreign securities.
Among the principal risks of investing in the Fund is market risk. Investments
in smaller companies tend to be more volatile than investments in large-cap or
mid-cap companies. To the extent the Fund invests in non-convertible bonds,
preferred stocks, and foreign stocks, your investment has interest rate risk,
credit risk, foreign risk and currency risk.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
--------------------------------------------------------------------------------
1 Year 5 Years 10 Years
--------------------------------------------------------------------------------
Class A 8.16% 18.83% 10.43%
--------------------------------------------------------------------------------
Class B 8.04% 18.95% 10.30%
--------------------------------------------------------------------------------
Class C 11.08% 18.95% 10.14%
--------------------------------------------------------------------------------
Russell 2000 Growth Index 43.08% 18.99% 13.51%
--------------------------------------------------------------------------------
Index returns and average annual total returns are for the periods ended
December 31, 1999. Average annual total returns reflect imposition of the
maximum front-end or contingent deferred sales charge as well as conversion of
Class B shares to Class A shares after the applicable period.
Performance information for periods prior to the inception of Class B shares
(9/17/90) and Class C shares (5/3/93) is the performance of the Fund's Class A
shares adjusted to reflect the higher expense ratio of Class B and Class C
shares. The average annual total returns for Class B and Class C shares since
their actual inception dates were 13.60% and 15.37%, respectively. Index returns
for the comparable periods (which date from month-end following applicable Class
inception date) were 18.05% and 15.74%, respectively.
BAR CHART
--------------------------------------------------------------------------------
The annual returns in the bar chart are for the Fund's Class A shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown. Through 9/30/00, the year to date unannualized return for the Class
A shares was 8.92%.
[The following was depicted as a bar chart in the printed material]
Calendar Year End
90 -23.44
91 34.27
92 2.81
93 16.16
94 -7.27
95 47.64
96 32.62
97 17.24
98 -4.56
99 12.96
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best Quarter was up 23.10%, 1st quarter, 1991; and Worst Quarter was down
-28.46%, 3rd quarter, 1998.
8
<PAGE>
The Alliance Fund
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OBJECTIVE:
The Fund's investment objective is long-term growth of capital and income
primarily through investments in common stocks.
Principal Investment Strategies and risks:
The Fund normally invests substantially all of its assets in high-quality common
stocks that Alliance expects to increase in value. The Fund may invest in a
broad range of companies, from large to small, but tends to emphasize attractive
opportunities in mid-cap companies. While the Fund's diversified and
high-quality investments cannot prevent fluctuations in market values, they tend
to limit investment risk and contribute to achieving the Fund's objective. The
Fund also may invest in convertible securities, U.S. Government securities, and
foreign securities.
Among the principal risks of investing in the Fund is market risk. Investments
in mid-cap companies may be more volatile than investments in large-cap
companies. To the extent the Fund invests in convertible securities and U.S.
Government securities, your investment may have interest rate or credit risk.
The Fund's investments in foreign securities have foreign risk and currency
risk.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
--------------------------------------------------------------------------------
1 Year 5 Years 10 Years
--------------------------------------------------------------------------------
Class A 28.20% 21.87% 15.97%
--------------------------------------------------------------------------------
Class B 28.63% 21.91% 15.93%
--------------------------------------------------------------------------------
Class C 31.69% 21.87% 15.85%
--------------------------------------------------------------------------------
S&P Midcap 400 Index 14.72% 23.05% 17.32%
--------------------------------------------------------------------------------
Index returns and average annual total returns are for the periods ended
December 31, 1999. Average annual total returns reflect imposition of the
maximum front-end or contingent deferred sales charges as well as conversion of
Class B shares to Class A shares after the applicable period.
Performance information for periods prior to the inception of Class B shares
(3/4/91) and Class C shares (5/3/93) is the performance of the Fund's Class A
shares adjusted to reflect the higher expense ratio of Class B and Class C
shares. The average annual total returns for Class B and Class C shares since
their actual inception dates were 16.40% and 17.66%, respectively. Index returns
for the comparable periods (which date from month-end following applicable Class
inception date) were 17.93% and 17.82%, respectively.
BAR CHART
--------------------------------------------------------------------------------
The annual returns in the bar chart are for the Fund's Class A shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown. Through 9/30/00, the year to date unannualized return for the Class
A shares was -5.90%.
[The following was depicted as a bar chart in the printed material]
Calendar Year End
90 -4.36
91 33.91
92 14.70
93 14.26
94 -2.51
95 34.84
96 17.54
97 36.01
98 -2.72
99 33.90
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best Quarter was up 26.41%, 4th quarter, 1999; and Worst Quarter was down
-24.32%, 3rd quarter, 1998.
9
<PAGE>
Alliance Disciplined Value Fund
OBJECTIVE:
The Fund's investment objective is long-term growth of capital through the
application of a disciplined value-oriented investment process.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in the equity securities of U.S. companies that
Alliance believes are undervalued. Alliance believes that, over time, a
company's stock price will come to reflect its intrinsic economic value.
Alliance uses a disciplined investment process to evaluate the companies in
Alliance's extensive research universe and to identify the stocks of companies
that offer the best combination of value and potential for price appreciation.
The Fund may invest in companies of any size and in any industry. At different
times, the Fund's investments may be in companies with significantly different
market capitalizations and with a greater emphasis on particular industries. The
Fund expects under normal circumstances to invest primarily in equity securities
of about 75 U.S. companies. The Fund may also invest up to 15% of its total
assets in foreign securities.
Among the principal risks of investing in the Fund is market risk. Depending on
the Fund's investments at a particular time, the Fund may also have
industry/sector risk. In addition, because the Fund may invest in small- to
mid-capitalization companies, it has capitalization risk. These investments may
be more volatile than investments in large-cap companies. To the extent the Fund
invests in foreign securities, it may have foreign risk and currency risk.
BAR CHART AND PERFORMANCE TABLE:
There is no bar chart or performance table for the Fund because it has not
completed a full calendar year of operations.
10
<PAGE>
TOTAL RETURN FUNDS
The Total Return Funds offer investors seeking both growth of capital and
current income a range of investment alternatives.
Alliance Growth and Income Fund
--------------------------------------------------------------------------------
OBJECTIVE:
The Fund's investment objective is appreciation through investments primarily in
dividend-paying common stocks of good quality, although the Fund also may invest
in fixed-income and convertible securities.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in dividend-paying common stocks of large,
well-established, "blue-chip" companies. The Fund also may invest in
fixed-income and convertible securities and in securities of foreign issuers.
Among the principal risks of investing in the Fund are market risk, interest
rate risk and credit risk. The Fund's investments in foreign securities have
foreign risk and currency risk.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
--------------------------------------------------------------------------------
1 Year 5 Years 10 Years
--------------------------------------------------------------------------------
Class A 6.16% 23.23% 14.56%
--------------------------------------------------------------------------------
Class B 6.20% 23.23% 14.35%
--------------------------------------------------------------------------------
Class C 8.86% 23.22% 14.20%
--------------------------------------------------------------------------------
Russell 1000 Value Index 7.35% 23.07% 15.60%
--------------------------------------------------------------------------------
Index returns and average annual total returns are for the periods ended
December 31, 1999. Average annual total returns reflect imposition of the
maximum front-end or contingent deferred sales charges as well as conversion of
Class B shares to Class A shares after the applicable period.
Performance information for periods prior to the inception of Class B shares
(2/8/91) and Class C shares (5/3/93) is the performance of the Fund's Class A
shares adjusted to reflect the higher expense ratio of Class B and Class C
shares. The average annual total returns for Class B and Class C shares since
their actual inception dates were 15.19% and 17.38%, respectively. Index returns
for the comparable periods (which date from month-end following applicable Class
inception date) were 17.50% and 17.90%, respectively.
BAR CHART
--------------------------------------------------------------------------------
The annual returns in the bar chart are for the Fund's Class A shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown. Through 9/30/00, the year to date unannualized return for the Class
A shares was 11.72%.
[The following was depicted as a bar chart in the printed material]
Calendar Year End
90 -1.69
91 27.08
92 4.52
93 9.96
94 -4.20
95 37.86
96 24.13
97 28.86
98 21.23
99 10.78
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best Quarter was up 23.25%, 4th quarter, 1998; and Worst Quarter was down
-13.82%, 3rd quarter, 1998.
11
<PAGE>
Alliance Balanced Shares
--------------------------------------------------------------------------------
OBJECTIVE:
The Fund's investment objective is high return through a combination of current
income and capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests in a diversified portfolio of equity and fixed-income
securities. The percentage of the Fund's assets invested in each type of
security will vary, but the Fund will not purchase a security if, as a result,
less than 25% of the Fund's total assets will be invested in fixed-income senior
securities. The Fund invests in common and preferred stocks, U.S. Government and
agency securities, bonds and senior debt securities. The Fund's investments in
each type of security depends on current economic conditions and market
outlooks. The Fund also may invest up to 15% of its total assets in foreign
equity and fixed-income securities.
Among the principal risks of investing in the Fund are market risk, interest
rate risk, allocation risk and credit risk. To the extent the Fund invests in
foreign securities, your investment has foreign risk and currency risk.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
--------------------------------------------------------------------------------
1 Year 5 Years 10 Years
--------------------------------------------------------------------------------
Class A 0.45% 15.41% 10.31%
--------------------------------------------------------------------------------
Class B 0.26% 15.51% 10.18%
--------------------------------------------------------------------------------
Class C 3.18% 15.55% 10.03%
--------------------------------------------------------------------------------
S&P 500 Index 21.03% 28.54% 18.19%
--------------------------------------------------------------------------------
Index returns and average annual total returns are for the periods ended
December 31, 1999. Average annual total returns reflect imposition of the
maximum front-end or contingent deferred sales charges as well as conversion of
Class B shares to Class A shares after the applicable period.
Performance information for periods prior to the inception of Class B shares
(2/4/91) and Class C shares (5/3/93) is the performance of the Fund's Class A
shares adjusted to reflect the higher expense ratio of Class B and Class C
shares. The average annual total returns for Class B and Class C shares since
their actual inception dates were 11.06% and 11.42%, respectively. Index returns
for the comparable periods (which date from month-end following applicable Class
inception date) were 19.73% and 22.17%, respectively.
BAR CHART
--------------------------------------------------------------------------------
The annual returns in the bar chart are for the Fund's Class A shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown. Through 9/30/00, the year to date unannualized return for the Class
A shares was 9.91%.
[The following was depicted as a bar chart in the printed material]
Calendar Year End
90 -2.20
91 20.47
92 6.81
93 9.93
94 -5.79
95 26.64
96 9.36
97 27.13
98 15.75
99 4.90
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best Quarter was up 13.45%, 4th quarter, 1998; and Worst Quarter was down
-8.21%, 3rd quarter, 1990.
12
<PAGE>
Alliance Utility Income Fund
--------------------------------------------------------------------------------
OBJECTIVE:
The Fund's investment objective is current income and capital appreciation by
investing primarily in equity and fixed-income securities of companies in the
utilities industry.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in income-producing equity securities. The Fund
invests in securities of utility companies in the electric, telecommunications,
gas, and water utility industries. The Fund may invest in both U.S. and foreign
utility companies, although the Fund will limit its investments in issuers in
any one foreign country to no more than 15% of its total assets. The Fund may
maintain up to 35% of its net assets in lower-rated securities and up to 30% of
its net assets in convertible securities.
Among the principal risks of investing in the Fund are market risk, interest
rate risk and credit risk. Because the Fund invests a substantial portion of its
assets in companies in a specific industry, it has industry/sector risk. This is
the risk that factors affecting utility companies will have a significant effect
on the value of the Fund's investments. To the extent the Fund invests in
lower-rated securities, your investment is subject to more credit risk than a
fund that invests in higher-rated securities.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
--------------------------------------------------------------------------------
Since
1 Year 5 Years Inception
--------------------------------------------------------------------------------
Class A 12.97% 19.56% 14.16%
--------------------------------------------------------------------------------
Class B 13.23% 19.76% 14.14%
--------------------------------------------------------------------------------
Class C 16.20% 19.78% 14.22%
--------------------------------------------------------------------------------
NYSE Utilities Index 14.62% 20.84% 12.90%
--------------------------------------------------------------------------------
Index returns and average annual total returns are for the periods ended
December 31, 1999. Average annual total returns reflect imposition of the
maximum front-end or contingent deferred sales charges as well as conversion of
Class B shares to Class A shares after the applicable period. Inception dates
are 10/18/93 for Class A shares and Class B shares and 10/27/93 for Class C
shares. Since inception index return is from 10/31/93.
BAR CHART
--------------------------------------------------------------------------------
The annual returns in the bar chart are for the Fund's Class A shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown. Through 9/30/00, the year to date unannualized return for the Class
A shares was 14.10%.
[The following was depicted as a bar chart in the printed material]
Calendar Year End
90 n/a
91 n/a
92 n/a
93 n/a
94 -10.94
95 22.93
96 8.28
97 30.65
98 24.38
99 18.01
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best Quarter was up 15.65%, 4th quarter, 1997; and Worst Quarter was down
-7.50%, 1st quarter, 1994.
13
<PAGE>
Alliance Real Estate Investment Fund
--------------------------------------------------------------------------------
OBJECTIVE:
The Fund's investment objective is total return from long-term growth of capital
and income principally through investing in equity securities of companies that
are primarily engaged in or related to the real estate industry.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in equity securities of real estate investment trusts
or "REITs" and other real estate industry companies. The Fund invests in real
estate companies that Alliance believes have strong property fundamentals and
management teams. The Fund seeks to invest in real estate companies whose
underlying portfolios are diversified geographically and by property type. The
Fund may invest up to 35% of its total assets in mortgage-backed securities,
which are securities that directly or indirectly represent participations in, or
are collateralized by and payable from, mortgage loans secured by real property.
Among the principal risks of investing in the Fund are market risk, interest
rate risk and credit risk. Because the Fund invests a substantial portion of its
assets in the real estate market, it has industry/sector risk. The Fund has many
of the same risks as direct ownership of real estate including the risk that the
value of real estate could decline due to a variety of factors affecting the
real estate market. In addition, REITs are dependent on the capability of their
managers, may have limited diversification, and could be significantly affected
by changes in tax laws. Because the Fund invests in mortgage-backed securities,
it is subject to the risk that mortgage loans will be prepaid when interest
rates decline, forcing the Fund to reinvest in securities with lower interest
rates. For this and other reasons, mortgage-backed securities may have
significantly greater price and yield volatility than traditional debt
securities.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
--------------------------------------------------------------------------------
Since
1 Year Inception
--------------------------------------------------------------------------------
Class A -10.66% 1.65%
--------------------------------------------------------------------------------
Class B -10.85% 2.01%
--------------------------------------------------------------------------------
Class C -8.21% 2.31%
--------------------------------------------------------------------------------
S&P 500 Index 21.03% 28.02%
--------------------------------------------------------------------------------
Index returns and average annual total returns are for the periods ended
December 31, 1999. Average annual total returns reflect imposition of the
maximum front-end or contingent deferred sales charges as well as conversion of
Class B shares to Class A shares after the applicable period. Inception dates
are 10/1/96 for Class A, Class B and Class C shares. Since inception index
return is from 10/31/96.
BAR CHART
--------------------------------------------------------------------------------
The annual returns in the bar chart are for the Fund's Class A shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown. Through 9/30/00, the year to date unannualized return for the Class
A shares was 24.32%.
[The following was depicted as a bar chart in the printed material]
Calendar Year End
90 n/a
91 n/a
92 n/a
93 n/a
94 n/a
95 n/a
96 n/a
97 22.98
98 -20.22
99 -6.70
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best Quarter was up 14.55%, 3rd quarter, 1997; and Worst Quarter was down
-12.33%, 3rd quarter, 1998.
14
<PAGE>
GLOBAL STOCK FUNDS
The Global Stock Funds offer investors seeking long-term capital appreciation a
range of alternative approaches to investing in foreign securities.
Alliance New Europe Fund
--------------------------------------------------------------------------------
OBJECTIVE:
The Fund's investment objective is long-term capital appreciation through
investments primarily in the equity securities of companies based in Europe.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in equity securities of European companies. The Fund
diversifies its investments among a number of European countries and normally
invests in companies based in at least three of these countries, although it may
invest 25% or more of its assets in issuers in a single country. The Fund may
invest up to 35% of its total assets in high-quality, U.S. Dollar or foreign
currency denominated, fixed-income securities issued or guaranteed by European
governmental entities, European or multinational companies, or supranational
organizations. At June 30, 2000, the Fund had approximately 34% of its assets
invested in securities of United Kingdom issuers.
Among the principal risks of investing in the Fund are market risk, foreign risk
and currency risk. In addition, the Fund's investments in U.S. Dollar or foreign
currency denominated fixed-income securities have interest rate and credit risk.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
--------------------------------------------------------------------------------
Since
1 Year 5 Years Inception
--------------------------------------------------------------------------------
Class A 20.76% 20.33% 12.72%
--------------------------------------------------------------------------------
Class B 21.24% 20.51% 12.86%
--------------------------------------------------------------------------------
Class C 24.21% 20.52% 12.67%
--------------------------------------------------------------------------------
MSCI Europe Index 16.23% 22.54% 15.48%
--------------------------------------------------------------------------------
Index returns and average annual total returns are for the periods ended
December 31, 1999. Average annual total returns reflect imposition of the
maximum front-end or contingent deferred sales charges as well as conversion of
Class B shares to Class A shares after the applicable period. Inception date of
Class A shares is 4/2/90. Since inception index returns are from month-end of
applicable class inception date.
Performance information for periods prior to the inception of Class B shares
(3/5/91) and Class C shares (5/3/93) is the performance of the Fund's Class A
shares adjusted to reflect the higher expense ratio of Class B and Class C
shares. The average annual total returns for Class B and Class C shares since
their actual inception dates were 14.65% and 18.83%, respectively. Index returns
for the comparable periods were 16.54% and 20.08%, respectively.
BAR CHART
--------------------------------------------------------------------------------
The annual returns in the bar chart are for the Fund's Class A shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown. Through 9/30/00, the year to date unannualized return for the Class
A shares was -9.57%.
[The following was depicted as a bar chart in the printed material]
Calendar Year End
90 n/a
91 3.30
92 -0.53
93 34.57
94 4.64
95 18.63
96 20.58
97 16.83
98 24.99
99 26.12
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best Quarter was up 24.84%, 4th quarter, 1999; and Worst Quarter was down
-19.73%, 3rd quarter, 1998.
15
<PAGE>
Alliance Worldwide Privatization Fund
--------------------------------------------------------------------------------
OBJECTIVE:
The Fund's investment objective is long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in equity securities of companies that are
undergoing, or have undergone, privatization. The Fund also invests in
securities of companies that will benefit from privatizations. The Fund takes
advantage of investment opportunities, historically inaccessible to U.S.
individual investors, that result from the privatization of state enterprises in
both established and developing economies. Because privatizations are integral
to a country's economic restructuring, securities sold in initial public
offerings often are attractively priced to secure the issuer's transition to
private sector ownership. In addition, these enterprises often dominate their
local markets and have the potential for significant managerial and operational
efficiency gains.
The Fund diversifies its investments among a number of countries and normally
invests in issuers based in at least four, and usually considerably more,
countries. The Fund may invest up to 30% of its total assets in any one of
France, Germany, Great Britain, Italy, and Japan and may invest all of its
assets in a single world region. The Fund also may invest up to 35% of its total
assets in debt securities and convertible debt securities of privatized
companies.
Among the principal risks of investing in the Fund are market risk, foreign risk
and currency risk. Because the Fund invests in companies that are undergoing, or
have undergone, privatization, it has industry/sector risk. These companies
could have more risk because they have no operating history as a private
company. In addition, the Fund's investments in U.S. Dollar or foreign currency
denominated fixed-income securities have interest rate and credit risk.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
--------------------------------------------------------------------------------
Since
1 Year 5 Years Inception
--------------------------------------------------------------------------------
Class A 49.67% 18.98% 16.81%
--------------------------------------------------------------------------------
Class B 51.14% 19.16% 16.88%
--------------------------------------------------------------------------------
Class C 54.04% 19.16% 16.88%
--------------------------------------------------------------------------------
MSCI World Index (minus the U.S.) 28.27% 13.42% 12.04%
--------------------------------------------------------------------------------
Index returns and average annual total returns are for the periods ended
December 31, 1999. Average annual total returns reflect imposition of the
maximum front-end or contingent deferred sales charges as well as conversion of
Class B shares to Class A shares after the applicable period. Inception date of
Class A and Class B shares is 6/2/94. Since inception index returns are from
month-end of applicable class inception date.
Performance information for periods prior to the inception of Class C shares
(2/8/95) is the performance of the Fund's Class A shares adjusted to reflect the
higher expense ratio of Class C shares. The average annual total return for
Class C since its actual inception date was 20.64%. Index return for the
comparable period was 14.85%.
BAR CHART
--------------------------------------------------------------------------------
The annual returns in the bar chart are for the Fund's Class A shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown. Through 9/30/00, the year to date unannualized return for the Class
A shares was -18.04%.
[The following was depicted as a bar chart in the printed material]
Calendar Year End
90 n/a
91 n/a
92 n/a
93 n/a
94 n/a
95 4.91
96 23.14
97 13.18
98 8.92
99 56.33
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best Quarter was up 34.15%, 4th quarter, 1999; and Worst Quarter was down
-17.44%, 3rd quarter, 1998.
16
<PAGE>
Alliance International Premier Growth Fund
--------------------------------------------------------------------------------
OBJECTIVE:
The Fund's investment objective is long-term growth of capital by investing
predominantly in equity securities of a limited number of carefully selected
international companies that are judged likely to achieve superior earnings
growth. Current income is incidental to the Fund's objective.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in equity securities of comparatively large,
high-quality, international companies. The Fund invests in at least four, and
usually considerably more, countries. Normally, the Fund invests no more than
15% of its total assets in issuers of any one foreign country, but may invest up
to 35% of its total assets in each of the United Kingdom and Japan and up to 25%
of its total assets in each of Canada, France, Germany, Italy, The Netherlands
and Switzerland. Unlike more typical international equity funds, the Fund
focuses on a relatively small number of intensively researched companies.
Alliance selects the Fund's investments from a research universe of
approximately 900 companies.
Normally, the Fund invests in about 40 companies, with the 30 most highly
regarded of these companies usually constituting approximately 70%, and often
more, of the Fund's net assets. The Fund invests in companies with market values
generally in excess of $10 billion. Alliance may take advantage of market
volatility to adjust the Fund's portfolio positions. To the extent consistent
with local market liquidity considerations, the Fund strives to capitalize on
apparently unwarranted price fluctuations, both to purchase or increase
positions on weakness and to sell or reduce overpriced holdings. The Fund
invests primarily in equity securities and also may invest in convertible
securities.
Among the principal risks of investing in the Fund are market risk, foreign risk
and currency risk. In addition, since the Fund invests in a smaller number of
securities than many other international equity funds, changes in the value of a
single security may have a more significant effect, either negative or positive,
on the Fund's net asset value.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
--------------------------------------------------------------------------------
Since
1 Year Inception
--------------------------------------------------------------------------------
Class A 40.89% 20.85%
--------------------------------------------------------------------------------
Class B 42.19% 21.47%
--------------------------------------------------------------------------------
Class C 45.09% 22.81%
--------------------------------------------------------------------------------
MSCI EAFE Index 27.30% 17.93%
--------------------------------------------------------------------------------
Index returns and average annual total returns are for the periods ended
December 31, 1999. Average annual total returns reflect imposition of the
maximum front-end or contingent deferred sales charges as well as conversion of
Class B shares to Class A shares after the applicable period. Inception dates
are 3/3/98 for Class A, Class B and Class C shares. Since inception index
returns are from 3/31/98.
BAR CHART
--------------------------------------------------------------------------------
The annual return in the bar chart is for the Fund's Class A shares and does not
reflect sales loads. If sales loads were reflected, the annual return would be
less than that shown. Through 9/30/00, the year to date unannualized return for
the Class A shares was -16.11%.
[The following was depicted as a bar chart in the printed material]
Calendar Year End
90 n/a
91 n/a
92 n/a
93 n/a
94 n/a
95 n/a
96 n/a
97 n/a
98 n/a
99 47.21
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best Quarter was up 30.43%, 4th quarter, 1999; and Worst Quarter was up 3.29%,
1st quarter, 1999.
17
<PAGE>
Alliance Global Small Cap Fund
--------------------------------------------------------------------------------
OBJECTIVE:
The Fund's investment objective is long-term growth of capital through
investment in a global portfolio of equity securities of selected companies with
relatively small market capitalizations.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in equity securities of global companies, both
domestic and foreign, with relatively small market capitalizations. The Fund's
investments emphasize companies that are in the smallest 20% of the U.S. stock
market (or less than approximately $1.5 billion). Although these companies are
small by U.S. standards, they may be among the largest companies in their own
countries. The Fund may invest up to 35% of its total assets in securities of
companies whose market capitalizations exceed the Fund's size standard. The Fund
invests in at least three countries, including the U.S.
Among the principal risks of investing in the Fund are market risk, foreign risk
and currency risk. Investments in smaller companies tend to be more volatile
than investments in large-cap or mid-cap companies.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
--------------------------------------------------------------------------------
1 Year 5 Years 10 Years
--------------------------------------------------------------------------------
Class A 40.43% 18.98% 9.36%
--------------------------------------------------------------------------------
Class B 41.53% 19.15% 9.23%
--------------------------------------------------------------------------------
Class C 44.54% 19.16% 9.08%
--------------------------------------------------------------------------------
MSCI World Index 25.34% 20.25% 11.96%
--------------------------------------------------------------------------------
Index returns and average annual total returns are for the periods ended
December 31, 1999. Average annual total returns reflect imposition of the
maximum front-end or contingent deferred sales charge as well as conversion of
Class B shares to Class A shares after the applicable period.
Performance information for periods prior to the inception of Class B shares
(9/17/90) and Class C shares (5/3/93) is the performance of the Fund's Class A
shares adjusted to reflect the higher expense ratio of Class B and Class C
shares. The average annual total returns for Class B and Class C shares since
their actual inception dates were 12.56% and 15.58%, respectively. Index returns
for the comparable periods (which date from month-end following applicable class
inception date) were 16.39% and 16.96%, respectively.
BAR CHART
--------------------------------------------------------------------------------
The annual returns in the bar chart are for the Fund's Class A shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown. Through 9/30/00, the year to date unannualized return for the Class
A shares was 3.13%.
[The following was depicted as a bar chart in the printed material]
Calendar Year End
90 -24.89
91 25.29
92 -4.89
93 20.04
94 -4.55
95 27.18
96 19.37
97 8.08
98 3.56
99 46.65
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best Quarter was up 31.92%, 4th quarter, 1999; and Worst Quarter was down
-26.77%, 3rd quarter, 1990.
18
<PAGE>
Alliance International Fund
--------------------------------------------------------------------------------
OBJECTIVE:
The Fund's investment objective is total return from long-term growth of capital
and income primarily through investment in a broad portfolio of marketable
securities of established international companies, companies participating in
foreign economies with prospects for growth, including U.S. companies having
their principal activities and interests outside the U.S. and in foreign
government securities.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in equity securities of established international
companies, companies participating in foreign economies with prospects for
growth, including U.S. companies having their principal activities and interests
outside the U.S., and foreign government securities. The Fund diversifies its
investments broadly among countries and normally invests in companies in at
least three foreign countries, although it may invest a substantial portion of
its assets in companies in one or more foreign countries.
Among the principal risks of investing in the Fund are market risk, foreign risk
and currency risk.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
--------------------------------------------------------------------------------
1 Year 5 Years 10 Years
--------------------------------------------------------------------------------
Class A 28.92% 11.09% 6.21%
--------------------------------------------------------------------------------
Class B 29.69% 11.19% 6.00%
--------------------------------------------------------------------------------
Class C 32.69% 11.17% 6.12%
--------------------------------------------------------------------------------
MSCI EAFE Index 27.30% 13.15% 7.33%
--------------------------------------------------------------------------------
Index returns and average annual total returns are for the periods ended
December 31, 1999. Average annual total returns reflect imposition of the
maximum front-end or contingent deferred sales charges as well as conversion of
Class B shares to Class A shares after the applicable period.
Performance information for periods prior to the inception of Class B shares
(9/17/90) and Class C shares (5/3/93) is the performance of the Fund's Class A
shares adjusted to reflect the higher expense ratio of Class B and Class C
shares. The average annual total returns for Class B and Class C shares since
their actual inception dates were 8.30% and 10.43%, respectively. Index returns
for the comparable periods (which date from month-end following applicable class
inception date) were 12.30% and 12.12%, respectively.
BAR CHART
--------------------------------------------------------------------------------
The annual returns in the bar chart are for the Fund's Class A shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown. Through 9/30/00, the year to date unannualized return for the Class
A shares was -15.41%.
[The following was depicted as a bar chart in the printed material]
Calendar Year End
90 -20.95
91 7.72
92 -5.86
93 27.51
94 5.68
95 10.10
96 7.20
97 1.41
98 9.64
99 34.62
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best Quarter was up 25.84%, 4th quarter, 1999; and Worst Quarter was down
-22.29%, 3rd quarter, 1990.
19
<PAGE>
Alliance Greater China '97 Fund
--------------------------------------------------------------------------------
OBJECTIVE:
The Fund's investment objective is long-term capital appreciation through
investment of at least 80% of its total assets in equity securities of Greater
China companies.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests in equity securities of Greater China companies, which are
companies in China, Hong Kong, and Taiwan. Of these countries, the Fund expects
to invest a significant portion of its assets, which may be greater than 50%, in
Hong Kong companies and may invest all of its assets in Hong Kong companies or
companies of either of the other Greater China countries. The Fund also may
invest in convertible securities and equity-linked debt securities issued or
guaranteed by Greater China companies or Greater China Governments, their
agencies, or instrumentalities. As of June 30, 2000, the Fund had approximately
83% of its assets invested in securities of Hong Kong companies.
Among the principal risks of investing in the Fund are market risk, foreign risk
and currency risk. Because it invests in Greater China companies, the Fund's
returns will be significantly more volatile and differ substantially from U.S.
markets generally. Your investment also has the risk that market changes or
other events affecting the Greater China countries, including political
instability and unpredictable economic conditions, may have a more significant
effect on the Fund's net asset value. In addition, the Fund is
"non-diversified," meaning that it invests more of its assets in a smaller
number of companies than many other international funds. As a result, changes in
the value of a single security may have a more significant effect, either
negative or positive, on the Fund's net asset value. The Fund's investments in
debt securities have interest rate and credit risk.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
--------------------------------------------------------------------------------
Since
1 Year Inception
--------------------------------------------------------------------------------
Class A 75.11% 6.40%
--------------------------------------------------------------------------------
Class B 77.23% 6.77%
--------------------------------------------------------------------------------
Class C 80.20% 7.47%
--------------------------------------------------------------------------------
MSCI China Free Index 9.94% -32.64%
--------------------------------------------------------------------------------
MSCI Hong Kong Index 59.52% 4.44%
--------------------------------------------------------------------------------
MSCI Taiwan Index 52.71% -1.11%
--------------------------------------------------------------------------------
Index returns and average annual total returns are for the periods ended
December 31, 1999. Average annual total returns reflect imposition of the
maximum front-end or contingent deferred sales charge as well as conversion of
Class B shares to Class A shares after the applicable period. Inception dates
are 9/3/97 for Class A, Class B, and Class C shares. Since inception index
returns are from 9/30/97.
BAR CHART
--------------------------------------------------------------------------------
The annual returns in the bar chart are for the Fund's Class A shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown. Through 9/30/00, the year to date unannualized return for the Class
A shares was -21.32%.
[The following was depicted as a bar chart in the printed material]
Calendar Year End
90 n/a
91 n/a
92 n/a
93 n/a
94 n/a
95 n/a
96 n/a
97 n/a
98 -8.02
99 82.87
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best Quarter was up 49.31%, 4th quarter, 1999; and Worst Quarter was down
-26.95%, 2nd quarter, 1998.
20
<PAGE>
Alliance All-Asia Investment Fund
--------------------------------------------------------------------------------
OBJECTIVE:
The Fund's investment objective is long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund primarily invests in securities of various types of companies based in
Asia. The Fund invests in equity securities, preferred stocks, and equity-linked
debt securities issued by Asian companies and may invest more than 50% of its
total assets in equity securities of Japanese issuers. The Fund also may invest
up to 35% of its total assets in debt securities issued or guaranteed by Asian
companies or by Asian governments, their agencies or instrumentalities, and may
invest up to 25% of its net assets in convertible securities. At June 30, 2000,
the Fund had approximately 48% of its total assets invested in securities of
Japanese companies.
Among the principal risks of investing in the Fund are market risk, foreign risk
and currency risk. Because it invests in Asian and Pacific region countries and
emerging markets, the Fund's returns will be significantly more volatile and may
differ substantially from the overall U.S. market generally. Your investment has
the risk that market changes or other factors affecting Asian and Pacific region
countries and other emerging markets, including political instability and
unpredictable economic conditions, may have a more significant effect on the
Fund's net asset value. To the extent that the Fund invests a substantial amount
of its assets in Japanese companies, your investment has the risk that market
changes or other events affecting that country may have a more significant
effect on the Fund's net asset value. In addition, the Fund's investments in
debt securities have interest rate and credit risk.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
--------------------------------------------------------------------------------
Since
1 Year 5 Years Inception
--------------------------------------------------------------------------------
Class A 109.70% 6.58% 6.48%
--------------------------------------------------------------------------------
Class B 113.43% 6.76% 6.64%
--------------------------------------------------------------------------------
Class C 116.21% 6.81% 6.68%
--------------------------------------------------------------------------------
MSCI All Country Asia Pacific Index 59.66% 1.99% 2.11%
--------------------------------------------------------------------------------
Index returns and average annual total returns are for the periods ended
December 31, 1999. Average annual total returns reflect imposition of the
maximum front-end or contingent deferred sales charges as well as conversion of
Class B shares to Class A shares after the applicable period. Inception dates
are 11/28/94 for Class A, Class B, and Class C shares. Since inception index
returns are from 11/30/94.
BAR CHART
--------------------------------------------------------------------------------
The annual returns in the bar chart are for the Fund's Class A shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown. Through 9/30/00, the year to date unannualized return for the Class
A shares was -23.34%.
[The following was depicted as a bar chart in the printed material]
Calendar Year End
90 n/a
91 n/a
92 n/a
93 n/a
94 n/a
95 10.21
96 4.58
97 -35.10
98 -12.34
99 118.99
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best Quarter was up 38.96%, 4th quarter, 1999; and Worst Quarter was down
-18.81%, 4th quarter, 1997.
21
<PAGE>
SUMMARY OF PRINCIPAL RISKS
The value of your investment in a Fund will change with changes in the values of
that Fund's investments. Many factors can affect those values. In this Summary,
we describe the principal risks that may affect a Fund's portfolio as a whole.
These risks and the Funds particularly subject to these risks appear in a chart
at the end of the section. All Funds could be subject to additional principal
risks because the types of investments made by each Fund can change over time.
This Prospectus has additional descriptions of the types of investments that
appear in bold type in the discussions under "Description of Additional
Investment Practices" or "Additional Risk Considerations." These sections also
include more information about the Funds, their investments, and related risks.
MARKET RISK
This is the risk that the value of a Fund's investments will fluctuate as the
stock or bond markets fluctuate and that prices overall will decline over short-
or long-term periods. All of the Alliance Stock Funds are subject to market
risk.
INDUSTRY/SECTOR RISK
This is the risk of investments in a particular industry sector. Market or
economic factors affecting that industry or group of related industries could
have a major effect on the value of a Fund's investments. Funds particularly
subject to this risk are Alliance Health Care Fund, Alliance Technology Fund,
Alliance Disciplined Value Fund, Alliance Utility Income Fund, Alliance Real
Estate Investment Fund and Alliance Worldwide Privatization Fund. This risk may
be greater for Alliance Technology Fund because technology stocks, especially
those of smaller, less-seasoned companies, tend to be more volatile than the
overall market.
CAPITALIZATION RISK
This is the risk of investments in small- to mid-capitalization companies.
Investments in mid-cap companies may be more volatile than investments in
large-cap companies. Alliance Growth Fund, The Alliance Fund and Alliance
Disciplined Value Fund are particularly subject to this risk. Investments in
small-cap companies tend to be more volatile than investments in large-cap or
mid-cap companies. A Fund's investments in smaller capitalization stocks may
have additional risks because these companies often have limited product lines,
markets, or financial resources. Alliance Health Care Fund, Alliance Quasar
Fund, Alliance Disciplined Value Fund and Alliance Global Small Cap Fund are
particularly subject to this risk.
INTEREST RATE RISK
This is the risk that changes in interest rates will affect the value of a
Fund's investments in income-producing, fixed-income (i.e., debt) securities.
Increases in interest rates may cause the value of a Fund's investments to
decline and this decrease in value may not be offset by the higher interest rate
income. Interest rate risk is particularly applicable to Funds that invest in
fixed-income securities and is greater for those Alliance Stock Funds that
invest a substantial portion of their assets in fixed-income securities, such as
Alliance Growth and Income Fund, Alliance Balanced Shares and Alliance Utility
Income Fund. Interest rate risk is greater for those Funds that invest in
lower-rated securities or comparable unrated securities ("junk bonds") such as
Alliance Utility Income Fund. Alliance Real Estate Investment Fund also has more
exposure to interest rate risk because it invests in real estate industry
companies and in mortgage-backed securities.
CREDIT RISK
This is the risk that the issuer of a security or the other party to an
over-the-counter transaction will be unable or unwilling to make timely payments
of interest or principal, or to otherwise honor its obligations. The degree of
risk for a particular security may be reflected in its credit rating. Credit
risk is applicable to Funds that invest in fixed-income securities and is
greater for those Alliance Stock Funds that invest a substantial portion of
their assets in lower-rated securities, such as Alliance Utility Income Fund.
FOREIGN RISK
This is the risk of investments in issuers located in foreign countries. All
Alliance Stock Funds with foreign securities are subject to this risk,
including, in particular, Alliance Health Care Fund, Alliance Technology Fund,
Alliance New Europe Fund, Alliance Worldwide Privatization Fund, Alliance
International Premier Growth Fund, Alliance Global Small Cap Fund, Alliance
International Fund, Alliance Greater China '97 Fund and Alliance All-Asia
Investment Fund. Funds investing in foreign securities may experience more rapid
and extreme changes in value than Funds with investments solely in securities of
U.S. companies. This is because the securities markets of many foreign countries
are relatively small, with a limited number of companies representing a small
number of industries. Additionally, foreign securities issuers are usually not
subject to the same degree of regulation as U.S. issuers. Reporting, accounting,
and auditing standards of foreign countries differ, in some cases significantly,
from U.S. standards. Also, nationalization, expropriation or confiscatory
taxation, currency blockage, or political changes or diplomatic developments
could adversely affect a Fund's investments in a foreign country. In the event
of nationalization, expropriation, or other confiscation, a Fund could lose its
entire investment.
COUNTRY OR GEOGRAPHIC RISK
This is the risk of investments in issuers located in a particular country or
geographic region. Market changes or other factors affecting that country or
region, including political instability and unpredictable economic conditions,
may have a particularly significant effect on a Fund's net asset value. The
Funds particularly subject to this risk are Alliance New Europe Fund, Alliance
Worldwide Privatization Fund, Alliance International Fund, Alliance Greater
China '97 Fund and Alliance All-Asia Investment Fund.
22
<PAGE>
CURRENCY RISK
This is the risk that fluctuations in the exchange rates between the U.S. Dollar
and foreign currencies may negatively affect the value of a Fund's investments.
Funds with foreign securities are subject to this risk, including, in
particular, Alliance Health Care Fund, Alliance Technology Fund, Alliance
New Europe Fund, Alliance Worldwide Privatization Fund, Alliance International
Premier Growth Fund, Alliance Global Small Cap Fund, Alliance International
Fund, Alliance Greater China '97 Fund and Alliance All-Asia Investment Fund.
MANAGEMENT RISK
Each Alliance Stock Fund is subject to management risk because it is an actively
managed investment portfolio. Alliance will apply its investment techniques and
risk analyses in making investment decisions for the Funds, but there is no
guarantee that its decisions will produce the intended result.
FOCUSED PORTFOLIO RISK
Funds, such as Alliance Premier Growth Fund and Alliance International Premier
Growth Fund, that invest in a limited number of companies, may have more risk
because changes in the value of a single security may have a more significant
effect, either negative or positive, on the Fund's net asset value. Similarly,
Alliance Greater China '97 Fund may have more risk because it is
"non-diversified," meaning that it can invest more of its assets in a smaller
number of companies than many other international funds.
ALLOCATION RISK
Alliance Balanced Shares has the risk that the allocation of its investments
between equity and debt securities may have a more significant effect on the
Fund's net asset value when one of these asset classes is performing more poorly
than the other.
PRINCIPAL RISKS BY FUND
--------------------------------------------------------------------------------
The following chart summarizes the principal risks of each Fund. Risks not
marked for a particular Fund may, however, still apply to some extent to that
Fund at various times.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Industry/ Capital- Interest Country or
Market Sector ization Rate Credit Foreign Geographic Currency Manage-
Fund Risk Risk Risk Risk Risk Risk Risk Risk ment Risk
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Alliance Premier Growth Fund o o
------------------------------------------------------------------------------------------------------------------------------------
Alliance Health Care Fund o o o o o o
------------------------------------------------------------------------------------------------------------------------------------
Alliance Growth Fund o o o o o o o
------------------------------------------------------------------------------------------------------------------------------------
Alliance Technology Fund o o o o o
------------------------------------------------------------------------------------------------------------------------------------
Alliance Quasar Fund o o o
------------------------------------------------------------------------------------------------------------------------------------
The Alliance Fund o o o
------------------------------------------------------------------------------------------------------------------------------------
Alliance Disciplined Value Fund o o o o
------------------------------------------------------------------------------------------------------------------------------------
Alliance Growth and Income Fund o o o o
------------------------------------------------------------------------------------------------------------------------------------
Alliance Balanced Shares o o o o
------------------------------------------------------------------------------------------------------------------------------------
Alliance Utility Income Fund o o o o o
------------------------------------------------------------------------------------------------------------------------------------
Alliance Real Estate Investment Fund o o o o o
------------------------------------------------------------------------------------------------------------------------------------
Alliance New Europe Fund o o o o o
------------------------------------------------------------------------------------------------------------------------------------
Alliance Worldwide Privatization Fund o o o o o o
------------------------------------------------------------------------------------------------------------------------------------
Alliance International Premier Growth Fund o o o o
------------------------------------------------------------------------------------------------------------------------------------
Alliance Global Small Cap Fund o o o o o
------------------------------------------------------------------------------------------------------------------------------------
Alliance International Fund o o o o o
------------------------------------------------------------------------------------------------------------------------------------
Alliance Greater China '97 Fund o o o o o
------------------------------------------------------------------------------------------------------------------------------------
Alliance All-Asia Investment Fund o o o o o
------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
--------------------------------------------------------------------
Focused
Portfolio Allocation
Fund Risk Risk
--------------------------------------------------------------------
<S> <C> <C>
Alliance Premier Growth Fund o
--------------------------------------------------------------------
Alliance Health Care Fund
--------------------------------------------------------------------
Alliance Growth Fund
--------------------------------------------------------------------
Alliance Technology Fund
--------------------------------------------------------------------
Alliance Quasar Fund
--------------------------------------------------------------------
The Alliance Fund
--------------------------------------------------------------------
Alliance Disciplined Value Fund
--------------------------------------------------------------------
Alliance Growth and Income Fund
--------------------------------------------------------------------
Alliance Balanced Shares o
--------------------------------------------------------------------
Alliance Utility Income Fund
--------------------------------------------------------------------
Alliance Real Estate Investment Fund
--------------------------------------------------------------------
Alliance New Europe Fund
--------------------------------------------------------------------
Alliance Worldwide Privatization Fund
--------------------------------------------------------------------
Alliance International Premier Growth Fund o
--------------------------------------------------------------------
Alliance Global Small Cap Fund
--------------------------------------------------------------------
Alliance International Fund
--------------------------------------------------------------------
Alliance Greater China '97 Fund o
--------------------------------------------------------------------
Alliance All-Asia Investment Fund
--------------------------------------------------------------------
</TABLE>
23
<PAGE>
--------------------------------------------------------------------------------
FEES AND EXPENSES OF THE FUNDS
--------------------------------------------------------------------------------
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Funds.
SHAREHOLDER FEES (fees paid directly from your investment)
<TABLE>
<CAPTION>
Class A Shares Class B Shares Class C Shares
--------------- --------------- ---------------
<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price) 4.25% None None
Maximum Deferred Sales Charge (Load) None 4.0%* 1.0%**
(as a percentage of original purchase price
or redemption proceeds, whichever is lower)
Exchange Fee None None None
</TABLE>
* Class B shares automatically convert to Class A shares after 8 years. The
CDSC decreases over time. For Class B shares the CDSC decreases 1.00%
annually to 0% after the 4th year.
** For Class C shares the CDSC is 0% after the first year.
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) and
EXAMPLES
The Examples are to help you compare the cost of investing in the Funds with the
cost of investing in other funds. They assume that you invest $10,000 in each
Fund for the time periods indicated and then redeem all of your shares at the
end of those periods. They also assume that your investment has a 5% return each
year, that the Fund's operating expenses stay the same and that all dividends
and distributions are reinvested. Your actual costs may be higher or lower.
<TABLE>
<CAPTION>
Operating Expenses Examples
--------------------------------------------------------- ----------------------------------------------------------------------
Alliance Premier Growth Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- --------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees .95% .95% .95% After 1 year $ 571 $ 621 $ 221 $ 321 $ 221
Distribution (12b-1) fees .33% 1.00% 1.00% After 3 years $ 879 $ 882 $ 682 $ 682 $ 682
Other expenses .22% .23% .23% After 5 years $ 1,209 $1,169 $1,169 $ 1,169 $ 1,169
---- ---- ---- After 10 years $ 2,139 $2,341(b) $2,341(b) $ 2,513 $ 2,513
Total fund
operating expenses 1.50% 2.18% 2.18%
==== ==== ====
<CAPTION>
Alliance Health Care Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- --------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees .95% .95% .95% After 1 year $ 616 $ 670 $ 270 $ 370 $ 270
Distribution (12b-1) fees .30% 1.00% 1.00% After 3 years(c) $ 1,014 $1,029 $ 829 $ 829 $ 829
Other expenses .67% .69% .68% After 5 years(c) $ 1,437 $1,415 $1,415 $ 1,415 $ 1,415
---- ---- ---- After 10 years(c) $ 2,613 $2,831(b) $2,831(b) $ 3,003 $ 3,003
Total fund
operating expenses 1.92% 2.64% 2.63%
==== ==== ====
<CAPTION>
Alliance Growth Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- --------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees .68% .68% .68% After 1 year $ 540 $ 593 $ 193 $ 293 $ 193
Distribution (12b-1) fees .30% 1.00% 1.00% After 3 years $ 784 $ 797 $ 597 $ 597 $ 597
Other expenses .20% .22% .22% After 5 years $ 1,046 $1,026 $ 1,026 $ 1,026 $ 1,026
---- ---- ---- After 10 years $ 1,796 $2,035(b) $ 2,035(b) $ 2,222 $ 2,222
Total fund
operating expenses 1.18% 1.90% 1.90%
==== ==== ====
<CAPTION>
Alliance Technology Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- --------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees 1.10% 1.10% 1.10% After 1 year $ 589 $ 642 $ 242 $ 344 $ 244
Distribution (12b-1) fees .30% 1.00% 1.00% After 3 years $ 932 $ 945 $ 745 $ 751 $ 751
Other expenses .28% .29% .31% After 5 years $ 1,299 $1,275 $1,275 $ 1,285 $ 1,285
---- ---- ---- After 10 years $ 2,328 $2,550(b) $2,550(b) $ 2,746 $ 2,746
Total fund
operating expenses 1.68% 2.39% 2.41%
==== ==== ====
</TABLE>
--------------------------------------------------------------------------------
Please refer to the footnotes on page 26.
24
<PAGE>
<TABLE>
<CAPTION>
Operating Expenses Examples
--------------------------------------------------------- ----------------------------------------------------------------------
Alliance Quasar Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- --------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees 1.01% 1.01% 1.01% After 1 year $ 589 $ 649 $ 249 $ 348 $ 248
Distribution (12b-1) fees .27% 1.00% 1.00% After 3 years $ 935 $ 967 $ 767 $ 764 $ 764
Other expenses .41% .45% .44% After 5 years $ 1,304 $1,311 $ 1,311 $ 1,306 $ 1,306
---- ---- ---- After 10 years $ 2,338 $2,606(b) $ 2,606(b) $ 2,786 $ 2,786
Total fund
operating expenses 1.69% 2.46% 2.45%
==== ==== ====
<CAPTION>
The Alliance Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- --------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees .68% .68% .68% After 1 year $ 528 $ 592 $ 192 $ 289 $ 189
Distribution (12b-1) fees .21% 1.00% 1.00% After 3 years $ 748 $ 794 $ 594 $ 585 $ 585
Other expenses .17% .21% .18% After 5 years $ 985 $1,021 $ 1,021 $ 1,006 $ 1,006
---- ---- ---- After 10 years $ 1,664 $1,995(b) $ 1,995(b) $ 2,180 $ 2,180
Total fund
operating expenses 1.06% 1.89% 1.86%
==== ==== ====
<CAPTION>
Alliance Disciplined
Value Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- --------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees .75% .75% .75% After 1 year (c) $ 667 $ 723 $ 323 $ 423 $ 323
Distribution (12b-1) fees .30% 1.00% 1.00% After 3 years (c) $ 1,334 $ 1,353 $ 1,153 $ 1,153 $ 1,153
Other expenses 2.29% 2.29% 2.29% After 5 years (c) $ 2,023 $ 2,000 $ 2,000 $ 2,000 $ 2,000
---- ---- ---- After 10 years (c) $ 3,847 $ 4,039 $ 4,039 $ 4,188 $ 4,188
Total fund
operating expenses 3.34% 4.04% 4.04%
==== ==== ====
Waiver and/or expense
reimbursement (a) (.84)% (.84)% (.84)%
==== ==== ====
Net expenses 2.50% 3.20% 3.20%
==== ==== ====
<CAPTION>
Alliance Growth and
Income Fund (d) Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- --------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees .47% .47% .47% After 1 year $ 516 $ 573 $ 173 $ 272 $ 172
Distribution (12b-1) fees .24% 1.00% 1.00% After 3 years $ 709 $ 736 $ 536 $ 533 $ 533
Other expenses .22% .23% .22% After 5 years $ 918 $ 923 $ 923 $ 918 $ 918
---- ---- ---- After 10 years $ 1,519 $1,804(b) $ 1,804(b) $ 1,998 $ 1,998
Total fund
operating expenses .93% 1.70% 1.69%
==== ==== ====
<CAPTION>
Alliance Balanced Shares Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- --------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees .56% .56% .56% After 1 year $ 534 $ 589 $ 189 $ 289 $ 189
Distribution (12b-1) fees .26% 1.00% 1.00% After 3 years $ 766 $ 785 $ 585 $ 585 $ 585
Other expenses .30% .30% .30% After 5 years $ 1,016 $1,006 $ 1,006 $ 1,006 $ 1,006
---- ---- ---- After 10 years $ 1,730 $1,986(b) $ 1,986(b) $ 2,180 $ 2,180
Total fund
operating expenses 1.12% 1.86% 1.86%
==== ==== ====
<CAPTION>
Alliance Utility Income Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- --------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees .75% .75% .75% After 1 year $ 571 $ 623 $ 223 $ 323 $ 223
Distribution (12b-1) fees .30% 1.00% 1.00% After 3 years (c) $ 925 $ 938 $ 738 $ 738 $ 738
Other expenses .68% .69% .69% After 5 years (c) $ 1,303 $1,279 $ 1,279 $ 1,279 $ 1,279
---- ---- ---- After 10 years $ 1,730 $1,986(b) $ 1,986(b) $ 2,180 $ 2,180
Total fund
operating expenses 1.73% 2.44% 2.44%
==== ==== ====
Waiver and/or expense
reimbursement (a) (.23)% (.24)% (.24)%
==== ==== ====
Net expenses 1.50% 2.20% 2.20%
==== ==== ====
<CAPTION>
Alliance Real Estate
Investment Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- --------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees .90% .90% .90% After 1 year $ 591 $ 644 $ 244 $ 343 $ 243
Distribution (12b-1) fees .30% 1.00% 1.00% After 3 years $ 941 $ 951 $ 751 $ 748 $ 748
Other expenses .51% .51% .50% After 5 years $ 1,314 $1,285 $ 1,285 $ 1,280 $ 1,280
---- ---- ---- After 10 years $ 2,359 $2,573(b) $ 2,573(b) $ 2,736 $ 2,736
Total fund
operating expenses 1.71% 2.41% 2.40%
==== ==== ====
<CAPTION>
Alliance New Europe Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- --------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees .92% .92% .92% After 1 year $ 586 $ 641 $ 241 $ 339 $ 239
Distribution (12b-1) fees .30% 1.00% 1.00% After 3 years $ 923 $ 942 $ 742 $ 736 $ 736
Other expenses .43% .46% .44% After 5 years $ 1,284 $1,270 $ 1,270 $ 1,260 $ 1,260
---- ---- ---- After 10 years $ 2,296 $2,535(b) $ 2,535(b) $ 2,696 $ 2,696
Total fund
operating expenses 1.65% 2.38% 2.36%
==== ==== ====
</TABLE>
--------------------------------------------------------------------------------
Please refer to the footnotes on page 26.
25
<PAGE>
<TABLE>
<CAPTION>
Operating Expenses Examples
--------------------------------------------------------- ----------------------------------------------------------------------
Alliance Worldwide
Privatization Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- --------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees 1.00% 1.00% 1.00% After 1 year $ 594 $ 650 $ 250 $ 347 $ 247
Distribution (12b-1) fees .30% 1.00% 1.00% After 3 years $ 950 $ 970 $ 770 $ 761 $ 761
Other expenses .44% .47% .44% After 5 years $ 1,329 $1,316 $ 1,316 $ 1,301 $ 1,301
---- ---- ---- After 10 years $ 2,389 $2,626(b) $ 2,626(b) $ 2,776 $ 2,776
Total fund
operating expenses 1.74% 2.47% 2.44%
==== ==== ====
<CAPTION>
Alliance International
Premier Growth Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- --------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees 1.00% 1.00% 1.00% After 1 year $ 668 $ 724 $ 324 $ 424 $ 324
Distribution (12b-1) fees .30% 1.00% 1.00% After 3 years (c) $ 1,319 $1,333 $ 1,133 $ 1,131 $ 1,131
Other expenses 1.96% 1.93% 1.92% After 5 years (c) $ 1,993 $1,959 $ 1,959 $ 1,955 $ 1,955
---- ---- ---- After 10 years (c) $ 3,783 $3,959(b) $ 3,959(b) $ 4,094 $ 4,094
Total fund
operating expenses 3.26% 3.93% 3.92%
==== ==== ====
Waiver and/or expense
reimbursement (a) (.75)% (.72)% (.71)%
==== ==== ====
Net expenses 2.51% 3.21% 3.21%
==== ==== ====
<CAPTION>
Alliance Global Small Cap Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- --------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees 1.00% 1.00% 1.00% After 1 year $ 621 $ 679 $ 279 $ 378 $ 278
Distribution (12b-1) fees .30% 1.00% 1.00% After 3 years $ 1.032 $1,056 $ 856 $ 853 $ 853
Other expenses .72% .76% .75% After 5 years $ 1,467 $1,459 $ 1,459 $ 1,454 $ 1,454
---- ---- ---- After 10 years $ 2,673 $2,913(b) $ 2,913(b) $ 3,080 $ 3,080
Total fund
operating expenses 2.02% 2.76% 2.75%
==== ==== ====
<CAPTION>
Alliance International Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- --------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees 1.03% 1.03% 1.03% After 1 year $ 601 $ 663 $ 263 $ 360 $ 260
Distribution (12b-1) fees .26% 1.00% 1.00% After 3 years (c) $ 998 $1,037 $ 837 $ 826 $ 826
Interest Expense .01% 0% 0% After 5 years (c) $ 1,420 $1,437 $ 1,437 $ 1,418 $ 1,418
Other expenses .65% .71% .67% After 10 years (c) $ 2,592 $2,871(b) $ 2,871(b) $ 3,022 $ 3,022
---- ---- ----
Total fund
operating expenses 1.95% 2.74% 2.70%
==== ==== ====
Waiver and/or expense
reimbursement (a) (.14)% (.14)% (.13)%
==== ==== ====
Net expenses 1.81% 2.60% 2.57%
==== ==== ====
<CAPTION>
Alliance Greater
China '97 Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- --------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees 1.00% 1.00% 1.00% After 1 year $ 669 $ 725 $ 325 $ 425 $ 325
Distribution (12b-1) fees .30% 1.00% 1.00% After 3 years (c) $ 2,521 $2,584 $ 2,384 $ 2,262 $ 2,262
Other expenses 8.62% 8.72% 8.01% After 5 years (c) $ 4,196 $4,214 $ 4,214 $ 4,009 $ 4,009
------ ------ ------ After 10 years (c) $ 7,712 $7,858(b) $ 7,858(b) $ 7,668 $ 7,668
Total fund
operating expenses 9.92% 10.72% 10.01%
====== ====== ======
Waiver and/or expense
reimbursement (a) (7.40)% (7.50)% (6.79)%
====== ====== ======
Net expenses 2.52% 3.22% 3.22%
====== ====== ======
<CAPTION>
Alliance All-Asia
Investment Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- --------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees 1.00% 1.00% 1.00% After 1 year $ 663 $ 751 $ 351 $ 444 $ 344
Distribution (12b-1) fees .30% 1.00% 1.00% After 3 years (c) $ 1,156 $1,268 $ 1,068 $1,048 $1,048
Other expenses After 5 years (c) $ 1,675 $1,807 $ 1,807 $1,774 $1,774
Administration fees .15% .15% .15% After 10 years (c) $ 3,093 $3,526(b) $ 3,526(b) $3,694(b) $3,694(b)
Other operating expenses 1.48% 1.81% 1.74%
---- ---- ----
Total other expenses 1.63% 1.96% 1.89%
---- ---- ----
Total fund
operating expenses 2.93% 3.96% 3.89%
==== ==== ====
Waiver and/or expense
reimbursement (a) (.48)% (.48)% (.48)%
==== ==== ====
Net expenses 2.45% 3.48% 3.41%
==== ==== ====
</TABLE>
--------------------------------------------------------------------------------
+ Assumes redemption at end of period.
++ Assumes no redemption at end of period.
(a) Reflects Alliance's contractual waiver of a portion of its advisory fee
and/or reimbursement of a portion of the Fund's operating expenses. This
waiver extends through the Fund's current fiscal year and may be extended
by Alliance for additional one-year terms.
(b) Assumes Class B shares convert to Class A shares after eight years.
(c) These examples assume that Alliance's agreement to waive management fees
and/or bear Fund expenses is not extended beyond its initial period.
(d) The advisory fee for the Fund is proposed to be increased. See page 32.
26
<PAGE>
--------------------------------------------------------------------------------
GLOSSARY
--------------------------------------------------------------------------------
This Prospectus uses the following terms.
TYPES OF SECURITIES
Convertible securities are fixed-income securities that are convertible into
common stock.
Debt securities are bonds, debentures, notes, bills, loans, other direct debt
instruments, and other fixed, floating and variable rate debt obligations, but
do not include convertible securities.
Depositary receipts include American Depositary Receipts ("ADRs"), Global
Depositary Receipts ("GDRs") and other types of depositary receipts.
Equity securities include (i) common stocks, partnership interests, business
trust shares and other equity or ownership interests in business enterprises and
(ii) securities convertible into, and rights and warrants to subscribe for the
purchase of, such stocks, shares and interests.
Fixed-income securities are debt securities and dividend-paying preferred
stocks, including floating rate and variable rate instruments.
Foreign government securities are securities issued or guaranteed, as to payment
of principal and interest, by foreign governments, quasi-governmental entities,
governmental agencies or other governmental entities.
Qualifying bank deposits are certificates of deposit, bankers' acceptances and
interest-bearing savings deposits of banks that have total assets of more than
$1 billion and are members of the Federal Deposit Insurance Corporation.
Rule 144A securities are securities that may be resold under Rule 144A of the
Securities Act.
U.S. Government securities are securities issued or guaranteed by the United
States Government, its agencies or instrumentalities.
TYPES OF COMPANIES OR COUNTRIES
Asian company is an entity that (i) is organized under the laws of an Asian
country and conducts business in an Asian country, (ii) derives 50% or more of
its total revenues from business in Asian countries, or (iii) issues equity or
debt securities that are traded principally on a stock exchange in an Asian
country.
Asian countries are Australia, the Democratic Socialist Republic of Sri Lanka,
the Hong Kong Special Administrative Region of the People's Republic of China
(Hong Kong), the Islamic Republic of Pakistan, Japan, the Kingdom of Thailand,
Malaysia, Negara Brunei Darussalam (Brunei), New Zealand, the People's Republic
of China, the People's Republic of Kampuchea (Cambodia), the Republic of China
(Taiwan), the Republic of India, the Republic of Indonesia, the Republic of
Korea (South Korea), the Republic of the Philippines, the Republic of Singapore,
the Socialist Republic of Vietnam and the Union of Myanmar.
European Company is a company (i) organized under the laws of a European country
that issues equity or debt securities that are traded principally on a European
stock exchange, or (ii) a company that derives 50% or more of its total revenues
or profits from businesses in Europe.
Greater China company is an entity that (i) is organized under the laws of a
Greater China country and conducts business in a Greater China country, (ii)
derives 50% or more of its total revenues from businesses in Greater China
countries, or (iii) issues equity or debt securities that are traded principally
on a stock exchange in a Greater China country. A company of a particular
Greater China country is a company that meets any of these criteria with respect
to that country.
Greater China countries are the People's Republic of China ("China"), the Hong
Kong Special Administrative Region of the People's Republic of China ("Hong
Kong") and the Republic of China ("Taiwan").
Health Care Industries include the health care and health care-related
(including health sciences) industries. These industries are principally engaged
in the discovery, development, provision, production or distribution of products
and services that relate to the diagnosis, treatment and prevention of diseases
or other medical disorders. Companies in these fields include, but are not
limited to, pharmaceutical firms; companies that design, manufacture or sell
medical supplies, equipment and support services; companies that operate
hospitals and other health care facilities; and companies engaged in medical,
diagnostic, biochemical, biotechnological or other health sciences research and
development.
International Company is an entity that (i) is organized under the laws of a
foreign country and conducts business in a foreign country, (ii) derives 50% or
more of its total revenues from business in foreign countries, or (iii) issues
equity or debt securities that are traded principally on a stock exchange in a
foreign country.
Non-U.S. Company is an entity that (i) is organized under the laws of a foreign
country, (ii) has its principal place of business in a foreign country, and
(iii) issues equity or debt securities that are traded principally in a foreign
country. Securities issued by non-U.S. companies are known as foreign
securities.
RATING AGENCIES, RATED SECURITIES AND INDEXES
Duff & Phelps is Duff & Phelps Credit Rating Co.
EAFE Index is Morgan Stanley Capital International Europe, Australasia and Far
East ("EAFE") Index.
Fitch is Fitch IBCA, Inc.
Investment grade securities are fixed-income securities rated Baa and above by
Moody's or BBB and above by S&P, Duff & Phelps or Fitch, or determined by
Alliance to be of equivalent quality.
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Lower-rated securities are fixed-income securities rated Ba or below by Moody's
or BB or below by S&P, Duff & Phelps or Fitch, or determined by Alliance to be
of equivalent quality, and are commonly referred to as "junk bonds."
Moody's is Moody's Investors Service, Inc.
Prime commercial paper is commercial paper rated Prime 1 by Moody's or A-1 or
higher by S&P or, if not rated, issued by companies that have an outstanding
debt issue rated Aa or higher by Moody's or AA or higher by S&P.
S&P is Standard & Poor's Ratings Services.
S&P 500 Index is S&P's 500 Composite Stock Price Index, a widely recognized
unmanaged index of market activity.
OTHER
1940 Act is the Investment Company Act of 1940, as amended.
Code is the Internal Revenue Code of 1986, as amended.
Commission is the Securities and Exchange Commission.
Exchange is the New York Stock Exchange.
Securities Act is the Securities Act of 1933, as amended.
--------------------------------------------------------------------------------
DESCRIPTION OF THE FUNDS
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This section of the Prospectus provides a more complete description of each
Fund's investment objectives, principal strategies and risks. Of course, there
can be no assurance that any Fund will achieve its investment objective.
Please note that:
o Additional discussion of the Funds' investments, including the risks of
the investments, can be found in the discussion under Description of
Additional Investment Practices following this section.
o The description of the principal risks for a Fund may include risks
described in the Summary of Principal Risks above. Additional information
about the risks of investing in a Fund can be found in the discussion
under Additional Risk Considerations.
o Additional descriptions of each Fund's strategies, investments and risks
can be found in the Fund's Statement of Additional Information or SAI.
o Except as noted, (i) the Funds' investment objectives are "fundamental"
and cannot be changed without a shareholder vote, and (ii) the Funds'
investment policies are not fundamental and thus can be changed without a
shareholder vote. Where an investment policy or restriction has a
percentage limitation, such limitation is applied at the time of
investment. Changes in the market value of securities in a Fund's
portfolio after they are purchased by the Fund will not cause the Fund to
be in violation of such limitation.
INVESTMENT OBJECTIVES AND PRINCIPAL POLICIES
DOMESTIC STOCK FUNDS
The Domestic Stock Funds offer investors seeking capital appreciation a range of
alternative approaches to investing in the U.S. equity markets.
Alliance Premier Growth Fund
Alliance Premier Growth Fund seeks long-term growth of capital by investing
predominantly in the equity securities of a limited number of large, carefully
selected, high-quality U.S. companies that are judged likely to achieve superior
earnings growth. As a matter of fundamental policy, the Fund normally invests at
least 85% of its total assets in the equity securities of U.S. companies. A U.S.
company is a company that is organized under United States law, has its
principal office in the United States and issues equity securities that are
traded principally in the United States. Normally, about 40-60 companies will
be represented in the Fund's portfolio, with the 25 most highly regarded of
these companies usually constituting approximately 70% of the Fund's net assets.
The Fund is thus atypical from most equity mutual funds in its focus on a
relatively small number of intensively researched companies. The Fund is
designed for those seeking to accumulate capital over time with less volatility
than that associated with investment in smaller companies.
On September 7, 2000 and September 26, 2000, the Board of Directors of Alliance
Premier Growth Fund, Inc. approved several proposals that will be presented to
stockholders at a special meeting that is planned for December 12, 2000. These
proposals include changes in certain of the Fund's fundamental investment
policies. These investment policy changes would: (1) permit the Fund to invest
up to 20% of its total assets on non-U.S. companies, up from the current 15%,
and remove the current definition of a "U.S. Company", thereby allowing the Fund
to rely on the standard definition of "Non-U.S. Company" used by other Alliance
Mutual Funds (as reflected in the Glossary), (2) enable the Fund to engage in
securities lending to the extent permitted by the 1940 Act, (3) revise the
fundamental policy regarding portfolio diversification to permit the Fund to
fully utilize the investment latitude for diversified funds contained in the
1940 Act, and (4) reclassify the Fund's fundamental policy regarding investments
in illiquid securities as a non-fundamental policy and revise that policy to
conform it to current SEC guidelines. If these proposals are adopted,
prospective investors will be notified by way of a supplement to this
Prospectus.
Alliance's investment strategy for the Fund emphasizes stock selection and
investment in the securities of a limited number of issuers. Alliance relies
heavily upon the fundamental analysis and research of its large internal
research staff, which generally follows a primary research universe of more than
500 companies that have strong management, superior industry positions,
excellent balance sheets and superior earnings growth prospects. An emphasis is
placed on identifying companies whose substantially above average prospective
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earnings growth is not fully reflected in current market valuations.
In managing the Fund, Alliance seeks to utilize market volatility judiciously
(assuming no change in company fundamentals), striving to capitalize on
apparently unwarranted price fluctuations, both to purchase or increase
positions on weakness and to sell or reduce overpriced holdings. The Fund
normally remains nearly fully invested and does not take significant cash
positions for market timing purposes. During market declines, while adding to
positions in favored stocks, the Fund becomes somewhat more aggressive,
gradually reducing the number of companies represented in its portfolio.
Conversely, in rising markets, while reducing or eliminating fully valued
positions, the Fund becomes somewhat more conservative, gradually increasing the
number of companies represented in its portfolio. Alliance thus seeks to gain
positive returns in good markets while providing some measure of protection in
poor markets.
Alliance expects the average market capitalization of companies represented in
the Fund's portfolio normally to be in the range, or in excess, of the average
market capitalization of companies included in the S&P 500 Index.
The Fund also may:
o invest up to 20% of its net assets in convertible securities;
o invest up to 5% of its net assets in rights or warrants;
o invest up to 15% of its total assets in foreign securities;
o purchase and sell exchange-traded index options and stock index futures
contracts; and
o write covered exchange-traded call options on its securities of up to 15%
of its total assets, and purchase and sell exchange-traded call and put
options on common stocks written by others of up to, for all options, 10%
of its total assets.
Because the Fund invests in a smaller number of securities than many other
equity funds, your investment has the risk that changes in the value of a single
security may have a more significant effect, either negative or positive, on the
Fund's net asset value.
Alliance Health Care Fund
Alliance Health Care Fund seeks capital appreciation and, secondarily, current
income. In seeking to achieve its investment objective, under normal
circumstances the Fund invests at least 65%, and normally substantially all, of
its total assets in securities issued by companies principally engaged in Health
Care Industries.
The Fund seeks investments in both new, smaller and less seasoned companies and
well-known, larger and established companies. Whenever possible, investments in
new, smaller or less seasoned companies will be made with a view to benefiting
from the development and growth of new products and markets in Health Care
Industries. Investments in these companies may offer more reward but may also
entail more risk than is generally true of larger, established companies.
While the Fund anticipates that a substantial portion of its portfolio will be
invested in the securities of U.S. companies, the Fund is not limited to
investing in such securities. Many companies in the forefront of world medical
technology are located outside the United States, primarily in Japan and Europe.
Accordingly, the Fund may invest up to 40% of its total assets in foreign
securities, including up to 25% in issuers located in any one foreign country.
However, no more than 5% of the Fund's total net assets may be invested in
securities of issuers located in emerging market countries.
Although the payment of dividends will be a factor considered in the selection
of investments for the Fund, the Fund seeks primarily to take advantage of
capital appreciation opportunities identified by Alliance in emerging
technologies and services in Health Care Industries by investing in companies
that are expected to profit from the development of new products and services
for these industries. Examples of such emerging technologies and services
include:
o New methods for administering drugs to a patient, such as surgical
implants and skin patches that enhance the effectiveness of the drugs and
may reduce patient side effects by delivering the drugs in precise
quantities over a prolonged time period or by evading natural body defense
mechanisms which delay the effect of the drugs;
o Developments in medical imaging such as the application of computer
technology to the output of conventional x-ray systems that allow for
cross-sectional images of soft tissue and organs (CT scanning) and
continuous imaging (digital radiography) as well as more advanced nuclear
medicine, ultrasound and magnetic resonance imaging (MRI);
o Advances in minimally invasive surgical techniques, such as angioplasty
and related technologies for diseased blood vessels and laser beams for
the eye, general and cardiovascular surgery, which provide greater
effectiveness, lower cost and improved patient safety than more
traditional surgical techniques;
o New therapeutic pharmaceutical compounds that control or alleviate
disease, including prescription and non-prescription drugs and treatment
regimes for conditions not controlled, alleviated or treatable by existing
medications or treatments and chemical or biological pharmaceuticals for
use in diagnostic testing;
o Advances in molecular biology such as signal transduction, cell adhesion
and cell to cell communication which have facilitated a rapid increase in
new classes of drugs. These have included monoclonal antibodies,
bio-engineered proteins and small molecules from novel synthesis and
screening techniques;
o Genomics, which allows scientists to better understand the causes of human
diseases, and in some cases has led to the manufacture of proteins for use
as therapeutic drugs;
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o Gene chips and other equipment that provides for the screening, diagnosis
and treatment of diseases;
o The introduction of large scale business efficiencies to the management of
nursing homes, acute and specialty hospitals as well as free-standing
outpatient facilities, surgical centers and rehabilitation centers;
o Adaptations of microprocessors for use by pharmaceutical manufacturers,
hospitals, doctors and others in Health Care Industries to increase
distribution efficiency;
o Health care delivery organizations that combine cost effectiveness with
high quality medical care and help address the rising cost of health care;
and
o The sale of prescription drugs and other pharmaceuticals to consumers via
the Internet.
The Fund's portfolio may also include companies that provide traditional
products and services currently in use in Health Care Industries and that are
likely to benefit from any increases in the general demand for such products and
services. The following are examples of the products and services that may be
offered by companies in Health Care Industries:
o Drugs or Pharmaceuticals, including both ethical and proprietary drugs,
drug administration products and pharmaceutical components used in
diagnostic testing;
o Medical Equipment and Supplies, including equipment and supplies used by
health service companies and individual practitioners, such as electronic
equipment used for diagnosis and treatment, surgical and medical
instruments and other products designed especially for Health Care
Industries;
o Health Care Services, including the services of clinical testing
laboratories, hospitals, nursing homes, clinics, centers for convalescence
and rehabilitation, and products and services for home health care; and
o Medical Research, including scientific research to develop drugs,
processes or technologies with possible commercial application in Health
Care Industries.
The Fund also may:
o purchase or sell forward foreign currency exchange contracts;
o enter into forward commitments for the purchase or sale of securities;
o make secured loans of portfolio securities of up to 20% of its total
assets; and
o enter into repurchase agreements.
Alliance Growth Fund
Alliance Growth Fund seeks long-term growth of capital. Current income is only
an incidental consideration. The Fund seeks to achieve its objective by
investing primarily in equity securities of companies with favorable earnings
outlooks and long-term growth rates that are expected to exceed that of the U.S.
economy over time. The Fund's investment objective is not fundamental.
The Fund also may invest up to 25% of its total assets in lower-rated
fixed-income securities and convertible bonds. The Fund generally will not
invest in securities rated at the time of purchase below Caa- by Moody's and
CCC- by S&P, Duff & Phelps or Fitch or in securities judged by Alliance to be of
comparable investment quality. From time to time, however, the Fund may invest
in securities rated in the lowest grades (i.e., C by Moody's or D or equivalent
by S&P, Duff & Phelps or Fitch) or securities of comparable investment quality
if there are prospects for an upgrade or a favorable conversion into equity
securities. If the credit rating of a security held by the Fund falls below its
rating at the time of purchase (or Alliance determines that the credit quality
of the security has deteriorated), the Fund may continue to hold the security if
such investment is considered appropriate under the circumstances.
The Fund also may:
o invest in zero-coupon and payment-in-kind bonds;
o invest in foreign securities although not generally in excess of 20% of
its total assets;
o buy or sell foreign currencies, options on foreign currencies, and foreign
currency futures contracts (and related options) and deal in forward
foreign currency exchange contracts;
o enter into forward commitments;
o buy and sell stock index futures contracts and options on futures
contracts and on stock indices;
o purchase and sell futures contracts and options on futures contracts and
U.S. Treasury securities;
o write covered call and put options;
o purchase and sell put and call options;
o make loans of portfolio securities of up to 25% of its total assets; and
o enter into repurchase agreements of up to 25% of its total assets.
Alliance Technology Fund
Alliance Technology Fund emphasizes growth of capital and invests for capital
appreciation. Current income is only an incidental consideration. The Fund may
seek income by writing listed call options. The Fund invests primarily in
securities of companies expected to benefit from technological advances and
improvements (i.e., companies that use technology extensively in the development
of new or improved products or processes). The Fund normally will have at least
80% of its assets invested in the securities of these companies. The Fund
normally will have substantially all its assets invested in equity securities,
but it also invests in debt securities offering an opportunity for price
appreciation. The Fund will invest in listed and unlisted securities, in U.S.
securities and up to 25% of its total assets in foreign securities.
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The Fund's policy is to invest in any company and industry and in any type of
security with potential for capital appreciation. It invests in well-known and
established companies and in new and unseasoned companies.
The Fund also may:
o write covered call options on its securities of up to 15% of its total
assets and purchase exchange-listed call and put options, including
exchange-traded index put options of up to, for all options, 10% of its
total assets;
o invest up to 10% of its total assets in warrants; and
o make loans of portfolio securities of up to 30% of its total assets.
Because the Fund invests primarily in technology companies, factors affecting
those types of companies could have a significant effect on the Fund's net asset
value. In addition, the Fund's investments in technology stocks, especially
those of smaller, less seasoned companies, tend to be more volatile than the
overall market. The Fund's investments in debt and foreign securities have
credit risk and foreign risk.
Alliance Quasar Fund
Alliance Quasar Fund seeks growth of capital by pursuing aggressive investment
policies. The Fund invests for capital appreciation and only incidentally for
current income. The Fund's practice of selecting securities based on the
possibility of appreciation cannot, of course, ensure against a loss in value.
Moreover, because the Fund's investment policies are aggressive, an investment
in the Fund is risky and investors who want assured income or preservation of
capital should not invest in the Fund.
On September 7, 2000, the Board of Directors of Alliance Quasar Fund, Inc.
approved several proposals that will be presented to stockholders at a special
meeting that is planned for December 12, 2000. These proposals include changes
in certain of the Fund's fundamental investment policies. These investment
policy changes would: (1) enable the Fund to engage in securities lending to the
extent permitted by the 1940 Act, (2) permit the Fund to engage in financial
forward and futures contracts and options thereon, (3) remove the fundamental
policy which restricts the Fund's ability to invest in securities of companies
(including predecessors) with less than three years of continuous operation, (4)
revise the fundamental policy regarding portfolio diversification to permit the
Fund to fully utilize the investment latitude for diversified funds contained in
the 1940 Act, and (5) reclassify the Fund's fundamental policy regarding
investments in illiquid securities as a non-fundamental policy and revise that
policy to conform it to current SEC guidelines. If these proposals are adopted,
prospective investors will be notified by way of a supplement to this
Prospectus.
The Fund invests in any company and industry and in any type of security with
potential for capital appreciation. It invests in well-known and established
companies and in new and unseasoned companies. When selecting securities for the
Fund, Alliance considers the economic and political outlook, the values of
specific securities relative to other investments, trends in the determinants of
corporate profits and management capability and practices.
The Fund invests principally in equity securities, but it also invests to a
limited degree in non-convertible bonds and preferred stocks. The Fund invests
in listed and unlisted U.S. and foreign securities. The Fund can periodically
invest in the securities of companies that are expected to appreciate due to a
development particularly or uniquely applicable to that company regardless of
general business conditions or movements of the market as a whole.
The Fund also may:
o make short sales of securities against the box but not more than 15% of
its net assets may be deposited on short sales; and
o write covered call options of up to 15% of its total assets and purchase
and sell put and call options written by others of up to, for all options,
10% of its total assets.
Investments in smaller companies may have more risk because they tend to be more
volatile than the overall stock market. The Fund's investments in
non-convertible bonds, preferred stocks and foreign stocks may have credit risk
and foreign risk.
The Alliance Fund
The Alliance Fund seeks long-term growth of capital and income primarily through
investment in common stocks. The Fund normally invests substantially all of its
assets in common stocks that Alliance believes will appreciate in value. The
Fund also may invest in other types of securities such as convertible
securities, investment grade instruments, U.S. Government securities and high
quality, short-term obligations such as repurchase agreements, bankers'
acceptances and domestic certificates of deposit. The Fund may invest without
limit in foreign securities. The Fund generally does not effect portfolio
transactions in order to realize short-term trading profits or exercise control.
The Fund also may:
o write exchange-traded covered call options on up to 25% of its total
assets;
o make secured loans of portfolio securities of up to 25% of its total
assets; and
o enter into repurchase agreements of up to seven days' duration with
commercial banks, but only if those agreements together with any
restricted securities and any securities which do not have readily
available market quotations do not exceed 10% of its net assets.
While the diversification and generally high quality of the Fund's investments
cannot prevent fluctuations in market values, they tend to limit investment risk
and contribute to achieving the Fund's objective.
