Document/Exhibit Description Pages Size
1: 485BPOS Post-Effective Amendment 304± 1.25M
16: EX-99.11 Miscellaneous Exhibit 1 8K
17: EX-99.16 Miscellaneous Exhibit 2 8K
2: EX-99.1A Miscellaneous Exhibit 12 43K
3: EX-99.1B Miscellaneous Exhibit 2 9K
4: EX-99.1C Miscellaneous Exhibit 3 11K
5: EX-99.1D Miscellaneous Exhibit 4 16K
6: EX-99.1E Miscellaneous Exhibit 7 27K
7: EX-99.2 Miscellaneous Exhibit 27 61K
8: EX-99.5 Miscellaneous Exhibit 5 23K
9: EX-99.6A Miscellaneous Exhibit 13 53K
10: EX-99.6B Miscellaneous Exhibit 2 13K
11: EX-99.6C Miscellaneous Exhibit 6 22K
12: EX-99.6D Miscellaneous Exhibit 6 23K
13: EX-99.8A Miscellaneous Exhibit 32 64K
14: EX-99.8B Miscellaneous Exhibit 2 9K
15: EX-99.9 Miscellaneous Exhibit 30 66K
As filed with the Securities and Exchange
Commission on October 31, 1997
File No. 2-70427
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF l933 X
Pre-Effective Amendment No. X
Post-Effective Amendment No. 29 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF l940
Amendment No. 25 X
ALLIANCE TECHNOLOGY FUND, INC.
(Exact Name of Registrant as Specified in Charter)
Alliance Capital Management L.P.
1345 Avenue of the Americas, New York, New York 10105
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, Including Area Code:(800) 221-5672
EDMUND P. BERGAN, JR., ESQ.
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, New York 10105
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check
appropriate box)
X immediately upon filing pursuant to paragraph (b)
on (date) pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)(1)
on (date) pursuant to paragraph (a)(1)
75 days after filing pursuant to paragraph (a)(2)
on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
This post-effective amendment designates a new effective
date for a previously filed post-effective amendment.
CROSS REFERENCE SHEET
(as required by Rule 404(c))
N-1A Item No. Location in Prospectus
PART A
Item 1. Cover Page........................ Cover Page
Item 2. Synopsis.......................... Expense
Information
Item 3. Financial Highlights.............. Financial
Highlights
Item 4. General Description of
Registrant...................... Description of the
Fund; General
Information
Item 5. Management of the Fund............ Management of the
Fund; General
Information
Item 5a. Management's Discussion of Fund Not Applicable
Performance
Item 6. Capital Stock and Other
Securities....................... General
Information;
Dividends,
Distributions and
Taxes
Item 7. Purchase of Securities Being
Offered.......................... Purchase and Sale
of Shares; General
Information
Item 8. Redemption or Repurchase.......... Purchase and Sale
of Shares; General
Information
Item 9. Pending Legal Proceedings......... Not Applicable
Item 10. Cover Page........................ Cover Page
Item 11. Table of Contents................. Cover Page
PART B Location in Statement
of Additional Information
Item 12. General Information and History... Management of
the Fund;
General
Information
Item 13. Investment Objective
and Policies..................... Investment
Objective;
Policies and
Restrictions
Item 14. Management of the Fund........... Management of
the Fund
Item 15. Control Persons and Principal
Holders of Securities............ Management of
the Fund;
General
Information
Item 16. Investment Advisory and
Other Services................... Management of
the Fund
Item 17. Brokerage Allocation and Other
Practices................... Portfolio
Transactions
Item 18. Capital Stock and Other
Securities....................... General
Information
Item 19. Purchase, Redemption and Pricing
of Securities Being Offered...... Purchase of
Shares;
Redemption and
Repurchase of
Shares; Net
Asset Value
Item 20. Tax Status....................... Dividends,
Distributions
and Taxes
Item 21. Underwriters..................... General
Information
Item 22. Calculation of Performance Data.. General
Information
PART B Location in Statement
of Additional Information
Item 23. Financial Statements............. Financial
Statements;
Report of
Independent
Auditors
THE ALLIANCE
------------
STOCK FUNDS
------------
P.O. Box 1520, Secaucus, New Jersey 07096-1520
Toll Free (800) 221-5672
For Literature: Toll Free (800) 227-4618
Prospectus and Application
November 1, 1997
Domestic Stock Funds Global Stock Funds
-The Alliance Fund -Alliance International Fund
-Alliance Growth Fund -Alliance Worldwide Privatization Fund
-Alliance Premier Growth Fund -Alliance New Europe Fund
-Alliance Technology Fund -Alliance All-Asia Investment Fund
-Alliance Quasar Fund -Alliance Global Small Cap Fund
Total Return Funds
-Alliance Strategic Balanced Fund
-Alliance Balanced Shares
-Alliance Income Builder Fund
-Alliance Utility Income Fund
-Alliance Growth and Income Fund
-Alliance Real Estate Investment Fund
--------------------------------------------------------------------------------
[Download Table]
Table of Contents Page
The Funds at a Glance ..................................................... 2
Expense Information ....................................................... 4
Financial Highlights ...................................................... 7
Glossary .................................................................. 19
Description of the Funds .................................................. 20
Investment Objectives and Policies ........................................ 20
Additional Investment Practices ........................................ 30
Certain Fundamental Investment Policies ................................ 37
Risk Considerations .................................................... 40
Purchase and Sale of Shares ............................................... 44
Management of the Funds ................................................... 47
Dividends, Distributions and Taxes ........................................ 51
General Information ....................................................... 53
--------------------------------------------------------------------------------
Adviser
Alliance Capital Management L.P.
1345 Avenue Of The Americas
New York, New York 10105
The Alliance Stock Funds provide a broad selection of investment alternatives to
investors seeking capital growth or high total return. The Domestic Stock Funds
invest mainly in the United States equity markets and the Global Stock Funds
diversify their investments among equity markets around the world, while the
Total Return Funds invest in both equity and fixed-income securities.
Each fund or portfolio (each a "Fund") is, or is a series of, an open-end
management investment company. This Prospectus sets forth concisely the
information which a prospective investor should know about each Fund before
investing. A "Statement of Additional Information" for each Fund which provides
further information regarding certain matters discussed in this Prospectus and
other matters which may be of interest to some investors has been filed with the
Securities and Exchange Commission and is incorporated herein by reference. For
a free copy, call or write Alliance Fund Services, Inc. at the indicated address
or call the "For Literature" telephone number shown above.
Each Fund offers three classes of shares through this Prospectus. These shares
may be purchased, at the investor's choice, at a price equal to their net asset
value (i) plus an initial sales charge imposed at the time of purchase (the
"Class A shares"), (ii) with a contingent deferred sales charge imposed on most
redemptions made within four years of purchase (the "Class B shares"), or (iii)
without any initial or contingent deferred sales charge, as long as the shares
are held for one year or more (the "Class C shares"). See "Purchase and Sale of
Shares."
An investment in these securities is not a deposit or obligation of, or
guaranteed or endorsed by, any bank and is not federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board or any other agency.
Investors are advised to read this Prospectus carefully and to retain it for
future reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
[LOGO]
Alliance(R)
Investing without the Mystery.(SM)
(R)/SM These are registered marks used under licenses from the owner, Alliance
Capital Management L.P.
The Funds At A Glance
The following summary is qualified in its entirety by the more detailed
information contained in this Prospectus.
The Funds' Investment Adviser Is . . .
Alliance Capital Management L.P. ("Alliance"), a global investment manager
providing diversified services to institutions and individuals through a broad
line of investments including more than 100 mutual funds. Since 1971, Alliance
has earned a reputation as a leader in the investment world with over $199
billion in assets under management as of June 30, 1997. Alliance provides
investment management services to employee benefit plans for 29 of the FORTUNE
100 companies.
Domestic Stock Funds
Alliance Fund
Seeks . . . Long-term growth of capital and income primarily through investment
in common stocks.
Invests Principally in . . . A diversified portfolio of equity securities that,
in the judgment of Alliance, have the potential to achieve capital appreciation.
Growth Fund
Seeks . . . Long-term growth of capital by investing primarily in common stocks
and other equity securities.
Invests Principally in . . . A diversified portfolio of equity securities of
companies with a favorable outlook for earnings and whose rate of growth is
expected to exceed that of the United States economy over time.
Premier Growth Fund
Seeks . . . Long-term growth of capital by investing in the equity securities of
a limited number of large, carefully selected, high-quality American companies
from a relatively small universe of intensively researched companies.
Invests Principally in . . . A diversified portfolio of equity securities that,
in the judgment of Alliance, are likely to achieve superior earnings growth.
Normally, approximately 40 companies will be represented in the Fund's
investment portfolio. The Fund's investments in 25 of these companies most
highly regarded at any point in time by Alliance will usually constitute
approximately 70% of the Fund's net assets.
Technology Fund
Seeks . . . Growth of capital through investment in companies expected to
benefit from advances in technology.
Invests Principally in . . . A diversified portfolio of securities of companies
which use technology extensively in the development of new or improved products
or processes.
Quasar Fund
Seeks . . . Growth of capital by pursuing aggressive investment policies.
Invests Principally in . . . A diversified portfolio of equity securities of any
company and industry and in any type of security which is believed to offer
possibilities for capital appreciation.
Global Stock Funds
International Fund
Seeks . . . A total return on its assets from long-term growth of capital and
from income.
Invests Principally in . . . A diversified portfolio of marketable securities of
established non-United States companies, companies participating in foreign
economies with prospects for growth, and foreign government securities.
Worldwide Privatization Fund
Seeks . . . Long-term capital appreciation.
Invests Principally in . . . A non-diversified portfolio of equity securities
issued by enterprises that are undergoing, or have undergone, privatization. The
balance of the Fund's investment portfolio will include securities of companies
that are believed by Alliance to be beneficiaries of the privatization process.
New Europe Fund
Seeks . . . Long-term capital appreciation through investment primarily in the
equity securities of companies based in Europe.
Invests Principally in . . . A non-diversified portfolio of equity securities of
European companies.
All-Asia Investment Fund
Seeks . . . Long-term capital appreciation.
Invests Principally in . . . A non-diversified portfolio of equity securities of
Asian/Pacific companies.
Global Small Cap Fund
Seeks . . . Long-term growth of capital.
Invests Principally in . . . A diversified global portfolio of the equity
securities of small capitalization companies.
Total Return Funds
Strategic Balanced Fund
Seeks . . . A high long-term total return by investing in a combination of
equity and debt securities.
2
Invests Principally in . . . A diversified portfolio of dividend-paying common
stocks and fixed-income securities, and also in equity-type securities such as
warrants, preferred stocks and convertible debt instruments.
Balanced Shares
Seeks . . . A high return through a combination of current income and capital
appreciation.
Invests Principally in . . . A diversified portfolio of equity and fixed-income
securities such as common and preferred stocks, U.S. Government and agency
obligations, bonds and senior debt securities.
Income Builder Fund
Seeks . . . Both an attractive level of current income and long-term growth of
income and capital.
Invests Principally in . . . A non-diversified portfolio of fixed-income
securities and dividend-paying common stocks. Alliance currently expects to
continue to maintain approximately 60% of the Fund's net assets in fixed-income
securities and 40% in equity securities.
Utility Income Fund
Seeks . . . Current income and capital appreciation through investment in the
utilities industry.
Invests Principally in . . . A diversified portfolio of equity securities, such
as common stocks, securities convertible into common stocks and rights and
warrants to subscribe for purchase of common stocks, and in fixed-income
securities such as bonds and preferred stocks.
Growth and Income Fund
Seeks . . . Income and appreciation through investment in dividend-paying common
stocks of quality companies.
Invests Principally in . . . A diversified portfolio of dividend-paying common
stocks of good quality, and, under certain market conditions, other types of
securities, including bonds, convertible bonds and preferred stocks.
Real Estate Investment Fund
Seeks . . . Total return on its assets from long-term growth of capital and from
income.
Invests Principally in . . . A diversified portfolio of equity securities of
issuers that are primarily engaged in or related to the real estate industry.
Distributions...
Balanced Shares, Income Builder Fund, Utility Income Fund, Growth and Income
Fund and Real Estate Investment Fund make distributions quarterly to
shareholders. These distributions may include ordinary income and capital gain
(each of which is taxable) and a return of capital (which is generally
non-taxable). See "Dividends, Distributions and Taxes."
A Word About Risk . . .
The price of the shares of the Alliance Stock Funds will fluctuate as the daily
prices of the individual securities in which they invest fluctuate, so that your
shares, when redeemed, may be worth more or less than their original cost. With
respect to those Funds permitted to invest in foreign currency denominated
securities, these fluctuations may be magnified by changes in foreign exchange
rates. Investment in the Global Stock Funds involves risks not associated with
funds that invest primarily in securities of U.S. issuers. While the Funds
invest principally in common stocks and other equity securities, in order to
achieve their investment objectives the Funds may at times use certain types of
investment derivatives, such as options, futures, forwards and swaps. These
involve risks different from, and, in certain cases, greater than, the risks
presented by more traditional investments. An investment in the Real Estate
Investment Fund is subject to certain risks associated with the direct ownership
of real estate in general, including possible declines in the value of real
estate, general and local economic conditions, environmental problems and
changes in interest rates. These risks are fully discussed in this Prospectus.
Getting Started . . .
Shares of the Funds are available through your financial representative and most
banks, insurance companies and brokerage firms nationwide. Shares can be
purchased for a minimum initial investment of $250, and subsequent investments
can be made for as little as $50. For detailed information about purchasing and
selling shares, see "Purchase and Sale of Shares." In addition, the Funds offer
several time and money saving services to investors. Be sure to ask your
financial representative about:
--------------------------------------------------------------------------------
AUTOMATIC REINVESTMENT
--------------------------------------------------------------------------------
AUTOMATIC INVESTMENT PROGRAM
--------------------------------------------------------------------------------
RETIREMENT PLANS
--------------------------------------------------------------------------------
SHAREHOLDER COMMUNICATIONS
--------------------------------------------------------------------------------
DIVIDEND DIRECTION PLANS
--------------------------------------------------------------------------------
AUTO EXCHANGE
--------------------------------------------------------------------------------
SYSTEMATIC WITHDRAWALS
--------------------------------------------------------------------------------
A CHOICE OF PURCHASE PLANS
--------------------------------------------------------------------------------
TELEPHONE TRANSACTIONS
--------------------------------------------------------------------------------
24 HOUR INFORMATION
--------------------------------------------------------------------------------
[LOGO]
Alliance(R)
Investing without the Mystery.(SM)
(R)/SM These are registered marks used under licenses from the owner, Alliance
Capital Management L.P.
3
--------------------------------------------------------------------------------
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.
[Enlarge/Download Table]
Class A Shares Class B Shares Class C Shares
-------------- -------------- --------------
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
--------------------------------------------------------------------------------
(a) Reduced for larger purchases. Purchases of $1,000,000 or more are not
subject to an initial sales charge but may be subject to a 1% deferred sales
charge on redemptions within one year of purchase. See "Purchase and Sale of
Shares--How to Buy Shares" -page 44.
(b) Class B shares of each Fund other than Premier Growth Fund automatically
convert to Class A shares after eight years and the Class B shares of
Premier Growth Fund convert to Class A shares after six years. See "Purchase
and Sale of Shares--How to Buy Shares" -page 44.
[Enlarge/Download Table]
====================================================================================================================================
Operating Expenses Examples
-------------------------------------------------------------- ------------------------------------------------------------------
Alliance Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
Management fees .70% .70% .70% After 1 year $ 53 $ 59 $ 19 $ 29 $ 19
12b-1 fees .19% 1.00% 1.00% After 3 years $ 74 $ 79 $ 59 $ 58 $ 58
Other expenses (a) .15% .17% .16% After 5 years $ 97 $101 $101 $101 $101
---- ---- ---- After 10 years $164 $197(b) $197(b) $218 $218
Total fund
operating expenses 1.04% 1.87% 1.86%
==== ==== ====
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 $ 55 $ 60 $ 20 $ 30 $ 20
12b-1 fees .30% 1.00% 1.00% After 3 years $ 82 $ 82 $ 62 $ 63 $ 63
Other expenses (a) .25% .24% .25% After 5 years $111 $107 $107 $108 $108
---- ---- ---- After 10 years $193 $214(b) $214(b) $233 $233
Total fund
operating expenses 1.30% 1.99% 2.00%
==== ==== ====
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 $ 59 $ 64 $ 24 $ 34 $ 24
12b-1 fees .33% 1.00% 1.00% After 3 years $ 92 $ 92 $ 72 $ 72 $ 72
Other expenses (a) .32% .32% .32% After 5 years $128 $124 $124 $124 $124
---- ---- ---- After 10 years $230 $249(b) $249(b) $266 $266
Total fund
operating expenses 1.65% 2.32% 2.32%
==== ==== ====
Technology Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
Management fees (g) 1.11% 1.11% 1.11% After 1 year $ 59 $ 65 $ 25 $ 35 $ 25
12b-1 fees .30% 1.00% 1.00% After 3 years $ 95 $ 96 $ 76 $ 76 $ 76
Other expenses (a) .33% .33% .33% After 5 years $133 $130 $130 $130 $130
---- ---- ---- After 10 years $239 $260(b) $260(b) $278 $278
Total fund
operating expenses 1.74% 2.44% 2.44%
==== ==== ====
--------------------------------------------------------------------------------
Please refer to the footnotes on page 6.
4
[Enlarge/Download Table]
====================================================================================================================================
Operating Expenses Examples
-------------------------------------------------------------- ------------------------------------------------------------------
Quasar Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
Management fees (g) 1.15% 1.15% 1.15% After 1 year $ 60 $ 67 $ 27 $ 36 $ 26
12b-1 fees .21% 1.00% 1.00% After 3 years $ 96 $101 $ 81 $ 81 $ 81
Other expenses (a) .43% .47% .46% After 5 years $135 $139 $139 $139 $139
---- ---- ---- After 10 years $244 $275(b) $275(b) $294 $294
Total fund
operating expenses 1.79% 2.62% 2.61%
==== ==== ====
International Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
Management fees
(after waiver) (c) .85% .85% .85% After 1 year $ 58 $ 65 $ 25 $ 35 $ 25
12b-1 fees .17% 1.00% 1.00% After 3 years $ 90 $ 96 $ 76 $ 75 $ 75
Other expenses (a) .56% .58% .57% After 5 years $125 $130 $130 $129 $129
---- ---- ---- After 10 years $222 $256(b) $256(b) $276 $276
Total fund
operating expenses (d) 1.58% 2.43% 2.42%
==== ==== ====
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 $ 59 $ 65 $ 25 $ 35 $ 25
12b-1 fees .30% 1.00% 1.00% After 3 years $ 94 $ 96 $ 76 $ 75 $ 75
Other expenses (a) .42% .43% .42% After 5 years $132 $130 $130 $129 $129
---- ---- ---- After 10 years $237 $259(b) $259(b) $276 $276
Total fund
operating expenses 1.72% 2.43% 2.42%
==== ==== ====
New Europe Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
Management fees 1.06% 1.06% 1.06% After 1 year $ 62 $ 68 $ 28 $ 38 $ 28
12b-1 fees .30% 1.00% 1.00% After 3 years $104 $105 $ 85 $ 85 $ 85
Other expenses (a) .69% .69% .68% After 5 years $148 $145 $145 $145 $145
---- ---- ---- After 10 years $270 $291(b) $291(b) $307 $307
Total fund
operating expenses 2.05% 2.75% 2.74%
==== ==== ====
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 $ 73 $ 78 $ 38 $ 48 $ 38
(after waiver) (c) .65% .65% .65% After 3 years $135 $137 $117 $117 $117
12b-1 fees .30% 1.00% 1.00% After 5 years $199 $197 $197 $197 $197
Other expenses After 10 years $371 $390(b) $390(b) $405 $405
Administration fees
(after waiver) (f) .00% .00% .00%
Other operating expenses (a) 2.17% 2.17% 2.17%
---- ---- ----
Total other expenses 2.17% 2.17% 2.17%
==== ==== ====
Total fund
operating expenses (d) 3.12% 3.82% 3.82%
==== ==== ====
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 $ 66 $ 71 $ 31 $ 41 $ 31
12b-1 fees .30% 1.00% 1.00% After 3 years $114 $116 $ 96 $ 96 $ 96
Other expenses (a) 1.11% 1.11% 1.10% After 5 years $166 $163 $163 $163 $163
---- ---- ---- After 10 years $305 $326(b) $326(b) $341 $341
Total fund
operating expenses 2.41% 3.11% 3.10%
==== ==== ====
Strategic Balanced Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
Management fees
(after waiver) (c) .09% .09% .09% After 1 year $ 56 $ 62 $ 22 $ 32 $ 22
12b-1 fees .30% 1.00% 1.00% After 3 years $ 85 $ 86 $ 66 $ 66 $ 66
Other expenses (a) 1.02% 1.03% 1.03% After 5 years $116 $114 $114 $114 $114
---- ---- ---- After 10 years $204 $227(b) $227(b) $245 $245
Total fund
operating expenses (d) 1.41% 2.12% 2.12%
==== ==== ====
--------------------------------------------------------------------------------
Please refer to the footnotes on page 6.
5
[Enlarge/Download Table]
Operating Expenses Examples
-------------------------------------------------------------- ------------------------------------------------------------------
Balanced Shares Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
Management fees .63% .63% .63% After 1 year $ 57 $ 63 $ 23 $ 33 $ 23
12b-1 fees .24% 1.00% 1.00% After 3 years $ 87 $ 90 $ 70 $ 70 $ 70
Other expenses (a) .60% .62% .60% After 5 years $119 $120 $120 $119 $119
---- ---- ---- After 10 years $211 $239(b) $239(b) $256 $256
Total fund
operating expenses 1.47% 2.25% 2.23%
==== ==== ====
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 $ 64 $ 70 $ 30 $ 40 $ 30
12b-1 fees .30% 1.00% 1.00% After 3 years $108 $110 $ 90 $ 91 $ 91
Other expenses (a) 1.15% 1.17% 1.18% After 5 years $155 $154 $154 $154 $154
---- ---- ---- After 10 years $285 $307(b) $307(b) $325 $325
Total fund
operating expenses 2.20% 2.92% 2.93%
==== ==== ====
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 .51% .51% .51% After 1 year $ 52 $ 58 $ 18 $ 28 $ 18
12b-1 fees .21% 1.00% 1.00% After 3 years $ 72 $ 76 $ 56 $ 55 $ 55
Other expenses (a) .25% .27% .25% After 5 years $ 94 $ 96 $ 96 $ 95 $ 95
---- ---- ---- After 10 years $156 $188(b) $188(b) $207 $207
Total fund
operating expenses .97% 1.78% 1.76%
==== ==== ====
Real Estate Investment Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
Management fees .90% .90% .90% After 1 year $ 60 $ 65 $ 25 $ 35 $ 25
12b-1 fees .30% 1.00% 1.00% After 3 years $ 96 $ 96 $ 76 $ 76 $ 76
Other expenses (a) .57% .54% .53% After 5 years $134 $130 $130 $130 $130
---- ---- ---- After 10 years $242 $261(b) $261(b) $277 $277
Total fund
operating expenses 1.77% 2.44% 2.43%
==== ==== ====
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+ Assumes redemption at end of period.
++ Assumes no redemption at end of period.
(a) These expenses include a transfer agency fee payable to Alliance Fund
Services, Inc., an affiliate of Alliance. The expenses shown do
not reflect the application of credits that reduce Fund expenses.
(b) Assumes Class B shares converted to Class A shares after eight years, or
six years with respect to Premier Growth Fund.
(c) Net of voluntary fee waiver. In the absence of such waiver, management fees
would be .75% for Strategic Balanced Fund and Utility Income Fund, 1.00%
for All-Asia Investment Fund and 1.01% for International Fund.
International Fund's fee, absent the voluntary fee waiver, is calculated
based on average daily net assets. Maximum contractual rate, based on
quarter-end net assets, is 1.00%.
(d) Net of voluntary fee waiver and/or expense reimbursement. In the absence of
such waiver and/or reimbursement, total fund operating expenses for
Strategic Balanced Fund would have been 2.08%, 2.76% and 2.76%,
respectively, for Class A, Class B and Class C shares, total fund operating
expenses for All-Asia Investment Fund would have been 3.61%, 4.33% and
4.30%, respectively, for Class A, Class B and Class C shares annualized and
total fund operating expenses for International Fund would have been 1.74%,
2.59% and 2.58%, respectively, for Class A, Class B and Class C annualized.
(e) Net of expense reimbursements. Absent expense reimbursements, total fund
operating expenses for Utility Income Fund would be 3.38%, 4.08%, 4.07%,
respectively, for Class A, Class B and Class C shares.
(f) Net of voluntary fee waiver. Absent such fee waiver, administration fees
would have been .15% for the Fund's Class A, Class B and Class C shares.
Reflects the fees payable by All-Asia Investment Fund to Alliance pursuant
to an administration agreement.
(g) Calculated based on average daily net assets. Maximum contractual rate,
based on quarter-end net assets, is 1.00% for Quasar Fund and Technology
Fund.
The purpose of the foregoing table is to assist the investor in understanding
the various costs and expenses that an investor in a Fund will bear directly or
indirectly. Long-term shareholders of a Fund may pay aggregate sales charges
totaling more than the economic equivalent of the maximum initial sales charges
permitted by the Conduct Rules of the National Association of Securities
Dealers, Inc. See "Management of the Funds--Distribution Services Agreements."
The Rule 12b-1 fee for each class comprises a service fee not exceeding .25% of
the aggregate average daily net assets of the Fund attributable to the class and
an asset-based sales charge equal to the remaining portion of the Rule 12b-1
fee. "Management fees" for International Fund and All-Asia Investment Fund and
"Adminstration fee" for All-Asia Investment Fund have been restated to reflect
current voluntary fee waivers. The examples set forth above assume reinvestment
of all dividends and distributions and utilize a 5% annual rate of return as
mandated by Commission regulations. The examples should not be considered
representative of past or future expenses; actual expenses may be greater or
less than those shown.
6
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
The tables on the following pages present, for each Fund, per share income and
capital changes for a share outstanding throughout each period indicated. Except
as otherwise indicated, the information in the tables for Alliance Fund, Growth
Fund, Premier Growth Fund, Strategic Balanced Fund, Balanced Shares, Utility
Income Fund, Worldwide Privatization Fund and Growth and Income Fund has been
audited by Price Waterhouse LLP, the independent auditors for each Fund, and for
All-Asia Investment Fund, Technology Fund, Quasar Fund, International Fund, New
Europe Fund, Global Small Cap Fund, Real Estate Investment Fund and Income
Builder Fund by Ernst & Young LLP, the independent auditors for each Fund. A
report of Price Waterhouse LLP or Ernst & Young LLP, as the case may be, on the
information with respect to each Fund, appears in the Fund's Statement of
Additional Information. The following information for each Fund should be read
in conjunction with the financial statements and related notes which are
included in the Fund's Statement of Additional Information.
Further information about a Fund's performance is contained in the Fund's annual
report to shareholders, which may be obtained without charge by contacting
Alliance Fund Services, Inc. at the address or the "For Literature" telephone
number shown on the cover of this Prospectus.
7
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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
Class A
12/1/96 to 5/31/97+++ ........... $ 7.71 $ (.01)(b) $ .67 $ .66 $ (.02) $(1.06)
Year ended 11/30/96 ............. 7.72 .02 1.06 1.08 (.02) (1.07)
Year ended 11/30/95 ............. 6.63 .02 2.08 2.10 (.01) (1.00)
1/1/94 to 11/30/94** ............ 6.85 .01 (.23) (.22) 0.00 0.00
Year ended 12/31/93 ............. 6.68 .02 .93 .95 (.02) (.76)
Year ended 12/31/92 ............. 6.29 .05 .87 .92 (.05) (.48)
Year ended 12/31/91 ............. 5.22 .07 1.70 1.77 (.07) (.63)
Year ended 12/31/90 ............. 6.87 .09 (.32) (.23) (.18) (1.24)
Year ended 12/31/89 ............. 5.60 .12 1.19 1.31 (.04) 0.00
Year ended 12/31/88 ............. 5.15 .08 .80 .88 (.08) (.35)
Year ended 12/31/87 ............. 6.87 .08 .27 .35 (.13) (1.94)
Year ended 12/31/86 ............. 11.15 .11 .87 .98 (.10) (5.16)
Class B
12/1/96 to 5/31/97+++ ........... $ 7.40 $ (.03)(b) $ .63 $ .60 $ 0.00 $(1.06)
Year ended 11/30/96 ............. 7.49 (.01) .99 .98 0.00 (1.07)
Year ended 11/30/95 ............. 6.50 (.03) 2.02 1.99 0.00 (1.00)
1/1/94 to 11/30/94** ............ 6.76 (.03) (.23) (.26) 0.00 0.00
Year ended 12/31/93 ............. 6.64 (.03) .91 .88 0.00 (.76)
Year ended 12/31/92 ............. 6.27 (.01)(b) .87 .86 (.01) (.48)
3/4/91++ to 12/31/91 ............ 6.14 .01 (b) .79 .80 (.04) (.63)
Class C
12/1/96 to 5/31/97+++ ........... $ 7.41 $ (.03)(b) $ .62 $ .59 $ 0.00 $(1.06)
Year ended 11/30/96 ............. 7.50 (.02) 1.00 .98 0.00 (1.07)
Year ended 11/30/95 ............. 6.50 (.03) 2.03 2.00 0.00 (1.00)
1/1/94 to 11/30/94** ............ 6.77 (.03) (.24) (.27) 0.00 0.00
5/3/93++ to 12/31/93 ............ 6.67 (.02) .88 .86 0.00 (.76)
Growth Fund (i)
Class A
11/1/96 to 4/30/97+++ ........... $34.91 $ (.01)(b) $ 1.91 $ 1.90 $ 0.00 $(1.03)
Year ended 10/31/96 ............. 29.48 .05 6.20 6.25 (.19) (.63)
Year ended 10/31/95 ............. 25.08 .12 4.80 4.92 (.11) (.41)
5/1/94 to 10/31/94** ............ 23.89 .09 1.10 1.19 0.00 0.00
Year ended 4/30/94 .............. 22.67 (.01)(c) 3.55 3.54 0.00 (2.32)
Year ended 4/30/93 .............. 20.31 .05 (c) 3.68 3.73 (.14) (1.23)
Year ended 4/30/92 .............. 17.94 .29 (c) 3.95 4.24 (.26) (1.61)
9/4/90++ to 4/30/91 ............. 13.61 .17 (c) 4.22 4.39 (.06) 0.00
Class B
11/1/96 to 4/30/97+++ ........... $29.21 $ (.11)(b) $ 1.60 $ 1.49 $ 0.00 $(1.03)
Year ended 10/31/96 ............. 24.78 (.12) 5.18 5.06 0.00 (.63)
Year ended 10/31/95 ............. 21.21 (.02) 4.01 3.99 (.01) (.41)
5/1/94 to 10/31/94** ............ 20.27 .01 .93 .94 0.00 0.00
Year ended 4/30/94 .............. 19.68 (.07)(c) 2.98 2.91 0.00 (2.32)
Year ended 4/30/93 .............. 18.16 (.06)(c) 3.23 3.17 (.03) (1.62)
Year ended 4/30/92 .............. 16.88 .17 (c) 3.67 3.84 (.21) (2.35)
Year ended 4/30/91 .............. 14.38 .08 (c) 3.22 3.30 (.09) (.71)
Year ended 4/30/90 .............. 14.13 .01 (b)(c) 1.26 1.27 0.00 (1.02)
Year ended 4/30/89 .............. 12.76 (.01)(c) 2.44 2.43 0.00 (1.06)
10/23/87+ to 4/30/88 ............ 10.00 (.02)(c) 2.78 2.76 0.00 0.00
Class C
11/1/96 to 4/30/97+++ ........... $29.22 $ (.11)(b) $ 1.60 $ 1.49 $ 0.00 $(1.03)
Year ended 10/31/96 ............. 24.79 (.12) 5.18 5.06 0.00 (.63)
Year ended 10/31/95 ............. 21.22 (.03) 4.02 3.99 (.01) (.41)
5/1/94 to 10/31/94** ............ 20.28 .01 .93 .94 0.00 0.00
8/2/93++ to 4/30/94 ............. 21.47 (.02)(c) 1.15 1.13 0.00 (2.32)
Premier Growth Fund
Class A
12/1/96 to 5/31/97+++ ........... $17.98 $ (.03)(b) $ 2.64 $ 2.61 $ 0.00 $(1.08)
Year ended 11/30/96 ............. 16.09 (.04)(b) 3.20 3.16 0.00 (1.27)
Year ended 11/30/95 ............. 11.41 (.03) 5.38 5.35 0.00 (.67)
Year ended 11/30/94 ............. 11.78 (.09) (.28) (.37) 0.00 0.00
Year ended 11/30/93 ............. 10.79 (.05) 1.05 1.00 (.01) 0.00
9/28/92+ to 11/30/92 ............ 10.00 .01 .78 .79 0.00 0.00
Class B
12/1/96 to 5/31/97+++ ........... $17.52 $ (.09)(b) $ 2.56 $ 2.47 $ 0.00 $(1.08)
Year ended 11/30/96 ............. 15.81 (.14)(b) 3.12 2.98 0.00 (1.27)
Year ended 11/30/95 ............. 11.29 (.11) 5.30 5.19 0.00 (.67)
Year ended 11/30/94 ............. 11.72 (.15) (.28) (.43) 0.00 0.00
Year ended 11/30/93 ............. 10.79 (.10) 1.03 .93 0.00 0.00
9/28/92+ to 11/30/92 ............ 10.00 0.00 .79 .79 0.00 0.00
Class C
12/1/96 to 5/31/97+++ ........... $17.54 $ (.09)(b) $ 2.57 $ 2.48 $ 0.00 $(1.08)
Year ended 11/30/96 ............. 15.82 (.14)(b) 3.13 2.99 0.00 (1.27)
Year ended 11/30/95 ............. 11.30 (.08) 5.27 5.19 0.00 (.67)
Year ended 11/30/94 ............. 11.72 (.09) (.33) (.42) 0.00 0.00
5/3/93++ to 11/30/93 ............ 10.48 (.05) 1.29 1.24 0.00 0.00
------------------------------------------------------------------------------------------------------------------------------------
Please refer to the footnotes on page 18.
8
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Total Net Assets Ratio Of Net
Total Net Asset Investment At End Of Ratio Of Investment
Dividends Value Return Based Period Expenses Income (Loss) Average
And End Of on Net Asset (000's To Average To Average Portfolio Commission
Distributions Period Value (a) omitted) Net Assets Net Assets Turnover Rate Rate (k)
------------- ----------- ------------ ------------ ----------- ------------- ------------- ------------
$ (1.08) $ 7.29 10.46% $1,024,652 1.05%* (.16)%* 107% $0.0559
(1.09) 7.71 16.49 999,067 1.04 .30 80 0.0646
(1.01) 7.72 37.87 945,309 1.08 .31 81 --
0.00 6.63 (3.21) 760,679 1.05* .21* 63 --
(.78) 6.85 14.26 831,814 1.01 .27 66 --
(.53) 6.68 14.70 794,733 .81 .79 58 --
(.70) 6.29 33.91 748,226 .83 1.03 74 --
(1.42) 5.22 (4.36) 620,374 .81 1.56 71 --
(.04) 6.87 23.42 837,429 .75 1.79 81 --
(.43) 5.60 17.10 760,619 .82 1.38 65 --
(2.07) 5.15 4.90 695,812 .76 1.03 100 --
(5.26) 6.87 12.60 652,009 .61 1.39 46 --
$ (1.06) $ 6.94 9.98% $ 50,785 1.88%* (.99)%* 107% $0.0559
(1.07) 7.40 15.47 44,450 1.87 (.53) 80 0.0646
(1.00) 7.49 36.61 31,738 1.90 (.53) 81 --
0.00 6.50 (3.85) 18,138 1.89* (.60)* 63 --
(.76) 6.76 13.28 12,402 1.90 (.64) 66 --
(.49) 6.64 13.75 3,825 1.64 (.04) 58 --
(.67) 6.27 13.10 852 1.64* .10* 74 --
$ (1.06) $ 6.94 9.83% $ 15,670 1.86%* (.97)%* 107% $0.0559
(1.07) 7.41 15.48 13,899 1.86 (.51) 80 0.0646
(1.00) 7.50 36.79 10,078 1.89 (.51) 81 --
0.00 6.50 (3.99) 6,230 1.87* (.59)* 63 --
(.76) 6.77 13.95 4,006 1.94* (.74)* 66 --
$ (1.03) $ 35.78 5.46% $ 579,580 1.24%* (.03)%* 19% $0.0537
(.82) 34.91 21.65 499,459 1.30 .15 46 0.0584
(.52) 29.48 20.18 285,161 1.35 .56 61 --
0.00 25.08 4.98 167,800 1.35* .86* 24 --
(2.32) 23.89 15.66 102,406 1.40 (f) .32 87 --
(1.37) 22.67 18.89 13,889 1.40 (f) .20 124 --
(1.87) 20.31 23.61 8,228 1.40 (f) 1.44 137 --
(.06) 17.94 32.40 713 1.40*(f) 1.99* 130 --
$ (1.03) $ 29.67 5.12% $2,829,994 1.94%* (.74)%* 19% $0.0537
(.63) 29.21 20.82 2,498,097 1.99 (.54) 46 0.0584
(.42) 24.78 19.33 1,052,020 2.05 (.15) 61 --
0.00 21.21 4.64 751,521 2.05* .16* 24 --
(2.32) 20.27 14.79 394,227 2.10 (f) (.36) 87 --
(1.65) 19.68 18.16 56,704 2.15 (f) (.53) 124 --
(2.56) 18.16 22.75 37,845 2.15 (f) .78 137 --
(.80) 16.88 24.72 22,710 2.10 (f) .56 130 --
(1.02) 14.38 8.81 15,800 2.00 (f) .07 165 --
(1.06) 14.13 20.31 7,672 2.00 (f) (.03) 139 --
0.00 12.76 27.60 1,938 2.00*(f) (.40)* 52 --
$ (1.03) $ 29.68 5.11% $ 472,104 1.94%* (.73)%* 19% $0.0537
(.63) 29.22 20.81 403,478 2.00 (.55) 46 0.0584
(.42) 24.79 19.32 226,662 2.05 (.15) 61 --
0.00 21.22 4.64 114,455 2.05* .16* 24 --
(2.32) 20.28 5.27 64,030 2.10*(f) (.31)* 87 --
$ (1.08) $ 19.51 15.70% $ 215,464 1.57%* (.36)%* 47% $0.0598
(1.27) 17.98 21.52 172,870 1.65 (.27) 95 0.0651
(.67) 16.09 49.95 72,366 1.75 (.28) 114 --
0.00 11.41 (3.14) 35,146 1.96 (.67) 98 --
(.01) 11.78 9.26 40,415 2.18 (.61) 68 --
0.00 10.79 7.90 4,893 2.17* .91* 0 --
$ (1.08) $ 18.91 15.29% $ 550,297 2.26%* (1.05)%* 47% $0.0598
(1.27) 17.52 20.70 404,137 2.32 (.94) 95 0.0651
(.67) 15.81 49.01 238,088 2.43 (.95) 114 --
0.00 11.29 (3.67) 139,988 2.47 (1.19) 98 --
0.00 11.72 8.64 151,600 2.70 (1.14) 68 --
0.00 10.79 7.90 19,941 2.68*(f) .35*(f) 0 --
$ (1.08) $ 18.94 15.33% $ 91,551 2.25% (1.05)%* 47% $0.0598
(1.27) 17.54 20.76 60,194 2.32 (.94) 95 0.0651
(.67) 15.82 48.96 20,679 2.42 (.97) 114 --
0.00 11.30 (3.58) 7,332 2.47 (1.16) 98 --
0.00 11.72 11.83 3,899 2.79* (1.35)* 68 --
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9
[Enlarge/Download Table]
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
Class A
12/1/96 to 5/31/97+++ ........... $51.15 $ (.20)(b) $ .70 $ .50 $ 0.00 $ (.42)
Year ended 11/30/96 ............. 46.64 (.39)(b) 7.28 6.89 0.00 (2.38)
Year ended 11/30/95 ............. 31.98 (.30) 18.13 17.83 0.00 (3.17)
1/1/94 to 11/30/94** ............ 26.12 (.32) 6.18 5.86 0.00 0.00
Year ended 12/31/93 ............. 28.20 (.29) 6.39 6.10 0.00 (8.18)
Year ended 12/31/92 ............. 26.38 (.22)(b) 4.31 4.09 0.00 (2.27)
Year ended 12/31/91 ............. 19.44 (.02) 10.57 10.55 0.00 (3.61)
Year ended 12/31/90 ............. 21.57 (.03) (.56) (.59) 0.00 (1.54)
Year ended 12/31/89 ............. 20.35 0.00 1.22 1.22 0.00 0.00
Year ended 12/31/88 ............. 20.22 (.03)(c) .16 .13 0.00 0.00
Year ended 12/31/87 ............. 23.11 (.10)(c) 4.54 4.44 0.00 (7.33)
Year ended 12/31/86 ............. 20.64 (.14)(c) 2.62 2.48 (.01) 0.00
Class B
12/1/96 to 5/31/97+++ ........... $49.76 $ (.35)(b) $ .66 $ .31 $ 0.00 $ (.42)
Year ended 11/30/96 ............. 45.76 (.70)(b) 7.08 6.38 0.00 (2.38)
Year ended 11/30/95 ............. 31.61 (.60)(b) 17.92 17.32 0.00 (3.17)
1/1/94 to 11/30/94** ............ 25.98 (.23) 5.86 5.63 0.00 0.00
5/3/93++ to 12/31/93 ............ 27.44 (.12) 6.84 6.72 0.00 (8.18)
Class C
12/1/96 to 5/31/97+++ ........... $49.76 $ (.35)(b) $ .66 $ .31 $ 0.00 $ (.42)
Year ended 11/30/96 ............. 45.77 (.70)(b) 7.07 6.37 0.00 (2.38)
Year ended 11/30/95 ............. 31.61 (.58)(b) 17.91 17.33 0.00 (3.17)
1/1/94 to 11/30/94** ............ 25.98 (.24) 5.87 5.63 0.00 0.00
5/3/93++ to 12/31/93 ............ 27.44 (.13) 6.85 6.72 0.00 (8.18)
Quasar Fund
Class A
10/1/96 to 3/31/97+++ ........... $27.92 $ (.11)(b) $ .27 $ .16 $ 0.00 $(4.11)
Year ended 9/30/96 .............. 24.16 (.25) 8.82 8.57 0.00 (4.81)
Year ended 9/30/95 .............. 22.65 (.22)(b) 5.59 5.37 0.00 (3.86)
Year ended 9/30/94 .............. 24.43 (.60) (.36) (.96) 0.00 (.82)
Year ended 9/30/93 .............. 19.34 (.41) 6.38 5.97 0.00 (.88)
Year ended 9/30/92 .............. 21.27 (.24) (1.53) (1.77) 0.00 (.16)
Year ended 9/30/91 .............. 15.67 (.05) 5.71 5.66 (.06) 0.00
Year ended 9/30/90 .............. 24.84 .03 (b) (7.18) (7.15) 0.00 (2.02)
Year ended 9/30/89 .............. 17.60 .02(b) 7.40 7.42 0.00 (.18)
Year ended 9/30/88 .............. 24.47 (.08)(c) (2.08) (2.16) 0.00 (4.71)
Year ended 9/30/87(d) ........... 21.80 (.14)(c) 5.88 5.74 0.00 (3.07)
Class B
10/1/96 to 3/31/97+++ ........... $26.13 $ (.19)(b) $ .24 $ .05 $ 0.00 $(4.11)
Year ended 9/30/96 .............. 23.03 (.20) 8.11 7.91 0.00 (4.81)
Year ended 9/30/95 .............. 21.92 (.37)(b) 5.34 4.97 0.00 (3.86)
Year ended 9/30/94 .............. 23.88 (.53) (.61) (1.14) 0.00 (.82)
Year ended 9/30/93 .............. 19.07 (.18) 5.87 5.69 0.00 (.88)
Year ended 9/30/92 .............. 21.14 (.39) (1.52) (1.91) 0.00 (.16)
Year ended 9/30/91 .............. 15.66 (.13) 5.67 5.54 (.06) 0.00
9/17/90++ to 9/30/90 ............ 17.17 (.01) (1.50) (1.51) 0.00 0.00
Class C
10/1/96 to 3/31/97+++ ........... $26.14 $ (.19)(b) $ .23 $ .04 $ 0.00 $(4.11)
Year ended 9/30/96 .............. 23.05 (.20) 8.10 7.90 0.00 (4.81)
Year ended 9/30/95 .............. 21.92 (.37)(b) 5.36 4.99 0.00 (3.86)
Year ended 9/30/94 .............. 23.88 (.36) (.78) (1.14) 0.00 (.82)
5/3/93++ to 9/30/93 ............. 20.33 (.10) 3.65 3.55 0.00 0.00
International Fund
Class A
Year ended 6/30/97 .............. $18.32 $ .06 (b) $ 1.51 $ 1.57 $ (.12) $(1.08)
Year ended 6/30/96 .............. 16.81 .05 (b) 2.51 2.56 0.00 (1.05)
Year ended 6/30/95 .............. 18.38 .04 .01 .05 0.00 (1.62)
Year ended 6/30/94 .............. 16.01 (.09) 3.02 2.93 0.00 (.56)
Year ended 6/30/93 .............. 14.98 (.01) 1.17 1.16 (.04) (.09)
Year ended 6/30/92 .............. 14.00 .01 (b) 1.04 1.05 (.07) 0.00
Year ended 6/30/91 .............. 17.99 .05 (3.54) (3.49) (.03) (.47)
Year ended 6/30/90 .............. 17.24 .03 2.87 2.90 (.04) (2.11)
Year ended 6/30/89 .............. 16.09 .05 3.73 3.78 (.13) (2.50)
Year ended 6/30/88 .............. 23.70 .17 (1.22) (1.05) (.21) (6.35)
Class B
Year ended 6/30/97 .............. $17.45 $ (.09)(b) $ 1.43 $ 1.34 $ 0.00 $(1.08)
Year ended 6/30/96 .............. 16.19 (.07)(b) 2.38 2.31 0.00 (1.05)
Year ended 6/30/95 .............. 17.90 (.01) (.08) (.09) 0.00 (1.62)
Year ended 6/30/94 .............. 15.74 (.19)(b) 2.91 2.72 0.00 (.56)
Year ended 6/30/93 .............. 14.81 (.12) 1.14 1.02 0.00 (.09)
Year ended 6/30/92 .............. 13.93 (.11)(b) 1.02 .91 (.03) 0.00
9/17/90++ to 6/30/91 ............ 15.52 .03 (1.12) (1.09) (.03) (.47)
Class C
Year ended 6/30/97 .............. $17.46 $ (.09)(b) $ 1.44 $ 1.35 $ 0.00 $(1.08)
Year ended 6/30/96 .............. 16.20 (.07)(b) 2.38 2.31 0.00 (1.05)
Year ended 6/30/95 .............. 17.91 (.14) .05 (.09) 0.00 (1.62)
Year ended 6/30/94 .............. 15.74 (.11) 2.84 2.73 0.00 (.56)
5/3/93++ to 6/30/93 ............. 15.93 0.00 (.19) (.19) 0.00 0.00
------------------------------------------------------------------------------------------------------------------------------------
Please refer to the footnotes on page 18.
