<PAGE>
This is filed pursuant to Rule 497(c).
File Nos. 2-25364 and 811-01415.
<PAGE>
<PAGE>
The Alliance
---------------------
Stock Funds
---------------------
P.O. Box 1520, Secaucus, New Jersey 07096-1520
Toll Free (800) 221-5672
For Literature: Toll Free (800) 227-4618
Prospectus and Application
October 1, 1996
Domestic Stock Funds Global Stock Funds
- -The Alliance Fund -Alliance International Fund
- -Alliance Growth Fund -Alliance Worldwide Privatization Fund
- -Alliance Premier Growth Fund -Alliance New Europe Fund
- -Alliance Technology Fund -Alliance All-Asia Investment Fund
- -Alliance Quasar Fund -Alliance Global Small Cap Fund
Total Return Funds
-Alliance Strategic Balanced Fund
-Alliance Balanced Shares
-Alliance Income Builder Fund
-Alliance Utility Income Fund
-Alliance Growth and Income Fund
- ------------------------------------------------------------------------------
Table of Contents Page
The Funds at a Glance .......................................... 2
Expense Information ............................................ 4
Financial Highlights ........................................... 7
Glossary ....................................................... 17
Description of the Funds ....................................... 18
Investment Objectives and Policies ......................... 18
Additional Investment Practices ............................ 26
Certain Fundamental Investment Policies..................... 33
Risk Considerations ........................................ 35
Purchase and Sale of Shares .................................... 39
Management of the Funds ........................................ 42
Dividends, Distributions and Taxes ............................. 44
General Information ............................................ 46
Adviser
Alliance Capital Management L.P.
1345 Avenue Of The Americas
New York, New York 10105
The Alliance Stock Funds provide a broad selection of investment alternatives to
investors seeking capital growth or high total return. The Domestic Stock Funds
invest mainly in the United States equity markets and the Global Stock Funds
diversify their investments among equity markets around the world, while the
Total Return Funds invest in both equity and fixed-income securities.
Each fund or portfolio (each a "Fund") is, or is a series of, an open-end
management investment company. This Prospectus sets forth concisely the
information which a prospective investor should know about each Fund before
investing. A "Statement of Additional Information" for each Fund which provides
further information regarding certain matters discussed in this Prospectus and
other matters which may be of interest to some investors has been filed with the
Securities and Exchange Commission and is incorporated herein by reference. For
a free copy, call or write Alliance Fund Services, Inc. at the indicated address
or call the "For Literature" telephone number shown above.
Each Fund offers three classes of shares through this prospectus. These shares
may be purchased, at the investor's choice, at a price equal to their net asset
value (i) plus an initial sales charge imposed at the time of purchase (the
"Class A shares"), (ii) with a contingent deferred sales charge imposed on most
redemptions made within four years of purchase (the "Class B shares"), or (iii)
without any initial or contingent deferred sales charge, as long as the shares
are held for one year or more (the "Class C shares"). See "Purchase and Sale of
Shares."
An investment in these securities is not a deposit or obligation of, or
guaranteed or endorsed by, any bank and is not federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board or any other agency.
Investors are advised to read this Prospectus carefully and to retain it for
future reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
[LOGO FOR ALLIANCE APPEARS HERE]
(R)/SM These are registered marks used under licenses from the owner, Alliance
Capital Management L.P.
<PAGE>
The Funds At A Glance
The following summary is qualified in its entirety by the more detailed
information contained in this Prospectus.
The Funds' Investment Adviser Is . . .
Alliance Capital Management L.P. ("Alliance"), a global investment manager
providing diversified services to institutions and individuals through a broad
line of investments including more than 100 mutual funds. Since 1971, Alliance
has earned a reputation as a leader in the investment world with over $168
billion in assets under management as of June 30, 1996. Alliance provides
investment management services to employee benefit plans for 33 of the FORTUNE
100 companies.
Domestic Stock Funds
Alliance Fund
Seeks . . . Long-term growth of capital and income primarily through investment
in common stocks.
Invests Principally in . . . A diversified portfolio of equity securities that,
in the judgment of Alliance, have the potential to achieve capital appreciation.
Growth Fund
Seeks . . . Long-term growth of capital by investing primarily in common stocks
and other equity securities.
Invests Principally in . . . A diversified portfolio of equity securities of
companies with a favorable outlook for earnings and whose rate of growth is
expected to exceed that of the United States economy over time.
Premier Growth Fund
Seeks . . . Long-term growth of capital by investing in the equity
securities of a limited number of large, carefully selected, high-quality
American companies from a relatively small universe of intensively researched
companies.
Invests Principally in . . . A non-diversified portfolio of equity securities
that, in the judgment of Alliance, are likely to achieve superior earnings
growth. Normally, approximately 40 companies will be represented in the Fund's
investment portfolio. The Fund's investments in 25 of these companies most
highly regarded at any point in time by Alliance will usually constitute
approximately 70% of the Fund's net assets.
Technology Fund
Seeks . . . Growth of capital through investment in companies expected to
benefit from advances in technology.
Invests Principally in . . . A diversified portfolio of securities of companies
which use technology extensively in the development of new or improved products
or processes.
Quasar Fund
Seeks . . . Growth of capital by pursuing aggressive investment policies.
Invests Principally in . . . A diversified portfolio of equity securities of any
company and industry and in any type of security which is believed to offer
possibilities for capital appreciation.
Global Stock Funds
International Fund
Seeks . . . A total return on its assets from long-term growth of capital and
from income.
Invests Principally in . . . A diversified portfolio of marketable securities of
established non-United States companies, companies participating in foreign
economies with prospects for growth, and foreign government securities.
Worldwide Privatization Fund
Seeks . . . Long-term capital appreciation.
Invests Principally in . . . A non-diversified portfolio of equity securities
issued by enterprises that are undergoing, or have undergone, privatization. The
balance of the Fund's investment portfolio will include securities of companies
that are believed by Alliance to be beneficiaries of the privatization process.
New Europe Fund
Seeks . . . Long-term capital appreciation through investment primarily in the
equity securities of companies based in Europe.
Invests Principally in . . . A non-diversified portfolio of equity securities of
European companies.
All-Asia Investment Fund
Seeks . . . Long-term capital appreciation.
Invests Principally in . . . A non-diversified portfolio of equity securities of
Asian/Pacific companies.
Global Small Cap Fund
Seeks . . . Long-term growth of capital.
Invests Principally in . . . A diversified global portfolio of the equity
securities of small capitalization companies.
2
<PAGE>
Total Return Funds
Strategic Balanced Fund
Seeks . . . A high long-term total return by investing in a combination of
equity and debt securities.
Invests Principally in . . . A diversified portfolio of dividend-paying common
stocks and fixed-income securities, and also in equity-type securities such as
warrants, preferred stocks and convertible debt instruments.
Balanced Shares
Seeks . . . A high return through a combination of current income and capital
appreciation.
Invests Principally in . . . A diversified portfolio of equity and fixed-income
securities such as common and preferred stocks, U.S. Government and agency
obligations, bonds and senior debt securities.
Income Builder Fund
Seeks . . . Both an attractive level of current income and long-term growth of
income and capital.
Invests Principally in . . . A non-diversified portfolio of fixed-income
securities and dividend-paying common stocks. Alliance currently expects to
continue to maintain approximately 60% of the Fund's net assets in fixed-income
securities and 40% in equity securities.
Utility Income Fund
Seeks . . . Current income and capital appreciation through investment in the
utilities industry.
Invests Principally in . . . A diversified portfolio of equity securities, such
as common stocks, securities convertible into common stocks and rights and
warrants to subscribe for purchase of common stocks, and in fixed-income
securities such as bonds and preferred stocks.
Growth and Income Fund
Seeks . . . Income and appreciation through investment in dividend-paying common
stocks of quality companies.
Invests Principally in . . . A diversified portfolio of dividend-paying common
stocks of good quality, and, under certain market conditions, other types of
securities, including bonds, convertible bonds and preferred stocks.
A Word About Risk . . .
The price of the shares of the Alliance Stock Funds will fluctuate as the daily
prices of the individual securities in which they invest fluctuate, so that your
shares, when redeemed, may be worth more or less than their original cost. With
respect to those Funds permitted to invest in foreign currency denominated
securities, these fluctuations may be magnified by changes in foreign exchange
rates. Investment in the Global Stock Funds involves risks not associated with
funds that invest primarily in securities of U.S. issuers. While the Funds
invest principally in common stocks and other equity securities, in order to
achieve their investment objectives the Funds may at times use certain types of
investment derivatives, such as options, futures, forwards and swaps. These
involve risks different from, and, in certain cases, greater than, the risks
presented by more traditional investments. These risks are fully discussed in
this Prospectus.
Getting Started . . .
Shares of the Funds are available through your financial representative and most
banks, insurance companies and brokerage firms nationwide. Shares can be
purchased for a minimum initial investment of $250, and subsequent investments
can be made for as little as $50. For detailed information about purchasing and
selling shares, see "Purchase and Sale of Shares." In addition, the Funds offer
several time and money saving services to investors. Be sure to ask your
financial representative about:
----------------------------------
Automatic Reinvestment
----------------------------------
Automatic Investment Program
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Retirement Plans
----------------------------------
Shareholder Communications
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Dividend Direction Plans
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Auto Exchange
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Systematic Withdrawals
----------------------------------
A Choice Of Purchase Plans
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Telephone Transactions
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24 Hour Information
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[LOGO OF ALLIANCE APPEARS HERE]
(R)/SM These are registered marks used under licenses from the owner, Alliance
Capital Management L.P.
3
<PAGE>
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Expense Information
- ------------------------------------------------------------------------------
Shareholder Transaction Expenses are one of several factors to consider when you
invest in a Fund. The following table summarizes your maximum transaction costs
from investing in a Fund and annual expenses for each class of shares of each
Fund. For each Fund, the "Examples" to the right of the table below show the
cumulative expenses attributable to a hypothetical $1,000 investment in each
class for the periods specified.
<TABLE>
<CAPTION>
Class A Shares Class B Shares Class C Shares
-------------- -------------- --------------
<S> <C> <C> <C>
Maximum sales charge imposed on purchases (as a percentage of
offering price).............................................. 4.25%(a) None None
Sales charge imposed on dividend reinvestments............... None None None
Deferred sales charge (as a
percentage of original purchase
price or redemption proceeds,
whichever is lower) ......................................... None(a) 4.0% 1.0%
during the during the
first year, first year
decreasing 1.0% 0% thereafter
annually to 0%
after the
fourth year (b)
Exchange fee................................................. None None None
</TABLE>
- --------------------------------------------------------------------------------
(a) Reduced for larger purchases. Purchases of $1,000,000 or more are not
subject to an initial sales charge but may be subject to a 1% deferred sales
charge on redemptions within one year of purchase. See "Purchase and Sale of
Shares--How to Buy Shares" -page 39.
(b) Class B shares of each Fund other than Premier Growth Fund automatically
convert to Class A shares after eight years and the Class B shares of
Premier Growth Fund convert to Class A shares after six years. See "Purchase
and Sale of Shares--How to Buy Shares" - page 39.
<TABLE>
<CAPTION>
Operating Expenses Examples
- ----------------------------------------------------- -----------------------------------------------------------------
Alliance Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees .71% .71% .71% After 1 year $ 53 $ 59 $ 19 $ 29 $ 19
12b-1 fees .19% 1.00% 1.00% After 3 years $ 75 $ 80 $ 60 $ 59 $ 59
Other expenses (a) .18% .19% .18% After 5 years $100 $103 $103 $102 $102
---- ---- ---- After 10 years $169 $201(b) $201(b) $221 $221
Total fund
operating expenses 1.08% 1.90% 1.89%
==== ==== ====
Growth Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
Management fees .75% .75% .75% After 1 year $ 56 $ 61 $ 21 $ 31 $ 21
12b-1 fees .30% 1.00% 1.00% After 3 years $ 83 $ 84 $ 64 $ 64 $ 64
Other expenses (a) .30% .30% .30% After 5 years $113 $110 $110 $110 $110
---- ---- ---- After 10 years $198 $220(b) $220(b) $238 $238
Total fund
operating expenses 1.35% 2.05% 2.05%
==== ==== ====
Premier Growth Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
Management fees 1.00% 1.00% 1.00% After 1 year $ 60 $ 65 $ 25 $ 35 $ 25
12b-1 fees .37% 1.00% 1.00% After 3 years $ 95 $ 96 $ 76 $ 75 $ 75
Other expenses (a) .38% .43% .42% After 5 years $133 $130 $130 $129 $129
---- ---- ---- After 10 years $240 $244(b) $244(b) $276 $276
Total fund
operating expenses 1.75% 2.43% 2.42%
==== ==== ====
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Please refer to the footnotes on page 6.
4
<PAGE>
<TABLE>
<CAPTION>
Operating Expenses Examples
- --------------------------------------------------------- -----------------------------------------------------------------
Technology Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees (g) 1.14% 1.14% 1.14% After 1 year $ 60 $ 65 $ 25 $ 35 $ 25
12b-1 fees .30% 1.00% 1.00% After 3 years $ 95 $ 97 $ 77 $ 77 $ 77
Other expenses (a) .31% .34% .34% After 5 years $133 $132 $132 $132 $132
---- ---- ---- After 10 years $240 $264(b) $264(b) $282 $282
Total fund
operating expenses 1.75% 2.48% 2.48%
==== ==== ====
Quasar Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
Management fees (g) .99% .99% 1.00% After 1 year $ 60 $ 67 $ 27 $ 37 $ 27
12b-1 fees .21% 1.00% 1.00% After 3 years $ 98 $102 $ 82 $ 82 $ 82
Other expenses (a) .63% .66% .65% After 5 years $137 $141 $141 $140 $140
---- ---- ---- After 10 years $248 $278(b) $278(b) $297 $297
Total fund
operating expenses 1.83% 2.65% 2.64%
==== ==== ====
International Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
Management fees (g) .92% .92% .92% After 1 year $ 59 $ 66 $ 26 $ 36 $ 26
12b-1 fees .17% 1.00% 1.00% After 3 years $ 94 $ 99 $ 79 $ 79 $ 79
Other expenses (a) .63% .63% .61% After 5 years $132 $136 $136 $135 $135
---- ---- ---- After 10 years $237 $268(b) $268(b) $287 $287
Total fund
operating expenses 1.72% 2.55% 2.53%
==== ==== ====
Worldwide Privatization Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
Management fees 1.00% 1.00% 1.00% After 1 year $ 61 $ 69 $ 29 $ 36 $ 26
12b-1 fees .30% 1.00% 1.00% After 3 years $ 99 $108 $ 88 $ 80 $ 80
Other expenses (a) .57% .83% .57% After 5 years $139 $149 $149 $137 $137
---- ---- ---- After 10 years $252 $293(b) $293(b) $290 $290
Total fund
operating expenses 1.87% 2.83% 2.57%
==== ==== ====
New Europe Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
Management fees 1.07% 1.07% 1.07% After 1 year $ 63 $ 69 $ 29 $ 39 $ 29
12b-1 fees .30% 1.00% 1.00% After 3 years $107 $109 $ 89 $ 89 $ 89
Other expenses (a) .77% .79% .80% After 5 years $153 $151 $151 $151 $151
---- ---- ---- After 10 years $279 $301(b) $301(b) $319 $319
Total fund
operating expenses 2.14% 2.86% 2.87%
==== ==== ====
All-Asia Investment Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
Management fees After 1 year $ 85 $ 92 $ 52 $ 68 $ 58
(after waiver) (c) 0.00% 0.00% 0.00% After 3 years $171 $176 $156 $173 $173
12b-1 fees .30% 1.00% 1.00% After 5 years $257 $259 $259 $286 $286
Other expenses After 10 years $478 $500(b) $500(b) $560 $560
Administration fees
(after waiver) (f) 0.00% 0.00% 0.00%
Other operating expenses (a)
(after reimbursement) (d) 4.12% 4.20% 4.84%
---- ---- ----
Total other expenses 4.12% 4.20% 4.84%
---- ---- ----
Total fund
operating expenses (d) 4.42% 5.20% 5.84%
==== ==== ====
Global Small Cap Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
Management fees 1.00% 1.00% 1.00% After 1 year $ 67 $ 72 $ 32 $ 42 $ 32
12b-1 fees .30% 1.00% 1.00% After 3 years $117 $119 $ 99 $ 98 $ 98
Other expenses (a) 1.21% 1.21% 1.19% After 5 years $170 $168 $168 $167 $167
---- ---- ---- After 10 years $315 $335(b) $335(b) $349 $349
Total fund
operating expenses 2.51% 3.21% 3.19%
==== ==== ====
Strategic Balanced Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
Management fees
(after waiver) (c) .38% .38% .38% After 1 year $ 56 $ 61 $ 21 $ 31 $ 21
12b-1 fees .30% 1.00% 1.00% After 3 years $ 85 $ 86 $ 66 $ 66 $ 66
Other expenses (a) .72% .72% .72% After 5 years $116 $113 $113 $113 $113
---- ---- ---- After 10 years $203 $225(b) $225(b) $243 $243
Total fund
operating expenses (d) 1.40% 2.10% 2.10%
==== ==== ====
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Please refer to the footnotes on page 6.
5
<PAGE>
<TABLE>
<CAPTION>
Operating Expenses Examples
- ---------------------------------------------------- ------------------------------------------------------------------
Balanced Shares Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees .63% .63% .63% After 1 year $ 56 $ 62 $ 22 $ 32 $ 22
12b-1 fees .24% 1.00% 1.00% After 3 years $ 84 $ 88 $ 68 $ 67 $ 67
Other expenses (a) .51% .53% .52% After 5 years $115 $116 $116 $115 $115
----- ----- ----- After 10 years $201 $229(b) $229(b) $248 $248
Total fund
operating expenses 1.38% 2.16% 2.15%
===== ===== =====
Income Builder Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
Management fees .75% .75% .75% After 1 year $ 66 $ 71 $ 31 $ 40 $ 30
12b-1 fees .30% 1.00% 1.00% After 3 years $114 $115 $ 95 $ 93 $ 93
Other expenses (a) 1.33% 1.34% 1.27% After 5 years $164 $162 $162 $159 $159
----- ----- ----- After 10 years $303 $324(b) $324(b) $334 $334
Total fund
operating expenses 2.38% 3.09% 3.02%
===== ===== =====
Utility Income Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
Management fees 0.00% 0.00% 0.00% After 1 year $ 57 $ 62 $ 22 $ 32 $ 22
after waiver) (c) After 3 years $ 88 $ 89 $ 69 $ 69 $ 69
12b-1 fees .30% 1.00% 1.00% After 5 years $121 $118 $118 $118 $118
Other expenses (a) 1.20% 1.20% 1.20% After 10 years $214 $236(b) $236(b) $253 $253
----- ----- -----
Total fund
operating expenses (e) 1.50% 2.20% 2.20%
===== ===== =====
Growth and Income Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
Management fees .53% .53% .53% After 1 year $ 53 $ 59 $ 19 $ 29 $ 19
12b-1 fees .20% 1.00% 1.00% After 3 years $ 74 $ 78 $ 58 $ 58 $ 58
Other expenses (a) .32% .33% .31% After 5 years $ 98 $101 $101 $100 $100
----- ----- ----- After 10 years $165 $197(b) $197(b) $216 $216
Total fund
operating expenses 1.05% 1.86% 1.84%
===== ===== =====
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Assumes redemption at end of period.
++ Assumes no redemption at end of period.
(a) These expenses include a transfer agency fee payable to Alliance Fund
Services, Inc., an affiliate of Alliance, based on a fixed dollar amount
charged to the Fund for each shareholder's account.
(b) Assumes Class B shares converted to Class A shares after eight years, or six
years with respect to Premier Growth Fund
(c) Net of voluntary fee waiver. In the absence of such waiver, management fees
would be .75% for Strategic Balanced Fund and Utility Income Fund and 1.00%
for All-Asia Investment Fund.
(d) Net of voluntary fee waiver and/or expense reimbursement. In the absence of
such waiver and/or reimbursement, total fund operating expenses for
Strategic Balanced Fund would have been 1.76%, 2.47% and 2.48%,
respectively, for Class A, Class B and Class C shares. In the absence of
such waiver and reimbursements, other expenses for All-Asia Investment Fund
would have been 9.27%, 9.32% and 9.38%, respectively for Class A, Class B
and Class C shares, and total fund operating expenses for All-Asia
Investment Fund would have been 10.57%, 11.32% and 11.38%, respectively, for
Class A, Class B and Class C shares annualized.
(e) Net of expense reimbursements. Absent expense reimbursements, total fund
operating expenses for Utility Income Fund would be 4.86%, 5.34% and 5.99%,
respectively, for Class A, Class B and Class C shares.
(f) Reflects the fees payable by All-Asia Investment Fund to Alliance pursuant
to an administration agreement net of voluntary fee waiver. In the absence
of such fee waiver, the administration fee would be .15%.
(g) Calculated based on average daily net assets. Maximum contractual rate,
based on quarter-end net assets, is 1.00% for Quasar Fund, Technology Fund
and International Fund.
The purpose of the foregoing table is to assist the investor in understanding
the various costs and expenses that an investor in a Fund will bear directly or
indirectly. Long-term shareholders of a Fund may pay aggregate sales charges
totaling more than the economic equivalent of the maximum initial sales charges
permitted by the Conduct Rules of the National Association of Securities
Dealers, Inc. See "Management of the Funds--Distribution Services Agreements."
The Rule 12b-1 fee for each class comprises a service fee not exceeding .25% of
the aggregate average daily net assets of the Fund attributable to the class and
an asset-based sales charge equal to the remaining portion of the Rule 12b-1
fee. The information shown in the table for Alliance Fund, Growth Fund and
Technology Fund reflects annualized expenses based on the Fund's most recent
fiscal periods. The information shown in the table for Premier Growth Fund
reflects estimated annualized expenses for that Fund's current fiscal period.
"Total Fund Operating Expenses" for Utility Income Fund are based on estimated
amounts for the Fund's current fiscal year. See "Management of the Funds."
"Other Expenses" for Class A, Class B and Class C shares of All-Asia Investment
Fund are based on estimated amounts for the Fund's current fiscal year. The
management fee rates of Growth Fund, Premier Growth Fund, Strategic Balanced
Fund, Technology Fund, International Fund, Worldwide Privatization Fund, New
Europe Fund, All-Asia Investment Fund, Income Builder Fund, Utility Income Fund
and Global Small Cap Fund are higher than those paid by most other investment
companies, but Alliance believes the fees are comparable to those paid by
investment companies of similar investment orientation. The expense ratios for
Class B and Class C shares of Technology Fund and Quasar Fund, and for each
Class of shares of Global Small Cap Fund and Worldwide Privatization Fund, are
higher than the expense ratios of most other mutual funds, but are comparable to
the expense ratios of mutual funds whose shares are similarly priced. The
examples set forth above assume reinvestment of all dividends and distributions
and utilize a 5% annual rate of return as mandated by Commission regulations.
The examples should not be considered representative of past or future expenses;
actual expenses may be greater or less than those shown.
6
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
The tables on the following pages present, for each Fund, per share income and
capital changes for a share outstanding throughout each period indicated. The
information in the tables for Alliance Fund, Growth Fund, Premier Growth Fund,
Strategic Balanced Fund, Balanced Shares, Utility Income Fund, Worldwide
Privatization Fund and Growth and Income Fund has been audited by Price
Waterhouse LLP, the independent accountants for each Fund, and for All-Asia
Investment Fund, Technology Fund, Quasar Fund, International Fund, New Europe
Fund, Global Small Cap Fund and Income Builder Fund by Ernst & Young LLP, the
independent auditors for each Fund. A report of Price Waterhouse LLP or Ernst &
Young LLP, as the case may be, on the information with respect to each Fund,
appears in the Fund's Statement of Additional Information. The following
information for each Fund should be read in conjunction with the financial
statements and related notes which are included in the Fund's Statement of
Additional Information.
Further information about a Fund's performance is contained in the Fund's annual
report to shareholders, which may be obtained without charge by contacting
Alliance Fund Services, Inc. at the address or the "For Literature" telephone
number shown on the cover of this Prospectus.
7
<PAGE>
<TABLE>
<CAPTION>
Net Net Net
Asset Realized and Increase
Value Unrealized (Decrease) In Dividends From Distributions
Beginning Of Net Investment Gain (Loss) On Net Asset Value Net Investment From Net
Fiscal Year or Period Period Income (Loss) Investments From Operations Income Realized Gains
--------------------- ------------ -------------- -------------- --------------- -------------- --------------
Alliance Fund
<S> <C> <C> <C> <C> <C> <C>
Class A
12/1/95 to 5/31/96+++....... $ 7.72 $ .01 $ .47 $ .48 $ (.02) $(1.07)
Year ended 11/30/95 ........ 6.63 .02 2.08 2.10 (.01) (1.00)
1/1/94 to 11/30/94**........ 6.85 .01 (.23) (.22) 0.00 0.00
Year ended 12/31/93 ........ 6.68 .02 .93 .95 (.02) (.76)
Year ended 12/31/92 ........ 6.29 .05 .87 .92 (.05) (.48)
Year ended 12/31/91 ........ 5.22 .07 1.70 1.77 (.07) (.63)
Year ended 12/31/90 ........ 6.87 .09 (.32) (.23) (.18) (1.24)
Year ended 12/31/89 ........ 5.60 .12 1.19 1.31 (.04) 0.00
Year ended 12/31/88 ........ 5.15 .08 .80 .88 (.08) (.35)
Year ended 12/31/87 ........ 6.87 .08 .27 .35 (.13) (1.94)
Year ended 12/31/86 ........ 11.15 .11 .87 .98 (.10) (5.16)
Year ended 12/31/85 ........ 9.18 .20 2.51 2.71 (.23) (.51)
Class B
12/1/95 to 5/31/96+++....... $ 7.49 $ (.02) $ .46 $ .44 $ 0.00 $(1.07)
Year ended 11/30/95 ........ 6.50 (.01) 2.00 1.99 0.00 (1.00)
1/1/94 to 11/30/94**........ 6.76 (.03) (.23) (.26) 0.00 0.00
Year ended 12/31/93 ........ 6.64 (.03) .91 .88 0.00 (.76)
Year ended 12/31/92 ........ 6.27 (.01)(b) .87 .86 (.01) (.48)
3/4/91++ to 12/31/91........ 6.14 .01(b) .79 .80 (.04) (.63)
Class C
12/1/95 to 5/31/96+++....... $ 7.50 $ (.02) $ .45 $ .43 $ 0.00 $(1.07)
Year ended 11/30/95 ........ 6.50 (.02) 2.02 2.00 0.00 (1.00)
1/1/94 to 11/30/94**........ 6.77 (.03) (.24) (.27) 0.00 0.00
5/3/93++ to 12/31/93........ 6.67 (.02) .88 .86 0.00 (.76)
Growth Fund (i)
Class A
11/1/95 to 4/30/96+++....... $29.48 $ .04 $3.56 $3.60 $ (.19) $ (.63)
Year ended 10/31/95 ........ 25.08 .12 4.80 4.92 (.11) (.41)
5/1/94 to 10/31/94**........ 23.89 .09 1.10 1.19 0.00 0.00
Year ended 4/30/94 ......... 22.67 (.01)(c) 3.55 3.54 0.00 (2.32)
Year ended 4/30/93 ......... 20.31 .05(c) 3.68 3.73 (.14) (1.23)
Year ended 4/30/92 ......... 17.94 .29(c) 3.95 4.24 (.26) (1.61)
9/4/90++ to 4/30/91 ........ 13.61 .17(c) 4.22 4.39 (.06) 0.00
Class B
11/1/95 to 4/30/96+++....... $24.78 $ (.05) $2.99 $2.94 $ 0.00 $ (.63)
Year ended 10/31/95 ........ 21.21 (.02) 4.01 3.99 (.01) (.41)
5/1/94 to 10/31/94**........ 20.27 .01 .93 .94 0.00 0.00
Year ended 4/30/94 ......... 19.68 (.07)(c) 2.98 2.91 0.00 (2.32)
Year ended 4/30/93 ......... 18.16 (.06)(c) 3.23 3.17 (.03) (1.62)
Year ended 4/30/92 ......... 16.88 .17(c) 3.67 3.84 (.21) (2.35)
Year ended 4/30/91 ......... 14.38 .08(c) 3.22 3.30 (.09) (.71)
Year ended 4/30/90 ......... 14.13 .01(b)(c) 1.26 1.27 0.00 (1.02)
Year ended 4/30/89 ......... 12.76 (.01)(c) 2.44 2.43 0.00 (1.06)
10/23/87+ to 4/30/88........ 10.00 (.02)(c) 2.78 2.76 0.00 0.00
Class C
11/1/95 to 4/30/96+++....... $24.79 $ (.05) $2.99 $2.94 $ 0.00 $ (.63)
Year ended 10/31/95 ........ 21.22 (.03) 4.02 3.99 (.01) (.41)
5/1/94 to 10/31/94**........ 20.28 .01 .93 .94 0.00 0.00
8/2/93++ to 4/30/94 ........ 21.47 (.02)(c) 1.15 1.13 0.00 (2.32)
Premier Growth Fund
Class A
12/1/95 to 5/31/96+++....... $16.09 $ (.03) $1.26 $1.23 $ 0.00 $(1.27)
Year ended 11/30/95 ........ 11.41 (.03) 5.38 5.35 0.00 (.67)
Year ended 11/30/94 ........ 11.78 (.09) (.28) (.37) 0.00 0.00
Year ended 11/30/93 ........ 10.79 (.05) 1.05 1.00 (.01) 0.00
9/28/92+ to 11/30/92........ 10.00 .01 .78 .79 0.00 0.00
Class B
12/1/95 to 5/31/96+++....... $15.81 $ (.08) $1.23 $1.15 $ 0.00 $(1.27)
Year ended 11/30/95 ........ 11.29 (.11) 5.30 5.19 0.00 (.67)
Year ended 11/30/94 ........ 11.72 (.15) (.28) (.43) 0.00 0.00
Year ended 11/30/93 ........ 10.79 (.10) 1.03 .93 0.00 0.00
9/28/92+ to 11/30/92........ 10.00 0.00 .79 .79 0.00 0.00
Class C
12/1/95 to 5/31/96+++....... $15.82 $ (.08) $1.24 $1.16 $ 0.00 $(1.27)
Year ended 11/30/95 ........ 11.30 (.08) 5.27 5.19 0.00 (.67)
Year ended 11/30/94 ........ 11.72 (.09) (.33) (.42) 0.00 0.00
5/3/93++ to 11/30/93........ 10.48 (.05) 1.29 1.24 0.00 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Please refer to the footnotes on page 16.
8
<PAGE>
<TABLE>
<CAPTION>
Total Net Assets Ratio Of Net
Total Net Asset Investment At End Of Ratio Of Investment
Dividends Value Return Based Period Expenses Income (Loss)
And End Of on Net Asset (000's To Average To Average Portfolio
Fiscal Year or Period Distributions Period Value (a) omitted) Net Assets Net Assets Turnover Rate
--------------------- ---------------- --------- ------------ ---------- ---------- ------------- -------------
Alliance Fund
<S> <C> <C> <C> <C> <C> <C> <C>
Class A
12/1/95 to 5/31/96+++....... $(1.09) $ 7.11 7.42% $ 952,789 1.04% .23% 43%
Year ended 11/30/95 ........ (1.01) 7.72 37.87 945,309 1.08 .31 81
1/1/94 to 11/30/94**........ 0.00 6.63 (3.21) 760,679 1.05* .21* 63
Year ended 12/31/93 ........ (.78) 6.85 14.26 831,814 1.01 .27 66
Year ended 12/31/92 ........ (.53) 6.68 14.70 794,733 .81 .79 58
Year ended 12/31/91 ........ (.70) 6.29 33.91 748,226 .83 1.03 74
Year ended 12/31/90 ........ (1.42) 5.22 (4.36) 620,374 .81 1.56 71
Year ended 12/31/89 ........ (.04) 6.87 23.42 837,429 .75 1.79 81
Year ended 12/31/88 ........ (.43) 5.60 17.10 760,619 .82 1.38 65
Year ended 12/31/87 ........ (2.07) 5.15 4.90 695,812 .76 1.03 100
Year ended 12/31/86 ........ (5.26) 6.87 12.60 652,009 .61 1.39 46
Year ended 12/31/85 ........ (.74) 11.15 31.52 710,851 .59 1.96 62
Class B
12/1/95 to 5/31/96+++....... $(1.07) $ 6.86 7.05% $ 39,399 1.87% (.60)% 43%
Year ended 11/30/95 ........ (1.00) 7.49 36.61 31,738 1.90 (.53) 81
1/1/94 to 11/30/94**........ 0.00 6.50 (3.85) 18,138 1.89* (.60)* 63
Year ended 12/31/93 ........ (.76) 6.76 13.28 12,402 1.90 (.64) 66
Year ended 12/31/92 ........ (.49) 6.64 13.75 3,825 1.64 (.04) 58
3/4/91++ to 12/31/91........ (.67) 6.27 13.10 852 1.64* .10* 74
Class C
12/1/95 to 5/31/96+++....... $(1.07) $ 6.86 6.90% $ 13,326 1.86% (.59)% 43%
Year ended 11/30/95 ........ (1.00) 7.50 36.79 10,078 1.89 (.51) 81
1/1/94 to 11/30/94**........ 0.00 6.50 (3.99) 6,230 1.87* (.59)* 63
5/3/93++ to 12/31/93........ (.76) 6.77 13.95 4,006 1.94* (.74)* 66
Growth Fund (i)
Class A
11/1/95 to 4/30/96+++....... $ (.82) $32.26 12.42% $ 395,674 1.28% .23% 15%
Year ended 10/31/95 ........ (.52) 29.48 20.18 285,161 1.35 .56 61
5/1/94 to 10/31/94**........ 0.00 25.08 4.98 167,800 1.35* .86* 24
Year ended 4/30/94 ......... (2.32) 23.89 15.66 102,406 1.40 (f) .32 87
Year ended 4/30/93 ......... (1.37) 22.67 18.89 13,889 1.40 (f) .20 124
Year ended 4/30/92 ......... (1.87) 20.31 23.61 8,228 1.40 (f) 1.44 137
9/4/90++ to 4/30/91 ........ (.06) 17.94 32.40 713 1.40*(f) 1.99* 130
Class B
11/1/95 to 4/30/96+++....... $ (.63) $27.09 12.05% $2,060,163 1.98% (.47)% 15%
Year ended 10/31/95 ........ (.42) 24.78 19.33 1,052,020 2.05 (.15) 61
5/1/94 to 10/31/94**........ 0.00 21.21 4.64 751,521 2.05* .16* 24
Year ended 4/30/94 ......... (2.32) 20.27 14.79 394,227 2.10 (f) (.36) 87
Year ended 4/30/93 ......... (1.65) 19.68 18.16 56,704 2.15 (f) (.53) 124
Year ended 4/30/92 ......... (2.56) 18.16 22.75 37,845 2.15 (f) .78 137
Year ended 4/30/91 ......... (.80) 16.88 24.72 22,710 2.10 (f) .56 130
Year ended 4/30/90 ......... (1.02) 14.38 8.81 15,800 2.00 (f) .07 165
Year ended 4/30/89 ......... (1.06) 14.13 20.31 7,672 2.00 (f) (.03) 139
10/23/87+ to 4/30/88........ 0.00 12.76 27.60 1,938 2.00*(f) (.40)* 52
Class C
11/1/95 to 4/30/96+++....... $ (.63) $27.10 12.05% $ 318,094 1.98% (.47)% 15%
Year ended 10/31/95 ........ (.42) 24.79 19.32 226,662 2.05 (.15) 61
5/1/94 to 10/31/94**........ 0.00 21.22 4.64 114,455 2.05* .16* 24
8/2/93++ to 4/30/94 ........ (2.32) 20.28 5.27 64,030 2.10*(f) (.31)* 87
Premier Growth Fund
Class A
12/1/95 to 5/31/96+++....... $(1.27) $16.05 8.48% $ 141,181 1.63% (.42)% 54%
Year ended 11/30/95 ........ (.67) 16.09 49.95 72,366 1.75 (.28) 114
Year ended 11/30/94 ........ 0.00 11.41 (3.14) 35,146 1.96 (.67) 98
Year ended 11/30/93 ........ (.01) 11.78 9.26 40,415 2.18 (.61) 68
9/28/92+ to 11/30/92........ 0.00 10.79 7.90 4,893 2.17*(f) .91*(f) 0
Class B
12/1/95 to 5/31/96+++....... $(1.27) $15.69 8.10% $ 329,465 2.31% (1.07)% 54%
Year ended 11/30/95 ........ (.67) 15.81 49.01 238,088 2.43 (.95) 114
Year ended 11/30/94 ........ 0.00 11.29 (3.67) 139,988 2.47 (1.19) 98
Year ended 11/30/93 ........ 0.00 11.72 8.64 151,600 2.70 (1.14) 68
9/28/92+ to 11/30/92........ 0.00 10.79 7.90 19,941 2.68*(f) .35*(f) 0
Class C
12/1/95 to 5/31/96+++....... $(1.27) $15.71 8.16% $ 41,175 2.30% (1.08)% 54%
Year ended 11/30/95 ........ (.67) 15.82 48.96 20,679 2.42 (.97) 114
Year ended 11/30/94 ........ 0.00 11.30 (3.58) 7,332 2.47 (1.16) 98
5/3/93++ to 11/30/93........ 0.00 11.72 11.83 3,899 2.79* (1.35)* 68
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Net Net Net
Asset Realized and Increase
Value Unrealized (Decrease) In Dividends From Distributions
Beginning Of Net Investment Gain (Loss) On Net Asset Value Net Investment From Net
Fiscal Year or Period Period Income (Loss) Investments From Operations Income Realized Gains
--------------------- ------------ -------------- -------------- --------------- -------------- --------------
Technology Fund
<S> <C> <C> <C> <C> <C> <C>
Class A
12/1/95 to 5/31/96+++ ...... $46.64 $(.14) $ 2.93 $ 2.79 $0.00 $(2.38)
Year ended 11/30/95 ........ 31.98 (.30) 18.13 17.83 0.00 (3.17)
1/1/94 to 11/30/94** ....... 26.12 (.32) 6.18 5.86 0.00 0.00
Year ended 12/31/93 ........ 28.20 (.29) 6.39 6.10 0.00 (8.18)
Year ended 12/31/92 ........ 26.38 (.22)(b) 4.31 4.09 0.00 (2.27)
Year ended 12/31/91 ........ 19.44 (.02) 10.57 10.55 0.00 (3.61)
Year ended 12/31/90 ........ 21.57 (.03) (.56) (.59) 0.00 (1.54)
Year ended 12/31/89 ........ 20.35 0.00 1.22 1.22 0.00 0.00
Year ended 12/31/88 ........ 20.22 (.03) .16 .13 0.00 0.00
Year ended 12/31/87 ........ 23.11 (.10) 4.54 4.44 0.00 (7.33)
Year ended 12/31/86 ........ 20.64 (.14) 2.62 2.48 (.01) 0.00
Year ended 12/31/85 ........ 16.52 .02 4.30 4.32 (.20) 0.00
Class B
12/1/95 to 5/31/96+++ ...... $45.76 $(.29) $ 2.85 $ 2.56 $0.00 $(2.38)
Year ended 11/30/95 ........ 31.61 (.60)(b) 17.92 17.32 0.00 (3.17)
1/1/94 to 11/30/94** ....... 25.98 (.23) 5.86 5.63 0.00 0.00
5/3/93++ to 12/31/93 ....... 27.44 (.12) 6.84 6.72 0.00 (8.18)
Class C
12/1/95 to 5/31/96+++....... $45.77 $(.29) $ 2.84 $ 2.55 $0.00 $(2.38)
Year ended 11/30/95 ........ 31.61 (.58)(b) 17.91 17.33 0.00 (3.17)
1/1/94 to 11/30/94** ....... 25.98 (.24) 5.87 5.63 0.00 0.00
5/3/93++ to 12/31/93 ....... 27.44 (.13) 6.85 6.72 0.00 (8.18)
Quasar Fund
Class A
10/1/95 to 3/31/96+++ ...... $24.16 $(.12)(b) $ 6.42 $ 6.30 $0.00 $(4.81)
Year ended 9/30/95 ......... 22.65 (.22)(b) 5.59 5.37 0.00 (3.86)
Year ended 9/30/94 ......... 24.43 (.60) (.36) (.96) 0.00 (.82)
Year ended 9/30/93 ......... 19.34 (.41) 6.38 5.97 0.00 (.88)
Year ended 9/30/92 ......... 21.27 (.24) (1.53) (1.77) 0.00 (.16)
Year ended 9/30/91 ......... 15.67 (.05) 5.71 5.66 (.06) 0.00
Year ended 9/30/90 ......... 24.84 .03(b) (7.18) (7.15) 0.00 (2.02)
Year ended 9/30/89 ......... 17.60 .02(b) 7.40 7.42 0.00 (.18)
Year ended 9/30/88 ......... 24.47 (.08) (2.08) (2.16) 0.00 (4.71)
Year ended 9/30/87(d) ...... 21.80 (.14) 5.88 5.74 0.00 (3.07)
Year ended 9/30/86(d) ...... 17.25 0.00 5.54 5.54 (.03) (.96)
Year ended 9/30/85(d) ...... 14.67 .04 2.87 2.91 (.11) (.22)
Class B
10/1/95 to 3/31/96+++ ...... $23.03 $(.14) $ 6.03 $ 5.89 $0.00 $(4.81)
Year ended 9/30/95 ......... 21.92 (.37)(b) 5.34 4.97 0.00 (3.86)
Year ended 9/30/94 ......... 23.88 (.53) (.61) (1.14) 0.00 (.82)
Year ended 9/30/93 ......... 19.07 (.18) 5.87 5.69 0.00 (.88)
Year ended 9/30/92 ......... 21.14 (.39) (1.52) (1.91) 0.00 (.16)
Year ended 9/30/91 ......... 15.66 (.13) 5.67 5.54 (.06) 0.00
9/17/90++ to 9/30/90 ....... 17.17 (.01) (1.50) (1.51) 0.00 0.00
Class C
10/1/95 to 3/31/96+++ ...... $23.05 $(.14) $ 5.98 $ 5.84 $0.00 $(4.81)
Year ended 9/30/95 ......... 21.92 (.37)(b) 5.36 4.99 0.00 (3.86)
Year ended 9/30/94 ......... 23.88 (.36) (.78) (1.14) 0.00 (.82)
5/3/93++ to 9/30/93 ........ 20.33 (.10) 3.65 3.55 0.00 0.00
International Fund
Class A
Year ended 6/30/96 ......... $16.81 $ .05 $ 2.51 $ 2.56 $0.00 $(1.05)
Year ended 6/30/95 ......... 18.38 .04 .01 .05 0.00 (1.62)
Year ended 6/30/94 ......... 16.01 (.09) 3.02 2.93 0.00 (.56)
Year ended 6/30/93 ......... 14.98 (.01) 1.17 1.16 (.04) (.09)
Year ended 6/30/92 ......... 14.00 .01(b) 1.04 1.05 (.07) 0.00
Year ended 6/30/91 ......... 17.99 .05 (3.54) (3.49) (.03) (.47)
Year ended 6/30/90 ......... 17.24 .03 2.87 2.90 (.04) (2.11)
Year ended 6/30/89 ......... 16.09 .05 3.73 3.78 (.13) (2.50)
Year ended 6/30/88 ......... 23.70 .17 (1.22) (1.05) (.21) (6.35)
Year ended 6/30/87 ......... 22.02 .15 4.31 4.46 (.03) (2.75)
Class B
Year ended 6/30/96 ......... $16.19 $ .07 $ 2.38 $ 2.31 $0.00 $(1.05)
Year ended 6/30/95 ......... 17.90 (.01) (.08) (.09) 0.00 (1.62)
Year ended 6/30/94 ......... 15.74 (.19)(b) 2.91 2.72 0.00 (.56)
Year ended 6/30/93 ......... 14.81 (.12) 1.14 1.02 0.00 (.09)
Year ended 6/30/92 ......... 13.93 (.11)(b) 1.02 .91 (.03) 0.00
9/17/90++ to 6/30/91 ....... 15.52 .03 (1.12) (1.09) (.03) (.47)
Class C
Year ended 6/30/96 ......... $16.20 $ .07 $ 2.38 $ 2.31 $0.00 $(1.05)
Year ended 6/30/95 ......... 17.91 (.14) .05 (.09) 0.00 (1.62)
Year ended 6/30/94 ......... 15.74 (.11) 2.84 2.73 0.00 (.56)
5/3/93++ to 6/30/93 ........ 15.93 0.00 (.19) (.19) 0.00 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Please refer to the footnotes on page 16.
10
<PAGE>
<TABLE>
<CAPTION>
Total Net Assets Ratio Of Net
Total Net Asset Investment At End Of Ratio Of Investment
Dividends Value Return Based Period Expenses Income (Loss)
And End Of on Net Asset (000's To Average To Average Portfolio
Fiscal Year or Period Distributions Period Value (a) omitted) Net Assets Net Assets Turnover Rate
--------------------- ------------- --------- ------------ ---------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Technology Fund
Class A
12/1/95 to 5/31/96+++ ...... $(2.38) $47.05 6.75% $507,135 1.74% (.65)% 19%
Year ended 11/30/95 ........ (3.17) 46.64 61.93 398,262 1.75 (.77) 55
1/1/94 to 11/30/94** ....... 0.00 31.98 22.43 202,929 1.66* (1.22)* 55
Year ended 12/31/93 ........ (8.18) 26.12 21.63 173,732 1.73 (1.32) 64
Year ended 12/31/92 ........ (2.27) 28.20 15.50 173,566 1.61 (.90) 73
Year ended 12/31/91 ........ (3.61) 26.38 54.24 191,693 1.71 (.20) 134
Year ended 12/31/90 ........ (1.54) 19.44 (3.08) 131,843 1.77 (.18) 147
Year ended 12/31/89 ........ 0.00 21.57 6.00 141,730 1.66 .02 139
Year ended 12/31/88 ........ 0.00 20.35 0.64 169,856 1.42(f) (.16)(f) 139
Year ended 12/31/87 ........ (7.33) 20.22 19.16 167,608 1.31(f) (.56)(f) 248
Year ended 12/31/86 ........ (.01) 23.11 12.03 147,733 1.13(f) (.57)(f) 141
Year ended 12/31/85 ........ (.20) 20.64 26.24 147,114 1.14(f) .07 (f) 259
Class B
12/1/95 to 5/31/96+++ ...... $(2.38) $45.94 6.36% $486,752 2.45% (1.37)% 19%
Year ended 11/30/95 ........ (3.17) 45.76 60.95 277,111 2.48 (1.47) 55
1/1/94 to 11/30/94** ....... 0.00 31.61 21.67 18,397 2.43* (1.95)* 55
5/3/93++ to 12/31/93 ....... (8.18) 25.98 24.49 1,645 2.57* (2.30)* 64
Class C
12/1/95 to 5/31/96+++....... $(2.38) $45.94 6.33% $82,541 2.44% (1.36)% 19%
Year ended 11/30/95 ........ (3.17) 45.77 60.98 43,161 2.48 (1.47) 55
1/1/94 to 11/30/94** ....... 0.00 31.61 21.67 7,470 2.41* (1.94)* 55
5/3/93++ to 12/31/93 ....... (8.18) 25.98 24.49 1,096 2.52* (2.25)* 64
Quasar Fund
Class A
10/1/95 to 3/31/96+++ ...... $(4.81) $25.65 30.84% $203,483 1.83% (1.14)% 87%
Year ended 9/30/95 ......... (3.86) 24.16 30.73 146,663 1.83 (1.06) 160
Year ended 9/30/94 ......... (.82) 22.65 (4.05) 155,470 1.67 (1.15) 110
Year ended 9/30/93 ......... (.88) 24.43 31.58 228,874 1.65 (1.00) 102
Year ended 9/30/92 ......... (.16) 19.34 (8.34) 252,140 1.62 (.89) 128
Year ended 9/30/91 ......... (.06) 21.27 36.28 333,806 1.64 (.22) 118
Year ended 9/30/90 ......... (2.02) 15.67 (30.81) 251,102 1.66 .16 90
Year ended 9/30/89 ......... (.18) 24.84 42.68 263,099 1.73 .10 90
Year ended 9/30/88 ......... (4.71) 17.60 (8.61) 90,713 1.28(f) (.40)(f) 58
Year ended 9/30/87(d) ...... (3.07) 24.47 29.61 134,676 1.18(f) (.56)(f) 76
Year ended 9/30/86(d) ...... (.99) 21.80 33.79 144,959 1.18 .02 84
Year ended 9/30/85(d) ...... (.33) 17.25 20.29 77,067 1.18 .22 77
Class B
10/1/95 to 3/31/96+++ ...... $(4.81) $24.11 30.54% $29,346 2.64% (1.95)% 87%
Year ended 9/30/95 ......... (3.86) 23.03 29.78 16,604 2.65 (1.88) 160
Year ended 9/30/94 ......... (.82) 21.92 (4.92) 13,901 2.50 (1.98) 110
Year ended 9/30/93 ......... (.88) 23.88 30.53 16,779 2.46 (1.81) 102
Year ended 9/30/92 ......... (.16) 19.07 (9.05) 9,454 2.42 (1.67) 128
Year ended 9/30/91 ......... (.06) 21.14 35.54 7,346 2.41 (1.28) 118
9/17/90++ to 9/30/90 ....... 0.00 15.66 (8.79) 71 2.09* (.26)* 90
Class C
10/1/95 to 3/31/96+++ ...... $(4.81) $24.08 30.31% $6,779 2.65% (1.95)% 87%
Year ended 9/30/95 ......... (3.86) 23.05 29.87 1,611 2.64* (1.76)* 160
Year ended 9/30/94 ......... (.82) 21.92 (4.92) 1,220 2.48 (1.96) 110
5/3/93++ to 9/30/93 ........ 0.00 23.88 17.46 118 2.49* (1.90)* 102
International Fund
Class A
Year ended 6/30/96 ......... $(1.05) $18.32 15.83% $196,261 1.72% .31% 78%
Year ended 6/30/95 ......... (1.62) 16.81 .59 165,584 1.73 .26 119
Year ended 6/30/94 ......... (.56) 18.38 18.68 201,916 1.90 (.50) 97
Year ended 6/30/93 ......... (.13) 16.01 7.86 161,048 1.88 (.14) 94
Year ended 6/30/92 ......... (.07) 14.98 7.52 179,807 1.82 .07 72
Year ended 6/30/91 ......... (.50) 14.00 (19.34) 214,442 1.73 .37 71
Year ended 6/30/90 ......... (2.15) 17.99 16.98 265,999 1.45 .33 37
Year ended 6/30/89 ......... (2.63) 17.24 27.65 166,003 1.41 .39 87
Year ended 6/30/88 ......... (6.56) 16.09 (4.20) 132,319 1.41 .84 55
Year ended 6/30/87 ......... (2.78) 23.70 23.05 194,716 1.30 .77 58
Class B
Year ended 6/30/96 ......... $(1.05) $17.45 14.87% $72,470 2.55% (.46)% 78%
Year ended 6/30/95 ......... (1.62) 16.19 (.22) 48,998 2.57 (.62) 119
Year ended 6/30/94 ......... (.56) 17.90 17.65 29,943 2.78 (1.15) 97
Year ended 6/30/93 ......... (.09) 15.74 6.98 6,363 2.70 (.96) 94
Year ended 6/30/92 ......... (.03) 14.81 6.54 5,585 2.68 (.70) 72
9/17/90++ to 6/30/91 ....... (.50) 13.93 (6.97) 3,515 3.39* .84* 71
Class C
Year ended 6/30/96 ......... $(1.05) $17.46 14.85% $26,965 2.53% (.47)% 78%
Year ended 6/30/95 ......... (1.62) 16.20 (.22) 19,395 2.54 (.88) 119
Year ended 6/30/94 ......... (.56) 17.91 17.72 13,503 2.78 (1.12) 97
5/3/93++ to 6/30/93 ........ 0.00 15.74 (1.19) 229 2.57* .08* 94
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
Net Net Net
Asset Realized and Increase
Value Unrealized (Decrease) In Dividends From Distributions
Beginning Of Net Investment Gains (Loss) On Net Asset Value Net Investment From Net
Fiscal Year or Period Period Income (Loss) Investments From Operations Income Realized Gains
--------------------- ------------- -------------- --------------- --------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Worldwide Privatization Fund
Class A
Year ended 6/30/96 ...... $10.18 $ .10 $ 1.85 $ 1.95 $0.00 $ 0.00
Year ended 6/30/95 ...... 9.75 .06 .37 .43 0.00 0.00
6/2/94+ to 6/30/94 ...... 10.00 .01 (.26) (.25) 0.00 0.00
Class B
Year ended 6/30/96 ...... $10.10 $(.02) $ 1.88 $ 1.86 $0.00 $ 0.00
Year ended 6/30/95 ...... 9.74 .02 .34 .36 0.00 0.00
6/2/94+ to 6/30/94 ...... 10.00 .00 (.26) (.26) 0.00 0.00
Class C
Year ended 6/30/96 ...... $10.10 $ .03 $ 1.83 $ 1.86 $0.00 $ 0.00
2/8/95++ to 6/30/95 ..... 9.53 .05 .52 .57 0.00 0.00
New Europe Fund
Class A
Year ended 7/31/96 ...... $15.11 $ .18 $ 1.02 $ 1.20 $0.00 $ (.47)
Year ended 7/31/95 ...... 12.66 .04 2.50 2.54 (.09) 0.00
Period ended 7/31/94** .. 12.53 .09 .04 .13 0.00 0.00
Year ended 2/28/94 ...... 9.37 .02(b) 3.14 3.16 0.00 0.00
Year ended 2/28/93 ...... 9.81 .04 (.33) (.29) (.15) 0.00
Year ended 2/29/92 ...... 9.76 .02(b) .05 .07 (.02) 0.00
4/2/90+ to 2/28/91 ...... 11.11(e) .26 (.91) (.65) (.26) (.44)
Class B
Year ended 7/31/96 ...... $14.71 $ .08 $ .99 $ 1.07 $0.00 $ (.47)
Year ended 7/31/95 ...... 12.41 (.05) 2.44 2.39 (.09) 0.00
Period ended 7/31/94** .. 12.32 .07 .02 .09 0.00 0.00
Year ended 2/28/94 ...... 9.28 (.05)(b) 3.09 3.04 0.00 0.00
Year ended 2/28/93 ...... 9.74 (.02) (.33) (.35) (.11) 0.00
3/5/91++ to 2/29/92 ..... 9.84 (.04)(b) (.04) (.08) (.02) 0.00
Class C
Year ended 7/31/96 ...... $14.72 $ .08 $ 1.00 $ 1.08 $0.00 $ (.47)
Year ended 7/31/95 ...... 12.42 (.07) 2.46 2.39 (.09) 0.00
Period ended 7/31/94** .. 12.33 .06 .03 .09 0.00 0.00
5/3/93++ to 2/28/94 ..... 10.21 (.04)(b) 2.16 2.12 0.00 0.00
All-Asia Investment Fund
Class A
11/1/95 to 4/30/96+++ ... $10.45 $(.10) $ 1.92 $ 1.82 $0.00 $ (.08)
11/28/94+ to 10/31/95 ... 10.00 (.19)(c) .64 .45 0.00 0.00
Class B
11/1/95 to 4/30/96+++ ... $10.41 $(.14) $ 1.89 $ 1.75 $0.00 $ (.08)
11/28/94+ to 10/31/95 ... 10.00 (.25)(c) .66 .41 0.00 0.00
Class C
11/1/95 to 4/30/96+++ ... $10.41 $(.14) $ 1.90 $ 1.76 $0.00 $ (.08)
11/28/94+ to 10/31/95 ... 10.00 (.35)(c) .76 .41 0.00 0.00
Global Small Cap Fund
Class A
Year ended 7/31/96 ...... $10.38 $(.14) $ 1.90 $ 1.76 $0.00 $ (.53)
Year ended 7/31/95 ...... 11.08 (.09) 1.50 1.41 0.00 (2.11)(j)
Period ended 7/31/94** .. 11.24 (.15) (.01) (.16) 0.00 0.00
Year ended 9/30/93 ...... 9.33 (.15) 2.49 2.34 0.00 (.43)
Year ended 9/30/92 ...... 10.55 (.16) (1.03) (1.19) 0.00 (.03)
Year ended 9/30/91 ...... 8.26 (.06) 2.35 2.29 0.00 0.00
Year ended 9/30/90 ...... 15.54 (.05)(b) (4.12) (4.17) 0.00 (3.11)
Year ended 9/30/89 ...... 11.41 (.03) 4.25 4.22 0.00 (.09)
Year ended 9/30/88 ...... 15.07 (.05) (1.83) (1.88) 0.00 (1.78)
Year ended 9/30/87 ...... 15.47 (.07) 4.19 4.12 (.04) (4.48)
Class B
Year ended 7/31/96 ...... $ 9.95 $(.20) $ 1.81 $ 1.61 $0.00 $ (.53)
Year ended 7/31/95 ...... 10.78 (.12) 1.40 1.28 0.00 (2.11)(j)
Period ended 7/31/94** .. 11.00 (.17)(b) (.05) (.22) 0.00 0.00
Year ended 9/30/93 ...... 9.20 (.15) 2.38 2.23 0.00 (.43)
Year ended 9/30/92 ...... 10.49 (.20) (1.06) (1.26) 0.00 (.03)
Year ended 9/30/91 ...... 8.26 (.07) 2.30 2.23 0.00 0.00
9/17/90++ to 9/30/90 .... 9.12 (.01) (.85) (.86) 0.00 0.00
Class C
Year ended 7/31/96 ...... $ 9.96 $(.20) $ 1.82 $ 1.62 $0.00 $ (.53)
Year ended 7/31/95 ...... 10.79 (.17) 1.45 1.28 0.00 (2.11)(j)
Period ended 7/31/94** .. 11.00 (.17)(b) (.04) (.21) 0.00 0.00
5/3/93++ to 9/30/93 ..... 9.86 (.05) 1.19 1.14 0.00 0.00
Strategic Balanced Fund (i)
Class A
Year ended 7/31/96 ...... $17.98 $ .35 $ 1.08 $ 1.43 $(.32) $ (.61)
Year ended 7/31/95 ...... 16.26 .34(c) 1.64 1.98 (.22) (.04)
Period ended 7/31/94** .. 16.46 .07(c) (.27) (.20) 0.00 0.00
Year ended 4/30/94 ...... 16.97 .16(c) .74 .90 (.24) (1.17)
Year ended 4/30/93 ...... 17.06 .39(c) .59 .98 (.42) (.65)
Year ended 4/30/92 ...... 14.48 .27(c) 2.80 3.07 (.17) (.32)
9/4/90++ to 4/30/91 ..... 12.51 .34(c) 1.66 2.00 (.03) 0.00
- ----------------------------------------------------------------------------------------------------------------------------------
Please refer to the footnotes on page 16.
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Total Net Assets Ratio Of Net
Total Net Asset Investment At End Of Ratio Of Investment
Dividends Value Return Based Period Expenses Income (Loss)
And End Of on Net Asset (000's) To Average To Average Portfolio
Fiscal Year or Period Distributions Period Value(a) omitted Net Assets Net Assets Turnover Rate
--------------------- ------------- ------- ------------ --------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Worldwide Privatization Fund
Class A
Year ened 6/30/96 ....... $ 0.00 $12.13 19.16% $672,732 1.87% .95% 28%
Year ended 6/30/95 ...... 0.00 10.18 4.41 13,535 2.56 .66 36
6/2/94+ to 6/30/94 ...... 0.00 9.75 (2.50) 4,990 2.75* 1.03* 0
Class B
Year ended 6/30/96 ...... $ 0.00 $11.96 18.42% $83,050 2.83% (.20)% 28%
Year ended 6/30/95 ...... 0.00 10.10 3.70 79,359 3.27 .01 36
6/2/94+ to 6/30/94 ...... 0.00 9.74 (2.60) 22,859 3.45* .33* 0
Class C
Year ended 6/30/96 ...... $ 0.00 $11.96 18.42% $2,383 2.57% .63% 28%
2/8/95++ to 6/30/95 ..... 0.00 10.10 5.98 338 3.27* 2.65* 36
New Europe Fund
Class A
Year ended 7/31/96 ...... $ (.47) $15.84 8.20% $74,026 2.14% 1.10% 69%
Year ended 7/31/95 ...... (.09) 15.11 20.22 86,112 2.09 .37 74
Period ended 7/31/94** .. 0.00 12.66 1.04 86,739 2.06* 1.85* 35
Year ended 2/28/94 ...... 0.00 12.53 33.73 90,372 2.30 .17 94
Year ended 2/28/93 ...... (.15) 9.37 (2.82) 79,285 2.25 .47 125
Year ended 2/29/92 ...... (.02) 9.81 .74 108,510 2.24 .16 34
4/2/90+ to 2/28/91 ...... (.70) 9.76 (5.63) 188,016 1.52* 2.71* 48
Class B
Year ended 7/31/96 ...... $ (.47) $15.31 7.53% $42,662 2.86% .59% 69%
Year ended 7/31/95 ...... (.09) 14.71 19.42 34,527 2.79 (.33) 74
Period ended 7/31/94** .. 0.00 12.41 .73 31,404 2.76* 1.15* 35
Year ended 2/28/94 ...... 0.00 12.32 32.76 20,729 3.02 (.52) 94
Year ended 2/28/93 ...... (.11) 9.28 (3.49) 1,732 3.00 (.50) 125
3/5/91++ to 2/29/92 ..... (.02) 9.74 .03 1,423 3.02* (.71)* 34
Class C
Year ended 7/31/96 ...... $ (.47) $15.33 7.59% $10,141 2.87% .58% 69%
Year ended 7/31/95 ...... (.09) 14.72 19.40 7,802 2.78 (.33) 74
Period ended 7/31/94** .. 0.00 12.42 .73 11,875 2.76* 1.15* 35
5/3/93++ to 2/28/94 ..... 0.00 12.33 20.77 10,886 3.00* (.52)* 94
All-Asia Investment Fund
Class A
11/1/95 to 4/30/96+++ ... $ (.08) $12.19 17.52% $11,645 3.47% (1.75)% 42%
11/28/94+ to 10/31/95 ... 0.00 10.45 4.50 2,870 4.42* (1.87)*(f) 90
Class B
11/1/95 to 4/30/96+++ ... $ (.08) $12.08 16.91% $20,176 4.17% (2.42)% 42%
11/28/94+ to 10/31/95 ... 0.00 10.41 4.10 5,170 5.20* (2.64)*(f) 90
Class C
11/1/95 to 4/30/96+++ ... $ (.08) $12.09 17.01% $2,931 4.18% (2.44)% 42%
11/28/94+ to 10/31/95 ... 0.00 10.41 4.10 597 5.84* (3.41)*(f) 90
Global Small Cap Fund
Class A
Year ended 7/31/96 ...... $ (.53) $11.61 17.46% $68,623 2.51% (1.22)% 139%
Year ended 7/31/95 ...... (2.11) 10.38 16.62 60,057 2.54(f) (1.17)(f) 128
Period ended 7/31/94** .. 0.00 11.08 (1.42) 61,372 2.42* (1.26)* 78
Year ended 9/30/93 ...... (.43) 11.24 25.83 65,713 2.53 (1.13) 97
Year ended 9/30/92 ...... (.03) 9.33 (11.30) 58,491 2.34 (.85) 108
Year ended 9/30/91 ...... 0.00 10.55 27.72 84,370 2.29 (.55) 104
Year ended 9/30/90 ...... (3.11) 8.26 (31.90) 68,316 1.73 (.46) 89
Year ended 9/30/89 ...... (.09) 15.54 37.34 113,583 1.56 (.17) 106
Year ended 9/30/88 ...... (1.78) 11.41 (8.11) 90,071 1.54(f) (.50)(f) 74
Year ended 9/30/87 ...... (4.52) 15.07 34.11 113,305 1.41(f) (.44)(f) 98
Class B
Year ended 7/31/96 ...... $ (.53) $11.03 16.69% $14,247 3.21% (1.88)% 139%
Year ended 7/31/95 ...... (2.11) 9.95 15.77 5,164 3.20(f) (1.92)(f) 128
Period ended 7/31/94** .. 0.00 10.78 (2.00) 3,889 3.15* (1.93)* 78
Year ended 9/30/93 ...... (.43) 11.00 24.97 1,150 3.26 (1.85) 97
Year ended 9/30/92 ...... (.03) 9.20 (12.03) 819 3.11 (1.31) 108
Year ended 9/30/91 ...... 0.00 10.49 27.00 121 2.98 (1.39) 104
9/17/90++ to 9/30/90 .... 0.00 8.26 (9.43) 183 2.61* (1.30)* 89
Class C
Year ended 7/31/96 ...... $ (.53) $11.05 16.77% $14,119 3.19% (1.85)% 139%
Year ended 7/31/95 ...... (2.11) 9.96 15.75 1,407 3.25(f) (2.10)(f) 128
Period ended 7/31/94** .. 0.00 10.79 (1.91) 1,330 3.13* (1.92)* 78
5/3/93++ to 9/30/93 ..... 0.00 11.00 11.56 261 3.75* (2.51)* 97
Strategic Balanced Fund (i)
Class A
Year ended 7/31/96 ...... $ (.93) $18.48 8.05% $18,329 1.40% 1.78% 173%
Year ended 7/31/95 ...... (.26) 17.98 12.40 10,952 1.40(f) 2.07 172
Period ended 7/31/94** .. 0.00 16.26 (1.22) 9,640 1.40(f) 1.63* 21
Year ended 4/30/94 ...... (1.41) 16.46 5.06 9,822 1.40(f) 1.67 139
Year ended 4/30/93 ...... (1.07) 16.97 5.85 8,637 1.40(f) 2.29 98
Year ended 4/30/92 ...... (.49) 17.06 20.96 6,843 1.40(f) 1.92 103
9/4/90++ to 4/30/91 ..... (.03) 14.48 16.00 443 1.40*(f) 3.54* 137
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Please refer to the footnotes on page 16.
13
<PAGE>
<TABLE>
<CAPTION>
Net Net Net
Asset Realized and Increase
Value Unrealized (Decrease) In Dividends From Distributions
Beginning Of Net Investment Gains (Loss) On Net Asset Value Net Investment From Net
Fiscal Year or Period Period Income (Loss) Investments From Operations Income Realized Gains
--------------------- ------------ -------------- --------------- --------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Strategic Balanced Fund (i) (continued)
Class B
Year ended 7/31/96 .......... $15.56 $.16 $ .98 $ 1.14 $(.20) $ (.61)
Year ended 7/31/95 .......... 14.10 .22(c) 1.40 1.62 (.12) (.04)
Period ended 7/31/94** ...... 14.30 .03(c) (.23) (.20) 0.00 0.00
Year ended 4/30/94 .......... 14.92 .06(c) .63 .69 (.14) (1.17)
Year ended 4/30/93 .......... 15.51 .23(c) .53 .76 (.25) (1.10)
Year ended 4/30/92 .......... 13.96 .22(c) 2.70 2.92 (.29) (1.08)
Year ended 4/30/91 .......... 12.40 .43(c) 1.60 2.03 (.47) 0.00
Year ended 4/30/90 .......... 11.97 .50(b)(c) .60 1.10 (.25) (.42)
Year ended 4/30/89 .......... 11.45 .48(c) 1.11 1.59 (.30) (.77)
10/23/87+ to 4/30/88 ........ 10.00 .13(c) 1.38 1.51 (.06) 0.00
Class C
Year ended 7/31/96 .......... $15.57 $.14 $ .99 $ 1.13 $(.20) $ (.61)
Year ended 7/31/95 .......... 14.11 .16(c) 1.46 1.62 (.12) (.04)
Period ended 7/31/94** ...... 14.31 .03(c) (.23) (.20) 0.00 0.00
8/2/93++ to 4/30/94 ......... 15.64 .15(c) (.17) (.02) (.14) (1.17)
Balanced Shares
Class A
Year ended 7/31/96 .......... $15.08 $.37 $ .45 $ .82 $(.41) $(1.48)
Year ended 7/31/95 .......... 13.38 .46 1.62 2.08 (.36) (.02)
Period ended 7/31/94** ...... 14.40 .29 (.74) (.45) (.28) (.29)
Year ended 9/30/93 .......... 13.20 .34 1.29 1.63 (.43) 0.00
Year ended 9/30/92 .......... 12.64 .44 .57 1.01 (.45) 0.00
Year ended 9/30/91 .......... 10.41 .46 2.17 2.63 (.40) 0.00
Year ended 9/30/90 .......... 14.13 .45 (2.14) (1.69) (.40) (1.63)
Year ended 9/30/89 .......... 12.53 .42 2.18 2.60 (.46) (.54)
Year ended 9/30/88 .......... 16.33 .46 (1.07) (.61) (.44) (2.75)
Year ended 9/30/87 .......... 14.64 .67 1.62 2.29 (.60) 0.00
Class B
Year ended 7/31/96 .......... $14.88 $.28 $ .42 $ .70 $(.31) $(1.48)
Year ended 7/31/95 .......... 13.23 .30 1.65 1.95 (.28) (.02)
Period ended 7/31/94** ...... 14.27 .22 (.75) (.53) (.22) (.29)
Year ended 9/30/93 .......... 13.13 .29 1.22 1.51 (.37) 0.00
Year ended 9/30/92 .......... 12.61 .37 .54 .91 (.39) 0.00
2/4/91++ to 9/30/91 ......... 11.84 .25 .80 1.05 (.28) 0.00
Class C
Year ended 7/31/96 .......... $14.89 $.26 $ .45 $ .71 $(.31) $(1.48)
Year ended 7/31/95 .......... 13.24 .30 1.65 1.95 (.28) (.02)
Period ended 7/31/94** ...... 14.28 .24 (.77) (.53) (.22) (.29)
5/3/93++ to 9/30/93 ......... 13.63 .11 .71 .82 (.17) 0.00
Income Builder Fund (h)
Class A
11/1/95 to 4/30/96+++ ....... $10.70 $.26 $ .40 $ .66 $(.29) $ (.11)
Year ended 10/31/95 ......... 9.69 .93(b) .59 1.52 (.51) 0.00
3/25/94++ to 10/31/94 ....... 10.00 .96 (1.02) (.06) (.05)(g) (.20)
Class B
11/1/95 to 4/30/96+++ ....... $10.70 $.22 $ .40 $ .62 $(.26) $ (.11)
Year ended 10/31/95 ......... 9.68 .63(b) .83 1.46 (.44) 0.00
3/25/94++ to 10/31/94 ....... 10.00 .88 (.98) (.10) (.06)(g) (.16)
Class C
11/1/95 to 4/30/96+++ ....... $10.67 $.22 $ .40 $ .62 $(.26) $ (.11)
Year ended 10/31/95 ......... 9.66 .40(b) 1.05 1.45 (.44) 0.00
Year ended 10/31/94 ......... 10.47 .50 (.85) (.35) (.11)(g) (.35)
Year ended 10/31/93 ......... 9.80 .52 .51 1.03 (.36) 0.00
Year ended 10/31/92 ......... 10.00 .55 (.28) .27 (.47) 0.00
10/25/91+ to 10/31/91 ....... 10.00 .01 0.00 .01 (.01) 0.00
Utility Income Fund
Class A
12/1/95 to 5/31/96+++ ....... $10.22 $.07 $ .25 $ .32 $(.26) $ 0.00
Year ended 11/30/95 ......... 8.97 .30(c) 1.40 1.70 (.45) 0.00
Year ended 11/30/94 ......... 9.92 .42(c) (.89) (.47) (.48) 0.00
10/18/93+ to 11/30/93 ....... 10.00 .02(c) (.10) (.08) 0.00 0.00
Class B
12/1/95 to 5/31/96+++ ....... $10.20 $.04 $ .26 $ .30 $(.23) $ 0.00
Year ended 11/30/95 ......... 8.96 .27(c) 1.36 1.63 (.39) 0.00
Year ended 11/30/94 ......... 9.91 .37(c) (.91) (.54) (.41) 0.00
10/18/93+ to 11/30/93 ....... 10.00 .01(c) (.10) (.09) 0.00 0.00
Class C
12/1/95 to 5/31/96+++ ....... $10.22 $.06 $ .23 $ .29 $(.23) $ 0.00
Year ended 11/30/95 ......... 8.97 .17(c) 1.47 1.64 (.39) 0.00
Year ended 11/30/94 ......... 9.92 .39(c) (.93) (.54) (.41) 0.00
10/27/93+ to 11/30/93 ....... 10.00 .01(c) (.09) (.08) 0.00 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
Please refer to the footnotes on page 16.
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Total Net Assets Ratio Of Net
Total Net Asset Investment At End Of Ratio Of Investment
Dividends Value Return Based Period Expenses Income (Loss)
And End Of on Net Asset (000's) To Average To Average Portfolio
Distributions Period Value(a) omitted Net Assets Net Assets Turnover Rate
------------- ------ ------------ --------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Strategic Balanced Fund (i) (continued)
Class B
Year ended 7/31/96 ............ $(.81) $15.89 7.41% $28,492 2.10% .99% 173%
Year ended 7/31/95 ............ (.16) 15.56 11.63 37,301 2.10 (f) 1.38 172
Period ended 7/31/94** ........ 0.00 14.10 (1.40) 43,578 2.10*(f) .92* 21
Year ended 4/30/94 ............ (1.31) 14.30 4.29 43,616 2.10 (f) .93 139
Year ended 4/30/93 ............ (1.35) 14.92 4.96 36,155 2.15 (f) 1.55 98
Year ended 4/30/92 ............ (1.37) 15.51 20.14 31,842 2.15 (f) 1.34 103
Year ended 4/30/91 ............ (.47) 13.96 16.73 22,552 2.10 (f) 3.23 137
Year ended 4/30/90 ............ (.67) 12.40 8.85 19,523 2.00 (f) 3.85 120
Year ended 4/30/89 ............ (1.07) 11.97 14.66 5,128 2.00 (f) 4.31 103
10/23/87+ to 4/30/88 .......... (.06) 11.45 15.10 2,344 2.00*(f) 2.44* 72
Class C
Year ended 7/31/96 ............ $(.81) $15.89 7.34% $3,157 2.10% .99% 173%
Year ended 7/31/95 ............ (.16) 15.57 11.62 4,113 2.10 (f) 1.38 172
Period ended 7/31/94** ........ 0.00 14.11 (1.40) 4,317 2.10*(f) .93* 21
8/2/93++ to 4/30/94 ........... (1.31) 14.31 .45 4,289 2.10*(f) .69* 139
Balanced Shares
Class A
Year ended 7/31/96 ............ $(1.89) $14.01 5.23% $102,567 1.38% 2.41% 227%
Year ended 7/31/95 ............ (.38) 15.08 15.99 122,033 1.32 3.12 179
Period ended 7/31/94** ........ (.57) 13.38 (3.21) 157,637 1.27* 2.50* 116
Year ended 9/30/93 ............ (.43) 14.40 12.52 172,484 1.35 2.50 188
Year ended 9/30/92 ............ (.45) 13.20 8.14 143,883 1.40 3.26 204
Year ended 9/30/91 ............ (.40) 12.64 25.52 154,230 1.44 3.75 70
Year ended 9/30/90 ............ (2.03) 10.41 (13.12) 140,913 1.36 4.01 169
Year ended 9/30/89 ............ (1.00) 14.13 22.27 159,290 1.42 3.29 132
Year ended 9/30/88 ............ (3.19) 12.53 (1.10) 111,515 1.42 3.74 190
Year ended 9/30/87 ............ (.60) 16.33 15.80 129,786 1.17 4.14 136
Class B
Year ended 7/31/96 ............ $(1.79) $13.79 4.45% $18,393 2.16% 1.61% 227%
Year ended 7/31/95 ............ (.30) 14.88 15.07 15,080 2.11 2.30 179
Period ended 7/31/94** ........ (.51) 13.23 (3.80) 14,347 2.05* 1.73* 116
Year ended 9/30/93 ............ (.37) 14.27 11.65 12,789 2.13 1.72 188
Year ended 9/30/92 ............ (.39) 13.13 7.32 6,499 2.16 2.46 204
2/4/91++ to 9/30/91 ........... (.28) 12.61 8.96 1,830 2.13* 3.19* 70
Class C
Year ended 7/31/96 ............ $(1.79) $13.81 4.52% $6,096 2.15% 1.63% 227%
Year ended 7/31/95 ............ (.30) 14.89 15.06 5,108 2.09 2.32 179
Period ended 7/31/94** ........ (.51) 13.24 (3.80) 6,254 2.03* 1.81* 116
5/3/93++ to 9/30/93 ........... (.17) 14.28 6.01 1,487 2.29* 1.47* 188
Income Builder Fund (h)
Class A
11/1/95 to 4/30/96+++ ......... $(.40) $10.96 6.30% $1,402 2.32% 4.64% 120%
Year ended 10/31/95 ........... (.51) 10.70 16.22 1,398 2.38 5.44 92
3/25/94++ to 10/31/94 ......... (.25) 9.69 (.54) 600 2.52* 6.11* 126
Class B
11/1/95 to 4/30/96+++ ......... $(.37) $10.95 5.88% $4,789 3.03% 3.93% 120%
Year ended 10/31/95 ........... (.44) 10.70 15.55 3,769 3.09 4.73 92
3/25/94++ to 10/31/94 ......... (.22) 9.68 (.99) 1,998 3.09* 5.07* 126
Class C
11/1/95 to 4/30/96+++ ......... $(.37) $10.92 5.89% $46,629 3.02% 3.93% 120%
Year ended 10/31/95 ........... (.44) 10.67 15.47 49,107 3.02 4.81 92
Year ended 10/31/94 ........... (.46) 9.66 (3.44) 64,027 2.67 3.82 126
Year ended 10/31/93 ........... (.36) 10.47 10.65 106,034 2.32 6.85 101
Year ended 10/31/92 ........... (.47) 9.80 2.70 152,617 2.33 5.47 108
10/25/91+ to 10/31/91 ......... (.01) 10.00 .11 41,813 0.00*(f) .94* 0
Utility Income Fund
Class A
12/1/95 to 5/31/96+++ ......... $(.26) $10.28 3.24% $2,911 1.50% 1.34% 38%
Year ended 11/30/95 ........... (.45) 10.22 19.32 2,748 1.50 (f) 2.48 (f) 162
Year ended 11/30/94 ........... (.48) 8.97 (4.86) 1,068 1.50 (f) 4.13 30
10/18/93+ to 11/30/93 ......... 0.00 9.92 (.80) 229 1.50*(f) 2.35* 11
Class B
12/1/95 to 5/31/96+++ ......... $(.23) $10.27 3.02% $12,934 2.20% .64% 38%
Year ended 11/30/95 ........... (.39) 10.20 18.40 10,988 2.20 (f) 1.60 (f) 162
Year ended 11/30/94 ........... (.41) 8.96 (5.59) 2,353 2.20 (f) 3.53 30
10/18/93+ to 11/30/93 ......... 0.00 9.91 (.90) 244 2.20*(f) 2.84* 11
Class C
12/1/95 to 5/31/96+++ ......... $(.23) $10.28 2.92% $4,532 2.20% .66% 38%
Year ended 11/30/95 ........... (.39) 10.22 18.63 3,500 2.20 (f) 1.88 (f) 162
Year ended 11/30/94 ........... (.41) 8.97 (5.58) 2,651 2.20 (f) 3.60 30
10/27/93+ to 11/30/93 ......... 0.00 9.92 (.80) 18 2.20*(f) 3.08* 11
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
Net Net Net
Asset Realized and Increase
Value Unrealized (Decrease) In Dividends From Distributions
Beginning Of Net Investment Gain (Loss) On Net Asset Value Net Investment From Net
Fiscal Year or Period Period Income (Loss) Investments From Operations Income Realized Gains
--------------------- ------------ -------------- --------------- --------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Growth and Income Fund
Class A
11/1/95 to 4/30/96+++ ........... $ 2.71 $ .03 $ .35 $ .38 $ (.03) $ (.21)
Year ended 10/31/95 ............. 2.35 .02 .52 .54 (.06) (.12)
Year ended 10/31/94 ............. 2.61 .06 (.08) (.02) (.06) (.18)
Year ended 10/31/93 ............. 2.48 .06 .29 .35 (.06) (.16)
Year ended 10/31/92 ............. 2.52 .06 .11 .17 (.06) (.15)
Year ended 10/31/91 ............. 2.28 .07 .56 .63 (.09) (.30)
Year ended 10/31/90 ............. 3.02 .09 (.30) (.21) (.10) (.43)
Year ended 10/31/89 ............. 3.05 .10 .43 .53 (.08) (.48)
Year ended 10/31/88 ............. 3.48 .10 .33 .43 (.08) (.78)
Year ended 10/31/87 ............. 3.52 .11 (.03) .08 (.12) 0.00
Year ended 10/31/86 ............. 3.01 .12 .92 1.04 (.13) (.40)
Year ended 10/31/85 ............. 2.93 .14 .42 .56 (.15) (.33)
Class B
11/1/95 to 4/30/96+++............ $ 2.69 $ .02 $ .36 $ .38 $ (.02) $ (.21)
Year ended 10/31/95.............. 2.34 .01 .49 .50 (.03) (.12)
Year ended 10/31/94.............. 2.60 .04 (.08) (.04) (.04) (.18)
Year ended 10/31/93.............. 2.47 .05 .28 .33 (.04) (.16)
Year ended 10/31/92.............. 2.52 .04 .11 .15 (.05) (.15)
2/8/91++ to 10/31/91............. 2.40 .04 .12 .16 (.04) 0.00
Class C
11/1/95 to 4/30/96+++............ $ 2.70 $ .02 $ .35 $ .37 $ (.02) $ (.21)
Year ended 10/31/95.............. 2.34 .01 .50 .51 (.03) (.12)
Year ended 10/31/94 ............. 2.60 .04 (.08) (.04) (.04) (.18)
5/3/93++ to 10/31/93 ............ 2.43 .02 .17 .19 (.02) 0.00
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Commencement of operations.