Alliance Disciplined Value Fund
Alliance Disciplined Value Fund seeks long-term growth of capital through the
application of a disciplined value-oriented
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investment process. The Fund invests primarily in the equity securities of U.S.
companies that Alliance believes are undervalued. Alliance believes that, over
time, a company's stock price will come to reflect its intrinsic economic value.
Alliance uses a disciplined investment process to evaluate the companies in
Alliance's extensive research universe. Through this process, Alliance seeks to
identify the stocks of companies that offer the best combination of value and
potential for price appreciation.
Alliance depends heavily upon the fundamental analysis and research of its large
internal research staff in making investment decisions for the Fund. The
research staff follows a primary research universe of approximately 500 largely
domestic companies that are significant participants in their particular
industries. As one of the largest multi-national investment firms, Alliance has
access to considerable information concerning all of the companies followed, an
in-depth understanding of the products, services, markets and competition of
these companies and a good knowledge of the managements of most of the companies
in its research universe. Alliance's analysts prepare their own earnings
estimates and financial models for each company followed.
The disciplined value investment process is grounded in Alliance's research
capabilities. Through its research, Alliance identifies equity securities whose
current market prices do not reflect what Alliance considers to be their
intrinsic economic value. In determining a company's intrinsic economic value,
Alliance takes into account many factors it believes bear on the ability of the
company to perform in the future, including earnings growth, prospective cash
flows, dividend growth and growth in book value. Alliance then ranks, at least
weekly, each of the companies in its research universe in the relative order of
disparity between their intrinsic economic values and their stock prices, with
companies with the greatest disparities receiving the highest rankings (i.e.,
being considered the most undervalued). Alliance anticipates that, normally,
about 75 companies will be represented in the Fund's portfolio, with
substantially all of those companies ranking in the top three deciles of
Alliance's valuation model. Not every security deemed to be undervalued is
subsequently purchased by the Fund; undervalued securities are further analyzed
before being added to the Fund's portfolio. Alliance will use its research
capability to help best evaluate the potential rewards and risks of investing in
competing undervalued securities. It is the interaction between Alliance's
research capabilities and the disciplined value model's perception of value that
determines which securities will be purchased or sold by the Fund.
Alliance recognizes that the perception of what is a "value" stock is relative
and the factors considered in determining whether a stock is a "value" stock
may, and often will, have differing relative significance in different phases of
an economic cycle. Also, at different times, the Fund may be attracted to
investments in companies with different market capitalizations (i.e., large, mid
or small capitalization) or companies engaged in particular types of business
(e.g., banks and other financial institutions), although the Fund does not
intend to concentrate in any particular industries or businesses. The Fund's
portfolio emphasis upon particular industries or sectors will be a by-product of
the stock selection process rather than the result of assigned targets or
ranges.
Although the Fund intends to invest primarily in the equity securities of U.S.
companies, the Fund may also invest up to 15% of its assets in securities of
foreign securities.
The Fund also may:
o invest in convertible securities and rights and warrants;
o for hedging purposes, enter into forward commitments, and purchase and
sell futures contracts and options on securities, as well as options on
securities indices and options on futures contracts; and
o for hedging purposes, enter into currency swaps, forward foreign currency
exchange contracts and options on foreign currencies.
TOTAL RETURN FUNDS
The Total Return Funds provide a range of investment alternatives to investors
seeking both growth of capital and current income.
Alliance Growth and Income Fund
Alliance Growth and Income Fund seeks appreciation through investments primarily
in dividend-paying common stocks of good quality. The Fund also may invest in
fixed-income securities and convertible securities.
The Fund also may try to realize income by writing covered call options listed
on domestic securities exchanges. The Fund also invests in foreign securities.
Since the purchase of foreign securities entails certain political and economic
risks, the Fund restricts its investments in these securities to issues of high
quality. The Fund also may purchase and sell financial forward and futures
contracts and options on these securities for hedging purposes.
On July 19-20, 2000, the Board of Directors of Alliance Growth and Income Fund
approved several proposals that will be presented to the Fund's stockholders at
a special stockholders meeting that is planned for November 2, 2000. These
proposals include a proposed amendment to the Fund's investment advisory
agreement to increase the advisory fee payable by the Fund to Alliance Capital
Management L.P. (the "Adviser") and revise the current advisory fee breakpoint
schedule. If stockholders approve the proposal, at the Fund's current size, the
effective advisory fee would increase from .47 of 1% to .624 of 1% and the
advisory fee breakpoint schedule would change. The new advisory fee would become
effective promptly following such approval. In addition, the Fund will be
requesting stockholder approval of, among other things, changes in two of the
Fund's fundamental investment policies. These investment policy changes would
(1) enable the Fund to engage in securities lending to the extent permitted by
the 1940 Act and (2) revise the Fund's fundamental investment policy regarding
diversification to permit the Fund to fully utilize the investment latitude for
diversified funds established by the 1940 Act. If
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these proposals are adopted, prospective investors will be notified by way of a
supplement to this prospectus.
Alliance Balanced Shares
Alliance Balanced Shares seeks a high return through a combination of current
income and capital appreciation. Although the Fund's investment objective is not
fundamental, the Fund is a "balanced" fund as a matter of fundamental policy.
The Fund invests in equity securities of high-quality, financially strong,
dividend-paying companies. Normally, the Fund's investments will consist of
about 60% in stocks, but stocks may make up to 75% of its investments. The Fund
will not purchase a security if as a result less than 25% of its total assets
will be in fixed income senior securities. These investments may include short-
and long-term debt securities, preferred stocks, convertible debt securities and
convertible preferred stocks to the extent that their values are attributable to
their fixed-income characteristics. Other than this restriction, the percentage
of the Fund's assets invested in each type of security will vary.
On September 7, 2000, the Board of Directors of Alliance Balanced Shares, Inc.
approved several proposals that will be presented to stockholders at a special
meeting that is planned for December 12, 2000. These proposals include changes
in certain of the Fund's fundamental investment policies. These investment
policy changes would:1) enable the Fund to engage in securities lending to the
extent permitted by the 1940 Act, (2) revise the fundamental policy regarding
portfolio diversification to permit the Fund to fully utilize the investment
latitude for diversified funds contained in the 1940 Act, (3) permit the Fund to
engage in financial forward and futures contracts and options thereon, and (4)
reclassify the Fund's fundamental policy regarding investments in illiquid
securities as a non-fundamental policy. If these proposals are adopted,
prospective investors will be notified by way of a supplement to this
Prospectus.
The Fund invests in U.S. Government securities, bonds, senior debt securities,
and preferred and common stocks in such proportions and of such type as Alliance
deems best adapted to the current economic and market outlooks. The Fund may
invest up to 15% of the value of its total assets in foreign equity and
fixed-income securities eligible for purchase by the Fund under its investment
policies described above.
The Fund also may:
o enter into contracts for the purchase or sale for future delivery of
foreign currencies;
o purchase and write put and call options on foreign currencies and enter
into forward foreign currency exchange contracts for hedging purposes; and
o subject to market conditions, write covered call options listed on a
domestic exchange to realize income.
As a balanced fund, the Fund has the risk that the allocation of its investments
between equity and debt securities may have a more significant effect on the
Fund's net asset value when one of these asset classes is performing more poorly
than the other.
Alliance Utility Income Fund
Alliance Utility Income Fund seeks current income and capital appreciation by
investing primarily in equity and fixed-income securities of companies in the
utilities industry. As a fundamental policy, the Fund normally invests at least
65% of its total assets in securities of companies in the utilities industry.
The Fund seeks to take advantage of the characteristics and historical
performance of securities of utility companies, many of which pay regular
dividends and increase their common stock dividends over time. The Fund
considers a company to be in the utilities industry if, during the most recent
twelve-month period, at least 50% of the company's gross revenues, on a
consolidated basis, were derived from its utilities activities.
The Fund may invest in securities of both U.S. and foreign issuers, although the
Fund will invest no more than 15% of its total assets in issuers in any one
foreign country. The Fund invests at least 65% of its total assets in
income-producing securities, but there is otherwise no limit on the allocation
of the Fund's investments between equity securities and fixed-income securities.
The Fund may maintain up to 35% of its net assets in lower-rated securities. The
Fund will not retain a security that is downgraded below B or determined by
Alliance to have undergone similar credit quality deterioration following
purchase.
The Fund may invest up to 35% of its total assets in equity and fixed-income
securities of domestic and foreign corporate and governmental issuers other than
utility companies. These securities include U.S. Government securities and
repurchase agreements for those securities, foreign government securities,
corporate fixed-income securities of domestic issuers, corporate fixed-income
securities of foreign issuers denominated in foreign currencies or in U.S.
Dollars (in each case including fixed-income securities of an issuer in one
country denominated in the currency of another country), qualifying bank
deposits, and prime commercial paper.
The Fund also may:
o invest up to 30% of its net assets in convertible securities;
o invest up to 5% of its net assets in rights or warrants;
o invest in depositary receipts, securities of supranational entities
denominated in the currency of any country, securities denominated in
European Currency Units, and "semi-governmental securities";
o write covered call and put options, purchase call and put options on
securities of the types in which it is permitted to invest that are
exchange-traded and over-the-counter, and write uncovered call options for
cross-hedging purposes;
o purchase and sell exchange-traded options on any securities index composed
of the types of securities in which it may invest;
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o enter into contracts for the purchase or sale for future delivery of
fixed-income securities or foreign currencies, or contracts based on
financial indices, including an index of U.S. Government securities,
foreign government securities, corporate fixed-income securities, or
common stock, and may purchase and write options on futures contracts;
o purchase and write call and put options on foreign currencies traded on
U.S. and foreign exchanges or over-the-counter for hedging purposes;
o purchase or sell forward contracts;
o enter into interest rate swaps and purchase or sell interest rate caps and
floors;
o enter into forward commitments;
o enter into standby commitment agreements;
o make short sales of securities or maintain a short position;
o make secured loans of portfolio securities of up to 20% of its total
assets; and
o enter into repurchase agreements for U.S. Government securities.
The Fund's principal risks include those that arise from its investing primarily
in electric utility companies. Factors affecting that industry sector can have a
significant effect on the Fund's net asset value. The U.S. utilities industry
has experienced significant changes in recent years. Electric utility companies
in general have been favorably affected by lower fuel costs, the full or near
completion of major construction programs and lower financing costs. In
addition, many utility companies have generated cash flows in excess of current
operating expenses and construction expenditures, permitting some degree of
diversification into unregulated businesses. Regulatory changes, however, could
increase costs or impair the ability of nuclear and conventionally fueled
generating facilities to operate their facilities and reduce their ability to
make dividend payments on their securities. Rates of return of utility companies
generally are subject to review and limitation by state public utilities
commissions and tend to fluctuate with marginal financing costs. Rate changes
ordinarily lag behind changes in financing costs and can favorably or
unfavorably affect the earnings or dividend pay-outs of utilities stocks
depending upon whether the rates and costs are declining or rising.
Utility companies historically have been subject to the risks of increases in
fuel and other operating costs, high interest costs, costs associated with
compliance with environmental and nuclear safety regulations, service
interruptions, economic slowdowns, surplus capacity, competition, and regulatory
changes. There also can be no assurance that regulatory policies or accounting
standards changes will not negatively affect utility companies' earnings or
dividends. Utility companies are subject to regulation by various authorities
and may be affected by the imposition of special tariffs and changes in tax
laws. To the extent that rates are established or reviewed by governmental
authorities, utility companies are subject to the risk that such authorities
will not authorize increased rates. Because of the Fund's policy of
concentrating its investments in utility companies, the Fund is more susceptible
than most other mutual funds to economic, political or regulatory occurrences
affecting the utilities industry.
Foreign utility companies, like those in the U.S., are generally subject to
regulation, although the regulation may or may not be comparable to domestic
regulations. Foreign utility companies in certain countries may be more heavily
regulated by their respective governments than utility companies located in the
U.S. As in the U.S., foreign utility companies generally are required to seek
government approval for rate increases. In addition, many foreign utility
companies use fuels that cause more pollution than those used in the U.S. and
may yet be required to invest in pollution control equipment. Foreign utility
regulatory systems vary from country to country and may evolve in ways different
from regulation in the U.S. The percentage of the Fund's assets invested in
issuers of particular countries wil vary.
Increases in interest rates may cause the value of the Fund's investments to
decline and the decrease in value may not be offset by higher interest rate
income. The Fund's investments in lower-rated securities may be subject to more
credit risk than a fund that invests in higher-rated securities.
Alliance Real Estate Investment Fund
Alliance Real Estate Investment Fund seeks a total return from long-term growth
of capital and from income principally through investing in a portfolio of
equity securities of issuers that are primarily engaged in or related to the
real estate industry.
The Fund normally invests at least 65% of its total assets in equity securities
of real estate investment trusts, or REITs, and other real estate industry
companies. A "real estate industry company" is a company that derives at least
50% of its gross revenues or net profits from the ownership, development,
construction, financing, management, or sale of commercial, industrial, or
residential real estate or interests in these properties. The Fund invests in
equity securities that include common stock, shares of beneficial interest of
REITs, and securities with common stock characteristics, such as preferred stock
or convertible securities ("Real Estate Equity Securities").
The Fund may invest up to 35% of its total assets in (a) securities that
directly or indirectly represent participations in, or are collateralized by and
payable from, mortgage loans secured by real property ("Mortgage-Backed
Securities"), such as mortgage pass-through certificates, real estate mortgage
investment conduit certificates ("REMICs") and collateralized mortgage
obligations ("CMOs") and (b) short-term investments. These securities are
described below.
In selecting Real Estate Equity Securities, Alliance's analysis will focus on
determining the degree to which the company involved can achieve sustainable
growth in cash flow and dividend paying capability. Alliance believes that the
primary determinant of this capability is the economic viability of property
markets in which the company operates and that the secondary determinant of this
capability is the ability of management to add value through strategic focus and
operating expertise. The Fund will purchase
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Real Estate Equity Securities when, in the judgment of Alliance, their market
price does not adequately reflect this potential. In making this determination,
Alliance will take into account fundamental trends in underlying property
markets as determined by proprietary models, site visits conducted by
individuals knowledgeable in local real estate markets, price-earnings ratios
(as defined for real estate companies), cash flow growth and stability, the
relationship between asset value and market price of the securities, dividend
payment history, and such other factors that Alliance may determine from time to
time to be relevant. Alliance will attempt to purchase for the Fund Real Estate
Equity Securities of companies whose underlying portfolios are diversified
geographically and by property type.
The Fund may invest without limitation in shares of REITs. REITs are pooled
investment vehicles that invest primarily in income producing real estate or
real estate related loans or interests. REITs are generally classified as equity
REITs, mortgage REITs, or a combination of equity and mortgage REITs. Equity
REITs invest the majority of their assets directly in real property and derive
income primarily from the collection of rents. Equity REITs can also realize
capital gains by selling properties that have appreciated in value. Mortgage
REITs invest the majority of their assets in real estate mortgages and derive
income from the collection of interest payments. Similar to investment companies
such as the Fund, REITs are not taxed on income distributed to shareholders
provided they comply with several requirements of the Code. The Fund will
indirectly bear its proportionate share of expenses incurred by REITs in which
the Fund invests in addition to the expenses incurred directly by the Fund.
The Fund's investment strategy with respect to Real Estate Equity Securities is
based on the premise that property market fundamentals are the primary
determinant of growth underlying the performance of Real Estate Equity
Securities. Value and management further distinguishes the most attractive Real
Estate Equity Securities. The Fund's research and investment process is designed
to identify those companies with strong property fundamentals and strong
management teams. This process is comprised of real estate market research,
specific property inspection, and securities analysis. Alliance believes that
this process will result in a portfolio that will consist of Real Estate Equity
Securities of companies that own assets in the most desirable markets across the
country, diversified geographically and by property type.
To implement the Fund's research and investment process, Alliance has retained
the consulting services of CB Richard Ellis, Inc. ("CBRE"), a publicly held
company and the largest real estate services company in the United States.
CBRE's business includes real estate brokerage, property and facilities
management, and real estate finance and investment advisory activities. The
universe of property-owning real estate industry firms consists of approximately
135 companies of sufficient size and quality to merit consideration for
investment by the Fund. As consultant to Alliance, CBRE provides access to its
proprietary model, REIT-Score, which analyzes the approximately 22,000
properties owned by these 135 companies. Using proprietary databases and
algorithms, CBRE analyzes local market rent, expenses, occupancy trends, market
specific transaction pricing, demographic and economic trends, and leading
indicators of real estate supply such as building permits. Over 1,000 asset-type
specific geographic markets are analyzed and ranked on a relative scale by CBRE
in compiling its REIT-Score database. The relative attractiveness of these real
estate industry companies is similarly ranked based on the composite rankings of
the properties they own.
Once the universe of real estate industry companies has been distilled through
the market research process, CBRE's local market presence provides the
capability to perform site specific inspections of key properties. This analysis
examines specific location, condition, and sub-market trends. CBRE's use of
locally based real estate professionals provides Alliance with a window on the
operations of the portfolio companies as information can immediately be put in
the context of local market events. Only those companies whose specific property
portfolios reflect the promise of their general markets will be considered for
investment by the Fund.
Alliance further screens the universe of real estate industry companies by using
rigorous financial models and by engaging in regular contact with management of
targeted companies. Each management's strategic plan and ability to execute the
plan are determined and analyzed. Alliance makes extensive use of CBRE's network
of industry analysts in order to assess trends in tenant industries. This
information is then used to further evaluate management's strategic plans.
Financial ratio analysis is used to isolate those companies with the ability to
make value-added acquisitions. This information is combined with property market
trends and used to project future earnings potential.
The Fund may invest in short-term investments including: corporate commercial
paper and other short-term commercial obligations, in each case rated or issued
by companies with similar securities outstanding that are rated Prime-1, Aa or
better by Moody's or A-1, AA or better by S&P; obligations (including
certificates of deposit, time deposits, demand deposits and bankers'
acceptances) of banks with securities outstanding that are rated Prime-1, Aa or
better by Moody's or A-1, AA or better by S&P; and obligations issued or
guaranteed by the U.S. Government or its agencies or instrumentalities with
remaining maturities not exceeding 18 months.
The Fund may invest in debt securities rated BBB or higher by S&P or Baa or
higher by Moody's or, if not rated, of equivalent credit quality as determined
by Alliance. The Fund expects that it will not retain a debt security that is
downgraded below BBB or Baa or, if unrated, determined by Alliance to have
undergone similar credit quality deterioration, subsequent to purchase by the
Fund.
The Fund also may:
o invest up to 15% of its net assets in convertible securities;
o enter into forward commitments;
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o enter into standby commitment agreements;
o make short sales of securities or maintain a short position but only if at
all times when a short position is open not more than 25% of the Fund's
net assets is held as collateral for such sales;
o invest up to 10% of its net assets in rights or warrants;
o make loans of portfolio securities of up to 25% of its total assets; and
o enter into repurchase agreements of up to seven days' duration.
Because the Fund invests a substantial portion of its assets in the real estate
market, it is subject to many of the same risks involved in direct ownership of
real estate. For example, the value of real estate could decline due to a
variety of factors affecting the real estate market generally, such as
overbuilding, increases in interest rates, or declines in rental rates. In
addition, REITs are dependent on the capability of their managers, may have
limited diversification, and could be significantly affected by changes in tax
laws.
The Fund's investments in mortgage-backed securities have prepayment risk, which
is the risk that mortgage loans will be prepaid when interest rates decline and
the Fund will have to reinvest in securities with lower interest rates. This
risk causes mortgage-backed securities to have significantly greater price and
yield volatility than traditional fixed-income securities. The Fund's
investments in REMICs, CMOs and other types of mortgage-backed securities may be
subject to special risks that are described under "Description of Investment
Practices."
GLOBAL STOCK FUNDS
The Global Stock Funds offer investors the opportunity to participate in the
potential for long-term capital appreciation available from investment in
foreign securities.
Alliance New Europe Fund
Alliance New Europe Fund seeks long-term capital appreciation through investment
primarily in the equity securities of companies based in Europe. The Fund
intends to invest substantially all of its assets in the equity securities of
European companies and has a fundamental policy of normally investing at least
65% of its total assets in these securities. The Fund may invest up to 35% of
its total assets in high-quality U.S. Dollar or foreign currency denominated
fixed-income securities issued or guaranteed by European governmental entities,
or by European or multinational companies or supranational organizations.
The Fund expects that it will invest primarily in the more established and
liquid markets in Europe. However, the Fund may also invest in the
lesser-developed markets in Europe including those countries in Southern and
Eastern Europe, as well as the former communist countries in the Soviet Union.
The Fund does not expect to invest more than 20% of its total assets in these
developing markets under normal circumstances or more than 10% of its total
assets in issuers based in any one of these developing countries.
In managing the Fund, Alliance utilizes a disciplined approach to invest on a
bottom-up basis in those companies exhibiting the best available combination of
sustainable fundamental growth at a reasonable price. Alliance's approach
emphasizes proprietary qualitative and quantitative inputs provided by its
in-house analysts. Internal analysis focuses primarily on large to upper-medium
capitalization stocks (those with a market value of $3 billion and above).
Country and industry exposures are by-products of the stock selection process.
Alliance does not actively manage currency exposures for this Fund but may hedge
underlying exposures back to U.S. Dollars when conditions are perceived to be
extreme.
Stock selection focuses on companies in growth industries that exhibit
above-average growth based on a competitive or sustainable advantage based on
brand, technology, or market share. A stock is typically sold when its relative
fundamentals are no longer as attractive as other investment opportunities
available to the Fund. This may be a function of the stock having achieved its
fair market value, deterioration in fundamentals relative to Alliance's
expectations, or because the management team looses confidence in company
management.
The Fund diversifies its investments among a number of European countries and
normally invests in companies based in at least three of these countries. The
Fund's investment policies do not require that the Fund concentrate its
investments in any single country. However, these policies also do not prevent
the Fund from concentrating its investments in a single country and in recent
years the Fund has invested more than 25% of its total assets in the United
Kingdom The Fund may invest without limit in any single European country. During
such times, the Fund would be subject to a correspondingly greater risk of loss
due to adverse political or regulatory developments, or an economic downturn,
within that country.
The Fund also may:
o invest up to 20% of its total assets in rights or warrants;
o invest in depositary receipts or other securities convertible into
securities of companies based in European countries, debt securities of
supranational entities denominated in the Euro or the currency of any
European country, debt securities denominated in the Euro of an issuer in
a European country (including supranational issuers), and
"semi-governmental securities";
o purchase and sell forward contracts;
o write covered call or put options and sell and purchase exchange-traded
put and call options, including exchange-traded index options;
o enter into financial futures contracts, including contracts for the
purchase or sale for future delivery of foreign currencies and futures
contracts based on stock indices, and purchase and write options on
futures contracts;
o purchase and write put options on foreign currencies traded on securities
exchanges or boards of trade or over-the-counter;
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o enter into forward commitments;
o enter into standby commitment agreements; and
o make secured loans of portfolio securities of up to 30% of its total
assets.
The Fund's investments in foreign countries and smaller countries may have more
risk because they tend to be more volatile than the overall stock market. To the
extent the Fund invests a substantial amount of its assets in a particular
European country, your investment is subject to the risk that market changes or
other events affecting that country may have a more significant effect on the
Fund's net asset value. The Fund's investments in U.S. Dollar- or foreign
currency-denominated fixed-income securities have interest rate and credit risk.
Alliance Worldwide Privatization Fund
Alliance Worldwide Privatization Fund seeks long-term capital appreciation. As a
fundamental policy, the Fund invests at least 65% of its total assets in equity
securities issued by enterprises that are undergoing, or have undergone,
privatization (as described below), although normally significantly more of its
assets will be invested in such securities. The balance of its investments will
include securities of companies believed by Alliance to be beneficiaries of
privatizations. The Fund is designed for investors desiring to take advantage of
investment opportunities, historically inaccessible to U.S. individual
investors, that are created by privatizations of state enterprises in both
established and developing economies. These companies include those in Western
Europe and Scandinavia, Australia, New Zealand, Latin America, Asia, Eastern and
Central Europe and, to a lesser degree, Canada and the United States.
The Fund's investments in enterprises undergoing privatization may comprise
three distinct situations. First, the Fund may invest in the initial offering of
publicly traded equity securities (an "initial equity offering") of a
government- or state-owned or controlled company or enterprise (a "state
enterprise"). Secondly, the Fund may purchase securities of a current or former
state enterprise following its initial equity offering. Finally, the Fund may
make privately negotiated purchases of stock or other equity interests in a
state enterprise that has not yet conducted an initial equity offering. Alliance
believes that substantial potential for capital appreciation exists as
privatizing enterprises rationalize their management structures, operations and
business strategies in order to compete efficiently in a market economy and the
Fund will thus emphasize investments in such enterprises.
Privatization is a process through which the ownership and control of companies
or assets changes in whole or in part from the public sector to the private
sector. Through privatization a government or state divests or transfers all or
a portion of its interest in a state enterprise to some form of private
ownership. Governments and states with established economies, including France,
Great Britain, Germany, and Italy, and those with developing economies,
including Argentina, Mexico, Chile, Indonesia, Malaysia, Poland, and Hungary,
are engaged in privatizations. The Fund will invest in any country believed to
present attractive investment opportunities.
A major premise of the Fund's approach is that the equity securities of
privatized companies offer opportunities for significant capital appreciation.
In particular, because privatizations are integral to a country's economic
restructuring, securities sold in initial equity offerings often are priced
attractively to secure the issuer's successful transition to private sector
ownership. Additionally, these enterprises often dominate their local markets
and typically have the potential for significant managerial and operational
efficiency gains.
The Fund diversifies its investments among a number of countries and normally
invests in issuers based in at least four, and usually considerably more,
countries. The Fund may invest up to 15% of its total assets in issuers in any
one foreign country, except that the Fund may invest up to 30% of its total
assets in issuers in any one of France, Germany, Great Britain, Italy and Japan.
The Fund may invest all of its assets within a single region of the world.
The Fund may invest up to 35% of its total assets in debt securities and
convertible debt securities. The Fund may maintain no more than 5% of its net
assets in lower-rated securities. The Fund will not retain a non-convertible
security that is downgraded below C or determined by Alliance to have undergone
similar credit quality deterioration following purchase.
The Fund also may:
o invest up to 20% of its total assets in rights or warrants;
o write covered call and put options, purchase put and call options on
securities of the types in which it is permitted to invest and on
exchange-traded index options, and write uncovered options for
cross-hedging purposes;
o enter into contracts for the purchase or sale for future delivery of
fixed-income securities or foreign currencies, or contracts based on
financial indices, including any index of U.S. Government securities,
foreign government securities, or common stock, and may purchase and write
options on future contracts;
o purchase and write put and call options on foreign currencies for hedging
purposes;
o purchase or sell forward contracts;
o enter into forward commitments;
o enter into standby commitment agreements;
o enter into currency swaps for hedging purposes;
o make short sales of securities or maintain a short position;
o make secured loans of portfolio securities of up to 30% of its total
assets; and
o enter into repurchase agreements for U.S. Government securities.
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Investments in non-U.S. companies and smaller companies may have more risk
because they tend to be more volatile than the overall stock market. The Fund's
investments in debt securities and convertible securities have interest risk and
credit risk.
Alliance International Premier Growth Fund
Alliance International Premier Growth Fund seeks long-term capital appreciation
by investing predominately in the equity securities of a limited number of
carefully selected international companies that are judged likely to achieve
superior earnings growth. As a matter of fundamental policy, the Fund will
invest under normal circumstances at least 85% of its total assets in equity
securities. The Fund makes investments based upon their potential for capital
appreciation. Current income is incidental to that objective.
In the main, the Fund's investments will be in comparatively large, high-quality
companies. Normally, about 40 companies will be represented in the Fund's
portfolio, and the 30 most highly regarded of these companies usually will
constitute approximately 70%, and often more, of the Fund's net assets. The Fund
thus differs from more typical international equity mutual funds by focusing on
a relatively small number of intensively researched companies. The Fund is
designed for investors seeking to accumulate capital over time. Because of
market risks inherent in any investment, the selection of securities on the
basis of their appreciation possibilities cannot ensure against possible loss in
value. There is, of course, no assurance that the Fund's investment objective
will be met.
Alliance expects that the market capitalization of the companies represented in
the Fund's portfolio will generally be in excess of $10 billion.
Within the investment framework of the Fund, Alliance's Large Cap Growth Group,
headed by Alfred Harrison, Alliance's Vice Chairman, has responsibility for
managing the Fund's portfolio. As discussed below, in selecting the Fund's
portfolio investments Alliance's Large Cap Growth Group will follow a
structured, disciplined research and investment process that is essentially
similar to that which it employs in managing the Alliance Premier Growth Fund.
In managing the Fund's assets, Alliance's investment strategy will emphasize
stock selection and investment in the securities of a limited number of issuers.
Alliance depends heavily upon the fundamental analysis and research of its large
global equity research team situated in numerous locations around the world. Its
global equity analysts follow a research universe of approximately 900
companies. As one of the largest multinational investment management firms,
Alliance has access to considerable information concerning the companies in its
research universe, an in-depth understanding of the products, services, markets
and competition of these companies, and a good knowledge of their management.
Research emphasis is placed on the identification of companies whose superior
prospective earnings growth is not fully reflected in current market valuations.
Alliance constantly adds to and deletes from this universe as fundamentals and
valuations change. Alliance's global equity analysts rate companies in three
categories. The performance of each analyst's ratings is an important
determinant of his or her incentive compensation. The equity securities of
"one-rated" companies are expected to significantly outperform the local market
in local currency terms. All equity securities purchased for the Fund's
portfolio will be selected from the universe of approximately 100 "one-rated"
companies. As noted above, the Fund usually invests approximately 70% of its net
assets in the approximately 30 of the most highly regarded of these companies.
The Fund's portfolio emphasis upon particular industries or sectors will be a
by-product of the stock selection process rather than the result of assigned
targets or ranges.
The Fund diversifies its investments among at least four, and usually
considerably more, countries. No more than 15% of the Fund's total assets will
be invested in issuers in any one foreign country, except that the Fund may
invest up to 35% of its total assets in each of the United Kingdom and Japan and
up to 25% of its total assets in issuers in each of Canada, France, Germany,
Italy, The Netherlands and Switzerland. Within these limits, geographic
distribution of the Fund's investments among countries or regions also will be a
product of the stock selection process rather than a predetermined allocation.
To the extent that the Fund concentrates its assets within one region or
country, the Fund may be subject to any special risks associated with that
region or country. During such times, the Fund would be subject to a
correspondingly greater risk of loss due to adverse political or regulatory
developments, or an economic downturn, within that country. While the Fund may
engage in currency hedging programs in periods in which Alliance perceives
extreme exchange rate risk, the Fund normally will not make significant use of
currency hedging strategies.
In the management of the Fund's investment portfolio, Alliance will seek to
utilize market volatility judiciously (assuming no change in company
fundamentals) to adjust the Fund's portfolio positions. To the extent consistent
with local market liquidity considerations, the Fund will strive to capitalize
on apparently unwarranted price fluctuations, both to purchase or increase
positions on weakness and to sell or reduce overpriced holdings. Under normal
circumstances, the Fund will remain substantially fully invested in equity
securities and will not take significant cash positions for market timing
purposes. Rather, through "buying into declines" and "selling into strength,"
Alliance seeks superior relative returns over time.
The Fund also may:
o invest up to 20% of its total assets in convertible securities;
o invest up to 20% of its total assets in rights or warrants;
o write covered call and put options, purchase put and call options on
securities of the types in which it is permitted to invest and on
exchange-traded index options, and write uncovered options for cross
hedging purposes;
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o enter into contracts for the purchase or sale for future delivery of
fixed-income securities or foreign currencies, or contracts based on
financial indices, including any index of U.S. Government securities,
foreign government securities, or common stock and may purchase and write
options on such future contracts;
o purchase and write put and call options on foreign currencies for hedging
purposes;
o purchase or sell forward contracts;
o enter into standby commitment agreements;
o enter into forward commitments;
o enter into currency swaps for hedging purposes;
o make short sales of securities or maintain short positions of no more than
5% of its net assets as collateral for short sales;
o make secured loans of portfolio securities of up to 30% of its total
assets; and
o enter into repurchase agreements for U.S. Government securities.
Because the Fund invests in a smaller number of securities than many other
equity funds, your investment also has the risk that changes in the value of a
single security may have a more significant effect, either negative or positive,
on the Fund's net asset value.
Alliance Global Small Cap Fund
Alliance Global Small Cap Fund seeks long-term growth of capital through
investment in a global portfolio of the equity securities of selected companies
with relatively small market capitalizations The Fund's portfolio emphasizes
companies with market capitalizations that would have placed them (when
purchased) in about the smallest 20% by market capitalization of actively traded
U.S. companies, or market capitalizations of up to about $1.5 billion. Because
the Fund applies the U.S. size standard on a global basis, its foreign
investments might rank above the lowest 20%, and, in fact, might in some
countries rank among the largest, by market capitalization in local markets.
Normally, the Fund invests at least 65% of its assets in equity securities of
these smaller capitalization companies. These companies are located in at least
three countries, one of which may be the U.S. The Fund may invest up to 35% of
its total assets in securities of companies whose market capitalizations exceed
the Fund's size standard. The Fund's portfolio securities may be listed on a
U.S. or foreign exchange or traded over-the-counter.
The Fund also may:
o invest up to 20% of its total assets in warrants to purchase equity
securities;
o invest in depositary receipts or other securities representing securities
of companies based in countries other than the U.S.;
o purchase or sell forward foreign currency contracts;
o write covered call options on its securities of up to 15% of its total
assets, and purchase exchange-traded call and put options, including put
options on market indices of up to, for all options, 10% of its total
assets; and
o make secured loans of portfolio securities of up to 30% of its total
assets.
One of the Fund's principal risks is its investments in smaller capitalization
companies. Alliance believes that smaller capitalization companies often have
sales and earnings growth rates exceeding those of larger companies and that
these growth rates tend to cause more rapid share price appreciation. Investing
in smaller capitalization stocks, however, involves greater risk than is
associated with larger, more established companies. For example, smaller
capitalization companies often have limited product lines, markets, or financial
resources. They may be dependent for management on one or a few key persons and
can be more susceptible to losses and risks of bankruptcy. Their securities may
be thinly traded (and therefore have to be sold at a discount from current
market prices or sold in small lots over an extended period of time), may be
followed by fewer investment research analysts, and may be subject to wider
price swings. For these reasons, the Fund's investments may have a greater
chance of loss than investments in securities of larger capitalization
companies. In addition, transaction costs in small capitalization stocks may be
higher than in those of larger capitalization companies.
The Fund's investments in international companies and in smaller companies will
be more volatile and may differ substantially from the overall U.S. market.
Alliance International Fund
Alliance International Fund seeks a total return on its assets from long-term
growth of capital and from income primarily through a broad portfolio of
marketable securities of established international companies, companies
participating in foreign economies with prospects for growth, including U.S.
companies having their principal activities and interests outside the U.S., and
foreign government securities. Normally, the Fund will invest more than 80% of
its assets in these types of companies.
The Fund expects to invest primarily in common stocks of established
international companies that Alliance believes have potential for capital
appreciation or income or both, but the Fund is not required to invest
exclusively in common stocks or other equity securities. The Fund may invest in
any other type of investment grade security, including convertible securities,
as well as in warrants, or obligations of the U.S. or foreign governments and
their political subdivisions.
The Fund intends to diversify its investments broadly among countries and
normally invests in at least three foreign countries, although it may invest a
substantial portion of its assets in one or more of these countries. The Fund
may invest in companies, wherever organized, that Alliance judges have their
principal activities and interests outside the U.S. These
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companies may be located in developing countries, which involves exposure to
economic structures that are generally less diverse and mature, and to political
systems that can be expected to have less stability than those of developed
countries. The Fund currently does not intend to invest more than 10% of its
total assets in companies in, or governments of, developing countries.
The Fund also may:
o purchase or sell forward foreign currency exchange contracts;
o write covered call or put options, sell and purchase U.S. or foreign
exchange-listed put and call options, including exchange-traded index
options;
o enter into financial futures contracts, including contracts for the
purchase or sale for future delivery of foreign currencies and stock index
futures, and purchase and write put and call options on futures contracts
traded on U.S. or foreign exchanges or over-the-counter;
o purchase and write put options on foreign currencies traded on securities
exchanges or boards of trade or over-the-counter;
o make loans of portfolio securities of up to 30% of its total assets; and
o enter into repurchase agreements of up to seven days' duration for up to
10% of the Fund's total assets.
Investments in foreign countries may have more risk because they tend to be more
volatile than the U.S. stock market. To the extent that the Fund invests a
substantial amount of its assets in a particular foreign country, an investment
in the Fund has the risk that market changes or other events affecting that
country may have a more significant effect, either negative or positive, on the
Fund's net asset value.
Alliance Greater China '97 Fund
Alliance Greater China '97 Fund is a non-diversified investment company that
seeks long-term capital appreciation through investment of at least 80% of its
total assets in equity securities issued by Greater China companies. The Fund
expects to invest a significant portion, which may be greater than 50%, of its
assets in equity securities of Hong Kong companies and may invest, from time to
time, all of its assets in Hong Kong companies or companies of either of the
other Greater China countries.
In recent years, China, Hong Kong and Taiwan have each experienced a high level
of real economic growth, although growth slowed during 1999, as expected. This
growth has resulted from advantageous economic conditions, including favorable
demographics, competitive wage rates, and rising per capita income and consumer
demand. Significantly, the growth has also been fueled by an easing by both
China and Taiwan of government restrictions and an increased receptivity to
foreign investment. This expanded, if not yet complete, openness to foreign
investment extends as well to the securities markets of both countries. Hong
Kong's free-market economy has historically included securities markets
completely open to foreign investments. All three countries have regulated stock
exchanges upon which shares of an increasing number of Greater China companies
are traded.
With its population estimated at more than 1.2 billion as a driving force, and
notwithstanding its continuing political rigidity, China's economic growth has
been coupled with significantly reduced government economic intervention and
basic economic structural change. Recent years have seen large increases in
industrial production with a significant decline in the state sector share of
industrial output, and increased involvement of local governmental units and the
private sector in establishing new business enterprises.
With China's growth has come an increasing direct and indirect economic
involvement of all three Greater China countries. For some time, Hong Kong, a
world financial and trade center in its own right, with a large stock exchange
and offices of many of the world's multinational companies, has been the gateway
to trade with and foreign investment in China. With the transfer on July 1, 1997
of the sovereignty of Hong Kong from Great Britain to China, not only the
political but the economic ties between China and Hong Kong are expected to
continue to intensify, with the continuation of Hong Kong's economic system as
provided for in the law governing its sovereignty.
Notwithstanding the, at times considerable, political tension between the two
countries, it is generally recognized that substantially increased trade and
investment with China has been generated from Taiwan, in many cases through Hong
Kong. Along with this increased interaction with China, Taiwan is becoming a
regional technological and telecommunication center, while continuing the
process of opening its economy up to foreign investment. Although geographically
limited, Taiwan boasts an economy among the world's 20 largest and its foreign
exchange reserves are the third largest in the world measured in U.S. dollars.
As China's economy continues to expand, it is expected that Taiwan's economic
interaction with China will likewise increase.
Alliance believes that over the long term conditions are favorable for
continuing and expanding economic growth in all three Greater China countries.
It is this potential which the Fund hopes to take advantage of by investing both
in established and new and emerging companies. Appendix A has additional
information about the Greater China countries.
In addition to investing in equity securities of Greater China companies, the
Fund may invest up to 20% of its total assets in (i) debt securities issued or
guaranteed by Greater China companies or by Greater China governments, their
agencies or instrumentalities and (ii) equity or debt securities issued by
issuers other than Greater China companies. The Fund will invest only in
investment grade securities. The Fund will normally sell a security that is
downgraded below investment grade or is determined by Alliance to have undergone
a similar credit quality deterioration.
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The Fund also may:
o invest up to 25% of its net assets in the convertible securities;
o invest up to 20% of its net assets in rights or warrants;
o invest in depositary receipts, instruments of supranational entities
denominated in the currency of any country, securities of multinational
companies and "semi-governmental securities";
o invest up to 25% of its net assets in equity-linked debt securities with
the objective of realizing capital appreciation;
o invest up to 20% of its net assets in loans and other direct debt
securities;
o write covered call and put options, sell or purchase exchange-traded index
options, and write uncovered options for cross-hedging purposes;
o enter into contracts for the purchase or sale for future delivery of
fixed-income securities or foreign currencies, or contracts based on
financial indices, including any index of U.S. Government securities,
securities issued by foreign government entities, or common stock, and may
purchase and write options on future contracts;
o purchase and write put and call options on foreign currencies for hedging
purposes;
o purchase or sell forward contracts;
o enter into interest rate swaps and purchase or sell interest rate caps and
floors;
o enter into forward commitments;
o enter into standby commitment agreements;
o enter into currency swaps for hedging purposes;
o make short sales of securities or maintain a short position, in each case
only if against the box;
o make secured loans of portfolio securities of up to 30% of its total
assets; and
o enter into repurchase agreements for U.S. Government securities.
All or some of the policies and practices listed above may not be available to
the Fund in the Greater China countries and the Fund will utilize these policies
only to the extent permissible.
The Fund's investments in Greater China companies will be significantly more
volatile and may differ significantly from the overall U.S. market. Your
investment also has the risk that market changes or other events affecting the
Greater China countries may have a more significant effect on the Fund's net
asset value. In addition, the Fund is "non-diversified," meaning that it invests
more of its assets in a smaller number of companies than many other
international funds. As a result, changes in the value of a single security may
have a more significant effect, either negative or positive, on the Fund's net
asset value.
Alliance All-Asia Investment Fund
Alliance All-Asia Investment Fund's investment objective is long-term capital
appreciation. The Fund invests at least 65% of its total assets in equity
securities (for the purposes of this investment policy, rights, warrants, and
options to purchase common stocks are not deemed to be equity securities),
preferred stocks and equity-linked debt securities issued by Asian companies.
The Fund may invest up to 35% of its total assets in debt securities issued or
guaranteed by Asian companies or by Asian governments, their agencies or
instrumentalities. The Fund will invest at least 80% of its total assets in
Asian companies and Asian debt securities, but also may invest in securities
issued by non-Asian issuers. The Fund expects to invest, from time to time, a
significant portion, which may be in excess of 50%, of its assets in equity
securities of Japanese companies.
In the past decade, Asian countries generally have experienced a high level of
real economic growth due to political and economic changes, including foreign
investment and reduced government intervention in the economy. Alliance believes
that certain conditions exist in Asian countries that create the potential for
continued rapid economic growth. These conditions include favorable demographics
and competitive wage rates, increasing levels of foreign direct investment,
rising per capita incomes and consumer demand, a high savings rate, and numerous
privatization programs. Asian countries also are becoming more industrialized
and are increasing their intra-Asian exports while reducing their dependence on
Western export demand. Alliance believes that these conditions are important to
the long-term economic growth of Asian countries.
As the economies of many Asian countries move through the "emerging market"
stage, thus increasing the supply of goods, services and capital available to
less developed Asian markets and helping to spur economic growth in those
markets, the potential is created for many Asian companies to experience rapid
growth. In addition, many Asian companies that have securities listed on
exchanges in more developed Asian countries will be participants in the rapid
economic growth of the less-developed countries. These companies generally offer
the advantages of more experienced management and more developed market
regulation.
As their economies have grown, the securities markets in Asian countries have
also expanded. New exchanges have been created and the number of listed
companies, annual trading volume, and overall market capitalization have
increased significantly. Additionally, new markets continue to open to foreign
investments. The Fund also offers investors the opportunity to access relatively
restricted markets. Alliance believes that investment opportunities in Asian
countries will continue to expand.
The Fund will invest in companies believed to possess rapid growth potential.
Thus, the Fund will invest in smaller, emerging companies, but will also invest
in larger, more established companies in such growing economic sectors as
capital goods, telecommunications, and consumer services.
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The Fund will invest primarily in investment grade debt securities, but may
maintain not more than 5% of its net assets in lower-rated securities,
lower-rated loans, and other lower-rated direct debt instruments. The Fund will
not retain a security that is downgraded below C or determined by Alliance to
have undergone similar credit quality deterioration following purchase.
The Fund also may:
o invest up to 25% of its net assets in the convertible securities;
o invest up to 20% of its net assets in rights or warrants;
o invest in depositary receipts, instruments of supranational entities
denominated in the currency of any country, securities of multinational
companies and "semi-governmental securities";
o invest up to 25% of its net assets in equity-linked debt securities with
the objective of realizing capital appreciation;
o invest up to 25% of its net assets in loans and other direct debt
instruments;
o write covered call and put options, sell or purchase exchange-traded index
options, and write uncovered options for cross-hedging purposes;
o enter into contracts for the purchase or sale for future delivery of
fixed-income securities or foreign currencies, or contracts based on
financial indices, including any index of U.S. Government securities,
securities issued by foreign government entities, or common stock and may
purchase and write options on future contracts;
o purchase and write put and call options on foreign currencies for hedging
purposes;
o purchase or sell forward contracts;
o enter into interest rate swaps and purchase or sell interest rate caps and
floors;
o enter into forward commitments;
o enter into standby commitment agreements;
o enter into currency swaps for hedging purposes;
o make short sales of securities or maintain a short position, in each case
only if against the box;
o make secured loans of portfolio securities of up to 30% of its total
assets; and
o enter into repurchase agreements for U.S. Government securities.
The Fund's investments in Asian and Pacific region countries will be
significantly more volatile and may differ significantly from the overall U.S.
market. To the extent the Fund invests a substantial amount of its assets in
Japanese companies, your investment has the risk that market changes or other
events affecting that country may have a more significant effect on the Fund's
net asset value. The Fund's investments in debt securities have interest rate
and credit risk.
DESCRIPTION OF ADDITIONAL INVESTMENT PRACTICES
This section describes the Funds' investment practices and associated risks.
Unless otherwise noted, a Fund's use of any of these practices was specified in
the previous section.
Asset-Backed Securities. Asset-backed securities (unrelated to first mortgage
loans) represent fractional interests in pools of leases, retail installment
loans, revolving credit receivables, and other payment obligations, both secured
and unsecured. These assets are generally held by a trust and payments of
principal and interest or interest only are passed through monthly or quarterly
to certificate holders and may be guaranteed up to certain amounts by letters of
credit issued by a financial institution affiliated or unaffiliated with the
trustee or originator of the trust.
Like mortgages underlying mortgage-backed securities, underlying automobile
sales contracts or credit card receivables are subject to prepayment, which may
reduce the overall return to certificate holders. Certificate holders may also
experience delays in payment on the certificates if the full amounts due on
underlying sales contracts or receivables are not realized by the trust because
of unanticipated legal or administrative costs of enforcing the contracts or
because of depreciation or damage to the collateral (usually automobiles)
securing certain contracts, or other factors.
Convertible Securities. Prior to conversion, convertible securities have the
same general characteristics as non-convertible debt securities, which generally
provide a stable stream of income with yields that are generally higher than
those of equity securities of the same or similar issuers. The price of a
convertible security will normally vary with changes in the price of the
underlying equity security, although the higher yield tends to make the
convertible security less volatile than the underlying equity security. As with
debt securities, the market value of convertible securities tends to decrease as
interest rates rise and increase as interest rates decline. While convertible
securities generally offer lower interest or dividend yields than
non-convertible debt securities of similar quality, they offer investors the
potential to benefit from increases in the market price of the underlying common
stock. Convertible debt securities that are rated Baa or lower by Moody's or BBB
or lower by S&P, Duff & Phelps or Fitch and comparable unrated securities as
determined by Alliance may share some or all of the risks of non-convertible
debt securities with those ratings.
Currency Swaps. Currency swaps involve the individually negotiated exchange by a
Fund with another party of a series of payments in specified currencies. A
currency swap may involve the delivery at the end of the exchange period of a
substantial amount of one designated currency in exchange for the other
designated currency. Therefore, the entire principal value of a currency swap is
subject to the risk that the other party to the swap will default on its
contractual delivery obligations. A Fund will not enter into any currency swap
unless the credit quality of the unsecured senior debt or the claims-paying
ability of the
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counterparty is rated in the highest rating category of at least one nationally
recognized rating organization at the time of entering into the transaction. If
there is a default by the counterparty to the transaction, the Fund will have
contractual remedies under the transaction agreements.
Depositary Receipts and Securities of Supranational Entities. Depositary
receipts may not necessarily be denominated in the same currency as the
underlying securities into which they may be converted. In addition, the issuers
of the stock of unsponsored depositary receipts are not obligated to disclose
material information in the United States and, therefore, there may not be a
correlation between such information and the market value of the depositary
receipts. ADRs are depositary receipts typically issued by an U.S. bank or trust
company that evidence ownership of underlying securities issued by a foreign
corporation. GDRs and other types of depositary receipts are typically issued by
foreign banks or trust companies and evidence ownership of underlying securities
issued by either a foreign or an U.S. company. Generally, depositary receipts in
registered form are designed for use in the U.S. securities markets, and
depositary receipts in bearer form are designed for use in foreign securities
markets. For purposes of determining the country of issuance, investments in
depositary receipts of either type are deemed to be investments in the
underlying securities, except with respect to Alliance Growth Fund, where
investments in ADRs are deemed to be investments in securities issued by U.S.
issuers and those in GDRs and other types of depositary receipts are deemed to
be investments in the underlying securities.
A supranational entity is an entity designated or supported by the national
government of one or more countries to promote economic reconstruction or
development. Examples of supranational entities include, among others, the World
Bank (International Bank for Reconstruction and Development) and the European
Investment Bank. A European Currency Unit is a basket of specified amounts of
the currencies of the member states of the European Economic Community.
"Semi-governmental securities" are securities issued by entities owned by either
a national, state or equivalent government or are obligations of one of such
government jurisdictions that are not backed by its full faith and credit and
general taxing powers.
Equity-Linked Debt Securities. Equity-linked debt securities are securities on
which the issuer is obligated to pay interest and/or principal that is linked to
the performance of a specified index of equity securities. The interest or
principal payments may be significantly greater or less than payment obligations
for other types of debt securities. Adverse changes in equity securities indices
and other adverse changes in the securities markets may reduce payments made
under, and/or the principal of, equity-linked debt securities held by a Fund. As
with any debt securities, the values of equity-linked debt securities will
generally vary inversely with changes in interest rates. A Fund's ability to
dispose of equity-linked debt securities will depend on the availability of
liquid markets for such securities. Investment in equity-linked debt securities
may be considered to be speculative.
Forward Commitments. Forward commitments for the purchase or sale of securities
may include purchases on a "when-issued" basis or purchases or sales on a
"delayed delivery" basis. In some cases, a forward commitment may be conditioned
upon the occurrence of a subsequent event, such as approval and consummation of
a merger, corporate reorganization or debt restructuring (i.e., a "when, as and
if issued" trade).
When forward commitment transactions are negotiated, the price is fixed at the
time the commitment is made, but delivery and payment for the securities take
place at a later date. Normally, the settlement date occurs within two months
after the transaction, but a Fund may negotiate settlements beyond two months.
Securities purchased or sold under a forward commitment are subject to market
fluctuations and no interest or dividends accrue to the purchaser prior to the
settlement date.
The use of forward commitments enables a Fund to protect against anticipated
changes in interest rates and prices. For instance, in periods of rising
interest rates and falling bond prices, a Fund might sell securities in its
portfolio on a forward commitment basis to limit its exposure to falling prices.
In periods of falling interest rates and rising bond prices, a Fund might sell a
security in its portfolio and purchase the same or a similar security on a
when-issued or forward commitment basis to obtain the benefit of currently
higher cash yields. If, however, Alliance were to forecast incorrectly the
direction of interest rate movements, a Fund might be required to complete such
when-issued or forward transactions at prices inferior to the then current
market values. When-issued securities and forward commitments may be sold prior
to the settlement date, but a Fund enters into when-issued and forward
commitments only with the intention of actually receiving securities or
delivering them, as the case may be. If a Fund chooses to dispose of the right
to acquire a when-issued security prior to its acquisition or dispose of its
right to deliver or receive against a forward commitment, it may incur a gain or
loss. Any significant commitment of Fund assets to the purchase of securities on
a "when, as and if issued" basis may increase the volatility of the Fund's net
asset value. No forward commitments will be made by Alliance Health Care Fund,
Alliance Utility Income Fund, Alliance Real Estate Investment Fund, Alliance New
Europe Fund, Alliance Worldwide Privatization Fund, Alliance International
Premier Growth Fund, Alliance Greater China '97 Fund or Alliance All-Asia
Investment Fund if, as a result, the Fund's aggregate commitments under the
transactions would be more than 30% of its total assets. In the event the other
party to a forward commitment transaction were to default, a Fund might lose the
opportunity to invest money at favorable rates or to dispose of securities at
favorable prices.
Forward Foreign Currency Exchange Contracts. A Fund may purchase or sell forward
foreign currency exchange contracts to minimize the risk of adverse changes in
the relationship between the U.S. Dollar and other currencies. A forward
contract is an obligation to purchase or sell a specific currency for an agreed
price at a future date, and is individually negotiated and privately traded.
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A Fund may enter into a forward contract, for example, when it enters into a
contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. Dollar price of the security
("transaction hedge"). A Fund will not engage in transaction hedges with respect
to the currency of a particular country to an extent greater than the aggregate
amount of the Fund's transactions in that currency. When a Fund believes that a
foreign currency may suffer a substantial decline against the U.S. Dollar, it
may enter into a forward sale contract to sell an amount of that foreign
currency approximating the value of some or all of the Fund's portfolio
securities denominated in such foreign currency, or when the Fund believes that
the U.S. Dollar may suffer a substantial decline against a foreign currency, it
may enter into a forward purchase contract to buy that foreign currency for a
fixed dollar amount ("position hedge"). A Fund will not position hedge with
respect to a particular currency to an extent greater than the aggregate market
value (at the time of making such sale) of the securities held in its portfolio
denominated or quoted in that currency. Instead of entering into a position
hedge, a Fund may, in the alternative, enter into a forward contract to sell a
different foreign currency for a fixed U.S. Dollar amount where the Fund
believes that the U.S. Dollar value of the currency to be sold pursuant to the
forward contract will fall whenever there is a decline in the U.S. Dollar value
of the currency in which portfolio securities of the Fund are denominated
("cross-hedge"). Unanticipated changes in currency prices may result in poorer
overall performance for the Fund than if it had not entered into such forward
contracts.
Hedging against a decline in the value of a currency does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Such transactions also preclude the
opportunity for gain if the value of the hedged currency should rise. Moreover,
it may not be possible for a Fund to hedge against a devaluation that is so
generally anticipated that the Fund is not able to contract to sell the currency
at a price above the devaluation level it anticipates. Alliance New Europe Fund,
Alliance Global Small Cap Fund and Alliance International Fund will not enter
into a forward contract with a term of more than one year or if, as a result,
more than 50% of its total assets would be committed to such contracts. Alliance
New Europe Fund's, Alliance Global Small Cap Fund's and Alliance International
Fund's investments in forward contracts will be limited to hedging involving
either specific transactions or portfolio positions. Alliance Growth Fund also
may purchase and sell foreign currency on a spot basis.
Illiquid Securities. The Funds will limit their investments in illiquid
securities to no more than 15% of their net assets, except that the limit is 10%
for Alliance Health Care Fund, Alliance International Fund, Alliance Technology
Fund, Alliance Quasar Fund, Alliance New Europe Fund, and Alliance Global Small
Cap Fund and 5% for The Alliance Fund and Alliance Growth Fund. Illiquid
securities generally include: (i) direct placements or other securities that are
subject to legal or contractual restrictions on resale or for which there is no
readily available market (e.g., when trading in the security is suspended or, in
the case of unlisted securities, when market makers do not exist or will not
entertain bids or offers), including many individually negotiated currency swaps
and any assets used to cover currency swaps and most privately negotiated
investments in state enterprises that have not yet conducted an initial equity
offering, (ii) over-the-counter options and assets used to cover
over-the-counter options, and (iii) repurchase agreements not terminable within
seven days.
Because of the absence of a trading market for illiquid securities, a Fund may
not be able to realize their full value upon sale. Alliance will monitor the
liquidity of a Fund's investments in illiquid securities. Except with respect to
Alliance Quasar Fund, Rule 144A securities will not be treated as "illiquid" for
purposes of this limit on investments.
A Fund that invests in securities for which there is no ready market may not be
able to readily sell such securities. Such securities are unlike securities that
are traded in the open market and can be expected to be sold immediately if the
market is adequate. The sale price of illiquid securities may be lower or higher
than Alliance's most recent estimate of their fair value. Generally, less public
information is available about the issuers of such securities than about
companies whose securities are traded on an exchange. To the extent that these
securities are foreign securities, there is no law in many of the countries in
which a Fund may invest similar to the Securities Act requiring an issuer to
register the sale of securities with a governmental agency or imposing legal
restrictions on resales of securities, either as to length of time the
securities may be held or manner of resale. However, there may be contractual
restrictions on resales of non-publicly traded foreign securities.
Interest Rate Transactions (Swaps, Caps, and Floors). Each Fund that may enter
into interest rate transactions expects to do so primarily to preserve a return
or spread on a particular investment or portion of its portfolio or to protect
against any increase in the price of securities the Fund anticipates purchasing
at a later date. The Funds do not intend to use these transactions in a
speculative manner.
Interest rate swaps involve the exchange by a Fund with another party of their
respective commitments to pay or receive interest (e.g., an exchange of floating
rate payments for fixed rate payments). Interest rate swaps are entered on a net
basis (i.e., the two payment streams are netted out, with the Fund receiving or
paying, as the case may be, only the net amount of the two payments). With
respect to Alliance Utility Income Fund, Alliance Greater China '97 Fund and
Alliance All-Asia Investment Fund, the exchange commitments can involve payments
in the same currency or in different currencies. The purchase of an interest
rate cap entitles the purchaser, to the extent that a specified index exceeds a
predetermined interest rate, to receive payments of interest on a
contractually-based principal amount from the party selling such interest rate
cap. The purchase of an interest rate floor entitles the purchaser, to the
extent that a specified index falls below a predetermined interest rate, to
receive payments of interest on an agreed principal amount from the party
selling the interest rate floor.
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A Fund may enter into interest rate swaps, caps, and floors on either an
asset-based or liability-based basis, depending upon whether it is hedging its
assets or liabilities. A Fund will not enter into an interest rate swap, cap, or
floor transaction unless the unsecured senior debt or the claims-paying ability
of the other party is rated in the highest rating category of at least one
nationally recognized rating organization. Alliance will monitor the
creditworthiness of counterparties on an ongoing basis. The swap market has
grown substantially in recent years, with a large number of banks and investment
banking firms acting both as principals and as agents utilizing standardized
swap documentation. As a result, the swap market has become relatively liquid.
Caps and floors are more recent innovations for which standardized documentation
has not yet been developed and, accordingly, they are less liquid than swaps.
The use of interest rate transactions is a highly specialized activity that
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. If Alliance were to incorrectly
forecast market values, interest rates and other applicable factors, the
investment performance of a Fund would be adversely affected by the use of these
investment techniques. Moreover, even if Alliance is correct in its forecasts,
there is a risk that the transaction position may correlate imperfectly with the
price of the asset or liability being hedged. There is no limit on the amount of
interest rate transactions that may be entered into by a Fund that is permitted
to enter into such transactions. These transactions do not involve the delivery
of securities or other underlying assets or principal. Accordingly, the risk of
loss with respect to interest rate transactions is limited to the net amount of
interest payments that a Fund is contractually obligated to make. If the
counterparty to an interest rate transaction defaults, a Fund's risk of loss
consists of the net amount of interest payments that the Fund contractually is
entitled to receive.
Loans and Other Direct Debt Instruments. Loans and other direct debt instruments
are interests in amounts owed by a corporate, governmental or other borrower to
another party. They may represent amounts owed to lenders or lending syndicates
(loans and loan participations), to suppliers of goods or services (trade claims
or other receivables), or to other creditors. Direct debt instruments involve
the risk of loss in case of default or insolvency of the borrower and may offer
less legal protection to a Fund in the event of fraud or misrepresentation than
debt securities. In addition, loan participations involve a risk of insolvency
of the lending bank or other financial intermediary. Direct debt instruments may
also include standby financing commitments that obligate a Fund to supply
additional cash to the borrower on demand. Loans and other direct debt
instruments are generally illiquid and may be transferred only through
individually negotiated private transactions.
Purchasers of loans and other forms of direct indebtedness depend primarily upon
the creditworthiness of the borrower for payment of principal and interest.
Direct debt instruments may not be rated by any nationally recognized rating
service. Failure to receive scheduled interest or principal payments on these
types of investments could adversely affect a Fund's net asset value and yield.
Loans that are fully secured offer a Fund more protection than unsecured loans
in the event of non-payment of scheduled interest or principal. However, there
is no assurance that the liquidation of collateral from a secured loan would
satisfy the borrower's obligation, or that the collateral can be liquidated.
Making loans to borrowers whose creditworthiness is poor may involve substantial
risks and may be highly speculative.
Borrowers that are in bankruptcy or restructuring may never pay off their
indebtedness, or may pay only a small fraction of the amount owed. Direct
indebtedness of government issuers will also involve a risk that the
governmental entities responsible for the repayment of the debt may be unable,
or unwilling, to pay interest and repay principal when due.
Investments in loans through direct assignment of a financial institution's
interests with respect to a loan may involve additional risks to a Fund. For
example, if a loan is foreclosed, a Fund could become part owner of any
collateral and would bear the costs and liabilities associated with owning and
disposing of the collateral. Direct debt instruments may also involve a risk of
insolvency of the lending bank or other intermediary.
A loan is often administered by a bank or other financial institution that acts
as agent for all holders. The agent administers the terms of the loan, as
specified on the loan agreement. Unless, under the terms of the loan or other
indebtedness, a Fund has direct recourse against the borrower, it may have to
rely on the agent to apply appropriate credit remedies against a borrower. If
assets held by the agent for the benefit of a Fund were determined to be subject
to the claims of the agent's general creditors, the Fund might incur certain
costs and delays in realizing payment on the loan or loan participation and
could suffer a loss of principal or interest.
Direct indebtedness purchased by a Fund may include letters of credit, revolving
credit facilities, or other standby financing commitments obligating a Fund to
pay additional cash on demand. These commitments may have the effect of
requiring a Fund to increase its investment in a borrower at a time when it
would not otherwise have done so, even if the borrower's condition makes it
unlikely that the amount will ever be repaid.
Loans of Portfolio Securities. The risk in lending portfolio securities, as with
other extensions of credit, consists of the possible loss of rights in the
collateral should the borrower fail financially. In determining whether to lend
securities to a particular borrower, Alliance will consider all relevant facts
and circumstances, including the creditworthiness of the borrower. While
securities are on loan, the borrower will pay the Fund any income from the
securities. The Fund may invest any cash collateral in portfolio securities and
earn additional income or receive an agreed-upon amount of income from a
borrower who has delivered equivalent collateral. Each Fund will have the right
to regain record ownership of loaned securities or equivalent securities in
order to exercise ownership rights such as voting rights, subscription rights
and rights to dividends, interest,
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or distributions. A Fund may pay reasonable finders', administrative, and
custodial fees in connection with a loan.
Mortgage-Backed Securities and Associated Risks. Interest and principal payments
(including prepayments) on the mortgages underlying mortgage-backed securities
are passed through to the holders of the securities. As a result of the
pass-through of prepayments of principal on the underlying securities,
mortgage-backed securities are often subject to more rapid prepayment of
principal than their stated maturity would indicate. Prepayments occur when the
mortgagor on a mortgage prepays the remaining principal before the mortgage's
scheduled maturity date. Because the prepayment characteristics of the
underlying mortgages vary, it is impossible to predict accurately the realized
yield or average life of a particular issue of pass-through certificates.
Prepayments are important because of their effect on the yield and price of the
mortgage-backed securities. During periods of declining interest rates,
prepayments can be expected to accelerate and a Fund that invests in these
securities would be required to reinvest the proceeds at the lower interest
rates then available. Conversely, during periods of rising interest rates, a
reduction in prepayments may increase the effective maturity of the securities,
subjecting them to a greater risk of decline in market value in response to
rising interest rates. In addition, prepayments of mortgages underlying
securities purchased at a premium could result in capital losses.
Mortgage-Backed Securities include mortgage pass-through certificates and
multiple-class pass-through securities, such as REMIC pass-through certificates,
CMOs and stripped mortgage-backed securities ("SMBS"), and other types of
Mortgage-Backed Securities that may be available in the future.
Guaranteed Mortgage Pass-Through Securities. Alliance Real Estate Investment
Fund may invest in guaranteed mortgage pass-through securities which represent
participation interests in pools of residential mortgage loans and are issued by
U.S. governmental or private lenders and guaranteed by the U.S. Government or
one of its agencies or instrumentalities, including but not limited to the
Government National Mortgage Association ("Ginnie Mae"), the Federal National
Mortgage Association ("Fannie Mae") and the Federal Home Loan Mortgage
Corporation ("Freddie Mac"). Ginnie Mae certificates are guaranteed by the full
faith and credit of the United States Government for timely payment of principal
and interest on the certificates. Fannie Mae certificates are guaranteed by
Fannie Mae, a federally chartered and privately-owned corporation, for full and
timely payment of principal and interest on the certificates. Freddie Mac
certificates are guaranteed by Freddie Mac, a corporate instrumentality of the
United States Government, for timely payment of interest and the ultimate
collection of all principal of the related mortgage loans.
Multiple-Class Pass-Through Securities and Collateralized Mortgage Obligations.
Mortgage-Backed Securities also include CMOs and REMIC pass-through or
participation certificates that may be issued by, among others, U.S. Government
agencies and instrumentalities as well as private lenders. CMOs and REMIC
certificates are issued in multiple classes and the principal of and interest on
the mortgage assets may be allocated among the several classes of CMOs or REMIC
certificates in various ways. Each class of CMOs or REMIC certificates, often
referred to as a "tranche," is issued at a specific adjustable or fixed interest
rate and must be fully retired no later than its final distribution date.
Generally, interest is paid or accrues on all classes of CMOs or REMIC
certificates on a monthly basis. Alliance Real Estate Investment Fund will not
invest in the lowest tranche of CMOs and REMIC certificates.
Typically, CMOs are collateralized by Ginnie Mae or Freddie Mac certificates but
also may be collateralized by other mortgage assets such as whole loans or
private mortgage pass-through securities. Debt service on CMOs is provided from
payments of principal and interest on collateral of mortgaged assets and any
reinvestment income.
A REMIC is a CMO that qualifies for special tax treatment under the Code and
invests in certain mortgages primarily secured by interests in real property and
other permitted investments. Investors may purchase "regular" and "residual"
interest shares of beneficial interest in REMIC trusts, although Alliance Real
Estate Investment Fund does not intend to invest in residual interests.
Options on Securities. An option gives the purchaser of the option, upon payment
of a premium, the right to deliver to (in the case of a put) or receive from (in
the case of a call) the writer a specified amount of a security on or before a
fixed date at a predetermined price. A call option written by a Fund is
"covered" if the Fund owns the underlying security, has an absolute and
immediate right to acquire that security upon conversion or exchange of another
security it holds, or holds a call option on the underlying security with an
exercise price equal to or less than that of the call option it has written. A
put option written by a Fund is covered if the Fund holds a put option on the
underlying securities with an exercise price equal to or greater than that of
the put option it has written.
A call option is for cross-hedging purposes if a Fund does not own the
underlying security, and is designed to provide a hedge against a decline in
value in another security that the Fund owns or has the right to acquire. A Fund
would write a call option for cross-hedging purposes, instead of writing a
covered call option, when the premium to be received from the cross-hedge
transaction would exceed that which would be received from writing a covered
call option, while at the same time achieving the desired hedge.
In purchasing an option, a Fund would be in a position to realize a gain if,
during the option period, the price of the underlying security increased (in the
case of a call) or decreased (in the case of a put) by an amount in excess of
the premium paid; otherwise the Fund would experience a loss equal to the
premium paid for the option.
If an option written by a Fund were exercised, the Fund would be obligated to
purchase (in the case of a put) or sell (in the case of a call) the underlying
security at the exercise price. The risk involved in writing an option is that,
if the option were exercised, the underlying security would then be purchased or
sold by the
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Fund at a disadvantageous price. Entering into a closing transaction (i.e., by
disposing of the option prior to its exercise) could reduce these risks. A Fund
retains the premium received from writing a put or call option whether or not
the option is exercised. The writing of covered call options could result in
increases in a Fund's portfolio turnover rate, especially during periods when
market prices of the underlying securities appreciate.
Alliance Technology Fund and Alliance Global Small Cap Fund will not write a
call option if the premium to be received by the Fund would not produce an
annualized return of at least 15% of the then current market value of the
securities subject to the option (without giving effect to commissions, stock
transfer taxes and other expenses that are deducted from premium receipts).
Options purchased or written by a Fund in negotiated transactions are illiquid
and it may not be possible for the Fund to effect a closing transaction at an
advantageous time.
Options on Securities Indices. An option on a securities index is similar to an
option on a security except that, rather than the right to take or make delivery
of a security at a specified price, an option on a securities index gives the
holder the right to receive, upon exercise of the option, an amount of cash if
the closing level of the chosen index is greater than (in the case of a call) or
less than (in the case of a put) the exercise price of the option.
Options on Foreign Currencies. As in the case of other kinds of options, the
writing of an option on a foreign currency constitutes only a partial hedge, up
to the amount of the premium received, and a Fund could be required to purchase
or sell foreign currencies at disadvantageous exchange rates and incur losses.
The purchase of an option on a foreign currency may constitute an effective
hedge against fluctuations in exchange rates although, in the event of rate
movements adverse to a Fund's position, it may forfeit the entire amount of the
premium plus related transaction costs. For Funds that may invest in options on
foreign currencies, see the Fund's SAI for further discussion of the use, risks,
and costs of options on foreign currencies.
Futures Contracts and Options on Futures Contracts. A "sale" of a futures
contract means the acquisition of a contractual obligation to deliver the
securities or foreign currencies or other commodity called for by the contract
at a specified price on a specified date. A "purchase" of a futures contract
means the incurring of an obligation to acquire the securities, foreign
currencies or other commodity called for by the contract at a specified price on
a specified date. The purchaser of a futures contract on an index agrees to take
or make delivery of an amount of cash equal to the difference between a
specified dollar multiple of the value of the index on the expiration date of
the contract ("current contract value") and the price at which the contract was
originally struck. No physical delivery of the securities underlying the index
is made.
A Fund may purchase options on futures contracts written or purchased by a Fund
that are traded on U.S. or foreign exchanges or over-the-counter. These
investment techniques will be used only to hedge against anticipated future
changes in market conditions and interest or exchange rates which otherwise
might either adversely affect the value of the Fund's portfolio securities or
adversely affect the prices of securities which the Fund intends to purchase at
a later date.
No Fund will enter into any futures contracts or options on futures contracts if
immediately thereafter the market values of the outstanding futures contracts of
the Fund and the currencies and futures contracts subject to outstanding options
written by the Fund would exceed 50% of its total assets, or in the case of
Alliance International Premier Growth Fund 100% of its total assets. Alliance
Premier Growth Fund, Alliance Growth and Income Fund, and Alliance Disciplined
Value Fund may not purchase or sell a stock index future if immediately
thereafter more than 30% of its total assets would be hedged by stock index
futures. Alliance Premier Growth Fund, Alliance Growth and Income Fund, and
Alliance Disciplined Value Fund may not purchase or sell a stock index future
if, immediately thereafter, the sum of the amount of margin deposits on the
Fund's existing futures positions would exceed 5% of the market value of the
Fund's total assets.
Repurchase Agreements. A repurchase agreement arises when a buyer purchases a
security and simultaneously agrees to resell it to the vendor at an agreed-upon
future date, normally a day or a few days later. The resale price is greater
than the purchase price, reflecting an agreed-upon interest rate for the period
the buyer's money is invested in the security. Such agreements permit a Fund to
keep all of its assets at work while retaining "overnight" flexibility in
pursuit of investments of a longer-term nature. If a vendor defaults on its
repurchase obligation, a Fund would suffer a loss to the extent that the
proceeds from the sale of the collateral were less than the repurchase price. If
a vendor goes bankrupt, a Fund might be delayed in, or prevented from, selling
the collateral for its benefit. Alliance monitors the creditworthiness of the
vendors with which the Fund enters into repurchase agreements.
Rights and Warrants. A Fund will invest in rights or warrants only if Alliance
deems the underlying equity securities themselves appropriate for inclusion in
the Fund's portfolio. Rights and warrants entitle the holder to buy equity
securities at a specific price for a specific period of time. Rights are similar
to warrants except that they have a substantially shorter duration. Rights and
warrants may be considered more speculative than certain other types of
investments in that they do not entitle a holder to dividends or voting rights
with respect to the underlying securities nor do they represent any rights in
the assets of the issuing company. The value of a right or warrant does not
necessarily change with the value of the underlying security, although the value
of a right or warrant may decline because of a decrease in the value of the
underlying security, the passage of time or a change in perception as to the
potential of the underlying security, or any combination of these factors. If
the market price of the underlying security is below the exercise
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price of the warrant on the expiration date, the warrant will expire worthless.
Moreover, a right or warrant ceases to have value if it is not exercised prior
to the expiration date.
Short Sales. A short sale is effected by selling a security that a Fund does not
own, or, if the Fund does own such security, it is not to be delivered upon
consummation of the sale. A short sale is "against the box" to the extent that a
Fund contemporaneously owns or has the right to obtain securities identical to
those sold short without payment. Alliance Utility Income Fund, Alliance
Worldwide Privatization Fund, Alliance Greater China '97 Fund and Alliance
All-Asia Investment Fund, each may make short sales of securities or maintain
short positions only for the purpose of deferring realization of gain or loss
for U.S. federal income tax purposes, provided that at all times when a short
position is open the Fund owns an equal amount of securities of the same issue
as, and equal in amount to, the securities sold short. In addition, each of
those Funds may not make a short sale if as a result more than 10% of the Fund's
net assets would be held as collateral for short sales, except that Alliance
Real Estate Investment Fund, Alliance Greater China '97 Fund and Alliance
All-Asia Investment Fund may not make a short sale if as a result more than 25%
of the Fund's net assets would be held as collateral for short sales. If the
price of the security sold short increases between the time of the short sale
and the time a Fund replaces the borrowed security, the Fund will incur a loss;
conversely, if the price declines, the Fund will realize a capital gain.
Standby Commitment Agreements. Standby commitment agreements commit a Fund, for
a stated period of time, to purchase a stated amount of a security that may be
issued and sold to the Fund at the option of the issuer. The price and coupon of
the security are fixed at the time of the commitment. At the time of entering
into the agreement, the Fund is paid a commitment fee, regardless of whether the
security ultimately is issued, typically equal to approximately 0.5% of the
aggregate purchase price of the security the Fund has committed to purchase. A
Fund will enter into such agreements only for the purpose of investing in the
security underlying the commitment at a yield and price considered advantageous
to the Fund and unavailable on a firm commitment basis. Investments in standby
commitments will be limited so that the aggregate purchase price of the
securities subject to the commitments will not exceed 25% with respect to
Alliance Real Estate Investment Fund and Alliance New Europe Fund, 50% with
respect to Alliance Worldwide Privatization Fund, Alliance International Premier
Growth Fund, Alliance Greater China '97 Fund and Alliance All-Asia Investment
Fund and 20% with respect to Alliance Utility Income Fund, of the Fund's assets
at the time of making the commitment.
There is no guarantee that a security subject to a standby commitment will be
issued and the value of the security, if issued, on the delivery date may be
more or less than its purchase price. Since the issuance of the security
underlying the commitment is at the option of the issuer, a Fund will bear the
risk of capital loss in the event the value of the security declines and may not
benefit from an appreciation in the value of the security during the commitment
period if the issuer decides not to issue and sell the security to the Fund.
Zero-Coupon and Payment-in-Kind Bonds. Zero-coupon bonds are issued at a
significant discount from their principal amount in lieu of paying interest
periodically. Payment-in-kind bonds allow the issuer to make current interest
payments on the bonds in additional bonds. Because zero-coupon bonds and
payment-in-kind bonds do not pay current interest in cash, their value is
generally subject to greater fluctuation in response to changes in market
interest rates than bonds that pay interest in cash currently. Both zero-coupon
and payment-in-kind bonds allow an issuer to avoid the need to generate cash to
meet current interest payments. These bonds may involve greater credit risks
than bonds paying interest currently. Although these bonds do not pay current
interest in cash, a Fund is nonetheless required to accrue interest income on
such investments and to distribute such amounts at least annually to
shareholders. Thus, a Fund could be required at times to liquidate other
investments in order to satisfy its dividend requirements.
Future Developments. A Fund may, following written notice to its shareholders,
take advantage of other investment practices that are not currently contemplated
for use by the Fund, or are not available but may yet be developed, to the
extent such investment practices are consistent with the Fund's investment
objective and legally permissible for the Fund. Such investment practices, if
they arise, may involve risks that exceed those involved in the activities
described above.
General. The successful use of the investment practices described above draws
upon Alliance's special skills and experience and usually depends on Alliance's
ability to forecast price movements, interest rates, or currency exchange rate
movements correctly. Should interest rates, prices or exchange rates move
unexpectedly, a Fund may not achieve the anticipated benefits of the
transactions or may realize losses and thus be in a worse position than if such
strategies had not been used. Unlike many exchange-traded futures contracts and
options on futures contracts, there are no daily price fluctuation limits for
certain options and forward contracts, and adverse market movements could
therefore continue to an unlimited extent over a period of time. In addition,
the correlation between movements in the prices of futures contracts, options
and forward contracts and movements in the prices of the securities and
currencies hedged or used for cover will not be perfect and could produce
unanticipated losses.
A Fund's ability to dispose of its position in futures contracts, options, and
forward contracts depends on the availability of liquid markets in such
instruments. Markets in options and futures with respect to a number of types of
securities and currencies are relatively new and still developing, and there is
no public market for forward contracts. It is impossible to predict the amount
of trading interest that may exist in various types of futures contracts,
options, and forward contracts. If a secondary market does not exist for an
option purchased or written by a Fund, it might not be possible to effect a
closing
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transaction in the option (i.e., dispose of the option), with the result that
(i) an option purchased by the Fund would have to be exercised in order for the
Fund to realize any profit and (ii) the Fund may not be able to sell currencies
or portfolio securities covering an option written by the Fund until the option
expires or it delivers the underlying security, futures contract or currency
upon exercise. Therefore, no assurance can be given that the Funds will be able
to utilize these instruments effectively. In addition, a Fund's ability to
engage in options and futures transactions may be limited by tax considerations
and the use of certain hedging techniques may adversely impact the
characterization of income to a Fund for U.S. federal income tax purposes.
Portfolio Turnover. The portfolio turnover rate for each Fund is included in the
Financial Highlights section. The Funds are actively managed and, in some cases
in response to market conditions, a Fund's portfolio turnover may exceed 100%. A
higher rate of portfolio turnover increases brokerage and other expenses, which
must be borne by the Fund and its shareholders. High portfolio turnover also may
result in the realization of substantial net short-term capital gains, which,
when distributed, are taxable to shareholders.
Temporary Defensive Position. For temporary defensive purposes, each Fund may
reduce its position in equity securities and invest in, without limit, certain
types of short-term, liquid, high grade or high-quality (depending on the Fund)
debt securities. These securities may include U.S. Government securities,
qualifying bank deposits, money market instruments, prime commercial paper and
other types of short-term debt securities including notes and bonds. For Funds
that may invest in foreign countries, such securities also may include
short-term, foreign-currency denominated securities of the type mentioned above
issued by foreign governmental entities, companies, and supranational
organizations. While the Funds are investing for temporary defensive purposes,
they may not meet their investment objectives.
ADDITIONAL RISK CONSIDERATIONS
Investment in certain of the Funds involves the special risk considerations
described below. Certain of these risks may be heightened when investing in
emerging markets.
Currency Considerations. Substantially all of the assets of Alliance New Europe
Fund, Alliance Worldwide Privatization Fund, Alliance International Premier
Growth Fund, Alliance International Fund, Alliance Greater China '97 Fund and
Alliance All-Asia Investment Fund, and a substantial portion of the assets of
Alliance Disciplined Value Fund and Alliance Global Small Cap Fund are invested
in securities denominated in foreign currencies. The Funds receive a
corresponding portion of their revenues in foreign currencies. Therefore, the
dollar equivalent of their net assets, distributions, and income will be
adversely affected by reductions in the value of certain foreign currencies
relative to the U.S. Dollar. If the value of the foreign currencies in which a
Fund receives its income falls relative to the U.S. Dollar between receipt of
the income and the making of Fund distributions, the Fund may be required to
liquidate securities in order to make distributions if it has insufficient cash
in U.S. Dollars to meet distribution requirements that the Fund must satisfy to
qualify as a regulated investment company for federal income tax purposes.