10
[Enlarge/Download Table]
Total Net Assets Ratio Of Net
Total Net Asset Investment At End Of Ratio Of Investment
Dividends Value Return Based Period Expenses Income (Loss) Average
And End Of on Net Asset (000's To Average To Average Portfolio Commission
Distributions Period Value (a) omitted) Net Assets Net Assets Turnover Rate Rate (k)
------------- ----------- ------------ ------------ ----------- ------------- ------------- ------------
$ (.42) $ 51.23 .99% $631,967 1.64%* (.81)%* 28% $ 0.0576
(2.38) 51.15 16.05 594,861 1.74 (.87) 30 0.0612
(3.17) 46.64 61.93 398,262 1.75 (.77) 55 --
0.00 31.98 22.43 202,929 1.66* (1.22)* 55 --
(8.18) 26.12 21.63 173,732 1.73 (1.32) 64 --
(2.27) 28.20 15.50 173,566 1.61 (.90) 73 --
(3.61) 26.38 54.24 191,693 1.71 (.20) 134 --
(1.54) 19.44 (3.08) 131,843 1.77 (.18) 147 --
0.00 21.57 6.00 141,730 1.66 .02 139 --
0.00 20.35 0.64 169,856 1.42 (f) (.16)(f) 139 --
(7.33) 20.22 19.16 167,608 1.31 (f) (.56)(f) 248 --
(.01) 23.11 12.03 147,733 1.13 (f) (.57)(f) 141 --
$ (.42) $ 49.65 .64% $864,200 2.35%* (1.50)%* 28% $ 0.0576
(2.38) 49.76 15.20 660,921 2.44 (1.61) 30 0.0612
(3.17) 45.76 60.95 277,111 2.48 (1.47) 55 --
0.00 31.61 21.67 18,397 2.43* (1.95)* 55 --
(8.18) 25.98 24.49 1,645 2.57* (2.30)* 64 --
$ (.42) $ 49.65 .64% $145,146 2.36%* (1.50)%* 28% $ 0.0576
(2.38) 49.76 15.17 108,488 2.44 (1.60) 30 0.0612
(3.17) 45.77 60.98 43,161 2.48 (1.47) 55 --
0.00 31.61 21.67 7,470 2.41* (1.94)* 55 --
(8.18) 25.98 24.49 1,096 2.52* (2.25)* 64 --
$ (4.11) $ 23.97 .88% $265,131 1.54%* (.81)%* 75% $ 0.0533
(4.81) 27.92 42.42 229,798 1.79 (1.11) 168 0.0596
(3.86) 24.16 30.73 146,663 1.83 (1.06) 160 --
(.82) 22.65 (4.05) 155,470 1.67 (1.15) 110 --
(.88) 24.43 31.58 228,874 1.65 (1.00) 102 --
(.16) 19.34 (8.34) 252,140 1.62 (.89) 128 --
(.06) 21.27 36.28 333,806 1.64 (.22) 118 --
(2.02) 15.67 (30.81) 251,102 1.66 .16 90 --
(.18) 24.84 42.68 263,099 1.73 .10 90 --
(4.71) 17.60 (8.61) 90,713 1.28(f) (.40)(f) 58 --
(3.07) 24.47 29.61 134,676 1.18(f) (.56)(f) 76 --
$ (4.11) $ 22.07 .48% $229,756 2.35%* (1.61)%* 75% $ 0.0533
(4.81) 26.13 41.48 112,490 2.62 (1.96) 168 0.0596
(3.86) 23.03 29.78 16,604 2.65 (1.88) 160 --
(.82) 21.92 (4.92) 13,901 2.50 (1.98) 110 --
(.88) 23.88 30.53 16,779 2.46 (1.81) 102 --
(.16) 19.07 (9.05) 9,454 2.42 (1.67) 128 --
(.06) 21.14 35.54 7,346 2.41 (1.28) 118 --
0.00 15.66 (8.79) 71 2.09* (.26)* 90 --
$ (4.11) $ 22.07 .44% $ 66,742 2.34%* (1.59)%* 75% $ 0.0533
(4.81) 26.14 41.46 28,541 2.61 (1.94) 168 0.0596
(3.86) 23.05 29.87 1,611 2.64* (1.76)* 160 --
(.82) 21.92 (4.92) 1,220 2.48 (1.96) 110 --
0.00 23.88 17.46 118 2.49* (1.90)* 102 --
$ (1.20) $ 18.69 9.30% $190,173 1.74%(l) .31% 94% $ 0.0363
(1.05) 18.32 15.83 196,261 1.72 .31 78 --
(1.62) 16.81 .59 165,584 1.73 .26 119 --
(.56) 18.38 18.68 201,916 1.90 (.50) 97 --
(.13) 16.01 7.86 161,048 1.88 (.14) 94 --
(.07) 14.98 7.52 179,807 1.82 .07 72 --
(.50) 14.00 (19.34) 214,442 1.73 .37 71 --
(2.15) 17.99 16.98 265,999 1.45 .33 37 --
(2.63) 17.24 27.65 166,003 1.41 .39 87 --
(6.56) 16.09 (4.20) 132,319 1.41 .84 55 --
$ (1.08) $ 17.71 8.37% $ 77,725 2.59%(l) (.51)% 94% $ 0.0363
(1.05) 17.45 14.87 72,470 2.55 (.46) 78 --
(1.62) 16.19 (.22) 48,998 2.57 (.62) 119 --
(.56) 17.90 17.65 29,943 2.78 (1.15) 97 --
(.09) 15.74 6.98 6,363 2.70 (.96) 94 --
(.03) 14.81 6.54 5,585 2.68 (.70) 72 --
(.50) 13.93 (6.97) 3,515 3.39* 84* 71 --
$ (1.08) $ 17.73 8.42% $ 23,268 2.58%(l) (.51)% 94% $ 0.0363
(1.05) 17.46 14.85 26,965 2.53 (.47) 78 --
(1.62) 16.20 (.22) 19,395 2.54 (.88) 119 --
(.56) 17.91 17.72 13,503 2.78 (1.12) 97 --
0.00 15.74 (1.19) 229 2.57* .08* 94 --
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11
[Enlarge/Download Table]
Net
Net Increase
Asset Net Realized and (Decrease) Dividends Distributions Distributions
Value Of Investment Unrealized In Net Asset From Net in Excess Of From Net
Beginning Income Gain (Loss) On Value From Investment Net Investment Realized
Fiscal Year or Period Period (Loss) Investments Operations Income Income Gains
---------------------- ---------- ---------- --------------- ------------ ---------- -------------- -------------
Worldwide Privatization Fund
Class A
Year ended 6/30/97 ...... $12.13 $ .15 (b) $ 2.55 $ 2.70 $ (.15) $ 0.00 $(1.42)
Year ended 6/30/96 ...... 10.18 .10 (b) 1.85 1.95 0.00 0.00 0.00
Year ended 6/30/95 ...... 9.75 .06 .37 .43 0.00 0.00 0.00
6/2/94+ to 6/30/94 ...... 10.00 .01 (.26) (.25) 0.00 0.00 0.00
Class B
Year ended 6/30/97 ...... $11.96 $ .08 (b) $ 2.50 $ 2.58 $ (.08) $ 0.00 $(1.42)
Year ended 6/30/96 ...... 10.10 (.02) 1.88 1.86 0.00 0.00 0.00
Year ended 6/30/95 ...... 9.74 .02 .34 .36 0.00 0.00 0.00
6/2/94+ to 6/30/94 ...... 10.00 .00 (.26) (.26) 0.00 0.00 0.00
Class C
Year ended 6/30/97 ...... $11.96 $ .12 (b) $ 2.46 $ 2.58 $ (.08) $ 0.0 $(1.42)
Year ended 6/30/96 ...... 10.10 .03 1.83 1.86 0.00 0.00 0.00
2/8/95++ to 6/30/95 ..... 9.53 .05 .52 .57 0.00 0.00 0.00
New Europe Fund
Class A
Year ended 7/31/97 ...... $15.84 $ .07 (b) $ 4.20 $ 4.27 $ (.15) $ (.03) $(1.32)
Year ended 7/31/96 ...... 15.11 .18 1.02 1.20 0.00 0.00 (.47)
Year ended 7/31/95 ...... 12.66 .04 2.50 2.54 (.09) 0.00 0.00
Period ended 7/31/94** .. 12.53 .09 .04 .13 0.00 0.00 0.00
Year ended 2/28/94 ...... 9.37 .02 (b) 3.14 3.16 0.00 0.00 0.00
Year ended 2/28/93 ...... 9.81 .04 (.33) (.29) (.15) 0.00 0.00
Year ended 2/29/92 ...... 9.76 .02 (b) .05 .07 (.02) 0.00 0.00
4/2/90+ to 2/28/91 ...... 11.11 (e) .26 (.91) (.65) (.26) 0.00 (.44)
Class B
Year ended 7/31/97 ...... $15.31 $ (.04)(b) $ 4.02 $ 3.98 $ 0.00 $ (.10) $(1.32)
Year ended 7/31/96 ...... 14.71 .08 .99 1.07 0.00 0.00 (.47)
Year ended 7/31/95 ...... 12.41 (.05) 2.44 2.39 (.09) 0.00 0.00
Period ended 7/31/94** .. 12.32 .07 .02 .09 0.00 0.00 0.00
Year ended 2/28/94 ...... 9.28 (.05)(b) 3.09 3.04 0.00 0.00 0.00
Year ended 2/28/93 ...... 9.74 (.02) (.33) (.35) (.11) 0.00 0.00
3/5/91++ to 2/29/92 ..... 9.84 (.04)(b) (.04) (.08) (.02) 0.00 0.00
Class C
Year ended 7/31/97 ...... $15.33 $ (.04)(b) $ 4.02 $ 3.98 $ 0.00 $ (.10) $(1.32)
Year ended 7/31/96 ...... 14.72 .08 1.00 1.08 0.00 0.00 (.47)
Year ended 7/31/95 ...... 12.42 (.07) 2.46 2.39 (.09) 0.00 0.00
Period ended 7/31/94** .. 12.33 .06 .03 .09 0.00 0.00 0.00
5/3/93++ to 2/28/94 ..... 10.21 (.04)(b) 2.16 2.12 0.00 0.00 0.00
All-Asia Investment Fund
Class A
11/1/96 to 4/30/97+++ ... $11.04 $ (.13)(b) $ (.50) $ (.63) $ 0.00 $ 0.00 $ (.34)
Year ended 10/31/96 ..... 10.45 (.21)(b)(c) .88 .67 0.00 0.00 (.08)
11/28/94+ to 10/31/95 ... 10.00 (.19)(c) .64 .45 0.00 0.00 0.00
Class B
11/1/96 to 4/30/97+++ ... $10.90 $ (.16)(b) $ (.49) $ (.65) $ 0.00 $ 0.00 $ (.34)
Year ended 10/31/96 ..... 10.41 (.28)(b)(c) .85 .57 0.00 0.00 (.08)
11/28/94+ to 10/31/95 ... 10.00 (.25)(c) .66 .41 0.00 0.00 0.00
Class C
11/1/96 to 4/30/97+++ ... $10.91 $ (.16)(b) $ (.49) $ (.65) $ 0.00 $ 0.00 $ (.34)
Year ended 10/31/96 ..... 10.41 (.28)(b)(c) .86 .58 0.00 0.00 (.08)
11/28/94+ to 10/31/95 ... 10.00 (.35)(c) .76 .41 0.00 0.00 0.00
Global Small Cap Fund
Class A
Year ended 7/31/97 ...... $11.61 $ (.15)(b) $ 2.97 $ 2.82 $ 0.00 $ 0.00 $(1.56)
Year ended 7/31/96 ...... 10.38 (.14)(b) 1.90 1.76 0.00 0.00 (.53)
Year ended 7/31/95 ...... 11.08 (.09) 1.50 1.41 0.00 0.00 (2.11)(j)
Period ended 7/31/94** .. 11.24 (.15)(b) (.01) (.16) 0.00 0.00 0.00
Year ended 9/30/93 ...... 9.33 (.15) 2.49 2.34 0.00 0.00 (.43)
Year ended 9/30/92 ...... 10.55 (.16) (1.03) (1.19) 0.00 0.00 (.03)
Year ended 9/30/91 ...... 8.26 (.06) 2.35 2.29 0.00 0.00 0.00
Year ended 9/30/90 ...... 15.54 (.05)(b) (4.12) (4.17) 0.00 0.00 (3.11)
Year ended 9/30/89 ...... 11.41 (.03) 4.25 4.22 0.00 0.00 (.09)
Year ended 9/30/88 ...... 15.07 (.05) (1.83) (1.88) 0.00 0.00 (1.78)
Year ended 9/30/87 ...... 15.47 (.07) 4.19 4.12 (.04) 0.00 (4.48)
Class B
Year ended 7/31/97 ...... $11.03 $ (.21)(b) $ 2.77 $ 2.56 $ 0.00 $ 0.00 $(1.56)
Year ended 7/31/96 ...... 9.95 (.20)(b) 1.81 1.61 0.00 0.00 (.53)
Year ended 7/31/95 ...... 10.78 (.12) 1.40 1.28 0.00 0.00 (2.11)(j)
Period ended 7/31/94** .. 11.00 (.17)(b) (.05) (.22) 0.00 0.00 0.00
Year ended 9/30/93 ...... 9.20 (.15) 2.38 2.23 0.00 0.00 (.43)
Year ended 9/30/92 ...... 10.49 (.20) (1.06) (1.26) 0.00 0.00 (.03)
Year ended 9/30/91 ...... 8.26 (.07) 2.30 2.23 0.00 0.00 0.00
9/17/90++ to 9/30/90 .... 9.12 (.01) (.85) (.86) 0.00 0.00 0.00
Class C
Year ended 7/31/97 ...... $11.05 $ (.22)(b) $ 2.78 $ 2.56 $ 0.00 $ 0.00 $(1.56)
Year ended 7/31/96 ...... 9.96 (.20)(b) 1.82 1.62 0.00 0.00 (.53)
Year ended 7/31/95 ...... 10.79 (.17) 1.45 1.28 0.00 0.00 (2.11)(j)
Period ended 7/31/94** .. 11.00 (.17)(b) (.04) (.21) 0.00 0.00 0.00
5/3/93++ to 9/30/93 ..... 9.86 (.05) 1.19 1.14 0.00 0.00 0.00
------------------------------------------------------------------------------------------------------------------------------------
Please refer to the footnotes on page 18.
12
[Enlarge/Download Table]
Total Net Assets Ratio Of Net
Total Net Asset Investment At End Of Ratio Of Investment
Dividends Value Return Based Period Expenses Income (Loss) Average
And End Of on Net Asset (000's To Average To Average Portfolio Commission
Distributions Period Value (a) omitted) Net Assets Net Assets Turnover Rate Rate (k)
------------- ---------- ------------ ------------ ----------- ------------- ------------- ------------
$ (1.57) $ 13.26 25.16% $561,793 1.72% 1.27% 48% $ 0.0132
0.00 12.13 19.16 672,732 1.87 .95 28 --
0.00 10.18 4.41 13,535 2.56 .66 36 --
0.00 9.75 (2.50) 4,990 2.75* 1.03* 0 --
$ (1.50) $ 13.04 24.34% $121,173 2.43% .66% 48% $ 0.0132
0.00 11.96 18.42 83,050 2.83 (.20) 28 --
0.00 10.10 3.70 79,359 3.27 .01 36 --
0.00 9.74 (2.60) 22,859 3.45* .33* 0 --
$ (1.50) $ 13.04 24.33% $ 12,929 2.42% 1.06% 48% $ 0.0132
0.00 11.96 18.42 2,383 2.57 .63 28 --
0.00 10.10 5.98 338 3.27* 2.65* 36 --
$ (1.50) $ 18.61 28.78% $ 78,578 2.05%(l) .40% 89% $ 0.0569
(.47) 15.84 8.20 74,026 2.14 1.10 69 --
(.09) 15.11 20.22 86,112 2.09 .37 74 --
0.00 12.66 1.04 86,739 2.06* 1.85* 35 --
0.00 12.53 33.73 90,372 2.30 .17 94 --
(.15) 9.37 (2.82) 79,285 2.25 .47 125 --
(.02) 9.81 .74 108,510 2.24 .16 34 --
(.70) 9.76 (5.63) 188,016 1.52* 2.71* 48 --
$ (1.42) $ 17.87 27.76% $ 66,032 2.75%(l) (.23)% 89% $ 0.0569
(.47) 15.31 7.53 42,662 2.86 .59 69 --
(.09) 14.71 19.42 34,527 2.79 (.33) 74 --
0.00 12.41 .73 31,404 2.76* 1.15* 35 --
0.00 12.32 32.76 20,729 3.02 (.52) 94 --
(.11) 9.28 (3.49) 1,732 3.00 (.50) 125 --
(.02) 9.74 .03 1,423 3.02* (.71)* 34 --
$ (1.42) $ 17.89 27.73% $ 16,907 2.74%(l) (.23)% 89% $ 0.0569
(.47) 15.33 7.59 10,141 2.87 .58 69 --
(.09) 14.72 19.40 7,802 2.78 (.33) 74 --
0.00 12.42 .73 11,875 2.76* 1.15* 35 --
0.00 12.33 20.77 10,886 3.00* (.52)* 94 --
$ (.34) $ 10.07 (5.99)% $ 8,840 3.45%* (2.29)%* 56% $ 0.0269
(.08) 11.04 6.43 12,284 3.37*(f) (1.75) 66 0.0280
0.00 10.45 4.50 2,870 4.42*(f) (1.87)* 90 --
$ (.34) $ 9.91 (6.26)% $ 19,696 4.16%* (2.99)%* 56% $ 0.0269
(.08) 10.90 5.49 23,784 4.07(f) (2.44) 66 0.0280
0.00 10.41 4.10 5,170 5.20*(f) (2.64)* 90 --
$ (.34) $ 9.92 (6.25)% $ 2,898 4.14%* (2.98)%* 56% $ 0.0269
(.08) 10.91 5.59 4,228 4.07(f) (2.42) 66 0.0280
0.00 10.41 4.10 597 5.84*(f) (3.41)* 90 --
$ (1.56) $ 12.87 26.47% $ 85,217 2.41%(l) (1.25)% 129% $ 0.0364
(.53) 11.61 17.46 68,623 2.51 (1.22) 139 --
(2.11) 10.38 16.62 60,057 2.54(f) (1.17) 128 --
0.00 11.08 (1.42) 61,372 2.42* (1.26)* 78 --
(.43) 11.24 25.83 65,713 2.53 (1.13) 97 --
(.03) 9.33 (11.30) 58,491 2.34 (.85) 108 --
0.00 10.55 27.72 84,370 2.29 (.55) 104 --
(3.11) 8.26 (31.90) 68,316 1.73 (.46) 89 --
(.09) 15.54 37.34 113,583 1.56 (.17) 106 --
(1.78) 11.41 (8.11) 90,071 1.54(f) (.50) 74 --
(4.52) 15.07 34.11 113,305 1.41(f) (.44) 98 --
$ (1.56) $ 12.03 25.42% $ 31,946 3.11%(l) (1.92)% 129% $ 0.0364
(.53) 11.03 16.69 14,247 3.21 (1.88) 139 --
(2.11) 9.95 15.77 5,164 3.20(f) (1.92) 128 --
0.00 10.78 (2.00) 3,889 3.15* (1.93)* 78 --
(.43) 11.00 24.97 1,150 3.26 (1.85) 97 --
(.03) 9.20 (12.03) 819 3.11 (1.31) 108 --
0.00 10.49 27.00 121 2.98 (1.39) 104 --
0.00 8.26 (9.43) 183 2.61* (1.30)* 89 --
$ (1.56) $ 12.05 25.37% $ 8,718 3.10%(l) (1.93)% 129% $ 0.0364
(.53) 11.05 16.77 4,119 3.19 (1.85) 139 --
(2.11) 9.96 15.75 1,407 3.25(f) (2.10) 128 --
0.00 10.79 (1.91) 1,330 3.13* (1.92)* 78 --
0.00 11.00 11.56 261 3.75* (2.51)* 97 --
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13
[Enlarge/Download Table]
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
---------------------- ------------ -------------- -------------- --------------- -------------- --------------
Strategic Balanced Fund (i)
Class A
Year ended 7/31/97 .......... $18.48 $ .47(b)(c) $ 3.56 $ 4.03 $ (.39) $(2.33)
Year ended 7/31/96 .......... 17.98 .35(b)(c) 1.08 1.43 (.32) (.61)
Year ended 7/31/95 .......... 16.26 .34(c) 1.64 1.98 (.22) (.04)
Period ended 7/31/94** ...... 16.46 .07(c) (.27) (.20) 0.00 0.00
Year ended 4/30/94 .......... 16.97 .16(c) .74 .90 (.24) (1.17)
Year ended 4/30/93 .......... 17.06 .39(c) .59 .98 (.42) (.65)
Year ended 4/30/92 .......... 14.48 .27(c) 2.80 3.07 (.17) (.32)
9/4/90++ to 4/30/91 ......... 12.51 .34(c) 1.66 2.00 (.03) 0.00
Class B
Year ended 7/31/97 .......... $15.89 $ .28(b)(c) $ 3.02 $ 3.30 $ (.27) $(2.33)
Year ended 7/31/96 .......... 15.56 .16(b)(c) .98 1.14 (.20) (.61)
Year ended 7/31/95 .......... 14.10 .22(c) 1.40 1.62 (.12) (.04)
Period ended 7/31/94** ...... 14.30 .03(c) (.23) (.20) 0.00 0.00
Year ended 4/30/94 .......... 14.92 .06(c) .63 .69 (.14) (1.17)
Year ended 4/30/93 .......... 15.51 .23(c) .53 .76 (.25) (1.10)
Year ended 4/30/92 .......... 13.96 .22(c) 2.70 2.92 (.29) (1.08)
Year ended 4/30/91 .......... 12.40 .43(c) 1.60 2.03 (.47) 0.00
Year ended 4/30/90 .......... 11.97 .50(b)(c) .60 1.10 (.25) (.42)
Year ended 4/30/89 .......... 11.45 .48(c) 1.11 1.59 (.30) (.77)
10/23/87+ to 4/30/88 ........ 10.00 .13(c) 1.38 1.51 (.06) 0.00
Class C
Year ended 7/31/97 .......... $15.89 $ .28(b)(c) $ 3.02 $ 3.30 $ (.27) $(2.33)
Year ended 7/31/96 .......... 15.57 .14(b)(c) .99 1.13 (.20) (.61)
Year ended 7/31/95 .......... 14.11 .16(c) 1.46 1.62 (.12) (.04)
Period ended 7/31/94** ...... 14.31 .03(c) (.23) (.20) 0.00 0.00
8/2/93++ to 4/30/94 ......... 15.64 .15(c) (.17) (.02) (.14) (1.17)
Balanced Shares
Class A
Year ended 7/31/97 .......... $14.01 $ .31(b) $ 3.97 $ 4.28 $ (.32) $(1.80)
Year ended 7/31/96 .......... 15.08 .37 .45 .82 (.41) (1.48)
Year ended 7/31/95 .......... 13.38 .46 1.62 2.08 (.36) (.02)
Period ended 7/31/94** ...... 14.40 .29 (.74) (.45) (.28) (.29)
Year ended 9/30/93 .......... 13.20 .34 1.29 1.63 (.43) 0.00
Year ended 9/30/92 .......... 12.64 .44 .57 1.01 (.45) 0.00
Year ended 9/30/91 .......... 10.41 .46 2.17 2.63 (.40) 0.00
Year ended 9/30/90 .......... 14.13 .45 (2.14) (1.69) (.40) (1.63)
Year ended 9/30/89 .......... 12.53 .42 2.18 2.60 (.46) (.54)
Year ended 9/30/88 .......... 16.33 .46 (1.07) (.61) (.44) (2.75)
Year ended 9/30/87 .......... 14.64 .67 1.62 2.29 (.60) 0.00
Class B
Year ended 7/31/97 .......... $13.79 $ .19(b) $ 3.89 $ 4.08 $ (.24) $(1.80)
Year ended 7/31/96 .......... 14.88 .28 .42 .70 (.31) (1.48)
Year ended 7/31/95 .......... 13.23 .30 1.65 1.95 (.28) (.02)
Period ended 7/31/94** ...... 14.27 .22 (.75) (.53) (.22) (.29)
Year ended 9/30/93 .......... 13.13 .29 1.22 1.51 (.37) 0.00
Year ended 9/30/92 .......... 12.61 .37 .54 .91 (.39) 0.00
2/4/91++ to 9/30/91 ......... 11.84 .25 .80 1.05 (.28) 0.00
Class C
Year ended 7/31/97 .......... $13.81 $ .20(b) $ 3.89 $ 4.09 $ (.24) $(1.80)
Year ended 7/31/96 .......... 14.89 .26 .45 .71 (.31) (1.48)
Year ended 7/31/95 .......... 13.24 .30 1.65 1.95 (.28) (.02)
Period ended 7/31/94** ...... 14.28 .24 (.77) (.53) (.22) (.29)
5/3/93++ to 9/30/93 ......... 13.63 .11 .71 .82 (.17) 0.00
Income Builder Fund (h)
Class A
11/1/96 to 4/30/97+++ ....... $11.57 $ .24(b) $ .69 $ .93 $ (.25) $ (.61)
Year ended 10/31/96 ......... 10.70 .56(b) .98 1.54 (.55) (.12)
Year ended 10/31/95 ......... 9.69 .93(b) .59 1.52 (.51) 0.00
3/25/94++ to 10/31/94 ....... 10.00 .96 (1.02) (.06) (.05)(g) (.20)
Class B
11/1/96 to 4/30/97+++ ....... $11.55 $ .20(b) $ .70 $ .90 $ (.22) $ (.61)
Year ended 10/31/96 ......... 10.70 .47(b) .98 1.45 (.48) (.12)
Year ended 10/31/95 ......... 9.68 .63(b) .83 1.46 (.44) 0.00
3/25/94++ to 10/31/94 ....... 10.00 .88 (.98) (.10) (.06)(g) (.16)
Class C
11/1/96 to 4/30/97+++ ....... $11.52 $ .21(b) $ .68 $ .89 $ (.22) $ (.61)
Year ended 10/31/96 ......... 10.67 .46(b) .99 1.45 (.48) (.12)
Year ended 10/31/95 ......... 9.66 .40(b) 1.05 1.45 (.44) 0.00
Year ended 10/31/94 ......... 10.47 .50 (.85) (.35) (.11)(g) (.35)
Year ended 10/31/93 ......... 9.80 .52 .51 1.03 (.36) 0.00
Year ended 10/31/92 ......... 10.00 .55 (.28) .27 (.47) 0.00
10/25/91+ to 10/31/91 ....... 10.00 .01 0.00 .01 (.01) 0.00
Utility Income Fund
Class A
12/1/96 to 5/31/97+++ ....... $10.59 $ .16(b)(c) $ .07 $ .23 $ (.18) $ (.13)
Year ended 11/30/96 ......... 10.22 .18(b)(c) .65 .83 (.46) 0.00
Year ended 11/30/95 ......... 8.97 .27(c) 1.43 1.70 (.45) 0.00
Year ended 11/30/94 ......... 9.92 .42(c) (.89) (.47) (.48) 0.00
10/18/93+ to 11/30/93 ....... 10.00 .02(c) (.10) (.08) 0.00 0.00
------------------------------------------------------------------------------------------------------------------------------------
Please refer to the footnotes on page 18.
14
[Enlarge/Download Table]
Total Net Assets Ratio Of Net
Total Net Asset Investment At End Of Ratio Of Investment
Dividends Value Return Based Period Expenses Income (Loss) Average
And End Of on Net Asset (000's To Average To Average Portfolio Commission
Distributions Period Value (a) omitted) Net Assets Net Assets Turnover Rate Rate (k)
------------- --------- ------------ ------------ ----------- ------------- ------------- ------------
$ (2.72) $ 19.79 23.90% $ 20,312 1.41%(f)(l) 2.50%(c) 170% $ 0.0395
(.93) 18.48 8.05 18,329 1.40(f) 1.78 173 --
(.26) 17.98 12.40 10,952 1.40(f) 2.07 172 --
0.00 16.26 (1.22) 9,640 1.40(f) 1.63* 21 --
(1.41) 16.46 5.06 9,822 1.40*(f) 1.67 139 --
(1.07) 16.97 5.85 8,637 1.40(f) 2.29 98 --
(.49) 17.06 20.96 6,843 1.40(f) 1.92 103 --
(.03) 14.48 16.00 443 1.40*(f) 3.54* 137 --
$ (2.60) $ 16.59 23.01% $ 28,037 2.12%(f)(l) 1.78%(f) 170% $ 0.0395
(.81) 15.89 7.41 28,492 2.10(f) .99(f) 173 --
(.16) 15.56 11.63 37,301 2.10(f) 1.38(f) 172 --
0.00 14.10 (1.40) 43,578 2.10*(f) .92*(f) 21 --
(1.31) 14.30 4.29 43,616 2.10(f) .93(f) 139 --
(1.35) 14.92 4.96 36,155 2.15(f) 1.55(f) 98 --
(1.37) 15.51 20.14 31,842 2.15(f) 1.34(f) 103 --
(.47) 13.96 16.73 22,552 2.10(f) 3.23(f) 137 --
(.67) 12.40 8.85 19,523 2.00(f) 3.85(f) 120 --
(1.07) 11.97 14.66 5,128 2.00(f) 4.31(f) 103 --
(.06) 11.45 15.10 2,344 2.00*(f) 2.44*(f) 72 --
$ (2.60) $ 16.59 23.01% $ 3,045 2.12%(f)(l) 1.78% 170% $ 0.0395
(.81) 15.89 7.34 3,157 2.10(f) .99 173 --
(.16) 15.57 11.62 4,113 2.10(f) 1.38 172 --
0.00 14.11 (1.40) 4,317 2.10*(f) .93* 21 --
(1.31) 14.31 .45 4,289 2.10*(f) .69* 139 --
$ (2.12) $ 16.17 33.46% $115,500 1.47%(l) 2.11% 207% $ 0.0552
(1.89) 14.01 5.23 102,567 1.38 2.41 227 --
(.38) 15.08 15.99 122,033 1.32 3.12 179 --
(.57) 13.38 (3.21) 157,637 1.27* 2.50* 116 --
(.43) 14.40 12.52 172,484 1.35 2.50 188 --
(.45) 13.20 8.14 143,883 1.40 3.26 204 --
(.40) 12.64 25.52 154,230 1.44 3.75 70 --
(2.03) 10.41 (13.12) 140,913 1.36 4.01 169 --
(1.00) 14.13 22.27 159,290 1.42 3.29 132 --
(3.19) 12.53 (1.10) 111,515 1.42 3.74 190 --
(.60) 16.33 15.80 129,786 1.17 4.14 136 --
$ (2.04) $ 15.83 32.34% $ 24,192 2.25%(l) 1.32% 207% $ 0.0552
(1.79) 13.79 4.45 18,393 2.16 1.61 227 --
(.30) 14.88 15.07 15,080 2.11 2.30 179 --
(.51) 13.23 (3.80) 14,347 2.05* 1.73* 116 --
(.37) 14.27 11.65 12,789 2.13 1.72 188 --
(.39) 13.13 7.32 6,499 2.16 2.46 204 --
(.28) 12.61 8.96 1,830 2.13* 3.19* 70 --
$ (2.04) $ 15.86 32.37% $ 5,510 2.23%(l) 1.37% 207% $ 0.0552
(1.79) 13.81 4.52 6,096 2.15 1.63 227 --
(.30) 14.89 15.06 5,108 2.09 2.32 179 --
(.51) 13.24 (3.80) 6,254 2.03* 1.81* 116 --
(.17) 14.28 6.01 1,487 2.29* 1.47* 188 --
$ (.86) $ 11.64 8.31% $ 1,943 2.30%* 4.22%* 169% $ 0.0519
(.67) 11.57 14.82 2,056 2.20 4.92 108 0.0600
(.51) 10.70 16.22 1,398 2.38 5.44 92 --
(.25) 9.69 (.54) 600 2.52* 6.11* 126 --
$ (.83) $ 11.62 8.01% $ 7,328 3.01%* 3.53%* 169% $ 0.0519
(.60) 11.55 13.92 5,775 2.92 4.19 108 0.0600
(.44) 10.70 15.55 3,769 3.09 4.73 92 --
(.22) 9.68 (.99) 1,998 3.09* 5.07* 126 --
$ (.83) $ 11.58 7.94% $ 43,577 3.00%* 3.53%* 169% $ 0.0519
(.60) 11.52 13.96 44,441 2.93 4.13 108 0.0600
(.44) 10.67 15.47 49,107 3.02 4.81 92 --
(.46) 9.66 (3.44) 64,027 2.67 3.82 126 --
(.36) 10.47 10.65 106,034 2.32 6.85 101 --
(.47) 9.80 2.70 152,617 2.33 5.47 108 --
(.01) 10.00 .11 41,813 0.00*(f) .94* 0 --
$ (.31) $ 10.51 2.19% $ 3,571 1.50%*(f) 3.06%* 23% $ 0.0411
(.46) 10.59 8.47 3,294 1.50(f) 1.67 98 0.0536
(.45) 10.22 19.58 2,748 1.50(f) 2.48 162 --
(.48) 8.97 (4.86) 1,068 1.50(f) 4.13 30 --
0.00 9.92 (.80) 229 1.50*(f) 2.35* 11 --
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15
[Enlarge/Download Table]
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
---------------------- ------------ -------------- -------------- --------------- -------------- --------------
Utility Income Fund (continued)
Class B
12/1/96 to 5/31/97+++ ......... $10.57 $ .12(b)(c) $ .08 $ .20 $ (.15) $ (.13)
Year ended 11/30/96 ........... 10.20 .10(b)(c) .67 .77 (.40) 0.00
Year ended 11/30/95 ........... 8.96 .18(c) 1.45 1.63 (.39) 0.00
Year ended 11/30/94 ........... 9.91 .37(c) (.91) (.54) (.41) 0.00
10/18/93+ 11/30/93 ............ 10.00 .01(c) (.10) (.09) 0.00 0.00
Class C
12/1/96 to 5/31/97+++ ......... $10.59 $ .12(b)(c) $ .07 $ .19 $ (.15) $ (.13)
Year ended 11/30/96 ........... 10.22 .11(b)(c) .66 .77 (.40) 0.00
Year ended 11/30/95 ........... 8.97 .18(c) 1.46 1.64 (.39) 0.00
Year ended 11/30/94 ........... 9.92 .39(c) (.93) (.54) (.41) 0.00
10/27/93+ to 11/30/93 ......... 10.00 .01(c) (.09) (.08) 0.00 0.00
Growth and Income Fund
Class A
11/1/96 to 4/30/97+++ ......... $ 3.00 $ .03(b) $ .36 $ .39 $ (.03) $ (.38)
Year ended 10/31/96 ........... 2.71 .05 .50 .55 (.05) (.21)
Year ended 10/31/95 ........... 2.35 .02 .52 .54 (.06) (.12)
Year ended 10/31/94 ........... 2.61 .06 (.08) (.02) (.06) (.18)
Year ended 10/31/93 ........... 2.48 .06 .29 .35 (.06) (.16)
Year ended 10/31/92 ........... 2.52 .06 .11 .17 (.06) (.15)
Year ended 10/31/91 ........... 2.28 .07 .56 .63 (.09) (.30)
Year ended 10/31/90 ........... 3.02 .09 (.30) (.21) (.10) (.43)
Year ended 10/31/89 ........... 3.05 .10 .43 .53 (.08) (.48)
Year ended 10/31/88 ........... 3.48 .10 .33 .43 (.08) (.78)
Year ended 10/31/87 ........... 3.52 .11 (.03) .08 (.12) 0.00
Class B
11/1/96 to 4/30/97+++ ......... $ 2.99 $ .01(b) $ .36 $ .37 $ (.02) $ (.38)
Year ended 10/31/96 ........... 2.69 .03 .51 .54 (.03) (.21)
Year ended 10/31/95 ........... 2.34 .01 .49 .50 (.03) (.12)
Year ended 10/31/94 ........... 2.60 .04 (.08) (.04) (.04) (.18)
Year ended 10/31/93 ........... 2.47 .05 .28 .33 (.04) (.16)
Year ended 10/31/92 ........... 2.52 .04 .11 .15 (.05) (.15)
2/8/91++ to 10/31/91 .......... 2.40 .04 .12 .16 (.04) 0.00
Class C
11/1/96 to 4/30/97+++ ......... $ 2.99 $ .01(b) $ .37 $ .38 $ (.02) $ (.38)
Year ended 10/31/96 ........... 2.70 .03 .50 .53 (.03) (.21)
Year ended 10/31/95 ........... 2.34 .01 .50 .51 (.03) (.12)
Year ended 10/31/94 ........... 2.60 .04 (.08) (.04) (.04) (.18)
5/3/93 ++ to 10/31/93 ......... 2.43 .02 .17 .19 (.02) 0.00
Real Estate Investment Fund
Class A
10/1/96+ to 8/31/97 ........... $10.00 $ .30(b) $ 2.88 $ 3.18 $ (.38)(m) $ 0.00
Class B
Year ended 10/1/96+ to 8/31/97 $10.00 $ .23(b) $ 2.89 $ 3.12 $ (.33)(m) $ 0.00
Class C
Year ended 10/1/96+ to 8/31/97 $10.00 $ .23(b) $ 2.89 $ 3.12 $ (.33)(m) $ 0.00
------------------------------------------------------------------------------------------------------------------------------------
Please refer to the footnotes on page 18.
16
[Enlarge/Download Table]
Total Net Assets Ratio Of Net
Total Net Asset Investment At End Of Ratio Of Investment
Dividends Value Return Based Period Expenses Income (Loss) Average
And End Of on Net Asset (000's To Average To Average Portfolio Commission
Distributions Period Value (a) omitted) Net Assets Net Assets Turnover Rate Rate (k)
------------- --------- ------------ ------------ ----------- ------------- ------------- ------------
$ (.28) $ 10.49 1.86% $ 12,972 2.20%*(f) 2.40%* 23% $0.0411
(.40) 10.57 7.82 13,561 2.20(f) .95 98 0.0536
(.39) 10.20 18.66 10,988 2.20(f) 1.60 162 --
(.41) 8.96 (5.59) 2,353 2.20(f) 3.53 30 --
0.00 9.91 (.90) 244 2.20*(f) 2.84* 11 --
$ (.28) $ 10.50 1.76% $ 3,195 2.20%*(f) 2.39%* 23% $0.0411
(.40) 10.59 7.81 3,376 2.20(f) .94 98 0.0536
(.39) 10.22 18.76 3,500 2.20(f) 1.88 162 --
(.41) 8.97 (5.58) 2,651 2.20(f) 3.60 30 --
0.00 9.92 (.80) 18 2.20*(f) 3.08* 11 --
$ (.41) $ 2.98 13.29% $628,306 .91%* 1.76%* 55% $0.0585
(.26) 3.00 21.51 553,151 .97 1.73 88 0.0625
(.18) 2.71 24.21 458,158 1.05 1.88 142 --
(.24) 2.35 (.67) 414,386 1.03 2.36 68 --
(.22) 2.61 14.98 459,372 1.07 2.38 91 --
(.21) 2.48 7.23 417,018 1.09 2.63 104 --
(.39) 2.52 31.03 409,597 1.14 2.74 84 --
(.53) 2.28 (8.55) 314,670 1.09 3.40 76 --
(.56) 3.02 21.59 377,168 1.08 3.49 79 --
(.86) 3.05 16.45 350,510 1.09 3.09 66 --
(.12) 3.48 2.04 348,375 .86 2.77 60 --
$ (.40) $ 2.96 12.60% $326,163 1.72%* .96%* 55% $0.0585
(.24) 2.99 21.20 235,263 1.78 .91 88 0.0625
(.15) 2.69 22.84 136,758 1.86 1.05 142 --
(.22) 2.34 (1.50) 102,546 1.85 1.56 68 --
(.20) 2.60 14.22 76,633 1.90 1.58 91 --
(.20) 2.47 6.22 29,656 1.90 1.69 104 --
(.04) 2.52 6.83 10,221 1.99* 1.67* 84 --
$ (.40) $ 2.97 12.98% $ 78,967 1.70%* .97%* 55% $0.0585
(.24) 2.99 20.72 61,356 1.76 .93 88 0.0625
(.15) 2.70 23.30 35,835 1.84 1.04 142 --
(.22) 2.34 (1.50) 19,395 1.84 1.61 68 --
(.02) 2.60 7.85 7,774 1.96* 1.45* 91 --
$ (.38) $ 12.80 32.24% $ 37,638 1.77%*(l) 2.73%* 20% $0.0518
$ (.33) $ 12.79 31.49% $186,802 2.44%*(l) 2.08%* 20% $0.0518
$ (.33) $ 12.79 31.49% $ 42,719 2.43%*(l) 2.06%* 20% $0.0518
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17
----------
+ Commencement of operations.
++ Commencement of distribution.
+++ Unaudited.
* Annualized.
** Reflects a change in fiscal year end.
(a) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at the net asset value during the period, and a
redemption on the last day of the period. Initial sales charge or
contingent deferred sales charge is not reflected in the calculation of
total investment return. Total investment returns calculated for periods of
less than one year are not annualized.
(b) Based on average shares outstanding.
(c) Net of fee waiver and/or expense reimbursement.
(d) Adjusted for a 200% stock dividend paid to shareholders of record on
January 15, 1988.
(e) Net of offering costs of ($.05).
(f) Net of expenses assumed and/or waived/reimbursed. If the following Funds
had borne all expenses in their most recent five fiscal years, their
expense ratios, giving effect to the expense offset arrangement described
in (l) below, would have been as follows:
[Enlarge/Download Table]
1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ----
All-Asia Investment Fund
Class A -- -- 10.57%# 3.62% --
Class B -- -- 11.32%# 4.32% --
Class C -- -- 11.38%# 4.32% --
Growth Fund
Class A 1.94% 1.84% 1.46% -- -- --
Class B 2.65% 2.52% 2.13% -- -- --
Class C -- -- 2.13%# --
Premier Growth
Class A 3.33%# -- -- -- -- --
Class B 3.78%# -- -- -- -- --
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 1.85% 1.70%1 1.81% 1.76% 2.06%
1.94%#2
Class B 2.56% 2.42%1 2.49% 2.47% 2.76%
2.64%#2
Class C -- 2.07%#1 2.50% 2.48% 2.76%
2.64%#2
Utility Income Fund
Class A 145.63%# 13.72% 4.86%# 3.38% 3.41%
Class B 133.62%# 14.42% 5.34%# 4.08% 4.12%
Class C 148.03%# 14.42% 5.99%# 4.07% 4.11%
----------
# annualized
1. For the period ended April 30, 1994
2. For the period ended July 31, 1994
For the expense ratios of the Funds in years prior to fiscal year 1992, assuming
the Funds had borne all expenses, please see the Financial Statements in each
Fund's Statement of Additional Information.
(g) "Dividends from Net Investment Income" includes a return of capital. Income
Builder Fund had a return of capital with respect to Class A shares, for
the period ended October 31, 1994, of $(.01); with respect to Class B
shares, $(.01); and with respect to Class C shares, for the year ended
October 31, 1994, $(.02).
(h) On March 25, 1994, all existing shares of Income Builder Fund, previously
known as Alliance Multi-Market Income and Growth Trust, were converted into
Class C shares.
(i) Prior to July 22, 1993, Equitable Capital Management Corporation
("Equitable Capital") served as the investment adviser to the predecessor
to The Alliance Portfolios, of which Growth Fund and Strategic Balanced
Fund are series. On July 22, 1993, Alliance acquired the business and
substantially all assets of Equitable Capital and became investment adviser
to the Funds.
(j) "Distributions from Net Realized Gains" includes a return of capital of
$(.12).
(k) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades on
which commissions are charged.
(l) The following funds benefitted from an expense offset arrangement with the
transfer agent. Had such expense offset not been in effect, the ratio of
expenses to average net assets, absent the assumption and/or
waiver/reimbursement of expenses described in (f) above, would have been as
follows:
[Enlarge/Download Table]
Balanced Shares 1997 International Fund 1997 Strategic Balanced 1997
---------------------------------------------------------------------------------------------------------
Class A 1.46% Class A 1.73% Class A 1.40%
Class B 2.24% Class B 2.58% Class B 2.10%
Class C 2.22% Class C 2.56% Class C 2.10%
Real Estate 1997 Global Small Cap Fund 1997 New Europe 1997
---------------------------------------------------------------------------------------------------------
Class A 1.77% Class A 2.38% Class A 2.04%
Class B 2.43% Class B 3.08% Class B 2.74%
Class C 2.42% Class C 3.08% Class C 2.73%
(m) Distributions from net investment income include a tax return of capital of
$.08, $.09 and $.09 for Class A, B and C shares, respectively.
18
-------------------------------------------------------------------------------
GLOSSARY
-------------------------------------------------------------------------------
The following terms are frequently used in this Prospectus.
Equity securities are (i) common stocks, partnership interests, business trust
shares and other equity or ownership interests in business enterprises, and (ii)
securities convertible into, and rights and warrants to subscribe for the
purchase of, such stocks, shares and interests.
Debt securities are bonds, debentures, notes, bills, repurchase agreements,
loans, other direct debt instruments and other fixed, floating and variable rate
debt obligations, but do not include convertible securities.
Fixed-income securities are debt securities and dividend-paying preferred stocks
and include floating rate and variable rate instruments.
Convertible securities are fixed-income securities that are convertible into
common stock.
U.S. Government securities are securities issued or guaranteed by the United
States Government, its agencies or instrumentalities.
Foreign government securities are securities issued or guaranteed, as to payment
of principal and interest, by governments, quasi-governmental entities,
governmental agencies or other governmental entities.
Asian company is an entity that (i) is organized under the laws of an Asian
country and conducts business in an Asian country, (ii) derives 50% or more of
its total revenues from business in Asian countries, or (iii) issues equity or
debt securities that are traded principally on a stock exchange in an Asian
country.
Asian countries are Australia, the Democratic Socialist Republic of Sri Lanka,
Hong Kong, the Islamic Republic of Pakistan, Japan, the Kingdom of Thailand,
Malaysia, Negara Brunei Darussalam (Brunei), New Zealand, the People's Republic
of China, the People's Republic of Kampuchea (Cambodia), the Republic of China
(Taiwan), the Republic of India, the Republic of Indonesia, the Republic of
Korea (South Korea), the Republic of the Philippines, the Republic of Singapore,
the Socialist Republic of Vietnam and the Union of Myanmar.
Moody's is Moody's Investors Service, Inc.
S&P is Standard & Poor's Ratings Services.
Duff & Phelps is Duff & Phelps Credit Rating Co.