++ Commencement of distribution.
+++ Unaudited.
* Annualized.
** Reflects a change in fiscal year end.
(a) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at the net asset value during the period, and a
redemption on the last day of the period. Initial sales charge or
contingent deferred sales charge is not reflected in the calculation of
total investment return. Total investment returns calculated for periods of
less than one year are not annualized.
(b) Based on average shares outstanding.
(c) Net of fee waiver and/or expense reimbursement.
(d) Adjusted for a 200% stock dividend paid to shareholders of record on
January 15, 1988.
(e) Net of offering costs of ($.05).
(f) Net of expenses assumed and/or waived/reimbursed. If the following Funds
had borne all expenses in their most recent five fiscal years, their
expense ratios would have been as follows:
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C>
All-Asia Investment Fund
Class A -- -- -- -- 10.57%# --
Class B -- -- -- -- 11.32%# --
Class C -- -- -- -- 11.38%# --
Growth Fund
Class A 8.79%# 1.94% 1.84% 1.46% -- --
Class B 3.06% 2.65% 2.52% 2.13% -- --
Class C -- -- -- 2.13# -- --
Premier Growth
Class A -- 3.33%# -- -- -- --
Class B -- 3.78%# -- -- -- --
Net investment income ratios for Premier Growth would have been (.25%#) for
Class A and (.75%#) for Class B for this same period.
Global Small Cap Fund
Class A -- -- -- -- 2.61% --
Class B -- -- -- -- 3.27% --
Class C -- -- -- -- 3.31% --
Strategic Balanced Fund
Class A 11.59%# 2.05% 1.85% 1.70%1 1.81% 1.76%
1.94%#2
Class B 2.93% 2.70% 2.56% 2.42%1 2.49% 2.47%
2.64%#2
Class C -- -- -- 2.07%#1 2.50% 2.48%
2.64%#2
Income Builder Fund
Class C 1.99%# -- -- -- -- --
Utility Income Fund
Class A -- -- 145.63%# 13.72% 4.86%# --
Class B -- -- 133.62%# 14.42% 5.34%# --
Class C -- -- 148.03%# 14.42% 5.99%# --
</TABLE>
- -----------------------
# annualized
1. For the period ended April 30, 1994
2. For the period ended July 31, 1994
For the expense ratios of the Funds in years prior to fiscal year 1990,
assuming the Funds had borne all expenses, please see the Financial
Statements in each Fund's Statement of Additional Information.
(g) "Dividends from Net Investment Income" includes a return of capital. Income
Builder Fund had a return of capital with respect to Class A shares, for
the period ended October 31, 1994, of $(.01); with respect to Class B
shares, $(.01); and with respect to Class C shares, for the year ended
October 31, 1994, $(.02).
(h) On March 25, 1994, all existing shares of Income Builder Fund, previously
known as Alliance Multi-Market Income and Growth Trust, were converted into
Class C shares.
(i) Prior to July 22, 1993, Equitable Capital Management Corporation
("Equitable Capital") served as the investment adviser to the predecessor
to The Alliance Portfolios, of which Growth Fund and Strategic Balanced
Fund are series. On July 22, 1993, Alliance acquired the business and
substantially all assets of Equitable Capital and became investment adviser
to the Funds.
(j) "Distributions from Net Realized Gains" includes a return of capital.
Global Small Cap Fund had a return of capital with respect to Class A
shares, for the year ended July 31, 1995, of $(.12); with respect to Class
B shares, $(.12); and with respect to Class C shares, $(.12).
16
<PAGE>
<TABLE>
<CAPTION>
Total Net Assets Ratio Of Net
Total Net Asset Investment At End Of Ratio Of Investment
Dividends Value Return Based Period Expenses Income (Loss)
And End Of on Net Asset (000's To Average To Average Portfolio
Fiscal Year or Period Distributions Period Value(a) omitted Net Assets Net Assets Turnover Rate
--------------------- ------------- ------ ------------ --------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Growth and Income Fund
Class A
11/1/95 to 4/30/96+++ ........... $ (.24) $ 2.85 14.46% $518,880 .95% 1.74% 43%
Year ended 10/31/95 ............. (.18) 2.71 24.21 458,158 1.05 1.88 142
Year ended 10/31/94 ............. (.24) 2.35 (.67) 414,386 1.03 2.36 68
Year ended 10/31/93 ............. (.22) 2.61 14.98 459,372 1.07 2.38 91
Year ended 10/31/92 ............. (.21) 2.48 7.23 417,018 1.09 2.63 104
Year ended 10/31/91 ............. (.39) 2.52 31.03 409,597 1.14 2.74 84
Year ended 10/31/90 ............. (.53) 2.28 (8.55) 314,670 1.09 3.40 76
Year ended 10/31/89 ............. (.56) 3.02 21.59 377,168 1.08 3.49 79
Year ended 10/31/88 ............. (.86) 3.05 16.45 350,510 1.09 3.09 66
Year ended 10/31/87 ............. (.12) 3.48 2.04 348,375 .86 2.77 60
Year ended 10/31/86 ............. (.53) 3.52 34.92 347,679 .81 3.31 11
Year ended 10/31/85 ............. (.48) 3.01 19.53 275,681 .95 3.78 15
Class B
11/1/95 to 4/30/96+++............ $ (.23) $ 2.84 14.53% $189,725 1.76% .92% 43%
Year ended 10/31/95.............. (.15) 2.69 22.84 136,758 1.86 1.05 142
Year ended 10/31/94.............. (.22) 2.34 (1.50) 102,546 1.85 1.56 68
Year ended 10/31/93.............. (.20) 2.60 14.22 76,633 1.90 1.58 91
Year ended 10/31/92.............. (.20) 2.47 6.22 29,656 1.90 1.69 104
2/8/91++ to 10/31/91............. (.04) 2.52 6.83 10,221 1.99* 1.67* 84
Class C
11/1/95 to 4/30/96+++............ $ (.23) $ 2.84 14.07% $ 50,483 1.74% .93% 43%
Year ended 10/31/95.............. (.15) 2.70 23.30 35,835 1.84 1.04 142
Year ended 10/31/94 ............. (.22) 2.34 (1.50) 19,395 1.84 1.61 68
5/3/93++ to 10/31/93 ............ (.02) 2.60 7.85 7,774 1.96* 1.45* 91
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Please refer to the footnotes on page 16.
- --------------------------------------------------------------------------------
Glossary
- --------------------------------------------------------------------------------
The following terms are frequently used in this Prospectus.
Equity securities are (i) common stocks, partnership interests, business trust
shares and other equity or ownership interests in business enterprises, and (ii)
securities convertible into, and rights and warrants to subscribe for the
purchase of, such stocks, shares and interests.
Debt securities are bonds, debentures, notes, bills, repurchase agreements,
loans, other direct debt instruments and other fixed, floating and variable rate
debt obligations, but do not include convertible securities.
Fixed-income securities are debt securities and dividend-paying preferred stocks
and include floating rate and variable rate instruments.
Convertible securities are fixed-income securities that are convertible into
common stock.
U.S. Government securities are securities issued or guaranteed by the United
States Government, its agencies or instrumentalities.
Foreign government securities are securities issued or guaranteed, as to payment
of principal and interest, by governments, quasi-governmental entities,
governmental agencies or other governmental entities.
Asian company is an entity that (i) is organized under the laws of an Asian
country and conducts business in an Asian country, (ii) derives 50% or more of
its total revenues from business in Asian countries, or (iii) issues equity or
debt securities that are traded principally on a stock exchange in an Asian
country.
Asian countries are Australia, the Democratic Socialist Republic of
Sri Lanka, Hong Kong, the Islamic Republic of Pakistan, Japan, the Kingdom of
Thailand, Malaysia, Negara Brunei Darussalam (Brunei), New Zealand, the People's
Republic of China, the People's Republic of Kampuchea (Cambodia), the Republic
of China (Taiwan), the Republic of India, the Republic of Indonesia, the
Republic of Korea (South Korea), the Republic of the Philippines, the Republic
of Singapore, the Socialist Republic of Vietnam and the Union of Myanmar.
Moody's is Moody's Investors Service, Inc.
S&P is Standard & Poor's Ratings Services.
Duff & Phelps is Duff & Phelps Credit Rating Co.
Fitch is Fitch Investors Service, Inc.
Investment grade securities are fixed-income securities rated Baa and above by
Moody's or BBB and above by S&P, Duff & Phelps or Fitch, or determined by
Alliance to be of equivalent quality.
Lower-rated securities are fixed-income securities rated Ba or below by Moody's
or BB or below by S&P, Duff & Phelps or Fitch, or determined by Alliance to be
of equivalent quality, and are commonly referred to as "junk bonds."
Prime commercial paper is commercial paper rated Prime 1 by Moody's or A-1 or
higher by S&P or, if not rated, issued by companies that have an outstanding
debt issue rated Aa or higher by Moody's or AA or higher by S&P.
Qualifying bank deposits are certificates of deposit, bankers' acceptances and
interest-bearing savings deposits of banks having total assets of more than $1
billion and which are members of the Federal Deposit Insurance Corporation.
Rule 144A securities are securities that may be resold pursuant to Rule 144A
under the Securities Act of 1933, as amended (the "Securities Act").
Depositary receipts include American Depositary Receipts ("ADRs"), Global
Depositary Receipts ("GDRs") and other types of depositary receipts.
Commission is the Securities and Exchange Commission.
1940 Act is the Investment Company Act of 1940, as amended.
Code is the Internal Revenue Code of 1986, as amended.
17
<PAGE>
- --------------------------------------------------------------------------------
Description Of The Funds
- --------------------------------------------------------------------------------
Except as noted, (i) the Funds' investment objectives are "fundamental" and
cannot be changed without shareholder vote, and (ii) the Funds' investment
policies are not fundamental and thus can be changed without a shareholder vote.
No Fund will change a non-fundamental objective or policy without notifying its
shareholders. There is no guarantee that any Fund will achieve its investment
objective.
INVESTMENT OBJECTIVES AND POLICIES
Domestic Stock Funds
The Domestic Stock Funds have been designed to offer investors seeking capital
appreciation a range of alternative approaches to investing in the U.S. equity
markets.
The Alliance Fund
The Alliance Fund, Inc. ("Alliance Fund") is a diversified investment company
that seeks long-term growth of capital and income primarily through investment
in common stocks. The Fund normally invests substantially all of its assets in
common stocks that Alliance believes will appreciate in value, but it may invest
in other types of securities such as convertible securities, high grade
instruments, U.S. Government securities and high quality, short-term obligations
such as repurchase agreements, bankers' acceptances and domestic certificates of
deposit, and may invest without limit in foreign securities. While the
diversification and generally high quality of the Fund's investments cannot
prevent fluctuations in market values, they tend to limit investment risk and
contribute to achieving the Fund's objective. The Fund generally does not effect
portfolio transactions in order to realize short-term trading profits or
exercise control.
The Fund may also: (i) make secured loans of its portfolio securities equal in
value up to 25% of its total assets to brokers, dealers and financial
institutions; (ii) enter into repurchase agreements of up to one week in
duration with commercial banks, but only if those agreements together with any
restricted securities and any securities which do not have readily available
market quotations do not exceed 10% of its net assets; and (iii) write exchange-
traded covered call options with respect to up to 25% of its total assets. For
additional information on the use, risks and costs of these policies and
practices see "Additional Investment Practices."
Alliance Growth Fund
Alliance Growth Fund ("Growth Fund") is a diversified investment company that
seeks long-term growth of capital. Current income is only an incidental
consideration. The Fund seeks its objective by investing primarily in equity
securities of companies with favorable earnings outlooks and whose long-term
growth rates are expected to exceed that of the U.S. economy over time. The
Fund's investment objective is not fundamental.
The Fund may also invest up to 25% of its total assets in lower-rated fixed-
income and convertible securities. See "Risk Considerations--Securities Ratings"
and "--Investment in Lower-Rated Fixed-Income Securities." The Fund generally
will not invest in securities rated at the time of purchase below Caa- by
Moody's and CCC- by S&P, Duff & Phelps or Fitch or in securities judged by
Alliance to be of comparable investment quality. However, from time to time, the
Fund may invest in securities rated in the lowest grades (i.e., C by Moody's or
D or equivalent by S&P, Duff & Phelps or Fitch), or securities Alliance judges
to be of comparable investment quality, if there are prospects for an upgrade or
a favorable conversion into equity securities. For the period ended August 31,
1996, the Fund invested less than 5% of its total assets in lower-rated
securities. If the credit rating of a security held by the Fund falls below its
rating at the time of purchase (or Alliance determines that the quality of such
security has so deteriorated), the Fund may continue to hold the security if
such investment is considered appropriate under the circumstances.
The Fund may also: (i) invest in "zero-coupon" bonds and "payment-in-kind"
bonds; (ii) invest in foreign securities, although the Fund will not generally
invest more than 15% of its total assets in foreign securities; (iii) invest in
securities that are not publicly traded, including Rule 144A securities;
(iv) buy or sell foreign currencies, options on foreign currencies, foreign
currency futures contracts (and related options) and deal in forward foreign
exchange contracts; (v) lend portfolio securities amounting to not more than 25%
of its total assets; (vi) enter into repurchase agreements of up to 25% of its
total assets and purchase and sell securities on a forward commitment basis;
(vii) buy and sell stock index futures contracts and buy and sell options on
those contracts and on stock indices; (viii) purchase and sell futures
contracts, options thereon and options with respect to U.S. Treasury securities;
(ix) write covered call and put options on securities it owns or in which it may
invest; and (x) purchase and sell put and call options. For additional
information on the use, risks and costs of these policies and practices see
"Additional Investment Practices."
Alliance Premier Growth Fund
Alliance Premier Growth Fund, Inc. ("Premier Growth Fund") is a diversified
investment company that seeks long-term growth of capital by investing
predominantly in the equity securities of a limited number of large, carefully
selected, high-quality U.S. companies that are judged likely to achieve superior
earnings growth. Normally, about 40 companies will be represented in the Fund's
portfolio, with the 25 most highly regarded of these companies usually
constituting approximately 70% of the Fund's net assets. The Fund is thus
atypical from most equity mutual funds in its focus on a relatively small number
of intensively researched companies and is designed for those seeking to
accumulate capital over time with less volatility than that associated with
investment in smaller companies.
As a matter of fundamental policy, the Fund normally invests at least 85% of its
total assets in the equity securities of U.S. companies. These are companies
(i) organized under U.S. law that have their principal office in the U.S., and
(ii) the equity securities of which are traded principally in the U.S.
Alliance's investment strategy for the Fund emphasizes stock selection and
investment in the securities of a limited number of issuers. Alliance relies
heavily upon the fundamental analysis
18
<PAGE>
and research of its large internal research staff, which generally follows a
primary research universe of more than 600 companies that have strong
management, superior industry positions, excellent balance sheets and superior
earnings growth prospects. An emphasis is placed on identifying companies whose
substantially above average prospective earnings growth is not fully reflected
in current market valuations.
In managing the Fund, Alliance seeks to utilize market volatility judiciously
(assuming no change in company fundamentals), striving to capitalize on
apparently unwarranted price fluctuations, both to purchase or increase
positions on weakness and to sell or reduce overpriced holdings. The Fund
normally remains nearly fully invested and does not take significant cash
positions for market timing purposes. During market declines, while adding to
positions in favored stocks, the Fund becomes somewhat more aggressive,
gradually reducing the number of companies represented in its portfolio.
Conversely, in rising markets, while reducing or eliminating fully valued
positions, the Fund becomes somewhat more conservative, gradually increasing the
number of companies represented in its portfolio. Alliance thus seeks to gain
positive returns in good markets while providing some measure of protection in
poor markets.
Alliance expects the average market capitalization of companies represented in
the Fund's portfolio normally to be in the range, or in excess, of the average
market capitalization of companies comprising the "S&P 500" (the Standard &
Poor's 500 Composite Stock Price Index, a widely recognized unmanaged index of
market activity).
The Fund may also: (i) invest up to 20% of its net assets in convertible
securities of companies whose common stocks are eligible for purchase by it;
(ii) invest up to 5% of its net assets in rights or warrants; (iii) invest up to
15% of its total assets in securities of foreign issuers whose common stocks are
eligible for purchase by it; (iv) purchase and sell exchange-traded index
options and stock index futures contracts; and (v) write covered exchange-traded
call options on common stocks, unless as a result, the amount of its securities
subject to call options would exceed 15% of its total assets, and purchase and
sell exchange-traded call and put options on common stocks written by others,
but the total cost of all options held by the Fund (including exchange-traded
index options) may not exceed 10% of its total assets. For additional
information on the use, risks and costs of these policies and practices see
"Additional Investment Practices." The Fund will not write put options.
Alliance Technology Fund
Alliance Technology Fund, Inc. ("Technology Fund") is a diversified investment
company that emphasizes growth of capital and invests for capital appreciation,
and only incidentally for current income. The Fund may seek income by writing
listed call options. The Fund invests primarily in securities of companies
expected to benefit from technological advances and improvements (i.e.,
companies that use technology extensively in the development of new or improved
products or processes). The Fund will normally have at least 80% of its assets
invested in the securities of these companies. The Fund normally will have
substantially all its assets invested in equity securities, but it also invests
in debt securities offering an opportunity for price appreciation. The Fund will
invest in listed and unlisted securities and U.S. and foreign securities, but it
will not purchase a foreign security if as a result 10% or more of the Fund's
total assets would be invested in foreign securities.
The Fund's policy is to invest in any company and industry and in any type of
security with potential for capital appreciation. It invests in well-known and
established companies and in new and unseasoned companies.
The Fund may also: (i) write and purchase exchange-listed call options and
purchase listed put options, including exchange-traded index put options;
(ii) invest up to 10% of its total assets in warrants; (iii) invest in
restricted securities and in other assets having no ready market if as a result
no more than 10% of the Fund's net assets are invested in such securities and
assets; (iv) lend portfolio securities equal in value to not more than 30% of
the Fund's total assets; and (v) invest up to 10% of its total assets in foreign
securities. For additional information on the use, risks and costs of the
policies and practices see "Additional Investment Practices."
Alliance Quasar Fund
Alliance Quasar Fund, Inc. ("Quasar Fund") is a diversified investment company
that seeks growth of capital by pursuing aggressive investment policies. It
invests for capital appreciation and only incidentally for current income. The
selection of securities based on the possibility of appreciation cannot prevent
loss in value. Moreover, because the Fund's investment policies are aggressive,
an investment in the Fund is risky and investors who want assured income or
preservation of capital should not invest in the Fund.
The Fund invests in any company and industry and in any type of security with
potential for capital appreciation. It invests in well-known and established
companies and in new and unseasoned companies. When selecting securities,
Alliance considers the economic and political outlook, the values of specific
securities relative to other investments, trends in the determinants of
corporate profits and management capability and practices.
The Fund invests principally in equity securities, but it also invests to a
limited degree in non-convertible bonds and preferred stocks. The Fund invests
in listed and unlisted U.S. and foreign securities. The Fund periodically
invests in special situations, which occur when the securities of a company are
expected to appreciate due to a development particularly or uniquely applicable
to that company and regardless of general business conditions or movements of
the market as a whole.
The Fund may also: (i) invest in restricted securities and in other assets
having no ready market, but not more than 10% of its total assets may be
invested in such securities or assets; (ii) make short sales of securities
"against the box," but not more than 15% of its net assets may be deposited on
short sales; and (iii) write call options and purchase and sell
19
<PAGE>
put and call options written by others. For additional information on the use,
risks and costs of these policies and practices see "Additional Investment
Practices."
Global Stock Funds
The Global Stock Funds have been designed to enable investors to participate in
the potential for long-term capital appreciation available from investment in
foreign securities.
Alliance International Fund
Alliance International Fund ("International Fund") is a diversified investment
company that seeks a total return on its assets from long-term growth of capital
and from income primarily through a broad portfolio of marketable securities of
established non-U.S. companies, companies participating in foreign economies
with prospects for growth, including U.S. companies having their principal
activities and interests outside the U.S. and foreign government securities.
Normally, more than 80% of the Fund's assets will be invested in such issuers.
The Fund expects to invest primarily in common stocks of established non-U.S.
companies that Alliance believes have potential for capital appreciation or
income or both, but the Fund is not required to invest exclusively in common
stocks or other equity securities, and it may invest in any other type of
investment grade security, including convertible securities, warrants, or
obligations of the U.S. or foreign governments and their political subdivisions.
The Fund intends to diversify its investments broadly among countries and
normally invests in at least three foreign countries, although it may invest a
substantial portion of its assets in one or more of such countries, in this
regard At August 31, 1996, approximately 36% of the Fund's assets were invested
in securities of Japanese issuers. The Fund may invest in companies, wherever
organized, that Alliance judges have their principal activities and interests
outside the U.S. These companies may be located in developing countries, which
involves exposure to economic structures that are generally less diverse and
mature, and to political systems which can be expected to have less stability,
than those of developed countries. The Fund currently does not intend to invest
more than 10% of its total assets in companies in, or governments of, developing
countries.
The Fund may also: (i) purchase or sell forward foreign currency exchange
contracts; (ii) write, sell and purchase U.S. or foreign exchange-listed put and
call options, including exchange-traded index options; (iii) enter into
financial futures contracts, including contracts for the purchase or sale for
future delivery of foreign currencies and stock index futures, and purchase and
write put and call options on futures contracts traded on U.S. or foreign
exchanges or over-the-counter; (iv) purchase and write put options on foreign
currencies traded on securities exchanges or boards of trade or
over-the-counter; (v) lend portfolio securities equal in value to not more than
30% of its total assets; and (vi) enter into repurchase agreements of up to
seven days' duration, provided that not more than 10% of the Fund's total assets
would be so invested. For additional information on the use, risks and costs of
these policies and practices see "Additional Investment Practices."
Alliance Worldwide Privatization Fund
Alliance Worldwide Privatization Fund, Inc. ("Worldwide Privatization Fund") is
a non-diversified investment company that seeks long-term capital appreciation.
As a fundamental policy, the Fund invests at least 65% of its total assets in
equity securities issued by enterprises that are undergoing, or have undergone,
privatization (as described below), although normally significantly more of its
assets will be invested in such securities. The balance of its investments will
include securities of companies believed by Alliance to be beneficiaries of
privatizations. The Fund is designed for investors desiring to take advantage of
investment opportunities, historically inaccessible to U.S. individual
investors, that are created by privatizations of state enterprises in both
established and developing economies, including those in Western Europe and
Scandinavia, Australia, New Zealand, Latin America, Asia and Eastern and Central
Europe and, to a lesser degree, Canada and the United States.
The Fund's investments in enterprises undergoing privatization may comprise
three distinct situations. First, the Fund may invest in the initial offering of
publicly traded equity securities (an "initial equity offering") of a
government- or state-owned or controlled company or enterprise (a "state
enterprise"). Secondly, the Fund may purchase securities of a current or former
state enterprise following its initial equity offering. Finally, the Fund may
make privately negotiated purchases of stock or other equity interests in a
state enterprise that has not yet conducted an initial equity offering. Alliance
believes that substantial potential for capital appreciation exists as
privatizing enterprises rationalize their management structures, operations and
business strategies in order to compete efficiently in a market economy, and the
Fund will thus emphasize investments in such enterprises.
The Fund diversifies its investments among a number of countries and normally
invests in issuers based in at least four, and usually considerably more,
countries. No more than 15% of the Fund's total assets, however, will be
invested in issuers in any one foreign country, except that the Fund may invest
up to 30% of its total assets in issuers in any one of France, Germany, Great
Britain, Italy and Japan. The Fund may invest all of its assets within a single
region of the world. To the extent that the Fund's assets are invested within
any one region, the Fund may be subject to any special risks that may be
associated with that region.
Privatization is a process through which the ownership and control of companies
or assets changes in whole or in part from the public sector to the private
sector. Through privatization a government or state divests or transfers all or
a portion of its interest in a state enterprise to some form of private
ownership. Governments and states with established
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economies, including France, Great Britain, Germany and Italy, and those with
developing economies, including Argentina, Mexico, Chile, Indonesia, Malaysia,
Poland and Hungary, are engaged in privatizations. The Fund will invest in any
country believed to present attractive investment opportunities.
A major premise of the Fund's approach is that the equity securities of
privatized companies offer opportunities for significant capital appreciation.
In particular, because privatizations are integral to a country's economic
restructuring, securities sold in initial equity offerings often are priced
attractively so as to secure the issuer's successful transition to private
sector ownership. Additionally, these enterprises often dominate their local
markets and typically have the potential for significant managerial and
operational efficiency gains.
Although the Fund anticipates that it will not concentrate its investments in
any industry, it is permitted to invest more than 25% of its total assets in
issuers whose primary business activity is that of national commercial banking.
Prior to so concentrating, however, the Fund's Directors must determine that its
ability to achieve its investment objective would be adversely affected if it
were not permitted to concentrate. The staff of the Commission is of the view
that registered investment companies may not, absent shareholder approval,
change between concentration and non-concentration in a single industry. The
Fund disagrees with the staff's position but has undertaken that it will not
concentrate in the securities of national commercial banks until, if ever, the
issue is resolved. If the Fund were to invest more than 25% of its total assets
in national commercial banks, the Fund's performance could be significantly
influenced by events or conditions affecting this industry, which is subject to,
among other things, increases in interest rates and deteriorations in general
economic conditions, and the Fund's investments may be subject to greater risk
and market fluctuation than if its portfolio represented a broader range of
investments.
The Fund may invest up to 35% of its total assets in debt securities and
convertible debt securities of issuers whose common stocks are eligible for
purchase by the Fund. The Fund may maintain not more than 5% of its net assets
in lower-rated securities. See "Risk Considerations--Securities Ratings" and
"--Investment in Lower-Rated Fixed-Income Securities." The Fund will not
retain a non-convertible security that is downgraded below C or determined by
Alliance to have undergone similar credit quality deterioration following
purchase.
The Fund may also: (i) invest up to 20% of its total assets in rights or
warrants; (ii) write covered put and call options and purchase put and call
options on securities of the types in which it is permitted to invest and on
exchange-traded index options; (iii) enter into contracts for the purchase or
sale for future delivery of fixed-income securities or foreign currencies, or
contracts based on financial indices, including any index of U.S. Government
securities, foreign government securities, or common stock and may purchase and
write options on future contracts; (iv) purchase and write put and call options
on foreign currencies for hedging purposes; (v) purchase or sell forward
contracts; (vi) enter in forward commitments for the purchase or sale of
securities; (vii) enter into standby commitment agreements; (viii) enter into
currency swaps for hedging purposes; (ix) enter into repurchase agreements
pertaining to U.S. Government securities with member banks of the Federal
Reserve System or primary dealers in such securities; (x) make short sales of
securities or maintain a short position; and (xi) make secured loans of its
portfolio securities not in excess of 30% of its total assets to entities with
which it can enter into repurchase agreements. For additional information on the
use, risks and costs of these policies and practices see "Additional Investment
Practices".
Alliance New Europe Fund
Alliance New Europe Fund, Inc. ("New Europe Fund") is a non-diversified
investment company that seeks long-term capital appreciation through investment
primarily in the equity securities of companies based in Europe. The Fund
intends to invest substantially all of its assets in the equity securities of
European companies and has a fundamental policy of normally investing at least
65% of its total assets in such securities. Up to 35% of its total assets may be
invested in high quality U.S. dollar or foreign currency denominated fixed-
income securities issued or guaranteed by European governmental entities, or by
European or multinational companies or supranational organizations.
Alliance believes that the quickening pace of economic integration and political
change in Europe creates the potential for many European companies to experience
rapid growth and that the emergence of new market economies in Europe and the
broadening and strengthening of other European economies may significantly
accelerate economic development. The Fund will invest in companies that Alliance
believes possess rapid growth potential. Thus, the Fund will emphasize
investments in smaller, emerging companies, but will also invest in larger,
established companies in such growing economic sectors as capital goods,
telecommunications, pollution control and consumer services.
The Fund will emphasize investment in companies believed to be the likely
beneficiaries of a program, originally known as the "1992 Program," to remove
substantially all barriers to the free movement of goods, persons, services and
capital within the European Community. Alliance believes that the beneficial
effects of this program upon economies, sectors and companies may be most
pronounced in the decade following 1992. The European Community is a Western
European economic cooperative organization consisting of Belgium, Denmark,
France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal,
Spain and the United Kingdom.
In recent years, economic ties between the former "east bloc" countries of
Eastern Europe and certain other European countries have been strengthened.
Alliance believes that as this strengthening continues, some Western European
financial institutions and other companies will have special opportunities to
facilitate East-West transactions. The Fund will seek investment opportunities
among such companies and, as such become available, within the former "east
bloc," although
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the Fund will not invest more than 20% of its total assets in issuers based
therein, or more than 10% of its total assets in issuers based in any one such
country.
The Fund diversifies its investments among a number of European countries and,
under normal circumstances, will invest in companies based in at least three
such countries. Subject to the foregoing and to the limitation on investment in
any one former "east bloc" country, the Fund may invest without limit in a
single European country. While the Fund does not intend to concentrate its
investments in a single country, at times 25% or more of its assets may be
invested in issuers located in a single country. During such times, the Fund
would be subject to a correspondingly greater risk of loss due to adverse
political or regulatory developments, or an economic downturn, within that
country. In this regard, at August 31, 1996, approximately 40% of the Fund's
assets were invested in securities of issuers in the United Kingdom.
The Fund may also: (i) invest up to 10% of its total assets in securities for
which there is no ready market; (ii) invest up to 20% of its total assets in
warrants and rights to purchase equity securities of European companies;
(iii) invest in depositary receipts or other securities convertible into
securities of companies based in European countries, debt securities of
supranational entities denominated in the currency of any European country, debt
securities denominated in European Currency Units of an issuer in a European
country (including supranational issuers) and "semi-governmental securities";
(iv) purchase and sell forward contracts; (v) write, sell and purchase
exchange-traded put and call options, including exchange-traded index options;
(vi) enter into financial futures contracts, including contracts for the
purchase or sale for future delivery of foreign currencies and futures contracts
based on stock indices, and purchase and write options on futures contracts;
(vii) purchase and write put options on foreign currencies traded on securities
exchanges or boards of trade or over-the-counter; (viii) make secured loans of
portfolio securities not in excess of 30% of its total assets to brokers,
dealers and financial institutions; (ix) enter into forward commitments for the
purchase or sale of securities; and (x) enter into standby commitment
agreements. For additional information on the use, risks and costs of these
policies and practices see "Additional Investment Practices."
Alliance All-Asia Investment Fund
Alliance All-Asia Investment Fund, Inc. ("All-Asia Investment Fund") is a
non-diversified investment company whose investment objective is to seek
long-term capital appreciation. In seeking to achieve its investment objective,
the Fund will invest at least 65% of its total assets in equity securities (for
the purposes of this investment policy, rights, warrants and options to purchase
common stocks are not deemed to be equity securities), preferred stocks and
equity-linked debt securities issued by Asian companies. The Fund may invest up
to 35% of its total assets in debt securities issued or guaranteed by Asian
companies or by Asian governments, their agencies or instrumentalities. The Fund
may also invest in securities issued by non-Asian issuers, provided that the
Fund will invest at least 80% of its total assets in securities issued by Asian
companies and the Asian debt securities referred to above. The Fund expects to
invest, from time to time, a significant portion, but less than 50%, of its
assets in equity securities of Japanese companies.
In the past decade, Asian countries generally have experienced a high level of
real economic growth due to political and economic changes, including foreign
investment and reduced government intervention in the economy. Alliance believes
that certain conditions exist in Asian countries which create the potential for
continued rapid economic growth. These conditions include favorable demographics
and competitive wage rates, increasing levels of foreign direct investment,
rising per capita incomes and consumer demand, a high savings rate and numerous
privatization programs. Asian countries are also becoming more industrialized
and are increasing their intra-Asian exports while reducing their dependence on
Western export demand. Alliance believes that these conditions are important to
the long-term economic growth of Asian countries.
As the economies of many Asian countries move through the "emerging market"
stage, thus increasing the supply of goods, services and capital available to
less developed Asian markets and helping to spur economic growth in those
markets, the potential is created for many Asian companies to experience rapid
growth. In addition, many Asian companies the securities of which are listed on
exchanges in more developed Asian countries will be participants in the rapid
economic growth of the lesser developed countries. These companies generally
offer the advantages of more experienced management and more developed market
regulation.
As their economies have grown, the securities markets in Asian countries have
also expanded. New exchanges have been created and the number of listed
companies, annual trading volume and overall market capitalization have
increased significantly. Additionally, new markets continue to open to foreign
investments. For example, South Korea and India have recently relaxed investment
restrictions and Vietnamese direct investments have recently become available to
U.S. investors. The Fund also offers investors the opportunity to access
relatively restricted markets. Alliance believes that investment opportunities
in Asian countries will continue to expand.
The Fund will invest in companies believed to possess rapid growth potential.
Thus, the Fund will invest in smaller, emerging companies, but will also invest
in larger, more established companies in such growing economic sectors as
capital goods, telecommunications and consumer services.
The Fund will invest in investment grade debt securities, except that the Fund
may maintain not more than 5% of its net assets in lower-rated securities and
lower-rated loans and other lower-rated direct debt instruments. See "Risk
Considerations--Securities Ratings", "--Investment in Lower-Rated Fixed-Income
Securities" and Appendix C in the Fund's Statement of
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Additional Information for a description of such ratings. The Fund will not
retain a security that is downgraded below C or determined by Alliance to have
undergone similar credit quality deterioration following purchase.
The Fund may also: (i) invest up to 25% of its net assets in the convertible
securities of companies whose common stocks are eligible for purchase by the
Fund; (ii) invest up to 20% of its net assets in rights or warrants;
(iii) invest in depositary receipts, instruments of supranational entities
denominated in the currency of any country, securities of multinational
companies and "semi-governmental securities;" (iv) invest up to 25% of its net
assets in equity-linked debt securities with the objective of realizing capital
appreciation; (v) invest up to 25% of its net assets in loans and other direct
debt instruments; (vi) write covered put and call options on securities of the
types in which it is permitted to invest and on exchange-traded index options;
(vii) enter into contracts for the purchase or sale for future delivery of
fixed-income securities or foreign currencies, or contracts based on financial
indices, including any index of U.S. Government securities, securities issued by
foreign government entities, or common stock and may purchase and write options
on future contracts; (viii) purchase and write put and call options on foreign
currencies for hedging purposes; (ix) purchase or sell forward contracts;
(x) enter into interest rate swaps and purchase or sell interest rate caps and
floors; (xi) enter into forward commitments for the purchase or sale of
securities; (xii) enter into standby commitment agreements; (xiii) enter into
currency swaps for hedging purposes; (xiv) enter into repurchase agreements
pertaining to U.S. Government securities with member banks of the Federal
Reserve System or primary dealers in such securities; (xv) make short sales of
securities or maintain a short position, in each case only if "against the box;"
and (xvi) make secured loans of its portfolio securities not in excess of 30% of
its total assets to entities with which it can enter into repurchase agreements.
For additional information on the use, risks and costs of these policies and
practices see "Additional Investment Practices".
Alliance Global Small Cap Fund
Alliance Global Small Cap Fund, Inc. ("Global Small Cap Fund") is a diversified
investment company that seeks long-term growth of capital through investment in
a global portfolio of the equity securities of selected companies with
relatively small market capitalization. The Fund's portfolio emphasizes
companies with market capitalizations that would have placed them (when
purchased) in about the smallest 20% by market capitalization of actively traded
U.S. companies, or market capitalizations of up to about $1 billion. Because the
Fund applies the U.S. size standard on a global basis, its foreign investments
might rank above the lowest 20%, and, in fact, might in some countries rank
among the largest, by market capitalization in local markets. Normally, the Fund
invests at least 65% of its assets in equity securities of these smaller
capitalization issuers, and these issuers are located in at least three
countries, one of which may be the U.S. Up to 35% of the Fund's total assets may
be invested in securities of companies whose market capitalizations exceed the
Fund's size standard. The Fund's portfolio securities may be listed on a U.S. or
foreign exchange or traded over-the-counter.
Alliance believes that smaller capitalization issuers often have sales and
earnings growth rates exceeding those of larger companies, and that these growth
rates tend to cause more rapid share price appreciation. Investing in smaller
capitalization stocks, however, involves greater risk than is associated with
larger, more established companies. For example, smaller capitalization
companies often have limited product lines, markets, or financial resources.
They may be dependent for management on one or a few key persons, and can be
more susceptible to losses and risks of bankruptcy. Their securities may be
thinly traded (and therefore have to be sold at a discount from current market
prices or sold in small lots over an extended period of time), may be followed
by fewer investment research analysts and may be subject to wider price swings
and thus may create a greater chance of loss than when investing in securities
of larger capitalization companies. Transaction costs in small capitalization
stocks may be higher than in those of larger capitalization companies.
The Fund may also: (i) invest up to 10% of its total assets in securities for
which there is no ready market; (ii) invest up to 20% of its total assets in
warrants to purchase equity securities; (iii) invest in depositary receipts or
other securities representing securities of companies based in countries other
than the U.S.; (iv) purchase or sell forward foreign currency contracts; (v)
write and purchase exchange-traded call options and purchase exchange-traded put
options, including put options on market indices; and (vi) make secured loans of
portfolio securities not in excess of 30% of its total assets to brokers,
dealers and financial institutions. For additional information on the use, risks
and costs of these policies and practices see "Additional Investment Practices."
Total Return Funds
The Total Return Funds have been designed to provide a range of investment
alternatives to investors seeking both growth of capital and current income.
Alliance Strategic Balanced Fund
Alliance Strategic Balanced Fund ("Strategic Balanced Fund") is a diversified
investment company that seeks a high long-term total return by investing in a
combination of equity and debt securities. The portion of the Fund's assets
invested in each type of security varies in accordance with economic conditions,
the general level of common stock prices, interest rates and other relevant
considerations, including the risks associated with each investment medium. The
Fund's investment objective is not fundamental.
The Fund's equity securities will generally consist of dividend-paying common
stocks and other equity securities of companies with favorable earnings outlooks
and long-term growth rates that Alliance expects will exceed that of the U.S.
economy. The Fund's debt securities may include U.S.
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<PAGE>
Government securities and securities issued by private corporations. The Fund
may also invest in mortgage-backed securities, adjustable rate securities,
asset-backed securities and so-called "zero-coupon" bonds and "payment-in-kind"
bonds.
As a fundamental policy, the Fund will invest at least 25% of its total assets
in fixed-income securities, which for this purpose include debt securities,
preferred stocks and that portion of the value of convertible securities that is
attributable to the fixed-income characteristics of those securities.
The Fund's debt securities will generally be of investment grade. See "Risk
Considerations--Securities Ratings" and "--Investment in Lower-Rated
Fixed-Income Securities." In the event that the rating of any debt securities
held by the Fund falls below investment grade, the Fund will not be obligated to
dispose of such obligations and may continue to hold them if considered
appropriate under the circumstances.
The Fund may also: (i) invest in foreign securities, although the Fund will not
generally invest more than 15% of its total assets in foreign securities;
(ii) invest, without regard to this 15% limit, in Eurodollar CDs, which are
dollar-denominated certificates of deposit issued by foreign branches of U.S.
banks that are not insured by any agency or instrumentality of the U.S.
Government; (iii) write covered call and put options on securities it owns or in
which it may invest; (iv) buy and sell put and call options and buy and sell
combinations of put and call options on the same underlying securities; (v) lend
portfolio securities amounting to not more than 25% of its total assets;
(vi) enter into repurchase agreements on up to 25% of its total assets;
(vii) purchase and sell securities on a forward commitment basis; (viii) buy
or sell foreign currencies, options on foreign currencies, foreign currency
futures contracts (and related options) and deal in forward foreign exchange
contracts; (ix) buy and sell stock index futures contracts and buy and sell
options on those contracts and on stock indices; (x) purchase and sell futures
contracts, options thereon and options with respect to U.S. Treasury securities;
and (xi) invest in securities that are not publicly traded, including Rule 144A
securities. For additional information on the use, risks and costs of these
policies and practices see "Additional Investment Practices."
Alliance Balanced Shares
Alliance Balanced Shares, Inc. ("Balanced Shares") is a diversified investment
company that seeks a high return through a combination of current income and
capital appreciation. Although the Fund's investment objective is not
fundamental, the Fund is a "balanced fund" as a matter of fundamental policy.
The Fund will not purchase a security if as a result less than 25% of its total
assets will be in fixed-income senior securities (including short- and long-term
debt securities, preferred stocks, and convertible debt securities and
convertible preferred stocks to the extent that their values are attributable to
their fixed-income characteristics). Subject to these restrictions, the
percentage of the Fund's assets invested in each type of security will vary. The
Fund's assets are invested in U.S. Government securities, bonds, senior debt
securities and preferred and common stocks in such proportions and of such type
as are deemed best adapted to the current economic and market outlooks. The Fund
may invest up to 15% of the value of its total assets in foreign equity and
fixed-income securities eligible for purchase by the Fund under its investment
policies described above. See "Risk Considerations--Foreign Investment."
The Fund may also: (i) enter into contracts for the purchase or sale for future
delivery of foreign currencies; and (ii) purchase and write put and call options
on foreign currencies and enter into forward foreign currency exchange contracts
for hedging purposes. Subject to market conditions, the Fund may also seek to
realize income by writing covered call options listed on a domestic exchange.
For additional information on the use, risks and costs of these policies and
practices see "Additional Investment Practices."
Alliance Income Builder Fund
Alliance Income Builder Fund, Inc. ("Income Builder Fund") is a non-diversified
investment company that seeks an attractive level of current income and
long-term growth of income and capital by investing principally in fixed-income
securities and dividend-paying common stocks. Its investments in equity
securities emphasize common stocks of companies with a historical or projected
pattern of paying rising dividends. Normally, at least 65% of the Fund's total
assets are invested in income-producing securities. The Fund may vary the
percentage of assets invested in any one type of security based upon Alliance's
evaluation as to the appropriate portfolio structure for achieving the Fund's
investment objective, although Alliance currently maintains approximately 60% of
the Fund's net assets in fixed-income securities and 40% in equity
securities.
The Fund may invest in fixed-income securities of domestic and foreign issuers,
including U.S. Government securities and repurchase agreements pertaining
thereto, corporate fixed-income securities of U.S. issuers, qualifying bank
deposits and prime commercial paper.
The Fund may maintain up to 35% of its net assets in lower-rated securities. See
"Risk Considerations--Securities Ratings" and "--Investment in Lower-Rated
Fixed-Income Securities." The Fund will not retain a non-convertible security
that is downgraded below CCC or determined by Alliance to have undergone similar
credit quality deterioration following purchase.
Foreign securities in which the Fund invests may include fixed-income
securities of foreign corporate and governmental issuers, denominated in U.S.
Dollars, and equity securities of foreign corporate issuers, denominated in
foreign currencies or in U.S. Dollars. The Fund will not invest more than 10% of
its net assets in equity securities of foreign issuers nor more than 15% of its
total assets in issuers of any one foreign country. See "Risk
Considerations--Foreign Investment."
The Fund may also: (i) invest up to 5% of its net assets in
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rights or warrants; (ii) invest in depositary receipts and U.S. Dollar
denominated securities issued by supranational entities; (iii) write covered put
and call options and purchase put and call options on securities of the types in
which it is permitted to invest that are exchange-traded; (iv) purchase and sell
exchange-traded options on any securities index composed of the types of
securities in which it may invest; (v) enter into contracts for the purchase or
sale for future delivery of fixed-income securities or foreign currencies, or
contracts based on financial indices, including any index of U.S. Government
securities, foreign government securities, corporate fixed income securities, or
common stock, and purchase and write options on future contracts; (vi) purchase
and write put and call options on foreign currencies and enter into forward
contracts for hedging purposes; (vii) enter into interest rate swaps and
purchase or sell interest rate caps and floors; (viii) enter into forward
commitments for the purchase or sale of securities; (ix) enter into standby
commitment agreements; (x) enter into repurchase agreements pertaining to U.S.
Government securities with member banks of the Federal Reserve System or primary
dealers in such securities; (xi) make short sales of securities or maintain a
short position as described below under "Additional Investment Policies and
Practices--Short Sales;" and (xii) make secured loans of its portfolio
securities not in excess of 20% of its total assets to brokers, dealers and
financial institutions. For additional information on the use, risks and costs
of these policies and practices see "Additional Investment Practices."
Alliance Utility Income Fund
Alliance Utility Income Fund, Inc. ("Utility Income Fund") is a diversified
investment company that seeks current income and capital appreciation by
investing primarily in equity and fixed-income securities of companies in the
utilities industry. The Fund may invest in securities of both U.S. and foreign
issuers, although no more than 15% of the Fund's total assets will be invested
in issuers in any one foreign country. The utilities industry consists of
companies engaged in (i) the manufacture, production, generation, provision,
transmission, sale and distribution of gas and electric energy, and
communications equipment and services, including telephone, telegraph,
satellite, microwave and other companies providing communication facilities for
the public, or (ii) the provision of other utility or utility-related goods and
services, including, but not limited to, entities engaged in water provision,
cogeneration, waste disposal system provision, solid waste electric generation,
independent power producers and non-utility generators. The Fund is designed to
take advantage of the characteristics and historical performance of securities
of utility companies, many of which pay regular dividends and increase their
common stock dividends over time. As a fundamental policy, the Fund normally
invests at least 65% of its total assets in securities of companies in the
utilities industry. The Fund considers a company to be in the utilities industry
if, during the most recent twelve-month period, at least 50% of the company's
gross revenues, on a consolidated basis, were derived from its utilities
activities.
At least 65% of the Fund's total assets are invested in income-producing
securities, but there is otherwise no limit on the allocation of the Fund's
investments between equity securities and fixed-income securities. The Fund may
maintain up to 35% of its net assets in lower-rated securities. See " Risk
Considerations--Securities Ratings" and "--Investment in Lower-Rated
Fixed-Income Securities." The Fund will not retain a security that is downgraded
below B or determined by Alliance to have undergone similar credit quality
deterioration following purchase.
The United States utilities industry has experienced significant changes in
recent years. Electric utility companies in general have been favorably affected
by lower fuel costs, the full or near completion of major construction programs
and lower financing costs. In addition, many utility companies have generated
cash flows in excess of current operating expenses and construction
expenditures, permitting some degree of diversification into unregulated
businesses. Regulatory changes with respect to nuclear and conventionally fueled
generating facilities, however, could increase costs or impair the ability of
such electric utilities to operate such facilities, thus reducing their ability
to service dividend payments with respect to the securities they issue.
Furthermore, rates of return of utility companies generally are subject to
review and limitation by state public utilities commissions and tend to
fluctuate with marginal financing costs. Rate changes, however, ordinarily lag
behind the changes in financing costs, and thus can favorably or unfavorably
affect the earnings or dividend pay-outs on utilities stocks depending upon
whether such rates and costs are declining or rising.
Gas transmission companies, gas distribution companies and telecommunications
companies are also undergoing significant changes. Gas utilities have been
adversely affected by declines in the prices of alternative fuels, and have also
been affected by oversupply conditions and competition. Telephone utilities are
still experiencing the effects of the break-up of American Telephone & Telegraph
Company, including increased competition and rapidly developing technologies
with which traditional telephone companies now compete. Although there can be no
assurance that increased competition and other structural changes will not
adversely affect the profitability of such utilities, or that other negative
factors will not develop in the future, in Alliance's opinion, increased
competition and change may provide better positioned utility companies with
opportunities for enhanced profitability.
Utility companies historically have been subject to the risks of increases in
fuel and other operating costs, high interest costs, costs associated with
compliance with environmental and nuclear safety regulations, service
interruptions, economic slowdowns, surplus capacity, competition and regulatory
changes. There can also be no assurance that regulatory policies or accounting
standards changes will not negatively affect utility companies' earnings or
dividends. Utility
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companies are subject to regulation by various authorities and may be affected
by the imposition of special tariffs and changes in tax laws. To the extent that
rates are established or reviewed by governmental authorities, utility companies
are subject to the risk that such authorities will not authorize increased
rates. Because of the Fund's policy of concentrating its investments in utility
companies, the Fund is more susceptible than most other mutual funds to
economic, political or regulatory occurrences affecting the utilities industry.
Foreign utility companies, like those in the U.S., are generally subject to
regulation, although such regulations may or may not be comparable to domestic
regulations. Foreign utility companies in certain countries may be more heavily
regulated by their respective governments than utility companies located in the
U.S. and, as in the U.S., generally are required to seek government approval for
rate increases. In addition, because many foreign utility companies use fuels
that cause more pollution than those used in the U.S., such utilities may yet be
required to invest in pollution control equipment. Foreign utility regulatory
systems vary from country to country and may evolve in ways different from
regulation in the U.S. The percentage of the Fund's assets invested in issuers
of particular countries will vary. See "Risk Considerations-- Foreign
Investment."
The Fund may invest up to 35% of its total assets in equity and fixed-income
securities of domestic and foreign corporate and governmental issuers other than
utility companies, including U.S. Government securities and repurchase
agreements pertaining thereto, foreign government securities, corporate fixed-
income securities of domestic issuers, corporate fixed-income securities of
foreign issuers denominated in foreign currencies or in U.S. dollars (in each
case including fixed-income securities of an issuer in one country denominated
in the currency of another country), qualifying bank deposits and prime
commercial paper.
The Fund may also: (i) invest up to 30% of its net assets in the convertible
securities of companies whose common stocks are eligible for purchase by the
Fund; (ii) invest up to 5% of its net assets in rights or warrants; (iii) invest
in depositary receipts, securities of supranational entities denominated in the
currency of any country, securities denominated in European Currency Units and
"semi-governmental securities;" (iv) write covered put and call options and
purchase put and call options on securities of the types in which it is
permitted to invest that are exchange-traded and over-the-counter; (v) purchase
and sell exchange-traded options on any securities index composed of the types
of securities in which it may invest; (vi) enter into contracts for the purchase
or sale for future delivery of fixed-income securities or foreign currencies, or
contracts based on financial indices, including an index of U.S. Government
securities, foreign government securities, corporate fixed-income securities, or
common stock, and may purchase and write options on futures contracts;
(vii) purchase and write put and call options on foreign currencies traded on
U.S. and foreign exchanges or over-the-counter for hedging purposes;
(viii) purchase or sell forward contracts; (ix) enter into interest rate swaps
and purchase or sell interest rate caps and floors; (x) enter in forward
commitments for the purchase or sale of securities; (xi) enter into standby
commitment agreements; (xii) enter into repurchase agreements pertaining to U.S.
Government securities with member banks of the Federal Reserve System or primary
dealers in such securities; (xiii) make short sales of securities or maintain a
short position as described below under "Additional Investment Practices--Short
Sales;" and (xiv) make secured loans of its portfolio securities not in excess
of 20% of its total assets to brokers, dealers and financial institutions. For
additional information on the use, risk and costs of these policies and
practices, see "Additional Investment Practices."
Alliance Growth and Income Fund
Alliance Growth and Income Fund, Inc. ("Growth and Income Fund") is a
diversified investment company that seeks appreciation through investments
primarily in dividend-paying common stocks of good quality, although it is
permitted to invest in fixed-income securities and convertible securities.
The Fund may also try to realize income by writing covered call options listed
on domestic securities exchanges. See "Additional Investment Practices--
Options." The Fund also invests in foreign securities. Since the purchase of
foreign securities entails certain political and economic risks, the Fund has
restricted its investments in securities in this category to issues of high
quality. See "Risk Considerations--Foreign Investment."
ADDITIONAL INVESTMENT PRACTICES
Some or all of the Funds may engage in the following investment practices to the
extent described above.
Convertible Securities. Prior to conversion, convertible securities have the
same general characteristics as non-convertible debt securities, which provide a
stable stream of income with yields that are generally higher than those of
equity securities of the same or similar issuers. The price of a convertible
security will normally vary with changes in the price of the underlying stock,
although the higher yield tends to make the convertible security less volatile
than the underlying common stock. As with debt securities, the market value of
convertible securities tends to decline as interest rates increase and increase
as interest rates decline. While convertible securities generally offer lower
interest or dividend yields than non-convertible debt securities of similar
quality, they offer investors the potential to benefit from increases in the
market price of the underlying common stock. Convertible debt securities that
are rated Baa or lower by Moody's or BBB or lower by S&P, Duff & Phelps or Fitch
and comparable unrated securities as determined by Alliance may share some or
all of the risks of non-convertible debt securities with those ratings. For a
description of these risks, see "Risk Considerations-- Securities Ratings" and
"--Investment in Lower-Rated Fixed-Income Securities."
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Rights and Warrants. A Fund will invest in rights or warrants only if the
underlying equity securities themselves are deemed appropriate by Alliance for
inclusion in the Fund's portfolio. Rights and warrants entitle the holder to buy
equity securities at a specific price for a specific period of time. Rights are
similar to warrants except that they have a substantially shorter duration.
Rights and warrants may be considered more speculative than certain other types
of investments in that they do not entitle a holder to dividends or voting
rights with respect to the underlying securities nor do they represent any
rights in the assets of the issuing company. The value of a right or warrant
does not necessarily change with the value of the underlying security, although
the value of a right or warrant may decline because of a decrease in the value
of the underlying security, the passage of time or a change in perception as to
the potential of the underlying security, or any combination thereof. If the
market price of the underlying security is below the exercise price set forth in
the warrant on the expiration date, the warrant will expire worthless. Moreover,
a right or warrant ceases to have value if it is not exercised prior to the
expiration date.
Depositary Receipts and Securities of Supranational Entities. Depositary
receipts may not necessarily be denominated in the same currency as the
underlying securities into which they may be converted. In addition, the issuers
of the stock of unsponsored depositary receipts are not obligated to disclose
material information in the United States and, therefore, there may not be a
correlation between such information and the market value of the depositary
receipts. ADRs are depositary receipts typically issued by a U.S. bank or trust
company that evidence ownership of underlying securities issued by a foreign
corporation. GDRs and other types of depositary receipts are typically issued by
foreign banks or trust companies and evidence ownership of underlying securities
issued by either a foreign or a U.S. company. Generally, depositary receipts in
registered form are designed for use in the U.S. securities markets, and
depositary receipts in bearer form are designed for use in foreign securities
markets. For purposes of determining the country of issuance, the investments of
Growth Fund, Strategic Balanced Fund and Income Builder Fund 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, while the investments of All-Asia Investment Fund in
depositary receipts of either type are deemed to be investments in the
underlying securities.
A supranational entity is an entity designated or supported by the national
government of one or more countries to promote economic reconstruction or
development. Examples of supranational entities include, among others, the World
Bank (International Bank for Reconstruction and Development) and the European
Investment Bank. A European Currency Unit is a basket of specified amounts of
the currencies of the member states of the European Economic Community. "Semi-
governmental securities" are securities issued by entities owned by either a
national, state or equivalent government or are obligations of one of such
government jurisdictions which are not backed by its full faith and credit and
general taxing powers.
Mortgage-Backed Securities. Interest and principal payments (including
prepayments) on the mortgages underlying mortgage-backed securities are passed
through to the holders of the securities. As a result of the pass-through of
prepayments of principal on the underlying securities, mortgage-backed
securities are often subject to more rapid prepayment of principal than their
stated maturity would indicate. Prepayments occur when the mortgagor on a
mortgage prepays the remaining principal before the mortgage's scheduled
maturity date. Because the prepayment characteristics of the underlying
mortgages vary, it is impossible to predict accurately the realized yield or
average life of a particular issue of pass-through certificates. Prepayments are
important because of their effect on the yield and price of the mortgage-backed
securities. During periods of declining interest rates, prepayments can be
expected to accelerate and a Fund investing in such securities would be required
to reinvest the proceeds at the lower interest rates then available. Conversely,
during periods of rising interest rates, a reduction in prepayments may increase
the effective maturity of the securities, subjecting them to a greater risk of
decline in market value in response to rising interest rates. In addition,
prepayments of mortgages underlying securities purchased at a premium could
result in capital losses.
Adjustable Rate Securities. Adjustable rate securities have interest rates that
are reset at periodic intervals, usually by reference to some interest rate
index or market interest rate. Some adjustable rate securities are backed by
pools of mortgage loans. Although the rate-adjustment feature may reduce sharp
changes in the value of adjustable rate securities, these securities can change
in value based on changes in market interest rates or the issuer's
creditworthiness. Changes in the interest rate on adjustable rate securities may
lag behind changes in prevailing market interest rates. Also, some adjustable
rate securities (or the underlying mortgages) are subject to caps or floors that
limit the maximum change in interest rate.
Asset-Backed Securities. Asset-backed securities (unrelated to first mortgage
loans) represent fractional interests in pools of leases, retail installment
loans, revolving credit receivables and other payment obligations, both secured
and unsecured. These assets are generally held by a trust and payments of
principal and interest or interest only are passed through monthly or quarterly
to certificate holders and may be guaranteed up to certain amounts by letters of
credit issued by a financial institution affiliated or unaffiliated with the
trustee or originator of the trust.
Like mortgages underlying mortgage-backed securities, underlying automobile
sales contracts or credit card receivables are subject to prepayment, which may
reduce the overall return to certificate holders. Certificate holders may also
experience delays in payment on the certificates if the full amounts due on
underlying sales contracts or receivables are not realized by the trust because
of unanticipated legal or administrative costs of enforcing the contracts or
because of depreciation or damage to the collateral (usually automobiles)
securing certain contracts, or other factors.
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Zero-Coupon and Payment-in-Kind Bonds. Zero-coupon bonds are issued at a
significant discount from their principal amount in lieu of paying interest
periodically. Payment-in-kind bonds allow the issuer to make current interest
payments on the bonds in additional bonds. Because zero-coupon bonds and
payment-in-kind bonds do not pay current interest in cash, their value is
generally subject to greater fluctuation in response to changes in market
interest rates than bonds that pay interest in cash currently. Both zero-coupon
and payment-in-kind bonds allow an issuer to avoid the need to generate cash to
meet current interest payments. Accordingly, such bonds may involve greater
credit risks than bonds paying interest currently. Even though such bonds do not
pay current interest in cash, a Fund is nonetheless required to accrue interest
income on such investments and to distribute such amounts at least annually to
shareholders. Thus, a Fund could be required at times to liquidate other
investments in order to satisfy its dividend requirements.
Equity-Linked Debt Securities. Equity-linked debt securities are securities with
respect to which the amount of interest and/or principal that the issuer thereof
is obligated to pay is linked to the performance of a specified index of equity
securities. Such amount may be significantly greater or less than payment
obligations in respect of other types of debt securities. Adverse changes in
equity securities indices and other adverse changes in the securities markets
may reduce payments made under, and/or the principal of, equity-linked debt
securities held by the Fund. Furthermore, as with any debt securities, the
values of equity-linked debt securities will generally vary inversely with
changes in interest rates. The Fund's ability to dispose of equity-linked debt
securities will depend on the availability of liquid markets for such
securities. Investment in equity-linked debt securities may be considered to be
speculative. As with other securities, the Fund could lose its entire investment
in equity-linked debt securities.
Loans and Other Direct Debt Instruments. Loans and other direct debt instruments
are interests in amounts owed by a corporate, governmental or other borrower to
another party. They may represent amounts owed to lenders or lending syndicates
(loans and loan participations), to suppliers of goods or services (trade claims
or other receivables), or to other creditors. Direct debt instruments involve
the risk of loss in case of default or insolvency of the borrower and may offer
less legal protection to the Fund in the event of fraud or misrepresentation
than debt securities. In addition, loan participations involve a risk of
insolvency of the lending bank or other financial intermediary. Direct debt
instruments may also include standby financing commitments that obligate the
Fund to supply additional cash to the borrower on demand. Loans and other direct
debt instruments are generally illiquid and may be transferred only through
individually negotiated private transactions.
Purchasers of loans and other forms of direct indebtedness depend primarily upon
the creditworthiness of the borrower for payment of principal and interest.
Direct debt instruments may not be rated by any nationally recognized rating
service. If the Fund does not receive scheduled interest or principal payments
on such indebtedness, the Fund's share price and yield could be adversely
affected. Loans that are fully secured offer the Fund more protection than
unsecured loans in the event of non-payment of scheduled interest or principal.
However, there is no assurance that the liquidation of collateral from a secured
loan would satisfy the borrower's obligation, or that the collateral can be
liquidated. Indebtedness of borrowers whose creditworthiness is poor may involve
substantial risks, and may be highly speculative.
Borrowers that are in bankruptcy or restructuring may never pay off their
indebtedness, or may pay only a small fraction of the amount owed. Direct
indebtedness of Asian countries will also involve a risk that the governmental
entities responsible for the repayment of the debt may be unable, or unwilling,
to pay interest and repay principal when due.
Investments in loans through direct assignment of a financial institution's
interests with respect to a loan may involve additional risks to the Fund. For
example, if a loan is foreclosed, the Fund could become part owner of any
collateral, and would bear the costs and liabilities associated with owning and
disposing of the collateral. Direct debt instruments may also involve a risk of
insolvency of the lending bank or other intermediary.
A loan is often administered by a bank or other financial institution that acts
as agent for all holders. The agent administers the terms of the loan, as
specified on the loan agreement. Unless, under the terms of the loan or other
indebtedness, the Fund has direct recourse against the borrower, it may have to
rely on the agent to apply appropriate credit remedies against a borrower. If
assets held by the agent for the benefit of the Fund were determined to be
subject to the claims of the agent's general creditors, the Fund might incur
certain costs and delays in realizing payment on the loan or loan participation
and could suffer a loss of principal or interest.
Direct indebtedness purchased by the Fund may include letters of credit,
revolving credit facilities, or other standby financing commitments obligating
the Fund to pay additional cash on demand. These commitments may have the effect
of requiring the Fund to increase its investment in a borrower at a time when it
would not otherwise have done so, even if the borrower's condition makes it
unlikely that the amount will ever be repaid.
Illiquid Securities. Subject to any more restrictive applicable fundamental
investment policy, none of the Funds will maintain more than 15% of its net
assets in illiquid securities. Illiquid securities generally include (i) direct
placements or other securities that are subject to legal or contractual
restrictions on resale or for which there is no readily available market (e.g.,
when trading in the security is suspended or, in the case of unlisted
securities, when market makers do not exist or will not entertain bids or
offers), including many individually negotiated currency swaps and any assets
used to cover currency swaps and most privately negotiated investments in state
enterprises that have not yet conducted an initial equity offering,
(ii) over-the-counter options and assets used to cover over-the-counter
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options, and (iii) repurchase agreements not terminable within seven days.
Because of the absence of a trading market for illiquid securities, a Fund may
not be able to realize their full value upon sale. With respect to each Fund
that may invest in such securities, Alliance will monitor their illiquidity
under the supervision of the Directors of the Fund. To the extent permitted by
applicable law, Rule 144A securities will not be treated as "illiquid" for
purposes of the foregoing restriction so long as such securities meet liquidity
guidelines established by a Fund's Directors. Investment in non-publicly traded
securities by each of Growth Fund and Strategic Balanced Fund is restricted to
5% of its total assets (not including for these purposes Rule 144A securities,
to the extent permitted by applicable law) and is also subject to the 15%
restriction on investment in illiquid securities described above.
A Fund that invests in securities for which there is no ready market may
therefore not be able to readily sell such securities. To the extent that these
securities are foreign securities, there is no law in many of the countries in
which a Fund may invest similar to the Securities Act requiring an issuer to
register the sale of securities with a governmental agency or imposing legal
restrictions on resales of securities, either as to length of time the
securities may be held or manner of resale. However, there may be contractual
restrictions on resale of securities.
Options. An option gives the purchaser of the option, upon payment of a premium,
the right to deliver to (in the case of a put) or receive from (in the case of a
call) the writer a specified amount of a security on or before a fixed date at a
predetermined price. A call option written by a Fund is "covered" if the Fund
owns the underlying security, has an absolute and immediate right to acquire
that security upon conversion or exchange of another security it holds, or holds
a call option on the underlying security with an exercise price equal to or less
than that of the call option it has written. A put option written by a Fund is
covered if the Fund holds a put option on the underlying securities with an
exercise price equal to or greater than that of the put option it has written.
A call option is for cross-hedging purposes if a Fund does not own the
underlying security, and is designed to provide a hedge against a decline in
value in another security which the Fund owns or has the right to acquire.
Worldwide Privatization Fund, All-Asia Investment Fund, Income Builder Fund and
Utility Income Fund each may write call options for cross-hedging purposes. A
Fund would write a call option for cross-hedging purposes, instead of writing a
covered call option, when the premium to be received from the cross-hedge
transaction would exceed that which would be received from writing a covered
call option, while at the same time achieving the desired hedge.
In purchasing an option, a Fund would be in a position to realize a gain if,
during the option period, the price of the underlying security increased (in the
case of a call) or decreased (in the case of a put) by an amount in excess of
the premium paid; otherwise the Fund would experience a loss equal to the
premium paid for the option.
If an option written by a Fund were exercised, the Fund would be obligated to
purchase (in the case of a put) or sell (in the case of a call) the underlying
security at the exercise price. The risk involved in writing an option is that,
if the option were exercised, the underlying security would then be purchased or
sold by the Fund at a disadvantageous price. These risks could be reduced by
entering into a closing transaction (i.e., by disposing of the option prior to
its exercise). A Fund retains the premium received from writing a put or call
option whether or not the option is exercised. The writing of covered call
options could result in increases in a Fund's portfolio turnover rate,
especially during periods when market prices of the underlying securities
appreciate.
Technology Fund, Quasar Fund, International Fund, New Europe Fund
and Global Small Cap Fund will not write uncovered call options. Technology Fund
and Global Small Cap Fund will not write a call option if the premium to be
received by the Fund in doing so would not produce an annualized return of at
least 15% of the then current market value of the securities subject to the
option (without giving effect to commissions, stock transfer taxes and other
expenses that are deducted from premium receipts). Technology Fund, Quasar Fund
and Global Small Cap Fund will not write a call option if, as a result, the
aggregate of the Fund's portfolio securities subject to outstanding call options
(valued at the lower of the option price or market value of such securities)
would exceed 15% of the Fund's total assets or more than 10% of the Fund's
assets would be committed to call options that at the time of sale have a
remaining term of more than 100 days. The aggregate cost of all outstanding
options purchased and held by each of Premier Growth Fund, Technology Fund,
Quasar Fund and Global Small Cap Fund will at no time exceed 10% of the Fund's
total assets. Neither International Fund nor New Europe Fund will write
uncovered put options.
A Fund that purchases or writes options on securities in privately negotiated
(i.e., over-the-counter) transactions will effect such transactions only with
investment dealers and other financial institutions (such as commercial banks or
savings and loan institutions) deemed creditworthy by Alliance, and Alliance has
adopted procedures for monitoring the creditworthiness of such entities. Options
purchased or written by a Fund in negotiated transactions are illiquid and it
may not be possible for the Fund to effect a closing transaction at an
advantageous time. See "Illiquid Securities."
Options on Securities Indices. An option on a securities index is similar to an
option on a security except that, rather than the right to take or make delivery
of a security at a specified price, an option on a securities index gives the
holder the right to receive, upon exercise of the option, an amount of cash if
the closing level of the chosen index is greater than (in the case of a call) or
less than (in the case of a put) the exercise price of the option.
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Futures Contracts and Options on Futures Contracts. A "sale" of a futures
contract means the acquisition of a contractual obligation to deliver the
securities or foreign currencies or other commodity called for by the contract
at a specified price on a specified date. A "purchase" of a futures contract
means the incurring of an obligation to acquire the securities, foreign
currencies or other commodity called for by the contract at a specified price on
a specified date. The purchaser of a futures contract on an index agrees to take
or make delivery of an amount of cash equal to the difference between a
specified dollar multiple of the value of the index on the expiration date of
the contract ("current contract value") and the price at which the contract was
originally struck. No physical delivery of the securities underlying the index
is made.
Options on futures contracts written or purchased by a Fund will be
traded on U.S. or foreign exchanges or over-the-counter. These investment
techniques will be used only to hedge against anticipated future changes in
market conditions and interest or exchange rates which otherwise might either
adversely affect the value of the Fund's portfolio securities or adversely
affect the prices of securities which the Fund intends to purchase at a later
date.
No Fund will enter into any futures contracts or options on futures
contracts if immediately thereafter the market values of the outstanding futures
contracts of the Fund and the currencies and futures contracts subject to
outstanding options written by the Fund would exceed 50% of its total assets,
and Income Builder Fund will also not do so if immediately thereafter the
aggregate of initial margin deposits on all the outstanding futures contracts of
the Fund and premiums paid on outstanding options on futures contracts would
exceed 5% of the market value of the total assets of the Fund. Premier Growth
Fund may not purchase or sell a stock index future if immediately thereafter
more than 30% of its total assets would be hedged by stock index futures.
Premier Growth Fund may not purchase or sell a stock index future if,
immediately thereafter, the sum of the amount of margin deposits on the Fund's
existing futures positions would exceed 5% of the market value of the Fund's
total assets.
Options on Foreign Currencies. As in the case of other kinds of options, the
writing of an option on a foreign currency constitutes only a partial hedge, up
to the amount of the premium received, and a Fund could be required to purchase
or sell foreign currencies at disadvantageous exchange rates, thereby incurring
losses. The purchase of an option on a foreign currency may constitute an
effective hedge against fluctuations in exchange rates although, in the event of
rate movements adverse to a Fund's position, it may forfeit the entire amount of
the premium plus related transaction costs. See the Statement of Additional
Information of each Fund that may invest in options on foreign currencies for
further discussion of the use, risks and costs of options on foreign currencies.
Forward Foreign Currency Exchange Contracts. A Fund purchases or sells forward
contracts to minimize the risk to it from adverse changes in the relationship
between the U.S. dollar and other currencies. A forward contract is an
obligation to purchase or sell a specific currency for an agreed price at a
future date, and is individually negotiated and privately traded.
A Fund may enter into a forward contract, for example, when it enters into a
contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. dollar price of the security
("transaction hedge"). A Fund will not engage in transaction hedges with respect
to the currency of a particular country to an extent greater than the aggregate
amount of the Fund's transactions in that currency. When a Fund believes that a
foreign currency may suffer a substantial decline against the U.S. dollar, it
may enter into a forward sale contract to sell an amount of that foreign
currency approximating the value of some or all of the Fund's portfolio
securities denominated in such foreign currency, or when the Fund believes that
the U.S. dollar may suffer a substantial decline against a foreign currency, it
may enter into a forward purchase contract to buy that foreign currency for a
fixed dollar amount ("position hedge"). A Fund will not position hedge with
respect to the currency of a particular country 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 particular foreign currency.
Instead of entering into a position hedge, a Fund may, in the alternative, enter
into a forward contract to sell a different foreign currency for a fixed U.S.
dollar amount where the Fund believes that the U.S. dollar value of the currency
to be sold pursuant to the forward contract will fall whenever there is a
decline in the U.S. dollar value of the currency in which portfolio securities
of the Fund are denominated ("cross-hedge"). Unanticipated changes in currency
prices may result in poorer overall performance for the Fund than if it had not
entered into such forward contracts.
Hedging against a decline in the value of a currency does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Such transactions also preclude the
opportunity for gain if the value of the hedged currency should rise. Moreover,
it may not be possible for a Fund to hedge against a devaluation that is so
generally anticipated that the Fund is not able to contract to sell the currency
at a price above the devaluation level it anticipates. International Fund, New
Europe Fund and Global Small Cap Fund will not enter into a forward contract
with a term of more than one year or if, as a result, more than 50% of its total
assets would be committed to such contracts. The dealings of International Fund,
New Europe Fund and Global Small Cap Fund in forward contracts will be limited
to hedging involving either specific transactions or portfolio positions.
Growth Fund and Strategic Balanced Fund may also purchase and sell foreign
currency on a spot basis.
Forward Commitments. Forward commitments for the purchase or sale of securities
may include purchases on a "when-issued" basis or purchases or sales on a
"delayed delivery" basis. In some cases, a forward commitment may be conditioned
upon
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the occurrence of a subsequent event, such as approval and consummation of a
merger, corporate reorganization or debt restructuring (i.e., a "when, as and if
issued" trade).
When forward commitment transactions are negotiated, the price is fixed at the
time the commitment is made, but delivery and payment for the securities take
place at a later date. Normally, the settlement date occurs within two months
after the transaction, but settlements beyond two months may be negotiated.
Securities purchased or sold under a forward commitment are subject to market
fluctuation, and no interest or dividends accrue to the purchaser prior to the
settlement date. At the time a Fund intends to enter into a forward commitment,
it records the transaction and thereafter reflects the value of the security
purchased or, if a sale, the proceeds to be received, in determining its net
asset value. Any unrealized appreciation or depreciation reflected in such
valuation of a "when, as and if issued" security would be canceled in the event
that the required conditions did not occur and the trade was canceled.
The use of forward commitments enables a Fund to protect against anticipated
changes in interest rates and prices. For instance, in periods of rising
interest rates and falling bond prices, a Fund might sell securities in its
portfolio on a forward commitment basis to limit its exposure to falling prices.
In periods of falling interest rates and rising bond prices, a Fund might sell a
security in its portfolio and purchase the same or a similar security on a
when-issued or forward commitment basis, thereby obtaining the benefit of
currently higher cash yields. However, if Alliance were to forecast incorrectly
the direction of interest rate movements, a Fund might be required to complete
such when-issued or forward transactions at prices inferior to the then current
market values. When-issued securities and forward commitments may be sold prior
to the settlement date, but a Fund enters into when-issued and forward
commitments only with the intention of actually receiving securities or
delivering them, as the case may be. If a Fund chooses to dispose of the right
to acquire a when-issued security prior to its acquisition or dispose of its
right to deliver or receive against a forward commitment, it may incur a gain or
loss. Any significant commitment of Fund assets to the purchase of securities on
a "when, as and if issued" basis may increase the volatility of the Fund's net
asset value. No forward commitments will be made by New Europe Fund, All-Asia
Investment Fund, Worldwide Privatization Fund, Income Builder Fund or Utility
Income Fund if, as a result, the Fund's aggregate commitments under such
transactions would be more than 30% of the Fund's total assets. In the event the
other party to a forward commitment transaction were to default, a Fund might
lose the opportunity to invest money at favorable rates or to dispose of
securities at favorable prices.