Similarly, if an exchange rate declines between the time a Fund incurs expenses
in U.S. Dollars and the time cash expenses are paid, the amount of the currency
required to be converted into U.S. Dollars in order to pay expenses in U.S.
Dollars could be greater than the equivalent amount of such expenses in the
currency at the time they were incurred. In light of these risks, a Fund may
engage in currency hedging transactions, as described above, which involve
certain special risks.
Foreign Securities. The securities markets of many foreign countries are
relatively small, with the majority of market capitalization and trading volume
concentrated in a limited number of companies representing a small number of
industries. Consequently, a Fund whose investment portfolio includes foreign
securities may experience greater price volatility and significantly lower
liquidity than a portfolio invested solely in equity securities of U.S.
companies. These markets may be subject to greater influence by adverse events
generally affecting the market, and by large investors trading significant
blocks of securities, than is usual in the United States. Securities settlements
may in some instances be subject to delays and related administrative
uncertainties.
Certain foreign countries require governmental approval prior to investments by
foreign persons or limit investment by foreign persons to only a specified
percentage of an issuer's outstanding securities or a specific class of
securities that may have less advantageous terms (including price) than
securities of the company available for purchase by nationals. These
restrictions or controls may at times limit or preclude investment in certain
securities and may increase the costs and expenses of a Fund. In addition, the
repatriation of investment income, capital, or the proceeds of sales of
securities from certain countries is controlled under regulations, including in
some cases the need for certain advance government notification or authority. If
a deterioration occurs in a country's balance of payments, the country could
impose temporary restrictions on foreign capital remittances.
A Fund also could be adversely affected by delays in, or a refusal to grant, any
required governmental approval for repatriation, as well as by the application
of other restrictions on investment. Investing in local markets may require a
Fund to adopt special procedures that may involve additional costs to a Fund.
These factors may affect the liquidity of a Fund's investments in any country
and Alliance will monitor the effect of any such factor or factors on a Fund's
investments. Furthermore, transaction costs including brokerage commissions for
transactions both on and off the securities exchanges in many foreign countries
are generally higher than in the United States.
Issuers of securities in foreign jurisdictions are generally not subject to the
same degree of regulation as are U.S. issuers with respect to such matters as
insider trading rules,
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restrictions on market manipulation, shareholder proxy requirements, and timely
disclosure of information. The reporting, accounting and auditing standards of
foreign countries may differ, in some cases significantly, from U.S. standards
in important respects and less information may be available to investors in
foreign securities than to investors in U.S. securities. Substantially less
information is publicly available about certain non-U.S. issuers than is
available about U.S. issuers.
The economies of individual foreign countries may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross domestic
product or gross national product, rate of inflation, capital reinvestment,
resource self-sufficiency, and balance of payments position. Nationalization,
expropriation or confiscatory taxation, currency blockage, political changes,
government regulation, political or social instability, or diplomatic
developments could affect adversely the economy of a foreign country and the
Fund's investments. In the event of expropriation, nationalization or other
confiscation, a Fund could lose its entire investment in the country involved.
In addition, laws in foreign countries governing business organizations,
bankruptcy and insolvency may provide less protection to security holders such
as the Fund than that provided by U.S. laws.
Alliance International Fund, Alliance New Europe Fund, Alliance Greater China
'97 Fund and Alliance All-Asia Investment Fund may invest substantial amounts of
their assets in United Kingdom issuers, Japanese issuers, and/or Greater China
issuers. Please refer to Appendix A for a discussion of risks associated with
investments in these countries.
Investment in Privatized Enterprises by Alliance Worldwide Privatization Fund.
In certain jurisdictions, the ability of foreign entities, such as the Fund, to
participate in privatizations may be limited by local law, or the price or terms
on which the Fund may be able to participate may be less advantageous than for
local investors. Moreover, there can be no assurance that governments that have
embarked on privatization programs will continue to divest their ownership of
state enterprises, that proposed privatizations will be successful or that
governments will not re-nationalize enterprises that have been privatized.
Furthermore, in the case of certain of the enterprises in which the Fund may
invest, large blocks of the stock of those enterprises may be held by a small
group of stockholders, even after the initial equity offerings by those
enterprises. The sale of some portion or all of those blocks could have an
adverse effect on the price of the stock of any such enterprise.
Most state enterprises or former state enterprises go through an internal
reorganization of management prior to conducting an initial equity offering in
an attempt to better enable these enterprises to compete in the private sector.
However, certain reorganizations could result in a management team that does not
function as well as the enterprise's prior management and may have a negative
effect on such enterprise. After making an initial equity offering, enterprises
that may have enjoyed preferential treatment from the respective state or
government that owned or controlled them may no longer receive such preferential
treatment and may become subject to market competition from which they were
previously protected. Some of these enterprises may not be able to effectively
operate in a competitive market and may suffer losses or experience bankruptcy
due to such competition. In addition, the privatization of an enterprise by its
government may occur over a number of years, with the government continuing to
hold a controlling position in the enterprise even after the initial equity
offering for the enterprise.
Investment in Smaller, Emerging Companies. The Funds may invest in smaller,
emerging companies. Alliance New Europe Fund and Alliance Global Small Cap Fund
will emphasize investment in, and Alliance All-Asia Investment Fund and Alliance
Greater China '97 Fund may emphasize investment in, smaller, emerging companies.
Investment in such companies involves greater risks than is customarily
associated with securities of more established companies. Companies in the
earlier stages of their development often have products and management personnel
which have not been thoroughly tested by time or the marketplace; their
financial resources may not be as substantial as those of more established
companies. The securities of smaller companies may have relatively limited
marketability and may be subject to more abrupt or erratic market movements than
securities of larger companies or broad market indices. The revenue flow of such
companies may be erratic and their results of operations may fluctuate widely
and may also contribute to stock price volatility.
Extreme Governmental Action; Less Protective Laws. In contrast to investing in
the U.S., foreign investment may involve in certain situations greater risk of
nationalization, expropriation, confiscatory taxation, currency blockage or
other extreme governmental action which could adversely impact a Fund's
investments. In the event of certain such actions, a Fund could lose its entire
investment in the country involved. In addition, laws in various foreign
countries, including in certain respects each of the Greater China countries,
governing, among other subjects, business organization and practices, securities
and securities trading, bankruptcy and insolvency may provide less protection to
investors such as the Fund than provided under United States laws.
The Real Estate Industry. Although Alliance Real Estate Investment Fund does not
invest directly in real estate, it invests primarily in Real Estate Equity
Securities and has a policy of concentration of its investments in the real
estate industry. Therefore, an investment in the Fund is subject to certain
risks associated with the direct ownership of real estate and with the real
estate industry in general. These risks include, among others: possible declines
in the value of real estate; risks related to general and local economic
conditions; possible lack of availability of mortgage funds; overbuilding;
extended vacancies of properties; increases in competition, property taxes and
operating expenses; changes in zoning laws; costs resulting from the clean-up
of, and liability to third parties for damages resulting from, environmental
problems; casualty
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or condemnation losses; uninsured damages from floods, earthquakes or other
natural disasters; limitations on and variations in rents; and changes in
interest rates. To the extent that assets underlying the Fund's investments are
concentrated geographically, by property type or in certain other respects, the
Fund may be subject to certain of the foregoing risks to a greater extent.
In addition, if Alliance Real Estate Investment Fund receives rental income or
income from the disposition of real property acquired as a result of a default
on securities the Fund owns, the receipt of such income may adversely affect the
Fund's ability to retain its tax status as a regulated investment company.
Investments by the Fund in securities of companies providing mortgage servicing
will be subject to the risks associated with refinancings and their impact on
servicing rights.
REITs. Investing in REITs involves certain unique risks in addition to those
risks associated with investing in the real estate industry in general. Equity
REITs may be affected by changes in the value of the underlying property owned
by the REITs, while mortgage REITs may be affected by the quality of any credit
extended. REITs are dependent upon management skills, are not diversified, and
are subject to heavy cash flow dependency, default by borrowers and
self-liquidation. REITs are also subject to the possibilities of failing to
qualify for tax-free pass-through of income under the Code and failing to
maintain their exemptions from registration under the 1940 Act.
REITs (especially mortgage REITs) also are subject to interest rate risks. When
interest rates decline, the value of a REIT's investment in fixed rate
obligations can be expected to rise. Conversely, when interest rates rise, the
value of a REIT's investment in fixed rate obligations can be expected to
decline. In contrast, as interest rates on adjustable rate mortgage loans are
reset periodically, yields on a REIT's investments in such loans will gradually
align themselves to reflect changes in market interest rates, causing the value
of such investments to fluctuate less dramatically in response to interest rate
fluctuations than would investments in fixed rate obligations.
Investing in REITs involves risks similar to those associated with investing in
small capitalization companies. REITs may have limited financial resources, may
trade less frequently and in a limited volume and may be subject to more abrupt
or erratic price movements than larger company securities. Historically, small
capitalization stocks, such as REITs, have been more volatile in price than the
larger capitalization stocks included in the S&P 500 Index.
Mortgage-Backed Securities. Investing in Mortgage-Backed Securities involves
certain unique risks in addition to those risks associated with investment in
the real estate industry in general. These risks include the failure of a
counterparty to meet its commitments, adverse interest rate changes and the
effects of prepayments on mortgage cash flows. When interest rates decline, the
value of an investment in fixed rate obligations can be expected to rise.
Conversely, when interest rates rise, the value of an investment in fixed rate
obligations can be expected to decline. In contrast, as interest rates on
adjustable rate mortgage loans are reset periodically, yields on investments in
such loans will gradually align themselves to reflect changes in market interest
rates, causing the value of such investments to fluctuate less dramatically in
response to interest rate fluctuations than would investments in fixed rate
obligations.
Further, the yield characteristics of Mortgage-Backed Securities, such as those
in which Alliance Real Estate Investment Fund may invest, differ from those of
traditional fixed-income securities. The major differences typically include
more frequent interest and principal payments (usually monthly), the
adjustability of interest rates, and the possibility that prepayments of
principal may be made substantially earlier than their final distribution dates.
Prepayment rates are influenced by changes in current interest rates and a
variety of economic, geographic, social, and other factors, and cannot be
predicted with certainty. Both adjustable rate mortgage loans and fixed rate
mortgage loans may be subject to a greater rate of principal prepayments in a
declining interest rate environment and to a lesser rate of principal
prepayments in an increasing interest rate environment. Early payment associated
with Mortgage-Backed Securities causes these securities to experience
significantly greater price and yield volatility than that experienced by
traditional fixed-income securities. Under certain interest rate and prepayment
rate scenarios, the Fund may fail to recoup fully its investment in
Mortgage-Backed Securities notwithstanding any direct or indirect governmental
or agency guarantee. When the Fund reinvests amounts representing payments and
unscheduled prepayments of principal, it may receive a rate of interest that is
lower than the rate on existing adjustable rate mortgage pass-through
securities. Thus, Mortgage-Backed Securities, and adjustable rate mortgage
pass-through securities in particular, may be less effective than other types of
U.S. Government securities as a means of "locking in" interest rates.
U.S. and Foreign Taxes. A Fund's investment in foreign securities may be subject
to taxes withheld at the source on dividend or interest payments. Foreign taxes
paid by a Fund may be creditable or deductible by U.S. shareholders for U.S.
income tax purposes. No assurance can be given that applicable tax laws and
interpretations will not change in the future. Moreover, non-U.S. investors may
not be able to credit or deduct such foreign taxes.
Fixed-Income Securities. The value of each Fund's shares will fluctuate with the
value of its investments. The value of each Fund's investments in fixed-income
securities will change as the general level of interest rates fluctuates. During
periods of falling interest rates, the values of fixed-income securities
generally rise. Conversely, during periods of rising interest rates, the values
of fixed-income securities generally decline.
Under normal market conditions, the average dollar-weighted maturity of a Fund's
portfolio of debt or other fixed-income securities is expected to vary between
five and 30 years in the case of Alliance All-Asia Investment Fund, between five
and 25
51
<PAGE>
years in the case of Alliance Utility Income Fund, and between one year or less
and 30 years in the case of all other Funds that invest in such securities. In
periods of increasing interest rates, each of the Funds may, to the extent it
holds mortgage-backed securities, be subject to the risk that the average
dollar-weighted maturity of the Fund's portfolio of debt or other fixed-income
securities may be extended as a result of lower than anticipated prepayment
rates.
Investment in Lower-Rated Fixed-Income Securities. Lower-rated securities, i.e.,
those rated Ba and lower by Moody's or BB and lower by S&P, Duff & Phelps or
Fitch, are subject to greater credit risk or loss of principal and interest than
higher-rated securities. They also are generally considered to be subject to
greater market risk than higher-rated securities. The capacity of issuers of
lower-rated securities to pay interest and repay principal is more likely to
weaken than is that of issuers of higher-rated securities in times of
deteriorating economic conditions or rising interest rates. In addition,
lower-rated securities may be more susceptible to real or perceived adverse
economic conditions than investment grade securities.
The market for lower-rated securities may be thinner and less active than that
for higher-rated securities, which can adversely affect the prices at which
these securities can be sold. To the extent that there is no established
secondary market for lower-rated securities, a Fund may experience difficulty in
valuing the securities for the purpose of computing a Fund's net asset value. In
addition, adverse publicity and investor perceptions about lower-rated
securities, whether or not factual, may tend to impair their market value and
liquidity.
Alliance will try to reduce the risk inherent in investment in lower-rated
securities through credit analysis, diversification and attention to current
developments and trends in interest rates and economic and political conditions.
However, there can be no assurance that losses will not occur. Since the risk of
default is higher for lower-rated securities, Alliance's research and credit
analysis are a correspondingly more important aspect of its program for managing
a Fund's securities than would be the case if a Fund did not invest in
lower-rated securities.
In seeking to achieve a Fund's investment objective, there will be times, such
as during periods of rising interest rates, when depreciation and realization of
capital losses on securities in a Fund's portfolio will be unavoidable.
Moreover, medium- and lower-rated securities and non-rated securities of
comparable quality may be subject to wider fluctuations in yield and market
values than higher-rated securities under certain market conditions. Such
fluctuations after a security is acquired do not affect the cash income received
from that security but are reflected in the net asset value of a Fund.
Certain lower-rated securities may contain call or buy-back features that permit
the issuers thereof to call or repurchase such securities. Such securities may
present risks based on prepayment expectations. If an issuer exercises such a
provision, a Fund may have to replace the called security with a lower-yielding
security, resulting in a decreased rate of return to the Fund.
--------------------------------------------------------------------------------
MANAGEMENT OF THE FUNDS
--------------------------------------------------------------------------------
INVESTMENT ADVISER
Each Fund's Adviser is Alliance Capital Management, L.P., 1345 Avenue of the
Americas, New York, NY 10105. Alliance is a leading international investment
adviser supervising client accounts with assets as of June 30, 2000
totaling more than $388 billion (of which more than $185 billion represented
assets of investment companies). As of June 30, 2000, Alliance managed
retirement assets for many of the largest public and private employee benefit
plans (including 29 of the nation's FORTUNE 100 companies), for public employee
retirement funds in 33 states, for investment companies, and for foundations,
endowments, banks and insurance companies worldwide. The 52 registered
investment companies managed by Alliance, comprising 122 separate investment
portfolios, currently have more than 6.1 million shareholder accounts.
Alliance provides investment advisory services and order placement facilities
for the Funds. For these advisory services, the Funds paid Alliance as a
percentage of average daily net assets:
<TABLE>
<CAPTION>
Fee as a percentage of Fiscal
Fund average daily net assets* Year Ending
---- ------------------------- -----------
<S> <C> <C>
Alliance Premier Growth Fund .95% 11/30/99
Alliance Health Care Fund .95 6/30/00
Alliance Growth Fund .68 10/31/99
Alliance Technology Fund 1.10 11/30/99
Alliance Quasar Fund 1.01 9/30/99
The Alliance Fund .68 11/30/99
Alliance Disciplined Value Fund .75** 11/30/00
Alliance Growth and Income Fund .47 10/31/99
Alliance Balanced Shares Fund .56 7/31/00
Alliance Utility Income Fund .51 11/30/99
Alliance Real Estate Investment Fund .90 8/31/00
Alliance New Europe Fund .92 7/31/00
Alliance Worldwide Privatization Fund 1.00 6/30/00
Alliance International Premier Growth Fund .71 11/30/99
Alliance Global Small Cap Fund 1.00 7/31/00
Alliance International Fund .87 6/30/00
Alliance Greater China '97 Fund -0- 7/31/00
Alliance All-Asia Investment Fund .65 10/31/99
</TABLE>
--------------------------------------------------------------------------------
* Fees are stated net of any waivers and/or reimbursements. See the "Fee
Table" at the beginning of the Prospectus for more information about fee
waivers.
** Prior to any waiver by Alliance. See "Fee Table" at the beginning of the
Prospectus.
52
<PAGE>
In connection with providing advisory services to Alliance Greater China '97
Fund, Alliance has, at its expense, retained as a consultant New Alliance, a
joint venture company headquartered in Hong Kong, which was formed in 1997 by
Alliance and Sun Hung Kai Properties Limited. New Alliance provides Alliance
with ongoing, current, and comprehensive information and analysis of conditions
and developments in Greater China countries.
In connection with investments in real estate securities, Alliance has, at its
expense, retained as a consultant CB Richard Ellis, Inc. ("CBRE"). CBRE is a
publicly held company and the largest real estate services company in the United
States, comprised of real estate brokerage, property and facilities management,
real estate finance, and investment advisory services.
Portfolio Managers
The following table lists the person or persons who are primarily responsible
for the day-to-day management of each Fund's portfolio, the length of time that
each person has been primarily responsible for the Fund, and each person's
principal occupation during the past five years.
Principal Occupation
During the Past
Fund Employee; Year; Title Five (5) Years
--------------------------------------------------------------------------------
Alliance Premier Alfred Harrison; since *
Growth Fund inception--Vice Chairman
of Alliance Capital
Management Corporation
(ACMC)**
Alliance Health Care Norman Fidel; since inception *
Fund --Senior Vice President
of ACMC
Alliance Growth Tyler Smith; since inception *
Fund --Senior Vice President
of ACMC
Alliance Technology Peter Anastos; since 1992 *
Fund --Senior Vice President
of ACMC
Gerald T. Malone; since 1992 *
--Senior Vice President
of ACMC
Alliance Quasar Bruce Aranow; since 1999 Associated with
Fund --Vice President of ACMC Alliance since 1999;
prior thereto, Vice
President at Invesco
since 1998, prior
thereto, Vice President
at LGT Asset Management
since 1996.
The Alliance Fund Alden M. Stewart; since 1997 *
--(see above)
Alliance Disciplined Paul Rissman; since inception *
Value Fund --Senior Vice President
of ACMC
Frank Caruso; since inception *
--Senior Vice President
of ACMC
Alliance Growth and Paul Rissman; since 1994 *
Income Fund --(see above)
Alliance Balanced Paul Rissman; since 1997 *
Shares --(see above)
Alliance Utility Paul Rissman; since 1996 *
Income Fund --(see above)
Alliance Real Estate Daniel G. Pine; since 1996 *
Investment Fund --Senior Vice President
of ACMC
David Kruth; since 1997 Associated with
--Vice President of ACMC Alliance since 1997;
prior thereto, Senior
Vice President of
Yarmouth Group
Alliance New Steven Beinhacker; since 1997 *
Europe Fund --Senior Vice President
of ACMC
Alliance Worldwide Mark H. Breedon; since *
Privatization Fund inception--Vice President
of ACMC and Director and
Senior Vice President of
Alliance Capital Limited***
Alliance International Alfred Harrison; since 1998 *
Premier Growth --(see above)
Fund
Thomas Kamp; since 1998 *
--Senior Vice President
of ACMC
Alliance Global Bruce Aranow; since 1999 (see above)
Small Cap Fund --(see above)
Mark H. Breedon; since 1998 *
--(see above)
Alliance Nicholas D.P. Carn; *
International Fund since 1998
--Senior Vice President
of ACMC
Alliance Greater Matthew W.S. Lee; since 1997 Associated with
China '97 Fund --Vice President of ACMC Alliance since 1997;
prior thereto,
associated with
National Mutual Funds
Management (Asia) and
James Capel and Co.
Alliance All-Asia Hiroshi Motoki; since 1998 *
Investment Fund --Senior Vice President
of ACMC and director of
Japanese/Asian Equity
research
--------------------------------------------------------------------------------
* Unless indicated otherwise, persons associated with Alliance have been
employed in a substantially similar capacity to their current position.
** The sole general partner of Alliance.
*** An indirect wholly-owned subsidiary of Alliance.
Performance of Similarly Managed Portfolios. In addition to managing the assets
of Alliance Premier Growth Fund, Mr. Harrison has ultimate responsibility for
the management of discretionary tax-exempt accounts of institutional clients
managed as described below without significant client-imposed restrictions
("Historical Portfolios"). These accounts have substantially the same investment
objectives and policies and are managed in accordance with essentially the same
investment strategies and techniques as those for Alliance Premier Growth Fund,
except for the ability of Alliance Premier Growth Fund to use futures and
options as hedging tools and to invest in warrants. The Historical Portfolios
also are not subject
53
<PAGE>
to certain limitations, diversification requirements and other restrictions
imposed under the 1940 Act and the Code to which Alliance Premier Growth Fund,
as a registered investment company, is subject and which, if applicable to the
Historical Portfolios, may have adversely affected the performance results of
the Historical Portfolios.
Set forth below is performance data provided by Alliance relating to the
Historical Portfolios for the period during which Mr. Harrison has managed the
Historical Portfolios as an employee of Alliance. As of September 30, 2000,
the assets in the Historical Portfolios totaled approximately $14.3 billion and
the average size of an institutional account in the Historical Portfolio was
$529 million. Each Historical Portfolio has a nearly identical composition of
investment holdings and related percentage weightings.
The performance data is net of all fees (including brokerage commissions)
charged to those accounts. The performance data is computed in accordance with
standards formulated by the Association of Investment Management and Research
and has not been adjusted to reflect any fees that will be payable by Alliance
Premier Growth Fund, which are higher than the fees imposed on the Historical
Portfolio and will result in a higher expense ratio and lower returns for
Alliance Premier Growth Fund. Expenses associated with the distribution of Class
A, Class B, and Class C shares of Alliance Premier Growth Fund in accordance
with the plan adopted by Alliance Premier Growth Fund's Board of Directors under
Commission Rule 12b-1 are also excluded. The performance data has also not been
adjusted for corporate or individual taxes, if any, payable by the account
owners.
Alliance has calculated the investment performance of the Historical Portfolios
on a trade-date basis. Dividends have been accrued at the end of the month and
cash flows weighted daily. Composite investment performance for all portfolios
has been determined on an asset weighted basis. New accounts are included in the
composite investment performance computations at the beginning of the quarter
following the initial contribution. The total returns set forth below are
calculated using a method that links the monthly return amounts for the
disclosed periods, resulting in a time-weighted rate of return.
As reflected below, the Historical Portfolios have over time performed favorably
when compared with the performance of recognized performance indices. The S&P
500 Index is a widely recognized, unmanaged index of market activity based upon
the aggregate performance of a selected portfolio of publicly traded common
stocks, including monthly adjustments to reflect the reinvestment of dividends
and other distributions. The S&P 500 Index reflects the total return of
securities comprising the Index, including changes in market prices as well as
accrued investment income, which is presumed to be reinvested. The Russell 1000
universe of securities is compiled by Frank Russell Company and is segmented
into two style indices, based on the capitalization-weighted median
book-to-price ratio of each of the securities. At each reconstitution, the
Russell 1000 constituents are ranked by their book-to-price ratio. Once so
ranked, the breakpoint for the two styles is determined by the median market
capitalization of the Russell 1000. Thus, those securities falling within the
top fifty percent of the cumulative market capitalization (as ranked by
descending book-to-price) become members of the Russell Price-Driven Indices.
The Russell 1000 Growth Index is, accordingly, designed to include those Russell
1000 securities with a greater-than-average growth orientation. In contrast with
the securities in the Russell Price-Driven Indices, companies in the Growth
Index tend to exhibit higher price-to-book and price-earnings ratios, lower
dividend yield and higher forecasted growth values.
To the extent Alliance Premier Growth Fund does not invest in U.S. common stocks
or utilizes investment techniques such as futures or options, the S&P 500 Index
and Russell 1000 Growth Index may not be substantially comparable to Alliance
Premier Growth Fund. The S&P 500 Index and Russell 1000 Growth Index are
included to illustrate material economic and market factors that existed during
the time period shown. The S&P 500 Index and Russell 1000 Growth Index do not
reflect the deduction of any fees. If Alliance Premier Growth Fund were to
purchase a portfolio of securities substantially identical to the securities
comprising the S&P 500 Index or the Russell 1000 Growth Index, Alliance Premier
Growth Fund's performance relative to the index would be reduced by Alliance
Premier Growth Fund's expenses, including brokerage commissions, advisory fees,
distribution fees, custodial fees, transfer agency costs and other
administrative expenses, as well as by the impact on Alliance Premier Growth
Fund's shareholders of sales charges and income taxes.
The Lipper Large Cap Growth Fund Index is prepared by Lipper, Inc. and
represents a composite index of the investment performance for the 30 largest
large capitalization growth mutual funds. The composite investment performance
of the Lipper Large Cap Growth Fund Index reflects investment management and
administrative fees and other operating expenses paid by these mutual funds and
reinvested income dividends and capital gain distributions, but excludes the
impact of any income taxes and sales charges.
The following performance data is provided solely to illustrate Mr. Harrison's
performance in managing the Historical Portfolios and the Alliance Premier
Growth Fund as measured against certain broad based market indices and against
the composite performance of other open-end growth mutual funds. Investors
should not rely on the following performance data of the Historical Portfolios
as an indication of future performance of Alliance Premier Growth Fund. The
composite investment
54
<PAGE>
performance for the periods presented may not be indicative of future rates of
return. Other methods of computing investment performance may produce different
results, and the results for different periods may vary.
Schedule of Composite Investment Performance--Historical Portfolios*
<TABLE>
<CAPTION>
Lipper
Russell Large Cap
Premier Historical S&P500 1000 Growth
Growth Portfolios Index Growth Index Fund Index
Fund Total Return** Total Return Total Return Total Return
<S> <C> <C> <C> <C> <C>
1/1/00-9/30/00*** ........................ (8.74)% (4.55)% (1.39)% (1.37)% (1.44)%
Year ended December:
1999*** .................................. 23.51 29.67 21.03 33.16 34.82
1998*** .................................. 42.97 52.16 28.60 38.71 36.47
1997*** .................................. 27.05 34.64 33.36 30.49 27.59
1996*** .................................. 18.84 22.06 22.96 23.12 20.56
1995*** .................................. 40.66 39.83 37.58 37.19 34.92
1994 ..................................... (9.78) (4.82) 1.32 2.66 (0.82)
1993 ..................................... 5.35 10.54 10.08 2.90 10.66
1992 ..................................... -- 12.18 7.62 5.00 6.89
1991 ..................................... -- 38.91 30.47 41.16 37.34
1990 ..................................... -- (1.57) (3.10) (0.26) (1.82)
1989 ..................................... -- 38.80 31.69 35.92 32.30
1988 ..................................... -- 10.88 16.61 11.27 10.84
1987 ..................................... -- 8.49 5.25 5.31 3.33
1986 ..................................... -- 27.40 18.67 15.36 16.75
1985 ..................................... -- 37.41 31.73 32.85 32.85
1984 ..................................... -- (3.31) 6.27 (.95) (4.25)
1983 ..................................... -- 20.80 22.56 15.98 22.63
1982 ..................................... -- 28.02 21.55 20.46 28.91
1981 ..................................... -- (1.09) (4.92) (11.31) (0.06)
1980 ..................................... -- 50.73 32.50 39.57 47.73
1979 ..................................... -- 30.76 18.61 23.91 29.90
Cumulative total
return for the period
January 1, 1979 to
September 30, 2000 ....................... -- 5850% 3032% 3148% 3961%
</TABLE>
--------------------------------------------------------------------------------
* Total return is a measure of investment performance that is based upon the
change in value of an investment from the beginning to the end of a
specified period and assumes reinvestment of all dividends and other
distributions. The basis of preparation of this data is described in the
preceding discussion. Total returns for Alliance Premier Growth Fund are
for Class A shares, with imposition of the maximum 4.25% sales charge.
** Assumes imposition of the maximum advisory fee charged by Alliance for any
Historical Portfolio for the period involved.
*** During this period, the Historical Portfolios differed from Alliance
Premier Growth Fund in that Alliance Premier Growth Fund invested a
portion of its net assets in warrants on equity securities in which the
Historical Portfolios were unable, by their investment restrictions, to
purchase. In lieu of warrants, the Historical Portfolios acquired the
common stock upon which the warrants were based.
The average annual total returns presented below are based upon the cumulative
total return as of September 30, 2000 and, for more than one year, assume a
steady compounded rate of return and are not year-by-year results, which
fluctuated over the periods as shown.
AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
Lipper
Russell Large Cap
Premier Historical S&P 500 1000 Growth
Growth Portfolios Index Growth Index Fund Index
<S> <C> <C> <C> <C> <C>
One year ...................................... 9.93% 15.27% 13.27% 23.43% 23.73%
Three years ................................... 19.61 22.74 16.44 22.74 21.95
Five years .................................... 23.84 25.65 21.68 25.07 23.41
Ten years ..................................... 21.70* 23.25 19.42 21.44 20.75
Since January 1, 1979 ......................... -- 20.67 17.16 17.36 18.57
</TABLE>
--------------------------------------------------------------------------------
* Since inception on 9/28/92
Performance of a Similarly Managed Fund. Alliance is the investment adviser of
an investment company organized and operated under the laws of the Grand Duchy
of Luxembourg, ACM International Health Care Fund (the "ACM Fund"), that has
substantially the same investment objective and policies as those of Alliance
Health Care Fund. The ACM Fund has been managed in accordance with substantially
the same investment strategies and techniques as are employed with respect to
the Alliance Health Care Fund.
Norman Fidel, the portfolio manager of Alliance Health Care Fund, is also the
person who has been primarily responsible for the day-to-day management of the
ACM Fund since 1988. Mr. Fidel manages approximately $2 billion of Health Care
Industries assets, including approximately $646 million of assets in the
ACM Fund as of September 30, 2000.
The ACM Fund is not subject to certain limitations, diversification requirements
and other restrictions imposed under the 1940 Act and the Code to which Alliance
Health Care Fund, as a registered investment company, is subject and which, if
applicable to the ACM Fund, may have adversely affected the performance results
of the ACM Fund.
Set forth below are performance data provided by Alliance relating to the Class
AX shares of the ACM Fund since 1988, when Mr. Fidel began managing that fund.
Performance data are shown annually and cumulatively through September 30, 2000.
The performance data are net of all fees imposed by the ACM Fund. The
performance data have not been adjusted to reflect the fees that are payable by
Alliance Health Care Fund, which, at comparable asset levels, may be lower than
the fees imposed on the ACM Fund and may result in a lower expense ratio for
Alliance Health Care Fund. Expenses associated with the distribution of Class A,
Class B and Class C shares of Alliance Health Care Fund in accordance with the
plan adopted by Alliance Health Care Fund's Board of Directors under Commission
Rule 12b-1 also are not reflected in the data below relating to the ACM Fund.
See "Fees and Expenses of the Funds." The performance data have also not been
adjusted for corporate or individual taxes, if any, payable by the ACM Fund
shareholders.
The following performance data are provided solely to illustrate Mr. Fidel's
performance in managing the ACM Fund. Investors should not rely on the following
performance data of the ACM Fund as an indication of future performance of the
Alliance
55
<PAGE>
Health Care Fund. The investment performance for the periods presented may not
be indicative of future rates of return.
ACM International Health Care Fund
Total Returns
-------------
1988.................................................... 21.82%
1989.................................................... 46.75%
1990.................................................... 25.96%
1991.................................................... 83.07%
1992.................................................... -10.46%
1993.................................................... -1.38%
1994.................................................... 13.84%
1995.................................................... 46.49%
1996.................................................... 2.18%
1997.................................................... 23.07%
1998.................................................... 24.29%
1999.................................................... -3.03%
2000*................................................... 27.00%
Average Annual Total Return
(for periods ended 9/30/00)
---------------------------
One year................................................ 39.66%
Five years.............................................. 17.07%
Ten years............................................... 20.01%
Cumulative Total Return of the ACM Fund from 12/31/87 to 9/30/00: 1068%
--------------------------------------------------------------------------------
* Through September 30, 2000 (unannualized)
The Funds' SAIs have more detailed information about Alliance and other Fund
service providers.
--------------------------------------------------------------------------------
PURCHASE AND SALE OF SHARES
--------------------------------------------------------------------------------
HOW THE FUNDS VALUE THEIR SHARES
The Funds' net asset value or NAV is calculated at 4 p.m., Eastern time, each
day the Exchange is open for business. To calculate NAV, a Fund's assets are
valued and totaled, liabilities are subtracted, and the balance, called net
assets, is divided by the number of shares outstanding. The Funds value their
securities at their current market value determined on the basis of market
quotations, or, if such quotations are not readily available, such other methods
as the Funds' directors believe accurately reflect fair market value.
Your order for purchase, sale, or exchange of shares is priced at the next NAV
calculated after your order is received in proper form by the Fund. Your
purchase of Fund shares may be subject to an initial sales charge. Sales of Fund
shares may be subject to a contingent deferred sales charge or CDSC. See the
next section of this Prospectus, Distribution Arrangements, for details.
HOW TO BUY SHARES
You may purchase a Fund's shares through broker-dealers, banks, or other
financial intermediaries. You also may purchase shares directly from the Funds'
principal underwriter, Alliance Fund Distributors, Inc., or AFD.
Minimum investment amounts are:
--Initial: $250
--Subsequent: $ 50
--Automatic Investment Program: $ 25
If you are an existing Fund shareholder, you may purchase shares by electronic
funds transfer in amounts not exceeding $500,000 if you have completed the
appropriate section of the Shareholder Application. Call 800-221-5672 to arrange
a transfer from your bank account.
A Fund is required to withhold 31% of taxable dividends, capital gains
distributions, and redemptions paid to shareholders who have not provided the
Fund with their certified taxpayer identification number. To avoid this, you
must provide your correct Tax Identification Number (Social Security Number for
most investors) on your account application.
A Fund may refuse any order to purchase shares. In particular, the Funds reserve
the right to restrict purchases of shares (including through exchanges) when
they appear to evidence a pattern of frequent purchases and sales made in
response to short-term considerations.
HOW TO EXCHANGE SHARES
You may exchange your Fund shares for shares of the same class of other Alliance
Mutual Funds (including AFD Exchange Reserves, a money market fund managed by
Alliance). Exchanges of shares are made at the next determined NAV, without
sales or service charges. You may request an exchange by mail or telephone. You
must call by 4:00 p.m., Eastern time, to receive that day's NAV. The Funds may
change, suspend, or terminate the exchange service on 60 days' written notice.
HOW TO SELL SHARES
You may "redeem" your shares (i.e., sell your shares to a Fund) on any day the
Exchange is open, either directly or through your financial intermediary. Your
sales price will be the next-determined NAV, less any applicable CDSC, after the
Fund receives your sales request in proper form. Normally, proceeds will be sent
to you within 7 days. If you recently purchased your shares by check or
electronic funds transfer, your redemption payment may be delayed until the Fund
is reasonably satisfied that the check or electronic funds transfer has been
collected (which may take up to 15 days).
o Selling Shares Through Your Broker
Your broker must receive your sales request by 4:00 p.m., Eastern time, and
submit it to the Fund by 5:00 p.m., Eastern time, for you to receive that day's
NAV, less any applicable CDSC. Your broker is responsible for submitting all
necessary documentation to the Fund and may charge you for this service.
56
<PAGE>
o Selling Shares Directly to the Fund
By Mail:
-- Send a signed letter of instruction or stock power, along with
certificates, to:
Alliance Fund Services, Inc.
P.O. Box 1520
Secaucus, N.J. 07906-1520
800-221-5672
-- For your protection, a bank, a member firm of a national stock exchange,
or other eligible guarantor institution, must guarantee signatures. Stock
power forms are available from your financial intermediary, AFS, and many
commercial banks. Additional documentation is required for the sale of
shares by corporations, intermediaries, fiduciaries, and surviving joint
owners. If you have any questions about these procedures, contact AFS.
By Telephone:
-- You may redeem your shares for which no stock certificates have been
issued by telephone request. Call AFS at 800-221-5672 with instructions on
how you wish to receive your sale proceeds.
-- A telephone redemption request must be received by 4:00 p.m., Eastern
time, for you to receive that day's NAV, less any applicable CDSC.
-- If you have selected electronic funds transfer in your Shareholder
Application, the redemption proceeds will be sent directly to your bank.
Otherwise, the proceeds will be mailed to you.
-- Redemption requests by electronic funds transfer may not exceed $100,000
per day and redemption requests by check cannot exceed $50,000 per day.
-- Telephone redemption is not available for shares held in nominee or
"street name" accounts, retirement plan accounts, or shares held by a
shareholder who has changed his or her address of record within the
previous 30 calendar days.
--------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES
--------------------------------------------------------------------------------
Each Fund's income dividends and capital gains distributions, if any, declared
by a Fund on its outstanding shares will, at the election of each shareholder,
be paid in cash or in additional shares of the same class of shares of that
Fund. If paid in additional shares, the shares will have an aggregate net asset
value as of the close of business on the day following the declaration date of
the dividend or distribution equal to the cash amount of the dividend or
distribution. You may make an election to receive dividends and distributions in
cash or in shares at the time you purchase shares. Your election can be changed
at any time prior to a record date for a dividend. There is no sales or other
charge in connection with the reinvestment of dividends or capital gains
distributions. Cash dividends may be paid in check, or at your election,
electronically via the ACH network. There is no sales or other charge on the
reinvestment of Fund dividends and distributions.
If you receive an income dividend or capital gains distribution in cash you may,
within 120 days following the date of its payment, reinvest the dividend or
distribution in additional shares of that Fund without charge by returning to
Alliance, with appropriate instructions, the check representing the dividend or
distribution. Thereafter, unless you otherwise specify, you will be deemed to
have elected to reinvest all subsequent dividends and distributions in shares of
that Fund.
For federal income tax purposes, the Fund's dividend distributions of net income
(or short-term taxable gains) will be taxable to you as ordinary income.
Distributions of long-term capital gains generally will be taxable to you as
long-term capital gains. A Fund's distributions also may be subject to certain
state and local taxes.
While it is the intention of each Fund to distribute to its shareholders
substantially all of each fiscal year's net income and net realized capital
gains, if any, the amount and time of any dividend or distribution will depend
on the realization by the Fund of income and capital gains from investments.
There is no fixed dividend rate and there can be no assurance that a Fund will
pay any dividends or realize any capital gains. Since REITs pay distributions
based on cash flow, without regard to depreciation and amortization, it is
likely that a portion of the distributions paid to Alliance Real Estate
Investment Fund and subsequently distributed to shareholders may be a nontaxable
return of capital. The final determination of the amount of a Fund's return of
capital distributions for the period will be made after the end of each calendar
year.
Investment income received by a Fund from sources within foreign countries may
be subject to foreign income taxes withheld at the source. To the extent that
any Fund is liable for foreign income taxes withheld at the source, each Fund
intends, if possible, to operate so as to meet the requirements of the Code to
"pass through" to the Fund's shareholders credits for foreign income taxes paid
(or to permit shareholders to claim a deduction for such foreign taxes), but
there can be no assurance that any Fund will be able to do so. Furthermore, a
shareholder's ability to claim a foreign tax credit or deduction for foreign
taxes paid by a Fund may be subject to certain limitations imposed by the Code,
as a result of which a shareholder may not be permitted to claim a credit or
deduction for all or a portion of the amount of such taxes.
Under certain circumstances, if a Fund realizes losses (e.g., from fluctuations
in currency exchange rates) after paying a dividend, all or a portion of the
dividend may subsequently be characterized as a return of capital. Returns of
capital are generally nontaxable, but will reduce a shareholder's basis in
shares of a Fund. If that basis is reduced to zero (which could happen if the
shareholder does not reinvest distributions and returns of capital are
significant), any further returns of capital
57
<PAGE>
will be taxable as capital gain. See the Fund's SAI for a further explanation of
these tax issues.
If you buy shares just before a Fund deducts a distribution from its NAV, you
will pay the full price for the shares and then receive a portion of the price
back as a taxable distribution.
The sale or exchange of Fund shares is a taxable transaction for federal income
tax purposes.
Each year shortly after December 31, the Funds will send you tax information
stating the amount and type of all its distributions for the year. Consult your
tax adviser about the federal, state, and local tax consequences in your
particular circumstances.
--------------------------------------------------------------------------------
DISTRIBUTION ARRANGEMENTS
--------------------------------------------------------------------------------
Share Classes. The Funds offer three classes of shares.
CLASS A SHARES--INITIAL SALES CHARGE ALTERNATIVE
You can purchase Class A shares at NAV with an initial sales charge as follows:
Initial Sales Charge
As % of As % of Commission
Net Amount Offering to Dealer/
Invested Price Agent as
% of
Offering
Amount Purchased Price
--------------------------------------------------------------------------------
Up to $100,000 4.44% 4.25% 4.00%
$100,000 up to $250,000 3.36 3.25 3.00
$250,000 up to $500,000 2.30 2.25 2.00
$500,000 up to $1,000,000 1.78 1.75 1.50
You pay no initial sales charge on purchases of Class A Shares in the amount of
$1,000,000 or more, but may pay a 1% CDSC if you redeem your shares within 1
year. Alliance may pay the dealer or agent a fee of up to 1% of the dollar
amount purchased. Certain purchases of Class A shares may qualify for reduced or
eliminated sales charges under a Fund's Combined Purchase Privilege, Cumulative
Quantity Discount, Statement of Intention, Privilege for Certain Retirement
Plans, Reinstatement Privilege and Sales at Net Asset Value Programs. Consult
the Subscription Application and a Fund's SAI for additional information about
these options.
CLASS B SHARES--DEFERRED SALES CHARGE ALTERNATIVE
You can purchase Class B Shares at NAV without an initial sales charge. A Fund
will thus receive the full amount of your purchase. Your investment, however,
will be subject to a CDSC if you redeem shares within 4 years of purchase. The
CDSC varies depending on the number of years you hold the shares. The CDSC
amounts are:
Years Since Purchase CDSC
First 4.0%
Second 3.0%
Third 2.0%
Fourth 1.0%
Fifth None
If you exchange your shares for the Class B shares of another Alliance Mutual
Fund, the CDSC also will apply to those Class B shares. The CDSC period begins
with the date of your original purchase, not the date of exchange for the other
Class B shares.
The Fund's Class B shares purchased for cash automatically convert to Class A
shares eight years after the end of the month of your purchase. If you purchase
shares by exchange for the Class B shares of another Alliance Mutual Fund, the
conversion period runs from the date of your original purchase.
CLASS C SHARES--ASSET-BASED SALES CHARGE ALTERNATIVE
You can purchase shares at NAV without an initial sales charge. A Fund will thus
receive the full amount of your purchase. Your investment, however, will be
subject to a 1% CDSC if you redeem your shares within 1 year. If you exchange
your shares for the Class C shares of another Alliance Mutual Fund, the 1% CDSC
also will apply to those Class C shares. The 1-year period for the CDSC begins
with the date of your original purchase, not the date of the exchange for the
other Class C shares.
Class C shares do not convert to any other class of shares of the Fund.
Asset-based Sales Charge or Rule 12b-1 Fees. Each Fund has adopted a plan under
Commission Rule 12b-1 that allows the Fund to pay asset-based sales charges or
distribution and service fees for the distribution and sale of its shares. The
amount of these fees for each class of the Fund's shares is:
Rule 12b-1 Fee (As a Percentage of
Aggregate Average Daily Net Assets)
Class A .30%*
Class B 1.00%
Class C 1.00%
--------------------------------------------------------------------------------
* The fee under the Rule 12b-1 Plan for the Class A shares of Alliance
Growth Fund and Alliance Premier Growth Fund is .50% of the aggregate
average daily net assets. The Directors of Alliance Growth Fund currently
limit the payments to .30%. The Directors of Alliance Premier Growth Fund
limit payments for Class A shares purchased after November 1993 to .30% of
aggregate average daily net assets.
Because these fees are paid out of the Fund's assets on an on-going basis, over
time these fees will increase the cost of your investment and may cost you more
than paying other types of sales fees. Class B and Class C shares are subject to
higher distribution fees than Class A shares (Class B shares are subject to
these higher fees for a period of eight years, after which they convert to Class
A shares). The higher fees mean a higher expense ratio, so Class B and Class C
shares pay correspondingly lower dividends and may have a lower net asset value
than Class A shares.
Choosing a Class of Shares. The decision as to which class of shares is more
beneficial to you depends on the amount and intended length of your investment.
If you are making a large investment, thus qualifying for a reduced sales
charge, you might consider purchasing Class A shares. If you are making a
smaller investment, you might consider purchasing Class B shares because 100% of
your purchase is invested immediately. If you are unsure of the length of your
investment, you might
58
<PAGE>
consider Class C shares because there is no initial sales charge and no CDSC as
long as the shares are held for one year or more. Dealers and agents may receive
differing compensation for selling Class A, Class B, or Class C shares. There is
no size limit on purchases of Class A shares. The maximum purchase of Class B
shares is $250,000. The maximum purchase of Class C shares is $1,000,000.
You should consult your financial agent to assist in choosing a class of Fund
shares.
Application of the CDSC. The CDSC is applied to the lesser of the original cost
of shares being redeemed or NAV at the time of redemption (or, as to Fund shares
acquired through an exchange, the cost of the Alliance Mutual Fund shares
originally purchased for cash). Shares obtained from dividend or distribution
reinvestment are not subject to the CDSC. The Fund may waive the CDSC on
redemptions of shares following the death or disability of a shareholder, to
meet the requirements of certain qualified retirement plans, or under a monthly,
bimonthly, or quarterly systematic withdrawal plan. See the Fund's SAI for
further information about CDSC waivers.
Other. A transaction, service, administrative or other similar fee may be
charged by your broker-dealer, agent, financial intermediary, or other financial
representative with respect to the purchase, sale, or exchange of Class A, Class
B, or Class C shares made through your financial representative. The financial
intermediaries also may impose requirements on the purchase, sale, or exchange
of shares that are different from, or in addition to, those imposed by a Fund,
including requirements as to the minimum initial and subsequent investment
amounts.
--------------------------------------------------------------------------------
GENERAL INFORMATION
--------------------------------------------------------------------------------
Under unusual circumstances, a Fund may suspend redemptions or postpone payment
for up to seven days or longer, as permitted by federal securities law. The
Funds reserve the right to close an account that through redemption has remained
below $200 for 90 days. Shareholders will receive 60 days' written notice to
increase the account value before the account is closed.
During drastic economic or market developments, you might have difficulty in
reaching AFS by telephone, in which event you should issue written instructions
to AFS. AFS is not responsible for the authenticity of telephone requests to
purchase, sell, or exchange shares. AFS will employ reasonable procedures to
verify that telephone requests are genuine, and could be liable for losses
resulting from unauthorized transactions if it failed to do so. Dealers and
agents may charge a commission for handling telephone requests. The telephone
service may be suspended or terminated at any time without notice.
Shareholder Services. AFS offers a variety of shareholder services. For more
information about these services or your account, call AFS's toll-free number,
800-221-5672. Some services are described in the attached Subscription
Application. You also may request a shareholder's manual explaining all
available services by calling 800-227-4618.
Employee Benefit Plans. Certain employee benefit plans, including
employer-sponsored tax-qualified 401(k) plans and other defined contribution
retirement plans ("Employee Benefit Plans"), may establish requirements as to
the purchase, sale or exchange of shares, including maximum and minimum initial
investment requirements, that are different from those described in this
Prospectus. Employee Benefit Plans also may not offer all classes of shares of
the Funds. In order to enable participants investing through Employee Benefit
Plans to purchase shares of the Funds, the maximum and minimum investment
amounts may be different for shares purchased through Employee Benefit Plans
from those described in this Prospectus. In addition, the Class A, Class B, and
Class C CDSC may be waived for investments made through Employee Benefit Plans.
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
The financial highlights table is intended to help you understand each Fund's
financial performance for the past 5 years (or, if shorter, the period of the
Fund's operations). Certain information reflects financial results for a single
share of each Fund. The total returns in the table represent the rate that an
investor would have earned (or lost) on an investment in the Fund (assuming
reinvestment of all dividends and distributions). Except as otherwise indicated,
this information has been audited by PricewaterhouseCoopers LLP, the independent
accountants for The Alliance Fund, Alliance Growth Fund, Alliance Premier Growth
Fund, Alliance Health Care Fund, Alliance International Premier Growth Fund,
Alliance Balanced Shares, Alliance Utility Income Fund, Alliance Worldwide
Privatization Fund, and Alliance Growth and Income Fund, and by Ernst & Young
LLP, the independent auditors for Alliance All-Asia Investment Fund, Alliance
Technology Fund, Alliance Quasar Fund, Alliance International Fund, Alliance New
Europe Fund, Alliance Global Small Cap Fund, Alliance Greater China '97 Fund,
and Alliance Real Estate Investment Fund, whose reports, along with each Fund's
financial statements, are included in each Fund's annual report, which is
available upon request.
59
<PAGE>
<TABLE>
<CAPTION>
Income from Investment Operations
-------------------------------------------------------
Net Gains
Net Asset or Losses on
Value, Securities Total from
Beginning Net Investment (both realized Investment
Fiscal Year or Period of Period Income (Loss) and unrealized) Operations
--------------------- ------------ -------------- -------------- -------------
<S> <C> <C> <C> <C>
Alliance Premier Growth Fund
Class A
12/1/99 to 5/31/00+++ . $ 35.82 $ (.10)(b) $ 2.71 $ 2.61
Year ended 11/30/99 ... 27.50 (.28)(b) 9.21 8.93
Year ended 11/30/98 ... 22.00 (.15)(b) 7.11 6.96
Year ended 11/30/97 ... 17.98 (.10)(b) 5.20 5.10
Year ended 11/30/96 ... 16.09 (.04)(b) 3.20 3.16
Year ended 11/30/95 ... 11.41 (.03) 5.38 5.35
Class B
12/1/99 to 5/31/00+++ . $ 34.05 $ (.21)(b) $ 2.56 $ 2.35
Year ended 11/30/99 ... 26.33 (.48)(b) 8.81 8.33
Year ended 11/30/98 ... 21.26 (.30)(b) 6.83 6.53
Year ended 11/30/97 ... 17.52 (.23)(b) 5.05 4.82
Year ended 11/30/96 ... 15.81 (.14)(b) 3.12 2.98
Year ended 11/30/95 ... 11.29 (.11) 5.30 5.19
Class C
12/1/99 to 5/31/00+++ . $ 34.09 $ (.21)(b) $ 2.57 $ 2.36
Year ended 11/30/99 ... 26.36 (.49)(b) 8.83 8.34
Year ended 11/30/98 ... 21.29 (.31)(b) 6.84 6.53
Year ended 11/30/97 ... 17.54 (.24)(b) 5.07 4.83
Year ended 11/30/96 ... 15.82 (.14)(b) 3.13 2.99
Year ended 11/30/95 ... 11.30 (.08) 5.27 5.19
Alliance Health Care Fund
Class A
8/27/99+ to 6/30/00 ... $ 10.00 $ (.06)(b)(c) $ 2.46 $ 2.40
Class B
8/27/99+ to 6/30/00 ... $ 10.00 $ (.13)(b)(c) $ 2.46 $ 2.33
Class C
8/27/99+ to 6/30/00 ... $ 10.00 $ (.12)(b)(c) $ 2.45 $ 2.33
Alliance Growth Fund
Class A
11/1/99 to 4/30/00+++ . $ 56.32 $ (.08)(b) $ 6.76 $ 6.68
Year ended 10/31/99 ... 47.17 (.15)(b) 13.01 12.86
Year ended 10/31/98 ... 43.95 (.05)(b) 6.18 6.13
Year ended 10/31/97 ... 34.91 (.10)(b) 10.17 10.07
Year ended 10/31/96 ... 29.48 .05 6.20 6.25
Year ended 10/31/95 ... 25.08 .12 4.80 4.92
Class B
11/1/99 to 4/30/00+++ . $ 44.40 $ (.21)(b) $ 5.26 $ 5.05
Year ended 10/31/99 ... 38.15 (.42)(b) 10.38 9.96
Year ended 10/31/98 ... 36.31 (.31)(b) 5.06 4.75
Year ended 10/31/97 ... 29.21 (.31)(b) 8.44 8.13
Year ended 10/31/96 ... 24.78 (.12) 5.18 5.06
Year ended 10/31/95 ... 21.21 (.02) 4.01 3.99
Class C
11/1/99 to 4/30/00+++ . $ 44.42 $ (.21)(b) $ 5.27 $ 5.06
Year ended 10/31/99 ... 38.17 (.42)(b) 10.38 9.96
Year ended 10/31/98 ... 36.33 (.31)(b) 5.06 4.75
Year ended 10/31/97 ... 29.22 (.31)(b) 8.45 8.14
Year ended 10/31/96 ... 24.79 (.12) 5.18 5.06
Year ended 10/31/95 ... 21.22 (.03) 4.02 3.99
Alliance Technology Fund
Class A
12/1/99 to 5/31/00+++ . $ 111.46 $ (.63)(b) $ 25.01 $ 24.38
Year ended 11/30/99 ... 68.60 (.99)(b) 49.02 48.03
Year ended 11/30/98 ... 54.44 (.68)(b) 15.42 14.74
Year ended 11/30/97 ... 51.15 (.51)(b) 4.22 3.71
Year ended 11/30/96 ... 46.64 (.39)(b) 7.28 6.89
Year ended 11/30/95 ... 31.98 (.30)(b) 18.13 17.83
Class B
12/1/99 to 5/31/00+++ . $ 105.73 $ (1.05)(b) $ 23.69 $ 22.64
Year ended 11/30/99 ... 65.75 (1.54)(b) 46.69 45.15
Year ended 11/30/98 ... 52.58 (1.08)(b) 14.83 13.75
Year ended 11/30/97 ... 49.76 (.88)(b) 4.12 3.24
Year ended 11/30/96 ... 45.76 (.70)(b) 7.08 6.38
Year ended 11/30/95 ... 31.61 (.60)(b) 17.92 17.32
Class C
12/1/99 to 5/31/00+++ . $ 105.69 $ (1.06)(b) $ 23.69 $ 22.63
Year ended 11/30/99 ... 65.74 (1.57)(b) 46.69 45.12
Year ended 11/30/98 ... 52.57 (1.08)(b) 14.83 13.75
Year ended 11/30/97 ... 49.76 (.88)(b) 4.11 3.23
Year ended 11/30/96 ... 45.77 (.70)(b) 7.07 6.37
Year ended 11/30/95 ... 31.61 (.58)(b) 17.91 17.33
<CAPTION>
Less Dividends and Distributions
---------------------------------------------------------------------
Dividends Distributions Total Net Asset
from Net in Excess of Distributions Dividends Value,
Investment Net Investment from and End of
Fiscal Year or Period Income Income Capital Gains Distributions Period
--------------------- ----------- -------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Alliance Premier Growth Fund
Class A
12/1/99 to 5/31/00+++ . $ 0.00 $ 0.00 $ (2.36) $ (2.36) $ 36.07
Year ended 11/30/99 ... 0.00 0.00 (.61) (.61) 35.82
Year ended 11/30/98 ... 0.00 0.00 (1.46) (1.46) 27.50
Year ended 11/30/97 ... 0.00 0.00 (1.08) (1.08) 22.00
Year ended 11/30/96 ... 0.00 0.00 (1.27) (1.27) 17.98
Year ended 11/30/95 ... 0.00 0.00 (.67) (.67) 16.09
Class B
12/1/99 to 5/31/00+++ . $ 0.00 $ 0.00 $ (2.36) $ (2.36) $ 34.04
Year ended 11/30/99 ... 0.00 0.00 (.61) (.61) 34.05
Year ended 11/30/98 ... 0.00 0.00 (1.46) (1.46) 26.33
Year ended 11/30/97 ... 0.00 0.00 (1.08) (1.08) 21.26
Year ended 11/30/96 ... 0.00 0.00 (1.27) (1.27) 17.52
Year ended 11/30/95 ... 0.00 0.00 (.67) (.67) 15.81
Class C
12/1/99 to 5/31/00+++ . $ 0.00 $ 0.00 $ (2.36) $ (2.36) $ 34.09
Year ended 11/30/99 ... 0.00 0.00 (.61) (.61) 34.09
Year ended 11/30/98 ... 0.00 0.00 (1.46) (1.46) 26.36
Year ended 11/30/97 ... 0.00 0.00 (1.08) (1.08) 21.29
Year ended 11/30/96 ... 0.00 0.00 (1.27) (1.27) 17.54
Year ended 11/30/95 ... 0.00 0.00 (.67) (.67) 15.82
Alliance Health Care Fund
Class A
8/27/99+ to 6/30/00 ... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 12.40
Class B
8/27/99+ to 6/30/00 ... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 12.33
Class C
8/27/99+ to 6/30/00 ... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 12.33
Alliance Growth Fund
Class A
11/1/99 to 4/30/00+++ . $ 0.00 $ 0.00 $ (7.44) $ (7.44) $ 55.56
Year ended 10/31/99 ... 0.00 0.00 (3.71) (3.71) 56.32
Year ended 10/31/98 ... 0.00 0.00 (2.91) (2.91) 47.17
Year ended 10/31/97 ... 0.00 0.00 (1.03) (1.03) 43.95
Year ended 10/31/96 ... (.19) 0.00 (.63) (.82) 34.91
Year ended 10/31/95 ... (.11) 0.00 (.41) (.52) 29.48
Class B
11/1/99 to 4/30/00+++ . $ 0.00 $ 0.00 $ (7.44) $ (7.44) $ 42.01
Year ended 10/31/99 ... 0.00 0.00 (3.71) (3.71) 44.40
Year ended 10/31/98 ... 0.00 0.00 (2.91) (2.91) 38.15
Year ended 10/31/97 ... 0.00 0.00 (1.03) (1.03) 36.31
Year ended 10/31/96 ... 0.00 0.00 (.63) (.63) 29.21
Year ended 10/31/95 ... (.01) 0.00 (.41) (.42) 24.78
Class C
11/1/99 to 4/30/00+++ . $ 0.00 $ 0.00 $ (7.44) $ (7.44) $ 42.04
Year ended 10/31/99 ... 0.00 0.00 (3.71) (3.71) 44.42
Year ended 10/31/98 ... 0.00 0.00 (2.91) (2.91) 38.17
Year ended 10/31/97 ... 0.00 0.00 (1.03) (1.03) 36.33
Year ended 10/31/96 ... 0.00 0.00 (.63) (.63) 29.22
Year ended 10/31/95 ... (.01) 0.00 (.41) (.42) 24.79
Alliance Technology Fund
Class A
12/1/99 to 5/31/00+++ . $ 0.00 $ 0.00 $ (4.04) $ (4.04) $ 131.80
Year ended 11/30/99 ... 0.00 0.00 (5.17) (5.17) 111.46
Year ended 11/30/98 ... 0.00 0.00 (.58) (.58) 68.60
Year ended 11/30/97 ... 0.00 0.00 (.42) (.42) 54.44
Year ended 11/30/96 ... 0.00 0.00 (2.38) (2.38) 51.15
Year ended 11/30/95 ... 0.00 0.00 (3.17) (3.17) 46.64
Class B
12/1/99 to 5/31/00+++ . $ 0.00 $ 0.00 $ (4.04) $ (4.04) $ 124.33
Year ended 11/30/99 ... 0.00 0.00 (5.17) (5.17) 105.73
Year ended 11/30/98 ... 0.00 0.00 (.58) (.58) 65.75
Year ended 11/30/97 ... 0.00 0.00 (.42) (.42) 52.58
Year ended 11/30/96 ... 0.00 0.00 (2.38) (2.38) 49.76
Year ended 11/30/95 ... 0.00 0.00 (3.17) (3.17) 45.76
Class C
12/1/99 to 5/31/00+++ . $ 0.00 $ 0.00 $ (4.04) $ (4.04) $ 124.28
Year ended 11/30/99 ... 0.00 0.00 (5.17) (5.17) 105.69
Year ended 11/30/98 ... 0.00 0.00 (.58) (.58) 65.74
Year ended 11/30/97 ... 0.00 0.00 (.42) (.42) 52.57
Year ended 11/30/96 ... 0.00 0.00 (2.38) (2.38) 49.76
Year ended 11/30/95 ... 0.00 0.00 (3.17) (3.17) 45.77
<CAPTION>
Ratios/Supplemental Data
--------------------------------------------------------------------------------
Ratio of Ratio of Net
Net Assets, Expenses Income (Loss)
Total End of Period to Average to Average Portfolio
Fiscal Year or Period Return (a) (000's omitted) Net Assets Net Assets Turnover Rate
--------------------- ------------ -------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Alliance Premier Growth Fund
Class A
12/1/99 to 5/31/00+++ . 7.67% $5,432,865 1.39%* (.53)%* 68%
Year ended 11/30/99 ... 33.13% 4,285,490 1.50 (.85) 75
Year ended 11/30/98 ... 33.94 1,418,262 1.59(f) (.59) 82
Year ended 11/30/97 ... 30.46 373,099 1.57 (.52) 76
Year ended 11/30/96 ... 21.52 172,870 1.65 (.27) 95
Year ended 11/30/95 ... 49.95 72,366 1.75 (.28) 114
Class B
12/1/99 to 5/31/00+++ . 7.29% $9,915,193 2.08%* (1.22)%* 68%
Year ended 11/30/99 ... 32.30 8,161,471 2.18 (1.53) 75
Year ended 11/30/98 ... 33.04 2,799,288 2.28(f) (1.27) 82
Year ended 11/30/97 ... 29.62 858,449 2.25 (1.20) 76
Year ended 11/30/96 ... 20.70 404,137 2.32 (.94) 95
Year ended 11/30/95 ... 49.01 238,088 2.43 (.95) 114
Class C
12/1/99 to 5/31/00+++ . 7.30% $3,720,469 2.08%* (1.22)%* 68%
Year ended 11/30/99 ... 32.31 2,965,440 2.18 (1.53) 75
Year ended 11/30/98 ... 32.99 862,193 2.28(f) (1.30) 82
Year ended 11/30/97 ... 29.64 177,923 2.24 (1.22) 76
Year ended 11/30/96 ... 20.76 60,194 2.32 (.94) 95
Year ended 11/30/95 ... 48.96 20,679 2.42 (.97) 114
Alliance Health Care Fund
Class A
8/27/99+ to 6/30/00 ... 24.00% $ 55,412 1.92%*(d) (.67)%* 26%
Class B
8/27/99+ to 6/30/00 ... 23.30% $ 144,659 2.64%*(d) (1.40)%* 26%
Class C
8/27/99+ to 6/30/00 ... 23.30% $ 44,582 2.63%*(d) (1.38)%* 26%
Alliance Growth Fund
Class A
11/1/99 to 4/30/00+++ . 12.31% $1,677,919 1.13%* (.28)%* 38%
Year ended 10/31/99 ... 28.69 1,441,962 1.18 (.28) 62
Year ended 10/31/98 ... 14.56 1,008,093 1.22(f) (.11) 61
Year ended 10/31/97 ... 29.54 783,110 1.26(f) (.25) 48
Year ended 10/31/96 ... 21.65 499,459 1.30 .15 46
Year ended 10/31/95 ... 20.18 285,161 1.35 .56 61
Class B
11/1/99 to 4/30/00+++ . 11.89% $5,640,866 1.84%* (1.00)%* 38%
Year ended 10/31/99 ... 27.79 5,265,153 1.90 (1.00) 62
Year ended 10/31/98 ... 13.78 4,230,756 1.94(f) (.83) 61
Year ended 10/31/97 ... 28.64 3,578,806 1.96(f) (.94) 48
Year ended 10/31/96 ... 20.82 2,498,097 1.99 (.54) 46
Year ended 10/31/95 ... 19.33 1,052,020 2.05 (.15) 61
Class C
11/1/99 to 4/30/00+++ . 11.91% $1,044,948 1.84%* (.99)%* 38%
Year ended 10/31/99 ... 27.78 923,483 1.90 (1.00) 62
Year ended 10/31/98 ... 13.76 718,688 1.93(f) (.83) 61
Year ended 10/31/97 ... 28.66 599,449 1.97(f) (.95) 48
Year ended 10/31/96 ... 20.81 403,478 2.00 (.55) 46
Year ended 10/31/95 ... 19.32 226,662 2.05 (.15) 61
Alliance Technology Fund
Class A
12/1/99 to 5/31/00+++ . 22.40% $3,472,183 1.53%* (.90)%* 23%
Year ended 11/30/99 ... 74.67 2,167,060 1.68(f) (1.11) 54
Year ended 11/30/98 ... 27.36 824,636 1.66(f) (1.13) 67
Year ended 11/30/97 ... 7.32 624,716 1.67(f) (.97) 51
Year ended 11/30/96 ... 16.05 594,861 1.74 (.87) 30
Year ended 11/30/95 ... 61.93 398,262 1.75 (.77) 55
Class B
12/1/99 to 5/31/00+++ . 21.95% $6,063,004 2.23%* (1.61)%* 23%
Year ended 11/30/99 ... 73.44 3,922,584 2.39(f) (1.83) 54
Year ended 11/30/98 ... 26.44 1,490,578 2.39(f) (1.86) 67
Year ended 11/30/97 ... 6.57 1,053,436 2.38(f) (1.70) 51
Year ended 11/30/96 ... 15.20 660,921 2.44 (1.61) 30
Year ended 11/30/95 ... 60.95 277,111 2.48 (1.47) 55
Class C
12/1/99 to 5/31/00+++ . 21.95% $1,585,521 2.23%* (1.61)%* 23%
Year ended 11/30/99 ... 73.40 907,707 2.41(f) (1.85) 54
Year ended 11/30/98 ... 26.44 271,320 2.40(f) (1.87) 67
Year ended 11/30/97 ... 6.55 184,194 2.38(f) (1.70) 51
Year ended 11/30/96 ... 15.17 108,488 2.44 (1.60) 30
Year ended 11/30/95 ... 60.98 43,161 2.48 (1.47) 55
</TABLE>
--------------------------------------------------------------------------------
Please refer to the footnotes on page 70 and 71.
60 & 61
<PAGE>
<TABLE>
<CAPTION>
Income from Investment Operations
-------------------------------------------------------
Net Gains
Net Asset or Losses on
Value, Securities Total from
Beginning Net Investment (both realized Investment
Fiscal Year or Period of Period Income (Loss) and unrealized) Operations
--------------------- ------------ -------------- -------------- -------------
<S> <C> <C> <C> <C>
Alliance Quasar Fund
Class A
10/1/99 to 3/31/00+++ .... $ 23.84 $ (.12)(b) $ 4.54 $ 4.42
Year ended 9/30/99 ....... 22.27 (.22)(b) 2.80 2.58
Year ended 9/30/98 ....... 30.37 (.17)(b) (6.70) (6.87)
Year ended 9/30/97 ....... 27.92 (.24)(b) 6.80 6.56
Year ended 9/30/96 ....... 24.16 (.25) 8.82 8.57
Year ended 9/30/95 ....... 22.65 (.22)(b) 5.59 5.37
Class B
10/1/99 to 3/31/00+++ .... $ 21.32 $ (.19)(b) $ 4.05 $ 3.86
Year ended 9/30/99 ....... 20.17 (.37)(b) 2.53 2.16
Year ended 9/30/98 ....... 27.83 (.36)(b) (6.07) (6.43)
Year ended 9/30/97 ....... 26.13 (.42)(b) 6.23 5.81
Year ended 9/30/96 ....... 23.03 (.20) 8.11 7.91
Year ended 9/30/95 ....... 21.92 (.37)(b) 5.34 4.97
Class C
10/1/99 to 3/31/00+++ .... $ 21.34 $ (.20)(b) $ 4.06 $ 3.86
Year ended 9/30/99 ....... 20.18 (.36)(b) 2.53 2.17
Year ended 9/30/98 ....... 27.85 (.35)(b) (6.09) (6.44)
Year ended 9/30/97 ....... 26.14 (.42)(b) 6.24 5.82
Year ended 9/30/96 ....... 23.05 (.20) 8.10 7.90
Year ended 9/30/95 ....... 21.92 (.37)(b) 5.36 4.99
The Alliance Fund
Class A
12/1/99 to 5/31/00+++ .... $ 7.55 $ (.01)(b) $ (.32) $ (.33)
Year ended 11/30/99 ...... 5.97 (.03)(b) 2.00 1.97
Year ended 11/30/98 ...... 8.70 (.02)(b) (.54) (.56)
Year ended 11/30/97 ...... 7.71 (.02)(b) 2.09 2.07
Year ended 11/30/96 ...... 7.72 .02 1.06 1.08
Year ended 11/30/95 ...... 6.63 .02(b) 2.08 2.10
Class B
12/1/99 to 5/31/00+++ .... $ 6.87 $ (.04)(b) $ (.29) $ (.33)
Year ended 11/30/99 ...... 5.51 (.07)(b) 1.82 1.75
Year ended 11/30/98 ...... 8.25 (.07)(b) (.50) (.57)
Year ended 11/30/97 ...... 7.40 (.08)(b) 1.99 1.91
Year ended 11/30/96 ...... 7.49 (.01) .99 .98
Year ended 11/30/95 ...... 6.50 (.03)(b) 2.02 1.99
Class C
12/1/99 to 5/31/00+++ .... $ 6.86 $ (.04)(b) $ (.29) $ (.33)
Year ended 11/30/99 ...... 5.50 (.08)(b) 1.83 1.75
Year ended 11/30/98 ...... 8.26 (.07)(b) (.52) (.59)
Year ended 11/30/97 ...... 7.41 (.08)(b) 1.99 1.91
Year ended 11/30/96 ...... 7.50 (.02) 1.00 .98
Year ended 11/30/95 ...... 6.50 (.03)(b) 2.03 2.00
Alliance Growth and Income Fund
Class A
11/1/99 to 4/30/00+++ .... $ 3.70 $ .02(b) $ .21 $ .23
Year ended 10/31/99 ...... 3.44 .03(b) .62 .65
Year ended 10/31/98 ...... 3.48 .03(b) .43 .46
Year ended 10/31/97 ...... 3.00 .04(b) .87 .91
Year ended 10/31/96 ...... 2.71 .05 .50 .55
Year ended 10/31/95 ...... 2.35 .02 .52 .54
Class B
11/1/99 to 4/30/00+++ .... $ 3.66 $ .00(b) $ .21 $ .21
Year ended 10/31/99 ...... 3.41 .00(b) .62 .62
Year ended 10/31/98 ...... 3.45 .01(b) .43 .44
Year ended 10/31/97 ...... 2.99 .02(b) .85 .87
Year ended 10/31/96 ...... 2.69 .03 .51 .54
Year ended 10/31/95 ...... 2.34 .01 .49 .50
Class C
11/1/99 to 4/30/00+++ .... $ 3.66 $ .00(b) $ .21 $ .21
Year ended 10/31/99 ...... 3.41 .00(b) .62 .62
Year ended 10/31/98 ...... 3.45 .01(b) .43 .44
Year ended 10/31/97 ...... 2.99 .02(b) .85 .87
Year ended 10/31/96 ...... 2.70 .03 .50 .53
Year ended 10/31/95 ...... 2.34 .01 .50 .51
<CAPTION>
Less Dividends and Distributions
---------------------------------------------------------------------
Dividends Distributions Total Net Asset
from Net in Excess of Distributions Dividends Value,
Investment Net Investment from and End of
Fiscal Year or Period Income Income Capital Gains Distributions Period
--------------------- ----------- -------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Alliance Quasar Fund
Class A
10/1/99 to 3/31/00+++ .... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 28.26
Year ended 9/30/99 ....... 0.00 0.00 (1.01) (1.01) 23.84
Year ended 9/30/98 ....... 0.00 0.00 (1.23) (1.23) 22.27
Year ended 9/30/97 ....... 0.00 0.00 (4.11) (4.11) 30.37
Year ended 9/30/96 ....... 0.00 0.00 (4.81) (4.81) 27.92
Year ended 9/30/95 ....... 0.00 0.00 (3.86) (3.86) 24.16
Class B
10/1/99 to 3/31/00+++ .... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 25.18
Year ended 9/30/99 ....... 0.00 0.00 (1.01) (1.01) 21.32
Year ended 9/30/98 ....... 0.00 0.00 (1.23) (1.23) 20.17
Year ended 9/30/97 ....... 0.00 0.00 (4.11) (4.11) 27.83
Year ended 9/30/96 ....... 0.00 0.00 (4.81) (4.81) 26.13
Year ended 9/30/95 ....... 0.00 0.00 (3.86) (3.86) 23.03
Class C
10/1/99 to 3/31/00+++ .... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 25.20
Year ended 9/30/99 ....... 0.00 0.00 (1.01) (1.01) 21.34
Year ended 9/30/98 ....... 0.00 0.00 (1.23) (1.23) 20.18
Year ended 9/30/97 ....... 0.00 0.00 (4.11) (4.11) 27.85
Year ended 9/30/96 ....... 0.00 0.00 (4.81) (4.81) 26.14
Year ended 9/30/95 ....... 0.00 0.00 (3.86) (3.86) 23.05
The Alliance Fund
Class A
12/1/99 to 5/31/00+++ .... $ 0.00 $ 0.00 $ (.64) $ (.64) $ 6.58
Year ended 11/30/99 ...... 0.00 $ 0.00 (.39) (.39) 7.55
Year ended 11/30/98 ...... 0.00 0.00 (2.17) (2.17) 5.97
Year ended 11/30/97 ...... (.02) 0.00 (1.06) (1.08) 8.70
Year ended 11/30/96 ...... (.02) 0.00 (1.07) (1.09) 7.71
Year ended 11/30/95 ...... (.01) 0.00 (1.00) (1.01) 7.72
Class B
12/1/99 to 5/31/00+++ .... $ 0.00 $ 0.00 $ (.64) $ (.64) $ 5.90
Year ended 11/30/99 ...... 0.00 0.00 (.39) (.39) 6.87
Year ended 11/30/98 ...... 0.00 0.00 (2.17) (2.17) 5.51
Year ended 11/30/97 ...... 0.00 0.00 (1.06) (1.06) 8.25
Year ended 11/30/96 ...... 0.00 0.00 (1.07) (1.07) 7.40
Year ended 11/30/95 ...... 0.00 0.00 (1.00) (1.00) 7.49
Class C
12/1/99 to 5/31/00+++ .... $ 0.00 $ 0.00 $ (.64) $ (.64) $ 5.89
Year ended 11/30/99 ...... 0.00 0.00 (.39) (.39) 6.86
Year ended 11/30/98 ...... 0.00 0.00 (2.17) (2.17) 5.50
Year ended 11/30/97 ...... 0.00 0.00 (1.06) (1.06) 8.26
Year ended 11/30/96 ...... 0.00 0.00 (1.07) (1.07) 7.41
Year ended 11/30/95 ...... 0.00 0.00 (1.00) (1.00) 7.50
Alliance Growth and Income Fund
Class A
11/1/99 to 4/30/00+++ .... $ (.02) $ 0.00 $ (.17) $ (.19) $ 3.74
Year ended 10/31/99 ...... (.03) (.01) (.35) (.39) 3.70
Year ended 10/31/98 ...... (.04) 0.00 (.46) (.50) 3.44
Year ended 10/31/97 ...... (.05) 0.00 (.38) (.43) 3.48
Year ended 10/31/96 ...... (.05) 0.00 (.21) (.26) 3.00
Year ended 10/31/95 ...... (.06) 0.00 (.12) (.18) 2.71
Class B
11/1/99 to 4/30/00+++ .... $ (.01) $ 0.00 $ (.17) $ (.18) $ 3.69
Year ended 10/31/99 ...... 0.00 (.02) (.35) (.37) 3.66
Year ended 10/31/98 ...... (.02) 0.00 (.46) (.48) 3.41
Year ended 10/31/97 ...... (.03) 0.00 (.38) (.41) 3.45
Year ended 10/31/96 ...... (.03) 0.00 (.21) (.24) 2.99
Year ended 10/31/95 ...... (.03) 0.00 (.12) (.15) 2.69
Class C
11/1/99 to 4/30/00+++ .... $ (.01) $ 0.00 $ (.17) $ (.18) $ 3.69
Year ended 10/31/99 ...... 0.00 (.02) (.35) (.37) 3.66
Year ended 10/31/98 ...... (.02) 0.00 (.46) (.48) 3.41
Year ended 10/31/97 ...... (.03) 0.00 (.38) (.41) 3.45
Year ended 10/31/96 ...... (.03) 0.00 (.21) (.24) 2.99
Year ended 10/31/95 ...... (.03) 0.00 (.12) (.15) 2.70
<CAPTION>
Ratios/Supplemental Data
--------------------------------------------------------------------------------
Ratio of Ratio of Net
Net Assets, Expenses Income (Loss)
Total End of Period to Average to Average Portfolio
Fiscal Year or Period Return (a) (000's omitted) Net Assets Net Assets Turnover Rate
--------------------- ------------ -------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Alliance Quasar Fund
Class A
10/1/99 to 3/31/00+++ .... 18.54% $ 467,721 1.67%*(f) (.90)%* 86%
Year ended 9/30/99 ....... 11.89 517,289 1.69(f) (.90) 91
Year ended 9/30/98 ....... (23.45) 495,070 1.61(f) (.59) 109
Year ended 9/30/97 ....... 27.81 402,081 1.67 (.91) 135
Year ended 9/30/96 ....... 42.42 229,798 1.79 (1.11) 168
Year ended 9/30/95 ....... 30.73 146,663 1.83 (1.06) 160
Class B
10/1/99 to 3/31/00+++ .... 18.10% $ 568,729 2.41%*(f) (1.64)%* 86%
Year ended 9/30/99 ....... 11.01 587,919 2.46(f) (1.68) 91
Year ended 9/30/98 ....... (24.03) 625,147 2.39(f) (1.36) 109
Year ended 9/30/97 ....... 26.70 503,037 2.51 (1.73) 135
Year ended 9/30/96 ....... 41.48 112,490 2.62 (1.96) 168
Year ended 9/30/95 ....... 29.78 16,604 2.65 (1.88) 160
Class C
10/1/99 to 3/31/00+++ .... 18.09% $ 151,965 2.41%*(f) (1.63)%* 86%
Year ended 9/30/99 ....... 11.05 168,120 2.45(f) (1.66) 91
Year ended 9/30/98 ....... (24.05) 182,110 2.38(f) (1.35) 109
Year ended 9/30/97 ....... 26.74 145,494 2.50 (1.72) 135
Year ended 9/30/96 ....... 41.46 28,541 2.61 (1.94) 168
Year ended 9/30/95 ....... 29.87 1,611 2.64 (1.76) 160
The Alliance Fund
Class A
12/1/99 to 5/31/00+++ .... (4.89)% $1,078,444 1.03%* (.33)%* 46%
Year ended 11/30/99 ...... 35.37 1,128,166 1.06 (.41) 97
Year ended 11/30/98 ...... (8.48) 953,181 1.03 (.36) 106
Year ended 11/30/97 ...... 31.82 1,201,435 1.03 (.29) 158
Year ended 11/30/96 ...... 16.49 999,067 1.04 .30 80
Year ended 11/30/95 ...... 37.87 945,309 1.08 .31 81
Class B
12/1/99 to 5/31/00+++ .... (5.42)% $ 96,805 1.86%* (1.16)%* 46%
Year ended 11/30/99 ...... 34.24 101,858 1.89 (1.23) 97
Year ended 11/30/98 ...... (9.27) 85,456 1.84 (1.17) 106
Year ended 11/30/97 ...... 30.74 70,461 1.85 (1.12) 158
Year ended 11/30/96 ...... 15.47 44,450 1.87 (.53) 80
Year ended 11/30/95 ...... 36.61 31,738 1.90 (.53) 81
Class C
12/1/99 to 5/31/00+++ .... (5.43)% $ 25,641 1.85%* (1.16)%* 46%
Year ended 11/30/99 ...... 34.31 28,025 1.86 (1.22) 97
Year ended 11/30/98 ...... (9.58) 21,231 1.84 (1.18) 106
Year ended 11/30/97 ...... 30.72 18,871 1.83 (1.10) 158
Year ended 11/30/96 ...... 15.48 13,899 1.86 (.51) 80
Year ended 11/30/95 ...... 36.79 10,078 1.89 (.51) 81
Alliance Growth and Income Fund
Class A
11/1/99 to 4/30/00+++ .... 6.76% $1,685,202 .91%* .94%* 28%
Year ended 10/31/99 ...... 20.48 1,503,874 .93 .87 48
Year ended 10/31/98 ...... 14.70 988,965 .93(f) .96 89
Year ended 10/31/97 ...... 33.28 787,566 .92(f) 1.39 88
Year ended 10/31/96 ...... 21.51 553,151 .97 1.73 88
Year ended 10/31/95 ...... 24.21 458,158 1.05 1.88 142
Class B
11/1/99 to 4/30/00+++ .... 6.20% $2,079,387 1.68%* .17%* 28%
Year ended 10/31/99 ...... 19.56 1,842,045 1.70 .09 48
Year ended 10/31/98 ...... 14.07 787,730 1.72(f) .17 89
Year ended 10/31/97 ...... 31.83 456,399 1.72(f) .56 88
Year ended 10/31/96 ...... 21.20 235,263 1.78 .91 88
Year ended 10/31/95 ...... 22.84 136,758 1.86 1.05 142
Class C
11/1/99 to 4/30/00+++ .... 6.18% $ 617,713 1.67%* .19%* 28%
Year ended 10/31/99 ...... 19.56 518,185 1.69 .11 48
Year ended 10/31/98 ...... 14.07 179,487 1.72(f) .18 89
Year ended 10/31/97 ...... 31.83 106,526 1.71(f) .58 88
Year ended 10/31/96 ...... 20.72 61,356 1.76 .93 88
Year ended 10/31/95 ...... 23.30 35,835 1.84 1.04 142
</TABLE>
--------------------------------------------------------------------------------
Please refer to the footnotes on page 70 and 71.