Fitch is Fitch Investors Service, L.P.
Investment grade securities are fixed-income securities rated Baa and above by
Moody's or BBB and above by S&P, Duff & Phelps or Fitch, or determined by
Alliance to be of equivalent quality.
Lower-rated securities are fixed-income securities rated Ba or below by Moody's
or BB or below by S&P, Duff & Phelps or Fitch, or determined by Alliance to be
of equivalent quality, and are commonly referred to as "junk bonds."
Prime commercial paper is commercial paper rated Prime 1 by Moody's or A-1 or
higher by S&P or, if not rated, issued by companies that have an outstanding
debt issue rated Aa or higher by Moody's or AA or higher by S&P.
Qualifying bank deposits are certificates of deposit, bankers' acceptances and
interest-bearing savings deposits of banks having total assets of more than $1
billion and which are members of the Federal Deposit Insurance Corporation.
Rule 144A securities are securities that may be resold pursuant to Rule 144A
under the Securities Act of 1933, as amended (the "Securities Act").
Depositary receipts include American Depositary Receipts ("ADRs"), Global
Depositary Receipts ("GDRs") and other types of depositary receipts.
Commission is the Securities and Exchange Commission.
1940 Act is the Investment Company Act of 1940, as amended.
Code is the Internal Revenue Code of 1986, as amended.
19
--------------------------------------------------------------------------------
DESCRIPTION OF THE FUNDS
--------------------------------------------------------------------------------
Except as noted, (i) the Funds' investment objectives are "fundamental" and
cannot be changed without shareholder vote, and (ii) the Funds' investment
policies are not fundamental and thus can be changed without a shareholder vote.
No Fund will change a non-fundamental objective or policy without notifying its
shareholders. There is no guarantee that any Fund will achieve its investment
objective.
INVESTMENT OBJECTIVES AND POLICIES
Domestic Stock Funds
The Domestic Stock Funds have been designed to offer investors seeking capital
appreciation a range of alternative approaches to investing in the U.S. equity
markets.
The Alliance Fund
The Alliance Fund, Inc. ("Alliance Fund") is a diversified investment company
that seeks long-term growth of capital and income primarily through investment
in common stocks. The Fund normally invests substantially all of its assets in
common stocks that Alliance believes will appreciate in value, but it may invest
in other types of securities such as convertible securities, high grade
instruments, U.S. Government securities and high quality, short-term obligations
such as repurchase agreements, bankers' acceptances and domestic certificates of
deposit, and may invest without limit in foreign securities. While the
diversification and generally high quality of the Fund's investments cannot
prevent fluctuations in market values, they tend to limit investment risk and
contribute to achieving the Fund's objective. The Fund generally does not effect
portfolio transactions in order to realize short-term trading profits or
exercise control.
The Fund may also: (i) make secured loans of its portfolio securities equal in
value up to 25% of its total assets to brokers, dealers and financial
institutions; (ii) enter into repurchase agreements of up to one week in
duration with commercial banks, but only if those agreements together with any
restricted securities and any securities which do not have readily available
market quotations do not exceed 10% of its net assets; and (iii) write
exchange-traded covered call options with respect to up to 25% of its total
assets. For additional information on the use, risks and costs of these policies
and practices see "Additional Investment Practices."
Alliance Growth Fund
Alliance Growth Fund ("Growth Fund") is a diversified investment company that
seeks long-term growth of capital. Current income is only an incidental
consideration. The Fund seeks to achieve its objective by investing primarily in
equity securities of companies with favorable earnings outlooks and whose
long-term growth rates are expected to exceed that of the U.S. economy over
time. The Fund's investment objective is not fundamental.
The Fund may also invest up to 25% of its total assets in lower-rated
fixed-income and convertible bonds. See "Risk Considerations--Securities
Ratings" and "--Investment in Lower-Rated Fixed-Income Securities." The Fund
generally will not invest in securities rated at the time of purchase below Caa-
by Moody's and CCC- by S&P, Duff & Phelps or Fitch or in securities judged by
Alliance to be of comparable investment quality. However, from time to time, the
Fund may invest in securities rated in the lowest grades (i.e., C by Moody's or
D or equivalent by S&P, Duff & Phelps or Fitch), or securities Alliance judges
to be of comparable investment quality, if there are prospects for an upgrade or
a favorable conversion into equity securities. If the credit rating of a
security held by the Fund falls below its rating at the time of purchase (or
Alliance determines that the quality of such security has so deteriorated), the
Fund may continue to hold the security if such investment is considered
appropriate under the circumstances.
The Fund may also: (i) invest in "zero-coupon" bonds and "payment-in-kind"
bonds; (ii) invest in foreign securities, although the Fund will not generally
invest more than 15% of its total assets in foreign securities; (iii) invest in
securities that are not publicly traded, including Rule 144A securities; (iv)
buy or sell foreign currencies, options on foreign currencies, foreign currency
futures contracts (and related options) and deal in forward foreign exchange
contracts; (v) lend portfolio securities amounting to not more than 25% of its
total assets; (vi) enter into repurchase agreements of up to 25% of its total
assets and purchase and sell securities on a forward commitment basis; (vii) buy
and sell stock index futures contracts and buy and sell options on those
contracts and on stock indices; (viii) purchase and sell futures contracts,
options thereon and options with respect to U.S. Treasury securities; (ix) write
covered call and put options on securities it owns or in which it may invest;
and (x) purchase and sell put and call options. For additional information on
the use, risks and costs of these policies and practices see "Additional
Investment Practices."
Alliance Premier Growth Fund
Alliance Premier Growth Fund, Inc. ("Premier Growth Fund") is a diversified
investment company that seeks long-term growth of capital by investing
predominantly in the equity securities of a limited number of large, carefully
selected, high-quality U.S. companies that are judged likely to achieve superior
earnings growth. Normally, about 40 companies will be represented in the Fund's
portfolio, with the 25 most highly regarded of these companies usually
constituting approximately 70% of the Fund's net assets. The Fund is thus
atypical from most equity mutual funds in its focus on a relatively small number
of intensively researched companies and is designed for those seeking to
accumulate capital over time with less volatility than that associated with
investment in smaller companies.
As a matter of fundamental policy, the Fund normally invests at least 85% of its
total assets in the equity securities of U.S. companies. These are companies (i)
organized under U.S. law that have their principal office in the U.S., and (ii)
the equity securities of which are traded principally in the U.S.
Alliance's investment strategy for the Fund emphasizes stock selection and
investment in the securities of a limited number of issuers. Alliance relies
heavily upon the fundamental analysis
20
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
21
put and call options written by others. For additional information on the use,
risks and costs of these policies and practices see "Additional Investment
Practices."
Global Stock Funds
The Global Stock Funds have been designed to enable investors to participate in
the potential for long-term capital appreciation available from investment in
foreign securities.
Alliance International Fund
Alliance International Fund ("International Fund") is a diversified investment
company that seeks a total return on its assets from long-term growth of capital
and from income primarily through a broad portfolio of marketable securities of
established non-U.S. companies, companies participating in foreign economies
with prospects for growth, including U.S. companies having their principal
activities and interests outside the U.S. and foreign government securities.
Normally, more than 80% of the Fund's assets will be invested in such issuers.
The Fund expects to invest primarily in common stocks of established non-U.S.
companies that Alliance believes have potential for capital appreciation or
income or both, but the Fund is not required to invest exclusively in common
stocks or other equity securities, and it may invest in any other type of
investment grade security, including convertible securities, as well as in
warrants, or obligations of the U.S. or foreign governments and their political
subdivisions.
The Fund intends to diversify its investments broadly among countries and
normally invests in at least three foreign countries, although it may invest a
substantial portion of its assets in one or more of such countries. In this
regard, at June 30, 1997, approximately 28% of the Fund's assets were invested
in securities of Japanese issuers. The Fund may invest in companies, wherever
organized, that Alliance judges have their principal activities and interests
outside the U.S. These companies may be located in developing countries, which
involves exposure to economic structures that are generally less diverse and
mature, and to political systems which can be expected to have less stability,
than those of developed countries. The Fund currently does not intend to invest
more than 10% of its total assets in companies in, or governments of, developing
countries.
The Fund may also: (i) purchase or sell forward foreign currency exchange
contracts; (ii) write, sell and purchase U.S. or foreign exchange-listed put and
call options, including exchange-traded index options; (iii) enter into
financial futures contracts, including contracts for the purchase or sale for
future delivery of foreign currencies and stock index futures, and purchase and
write put and call options on futures contracts traded on U.S. or foreign
exchanges or over-the-counter; (iv) purchase and write put options on foreign
currencies traded on securities exchanges or boards of trade or
over-the-counter; (v) lend portfolio securities equal in value to not more than
30% of its total assets; and (vi) enter into repurchase agreements of up to
seven days' duration, provided that not more than 10% of the Fund's total assets
would be so invested. For additional information on the use, risks and costs of
these policies and practices see "Additional Investment Practices."
Alliance Worldwide Privatization Fund
Alliance Worldwide Privatization Fund, Inc. ("Worldwide Privatization Fund") is
a non-diversified investment company that seeks long-term capital appreciation.
As a fundamental policy, the Fund invests at least 65% of its total assets in
equity securities issued by enterprises that are undergoing, or have undergone,
privatization (as described below), although normally significantly more of its
assets will be invested in such securities. The balance of its investments will
include securities of companies believed by Alliance to be beneficiaries of
privatizations. The Fund is designed for investors desiring to take advantage of
investment opportunities, historically inaccessible to U.S. individual
investors, that are created by privatizations of state enterprises in both
established and developing economies, including those in Western Europe and
Scandinavia, Australia, New Zealand, Latin America, Asia and Eastern and Central
Europe and, to a lesser degree, Canada and the United States.
The Fund's investments in enterprises undergoing privatization may comprise
three distinct situations. First, the Fund may invest in the initial offering of
publicly traded equity securities (an "initial equity offering") of a
government- or state-owned or controlled company or enterprise (a "state
enterprise"). Secondly, the Fund may purchase securities of a current or former
state enterprise following its initial equity offering. Finally, the Fund may
make privately negotiated purchases of stock or other equity interests in a
state enterprise that has not yet conducted an initial equity offering. Alliance
believes that substantial potential for capital appreciation exists as
privatizing enterprises rationalize their management structures, operations and
business strategies in order to compete efficiently in a market economy, and the
Fund will thus emphasize investments in such enterprises.
The Fund diversifies its investments among a number of countries and normally
invests in issuers based in at least four, and usually considerably more,
countries. No more than 15% of the Fund's total assets, however, will be
invested in issuers in any one foreign country, except that the Fund may invest
up to 30% of its total assets in issuers in any one of France, Germany, Great
Britain, Italy and Japan. The Fund may invest all of its assets within a single
region of the world. To the extent that the Fund's assets are invested within
any one region, the Fund may be subject to any special risks that may be
associated with that region.
Privatization is a process through which the ownership and control of companies
or assets changes in whole or in part from the public sector to the private
sector. Through privatization a government or state divests or transfers all or
a portion of its interest in a state enterprise to some form of private
ownership. Governments and states with established
22
economies, including France, Great Britain, Germany and Italy, and those with
developing economies, including Argentina, Mexico, Chile, Indonesia, Malaysia,
Poland and Hungary, are engaged in privatizations. The Fund will invest in any
country believed to present attractive investment opportunities.
A major premise of the Fund's approach is that the equity securities of
privatized companies offer opportunities for significant capital appreciation.
In particular, because privatizations are integral to a country's economic
restructuring, securities sold in initial equity offerings often are priced
attractively so as to secure the issuer's successful transition to private
sector ownership. Additionally, these enterprises often dominate their local
markets and typically have the potential for significant managerial and
operational efficiency gains.
Although the Fund anticipates that it will not concentrate its investments in
any industry, it is permitted to invest more than 25% of its total assets in
issuers whose primary business activity is that of national commercial banking.
Prior to so concentrating, however, the Fund's Directors must determine that its
ability to achieve its investment objective would be adversely affected if it
were not permitted to concentrate. The staff of the Commission is of the view
that registered investment companies may not, absent shareholder approval,
change between concentration and non-concentration in a single industry. The
Fund disagrees with the staff's position but has undertaken that it will not
concentrate in the securities of national commercial banks until, if ever, the
issue is resolved. If the Fund were to invest more than 25% of its total assets
in national commercial banks, the Fund's performance could be significantly
influenced by events or conditions affecting this industry, which is subject to,
among other things, increases in interest rates and deteriorations in general
economic conditions, and the Fund's investments may be subject to greater risk
and market fluctuation than if its portfolio represented a broader range of
investments.
The Fund may invest up to 35% of its total assets in debt securities and
convertible debt securities of issuers whose common stocks are eligible for
purchase by the Fund. The Fund may maintain not more than 5% of its net assets
in lower-rated securities. See "Risk Considerations Securities Ratings" and
"--Investment in Lower-Rated Fixed-Income Securities." The Fund will not retain
a non-convertible security that is downgraded below C or determined by Alliance
to have undergone similar credit quality deterioration following purchase.
The Fund may also: (i) invest up to 20% of its total assets in rights or
warrants; (ii) write covered put and call options and purchase put and call
options on securities of the types in which it is permitted to invest and on
exchange-traded index options; (iii) enter into contracts for the purchase or
sale for future delivery of fixed-income securities or foreign currencies, or
contracts based on financial indices, including any index of U.S. Government
securities, foreign government securities, or common stock and may purchase and
write options on future contracts; (iv) purchase and write put and call options
on foreign currencies for hedging purposes; (v) purchase or sell forward
contracts; (vi) enter in forward commitments for the purchase or sale of
securities; (vii) enter into standby commitment agreements; (viii) enter into
currency swaps for hedging purposes; (ix) enter into repurchase agreements
pertaining to U.S. Government securities with member banks of the Federal
Reserve System or primary dealers in such securities; (x) make short sales of
securities or maintain a short position; and (xi) make secured loans of its
portfolio securities not in excess of 30% of its total assets to entities with
which it can enter into repurchase agreements. For additional information on the
use, risks and costs of these policies and practices see "Additional Investment
Practices."
Alliance New Europe Fund
Alliance New Europe Fund, Inc. ("New Europe Fund") is a non-diversified
investment company that seeks long-term capital appreciation through investment
primarily in the equity securities of companies based in Europe. The Fund
intends to invest substantially all of its assets in the equity securities of
European companies and has a fundamental policy of normally investing at least
65% of its total assets in such securities. Up to 35% of its total assets may be
invested in high quality U.S. dollar or foreign currency denominated
fixed-income securities issued or guaranteed by European governmental entities,
or by European or multinational companies or supranational organizations.
Alliance believes that the quickening pace of economic integration and political
change in Europe creates the potential for many European companies to experience
rapid growth and that the emergence of new market economies in Europe and the
broadening and strengthening of other European economies may significantly
accelerate economic development. The Fund will invest in companies that Alliance
believes possess rapid growth potential. Thus, the Fund will emphasize
investments in larger, established companies, but will also invest in smaller,
emerging companies.
In recent years, economic ties between the former "east bloc" countries of
Eastern Europe and certain other European countries have been strengthened.
Alliance believes that as this strengthening continues, some Western European
financial institutions and other companies will have special opportunities to
facilitate East-West transactions. The Fund will seek investment opportunities
among such companies and, as such become available, within the former "east
bloc," although the Fund will not invest more than 20% of its total assets in
issuers based therein, or more than 10% of its total assets in issuers based in
any one such country.
The Fund diversifies its investments among a number of European countries and,
under normal circumstances, will invest in companies based in at least three
such countries. Subject to the foregoing and to the limitation on investment in
any one former "east bloc" country, the Fund may invest without limit in a
single European country. While the Fund does not intend to concentrate its
investments in a single country, at times 25% or more of its assets may be
invested in issuers located in a single country. During such times, the Fund
would be subject to a correspondingly greater risk of loss due to
23
adverse political or regulatory developments, or an economic downturn, within
that country. In this regard, at July 31, 1997, approximately 32% of the Fund's
assets were invested in securities of issuers in the United Kingdom.
The Fund may also: (i) invest up to 10% of its total assets in securities for
which there is no ready market; (ii) invest up to 20% of its total assets in
warrants and rights to purchase equity securities of European companies; (iii)
invest in depositary receipts or other securities convertible into securities of
companies based in European countries, debt securities of supranational entities
denominated in the currency of any European country, debt securities denominated
in European Currency Units of an issuer in a European country (including
supranational issuers) and "semi-governmental securities"; (iv) purchase and
sell forward contracts; (v) write, sell and purchase exchange-traded put and
call options, including exchange-traded index options; (vi) enter into financial
futures contracts, including contracts for the purchase or sale for future
delivery of foreign currencies and futures contracts based on stock indices, and
purchase and write options on futures contracts; (vii) purchase and write put
options on foreign currencies traded on securities exchanges or boards of trade
or over-the-counter; (viii) make secured loans of portfolio securities not in
excess of 30% of its total assets to brokers, dealers and financial
institutions; (ix) enter into forward commitments for the purchase or sale of
securities; and (x) enter into standby commitment agreements. For additional
information on the use, risks and costs of these policies and practices see
"Additional Investment Practices."
Alliance All-Asia Investment Fund
Alliance All-Asia Investment Fund, Inc. ("All-Asia Investment Fund") is a
non-diversified investment company whose investment objective is to seek
long-term capital appreciation. In seeking to achieve its investment objective,
the Fund will invest at least 65% of its total assets in equity securities (for
the purposes of this investment policy, rights, warrants and options to purchase
common stocks are not deemed to be equity securities), preferred stocks and
equity-linked debt securities issued by Asian companies. The Fund may invest up
to 35% of its total assets in debt securities issued or guaranteed by Asian
companies or by Asian governments, their agencies or instrumentalities. The Fund
may also invest in securities issued by non-Asian issuers, provided that the
Fund will invest at least 80% of its total assets in securities issued by Asian
companies and the Asian debt securities referred to above. The Fund expects to
invest, from time to time, a significant portion, but less than 50%, of its
assets in equity securities of Japanese companies.
In the past decade, Asian countries generally have experienced a high level of
real economic growth due to political and economic changes, including foreign
investment and reduced government intervention in the economy. Alliance believes
that certain conditions exist in Asian countries which create the potential for
continued rapid economic growth. These conditions include favorable demographics
and competitive wage rates, increasing levels of foreign direct investment,
rising per capita incomes and consumer demand, a high savings rate and numerous
privatization programs. Asian countries are also becoming more industrialized
and are increasing their intra-Asian exports while reducing their dependence on
Western export demand. Alliance believes that these conditions are important to
the long-term economic growth of Asian countries.
As the economies of many Asian countries move through the "emerging market"
stage, thus increasing the supply of goods, services and capital available to
less developed Asian markets and helping to spur economic growth in those
markets, the potential is created for many Asian companies to experience rapid
growth. In addition, many Asian companies the securities of which are listed on
exchanges in more developed Asian countries will be participants in the rapid
economic growth of the lesser developed countries. These companies generally
offer the advantages of more experienced management and more developed market
regulation.
As their economies have grown, the securities markets in Asian countries have
also expanded. New exchanges have been created and the number of listed
companies, annual trading volume and overall market capitalization have
increased significantly. Additionally, new markets continue to open to foreign
investments. For example, South Korea and India have recently relaxed investment
restrictions and Vietnamese direct investments have recently become available to
U.S. investors. The Fund also offers investors the opportunity to access
relatively restricted markets. Alliance believes that investment opportunities
in Asian countries will continue to expand.
The Fund will invest in companies believed to possess rapid growth potential.
Thus, the Fund will invest in smaller, emerging companies, but will also invest
in larger, more established companies in such growing economic sectors as
capital goods, telecommunications and consumer services.
The Fund will invest in investment grade debt securities, except that the Fund
may maintain not more than 5% of its net assets in lower-rated securities and
lower-rated loans and other lower-rated direct debt instruments. See "Risk
Considerations--Securities Ratings", "--Investment in Lower-Rated Fixed-Income
Securities" and Appendix C in the Fund's Statement of Additional Information for
a description of such ratings. The Fund will not retain a security that is
downgraded below C or determined by Alliance to have undergone similar credit
quality deterioration following purchase.
The Fund may also: (i) invest up to 25% of its net assets in the convertible
securities of companies whose common stocks are eligible for purchase by the
Fund; (ii) invest up to 20% of its net assets in rights or warrants; (iii)
invest in depositary receipts, instruments of supranational entities denominated
in the currency of any country, securities of multinational companies and
"semi-governmental securities;" (iv) invest up to 25% of its net assets in
equity-linked debt securities with the objective of realizing capital
appreciation; (v) invest up to 25% of its net assets in loans and other direct
debt instruments; (vi) write covered put and call options on
24
securities of the types in which it is permitted to invest and on
exchange-traded index options; (vii) enter into contracts for the purchase or
sale for future delivery of fixed-income securities or foreign currencies, or
contracts based on financial indices, including any index of U.S. Government
securities, securities issued by foreign government entities, or common stock
and may purchase and write options on future contracts; (viii) purchase and
write put and call options on foreign currencies for hedging purposes; (ix)
purchase or sell forward contracts; (x) enter into interest rate swaps and
purchase or sell interest rate caps and floors; (xi) enter into forward
commitments for the purchase or sale of securities; (xii) enter into standby
commitment agreements; (xiii) enter into currency swaps for hedging purposes;
(xiv) enter into repurchase agreements pertaining to U.S. Government securities
with member banks of the Federal Reserve System or primary dealers in such
securities; (xv) make short sales of securities or maintain a short position, in
each case only if "against the box;" and (xvi) make secured loans of its
portfolio securities not in excess of 30% of its total assets to entities with
which it can enter into repurchase agreements. For additional information on the
use, risks and costs of these policies and practices see "Additional Investment
Practices."
Alliance Global Small Cap Fund
Alliance Global Small Cap Fund, Inc. ("Global Small Cap Fund") is a diversified
investment company that seeks long-term growth of capital through investment in
a global portfolio of the equity securities of selected companies with
relatively small market capitalization. The Fund's portfolio emphasizes
companies with market capitalizations that would have placed them (when
purchased) in about the smallest 20% by market capitalization of actively traded
U.S. companies, or market capitalizations of up to about $1 billion. Because the
Fund applies the U.S. size standard on a global basis, its foreign investments
might rank above the lowest 20%, and, in fact, might in some countries rank
among the largest, by market capitalization in local markets. Normally, the Fund
invests at least 65% of its assets in equity securities of these smaller
capitalization issuers, and these issuers are located in at least three
countries, one of which may be the U.S. Up to 35% of the Fund's total assets may
be invested in securities of companies whose market capitalizations exceed the
Fund's size standard. The Fund's portfolio securities may be listed on a U.S. or
foreign exchange or traded over-the-counter.
Alliance believes that smaller capitalization issuers often have sales and
earnings growth rates exceeding those of larger companies, and that these growth
rates tend to cause more rapid share price appreciation. Investing in smaller
capitalization stocks, however, involves greater risk than is associated with
larger, more established companies. For example, smaller capitalization
companies often have limited product lines, markets, or financial resources.
They may be dependent for management on one or a few key persons, and can be
more susceptible to losses and risks of bankruptcy. Their securities may be
thinly traded (and therefore have to be sold at a discount from current market
prices or sold in small lots over an extended period of time), may be followed
by fewer investment research analysts and may be subject to wider price swings
and thus may create a greater chance of loss than when investing in securities
of larger capitalization companies. Transaction costs in small capitalization
stocks may be higher than in those of larger capitalization companies.
The Fund may also: (i) invest up to 10% of its total assets in securities for
which there is no ready market; (ii) invest up to 20% of its total assets in
warrants to purchase equity securities; (iii) invest in depositary receipts or
other securities representing securities of companies based in countries other
than the U.S.; (iv) purchase or sell forward foreign currency contracts; (v)
write and purchase exchange-traded call options and purchase exchange-traded put
options, including put options on market indices; and (vi) make secured loans of
portfolio securities not in excess of 30% of its total assets to brokers,
dealers and financial institutions. For additional information on the use, risks
and costs of these policies and practices see "Additional Investment Practices."
Total Return Funds
The Total Return Funds have been designed to provide a range of investment
alternatives to investors seeking both growth of capital and current income.
Alliance Strategic Balanced Fund
Alliance Strategic Balanced Fund ("Strategic Balanced Fund") is a diversified
investment company that seeks a high long-term total return by investing in a
combination of equity and debt securities. The portion of the Fund's assets
invested in each type of security varies in accordance with economic conditions,
the general level of common stock prices, interest rates and other relevant
considerations, including the risks associated with each investment medium. The
Fund's investment objective is not fundamental.
The Fund's equity securities will generally consist of dividend-paying common
stocks and other equity securities of companies with favorable earnings outlooks
and long-term growth rates that Alliance expects will exceed that of the U.S.
economy. The Fund's debt securities may include U.S. Government securities and
securities issued by private corporations. The Fund may also invest in
mortgage-backed securities, adjustable rate securities, asset-backed securities
and so-called "zero-coupon" bonds and "payment-in-kind" bonds.
As a fundamental policy, the Fund will invest at least 25% of its total assets
in fixed-income securities, which for this purpose include debt securities,
preferred stocks and that portion of the value of convertible securities that is
attributable to the fixed-income characteristics of those securities.
The Fund's debt securities will generally be of investment grade. See "Risk
Considerations--Securities Ratings" and "Investment in Lower-Rated Fixed-Income
Securities." In the event that the rating of any debt securities held by the
Fund falls below investment grade, the Fund will not be obligated to
25
dispose of such obligations and may continue to hold them if considered
appropriate under the circumstances.
The Fund may also: (i) invest in foreign securities, although the Fund will not
generally invest more than 15% of its total assets in foreign securities; (ii)
invest, without regard to this 15% limit, in Eurodollar CDs, which are
dollar-denominated certificates of deposit issued by foreign branches of U.S.
banks that are not insured by any agency or instrumentality of the U.S.
Government; (iii) write covered call and put options on securities it owns or in
which it may invest; (iv) buy and sell put and call options and buy and sell
combinations of put and call options on the same underlying securities; (v) lend
portfolio securities amounting to not more than 25% of its total assets; (vi)
enter into repurchase agreements on up to 25% of its total assets; (vii)
purchase and sell securities on a forward commitment basis; (viii) buy or sell
foreign currencies, options on foreign currencies, foreign currency futures
contracts (and related options) and deal in forward foreign exchange contracts;
(ix) buy and sell stock index futures contracts and buy and sell options on
those contracts and on stock indices; (x) purchase and sell futures contracts,
options thereon and options with respect to U.S. Treasury securities; and (xi)
invest in securities that are not publicly traded, including Rule 144A
securities. For additional information on the use, risks and costs of these
policies and practices see "Additional Investment Practices."
Alliance Balanced Shares
Alliance Balanced Shares, Inc. ("Balanced Shares") is a diversified investment
company that seeks a high return through a combination of current income and
capital appreciation. Although the Fund's investment objective is not
fundamental, the Fund is a "balanced fund" as a matter of fundamental policy.
The Fund will not purchase a security if as a result less than 25% of its total
assets will be in fixed-income senior securities (including short- and long-term
debt securities, preferred stocks, and convertible debt securities and
convertible preferred stocks to the extent that their values are attributable to
their fixed-income characteristics). Subject to these restrictions, the
percentage of the Fund's assets invested in each type of security will vary. The
Fund's assets are invested in U.S. Government securities, bonds, senior debt
securities and preferred and common stocks in such proportions and of such type
as are deemed best adapted to the current economic and market outlooks. The Fund
may invest up to 15% of the value of its total assets in foreign equity and
fixed-income securities eligible for purchase by the Fund under its investment
policies described above. See "Risk Considerations--Foreign Investment."
The Fund may also: (i) enter into contracts for the purchase or sale for future
delivery of foreign currencies; and (ii) purchase and write put and call options
on foreign currencies and enter into forward foreign currency exchange contracts
for hedging purposes. Subject to market conditions, the Fund may also seek to
realize income by writing covered call options listed on a domestic exchange.
For additional information on the use, risks and costs of these policies and
practices see "Additional Investment Practices."
Alliance Income Builder Fund
Alliance Income Builder Fund, Inc. ("Income Builder Fund") is a non-diversified
investment company that seeks an attractive level of current income and
long-term growth of income and capital by investing principally in fixed-income
securities and dividend-paying common stocks. Its investments in equity
securities emphasize common stocks of companies with a historical or projected
pattern of paying rising dividends. Normally, at least 65% of the Fund's total
assets are invested in income-producing securities. The Fund may vary the
percentage of assets invested in any one type of security based upon Alliance's
evaluation as to the appropriate portfolio structure for achieving the Fund's
investment objective, although Alliance currently maintains approximately 60% of
the Fund's net assets in fixed-income securities and 40% in equity securities.
The Fund may invest in fixed-income securities of domestic and foreign issuers,
including U.S. Government securities and repurchase agreements pertaining
thereto, corporate fixed-income securities of U.S. issuers, qualifying bank
deposits and prime commercial paper.
The Fund may maintain up to 35% of its net assets in lower-rated securities. See
"Risk Considerations--Securities Ratings" and "--Investment in Lower-Rated
Fixed-Income Securities." The Fund will not retain a non-convertible security
that is downgraded below CCC or determined by Alliance to have undergone similar
credit quality deterioration following purchase.
Foreign securities in which the Fund invests may include fixed-income securities
of foreign corporate and governmental issuers, denominated in U.S. Dollars, and
equity securities of foreign corporate issuers, denominated in foreign
currencies or in U.S. Dollars. The Fund will not invest more than 10% of its net
assets in equity securities of foreign issuers nor more than 15% of its total
assets in issuers of any one foreign country. See "Risk Considerations Foreign
Investment."
The Fund may also: (i) invest up to 5% of its net assets in rights or warrants;
(ii) invest in depositary receipts and U.S. Dollar denominated securities issued
by supranational entities; (iii) write covered put and call options and purchase
put and call options on securities of the types in which it is permitted to
invest that are exchange-traded; (iv) purchase and sell exchange-traded options
on any securities index composed of the types of securities in which it may
invest; (v) enter into contracts for the purchase or sale for future delivery of
fixed-income securities or foreign currencies, or contracts based on financial
indices, including any index of U.S. Government securities, foreign government
securities, corporate fixed income securities, or common stock, and purchase and
write options on future contracts; (vi) purchase and write put and call options
on foreign currencies and enter into forward contracts for hedging purposes;
(vii) enter into interest rate swaps and purchase or sell interest rate caps and
floors; (viii) enter into forward commitments for the purchase or sale of
securities; (ix) enter into standby commitment agreements; (x) enter into
repurchase agreements pertaining to U.S.
26
Government securities with member banks of the Federal Reserve System or primary
dealers in such securities; (xi) make short sales of securities or maintain a
short position as described below under "Additional Investment Policies and
Practices Short Sales;" and (xii) make secured loans of its portfolio securities
not in excess of 20% of its total assets to brokers, dealers and financial
institutions. For additional information on the use, risks and costs of these
policies and practices see "Additional Investment Practices."
Alliance Utility Income Fund
Alliance Utility Income Fund, Inc. ("Utility Income Fund") is a diversified
investment company that seeks current income and capital appreciation by
investing primarily in equity and fixed-income securities of companies in the
utilities industry. The Fund may invest in securities of both U.S. and foreign
issuers, although no more than 15% of the Fund's total assets will be invested
in issuers in any one foreign country. The utilities industry consists of
companies engaged in (i) the manufacture, production, generation, provision,
transmission, sale and distribution of gas and electric energy, and
communications equipment and services, including telephone, telegraph,
satellite, microwave and other companies providing communication facilities for
the public, or (ii) the provision of other utility or utility-related goods and
services, including, but not limited to, entities engaged in water provision,
cogeneration, waste disposal system provision, solid waste electric generation,
independent power producers and non-utility generators. The Fund is designed to
take advantage of the characteristics and historical performance of securities
of utility companies, many of which pay regular dividends and increase their
common stock dividends over time. As a fundamental policy, the Fund normally
invests at least 65% of its total assets in securities of companies in the
utilities industry. The Fund considers a company to be in the utilities industry
if, during the most recent twelve-month period, at least 50% of the company's
gross revenues, on a consolidated basis, were derived from its utilities
activities.
At least 65% of the Fund's total assets are invested in income-producing
securities, but there is otherwise no limit on the allocation of the Fund's
investments between equity securities and fixed-income securities. The Fund may
maintain up to 35% of its net assets in lower-rated securities. See "Risk
Considerations--Securities Ratings" and "--Investment in Lower-Rated
Fixed-Income Securities." The Fund will not retain a security that is downgraded
below B or determined by Alliance to have undergone similar credit quality
deterioration following purchase.
The United States utilities industry has experienced significant changes in
recent years. Electric utility companies in general have been favorably affected
by lower fuel costs, the full or near completion of major construction programs
and lower financing costs. In addition, many utility companies have generated
cash flows in excess of current operating expenses and construction
expenditures, permitting some degree of diversification into unregulated
businesses. Regulatory changes with respect to nuclear and conventionally fueled
generating facilities, however, could increase costs or impair the ability of
such electric utilities to operate such facilities, thus reducing their ability
to service dividend payments with respect to the securities they issue.
Furthermore, rates of return of utility companies generally are subject to
review and limitation by state public utilities commissions and tend to
fluctuate with marginal financing costs. Rate changes, however, ordinarily lag
behind the changes in financing costs, and thus can favorably or unfavorably
affect the earnings or dividend pay-outs on utilities stocks depending upon
whether such rates and costs are declining or rising.
Gas transmission companies, gas distribution companies and telecommunications
companies are also undergoing significant changes. Gas utilities have been
adversely affected by declines in the prices of alternative fuels, and have also
been affected by oversupply conditions and competition. Telephone utilities are
still experiencing the effects of the break-up of American Telephone & Telegraph
Company, including increased competition and rapidly developing technologies
with which traditional telephone companies now compete. Although there can be no
assurance that increased competition and other structural changes will not
adversely affect the profitability of such utilities, or that other negative
factors will not develop in the future, in Alliance's opinion, increased
competition and change may provide better positioned utility companies with
opportunities for enhanced profitability.
Utility companies historically have been subject to the risks of increases in
fuel and other operating costs, high interest costs, costs associated with
compliance with environmental and nuclear safety regulations, service
interruptions, economic slowdowns, surplus capacity, competition and regulatory
changes. There can also be no assurance that regulatory policies or accounting
standards changes will not negatively affect utility companies' earnings or
dividends. Utility companies are subject to regulation by various authorities
and may be affected by the imposition of special tariffs and changes in tax
laws. To the extent that rates are established or reviewed by governmental
authorities, utility companies are subject to the risk that such authorities
will not authorize increased rates. Because of the Fund's policy of
concentrating its investments in utility companies, the Fund is more susceptible
than most other mutual funds to economic, political or regulatory occurrences
affecting the utilities industry.
Foreign utility companies, like those in the U.S., are generally subject to
regulation, although such regulations may or may not be comparable to domestic
regulations. Foreign utility companies in certain countries may be more heavily
regulated by their respective governments than utility companies located in the
U.S. and, as in the U.S., generally are required to seek government approval for
rate increases. In addition, because many foreign utility companies use fuels
that cause more pollution than those used in the U.S., such utilities may yet be
required to invest in pollution control equipment. Foreign utility regulatory
systems vary from country to country and may evolve in ways different from
regulation in the U.S. The percentage of the Fund's assets invested in issuers
of
27
particular countries will vary. See "Risk Considerations--Foreign Investment."
The Fund may invest up to 35% of its total assets in equity and fixed-income
securities of domestic and foreign corporate and governmental issuers other than
utility companies, including U.S. Government securities and repurchase
agreements pertaining thereto, foreign government securities, corporate
fixed-income securities of domestic issuers, corporate fixed-income securities
of foreign issuers denominated in foreign currencies or in U.S. dollars (in each
case including fixed-income securities of an issuer in one country denominated
in the currency of another country), qualifying bank deposits and prime
commercial paper.
The Fund may also: (i) invest up to 30% of its net assets in the convertible
securities of companies whose common stocks are eligible for purchase by the
Fund; (ii) invest up to 5% of its net assets in rights or warrants; (iii) invest
in depositary receipts, securities of supranational entities denominated in the
currency of any country, securities denominated in European Currency Units and
"semi-governmental securities;" (iv) write covered put and call options and
purchase put and call options on securities of the types in which it is
permitted to invest that are exchange-traded and over-the-counter; (v) purchase
and sell exchange-traded options on any securities index composed of the types
of securities in which it may invest; (vi) enter into contracts for the purchase
or sale for future delivery of fixed-income securities or foreign currencies, or
contracts based on financial indices, including an index of U.S. Government
securities, foreign government securities, corporate fixed-income securities, or
common stock, and may purchase and write options on futures contracts; (vii)
purchase and write put and call options on foreign currencies traded on U.S. and
foreign exchanges or over-the-counter for hedging purposes; (viii) purchase or
sell forward contracts; (ix) enter into interest rate swaps and purchase or sell
interest rate caps and floors; (x) enter in forward commitments for the purchase
or sale of securities; (xi) enter into standby commitment agreements; (xii)
enter into repurchase agreements pertaining to U.S. Government securities with
member banks of the Federal Reserve System or primary dealers in such
securities; (xiii) make short sales of securities or maintain a short position
as described below under "Additional Investment Practices Short Sales;" and
(xiv) make secured loans of its portfolio securities not in excess of 20% of its
total assets to brokers, dealers and financial institutions. For additional
information on the use, risk and costs of these policies and practices, see
"Additional Investment Practices."
Alliance Growth and Income Fund
Alliance Growth and Income Fund, Inc. ("Growth and Income Fund") is a
diversified investment company that seeks appreciation through investments
primarily in dividend-paying common stocks of good quality, although it is
permitted to invest in fixed-income securities and convertible securities.
The Fund may also try to realize income by writing covered call options listed
on domestic securities exchanges. The Fund also invests in foreign securities.
Since the purchase of foreign securities entails certain political and economic
risks, the Fund has restricted its investments in securities in this category to
issues of high quality. The Fund may also purchase and sell financial forward
and futures contracts and options thereon for hedging purposes. For additional
information on the use, risk and costs of these policies and practices, see
"Additional Investment Practices."
Alliance Real Estate Investment Fund
Alliance Real Estate Investment Fund, Inc. ("Real Estate Investment Fund") is a
diversified investment company that seeks a total return on its assets from
long-term growth of capital and from income principally through investing in a
portfolio of equity securities of issuers that are primarily engaged in or
related to the real estate industry.
Under normal circumstances, at least 65% of the Fund's total assets will be
invested in equity securities of real estate investment trusts ("REITS") and
other real estate industry companies. A "real estate industry company" is a
company that derives at least 50% of its gross revenues or net profits from the
ownership, development, construction, financing, management or sale of
commercial, industrial or residential real estate or interests therein. The
equity securities in which the Fund will invest for this purpose consist of
common stock, shares of beneficial interest of REITs and securities with common
stock characteristics, such as preferred stock or convertible securities ("real
estate equity securities").
The Fund may invest up to 35% of its total assets in (a) securities that
directly or indirectly represent participations in, or are collateralized by and
payable from, mortgage loans secured by real property ("Mortgage-Backed
Securities"), such as mortgage pass-through certificates, real estate mortgage
investment conduit ("REMIC") certificates and collateralized mortgage
obligations ("CMOs") and (b) short-term investments. These instruments are
described below. The risks associated with the Fund's transactions in REMICs,
CMOs and other types of mortgage-backed securities, which are considered to be
derivative securities, may include some or all of the following: market risk,
leverage and volatility risk, correlation risk, credit risk and liquidity and
valuation risk. See "Risk Considerations" for a description of these and other
risks.
As to any investment in Real Estate Equity Securities, Alliance's analysis will
focus on determining the degree to which the company involved can achieve
sustainable growth in cash flow and dividend paying capability. Alliance
believes that the primary determinant of this capability is the economic
viability of property markets in which the company operates and that the
secondary determinant of this capability is the ability of management to add
value through strategic focus and operating expertise. The Fund will purchase
Real Estate Equity Securities when, in the judgment of Alliance, their market
price does not adequately reflect this potential. In making this determination,
Alliance will take into account fundamental
28
trends in underlying property markets as determined by proprietary models, site
visits conducted by individuals knowledgeable in local real estate markets,
price-earnings ratios (as defined for real estate companies), cash flow growth
and stability, the relationship between asset value and market price of the
securities, dividend payment history, and such other factors which Alliance may
determine from time to time to be relevant. Alliance will attempt to purchase
for the Fund Real Estate Equity Securities of companies whose underlying
portfolios are diversified geographically and by property type.
The Fund may invest without limitation in shares of REITs. REITs are pooled
investment vehicles which invest primarily in income producing real estate or
real estate related loans or interests. REITs are generally classified as equity
REITs, mortgage REITs or a combination of equity and mortgage REITs. Equity
REITs invest the majority of their assets directly in real property and derive
income primarily from the collection of rents. Equity REITs can also realize
capital gains by selling properties that have appreciated in value. Mortgage
REITs invest the majority of their assets in real estate mortgages and derive
income from the collection of interest payments. Similar to investment companies
such as the Fund, REITs are not taxed on income distributed to shareholders
provided they comply with several requirements of the Code. The Fund will
indirectly bear its proportionate share of expenses incurred by REITs in which
the Fund invests in addition to the expenses incurred directly by the Fund.
Investment Process for Real Estate Equity Securities. The Fund's investment
strategy with respect to Real Estate Equity Securities is based on the premise
that property market fundamentals are the primary determinant of growth
underlying the success of Real Estate Equity Securities. Value added management
will further distinguish the most attractive Real Estate Equity Securities. The
Fund's research and investment process is designed to identify those companies
with strong property fundamentals and strong management teams. This process is
comprised of real estate market research, specific property inspection and
securities analysis.
The universe of property-owning real estate industry firms consists of
approximately 130 companies of sufficient size and quality to merit
consideration for investment by the Fund. In implementing the Fund's research
and investment process, Alliance will avail itself of the consulting services of
CB Commercial Real Estate Group, Inc. ("CBC"), a publicly held company and the
largest real estate services company in the United States, comprised of real
estate brokerage, property and facilities management, and real estate finance
and investment advisory activities (CBC in August of 1997 acquired Koll
Management Services ("Koll"), which previously provided these consulting
services to Alliance). In 1996, CBC (and Koll, on a combined basis) completed
25,000 sale and lease transactions, managed over 4,100 client properties,
created over $3.5 billion in mortgage originations, and completed over 2,600
appraisal and consulting assignments. In addition, they advised and managed for
institutions over $4 billion in real estate investments. As consultant to
Alliance, CBC provides access to its proprietary model, REIT-Score, that
analyzes the approximately 12,000 properties owned by these 130 companies. Using
proprietary databases and algorithms, CBC analyzes local market rent, expense,
and occupancy trends, market specific transaction pricing, demographic and
economic trends, and leading indicators of real estate supply such as building
permits. Over 650 asset-type specific geographic markets are analyzed and ranked
on a relative scale by CBC in compiling its REIT-Score database. The relative
attractiveness of these real estate industry companies is similarly ranked based
on the composite rankings of the properties they own. See "Management of the
Funds--Consultant to Adviser" for more information about CBC.
Once the universe of real estate industry companies has been distilled through
the market research process, CBC's local market presence provides the capability
to perform site specific inspections of key properties. This analysis examines
specific location, condition, and sub-market trends. CBC's use of locally based
real estate professionals provides Alliance with a window on the operations of
the portfolio companies as information can immediately be put in the context of
local market events. Only those companies whose specific property portfolios
reflect the promise of their general markets will be considered for initial and
continued investment by the Fund.
Alliance further screens the universe of real estate industry companies by using
rigorous financial models and by engaging in regular contact with management of
targeted companies. Each management's strategic plan and ability to execute the
plan are determined and analyzed. Alliance will make extensive use of CBC's
network of industry analysts in order to assess trends in tenant industries.
This information is then used to further interpret management's strategic plans.
Financial ratio analysis is used to isolate those companies with the ability to
make value-added acquisitions. This information is combined with property market
trends and used to project future earnings potential.
Alliance believes that this process will result in a portfolio that will consist
of Real Estate Equity Securities of companies that own assets in the most
desirable markets across the country, diversified geographically and by property
type.
The short-term investments in which Real Estate Investment Fund may invest are:
corporate commercial paper and other short-term commercial obligations, in each
case rated or issued by companies with similar securities outstanding that are
rated Prime-1, Aa or better by Moody's or A-1, AA or better by S&P; obligations
(including certificates of deposit, time deposits, demand deposits and bankers'
acceptances) of banks with securities outstanding that are rated Prime-1, Aa or
better by Moody's or A-1, AA or better by S&P; and obligations issued or
guaranteed by the U.S. Government or its agencies or instrumentalities with
remaining maturities not exceeding 18 months.
The Fund may invest in debt securities rated BBB or higher by S&P or Baa or
higher by Moody's or, if not so rated, of equivalent credit quality as
determined by Alliance. The Fund expects that it will not retain a debt security
which is downgraded below BBB or Baa or, if unrated, determined by
29
Alliance to have undergone similar credit quality deterioration, subsequent to
purchase by the Fund.
The Fund may also engage in the following investment practices to the extent
indicated: (i) invest up to 10% of its net assets in rights or warrants; (ii)
invest up to 15% of its net assets in the convertible securities of companies
whose common stocks are eligible for purchase by the Fund; (iii) lend portfolio
securities equal in value to not more than 25% of total assets; (iv) enter into
repurchase agreements of up to seven days' duration; (v) enter into forward
commitment transactions as long as the Fund's aggregate commitments under such
transactions are not more than 30% of the Fund's total assets; (vi) enter into
standby commitment agreements; (vii) make short sales of securities or maintain
a short position but only if at all times when a short position is open not more
than 25% of the Fund's net assets (taken at market value) is held as collateral
for such sales; and (viii) invest in illiquid securities unless, as a result,
more than 15% of its net assets would be so invested.
ADDITIONAL INVESTMENT PRACTICES
Some or all of the Funds may engage in the following investment practices to the
extent described above. Convertible Securities. Prior to conversion, convertible
securities have the same general characteristics as non-convertible debt
securities, which provide a stable stream of income with yields that are
generally higher than those of equity securities of the same or similar issuers.
The price of a convertible security will normally vary with changes in the price
of the underlying stock, although the higher yield tends to make the convertible
security less volatile than the underlying common stock. As with debt
securities, the market value of convertible securities tends to decline as
interest rates increase and increase as interest rates decline. While
convertible securities generally offer lower interest or dividend yields than
non-convertible debt securities of similar quality, they offer investors the
potential to benefit from increases in the market price of the underlying common
stock. Convertible debt securities that are rated Baa or lower by Moody's or BBB
or lower by S&P, Duff & Phelps or Fitch and comparable unrated securities as
determined by Alliance may share some or all of the risks of non-convertible
debt securities with those ratings. For a description of these risks, see "Risk
Considerations--Securities Ratings" and "--Investment in Lower-Rated
Fixed-Income Securities."