Standby Commitment Agreements. Standby commitment agreements commit a Fund, for
a stated period of time, to purchase a stated amount of a security that may be
issued and sold to the Fund at the option of the issuer. The price and coupon of
the security are fixed at the time of the commitment. At the time of entering
into the agreement the Fund is paid a commitment fee, regardless of whether the
security ultimately is issued, typically equal to approximately 0.5% of the
aggregate purchase price of the security the Fund has committed to purchase. A
Fund will enter into such agreements only for the purpose of investing in the
security underlying the commitment at a yield and price considered advantageous
to the Fund and unavailable on a firm commitment basis. No Fund, other than
Income Builder Fund, will enter into a standby commitment with a remaining term
in excess of 45 days. Investments in standby commitments will be limited so that
the aggregate purchase price of the securities subject to the commitments will
not exceed 25% with respect to New Europe Fund, 50% with respect to Worldwide
Privatization Fund and All-Asia Investment Fund, and 20% with respect to Utility
Income Fund, of the Fund's assets taken at the time of making the commitment.
There is no guarantee that a security subject to a standby commitment will be
issued and the value of the security, if issued, on the delivery date may be
more or less than its purchase price. Since the issuance of the security
underlying the commitment is at the option of the issuer, a Fund will bear the
risk of capital loss in the event the value of the security declines and may not
benefit from an appreciation in the value of the security during the commitment
period if the issuer decides not to issue and sell the security to the
Fund.
Currency Swaps. Currency swaps involve the individually negotiated exchange by a
Fund with another party of a series of payments in specified currencies. A
currency swap may involve the delivery at the end of the exchange period of a
substantial amount of one designated currency in exchange for the other
designated currency. Therefore the entire principal value of a currency swap is
subject to the risk that the other party to the swap will default on its
contractual delivery obligations. The net amount of the excess, if any, of a
Fund's obligations over its entitlements with respect to each currency swap will
be accrued on a daily basis. A Fund will not enter into any currency swap unless
the credit quality of the unsecured senior debt or the claims-paying ability of
the other party thereto is rated in the highest rating category of at least one
nationally recognized rating organization at the time of entering into the
transaction. If there is a default by the other party to such a transaction,
such Fund will have contractual remedies pursuant to the agreements related to
the transactions.
Interest Rate Transactions. Each Fund that may enter into interest rate
transactions expects to do so primarily to preserve a return or spread on a
particular investment or portion of its portfolio or to protect against any
increase in the price of securities the Fund anticipates purchasing at a later
date. The Funds do not intend to use these transactions in a speculative manner.
Interest rate swaps involve the exchange by a Fund with another party of their
respective commitments to pay or
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receive interest (e.g., an exchange of floating rate payments for fixed rate
payments). Interest rate swaps are entered on a net basis (i.e., the two payment
streams are netted out, with the Fund receiving or paying, as the case may be,
only the net amount of the two payments). With respect to All-Asia Investment
Fund and Utility Income Fund, the exchange commitments can involve payments in
the same currency or in different currencies. The purchase of an interest rate
cap entitles the purchaser, to the extent that a specified index exceeds a
predetermined interest rate, to receive payments of interest on a
contractually-based principal amount from the party selling such interest rate
cap. The purchase of an interest rate floor entitles the purchaser, to the
extent that a specified index falls below a predetermined interest rate, to
receive payments of interest on an agreed principal amount from the party
selling the interest rate floor.
A Fund may enter into interest rate swaps, caps and floors on either an
asset-based or liability-based basis, depending upon whether it is hedging its
assets or liabilities. The net amount of the excess, if any, of a Fund's
obligations over its entitlements with respect to each interest rate swap, cap
and floor is accrued daily. A Fund will not enter into an interest rate swap,
cap or floor transaction unless the unsecured senior debt or the claims-paying
ability of the other party thereto is then rated in the highest rating category
of at least one nationally recognized rating organization. Alliance will monitor
the creditworthiness of counterparties on an ongoing basis. The swap market has
grown substantially in recent years, with a large number of banks and investment
banking firms acting both as principals and as agents utilizing standardized
swap documentation. As a result, the swap market has become relatively liquid.
Caps and floors are more recent innovations for which standardized documentation
has not yet been developed and, accordingly, they are less liquid than swaps.
The use of interest rate transactions is a highly specialized activity which
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. If Alliance were to incorrectly
forecast market values, interest rates and other applicable factors, the
investment performance of a Fund would be adversely affected by the use of these
investment techniques. Moreover, even if Alliance is correct in its forecasts,
there is a risk that the transaction position may correlate imperfectly with the
price of the asset or liability being hedged. There is no limit on the amount of
interest rate transactions that may be entered into by a Fund that is permitted
to enter into such transactions. These transactions do not involve the delivery
of securities or other underlying assets or principal. Accordingly, the risk of
loss with respect to interest rate transactions is limited to the net amount of
interest payments that a Fund is contractually obligated to make. If the other
party to an interest rate transaction defaults, a Fund's risk of loss consists
of the net amount of interest payments that the Fund contractually is entitled
to receive.
Repurchase Agreements. A repurchase agreement arises when a buyer purchases a
security and simultaneously agrees to resell it to the vendor at an agreed-upon
future date, normally a day or a few days later. The resale price is greater
than the purchase price, reflecting an agreed-upon interest rate for the period
the buyer's money is invested in the security. Such agreements permit a Fund to
keep all of its assets at work while retaining "overnight" flexibility in
pursuit of investments of a longer-term nature. If a vendor defaults on its
repurchase obligation, a Fund would suffer a loss to the extent that the
proceeds from the sale of the collateral were less than the repurchase price. If
a vendor goes bankrupt, a Fund might be delayed in, or prevented from, selling
the collateral for its benefit. Alliance monitors the creditworthiness of the
vendors with which the Fund enters into repurchase agreements. There is no
percentage restriction on a Fund's ability to enter into repurchase agreements,
other than as indicated under "Investment Objectives and Policies."
Short Sales. A short sale is effected by selling a security that a Fund does not
own, or if the Fund does own such security, it is not to be delivered upon
consummation of the sale. A short sale is "against the box" to the extent that a
Fund contemporaneously owns or has the right to obtain securities identical to
those sold short without payment. Worldwide Privatization Fund, All-Asia
Investment Fund, Income Builder Fund and Utility Income Fund each may make short
sales of securities or maintain short positions only for the purpose of
deferring realization of gain or loss for U.S. federal income tax purposes,
provided that at all times when a short position is open the Fund owns an equal
amount of securities of the same issue as, and equal in amount to, the
securities sold short. In addition, each of those Funds may not make a short
sale if as a result more than 10% of the Fund's net assets would be held as
collateral for short sales, except that All-Asia Investment Fund may not make a
short sale if as a result more than 25% of the Fund's net assets would be held
as collateral for short sales. If the price of the security sold short increases
between the time of the short sale and the time a Fund replaces the borrowed
security, the Fund will incur a loss; conversely, if the price declines, the
Fund will realize a capital gain. See "Certain Fundamental Investment Policies."
Certain special federal income tax considerations may apply to short sales
entered into by a Fund. See "Dividends, Distributions and Taxes" in the relevant
Fund's Statement of Additional Information.
Loans of Portfolio Securities. The 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, Alliance will consider all relevant facts
and circumstances, including the creditworthiness of the borrower. While
securities are on loan, the borrower will pay the Fund any income earned thereon
and the Fund may invest any cash collateral in portfolio securities, thereby
earning additional income, or receive an agreed upon amount of income from a
borrower who has delivered equivalent collateral. Each Fund will have the right
to regain record ownership of loaned securities or equivalent securities in
order to exercise ownership rights such as voting rights, subscription rights
and
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rights to dividends, interest or distributions. A Fund may pay reasonable
finders', administrative and custodial fees in connection with a loan. A Fund
will not lend its portfolio securities to any officer, director, employee or
affiliate of the Fund or Alliance.
General. The successful use of the foregoing investment practices draws upon
Alliance's special skills and experience with respect to such instruments and
usually depends on Alliance's ability to forecast price movements, interest
rates or currency exchange rate movements correctly. Should interest rates,
prices or exchange rates move unexpectedly, a Fund may not achieve the
anticipated benefits of the transactions or may realize losses and thus be in a
worse position than if such strategies had not been used. Unlike many
exchange-traded futures contracts and options on futures contracts, there are no
daily price fluctuation limits with respect to certain options and forward
contracts, and adverse market movements could therefore continue to an unlimited
extent over a period of time. In addition, the correlation between movements in
the prices of futures contracts, options and forward contracts and movements in
the prices of the securities and currencies hedged or used for cover will not be
perfect and could produce unanticipated losses.
A Fund's ability to dispose of its position in futures contracts, options and
forward contracts depends on the availability of liquid markets in such
instruments. Markets in options and futures with respect to a number of types of
securities and currencies are relatively new and still developing, and there is
no public market for forward contracts. It is impossible to predict the amount
of trading interest that may exist in various types of futures contracts,
options and forward contracts. If a secondary market does not exist with respect
to an option purchased or written by a Fund, it might not be possible to effect
a closing transaction in the option (i.e., dispose of the option) with the
result that (i) an option purchased by the Fund would have to be exercised in
order for the Fund to realize any profit and (ii) the Fund may not be able to
sell currencies or portfolio securities covering an option written by the Fund
until the option expires or it delivers the underlying security, futures
contract or currency upon exercise. Therefore, no assurance can be given that
the Funds will be able to utilize these instruments effectively for the purposes
set forth above. Furthermore, a Fund's ability to engage in options and futures
transactions may be limited by tax considerations. See "Dividends, Distributions
and Taxes" in the Statement of Additional Information of each Fund that invests
in options and futures.
Future Developments. A Fund may, following written notice to its shareholders,
take advantage of other investment practices that are not currently contemplated
for use by the Fund or are not available but may yet be developed, to the extent
such investment practices are consistent with the Fund's investment objective
and legally permissible for the Fund. Such investment practices, if they arise,
may involve risks that exceed those involved in the activities described above.
Defensive Position. For temporary defensive purposes, each Fund may invest in
certain types of short-term, liquid, high grade or high quality (depending on
the Fund) debt securities. These securities may include U.S. Government
securities, qualifying bank deposits, money market instruments, prime commercial
paper and other types of short-term debt securities including notes and bonds.
For Funds that may invest in foreign countries, such securities may also include
short-term, foreign-currency denominated securities of the type mentioned above
issued by foreign governmental entities, companies and supranational
organizations. For a complete description of the types of securities each Fund
may invest in while in a temporary defensive position, please see such Fund's
Statement of Additional Information.
Portfolio Turnover. Portfolio turnover rates are set forth under "Financial
Highlights." These portfolio turnover rates are greater than those of most other
investment companies, including those which emphasize capital appreciation as a
basic policy. A high rate of portfolio turnover involves correspondingly greater
brokerage and other expenses than a lower rate, which must be borne by the Fund
and its shareholders. High portfolio turnover also may result in the realization
of substantial net short-term capital gains. See "Dividends, Distributions and
Taxes" in each Fund's Statement of Additional Information.
CERTAIN FUNDAMENTAL INVESTMENT POLICIES
Each Fund has adopted certain fundamental investment policies listed below,
which may not be changed without the approval of its shareholders. Additional
investment restrictions with respect to a Fund are set forth in its Statement of
Additional Information.
Alliance Fund may not: (i) invest more than 5% of its total assets in the
securities of any one issuer (other than the U.S. Government); (ii) acquire more
than 10% of the voting or other securities of any one issuer; or (iii) buy
securities of any company that (including its predecessors) has not been in
business at least three continuous years. Pursuant to investment policies which
are not fundamental, the Fund does not invest (i) in puts or calls (except as
discussed above); (ii) in straddles, spreads, or any combination thereof;
(iii) in oil, gas or other mineral exploration or development programs; or
(iv) more than 5% of its gross assets in securities the disposition of which
would be subject to restrictions under the federal securities laws.
Growth Fund and Strategic Balanced Fund each may not: (i) invest more than 5% of
its total assets in the securities of any one issuer (other than U.S. Government
securities and repurchase agreements relating thereto), although up to 25% of
each Fund's total assets may be invested without regard to this restriction; or
(ii) invest 25% or more of its total assets in the securities of any one
industry.
Premier Growth Fund may not: (i) purchase more than 10% of the outstanding
voting securities of any one issuer; (ii) invest 25% or more of the value of its
total assets in the same industry; (iii) borrow money or issue senior securities
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except for temporary or emergency purposes in an amount not exceeding 5% of the
value of its total assets at the time the borrowing is made; (iv) pledge,
mortgage, hypothecate or otherwise encumber any of its assets except in
connection with the writing of call options and except to secure permitted
borrowings; or (v) invest in the securities of any issuer that has a record of
less than three years of continuous operation (including the operation of any
predecessor) if as a result more than 10% of the value of the total assets of
the Fund would be invested in the securities of such issuer or issuers.
Technology Fund may not: (i) with respect to 75% of its total assets, have such
assets represented by other than: (a) cash and cash items, (b) U.S. Government
securities, or (c) securities of any one issuer (other than the U.S. Government
and its agencies or instrumentalities) not greater in value than 5% of the
Fund's total assets, and not more than 10% of the outstanding voting securities
of such issuer; (ii) purchase the securities of any one issuer, other than the
U.S. Government and its agencies or instrumentalities, if as a result (a) the
value of the holdings of the Fund in the securities of such issuer exceeds 25%
of its total assets, or (b) the Fund owns more than 25% of the outstanding
securities of any one class of securities of such issuer; (iii) concentrate its
investments in any one industry, but the Fund has reserved the right to invest
up to 25% of its total assets in a particular industry; and (iv) invest in the
securities of any issuer which has a record of less than three years of
continuous operation (including the operation of any predecessor) if such
purchase would cause 10% or more of its total assets to be invested in the
securities of such issuers.
Quasar Fund may not: (i) purchase the securities of any one issuer, other than
the U.S. Government or any of its agencies or instrumentalities, if as a result
more than 5% of its total assets would be invested in such issuer or the Fund
would own more than 10% of the outstanding voting securities of such issuer,
except that up to 25% of its total assets may be invested without regard to
these 5% and 10% limitations; (ii) invest more than 25% of its total assets in
any particular industry; (iii) borrow money except for temporary or emergency
purposes in an amount not exceeding 5% of its total assets at the time the
borrowing is made; or (iv) invest more than 10% of its assets in restricted
securities.
International Fund may not: (i) invest more than 5% of the value of its total
assets in securities of a single issuer (including repurchase agreements with
any one entity), except U.S. Government securities or foreign government
securities; provided, however, that the Fund may not, with respect to 75% of its
total assets, invest more than 5% of its total assets in securities of any one
foreign government issuer; (ii) own more than 10% of the outstanding securities
of any class of any issuer (for this purpose, all preferred stocks of an issuer
shall be deemed a single class, and all indebtedness of an issuer shall be
deemed a single class), except U.S. Government securities; (iii) invest more
than 25% of the value of its total assets in securities of issuers having their
principal business activities in the same industry; provided, that this
limitation does not apply to U.S. Government securities or foreign government
securities; (iv) invest more than 5% of the value of its total assets in the
securities of any issuer that has a record of less than three years of
continuous operation (including the operation of any predecessor or
unconditional guarantor), except U.S. Government securities or foreign
government securities; (v) invest more than 5% of the value of its total assets
in securities with legal or contractual restrictions on resale, other than
repurchase agreements, or more than 10% of the value of its total assets in
securities that are not readily marketable (including restricted securities and
repurchase agreements not terminable within seven business days); and
(vi) borrow money, except as a temporary measure for extraordinary or emergency
purposes, and then only from banks in amounts not exceeding 5% of its total
assets.
Worldwide Privatization Fund may not: (i) invest 25% or more of its total assets
in securities of issuers conducting their principal business activities in the
same industry, except that this restriction does not apply to (a) U.S.
Government securities, or (b) the purchase of securities of issuers whose
primary business activity is in the national commercial banking industry, so
long as the Fund's Directors determine, on the basis of factors such as
liquidity, availability of investments and anticipated returns, that the Fund's
ability to achieve its investment objective would be adversely affected if the
Fund were not permitted to invest more than 25% of its total assets in those
securities, and so long as the Fund notifies its shareholders of any decision by
the Directors to permit or cease to permit the Fund to invest more than 25% of
its total assets in those securities, such notice to include a discussion of any
increased investment risks to which the Fund may be subjected as a result of the
Directors' determination; (ii) borrow money except from banks for temporary or
emergency purposes, including the meeting of redemption requests that might
require the untimely disposition of securities; borrowing in the aggregate may
not exceed 15%, and borrowing for purposes other than meeting redemptions may
not exceed 5%, of the Fund's total assets (including the amount borrowed) less
liabilities (not including the amount borrowed) at the time the borrowing is
made; outstanding borrowings in excess of 5% of the value of the Fund's total
assets will be repaid before any investments are made; or (iii) pledge,
hypothecate, mortgage or otherwise encumber its assets, except to secure
permitted borrowings. The exception contained in clause (i)(b) above is subject
to the operating policy regarding concentration described in this Prospectus.
New Europe Fund may not: (i) purchase more than 10% of the outstanding voting
securities of any one issuer; (ii) invest more than 15% of its total assets in
the securities of any one issuer or 25% or more of its total assets in the same
industry, provided, however, that the foregoing restriction shall not be deemed
to prohibit the Fund from purchasing the securities of any issuer pursuant to
the exercise of rights distributed to the Fund by the issuer, except that no
such purchase may be made if as a result the Fund will fail to meet the
diversification
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requirements of the Code and any such acquisition in excess of the foregoing 15%
or 25% limits will be sold by the Fund as soon as reasonably practicable (this
restriction does not apply to U.S. Government securities, but will apply to
foreign government securities unless the Commission permits their exclusion);
(iii) borrow money except from banks for temporary or emergency purposes,
including the meeting of redemption requests that might require the untimely
disposition of securities; borrowing in the aggregate may not exceed 15%, and
borrowing for purposes other than meeting redemptions may not exceed 5%, of the
Fund's total assets (including the amount borrowed) less liabilities (not
including the amount borrowed) at the time the borrowing is made; outstanding
borrowings in excess of 5% of the Fund's total assets will be repaid before any
subsequent investments are made; or (iv) purchase a security (unless the
security is acquired pursuant to a plan of reorganization or an offer of
exchange) if, as a result, the Fund would own any securities of an open-end
investment company or more than 3% of the total outstanding voting stock of any
closed-end investment company, or more than 5% of the value of the Fund's total
assets would be invested in securities of any closed-end investment company, or
more than 10% of such value in closed-end investment companies in general.
All-Asia Investment Fund may not: (i) invest 25% or more of its total assets in
securities of issuers conducting their principal business activities in the same
industry; (ii) borrow money except from banks for temporary or emergency
purposes, including the meeting of redemption requests that might require the
untimely disposition of securities; borrowing in the aggregate may not exceed
15%, and borrowing for purposes other than meeting redemptions may not exceed
5%, of the Fund's total assets (including the amount borrowed) less liabilities
(not including the amount borrowed) at the time the borrowing is made;
outstanding borrowings in excess of 5% of the value of the Fund's total assets
will be repaid before any investments are made; or (iii) pledge, hypothecate,
mortgage or otherwise encumber its assets, except to secure permitted
borrowings.
Global Small Cap Fund may not: (i) purchase the securities of any one issuer,
other than the U.S. Government or any of its agencies or instrumentalities, if
immediately after such purchase more than 5% of the value of its total assets
would be invested in such issuer or the Fund would own more than 10% of the
outstanding voting securities of such issuer, except that up to 25% of the
Fund's total assets may be invested without regard to these 5% and 10%
limitations; (ii) invest 25% or more of its total assets in the same industry;
this restriction does not apply to U.S. Government securities, but will apply to
foreign government securities unless the Commission permits their exclusion;
(iii) borrow money except from banks for emergency or temporary purposes in an
amount not exceeding 5% of the total assets of the Fund; or (iv) make short
sales of securities or maintain a short position, unless at all times when a
short position is open it owns an equal amount of such securities or securities
convertible into or exchangeable for, without payment of any further
consideration, securities of the same issue as, and equal in amount to, the
securities sold short and unless not more than 5% of the Fund's net assets is
held as collateral for such sales at any one time.
Balanced Shares may not: (i) invest more than 5% of its total assets in the
securities of any one issuer, except U.S. Government securities; or (ii) own
more than 10% of the outstanding voting securities of any one issuer.
Income Builder Fund may not: (i) invest 25% or more of its total assets in
securities of companies engaged principally in any one industry, except that
this restriction does not apply to U.S. Government securities; (ii) borrow money
except from banks for temporary or emergency purposes, including the meeting of
redemption requests that might require the untimely disposition of securities;
borrowing in the aggregate may not exceed 15%, and borrowing for purposes other
than meeting redemptions may not exceed 5%, of the Fund's total assets
(including the amount borrowed) less liabilities (not including the amount
borrowed) at the time borrowing is made; securities will not be purchased while
borrowings in excess of 5% of the Fund's total assets are outstanding; or
(iii) pledge, hypothecate, mortgage or otherwise encumber its assets, except
to secure permitted borrowings.
Utility Income Fund may not: (i) invest more than 5% of its total assets in the
securities of any one issuer except the U.S. Government, although with respect
to 25% of its total assets it may invest in any number of issuers; (ii) invest
25% or more of its total assets in the securities of issuers conducting their
principal business activities in any one industry, other than the utilities
industry, except that this restriction does not apply to U.S. Government
securities; (iii) purchase more than 10% of any class of the voting securities
of any one issuer; (iv) borrow money except from banks for temporary or
emergency purposes, including the meeting of redemption requests that might
require the untimely disposition of securities; borrowing in the aggregate may
not exceed 15%, and borrowing for purposes other than meeting redemptions may
not exceed 5%, of the Fund's total assets (including the amount borrowed) less
liabilities (not including the amount borrowed) at the time the borrowing is
made; outstanding borrowings in excess of 5% of the Fund's total assets will be
repaid before any subsequent investments are made; or (v) purchase a security
if, as a result (unless the security is acquired pursuant to a plan of
reorganization or an offer of exchange), the Fund would own any securities of an
open-end investment company or more than 3% of the total outstanding voting
stock of any closed-end investment company or more than 5% of the value of the
Fund's net assets would be invested in securities of any one or more closed-end
investment companies.
Growth and Income Fund may not (i) invest more than 5% of its net assets in the
security of any one issuer, except U.S. Government obligations or (ii) own more
than 10% of the outstanding voting securities of any issuer.
RISK CONSIDERATIONS
Investment in certain of the Funds involves the special risk
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considerations described below. These risks may be heightened when investing in
emerging markets.
Investment in Privatized Enterprises by Worldwide Privatization Fund. In certain
jurisdictions, the ability of foreign entities, such as the Fund, to participate
in privatizations may be limited by local law, or the price or terms on which
the Fund may be able to participate may be less advantageous than for local
investors. Moreover, there can be no assurance that governments that have
embarked on privatization programs will continue to divest their ownership of
state enterprises, that proposed privatizations will be successful or that
governments will not re-nationalize enterprises that have been privatized.
Furthermore, in the case of certain of the enterprises in which the Fund may
invest, large blocks of the stock of those enterprises may be held by a small
group of stockholders, even after the initial equity offerings by those
enterprises. The sale of some portion or all of those blocks could have an
adverse effect on the price of the stock of any such enterprise.
Most state enterprises or former state enterprises go through an internal
reorganization of management prior to conducting an initial equity offering in
an attempt to better enable these enterprises to compete in the private sector.
However, certain reorganizations could result in a management team that does not
function as well as the enterprise's prior management and may have a negative
effect on such enterprise. After making an initial equity offering, enterprises
that may have enjoyed preferential treatment from the respective state or
government that owned or controlled them may no longer receive such preferential
treatment and may become subject to market competition from which they were
previously protected. Some of these enterprises may not be able to effectively
operate in a competitive market and may suffer losses or experience bankruptcy
due to such competition. In addition, the privatization of an enterprise by its
government may occur over a number of years, with the government continuing to
hold a controlling position in the enterprise even after the initial equity
offering for the enterprise.
Currency Considerations. Substantially all of the assets of International Fund,
New Europe Fund, All-Asia Investment Fund, Global Small Cap Fund and Worldwide
Privatization Fund will be invested in securities denominated in foreign
currencies, and a corresponding portion of these Funds' revenues will be
received in such currencies. Therefore, the dollar equivalent of their net
assets, distributions and income will be adversely affected by reductions in the
value of certain foreign currencies relative to the U.S. dollar. If the value of
the foreign currencies in which a Fund receives its income falls relative to the
U.S. dollar between receipt of the income and the making of Fund distributions,
the Fund may be required to liquidate securities in order to make distributions
if it has insufficient cash in U.S. dollars to meet distribution requirements
that the Fund must satisfy to qualify as a regulated investment company for
federal income tax purposes. Similarly, if an exchange rate declines between the
time a Fund incurs expenses in U.S. dollars and the time cash expenses are paid,
the amount of the currency required to be converted into U.S. dollars in order
to pay expenses in U.S. dollars could be greater than the equivalent amount of
such expenses in the currency at the time they were incurred. In light of these
risks, a Fund may engage in certain currency hedging transactions, which
themselves involve certain special risks. See "Additional Investment Practices"
above.
Foreign Investment. The securities markets of many foreign countries are
relatively small, with the majority of market capitalization and trading volume
concentrated in a limited number of companies representing a small number of
industries. Consequently, a Fund whose investment portfolio includes such
securities may experience greater price volatility and significantly lower
liquidity than a portfolio invested solely in equity securities of United States
companies. These markets may be subject to greater influence by adverse events
generally affecting the market, and by large investors trading significant
blocks of securities, than is usual in the United States. Securities settlements
may in some instances be subject to delays and related administrative
uncertainties. These problems are particularly severe in India, where settlement
is through physical delivery, and, where, currently, a severe shortage of vault
capacity exists among custodial banks, although efforts are being undertaken to
alleviate the shortage. Certain foreign countries require governmental approval
prior to investments by foreign persons or limit investment by foreign persons
to only a specified percentage of an issuer's outstanding securities or a
specific class of securities which may have less advantageous terms (including
price) than securities of the company available for purchase by nationals. These
restrictions or controls may at times limit or preclude investment in certain
securities and may increase the costs and expenses of a Fund. In addition, the
repatriation of investment income, capital or the proceeds of sales of
securities from certain of the countries is controlled under regulations,
including in some cases the need for certain advance government notification or
authority, and if a deterioration occurs in a country's balance of payments, the
country could impose temporary restrictions on foreign capital remittances.
A Fund could be adversely affected by delays in, or a refusal to grant, any
required governmental approval for repatriation, as well as by the application
to it of other restrictions on investment. Investing in local markets may
require a Fund to adopt special procedures, which may involve additional costs
to a Fund. The liquidity of a Fund's investments in any country in which any of
these factors exists could be affected and Alliance will monitor the effect of
any such factor or factors on a Fund's investments. Furthermore, transaction
costs including brokerage commissions for transactions both on and off the
securities exchanges in many foreign countries are generally higher than in the
U.S.
Issuers of securities in foreign jurisdictions are generally not subject to the
same degree of regulation as are U.S. issuers with respect to such matters as
insider trading rules, restrictions on market manipulation, shareholder proxy
requirements and
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timely disclosure of information. The reporting, accounting and auditing
standards of foreign countries may differ, in some cases significantly, from
U.S. standards in important respects and less information may be available to
investors in foreign securities than to investors in U.S. securities.
Substantially less information is publicly available about certain non-U.S.
issuers than is available about U.S. issuers.
The economies of individual foreign countries may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross domestic
product or gross national product, rate of inflation, capital reinvestment,
resource self-sufficiency and balance of payments position. Nationalization,
expropriation or confiscatory taxation, currency blockage, political changes,
government regulation, political or social instability or diplomatic
developments could affect adversely the economy of a foreign country or the
Fund's investments in such country. In the event of expropriation,
nationalization or other confiscation, a Fund could lose its entire investment
in the country involved. In addition, laws in foreign countries governing
business organizations, bankruptcy and insolvency may provide less protection to
security holders such as the Fund than that provided by U.S. laws.
Investment in United Kingdom Issuers by New Europe Fund. 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. Since 1972, when the pound sterling
was allowed to float against other currencies, it has generally depreciated
against most major currencies, including the U.S. dollar. Between September and
December 1992, after the United Kingdom's exit from the Exchange Rate Mechanism
of the European Monetary System, the value of the pound sterling fell by almost
20% against the U.S. dollar. The pound sterling continued to fall in early 1993,
but recovered due to interest rate cuts throughout Europe and an upturn in the
economy of the United Kingdom. From 1994 through 1995, the pound sterling
increased at an average annual rate of 3.8% against the U.S. dollar. On
September 13, 1996, the pound sterling-dollar exchange rate was virtually
unchanged from that at the end of 1995.
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 a
record high of 3977.2 on September 16, 1996, up nearly 8% from the end of 1995.
The public sector borrowing requirement ("PSBR"), a mandated measure of the
amount required to balance the budget, is in excess of the government's original
budget estimate for the 1995-96 fiscal year as a result of lower economic growth
and decreased tax revenue. Further, the PSBR estimate for the 1996-97 fiscal
year has been raised, and is expected to be above the European Union limit. As a
result, the general government budget deficit for the the 1996-97 fiscal year is
expected to be in excess of the level permitted of countries scheduled to
participate in the European Union beginning in January 1999. In July 1996, the
European Union stated that public borrowing would have to be reduced by July
1998 if the pound sterling is to be eligible for membership.
Since 1979, the Conservative Party has controlled Parliament. However, in recent
years, this dominance has been called into question. In 1990, due to an internal
challenge for leadership the Conservative Party chose John Major to replace
Margaret Thatcher as Prime Minister. Mr. Major's position has been strengthened
by his reelection as leader of the Conservative Party and is expected to retain
that position until the next general election. Unless the Conservative Party
calls for an earlier election, the next general election will take place in May
1997. Opinion polls currently indicate a lead for the Labour Party, and its is
not clear that the Conservative Party will retain control of Parliament. For
further information regarding the United Kingdom, see the Fund's Statement of
Additional Information.
Investment in Japanese Issuers by All-Asia Investment Fund and International
Fund. 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. The Japanese yen has generally been appreciating
against the U.S. dollar for the past decade but has fallen from its post-World
War II high (in 1995) against the U.S. dollar.
Japan's largest stock exchange is the Tokyo Stock Exchange, the First Section of
which is reserved for larger, established companies. As measured by the TOPIX, a
capitalization-weighted composite index of all common stocks listed in the First
Section, the performance of the First Section reached a peak in 1989.
Thereafter, the TOPIX declined approximately 50% through the end of 1993. In
1994, the TOPIX increased by approximately 8% from the end of 1993, and by the
end of 1995 increased by approximately 1% from the end of 1994. As of September
13, 1996, the TOPIX closed at a level almost identical to that at the end of
1995. Certain valuation measures, such as price-to-book value and price-to-cash
flow ratios, indicate that the Japanese stock market is near its lowest level in
the last twenty years relative to other world markets. The price/earnings ratios
of First Section companies, however, are on average high in comparison with
other major stock markets.
In recent years, Japan has consistently recorded large current account trade
surpluses with the U.S. that have caused difficulties in the relations between
the two countries. On October 1, 1994, the U.S. and Japan reached an agreement
that may lead to more open Japanese markets with respect to trade in certain
goods and services. In June 1995, the two countries agreed in principle to
increase Japanese imports of American automobiles and automotive parts.
Nevertheless it is expected that the continuing friction between the U.S. and
Japan with respect to trade issues will continue for the foreseeable future.
37
<PAGE>
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. In
August 1993, following a split in that party, a coalition government was formed.
That coalition government collapsed in April 1994, and was replaced by a
minority coalition that, in turn, collapsed in June 1994. The stability of the
current ruling coalition, the fourth since 1993, is not assured in that
Ryutaro Hashimato, the current prime minister, has called for new national
elections to be held on October 20,1996. For further information regarding
Japan, see each Fund's Statement of Additional Information.
Investment in Smaller, Emerging Companies. The Funds may invest in smaller,
emerging companies. Global Small Cap Fund and New Europe Fund will emphasize
investment in, and All-Asia Investment Fund may emphasize investment in,
smaller, emerging companies. Investment in such companies involves greater risks
than is customarily associated with securities of more established companies.
The securities of smaller companies may have relatively limited marketability
and may be subject to more abrupt or erratic market movements than securities of
larger companies or broad market indices.
U.S. and Foreign Taxes. Foreign taxes paid by a Fund may be creditable or
deductible by U.S. shareholders for U.S. income tax purposes. No assurance can
be given that applicable tax laws and interpretations will not change in the
future. Moreover, non-U.S. investors may not be able to credit or deduct such
foreign taxes. Investors should review carefully the information discussed under
the heading "Dividends, Distributions and Taxes" and should discuss with their
tax advisers the specific tax consequences of investing in a Fund.
Fixed-Income Securities. The value of each Fund's shares will fluctuate with the
value of its investments. The value of each Fund's investments in fixed-income
securities will change as the general level of interest rates fluctuates. During
periods of falling interest rates, the values of fixed-income securities
generally rise. Conversely, during periods of rising interest rates, the values
of fixed-income securities generally decline.
Under normal market conditions, the average dollar-weighted maturity of a Fund's
portfolio of debt or other fixed-income securities is expected to vary between
five and 30 years in the case of All-Asia Investment Fund, between eight and 15
years in the case of Income Builder Fund, between five and 25 years in the case
of Utility Income Fund and between one year or less and 30 years in the case of
all other Funds that invest in such securities. In periods of increasing
interest rates, each of the Funds may, to the extent it holds mortgage-backed
securities, be subject to the risk that the average dollar-weighted maturity of
the Fund's portfolio of debt or other fixed-income securities may be extended as
a result of lower than anticipated prepayment rates. See "Additional Investment
Practices--Mortage-Backed Securities."
Securities Ratings. The ratings of securities by S&P, Moody's, Duff & Phelps and
Fitch are a generally accepted barometer of credit risk. They are, however,
subject to certain limitations from an investor's standpoint. The rating of an
issuer is heavily weighted by past developments and does not necessarily reflect
probable future conditions. There is frequently a lag between the time a rating
is assigned and the time it is updated. In addition, there may be varying
degrees of difference in credit risk of securities within each rating category.
Securities rated Aaa by Moody's and AAA by S&P, Duff & Phelps and Fitch are
considered to be of the highest quality; capacity to pay interest and repay
principal is extremely strong. Securities rated Aa by Moody's and AA by S&P,
Duff & Phelps and Fitch are considered to be high quality; capacity to repay
principal is considered very strong, although elements may exist that make risks
appear somewhat larger than exist with securities rated Aaa or AAA. Securities
rated A are considered by Moody's to possess adequate factors giving security to
principal and interest. S&P, Duff & Phelps and Fitch consider such securities to
have a strong capacity to pay interest and repay principal. Such securities are
more susceptible to adverse changes in economic conditions and circumstances
than higher-rated securities.
Securities rated Baa by Moody's and BBB by S&P, Duff & Phelps and Fitch are
considered to have an adequate capacity to pay interest and repay principal.
Such securities are considered to have speculative characteristics and share
some of the same characteristics as lower-rated securities. Sustained periods of
deteriorating economic conditions or of rising interest rates are more likely to
lead to a weakening in the issuer's capacity to pay interest and repay principal
than in the case of higher-rated securities. Securities rated Ba by Moody's and
BB by S&P, Duff & Phelps and Fitch are considered to have speculative
characteristics with respect to capacity to pay interest and repay principal
over time; their future cannot be considered as well-assured. Securities rated B
by Moody's, S&P, Duff & Phelps and Fitch are considered to have highly
speculative characteristics with respect to capacity to pay interest and repay
principal. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Securities rated Caa by Moody's and CCC by S&P, Duff & Phelps and Fitch are of
poor standing and there is a present danger with respect to payment of principal
or interest. Securities rated Ca by Moody's and CC by S&P and Fitch are
minimally protected, and default in payment of principal or interest is
probable. Securities rated C by Moody's, S&P and Fitch are in imminent default
in payment of principal or interest and have extremely poor prospects of ever
attaining any real investment standing. Securities rated D by S&P and Fitch are
in default. The issuer of securities rated DD by Duff & Phelps is under an order
of liquidation.
Investment in Lower-Rated Fixed-Income Securities. Lower-rated securities, i.e.,
those rated Ba and lower by Moody's or BB and lower by S&P, Duff & Phelps or
Fitch, are subject to greater risk of loss of principal and interest than
higher-rated securities. They are also generally considered to be subject to
greatermarket risk than higher-rated securities, and the capacity of issuers
of lower-rated securities to pay interest and repay
38
<PAGE>
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, 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.
The market for lower-rated securities may be thinner and less active than that
for higher-rated securities, which can adversely affect the prices at which
these securities can be sold. To the extent that there is no established
secondary market for lower-rated securities, a Fund may experience difficulty in
valuing such securities and, in turn, the Fund's assets. In addition, adverse
publicity and investor perceptions about lower-rated securities, whether or not
factual, may tend to impair their market value and liquidity.
Alliance will try to reduce the risk inherent in investment in lower-rated
securities through credit analysis, diversification and attention to current
developments and trends in interest rates and economic and political conditions.
However, there can be no assurance that losses will not occur. Since the risk of
default is higher for lower-rated securities, Alliance's research and credit
analysis are a correspondingly more important aspect of its program for managing
a Fund's securities than would be the case if a Fund did not invest in lower-
rated securities.
In seeking to achieve a Fund's investment objective, there will be times, such
as during periods of rising interest rates, when depreciation and realization of
capital losses on securities in a Fund's portfolio will be unavoidable.
Moreover, medium- and lower-rated securities and non-rated securities of
comparable quality may be subject to wider fluctuations in yield and market
values than higher-rated securities under certain market conditions. Such
fluctuations after a security is acquired do not affect the cash income received
from that security but are reflected in the net asset value of a Fund. See the
Statement of Additional Information for each Fund that invests in lower-rated
securities for a description of the bond ratings of Moody's, S&P, Duff & Phelps
and Fitch.
Certain lower-rated securities in which Growth Fund, Income Builder Fund,
Strategic Balanced and Utility Income Fund may invest may contain call or buy-
back features that permit the issuers thereof to call or repurchase such
securities. Such securities may present risks based on prepayment expectations.
If an issuer exercises such a provision, a Fund may have to replace the called
security with a lower yielding security, resulting in a decreased rate of return
to the Fund.
Non-Diversified Status. Each of Worldwide Privatization Fund, New Europe Fund,
All-Asia Investment Fund and Income Builder Fund is a "non-diversified"
investment company, which means the Fund is not limited in the proportion of its
assets that may be invested in the securities of a single issuer. However, each
Fund intends to conduct its operations so as to qualify to be taxed as a
"regulated investment company" for purposes of the Code, which will relieve the
Fund of any liability for federal income tax to the extent its earnings are
distributed to shareholders. See "Dividends, Distributions and Taxes" in each
Fund's Statement of Additional Information. To so qualify, among other
requirements, the Fund will limit its investments so that, at the close of each
quarter of the taxable year, (i) not more than 25% of the Fund's total assets
will be invested in the securities of a single issuer, and (ii) with respect to
50% of its total assets, not more than 5% of its total assets will be invested
in the securities of a single issuer and the Fund will not own more than 10% of
the outstanding voting securities of a single issuer. A Fund's investments in
U.S. Government securities are not subject to these limitations. Because
Worldwide Privatization Fund, New Europe Fund, All-Asia Investment Fund and
Income Builder Fund is each a non-diversified investment company, it may invest
in a smaller number of individual issuers than a diversified investment company,
and an investment in such Fund may, under certain circumstances, present greater
risk to an investor than an investment in a diversified investment company.
Foreign government securities are not treated like U.S. Government securities
for purposes of the diversification tests described in the preceding paragraph,
but instead are subject to these tests in the same manner as the securities of
non-governmental issuers.
- --------------------------------------------------------------------------------
PURCHASE AND SALE
- --------------------------------------------------------------------------------
OF SHARES
- --------------------------------------------------------------------------------
HOW TO BUY SHARES
You can purchase shares of any of the Funds through broker-dealers, banks or
other financial intermediaries, or directly through Alliance Fund Distributors,
Inc. ("AFD"), each Fund's principal underwriter. The minimum initial investment
in each Fund is $250. The minimum for subsequent investments in each Fund is
$50. Investments of $25 or more are allowed under the automatic investment
program of each Fund. Share certificates are issued only upon request. See the
Subscription Application and Statement of Additional Information for more
information.
Existing shareholders may make subsequent purchases by electronic funds transfer
if they have completed the Telephone Transactions section of the Subscription
Application or the Shareholder Options form obtained from Alliance Fund
Services, Inc. ("AFS"), each Fund's registrar, transfer agent and dividend
disbursing agent. Telephone purchase orders can be made by calling (800)
221-5672, may not exceed $500,000, must be received by the Fund by 3:00 p.m.
Eastern time on a Fund business day and will be made at the next day's net asset
value (less any applicable sales charge).
Each Fund offers three classes of shares through this prospectus, Class A, Class
B and Class C. The Funds may refuse any order to purchase shares. In this
regard, the Funds reserve the right to restrict purchases of Fund shares
(including through exchanges) when they appear to evidence a pattern of frequent
purchases and sales made in response to short-term considerations.
39
<PAGE>
Class A Shares--Initial Sales Charge Alternative
You can purchase Class A shares at net asset value plus an initial sales charge,
as follows:
<TABLE>
<CAPTION>
Initial Sales Charge
as % of Commission to
Net Amount as % of Dealer/Agent as %
Amount Purchased Invested Offering Price of Offering Price
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
Less than $100,000 4.44% 4.25% 4.00%
- --------------------------------------------------------------------------------
$100,000 to
less than $250,000 3.36 3.25 3.00
- --------------------------------------------------------------------------------
$250,000 to
less than $500,000 2.30 2.25 2.00
- --------------------------------------------------------------------------------
$500,000 to
less than $1,000,000 1.78 1.75 1.50
- --------------------------------------------------------------------------------
</TABLE>
On purchases of $1,000,000 or more, you pay no initial sales charge but may pay
a contingent deferred sales charge ("CDSC") equal to 1% of the lesser of net
asset value at the time of redemption or original cost if you redeem within one
year; Alliance may pay the dealer or agent a fee of up to 1% of the dollar
amount purchased. Certain purchases of Class A shares may qualify for reduced or
eliminated sales charges in accordance with a Fund's Combined Purchase
Privilege, Cumulative Quantity Discount, Statement of Intention, Privilege for
Certain Retirement Plans, Reinstatement Privilege and Sales at Net Asset Value
programs. Consult the Subscription Application and Statement of Additional
Information.
Class B Shares--Deferred Sales Charge Alternative
You can purchase Class B shares at net asset value without an initial sales
charge. However, you may pay a CDSC if you redeem shares within four years after
purchase. The amount of the CDSC (expressed as a percentage of the lesser of the
current net asset value or original cost) will vary according to the number of
years from the purchase of Class B shares until the redemption of those shares.
The amount of the CDSC for each Fund is as set forth below. Class B shares of a
Fund purchased prior to the date of this Prospectus may be subject to a
different CDSC schedule, which was disclosed in the Fund's prospectus in use at
the time of purchase and is set forth in the Fund's current Statement of
Additional Information.
<TABLE>
<CAPTION>
Year Since Purchase CDSC
-----------------------------------------------------
<S> <C>
First....................................... 4.0%
Second...................................... 3.0%
Third....................................... 2.0%
Fourth...................................... 1.0%
Fifth....................................... None
</TABLE>
Class B shares are subject to higher distribution fees than Class A shares for a
period (after which they convert to Class A shares) of eight years, or six years
with respect to Premier Growth Fund. The higher fees mean a higher expense
ratio, so Class B shares pay correspondingly lower dividends and may have a
lower net asset value than Class A shares.
Class C Shares--Asset-Based Sales Charge Alternative
You can purchase Class C shares without any initial sales charge. A Fund will
thus receive the full amount of your purchase, and, if you hold your shares for
one year or more, you will receive the entire net asset value of your shares
upon redemption. Class C shares incur higher distribution fees than Class A
shares and do not convert to any other class of shares of the Fund. The higher
fees mean a higher expense ratio, so Class C shares pay correspondingly lower
dividends and may have a lower net asset value than Class A shares.
Class C shares redeemed within one year of purchase will be subject to a CDSC
equal to 1% of the lesser of the original cost of the shares being redeemed or
net asset value at the time of redemption.
Application of the CDSC
Shares obtained from dividend or distribution reinvestment are not subject to
the CDSC. The CDSC is deducted from the amount of the redemption and is paid to
AFD. The CDSC will be waived on redemptions of shares following the death or
disability of a shareholder, to meet the requirements of certain qualified
retirement plans or pursuant to a monthly, bimonthly or quarterly systematic
withdrawal plan. See the Statements of Additional Information.
How the Funds Value Their Shares
The net asset value of each Class of shares of a Fund is calculated by dividing
the value of the Fund's net assets allocable to that Class by the outstanding
shares of that Class. Shares are valued each day the New York Stock Exchange
(the "Exchange") is open as of the close of regular trading (currently 4:00 p.m.
Eastern time). The securities in a Fund are valued at their current market value
determined on the basis of market quotations or, if such quotations are not
readily available, such other methods as the Fund's Directors believe would
accurately reflect fair market value.
General
The decision as to which Class of shares is more beneficial to you depends on
the amount and intended length of your investment. If you are making a large
investment, thus qualifying for a reduced sales charge, you might consider Class
A shares. If you are making a smaller investment, you might consider Class B
shares because 100% of your purchase is invested immediately. If you are unsure
of the length of your investment, you might consider Class C shares because
there is no initial sales charge and no CDSC as long as the shares are held for
one year or more. Consult your financial agent. Dealers and agents may receive
differing compensation for selling Class A, Class B or Class C shares. There is
no size limit on purchases of Class A shares. The maximum purchase of Class C
shares is $5,000,000. The maximum purchase of Class B shares is $250,000. The
Funds may refuse any order to purchase shares.
Each Fund offers a fourth class of shares, Advisor Class shares, by means of
separate prospectus. Advisor Class shares may be purchased and held solely by
(i) accounts established under a fee-based program sponsored and maintained by a
registered broker-dealer or other financial intermediary and approved by AFD
pursuant to which each investor pays an asset-based fee at an annual rate of at
least .50% of the assets in the investor's account to the broker-dealer or other
financial intermediary, or its affiliate or agent, (ii) a self-directed defined
contribution
40
<PAGE>
employee benefit plan (e.g., a 401(k) plan) that has at least 1,000 participants
or $25 million in assets and (iii) investment advisory clients of, and certain
other persons associated with, Alliance and its affiliates or the Funds. Advisor
Class shares are offered without any initial sales charge or CDSC and without an
ongoing distribution fee and are expected, therefore, to have different
performance than Class A, Class B or Class C shares. You may obtain more
information about Advisor Class shares by contacting AFS at 800-221-5672 or by
contacting your financial representative.
In addition to the discount or commission paid to dealers or agents, AFD from
time to time pays additional cash or other incentives to dealers or agents,
including Equico Securities, Inc., an affiliate of AFD, in connection with the
sale of shares of the Funds. Such additional amounts may be utilized, in whole
or in part, in some cases together with other revenues of such dealers or
agents, to provide additional compensation to registered representatives who
sell shares of the Funds. On some occasions, such cash or other incentives will
be conditioned upon the sale of a specified minimum dollar amount of the shares
of a Fund and/or other Alliance Mutual Funds during a specific period of time.
Such incentives may take the form of payment for attendance at seminars, meals,
sporting events or theater performances, or payment for travel, lodging and
entertainment incurred in connection with travel by persons associated with a
dealer or agent and their immediate family members to urban or resort locations
within or outside the United States. Such dealer or agent may elect to receive
cash incentives of equivalent amount in lieu of such payments.
HOW TO SELL SHARES
You may "redeem", i.e., sell your shares in a Fund to the Fund on any day the
Exchange is open, either directly or through your financial intermediary. The
price you will receive is the net asset value (less any applicable CDSC) next
calculated after the Fund receives your request in proper form. Proceeds
generally will be sent to you within seven days. However, for shares recently
purchased by check or electronic funds transfer, a Fund will not send proceeds
until it is reasonably satisfied that the check or electronic funds transfer has
been collected (which may take up to 15 days).
Selling Shares Through Your Broker
Your broker must receive your request before 4:00 p.m. Eastern time, and
your broker must transmit your request to the Fund by 5:00 p.m. Eastern time,
for you to receive that day's net asset value (less any applicable CDSC). Your
broker is responsible for furnishing all necessary documentation to a Fund and
may charge you for this service.
Selling Shares Directly To A Fund
Send a signed letter of instruction or stock power form to AFS along with
certificates, if any, that represent the shares you want to sell. For your
protection, signatures must be guaranteed by a bank, a member firm of a national
stock exchange or other eligible guarantor institution. Stock power forms are
available from your financial intermediary, AFS, and many commercial banks.
Additional documentation is required for the sale of shares by corporations,
intermediaries, fiduciaries and surviving joint owners. For details contact:
Alliance Fund Services
P.O. Box 1520
Secaucus, NJ 07096-1520
1-800-221-5672
Alternatively, a request for redemption of shares for which no stock
certificates have been issued can also be made by telephone to 800-221-5672.
Telephone redemption requests must be made by 4 p.m. Eastern time on a Fund
business day in order to receive that day's net asset value, and may be made
only once in any 30-day period. A shareholder who has completed the Telephone
Transactions section of the Subscription Application, or the Shareholder Options
form obtained from AFS, can elect to have the proceeds of his or her redemption
sent to his or her bank via an electronic funds transfer. Proceeds of telephone
redemptions also may be sent by check to a shareholder's address of record.
Redemption requests by electronic funds transfer may not exceed $100,000 and
redemption requests by check may not exceed $50,000. Telephone redemption is not
available for shares held in nominee or "street name" accounts or retirement
plan accounts or shares held by a shareholder who has changed his or her address
of record within the previous 30 calendar days.
General
The sale of shares is a taxable transaction for federal tax purposes. Under
unusual circumstances, a Fund may suspend redemptions or postpone payment for
up to seven days or longer, as permitted by federal securities law. The Funds
reserve the right to close an account that through redemption has remained below
$200 for 90 days. Shareholders will receive 60 days' written notice to increase
the account value before the account is closed.
During drastic economic or market developments, you might have difficulty
reaching AFS by telephone, in which event you should issue written instructions
to AFS. AFS is not responsible for the authenticity of telephonic requests to
purchase, sell or exchange shares. AFS will employ reasonable procedures to
verify that telephone requests are genuine, and could be liable for losses
resulting from unauthorized transactions if it failed to do so. Dealers and
agents may charge a commission for handling telephonic requests. The telephone
service may be suspended or terminated at any time without notice.
SHAREHOLDER SERVICES
AFS offers a variety of shareholder services. For more information about these
services or your account, call AFS's toll-free number, 800-221-5672. Some
services are described in the attached Application. A shareholder's manual
explaining all available services will be provided upon request. To request a
shareholder manual, call 800-227-4618.
41
<PAGE>
HOW TO EXCHANGE SHARES
You may exchange your shares of any Fund for shares of the same class of other
Alliance Mutual Funds (including AFD Exchange Reserves, a money market fund
managed by Alliance). Exchanges of shares are made at the net asset values next
determined, without sales or service charges. Exchanges may be made by telephone
or written request. Telephone exchange requests must be received by AFS by 4:00
p.m. Eastern time on a Fund business day in order to receive that day's net
asset value.
Shares will continue to age without regard to exchanges for purposes of
determining the CDSC, if any, upon redemption and, in the case of Class B
shares, for the purposes of conversion to Class A shares. After an exchange,
your Class B shares will automatically convert to Class A shares in accordance
with the conversion schedule applicable to the Class B shares of the Alliance
Mutual Fund you originally purchased for cash ("original shares"). When
redemption occurs, the CDSC applicable to the original shares is applied.
Please read carefully the Prospectus of the mutual fund into which you are
exchanging before submitting the request. Call AFS at 800-221-5672 to exchange
uncertificated shares. An exchange is a taxable capital transaction for federal
tax purposes. The exchange service may be changed, suspended, or terminated on
60 days' written notice.
- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUNDS
- --------------------------------------------------------------------------------
ADVISER
Alliance, which is a Delaware limited partnership with principal offices at 1345
Avenue of the Americas, New York, New York 10105, has been retained under an
advisory agreement (the "Advisory Agreement") to provide investment advice and,
in general, to conduct the management and investment program of each Fund,
subject to the general supervision and control of the Directors of the Fund.
The following table lists the person or persons who are primarily responsible
for the day-to-day management of each Fund's portfolio, the length of time that
each person has been primarily responsible, and each person's principal
occupation during the past five years.
<TABLE>
<CAPTION>
Principal occupation
during the past
Fund Employee; year; title five years
- ----------------------------------------------------------------------------------------
<S> <C> <C>
The Alliance Fund Alfred Harrison since 1989-- Associated with
Vice Chairman of Alliance Capital Alliance
Management Corporation
("ACMC")*
Paul H. Jenkel since 1985-- Associated with
Senior Vice President of ACMC Alliance
Growth Fund Tyler Smith since inception-- Associated with
Senior Vice President of ACMC Alliance since
July 1993; prior
thereto,
associated with
Equitable Capital
Management
Corporation
("Equitable
Capital")**
Premier Growth Fund Alfred Harrison since inception-- (see above)
(see above)
Technology Fund Peter Anastos since 1992-- Associated with
Senior Vice President of ACMC Alliance
Gerald T. Malone since 1992-- Associated with
Senior Vice President of ACMC Alliance since
1992; prior
thereto
associated with
College
Retirement
Equities Fund
Quasar Fund Alden M. Stewart since 1994-- Associated with
Executive Vice President of ACMC Alliance since
1993; prior
thereto,
associated with
Equitable Capital
Randall E. Haase since 1994-- Associated with
Senior Vice President of ACMC Alliance since July
1993; prior
thereto,
associated with
Equitable Capital
Timothy Rice since 1993-- Associated with
Vice President of ACMC Alliance
International Fund A. Rama Krishna since 1993-- Associated with
Senior Vice President of ACMC Alliance since
and director of Asian Equity 1993, prior
research thereto,
Chief Investment
Strategist and
Director--Equity
Research for CS
First Boston
Worldwide Privatization Mark H. Breedon since inception--- Associated with
Senior Vice President of ACMC Alliance
and Director and Vice President
of Alliance Capital Limited ***
New Europe Fund Nigel Hankin since 1996--- Associated with
Vice President of ACMC Alliance since
1996; prior
thereto portfolio
manager at
Draycott Partners.
Gregory Eckersley since 1996--- Associated with
Vice President of ACMC Alliance since
1996; prior
thereto portfolio
manager at
Draycott Partners.
All-Asia Investment A. Rama Krishna since inception-- (see above)
Fund (see above)
Global Small Cap Alden M. Stewart since 1994-- (see above)
Fund (see above)
Randall E. Haase since 1994-- (see above)
(see above)
Timothy Rice since 1993-- (see above)
(see above)
Ronald L. Simcoe since 1993-- Associated with
Vice President of ACMC Alliance since
1993; prior
thereto,
associated with
Equitable Capital
</TABLE>
42
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Principal occupation
during the past
Fund Employee; year; title five years
- ------------------------------------------------------------------------------------------
Strategic Balanced Robert G. Heisterberg Associated with
Fund since 1996--Senior Vice Alliance
President of ACMC
Balanced Shares Kevin J. O'Brien since 1996-- Associated with
Senior Vice President of ACMC Alliance
Income Builder Fund Andrew M. Aran since 1994-- Associated with
Senior Vice President of ACMC Alliance since
March 1991; prior
thereto, a Vice
President of
PaineWebber, Inc.
Thomas M. Perkins since 1991-- Associated with
Senior Vice President of ACMC Alliance
Utility Income Fund Paul Rissman since 1996-- Associated with
Vice President of ACMC Alliance
Growth & Income Paul Rissman since 1994-- Associated with
Fund Vice President of ACMC Alliance
- ----------------------------------------------------------------------------------------
</TABLE>
* The sole general partner of Alliance.
** Equitable Capital was, prior to Alliance's acquisition of it,
a management firm under common control with Alliance.
*** An indirect wholly-owned subsidiary of Alliance.
Alliance is a leading international investment manager supervising client
accounts with assets as of June 30, 1996 totaling more than $168 billion (of
which approximately $55 billion represented the assets of investment companies).
Alliance's clients are primarily major corporate employee benefit funds, public
employee retirement systems, investment companies, foundations and endowment
funds. The 51 registered investment companies managed by Alliance comprising
more than 100 separate investment portfolios currently have over two million
shareholders. As of June 30, 1996, Alliance was an investment manager of
employee benefit plan assets for 33 of the Fortune 100 companies.
ACMC, the sole general partner of, and the owner of a 1% general partnership
interest in, Alliance, is an indirect wholly-owned subsidiary of The Equitable
Life Assurance Society of the United States ("Equitable"), one of the largest
life insurance companies in the United States, which is a wholly-owned
subsidiary of The Equitable Companies Incorporated, a holding company controlled
by AXA, a French insurance holding company. Certain information concerning the
ownership and control of Equitable by AXA is set forth in each Fund's Statement
of Additional Information under "Management of the Fund."
ADMINISTRATOR AND CONSULTANT TO ALL-ASIA
INVESTMENT FUND
Alliance has been retained by All-Asia Investment Fund under an administration
agreement (the "Administration Agreement") to perform administrative services
necessary for the operation of the Fund. For a description of such services, see
the Statement of Additional Information of the Fund.
In connection with its provision of advisory services to All-Asia Investment
Fund, Alliance has retained at its expense OCBC Asset Management Limited ("OAM")
as a consultant to provide to Alliance such statistical and other factual
information, research and assistance with respect to economic, financial,
political, technological and social conditions and trends in Asian countries,
including information on markets and industries, as Alliance shall from time to
time request. OAM will not furnish investment advice or make recommendations
regarding the purchase or sale of securities by the Fund nor will it be
responsible for making investment decisions involving Fund assets.
OAM is one of the largest Singapore-based investment management companies
specializing in investment in Asia-Pacific markets. OAM provides consulting and
advisory services to institutions and individuals, including mutual funds.
OAM is a wholly-owned subsidiary of Oversea-Chinese Banking Corporation Limited
("OCBC Bank"), which is based in Singapore. The OCBC Bank Group has an extensive
network of banking offices in the Asian Pacific region. The OCBC Bank Group
engages in a wide variety of activities including commercial banking, investment
banking, and property and hotel investment and management.
DISTRIBUTION SERVICES AGREEMENTS
Rule 12b-1 adopted by the Commission under the 1940 Act permits an investment
company to pay expenses associated with the distribution of its shares in
accordance with a duly adopted plan. Each Fund has adopted one or more
"Rule 12b-1 plans" (for each Fund, a "Plan") and has entered into a Distribution
Services Agreement (the "Agreement") with AFD. Pursuant to its Plan, a Fund pays
to AFD a Rule 12b-1 distribution services fee, which may not exceed an annual
rate of .30% (.50% with respect to Growth Fund, Premier Growth Fund and
Strategic Balanced Fund) of the Fund's aggregate average daily net assets
attributable to the Class A shares, 1.00% of the Fund's aggregate average daily
net assets attributable to the Class B shares and 1.00% of the Fund's aggregate
average daily net assets attributable to the Class C shares, for distribution
expenses. The Directors of Growth Fund and Strategic Balanced Fund currently
limit payments with respect to Class A shares under the Plan to .30% of each
Fund's aggregate average daily net assets attributable to Class A shares. The
Directors of Premier Growth Fund currently limit payments under the Plan with
respect to sales of Class A shares made after November 1993 to .30% of the
Fund's aggregate average daily net assets. The Plans provide that a portion of
the distribution services fee in an amount not to exceed .25% of the aggregate
average daily net assets of each Fund attributable to each of Class A, Class B
and Class C shares constitutes a service fee used for personal service and/or
the maintenance of shareholder accounts.
The Plans provide that AFD will use the distribution services fee received from
a Fund in its entirety for payments (i) to compensate broker-dealers or other
persons for providing distribution assistance, (ii) to otherwise promote the
sale of shares of the Fund, and (iii) to compensate broker-dealers,
43
<PAGE>
depository institutions and other financial intermediaries for providing
administrative, accounting and other services with respect to the Fund's
shareholders. In this regard, some payments under the Plans are used to
compensate financial intermediaries with trail or maintenance commissions in an
amount equal to .25%, annualized, with respect to Class A shares and Class B
shares, and 1.00%, annualized, with respect to Class C shares, of the assets
maintained in a Fund by their customers. Distribution services fees received
from the Funds, except Growth Fund and Strategic Balanced Fund, with respect to
Class A shares will not be used to pay any interest expenses, carrying charges
or other financing costs or allocation of overhead of AFD. Distribution services
fees received from the Funds, with respect to Class B and Class C shares, may be
used for these purposes. The Plans also provide that Alliance may use its own
resources to finance the distribution of each Fund's shares.
The Funds are not obligated under the Plans to pay any distribution services fee
in excess of the amounts set forth above. Except as noted below for Growth Fund
and Strategic Balanced Fund, with respect to Class A shares of each Fund,
distribution expenses accrued by AFD in one fiscal year may not be paid from
distribution services fees received from the Fund in subsequent fiscal years.
Except as noted below for Growth Fund and Strategic Balanced Fund, AFD's
compensation with respect to Class B and Class C shares under the Plans of the
other Funds is directly tied to its expenses incurred. Actual distribution
expenses for such Class B and Class C shares for any given year, however, will
probably exceed the distribution services fees payable under the applicable Plan
with respect to the class involved and payments received from CDSCs. The excess
will be carried forward by AFD and reimbursed from distribution services fees
payable under the Plan with respect to the class involved and payments
subsequently received through CDSCs, so long as the Plan and the Agreement are
in effect. Since AFD's compensation under the Plans of Growth Fund and Strategic
Balanced Fund is not directly tied to the expenses incurred by AFD, the amount
of compensation received by it under the applicable Plan during any year may be
more or less than its actual expenses.
Unreimbursed distribution expenses incurred as of the end of each Fund's most
recently completed fiscal period, and carried over for reimbursement in future
years in respect of the Class B and Class C shares for all Funds (except Growth
Fund and Strategic Balanced Fund) were, as of that time, as follows:
<TABLE>
<CAPTION>
Amount of Unreimbursed Distribution Expenses
(as % of Net Assets of Class)
-------------------------------------------------
Class B Class C
<S> <C> <C> <C> <C>
Alliance Fund ..................... $ 1,985,734 (6.26%) $ 581,997 (5.77%)
Growth Fund ....................... $43,429,599 (2.89%) $1,079,385 (0.48%)
Premier Growth Fund ............... $ 5,101,361 (2.14%) $ 267,542 (1.29%)
Technology Fund ................... $ 9,244,048 (3.34%) $ 398,864 (0.92%)
Quasar Fund ....................... $ 764,753 (4.61%) $ 159,240 (9.88%)
International Fund ................ $ 2,164,342 (2.99%) $ 588,872 (2.18%)
Worldwide Privatization Fund ...... $ 4,025,624 (4.85%) $ 62,445 (2.62%)
</TABLE>
<TABLE>
<CAPTION>
Amount of Unreimbursed Distribution Expenses
(as % of Net Assets of Class)
--------------------------------------------------
Class B Class C
<S> <C> <C> <C> <C>
New Europe Fund .............. $2,109,619 (4.94%) $ 394,639 (3.89%)
All-Asia Investment Fund ..... $ 552,379 (10.68%) $ 25,680 (4.30%)
Global Small Cap Fund ........ $1,345,113 (9.44%) $ 442,584 (10.74%)
Strategic Balanced Fund ...... $ 957,033 (3.36%) $ 290,100 (9.19%)
Balanced Shares .............. $1,233,618 (6.71%) $ 349,587 (5.73%)
Income Builder Fund .......... $ 526,493 (13.97%) $1,642,685 (3.35%)
Utility Income Fund .......... $ 725,771 (6.6%) $ 293,252 (8.4%)
Growth and Income Fund ....... $3,367,375 (2.46%) $ 638,657 (1.78%)
</TABLE>
The Plans are in compliance with rules of the National Association of Securities
Dealers, Inc. which effectively limit the annual asset-based sales charges and
service fees that a mutual fund may pay on a class of shares to .75% and .25%,
respectively, of the average annual net assets attributable to that class. The
rules also limit the aggregate of all front-end, deferred and asset-based sales
charges imposed with respect to a class of shares by a mutual fund that also
charges a service fee to 6.25% of cumulative gross sales of shares of that
class, plus interest at the prime rate plus 1% per annum.
The Glass-Steagall Act and other applicable laws may limit the ability of a bank
or other depository institution to become an underwriter or distributor of
securities. However, in the opinion of the Funds' management, based on the
advice of counsel, these laws do not prohibit such depository institutions from
providing services for investment companies such as the administrative,
accounting and other services referred to in the Agreements. In the event that a
change in these laws prevented a bank from providing such services, it is
expected that other services arrangements would be made and that shareholders
would not be adversely affected. The State of Texas requires that shares of a
Fund may be sold in that state only by dealers or other financial institutions
that are registered there as broker-dealers.
- --------------------------------------------------------------------------------
Dividends, Distributions
- --------------------------------------------------------------------------------
And Taxes
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS
If you receive an income dividend or capital gains distribution in cash you may,
within 120 days following the date of its payment, reinvest the dividend or
distribution in additional shares of that Fund without charge by returning to
Alliance, with appropriate instructions, the check representing such dividend or
distribution. Thereafter, unless you otherwise specify, you will be deemed to
have elected to reinvest all subsequent dividends and distributions in shares of
that Fund.
Each income dividend and capital gains distribution, if any, declared by a Fund
on its outstanding shares will, at the election of each shareholder, be paid in
cash or in additional shares of the same class of shares of that Fund having an
aggregate net asset value as of the close of business on the
44
<PAGE>
day following the declaration date of such dividend or distribution equal to the
cash amount of such income dividend or distribution. Election to receive
dividends and distributions in cash or shares is made at the time shares are
initially purchased and may be changed at any time prior to the record date for
a particular dividend or distribution. Cash dividends can be paid by check or,
if the shareholder so elects, electronically via the ACH network. There is no
sales or other charge in connection with the reinvestment of dividends and
capital gains distributions. Dividends paid by a Fund, if any, with respect to
Class A, Class B and Class C shares will be calculated in the same manner at the
same time on the same day and will be in the same amount, except that the higher
distribution services fees applicable to Class B and C shares, and any
incremental transfer agency costs relating to Class B and Class C shares, will
be borne exclusively by the class to which they relate.
While it is the intention of each Fund to distribute to its shareholders
substantially all of each fiscal year's net income and net realized capital
gains, if any, the amount and time of any such dividend or distribution must
necessarily depend upon the realization by such Fund of income and capital gains
from investments. There is no fixed dividend rate, and there can be no assurance
that a Fund will pay any dividends or realize any capital gains.
If you buy shares just before a Fund deducts a distribution from its net asset
value, you will pay the full price for the shares and then receive a portion of
the price back as a taxable distribution.
FOREIGN INCOME TAXES
Investment income received by a Fund from sources within foreign countries may
be subject to foreign income taxes withheld at the source. To the extent that
any Fund is liable for foreign income taxes withheld at the source, each Fund
intends, if possible, to operate so as to meet the requirements of the Code to
"pass through" to the Fund's shareholders credits for foreign income taxes paid,
but there can be no assurance that any Fund will be able to do so.
U.S. FEDERAL INCOME TAXES
Each Fund intends to qualify to be taxed as a "regulated investment company"
under the Code. To the extent that a Fund distributes its taxable income and net
capital gain to its shareholders, qualification as a regulated investment
company relieves that Fund of federal income and excise taxes on that part of
its taxable income including net capital gains which it pays out to its
shareholders. Dividends out of net ordinary income and distributions of net
short-term capital gains are taxable to the recipient shareholders as ordinary
income. In the case of corporate shareholders, such dividends may be eligible
for the dividends-received deduction, except that the amount eligible for the
deduction is limited to the amount of qualifying dividends received by the Fund.
A corporation's dividends-received deduction will be disallowed unless the
corporation holds shares in the Fund at least 46 days. Furthermore, the
dividends-received deduction will be disallowed to the extent a corporation's
investment in shares of a Fund is financed with indebtedness.
The excess of net long-term capital gains over the net short-term capital losses
realized and distributed by each Fund to its shareholders as capital gains
distributions is taxable to the shareholders as long-term capital gains,
irrespective of the length of time a shareholder may have held his or her stock.
Long-term capital gains distributions are not eligible for the
dividends-received deduction referred to above.
Under the current federal tax law the amount of an income dividend or capital
gains distribution declared by a Fund during October, November or December of a
year to shareholders of record as of a specified date in such a month that is
paid during January of the following year is includable in the prior year's
taxable income of shareholders that are calendar year taxpayers.
Any dividend or distribution received by a shareholder on shares of a Fund will
have the effect of reducing the net asset value of such shares by the amount of
such dividend or distribution. Furthermore, a dividend or distribution made
shortly after the purchase of such shares by a shareholder, although in effect a
return of capital to that particular shareholder, would be taxable to him or her
as described above. If a shareholder held shares six months or less and during
that period received a distribution taxable to such shareholder as long-term
capital gain, any loss realized on the sale of such shares during such six-month
period would be a long-term capital loss to the extent of such distribution.
A dividend or capital gains distribution with respect to shares of a Fund held
by a tax-deferred or qualified plan, such as an individual retirement account,
403(b)(7) retirement plan or corporate pension or profit-sharing plan, will not
be taxable to the plan. Distributions from such plans will be taxable to
individual participants under applicable tax rules without regard to the
character of the income earned by the qualified plan.
Distributions by a Fund may be subject to state and local taxes. Alliance Fund,
Premier Growth Fund, Technology Fund, Income Builder Fund, Quasar Fund, New
Europe Fund, Balanced Shares and Growth and Income Fund are qualified to do
business in the Commonwealth of Pennsylvania and, therefore, are subject to the
Pennsylvania foreign franchise and corporate net income tax in respect of their
business activities in Pennsylvania. Accordingly, shares of such Funds are
exempt from Pennsylvania personal property taxes. These Funds anticipate
continuing such business activities but reserve the right to suspend them at any
time, resulting in the termination of the exemptions.
A Fund will be required to withhold 31% of any payments made to a shareholder if
the shareholder has not provided a certified taxpayer identification number to
the Fund, or the Secretary of the Treasury notifies a Fund that a shareholder
has not reported all interest and dividend income required to be shown on the
shareholder's Federal income tax return.
45
<PAGE>
Under certain circumstances, if a Fund realizes losses from fluctuations in
currency exchange rates after paying a dividend, all or a portion of the
dividend may subsequently be characterized as a return of capital. See
"Dividends, Distributions and Taxes" in the Statement of Additional Information.
Shareholders will be advised annually as to the federal tax status of dividends
and capital gains distributions made by a Fund for the preceding year.
Shareholders are urged to consult their tax advisers regarding their own tax
situation.
- --------------------------------------------------------------------------------
General Information
- --------------------------------------------------------------------------------
PORTFOLIO TRANSACTIONS
Consistent with the Conduct Rules of the National Association of Securities
Dealers, Inc., and subject to seeking best price and execution, a Fund may
consider sales of its shares as a factor in the selection of dealers to enter
into portfolio transactions with the Fund.
ORGANIZATION
Each of the following Funds is a Maryland corporation organized in the year
indicated: The Alliance Fund, Inc. (1938), Alliance Balanced Shares, Inc.
(1932), Alliance Premier Growth Fund, Inc. (1992), Alliance Technology Fund,
Inc. (1980), Alliance Quasar Fund, Inc. (1968), Alliance Worldwide Privatization
Fund, Inc. (1994), Alliance New Europe Fund, Inc. (1990), Alliance All-Asia
Investment Fund, Inc. (1994), Alliance Global Small Cap Fund, Inc. (1966),
Alliance Income Builder Fund, Inc. (1991), Alliance Utility Income Fund, Inc.
(1993), and Alliance Growth and Income Fund, Inc. (1932). Each of the following
Funds is either a Massachusetts business trust or a series of a Massachusetts
business trust organized in the year indicated: Alliance Growth Fund and
Alliance Strategic Balanced Fund (each a series of The Alliance Portfolios)
(1987), and Alliance International Fund (1980). Prior to August 2, 1993, The
Alliance Portfolios was known as The Equitable Funds, Growth Fund was known as
The Equitable Growth Fund and Strategic Balanced Fund was known as The Equitable
Balanced Fund. Prior to March 22, 1994, Income Builder Fund was known as
Alliance Multi-Market Income and Growth Trust, Inc.
It is anticipated that annual shareholder meetings will not be held; shareholder
meetings will be held only when required by federal, or in the case of the Funds
organized as Maryland corporations, state law. Shareholders have available
certain procedures for the removal of Directors.
A shareholder in a Fund will be entitled to share pro rata with other holders of
the same class of shares all dividends and distributions arising from the Fund's
assets and, upon redeeming shares, will receive the then current net asset value
of the Fund represented by the redeemed shares less any applicable CDSC. The
Funds are empowered to establish, without shareholder approval, additional
portfolios, which may have different investment objectives, and additional
classes of shares. If an additional portfolio or class were established in a
Fund, each share of the portfolio or class would normally be entitled to one
vote for all purposes. Generally, shares of each portfolio and class would vote
together as a single class on matters, such as the election of Directors, that
affect each portfolio and class in substantially the same manner. Class A, B, C
and Advisor Class shares have identical voting, dividend, liquidation and other
rights, except that each class bears its own transfer agency expenses, each of
Class A, Class B and Class C shares bears its own distribution expenses and
Class B shares and Advisor Class shares convert to Class A shares under certain
circumstances. Each class of shares votes separately with respect to a Fund's
Rule 12b-1 distribution plan and other matters for which separate class voting
is appropriate under applicable law. Shares are freely transferable, are
entitled to dividends as determined by the Directors and, in liquidation of a
Fund, are entitled to receive the net assets of the Fund. Since this Prospectus
sets forth information about all the Funds, it is theoretically possible that a
Fund might be liable for any materially inaccurate or incomplete disclosure in
this Prospectus concerning another Fund. Based on the advice of counsel,
however, the Funds believe that the potential liability of each Fund with
respect to the disclosure in this Prospectus extends only to the disclosure
relating to that Fund. Certain additional matters relating to a Fund's
organization are discussed in its Statement of Additional Information.
REGISTRAR, TRANSFER AGENT AND DIVIDEND-DISBURSING
AGENT
AFS, an indirect wholly-owned subsidiary of Alliance, located at 500 Plaza
Drive, Secaucus, New Jersey 07094, acts as each Fund's registrar, transfer agent
and dividend-disbursing agent for a fee based upon the number of shareholder
accounts maintained for the Funds. The transfer agency fee with respect to the
Class B shares will be higher than the transfer agency fee with respect to the
Class A shares or Class C shares.
PRINCIPAL UNDERWRITER
AFD, an indirect wholly-owned subsidiary of Alliance, located at 1345 Avenue of
the Americas, New York, New York 10105, is the principal underwriter of shares
of the Funds.
PERFORMANCE INFORMATION
From time to time, the Funds advertise their "total
return," which is computed separately for Class A, Class B and Class C shares.
Such advertisements disclose a Fund's average annual compounded total return for
the periods prescribed by the Commission. A Fund's total return for each such
period is computed by finding, through the use of a formula prescribed by the
Commission, the average annual compounded rate of return over the period that
would equate an assumed initial amount invested to the value of the investment
at the end of the period. For purposes of computing total return, income
dividends and capital gains distributions paid on shares of a Fund are assumed
to have been reinvested when paid and the maximum sales charges applicable to
purchases and redemptions of a Fund's shares are assumed to have been paid.
46
<PAGE>
Balanced Shares, Growth and Income Fund, Income Builder Fund, Strategic Balanced
Fund and Utility Income Fund may also advertise their "yield," which is also
computed separately for Class A, Class B and Class C shares. A Fund's yield for
any 30-day (or one-month) period is computed by dividing the net investment
income per share earned during such period by the maximum public offering price
per share on the last day of the period, and then annualizing such 30-day (or
one-month) yield in accordance with a formula prescribed by the Commission which
provides for compounding on a semi-annual basis.
Strategic Balanced Fund, Balanced Shares, Income Builder Fund, Utility Income
Fund and Growth and Income Fund may also state in sales literature an "actual
distribution rate" for each class which is computed in the same manner as yield
except that actual income dividends declared per share during the period in
question are substituted for net investment income per share. The actual
distribution rate is computed separately for Class A, Class B and Class C
shares.
A Fund's advertisements may quote performance rankings or ratings of a Fund by
financial publications or independent organizations such as Lipper Analytical
Services, Inc. and Morningstar, Inc. or compare a Fund's performance to various
indices.
ADDITIONAL INFORMATION
This Prospectus and the Statements of Additional Information, which have been
incorporated by reference herein, do not contain all the information set forth
in the Registration Statements filed by the Funds with the Commission under the
Securities Act. Copies of the Registration Statements may be obtained at a
reasonable charge from the Commission or may be examined, without charge, at the
offices of the Commission in Washington, D.C.
This prospectus does not constitute an offering in any state in which such
offering may not lawfully be made.
This prospectus is intended to constitute an offer by each Fund only of the
securities of which it is the issuer and is not intended to constitute an offer
by any Fund of the securities of any other Fund whose securities are also
offered by this prospectus. No Fund intends to make any representation as to the
accuracy or completeness of the disclosure in this prospectus relating to any
other Fund. See "General Information--Organization."