62 & 63
<PAGE>
<TABLE>
<CAPTION>
Income from Investment Operations
-------------------------------------------------------
Net Gains
Net Asset or Losses on
Value, Securities Total from
Beginning Net Investment (both realized Investment
Fiscal Year or Period of Period Income (Loss) and unrealized) Operations
--------------------- ------------ -------------- -------------- -------------
<S> <C> <C> <C> <C>
Alliance Balanced Shares
Class A
Year ended 7/31/00 ......... $ 15.63 $ .40(b) $ .49 $ .89
Year ended 7/31/99 ......... 15.97 .36(b) 1.29 1.65
Year ended 7/31/98 ......... 16.17 .33(b) 1.86 2.19
Year ended 7/31/97 ......... 14.01 .31(b) 3.97 4.28
Year ended 7/31/96 ......... 15.08 .37 .45 .82
Class B
Year ended 7/31/00 ......... $ 15.11 $ .27(b) $ .48 $ .75
Year ended 7/31/99 ......... 15.54 .23(b) 1.25 1.48
Year ended 7/31/98 ......... 15.83 .21(b) 1.81 2.02
Year ended 7/31/97 ......... 13.79 .19(b) 3.89 4.08
Year ended 7/31/96 ......... 14.88 .28 .42 .70
Class C
Year ended 7/31/00 ......... $ 15.15 $ .28(b) $ .48 $ .76
Year ended 7/31/99 ......... 15.57 .24(b) 1.25 1.49
Year ended 7/31/98 ......... 15.86 .21(b) 1.81 2.02
Year ended 7/31/97 ......... 13.81 .20(b) 3.89 4.09
Year ended 7/31/96 ......... 14.89 .26 .45 .71
Alliance Utility Income Fund
Class A
12/1/99 to 5/31/00+++ ...... $ 16.91 $ 1.33(b)(c) $ (.37) $ .96
Year ended 11/30/99 ........ 14.68 .36(b)(c) 2.53 2.89
Year ended 11/30/98 ........ 12.48 .30(b)(c) 2.69 2.99
Year ended 11/30/97 ........ 10.59 .32(b)(c) 2.04 2.36
Year ended 11/30/96 ........ 10.22 .18(b)(c) .65 .83
Year ended 11/30/95 ........ 8.97 .27(b)(c) 1.43 1.70
Class B
12/1/99 to 5/31/00+++ ...... $ 16.80 $ 1.28(b)(c) $ (.39) $ .89
Year ended 11/30/99 ........ 14.62 .25(b)(c) 2.52 2.77
Year ended 11/30/98 ........ 12.46 .21(b)(c) 2.67 2.88
Year ended 11/30/97 ........ 10.57 .25(b)(c) 2.04 2.29
Year ended 11/30/96 ........ 10.20 .10(b)(c) .67 .77
Year ended 11/30/95 ........ 8.96 .18(b)(c) 1.45 1.63
Class C
12/1/99 to 5/31/00+++ ...... $ 16.82 $ 1.26(b)(c) $ (.37) $ .89
Year ended 11/30/99 ........ 14.65 .25(b)(c) 2.51 2.76
Year ended 11/30/98 ........ 12.47 .21(b)(c) 2.69 2.90
Year ended 11/30/97 ........ 10.59 .25(b)(c) 2.03 2.28
Year ended 11/30/96 ........ 10.22 .11(b)(c) .66 .77
Year ended 11/30/95 ........ 8.97 .18(b)(c) 1.46 1.64
Alliance Real Estate
Investment Fund
Class A
Year ended 8/31/00 ......... $ 10.19 $ .37(b) $ .89 $ 1.26
Year ended 8/31/99 ......... 10.47 .46(b) (.06) .40
Year ended 8/31/98 ......... 12.80 .52(b) (2.33) (1.81)
10/1/96+ to 8/31/97 ........ 10.00 .30(b) 2.88 3.18
Class B
Year ended 8/31/00 ......... $ 10.17 $ .30(b) $ .89 $ 1.19
Year ended 8/31/99 ......... 10.44 .38(b) (.05) .33
Year ended 8/31/98 ......... 12.79 .42(b) (2.33) (1.91)
10/1/96+ to 8/31/97 ........ 10.00 .23(b) 2.89 3.12
Class C
Year ended 8/31/00 ......... $ 10.17 $ .29(b) $ .91 $ 1.20
Year ended 8/31/99 ......... 10.44 .38(b) (.05) .33
Year ended 8/31/98 ......... 12.79 .42(b) (2.33) (1.91)
10/1/96+ to 8/31/97 ........ 10.00 .23(b) 2.89 3.12
<CAPTION>
Less Dividends and Distributions
---------------------------------------------------------------------
Dividends Distributions Total Net Asset
from Net in Excess of Distributions Dividends Value,
Investment Net Investment from and End of
Fiscal Year or Period Income Income Capital Gains Distributions Period
--------------------- ----------- -------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Alliance Balanced Shares
Class A
Year ended 7/31/00 ......... $ (.35) $ 0.00 $ (.64) $ (.99) $ 15.53
Year ended 7/31/99 ......... (.34) 0.00 (1.65) (1.99) 15.63
Year ended 7/31/98 ......... (.32) 0.00 (2.07) (2.39) 15.97
Year ended 7/31/97 ......... (.32) 0.00 (1.80) (2.12) 16.17
Year ended 7/31/96 ......... (.41) 0.00 (1.48) (1.89) 14.01
Class B
Year ended 7/31/00 ......... $ (.26) $ 0.00 $ (.64) $ (.90) $ 14.96
Year ended 7/31/99 ......... (.26) 0.00 (1.65) (1.91) 15.11
Year ended 7/31/98 ...... (.24) 0.00 (2.07) (2.31) 15.54
Year ended 7/31/97 ......... (.24) 0.00 (1.80) (2.04) 15.83
Year ended 7/31/96 ......... (.31) 0.00 (1.48) (1.79) 13.79
Class C
Year ended 7/31/00 ......... $ (.26) $ 0.00 $ (.64) $ (.90) $ 15.01
Year ended 7/31/99 ......... (.26) 0.00 (1.65) (1.91) 15.15
Year ended 7/31/98 ......... (.24) 0.00 (2.07) (2.31) 15.57
Year ended 7/31/97 ......... (.24) 0.00 (1.80) (2.04) 15.86
Year ended 7/31/96 ......... (.31) 0.00 (1.48) (1.79) 13.81
Alliance Utility Income Fund
Class A
12/1/99 to 5/31/00+++ ...... $ (.16) $ 0.00 $ (.94) $ (1.10) $ 16.77
Year ended 11/30/99 ........ (.32) 0.00 (.34) (.66) 16.91
Year ended 11/30/98 ........ (.32) 0.00 (.47) (.79) 14.68
Year ended 11/30/97 ........ (.34) 0.00 (.13) (.47) 12.48
Year ended 11/30/96 ........ (.46) 0.00 0.00 (.46) 10.59
Year ended 11/30/95 ........ (.45) 0.00 0.00 (.45) 10.22
Class B
12/1/99 to 5/31/00+++ ...... $ (.12) $ 0.00 $ (.94) $ (1.06) $ 16.63
Year ended 11/30/99 ........ (.25) 0.00 (.34) (.59) 16.80
Year ended 11/30/98 ........ (.25) 0.00 (.47) (.72) 14.62
Year ended 11/30/97 ........ (.27) 0.00 (.13) (.40) 12.46
Year ended 11/30/96 ........ (.40) 0.00 0.00 (.40) 10.57
Year ended 11/30/95 ........ (.39) 0.00 0.00 (.39) 10.20
Class C
12/1/99 to 5/31/00+++ ...... $ (.12) $ 0.00 $ (.94) $ (1.06) $ 16.65
Year ended 11/30/99 ........ (.25) 0.00 (.34) (.59) 16.82
Year ended 11/30/98 ........ (.25) 0.00 (.47) (.72) 14.65
Year ended 11/30/97 ........ (.27) 0.00 (.13) (.40) 12.47
Year ended 11/30/96 ........ (.40) 0.00 0.00 (.40) 10.59
Year ended 11/30/95 ........ (.39) 0.00 0.00 (.39) 10.22
Alliance Real Estate
Investment Fund
Class A
Year ended 8/31/00 ......... $ (.60)(g) $ (0) $ (.00) $ (.60) $ 10.85
Year ended 8/31/99 ......... (.48)(g) (.10) (.10) (.68) 10.19
Year ended 8/31/98 ......... (.51) 0.00 (.01) (.52) 10.47
10/1/96+ to 8/31/97 ........ (.38)(g) 0.00 0.00 (.38) 12.80
Class B
Year ended 8/31/00 ......... $ (.52)(g) $ (0.00) $ (.00) $ (.52) $ 10.84
Year ended 8/31/99 ......... (.40)(g) (.10) (.10) (.60) 10.17
Year ended 8/31/98 ......... (.43) 0.00 (.01) (.44) 10.44
10/1/96+ to 8/31/97 ........ (.33)(g) 0.00 0.00 (.33) 12.79
Class C
Year ended 8/31/00 ......... $ (.52)(g) $ (0.00) $ (.00) $ (.52) $ 10.85
Year ended 8/31/99 ......... (.40)(g) (.10) (.10) (.60) 10.17
Year ended 8/31/98 ......... (.43) 0.00 (.01) (.44) 10.44
10/1/96+ to 8/31/97 ........ (.33)(g) 0.00 0.00 (.33) 12.79
<CAPTION>
Ratios/Supplemental Data
--------------------------------------------------------------------------------
Ratio of Ratio of Net
Net Assets, Expenses Income (Loss)
Total End of Period to Average to Average Portfolio
Fiscal Year or Period Return (a) (000's omitted) Net Assets Net Assets Turnover Rate
--------------------- ------------ -------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Alliance Balanced Shares
Class A
Year ended 7/31/00 ......... 6.22% $212,326 1.12% 2.62% 76%
Year ended 7/31/99 ......... 11.44 189,953 1.22(f) 2.31 105
Year ended 7/31/98 ......... 14.99 123,623 1.30(f) 2.07 145
Year ended 7/31/97 ......... 33.46 115,500 1.47(f) 2.11 207
Year ended 7/31/96 ......... 5.23 102,567 1.38 2.41 227
Class B
Year ended 7/31/00 ......... 5.46% $155,060 1.86% 1.88% 76%
Year ended 7/31/99 ......... 10.56 136,384 1.97(f) 1.56 105
Year ended 7/31/98 ......... 14.13 47,728 2.06(f) 1.34 145
Year ended 7/31/97 ......... 32.34 24,192 2.25(f) 1.32 207
Year ended 7/31/96 ......... 4.45 18,393 2.16 1.61 227
Class C
Year ended 7/31/00 ......... 5.52% $ 65,214 1.86% 1.88% 76%
Year ended 7/31/99 ......... 10.60 63,517 1.96(f) 1.57 105
Year ended 7/31/98 ......... 14.09 10,855 2.05(f) 1.36 145
Year ended 7/31/97 ......... 32.37 5,510 2.23(f) 1.37 207
Year ended 7/31/96 ......... 4.52 6,096 2.15 1.63 227
Alliance Utility Income Fund
Class A
12/1/99 to 5/31/00+++ ...... 5.98% $ 37,191 1.49%*(d) 15.87%* 19%
Year ended 11/30/99 ........ 20.27 29,841 1.50(d) 2.26 19
Year ended 11/30/98 ........ 24.99 9,793 1.50(d) 2.23 16
Year ended 11/30/97 ........ 23.10 4,117 1.50(d) 2.89 37
Year ended 11/30/96 ........ 8.47 3,294 1.50(d) 1.67 98
Year ended 11/30/95 ........ 19.58 2,748 1.50(d) 2.48 162
Class B
12/1/99 to 5/31/00+++ ...... 5.61% $102,261 2.20%*(d) 15.34%* 19%
Year ended 11/30/99 ........ 19.45 80,806 2.20%(d) 1.55% 19%
Year ended 11/30/98 ........ 24.02 35,550 2.20(d) 1.56 16
Year ended 11/30/97 ........ 22.35 14,782 2.20(d) 2.27 37
Year ended 11/30/96 ........ 7.82 13,561 2.20(d) .95 98
Year ended 11/30/95 ........ 18.66 10,988 2.20(d) 1.60 162
Class C
12/1/99 to 5/31/00+++ ...... 5.60% $ 24,572 2.20%*(d) 15.10%* 19%
Year ended 11/30/99 ........ 19.34 20,605 2.20(d) 1.56 19
Year ended 11/30/98 ........ 24.16 7,298 2.20(d) 1.54 16
Year ended 11/30/97 ........ 22.21 3,413 2.20(d) 2.27 37
Year ended 11/30/96 ........ 7.81 3,376 2.20(d) .94 98
Year ended 11/30/95 ........ 18.76 3,500 2.20(d) 1.88 162
Alliance Real Estate
Investment Fund
Class A
Year ended 8/31/00 ......... 13.46% $ 22,221 1.71% 3.81% 26%
Year ended 8/31/99 ......... 3.86 35,299 1.58 4.57 29
Year ended 8/31/98 ......... (14.90) 51,214 1.55 3.87 23
10/1/96+ to 8/31/97 ........ 32.24 37,638 1.77*(d)(f) 2.73* 20
Class B
Year ended 8/31/00 ......... 12.68% $113,542 2.41% 3.13% 26%
Year ended 8/31/99 ......... 3.20 168,741 2.31 3.82 29
Year ended 8/31/98 ......... (15.56) 268,856 2.26 3.16 23
10/1/96+ to 8/31/97 ........ 31.49 186,802 2.44*(d)(f) 2.08* 20
Class C
Year ended 8/31/00 ......... 12.78% $ 34,217 2.40% 3.02% 26%
Year ended 8/31/99 ......... 3.20 44,739 2.30 3.77 29
Year ended 8/31/98 ......... (15.56) 69,575 2.26 3.15 23
10/1/96+ to 8/31/97 ........ 31.49 42,719 2.43*(d)(f) 2.06* 20
</TABLE>
--------------------------------------------------------------------------------
Please refer to the footnotes on page 70 and 71.
64 & 65
<PAGE>
<TABLE>
<CAPTION>
Income from Investment Operations
-------------------------------------------------------
Net Gains
Net Asset or Losses on
Value, Securities Total from
Beginning Net Investment (both realized Investment
Fiscal Year or Period of Period Income (Loss) and unrealized) Operations
--------------------- ------------ -------------- -------------- -------------
<S> <C> <C> <C> <C>
Alliance New Europe Fund
Class A
Year ended 7/31/00 ......... $ 18.57 $ (.10)(b) $ 3.55 $ 3.45
Year ended 7/31/99 ......... 21.85 .07(b) (.79) (.72)
Year ended 7/31/98 ......... 18.61 .05(b) 5.28 5.33
Year ended 7/31/97 ......... 15.84 .07(b) 4.20 4.27
Year ended 7/31/96 ......... 15.11 .18 1.02 1.20
Class B
Year ended 7/31/00 ......... $ 17.39 $ (.23)(b) $ 3.31 $ 3.08
Year ended 7/31/99 ......... 20.76 (.06)(b) (.75) (.81)
Year ended 7/31/98 ......... 17.87 (.08)(b) 5.02 4.94
Year ended 7/31/97 ......... 15.31 (.04)(b) 4.02 3.98
Year ended 7/31/96 ......... 14.71 .08 .99 1.07
Class C
Year ended 7/31/00 ......... $ 17.41 $ (.23)(b) $ 3.31 $ 3.08
Year ended 7/31/99 ......... 20.77 (.05)(b) (.75) (.80)
Year ended 7/31/98 ......... 17.89 (.08)(b) 5.01 4.93
Year ended 7/31/97 ......... 15.33 (.04)(b) 4.02 3.98
Year ended 7/31/96 ......... 14.72 .08 1.00 1.08
Alliance Worldwide
Privatization Fund
Class A
Year ended 6/30/00 ......... $ 11.84 $ (.04)(b) $ 2.83 $ 2.79
Year ended 6/30/99 ......... 12.67 .00(b) .93 .93
Year ended 6/30/98 ......... 13.26 .10(b) .85 .95
Year ended 6/30/97 ......... 12.13 .15(b) 2.55 2.70
Year ended 6/30/96 ......... 10.18 .10(b) 1.85 1.95
Class B
Year ended 6/30/00 ......... $ 11.50 $ (.13)(b) $ 2.75 $ 2.62
Year ended 6/30/99 ......... 12.37 .(08)(b) .89 .81
Year ended 6/30/98 ......... 13.04 .02(b) .82 .84
Year ended 6/30/97 ......... 11.96 .08(b) 2.50 2.58
Year ended 6/30/96 ......... 10.10 (.02)(b) 1.88 1.86
Class C
Year ended 6/30/00 ......... $ 11.50 $ (.12)(b) $ 2.73 $ 2.61
Year ended 6/30/99 ......... 12.37 .(08)(b) .89 .81
Year ended 6/30/98 ......... 13.04 .05(b) .79 .84
Year ended 6/30/97 ......... 11.96 .12(b) 2.46 2.58
Year ended 6/30/96 ......... 10.10 .03(b) 1.83 1.86
Alliance International
Premier Growth
Class A
12/1/99 to 5/31/00+++ ...... $ 13.22 $ (.04)(b)(c) $ .47 $ .43
Year ended 11/30/99 ........ 9.63 (.15)(b)(c) 3.74 3.59
3/3/98+ to 11/30/98 ........ 10.00 (.08)(b)(c) (.29) (.37)
Class B
12/1/99 to 5/31/00+++ ...... $ 13.05 $ (.09)(b)(c) $ .49 $ .40
Year ended 11/30/99 ........ 9.58 (.22)(b)(c) 3.69 3.47
3/3/98+ to 11/30/98 ........ 10.00 (.13)(b)(c) (.29) (.42)
Class C
12/1/99 to 5/31/00+++ ...... $ 13.05 $ (.09)(b)(c) $ .48 $ .39
Year ended 11/30/99 ........ 9.57 (.22)(b)(c) 3.70 3.48
3/3/98+ to 11/30/98 ........ 10.00 (.15)(b)(c) (.28) (.43)
<CAPTION>
Less Dividends and Distributions
---------------------------------------------------------------------
Dividends Distributions Total Net Asset
from Net in Excess of Distributions Dividends Value,
Investment Net Investment from and End of
Fiscal Year or Period Income Income Capital Gains Distributions Period
--------------------- ----------- -------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Alliance New Europe Fund
Class A
Year ended 7/31/00 ......... $ 0.00 $ 0.00 $ (.91) $ (.91) $ 21.11
Year ended 7/31/99 ......... 0.00 0.00 (2.56) (2.56) 18.57
Year ended 7/31/98 ......... 0.00 (.04) (2.05) (2.09) 21.85
Year ended 7/31/97 ......... (.15) (.03) (1.32) (1.50) 18.61
Year ended 7/31/96 ......... 0.00 0.00 (.47) (.47) 15.84
Class B
Year ended 7/31/00 ......... $ 0.00 $ 0.00 $ (.91) $ (.91) $ 19.56
Year ended 7/31/99 ......... 0.00 0.00 (2.56) (2.56) 17.39
Year ended 7/31/98 ......... 0.00 0.00 (2.05) (2.05) 20.76
Year ended 7/31/97 ......... 0.00 (.10) (1.32) (1.42) 17.87
Year ended 7/31/96 ......... 0.00 0.00 (.47) (.47) 15.31
Class C
Year ended 7/31/00 ......... $ 0.00 $ 0.00 $ (.91) $ (.91) $ 19.58
Year ended 7/31/99 ......... 0.00 0.00 (2.56) (2.56) 17.41
Year ended 7/31/98 ......... 0.00 0.00 (2.05) (2.05) 20.77
Year ended 7/31/97 ......... 0.00 (.10) (1.32) (1.42) 17.89
Year ended 7/31/96 ......... 0.00 0.00 (.47) (.47) 15.33
Alliance Worldwide
Privatization Fund
Class A
Year ended 6/30/00 ......... $ 0.00 $ 0.00 $ (1.06) $ (1.06) $ 13.57
Year ended 6/30/99 ......... (.12) 0.00 (1.64) (1.76) 11.84
Year ended 6/30/98 ......... (.18) 0.00 (1.36) (1.54) 12.67
Year ended 6/30/97 ......... (.15) 0.00 (1.42) (1.57) 13.26
Year ended 6/30/96 ......... 0.00 0.00 0.00 0.00 12.13
Class B
Year ended 6/30/00 ......... $ 0.00 $ 0.00 $ (1.06) $ (1.06) $ 13.06
Year ended 6/30/99 ......... (.04) 0.00 (1.64) (1.68) 11.50
Year ended 6/30/98 ......... (.15) 0.00 (1.36) (1.51) 12.37
Year ended 6/30/97 ......... (.08) 0.00 (1.42) (1.50) 13.04
Year ended 6/30/96 ......... 0.00 0.00 0.00 0.00 11.96
Class C
Year ended 6/30/00 ......... $ 0.00 $ 0.00 $ (1.06) $ (1.06) $ 13.05
Year ended 6/30/99 ......... (.04) 0.00 (1.64) (1.68) 11.50
Year ended 6/30/98 ......... (.15) 0.00 (1.36) (1.51) 12.37
Year ended 6/30/97 ......... (.08) 0.00 (1.42) (1.50) 13.04
Year ended 6/30/96 ......... 0.00 0.00 0.00 0.00 11.96
Alliance International
Premier Growth
Class A
12/1/99 to 5/31/00+++ ...... $ 0.00 $ 0.00 $ (.44) $ (.44) $ 13.21
Year ended 11/30/99 ........ 0.00 0.00 0.00 0.00 13.22
3/3/98+ to 11/30/98 ........ 0.00 0.00 0.00 0.00 9.63
Class B
12/1/99 to 5/31/00+++ ...... $ 0.00 $ 0.00 $ (.44) $ (.44) $ 13.01
Year ended 11/30/99 ........ 0.00 0.00 0.00 0.00 13.05
3/3/98+ to 11/30/98 ........ 0.00 0.00 0.00 0.00 9.58
Class C
12/1/99 to 5/31/00+++ ...... $ 0.00 $ 0.00 $ (.44) $ (.44) $ 13.00
Year ended 11/30/99 ........ 0.00 0.00 0.00 0.00 13.05
3/3/98+ to 11/30/98 ........ 0.00 0.00 0.00 0.00 9.57
<CAPTION>
Ratios/Supplemental Data
--------------------------------------------------------------------------------
Ratio of Ratio of Net
Net Assets, Expenses Income (Loss)
Total End of Period to Average to Average Portfolio
Fiscal Year or Period Return (a) (000's omitted) Net Assets Net Assets Turnover Rate
--------------------- ------------ -------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Alliance New Europe Fund
Class A
Year ended 7/31/00 ......... 18.89% $170,815 1.65%(f) (.46)% 103%
Year ended 7/31/99 ......... (2.87) 125,729 1.80(f) .39 89
Year ended 7/31/98 ......... 32.21 130,777 1.85(f) .25 99
Year ended 7/31/97 ......... 28.78 78,578 2.05(f) .40 89
Year ended 7/31/96 ......... 8.20 74,026 2.14 1.10 69
Class B
Year ended 7/31/00 ......... 18.01% $181,285 2.38%(f) (1.18)% 103%
Year ended 7/31/99 ......... (3.52) 144,570 2.50(f) (.34) 89
Year ended 7/31/98 ......... 31.22 137,425 2.56(f) (.40) 99
Year ended 7/31/97 ......... 27.76 66,032 2.75(f) (.23) 89
Year ended 7/31/96 ......... 7.53 42,662 2.86 .59 69
Class C
Year ended 7/31/00 ......... 17.99% $ 60,984 2.36%(f) (1.18)% 103%
Year ended 7/31/99 ......... (3.46) 45,845 2.50(f) (.28) 89
Year ended 7/31/98 ......... 31.13 39,618 2.56(f) (.41) 99
Year ended 7/31/97 ......... 27.73 16,907 2.74(f) (.23) 89
Year ended 7/31/96 ......... 7.59 10,141 2.87 .58 69
Alliance Worldwide
Privatization Fund
Class A
Year ended 6/30/00 ......... 24.26% $394,665 1.74%(f) (.31)% 67%
Year ended 6/30/99 ......... 9.86 340,194 1.92(f) (.01) 58
Year ended 6/30/98 ......... 9.11 467,960 1.73 .80 53
Year ended 6/30/97 ......... 25.16 561,793 1.72 1.27 48
Year ended 6/30/96 ......... 19.16 672,732 1.87 .95 28
Class B
Year ended 6/30/00 ......... 23.45% $160,847 2.47%(f) (1.02)% 67%
Year ended 6/30/99 ......... 8.91 117,420 2.63(f) (1.43) 58
Year ended 6/30/98 ......... 8.34 156,348 2.45 .20 53
Year ended 6/30/97 ......... 24.34 121,173 2.43 .66 48
Year ended 6/30/96 ......... 18.42 83,050 2.83 (.20) 28
Class C
Year ended 6/30/00 ......... 23.37% $ 39,598 2.44%(f) (.94)% 67%
Year ended 6/30/99 ......... 8.91 20,397 2.63(f) (1.44) 58
Year ended 6/30/98 ......... 8.34 26,635 2.44 .38 53
Year ended 6/30/97 ......... 24.33 12,929 2.42 1.06 48
Year ended 6/30/96 ......... 18.42 2,383 2.57 .63 28
Alliance International
Premier Growth
Class A
12/1/99 to 5/31/00+++ ...... 3.32% $ 58,071 1.88%* (.57)%* 122%
Year ended 11/30/99 ........ 37.28 12,851 2.51(d)(f) (1.34) 107
3/3/98+ to 11/30/98 ........ (3.70) 7,255 2.50*(d) (.90)* 151
Class B
12/1/99 to 5/31/00+++ ...... 3.12% $119,116 2.60%* (1.30)%* 122%
Year ended 11/30/99 ........ 36.22 28,678 3.21(d)(f) (2.07) 107
3/3/98+ to 11/30/98 ........ (4.20) 11,710 3.20*(d) (1.41)* 151
Class C
12/1/99 to 5/31/00+++ ...... 3.05% $ 43,867 2.59%* (1.28)%* 122%
Year ended 11/30/99 ........ 36.36 9,235 3.21(d)(f) (2.06) 107
3/3/98+ to 11/30/98 ........ (4.30) 3,120 3.20*(d) (1.69)* 151
</TABLE>
--------------------------------------------------------------------------------
Please refer to the footnotes on page 70 and 71.
66 & 67
<PAGE>
<TABLE>
<CAPTION>
Income from Investment Operations
-------------------------------------------------------
Net Gains
Net Asset or Losses on
Value, Securities Total from
Beginning Net Investment (both realized Investment
Fiscal Year or Period of Period Income (Loss) and unrealized) Operations
--------------------- ------------ -------------- -------------- -------------
<S> <C> <C> <C> <C>
Alliance Global Small Cap Fund
Class A
Year ended 7/31/00 ......... $ 11.66 $ (.16)(b) $ 3.83 $ 3.67
Year ended 7/31/99 ......... 12.14 (.08)(b) .76 .68
Year ended 7/31/98 ......... 12.87 (.11)(b) .37 .26
Year ended 7/31/97 ......... 11.61 (.15)(b) 2.97 2.82
Year ended 7/31/96 ......... 10.38 (.14)(b) 1.90 1.76
Class B
Year ended 7/31/00 ......... $ 10.57 $ (.24)(b) $ 3.46 $ 3.22
Year ended 7/31/99 ......... 11.20 (.15)(b) .68 .53
Year ended 7/31/98 ......... 12.03 (.18)(b) .34 .16
Year ended 7/31/97 ......... 11.03 (.21)(b) 2.77 2.56
Year ended 7/31/96 ......... 9.95 (.20)(b) 1.81 1.61
Class C
Year ended 7/31/00 ......... $ 10.59 $ (.24)(b) $ 3.47 $ 3.23
Year ended 7/31/99 ......... 11.22 (.16)(b) .69 .53
Year ended 7/31/98 ......... 12.05 (.19)(b) .35 .16
Year ended 7/31/97 ......... 11.05 (.22)(b) 2.78 2.56
Year ended 7/31/96 ......... 9.96 (.20)(b) 1.82 1.62
Alliance International Fund
Class A
Year ended 6/30/00 ......... $ 16.24 $ (.04)(b)(c) $ 4.64 $ 4.60
Year ended 6/30/99 ......... 18.55 (.04)(b)(c) (.75) (.79)
Year ended 6/30/98 ......... 18.69 (.01)(b)(c) 1.13 1.12
Year ended 6/30/97 ......... 18.32 .06(b) 1.51 1.57
Year ended 6/30/96 ......... 16.81 .05(b) 2.51 2.56
Class B
Year ended 6/30/00 ......... $ 15.19 $ (.17)(b)(c) $ 4.33 $ 4.16
Year ended 6/30/99 ......... 17.41 (.16)(b)(c) (.68) (.84)
Year ended 6/30/98 ......... 17.71 (.16)(b)(c) 1.07 .91
Year ended 6/30/97 ......... 17.45 (.09)(b) 1.43 1.34
Year ended 6/30/96 ......... 16.19 (.07)(b) 2.38 2.31
Class C
Year ended 6/30/00 ......... $ 15.19 $ (.16)(b)(c) $ 4.32 $ 4.16
Year ended 6/30/99 ......... 17.42 (.16)(b)(c) (.69) (.85)
Year ended 6/30/98 ......... 17.73 (.15)(b)(c) 1.05 .90
Year ended 6/30/97 ......... 17.46 (.09)(b) 1.44 1.35
Year ended 6/30/96 ......... 16.20 (.07)(b) 2.38 2.31
Alliance Greater China '97 Fund
Class A
Year ended 7/31/00 ......... $ 8.20 $ (.04)(b)(c) $ 2.18 $ 2.14
Year ended 7/31/99 ......... 4.84 .02(b)(c) 3.34 3.36
9/3/97+ to 7/31/98 ......... 10.00 .08(b)(c) (5.18) (5.10)
Class B
Year ended 7/31/00 ......... $ 8.12 $ (.11)(b)(c) $ 2.12 $ 2.01
Year ended 7/31/99 ......... 4.82 (.01)(b)(c) 3.31 3.30
9/3/97+ to 7/31/98 ......... 10.00 .03(b)(c) (5.17) (5.14)
Class C
Year ended 7/31/00 ......... $ 8.11 $ (.13)(b)(c) $ 2.15 $ 2.02
Year ended 7/31/99 ......... 4.82 (.03)(b)(c) 3.32 3.29
9/3/97+ to 7/31/98 ......... 10.00 .03(b)(c) (5.17) (5.14)
Alliance All-Asia Investment Fund
Class A
11/1/99 to 4/30/00+++ ...... $ 10.46 $ (.09)(b) $ 2.85 $ 2.76
Year ended 10/31/99 ........ 5.86 (.10)(b)(c) 4.70 4.60
Year ended 10/31/98 ........ 7.54 (.10)(b)(c) (1.58) (1.68)
Year ended 10/31/97 ........ 11.04 (.21)(b)(c) (2.95) (3.16)
Year ended 10/31/96 ........ 10.45 (.21)(b)(c) .88 .67
11/28/94+ to 10/31/95 ...... 10.00 (.19)(c)(b) .64 .45
Class B
11/1/99 to 4/30/00+++ ...... $ 10.09 $ (.13)(b) $ 2.75 $ 2.62
Year ended 10/31/99 ........ 5.71 (.18)(b)(c) 4.56 4.38
Year ended 10/31/98 ........ 7.39 (.14)(b)(c) (1.54) (1.68)
Year ended 10/31/97 ........ 10.90 (.28)(b)(c) (2.89) (3.17)
Year ended 10/31/96 ........ 10.41 (.28)(b)(c) .85 .57
11/28/94+ to 10/31/95 ...... 10.00 (.25)(b)(c) .66 .41
Class C
11/1/99 to 4/30/00+++ ...... $ 10.12 $ (.13)(b) $ 2.75 $ 2.62
Year ended 10/31/99 ........ 5.72 (.18)(b)(c) 4.58 4.40
Year ended 10/31/98 ........ 7.40 (.14)(b)(c) (1.54) (1.68)
Year ended 10/31/97 ........ 10.91 (.27)(b)(c) (2.90) (3.17)
Year ended 10/31/96 ........ 10.41 (.28)(b)(c) .86 .58
Year ended 10/31/95 ........ 10.00 (.35)(b)(c) .76 .41
<CAPTION>
Less Dividends and Distributions
---------------------------------------------------------------------
Dividends Distributions Total Net Asset
from Net in Excess of Distributions Dividends Value,
Investment Net Investment from and End of
Fiscal Year or Period Income Income Capital Gains Distributions Period
--------------------- ----------- -------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Alliance Global Small Cap Fund
Class A
Year ended 7/31/00 ......... $ 0.00 $ 0.00 $ (.20) $ (.20) $ 15.13
Year ended 7/31/99 ......... 0.00 0.00 (1.16) (1.16) 11.66
Year ended 7/31/98 ......... 0.00 0.00 (.99) (.99) 12.14
Year ended 7/31/97 ......... 0.00 0.00 (1.56) (1.56) 12.87
Year ended 7/31/96 ......... 0.00 0.00 (.53) (.53) 11.61
Class B
Year ended 7/31/00 ......... $ 0.00 $ 0.00 $ (.20) $ (.20) $ 13.59
Year ended 7/31/99 ......... 0.00 0.00 (1.16) (1.16) 10.57
Year ended 7/31/98 ......... 0.00 0.00 (.99) (.99) 11.20
Year ended 7/31/97 ......... 0.00 0.00 (1.56) (1.56) 12.03
Year ended 7/31/96 ......... 0.00 0.00 (.53) (.53) 11.03
Class C
Year ended 7/31/00 ......... $ 0.00 $ 0.00 $ (.20) $ (.20) $ 13.62
Year ended 7/31/99 ......... 0.00 0.00 (1.16) (1.16) 10.59
Year ended 7/31/98 ......... 0.00 0.00 (.99) (.99) 11.22
Year ended 7/31/97 ......... 0.00 0.00 (1.56) (1.56) 12.05
Year ended 7/31/96 ......... 0.00 0.00 (.53) (.53) 11.05
Alliance International Fund
Class A
Year ended 6/30/00 ......... $ 0.00 $ 0.00 $ (1.19) $ (1.19) $ 19.65
Year ended 6/30/99 ......... 0.00 (.48) (1.04) (1.52) 16.24
Year ended 6/30/98 ......... 0.00 (.05) (1.21) (1.26) 18.55
Year ended 6/30/97 ......... (.12) 0.00 (1.08) (1.20) 18.69
Year ended 6/30/96 ......... 0.00 0.00 (1.05) (1.05) 18.32
Class B
Year ended 6/30/00 ......... $ 0.00 $ 0.00 $ (1.19) $ (1.19) $ 18.16
Year ended 6/30/99 ......... 0.00 (.34) (1.04) (1.38) 15.19
Year ended 6/30/98 ......... 0.00 0.00 (1.21) (1.21) 17.41
Year ended 6/30/97 ......... 0.00 0.00 (1.08) (1.08) 17.71
Year ended 6/30/96 ......... 0.00 0.00 (1.05) (1.05) 17.45
Class C
Year ended 6/30/00 ......... $ 0.00 $ 0.00 $ (1.19) $ (1.19) $ 18.16
Year ended 6/30/99 ......... 0.00 (.34) (1.04) (1.38) 15.19
Year ended 6/30/98 ......... 0.00 0.00 (1.21) (1.21) 17.42
Year ended 6/30/97 ......... 0.00 0.00 (1.08) (1.08) 17.73
Year ended 6/30/96 ......... 0.00 0.00 (1.05) (1.05) 17.46
Alliance Greater China '97 Fund
Class A
Year ended 7/31/00 ......... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 10.34
Year ended 7/31/99 ......... 0.00 0.00 0.00 0.00 8.20
9/3/97+ to 7/31/98 ......... (.06) 0.00 0.00 (.06) 4.84
Class B
Year ended 7/31/00 ......... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 10.13
Year ended 7/31/99 ......... 0.00 0.00 0.00 0.00 8.12
9/3/97+ to 7/31/98 ......... (.03) (.01) 0.00 (.04) 4.82
Class C
Year ended 7/31/00 ......... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 10.13
Year ended 7/31/99 ......... 0.00 0.00 0.00 0.00 8.11
9/3/97+ to 7/31/98 ......... (.03) (.01) 0.00 (.04) 4.82
Alliance All-Asia Investment Fund
Class A
11/1/99 to 4/30/00+++ ...... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 13.22
Year ended 10/31/99 ........ 0.00 0.00 0.00 0.00 10.46
Year ended 10/31/98 ........ 0.00 0.00 0.00 0.00 5.86
Year ended 10/31/97 ........ 0.00 0.00 (.34) (.34) 7.54
Year ended 10/31/96 ........ 0.00 0.00 (.08) (.08) 11.04
11/28/94+ to 10/31/95 ...... 0.00 0.00 0.00 0.00 10.45
Class B
11/1/99 to 4/30/00+++ ... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 12.71
Year ended 10/31/99 ........ 0.00 0.00 0.00 0.00 10.09
Year ended 10/31/98 ........ 0.00 0.00 0.00 0.00 5.71
Year ended 10/31/97 ........ 0.00 0.00 (.34) (.34) 7.39
Year ended 10/31/96 ........ 0.00 0.00 (.08) (.08) 10.90
11/28/94+ to 10/31/95 ...... 0.00 0.00 0.00 0.00 10.41
Class C
11/1/99 to 4/30/00+++ ...... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 12.74
Year ended 10/31/99 ........ 0.00 0.00 0.00 0.00 10.12
Year ended 10/31/98 ........ 0.00 0.00 0.00 0.00 5.72
Year ended 10/31/97 ........ 0.00 0.00 (.34) (.34) 7.40
Year ended 10/31/96 ........ 0.00 0.00 (.08) (.08) 10.91
Year ended 10/31/95 ........ 0.00 0.00 0.00 0.00 10.41
<CAPTION>
Ratios/Supplemental Data
--------------------------------------------------------------------------------
Ratio of Ratio of Net
Net Assets, Expenses Income (Loss)
Total End of Period to Average to Average Portfolio
Fiscal Year or Period Return (a) (000's omitted) Net Assets Net Assets Turnover Rate
--------------------- ------------ -------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Alliance Global Small Cap Fund
Class A
Year ended 7/31/00 ......... 31.81% $120,687 2.02%(f) (1.07)% 133%
Year ended 7/31/99 ......... 7.51 77,164 2.37(f) (.79) 120
Year ended 7/31/98 ......... 2.49 82,843 2.16(f) (.88) 113
Year ended 7/31/97 ......... 26.47 85,217 2.41(f) (1.25) 129
Year ended 7/31/96 ......... 17.46 68,623 2.51 (1.22) 139
Class B
Year ended 7/31/00 ......... 30.82% $ 65,097 2.76%(f) (1.82)% 133%
Year ended 7/31/99 ......... 6.74 30,205 3.14(f) (1.59) 120
Year ended 7/31/98 ......... 1.80 38,827 2.88(f) (1.58) 113
Year ended 7/31/97 ......... 25.42 31,946 3.11(f) (1.92) 129
Year ended 7/31/96 ......... 16.69 14,247 3.21 (1.88) 139
Class C
Year ended 7/31/00 ......... 30.86% $ 19,580 2.75%(f) (1.80)% 133%
Year ended 7/31/99 ......... 6.72 7,058 3.15(f) (1.61) 120
Year ended 7/31/98 ......... 1.79 9,471 2.88(f) (1.59) 113
Year ended 7/31/97 ......... 25.37 8,718 3.10(f) (1.93) 129
Year ended 7/31/96 ......... 16.77 4,119 3.19 (1.85) 139
Alliance International Fund
Class A
Year ended 6/30/00 ......... 29.18% $ 88,507 1.81%(d)(f)(h) (.21)% 154%
Year ended 6/30/99 ......... (3.95) 78,303 1.80(d)(f) (.25)(c) 178
Year ended 6/30/98 ......... 6.79 131,565 1.65(d) (.05)(c) 121
Year ended 6/30/97 ......... 9.30 190,173 1.74(f) .31 94
Year ended 6/30/96 ......... 15.83 196,261 1.72 .31 78
Class B
Year ended 6/30/00 ......... 28.27% $ 68,639 2.60%(d)(f)(h) (.96)% 154%
Year ended 6/30/99 ......... (4.56) 55,724 2.61(d)(f) (1.02)(c) 178
Year ended 6/30/98 ......... 5.92 71,370 2.49(d) (.90)(c) 121
Year ended 6/30/97 ......... 8.37 77,725 2.58(f) (.51) 94
Year ended 6/30/96 ......... 14.87 72,470 2.55 (.46) 78
Class C
Year ended 6/30/00 ......... 28.27% $ 21,180 2.57%(d)(f)(h) (.94)% 154%
Year ended 6/30/99 ......... (4.62) 16,876 2.61(d)(f) (1.02)(c) 178
Year ended 6/30/98 ......... 5.85 20,428 2.48(d) (.90)(c) 121
Year ended 6/30/97 ......... 8.42 23,268 2.56(f) (.51) 94
Year ended 6/30/96 ......... 14.85 26,965 2.53 (.47) 78
Alliance Greater China '97 Fund
Class A
Year ended 7/31/00 ......... 26.10% $ 2,471 2.52%(d)(f) (.42)% 158%
Year ended 7/31/99 ......... 69.42 1,011 2.52(d)(f) .36 94
9/3/97+ to 7/31/98 ......... (51.20) 445 2.52(d)(f)* 1.20* 58
Class B
Year ended 7/31/00 ......... 24.75% $ 4,047 3.22%(d)(f) (1.13)% 158%
Year ended 7/31/99 ......... 68.46 1,902 3.22(d)(f) (.22) 94
9/3/97+ to 7/31/98 ......... (51.53) 1,551 3.22(d)(f)* .53* 58
Class C
Year ended 7/31/00 ......... 24.91% $ 1,372 3.22%(d)(f) (1.31)% 158%
Year ended 7/31/99 ......... 68.26 162 3.22(d)(f) (.49) 94
9/3/97+ to 7/31/98 ......... (51.53) 102 3.22(d)(f)* .50* 58
Alliance All-Asia Investment Fund
Class A
11/1/99 to 4/30/00+++ ...... 26.39% $ 39,125 2.04%(f)(h)* (1.27)%* 164%
Year ended 10/31/99 ........ 78.50 40,040 2.45(d)(f) (1.20) 119
Year ended 10/31/98 ........ (22.28) 3,778 3.74(d)(f) (1.50) 93
Year ended 10/31/97 ........ (29.61) 5,916 3.45(d) (1.97) 70
Year ended 10/31/96 ........ 6.43 12,284 3.37(d) (1.75) 66
11/28/94+ to 10/31/95 ...... 4.50 2,870 4.42*(d) (1.87)* 90
Class B
11/1/99 to 4/30/00+++ ...... 25.97% $ 64,245 2.80%(f)(h)* (2.02)%* 164%
Year ended 10/31/99 ........ 76.71% 38,108 3.48%(d)(f) (2.31) 119
Year ended 10/31/98 ........ (22.73) 8,844 4.49(d)(f) (2.22) 93
Year ended 10/31/97 ........ (30.09) 11,439 4.15(d) (2.67) 70
Year ended 10/31/96 ........ 5.49 23,784 4.07(d) (2.44) 66
11/28/94+ to 10/31/95 ...... 4.10 5,170 5.20*(d) (2.64)* 90
Class C
11/1/99 to 4/30/00+++ ...... 25.89% $ 19,364 2.80%(f)(h)* (2.00)%* 164%
Year ended 10/31/99 ........ 76.92 10,060 3.41(d)(f) (2.21) 119
Year ended 10/31/98 ........ (22.70) 1,717 4.48(d)(f) (2.20) 93
Year ended 10/31/97 ........ (30.06) 1,859 4.15(d) (2.66) 70
Year ended 10/31/96 ........ 5.59 4,228 4.07(d) (2.42) 66
Year ended 10/31/95 ........ 4.10 597 5.84(d) (3.41) 90
</TABLE>
--------------------------------------------------------------------------------
Please refer to the footnotes on page 70 and 71.
68 & 69
<PAGE>
+ Commencement of operations.
++ Commencement of distribution.
+++ Unaudited.
* Annualized.
(a) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at the net asset value during the period, and
a redemption on the last day of the period. Initial sales charges or
contingent deferred sales charges are not reflected in the calculation of
total investment return. Total investment returns calculated for periods
of less than one year are not annualized.
(b) Based on average shares outstanding.
(c) Net of fee waiver and expense reimbursement.
(d) Net of expenses assumed and/or waived/reimbursed. If the following Funds
had borne all expenses in their most recent five fiscal years, their
expense ratios, without giving effect to the expense offset arrangement
described in (f) below, would have been as follows:
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Alliance All-Asia Investment Fund
Class A 10.57%* 3.61% 3.57% 4.63% 2.93% --
Class B 11.32%* 4.33% 4.27% 5.39% 3.96% --
Class C 11.38%* 4.30% 4.27% 5.42% 3.89% --
Alliance Real Estate Investment Fund
Class A -- -- 1.79%* -- -- --
Class B -- -- 2.45%* -- -- --
Class C -- -- 2.45%* -- -- --
Alliance Global Small Cap Fund
Class A 2.61% -- -- -- -- --
Class B 3.27% -- -- -- -- --
Class C 3.31% -- -- -- -- --
Alliance Utility Income Fund
Class A 4.86% 3.38% 3.55% 2.48% 1.73% 1.49%*
Class B 5.34% 4.08% 4.28% 3.21% 2.44% 2.20%*
Class C 5.99% 4.07% 4.28% 3.22% 2.44% 2.20%*
Alliance International Fund
Class A -- -- -- 1.80% 1.91% 1.95%
Class B -- -- -- 2.64% 2.74% 2.74%
Class C -- -- -- 2.63% 2.75% 2.70%
Alliance Greater China '97 Fund
Class A -- -- -- 18.27%* 19.68% 9.92
Class B -- -- -- 19.18%* 20.22% 10.72
Class C -- -- -- 19.37%* 20.41% 10.01
Alliance International Premier Growth Fund
Class A -- -- -- 5.19%* 3.26% 1.88%*
Class B -- -- -- 6.14%* 3.93% 2.60%*
Class C -- -- -- 6.00%* 3.92% 2.59%*
Alliance Health Care Fund
Class A -- -- -- -- -- 1.96%*
Class B -- -- -- -- -- 2.67%*
Class C -- -- -- -- -- 2.67%*
</TABLE>
--------------------------------------------------------------------------------
For the expense ratios of the Funds in years prior to fiscal year 1995, assuming
the Funds had borne all expenses, please see the Financial Statements in each
Fund's Statement of Additional Information.
70
<PAGE>
(e) "Distributions from Net Realized Gains" includes a return of capital of
$(.12).
(f) Amounts do not reflect the impact of expense offset arrangements with the
transfer agent. Taking into account such expense offset arrangements, the
ratio of expenses to average net assets, assuming the assumption and/or
waiver/reimbursement of expenses described in (d) above, would have been
as follows:
<TABLE>
<S> <C> <C> <C> <C>
Alliance Balanced Shares 1997 1998 1999 2000
Class A 1.46% 1.29% 1.21% --
Class B 2.24% 2.05% 1.96% --
Class C 2.22% 2.04% 1.94% --
Alliance Real Estate Investment Fund 1997 1998 1999 2000
Class A 1.77% -- -- --
Class B 2.43% -- -- --
Class C 2.42% -- -- --
Alliance Growth Fund 1997 1998 1999 2000
Class A 1.25% 1.21% -- --
Class B 1.95% 1.93% -- --
Class C 1.95% 1.92% -- --
Alliance International Fund 1997 1998 1999 2000
Class A 1.73% -- 1.78% 1.79%
Class B 2.58% -- 2.59% 2.59%
Class C 2.56% -- 2.59% 2.55%
Alliance Global Small Cap Fund 1997 1998 1999 2000
Class A 2.38% 2.14% 2.33% 2.01%
Class B 3.08% 2.86% 3.11% 2.75%
Class C 3.08% 2.85% 3.12% 2.74%
Alliance Technology Fund 1997 1998 1999 2000
Class A 1.66% 1.65% 1.66% --
Class B 2.36% 2.38% 2.38% --
Class C 2.37% 2.38% 2.40% --
Alliance Worldwide Privatization Fund 1997 1998 1999 2000
Class A -- -- 1.91% 1.73%
Class B -- -- 2.62% 2.46%
Class C -- -- 2.61% 2.43%
Alliance Greater China '97 Fund 1997 1998 1999 2000
Class A -- 2.50%* 2.50% 2.50%
Class B -- 3.20%* 3.20% 3.20%
Class C -- 3.20%* 3.20% 3.20%
Alliance New Europe Fund 1997 1998 1999 2000
Class A 2.04% 1.84% 1.78% 1.64%
Class B 2.74% 2.54% 2.49% 2.36%
Class C 2.73% 2.54% 2.49% 2.35%
Alliance Growth and Income Fund 1997 1998 1999 2000
Class A .91% .92% -- --
Class B 1.71% 1.71% -- --
Class C 1.70% 1.71% -- --
Alliance Quasar Fund 1997 1998 1999 2000
Class A -- 1.60% 1.68% 1.66%*
Class B -- 2.38% 2.45% 2.40%*
Class C -- 2.37% 2.44% 2.40%*
Alliance Premier Growth Fund 1997 1998 1999 2000
Class A -- 1.58% -- --
Class B -- 2.27% -- --
Class C -- 2.27% -- --
Alliance All-Asia 1997 1998 1999 2000
Class A -- 3.70% 2.43% 2.03%*
Class B -- 4.44% 3.46% 2.79%*
Class C -- 4.44% 3.39% 2.79%*
Alliance International Premier Growth 1997 1998 1999 2000
Class A -- -- 2.50% --
Class B -- -- 3.20% --
Class C -- -- 3.20% --
</TABLE>
(g) Distributions from net investment income for the years ended 2000, 1999
and 1997 include a tax return of capital of $.18, $.02 and $.08 for
Class A shares, $.16, $.02 and $.09 for Class B shares and $.16, $.02 and
$.08 for Class C shares, respectively. 2.
(h) Includes interest expenses. If Alliance International Fund had not borne
interest expenses, the ratio of expenses (net of interest expenses) to
average net assets would have been 1.94%, 2.74% and 2.70% for Class A,
Class B and Class C respectively for 2000. If Alliance All-Asia Fund had
not borne interest expenses, the ratio of expenses (net of interest
expenses to average net assets would have been 1.98%, 2.73% and 2.72% for
Class A, Class B and Class C, respectively for 2000.
71
<PAGE>
--------------------------------------------------------------------------------
APPENDIX A
--------------------------------------------------------------------------------
The following is additional information about the United Kingdom, Japan and
Greater China countries.
Investment in United Kingdom Issuers. Investment in securities of United Kingdom
issuers involves certain considerations not present with investment in
securities of U.S. issuers. As with any investment not denominated in the U.S.
Dollar, the U.S. dollar value of the Fund's investment denominated in the
British pound sterling will fluctuate with pound sterling-dollar exchange rate
movements. Between 1972, when the pound sterling was allowed to float against
other currencies, and the end of 1992, the pound sterling generally depreciated
against most major currencies, including the U.S. Dollar. Between September and
December 1992, after the United Kingdom's exit from the Exchange Rate Mechanism
of the European Monetary System, the value of the pound sterling fell by almost
20% against the U.S. Dollar. The pound sterling has since recovered due to
interest rate cuts throughout Europe and an upturn in the economy of the United
Kingdom. The average exchange rate of the U.S. Dollar to the pound sterling was
1.50 in 1993 and 1.62 in 1999. On October 23, 2000 the U.S. Dollar-pound
sterling exchange rate was 1.45.
The United Kingdom's largest stock exchange is the London Stock Exchange, which
is the third largest exchange in the world. As measured by the FT-SE 100 index,
the performance of the 100 largest companies in the United Kingdom reached
6930.2 at the end of 1999, up approximately 18% from the end of 1998. The FT-SE
100 index closed at 6315.90 on October 23, 2000, down approximately 9% from
the beginning of 2000.
The Economic and Monetary Union ("EMU") became effective on January 1, 1999.
When fully implemented in 2002, the EMU will establish a common currency for
European countries that meet the eligibility criteria and choose to participate.
Although the United Kingdom meets the eligibility criteria, the government has
not taken any action to join the EMU.
>From 1979 until 1997 the Conservative Party controlled Parliament. In the May
1 ,1997 general elections, however, the Labour Party, led by Tony Blair, won a
majority in Parliament, gaining 418 of 659 seats in the House of Commons. Mr.
Blair, who was appointed Prime Minister, has launched a number of reform
initiatives, including an overhaul of the monetary policy framework intended to
protect monetary policy from political forces by vesting responsibility for
setting interest rates in a new Monetary Policy Committee headed by the Governor
of the Bank of England, as opposed to the Treasury. Prime Minister Blair has
also undertaken a comprehensive restructuring of the regulation of the financial
services industry. For further information regarding the United Kingdom, see the
SAI of New Europe Fund.
Investment in Japanese Issuers. Investment in securities of Japanese issuers
involves certain considerations not present with investment in securities of
U.S. issuers. As with any investment not denominated in the U.S. Dollar, the
U.S. dollar value of each Fund's investments denominated in the Japanese yen
will fluctuate with yen-dollar exchange rate movements. Between 1985 and 1995,
the Japanese yen generally appreciated against the U.S. Dollar. Thereafter, the
Japanese yen generally depreciated against the U.S. Dollar until mid-1998, when
it began to appreciate. In September 1999 the Japanese yen reached a 43-month
high against the U.S. Dollar, precipitating a series of interventions by the
Japanese government in the currency market, which have succeeded in slowing the
appreciation of the Japanese yen against the U.S. Dollar.
Japan's largest stock exchange is the Tokyo Stock Exchange, the First Section of
which is reserved for larger, established companies. As measured by the TOPIX, a
capitalization-weighted composite index of all common stocks listed in the First
Section, the performance of the First Section reached a peak in 1989.
Thereafter, the TOPIX declined approximately 50% through the end of 1997. On
December 31, 1999 the TOPIX closed at 1722.20, up approximately 58% from the
end of 1998. On October 23, 2000 the TOPIX closed at 1422.84, down
approximately 17% from the beginning of 2000.
Since the early 1980s, Japan has consistently recorded large current account
trade surpluses with the U.S. that have caused difficulties in the relations
between the two countries. On October 1, 1994, the U.S. and Japan reached an
agreement that was expected to more open Japanese markets with respect to trade
in certain goods and services. Since then, the two countries have agreed in
principle to increase Japanese imports of American automobiles and automotive
parts, as well as other goods and services. Nevertheless, the surpluses have
persisted and it is expected that continuing the friction between the U.S. and
Japan with respect to trade issues will continue for the foreseeable future.
Each Fund's investments in Japanese issuers will be subject to uncertainty
resulting from the instability of recent Japanese ruling coalitions. >From 1955
to 1993, Japan's government was controlled by a single political party. Between
August 1993 and October 1996, Japan was ruled by a series of four coalition
governments. As the result of a general election on October 20, 1996, however,
Japan returned to a single-party government led by Ryutaro Hashimoto, a member
of the Liberal Democratic Party ("LDP"). While the LDP does not control a
majority of the seats in the parliament, subsequent to the 1996 elections it
established a majority in the House of Representatives as individual members
joined the ruling party. The popularity of the LDP declined, however, due to the
dissatisfaction with Mr. Hashimoto's leadership. In the July 1998 House of
Councillors election, the LDP's representation fell to 103 seats from 120 seats.
As a result of the LDP's defeat, Mr. Hashimoto resigned as prime minister and
leader of the LDP. Mr. Hashimoto was replaced by Keizo Obuchi. On January 14,
1999, the LDP formed a coalition government with a major opposition party. As a
result, Mr. Obuchi's administration strengthened its position in the parliament,
where it increased its majority in the House of Representatives and reduced its
shortfall in the House of
72
<PAGE>
Councillors. The LDP formed a new three-party coalition government on October 5,
1999 that further strengthened the position of Mr. Obuchi's administration in
the parliament. On April 6, 2000, following an ultimately fatal stroke suffered
by Mr. Obuchi, the parliament elected Yoshiro Mori to replace Mr. Obuchi as
prime minister. Although the LDP held on to its power in the House of
Representatives elections in June 2000, its margin of victory was less than
predicted. For the past several years, Japan's banking industry has been
weakened by a significant amount of problem loans. Japan's banks also have had
significant exposure to the recent financial turmoil in other Asian markets.
Following the insolvency of one of Japan's largest banks in November 1997, the
government proposed several plans designed to strengthen the weakened banking
sector. In October 1998, the Japanese parliament approved several new laws that
made $508 billion in public funds available to increase the capital of Japanese
banks, to guarantee depositors' accounts and to nationalize the weakest banks.
It is unclear whether these laws will achieve their intended effect. For further
information regarding Japan, see the SAIs of Alliance International Fund and
Alliance All-Asia Investment Fund.
Investment in Greater China Issuers. China, in particular, but Hong Kong and
Taiwan, as well, in significant measure because of their existing and increasing
economic, and now in the case of Hong Kong, direct political ties with China,
may be subject to a greater degree of economic, political and social instability
than is the case in the United States.
China's economy is very much in transition. While the government still controls
production and pricing in major economic sectors, significant steps have been
taken toward capitalism and China's economy has become increasingly market
oriented. China's strong economic growth and ability to attract significant
foreign investment in recent years stem from the economic liberalization
initiated by Deng Xiaoping, who assumed power in the late 1970s. The economic
growth, however, has not been smooth and has been marked by extremes in many
respects of inordinate growth, which has not been tightly controlled, followed
by rigid measures of austerity.
The rapidity and erratic nature of the growth have resulted in inefficiencies
and dislocations, including at times high rates of inflation.
China's economic development has occurred notwithstanding the continuation of
the power of China's Communist Party and China's authoritarian government
control, not only of centrally planned economic decisions, but of many aspects
of the social structure. While a significant portion of China's population has
benefited from China's economic growth, the conditions of many leave much room
for improvement. Notwithstanding restrictions on freedom of expression and the
absence of a free press, and notwithstanding the extreme manner in which past
unrest has been dealt with, the 1989 Tianamen Square uprising being a recent
reminder, the potential for renewed popular unrest associated with demands for
improved social, political and economic conditions cannot be dismissed.
Following the death of Deng Xiaoping in February 1997, Jiang Zemin became the
leader of China's Communist Party. The transfer of political power has
progressed smoothly and Jiang's popularity and credibility have gradually
increased. Jiang continues to consolidate his power, but as of yet does not
appear to have the same degree of control as did Deng Xiaoping. Jiang has
continued the market-oriented policies of Deng. Currently, China's major
economic challenge centers on reforming or eliminating inefficient state-owned
enterprises without creating an unacceptable level of unemployment. Recent
capitalistic policies have in many respects effectively outdated the Communist
Party and the governmental structure, but both remain entrenched. The Communist
Party still controls access to governmental positions and closely monitors
governmental action.
In addition to the economic impact of China's internal political uncertainties,
the potential effect of China's actions, not only on China Itself, but on Hong
Kong and Taiwan as well, could also be significant.
China is heavily dependent on foreign trade, particularly with Japan, the U.S.,
South Korea and Taiwan, as well as trade with Hong Kong. Political developments
adverse to its trading partners, as well as political and social repression,
could cause the U.S. and others to alter their trading policy towards China.In
September 2000, however, following an agreement reached in November 1999 between
the U.S. and China, the U.S. Congress authorized the President to grant
permanent normal trade relations (formerly known as most favored nation status)
to China, ending the current annual review process and facilitating China's
entry into the World Trade Organization. With much of China's trading activity
being funneled through Hong Kong and with trade through Taiwan becoming
increasingly significant, any sizable reduction in demand for goods from China
would have negative implications for both countries. China is believed to be the
largest investor in Hong Kong and its markets and an economic downturn in China
would be expected to reverberate through Hong Kong's markets as well.
China has committed by treaty to preserve Hong Kong's autonomy and its economic,
political and social freedoms for fifty years from the July 1, 1997 transfer of
sovereignty from Great Britain to China. Hong Kong is headed by a chief
executive, appointed by the central government of China, whose power is checked
by both the government of China and a Legislative Council. Although Hong Kong
voters voted overwhelmingly for pro-democracy candidates in the May 1998
election and again in the September 2000 election (although by a smaller
margin), it remains possible that China could exert its authority so as to alter
the economic structure, political structure or existing social policy of Hong
Kong. Investor and business confidence in Hong Kong can be affected
significantly by such developments, which in turn can affect markets and
business performance. In this connection, it is noted that a substantial portion
of the companies listed on the Hong Kong Stock Exchange are involved in real
estate-related activities.
The securities markets of China and to a lesser extent Taiwan, are relatively
small, with the majority of market capitalization
73
<PAGE>
and trading volume concentrated in a limited number of companies representing a
small number of industries. Consequently, Alliance Greater China '97 Fund may
experience greater price volatility and significantly lower liquidity than a
portfolio invested solely in equity securities of U.S. companies. These markets
may be subject to greater influence by adverse events generally affecting the
market, and by large investors trading significant blocks of securities, than is
usual in the U.S. Securities settlements may in some instances be subject to
delays and related administrative uncertainties.
Foreign investment in the securities markets of China and Taiwan is restricted
or controlled to varying degrees. These restrictions or controls, which apply to
the Alliance Greater China '97 Fund, may at times limit or preclude investment
in certain securities and may increase the cost and expenses of the Fund. China
and Taiwan require governmental approval prior to investments by foreign persons
or limit investment by foreign persons to only a specified percentage of an
issuer's outstanding securities or a specific class of securities which may have
less advantageous terms (including price) than securities of the company
available for purchase by nationals. In addition, the repatriation of investment
income, capital or the proceeds of sales of securities from China and Taiwan is
controlled under regulations, including in some cases the need for certain
advance government notification or authority, and if a deterioration occurs in a
country's balance of payments, the country could impose restrictions on foreign
capital remittances.
Alliance Greater China '97 Fund could be adversely affected by delays in, or a
refusal to grant, any required governmental approval for repatriation, as well
as by the application to it of other restrictions on investment. The liquidity
of the Fund's investments in any country in which any of these factors exists
could be affected by any such factor or factors on the Fund's investments. The
limited liquidity in certain Greater China markets is a factor to be taken into
account in the Fund's valuation of portfolio securities in this category and may
affect the Fund's ability to dispose of securities in order to meet redemption
requests at the price and time it wishes to do so. It is also anticipated that
transaction costs, including brokerage commissions for transactions both on and
off the securities exchanges in Greater China countries, will be higher than in
the U.S.
Issuers of securities in Greater China countries are generally not subject to
the same degree of regulation as are U.S. issuers with respect to such matters
as timely disclosure of information, insider trading rules, restrictions on
market manipulation and shareholder proxy requirements. Reporting, accounting
and auditing standards of Greater China countries may differ, in some cases
significantly, from U.S. standards in important respects, and less information
may be available to investors in securities of Greater China country issuers
than to investors in securities of U.S. issuers.
Investment in Greater China companies that are in the initial stages of their
development involves greater risk than is customarily associated with securities
of more established companies. The securities of such companies may have
relatively limited marketability and may be subject to more abrupt or erratic
market movements than securities of established companies or broad market
indices.
74
<PAGE>
(This page left intentionally blank.)
<PAGE>
For more information about the Funds, the following documents are available upon
request:
o Annual/Semi-Annual Reports to Shareholders
The Funds' annual and semi-annual reports to shareholders contain additional
information on the Funds' investments. In the annual report, you will find a
discussion of the market conditions and investment strategies that significantly
affected a Fund's performance during its last fiscal year.
o Statement of Additional Information (SAI)
Each Fund has an SAI, which contains more detailed information about the Fund,
including its operations and investment policies. The Funds' SAIs are
incorporated by reference into (and are legally part of) this prospectus.
You may request a free copy of the current annual/semi-annual report or the SAI,
or make inquiries concerning the Funds, by contacting your broker or other
financial intermediary, or by contacting Alliance:
By Mail: c/o Alliance Fund Services, Inc.
P.O. Box 1520
Secaucus, NJ 07096-1520
By Phone: For Information: (800) 221-5672
For Literature: (800) 227-4618
Or you may view or obtain these documents from the Commission:
o Call the Commission at 1-202-942-8090 for information on the operation of
the Public Reference Room.
o Reports and other information about the Fund are available on the EDGAR
Database on the Commission's Internet site at http://www.sec.gov
o Copies of the information may be obtained, after paying a duplicating fee,
by electronic request at [email protected], or by writing the
Commission's Public Reference Section, Wash. DC 20549-0102
On the Internet: www.sec.gov
You also may find more information about Alliance and the Funds on the Internet
at: www.Alliancecapital.com
Fund SEC File No.
----- -----------
Alliance Premier Growth Fund 811-06730
Alliance Health Care Fund 811-09329
Alliance Growth Fund 811-05088
Alliance Technology Fund 811-03131
Alliance Quasar Fund 811-01716
The Alliance Fund 811-00204
Alliance Disciplined Value Fund 811-09687
Alliance Growth & Income 811-00126
Alliance Balanced Shares 811-00134
Alliance Utility Income Fund 811-07916
Alliance Real Estate Investment Fund 811-07707
Alliance New Europe Fund 811-06028
Alliance Worldwide Privatization Fund 811-08426
Alliance International Premier Growth Fund 811-08527
Alliance Global Small Cap Fund 811-01415
Alliance International Fund 811-03130
Alliance Greater China '97 Fund 811-08201
Alliance All-Asia Investment Fund 811-08776
76
The Alliance
Stock Funds
The Alliance Stock Funds provide a broad selection of investment alternatives to
investors seeking capital growth or high total return.
Advisor Class Prospectus and Application
November 1, 2000
Domestic Stock Funds
> Alliance Premier Growth Fund
> Alliance Health Care Fund
> Alliance Growth Fund
> Alliance Technology Fund
> Alliance Quasar Fund
> The Alliance Fund
Total Return Funds
> Alliance Growth and Income Fund
> Alliance Balanced Shares
> Alliance Utility Income Fund
> Alliance Real Estate
Investment Fund
Global Stock Funds
> Alliance New Europe Fund
> Alliance Worldwide
Privatization Fund
> Alliance International
Premier Growth Fund
> Alliance Global Small Cap Fund
> Alliance International Fund
> Alliance Greater China '97 Fund
> Alliance All-Asia Investment Fund
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation to
the contrary is a criminal offense.
Alliance Capital [LOGO](R)
<PAGE>
Investment Products Offered
---------------------------
> Are Not FDIC Insured
> May Lose Value
> Are Not Bank Guaranteed
---------------------------
2
<PAGE>
TABLE OF CONTENTS
--------------------------------------------------------------------------------
Page
RISK/RETURN SUMMARY...................................................... 3
Domestic Stock Funds..................................................... 4
Total Return Funds....................................................... 10
Global Stock Funds....................................................... 14
Summary of Principal Risks............................................... 21
Principal Risks by Fund.................................................. 22
FEES AND EXPENSES OF THE FUNDS........................................... 23
GLOSSARY................................................................. 26
DESCRIPTION OF THE FUNDS................................................. 27
Investment Objectives and Principal Policies............................. 27
Description of Additional Investment Practices........................... 40
Additional Risk Considerations........................................... 47
MANAGEMENT OF THE FUNDS.................................................. 50
PURCHASE AND SALE OF SHARES.............................................. 54
How The Funds Value Their Shares......................................... 54
How To Buy Shares........................................................ 54
How to Exchange Shares................................................... 54
How To Sell Shares....................................................... 55
DIVIDENDS, DISTRIBUTIONS AND TAXES....................................... 55
CONVERSION FEATURE....................................................... 56
GENERAL INFORMATION................................................... 56
FINANCIAL HIGHLIGHTS..................................................... 57
APPENDIX A--ADDITIONAL INFORMATION
ABOUT THE UNITED KINGDOM, JAPAN, AND
GREATER CHINA COUNTRIES.................................................. 62
The Funds' investment adviser is Alliance Capital Management L.P., a global
investment manager providing diversified services to institutions and
individuals through a broad line of investments including more than 100 mutual
funds.
RISK/RETURN SUMMARY
The following is a summary of certain key information about the Alliance Stock
Funds. You will find additional information about each Fund, including a
detailed description of the risks of an investment in each Fund, after this
Summary.
The Risk/Return Summary describes the Funds' objectives, principal investment
strategies, principal risks and fees. Each Fund's Summary page includes a short
discussion of some of the principal risks of investing in that Fund. A further
discussion of these and other risks begins on page 21.
More detailed descriptions of the Funds, including the risks associated with
investing in the Funds, can be found further back in this Prospectus. Please be
sure to read this additional information BEFORE you invest. Each of the Funds
also may at times use certain types of investment derivatives such as options,
futures, forwards, and swaps. The use of these techniques involves special risks
that are discussed in this Prospectus.
The Summary includes a table for each Fund showing its average annual returns
and a bar chart showing its annual returns. The table and bar chart provide an
indication of the historical risk of an investment in each Fund by showing:
o how the Fund's average annual returns for one, five, and 10 years
(or over the life of the Fund if the Fund is less than 10 years old)
compare to those of a broad based securities market index; and
o changes in the Fund's performance from year to year over 10 years
(or over the life of the Fund if the Fund is less than 10 years
old).
A Fund's past performance, of course, does not necessarily indicate how it will
perform in the future. As with all investments you may lose money by investing
in the Funds.
3
<PAGE>
DOMESTIC STOCK FUNDS
The Domestic Stock Funds offer investors seeking capital appreciation a range of
alternative approaches to investing primarily in U.S. equity markets.
Alliance Premier Growth Fund
--------------------------------------------------------------------------------
OBJECTIVE:
The Fund's investment objective is long-term growth of capital by investing
predominantly in equity securities of a limited number of large, carefully
selected, high-quality U.S. companies that are judged likely to achieve superior
earnings growth.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in equity securities of U.S. companies. Unlike most
equity funds, the Fund focuses on a relatively small number of intensively
researched companies. Alliance selects the Fund's investments from a research
universe of more than 500 companies that have strong management, superior
industry positions, excellent balance sheets and superior earnings growth
prospects.
Normally, the Fund invests in about 40-60 companies, with the 25 most highly
regarded of these companies usually constituting approximately 70% of the Fund's
net assets. During market declines, while adding to positions in favored stocks,
the Fund becomes somewhat more aggressive, gradually reducing the number of
companies represented in its portfolio. Conversely, in rising markets, while
reducing or eliminating fully-valued positions, the Fund becomes somewhat more
conservative, gradually increasing the number of companies represented in its
portfolio. Through this approach, Alliance seeks to gain positive returns in
good markets while providing some measure of protection in poor markets. The
Fund also may invest up to 20% of its net assets in convertible securities.
Among the principal risks of investing in the Fund is market risk. Because the
Fund invests in a smaller number of securities than many other equity funds,
your investment has the risk that changes in the value of a single security may
have a more significant effect, either negative or positive, on the Fund's net
asset value. The Fund's investments in foreign securities have foreign risk and
currency risk.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
--------------------------------------------------------------------------------
Since
1 Year Inception
--------------------------------------------------------------------------------
Advisor Class 29.42% 38.66%
--------------------------------------------------------------------------------
Russell 1000 Growth Index 33.16% 34.19%
--------------------------------------------------------------------------------
Index returns and average annual total returns are for the periods ended
December 31, 1999. Advisor Class shares inception date is 10/1/96. Since
inception index return is from 10/31/96.
BAR CHART
--------------------------------------------------------------------------------
The following chart shows the annual returns for the Advisor Class shares since
inception. Through 9/30/00, the year to date unannualized return for the Advisor
Class shares was -4.44%.
[The following table was depicted as a bar chart in the printed material.]
Calendar
Year
End
--------
90 n/a
91 n/a
92 n/a
93 n/a
94 n/a
95 n/a
96 n/a
97 33.11
98 49.85
99 29.42
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best Quarter was up 31.15%, 4th quarter, 1998; and Worst Quarter was down
-12.02%, 3rd quarter, 1998.
4
<PAGE>
Alliance Health Care Fund
--------------------------------------------------------------------------------
OBJECTIVE:
The Fund's investment objective is capital appreciation and, secondarily,
current income.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
Under normal circumstances, the Fund invests at least 65%, and normally
substantially all, of the value of its total assets in securities issued by
companies principally engaged in health care and health care-related industries
("Health Care Industries") (companies principally engaged in the discovery,
development, provision, production or distribution of products and services that
relate to the diagnosis, treatment and prevention of diseases or other medical
disorders). Although the payment of dividends will be a factor considered in the
selection of investments for the Fund, the Fund seeks primarily to take
advantage of capital appreciation opportunities identified by Alliance in
emerging technologies and services in Health Care Industries by investing in
companies which are expected to profit from the development of new products and
services for these industries. Under normal circumstances, the Fund invests
primarily in the equity securities of U.S. companies. The Fund may invest up to
40% of its total assets in foreign securities. The Fund may invest in new,
smaller or less-seasoned companies as well as in larger, established companies
in the Health Care Industries.
Among the principal risks of investing in the Fund are market risk and
industry/sector risk. Unlike many other equity funds, the Fund invests in the
securities of companies principally engaged in Health Care Industries. As a
result, certain economic conditions and market changes that affect those
industries may have a more significant effect on the Fund's net asset value than
on the value of a more broadly diversified fund. For example, the Fund's share
price could be affected by changes in competition, legislation or government
regulation, government funding, product liability and other litigation, the
obsolescence or development of products, or other factors specific to the health
care and health sciences industries. The Fund's investments in foreign
securities have foreign risk and currency risk. The Fund's investment in small-
to mid-capitalization companies have capitalization risk. These investments may
be more volatile than investments in large-cap companies.
BAR CHART AND PERFORMANCE TABLE:
There is no bar chart or performance table for the Fund because it has not
completed a full calendar year of operations.
5
<PAGE>
Alliance Growth Fund
--------------------------------------------------------------------------------
OBJECTIVE:
The Fund's investment objective is long-term growth of capital. Current income
is incidental to the Fund's objective.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in equity securities of companies with favorable
earnings outlooks and whose long-term growth rates are expected to exceed that
of the U.S. economy over time. The Fund emphasizes investments in large- and
mid-cap companies. The Fund also may invest up to 25% of its total assets in
lower-rated, fixed-income securities and convertible bonds and generally up to
20% of its total assets in foreign securities.
Among the principal risks of investing in the Fund is market risk. Investments
in mid-cap companies may be more volatile than investments in large-cap
companies. To the extent the Fund invests in lower-rated, fixed-income
securities and convertible bonds, your investment may have interest rate or
credit risk. The Fund's investments in foreign securities have foreign risk and
currency risk.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
--------------------------------------------------------------------------------
Since
1 Year Inception
--------------------------------------------------------------------------------
Advisor Class 25.96% 28.29%
--------------------------------------------------------------------------------
S&P 500 Index 21.03% 28.02%
--------------------------------------------------------------------------------
Index returns and average annual total returns are for the periods ended
December 31, 1999. Advisor Class shares inception date is 10/1/96. Since
inception index return is from 10/31/96.
BAR CHART
--------------------------------------------------------------------------------
The following chart shows the annual returns for the Advisor Class shares since
inception. Through 9/30/00, the year to date unannualized return for the Advisor
Class shares was -6.03%.
[The following table was depicted as a bar chart in the printed material.]
Calendar
Year
End
--------
90 n/a
91 n/a
92 n/a
93 n/a
94 n/a
95 n/a
96 n/a
97 27.46
98 28.55
99 25.96
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best Quarter was up 28.97%, 4th quarter, 1998; and Worst Quarter was down
-16.20%, 3rd quarter, 1998.
6
<PAGE>
Alliance Technology Fund
--------------------------------------------------------------------------------
OBJECTIVE:
The Fund's investment objective is growth of capital. Current income is
incidental to the Fund's objective.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in securities of companies that use technology
extensively in the development of new or improved products or processes. Within
this framework, the Fund may invest in any company and industry and in any type
of security with potential for capital appreciation. It invests in well-known,
established companies or in new or unseasoned companies. The Fund also may
invest in debt securities and up to 25% of its total assets in foreign
securities.
Among the principal risks of investing in the Fund are market risk and
industry/sector risk. In addition, technology stocks, especially those of
smaller, less-seasoned companies, tend to be more volatile than the overall
stock market. To the extent the Fund invests in debt and foreign securities,
your investment has interest rate risk, credit risk, foreign risk and currency
risk.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
--------------------------------------------------------------------------------
Since
1 Year Inception
--------------------------------------------------------------------------------
Advisor Class 72.32% 41.79%
--------------------------------------------------------------------------------
S&P 500 Index 21.03% 28.02%
--------------------------------------------------------------------------------
Index returns and average annual total returns are for the periods ended
December 31, 1999. Advisor Class shares inception date is 10/1/96. Since
inception index return is from 10/31/96.
BAR CHART
--------------------------------------------------------------------------------
The following chart shows the annual returns for the Advisor Class shares since
inception. Through 9/30/00, the year to date unannualized return for the Advisor
Class shares was 4.04%.
[The following table was depicted as a bar chart in the printed material.]
Calendar
Year
End
--------
90 n/a
91 n/a
92 n/a
93 n/a
94 n/a
95 n/a
96 n/a
97 4.84
98 63.68
99 72.32
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best Quarter was up 44.69%, 4th quarter, 1999; and Worst Quarter was down
-16.43%, 4th quarter, 1997.
7
<PAGE>
Alliance Quasar Fund
--------------------------------------------------------------------------------
OBJECTIVE:
The Fund's investment objective is growth of capital by pursuing aggressive
investment policies. Current income is incidental to the Fund's objective.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund generally invests in a widely-diversified portfolio of equity
securities spread among many industries that offer the possibility of
above-average earnings growth. The Fund currently emphasizes investment in small
cap companies. The Fund invests in well-known and established companies and in
new and unseasoned companies. The Fund can invest in the equity securities of
any company and industry and in any type of security with potential for capital
appreciation. When selecting securities, Alliance considers the economic and
political outlook, the values of specific securities relative to other
investments, trends in the determinants of corporate profits, and management
capabilities and practices. The Fund also may invest in non-convertible bonds,
preferred stocks, and foreign securities.