Rights and Warrants. A Fund will invest in rights or warrants only if the
underlying equity securities themselves are deemed appropriate by Alliance for
inclusion in the Fund's portfolio. Rights and warrants entitle the holder to buy
equity securities at a specific price for a specific period of time. Rights are
similar to warrants except that they have a substantially shorter duration.
Rights and warrants may be considered more speculative than certain other types
of investments in that they do not entitle a holder to dividends or voting
rights with respect to the underlying securities nor do they represent any
rights in the assets of the issuing company. The value of a right or warrant
does not necessarily change with the value of the underlying security, although
the value of a right or warrant may decline because of a decrease in the value
of the underlying security, the passage of time or a change in perception as to
the potential of the underlying security, or any combination thereof. If the
market price of the underlying security is below the exercise price set forth in
the warrant on the expiration date, the warrant will expire worthless. Moreover,
a right or warrant ceases to have value if it is not exercised prior to the
expiration date.
Depositary Receipts and Securities of Supranational Entities. Depositary
receipts may not necessarily be denominated in the same currency as the
underlying securities into which they may be converted. In addition, the issuers
of the stock of unsponsored depositary receipts are not obligated to disclose
material information in the United States and, therefore, there may not be a
correlation between such information and the market value of the depositary
receipts. ADRs are depositary receipts typically issued by a U.S. bank or trust
company that evidence ownership of underlying securities issued by a foreign
corporation. GDRs and other types of depositary receipts are typically issued by
foreign banks or trust companies and evidence ownership of underlying securities
issued by either a foreign or a U.S. company. Generally, depositary receipts in
registered form are designed for use in the U.S. securities markets, and
depositary receipts in bearer form are designed for use in foreign securities
markets. For purposes of determining the country of issuance, investments in
depositary receipts of either type are deemed to be investments in the
underlying securities except with respect to Growth Fund, Strategic Balanced
Fund and Income Builder Fund, where investments in ADRs are deemed to be
investments in securities issued by U.S. issuers and those in GDRs and other
types of depositary receipts are deemed to be investments in the underlying
securities.
A supranational entity is an entity designated or supported by the
national government of one or more countries to promote economic reconstruction
or development. Examples of supranational entities include, among others, the
World Bank (International Bank for Reconstruction and Development) and the
European Investment Bank. A European Currency Unit is a basket of specified
amounts of the currencies of the member states of the European Economic
Community. "Semi-governmental securities" are securities issued by entities
owned by either a national, state or equivalent government or are obligations of
one of such government jurisdictions which are not backed by its full faith and
credit and general taxing powers.
Mortgage-Backed Securities. Interest and principal payments (including
prepayments) on the mortgages underlying mortgage-backed securities are passed
through to the holders of the securities. As a result of the pass-through of
prepayments of principal on the underlying securities, mortgage-backed
securities are often subject to more rapid prepayment of principal than their
stated maturity would indicate. Prepayments occur when the mortgagor on a
mortgage prepays the remaining principal before the mortgage's scheduled
maturity date. Because the prepayment characteristics of the underlying
mortgages vary, it is impossible to predict accurately the realized yield or
average life of a particular issue of pass-
30
through certificates. Prepayments are important because of their effect on the
yield and price of the mortgage-backed securities. During periods of declining
interest rates, prepayments can be expected to accelerate and a Fund investing
in such securities would be required to reinvest the proceeds at the lower
interest rates then available. Conversely, during periods of rising interest
rates, a reduction in prepayments may increase the effective maturity of the
securities, subjecting them to a greater risk of decline in market value in
response to rising interest rates. In addition, prepayments of mortgages
underlying securities purchased at a premium could result in capital losses.
Adjustable Rate Securities. Adjustable rate securities have interest rates that
are reset at periodic intervals, usually by reference to some interest rate
index or market interest rate. Some adjustable rate securities are backed by
pools of mortgage loans. Although the rate-adjustment feature may reduce sharp
changes in the value of adjustable rate securities, these securities can change
in value based on changes in market interest rates or the issuer's
creditworthiness. Changes in the interest rate on adjustable rate securities may
lag behind changes in prevailing market interest rates. Also, some adjustable
rate securities (or the underlying mortgages) are subject to caps or floors that
limit the maximum change in interest rate.
Asset-Backed Securities. Asset-backed securities (unrelated to first mortgage
loans) represent fractional interests in pools of leases, retail installment
loans, revolving credit receivables and other payment obligations, both secured
and unsecured. These assets are generally held by a trust and payments of
principal and interest or interest only are passed through monthly or quarterly
to certificate holders and may be guaranteed up to certain amounts by letters of
credit issued by a financial institution affiliated or unaffiliated with the
trustee or originator of the trust.
Like mortgages underlying mortgage-backed securities, underlying automobile
sales contracts or credit card receivables are subject to prepayment, which may
reduce the overall return to certificate holders. Certificate holders may also
experience delays in payment on the certificates if the full amounts due on
underlying sales contracts or receivables are not realized by the trust because
of unanticipated legal or administrative costs of enforcing the contracts or
because of depreciation or damage to the collateral (usually automobiles)
securing certain contracts, or other factors.
Zero-Coupon and Payment-in-Kind Bonds. Zero-coupon bonds are issued at a
significant discount from their principal amount in lieu of paying interest
periodically. Payment-in-kind bonds allow the issuer to make current interest
payments on the bonds in additional bonds. Because zero-coupon bonds and
payment-in-kind bonds do not pay current interest in cash, their value is
generally subject to greater fluctuation in response to changes in market
interest rates than bonds that pay interest in cash currently. Both zero-coupon
and payment-in-kind bonds allow an issuer to avoid the need to generate cash to
meet current interest payments. Accordingly, such bonds may involve greater
credit risks than bonds paying interest currently. Even though such bonds do not
pay current interest in cash, a Fund is nonetheless required to accrue interest
income on such investments and to distribute such amounts at least annually to
shareholders. Thus, a Fund could be required at times to liquidate other
investments in order to satisfy its dividend requirements.
Equity-Linked Debt Securities. Equity-linked debt securities are securities with
respect to which the amount of interest and/or principal that the issuer thereof
is obligated to pay is linked to the performance of a specified index of equity
securities. Such amount may be significantly greater or less than payment
obligations in respect of other types of debt securities. Adverse changes in
equity securities indices and other adverse changes in the securities markets
may reduce payments made under, and/or the principal of, equity-linked debt
securities held by the Fund. Furthermore, as with any debt securities, the
values of equity-linked debt securities will generally vary inversely with
changes in interest rates. The Fund's ability to dispose of equity-linked debt
securities will depend on the availability of liquid markets for such
securities. Investment in equity-linked debt securities may be considered to be
speculative. As with other securities, the Fund could lose its entire investment
in equity-linked debt securities.
Loans and Other Direct Debt Instruments. Loans and other direct debt instruments
are interests in amounts owed by a corporate, governmental or other borrower to
another party. They may represent amounts owed to lenders or lending syndicates
(loans and loan participations), to suppliers of goods or services (trade claims
or other receivables), or to other creditors. Direct debt instruments involve
the risk of loss in case of default or insolvency of the borrower and may offer
less legal protection to the Fund in the event of fraud or misrepresentation
than debt securities. In addition, loan participations involve a risk of
insolvency of the lending bank or other financial intermediary. Direct debt
instruments may also include standby financing commitments that obligate the
Fund to supply additional cash to the borrower on demand. Loans and other direct
debt instruments are generally illiquid and may be transferred only through
individually negotiated private transactions.
Purchasers of loans and other forms of direct indebtedness depend primarily upon
the creditworthiness of the borrower for payment of principal and interest.
Direct debt instruments may not be rated by any nationally recognized rating
service. If the Fund does not receive scheduled interest or principal payments
on such indebtedness, the Fund's share price and yield could be adversely
affected. Loans that are fully secured offer the Fund more protection than
unsecured loans in the event of non-payment of scheduled interest or principal.
However, there is no assurance that the liquidation of collateral from a secured
loan would satisfy the borrower's obligation, or that the collateral can be
liquidated. Indebtedness of borrowers whose creditworthiness is poor may involve
substantial risks, and may be highly speculative.
Borrowers that are in bankruptcy or restructuring may never pay off their
indebtedness, or may pay only a small fraction of the amount owed. Direct
indebtedness of Asian countries will
31
also involve a risk that the governmental entities responsible for the repayment
of the debt may be unable, or unwilling, to pay interest and repay principal
when due.
Investments in loans through direct assignment of a financial institution's
interests with respect to a loan may involve additional risks to the Fund. For
example, if a loan is foreclosed, the Fund could become part owner of any
collateral, and would bear the costs and liabilities associated with owning and
disposing of the collateral. Direct debt instruments may also involve a risk of
insolvency of the lending bank or other intermediary.
A loan is often administered by a bank or other financial institution that acts
as agent for all holders. The agent administers the terms of the loan, as
specified on the loan agreement. Unless, under the terms of the loan or other
indebtedness, the Fund has direct recourse against the borrower, it may have to
rely on the agent to apply appropriate credit remedies against a borrower. If
assets held by the agent for the benefit of the Fund were determined to be
subject to the claims of the agent's general creditors, the Fund might incur
certain costs and delays in realizing payment on the loan or loan participation
and could suffer a loss of principal or interest.
Direct indebtedness purchased by the Fund may include letters of credit,
revolving credit facilities, or other standby financing commitments obligating
the Fund to pay additional cash on demand. These commitments may have the effect
of requiring the Fund to increase its investment in a borrower at a time when it
would not otherwise have done so, even if the borrower's condition makes it
unlikely that the amount will ever be repaid.
Mortgage-Backed Securities and Associated Risks. Mortgage-Backed Securities
include mortgage pass-through certificates and multiple-class pass-through
securities, such as REMIC pass-through certificates, CMOs and stripped
mortgage-backed securities ("SMBS"), and other types of Mortgage-Backed
Securities that may be available in the future.
Guaranteed Mortgage Pass-Through Securities. Real Estate Investment Fund may
invest in guaranteed mortgage pass-through securities which represent
participation interests in pools of residential mortgage loans and are issued by
U.S. governmental or private lenders and guaranteed by the U.S. Government or
one of its agencies or instrumentalities, including but not limited to the
Government National Mortgage Association ("Ginnie Mae"), the Federal National
Mortgage Association ("Fannie Mae") and the Federal Home Loan Mortgage
Corporation ("Freddie Mac"). Ginnie Mae certificates are guaranteed by the full
faith and credit of the United States Government for timely payment of principal
and interest on the certificates. Fannie Mae certificates are guaranteed by
Fannie Mae, a federally chartered and privately-owned corporation for full and
timely payment of principal and interest on the certificates. Freddie Mac
certificates are guaranteed by Freddie Mac, a corporate instrumentality of the
United States Government, for timely payment of interest and the ultimate
collection of all principal of the related mortgage loans. Multiple-Class
Pass-Through Securities and Collateralized Mortgage Obligations. Mortgage-Backed
Securities also include CMOs and REMIC pass-through or participation
certificates, which may be issued by, among others, U.S. Government agencies and
instrumentalities as well as private lenders. CMOs and REMIC certificates are
issued in multiple classes and the principal of and interest on the mortgage
assets may be allocated among the several classes of CMOs or REMIC certificates
in various ways. Each class of CMOs or REMIC certificates, often referred to as
a "tranche," is issued at a specific adjustable or fixed interest rate and must
be fully retired no later than its final distribution date. Generally, interest
is paid or accrues on all classes of CMOs or REMIC certificates on a monthly
basis. Real Estate Investment Fund will not invest in the lowest tranche of CMOs
and REMIC certificates.
Typically, CMOs are collateralized by Ginnie Mae or Freddie Mac certificates but
also may be collateralized by other mortgage assets such as whole loans or
private mortgage pass-through securities. Debt service on CMOs is provided from
payments of principal and interest on collateral of mortgaged assets and any
reinvestment income thereon.
A REMIC is a CMO that qualifies for special tax treatment under the Code and
invests in certain mortgages primarily secured by interests in real property and
other permitted investments. Investors may purchase "regular" and "residual"
interest shares of beneficial interest in REMIC trusts although the Fund does
not intend to invest in residual interests.
Risks. Investing in Mortgage-Backed Securities involves certain unique risks in
addition to those generally associated with investing in the real estate
industry in general. These unique risks include the failure of a counterparty to
meet its commitments, adverse interest rate changes and the effects of
prepayments on mortgage cash flows. See "Risk Considerations--Mortgage-Backed
Securities" for a more complete description of the characteristics of
Mortgage-Backed Securities and associated risks.
Illiquid Securities. Subject to any more restrictive applicable fundamental
investment policy, none of the Funds will maintain more than 15% of its net
assets in illiquid securities. Illiquid securities generally include (i) direct
placements or other securities that are subject to legal or contractual
restrictions on resale or for which there is no readily available market (e.g.,
when trading in the security is suspended or, in the case of unlisted
securities, when market makers do not exist or will not entertain bids or
offers), including many individually negotiated currency swaps and any assets
used to cover currency swaps and most privately negotiated investments in state
enterprises that have not yet conducted an initial equity offering, (ii)
over-the-counter options and assets used to cover over-the-counter options, and
(iii) repurchase agreements not terminable within seven days.
Because of the absence of a trading market for illiquid securities, a Fund may
not be able to realize their full value upon sale. With respect to each Fund
that may invest in such securities, Alliance will monitor their illiquidity
under the supervision of the Directors of the Fund. To the extent
32
permitted by applicable law, Rule 144A securities will not be treated as
"illiquid" for purposes of the foregoing restriction so long as such securities
meet liquidity guidelines established by a Fund's Directors. Investment in
non-publicly traded securities by each of Growth Fund and Strategic Balanced
Fund is restricted to 5% of its total assets (not including for these purposes
Rule 144A securities, to the extent permitted by applicable law) and is also
subject to the 15% restriction on investment in illiquid securities described
above.
A Fund that invests in securities for which there is no ready market may
therefore not be able to readily sell such securities. To the extent that these
securities are foreign securities, there is no law in many of the countries in
which a Fund may invest similar to the Securities Act requiring an issuer to
register the sale of securities with a governmental agency or imposing legal
restrictions on resales of securities, either as to length of time the
securities may be held or manner of resale. However, there may be contractual
restrictions on resales of securities.
Options. An option gives the purchaser of the option, upon payment of a premium,
the right to deliver to (in the case of a put) or receive from (in the case of a
call) the writer a specified amount of a security on or before a fixed date at a
predetermined price. A call option written by a Fund is "covered" if the Fund
owns the underlying security, has an absolute and immediate right to acquire
that security upon conversion or exchange of another security it holds, or holds
a call option on the underlying security with an exercise price equal to or less
than that of the call option it has written. A put option written by a Fund is
covered if the Fund holds a put option on the underlying securities with an
exercise price equal to or greater than that of the put option it has written.
A call option is for cross-hedging purposes if a Fund does not own the
underlying security, and is designed to provide a hedge against a decline in
value in another security which the Fund owns or has the right to acquire.
Worldwide Privatization Fund, All-Asia Investment Fund, Income Builder Fund and
Utility Income Fund each may write call options for cross-hedging purposes. A
Fund would write a call option for cross-hedging purposes, instead of writing a
covered call option, when the premium to be received from the cross-hedge
transaction would exceed that which would be received from writing a covered
call option, while at the same time achieving the desired hedge.
In purchasing an option, a Fund would be in a position to realize a gain if,
during the option period, the price of the underlying security increased (in the
case of a call) or decreased (in the case of a put) by an amount in excess of
the premium paid; otherwise the Fund would experience a loss equal to the
premium paid for the option.
If an option written by a Fund were exercised, the Fund would be obligated to
purchase (in the case of a put) or sell (in the case of a call) the underlying
security at the exercise price. The risk involved in writing an option is that,
if the option were exercised, the underlying security would then be purchased or
sold by the Fund at a disadvantageous price. These risks could be reduced by
entering into a closing transaction (i.e., by disposing of the option prior to
its exercise). A Fund retains the premium received from writing a put or call
option whether or not the option is exercised. The writing of covered call
options could result in increases in a Fund's portfolio turnover rate,
especially during periods when market prices of the underlying securities
appreciate.
Technology Fund, Quasar Fund, International Fund, New Europe Fund and Global
Small Cap Fund will not write uncovered call options. Technology Fund and Global
Small Cap Fund will not write a call option if the premium to be received by the
Fund in doing so would not produce an annualized return of at least 15% of the
then current market value of the securities subject to the option (without
giving effect to commissions, stock transfer taxes and other expenses that are
deducted from premium receipts). Technology Fund, Quasar Fund and Global Small
Cap Fund will not write a call option if, as a result, the aggregate of the
Fund's portfolio securities subject to outstanding call options (valued at the
lower of the option price or market value of such securities) would exceed 15%
of the Fund's total assets or more than 10% of the Fund's assets would be
committed to call options that at the time of sale have a remaining term of more
than 100 days. The aggregate cost of all outstanding options purchased and held
by each of Premier Growth Fund, Technology Fund, Quasar Fund and Global Small
Cap Fund will at no time exceed 10% of the Fund's total assets. Neither
International Fund nor New Europe Fund will write uncovered put options.
A Fund that purchases or writes options on securities in privately negotiated
(i.e., over-the-counter) transactions will effect such transactions only with
investment dealers and other financial institutions (such as commercial banks or
savings and loan institutions) deemed creditworthy by Alliance, and Alliance has
adopted procedures for monitoring the creditworthiness of such entities. Options
purchased or written by a Fund in negotiated transactions are illiquid and it
may not be possible for the Fund to effect a closing transaction at an
advantageous time. See "Illiquid Securities."
Options on Securities Indices. An option on a securities index is similar to an
option on a security except that, rather than the right to take or make delivery
of a security at a specified price, an option on a securities index gives the
holder the right to receive, upon exercise of the option, an amount of cash if
the closing level of the chosen index is greater than (in the case of a call) or
less than (in the case of a put) the exercise price of the option.
Futures Contracts and Options on Futures Contracts. A "sale" of a futures
contract means the acquisition of a contractual obligation to deliver the
securities or foreign currencies or other commodity called for by the contract
at a specified price on a specified date. A "purchase" of a futures contract
means the incurring of an obligation to acquire the securities, foreign
currencies or other commodity called for by the contract at a specified price on
a specified date. The purchaser of a futures contract on an index agrees to take
or make delivery of an amount of cash equal to the difference between a
specified
33
dollar multiple of the value of the index on the expiration date of the contract
("current contract value") and the price at which the contract was originally
struck. No physical delivery of the securities underlying the index is made.
Options on futures contracts written or purchased by a Fund will be traded on
U.S. or foreign exchanges or over-the-counter. These investment techniques will
be used only to hedge against anticipated future changes in market conditions
and interest or exchange rates which otherwise might either adversely affect the
value of the Fund's portfolio securities or adversely affect the prices of
securities which the Fund intends to purchase at a later date.
No Fund will enter into any futures contracts or options on futures contracts if
immediately thereafter the market values of the outstanding futures contracts of
the Fund and the currencies and futures contracts subject to outstanding options
written by the Fund would exceed 50% of its total assets, and Income Builder
Fund will also not do so if immediately thereafter the aggregate of initial
margin deposits on all the outstanding futures contracts of the Fund and
premiums paid on outstanding options on futures contracts would exceed 5% of the
market value of the total assets of the Fund. Premier Growth Fund and Growth and
Income Fund may not purchase or sell a stock index future if immediately
thereafter more than 30% of its total assets would be hedged by stock index
futures. Premier Growth Fund and Growth and Income Fund may not purchase or sell
a stock index future if, immediately thereafter, the sum of the amount of margin
deposits on the Fund's existing futures positions would exceed 5% of the market
value of the Fund's total assets.
Options on Foreign Currencies. As in the case of other kinds of options, the
writing of an option on a foreign currency constitutes only a partial hedge, up
to the amount of the premium received, and a Fund could be required to purchase
or sell foreign currencies at disadvantageous exchange rates, thereby incurring
losses. The purchase of an option on a foreign currency may constitute an
effective hedge against fluctuations in exchange rates although, in the event of
rate movements adverse to a Fund's position, it may forfeit the entire amount of
the premium plus related transaction costs. See the Statement of Additional
Information of each Fund that may invest in options on foreign currencies for
further discussion of the use, risks and costs of options on foreign currencies.
Forward Foreign Currency Exchange Contracts. A Fund purchases or sells forward
contracts to minimize the risk to it from adverse changes in the relationship
between the U.S. dollar and other currencies. A forward contract is an
obligation to purchase or sell a specific currency for an agreed price at a
future date, and is individually negotiated and privately traded.
A Fund may enter into a forward contract, for example, when it enters into a
contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. dollar price of the security
("transaction hedge"). A Fund will not engage in transaction hedges with respect
to the currency of a particular country to an extent greater than the aggregate
amount of the Fund's transactions in that currency. When a Fund believes that a
foreign currency may suffer a substantial decline against the U.S. dollar, it
may enter into a forward sale contract to sell an amount of that foreign
currency approximating the value of some or all of the Fund's portfolio
securities denominated in such foreign currency, or when the Fund believes that
the U.S. dollar may suffer a substantial decline against a foreign currency, it
may enter into a forward purchase contract to buy that foreign currency for a
fixed dollar amount ("position hedge"). A Fund will not position hedge with
respect to a particular currency to an extent greater than the aggregate market
value (at the time of making such sale) of the securities held in its portfolio
denominated or quoted in that currency. Instead of entering into a position
hedge, a Fund may, in the alternative, enter into a forward contract to sell a
different foreign currency for a fixed U.S. dollar amount where the Fund
believes that the U.S. dollar value of the currency to be sold pursuant to the
forward contract will fall whenever there is a decline in the U.S. dollar value
of the currency in which portfolio securities of the Fund are denominated
("cross-hedge"). Unanticipated changes in currency prices may result in poorer
overall performance for the Fund than if it had not entered into such forward
contracts.
Hedging against a decline in the value of a currency does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Such transactions also preclude the
opportunity for gain if the value of the hedged currency should rise. Moreover,
it may not be possible for a Fund to hedge against a devaluation that is so
generally anticipated that the Fund is not able to contract to sell the currency
at a price above the devaluation level it anticipates. International Fund, New
Europe Fund and Global Small Cap Fund will not enter into a forward contract
with a term of more than one year or if, as a result, more than 50% of its total
assets would be committed to such contracts. The dealings of International Fund,
New Europe Fund and Global Small Cap Fund in forward contracts will be limited
to hedging involving either specific transactions or portfolio positions.
Growth Fund and Strategic Balanced Fund may also purchase and sell foreign
currency on a spot basis.
Forward Commitments. Forward commitments for the purchase or sale of securities
may include purchases on a "when-issued" basis or purchases or sales on a
"delayed delivery" basis. In some cases, a forward commitment may be conditioned
upon the occurrence of a subsequent event, such as approval and consummation of
a merger, corporate reorganization or debt restructuring (i.e., a "when, as and
if issued" trade).
When forward commitment transactions are negotiated, the price is fixed at the
time the commitment is made, but delivery and payment for the securities take
place at a later date. Normally, the settlement date occurs within two months
after the transaction, but settlements beyond two months may be negotiated.
Securities purchased or sold under a forward commitment are subject to market
fluctuation, and no interest or dividends accrue to the purchaser prior to the
settlement date. At the time a Fund intends to enter into a forward commitment,
it records the transaction and thereafter reflects the value of the security
purchased or, if a sale, the proceeds
34
to be received, in determining its net asset value. Any unrealized appreciation
or depreciation reflected in such valuation of a "when, as and if issued"
security would be canceled in the event that the required conditions did not
occur and the trade was canceled.
The use of forward commitments enables a Fund to protect against anticipated
changes in interest rates and prices. For instance, in periods of rising
interest rates and falling bond prices, a Fund might sell securities in its
portfolio on a forward commitment basis to limit its exposure to falling prices.
In periods of falling interest rates and rising bond prices, a Fund might sell a
security in its portfolio and purchase the same or a similar security on a
when-issued or forward commitment basis, thereby obtaining the benefit of
currently higher cash yields. However, if Alliance were to forecast incorrectly
the direction of interest rate movements, a Fund might be required to complete
such when-issued or forward transactions at prices inferior to the then current
market values. When-issued securities and forward commitments may be sold prior
to the settlement date, but a Fund enters into when-issued and forward
commitments only with the intention of actually receiving securities or
delivering them, as the case may be. If a Fund chooses to dispose of the right
to acquire a when-issued security prior to its acquisition or dispose of its
right to deliver or receive against a forward commitment, it may incur a gain or
loss. Any significant commitment of Fund assets to the purchase of securities on
a "when, as and if issued" basis may increase the volatility of the Fund's net
asset value. No forward commitments will be made by New Europe Fund, All-Asia
Investment Fund, Worldwide Privatization Fund, Income Builder Fund, Real
Estate Investment Fund or Utility Income Fund if, as a result, the Fund's
aggregate commitments under such transactions would be more than 30% of the
Fund's total assets. In the event the other party to a forward commitment
transaction were to default, a Fund might lose the opportunity to invest money
at favorable rates or to dispose of securities at favorable prices.
Standby Commitment Agreements. Standby commitment agreements commit a Fund, for
a stated period of time, to purchase a stated amount of a security that may be
issued and sold to the Fund at the option of the issuer. The price and coupon of
the security are fixed at the time of the commitment. At the time of entering
into the agreement the Fund is paid a commitment fee, regardless of whether the
security ultimately is issued, typically equal to approximately 0.5% of the
aggregate purchase price of the security the Fund has committed to purchase. A
Fund will enter into such agreements only for the purpose of investing in the
security underlying the commitment at a yield and price considered advantageous
to the Fund and unavailable on a firm commitment basis. No Fund, other than
Income Builder Fund, will enter into a standby commitment with a remaining term
in excess of 45 days. Investments in standby commitments will be limited so that
the aggregate purchase price of the securities subject to the commitments will
not exceed 25% with respect to New Europe Fund and Real Estate Investment Fund,
50% with respect to Worldwide Privatization Fund and All-Asia Investment Fund,
and 20% with respect to Utility Income Fund, of the Fund's assets taken at the
time of making the commitment.
There is no guarantee that a security subject to a standby commitment will be
issued and the value of the security, if issued, on the delivery date may be
more or less than its purchase price. Since the issuance of the security
underlying the commitment is at the option of the issuer, a Fund will bear the
risk of capital loss in the event the value of the security declines and may not
benefit from an appreciation in the value of the security during the commitment
period if the issuer decides not to issue and sell the security to the Fund.
Currency Swaps. Currency swaps involve the individually negotiated exchange by a
Fund with another party of a series of payments in specified currencies. A
currency swap may involve the delivery at the end of the exchange period of a
substantial amount of one designated currency in exchange for the other
designated currency. Therefore the entire principal value of a currency swap is
subject to the risk that the other party to the swap will default on its
contractual delivery obligations. The net amount of the excess, if any, of a
Fund's obligations over its entitlements with respect to each currency swap will
be accrued on a daily basis. A Fund will not enter into any currency swap unless
the credit quality of the unsecured senior debt or the claims-paying ability of
the other party thereto is rated in the highest rating category of at least one
nationally recognized rating organization at the time of entering into the
transaction. If there is a default by the other party to such a transaction,
such Fund will have contractual remedies pursuant to the agreements related to
the transactions.
Interest Rate Transactions. Each Fund that may enter into interest rate
transactions expects to do so primarily to preserve a return or spread on a
particular investment or portion of its portfolio or to protect against any
increase in the price of securities the Fund anticipates purchasing at a later
date. The Funds do not intend to use these transactions in a speculative manner.
Interest rate swaps involve the exchange by a Fund with another party of their
respective commitments to pay or receive interest (e.g., an exchange of floating
rate payments for fixed rate payments). Interest rate swaps are entered on a net
basis (i.e., the two payment streams are netted out, with the Fund receiving or
paying, as the case may be, only the net amount of the two payments). With
respect to All-Asia Investment Fund and Utility Income Fund, the exchange
commitments can involve payments in the same currency or in different
currencies. The purchase of an interest rate cap entitles the purchaser, to the
extent that a specified index exceeds a predetermined interest rate, to receive
payments of interest on a contractually-based principal amount from the party
selling such interest rate cap. The purchase of an interest rate floor entitles
the purchaser, to the extent that a specified index falls below a predetermined
interest rate, to receive payments of interest on an agreed principal amount
from the party selling the interest rate floor.
35
A Fund may enter into interest rate swaps, caps and floors on either an
asset-based or liability-based basis, depending upon whether it is hedging its
assets or liabilities. The net amount of the excess, if any, of a Fund's
obligations over its entitlements with respect to each interest rate swap, cap
and floor is accrued daily. A Fund will not enter into an interest rate swap,
cap or floor transaction unless the unsecured senior debt or the claims-paying
ability of the other party thereto is then rated in the highest rating category
of at least one nationally recognized rating organization. Alliance will monitor
the creditworthiness of counterparties on an ongoing basis. The swap market has
grown substantially in recent years, with a large number of banks and investment
banking firms acting both as principals and as agents utilizing standardized
swap documentation. As a result, the swap market has become relatively liquid.
Caps and floors are more recent innovations for which standardized documentation
has not yet been developed and, accordingly, they are less liquid than swaps.
The use of interest rate transactions is a highly specialized activity which
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. If Alliance were to incorrectly
forecast market values, interest rates and other applicable factors, the
investment performance of a Fund would be adversely affected by the use of these
investment techniques. Moreover, even if Alliance is correct in its forecasts,
there is a risk that the transaction position may correlate imperfectly with the
price of the asset or liability being hedged. There is no limit on the amount of
interest rate transactions that may be entered into by a Fund that is permitted
to enter into such transactions. These transactions do not involve the delivery
of securities or other underlying assets or principal. Accordingly, the risk of
loss with respect to interest rate transactions is limited to the net amount of
interest payments that a Fund is contractually obligated to make. If the other
party to an interest rate transaction defaults, a Fund's risk of loss consists
of the net amount of interest payments that the Fund contractually is entitled
to receive.
Repurchase Agreements. A repurchase agreement arises when a buyer purchases a
security and simultaneously agrees to resell it to the vendor at an agreed-upon
future date, normally a day or a few days later. The resale price is greater
than the purchase price, reflecting an agreed-upon interest rate for the period
the buyer's money is invested in the security. Such agreements permit a Fund to
keep all of its assets at work while retaining "overnight" flexibility in
pursuit of investments of a longer-term nature. If a vendor defaults on its
repurchase obligation, a Fund would suffer a loss to the extent that the
proceeds from the sale of the collateral were less than the repurchase price. If
a vendor goes bankrupt, a Fund might be delayed in, or prevented from, selling
the collateral for its benefit. Alliance monitors the creditworthiness of the
vendors with which the Fund enters into repurchase agreements. There is no
percentage restriction on a Fund's ability to enter into repurchase agreements,
other than as indicated under "Investment Objectives and Policies."
Short Sales. A short sale is effected by selling a security that a Fund does not
own, or if the Fund does own such security, it is not to be delivered upon
consummation of the sale. A short sale is "against the box" to the extent that a
Fund contemporaneously owns or has the right to obtain securities identical to
those sold short without payment. Worldwide Privatization Fund, All-Asia
Investment Fund, Income Builder Fund and Utility Income Fund each may make short
sales of securities or maintain short positions only for the purpose of
deferring realization of gain or loss for U.S. federal income tax purposes,
provided that at all times when a short position is open the Fund owns an equal
amount of securities of the same issue as, and equal in amount to, the
securities sold short. In addition, each of those Funds may not make a short
sale if as a result more than 10% of the Fund's net assets would be held as
collateral for short sales, except that All-Asia Investment Fund and Real Estate
Investment Fund may not make a short sale if as a result more than 25% of the
Fund's net assets would be held as collateral for short sales. If the price of
the security sold short increases between the time of the short sale and the
time a Fund replaces the borrowed security, the Fund will incur a loss;
conversely, if the price declines, the Fund will realize a capital gain. See
"Certain Fundamental Investment Policies." Certain special federal income tax
considerations may apply to short sales entered into by a Fund. See "Dividends,
Distributions and Taxes" in the relevant Fund's Statement of Additional
Information.
Loans of Portfolio Securities. The risk in lending portfolio securities, as with
other extensions of credit, consists of the possible loss of rights in the
collateral should the borrower fail financially. In determining whether to lend
securities to a particular borrower, Alliance will consider all relevant facts
and circumstances, including the creditworthiness of the borrower. While
securities are on loan, the borrower will pay the Fund any income earned thereon
and the Fund may invest any cash collateral in portfolio securities, thereby
earning additional income, or receive an agreed upon amount of income from a
borrower who has delivered equivalent collateral. Each Fund will have the right
to regain record ownership of loaned securities or equivalent securities in
order to exercise ownership rights such as voting rights, subscription rights
and rights to dividends, interest or distributions. A Fund may pay reasonable
finders', administrative and custodial fees in connection with a loan. A Fund
will not lend its portfolio securities to any officer, director, employee or
affiliate of the Fund or Alliance.
General. The successful use of the foregoing investment practices draws upon
Alliance's special skills and experience with respect to such instruments and
usually depends on Alliance's ability to forecast price movements, interest
rates or currency exchange rate movements correctly. Should interest rates,
prices or exchange rates move unexpectedly, a Fund may not achieve the
anticipated benefits of the transactions or may realize losses and thus be in a
worse position than if such strategies had not been used. Unlike many
exchange-traded futures contracts and options on futures contracts, there are no
daily price fluctuation limits
36
with respect to certain options and forward contracts, and adverse market
movements could therefore continue to an unlimited extent over a period of time.
In addition, the correlation between movements in the prices of futures
contracts, options and forward contracts and movements in the prices of the
securities and currencies hedged or used for cover will not be perfect and could
produce unanticipated losses.
A Fund's ability to dispose of its position in futures contracts, options and
forward contracts depends on the availability of liquid markets in such
instruments. Markets in options and futures with respect to a number of types of
securities and currencies are relatively new and still developing, and there is
no public market for forward contracts. It is impossible to predict the amount
of trading interest that may exist in various types of futures contracts,
options and forward contracts. If a secondary market does not exist with respect
to an option purchased or written by a Fund, it might not be possible to effect
a closing transaction in the option (i.e., dispose of the option), with the
result that (i) an option purchased by the Fund would have to be exercised in
order for the Fund to realize any profit and (ii) the Fund may not be able to
sell currencies or portfolio securities covering an option written by the Fund
until the option expires or it delivers the underlying security, futures
contract or currency upon exercise. Therefore, no assurance can be given that
the Funds will be able to utilize these instruments effectively for the purposes
set forth above. Furthermore, a Fund's ability to engage in options and futures
transactions may be limited by tax considerations. See "Dividends, Distributions
and Taxes" in the Statement of Additional Information of each Fund that invests
in options and futures.
Future Developments. A Fund may, following written notice to its shareholders,
take advantage of other investment practices that are not currently contemplated
for use by the Fund or are not available but may yet be developed, to the extent
such investment practices are consistent with the Fund's investment objective
and legally permissible for the Fund. Such investment practices, if they arise,
may involve risks that exceed those involved in the activities described above.
Defensive Position. For temporary defensive purposes, each Fund may invest in
certain types of short-term, liquid, high grade or high quality (depending on
the Fund) debt securities. These securities may include U.S. Government
securities, qualifying bank deposits, money market instruments, prime commercial
paper and other types of short-term debt securities including notes and bonds.
For Funds that may invest in foreign countries, such securities may also include
short-term, foreign-currency denominated securities of the type mentioned above
issued by foreign governmental entities, companies and supranational
organizations. For a complete description of the types of securities each Fund
may invest in while in a temporary defensive position, please see such Fund's
Statement of Additional Information.
Portfolio Turnover. Portfolio turnover rates are set forth under "Financial
Highlights." These portfolio turnover rates are greater than those of most other
investment companies, including those which emphasize capital appreciation as a
basic policy. A high rate of portfolio turnover involves correspondingly greater
brokerage and other expenses than a lower rate, which must be borne by the Fund
and its shareholders. High portfolio turnover also may result in the realization
of substantial net short-term capital gains. See "Dividends, Distributions and
Taxes" in each Fund's Statement of Additional Information.
CERTAIN FUNDAMENTAL INVESTMENT POLICIES
Each Fund has adopted certain fundamental investment policies listed below,
which may not be changed without the approval of its shareholders. Additional
investment restrictions with respect to a Fund are set forth in its Statement of
Additional Information.
Alliance Fund may not: (i) invest more than 5% of its total assets in the
securities of any one issuer (other than the U.S. Government); (ii) acquire more
than 10% of the voting or other securities of any one issuer; or (iii) buy
securities of any company that (including its predecessors) has not been in
business at least three continuous years. Pursuant to investment policies which
are not fundamental, the Fund does not invest (i) in puts or calls (except as
discussed above); (ii) in straddles, spreads, or any combination thereof; (iii)
in oil, gas or other mineral exploration or development programs; or (iv) more
than 5% of its gross assets in securities the disposition of which would be
subject to restrictions under the federal securities laws.
Growth Fund and Strategic Balanced Fund each may not: (i) invest more than 5% of
its total assets in the securities of any one issuer (other than U.S. Government
securities and repurchase agreements relating thereto), although up to 25% of
each Fund's total assets may be invested without regard to this restriction; or
(ii) invest 25% or more of its total assets in the securities of any one
industry.
Premier Growth Fund may not: (i) purchase more than 10% of the outstanding
voting securities of any one issuer; (ii) invest 25% or more of the value of its
total assets in the same industry; (iii) borrow money or issue senior securities
except for temporary or emergency purposes in an amount not exceeding 5% of the
value of its total assets at the time the borrowing is made; (iv) pledge,
mortgage, hypothecate or otherwise encumber any of its assets except in
connection with the writing of call options and except to secure permitted
borrowings; or (v) invest in the securities of any issuer that has a record of
less than three years of continuous operation (including the operation of any
predecessor) if as a result more than 10% of the value of the total assets of
the Fund would be invested in the securities of such issuer or issuers.
Technology Fund may not: (i) with respect to 75% of its total assets, have such
assets represented by other than: (a) cash and cash items, (b) U.S. Government
securities, or (c) securities of any one issuer (other than the U.S. Government
37
and its agencies or instrumentalities) not greater in value than 5% of the
Fund's total assets, and not more than 10% of the outstanding voting securities
of such issuer; (ii) purchase the securities of any one issuer, other than the
U.S. Government and its agencies or instrumentalities, if as a result (a) the
value of the holdings of the Fund in the securities of such issuer exceeds 25%
of its total assets, or (b) the Fund owns more than 25% of the outstanding
securities of any one class of securities of such issuer; (iii) concentrate its
investments in any one industry, but the Fund has reserved the right to invest
up to 25% of its total assets in a particular industry; and (iv) invest in the
securities of any issuer which has a record of less than three years of
continuous operation (including the operation of any predecessor) if such
purchase would cause 10% or more of its total assets to be invested in the
securities of such issuers.
Quasar Fund may not: (i) purchase the securities of any one issuer, other than
the U.S. Government or any of its agencies or instrumentalities, if as a result
more than 5% of its total assets would be invested in such issuer or the Fund
would own more than 10% of the outstanding voting securities of such issuer,
except that up to 25% of its total assets may be invested without regard to
these 5% and 10% limitations; (ii) invest more than 25% of its total assets in
any particular industry; (iii) borrow money except for temporary or emergency
purposes in an amount not exceeding 5% of its total assets at the time the
borrowing is made; or (iv) invest more than 10% of its assets in restricted
securities.
International Fund may not: (i) invest more than 5% of the value of its total
assets in securities of a single issuer (including repurchase agreements with
any one entity), except U.S. Government securities or foreign government
securities; provided, however, that the Fund may not, with respect to 75% of its
total assets, invest more than 5% of its total assets in securities of any one
foreign government issuer; (ii) own more than 10% of the outstanding securities
of any class of any issuer (for this purpose, all preferred stocks of an issuer
shall be deemed a single class, and all indebtedness of an issuer shall be
deemed a single class), except U.S. Government securities; (iii) invest more
than 25% of the value of its total assets in securities of issuers having their
principal business activities in the same industry; provided, that this
limitation does not apply to U.S. Government securities or foreign government
securities; (iv) invest more than 5% of the value of its total assets in the
securities of any issuer that has a record of less than three years of
continuous operation (including the operation of any predecessor or
unconditional guarantor), except U.S. Government securities or foreign
government securities; (v) invest more than 5% of the value of its total assets
in securities with legal or contractual restrictions on resale, other than
repurchase agreements, or more than 10% of the value of its total assets in
securities that are not readily marketable (including restricted securities and
repurchase agreements not terminable within seven business days); and (vi)
borrow money, except as a temporary measure for extraordinary or emergency
purposes, and then only from banks in amounts not exceeding 5% of its total
assets.
Worldwide Privatization Fund may not: (i) invest 25% or more of its total assets
in securities of issuers conducting their principal business activities in the
same industry, except that this restriction does not apply to (a) U.S.
Government securities, or (b) the purchase of securities of issuers whose
primary business activity is in the national commercial banking industry, so
long as the Fund's Directors determine, on the basis of factors such as
liquidity, availability of investments and anticipated returns, that the Fund's
ability to achieve its investment objective would be adversely affected if the
Fund were not permitted to invest more than 25% of its total assets in those
securities, and so long as the Fund notifies its shareholders of any decision by
the Directors to permit or cease to permit the Fund to invest more than 25% of
its total assets in those securities, such notice to include a discussion of any
increased investment risks to which the Fund may be subjected as a result of the
Directors' determination; (ii) borrow money except from banks for temporary or
emergency purposes, including the meeting of redemption requests that might
require the untimely disposition of securities; borrowing in the aggregate may
not exceed 15%, and borrowing for purposes other than meeting redemptions may
not exceed 5%, of the Fund's total assets (including the amount borrowed) less
liabilities (not including the amount borrowed) at the time the borrowing is
made; outstanding borrowings in excess of 5% of the value of the Fund's total
assets will be repaid before any investments are made; or (iii) pledge,
hypothecate, mortgage or otherwise encumber its assets, except to secure
permitted borrowings. The exception contained in clause (i)(b) above is subject
to the operating policy regarding concentration described in this Prospectus.
New Europe Fund may not: (i) purchase more than 10% of the outstanding voting
securities of any one issuer; (ii) invest more than 15% of its total assets in
the securities of any one issuer or 25% or more of its total assets in the same
industry, provided, however, that the foregoing restriction shall not be deemed
to prohibit the Fund from purchasing the securities of any issuer pursuant to
the exercise of rights distributed to the Fund by the issuer, except that no
such purchase may be made if as a result the Fund will fail to meet the
diversification requirements of the Code and any such acquisition in excess of
the foregoing 15% or 25% limits will be sold by the Fund as soon as reasonably
practicable (this restriction does not apply to U.S. Government securities, but
will apply to foreign government securities unless the Commission permits their
exclusion); (iii) borrow money except from banks for temporary or emergency
purposes, including the meeting of redemption requests that might require the
untimely disposition of securities; borrowing in the aggregate may not exceed
15%, and borrowing for purposes other than meeting redemptions may not exceed
5%, of the Fund's total assets (including the amount borrowed) less liabilities
(not including the amount borrowed) at the time the borrowing is made;
outstanding borrowings in excess of 5% of the Fund's total assets will be repaid
before any subsequent investments are made; or (iv) purchase a security (unless
the security is acquired pursuant to a plan of reorganization or an offer of
exchange) if,
38
as a result, the Fund would own any securities of an open-end investment company
or more than 3% of the total outstanding voting stock of any closed-end
investment company, or more than 5% of the value of the Fund's total assets
would be invested in securities of any closed-end investment company, or more
than 10% of such value in closed-end investment companies in general.
All-Asia Investment Fund may not: (i) invest 25% or more of its total assets in
securities of issuers conducting their principal business activities in the same
industry; (ii) borrow money except from banks for temporary or emergency
purposes, including the meeting of redemption requests that might require the
untimely disposition of securities; borrowing in the aggregate may not exceed
15%, and borrowing for purposes other than meeting redemptions may not exceed
5%, of the Fund's total assets (including the amount borrowed) less liabilities
(not including the amount borrowed) at the time the borrowing is made;
outstanding borrowings in excess of 5% of the value of the Fund's total assets
will be repaid before any investments are made; or (iii) pledge, hypothecate,
mortgage or otherwise encumber its assets, except to secure permitted
borrowings.
Global Small Cap Fund may not: (i) purchase the securities of any one issuer,
other than the U.S. Government or any of its agencies or instrumentalities, if
immediately after such purchase more than 5% of the value of its total assets
would be invested in such issuer or the Fund would own more than 10% of the
outstanding voting securities of such issuer, except that up to 25% of the
Fund's total assets may be invested without regard to these 5% and 10%
limitations; (ii) invest 25% or more of its total assets in the same industry;
this restriction does not apply to U.S. Government securities, but will apply to
foreign government securities unless the Commission permits their exclusion;
(iii) borrow money except from banks for emergency or temporary purposes in an
amount not exceeding 5% of the total assets of the Fund; or (iv) make short
sales of securities or maintain a short position, unless at all times when a
short position is open it owns an equal amount of such securities or securities
convertible into or exchangeable for, without payment of any further
consideration, securities of the same issue as, and equal in amount to, the
securities sold short and unless not more than 5% of the Fund's net assets is
held as collateral for such sales at any one time.
Balanced Shares may not: (i) invest more than 5% of its total assets in the
securities of any one issuer, except U.S. Government securities; or (ii) own
more than 10% of the outstanding voting securities of any one issuer.
Income Builder Fund may not: (i) invest 25% or more of its total assets in
securities of companies engaged principally in any one industry, except that
this restriction does not apply to U.S. Government securities; (ii) borrow money
except from banks for temporary or emergency purposes, including the meeting of
redemption requests that might require the untimely disposition of securities;
borrowing in the aggregate may not exceed 15%, and borrowing for purposes other
than meeting redemptions may not exceed 5%, of the Fund's total assets
(including the amount borrowed) less liabilities (not including the amount
borrowed) at the time borrowing is made; securities will not be purchased while
borrowings in excess of 5% of the Fund's total assets are outstanding; or (iii)
pledge, hypothecate, mortgage or otherwise encumber its assets, except to secure
permitted borrowings.
Utility Income Fund may not: (i) invest more than 5% of its total assets in the
securities of any one issuer except the U.S. Government, although with respect
to 25% of its total assets it may invest in any number of issuers; (ii) invest
25% or more of its total assets in the securities of issuers conducting their
principal business activities in any one industry, other than the utilities
industry, except that this restriction does not apply to U.S. Government
securities; (iii) purchase more than 10% of any class of the voting securities
of any one issuer; (iv) borrow money except from banks for temporary or
emergency purposes, including the meeting of redemption requests that might
require the untimely disposition of securities; borrowing in the aggregate may
not exceed 15%, and borrowing for purposes other than meeting redemptions may
not exceed 5%, of the Fund's total assets (including the amount borrowed) less
liabilities (not including the amount borrowed) at the time the borrowing is
made; outstanding borrowings in excess of 5% of the Fund's total assets will be
repaid before any subsequent investments are made; or (v) purchase a security
if, as a result (unless the security is acquired pursuant to a plan of
reorganization or an offer of exchange), the Fund would own any securities of an
open-end investment company or more than 3% of the total outstanding voting
stock of any closed-end investment company or more than 5% of the value of the
Fund's net assets would be invested in securities of any one or more closed-end
investment companies.