47
<PAGE>
SUBSCRIPTION APPLICATION
- --------------------------------------------------------------------------------
THE ALLIANCE STOCK FUNDS
(see instructions at the front of the application)
- --------------------------------------------------------------------------------
1. YOUR ACCOUNT REGISTRATION (Please Print)
- --------------------------------------------------------------------------------
[_] INDIVIDUAL OR JOINT ACCOUNT
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Owner's Name (First Name) (MI) (Last Name)
|_|_|_|-|_|_|-|_|_|_|_|
Social Security Number (Required to open account)
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Joint Owner's Name* (First Name) (MI) (Last Name)
*Joint Tenants with right of survivorship unless Alliance Fund Services is
informed otherwise.
[_] GIFT/TRANSFER TO A MINOR
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Custodian-One Name Only (First Name) (MI) (Last Name)
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Minor (First Name) (MI) (Last Name)
|_|_|_|-|_|_|-|_|_|_|_|
Minor's Social Security Number (Required to open account) Under the State
of _____ (Minor's Residence) Uniform Gifts/Transfer to Minor's Act
[_] TRUST ACCOUNT
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Name of Trustee
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Name of Trust
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Name of Trust (cont'd)
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| |_|_|_|_|_|_|_|_|_|
Trust Dated Tax ID or Social Security Number
(Required to open account)
[_] OTHER
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Name of Corporation, Partnership, Investment only retirement plan, or other
Entity
|_|_|_|_|_|_|_|_|_| |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Tax ID Number Trustee Name (Retirement Plans Only
- --------------------------------------------------------------------------------
2. YOUR ADDRESS
- --------------------------------------------------------------------------------
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Street
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
City State Zip Code
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
If Non-U.S., Specify Country
|_|_|_|-|_|_|_|-|_|_|_|_| |_|_|_|-|_|_|_|-|_|_|_|_|
Daytime Phone Evening Phone
I am a: [ ] U.S. Citizen [ ] Non-Resident Alien
[ ] Resident Alien [ ] Other
++ ++
+ +
For Alliance Use Only
+ +
++ ++
<PAGE>
- --------------------------------------------------------------------------------
3. YOUR INITIAL INVESTMENT
- --------------------------------------------------------------------------------
The minimum investment is $250 per fund. The maximum investment in Class B is
$250,000; Class C is $5,000,000.
I hereby subscribe for shares of the following Alliance Stock Fund(s) and elect
distribution options as indicated.
Dividend and Capital Gain Distribution Options:
- -----------------------------------
BROKER/DEALER USE ONLY
WIRE CONFIRM #
- -----------------------------------
- -----------------------------------
R Reinvest distributions into my fund account.
----------------------
C Send my distributions in cash to the address I have provided in Section 2.
-----------------------------
(Complete Section 4D for direct deposit to your bank account. Complete
Section 4E for payment to a third party).
D Direct my distributions to another Alliance fund. Complete the appropriate
------------------------------------------------
portion of Section 4A to direct your distributions (dividends and capital
gains) to another Alliance Fund (the $250 minimum investment requirement
applies to Funds into which distributions are directed).
<TABLE>
<CAPTION>
- ----------------------------- ---------------------------------------------- -----------------------
CLASS OF SHARES
Make all checks payable to: ---------------------------------------------- DISTRIBUTIONS OPTIONS
Alliance Fund Services CONTINGENT "CIRCLE"
INITIAL SALES DEFERRED ASSET-BASED -----------------------
- ----------------------------- CHARGE SALES CHARGE SALES CHARGE CAPITAL
ALLIANCE FUND NAME A B C DIVIDENDS GAINS
- ----------------------------- --------------- -------------- --------------- ------------ ----------
<S> <C> <C> <C> <C> <C>
The Alliance Fund $ (44) $ (43) $ (344) R C D R C D
- ----------------------------------------------------------------------------------------------------
Growth Fund (31) (01) (331) R C D R C D
- ----------------------------------------------------------------------------------------------------
Premier Growth Fund (78) (79) (378) R C D R C D
- ----------------------------------------------------------------------------------------------------
Technology Fund (82) (282) (382) R C D R C D
- ----------------------------------------------------------------------------------------------------
Quasar Fund (26) (29) (326) R C D R C D
- ----------------------------------------------------------------------------------------------------
International Fund (40) (41) (340) R C D R C D
- ----------------------------------------------------------------------------------------------------
Worldwide Privatization Fund (112) (212) (312) R C D R C D
- ----------------------------------------------------------------------------------------------------
New Europe Fund (62) (58) (362) R C D R C D
- ----------------------------------------------------------------------------------------------------
All-Asia Investment Fund (118) (218) (318) R C D R C D
- ----------------------------------------------------------------------------------------------------
Global Small Cap Fund (45) (48) (345) R C D R C D
- ----------------------------------------------------------------------------------------------------
Strategic Balanced Fund (32) (02) (332) R C D R C D
- ----------------------------------------------------------------------------------------------------
Balanced Shares (96) (75) (396) R C D R C D
- ----------------------------------------------------------------------------------------------------
Income Builder Fund (111) (211) (311) R C D R C D
- ----------------------------------------------------------------------------------------------------
Utility Income Fund (09) (209) (309) R C D R C D
- ----------------------------------------------------------------------------------------------------
Growth & Income Fund (94) (74) (394) R C D R C D
- ----------------------------------------------------------------------------------------------------
R C D R C D
- ----------------------------------------------------------------------------------------------------
R C D R C D
- ----------------------------------------------------------------------------------------------------
TOTAL INVESTMENT $ $ $
- ----------------------------- ----------------------------------------------
</TABLE>
<PAGE>
MY SOCIAL SECURITY (TAX
IDENTIFICATION) NUMBER IS: ----- ----- ----- ----- ----- ----- ----- ----- -----
----- ----- ----- ----- ----- ----- ----- ----- -----
- --------------------------------------------------------------------------------
4. YOUR SHAREHOLDER OPTIONS
- --------------------------------------------------------------------------------
- -------------------------------------
A. AUTOMATIC INVESTMENT PLANS (AIP)
- -------------------------------------
[_] WITHDRAW FROM MY BANK ACCOUNT
I authorize Alliance to draw on my bank account for investment in my fund
account(s) as indicated below (Complete Section 4D also).
<TABLE>
<CAPTION>
Monthly Dollar Amount Day of Withdrawal
Fund Name ($25 minimum) (1st thru 31st) Circle "all" or applicable months
<C> <C> <C> <S>
All J F M A M J J A S O N D
- ----------------------------------------------------------------------------------------------------------
All J F M A M J J A S O N D
- ----------------------------------------------------------------------------------------------------------
All J F M A M J J A S O N D
- ----------------------------------------------------------------------------------------------------------
All J F M A M J J A S O N D
- ----------------------------------------------------------------------------------------------------------
</TABLE>
* Your bank must be a member of the National Automated Clearing House
Association (NACHA).
[_] DIRECT MY DISTRIBUTIONS
As indicated in Section 3, I would like my dividends and/or capital gains
directed to the same class of shares of another Alliance fund.
<TABLE>
<CAPTION>
"From" Fund Name "From" Fund Account # (if existing) "To" Fund Name "To" Fund Account # (if existing)
<C> <C> <C> <S>
[_] New
[_] Existing
- ------------------------------------------------------------------------------------------------------------------------------------
[_] New
[_] Existing
- ------------------------------------------------------------------------------------------------------------------------------------
[_] New
[_] Existing
- ------------------------------------------------------------------------------------------------------------------------------------
[_] New
[_] Existing
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
[_] EXCHANGE SHARES MONTHLY
I authorize Alliance to transact monthly exchanges within the same class of
shares between my fund accounts as listed below.
<TABLE>
<CAPTION>
"From" Fund Account # Dollar Amount Day of Exchange** "To" Fund Account #
"From" Fund Name (if existing) ($25 minimum) (1st thru 31st) "To" Fund Name (if existing)
<C> <C> <C> <C> <C> <S>
[_] New
[_] Existing
- ------------------------------------------------------------------------------------------------------------------------------------
[_] New
[_] Existing
- ------------------------------------------------------------------------------------------------------------------------------------
[_] New
[_] Existing
- ------------------------------------------------------------------------------------------------------------------------------------
[_] New
[_] Existing
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
**Shares exchanged will be redeemed at the net asset value on the "Day of
Exchange". (If the "Day of Exchange" is not a fund business day, the exchange
transaction will be processed on the next fund business day). The exchange
privilege is not available if stock certificates have been issued.
- --------------------------------------
B. SYSTEMATIC WITHDRAWAL PLANS (SWP)
- --------------------------------------
In order to establish a SWP, you must reinvest all dividends and capital gains
and own or purchase shares of the Fund having a current net asset value of at
least: .$10,000 for monthly payments, .$5,000 for bi-monthly payments,
.$4,000 for quarterly or less frequent payments
Your bank must be a member of the National Automated Clearing House Association
(NACHA) in order for you to receive SWP proceeds directly into your checking
account.
[_] I authorize Alliance to transact periodic redemptions from my fund account
and send the proceeds to me as indicated below.
<TABLE>
<CAPTION>
Fund Name and Class of Shares Dollar Amount ($50 minimum) Circle "all" or applicable months
<C> <C> <S>
All J F M A M J J A S O N D
- -------------------------------------------------------------------------------------------------------------
All J F M A M J J A S O N D
- -------------------------------------------------------------------------------------------------------------
All J F M A M J J A S O N D
- -------------------------------------------------------------------------------------------------------------
All J F M A M J J A S O N D
- -------------------------------------------------------------------------------------------------------------
</TABLE>
PLEASE SEND MY SWP PROCEEDS TO:
[_] MY CHECKING ACCOUNT (via EFT) - (1st-31st)
----------
I would like to have these payments occur on or about the of
----------
the months circled above. (Complete Section 4D)
[_] MY ADDRESS OF RECORD (via CHECK)
[_] THE PAYEE AND ADDRESS SPECIFIED IN SECTION 4E (via CHECK)
<PAGE>
C. PURCHASES AND REDEMPTIONS VIA EFT
You can call our toll-free number 1-800-221-5672 and instruct Alliance Fund
Services, Inc. in a recorded conversation to purchase, redeem or exchange
shares for your account. Purchase and redemption requests will be processed
via electronic funds transfer (EFT) to and from your bank account.
Instructions: . Review the information in the Prospectus about telephone
transaction services.
. If you select the telephone purchase or redemption privilege,
you must write "VOID" across the face of a check from the
bank account you wish to use and attach it to Section 4D of
this application.
Purchases and Redemptions via EFT
/ / I hereby authorize Alliance Fund Services, Inc. to effect the purchase
and/or redemption of Fund shares for my account according to my telephone
instructions or telephone instructions from my Broker/Agent, and to with-
draw money or credit money for such shares via EFT from the bank account
I have selected.
In the case of shares purchased by check, redemption proceeds may not be
made available until the Fund is reasonably assured that the check has
cleared, normally 15 calendar days after the purchase date.
D. BANK INFORMATION
This bank account information will be used for:
/ / Distributions (Section 3)
/ / Automatic Investments (Section 4A)
/ / Systematic Withdrawals (Section 4B)
/ / Telephone Transactions (Section 4C)
Please attach a voided check:
----------------------------------------------------------------------------
| |
| |
| |
| |
| Tape Preprinted Voided Check Here. |
| We cannot Establish These Services Without it. |
| |
| |
| |
| |
----------------------------------------------------------------------------
Your bank must be a member of the National Automated Clearing House
Association (NACHA) in order to have EFT transactions processed to your fund
account. For EFT transactions, the fund requires signatures of bank account
owners exactly as they appear or bank records.
E. THIRD PARTY PAYMENT DETAILS
This third party payee information will be used for:
/ / Distributions (Section 3) / / Systematic Withdrawals (Section 4B)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
-----------------------------------------------------------------------
Name
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
-----------------------------------------------------------------------
Address - Line 1
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
-----------------------------------------------------------------------
Address - Line 2
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
-----------------------------------------------------------------------
Address - Line 3
F. REDUCED CHARGES (CLASS A ONLY)
If you, your spouse or minor children own shares in other Alliance funds, you
may be eligible for a reduced sales charge. Please complete the Right of
Accumulation section or the Statement of Intent section.
A. Right of Accumulation
/ / Please link the tax identification numbers or account numbers listed below
for Right of Accumulation privileges, so that this and future purchases
will receive any discount for which they are eligible.
B. Statement of Intent
/ / I want to reduce my sales charge by agreeing to invest the following
amount over a 13-month period.
/ / $100,000 / / $250,000 / / $500,000 / / $1,000,000
If the full amount indicated is not purchased within 13 months, I
understand that an additional sales charge must be paid from my account.
------------------------- ------------------------- ------------------------
Tax ID or Account # Tax ID or Account # Tax ID or Account #
<PAGE>
- --------------------------------------------------------------------------------
5. SHAREHOLDER AUTHORIZATION This section MUST be completed
- --------------------------------------------------------------------------------
Telephone Exchanges and Redemptions by Check
Unless I have checked one or both boxes below, these privileges will
automatically apply, and by signing this application, I hereby authorize
Alliance Fund Services, Inc. to act on my telephone instructions, or on
telephone instructions from any person representing himself to be an authorized
employee of an investment dealer or agent requesting a redemption or exchange on
my behalf. (NOTE: Telephone exchanges may only be processed between accounts
that have identical registrations.) Telephone redemption checks will only be
mailed to the name and address of record; and the address must have no change
within the last 30 days. The maximum telephone redemption amount is $50,000.
This service can be enacted once every 30 days.
/ / I do not elect the telephone exchange service.
---
/ / I do not elect the telephone redemption by check service.
---
I certify under penalty of perjury that the number shown in Section 1 of this
form is my correct tax identification number or social security number and that
I have not been notified that this account is subject to backup withholding.
By selecting any of the above telephone privileges, I agree that neither the
Fund nor Alliance, Alliance Fund Distributors, Inc., Alliance Fund Services,
Inc. or other Fund Agent will be liable for any loss, injury, damage or expense
as a result of acting upon telephone instructions purporting to be on my behalf,
that the Fund reasonably believes to be genuine, and that neither the Fund nor
any such party will be responsible for the authenticity of such telephone
instructions. I understand that any or all of these privileges may be
discontinued by me or the Fund at any time. I understand and agree that the Fund
reserves the right to refuse any telephone instructions and that my investment
dealer or agent reserves the right to refuse to issue any telephone instructions
I may request.
For non-residents only: Under penalties of perjury, I certify that to the best
of my knowledge and belief, I qualify as a foreign person as indicated in
Section 2.
I am of legal age and capacity and have received and read the Prospectus and
agree to its terms.
The Internal Revenue Service does not require your consent to any provision of
this document other than the certification required to avoid backup withholding.
- --------------------------------- ---------------
Signature Date
- --------------------------------- --------------- ----------------------------
Signature Date Acceptance Date
- --------------------------------------------------------------------------------
DEALER/AGENT AUTHORIZATION For selected Dealers or agents ONLY.
- --------------------------------------------------------------------------------
We hereby authorize Alliance Fund Services, Inc. to act as our agent in
connection with transactions under this authorization form; and we guarantee the
signature(s) set forth in Section 5, as well as the legal capacity of the
shareholder.
- --------------------------------- ---------------------------------------------
Dealer/Agent Firm Authorized Signature
- --------------------------------- --------------- ----------------------------
Representative First Name MI Last Name
- --------------------------------------------------------------------------------
Representative Number
- --------------------------------------------------------------------------------
Branch Office Address
- --------------------------------------------------------------------------------
City State Zip Code
( )
- --------------------------------------------------------------------------------
Branch Number Branch Phone
<PAGE>
ALLIANCE SUBSCRIPTION APPLICATION
- --------------------------------------------------------------------------------
THE ALLIANCE STOCK FUNDS
THE ALLIANCE FUND INTERNATIONAL FUND STRATEGIC BALANCED FUND
GROWTH FUND WORLDWIDE PRIVATIZATION FUND BALANCED SHARES
PREMIER GROWTH FUND NEW EUROPE FUND INCOME BUILDER FUND
TECHNOLOGY FUND ALL-ASIA INVESTMENT FUND UTILITY INCOME FUND
QUASAR FUND GLOBAL SMALL CAP FUND GROWTH & INCOME FUND
- --------------------------------------------------------------------------------
INFORMATION AND INSTRUCTIONS
- --------------------------------------------------------------------------------
To Open Your New Alliance Account...
Please complete the application For certified or overnight deliveries,
and mail it to: send to:
Alliance Fund Services, Inc. Alliance Fund Services, Inc.
P.O. Box 1520 500 Plaza Drive
Secaucus, New Jersey 07096-1520 Secaucus, New Jersey 07094
- ---------
Section 1 Your Account Registration (Required)
- ---------
Complete one of the available choices. To ensure proper tax reporting to the
IRS:
. Individuals, Joint Tenants and Gift/Transfer to a Minor:
. Indicate your name(s) exactly as it appears on your social
security card.
. Trust/Other:
. Indicate the name of the entity exactly as it appeared on the
notice you received from the IRS when your Employer
Identification number was assigned.
- ---------
Section 2 Your Address (Required)
- ---------
Complete in full.
- ---------
Section 3 Your Initial Investment (Required)
- ---------
For each fund in which you are investing: 1) Write the dollar amount of your
initial purchase in the column corresponding to the class of shares you have
chosen (If you are eligible for a reduced sales charge, you must also complete
Section 4F) 2) Circle a distribution option for your dividends 3) Circle a
distribution option for your capital gains. All distributions (dividends and
capital gains) will be reinvested into your fund account unless you direct
otherwise. If you want distributions sent directly to your bank account, then
you must complete Section 4D and attach a voided check for that account. If you
want your distributions sent to a third party you must complete Section 4E.
- ---------
Section 4 Your Shareholder Options (Complete only those options you want)
- ---------
A.Automatic Investment Plans (AIP)-You can make periodic investments into any
of your Alliance Funds in one of three ways. First, by a periodic withdrawal
($25 minimum) directly from your bank account and invested into an Alliance
Fund. Second, you can direct your distributions (dividends and capital gains)
from one Alliance Fund into another Fund. Or third, you can automatically
exchange monthly ($25 minimum) shares of one Alliance Fund for shares of
another Fund. To elect one of these options, complete the appropriate portion
of Section 4A.
B.Systematic Withdrawal Plans (SWP)-Complete this option if you wish to
periodically redeem dollars from one of your fund accounts. Payments can be
made via Electronic Funds Transfer (EFT) to your bank account or by check.
C.Telephone Transactions via EFT-Complete this option if you would like to be
able to transact via telephone between your fund account and your bank
account.
D.Bank Information-If you have elected any options that involve transactions
between your bank account and your fund account or have elected cash
distribution options and would like the payments sent to your bank account,
please tape a voided check to this section of the application.
E.Third Party Payment Details-If you have chosen cash distributions and/or
a Systematic Withdrawal Plan and would like the payments sent to a person
and/or address other than those provided in section 1 or 2, complete this
option.
F.Reduced Charges (Class A Only)-Complete if you would like to link fund
accounts that have combined balances that might exceed $100,000 so that
future purchases will receive discounts. Complete if you intend to purchase
over $100,000 within 13 months.
- ---------
Section 5 Shareholder Authorization (Required)
- ---------
All owners must sign. If it is a custodial, corporate, or trust account, the
custodian, an authorized officer, or the trustee respectively must sign.
If We Can Assist You In Any Way, Please Do Not Hesitate To Call Us At:
(800) 221-5672.
<PAGE>
This is filed pursuant to Rule 497(c).
File Nos. 2-25364 and 811-01415.
<PAGE>
<PAGE>
The Alliance
----------------------------------------------------
Stock Funds
----------------------------------------------------
P.O. Box 1520, Secaucus, New Jersey 07096-1520
Toll Free (800) 221-5672
For Literature: Toll Free (800) 227-4618
Prospectus and Application
(Advisor Class)
October 1, 1996
Domestic Stock Funds Global Stock Funds
- -The Alliance Fund -Alliance International Fund
- -Alliance Growth Fund -Alliance Worldwide
- -Alliance Premier Growth Fund Privatization Fund
- -Alliance Technology Fund -Alliance New Europe Fund
- -Alliance Quasar Fund -Alliance All-Asia Investment
Fund
-Alliance Global Small Cap
Fund
Total Return Funds
-Alliance Strategic Balanced Fund
-Alliance Balanced Shares
-Alliance Income Builder Fund
-Alliance Utility Income Fund
-Alliance Growth and Income Fund
Table of Contents Page
The Funds at a Glance ..................................................... 2
Expense Information ....................................................... 4
Glossary .................................................................. 6
Description of the Funds .................................................. 7
Investment Objectives and Policies ...................................... 7
Additional Investment Practices ......................................... 15
Certain Fundamental Investment Policies ................................. 22
Risk Considerations ..................................................... 24
Purchase and Sale of Shares ............................................... 28
Management of the Funds ................................................... 30
Dividends, Distributions and Taxes ........................................ 31
Conversion Feature ........................................................ 33
General Information ....................................................... 41
Adviser
Alliance Capital Management L.P.
1345 Avenue Of The Americas
New York, New York 10105
The Alliance Stock Funds provide a broad selection of investment alternatives to
investors seeking capital growth or high total return. The Domestic Stock Funds
invest mainly in the United States equity markets and the Global Stock Funds
diversify their investments among equity markets around the world, while the
Total Return Funds invest in both equity and fixed-income securities.
Each fund or portfolio (each a "Fund") is, or is a series of, an open-end
management investment company. This Prospectus sets forth concisely the
information which a prospective investor should know about each Fund before
investing. A "Statement of Additional Information" for each Fund which provides
further information regarding certain matters discussed in this Prospectus and
other matters which may be of interest to some investors has been filed with the
Securities and Exchange Commission and is incorporated herein by reference. For
a free copy, call or write Alliance Fund Services, Inc. at the indicated address
or call the "For Literature" telephone number shown above.
This Prospectus offers the Advisor Class shares of each Fund which may be
purchased at net asset value without any initial or contingent deferred sales
charges and without ongoing distribution expenses. Advisor Class shares are
offered solely to (i) investors participating in fee-based programs meeting
certain standards established by Alliance Fund Distributors, Inc., each Fund's
principal underwriter, (ii) participants in self-directed defined contribution
employee benefit plans (e.g., 401(k) plans) that meet certain minimum standards
and (iii) investment advisory clients of, and certain other persons associated
with, Alliance Capital Management L.P. and its affiliates or the Funds. See
"Purchase and Sale of Shares."
An investment in these securities is not a deposit or obligation of, or
guaranteed or endorsed by, any bank and is not federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board or any other agency.
Investors are advised to read this Prospectus carefully and to retain it for
future reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Alliance(R)
Investing without the Mystery(SM)
(R)/(SM) These are registered marks used under licenses from the owner, Alliance
Capital Management L.P.
<PAGE>
The Funds At A Glance
The following summary is qualified in its entirety by the more detailed
information contained in this Prospectus.
The Funds' Investment Adviser Is . . .
Alliance Capital Management L.P. ("Alliance"), a global investment manager
providing diversified services to institutions and individuals through a broad
line of investments including more than 100 mutual funds. Since 1971, Alliance
has earned a reputation as a leader in the investment world with over $168
billion in assets under management as of June 30, 1996. Alliance provides
investment management services to employee benefit plans for 33 of the FORTUNE
100 companies.
Domestic Stock Funds
Alliance Fund
Seeks . . . Long-term growth of capital and income primarily through investment
in common stocks.
Invests Principally in . . . A diversified portfolio of equity securities that,
in the judgment of Alliance, have the potential to achieve capital appreciation.
Growth Fund
Seeks . . . Long-term growth of capital by investing primarily in common stocks
and other equity securities.
Invests Principally in . . . A diversified portfolio of equity securities of
companies with a favorable outlook for earnings and whose rate of growth is
expected to exceed that of the United States economy over time.
Premier Growth Fund
Seeks . . . Long-term growth of capital by investing in the equity securities of
a limited number of large, carefully selected, high-quality American companies
from a relatively small universe of intensively researched companies.
Invests Principally in . . . A diversified portfolio of equity securities that,
in the judgment of Alliance, are likely to achieve superior earnings growth.
Normally, approximately 40 companies will be represented in the Fund's
investment portfolio. The Fund's investments in 25 of these companies most
highly regarded at any point in time by Alliance will usually constitute
approximately 70% of the Fund's net assets.
Technology Fund
Seeks . . . Growth of capital through investment in companies expected to
benefit from advances in technology.
Invests Principally in . . . A diversified portfolio of securities of companies
which use technology extensively in the development of new or improved products
or processes.
Quasar Fund
Seeks . . . Growth of capital by pursuing aggressive investment policies.
Invests Principally in . . . A diversified portfolio of equity securities of any
company and industry and in any type of security which is believed to offer
possibilities for capital appreciation.
Global Stock Funds
International Fund
Seeks . . . A total return on its assets from long-term growth of capital and
from income.
Invests Principally in . . . A diversified portfolio of marketable securities of
established non-United States companies, companies participating in foreign
economies with prospects for growth, and foreign government securities.
Worldwide Privatization Fund
Seeks . . . Long-term capital appreciation.
Invests Principally in . . . A non-diversified portfolio of equity securities
issued by enterprises that are undergoing, or have undergone, privatization. The
balance of the Fund's investment portfolio will include securities of companies
that are believed by Alliance to be beneficiaries of the privatization process.
New Europe Fund
Seeks . . . Long-term capital appreciation through investment primarily in the
equity securities of companies based in Europe.
Invests Principally in . . . A non-diversified portfolio of equity securities of
European companies.
All-Asia Investment Fund
Seeks . . . Long-term capital appreciation.
Invests Principally in . . . A non-diversified portfolio of equity securities of
Asian/Pacific companies.
Global Small Cap Fund
Seeks . . . Long-term growth of capital.
Invests Principally in . . . A diversified global portfolio of the equity
securities of small capitalization companies.
2
<PAGE>
Total Return Funds
Strategic Balanced Fund
Seeks . . . A high long-term total return by investing in a combination of
equity and debt securities.
Invests Principally in . . . A diversified portfolio of dividend-paying common
stocks and fixed-income securities, and also in equity-type securities such as
warrants, preferred stocks and convertible debt instruments.
Balanced Shares
Seeks . . . A high return through a combination of current income and capital
appreciation.
Invests Principally in . . . A diversified portfolio of equity and fixed-income
securities such as common and preferred stocks, U.S. Government and agency
obligations, bonds and senior debt securities.
Income Builder Fund
Seeks . . . Both an attractive level of current income and long-term growth of
income and capital.
Invests Principally in . . . A non-diversified portfolio of fixed-income
securities and dividend-paying common stocks. Alliance currently expects to
continue to maintain approximately 60% of the Fund's net assets in fixed-income
securities and 40% in equity securities.
Utility Income Fund
Seeks . . . Current income and capital appreciation through investment in the
utilities industry.
Invests Principally in . . . A diversified portfolio of equity securities, such
as common stocks, securities convertible into common stocks and rights and
warrants to subscribe for purchase of common stocks, and in fixed-income
securities such as bonds and preferred stocks.
Growth and Income Fund
Seeks . . . Income and appreciation through investment in dividend-paying common
stocks of quality companies.
Invests Principally in . . . A diversified portfolio of dividend-paying common
stocks of good quality, and, under certain market conditions, other types of
securities, including bonds, convertible bonds and preferred stocks.
A Word About Risk . . .
The price of the shares of the Alliance Stock Funds will fluctuate as the daily
prices of the individual securities in which they invest fluctuate, so that your
shares, when redeemed, may be worth more or less than their original cost. With
respect to those Funds permitted to invest in foreign currency denominated
securities, these fluctuations may be magnified by changes in foreign exchange
rates. Investment in the Global Stock Funds involves risks not associated with
funds that invest primarily in securities of U.S. issuers. While the Funds
invest principally in common stocks and other equity securities, in order to
achieve their investment objectives the Funds may at times use certain types of
investment derivatives, such as options, futures, forwards and swaps. These
involve risks different from, and, in certain cases, greater than, the risks
presented by more traditional investments. These risks are fully discussed in
this Prospectus.
Getting Started . . .
Shares of the Funds are available through your financial representative. Each
Fund offers multiple classes of shares, of which only the Advisor Class is
offered by this Prospectus. Advisor Class shares may be purchased at net asset
value without any initial or contingent deferred sales charges and are not
subject to ongoing distribution expenses. Advisor Class shares may be purchased
and held solely (i) through accounts established under a fee-based program,
sponsored and maintained by a registered broker-dealer or other financial
intermediary and approved by Alliance Fund Distributors, Inc. ("AFD"), each
Fund's principal underwriter, pursuant to which each investor pays an
asset-based fee at an annual rate of at least .50% of the assets in the
investor's account, to the broker-dealer or financial intermediary, or its
affiliate or agent, (ii) through a self-directed defined contribution employee
benefit plan (e.g., a 401(k) plan) that has at least 1,000 participants or $25
million in assets and (iii) by investment advisory clients of, and certain other
persons associated with, Alliance and its affiliates or the Funds. A
shareholder's Advisor Class shares will automatically convert to Class A shares
of the same Fund under certain circumstances. See "Conversion Feature--
Conversion to Class A Shares." Shares can be purchased for a minimum initial
investment of $250, and subsequent investments can be made for as little as $50.
In addition, persons investing in Advisor Class shares of the Fund through a
fee-based program may do so only if the fee-based program has an aggregate of
at least $250,000 invested in Advisor Class shares of Alliance Mutual Funds,
including the Fund. Fee-based programs through which Advisor Class shares may be
purchased may impose different requirements with respect to minimum initial and
subsequent investment levels than described above. For detailed information
about purchasing and selling shares, see "Purchase and Sale of Shares."
Alliance(R)
Investing without the Mystery.(SM)
(R)/SM These are registered marks used under licenses from the owner, Alliance
Capital Management L.P.
3
<PAGE>
- --------------------------------------------------------------------------------
Expense Information
- --------------------------------------------------------------------------------
Shareholder Transaction Expenses are one of several factors to consider when you
invest in a Fund. The following table summarizes your maximum transaction costs
from investing in the Advisor Class shares of each Fund and estimated annual
expenses for Advisor Class shares of each Fund. For each Fund, the "Examples" to
the right of the table below show the cumulative expenses attributable to a
hypothetical $1,000 investment in Advisor Class shares for the periods
specified.
Advisor Class Shares
--------------------
Maximum sales charge imposed on purchases........ None
Sales charge imposed on dividend reinvestments... None
Deferred sales charge............................ None
Exchange fee..................................... None
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Operating Expenses Examples
- ---------------------------------------- ---------------------------------------
Alliance Fund Advisor Class Advisor Class
------------- -------------
<S> <C> <C> <C>
Management fees .71% After 1 year $ 9
12b-1 fees None After 3 years $ 28
Other expenses (a) .18%
----
Total fund
operating expenses (b) .89%
====
<CAPTION>
Growth Fund Advisor Class Advisor Class
------------- -------------
<S> <C> <C> <C>
After 1 year $ 11
Management fees .75% After 3 years $ 33
12b-1 fees None
Other expenses (a) .30%
----
Total fund
operating expenses (b) 1.05%
====
<CAPTION>
Premier Growth Fund Advisor Class Advisor Class
------------- -------------
<S> <C> <C> <C>
After 1 year $ 14
Management fees 1.00% After 3 years $ 44
12b-1 fees None
Other expenses (a) .38%
----
Total fund
operating expenses (b) 1.38%
====
<CAPTION>
Technology Fund Advisor Class Advisor Class
------------- -------------
<S> <C> <C> <C>
Management fees (g) 1.14% After 1 year $ 15
12b-1 fees None After 3 years $ 46
Other expenses (a) .31%
----
Total fund
operating expenses (b) 1.45%
====
<CAPTION>
Quasar Fund Advisor Class Advisor Class
------------- -------------
<S> <C> <C> <C>
After 1 year $ 16
Management fees (g) .99% After 3 years $ 51
12b-1 fees None
Other expenses (a) .63%
----
Total fund
operating expenses (b) 1.62%
====
<CAPTION>
International Fund Advisor Class Advisor Class
------------- -------------
<S> <C> <C> <C>
Management fees (g) .92% After 1 year $ 16
12b-1 fees None After 3 years $ 49
Other expenses (a) .63%
----
Total fund
operating expenses (b) 1.55%
====
</TABLE>
- --------------------------------------------------------------------------------
Please refer to the footnotes and the discussion following these tables on page
6.
4
<PAGE>
<TABLE>
<CAPTION>
Operating Expenses Examples
------------------------------------------ ------------------------------------------
Worldwide Privatization Fund Advisor Class Advisor Class
------------- -------------
<S> <C> <C> <C>
Management fees 1.00% After 1 year $ 16
12b-1 fees None After 3 years $ 50
Other expenses (a) .57%
----
Total fund
operating expenses (b) 1.57%
====
<CAPTION>
New Europe Fund Advisor Class Advisor Class
------------- -------------
<S> <C> <C> <C>
Management fees 1.07% After 1 year $ 19
12b-1 fees None After 3 years $ 58
Other expenses (a) .77%
----
Total fund
operating expenses (b) 1.84%
====
<CAPTION>
All-Asia Investment Fund Advisor Class Advisor Class
------------- -------------
<S> <C> <C> <C>
Management fees After 1 year $ 41
(after waiver) (c) 0.00% After 3 years $125
12b-1 fees None
Other expenses
Administration fees
(after waiver) (d) 0.00%
Other operating expenses (a)
(after reimbursement) (e) 4.12%
----
Total other expenses 4.12%
----
Total fund
operating expenses (b) 4.12%
====
<CAPTION>
Global Small Cap Fund Advisor Class Advisor Class
------------- -------------
<S> <C> <C> <C>
Management fees 1.00% After 1 year $ 22
12b-1 fees None After 3 years $ 69
Other expenses (a) 1.21%
----
Total fund
operating expenses (b) 2.21%
====
<CAPTION>
Strategic Balanced Fund Advisor Class Advisor Class
------------- -------------
<S> <C> <C> <C>
Management fees After 1 year $ 11
(after waiver) (c) .38% After 3 years $ 35
12b-1 fees None
Other expenses (a) .72%
----
Total fund
operating expenses (b) (e) 1.10%
====
<CAPTION>
Balanced Shares Advisor Class Advisor Class
------------- -------------
<S> <C> <C> <C>
Management fees .63% After 1 year $ 12
12b-1 fees None After 3 years $ 36
Other expenses (a) .51%
----
Total fund
operating expenses (b) 1.14%
====
<CAPTION>
Income Builder Fund Advisor Class Advisor Class
------------- -------------
<S> <C> <C> <C>
Management fees .75% After 1 year $ 21
12b-1 fees None After 3 years $ 65
Other expenses (a) 1.33%
----
Total fund
operating expenses (b) 2.08%
====
<CAPTION>
Utility Income Fund Advisor Class Advisor Class
------------- -------------
<S> <C> <C> <C>
Management fees After 1 year $ 12
(after waiver) (c) 0.00% After 3 years $ 38
12b-1 fees None
Other expenses (a) 1.20%
----
Total fund
operating expenses (b) (f) 1.20%
====
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Operating Expenses Examples
------------------------------------- -------------------------------------
Growth and Income Fund Advisor Class Advisor Class
------------- -------------
<S> <C> <C> <C>
Management fees .53% After 1 year $ 9
12b-1 fees None After 3 years $ 27
Other expenses (a) .32%
----
Total fund
operating expenses (b) .85%
====
</TABLE>
- --------------------------------------------------------------------------------
(a) These expenses include a transfer agency fee payable to Alliance Fund
Services, Inc., an affiliate of Alliance, based on a fixed dollar amount
charged to the Fund for each shareholder's account.
(b) The expense information does not reflect any charges or expenses imposed by
your financial representative or your employee benefit plan.
(c) Net of voluntary fee waiver. In the absence of such waiver, management fees
would be 1.00% for All-Asia Investment Fund and .75% for Strategic Balanced
Fund and Utility Income Fund.
(d) Reflects the fees payable by All-Asia Investment Fund to Alliance pursuant
to an administration agreement net of voluntary fee waiver. In the absence
of such fee waiver, the administration fee would be .15%.
(e) Net of voluntary fee waiver and/or expense reimbursement. In the absence of
such waiver and/or reimbursement, total fund operating expenses for
Strategic Balanced Fund would have been 1.76%. In the absence of such waiver
and reimbursements, other expenses for All-Asia Investment Fund would have
been 9.27%, and total fund operating expenses for All-Asia Investment Fund
would have been 10.57% annualized.
(f) Net of expense reimbursements. Absent expense reimbursements, total fund
operating expenses for Utility Income Fund would be 4.86%.
(g) Calculated based on average daily net assets. Maximum contractual rate,
based on quarter-end net assets, is 1.00% for Quasar Fund, Technology Fund
and International Fund.
The purpose of the foregoing table is to assist the investor in understanding
the various costs and expenses that an investor in a Fund will bear directly or
indirectly. "Other Expenses" are based on estimated amounts for each Fund's
current fiscal year. The management fee rates of Growth Fund, Premier Growth
Fund, Strategic Balanced Fund, Technology Fund, International Fund, Worldwide
Privatization Fund, New Europe Fund, All-Asia Investment Fund, Income Builder
Fund, Utility Income Fund and Global Small Cap Fund are higher than those paid
by most other investment companies, but Alliance believes the fees are
comparable to those paid by investment companies of similar investment
orientation. The Examples set forth above assume reinvestment of all dividends
and distributions and utilize a 5% annual rate of return as mandated by
Commission regulations. The Examples should not be considered representative of
future expenses; actual expenses may be greater or less than those shown.
- --------------------------------------------------------------------------------
Glossary
- --------------------------------------------------------------------------------
The following terms are frequently used in this Prospectus.
Equity securities are (i) common stocks, partnership interests, business trust
shares and other equity or ownership interests in business enterprises, and (ii)
securities convertible into, and rights and warrants to subscribe for the
purchase of, such stocks, shares and interests.
Debt securities are bonds, debentures, notes, bills, repurchase agreements,
loans, other direct debt instruments and other fixed, floating and variable rate
debt obligations, but do not include convertible securities.
Fixed-income securities are debt securities and dividend-paying preferred stocks
and include floating rate and variable rate instruments.
Convertible securities are fixed-income securities that are convertible into
common stock.
U.S. Government securities are securities issued or guaranteed by the United
States Government, its agencies or instrumentalities.
Foreign government securities are securities issued or guaranteed, as to payment
of principal and interest, by governments, quasi-governmental entities,
governmental agencies or other governmental entities.
Asian company is an entity that (i) is organized under the laws of an Asian
country and conducts business in an Asian country, (ii) derives 50% or more of
its total revenues from business in Asian countries, or (iii) issues equity or
debt securities that are traded principally on a stock exchange in an Asian
country.
Asian countries are Australia, the Democratic Socialist Republic of Sri Lanka,
Hong Kong, the Islamic Republic of Pakistan, Japan, the Kingdom of Thailand,
Malaysia, Negara Brunei Darussalam (Brunei), New Zealand, the People's Republic
of China, the People's Republic of Kampuchea (Cambodia), the Republic of China
(Taiwan), the Republic of India, the Republic of Indonesia, the Republic of
Korea (South Korea), the Republic of the Philippines, the Republic of Singapore,
the Socialist Republic of Vietnam and the Union of Myanmar.
Moody's is Moody's Investors Service, Inc.
S&P is Standard & Poor's Ratings Services.
Duff & Phelps is Duff & Phelps Credit Rating Co.
Fitch is Fitch Investors Service, Inc.
Investment grade securities are fixed-income securities rated Baa and above by
Moody's or BBB and above by S&P, Duff & Phelps or Fitch, or determined by
Alliance to be of equivalent quality.
Lower-rated securities are fixed-income securities rated Ba or below by Moody's
or BB or below by S&P, Duff & Phelps or Fitch, or determined by Alliance to be
of equivalent quality, and are commonly referred to as "junk bonds."
Prime commercial paper is commercial paper rated Prime 1 by Moody's or A-1 or
higher by S&P or, if not rated, issued by companies that have an outstanding
debt issue rated Aa or higher by Moody's or AA or higher by S&P.
Qualifying bank deposits are certificates of deposit, bankers' acceptances and
interest-bearing savings deposits of banks having total assets of more than $1
billion and which are members of the Federal Deposit Insurance Corporation.
Rule 144A securities are securities that may be resold pursuant to Rule 144A
under the Securities Act of 1933, as amended (the "Securities Act").
Depositary receipts include American Depositary Receipts ("ADRs"), Global
Depositary Receipts ("GDRs") and other types of depositary receipts.
Commission is the Securities and Exchange Commission.
1940 Act is the Investment Company Act of 1940, as amended.
Code is the Internal Revenue Code of 1986, as amended.
6
<PAGE>
- --------------------------------------------------------------------------------
Description Of The Funds
- --------------------------------------------------------------------------------
Except as noted, (i) the Funds' investment objectives are "fundamental" and
cannot be changed without shareholder vote, and (ii) the Funds' investment
policies are not fundamental and thus can be changed without a shareholder vote.
No Fund will change a non-fundamental objective or policy without notifying its
shareholders. There is no guarantee that any Fund will achieve its investment
objective.
INVESTMENT OBJECTIVES AND POLICIES
Domestic Stock Funds
The Domestic Stock Funds have been designed to offer investors seeking capital
appreciation a range of alternative approaches to investing in the U.S. equity
markets.
The Alliance Fund
The Alliance Fund, Inc. ("Alliance Fund") is a diversified investment company
that seeks long-term growth of capital and income primarily through investment
in common stocks. The Fund normally invests substantially all of its assets in
common stocks that Alliance believes will appreciate in value, but it may invest
in other types of securities such as convertible securities, high grade
instruments, U.S. Government securities and high quality, short-term obligations
such as repurchase agreements, bankers' acceptances and domestic certificates of
deposit, and may invest without limit in foreign securities. While the
diversification and generally high quality of the Fund's investments cannot
prevent fluctuations in market values, they tend to limit investment risk and
contribute to achieving the Fund's objective. The Fund generally does not effect
portfolio transactions in order to realize short-term trading profits or
exercise control.
The Fund may also: (i) make secured loans of its portfolio securities equal in
value up to 25% of its total assets to brokers, dealers and financial
institutions; (ii) enter into repurchase agreements of up to one week in
duration with commercial banks, but only if those agreements together with any
restricted securities and any securities which do not have readily available
market quotations do not exceed 10% of its net assets; and (iii) write exchange-
traded covered call options with respect to up to 25% of its total assets. For
additional information on the use, risks and costs of these policies and
practices see "Additional Investment Practices."
Alliance Growth Fund
Alliance Growth Fund ("Growth Fund") is a diversified investment company that
seeks long-term growth of capital. Current income is only an incidental
consideration. The Fund seeks its objective by investing primarily in equity
securities of companies with favorable earnings outlooks and whose long-term
growth rates are expected to exceed that of the U.S. economy over time. The
Fund's investment objective is not fundamental.
The Fund may also invest up to 25% of its total assets in lower-rated fixed-
income and convertible securities. See "Risk Considerations--Securities Ratings"
and "--Investment in Lower-Rated Fixed-Income Securities." The Fund generally
will not invest in securities rated at the time of purchase below Caa- by
Moody's and CCC- by S&P, Duff & Phelps or Fitch or in securities judged by
Alliance to be of comparable investment quality. However, from time to time, the
Fund may invest in securities rated in the lowest grades (i.e., C by Moody's or
D or equivalent by S&P, Duff & Phelps or Fitch), or securities Alliance judges
to be of comparable investment quality, if there are prospects for an upgrade or
a favorable conversion into equity securities. For the period ended August 31,
1996, the Fund invested less than 5% of its total assets in lower-rated
securities. If the credit rating of a security held by the Fund falls below its
rating at the time of purchase (or Alliance determines that the quality of such
security has so deteriorated), the Fund may continue to hold the security if
such investment is considered appropriate under the circumstances.
The Fund may also: (i) invest in "zero-coupon" bonds and "payment-in-kind"
bonds; (ii) invest in foreign securities, although the Fund will not generally
invest more than 15% of its total assets in foreign securities; (iii) invest in
securities that are not publicly traded, including Rule 144A securities; (iv)
buy or sell foreign currencies, options on foreign currencies, foreign currency
futures contracts (and related options) and deal in forward foreign exchange
contracts; (v) lend portfolio securities amounting to not more than 25% of its
total assets; (vi) enter into repurchase agreements of up to 25% of its total
assets and purchase and sell securities on a forward commitment basis; (vii) buy
and sell stock index futures contracts and buy and sell options on those
contracts and on stock indices; (viii) purchase and sell futures contracts,
options thereon and options with respect to U.S. Treasury securities; (ix) write
covered call and put options on securities it owns or in which it may invest;
and (x) purchase and sell put and call options. For additional information on
the use, risks and costs of these policies and practices see "Additional
Investment Practices."
Alliance Premier Growth Fund
Alliance Premier Growth Fund, Inc. ("Premier Growth Fund") is a diversified
investment company that seeks long-term growth of capital by investing
predominantly in the equity securities of a limited number of large, carefully
selected, high-quality U.S. companies that are judged likely to achieve superior
earnings growth. Normally, about 40 companies will be represented in the Fund's
portfolio, with the 25 most highly regarded of these companies usually
constituting approximately 70% of the Fund's net assets. The Fund is thus
atypical from most equity mutual funds in its focus on a relatively small number
of intensively researched companies and is designed for those seeking to
accumulate capital over time with less volatility than that associated with
investment in smaller companies.
As a matter of fundamental policy, the Fund normally invests at least 85% of its
total assets in the equity securities of U.S. companies. These are companies (i)
organized under U.S. law that have their principal office in the U.S., and (ii)
the equity securities of which are traded principally in the U.S.
Alliance's investment strategy for the Fund emphasizes stock selection and
investment in the securities of a limited number of
7
<PAGE>
issuers. Alliance relies heavily upon the fundamental analysis and research of
its large internal research staff, which generally follows a primary research
universe of more than 600 companies that have strong management, superior
industry positions, excellent balance sheets and superior earnings growth
prospects. An emphasis is placed on identifying companies whose substantially
above average prospective earnings growth is not fully reflected in current
market valuations.
In managing the Fund, Alliance seeks to utilize market volatility judiciously
(assuming no change in company fundamentals), striving to capitalize on
apparently unwarranted price fluctuations, both to purchase or increase
positions on weakness and to sell or reduce overpriced holdings. The Fund
normally remains nearly fully invested and does not take significant cash
positions for market timing purposes. During market declines, while adding to
positions in favored stocks, the Fund becomes somewhat more aggressive,
gradually reducing the number of companies represented in its portfolio.
Conversely, in rising markets, while reducing or eliminating fully valued
positions, the Fund becomes somewhat more conservative, gradually increasing the
number of companies represented in its portfolio. Alliance thus seeks to gain
positive returns in good markets while providing some measure of protection in
poor markets.
Alliance expects the average market capitalization of companies represented in
the Fund's portfolio normally to be in the range, or in excess, of the average
market capitalization of companies comprising the "S&P 500" (the Standard &
Poor's 500 Composite Stock Price Index, a widely recognized unmanaged index of
market activity).
The Fund may also: (i) invest up to 20% of its net assets in convertible
securities of companies whose common stocks are eligible for purchase by it;
(ii) invest up to 5% of its net assets in rights or warrants; (iii) invest up to
15% of its total assets in securities of foreign issuers whose common stocks are
eligible for purchase by it; (iv) purchase and sell exchange-traded index
options and stock index futures contracts; and (v) write covered exchange-traded
call options on common stocks, unless as a result, the amount of its securities
subject to call options would exceed 15% of its total assets, and purchase and
sell exchange-traded call and put options on common stocks written by others,
but the total cost of all options held by the Fund (including exchange-traded
index options) may not exceed 10% of its total assets. For additional
information on the use, risks and costs of these policies and practices see
"Additional Investment Practices." The Fund will not write put options.
Alliance Technology Fund
Alliance Technology Fund, Inc. ("Technology Fund") is a diversified investment
company that emphasizes growth of capital and invests for capital appreciation,
and only incidentally for current income. The Fund may seek income by writing
listed call options. The Fund invests primarily in securities of companies
expected to benefit from technological advances and improvements (i.e.,
companies that use technology extensively in the development of new or improved
products or processes). The Fund will normally have at least 80% of its assets
invested in the securities of these companies. The Fund normally will have
substantially all its assets invested in equity securities, but it also invests
in debt securities offering an opportunity for price appreciation. The Fund will
invest in listed and unlisted securities and U.S. and foreign securities, but it
will not purchase a foreign security if as a result 10% or more of the Fund's
total assets would be invested in foreign securities.
The Fund's policy is to invest in any company and industry and in any type of
security with potential for capital appreciation. It invests in well-known and
established companies and in new and unseasoned companies.
The Fund may also: (i) write and purchase exchange-listed call options and
purchase listed put options, including exchange-traded index put options; (ii)
invest up to 10% of its total assets in warrants; (iii) invest in restricted
securities and in other assets having no ready market if as a result no more
than 10% of the Fund's net assets are invested in such securities and assets;
(iv) lend portfolio securities equal in value to not more than 30% of the Fund's
total assets; and (v) invest up to 10% of its total assets in foreign
securities. For additional information on the use, risks and costs of the
policies and practices see "Additional Investment Practices."
Alliance Quasar Fund
Alliance Quasar Fund, Inc. ("Quasar Fund") is a diversified investment company
that seeks growth of capital by pursuing aggressive investment policies. It
invests for capital appreciation and only incidentally for current income. The
selection of securities based on the possibility of appreciation cannot prevent
loss in value. Moreover, because the Fund's investment policies are aggressive,
an investment in the Fund is risky and investors who want assured income or
preservation of capital should not invest in the Fund.
The Fund invests in any company and industry and in any type of security with
potential for capital appreciation. It invests in well-known and established
companies and in new and unseasoned companies. When selecting securities,
Alliance considers the economic and political outlook, the values of specific
securities relative to other investments, trends in the determinants of
corporate profits and management capability and practices.
The Fund invests principally in equity securities, but it also invests to a
limited degree in non-convertible bonds and preferred stocks. The Fund invests
in listed and unlisted U.S. and foreign securities. The Fund periodically
invests in special situations, which occur when the securities of a company are
expected to appreciate due to a development particularly or uniquely applicable
to that company and regardless of general business conditions or movements of
the market as a whole.
The Fund may also: (i) invest in restricted securities and in other assets
having no ready market, but not more than 10% of its total assets may be
invested in such securities or assets; (ii) make short sales of securities
"against the box," but not more than 15% of its net assets may be deposited on
8
<PAGE>
short sales; and (iii) write call options and purchase and sell put and call
options written by others. For additional information on the use, risks and
costs of these policies and practices see "Additional Investment Practices."
Global Stock Funds
The Global Stock Funds have been designed to enable investors to participate in
the potential for long-term capital appreciation available from investment in
foreign securities.
Alliance International Fund
Alliance International Fund ("International Fund") is a diversified investment
company that seeks a total return on its assets from long-term growth of capital
and from income primarily through a broad portfolio of marketable securities of
established non-U.S. companies, companies participating in foreign economies
with prospects for growth, including U.S. companies having their principal
activities and interests outside the U.S. and foreign government securities.
Normally, more than 80% of the Fund's assets will be invested in such issuers.
The Fund expects to invest primarily in common stocks of established non-U.S.
companies that Alliance believes have potential for capital appreciation or
income or both, but the Fund is not required to invest exclusively in common
stocks or other equity securities, and it may invest in any other type of
investment grade security, including convertible securities, warrants, or
obligations of the U.S. or foreign governments and their political subdivisions.
The Fund intends to diversify its investments broadly among countries and
normally invests in at least three foreign countries, although it may invest a
substantial portion of its assets in one or more of such countries. In this
regard, at August 31, 1996, approximately [36]% of the Fund's assets were
invested in securities of Japanese issuers. The Fund may invest in companies,
wherever organized, that Alliance judges have their principal activities and
interests outside the U.S. These companies may be located in developing
countries, which involves exposure to economic structures that are generally
less diverse and mature, and to political systems which can be expected to have
less stability, than those of developed countries. The Fund currently does not
intend to invest more than 10% of its total assets in companies in, or
governments of, developing countries.
The Fund may also: (i) purchase or sell forward foreign currency exchange
contracts; (ii) write, sell and purchase U.S. or foreign exchange-listed put and
call options, including exchange-traded index options; (iii) enter into
financial futures contracts, including contracts for the purchase or sale for
future delivery of foreign currencies and stock index futures, and purchase and
write put and call options on futures contracts traded on U.S. or foreign
exchanges or over-the-counter; (iv) purchase and write put options on foreign
currencies traded on securities exchanges or boards of trade or over-the-
counter; (v) lend portfolio securities equal in value to not more than 30% of
its total assets; and (vi) enter into repurchase agreements of up to seven days'
duration, provided that not more than 10% of the Fund's total assets would be so
invested. For additional information on the use, risks and costs of these
policies and practices see "Additional Investment Practices."
Alliance Worldwide Privatization Fund
Alliance Worldwide Privatization Fund, Inc. ("Worldwide Privatization Fund") is
a non-diversified investment company that seeks long-term capital appreciation.
As a fundamental policy, the Fund invests at least 65% of its total assets in
equity securities issued by enterprises that are undergoing, or have undergone,
privatization (as described below), although normally significantly more of its
assets will be invested in such securities. The balance of its investments will
include securities of companies believed by Alliance to be beneficiaries of
privatizations. The Fund is designed for investors desiring to take advantage of
investment opportunities, historically inaccessible to U.S. individual
investors, that are created by privatizations of state enterprises in both
established and developing economies, including those in Western Europe and
Scandinavia, Australia, New Zealand, Latin America, Asia and Eastern and Central
Europe and, to a lesser degree, Canada and the United States.
The Fund's investments in enterprises undergoing privatization may comprise
three distinct situations. First, the Fund may invest in the initial offering of
publicly traded equity securities (an "initial equity offering") of a
government- or state-owned or controlled company or enterprise (a "state
enterprise"). Secondly, the Fund may purchase securities of a current or former
state enterprise following its initial equity offering. Finally, the Fund may
make privately negotiated purchases of stock or other equity interests in a
state enterprise that has not yet conducted an initial equity offering. Alliance
believes that substantial potential for capital appreciation exists as
privatizing enterprises rationalize their management structures, operations and
business strategies in order to compete efficiently in a market economy, and the
Fund will thus emphasize investments in such enterprises.
The Fund diversifies its investments among a number of countries and normally
invests in issuers based in at least four, and usually considerably more,
countries. No more than 15% of the Fund's total assets, however, will be
invested in issuers in any one foreign country, except that the Fund may invest
up to 30% of its total assets in issuers in any one of France, Germany, Great
Britain, Italy and Japan. The Fund may invest all of its assets within a single
region of the world. To the extent that the Fund's assets are invested within
any one region, the Fund may be subject to any special risks that may be
associated with that region.
Privatization is a process through which the ownership and control of companies
or assets changes in whole or in part from the public sector to the private
sector. Through privatization a government or state divests or transfers all or
a portion of its interest in a state enterprise to some form of
9
<PAGE>
private ownership. Governments and states with established economies, including
France, Great Britain, Germany and Italy, and those with developing economies,
including Argentina, Mexico, Chile, Indonesia, Malaysia, Poland and Hungary, are
engaged in privatizations. The Fund will invest in any country believed to
present attractive investment opportunities.
A major premise of the Fund's approach is that the equity securities of
privatized companies offer opportunities for significant capital appreciation.
In particular, because privatizations are integral to a country's economic
restructuring, securities sold in initial equity offerings often are priced
attractively so as to secure the issuer's successful transition to private
sector ownership. Additionally, these enterprises often dominate their local
markets and typically have the potential for significant managerial and
operational efficiency gains.
Although the Fund anticipates that it will not concentrate its investments in
any industry, it is permitted to invest more than 25% of its total assets in
issuers whose primary business activity is that of national commercial banking.
Prior to so concentrating, however, the Fund's Directors must determine that its
ability to achieve its investment objective would be adversely affected if it
were not permitted to concentrate. The staff of the Commission is of the view
that registered investment companies may not, absent shareholder approval,
change between concentration and non-concentration in a single industry. The
Fund disagrees with the staff's position but has undertaken that it will not
concentrate in the securities of national commercial banks until, if ever, the
issue is resolved. If the Fund were to invest more than 25% of its total assets
in national commercial banks, the Fund's performance could be significantly
influenced by events or conditions affecting this industry, which is subject to,
among other things, increases in interest rates and deteriorations in general
economic conditions, and the Fund's investments may be subject to greater risk
and market fluctuation than if its portfolio represented a broader range of
investments.
The Fund may invest up to 35% of its total assets in debt securities and
convertible debt securities of issuers whose common stocks are eligible for
purchase by the Fund. The Fund may maintain not more than 5% of its net assets
in lower-rated securities. See "Risk Considerations--Securities Ratings" and
"-- Investment in Lower-Rated Fixed-Income Securities." The Fund will not retain
a non-convertible security that is downgraded below C or determined by Alliance
to have undergone similar credit quality deterioration following purchase.
The Fund may also: (i) invest up to 20% of its total assets in rights or
warrants; (ii) write covered put and call options and purchase put and call
options on securities of the types in which it is permitted to invest and on
exchange-traded index options; (iii) enter into contracts for the purchase or
sale for future delivery of fixed-income securities or foreign currencies, or
contracts based on financial indices, including any index of U.S. Government
securities, foreign government securities, or common stock and may purchase and
write options on future contracts; (iv) purchase and write put and call options
on foreign currencies for hedging purposes; (v) purchase or sell forward
contracts; (vi) enter in forward commitments for the purchase or sale of
securities; (vii) enter into standby commitment agreements; (viii) enter into
currency swaps for hedging purposes; (ix) enter into repurchase agreements
pertaining to U.S. Government securities with member banks of the Federal
Reserve System or primary dealers in such securities; (x) make short sales of
securities or maintain a short position; and (xi) make secured loans of its
portfolio securities not in excess of 30% of its total assets to entities with
which it can enter into repurchase agreements. For additional information on the
use, risks and costs of these policies and practices see "Additional Investment
Practices".
Alliance New Europe Fund
Alliance New Europe Fund, Inc. ("New Europe Fund") is a non-diversified
investment company that seeks long-term capital appreciation through investment
primarily in the equity securities of companies based in Europe. The Fund
intends to invest substantially all of its assets in the equity securities of
European companies and has a fundamental policy of normally investing at least
65% of its total assets in such securities. Up to 35% of its total assets may be
invested in high quality U.S. dollar or foreign currency denominated fixed-
income securities issued or guaranteed by European governmental entities, or by
European or multinational companies or supranational organizations.
Alliance believes that the quickening pace of economic integration and political
change in Europe creates the potential for many European companies to experience
rapid growth and that the emergence of new market economies in Europe and the
broadening and strengthening of other European economies may significantly
accelerate economic development. The Fund will invest in companies that Alliance
believes possess rapid growth potential. Thus, the Fund will emphasize
investments in smaller, emerging companies, but will also invest in larger,
established companies in such growing economic sectors as capital goods,
telecommunications, pollution control and consumer services.
The Fund will emphasize investment in companies believed to be the likely
beneficiaries of a program, originally known as the "1992 Program," to remove
substantially all barriers to the free movement of goods, persons, services and
capital within the European Community. Alliance believes that the beneficial
effects of this program upon economies, sectors and companies may be most
pronounced in the decade following 1992. The European Community is a Western
European economic cooperative organization consisting of Belgium, Denmark,
France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal,
Spain and the United Kingdom.
In recent years, economic ties between the former "east bloc" countries of
Eastern Europe and certain other European countries have been strengthened.
Alliance believes that as this strengthening continues, some Western European
financial institutions and other companies will have special opportunities to
facilitate East-West transactions. The Fund will seek investment opportunities
among such companies and, as such become available, within the former "east
bloc," although the Fund will not invest more than 20% of its total assets in
issuers
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based therein, or more than 10% of its total assets in issuers based in any one
such country.
The Fund diversifies its investments among a number of European countries and,
under normal circumstances, will invest in companies based in at least three
such countries. Subject to the foregoing and to the limitation on investment in
any one former "east bloc" country, the Fund may invest without limit in a
single European country. While the Fund does not intend to concentrate its
investments in a single country, at times 25% or more of its assets may be
invested in issuers located in a single country. During such times, the Fund
would be subject to a correspondingly greater risk of loss due to adverse
political or regulatory developments, or an economic downturn, within that
country. In this regard, at August 31, 1996, approximately [40%] of the Fund's
assets were invested in securities of issuers in the United Kingdom.
The Fund may also: (i) invest up to 10% of its total assets in securities for
which there is no ready market; (ii) invest up to 20% of its total assets in
warrants and rights to purchase equity securities of European companies; (iii)
invest in depositary receipts or other securities convertible into securities of
companies based in European countries, debt securities of supranational entities
denominated in the currency of any European country, debt securities denominated
in European Currency Units of an issuer in a European country (including
supranational issuers) and "semi-governmental securities"; (iv) purchase and
sell forward contracts; (v) write, sell and purchase exchange-traded put and
call options, including exchange-traded index options; (vi) enter into financial
futures contracts, including contracts for the purchase or sale for future
delivery of foreign currencies and futures contracts based on stock indices, and
purchase and write options on futures contracts; (vii) purchase and write put
options on foreign currencies traded on securities exchanges or boards of trade
or over-the-counter; (viii) make secured loans of portfolio securities not in
excess of 30% of its total assets to brokers, dealers and financial
institutions; (ix) enter into forward commitments for the purchase or sale of
securities; and (x) enter into standby commitment agreements. For additional
information on the use, risks and costs of these policies and practices see
"Additional Investment Practices."
Alliance All-Asia Investment Fund
Alliance All-Asia Investment Fund, Inc. ("All-Asia Investment Fund") is a
non-diversified investment company whose investment objective is to seek long-
term capital appreciation. In seeking to achieve its investment objective, the
Fund will invest at least 65% of its total assets in equity securities (for the
purposes of this investment policy, rights, warrants and options to purchase
common stocks are not deemed to be equity securities), preferred stocks and
equity-linked debt securities issued by Asian companies. The Fund may invest up
to 35% of its total assets in debt securities issued or guaranteed by Asian
companies or by Asian governments, their agencies or instrumentalities. The Fund
may also invest in securities issued by non-Asian issuers, provided that the
Fund will invest at least 80% of its total assets in securities issued by Asian
companies and the Asian debt securities referred to above. The Fund expects to
invest, from time to time, a significant portion, but less than 50%, of its
assets in equity securities of Japanese companies.
In the past decade, Asian countries generally have experienced a high level of
real economic growth due to political and economic changes, including foreign
investment and reduced government intervention in the economy. Alliance believes
that certain conditions exist in Asian countries which create the potential for
continued rapid economic growth. These conditions include favorable demographics
and competitive wage rates, increasing levels of foreign direct investment,
rising per capita incomes and consumer demand, a high savings rate and numerous
privatization programs. Asian countries are also becoming more industrialized
and are increasing their intra-Asian exports while reducing their dependence on
Western export demand. Alliance believes that these conditions are important to
the long-term economic growth of Asian countries.
As the economies of many Asian countries move through the "emerging market"
stage, thus increasing the supply of goods, services and capital available to
less developed Asian markets and helping to spur economic growth in those
markets, the potential is created for many Asian companies to experience rapid
growth. In addition, many Asian companies the securities of which are listed on
exchanges in more developed Asian countries will be participants in the rapid
economic growth of the lesser developed countries. These companies generally
offer the advantages of more experienced management and more developed market
regulation.
As their economies have grown, the securities markets in Asian countries have
also expanded. New exchanges have been created and the number of listed
companies, annual trading volume and overall market capitalization have
increased significantly. Additionally, new markets continue to open to foreign
investments. For example, South Korea and India have recently relaxed investment
restrictions and Vietnamese direct investments have recently become available to
U.S. investors. The Fund also offers investors the opportunity to access
relatively restricted markets. Alliance believes that investment opportunities
in Asian countries will continue to expand.
The Fund will invest in companies believed to possess rapid growth potential.
Thus, the Fund will invest in smaller, emerging companies, but will also invest
in larger, more established companies in such growing economic sectors as
capital goods, telecommunications and consumer services.
The Fund will invest in investment grade debt securities, except that the Fund
may maintain not more than 5% of its net assets in lower-rated securities and
lower-rated loans and other lower-rated direct debt instruments. See "Risk
Considerations--Securities Ratings," "--Investment in Lower-Rated Fixed-Income
Securities" and Appendix C in the Fund's Statement of Additional Information for
a description of such ratings. The Fund will not retain a security that is
downgraded below C or
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determined by Alliance to have undergone similar credit quality deterioration
following purchase.
The Fund may also: (i) invest up to 25% of its net assets in the convertible
securities of companies whose common stocks are eligible for purchase by the
Fund; (ii) invest up to 20% of its net assets in rights or warrants; (iii)
invest in depositary receipts, instruments of supranational entities denominated
in the currency of any country, securities of multinational companies and "semi-
governmental securities;" (iv) invest up to 25% of its net assets in equity-
linked debt securities with the objective of realizing capital appreciation; (v)
invest up to 25% of its net assets in loans and other direct debt instruments;
(vi) write covered put and call options on securities of the types in which it
is permitted to invest and on exchange-traded index options; (vii) enter into
contracts for the purchase or sale for future delivery of fixed-income
securities or foreign currencies, or contracts based on financial indices,
including any index of U.S. Government securities, securities issued by foreign
government entities, or common stock and may purchase and write options on
future contracts; (viii) purchase and write put and call options on foreign
currencies for hedging purposes; (ix) purchase or sell forward contracts; (x)
enter into interest rate swaps and purchase or sell interest rate caps and
floors; (xi) enter into forward commitments for the purchase or sale of
securities; (xii) enter into standby commitment agreements; (xiii) enter into
currency swaps for hedging purposes; (xiv) enter into repurchase agreements
pertaining to U.S. Government securities with member banks of the Federal
Reserve System or primary dealers in such securities; (xv) make short sales of
securities or maintain a short position, in each case only if "against the box;"
and (xvi) make secured loans of its portfolio securities not in excess of 30% of
its total assets to entities with which it can enter into repurchase agreements.
For additional information on the use, risks and costs of these policies and
practices see "Additional Investment Practices".
Alliance Global Small Cap Fund
Alliance Global Small Cap Fund, Inc. ("Global Small Cap Fund") is a diversified
investment company that seeks long-term growth of capital through investment in
a global portfolio of the equity securities of selected companies with
relatively small market capitalization. The Fund's portfolio emphasizes
companies with market capitalizations that would have placed them (when
purchased) in about the smallest 20% by market capitalization of actively traded
U.S. companies, or market capitalizations of up to about $1 billion. Because the
Fund applies the U.S. size standard on a global basis, its foreign investments
might rank above the lowest 20%, and, in fact, might in some countries rank
among the largest, by market capitalization in local markets. Normally, the Fund
invests at least 65% of its assets in equity securities of these smaller
capitalization issuers, and these issuers are located in at least three
countries, one of which may be the U.S. Up to 35% of the Fund's total assets may
be invested in securities of companies whose market capitalizations exceed the
Fund's size standard. The Fund's portfolio securities may be listed on a U.S. or
foreign exchange or traded over-the-counter.
Alliance believes that smaller capitalization issuers often have sales and
earnings growth rates exceeding those of larger companies, and that these growth
rates tend to cause more rapid share price appreciation. Investing in smaller
capitalization stocks, however, involves greater risk than is associated with
larger, more established companies. For example, smaller capitalization
companies often have limited product lines, markets, or financial resources.
They may be dependent for management on one or a few key persons, and can be
more susceptible to losses and risks of bankruptcy. Their securities may be
thinly traded (and therefore have to be sold at a discount from current market
prices or sold in small lots over an extended period of time), may be followed
by fewer investment research analysts and may be subject to wider price swings
and thus may create a greater chance of loss than when investing in securities
of larger capitalization companies. Transaction costs in small capitalization
stocks may be higher than in those of larger capitalization companies.
The Fund may also: (i) invest up to 10% of its total assets in securities for
which there is no ready market; (ii) invest up to 20% of its total assets in
warrants to purchase equity securities; (iii) invest in depositary receipts or
other securities representing securities of companies based in countries other
than the U.S.; (iv) purchase or sell forward foreign currency contracts; (v)
write and purchase exchange-traded call options and purchase exchange-traded put
options, including put options on market indices; and (vi) make secured loans of
portfolio securities not in excess of 30% of its total assets to brokers,
dealers and financial institutions. For additional information on the use, risks
and costs of these policies and practices see "Additional Investment Practices."
Total Return Funds
The Total Return Funds have been designed to provide a range of investment
alternatives to investors seeking both growth of capital and current income.
Alliance Strategic Balanced Fund
Alliance Strategic Balanced Fund ("Strategic Balanced Fund") is a diversified
investment company that seeks a high long-term total return by investing in a
combination of equity and debt securities. The portion of the Fund's assets
invested in each type of security varies in accordance with economic conditions,
the general level of common stock prices, interest rates and other relevant
considerations, including the risks associated with each investment medium. The
Fund's investment objective is not fundamental.
The Fund's equity securities will generally consist of dividend-paying common
stocks and other equity securities of companies with favorable earnings outlooks
and long-term growth rates that Alliance expects will exceed that of the U.S.
economy. The Fund's debt securities may include U.S. Government securities and
securities issued by private corporations. The Fund may also invest in mortgage-
backed securities, adjustable rate securities, asset-backed securities and so-
called "zero-coupon" bonds and "payment-in-kind" bonds.
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As a fundamental policy, the Fund will invest at least 25% of its total assets
in fixed-income securities, which for this purpose include debt securities,
preferred stocks and that portion of the value of convertible securities that is
attributable to the fixed-income characteristics of those securities.
The Fund's debt securities will generally be of investment grade. See "Risk
Considerations--Securities Ratings" and "--Investment in Lower-Rated Fixed-
Income Securities." In the event that the rating of any debt securities held by
the Fund falls below investment grade, the Fund will not be obligated to dispose
of such obligations and may continue to hold them if considered appropriate
under the circumstances.
The Fund may also: (i) invest in foreign securities, although the Fund will not
generally invest more than 15% of its total assets in foreign securities; (ii)
invest, without regard to this 15% limit, in Eurodollar CDs, which are dollar-
denominated certificates of deposit issued by foreign branches of U.S. banks
that are not insured by any agency or instrumentality of the U.S. Government;
(iii) write covered call and put options on securities it owns or in which it
may invest; (iv) buy and sell put and call options and buy and sell combinations
of put and call options on the same underlying securities; (v) lend portfolio
securities amounting to not more than 25% of its total assets; (vi) enter into
repurchase agreements on up to 25% of its total assets; (vii) purchase and sell
securities on a forward commitment basis; (viii) buy or sell foreign currencies,
options on foreign currencies, foreign currency futures contracts (and related
options) and deal in forward foreign exchange contracts; (ix) buy and sell stock
index futures contracts and buy and sell options on those contracts and on stock
indices; (x) purchase and sell futures contracts, options thereon and options
with respect to U.S. Treasury securities; and (xi) invest in securities that are
not publicly traded, including Rule 144A securities. For additional information
on the use, risks and costs of these policies and practices see "Additional
Investment Practices."
Alliance Balanced Shares
Alliance Balanced Shares, Inc. ("Balanced Shares") is a diversified investment
company that seeks a high return through a combination of current income and
capital appreciation. Although the Fund's investment objective is not
fundamental, the Fund is a "balanced fund" as a matter of fundamental policy.
The Fund will not purchase a security if as a result less than 25% of its total
assets will be in fixed-income senior securities (including short- and long-term
debt securities, preferred stocks, and convertible debt securities and
convertible preferred stocks to the extent that their values are attributable to
their fixed-income characteristics). Subject to these restrictions, the
percentage of the Fund's assets invested in each type of security will vary. The
Fund's assets are invested in U.S. Government securities, bonds, senior debt
securities and preferred and common stocks in such proportions and of such type
as are deemed best adapted to the current economic and market outlooks. The Fund
may invest up to 15% of the value of its total assets in foreign equity and
fixed-income securities eligible for purchase by the Fund under its investment
policies described above. See "Risk Considerations--Foreign Investment."
The Fund may also: (i) enter into contracts for the purchase or sale for future
delivery of foreign currencies; and (ii) purchase and write put and call options
on foreign currencies and enter into forward foreign currency exchange contracts
for hedging purposes. Subject to market conditions, the Fund may also seek to
realize income by writing covered call options listed on a domestic exchange.
For additional information on the use, risks and costs of these policies and
practices see "Additional Investment Practices."
Alliance Income Builder Fund
Alliance Income Builder Fund, Inc. ("Income Builder Fund") is a non-diversified
investment company that seeks an attractive level of current income and long-
term growth of income and capital by investing principally in fixed-income
securities and dividend-paying common stocks. Its investments in equity
securities emphasize common stocks of companies with a historical or projected
pattern of paying rising dividends. Normally, at least 65% of the Fund's total
assets are invested in income-producing securities. The Fund may vary the
percentage of assets invested in any one type of security based upon Alliance's
evaluation as to the appropriate portfolio structure for achieving the Fund's
investment objective, although Alliance currently maintains approximately 60% of
the Fund's net assets in fixed-income securities and 40% in equity
securities.
The Fund may invest in fixed-income securities of domestic and foreign issuers,
including U.S. Government securities and repurchase agreements pertaining
thereto, corporate fixed-income securities of U.S. issuers, qualifying bank
deposits and prime commercial paper.
The Fund may maintain up to 35% of its net assets in lower-rated securities. See
"Risk Considerations--Securities Ratings" and "--Investment in Lower-Rated
Fixed-Income Securities." The Fund will not retain a non-convertible security
that is downgraded below CCC or determined by Alliance to have undergone similar
credit quality deterioration following purchase.
Foreign securities in which the Fund invests may include fixed-income securities
of foreign corporate and governmental issuers, denominated in U.S. Dollars, and
equity securities of foreign corporate issuers, denominated in foreign
currencies or in U.S. Dollars. The Fund will not invest more than 10% of its net
assets in equity securities of foreign issuers nor more than 15% of its total
assets in issuers of any one foreign country. See "Risk Considerations--Foreign
Investment."
The Fund may also: (i) invest up to 5% of its net assets in rights or warrants;
(ii) invest in depositary receipts and U.S. Dollar denominated securities issued
by supranational entities; (iii) write covered put and call options and purchase
put and call options on securities of the types in which it is permitted to
invest that are exchange-traded; (iv) purchase and sell exchange-traded options
on any securities index composed of
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the types of securities in which it may invest; (v) enter into contracts for the
purchase or sale for future delivery of fixed-income securities or foreign
currencies, or contracts based on financial indices, including any index of U.S.
Government securities, foreign government securities, corporate fixed income
securities, or common stock, and purchase and write options on future contracts;
(vi) purchase and write put and call options on foreign currencies and enter
into forward contracts for hedging purposes; (vii) enter into interest rate
swaps and purchase or sell interest rate caps and floors; (viii) enter into
forward commitments for the purchase or sale of securities; (ix) enter into
standby commitment agreements; (x) enter into repurchase agreements pertaining
to U.S. Government securities with member banks of the Federal Reserve System or
primary dealers in such securities; (xi) make short sales of securities or
maintain a short position as described below under "Additional Investment
Policies and Practices--Short Sales;" and (xii) make secured loans of its
portfolio securities not in excess of 20% of its total assets to brokers,
dealers and financial institutions. For additional information on the use, risks
and costs of these policies and practices see "Additional Investment Practices."
Alliance Utility Income Fund
Alliance Utility Income Fund, Inc. ("Utility Income Fund") is a diversified
investment company that seeks current income and capital appreciation by
investing primarily in equity and fixed-income securities of companies in the
utilities industry. The Fund may invest in securities of both U.S. and foreign
issuers, although no more than 15% of the Fund's total assets will be invested
in issuers in any one foreign country. The utilities industry consists of
companies engaged in (i) the manufacture, production, generation, provision,
transmission, sale and distribution of gas and electric energy, and
communications equipment and services, including telephone, telegraph,
satellite, microwave and other companies providing communication facilities for
the public, or (ii) the provision of other utility or utility-related goods and
services, including, but not limited to, entities engaged in water provision,
cogeneration, waste disposal system provision, solid waste electric generation,
independent power producers and non-utility generators. The Fund is designed to
take advantage of the characteristics and historical performance of securities
of utility companies, many of which pay regular dividends and increase their
common stock dividends over time. As a fundamental policy, the Fund normally
invests at least 65% of its total assets in securities of companies in the
utilities industry. The Fund considers a company to be in the utilities industry
if, during the most recent twelve-month period, at least 50% of the company's
gross revenues, on a consolidated basis, were derived from its utilities
activities.
At least 65% of the Fund's total assets are invested in income-producing
securities, but there is otherwise no limit on the allocation of the Fund's
investments between equity securities and fixed-income securities. The Fund may
maintain up to 35% of its net assets in lower-rated securities. See "Risk
Considerations--Securities Ratings" and "--Investment in Lower-Rated Fixed-
Income Securities." The Fund will not retain a security that is downgraded below
B or determined by Alliance to have undergone similar credit quality
deterioration following purchase.
The United States utilities industry has experienced significant changes in
recent years. Electric utility companies in general have been favorably affected
by lower fuel costs, the full or near completion of major construction programs
and lower financing costs. In addition, many utility companies have generated
cash flows in excess of current operating expenses and construction
expenditures, permitting some degree of diversification into unregulated
businesses. Regulatory changes with respect to nuclear and conventionally fueled
generating facilities, however, could increase costs or impair the ability of
such electric utilities to operate such facilities, thus reducing their ability
to service dividend payments with respect to the securities they issue.
Furthermore, rates of return of utility companies generally are subject to
review and limitation by state public utilities commissions and tend to
fluctuate with marginal financing costs. Rate changes, however, ordinarily lag
behind the changes in financing costs, and thus can favorably or unfavorably
affect the earnings or dividend pay-outs on utilities stocks depending upon
whether such rates and costs are declining or rising.