Among the principal risks of investing in the Fund is market risk. Investments
in smaller companies tend to be more volatile than investments in large-cap or
mid-cap companies. To the extent the Fund invests in non-convertible bonds,
preferred stocks, and foreign stocks, your investment has interest rate risk,
credit risk, foreign risks and currency risk.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
--------------------------------------------------------------------------------
Since
1 Year Inception
--------------------------------------------------------------------------------
Advisor Class 13.25% 8.70%
--------------------------------------------------------------------------------
Russell 2000 Growth Index 43.08% 18.56%
--------------------------------------------------------------------------------
Index returns and average annual total returns are for the periods ended
December 31, 1999. Advisor Class shares inception date is 10/1/96. Since
inception index return is from 10/31/96.
BAR CHART
--------------------------------------------------------------------------------
The following chart shows the annual returns for the Advisor Class shares since
inception. Through 9/30/00, the year to date unannualized return for the Advisor
Class shares was 9.13%.
[The following table was depicted as a bar chart in the printed material.]
Calendar
Year
End
--------
90 n/a
91 n/a
92 n/a
93 n/a
94 n/a
95 n/a
96 n/a
97 17.48
98 -4.30
99 13.25
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best Quarter was up 18.58%, 4th quarter, 1999; and Worst Quarter was down
-28.39%, 3rd quarter, 1998.
8
<PAGE>
The Alliance Fund
--------------------------------------------------------------------------------
OBJECTIVE:
The Fund's investment objective is long-term growth of capital and income
primarily through investments in common stocks.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund normally invests substantially all of its assets in high-quality common
stocks that Alliance expects to increase in value. The Fund may invest in a
broad range of companies, from large to small, but tends to emphasize attractive
opportunities in mid-cap companies. While the Fund's diversified and
high-quality investments cannot prevent fluctuations in market values, they tend
to limit investment risk and contribute to achieving the Fund's objective. The
Fund also may invest in convertible securities, U.S. Government securities, and
foreign securities.
Among the principal risks of investing in the Fund is market risk. Investments
in mid-cap companies may be more volatile than investments in large-cap
companies. To the extent the Fund invests in convertible securities and U.S.
Government securities, your investment may have interest rate or credit risk.
The Fund's investments in foreign securities have currency risk and foreign
risk.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
--------------------------------------------------------------------------------
Since
1 Year Inception
--------------------------------------------------------------------------------
Advisor Class 33.95% 22.91%
--------------------------------------------------------------------------------
S&P 400 Mid-Cap Index 14.72% 22.67%
--------------------------------------------------------------------------------
Index returns and average annual total returns are for the periods ended
December 31, 1999. Advisor Class shares inception date is 10/1/96. Since
inception index return is from 10/31/96.
BAR CHART
--------------------------------------------------------------------------------
The following chart shows the annual returns for the Advisor Class shares since
inception. Through 9/30/00, the year to date unannualized return for the Advisor
Class shares was -5.74%.
[The following table was depicted as a bar chart in the printed material.]
Calendar
Year
End
--------
90 n/a
91 n/a
92 n/a
93 n/a
94 n/a
95 n/a
96 n/a
97 36.27
98 -2.41
99 33.95
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best Quarter was up 26.29%, 4th quarter, 1999; and Worst Quarter was down
-24.17%, 3rd quarter, 1998.
9
<PAGE>
TOTAL RETURN FUNDS
The Total Return Funds offer investors seeking both growth of capital and
current income a range of investment alternatives.
Alliance Growth and Income Fund
--------------------------------------------------------------------------------
OBJECTIVE:
The Fund's investment objective is appreciation through investments primarily in
dividend-paying common stocks of good quality, although the Fund also may invest
in fixed-income and convertible securities.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in dividend-paying common stocks of large,
well-established "blue-chip" companies. The Fund also may invest in fixed-income
and convertible securities and in securities of foreign issuers.
Among the principal risks of investing in the Fund are market risk, interest
rate risk and credit risk. The Fund's investments in foreign securities have
foreign risk and currency risk.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
--------------------------------------------------------------------------------
Since
1 Year Inception
--------------------------------------------------------------------------------
Advisor Class 11.33% 22.34%
--------------------------------------------------------------------------------
Russell 1000 Value Index 7.35% 19.88%
--------------------------------------------------------------------------------
Index returns and average annual total returns are for the periods ended
December 31, 1999. Advisor Class shares inception date is 10/1/96. Since
inception index return is from 10/31/96.
BAR CHART
--------------------------------------------------------------------------------
The following chart shows the annual returns for the Advisor Class shares since
inception. Through 9/30/00, the year to date unannualized return for the Advisor
Class shares was 11.87%.
[The following table was depicted as a bar chart in the printed material.]
Calendar
Year
End
--------
90 n/a
91 n/a
92 n/a
93 n/a
94 n/a
95 n/a
96 n/a
97 29.57
98 21.48
99 11.33
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best Quarter was up 23.28%, 4th quarter, 1998; and Worst Quarter was down
-13.76%, 3rd quarter, 1998.
10
<PAGE>
Alliance Balanced Shares
--------------------------------------------------------------------------------
OBJECTIVE:
The Fund's investment objective is high return through a combination of current
income and capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests in a diversified portfolio of equity and fixed-income
securities. The percentage of the Fund's assets invested in each type of
security will vary, but the Fund will not purchase a security if, as a result,
less than 25% of the Fund's total assets will be invested in fixed-income senior
securities. The Fund invests in common and preferred stocks, U.S. Government and
agency securities, bonds and senior debt securities. The Fund's investments in
each type of security depends on current economic conditions and market
outlooks. The Fund also may invest up to 15% of its total assets in foreign
equity and fixed-income securities.
Among the principal risks of investing in the Fund are market risk, interest
rate risk, allocation risk and credit risk. To the extent the Fund invests in
foreign securities, your investment has foreign risk and currency risk.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
--------------------------------------------------------------------------------
Since
1 Year Inception
--------------------------------------------------------------------------------
Advisor Class 5.22% 16.31%
--------------------------------------------------------------------------------
S&P 500 Index 21.03% 28.02%
--------------------------------------------------------------------------------
Index returns and average annual total returns are for the periods ended
December 31, 1999. Advisor Class shares inception date is 10/1/96. Since
inception index return is from 10/31/96.
BAR CHART
--------------------------------------------------------------------------------
The following chart shows the annual returns for the Advisor Class shares since
inception. Through 9/30/00, the year to date unannualized return for the Advisor
Class shares was 10.03%.
[The following table was depicted as a bar chart in the printed material.]
Calendar
Year
End
--------
90 n/a
91 n/a
92 n/a
93 n/a
94 n/a
95 n/a
96 n/a
97 27.43
98 16.03
99 5.22
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best Quarter was up 13.52%, 4th quarter, 1998; and Worst Quarter was down
-6.36%, 3rd quarter, 1998.
11
<PAGE>
Alliance Utility Income Fund
--------------------------------------------------------------------------------
OBJECTIVE:
The Fund's investment objective is current income and capital appreciation by
investing primarily in equity and fixed-income securities of companies in the
utilities industry.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in income-producing equity securities. The Fund
invests in securities of utility companies in the electric, telecommunications,
gas, and water utility industries. The Fund may invest in both U.S. and foreign
utility companies, although the Fund will limit its investments in issuers in
any one foreign country to no more than 15% of its total assets. The Fund may
maintain up to 35% of its net assets in lower-rated securities and up to 30% of
its net assets in convertible securities.
Among the principal risks of investing in the Fund are market risk, interest
rate risk and credit risk. Because the Fund invests a substantial portion of its
assets in companies in a specific industry, it has industry/sector risk. This is
the risk that factors affecting utility companies will have a significant effect
on the value of the Fund's investments. To the extent the Fund invests in
lower-rated securities, your investment is subject to more credit risk than a
fund that invests in higher rated securities.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
--------------------------------------------------------------------------------
Since
1 Year Inception
--------------------------------------------------------------------------------
Advisor Class 18.41% 25.36%
--------------------------------------------------------------------------------
NYSE Utilities Index 14.62% 24.99%
--------------------------------------------------------------------------------
Index returns and average annual total returns are for the periods ended
December 31, 1999. Advisor Class shares inception date is 10/1/96. Since
inception index return is from 10/31/96.
BAR CHART
--------------------------------------------------------------------------------
The following chart shows the annual returns for the Advisor Class shares since
inception. Through 9/30/00, the year to date unannualized return for the Advisor
Class shares was 14.34%.
[The following table was depicted as a bar chart in the printed material.]
Calendar
Year
End
--------
90 n/a
91 n/a
92 n/a
93 n/a
94 n/a
95 n/a
96 n/a
97 31.16
98 24.83
99 18.41
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best Quarter was up 15.63%, 4th quarter, 1997; and Worst Quarter was down
-3.01%, 1st quarter, 1997.
12
<PAGE>
Alliance Real Estate Investment Fund
--------------------------------------------------------------------------------
OBJECTIVE:
The Fund's investment objective is total return from long-term growth of capital
and income principally through investing in equity securities of companies that
are primarily engaged in or related to the real estate industry.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in equity securities of real estate investment trusts
or "REITs" and other real estate industry companies. The Fund invests in real
estate companies that Alliance believes have strong property fundamentals and
management teams. The Fund seeks to invest in real estate companies whose
underlying portfolios are diversified geographically and by property type. The
Fund may invest up to 35% of its total assets in mortgage-backed securities,
which are securities that directly or indirectly represent participations in, or
are collateralized by and payable from, mortgage loans secured by real property.
Among the principal risks of investing in the Fund are market risk, interest
rate risk and credit risk. Because the Fund invests a substantial portion of its
assets in the real estate market, it has industry/sector risk. The Fund has many
of the same risks as direct ownership of real estate including the risk that the
value of real estate could decline due to a variety of factors affecting the
real estate market. In addition, REITs are dependent on the capability of their
managers, may have limited diversification, and could be significantly affected
by changes in tax laws. Because the Fund invests in mortgage-backed securities,
it is subject to the risk that mortgage loans will be prepaid when interest
rates decline, forcing the Fund to reinvest in securities with lower interest
rates. For this and other reasons, mortgage-backed securities may have
significantly greater price and yield volatility than traditional debt
securities.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
--------------------------------------------------------------------------------
Since
1 Year Inception
--------------------------------------------------------------------------------
Advisor Class -6.39% 3.30%
--------------------------------------------------------------------------------
S&P 500 Index 21.03% 28.02%
--------------------------------------------------------------------------------
Index returns and average annual total returns are for the periods ended
December 31, 1999. Advisor Class shares inception date is 10/1/96. Since
inception index return is from 10/31/96.
BAR CHART
--------------------------------------------------------------------------------
The following chart shows the annual returns for the Advisor Class shares since
inception. Through 9/30/00, the year to date unannualized return for the Advisor
Class shares was 24.72%.
[The following table was depicted as a bar chart in the printed material.]
Calendar
Year
End
--------
90 n/a
91 n/a
92 n/a
93 n/a
94 n/a
95 n/a
96 n/a
97 23.27
98 -20.05
99 -6.39
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best Quarter was up 14.51%, 3rd quarter, 1997; and Worst Quarter was down
-12.33%, 3rd quarter, 1998.
13
<PAGE>
GLOBAL STOCK FUNDS
The Global Stock Funds offer investors seeking long-term capital appreciation a
range of alternative approaches to investing in foreign securities.
Alliance New Europe Fund
--------------------------------------------------------------------------------
OBJECTIVE:
The Fund's investment objective is long-term capital appreciation through
investments primarily in the equity securities of companies based in Europe.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in equity securities of European companies. The Fund
diversifies its investments among a number of European countries and normally
invests in companies based in at least three of these countries, although it may
invest 25% or more of its assets in issuers in a single country. The Fund may
invest up to 35% of its total assets in high-quality, U.S. Dollar or foreign
currency denominated, fixed-income securities issued or guaranteed by European
governmental entities, European or multinational companies, or supranational
organizations. At June 30, 2000, the Fund had approximately 34% of its assets
invested in securities of United Kingdom issuers.
Among the principal risks of investing in the Fund are market risk, foreign risk
and currency risk. In addition, the Fund's investments in U.S. Dollar or foreign
currency denominated fixed-income securities have interest rate and credit
risks.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
--------------------------------------------------------------------------------
Since
1 Year Inception
--------------------------------------------------------------------------------
Advisor Class 26.53% 24.50%
--------------------------------------------------------------------------------
MSCI Europe Index 16.23% 24.33%
--------------------------------------------------------------------------------
Index returns and average annual total returns are for the periods ended
December 31, 1999. Advisor Class shares inception date is 10/1/96. Since
inception index return is from 10/31/96.
BAR CHART
--------------------------------------------------------------------------------
The following chart shows the annual returns for the Advisor Class shares since
inception. Through 9/30/00, the year to date unannualized return for the Advisor
Class shares was -9.46%.
[The following table was depicted as a bar chart in the printed material.]
Calendar
Year
End
--------
90 n/a
91 n/a
92 n/a
93 n/a
94 n/a
95 n/a
96 n/a
97 17.08
98 25.39
99 26.53
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best Quarter was up 24.91%, 4th quarter, 1999; and Worst Quarter was down
-19.61%, 3rd quarter, 1998.
14
<PAGE>
Alliance Worldwide Privatization Fund
--------------------------------------------------------------------------------
OBJECTIVE:
The Fund's investment objective is long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in equity securities of companies that are
undergoing, or have undergone, privatization. The Fund also invests in
securities of companies that will benefit from privatizations. The Fund takes
advantage of investment opportunities, historically inaccessible to U.S.
individual investors, that result from the privatization of state enterprises in
both established and developing economies. Because privatizations are integral
to a country's economic restructuring, securities sold in initial public
offerings often are attractively priced to secure the issuer's transition to
private sector ownership. In addition, these enterprises often dominate their
local markets and have the potential for significant managerial and operational
efficiency gains.
The Fund diversifies its investments among a number of countries and normally
invests in issuers based in at least four, and usually considerably more,
countries. The Fund may invest up to 30% of its total assets in any one of
France, Germany, Great Britain, Italy, and Japan and may invest all of its
assets in a single world region. The Fund also may invest up to 35% of its total
assets in debt securities and convertible debt securities of privatized
companies.
Among the principal risks of investing in the Fund are market risk, foreign risk
and currency risk. Because the Fund invests in companies that are undergoing, or
have undergone, privatization, it has industry/sector risk. These companies
could have more risk because they have no operating history as a private
company. In addition, the Fund's investments in U.S. Dollar or foreign currency
denominated fixed-income securities have interest rate and credit risks.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
--------------------------------------------------------------------------------
Since
1 Year Inception
--------------------------------------------------------------------------------
Advisor Class 56.62% 24.97%
--------------------------------------------------------------------------------
MSCI World Index
(minus the U.S.) 28.27% 16.20%
--------------------------------------------------------------------------------
Index returns and average annual total returns are for the periods ended
December 31, 1999. Advisor Class shares inception date is 10/1/96. Since
inception index return is from 10/31/96.
BAR CHART
--------------------------------------------------------------------------------
The following chart shows the annual returns for the Advisor Class shares since
inception. Through 9/30/00, the year to date unannualized return for the Advisor
Class shares was -17.80%.
[The following table was depicted as a bar chart in the printed material.]
Calendar
Year
End
--------
90 n/a
91 n/a
92 n/a
93 n/a
94 n/a
95 n/a
96 n/a
97 13.45
98 9.33
99 56.62
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best Quarter was up 34.27%, 4th quarter, 1999; and Worst Quarter was down
-17.42%, 3rd quarter, 1998.
15
<PAGE>
Alliance International Premier Growth Fund
--------------------------------------------------------------------------------
OBJECTIVE:
The Fund's investment objective is long-term growth of capital by investing
predominantly in equity securities of a limited number of carefully selected
international companies that are judged likely to achieve superior earnings
growth. Current income is incidental to the Fund's objective.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in equity securities of comparatively large,
high-quality, international companies. The Fund invests in at least four, and
usually considerably more, countries. Normally, the Fund invests no more than
15% of its total assets in issuers of any one foreign country, but may invest up
to 35% of its total assets in each of the United Kingdom and Japan and up to 25%
of its total assets in each of Canada, France, Germany, Italy, The Netherlands
and Switzerland. Unlike more typical international equity funds, the Fund
focuses on a relatively small number of intensively researched companies.
Alliance selects the Fund's investments from a research universe of
approximately 900 companies.
Normally, the Fund invests in about 40 companies, with the 30 most highly
regarded of these companies usually constituting approximately 70%, and often
more, of the Fund's net assets. The Fund invests in companies with market values
generally in excess of $10 billion. Alliance may take advantage of market
volatility to adjust the Fund's portfolio positions. To the extent consistent
with local market liquidity considerations, the Fund strives to capitalize on
apparently unwarranted price fluctuations, both to purchase or increase
positions on weakness and to sell or reduce overpriced holdings. The Fund
invests primarily in equity securities and also may invest in convertible
securities.
Among the principal risks of investing in the Fund are market risk, foreign risk
and currency risk. In addition, since the Fund invests in a smaller number of
securities than many other international equity funds, changes in the value of a
single security may have a more significant effect, either negative or positive,
on the Fund's net asset value.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
--------------------------------------------------------------------------------
Since
1 Year Inception
--------------------------------------------------------------------------------
Advisor Class 47.51% 24.00%
--------------------------------------------------------------------------------
MSCI EAFE Index 27.30% 17.93%
--------------------------------------------------------------------------------
Index returns and average annual total returns are for the periods ended
December 31, 1999. Advisor Class shares inception date is 3/3/98. Since
inception index return is from 3/31/98.
BAR CHART
--------------------------------------------------------------------------------
The following chart shows the annual return for the Advisor Class shares since
inception. Through 9/30/00, the year to date unannualized return for the Advisor
Class shares was -15.76%.
[The following table was depicted as a bar chart in the printed material.]
Calendar
Year
End
--------
90 n/a
91 n/a
92 n/a
93 n/a
94 n/a
95 n/a
96 n/a
97 n/a
98 n/a
99 47.51
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best Quarter was up 30.50%, 4th quarter, 1999; and Worst Quarter was up 3.38%,
1st quarter, 1999.
16
<PAGE>
Alliance Global Small Cap Fund
--------------------------------------------------------------------------------
OBJECTIVE:
The Fund's investment objective is long-term growth of capital through
investment in a global portfolio of equity securities of selected companies with
relatively small market capitalizations.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in equity securities of global companies, both
domestic and foreign, with relatively small market capitalizations. The Fund's
investments emphasize companies that are in the smallest 20% of the U.S. stock
market (or less than approximately $1.5 billion). Although these companies are
small by U.S. standards, they may be among the largest companies in their own
countries. The Fund may invest up to 35% of its total assets in securities of
companies whose market capitalizations exceed the Fund's size standard. The Fund
invests in at least three countries including the U.S.
Among the principal risks of investing in the Fund are market risk, foreign risk
and currency risk. Investments in smaller companies tend to be more volatile
than investments in large-cap or mid-cap companies.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
--------------------------------------------------------------------------------
Since
1 Year Inception
--------------------------------------------------------------------------------
Advisor Class 46.91% 17.65%
--------------------------------------------------------------------------------
MSCI World Index 25.34% 22.24%
--------------------------------------------------------------------------------
Index returns and average annual total returns are for the periods ended
December 31, 1999. Advisor Class shares inception date is 10/1/96. Since
inception index return is from 10/31/96.
BAR CHART
--------------------------------------------------------------------------------
The following chart shows the annual returns for the Advisor Class shares since
inception. Through 9/30/00, the year to date unannualized return for the Advisor
Class shares was 3.24%.
[The following table was depicted as a bar chart in the printed material.]
Calendar
Year
End
--------
90 n/a
91 n/a
92 n/a
93 n/a
94 n/a
95 n/a
96 n/a
97 8.44
98 3.81
99 46.91
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best Quarter was up 32.13%, 4th quarter, 1999; and Worst Quarter was down
-22.96%, 3rd quarter, 1998.
17
<PAGE>
Alliance International Fund
--------------------------------------------------------------------------------
OBJECTIVE:
The Fund's investment objective is total return from long-term growth of capital
and income primarily through investment in a broad portfolio of marketable
securities of established international companies, companies participating in
foreign economies with prospects for growth, including U.S. companies having
their principal activities and interests outside the U.S. and in foreign
government securities.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in equity securities of established international
companies, companies participating in foreign economies with prospects for
growth, including U.S. companies having their principal activities and interests
outside the U.S., and foreign government securities. The Fund diversifies its
investments broadly among countries and normally invests in companies in at
least three foreign countries, although it may invest a substantial portion of
its assets in companies in one or more foreign countries.
Among the principal risks of investing in the Fund are market risk, foreign risk
and currency risk.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
--------------------------------------------------------------------------------
Since
1 Year Inception
--------------------------------------------------------------------------------
Advisor Class 35.12% 14.10%
--------------------------------------------------------------------------------
MSCI EAFE Index 27.30% 16.11%
--------------------------------------------------------------------------------
Index returns and average annual total returns are for the periods ended
December 31, 1999. Advisor Class shares inception date is 10/1/96. Since
inception index return is from 10/31/96.
BAR CHART
--------------------------------------------------------------------------------
The following chart shows the annual returns for the Advisor Class shares since
inception. Through 9/30/00, the year to date unannualized return for the Advisor
Class shares was -15.22%.
[The following table was depicted as a bar chart in the printed material.]
Calendar
Year
End
--------
90 n/a
91 n/a
92 n/a
93 n/a
94 n/a
95 n/a
96 n/a
97 1.59
98 9.96
99 35.12
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best Quarter was up 26.08%, 4th quarter, 1999; and Worst Quarter was down
-17.80%, 3rd quarter, 1998.
18
<PAGE>
Alliance Greater China '97 Fund
--------------------------------------------------------------------------------
OBJECTIVE:
The Fund's investment objective is long-term capital appreciation through
investment of at least 80% of its total assets in equity securities of Greater
China companies.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests in equity securities of Greater China companies, which are
companies in China, Hong Kong, and Taiwan. Of these countries, the Fund expects
to invest a significant portion of its assets, which may be greater than 50%, in
Hong Kong companies and may invest all of its assets in Hong Kong companies or
companies of either of the other Greater China countries. The Fund also may
invest in convertible securities and equity-linked debt securities issued or
guaranteed by Greater China companies or Greater China Governments, their
agencies, or instrumentalities. As of June 30, 2000 the Fund had approximately
83% of its assets invested in securities of Hong Kong companies.
Among the principal risks of investing in the Fund are market risk, foreign risk
and currency rate risk. Because it invests in Greater China companies, the
Fund's returns will be significantly more volatile and differ substantially from
U.S. markets generally. Your investment also has the risk that market changes or
other events affecting the Greater China countries, including political
instability and unpredictable economic conditions, may have a more significant
effect on the Fund's net asset value. In addition, the Fund is
"non-diversified," meaning that it invests more of its assets in a smaller
number of companies than many other international funds. As a result, changes in
the value of a single security may have a more significant effect, either
negative or positive, on the Fund's net asset value. The Fund's investments in
debt securities have interest rate and credit risks.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
--------------------------------------------------------------------------------
Since
1 Year Inception
--------------------------------------------------------------------------------
Advisor Class 83.38% 8.69%
--------------------------------------------------------------------------------
MSCI China Free Index 9.94% -32.64%
--------------------------------------------------------------------------------
MSCI Hong Kong Index 59.52% 4.44%
--------------------------------------------------------------------------------
MSCI Taiwan Index 52.71% -1.11%
--------------------------------------------------------------------------------
Index returns and average annual total returns are for the periods ended
December 31, 1999. Advisor Class shares inception date is 9/3/97. Since
inception index returns are from 9/30/97.
BAR CHART
--------------------------------------------------------------------------------
The following chart shows the annual returns for the Advisor Class shares since
inception. Through 9/30/00, the year to date unannualized return for the Advisor
Class shares was -21.28%.
[The following table was depicted as a bar chart in the printed material.]
Calendar
Year
End
--------
90 n/a
91 n/a
92 n/a
93 n/a
94 n/a
95 n/a
96 n/a
97 n/a
98 -7.87
99 83.38
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best Quarter was up 49.44%, 4th quarter, 1999; and Worst Quarter was down
-26.92%, 2nd quarter, 1998.
19
<PAGE>
Alliance All-Asia Investment Fund
--------------------------------------------------------------------------------
OBJECTIVE:
The Fund's investment objective is long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund primarily invests in securities of various types of companies based in
Asia. The Fund invests in equity securities, preferred stocks, and equity-linked
debt securities issued by Asian companies and may invest more than 50% of its
total assets in equity securities of Japanese issuers. The Fund also may invest
up to 35% of its total assets in debt securities issued or guaranteed by Asian
companies or by Asian governments, their agencies or instrumentalities, and may
invest up to 25% of its net assets in convertible securities. At June 30, 2000,
the Fund had approximately 48% of its total assets invested in securities of
Japanese companies.
Among the principal risks of investing in the Fund are market risk, foreign risk
and currency risk. Because it invests in Asian and Pacific region countries and
emerging markets, the Fund's returns will be significantly more volatile and may
differ substantially from the overall U.S. market generally. Your investment has
the risk that market changes or other factors affecting Asian and Pacific region
countries and other emerging markets, including political instability and
unpredictable economic conditions, may have a more significant effect on the
Fund's net asset value. To the extent that the Fund invests a substantial amount
of its assets in Japanese companies, your investment has the risk that market
changes or other events affecting that country may have a more significant
effect on the Fund's net asset value. In addition, the Fund's investments in
debt securities have interest rate and credit risks.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
--------------------------------------------------------------------------------
Since
1 Year Inception
--------------------------------------------------------------------------------
Advisor Class 119.50% 6.71%
--------------------------------------------------------------------------------
MSCI All Country Asia
Pacific Index 59.66% 4.98%
--------------------------------------------------------------------------------
Index returns and average annual total returns are for the periods ended
December 31, 1999. Advisor Class shares inception date is 10/1/96. Since
inception index return is from 10/31/96.
BAR CHART
--------------------------------------------------------------------------------
The following chart shows the annual returns for the Advisor Class shares since
inception. Through 9/30/00, the year to date unannualized return for the Advisor
Class shares was -23.21%.
[The following table was depicted as a bar chart in the printed material.]
Calendar
Year
End
--------
90 n/a
91 n/a
92 n/a
93 n/a
94 n/a
95 n/a
96 n/a
97 -34.83
98 -12.15
99 119.50
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best Quarter was up 39.04%, 4th quarter, 1999; and Worst Quarter was down
-18.65%, 4th quarter, 1997.
20
<PAGE>
SUMMARY OF PRINCIPAL RISKS
The value of your investment in a Fund will change with changes in the values of
that Fund's investments. Many factors can affect those values. In this Summary,
we describe the principal risks that may affect a Fund's portfolio as a whole.
These risks and the Funds particularly subject to these risks appear in a chart
at the end of the section. All Funds could be subject to additional principal
risks because the types of investments made by each Fund can change over time.
This Prospectus has additional descriptions of the types of investments that
appear in bold type in the discussions under "Description of Additional
Investment Practices" or "Additional Risk Considerations." These sections also
include more information about the Funds, their investments, and related risks.
MARKET RISK
This is the risk that the value of a Fund's investments will fluctuate as the
stock or bond markets fluctuate and that prices overall will decline over short-
or long-term periods. All of the Alliance Stock Funds are subject to market
risk.
INDUSTRY/SECTOR RISK
This is the risk of investments in a particular industry or group of related
industries. Market or economic factors affecting that industry could have a
major effect on the value of a Fund's investments. Funds particularly subject to
this risk are Alliance Health Care Fund, Alliance Technology Fund, Alliance
Utility Income Fund, Alliance Real Estate Investment Fund and Alliance Worldwide
Privatization Fund. This risk may be greater for Alliance Technology Fund
because technology stocks, especially those of smaller, less-seasoned companies,
tend to be more volatile than the overall market.
CAPITALIZATION RISK
This is the risk of investments in small- to mid-capitalization companies.
Investments in mid-cap companies may be more volatile than investments in
large-cap companies. Alliance Growth Fund and The Alliance Fund are particularly
subject to this risk. Investments in small-cap companies tend to be more
volatile than investments in large-cap or mid-cap companies. A Fund's
investments in smaller capitalization stocks may have additional risks because
these companies often have limited product lines, markets or financial
resources. Alliance Health Care Fund, Alliance Quasar Fund and Alliance Global
Small Cap Fund are particularly subject to this risk.
INTEREST RATE RISK
This is the risk that changes in interest rates will affect the value of a
Fund's investments in income-producing, fixed-income (i.e., debt) securities.
Increases in interest rates may cause the value of a Fund's investments to
decline and this decrease in value may not be offset by the higher interest rate
income. Interest rate risk is particularly applicable to Funds that invest in
fixed-income securities and is greater for those Alliance Stock Funds that
invest a substantial portion of their assets in fixed-income securities, such as
Alliance Growth and Income Fund, Alliance Balanced Shares and Alliance Utility
Income Fund. Interest rate risk is greater for those Funds that invest in
lower-rated securities or comparable unrated securities ("junk bonds") such as
Alliance Utility Income Fund. Alliance Real Estate Investment Fund also has more
exposure to interest rate risk because it invests in real estate industry
companies and in mortgage-backed securities.
CREDIT RISK
This is the risk that the issuer of a security, or the other party to an
over-the-counter transaction, will be unable or unwilling to make timely
payments of interest or principal, or to otherwise honor its obligations. The
degree of risk for a particular security may be reflected in its credit rating.
Credit risk is applicable to Funds that invest in fixed-income securities and is
greater for those Alliance Stock Funds that invest a substantial portion of
their assets in lower-rated securities, such as Alliance Utility Income Fund.
FOREIGN RISK
This is the risk of investments in issuers located in foreign countries. All
Alliance Stock Funds with foreign securities are subject to this risk,
including, in particular, Alliance Health Care Fund, Alliance Technology Fund,
Alliance New Europe Fund, Alliance Worldwide Privatization Fund, Alliance
International Premier Growth Fund, Alliance Global Small Cap Fund, Alliance
International Fund, Alliance Greater China '97 Fund and Alliance All-Asia
Investment Fund. Funds investing in foreign securities may experience more rapid
and extreme changes in value than Funds with investments solely in securities of
U.S. companies. This is because the securities markets of many foreign countries
are relatively small, with a limited number of companies representing a small
number of industries. Additionally, foreign securities issuers are usually not
subject to the same degree of regulation as U.S. issuers. Reporting, accounting,
and auditing standards of foreign countries differ, in some cases significantly,
from U.S. standards. Also, nationalization, expropriation or confiscatory
taxation, currency blockage, or political changes or diplomatic developments
could adversely affect a Fund's investments in a foreign country. In the event
of nationalization, expropriation, or other confiscation, a Fund could lose its
entire investment.
COUNTRY OR GEOGRAPHIC RISK
This is the risk of investments in issuers located in a particular country or
geographic region. Market changes or other factors affecting that country or
region, including political instability and unpredictable economic conditions,
may have a particularly significant effect on a Fund's net asset value. The
Funds particularly subject to this risk are Alliance New Europe Fund, Alliance
Worldwide Privatization Fund, Alliance International Fund, Alliance Greater
China '97 Fund and Alliance All-Asia Investment Fund.
21
<PAGE>
CURRENCY RISK
This is the risk that fluctuations in the exchange rates between the U.S. Dollar
and foreign currencies may negatively affect the value of a Fund's investments.
Funds with foreign securities are subject to this risk, including, in
particular, Alliance Health Care Fund, Alliance Technology Fund, Alliance New
Europe Fund, Alliance Worldwide Privatization Fund, Alliance International
Premier Growth Fund, Alliance Global Small Cap Fund, Alliance International
Fund, Alliance Greater China '97 Fund and Alliance All-Asia Investment Fund.
MANAGEMENT RISK
Each Alliance Stock Fund is subject to management risk because it is an actively
managed investment portfolio. Alliance will apply its investment techniques and
risk analyses in making investment decisions for the Funds, but there is no
guarantee that its decisions will produce the intended result.
FOCUSED PORTFOLIO RISK
Funds, such as Alliance Premier Growth Fund and Alliance International Premier
Growth Fund, that invest in a limited number of companies, may have more risk
because changes in the value of a single security may have a more significant
effect, either negative or positive, on the Fund's net asset value. Similarly,
Alliance Greater China '97 Fund may have more risk because it is
"non-diversified," meaning that it can invest more of its assets in a smaller
number of companies than many other international funds.
ALLOCATION RISK
Alliance Balanced Shares has the risk that the allocation of its investments
between equity and debt securities may have a more significant effect on the
Fund's net asset value when one of these asset classes is performing more poorly
than the other.
PRINCIPAL RISKS BY FUND
--------------------------------------------------------------------------------
The following chart summarizes the principal risks of each Fund. Risks not
marked for a particular Fund may, however, still apply to some extent to that
Fund at various times.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
Industry/ Capital- Interest Country or
Market Sector ization Rate Credit Foreign Geographic Currency
Fund Risk Risk Risk Risk Risk Risk Risk Risk
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Alliance Premier Growth Fund o
---------------------------------------------------------------------------------------------------------------------
Alliance Health Care Fund o o o o o
---------------------------------------------------------------------------------------------------------------------
Alliance Growth Fund o o o o o
---------------------------------------------------------------------------------------------------------------------
Alliance Technology Fund o o o o
---------------------------------------------------------------------------------------------------------------------
Alliance Quasar Fund o o
---------------------------------------------------------------------------------------------------------------------
The Alliance Fund o o
---------------------------------------------------------------------------------------------------------------------
Alliance Growth and
Income Fund o o o
---------------------------------------------------------------------------------------------------------------------
Alliance Balanced Shares o o o
---------------------------------------------------------------------------------------------------------------------
Alliance Utility Income Fund o o o o
---------------------------------------------------------------------------------------------------------------------
Alliance Real Estate
Investment Fund o o o o
---------------------------------------------------------------------------------------------------------------------
Alliance New Europe Fund o o o o
---------------------------------------------------------------------------------------------------------------------
Alliance Worldwide
Privatization Fund o o o o
---------------------------------------------------------------------------------------------------------------------
Alliance International
Premier Growth Fund o o o
---------------------------------------------------------------------------------------------------------------------
Alliance Global Small Cap
Fund o o o o
---------------------------------------------------------------------------------------------------------------------
Alliance International Fund o o o o
---------------------------------------------------------------------------------------------------------------------
Alliance Greater China '97
Fund o o o o
---------------------------------------------------------------------------------------------------------------------
Alliance All-Asia Investment
Fund o o o o
---------------------------------------------------------------------------------------------------------------------
<CAPTION>
------------------------------------------------------------------
Focused
Manage- Portfolio Allocation
Fund ment Risk Risk Risk
------------------------------------------------------------------
<S> <C> <C> <C>
Alliance Premier Growth Fund o o
------------------------------------------------------------------
Alliance Health Care Fund o
------------------------------------------------------------------
Alliance Growth Fund o
------------------------------------------------------------------
Alliance Technology Fund o
------------------------------------------------------------------
Alliance Quasar Fund o
------------------------------------------------------------------
The Alliance Fund o
------------------------------------------------------------------
Alliance Growth and
Income Fund o
------------------------------------------------------------------
Alliance Balanced Shares o o
------------------------------------------------------------------
Alliance Utility Income Fund o
------------------------------------------------------------------
Alliance Real Estate
Investment Fund o
------------------------------------------------------------------
Alliance New Europe Fund o
------------------------------------------------------------------
Alliance Worldwide
Privatization Fund o
------------------------------------------------------------------
Alliance International
Premier Growth Fund o o
------------------------------------------------------------------
Alliance Global Small Cap
Fund o
------------------------------------------------------------------
Alliance International Fund o
------------------------------------------------------------------
Alliance Greater China '97
Fund o o
------------------------------------------------------------------
Alliance All-Asia Investment
Fund o
------------------------------------------------------------------
</TABLE>
22
<PAGE>
--------------------------------------------------------------------------------
FEES AND EXPENSES OF THE FUNDS
--------------------------------------------------------------------------------
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Funds.
SHAREHOLDER FEES (fees paid directly from your investment)
Advisor Class Share
-------------------
Maximum Front-end or Deferred Sales Charge (Load) None
(as a percentage of original purchase
price or redemption proceeds,
whichever is lower)
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) and
EXAMPLES
The Examples are to help you compare the cost of investing in the Funds with the
cost of investing in other funds. They assume that you invest $10,000 in each
Fund for the time periods indicated and then redeem all of your shares at the
end of those periods. They also assume that your investment has a 5% return each
year, that the Fund's operating expenses stay the same and that all dividends
and distributions are reinvested. Your actual costs may be higher or lower.
<TABLE>
<CAPTION>
Operating Expenses Examples
-------------------------------------------------------- --------------------------------------------------------
<S> <C> <C> <C>
Alliance Premier Growth Fund
Management fees .95% After 1 year $ 118
Distribution (12b-1) fees None After 3 years $ 368
Other expenses .21% After 5 years $ 638
----- After 10 years $ 1,409
Total fund operating expenses 1.16%
=====
Alliance Health Care Fund
Management fees .95% After 1 year $ 168
Distribution (12b-1) fees None After 3 years (b) $ 520
Other expenses .66% After 5 years (b) $ 897
----- After 10 years (b) $ 1,955
Total fund operating expenses 1.61%
=====
Alliance Growth Fund
Management fees .68% After 1 year $ 90
Distribution (12b-1) fees None After 3 years $ 281
Other expenses .20% After 5 years $ 488
----- After 10 years $ 1,084
Total fund operating expenses .88%
=====
Alliance Technology Fund
Management fees 1.10% After 1 year $ 137
Distribution (12b-1) fees None After 3 years $ 428
Other expenses .25% After 5 years $ 739
----- After 10 years $ 1,624
Total fund operating expenses 1.35%
=====
Alliance Quasar Fund
Management fees 1.01% After 1 year $ 145
Distribution (12b-1) fees None After 3 years $ 449
Other expenses .41% After 5 years $ 776
----- After 10 years $ 1,702
Total fund operating expenses 1.42%
=====
The Alliance Fund
Management fees .68% After 1 year $ 87
Distribution (12b-1) fees None After 3 years $ 271
Other expenses .17% After 5 years $ 471
----- After 10 years $ 1,049
Total fund operating expenses .85%
=====
</TABLE>
--------------------------------------------------------------------------------
Please refer to footnotes on page 25.
23
<PAGE>
<TABLE>
<CAPTION>
Operating Expenses Examples
-------------------------------------------------------- --------------------------------------------------------
<S> <C> <C> <C>
Alliance Growth and
Income Fund(C)
Management fees .47% After 1 year $ 69
Distribution (12b-1) fees None After 3 years $ 218
Other expenses .21% After 5 years $ 379
----- After 10 years $ 847
Total fund operating expenses .68%
=====
Alliance Balanced Shares Fund
Management fees .56% After 1 year $ 88
Distribution (12b-1) fees None After 3 years $ 274
Other expenses .30% After 5 years $ 477
----- After 10 years $ 1,061
Total fund operating expenses .86%
=====
Alliance Utility Income Fund
Management fees .75% After 1 year $ 122
Distribution (12b-1) fees None After 3 years (b) $ 426
Other expenses .66% After 5 years (b) $ 751
----- After 10 years (b) $ 1,673
Total fund operating expenses 1.41%
=====
Waiver and/or expense reimbursement (a) (.21)%
=====
Net expenses 1.20%
=====
Alliance Real Estate
Investment Fund
Management fees .90% After 1 year $ 143
Distribution (12b-1) fees None After 3 years $ 443
Other expenses .50% After 5 years $ 766
----- After 10 years $ 1,680
Total fund operating expenses 1.40%
=====
Alliance New Europe Fund
Management fees .92% After 1 year $ 136
Distribution (12b-1) fees None After 3 years $ 425
Other expenses .42% After 5 years $ 734
----- After 10 years $ 1,613
Total fund operating expenses 1.34%
=====
Alliance Worldwide
Privatization Fund
Management fees 1.00% After 1 year $ 146
Distribution (12b-1) fees None After 3 years $ 452
Other expenses .43% After 5 years $ 782
----- After 10 years $ 1,713
Total fund operating expenses 1.43%
=====
Alliance International
Premier Growth Fund
Management fees 1.00% After 1 year $ 224
Distribution (12b-1) fees None After 3 years (b) $ 845
Other expenses 1.96% After 5 years (b) $ 1,492
----- After 10 years (b) $ 3,227
Total fund operating expenses 2.96%
=====
Waiver and/or expense reimbursement (a) (.75)%
=====
Net expenses 2.21%
=====
Alliance Global
Small Cap Fund
Management Fees 1.00% After 1 year $ 172
Distribution (12b-1) Fees None After 3 years $ 533
Other Expenses .69% After 5 years $ 918
----- After 10 years $ 1,998
Total fund operating expenses 1.69%
=====
</TABLE>
--------------------------------------------------------------------------------
Please refer to footnotes on page 25.
24
<PAGE>
<TABLE>
<CAPTION>
Operating Expenses Examples
-------------------------------------------------------- --------------------------------------------------------
<S> <C> <C> <C>
Alliance International Fund
Management fees 1.03% After 1 year $ 158
Distribution (12b-1) fees None After 3 years (b) $ 519
Interest Expense .01% After 5 years (b) $ 905
Other expenses .65% After 10 years (b) $ 1,986
-----
Total fund operating expenses 1.69%
=====
Waiver and/or expense reimbursement (a) (.14)%
=====
Net expenses 1.55%
=====
Alliance Greater
China '97 Fund
Management fees 1.00% After 1 year $ 225
Distribution (12b-1) fees None After 3 years (b) $ 2,110
Other expenses 8.61% After 5 years (b) $ 3,826
----- After 10 years (b) $ 7,464
Total fund operating expenses 9.61%
=====
Waiver and/or expense reimbursement (a) (7.39)%
=====
Net expenses 2.22%
=====
Alliance All-Asia
Investment Fund
Management fees 1.00% After 1 year $ 248
Distribution (12b-1) fees None After 3 years (b) $ 764
Administration fees .15% After 5 years (b) $ 1,306
Other operating expenses 1.78% After 10 years (b) $ 2,786
-----
Total fund operating expenses 2.93%
=====
Waiver and/or expense reimbursement (a) (.48)%
=====
Net Expenses 2.45%
=====
</TABLE>
--------------------------------------------------------------------------------
(a) Reflects Alliance's contractual waiver of a portion of its advisory fee
and/or reimbursement of a portion of the Fund's operating expenses. This
waiver extends through the end of the Fund's current fiscal year and may
be extended by Alliance for additional one year terms.
(b) These examples assume that Alliance's agreement to waive management fees
and/or reimburse Fund expenses is not extended beyond its initial period.
(c) The advisory fee for the Fund is proposed to be increased. See page 31.
25
<PAGE>
--------------------------------------------------------------------------------
GLOSSARY
--------------------------------------------------------------------------------
This Prospectus uses the following terms.
TYPES OF SECURITIES
Convertible securities are fixed-income securities that are convertible into
common stock.
Debt securities are bonds, debentures, notes, bills, loans, other direct debt
instruments, and other fixed, floating and variable rate debt obligations, but
do not include convertible securities.
Depositary receipts include American Depositary Receipts ("ADRs"), Global
Depositary Receipts ("GDRs") and other types of depositary receipts.
Equity securities include (i) common stocks, partnership interests, business
trust shares and other equity or ownership interests in business enterprises and
(ii) securities convertible into, and rights and warrants to subscribe for the
purchase of, such stocks, shares and interests.
Fixed-income securities are debt securities and dividend-paying preferred
stocks, including floating rate and variable rate instruments.
Foreign government securities are securities issued or guaranteed, as to payment
of principal and interest, by foreign governments, quasi-governmental entities,
governmental agencies or other governmental entities.
Qualifying bank deposits are certificates of deposit, bankers' acceptances and
interest-bearing savings deposits of banks that have total assets of more than
$1 billion and are members of the Federal Deposit Insurance Corporation.
Rule 144A securities are securities that may be resold under Rule 144A of the
Securities Act.
U.S. Government securities are securities issued or guaranteed by the United
States Government, its agencies or instrumentalities.
TYPES OF COMPANIES OR COUNTRIES
Asian company is an entity that (i) is organized under the laws of an Asian
country and conducts business in an Asian country, (ii) derives 50% or more of
its total revenues from business in Asian countries, or (iii) issues equity or
debt securities that are traded principally on a stock exchange in an Asian
country.
Asian countries are Australia, the Democratic Socialist Republic of Sri Lanka,
the Hong Kong Special Administrative Region of the People's Republic of China
(Hong Kong), the Islamic Republic of Pakistan, Japan, the Kingdom of Thailand,
Malaysia, Negara Brunei Darussalam (Brunei), New Zealand, the People's Republic
of China, the People's Republic of Kampuchea (Cambodia), the Republic of China
(Taiwan), the Republic of India, the Republic of Indonesia, the Republic of
Korea (South Korea), the Republic of the Philippines, the Republic of Singapore,
the Socialist Republic of Vietnam and the Union of Myanmar.
European Company is a company (i) organized under the laws of a European country
that issues equity or debt securities that are traded principally on a European
stock exchange, or (ii) a company that derives 50% or more of its total revenues
or profits from businesses in Europe.
Greater China company is an entity that (i) is organized under the laws of a
Greater China country and conducts business in a Greater China country, (ii)
derives 50% or more of its total revenues from businesses in Greater China
countries, or (iii) issues equity or debt securities that are traded principally
on a stock exchange in a Greater China country. A company of a particular
Greater China country is a company that meets any of these criteria with respect
to that country.
Greater China countries are the People's Republic of China ("China"), the Hong
Kong Special Administrative Region of the People's Republic of China ("Hong
Kong") and the Republic of China ("Taiwan").
Health Care Industries include the health care and health care-related
(including health sciences) industries. These industries are principally engaged
in the discovery, development, provision, production or distribution of products
and services that relate to the diagnosis, treatment and prevention of diseases
or other medical disorders. Companies in these fields include, but are not
limited to, pharmaceutical firms; companies that design, manufacture or sell
medical supplies, equipment and support services; companies that operate
hospitals and other health care facilities; and companies engaged in medical,
diagnostic, biochemical, biotechnological or other health sciences research and
development.
International Company is an entity that (i) is organized under the laws of a
foreign country and conducts business in a foreign country, (ii) derives 50% or
more of its total revenues from business in foreign countries, or (iii) issues
equity or debt securities that are traded principally on a stock exchange in a
foreign country.
Non-U.S. Company is an entity that (i) is organized under the laws of a foreign
country, (ii) has its principal place of business in a foreign country, and
(iii) issues equity or debt securities that are traded principally in a foreign
country. Securities issued by non-U.S. companies are known as foreign
securities.
RATING AGENCIES, RATED SECURITIES and INDEXES
Duff & Phelps is Duff & Phelps Credit Rating Co.
EAFE Index is Morgan Stanley Capital International Europe, Australasia and Far
East ("EAFE") Index.
Fitch is Fitch IBCA, Inc.
Investment grade securities are fixed-income securities rated Baa and above by
Moody's or BBB and above by S&P, Duff & Phelps or Fitch, or determined by
Alliance to be of equivalent quality.
26
<PAGE>
Lower-rated securities are fixed-income securities rated Ba or below by Moody's
or BB or below by S&P, Duff & Phelps or Fitch, or determined by Alliance to be
of equivalent quality, and are commonly referred to as "junk bonds."
Moody's is Moody's Investors Service, Inc.
Prime commercial paper is commercial paper rated Prime 1 by Moody's or A-1 or
higher by S&P or, if not rated, issued by companies that have an outstanding
debt issue rated Aa or higher by Moody's or AA or higher by S&P.
S&P is Standard & Poor's Ratings Services.
S&P 500 Index is S&P's 500 Composite Stock Price Index, a widely recognized
unmanaged index of market activity.
OTHER
1940 Act is the Investment Company Act of 1940, as amended.
Code is the Internal Revenue Code of 1986, as amended.
Commission is the Securities and Exchange Commission.
Exchange is the New York Stock Exchange.
Securities Act is the Securities Act of 1933, as amended.
--------------------------------------------------------------------------------
DESCRIPTION OF THE FUNDS
--------------------------------------------------------------------------------
This section of the Prospectus provides a more complete description of the
Funds' investment objectives, principal strategies and risks. Of course, there
can be no assurance that any Fund will achieve its investment objective.
Please note that:
o Additional discussion of the Funds' investments, including the risks of
the investments, can be found in the discussion under Description of
Additional Investment Practices following this section.
o The description of the principal risks for a Fund may include risks
described in the Summary of Principal Risks above. Additional information
about the risks of investing in a Fund can be found in the discussion
under Additional Risk Considerations.
o Additional descriptions of each Fund's strategies, investments and risks
can be found in the Fund's Statement of Additional Information or SAI.
o Except as noted, (i) the Funds' investment objectives are "fundamental"
and cannot be changed without a shareholder vote, and (ii) the Funds'
investment policies are not fundamental and thus can be changed without a
shareholder vote. Where an investment policy or restriction has a
percentage limitation, such limitation is applied at the time of
investment. Changes in the market value of securities in a Fund's
portfolio after they are purchased by the Fund will not cause the Fund to
be in violation of such limitation.
INVESTMENT OBJECTIVES AND PRINCIPAL POLICIES
DOMESTIC STOCK FUNDS
The Domestic Stock Funds offer investors seeking capital appreciation a range of
alternative approaches to investing in the U.S. equity markets.
Alliance Premier Growth Fund
Alliance Premier Growth Fund seeks long-term growth of capital by investing
predominantly in the equity securities of a limited number of large, carefully
selected, high-quality U.S. companies that are judged likely to achieve superior
earnings growth. As a matter of fundamental policy, the Fund normally invests at
least 85% of its total assets in the equity securities of U.S. companies. A U.S.
company is a company that is organized under United States law, has its
principal office in the United States and issues equity securities that are
traded principally in the United States. Normally, about 40-60 companies will be
represented in the Fund's portfolio, with the 25 most highly regarded of these
companies usually constituting approximately 70% of the Fund's net assets. The
Fund is thus atypical from most equity mutual funds in its focus on a relatively
small number of intensively researched companies. The Fund is designed for those
seeking to accumulate capital over time with less volatility than that
associated with investment in smaller companies.
On September 7, 2000 and September 26, 2000, the Board of Directors of Alliance
Premier Growth Fund, Inc. approved several proposals that will be presented to
stockholders at a special meeting that is planned for December 12, 2000. These
proposals include changes in certain of the Fund's fundamental investment
policies. These investment policy changes would: 1) permit the Fund to invest up
to 20% of its total assets on non-U.S. companies, up from the current 15%, and
remove the current definition of a "U.S. Company", thereby allowing the Fund to
rely on the standard definition of "Non-U.S. Company" used by other Alliance
Mutual Funds (as reflected in the Glossary), (2) enable the Fund to engage in
securities lending to the extent permitted by the 1940 Act, (3) revise the
fundamental policy regarding portfolio diversification to permit the Fund to
fully utilize the investment latitude for diversified funds contained in the
1940 Act, and (4) reclassify the Fund's fundamental policy regarding investments
in illiquid securities as a non-fundamental policy and revise that policy to
conform it to current SEC guidelines. If these proposals are adopted,
prospective investors will be notified by way of a supplement to this
Prospectus.
Alliance's investment strategy for the Fund emphasizes stock selection and
investment in the securities of a limited number of issuers. Alliance relies
heavily upon the fundamental analysis and research of its large internal
research staff, which generally follows a primary research universe of more than
500 companies that have strong management, superior industry positions,
excellent balance sheets and superior earnings growth prospects. An emphasis is
placed on identifying companies whose substantially above average prospective
27
<PAGE>
earnings growth is not fully reflected in current market valuations.
In managing the Fund, Alliance seeks to utilize market volatility judiciously
(assuming no change in company fundamentals), striving to capitalize on
apparently unwarranted price fluctuations, both to purchase or increase
positions on weakness and to sell or reduce overpriced holdings. The Fund
normally remains nearly fully invested and does not take significant cash
positions for market timing purposes. During market declines, while adding to
positions in favored stocks, the Fund becomes somewhat more aggressive,
gradually reducing the number of companies represented in its portfolio.
Conversely, in rising markets, while reducing or eliminating fully valued
positions, the Fund becomes somewhat more conservative, gradually increasing the
number of companies represented in its portfolio. Alliance thus seeks to gain
positive returns in good markets while providing some measure of protection in
poor markets.
Alliance expects the average market capitalization of companies represented in
the Fund's portfolio normally to be in the range, or in excess, of the average
market capitalization of companies included in the S&P 500 Index.
The Fund also may:
o invest up to 20% of its net assets in convertible securities;
o invest up to 5% of its net assets in rights or warrants;
o invest up to 15% of its total assets in foreign securities;
o purchase and sell exchange-traded index options and stock index futures
contracts; and
o write covered exchange-traded call options on its securities of up to 15%
of its total assets, and purchase and sell exchange-traded call and put
options on common stocks written by others of up to, for all options, 10%
of its total assets.
Because the Fund invests in a smaller number of securities than many other
equity funds, your investment has the risk that changes in the value of a single
security may have a more significant effect, either negative or positive, on the
Fund's net asset value.
Alliance Health Care Fund
Alliance Health Care Fund seeks capital appreciation and, secondarily, current
income. In seeking to achieve its investment objective, under normal
circumstances the Fund invests at least 65%, and normally substantially all, of
its total assets in securities issued by companies principally engaged in Health
Care Industries.
The Fund seeks investments in both new, smaller and less seasoned companies and
well-known, larger and established companies. Whenever possible, investments in
new, smaller or less seasoned companies will be made with a view to benefiting
from the development and growth of new products and markets in Health Care
Industries. Investments in these companies may offer more reward but may also
entail more risk than is generally true of larger, established companies. While
the Fund anticipates that a substantial portion of its portfolio will be
invested in the securities of U.S. companies, the Fund is not limited to
investing in such securities. Many companies in the forefront of world medical
technology are located outside the United States, primarily in Japan and Europe.
Accordingly, the Fund may invest up to 40% of its total assets in foreign
securities, including up to 25% in issuers located in any one foreign country.
However, no more than 5% of the Fund's total net assets may be invested in
securities of issuers located in emerging market countries.
Although the payment of dividends will be a factor considered in the selection
of investments for the Fund, the Fund seeks primarily to take advantage of
capital appreciation opportunities identified by Alliance in emerging
technologies and services in Health Care Industries by investing in companies
that are expected to profit from the development of new products and services
for these industries. Examples of such emerging technologies and services
include:
o New methods for administering drugs to a patient, such as surgical
implants and skin patches that enhance the effectiveness of the drugs and
may reduce patient side effects by delivering the drugs in precise
quantities over a prolonged time period or by evading natural body defense
mechanisms which delay the effect of the drugs;
o Developments in medical imaging such as the application of computer
technology to the output of conventional x-ray systems that allow for
cross-sectional images of soft tissue and organs (CT scanning) and
continuous imaging (digital radiography) as well as more advanced nuclear
medicine, ultrasound and magnetic resonance imaging (MRI);
o Advances in minimally invasive surgical techniques, such as angioplasty
and related technologies for diseased blood vessels and laser beams for
the eye, general and cardiovascular surgery, which provide greater
effectiveness, lower cost and improved patient safety than more
traditional surgical techniques;
o New therapeutic pharmaceutical compounds that control or alleviate
disease, including prescription and non-prescription drugs and treatment
regimes for conditions not controlled, alleviated or treatable by existing
medications or treatments and chemical or biological pharmaceuticals for
use in diagnostic testing;
o Advances in molecular biology such as signal transduction, cell adhesion
and cell to cell communication which have facilitated a rapid increase in
new classes of drugs. These have included monoclonal antibodies,
bio-engineered proteins and small molecules from novel synthesis and
screening techniques;
o Genomics, which allows scientists to better understand the causes of human
diseases, and in some cases has led to the manufacture of proteins for use
as therapeutic drugs;
28
<PAGE>
o Gene chips and other equipment that provide for the screening, diagnosis
and treatment of diseases;
o The introduction of large scale business efficiencies to the management of
nursing homes, acute and specialty hospitals, as well as free-standing
outpatient facilities, surgical centers and rehabilitation centers;
o Adaptations of microprocessors for use by pharmaceutical manufacturers,
hospitals, doctors and others in Health Care Industries to increase
distribution efficiency;
o Health care delivery organizations that combine cost effectiveness with
high quality medical care and help address the rising cost of health care;
and
o The sale of prescription drugs and pharmaceuticals to consumers via the
Internet.
The Fund's portfolio may also include companies that provide traditional
products and services currently in use in Health Care Industries and that are
likely to benefit from any increases in the general demand for such products and
services. The following are examples of the products and services that may be
offered by companies in Health Care Industries:
o Drugs or Pharmaceuticals, including both ethical and proprietary drugs,
drug administration products and pharmaceutical components used in
diagnostic testing;
o Medical Equipment and Supplies, including equipment and supplies used by
health service companies and individual practitioners, such as electronic
equipment used for diagnosis and treatment, surgical and medical
instruments and other products designed especially for Health Care
Industries;
o Health Care Services, including the services of clinical testing
laboratories, hospitals, nursing homes, clinics, centers for convalescence
and rehabilitation, and products and services for home health care; and
o Medical Research, including scientific research to develop drugs,
processes or technologies with possible commercial application in Health
Care Industries.
The Fund also may:
o purchase or sell forward foreign currency exchange contracts;
o enter into forward commitments for the purchase or sale of securities;
o make secured loans of portfolio securities of up to 20% of its total
assets; and
o enter into repurchase agreements.
Alliance Growth Fund
Alliance Growth Fund seeks long-term growth of capital. Current income is only
an incidental consideration. The Fund seeks to achieve its objective by
investing primarily in equity securities of companies with favorable earnings
outlooks and long-term growth rates that are expected to exceed that of the U.S.
economy over time. The Fund's investment objective is not fundamental.
The Fund also may invest up to 25% of its total assets in lower-rated
fixed-income securities and convertible bonds. The Fund generally will not
invest in securities rated at the time of purchase below Caa- by Moody's and
CCC- by S&P, Duff & Phelps or Fitch or in securities judged by Alliance to be of
comparable investment quality. From time to time, however, the Fund may invest
in securities rated in the lowest grades (i.e., C by Moody's or D or equivalent
by S&P, Duff & Phelps or Fitch) or securities of comparable investment quality
if there are prospects for an upgrade or a favorable conversion into equity
securities. If the credit rating of a security held by the Fund falls below its
rating at the time of purchase (or Alliance determines that the credit quality
of the security has deteriorated), the Fund may continue to hold the security if
such investment is considered appropriate under the circumstances.
The Fund also may:
o invest in zero-coupon and payment-in-kind bonds;
o invest in foreign securities although not generally in excess of 20% of
its total assets;
o buy or sell foreign currencies, options on foreign currencies, and foreign
currency futures contracts (and related options) and deal in forward
foreign currency exchange contracts;
o enter into forward commitments;
o buy and sell stock index futures contracts and options on future contracts
and on stock indices;
o purchase and sell futures contracts and options on futures contracts and
U.S. Treasury securities;
o write covered call and put options;
o purchase and sell put and call options;
o make loans of portfolio securities of up to 25% of its total assets; and
o enter into repurchase agreements of up to 25% of its total assets;
Alliance Technology Fund
Alliance Technology Fund emphasizes growth of capital and invests for capital
appreciation. Current income is only an incidental consideration. The Fund may
seek income by writing listed call options. The Fund invests primarily in
securities of companies expected to benefit from technological advances and
improvements (i.e., companies that use technology extensively in the development
of new or improved products or processes). The Fund normally will have at least
80% of its assets invested in the securities of these companies. The Fund
normally will have substantially all its assets invested in equity securities,
but it also invests in debt securities offering an opportunity for price
appreciation. The Fund will invest in listed and unlisted securities, in U.S.
securities, and up to 25% of its total assets in foreign securities.
29
<PAGE>
The Fund's policy is to invest in any company and industry and in any type of
security with potential for capital appreciation. It invests in well-known and
established companies and in new and unseasoned companies.
The Fund also may:
o write covered call options on its securities of up to 15% of its total
assets and purchase exchange-listed call and put options, including
exchange-traded index put options of up to, for all options, 10% of its
total assets;
o invest up to 10% of its total assets in warrants; and
o make loans of portfolio securities of up to 30% of its total assets.
Because the Fund invests primarily in technology companies, factors affecting
those types of companies could have a significant effect on the Fund's net asset
value. In addition, the Fund's investments in technology stocks, especially
those of smaller, less seasoned companies, tend to be more volatile than the
overall market. The Fund's investments in debt and foreign securities have
credit risk and foreign risk.
Alliance Quasar Fund
Alliance Quasar Fund seeks growth of capital by pursuing aggressive investment
policies. The Fund invests for capital appreciation and only incidentally for
current income. The Fund's practice of selecting securities based on the
possibility of appreciation cannot, of course, ensure against a loss in value.
Moreover, because the Fund's investment policies are aggressive, an investment
in the Fund is risky and investors who want assured income or preservation of
capital should not invest in the Fund.
On September 7, 2000, the Board of Directors of Alliance Quasar Fund, Inc.
approved several proposals that will be presented to stockholders at a special
meeting that is planned for December 12, 2000. These proposals include changes
in certain of the Fund's fundamental investment policies. These investment
policy changes would: (1) enable the Fund to engage in securities lending to the
extent permitted by the 1940 Act, (2) permit the Fund to engage in financial
forward and futures contracts and options thereon, (3) remove the fundamental
policy which restricts the Fund's ability to invest in securities of companies
(including predecessors) with less than three years of continuous operation, (4)
revise the fundamental policy regarding portfolio diversification to permit the
Fund to fully utilize the investment latitude for diversified funds contained in
the 1940 Act, and (5) reclassify the Fund's fundamental policy regarding
investments in illiquid securities as a non-fundamental policy and revise that
policy to conform it to current SEC guidelines. If these proposals are adopted,
prospective investors will be notified by way of a supplement to this
Prospectus.
The Fund invests in any company and industry and in any type of security with
potential for capital appreciation. It invests in well-known and established
companies and in new and unseasoned companies. When selecting securities for the
Fund, Alliance considers the economic and political outlook, the values of
specific securities relative to other investments, trends in the determinants of
corporate profits, and management capability and practices.
The Fund invests principally in equity securities, but it also invests to a
limited degree in non-convertible bonds and preferred stocks. The Fund invests
in listed and unlisted U.S. and foreign securities. The Fund can periodically
invest in the securities of companies that are expected to appreciate due to a
development particularly or uniquely applicable to a company regardless of
general business conditions or movements of the market as a whole.
The Fund also may:
o make short sales of securities against the box but not more than 15% of
its net assets may be deposited on short sales; and
o write covered call options of up to 15% of its total assets and purchase
and sell put and call options written by others of up to, for all options,
10% of its total assets.
Investments in smaller companies may have more risk because they tend to be more
volatile than the overall stock market. The Fund's investments in
non-convertible bonds, preferred stocks and foreign stocks may have credit risk
and foreign risk.
The Alliance Fund
The Alliance Fund seeks long-term growth of capital and income primarily through
investment in common stocks. The Fund normally invests substantially all of its
assets in common stocks that Alliance believes will appreciate in value. The
Fund also may invest in other types of securities such as convertible
securities, investment grade instruments, U.S. Government securities and high
quality, short-term obligations such as repurchase agreements, bankers'
acceptances and domestic certificates of deposit. The Fund may invest without
limit in foreign securities. The Fund generally does not effect portfolio
transactions in order to realize short-term trading profits or exercise control.
The Fund also may:
o write exchange-traded covered call options on up to 25% of its total
assets;
o make secured loans of portfolio securities of up to 25% of its total
assets; and
o enter into repurchase agreements of up to seven days' duration with
commercial banks, but only if those agreements together with any
restricted securities and any securities which do not have readily
available market quotations do not exceed 10% of its net assets.
While the diversification and generally high quality of the Fund's investments
cannot prevent fluctuations in market values, they tend to limit investment risk
and contribute to achieving the Fund's objective.
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TOTAL RETURN FUNDS
The Total Return Funds provide a range of investment alternatives to investors
seeking both growth of capital and current income.
Alliance Growth and Income Fund
Alliance Growth and Income Fund seeks appreciation through investments primarily
in dividend-paying common stocks of good quality. The Fund also may invest in
fixed-income securities and convertible securities.
The Fund also may try to realize income by writing covered call options listed
on domestic securities exchanges. The Fund also invests in foreign securities.
Since the purchase of foreign securities entails certain political and economic
risks, the Fund restricts its investments in these securities to issues of high
quality. The Fund also may purchase and sell financial forward and futures
contracts and options on these securities for hedging purposes.
On July 19-20, 2000, the Board of Directors of Alliance Growth and Income Fund
approved several proposals that will be presented to the Fund's stockholders at
a special stockholders meeting that is planned for November 2, 2000. These
proposals include a proposed amendment to the Fund's investment advisory
agreement to increase the advisory fee payable by the Fund to Alliance Capital
Management L.P. (the "Adviser") and revise the current advisory fee breakpoint
schedule. If stockholders approve the proposal, at the Fund's current size, the
effective advisory fee would increase from .47 of 1% to .624 of 1% and the
advisory fee breakpoint schedule would change. The new advisory fee would become
effective promptly following such approval. In addition, the Fund will be
requesting stockholder approval of, among other things, changes in two of the
Fund's fundamental investment policies. These investment policy changes would
(1) enable the Fund to engage in securities lending to the extent permitted by
the 1940 Act and (2) revise the Fund's fundamental investment policy
relating to portfolio diversification to permit the Fund to fully utilize the
investment latitude for diversified funds established by the 1940 Act. If these
proposals are adopted, prospective investors will be notified by way of a
supplement to this Prospectus.
Alliance Balanced Shares
Alliance Balanced Shares seeks a high return through a combination of current
income and capital appreciation. Although the Fund's investment objective is not
fundamental, the Fund is a "balanced" fund as a matter of fundamental policy.
The Fund invests in equity securities of high-quality, financially strong,
dividend-paying companies. Normally, the Fund's investments will consist of
about 60% in stocks, but stocks may make up to 75% of its investments. The Fund
will not purchase a security if as a result less than 25% of its total assets
will be in fixed income senior securities. These investments may include short-
and long-term debt securities, preferred stocks, convertible debt securities and
convertible preferred stocks to the extent that their values are attributable to
their fixed-income characteristics. Other than this restriction, the percentage
of the Fund's assets invested in each type of security will vary.
On September 7, 2000, the Board of Directors of Alliance Balanced Shares, Inc.
approved several proposals that will be presented to stockholders at a special
meeting that is planned for December 12, 2000. These proposals include changes
in certain of the Fund's fundamental investment policies. These investment
policy changes would: 1) enable the Fund to engage in securities lending to the
extent permitted by the 1940 Act, (2) revise the fundamental policy regarding
portfolio diversification to permit the Fund to fully utilize the investment
latitude for diversified funds contained in the 1940 Act, (3) permit the Fund to
engage in financial forward and futures contracts and options thereon, and (4)
reclassify the Fund's fundamental policy regarding investments in illiquid
securities as a non-fundamental policy. If these proposals are adopted,
prospective investors will be notified by way of a supplement to this
prospectus.
The Fund invests in U.S. Government securities, bonds, senior debt securities,
and preferred and common stocks in such proportions and of such type as Alliance
deems best adapted to the current economic and market outlooks. The Fund may
invest up to 15% of the value of its total assets in foreign equity and
fixed-income securities eligible for purchase by the Fund under its investment
policies described above.
The Fund also may:
o enter into contracts for the purchase or sale for future delivery of
foreign currencies;
o purchase and write put and call options on foreign currencies and enter
into forward foreign currency exchange contracts for hedging purposes; and
o subject to market conditions, write covered call options listed on a
domestic exchange to realize income.
As a balanced fund, the Fund has the risk that the allocation of its investments
between equity and debt securities may have a more significant effect on the
Fund's net asset value when one of these asset classes is performing more poorly
than the other.
Alliance Utility Income Fund
Alliance Utility Income Fund seeks current income and capital appreciation by
investing primarily in equity and fixed-income securities of companies in the
utilities industry. As a fundamental policy, the Fund normally invests at least
65% of its total assets in securities of companies in the utilities industry.
The Fund seeks to take advantage of the characteristics and historical
performance of securities of utility companies, many of which pay regular
dividends and increase their common stock dividends over time. The Fund
considers a company to be in the utilities industry if, during the most recent
twelve-month period, at least 50% of the company's gross revenues, on a
consolidated basis, were derived from its utilities activities.
The Fund may invest in securities of both U.S. and foreign issuers, although the
Fund will invest no more than 15% of its
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total assets in issuers in any one
foreign country. The Fund invests at least 65% of its total assets in
income-producing securities, but there is otherwise no limit on the allocation
of the Fund's investments between equity securities and fixed-income securities.
The Fund may maintain up to 35% of its net assets in lower-rated securities. The
Fund will not retain a security that is downgraded below B or determined by
Alliance to have undergone similar credit quality deterioration following
purchase.
The Fund may invest up to 35% of its total assets in equity and fixed-income
securities of domestic and foreign corporate and governmental issuers other than
utility companies. These securities include U.S. Government securities and
repurchase agreements for those securities, foreign government securities,
corporate fixed-income securities of domestic issuers, corporate fixed-income
securities of foreign issuers denominated in foreign currencies or in U.S.
Dollars (in each case including fixed-income securities of an issuer in one
country denominated in the currency of another country), qualifying bank
deposits, and prime commercial paper.
The Fund also may:
o invest up to 30% of its net assets in convertible securities;
o invest up to 5% of its net assets in rights or warrants;
o invest in depositary receipts, securities of supranational entities
denominated in the currency of any country, securities denominated in
European Currency Units, and "semi-governmental securities";
o write covered call and put options, purchase call and put options on
securities of the types in which it is permitted to invest that are
exchange-traded and over-the-counter, and write uncovered call options for
cross-hedging purposes;
o purchase and sell exchange-traded options on any securities index composed
of the types of securities in which it may invest;
o enter into contracts for the purchase or sale for future delivery of
fixed-income securities or foreign currencies, or contracts based on
financial indices, including an index of U.S. Government securities,
foreign government securities, corporate fixed-income securities, or
common stock, and may purchase and write options on futures contracts;
o purchase and write call and put options on foreign currencies traded on
U.S. and foreign exchanges or over-the-counter for hedging purposes;
o purchase or sell forward contracts;
o enter into interest rate swaps and purchase or sell interest rate caps and
floors;
o enter into forward commitments;
o enter into standby commitment agreements;
o make short sales of securities or maintain a short position;
o make secured loans of portfolio securities of up to 20% of its total
assets; and
o enter into repurchase agreements for U.S. Government securities;
The Fund's principal risks include those that arise from its investing primarily
in electric utility companies. Factors affecting that industry sector can have a
significant effect on the Fund's net asset value. The U.S. utilities industry
has experienced significant changes in recent years. Electric utility companies
in general have been favorably affected by lower fuel costs, the full or near
completion of major construction programs and lower financing costs. In
addition, many utility companies have generated cash flows in excess of current
operating expenses and construction expenditures, permitting some degree of
diversification into unregulated businesses. Regulatory changes, however, could
increase costs or impair the ability of nuclear and conventionally fueled
generating facilities to operate their facilities and reduce their ability to
make dividend payments on their securities. Rates of return of utility companies
generally are subject to review and limitation by state public utilities
commissions and tend to fluctuate with marginal financing costs. Rate changes
ordinarily lag behind changes in financing costs and can favorably or
unfavorably affect the earnings or dividend pay-outs of utilities stocks
depending upon whether the rates and costs are declining or rising.
Utility companies historically have been subject to the risks of increases in
fuel and other operating costs, high interest costs, costs associated with
compliance with environmental and nuclear safety regulations, service
interruptions, economic slowdowns, surplus capacity, competition, and regulatory
changes. There also can be no assurance that regulatory policies or accounting
standards changes will not negatively affect utility companies' earnings or
dividends. Utility companies are subject to regulation by various authorities
and may be affected by the imposition of special tariffs and changes in tax
laws. To the extent that rates are established or reviewed by governmental
authorities, utility companies are subject to the risk that such authorities
will not authorize increased rates. Because of the Fund's policy of
concentrating its investments in utility companies, the Fund is more susceptible
than most other mutual funds to economic, political or regulatory occurrences
affecting the utilities industry.
Foreign utility companies, like those in the U.S., are generally subject to
regulation, although the regulation may or may not be comparable to domestic
regulations. Foreign utility companies in certain countries may be more heavily
regulated by their respective governments than utility companies located in the
U.S. As in the U.S., foreign utility companies generally are required to seek
government approval for rate increases. In addition, many foreign utility
companies use fuels that cause more pollution than those used in the U.S. and
may yet be required to invest in pollution control equipment. Foreign utility
regulatory systems vary from country to country and may evolve in ways different
from regulation in the U.S. The percentage of the Fund's assets invested in
issuers of particular countries will vary.
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Increases in interest rates may cause the value of the Fund's investments to
decline and the decrease in value may not be offset by higher interest rate
income. The Fund's investments in lower-rated securities may be subject to more
credit risk than a fund that invests in higher-rated securities.
Alliance Real Estate Investment Fund
Alliance Real Estate Investment Fund seeks a total return from long-term growth
of capital and from income principally through investing in a portfolio of
equity securities of issuers that are primarily engaged in or related to the
real estate industry.
The Fund normally invests at least 65% of its total assets in equity securities
of real estate investment trusts, or REITs, and other real estate industry
companies. A "real estate industry company" is a company that derives at least
50% of its gross revenues or net profits from the ownership, development,
construction, financing, management, or sale of commercial, industrial, or
residential real estate or interests in these properties. The Fund invests in
equity securities that include common stock, shares of beneficial interest of
REITs, and securities with common stock characteristics, such as preferred stock
or convertible securities ("Real Estate Equity Securities").
The Fund may invest up to 35% of its total assets in (a) securities that
directly or indirectly represent participations in, or are collateralized by and
payable from, mortgage loans secured by real property ("Mortgage-Backed
Securities"), such as mortgage pass-through certificates, real estate mortgage
investment conduit certificates ("REMICs") and collateralized mortgage
obligations ("CMOs") and (b) short-term investments. These securities are
described below.
In selecting Real Estate Equity Securities, Alliance's analysis will focus on
determining the degree to which the company involved can achieve sustainable
growth in cash flow and dividend paying capability. Alliance believes that the
primary determinant of this capability is the economic viability of property
markets in which the company operates and that the secondary determinant of this
capability is the ability of management to add value through strategic focus and
operating expertise. The Fund will purchase Real Estate Equity Securities when,
in the judgment of Alliance, their market price does not adequately reflect this
potential. In making this determination, Alliance will take into account
fundamental trends in underlying property markets as determined by proprietary
models, site visits conducted by individuals knowledgeable in local real estate
markets, price-earnings ratios (as defined for real estate companies), cash flow
growth and stability, the relationship between asset value and market price of
the securities, dividend payment history, and such other factors that Alliance
may determine from time to time to be relevant. Alliance will attempt to
purchase for the Fund Real Estate Equity Securities of companies whose
underlying portfolios are diversified geographically and by property type.
The Fund may invest without limitation in shares of REITs. REITs are pooled
investment vehicles that invest primarily in income producing real estate or
real estate related loans or interests. REITs are generally classified as equity
REITs, mortgage REITs, or a combination of equity and mortgage REITs. Equity
REITs invest the majority of their assets directly in real property and derive
income primarily from the collection of rents. Equity REITs can also realize
capital gains by selling properties that have appreciated in value. Mortgage
REITs invest the majority of their assets in real estate mortgages and derive
income from the collection of interest payments. Similar to investment companies
such as the Fund, REITs are not taxed on income distributed to shareholders
provided they comply with several requirements of the Code. The Fund will
indirectly bear its proportionate share of expenses incurred by REITs in which
the Fund invests in addition to the expenses incurred directly by the Fund.
The Fund's investment strategy with respect to Real Estate Equity Securities is
based on the premise that property market fundamentals are the primary
determinant of growth underlying the performance of Real Estate Equity
Securities. Value and management further distinguishes the most attractive Real
Estate Equity Securities. The Fund's research and investment process is designed
to identify those companies with strong property fundamentals and strong
management teams. This process is comprised of real estate market research,
specific property inspection, and securities analysis. Alliance believes that
this process will result in a portfolio that will consist of Real Estate Equity
Securities of companies that own assets in the most desirable markets across the
country, diversified geographically and by property type.
To implement the Fund's research and investment process, Alliance has retained
the consulting services of CB Richard Ellis, Inc. ("CBRE"), a publicly held
company and the largest real estate services company in the United States.
CBRE's business includes real estate brokerage, property and facilities
management, and real estate finance and investment advisory activities. The
universe of property-owning real estate industry firms consists of approximately
135 companies of sufficient size and quality to merit consideration for
investment by the Fund. As consultant to Alliance, CBRE provides access to its
proprietary model, REIT-Score, which analyzes the approximately 22,000
properties owned by these 135 companies. Using proprietary databases and
algorithms, CBRE analyzes local market rent, expenses, occupancy trends, market
specific transaction pricing, demographic and economic trends, and leading
indicators of real estate supply such as building permits. Over 1,000 asset-type
specific geographic markets are analyzed and ranked on a relative scale by CBRE
in compiling its REIT-Score database. The relative attractiveness of these real
estate industry companies is similarly ranked based on the composite rankings of
the properties they own.
Once the universe of real estate industry companies has been distilled through
the market research process, CBRE's local market presence provides the
capability to perform site specific inspections of key properties. This analysis
examines specific location, condition, and sub-market trends. CBRE's use of
locally based real estate professionals provides Alliance with a window on the
operations of the portfolio companies as information can immediately be put in
the context of local
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market events. Only those companies whose specific property portfolios reflect
the promise of their general markets will be considered for investment by the
Fund.
Alliance further screens the universe of real estate industry companies by using
rigorous financial models and by engaging in regular contact with management of
targeted companies. Each management's strategic plan and ability to execute the
plan are determined and analyzed. Alliance makes extensive use of CBRE's network
of industry analysts in order to assess trends in tenant industries. This
information is then used to further evaluate management's strategic plans.
Financial ratio analysis is used to isolate those companies with the ability to
make value-added acquisitions. This information is combined with property market
trends and used to project future earnings potential.
The Fund may invest in short-term investments including: corporate commercial
paper and other short-term commercial obligations, in each case rated or issued
by companies with similar securities outstanding that are rated Prime-1, Aa or
better by Moody's or A-1, AA or better by S&P; obligations (including
certificates of deposit, time deposits, demand deposits and bankers'
acceptances) of banks with securities outstanding that are rated Prime-1, Aa or
better by Moody's or A-1, AA or better by S&P; and obligations issued or
guaranteed by the U.S. Government or its agencies or instrumentalities with
remaining maturities not exceeding 18 months.
The Fund may invest in debt securities rated BBB or higher by S&P or Baa or
higher by Moody's or, if not rated, of equivalent credit quality as determined
by Alliance. The Fund expects that it will not retain a debt security that is
downgraded below BBB or Baa or, if unrated, determined by Alliance to have
undergone similar credit quality deterioration, subsequent to purchase by the
Fund.
The Fund also may:
o invest up to 15% of its net assets in convertible securities;
o enter into forward commitments;
o enter into standby commitment agreements;
o make short sales of securities or maintain a short position but only if at
all times when a short position is open not more than 25% of the Fund's
net assets is held as collateral for such sales;
o invest up to 10% of its net assets in rights or warrants;
o make loans of portfolio securities of up to 25% of its total assets; and
o enter into repurchase agreements of up to seven days' duration.
Because the Fund invests a substantial portion of its assets in the real estate
market, it is subject to many of the same risks involved in direct ownership of
real estate. For example, the value of real estate could decline due to a
variety of factors affecting the real estate market generally, such as
overbuilding, increases in interest rates, or declines in rental rates. In
addition, REITs are dependent on the capability of their managers, may have
limited diversification, and could be significantly affected by changes in tax
laws.