Growth and Income Fund may not (i) invest more than 5% of its net assets in the
security of any one issuer, except U.S. Government obligations or (ii) own more
than 10% of the outstanding voting securities of any issuer.
Real Estate Investment Fund may not: (i) with respect to 75% of its total
assets, have such assets represented by other than: (a) cash and cash items, (b)
U.S. Government securities, or (c) securities of any one issuer (other than the
U.S. Government and its agencies or instrumentalities) not greater in value than
5% of the Fund's total assets, and not more than 10% of the outstanding voting
securities of such issuer; (ii) purchase the securities of any one issuer, other
than the U.S. Government and its agencies or instrumentalities, if as a result
(a) the value of the holdings of the Fund in the securities of such issuer
exceeds 25% of its total assets, or (b) the Fund owns more than 25% of the
outstanding securities of any one class of securities of such issuer; (iii)
invest 25% or more of its total assets in the securities of issuers conducting
their principal business activities in any one industry, other than the real
estate industry in which the Fund will invest at least 25% or more of its total
assets, except that this restriction does not apply to U.S. Government
securities; (iv) purchase or sell real estate, except that it may purchase and
sell securities of companies which deal in real estate or interests therein,
including Real Estate Equity
39
Securities; or (v) borrow money except for temporary or emergency purposes or to
meet redemption requests, in an amount not exceeding 5% of the value of its
total assets at the time the borrowing is made.
RISK CONSIDERATIONS
Investment in certain of the Funds involves the special risk considerations
described below. These risks may be heightened when investing in emerging
markets.
Investment in Privatized Enterprises by Worldwide Privatization Fund. In certain
jurisdictions, the ability of foreign entities, such as the Fund, to participate
in privatizations may be limited by local law, or the price or terms on which
the Fund may be able to participate may be less advantageous than for local
investors. Moreover, there can be no assurance that governments that have
embarked on privatization programs will continue to divest their ownership of
state enterprises, that proposed privatizations will be successful or that
governments will not re-nationalize enterprises that have been privatized.
Furthermore, in the case of certain of the enterprises in which the Fund may
invest, large blocks of the stock of those enterprises may be held by a small
group of stockholders, even after the initial equity offerings by those
enterprises. The sale of some portion or all of those blocks could have an
adverse effect on the price of the stock of any such enterprise.
Most state enterprises or former state enterprises go through an internal
reorganization of management prior to conducting an initial equity offering in
an attempt to better enable these enterprises to compete in the private sector.
However, certain reorganizations could result in a management team that does not
function as well as the enterprise's prior management and may have a negative
effect on such enterprise. After making an initial equity offering, enterprises
that may have enjoyed preferential treatment from the respective state or
government that owned or controlled them may no longer receive such preferential
treatment and may become subject to market competition from which they were
previously protected. Some of these enterprises may not be able to effectively
operate in a competitive market and may suffer losses or experience bankruptcy
due to such competition. In addition, the privatization of an enterprise by its
government may occur over a number of years, with the government continuing to
hold a controlling position in the enterprise even after the initial equity
offering for the enterprise.
Currency Considerations. Substantially all of the assets of International Fund,
New Europe Fund, All-Asia Investment Fund, and Worldwide Privatization Fund and
a substantial portion of the assets of Global Small Cap Fund will be invested in
securities denominated in foreign currencies, and a corresponding portion of
these Funds' revenues will be received in such currencies. Therefore, the dollar
equivalent of their net assets, distributions and income will be adversely
affected by reductions in the value of certain foreign currencies relative to
the U.S. dollar. If the value of the foreign currencies in which a Fund receives
its income falls relative to the U.S. dollar between receipt of the income and
the making of Fund distributions, the Fund may be required to liquidate
securities in order to make distributions if it has insufficient cash in U.S.
dollars to meet distribution requirements that the Fund must satisfy to qualify
as a regulated investment company for federal income tax purposes. Similarly, if
an exchange rate declines between the time a Fund incurs expenses in U.S.
dollars and the time cash expenses are paid, the amount of the currency required
to be converted into U.S. dollars in order to pay expenses in U.S. dollars could
be greater than the equivalent amount of such expenses in the currency at the
time they were incurred. In light of these risks, a Fund may engage in certain
currency hedging transactions, which themselves involve certain special risks.
See "Additional Investment Practices" above.
Foreign Investment. The securities markets of many foreign countries are
relatively small, with the majority of market capitalization and trading volume
concentrated in a limited number of companies representing a small number of
industries. Consequently, a Fund whose investment portfolio includes such
securities may experience greater price volatility and significantly lower
liquidity than a portfolio invested solely in equity securities of U.S.
companies. These markets may be subject to greater influence by adverse events
generally affecting the market, and by large investors trading significant
blocks of securities, than is usual in the United States. Securities settlements
may in some instances be subject to delays and related administrative
uncertainties. These problems are particularly severe in India, where settlement
is through physical delivery, and, where, currently, a severe shortage of vault
capacity exists among custodial banks, although efforts are being undertaken to
alleviate the shortage. Certain foreign countries require governmental approval
prior to investments by foreign persons or limit investment by foreign persons
to only a specified percentage of an issuer's outstanding securities or a
specific class of securities which may have less advantageous terms (including
price) than securities of the company available for purchase by nationals. These
restrictions or controls may at times limit or preclude investment in certain
securities and may increase the costs and expenses of a Fund. In addition, the
repatriation of investment income, capital or the proceeds of sales of
securities from certain countries is controlled under regulations, including in
some cases the need for certain advance government notification or authority,
and if a deterioration occurs in a country's balance of payments, the country
could impose temporary restrictions on foreign capital remittances.
A Fund could also be adversely affected by delays in, or a refusal to grant, any
required governmental approval for repatriation, as well as by the application
to it of other restrictions on investment. Investing in local markets may
require a Fund to adopt special procedures, which may involve additional costs
to a Fund. The liquidity of a Fund's investments in any country in which any of
these factors exists could be affected and Alliance will monitor the effect of
any such factor or factors on a Fund's investments. Furthermore, transaction
40
costs including brokerage commissions for transactions both on and off the
securities exchanges in many foreign countries are generally higher than in the
United States.
Issuers of securities in foreign jurisdictions are generally not subject to the
same degree of regulation as are U.S. issuers with respect to such matters as
insider trading rules, restrictions on market manipulation, shareholder proxy
requirements and timely disclosure of information. The reporting, accounting and
auditing standards of foreign countries may differ, in some cases significantly,
from U.S. standards in important respects and less information may be available
to investors in foreign securities than to investors in U.S. securities.
Substantially less information is publicly available about certain non-U.S.
issuers than is available about U.S. issuers.
The economies of individual foreign countries may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross domestic
product or gross national product, rate of inflation, capital reinvestment,
resource self-sufficiency and balance of payments position. Nationalization,
expropriation or confiscatory taxation, currency blockage, political changes,
government regulation, political or social instability or diplomatic
developments could affect adversely the economy of a foreign country or the
Fund's investments in such country. In the event of expropriation,
nationalization or other confiscation, a Fund could lose its entire investment
in the country involved. In addition, laws in foreign countries governing
business organizations, bankruptcy and insolvency may provide less protection to
security holders such as the Fund than that provided by U.S. laws.
Investment in United Kingdom Issuers. Investment in securities of United Kingdom
issuers involves certain considerations not present with investment in
securities of U.S. issuers. As with any investment not denominated in the U.S.
dollar, the U.S. dollar value of the Fund's investment denominated in the
British pound sterling will fluctuate with pound sterling--dollar exchange rate
movements. Between 1972, when the pound sterling was allowed to float against
other currencies, and the end of 1992, the pound sterling generally depreciated
against most major currencies, including the U.S. dollar. Between September and
December 1992, after the United Kingdom's exit from the Exchange Rate Mechanism
of the European Monetary System, the value of the pound sterling fell by almost
20% against the U.S. dollar. The pound sterling continued to fall in early 1993,
but recovered due to interest rate cuts throughout Europe and an upturn in the
economy of the United Kingdom. The average exchange rate of the U.S. dollar to
the pound sterling was 1.50 in 1993 and 1.56 in 1996. On September 30, 1997 the
U.S. dollar-pound sterling exchange rate was 1.61.
The United Kingdom's largest stock exchange is the London Stock Exchange, which
is the third largest exchange in the world. As measured by the FT-SE 100 index,
the performance of the 100 largest companies in the United Kingdom reached
4118.5 at the end of 1996, up approximately 12% from the end of 1995. On
September 30, 1997 the FT-SE 100 index closed at 5244.2, up approximately 27%
from the end of 1996.
The public sector borrowing requirement ("PSBR"), a mandated measure of the
amount required to balance the budget, has been, over the last two fiscal years,
higher than forecast. The general government fiscal deficit has been in excess
of the eligibility limit prescribed by the European Union for countries that
intend to participate in the Economic and Monetary Union ("EMU"), which is
scheduled to take effect in January 1999. The government, however, expects that
the deficit will drop below that limit during calendar year 1997 and will
continue to drop in the 1997-98 and 1998-99 fiscal years. Although the
government has not yet made a formal announcement with respect to the United
Kingdom's participation in the EMU, remarks of the Chancellor of the Exchequer
made in mid-October 1997 suggest that the United Kingdom will not participate in
the EMU beginning in January 1999 but may do so thereafter.
From 1979 until 1997 the Conversative Party controlled Parliament. In the May 1,
1997 general elections, however, the Labour Party, led by Tony Blair, won a
majority in Parliament, holding 418 of 658 seats in the House of Commons. Mr.
Blair, who was appointed Prime Minister, has launched a number of reform
initiatives, including an overhaul of the monetary policy framework intended to
protect monetary policy from political forces by vesting responsibility for
setting interest rates in a new Monetary Policy Committee headed by the Governor
of the Bank of England, as opposed to the Treasury. Prime Minister Blair has
also undertaken a comprehensive restructuring of the regulation of the financial
services industry. For further information regarding the United Kingdom, see the
Statement of Additional Information of New Europe Fund.
Investment in Japanese Issuers. Investment in securities of Japanese issuers
involves certain considerations not present with investment in securities of
U.S. issuers. As with any investment not denominated in the U.S. dollar, the
U.S. dollar value of each Fund's investments denominated in the Japanese yen
will fluctuate with yen-dollar exchange rate movements. Between 1985 and 1995,
the Japanese yen generally appreciated against the U.S. dollar, but has fallen
from its post-World War II high (in 1995) against the U.S. dollar.
Japan's largest stock exchange is the Tokyo Stock Exchange, the First Section of
which is reserved for larger, established companies. As measured by the TOPIX, a
capitalization-weighted composite index of all common stocks listed in the First
Section, the performance of the First Section reached a peak in 1989.
Thereafter, the TOPIX declined approximately 50% through the end of 1993. In
1994, the TOPIX closed at 1,559.09, up approximately 8% from the end of 1993; in
1995, the TOPIX closed at 1,577.70, up approximately 1% from the end of 1994;
and in 1996, the TOPIX closed at 1,470.94, down approximately 7% from the end of
1995. On September 30, 1997, the TOPIX closed at 1,388.22, down 5.6% from the
end of 1996. Certain valuation measures, such as price-to-book value and
price-to-cash flow ratios, indicate that the Japanese stock market is near its
lowest level in the last twenty years relative to other world markets. The
41
price/earnings ratios of First Section companies, however, are on average high
in comparison with other major stock markets.
In recent years, Japan has consistently recorded large current account trade
surpluses with the U.S. that have caused difficulties in the relations between
the two countries. On October 1, 1994, the U.S. and Japan reached an agreement
that may lead to more open Japanese markets with respect to trade in certain
goods and services. In June 1995, the two countries agreed in principle to
increase Japanese imports of American automobiles and automotive parts.
Nevertheless it is expected that the continuing friction between the U.S. and
Japan with respect to trade issues will continue for the foreseeable future.
Each Fund's investments in Japanese issuers will be subject to uncertainty
resulting from the instability of recent Japanese ruling coalitions. From 1955
to 1993, Japan's government was controlled by a single political party. Between
August 1993 and October 1996 Japan was ruled by a series of four coalition
governments. As the result of a general election on October 20, 1996, however,
Japan has returned to a single-party government led by Prime Minister Ryutaro
Hashimoto. While Mr. Hashimoto's party, does not control a majority of the seats
in the parliament it is only three seats short of the 251 seats required to
attain a majority in the House of Representatives (down from a 12-seat shortfall
just after the October 1996 election). For further information regarding Japan,
see the Statements of Additional Information of All-Asia Investment Fund and
International Fund.
Investment in Smaller, Emerging Companies. The Funds may invest in smaller,
emerging companies. Global Small Cap Fund and New Europe Fund will emphasize
investment in, and All-Asia Investment Fund may emphasize investment in,
smaller, emerging companies. Investment in such companies involves greater risks
than is customarily associated with securities of more established companies.
The securities of smaller companies may have relatively limited marketability
and may be subject to more abrupt or erratic market movements than securities of
larger companies or broad market indices.
The Real Estate Industry. Although Real Estate Investment Fund does not invest
directly in real estate, it does invest primarily in Real Estate Equity
Securities and does have a policy of concentration of its investments in the
real estate industry. Therefore, an investment in the Fund is subject to certain
risks associated with the direct ownership of real estate and with the real
estate industry in general. These risks include, among others: possible declines
in the value of real estate; risks related to general and local economic
conditions; possible lack of availability of mortgage funds; overbuilding;
extended vacancies of properties; increases in competition, property taxes and
operating expenses; changes in zoning laws; costs resulting from the clean-up
of, and liability to third parties for damages resulting from, environmental
problems; casualty or condemnation losses; uninsured damages from floods,
earthquakes or other natural disasters; limitations on and variations in rents;
and changes in interest rates. To the extent that assets underlying the Fund's
investments are concentrated geographically, by property type or in certain
other respects, the Fund may be subject to certain of the foregoing risks to a
greater extent.
In addition, if Real Estate Investment Fund receives rental income or income
from the disposition of real property acquired as a result of a default on
securities the Fund owns, the receipt of such income may adversely affect the
Fund's ability to retain its tax status as a regulated investment company. See
"Dividends, Distributions and Taxes" in the Statement of Additional Information.
Investments by the Fund in securities of companies providing mortgage servicing
will be subject to the risks associated with refinancings and their impact on
servicing rights.
REITs. Investing in REITs involves certain unique risks in addition to those
risks associated with investing in the real estate industry in general. Equity
REITs may be affected by changes in the value of the underlying property owned
by the REITs, while mortgage REITs may be affected by the quality of any credit
extended. REITs are dependent upon management skills, are not diversified, are
subject to heavy cash flow dependency, default by borrowers and
self-liquidation. REITs are also subject to the possibilities of failing to
qualify for tax free pass-through of income under the Code and failing to
maintain their exemptions from registration under the 1940 Act.
REITs (especially mortgage REITs) are also subject to interest rate risks. When
interest rates decline, the value of a REIT's investment in fixed rate
obligations can be expected to rise. Conversely, when interest rates rise, the
value of a REIT's investment in fixed rate obligations can be expected to
decline. In contrast, as interest rates on adjustable rate mortgage loans are
reset periodically, yields on a REIT's investments in such loans will gradually
align themselves to reflect changes in market interest rates, causing the value
of such investments to fluctuate less dramatically in response to interest rate
fluctuations than would investments in fixed rate obligations.
Investing in REITs involves risks similar to those associated with investing in
small capitalization companies. REITs may have limited financial resources, may
trade less frequently and in a limited volume and may be subject to more abrupt
or erratic price movements than larger company securities. Historically, small
capitalization stocks, such as REITs, have been more volatile in price than the
larger capitalization stocks included in the S&P Index of 500 Common Stocks.
Mortgage-Backed Securities. As discussed above, investing in Mortgage-Backed
Securities involves certain unique risks in addition to those risks associated
with investment in the real estate industry in general. These risks include the
failure of a counterparty to meet its commitments, adverse interest rate changes
and the effects of prepayments on mortgage cash flows. When interest rates
decline, the value of an investment in fixed rate obligations can be expected to
rise. Conversely, when interest rates rise, the value of an investment in fixed
rate obligations can be expected to decline. In contrast, as interest rates on
adjustable rate mortgage loans are reset periodically, yields on investments in
such loans will gradually align
42
themselves to reflect changes in market interest rates, causing the value of
such investments to fluctuate less dramatically in response to interest rate
fluctuations than would investments in fixed rate obligations.
Further, the yield characteristics of Mortgage-Backed Securities, such as those
in which Real Estate Investment Fund may invest, differ from those of
traditional fixed-income securities. The major differences typically include
more frequent interest and principal payments (usually monthly), the
adjustability of interest rates, and the possibility that prepayments of
principal may be made substantially earlier than their final distribution dates.
Prepayment rates are influenced by changes in current interest rates and a
variety of economic, geographic, social and other factors, and cannot be
predicted with certainty. Both adjustable rate mortgage loans and fixed rate
mortgage loans may be subject to a greater rate of principal prepayments in a
declining interest rate environment and to a lesser rate of principal
prepayments in an increasing interest rate environment. Early payment associated
with Mortgage-Backed Securities causes these securities to experience
significantly greater price and yield volatility than that experienced by
traditional fixed-income securities. Under certain interest rate and prepayment
rate scenarios, the Fund may fail to recoup fully its investment in
Mortgage-Backed Securities notwithstanding any direct or indirect governmental
or agency guarantee. When the Fund reinvests amounts representing payments and
unscheduled prepayments of principal, it may receive a rate of interest that is
lower than the rate on existing adjustable rate mortgage pass-through
securities. Thus, Mortgage-Backed Securities, and adjustable rate mortgage
pass-through securities in particular, may be less effective than other types of
U.S. Government securities as a means of "locking in" interest rates.
U.S. and Foreign Taxes. A Fund's investment in foreign securities may be subject
to taxes withheld at the source on dividend or interest payments. Foreign taxes
paid by a Fund may be creditable or deductible by U.S. shareholders for U.S.
income tax purposes. No assurance can be given that applicable tax laws and
interpretations will not change in the future. Moreover, non-U.S. investors may
not be able to credit or deduct such foreign taxes. Investors should review
carefully the information discussed under the heading "Dividends, Distributions
and Taxes" and should discuss with their tax advisers the specific tax
consequences of investing in a Fund.
Fixed-Income Securities. The value of each Fund's shares will fluctuate with the
value of its investments. The value of each Fund's investments in fixed-income
securities will change as the general level of interest rates fluctuates. During
periods of falling interest rates, the values of fixed-income securities
generally rise. Conversely, during periods of rising interest rates, the values
of fixed-income securities generally decline.
Under normal market conditions, the average dollar-weighted maturity of a Fund's
portfolio of debt or other fixed-income securities is expected to vary between
five and 30 years in the case of All-Asia Investment Fund, between eight and 15
years in the case of Income Builder Fund, between five and 25 years in the case
of Utility Income Fund and between one year or less and 30 years in the case of
all other Funds that invest in such securities. In periods of increasing
interest rates, each of the Funds may, to the extent it holds mortgage-backed
securities, be subject to the risk that the average dollar-weighted maturity of
the Fund's portfolio of debt or other fixed- income securities may be extended
as a result of lower than anticipated prepayment rates. See "Additional
Investment Practices--Mortgage-Backed Securities."
Securities Ratings. The ratings of securities by S&P, Moody's, Duff & Phelps and
Fitch are a generally accepted barometer of credit risk. They are, however,
subject to certain limitations from an investor's standpoint. The rating of an
issuer is heavily weighted by past developments and does not necessarily reflect
probable future conditions. There is frequently a lag between the time a rating
is assigned and the time it is updated. In addition, there may be varying
degrees of difference in credit risk of securities within each rating category.
Securities rated Aaa by Moody's and AAA by S&P, Duff & Phelps and Fitch are
considered to be of the highest quality; capacity to pay interest and repay
principal is extremely strong. Securities rated Aa by Moody's and AA by S&P,
Duff & Phelps and Fitch are considered to be high quality; capacity to repay
principal is considered very strong, although elements may exist that make risks
appear somewhat larger than exist with securities rated Aaa or AAA. Securities
rated A are considered by Moody's to possess adequate factors giving security to
principal and interest. S&P, Duff & Phelps and Fitch consider such securities to
have a strong capacity to pay interest and repay principal. Such securities are
more susceptible to adverse changes in economic conditions and circumstances
than higher-rated securities.
Securities rated Baa by Moody's and BBB by S&P, Duff & Phelps and Fitch are
considered to have an adequate capacity to pay interest and repay principal.
Such securities are considered to have speculative characteristics and share
some of the same characteristics as lower-rated securities. Sustained periods of
deteriorating economic conditions or of rising interest rates are more likely to
lead to a weakening in the issuer's capacity to pay interest and repay principal
than in the case of higher-rated securities. Securities rated Ba by Moody's and
BB by S&P, Duff & Phelps and Fitch are considered to have speculative
characteristics with respect to capacity to pay interest and repay principal
over time; their future cannot be considered as well-assured. Securities rated B
by Moody's, S&P, Duff & Phelps and Fitch are considered to have highly
speculative characteristics with respect to capacity to pay interest and repay
principal. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Securities rated Caa by Moody's and CCC by S&P, Duff & Phelps and Fitch are of
poor standing and there is a present danger with respect to payment of principal
or interest. Securities rated Ca by Moody's and CC by S&P and Fitch are
43
minimally protected, and default in payment of principal or interest is
probable. Securities rated C by Moody's, S&P and Fitch are in imminent default
in payment of principal or interest and have extremely poor prospects of ever
attaining any real investment standing. Securities rated D by S&P and Fitch are
in default. The issuer of securities rated DD by Duff & Phelps is under an order
of liquidation.
Investment in Lower-Rated Fixed-Income Securities. Lower-rated securities, i.e.,
those rated Ba and lower by Moody's or BB and lower by S&P, Duff & Phelps or
Fitch, are subject to greater risk of loss of principal and interest than
higher-rated securities. They are also generally considered to be subject to
greater market risk than higher-rated securities, and the capacity of issuers of
lower-rated securities to pay interest and repay principal is more likely to
weaken than is that of issuers of higher-rated securities in times of
deteriorating economic conditions or rising interest rates. In addition,
lower-rated securities may be more susceptible to real or perceived adverse
economic conditions than investment grade securities.
The market for lower-rated securities may be thinner and less active than that
for higher-rated securities, which can adversely affect the prices at which
these securities can be sold. To the extent that there is no established
secondary market for lower-rated securities, a Fund may experience difficulty in
valuing such securities and, in turn, the Fund's assets. In addition, adverse
publicity and investor perceptions about lower-rated securities, whether or not
factual, may tend to impair their market value and liquidity.
Alliance will try to reduce the risk inherent in investment in lower-rated
securities through credit analysis, diversification and attention to current
developments and trends in interest rates and economic and political conditions.
However, there can be no assurance that losses will not occur. Since the risk of
default is higher for lower-rated securities, Alliance's research and credit
analysis are a correspondingly more important aspect of its program for managing
a Fund's securities than would be the case if a Fund did not invest in
lower-rated securities.
In seeking to achieve a Fund's investment objective, there will be times, such
as during periods of rising interest rates, when depreciation and realization of
capital losses on securities in a Fund's portfolio will be unavoidable.
Moreover, medium- and lower-rated securities and non-rated securities of
comparable quality may be subject to wider fluctuations in yield and market
values than higher-rated securities under certain market conditions. Such
fluctuations after a security is acquired do not affect the cash income received
from that security but are reflected in the net asset value of a Fund. See the
Statement of Additional Information for each Fund that invests in lower-rated
securities for a description of the bond ratings of Moody's, S&P, Duff & Phelps
and Fitch.
Certain lower-rated securities in which Growth Fund, Income Builder Fund,
Strategic Balanced and Utility Income Fund may invest may contain call or
buy-back features that permit the issuers thereof to call or repurchase such
securities. Such securities may present risks based on prepayment expectations.
If an issuer exercises such a provision, a Fund may have to replace the called
security with a lower yielding security, resulting in a decreased rate of return
to the Fund.
Non-Diversified Status. Each of Worldwide Privatization Fund, New Europe Fund,
All-Asia Investment Fund and Income Builder Fund is a "non-diversified"
investment company, which means the Fund is not limited in the proportion of its
assets that may be invested in the securities of a single issuer. However, each
Fund intends to conduct its operations so as to qualify to be taxed as a
"regulated investment company" for purposes of the Code, which will relieve the
Fund of any liability for federal income tax to the extent its earnings are
distributed to shareholders. See "Dividends, Distributions and Taxes" in each
Fund's Statement of Additional Information. To so qualify, among other
requirements, the Fund will limit its investments so that, at the close of each
quarter of the taxable year, (i) not more than 25% of the Fund's total assets
will be invested in the securities of a single issuer, and (ii) with respect to
50% of its total assets, not more than 5% of its total assets will be invested
in the securities of a single issuer and the Fund will not own more than 10% of
the outstanding voting securities of a single issuer. A Fund's investments in
U.S. Government securities and other regulated investment companies are not
subject to these limitations. Because each of Worldwide Privatization Fund, New
Europe Fund, All-Asia Investment Fund and Income Builder Fund is a
non-diversified investment company, it may invest in a smaller number of
individual issuers than a diversified investment company, and an investment in
such Fund may, under certain circumstances, present greater risk to an investor
than an investment in a diversified investment company.
Foreign government securities are not treated like U.S. Government securities
for purposes of the diversification tests described in the preceding paragraph,
but instead are subject to these tests in the same manner as the securities of
non-governmental issuers.
--------------------------------------------------------------------------------
PURCHASE AND SALE
--------------------------------------------------------------------------------
OF SHARES
--------------------------------------------------------------------------------
HOW TO BUY SHARES
You can purchase shares of any of the Funds at a price based on the next
calculation of their net asset value after receipt of a proper purchase order
either through broker-dealers, banks or other financial intermediaries, or
directly through Alliance Fund Distributors, Inc. ("AFD"), each Fund's principal
underwriter. The minimum initial investment in each Fund is $250. The minimum
for subsequent investments in each Fund is $50. Investments of $25 or more are
allowed under the automatic investment program of each Fund. Share certificates
are issued only upon request. See the Subscription Application and Statements of
Additional Information for more information.
Existing shareholders may make subsequent purchases by electronic funds transfer
if they have completed the Telephone Transactions section of the Subscription
Application or the
44
Shareholder Options form obtained from Alliance Fund Services, Inc. ("AFS"),
each Fund's registrar, transfer agent and dividend disbursing agent. Telephone
purchase orders can be made by calling (800) 221-5672 and may not exceed
$500,000.
Each Fund offers three classes of shares through this prospectus, Class A, Class
B and Class C. The Funds may refuse any order to purchase shares. In this
regard, the Funds reserve the right to restrict purchases of Fund shares
(including through exchanges) when they appear to evidence a pattern of frequent
purchases and sales made in response to short-term considerations.
Class A Shares--Initial Sales Charge Alternative
You can purchase Class A shares at net asset value plus an initial sales charge,
as follows:
[Download Table]
Initial Sales Charge
as % of Commission to
Net Amount as % of Dealer/Agent as %
Amount Purchased Invested Offering Price of Offering Price
--------------------------------------------------------------------------------
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
--------------------------------------------------------------------------------
On purchases of $1,000,000 or more, you pay no initial sales charge but may pay
a contingent deferred sales charge ("CDSC") equal to 1% of the lesser of net
asset value at the time of redemption or original cost if you redeem within one
year; Alliance may pay the dealer or agent a fee of up to 1% of the dollar
amount purchased. Certain purchases of Class A shares may qualify for reduced or
eliminated sales charges in accordance with a Fund's Combined Purchase
Privilege, Cumulative Quantity Discount, Statement of Intention, Privilege for
Certain Retirement Plans, Reinstatement Privilege and Sales at Net Asset Value
programs. Consult the Subscription Application and Statements of Additional
Information.
Class B Shares--Deferred Sales Charge Alternative
You can purchase Class B shares at net asset value without an initial sales
charge. A Fund will thus receive the full amount of your purchase. However, you
may pay a CDSC if you redeem shares within four years after purchase. The amount
of the CDSC (expressed as a percentage of the lesser of the current net asset
value or original cost) will vary according to the number of years from the
purchase of Class B shares until the redemption of those shares.
The amount of the CDSC for Class B shares for each Fund is as set forth below.
Class B shares of a Fund purchased prior to the date of this Prospectus may be
subject to a different CDSC schedule, which was disclosed in the Fund's
prospectus in use at the time of purchase and is set forth in the Fund's current
Statement of Additional Information.
[Download Table]
Year Since Purchase CDSC
-------------------------------------------
First ............................. 4.0%
Second ............................ 3.0%
Third ............................. 2.0%
Fourth ............................ 1.0%
Fifth ............................. None
Class B shares are subject to higher distribution fees than Class A shares for a
period (after which they convert to Class A shares) of eight years, or six years
with respect to Premier Growth Fund. The higher fees mean a higher expense
ratio, so Class B shares pay correspondingly lower dividends and may have a
lower net asset value than Class A shares.
Class C Shares--Asset-Based Sales Charge Alternative
You can purchase Class C shares at net asset value without any initial sales
charge. A Fund will thus receive the full amount of your purchase, and, if you
hold your shares for one year or more, you will receive the entire net asset
value of your shares upon redemption. Class C shares incur higher distribution
fees than Class A shares and do not convert to any other class of shares of the
Fund. The higher fees mean a higher expense ratio, so Class C shares pay
correspondingly lower dividends and may have a lower net asset value than Class
A shares.
Class C shares redeemed within one year of purchase will be subject to a CDSC
equal to 1% of the lesser of their original cost or net asset value at the time
of redemption.
Application of the CDSC
Shares obtained from dividend or distribution reinvestment are not subject to
the CDSC. The CDSC is deducted from the amount of the redemption and is paid to
AFD. The CDSC will be waived on redemptions of shares following the death or
disability of a shareholder, to meet the requirements of certain qualified
retirement plans or pursuant to a monthly, bimonthly or quarterly systematic
withdrawal plan. See the Statements of Additional Information.
How the Funds Value Their Shares
The net asset value of each Class of shares of a Fund is calculated by dividing
the value of the Fund's net assets allocable to that Class by the outstanding
shares of that Class. Shares are valued each day the New York Stock Exchange
(the "Exchange") is open as of the close of regular trading (currently 4:00 p.m.
Eastern time). The securities in a Fund are valued at their current market value
determined on the basis of market quotations or, if such quotations are not
readily available, such other methods as the Fund's Directors believe accurately
reflects fair market value.
Employee Benefit Plans
Certain employee benefit plans, including employer-sponsored tax-qualified
401(k) plans and other defined contribution retirement plans ("Employee Benefit
Plans"), may establish requirements as to the purchase, sale or exchange or
shares, including maximum and minimum initial investment requirements, that are
different from those described in this Prospectus. Such Employee Benefit Plans
may also not offer all classes of shares of the Funds. In order to enable
participants investing through such Employee Benefit Plans to purchase shares of
the Funds, the maximum and minimum investment amounts may be different for
shares purchased through these Employee Benefit Plans from those described in
this Prospectus. In addition, the Class A, Class B and Class C CDSC may be
waived for investments made through such Employee Benefit Plans.
45
General
The decision as to which Class of shares is more beneficial to you depends on
the amount and intended length of your investment. If you are making a large
investment, thus qualifying for a reduced sales charge, you might consider Class
A shares. If you are making a smaller investment, you might consider Class B
shares because 100% of your purchase is invested immediately. If you are unsure
of the length of your investment, you might consider Class C shares because
there is no initial sales charge and no CDSC as long as the shares are held for
one year or more. Consult your financial agent. Dealers and agents may receive
differing compensation for selling Class A, Class B or Class C shares. There is
no size limit on purchases of Class A shares. The maximum purchase of Class B
shares is $250,000. The maximum purchase of Class C shares is $1,000,000.
Each Fund offers a fourth class of shares, Advisor Class shares, by means of
separate prospectus. Advisor Class shares may be purchased and held solely by
(i) accounts established under a fee-based program sponsored and maintained by a
registered broker-dealer or other financial intermediary and approved by AFD,
(ii) a self-directed defined contribution employee benefit plan (e.g., a 401(k)
plan) that has at least 1,000 participants or $25 million in assets and (iii)
certain other categories of investors described in the prospectus for the
Advisor Class, including investment advisory clients of, and certain other
persons associated with, Alliance and its affiliates or the Funds. Advisor Class
shares are offered without any initial sales charge or CDSC and without an
ongoing distribution fee and are expected, therefore, to have different
performance than Class A, Class B or Class C shares. You can obtain more
information about Advisor Class shares by contacting AFS at 800-221-5672 or by
contacting your financial representative.
A transaction, service, administrative or other similar fee may be charged by
your broker-dealer, agent, financial intermediary or other financial
representative with respect to the purchase, sale or exchange of Class A, Class
B or Class C shares made through such financial representative. Such financial
intermediaries may also impose requirements with respect to the purchase, sale
or exchange of shares that are different from, or in addition to, those imposed
by a Fund, including requirements as to the minimum initial and subsequent
investment amounts.
In addition to the discount or commission paid to dealers or agents, AFD from
time to time pays additional cash or other incentives to dealers or agents,
including EQ Financial Consultants, Inc., an affiliate of AFD, in connection
with the sale of shares of the Funds. Such additional amounts may be utilized,
in whole or in part, in some cases together with other revenues of such dealers
or agents, to provide additional compensation to registered representatives who
sell shares of the Funds. On some occasions, such cash or other incentives will
be conditioned upon the sale of a specified minimum dollar amount of the shares
of a Fund and/or other Alliance Mutual Funds during a specific period of time.
Such incentives may take the form of payment for attendance at seminars, meals,
sporting events or theater performances, or payment for travel, lodging and
entertainment incurred in connection with travel by persons associated with a
dealer or agent and their immediate family members to urban or resort locations
within or outside the United States. Such dealer or agent may elect to receive
cash incentives of equivalent amount in lieu of such payments.
HOW TO SELL SHARES
You may "redeem", i.e., sell your shares in a Fund to the Fund on any day the
Exchange is open, either directly or through your financial intermediary. The
price you will receive is the net asset value (less any applicable CDSC) next
calculated after the Fund receives your request in proper form. Proceeds
generally will be sent to you within seven days. However, for shares recently
purchased by check or electronic funds transfer, a Fund will not send proceeds
until it is reasonably satisfied that the check or electronic funds transfer has
been collected (which may take up to 15 days).
Selling Shares Through Your Broker
Your broker must receive your request before 4:00 p.m. Eastern time, and your
broker must transmit your request to the Fund by 5:00 p.m. Eastern time, for you
to receive that day's net asset value (less any applicable CDSC). Your broker is
responsible for furnishing all necessary documentation to a Fund and may charge
you for this service.
Selling Shares Directly To A Fund
Send a signed letter of instruction or stock power form to AFS along with
certificates, if any, that represent the shares you want to sell. For your
protection, signatures must be guaranteed by a bank, a member firm of a national
stock exchange or other eligible guarantor institution. Stock power forms are
available from your financial intermediary, AFS, and many commercial banks.
Additional documentation is required for the sale of shares by corporations,
intermediaries, fiduciaries and surviving joint owners. For details contact:
Alliance Fund Services
P.O. Box 1520
Secaucus, NJ 07096-1520
1-800-221-5672
Alternatively, a request for redemption of shares for which no stock
certificates have been issued can also be made by telephone to 800-221-5672.
Telephone redemption requests must be made by 4:00 p.m. Eastern time on a Fund
business day in order to receive that day's net asset value, and, except for
certain omnibus accounts, may be made only once in any 30-day period. A
shareholder who has completed the Telephone Transactions section of the
Subscription Application, or the Shareholder Options form obtained from AFS, can
elect to have the proceeds of his or her redemption sent to his or her bank via
an electronic funds transfer. Proceeds of telephone redemptions also may be sent
by check to a shareholder's address of record. Redemption requests by electronic
funds transfer may not exceed $100,000 and redemption requests by check may not
exceed $50,000. Telephone redemption is not available for shares held in nominee
or "street name"
46
accounts or retirement plan accounts or shares held by a shareholder who has
changed his or her address of record within the previous 30 calendar days.
General
The sale of shares is a taxable transaction for federal tax purposes. Under
unusual circumstances, a Fund may suspend redemptions or postpone payment for up
to seven days or longer, as permitted by federal securities law. The Funds
reserve the right to close an account that through redemption has remained below
$200 for 90 days. Shareholders will receive 60 days' written notice to increase
the account value before the account is closed.
During drastic economic or market developments, you might have difficulty
reaching AFS by telephone, in which event you should issue written instructions
to AFS. AFS is not responsible for the authenticity of telephonic requests to
purchase, sell or exchange shares. AFS will employ reasonable procedures to
verify that telephone requests are genuine, and could be liable for losses
resulting from unauthorized transactions if it fails to do so. Dealers and
agents may charge a commission for handling telephonic requests. The telephone
service may be suspended or terminated at any time without notice.
SHAREHOLDER SERVICES
AFS offers a variety of shareholder services. For more information about these
services or your account, call AFS's toll-free number, 800-221-5672. Some
services are described in the attached Subscription Application. A shareholder's
manual explaining all available services will be provided upon request. To
request a shareholder manual, call 800-227-4618.
HOW TO EXCHANGE SHARES
You may exchange your shares of any Fund for shares of the same class of other
Alliance Mutual Funds (including AFD Exchange Reserves, a money market fund
managed by Alliance). Exchanges of shares are made at the net asset values next
determined, without sales or service charges. Exchanges may be made by telephone
or written request. Telephone exchange requests must be received by AFS by 4:00
p.m. Eastern time on a Fund business day in order to receive that day's net
asset value.
Shares will continue to age without regard to exchanges for purposes of
determining the CDSC, if any, upon redemption and, in the case of Class B
shares, for the purposes of conversion to Class A shares. After an exchange,
your Class B shares will automatically convert to Class A shares in accordance
with the conversion schedule applicable to the Class B shares of the Alliance
Mutual Fund you originally purchased for cash ("original shares"). When
redemption occurs, the CDSC applicable to the original shares is applied.
Please read carefully the Prospectus of the mutual fund into which you are
exchanging before submitting the request. Call AFS at 800-221-5672 to exchange
uncertificated shares. An exchange is a taxable capital transaction for federal
tax purposes. The exchange service may be changed, suspended, or terminated on
60 days' written notice.
--------------------------------------------------------------------------------
MANAGEMENT OF THE FUNDS
--------------------------------------------------------------------------------
ADVISER
Alliance, which is a Delaware limited partnership with principal offices at 1345
Avenue of the Americas, New York, New York 10105, has been retained under an
advisory agreement (the "Advisory Agreement") to provide investment advice and,
in general, to conduct the management and investment program of each Fund,
subject to the general supervision and control of the Directors of the Fund.
The following table lists the person or persons who are primarily responsible
for the day-to-day management of each Fund's portfolio, the length of time that
each person has been primarily responsible, and each person's principal
occupation during the past five years.
Principal occupation
during the past
Fund Employee; year; title five years
--------------------------------------------------------------------------------
The Alliance Fund Alden M. Stewart since 1997-- Associated with
Executive Vice President of Alliance since
Alliance Capital Management 1993; prior
Corporation (ACMC*) thereto,
associated with
Equitable Capital
Management
Corporation
("Equitable
Capital")**
Randall E. Haase since 1997-- Associated with
Senior Vice President of ACMC Alliance since July
1993; prior
thereto,
associated with
Equitable Capital
Growth Fund Tyler Smith since inception-- Associated with
Senior Vice President of ACMC Alliance since
July 1993; prior
thereto,
associated with
Equitable Capital
Premier Growth Fund Alfred Harrison since inception-- Associated with
Vice Chairman of ACMC Alliance
Technology Fund Peter Anastos since 1992-- Associated with
Senior Vice President of ACMC Alliance
Gerald T. Malone since 1992-- Associated with
Senior Vice President of ACMC Alliance since
1992; prior
thereto
associated with
College
Retirement
Equities Fund
Quasar Fund Alden M. Stewart since 1994-- (see above)
(see above)
Randall E. Haase since 1994-- (see above)
(see above)
International Fund A. Rama Krishna since 1993-- Associated with
Senior Vice President of ACMC Alliance since
and director of Asian Equity 1993; prior
research thereto,
Chief Investment
Strategist and
Director--Equity
Research for CS
First Boston
47
Principal occupation
during the past
Fund Employee; year; title five years
-------------------------------------------------------------------------------
Worldwide Privatization Mark H. Breedon since inception-- Associated with
Senior Vice President of ACMC Alliance
and Director and Vice President
of Alliance Capital Limited ***
New Europe Fund Steven Beinhacker Associated with
Vice President of ACMC Alliance
All-Asia Investment A. Rama Krishna since inception-- (see above)
Fund (see above)
Global Small Cap Alden M. Stewart since 1994-- (see above)
Fund (see above)
Randall E. Haase since 1994-- (see above)
(see above)
Ronald L. Simcoe since 1993-- Associated with
Vice President of ACMC Alliance since
1993; prior
thereto,
associated with
Equitable Capital
Strategic Balanced Nicholas D.P. Carn Associated with
Fund since 1997-- Alliance since
Vice President of ACMC 1997; prior
thereto, Chief
Investment
Officer and
Portfolio Manager
at Draycott
Partners
Balanced Shares Paul Rissman since 1997-- Associated with
Senior Vice President of ACMC Alliance
Income Builder Fund Andrew M. Aran since 1994-- Associated with
Senior Vice President of ACMC Alliance
Thomas M. Perkins since 1991-- Associated with
Senior Vice President of ACMC Alliance
Vita Marie Pike since 1997 Associated with
Vice President of ACMC Alliance
Corinne Molof Hill since 1997 Associated with
Vice President of ACMC Alliance
Utility Income Fund Paul Rissman since 1996-- Associated with
(See above) Alliance
Growth & Income Paul Rissman since 1994-- Associated with
Fund (see above) Alliance
Real Estate Daniel G. Pine since (1996) Associated with
Investment Fund Senior Vice President of ACMC Alliance since
1996; prior
thereto, Senior
Vice President of
Desai Capital
Management
David Kruth since 1997 Associated with
Vice President of ACMC Alliance since
1997; prior
thereto Senior
Vice President of
the Yarmouth
Group
--------------------------------------------------------------------------------
* The sole general partner of Alliance.
** Equitable Capital was, prior to Alliance's acquisition of it, a management
firm under common control with Alliance.
*** An indirect wholly-owned subsidiary of Alliance.
Alliance is a leading international investment manager supervising client
accounts with assets as of June 30, 1997 totaling more than $199 billion (of
which approximately $71 billion represented the assets of investment companies).
Alliance's clients are primarily major corporate employee benefit funds, public
employee retirement systems, investment companies, foundations and endowment
funds. The 54 registered investment companies managed by Alliance comprising 116
separate investment portfolios currently have over two million shareholders. As
of June 30, 1997, Alliance was an investment manager of employee benefit plan
assets for 29 of the Fortune 100 companies.
ACMC, the sole general partner of, and the owner of a 1% general partnership
interest in, Alliance, is an indirect wholly-owned subsidiary of The Equitable
Life Assurance Society of the United States ("Equitable"), one of the largest
life insurance companies in the United States, which is a wholly-owned
subsidiary of The Equitable Companies Incorporated, a holding company controlled
by AXA-UAP, a French insurance holding company. Certain information concerning
the ownership and control of Equitable by AXA-UAP is set forth in each Fund's
Statement of Additional Information under "Management of the Funds."
Performance of Similarly Managed Portfolios. In addition to managing the assets
of Premier Growth Fund, Mr. Harrison has ultimate responsibility for the
management of 35 portfolios of discretionary tax-exempt accounts of
institutional clients managed as described below without significant
client-imposed restrictions ("Historical Portfolios"). These accounts have
substantially the same investment objectives and policies and are managed in
accordance with essentially the same investment strategies and techniques as
those for Premier Growth Fund, except for the ability of Premier Growth Fund to
use futures and options as hedging tools and to invest in warrants. The
Historical Portfolios are also not subject to certain limitations,
diversification requirements and other restrictions to which Premier Growth
Fund, as a registered investment company, is subject and which if applicable to
the Historical Portfolios, may have adversely affected the performance results
of the Historical Portfolios. See "Investment Objective and Policies."
Set forth below is performance data provided by Alliance relating to the
Historical Portfolios for each of the eighteen full calendar years during which
Mr. Harrison has managed the Historical Portfolios and cumulatively through
September 30, 1997. As of September 30, 1997, the assets in the Historical
Portfolios totaled approximately $12.4 billion and the average size of an
institutional account in the Historical Portfolio was $355 million. Each
Historical Portfolio has a nearly identical composition of individual investment
holdings and related percentage weightings.
The performance data is gross of advisory fees charged to those accounts. Total
returns would be lower if advisory fees had been taken into account. The
performance data includes the cost of brokerage commissions, but excludes
custodial fees, transfer agency costs and other administrative expenses that
will be payable by Premier Growth Fund and will result in a higher expense ratio
for Premier Growth Fund. Expenses associated with the distribution of Class A,
Class B and Class C shares of Premier Growth Fund in accordance with the plan
adopted by Premier Growth Fund's Board of Directors pursuant to Rule 12b-1 of
the 1940 Act ("distribution fees")
48
are also excluded. See "Expense Information." The performance data has also not
been adjusted for corporate or individual taxes, if any, payable by the account
owners.
Alliance has calculated the investment performance of the Historical Portfolios
on a trade-date basis. Dividends have been accrued at the end of the month and
cash flows weighted daily. Composite investment performance for all portfolios
has been determined on an asset weighted basis. New accounts are included in the
composite investment performance computations at the beginning of the quarter
following the initial contribution. The composite total returns set forth below
are calculated using a method that links the monthly return amounts for the
disclosed periods, resulting in a time-weighted rate of return.
As reflected below, the Historical Portfolios have over time performed favorably
when compared with the performance of recognized performance indices. The S&P
500 Index is a widely recognized, unmanaged index of market activity based upon
the aggregate performance of a selected portfolio of publicly traded common
stocks, including monthly adjustments to reflect the reinvestment of dividends
and other distributions. The S&P 500 Index reflects the total return of
securities comprising the Index, including changes in market prices as well as
accrued investment income, which is presumed to be reinvested. The Russell 1000
universe of securities is compiled by Frank Russell Company and is segmented
into two style indices, based on the capitalization-weighted median
book-to-price ratio of each of the securities. At each reconstitution, the
Russell 1000 constituents are ranked by their book-to-price ratio. Once so
ranked, the breakpoint for the two styles is determined by the median market
capitalization of the Russell 1000. Thus, those securities falling within the
top fifty percent of the cumulative market capitalization (as ranked by
descending book-to-price) become members of the Russell Price-Driven Indices.
The Russell 1000 Growth Index is, accordingly, designed to include those Russell
1000 securities with a greater-than-average growth orientation. In contrast with
the securities in the Russell Price-Driven Indices, companies in the Growth
Index tend to exhibit higher price-to-book and price-earnings ratios, lower
dividend yield and higher forecasted growth values.