Gas transmission companies, gas distribution companies and telecommunications
companies are also undergoing significant changes. Gas utilities have been
adversely affected by declines in the prices of alternative fuels, and have also
been affected by oversupply conditions and competition. Telephone utilities are
still experiencing the effects of the break-up of American Telephone & Telegraph
Company, including increased competition and rapidly developing technologies
with which traditional telephone companies now compete. Although there can be no
assurance that increased competition and other structural changes will not
adversely affect the profitability of such utilities, or that other negative
factors will not develop in the future, in Alliance's opinion, increased
competition and change may provide better positioned utility companies with
opportunities for enhanced profitability.
Utility companies historically have been subject to the risks of increases in
fuel and other operating costs, high interest costs, costs associated with
compliance with environmental and nuclear safety regulations, service
interruptions, economic slowdowns, surplus capacity, competition and regulatory
changes. There can also be no assurance that regulatory policies or accounting
standards changes will not negatively affect utility companies' earnings or
dividends. Utility companies are subject to regulation by various authorities
and may be affected by the imposition of special tariffs and changes in tax
laws. To the extent that rates are established or reviewed by governmental
authorities, utility companies are subject to the risk that such authorities
will not authorize increased rates. Because of the Fund's policy of
concentrating its investments in utility companies, the Fund is more susceptible
than most other mutual funds to economic, political or regulatory occurrences
affecting the utilities industry.
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Foreign utility companies, like those in the U.S., are generally subject to
regulation, although such regulations may or may not be comparable to domestic
regulations. Foreign utility companies in certain countries may be more heavily
regulated by their respective governments than utility companies located in the
U.S. and, as in the U.S., generally are required to seek government approval for
rate increases. In addition, because many foreign utility companies use fuels
that cause more pollution than those used in the U.S., such utilities may yet be
required to invest in pollution control equipment. Foreign utility regulatory
systems vary from country to country and may evolve in ways different from
regulation in the U.S. The percentage of the Fund's assets invested in issuers
of particular countries will vary. See "Risk Considerations--Foreign
Investment."
The Fund may invest up to 35% of its total assets in equity and fixed-income
securities of domestic and foreign corporate and governmental issuers other than
utility companies, including U.S. Government securities and repurchase
agreements pertaining thereto, foreign government securities, corporate fixed-
income securities of domestic issuers, corporate fixed-income securities of
foreign issuers denominated in foreign currencies or in U.S. dollars (in each
case including fixed-income securities of an issuer in one country denominated
in the currency of another country), qualifying bank deposits and prime
commercial paper.
The Fund may also: (i) invest up to 30% of its net assets in the convertible
securities of companies whose common stocks are eligible for purchase by the
Fund; (ii) invest up to 5% of its net assets in rights or warrants; (iii) invest
in depositary receipts, securities of supranational entities denominated in the
currency of any country, securities denominated in European Currency Units and
"semi-governmental securities;" (iv) write covered put and call options and
purchase put and call options on securities of the types in which it is
permitted to invest that are exchange-traded and over-the-counter; (v) purchase
and sell exchange-traded options on any securities index composed of the types
of securities in which it may invest; (vi) enter into contracts for the purchase
or sale for future delivery of fixed-income securities or foreign currencies, or
contracts based on financial indices, including an index of U.S. Government
securities, foreign government securities, corporate fixed-income securities, or
common stock, and may purchase and write options on futures contracts; (vii)
purchase and write put and call options on foreign currencies traded on U.S. and
foreign exchanges or over-the-counter for hedging purposes; (viii) purchase or
sell forward contracts; (ix) enter into interest rate swaps and purchase or sell
interest rate caps and floors; (x) enter in forward commitments for the purchase
or sale of securities; (xi) enter into standby commitment agreements; (xii)
enter into repurchase agreements pertaining to U.S. Government securities with
member banks of the Federal Reserve System or primary dealers in such
securities; (xiii) make short sales of securities or maintain a short position
as described below under "Additional Investment Practices--Short Sales;" and
(xiv) make secured loans of its portfolio securities not in excess of 20% of its
total assets to brokers, dealers and financial institutions. For additional
information on the use, risk and costs of these policies and practices, see
"Additional Investment Practices."
Alliance Growth and Income Fund
Alliance Growth and Income Fund, Inc. ("Growth and Income Fund") is a
diversified investment company that seeks appreciation through investments
primarily in dividend-paying common stocks of good quality, although it is
permitted to invest in fixed-income securities and convertible securities.
The Fund may also try to realize income by writing covered call options listed
on domestic securities exchanges. See "Additional Investment Practices--
Options." The Fund also invests in foreign securities. Since the purchase of
foreign securities entails certain political and economic risks, the Fund has
restricted its investments in securities in this category to issues of high
quality. See "Risk Considerations--Foreign Investment."
ADDITIONAL INVESTMENT PRACTICES
Some or all of the Funds may engage in the following investment practices to the
extent described above.
Convertible Securities. Prior to conversion, convertible securities have the
same general characteristics as non-convertible debt securities, which provide a
stable stream of income with generally higher yields that are generally higher
than those of equity securities of the same or similar issuers. The price of a
convertible security will normally vary with changes in the price of the
underlying stock, although the higher yield tends to make the convertible
security less volatile than the underlying common stock. As with debt
securities, the market value of convertible securities tends to decline as
interest rates increase and increase as interest rates decline. While
convertible securities generally offer lower interest or dividend yields than
non-convertible debt securities of similar quality, they offer investors the
potential to benefit from increases in the market price of the underlying common
stock. Convertible debt securities that are rated Baa or lower by Moody's or BBB
or lower by S&P, Duff & Phelps or Fitch and comparable unrated securities as
determined by Alliance may share some or all of the risks of non-convertible
debt securities with those ratings. For a description of these risks, see "Risk
Considerations--Securities Ratings" and "--Investment in Lower-Rated Fixed-
Income Securities."
Rights and Warrants. A Fund will invest in rights or warrants only if the
underlying equity securities themselves are deemed appropriate by Alliance for
inclusion in the Fund's portfolio. Rights and warrants entitle the holder to buy
equity securities at a specific price for a specific period of time. Rights are
similar to warrants except that they have a substantially shorter duration.
Rights and warrants may be considered more speculative than certain other types
of investments in that they do not entitle a holder to dividends or voting
rights with respect to the underlying securities nor do they represent any
rights in the assets of the issuing company. The value of a right or
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warrant does not necessarily change with the value of the underlying security,
although the value of a right or warrant may decline because of a decrease in
the value of the underlying security, the passage of time or a change in
perception as to the potential of the underlying security, or any combination
thereof. If the market price of the underlying security is below the exercise
price set forth in the warrant on the expiration date, the warrant will expire
worthless. Moreover, a right or warrant ceases to have value if it is not
exercised prior to the expiration date.
Depositary Receipts and Securities of Supranational Entities. Depositary
receipts may not necessarily be denominated in the same currency as the
underlying securities into which they may be converted. In addition, the issuers
of the stock of unsponsored depositary receipts are not obligated to disclose
material information in the United States and, therefore, there may not be a
correlation between such information and the market value of the depositary
receipts. ADRs are depositary receipts typically issued by a U.S. bank or trust
company that evidence ownership of underlying securities issued by a foreign
corporation. GDRs and other types of depositary receipts are typically issued by
foreign banks or trust companies and evidence ownership of underlying securities
issued by either a foreign or a U.S. company. Generally, depositary receipts in
registered form are designed for use in the U.S. securities markets, and
depositary receipts in bearer form are designed for use in foreign securities
markets. For purposes of determining the country of issuance, the investments of
Growth Fund, Strategic Balanced Fund and Income Builder Fund 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 while the investments of All-Asia Investment Fund in
depositary receipts of either type are deemed to be investments in the
underlying securities.
A supranational entity is an entity designated or supported by the national
government of one or more countries to promote economic reconstruction or
development. Examples of supranational entities include, among others, the World
Bank (International Bank for Reconstruction and Development) and the European
Investment Bank. A European Currency Unit is a basket of specified amounts of
the currencies of the member states of the European Economic Community. "Semi-
governmental securities" are securities issued by entities owned by either a
national, state or equivalent government or are obligations of one of such
government jurisdictions which are not backed by its full faith and credit and
general taxing powers.
Mortgage-Backed Securities. Interest and principal payments (including
prepayments) on the mortgages underlying mortgage-backed securities are passed
through to the holders of the securities. As a result of the pass-through of
prepayments of principal on the underlying securities, mortgage-backed
securities are often subject to more rapid prepayment of principal than their
stated maturity would indicate. Prepayments occur when the mortgagor on a
mortgage prepays the remaining principal before the mortgage's scheduled
maturity date. Because the prepayment characteristics of the underlying
mortgages vary, it is impossible to predict accurately the realized yield or
average life of a particular issue of pass-through certificates. Prepayments are
important because of their effect on the yield and price of the mortgage-backed
securities. During periods of declining interest rates, prepayments can be
expected to accelerate and a Fund investing in such securities would be required
to reinvest the proceeds at the lower interest rates then available. Conversely,
during periods of rising interest rates, a reduction in prepayments may
increase the effective maturity of the securities, subjecting them to a greater
risk of decline in market value in response to rising interest rates. In
addition, prepayments of mortgages underlying securities purchased at a premium
could result in capital losses.
Adjustable Rate Securities. Adjustable rate securities have interest rates that
are reset at periodic intervals, usually by reference to some interest rate
index or market interest rate. Some adjustable rate securities are backed by
pools of mortgage loans. Although the rate-adjustment feature may reduce sharp
changes in the value of adjustable rate securities, these securities can change
in value based on changes in market interest rates or the issuer's
creditworthiness. Changes in the interest rate on adjustable rate securities may
lag behind changes in prevailing market interest rates. Also, some adjustable
rate securities (or the underlying mortgages) are subject to caps or floors that
limit the maximum change in interest rate.
Asset-Backed Securities. Asset-backed securities (unrelated to first mortgage
loans) represent fractional interests in pools of leases, retail installment
loans, revolving credit receivables and other payment obligations, both secured
and unsecured. These assets are generally held by a trust and payments of
principal and interest or interest only are passed through monthly or quarterly
to certificate holders and may be guaranteed up to certain amounts by letters of
credit issued by a financial institution affiliated or unaffiliated with the
trustee or originator of the trust.
Like mortgages underlying mortgage-backed securities, underlying automobile
sales contracts or credit card receivables are subject to prepayment, which may
reduce the overall return to certificate holders. Certificate holders may also
experience delays in payment on the certificates if the full amounts due on
underlying sales contracts or receivables are not realized by the trust because
of unanticipated legal or administrative costs of enforcing the contracts or
because of depreciation or damage to the collateral (usually automobiles)
securing certain contracts, or other factors.
Zero-Coupon and Payment-in-Kind Bonds. Zero-coupon bonds are issued at a
significant discount from their principal amount in lieu of paying interest
periodically. Payment-in-kind bonds allow the issuer to make current interest
payments on the bonds in additional bonds. Because zero-coupon bonds and
payment-in-kind bonds do not pay current interest in cash, their value is
generally subject to greater fluctuation in response to changes in market
interest rates than bonds that pay interest
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in cash currently. Both zero-coupon and payment-in-kind bonds allow an issuer to
avoid the need to generate cash to meet current interest payments. Accordingly,
such bonds may involve greater credit risks than bonds paying interest
currently. Even though such bonds do not pay current interest in cash, a Fund is
nonetheless required to accrue interest income on such investments and to
distribute such amounts at least annually to shareholders. Thus, a Fund could be
required at times to liquidate other investments in order to satisfy its
dividend requirements.
Equity-Linked Debt Securities. Equity-linked debt securities are securities with
respect to which the amount of interest and/or principal that the issuer thereof
is obligated to pay is linked to the performance of a specified index of equity
securities. Such amount may be significantly greater or less than payment
obligations in respect of other types of debt securities. Adverse changes in
equity securities indices and other adverse changes in the securities markets
may reduce payments made under, and/or the principal of, equity-linked debt
securities held by the Fund. Furthermore, as with any debt securities, the
values of equity-linked debt securities will generally vary inversely with
changes in interest rates. The Fund's ability to dispose of equity-linked debt
securities will depend on the availability of liquid markets for such
securities. Investment in equity-linked debt securities may be considered to be
speculative. As with other securities, the Fund could lose its entire investment
in equity-linked debt securities.
Loans and Other Direct Debt Instruments. Loans and other direct debt instruments
are interests in amounts owed by a corporate, governmental or other borrower to
another party. They may represent amounts owed to lenders or lending syndicates
(loans and loan participations), to suppliers of goods or services (trade claims
or other receivables), or to other creditors. Direct debt instruments involve
the risk of loss in case of default or insolvency of the borrower and may offer
less legal protection to the Fund in the event of fraud or misrepresentation
than debt securities. In addition, loan participations involve a risk of
insolvency of the lending bank or other financial intermediary. Direct debt
instruments may also include standby financing commitments that obligate the
Fund to supply additional cash to the borrower on demand. Loans and other direct
debt instruments are generally illiquid and may be transferred only through
individually negotiated private transactions.
Purchasers of loans and other forms of direct indebtedness depend primarily upon
the creditworthiness of the borrower for payment of principal and interest.
Direct debt instruments may not be rated by any nationally recognized rating
service. If the Fund does not receive scheduled interest or principal payments
on such indebtedness, the Fund's share price and yield could be adversely
affected. Loans that are fully secured offer the Fund more protection than
unsecured loans in the event of non-payment of scheduled interest or principal.
However, there is no assurance that the liquidation of collateral from a secured
loan would satisfy the borrower's obligation, or that the collateral can be
liquidated. Indebtedness of borrowers whose creditworthiness is poor may involve
substantial risks, and may be highly speculative.
Borrowers that are in bankruptcy or restructuring may never pay off their
indebtedness, or may pay only a small fraction of the amount owed. Direct
indebtedness of Asian countries will also involve a risk that the governmental
entities responsible for the repayment of the debt may be unable, or unwilling,
to pay interest and repay principal when due.
Investments in loans through direct assignment of a financial institution's
interests with respect to a loan may involve additional risks to the Fund. For
example, if a loan is foreclosed, the Fund could become part owner of any
collateral, and would bear the costs and liabilities associated with owning and
disposing of the collateral. Direct debt instruments may also involve a risk of
insolvency of the lending bank or other intermediary.
A loan is often administered by a bank or other financial institution that acts
as agent for all holders. The agent administers the terms of the loan, as
specified on the loan agreement. Unless, under the terms of the loan or other
indebtedness, the Fund has direct recourse against the borrower, it may have to
rely on the agent to apply appropriate credit remedies against a borrower. If
assets held by the agent for the benefit of the Fund were determined to be
subject to the claims of the agent's general creditors, the Fund might incur
certain costs and delays in realizing payment on the loan or loan participation
and could suffer a loss of principal or interest.
Direct indebtedness purchased by the Fund may include letters of credit,
revolving credit facilities, or other standby financing commitments obligating
the Fund to pay additional cash on demand. These commitments may have the effect
of requiring the Fund to increase its investment in a borrower at a time when it
would not otherwise have done so, even if the borrower's condition makes it
unlikely that the amount will ever be repaid.
Illiquid Securities. Subject to any more restrictive applicable fundamental
investment policy, none of the Funds will maintain more than 15% of its net
assets in illiquid securities. Illiquid securities generally include (i) direct
placements or other securities that are subject to legal or contractual
restrictions on resale or for which there is no readily available market (e.g.,
when trading in the security is suspended or, in the case of unlisted
securities, when market makers do not exist or will not entertain bids or
offers), including many individually negotiated currency swaps and any assets
used to cover currency swaps and most privately negotiated investments in state
enterprises that have not yet conducted an initial equity offering, (ii) over-
the-counter options and assets used to cover over-the-counter options, and (iii)
repurchase agreements not terminable within seven days.
Because of the absence of a trading market for illiquid securities, a Fund may
not be able to realize their full value upon sale. With respect to each Fund
that may invest in such securities, Alliance will monitor their illiquidity
under the supervision of the Directors of the Fund. To the extent permitted by
applicable law, Rule 144A securities will not be treated as "illiquid" for
purposes of the foregoing restriction so
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long as such securities meet liquidity guidelines established by a Fund's
Directors. Investment in non-publicly traded securities by each of Growth Fund
and Strategic Balanced Fund is restricted to 5% of its total assets (not
including for these purposes Rule 144A securities, to the extent permitted by
applicable law) and is also subject to the 15% restriction on investment in
illiquid securities described above.
A Fund that invests in securities for which there is no ready market may
therefore not be able to readily sell such securities. To the extent that these
securities are foreign securities, there is no law in many of the countries in
which a Fund may invest similar to the Securities Act requiring an issuer to
register the sale of securities with a governmental agency or imposing legal
restrictions on resales of securities, either as to length of time the
securities may be held or manner of resale. However, there may be contractual
restrictions on resale of securities.
Options. An option gives the purchaser of the option, upon payment of a premium,
the right to deliver to (in the case of a put) or receive from (in the case of a
call) the writer a specified amount of a security on or before a fixed date at a
predetermined price. A call option written by a Fund is "covered" if the Fund
owns the underlying security, has an absolute and immediate right to acquire
that security upon conversion or exchange of another security it holds, or holds
a call option on the underlying security with an exercise price equal to or less
than that of the call option it has written. A put option written by a Fund is
covered if the Fund holds a put option on the underlying securities with an
exercise price equal to or greater than that of the put option it has written.
A call option is for cross-hedging purposes if a Fund does not own the
underlying security, and is designed to provide a hedge against a decline in
value in another security which the Fund owns or has the right to acquire.
Worldwide Privatization Fund, All-Asia Investment Fund, Income Builder Fund and
Utility Income Fund each may write call options for cross-hedging purposes. A
Fund would write a call option for cross-hedging purposes, instead of writing a
covered call option, when the premium to be received from the cross-hedge
transaction would exceed that which would be received from writing a covered
call option, while at the same time achieving the desired hedge.
In purchasing an option, a Fund would be in a position to realize a gain if,
during the option period, the price of the underlying security increased (in the
case of a call) or decreased (in the case of a put) by an amount in excess of
the premium paid; otherwise the Fund would experience a loss equal to the
premium paid for the option.
If an option written by a Fund were exercised, the Fund would be obligated to
purchase (in the case of a put) or sell (in the case of a call) the underlying
security at the exercise price. The risk involved in writing an option is that,
if the option were exercised, the underlying security would then be purchased or
sold by the Fund at a disadvantageous price. These risks could be reduced by
entering into a closing transaction (i.e., by disposing of the option prior to
its exercise). A Fund retains the premium received from writing a put or call
option whether or not the option is exercised. The writing of covered call
options could result in increases in a Fund's portfolio turnover rate,
especially during periods when market prices of the underlying securities
appreciate.
Technology Fund, Quasar Fund, International Fund, New Europe Fund and Global
Small Cap Fund will not write uncovered call options. Technology Fund and Global
Small Cap Fund will not write a call option if the premium to be received by the
Fund in doing so would not produce an annualized return of at least 15% of the
then current market value of the securities subject to the option (without
giving effect to commissions, stock transfer taxes and other expenses that are
deducted from premium receipts). Technology Fund, Quasar Fund and Global Small
Cap Fund will not write a call option if, as a result, the aggregate of the
Fund's portfolio securities subject to outstanding call options (valued at the
lower of the option price or market value of such securities) would exceed 15%
of the Fund's total assets or more than 10% of the Fund's assets would be
committed to call options that at the time of sale have a remaining term of more
than 100 days. The aggregate cost of all outstanding options purchased and held
by each of Premier Growth Fund, Technology Fund, Quasar Fund and Global Small
Cap Fund will at no time exceed 10% of the Fund's total assets. Neither
International Fund nor New Europe Fund will write uncovered put options.
A Fund that purchases or writes options on securities in privately negotiated
(i.e., over-the-counter) transactions will effect such transactions only with
investment dealers and other financial institutions (such as commercial banks or
savings and loan institutions) deemed creditworthy by Alliance, and Alliance has
adopted procedures for monitoring the creditworthiness of such entities. Options
purchased or written by a Fund in negotiated transactions are illiquid and it
may not be possible for the Fund to effect a closing transaction at an
advantageous time. See "Illiquid Securities."
Options on Securities Indices. An option on a securities index is similar to an
option on a security except that, rather than the right to take or make delivery
of a security at a specified price, an option on a securities index gives the
holder the right to receive, upon exercise of the option, an amount of cash if
the closing level of the chosen index is greater than (in the case of a call) or
less than (in the case of a put) the exercise price of the option.
Futures Contracts and Options on Futures Contracts. A "sale" of a futures
contract means the acquisition of a contractual obligation to deliver the
securities or foreign currencies or other commodity called for by the contract
at a specified price on a specified date. A "purchase" of a futures contract
means the incurring of an obligation to acquire the securities, foreign
currencies or other commodity called for by the contract at a specified price on
a specified date. The purchaser of a futures contract on an index agrees to take
or make delivery of an amount of cash equal to the difference between a
specified dollar multiple of the value of the index on the expiration date
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of the contract ("current contract value") and the price at which the contract
was originally struck. No physical delivery of the securities underlying the
index is made.
Options on futures contracts written or purchased by a Fund will be traded on
U.S. or foreign exchanges or over-the-counter. These investment techniques will
be used only to hedge against anticipated future changes in market conditions
and interest or exchange rates which otherwise might either adversely affect the
value of the Fund's portfolio securities or adversely affect the prices of
securities which the Fund intends to purchase at a later date.
No Fund will enter into any futures contracts or options on futures contracts if
immediately thereafter the market values of the outstanding futures contracts of
the Fund and the currencies and futures contracts subject to outstanding options
written by the Fund would exceed 50% of its total assets, and Income Builder
Fund will also not do so if immediately thereafter the aggregate of initial
margin deposits on all the outstanding futures contracts of the Fund and
premiums paid on outstanding options on futures contracts would exceed 5% of the
market value of the total assets of the Fund. Premier Growth Fund may not
purchase or sell a stock index future if immediately thereafter more than 30% of
its total assets would be hedged by stock index futures. Premier Growth Fund may
not purchase or sell a stock index future if, immediately thereafter, the sum of
the amount of margin deposits on the Fund's existing futures positions would
exceed 5% of the market value of the Fund's total assets.
Options on Foreign Currencies. As in the case of other kinds of options, the
writing of an option on a foreign currency constitutes only a partial hedge, up
to the amount of the premium received, and a Fund could be required to purchase
or sell foreign currencies at disadvantageous exchange rates, thereby incurring
losses. The purchase of an option on a foreign currency may constitute an
effective hedge against fluctuations in exchange rates although, in the event of
rate movements adverse to a Fund's position, it may forfeit the entire amount of
the premium plus related transaction costs. See the Statement of Additional
Information of each Fund that may invest in options on foreign currencies for
further discussion of the use, risks and costs of options on foreign currencies.
Forward Foreign Currency Exchange Contracts. A Fund purchases or sells forward
contracts to minimize the risk to it from adverse changes in the relationship
between the U.S. dollar and other currencies. A forward contract is an
obligation to purchase or sell a specific currency for an agreed price at a
future date, and is individually negotiated and privately traded.
A Fund may enter into a forward contract, for example, when it enters into a
contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. dollar price of the security
("transaction hedge"). A Fund will not engage in transaction hedges with respect
to the currency of a particular country to an extent greater than the aggregate
amount of the Fund's transactions in that currency. When a Fund believes that a
foreign currency may suffer a substantial decline against the U.S. dollar, it
may enter into a forward sale contract to sell an amount of that foreign
currency approximating the value of some or all of the Fund's portfolio
securities denominated in such foreign currency, or when the Fund believes that
the U.S. dollar may suffer a substantial decline against a foreign currency, it
may enter into a forward purchase contract to buy that foreign currency for a
fixed dollar amount ("position hedge"). A Fund will not position hedge with
respect to the currency of a particular country 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 particular foreign currency.
Instead of entering into a position hedge, a Fund may, in the alternative, enter
into a forward contract to sell a different foreign currency for a fixed U.S.
dollar amount where the Fund believes that the U.S. dollar value of the currency
to be sold pursuant to the forward contract will fall whenever there is a
decline in the U.S. dollar value of the currency in which portfolio securities
of the Fund are denominated ("cross-hedge"). Unanticipated changes in currency
prices may result in poorer overall performance for the Fund than if it had not
entered into such forward contracts.
Hedging against a decline in the value of a currency does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Such transactions also preclude the
opportunity for gain if the value of the hedged currency should rise. Moreover,
it may not be possible for a Fund to hedge against a devaluation that is so
generally anticipated that the Fund is not able to contract to sell the currency
at a price above the devaluation level it anticipates. International Fund, New
Europe Fund and Global Small Cap Fund will not enter into a forward contract
with a term of more than one year or if, as a result, more than 50% of its total
assets would be committed to such contracts. The dealings of International Fund,
New Europe Fund and Global Small Cap Fund in forward contracts will be limited
to hedging involving either specific transactions or portfolio positions.
Growth Fund and Strategic Balanced Fund may also purchase and sell foreign
currency on a spot basis.
Forward Commitments. Forward commitments for the purchase or sale of securities
may include purchases on a "when-issued" basis or purchases or sales on a
"delayed delivery" basis. In some cases, a forward commitment may be conditioned
upon the occurrence of a subsequent event, such as approval and consummation of
a merger, corporate reorganization or debt restructuring (i.e., a "when, as and
if issued" trade).
When forward commitment transactions are negotiated, the price is fixed at the
time the commitment is made, but delivery and payment for the securities take
place at a later date. Normally, the settlement date occurs within two months
after the transaction, but settlements beyond two months may be negotiated.
Securities purchased or sold under a forward commitment are subject to market
fluctuation, and no interest
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or dividends accrue to the purchaser prior to the settlement date. At the time a
Fund intends to enter into a forward commitment, it records the transaction and
thereafter reflects the value of the security purchased or, if a sale, the
proceeds to be received, in determining its net asset value. Any unrealized
appreciation or depreciation reflected in such valuation of a "when, as and if
issued" security would be canceled in the event that the required conditions did
not occur and the trade was canceled.
The use of forward commitments enables a Fund to protect against anticipated
changes in interest rates and prices. For instance, in periods of rising
interest rates and falling bond prices, a Fund might sell securities in its
portfolio on a forward commitment basis to limit its exposure to falling prices.
In periods of falling interest rates and rising bond prices, a Fund might sell a
security in its portfolio and purchase the same or a similar security on a when-
issued or forward commitment basis, thereby obtaining the benefit of currently
higher cash yields. However, if Alliance were to forecast incorrectly the
direction of interest rate movements, a Fund might be required to complete such
when-issued or forward transactions at prices inferior to the then current
market values. When-issued securities and forward commitments may be sold prior
to the settlement date, but a Fund enters into when-issued and forward
commitments only with the intention of actually receiving securities or
delivering them, as the case may be. If a Fund chooses to dispose of the right
to acquire a when-issued security prior to its acquisition or dispose of its
right to deliver or receive against a forward commitment, it may incur a gain or
loss. Any significant commitment of Fund assets to the purchase of securities on
a "when, as and if issued" basis may increase the volatility of the Fund's net
asset value. No forward commitments will be made by New Europe Fund, All-Asia
Investment Fund, Worldwide Privatization Fund, Income Builder Fund or Utility
Income Fund if, as a result, the Fund's aggregate commitments under such
transactions would be more than 30% of the Fund's total assets. In the event the
other party to a forward commitment transaction were to default, a Fund might
lose the opportunity to invest money at favorable rates or to dispose of
securities at favorable prices.
Standby Commitment Agreements. Standby commitment agreements commit a Fund, for
a stated period of time, to purchase a stated amount of a security that may be
issued and sold to the Fund at the option of the issuer. The price and coupon of
the security are fixed at the time of the commitment. At the time of entering
into the agreement the Fund is paid a commitment fee, regardless of whether the
security ultimately is issued, typically equal to approximately 0.5% of the
aggregate purchase price of the security the Fund has committed to purchase. A
Fund will enter into such agreements only for the purpose of investing in the
security underlying the commitment at a yield and price considered advantageous
to the Fund and unavailable on a firm commitment basis. No Fund, other than
Income Builder Fund, will enter into a standby commitment with a remaining term
in excess of 45 days. Investments in standby commitments will be limited so that
the aggregate purchase price of the securities subject to the commitments will
not exceed 25% with respect to New Europe Fund, 50% with respect to Worldwide
Privatization Fund and All-Asia Investment Fund, and 20% with respect to Utility
Income Fund, of the Fund's assets taken at the time of making the commitment.
There is no guarantee that a security subject to a standby commitment will be
issued and the value of the security, if issued, on the delivery date may be
more or less than its purchase price. Since the issuance of the security
underlying the commitment is at the option of the issuer, a Fund will bear the
risk of capital loss in the event the value of the security declines and may not
benefit from an appreciation in the value of the security during the commitment
period if the issuer decides not to issue and sell the security to the Fund.
Currency Swaps. Currency swaps involve the individually negotiated exchange by a
Fund with another party of a series of payments in specified currencies. A
currency swap may involve the delivery at the end of the exchange period of a
substantial amount of one designated currency in exchange for the other
designated currency. Therefore the entire principal value of a currency swap is
subject to the risk that the other party to the swap will default on its
contractual delivery obligations. The net amount of the excess, if any, of a
Fund's obligations over its entitlements with respect to each currency swap will
be accrued on a daily basis. A Fund will not enter into any currency swap unless
the credit quality of the unsecured senior debt or the claims-paying ability of
the other party thereto is rated in the highest rating category of at least one
nationally recognized rating organization at the time of entering into the
transaction. If there is a default by the other party to such a transaction,
such Fund will have contractual remedies pursuant to the agreements related to
the transactions.
Interest Rate Transactions. Each Fund that may enter into interest rate
transactions expects to do so primarily to preserve a return or spread on a
particular investment or portion of its portfolio or to protect against any
increase in the price of securities the Fund anticipates purchasing at a later
date. The Funds do not intend to use these transactions in a speculative manner.
Interest rate swaps involve the exchange by a Fund with another party of their
respective commitments to pay or receive interest (e.g., an exchange of floating
rate payments for fixed rate payments). Interest rate swaps are entered on a net
basis (i.e., the two payment streams are netted out, with the Fund receiving or
paying, as the case may be, only the net amount of the two payments). With
respect to All-Asia Investment Fund and Utility Income Fund, the exchange
commitments can involve payments in the same currency or in different
currencies. The purchase of an interest rate cap entitles the purchaser, to the
extent that a specified index exceeds a predetermined interest rate, to receive
payments of interest on a contractually-based principal amount from the
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party selling such interest rate cap. The purchase of an interest rate floor
entitles the purchaser, to the extent that a specified index falls below a
predetermined interest rate, to receive payments of interest on an agreed
principal amount from the party selling the interest rate floor.
A Fund may enter into interest rate swaps, caps and floors on either an asset-
based or liability-based basis, depending upon whether it is hedging its assets
or liabilities. The net amount of the excess, if any, of a Fund's obligations
over its entitlements with respect to each interest rate swap, cap and floor is
accrued daily. A Fund will not enter into an interest rate swap, cap or floor
transaction unless the unsecured senior debt or the claims-paying ability of the
other party thereto is then rated in the highest rating category of at least one
nationally recognized rating organization. Alliance will monitor the
creditworthiness of counterparties on an ongoing basis. The swap market has
grown substantially in recent years, with a large number of banks and investment
banking firms acting both as principals and as agents utilizing standardized
swap documentation. As a result, the swap market has become relatively liquid.
Caps and floors are more recent innovations for which standardized documentation
has not yet been developed and, accordingly, they are less liquid than swaps.
The use of interest rate transactions is a highly specialized activity which
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. If Alliance were to incorrectly
forecast market values, interest rates and other applicable factors, the
investment performance of a Fund would be adversely affected by the use of these
investment techniques. Moreover, even if Alliance is correct in its forecasts,
there is a risk that the transaction position may correlate imperfectly with the
price of the asset or liability being hedged. There is no limit on the amount of
interest rate transactions that may be entered into by a Fund that is permitted
to enter into such transactions. These transactions do not involve the delivery
of securities or other underlying assets or principal. Accordingly, the risk of
loss with respect to interest rate transactions is limited to the net amount of
interest payments that a Fund is contractually obligated to make. If the other
party to an interest rate transaction defaults, a Fund's risk of loss consists
of the net amount of interest payments that the Fund contractually is entitled
to receive.
Repurchase Agreements. A repurchase agreement arises when a buyer purchases a
security and simultaneously agrees to resell it to the vendor at an agreed-upon
future date, normally a day or a few days later. The resale price is greater
than the purchase price, reflecting an agreed-upon interest rate for the period
the buyer's money is invested in the security. Such agreements permit a Fund to
keep all of its assets at work while retaining "overnight" flexibility in
pursuit of investments of a longer-term nature. If a vendor defaults on its
repurchase obligation, a Fund would suffer a loss to the extent that the
proceeds from the sale of the collateral were less than the repurchase price. If
a vendor goes bankrupt, a Fund might be delayed in, or prevented from, selling
the collateral for its benefit. Alliance monitors the creditworthiness of the
vendors with which the Fund enters into repurchase agreements. There is no
percentage restriction on a Fund's ability to enter into repurchase agreements,
other than as indicated under "Investment Objectives and Policies."
Short Sales. A short sale is effected by selling a security that a Fund does not
own, or if the Fund does own such security, it is not to be delivered upon
consummation of the sale. A short sale is "against the box" to the extent that a
Fund contemporaneously owns or has the right to obtain securities identical to
those sold short without payment. Worldwide Privatization Fund, All-Asia
Investment Fund, Income Builder Fund and Utility Income Fund each may make short
sales of securities or maintain short positions only for the purpose of
deferring realization of gain or loss for U.S. federal income tax purposes,
provided that at all times when a short position is open the Fund owns an equal
amount of securities of the same issue as, and equal in amount to, the
securities sold short. In addition, each of those Funds may not make a short
sale if as a result more than 10% of the Fund's net assets would be held as
collateral for short sales, except that All-Asia Investment Fund may not make a
short sale if as a result more than 25% of the Fund's net assets would be held
as collateral for short sales. If the price of the security sold short increases
between the time of the short sale and the time a Fund replaces the borrowed
security, the Fund will incur a loss; conversely, if the price declines, the
Fund will realize a capital gain. See "Certain Fundamental Investment Policies."
Certain special federal income tax considerations may apply to short sales
entered into by a Fund. See "Dividends, Distributions and Taxes" in the relevant
Fund's Statement of Additional Information.
Loans of Portfolio Securities. The 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, Alliance will consider all relevant facts
and circumstances, including the creditworthiness of the borrower. While
securities are on loan, the borrower will pay the Fund any income earned thereon
and the Fund may invest any cash collateral in portfolio securities, thereby
earning additional income, or receive an agreed upon amount of income from a
borrower who has delivered equivalent collateral. Each Fund will have the right
to regain record ownership of loaned securities or equivalent securities in
order to exercise ownership rights such as voting rights, subscription rights
and rights to dividends, interest or distributions. A Fund may pay reasonable
finders', administrative and custodial fees in connection with a loan. A Fund
will not lend its portfolio securities to any officer, director, employee or
affiliate of the Fund or Alliance.
General. The successful use of the foregoing investment practices draws upon
Alliance's special skills and experience with respect to such instruments and
usually depends on Alliance's ability to forecast price movements, interest
rates or currency exchange rate movements correctly. Should interest rates,
prices
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or exchange rates move unexpectedly, a Fund may not achieve the anticipated
benefits of the transactions or may realize losses and thus be in a worse
position than if such strategies had not been used. Unlike many exchange-traded
futures contracts and options on futures contracts, there are no daily price
fluctuation limits with respect to certain options and forward contracts, and
adverse market movements could therefore continue to an unlimited extent over a
period of time. In addition, the correlation between movements in the prices of
futures contracts, options and forward contracts and movements in the prices of
the securities and currencies hedged or used for cover will not be perfect and
could produce unanticipated losses.
A Fund's ability to dispose of its position in futures contracts, options and
forward contracts depends on the availability of liquid markets in such
instruments. Markets in options and futures with respect to a number of types of
securities and currencies are relatively new and still developing, and there is
no public market for forward contracts. It is impossible to predict the amount
of trading interest that may exist in various types of futures contracts,
options and forward contracts. If a secondary market does not exist with respect
to an option purchased or written by a Fund, it might not be possible to effect
a closing transaction in the option (i.e., dispose of the option) with the
result that (i) an option purchased by the Fund would have to be exercised in
order for the Fund to realize any profit and (ii) the Fund may not be able to
sell currencies or portfolio securities covering an option written by the Fund
until the option expires or it delivers the underlying security, futures
contract or currency upon exercise. Therefore, no assurance can be given that
the Funds will be able to utilize these instruments effectively for the purposes
set forth above. Furthermore, a Fund's ability to engage in options and futures
transactions may be limited by tax considerations. See "Dividends, Distributions
and Taxes" in the Statement of Additional Information of each Fund that invests
in options and futures.
Future Developments. A Fund may, following written notice to its shareholders,
take advantage of other investment practices that are not currently contemplated
for use by the Fund or are not available but may yet be developed, to the extent
such investment practices are consistent with the Fund's investment objective
and legally permissible for the Fund. Such investment practices, if they arise,
may involve risks that exceed those involved in the activities described above.
Defensive Position. For temporary defensive purposes, each Fund may invest in
certain types of short-term, liquid, high grade or high quality (depending on
the Fund) debt securities. These securities may include U.S. Government
securities, qualifying bank deposits, money market instruments, prime commercial
paper and other types of short-term debt securities including notes and bonds.
For Funds that may invest in foreign countries, such securities may also include
short-term, foreign-currency denominated securities of the type mentioned above
issued by foreign governmental entities, companies and supranational
organizations. For a complete description of the types of securities each Fund
may invest in while in a temporary defensive position, please see such Fund's
Statement of Additional Information.
Portfolio Turnover. Portfolio turnover rates for the existing classes of shares
of the Fund are set forth in the tables that begin on page 36. These portfolio
turnover rates are greater than those of most other investment companies,
including those which emphasize capital appreciation as a basic policy. A high
rate of portfolio turnover involves correspondingly greater brokerage and other
expenses than a lower rate, which must be borne by the Fund and its
shareholders. High portfolio turnover also may result in the realization of
substantial net short-term capital gains. See "Dividends, Distributions and
Taxes" in each Fund's Statement of Additional Information.
CERTAIN FUNDAMENTAL INVESTMENT POLICIES
Each Fund has adopted certain fundamental investment
policies listed below, which may not be changed without the approval of its
shareholders. Additional investment restrictions with respect to a Fund are set
forth in its Statement of Additional Information.
Alliance Fund may not: (i) invest more than 5% of its total assets in the
securities of any one issuer (other than the U.S. Government); (ii) acquire more
than 10% of the voting or other securities of any one issuer; or (iii) buy
securities of any company that (including its predecessors) has not been in
business at least three continuous years. Pursuant to investment policies which
are not fundamental, the Fund does not invest (i) in puts or calls (except as
discussed above); (ii) in straddles, spreads, or any combination thereof;
(iii) in oil, gas or other mineral exploration or development programs; or (iv)
more than 5% of its gross assets in securities the disposition of which would be
subject to restrictions under the federal securities laws.
Growth Fund and Strategic Balanced Fund each may not: (i) invest more than 5% of
its total assets in the securities of any one issuer (other than U.S. Government
securities and repurchase agreements relating thereto), although up to 25% of
each Fund's total assets may be invested without regard to this restriction; or
(ii) invest 25% or more of its total assets in the securities of any one
industry.
Premier Growth Fund may not: (i) purchase more than 10% of the outstanding
voting securities of any one issuer; (ii) invest 25% or more of the value of its
total assets in the same industry; (iii) borrow money or issue senior securities
except for temporary or emergency purposes in an amount not exceeding 5% of the
value of its total assets at the time the borrowing is made; (iv) pledge,
mortgage, hypothecate or otherwise encumber any of its assets except in
connection with the writing of call options and except to secure permitted
borrowings; or (v) invest in the securities of any issuer that has a record of
less than three years of continuous operation (including the operation of any
predecessor) if as a result more than 10% of the value of the total assets of
the Fund would be invested in the securities of such issuer or issuers.
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Technology Fund may not: (i) with respect to 75% of its total assets, have such
assets represented by other than: (a) cash and cash items, (b) U.S. Government
securities, or (c) securities of any one issuer (other than the U.S. Government
and its agencies or instrumentalities) not greater in value than 5% of the
Fund's total assets, and not more than 10% of the outstanding voting securities
of such issuer; (ii) purchase the securities of any one issuer, other than the
U.S. Government and its agencies or instrumentalities, if as a result (a) the
value of the holdings of the Fund in the securities of such issuer exceeds 25%
of its total assets, or (b) the Fund owns more than 25% of the outstanding
securities of any one class of securities of such issuer; (iii) concentrate its
investments in any one industry, but the Fund has reserved the right to invest
up to 25% of its total assets in a particular industry; and (iv) invest in the
securities of any issuer which has a record of less than three years of
continuous operation (including the operation of any predecessor) if such
purchase would cause 10% or more of its total assets to be invested in the
securities of such issuers.
Quasar Fund may not: (i) purchase the securities of any one issuer, other than
the U.S. Government or any of its agencies or instrumentalities, if as a result
more than 5% of its total assets would be invested in such issuer or the Fund
would own more than 10% of the outstanding voting securities of such issuer,
except that up to 25% of its total assets may be invested without regard to
these 5% and 10% limitations; (ii) invest more than 25% of its total assets in
any particular industry; (iii) borrow money except for temporary or emergency
purposes in an amount not exceeding 5% of its total assets at the time the
borrowing is made; or (iv) invest more than 10% of its assets in restricted
securities.
International Fund may not: (i) invest more than 5% of the value of its total
assets in securities of a single issuer (including repurchase agreements with
any one entity), except U.S. Government securities or foreign government
securities; provided, however, that the Fund may not, with respect to 75% of its
total assets, invest more than 5% of its total assets in securities of any one
foreign government issuer; (ii) own more than 10% of the outstanding securities
of any class of any issuer (for this purpose, all preferred stocks of an issuer
shall be deemed a single class, and all indebtedness of an issuer shall be
deemed a single class), except U.S. Government securities; (iii) invest more
than 25% of the value of its total assets in securities of issuers having their
principal business activities in the same industry; provided, that this
limitation does not apply to U.S. Government securities or foreign government
securities; (iv) invest more than 5% of the value of its total assets in the
securities of any issuer that has a record of less than three years of
continuous operation (including the operation of any predecessor or
unconditional guarantor), except U.S. Government securities or foreign
government securities; (v) invest more than 5% of the value of its total assets
in securities with legal or contractual restrictions on resale, other than
repurchase agreements, or more than 10% of the value of its total assets in
securities that are not readily marketable (including restricted securities and
repurchase agreements not terminable within seven business days); and (vi)
borrow money, except as a temporary measure for extraordinary or emergency
purposes, and then only from banks in amounts not exceeding 5% of its total
assets.
Worldwide Privatization Fund may not: (i) invest 25% or more of its total assets
in securities of issuers conducting their principal business activities in the
same industry, except that this restriction does not apply to (a) U.S.
Government securities, or (b) the purchase of securities of issuers whose
primary business activity is in the national commercial banking industry, so
long as the Fund's Directors determine, on the basis of factors such as
liquidity, availability of investments and anticipated returns, that the Fund's
ability to achieve its investment objective would be adversely affected if the
Fund were not permitted to invest more than 25% of its total assets in those
securities, and so long as the Fund notifies its shareholders of any decision by
the Directors to permit or cease to permit the Fund to invest more than 25% of
its total assets in those securities, such notice to include a discussion of any
increased investment risks to which the Fund may be subjected as a result of the
Directors' determination; (ii) borrow money except from banks for temporary or
emergency purposes, including the meeting of redemption requests that might
require the untimely disposition of securities; borrowing in the aggregate may
not exceed 15%, and borrowing for purposes other than meeting redemptions may
not exceed 5%, of the Fund's total assets (including the amount borrowed) less
liabilities (not including the amount borrowed) at the time the borrowing is
made; outstanding borrowings in excess of 5% of the value of the Fund's total
assets will be repaid before any investments are made; or (iii) pledge,
hypothecate, mortgage or otherwise encumber its assets, except to secure
permitted borrowings. The exception contained in clause (i)(b) above is subject
to the operating policy regarding concentration described in this Prospectus.
New Europe Fund may not: (i) purchase more than 10% of the outstanding voting
securities of any one issuer; (ii) invest more than 15% of its total assets in
the securities of any one issuer or 25% or more of its total assets in the same
industry, provided, however, that the foregoing restriction shall not be deemed
to prohibit the Fund from purchasing the securities of any issuer pursuant to
the exercise of rights distributed to the Fund by the issuer, except that no
such purchase may be made if as a result the Fund will fail to meet the
diversification requirements of the Code and any such acquisition in excess of
the foregoing 15% or 25% limits will be sold by the Fund as soon as reasonably
practicable (this restriction does not apply to U.S. Government securities, but
will apply to foreign government securities unless the Commission permits their
exclusion); (iii) borrow money except from banks for temporary or emergency
purposes, including the meeting of redemption requests that might require the
untimely disposition of securities; borrowing in the aggregate may not exceed
15%, and borrowing for purposes other than meeting redemptions may not exceed
5%, of the Fund's total assets (including the
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amount borrowed) less liabilities (not including the amount borrowed) at the
time the borrowing is made; outstanding borrowings in excess of 5% of the Fund's
total assets will be repaid before any subsequent investments are made; or (iv)
purchase a security (unless the security is acquired pursuant to a plan of
reorganization or an offer of exchange) if, as a result, the Fund would own any
securities of an open-end investment company or more than 3% of the total
outstanding voting stock of any closed-end investment company, or more than 5%
of the value of the Fund's total assets would be invested in securities of any
closed-end investment company, or more than 10% of such value in closed-end
investment companies in general.
All-Asia Investment Fund may not: (i) invest 25% or more of its total assets in
securities of issuers conducting their principal business activities in the same
industry; (ii) borrow money except from banks for temporary or emergency
purposes, including the meeting of redemption requests that might require the
untimely disposition of securities; borrowing in the aggregate may not exceed
15%, and borrowing for purposes other than meeting redemptions may not exceed
5%, of the Fund's total assets (including the amount borrowed) less liabilities
(not including the amount borrowed) at the time the borrowing is made;
outstanding borrowings in excess of 5% of the value of the Fund's total assets
will be repaid before any investments are made; or (iii) pledge, hypothecate,
mortgage or otherwise encumber its assets, except to secure permitted
borrowings.
Global Small Cap Fund may not: (i) purchase the securities of any one issuer,
other than the U.S. Government or any of its agencies or instrumentalities, if
immediately after such purchase more than 5% of the value of its total assets
would be invested in such issuer or the Fund would own more than 10% of the
outstanding voting securities of such issuer, except that up to 25% of the
Fund's total assets may be invested without regard to these 5% and 10%
limitations; (ii) invest 25% or more of its total assets in the same industry;
this restriction does not apply to U.S. Government securities, but will apply to
foreign government securities unless the Commission permits their exclusion;
(iii) borrow money except from banks for emergency or temporary purposes in an
amount not exceeding 5% of the total assets of the Fund; or (iv) make short
sales of securities or maintain a short position, unless at all times when a
short position is open it owns an equal amount of such securities or securities
convertible into or exchangeable for, without payment of any further
consideration, securities of the same issue as, and equal in amount to, the
securities sold short and unless not more than 5% of the Fund's net assets is
held as collateral for such sales at any one time.
Balanced Shares may not: (i) invest more than 5% of its total assets in the
securities of any one issuer, except U.S. Government securities; or (ii) own
more than 10% of the outstanding voting securities of any one issuer.
Income Builder Fund may not: (i) invest 25% or more of its total assets in
securities of companies engaged principally in any one industry, except that
this restriction does not apply to U.S. Government securities; (ii) borrow money
except from banks for temporary or emergency purposes, including the meeting of
redemption requests that might require the untimely disposition of securities;
borrowing in the aggregate may not exceed 15%, and borrowing for purposes other
than meeting redemptions may not exceed 5%, of the Fund's total assets
(including the amount borrowed) less liabilities (not including the amount
borrowed) at the time borrowing is made; securities will not be purchased while
borrowings in excess of 5% of the Fund's total assets are outstanding; or
(iii) pledge, hypothecate, mortgage or otherwise encumber its assets, except to
secure permitted borrowings.
Utility Income Fund may not: (i) invest more than 5% of its total assets in the
securities of any one issuer except the U.S. Government, although with respect
to 25% of its total assets it may invest in any number of issuers; (ii) invest
25% or more of its total assets in the securities of issuers conducting their
principal business activities in any one industry, other than the utilities
industry, except that this restriction does not apply to U.S. Government
securities; (iii) purchase more than 10% of any class of the voting securities
of any one issuer; (iv) borrow money except from banks for temporary or
emergency purposes, including the meeting of redemption requests that might
require the untimely disposition of securities; borrowing in the aggregate may
not exceed 15%, and borrowing for purposes other than meeting redemptions may
not exceed 5%, of the Fund's total assets (including the amount borrowed) less
liabilities (not including the amount borrowed) at the time the borrowing is
made; outstanding borrowings in excess of 5% of the Fund's total assets will be
repaid before any subsequent investments are made; or (v) purchase a security
if, as a result (unless the security is acquired pursuant to a plan of
reorganization or an offer of exchange), the Fund would own any securities of an
open-end investment company or more than 3% of the total outstanding voting
stock of any closed-end investment company or more than 5% of the value of the
Fund's net assets would be invested in securities of any one or more closed-end
investment companies.
Growth and Income Fund may not (i) invest more than 5% of its net assets in the
security of any one issuer, except U.S. Government obligations or (ii) own more
than 10% of the outstanding voting securities of any issuer.
RISK CONSIDERATIONS
Investment in certain of the Funds involves the special risk considerations
described below. These risks may be heightened when investing in emerging
markets.
Investment in Privatized Enterprises by Worldwide Privatization Fund. In certain
jurisdictions, the ability of foreign entities, such as the Fund, to participate
in privatizations may be limited by local law, or the price or terms on which
the Fund may be able to participate may be less advantageous than for local
investors. Moreover, there can be no assurance that governments that have
embarked on privatization programs will continue to divest their ownership of
state enterprises, that proposed privatizations will be successful or that
governments
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will not re-nationalize enterprises that have been privatized. Furthermore, in
the case of certain of the enterprises in which the Fund may invest, large
blocks of the stock of those enterprises may be held by a small group of
stockholders, even after the initial equity offerings by those enterprises. The
sale of some portion or all of those blocks could have an adverse effect on the
price of the stock of any such enterprise.
Most state enterprises or former state enterprises go through an internal
reorganization of management prior to conducting an initial equity offering in
an attempt to better enable these enterprises to compete in the private sector.
However, certain reorganizations could result in a management team that does not
function as well as the enterprise's prior management and may have a negative
effect on such enterprise. After making an initial equity offering, enterprises
that may have enjoyed preferential treatment from the respective state or
government that owned or controlled them may no longer receive such preferential
treatment and may become subject to market competition from which they were
previously protected. Some of these enterprises may not be able to effectively
operate in a competitive market and may suffer losses or experience bankruptcy
due to such competition. In addition, the privatization of an enterprise by its
government may occur over a number of years, with the government continuing to
hold a controlling position in the enterprise even after the initial equity
offering for the enterprise.
Currency Considerations. Substantially all of the assets of International Fund,
New Europe Fund, All-Asia Investment Fund, Global Small Cap Fund and Worldwide
Privatization Fund will be invested in securities denominated in foreign
currencies, and a corresponding portion of these Funds' revenues will be
received in such currencies. Therefore, the dollar equivalent of their net
assets, distributions and income will be adversely affected by reductions in the
value of certain foreign currencies relative to the U.S. dollar. If the value of
the foreign currencies in which a Fund receives its income falls relative to the
U.S. dollar between receipt of the income and the making of Fund distributions,
the Fund may be required to liquidate securities in order to make distributions
if it has insufficient cash in U.S. dollars to meet distribution requirements
that the Fund must satisfy to qualify as a regulated investment company for
federal income tax purposes. Similarly, if an exchange rate declines between the
time a Fund incurs expenses in U.S. dollars and the time cash expenses are paid,
the amount of the currency required to be converted into U.S. dollars in order
to pay expenses in U.S. dollars could be greater than the equivalent amount of
such expenses in the currency at the time they were incurred. In light of these
risks, a Fund may engage in certain currency hedging transactions, which
themselves involve certain special risks. See "Additional Investment Practices"
above.
Foreign Investment. The securities markets of many foreign countries are
relatively small, with the majority of market capitalization and trading volume
concentrated in a limited number of companies representing a small number of
industries. Consequently, a Fund whose investment portfolio includes such
securities may experience greater price volatility and significantly lower
liquidity than a portfolio invested solely in equity securities
of United States companies. These markets may be subject to greater influence by
adverse events generally affecting the market, and by large investors trading
significant blocks of securities, than is usual in the United States. Securities
settlements may in some instances be subject to delays and related
administrative uncertainties. These problems are particularly severe in India,
where settlement is through physical delivery, and, where, currently, a severe
shortage of vault capacity exists among custodial banks, although efforts are
being undertaken to alleviate the shortage. Certain foreign countries require
governmental approval prior to investments by foreign persons or limit
investment by foreign persons to only a specified percentage of an issuer's
outstanding securities or a specific class of securities which may have less
advantageous terms (including price) than securities of the company available
for purchase by nationals. These restrictions or controls may at times limit or
preclude investment in certain securities and may increase the costs and
expenses of a Fund. In addition, the repatriation of investment income, capital
or the proceeds of sales of securities from certain of the countries is
controlled under regulations, including in some cases the need for certain
advance government notification or authority, and if a deterioration occurs in a
country's balance of payments, the country could impose temporary restrictions
on foreign capital remittances.
A Fund could be adversely affected by delays in, or a refusal to grant, any
required governmental approval for repatriation, as well as by the application
to it of other restrictions on investment. Investing in local markets may
require a Fund to adopt special procedures, which may involve additional costs
to a Fund. The liquidity of a Fund's investments in any country in which any of
these factors exists could be affected and Alliance will monitor the effect of
any such factor or factors on a Fund's investments. Furthermore, transaction
costs including brokerage commissions for transactions both on and off the
securities exchanges in many foreign countries are generally higher than in the
U.S.
Issuers of securities in foreign jurisdictions are generally not subject to the
same degree of regulation as are U.S. issuers with respect to such matters as
insider trading rules, restrictions on market manipulation, shareholder proxy
requirements and timely disclosure of information. The reporting, accounting and
auditing standards of foreign countries may differ, in some cases significantly,
from U.S. standards in important respects and less information may be available
to investors in foreign securities than to investors in U.S. securities.
Substantially less information is publicly available about certain non-U.S.
issuers than is available about U.S. issuers.
The economies of individual foreign countries may differ favorably
or unfavorably from the U.S. economy in such respects as growth of gross
domestic product or gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payments position.
Nationalization, expropriation or confiscatory taxation, currency blockage,
political changes, government regulation, political or social instability or
diplomatic developments could affect adversely the economy of a foreign country
or the Fund's investments in such country. In the event of expropriation,
nationalization or other confiscation, a Fund could lose its entire investment
in the country involved. In addition, laws in foreign countries
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governing business organizations, bankruptcy and insolvency may provide less
protection to security holders such as the Fund than that provided by U.S. laws.
Investment in United Kingdom Issuers by New Europe Fund. 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. Since 1972, when the pound sterling
was allowed to float against other currencies, it has generally depreciated
against most major currencies, including the U.S. dollar. Between September and
December 1992, after the United Kingdom's exit from the Exchange Rate Mechanism
of the European Monetary System, the value of the pound sterling fell by almost
20% against the U.S. dollar. The pound sterling continued to fall in early 1993,
but recovered due to interest rate cuts throughout Europe and an upturn in the
economy of the United Kingdom. From 1994 through 1995, the pound sterling
increased at an average annual rate of 3.8% against the U.S. dollar. On
September 13, 1996, the pound sterling-dollar exchange rate was virtually
unchanged from that at the end of 1995.
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 a
record high of 3977.2 on September 16, 1996, up nearly 8% from the end of 1995.
The public sector borrowing requirement ("PSBR"), a mandated measure of the
amount required to balance the budget, is in excess of the government's original
budget estimate for the 1995-96 fiscal year as a result of lower economic growth
and decreased tax revenue. Further, the PSBR estimate for the 1996-97 fiscal
year has been raised and is expected to be above the European Union limit. As a
result, the general government budget deficit for the 1996-97 fiscal year is
expected to be in excess of the level permitted of countries scheduled to
participate in the European Union beginning in January 1999. In July 1996, the
European Union stated that public borrowing would have to be reduced by July
1998 if the pound sterling is to be eligible for membership.
Since 1979, the Conservative Party has controlled Parliament. However, in recent
years, this dominance has been called into question. In 1990, due to an internal
challenge for leadership the Conservative Party chose John Major to replace
Margaret Thatcher as Prime Minister. Mr. Major's position has been strengthened
by his reelection as leader of the Conservative Party and is expected to retain
that position until the next general election. Unless the Conservative Party
calls for an earlier election, the next general election will take place in May
1997. Opinion polls currently indicate a lead for the Labour Party, and it is
not clear that the Conservative Party will retain control of Parliament. For
further information regarding the United Kingdom, see the Fund's Statement of
Additional Information.
Investment in Japanese Issuers by All-Asia Investment Fund and International
Fund. 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. The Japanese yen has generally been appreciating
against the U.S. dollar for the past decade but has fallen from its post-World
War II high (in 1995) against the U.S. dollar.
Japan's largest stock exchange is the Tokyo Stock Exchange, the First Section of
which is reserved for larger, established companies. As measured by the TOPIX, a
capitalization-weighted composite index of all common stocks listed in the First
Section, the performance of the First Section reached a peak in 1989.
Thereafter, the TOPIX declined approximately 50% through the end of 1993. In
1994, the TOPIX increased by approximately 8% from the end of 1993, and by the
end of 1995 increased by approximately 1% from the end of 1994. As of September
13, 1996, the TOPIX closed at a level almost identifical to that at the end of
1995. Certain valuation measures, such as price-to-book value and price-to-cash
flow ratios, indicate that the Japanese stock market is near its lowest level in
the last twenty years relative to other world markets. The price/earnings ratios
of First Section companies, however, are on average high in comparison with
other major stock markets.
In recent years, Japan has consistently recorded large current account trade
surpluses with the U.S. that have caused difficulties in the relations between
the two countries. On October 1, 1994, the U.S. and Japan reached an agreement
that may lead to more open Japanese markets with respect to trade in certain
goods and services. In June 1995, the two countries agreed in principle to
increase Japanese imports of American automobiles and automotive parts.
Nevertheless it is expected that the continuing friction between the U.S. and
Japan with respect to trade issues will continue for the foreseeable future.
Each Fund's investments in Japanese issuers will be subject to uncertainty
resulting from the instability of recent Japanese ruling coalitions. From 1955
to 1993, Japan's government was controlled by a single political party. In
August 1993, following a split in that party, a coalition government was formed.
That coalition government collapsed in April 1994, and was replaced by a
minority coalition that, in turn, collapsed in June 1994. The stability of the
current ruling coalition, the fourth since 1993, is not assured in that Ryutaro
Hashimoto, the current prime minister, has called for new national elections to
be held on October 20, 1996. For further information regarding
Japan, see each Fund's Statement of Additional Information.
Investment in Smaller, Emerging Companies. The Funds may invest in smaller,
emerging companies. Global Small Cap Fund and New Europe Fund will emphasize
investment in, and All-Asia Investment Fund may emphasize investment in,
smaller, emerging companies. Investment in such companies involves greater risks
than is customarily associated with securities of more established companies.
The securities of smaller
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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.
U.S. and Foreign Taxes. Foreign taxes paid by a Fund may be creditable or
deductible by U.S. shareholders for U.S. income tax purposes. No assurance can
be given that applicable tax laws and interpretations will not change in the
future. Moreover, non-U.S. investors may not be able to credit or deduct such
foreign taxes. Investors should review carefully the information discussed under
the heading "Dividends, Distributions and Taxes" and should discuss with their
tax advisers the specific tax consequences of investing in a Fund.
Fixed-Income Securities. The value of each Fund's shares will fluctuate with the
value of its investments. The value of each Fund's investments in fixed-income
securities will change as the general level of interest rates fluctuates. During
periods of falling interest rates, the values of fixed-income securities
generally rise. Conversely, during periods of rising interest rates, the values
of fixed-income securities generally decline.
Under normal market conditions, the average dollar-weighted maturity of a Fund's
portfolio of debt or other fixed-income securities is expected to vary between
five and 30 years in the case of All-Asia Investment Fund, between eight and 15
years in the case of Income Builder Fund, between five and 25 years in the case
of Utility Income Fund and between one year or less and 30 years in the case of
all other Funds that invest in such securities. In periods of increasing
interest rates, each of the Funds may, to the extent it holds mortgage-backed
securities, be subject to the risk that the average dollar-weighted maturity of
the Fund's portfolio of debt or other fixed-income securities may be extended as
a result of lower than anticipated prepayment rates. See "Additional Investment
Practices-Mortgage-Backed Securities."
Securities Ratings. The ratings of securities by S&P, Moody's, Duff & Phelps and
Fitch are a generally accepted barometer of credit risk. They are, however,
subject to certain limitations from an investor's standpoint. The rating of an
issuer is heavily weighted by past developments and does not necessarily reflect
probable future conditions. There is frequently a lag between the time a rating
is assigned and the time it is updated. In addition, there may be varying
degrees of difference in credit risk of securities within each rating category.
Securities rated Aaa by Moody's and AAA by S&P, Duff & Phelps and Fitch are
considered to be of the highest quality; capacity to pay interest and repay
principal is extremely strong. Securities rated Aa by Moody's and AA by S&P,
Duff & Phelps and Fitch are considered to be high quality; capacity to repay
principal is considered very strong, although elements may exist that make risks
appear somewhat larger than exist with securities rated Aaa or AAA. Securities
rated A are considered by Moody's to possess adequate factors giving security to
principal and interest. S&P, Duff & Phelps and Fitch consider such securities to
have a strong capacity to pay interest and repay principal. Such securities are
more susceptible to adverse changes in economic conditions and circumstances
than higher-rated securities.
Securities rated Baa by Moody's and BBB by S&P, Duff & Phelps and Fitch are
considered to have an adequate capacity to pay interest and repay principal.
Such securities are considered to have speculative characteristics and share
some of the same characteristics as lower-rated securities. Sustained periods of
deteriorating economic conditions or of rising interest rates are more likely to
lead to a weakening in the issuer's capacity to pay interest and repay principal
than in the case of higher-rated securities. Securities rated Ba by Moody's and
BB by S&P, Duff & Phelps and Fitch are considered to have speculative
characteristics with respect to capacity to pay interest and repay principal
over time; their future cannot be considered as well-assured. Securities rated B
by Moody's, S&P, Duff & Phelps and Fitch are considered to have highly
speculative characteristics with respect to capacity to pay interest and repay
principal. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Securities rated Caa by Moody's and CCC by S&P, Duff & Phelps and Fitch are of
poor standing and there is a present danger with respect to payment of principal
or interest. Securities rated Ca by Moody's and CC by S&P and Fitch are
minimally protected, and default in payment of principal or interest is
probable. Securities rated C by Moody's, S&P and Fitch are in imminent default
in payment of principal or interest and have extremely poor prospects of ever
attaining any real investment standing. Securities rated D by S&P and Fitch are
in default. The issuer of securities rated DD by Duff & Phelps is under an order
of liquidation.
Investment in Lower-Rated Fixed-Income Securities. Lower-rated securities, i.e.,
those rated Ba and lower by Moody's or BB and lower by S&P, Duff & Phelps or
Fitch, are subject to greater risk of loss of principal and interest than
higher-rated securities. They are also generally considered to be subject to
greater market risk than higher-rated securities, and the capacity of issuers of
lower-rated securities to pay interest and repay principal is more likely to
weaken than is that of issuers of higher-rated securities in times of
deteriorating economic conditions or rising interest rates. In addition, lower-
rated securities may be more susceptible to real or perceived adverse economic
conditions than investment grade securities, 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.
The market for lower-rated securities may be thinner and less active than that
for higher-rated securities, which can adversely affect the prices at which
these securities can be sold. To the extent that there is no established
secondary market for lower-rated securities, a Fund may experience difficulty in
valuing such securities and, in turn, the Fund's assets. In addition, adverse
publicity and investor perceptions about lower-rated securities, whether or not
factual, may tend to impair their market value and liquidity.
Alliance will try to reduce the risk inherent in investment in lower-rated
securities through credit analysis, diversification and attention to current
developments and trends in interest rates and economic and political conditions.
However, there can be no
27
<PAGE>
assurance that losses will not occur. Since the risk of default is higher for
lower-rated securities, Alliance's research and credit analysis are a
correspondingly more important aspect of its program for managing a Fund's
securities than would be the case if a Fund did not invest in lower-rated
securities.
In seeking to achieve a Fund's investment objective, there will be times, such
as during periods of rising interest rates, when depreciation and realization of
capital losses on securities in a Fund's portfolio will be unavoidable.
Moreover, medium- and lower-rated securities and non-rated securities of
comparable quality may be subject to wider fluctuations in yield and market
values than higher-rated securities under certain market conditions. Such
fluctuations after a security is acquired do not affect the cash income received
from that security but are reflected in the net asset value of a Fund. See the
Statement of Additional Information for each Fund that invests in lower-rated
securities for a description of the bond ratings of Moody's, S&P, Duff & Phelps
and Fitch.
Certain lower-rated securities in which Growth Fund, Income Builder Fund,
Strategic Balanced Fund and Utility Income Fund may invest may contain call or
buy-back features that permit the issuers thereof to call or repurchase such
securities. Such securities may present risks based on prepayment expectations.
If an issuer exercises such a provision, a Fund may have to replace the called
security with a lower yielding security, resulting in a decreased rate of return
to the Fund.
Non-Diversified Status. Each of Worldwide Privatization Fund, New Europe Fund,
All-Asia Investment Fund and Income Builder Fund is a "non-diversified"
investment company, which means the Fund is not limited in the proportion of its
assets that may be invested in the securities of a single issuer. However, each
Fund intends to conduct its operations so as to qualify to be taxed as a
"regulated investment company" for purposes of the Code, which will relieve the
Fund of any liability for federal income tax to the extent its earnings are
distributed to shareholders. See "Dividends, Distributions and Taxes" in each
Fund's Statement of Additional Information. To so qualify, among other
requirements, the Fund will limit its investments so that, at the close of each
quarter of the taxable year, (i) not more than 25% of the Fund's total assets
will be invested in the securities of a single issuer, and (ii) with respect to
50% of its total assets, not more than 5% of its total assets will be invested
in the securities of a single issuer and the Fund will not own more than 10% of
the outstanding voting securities of a single issuer. A Fund's investments in
U.S. Government securities are not subject to these limitations. Because
Worldwide Privatization Fund, New Europe Fund, All-Asia Investment Fund and
Income Builder Fund is each a non-diversified investment company, it may invest
in a smaller number of individual issuers than a diversified investment company,
and an investment in such Fund may, under certain circumstances, present greater
risk to an investor than an investment in a diversified investment company.
Foreign government securities are not treated like U.S. Government securities
for purposes of the diversification tests described in the preceding paragraph,
but instead are subject to these tests in the same manner as the securities of
non-governmental issuers.
- -------------------------------------------------------------------------------
Purchase And Sale
- -------------------------------------------------------------------------------
Of Shares
- -------------------------------------------------------------------------------
HOW TO BUY SHARES
Each Fund offers multiple classes of shares, of which only the Advisor Class is
offered by this Prospectus. Advisor Class shares of each Fund may be purchased
through your financial representative at net asset value without any initial or
contingent deferred sales charges and are not subject to ongoing distribution
expenses. Advisor Class shares may be purchased and held solely (i) through
accounts established under a fee-based program, sponsored and maintained by a
registered broker-dealer or other financial intermediary and approved by AFD,
pursuant to which each investor pays an asset-based fee at an annual rate of at
least .50% of the assets in the investor's account to the broker-dealer or
financial intermediary, or its affiliate or agent, (ii) through a self-directed
defined contribution employee benefit plan (e.g., a 401(k) plan) that has at
least 1,000 participants or $25 million in assets and (iii) by investment
advisory clients of, and certain other persons associated with, Alliance and its
affiliates or the Funds. For more detailed information about who may purchase
and hold Advisor Class shares see the Statement of Additional Information. A
shareholder's Advisor Class shares will automatically convert to Class A shares
of the same Fund under certain circumstances. For a more detailed description of
the conversion feature and Class A shares, see "Conversion Feature." The minimum
initial investment in each Fund is $250. The minimum for subsequent investments
in each Fund is $50. In addition, persons investing in Advisor Class shares of
the Fund through a fee-based program may do so only if the fee-based program has
an aggregate of at least $250,000 invested in Advisor Class shares of Alliance
Mutual Funds, including the Fund. Investments of $25 or more are allowed under
the automatic investment program of each Fund and under a 403(b)(7) retirement
plan. Share certificates are issued only upon request. See the Subscription
Application and the Statement of Additional Information for more information.
The Funds may refuse any order to purchase Advisor Class shares. In this regard,
the Funds reserve the right to restrict purchases of Advisor Class shares
(including through exchanges) when there appears to be evidence of a pattern of
frequent purchases and sales made in response to short-term considerations.
How the Funds Value Their Shares
The net asset value of Advisor Class shares of a Fund is calculated by dividing
the value of the Fund's net assets allocable to the Advisor Class by the
outstanding shares of the Advisor Class. Shares are valued each day the New York
Stock Exchange (the "Exchange") is open as of the close of regular trading
(currently 4:00 p.m. Eastern time). The securities in a Fund are valued at their
current market value determined on the basis of market quotations or, if such
quotations are not readily available, such other methods as the Fund's Directors
believe would accurately reflect fair market value.
28
<PAGE>
HOW TO SELL SHARES
You may "redeem," i.e., sell your shares in a Fund to the Fund on any day the
Exchange is open, either directly or through your financial representative. The
price you will receive is the net asset value next calculated after the Fund
receives your request in proper form. Proceeds generally will be sent to you
within seven days. However, for shares recently purchased by check or electronic
funds transfer, a Fund will not send proceeds until it is reasonably satisfied
that the check or electronic funds transfer has been collected (which may take
up to 15 days). If you are in doubt about what documents are required by your
fee-based program or employee benefit plan, you should contact your financial
representative.
Selling Shares Through Your Financial Representative
Your financial representative must receive your request before 4:00 p.m. Eastern
time, and your financial representative must transmit your request to the Fund
by 5:00 p.m. Eastern time, for you to receive that day's net asset value. Your
financial representative is responsible for furnishing all necessary
documentation to a Fund and may charge you for this service.
Selling Shares Directly To A Fund
Send a signed letter of instruction or stock power form to AFS along with
certificates, if any, that represent the shares you want to sell. For your
protection, signatures must be guaranteed by a bank, a member firm of a national
stock exchange or other eligible guarantor institution. Stock power forms are
available from your financial representative, AFS, and many commercial banks.
Additional documentation is required for the sale of shares by corporations,
intermediaries, fiduciaries and surviving joint owners. For details contact:
Alliance Fund Services
P.O. Box 1520
Secaucus, NJ 07096-1520
1-800-221-5672
Alternatively, a request for redemption of shares for which no stock
certificates have been issued can also be made by telephone to 800-221-5672.
Telephone redemption requests must be made by 4 p.m. Eastern time on a Fund
business day in order to receive that day's net asset value, and, except for
certain omnibus accounts, may be made only once in any 30-day period. A
shareholder who has completed the Telephone Transactions section of the
Subscription Application, or the Shareholder Options form obtained from AFS, can
elect to have the proceeds of his or her redemption sent to his or her bank via
an electronic funds transfer. Proceeds of telephone redemptions also may be sent
by check to a shareholder's address of record. Except for certain omnibus
accounts, redemption requests by electronic funds transfer may not exceed
$100,000 and redemption requests by check may not exceed $50,000. Telephone
redemption is not available for shares held in nominee or "street name" accounts
or retirement plan accounts or shares held by a shareholder who has changed his
or her address of record within the previous 30 calendar days.
General
The sale of shares is a taxable transaction for federal tax purposes. Under
unusual circumstances, a Fund may suspend redemptions or postpone payment for up
to seven days or longer, as permitted by federal securities law. The Funds
reserve the right to close an account that through redemption has remained below
$200 for 90 days. Shareholders will receive 60 days' written notice to increase
the account value before the account is closed.
During drastic economic or market developments, you might have difficulty
reaching AFS by telephone, in which event you should issue written instructions
to AFS. AFS is not responsible for the authenticity of telephonic requests to
purchase, sell or exchange shares. AFS will employ reasonable procedures to
verify that telephone requests are genuine, and could be liable for losses
resulting from unauthorized transactions if it failed to do so. Dealers and
agents may charge a commission for handling telephonic requests. The telephone
service may be suspended or terminated at any time without notice.
SHAREHOLDER SERVICES
AFS offers a variety of shareholder services. For more information
about these services or your account, call AFS's toll-free number, 800-221-5672.
HOW TO EXCHANGE SHARES
You may exchange your Advisor Class shares of any Fund for Advisor Class shares
of other Alliance Mutual Funds (including AFD Exchange Reserves, a money market
fund managed by Alliance). Exchanges of shares are made at the net asset value
next determined and without sales or service charges. Exchanges may be made by
telephone or written request. Telephone exchange requests must be received by
AFS by 4:00 p.m. Eastern time on a Fund business day in order to receive that
day's net asset value.
Please read carefully the prospectus of the mutual fund into which you are
exchanging before submitting the request. Call AFS at 800-221-5672 to exchange
uncertificated shares. An exchange is a taxable capital transaction for federal
tax purposes. The exchange service may be changed, suspended, or terminated on
60 days' written notice.
GENERAL
If you are a Fund shareholder through an account established under a fee-based
program, your fee-based program may impose requirements with respect to the
purchase, sale or exchange of Advisor Class shares of a Fund that are different
from those described in this Prospectus. A transaction 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.
Each Fund offers three classes of shares other than the Advisor Class, which are
Class A, Class B and Class C. All classes of shares of a Fund have a common
investment objective and investment portfolio. Class A shares are offered with
an initial sales charge and pay a distribution services fee. Class B shares have
a contingent deferred sales charge (a "CDSC") and also pay a distribution
services fee. Class C shares have no initial sales charge or CDSC as long as
they are not redeemed within one year of purchase, but pay a distribution
services fee. Because Advisor Class shares have no initial sales charge or CDSC
and pay no distribution services fee, Advisor Class shares are expected to have
different performance from Class A, Class B or Class C shares. You may obtain
more information about Class A, Class B and Class C shares, which are not
offered by this Prospectus, by contacting AFS by telephone at 1-800-221-5672 or
by contacting your financial representative.
29
<PAGE>
- -------------------------------------------------------------------------------
Management Of The Funds
- -------------------------------------------------------------------------------
ADVISER
Alliance, which is a Delaware limited partnership with principal offices at 1345
Avenue of the Americas, New York, New York 10105, has been retained under an
advisory agreement (the "Advisory Agreement") to provide investment advice and,
in general, to conduct the management and investment program of each Fund,
subject to the general supervision and control of the Directors of the Fund.
The following table lists the person or persons who are primarily responsible
for the day-to-day management of each Fund's portfolio, the length of time that
each person has been primarily responsible, and each person's principal
occupation during the past five years.
<TABLE>
<CAPTION>
Principal occupation
during the past
Fund Employee; year; title five years
- -------------------------------------------------------------------------------
<S> <C> <C>
The Alliance Fund Alfred Harrison since 1989-- Associated with
Vice Chairman of Alliance Alliance
Capital Management Corporation
("ACMC")*
Paul H. Jenkel since 1985-- Associated with
Senior Vice President of ACMC Alliance
Growth Fund Tyler Smith since inception-- Associated with
Senior Vice President of ACMC Alliance since
July 1993; prior
thereto,
associated with
Equitable Capital
Management
Corporation
("Equitable
Capital")**
Premier Growth Fund Alfred Harrison since inception-- (see above)
(see above)
Technology Fund Peter Anastos since 1992-- Associated with
Senior Vice President of ACMC Alliance
Gerald T. Malone since 1992-- Associated with
Senior Vice President of ACMC Alliance since
1992; prior
thereto
associated with
College
Retirement
Equities Fund
Quasar Fund Alden M. Stewart since 1994-- Associated with
Executive Vice President of ACMC Alliance since
1993; prior
thereto,
associated with
Equitable Capital
Randall E. Haase since 1994-- Associated with
Senior Vice President of ACMC Alliance since July
1993; prior
thereto,
associated with
Equitable Capital
Timothy Rice since 1993-- Associated with
Vice President of ACMC Alliance
International Fund A. Rama Krishna since 1993-- Associated with
Senior Vice President of ACMC Alliance since
and director of Asian Equity 1993, prior
research thereto,
Chief Investment
Strategist and
Director--Equity
Research for CS
First Boston
Worldwide Privatization Mark H. Breedon since inception--- Associated with
Senior Vice President of ACMC Alliance
and Director and Vice President
of Alliance Capital Limited ***
New Europe Fund Nigel Hankin since 1996-- Associated with
Vice President of ACMC Alliance since
1996; prior
thereto portfolio
manager of
Draycott Partners
Gregory Eckersley since 1996-- Associated with
Vice President of ACMC Alliance since
1996; prior
thereto portfolio
manager of
Draycott Partners
All-Asia Investment A. Rama Krishna since inception-- (see above)
Fund (see above)
Global Small Cap Alden M. Stewart since 1994-- (see above)
Fund (see above)
Randall E. Haase since 1994-- (see above)
(see above)
Timothy Rice since 1993-- (see above)
(see above)
Ronald L. Simcoe since 1993-- Associated with
Vice President of ACMC Alliance since
1993; prior
thereto,
associated with
Equitable Capital
Strategic Balanced Robert G. Heisterberg since 1996-- Associated with
Fund Senior Vice President of ACMC Alliance
Balanced Shares Kevin J. O'Brien since 1996-- Associated with
Senior Vice President of ACMC Alliance
Income Builder Fund Andrew M. Aran since 1994-- Associated with
Senior Vice President of ACMC Alliance since
March 1991; prior
thereto, a Vice
President of
PaineWebber, Inc.