The Fund's investments in mortgage-backed securities have prepayment risk, which
is the risk that mortgage loans will be prepaid when interest rates decline and
the Fund will have to reinvest in securities with lower interest rates. This
risk causes mortgage-backed securities to have significantly greater price and
yield volatility than traditional fixed-income securities. The Fund's
investments in REMICs, CMOs and other types of mortgage-backed securities may be
subject to special risks that are described under "Description of Investment
Practices."
GLOBAL STOCK FUNDS
The Global Stock Funds offer investors the opportunity to participate in the
potential for long-term capital appreciation available from investment in
foreign securities.
Alliance New Europe Fund
Alliance New Europe Fund seeks long-term capital appreciation through investment
primarily in the equity securities of companies based in Europe. The Fund
intends to invest substantially all of its assets in the equity securities of
European companies and has a fundamental policy of normally investing at least
65% of its total assets in these securities. The Fund may invest up to 35% of
its total assets in high-quality U.S. Dollar or foreign currency denominated
fixed-income securities issued or guaranteed by European governmental entities,
or by European or multinational companies or supranational organizations.
The Fund expects that it will invest primarily in the more established and
liquid markets in Europe. However, the Fund may also invest in the
lesser-developed markets in Europe including those countries in Southern and
Eastern Europe, as well as the former communist countries in the Soviet Union.
The Fund does not expect to invest more than 20% of its total assets in these
developing markets under normal circumstances or more than 10% of its total
assets in issuers based in any one of these developing countries.
In managing the Fund, Alliance utilizes a disciplined approach to invest on a
bottom-up basis in those companies exhibiting the best available combination of
sustainable fundamental growth at a reasonable price. Alliance's approach
emphasizes proprietary qualitative and quantitative inputs provided by its
in-house analysts. Internal analysis focuses primarily on large to upper-medium
capitalization stocks (those with a market value of $3 billion and above).
Country and industry exposures are by-products of the stock selection process.
Alliance does not actively manage currency exposures for this Fund but may hedge
underlying exposures back to U.S. Dollars when conditions are perceived to be
extreme.
Stock selection focuses on companies in growth industries that exhibit
above-average growth based on a competitive or sustainable advantage based on
brand, technology, or market share. A stock is typically sold when its relative
fundamentals are no longer as attractive as other investment opportunities
available to the Fund. This may be a function of the stock having
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achieved its fair market value, deterioration in fundamentals relative to
Alliance's expectations, or because the management team loses confidence in
company management.
The Fund diversifies its investments among a number of European countries and
normally invests in companies based in at least three of these countries. The
Fund's investment policies do not require that the Fund concentrate its
investments in any single country. However, these policies also do not prevent
the Fund from concentrating its investments in a single country and in recent
years the Fund has invested more than 25% of its total assets in the United
Kingdom The Fund may invest without limit in any single European country. During
such times, the Fund would be subject to a correspondingly greater risk of loss
due to adverse political or regulatory developments, or an economic downturn,
within that country.
The Fund also may:
o invest up to 20% of its total assets in rights or warrants;
o invest in depositary receipts or other securities convertible into
securities of companies based in European countries, debt securities of
supranational entities denominated in the Euro or the currency of any
European country, debt securities denominated in the Euro of an issuer in
a European country (including supranational issuers), and
"semi-governmental securities";
o purchase and sell forward contracts;
o write covered call or put options and sell and purchase exchange-traded
put and call options, including exchange-traded index options;
o enter into financial futures contracts, including contracts for the
purchase or sale for future delivery of foreign currencies and futures
contracts based on stock indices, and purchase and write options on
futures contracts;
o purchase and write put options on foreign currencies traded on securities
exchanges or boards of trade or over-the-counter;
o enter into standby commitment agreements;
o make secured loans of portfolio securities of up to 30% of its total
assets; and
o enter into forward commitments.
The Fund's investments in foreign countries and smaller countries may have more
risk because they tend to be more volatile than the overall stock market. To the
extent the Fund invests a substantial amount of its assets in a particular
European country, your investment is subject to the risk that market changes or
other events affecting that country may have a more significant effect on the
Fund's net asset value. The Fund's investments in U.S. Dollar- or foreign
currency-denominated fixed-income securities have interest rate and credit risk.
Alliance Worldwide Privatization Fund
Alliance Worldwide Privatization Fund seeks long-term capital appreciation. As a
fundamental policy, the Fund invests at least 65% of its total assets in equity
securities issued by enterprises that are undergoing, or have undergone,
privatization (as described below), although normally significantly more of its
assets will be invested in such securities. The balance of its investments will
include securities of companies believed by Alliance to be beneficiaries of
privatizations. The Fund is designed for investors desiring to take advantage of
investment opportunities, historically inaccessible to U.S. individual
investors, that are created by privatizations of state enterprises in both
established and developing economies. These companies include those in Western
Europe and Scandinavia, Australia, New Zealand, Latin America, Asia, Eastern and
Central Europe and, to a lesser degree, Canada and the United States.
The Fund's investments in enterprises undergoing privatization may comprise
three distinct situations. First, the Fund may invest in the initial offering of
publicly traded equity securities (an "initial equity offering") of a
government- or state-owned or controlled company or enterprise (a "state
enterprise"). Secondly, the Fund may purchase securities of a current or former
state enterprise following its initial equity offering. Finally, the Fund may
make privately negotiated purchases of stock or other equity interests in a
state enterprise that has not yet conducted an initial equity offering. Alliance
believes that substantial potential for capital appreciation exists as
privatizing enterprises rationalize their management structures, operations and
business strategies in order to compete efficiently in a market economy and the
Fund will thus emphasize investments in such enterprises.
Privatization is a process through which the ownership and control of companies
or assets changes in whole or in part from the public sector to the private
sector. Through privatization a government or state divests or transfers all or
a portion of its interest in a state enterprise to some form of private
ownership. Governments and states with established economies, including France,
Great Britain, Germany, and Italy, and those with developing economies,
including Argentina, Mexico, Chile, Indonesia, Malaysia, Poland, and Hungary,
are engaged in privatizations. The Fund will invest in any country believed to
present attractive investment opportunities.
A major premise of the Fund's approach is that the equity securities of
privatized companies offer opportunities for significant capital appreciation.
In particular, because privatizations are integral to a country's economic
restructuring, securities sold in initial equity offerings often are priced
attractively to secure the issuer's successful transition to private sector
ownership. Additionally, these enterprises often dominate their local markets
and typically have the potential for significant managerial and operational
efficiency gains.
The Fund diversifies its investments among a number of countries and normally
invests in issuers based in at least four, and usually considerably more,
countries. The Fund may maintain no more than 15% of its total assets in issuers
in any
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one foreign country, except that the Fund may invest up to 30% of its total
assets in issuers in any one of France, Germany, Great Britain, Italy and Japan.
The Fund may invest all of its assets within a single region of the world.
The Fund may invest up to 35% of its total assets in debt securities and
convertible debt securities. The Fund may invest up to 5% of its net assets in
lower-rated securities. The Fund will not retain a non-convertible security that
is downgraded below C or determined by Alliance to have undergone similar credit
quality deterioration following purchase.
The Fund also may:
o invest up to 20% of its total assets in rights or warrants;
o write covered call and put options, purchase put and call options on
securities of the types in which it is permitted to invest and on
exchange-traded index options, and write uncovered options for
cross-hedging purposes;
o enter into contracts for the purchase or sale for future delivery of
fixed-income securities or foreign currencies, or contracts based on
financial indices, including any index of U.S. Government securities,
foreign government securities, or common stock, and may purchase and write
options on future contracts;
o purchase and write put and call options on foreign currencies for hedging
purposes;
o purchase or sell forward contracts;
o enter into forward commitments;
o enter into standby commitment agreements;
o enter into currency swaps for hedging purposes;
o make short sales of securities or maintain a short position;
o make secured loans of portfolio securities of up to 30% of its total
assets; and
o enter into repurchase agreements for U.S. Government securities.
Investments in non-U.S. companies and smaller companies may have more risk
because they tend to be more volatile than the overall stock market. The Fund's
investments in debt securities and convertible securities have interest risk and
credit risk.
Alliance International Premier Growth Fund
Alliance International Premier Growth Fund seeks long-term capital appreciation
by investing predominately in the equity securities of a limited number of
carefully selected international companies that are judged likely to achieve
superior earnings growth. As a matter of fundamental policy, the Fund will
invest under normal circumstances at least 85% of its total assets in equity
securities. The Fund makes investments based upon their potential for capital
appreciation. Current income is incidental to that objective.
In the main, the Fund's investments will be in comparatively large, high-quality
companies. Normally, about 40 companies will be represented in the Fund's
portfolio, and the 30 most highly regarded of these companies usually will
constitute approximately 70%, and often more, of the Fund's net assets. The Fund
thus differs from more typical international equity mutual funds by focusing on
a relatively small number of intensively researched companies. The Fund is
designed for investors seeking to accumulate capital over time. Because of
market risks inherent in any investment, the selection of securities on the
basis of their appreciation possibilities cannot ensure against possible loss in
value. There is, of course, no assurance that the Fund's investment objective
will be met.
Alliance expects that the market capitalization of the companies represented in
the Fund's portfolio will generally be in excess of $10 billion.
Within the investment framework of the Fund, Alliance's Large Cap Growth Group,
headed by Alfred Harrison, Alliance's Vice Chairman, has responsibility for
managing the Fund's portfolio. As discussed below, in selecting the Fund's
portfolio investments, Alliance's Large Cap Growth Group will follow a
structured, disciplined research and investment process that is essentially
similar to that which it employs in managing the Alliance Premier Growth Fund.
In managing the Fund's assets, Alliance's investment strategy will emphasize
stock selection and investment in the securities of a limited number of issuers.
Alliance depends heavily upon the fundamental analysis and research of its large
global equity research team situated in numerous locations around the world. Its
global equity analysts follow a research universe of approximately 900
companies. As one of the largest multinational investment management firms,
Alliance has access to considerable information concerning the companies in its
research universe, an in-depth understanding of the products, services, markets
and competition of these companies, and a good knowledge of their management.
Research emphasis is placed on the identification of companies whose superior
prospective earnings growth is not fully reflected in current market valuations.
Alliance constantly adds to and deletes from this universe as fundamentals and
valuations change. Alliance's global equity analysts rate companies in three
categories. The performance of each analyst's ratings is an important
determinant of his or her incentive compensation. The equity securities of
"one-rated" companies are expected to significantly outperform the local market
in local currency terms. All equity securities purchased for the Fund's
portfolio will be selected from the universe of approximately 100 "one-rated"
companies. As noted above, the Fund usually invests approximately 70% of its net
assets in approximately 30 of the most highly regarded of these companies. The
Fund's portfolio emphasis upon particular industries or sectors will be a
by-product of the stock selection process rather than the result of assigned
targets or ranges.
The Fund diversifies its investments among at least four, and usually
considerably more, countries. No more than 15% of the Fund's total assets will
be invested in issuers in any one foreign country, except that the Fund may
invest up to 35% of its total assets in each of the United Kingdom and Japan and
up to
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25% of its total assets in issuers in each of Canada, France, Germany, Italy,
The Netherlands and Switzerland. Within these limits, geographic distribution of
the Fund's investments among countries or regions also will be a product of the
stock selection process rather than a predetermined allocation. To the extent
that the Fund concentrates its assets within one region or country, the Fund may
be subject to any special risks associated with that region or country. During
such times, the Fund would be subject to a correspondingly greater risk of loss
due to adverse political or regulatory developments, or an economic downturn,
within that country. While the Fund may engage in currency hedging programs in
periods in which Alliance perceives extreme exchange rate risk, the Fund
normally will not make significant use of currency hedging strategies.
In the management of the Fund's investment portfolio, Alliance will seek to
utilize market volatility judiciously (assuming no change in company
fundamentals) to adjust the Fund's portfolio positions. To the extent consistent
with local market liquidity considerations, the Fund will strive to capitalize
on apparently unwarranted price fluctuations, both to purchase or increase
positions on weakness and to sell or reduce overpriced holdings. Under normal
circumstances, the Fund will remain substantially fully invested in equity
securities and will not take significant cash positions for market timing
purposes. Rather, through "buying into declines" and "selling into strength,"
Alliance seeks superior relative returns over time.
The Fund also may:
o invest up to 20% of its total assets in convertible securities;
o invest up to 20% of its total assets in rights or warrants;
o write covered call and put options, purchase put and call options on
securities of the types in which it is permitted to invest and on
exchange-traded index options, and write uncovered options for cross
hedging purposes;
o enter into contracts for the purchase or sale for future delivery of
fixed-income securities or foreign currencies, or contracts based on
financial indices, including any index of U.S. Government securities,
foreign government securities, or common stock and may purchase and write
options on such future contracts;
o purchase and write put and call options on foreign currencies for hedging
purposes;
o purchase or sell forward contracts;
o enter into standby commitment agreements;
o enter into forward commitments;
o enter into currency swaps for hedging purposes;
o make short sales of securities or maintain short positions of no more than
5% of its net assets as collateral for short sales;
o make secured loans of portfolio securities of up to 30% of its total
assets; and
o enter into repurchase agreements for U.S. Government securities.
Because the Fund invests in a smaller number of securities than many other
equity funds, your investment also has the risk that changes in the value of a
single security may have a more significant effect, either negative or positive,
on the Fund's net asset value.
Alliance Global Small Cap Fund
Alliance Global Small Cap Fund seeks long-term growth of capital through
investment in a global portfolio of the equity securities of selected companies
with relatively small market capitalizations. The Fund's portfolio emphasizes
companies with market capitalizations that would have placed them (when
purchased) in about the smallest 20% by market capitalization of actively traded
U.S. companies, or market capitalizations of up to about $1.5 billion. Because
the Fund applies the U.S. size standard on a global basis, its foreign
investments might rank above the lowest 20%, and, in fact, might in some
countries rank among the largest, by market capitalization in local markets.
Normally, the Fund invests at least 65% of its assets in equity securities of
these smaller capitalization companies. These companies are located in at least
three countries, one of which may be the U.S. The Fund may invest up to 35% of
its total assets in securities of companies whose market capitalizations exceed
the Fund's size standard. The Fund's portfolio securities may be listed on a
U.S. or foreign exchange or traded over-the-counter.
The Fund also may:
o invest up to 20% of its total assets in warrants to purchase equity
securities;
o invest in depositary receipts or other securities representing securities
of companies based in countries other than the U.S.;
o purchase or sell forward foreign currency contracts;
o write covered call options on its securities of up to 15% of its total
assets, and purchase exchange-traded call and put options, including put
options on market indices of up to, for all options, 10% of its total
assets; and
o make secured loans of portfolio securities of up to 30% of its total
assets.
One of the Fund's principal risks is its investments in smaller capitalization
companies. Alliance believes that smaller capitalization companies often have
sales and earnings growth rates exceeding those of larger companies and that
these growth rates tend to cause more rapid share price appreciation. Investing
in smaller capitalization stocks, however, involves greater risk than is
associated with larger, more established companies. For example, smaller
capitalization companies often have limited product lines, markets, or financial
resources. They may be dependent for management on one or a few key persons and
can be more susceptible to losses and risks of bankruptcy. Their securities may
be thinly traded (and therefore have to be sold at a discount from current
market prices or sold in small
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lots over an extended period of time), may be followed by fewer investment
research analysts, and may be subject to wider price swings. For these reasons,
the Fund's investments may have a greater chance of loss than investments in
securities of larger capitalization companies. In addition, transaction costs in
small capitalization stocks may be higher than in those of larger capitalization
companies.
The Fund's investments in international companies and in smaller companies will
be more volatile and may differ substantially from the overall U.S. market.
Alliance International Fund
Alliance International Fund seeks a total return on its assets from long-term
growth of capital and from income primarily through a broad portfolio of
marketable securities of established international companies, companies
participating in foreign economies with prospects for growth, including U.S.
companies having their principal activities and interests outside the U.S. and
foreign government securities. Normally, the Fund will invest more than 80% of
its assets in these types of companies.
The Fund expects to invest primarily in common stocks of established
international companies that Alliance believes have potential for capital
appreciation or income or both, but the Fund is not required to invest
exclusively in common stocks or other equity securities. The Fund may invest in
any other type of investment grade security, including convertible securities,
as well as in warrants, or obligations of the U.S. or foreign governments and
their political subdivisions.
The Fund intends to diversify its investments broadly among countries and
normally invests in at least three foreign countries, although it may invest a
substantial portion of its assets in one or more of these countries. The Fund
may invest in companies, wherever organized, that Alliance judges have their
principal activities and interests outside the U.S. These companies may be
located in developing countries, which involves exposure to economic structures
that are generally less diverse and mature and to political systems that can be
expected to have less stability than those of developed countries. The Fund
currently does not intend to invest more than 10% of its total assets in
companies in, or governments of, developing countries.
The Fund also may:
o purchase or sell forward foreign currency exchange contracts;
o write covered call or put options, sell and purchase U.S. or foreign
exchange-listed put and call options, including exchange-traded index
options;
o enter into financial futures contracts, including contracts for the
purchase or sale for future delivery of foreign currencies and stock index
futures, and purchase and write put and call options on futures contracts
traded on U.S. or foreign exchanges or over-the-counter;
o purchase and write put options on foreign currencies traded on securities
exchanges or boards of trade or over-the-counter;
o make loans of portfolio securities of up to 30% of its total assets; and
o enter into repurchase agreements of up to seven days' duration for up to
10% of the Fund's total assets.
Investments in foreign countries may have more risk because they tend to be more
volatile than the U.S. stock market. To the extent that the Fund invests a
substantial amount of its assets in a particular foreign country, an investment
in the Fund has the risk that market changes or other events affecting that
country may have a more significant effect, either negative or positive, on the
Fund's net asset value.
Alliance Greater China '97 Fund
Alliance Greater China '97 Fund is a non-diversified investment company that
seeks long-term capital appreciation through investment of at least 80% of its
total assets in equity securities issued by Greater China companies. The Fund
expects to invest a significant portion, which may be greater than 50%, of its
assets in equity securities of Hong Kong companies and may invest, from time to
time, all of its assets in Hong Kong companies or companies of either of the
other Greater China countries.
In recent years, China, Hong Kong and Taiwan have each experienced a high level
of real economic growth, although growth slowed during 1999, as expected. This
growth has resulted from advantageous economic conditions, including favorable
demographics, competitive wage rates, and rising per capita income and consumer
demand. Significantly, the growth has also been fueled by an easing by both
China and Taiwan of government restrictions and an increased receptivity to
foreign investment. This expanded, if not yet complete, openness to foreign
investment extends as well to the securities markets of both countries. Hong
Kong's free-market economy has historically included securities markets
completely open to foreign investments. All three countries have regulated stock
exchanges upon which shares of an increasing number of Greater China companies
are traded.
With its population estimated at more than 1.2 billion as a driving force, and
notwithstanding its continuing political rigidity, China's economic growth has
been coupled with significantly reduced government economic intervention and
basic economic structural change. Recent years have seen large increases in
industrial production with a significant decline in the state sector share of
industrial output, and increased involvement of local governmental units and the
private sector in establishing new business enterprises.
With China's growth has come an increasing direct and indirect economic
involvement of all three Greater China countries. For some time, Hong Kong, a
world financial and trade center in its own right, with a large stock exchange
and offices of many of the world's multinational companies, has been the gateway
to trade with and foreign investment in China. With the transfer on
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July 1, 1997 of the sovereignty of Hong Kong from Great Britain to China, not
only the political but the economic ties between China and Hong Kong are
expected to continue to intensify, with the continuation of Hong Kong's economic
system as provided for in the law governing its sovereignty.
Notwithstanding the, at times considerable, political tension between the two
countries, it is generally recognized that substantially increased trade and
investment with China has been generated from Taiwan, in many cases through Hong
Kong. Along with this increased interaction with China, Taiwan is becoming a
regional technological and telecommunication center, while continuing the
process of opening its economy up to foreign investment. Although geographically
limited, Taiwan boasts an economy among the world's 20 largest and its foreign
exchange reserves are the third largest in the world measured in U.S. dollars.
As China's economy continues to expand, it is expected that Taiwan's economic
interaction with China will likewise increase.
Alliance believes that over the long term conditions are favorable for
continuing and expanding economic growth in all three Greater China countries.
It is this potential which the Fund hopes to take advantage of by investing both
in established and new and emerging companies. Appendix A has additional
information about the Greater China countries.
In addition to investing in equity securities of Greater China companies, the
Fund may invest up to 20% of its total assets in (i) debt securities issued or
guaranteed by Greater China companies or by Greater China governments, their
agencies or instrumentalities, and (ii) equity or debt securities issued by
issuers other than Greater China companies. The Fund will invest only in
investment grade securities. The Fund will sell a security that is downgraded
below investment grade or is determined by Alliance to have undergone a similar
credit quality deterioration, the Fund will sell of that security.
The Fund also may:
o invest up to 25% of its net assets in the convertible securities;
o invest up to 20% of its net assets in rights or warrants;
o invest in depositary receipts, instruments of supranational entities
denominated in the currency of any country, securities of multinational
companies and "semi-governmental securities";
o invest up to 25% of its net assets in equity-linked debt securities with
the objective of realizing capital appreciation;
o invest up to 20% of its net assets in loans and other direct debt
securities;
o write covered call and put options, sell or purchase exchange-traded index
options, and write uncovered options for cross-hedging purposes;
o enter into contracts for the purchase or sale for future delivery of
fixed-income securities or foreign currencies, or contracts based on
financial indices, including any index of U.S. Government securities,
securities issued by foreign government entities, or common stock, and may
purchase and write options on future contracts;
o purchase and write put and call options on foreign currencies for hedging
purposes;
o purchase or sell forward contracts;
o enter into interest rate swaps and purchase or sell interest rate caps and
floors;
o enter into forward commitments;
o enter into standby commitment agreements;
o enter into currency swaps for hedging purposes;
o make short sales of securities or maintain a short position, in each case
only if against the box;
o make secured loans of portfolio securities of up to 30% of its total
assets; and
o enter into repurchase agreements for U.S. Government securities.
All or some of the policies and practices listed above may not be available to
the Fund in the Greater China countries and the Fund will utilize these policies
only to the extent permissible.
The Fund's investments in Greater China companies will be significantly more
volatile and may differ significantly from the overall U.S. market. Your
investment also has the risk that market changes or other events affecting the
Greater China countries may have a more significant effect on the Fund's net
asset value. In addition, the Fund is "non-diversified," meaning that it invests
more of its assets in a smaller number of companies than many other
international funds. As a result, changes in the value of a single security may
have a more significant effect, either negative or positive, on the Fund's net
asset value.
Alliance All-Asia Investment Fund
Alliance All-Asia Investment Fund's investment objective is long-term capital
appreciation. The Fund invests at least 65% of its total assets in equity
securities (for the purposes of this investment policy, rights, warrants, and
options to purchase common stocks are not deemed to be equity securities),
preferred stocks and equity-linked debt securities issued by Asian companies.
The Fund may invest up to 35% of its total assets in debt securities issued or
guaranteed by Asian companies or by Asian governments, their agencies or
instrumentalities. The Fund will invest at least 80% of its total assets in
Asian companies and Asian debt securities, but also may invest in securities
issued by non-Asian issuers. The Fund expects to invest, from time to time, a
significant portion, which may be in excess of 50%, of its assets in equity
securities of Japanese companies.
In the past decade, Asian countries generally have experienced a high level of
real economic growth due to political and economic changes, including foreign
investment and reduced government intervention in the economy. Alliance believes
that
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certain conditions exist in Asian countries that create the potential for
continued rapid economic growth. These conditions include favorable demographics
and competitive wage rates, increasing levels of foreign direct investment,
rising per capita incomes and consumer demand, a high savings rate, and numerous
privatization programs. Asian countries also are becoming more industrialized
and are increasing their intra-Asian exports while reducing their dependence on
Western export demand. Alliance believes that these conditions are important to
the long-term economic growth of Asian countries.
As the economies of many Asian countries move through the "emerging market"
stage, thus increasing the supply of goods, services and capital available to
less developed Asian markets and helping to spur economic growth in those
markets, the potential is created for many Asian companies to experience rapid
growth. In addition, many Asian companies that have securities listed on
exchanges in more developed Asian countries will be participants in the rapid
economic growth of the lesser-developed countries. These companies generally
offer the advantages of more experienced management and more developed market
regulation.
As their economies have grown, the securities markets in Asian countries have
also expanded. New exchanges have been created and the number of listed
companies, annual trading volume, and overall market capitalization have
increased significantly. Additionally, new markets continue to open to foreign
investments. The Fund also offers investors the opportunity to access relatively
restricted markets. Alliance believes that investment opportunities in Asian
countries will continue to expand.
The Fund will invest in companies believed to possess rapid growth potential.
Thus, the Fund will invest in smaller, emerging companies, but will also invest
in larger, more established companies in such growing economic sectors as
capital goods, telecommunications, and consumer services.
The Fund will primarily invest in investment grade debt securities, but may
maintain no more than 5% of its net assets in lower-rated securities,
lower-rated loans, and other lower-rated direct debt instruments. The Fund will
not retain a security that is downgraded below C or determined by Alliance to
have undergone similar credit quality deterioration following purchase.
The Fund also may:
o invest up to 25% of its net assets in the convertible securities;
o invest up to 20% of its net assets in rights or warrants;
o invest in depositary receipts, instruments of supranational entities
denominated in the currency of any country, securities of multinational
companies and "semi-governmental securities";
o invest up to 25% of its net assets in equity-linked debt securities with
the objective of realizing capital appreciation;
o invest up to 25% of its net assets in loans and other direct debt
instruments;
o write covered call and put options, sell or purchase exchange-traded index
options, and write uncovered options for cross-hedging purposes;
o enter into contracts for the purchase or sale for future delivery of
fixed-income securities or foreign currencies, or contracts based on
financial indices, including any index of U.S. Government securities,
securities issued by foreign government entities, or common stock and may
purchase and write options on future contracts;
o purchase and write put and call options on foreign currencies for hedging
purposes;
o purchase or sell forward contracts;
o enter into interest rate swaps and purchase or sell interest rate caps and
floors;
o enter into forward commitments;
o enter into standby commitment agreements;
o enter into currency swaps for hedging purposes;
o make short sales of securities or maintain a short position, in each case
only if against the box;
o make secured loans of portfolio securities of up to 30% of its total
assets; and
o enter into repurchase agreements for U.S. Government securities.
The Fund's investments in Asian and Pacific region countries will be
significantly more volatile and may differ significantly from the overall U.S.
market. To the extent the Fund invests a substantial amount of its assets in
Japanese companies, your investment has the risk that market changes or other
events affecting that country may have a more significant effect on the Fund's
net asset value. The Fund's investments in debt securities have interest rate
and credit risk.
DESCRIPTION OF ADDITIONAL INVESTMENT PRACTICES
This section describes the Funds' investment practices and associated risks.
Unless otherwise noted, a Fund's use of any of these practices was specified in
the previous section.
Asset-Backed Securities. Asset-backed securities (unrelated to first mortgage
loans) represent fractional interests in pools of leases, retail installment
loans, revolving credit receivables, and other payment obligations, both secured
and unsecured. These assets are generally held by a trust and payments of
principal and interest or interest only are passed through monthly or quarterly
to certificate holders and may be guaranteed up to certain amounts by letters of
credit issued by a financial institution affiliated or unaffiliated with the
trustee or originator of the trust.
Like mortgages underlying mortgage-backed securities, underlying automobile
sales contracts or credit card receivables are subject to prepayment, which may
reduce the overall return to certificate holders. Certificate holders may also
experience delays in payment on the certificates if the full amounts due on
underlying sales contracts or receivables are not realized by the
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trust because of unanticipated legal or administrative costs of enforcing the
contracts or because of depreciation or damage to the collateral (usually
automobiles) securing certain contracts, or other factors.
Convertible Securities. Prior to conversion, convertible securities have the
same general characteristics as non-convertible debt securities, which generally
provide a stable stream of income with yields that are generally higher than
those of equity securities of the same or similar issuers. The price of a
convertible security will normally vary with changes in the price of the
underlying equity security, although the higher yield tends to make the
convertible security less volatile than the underlying equity security. As with
debt securities, the market value of convertible securities tends to decrease as
interest rates rise and increase as interest rates decline. While convertible
securities generally offer lower interest or dividend yields than
non-convertible debt securities of similar quality, they offer investors the
potential to benefit from increases in the market price of the underlying common
stock. Convertible debt securities that are rated Baa or lower by Moody's or BBB
or lower by S&P, Duff & Phelps or Fitch and comparable unrated securities as
determined by Alliance may share some or all of the risks of non-convertible
debt securities with those ratings.
Currency Swaps. Currency swaps involve the individually negotiated exchange by a
Fund with another party of a series of payments in specified currencies. A
currency swap may involve the delivery at the end of the exchange period of a
substantial amount of one designated currency in exchange for the other
designated currency. Therefore, the entire principal value of a currency swap is
subject to the risk that the other party to the swap will default on its
contractual delivery obligations. A Fund will not enter into any currency swap
unless the credit quality of the unsecured senior debt or the claims-paying
ability of the counterparty is rated in the highest rating category of at least
one nationally recognized rating organization at the time of entering into the
transaction. If there is a default by the counterparty to the transaction, the
Fund will have contractual remedies under the transaction agreements.
Depositary Receipts and Securities of Supranational Entities. Depositary
receipts may not necessarily be denominated in the same currency as the
underlying securities into which they may be converted. In addition, the issuers
of the stock of unsponsored depositary receipts are not obligated to disclose
material information in the United States and, therefore, there may not be a
correlation between such information and the market value of the depositary
receipts. ADRs are depositary receipts typically issued by an U.S. bank or trust
company that evidence ownership of underlying securities issued by a foreign
corporation. GDRs and other types of depositary receipts are typically issued by
foreign banks or trust companies and evidence ownership of underlying securities
issued by either a foreign or an U.S. company. Generally, depositary receipts in
registered form are designed for use in the U.S. securities markets, and
depositary receipts in bearer form are designed for use in foreign securities
markets. For purposes of determining the country of issuance, investments in
depositary receipts of either type are deemed to be investments in the
underlying securities, except with respect to Alliance Growth Fund, where
investments in ADRs are deemed to be investments in securities issued by U.S.
issuers and those in GDRs and other types of depositary receipts are deemed to
be investments in the underlying securities.
A supranational entity is an entity designated or supported by the national
government of one or more countries to promote economic reconstruction or
development. Examples of supranational entities include, among others, the World
Bank (International Bank for Reconstruction and Development) and the European
Investment Bank. A European Currency Unit is a basket of specified amounts of
the currencies of the member states of the European Economic Community.
"Semi-governmental securities" are securities issued by entities owned by either
a national, state or equivalent government or are obligations of one of such
government jurisdictions that are not backed by its full faith and credit and
general taxing powers.
Equity-Linked Debt Securities. Equity-linked debt securities are securities on
which the issuer is obligated to pay interest and/or principal that is linked to
the performance of a specified index of equity securities. The interest or
principal payments may be significantly greater or less than payment obligations
for other types of debt securities. Adverse changes in equity securities indices
and other adverse changes in the securities markets may reduce payments made
under, and/or the principal of, equity-linked debt securities held by a Fund. As
with any debt securities, the values of equity-linked debt securities will
generally vary inversely with changes in interest rates. A Fund's ability to
dispose of equity-linked debt securities will depend on the availability of
liquid markets for such securities. Investment in equity-linked debt securities
may be considered to be speculative.
Forward Commitments. Forward commitments for the purchase or sale of securities
may include purchases on a "when-issued" basis or purchases or sales on a
"delayed delivery" basis. In some cases, a forward commitment may be conditioned
upon the occurrence of a subsequent event, such as approval and consummation of
a merger, corporate reorganization or debt restructuring (i.e., a "when, as and
if issued" trade).
When forward commitment transactions are negotiated, the price is fixed at the
time the commitment is made, but delivery and payment for the securities take
place at a later date. Normally, the settlement date occurs within two months
after the transaction, but a Fund may negotiate settlements beyond two months.
Securities purchased or sold under a forward commitment are subject to market
fluctuations and no interest or dividends accrue to the purchaser prior to the
settlement date.
The use of forward commitments enables a Fund to protect against anticipated
changes in interest rates and prices. For instance, in periods of rising
interest rates and falling bond prices, a Fund might sell securities in its
portfolio on a forward commitment basis to limit its exposure to falling prices.
In periods of falling interest rates and rising bond prices, a Fund might sell a
security in its portfolio and purchase the same or a
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similar security on a when-issued or forward commitment basis to obtain the
benefit of currently higher cash yields. If, however, Alliance were to forecast
incorrectly the direction of interest rate movements, a Fund might be required
to complete such when-issued or forward transactions at prices inferior to the
then current market values. When-issued securities and forward commitments may
be sold prior to the settlement date, but a Fund enters into when-issued and
forward commitments only with the intention of actually receiving securities or
delivering them, as the case may be. If a Fund chooses to dispose of the right
to acquire a when-issued security prior to its acquisition or dispose of its
right to deliver or receive against a forward commitment, it may incur a gain or
loss. Any significant commitment of Fund assets to the purchase of securities on
a "when, as and if issued" basis may increase the volatility of the Fund's net
asset value. No forward commitments will be made by Alliance Health Care Fund,
Alliance Utility Income Fund, Alliance Real Estate Investment Fund, Alliance New
Europe Fund, Alliance Worldwide Privatization Fund, Alliance International
Premier Growth Fund, Alliance Greater China '97 Fund or Alliance All-Asia
Investment Fund if, as a result, the Fund's aggregate commitments under the
transactions would be more than 30% of its total assets. In the event the other
party to a forward commitment transaction were to default, a Fund might lose the
opportunity to invest money at favorable rates or to dispose of securities at
favorable prices.
Forward Foreign Currency Exchange Contracts. A Fund may purchase or sell forward
foreign currency exchange contracts to minimize the risk of adverse changes in
the relationship between the U.S. Dollar and other currencies. A forward
contract is an obligation to purchase or sell a specific currency for an agreed
price at a future date, and is individually negotiated and privately traded.
A Fund may enter into a forward contract, for example, when it enters into a
contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. Dollar price of the security
("transaction hedge"). A Fund will not engage in transaction hedges with respect
to the currency of a particular country to an extent greater than the aggregate
amount of the Fund's transactions in that currency. When a Fund believes that a
foreign currency may suffer a substantial decline against the U.S. Dollar, it
may enter into a forward sale contract to sell an amount of that foreign
currency approximating the value of some or all of the Fund's portfolio
securities denominated in such foreign currency, or when the Fund believes that
the U.S. Dollar may suffer a substantial decline against a foreign currency, it
may enter into a forward purchase contract to buy that foreign currency for a
fixed dollar amount ("position hedge"). A Fund will not position hedge with
respect to a particular currency to an extent greater than the aggregate market
value (at the time of making such sale) of the securities held in its portfolio
denominated or quoted in that currency. Instead of entering into a position
hedge, a Fund may, in the alternative, enter into a forward contract to sell a
different foreign currency for a fixed U.S. Dollar amount where the Fund
believes that the U.S. Dollar value of the currency to be sold pursuant to the
forward contract will fall whenever there is a decline in the U.S. Dollar value
of the currency in which portfolio securities of the Fund are denominated
("cross-hedge"). Unanticipated changes in currency prices may result in poorer
overall performance for the Fund than if it had not entered into such forward
contracts.
Hedging against a decline in the value of a currency does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Such transactions also preclude the
opportunity for gain if the value of the hedged currency should rise. Moreover,
it may not be possible for a Fund to hedge against a devaluation that is so
generally anticipated that the Fund is not able to contract to sell the currency
at a price above the devaluation level it anticipates. Alliance New Europe Fund,
Alliance Global Small Cap Fund and Alliance International Fund will not enter
into a forward contract with a term of more than one year or if, as a result,
more than 50% of its total assets would be committed to such contracts. Alliance
New Europe Fund's, Alliance Global Small Cap Fund's and Alliance International
Fund's investments in forward contracts will be limited to hedging involving
either specific transactions or portfolio positions. Alliance Growth Fund also
may purchase and sell foreign currency on a spot basis.
Illiquid Securities. The Funds will limit their investments in illiquid
securities to no more than 15% of their net assets, except the limit is 10% for
Alliance Health Care Fund, Alliance International Fund, Alliance Technology
Fund, Alliance Quasar Fund, Alliance New Europe Fund, and Alliance Global Small
Cap Fund and 5% for The Alliance Fund and Alliance Growth Fund. Illiquid
securities generally include: (i) direct placements or other securities that are
subject to legal or contractual restrictions on resale or for which there is no
readily available market (e.g., when trading in the security is suspended or, in
the case of unlisted securities, when market makers do not exist or will not
entertain bids or offers), including many individually negotiated currency swaps
and any assets used to cover currency swaps and most privately negotiated
investments in state enterprises that have not yet conducted an initial equity
offering, (ii) over-the-counter options and assets used to cover
over-the-counter options, and (iii) repurchase agreements not terminable within
seven days.
Because of the absence of a trading market for illiquid securities, a Fund may
not be able to realize their full value upon sale. Alliance will monitor the
liquidity of a Fund's investments in illiquid securities. Except with respect to
Alliance Quasar Fund, Rule 144A securities will not be treated as "illiquid" for
purposes of this limit on investments.
A Fund that invests in securities for which there is no ready market may not be
able to readily sell such securities. Such securities are unlike securities that
are traded in the open market and can be expected to be sold immediately if the
market is adequate. The sale price of illiquid securities may be lower or higher
than Alliance's most recent estimate of their fair value. Generally, less public
information is available about the issuers of such securities than about
companies whose securities are traded on an exchange. To the extent that these
securities are foreign securities, there is no law in many of the
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countries in which a Fund may invest similar to the Securities Act requiring an
issuer to register the sale of securities with a governmental agency or imposing
legal restrictions on resales of securities, either as to length of time the
securities may be held or manner of resale. However, there may be contractual
restrictions on resales of non-publicly traded foreign securities.
Interest Rate Transactions (Swaps, Caps, and Floors). Each Fund that may enter
into interest rate transactions expects to do so primarily to preserve a return
or spread on a particular investment or portion of its portfolio or to protect
against any increase in the price of securities the Fund anticipates purchasing
at a later date. The Funds do not intend to use these transactions in a
speculative manner.
Interest rate swaps involve the exchange by a Fund with another party of their
respective commitments to pay or receive interest (e.g., an exchange of floating
rate payments for fixed rate payments). Interest rate swaps are entered on a net
basis (i.e., the two payment streams are netted out, with the Fund receiving or
paying, as the case may be, only the net amount of the two payments). With
respect to Alliance Utility Income Fund, Alliance Greater China '97 Fund and
Alliance All-Asia Investment Fund, the exchange commitments can involve payments
in the same currency or in different currencies. The purchase of an interest
rate cap entitles the purchaser, to the extent that a specified index exceeds a
predetermined interest rate, to receive payments of interest on a
contractually-based principal amount from the party selling such interest rate
cap. The purchase of an interest rate floor entitles the purchaser, to the
extent that a specified index falls below a predetermined interest rate, to
receive payments of interest on an agreed principal amount from the party
selling the interest rate floor.
A Fund may enter into interest rate swaps, caps, and floors on either an
asset-based or liability-based basis, depending upon whether it is hedging its
assets or liabilities. A Fund will not enter into an interest rate swap, cap, or
floor transaction unless the unsecured senior debt or the claims-paying ability
of the other party is rated in the highest rating category of at least one
nationally recognized rating organization. Alliance will monitor the
creditworthiness of counterparties on an ongoing basis. The swap market has
grown substantially in recent years, with a large number of banks and investment
banking firms acting both as principals and as agents utilizing standardized
swap documentation. As a result, the swap market has become relatively liquid.
Caps and floors are more recent innovations for which standardized documentation
has not yet been developed and, accordingly, they are less liquid than swaps.
The use of interest rate transactions is a highly specialized activity that
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. If Alliance were to incorrectly
forecast market values, interest rates and other applicable factors, the
investment performance of a Fund would be adversely affected by the use of these
investment techniques. Moreover, even if Alliance is correct in its forecasts,
there is a risk that the transaction position may correlate imperfectly with the
price of the asset or liability being hedged. There is no limit on the amount of
interest rate transactions that may be entered into by a Fund that is permitted
to enter into such transactions. These transactions do not involve the delivery
of securities or other underlying assets or principal. Accordingly, the risk of
loss with respect to interest rate transactions is limited to the net amount of
interest payments that a Fund is contractually obligated to make. If the
counterparty to an interest rate transaction defaults, a Fund's risk of loss
consists of the net amount of interest payments that the Fund contractually is
entitled to receive.
Loans and Other Direct Debt Instruments. Loans and other direct debt instruments
are interests in amounts owed by a corporate, governmental or other borrower to
another party. They may represent amounts owed to lenders or lending syndicates
(loans and loan participations), to suppliers of goods or services (trade claims
or other receivables), or to other creditors. Direct debt instruments involve
the risk of loss in case of default or insolvency of the borrower and may offer
less legal protection to a Fund in the event of fraud or misrepresentation than
debt securities. In addition, loan participations involve a risk of insolvency
of the lending bank or other financial intermediary. Direct debt instruments may
also include standby financing commitments that obligate a Fund to supply
additional cash to the borrower on demand. Loans and other direct debt
instruments are generally illiquid and may be transferred only through
individually negotiated private transactions.
Purchasers of loans and other forms of direct indebtedness depend primarily upon
the creditworthiness of the borrower for payment of principal and interest.
Direct debt instruments may not be rated by any nationally recognized rating
service. Failure to receive scheduled interest or principal payments on these
types of investments could adversely affect a Fund's net asset value and yield.
Loans that are fully secured offer a Fund more protection than unsecured loans
in the event of non-payment of scheduled interest or principal. However, there
is no assurance that the liquidation of collateral from a secured loan would
satisfy the borrower's obligation, or that the collateral can be liquidated.
Making loans to borrowers whose creditworthiness is poor may involve substantial
risks and may be highly speculative.
Borrowers that are in bankruptcy or restructuring may never pay off their
indebtedness, or may pay only a small fraction of the amount owed. Direct
indebtedness of government issuers will also involve a risk that the
governmental entities responsible for the repayment of the debt may be unable,
or unwilling, to pay interest and repay principal when due.
Investments in loans through direct assignment of a financial institution's
interests with respect to a loan may involve additional risks to a Fund. For
example, if a loan is foreclosed, a Fund could become part owner of any
collateral and would bear the costs and liabilities associated with owning and
disposing of the collateral. Direct debt instruments may also involve a risk of
insolvency of the lending bank or other intermediary.
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A loan is often administered by a bank or other financial institution that acts
as agent for all holders. The agent administers the terms of the loan, as
specified on the loan agreement. Unless, under the terms of the loan or other
indebtedness, a Fund has direct recourse against the borrower, it may have to
rely on the agent to apply appropriate credit remedies against a borrower. If
assets held by the agent for the benefit of a Fund were determined to be subject
to the claims of the agent's general creditors, the Fund might incur certain
costs and delays in realizing payment on the loan or loan participation and
could suffer a loss of principal or interest.
Direct indebtedness purchased by a Fund may include letters of credit, revolving
credit facilities, or other standby financing commitments obligating a Fund to
pay additional cash on demand. These commitments may have the effect of
requiring a Fund to increase its investment in a borrower at a time when it
would not otherwise have done so, even if the borrower's condition makes it
unlikely that the amount will ever be repaid.
Loans of Portfolio Securities. The risk in lending portfolio securities, as with
other extensions of credit, consists of the possible loss of rights in the
collateral should the borrower fail financially. In determining whether to lend
securities to a particular borrower, Alliance will consider all relevant facts
and circumstances, including the creditworthiness of the borrower. While
securities are on loan, the borrower will pay the Fund any income from the
securities. The Fund may invest any cash collateral in portfolio securities and
earn additional income or receive an agreed-upon amount of income from a
borrower who has delivered equivalent collateral. Each Fund will have the right
to regain record ownership of loaned securities or equivalent securities in
order to exercise ownership rights such as voting rights, subscription rights
and rights to dividends, interest, or distributions. A Fund may pay reasonable
finders', administrative, and custodial fees in connection with a loan.
Mortgage-Backed Securities and Associated Risks. Interest and principal payments
(including prepayments) on the mortgages underlying mortgage-backed securities
are passed through to the holders of the securities. As a result of the
pass-through of prepayments of principal on the underlying securities,
mortgage-backed securities are often subject to more rapid prepayment of
principal than their stated maturity would indicate. Prepayments occur when the
mortgagor on a mortgage prepays the remaining principal before the mortgage's
scheduled maturity date. Because the prepayment characteristics of the
underlying mortgages vary, it is impossible to predict accurately the realized
yield or average life of a particular issue of pass-through certificates.
Prepayments are important because of their effect on the yield and price of the
mortgage-backed securities. During periods of declining interest rates,
prepayments can be expected to accelerate and a Fund that invests in these
securities would be required to reinvest the proceeds at the lower interest
rates then available. Conversely, during periods of rising interest rates, a
reduction in prepayments may increase the effective maturity of the securities,
subjecting them to a greater risk of decline in market value in response to
rising interest rates. In addition, prepayments of mortgages underlying
securities purchased at a premium could result in capital losses.
Mortgage-Backed Securities include mortgage pass-through certificates and
multiple-class pass-through securities, such as REMIC pass-through certificates,
CMOs and stripped mortgage-backed securities ("SMBS"), and other types of
Mortgage-Backed Securities that may be available in the future.
Guaranteed Mortgage Pass-Through Securities. Alliance Real Estate Investment
Fund may invest in guaranteed mortgage pass-through securities which represent
participation interests in pools of residential mortgage loans and are issued by
U.S. governmental or private lenders and guaranteed by the U.S. Government or
one of its agencies or instrumentalities, including but not limited to the
Government National Mortgage Association ("Ginnie Mae"), the Federal National
Mortgage Association ("Fannie Mae") and the Federal Home Loan Mortgage
Corporation ("Freddie Mac"). Ginnie Mae certificates are guaranteed by the full
faith and credit of the United States Government for timely payment of principal
and interest on the certificates. Fannie Mae certificates are guaranteed by
Fannie Mae, a federally chartered and privately-owned corporation, for full and
timely payment of principal and interest on the certificates. Freddie Mac
certificates are guaranteed by Freddie Mac, a corporate instrumentality of the
United States Government, for timely payment of interest and the ultimate
collection of all principal of the related mortgage loans.
Multiple-Class Pass-Through Securities and Collateralized Mortgage Obligations.
Mortgage-Backed Securities also include CMOs and REMIC pass-through or
participation certificates that may be issued by, among others, U.S. Government
agencies and instrumentalities as well as private lenders. CMOs and REMIC
certificates are issued in multiple classes and the principal of and interest on
the mortgage assets may be allocated among the several classes of CMOs or REMIC
certificates in various ways. Each class of CMOs or REMIC certificates, often
referred to as a "tranche," is issued at a specific adjustable or fixed interest
rate and must be fully retired no later than its final distribution date.
Generally, interest is paid or accrues on all classes of CMOs or REMIC
certificates on a monthly basis. Alliance Real Estate Investment Fund will not
invest in the lowest tranche of CMOs and REMIC certificates.
Typically, CMOs are collateralized by Ginnie Mae or Freddie Mac certificates but
also may be collateralized by other mortgage assets such as whole loans or
private mortgage pass-through securities. Debt service on CMOs is provided from
payments of principal and interest on collateral of mortgaged assets and any
reinvestment income.
A REMIC is a CMO that qualifies for special tax treatment under the Code and
invests in certain mortgages primarily secured by interests in real property and
other permitted investments. Investors may purchase "regular" and "residual"
interest shares of beneficial interest in REMIC trusts, although Alliance Real
Estate Investment Fund does not intend to invest in residual interests.
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Options on Securities. An option gives the purchaser of the option, upon payment
of a premium, the right to deliver to (in the case of a put) or receive from (in
the case of a call) the writer a specified amount of a security on or before a
fixed date at a predetermined price. A call option written by a Fund is
"covered" if the Fund owns the underlying security, has an absolute and
immediate right to acquire that security upon conversion or exchange of another
security it holds, or holds a call option on the underlying security with an
exercise price equal to or less than that of the call option it has written. A
put option written by a Fund is covered if the Fund holds a put option on the
underlying securities with an exercise price equal to or greater than that of
the put option it has written.
A call option is for cross-hedging purposes if a Fund does not own the
underlying security, and is designed to provide a hedge against a decline in
value in another security that the Fund owns or has the right to acquire. A Fund
would write a call option for cross-hedging purposes, instead of writing a
covered call option, when the premium to be received from the cross-hedge
transaction would exceed that which would be received from writing a covered
call option, while at the same time achieving the desired hedge.
In purchasing an option, a Fund would be in a position to realize a gain if,
during the option period, the price of the underlying security increased (in the
case of a call) or decreased (in the case of a put) by an amount in excess of
the premium paid; otherwise the Fund would experience a loss equal to the
premium paid for the option.
If an option written by a Fund were exercised, the Fund would be obligated to
purchase (in the case of a put) or sell (in the case of a call) the underlying
security at the exercise price. The risk involved in writing an option is that,
if the option were exercised, the underlying security would then be purchased or
sold by the Fund at a disadvantageous price. Entering into a closing transaction
(i.e., by disposing of the option prior to its exercise) could reduce these
risks. A Fund retains the premium received from writing a put or call option
whether or not the option is exercised. The writing of covered call options
could result in increases in a Fund's portfolio turnover rate, especially during
periods when market prices of the underlying securities appreciate.
Alliance Technology Fund and Alliance Global Small Cap Fund will not write a
call option if the premium to be received by the Fund would not produce an
annualized return of at least 15% of the then current market value of the
securities subject to the option (without giving effect to commissions, stock
transfer taxes and other expenses that are deducted from premium receipts).
Options purchased or written by a Fund in negotiated transactions are illiquid
and it may not be possible for the Fund to effect a closing transaction at an
advantageous time.
Options on Securities Indices. An option on a securities index is similar to an
option on a security except that, rather than the right to take or make delivery
of a security at a specified price, an option on a securities index gives the
holder the right to receive, upon exercise of the option, an amount of cash if
the closing level of the chosen index is greater than (in the case of a call) or
less than (in the case of a put) the exercise price of the option.
Options on Foreign Currencies. As in the case of other kinds of options, the
writing of an option on a foreign currency constitutes only a partial hedge, up
to the amount of the premium received, and a Fund could be required to purchase
or sell foreign currencies at disadvantageous exchange rates and incur losses.
The purchase of an option on a foreign currency may constitute an effective
hedge against fluctuations in exchange rates although, in the event of rate
movements adverse to a Fund's position, it may forfeit the entire amount of the
premium plus related transaction costs. For Funds that may invest in options on
foreign currencies, see the Fund's SAI for further discussion of the use, risks,
and costs of options on foreign currencies.
Futures Contracts and Options on Futures Contracts. A "sale" of a futures
contract means the acquisition of a contractual obligation to deliver the
securities or foreign currencies or other commodity called for by the contract
at a specified price on a specified date. A "purchase" of a futures contract
means the incurring of an obligation to acquire the securities, foreign
currencies or other commodity called for by the contract at a specified price on
a specified date. The purchaser of a futures contract on an index agrees to take
or make delivery of an amount of cash equal to the difference between a
specified dollar multiple of the value of the index on the expiration date of
the contract ("current contract value") and the price at which the contract was
originally struck. No physical delivery of the securities underlying the index
is made.
A Fund will purchase options on futures contracts written or purchased by a Fund
that are traded on U.S. or foreign exchanges or over-the-counter. These
investment techniques will be used only to hedge against anticipated future
changes in market conditions and interest or exchange rates which otherwise
might either adversely affect the value of the Fund's portfolio securities or
adversely affect the prices of securities which the Fund intends to purchase at
a later date.
No Fund will enter into any futures contracts or options on futures contracts if
immediately thereafter the market values of the outstanding futures contracts of
the Fund and the currencies and futures contracts subject to outstanding options
written by the Fund would exceed 50% of its total assets, or in the case of
Alliance International Premier Growth Fund 100% of its total assets. Alliance
Premier Growth Fund and Alliance Growth and Income Fund may not purchase or sell
a stock index future if immediately thereafter more than 30% of its total assets
would be hedged by stock index futures. Alliance Premier Growth Fund and
Alliance Growth and Income Fund may not purchase or sell a stock index future
if, immediately thereafter, the sum of the amount of margin deposits on the
Fund's existing futures positions would exceed 5% of the market value of the
Fund's total assets.
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Repurchase Agreements. A repurchase agreement arises when a buyer purchases a
security and simultaneously agrees to resell it to the vendor at an agreed-upon
future date, normally a day or a few days later. The resale price is greater
than the purchase price, reflecting an agreed-upon interest rate for the period
the buyer's money is invested in the security. Such agreements permit a Fund to
keep all of its assets at work while retaining "overnight" flexibility in
pursuit of investments of a longer-term nature. If a vendor defaults on its
repurchase obligation, a Fund would suffer a loss to the extent that the
proceeds from the sale of the collateral were less than the repurchase price. If
a vendor goes bankrupt, a Fund might be delayed in, or prevented from, selling
the collateral for its benefit. Alliance monitors the creditworthiness of the
vendors with which the Fund enters into repurchase agreements.
Rights and Warrants. A Fund will invest in rights or warrants only if Alliance
deems the underlying equity securities themselves appropriate for inclusion in
the Fund's portfolio. Rights and warrants entitle the holder to buy equity
securities at a specific price for a specific period of time. Rights are similar
to warrants except that they have a substantially shorter duration. Rights and
warrants may be considered more speculative than certain other types of
investments in that they do not entitle a holder to dividends or voting rights
with respect to the underlying securities nor do they represent any rights in
the assets of the issuing company. The value of a right or warrant does not
necessarily change with the value of the underlying security, although the value
of a right or warrant may decline because of a decrease in the value of the
underlying security, the passage of time or a change in perception as to the
potential of the underlying security, or any combination of these factors. If
the market price of the underlying security is below the exercise price of the
warrant on the expiration date, the warrant will expire worthless. Moreover, a
right or warrant ceases to have value if it is not exercised prior to the
expiration date.
Short Sales. A short sale is effected by selling a security that a Fund does not
own, or, if the Fund does own such security, it is not to be delivered upon
consummation of the sale. A short sale is "against the box" to the extent that a
Fund contemporaneously owns or has the right to obtain securities identical to
those sold short without payment. Alliance Utility Income Fund, Alliance
Worldwide Privatization Fund, Alliance Greater China '97 Fund and Alliance
All-Asia Investment Fund, each may make short sales of securities or maintain
short positions only for the purpose of deferring realization of gain or loss
for U.S. federal income tax purposes, provided that at all times when a short
position is open the Fund owns an equal amount of securities of the same issue
as, and equal in amount to, the securities sold short. In addition, each of
those Funds may not make a short sale if as a result more than 10% of the Fund's
net assets would be held as collateral for short sales, except that Alliance
Real Estate Investment Fund, Alliance Greater China '97 Fund and Alliance
All-Asia Investment Fund may not make a short sale if as a result more than 25%
of the Fund's net assets would be held as collateral for short sales. If the
price of the security sold short increases between the time of the short sale
and the time a Fund replaces the borrowed security, the Fund will incur a loss;
conversely, if the price declines, the Fund will realize a capital gain.
Standby Commitment Agreements. Standby commitment agreements commit a Fund, for
a stated period of time, to purchase a stated amount of a security that may be
issued and sold to the Fund at the option of the issuer. The price and coupon of
the security are fixed at the time of the commitment. At the time of entering
into the agreement, the Fund is paid a commitment fee, regardless of whether the
security ultimately is issued, typically equal to approximately 0.5% of the
aggregate purchase price of the security the Fund has committed to purchase. A
Fund will enter into such agreements only for the purpose of investing in the
security underlying the commitment at a yield and price considered advantageous
to the Fund and unavailable on a firm commitment basis. Investments in standby
commitments will be limited so that the aggregate purchase price of the
securities subject to the commitments will not exceed 25% with respect to
Alliance Real Estate Investment Fund and Alliance New Europe Fund, 50% with
respect to Alliance Worldwide Privatization Fund, Alliance International Premier
Growth Fund, Alliance Greater China '97 Fund and Alliance All-Asia Investment
Fund and 20% with respect to Alliance Utility Income Fund, of the Fund's assets
at the time of making the commitment.
There is no guarantee that a security subject to a standby commitment will be
issued and the value of the security, if issued, on the delivery date may be
more or less than its purchase price. Since the issuance of the security
underlying the commitment is at the option of the issuer, a Fund will bear the
risk of capital loss in the event the value of the security declines and may not
benefit from an appreciation in the value of the security during the commitment
period if the issuer decides not to issue and sell the security to the Fund.
Zero-Coupon and Payment-in-Kind Bonds. Zero-coupon bonds are issued at a
significant discount from their principal amount in lieu of paying interest
periodically. Payment-in-kind bonds allow the issuer to make current interest
payments on the bonds in additional bonds. Because zero-coupon bonds and
payment-in-kind bonds do not pay current interest in cash, their value is
generally subject to greater fluctuation in response to changes in market
interest rates than bonds that pay interest in cash currently. Both zero-coupon
and payment-in-kind bonds allow an issuer to avoid the need to generate cash to
meet current interest payments. These bonds may involve greater credit risks
than bonds paying interest currently. Although these bonds do not pay current
interest in cash, a Fund is nonetheless required to accrue interest income on
such investments and to distribute such amounts at least annually to
shareholders. Thus, a Fund could be required at times to liquidate other
investments in order to satisfy its dividend requirements.
Future Developments. A Fund may, following written notice to its shareholders,
take advantage of other investment practices that are not currently contemplated
for use by the Fund, or are not available but may yet be developed, to the
extent such investment practices are consistent with the Fund's investment
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objective and legally permissible for the Fund. Such investment practices, if
they arise, may involve risks that exceed those involved in the activities
described above.
General. The successful use of the investment practices described above draws
upon Alliance's special skills and experience and usually depends on Alliance's
ability to forecast price movements, interest rates, or currency exchange rate
movements correctly. Should interest rates, prices or exchange rates move
unexpectedly, a Fund may not achieve the anticipated benefits of the
transactions or may realize losses and thus be in a worse position than if such
strategies had not been used. Unlike many exchange-traded futures contracts and
options on futures contracts, there are no daily price fluctuation limits for
certain options and forward contracts, and adverse market movements could
therefore continue to an unlimited extent over a period of time. In addition,
the correlation between movements in the prices of futures contracts, options
and forward contracts and movements in the prices of the securities and
currencies hedged or used for cover will not be perfect and could produce
unanticipated losses.
A Fund's ability to dispose of its position in futures contracts, options, and
forward contracts depends on the availability of liquid markets in such
instruments. Markets in options and futures with respect to a number of types of
securities and currencies are relatively new and still developing, and there is
no public market for forward contracts. It is impossible to predict the amount
of trading interest that may exist in various types of futures contracts,
options, and forward contracts. If a secondary market does not exist for an
option purchased or written by a Fund, it might not be possible to effect a
closing transaction in the option (i.e., dispose of the option), with the result
that (i) an option purchased by the Fund would have to be exercised in order for
the Fund to realize any profit and (ii) the Fund may not be able to sell
currencies or portfolio securities covering an option written by the Fund until
the option expires or it delivers the underlying security, futures contract or
currency upon exercise. Therefore, no assurance can be given that the Funds will
be able to utilize these instruments effectively. In addition, a Fund's ability
to engage in options and futures transactions may be limited by tax
considerations and the use of certain hedging techniques may adversely impact
the characterization of income to a Fund for U.S. federal income tax purposes.
Portfolio Turnover. The portfolio turnover rate for each Fund is included in the
Financial Highlights section. The Funds are actively managed and, in some cases
in response to market conditions, a Fund's portfolio turnover may exceed 100%. A
higher rate of portfolio turnover increases brokerage and other expenses, which
must be borne by the Fund and its shareholders. High portfolio turnover also may
result in the realization of substantial net short-term capital gains, which,
when distributed, are taxable to shareholders.
Temporary Defensive Position. For temporary defensive purposes, each Fund may
reduce its position in equity securities and invest in, without limit, certain
types of short-term, liquid, high grade or high-quality (depending on the Fund)
debt securities. These securities may include U.S. Government securities,
qualifying bank deposits, money market instruments, prime commercial paper and
other types of short-term debt securities including notes and bonds. For Funds
that may invest in foreign countries, such securities also may include
short-term, foreign-currency denominated securities of the type mentioned above
issued by foreign governmental entities, companies, and supranational
organizations. While the Funds are investing for temporary defensive purposes,
they may not achieve their investment objectives.
ADDITIONAL RISK CONSIDERATIONS
Investment in certain of the Funds involves the special risk considerations
described below. These risks may be heightened when investing in emerging
markets.
Currency Considerations. Substantially all of the assets of Alliance New Europe
Fund, Alliance Worldwide Privatization Fund, Alliance International Premier
Growth Fund, Alliance International Fund, Alliance Greater China '97 Fund and
Alliance All-Asia Investment Fund, and a substantial portion of the assets of
Alliance Global Small Cap Fund are invested in securities denominated in foreign
currencies. The Funds receive a corresponding portion of their revenues in
foreign currencies. Therefore, the dollar equivalent of their net assets,
distributions, and income will be adversely affected by reductions in the value
of certain foreign currencies relative to the U.S. Dollar. If the value of the
foreign currencies in which a Fund receives its income falls relative to the
U.S. Dollar between receipt of the income and the making of Fund distributions,
the Fund may be required to liquidate securities in order to make distributions
if it has insufficient cash in U.S. Dollars to meet distribution requirements
that the Fund must satisfy to qualify as a regulated investment company for
federal income tax purposes. Similarly, if an exchange rate declines between the
time a Fund incurs expenses in U.S. Dollars and the time cash expenses are paid,
the amount of the currency required to be converted into U.S. Dollars in order
to pay expenses in U.S. Dollars could be greater than the equivalent amount of
such expenses in the currency at the time they were incurred. In light of these
risks, a Fund may engage in currency hedging transactions, as described above,
which involve certain special risks.
Foreign Securities. The securities markets of many foreign countries are
relatively small, with the majority of market capitalization and trading volume
concentrated in a limited number of companies representing a small number of
industries. Consequently, a Fund whose investment portfolio includes foreign
securities may experience greater price volatility and significantly lower
liquidity than a portfolio invested solely in equity securities of U.S.
companies. These markets may be subject to greater influence by adverse events
generally affecting the market, and by large investors trading significant
blocks of securities, than is usual in the United States. Securities settlements
may in some instances be subject to delays and related administrative
uncertainties.
Certain foreign countries require governmental approval prior to investments by
foreign persons or limit investment by foreign
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persons to only a specified percentage of an issuer's outstanding securities or
a specific class of securities that may have less advantageous terms (including
price) than securities of the company available for purchase by nationals. These
restrictions or controls may at times limit or preclude investment in certain
securities and may increase the costs and expenses of a Fund. In addition, the
repatriation of investment income, capital, or the proceeds of sales of
securities from certain countries is controlled under regulations, including in
some cases the need for certain advance government notification or authority. If
a deterioration occurs in a country's balance of payments, the country could
impose temporary restrictions on foreign capital remittances.
A Fund also could be adversely affected by delays in, or a refusal to grant, any
required governmental approval for repatriation, as well as by the application
of other restrictions on investment. Investing in local markets may require a
Fund to adopt special procedures that may involve additional costs to a Fund.
These factors may affect the liquidity of a Fund's investments in any country
and Alliance will monitor the effect of any such factor or factors on a Fund's
investments. Furthermore, transaction costs including brokerage commissions for
transactions both on and off the securities exchanges in many foreign countries
are generally higher than in the United States.
Issuers of securities in foreign jurisdictions are generally not subject to the
same degree of regulation as are U.S. issuers with respect to such matters as
insider trading rules, restrictions on market manipulation, shareholder proxy
requirements, and timely disclosure of information. The reporting, accounting
and auditing standards of foreign countries may differ, in some cases
significantly, from U.S. standards in important respects and less information
may be available to investors in foreign securities than to investors in U.S.
securities. Substantially less information is publicly available about certain
non-U.S. issuers than is available about U.S. issuers.
The economies of individual foreign countries may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross domestic
product or gross national product, rate of inflation, capital reinvestment,
resource self-sufficiency, and balance of payments position. Nationalization,
expropriation or confiscatory taxation, currency blockage, political changes,
government regulation, political or social instability, or diplomatic
developments could affect adversely the economy of a foreign country and the
Fund's investments. In the event of expropriation, nationalization or other
confiscation, a Fund could lose its entire investment in the country involved.
In addition, laws in foreign countries governing business organizations,
bankruptcy and insolvency may provide less protection to security holders such
as the Fund than that provided by U.S. laws.
Alliance International Fund, Alliance New Europe Fund, Alliance Greater China
'97 Fund and Alliance All-Asia Investment Fund may invest substantial amounts of
their assets in United Kingdom issuers, Japanese issuers, and/or Greater China
issuers. Please refer to Appendix A for a discussion of risks associated with
investments in these countries.
Investment in Privatized Enterprises by Alliance Worldwide Privatization Fund.
In certain jurisdictions, the ability of foreign entities, such as the Fund, to
participate in privatizations may be limited by local law, or the price or terms
on which the Fund may be able to participate may be less advantageous than for
local investors. Moreover, there can be no assurance that governments that have
embarked on privatization programs will continue to divest their ownership of
state enterprises, that proposed privatizations will be successful or that
governments will not re-nationalize enterprises that have been privatized.
Furthermore, in the case of certain of the enterprises in which the Fund may
invest, large blocks of the stock of those enterprises may be held by a small
group of stockholders, even after the initial equity offerings by those
enterprises. The sale of some portion or all of those blocks could have an
adverse effect on the price of the stock of any such enterprise.
Most state enterprises or former state enterprises go through an internal
reorganization of management prior to conducting an initial equity offering in
an attempt to better enable these enterprises to compete in the private sector.
However, certain reorganizations could result in a management team that does not
function as well as the enterprise's prior management and may have a negative
effect on such enterprise. After making an initial equity offering, enterprises
that may have enjoyed preferential treatment from the respective state or
government that owned or controlled them may no longer receive such preferential
treatment and may become subject to market competition from which they were
previously protected. Some of these enterprises may not be able to effectively
operate in a competitive market and may suffer losses or experience bankruptcy
due to such competition. In addition, the privatization of an enterprise by its
government may occur over a number of years, with the government continuing to
hold a controlling position in the enterprise even after the initial equity
offering for the enterprise.
Investment in Smaller, Emerging Companies. The Funds may invest in smaller,
emerging companies. Alliance New Europe Fund and Alliance Global Small Cap Fund
will emphasize investment in, and Alliance All-Asia Investment Fund and Alliance
Greater China '97 Fund may emphasize investment in, smaller, emerging companies.
Investment in such companies involves greater risks than is customarily
associated with securities of more established companies. Companies in the
earlier stages of their development often have products and management personnel
which have not been thoroughly tested by time or the marketplace; their
financial resources may not be as substantial as those of more established
companies. The securities of smaller companies may have relatively limited
marketability and may be subject to more abrupt or erratic market movements than
securities of larger companies or broad market indices. The revenue flow of such
companies may be erratic and their results of operations may fluctuate widely
and may also contribute to stock price volatility.
48
<PAGE>
Extreme Governmental Action; Less Protective Laws. In contrast to investing in
the U.S., foreign investment may involve in certain situations greater risk of
nationalization, expropriation, confiscatory taxation, currency blockage or
other extreme governmental action which could adversely impact a Fund's
investments. In the event of certain such actions, a Fund could lose its entire
investment in the country involved. In addition, laws in various foreign
countries, including in certain respects each of the Greater China countries,
governing, among other subjects, business organization and practices, securities
and securities trading, bankruptcy and insolvency may provide less protection to
investors such as the Fund than provided under United States laws.
The Real Estate Industry. Although Alliance Real Estate Investment Fund does not
invest directly in real estate, it invests primarily in Real Estate Equity
Securities and has a policy of concentration of its investments in the real
estate industry. Therefore, an investment in the Fund is subject to certain
risks associated with the direct ownership of real estate and with the real
estate industry in general. These risks include, among others: possible declines
in the value of real estate; risks related to general and local economic
conditions; possible lack of availability of mortgage funds; overbuilding;
extended vacancies of properties; increases in competition, property taxes and
operating expenses; changes in zoning laws; costs resulting from the clean-up
of, and liability to third parties for damages resulting from, environmental
problems; casualty or condemnation losses; uninsured damages from floods,
earthquakes or other natural disasters; limitations on and variations in rents;
and changes in interest rates. To the extent that assets underlying the Fund's
investments are concentrated geographically, by property type or in certain
other respects, the Fund may be subject to certain of the foregoing risks to a
greater extent.
In addition, if Alliance Real Estate Investment Fund receives rental income or
income from the disposition of real property acquired as a result of a default
on securities the Fund owns, the receipt of such income may adversely affect the
Fund's ability to retain its tax status as a regulated investment company.
Investments by the Fund in securities of companies providing mortgage servicing
will be subject to the risks associated with refinancings and their impact on
servicing rights.
REITs. Investing in REITs involves certain unique risks in addition to those
risks associated with investing in the real estate industry in general. Equity
REITs may be affected by changes in the value of the underlying property owned
by the REITs, while mortgage REITs may be affected by the quality of any credit
extended. REITs are dependent upon management skills, are not diversified, and
are subject to heavy cash flow dependency, default by borrowers and
self-liquidation. REITs are also subject to the possibilities of failing to
qualify for tax-free pass-through of income under the Code and failing to
maintain their exemptions from registration under the 1940 Act.
REITs (especially mortgage REITs) also are subject to interest rate risks. When
interest rates decline, the value of a REIT's investment in fixed rate
obligations can be expected to rise. Conversely, when interest rates rise, the
value of a REIT's investment in fixed rate obligations can be expected to
decline. In contrast, as interest rates on adjustable rate mortgage loans are
reset periodically, yields on a REIT's investments in such loans will gradually
align themselves to reflect changes in market interest rates, causing the value
of such investments to fluctuate less dramatically in response to interest rate
fluctuations than would investments in fixed rate obligations.
Investing in REITs involves risks similar to those associated with investing in
small capitalization companies. REITs may have limited financial resources, may
trade less frequently and in a limited volume and may be subject to more abrupt
or erratic price movements than larger company securities. Historically, small
capitalization stocks, such as REITs, have been more volatile in price than the
larger capitalization stocks included in the S&P 500 Index.
Mortgage-Backed Securities. Investing in Mortgage-Backed Securities involves
certain unique risks in addition to those risks associated with investment in
the real estate industry in general. These risks include the failure of a
counterparty to meet its commitments, adverse interest rate changes and the
effects of prepayments on mortgage cash flows. When interest rates decline, the
value of an investment in fixed rate obligations can be expected to rise.
Conversely, when interest rates rise, the value of an investment in fixed rate
obligations can be expected to decline. In contrast, as interest rates on
adjustable rate mortgage loans are reset periodically, yields on investments in
such loans will gradually align themselves to reflect changes in market interest
rates, causing the value of such investments to fluctuate less dramatically in
response to interest rate fluctuations than would investments in fixed rate
obligations.
Further, the yield characteristics of Mortgage-Backed Securities, such as those
in which Alliance Real Estate Investment Fund may invest, differ from those of
traditional fixed-income securities. The major differences typically include
more frequent interest and principal payments (usually monthly), the
adjustability of interest rates, and the possibility that prepayments of
principal may be made substantially earlier than their final distribution dates.
Prepayment rates are influenced by changes in current interest rates and a
variety of economic, geographic, social, and other factors, and cannot be
predicted with certainty. Both adjustable rate mortgage loans and fixed rate
mortgage loans may be subject to a greater rate of principal prepayments in a
declining interest rate environment and to a lesser rate of principal
prepayments in an increasing interest rate environment. Early payment associated
with Mortgage-Backed Securities causes these securities to experience
significantly greater price and yield volatility than that experienced by
traditional fixed-income securities. Under certain interest rate and prepayment
rate scenarios, the Fund may fail to recoup fully its investment in
Mortgage-Backed Securities notwithstanding any direct or indirect governmental
or agency guarantee. When the Fund reinvests amounts representing payments and
unscheduled
49
<PAGE>
prepayments of principal, it may receive a rate of interest that is lower than
the rate on existing adjustable rate mortgage pass-through securities. Thus,
Mortgage-Backed Securities, and adjustable rate mortgage pass-through securities
in particular, may be less effective than other types of U.S. Government
securities as a means of "locking in" interest rates.
U.S. and Foreign Taxes. A Fund's investment in foreign securities may be subject
to taxes withheld at the source on dividend or interest payments. Foreign taxes
paid by a Fund may be creditable or deductible by U.S. shareholders for U.S.
income tax purposes. No assurance can be given that applicable tax laws and
interpretations will not change in the future. Moreover, non-U.S. investors may
not be able to credit or deduct such foreign taxes.
Fixed-Income Securities. The value of each Fund's shares will fluctuate with the
value of its investments. The value of each Fund's investments in fixed-income
securities will change as the general level of interest rates fluctuates. During
periods of falling interest rates, the values of fixed-income securities
generally rise. Conversely, during periods of rising interest rates, the values
of fixed-income securities generally decline.
Under normal market conditions, the average dollar-weighted maturity of a Fund's
portfolio of debt or other fixed-income securities is expected to vary between
five and 30 years in the case of Alliance All-Asia Investment Fund, between five
and 25 years in the case of Alliance Utility Income Fund, and between one year
or less and 30 years in the case of all other Funds that invest in such
securities. In periods of increasing interest rates, each of the Funds may, to
the extent it holds mortgage-backed securities, be subject to the risk that the
average dollar-weighted maturity of the Fund's portfolio of debt or other
fixed-income securities may be extended as a result of lower than anticipated
prepayment rates.
Investment in Lower-Rated Fixed-Income Securities. Lower-rated securities, i.e.,
those rated Ba and lower by Moody's or BB and lower by S&P, Duff & Phelps or
Fitch, are subject to greater credit risk or loss of principal and interest than
higher-rated securities. They also are generally considered to be subject to
greater market risk than higher-rated securities. The capacity of issuers of
lower-rated securities to pay interest and repay principal is more likely to
weaken than is that of issuers of higher-rated securities in times of
deteriorating economic conditions or rising interest rates. In addition,
lower-rated securities may be more susceptible to real or perceived adverse
economic conditions than investment grade securities.
The market for lower-rated securities may be thinner and less active than that
for higher-rated securities, which can adversely affect the prices at which
these securities can be sold. To the extent that there is no established
secondary market for lower-rated securities, a Fund may experience difficulty in
valuing the securities for the purpose of computing a Fund's net asset value. In
addition, adverse publicity and investor perceptions about lower-rated
securities, whether or not factual, may tend to impair their market value and
liquidity.
Alliance will try to reduce the risk inherent in investment in lower-rated
securities through credit analysis, diversification and attention to current
developments and trends in interest rates and economic and political conditions.
However, there can be no assurance that losses will not occur. Since the risk of
default is higher for lower-rated securities, Alliance's research and credit
analysis are a correspondingly more important aspect of its program for managing
a Fund's securities than would be the case if a Fund did not invest in
lower-rated securities.
In seeking to achieve a Fund's investment objective, there will be times, such
as during periods of rising interest rates, when depreciation and realization of
capital losses on securities in a Fund's portfolio will be unavoidable.
Moreover, medium- and lower-rated securities and non-rated securities of
comparable quality may be subject to wider fluctuations in yield and market
values than higher-rated securities under certain market conditions. Such
fluctuations after a security is acquired do not affect the cash income received
from that security but are reflected in the net asset value of a Fund.
Certain lower-rated securities may contain call or buy-back features that permit
the issuers thereof to call or repurchase such securities. Such securities may
present risks based on prepayment expectations. If an issuer exercises such a
provision, a Fund may have to replace the called security with a lower-yielding
security, resulting in a decreased rate of return to the Fund.
--------------------------------------------------------------------------------
MANAGEMENT OF THE FUNDS
--------------------------------------------------------------------------------
INVESTMENT ADVISER
Each Fund's Adviser is Alliance Capital Management, L.P., 1345 Avenue of the
Americas, New York, NY 10105. Alliance is a leading international investment
adviser supervising client accounts with assets as of June 30, 2000 totaling
more than $388 billion (of which more than $185 billion represented assets of
investment companies). As of June 30, 2000, Alliance managed retirement assets
for many of the largest public and private employee benefit plans (including
29 of the nation's FORTUNE 100 companies), for public employee retirement funds
in 33 states, for investment companies, and for foundations, endowments, banks
and insurance companies worldwide. The 52 registered investment companies
managed by Alliance, comprising 122 separate investment portfolios, currently
have more than 6.1 million shareholder accounts.
50
<PAGE>
Alliance provides investment advisory services and order placement facilities
for the Funds. For these advisory services, the Funds paid Alliance as a
percentage of average daily net assets:
Fee as a percentage of Fiscal
Fund average daily net assets* Year Ending
---- ------------------------- -----------
Alliance Premier Growth
Fund .95% 11/30/99
Alliance Health Care Fund .95% 6/30/00
Alliance Growth Fund .68 10/31/99
Alliance Technology Fund 1.10 11/30/99
Alliance Quasar Fund 1.01 9/30/99
The Alliance Fund .68 11/30/99
Alliance Growth and Income
Fund .47 10/31/99
Alliance Balanced Shares
Fund .56 7/31/00
Alliance Utility Income Fund .51 11/30/99
Alliance Real Estate
Investment Fund .90 8/31/00
Alliance New Europe Fund .92% 7/31/00
Alliance Worldwide
Privatization Fund 1.00 6/30/00
Alliance International
Premier Growth Fund .71 11/30/99
Alliance Global Small Cap
Fund 1.00% 7/31/00
Alliance International Fund .87% 6/30/00
Alliance Greater China
'97 Fund 0% 7/31/00
Alliance All-Asia Investment
Fund .65 10/31/99
--------------------------------------------------------------------------------
* Fees are stated net of any waivers and/or reimbursements. See the "Fee
Table" at the beginning of the Prospectus for more information about fee
waivers.
In connection with providing advisory services to Alliance Greater China '97
Fund, Alliance has, at its expense, retained as a consultant New Alliance, a
joint venture company headquartered in Hong Kong, which was formed in 1997 by
Alliance and Sun Hung Kai Properties Limited. New Alliance provides Alliance
with ongoing, current, and comprehensive information and analysis of conditions
and developments in Greater China countries.
In connection with investments in real estate securities, Alliance has, at its
expense, retained as a consultant CB Richard Ellis, Inc. ("CBRE"). CBRE is a
publicly held company and the largest real estate services company in the United
States, comprised of real estate brokerage, property, and facilities management,
and real estate finance, and investment advisory services.
Portfolio Managers
The following table lists the person or persons who are primarily responsible
for the day-to-day management of each Fund's portfolio, the length of time that
each person has been primarily responsible for the Fund, and each person's
principal occupation during the past five years.
Principal Occupation
During the Past
Fund Employee; Year; Title Five (5) Years
--------------------------------------------------------------------------------
Alliance Premier Alfred Harrison; since *
Growth Fund inception--Vice Chairman
of Alliance Capital
Management Corporation
(ACMC)**
Alliance Health Norman Fidel; since inception *
Care Fund --Senior Vice President
of ACMC
Alliance Growth Tyler Smith; since inception *
Fund --Senior Vice President
Alliance Technology Peter Anastos; since 1992 *
Fund --Senior Vice President
of ACMC
Gerald T. Malone; since 1992 *
--Senior Vice President
of ACMC
Alliance Quasar Bruce Aranow; since 1999 Associated with
Fund --Vice President of ACMC Alliance since 1999;
prior thereto, Vice
President at Invesco
since 1998; prior
thereto, Vice
President at LGT
Asset Management
since 1996
The Alliance Fund Alden M. Stewart; since 1997 *
--(see above)
Alliance Growth and Paul Rissman; since 1994 *
Income Fund --Senior Vice President
of ACMC
Alliance Balanced Paul Rissman; since 1997 *
Shares Fund --(see above)
Alliance Utility Paul Rissman; since 1996 *
Income Fund --(see above)
Alliance Real Estate Daniel G. Pine; since 1996 *
Investment Fund --Senior Vice President
of ACMC
David Kruth; since 1997 Associated with
--Vice President of ACMC Alliance since 1997;
prior thereto, Senior
Vice President of
Yarmouth Group
Alliance New Europe Steven Beinhacker; since 1997 *
Fund --Senior Vice President
of ACMC
Alliance Worldwide Mark H. Breedon; since *
Privatization Fund inception, Vice President
of ACMC and Director
and Senior Vice President
of Alliance Capital Limited***
Alliance International Alfred Harrison; since 1998 *
Premier Growth Fund --(see above)
Thomas Kamp; since 1998 *
--Senior Vice President
of ACMC
51
<PAGE>
Principal Occupation
During the Past
Fund Employee; Year; Title Five (5) Years*
--------------------------------------------------------------------------------
Alliance Global Bruce Aranow; since 1999 (see above)
Small Cap Fund --(see above)
Mark D. Breedon; since 1998 *
--(see above)
Alliance Nicholas D.P. Carn; since 1998 *
International Fund --Senior Vice President
of ACMC
Alliance Greater Matthew W.S. Lee; since 1997 Associated with
China '97 Fund --Vice President of ACMC Alliance since 1997;
prior thereto,
associated with
National Mutual Funds
Management (Asia) and
James Capel and Co.