To the extent Premier Growth Fund does not invest in U.S. common stocks or
utilizes investment techniques such as futures or options, the S&P 500 and
Russell 1000 Growth Index may not be substantially comparable to Premier Growth
Fund. The S&P 500 and Russell 1000 Growth Index are included to illustrate
material economic and market factors that existed during the time period shown.
The S&P 500 and Russell 1000 Growth Index do not reflect the deduction of any
fees. If Premier Growth Fund were to purchase a portfolio of securities
substantially identical to the securities comprising the S&P 500 Index or the
Russell 1000 Growth Index, Premier Growth Fund's performance relative to the
index would be reduced by Premier Growth Fund's expenses, including brokerage
commissions, advisory fees, distribution fees, custodial fees, transfer agency
costs and other administrative expenses as well as by the impact on Premier
Growth Fund's shareholders of sales charges and income taxes.
The Lipper Growth Fund Index is prepared by Lipper Analytical Services, Inc. and
represents a composite index of the investment performance for the 30 largest
growth mutual funds. The composite investment performance of the Lipper Growth
Fund Index reflects investment management and administrative fees and other
operating expenses paid by these mutual funds and reinvested income dividends
and capital gain distributions, but excludes the impact of any income taxes and
sales charges.
The following performance data is provided solely to illustrate Mr. Harrison's
performance in managing the Historical Portfolios as measured against certain
broad based market indices and against the composite performance of other
open-end growth mutual funds. Investors should not rely on the following
performance data of the Historical Portfolios as an indication of future
performance of Premier Growth Fund. The composite investment performance for the
periods presented may not be indicative of future rates of return. Other methods
of computing investment performance may produce different results, and the
results for different periods may vary.
[Enlarge/Download Table]
Schedule of Composite Investment Performance Historical Portfolios*
Russell Lipper
Historical S&P 500 1000 Growth
Portfolios Index Growth Index Fund Index
Total Return Total Return Total Return Total Return
------------ ------------ ------------ ------------
Year ended:
December 31, 1996 ................................ 23.22 22.96 23.12 17.48
December 31, 1995** .............................. 41.12 37.58 37.19 32.65
December 31, 1994 ................................ (3.83) 1.32 2.66 (1.57)
December 31, 1993 ................................ 11.62 10.08 2.90 11.98
December 31, 1992 ................................ 13.27 7.62 5.00 7.63
December 31, 1991 ................................ 40.19 30.47 41.16 35.20
December 31, 1990 ................................ (0.57) (3.10) (0.26) (5.00)
December 31, 1989 ................................ 40.08 31.69 35.92 28.60
December 31, 1988 ................................ 11.96 16.61 11.27 15.80
December 31, 1987 ................................ 9.57 5.25 5.31 1.00
December 31, 1986 ................................ 28.60 18.67 15.36 15.90
December 31, 1985 ................................ 38.68 31.73 32.85 30.30
December 31, 1984 ................................ (2.33) 6.27 (.95) (2.80)
December 31, 1983 ................................ 21.95 22.56 15.98 22.30
December 31, 1982 ................................ 29.23 21.55 20.46 20.20
December 31, 1981 ................................ (0.10) (4.92) (11.31) (8.40)
December 31, 1980 ................................ 52.10 32.50 39.57 37.30
December 31, 1979 ................................ 31.99 18.61 23.91 27.40
Cumulative total return for
the period January 1,
1979 to September
30, 1997 ......................................... 3748.17 1888.65 1656.41 1772.84
--------------------------------------------------------------------------------
* Total return is a measure of investment performance that is based upon the
change in value of an investment from the beginning to the end of a
specified period and assumes reinvestment of all dividends and other
distributions. The basis of preparation of this data is described in the
preceding discussion.
** During this period, the Historical Portfolios differed from Premier Growth
Fund in that Premier Growth Fund invested a portion (4.54%) of its net
assets in warrants on equity securities in which the Historical Portfolios
were unable, by their investment restrictions, to purchase. In lieu of
warrants, the Historical Portfolios acquired the common stock upon which
the warrants were based. During this period, Premier Growth Fund's total
return, at net asset value, was 46.87%.
49
The average annual total returns presented below are based upon the cumulative
total return as of September 30, 1997, and for more than one year assume a
steady compounded rate of return and are not year-by-year results, which
fluctuated over the periods as shown.
[Download Table]
Average Annual Total Returns
-----------------------------------------------
Russell Lipper
Historical S&P 500 1000 Growth
Portfolios Index Growth Index Fund Index
---------- ----- ------------ ----------
Three years .................... 33.26 29.92 29.81 24.84
Five years ..................... 22.99 20.77 19.66 18.62
Ten years ...................... 17.03 14.75 14.66 13.19
Since January 1, 1979 .......... 21.07 11.69 16.51 16.18
ADMINISTRATOR TO ALL-ASIA INVESTMENT FUND
Alliance has been retained by All-Asia Investment Fund under an administration
agreement (the "Administration Agreement") to perform administrative services
necessary for the operation of the Fund. For a description of such services, see
the Statement of Additional Information of the Fund.
CONSULTANT TO ALLIANCE WITH RESPECT TO INVESTMENT IN REAL ESTATE SECURITIES
Alliance, with respect to investment in real estate securities, has retained as
a consultant CB Commercial Real Estate Group, Inc. ("CBC"), a publicly held
company and the largest real estate services company in the United States,
comprised of real estate brokerage, property and facilities management, and real
estate finance and investment advisory activities (CBC in August of 1997
acquired Koll, which previously provided these consulting services to Alliance).
In 1996, CBC (and Koll, on a combined basis) completed 25,000 sale and lease
transactions, managed over 4,100 client properties, created over $3.5 billion in
mortgage originations, and completed over 2,600 appraisal and consulting
assignments. In addition, they advised and managed for institutions over $4
billion in real estate investments. CBC will make available to Alliance the CBC
National Real Estate Index, which gathers, analyzes and publishes targeted
research data for the 65 largest U.S. markets, based on a variety of
public-sector and private-sector sources as well as CBC's proprietary database
of approximately 60,000 property transactions representing over $400 billion of
investment property. This information provides a substantial component of the
research and data used to create the REIT-Score model. As a consultant, CBC
provides to Alliance, at Alliance's expense, such in-depth information regarding
the real estate market, the factors influencing regional valuations and analysts
of recent transactions in office, retail, industrial and multi-family properties
as Alliance shall from time to time request. CBC will not furnish advice or make
recommendations regarding the purchase or sale of securities by the Fund nor
will it be responsible for making investment decisions involving Fund assets.
CBC is one of the three largest fee-based property management firms in the
United States, the largest commercial real estate lease brokerage firm in the
country, the largest investment property brokerage firm in the country, as well
as one of the largest publishers of real estate research, with approximately
6,000 employees nationwide. CBC will provide Alliance with exclusive access to
its REIT-Score model which ranks approximately 130 REITS based on the relative
attractiveness of the property markets in which they own real estate. This model
scores the approximately 12,000 individual properties owned by these companies.
REIT-Score is in turn based on CBC's National Real Estate Index which gathers,
analyzes and publishes targeted research for the 65 largest U.S. real estate
markets based on a variety of public- and private-sector sources as well as
CBC's proprietary database of 60,000 commercial property transactions
representing over $400 billion of investment property and over 3,000 tracked
properties which report rent and expense data quarterly. CBC has previously
provided access to its REIT-Score model results primarily to the institutional
market through subscriptions. The model is no longer provided to any research
publications and the Fund is currently the only mutual fund available to retail
investors that has access to CBC's REIT-Score model.
DISTRIBUTION SERVICES AGREEMENTS
Rule 12b-1 adopted by the Commission under the 1940 Act permits an investment
company to pay expenses associated with the distribution of its shares in
accordance with a duly adopted plan. Each Fund has adopted one or more "Rule
12b-1 plans" (for each Fund, a "Plan") and has entered into a Distribution
Services Agreement (the "Agreement") with AFD. Pursuant to its Plan, a Fund pays
to AFD a Rule 12b-1 distribution services fee, which may not exceed an annual
rate of .30% (.50% with respect to Growth Fund, Premier Growth Fund and
Strategic Balanced Fund) of the Fund's aggregate average daily net assets
attributable to the Class A shares, 1.00% of the Fund's aggregate average daily
net assets attributable to the Class B shares and 1.00% of the Fund's aggregate
average daily net assets attributable to the Class C shares, for distribution
expenses. The Directors of Growth Fund and Strategic Balanced Fund currently
limit payments with respect to Class A shares under the Plan to .30% of each
Fund's aggregate average daily net assets attributable to Class A shares. The
Directors of Premier Growth Fund currently limit payments under the Plan with
respect to sales of Class A shares made after November 1993 to .30% of the
Fund's aggregate average daily net assets. The Plans provide that a portion of
the distribution services fee in an amount not to exceed .25% of the aggregate
average daily net assets of each Fund attributable to each of the Class A, Class
B and Class C shares constitutes a service fee used for personal service and/or
the maintenance of shareholder accounts.
The Plans provide that AFD will use the distribution services fee received from
a Fund in its entirety for payments (i) to compensate broker-dealers or other
persons for providing distribution assistance, (ii) to otherwise promote the
sale of shares of the Fund, and (iii) to compensate broker-dealers, depository
institutions and other financial intermediaries for providing administrative,
accounting and other services with respect to the Fund's shareholders. In this
regard, some payments under the Plans are used to compensate financial
intermediaries with trail or maintenance commissions in an amount equal to .25%,
annualized, with respect to Class A shares and Class B shares, and 1.00%,
annualized, with
50
respect to Class C shares, of the assets maintained in a Fund by their
customers. Distribution services fees received from the Funds, except Growth
Fund and Strategic Balanced Fund, with respect to Class A shares will not be
used to pay any interest expenses, carrying charges or other financing costs or
allocation of overhead of AFD. Distribution services fees received from the
Funds, with respect to Class B and Class C shares, may be used for these
purposes. The Plans also provide that Alliance may use its own resources to
finance the distribution of each Fund's shares.
The Funds are not obligated under the Plans to pay any distribution services fee
in excess of the amounts set forth above. Except as noted below for Growth Fund
and Strategic Balanced Fund, with respect to Class A shares of each Fund,
distribution expenses accrued by AFD in one fiscal year may not be paid from
distribution services fees received from the Fund in subsequent fiscal years.
Except as noted below for Growth Fund and Strategic Balanced Fund, AFD's
compensation with respect to Class B and Class C shares under the Plans of the
other Funds is directly tied to its expenses incurred. Actual distribution
expenses for such Class B and Class C shares for any given year, however, will
probably exceed the distribution services fees payable under the applicable Plan
with respect to the class involved and, in the case of Class B and Class C
shares, payments received from CDSCs. The excess will be carried forward by AFD
and reimbursed from distribution services fees payable under the Plan with
respect to the class involved and, in the case of Class B and Class C shares,
payments subsequently received through CDSCs, so long as the Plan and the
Agreement are in effect. Since AFD's compensation under the Plans of Growth Fund
and Strategic Balanced Fund is not directly tied to the expenses incurred by
AFD, the amount of compensation received by it under the applicable Plan during
any year may be more or less than its actual expenses.
Unreimbursed distribution expenses incurred as of the end of each Fund's most
recently completed fiscal period, and carried over for reimbursement in future
years in respect of the Class B and Class C shares for all Funds were, as of
that time, as follows:
[Enlarge/Download Table]
Amount of Unreimbursed Distribution Expenses
(as % of Net Assets of Class)
------------------------------------------------------------------------
Class B Class C
------------------------------------------------------------------------------------------------------------------------------------
Alliance Fund ...................................... $ 2,718,791 (6.12%) $ 815,553 (5.87%)
Growth Fund ........................................ $63,986,412 (2.56%) $ 2,280,463 (0.57%)
Premier Growth Fund ................................ $ 9,179,357 (2.27%) $ 597,937 (0.99%)
Technology Fund .................................... $20,749,046 (3.14%) $ 892,004 (0.82%)
Quasar Fund ........................................ $ 3,754,485 (3.34%) $ 408,356 (1.43%)
International Fund ................................. $ 2,566,420 (3.30%) $ 807,347 (3.47%)
Worldwide Privatization Fund ....................... $ 5,013,479 (4.14%) $ 251,109 (1.94%)
New Europe Fund .................................... $ 2,535,456 (3.84%) $ 541,239 (3.20%)
All-Asia Investment Fund ........................... $ 1,402,190 (5.90%) $ 93,183 (2.20%)
Global Small Cap Fund .............................. $ 2,055,687 (6.43%) $ 586,919 (6.73%)
Strategic Balanced Fund ............................ $ 1,172,983 (4.18%) $ 372,907 (12.25%)
Balanced Shares .................................... $ 1,533,382 (6.34%) $ 463,860 (8.42%)
Income Builder Fund ................................ $ 748,972 (12.97%) $ 1,789,259 (4.03%)
Utility Income Fund ................................ $ 1,114,037 (8.21%) $ 406,214 (12.03%)
Growth and Income Fund ............................. $ 5,883,895 (2.50%) $ 975,417 (1.59%)
Real Estate Investment Fund ........................ $ 6,726,437 (3.60%) $ 366,120 (0.86%)
------------------------------------------------------------------------------------------------------------------------------------
The Plans are in compliance with rules of the National Association of Securities
Dealers, Inc. which effectively limit the annual asset-based sales charges and
service fees that a mutual fund may pay on a class of shares to .75% and .25%,
respectively, of the average annual net assets attributable to that class. The
rules also limit the aggregate of all front-end, deferred and asset-based sales
charges imposed with respect to a class of shares by a mutual fund that also
charges a service fee to 6.25% of cumulative gross sales of shares of that
class, plus interest at the prime rate plus 1% per annum.
The Glass-Steagall Act and other applicable laws may limit the ability of a bank
or other depository institution to become an underwriter or distributor of
securities. However, in the opinion of the Funds' management, based on the
advice of counsel, these laws do not prohibit such depository institutions from
providing services for investment companies such as the administrative,
accounting and other services referred to in the Agreements. In the event that a
change in these laws prevented a bank from providing such services, it is
expected that other services arrangements would be made and that shareholders
would not be adversely affected. The State of Texas requires that shares of a
Fund may be sold in that state only by dealers or other financial institutions
that are registered there as broker-dealers.
--------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS
--------------------------------------------------------------------------------
AND TAXES
--------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS
If you receive an income dividend or capital gains distribution in cash you may,
within 120 days following the date of its payment, reinvest the dividend or
distribution in additional shares of that Fund without charge by returning to
Alliance, with appropriate instructions, the check representing such dividend or
distribution. Thereafter, unless you otherwise specify, you will be deemed to
have elected to reinvest all subsequent dividends and distributions in shares of
that Fund.
Each income dividend and capital gains distribution, if any, declared by a Fund
on its outstanding shares will, at the election of each shareholder, be paid in
cash or in additional shares of the same class of shares of that Fund having an
aggregate net asset value as of the close of business on the day following the
declaration date of such dividend or distribution equal to the cash amount of
such income dividend or distribution. Election to receive dividends and
distributions in cash or shares is made at the time shares are initially
purchased and may be changed at any time prior to the record date for a
particular dividend or distribution. Cash dividends can be paid by check or, if
the shareholder so elects, electronically via the ACH network. There is no sales
or other charge in connection with the reinvestment of dividends and capital
gains distributions. Dividends paid by a Fund, if any, with respect to Class A,
Class B and Class C shares will be calculated in the same manner at the same
time on the same day and will be in the same amount,
51
except that the higher distribution services fees applicable to Class B and C
shares, and any incremental transfer agency costs relating to Class B and Class
C shares, will be borne exclusively by the class to which they relate.
While it is the intention of each Fund to distribute to its shareholders
substantially all of each fiscal year's net income and net realized capital
gains, if any, the amount and time of any such dividend or distribution must
necessarily depend upon the realization by such Fund of income and capital gains
from investments. There is no fixed dividend rate, and there can be no assurance
that a Fund will pay any dividends or realize any capital gains. Since REITs pay
distributions based on cash flow, without regard to depreciation and
amortization, a portion of the distributions paid to Real Estate Investment Fund
and subsequently distributed to shareholders may be a nontaxable return of
capital. The final determination of the amount of a Fund's return of capital
distributions for the period will be made after the end of each calendar year.
If you buy shares just before a Fund deducts a distribution from its net asset
value, you will pay the full price for the shares and then receive a portion of
the price back as a taxable distribution.
FOREIGN INCOME TAXES
Investment income received by a Fund from sources within foreign countries may
be subject to foreign income taxes withheld at the source. To the extent that
any Fund is liable for foreign income taxes withheld at the source, each Fund
intends, if possible, to operate so as to meet the requirements of the Code to
"pass through" to the Fund's shareholders credits for foreign income taxes paid
(or to permit shareholders to claim a deduction for such foreign taxes), but
there can be no assurance that any Fund will be able to do so.
U.S. FEDERAL INCOME TAXES
Each Fund intends to qualify to be taxed as a "regulated investment company"
under the Code. To the extent that a Fund distributes its taxable income and net
capital gain to its shareholders, qualification as a regulated investment
company relieves that Fund of federal income taxes on that part of its taxable
income, including net capital gains, which it pays out to its shareholders.
Dividends out of net ordinary income and distributions of net short-term capital
gains are taxable to the recipient shareholders as ordinary income. In the case
of corporate shareholders, such dividends may be eligible for the
dividends-received deduction, except that the amount eligible for the deduction
is limited to the amount of qualifying dividends received by the Fund.
Distributions received from a REIT generally do not constitute qualifying
dividends. A corporation's dividends-received deduction generally will be
disallowed unless the corporation holds shares in the Fund at least 46 days
during the 90-day period beginning 45 days before the date on which the
corporation becomes entitled to receive the dividend. Furthermore, the
dividends-received deduction will be disallowed to the extent a corporation's
investment in shares of a Fund is financed with indebtedness.
Distributions of net capital gains are not eligible for the dividends-received
deduction referred to above.
Pursuant to the Taxpayer Relief Act of 1997, two different tax rates apply to
net capital gains--that is, the excess of net gains from capital assets held for
more than one year over net losses from capital assets held for not more than
one year. One rate (generally 28%) applies to net gains on capital assets held
for more than one year but not more than 18 months ("mid-term gains"), and a
second rate (generally 20%) applies to the balance of such net capital gains
("adjusted net capital gains"). Distributions of mid-term gains and adjusted net
capital gains will be taxable to shareholders as such, regardless of how long a
shareholder has held shares in the Fund.
Distributions received by a shareholder of Real Estate Investment Fund may
include nontaxable returns of capital, which will reduce a shareholder's basis
in shares of the Fund. If that basis is reduced to zero (which could happen if
the shareholder does not reinvest distributions and returns of capital are
significant) any further returns of capital will be taxable as capital gain.
Under the current federal tax law, the amount of an income dividend or capital
gains distribution declared by a Fund during October, November or December of a
year to shareholders of record as of a specified date in such a month that is
paid during January of the following year is includable in the prior year's
taxable income of shareholders that are calendar year taxpayers.
Any dividend or distribution received by a shareholder on shares of a Fund will
have the effect of reducing the net asset value of such shares by the amount of
such dividend or distribution. Furthermore, a dividend or distribution made
shortly after the purchase of such shares by a shareholder, although in effect a
return of capital to that particular shareholder, would be taxable to him or her
as described above. If a shareholder held shares six months or less and during
that period received a distribution of net capital gains, any loss realized on
the sale of such shares during such six-month period would be a long-term
capital loss to the extent of such distribution.
A dividend or capital gains distribution with respect to shares of a Fund held
by a tax-deferred or qualified plan, such as an individual retirement account,
403(b)(7) retirement plan or corporate pension or profit-sharing plan, generally
will not be taxable to the plan. Distributions from such plans will be taxable
to individual participants under applicable tax rules without regard to the
character of the income earned by the qualified plan.
Distributions by a Fund may be subject to state and local taxes. Alliance Fund,
Premier Growth Fund, Technology Fund, Income Builder Fund, Quasar Fund, New
Europe Fund, Balanced Shares and Growth and Income Fund are qualified to do
business in the Commonwealth of Pennsylvania and, therefore, are subject to the
Pennsylvania foreign franchise and corporate net income tax in respect of their
business activities in Pennsylvania. Accordingly, shares of such Funds are
exempt from Pennsylvania personal property taxes. These Funds anticipate
continuing such business activities but
52
reserve the right to suspend them at any time, resulting in the termination of
the exemptions.
A Fund will be required to withhold 31% of any payments made to a shareholder if
the shareholder has not provided a certified taxpayer identification number to
the Fund, or the Secretary of the Treasury notifies a Fund that a shareholder
has not reported all interest and dividend income required to be shown on the
shareholder's Federal income tax return.
Under certain circumstances, if a Fund realizes losses from fluctuations in
currency exchange rates after paying a dividend, all or a portion of the
dividend may subsequently be characterized as a return of capital. See
"Dividends, Distributions and Taxes" in the Statement of Additional Information.
Shareholders will be advised annually as to the federal tax status of dividends
and capital gains and return of capital distributions made by a Fund for the
preceding year. Shareholders are urged to consult their tax advisers regarding
their own tax situation.
--------------------------------------------------------------------------------
GENERAL INFORMATION
--------------------------------------------------------------------------------
PORTFOLIO TRANSACTIONS
Consistent with the Conduct Rules of the National Association of Securities
Dealers, Inc., and subject to seeking best price and execution, a Fund may
consider sales of its shares as a factor in the selection of dealers to enter
into portfolio transactions with the Fund.
ORGANIZATION
Each of the following Funds is a Maryland corporation organized in the year
indicated: The Alliance Fund, Inc. (1938), Alliance Balanced Shares, Inc.
(1932), Alliance Premier Growth Fund, Inc. (1992), Alliance Technology Fund,
Inc. (1980), Alliance Quasar Fund, Inc. (1968), Alliance Worldwide Privatization
Fund, Inc. (1994), Alliance New Europe Fund, Inc. (1990), Alliance All-Asia
Investment Fund, Inc. (1994), Alliance Global Small Cap Fund, Inc. (1966),
Alliance Income Builder Fund, Inc. (1991), Alliance Utility Income Fund, Inc.
(1993), Alliance Growth and Income Fund, Inc. (1932), and Alliance Real Estate
Investment Fund, Inc. (1996). Each of the following Funds is either a
Massachusetts business trust or a series of a Massachusetts business trust
organized in the year indicated: Alliance Growth Fund and Alliance Strategic
Balanced Fund (each a series of The Alliance Portfolios) (1987), and Alliance
International Fund (1980). Prior to August 2, 1993, The Alliance Portfolios was
known as The Equitable Funds, Growth Fund was known as The Equitable Growth Fund
and Strategic Balanced Fund was known as The Equitable Balanced Fund. Prior to
March 22, 1994, Income Builder Fund was known as Alliance Multi-Market Income
and Growth Trust, Inc.
It is anticipated that annual shareholder meetings will not be held; shareholder
meetings will be held only when required by federal or state law. Shareholders
have available certain procedures for the removal of Directors.
A shareholder in a Fund will be entitled to share pro rata with other holders of
the same class of shares all dividends and distributions arising from the Fund's
assets and, upon redeeming shares, will receive the then current net asset value
of the Fund represented by the redeemed shares less any applicable CDSC. The
Funds are empowered to establish, without shareholder approval, additional
portfolios, which may have different investment objectives, and additional
classes of shares. If an additional portfolio or class were established in a
Fund, each share of the portfolio or class would normally be entitled to one
vote for all purposes. Generally, shares of each portfolio and class would vote
together as a single class on matters, such as the election of Directors, that
affect each portfolio and class in substantially the same manner. Class A, B, C
and Advisor Class shares have identical voting, dividend, liquidation and other
rights, except that each class bears its own transfer agency expenses, each of
Class A, Class B and Class C shares bears its own distribution expenses and
Class B shares and Advisor Class shares convert to Class A shares under certain
circumstances. Each class of shares votes separately with respect to a Fund's
Rule 12b-1 distribution plan and other matters for which separate class voting
is appropriate under applicable law. Shares are freely transferable, are
entitled to dividends as determined by the Directors and, in liquidation of a
Fund, are entitled to receive the net assets of the Fund. Since this Prospectus
sets forth information about all the Funds, it is theoretically possible that a
Fund might be liable for any materially inaccurate or incomplete disclosure in
this Prospectus concerning another Fund. Based on the advice of counsel,
however, the Funds believe that the potential liability of each Fund with
respect to the disclosure in this Prospectus extends only to the disclosure
relating to that Fund. Certain additional matters relating to a Fund's
organization are discussed in its Statement of Additional Information.
REGISTRAR, TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT
AFS, an indirect wholly-owned subsidiary of Alliance, located at 500 Plaza
Drive, Secaucus, New Jersey 07094, acts as each Fund's registrar, transfer agent
and dividend-disbursing agent for a fee based upon the number of shareholder
accounts maintained for the Funds. The transfer agency fee with respect to the
Class B shares will be higher than the transfer agency fee with respect to the
Class A shares or Class C shares.
PRINCIPAL UNDERWRITER
AFD, an indirect wholly-owned subsidiary of Alliance, located at 1345 Avenue of
the Americas, New York, New York 10105, is the principal underwriter of shares
of the Funds.
PERFORMANCE INFORMATION
From time to time, the Funds advertise their "total return," which is computed
separately for Class A, Class B and Class C shares. Such advertisements disclose
a Fund's average annual compounded total return for the periods prescribed by
the Commission. A Fund's total return for each such period is computed by
finding, through the use of a formula prescribed by the Commission, the average
annual compounded rate of return
53
over the period that would equate an assumed initial amount invested to the
value of the investment at the end of the period. For purposes of computing
total return, income dividends and capital gains distributions paid on shares of
a Fund are assumed to have been reinvested when paid and the maximum sales
charges applicable to purchases and redemptions of a Fund's shares are assumed
to have been paid.
Balanced Shares, Growth and Income Fund, Income Builder Fund, Strategic Balanced
Fund and Utility Income Fund may also advertise their "yield," which is also
computed separately for Class A, Class B and Class C shares. A Fund's yield for
any 30-day (or one-month) period is computed by dividing the net investment
income per share earned during such period by the maximum public offering price
per share on the last day of the period, and then annualizing such 30-day (or
one-month) yield in accordance with a formula prescribed by the Commission which
provides for compounding on a semi-annual basis.
Strategic Balanced Fund, Balanced Shares, Income Builder Fund, Utility Income
Fund and Growth and Income Fund may also state in sales literature an "actual
distribution rate" for each class which is computed in the same manner as yield
except that actual income dividends declared per share during the period in
question are substituted for net investment income per share. The actual
distribution rate is computed separately for Class A, Class B and Class C
shares.
A Fund's advertisements may quote performance rankings or ratings of a Fund by
financial publications or independent organizations such as Lipper Analytical
Services, Inc. and Morningstar, Inc. or compare a Fund's performance to various
indices.
ADDITIONAL INFORMATION
This Prospectus and the Statements of Additional Information, which have been
incorporated by reference herein, do not contain all the information set forth
in the Registration Statements filed by the Funds with the Commission under the
Securities Act. Copies of the Registration Statements may be obtained at a
reasonable charge from the Commission or may be examined, without charge, at the
offices of the Commission in Washington, D.C.
This prospectus does not constitute an offering in any state in which such
offering may not lawfully be made.
This prospectus is intended to constitute an offer by each Fund only of the
securities of which it is the issuer and is not intended to constitute an offer
by any Fund of the securities of any other Fund whose securities are also
offered by this prospectus. No Fund intends to make any representation as to the
accuracy or completeness of the disclosure in this prospectus relating to any
other Fund. See "General Information--Organization."
54
THE ALLIANCE
------------
STOCK FUNDS
------------
P.O. Box 1520, Secaucus, New Jersey 07096-1520
Toll Free (800) 221-5672
For Literature: Toll Free (800) 227-4618
Prospectus and Application
(Advisor Class)
November 1, 1997
Domestic Stock Funds Global Stock Funds
-The Alliance Fund -Alliance International Fund
-Alliance Growth Fund -Alliance Worldwide Privatization Fund
-Alliance Premier Growth Fund -Alliance New Europe Fund
-Alliance Technology Fund -Alliance All-Asia Investment Fund
-Alliance Quasar Fund -Alliance Global Small Cap Fund
Total Return Funds
-Alliance Strategic Balanced Fund
-Alliance Balanced Shares
-Alliance Income Builder Fund
-Alliance Utility Income Fund
-Alliance Growth and Income Fund
-Alliance Real Estate Investment Fund
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[Download Table]
Table of Contents Page
The Funds at a Glance ................................................... 2
Expense Information ..................................................... 4
Glossary ................................................................ 7
Financial Highlights .................................................... 7
Description of the Funds ................................................ 10
Investment Objectives and Policies ................................... 10
Additional Investment Practices ...................................... 20
Certain Fundamental Investment Policies .............................. 27
Risk Considerations .................................................. 30
Purchase and Sale of Shares ............................................. 35
Management of the Funds ................................................. 36
Dividends, Distributions and Taxes ...................................... 40
Conversion Feature ...................................................... 41
General Information ..................................................... 52
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Adviser
Alliance Capital Management L.P.
1345 Avenue Of The Americas
New York, New York 10105
The Alliance Stock Funds provide a broad selection of investment alternatives to
investors seeking capital growth or high total return. The Domestic Stock Funds
invest mainly in the United States equity markets and the Global Stock Funds
diversify their investments among equity markets around the world, while the
Total Return Funds invest in both equity and fixed-income securities.
Each fund or portfolio (each a "Fund") is, or is a series of, an open-end
management investment company. This Prospectus sets forth concisely the
information which a prospective investor should know about each Fund before
investing. A "Statement of Additional Information" for each Fund which provides
further information regarding certain matters discussed in this Prospectus and
other matters which may be of interest to some investors has been filed with the
Securities and Exchange Commission and is incorporated herein by reference. For
a free copy, call or write Alliance Fund Services, Inc. at the indicated address
or call the "For Literature" telephone number shown above.
This Prospectus offers the Advisor Class shares of each Fund which may be
purchased at net asset value without any initial or contingent deferred sales
charges and without ongoing distribution expenses. Advisor Class shares are
offered solely to (i) investors participating in fee-based programs meeting
certain standards established by Alliance Fund Distributors, Inc., each Fund's
principal underwriter, (ii) participants in self-directed defined contribution
employee benefit plans (e.g., 401(k) plans) that meet certain minimum standards
and (iii) certain other categories of investors described in the Prospectus,
including investment advisory clients of, and certain other persons associated
with, Alliance Capital Management L.P. and its affiliates or the Funds. See
"Purchase and Sale of Shares."
An investment in these securities is not a deposit or obligation of, or
guaranteed or endorsed by, any bank and is not federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board or any other agency.
Investors are advised to read this Prospectus carefully and to retain it for
future reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
[LOGO]
Alliance(R)
Investing without the Mystery.(SM)
(R)/SM These are registered marks used under licenses from the owner, Alliance
Capital Management L.P.
The Funds At A Glance
The following summary is qualified in its entirety by the more detailed
information contained in this Prospectus.
The Funds' Investment Adviser Is . . .
Alliance Capital Management L.P. ("Alliance"), a global investment manager
providing diversified services to institutions and individuals through a broad
line of investments including more than 100 mutual funds. Since 1971, Alliance
has earned a reputation as a leader in the investment world with over $199
billion in assets under management as of June 30, 1997. Alliance provides
investment management services to employee benefit plans for 29 of the FORTUNE
100 companies.
Domestic Stock Funds
Alliance Fund
Seeks . . . Long-term growth of capital and income primarily through investment
in common stocks.
Invests Principally in . . . A diversified portfolio of equity securities that,
in the judgment of Alliance, have the potential to achieve capital appreciation.
Growth Fund
Seeks . . . Long-term growth of capital by investing primarily in common stocks
and other equity securities.
Invests Principally in . . . A diversified portfolio of equity securities of
companies with a favorable outlook for earnings and whose rate of growth is
expected to exceed that of the United States economy over time.
Premier Growth Fund
Seeks . . . Long-term growth of capital by investing in the equity securities of
a limited number of large, carefully selected, high-quality American companies
from a relatively small universe of intensively researched companies.
Invests Principally in . . . A diversified portfolio of equity securities that,
in the judgment of Alliance, are likely to achieve superior earnings growth.
Normally, approximately 40 companies will be represented in the Fund's
investment portfolio. The Fund's investments in 25 of these companies most
highly regarded at any point in time by Alliance will usually constitute
approximately 70% of the Fund's net assets.
Technology Fund
Seeks . . . Growth of capital through investment in companies expected to
benefit from advances in technology.
Invests Principally in . . . A diversified portfolio of securities of companies
which use technology extensively in the development of new or improved products
or processes.
Quasar Fund
Seeks . . . Growth of capital by pursuing aggressive investment policies.
Invests Principally in . . . A diversified portfolio of equity securities of any
company and industry and in any type of security which is believed to offer
possibilities for capital appreciation.
Global Stock Funds
International Fund
Seeks . . . A total return on its assets from long-term growth of capital and
from income.
Invests Principally in . . . A diversified portfolio of marketable securities of
established non-United States companies, companies participating in foreign
economies with prospects for growth, and foreign government securities.
Worldwide Privatization Fund
Seeks . . . Long-term capital appreciation.
Invests Principally in . . . A non-diversified portfolio of equity securities
issued by enterprises that are undergoing, or have undergone, privatization. The
balance of the Fund's investment portfolio will include securities of companies
that are believed by Alliance to be beneficiaries of the privatization process.
New Europe Fund
Seeks . . . Long-term capital appreciation through investment primarily in the
equity securities of companies based in Europe.
Invests Principally in . . . A non-diversified portfolio of equity securities of
European companies.
All-Asia Investment Fund
Seeks . . . Long-term capital appreciation.
Invests Principally in . . . A non-diversified portfolio of equity securities of
Asian/Pacific companies.
Global Small Cap Fund
Seeks . . . Long-term growth of capital.
Invests Principally in . . . A diversified global portfolio of the equity
securities of small capitalization companies.
Total Return Funds
Strategic Balanced Fund
Seeks . . . A high long-term total return by investing in a combination of
equity and debt securities.
Invests Principally in . . . A diversified portfolio of dividend-paying common
stocks and fixed-income securities, and also in equity-type securities such as
warrants, preferred stocks and convertible debt instruments.
Balanced Shares
Seeks . . . A high return through a combination of current income and capital
appreciation.
2
Invests Principally in . . . A diversified portfolio of equity and fixed-income
securities such as common and preferred stocks, U.S. Government and agency
obligations, bonds and senior debt securities.
Income Builder Fund
Seeks . . . Both an attractive level of current income and long-term growth of
income and capital.
Invests Principally in . . . A non-diversified portfolio of fixed-income
securities and dividend-paying common stocks. Alliance currently expects to
continue to maintain approximately 60% of the Fund's net assets in fixed-income
securities and 40% in equity securities.
Utility Income Fund
Seeks . . . Current income and capital appreciation through investment in the
utilities industry.
Invests Principally in . . . A diversified portfolio of equity securities, such
as common stocks, securities convertible into common stocks and rights and
warrants to subscribe for purchase of common stocks, and in fixed-income
securities such as bonds and preferred stocks.
Growth and Income Fund
Seeks . . . Income and appreciation through investment in dividend-paying common
stocks of quality companies.
Invests Principally in . . . A diversified portfolio of dividend-paying common
stocks of good quality, and, under certain market conditions, other types of
securities, including bonds, convertible bonds and preferred stocks.
Real Estate Investment Fund
Seeks . . . Total return on its assets from long-term growth of capital and from
income.
Invests Principally in . . . A diversified portfolio of equity securities of
issuers that are primarily engaged in or related to the real estate industry.
Distributions...
Balanced Shares, Income Builder Fund, Utility Income Fund, Growth and Income
Fund and Real Estate Investment Fund make distributions quarterly to
shareholders. These distributions may include ordinary income and capital gain
(each of which is taxable) and a return of capital (which is generally
nontaxable). See "Dividends, Distributions and Taxes."
A Word About Risk . . .
The price of the shares of the Alliance Stock Funds will fluctuate as the daily
prices of the individual securities in which they invest fluctuate, so that your
shares, when redeemed, may be worth more or less than their original cost. With
respect to those Funds permitted to invest in foreign currency denominated
securities, these fluctuations may be magnified by changes in foreign exchange
rates. Investment in the Global Stock Funds involves risks not associated with
funds that invest primarily in securities of U.S. issuers. While the Funds
invest principally in common stocks and other equity securities, in order to
achieve their investment objectives the Funds may at times use certain types of
investment derivatives, such as options, futures, forwards and swaps. These
involve risks different from, and, in certain cases, greater than, the risks
presented by more traditional investments. An investment in the Real Estate
Investment Fund is subject to certain risks associated with the direct ownership
of real estate in general, including possible declines in the value of real
estate, general and local economic conditions, environmental problems and
changes in interest rates. These risks are fully discussed in this Prospectus.
Getting Started . . .
Shares of the Funds are available through your financial representative. Each
Fund offers multiple classes of shares, of which only the Advisor Class is
offered by this Prospectus. Advisor Class shares may be purchased at net asset
value without any initial or contingent deferred sales charges and are not
subject to ongoing distribution expenses. Advisor Class shares may be purchased
and held solely (i) through accounts established under a fee-based program,
sponsored and maintained by a registered broker-dealer or other financial
intermediary and approved by Alliance Fund Distributors, Inc. ("AFD"), each
Fund's principal underwriter, (ii) through a self-directed defined contribution
employee benefit plan (e.g., a 401(k) plan) that has at least 1,000 participants
or $25 million in assets, (iii) by investment advisory clients of, and certain
other persons associated with, Alliance and its affiliates or the Funds, and
(iv) through registered investment advisers or other financial intermediaries
who charge a management, consulting or other fee for their service and who
purchase shares through a broker or agent approved by AFD and clients of such
registered investment advisers or financial intermediaries whose accounts are
linked to the master account of such investment adviser or financial
intermediary on the books of such approved broker or agent. A shareholder's
Advisor Class shares will automatically convert to Class A shares of the same
Fund under certain circumstances. See "Conversion Feature-Conversion to Class A
Shares." Generally, a fee-based program must charge an asset-based or other
similar fee and must invest at least $250,000 in Advisor Class shares of each
Fund in which the program invests in order to be approved by AFD for investment
in Advisor Class shares. For more detailed information about who may purchase
and hold Advisor Class shares see the Statement of Additional Information.
Fee-based and other programs through which Advisor Class shares may be purchased
may impose different requirements with respect to investment in Advisor Class
shares than described above. For detailed information about purchasing and
selling shares, see "Purchase and Sale of Shares."
[LOGO]
Alliance(R)
Investing without the Mystery.(SM)
(R)/SM These are registered marks used under licenses from the owner, Alliance
Capital Management L.P.
3
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EXPENSE INFORMATION
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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.
[Download Table]
Advisor Class Shares
--------------------
Maximum sales charge imposed on purchases ............ None
Sales charge imposed on dividend reinvestments ....... None
Deferred sales charge ................................ None
Exchange fee ......................................... None
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[Enlarge/Download Table]
Operating Expenses Examples
---------------------------------------------------- --------------------------------------------
Alliance Fund Advisor Class Advisor Class
------------- -------------
Management fees .70% After 1 year $ 9
12b-1 fees None After 3 years $ 27
Other expenses (a) .15% After 5 years $ 47
---- After 10 years $105
Total fund
operating expenses (b) .85%
====
Growth Fund Advisor Class Advisor Class
------------- -------------
Management fees .75% After 1 year $ 10
12b-1 fees None After 3 years $ 32
Other expenses (a) .25% After 5 years $ 55
---- After 10 years $122
Total fund
operating expenses (b) 1.00%
====
Premier Growth Fund Advisor Class Advisor Class
------------- -------------
Management fees 1.00% After 1 year $ 13
12b-1 fees None After 3 years $ 42
Other expenses (a) .32% After 5 years $ 72
---- After 10 years $159
Total fund
operating expenses (b) 1.32%
====
Technology Fund Advisor Class Advisor Class
------------- -------------
Management fees (g) 1.11% After 1 year $ 15
12b-1 fees None After 3 years $ 46
Other expenses (a) .33% After 5 years $ 79
---- After 10 years $172
Total fund
operating expenses (b) 1.44%
====
Quasar Fund Advisor Class Advisor Class
------------- -------------
Management fees (g) 1.15% After 1 year $ 16
12b-1 fees None After 3 years $ 50
Other expenses (a) .43% After 5 years $ 86
---- After 10 years $188
Total fund
operating expenses (b) 1.58%
====
International Fund Advisor Class Advisor Class
------------- -------------
Management fees
(after waiver) (c) .85% After 1 year $ 16
12b-1 fees None After 3 years $ 48
Other expenses (a) .68% After 5 years $ 83
---- After 10 years $182
Total fund
operating expenses (b) (e) 1.53%
====
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Please refer to the footnotes and the discussion following these tables on
page 6.
4
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Operating Expenses Examples
---------------------------------------------------- --------------------------------------------
Worldwide Privatization Fund Advisor Class Advisor Class
------------- -------------
Management fees 1.00% After 1 year $ 20
12b-1 fees None After 3 years $ 62
Other expenses (a) .96% After 5 years $106
---- After 10 years $229
Total fund
operating expenses (b) 1.96%
====
New Europe Fund
Management fees 1.06% After 1 year $ 17
12b-1 fees None After 3 years $ 54
Other expenses (a) .65% After 5 years $ 93
---- After 10 years $202
Total fund
operating expenses (b) 1.71%
====
All-Asia Investment Fund
Management fees
(after waiver) (c) .65% After 1 year $ 29
12b-1 fees None After 3 years $ 87
Other expenses After 5 years $149
Administration fees After 10 years $315
(after waiver) (d) .00%
Other operating expenses (a) 2.17%
----
Total other expenses 2.17%
====
Total fund
operating expenses (b) (e) 2.82%
====
Global Small Cap Fund
Management fees 1.00% After 1 year $ 21
12b-1 fees None After 3 years $ 64
Other expenses (a) 1.05% After 5 years $110
---- After 10 years $238
Total fund
operating expenses (b) 2.05%
====
Strategic Balanced Fund
Management fees
(after waiver) (c) .09% After 1 year $ 11
12b-1 fees None After 3 years $ 35
Other expenses (a) 1.01% After 5 years $ 61
---- After 10 years $134
Total fund
operating expenses (b) (e) 1.10%
====
Balanced Shares
Management fees .63% After 1 year $ 13
12b-1 fees None After 3 years $ 41
Other expenses (a) .67% After 5 years $ 71
---- After 10 years $157
Total fund
operating expenses (b) 1.30%
====
Income Builder Fund
Management fees .75% After 1 year $ 19
12b-1 fees None After 3 years $ 59
Other expenses (a) 1.20% After 5 years $100
---- After 10 years $211
Total fund
operating expenses (b) 1.95%
====
Utility Income Fund
Management fees
(after waiver) (c) 0.00% After 1 year $ 12
12b-1 fees None After 3 years $ 38
Other expenses (a) 1.20% After 5 years $ 66
---- After 10 years $145
Total fund
operating expenses (b) (f) 1.20%
====
5
[Enlarge/Download Table]
Operating Expenses Examples
---------------------------------------------------- --------------------------------------------
Growth and Income Fund Advisor Class Advisor Class
------------- -------------
Management fees .51% After 1 year $ 8
12b-1 fees None After 3 years $ 24
Other expenses (a) .25% After 5 years $ 42
---- After 10 years $ 94
Total fund
operating expenses (b) .76%
====
Real Estate Investment Fund
Management fees .90% After 1 year $ 15
12b-1 fees None After 3 years $ 46
Other expenses (a) .55% After 5 years $ 79
---- After 10 years $174
Total fund
operating expenses (b) 1.45%
====
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(a) These expenses include a transfer agency fee payable to Alliance Fund
Services, Inc., an affiliate of Alliance. The expenses shown do
not include the application of credits that reduce Fund expenses.
(b) The expense information does not reflect any charges or expenses imposed by
your financial representative or your employee benefit plan.
(c) Net of voluntary fee waiver. In the absence of such waiver, management fees
would be 1.00% for All-Asia Investment Fund and .75% for Strategic Balanced
Fund and Utility Income Fund and 1.01% for International Fund.
International Fund's fee, absent the voluntary fee waiver, is calculated
based on average daily net assets. Maximum contractual rate, based on
quarter-end net assets, is 1.00%.
(d) Net of voluntary fee waiver. Absent such fee waiver, administration fees
would have been .15% for the Fund's shares. Reflects the fees
payable by All-Asia Investment Fund to Alliance pursuant to an
administration agreement.
(e) Net of voluntary fee waiver and/or expense reimbursement. In the absence of
such waiver and/or reimbursement, total fund operating expenses for
Strategic Balanced Fund would have been 2.35%, total fund operating
expenses for All-Asia Investment Fund would have been 3.32% annualized and
total fund operating expenses for International Fund would have been 1.69%,
annualized.
(f) Net of expense reimbursements. Absent expense reimbursements, total fund
operating expenses for Utility Income Fund would be 3.48%.
(g) Calculated based on average daily net assets. Maximum contractual rate,
based on quarter-end net assets, is 1.00% for Quasar Fund and Technology
Fund.
The purpose of the foregoing table is to assist the investor in understanding
the various costs and expenses that an investor in a Fund will bear directly or
indirectly. The information shown in the table for the Alliance Fund, Premier
Growth Fund, Technology Fund, Quasar Fund, All-Asia Investment Fund, Strategic
Balanced Fund, Income Builder Fund, Utility Income Fund and Growth and Income
Fund reflects expenses based on the Funds' most recent fiscal periods. For all
other Funds, "Other Expenses" are based on estimated amounts for those Fund's
current fiscal year. "Management fees" for International Fund and All-Asia
Investment Fund and "Administration fee" for All-Asia Investment Fund have been
restated to reflect current voluntary fee waivers. The Examples set forth above
assume reinvestment of all dividends and distributions and utilize a 5% annual
rate of return as mandated by Commission regulations. The Examples should not be
considered representative of future expenses; actual expenses may be greater or
less than those shown.
6
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GLOSSARY
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The following terms are frequently used in this Prospectus.
Equity securities are (i) common stocks, partnership interests, business trust
shares and other equity or ownership interests in business enterprises, and (ii)
securities convertible into, and rights and warrants to subscribe for the
purchase of, such stocks, shares and interests.
Debt securities are bonds, debentures, notes, bills, repurchase agreements,
loans, other direct debt instruments and other fixed, floating and variable rate
debt obligations, but do not include convertible securities.
Fixed-income securities are debt securities and dividend-paying preferred stocks
and include floating rate and variable rate instruments.
Convertible securities are fixed-income securities that are convertible into
common stock.
U.S. Government securities are securities issued or guaranteed by the United
States Government, its agencies or instrumentalities.
Foreign government securities are securities issued or guaranteed, as to payment
of principal and interest, by governments, quasi-governmental entities,
governmental agencies or other governmental entities.