Thomas M. Perkins since 1991-- Associated with
Senior Vice President of ACMC Alliance
Utility Income Fund Paul Rissman since 1996-- Associated with
Vice President of ACMC Alliance
Growth & Income Paul Rissman since 1994-- Associated with
Fund (see above) Alliance
- --------------------------------------------------------------------------------
</TABLE>
* The sole general partner of Alliance.
** Equitable Capital was, prior to Alliance's acquisition of it, a management
firm under common control with Alliance.
*** An indirect wholly-owned subsidiary of Alliance.
30
<PAGE>
Alliance is a leading international investment manager supervising client
accounts with assets as of June 30, 1996 totaling more than $168 billion (of
which approximately $55 billion represented the assets of investment companies).
Alliance's clients are primarily major corporate employee benefit funds, public
employee retirement systems, investment companies, foundations and endowment
funds. The 51 registered investment companies managed by Alliance comprising
more than 100 separate investment portfolios currently have over two million
shareholders. As of June 30, 1996, Alliance was an investment manager of
employee benefit plan assets for 33 of the Fortune 100 companies.
ACMC, the sole general partner of, and the owner of a 1% general partnership
interest in, Alliance, is an indirect wholly-owned subsidiary of The Equitable
Life Assurance Society of the United States ("Equitable"), one of the largest
life insurance companies in the United States, which is a wholly-owned
subsidiary of The Equitable Companies Incorporated, a holding company controlled
by AXA, a French insurance holding company. Certain information concerning the
ownership and control of Equitable by AXA is set forth in each Fund's Statement
of Additional Information under "Management of the Fund."
ADMINISTRATOR AND CONSULTANT TO ALL-ASIA
INVESTMENT FUND
Alliance has been retained by All-Asia Investment Fund under an
administration agreement (the "Administration Agreement") to perform
administrative services necessary for the operation of the Fund. For a
description of such services, see the Statement of Additional Information of the
Fund.
In connection with its provision of advisory services to All-Asia
Investment Fund, Alliance has retained at its expense OCBC Asset Management
Limited ("OAM") as a consultant to provide to Alliance such statistical and
other factual information, research and assistance with respect to economic,
financial, political, technological and social conditions and trends in Asian
countries, including information on markets and industries, as Alliance shall
from time to time request. OAM will not furnish investment advice or make
recommendations regarding the purchase or sale of securities by the Fund nor
will it be responsible for making investment decisions involving Fund assets.
OAM is one of the largest Singapore-based investment management companies
specializing in investment in Asia-Pacific markets. OAM provides consulting and
advisory services to institutions and individuals, including mutual funds.
OAM is a wholly-owned subsidiary of Oversea-Chinese Banking Corporation Limited
("OCBC Bank"), which is based in Singapore. The OCBC Bank Group has an extensive
network of banking offices in the Asian Pacific region. The OCBC Bank Group
engages in a wide variety of activities including commercial banking, investment
banking, and property and hotel investment and management.
DISTRIBUTION SERVICES AGREEMENTS
Each Fund has entered into a Distribution Services Agreement with AFD with
respect to the Advisor Class shares. The Glass-Steagall Act and other applicable
laws may limit the ability of a bank or other depository institution to become
an underwriter or distributor of securities. However, in the opinion of the
Funds' management, based on the advice of counsel, these laws do not prohibit
such depository institutions from providing services for investment companies
such as the administrative, accounting and other services referred to in the
Agreements. In the event that a change in these laws prevented a bank from
providing such services, it is expected that other service arrangements would be
made and that shareholders would not be adversely affected. The State of Texas
requires that shares of a Fund may be sold in that state only by dealers or
other financial institutions that are registered there as broker-dealers.
- --------------------------------------------------------------------------------
Dividends, Distributions
- --------------------------------------------------------------------------------
And Taxes
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS
If you receive an income dividend or capital gains distribution in cash you may,
within 120 days following the date of its payment, reinvest the dividend or
distribution in additional shares of that Fund without charge by returning to
Alliance, with appropriate instructions, the check representing such dividend or
distribution. Thereafter, unless you otherwise specify, you will be deemed to
have elected to reinvest all subsequent dividends and distributions in shares of
that Fund.
Each income dividend and capital gains distribution, if any, declared by a Fund
on its outstanding shares will, at the election of each shareholder, be paid in
cash or in additional shares of the same class of shares of that Fund having an
aggregate net asset value as of the payment date of such dividend or
distribution equal to the cash amount of such income dividend or distribution.
Election to receive dividends and distributions in cash or shares is made at the
time shares are initially purchased and may be changed at any time prior to the
record date for a particular dividend or distribution. Cash dividends can be
paid by check or, if the shareholder so elects, electronically via the ACH
network. There is no sales or other charge in connection with the reinvestment
of dividends and capital gains distributions.
While it is the intention of each Fund to distribute to its shareholders
substantially all of each fiscal year's net income and net realized capital
gains, if any, the amount and time of any such dividend or distribution must
necessarily depend upon the realization by such Fund of income and capital gains
from investments. There is no fixed dividend rate, and there can be no assurance
that a Fund will pay any dividends or realize any capital gains.
If you buy shares just before a Fund deducts a distribution from its net asset
value, you will pay the full price for the shares and then receive a portion of
the price back as a taxable distribution.
31
<PAGE>
FOREIGN INCOME TAXES
Investment income received by a Fund from sources within foreign countries may
be subject to foreign income taxes withheld at the source. To the extent that
any Fund is liable for foreign income taxes withheld at the source, each Fund
intends, if possible, to operate so as to meet the requirements of the Code to
"pass through" to the Fund's shareholders credits for foreign income taxes paid,
but there can be no assurance that any Fund will be able to do so.
U.S. FEDERAL INCOME TAXES EACH
Each Fund intends to qualify to be taxed as a "regulated investment company"
under the Code. To the extent that a Fund distributes its taxable income and net
capital gain to its shareholders, qualification as a regulated investment
company relieves that Fund of federal income and excise taxes on that part of
its taxable income including net capital gains which it pays out to its
shareholders. Dividends out of net ordinary income and distributions of net
short-term capital gains are taxable to the recipient shareholders as ordinary
income. In the case of corporate shareholders, such dividends may be eligible
for the dividends-received deduction, except that the amount eligible for the
deduction is limited to the amount of qualifying dividends received by the Fund.
A corporation's dividends-received deduction will be disallowed unless the
corporation holds shares in the Fund at least 46 days. Furthermore, the
dividends-received deduction will be disallowed to the extent a corporation's
investment in shares of a Fund is financed with indebtedness.
The excess of net long-term capital gains over the net short-term capital losses
realized and distributed by each Fund to its shareholders as capital gains
distributions is taxable to the shareholders as long-term capital gains,
irrespective of the length of time a shareholder may have held his or her stock.
Long-term capital gains distributions are not eligible for the dividends-
received deduction referred to above.
Under the current federal tax, law the amount of an income dividend or capital
gains distribution declared by a Fund during October, November or December of a
year to shareholders of record as of a specified date in such a month that is
paid during January of the following year is includable in the prior year's
taxable income of shareholders that are calendar year taxpayers.
Any dividend or distribution received by a shareholder on shares of a Fund will
have the effect of reducing the net asset value of such shares by the amount of
such dividend or distribution. Furthermore, a dividend or distribution made
shortly after the purchase of such shares by a shareholder, although in effect a
return of capital to that particular shareholder, would be taxable to him or her
as described above. If a shareholder held shares six months or less and during
that period received a distribution taxable to such shareholder as long-term
capital gain, any loss realized on the sale of such shares during such six-month
period would be a long-term capital loss to the extent of such distribution.
A dividend or capital gains distribution with respect to shares of a Fund held
by a tax-deferred or qualified plan, such as an individual retirement account,
403(b)(7) retirement plan or corporate pension or profit-sharing plan, will not
be taxable to the plan. Distributions from such plans will be taxable to
individual participants under applicable tax rules without regard to the
character of the income earned by the qualified plan.
Distributions by a Fund may be subject to state and local taxes. Alliance Fund,
Premier Growth Fund, Technology Fund, Income Builder Fund, Quasar Fund, New
Europe Fund, Balanced Shares and Growth and Income Fund are qualified to do
business in the Commonwealth of Pennsylvania and, therefore, are subject to the
Pennsylvania foreign franchise and corporate net income tax in respect of their
business activities in Pennsylvania. Accordingly, shares of such Funds are
exempt from Pennsylvania personal property taxes. These Funds anticipate
continuing such business activities but reserve the right to suspend them at any
time, resulting in the termination of the exemptions.
A Fund will be required to withhold 31% of any payments made to a shareholder if
the shareholder has not provided a certified taxpayer identification number to
the Fund, or the Secretary of the Treasury notifies a Fund that a shareholder
has not reported all interest and dividend income required to be shown on the
shareholder's Federal income tax return.
Under certain circumstances, if a Fund realizes losses from fluctuations in
currency exchange rates after paying a dividend, all or a portion of the
dividend may subsequently be characterized as a return of capital.
See "Dividends, Distributions and Taxes" in the Statement of Additonal
Information. Shareholders will be advised annually as to the tax status of
dividends and capital gains distributions. Shareholders are urged to consult
their tax advisers regarding their own tax situation.
32
<PAGE>
- --------------------------------------------------------------------------------
Conversion Feature
- --------------------------------------------------------------------------------
CONVERSION TO CLASS A SHARES
Advisor Class shares may be held solely through the fee-based program accounts
and employee benefit plans described above under "--How to Buy Shares," and by
investment advisory clients of, and certain other persons associated with,
Alliance and its affiliates or the Funds. If (i) a holder of Advisor Class
shares ceases to participate in a fee-based program or plan that satisfies the
requirements to purchase shares set forth under "--How to Buy Shares" or (ii)
the holder is otherwise no longer eligible to purchase Advisor Class shares as
described in this Prospectus (each, a "Conversion Event"), then all Advisor
Class shares held by the shareholder will convert automatically and without
notice to the shareholder, other than the notice contained in this Prospectus,
to Class A shares of the Fund during the calendar month following the month in
which the Fund is informed of the occurrence of the Conversion Event. The
failure of a shareholder or a fee-based program to satisfy the minimum
investment requirements to purchase Advisor Class shares will not constitute a
Conversion Event. The conversion would occur on the basis of the relative net
asset values of the two classes and without the imposition of any sales load,
fee or other charge.
DESCRIPTION OF CLASS A SHARES
The following sets forth maximum transaction costs, annual expenses, per share
income and capital charges for Class A shares of each of the Funds. Class A
shares are subject to a distribution fee that may not exceed an annual rate of
.30%. The higher fees mean a higher expense ratio, so Class A shares pay
correspondingly lower dividends and may have a lower net asset value than
Advisor Class shares.
Shareholder Transaction Expenses are one of several factors to consider when you
invest in a Fund. The following table summarizes your maximum transaction costs
from investing in Class A shares of a Fund and annual expenses for Class A
shares of each Fund. For each Fund, the "Examples" to the right of the table
below show the cumulative expenses attributable to a hypothetical $1,000
investment for the periods specified.
<TABLE>
<CAPTION>
Class A Shares
--------------
<S> <C>
Maximum sales charge imposed on purchases
(as a percentage of offering price) (a).............. None (sales
charge waived)
Sales charge imposed on dividend reinvestments....... None
Deferred sales charge (as a percentage of original
purchase price or redemption proceeds, whichever
is lower)............................................ None
Exchange fee......................................... None
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Operating Expenses Examples(a)
- ---------------------------------- ------------------------------
Alliance Fund Class A Class A
------- -------
<S> <C> <C> <C>
Management fees .71% After 1 year $ 11
12b-1 fees .19% After 3 years $ 34
Other expenses (b) .18% After 5 years $ 60
---- After 10 years $132
Total fund
operating expenses 1.08%
====
Growth Fund Class A Class A
------- -------
Management fees .75% After 1 year $ 14
12b-1 fees .30% After 3 years $ 43
Other expenses (b) .30% After 5 years $ 74
---- After 10 years $162
Total fund
operating expenses 1.35%
====
Premier Growth Fund Class A Class A
------- -------
Management fees 1.00% After 1 year $ 18
12b-1 fees .37% After 3 years $ 55
Other expenses (b) .38% After 5 years $ 95
---- After 10 years $206
Total fund
operating expenses 1.75%
====
Technology Fund Class A Class A
------- -------
Management fees (g) 1.14% After 1 year $ 18
12b-1 fees .30% After 3 years $ 55
Other expenses (b) .31% After 5 years $ 95
---- After 10 years $206
Total fund
operating expenses 1.75%
====
</TABLE>
- --------------------------------------------------------------------------------
Please refer to the footnotes on page 35.
33
<PAGE>
<TABLE>
<CAPTION>
Operating Expenses Examples(a)
- ---------------------------------- ------------------------------
Quasar Fund Class A Class A
------- -------
<S> <C> <C> <C>
Management fees (g) .99% After 1 year $ 19
12b-1 fees .21% After 3 years $ 58
Other expenses (b) .63% After 5 years $ 99
---- After 10 years $215
Total fund
operating expenses 1.83%
====
International Fund Class A Class A
------- -------
Management fees (g) .92% After 1 year $ 17
12b-1 fees .17% After 3 years $ 54
Other expenses (b) .63% After 5 years $ 93
---- After 10 years $203
Total fund
operating expenses 1.72%
====
Worldwide Privatization
Fund Class A Class A
------- -------
Management fees 1.00% After 1 year $ 19
12b-1 fees .30% After 3 years $ 59
Other expenses (b) .57% After 5 years $101
---- After 10 years $219
Total fund
operating expenses 1.87%
====
New Europe Fund Class A Class A
------- -------
Management fees 1.07% After 1 year $ 22
12b-1 fees .30% After 3 years $ 67
Other expenses (b) .77% After 5 years $115
---- After 10 years $247
Total fund
operating expenses 2.14%
====
All-Asia Investment Fund Class A Class A
------- -------
Management fees After 1 year $ 44
(after waiver) (c) 0.00% After 3 years $134
12b-1 fees .30% After 5 years $224
Other expenses After 10 years $455
Administration fees
(after waiver) (d) 0.00%
Other operating
expenses (b) (after
reimbursement) (e) 4.12%
----
Total other expenses 4.12%
Total fund ----
operating expenses (e) 4.42%
====
Global Small Cap Fund Class A Class A
------- -------
Management fees 1.00% After 1 year $ 25
12b-1 fees .30% After 3 years $ 78
Other expenses (b) 1.21% After 5 years $134
---- After 10 years $285
Total fund
operating expenses 2.51%
====
Strategic Balanced Fund Class A Class A
------- -------
Management fees
(after waiver) (c) .38% After 1 year $ 14
12b-1 fees .30% After 3 years $ 44
Other expenses (b) .72% After 5 years $ 77
---- After 10 years $168
Total fund
operating expenses (e) 1.40%
====
Balanced Shares Class A Class A
------- -------
Management fees .63% After 1 year $ 14
12b-1 fees .24% After 3 years $ 44
Other expenses (b) .51% After 5 years $ 76
---- After 10 years $166
Total fund
operating expenses 1.38%
====
</TABLE>
- --------------------------------------------------------------------------------
Please refer to the footnotes on page 35.
34
<PAGE>
<TABLE>
<CAPTION>
Operating Expenses Examples(a)
- ---------------------------------- ------------------------------
Income Builder Fund Class A Class A
------- -------
<S> <C> <C> <C>
Management fees .75% After 1 year $ 24
12b-1 fees .30% After 3 years $ 74
Other expenses (b) 1.33% After 5 years $127
---- After 10 years $272
Total fund
operating expenses 2.38%
====
Utility Income Fund Class A Class A
------- -------
Management fees
(after waiver) (c) 0.00% After 1 year $ 15
12b-1 fees .30% After 3 years $ 47
Other expenses (b) 1.20% After 5 years $ 82
---- After 10 years $179
Total fund
operating expenses (f) 1.50%
====
Growth and Income Fund Class A Class A
------- -------
Management fees .53% After 1 year $ 11
12b-1 fees .20% After 3 years $ 33
Other expenses (b) .32% After 5 years $ 58
---- After 10 years $128
Total fund
operating expenses 1.05%
====
</TABLE>
- --------------------------------------------------------------------------------
(a) Advisor Class shares convert to Class A shares at net asset value and
without the imposition of any sales charge and accordingly the maximum sales
charge of 4.25% on most purchases of Class A shares for cash does not apply
(b) These expenses include a transfer agency fee payable to Alliance Fund
Services, Inc., an affiliate of Alliance, based on a fixed dollar amount
charged to the Fund for each shareholder's account.
(c) Net of voluntary fee waiver. In the absence of such waiver, management fees
would be 1.00% for All-Asia Investment Fund and .75% for Strategic Balanced
Fund and Utility Income Fund.
(d) Reflects the fees payable by All-Asia Investment Fund to Alliance pursuant
to an administration agreement net of voluntary fee waiver. In the absence
of such fee waiver, the administration fee would be .15%.
(e) Net of voluntary fee waiver and/or expense reimbursement. In the absence of
such waiver and/or reimbursement, total fund operating expenses for
Strategic Balanced Fund would have been 1.76% for Class A shares. In the
absence of such waiver and reimbursements, other expenses for All-Asia
Investment Fund would have been 9.27% for Class A shares and total fund
operating expenses for All-Asia Investment Fund would have been 10.57% for
Class A shares annualized.
(f) Net of expense reimbursements. Absent expense reimbursements, total fund
operating expenses for Utility Income Fund would be 4.86% for Class A
shares.
(g) Calculated based on average daily net assets. Maximum contractual rate,
based on quarter-end net assets, is 1.00% for Quasar Fund, Technology Fund
and International Fund.
The purpose of the foregoing table is to assist the investor in understanding
the various costs and expenses that an investor in a Fund will bear directly or
indirectly. Long-term shareholders of Class A shares of a Fund may pay aggregate
sales charges totaling more than the economic equivalent of the maximum initial
sales charges permitted by the Conduct Rules of the National Association of
Securities Dealers, Inc. The Rule 12b-1 fee for Class A comprises a service fee
not exceeding .25% of the aggregate average daily net assets of the Fund
attributable to Class A and an asset-based sales charge equal to the remaining
portion of the Rule 12b-1 fee. The information shown in the table for Alliance
Fund, Growth Fund and Technology Fund reflects annualized expenses based on the
Fund's most recent fiscal periods. The information shown in the table for
Premier Growth Fund reflects estimated annualized expenses for that Fund's
current fiscal period. "Total Fund Operating Expenses" for Utility Income Fund
are based on estimated amounts for the Fund's current fiscal year. See
"Management of the Funds." "Other Expenses" for Class A shares of All-Asia
Investment Fund are based on estimated amounts for each Fund's current fiscal
year. The management fee rates of Growth Fund, Premier Growth Fund, Strategic
Balanced Fund, Technology Fund, International Fund, Worldwide Privatization
Fund, New Europe Fund, All-Asia Investment Fund, Income Builder Fund, Utility
Income Fund and Global Small Cap Fund are higher than those paid by most other
investment companies, but Alliance believes the fees are comparable to those
paid by investment companies of similar investment orientation. The expense
ratios for Class A shares of Global Small Cap Fund and Worldwide Privatization
Fund are higher than the expense ratios of most other mutual funds, but are
comparable to the expense ratios of mutual funds whose shares are similarly
priced. The Examples set forth above assume reinvestment of all dividends and
distributions and utilize a 5% annual rate of return as mandated by Commission
regulations. The Examples should not be considered representative of past or
future expenses; actual expenses may be greater or less than those shown.
Financial Highlights. The tables on the following pages present, for each Fund,
per share income and capital changes for a Class A share outstanding throughout
each period indicated. The information in the tables for Alliance Fund, Growth
Fund, Premier Growth Fund, Strategic Balanced Fund, Balanced Shares, Utility
Income Fund, Worldwide Privatization Fund and Growth and Income Fund has been
audited by Price Waterhouse LLP, the independent accountants for each Fund, and
for All-Asia Investment Fund, Technology Fund, Quasar Fund, International Fund,
New Europe Fund, Global Small Cap Fund and Income Builder Fund by Ernst & Young
LLP, the independent auditors for each Fund. A report of Price Waterhouse LLP or
Ernst & Young LLP, as the case may be, on the information with respect to each
Fund, appears in the Fund's Statement of Additional Information. The following
information for each Fund should be read in conjunction with the financial
statements and related notes which are included in the Fund's Statement of
Additional Information.
Further information about a Fund's performance is contained in the Fund's annual
report to shareholders, which may be obtained without charge by contacting AFS
at the address or the "For Literature" telephone number shown on the cover of
this Prospectus.
35
<PAGE>
<TABLE>
<CAPTION>
Net Net Net
Asset Realized and Increase
Value Unrealized (Decrease) in Dividends From Distributions
Beginning Of Net Investment Gain (Loss) On Net Asset Value Net Investment From Net
Fiscal Year or Period Period Income (Loss) Investments From Operations Income Realized Gains
--------------------- ------------ -------------- -------------- --------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Alliance Fund
Class A
12/1/95 to 5/31/96+++......... $ 7.72 $ .01 $ .47 $ .48 $ (.02) $ (1.07)
Year ended 11/30/95 .......... 6.63 .02 2.08 2.10 (.01) (1.00)
1/1/94 to 11/30/94**.......... 6.85 .01 (.23) (.22) 0.00 0.00
Year ended 12/31/93 .......... 6.68 .02 .93 .95 (.02) (.76)
Year ended 12/31/92 .......... 6.29 .05 .87 .92 (.05) (.48)
Year ended 12/31/91 .......... 5.22 .07 1.70 1.77 (.07) (.63)
Year ended 12/31/90 .......... 6.87 .09 (.32) (.23) (.18) (1.24)
Year ended 12/31/89 .......... 5.60 .12 1.19 1.31 (.04) 0.00
Year ended 12/31/88 .......... 5.15 .08 .80 .88 (.08) (.35)
Year ended 12/31/87 .......... 6.87 .08 .27 .35 (.13) (1.94)
Year ended 12/31/86 .......... 11.15 .11 .87 .98 (.10) (5.16)
Year ended 12/31/85 .......... 9.18 .20 2.51 2.71 (.23) (.51)
Growth Fund (i)
Class A
11/1/95 to 4/30/96+++......... $29.48 $ .04 $ 3.56 $ 3.60 $ (.19) $ (.63)
Year ended 10/31/95 .......... 25.08 .12 4.80 4.92 (.11) (.41)
5/1/94 to 10/31/94**.......... 23.89 .09 1.10 1.19 0.00 0.00
Year ended 4/30/94 ........... 22.67 (.01)(c) 3.55 3.54 0.00 (2.32)
Year ended 4/30/93 ........... 20.31 .05 (c) 3.68 3.73 (.14) (1.23)
Year ended 4/30/92 ........... 17.94 .29 (c) 3.95 4.24 (.26) (1.61)
9/4/90++ to 4/30/91 .......... 13.61 .17 (c) 4.22 4.39 (.06) 0.00
Premier Growth Fund
Class A
12/1/95 to 5/31/96+++......... $16.09 $(.03) $ 1.26 $ 1.23 $ 0.00 $ (1.27)
Year ended 11/30/95 .......... 11.41 (.03) 5.38 5.35 0.00 (.67)
Year ended 11/30/94 .......... 11.78 (.09) (.28) (.37) 0.00 0.00
Year ended 11/30/93 .......... 10.79 (.05) 1.05 1.00 (.01) 0.00
9/28/92+ to 11/30/92.......... 10.00 .01 .78 .79 0.00 0.00
Technology Fund
Class A
12/1/95 to 5/31/96+++......... $46.64 $(.14) $ 2.93 $ 2.79 $ 0.00 $ (2.38)
Year ended 11/30/95 .......... 31.98 (.30) 18.13 17.83 0.00 (3.17)
1/1/94 to 11/30/94**.......... 26.12 (.32) 6.18 5.86 0.00 0.00
Year ended 12/31/93 .......... 28.20 (.29) 6.39 6.10 0.00 (8.18)
Year ended 12/31/92 .......... 26.38 (.22)(b) 4.31 4.09 0.00 (2.27)
Year ended 12/31/91 .......... 19.44 (.02) 10.57 10.55 0.00 (3.61)
Year ended 12/31/90 .......... 21.57 (.03) (.56) (.59) 0.00 (1.54)
Year ended 12/31/89 .......... 20.35 0.00 1.22 1.22 0.00 0.00
Year ended 12/31/88 .......... 20.22 (.03) .16 .13 0.00 0.00
Year ended 12/31/87 .......... 23.11 (.10) 4.54 4.44 0.00 (7.33)
Year ended 12/31/86 .......... 20.64 (.14) 2.62 2.48 (.01) 0.00
Year ended 12/31/85 .......... 16.52 .02 4.30 4.32 (.20) 0.00
Quasar Fund
Class A
10/1/95 to 3/31/96+++......... $24.16 $(.12)(b) $ 6.42 $ 6.30 $ 0.00 $ (4.81)
Year ended 9/30/95 ........... 22.65 (.22)(b) 5.59 5.37 0.00 (3.86)
Year ended 9/30/94 ........... 24.43 (.60) (.36) (.96) 0.00 (.82)
Year ended 9/30/93 ........... 19.34 (.41) 6.38 5.97 0.00 (.88)
Year ended 9/30/92 ........... 21.27 (.24) (1.53) (1.77) 0.00 (.16)
Year ended 9/30/91 ........... 15.67 (.05) 5.71 5.66 (.06) 0.00
Year ended 9/30/90 ........... 24.84 .03 (b) (7.18) (7.15) 0.00 (2.02)
Year ended 9/30/89 ........... 17.60 .02 (b) 7.40 7.42 0.00 (.18)
Year ended 9/30/88 ........... 24.47 (.08) (2.08) (2.16) 0.00 (4.71)
Year ended 9/30/87(d)......... 21.80 (.14) 5.88 5.74 0.00 (3.07)
Year ended 9/30/86(d)......... 17.25 0.00 5.54 5.54 (.03) (.96)
Year ended 9/30/85(d)......... 14.67 .04 2.87 2.91 (.11) (.22)
International Fund
Class A
Year ended 6/30/96 ........... $16.81 $ .05 $ 2.51 $ 2.56 $ 0.00 $ (1.05)
Year ended 6/30/95 ........... 18.38 .04 .01 .05 0.00 (1.62)
Year ended 6/30/94 ........... 16.01 (.09) 3.02 2.93 0.00 (.56)
Year ended 6/30/93 ........... 14.98 (.01) 1.17 1.16 (.04) (.09)
Year ended 6/30/92 ........... 14.00 .01(b) 1.04 1.05 (.07) 0.00
Year ended 6/30/91 ........... 17.99 .05 (3.54) (3.49) (.03) (.47)
Year ended 6/30/90 ........... 17.24 .03 2.87 2.90 (.04) (2.11)
Year ended 6/30/89 ........... 16.09 .05 3.73 3.78 (.13) (2.50)
Year ended 6/30/88 ........... 23.70 .17 (1.22) (1.05) (.21) (6.35)
Year ended 6/30/87 ........... 22.02 .15 4.31 4.46 (.03) (2.75)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Please refer to the footnotes on page 40.
36
<PAGE>
<TABLE>
<CAPTION>
Total Net Assets Ratio Of Net
Total Net Asset Investment At End Of Ratio Of Investment
Dividends Value Return Based Period Expenses Income (Loss)
And End Of on Net Asset (000's To Average To Average
Fiscal Year or Period Distributions Period Value (a) omitted) Net Assets Net Assets
--------------------- ------------- -------------- -------------- --------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Alliance Fund
Class A
12s/1/95 to 5/31/96+++.......... $ (1.09) $ 7.11 7.42% $952,789 1.04% .23%
Year ended 11/30/95 ............ (1.01) 7.72 37.87 945,309 1.08 .31
1/1/94 to 11/30/94**............ 0.00 6.63 (3.21) 760,679 1.05* .21*
Year ended 12/31/93 ............ (.78) 6.85 14.26 831,814 1.01 .27
Year ended 12/31/92 ............ (.53) 6.68 14.70 794,733 .81 .79
Year ended 12/31/91 ............ (.70) 6.29 33.91 748,226 .83 1.03
Year ended 12/31/90 ............ (1.42) 5.22 (4.36) 620,374 .81 1.56
Year ended 12/31/89 ............ (.04) 6.87 23.42 837,429 .75 1.79
Year ended 12/31/88 ............ (.43) 5.60 17.10 760,619 .82 1.38
Year ended 12/31/87 ............ (2.07) 5.15 4.90 695,812 .76 1.03
Year ended 12/31/86 ............ (5.26) 6.87 12.60 652,009 .61 1.39
Year ended 12/31/85 ............ (.74) 11.15 31.52 710,851 .59 1.96
Growth Fund (i)
Class A
11/1/95 to 4/30/96+++........... $ (.82) $ 32.26 12.42% $395,674 1.28% .23%
Year ended 10/31/95 ............ (.52) 29.48 20.18 285,161 1.35 .56
5/1/94 to 10/31/94**............ 0.00 25.08 4.98 167,800 1.35* .86*
Year ended 4/30/94 ............. (2.32) 23.89 15.66 102,406 1.40(f) .32
Year ended 4/30/93 ............. (1.37) 22.67 18.89 13,889 1.40(f) .20
Year ended 4/30/92 ............. (1.87) 20.31 23.61 8,228 1.40(f) 1.44
9/4/90++ to 4/30/91 ............ (.06) 17.94 32.40 713 1.40*(f) 1.99*
Premier Growth Fund
Class A
12/1/95 to 5/31/96+++........... $ (1.27) $ 16.05 8.48% $141,181 1.63% (.42)%
Year ended 11/30/95 ............ (.67) 16.09 49.95 72,366 1.75 (.28)
Year ended 11/30/94 ............ 0.00 11.41 (3.14) 35,146 1.96 (.67)
Year ended 11/30/93 ............ (.01) 11.78 9.26 40,415 2.18 (.61)
9/28/92+ to 11/30/92............ 0.00 10.79 7.90 4,893 2.17*(f) .91*(f)
Technology Fund
Class A
12/1/95 to 5/31/96+++........... $ (2.38) $ 47.05 6.75% $507,135 1.74% (.65)%
Year ended 11/30/95 ............ (3.17) 46.64 61.93 398,262 1.75 (.77)
1/1/94 to 11/30/94**............ 0.00 31.98 22.43 202,929 1.66* (1.22)*
Year ended 12/31/93 ............ (8.18) 26.12 21.63 173,732 1.73 (1.32)
Year ended 12/31/92 ............ (2.27) 28.20 15.50 173,566 1.61 (.90)
Year ended 12/31/91 ............ (3.61) 26.38 54.24 191,693 1.71 (.20)
Year ended 12/31/90 ............ (1.54) 19.44 (3.08) 131,843 1.77 (.18)
Year ended 12/31/89 ............ 0.00 21.57 6.00 141,730 1.66 .02
Year ended 12/31/88 ............ 0.00 20.35 0.64 169,856 1.42(f) (.16)(f)
Year ended 12/31/87 ............ (7.33) 20.22 19.16 167,608 1.31(f) (.56)(f)
Year ended 12/31/86 ............ (.01) 23.11 12.03 147,733 1.13(f) (.57)(f)
Year ended 12/31/85 ............ (.20) 20.64 26.24 147,114 1.14(f) .07(f)
Quasar Fund
Class A
10/1/95 to 3/31/96+++........... $ (4.81) $ 25.65 30.84% $203,483 1.83% (1.14)%
Year ended 9/30/95 ............. (3.86) 24.16 30.73 146,663 1.83 (1.06)
Year ended 9/30/94 ............. (.82) 22.65 (4.05) 155,470 1.67 (1.15)
Year ended 9/30/93 ............. (.88) 24.43 31.58 228,874 1.65 (1.00)
Year ended 9/30/92 ............. (.16) 19.34 (8.34) 252,140 1.62 (.89)
Year ended 9/30/91 ............. (.06) 21.27 36.28 333,806 1.64 (.22)
Year ended 9/30/90 ............. (2.02) 15.67 (30.81) 251,102 1.66 .16
Year ended 9/30/89 ............. (.18) 24.84 42.68 263,099 1.73 .10
Year ended 9/30/88 ............. (4.71) 17.60 (8.61) 90,713 1.28(f) (.40)(f)
Year ended 9/30/87(d)........... (3.07) 24.47 29.61 134,676 1.18(f) (.56)(f)
Year ended 9/30/86(d)........... (.99) 21.80 33.79 144,959 1.18 .02
Year ended 9/30/85(d)........... (.33) 17.25 20.29 77,067 1.18 .22
International Fund
Class A
Year ended 6/30/96 ............. $ (1.05) $ 18.32 15.83% $196,261 1.72% .31%
Year ended 6/30/95 ............. (1.62) 16.81 .59 165,584 1.73 .26
Year ended 6/30/94 ............. (.56) 18.38 18.68 201,916 1.90 (.50)
Year ended 6/30/93 ............. (.13) 16.01 7.86 161,048 1.88 (.14)
Year ended 6/30/92 ............. (.07) 14.98 7.52 179,807 1.82 .07
Year ended 6/30/91 ............. (.50) 14.00 (19.34) 214,442 1.73 .37
Year ended 6/30/90 ............. (2.15) 17.99 16.98 265,999 1.45 .33
Year ended 6/30/89 ............. (2.63) 17.24 27.65 166,003 1.41 .39
Year ended 6/30/88 ............. (6.56) 16.09 (4.20) 132,319 1.41 .84
Year ended 6/30/87 ............. (2.78) 23.70 23.05 194,716 1.30 .77
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Portfolio
Fiscal Year or Period Turnover Rate
--------------------- -------------
<S> <C>
Alliance Fund
Class A
12s/1/95 to 5/31/96+++............... 43%
Year ended 11/30/95 ................. 81
1/1/94 to 11/30/94**................. 63
Year ended 12/31/93 ................. 66
Year ended 12/31/92 ................. 58
Year ended 12/31/91 ................. 74
Year ended 12/31/90 ................. 71
Year ended 12/31/89 ................. 81
Year ended 12/31/88 ................. 65
Year ended 12/31/87 ................. 100
Year ended 12/31/86 ................. 46
Year ended 12/31/85 ................. 62
Growth Fund (i)
Class A
11/1/95 to 4/30/96+++................ 15%
Year ended 10/31/95 ................. 61
5/1/94 to 10/31/94**................. 24
Year ended 4/30/94 .................. 87
Year ended 4/30/93 .................. 124
Year ended 4/30/92 .................. 137
9/4/90++ to 4/30/91 ................. 130
Premier Growth Fund
Class A
12/1/95 to 5/31/96+++................ 54%
Year ended 11/30/95 ................. 114
Year ended 11/30/94 ................. 98
Year ended 11/30/93 ................. 68
9/28/92+ to 11/30/92................. 0
Technology Fund
Class A
12/1/95 to 5/31/96+++................ 19%
Year ended 11/30/95 ................. 55
1/1/94 to 11/30/94**................. 55
Year ended 12/31/93 ................. 64
Year ended 12/31/92 ................. 73
Year ended 12/31/91 ................. 134
Year ended 12/31/90 ................. 147
Year ended 12/31/89 ................. 139
Year ended 12/31/88 ................. 139
Year ended 12/31/87 ................. 248
Year ended 12/31/86 ................. 141
Year ended 12/31/85 ................. 259
Quasar Fund
Class A
10/1/95 to 3/31/96+++................ 87%
Year ended 9/30/95 .................. 160
Year ended 9/30/94 .................. 110
Year ended 9/30/93 .................. 102
Year ended 9/30/92 .................. 128
Year ended 9/30/91 .................. 118
Year ended 9/30/90 .................. 90
Year ended 9/30/89 .................. 90
Year ended 9/30/88 .................. 58
Year ended 9/30/87(d)................ 76
Year ended 9/30/86(d)................ 84
Year ended 9/30/85(d)................ 77
International Fund
Class A
Year ended 6/30/96 .................. 78%
Year ended 6/30/95 .................. 119
Year ended 6/30/94 .................. 97
Year ended 6/30/93 .................. 94
Year ended 6/30/92 .................. 72
Year ended 6/30/91 .................. 71
Year ended 6/30/90 .................. 37
Year ended 6/30/89 .................. 87
Year ended 6/30/88 .................. 55
Year ended 6/30/87 .................. 58
- -----------------------------------------------------------
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
Net Net Net
Asset Realized and Increase
Value Unrealized (Decrease) In Dividends From Distributions
Beginning Of Net Investment Gain (Loss) On Net Asset Value Net Investment From Net
Fiscal Year or Period Period Income (Loss) Investments From Operations Income Realized Gains
--------------------- ------------ -------------- -------------- --------------- -------------- --------------
Worldwide Privatization Fund
<S> <C> <C> <C> <C> <C> <C>
Class A
Year ended 6/30/96 ............... $ 10.18 $ .10 $ 1.85 $ 1.95 $ 0.00 $ 0.00
Year ended 6/30/95 ............... 9.75 .06 .37 .43 0.00 0.00
6/2/94+ to 6/30/94 ............... 10.00 .01 (.26) (.25) 0.00 0.00
New Europe Fund
Class A
Year ended 7/31/96 ............... $ 15.11 $ .18 $ 1.02 $ 1.20 $ 0.00 $ (.47)
Year ended 7/31/95 ............... 12.66 .04 2.50 2.54 (.09) 0.00
Period ended 7/31/94** ........... 12.53 .09 .04 .13 0.00 0.00
Year ended 2/28/94 ............... 9.37 .02(b) 3.14 3.16 0.00 0.00
Year ended 2/28/93 ............... 9.81 .04 (.33) (.29) (.15) 0.00
Year ended 2/29/92 ............... 9.76 .02(b) .05 .07 (.02) 0.00
4/2/90+ to 2/28/91 ............... 11.11(e) .26 (.91) (.65) (.26) (.44)
All-Asia Investment Fund
Class A
11/1/95 to 4/30/96+++ ............ $ 10.45 $ (.10) $ 1.92 $ 1.82 $ 0.00 $ (.08)
11/28/94+ to 10/31/95 ............ 10.00 (.19)(c) .64 .45 0.00 0.00
Global Small Cap Fund
Class A
Year ended 7/31/96 ............... $ 10.38 $ (.14) $ 1.90 $ 1.76 $ 0.00 $ (.53)
Year ended 7/31/95 ............... 11.08 (.09) 1.50 1.41 0.00 (2.11)(j)
Period ended 7/31/94** ........... 11.24 (.15) (.01) (.16) 0.00 0.00
Year ended 9/30/93 ............... 9.33 (.15) 2.49 2.34 0.00 (.43)
Year ended 9/30/92 ............... 10.55 (.16) (1.03) (1.19) 0.00 (.03)
Year ended 9/30/91 ............... 8.26 (.06) 2.35 2.29 0.00 0.00
Year ended 9/30/90 ............... 15.54 (.05)(b) (4.12) (4.17) 0.00 (3.11)
Year ended 9/30/89 ............... 11.41 (.03) 4.25 4.22 0.00 (.09)
Year ended 9/30/88 ............... 15.07 (.05) (1.83) (1.88) 0.00 (1.78)
Year ended 9/30/87 ............... 15.47 (.07) 4.19 4.12 (.04) (4.48)
Strategic Balanced Fund (i)
Class A
Year ended 7/31/96 ............... $ 17.98 $ .35 $ 1.08 $ 1.43 $ (.32) $ (.61)
Year ended 7/31/95 ............... 16.26 .34(c) 1.64 1.98 (.22) (.04)
Period ended 7/31/94** ........... 16.46 .07(c) (.27) (.20) 0.00 0.00
Year ended 4/30/94 ............... 16.97 .16(c) .74 .90 (.24) (1.17)
Year ended 4/30/93 ............... 17.06 .39(c) .59 .98 (.42) (.65)
Year ended 4/30/92 ............... 14.48 .27(c) 2.80 3.07 (.17) (.32)
9/4/90++ to 4/30/91 .............. 12.51 .34(c) 1.66 2.00 (.03) 0.00
Balanced Shares
Class A
Year ended 7/31/96 ............... $ 15.08 $ .37 $ .45 $ .82 $ (.41) $(1.48)
Year ended 7/31/95 ............... 13.38 .46 1.62 2.08 (.36) (.02)
Period ended 7/31/94** ........... 14.40 .29 (.74) (.45) (.28) (.29)
Year ended 9/30/93 ............... 13.20 .34 1.29 1.63 (.43) 0.00
Year ended 9/30/92 ............... 12.64 .44 .57 1.01 (.45) 0.00
Year ended 9/30/91 ............... 10.41 .46 2.17 2.63 (.40) 0.00
Year ended 9/30/90 ............... 14.13 .45 (2.14) (1.69) (.40) (1.63)
Year ended 9/30/89 ............... 12.53 .42 2.18 2.60 (.46) (.54)
Year ended 9/30/88 ............... 16.33 .46 (1.07) (.61) (.44) (2.75)
Year ended 9/30/87 ............... 14.64 .67 1.62 2.29 (.60) 0.00
Income Builder Fund (h)
Class A
11/1/95 to 4/30/96+++ ............ $ 10.70 $ .26 $ .40 $ .66 $ (.29) $ (.11)
Year ended 10/31/95 .............. 9.69 .93(b) .59 1.52 (.51) 0.00
3/25/94++ to 10/31/94 ............ 10.00 .96 (1.02) (.06) (.05)(g) (.20)
Utility Income Fund
Class A
12/1/95 to 5/31/96+++ ............ $ 10.22 $ .07 $ .25 $ .32 $ (.26) $ 0.00
Year ended 11/30/95 .............. 8.97 .30(c) 1.40 1.70 (.45) 0.00
Year ended 11/30/94 .............. 9.92 .42(c) (.89) (.47) (.48) 0.00
10/18/93+ to 11/30/93 ............ 10.00 .02(c) (.10) (.08) 0.00 0.00
Growth and Income Fund
Class A
11/1/95 to 4/30/96+++ ............ $ 2.71 $ .03 $ .35 $ .38 $ (.03) $ (.21)
Year ended 10/31/95 .............. 2.35 .02 .52 .54 (.06) (.12)
Year ended 10/31/94 .............. 2.61 .06 (.08) (.02) (.06) (.18)
Year ended 10/31/93 .............. 2.48 .06 .29 .35 (.06) (.16)
Year ended 10/31/92 .............. 2.52 .06 .11 .17 (.06) (.15)
Year ended 10/31/91 .............. 2.28 .07 .56 .63 (.09) (.30)
Year ended 10/31/90 .............. 3.02 .09 (.30) (.21) (.10) (.43)
Year ended 10/31/89 .............. 3.05 .10 .43 .53 (.08) (.48)
Year ended 10/31/88 .............. 3.48 .10 .33 .43 (.08) (.78)
Year ended 10/31/87 .............. 3.52 .11 (.03) .08 (.12) 0.00
Year ended 10/31/86 .............. 3.01 .12 .92 1.04 (.13) (.40)
Year ended 10/31/85 .............. 2.93 .14 .42 .56 (.15) (.33)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Please refer to the footnotes on page 40.
38
<PAGE>
<TABLE>
<CAPTION>
Total Net Assets Ratio Of Net
Total Net Asset Investment At End Of Ratio Of Investment
Dividends Value Return Based Period Expenses Income (Loss) Portfolio
And End of on Net Asset (000's To Average To Average Turnover
Fiscal Year or Period Distributions Period Value (a) omitted) Net Assets Net Assets Rate
--------------------- ------------- --------- ------------ ---------- ---------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Worldwide Privatization Fund
Class A
Year ended 6/30/96 ........... $ 0.00 $12.13 19.16% $672,732 1.87% .95% 28%
Year ended 6/30/95 ........... 0.00 10.18 4.41 13,535 2.56 .66 36
6/2/94+ to 6/30/94 ........... 0.00 9.75 (2.50) 4,990 2.75* 1.03* 0
New Europe Fund
Class A
Year ended 7/31/96 ........... $ (.47) $15.84 8.20% $ 74,026 2.14% 1.10% 69%
Year ended 7/31/95 ........... (.09) 15.11 20.22 86,112 2.09 .37 74
Period ended 7/31/94** ....... 0.00 12.66 1.04 86,739 2.06* 1.85* 35
Year ended 2/28/94 ........... 0.00 12.53 33.73 90,372 2.30 .17 94
Year ended 2/28/93 ........... (.15) 9.37 (2.82) 79,285 2.25 .47 125
Year ended 2/29/92 ........... (.02) 9.81 .74 108,510 2.24 .16 34
4/2/90+ to 2/28/91 ........... (.70) 9.76 (5.63) 188,016 1.52* 2.71* 48
All-Asia Investment Fund
Class A
11/1/95 to 4/30/96+++ ........ $ (.08) $12.19 17.52% $ 11,645 3.47% (1.75)% 42%
11/28/94+ to 10/31/95 ........ 0.00 10.45 4.50 2,870 4.42* (1.87)*(f) 90
Global Small Cap Fund
Class A
Year ended 7/31/96 ........... $ (.53) $11.61 17.46% $ 68,623 2.51% (1.22)% 139%
Year ended 7/31/95 ........... (2.11) 10.38 16.62 60,057 2.54(f) (1.17)(f) 128
Period ended 7/31/94** ....... 0.00 11.08 (1.42) 61,372 2.42* (1.26)* 78
Year ended 9/30/93 ........... (.43) 11.24 25.83 65,713 2.53 (1.13) 97
Year ended 9/30/92 ........... (.03) 9.33 (11.30) 58,491 2.34 (.85) 108
Year ended 9/30/91 ........... 0.00 10.55 27.72 84,370 2.29 (.55) 104
Year ended 9/30/90 ........... (3.11) 8.26 (31.90) 68,316 1.73 (.46) 89
Year ended 9/30/89 ........... (.09) 15.54 37.34 113,583 1.56 (.17) 106
Year ended 9/30/88 ........... (1.78) 11.41 (8.11) 90,071 1.54(f) (.50)(f) 74
Year ended 9/30/87 ........... (4.52) 15.07 34.11 113,305 1.41(f) (.44)(f) 98
Strategic Balanced Fund (i)
Class A
Year ended 7/31/96 ........... $ (.93) $18.48 8.05% $ 18,329 1.40% 1.78% 173%
Year ended 7/31/95 ........... (.26) 17.98 12.40 10,952 1.40(f) 2.07 172
Period ended 7/31/94** ....... 0.00 16.26 (1.22) 9,640 1.40*(f) 1.63* 21
Year ended 4/30/94 ........... (1.41) 16.46 5.06 9,822 1.40(f) 1.67 139
Year ended 4/30/93 ........... (1.07) 16.97 5.85 8,637 1.40(f) 2.29 98
Year ended 4/30/92 ........... (.49) 17.06 20.96 6,843 1.40(f) 1.92 103
9/4/90++ to 4/30/91 .......... (.03) 14.48 16.00 443 1.40*(f) 3.54* 137
Balanced Shares
Class A
Year ended 7/31/96 ........... $(1.89) $14.01 5.23% $102,567 1.38% 2.41% 227%
Year ended 7/31/95 ........... (.38) 15.08 15.99 122,033 1.32 3.12 179
Period ended 7/31/94** ....... (.57) 13.38 (3.21) 157,637 1.27* 2.50* 116
Year ended 9/30/93 ........... (.43) 14.40 12.52 172,484 1.35 2.50 188
Year ended 9/30/92 ........... (.45) 13.20 8.14 143,883 1.40 3.26 204
Year ended 9/30/91 ........... (.40) 12.64 25.52 154,230 1.44 3.75 70
Year ended 9/30/90 ........... (2.03) 10.41 (13.12) 140,913 1.36 4.01 169
Year ended 9/30/89 ........... (1.00) 14.13 22.27 159,290 1.42 3.29 132
Year ended 9/30/88 ........... (3.19) 12.53 (1.10) 111,515 1.42 3.74 190
Year ended 9/30/87 ........... (.60) 16.33 15.80 129,786 1.17 4.14 136
Income Builder Fund (h)
Class A
11/1/95 to 4/30/96+++ ........ $ (.40) $10.96 6.30% $ 1,402 2.32% 4.64% 120%
Year ended 10/31/95 .......... (.51) 10.70 16.22 1,398 2.38 5.44 92
3/25/94++ to 10/31/94 ........ (.25) 9.69 (.54) 600 2.52* 6.11* 126
Utility Income Fund
Class A
12/1/95 to 5/31/96+++ ........ $ (.26) $10.28 3.24% $ 2,911 1.50% 1.34% 38%
Year ended 11/30/95 .......... (.45) 10.22 19.32 2,748 1.50%(f) 2.48(f) 162
Year ended 11/30/94 .......... (.48) 8.97 (4.86) 1,068 1.50(f) 4.13 30
10/18/93+ to 11/30/93 ........ 0.00 9.92 (.80) 229 1.50*(f) 2.35* 11
Growth and Income Fund
Class A
11/1/95 to 4/30/96+++ ........ $ (.24) $ 2.85 14.46% $518,880 .95% 1.74% 43%
Year ended 10/31/95 .......... (.18) 2.71 24.21 458,158 1.05% 1.88 142
Year ended 10/31/94 .......... (.24) 2.35 (.67) 414,386 1.03 2.36 68
Year ended 10/31/93 .......... (.22) 2.61 14.98 459,372 1.07 2.38 91
Year ended 10/31/92 .......... (.21) 2.48 7.23 417,018 1.09 2.63 104
Year ended 10/31/91 .......... (.39) 2.52 31.03 409,597 1.14 2.74 84
Year ended 10/31/90 .......... (.53) 2.28 (8.55) 314,670 1.09 3.40 76
Year ended 10/31/89 .......... (.56) 3.02 21.59 377,168 1.08 3.49 79
Year ended 10/31/88 .......... (.86) 3.05 16.45 350,510 1.09 3.09 66
Year ended 10/31/87 .......... (.12) 3.48 2.04 348,375 .86 2.77 60
Year ended 10/31/86 .......... (.53) 3.52 34.92 347,679 .81 3.31 11
Year ended 10/31/85 .......... (.48) 3.01 19.53 275,681 .95 3.78 15
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Please refer to the footnotes on page 40.
39
<PAGE>
+ Commencement of operations.
++ Commencement of distribution.
+++ Unaudited.
* Annualized.
** Reflects a change in fiscal year end.
(a) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at the net asset value during the period, and a
redemption on the last day of the period. Initial sales charge or
contingent deferred sales charge is not reflected in the calculation of
total investment return. Total investment returns calculated for periods of
less than one year are not annualized.
(b) Based on average shares outstanding.
(c) Net of fee waiver and/or expense reimbursement.
(d) Adjusted for a 200% stock dividend paid to shareholders of record on
January 15, 1988.
(e) Net of offering costs of ($.05).
(f) Net of expenses assumed and/or waived/reimbursed. If the following Funds
had borne all expenses in their most recent five fiscal years, their
expense ratios would have been as follows:
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C>
All-Asia Investment Fund
Class A - - - - 10.57%# -
Growth Fund
Class A 8.79%# 1.94% 1.84% 1.46% - -
Premier Growth
Class A - 3.33%# - - - -
Net investment income ratios for Premier Growth would have been
(.25%#) for Class A for this same period.
Global Small Cap Fund
Class A - - - - 2.61% -
Strategic Balanced Fund 1.76%
Class A 11.59%# 2.05% 1.85% 1.70%1 1.81%
1.94%#2
Utility Income Fund
Class A - - 145.63%# 13.72% 4.86%# -
</TABLE>
------------------
# annualized
1. For the period ended April 30, 1994
2. For the period ended July 31, 1994
For the expense ratios of the Funds in years prior to fiscal year 1990,
assuming the Funds had borne all expenses, please see the Financial
Statements in each Fund's Statement of Additional Information.
(g) "Dividends from Net Investment Income" includes a return of capital. Income
Builder Fund had a return of capital with respect to Class A shares, for
the period ended October 31, 1994, of $(.01).
(h) On March 25, 1994, all existing shares of Income Builder Fund, previously
known as Alliance Multi-Market Income and Growth Trust, were converted into
Class C shares.
(i) Prior to July 22, 1993, Equitable Capital Management Corporation
("Equitable Capital") served as the investment adviser to the predecessor
to The Alliance Portfolios, of which Growth Fund and Strategic Balanced
Fund are series. On July 22, 1993, Alliance acquired the business and
substantially all assets of Equitable Capital and became investment adviser
to the Funds.
(j) "Distributions from Net Realized Gains" includes a return of capital.
Global Small Cap Fund had a return of capital with respect to Class A
shares, for the year ended July 31, 1995, of $(.12).
40
<PAGE>
- --------------------------------------------------------------------------------
General Information
- --------------------------------------------------------------------------------
PORTFOLIO TRANSACTIONS
Consistent with the Conduct Rules of the National Association of Securities
Dealers, Inc., and subject to seeking best price and execution, a Fund may
consider sales of its shares as a factor in the selection of dealers to enter
into portfolio transactions with the Fund.
ORGANIZATION
Each of the following Funds is a Maryland corporation organized in the year
indicated: The Alliance Fund, Inc. (1938), Alliance Balanced Shares, Inc.
(1932), Alliance Premier Growth Fund, Inc. (1992), Alliance Technology Fund,
Inc. (1980), Alliance Quasar Fund, Inc. (1968), Alliance Worldwide Privatization
Fund, Inc. (1994), Alliance New Europe Fund, Inc. (1990), Alliance All-Asia
Investment Fund, Inc. (1994), Alliance Global Small Cap Fund, Inc. (1966),
Alliance Income Builder Fund, Inc. (1991), Alliance Utility Income Fund, Inc.
(1993), and Alliance Growth and Income Fund, Inc. (1932). Each of the following
Funds is either a Massachusetts business trust or a series of a Massachusetts
business trust organized in the year indicated: Alliance Growth Fund and
Alliance Strategic Balanced Fund (each a series of The Alliance Portfolios)
(1987), and Alliance International Fund (1980). Prior to August 2, 1993, The
Alliance Portfolios was known as The Equitable Funds, Growth Fund was known as
The Equitable Growth Fund and Strategic Balanced Fund was known as The Equitable
Balanced Fund. Prior to March 22, 1994, Income Builder Fund was known as
Alliance Multi-Market Income and Growth Trust, Inc.
It is anticipated that annual shareholder meetings will not be held; shareholder
meetings will be held only when required by federal or state law. Shareholders
have available certain procedures for the removal of Directors.
A shareholder in a Fund will be entitled to share pro rata with other holders of
the same class of shares all dividends and distributions arising from the Fund's
assets and, upon redeeming shares, will receive the then current net asset value
of the Fund represented by the redeemed shares. The Funds are empowered to
establish, without shareholder approval, additional portfolios, which may have
different investment objectives, and additional classes of shares. If an
additional portfolio or class were established in a Fund, each share of the
portfolio or class would normally be entitled to one vote for all purposes.
Generally, shares of each portfolio and class would vote together as a single
class on matters, such as the election of Directors, that affect each portfolio
and class in substantially the same manner. Advisor Class, Class A, Class B and
Class C shares have identical voting, dividend, liquidation and other rights,
except that each class bears its own transfer agency expenses, each of Class A,
Class B and Class C shares bears its own distribution expenses and Class B and
Advisor Class shares convert to Class A shares under certain circumstances. Each
class of shares votes separately with respect to matters for which separate
class voting is appropriate under applicable law. Shares are freely
transferable, are entitled to dividends as determined by the Directors and, in
liquidation of a Fund, are entitled to receive the net assets of the Fund. Since
this Prospectus sets forth information about all the Funds, it is theoretically
possible that a Fund might be liable for any materially inaccurate or incomplete
disclosure in this Prospectus concerning another Fund. Based on the advice of
counsel, however, the Funds believe that the potential liability of each Fund
with respect to the disclosure in this Prospectus extends only to the disclosure
relating to that Fund. Certain additional matters relating to a Fund's
organization are discussed in its Statement of Additional Information.
REGISTRAR, TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT
AFS, an indirect wholly-owned subsidiary of Alliance, located at 500 Plaza
Drive, Secaucus, New Jersey 07094, acts as each Fund's registrar, transfer agent
and dividend-disbursing agent for a fee based upon the number of shareholder
accounts maintained for the Funds.
PRINCIPAL UNDERWRITER
AFD, an indirect wholly-owned subsidiary of Alliance, located at 1345 Avenue of
the Americas, New York, New York 10105, is the principal underwriter of shares
of the Funds.
PERFORMANCE INFORMATION
From time to time, the Funds advertise their "total return," which is computed
separately for each class of shares, including Advisor Class shares. Such
advertisements disclose a Fund's average annual compounded total return for the
periods prescribed by the Commission. A Fund's total return for each such period
is computed by finding, through the use of a formula prescribed by the
Commission, the average annual compounded rate of return over the period that
would equate an assumed initial amount invested to the value of the investment
at the end of the period. For purposes of computing total return, income
dividends and capital gains distributions paid on shares of a Fund are assumed
to have been reinvested when paid and the maximum sales charges applicable to
purchases and redemptions of a Fund's shares are assumed to have been paid.
Balanced Shares, Growth and Income Fund, Income Builder Fund, Strategic Balanced
Fund and Utility Income Fund may also advertise their "yield," which is also
computed separately for each class of shares, including Advisor Class shares. A
Fund's yield for any 30-day (or one-month) period is computed by dividing the
net investment income per share earned during such period by the maximum public
offering price per share on the last day of the period, and then annualizing
such 30-day (or one-month) yield in accordance with a formula prescribed by the
Commission which provides for compounding on a semi-annual basis.
Strategic Balanced Fund, Balanced Shares, Income Builder Fund, Utility Income
Fund and Growth and Income Fund may also state in sales literature an "actual
distribution rate" for each class which is computed in the same manner as yield
41
<PAGE>
except that actual income dividends declared per share during the period in
question are substituted for net investment income per share. The actual
distribution rate is computed separately for each class of shares, including
Advisor Class shares.
A Fund's advertisements may quote performance rankings or ratings of a Fund by
financial publications or independent organizations such as Lipper Analytical
Services, Inc. and Morningstar, Inc. or compare a Fund's performance to various
indices.
Additional Information
This Prospectus and the Statements of Additional Information, which have been
incorporated by reference herein, do not contain all the information set forth
in the Registration Statements filed by the Funds with the Commission under the
Securities Act. Copies of the Registration Statements may be obtained at a
reasonable charge from the Commission or may be examined, without charge, at the
offices of the Commission in Washington, D.C.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY STATE IN WHICH SUCH
OFFERING MAY NOT LAWFULLY BE MADE.
THIS PROSPECTUS IS INTENDED TO CONSTITUTE AN OFFER BY EACH FUND ONLY OF THE
SECURITIES OF WHICH IT IS THE ISSUER AND IS NOT INTENDED TO CONSTITUTE AN OFFER
BY ANY FUND OF THE SECURITIES OF ANY OTHER FUND WHOSE SECURITIES ARE ALSO
OFFERED BY THIS PROSPECTUS. NO FUND INTENDS TO MAKE ANY REPRESENTATION AS TO THE
ACCURACY OR COMPLETENESS OF THE DISCLOSURE IN THIS PROSPECTUS RELATING TO ANY
OTHER FUND. SEE "GENERAL INFORMATION--ORGANIZATION."
42
<PAGE>
ALLIANCE SUBSCRIPTION APPLICATION
The Alliance Stock Funds
Advisor Class
The Alliance Fund International Fund Strategic Balanced Fund
Growth Fund Worldwide Privatization Fund Balanced Shares
Premier Growth Fund New Europe Fund Income Builder Fund
Technology Fund All-Asia Investment Fund Utility Income Fund
Quasar Fund Global Small Cap Fund Growth & Income Fund
- --------------------------------------------------------------------------------
Information And Instructions
- --------------------------------------------------------------------------------
To Open Your New Alliance Account...
Please complete the application For certified or overnight deliveries,
and mail it to: send to:
Alliance Fund Services, Inc. Alliance Fund Services, Inc.
P.O. Box 1520 500 Plaza Drive
Secaucus, New Jersey 07096-1520 Secaucus, New Jersey 07094
- ---------
Section 1 Your Account Registration (Required)
- ---------
Complete one of the available choices. To ensure proper tax reporting to the
IRS:
. Individuals, Joint Tenants and Gift/Transfer to a Minor:
. Indicate your name(s) exactly as it appears on your social security
card.
. Trust/Other:
. Indicate the name of the entity exactly as it appeared on the notice
you received from the IRS when your Employer Identification number was
assigned.
- ---------
Section 2 Your Address (Required)
- ---------
Complete in full.
- ---------
Section 3 Your Initial Investment (Required)
- ---------
For each fund in which you are investing: 1) Write the dollar amount of your
initial purchase 2) Circle a distribution option for your dividends 3) Circle
a distribution option for your capital gains. All distributions (dividends and
capital gains) will be reinvested into your fund account unless you direct
otherwise. If you want distributions sent directly to your bank account, then
you must complete Section 4D and attach a voided check for that account. If you
want your distributions sent to a third party you must complete Section 4E.
- ---------
Section 4 Your Shareholder Options (Complete only those options you want)
- ---------
A. Automatic Investment Plans (AIP) - You can make periodic investments into any
of your Alliance Funds in one of three ways. First, by a periodic withdrawal
($25 minimum) directly from your bank account and invested into an Alliance
Fund. Second, you can direct your distributions (dividends and capital gains)
from one Alliance Fund into another Fund. Or third, you can automatically
exchange monthly ($25 minimum) shares of one Alliance Fund for shares of
another Fund. To elect one of these options, complete the appropriate portion
of Section 4A.
B. Systematic Withdrawal Plans (SWP) - Complete this option if you wish to
periodically redeem dollars from one of your fund accounts. Payments can be
made via Electronic Funds Transfer (EFT) to your bank account or by check.
C. Telephone Transactions via EFT - Complete this option if you would like to be
able to transact via telephone between your fund account and your bank
account.
D. Bank Information - If you have elected any options that involve transactions
between your bank account and your fund account or have elected cash
distribution options and would like the payments sent to your bank account,
please tape a voided check of the account you wish to use to this section of
the application.
E. Third Party Payment Details - If you have chosen cash distributions and/or a
Systematic Withdrawal Plan and would like the payments sent to a person
and/or address other than those provided in section 1 or 2, complete this
option.
- ---------
Section 5 Shareholder Authorization (Required)
- ---------
All owners must sign. If it is a custodial, corporate, or trust account, the
custodian, an authorized officer, or the trustee respectively must sign.
If We Can Assist You In Any Way, Please Do Not Hesitate To Call Us At: (800)
221-5672.
<PAGE>
Subscription Application
- --------------------------------------------------------------------------------
The Alliance Stock Funds
Advisor Class
(see instructions at the front of the application)
1. Your Account Registration (Please Print)
[_] INDIVIDUAL OR JOINT ACCOUNT
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
----------------------------- -- ------------------------------------
Owner's Name (First Name) (MI) (Last Name)
| | | |-| | | -| | | | |
Social Security Number (Required to open account)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
--------------------------------------- --- -----------------------
Joint Owner's Name* (First Name ) (MI) (Last Name)
*Joint Tenants with right of survivorship unless Alliance Fund Services is
informed otherwise.
[_] GIFT/TRANSFER TO A MINOR
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
---------------------------------------- --- -------------------------
Custodian - One Name Only (First Name) (MI) (Last Name)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
----------------------------- --- -------------------------------------
Minor (First Name) (MI) (Last Name)
| | | |-| | |-| | | | |
Minor's Social Security Number (Required to open account)
Under the State of (Minor's Residence) Uniform Gifts/Transfer
to Minor's Act ---------------
[_] TRUST ACCOUNT
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
----------------------------- --- -------------------------------------
Name of Trustee
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Name of Trust
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
-------------------------------------------------------------------------
Name of Trust (cont'd)
| | | | | | | | | | | | | | | | | | | | | |
----------------------- -------------------
Trust Dated Tax ID or Social Security Number (Required to
open account)
[_] OTHER
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
---------------------------------------------------------------------------
Name of Corporation, Partnership, Investment Only Retirement Plan, or other
Entity
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
------------------- -----------------------------------------------
Tax ID Number Trustee Name (Retirement Plans only)
2. Your Address
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---------------------------------------------------------------------------
Street
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
---------------------------------------------------------------------------
City State Zip Code
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
---------------------------------------------------------------------------
If Non-U.S., Specify Country
| | | |-| | | |-| | | | | | | | |-| | | |-| | | | |
------- ------- --------- ------- ------- ---------
Daytime Phone Evening Phone
I am a: [_] U.S. Citizen [_] Non-Resident Alien
[_] Resident Alien [_] Other
For Alliance Use Only
<PAGE>
- --------------------------------------------------------------------------------
3. Your Initial Investment
- --------------------------------------------------------------------------------
The minimum investment is $250 per Fund.
I hereby subscribe for shares of the following Alliance Stock Fund(s) and elect
distribution options as indicated.
Dividend and Capital Gain R Reinvest distributions into
Distribution Options: - ----------------------
my fund account.
- ---------------------- C Send my distributions in cash to the address
Broker/Dealer Use Only - -----------------------------
- ---------------------- I have provided in Section 2. (Complete
Section 4D for direct deposit to your bank
Wire Confirm # account. Complete Section 4E for payment to
- ---------------------- a third party).
D Direct my distributions to another Alliance
- -------------------------------------------
fund. Complete the appropriate portion of
----
Section 4A to direct your distributions
(dividends and capital gains) to the Advisor
Class Shares of another Alliance Fund.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Make all checks payable to: Distributions Options *Circle*
Alliance Fund Services Advisor Class
- ----------------------------- ---------------------------------
Alliance Fund Name Dividends Capital Gains
- --------------------------------------------------------------------------------
<S> <C> <C>
The Alliance Fund $ $(44) R C D R C D
- --------------------------------------------------------------------------------
Growth Fund (31) R C D R C D
- --------------------------------------------------------------------------------
Premier Growth Fund (78) R C D R C D
- --------------------------------------------------------------------------------
Technology Fund (82) R C D R C D
- --------------------------------------------------------------------------------
Quasar Fund (26) R C D R C D
- --------------------------------------------------------------------------------
International Fund (40) R C D R C D
- --------------------------------------------------------------------------------
Worldwide Privatization Fund (122) R C D R C D
- --------------------------------------------------------------------------------
New Europe Fund (62) R C D R C D
- --------------------------------------------------------------------------------
All-Asia Investment Fund (118) R C D R C D
- --------------------------------------------------------------------------------
Global Small Cap Fund (45) R C D R C D
- --------------------------------------------------------------------------------
Strategic Balanced Fund (32) R C D R C D
- --------------------------------------------------------------------------------
Balanced Shares (96) R C D R C D
- --------------------------------------------------------------------------------
Income Builder Fund (111) R C D R C D
- --------------------------------------------------------------------------------
Utility Income Fund (09) R C D R C D
- --------------------------------------------------------------------------------
Growth & Income Fund (94) R C D R C D
- --------------------------------------------------------------------------------
R C D R C D
- --------------------------------------------------------------------------------
Total Investment $
- ---------------------------------------------
</TABLE>
<PAGE>
--------------------------
MY SOCIAL SECURITY (TAX IDENTIFICATION ) NUMBER IS:
--------------------------
- --------------------------------------------------------------------------------
4. Your Shareholder Options
- --------------------------------------------------------------------------------
- ------------------------------------
A. AUTOMATIC INVESTMENT PLANS (AIP)
- ------------------------------------
[ ] WITHDRAW FROM MY BANK ACCOUNT
I authorize Alliance to draw on my bank account for investment in my fund
account(s) as indicated below (Complete Section 4D also for the bank account you
wish to use).
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Monthly Dollar Amount Day of Withdrawal Circle "all" or
Fund Name ($25 minimum) (1st thru 31st) applicable months
All J F M A M J
J A S O N D
- --------------------------------------------------------------------------------
All J F M A M J
J A S O N D
- --------------------------------------------------------------------------------
All J F M A M J
J A S O N D
- --------------------------------------------------------------------------------
All J F M A M J
J A S O N D
- -------------------------------------------------------------------------------
Your bank must be a member of the National Automated Clearing House Association
(NACHA).
</TABLE>
[ ] DIRECT MY DISTRIBUTIONS
As indicated in Section 3, I would like my dividends and/or capital gains
directed to the same class of shares of another Alliance fund.
<TABLE>
<S> <C> <C> <C>
"From" Fund Name "From" Fund Account # "To" Fund Name "To" Fund Account #
(if existing) (if existing)
------------------------------------------------------------------------------
[ ] New
[ ] Existing
- --------------------------------------------------------------------------------
[ ] New
[ ] Existing
- --------------------------------------------------------------------------------
[ ] New
[ ] Existing
- --------------------------------------------------------------------------------
[ ] New
[ ] Existing
- --------------------------------------------------------------------------------
</TABLE>
[ ] EXCHANGE SHARES MONTHLY
I authorize Alliance to transact monthly exchanges within the same class of
shares between my fund accounts as listed below.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
"From" Fund Name "From" Fund Account # Dollar Amount Day of Exchange** "To" Fund Name "To" Fund Account #
(if existing) ($25 minimum) (1st thru 31st) (if existing)
[ ] New
[ ] Existing
- -------------------------------------------------------------------------------------------------------------------------
[ ] New
[ ] Existing
- -------------------------------------------------------------------------------------------------------------------------
[ ] New
[ ] Existing
- -------------------------------------------------------------------------------------------------------------------------
[ ] New
[ ] Existing
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
**Shares exchanged will be redeemed at the net asset value on the "Day of
Exchange" (If the "Day of Exchange" is not a fund business day, the exchange
transaction will be processed on the next fund business day). The exchange
privilege is not available if stock certificates have been issued.
- -------------------------------------
B. SYSTEMATIC WITHDRAWAL PLANS (SWP)
- -------------------------------------
In order to establish a SWP, you must reinvest all dividends and capital gains
and own or purchase shares of the Fund having a current net asset value of at
least:
.$10,000 for monthly payments, .$5,000 for bi-monthly payments,
.$4,000 for quarterly or less frequent payments
Your bank must be a member of the National Automated Clearing House Association
(NACHA) in order for you to receive SWP proceeds directly into your checking
account.
[ ] I authorize Alliance to transact periodic redemptions from my fund account
and send the proceeds to me as indicated below.
<TABLE>
<CAPTION>
Fund Name Dollar Amount ($50 minimum) Circle "all" or applicable months
<S> <C> <C>
ALL J F M A M J J A S O N D
- --------------------------------------------------------------------------------
All J F M A M J J A S O N D
- --------------------------------------------------------------------------------
All J F M A M J J A S O N D
- --------------------------------------------------------------------------------
All J F M A M J J A S O N D
- --------------------------------------------------------------------------------
</TABLE>
Please send my SWP proceeds to:
[ ] MY CHECKING ACCOUNT (via EFT)
1st-31st
I would like to have these payments occur on or about the [ ]
of the months circled above. (Complete Section 4D for the bank account you
wish to use)
[ ] MY ADDRESS OF RECORD (via CHECK)
[ ] THE PAYEE AND ADDRESS SPECIFIED IN SECTION 4E (via CHECK)
<PAGE>
- --------------------------------------
C. PURCHASES AND REDEMPTIONS VIA EFT
- --------------------------------------
You can call our toll-free number 1-800-221-5672 and instruct Alliance Fund
Services, Inc. in a recorded conversation to purchase, redeem or exchange shares
for your account. Purchase and redemption requests will be processed via
electronic funds transfer (EFT) to and from your bank account.
Instructions: . Review the information in the Prospectus about telephone
transaction services.
. If you select the telephone purchase or redemption
privilege, you must write "VOID" across the face of a check
from the bank account you wish to use and attach it to
Section 4D of this application.
Purchases and Redemptions via EFT
[_] I hereby authorize Alliance Fund Services, Inc. to effect the purchase
and/or redemption of Fund shares for my account according to my telephone
instructions or telephone instructions from my Broker/Agent, and to withdraw
money or credit money for such shares via EFT from the bank account I have
selected. In the case of shares purchased by check, redemption proceeds may
not be made available until the fund is reasonably assured that the check
has cleared, normally 15 calendar days after the purchase date.
- --------------------
D. BANK INFORMATION
- --------------------
This bank account information will be used for:
[_] Distributions (Section 3) [_] Automatic Investments (Section 4A)
[_] Systematic Withdrawals (Section 4B) [_] Telephone Transactions (Section 4C)
Please attach a voided check:
- --------------------------------------------------------------------------------
Tape Preprinted Voided Check Here.
We Cannot Establish These Services Without it.
- --------------------------------------------------------------------------------
Your bank must be a member of the National Automated Clearing House Association
(NACHA) in order to have EFT transactions processed to your fund account. For
EFT transactions, the fund requires signatures of bank account owners exactly as
they appear on bank records.
- -------------------------------
E. THIRD PARTY PAYMENT DETAILS
- -------------------------------
This third party payee information will be used for:
[_] Distributions (Section 3) [_] Systematic Withdrawals (Section 4B)
-------------------------------------------------------------------------
Name
-------------------------------------------------------------------------
Address - Line 1
-------------------------------------------------------------------------
Address - Line 2
-------------------------------------------------------------------------
Address - Line 3
<PAGE>
- ------------------------------------------------------------------------------
5. Shareholder Authorization This section MUST be completed
----
- ------------------------------------------------------------------------------
Telephone Exchanges and Redemptions by Check
Unless I have checked one or both boxes below, these privileges will
automatically apply, and by signing this application, I hereby authorize
Alliance Fund Services, Inc. to act on my telephone instructions, or on
telephone instructions from any person representing himself to be an authorized
employee of an investment dealer or agent requesting a redemption or exchange on
my behalf. (NOTE: Telephone exchanges may only be processed between accounts
that have identical registrations.) Telephone redemption checks will only be
mailed to the name and address of record; and the address must have no change
within the last 30 days. The maximum telephone redemption amount is $50,000.
This service can be enacted once every 30 days.
[_] I do not elect the telephone [_] I do not elect the telephone
--- ---
exchange service. redemption by check service.
I certify under penalty of perjury that the number shown in Section 1 of this
form is my correct tax identification number or social security number and that
I have not been notified that this account is subject to backup withholding.
By selecting any of the above telephone privileges, I agree that neither the
Fund nor Alliance, Alliance Fund Distributors, Inc., Alliance Fund Services,
Inc. or other Fund Agent will be liable for any loss, injury, damage or expense
as a result of acting upon telephone instructions purporting to be on my behalf,
that the Fund reasonably believes to be genuine, and that neither the Fund nor
any such party will be responsible for the authenticity of such telephone
instructions. I understand that any or all of these privileges may be
discontinued by me or the Fund at any time. I understand and agree that the
Fund reserves the right to refuse any telephone instructions and that my
investment dealer or agent reserves the right to refuse to issue any telephone
instructions I may request.
For non-residents only: Under penalties of perjury, I certify that to the best
of my knowledge and belief, I qualify as a foreign person as indicated in
Section 2.
I am of legal age and capacity and have received and read the Prospectus and
agree to its terms.
The Internal Revenue Service does not require your consent to any provision of
this document other than the certificate required to avoid backup withholding.
- ---------------------------------- -------------
Signature Date
- ---------------------------------- ------------- ----------------------
Signature Date Acceptance Date
- -----------------------------------------------------------------------------
Dealer/Agent Authorization For selected Dealers or Agents ONLY.
- -----------------------------------------------------------------------------
We hereby authorize Alliance Fund Services, Inc. to act as our agent in
connection with transactions under this authorization form; and we guarantee the
signature(s) set forth in Section 5, as well as the legal capacity of the
shareholder.
- ----------------------------------- ------------------------------------------
Dealer/Agent Firm Authorized Signature
- ----------------------------------- ------- ---------------------------------
Representative First Name MI Last Name
- --------------------------------------------------------------------------------
Representative Number
- --------------------------------------------------------------------------------
Branch Office Address
- --------------------------------------------------------------------------------
City State Zip Code
( )
- --------------------------------------------------------------------------------
Branch Number Branch Phone
<PAGE>
This is filed pursuant to Rule 497(c).
File Nos. 2-25364 and 811-01415.
<PAGE>
(LOGO)(R) ALLIANCE GLOBAL SMALL CAP FUND, INC.
________________________________________________________________
P.O. Box 1520, Secaucus, New Jersey 07096-1520
Toll Free (800) 221-5672
For Literature: Toll Free (800) 227-4618
_______________________________________________________________
_______________________________________________________________
STATEMENT OF ADDITIONAL INFORMATION
October 1, 1996
____________________________________________________________
This Statement of Additional Information is not a prospectus but
supplements and should be read in conjunction with the current
Prospectus for the Alliance Global Small Cap Fund, Inc. (the
"Fund") that offers the Class A, Class B and Class C shares of
the Fund and the current Prospectus for the Fund that offers the
Advisor Class shares of the Fund (the "Advisor Class Prospectus"
and, together with the Prospectus for the Fund that offers the
Class A, Class B and Class C shares, the "Prospectus"). Copies
of such Prospectuses may be obtained by contacting Alliance Fund
Services, Inc. at the address or the "For Literature" telephone
number shown above.
TABLE OF CONTENTS
Page
Description of the Fund
Management of the Fund
Expenses of the Fund
Purchase of Shares
Redemption and Repurchase of Shares
Shareholder Services
Net Asset Value
Dividends, Distributions and Taxes
Brokerage and Portfolio Transactions
General Information
Report of Independent Auditors and
Financial Statements
<PAGE>
_________________________
(R): This registered service mark used under license from the
owner, Alliance Capital Management L.P.