Alliance All-Asia Hiroshi Motoki; since 1998 *
Investment Fund --Senior Vice President
of ACMC and director of
Japanese/Asian Equity
research
--------------------------------------------------------------------------------
* Unless indicated otherwise, persons associated with Alliance have been
employed in a substantially similar capacity to their current position.
** The sole general partner of Alliance.
*** An indirect wholly-owned subsidiary of Alliance.
Performance of Similarly Managed Portfolios. In addition to managing the assets
of Alliance Premier Growth Fund, Mr. Harrison has ultimate responsibility for
the management of discretionary tax-exempt accounts of institutional clients
managed as described below without significant client-imposed restrictions
("Historical Portfolios"). These accounts have substantially the same investment
objectives and policies and are managed in accordance with essentially the same
investment strategies and techniques as those for Alliance Premier Growth Fund,
except for the ability of Alliance Premier Growth Fund to use futures and
options as hedging tools and to invest in warrants. The Historical Portfolios
also are not subject to certain limitations, diversification requirements and
other restrictions imposed under the 1940 Act and the Code to which Alliance
Premier Growth Fund, as a registered investment company, is subject and which,
if applicable to the Historical Portfolios, may have adversely affected the
performance results of the Historical Portfolios.
Set forth below is performance data provided by Alliance relating to the
Historical Portfolios for the period during which Mr. Harrison has managed the
Historical Portfolios as an employee of Alliance. As of September 30, 2000,
the assets in the Historical Portfolios totaled approximately $14.3 billion
and the average size of an institutional account in the Historical Portfolio
was $529 million. Each Historical Portfolio has a nearly identical composition
of investment holdings and related percentage weightings.
The performance data is net of all fees (including brokerage commissions)
charged to those accounts. The performance data is computed in accordance with
standards formulated by the Association of Investment Management and Research
and has not been adjusted to reflect any fees that will be payable by Alliance
Premier Growth Fund, which are higher than the fees imposed on the Historical
Portfolio and will result in a higher expense ratio and lower returns for
Alliance Premier Growth Fund. Expenses associated with the distribution of Class
A, Class B, and Class C shares of Alliance Premier Growth Fund in accordance
with the plan adopted by Alliance Premier Growth Fund's Board of Directors under
Commission Rule 12b-1 are also excluded. The performance data has also not been
adjusted for corporate or individual taxes, if any, payable by the account
owners.
Alliance has calculated the investment performance of the Historical Portfolios
on a trade-date basis. Dividends have been accrued at the end of the month and
cash flows weighted daily. Composite investment performance for all portfolios
has been determined on an asset weighted basis. New accounts are included in the
composite investment performance computations at the beginning of the quarter
following the initial contribution. The total returns set forth below are
calculated using a method that links the monthly return amounts for the
disclosed periods, resulting in a time-weighted rate of return.
As reflected below, the Historical Portfolios have over time performed favorably
when compared with the performance of recognized performance indices. The S&P
500 Index is a widely recognized, unmanaged index of market activity based upon
the aggregate performance of a selected portfolio of publicly traded common
stocks, including monthly adjustments to reflect the reinvestment of dividends
and other distributions. The S&P 500 Index reflects the total return of
securities comprising the Index, including changes in market prices as well as
accrued investment income, which is presumed to be reinvested. The Russell 1000
universe of securities is compiled by Frank Russell Company and is segmented
into two style indices, based on the capitalization-weighted median
book-to-price ratio of each of the securities. At each reconstitution, the
Russell 1000 constituents are ranked by their book-to-price ratio. Once so
ranked, the breakpoint for the two styles is determined by the median market
capitalization of the Russell 1000. Thus, those securities falling within the
top fifty percent of the cumulative market capitalization (as ranked by
descending book-to-price) become members of the Russell Price-Driven Indices.
The Russell 1000 Growth Index is, accordingly, designed to include those Russell
1000 securities with a greater-than-average growth orientation. In contrast with
the securities in the Russell Price-Driven Indices, companies in the Growth
Index tend to exhibit higher price-to-book and price-earnings ratios, lower
dividend yield and higher forecasted growth values.
To the extent Alliance Premier Growth Fund does not invest in U.S. common stocks
or utilizes investment techniques such as futures or options, the S&P 500 Index
and Russell 1000 Growth Index may not be substantially comparable to Alliance
Premier Growth Fund. The S&P 500 Index and Russell 1000 Growth Index are
included to illustrate material economic and market factors that existed during
the time period shown. The S&P 500 Index and Russell 1000 Growth Index do not
reflect the deduction of any fees. If Alliance Premier Growth Fund were to
purchase a portfolio of securities substantially identical to the
securities comprising the S&P 500 Index or the Russell 1000
52
<PAGE>
Growth Index, Alliance Premier Growth Fund's performance relative to the
index would be reduced by Alliance Premier Growth Fund's expenses, including
brokerage commissions, advisory fees, distribution fees, custodial fees,
transfer agency costs and other administrative expenses, as well as by the
impact on Alliance Premier Growth Fund's shareholders of sales charges and
income taxes.
The Lipper Large Cap Growth Fund Index is prepared by Lipper, Inc. and
represents a composite index of the investment performance for the 30 largest
large capitalization growth mutual funds. The composite investment performance
of the Lipper Large Cap Growth Fund Index reflects investment management and
administrative fees and other operating expenses paid by these mutual funds and
reinvested income dividends and capital gain distributions, but excludes the
impact of any income taxes and sales charges.
The following performance data is provided solely to illustrate Mr. Harrison's
performance in managing the Historical Portfolios and the Alliance Premier
Growth Fund as measured against certain broad based market indices and against
the composite performance of other open-end growth mutual funds. Investors
should not rely on the following performance data of the Historical Portfolios
as an indication of future performance of Alliance Premier Growth Fund. The
composite investment performance for the periods presented may not be indicative
of future rates of return. Other methods of computing investment performance may
produce different results, and the results for different periods may vary.
Schedule of Composite Investment Performance--Historical Portfolios*
<TABLE>
<CAPTION>
Lipper
Russell Large Cap
Premier Historical S&P 500 1000 Growth
Growth Portfolios Index Growth Index Fund Index
Fund Total Return** Total Return Total Return Total Return
<S> <C> <C> <C> <C> <C>
1/1/00-
9/30/00***...... (8.74)% (4.55)% (1.39)% (1.37)% (1.44)%
Year ended
December:
1999***......... 23.51 29.67 21.03 33.16 34.82
1998***......... 42.97 52.16 28.60 38.71 36.47
1997***......... 27.05 34.64 33.36 30.49 27.59
1996***......... 18.84 22.06 22.96 23.12 20.56
1995***......... 40.66 39.83 37.58 37.19 34.92
1994............ (9.78) (4.82) 1.32 2.66 (0.82)
1993............ 5.35 10.54 10.08 2.90 10.66
1992............ -- 12.18 7.62 5.00 6.89
1991............ -- 38.91 30.47 41.16 37.34
1990............ -- (1.57) (3.10) (0.26) (1.82)
1989............ -- 38.80 31.69 35.92 32.30
1988............ -- 10.88 16.61 11.27 10.84
1987............ -- 8.49 5.25 5.31 3.33
1986............ -- 27.40 18.67 15.36 16.75
1985............ -- 37.41 31.73 32.85 32.85
1984............ -- (3.31) 6.27 (.95) (4.25)
1983............ -- 20.80 22.56 15.98 22.63
1982............ -- 28.02 21.55 20.46 28.91
1981............ -- (1.09) (4.92) (11.31) (0.06)
1980............ -- 50.73 32.50 39.57 47.73
1979............ -- 30.76 18.61 23.91 29.90
Cumulative
total return
for the period
January 1, 1979 to
September 30, 2000 -- 5850% 3032% 3148% 3961%
</TABLE>
--------------------------------------------------------------------------------
* Total return is a measure of investment performance that is based upon the
change in value of an investment from the beginning to the end of a
specified period and assumes reinvestment of all dividends and other
distributions. The basis of preparation of this data is described in the
preceding discussion. Total returns for Alliance Premier Growth Fund are
for Class A shares, with imposition of the maximum 4.25% sales charge.
** Assumes imposition of the maximum advisory fee charged by Alliance for any
Historical Portfolio for the period involved.
*** During this period, the Historical Portfolios differed from Alliance
Premier Growth Fund in that Alliance Premier Growth Fund invested a
portion of its net assets in warrants on equity securities in which the
Historical Portfolios were unable, by their investment restrictions, to
purchase. In lieu of warrants, the Historical Portfolios acquired the
common stock upon which the warrants were based.
The average annual total returns presented below are based upon the cumulative
total return as of September 30, 2000 and, for more than one year, assume a
steady compounded rate of return and are not year-by-year results, which
fluctuated over the periods as shown.
AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
Lipper
Russell Large Cap
Premier Historical S&P 500 1000 Growth
Growth Portfolios Index Growth Index Fund Index
<S> <C> <C> <C> <C> <C>
One year........ 9.93% 15.27% 13.27% 23.43% 23.73%
Three years..... 19.61 22.74 16.44 22.74 21.95
Five years...... 23.84 25.65 21.68 25.07 23.41
Ten years...... 21.70* 23.25 19.42 21.44 20.75
Since January 1,
1979............ -- 20.67 17.16 17.36 18.57
</TABLE>
--------------------------------------------------------------------------------
* Since inception on 9/28/92
Performance of a Similarly Managed Fund. Alliance is the investment adviser of
an investment company organized and operated under the laws of the Grand Duchy
of Luxembourg, ACM International Health Care Fund (the "ACM Fund"), that has
substantially the same investment objective and policies as those of Alliance
Health Care Fund. The ACM Fund has been managed in accordance with substantially
the same investment strategies and techniques as are employed with respect to
Alliance Health Care Fund.
Norman Fidel, the portfolio manager of Alliance Health Care Fund, is also the
person who has been primarily responsible for the day-to-day management of the
ACM Fund since 1988. Mr. Fidel manages approximately $2 billion of Health
Care Industries assets, including approximately $646 million of assets in the
ACM Fund as of September 30, 2000.
The ACM Fund is not subject to certain limitations, diversification requirements
and other restrictions imposed under the 1940 Act and the Code to which Alliance
Health Care Fund, as a registered investment company, is subject and which, if
applicable to the ACM Fund, may have adversely affected the performance results
of the ACM Fund.
53
<PAGE>
Set forth below are performance data provided by Alliance relating to the Class
AX shares of the ACM Fund since 1988, when Mr. Fidel began managing that fund.
Performance data are shown annually and cumulatively through September 30, 2000.
The performance data are net of all fees imposed by the ACM Fund. The
performance data have not been adjusted to reflect the fees that are payable by
Alliance Health Care Fund, which, at comparable asset levels, may be lower than
the fees imposed on the ACM Fund and may result in a lower expense ratio for
Alliance Health Care Fund. Expenses associated with the distribution of Class A,
Class B and Class C shares of Alliance Health Care Fund in accordance with the
plan adopted by Alliance Health Care Fund's Board of Directors under Commission
Rule 12b-1 also are not reflected in the data below relating to the ACM Fund.
See "Fees and Expenses of the Funds." The performance data have also not been
adjusted for corporate or individual taxes, if any, payable by the ACM Fund
shareholders.
The following performance data are provided solely to illustrate Mr. Fidel's
performance in managing the ACM Fund. Investors should not rely on the following
performance data of the ACM Fund as an indication of future performance of the
Alliance Health Care Fund. The investment performance for the periods presented
may not be indicative of future rates of return.
ACM International Health Care Fund
----------------------------------
Total Returns
-------------
1988................................................... 21.82%
1989................................................... 46.75%
1990................................................... 25.96%
1991................................................... 83.07%
1992................................................... -10.46%
1993................................................... -1.38%
1994................................................... 13.84%
1995................................................... 46.49%
1996................................................... 2.18%
1997................................................... 23.07%
1998................................................... 24.29%
1999................................................... -3.03%
2000*.................................................. 27.00%
Average Annual Total Return
(for periods ended 9/30/00)
---------------------------
One year............................................... 39.66%
Five years............................................. 17.07%
Ten years.............................................. 20.01%
Cumulative Total Return of the ACM Fund from
12/31/87 to 9/30/00: 1068%
--------------------------------------------------------------------------------
* Through September 30, 2000 (unannualized)
The Funds' SAIs have more detailed information about Alliance and other Fund
service providers.
--------------------------------------------------------------------------------
PURCHASE AND SALE OF SHARES
--------------------------------------------------------------------------------
HOW THE FUNDS VALUE THEIR SHARES
The Funds' net asset value or NAV is calculated at 4 p.m., Eastern time, each
day the Exchange is open for business. To calculate NAV, a Fund's assets are
valued and totaled, liabilities are subtracted, and the balance, called net
assets, is divided by the number of shares outstanding. The Funds value their
securities at their current market value determined on the basis of market
quotations, or, if such quotations are not readily available, such other methods
as the Funds' directors believe accurately reflect fair market value.
Your order for purchase, sale, or exchange of shares is priced at the next NAV
calculated after your order is received in proper form by the Fund.
HOW TO BUY SHARES
You may purchase Advisor Class shares through your financial representative at
NAV. Advisor Class shares are not subject to any initial or contingent sales
charges or distribution expenses. You may purchase and hold shares solely:
o through accounts established under a fee-based program, sponsored and
maintained by a registered broker-dealer or other financial intermediary
and approved by the Fund's principal underwriter, Alliance Fund
Distributors, Inc. or AFD;
o through a self-directed defined contribution employee benefit plan (e.g.,
a 401(k) plan) that has at least 1,000 participants or $25 million in
assets;
o by investment advisory clients of, and certain other persons associated
with, Alliance and its affiliates or the Funds; and
o through registered investment advisers or other financial intermediaries
who charge a management, consulting or other fee for their services and
who purchase shares through a broker or agent approved by AFD and clients
of such registered investment advisers or financial intermediaries whose
accounts are linked to the master account of such investment adviser or
financial intermediary on the books of such approved broker or agent.
Generally, a fee-based program must charge an asset-based or other similar fee
and must invest at least $250,000 in Advisor Class shares to be approved by AFD
for investment in Advisor Class shares. The Fund's Statement of Additional
Information has more detailed information about who may purchase and hold
Advisor Class shares.
A Fund may refuse any order to purchase Advisor Class shares. In particular, the
Funds reserve the right to restrict purchases of Advisor Class shares (including
through exchanges) when there appears to be evidence of a pattern of frequent
purchases and sales made in response to short-term considerations.
HOW TO EXCHANGE SHARES
You may exchange your Advisor Class shares for Advisor Class shares of other
Alliance Mutual Funds. Exchanges of Advisor
54
<PAGE>
Class shares are made at the next-determined NAV, without any sales or service
charge. You may request an exchange by mail or telephone. You must call by 4:00
p.m., Eastern time, to receive that day's NAV. The Funds may change, suspend, or
terminate the exchange service on 60 days' written notice.
HOW TO SELL SHARES
You may "redeem" your shares (i.e., sell your shares to a Fund) on any day the
Exchange is open, either directly or through your financial intermediary. Your
sales price will be the next-determined NAV after the Fund receives your sales
request in proper form. Normally, proceeds will be sent to you within 7 days. If
you recently purchased your shares by check or electronic funds transfer, your
redemption payment may be delayed until the Fund is reasonably satisfied that
the check or electronic funds transfer has been collected (which may take up to
15 days). If you are in doubt about what procedures or documents are required by
your fee-based program or employee benefit plan to sell your shares, you should
contact your financial representative.
o Selling Shares Through Your Financial Representative
Your financial representative must receive your sales request by 4:00 p.m.,
Eastern time, and submit it to the Fund by 5:00 p.m., Eastern time, for you to
receive that day's NAV. Your financial representative is responsible for
submitting all necessary documentation to the Fund and may charge you for this
service.
o Selling Shares Directly to the Fund
By Mail:
-- Send a signed letter of instruction or stock power, along with
certificates, to:
Alliance Fund Services, Inc.
P.O. Box 1520
Secaucus, N.J. 07906-1520
800-221-5672
-- For your protection, a bank, a member firm of a national stock
exchange, or other eligible guarantor institution, must guarantee
signatures. Stock power forms are available from your financial
intermediary, AFS, and many commercial banks. Additional
documentation is required for the sale of shares by corporations,
intermediaries, fiduciaries, and surviving joint owners. If you have
any questions about these procedures, contact AFS.
By Telephone:
-- You may redeem your shares for which no stock certificates have been
issued by telephone request. Call AFS at 800-221-5672 with
instructions on how you wish to receive your sale proceeds.
-- A telephone redemption request must be received by 4:00 p.m.,
Eastern time, for you to receive that day's NAV.
-- If you have selected electronic funds transfer in your Shareholder
Application, the redemption proceeds will be sent directly to your
bank. Otherwise, the proceeds will be mailed to you.
-- Redemption requests by electronic funds transfer may not exceed
$100,000 per day and redemption requests by check cannot exceed
$50,000 per day.
-- Telephone redemption is not available for shares held in nominee or
"street name" accounts, retirement plan accounts, or shares held by
a shareholder who has changed his or her address of record within
the previous 30 calendar days.
OTHER
If you are a Fund shareholder through an account established under a fee-based
program, your fee-based program may impose requirements with respect to the
purchase, sale, or exchange of Advisor Class shares of a Fund that are different
from those described in this prospectus. A transaction, service, administrative
or other similar fee may be charged by your broker-dealer, agent, financial
intermediary or other financial representative with respect to the purchase,
sale or exchange of Advisor Class shares made through such financial
representative. Such financial intermediaries may also impose requirements with
respect to the purchase, sale or exchange of shares that are different from, or
in addition to, those imposed by a Fund, including requirements as to the
minimum initial and subsequent investment amounts.
--------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES
--------------------------------------------------------------------------------
Each Fund's income dividends and capital gains distributions, if any, declared
by a Fund on its outstanding shares will, at the election of each shareholder,
be paid in cash or in additional shares of the same class of shares of that
Fund. If paid in additional shares, the shares will have an aggregate NAV as of
the close of business on the day following the declaration date of the dividend
or distribution equal to the cash amount of the dividend or distribution. You
may make an election to receive dividends and distributions in cash or in shares
at the time you purchase shares. Your election can be changed at any time prior
to a record date for a dividend. There is no sales or other charge in connection
with the reinvestment of dividends or capital gains distributions. Cash
dividends may be paid in check, or at your election, electronically via the ACH
network. There is no sales or other charge on the reinvestment of Fund dividends
and distributions.
If you receive an income dividend or capital gains distribution in cash you may,
within 120 days following the date of its payment, reinvest the dividend or
distribution in additional shares of that Fund without charge by returning to
Alliance, with appropriate instructions, the check representing the dividend or
distribution. Thereafter, unless you otherwise specify, you will be deemed to
have elected to reinvest all subsequent dividends and distributions in shares of
that Fund.
55
<PAGE>
For federal income tax purposes, the Fund's dividend distributions of net income
(or short-term taxable gains) will be taxable to you as ordinary income.
Distributions of long-term capital gains generally will be taxable to you as
long-term capital gains. A Fund's distributions also may be subject to certain
state and local taxes.
While it is the intention of each Fund to distribute to its shareholders
substantially all of each fiscal year's net income and net realized capital
gains, if any, the amount and time of any dividend or distribution will depend
on the realization by the Fund of income and capital gains from investments.
There is no fixed dividend rate and there can be no assurance that a Fund will
pay any dividends or realize any capital gains. Since REITs pay distributions
based on cash flow, without regard to depreciation and amortization, it is
likely that a portion of the distributions paid to Alliance Real Estate
Investment Fund and subsequently distributed to shareholders may be a nontaxable
return of capital. The final determination of the amount of a Fund's return of
capital distributions for the period will be made after the end of each calendar
year.
Investment income received by a Fund from sources within foreign countries may
be subject to foreign income taxes withheld at the source. To the extent that
any Fund is liable for foreign income taxes withheld at the source, each Fund
intends, if possible, to operate so as to meet the requirements of the Code to
"pass through" to the Fund's shareholders credits for foreign income taxes paid
(or to permit shareholders to claim a deduction for such foreign taxes), but
there can be no assurance that any Fund will be able to do so. Furthermore, a
shareholder's ability to claim a foreign tax credit or deduction for foreign
taxes paid by a Fund may be subject to certain limitations imposed by the Code,
as a result of which a shareholder may not be permitted to claim a credit or
deduction for all or a portion of the amount of such taxes.
Under certain circumstances, if a Fund realizes losses (e.g., from fluctuations
in currency exchange rates) after paying a dividend, all or a portion of the
dividend may subsequently be characterized as a return of capital. Returns of
capital are generally nontaxable, but will reduce a shareholder's basis in
shares of a Fund. If that basis is reduced to zero (which could happen if the
shareholder does not reinvest distributions and returns of capital are
significant), any further returns of capital will be taxable as capital gain.
See the Fund's SAI for a further explanation of these tax issues.
If you buy shares just before a Fund deducts a distribution from its NAV, you
will pay the full price for the shares and then receive a portion of the price
back as a taxable distribution.
The sale or exchange of Fund shares is a taxable transaction for federal income
tax purposes.
Each year shortly after December 31, the Funds will send you tax information
stating the amount and type of all its distributions for the year. Consult your
tax adviser about the federal, state, and local tax consequences in your
particular circumstances.
--------------------------------------------------------------------------------
CONVERSION FEATURE
--------------------------------------------------------------------------------
Conversion
As described above, Advisor Class shares may be held solely through certain
fee-based program accounts, employee benefit plans and registered investment
advisory or other financial intermediary relationships, and by investment
advisory clients of, and certain persons associated with, Alliance and its
affiliates or the Funds. If a holder of Advisor Class shares (i) ceases to
participate in the fee-based program or plan, or to be associated with an
eligible investment advisor or financial intermediary or (ii) is otherwise no
longer eligible to purchase Advisor Class shares (each a "Conversion Event"),
then all Advisor Class shares held by the shareholder will convert automatically
to Class A shares of the same Fund. The Fund will provide the shareholder with
at least 30 days advance notice of such conversion. The failure of a shareholder
or a fee-based program to satisfy the minimum investment requirements to
purchase Advisor Class shares will not constitute a Conversion Event. The
conversion would occur on the basis of the relative NAV of the two classes and
without the imposition of any sales load, fee or other charge.
Description of Class A Shares
The Class A shares of each Fund have a distribution fee of .30% under the Fund's
Rule 12b-1 plan that allows the Fund to pay distribution and service fees for
the distribution and sale of its shares. Because this fee is paid out of the
Fund's assets, Class A shares have a higher expense ratio and may pay lower
dividends and may have a lower NAV than Advisor Class shares.
--------------------------------------------------------------------------------
GENERAL INFORMATION
--------------------------------------------------------------------------------
Under unusual circumstances, a Fund may suspend redemptions or postpone payment
for up to seven days or longer, as permitted by federal securities law. The
Funds reserve the right to close an account that through redemption has remained
below $200 for 90 days. Shareholders will receive 60 days' written notice to
increase the account value before the account is closed.
During drastic economic or market developments, you might have difficulty in
reaching AFS by telephone, in which event you should issue written instructions
to AFS. AFS is not responsible for the authenticity of telephone requests to
purchase, sell, or exchange shares. AFS will employ reasonable procedures to
verify that telephone requests are genuine, and could be liable for losses
resulting from unauthorized transactions if it failed to do so. Dealers and
agents may charge a commission for handling telephone requests. The telephone
service may be suspended or terminated at any time without notice.
56
<PAGE>
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
The financial highlights table is intended to help you understand each Fund's
financial performance for the past 5 years (or, if shorter, the period of the
Fund's operations). Certain information reflects financial results for a single
share of each Fund. The total returns in the table represent the rate that an
investor would have earned (or lost) on an investment in the Fund (assuming
reinvestment of all dividends and distributions). Except as otherwise indicated,
this information has been audited by PricewaterhouseCoopers LLP, the independent
accountants for The Alliance Fund, Alliance Growth Fund, Alliance Premier Growth
Fund, Alliance Health Care Fund, Alliance International Premier Growth Fund,
Alliance Balanced Shares, Alliance Utility Income Fund, Alliance Worldwide
Privatization Fund, and Alliance Growth and Income Fund, and by Ernst & Young
LLP, the independent auditors for Alliance All-Asia Investment Fund, Alliance
Technology Fund, Alliance Quasar Fund, Alliance International Fund, Alliance New
Europe Fund, Alliance Global Small Cap Fund, Alliance Greater China '97 Fund and
Alliance Real Estate Investment Fund, whose reports, along with each Fund's
financial statements, are included in each Fund's Annual Report, which is
available upon request.
57
<PAGE>
<TABLE>
<CAPTION>
Income from Investment Operations
----------------------------------------------
Net Gains
Net Asset or Losses on
Value, Securities Total from
Beginning Net Investment (both realized Investment
Fiscal Year or Period of Period Income (Loss) and unrealized) Operations
--------------------- ------------ -------------- --------------- ----------
<S> <C> <C> <C> <C>
Alliance Premier Growth Fund
12/1/99 to 5/31/00+++................ $ 36.25 $ (.04)(b) $ 2.74 $ 2.70
Year ended 11/30/99.................. 27.71 (.17)(b) 9.32 9.15
Year ended 11/30/98.................. 22.10 (.07)(b) 7.14 7.07
Year ended 11/30/97.................. 17.99 (.06)(b) 5.25 5.19
10/2/96+ to 11/30/96................. 15.94 (.01)(b) 2.06 2.05
Alliance Health Care Fund
8/27/99++ to 6/30/00................. $ 10.00 $ (.03)(b)(c) $ 2.57 $ 2.54
Alliance Growth Fund
11/1/99 to 4/30/00+++................ $ 56.88 $ (.01)(b) $ 6.84 $ 6.83
Year ended 10/31/99.................. 47.47 .02(b) 13.10 13.12
Year ended 10/31/98.................. 44.08 .08(b) 6.22 6.30
Year ended 10/31/97.................. 34.91 (.05)(b) 10.25 10.20
10/2/96+ to 10/31/96................. 34.14 0.00 .77 .77
Alliance Technology Fund
12/1/99 to 5/31/00+++................ $112.59 $ (.42)(b) $ 25.25 $ 24.83
Year ended 11/30/99.................. 69.04 (.68)(b) 49.40 48.72
Year ended 11/30/98.................. 54.63 (.50)(b) 15.49 14.99
Year ended 11/30/97.................. 51.17 (.45)(b) 4.33 3.88
10/2/96+ to 11/30/96................. 47.32 (.05)(b) 3.90 3.85
Alliance Quasar Fund
10/1/99 to 3/31/00+++................ $ 24.01 $ (.08)(b) $ 4.57 $ 4.49
Year ended 9/30/99................... 22.37 (.15)(b) 2.80 2.65
Year ended 9/30/98................... 30.42 (.09)(b) (6.73) (6.82)
10/2/96+ to 9/30/97.................. 27.82 (.17)(b) 6.88 6.71
The Alliance Fund
12/1/99 to 5/31/00+++................ $ 7.58 $ 0.00(b) $ (.33) $ (.33)
Year ended 11/30/99.................. 5.98 (.01)(b) 2.00 1.99
Year ended 11/30/98.................. 8.69 (.01)(b) (.53) (.54)
Year ended 11/30/97.................. 7.71 (.02)(b) 2.10 2.08
10/2/96+ to 11/30/96................. 6.99 0.00 .72 .72
Alliance Growth and
Income Fund
11/1/99 to 4/30/00+++................ $ 3.71 $ .02(b) $ .20 $ .22
Year ended 10/31/99.................. 3.44 .04(b) .63 .67
Year ended 10/31/98.................. 3.48 .04(b) .43 .47
Year ended 10/31/97.................. 3.00 .05(b) .87 .92
10/2/96+ to 10/31/96................. 2.97 0.00 .03 .03
Alliance Balanced Shares
Year ended 7/31/00................... $ 15.64 $ .43(b) $ .50 $ .93
Year ended 7/31/99................... 15.98 .39(b) 1.29 1.68
Year ended 7/31/98................... 16.17 .37(b) 1.87 2.24
10/2/96+ to 7/31/97.................. 14.79 .23(b) 3.22 3.45
Alliance Utility Income Fund
12/1/99 to 5/31/00+++................ $ 16.95 $ 1.18(b)(c) $ (.19) $ .99
Year ended 11/30/99.................. 14.70 .42(b)(c) 2.52 2.94
Year ended 11/30/98.................. 12.49 .37(b)(c) 2.66 3.03
Year ended 11/30/97.................. 10.59 .36(b)(c) 2.04 2.40
10/2/96+ to 11/30/96................. 9.95 .03(b)(c) .61 .64
Alliance Real Estate
Investment Fund
Year ended 8/31/00................... $ 10.20 $ .38(b) $ .92 $ 1.30
Year ended 8/31/99................... 10.48 .48(b) (.05) .43
Year ended 8/31/98................... 12.82 .55(b) (2.34) (1.79)
10/1/96+ to 8/31/97.................. 10.00 .35(b) 2.88 3.23
Alliance New Europe Fund
Year ended 7/31/00................... $ 18.58 $ (.01)(b) $ 3.52 $ 3.51
Year ended 7/31/99................... 21.79 .13(b) (.78) (.65)
Year ended 7/31/98................... 18.57 .08(b) 5.28 5.36
10/2/96+ to 7/31/97.................. 16.25 .11(b) 3.76 3.87
Alliance Worldwide
Privatization Fund
Year ended 6/30/00................... $ 11.77 $ 0.00 $ 2.82 $ 2.82
Year ended 6/30/99................... 12.63 .02(b) .93 .95
Year ended 6/30/98................... 13.23 .19(b) .80 .99
10/2/96+ to 6/30/97.................. 12.14 .18(b) 2.52 2.70
Alliance International
Premier Growth Fund
12/1/99 to 5/31/00+++................ $ 13.27 $ (.01)(b)(c) $ .48 $ .47
Year ended 11/30/99.................. 9.64 (.12)(b)(c) 3.75 3.63
3/3/98++ to 11/30/98................. 10.00 .01(b)(c) (.37) (.36)
<CAPTION>
Less Dividends and Distributions Less Distributions
--------------------------------------------- ------------------
Dividends Distributions Total Net Asset
from Net in Excess of Distributions Dividends Value,
Investment Net Investment from and End of
Fiscal Year or Period Income Income Capital Gains Distributions Period
--------------------- ----------- -------------- -------------- -------------- -----------
<S> <C> <C> <C> <C> <C>
Alliance Premier Growth Fund
12/1/99 to 5/31/00+++................ $ 0.00 $0.00 $(2.36) $(2.36) $ 36.59
Year ended 11/30/99.................. 0.00 0.00 (.61) (.61) 36.25
Year ended 11/30/98.................. 0.00 0.00 (1.46) (1.46) 27.71
Year ended 11/30/97.................. 0.00 0.00 (1.08) (1.08) 22.10
10/2/96+ to 11/30/96................. 0.00 0.00 0.00 0.00 17.99
Alliance Health Care Fund
8/27/99++ to 6/30/00................. $ 0.00 $0.00 $ 0.00 $ 0.00 $ 12.54
Alliance Growth Fund
11/1/99 to 4/30/00+++................ $ 0.00 $0.00 $(7.44) $(7.44) $ 56.27
Year ended 10/31/99.................. 0.00 0.00 (3.71) (3.71) 56.88
Year ended 10/31/98.................. 0.00 0.00 (2.91) (2.91) 47.47
Year ended 10/31/97.................. 0.00 0.00 (1.03) (1.03) 44.08
10/2/96+ to 10/31/96................. 0.00 0.00 0.00 0.00 34.91
Alliance Technology Fund
12/1/99 to 5/31/00+++................ $ 0.00 $0.00 $(4.04) $(4.04) $ 133.38
Year ended 11/30/99.................. 0.00 0.00 (5.17) (5.17) 112.59
Year ended 11/30/98.................. 0.00 0.00 (.58) (.58) 69.04
Year ended 11/30/97.................. 0.00 0.00 (.42) (.42) 54.63
10/2/96+ to 11/30/96................. 0.00 0.00 0.00 0.00 51.17
Alliance Quasar Fund
10/1/99 to 3/31/00+++................ $ 0.00 $0.00 $ 0.00 $ 0.00 $ 28.50
Year ended 9/30/99................... 0.00 0.00 (1.01) (1.01) 24.01
Year ended 9/30/98................... 0.00 0.00 (1.23) (1.23) 22.37
10/2/96+ to 9/30/97.................. 0.00 0.00 (4.11) (4.11) 30.42
The Alliance Fund
12/1/99 to 5/31/00+++................ $ 0.00 $0.00 $ (.64) $ (.64) $ 6.61
Year ended 11/30/99.................. 0.00 0.00 (.39) (.39) 7.58
Year ended 11/30/98.................. 0.00 0.00 (2.17) (2.17) 5.98
Year ended 11/30/97.................. (.04) 0.00 (1.06) (1.10) 8.69
10/2/96+ to 11/30/96................. 0.00 0.00 0.00 0.00 7.71
Alliance Growth and
Income Fund
11/1/99 to 4/30/00+++................ $ (.02) $0.00 $ (.17) $ (.19) $ 3.74
Year ended 10/31/99.................. (.04) (.01) (.35) (.40) 3.71
Year ended 10/31/98.................. (.05) 0.00 (.46) (.51) 3.44
Year ended 10/31/97.................. (0.06) 0.00 (.38) (.44) 3.48
10/2/96+ to 10/31/96................. 0.00 0.00 0.00 0.00 3.00
Alliance Balanced Shares
Year ended 7/31/00................... $ (.39) $0.00 $ (.64) $(1.03) $ 15.54
Year ended 7/31/99................... (.37) 0.00 (1.65) (2.02) 15.64
Year ended 7/31/98................... (.36) 0.00 (2.07) (2.43) 15.98
10/2/96+ to 7/31/97.................. (.27) 0.00 (1.80) (2.07) 16.17
Alliance Utility Income Fund
12/1/99 to 5/31/00+++................ $ (.18) $0.00 $ (.94) $(1.12) $ 16.82
Year ended 11/30/99.................. (.35) 0.00 (.34) (.69) 16.95
Year ended 11/30/98.................. (.35) 0.00 (.47) (.82) 14.70
Year ended 11/30/97.................. (.37) 0.00 (.13) (.50) 12.49
10/2/96+ to 11/30/96................. 0.00 0.00 0.00 0.00 10.59
Alliance Real Estate
Investment Fund
Year ended 8/31/00................... $ (.63)(f) $0.00 $ 0.00 $ (.63) $ 10.87
Year ended 8/31/99................... (.50)(f) (.11) (.10) (.71) 10.20
Year ended 8/31/98................... (.54) 0.00 (.01) (.55) 10.48
10/1/96+ to 8/31/97.................. (.41)(f) 0.00 0.00 (.41) 12.82
Alliance New Europe Fund
Year ended 7/31/00................... $ 0.00 $0.00 $ (.91) $ (.91) $ 21.18
Year ended 7/31/99................... 0.00 0.00 (2.56) (2.56) 18.58
Year ended 7/31/98................... 0.00 (.09) (2.05) (2.14) 21.79
10/2/96+ to 7/31/97.................. (.09) (.14) (1.32) (1.55) 18.57
Alliance Worldwide
Privatization Fund
Year ended 6/30/00................... $(0.00) $0.00 $(1.06) $(1.06) $ 13.53
Year ended 6/30/99................... (.17) 0.00 (1.64) (1.81) 11.77
Year ended 6/30/98................... (.23) 0.00 (1.36) (1.59) 12.63
10/2/96+ to 6/30/97.................. (.19) 0.00 (1.42) (1.61) 13.23
Alliance International
Premier Growth Fund
12/1/99 to 5/31/00+++................ $ 0.00 $0.00 $ (.44) $ (.44) $ 13.30
Year ended 11/30/99.................. 0.00 0.00 0.00 0.00 13.27
3/3/98++ to 11/30/98................. 0.00 0.00 0.00 0.00 9.64
<CAPTION>
Ratios/Supplemental Data
---------------------------------------------------------------------
Ratio of Ratio of Net
Net Assets, Expenses Income (Loss) to
Total End of Period to Average Average Portfolio
Fiscal Year or Period Return (a) (000's omitted) Net Assets Net Assets Turnover Rate
--------------------- ----------- -------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Alliance Premier Growth Fund
12/1/99 to 5/31/00+++................ 7.84% $590,345 1.06%* (.20)%* 68%
Year ended 11/30/99.................. 33.68% 466,690 1.16 (.51) 75
Year ended 11/30/98.................. 34.31 271,661 1.26(e) (.28) 82
Year ended 11/30/97.................. 30.98 53,459 1.25 (.28) 76
10/2/96+ to 11/30/96................. 12.86 1,922 1.50* (.48)* 95
Alliance Health Care Fund
8/27/99++ to 6/30/00................. 25.40% $ 6,184 1.61%*(d) (.36)%* 26%
Alliance Growth Fund
11/1/99 to 4/30/00+++................ 12.47% $ 40,622 .82%* (.03)%* 38%
Year ended 10/31/99.................. 29.08 142,720 .88 .03 62
Year ended 10/31/98.................. 14.92 174,745 .93(e) .17 61
Year ended 10/31/97.................. 29.92 101,205 .98(e) (.12) 48
10/2/96+ to 10/31/96................. 2.26 946 1.26* .50 46
Alliance Technology Fund
12/1/99 to 5/31/00+++................ 22.58% $348,407 1.23%* (.61)%* 23%
Year ended 11/30/99.................. 75.22 330,404 1.35%(e) (.78) 54
Year ended 11/30/98.................. 27.73 230,295 1.37(e) (.84) 67
Year ended 11/30/97.................. 7.65 167,120 1.39(e) (.81) 51
10/2/96+ to 11/30/96................. 8.14 566 1.75* (1.21)* 30
Alliance Quasar Fund
10/1/99 to 3/31/00+++................ 18.70% $141,054 1.37%(e)* (.59)%* 86%
Year ended 9/30/99................... 12.16 164,671 1.42(e) (.62) 91
Year ended 9/30/98................... (23.24) 175,037 1.38(e) (.32) 109
10/2/96+ to 9/30/97.................. 28.47 62,455 1.58* (.74)* 135
The Alliance Fund
12/1/99 to 5/31/00+++................ (4.87)% $ 9,891 .82%* (.13)%* 46%
Year ended 11/30/99.................. 35.66 9,970 .85 (.20) 97
Year ended 11/30/98.................. (8.19) 11,305 .83 (.16) 106
Year ended 11/30/97.................. 32.00 10,275 .83 (.21) 158
10/2/96+ to 11/30/96................. 10.30 1,083 .89* .38* 80
Alliance Growth and
Income Fund
11/1/99 to 4/30/00+++................ 6.59% $ 65,293 .66%* 1.19%* 28%
Year ended 10/31/99.................. 21.03 39,739 .68 1.12 48
Year ended 10/31/98.................. 14.96 22,786 .76(e) 1.14 89
Year ended 10/31/97.................. 33.61 3,207 .71(e) 1.42 88
10/2/96+ to 10/31/96................. 1.01 87 .37* 3.40* 88
Alliance Balanced Shares
Year ended 7/31/00................... 6.48% $ 2,943 .86% 2.88% 76%
Year ended 7/31/99................... 11.71 2,627 .97(e) 2.56 105
Year ended 7/31/98................... 15.32 2,079 1.06(e) 2.33 145
10/2/96+ to 7/31/97.................. 25.96 1,565 1.30(e)* 2.15* 207
Alliance Utility Income Fund
12/1/99 to 5/31/00+++................ 6.12% $ 1,035 1.19%(d)* 13.87%* 19%
Year ended 11/30/99.................. 20.62 1,532 1.20(d) 2.55 19
Year ended 11/30/98.................. 25.34 523 1.20(d) 2.83 16
Year ended 11/30/97.................. 23.57 42 1.20(d) 3.28 37
10/2/96+ to 11/30/96................. 6.33 33 1.20(d)* 4.02* 98
Alliance Real Estate
Investment Fund
Year ended 8/31/00................... 13.94% $ 1,943 1.40% 3.83% 26%
Year ended 8/31/99................... 4.18 2,270 1.30 4.75 29
Year ended 8/31/98................... (14.74) 2,899 1.25 4.08 23
10/1/96+ to 8/31/97.................. 32.72 2,313 1.45(d)(e)* 3.07* 20
Alliance New Europe Fund
Year ended 7/31/00................... 19.21% $ 9,196 1.34%(e) (.06)% 103%
Year ended 7/31/99................... (2.54) 4,778 1.51(e) .68 89
Year ended 7/31/98................... 32.55 3,143 1.56(e) .39 99
10/2/96+ to 7/31/97.................. 25.76 4,130 1.71(e)* .77* 89
Alliance Worldwide
Privatization Fund
Year ended 6/30/00................... 24.68% $ 2,506 1.43%(e) .01% 67%
Year ended 6/30/99................... 10.12 1,610 1.62(e) .37 58
Year ended 6/30/98................... 9.48 1,716 1.45 1.48 53
10/2/96+ to 6/30/97.................. 25.24 374 1.96* 2.97* 48
Alliance International
Premier Growth Fund
12/1/99 to 5/31/00+++................ 3.62% $ 21,076 1.53%* (.21)%* 122%
Year ended 11/30/99.................. 37.66 2,386 2.21(d)(e) (1.06) 107
3/3/98++ to 11/30/98................. (3.60) 1,386 2.20(d)* .13* 151
</TABLE>
--------------------------------------------------------------------------------
Please refer to the footnotes on page 60.
58 & 59
<PAGE>
<TABLE>
<CAPTION>
Income from Investment Operations
-----------------------------------------------
Net Gains
Net Asset or Losses on
Value, Securities Total from
Beginning Net Investment (both realized Investment
Fiscal Year or Period of Period Income (Loss) and unrealized) Operations
--------------------- --------- -------------- --------------- ----------
<S> <C> <C> <C> <C>
Alliance Global
Small Cap Fund
Year ended 7/31/00............... $11.74 $(.12)(b) $3.86 $3.74
Year ended 7/31/99............... 12.20 (.07)(b) .77 .70
Year ended 7/31/98............... 12.89 (.07)(b) .37 .30
10/2/96+ to 7/31/97.............. 12.56 (.08)(b) 1.97 1.89
Alliance International Fund
Year ended 6/30/00............... $16.24 $ .01(b)(c) $4.66 $4.67
Year ended 6/30/99............... 18.54 .01(b)(c) (.75) (.74)
Year ended 6/30/98............... 18.67 .02(b)(c) 1.13 1.15
10/2/96+ to 6/30/97.............. 17.96 .16(b) 1.78 1.94
Alliance Greater
China '97 Fund
Year ended 7/31/00............... $ 8.24 $(.02)(b)(c) $2.19 $2.17
Year ended 7/31/99............... 4.85 .04(b)(c) 3.35 3.39
9/3/97+ to 7/31/98............... 10.00 .10(b)(c) (5.18) (5.08)
Alliance All-Asia
Investment Fund
11/1/99 to 4/30/00+++............ $10.54 $(.07)(b) $2.87 $2.80
Year ended 10/31/99.............. 5.90 (.10)(b)(c) 4.74 4.64
Year ended 10/31/98.............. 7.56 (.08)(b)(c) (1.58) (1.66)
Year ended 10/31/97.............. 11.04 (.15)(b)(c) (2.99) (3.14)
10/2/96+ to 10/31/96............. 11.65 0.00(b)(c) (.61) (.61)
<CAPTION>
Less Dividends and Distributions Less Distributions
---------------------------------------------- ------------------
Dividends Distributions Total Net Asset
from Net in Excess of Distributions Dividends Value,
Investment Net Investment from and End of
Fiscal Year or Period Income Income Capital Gains Distributions Period
--------------------- ---------- -------------- ------------- -------------- ---------
<S> <C> <C> <C> <C> <C>
Alliance Global
Small Cap Fund
Year ended 7/31/00............... $0.00 $0.00 $ (.20) $ (.20) $15.28
Year ended 7/31/99............... 0.00 0.00 (1.16) (1.16) 11.74
Year ended 7/31/98............... 0.00 0.00 (.99) (.99) 12.20
10/2/96+ to 7/31/97.............. 0.00 0.00 (1.56) (1.56) 12.89
Alliance International Fund
Year ended 6/30/00............... $0.00 $0.00 $(1.19) $(1.19) $19.72
Year ended 6/30/99............... (.01) (.51) (1.04) (1.56) 16.24
Year ended 6/30/98............... (.02) (.05) (1.21) (1.28) 18.54
10/2/96+ to 6/30/97.............. (.15) 0.00 (1.08) (1.23) 18.67
Alliance Greater
China '97 Fund
Year ended 7/31/00............... $0.00 $0.00 $ 0.00 $ 0.00 $10.41
Year ended 7/31/99............... 0.00 0.00 0.00 0.00 8.24
9/3/97+ to 7/31/98............... (.07) 0.00 0.00 (.07) 4.85
Alliance All-Asia
Investment Fund
11/1/99 to 4/30/00+++............ $0.00 $0.00 $ 0.00 $ 0.00 $13.34
Year ended 10/31/99.............. 0.00 0.00 0.00 0.00 10.54
Year ended 10/31/98.............. 0.00 0.00 0.00 0.00 5.90
Year ended 10/31/97.............. 0.00 0.00 (.34) (.34) 7.56
10/2/96+ to 10/31/96............. 0.00 0.00 0.00 0.00 11.04
<CAPTION>
Ratios/Supplemental Data
---------------------------------------------------------------------
Ratio of Ratio of Net
Net Assets, Expenses Income (Loss) to
Total End of Period to Average Average Portfolio
Fiscal Year or Period Return (a) (000's omitted) Net Assets Net Assets Turnover Rate
--------------------- ---------- --------------- ---------- ---------------- -------------
<S> <C> <C> <C> <C> <C>
Alliance Global
Small Cap Fund
Year ended 7/31/00............... 32.19% $ 707 1.69%(e) (.76)% 133%
Year ended 7/31/99............... 7.63 189 2.13(e) (.63) 120
Year ended 7/31/98............... 2.82 392 1.87(e) (.57) 113
10/2/96+ to 7/31/97.............. 17.08 333 2.05(e)* (.84)* 129
Alliance International Fund
Year ended 6/30/00............... 29.64% $25,407 1.55%(d)(e)(g) .04% 154%
Year ended 6/30/99............... (3.62) 33,949 1.57(d)(e) .04(c) 178
Year ended 6/30/98............... 6.98 47,154 1.47(d) .13(c) 121
10/2/96+ to 6/30/97.............. 11.57 8,697 1.69(e)* 1.47* 94
Alliance Greater
China '97 Fund
Year ended 7/31/00............... 26.34% $ 273 2.22%(d)(e) (.15)%(c) 158%
Year ended 7/31/99............... 69.90% 161 2.22(d)(e) .58 94
9/3/97+ to 7/31/98............... (51.06) 60 2.22(d)(e)* 1.51* 58
Alliance All-Asia
Investment Fund
11/1/99 to 4/30/00+++............ 26.57% $ 8,568 1.77%(e)(g)* (.98)%* 164%
Year ended 10/31/99.............. 78.64 4,746 2.45(d)(e) (1.33) 119
Year ended 10/31/98.............. (21.96) 2,012 3.46(d)(e) 1.22 93
Year ended 10/31/97.............. (29.42) 1,338 3.21(d) (1.51) 70
10/2/96+ to 10/31/96............. (5.24) 27 4.97*(d) 1.63 66
</TABLE>
--------------------------------------------------------------------------------
+ Commencement of distribution.
++ Commencement of operations.
+++ Unaudited.
* Annualized.
(a) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at the net asset value during the period, and
a redemption on the last day of the period. Initial sales charges or
contingent deferred sales charges are not reflected in the calculation of
total investment return. Total investment returns calculated for periods
of less than one year are not annualized.
(b) Based on average shares outstanding.
(c) Net of fee waiver and expense reimbursement.
(d) Net of expenses assumed and/or waived/reimbursed. If the following Funds
had borne all expenses in their most recent five fiscal years, their
expense ratios, without giving effect to the expense offset arrangement
described in (e) below, would have been as follows:
1996 1997 1998 1999 2000
Alliance All-Asia Investment Fund
Advisor Class 5.54%* 3.43% 4.39% 2.93% --
Alliance Utility Income Fund
Advisor Class 3.48%* 3.29% 2.21% 1.41% 1.19%
Alliance Real Estate Investment
Fund
Advisor Class -- 1.47%* -- -- --
Alliance International Premier
Growth Fund
Advisor Class -- -- 6.28%* 2.96% --
1997 1998 1999 2000
Alliance International Fund
Advisor Class 1.69% 1.62% 1.70% 1.69%
Alliance Greater China '97 Fund
Advisor Class -- 18.13%* 19.01% 9.61%
Alliance Health Care Fund
Advisor Class -- -- -- 1.65%
(e) Amounts do not reflect the impact of expense offset arrangements with the
transfer agent. Taking into account such expense offset arrangements, the
rate of expenses to average net assets assuming the assumption and/or
waived reimbursement of expenses described in note (d) above would have
been as follows:
1997 1998 1999 2000
Alliance International Fund
Advisor Class 1.69%* -- 1.55% 1.53%
Alliance Global Small Cap Fund
Advisor Class 2.04%* 1.84% 2.10% 1.68%
Alliance New Europe Fund
Advisor Class 1.71%* 1.54% 1.50% 1.33%
Alliance All-Asia Investment Fund
Advisor Class -- 3.41% 2.43% 1.76%
Alliance Balanced Shares
Advisor Class 1.29%* 1.05% .96% --
Alliance Worldwide Privatization Fund
Advisor Class -- -- 1.61% 1.42%
Alliance Quasar Fund
Advisor Class -- 1.37% 1.41% 1.36%*
1997 1998 1999 2000
Alliance Real Estate Investment Fund
Advisor Class 1.44%* -- -- --
Alliance International Premier
Growth Fund
Advisor Class -- -- 2.20% --
Alliance Growth and Income Fund
Advisor Class .70% .75% -- --
Alliance Growth Fund
Advisor Class .96% .92% -- --
Alliance Technology Fund Fund
Advisor Class 1.38% 1.36% 1.34% --
Alliance Greater China '97 Fund
Advisor Class -- 2.20%* 2.20% 2.20%*
Alliance Premier Growth Fund
Advisor Class -- 1.25% -- --
(f) Distributions from net investment income for the years ended 2000, 1999
and 1997 include a tax return of capital of $.19, $.02 and $.03
respectively.
(g) Includes interest expense. If Alliance International Fund had not borne
interest expenses, the ratio of expenses (net of interest expenses) to
average net assets would have been with respect to the Adviser Class,
1.68% for 2000. If Alliance All-Asia Investment Fund had not borne
interest expenses, the ratio of expenses (net of interest expenses) to
average net assets would have been with respect to the Adviser Class,
1.70% for 2000.
60 & 61
<PAGE>
--------------------------------------------------------------------------------
APPENDIX A
--------------------------------------------------------------------------------
The following is additional information about the United Kingdom, Japan and
Greater China countries.
Investment in United Kingdom Issuers. Investment in securities of United Kingdom
issuers involves certain considerations not present with investment in
securities of U.S. issuers. As with any investment not denominated in the U.S.
Dollar, the U.S. dollar value of the Fund's investment denominated in the
British pound sterling will fluctuate with pound sterling-dollar exchange rate
movements. Between 1972, when the pound sterling was allowed to float against
other currencies, and the end of 1992, the pound sterling generally depreciated
against most major currencies, including the U.S. Dollar. Between September and
December 1992, after the United Kingdom's exit from the Exchange Rate Mechanism
of the European Monetary System, the value of the pound sterling fell by almost
20% against the U.S. Dollar. The pound sterling has since recovered due to
interest rate cuts throughout Europe and an upturn in the economy of the United
Kingdom. The average exchange rate of the U.S. Dollar to the pound sterling was
1.50 in 1993 and 1.62 in 1999. On October 23, 2000 the U.S. dollar-pound
sterling exchange rate was 1.45.
The United Kingdom's largest stock exchange is the London Stock Exchange, which
is the third largest exchange in the world. As measured by the FT-SE 100 index,
the performance of the 100 largest companies in the United Kingdom reached
6930.2 at the end of 1999, up approximately 18% from the end of 1998. The FT-SE
100 index closed at 6315.90 on October 23, 2000, down approximately 9%
from the beginning of 2000.
The Economic and Monetary Union ("EMU") became effective on January 1, 1999.
When fully implemented in 2002, the EMU will establish a common currency for
European countries that meet the eligibility criteria and choose to participate.
Although the United Kingdom meets the eligibility criteria, the government has
not taken any action to join the EMU.
From 1979 until 1997 the Conservative Party controlled Parliament. In the May 1,
1997 general elections, however, the Labour Party, led by Tony Blair, won a
majority in Parliament, gaining 418 of 659 seats in the House of Commons. Mr.
Blair, who was appointed Prime Minister, has launched a number of reform
initiatives, including an overhaul of the monetary policy framework intended to
protect monetary policy from political forces by vesting responsibility for
setting interest rates in a new Monetary Policy Committee headed by the Governor
of the Bank of England, as opposed to the Treasury. Prime Minister Blair has
also undertaken a comprehensive restructuring of the regulation of the financial
services industry. For further information regarding the United Kingdom, see the
SAI of New Europe Fund.
Investment in Japanese Issuers. Investment in securities of Japanese issuers
involves certain considerations not present with investment in securities of
U.S. issuers. As with any investment not denominated in the U.S. Dollar, the
U.S. Dollar value of each Fund's investments denominated in the Japanese yen
will fluctuate with yen-dollar exchange rate movements. Between 1985 and 1995,
the Japanese yen generally appreciated against the U.S. Dollar. Thereafter, the
Japanese yen generally depreciated against the U.S. Dollar until mid-1998, when
it began to appreciate. In September 1999 the Japanese yen reached a 43-month
high against the U.S. Dollar, precipitating a series of interventions by the
Japanese government in the currency market, which have succeeded in slowing the
appreciation of the Japanese yen against the U.S. Dollar.
Japan's largest stock exchange is the Tokyo Stock Exchange, the First Section of
which is reserved for larger, established companies. As measured by the TOPIX, a
capitalization-weighted composite index of all common stocks listed in the First
Section, the performance of the First Section reached a peak in 1989.
Thereafter, the TOPIX declined approximately 50% through the end of 1997. On
December 31, 1999 the TOPIX closed at 1722.20, up approximately 58% from the end
of 1998. On October 23, 2000 the TOPIX closed at 1422.84, down approximately
17% from the beginning of 2000.
Since the early 1980s, Japan has consistently recorded large current account
trade surpluses with the U.S. that have caused difficulties in the relations
between the two countries. On October 1, 1994, the U.S. and Japan reached an
agreement that was expected to to more open Japanese markets with respect to
trade in certain goods and services. Since then, the two countries have agreed
in principle to increase Japanese imports of American automobiles and automotive
parts, as well as other goods and services. Nevertheless, the surpluses have
persisted and it is expected that the friction between the U.S. and Japan with
respect to trade issues will continue for the foreseeable future.
Each Fund's investments in Japanese issuers will be subject to uncertainty
resulting from the instability of recent Japanese ruling coalitions. From 1955
to 1993, Japan's government was controlled by a single political party. Between
August 1993 and October 1996, Japan was ruled by a series of four coalition
governments. As the result of a general election on October 20, 1996, however,
Japan returned to a single-party government led by Ryutaro Hashimoto, a member
of the Liberal Democratic Party ("LDP"). While the LDP does not control a
majority of the seats in the parliament, subsequent to the 1996 elections it
established a majority in the House of Representatives as individual members
joined the ruling party. The popularity of the LDP declined, however, due to the
dissatisfaction with Mr. Hashimoto's leadership. In the July 1998 House of
Councillors election, the LDP's representation fell to 103 seats from 120 seats.
As a result of the LDP's defeat, Mr. Hashimoto resigned as prime minister and
leader of the LDP. Mr. Hashimoto was replaced by Keizo Obuchi. On January 14,
1999, the LDP formed a coalition government with a major opposition party. As a
result, Mr. Obuchi's administration strengthened its position
in the parliament, where it increased its majority in the House
62
<PAGE>
of Representatives and reduced its shortfall in the House of Councillors. The
LDP formed a new three-party coalition government on October 5, 1999 that
further strengthened the position of Mr. Obuchi's administration in the
parliament. On April 6, 2000, following an ultimately fatal stroke suffered by
Mr. Obuchi, the parliament elected Yoshiro Mori to replace Mr. Obuchi as prime
minister. Although the LDP held on to its power in the House of
Representatives elections in June 2000, its margin of victory was less than
predicted. For the past several years, Japan's banking industry has been
weakened by a significant amount of problem loans. Japan's banks also have
had significant exposure to the recent financial turmoil in other Asian
markets. Following the insolvency of one of Japan's largest banks in November
1997, the government proposed several plans designed to strengthen the
weakened banking sector. In October 1998, the Japanese parliament approved
several new laws that made $508 billion in public funds available to increase
the capital of Japanese banks, to guarantee depositors' accounts and to
nationalize the weakest banks. It is unclear whether these laws will achieve
their intended effect. For further information regarding Japan, see the SAIs
of Alliance International Fund and Alliance All-Asia Investment Fund.
Investment in Greater China Issuers. China, in particular, but Hong Kong and
Taiwan, as well, in significant measure because of their existing and increasing
economic, and now in the case of Hong Kong, direct political ties with China,
may be subject to a greater degree of economic, political and social instability
than is the case in the United States.
China's economy is very much in transition. While the government still controls
production and pricing in major economic sectors, significant steps have been
taken toward capitalism and China's economy has become increasingly market
oriented. China's strong economic growth and ability to attract significant
foreign investment in recent years stem from the economic liberalization
initiated by Deng Xiaoping, who assumed power in the late 1970s. The economic
growth, however, has not been smooth and has been marked by extremes in many
respects of inordinate growth, which has not been tightly controlled, followed
by rigid measures of austerity.
The rapidity and erratic nature of the growth have resulted in inefficiencies
and dislocations, including at times high rates of inflation.
China's economic development has occurred notwithstanding the continuation of
the power of China's Communist Party and China's authoritarian government
control, not only of centrally planned economic decisions, but of many aspects
of the social structure. While a significant portion of China's population has
benefited from China's economic growth, the conditions of many leave much room
for improvement. Notwithstanding restrictions on freedom of expression and the
absence of a free press, and notwithstanding the extreme manner in which past
unrest has been dealt with, the 1989 Tianamen Square uprising being a recent
reminder, the potential for renewed popular unrest associated with demands for
improved social, political and economic conditions cannot be dismissed.
Following the death of Deng Xiaoping in February 1997, Jiang Zemin became the
leader of China's Communist Party. The transfer of political power has
progressed smoothly and Jiang's popularity and credibility have gradually
increased. Jiang continues to consolidate his power, but as of yet does not
appear to have the same degree of control as did Deng Xiaoping. Jiang has
continued the market-oriented policies of Deng. Currently, China's major
economic challenge centers on reforming or eliminating inefficient state-owned
enterprises without creating an unacceptable level of unemployment. Recent
capitalistic policies have in many respects effectively outdated the Communist
Party and the governmental structure, but both remain entrenched. The Communist
Party still controls access to governmental positions and closely monitors
governmental action.
In addition to the economic impact of China's internal political uncertainties,
the potential effect of China's actions, not only on China Itself, but on Hong
Kong and Taiwan as well, could also be significant.
China is heavily dependent on foreign trade, particularly with Japan, the U.S.,
South Korea and Taiwan, as well as trade with Hong Kong. Political developments
adverse to its trading partners, as well as political and social repression,
could cause the U.S. and others to alter their trading policy towards China. In
September 2000, however, following an agreement reached in November 1999 between
the U.S. and China, the U.S. Congress authorized the President to grant
permanent normal trade relations (formerly known as most favored nation status)
to China, ending the current annual review process and facilitating China's
entry into the World Trade Organization. With much of China's trading activity
being funneled through Hong Kong and with trade through Taiwan becoming
increasingly significant, any sizable reduction in demand for goods from China
would have negative implications for both countries. China is believed to be the
largest investor in Hong Kong and its markets and an economic downturn in China
would be expected to reverberate through Hong Kong's markets as well.
China has committed by treaty to preserve Hong Kong's autonomy and its economic,
political and social freedoms for fifty years from the July 1, 1997 transfer of
sovereignty from Great Britain to China. Hong Kong is headed by a chief
executive, appointed by the central government of China, whose power is checked
by both the government of China and a Legislative Council. Although Hong Kong
voters voted overwhelmingly for pro-democracy candidates in the May 1998
election and again in the September 2000 election (although by a smaller
margin), it remains possible that China could exert its authority so as to alter
the economic structure, political structure or existing social policy of Hong
Kong. Investor and business confidence in Hong Kong can be significantly
affected by such developments, which in turn can affect markets and business
performance. In this connection, it is noted that a substantial portion of the
companies listed on the Hong Kong Stock Exchange are involved in real
estate-related activities. The securities markets of China and to a lesser
extent Taiwan, are relatively small, with the majority of market
capitalization and
63
<PAGE>
trading volume concentrated in a limited number of companies representing a
small number of industries. Consequently, Alliance Greater China '97 Fund
may experience greater price volatility and significantly lower liquidity
than a portfolio invested solely in equity securities of U.S. companies.
These markets may be subject to greater influence by adverse events
generally affecting the market, and by large investors trading significant
blocks of securities, than is usual in the U.S. Securities settlements may
in some instances be subject to delays and related administrative
uncertainties.
Foreign investment in the securities markets of China and Taiwan is restricted
or controlled to varying degrees. These restrictions or controls, which apply to
the Alliance Greater China '97 Fund, may at times limit or preclude investment
in certain securities and may increase the cost and expenses of the Fund. China
and Taiwan require governmental approval prior to investments by foreign persons
or limit investment by foreign persons to only a specified percentage of an
issuer's outstanding securities or a specific class of securities which may have
less advantageous terms (including price) than securities of the company
available for purchase by nationals. In addition, the repatriation of investment
income, capital or the proceeds of sales of securities from China and Taiwan is
controlled under regulations, including in some cases the need for certain
advance government notification or authority, and if a deterioration occurs in a
country's balance of payments, the country could impose restrictions on foreign
capital remittances.
Alliance Greater China '97 Fund could be adversely affected by delays in, or a
refusal to grant, any required governmental approval for repatriation, as well
as by the application to it of other restrictions on investment. The liquidity
of the Fund's investments in any country in which any of these factors exists
could be affected by any such factor or factors on the Fund's investments. The
limited liquidity in certain Greater China markets is a factor to be taken into
account in the Fund's valuation of portfolio securities in this category and may
affect the Fund's ability to dispose of securities in order to meet redemption
requests at the price and time it wishes to do so. It is also anticipated that
transaction costs, including brokerage commissions for transactions both on and
off the securities exchanges in Greater China countries, will be higher than in
the U.S.
Issuers of securities in Greater China countries are generally not subject to
the same degree of regulation as are U.S. issuers with respect to such matters
as timely disclosure of information, insider trading rules, restrictions on
market manipulation and shareholder proxy requirements. Reporting, accounting
and auditing standards of Greater China countries may differ, in some cases
significantly, from U.S. standards in important respects, and less information
may be available to investors in securities of Greater China country issuers
than to investors in securities of U.S. issuers.
Investment in Greater China companies that are in the initial stages of their
development involves greater risk than is customarily associated with securities
of more established companies. The securities of such companies may have
relatively limited marketability and may be subject to more abrupt or erratic
market movements than securities of established companies or broad market
indices.
64
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<PAGE>
For more information about the Funds, the following documents are available upon
request:
o Annual/Semi-Annual Reports to Shareholders
The Funds' annual and semi-annual reports to shareholders contain additional
information on the Funds' investments. In the annual report, you will find a
discussion of the market conditions and investment strategies that significantly
affected a Fund's performance during its last fiscal year.
o Statement of Additional Information (SAI)
Each Fund has an SAI, which contains more detailed information about the Fund,
including its operations and investment policies. The Funds' SAIs are
incorporated by reference into (and are legally part of) this prospectus.
You may request a free copy of the current annual/semi-annual report or the SAI,
or make inquiries concerning the Funds, by contacting your broker or other
financial intermediary, or by contacting Alliance:
By Mail: c/o Alliance Fund Services, Inc.
P.O. Box 1520
Secaucus, N.J. 07096-1520
By Phone: For Information: (800) 221-5672
For Literature: (800) 227-4618
Or you may view or obtain these documents from the Commission:
o Call the Commission at 1-202-942-8090 for information on the operation of
the Public Reference Room.
o Reports and other information about the Fund are available on the EDGAR
Database on the Commission's Internet site at http://www.sec.gov
o Copies of the information may be obtained, after paying a duplicating fee,
by electronic request at [email protected], or by writing the
Commission's Public Reference Section, Wash, DC 20549-0102
You also may find more information about Alliance and the Funds on the internet
at www.Alliancecapital.com
Fund SEC File No.
--------------------------------------------------------------------------------
Alliance Premier Growth Fund 811-06730
Alliance Health Care Fund 811-09329
Alliance Growth Fund 811-05088
Alliance Technology Fund 811-03131
Alliance Quasar Fund 811-01716
The Alliance Fund 811-00204
Alliance Growth & Income 811-00126
Alliance Balanced Shares 811-00134
Alliance Utility Income Fund 811-07916
Alliance Real Estate Investment Fund 811-07707
Alliance New Europe Fund 811-06028
Alliance Worldwide Privatization Fund 811-08426
Alliance International Premier Growth Fund 811-08527
Alliance Global Small Cap Fund 811-01415
Alliance International Fund 811-03130
Alliance Greater China '97 Fund 811-08201
Alliance All-Asia Investment Fund 811-08776
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(LOGO) ALLIANCE ALL-ASIA INVESTMENT
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FUND, INC.
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c/o Alliance Fund Services, Inc.
P.O. Box 1520, Secaucus, New Jersey 07096-1520
Toll Free (800) 221-5672
For Literature: Toll Free (800) 227-4618
________________________________________________________________
STATEMENT OF ADDITIONAL INFORMATION
February 1, 2000
(as amended November 1, 2000)
________________________________________________________________
This Statement of Additional Information is not a
prospectus but supplements and should be read in conjunction with
the current Prospectus, dated November 1, 2000, 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, dated November 1, 2000, for the Fund that offers the
Advisor Class shares of the Fund (the "Advisor Class Prospectus"
and, together with the Prospectus for the Fund that offers the
Class A, Class B and Class C shares of the Fund, the
"Prospectus"). Copies of such Prospectuses may be obtained by
contacting Alliance Fund Services, Inc. at the address or the
"For Literature" telephone 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....................
Portfolio Transactions................................
General Information...................................
Financial Statements and Report of Independent
Auditors..............................................
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
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____________________
(R): This registered service mark used under license from the
owner, Alliance Capital Management L.P.
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________________________________________________________________
DESCRIPTION OF THE FUND
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Alliance All-Asia Investment Fund, Inc. (the "Fund") is
a diversified, open-end investment company. 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.
How the Fund Pursues its Objective
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
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("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").
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
established companies in such growing economic sectors as capital
goods, telecommunications and consumer services.
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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.
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
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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-
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
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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.
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
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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
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
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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
described in the Prospectus under "Description of the Fund--
Additional Investment Policies and Practices--Interest Rate
Transactions."
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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
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
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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.
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
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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
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
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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
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
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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
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.
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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
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
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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
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
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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
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
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<PAGE>
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.
Repurchase agreements may exhibit the characteristics of
loans by the Fund. During the term of the repurchase agreement,
the Fund retains the security subject to the repurchase agreement
as collateral securing the seller's repurchase obligation,
continually monitors on a daily basis the market value of the
security subject to the agreement and requires the seller to
deposit with the Fund collateral equal to any amount by which the
market value of the security subject to the repurchase agreement
17
<PAGE>
falls below the resale amount provided under the repurchase
agreement.
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
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.
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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
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
19
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in the option (i.e., dispose of the option) with the result that
(i) an option purchased by the Fund would have to be exercised in
order for the Fund to realize any profit and (ii) the Fund may
not be able to sell currencies or portfolio securities covering
an option written by the Fund until the option expires or it
delivers the underlying futures contract or currency upon
exercise. Therefore, no assurance can be given that the Fund
will be able to utilize these instruments effectively for the
purposes set forth above.
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.
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Portfolio Turnover. Generally, the Fund's policy with
respect to portfolio turnover is to sell any security whenever,
in the judgment of the Adviser, its appreciation possibilities
have been substantially realized or the business or market
prospects for such security have deteriorated, irrespective of
the length of time that such security has been held. The Adviser
anticipates that the Fund's annual rate of portfolio turnover
will not exceed 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 or losses.
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
21
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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
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
22
<PAGE>
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,
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.
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<PAGE>
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
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
24
<PAGE>
not occur. Since the risk of default is higher for lower-rated
securities, the Adviser's research and credit analysis are a
correspondingly important aspect of its program for managing the
Fund's securities than would be the case if the Fund did not
invest in lower-rated securities. In considering investments for
the Fund, the Adviser will attempt to identify those high-risk,
high-yield securities whose financial condition is adequate to
meet future obligations, has improved or is expected to improve
in the future. The Adviser's analysis focuses on relative values
based on such factors as interest or dividend coverage, asset
coverage earnings prospects and the experience and managerial
strength of the issuer.
Non-rated securities will also be considered for
investment by the Fund when the Adviser believes that the
financial condition of the issuers of such securities, or the
protection afforded by the terms of the securities themselves,
limits the risk to the Fund to a degree comparable to that of
rated securities which are consistent with the Fund's objective
and policies.
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;
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<PAGE>
(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;
(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
26
<PAGE>
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
(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 business and affairs of the Fund are managed under
the direction of the Board of Directors. The Directors and
principal officers of the Fund, their ages and their principal
occupations during the past five years are set forth below. Each
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,* 55, Chairman of the Board, is the
President, Chief Operating Officer and a Director of Alliance
____________________
* An "interested person" of the Fund as defined in the 1940
Act.
27
<PAGE>
Capital Management Corporation ("ACMC"), with which he has been
associated since prior to 1995.
DAVID H. DIEVLER, 71, is an independent consultant.
Until December 1994 he was Senior Vice President of ACMC
responsible for mutual fund administration. Prior to joining
ACMC in 1984, he was Chief Financial Officer of Eberstadt Asset
Management since 1968. Prior to that he was a Senior Manager at
Price Waterhouse & Co. Member of American Institute of Certified
Public Accountants since 1953. His address is P.O. Box 167,
Spring Lake, New Jersey 07762.
JOHN H. DOBKIN, 58, Consultant. Formerly a Senior
Advisor from June 1999 - June 2000 and President from December
1989 - May 1999 of Historic Hudson Valley (historic
preservation). Previously, he was Director of the National
Academy of Design. During 1988-92, he was a Director and
Chairman of the Audit Committee of ACMC. His address is P.O. Box
12, Annandale, New York 12504.
W.H. HENDERSON, 73, joined the Royal Dutch/Shell Group
in 1948 and served in Singapore, Japan, South Africa, Hong Kong
and London. The greater part of his service was in Japan and
between 1969 and 1972 he was Managing Director and Chief
Executive Officer of the Shell Company of Hong Kong Limited.
Mr. Henderson retired from the Royal Dutch/Shell Group in 1974 in
order to establish his own oil and gas consultancy business.
Mr. Henderson is currently a Director of a number of investment
companies. His address is Quarrey House, Charlton Horethorne,
Sherborne, Dorset, DT9 4NY, England.
STIG HOST, 74, is the Chairman and Chief Executive
Officer of International Energy Corp. (oil and gas exploration),
with which he has been associated since prior to 1995. 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, 49, has been President of Zemi
Investments, L.P., since 1995, President of Zemi Communications,
L.L.C. and its predecessor company since 1996, and a Managing
Director of Kissinger Associates, Inc. since prior to 1995. He
has continued as a member of the Board of Directors of Kissinger
Associates. His address is Kissinger Associates, Inc., 350 Park
Avenue, New York, New York 10022.
28
<PAGE>
Officers
JOHN D. CARIFA, Chairman and President, (see biography
above).
KATHLEEN A. CORBET, Senior Vice President, 40, is an
Executive Vice President of ACMC, with which she has been
associated since prior to 1995.
THOMAS BARDONG, Vice President, 55, is a Senior Vice
President of ACMC, with which he has been associated since prior
to 1995.
RUSSELL BRODY, Vice President, 33, is a Vice President
and Head Trader of the London desk of ACL with which he has been
associated since July 1997. Prior thereto, he was Head of
European Equity Dealing with Lombard Odier et Cie, London office,
since prior to 1995.
HIROSHI MOTOKI, Vice President, 43, 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 with which he has been associated since prior to 1995.
MANISH SINGHAI, Vice President, 29, is a Vice President
of ACMC and an Emerging Markets Equity Analyst and Portfolio
Manager. Prior to joining ACMC in 1998, he was with Caspian
Securities Ltd. as the Head of Asian Telecommunications Research.
Previously, Mr. Singhai worked for ABN AMRO Hoare Govett
Securities as an Equity Research Analyst prior to 1995.
MARK D. GERSTEN, Treasurer and Chief Financial Officer,
50, is a Senior Vice President of Alliance Fund Services, Inc.
("AFS"), with which he has been associated since prior to 1995.
EDMUND P. BERGAN. JR., Secretary, 50, 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 1995.
ANDREW L. GANGOLF, Assistant Secretary, 46, is a Senior
Vice President and Assistant General Counsel of AFD, with which
he has been associated since prior to 1995.
DOMENICK PUGLIESE, Assistant Secretary, 39, is a Senior
Vice President and Assistant General Counsel of AFD, with which
he has been associated since May 1995.
VINCENT S. NOTO, Controller, 35, is a Vice President of
AFS, with which he has been associated since prior to 1995.
29
<PAGE>
The aggregate compensation to be paid by the Fund to
each of the Directors during the Fund's fiscal year ended
October 31, 1999, the aggregate compensation paid to each of the
Directors during calendar year 1999 by all of the registered
investment companies to which the Adviser provides investment
advisory services (collectively, the "Alliance Fund Complex"),
and the total number of registered investment companies (and
separate investment portfolios within those companies) in the
Alliance Fund Complex with respect to which each of the Directors
serves as a director or trustee, are set forth below. Neither
the Fund nor any other registered investment company in the
Alliance Fund Complex provides compensation in the form of
pension or retirement benefits to any of its directors or
trustees. Each of the Directors is a director or trustee of one
or more other registered investment companies in the Alliance
Fund Complex.
Total Number
Investment
Total Number Portfolios
of Investment within the
Companies in Alliance Fund
Total the Alliance Complex,
Compensation Complex, Including the
from the including the Fund, as to
Aggregate Alliance Fund Fund, as 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 49 106
David H. Dievler $5,693 $210,188 45 89
John H. Dobkin $6,794 $206,488 44 86
W.H. Henderson $6,900 $ 27,600 3 3
Stig Host $6,900 $ 27,600 3 3
Alan Stoga $6,900 $ 27,600 3 3
As of October 6, 2000, 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.(the "Adviser"), 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
30
<PAGE>
the supervision of the Fund's Board of Directors (see "Management
of the Fund" in the Prospectus).
The Adviser is a leading international adviser managing
client accounts with assets as of June 30, 2000 totaling more
than $388 billion (of which more than $185 billion represented
assets of investment companies). As of June 30, 2000, the
Adviser managed retirement assets for many of the largest public
and private employee benefit plans (including 29 of the nation's
FORTUNE 100 companies), for public employee retirement funds in
33 states, for investment companies, and for foundations,
endowments, banks and insurance companies worldwide. The 52
registered investment companies managed by the Adviser,
comprising 122 separate investment portfolios, currently have
approximately 6.1 million shareholder accounts.
ACMC is the general partner of the Adviser and a wholly
owned subsidiary of The Equitable Life Assurance Society of the
United States ("Equitable"). Equitable, one of the largest life
insurance companies in the United States, is the beneficial owner
of an approximately 55.4% partnership interest in the Adviser.
Alliance Capital Management Holding L.P. ("Alliance Holding")
owns an approximately 41.9% partnership interest in the
Adviser.** Equity interests in Alliance Holding are traded on
the New York Stock Exchange in the form of units. Approximately
98% of such interests are owned by the public and management or
employees of the Adviser and approximately 2% are owned by
Equitable. Equitable is a wholly owned subsidiary of AXA
Financial, Inc. ("AXA Financial"), a Delaware corporation whose
shares are traded on the New York Stock Exchange. AXA Financial
serves as the holding company for the Adviser, Equitable and
Donaldson, Lufkin & Jenrette, Inc., an integrated investment and
merchant bank. As of June 30, 1999, AXA, a French insurance
holding company, owned approximately 58.2% of the issued and
outstanding shares of common stock of AXA Financial.
____________________
** Until October 29, 1999, Alliance Holding served as the
investment adviser to the Fund. On that date, Alliance
Holding reorganized by transferring its business to the
Adviser. Prior thereto, the Adviser had no material
business operations. One result of the organization was
that the Advisory Agreement, then between the Fund and
Alliance Holding, was transferred to the Adviser by means
of a technical assignment, and ownership of Alliance Fund
Distributors, Inc. and Alliance Fund Services, Inc., the
Fund's principal underwriter and transfer agent,
respectively, also was transferred to the Adviser.
31
<PAGE>
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
$58,083 in respect of such services during the fiscal year of the
Fund ended October 31, 1999.
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 Adviser has agreed for the
current fiscal year to waive its fee and bear certain expenses so
that its total expenses do not exceed on an accrued basis 3.00%,
3.70%, 3.70% and 2.70% of average net assets, respectively, for
Class A, Class B, Class C and Advisor Class shares. The fee is
accrued daily and paid monthly. For the fiscal years ended
October 31, 1997, October 31, 1998 and October 31, 1999, the
Adviser received advisory fees of $343,746, $178,047 and
$387,722, respectively, from the Fund. Of that $42,986 was
waived by the Adviser for the fiscal year ended October 31, 1997,
$134,448 was waived by the Adviser for the fiscal year ended
October 31, 1998 and $136,029 was waived by the Adviser for the
fiscal year ended October 31, 1999.
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 effect 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
the Advisory Agreement or interested persons of any such party as
defined by the Act. The Advisory Agreement was approved for
32
<PAGE>
another annual term 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 April 30, 1999.
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 AFD Exchange Reserves, Alliance
Balanced Shares, Inc., Alliance Bond Fund, Inc., Alliance Capital
Reserves, Alliance Disciplined Value Fund, Inc., Alliance Global
Dollar Government Fund, Inc., Alliance Global Small Cap Fund,
Inc., Alliance Global Strategic Income Trust, Inc., Alliance
Government Reserves, Alliance Greater China '97 Fund, Inc.,
Alliance Growth and Income Fund, Inc., Alliance Health Care Fund,
Inc., Alliance High Yield Fund, Inc., Alliance Institutional
Funds, Inc., Alliance Institutional Reserves, Inc., Alliance
International Fund, Alliance International Premier Growth Fund,
Inc., Alliance Limited Maturity Government Fund, Inc., Alliance
Money Market Fund, Alliance Mortgage Securities Income Fund,
Inc., Alliance Multi-Market Strategy Trust, Inc., Alliance
Municipal Income Fund, Inc., Alliance Municipal Income Fund II,
Alliance Municipal Trust, Alliance New Europe Fund, Inc.,
Alliance North American Government Income Trust, Inc., Alliance
Premier Growth Fund, Inc., Alliance Quasar Fund, Inc., Alliance
33
<PAGE>
Real Estate Investment 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 Fund,
Inc., The Alliance Portfolios and EQ Advisors Trust, all
registered open-end investment companies; and to ACM Government
Income Fund, Inc., ACM Government Securities Fund, Inc., ACM
Government Spectrum Fund, Inc., ACM Government Opportunity Fund,
Inc., ACM Managed Dollar Income Fund, Inc., ACM Managed Income
Fund, Inc., ACM Municipal Securities Income Fund, Inc., Alliance
All-Market Advantage Fund, Inc., Alliance World Dollar Government
Fund, Inc., Alliance World Dollar Government Fund II, Inc., The
Austria Fund, Inc., The Korean Investment Fund, Inc., The
Southern Africa Fund, Inc. and The Spain Fund, Inc., all
registered closed-end investment companies.