Asian company is an entity that (i) is organized under the laws of an Asian
country and conducts business in an Asian country, (ii) derives 50% or more of
its total revenues from business in Asian countries, or (iii) issues equity or
debt securities that are traded principally on a stock exchange in an Asian
country.
Asian countries are Australia, the Democratic Socialist Republic of Sri Lanka,
Hong Kong, the Islamic Republic of Pakistan, Japan, the Kingdom of Thailand,
Malaysia, Negara Brunei Darussalam (Brunei), New Zealand, the People's Republic
of China, the People's Republic of Kampuchea (Cambodia), the Republic of China
(Taiwan), the Republic of India, the Republic of Indonesia, the Republic of
Korea (South Korea), the Republic of the Philippines, the Republic of Singapore,
the Socialist Republic of Vietnam and the Union of Myanmar.
Moody's is Moody's Investors Service, Inc.
S&P is Standard & Poor's Ratings Services.
Duff & Phelps is Duff & Phelps Credit Rating Co.
Fitch is Fitch Investors Service, L.P.
Investment grade securities are fixed-income securities rated Baa and above by
Moody's or BBB and above by S&P, Duff & Phelps or Fitch, or determined by
Alliance to be of equivalent quality.
Lower-rated securities are fixed-income securities rated Ba or below by Moody's
or BB or below by S&P, Duff & Phelps or Fitch, or determined by Alliance to be
of equivalent quality, and are commonly referred to as "junk bonds."
Prime commercial paper is commercial paper rated Prime 1 by Moody's or A-1 or
higher by S&P or, if not rated, issued by companies that have an outstanding
debt issue rated Aa or higher by Moody's or AA or higher by S&P.
Qualifying bank deposits are certificates of deposit, bankers' acceptances and
interest-bearing savings deposits of banks having total assets of more than $1
billion and which are members of the Federal Deposit Insurance Corporation.
Rule 144A securities are securities that may be resold pursuant to Rule 144A
under the Securities Act of 1933, as amended (the "Securities Act").
Depositary receipts include American Depositary Receipts ("ADRs"), Global
Depositary Receipts ("GDRs") and other types of depositary receipts.
Commission is the Securities and Exchange Commission.
1940 Act is the Investment Company Act of 1940, as amended.
Code is the Internal Revenue Code of 1986, as amended.
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FINANCIAL HIGHLIGHTS
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The tables on the following pages present per share income and capital changes
for an Advisor Class share outstanding throughout each period indicated. Except
as otherwise indicated, information for Alliance Fund, Growth Fund, Premier
Growth Fund, Strategic Balanced Fund, Balanced Shares, Utility Income Fund,
Worldwide Privatization Fund and Growth and Income Fund has been audited by
Price Waterhouse LLP, the independent auditors for each such Fund, and for
All-Asia Investment Fund, Technology Fund, Quasar Fund, International Fund, New
Europe Fund, Global Small Cap Fund, Real Estate Investment Fund and Income
Builder Fund by Ernst & Young LLP, the independent auditors for each such Fund.
A report of Price Waterhouse LLP or Ernst & Young LLP, as the case may be, on
the information with respect to each Fund, appears in the Fund's Statement of
Additional Information. The following information for each Fund should be read
in conjunction with the financial statements and related notes which are
included in the Fund's Statement of Additional Information.
Further information about a Fund's performance is contained in the Fund's annual
report to shareholders, which may be obtained without charge by contacting
Alliance Fund Services, Inc. at the address or the "For Literature" telephone
number shown on the cover of this Prospectus.
7
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Net Net Net
Asset Realized and Increase Distributions
Value Unrealized (Decrease) In Dividends From In Excess Of
Beginning Of Net Investment Gain (Loss) On Net Asset Value Net Investment Net Investment
Fiscal Year or Period Period Income (Loss) Investments From Operations Income Income
--------------------- ------------ -------------- ------------- --------------- -------------- --------------
Alliance Fund
Advisor Class
12/1/96 to 5/31/97++ $ 7.71 $(.01)(b) $ .67 $ .66 $(.04) $0.00
10/2/96+ to 11/30/96 6.99 0.00 .72 .72 0.00 0.00
Growth Fund
Advisor Class
11/1/96 to 4/30/97++ $34.91 $ .02(b) $1.94 $1.96 $0.00 $0.00
10/2/96+ to 10/31/96 34.14 0.00(b) .77 .77 0.00 0.00
Premier Growth Fund
Advisor Class
12/1/96 to 5/31/97++ $17.99 $(.02)(b) $2.66 $2.64 $0.00 $0.00
10/2/96+ to 11/30/96 15.94 (.01)(b) 2.06 2.05 0.00 0.00
Technology Fund
Advisor Class
12/1/96 to 5/31/97++ $51.17 $(.10)(b) $ .68 $ .58 $0.00 $0.00
10/2/96+ to 11/30/96 47.32 (.05)(b) 3.90 3.85 0.00 0.00
Quasar Fund
Advisor Class
10/2/96+ to 3/31/96++ $27.82 $(.04)(b) $ .33 $ .29 $0.00 $0.00
International Fund
Advisor Class
Year ended 6/30/97 $17.96 $ .16(b) $1.78 $1.94 $(.15) $0.00
Worldwide Privatization Fund
Advisor Class
Year ended 6/30/97 $12.14 $ .18(b) $2.52 $2.70 $(.19) $0.00
New Europe Fund
Advisor Class
Year ended 7/31/97 $16.25 $ .11(b) $3.76 $3.87 $(.09) $(.14)
All-Asia Investment Fund
Advisor Class
11/1/96 to 4/30/97++ $11.04 $(.09)(b) $(.53) $(.62) $0.00 $0.00
10/2/96+ to 10/31/96 11.65 0.00(c) (.61) (.61) 0.00 0.00
Global Small Cap Fund
Advisor Class
Year ended 7/31/97 $12.56 $(.08)(b) $1.97 $1.89 $0.00 $0.00
Strategic Balanced Fund
Advisor Class
Year ended 7/31/97 $19.49 $ .42(b)(c) $(.12) $(.30) $0.00 $0.00
Balanced Shares
Advisor Class
Year ended 7/31/97 $14.79 $ .23 $3.22 $3.45 $(.27) $0.00
Income Builder Fund
Advisor Class
10/2/96 to 4/30/97++ $10.00 $ .25(b) $2.27 $2.52 $(.27) $0.00
Utility Income Fund
Advisor Class
12/1/96 to 5/31/97++ $10.59 $ .18(b)(c) $ .07 $ .25 $(.20) $0.00
10/2/96+ to 11/30/96 9.95 .03(c) .61 .64 0.00 0.00
Growth and Income Fund
Advisor Class
11/1/96 to 4/30/97++ $ 3.00 $ .03 $ .36 $ .39 $(.03)
10/2/96+ to 10/31/96 2.97 0.00 .03 .03 0.00 $0.00
Real Estate Investment Fund
Advisor Class
10/1/96+ to 8/31/97 $10.00 $ .35(b) $2.88 $3.23 $(.41)(f) $0.00
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+ Commencement of distribution.
++ Unaudited
* Annualized.
(a) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at the net asset value during the period, and a
redemption on the last day of the period. Initial sales charge or
contingent deferred sales charge is not reflected in the calculation of
total investment return. Total investment returns calculated for periods of
less than one year are not annualized.
(b) Based on average shares outstanding.
(c) Net of fee waiver and/or expense reimbursement.
(d) Net of expenses assumed and/or waived/reimbursed. If the following Funds
had borne all expenses in their most recent fiscal year, their expense
ratios, giving effect to the expense offset arrangements described in (e)
below, would have been as follows:
[Download Table]
1996 1997 1997
All-Asia Investment Fund Strategic Balanced
Advisor Class 5.54%# -- Advisor Class 2.35%#
Utility Income Fund
Advisor Class 3.48%# 3.14#
Real Estate Investment Fund
Advisor Class 1.47%#
-------------
# annualized
8
[Enlarge/Download Table]
Total Net Assets Ratio Of Net
Total Net Asset Investment At End Of Ratio Of Investment
Distributions Dividends Value Return Based Period Expenses Income (Loss) Average
From Net And End Of on Net Asset (000's To Average To Average Portfolio Commission
Realized Gains Distributions Period Value (a) omitted) Net Assets Net Assets Turnover Rate Rate
-------------- ------------- --------- ------------ ----------- ---------- ------------- ------------- ----------
$(1.06) $(1.10) $ 7.27 10.43% $ 8,693 .89%* (.19)%* 107% $0.0559
0.00 0.00 7.71 10.30 1,083 .89* 0.38* 80 0.0646
$(1.03) $(1.03) $35.84 5.64% $54,075 .99%* .11%* .19% $0.0537
0.00 0.00 34.91 2.26 946 1.26* 0.50* 46 0.0584
$(1.08) $(1.08) $19.55 15.87% $33,225 1.28%* (.30)%* 47% $0.0598
0.00 0.00 17.99 12.86 1,922 1.50* (.48)* 95 0.0651
$(.42) $ (.42) $51.33 1.15% $77,548 1.55%* (.48)%* 28% $0.0576
0.00 0.00 51.17 8.14 566 1.75* (1.21)* 30 0.0612
$(4.11) $(4.11) $24.00 1.36% $14,761 1.34%*(e) (.40)%* 75% $0.0533
$(1.08) $(1.23) $18.67 11.57% $ 8,697 1.69%* (1.47)%* 94% $0.0363
$(1.42) $(1.61) $13.23 25.24% $ 374 1.96%* 2.97%* 48% $0.0132
$(1.32) $(1.55) $18.57 25.76% $ 4,430 1.71%* .77%* 89% $0.0569
$(.34) $ (.34) $10.08 (5.89)% $ 2,479 3.44%* (2.30)%* 56% $0.0269
0.00 0.00 11.04 (5.24) 27 3.07*(d) 1.63* 66 0.0280
$(1.56) $(1.56) $12.89 17.08% $ 333 2.05%*(e) (.84)%* 129% $0.0364
$ 0.00 $ 0.00 $19.79 1.54% $ 50 1.10%(d)(e)* 3.40%* 170% $0.0395
$(1.80) $(2.07) $16.17 25.96% $ 1,565 1.30%*(e) 2.15%* 207% $0.0552
$(.61) $ (.88) $11.64 8.48% $ 73 2.07%* 4.56%* 169% $0.0519
$(.13) $ (.33) $10.51 2.35% $ 39 1.20%*(d) 3.45%* 23% $0.0411
0.00 0.00 10.59 6.33 33 1.20*(d) 4.02* 98 0.0536
$(.38) $(.41) $ 2.98 13.46% $ 1,850 .75%* 1.95%* 55% $0.0585
0.00 0.00 3.00 1.01 87 0.37* 3.40* 88 0.0625
$0.00 $ (.41)(f) $12.82 32.72% $ 2,313 1.45%*(d)(e) 3.07%* 20% $0.0518
--------------------------------------------------------------------------------
(e) The following funds benefitted from an expense offset arrangement with the
transfer agent. Had such expense offsets not been in effect, the rate of
expense to average net assets absent the assumption and/or waiver
reimbursement of expenses described in note(d) above would have been as
follows:
[Download Table]
1997 1997
---- ----
International Fund New Europe Fund
Advisor Class 1.69%# Advisor Class 1.71%#
Global Small Cap Fund Balanced Shares Fund
Advisor Class 2.04%# Advisor Class 1.29%#
Strategic Balanced Fund Real Estate Fund
Advisor Class 2.35%# Advisor Class 1.44%#
------------
# annualized
(f) Distribution from net investment income include a tax return of capital of
$.03.
9
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DESCRIPTION OF THE FUNDS
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Except as noted, (i) the Funds' investment objectives are "fundamental" and
cannot be changed without shareholder vote, and (ii) the Funds' investment
policies are not fundamental and thus can be changed without a shareholder vote.
No Fund will change a non-fundamental objective or policy without notifying its
shareholders. There is no guarantee that any Fund will achieve its investment
objective.
INVESTMENT OBJECTIVES AND POLICIES
Domestic Stock Funds
The Domestic Stock Funds have been designed to offer investors seeking capital
appreciation a range of alternative approaches to investing in the U.S. equity
markets.
The Alliance Fund
The Alliance Fund, Inc. ("Alliance Fund") is a diversified investment company
that seeks long-term growth of capital and income primarily through investment
in common stocks. The Fund normally invests substantially all of its assets in
common stocks that Alliance believes will appreciate in value, but it may invest
in other types of securities such as convertible securities, high grade
instruments, U.S. Government securities and high quality, short-term obligations
such as repurchase agreements, bankers' acceptances and domestic certificates of
deposit, and may invest without limit in foreign securities. While the
diversification and generally high quality of the Fund's investments cannot
prevent fluctuations in market values, they tend to limit investment risk and
contribute to achieving the Fund's objective. The Fund generally does not effect
portfolio transactions in order to realize short-term trading profits or
exercise control.
The Fund may also: (i) make secured loans of its portfolio securities equal in
value up to 25% of its total assets to brokers, dealers and financial
institutions; (ii) enter into repurchase agreements of up to one week in
duration with commercial banks, but only if those agreements together with any
restricted securities and any securities which do not have readily available
market quotations do not exceed 10% of its net assets; and (iii) write
exchange-traded covered call options with respect to up to 25% of its total
assets. For additional information on the use, risks and costs of these policies
and practices see "Additional Investment Practices."
Alliance Growth Fund
Alliance Growth Fund ("Growth Fund") is a diversified investment company that
seeks long-term growth of capital. Current income is only an incidental
consideration. The Fund seeks to achieve its objective by investing primarily in
equity securities of companies with favorable earnings outlooks and whose
long-term growth rates are expected to exceed that of the U.S. economy over
time. The Fund's investment objective is not fundamental.
The Fund may also invest up to 25% of its total assets in lower-rated
fixed-income and convertible securities. See "Risk Considerations--Securities
Ratings" and "--Investment in Lower-Rated Fixed-Income Securities." The Fund
generally will not invest in securities rated at the time of purchase below Caa-
by Moody's and CCC- by S&P, Duff & Phelps or Fitch or in securities judged by
Alliance to be of comparable investment quality. However, from time to time, the
Fund may invest in securities rated in the lowest grades (i.e., C by Moody's or
D or equivalent by S&P, Duff & Phelps or Fitch), or securities Alliance judges
to be of comparable investment quality, if there are prospects for an upgrade or
a favorable conversion into equity securities. If the credit rating of a
security held by the Fund falls below its rating at the time of purchase (or
Alliance determines that the quality of such security has so deteriorated), the
Fund may continue to hold the security if such investment is considered
appropriate under the circumstances.
The Fund may also: (i) invest in "zero-coupon" bonds and "payment-in-kind"
bonds; (ii) invest in foreign securities, although the Fund will not generally
invest more than 15% of its total assets in foreign securities; (iii) invest in
securities that are not publicly traded, including Rule 144A securities; (iv)
buy or sell foreign currencies, options on foreign currencies, foreign currency
futures contracts (and related options) and deal in forward foreign exchange
contracts; (v) lend portfolio securities amounting to not more than 25% of its
total assets; (vi) enter into repurchase agreements of up to 25% of its total
assets and purchase and sell securities on a forward commitment basis; (vii) buy
and sell stock index futures contracts and buy and sell options on those
contracts and on stock indices; (viii) purchase and sell futures contracts,
options thereon and options with respect to U.S. Treasury securities; (ix) write
covered call and put options on securities it owns or in which it may invest;
and (x) purchase and sell put and call options. For additional information on
the use, risks and costs of these policies and practices see "Additional
Investment Practices."
Alliance Premier Growth Fund
Alliance Premier Growth Fund, Inc. ("Premier Growth Fund") is a diversified
investment company that seeks long-term growth of capital by investing
predominantly in the equity securities of a limited number of large, carefully
selected, high-quality U.S. companies that are judged likely to achieve superior
earnings growth. Normally, about 40 companies will be represented in the Fund's
portfolio, with the 25 most highly regarded of these companies usually
constituting approximately 70% of the Fund's net assets. The Fund is thus
atypical from most equity mutual funds in its focus on a relatively small number
of intensively researched companies and is designed for those seeking to
accumulate capital over time with less volatility than that associated with
investment in smaller companies.
As a matter of fundamental policy, the Fund normally invests at least 85% of its
total assets in the equity securities of U.S. companies. These are companies (i)
organized under U.S. law that have their principal office in the U.S., and (ii)
the equity securities of which are traded principally in the U.S.
10
Alliance's investment strategy for the Fund emphasizes stock selection and
investment in the securities of a limited number of issuers. Alliance relies
heavily upon the fundamental analysis and research of its large internal
research staff, which generally follows a primary research universe of more than
600 companies that have strong management, superior industry positions,
excellent balance sheets and superior earnings growth prospects. An emphasis is
placed on identifying companies whose substantially above average prospective
earnings growth is not fully reflected in current market valuations.
In managing the Fund, Alliance seeks to utilize market volatility judiciously
(assuming no change in company fundamentals), striving to capitalize on
apparently unwarranted price fluctuations, both to purchase or increase
positions on weakness and to sell or reduce overpriced holdings. The Fund
normally remains nearly fully invested and does not take significant cash
positions for market timing purposes. During market declines, while adding to
positions in favored stocks, the Fund becomes somewhat more aggressive,
gradually reducing the number of companies represented in its portfolio.
Conversely, in rising markets, while reducing or eliminating fully valued
positions, the Fund becomes somewhat more conservative, gradually increasing the
number of companies represented in its portfolio. Alliance thus seeks to gain
positive returns in good markets while providing some measure of protection in
poor markets.
Alliance expects the average market capitalization of companies represented in
the Fund's portfolio normally to be in the range, or in excess, of the average
market capitalization of companies comprising the "S&P 500" (the Standard &
Poor's 500 Composite Stock Price Index, a widely recognized unmanaged index of
market activity).
The Fund may also: (i) invest up to 20% of its net assets in convertible
securities of companies whose common stocks are eligible for purchase by it;
(ii) invest up to 5% of its net assets in rights or warrants; (iii) invest up to
15% of its total assets in securities of foreign issuers whose common stocks are
eligible for purchase by it; (iv) purchase and sell exchange-traded index
options and stock index futures contracts; and (v) write covered exchange-traded
call options on common stocks, unless as a result, the amount of its securities
subject to call options would exceed 15% of its total assets, and purchase and
sell exchange-traded call and put options on common stocks written by others,
but the total cost of all options held by the Fund (including exchange-traded
index options) may not exceed 10% of its total assets. For additional
information on the use, risks and costs of these policies and practices see
"Additional Investment Practices." The Fund will not write put options.
Alliance Technology Fund
Alliance Technology Fund, Inc. ("Technology Fund") is a diversified investment
company that emphasizes growth of capital and invests for capital appreciation,
and only incidentally for current income. The Fund may seek income by writing
listed call options. The Fund invests primarily in securities of companies
expected to benefit from technological advances and improvements (i.e.,
companies that use technology extensively in the development of new or improved
products or processes). The Fund will normally have at least 80% of its assets
invested in the securities of these companies. The Fund normally will have
substantially all its assets invested in equity securities, but it also invests
in debt securities offering an opportunity for price appreciation. The Fund will
invest in listed and unlisted securities and U.S. and foreign securities, but it
will not purchase a foreign security if as a result 10% or more of the Fund's
total assets would be invested in foreign securities.
The Fund's policy is to invest in any company and industry and in any type of
security with potential for capital appreciation. It invests in well-known and
established companies and in new and unseasoned companies.
The Fund may also: (i) write and purchase exchange-listed call options and
purchase listed put options, including exchange-traded index put options; (ii)
invest up to 10% of its total assets in warrants; (iii) invest in restricted
securities and in other assets having no ready market if as a result no more
than 10% of the Fund's net assets are invested in such securities and assets;
(iv) lend portfolio securities equal in value to not more than 30% of the Fund's
total assets; and (v) invest up to 10% of its total assets in foreign
securities. For additional information on the use, risks and costs of the
policies and practices see "Additional Investment Practices."
Alliance Quasar Fund
Alliance Quasar Fund, Inc. ("Quasar Fund") is a diversified investment company
that seeks growth of capital by pursuing aggressive investment policies. It
invests for capital appreciation and only incidentally for current income. The
selection of securities based on the possibility of appreciation cannot prevent
loss in value. Moreover, because the Fund's investment policies are aggressive,
an investment in the Fund is risky and investors who want assured income or
preservation of capital should not invest in the Fund.
The Fund invests in any company and industry and in any type of security with
potential for capital appreciation. It invests in well-known and established
companies and in new and unseasoned companies. When selecting securities,
Alliance considers the economic and political outlook, the values of specific
securities relative to other investments, trends in the determinants of
corporate profits and management capability and practices.
The Fund invests principally in equity securities, but it also invests to a
limited degree in non-convertible bonds and preferred stocks. The Fund invests
in listed and unlisted U.S. and foreign securities. The Fund periodically
invests in special situations, which occur when the securities of a company are
expected to appreciate due to a development particularly or uniquely applicable
to that company and regardless of general business conditions or movements of
the market as a whole.
The Fund may also: (i) invest in restricted securities and in other assets
having no ready market, but not more than 10%
11
of its total assets may be invested in such securities or assets; (ii) make
short sales of securities "against the box," but not more than 15% of its net
assets may be deposited on short sales; and (iii) write call options and
purchase and sell put and call options written by others. For additional
information on the use, risks and costs of these policies and practices see
"Additional Investment Practices."
Global Stock Funds
The Global Stock Funds have been designed to enable investors to participate in
the potential for long-term capital appreciation available from investment in
foreign securities.
Alliance International Fund
Alliance International Fund ("International Fund") is a diversified investment
company that seeks a total return on its assets from long-term growth of capital
and from income primarily through a broad portfolio of marketable securities of
established non-U.S. companies, companies participating in foreign economies
with prospects for growth, including U.S. companies having their principal
activities and interests outside the U.S. and foreign government securities.
Normally, more than 80% of the Fund's assets will be invested in such issuers.
The Fund expects to invest primarily in common stocks of established non-U.S.
companies that Alliance believes have potential for capital appreciation or
income or both, but the Fund is not required to invest exclusively in common
stocks or other equity securities, and it may invest in any other type of
investment grade security, including convertible securities, as well as in
warrants, or obligations of the U.S. or foreign governments and their political
subdivisions.
The Fund intends to diversify its investments broadly among countries and
normally invests in at least three foreign countries, although it may invest a
substantial portion of its assets in one or more of such countries. In this
regard, at June 30, 1997, approximately 28% of the Fund's assets were invested
in securities of Japanese issuers. The Fund may invest in companies, wherever
organized, that Alliance judges have their principal activities and interests
outside the U.S. These companies may be located in developing countries, which
involves exposure to economic structures that are generally less diverse and
mature, and to political systems which can be expected to have less stability,
than those of developed countries. The Fund currently does not intend to invest
more than 10% of its total assets in companies in, or governments of, developing
countries.
The Fund may also: (i) purchase or sell forward foreign currency exchange
contracts; (ii) write, sell and purchase U.S. or foreign exchange-listed put and
call options, including exchange-traded index options; (iii) enter into
financial futures contracts, including contracts for the purchase or sale for
future delivery of foreign currencies and stock index futures, and purchase and
write put and call options on futures contracts traded on U.S. or foreign
exchanges or over-the-counter; (iv) purchase and write put options on foreign
currencies traded on securities exchanges or boards of trade or
over-the-counter; (v) lend portfolio securities equal in value to not more than
30% of its total assets; and (vi) enter into repurchase agreements of up to
seven days' duration, provided that not more than 10% of the Fund's total assets
would be so invested. For additional information on the use, risks and costs of
these policies and practices see "Additional Investment Practices."
Alliance Worldwide Privatization Fund
Alliance Worldwide Privatization Fund, Inc. ("Worldwide Privatization Fund") is
a non-diversified investment company that seeks long-term capital appreciation.
As a fundamental policy, the Fund invests at least 65% of its total assets in
equity securities issued by enterprises that are undergoing, or have undergone,
privatization (as described below), although normally significantly more of its
assets will be invested in such securities. The balance of its investments will
include securities of companies believed by Alliance to be beneficiaries of
privatizations. The Fund is designed for investors desiring to take advantage of
investment opportunities, historically inaccessible to U.S. individual
investors, that are created by privatizations of state enterprises in both
established and developing economies, including those in Western Europe and
Scandinavia, Australia, New Zealand, Latin America, Asia and Eastern and Central
Europe and, to a lesser degree, Canada and the United States.
The Fund's investments in enterprises undergoing privatization may comprise
three distinct situations. First, the Fund may invest in the initial offering of
publicly traded equity securities (an "initial equity offering") of a
government- or state-owned or controlled company or enterprise (a "state
enterprise"). Secondly, the Fund may purchase securities of a current or former
state enterprise following its initial equity offering. Finally, the Fund may
make privately negotiated purchases of stock or other equity interests in a
state enterprise that has not yet conducted an initial equity offering. Alliance
believes that substantial potential for capital appreciation exists as
privatizing enterprises rationalize their management structures, operations and
business strategies in order to compete efficiently in a market economy, and the
Fund will thus emphasize investments in such enterprises.
The Fund diversifies its investments among a number of countries and normally
invests in issuers based in at least four, and usually considerably more,
countries. No more than 15% of the Fund's total assets, however, will be
invested in issuers in any one foreign country, except that the Fund may invest
up to 30% of its total assets in issuers in any one of France, Germany, Great
Britain, Italy and Japan. The Fund may invest all of its assets within a single
region of the world. To the extent that the Fund's assets are invested within
any one region, the Fund may be subject to any special risks that may be
associated with that region.
Privatization is a process through which the ownership and control of companies
or assets changes in whole or in part from the public sector to the private
sector. Through
12
privatization a government or state divests or transfers all or a portion of its
interest in a state enterprise to some form of private ownership. Governments
and states with established economies, including France, Great Britain, Germany
and Italy, and those with developing economies, including Argentina, Mexico,
Chile, Indonesia, Malaysia, Poland and Hungary, are engaged in privatizations.
The Fund will invest in any country believed to present attractive investment
opportunities.
A major premise of the Fund's approach is that the equity securities of
privatized companies offer opportunities for significant capital appreciation.
In particular, because privatizations are integral to a country's economic
restructuring, securities sold in initial equity offerings often are priced
attractively so as to secure the issuer's successful transition to private
sector ownership. Additionally, these enterprises often dominate their local
markets and typically have the potential for significant managerial and
operational efficiency gains.
Although the Fund anticipates that it will not concentrate its investments in
any industry, it is permitted to invest more than 25% of its total assets in
issuers whose primary business activity is that of national commercial banking.
Prior to so concentrating, however, the Fund's Directors must determine that its
ability to achieve its investment objective would be adversely affected if it
were not permitted to concentrate. The staff of the Commission is of the view
that registered investment companies may not, absent shareholder approval,
change between concentration and non-concentration in a single industry. The
Fund disagrees with the staff's position but has undertaken that it will not
concentrate in the securities of national commercial banks until, if ever, the
issue is resolved. If the Fund were to invest more than 25% of its total assets
in national commercial banks, the Fund's performance could be significantly
influenced by events or conditions affecting this industry, which is subject to,
among other things, increases in interest rates and deteriorations in general
economic conditions, and the Fund's investments may be subject to greater risk
and market fluctuation than if its portfolio represented a broader range of
investments.
The Fund may invest up to 35% of its total assets in debt securities and
convertible debt securities of issuers whose common stocks are eligible for
purchase by the Fund. The Fund may maintain not more than 5% of its net assets
in lower-rated securities. See "Risk Considerations--Securities Ratings" and
"--Investment in Lower-Rated Fixed-Income Securities." The Fund will not retain
a non-convertible security that is downgraded below C or determined by Alliance
to have undergone similar credit quality deterioration following purchase.
The Fund may also: (i) invest up to 20% of its total assets in rights or
warrants; (ii) write covered put and call options and purchase put and call
options on securities of the types in which it is permitted to invest and on
exchange-traded index options; (iii) enter into contracts for the purchase or
sale for future delivery of fixed-income securities or foreign currencies, or
contracts based on financial indices, including any index of U.S. Government
securities, foreign government securities, or common stock and may purchase and
write options on future contracts; (iv) purchase and write put and call options
on foreign currencies for hedging purposes; (v) purchase or sell forward
contracts; (vi) enter in forward commitments for the purchase or sale of
securities; (vii) enter into standby commitment agreements; (viii) enter into
currency swaps for hedging purposes; (ix) enter into repurchase agreements
pertaining to U.S. Government securities with member banks of the Federal
Reserve System or primary dealers in such securities; (x) make short sales of
securities or maintain a short position; and (xi) make secured loans of its
portfolio securities not in excess of 30% of its total assets to entities with
which it can enter into repurchase agreements. For additional information on the
use, risks and costs of these policies and practices see "Additional Investment
Practices."
Alliance New Europe Fund
Alliance New Europe Fund, Inc. ("New Europe Fund") is a non-diversified
investment company that seeks long-term capital appreciation through investment
primarily in the equity securities of companies based in Europe. The Fund
intends to invest substantially all of its assets in the equity securities of
European companies and has a fundamental policy of normally investing at least
65% of its total assets in such securities. Up to 35% of its total assets may be
invested in high quality U.S. dollar or foreign currency denominated
fixed-income securities issued or guaranteed by European governmental entities,
or by European or multinational companies or supranational organizations.
Alliance believes that the quickening pace of economic integration and political
change in Europe creates the potential for many European companies to experience
rapid growth and that the emergence of new market economies in Europe and the
broadening and strengthening of other European economies may significantly
accelerate economic development. The Fund will invest in companies that Alliance
believes possess rapid growth potential. Thus, the Fund will emphasize
investments in larger, established companies, but will also invest in smaller,
emerging companies.
In recent years, economic ties between the former "east bloc" countries of
Eastern Europe and certain other European countries have been strengthened.
Alliance believes that as this strengthening continues, some Western European
financial institutions and other companies will have special opportunities to
facilitate East-West transactions. The Fund will seek investment opportunities
among such companies and, as such become available, within the former "east
bloc," although the Fund will not invest more than 20% of its total assets in
issuers based therein, or more than 10% of its total assets in issuers based in
any one such country.
The Fund diversifies its investments among a number of European countries and,
under normal circumstances, will invest in companies based in at least three
such countries. Subject to the foregoing and to the limitation on investment in
any one former "east bloc" country, the Fund may invest without limit in a
single European country. While the Fund does not intend to concentrate its
investments in a single country,
13
at times 25% or more of its assets may be invested in issuers located in a
single country. During such times, the Fund would be subject to a
correspondingly greater risk of loss due to adverse political or regulatory
developments, or an economic downturn, within that country. In this regard, at
July 31, 1997, approximately 32% of the Fund's assets were invested in
securities of issuers in the United Kingdom.
The Fund may also: (i) invest up to 10% of its total assets in securities for
which there is no ready market; (ii) invest up to 20% of its total assets in
warrants and rights to purchase equity securities of European companies; (iii)
invest in depositary receipts or other securities convertible into securities of
companies based in European countries, debt securities of supranational entities
denominated in the currency of any European country, debt securities denominated
in European Currency Units of an issuer in a European country (including
supranational issuers) and "semi-governmental securities"; (iv) purchase and
sell forward contracts; (v) write, sell and purchase exchange-traded put and
call options, including exchange-traded index options; (vi) enter into financial
futures contracts, including contracts for the purchase or sale for future
delivery of foreign currencies and futures contracts based on stock indices, and
purchase and write options on futures contracts; (vii) purchase and write put
options on foreign currencies traded on securities exchanges or boards of trade
or over-the-counter; (viii) make secured loans of portfolio securities not in
excess of 30% of its total assets to brokers, dealers and financial
institutions; (ix) enter into forward commitments for the purchase or sale of
securities; and (x) enter into standby commitment agreements. For additional
information on the use, risks and costs of these policies and practices see
"Additional Investment Practices."
Alliance All-Asia Investment Fund
Alliance All-Asia Investment Fund, Inc. ("All-Asia Investment Fund") is a
non-diversified investment company whose investment objective is to seek
long-term capital appreciation. In seeking to achieve its investment objective,
the Fund will invest at least 65% of its total assets in equity securities (for
the purposes of this investment policy, rights, warrants and options to purchase
common stocks are not deemed to be equity securities), preferred stocks and
equity-linked debt securities issued by Asian companies. The Fund may invest up
to 35% of its total assets in debt securities issued or guaranteed by Asian
companies or by Asian governments, their agencies or instrumentalities. The Fund
may also invest in securities issued by non-Asian issuers, provided that the
Fund will invest at least 80% of its total assets in securities issued by Asian
companies and the Asian debt securities referred to above. The Fund expects to
invest, from time to time, a significant portion, but less than 50%, of its
assets in equity securities of Japanese companies.
In the past decade, Asian countries generally have experienced a high level of
real economic growth due to political and economic changes, including foreign
investment and reduced government intervention in the economy. Alliance believes
that certain conditions exist in Asian countries which create the potential for
continued rapid economic growth. These conditions include favorable demographics
and competitive wage rates, increasing levels of foreign direct investment,
rising per capita incomes and consumer demand, a high savings rate and numerous
privatization programs. Asian countries are also becoming more industrialized
and are increasing their intra-Asian exports while reducing their dependence on
Western export demand. Alliance believes that these conditions are important to
the long-term economic growth of Asian countries.
As the economies of many Asian countries move through the "emerging market"
stage, thus increasing the supply of goods, services and capital available to
less developed Asian markets and helping to spur economic growth in those
markets, the potential is created for many Asian companies to experience rapid
growth. In addition, many Asian companies the securities of which are listed on
exchanges in more developed Asian countries will be participants in the rapid
economic growth of the lesser developed countries. These companies generally
offer the advantages of more experienced management and more developed market
regulation.
As their economies have grown, the securities markets in Asian countries have
also expanded. New exchanges have been created and the number of listed
companies, annual trading volume and overall market capitalization have
increased significantly. Additionally, new markets continue to open to foreign
investments. For example, South Korea and India have recently relaxed investment
restrictions and Vietnamese direct investments have recently become available to
U.S. investors. The Fund also offers investors the opportunity to access
relatively restricted markets. Alliance believes that investment opportunities
in Asian countries will continue to expand.
The Fund will invest in companies believed to possess rapid growth potential.
Thus, the Fund will invest in smaller, emerging companies, but will also invest
in larger, more established companies in such growing economic sectors as
capital goods, telecommunications and consumer services.
The Fund will invest in investment grade debt securities, except that the Fund
may maintain not more than 5% of its net assets in lower-rated securities and
lower-rated loans and other lower-rated direct debt instruments. See "Risk
Considerations--Securities Ratings," "--Investment in Lower-Rated Fixed-Income
Securities" and Appendix C in the Fund's Statement of Additional Information for
a description of such ratings. The Fund will not retain a security that is
downgraded below C or determined by Alliance to have undergone similar credit
quality deterioration following purchase.
The Fund may also: (i) invest up to 25% of its net assets in the convertible
securities of companies whose common stocks are eligible for purchase by the
Fund; (ii) invest up to 20% of its net assets in rights or warrants; (iii)
invest in depositary receipts, instruments of supranational entities denominated
in the currency of any country, securities of multinational companies and
"semi-governmental securities;" (iv) invest up to 25% of its net assets in
equity-linked debt securities with
14
the objective of realizing capital appreciation; (v) invest up to 25% of its net
assets in loans and other direct debt instruments; (vi) write covered put and
call options on securities of the types in which it is permitted to invest and
on exchange-traded index options; (vii) enter into contracts for the purchase or
sale for future delivery of fixed-income securities or foreign currencies, or
contracts based on financial indices, including any index of U.S. Government
securities, securities issued by foreign government entities, or common stock
and may purchase and write options on future contracts; (viii) purchase and
write put and call options on foreign currencies for hedging purposes; (ix)
purchase or sell forward contracts; (x) enter into interest rate swaps and
purchase or sell interest rate caps and floors; (xi) enter into forward
commitments for the purchase or sale of securities; (xii) enter into standby
commitment agreements; (xiii) enter into currency swaps for hedging purposes;
(xiv) enter into repurchase agreements pertaining to U.S. Government securities
with member banks of the Federal Reserve System or primary dealers in such
securities; (xv) make short sales of securities or maintain a short position, in
each case only if "against the box;" and (xvi) make secured loans of its
portfolio securities not in excess of 30% of its total assets to entities with
which it can enter into repurchase agreements. For additional information on the
use, risks and costs of these policies and practices see "Additional Investment
Practices."
Alliance Global Small Cap Fund
Alliance Global Small Cap Fund, Inc. ("Global Small Cap Fund") is a diversified
investment company that seeks long-term growth of capital through investment in
a global portfolio of the equity securities of selected companies with
relatively small market capitalization. The Fund's portfolio emphasizes
companies with market capitalizations that would have placed them (when
purchased) in about the smallest 20% by market capitalization of actively traded
U.S. companies, or market capitalizations of up to about $1 billion. Because the
Fund applies the U.S. size standard on a global basis, its foreign investments
might rank above the lowest 20%, and, in fact, might in some countries rank
among the largest, by market capitalization in local markets. Normally, the Fund
invests at least 65% of its assets in equity securities of these smaller
capitalization issuers, and these issuers are located in at least three
countries, one of which may be the U.S. Up to 35% of the Fund's total assets may
be invested in securities of companies whose market capitalizations exceed the
Fund's size standard. The Fund's portfolio securities may be listed on a U.S. or
foreign exchange or traded over-the-counter.
Alliance believes that smaller capitalization issuers often have sales and
earnings growth rates exceeding those of larger companies, and that these growth
rates tend to cause more rapid share price appreciation. Investing in smaller
capitalization stocks, however, involves greater risk than is associated with
larger, more established companies. For example, smaller capitalization
companies often have limited product lines, markets, or financial resources.
They may be dependent for management on one or a few key persons, and can be
more susceptible to losses and risks of bankruptcy. Their securities may be
thinly traded (and therefore have to be sold at a discount from current market
prices or sold in small lots over an extended period of time), may be followed
by fewer investment research analysts and may be subject to wider price swings
and thus may create a greater chance of loss than when investing in securities
of larger capitalization companies. Transaction costs in small capitalization
stocks may be higher than in those of larger capitalization companies.
The Fund may also: (i) invest up to 10% of its total assets in securities for
which there is no ready market; (ii) invest up to 20% of its total assets in
warrants to purchase equity securities; (iii) invest in depositary receipts or
other securities representing securities of companies based in countries other
than the U.S.; (iv) purchase or sell forward foreign currency contracts; (v)
write and purchase exchange-traded call options and purchase exchange-traded put
options, including put options on market indices; and (vi) make secured loans of
portfolio securities not in excess of 30% of its total assets to brokers,
dealers and financial institutions. For additional information on the use, risks
and costs of these policies and practices see "Additional Investment Practices."
Total Return Funds
The Total Return Funds have been designed to provide a range of investment
alternatives to investors seeking both growth of capital and current income.
Alliance Strategic Balanced Fund
Alliance Strategic Balanced Fund ("Strategic Balanced Fund") is a diversified
investment company that seeks a high long-term total return by investing in a
combination of equity and debt securities. The portion of the Fund's assets
invested in each type of security varies in accordance with economic conditions,
the general level of common stock prices, interest rates and other relevant
considerations, including the risks associated with each investment medium. The
Fund's investment objective is not fundamental.
The Fund's equity securities will generally consist of dividend-paying common
stocks and other equity securities of companies with favorable earnings outlooks
and long-term growth rates that Alliance expects will exceed that of the U.S.
economy. The Fund's debt securities may include U.S. Government securities and
securities issued by private corporations. The Fund may also invest in
mortgage-backed securities, adjustable rate securities, asset-backed securities
and so-called "zero-coupon" bonds and "payment-in-kind" bonds.
As a fundamental policy, the Fund will invest at least 25% of its total assets
in fixed-income securities, which for this purpose include debt securities,
preferred stocks and that portion of the value of convertible securities that is
attributable to the fixed-income characteristics of those securities.
The Fund's debt securities will generally be of investment grade. See "Risk
Considerations--Securities Ratings" and
15
"--Investment in Lower-Rated Fixed-Income Securities." In the event that the
rating of any debt securities held by the Fund falls below investment grade, the
Fund will not be obligated to dispose of such obligations and may continue to
hold them if considered appropriate under the circumstances.
The Fund may also: (i) invest in foreign securities, although the Fund will not
generally invest more than 15% of its total assets in foreign securities; (ii)
invest, without regard to this 15% limit, in Eurodollar CDs, which are
dollar-denominated certificates of deposit issued by foreign branches of U.S.
banks that are not insured by any agency or instrumentality of the U.S.
Government; (iii) write covered call and put options on securities it owns or in
which it may invest; (iv) buy and sell put and call options and buy and sell
combinations of put and call options on the same underlying securities; (v) lend
portfolio securities amounting to not more than 25% of its total assets; (vi)
enter into repurchase agreements on up to 25% of its total assets; (vii)
purchase and sell securities on a forward commitment basis; (viii) buy or sell
foreign currencies, options on foreign currencies, foreign currency futures
contracts (and related options) and deal in forward foreign exchange contracts;
(ix) buy and sell stock index futures contracts and buy and sell options on
those contracts and on stock indices; (x) purchase and sell futures contracts,
options thereon and options with respect to U.S. Treasury securities; and (xi)
invest in securities that are not publicly traded, including Rule 144A
securities. For additional information on the use, risks and costs of these
policies and practices see "Additional Investment Practices."
Alliance Balanced Shares
Alliance Balanced Shares, Inc. ("Balanced Shares") is a diversified investment
company that seeks a high return through a combination of current income and
capital appreciation. Although the Fund's investment objective is not
fundamental, the Fund is a "balanced fund" as a matter of fundamental policy.
The Fund will not purchase a security if as a result less than 25% of its total
assets will be in fixed-income senior securities (including short- and long-term
debt securities, preferred stocks, and convertible debt securities and
convertible preferred stocks to the extent that their values are attributable to
their fixed-income characteristics). Subject to these restrictions, the
percentage of the Fund's assets invested in each type of security will vary. The
Fund's assets are invested in U.S. Government securities, bonds, senior debt
securities and preferred and common stocks in such proportions and of such type
as are deemed best adapted to the current economic and market outlooks. The Fund
may invest up to 15% of the value of its total assets in foreign equity and
fixed-income securities eligible for purchase by the Fund under its investment
policies described above. See "Risk Considerations--Foreign Investment."
The Fund may also: (i) enter into contracts for the purchase or sale for future
delivery of foreign currencies; and (ii) purchase and write put and call options
on foreign currencies and enter into forward foreign currency exchange contracts
for hedging purposes. Subject to market conditions, the Fund may also seek to
realize income by writing covered call options listed on a domestic exchange.
For additional information on the use, risks and costs of these policies and
practices see "Additional Investment Practices."
Alliance Income Builder Fund
Alliance Income Builder Fund, Inc. ("Income Builder Fund") is a non-diversified
investment company that seeks an attractive level of current income and
long-term growth of income and capital by investing principally in fixed-income
securities and dividend-paying common stocks. Its investments in equity
securities emphasize common stocks of companies with a historical or projected
pattern of paying rising dividends. Normally, at least 65% of the Fund's total
assets are invested in income-producing securities. The Fund may vary the
percentage of assets invested in any one type of security based upon Alliance's
evaluation as to the appropriate portfolio structure for achieving the Fund's
investment objective, although Alliance currently maintains approximately 60% of
the Fund's net assets in fixed-income securities and 40% in equity securities.
The Fund may invest in fixed-income securities of domestic and foreign issuers,
including U.S. Government securities and repurchase agreements pertaining
thereto, corporate fixed-income securities of U.S. issuers, qualifying bank
deposits and prime commercial paper.
The Fund may maintain up to 35% of its net assets in lower-rated securities. See
"Risk Considerations--Securities Ratings" and "--Investment in Lower-Rated
Fixed-Income Securities." The Fund will not retain a non-convertible security
that is downgraded below CCC or determined by Alliance to have undergone similar
credit quality deterioration following purchase.
Foreign securities in which the Fund invests may include fixed-income securities
of foreign corporate and governmental issuers, denominated in U.S. Dollars, and
equity securities of foreign corporate issuers, denominated in foreign
currencies or in U.S. Dollars. The Fund will not invest more than 10% of its net
assets in equity securities of foreign issuers nor more than 15% of its total
assets in issuers of any one foreign country. See "Risk Considerations--Foreign
Investment."
The Fund may also: (i) invest up to 5% of its net assets in rights or warrants;
(ii) invest in depositary receipts and U.S. Dollar denominated securities issued
by supranational entities; (iii) write covered put and call options and purchase
put and call options on securities of the types in which it is permitted to
invest that are exchange-traded; (iv) purchase and sell exchange-traded options
on any securities index composed of the types of securities in which it may
invest; (v) enter into contracts for the purchase or sale for future delivery of
fixed-income securities or foreign currencies, or contracts based on financial
indices, including any index of U.S. Government securities, foreign government
securities, corporate fixed income securities, or common stock, and purchase and
write options on future contracts; (vi) purchase and write put and
16
call options on foreign currencies and enter into forward contracts for hedging
purposes; (vii) enter into interest rate swaps and purchase or sell interest
rate caps and floors; (viii) enter into forward commitments for the purchase or
sale of securities; (ix) enter into standby commitment agreements; (x) enter
into repurchase agreements pertaining to U.S. Government securities with member
banks of the Federal Reserve System or primary dealers in such securities; (xi)
make short sales of securities or maintain a short position as described below
under "Additional Investment Policies and Practices--Short Sales;" and (xii)
make secured loans of its portfolio securities not in excess of 20% of its total
assets to brokers, dealers and financial institutions. For additional
information on the use, risks and costs of these policies and practices see
"Additional Investment Practices."
Alliance Utility Income Fund
Alliance Utility Income Fund, Inc. ("Utility Income Fund") is a diversified
investment company that seeks current income and capital appreciation by
investing primarily in equity and fixed-income securities of companies in the
utilities industry. The Fund may invest in securities of both U.S. and foreign
issuers, although no more than 15% of the Fund's total assets will be invested
in issuers in any one foreign country. The utilities industry consists of
companies engaged in (i) the manufacture, production, generation, provision,
transmission, sale and distribution of gas and electric energy, and
communications equipment and services, including telephone, telegraph,
satellite, microwave and other companies providing communication facilities for
the public, or (ii) the provision of other utility or utility-related goods and
services, including, but not limited to, entities engaged in water provision,
cogeneration, waste disposal system provision, solid waste electric generation,
independent power producers and non-utility generators. The Fund is designed to
take advantage of the characteristics and historical performance of securities
of utility companies, many of which pay regular dividends and increase their
common stock dividends over time. As a fundamental policy, the Fund normally
invests at least 65% of its total assets in securities of companies in the
utilities industry. The Fund considers a company to be in the utilities industry
if, during the most recent twelve-month period, at least 50% of the company's
gross revenues, on a consolidated basis, were derived from its utilities
activities.