<PAGE>
_________________________________________________________________
DESCRIPTION OF THE FUND
_________________________________________________________________
Except as otherwise indicated, the investment policies
of Alliance Global Small Cap Fund, Inc. (the "Fund") are not
"fundamental policies" and, therefore, may 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 may not be changed without shareholder approval. There
can be, of course, no assurance that the Fund will achieve its
investment objective.
Investment Objective
The investment objective of the Fund is to seek long-
term growth of capital through investment in a global portfolio
of the equity securities (i.e., common stocks, rights or warrants
to purchase common stocks and securities convertible into common
stocks) of selected companies with relatively small market
capitalization. Current income is not a consideration.
Investing in smaller companies and in foreign securities involves
both opportunities and risks that are different from those
associated with investing solely in larger United States
companies.
How The Fund Pursues Its Objective
The Fund will select its portfolio investments primarily
from among companies whose individual market capitalizations
would place them (at the time of purchase) in the same size range
as companies in approximately the lowest 20% by market
capitalization of companies that have equity securities listed on
a U.S. national securities exchange or traded in the NASDAQ
system. Based on recent U.S. share prices, the Fund's portfolio
companies typically will have individual market capitalizations
of between approximately $50 million and $1 billion (although the
Fund will be free to invest in smaller capitalization companies
that satisfy the Fund's size standard). Because the Fund applies
the U.S. size standard on a global basis, its investment outside
the U.S. might rank above the lowest 20% by market capitalization
in local markets and, in fact, might in some countries rank among
the largest companies in terms of capitalization.
Under normal market conditions, the Fund will invest at
least 65% of its assets in equity securities of such smaller
capitalization issuers, and such issuers will be located in at
least three countries, one of which may be the U.S. Up to 35% of
the Fund's total assets may be invested in securities of
2
<PAGE>
companies whose market capitalizations exceed the Fund's size
standard. Equity securities in which the Fund invests may be
listed on a U.S. or foreign exchange or traded over the counter.
Special Investment Considerations. Alliance Capital
Management, L.P. (the "Adviser") believes that the issuers of
smaller capitalization stocks often have sales and earnings
growth rates which exceed those of larger companies, and that
such growth rates may in turn be reflected in more rapid share
price appreciation. However, investing in smaller capitalization
stocks can involve greater risk than is customarily 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. Also, their
securities may be thinly traded (and therefore have to be sold at
a discount from current market prices or sold in small lots over
an extended period of time), may be followed by fewer investment
research analysts and may be subject to wider price swings and
thus may create a greater chance of loss than investing in
securities of larger capitalization companies. Transaction costs
in smaller capitalization stocks may be higher than those of
larger capitalization companies.
The Adviser believes that global investing offers
opportunities for superior investment returns. A portfolio
containing the securities of companies located in a number of
countries may offer the opportunity for greater capital
appreciation than investment in a portfolio composed only of the
securities of U.S. companies. The Adviser will adjust the Fund's
exposure to particular national economies based on its perception
of the most favorable markets and issuers. The Fund intends to
spread investment risk among the capital markets of a number of
countries and will invest in equity securities of companies based
in at least three, and normally considerably more such countries,
one of which may be the U.S. The percentage of the Fund's assets
invested in securities of companies in a particular country or
denominated in a particular currency will vary in accordance with
the Adviser's assessment of the appreciation potential of such
securities and the strength of that currency. Investing in
securities issued by foreign corporations involves considerations
and possible risks not typically associated with investing in
obligations issued by U.S. corporations. The values of foreign
investments are affected by changes in currency rates or exchange
control regulations, application of foreign tax laws, including
withholding taxes, changes in governmental administration or
economic or monetary policy (in this country or abroad) or
changed circumstances in dealings between nations. Costs are
incurred in connection with conversions between various
currencies. In addition, foreign brokerage commissions are
3
<PAGE>
generally higher than in the United States, and foreign
securities markets may be less liquid, more volatile and less
subject to governmental supervision than in the United States.
Investments in foreign countries could be affected by other
factors not present in the United States, including
expropriation, confiscatory taxation, lack of uniform accounting
and auditing standards and potential difficulties in enforcing
contractual obligations and could be subject to extended
settlement periods.
The Fund may invest up to 10% of its total assets in
securities for which there is no ready market. The Fund may
therefore not be able to readily sell such securities. While
there may not be securities sales registration requirements
comparable to those under U.S. laws or laws imposing legal
restrictions on resales of securities in many of the countries in
which the Fund may invest, there may be contractual restrictions
on resale of securities.
The Fund has the ability to invest up to 20% of its
total assets in warrants to purchase equity securities issued by
European companies to the extent consistent with the Fund's
investment objective; however, the Fund does not presently intend
to invest more than 10% of its total assets in such warrants.
The warrants in which the Fund may invest are a type of security,
usually issued together with another security of an issuer, that
entitles the holder to buy a fixed amount of common or preferred
stock of such issuer at a specified price for a fixed period of
time (which may be in perpetuity). Generally, warrants are
commonly issued attached to other securities of the issuer as a
method of making such securities more attractive and are usually
detachable and, thus, may be bought or sold separately from the
issued security. Warrants can be a speculative investment and
may be considered more speculative than certain other types of
investments in that they neither entitle a holder to dividends or
voting rights with respect to the securities which may be
purchased nor represent any rights in the assets of the issuing
company. Also, the value of a warrant does not necessarily
change with the value of the underlying securities, and a warrant
ceases to have value if it is not exercised prior to the
expiration date. The value of a warrant may decline because of a
decrease in the value of the underlying stock, the passage of
time or a change in perception as to the potential of the
underlying stock, or any combination thereof. If the market
price of the underlying stock is below the exercise price set
forth in the warrant on the expiration date, the warrant will
expire worthless. Warrants are freely transferable and are
generally traded on one or more stock exchanges. The Fund
anticipates that the warrants in which it will invest will have
exercise periods of approximately two to ten years. In addition
to purchasing corporate securities of non-U.S. issuers in
4
<PAGE>
overseas markets, the Fund may invest in American Depository
Receipts, European Depository Receipts or other securities
representing securities of companies based in countries other
than the United States.
For temporary defensive purposes, the Fund may vary from
its investment policy during periods in which conditions in
securities markets or other economic or political conditions
warrant. In such circumstances, the Fund will be able to invest
without limit in large capitalization companies or reduce its
position in equity securities and increase its position in debt
securities, which may include short-term U.S. Government
securities and U.S. dollar- or foreign currency-denominated
short-term indebtedness (including commercial paper), cash
equivalents and fixed income securities issued or guaranteed by
governmental entities, or by companies or supranational
organizations (e.g., International Bank for Reconstruction and
Development and the European Community) rated AA or better by
Standard & Poor's Corporation or Aa or better by Moody's
Investors Service, Inc. or if not so rated, of equivalent
investment quality as determined by the Adviser. Apart from
periods of defensive investment, the Fund may also at any time
temporarily invest funds awaiting reinvestment or held as
reserves for dividends and other distributions to shareholders in
U.S. dollar-denominated money market instruments.
Additional Investment Practices And Policies
The following additional investment policies supplement
those set forth above.
Options. In seeking to attain capital growth, the Fund
may supplement customary investment practices by writing and
purchasing call options listed on one or more U.S. or foreign
securities exchanges and purchasing listed put options, including
put options on market indexes. A put option gives the buyer of
such option, upon payment of a premium, the right to deliver a
specified number of shares of a stock 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
number of shares of a specified stock on or before a fixed date,
at a predetermined price, usually the market price at the time
the contract is negotiated. Prior to the expiration of the
option, the seller (the "writer") of the option has an obligation
to sell the underlying security to the holder of the option at
the exercise price regardless of the market price of the security
at the time the option is exercised. The premium received by the
Fund is recorded as a liability and is subsequently adjusted to
the current market value of the option written. Premiums
received from writing options which expire unexercised are
5
<PAGE>
treated by the Fund on the expiration date as realized capital
gains. The difference between the premium and the amount paid
upon executing a closing purchase transaction, including
brokerage commissions, is also treated as a gain, or if the
premium is less than the amount paid for the closing purchase
transaction, as a loss. If a call option is exercised, the
premium is added to the proceeds from the sale in determining
whether the Fund has realized a gain or loss.
Writing and purchasing options are highly specialized
activities and entail greater than ordinary investment risks.
The Fund will not write a call option unless the Fund at all
times during the option period owns either (a) the optioned
securities, or securities convertible into or carrying rights to
acquire the optioned securities, or (b) an offsetting call option
on the same securities.
It is the Fund's policy not to write a call option if
the premium to be received by the Fund in connection with such
option would not produce an annualized return of at least 15% of
the then current market value of the securities subject to option
(without giving effect to commissions, stock transfer taxes and
other expenses of the Fund which are deducted from premium
receipts). The Fund will also not write a call option if, as a
result, the aggregate of the Fund's portfolio securities subject
to outstanding call options (valued at the lower of the option
price or market value of such securities) would exceed 15% of the
Fund's total assets. The Fund will not sell any call option if
such sale would result in more than 10% of the Fund's assets
being committed to call options written by the Fund which, at the
time of sale by the Fund, have a remaining term of more than 100
days. The aggregate cost of all outstanding options purchased
and held by the Fund will at no time exceed 10% of the Fund's
total assets.
In the event the option is exercised, the Fund will be
obligated to sell stocks below the current market price. The
Fund's potential for gain is limited to the difference between
the exercise price plus the premium less the cost of the
security. Alternatively, the option's position could be closed
out by purchasing a like option. It is possible, although
considered unlikely, that the Fund might be unable to execute
such a closing purchase transaction. If the price of a security
declines below the amount to be received from the exercise price
less the amount of the call premium received and if the option
could not be closed, the Fund would hold a security which might
otherwise have been sold to protect against depreciation. In
addition, the Fund's portfolio turnover may increase to the
extent that the market price of the underlying securities covered
by call options written by the Fund increases and the Fund has
not entered into a closing purchase transaction.
6
<PAGE>
If an option purchased by the Fund expires without being
exercised, its premium would be lost by the Fund.
Options on Market Indexes. Options on securities
indexes are similar to options 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.
Through the purchase of listed index options, the Fund
could achieve many of the same objectives as through the use of
options on individual securities. Price movements in the Fund's
portfolio securities probably will not correlate perfectly with
movements in the level of the index and, therefore, the Fund
would bear a risk of loss on index options purchased by it if
favorable price movements of the hedged portfolio securities do
not equal or exceed losses on the options or if adverse price
movements of the hedged portfolio securities are greater than
gains realized from the options.
Restricted Securities. Where registration is required,
the Fund may be obligated to pay all or part of the registration
expense, and a considerable period may elapse between the time of
the decision to sell and the time the Fund may be permitted to
sell a security under an effective registration statement. If,
during such a period adverse market conditions were to develop,
the Fund might obtain a less favorable price than prevailed when
it decided to sell. Restricted securities will be valued in such
manner as the Board of Directors of the Fund, in good faith,
deems appropriate to reflect their fair market value.
Currency Hedging Techniques. The Fund may engage in
various portfolio strategies to hedge its portfolio against
currency risks. These strategies include the use of forward
foreign currency transactions, currency options and futures and
options on such futures. The Fund may enter into such
transactions only in connection with hedging strategies. While
the Fund's use of hedging strategies is intended to reduce the
risk of declines in the net asset value of Fund shares, there can
be no assurance that the Fund's hedging transactions will be
effective. Unanticipated changes in currency prices may result
in poorer overall performance for the Fund than if it had not
entered into such hedging transactions. Furthermore, the Fund
will only engage in hedging activities from time to time and may
not necessarily be engaging in hedging activities when movements
in the currency exchange rates occur.
7
<PAGE>
Although certain risks are involved in forward, futures
and options transactions, the Adviser believes that, because the
Fund will only engage in these transactions for hedging purposes,
the forward, futures and options portfolio strategies of the Fund
will not subject the Fund to the risks frequently associated with
the speculative use of futures transactions.
Forward Foreign Currency Exchange Contracts. The Fund
may purchase or sell forward foreign currency exchange contracts
("forward contracts") to attempt to minimize the risk to the Fund
from adverse changes in the relationship between the U.S. Dollar
and other currencies. Generally, the foreign exchange
transactions of the Fund will be conducted on a spot, i.e., cash,
basis at the spot rate for purchasing or selling currency
prevailing in the foreign exchange market. Under normal market
conditions, this rate differs from the prevailing exchange rate
in an amount generally less than one-tenth of one percent due to
the costs of converting from one currency to another. However,
the Fund has authority to deal in forward foreign exchange
between currencies of the different countries in whose securities
it will invest as a hedge against possible variations in the
foreign exchange rates between these currencies. A forward
contract is an obligation to purchase or sell a specific currency
for an agreed price at a future date (up to one year) which is
individually negotiated and privately traded by currency traders
and their customers. The Fund's dealings in forward contracts
will be limited to hedging involving either specific transactions
or portfolio positions. Transaction hedging is the purchase or
sale of forward contracts with respect to specific receivables or
payables of the Fund accruing in connection with the purchase and
sale of its portfolio securities or the payment of dividends and
distributions by the Fund. Position hedging is the sale of
forward contracts with respect to portfolio security positions
denominated or quoted in such foreign currency.
The Fund may not position hedge with respect to the
currency of a particular country 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
particular foreign currency. If the Fund enters into a position
hedging transaction, its custodian bank will place, to the extent
required by applicable law, liquid assets in a segregated account
of the Fund in an amount equal to the value of the Fund's total
assets committed to the consummation of such forward contract.
If the value of the assets placed in the segregated account
declines, additional liquid assets will be placed in the account
so that the value of the account will equal the amount of the
Fund's commitment with respect to such contracts. In addition,
the Fund may use such other methods of "cover" as are permitted
by applicable law. The Fund will not commit more than 15% of the
value of its assets to position hedging contracts.
8
<PAGE>
Forward contracts reduce the potential gain from a
positive change in the relationship between U.S. dollar and other
currencies. The Fund will not enter into a forward contract with
a term of more than one year or if, as a result thereof, more
than 50% of the Fund's total assets would be committed to such
contracts.
Hedging against a decline in the value of a currency
does not eliminate fluctuations in the prices of portfolio
securities denominated in such currency or prevent losses if the
prices of such securities decline. Such transactions also
preclude the opportunity for gain if the value of the hedge
currency should rise. Moreover, it may not be possible for the
Fund to hedge against a devaluation that is so generally
anticipated that the Fund is not able to contract to sell the
currency at a price above the devaluation level it anticipates.
The cost to the Fund of engaging in foreign currency transactions
varies with such factors as the currency involved, the length of
the contract period and the market conditions then prevailing.
Since transactions in foreign currency exchange are usually
conducted on a principal basis, no fees or commissions are
involved.
Foreign Currency Options, Foreign Currency Futures and
Options on Foreign Currency Futures. The Fund is also authorized
to purchase or sell listed or unlisted foreign currency options,
foreign currency futures and related options on foreign currency
futures as a short or long hedge against possible variations in
foreign exchange rates. Such transactions may be effected with
respect to hedges on non-U.S. dollar denominated securities owned
by the Fund, sold by the Fund but not yet delivered, or committed
or anticipated to be purchased by the Fund. As an illustration,
the Fund may use such techniques to hedge the stated value in
U.S. dollars of an investment in a pound sterling denominated
security. In such circumstances, for example, the Fund may
purchase a foreign currency put option enabling it to sell a
specified amount of pounds for dollars at a specified price by a
future date. To the extent the hedge is successful, a loss in
the value of the pound relative to the dollar will tend to be
offset by an increase in the value of the put option. To offset,
in whole or in part, the cost of acquiring such a put option, the
Fund may also sell a call option which, if exercised, requires it
to sell a specified amount of pounds for dollars at a specified
price by a future date (a technique called a "straddle"). By
selling such call option in this illustration, the Fund gives up
the unlimited opportunity to profit from increases in the
relative value of the pound to the dollar. All options written
by the Fund must be "covered," and must remain "covered" as long
as the Fund is obligated as a writer. For example, where the
Fund sells a call option on a futures or forward contract, it may
cover either by entering into a long position in the same
9
<PAGE>
contract at a price no higher than the strike price of the call
option or by owning the instruments or currency underlying the
futures or forward contracts. The Fund could also cover this
position by holding a separate call option permitting it to
purchase the same futures or forward contract at a price no
higher than the strike price of the call option sold by the Fund.
A put option written by the Fund may be "covered" if the Fund
maintains liquid assets with a value equal to the exercise price
in a segregated account with its custodian, or else owns a put on
the same contract as the put written where the exercise price of
the put held is equal or greater than the exercise price of the
put written.
Certain differences exist between these foreign currency
hedging instruments. Foreign currency options provide the holder
thereof the right to buy or sell a currency at a fixed price on a
future date. Listed options are third-party contracts (i.e.,
performance of the parties' obligations is guaranteed by an
exchange or clearing corporation) which are issued by a clearing
corporation, traded on an exchange and have standardized strike
prices and expiration dates. Unlisted options are two-party
contracts and have negotiated strike prices and expiration dates.
The Fund will engage in unlisted transactions involving options
only with member banks of the Federal Reserve System and primary
dealers in United States Government securities or with affiliates
of such banks or dealers which have capital of at least $50
million or whose obligations are guaranteed by an entity having
capital of at least $50 million. The Fund will acquire only
those unlisted options for which management believes the Fund can
receive on each business day at least two independent bids or
offers (one of which will be from an entity other than a party to
the option). A futures contract on a foreign currency is an
agreement between two parties to buy or sell a specified amount
of a currency for a set price on a future date. Certain futures
contracts and options on futures contracts are traded on boards
of trade or futures exchanges. The Fund may enter into such
transactions only in connection with hedging strategies against
variations on exchange rates.
The Fund will not speculate in foreign currency options,
futures or related options. Accordingly, the Fund will not hedge
a currency substantially in excess of (i) the market value of the
securities denominated in such currency which it owns; (ii) the
expected acquisition price of securities which it has committed
or anticipates to purchase which are denominated in such
currency; and (iii) in the case of securities which have been
sold by the Fund but not yet delivered, the proceeds thereof in
its denominated currency. Further, the Fund will segregate in a
segregated account with its custodian bank liquid assets having a
market value substantially representing any subsequent decrease
in the market value of such hedged security, less any initial or
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<PAGE>
variation margin held in the account of its broker. The Fund may
not incur potential net liabilities of more than 33 1/3% of its
total assets from foreign currency options, futures or related
options.
Risk Factors in Options, Futures and Currency
Transactions. Utilization of futures transactions involves the
risk of imperfect correlation in movements in the price of
futures contracts and movements in the price of the currencies
which are the subject of the hedge. If the price of the futures
contract moves more or less than the price of the currency, the
Fund will experience a gain or loss which will not be completely
offset by movements in the price of the currencies which are the
subject of the hedge. Unanticipated changes in currency prices
may result in poorer overall performance for the Fund than if it
had not entered into such contract. Transactions in options and
options on futures contracts involve similar risks. The
successful use of such instruments draws upon the Adviser's
special skills with respect to such instruments and usually
depends on the Adviser's ability to forecast currency exchange
rate movements correctly.
Other risks inherent in the use of these forward,
futures and options on futures strategies include: imperfect
correlation between movements in the prices of futures contracts
or options thereon and movements in the exchange rates of the
currencies hedged, the fact that skills and techniques needed to
trade futures contracts and options thereon are different from
those needed to select equity securities, no assurance that a
liquid secondary market will exist for any particular futures
contract or option thereon at any particular time, the fact that
some futures markets have daily price movements limits, and the
possible need to defer closing out of certain futures contracts
and options thereon in order to continue to qualify for
beneficial tax treatment under the Code (which requires the Fund
to limit its gains from the disposition of securities and certain
other investments held for less than three months to no more than
30% of the Fund's annual gross income). There are similar risks
inherent in the use of options on foreign currencies.
Prior to exercise or expiration, an exchange-traded
option position written by the Fund can only be terminated by
entering into a closing purchase or sale transaction. This
requires a secondary market on an exchange for call or put
options of the same series. The Fund will enter into an option
or futures transaction on an exchange only if there appears to be
a liquid secondary market for such options or futures. However,
there can be no assurance that a liquid secondary market will
exist for any particular call or put option or futures contract
at any specific time. Thus, it may not be possible for the Fund
to close a particular option or futures position. The Fund will
11
<PAGE>
acquire only unlisted options for which management believes the
Fund can receive on each business day at least two independent
bids or offers (one of which will be from an entity other than a
party to the option). In the case of a futures position, in the
event of adverse price movements, the Fund would continue to be
required to make daily cash payments of variation margin. In
such situations, if the Fund has insufficient cash, it may have
to sell portfolio securities to meet daily variation margin
requirements at a time when it may be disadvantageous to do so.
In addition, the Fund may be required to take or make delivery of
the currency underlying the currency futures contracts it holds.
The inability to close options and futures positions also could
have an adverse impact on the Fund's ability to effectively hedge
its portfolio. There is also the risk of loss by the Fund of
margin deposits in the event of the bankruptcy of a broker with
whom the Fund has an open position in the futures contract or
related option.
The exchanges on which the Fund intends to conduct
options transactions have generally established "position limits"
which are limitations governing the maximum number of call or put
options on the same underlying currency (whether or not covered)
which may be written by a single investor, whether acting alone
or in concert with others (regardless of whether such options are
written on the same or different exchanges or are held or written
on one or more accounts or through one or more brokers).
"Trading limits" are imposed on the maximum number of contracts
which any person may trade on a particular trading day. An
exchange may order the liquidation of positions found to be in
violation of these limits and it may impose other sanctions or
restrictions. The Adviser does not believe that these position
and trading limits will have any adverse impact on the portfolio
strategies for hedging the Fund's portfolio. On the other hand,
the protections afforded to exchange participants by position and
trading limits are not available with respect to transactions in
unlisted options.
Lending of Portfolio Securities. In order to increase
income, the Fund may from time to time lend portfolio securities
to brokers, dealers and financial institutions and receive
collateral in the form of liquid assets or bank letters of
credit. Under the Fund's procedures, collateral for such loans
must be maintained at all times in an amount equal to at least
100% of the market value of the loaned securities (including
interest accrued on the loaned securities) adjusted (marking-to-
market) with the borrower each day the securities are on loan to
provide for price fluctuations. The interest accruing on the
loaned securities will be paid to the Fund and the Fund will have
the right, on demand, to call back the loaned securities. The
Fund may pay fees to arrange the loans. The Fund will neither
lend portfolio securities in excess of 30% of the value of its
12
<PAGE>
total assets nor lend its portfolio securities to any officer,
director, employee or affiliate of the Fund or the Adviser.
While such 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 not lend its portfolio securities if such loans are not
permitted by the laws or regulations of any state within which
its shares are qualified for sale. Loans will be subject to
termination by the Fund in the normal settlement time, currently
five business days after notice, or by the borrower on one day's
notice. Although voting rights may pass with the loaned
securities, if a material event affecting the investment is to be
voted on, the loan must be terminated and the securities voted by
the Fund. Borrowed or equivalent securities must be returned
when the loan is terminated. Any gain or loss in the market
price of the borrowed securities that occurs during the term of
the loan inures to the Fund and its shareholders. The Fund may
pay reasonable finders', borrowers', administrative, and
custodial fees in connection with a loan. The Board of
Directors will monitor the Fund's lending of portfolio
securities.
ADRs and EDRs. In addition to purchasing corporate
securities of non-U.S. issuers in overseas securities markets,
the Fund may invest in American Depository Receipts (ADRs),
European Depository Receipts (EDRs) or other securities
representing securities of companies based in countries other
than the United States. Transactions in these securities may not
necessarily be settled in the same currency as transactions in
the securities into which they represent. Generally, ADRs, in
registered form, are designed for use in the U.S. securities
markets and EDRs, in bearer form, are designed for use in
European securities markets.
Portfolio Turnover. Generally, the Fund's policy with
respect to portfolio turnover is to purchase securities with a
view to holding them for periods of time sufficient to assure
long-term capital gains treatment upon their sale and not for
trading purposes. However, it is also the Fund's policy to sell
any security whenever, in the judgment of the Fund's 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. This policy may result in the Fund
realizing short-term capital gains or losses on the sale of
certain securities. See "Dividends, Distributions and Taxes." It
is anticipated that the Fund's rate of portfolio turnover will
approximate 100% in future years. A 100% annual turnover rate
13
<PAGE>
would occur, for example, if all the stocks in the Fund's
portfolio were replaced within a period of one year. A portfolio
turnover rate approximating 100% involves correspondingly greater
brokerage commission expenses than would a lower rates, which
expenses must be borne by the Fund and its shareholders.
The annual portfolio turnover rates for the Fund for the
fiscal years ended in 1995 and 1996 were 128% and 139%
respectively.
Certain Fundamental Investment Policies. The following
restrictions may not be changed without shareholder approval,
which means the affirmative vote of the holders of(a) 67% or more
of the shares represented at a meeting at which more than 50% of
the outstanding shares are represented or (b) more than 50% of
the outstanding shares, whichever is less. Whenever any
investment restriction states a maximum percentage of the Fund's
assets which may be invested in any security or other asset, it
is intended that such maximum percentage limitation be determined
immediately after and as a result of the Fund's acquisition of
such securities or other assets. Accordingly, any later increase
or decrease in percentage beyond the specified limitation
resulting from a change in values or net assets will not be
considered a violation.
The Fund may not:
(i) purchase the securities of any one issuer, other
than the U.S. Government or any of its agencies or
instrumentalities, if immediately after such
purchase more than 5% of the value of its total
assets would be invested in such issuer or the
Fund would own more than 10% of the outstanding
voting securities of such issuer, except that up
to 25% of the value of the Fund's total assets may
be invested without regard to such 5% and 10%
limitations;
(ii) invest 25% or more of the value of its total
assets in the same industry; this restriction does
not apply to securities issued or guaranteed by
the U.S. Government, its agencies and
instrumentalities, but will apply to foreign
government obligations unless the U.S. Securities
and Exchange Commission permits their exclusion;
(iii) borrow money except from banks for emergency or
temporary purposes in an amount not exceeding 5%
of the value of the total assets of the Fund;
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<PAGE>
(iv) make short sales of securities or maintain a short
position, unless at all times when a short
position is open it owns an equal amount of such
securities or securities convertible into or
exchangeable for, without payment of any further
consideration, securities of the same issue as,
and equal in amount to, the securities sold short
("short sales against the box") and unless not
more than 5% of the Fund's net assets (taken at
market value) is held as collateral for such sales
at any one time;
(v) purchase a security (unless the security is
acquired pursuant to a plan of reorganization or
an offer of exchange) if, as a result, the Fund
would own any securities of an open-end investment
company or more than 3% of the total outstanding
voting stock of any closed-end investment company,
or more than 5% of the value of the Fund's total
assets would be invested in securities of any
closed-end investment company or more than 10% of
such value in closed-end investment companies in
the aggregate;
(vi) invest in companies for the purpose of exercising
control;
(vii) purchase or sell real estate, except that it may
purchase and sell securities of companies which
deal in real estate or interests therein;
(viii) purchase or sell commodities or commodity
contracts (except foreign currencies, foreign
currency options and futures and forward contracts
or contracts for the future acquisition or
delivery of foreign currencies and related options
on futures contracts and other similar contracts);
(ix) invest in interests in oil, gas, or other mineral
exploration or development programs, except that
it may purchase and sell securities of companies
that deal in oil, gas or other mineral exploration
or development programs;
(x) purchase securities on margin, except for such
short-term credits as may be necessary for the
clearance of transactions; or
(xi) act as an underwriter of securities, except that
the Fund may acquire securities in private
placements under circumstances in which, if such
15
<PAGE>
securities were sold, the Fund might be deemed to
be an underwriter within the meaning of the
Securities Act of 1933, as amended.
In addition to the restrictions set forth above, in
connection with the qualification of its shares for sale in
certain states, the Fund may not invest in mineral leases nor may
the Fund invest in real estate limited partnerships.
________________________________________________________________
MANAGEMENT OF THE FUND
________________________________________________________________
Adviser
Alliance Capital Management L.P., a New York Stock
Exchange listed company with principal offices at 1345 Avenue of
the Americas, New York, New York 10105, has been retained under a
management agreement (the "Management Agreement") to provide
investment advice and, in general, to conduct the management and
investment program of the Fund under the supervision and control
of the Fund's Board of Directors.
The Adviser is a leading international investment
manager supervising client accounts with assets as of June 30,
1996 of more than $168 billion (of which more than $55 billion
represented the assets of investment companies). The Adviser's
clients are primarily major corporate employee benefit funds,
public employee retirement systems, investment companies,
foundations and endowment funds. As of June 30, 1996, the
Adviser was an investment manager of employee benefit fund assets
for 33 of the FORTUNE 100 companies. As of that date, the
Adviser and its subsidiaries employed approximately 1,450
employees who operated out of domestic offices and the offices of
subsidiaries in Bombay, Istanbul, London, Paris, Sao Paulo,
Sydney, Tokyo, Toronto, Bahrain, Luxembourg and Singapore. The
51 registered investment companies comprising more than 100
separate investment portfolios managed by the Adviser currently
have more than two million shareholders.
Alliance Capital Management Corporation, the sole
general partner of, and the owner of a 1% general partnership
interest in, the Adviser, is an indirect wholly-owned subsidiary
of The Equitable Life Assurance Society of the United States
("Equitable"), one of the largest life insurance companies in the
United States and a wholly-owned subsidiary of The Equitable
Companies Incorporated ("ECI"), a holding company controlled by
AXA, a French insurance holding company. As of June 30, 1996,
ACMC, Inc. and Equitable Capital Management Corporation, each a
wholly-owned direct or indirect subsidiary of Equitable, together
16
<PAGE>
with Equitable, owned in the aggregate approximately 57% of the
issued and outstanding units representing assignments of
beneficial ownership of limited partnership interests in the
Adviser ("Units"). As of June 30, 1996, approximately 33% and
10% of the Units were owned by the public and employees of the
Adviser and its subsidiaries, respectively, including employees
of the Adviser who serve as Directors of the Fund.
As of September 6, 1996, AXA and its subsidiaries owned
approximately 60.7% of the issued and outstanding shares of
capital stock of ECI. AXA is a holding company for an
international group of insurance and related financial services
companies. AXA's insurance operations include activities in life
insurance, property and casualty insurance and reinsurance. The
insurance operations are diverse geographically, with activities
in more than 20 countries, including France, the United States,
Australia, the United Kingdom, Canada and other countries,
principally in Western Europe and the Asia/Pacific area. AXA is
also engaged in asset management, investment banking, securities
trading, brokerage, real estate and other financial services
activities principally in the United States, as well as in
Western Europe and the Asia/Pacific area.
Based on information provided by AXA, as of September 9,
1996, 36.3% of the issued ordinary shares (representing 49.1% of
the voting power) of AXA were owned directly or indirectly by
Finaxa, a French holding company ("Finaxa"). As of September 6,
1996, 61.3% of the voting shares (representing 73.5% of the
voting power) of Finaxa were owned by five French mutual
insurance companies (the "Mutuelles AXA") (one of which, AXA
Assurances I.A.R.D. Mutuelle, owned 34.8% of the voting shares
representing 40.6% of the voting power), and 23.7% of the voting
shares of Finaxa (representing 15.0% of the voting power) were
owned by Banque Paribas, a French bank. Including the ordinary
shares directly or indirectly owned by Finaxa, the Mutuelles AXA
directly or indirectly owned 42.0% of the issued ordinary shares
(representing 56.8% of the voting power) of AXA as of September
9, 1996. Acting as a group, the Mutuelles AXA control AXA and
Finaxa. In addition, as of September 9, 1996, 7.8% of the issued
ordinary shares of AXA without the power to vote were owned by
subsidiaries of AXA.
Under the Management Agreement, the Adviser furnishes
advice and recommendations with respect to the Fund's portfolio
of securities and investments and provides persons satisfactory
to the Board of Directors to act as officers and employees of the
Fund. Such officers and employees, as well as certain Directors
of the Fund may be employees of the Adviser or its affiliates.
The Adviser is, under the Management Agreement,
responsible for certain expenses incurred by the Fund, including,
17
<PAGE>
for example, the costs of clerical and accounting assistance to
the Directors and expenses of office rental. The Fund has, under
the Management Agreement, assumed the obligation for payment of
all of its other expenses.
For the services rendered by the Adviser under the
Management Agreement, the Fund pays a monthly fee to the Adviser
at the annual rate of 1.00% of the average daily net assets of
the Fund during the month. The Fund may utilize personnel
employed by the Adviser or by affiliates of the Adviser.
The Management Agreement provides that the Adviser will
reimburse the Fund for its total expenses (exclusive of interest,
taxes, brokerage commissions and extraordinary expenses), to the
extent total expenses exceed the most restrictive annual expense
limitation prescribed by any state in which the Fund's shares are
registered for sale. The Fund believes that presently the most
restrictive expense ratio limitation imposed by any state is 2.5%
of the first $30 million of its average net assets, 2.0% of the
next $70 million of its average net assets and 1.5% of its
average net assets in excess of $100 million. As of July 31,
1996, such reimbursement amounted to $-0-.
For the fiscal years ended in 1994, 1995 and 1996, the
Adviser received from the Fund advisory fees of $578,879,
$640,582 and $772,166, respectively.
The Management Agreement became effective on July 22,
1992. The Management Agreement was approved by the unanimous
vote, cast in person, of the Fund's Directors (including the
Directors who are not parties to the Management Agreement or
interested persons, as defined in the 1940 Act, of any such
party) at a meeting called for the purpose and held on
October 17, 1991. At a meeting held on June 11, 1992, a majority
of the outstanding voting securities of the Fund approved the
Management Agreement.
The Management Agreement must be approved each year
either by (a) a majority vote of the Board of Directors of the
Fund or (b) a majority vote of the outstanding voting securities
of the Fund, and, in either case, by majority vote of the
Directors who are neither parties to the Management Agreement nor
"interested persons" of any such party (as defined by the 1940
Act), cast in person at a meeting called for the purpose of
voting on such approval. Any changes in the terms of the
Management Agreement must be approved by the shareholders. Most
recently, the continuance of the Management Agreement until
September 30, 1997 was approved by a vote, cast in person, of the
Directors, including a majority of the Directors who were not
parties to the Management Agreement or "interested persons" of
18
<PAGE>
any such party, at a meeting called for that purpose on July 19,
1996.
The Management Agreement automatically terminates upon
its assignment. In addition, the Management Agreement is
terminable at any time without penalty by the Board of Directors
of the Fund or by vote of a majority of the Fund's outstanding
voting securities on 60 days written notice to the Adviser or by
the Adviser on any January 1 on 60 days written notice to the
Fund. The term "majority of the Fund's outstanding voting
securities" as used above means (i) 67% or more of the
outstanding shares present at a meeting, if the holders of more
than 50% of the outstanding shares of the Fund are represented at
the meeting or (ii) more than 50% of the outstanding shares of
the Fund, whichever is less.
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 ACM Institutional Reserves, Inc.,
AFD Exchange Reserves, Alliance All-Asia Investment Fund, Inc.,
The Alliance Fund, Inc., Alliance Balanced Shares, Inc., Alliance
Bond Fund, Inc., Alliance Capital Reserves, Alliance Developing
Markets Fund, Inc., Alliance Global Strategic Income Trust, Inc.,
Alliance Global Dollar Government Fund, Inc., Alliance Government
Reserves, Alliance Growth and Income Fund, Inc., Alliance Income
Builder Fund, Inc., Alliance International Fund, Alliance Limited
Maturity Government Fund, Inc., Alliance Money Market Fund,
Alliance Mortgage Securities Income Fund, Inc., Alliance Multi-
Market Strategy Trust, Inc., Alliance Municipal Income Fund,
Inc., Alliance Municipal Income Fund II, Alliance Municipal
Trust, Alliance New Europe Fund, Inc., Alliance North American
Government Income Trust, Inc., Alliance Premier Growth Fund,
Inc., Alliance Quasar Fund, Inc., Alliance Real Estate Investment
Fund, Inc., Alliance Short-Term Multi-Market Trust, Inc.,
Alliance Technology Fund, Inc., Alliance Utility Income Fund,
19
<PAGE>
Inc., Alliance Variable Products Series Fund, Inc., Alliance
World Income Trust, Inc., Alliance Worldwide Privatization Fund,
Inc., The Alliance Portfolios, Fiduciary Management Associates
and The Hudson River Trust, all registered open-end investment
companies; and to ACM Government Income Fund, Inc., ACM
Government Securities Fund, Inc., ACM Government Spectrum Fund,
Inc., ACM Government Opportunity Fund, Inc., ACM Managed Income
Fund, Inc., ACM Managed Dollar Income Fund, Inc., ACM Municipal
Securities Income Fund, Inc., Alliance All-Market Advantage Fund,
Inc., Alliance Global Environment Fund, Inc., Alliance World
Dollar Government Fund, Inc., Alliance World Dollar Government
Fund II, Inc., Alliance Global Privatization Fund, Inc., The
Austria Fund, Inc., The Korean Investment Fund, Inc., The
Southern African Fund and The Spain Fund, Inc., all registered
closed-end investment companies.
Directors and Officers
The Directors and principal officers of the Fund and
their primary occupations during the past five years are set
forth below. Unless otherwise specified the address of each of
the following persons is at 1345 Avenue of the Americas, New
York, New York 10105. Each such Director and officer is also a
trustee, director or officer of other registered investment
companies sponsored by the Adviser.
Directors
JOHN D. CARIFA,* 51, - Chairman of the Board of
Directors, is the President and Chief Operating Officer and a
Director of ACMC, with which he has been associated since prior
to 1990.
RUTH BLOCK, 64, - was formerly Executive Vice President
and Chief Insurance Officer of The Equitable Life Assurance
Society of the United States ("Equitable"). She is a Director of
Ecolab Incorporated (specialty chemicals) and Amoco Corporation
(oil and gas). Her address is Box 4653, Stamford, Connecticut,
06903.
DAVID H. DIEVLER, 66, was formerly a Senior Vice
President of ACMC, with which he was associated since prior to
1990 through 1994. He is currently an independent consultant.
His address is P.O. Box 167, Spring Lake, New Jersey, 07762.
________________________
* An "interested person" of the Fund as defined in the
Investment Company Act of 1940.
20
<PAGE>
JOHN H. DOBKIN, 53, has been the President of Historic
Hudson Valley (historic preservation) since 1990. Previously, he
was Director of the National Academy of Design. From 1987 to
1992, he was a Director of ACMC. His address is 105 West 55th
Street, New York, New York, 10019.
WILLIAM H. FOULK, JR., 63, is an investment Advisor and
Independent Consultant. He was formerly Senior Manager of
Barrett Associates, Inc., a registered investment adviser, since
1986. His address is 2 Hekma Road, Greenwich, Connecticut,
06831.
DR. JAMES M. HESTER, 71, - is President of the Harry
Frank Guggenheim Foundation and a Director of Union Carbide
Corporation, with which he has been associated since prior to
1990. He was formerly President of New York University, the New
York Botanical Garden and Rector of the United Nations
University. His address is 45 East 89th Street, New York, New
York, 10128.
CLIFFORD L. MICHEL, 56, - is a partner in the law firm
of Cahill Gordon & Reindel, with which he has been associated
since prior to 1990. He is Chief Executive Officer of Wenonah
Development Company (investments) and Director of Placer Dome,
Inc., and Faber-Castell Corporation (writing products). His
address is 80 Pine Street, New York, New York, 10005.
DONALD J. ROBINSON, 61, was formerly a partner at
Orrick, Herrington & Sutcliffe and is currently of counsel to
that firm.
Officers
JOHN D. CARIFA, Chairman and President, see Biography
above.
ALDEN M. STEWART, Senior Vice President - Investments,
49, has been an Executive Vice President of ACMC since July,
1993. Prior thereto he was associated with ECMC.
RANDALL E. HAASE, Vice President, 32, has been a Vice
President of ACMC since July, 1993. Prior thereto he was
associated with ECMC.
DANIEL V. PANKER, Vice President, 57, is a Senior Vice
President of ACMC with which he has been associated since prior
to 1991.
TIMOTHY D. RICE, Vice President, 28, is a Vice President
of ACMC with which he has been associated since prior to 1991.
21
<PAGE>
RONALD L. SIMCOE, Vice President, 50, has been a Vice
President of ACMC since July, 1993. Prior thereto he was
associated with ECMC.
THOMAS BARDONG, Vice President, 50, is a Senior Vice
President of ACMC with which he has been associated since prior
to 1991
EDMUND P. BERGAN, JR., Secretary, 45, is a Senior Vice
President and the General Counsel of Alliance Fund Distributors,
Inc. ("AFD") with which he has been associated since prior to
1991
MARK D. GERSTEN, Treasurer and Chief Financial Officer,
44, is a Senior Vice President of Alliance Fund Services, Inc.
("AFS"), with which he has been associated since prior to 1990.
DOMENICK PUGLIESE, Assistant Secretary, 35, is a Vice
President and Associate General Counsel of AFD with which he has
been associated since May 1995. Previously, he was Vice
President and Counsel of Concord Holding Corporation since 1994,
Vice President and Associate General Counsel of Prudential
Securities since 1991.
VINCENT S. NOTO, Controller and Chief Accounting
Officer, 31, is a Vice President of Alliance Fund Services, Inc.
with which he has been associated since prior to 1991.
The aggregate compensation paid by the Fund to each of
the Directors during its fiscal year ended July 31, 1996, the
aggregate compensation paid to each of the Directors during
calendar year 1995 by all of the funds to which the Adviser
provides investment advisory services (collectively, the
"Alliance Fund Complex") and the total number of registered
investment companies in the Alliance Fund Complex with respect to
which each of the Directors serves as a director or trustee, are
set forth below. Neither the Fund nor any other fund in the
Alliance Fund Complex provides compensation in the form of
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.
22
<PAGE>
Total Number
of Funds in
the Alliance
Total Complex,
Compensation Including the
From the Fund, as to
Alliance Fund which the
Aggregate Complex, Director is a
Name of Director Compensation Including the Director or
of the Fund From the Fund Fund Trustee
________________ _____________ _____________ ______________
John D. Carifa $-0- $-0- 50
Ruth Block $5,100 $159,000 37
David H. Dievler $5,100 $179,200 43
John H. Dobkin $5,158 $117,200 30
William H. Foulk, Jr. $5,158 $143,500 31
Dr. James M. Hester $5,100 $156,000 38
Clifford L. Michel $5,100 $131,500 37
Donald J. Robinson $2,750 $66,500 38
As of September 20, 1996, the Directors and officers of the Fund
as a group owned less than 1% of the shares of the Fund.
________________________________________________________________
EXPENSES OF THE FUND
________________________________________________________________
Distribution Services Agreement
The Fund has entered into a Distribution Services
Agreement (the "Agreement") with Alliance Fund Distributors,
Inc., the Fund's principal underwriter (the "Principal
Underwriter"), to permit the Principal Underwriter to distribute
the Fund's shares and to permit the Fund to pay distribution
services fees to defray expenses associated with the distribution
of its Class A shares, Class B shares and Class C shares in
accordance with a plan of distribution which is included in the
Agreement and has been duly adopted and approved in accordance
with Rule 12b-1 adopted by the Securities and Exchange Commission
under the 1940 Act (the "Rule 12b-1 Plan").
Distribution services fees are accrued daily and paid
monthly and are charged as expenses of the Fund as accrued. The
distribution services fees attributable to the Class B shares and
Class C shares are designed to permit an investor to purchase
such shares through broker-dealers without the assessment of an
initial sales charge, and at the same time to permit the
Principal Underwriter to compensate broker-dealers in connection
with the sale of such shares. In this regard the purpose and
23
<PAGE>
function of the combined contingent deferred sales charge and
distribution services fee on the Class B shares and Class C
shares are the same as those of the initial sales charge and
distribution services fee with respect to the Class A shares in
that in each case the sales charge and distribution services fee
provide for the financing of the distribution of the relevant
class of the Fund's shares.
Under the Agreement, the Treasurer of the Fund reports
the amounts expended under the Rule 12b-1 Plan and the purposes
for which such expenditures were made to the Directors of the
Fund for their review on a quarterly basis. Also, the Agreement
provides that the selection and nomination of Directors who are
not "interested persons" of the Fund (as defined in the 1940 Act)
are committed to the discretion of such disinterested Directors
then in office.
The Agreement became effective on July 22, 1992 with
respect to Class A shares and Class B shares, was amended on
April 30, 1993 with respect to Class C shares and on July 19,
1996 with respect to Advisor Class shares.
The Adviser may, from time to time and from its own
funds or such other resources as may be permitted by rules of the
Securities and Exchange Commission, make payments for
distribution services to the Principal Underwriter; the latter
may in turn pay part or all of such compensation to brokers or
other persons for their distribution assistance.
During the Fund's fiscal year ended July 31, 1996, with
respect to Class A shares, the Fund paid distribution services
fees for expenditures under the Agreement in the aggregate amount
of $197,902, which constituted approximately .30%, of the average
daily net assets attributable to the Class A Shares during the
year and the Adviser made payments from its own resources, as
described above, aggregating $-0-. Of the $197,902 paid by the
Fund and the Adviser under the Plan with respect to Class A
shares, $19,654 was spent on advertising, $3,433 on printing and
mailing of prospectuses for persons other than current
shareholders, $108,473 for compensation to broker- dealers and
other financial intermediaries (including $33,017 to the Fund's
Principal Underwriter), $8,968 for compensation to sales
personnel and $49,437 was spent on printing of sales literature,
travel, entertainment, due diligence and other promotional
expenses.
During the Fund's fiscal year ended July 31, 1996, with
respect to Class B shares, the Fund paid distribution services
fees for expenditures under the Agreement in the aggregate amount
of $87,676, which constituted approximately 1.00% of the average
daily net assets attributable to Class B Shares during the year
24
<PAGE>
and the Adviser made payments from its own resources, as
described above, aggregating $434,130. Of the $521,806 paid by
the Fund and the Adviser under the Plan with respect to Class B
shares, $45,699 was spent on advertising, $8,256 on printing and
mailing of prospectuses for persons other than current
shareholders, $336,239 for compensation to broker- dealers and
other financial intermediaries (including $76,075 to the Fund's
Principal Underwriter), $6,947 for compensation to sales
personnel, $110,889 was spent on printing of sales literature,
travel, entertainment, due diligence and other promotional
expenses and $13,716 was spent on Class B share financing.
During the Fund's fiscal year ended July 31, 1996, with
respect to Class C shares, the Fund paid distribution services
fees for expenditures under the Agreement in the aggregate amount
of $24,818 which constituted approximately 1.00%, annualized, of
the average daily net assets attributable to the Class C shares
during the year and the Adviser made payments from its own
resources, as described above, aggregating $115,500. Of the
$140,330 paid by the Fund and the Adviser under the Plan with
respect to Class C shares, $21,592 was spent on advertising,
$3,534 on printing and mailing of prospectuses for persons other
than current shareholders, $63,039 for compensation to broker-
dealers and other financial intermediaries (including $33,671 to
the Fund's Principal Underwriter), $2,981 for compensation to
sales personnel and $49,184 was spent on printing of sales
literature, travel, entertainment, due diligence and other
promotional expenses.
The Agreement will continue in effect for successive
twelve-month periods (computed from each October 1) provided,
however, that such continuance is specifically approved at least
annually by the Directors, or by vote of the holders of a
majority of the Fund's outstanding voting securities (as defined
in the 1940 Act), of that class, and in either case, by a
majority of the Directors who are not parties to the Agreement or
interested persons, as defined in the 1940 Act, of any such party
(other than as directors of the Fund) and who have no direct or
indirect financial interest in the operation of the Rule 12b-1
plan or any agreement related thereto. Most recently the
continuance of the Agreement was approved until September 30,
1997 by a vote, cast in person, of the Board of Directors,
including a majority of the Directors who are not "interested
persons", as defined in the 1940 Act, at their Regular Meeting
held on July 19, 1996.
In the event that the Agreement is terminated or not
continued with respect to the Class A shares, Class B shares or
Class C shares, (i) no distribution services fees (other than
current amounts accrued but not yet paid) would be owed by the
Fund to the Principal Underwriter with respect to that class, and
25
<PAGE>
(ii) the Fund would not be obligated to pay the Principal
Underwriter for any amounts expended under the Agreement not
previously recovered by the Principal Underwriter from
distribution services fees in respect of shares of such class or
through deferred sales charges.
All material amendments to the Agreement must be
approved by a vote of the Directors or the holders of the Fund's
outstanding voting securities, voting separately by class, and in
either case, by a majority of the disinterested Directors, cast
in person at a meeting called for the purpose of voting on such
approval; and the Agreement may not be amended in order to
increase materially the costs that a particular class may bear
pursuant to the Agreement without the approval of a majority of
the outstanding voting shares of the class or classes affected.
The Agreement may be terminated (a) by the Fund without penalty
at any time by a majority vote of the holders of the outstanding
voting securities of the Fund, voting separately by class or by a
majority vote of the directors who are not "interested persons"
as defined in the 1940 Act, or (b) by the Principal Underwriter.
To terminate the Agreement, any party must give the other parties
60 days' written notice; to terminate the Rule 12b-1 Plan only,
the Fund need give no notice to the Principal Underwriter. The
Agreement will terminate automatically in the event of its
assignment.
Transfer Agency Agreement
Alliance Fund Services, Inc., an indirect wholly-owned
subsidiary of the Adviser, receives a transfer agency fee per
account holder of each of the Class A shares, Class B shares,
Class C shares and Advisor Class shares of the Fund, plus
reimbursement for out-of-pocket expenses. The transfer agency
fee with respect to the Class B and Class C shares is higher than
the transfer agency fee with respect to the Class A and Advisor
Class shares, reflecting the additional costs associated with the
Class B and Class C contingent deferred sales charge. During the
fiscal year ended in 1996, the Fund paid Alliance Fund Services,
Inc. $168,984 for transfer agency services.
________________________________________________________________
PURCHASE OF SHARES
________________________________________________________________
The following information supplements that set forth in
the Fund's Prospectus under the heading "Purchase and Sale of
Shares -- How to Buy Shares."
26
<PAGE>
General
Shares of the Fund are offered on a continuous basis at
a price equal to their net asset value plus an initial sales
charge at the time of purchase ("Class A shares"), with a
contingent deferred sales charge ("Class B shares"), without any
initial sales charge and, as long as the shares are held for one
year or more, without any contingent deferred sales charge
("Class C shares"), or, to investors eligible to purchase Advisor
Class shares, without any initial, contingent deferred or asset-
based sales charge, in each case as described below. Shares of
the Fund that are offered subject to a sales charge are offered
through (i) investment dealers that are members of the National
Association of Securities Dealers, Inc. and have entered into
selected dealer agreements with the Principal Underwriter
("selected dealers"), (ii) depository institutions and other
financial intermediaries or their affiliates, that have entered
into selected agent agreements with the Principal Underwriter
("selected agents"), and (iii) the Principal Underwriter.
Investors may purchase and hold Advisor Class shares of
the Fund 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, pursuant to which each investor pays an asset-based
fee at an annual rate of at least .50% of the assets in the
investor's account, to the sponsor, or its affiliate or agent,
(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, or (iii) by the categories of investors
described in clauses (i), (ii) and (iii) 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, all of
whom are not eligible to purchase and hold Advisor Class shares).
If you are a Fund shareholder through an account
established under a fee-based program, your fee-based program may
impose requirements with respect to the purchase, sale or
exchange of Advisor Class shares of the Fund that are different
from those described in the Advisor Class Prospectus and this
Statement of Additional Information. 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.
Investors may purchase shares of the Fund either through
selected dealers, agents or financial representatives or directly
through the Principal Underwriter. Sales personnel of selected
dealers and agents distributing the Fund's shares may receive
27
<PAGE>
differing compensation for selling Class A, Class B, Class C or
Advisor Class shares. Shares may also be sold in foreign
countries where permissible. 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
business.
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.
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
28
<PAGE>
Principal Underwriter prior to 5:00 p.m. Eastern time. The
selected dealer, agent or financial representative, as
applicable, is responsible for transmitting such orders by
5:00 p.m. If the selected dealer, agent or financial
representative fails to do so, the investor's right to that day's
closing price must be settled between the investor and the
selected dealer, agent or financial representative, as
applicable. If the selected dealer, agent or financial
representative, as applicable, receives the order after the close
of regular trading on the Exchange, the price will be based on
the net asset value determined as of the close of regular trading
on the Exchange on the next day it is open for trading.
Following the initial purchase of Fund shares, a
shareholder may place orders to purchase additional shares by
telephone if the shareholder has completed the appropriate
portion of the Subscription Application or an "Autobuy"
application obtained by calling the "Literature" telephone number
shown on the cover of this Statement of Additional Information.
Except with respect to certain omnibus accounts, telephone
purchase orders may not exceed $500,000. Payment for shares
purchased by telephone can be made only by Electronic Funds
Transfer from a bank account maintained by the shareholder at a
bank that is a member of the National Automated Clearing House
Association ("NACHA"). If a shareholder's telephone purchase
request is received before 3:00 p.m. Eastern time on a Fund
business day, the order to purchase shares is automatically
placed the following Fund business day, and the applicable public
offering price will be the public offering price determined as of
the close of business on such following business day.
Full and fractional shares are credited to a
subscriber's account in the amount of his or her subscription.
As a convenience to the subscriber, and to avoid unnecessary
expense to the Fund, stock certificates representing shares of
the Fund are not issued except upon written request to the Fund
by the shareholder or his or her authorized selected dealer or
agent. This facilitates later redemption and relieves the
shareholder of the responsibility for and inconvenience of lost
or stolen certificates. No certificates are issued for
fractional shares, although such shares remain in the
shareholder's account on the books of the Fund.
In addition to the discount or commission amount paid to
dealers or agents, the Principal Underwriter from time to time
pays additional cash or other incentives to dealers or agents,
including EQ Financial Consultants, Inc., formerly Equico
Securities, Inc., an affiliate of the Principal Underwriter, in
connection with the sale of shares of the Fund. Such additional
amounts may be utilized, in whole or in part, to provide
additional compensation to registered representatives who sell
29
<PAGE>
shares of the Fund. On some occasions, such cash or other
incentives will be conditioned upon the sale of a specified
minimum dollar amount of the shares of the Fund and/or other
Alliance Mutual Funds, as defined below, during a specific period
of time. On some occasions, such cash or other incentives may
take the form of payment for attendance at seminars, meals,
sporting events or theater performances, or payment for travel,
lodging and entertainment incurred in connection with travel
taken by persons associated with a dealer or agent and their
immediate family members to urban or resort locations within or
outside the United States. Such dealer or agent may elect to
receive cash incentives of equivalent amount in lieu of such
payments.
Class A, Class B, Class C and Advisor Class shares each
represent an interest in the same portfolio of investments of the
Fund, have the same rights and are identical in all respects,
except that (i) Class A shares bear the expense of the initial
sales charge (or contingent deferred sales charge, when
applicable) and Class B and Class C shares bear the expense of
the deferred sales charge, (ii) Class B and Class C shares each
bear the expense of a higher distribution services fee than do
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 do 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 and Advisor Class shares are subject to a conversion
feature. Each class has different exchange privileges and certain
different shareholder service options available.
The Directors of the Fund have determined that currently
no conflict of interest exists between or among the Class A,
Class B, Class C and Advisor Class shares. On an ongoing basis,
the Directors of the Fund, pursuant to their fiduciary duties
under the 1940 Act and state law, will seek to ensure that no
such conflict arises.
Alternative Retail Purchase Arrangements -- Class A, Class B and
Class C Shares1
____________________
1. Advisor Class shares are sold only to investors described
above in this section under "--General."
30
<PAGE>
Class A, Class B and Class C shares have the following
alternative purchase arrangements: Class A shares are sold to
investors choosing the initial sales charge alternative, Class B
shares are sold to investors choosing the deferred sales charge
alternative, and Class C shares are sold to investors choosing
the asset-based sales charge alternative. These alternative
purchase arrangements 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 charges on Class B shares prior to conversion, or
the accumulated distribution services fee and contingent deferred
sales charges on Class C shares, would be less than the initial
sales charge and accumulated distribution services fee on Class A
shares purchased at the same time, and to what extent such
differential would be offset by the higher return of Class A
shares. Class A shares will normally be more beneficial than
Class B shares to the investor who qualifies for reduced initial
sales charges on Class A shares, as described below. In this
regard, the Principal Underwriter will reject any order (except
orders from certain retirement plans) for more than $250,000 for
Class B shares. Class C shares will normally not be suitable for
the investor who qualifies to purchase Class A shares at net
asset value. For this reason, the Principal Underwriter will
reject any order for more than $5,000,000 for Class C shares.
Class A shares are subject to a lower distribution
services fee and, accordingly, pay correspondingly higher
dividends per share than Class B shares or Class C shares.
However, because initial sales charges are deducted at the time
of purchase, investors purchasing Class A shares would not have
all their funds invested initially and, therefore, would
initially own fewer shares. Investors not qualifying for reduced
initial sales charges who expect to maintain their investment for
an extended period of time might consider purchasing Class A
shares because the accumulated continuing distribution charges on
Class B shares or Class C shares may exceed the initial sales
charge on Class A shares during the life of the investment.
Again, however, such investors must weigh this consideration
against the fact that, because of such initial sales charges, not
all their funds will be invested initially.
Other investors might determine, however, that it would
be more advantageous to purchase Class B shares or Class C shares
in order to have all their funds invested initially, although
remaining subject to higher continuing distribution charges and
being subject to a contingent deferred sales charge for a four-
year and one-year period, respectively. For example, based on
current fees and expenses, an investor subject to the 4.25%
31
<PAGE>
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 year ended July 31, 1996,
July 31, 1995 and July 31, 1994, the aggregate amount of
underwriting commissions paid with respect to shares of the Fund
were $136,901, $31,844 and $77,748, respectively. Of that
amount, the Principal Underwriter, received $8,247, $2,309 and
$4,456, 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 or agents. During the Fund's
fiscal year ended July 31, 1996, the Principal Underwriter
received $11,791 in contingent deferred sales charges with
respect to Class B share redemptions.
Class A Shares
The public offering price of Class A shares is the net
asset value plus a sales charge, as set forth below.
32
<PAGE>
Sales Charge
Discount Or
Commission
As % of To Dealers
As % of the Public Or Agents
Amount of Net Amount Offering As % of
Purchase Invested Price Offering 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
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
33
<PAGE>
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 of 1933, as
amended.
Set forth below is an example of the method of computing the
offering price of the Class A shares. The example assumes a
purchase of Class A shares of the Fund aggregating less than
$100,000 subject to the schedule of sales charges set forth above
at a price based upon the net asset value of Class A shares of
the Fund on July 31, 1996.
34
<PAGE>
Net Asset Value per Class A Share at $11.61
July 31, 1996
Per Share Sales Charge - 4.25%
of offering price (4.43% of
net asset value per share) .52
_______
Class A Per Share Offering Price to
the Public $12.13
=======
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 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
35
<PAGE>
-U.S. Government Portfolio
Alliance Developing Markets Fund, Inc.
Alliance Global Dollar Government Fund, Inc.
Alliance Global Small Cap Fund, Inc.
Alliance Global Strategic Income Trust, Inc.
Alliance Growth and Income Fund, Inc.
Alliance Income Builder Fund, Inc.
Alliance International Fund
Alliance Limited Maturity Government Fund, Inc.
Alliance Mortgage Securities Income Fund, Inc.
Alliance Multi-Market Strategy Trust, Inc.
Alliance Municipal Income Fund, Inc.
-California Portfolio
-Insured California Portfolio
-Insured National Portfolio
-National Portfolio
-New York Portfolio
Alliance Municipal Income Fund II
-Arizona Portfolio
-Florida Portfolio
-Massachusetts Portfolio
-Michigan Portfolio
-Minnesota Portfolio
-New Jersey Portfolio
-Ohio Portfolio
-Pennsylvania Portfolio
-Virginia Portfolio
Alliance New Europe Fund, Inc.
Alliance North American Government Income Trust, Inc.
Alliance Premier Growth Fund, Inc.
Alliance Quasar Fund, Inc.
Alliance Real Estate Investment Fund, Inc.
Alliance Short-Term Multi-Market Trust, Inc.
Alliance Technology Fund, Inc.
Alliance Utility Income Fund, Inc.
Alliance World Income Trust, Inc.
Alliance Worldwide Privatization Fund, Inc.
The Alliance Fund, Inc.
The Alliance Portfolios
-Alliance Growth Fund
-Alliance Conservative Investors Fund
-Alliance Growth Investors Fund
-Alliance Strategic Balanced Fund
-Alliance Short-Term U.S. Government Fund
Prospectuses for the Alliance Mutual Funds may be obtained
without charge by contacting Alliance Fund Services, Inc. at the
address or the "Literature" telephone number shown on the front
cover of this Statement of Additional Information.
36
<PAGE>
Cumulative Quantity Discount (Right of Accumulation). An
investor's purchase of additional Class A shares of the Fund may
qualify for a Cumulative Quantity Discount. The applicable sales
charge will be based on the total of:
(i) the investor's current purchase;
(ii) the net asset value (at the close of business on
the previous day) of (a) all shares of the Fund
held by the investor and (b) all shares of any
other Alliance Mutual Fund held by the investor;
and
(iii) the net asset value of all shares described in
paragraph (ii) owned by another shareholder
eligible to combine his or her purchase with that
of the investor into a single "purchase" (see
above).
For example, if an investor owned shares of an Alliance
Mutual Fund worth $200,000 at their then current net asset value
and, subsequently, purchased Class A shares of the Fund worth an
additional $100,000, the initial 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 a Statement of Intention; however, the 13-month period
during which the Statement of Intention is in effect will begin
on the date of the earliest purchase to be included.
37
<PAGE>
Investors qualifying for the Combined Purchase Privilege
described above may purchase shares of the Alliance Mutual Funds
under a single Statement of Intention. For example, if at the
time an investor signs a Statement of Intention to invest at
least $100,000 in Class A shares of the Fund, the investor and
the investor's spouse each purchase shares of the Fund worth
$20,000 (for a total of $40,000), it will only be necessary to
invest a total of $60,000 during the following 13 months in
shares of the Fund or any other Alliance Mutual Fund, to qualify
for the 3.25% sales charge on the total amount being invested
(the sales charge applicable to an investment of $100,000).
The Statement of Intention is not a binding obligation
upon the investor to purchase the full amount indicated. The
minimum initial investment under a Statement of Intention is 5%
of such amount. Shares purchased with the first 5% of such
amount will be held in escrow (while remaining registered in the
name of the investor) to secure payment of the higher sales
charge applicable to the shares actually purchased if the full
amount indicated is not purchased, and such escrowed shares will
be involuntarily redeemed to pay the additional sales charge, if
necessary. Dividends on escrowed shares, whether paid in cash or
reinvested in additional Fund shares, are not subject to escrow.
When the full amount indicated has been purchased, the escrow
will be released. To the extent that an investor purchases more
than the dollar amount indicated on the Statement of Intention
and qualifies for a further reduced sales charge, the sales
charge will be adjusted for the entire amount purchased at the
end of the 13-month period. The difference in the sales charge
will be used to purchase additional shares of the Fund subject to
the rate of sales charge applicable to the actual amount of the
aggregate purchases.
Investors wishing to enter into a Statement of Intention
in conjunction with their initial investment in Class A shares of
the Fund should complete the appropriate portion of the
Subscription Application found in the Prospectus while current
Class A shareholders desiring to do so can obtain a form of
Statement of Intention by contacting Alliance Fund Services, Inc.
at the address or telephone numbers shown on the cover of this
Statement of Additional Information.
Certain Retirement Plans. Multiple participant payroll
deduction retirement plans may also purchase shares of the Fund
or any other Alliance Mutual Fund at a reduced sales charge on a
monthly basis during the 13-month period following such a plan's
initial purchase. The sales charge applicable to such initial
purchase of shares of the Fund will be that normally applicable,
under the schedule of sales charges set forth in this Statement
of Additional Information, to an investment 13 times larger than
such initial purchase. The sales charge applicable to each
38
<PAGE>
succeeding monthly purchase will be that normally applicable,
under such schedule, to an investment equal to the sum of (i) the
total purchase previously made during the 13-month period and
(ii) the current month's purchase multiplied by the number of
months (including the current month) remaining in the 13-month
period. Sales charges previously paid during such period will
not be retroactively adjusted on the basis of later purchases.
Reinstatement Privilege. A shareholder who has caused
any or all of his or her Class A or Class B shares of the Fund to
be redeemed or repurchased may reinvest all or any portion of the
redemption or repurchase proceeds in Class A shares of the Fund
at net asset value without any sales charge, provided that (i)
such reinvestment is made within 120 calendar days after the
redemption or repurchase date and (ii) for Class B shares, a
contingent deferred sales charge has been paid and the Principal
Underwriter has approved, at its discretion, the reinstatement of
such shares. Shares are sold to a reinvesting shareholder at the
net asset value next determined as described above. A
reinstatement pursuant to this privilege will not cancel the
redemption or repurchase transaction; therefore, any gain or loss
so realized will be recognized for Federal income tax purposes
except that no loss will be recognized to the extent that the
proceeds are reinvested in shares of the Fund within 30 calendar
days after the redemption or repurchase transaction. The
reinstatement privilege may be used by the shareholder only once,
irrespective of the number of shares redeemed or repurchased,
except that the privilege may be used more than once in
connection with transactions whose sole purpose is to transfer a
shareholder's interest in the Fund to his or her individual
retirement account or other qualified retirement plan account.
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, Alliance Fund Services, Inc.
and their affiliates; officers and directors of ACMC, the
Principal Underwriter, Alliance Fund Services, Inc. and their
affiliates; officers, directors and present and full-time
employees of selected dealers or agents; or the spouse, sibling,
direct ancestor or direct descendant (collectively "relatives")
of any such person; or any trust, individual retirement account
or retirement plan account for the benefit of any such person or
39
<PAGE>
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, Principal
Underwriter, Alliance Fund Services, Inc. and their affiliates;
certain employee benefit plans for employees of the Adviser, the
Principal Underwriter, Alliance Fund Services, Inc. and their
affiliates; (iv) persons participating in a fee-based program,
sponsored and maintained by a registered broker-dealer and
approved by the Principal Underwriter, pursuant to which such
persons pay an asset-based fee to such broker-dealer, or its
affiliate or agent, for services in the nature of investment
advisory or administrative services; (v) persons who establish to
the Principal Underwriter's satisfaction that they are investing
within such time period as may be designated by the Principal
Underwriter, proceeds of redemption of shares of such other
registered investment companies as may be designated from time to
time by the Principal Underwriter; and (vi) employer-sponsored
qualified pensions or profit-sharing plans (including Section
401(k) plans), custodial accounts maintained pursuant to Section
403(b)(7) retirement plans and individual retirement accounts
(including individual retirement accounts to which simplified
employee pension (SEP) contributions are made), if such plans or
accounts are established or administered under programs sponsored
by administrators or other persons that have been approved by the
Principal Underwriter.
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
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
40
<PAGE>
contingent deferred sales charge at the rates set forth below
charged as a percentage of the dollar amount subject thereto.
The charge will be assessed on an amount equal to the lesser of
the cost of the shares being redeemed or their net asset value at
the time of redemption. Accordingly, no sales charge will be
imposed on increases in net asset value above the initial
purchase price. In addition, no charge will be assessed on
shares derived from reinvestment of dividends or capital gains
distributions.
To illustrate, assume that on or after November 19, 1993
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 %
Of Dollar Amount Subject To Charge
Shares Purchased Shares Purchased
Before On Or After
Years Since Purchase November 19, 1993 November 19, 1993
Less than One 5.50% 4.0%
One 4.50% 3.0%
Two 3.50% 2.0%
Three 2.50% 1.0%
Four 1.50% None
Five 0.50% None
Six or More None 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
41
<PAGE>
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 purchases by the shareholder.
The contingent deferred sales charge is waived on
redemptions of shares (i) following the death or disability, as
defined in the Internal Revenue Code of 1986, as amended (the
"Code"), of a shareholder, (ii) to the extent that the redemption
represents a minimum required distribution from an individual
retirement account or other retirement plan to a shareholder who
has attained the age of 70-1/2, (iii) that had been purchased by
present or former Directors of the Fund, by the relative of any
such person, by any trust, individual retirement account or
retirement plan account for the benefit of any such person or
relative, or by the estate of any such person or relative, or
(iv) pursuant to a systematic withdrawal plan (see "Shareholder
Services - Systematic Withdrawal Plan" below).
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
42
<PAGE>
for an indefinite period which may extend beyond the period
ending eight years after the end of the calendar month in which
the shareholder's purchase order was accepted.
Class C Shares
Investors may purchase Class C shares at the public
offering price equal to the net asset value per share of the
Class C shares on the date of purchase without the imposition of
a sales charge either at the time of purchase or, as long as the
shares are held for one year or more, upon redemption. Class C
shares are sold without an initial sales charge so that the Fund
will receive the full amount of the investor's purchase payment
and, as long as the shares are held for one year or more, without
a contingent deferred sales charge so that the investor will
receive as proceeds upon redemption the entire net asset value of
his or her Class C shares. The Class C distribution services fee
enables the Fund to sell Class C shares without either an initial
or contingent deferred sales charge, as long as the shares are
held for one year or more. Class C shares do not convert to any
other class of shares of the Fund and incur higher distribution
services fees than Class A shares, and will thus have a higher
expense ratio and pay correspondingly lower dividends than Class
A 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
43
<PAGE>
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.
Conversion of Advisor Class Shares to Class A Shares
Advisor Class shares may be held solely through the fee-
based program accounts and employee benefit plans described above
under "Purchase of Shares--General," and by investment advisory
clients of, and 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 a fee-based program
or plan that satisfies the requirements to purchase shares set
forth under "Purchase of Shares--General" or (ii) the holder is
otherwise no longer eligible to purchase Advisor Class shares as
described in the Advisor Class Prospectus and this Statement of
Additional Information (each, a "Conversion Event"), then all
Advisor Class shares held by the shareholder will convert
automatically and without notice to the shareholder, other than
the notice contained in the Advisor Class Prospectus and this
Statement of Additional Information, to Class A shares of the
Fund during the calendar month following the month in which the
Fund is informed of the occurrence of the Conversion Event. The
failure of a shareholder or a fee-based program to satisfy the
minimum investment requirements to purchase Advisor Class shares
will not constitute a Conversion Event. The conversion would
occur on the basis of the relative net asset values of the two
classes and without the imposition of any sales load, fee or
other charge. Class A shares currently bear a .30% distribution
services fee and have a higher expense ratio than Advisor Class
shares. As a result, Class A shares may pay correspondingly
lower dividends and have a lower net asset value than Advisor
Class shares.
The conversion of Advisor Class shares to Class A shares
is subject to the continuing availability of an opinion of
counsel to the effect that the conversion of Advisor Class shares
to Class A shares does not constitute a taxable event under
federal income tax law. The conversion of Advisor Class shares
to Class A shares may be suspended if such an opinion is no
longer available at the time such conversion is to occur. In
that event, the Advisor Class shareholder would be required to
redeem his Advisor Class shares, which would constitute a taxable
event under federal income tax law.
44
<PAGE>
___________________________________________________________
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 New York Stock Exchange (the "Exchange") is
closed (other than customary weekend and holiday closings) or
during which the Commission determines that trading thereon is
restricted, or for any period during which an emergency (as
determined by the Commission) exists as a result of which
disposal by the Fund of securities owned by it is not reasonably
practicable or as a result of which it is not reasonably
practicable for the Fund fairly to determine the value of its net
assets, or for such other periods as the Commission may by order
permit for the protection of security holders of the Fund.
Payment of the redemption price will be made in cash.
The value of a shareholder's shares on redemption or repurchase
may be more or less than the cost of such shares to the
shareholder, depending upon the market value of the Fund's
portfolio securities at the time of such redemption or
45
<PAGE>
repurchase. Redemption proceeds on Class A, Class B and Class C
shares will reflect the deduction of the contingent deferred
sales charge, if any. Payment received by a shareholder upon
redemption or repurchase of his shares, assuming the shares
constitute capital assets in his hands, will result in long-term
or short-term capital gains (or loss) depending upon the
shareholder's holding period and basis in respect of the shares
redeemed.
To redeem shares of the Fund for which no share
certificates have been issued, the registered owner or owners
should forward a letter to the Fund containing a request for
redemption. The signature or signatures on the letter must be
guaranteed by an "eligible guarantor institution" as defined in
Rule 17Ad-15 under the Securities Exchange Act of 1934, as
amended.
To redeem shares of the Fund represented by share
certificates, the investor should forward the appropriate share
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 fund transfer once in any 30 day period (except for
certain omnibus accounts) of shares for which no share
certificates have been issued by telephone at (800) 221-5672 by a
shareholder who has completed the appropriate portion of the
Subscription Application or, in the case of an existing
shareholder, an "Autosell" application obtained from Alliance
Fund Services, Inc. A telephone redemption request may not exceed
$100,000 (except for certain omnibus accounts), and must be made
by 4:00 p.m. Eastern time on a Fund business day as defined
above. Proceeds of telephone redemptions will be sent by
Electronic Funds Transfer to a shareholder's designated bank
account at a bank selected by the shareholder that is a member of
the NACHA.
Telephone Redemption By Check. Except for certain
omnibus accounts or as noted below, each Fund shareholder is
eligible to request redemption by check, once in any 30-day
46
<PAGE>
period, of Fund shares for which no stock certificates have been
issued by telephone at (800) 221-5672 before 4:00 p.m. Eastern
time on a Fund business day in an amount not exceeding $50,000.
Proceeds of such redemptions are remitted by check to the
shareholder's address of record. Telephone redemption by check
is not available with respect to shares (i) for which
certificates have been issued, (ii) held in nominee or "street
name" accounts, (iii) held by a shareholder who has changed his
or her address of record within the preceding 30 calendar days or
(iv) held in any retirement plan account. A shareholder
otherwise eligible for telephone redemption by check may cancel
the privilege by written instruction to Alliance Fund Services,
Inc., or by checking the appropriate box on the Subscription
Application found in the Prospectus.
Telephone Redemptions - General. During periods of
drastic economic or market developments, such as the market break
of October 1987, it is possible that shareholders would have
difficulty in reaching Alliance Fund Services, Inc. by telephone
(although no such difficulty was apparent at any time in
connection with the 1987 market break). If a shareholder were to
experience such difficulty, the shareholder should issue written
instructions to Alliance Fund Services, Inc. at the address shown
on the cover of this Statement of Additional Information. The
Fund reserves the right to suspend or terminate its telephone
redemption service at any time without notice. Neither the Fund
nor the Adviser, the Principal Underwriter or Alliance Fund
Services, Inc. will be responsible for the authenticity of
telephone requests for redemptions that the Fund reasonably
believes to be genuine. The Fund will employ reasonable
procedures in order to verify that telephone requests for
redemptions are genuine, including, among others, recording such
telephone instructions and causing written confirmations of the
resulting transactions to be sent to shareholders. If the Fund
did not employ such procedures, it could be liable for losses
arising from unauthorized or fraudulent telephone instructions.
Selected dealers or agents may charge a commission for handling
telephone requests for redemptions.
Repurchase
The Fund may repurchase shares through the Principal
Underwriter, selected financial intermediaries or selected
dealers or agents. The repurchase price will be the net asset
value next determined after the Principal Underwriter receives
the request (less the contingent deferred sales charge, if any,
with respect to the Class A, Class B and Class C shares), except
that requests placed through selected dealers or agents before
the close of regular trading on the Exchange on any day will be
executed at the net asset value determined as of such close of
regular trading on that day if received by the Principal
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Underwriter prior to its close of business on that day (normally
5:00 p.m. Eastern time). The financial intermediary or selected
dealer or agent is responsible for transmitting the request to
the Principal Underwriter by 5:00 p.m. If the financial
intermediary or selected dealer or agent fails to do so, the
shareholder's right to receive that day's closing price must be
settled between the shareholder and the dealer or agent. A
shareholder may offer shares of the Fund to the Principal
Underwriter either directly or through a selected dealer or
agent. Neither the Fund nor the Principal Underwriter charges a
fee or commission in connection with the repurchase of shares
(except for the contingent deferred sales charge, if any, with
respect to Class A, Class B and Class C shares). Normally, if
shares of the Fund are offered through a financial intermediary
or selected dealer or agent, the repurchase is settled by the
shareholder as an ordinary transaction with or through the
selected dealer or agent, who may charge the shareholder for this
service. The repurchase of shares of the Fund as described above
is a voluntary service of the Fund and the Fund may suspend or
terminate this practice at any time.
General
The Fund reserves the right to close out an account that
through redemption has remained below $200 for 90 days.
Shareholders will receive 60 days' written notice to increase the
account value before the account is closed. No contingent
deferred sales charge will be deducted from the proceeds of this
redemption. In the case of a redemption or repurchase of shares
of the Fund recently purchased by check, redemption proceeds will
not be made available until the Fund is reasonably assured that
the check has cleared, normally up to 15 calendar days following
the purchase date.
___________________________________________________________
SHAREHOLDER SERVICES
___________________________________________________________
The following information supplements that set forth in
the Fund's Prospectus under the heading "Purchase and Sale of
Shares- Shareholder Services." The shareholder services set
forth below are applicable to Class A, Class B, Class C and
Advisor Class shares unless otherwise indicated. If you are an
Advisor Class shareholder through an account established under a
fee-based program your fee-based program may impose requirements
with respect to the purchase, sale or exchange of Advisor Class
shares of the Fund that are different from those described
herein. A transaction fee may be charged by your financial
representative with respect to the purchase, sale or exchange of
Advisor Class shares made through such financial representative.
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Automatic Investment Program
Investors may purchase shares of the Fund through an
automatic investment program utilizing Electronic Funds Transfer
drawn on the investor's own bank account. Under such a program,
pre-authorized monthly drafts for a fixed amount (at least $25)
are used to purchase shares through the selected dealer or
selected agent designated by the investor at the public offering
price next determined after the Principal Underwriter receives
the proceeds from the investor's bank. In electronic form,
drafts can be made on or about a date each month selected by the
shareholder. Investors wishing to establish an automatic
investment program in connection with their initial investment
should complete the appropriate portion of the Subscription
Application found in the Prospectus. Current shareholders should
contact Alliance Fund Services, Inc. at the address or telephone
numbers shown on the cover of this Statement of Additional
Information to establish an automatic investment program.