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
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
34
<PAGE>
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 years ended
October 31 1997, 1998 and 1999, the Administrator received
administration fees of $32,908, $26,707 and $58,083,
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" or "AFD"), 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 under the 1940 Act (the "Rule 12b-1
Plan").
During the Fund's fiscal year ended October 31, 1999,
the Fund paid distribution services fees for expenditures under
the Agreement, with respect to Class A shares, in amounts
aggregating $43,514 which constituted .30%, annualized, of the
Fund's aggregate average daily net assets attributable to Class A
shares during the period, and the Adviser made payments from its
own resources as described above aggregating $424,190. Of the
$467,704 paid by the Fund and the Adviser under the Rule 12b-1
Plan with respect to the Class A shares, $29,751 was spent on
advertising, $5,755 on the printing and mailing of prospectuses
for persons other than current shareholders, $167,660 for
compensation to broker-dealers and other financial intermediaries
(including, $86,151 to the Fund's Principal Underwriter), $97,959
for compensation to sales personnel, and $166,579 was spent on
35
<PAGE>
printing of sales literature, travel, entertainment, due
diligence and other promotional expenses.
During the Fund's fiscal year ended October 31, 1999,
the Fund paid distribution services fees for expenditures under
the Agreement, with respect to Class B shares, in amounts
aggregating $174,817, which constituted 1.0%, annualized, of the
Fund's aggregate average daily net assets attributable to Class B
shares during the period, and the Adviser made payments from its
own resources as described above aggregating $658,054. Of the
$832,871 paid by the Fund and the Adviser under the Rule 12b-1
Plan with respect to the Class B shares, $23,461 was spent on
advertising, $8,177 on the printing and mailing of prospectuses
for persons other than current shareholders, $600,811 for
compensation to broker-dealers and other financial intermediaries
(including, $68,313 to the Fund's Principal Underwriter), $42,184
for compensation to sales personnel, $125,557 was spent on
printing of sales literature, travel, entertainment, due
diligence and other promotional expenses, and $32,681 was spent
on interest relating to Class B shares financing.
During the Fund's fiscal year ended October 31, 1999,
the Fund paid distribution services fees for expenditures under
the Agreement, with respect to Class C shares, in amounts
aggregating $42,171, which constituted 1.00%, annualized, of the
Fund's aggregate average daily net assets attributable to Class C
shares during the period, and the Adviser made payments from its
own resources as described above aggregating $166,956. Of the
$209,127 paid by the Fund and the Adviser under the Rule 12b-1
Plan with respect to the Class C shares, $13,963 was spent on
advertising, $1,732 on the printing and mailing of prospectuses
for persons other than current shareholders, $113,885 for
compensation to broker-dealers and other financial intermediaries
(including, $35,004 to the Fund's Principal Underwriter), $16,586
for compensation to sales personnel, $61,913 was spent on
printing of sales literature, travel, entertainment, due
diligence, other promotional expenses, and $1,048 was spent on
interest relating to Class C shares financing.
Distribution services fees are accrued daily and paid
monthly and are charged as expenses of the Fund as accrued. The
distribution services fees attributable to the Class B shares and
Class C shares are designed to permit an investor to purchase
such shares through broker-dealers without the assessment of an
initial sales charge and at the same time to permit the 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
shares are the same as those of the initial sales charge and
distribution services fee with respect to the Class A shares in
36
<PAGE>
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.
With respect to Class A shares of the Fund, distribution
expenses accrued by AFD in one fiscal year may not be paid from
distribution services fees received from the Fund in subsequent
fiscal years. AFD's compensation with respect to Class B and
Class C shares for any given year, however, will probably exceed
the distribution services fee payable under the Rule 12b-1 Plan
with respect to the class involved and, in the case of Class B
and Class C shares, payments received from contingent deferred
sales charges ("CDSCs"). The excess will be carried forward by
AFD and reimbursed from distribution services fees payable under
the Rule 12b-1 Plan with respect to the class involved and, in
the case of Class B and Class C shares, payments subsequently
received through CDSCs, so long as the Rule 12b-1 Plan is in
effect.
Unreimbursed distribution expenses incurred as of the
end of the Fund's most recently completed fiscal period, and
carried over for reimbursement in future years in respect of the
Class B and Class C shares for the Fund were, respectively,
$2,669,556 (7.00% of the net assets of Class B) and $407,423
(4.05% of the net assets of Class C).
The Rule 12b-1 Plan is in compliance with rules of the
National Association of Securities Dealers, Inc. which
effectively limit the annual asset-based sales charges and
service fees that a mutual fund may pay on a class of shares to
.75% and .25%, respectively, of the average annual net assets
attributable to that class. The rules also limit the aggregate
of all front-end, deferred and asset-based sales charges imposed
with respect to a class of shares by a mutual fund that also
charges a service fee to 6.25% of cumulative gross sales of
shares of that class, plus interest at the prime rate plus 1% per
annum.
In approving the Rule 12b-1 Plan, the Directors of the
Fund determined that there was a reasonable likelihood that the
Rule 12b-1 Plan would benefit the Fund and its shareholders. The
distribution services fee of a particular class will not be used
to subsidize the provision of distribution services with respect
to any other class.
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.
37
<PAGE>
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. The Agreement
was approved for another annual term 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 April 30,
1999.
In the event that the Rule 12b-1 Plan is terminated or
not continued with respect to the Class A shares, Class B shares
or Class C shares, (i) no distribution services fees (other than
current amounts accrued but not yet paid) would be owed by the
Fund to the Principal Underwriter with respect to that class, and
(ii) the Fund would not be obligated to pay the Principal
Underwriter for any amounts expended under the Agreement not
previously recovered by the Principal Underwriter from
distribution services fees in respect of shares of such class or
through deferred sales charges.
Transfer Agency Agreement
AFS, an indirect wholly-owned subsidiary of the Adviser
located at 500 Plaza Drive, Secaucus, New Jersey 07094, 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 shares 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, 1999, the Fund paid AFS $135,941 for the
transfer agency services.
Code of Ethics
The Fund, the Adviser and the Principal Underwriter have
each adopted codes of ethics pursuant to Rule 17j-1 of the 1940
Act. These codes of ethics permit personnel subject to the codes
to invest in securities, including securities that may be
purchased or held by the Fund.
38
<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.
39
<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.
40
<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
representative, as applicable, receives the order after the close
of regular trading on the Exchange, the price will be based on
the net asset value determined as of the close of regular trading
on the Exchange on the next day it is open for trading.
Following the initial purchase of Fund shares, a
shareholder may place orders to purchase additional shares by
telephone if the shareholder has completed the appropriate
portion of the Subscription Application or an "Autobuy"
application obtained by calling the "For Literature" telephone
number shown on the cover of this Statement of Additional
Information. Except with respect to certain omnibus accounts,
telephone purchase orders may not exceed $500,000. Payment for
shares purchased by telephone can be made only by electronic
funds transfer from a bank account maintained by the shareholder
at a bank that is a member of the National Automated Clearing
House Association ("NACHA"). If a shareholder's telephone
purchase request is received before 3:00 p.m. Eastern time on a
Fund business day, the order to purchase shares is automatically
placed the following Fund business day, and the applicable public
offering price will be the public offering price determined as of
the close of business on such following business day.
Full and fractional shares are credited to a
subscriber's account in the amount of his or her subscription. As
41
<PAGE>
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, such cash or other
incentives may take the form of payment for attendance at
seminars, meals, sporting events or theater performances, or
payment for travel, lodging and entertainment incurred in
connection with travel taken by persons associated with a dealer
or agent to locations within or outside the United States. Such
dealer or agent may elect to receive cash incentives of
equivalent amount in lieu of such payments.
Class A, Class B, Class C and Advisor Class shares each
represent an interest in the same portfolio of investments of the
Fund, have the same rights and are identical in all respects,
except that (i) Class A shares bear the expense of the initial
sales charge (or contingent deferred sales charge when
applicable) and Class B and Class C shares bear the expense of
the contingent deferred sales charge, (ii) Class B shares and
Class C shares each bear the expense of a higher distribution
services fee than that borne by Class A shares, and Advisor Class
shares do not bear such a fee, (iii) Class B and Class C shares
bear higher transfer agency costs than those borne by Class A and
Advisor Class shares, (iv) each of Class A, Class B and Class C
shares has exclusive voting rights with respect to provisions of
the Rule 12b-1 Plan pursuant to which its distribution services
fee is paid and other matters for which separate class voting is
appropriate under applicable law, provided that, if the Fund
submits to a vote of the Class A shareholders, an amendment to
the Rule 12b-1 Plan that would materially increase the amount to
be paid thereunder with respect to the Class A shares, then such
amendment will also be submitted to the Class B shareholders and
Advisor Class shareholders and the Class A shareholders, the
Class B shareholders and the Advisor Class shareholders will vote
separately by class, and (v) Class B shares and Advisor Class
shares are subject to a conversion feature. Each class has
different exchange privileges and certain different shareholder
service options available.
42
<PAGE>
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.
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
____________________
*** Advisor Class shares are sold only to investors as
described above in this section under "--General."
43
<PAGE>
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 years ended October 31, 1997,
October 31, 1998 and October 31, 1999, the aggregate amount of
underwriting commissions payable with respect to shares of the
Fund was $51,997, $81,416 and $329,856, respectively. Of that
amount, the Principal Underwriter received the amount of $2,570,
$0 and $22,523, 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 October 31, 1999, 1998 and 1997, the
Principal Underwriter received contingent deferred sales charges
of $0, $437 and $0, respectively, on Class A shares, $32,103,
$69,438 and $73,693, respectively, on Class B shares, and $8,688,
$1,601 and $1,152, respectively, on Class C shares.
44
<PAGE>
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
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
45
<PAGE>
contingent deferred sales charge on Class A shares are paid to
the Principal Underwriter and are used by the Principal
Underwriter to defray the expenses of the Principal Underwriter
related to providing distribution-related services to the Fund in
connection with the sales of Class A shares, such as the payment
of compensation to selected dealers and agents for selling
Class A shares. With respect to purchases of $1,000,000 or more
made through selected dealers or agents, the Adviser may,
pursuant to the Distribution Services Agreement described above,
pay such dealers or agents from its own resources a fee of up to
1% of the amount invested to compensate such dealers or agents
for their distribution assistance in connection with such
purchases.
No initial sales charge is imposed on Class A shares
issued (i) pursuant to the automatic reinvestment of income
dividends or capital gains distributions, (ii) in exchange for
Class A shares of other "Alliance Mutual Funds" (as that term is
defined under "Combined Purchase Privilege" below), except that
an initial sales charge will be imposed on Class A shares issued
in exchange for Class A shares of AFD Exchange Reserves ("AFDER")
that were purchased for cash without the payment of an initial
sales charge and without being subject to a contingent deferred
sales charge or (iii) upon the automatic conversion of Class B
shares or Advisor Class shares as described below under "Class B
Shares--Conversion Feature" and "--Conversion of Advisor Class
Shares to Class A Shares." The Fund receives the entire net
asset value of its Class A shares sold to investors. The
Principal Underwriter's commission is the sales charge shown
above less any applicable discount or commission "reallowed" to
selected dealers and agents. The Principal Underwriter will
reallow discounts to selected dealers and agents in the amounts
indicated in the table above. In this regard, the Principal
Underwriter may elect to reallow the entire sales charge to
selected dealers and agents for all sales with respect to which
orders are placed with the Principal Underwriter. A selected
dealer who receives reallowance in excess of 90% of such a sales
charge may be deemed to be an "underwriter" under the Securities
Act.
Investors choosing the initial sales charge alternative
may under certain circumstances be entitled to pay (i) no initial
sales charge (but be subject in most such cases to a contingent
deferred sales charge) or (ii) a reduced initial sales charge.
The circumstances under which such investors may pay a reduced
initial sales charge are described below.
Combined Purchase Privilege. Certain persons may
qualify for the sales charge reductions indicated in the schedule
of such charges above by combining purchases of shares of the
Fund into a single "purchase," if the resulting "purchase" totals
46
<PAGE>
at least $100,000. The term "purchase" refers to: (i) a single
purchase by an individual, or to concurrent purchases, which in
the aggregate are at least equal to the prescribed amounts, by an
individual, his or her spouse and their children under the age of
21 years purchasing shares of the Fund for his, her or their own
account(s); (ii) a single purchase by a trustee or other
fiduciary purchasing shares for a single trust, estate or single
fiduciary account although more than one beneficiary is involved;
or (iii) a single purchase for the employee benefit plans of a
single employer. The term "purchase" also includes purchases by
any "company," as the term is defined in the 1940 Act, but does
not include purchases by any such company which has not been in
existence for at least six months or which has no purpose other
than the purchase of shares of the Fund or shares of other
registered investment companies at a discount. The term
"purchase" does not include purchases by any group of individuals
whose sole organizational nexus is that the participants therein
are credit card holders of a company, policy holders of an
insurance company, customers of either a bank or broker-dealer or
clients of an investment adviser. A "purchase" may also include
shares, purchased at the same time through a single selected
dealer or agent, of any other "Alliance Mutual Fund." Currently,
the Alliance Mutual Funds include:
AFD Exchange Reserves
Alliance All-Asia Investment Fund, Inc.
Alliance Balanced Shares, Inc.
Alliance Bond Fund, Inc.
-Corporate Bond Portfolio
-Quality Bond Portfolio
-U.S. Government Portfolio
Alliance Disciplined Value Fund, Inc.
Alliance Global Dollar Government Fund, Inc.
Alliance Global Small Cap Fund, Inc.
Alliance Global Strategic Income Trust, Inc.
Alliance Greater China '97 Fund, Inc.
Alliance Growth and Income Fund, Inc.
Alliance Health Care Fund, Inc.
Alliance High Yield Fund, Inc.
Alliance International Fund
Alliance International Premier Growth Fund, Inc.
Alliance Limited Maturity Government Fund, Inc.
Alliance Mortgage Securities Income Fund, Inc.
Alliance Multi-Market Strategy Trust, Inc.
Alliance Municipal Income Fund, Inc.
-California Portfolio
-Insured California Portfolio
-Insured National Portfolio
-National Portfolio
-New York Portfolio
Alliance Municipal Income Fund II
47
<PAGE>
-Arizona Portfolio
-Florida Portfolio
-Massachusetts Portfolio
-Michigan Portfolio
-Minnesota Portfolio
-New Jersey Portfolio
-Ohio Portfolio
-Pennsylvania Portfolio
-Virginia Portfolio
Alliance New Europe Fund, Inc.
Alliance North American Government Income Trust, Inc.
Alliance Premier Growth Fund, Inc.
Alliance Quasar Fund, Inc.
Alliance Real Estate Investment Fund, Inc.
Alliance Select Investor Series, Inc.
-Premier Portfolio
-Technology Portfolio
-Biotechnology Portfolio
Alliance Technology Fund, Inc.
Alliance Utility Income Fund, Inc.
Alliance Worldwide Privatization Fund, Inc.
The Alliance Fund, Inc.
The Alliance Portfolios
-Alliance Growth Fund
-Alliance Conservative Investors Fund
-Alliance Growth Investors Fund
Prospectuses for the Alliance Mutual Funds may be
obtained without charge by contacting AFS at the address or the
"For Literature" telephone number shown on the front cover of
this Statement of Additional Information.
Cumulative Quantity Discount (Right of Accumulation). An
investor's purchase of additional Class A shares of the Fund may
qualify for a Cumulative Quantity Discount. The applicable sales
charge will be based on the total of:
(i) the investor's current purchase;
(ii) the net asset value (at the close of business on
the previous day) of (a) all shares of the Fund
held by the investor and (b) all shares of any
other Alliance Mutual Fund held by the investor;
and
(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).
48
<PAGE>
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.
Investors qualifying for the Combined Purchase Privilege
described above may purchase shares of the Alliance Mutual Funds
under a single Statement of Intention. For example, if at the
time an investor signs a Statement of Intention to invest at
least $100,000 in Class A shares of the Fund, the investor and
the investor's spouse each purchase shares of the Fund worth
$20,000 (for a total of $40,000), it will only be necessary to
invest 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
49
<PAGE>
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
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
50
<PAGE>
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
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;
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<PAGE>
(v) persons participating in a fee-based program,
sponsored and maintained by a registered broker-
dealer or other financial intermediary and approved
by the Principal Underwriter, pursuant to which
such persons pay an asset-based fee to such broker-
dealer or financial intermediaries, or its
affiliates or agents, for services in the nature of
investment advisory or administrative services; and
(vi) employer-sponsored qualified pension or profit-
sharing plans (including Section 401(k) plans),
custodial accounts maintained pursuant to
Section 403(b)(7) retirement plans and individual
retirement accounts (including individual
retirement accounts to which simplified employee
pension ("SEP") contributions are made), if such
plans or accounts are established or administered
under programs sponsored by administrators or other
persons that have been approved by the Principal
Underwriter.
Class B Shares
Investors may purchase Class B shares at the public
offering price equal to the net asset value per share of the
Class B shares on the date of purchase without the imposition of
a sales charge at the time of purchase. The Class B shares are
sold without an initial sales charge so that the Fund will
receive the full amount of the investor's purchase payment.
Proceeds from the contingent deferred sales charge on
the Class B shares are paid to the Principal Underwriter and are
used by the Principal Underwriter to defray the expenses of the
Principal Underwriter related to providing distribution-related
services to the Fund in connection with the sale of the Class B
shares, such as the payment of compensation to selected dealers
and agents for selling Class B shares. The combination of the
contingent deferred sales charge and the distribution services
fee enables the Fund to sell the Class B shares without a sales
charge being deducted at the time of purchase. The higher
distribution services fee incurred by Class B shares will cause
such shares to have a higher expense ratio and to pay lower
dividends than those related to Class A shares.
Contingent Deferred Sales Charge. Class B shares that
are redeemed within four years of purchase will be subject to a
contingent deferred sales charge at the rates set forth below
charged as a percentage of the dollar amount subject thereto. The
charge will be assessed on an amount equal to the lesser of the
cost of the shares being redeemed or their net asset value at the
time of redemption. Accordingly, no sales charge will be imposed
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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
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
53
<PAGE>
been purchased by present or former Directors of the Fund, by the
relative of any such person, by any trust, individual retirement
account or retirement plan account for the benefit of any such
person or relative, or by the estate of any such person or
relative, or (iv) pursuant to a systematic withdrawal plan (see
"Shareholder Services--Systematic Withdrawal Plan" below).
Conversion Feature. Eight years after the end of the
calendar month in which the shareholder's purchase order was
accepted, Class B shares will automatically convert to Class A
shares and will no longer be subject to a higher distribution
services fee. Such conversion will occur on the basis of the
relative net asset values of the two classes, without the
imposition of any sales load, fee or other charge. The purpose
of the conversion feature is to reduce the distribution services
fee paid by holders of Class B shares that have been outstanding
long enough for the Principal Underwriter to have been
compensated for distribution expenses incurred in the sale of
such shares.
For purposes of conversion to Class A, Class B shares
purchased through the reinvestment of dividends and distributions
paid in respect of Class B shares in a shareholder's account will
be considered to be held in a separate sub-account. Each time
any Class B shares in the shareholder's account (other than those
in the sub-account) convert to Class A, an equal pro-rata portion
of the Class B shares in the sub-account will also convert to
Class A.
The conversion of Class B shares to Class A shares is
subject to the continuing availability of an opinion of counsel
to the effect that the conversion of Class B shares to Class A
shares does not constitute a taxable event under federal income
tax law. The conversion of Class B shares to Class A shares may
be suspended if such an opinion is no longer available at the
time such conversion is to occur. In that event, no further
conversions of Class B shares would occur, and shares might
continue to be subject to the higher distribution services fee
for an indefinite period which may extend beyond the period
ending eight years after the end of the calendar month in which
the shareholder's purchase order was accepted.
Class C Shares
Investors may purchase Class C shares at the public
offering price equal to the net asset value per share of the
Class C shares on the date of purchase without the imposition of
a sales charge either at the time of purchase or, as long as the
shares are held for one year or more, upon redemption. Class C
shares are sold without an initial sales charge so that the Fund
will receive the full amount of the investor's purchase payment
54
<PAGE>
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
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.
The contingent deferred sales charge is waived on
redemptions of shares (i) following the death or disability, as
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<PAGE>
defined in the Code, of a shareholder, (ii) to the extent that
the redemption represents a minimum required distribution from an
individual retirement account or other retirement plan to a
shareholder who has attained the age of 70-1/2, (iii) that had
been purchased by present or former Directors of the Fund, by the
relative of any such person, by any trust, individual retirement
account or retirement plan account for the benefit of any such
person or relative, or by the estate of any such person or
relative, (iv) pursuant to a systematic withdrawal plan (see
"Shareholder Services - Systematic Withdrawal Plan" below), or
(v) sold through programs offered by financial intermediaries and
approved by AFD where such programs offer only shares which are
not subject to a contingent deferred sales charge and where the
financial intermediary establishes a single omnibus account for
each Fund.
Conversion of Advisor Class Shares to Class A Shares
Advisor Class shares may be held solely through the fee-
based program accounts, employee benefit plans and registered
investment advisory or other financial intermediary relationships
described above under "Purchase of Shares--General," and by
investment advisory clients of, and by certain other persons
associated with, the Adviser and its affiliates or the Fund. If
(i) a holder of Advisor Class shares ceases to participate in 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 to
Class A shares of the Fund during the calendar month following
the month in which the Fund is informed of the occurrence of the
Conversion Event. The Fund will provide the shareholder with at
least 30 days' notice of the conversion. The failure of a
shareholder or a fee-based program to satisfy the minimum
investment requirements to purchase Advisor Class shares will not
constitute a Conversion Event. The conversion would occur on the
basis of the relative net asset values of the two classes and
without the imposition of any sales load, fee or other charge.
Class A shares currently bear a .30% distribution services fee.
Advisor Class shares do not have any distribution services fee.
As a result, Class A shares have a higher expense ratio and may
pay correspondingly lower dividends and have a lower net asset
value than Advisor Class shares.
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
56
<PAGE>
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 or her Advisor Class shares, which would constitute a
taxable event under federal income tax law.
_______________________________________________________________
REDEMPTION AND REPURCHASE OF SHARES
______________________________________________________________
The following information supplements that set forth in
the Fund's Prospectus under the heading "Purchase and Sale of
Shares--How to Sell Shares." If you are an Advisor Class
shareholder through an account established under a fee-based
program your fee-based program may impose requirements with
respect to the purchase, sale or exchange of Advisor Class shares
of the Fund that are different from those described herein. A
transaction fee may be charged by your financial representative
with respect to the purchase, sale or exchange of Advisor Class
shares made through such financial representative.
Redemption
Subject only to the limitations described below, the
Fund's Articles of Incorporation require that the Fund redeem the
shares tendered to it, as described below, at a redemption price
equal to their net asset value as next computed following the
receipt of shares tendered for redemption in proper form. Except
for any contingent deferred sales charge which may be applicable
to Class A, Class B or Class C shares, there is no redemption
charge. Payment of the redemption price will be made within seven
days after the Fund's receipt of such tender for redemption. If
a shareholder is in doubt about what documents are required by
his or her fee-based program or employee benefit plan, the
shareholder should contact his or her financial representative.
The right of redemption may not be suspended or the date
of payment upon redemption postponed for more than seven days
after shares are tendered for redemption, except for any period
during which the 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
57
<PAGE>
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.
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
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<PAGE>
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 nor
AFS will be responsible for the authenticity of telephone
requests for redemptions that the Fund reasonably believes to be
genuine. The Fund will employ reasonable procedures in order to
verify that telephone requests for redemptions are genuine,
including, among others, recording such telephone instructions
and causing written confirmations of the resulting transactions
to be sent to shareholders. If the Fund did not employ such
procedures, it could be liable for losses arising from
unauthorized or fraudulent telephone instructions. Selected
dealers or agents may charge a commission for handling telephone
requests for redemptions.
Repurchase
The Fund may repurchase shares through the Principal
Underwriter, selected financial intermediaries or selected
dealers or agents. The repurchase price will be the net asset
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
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<PAGE>
the close of regular trading on the Exchange on any day will be
executed at the net asset value determined as of such close of
regular trading on that day if received by the Principal
Underwriter prior to its close of business on that day (normally
5:00 p.m. Eastern time). The financial intermediary or selected
dealer or agent is responsible for transmitting the request to
the Principal Underwriter by 5:00 p.m. Eastern time (certain
selected dealers, agents or financial representatives may enter
into operating agreements permitting them to transmit purchase
information to the Principal Underwriter after 5:00 p.m. Eastern
time and receive that day's net asset value). If the financial
intermediary or selected dealer or agent fails to do so, the
shareholder's right to receive that day's closing price must be
settled between the shareholder and the dealer or agent. A
shareholder may offer shares of the Fund to the Principal
Underwriter either directly or through a selected dealer or
agent. Neither the Fund nor the Principal Underwriter charges a
fee or commission in connection with the repurchase of shares
(except for the contingent deferred sales charge, if any, with
respect to Class A, Class B and Class C shares). Normally, if
shares of the Fund are offered through a financial intermediary
or selected dealer or agent, the repurchase is settled by the
shareholder as an ordinary transaction with or through the
selected dealer or agent, who may charge the shareholder for this
service. The repurchase of shares of the Fund as described above
is a voluntary service of the Fund and the Fund may suspend or
terminate this practice at any time.
General
The Fund reserves the right to close out an account that
through redemption has remained below $200 for 90 days.
Shareholders will receive 60 days' written notice to increase the
account value before the account is closed. No contingent
deferred sales charge will be deducted from the proceeds of this
redemption. In the case of a redemption or repurchase of shares
of the Fund recently purchased by check, redemption proceeds will
not be made available until the Fund is reasonably assured that
the check has cleared, normally up to 15 calendar days following
the purchase date.
_______________________________________________________________
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
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<PAGE>
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 any other Alliance
Mutual Fund, including the Fund. Exchanges of shares are made at
the net asset value next determined and without sales or service
charges. Exchanges may be made by telephone or written request.
Telephone exchange requests must be received by 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 purpose of determining the CDSC, if any, upon redemption and,
in the case of Class B shares, for the purpose of conversion to
Class A shares. After an exchange, your Class B shares will
automatically convert to Class A shares in accordance with the
conversion schedule applicable to the Class B shares of the
61
<PAGE>
Alliance Mutual Fund you originally purchased for cash ("original
shares"). When redemption occurs, the CDSC applicable to the
original shares is applied.
Please read carefully the prospectus of the mutual fund
into which you are exchanging before submitting the request.
Call AFS at (800) 221-5672 to exchange uncertificated shares.
Except with respect to exchanges of Class A shares of the Fund
for Advisor Class shares of the Fund, exchanges of shares as
described above in this section are taxable transactions for
federal income tax purposes. The exchange service may be
changed, suspended, or terminated on 60 days' written notice.
All exchanges are subject to the minimum investment
requirements and any other applicable terms set forth in the
prospectus for the Alliance Mutual Fund whose shares are being
acquired. An exchange is effected through the redemption of the
shares tendered for exchange and the purchase of shares being
acquired at their respective net asset values as next determined
following receipt by the Alliance Mutual Fund whose shares are
being exchanged of (i) proper instructions and all necessary
supporting documents as described in such fund's Prospectus, or
(ii) a telephone request for such exchange in accordance with the
procedures set forth in the following paragraph. Exchanges
involving the redemption of shares recently purchased by check
will be permitted only after the Alliance Mutual Fund whose
shares have been tendered for exchange is reasonably assured that
the check has cleared, normally up to 15 calendar days following
the purchase date. Exchanges of shares of Alliance Mutual Funds
will generally result in the realization of a capital gain or
loss for federal income tax purposes.
Each Fund shareholder, and the shareholder's selected
dealer, agent or financial representative, as applicable, are
authorized to make telephone requests for exchanges unless AFS,
receives written instruction to the contrary from the
shareholder, or the shareholder declines the privilege by
checking the appropriate box on the Subscription Application
found in the Prospectus. Such telephone requests cannot be
accepted with respect to shares then represented by stock
certificates. Shares acquired pursuant to a telephone request
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
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<PAGE>
developments (such as the market break of October 1987) it is
possible that shareholders would have difficulty in reaching AFS
by telephone (although no such difficulty was apparent at any
time in connection with the 1987 market break). If a shareholder
were to experience such difficulty, the shareholder should issue
written instructions to AFS at the address shown on the cover of
this Statement of Additional Information.
A shareholder may elect to initiate a monthly "Auto
Exchange" whereby a specified dollar amount's worth of his or her
Fund shares (minimum $25) is automatically exchanged for shares
of another Alliance Mutual Fund. Auto Exchange transactions
normally occur on the 12th day of each month, or the Fund
business day prior thereto.
None of the Alliance Mutual Funds, the Adviser, the
Principal Underwriter or AFS will be responsible for the
authenticity of telephone requests for exchanges that the Fund
reasonably believes to be genuine. The Fund will employ
reasonable procedures in order to verify that telephone requests
for exchanges are genuine, including, among others, recording
such telephone instructions and causing written confirmations of
the resulting transactions to be sent to shareholders. If the
Fund did not employ such procedures, it could be liable for
losses arising from unauthorized or fraudulent telephone
instructions. Selected dealers, agents or financial
representatives, as applicable, may charge a commission for
handling telephone requests for exchanges.
The exchange privilege is available only in states where
shares of the Alliance Mutual Fund being acquired may be legally
sold. Each Alliance Mutual Fund reserves the right, at any time
on 60 days' notice to its shareholders, to reject any order to
acquire its shares through exchange or otherwise to modify,
restrict or terminate the exchange privilege.
Retirement Plans
The Fund may be a suitable investment vehicle for part
or all of the assets held in various types of retirement plans,
such as those listed below. The Fund has available forms of such
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:
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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.
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
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<PAGE>
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.
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
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depleted. A systematic withdrawal plan may be terminated at any
time by the shareholder or the Fund.
Withdrawal payments will not automatically end when a
shareholder's account reaches a certain minimum level. Therefore,
redemptions of shares under the plan may reduce or even liquidate
a shareholder's account and may subject the shareholder to the
Fund's involuntary redemption provisions. See "Redemption and
Repurchase of Shares--General." Purchases of additional shares
concurrently with withdrawals are undesirable because of sales
charges when purchases are made. While an occasional lump-sum
investment may be made by a holder of Class A shares who is
maintaining a systematic withdrawal plan, such investment should
normally be an amount equivalent to three times the annual
withdrawal or $5,000, whichever is less.
Payments under a systematic withdrawal plan may be made
by check or electronically via the Automated Clearing House
("ACH") network. Investors wishing to establish a systematic
withdrawal plan in conjunction with their initial investment in
shares of the Fund should complete the appropriate portion of the
Subscription Application found in the Prospectus, while current
Fund shareholders desiring to do so can obtain an application
form by contacting AFS at the address or the "For Literature"
telephone number shown on the cover of this Statement of
Additional Information.
CDSC Waiver for Class B Shares and Class C Shares.
Under a systematic withdrawal plan, up to 1% monthly, 2%
bi-monthly or 3% quarterly of the value at the time of redemption
of the Class B or Class C shares in a shareholder's account may
be redeemed free of any contingent deferred sales charge.
With respect to Class B shares, the waiver applies only
with respect to shares acquired after July 1, 1995. Class B
shares that are not subject to a contingent deferred sales charge
(such as shares acquired with reinvested dividends or
distributions) will be redeemed first and will count toward the
foregoing limitations. Remaining Class B shares that are held
the longest will be redeemed next. Redemption of Class B shares
in excess of the foregoing limitations will be subject to any
otherwise applicable contingent deferred sales charge.
With respect to Class C shares, shares held the longest
will be redeemed first and will count toward the foregoing
limitations. Redemptions in excess of those limitations will be
subject to any otherwise applicable contingent deferred sales
charge.
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Statements and Reports
Each shareholder of the Fund receives semi-annual and
annual reports which include a portfolio of investments,
financial statements and, in the case of the annual report, the
report of the Fund's independent auditors, Ernst & Young LLP, as
well as a confirmation of each purchase and redemption. By
contacting his or her broker or AFS, a shareholder can arrange
for copies of his or her account statements to be sent to another
person.
______________________________________________________________
NET ASSET VALUE
______________________________________________________________
The per share net asset value is computed in accordance
with the Fund's Articles of Incorporation and By-Laws at the next
close of regular trading on the Exchange (ordinarily 4:00 p.m.
Eastern time) following receipt of a purchase or redemption order
by the Fund on each Fund business day on which such an order is
received and on such other days as the Board of Directors deems
appropriate or necessary in order to comply with Rule 22c-1 under
the 1940 Act. The Fund's per share net asset value is calculated
by dividing the value of the Fund's total assets, less its
liabilities, by the total number of its shares then outstanding.
A Fund business day is any weekday on which the Exchange is open
for trading.
In accordance with applicable rules under the 1940 Act,
portfolio securities are valued at current market value or at
fair value as determined in good faith by the Board of Directors.
The Board of Directors has delegated to the Adviser certain of
the Board's duties with respect to the following procedures.
Readily marketable securities listed on the Exchange or on a
foreign securities exchange (other than foreign securities
exchanges whose operations are similar to those of the United
States over-the-counter market) are valued, except as indicated
below, at the last sale price reflected on the consolidated tape
at the close of the Exchange or, in the case of a foreign
securities exchange, at the last quoted sale price, in each case
on the business day as of which such value is being determined.
If there has been no sale on such day, the securities are valued
at the mean of the closing bid and asked prices on such day. If
no bid or asked prices are quoted on such day, then the security
is valued in good faith at fair value by, or in accordance with
procedures established by, the Board of Directors. Readily
marketable securities not listed on the Exchange or on a foreign
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
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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.
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
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completed well before the close of business of each Fund business
day. In addition, trading in foreign markets may not take place
on all Fund business days. Furthermore, trading may take place
in various foreign markets on days that are not Fund business
days. The Fund's calculation of the net asset value per share,
therefore, does not always take place contemporaneously with the
most recent determination of the prices of portfolio securities
in these markets. Events affecting the values of these portfolio
securities that occur between the time their prices are
determined in accordance with the above procedures and the close
of the Exchange will not be reflected in the Fund's calculation
of net asset value unless it is believed that these prices do not
reflect current market value, in which case the securities will
be valued in good faith by, or in accordance with procedures
established by, the Board of Directors at fair value.
The Board of Directors may suspend the determination of
the Fund's net asset value (and the offering and sale of shares),
subject to the rules of the Commission and other governmental
rules and regulations, at a time when: (1) the Exchange is
closed, other than customary weekend and holiday closings, (2) an
emergency exists as a result of which it is not reasonably
practicable for the Fund to dispose of securities owned by it or
to determine fairly the value of its net assets, or (3) for the
protection of shareholders, the Commission by order permits a
suspension of the right of redemption or a postponement of the
date of payment on redemption.
For purposes of determining the Fund's net asset value
per share, all assets and liabilities initially expressed in a
foreign currency will be converted into U.S. Dollars at the mean
of the current bid and asked prices of such currency against the
U.S. Dollar last quoted by a major bank that is a regular
participant in the relevant foreign exchange market or on the
basis of a pricing service that takes into account the quotes
provided by a number of such major banks. If such quotations are
not available as of the close of the Exchange, the rate of
exchange will be determined in good faith by, or under the
direction of, the Board of Directors.
The assets attributable to the Class A shares, Class B
shares, Class C shares and Advisor Class shares will be invested
together in a single portfolio. The net asset value of each
class will be determined separately by subtracting the
liabilities allocated to that class from the assets belonging to
that class in conformance with the provisions of a plan adopted
by the Fund in accordance with Rule 18f-3 under the 1940 Act.
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______________________________________________________________
DIVIDENDS, DISTRIBUTIONS AND TAXES
______________________________________________________________
Dividends paid by the Fund, if any, with respect to
Class A, Class B, Class C and Advisor Class shares will be
calculated in the same manner at the same time on the same day
and will be in the same amount, except that the higher
distribution services applicable to Class B and C shares, and any
incremental transfer agency costs relating to Class B and Class C
shares, will be borne exclusively by the class to which they
relate.
United States Federal Income Taxation
Of Dividends and Distributions
General. The Fund intends for each taxable year to
qualify to be taxed 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
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given calendar year if it makes timely distributions to the
shareholders equal to at least the sum of (i) 98% of its ordinary
income for that year; (ii) 98% of its capital gain net income and
foreign currency gains for the twelve-month period ending on
October 31 of that year; and (iii) any ordinary income or capital
gain net income from the preceding calendar year that was not
distributed during that year. For this purpose, income or gain
retained by the Fund that is subject to corporate income tax will
be considered to have been distributed by the Fund by year-end.
For federal income and excise tax purposes, dividends declared
and payable to shareholders of record as of a date in October,
November or December of a given year but actually paid during the
immediately following January will be treated as if paid by the
Fund on December 31 of that calendar year, and will be taxable to
these shareholders for the year declared, and not for the year in
which the shareholders actually receive the dividend.
The Fund intends to make timely distributions of the
Fund's taxable income (including any net capital gain) so that
the Fund will not be subject to federal income or excise taxes.
However, exchange control or other regulations on the
repatriation of investment income, capital or the proceeds of
securities sales, if any exist or are enacted in the future, may
limit the Fund's ability to make distributions sufficient in
amount to avoid being subject to one or both of such federal
taxes.
Dividends and Distributions. Dividends of the Fund's
net ordinary income and distributions of any net realized short-
term capital gain are taxable to shareholders as ordinary income.
The investment objective of the Fund is such that only a
small portion, if any, of the Fund's distributions is expected to
qualify for the dividends-received deduction for corporations.
Distributions of net capital gain 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 calendar year, the Fund will notify
shareholders of the federal income tax status of any
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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.
A dividend or capital gains distribution with respect to
shares of the Fund held by a tax-deferred or qualified plan, such
as an individual retirement account, 403(b)(7) retirement plan or
corporate pension or profit-sharing plan, generally will not be
taxable to the plan. Distributions from such plans will be
taxable to individual participants under applicable tax rules
without regard to the character of the income earned by the
qualified plan.
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 the
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
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amount of the Fund's assets to be invested within various
countries is not known. If more than 50% of the value of the
Fund's total assets at the close of its taxable year consists of
stocks or securities of foreign corporations, the Fund will be
eligible and intends to file an election with the Internal
Revenue Service to pass through to its shareholders the amount of
foreign taxes paid by the Fund. However, there can be no
assurance that the Fund will be able to do so. Pursuant to this
election a shareholder will be required to (i) include in gross
income (in addition to taxable dividends actually received) his
pro-rata share of foreign taxes paid by the Fund, (ii) treat his
pro-rata share of such foreign taxes as having been paid by him,
and (iii) either deduct such pro-rata share of foreign taxes in
computing his taxable income or treat such foreign taxes as a
credit against United States federal income taxes. Shareholders
who are not liable for federal income taxes, such as retirement
plans qualified under section 401 of the Code, will not be
affected by any such pass through of taxes by the Fund. No
deduction for foreign taxes may be claimed by an individual
shareholder who does not itemize deductions. In addition,
certain shareholders may be subject to rules which limit or
reduce their ability to fully deduct, or claim a credit for,
their pro rata share of the foreign taxes paid by the Fund. 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 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.
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United States Federal Income Taxation of the Fund
The following discussion relates to certain significant
United States federal income tax consequences to the Fund with
respect to the determination of its "investment company taxable
income" each year. This discussion assumes that the Fund will be
taxed as a regulated investment company for each of its taxable
years.
Passive Foreign Investment Companies. If the Fund owns
shares in a foreign corporation that constitutes a "passive
foreign investment company" (a "PFIC") for federal income tax
purposes and the Fund does not elect to treat the foreign
corporation as a "qualified electing fund" within the meaning of
the Code, the Fund may be subject to United States federal income
taxation on a portion of any "excess distribution" it receives
from the PFIC or any gain it derives from the disposition of such
shares, even if such income is distributed as a taxable dividend
by the Fund to its shareholders. The Fund may also be subject to
additional interest charges in respect of deferred taxes arising
from such distributions or gains. Any tax paid by the Fund as a
result of its ownership of shares in a PFIC will not give rise to
any deduction or credit to the Fund or to any shareholder. A
PFIC means any foreign corporation if, for the taxable year
involved, either (i) it derives at least 75% of its gross income
from "passive income" (including, but not limited to, interest,
dividends, royalties, rents and annuities), or (ii) on average,
at least 50% of the value (or adjusted tax basis, if elected) of
the assets held by the corporation produce "passive income." The
Fund could elect to "mark-to-market" stock in a PFIC. Under such
an election, the Fund would include in income each year an amount
equal to the excess, if any, of the fair market value of the PFIC
stock as of the close of the taxable year over the Fund's
adjusted basis in the PFIC stock. The Fund would be allowed a
deduction for the excess, if any, of the adjusted basis of the
PFIC stock over the fair market value of the PFIC stock as of the
close of the taxable year, but only to the extent of any net
mark-to-market gains included by the Fund for prior taxable
years. The Fund's adjusted basis in the PFIC stock would be
adjusted to reflect the amounts included in, or deducted from,
income under this election. Amounts included in income pursuant
to this election, as well as gain realized on the sale or other
disposition of the PFIC stock, would be treated as ordinary
income. The deductible portion of any mark-to-market loss, as
well as loss realized on the sale or other disposition of the
PFIC stock to the extent that such loss does not exceed the net
mark-to-market gains previously included by the Fund, would be
treated as ordinary loss. The Fund generally would not be
subject to the deferred tax and interest charge provisions
discussed above with respect to PFIC stock for which a mark-to-
market election has been made. If the Fund purchases shares in a
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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 income or loss. These gains or losses,
referred to under the Code as "Section 988" gains or losses,
increase or decrease the amount of the Fund's investment company
taxable income available to be distributed to its shareholders as
ordinary income, rather than increasing or decreasing the amount
of the Fund's net capital gain. Because section 988 losses
reduce the amount of ordinary dividends the Fund will be allowed
to distribute for a taxable year, such section 988 losses may
result in all or a portion of prior dividend distributions for
such year being recharacterized as a non-taxable return of
capital to shareholders, rather than as an ordinary dividend,
reducing each shareholder's basis in his Fund shares. 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
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income, as described above. The Fund can elect to exempt its
section 1256 contracts which are part of a "mixed straddle" (as
described below) from the application of section 1256.
The Treasury Department has the authority to issue
regulations that would permit or require the Fund either to
integrate a foreign currency hedging transaction with the
investment that is hedged and treat the two as a single
transaction, or otherwise to treat the hedging transaction in a
manner that is consistent with the hedged investment. The
regulations issued under this authority generally should not
apply to the type of hedging transactions in which the Fund
intends to engage.
With respect to equity options or options traded over-
the-counter or on certain foreign exchanges, gain or loss
realized by the Fund upon the lapse or sale of such options held
by the Fund will be either long-term or short-term capital gain
or loss depending upon the Fund's holding period with respect to
such option. However, gain or loss realized upon the lapse or
closing out of such options that are written by the Fund will be
treated as short-term capital gain or loss. In general, if the
Fund exercises an option, or an option that the Fund has written
is exercised, gain or loss on the option will not be separately
recognized but the premium received or paid will be included in
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
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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
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.
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Other Taxation
As noted above, the Fund may be subject to other state
and local taxes.
_______________________________________________________________
PORTFOLIO TRANSACTIONS
_______________________________________________________________
The management of the Fund has the responsibility for
allocating its brokerage orders and may direct orders to any
broker. It is the Fund's general policy to seek favorable net
prices and prompt reliable execution in connection with the
purchase or sale of all portfolio securities. In the purchase
and sale of over-the-counter securities, it is the Fund's policy
to use the primary market makers except when a better price can
be obtained by using a broker. The Board of Directors has
approved, as in the best interests of the Fund and the
shareholders, a policy of considering, among other factors, sales
of the Fund's shares as a factor in the selection of broker-
dealers to execute portfolio transactions, subject to best
execution. The Adviser is authorized under the Advisory
Agreement to place brokerage business with such brokers and
dealers. The use of brokers who supply supplemental research and
analysis and other services may result in the payment of higher
commissions than those available from other brokers and dealers
who provide only the execution of portfolio transactions. In
addition, the supplemental research and analysis and other
services that may be obtained from brokers and dealers through
which brokerage transactions are 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.
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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
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.
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<PAGE>
During the fiscal years ended October 31, 1997,
October 31, 1998 and October 31, 1999, the Fund incurred
brokerage commissions amounting in the aggregate to $294,710,
$121,751 and $210,819, respectively. During the fiscal years
ended October 31, 1997, October 31, 1998 and October 31, 1999,
brokerage commissions amounting in the aggregate to $-0-, $-0-
and $-0-, respectively, were paid to DLJ and brokerage
commissions amounting in the aggregate to $7,572, $-0- and $0,
respectively, were paid to brokers utilizing the Pershing
Division of DLJ. During the fiscal year ended in October 31,
1999, 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, 1999, 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, 1999, transactions in
portfolio securities of the Fund aggregating $116,495,566 with
associated brokerage commissions of approximately $349,993 were
allocated to persons or firms supplying research services to the
Fund or the Adviser.
_______________________________________________________________
GENERAL INFORMATION
______________________________________________________________
Capitalization
The Fund was organized as a corporation in Maryland in
1994. 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
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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.
It is anticipated that annual shareholder meetings will
not be held; shareholder meetings will be held only when required
by federal or state law. Shareholders have available certain
procedures for the removal of Directors.
A shareholder will be entitled to share pro rata with
other holders of the same class of shares all dividends and
distributions arising from the Fund's assets and, upon redeeming
shares, will receive the then current net asset value of the Fund
represented by the redeemed shares less any applicable CDSC. The
Fund is empowered to establish, without shareholder approval,
additional portfolios, which may have different investment
objectives and policies than those of the Fund, and additional
classes of shares within the Fund. If an additional portfolio or
class were established in the Fund, each share of the portfolio
or class would normally be entitled to one vote for all purposes.
Generally, shares of each portfolio and class would vote together
as a single class on matters, such as the election of Directors,
that affect each portfolio and class in substantially the same
manner. Class A, B, C and Advisor Class shares have identical
voting, dividend, liquidation and other rights, except that each
class bears its own transfer agency expenses, each of Class A,
Class B and Class C shares of the Fund bears its own distribution
expenses and Class B shares and Advisor Class shares convert to
Class A shares under certain circumstances. Each class of shares
of the Fund votes separately with respect to the Fund's Rule 12b-
1 distribution plan and other matters for which separate class
voting is appropriate under applicable law. Shares are freely
transferable, are entitled to dividends as determined by the
Directors and, in liquidation of the Fund, are entitled to
receive the net assets of the Fund.
The outstanding voting shares of the Fund as of October
6, 2000 consisted of 2,083,247 Class A, 3,892,540 Class B,
1,135,182 Class C and 502,374 Advisor Class shares. To the
knowledge of the Fund, the following persons owned of record or
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<PAGE>
beneficially 5% or more of the outstanding shares of the Fund as
of October 6, 2000:
No. of
Shares % of
Name and Address of Class Class
Class A
MLPF&S
For the Sole Benefit of
Its Customers
Attn Fund Administration (97FL3)
4800 Deer Lake Dr. East
2nd Floor
Jacksonville,
FL 32246-6484 165,171 7.92%
Class B
MLPF&S
For the Sole Benefit of
Its Customers
Attn Fund Administration (97FL4)
4800 Deer Lake Dr. East
2nd Floor
Jacksonville,
FL 32246-6484 667,957 17.15%
Class C
Merrill Lynch
Mutual Fund Admin (97 FL5)
4800 Deer Lake Dr.
East 2nd Floor
Jacksonville,
FL 32246-6484 274,970 24.00%
Advisor Class
Alliance Plan Div/F.T.C.
C/F Michael F. Delfino IRA
100 Montrose Station Road
Montrose, NY 10548-1015 29,247 5.76%
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<PAGE>
Alliance Plan Div/F.T.C.
FBO Maurice S. Mandel
Rollover IRA
14 Hillside Avenue
Port Washington,
NY 11050-2747-1015 33,444 6.58%
MLPF&S for the Sole Benefit
of its Customers
Attn: Fund Adm (97LNO)
4800 Deer Lake Dr East 2nd Fl.
Jacksonville, FL 32246-6484 89,044 17.53%
Trust for Profit Sharing Plan
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 298,545 58.77%
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., an indirect wholly-
owned subsidiary of the Adviser, located at 1345 Avenue of the
Americas, New York, New York 10105, is the principal underwriter
of shares of the Fund. Under the Agreement, the Fund has agreed
to indemnify the Principal Underwriter, in the absence of its
willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations thereunder, against certain civil
liabilities, including liabilities under the Securities Act.
Counsel
Legal matters in connection with the issuance of the
shares of Common Stock offered hereby are passed upon by Seward &
Kissel LLP, New York, New York. Seward & Kissel LLP has relied
upon the opinion of Venable, Baetjer and Howard, LLP, Baltimore,
Maryland, for matters relating to Maryland law.
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<PAGE>
Independent Auditors
Ernst & Young LLP, New York, New York, has been
appointed as independent auditors for the Fund.
Performance Information
From time to time, the Fund advertises its "total
return," which is computed separately for Class A, Class B, Class
C and Advisor Class shares. Such advertisements disclose the
Fund's average annual compounded total return for the periods
prescribed by the Commission. The Fund's total return for each
such period is computed by finding, through the use of a formula
prescribed by the Commission, the average annual compounded rate
of return over the period that would equate an assumed initial
amount invested to the value of the investment at the end of the
period. For purposes of computing total return, income dividends
and capital gains distributions paid on shares of the Fund are
assumed to have been reinvested when paid and the maximum sales
charges applicable to purchases and redemptions of the Fund's
shares are assumed to have been paid.
The Fund calculates average annual total return
information in the Performance Table in the Risk/Return Summary
according to the Commission formula as described above. In
accordance with Commission guidelines, total return information
is presented for each class for the same time periods, i.e., the
1, 5 and 10 years (or over the life of the Fund, if the Fund is
less than 10 years old) ending on the last day of the most recent
calendar year. Since different classes may have first been sold
on different dates ("Actual Inception Dates"), in some cases this
can result in return information being presented for a class for
periods prior to its Actual Inception Date. Where return
information is presented for periods prior to the Actual
Inception Date of a Class (a "Younger Class"), such information
is calculated by using the historical performance of the class
with the earliest Actual Inception Date (the "Oldest Class").
For this purpose, the Fund calculates the difference in total
annual fund operating expenses (as a percentage of average net
assets) between the Younger Class and the Oldest Class, divides
the difference by 12, and subtracts the result from the monthly
performance at net asset value (including reinvestment of all
dividends and distributions) of the Oldest Class for each month
prior to the Younger Class's Actual Inception Date for which
performance information is to be shown. The resulting "pro
forma" monthly performance information is used to calculate the
Younger Class's average annual returns for these periods. Any
conversion feature applicable to the Younger Class is assumed to
occur in accordance with the Actual Inception Date for that
class, not its hypothetical inception date.
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<PAGE>
The Fund's average annual total return for the one-,
five- and ten-year periods ended April 30, 2000 (or since
inception through that date, as noted) were as follows:
Year Ended 5 Years Ended 10 Years Ended
4/30/00 4/30/00 4/30/00
Class A 72.36% 6.04% 6.02%*
Class B 70.83% 5.26% 5.26%*
Class C 70.78% 5.26% 5.31%*
Advisor Class 72.57% 4.74%* N/A
*Inception Dates: Class A - November 28, 1994
Class B - November 28, 1994
Class C - November 28, 1994
Advisor Class - October 2 1996
The Fund's total return is computed separately for
Class A, Class B, Class C and Advisor Class shares. The Fund's
total return is not fixed and will fluctuate in response to
prevailing market conditions or as a function of the type and
quality of the securities in the Fund's portfolio and the Fund's
expenses. 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, 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
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Commission or may be examined, without charge, at the offices of
the Commission in Washington, D.C.
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<PAGE>
_______________________________________________________________
FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT AUDITORS
______________________________________________________________
The financial statements and the report of Ernst & Young
LLP of Alliance All-Asia Investment Fund, Inc. are incorporated
herein by reference to its annual and semi-annual report filings
made with the SEC pursuant to Section 30(b) of the 1940 Act and
Rule 30b-2 thereunder. The annual report is dated October 31,
1999 and the semi-annual report is dated April 30, 2000 and they
were filed on January 14, 2000 and July 7, 2000, respectively.
They are available without charge upon request by calling
Alliance Fund Services, Inc. at (800) 227-4618.
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_______________________________________________________________
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
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<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
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<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
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security rises sufficiently, the option may expire worthless to
the Fund.
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<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
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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 House of
Representatives election. Although the LDP was 12 seats short of
winning a majority in that election, it was 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.
Subsequent to the 1996 elections, the LDP established and has
continued to maintain a majority in the House of Representatives
as individual members have joined the ruling party. By 1998,
however, the popularity of the LDP had declined, due to
dissatisfaction with Mr. Hashimoto's leadership, and in the July
12, 1998 House of Councillors election, the LDP's representation
fell to 103 seats from 120 seats. As a result of the LDP's
defeat, on July 13, 1998, Mr. Hashimoto announced his resignation
as Prime Minister and was replaced by Keizo Obuchi on July 24,
1998. On January 14, 1999, the LDP formed a coalition government
with a major opposition party. As a result, Mr. Obuchi's
administration strengthened its position in the Diet, where it
increased its majority in the House of Representatives and
reduced its shortfall in the House of Councillors. A new three-
party coalition government was formed on October 5, 1999 that
further strengthened the position of Mr. Obuchi's administration
in the Diet. On April 5, 2000, following an ultimately fatal
stroke suffered by Mr. Obuchi on April 2, 2000, the Parliament
elected Yoshiro Mori to replace Mr. Obuchi as Prime Minister.
Although the LDP held on to its power in the House of
Representatives elections in June 2000, its margin of victory was
less than predicted. The coalition now holds 271 of 480 seats in
the House of Representatives and 141 of 252 seats in the House of
Councillors. The opposition is dominated by the new Minshuto
(Democratic Party of Japan), which was established in April 1998
by various opposition groups and parties. The next general
election (House of Councillors) is required by law to occur no
later than July 2001.
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 5.2%, respectively. In
1997 and 1998, Japan's real GDP growth rate fell to 1.6% and
-2.5%, respectively. In 1999 real GDP growth rate was 0.3%. In
the first two quarters of 2000, real GDP growth rate was 0.7% and
0.8%, respectively, compared to the first two quarters of 1999.
Inflation has remained low, 1.3% in 1993, 0.7% in 1994, -0.1% in
1995, 0.1% in 1996, 1.7% in 1997, 0.7% in 1998 and -0.3% in 1999.
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Although private consumer demand showed a modest increase in the
first quarter of 1999, after slowing down for several years due
to uncertainty about the economy and higher consumer taxes that
went into effect in April 1997, consumer demand dropped again in
the third quarter of 1999. Consumer demand has shown modest
signs of improvement in the first half of 2000, however.
Unemployment is at its highest level since the end of World War
II, rising to 4.6% in August 2000, 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. Since the early 1980's, Japan's relations with
its trading partners have been difficult, partly due to the
concentration of Japanese exports in products such as
automobiles, machine tools and semiconductors and the large trade
surpluses resulting therefrom, and an overall trade imbalance as
indicated by Japan's balance of payments. Japan's overall trade
surplus for 1994 was the 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
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 1997, the
overall trade surplus increased approximately 22% from 1996.
Exports increased to a total of $409 billion, up 2% from 1996,
and imports decreased to $308 billion, down 3% from 1996. During
1998, the overall trade surplus increased approximately 20% from
1997. Exports decreased to a total of $374.0 billion, down 8.6%
from 1997, and imports decreased to $251.7 billion, down 18.2%
from 1997. During 1999, the overall trade surplus was almost
unchanged from 1998, with exports showing an increase of 7.9% and
imports showing an increase of 11.1%. 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
with respect to trade in 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. These and other agreements,
however, have not been successful in addressing Japan's trade
surplus with the U.S. Other current sources of tension between
the two countries are disputes in connection with trade in steel,
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
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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 1997 and
again in 1998, the government announced additional stimulus
packages that included increased public works spending and tax
cuts. These measures have also been unsuccessful in stimulating
Japan's economy. In October 1998, Prime Minister Obuchi
instructed his cabinet to prepare another emergency economic
stimulus plan calling for even more public spending and further
tax cuts. The plan was finalized in November 1998.
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. By the end of the 1997/98
fiscal year, the government estimated that the banking system's
bad loans totaled 87.5 trillion Yen (approximately $600 billion),
or 11% of outstanding bank loans.
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 were postponed.
Subsequent to the December 1997 proposals, the government
proposed a series of additional proposals, culminating, after
vigorous political debate, in a set of laws that was approved by
the Diet in October 1998. The new laws made $508 billion in
public funds available to increase the capital of Japan's banks,
to guarantee depositors'' accounts and to nationalize the weakest
banks. On October 23, 1998, the Long-Term Credit Bank of Japan,
Ltd., one of Japan's 19 largest banks, became the first Japanese
bank to be nationalized pursuant to the new laws. On December
11, 1998, the Nippon Credit Bank, Ltd. became the second Japanese
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bank to be nationalized pursuant to the new laws. Since then,
four additional banks have been nationalized. It is unclear
whether these laws will achieve their intended effect. While the
risk of collapse among Japan's largest banks has diminished as a
result of the infusion of public funds, concerns remain about the
asset quality and core profitability of the major banks and
there remains a high level of bad debt throughout Japan's banks
(estimated at $188 billion at the largest banks as of March
2000). In this regard, the government has established the
Resolution and Collection Bank to purchase bad loans from
insolvent and solvent banks and also has established a legal
framework for the securitization of bad loans. The government
has also announced a delay from April 2001 to April 2002 in the
implementation of a plan announced in 1996 to scale back the
amount of deposit insurance available to depositors from its
current unlimited amount to $97,700 per depositor. The delay is
designed to give smaller institutions more time to get back on
their feet before the protection of unlimited deposit insurance
is removed. In addition to bad domestic loans, Japanese banks
also had significant exposure to the recent financial turmoil in
other Asian markets. Furthermore, the Japanese banking system
continues to be buffeted by factors beyond its control, including
a new wave of bankruptcies and falling stock prices. The
financial system's fragility is expected to continue for the
foreseeable future.
In November 1996, then Prime Minister Hashimoto announced a
set of initiatives to deregulate the financial sector by the year
2001. Known as "Tokyo's Big Bang," the 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. The Big Bang was formally launched in April 1998. Some
of the measures that have already been implemented include a
liberalization of foreign exchange restrictions, a repeal of the
ban on holding companies, allowing banks to sell mutual funds and
to issue bonds, the elimination of restrictions on the range of
activities permitted for securities subsidiaries and trust
banking subsidiaries and the elimination of fixed brokerage
commissions on all stock trades. The remaining reform measures,
which include the entry of banks and trust banks into the
insurance business through subsidiaries, are expected to be
implemented by March 2001. While in the long term the Big Bang
is viewed as a positive step for Japan, in the current economic
climate it is viewed as putting additional stress on weaker
institutions.
In the mid 1990s, a growing budget deficit and the
threat of a budget crisis resulted in a tightening of fiscal
policy. In March 1997, Prime Minister Hashimoto announced the
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first detailed plan for fiscal reform. The plan called 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. In November 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 included tax cuts and public
spending. Thereafter, in April 1998, Japan announced its then
largest ever package of public spending and tax cuts. In
November 1999, Japan announced its ninth major economic stimulus
plan of the 1990s, calling for $171.4 billion in public spending.
Another fiscal stimulus package was announced in October 2000,
calling for an additional $101.8 billion in public spending.
The government's recent spending programs have further
undermined Japan's fiscal condition, as evidenced by the
government's balance sheet made public by the Ministry of Finance
on October 10, 2000 (the first time a balance sheet has been made
public). If all of Japan's future pension liabilities are taken
into account, the balance sheet reflects a total public debt of
$7.3 trillion.
After becoming Prime Minister in July 1998 Mr. Obuchi
established several advisory bodies to devise a plan to improve
Japan's economy. One of these, the Economic Strategy Council,
which was comprised mostly of private experts, issued a report in
February 1999 that contained 234 recommendations. Less than 40
of these recommendations, those least likely to produce
fundamental changes, were accepted by Japan's various government
ministries. Subsequently, Mr. Obuchi formed another advisory
group, the Competitiveness Commission, which resulted in the
passage of the "industrial revitalization law," which became
effective in October 1999. The objective of this law is to
encourage new enterprises and technologies and to write off
excess capacity in the industrial sector.
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. After its peak of April 19, 1995,
the Yen generally decreased in value against the U.S. Dollar YD
until mid-1998, when the Japanese Yen began to appreciate again
against the U.S. Dollar, reaching a 43-month high against the
U.S. Dollar in September 1999. This precipitated a series of
interventions in the currency market by the Bank of Japan that
have slowed the appreciation of the Japanese Yen against the U.S.
Dollar. The average Yen-Dollar exchange rates in 1996, 1997,
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1998, and 1999 were 108.8, 121.0, 130.99 and 113.73,
respectively. In August 2000, the average Yen-Dollar exchange
rate was 108.08.
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 99.8% of the
share trading volume and for about 99.9% of the overall trading
value of all shares traded on Japanese stock exchanges during
1999. 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 annual trading
value (in billions of Yen) information with respect to each of
the three major Japanese stock exchanges for the years 1989
through 2000 (August). Trading volume and the value of foreign
stocks are not included.
<ps=8
<TABLE>
<CAPTION>
All Exchanges TOKYO OSAKA NAGOYA
VOLUME VALUE VOLUME VALUE VOLUME VALUE VOLUME VALUE
_______ ______ ______ _____ _______ ______ _______ _____
<S> <C> <C> <C> <C> <C> <C> <C> <C>
20001 140,543 216,121 123,482 183,854 13,108 26,365 3,881 5,797
1999 175,445 210,236 155,163 185,541 14,972 22,105 4,934 2,371
1998 139,757 124,102 123,198 97,392 12,836 20,532 3,367 5,986
1997 130,657 151,445 107,566 108,500 15,407 27,024 6,098 12,758
1996 126,496 136,170 101,170 101,893 20,783 27,280 4,104 5,391
1995 120,149 115,840 92,034 83,564 21,094 24,719 5,060 5,462
1994 105,937 114,622 84,514 87,356 14,904 19,349 4,720 5,780
1993 101,173 106,123 86,935 86,889 10,440 14,635 2,780 3,459
1992 82,563 80,456 66,408 60,110 12,069 15,575 3,300 3,876
1991 107,844 134,160 93,606 110,897 10,998 18,723 2,479 3,586
1990 145,837 231,837 123,099 186,667 17,187 35,813 4,323 7,301
1989 256,296 386,395 222,599 332,617 25,096 41,679 7,263 10,395
1 Through August.
Source: The Tokyo Stock Exchange Fact Books (1994-1999); monthly data sheets (2000).
</TABLE>
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.
During 8 months of 2000, the TSE accounted for 85.0% of the
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market value and 87.9% 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 42 (out of
1,990 total companies listed on the TSE) non-Japanese companies
at the end of August 2000. 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.
The TSE has recently undertaken several new initiatives.
In November 1999, for example, the TSE established MOTHERS
(Market for the High-Growth and Emerging Stocks), a new market
designed to foster the growth of emerging companies. In
addition, on October 17, 2000, the TSE announced plans to form an
alliance with the Chicago Mercantile Exchange, the TSE's most
concrete global alliance to date. Although the TSE has entered
into agreements with other exchanges, they are for the most part
limited to information sharing arrangements.
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 August 2000, the three largest industry sectors, based on
market value, listed on the first section of the TSE were
electric appliances, with 146 companies representing 21.57% of
all domestic stocks so listed; communications, with 7 companies
representing 10.16% of all domestic stocks listed on the TSE; and
banking with 94 companies representing 9.94% of all domestic
stocks so listed.
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 value increased to 412,521 million Yen and
aggregate year-end market value decreased to 347,578 billion Yen.
In 1997, average daily trading value increased to 442,858 million
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Yen and aggregate year-end market value decreased to 280,930
billion Yen. In 1998, average daily trading value decreased to
394,297 million Yen and aggregate year-end market value decreased
to 275,181 billion Yen. In 1999, the average daily trading value
was 757,313 million Yen and aggregate year-end market value in
1999 was 456,840 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. On December 30, 1998 the
TOPIX closed at 1086.99, down approximately 7% from the end of
1997. On December 31, 1999 the TOPIX closed at 1722.20, up
approximately 58% from the end of 1998.
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
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
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<PAGE>
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 shares, 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 were
repealed or liberalized beginning in April 1998, pursuant to the
revised Foreign Exchange and Foreign Trade Law, which was
approved in May 1997 as part of the plan to implement the Big
Bang. Under the new law, Japanese citizens are permitted to open
bank accounts abroad and companies are now permitted to trade
foreign currencies without prior government approval.
Additionally, the foreign exchange bank system, which required
that all foreign exchange transactions be conducted through
specially designated institutions, has been eliminated.
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
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.
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<PAGE>
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 operating discretionary
accounts, compensating losses or providing 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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<PAGE>
PART C
OTHER INFORMATION
ITEM 23. Exhibits
(a) (1) 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.
(2) 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.
(b) 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.
(c) Not applicable.
(d) 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.
(e) (1) Distribution Services Agreement between the
Registrant and Alliance Fund Distributors,
Inc. - Incorporated by reference to Exhibit
6(a) to Post-Effective Amendment No. 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.
(2) Amendment to Distribution Services Agreement
between the Registrant and Alliance Fund
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<PAGE>
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.
(3) 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.
(4) Form of Selected Agent Agreement between
Alliance Fund Distributors, Inc. and selected
agents making available shares of Registrant -
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.
(f) Not applicable.
(g) 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.
(h) (1) 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.
(2) 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
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<PAGE>
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.
(3) Expense Limitation Undertaking by Alliance
Capital Management L.P. - Incorporated by
reference to Exhibit (h)(3) to Post-Effective
Amendment No. 13 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 29, 1999.
(i) Opinion and Consent of Seward & Kissel LLP - Filed
herewith.
(j) Consent of Independent Auditors - Filed herewith.
(k) Not applicable
(l) Not applicable.
(m) Rule 12b-1 Plan - See Exhibit (e)(1) hereto.
(n) (1) 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.
(2) 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.
(o) (1) Code of Ethics for the Fund, incorporated by
reference to Exhibit (p)(1) to Post-Effective
Amendment No. 74 of the Registration Statement
on Form N-1A of Alliance Bond Fund, Inc. (File
Nos. 2-48227 and 811-2383), filed with the
Securities and Exchange Commission on
October 6, 2000, which is substantially
identical in all material respects except as
to the party which is the Registrant.
(2) Code of Ethics for the Alliance Capital
Management L.P. and Alliance Fund
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<PAGE>
Distributors, Inc. incorporated by reference
to Exhibit (p)(2) to Post-Effective Amendment
No. 74 of the Registration Statement on Form
N-1A of Alliance Bond Fund, Inc. (File Nos.
2-48227 and 811-2383), filed with the
Securities and Exchange Commission on
October 6, 2000.
Other Exhibit: Powers of Attorney for John D.
Carifa, David H. Dievler, John H. Dobkin, W. H.
Henderson, Stig Host and Alan Stoga - Incorporated
by reference to Other Exhibit to Post-Effective
Amendment No. 13 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 29, 1999.
ITEM 24. Persons Controlled by or Under Common Control with the
Fund.
None.
ITEM 25. Indemnification.
It is the Registrant's policy to indemnify its directors
and officers, employees and other agents to the maximum
extent permitted by Section 2-418 of the General
Corporation Law of the State of Maryland and as set
forth in Article EIGHTH of Registrant's Articles of
Incorporation, filed as Exhibit (a) in response to Item
23, Article VII and Article VIII of Registrant's By-
Laws, filed as Exhibit (b) in response to Item 23, and
Section 10 of the proposed Distribution Services
Agreement, filed as Exhibit (e)(1) in response to
Item 23, 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
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 (d) in response to
Item 23, 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 (h)(2) in response to Item
23, as set forth below.
Section 2-418 of the Maryland General Corporation Law
reads as follows:
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"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.
(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
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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
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.
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(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.
(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:
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(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
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
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(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
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
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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
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.
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(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
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
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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
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
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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
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.
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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
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
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<PAGE>
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 (a), (b), (d)
and (e)(1), respectively, in response to Item 23 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
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
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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
covered up to the limits specified for any claim against
them for acts committed in their capacities as trustee
or director. A pro rata share of the premium for this
coverage is charged to each investment company and to
the Adviser.
ITEM 26. Business and Other Connections of 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
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Information constituting Parts A and B, respectively, of
this Registration Statement are incorporated by
reference herein.
The information as to the directors and executive
officers of Alliance Capital Management Corporation, the
general partner of Alliance Capital Management L.P., set
forth in Alliance Capital Management L.P.'s Form ADV
filed with the Securities and Exchange Commission on
April 21, 1988 (File No. 801-32361) and amended through
the date hereof, is incorporated by reference.
ITEM 27. Principal Underwriters
(a) Alliance Fund Distributors, Inc., the Registrant's
Principal Underwriter in connection with the sale
of shares of the Registrant. Alliance Fund
Distributors, Inc. also acts as Principal
Underwriter or Distributor for the following
investment companies:
AFD Exchange Reserves
Alliance All-Asia Investment Fund, Inc.
Alliance Balanced Shares, Inc.
Alliance Bond Fund, Inc.
Alliance Capital Reserves
Alliance Disciplined Value Fund, Inc.
Alliance Global Dollar Government Fund, Inc.
Alliance Global Small Cap Fund, Inc.
Alliance Global Strategic Income Trust, Inc.
Alliance Government Reserves
Alliance Greater China '97 Fund, Inc.
Alliance Growth and Income Fund, Inc.
Alliance Health Care Fund, Inc.
Alliance High Yield Fund, Inc.
Alliance Institutional Funds, Inc.
Alliance Institutional Reserves, Inc.
Alliance International Fund
Alliance International Premier Growth Fund, Inc.
Alliance Limited Maturity Government Fund, Inc.
Alliance Money Market Fund
Alliance Mortgage Securities Income Fund, Inc.
Alliance Multi-Market Strategy Trust, Inc.
Alliance Municipal Income Fund, Inc.
Alliance Municipal Income Fund II
Alliance Municipal Trust
Alliance New Europe Fund, Inc.
Alliance North American Government Income
Trust, Inc.
Alliance Premier Growth Fund, Inc.
Alliance Quasar Fund, Inc.
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Alliance Real Estate Investment Fund, Inc.
Alliance Select Investor Series, Inc.
Alliance Technology Fund, Inc.
Alliance Utility Income Fund, Inc.
Alliance Variable Products Series Fund, Inc.
Alliance Worldwide Privatization Fund, Inc.
The Alliance Fund, Inc.
The Alliance Portfolios
(b) The following are the Directors and Officers of
Alliance Fund Distributors, Inc., the principal
place of business of which is 1345 Avenue of the
Americas, New York, New York, 10105.
POSITIONS AND POSITIONS AND
OFFICES WITH OFFICES WITH
NAME UNDERWRITER REGISTRANT
Michael J. Laughlin Director and Chairman
John D. Carifa Director [President],
Director/Trustee
Robert L. Errico Director and President
Geoffrey L. Hyde Director and Senior Vice
President
Dave H. Williams Director
David Conine Executive Vice President
Richard K. Saccullo Executive Vice President
Edmund P. Bergan, Jr. Senior Vice President, Secretary Clerk
General Counsel and
Secretary
Richard A. Davies Senior Vice President
Managing Director
Robert H. Joseph, Jr. Senior Vice President and
Chief Financial Officer
Anne S. Drennan Senior Vice President &
Treasurer
Benji A. Baer Senior Vice President
John R. Bonczek Senior Vice President
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Karen J. Bullot Senior Vice President
John R. Carl Senior Vice President
James S. Comforti Senior Vice President
James L. Cronin Senior Vice President
Byron M. Davis Senior Vice President
Mark J. Dunbar Senior Vice President
Donald N. Fritts Senior Vice President
Andrew L. Gangolf Senior Vice President Assistant
and Assistant General Secretary/
Counsel Assistant Clerk
Bradley F. Hanson Senior Vice President
George H. Keith Senior Vice President
Richard E. Khaleel Senior Vice President
Stephen R. Laut Senior Vice President
Susan L. Matteson-King Senior Vice President
Daniel D. McGinley Senior Vice President
Antonios G. Poleondakis Senior Vice President
Robert E. Powers Senior Vice President
Domenick Pugliese Senior Vice President Assistant
and Assistant General Secretary/
Counsel Assistant Clerk
Kevin A. Rowell Senior Vice President
John P. Schmidt Senior Vice President
Raymond S. Sclafani Senior Vice President
Gregory K. Shannahan Senior Vice President
Scott C. Sipple Senior Vice President
Joseph F. Sumanski Senior Vice President
Peter J. Szabo Senior Vice President
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William C. White Senior Vice President
Richard A. Winge Senior Vice President
Emilie D. Wrapp Senior Vice President and
Assistant General Counsel
Gerard J. Friscia Vice President &
Controller
Ricardo Arreola Vice President
Kenneth F. Barkoff Vice President
Adam J. Barnett Vice President
Charles M. Barrett Vice President
Matthew F. Beaudry Vice President
Leo Benitez Vice President
Gregory P. Best Vice President
Dale E. Boyd Vice President
Robert F. Brendli Vice President
Christopher L. Butts Vice President
Thomas C. Callahan Vice President
Kevin T. Cannon Vice President
John M. Capeci Vice President
John P. Chase Vice President
Doris T. Ciliberti Vice President
William W. Collins, Jr. Vice President
Leo H. Cook Vice President
Russell R. Corby Vice President
John W. Cronin Vice President
Robert J. Cruz Vice President
Richard W. Dabney Vice President
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Daniel J. Deckman Vice President
Sherry V. Delaney Vice President
Richard P. Dyson Vice President
John C. Endahl Vice President
John E. English Vice President
Sohaila S. Farsheed Vice President
Daniel J. Frank Vice President
Shawn C. Gage Vice President
Joseph C. Gallagher Vice President
Michael J. Germain Vice President
Mark D. Gersten Vice President Treasurer and
Chief Financial
Officer
Hyman Glasman Vice President
John Grambone Vice President
Charles M. Greenberg Vice President
Alan Halfenger Vice President
William B. Hanigan Vice President
Michael S. Hart Vice President
Scott F. Heyer Vice President
Timothy A. Hill Vice President
Brian R. Hoegee Vice President
George R. Hrabovsky Vice President
Michael J. Hutten Vice President
Scott Hutton Vice President
Oscar J. Isoba Vice President
Richard D. Keppler Vice President
C-21
<PAGE>
Richard D. Kozlowski Vice President
Daniel W. Krause Vice President
Donna M. Lamback Vice President
P. Dean Lampe Vice President
Henry Michael Lesmeister Vice President
Eric L. Levinson Vice President
James M. Liptrot Vice President
James P. Luisi Vice President
Michael F. Mahoney Vice President
Kathryn Austin Masters Vice President
Shawn P. McClain Vice President
David L. McGuire Vice President
Jeffrey P. Mellas Vice President
Michael V. Miller Vice President
Thomas F. Monnerat Vice President
Timothy S. Mulloy Vice President
Joanna D. Murray Vice President
Michael F. Nash, Jr. Vice President
Timothy H. Nasworthy Vice President
Nicole Nolan-Koester Vice President
Daniel A. Notto Vice President
Peter J. O'Brien Vice President
John C. O'Connell Vice President
John J. O'Connor Vice President
Daniel P. O'Donnell Vice President
Richard J. Olszewski Vice President
C-22
<PAGE>
Catherine N. Peterson Vice President
Jeffrey R. Petersen Vice President
James J. Posch Vice President
Bruce W. Reitz Vice President
Jeffrey B. Rood Vice President
Karen C. Satterberg Vice President
Robert C. Schultz Vice President
Richard J. Sidell Vice President
Clara Sierra Vice President
Teris A. Sinclair Vice President
Jeffrey C. Smith Vice President
David A. Solon Vice President
Martine H. Stansbery, Jr. Vice President
Eileen Stauber Vice President
Michael J. Tobin Vice President
Joseph T. Tocyloski Vice President
Benjamin H. Travers Vice President
David R. Turnbough Vice President
Andrew B. Vaughey Vice President
Wayne W. Wagner Vice President
Mark E. Westmoreland Vice President
Paul C. Wharf Vice President
Stephen P. Wood Vice President
Keith A. Yoho Vice President
Michael W. Alexander Assistant Vice President
Richard J. Appaluccio Assistant Vice President
C-23
<PAGE>
Paul G. Bishop Assistant Vice President
Mark S. Burns Assistant Vice President
Maria L. Carreras Assistant Vice President
Judith A. Chin Assistant Vice President
Jorge Ciprian Assistant Vice President
William P. Condon Assistant Vice President
Jean A. Coomber Assistant Vice President
Dorsey Davidge Assistant Vice President
Ralph A. DiMeglio Assistant Vice President
Faith C. Deutsch Assistant Vice President
Timothy J. Donegan Assistant Vice President
Joan Eilbott Assistant Vice President
Adam E. Engelhardt Assistant Vice President
Michael J. Eustic Assistant Vice President
Michele Grossman Assistant Vice President
Arthur F. Hoyt, Jr. Assistant Vice President
David A. Hunt Assistant Vice President
Theresa Iosca Assistant Vice President
Erik A. Jorgensen Assistant Vice President
Eric G. Kalender Assistant Vice President
Elizabeth E. Keefe Assistant Vice President
Edward W. Kelly Assistant Vice President
Victor Kopelakis Assistant Vice President
Jeffrey M. Kusterer Assistant Vice President
Alexandra C. Landau Assistant Vice President
Laurel E. Lindner Assistant Vice President
C-24
<PAGE>
Evamarie C. Lombardo Assistant Vice President
Amanda C. McNichol Assistant Vice President
Richard F. Meier Assistant Vice President
Charles B. Nanick Assistant Vice President
Alex E. Pady Assistant Vice President
Raymond E. Parker Assistant Vice President
Wandra M. Perry-Hartsfield Assistant Vice President
Rizwan A. Raja Assistant Vice President
Carol H. Rappa Assistant Vice President
Brendan J. Reynolds Assistant Vice President
James A. Rie Assistant Vice President
Lauryn A. Rivello Assistant Vice President
Christina Santiago Assistant Vice Assistant Vice
President and Counsel President and
and Counsel Counsel
Nancy D. Testa Assistant Vice President
Margaret M. Tompkins Assistant Vice President
Marie R. Vogel Assistant Vice President
Nina C. Wilkinson Assistant Vice President
Wesley S. Williams Assistant Vice President
Matthew Witschel Assistant Vice President
Mark R. Manley Assistant Secretary
(c) Not applicable.
ITEM 28. Location of Accounts and Records.
The 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
C-25
<PAGE>
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 29. Management Services.
Not applicable.
ITEM 30. Undertakings.
The Registrant undertakes to furnish each person whom
the prospectus is delivered with a copy of the
Registrant's latest report to Shareholders, upon request
and without charge.
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<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, 2000.
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, 2000
____________________ President
John D. Carifa
(2) Principal Financial
and Accounting Officer:
/s/ Mark D. Gersten Treasurer and October 30, 2000
____________________ Chief Financial
Mark D. Gersten Officer
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<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, 2000
Edmund P. Bergan, Jr.
Attorney-in-Fact
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<PAGE>
INDEX TO EXHIBITS
PAGE
(i) Opinion and Consent of Seward & Kissel LLP
(j) Consent of Independent Auditors
C-29
00250203.AY6