Exchange Privilege
You may exchange your investment in the Fund for shares
of the same class of other Alliance Mutual Funds (including AFD
Exchange Reserves, a money market fund managed by Alliance). In
addition, (i) present officers and full-time employees of the
Adviser, (ii) present Directors or Trustees of any Alliance
Mutual Fund and (iii) certain employee benefit plans for
employees of the Adviser, the Principal Underwriter, Alliance
Fund Services, Inc. and their affiliates may, on a tax-free
basis, exchange Class A shares of the Fund for Advisor Class
shares of the Fund. Exchanges of shares are made at the net
asset value next determined and without sales or service charges.
Exchanges may be made by telephone or written request. Telephone
exchange requests must be received by Alliance Fund Services,
Inc. by 4:00 p.m. Eastern time on a Fund business day in order to
receive that day's net asset value.
Shares will continue to age without regard to exchanges
for purpose of determining the CDSC, if any, upon redemption and,
in the case of Class B shares, for the purpose of conversion to
Class A shares. After an exchange, your Class B shares will
automatically convert to Class A shares in accordance with the
conversion schedule applicable to the Class B shares of the
Alliance Mutual Fund you originally purchased for cash ("original
shares"). When redemption occurs, the CDSC applicable to the
original shares is applied.
Please read carefully the prospectus of the mutual fund
into which you are exchanging before submitting the request.
Call Alliance Fund Services, Inc. at 800-221-5672 to exchange
uncertificated shares. Except with respect to exchanges of Class
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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
Alliance Fund Services, Inc. receives written instruction to the
contrary from the shareholder, or the shareholder declines the
privilege by checking the appropriate box on the Subscription
Application found in the Prospectus. Such telephone requests
cannot be accepted with respect to shares then represented by
stock certificates. Shares acquired pursuant to a telephone
request for exchange will be held under the same account
registration as the shares redeemed through such exchange.
Eligible shareholders desiring to make an exchange
should telephone Alliance Fund Services, Inc. with their account
number and other details of the exchange, at (800) 221-5672
before 4:00 p.m., Eastern time, on a Fund business day as defined
above. Telephone requests for exchange received before 4:00 p.m.
Eastern time on a Fund business day will be processed as of the
close of business on that day. During periods of drastic
economic or market developments, such as the market break of
October 1987, it is possible that shareholders would have
difficulty in reaching Alliance Fund Services, Inc. by telephone
(although no such difficulty was apparent at any time in
connection with the 1987 market break). If a shareholder were to
experience such difficulty, the shareholder should issue written
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instructions to Alliance Fund Services, Inc. at the address shown
on the cover of this Statement of Additional Information.
A shareholder may elect to initiate a monthly "Auto
Exchange" whereby a specified dollar amount's worth of his or her
Fund shares (minimum $25) is automatically exchanged for shares
of another Alliance Mutual Fund. Auto Exchange transactions
normally occur on the 12th day of each month, or the following
Fund business day prior thereto.
None of the Alliance Mutual Funds, the Adviser, the
Principal Underwriter or Alliance Fund Services, Inc. will be
responsible for the authenticity of telephone requests for
exchanges that the Fund reasonably believes to be genuine. The
Fund will employ reasonable procedures in order to verify that
telephone requests for exchanges are genuine, including, among
others, recording such telephone instructions and causing written
confirmations of the resulting transactions to be sent to
shareholders. If the Fund did not employ such procedures, it
could be liable for losses arising from unauthorized or
fraudulent telephone instructions. Selected dealers, agents or
financial representatives, as applicable may charge a commission
for handling telephone requests for exchanges.
The exchange privilege is available only in states where
shares of the Alliance Mutual Fund being acquired may be legally
sold. Each Alliance Mutual Fund reserves the right, at any time
on 60 days' notice to its shareholders, to reject any order to
acquire its shares through exchange or otherwise to modify,
restrict or terminate the exchange privilege.
Retirement Plans
The Fund may be a suitable investment vehicle for part
or all of the assets held in various types of retirement plans,
such as those listed below. The Fund has available forms of such
plans pursuant to which investments can be made in the Fund and
other Alliance Mutual Funds. Persons desiring information
concerning these plans should contact Alliance Fund Services,
Inc. at the "Literature" telephone number on the cover of this
Statement of Additional Information, or write to:
Alliance Fund Services, Inc.
Retirement Plans
P.O. Box 1520
Secaucus, New Jersey 07096-1520
Individual Retirement Account ("IRA"). Individuals who
receive compensation, including earnings from self-employment,
are entitled to establish and make contributions to an IRA.
Taxation of the income and gains paid to an IRA by the Fund is
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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 $5 million
on or before December 15 in any year, all Class B or Class
C shares of the Fund held by the plan can be exchanged, at the
plan's request, without any sales charge, for Class A shares of
the Fund.
Simplified Employee Pension Plan ("SEP"). Sole
proprietors, partnerships and corporations may sponsor a SEP
under which they make annual tax-deductible contributions to an
IRA established by each eligible employee within prescribed
limits based on employee compensation.
403(b)(7) Retirement Plan. Certain tax-exempt
organizations and public educational institutions may sponsor
retirements plans under which an employee may agree that monies
deducted from his or her compensation (minimum $25 per pay
period) may be contributed by the employer to a custodial account
established for the employee under the plan.
The Alliance Plans Division of Frontier Trust Company, a
subsidiary of Equitable, which serves as custodian or trustee
under the retirement plan prototype forms available from the
Fund, charges certain nominal fees for establishing an account
and for annual maintenance. A portion of these fees is remitted
to Alliance Fund Services, Inc. as compensation for its services
to the retirement plan accounts maintained with the Fund.
Distributions from retirement plans are subject to
certain Code requirements in addition to normal redemption
procedures. For additional information please contact Alliance
Fund Services, Inc.
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Dividend Direction Plan
A shareholder who already maintains, in addition to his
or her Class A, Class B, Class C or Advisor Class Fund accounts,
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 his or her Class A, Class B, Class C
or Advisor Class Fund shares be automatically reinvested, in any
amount, without the payment of any sales or service charges, in
shares of the same class of such other Alliance Mutual Fund(s).
Further information can be obtained by contacting Alliance Fund
Services, Inc. at the address or the "Literature" telephone
number shown on the cover of this Statement of Additional
Information. Investors wishing to establish a dividend direction
plan in connection with their initial investment should complete
the appropriate section of the Subscription Application found in
the Prospectus. Current shareholders should contact Alliance
Fund Services, Inc. to establish a dividend direction plan.
Systematic Withdrawal Plan
General. Any shareholder who owns or purchases shares
of the Fund having a current net asset value of at least $4,000
(for quarterly or less frequent payments), $5,000 (for bi-monthly
payments) or $10,000 (for monthly payments) may establish a
systematic withdrawal plan under which the shareholder will
periodically receive a payment in a stated amount of not less
than $50 on a selected date. Systematic withdrawal plan
participants must elect to have their dividends and distributions
from the Fund automatically reinvested in additional shares of
the Fund.
Shares of the Fund owned by a participant in the Fund's
systematic withdrawal plan will be redeemed as necessary to meet
withdrawal payments and such withdrawal payments will be subject
to any taxes applicable to redemptions and, except as discussed
below, any applicable contingent deferred sales charge. Shares
acquired with reinvested dividends and distributions will be
liquidated first to provide such withdrawal payments and
thereafter other shares will be liquidated to the extent
necessary, and depending upon the amount withdrawn, the
investor's principal may be depleted. A systematic withdrawal
plan may be terminated at any time by the shareholder or the
Fund.
Withdrawal payments will not automatically end when a
shareholder's account reaches a certain minimum level.
Therefore, redemptions of shares under the plan may reduce or
even liquidate a shareholder's account and may subject the
shareholder to the Fund's involuntary redemption provisions. See
"Redemption and Repurchase of Shares -- General." Purchases of
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additional shares concurrently with withdrawals are undesirable
because of sales charges when purchases are made. While an
occasional lump-sum investment may be made by a holder of Class A
shares who is maintaining a systematic withdrawal plan, such
investment should normally be an amount equivalent to three times
the annual withdrawal or $5,000, whichever is less.
Payments under a systematic withdrawal plan may be made
by check or electronically via the Automated Clearing House
("ACH") network. Investors wishing to establish a systematic
withdrawal plan in conjunction with their initial investment in
shares of the Fund should complete the appropriate portion of the
Subscription Application found in the Prospectus, while current
Fund shareholders desiring to do so can obtain an application
form by contacting Alliance Fund Services, Inc. at the address or
the "Literature" telephone number shown on the cover of this
Statement of Additional Information.
CDSC Waiver for Class B and Class C Shares. Under a
systematic withdrawal plan, up to 1% monthly, 2% bi-monthly or 3%
quarterly of the value at the time of redemption of the Class B
or Class C shares in a shareholder's account may be redeemed free
of any contingent deferred sales charge.
With respect to Class B shares, the waiver applies only
with respect to shares acquired after July 1, 1995. Class B
shares that are not subject to a contingent deferred sales charge
(such as shares acquired with reinvested dividends or
distributions) will be redeemed first and will count toward the
foregoing limitations. Remaining Class B shares that are held
the longest will be redeemed next. Redemptions of Class B shares
in excess of the foregoing limitations will be subject to any
otherwise applicable contingent deferred sales charge.
With respect to Class C shares, shares held the longest
will be redeemed first and will count toward the foregoing
limitations. Redemptions in excess of those limitations will be
subject to any otherwise applicable contingent deferred sales
charge.
Statements and Reports
Each shareholder of the Fund receives semi-annual and
annual reports which include a portfolio of investments,
financial statements and, in the case of the annual report, the
report of the Fund's independent auditors, Ernst & Young LLP, as
well as a confirmation of each purchase and redemption. By
contacting his or her broker or Alliance Fund Services, Inc., a
shareholder can arrange for copies of his or her account
statements to be sent to another person.
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_________________________________________________________
NET ASSET VALUE
_________________________________________________________
The net asset value per share is computed in accordance
with the Fund's Articles of Incorporation and By-Laws as of the
next close of regular trading on the Exchange (currently 4:00
p.m.) following receipt of a purchase or redemption order (and on
such other days as the Directors of the Fund deem necessary in
order to comply with Rule 22c-1 under the 1940 Act), by dividing
the value of the Fund's total assets less its liabilities, by the
total number of the Fund's shares then outstanding. For this
purpose, a Fund's business day is any weekday exclusive of
national holidays on which the Exchange is closed and Good
Friday.
Securities listed or traded on the Exchange or other
United States or foreign securities exchanges are valued at the
last quoted sales prices on such exchanges prior to the time when
assets are valued. Securities listed or traded on certain
foreign exchanges whose operations are similar to the United
States over-the-counter market are valued at the price within the
limits of the latest available current bid and asked prices
deemed best to reflect a fair value. A security which is listed
or traded on more than one exchange is valued at the quotations
on the exchange determined to be the primary market for such
security by the Directors or their delegates. Listed securities
that are not traded on a particular day, and securities regularly
traded in the over-the-counter market, are valued at the price
within the limits of the latest available current bid and asked
prices deemed best to reflect a fair value. In instances where
the price of a security determined above is deemed not to be
representative, the security is valued in such a manner as
prescribed by the Directors to reflect its fair value. All other
assets and securities are valued in a manner determined in good
faith by the Directors to reflect their fair value. For purposes
of determining the Fund's net asset value per share, all assets
and liabilities initially expressed in foreign currencies will be
converted into United States dollars at the mean of the bid and
asked prices of such currencies against the United States dollar
last quoted by any major bank. If such quotations are not
available as of the close of the Exchange, the rate of exchange
will be determined in accordance with policies established in
good faith by the Directors. On an ongoing basis, the Directors
monitor the Fund's method of valuation.
Trading in securities on European and Far Eastern
securities exchanges and over-the-counter markets is normally
completed well before the close of business of each business day
in New York (i.e., a day on which the Exchange is open). In
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addition, European or Far Eastern securities trading generally or
in a particular country or countries may not take place on all
business days in New York. Furthermore, trading takes place in
Japanese markets on certain Saturdays and in various foreign
markets on days which are not business days in New York and on
which the Fund's net asset value is not calculated. The Fund
calculates net asset value per share, and therefore effects
purchases and redemptions of its shares, as of the next close of
trading on the Exchange following receipt of a purchase or
redemption order (and on such other days as the Directors of the
Fund deem necessary in order to comply with Rule 22c-1 under the
1940 Act). Such calculation does not take place
contemporaneously with the determination of the prices of the
majority of the portfolio securities used in such calculation.
Events affecting the values of portfolio securities that occur
between the time their prices are determined and the close of the
Exchange will not be reflected in the Fund's calculation of net
asset value unless the Fund's Directors deem that the particular
event would materially affect net asset value, in which case an
adjustment will be made.
The Directors may suspend the determination of the
Fund's net asset value (and the offering and sales of shares),
subject to the rules of the Securities and Exchange Commission
and other governmental rules and regulations, at such time when:
(1) the New York Stock Exchange is closed, other than customary
weekend and holiday closing, (2) an emergency exists as a result
of which it is not reasonably practical 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
Securities and Exchange Commission by order permits a suspension
of the right of redemption or a postponement of the date of
payment on redemption.
The assets belonging to the Class A shares, the Class B
shares, the 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
accrued expenses and liabilities allocated to that class from the
assets belonging to that class.
___________________________________________________________
DIVIDENDS, DISTRIBUTIONS AND TAXES
___________________________________________________________
The Fund intends to qualify and elect to be treated as a
"regulated investment company" under Sections 851-855 of the
Internal Revenue Code of 1986, as amended (the "Code"). To so
qualify, the Fund must, among other things, (i) derive at least
90% of its gross income in each taxable year from dividends,
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interest, payments with respect to securities loans, gains from
the sale or other disposition of stock or securities or foreign
currency, or certain other income (including but not limited to
gains from options, futures and forward contracts) derived with
respect to its business of investing in stock, securities or
currency; (ii) derive less than 30% of its gross income in each
taxable year from the sale or other disposition of stock,
securities or certain other investments held less than three
months; and (iii) 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 total value of the Fund's
assets is represented by cash, U.S. Government securities,
securities of other regulated investment companies and other
securities (for this purpose, such other securities will qualify
only if the Fund's investment is limited, in respect of any one
issuer, to an amount not greater than 5% of the Fund's total
assets and 10% of the outstanding voting securities of such
issuer) and (b) not more than 25% of the total 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).
The Treasury Department is authorized to issue
regulations to provide that foreign currency gains that are "not
directly related" to the Fund's principal business of investing
in stock or securities may be excluded from the income that
qualifies for purposes of the 90% gross income requirement
described above with respect to the Fund's qualification as a
"regulated investment company." No such regulations have yet
been issued.
If the Fund qualifies as a regulated investment company
and makes a timely distribution of 90% or more of its taxable 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 (including any net capital gain) that it distributes to
its shareholders.
The Fund will also avoid the nondeductible 4% federal
excise tax that would otherwise apply to certain undistributed
income for a given calendar year if it meets certain minimum
distribution requirements by the end of each calendar 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 purposes of the 4%
excise tax and federal income tax, dividends declared and payable
as of a date in October, November or December will be treated as
if they were paid on December 31 of that year if the dividends
are actually paid during the following January.
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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.
Currency Fluctuations - "Section 988" Gains or Losses.
Under the Code, gains or losses attributable to fluctuations in
exchange rates which occur between the time the Fund accrues
interest or other receivables or accrues expenses or other
liabilities denominated in a foreign currency and the time the
Fund actually collects such receivables or pays such liabilities
are treated as ordinary income or ordinary loss. Similarly,
gains or losses from the disposition of foreign currencies, from
the disposition of debt securities denominated in a foreign
currency, or from the disposition of a forward contract
denominated in a foreign currency which are attributable to
fluctuations in the value of the foreign currency between the
date of acquisition of the asset and the date of disposition also
are treated as ordinary gain or loss. These gains or losses,
referred to under the Code as "section 988" gains or losses,
increase or decrease the amount of the Fund's investment company
taxable income available to be distributed to its shareholders as
ordinary income, rather than increasing or decreasing the amount
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. To the
extent that such distributions exceed such shareholder's basis,
each distribution will be treated as a gain from the sale of
shares.
Options, Futures and Forward Contracts. Certain listed
options, regulated futures contracts, and forward foreign
currency contracts are considered "section 1256 contracts" for
federal income tax purposes. Section 1256 contracts held by the
Fund at the end of each taxable year will be "marked to market"
and treated for federal income tax purposes as though sold for
fair market value on the last business day of such taxable year.
Gain or loss realized by the Fund on section 1256 contracts other
than forward foreign currency contracts will be considered 60%
long-term and 40% short-term capital gain or loss. Gain or loss
realized by the Fund on forward foreign currency contracts 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
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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, currency
swap, forward foreign currency contract, or other position
entered into or held by the Fund in conjunction with any other
position held by the Fund may constitute a "straddle" for federal
income tax purposes. A straddle of which at least one, but not
all, the positions are section 1256 contracts may constitute a
"mixed straddle". In general, straddles are subject to certain
rules that may affect the character and timing of the Fund's
gains and losses with respect to straddle positions by requiring,
among other things, that (i) loss realized on disposition of one
position of a straddle not be recognized to the extent that the
Fund has unrealized gains with respect to the other position in
such straddle; (ii) the Fund's holding period in straddle
positions be suspended while the straddle exists (possibly
resulting in gain being treated as short-term capital gain rather
than long-term capital gain); (iii) losses recognized with
respect to certain straddle positions which are part of a mixed
straddle and which are non-section 1256 positions be treated as
60% long-term and 40% short-term capital loss; (iv) losses
recognized with respect to certain straddle positions which would
otherwise constitute short-term capital losses be treated as
long-term capital losses; and (v) the deduction of interest and
carrying charges 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.
United States Shareholders - Foreign Tax Credits.
Income received by the Fund may also be subject to foreign income
taxes, including withholding taxes. It is impossible to
determine the effective rate of foreign tax in advance since the
amount of the Fund's assets to be invested within various
countries is not known. If more than 50% of the value of the
Fund's total assets at the close of its taxable year consists of
stocks or securities of foreign corporations, the Fund will be
eligible and intends to file an election with the Internal
Revenue Service to pass through to its shareholders the amount of
foreign taxes paid by the Fund. However, there can be no
assurance that the Fund will be able to do so. Pursuant to this
election a United States Shareholder will be required to (i)
include in gross income (in addition to taxable dividends
actually received) his pro rata share of foreign taxes paid by
60
<PAGE>
the Fund, (ii) treat his pro rata share of such foreign taxes as
having been paid by him, and (iii) either deduct such pro rata
share of foreign taxes in computing his taxable income or treat
such foreign taxes as a credit against United States federal
income taxes. Shareholders who are not liable for federal income
taxes, such as retirement plans qualified under section 401 of
the Code, will not be affected by any such pass-through of taxes
by the Fund. No deduction for foreign taxes may be claimed by an
individual United States Shareholder who does not itemize
deductions. In addition, certain individual United States
Shareholders may be subject to rules which limit or reduce their
ability to fully deduct their pro rata share of the foreign taxes
paid by the Fund. 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.
Generally, a credit for foreign taxes may not exceed the
United States Shareholder's United States tax attributable to the
shareholder's total foreign source taxable income. Generally,
the source of the Fund's income flows through to its
shareholders. The overall limitation on a foreign tax credit is
also applied separately to specific categories of foreign source
income, including foreign source "passive income," including
dividends, interest and capital gains. Further, the foreign tax
credit is allowed to offset only 90% of any alternative minimum
tax to which a United States Shareholder may be subject. As a
result of these rules, certain United States Shareholders may be
unable to claim a credit for the full amount of their
proportionate share of the foreign taxes paid by the Fund. If a
United States Shareholder could not credit his full share of the
foreign tax paid, double taxation of such income could be
mitigated only by deducting the foreign tax paid, which may be
subject to limitation as described above.
The federal income tax status of each year's
distributions by the Fund will be reported to shareholders and to
the Internal Revenue Service. The foregoing is only a general
description of the treatment of foreign taxes under the United
States federal income tax laws. Because the availability of a
foreign tax credit or deduction will depend on the particular
circumstances of each shareholder, potential investors are
advised to consult their own tax advisers.
The foregoing discussion relates only to U.S. Federal
income tax law as it affects shareholders who are U.S. residents
or U.S. corporations. The effects of Federal income tax law on
shareholders who are non-resident aliens or foreign corporations
61
<PAGE>
may be substantially different. Foreign investors should consult
their counsel for further information as to the U.S. tax
consequences of receipt of income from the Fund.
___________________________________________________________
BROKERAGE AND PORTFOLIO TRANSACTIONS
___________________________________________________________
Subject to the general supervision and control of the
Directors of the Fund, the Adviser makes the Fund's portfolio
decisions and determines the broker to be used in each specific
transaction with the objective of negotiating best price and
execution. When consistent with the objective of obtaining best
execution, brokerage may be directed to persons or firms
supplying investment information to the Adviser. There may be
occasions where the transaction cost charged by a broker may be
greater than that which another broker may charge if the Fund
determines in good faith that the amount of such transaction cost
is reasonable in relation to the value of the brokerage, research
and statistical services provided by the executing broker.
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 as a factor in
the selection of brokers to execute portfolio transactions for
the Fund.
Neither the Fund nor the Adviser has entered into
agreements or understandings with any brokers regarding the
placement of securities transactions because of research or
statistical services they provide. To the extent that such
persons or firms supply investment information to the Adviser for
use in rendering investment advice to the Fund, such information
may be supplied at no cost to the Adviser. While it is
impossible to place an actual dollar value on such investment
information, its receipt by the Adviser probably does not reduce
the overall expenses of the Adviser to any material extent.
The investment information provided to the Adviser is of
the type described in Section 28(e)(3) of the Securities Exchange
Act of 1934 and is designed to augment the Adviser's own internal
research and investment strategy capabilities. Research and
statistical services furnished by brokers through which the Fund
effects securities transactions are used by the Adviser in
carrying out its investment management responsibilities with
respect to all its client accounts but not all such services may
be used by the Adviser in connection with the Fund.
The Fund may deal in some instances in securities which
are not listed on a national stock exchange but are traded in the
over-the-counter market. The Fund may also purchase listed
62
<PAGE>
securities through the third market, i.e., from a dealer which is
not a member of the exchange on which a security is listed.
Where transactions are executed in the over-the-counter market or
third market, the Fund will seek to deal with the primary market
makers; but when necessary in order to obtain the best price and
execution, it will utilize the services of others. In all cases,
the Fund will attempt to negotiate best execution.
The Fund may from time to time place orders for the
purchase or sale of securities (including listed call options)
with Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"),
an affiliate of the Adviser, and with brokers which may have
their transactions cleared or settled, or both, by the Pershing
Division of DLJ, for which DLJ may receive a portion of the
brokerage commissions. In such instances, the placement of
orders with such brokers would be consistent with the Fund's
objective of obtaining best execution and would not be dependent
upon the fact that DLJ is an affiliate of the Adviser.
During the fiscal period ended July 31, 1994, the fiscal
year ended July 31, 1995 and the fiscal year ended July 31, 1996,
the Fund incurred brokerage commissions amounting in the
aggregate to $107,065, $259,471 and $444,996, respectively.
During the fiscal period ended July 31, 1994, the fiscal year
ended July 31, 1995 and the fiscal year ended July 31, 1996,
brokerage commissions amounting in the aggregate to $-0-, $-0-
and $-0-, respectively, were paid to DLJ and brokerage
commissions amounting in the aggregate to $-0-, $-0- and $-0-,
respectively, were paid to brokers utilizing the Pershing
Division of DLJ. During the fiscal year ended July 31, 1996, the
brokerage commissions paid to DLJ constituted -0-% of the Fund's
aggregate brokerage commissions and the brokerage commissions
paid to brokers utilizing the Pershing Division of DLJ
constituted -0-% of the Fund's aggregate brokerage commissions.
During the fiscal year ended July 31, 1996, of the Fund's
aggregate dollar amount of brokerage transactions involving the
payment of commissions, -0-% were effected through DLJ and -0-%
were effected through brokers utilizing the Pershing Division of
DLJ. During the fiscal year ended July 31, 1996, transactions in
portfolio securities of the Fund aggregating $211,829,054 with
associated brokerage commissions of approximately $[ ] were
allocated to persons or firms supplying research services to the
Fund or the Adviser.
63
<PAGE>
___________________________________________________________
GENERAL INFORMATION
___________________________________________________________
Capitalization
The authorized capital stock of the Fund currently
consists of 25,000,000 shares of Class A Common Stock, 12,500,000
shares of Class B Common Stock, 25,000,000 of Class C Common
Stock and 25,000,000 shares of Advisor Class Common Stock, each
having a par value of $.01 per share. All shares of the Fund,
when issued, are fully paid and non-assessable. The Directors
are authorized to reclassify and issue any unissued shares to any
number of additional series and classes without shareholder
approval. Accordingly, the Directors in the future, for reasons
such as the desire to establish one or more additional portfolios
with different investment objectives, policies or restrictions,
may create additional classes or series of shares. Any issuance
of shares of another class or series would be governed by the
1940 Act and the law of the State of Maryland. If shares of
another series were issued in connection with the creation of a
second portfolio, each share of either portfolio would normally
be entitled to one vote for all purposes. Generally, shares of
both portfolios would vote as a single series on matters, such as
the election of Directors, that affected both portfolios in
substantially the same manner. As to matters affecting each
portfolio differently, such as approval of the Advisory Agreement
and changes in investment policy, shares of each portfolio would
vote as a separate series.
Procedures for calling a shareholders' meeting for the
removal of Directors of the Fund, similar to those set forth in
Section 16(c) of the 1940 Act will be available to shareholders
of the Fund. The rights of the holders of shares of a series may
not be modified except by the vote of a majority of the
outstanding shares of such series.
At September 20, 1996 there were 7,573,132 shares of
common stock of the Fund outstanding, including 5,908,426 Class A
shares, 1,291,853 Class B shares, 372,853 Class C shares and no
Advisor Class shares. To the knowledge of the Fund, the
following persons owned of record, and no person owned
beneficially, 5% or more of the outstanding shares of the Fund as
of September 20, 1996:
64
<PAGE>
No. of % of % of % of
Name and Address Shares Class A Class B Class C
Merrill Lynch
Mutual Fund Operations 312,906.6290 5.26%
4800 Deer Lake Dr. East
Jacksonville FL 32246
Merrill Lynch
Mutual Fund Operations 345,247.1110 24.45%
4800 Deer Lake Dr. East
Jacksonville FL 32246
Merrill Lynch 193,360.5830 44.24%
Mutual Fund Operations
4800 Deer Lake Dr. East
Jacksonville FL 32246
Counsel
Legal matters in connection with the issuance of the
shares of Common Stock offered hereby are passed upon by Seward &
Kissel, New York, New York. Seward & Kissel has relied upon the
opinion of Venable, Baetjer and Howard, LLP, Baltimore, Maryland,
for matters relating to Maryland law.
Independent Auditors
Ernst & Young LLP, New York, New York, have been
appointed as the independent auditors for the Fund.
Custodian
State Street Bank and Trust Company, 225 Franklin St.,
Boston, Massachusetts 02110, acts as custodian for the securities
and cash of the Fund but plays no part in deciding the purchase
or sale of portfolio securities.
Principal Underwriter
Alliance Fund Distributors, Inc., 1345 Avenue of the
Americas, New York, New York 10105, serves as the Fund's
Principal Underwriter, and as such may solicit orders from the
public to purchase shares of the Fund. Under the Agreement
between the Fund and the Principal Underwriter, 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 of
1933, as amended.
65
<PAGE>
Performance Information
From time to time the Fund advertises its "total
return." Computed separately for each class, the Fund's "total
return" is its average annual compounded total return for its
most recently completed one, five, and ten-year periods. The
Fund's total return for each such period is computed by finding,
through the use of a formula prescribed by the Securities and
Exchange Commission, the average annual compounded rate of return
over the period that would equate an assumed initial amount
invested to the value of such investment at the end of the
period. For purposes of computing total return, income dividends
and capital gains distributions paid on shares of the Fund are
assumed to have been reinvested when paid and the maximum sales
charge applicable to purchases of Fund shares is assumed to have
been paid.
On September 17, 1990, all outstanding shares of the
Fund were reclassified as Class A shares. The Fund's average
annual compounded total return for Class A shares for the fiscal
year ended July 31, 1996 was 12.48%, for the five years ended
July 31, 1996 was 8.55% and for the ten years ended July 31, 1996
was 7.12%. The Fund's average annual compounded total return for
Class B shares for the fiscal year ended July 31, 1996 was
12.69%, for the five years ended July 31, 1996 was 8.72% and for
the period September 17, 1990 (commencement of distribution)
through July 31, 1996 was 9.17%. The Fund's average annual
compounded total return for Class C shares for the one year ended
July 31, 1996 was 15.77% and for the period May 3, 1993
(commencement of distribution) through July 31, 1996 was 12.76%.
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 return for a stated period of time. An investor's
principal invested in the Fund is not fixed and will fluctuate in
response to prevailing market conditions.
Advertisements quoting performance ratings of the Fund
as measured by financial publications or by independent
organizations such as Lipper Analytical Services, Inc. and
Morningstar, Inc. and advertisements presenting the historical
record of payments of income dividends by the Fund may also from
time to time be sent to investors or placed in newspapers and
magazines such as The New York Times, The Wall Street Journal,
66
<PAGE>
Barrons, Investor's Daily, Money Magazine, Changing Times,
Business Week and Forbes or other media on behalf of the Fund.
Additional Information
Any shareholder inquiries may be directed to the
shareholder's broker or other financial adviser or to Alliance
Fund Services, Inc. at the address or telephone numbers shown on
the front cover of this Statement of Additional Information.
This Statement of Additional Information does not contain all the
information set forth in the Registration Statement filed by the
Fund with the Securities and Exchange Commission under the
Securities Act of 1933. Copies of the Registration Statement may
be obtained at a reasonable charge from the Commission or may be
examined, without charge, at the offices of the Commission in
Washington, D.C.
67
00250176.AI4
<PAGE>
PORTFOLIO OF INVESTMENTS
JULY 31, 1996 ALLIANCE GLOBAL SMALL CAP FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $VALUE
- -------------------------------------------------------------------------
COMMON STOCKS & OTHER INVESTMENTS-94.9%
UNITED STATES INVESTMENTS-39.0%
BASIC INDUSTRIES-12.4%
ADVERTISING-0.4%
Ha Lo Industries, Inc. * 14,850 $ 334,125
BUSINESS SERVICES-1.7%
Equity Corp. International * 11,500 326,312
Oxford Resources Corp. * 9,600 228,000
Stewart Enterprises, Inc. 10,200 270,300
Team Rental Group, Inc. * 33,300 657,675
------------
1,482,287
CHEMICALS-1.6%
Crompton & Knowles Corp. 29,000 435,000
Cytec Industries, Inc. * 20,700 621,000
Polymer Group, Inc. * 30,300 386,325
------------
1,442,325
ENGINEERING & CONSTRUCTION-0.3%
Emcor Group, Inc. * 16,200 271,350
MINING & METALS-1.4%
Century Aluminum Co. 29,200 427,050
Kaiser Aluminum Corp. * 20,400 224,400
RMI Titanium Co. * 7,400 165,575
Titanium Metals Corp. * 14,000 339,500
Uranium Resources, Inc. * 4,000 42,500
------------
1,199,025
POLLUTION CONTROL-2.9%
Republic Industries, Inc. * 51,800 1,243,200
United Waste Systems, Inc. * 19,400 501,975
USA Waste Services, Inc. * 31,500 787,500
------------
2,532,675
TEXTILE PRODUCTS-1.3%
Mohawk Industries, Inc. * 36,200 642,550
Unifi, Inc. 17,400 480,675
------------
1,123,225
TRANSPORTATION & SHIPPING-2.8%
Alaska Air Group, Inc. * 40,800 979,200
America West Airlines, Inc. * 40,400 646,400
Continental Airlines, Inc. * 8,400 212,100
Xtra Corp. 13,700 578,825
------------
2,416,525
------------
10,801,537
CONSUMER PRODUCTS, SERVICES & STAPLES-12.4%
APPAREL-1.8%
Designer Holdings, Ltd. * 14,000 257,250
Mossimo, Inc. * 2,000 75,750
Timberland Co. * 11,800 212,400
Tommy Hilfiger Corp. * 14,600 740,950
Warnaco Group, Inc., Cl.A 10,400 245,700
------------
1,532,050
CONSUMER PRODUCTS-0.2%
Marker International * 28,200 172,725
DRUGS, HOSPITAL SUPPLIES, MEDICAL
SERVICES & PRODUCTS-2.6%
Centocor, Inc. * 8,600 213,925
Geltex Pharmaceuticals, Inc. * 23,900 292,775
Healthsouth Corp. * 26,868 816,115
Medimmune, Inc. * 10,700 147,125
National Surgery Centers, Inc. * 12,600 322,875
Neurex Corp. * 12,900 180,600
Veterinary Centers America, Inc. * 17,900 315,488
------------
2,288,903
ENTERTAINMENT & LEISURE TIME-0.3%
Heritage Media Corp. * 6,400 253,600
FOREST PRODUCTS-0.4%
Buckeye Cellulose Corp. * 14,500 333,500
7
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE GLOBAL SMALL CAP FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $VALUE
- -------------------------------------------------------------------------
RESTAURANTS & LODGING-3.4%
Doubletree Corp. * 6,600 $ 216,150
Extended Stay America, Inc. * 21,800 327,000
Host Marriott Corp. * 79,400 1,042,125
Interstate Hotels Co. * 8,500 193,375
La Quinta Inns, Inc. 33,000 602,250
QPQ Corp. * 16,400 38,950
warrants, expiring 9/22/98* 16,400 4,100
Red Lion Hotels, Inc. * 10,700 247,438
Suburban Lodges America, Inc. * 14,500 288,187
------------
2,959,575
RETAILING-3.7%
Nine West Group, Inc. * 32,100 1,552,838
Office Max, Inc. * 82,800 1,097,100
Santa Isabel, S.A. 7,600 205,200
Williams Sonoma, Inc. * 18,900 368,550
------------
3,223,688
------------
10,764,041
TECHNOLOGY-8.9%
COMMUNICATION & EQUIPMENT-0.9%
Andrew Corp. * 7,250 296,344
TCSI Corp. * 19,550 488,750
------------
785,094
COMMUNICATION SERVICES-0.3%
Vanguard Cellular Systems, Inc. * 13,400 242,875
COMPUTER PERIPHERALS-0.8%
Exabyte Corp. * 19,800 237,600
Storage Technology Corp. * 13,200 447,150
------------
684,750
COMPUTER SOFTWARE & SERVICES-3.3%
Applix, Inc. * 18,800 430,050
Comverse Technology, Inc. * 17,400 537,225
DST Systems, Inc. * 8,600 245,100
Hyperion Software Corp. * 15,100 179,312
Integrated Systems, Inc. * 10,900 335,175
Intersolv, Inc. * 9,700 88,513
Sterling Software, Inc. * 6,300 433,125
Symantec Corp. * 17,500 170,625
Xircom, Inc. * 34,600 441,150
------------
2,860,275
ELECTRONICS-1.3%
BMC Industries, Inc. 15,400 421,575
Harman International Industries, Inc. 9,600 430,800
VLSI Technology, Inc. * 22,700 278,075
------------
1,130,450
TELECOMMUNICATIONS-0.3%
Tadiran Telecommunications, Ltd. * 16,600 257,300
TELEPHONE UTILITY-2.0%
Telephone and Data Systems, Inc. 33,700 1,301,662
United States Cellular Corp. * 16,200 488,025
------------
1,789,687
------------
7,750,431
ENERGY-4.4%
DOMESTIC PRODUCERS-1.0%
Diamond Shamrock, Inc. * 30,400 843,600
INTERNATIONAL PRODUCERS-0.0%
XCL, Ltd. * 110,000 27,500
OIL & GAS SERVICES-3.4%
Diamond Offshore Drilling, Inc. * 22,052 1,041,957
Global Marine, Inc. * 31,800 425,325
Noble Drilling Corp. * 52,500 721,875
Rowan Cos., Inc. * 54,200 779,125
------------
2,968,282
------------
3,839,382
8
ALLIANCE GLOBAL SMALL CAP FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $VALUE
- -------------------------------------------------------------------------
FINANCIAL SERVICES-0.9%
INSURANCE-0.7%
20th Century Industries, Inc. * 26,300 $ 394,500
Riscorp, Inc. * 22,900 246,175
------------
640,675
MISCELLANEOUS-0.2%
Onyx Acceptance Corp. * 14,100 155,100
------------
795,775
Total United States Investments
(cost $34,358,479) 33,951,166
FOREIGN INVESTMENTS-55.9%
ARGENTINA-0.2%
Quilmes Industrial Quinsa S.A. (ADR) 14,300 137,638
Beverages
AUSTRALIA-2.1%
AAPC, Ltd. 300,000 185,629
Hotels
Boral, Ltd. 40,000 96,218
Building Materials
Brambles Industries, Ltd. 20,000 275,350
Business Services
Cochlear, Ltd. (a) 123,100 309,440
Medical Devices
Coles Myer, Ltd. 70,000 240,390
Retail
Fai Life, Ltd. 90,000 54,297
Insurance
Oil Search, Ltd. 200,000 201,098
Oil
Plutonic Resources 20,000 86,472
Metals & Mining
Spectrum Network (a)* 480,000 267,306
Telecommunications
WMC, Ltd. 15,000 99,776
Metals & Mining
------------
1,815,976
AUSTRIA-0.6%
Austria Mikro Systeme International AG (a) 1,060 83,384
Semi-Conductors
Benckiser-Wasser-Technik AG 1,200 149,761
Chemicals
OMV AG 3,000 278,877
Oil-International
------------
512,022
CANADA-2.6%
Accugraph Corp. * 17,000 23,494
Computer Software
Alumax, Inc. * 13,000 398,125
Metals & Mining
Architel Systems Corp. (a)* 14,400 85,889
Computer Software & Services
Cinar Films, Inc. Cl. B (ADR) * 5,000 118,750
Entertainment & Leisure
Intelcom Group, Inc. 7,400 142,450
Telecommunications
Intelcom Group, Inc. (b) * 18,461 355,374
Telecommunications
Istar Internet, Inc. (a) * 17,500 54,863
Computer Software & Services
Loewen Group, Inc. 26,600 713,213
Business Services
Nelvana, Ltd. (a) * 12,000 200,757
Entertainment & Leisure
Prime Resources Group, Inc. 5,000 37,096
Mining & Metals
Renaissance Energy, Ltd. * 4,000 101,978
Oil & Gas Exploration
Royal Plastics Group, Ltd. (a) * 5,000 72,374
Building Materials
------------
2,304,363
9
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE GLOBAL SMALL CAP FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $VALUE
- -------------------------------------------------------------------------
CHILE-0.5%
Banco Santander (ADR) 11,000 $ 143,000
Banks
Empresas Telex Chile S.A. (ADR) 34,000 238,000
Telephone Utility
Enersis S.A. Sponsored (ADR) 3,000 91,500
Utility / Electric
------------
472,500
DENMARK-1.2%
Carli Gry International AS (a) * 8,700 290,356
Textile Products
Novo Nordisk AS 2,450 354,611
Drugs
Scandinavian Mobility Intl. (a) * 18,400 336,132
Medical Products
Tele Danmark AS 2,000 93,097
Utility / Telephone
------------
1,074,196
FINLAND-0.9%
Kone Corp. * 10,000 260,730
Machinery
Nokia AB OY Corp. pfd. (a) 12,000 422,516
Communication Equipment
OY Tamro AB 15,000 91,924
Pharmaceutical Distribution
------------
775,170
FRANCE-1.2%
Alcatel Alsthom (Cie Gen. de Electricite) 2,000 163,734
Electrical Equipment
Business Objects S.A. (ADR) * 14,200 273,350
Computer Software & Services
Casino Guichard Perrachon 1,200 48,039
Retail
Coflexip S.A. (ADR) * 7,700 140,525
Oil & Gas Services
Credit Local de France 2,000 166,056
Banks
Lafarge Coppee 2,200 131,976
Building Materials
Michelin 2,000 90,795
Tire & Rubber
------------
1,014,475
GERMANY-2.1%
Adidas AG (a) 2,000 156,229
Apparel
Apcoa Parking AG (a) 1,600 157,587
Business Services
Bayer AG 3,000 100,869
Chemicals
Duerr Beteiliqunqs AG 100 34,642
Machinery
Fag Kugelfischer 300 39,533
Industrial Machinery
Fielmann AG pfd. 13,000 543,065
Retail
Hach AG 50 19,257
Retail
Mannesmann AG 500 179,493
Machinery
Rheinhold & Mahla AG 300 28,529
Building & Related
SGL Carbon AG (a) 4,000 440,701
Specialty Chemical
Veba AG (c) 2,000 101,820
Utility / Electric
------------
1,801,725
GREECE-0.2%
Ote SA 10,000 164,699
Utility / Telephone
HONG KONG-0.4%
Ek Chor China Motorcycle Co. 2,000 22,250
Motorcycles
Fu Hui Jewelry Co., Ltd. * 200,000 5,690
Jewelry & Watches
10
ALLIANCE GLOBAL SMALL CAP FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $VALUE
- -------------------------------------------------------------------------
HSBC Holdings Plc. 10,000 $ 159,699
Banks
Paul Y.-ITC Construction Holdings, Inc. 600,000 148,190
warrants, expiring 3/31/97* 60,000 1,435
warrants, expiring 3/31/98* 60,000 1,490
Building & Construction
------------
338,754
INDIA-0.1%
Gujarat Narmada Valley Fertilizers Co.,
Ltd. (GDR) (a) * 4,000 21,237
Chemicals
Shriram Industrial Enterprises,
Ltd. (GDR) (a) * 15,000 50,625
Consumer Appliances
------------
71,862
INDONESIA-0.1%
Indonesian Satellite Corp. (ADR) 4,000 122,000
Telecommunications
IRELAND-0.5%
Crean (James) Plc. 55,000 212,164
Multi-Industry
Irish Continental Group 21,500 191,281
Transportation & Shipping
------------
403,445
ITALY-2.0%
Fila Holding Sponsored (ADR) 5,000 403,125
Apparel
Industrie Natuzzi S.p.A. (ADR) 16,600 751,150
Household Products
Mediaset * 109,200 493,183
Broadcasting & Cable
Telecom Italia 40,000 83,682
Utility / Telephone
------------
1,731,140
JAPAN-17.5%
Asahi Diamond Industrial 14,420 174,248
Machinery
Asatsu, Inc. 3,500 144,256
Professional Services
Bank Of Tokyo - Mitsubishi, Ltd. 1,250 26,345
Banks
Bridgestone Metalpha Corp. 1,000 12,739
Automobile Related
Canon, Inc. 24,000 454,124
Office Equipment
Credit Saison Co. 5,700 138,289
Financial Services
Daibiru Corp. 8,000 105,663
Real Estate
Daiichi Corp. 2,000 56,016
Recycling Equipment
Daimon Co. 3,000 140,228
Retail
Daiseki Co. 2,000 55,267
Pollution Control
DDI Corp. 37 299,105
Telecommunications
Doshisha Co. 600 20,289
Retail
Eiden Sakakiya Co. 6,000 80,371
Retail
Fujikura 22,000 174,755
Building Materials
Fujitsu Electronics 2,000 17,779
Technology
Hachijuni Bank 5,000 52,925
Banks
Hirose Electric Co. 3,500 209,498
Technology
Hitachi Metals, Ltd. 16,000 166,362
Steel
Hitachi Plant Engineering & Construction Co. 15,000 120,135
Engineering & Construction
11
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE GLOBAL SMALL CAP FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $VALUE
- -------------------------------------------------------------------------
Hokushin Co. 300 $ 3,260
Building Materials
Home Wide Corp. 1,000 13,957
Retail
Honda Motor Co. 18,000 435,015
Automobiles
Hoya Corp. 7,000 212,449
Technology
Isetan Co. 10,000 148,939
Retail
Ishihara Sangyo * 30,000 107,068
Chemicals
Japan Industrial Land Development 2,200 68,006
Building & Construction
Kajima Corp. 5,000 47,773
Building & Construction
Kaneshita Construction 8,000 94,422
Building & Construction
Kawasaki Kisen * 11,000 32,148
Transportation
Keyence Corp. 1,200 153,998
Machinery
King Co. 18,000 127,469
Apparel
Koa Fire & Marine 10,000 62,292
Insurance
Makino Milling 10,000 93,204
Industrial Machinery
Matsuda Sangyo 3,000 104,257
Environmental Services
Matsushita Electrical Industrial Co., Ltd. 7,000 121,962
Appliances
Meitec Corp. 14,000 329,165
Software Services
Minebea Co. 22,000 179,289
Machinery
Ministop Co. 1,000 28,945
Retail-Food
Mitsubishi Corp. 20,000 252,916
Diversified
Mitsubishi Estate 16,000 209,826
Real Estate
Mitsubishi Heavy Industries 90,000 762,962
Industrial Machinery
Mitsui Home Co. 3,000 49,178
Homebuilders
Namco 6,200 202,108
Leisure Related
Namura Shipbuilding 12,000 58,452
Machinery
Nanno Construction 8,000 92,923
Building & Construction
NEC Corp. 12,000 125,896
Technology
New Oji Paper Co., Ltd. 7,000 61,177
Paper & Forest Products
Nichiei Co. 5,800 377,050
Financial Services
Nichiha Corp. 5,400 105,213
Building Materials
Nikon Corp. 8,000 91,424
Semi-Conductors
Nintendo Corp. Ltd. 1,500 105,100
Leisure Related
Nippon Electric Glass Co., Ltd. 16,000 272,774
Chemicals
Nippon Kanzai Co. 200 6,257
Building & Construction
Nippon Paper Industries Co. 10,000 64,447
Paper
Nippon TV Network 900 280,736
Broadcasting
Nireco Corp. 9,000 158,494
Machinery
Nissen Corp., Ltd. 2,300 25,207
Retail
Nitta Corp. 7,000 127,863
Machinery
Nitto Kohki Co. 4,600 205,105
Machinery
Noritsu Koki Co. 4,000 206,454
Photography
12
ALLIANCE GLOBAL SMALL CAP FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $VALUE
- -------------------------------------------------------------------------
Ohmoto Gumi Co. 4,400 $ 83,256
Building & Construction
Oie Sangyo Co., Ltd. 3,000 48,054
Food
Omron Corp. 20,000 367,196
Machinery
Oriental Construction 4,300 72,502
Building & Construction
Paris Miki, Inc. 4,700 212,206
Retailing
Promise Co., Ltd. 1,500 72,081
Financial Services
PS Corp. 8,000 155,871
Building & Construction
Renown Inc. * 30,000 111,564
Apparel
Rohm Co., Ltd. 4,000 239,801
Technology
Sankyo Co. 4,000 103,789
Drugs
Santen Pharmaceutical Co. 5,200 126,645
Drugs
Sanyo Electric Co. 30,000 165,800
Appliances
Sanyo Pax Co. 9,500 203,784
Packaging
Sanyo Shinpan Finance Co., Ltd. 2,500 162,990
Financial Services
Sato Corp. 6,000 140,509
Technology
Sekisui Chemical Co. 14,000 162,615
Chemicals
Seven Eleven Japan 1,200 76,100
Retail-Food
Shin-Etsu Chemical Co., Ltd. 3,000 53,112
Chemicals
Sho Bond Corp. 5,500 200,412
Building & Construction
SMC Corp. 4,200 326,542
Industrial Machinery
Sodick Co. * 25,000 259,941
Industrial Machinery
Sumitomo Forestry 6,000 94,422
Forest Products
Sumitomo Metal Industries 95,000 285,654
Steel
Taisho Pharmaceutical Co. 8,000 172,357
Drugs
Takeda Chemical Industries 5,000 87,584
Drugs
TDK Corp. 2,000 115,966
Technology
Tokyo Broadcasting 17,000 278,676
Broadcasting
Tokyo Electron, Ltd. 9,000 253,759
Semi-Conductors
Toso Co., Ltd. 10,000 158,306
Household Furnishings
Warabeya Nichiyo 3,000 41,310
Food
Wesco, Inc.* 4,680 90,308
Building & Construction
Xebio Co. 1,600 62,348
Retail
Yamaha Corp. 10,000 157,370
Leisure Related
Yamaichi Securities Co. 35,000 229,170
Financial Services
Yamanouchi Pharmaceutical 12,000 263,032
Drugs
Yamato Transport 45,000 526,907
Transportation
Yaskawa Electric Corp. * 28,000 127,994
Machinery
Yokogawa Electric 35,000 327,854
Electrical Equipment
------------
15,271,361
KOREA-0.6%
Korea Mobile Telecommunications Corp. (ADR) * 31,000 519,250
Telecommunications
13
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE GLOBAL SMALL CAP FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $VALUE
- -------------------------------------------------------------------------
LUXEMBOURG-1.0%
Millicom International Cellular, S.A. * 21,700 $ 840,875
Telecommunications
MALAYSIA-0.9%
Austral Enterprise 6,333 11,977
Multi-Industry
C.I. Holdings Berhad 8,000 29,169
Building Materials
Highlands & Lowlands 10,000 16,748
Real Estate
Hong Leong Bank Berhad 30,000 77,530
Banks
Kim Hin Industry 70,000 126,773
Building Materials
Malaysian Assurance 11,750 61,203
Insurance
Pacific & Orient 50,000 130,219
Insurance
Road Builder (M) Holdings Bhd 30,000 125,010
Building & Construction
Sriwani Holdings Bhd 100,000 160,269
Retailing
Star Publications 20,000 64,108
Printing & Publishing
------------
803,006
MEXICO-0.3%
Bufete Industrial S.A. (ADR) * 700 11,112
Engineering & Construction
Grupo Industrial Durango, S.A. (ADR) * 15,000 159,375
Paper & Forest Products
International de Ceramica * 34,915 43,555
Ceramic Tiles
------------
214,042
NETHERLANDS-3.1%
Aegon N.V. 18,000 825,808
Insurance
BAM Groep N.V. 800 46,968
Building & Construction
Content Beheer N.V. 5,000 172,497
Temporary Help
Elsevier N.V. 25,000 379,797
Printing & Publishing
Fortis Amev N.V. 10,000 286,890
Insurance
IHC Caland N.V. 4,000 196,102
Machinery
KLM Royal Dutch Airlines 9,000 283,803
Airlines
Kon Ptt Nederland 5,000 176,432
Telephone Utility
Nutricia Verenigde Bedrijuen (a) 1,300 138,639
Food
Philips Electronic 5,000 165,840
Appliances
------------
2,672,776
NEW ZEALAND-0.4%
Fisher & Paykel Industries 10,000 31,582
Consumer Appliances
Helicopter Line 50,000 97,228
Leisure Related
Lion Nathan, Ltd. 40,000 105,364
Beverages
Warehouse Group 62,500 105,589
Retail
------------
339,763
NORWAY-1.5%
Fokus Bank 6,000 34,200
Banks
Hafslund ASA 4,000 26,066
Utility / Electric
Merkantildata 5,000 62,416
Computer Software
Nycomed * 4,000 56,842
Medical Supplies
Sparebanken NOR 8,000 200,361
Banks
14
ALLIANCE GLOBAL SMALL CAP FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $VALUE
- -------------------------------------------------------------------------
Tomra Systems AS 75,000 $ 818,482
Environmental Services
Western Bulk Shipping AS (a) 26,000 122,478
Shipping
------------
1,320,845
PANAMA-1.1%
Banco Latinoamericano de Exportaciones, S.A. 18,200 932,750
Financial Services
PERU-0.7%
Banco Wiese Sponsored (ADR) 15,000 106,875
Banks
Telefonica del Peru S.A. (ADR)* 24,300 531,563
Telecommunications
------------
638,438
PHILIPPINES-0.6%
Alsons Cement * 500,000 195,574
Building Materials
Asian Terminals, Inc. 400,000 100,744
Shipping
International Container 400,000 240,412
Shipping
------------
536,730
PORTUGAL-0.0%
TVI Televisas Independente (b)* 7,800 23,649
Broadcasting & Cable
SINGAPORE-1.2%
City Developments 40,000 300,049
Real Estate
Fraser & Neave, Ltd. 40,000 401,953
Beverages
Lim Kah Ngam, Ltd. 30,000 28,873
Multi-Industry
Overseas Union Bank, Ltd. 23,000 136,721
Banks
Singapore Airlines, Ltd. 20,000 200,977
Airlines
------------
1,068,573
SOUTH KOREA-0.4%
Samsung Electronics, Co., Ltd. (GDR)(a) 8,385 202,078
bonus shares (a) * 837 42,687
bonus shares (a) * 2,779 66,974
Technology
------------
311,739
SPAIN-1.9%
Aguas de Barcelona (c) 1,200 47,258
Water Utility
Banco Popular Esp 700 120,973
Banks
Centros Commerciales Continente, S.A.* 5,000 117,668
Retail
Construcciones Y Aux de Ferr 2,000 72,871
Railroad Transportation
Corporacion Mapfre 4,952 217,302
Insurance
Gas Y Electricidad 9,000 476,646
Utility / Electric
Hidroel Cantabrico 2,000 63,951
Utility / Electric
Iberdrola II S.A. 20,000 182,376
Utility / Electric
Repsol S.A. 5,000 168,040
Energy
Telefonica de Espana 6,000 104,647
Telephone Utility
Viscofan Envolturas Celulosi 4,000 53,518
Food
------------
1,625,250
15
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE GLOBAL SMALL CAP FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $VALUE
- -------------------------------------------------------------------------
SWEDEN-2.4%
Autoliv AB 5,000 $ 142,157
Automobile Related
Autoliv AB Sponsored (ADR) (a) 7,800 221,916
Automobile Related
Dahl International AB * 20,500 303,823
Building Materials
Kalmar Industries AB (a) 16,000 313,351
Machinery
Netcom Systems AB (a) * 22,000 224,578
Telecommunications
SKF AB 25,000 516,076
Machinery
Sparbanken Sverige (a) 8,000 96,183
Banks
Swedish Match * 80,000 235,920
Tobacco
------------
2,054,004
SWITZERLAND-1.1%
BBC Brown Boveri AG 300 355,299
Electrical Equipment
Roche Holdings AG, Ltd. 60 442,496
Drugs
Sandoz AG 140 156,218
Drugs
------------
954,013
TAIWAN-0.1%
The Taiwan Fund, Inc. 5,000 110,000
Mutual Funds
THAILAND-1.0%
CMIC Finance & Security Public Co. 110,000 257,091
Financial Services
Nawarat Patanakarn 20,000 48,328
Building & Construction
Thai Engine Manufacturing 50,000 435,747
Machinery
Total Access Communication (a) 20,000 143,000
Communication Services
884,166
TURKEY-0.0%
Netas Telekomunik Ord. Cl.B (a) 215,600 45,933
Communication Equipment
UNITED KINGDOM-5.4%
Asda Group Plc. 20,000 35,698
Retailing
Automated Security Holdings Plc. * 120,008 69,067
Business Services
Barclays Plc. 14,000 177,477
Banks
British Airways Plc 25,000 204,153
Airlines
Caird Group * 3,000 17,592
Environmental Services
Carlton Communications Plc. 10,000 71,317
Broadcasting
Filtronic Comtec Plc. 100,000 365,531
Communication Equipment
Grand Metropolitan Plc 10,000 67,584
Food
Guinness 40,000 287,448
Beverages
Harvey Nichols Group Plc. (a)* 73,400 357,924
Retail
M.S. International Plc. 325,000 121,325
Machinery
McBride (a) 30,000 61,129
Household Products
Mid-States Plc * 250,000 159,434
Automobile Related
Mirror Group Plc 25,000 72,717
Newspapers
Misys Plc. 10,000 118,992
Computer Software & Services
Mowlem (John) & Co. Plc 220,000 285,737
Building & Construction
16
ALLIANCE GLOBAL SMALL CAP FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $VALUE
- -------------------------------------------------------------------------
Pace Micro Tech * 110,000 $ 300,280
Technology
Powerscreen International Plc. 44,000 340,831
Recycling Equipment
Railtrack Group Plc (a) (ADR)* 670 22,881
Transportation-Shipping
Rank Organisation 10,000 74,817
Entertainment & Leisure
Rentokil Group 50,000 302,535
Environmental Services
Resort Hotels Plc (b) * 1,000,000 -0-
Restaurants & Lodging
Siebe Plc. 12,000 164,256
Machinery
Tate & Lyle Plc 20,000 144,346
Food
Tomkins 35,000 137,191
Diversified
Vodafone Group Plc 50,000 178,488
Telecommunications
WPP Group 70,000 225,385
Advertising
Zeneca Group Plc 16,000 346,181
Drugs
------------
4,710,316
PRINCIPAL
AMOUNT
COMPANY (000) U.S. $VALUE
- -------------------------------------------------------------------------
Total Foreign Investments
(cost $46,004,105) $48,617,444
Total Common Stocks & Other Investments
(cost $80,362,584) 82,568,610
COMMERCIAL PAPER-5.9%
American Express Co.
5.28%, 8/02/96 $3,000 2,999,560
Ford Motor Credit Corp.
5.31%, 8/06/96 305 304,775
Prudential Funding
5.26%, 8/05/96 1,060 1,059,380
5.30%, 8/05/96 785 784,538
Total Commercial Paper
(amortized cost $5,148,253) 5,148,253
TOTAL INVESTMENTS -100.8%
(cost $85,510,837) 87,716,863
Other assets less liabilities-(0.8%) (727,107)
NET ASSETS-100% $86,989,756
* Non-income producing security.
(a) Securities are exempt from registration under Rule 144A of the Securities
Act of 1933. These may be resold in transactions exempt from registration,
normally to qualified institutional buyers. At July 31, 1996, these securities
amounted to $5,009,147 representing 5.8% of net assets.
(b) Illiquid security, valued at fair market value (see Notes A and E).
(c) Warrants attached, expiring August 8, 1996.
Glossary of Terms:
ADR - American Depository Receipt
GDR - Global Depository Receipt
GDS - Global Depository Share
See notes to financial statements.
17
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1996 ALLIANCE GLOBAL SMALL CAP FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $85,510,837) $87,716,863
Cash, at value (cost $377,402) 381,244
Receivable for investment securities and foreign currency sold 653,118
Receivable for capital stock sold 233,974
Dividends and interest receivable 32,512
Foreign taxes receivable 25,577
Total assets 89,043,288
LIABILITIES
Payable for investment securities and foreign currency purchased 742,495
Unclaimed dividends 634,139
Unrealized depreciation of forward exchange currency contracts 234,070
Payable for capital stock redeemed 121,901
Management fee payable 75,846
Distribution fee payable 33,700
Accrued expenses 211,381
Total liabilities 2,053,532
NET ASSETS $86,989,756
COMPOSITION OF NET ASSETS
Capital stock, at par $ 75,731
Additional paid-in capital 72,262,656
Accumulated net realized gain on investments and foreign
currency transactions 12,674,051
Net unrealized appreciation of investments and foreign
currency denominated assets and liabilities 1,977,318
$86,989,756
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share ($68,623,378/
5,908,426 shares of capital stock issued and outstanding) $11.61
Sales charge-4.25% of public offering price .52
Maximum offering price $12.13
CLASS B SHARES
Net asset value and offering price per share ($14,247,210/
1,291,853 shares of capital stock issued and outstanding) $11.03
CLASS C SHARES
Net asset value and offering price per share ($4,119,168/
372,853 shares of capital stock issued and outstanding) $11.05
See notes to financial statements.
18
STATEMENT OF OPERATIONS
YEAR ENDED JULY 31, 1996 ALLIANCE GLOBAL SMALL CAP FUND
_______________________________________________________________________________
INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $89,314) $675,843
Interest 328,246 $ 1,004,089
EXPENSES
Management fee 772,166
Distribution fee - Class A 197,902
Distribution fee - Class B 87,676
Distribution fee - Class C 24,818
Custodian 321,779
Transfer agency 215,149
Administrative 146,488
Audit and legal 89,391
Printing 65,281
Registration 52,733
Directors' fees 32,000
Miscellaneous 10,967
Total expenses 2,016,350
Net investment loss (1,012,261)
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY
Net realized gain on investments 15,991,254
Net realized gain on foreign currency transactions 938,616
Net change in unrealized appreciation of investments (4,647,179)
Net change in unrealized depreciation of foreign
currency denominated assets and liabilities (78,971)
Net gain on investments and foreign currency transactions 12,203,720
NET INCREASE IN NET ASSETS FROM OPERATIONS $11,191,459
See notes to financial statements.
19
STATEMENTS OF CHANGES IN NET ASSETS ALLIANCE GLOBAL SMALL CAP FUND
_______________________________________________________________________________
YEAR ENDED YEAR ENDED
JULY 31, JULY 31,
1996 1995
------------ ------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment loss $(1,012,261) $ (794,248)
Net realized gain on investments and foreign
currency transactions 16,929,870 7,789,167
Net change in unrealized appreciation/
depreciation of investments and foreign
currency denominated assets and liabilities (4,726,150) 2,436,403
Net increase in net assets from operations 11,191,459 9,431,322
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gain on investments
Class A (2,964,670) (10,605,411)
Class B (331,138) (885,298)
Class C (74,101) (257,942)
Tax return of capital
Class A -0- (679,545)
Class B -0- (56,726)
Class C -0- (16,528)
CAPITAL STOCK TRANSACTIONS
Net increase 12,540,287 3,106,523
Total increase 20,361,837 36,395
NET ASSETS
Beginning of year 66,627,919 66,591,524
End of year $86,989,756 $66,627,919
See notes to financial statements.
20
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1996 ALLIANCE GLOBAL SMALL CAP FUND
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Global Small Cap Fund, Inc., (the "Fund"), is registered under the
Investment Company Act of 1940 as a diversified, open-end management investment
company. The Fund offers Class A, Class B and Class C shares. Class A shares
are sold with a front-end sales charge of up to 4.25%. Class B shares are sold
with a contingent deferred sales charge which declines from 4.00% to zero
depending on the period of time the shares are held. Class B shares will
automatically convert to Class A shares eight years after the end of the
calendar month of purchase. Class C shares were sold without an initial or
contingent deferred sales charge. However, Class C shares purchased on or after
July 1, 1996, are subject to a contingent deferred sales charge of 1% on
redemptions made within the first year after purchase. All three classes of
shares have identical voting, dividend, liquidation and other rights, except
that each class bears different distribution expenses and has exclusive voting
rights with respect to its distribution plan. The following is a summary of
significant accounting policies followed by the Fund.
1. SECURITY VALUATION
Securities traded on United States or foreign securities exchanges are valued
at the last reported sales price, or, if no sale occurred, at the mean of the
bid and asked price. Securities listed or traded on certain foreign exchanges
whose operations are similar to the U.S. over-the-counter market are valued at
the closing bid price. Debt securities are valued at the mean of the bid and
asked price except that debt securities maturing within 60 days are valued at
amortized cost, which approximates market value. Securities for which current
market quotations are not readily available (including investments which are
subject to limitations as to their sale) are valued at their fair value as
determined in good faith by the Board of Directors. The values of foreign
securities quoted in foreign currencies are translated into U.S. dollars at the
current rate of exchange at July 31, 1996.
2. CURRENCY TRANSLATION
Assets and liabilities denominated in foreign currencies and commitments under
forward currency exchange contracts are translated into U.S. dollars at the
mean of the quoted bid and asked price of such currencies against the U.S.
dollar. Purchases and sales of portfolio securities are translated at the rates
of exchange prevailing when such securities were acquired or sold. Income and
expenses are translated at rates of exchange prevailing when accrued.
Net realized gain on foreign currency transactions represents net foreign
exchange gains from holding of foreign currencies, currency gains or losses
realized between the trade and settlement dates on foreign security
transactions, and the difference between the amounts of dividends, interest and
foreign taxes recorded on the Fund's books and the U.S. dollar equivalent
amounts actually received or paid.
Net currency gains or losses from valuing foreign currency denominated assets
and liabilities at period end exchange rates are reflected as a component of
net change in unrealized depreciation of foreign currency denominated assets
and liabilities.
3. INVESTMENT INCOME AND SECURITY TRANSACTIONS
Dividend income is recorded on the ex-dividend date. Interest income is accrued
daily. Security transactions are accounted for on the date the securities are
purchased or sold. Security gains and losses are determined on the identified
cost basis.
4. TAXES
It is the Fund's policy to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if applicable, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
5. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex-dividend
date and are determined in accordance with income tax regulations.
6. RECLASSIFICATION OF NET ASSETS
As of July 31, 1996, the Fund reclassified certain components of net assets.
The reclassification resulted in a net increase of $1,012,261 to undistributed
net investment income, and net decreases to accumulated net realized gain on
investments and foreign currency transactions of $7,970 and to additional paid
in capital of $1,004,291.
21
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE GLOBAL SMALL CAP FUND
_______________________________________________________________________________
These reclassifications were the result of permanent book and tax differences,
primarily resulting from the Fund's net operating loss and certain foreign
currency gains. These reclasses had no effect on net investment income, net
realized gains and net assets.
NOTE B: MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Under an investment advisory agreement the Fund pays Alliance Capital
Management L.P., (the "Adviser"), a management fee at an annual rate of 1% of
the average daily net assets of the Fund. The fee is accrued daily and paid
monthly.
The Manager has agreed to reimburse the Fund to the extent that its aggregate
annual expenses (exclusive of interest, taxes, brokerage, distribution fees,
foreign custody charges and extraordinary expenses) exceed the limits
prescribed by any state in which the Fund's shares are qualified for sale.
The Manager believes that the most restrictive expense ratio limitation imposed
by any state is 2.5% of the first $30 million of its average daily net assets,
2% of the next $70 million of its average daily net assets and 1.5% of its
average daily net assets in excess of $100 million. No reimbursement was
required for the year ended July 31, 1996. Pursuant to the management
agreement, the Fund paid $146,488 to the Manager representing the cost of
certain legal and accounting services provided to the Fund by the Manager for
the year ended July 31, 1996.
The Fund compensates Alliance Fund Services, Inc. (a wholly-owned subsidiary of
the Manager) in accordance with a Services Agreement for providing personnel
and facilities to perform transfer agency services for the Fund. Such
compensation amounted to $168,984 for the year ended July 31, 1996.
Alliance Fund Distributors, Inc. (a wholly-owned subsidiary of the Manager)
serves as the Distributor of the Fund's shares. The Distributor received
front-end sales charges of $8,247 from the sale of Class A shares and $11,791
in contingent deferred sales charges imposed upon redemptions by shareholders
of Class B shares for the year ended July 31, 1996.
Brokerage commissions paid on securities transactions for the year ended July
31, 1996 amounted to $455,996, none of which was paid to brokers utilizing the
services of the Pershing Division of Donaldson, Lufkin & Jenrette Securities
Corp. ("DLJ"), an affiliate of the Manager, nor to DLJ directly.
NOTE C: DISTRIBUTION SERVICES AGREEMENT
The Fund has adopted a Distribution Services Agreement (the "Agreement")
pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the
Agreement, the Fund pays a distribution fee to the Distributor at an annual
rate of up to .30% of the Fund's average daily net assets attributable to Class
A shares and 1% of the average daily net assets attributable to both Class B
and Class C shares. The Agreement provides that the Distributor will use such
payments in their entirety for distribution assistance and promotional
activities. The Distributor has incurred expenses in excess of the distribution
costs reimbursed by the Fund in the amount of $1,345,113, and $442,584 for
Class B and C shares, respectively; such costs may be recovered from the Fund
in future periods so long as the Agreement is in effect. In accordance with the
Agreement, there is no provision for recovery of unreimbursed distribution
costs, incurred by the Distributor, beyond the current fiscal year for Class A
shares. The Agreement also provides that the Manager may use its own resources
to finance the distribution of the Fund's shares.
NOTE D: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments)
aggregated $111,058,934 and $100,770,120, respectively, for the year ended July
31, 1996. There were no purchases or sales of U.S. Government and government
agency obligations for the year ended July 31, 1996.
22
ALLIANCE GLOBAL SMALL CAP FUND
_______________________________________________________________________________
FORWARD EXCHANGE CURRENCY CONTRACTS
The Fund enters into forward exchange currency contracts in order to hedge its
exposure to changes in foreign currency exchange rates on its foreign portfolio
holdings and to hedge certain firm purchase and sale commitments denominated in
foreign currencies. A forward exchange currency contract is a commitment to
purchase or sell a foreign currency at a future date at a negotiated forward
rate. The gain or loss arising from the difference between the original
contracts and the closing of such contracts is included in net realized gain or
loss on foreign currency transactions.
Fluctuations in the value of forward exchange currency contracts are recorded
for financial reporting purposes as unrealized gains or losses by the Fund.
Risks may arise from the potential inability of a counterparty to meet the
terms of a contract and from unanticipated movements in the value of a foreign
currency relative to the U.S. dollar. The face or contract amount, in U.S.
dollars, as reflected in the following table, reflects the total exposure the
Fund has in that particular currency contract.
At July 31, 1996, the Fund had outstanding forward exchange currency contracts,
both to purchase and sell foreign currencies against the U.S. dollar, as
follows:
<TABLE>
<CAPTION>
CONTRACT VALUE ON U.S. $ UNREALIZED
AMOUNT ORIGINATION CURRENT APPRECIATION
(000) DATE VALUE (DEPRECIATION)
-------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
FOREIGN CURRENCY BUY CONTRACTS
Japanese Yen, expiring 11/12/96 173,000 $1,636,862 $1,644,901 $ 8,039
FOREIGN CURRENCY SALE CONTRACTS
Deutsche Mark, expiring 9/20/96 2,500 1,643,439 1,703,316 (59,877)
Japanese Yen, expiring 11/12/96 355,000 3,273,398 3,375,376 (101,978)
Netherland Guilder, expiring 9/20/96 4,400 2,592,047 2,672,301 (80,254)
----------
$(234,070)
</TABLE>
At July 31, 1996, the cost of investments for federal income tax purposes was
$85,617,099. Accordingly, gross unrealized appreciation of investments was
$9,446,338 and gross unrealized depreciation of investments was $7,346,574,
resulting in net unrealized appreciation of $2,099,764.
NOTE E: ILLIQUID SECURITIES
DATE ACQUIRED COST
------------- ------------
Intelcom Group, Inc. 7/8/96 $ 283,503
Resort Hotels Plc. 5/1/92 719,086
TVI Televisao Independente 10/24/94 56,543
----------
$1,059,132
The securities shown above are restricted as to sale and have been valued at
fair value in accordance with the procedures described in Note A. The value of
these securities at July 31, 1996 was $379,023, representing 0.4% of net assets.
23
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE GLOBAL SMALL CAP FUND
_______________________________________________________________________________
NOTE F: CAPITAL STOCK
There are 62,500,000 shares of $.01 par value capital stock authorized, divided
into three classes, designated Class A, Class B and Class C shares. Class A and
Class C each consist of 25,000,000 authorized shares and Class B consists of
12,500,000 authorized shares. Transactions in capital stock were as follows:
Shares Amount
-------------------------- ------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
JULY 31,1996 JULY 31,1995 JULY 31,1996 JULY 31,1995
------------ ------------ -------------- --------------
CLASS A
Shares sold 666,687 391,760 $ 7,703,615 $ 3,971,546
Shares issued in
reinvestment of
distributions 214,027 952,163 2,238,721 8,217,164
Shares converted
from Class B 29,137 -0- 365,303 -0-
Shares redeemed (788,775) (1,095,655) (8,976,608) (10,827,369)
Net increase 121,076 248,268 $ 1,331,031 $ 1,361,341
CLASS B
Shares sold 1,035,693 287,247 $11,503,034 $ 2,886,684
Shares issued in
reinvestment of
distributions 21,596 75,995 215,523 631,516
Shares converted to
Class A (30,676) -0- (365,303) -0-
Shares redeemed (253,960) (204,792) (2,731,200) (1,961,914)
Net increase 772,653 158,450 $ 8,622,054 $ 1,556,286
CLASS C
Shares sold 501,624 136,839 $ 5,589,123 $ 1,295,724
Shares issued in
reinvestment of
distributions 4,299 15,861 42,946 131,935
Shares redeemed (274,347) (134,697) (3,044,867) (1,238,763)
Net increase 231,576 18,003 $ 2,587,202 $ 188,896
24
FINANCIAL HIGHLIGHTS ALLIANCE GLOBAL SMALL CAP FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Class A
-----------------------------------------------------------------------------
OCTOBER 1,
1993
YEAR ENDED JULY 31, TO YEAR ENDED SEPTEMBER 30,
------------------------- JULY 31, ------------------------------------
1996 1995 1994(E) 1993 1992 1991
------------ ----------- ------------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.38 $11.08 $11.24 $9.33 $10.55 $8.26
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (.14)(a) (.09) (.15)(a) (.15) (.16) (.06)
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions 1.90 1.50 (.01) 2.49 (1.03) 2.35
Net increase (decrease) in net asset
value from operations 1.76 1.41 (.16) 2.34 (1.19) 2.29
LESS: DISTRIBUTIONS
Distributions from net realized gains (.53) (1.99) -0- (.43) (.03) -0-
Tax return of capital -0- (.12) -0- -0- -0- -0-
Net asset value, end of period $11.61 $10.38 $11.08 $11.24 $9.33 $10.55
TOTAL RETURN
Total investment return based on net
asset value (b) 17.46% 16.62% (1.42)% 25.83% (11.30)% 27.72%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $68,623 $60,057 $61,372 $65,713 $58,491 $84,370
Ratios to average net assets of:
Expenses, net of waivers/reimbursements 2.51% 2.54%(c) 2.42%(d) 2.53% 2.34% 2.29%
Net investment loss (1.22)% (1.17)% (1.26)%(d) (1.13)% (.85)% (.55)%
Portfolio turnover rate 139% 128% 78% 97% 108% 104%
</TABLE>
See footnote summary on page 27.
25
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE GLOBAL SMALL CAP FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Class B
------------------------------------------------------------------------------
OCTOBER 1,
1993
YEAR ENDED JULY 31, TO YEAR ENDED SEPTEMBER 30,
------------------------- JULY 31, ------------------------------------
1996 1995 1994(E) 1993 1992 1991
------------ ----------- ------------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $9.95 $10.78 $11.00 $9.20 $10.49 $8.26
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (.20)(a) (.12) (.17)(a) (.15) (.20) (.07)
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions 1.81 1.40 (.05) 2.38 (1.06) 2.30
Net increase (decrease) in net asset
value from operations 1.61 1.28 (.22) 2.23 (1.26) 2.23
LESS: DISTRIBUTIONS
Distributions from net realized gains (.53) (1.99) -0- (.43) (.03) -0-
Tax return of capital -0- (.12) -0- -0- -0- -0-
Net asset value, end of period $11.03 $9.95 $10.78 $11.00 $9.20 $10.49
TOTAL RETURN
Total investment return based on net
asset value (b) 16.69% 15.77% (2.00)% 24.97% (12.03)% 27.00%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $14,247 $5,164 $3,889 $1,150 $819 $121
Ratio to average net assets of:
Expenses, net of waivers/reimbursements 3.21% 3.20%(c) 3.15%(d) 3.26% 3.11% 2.98%
Net investment loss (1.88)% (1.92)% (1.93)%(d) (1.85)% (1.31)% (1.39)%
Portfolio turnover rate 139% 128% 78% 97% 108% 104%
</TABLE>
See footnote summary on page 27.
26
ALLIANCE GLOBAL SMALL CAP FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Class C
--------------------------------------------------------
OCTOBER 1, MAY 3,
1993 1993(F)
YEAR ENDED JULY 31, TO TO
-------------------------- JULY 31, SEPTEMBER 30,
1996 1995 1994(E) 1993
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $9.96 $10.79 $11.00 $9.86
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (.20)(a) (.17) (.17)(a) (.05)
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions 1.82 1.45 (.04) 1.19
Net increase (decrease) in net asset
value from operations 1.62 1.28 (.21) 1.14
LESS: DISTRIBUTIONS
Distributions from net realized gains (.53) (1.99) -0- -0-
Tax return of capital -0- (.12) -0- -0-
Net asset value, end of period $11.05 $9.96 $10.79 $11.00
TOTAL RETURN
Total investment return based on net
asset value (b) 16.77% 15.75% (1.91)% 11.56%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $4,119 $1,407 $1,330 $261
Ratio to average net assets of:
Expenses, net of waivers/reimbursements 3.19% 3.25%(c) 3.13%(d) 3.75%(d)
Net investment loss (1.85)% (2.10)% (1.92)%(d) (2.51)%(d)
Portfolio turnover rate 139% 128% 78% 97%
</TABLE>
(a) Based on average shares outstanding.
(b) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Initial sales charge or contingent
deferred sales charge is not reflected in the calculation of total investment
return. Total investment return calculated for a period of less than one year
is not annualized.
(c) If the Fund had borne all expenses, the expense ratios would have been
2.61%, 3.27%, and 3.31% for Class A, Class B and Class C shares, respectively.
(d) Annualized.
(e) The Fund changed its fiscal year end from September 30 to July 31.
(f) Commencement of distribution.
27
REPORT OF ERNST & YOUNG LLP
INDEPENDENT AUDITORS ALLIANCE GLOBAL SMALL CAP FUND
_______________________________________________________________________________
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
ALLIANCE GLOBAL SMALL CAP FUND, INC.
We have audited the accompanying statement of assets and liabilities of
Alliance Global Small Cap Fund, Inc., including the portfolio of investments,
as of July 31, 1996, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the periods
indicated therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of July
31, 1996, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Alliance Global Small Cap Fund, Inc. at July 31, 1996, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each
of the indicated periods, in conformity with generally accepted accounting
principles.
New York, New York
September 6, 1996
28