At least 65% of the Fund's total assets are invested in income-producing
securities, but there is otherwise no limit on the allocation of the Fund's
investments between equity securities and fixed-income securities. The Fund may
maintain up to 35% of its net assets in lower-rated securities. See "Risk
Considerations--Securities Ratings" and "--Investment in Lower-Rated
Fixed-Income Securities." The Fund will not retain a security that is downgraded
below B or determined by Alliance to have undergone similar credit quality
deterioration following purchase.
The United States utilities industry has experienced significant changes in
recent years. Electric utility companies in general have been favorably affected
by lower fuel costs, the full or near completion of major construction programs
and lower financing costs. In addition, many utility companies have generated
cash flows in excess of current operating expenses and construction
expenditures, permitting some degree of diversification into unregulated
businesses. Regulatory changes with respect to nuclear and conventionally fueled
generating facilities, however, could increase costs or impair the ability of
such electric utilities to operate such facilities, thus reducing their ability
to service dividend payments with respect to the securities they issue.
Furthermore, rates of return of utility companies generally are subject to
review and limitation by state public utilities commissions and tend to
fluctuate with marginal financing costs. Rate changes, however, ordinarily lag
behind the changes in financing costs, and thus can favorably or unfavorably
affect the earnings or dividend pay-outs on utilities stocks depending upon
whether such rates and costs are declining or rising.
Gas transmission companies, gas distribution companies and telecommunications
companies are also undergoing significant changes. Gas utilities have been
adversely affected by declines in the prices of alternative fuels, and have also
been affected by oversupply conditions and competition. Telephone utilities are
still experiencing the effects of the break-up of American Telephone & Telegraph
Company, including increased competition and rapidly developing technologies
with which traditional telephone companies now compete. Although there can be no
assurance that increased competition and other structural changes will not
adversely affect the profitability of such utilities, or that other negative
factors will not develop in the future, in Alliance's opinion, increased
competition and change may provide better positioned utility companies with
opportunities for enhanced profitability.
Utility companies historically have been subject to the risks of increases in
fuel and other operating costs, high interest costs, costs associated with
compliance with environmental and nuclear safety regulations, service
interruptions, economic slowdowns, surplus capacity, competition and regulatory
changes. There can also be no assurance that regulatory policies or accounting
standards changes will not negatively affect utility companies' earnings or
dividends. Utility companies are subject to regulation by various authorities
and may be affected by the imposition of special tariffs and changes in tax
laws. To the extent that rates are established or reviewed by governmental
authorities, utility companies are subject to the risk that such authorities
will not authorize increased rates. Because of the Fund's policy of
concentrating its investments in utility companies, the Fund is more susceptible
than most other mutual funds to economic, political or regulatory occurrences
affecting the utilities industry.
Foreign utility companies, like those in the U.S., are generally subject to
regulation, although such regulations may or may not be comparable to domestic
regulations. Foreign utility companies in certain countries may be more heavily
regulated by their respective governments than utility companies located in the
U.S. and, as in the U.S., generally are required to seek government approval for
rate increases. In addition, because
17
many foreign utility companies use fuels that cause more pollution than those
used in the U.S., such utilities may yet be required to invest in pollution
control equipment. Foreign utility regulatory systems vary from country to
country and may evolve in ways different from regulation in the U.S. The
percentage of the Fund's assets invested in issuers of particular countries will
vary. See "Risk Considerations--Foreign Investment."
The Fund may invest up to 35% of its total assets in equity and fixed-income
securities of domestic and foreign corporate and governmental issuers other than
utility companies, including U.S. Government securities and repurchase
agreements pertaining thereto, foreign government securities, corporate
fixed-income securities of domestic issuers, corporate fixed-income securities
of foreign issuers denominated in foreign currencies or in U.S. dollars (in each
case including fixed-income securities of an issuer in one country denominated
in the currency of another country), qualifying bank deposits and prime
commercial paper.
The Fund may also: (i) invest up to 30% of its net assets in the convertible
securities of companies whose common stocks are eligible for purchase by the
Fund; (ii) invest up to 5% of its net assets in rights or warrants; (iii) invest
in depositary receipts, securities of supranational entities denominated in the
currency of any country, securities denominated in European Currency Units and
"semi-governmental securities;" (iv) write covered put and call options and
purchase put and call options on securities of the types in which it is
permitted to invest that are exchange-traded and over-the-counter; (v) purchase
and sell exchange-traded options on any securities index composed of the types
of securities in which it may invest; (vi) enter into contracts for the purchase
or sale for future delivery of fixed-income securities or foreign currencies, or
contracts based on financial indices, including an index of U.S. Government
securities, foreign government securities, corporate fixed-income securities, or
common stock, and may purchase and write options on futures contracts; (vii)
purchase and write put and call options on foreign currencies traded on U.S. and
foreign exchanges or over-the-counter for hedging purposes; (viii) purchase or
sell forward contracts; (ix) enter into interest rate swaps and purchase or sell
interest rate caps and floors; (x) enter in forward commitments for the purchase
or sale of securities; (xi) enter into standby commitment agreements; (xii)
enter into repurchase agreements pertaining to U.S. Government securities with
member banks of the Federal Reserve System or primary dealers in such
securities; (xiii) make short sales of securities or maintain a short position
as described below under "Additional Investment Practices--Short Sales;" and
(xiv) make secured loans of its portfolio securities not in excess of 20% of its
total assets to brokers, dealers and financial institutions. For additional
information on the use, risk and costs of these policies and practices, see
"Additional Investment Practices."
Alliance Growth and Income Fund
Alliance Growth and Income Fund, Inc. ("Growth and Income Fund") is a
diversified investment company that seeks appreciation through investments
primarily in dividend-paying common stocks of good quality, although it is
permitted to invest in fixed-income securities and convertible securities.
The Fund may also try to realize income by writing covered call options listed
on domestic securities exchanges. The Fund also invests in foreign securities.
Since the purchase of foreign securities entails certain political and economic
risks, the Fund has restricted its investments in securities in this category to
issues of high quality. The Fund may also purchase and sell financial forward
and futures contracts and options thereon for hedging purposes. For additional
information on the use, rights and costs of these policies and practices, see
"Additional Investment Practices."
Alliance Real Estate Investment Fund
Alliance Real Estate Investment Fund, Inc. ("Real Estate Investment Fund") is a
diversified investment company that seeks a total return on its assets from
long-term growth of capital and from income principally through investing in a
portfolio of equity securities of issuers that are primarily engaged in or
related to the real estate industry.
Under normal circumstances, at least 65% of the Fund's total assets will be
invested in equity securities of real estate investment trusts ("REITs") and
other real estate industry companies. A "real estate industry company" is a
company that derives at least 50% of its gross revenues or net profits from the
ownership, development, construction, financing, management or sale of
commercial, industrial or residential real estate or interests therein. The
equity securities in which the Fund will invest for this purpose consist of
common stock, shares of beneficial interest of REITs and securities with common
stock characteristics, such as preferred stock or convertible securities ("Real
Estate Equity Securities").
The Fund may invest up to 35% of its total assets in (a) securities that
directly or indirectly represent participations in, or are collateralized by and
payable from, mortgage loans secured by real property ("Mortgage-Backed
Securities"), such as mortgage pass-through certificates, real estate mortgage
investment conduit ("REMIC") certificates and collateralized mortgage
obligations ("CMOs") and (b) short-term investments. These instruments are
described below. The risks associated with the Fund's transactions in REMICs,
CMOs and other types of mortgage-backed securities, which are considered to be
derivative securities, may include some or all of the following: market risk,
leverage and volatility risk, correlation risk, credit risk and liquidity and
valuation risk. See "Risk Considerations" for a description of these and other
risks.
As to any investment in Real Estate Equity Securities, Alliance's analysis will
focus on determining the degree to which the company involved can achieve
sustainable growth in cash flow and dividend paying capability. Alliance
believes that the primary determinant of this capability is the economic
viability of property markets in which the company operates and that the
secondary determinant of this capability is the ability of management to add
value through strategic focus and operating expertise. The Fund will purchase
Real Estate Equity
18
Securities when, in the judgment of Alliance, their market price does not
adequately reflect this potential. In making this determination, Alliance will
take into account fundamental trends in underlying property markets as
determined by proprietary models, site visits conducted by individuals
knowledgeable in local real estate markets, price-earnings ratios (as defined
for real estate companies), cash flow growth and stability, the relationship
between asset value and market price of the securities, dividend payment
history, and such other factors which Alliance may determine from time to time
to be relevant. Alliance will attempt to purchase for the Fund Real Estate
Equity Securities of companies whose underlying portfolios are diversified
geographically and by property type.
The Fund may invest without limitation in shares of REITs. REITs are pooled
investment vehicles which invest primarily in income producing real estate or
real estate related loans or interests. REITs are generally classified as equity
REITs, mortgage REITs or a combination of equity and mortgage REITs. Equity
REITs invest the majority of their assets directly in real property and derive
income primarily from the collection of rents. Equity REITs can also realize
capital gains by selling properties that have appreciated in value. Mortgage
REITs invest the majority of their assets in real estate mortgages and derive
income from the collection of interest payments. Similar to investment companies
such as the Fund, REITs are not taxed on income distributed to shareholders
provided they comply with several requirements of the Code. The Fund will
indirectly bear its proportionate share of expenses incurred by REITs in which
the Fund invests in addition to the expenses incurred directly by the Fund.
Investment Process for Real Estate Equity Securities
Real Estate Investment Fund's investment strategy with respect to Real Estate
Equity Securities is based on the premise that property market fundamentals are
the primary determinant of growth underlying the success of Real Estate Equity
Securities. Value added management will further distinguish the most attractive
Real Estate Equity Securities. The Fund's research and investment process is
designed to identify those companies with strong property fundamentals and
strong management teams. This process is comprised of real estate market
research, specific property inspection and securities analysis.
The universe of property-owning real estate industry firms consists of
approximately 130 companies of sufficient size and quality to merit
consideration for investment by the Fund. In implementing the Fund's research
and investment process, Alliance will avail itself of the consulting services of
CB Commercial Real Estate Group, Inc. ("CBC"), a publicly held company and the
largest real estate services company in the United States, comprised of real
estate brokerage, property and facilities management, and real estate finance
and investment advisory activities (CBC in August of 1997 acquired Koll
Management Services ("Koll"), which previously provided these consulting
services to Alliance). In 1996, CBC (and Koll, on a combined basis) completed
25,000 sale and lease transactions, managed over 4,100 client properties,
created over $3.5 billion in mortgage originations, and completed over 2,600
appraisal and consulting assignments. In addition, they advised and managed for
institutions over $4 billion in real estate investments. As consultant to
Alliance, CBC provides access to its proprietary model, REIT-Score, that
analyzes the approximately 12,000 properties owned by these 130 companies. Using
proprietary databases and algorithms, CBC analyzes local market rent, expense,
and occupancy trends, market specific transaction pricing, demographic and
economic trends, and leading indicators of real estate supply such as building
permits. Over 650 asset-type specific geographic markets are analyzed and ranked
on a relative scale by CBC in compiling its REIT-Score database. The relative
attractiveness of these real estate industry companies is similarly ranked based
on the cmposite rankings of the properties they own. See "Management of the
Funds--Consultant to Advir" for more information about CBC.
Once the universe of real estate industry companies has been distilled through
the market research process, CBC's local market presence provides the capability
to perform site specific inspections of key properties. This analysis examines
specific location, condition, and sub-market trends. CBC's use of locally based
real estate professionals provides Alliance with a window on the operations of
the portfolio companies as information can immediately be put in the context of
local market events. Only those companies whose specific property portfolios
reflect the promise of their general markets will be considered for initial and
continued investment by the Fund.
Alliance further screens the universe of real estate industry companies by using
rigorous financial models and by engaging in regular contact with management of
targeted companies. Each management's strategic plan and ability to execute the
plan are determined and analyzed. Alliance will make extensive use of CBC's
network of industry analysts in order to assess trends in tenant industries.
This information is then used to further interpret management's strategic plans.
Financial ratio analysis is used to isolate those companies with the ability to
make value-added acquisitions. This information is combined with property market
trends and used to project future earnings potential.
Alliance believes that this process will result in a portfolio that will consist
of Real Estate Equity Securities of companies that own assets in the most
desirable markets across the country, diversified geographically and by property
type.
The short-term investments in which Real Estate Investment Fund may invest are:
corporate commercial paper and other short-term commercial obligations, in each
case rated or issued by companies with similar securities outstanding that are
rated Prime-1, Aa or better by Moody's or A-1, AA or better by S&P; obligations
(including certificates of deposit, time deposits, demand deposits and bankers'
acceptances) of banks with securities outstanding that are rated Prime-1, Aa or
better by Moody's or A-1, AA or better by S&P; and obligations
19
issued or guaranteed by the U.S. Government or its agencies or instrumentalities
with remaining maturities not exceeding 18 months.
The Fund may invest in debt securities rated BBB or higher by S&P or Baa or
higher by Moody's or, if not so rated, of equivalent credit quality as
determined by Alliance. The Fund expects that it will not retain a debt security
which is downgraded below BBB or Baa or, if unrated, determined by Alliance to
have undergone similar credit quality deterioration, subsequent to purchase by
the Fund.
The Fund may also engage in the following investment practices to the extent
indicated: (i) invest up to 10% of its net assets in rights or warrants; (ii)
invest up to 15% of its net assets in the convertible securities of companies
whose common stocks are eligible for purchase by the Fund; (iii) lend portfolio
securities equal in value to not more than 25% of total assets; (iv) enter into
repurchase agreements of up to seven days' duration; (v) enter into forward
commitments transactions as long as the Fund's aggregate commitments under such
transactions are not more than 30% of the Fund's total assets; (vi) enter into
standby commitment agreements; (vii) make short sales of securities or maintain
a short position but only if at all times when a short position is open not more
than 25% of the Fund's net assets (taken at market value) is held as collateral
for such sales; and (viii) invest in illiquid securities unless, as a result,
more than 15% of its net assets would be so invested.
ADDITIONAL INVESTMENT PRACTICES
Some or all of the Funds may engage in the following investment practices to the
extent described above.
Convertible Securities. Prior to conversion, convertible securities have the
same general characteristics as non-convertible debt securities, which provide a
stable stream of income with yields that are generally higher than those of
equity securities of the same or similar issuers. The price of a convertible
security will normally vary with changes in the price of the underlying stock,
although the higher yield tends to make the convertible security less volatile
than the underlying common stock. As with debt securities, the market value of
convertible securities tends to decline as interest rates increase and increase
as interest rates decline. While convertible securities generally offer lower
interest or dividend yields than non-convertible debt securities of similar
quality, they offer investors the potential to benefit from increases in the
market price of the underlying common stock. Convertible debt securities that
are rated Baa or lower by Moody's or BBB or lower by S&P, Duff & Phelps or Fitch
and comparable unrated securities as determined by Alliance may share some or
all of the risks of non-convertible debt securities with those ratings. For a
description of these risks, see "Risk Considerations--Securities Ratings" and
"--Investment in Lower-Rated Fixed-Income Securities."
Rights and Warrants. A Fund will invest in rights or warrants only if the
underlying equity securities themselves are deemed appropriate by Alliance for
inclusion in the Fund's portfolio. Rights and warrants entitle the holder to buy
equity securities at a specific price for a specific period of time. Rights are
similar to warrants except that they have a substantially shorter duration.
Rights and warrants may be considered more speculative than certain other types
of investments in that they do not entitle a holder to dividends or voting
rights with respect to the underlying securities nor do they represent any
rights in the assets of the issuing company. The value of a right or warrant
does not necessarily change with the value of the underlying security, although
the value of a right or warrant may decline because of a decrease in the value
of the underlying security, the passage of time or a change in perception as to
the potential of the underlying security, or any combination thereof. If the
market price of the underlying security is below the exercise price set forth in
the warrant on the expiration date, the warrant will expire worthless. Moreover,
a right or warrant ceases to have value if it is not exercised prior to the
expiration date.
Depositary Receipts and Securities of Supranational Entities. Depositary
receipts may not necessarily be denominated in the same currency as the
underlying securities into which they may be converted. In addition, the issuers
of the stock of unsponsored depositary receipts are not obligated to disclose
material information in the United States and, therefore, there may not be a
correlation between such information and the market value of the depositary
receipts. ADRs are depositary receipts typically issued by a U.S. bank or trust
company that evidence ownership of underlying securities issued by a foreign
corporation. GDRs and other types of depositary receipts are typically issued by
foreign banks or trust companies and evidence ownership of underlying securities
issued by either a foreign or a U.S. company. Generally, depositary receipts in
registered form are designed for use in the U.S. securities markets, and
depositary receipts in bearer form are designed for use in foreign securities
markets. For purposes of determining the country of issuance, investments in
depositary receipts of either type are deemed to be investments in the
underlying securities except with respect to Growth Fund, Strategic Balanced
Fund and Income Builder Fund, where investments in ADRs are deemed to be
investments in securities issued by U.S. issuers and those in GDRs and other
types of depositary receipts are deemed to be investments in the underlying
securities.
A supranational entity is an entity designated or supported by the national
government of one or more countries to promote economic reconstruction or
development. Examples of supranational entities include, among others, the World
Bank (International Bank for Reconstruction and Development) and the European
Investment Bank. A European Currency Unit is a basket of specified amounts of
the currencies of the member states of the European Economic Community.
"Semi-governmental securities" are securities issued by entities owned by either
a national, state or equivalent government or are obligations of one of such
government jurisdictions which are not backed by its full faith and credit and
general taxing powers.
Mortgage-Backed Securities. Interest and principal payments (including
prepayments) on the mortgages underlying
20
mortgage-backed securities are passed through to the holders of the securities.
As a result of the pass-through of prepayments of principal on the underlying
securities, mortgage-backed securities are often subject to more rapid
prepayment of principal than their stated maturity would indicate. Prepayments
occur when the mortgagor on a mortgage prepays the remaining principal before
the mortgage's scheduled maturity date. Because the prepayment characteristics
of the underlying mortgages vary, it is impossible to predict accurately the
realized yield or average life of a particular issue of pass-through
certificates. Prepayments are important because of their effect on the yield and
price of the mortgage-backed securities. During periods of declining interest
rates, prepayments can be expected to accelerate and a Fund investing in such
securities would be required to reinvest the proceeds at the lower interest
rates then available. Conversely, during periods of rising interest rates, a
reduction in prepayments may increase the effective maturity of the securities,
subjecting them to a greater risk of decline in market value in response to
rising interest rates. In addition, prepayments of mortgages underlying
securities purchased at a premium could result in capital losses.
Adjustable Rate Securities. Adjustable rate securities have interest rates that
are reset at periodic intervals, usually by reference to some interest rate
index or market interest rate. Some adjustable rate securities are backed by
pools of mortgage loans. Although the rate-adjustment feature may reduce sharp
changes in the value of adjustable rate securities, these securities can change
in value based on changes in market interest rates or the issuer's
creditworthiness. Changes in the interest rate on adjustable rate securities may
lag behind changes in prevailing market interest rates. Also, some adjustable
rate securities (or the underlying mortgages) are subject to caps or floors that
limit the maximum change in interest rate.
Asset-Backed Securities. Asset-backed securities (unrelated to first mortgage
loans) represent fractional interests in pools of leases, retail installment
loans, revolving credit receivables and other payment obligations, both secured
and unsecured. These assets are generally held by a trust and payments of
principal and interest or interest only are passed through monthly or quarterly
to certificate holders and may be guaranteed up to certain amounts by letters of
credit issued by a financial institution affiliated or unaffiliated with the
trustee or originator of the trust.
Like mortgages underlying mortgage-backed securities, underlying automobile
sales contracts or credit card receivables are subject to prepayment, which may
reduce the overall return to certificate holders. Certificate holders may also
experience delays in payment on the certificates if the full amounts due on
underlying sales contracts or receivables are not realized by the trust because
of unanticipated legal or administrative costs of enforcing the contracts or
because of depreciation or damage to the collateral (usually automobiles)
securing certain contracts, or other factors.
Zero-Coupon and Payment-in-Kind Bonds. Zero-coupon bonds are issued at a
significant discount from their principal amount in lieu of paying interest
periodically. Payment-in-kind bonds allow the issuer to make current interest
payments on the bonds in additional bonds. Because zero-coupon bonds and
payment-in-kind bonds do not pay current interest in cash, their value is
generally subject to greater fluctuation in response to changes in market
interest rates than bonds that pay interest in cash currently. Both zero-coupon
and payment-in-kind bonds allow an issuer to avoid the need to generate cash to
meet current interest payments. Accordingly, such bonds may involve greater
credit risks than bonds paying interest currently. Even though such bonds do not
pay current interest in cash, a Fund is nonetheless required to accrue interest
income on such investments and to distribute such amounts at least annually to
shareholders. Thus, a Fund could be required at times to liquidate other
investments in order to satisfy its dividend requirements.
Equity-Linked Debt Securities. Equity-linked debt securities are securities with
respect to which the amount of interest and/or principal that the issuer thereof
is obligated to pay is linked to the performance of a specified index of equity
securities. Such amount may be significantly greater or less than payment
obligations in respect of other types of debt securities. Adverse changes in
equity securities indices and other adverse changes in the securities markets
may reduce payments made under, and/or the principal of, equity-linked debt
securities held by the Fund. Furthermore, as with any debt securities, the
values of equity-linked debt securities will generally vary inversely with
changes in interest rates. The Fund's ability to dispose of equity-linked debt
securities will depend on the availability of liquid markets for such
securities. Investment in equity-linked debt securities may be considered to be
speculative. As with other securities, the Fund could lose its entire investment
in equity-linked debt securities.
Loans and Other Direct Debt Instruments. Loans and other direct debt instruments
are interests in amounts owed by a corporate, governmental or other borrower to
another party. They may represent amounts owed to lenders or lending syndicates
(loans and loan participations), to suppliers of goods or services (trade claims
or other receivables), or to other creditors. Direct debt instruments involve
the risk of loss in case of default or insolvency of the borrower and may offer
less legal protection to the Fund in the event of fraud or misrepresentation
than debt securities. In addition, loan participations involve a risk of
insolvency of the lending bank or other financial intermediary. Direct debt
instruments may also include standby financing commitments that obligate the
Fund to supply additional cash to the borrower on demand. Loans and other direct
debt instruments are generally illiquid and may be transferred only through
individually negotiated private transactions.
Purchasers of loans and other forms of direct indebtedness depend primarily upon
the creditworthiness of the borrower for payment of principal and interest.
Direct debt instruments may not be rated by any nationally recognized rating
service. If the
21
Fund does not receive scheduled interest or principal payments on such
indebtedness, the Fund's share price and yield could be adversely affected.
Loans that are fully secured offer the Fund more protection than unsecured loans
in the event of non-payment of scheduled interest or principal. However, there
is no assurance that the liquidation of collateral from a secured loan would
satisfy the borrower's obligation, or that the collateral can be liquidated.
Indebtedness of borrowers whose creditworthiness is poor may involve substantial
risks, and may be highly speculative.
Borrowers that are in bankruptcy or restructuring may never pay off their
indebtedness, or may pay only a small fraction of the amount owed. Direct
indebtedness of Asian countries will also involve a risk that the governmental
entities responsible for the repayment of the debt may be unable, or unwilling,
to pay interest and repay principal when due.
Investments in loans through direct assignment of a financial institution's
interests with respect to a loan may involve additional risks to the Fund. For
example, if a loan is foreclosed, the Fund could become part owner of any
collateral, and would bear the costs and liabilities associated with owning and
disposing of the collateral. Direct debt instruments may also involve a risk of
insolvency of the lending bank or other intermediary.
A loan is often administered by a bank or other financial institution that acts
as agent for all holders. The agent administers the terms of the loan, as
specified on the loan agreement. Unless, under the terms of the loan or other
indebtedness, the Fund has direct recourse against the borrower, it may have to
rely on the agent to apply appropriate credit remedies against a borrower. If
assets held by the agent for the benefit of the Fund were determined to be
subject to the claims of the agent's general creditors, the Fund might incur
certain costs and delays in realizing payment on the loan or loan participation
and could suffer a loss of principal or interest.
Direct indebtedness purchased by the Fund may include letters of credit,
revolving credit facilities, or other standby financing commitments obligating
the Fund to pay additional cash on demand. These commitments may have the effect
of requiring the Fund to increase its investment in a borrower at a time when it
would not otherwise have done so, even if the borrower's condition makes it
unlikely that the amount will ever be repaid.
Mortgage-Backed Securities and Associated Risks. Mortgage-Backed Securities
include mortgage pass-through certificates and multiple-class pass-through
securities, such as REMIC pass-through certificates, CMOs and stripped
mortgage-backed securities ("SMBS"), and other types of Mortgage-Backed
Securities that may be available in the future.
Guaranteed Mortgage Pass-Through Securities. Real Estate Investment Fund may
invest in guaranteed mortgage pass-through securities which represent
participation interests in pools of residential mortgage loans and are issued by
U.S. governmental or private lenders and guaranteed by the U.S. Government or
one of its agencies or instrumentalities, including but not limited to the
Government National Mortgage Association ("Ginnie Mae"), the Federal National
Mortgage Association ("Fannie Mae") and the Federal Home Loan Mortgage
Corporation ("Freddie Mac"). Ginnie Mae certificates are guaranteed by the full
faith and credit of the United States Government for timely payment of principal
and interest on the certificates. Fannie Mae certificates are guaranteed by
Fannie Mae, a federally chartered and privately-owned corporation for full and
timely payment of principal and interest on the certificates. Freddie Mac
certificates are guaranteed by Freddie Mac, a corporate instrumentality of the
United States Government, for timely payment of interest and the ultimate
collection of all principal of the related mortgage loans.
Multiple-Class Pass-Through Securities and Collateralized Mortgage Obligations.
Mortgage-Backed Securities also include CMOs and REMIC pass-through or
participation certificates, which may be issued by, among others, U.S.
Government agencies and instrumentalities as well as private lenders. CMOs and
REMIC certificates are issued in multiple classes and the principal of and
interest on the mortgage assets may be allocated among the several classes of
CMOs or REMIC certificates in various ways. Each class of CMOs or REMIC
certificates, often referred to as a "tranche," is issued at a specific
adjustable or fixed interest rate and must be fully retired no later than its
final distribution date. Generally, interest is paid or accrues on all classes
of CMOs or REMIC certificates on a monthly basis. Real Estate Investment Fund
will not invest in the lowest tranche of CMOs and REMIC certificates.
Typically, CMOs are collateralized by Ginnie Mae or Freddie Mac certificates but
also may be collateralized by other mortgage assets such as whole loans or
private mortgage pass-through securities. Debt service on CMOs is provided from
payments of principal and interest on collateral of mortgaged assets and any
reinvestment income thereon.
A REMIC is a CMO that qualifies for special tax treatment under the Code and
invests in certain mortgages primarily secured by interests in real property and
other permitted investments. Investors may purchase "regular" and "residual"
interest shares of beneficial interest in REMIC trusts although the Fund does
not intend to invest in residual interests.
Risks. Investing in Mortgage-Backed Securities involves certain unique risks in
addition to those generally associated with investing in the real estate
industry in general. These unique risks include the failure of a counterparty to
meet its commitments, adverse interest rate changes and the effects of
prepayments on mortgage cash flows. See "Risk Considerations--Mortgage-Backed
Securities" for a more complete description of the characteristics of
Mortgage-Backed Securities and associated risks.
Illiquid Securities. Subject to any more restrictive applicable fundamental
investment policy, none of the Funds will maintain more than 15% of its net
assets in illiquid securities. Illiquid securities generally include (i) direct
placements or other
22
securities that are subject to legal or contractual restrictions on resale or
for which there is no readily available market (e.g., when trading in the
security is suspended or, in the case of unlisted securities, when market makers
do not exist or will not entertain bids or offers), including many individually
negotiated currency swaps and any assets used to cover currency swaps and most
privately negotiated investments in state enterprises that have not yet
conducted an initial equity offering, (ii) over-the-counter options and assets
used to cover over-the-counter options, and (iii) repurchase agreements not
terminable within seven days.
Because of the absence of a trading market for illiquid securities, a Fund may
not be able to realize their full value upon sale. With respect to each Fund
that may invest in such securities, Alliance will monitor their illiquidity
under the supervision of the Directors of the Fund. To the extent permitted by
applicable law, Rule 144A securities will not be treated as "illiquid" for
purposes of the foregoing restriction so long as such securities meet liquidity
guidelines established by a Fund's Directors. Investment in non-publicly traded
securities by each of Growth Fund and Strategic Balanced Fund is restricted to
5% of its total assets (not including for these purposes Rule 144A securities,
to the extent permitted by applicable law) and is also subject to the 15%
restriction on investment in illiquid securities described above.
A Fund that invests in securities for which there is no ready market may
therefore not be able to readily sell such securities. To the extent that these
securities are foreign securities, there is no law in many of the countries in
which a Fund may invest similar to the Securities Act requiring an issuer to
register the sale of securities with a governmental agency or imposing legal
restrictions on resales of securities, either as to length of time the
securities may be held or manner of resale. However, there may be contractual
restrictions on resales of securities.
Options. An option gives the purchaser of the option, upon payment of a premium,
the right to deliver to (in the case of a put) or receive from (in the case of a
call) the writer a specified amount of a security on or before a fixed date at a
predetermined price. A call option written by a Fund is "covered" if the Fund
owns the underlying security, has an absolute and immediate right to acquire
that security upon conversion or exchange of another security it holds, or holds
a call option on the underlying security with an exercise price equal to or less
than that of the call option it has written. A put option written by a Fund is
covered if the Fund holds a put option on the underlying securities with an
exercise price equal to or greater than that of the put option it has written.
A call option is for cross-hedging purposes if a Fund does not own the
underlying security, and is designed to provide a hedge against a decline in
value in another security which the Fund owns or has the right to acquire.
Worldwide Privatization Fund, All-Asia Investment Fund, Income Builder Fund and
Utility Income Fund each may write call options for cross-hedging purposes. A
Fund would write a call option for cross- hedging purposes, instead of writing a
covered call option, when the premium to be received from the cross-hedge
transaction would exceed that which would be received from writing a covered
call option, while at the same time achieving the desired hedge.
In purchasing an option, a Fund would be in a position to realize a gain if,
during the option period, the price of the underlying security increased (in the
case of a call) or decreased (in the case of a put) by an amount in excess of
the premium paid; otherwise the Fund would experience a loss equal to the
premium paid for the option.
If an option written by a Fund were exercised, the Fund would be obligated to
purchase (in the case of a put) or sell (in the case of a call) the underlying
security at the exercise price. The risk involved in writing an option is that,
if the option were exercised, the underlying security would then be purchased or
sold by the Fund at a disadvantageous price. These risks could be reduced by
entering into a closing transaction (i.e., by disposing of the option prior to
its exercise). A Fund retains the premium received from writing a put or call
option whether or not the option is exercised. The writing of covered call
options could result in increases in a Fund's portfolio turnover rate,
especially during periods when market prices of the underlying securities
appreciate.
Technology Fund, Quasar Fund, International Fund, New Europe Fund and Global
Small Cap Fund will not write uncovered call options. Technology Fund and Global
Small Cap Fund will not write a call option if the premium to be received by the
Fund in doing so would not produce an annualized return of at least 15% of the
then current market value of the securities subject to the option (without
giving effect to commissions, stock transfer taxes and other expenses that are
deducted from premium receipts). Technology Fund, Quasar Fund and Global Small
Cap Fund will not write a call option if, as a result, the aggregate of the
Fund's portfolio securities subject to outstanding call options (valued at the
lower of the option price or market value of such securities) would exceed 15%
of the Fund's total assets or more than 10% of the Fund's assets would be
committed to call options that at the time of sale have a remaining term of more
than 100 days. The aggregate cost of all outstanding options purchased and held
by each of Premier Growth Fund, Technology Fund, Quasar Fund and Global Small
Cap Fund will at no time exceed 10% of the Fund's total assets. Neither
International Fund nor New Europe Fund will write uncovered put options.
A Fund that purchases or writes options on securities in privately negotiated
(i.e., over-the-counter) transactions will effect such transactions only with
investment dealers and other financial institutions (such as commercial banks or
savings and loan institutions) deemed creditworthy by Alliance, and Alliance has
adopted procedures for monitoring the creditworthiness of such entities. Options
purchased or written by a Fund in negotiated transactions are illiquid and it
may not be possible for the Fund to effect a closing transaction at an
advantageous time. See "Illiquid Securities."
23
Options on Securities Indices. An option on a securities index is similar to an
option on a security except that, rather than the right to take or make delivery
of a security at a specified price, an option on a securities index gives the
holder the right to receive, upon exercise of the option, an amount of cash if
the closing level of the chosen index is greater than (in the case of a call) or
less than (in the case of a put) the exercise price of the option.
Futures Contracts and Options on Futures Contracts. A "sale" of a futures
contract means the acquisition of a contractual obligation to deliver the
securities or foreign currencies or other commodity called for by the contract
at a specified price on a specified date. A "purchase" of a futures contract
means the incurring of an obligation to acquire the securities, foreign
currencies or other commodity called for by the contract at a specified price on
a specified date. The purchaser of a futures contract on an index agrees to take
or make delivery of an amount of cash equal to the difference between a
specified dollar multiple of the value of the index on the expiration date of
the contract ("current contract value") and the price at which the contract was
originally struck. No physical delivery of the securities underlying the index
is made.
Options on futures contracts written or purchased by a Fund will be traded on
U.S. or foreign exchanges or over-the-counter. These investment techniques will
be used only to hedge against anticipated future changes in market conditions
and interest or exchange rates which otherwise might either adversely affect the
value of the Fund's portfolio securities or adversely affect the prices of
securities which the Fund intends to purchase at a later date.
No Fund will enter into any futures contracts or options on futures contracts if
immediately thereafter the market values of the outstanding futures contracts of
the Fund and the currencies and futures contracts subject to outstanding options
written by the Fund would exceed 50% of its total assets, and Income Builder
Fund will also not do so if immediately thereafter the aggregate of initial
margin deposits on all the outstanding futures contracts of the Fund and
premiums paid on outstanding options on futures contracts would exceed 5% of the
market value of the total assets of the Fund. Premier Growth Fund and Growth and
Income Fund may not purchase or sell a stock index future if immediately
thereafter more than 30% of its total assets would be hedged by stock index
futures. Premier Growth Fund and Growth and Income Fund may not purchase or sell
a stock index future if, immediately thereafter, the sum of the amount of margin
deposits on the Fund's existing futures positions would exceed 5% of the market
value of the Fund's total assets.
Options on Foreign Currencies. As in the case of other kinds of options, the
writing of an option on a foreign currency constitutes only a partial hedge, up
to the amount of the premium received, and a Fund could be required to purchase
or sell foreign currencies at disadvantageous exchange rates, thereby incurring
losses. The purchase of an option on a foreign currency may constitute an
effective hedge against fluctuations in exchange rates although, in the event of
rate movements adverse to a Fund's position, it may forfeit the entire amount of
the premium plus related transaction costs. See the Statement of Additional
Information of each Fund that may invest in options on foreign currencies for
further discussion of the use, risks and costs of options on foreign currencies.
Forward Foreign Currency Exchange Contracts. A Fund purchases or sells forward
contracts to minimize the risk to it from adverse changes in the relationship
between the U.S. dollar and other currencies. A forward contract is an
obligation to purchase or sell a specific currency for an agreed price at a
future date, and is individually negotiated and privately traded.
A Fund may enter into a forward contract, for example, when it enters into a
contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. dollar price of the security
("transaction hedge"). A Fund will not engage in transaction hedges with respect
to the currency of a particular country to an extent greater than the aggregate
amount of the Fund's transactions in that currency. When a Fund believes that a
foreign currency may suffer a substantial decline against the U.S. dollar, it
may enter into a forward sale contract to sell an amount of that foreign
currency approximating the value of some or all of the Fund's portfolio
securities denominated in such foreign currency, or when the Fund believes that
the U.S. dollar may suffer a substantial decline against a foreign currency, it
may enter into a forward purchase contract to buy that foreign currency for a
fixed dollar amount ("position hedge"). A Fund will not position hedge with
respect to a particular currency to an extent greater than the aggregate market
value (at the time of making such sale) of the securities held in its portfolio
denominated or quoted in that currency. Instead of entering into a position
hedge, a Fund may, in the alternative, enter into a forward contract to sell a
different foreign currency for a fixed U.S. dollar amount where the Fund
believes that the U.S. dollar value of the currency to be sold pursuant to the
forward contract will fall whenever there is a decline in the U.S. dollar value
of the currency in which portfolio securities of the Fund are denominated
("cross-hedge"). Unanticipated changes in currency prices may result in poorer
overall performance for the Fund than if it had not entered into such forward
contracts.
Hedging against a decline in the value of a currency does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Such transactions also preclude the
opportunity for gain if the value of the hedged currency should rise. Moreover,
it may not be possible for a Fund to hedge against a devaluation that is so
generally anticipated that the Fund is not able to contract to sell the currency
at a price above the devaluation level it anticipates. International Fund, New
Europe Fund and Global Small Cap Fund will not enter into a forward contract
with a term of more than one year or if, as a result, more than 50% of its total
assets would be committed to such contracts. The dealings of International Fund,
New Europe Fund and Global Small Cap Fund in forward contracts will be limited
to hedging involving either specific transactions or portfolio positions.
24
Growth Fund and Strategic Balanced Fund may also purchase and sell foreign
currency on a spot basis.
Forward Commitments. Forward commitments for the purchase or sale of securities
may include purchases on a "when-issued" basis or purchases or sales on a
"delayed delivery" basis. In some cases, a forward commitment may be conditioned
upon the occurrence of a subsequent event, such as approval and consummation of
a merger, corporate reorganization or debt restructuring (i.e., a "when, as and
if issued" trade).
When forward commitment transactions are negotiated, the price is fixed at the
time the commitment is made, but delivery and payment for the securities take
place at a later date. Normally, the settlement date occurs within two months
after the transaction, but settlements beyond two months may be negotiated.
Securities purchased or sold under a forward commitment are subject to market
fluctuation, and no interest or dividends accrue to the purchaser prior to the
settlement date. At the time a Fund intends to enter into a forward commitment,
it records the transaction and thereafter reflects the value of the security
purchased or, if a sale, the proceeds to be received, in determining its net
asset value. Any unrealized appreciation or depreciation reflected in such
valuation of a "when, as and if issued" security would be canceled in the event
that the required conditions did not occur and the trade was canceled.
The use of forward commitments enables a Fund to protect against anticipated
changes in interest rates and prices. For instance, in periods of rising
interest rates and falling bond prices, a Fund might sell securities in its
portfolio on a forward commitment basis to limit its exposure to falling prices.
In periods of falling interest rates and rising bond prices, a Fund might sell a
security in its portfolio and purchase the same or a similar security on a
when-issued or forward commitment basis, thereby obtaining the benefit of
currently higher cash yields. However, if Alliance were to forecast incorrectly
the direction of interest rate movements, a Fund might be required to complete
such when-issued or forward transactions at prices inferior to the then current
market values. When-issued securities and forward commitments may be sold prior
to the settlement date, but a Fund enters into when-issued and forward
commitments only with the intention of actually receiving securities or
delivering them, as the case may be. If a Fund chooses to dispose of the right
to acquire a when-issued security prior to its acquisition or dispose of its
right to deliver or receive against a forward commitment, it may incur a gain or
loss. Any significant commitment of Fund assets to the purchase of securities on
a "when, as and if issued" basis may increase the volatility of the Fund's net
asset value. No forward commitments will be made by New Europe Fund, All-Asia
Investment Fund, Worldwide Privatization Fund, Income Builder Fund, Utility
Income Fund or Real Estate Investment Fund if, as a result, the Fund's aggregate
commitments under such transactions would be more than 30% of the Fund's total
assets. In the event the other party to a forward commitment transaction were to
default, a Fund might lose the opportunity to invest money at favorable rates or
to dispose of securities at favorable prices.
Standby Commitment Agreements. Standby commitment agreements commit a Fund, for
a stated period of time, to purchase a stated amount of a security that may be
issued and sold to the Fund at the option of the issuer. The price and coupon of
the security are fixed at the time of the commitment. At the time of entering
into the agreement the Fund is paid a commitment fee, regardless of whether the
security ultimately is issued, typically equal to approximately 0.5% of the
aggregate purchase price of the security the Fund has committed to purchase. A
Fund will enter into such agreements only for the purpose of investing in the
security underlying the commitment at a yield and price considered advantageous
to the Fund and unavailable on a firm commitment basis. No Fund, other than
Income Builder Fund, will enter into a standby commitment with a remaining term
in excess of 45 days. Investments in standby commitments will be limited so that
the aggregate purchase price of the securities subject to the commitments will
not exceed 25% with respect to New Europe Fund and Real Estate Investment Fund,
50% with respect to Worldwide Privatization Fund and All-Asia Investment Fund,
and 20% with respect to Utility Income Fund, of the Fund's assets taken at the
time of making the commitment.
There is no guarantee that a security subject to a standby commitment will be
issued and the value of the security, if issued, on the delivery date may be
more or less than its purchase price. Since the issuance of the security
underlying the commitment is at the option of the issuer, a Fund will bear the
risk of capital loss in the event the value of the security declines and may not
benefit from an appreciation in the value of the security during the commitment
period if the issuer decides not to issue and sell the security to the Fund.
Currency Swaps. Currency swaps involve the individually negotiated exchange by a
Fund with another party of a series of payments in specified currencies. A
currency swap may involve the delivery at the end of the exchange period of a
substantial amount of one designated currency in exchange for the other
designated currency. Therefore the entire principal value of a currency swap is
subject to the risk that the other party to the swap will default on its
contractual delivery obligations. The net amount of the excess, if any, of a
Fund's obligations over its entitlements with respect to each currency swap will
be accrued on a daily basis. A Fund will not enter into any currency swap unless
the credit quality of the unsecured senior debt or the claims-paying ability of
the other party thereto is rated in the highest rating category of at least one
nationally recognized rating organization at the time of entering into the
transaction. If there is a default by the other party to such a transaction,
such Fund will have contractual remedies pursuant to the agreements related to
the transactions.
Interest Rate Transactions. Each Fund that may enter into interest rate
transactions expects to do so primarily to preserve a return or spread on a
particular investment or portion of its portfolio or to protect against any
increase in the
25
price of securities the Fund anticipates purchasing at a later date. The Funds
do not intend to use these transactions in a speculative manner.
Interest rate swaps involve the exchange by a Fund with another party of their
respective commitments to pay or receive interest (e.g., an exchange of floating
rate payments for fixed rate payments). Interest rate swaps are entered on a net
basis (i.e., the two payment streams are netted out, with the Fund receiving or
paying, as the case may be, only the net amount of the two payments). With
respect to All-Asia Investment Fund and Utility Income Fund, the exchange
commitments can involve payments in the same currency or in different
currencies. The purchase of an interest rate cap entitles the purchaser, to the
extent that a specified index exceeds a predetermined interest rate, to receive
payments of interest on a contractually-based principal amount from the party
selling such interest rate cap. The purchase of an interest rate floor entitles
the purchaser, to the extent that a specified index falls below a predetermined
interest rate, to receive payments of interest on an agreed principal amount
from the party selling the interest rate floor.
A Fund may enter into interest rate swaps, caps and floors on either an
asset-based or liability-based basis, depending upon whether it is hedging its
assets or liabilities. The net amount of the excess, if any, of a Fund's
obligations over its entitlements with respect to each interest rate swap, cap
and floor is accrued daily. A Fund will not enter into an interest rate swap,
cap or floor transaction unless the unsecured senior debt or the claims-paying
ability of the other party thereto is then rated in the highest rating category
of at least one nationally recognized rating organization. Alliance will monitor
the creditworthiness of counterparties on an ongoing basis. The swap market has
grown substantially in recent years, with a large number of banks and investment
banking firms acting both as principals and as agents utilizing standardized
swap documentation. As a result, the swap market has become relatively liquid.
Caps and floors are more recent innovations for which standardized documentation
has not yet been developed and, accordingly, they are less liquid than swaps.
The use of interest rate transactions is a highly specialized activity which
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. If Alliance were to incorrectly
forecast market values, interest rates and other applicable factors, the
investment performance of a Fund would be adversely affected by the use of these
investment techniques. Moreover, even if Alliance is correct in its forecasts,
there is a risk that the transaction position may correlate imperfectly with the
price of the asset or liability being hedged. There is no limit on the amount of
interest rate transactions that may be entered into by a Fund that is permitted
to enter into such transactions. These transactions do not involve the delivery
of securities or other underlying assets or principal. Accordingly, the risk of
loss with respect to interest rate transactions is limited to the net amount of
interest payments that a Fund is contractually obligated to make. If the other
party to an interest rate transaction defaults, a Fund's risk of loss consists
of the net amount of interest payments that the Fund contractually is entitled
to receive.
Repurchase Agreements. A repurchase agreement arises when a buyer purchases a
security and simultaneously agrees to resell it to the vendor at an agreed-upon
future date, normally a day or a few days later. The resale price is greater
than the purchase price, reflecting an agreed-upon interest rate for the period
the buyer's money is invested in the security. Such agreements permit a Fund to
keep all of its assets at work while retaining "overnight" flexibility in
pursuit of investments of a longer-term nature. If a vendor defaults on its
repurchase obligation, a Fund would suffer a loss to the extent that the
proceeds from the sale of the collateral were less than the repurchase price. If
a vendor goes bankrupt, a Fund might be delayed in, or prevented from, selling
the collateral for its benefit. Alliance monitors the creditworthiness of the
vendors with which the Fund enters into repurchase agreements. There is no
percentage restriction on a Fund's ability to enter into repurchase agreements,
other than as indicated under "Investment Objectives and Policies."
Short Sales. A short sale is effected by selling a security that a Fund does not
own, or if the Fund does own such security, it is not to be delivered upon
consummation of the sale. A short sale is "against the box" to the extent that a
Fund contemporaneously owns or has the right to obtain securities identical to
those sold short without payment. Worldwide Privatization Fund, All-Asia
Investment Fund, Income Builder Fund and Utility Income Fund each may make short
sales of securities or maintain short positions only for the purpose of
deferring realization of gain or loss for U.S. federal income tax purposes,
provided that at all times when a short position is open the Fund owns an equal
amount of securities of the same issue as, and equal in amount to, the
securities sold short. In addition, each of those Funds may not make a short
sale if as a result more than 10% of the Fund's net assets would be held as
collateral for short sales, except that All-Asia Investment Fund and Real Estate
Investment Fund may not make a short sale if as a result more than 25% of the
Fund's net assets would be held as collateral for short sales. If the price of
the security sold short increases between the time of the short sale and the
time a Fund replaces the borrowed security, the Fund will incur a loss;
conversely, if the price declines, the Fund will realize a capital gain. See
"Certain Fundamental Investment Policies." Certain special federal income tax
considerations may apply to short sales entered into by a Fund. See "Dividends,
Distributions and Taxes" in the relevant Fund's Statement of Additional
Information.
Loans of Portfolio Securities. The risk in lending portfolio securities, as with
other extensions of credit, consists of the possible loss of rights in the
collateral should the borrower fail financially. In determining whether to lend
securities to a particular borrower, Alliance will consider all relevant facts
and circumstances, including the creditworthiness of the borrower. While
securities are on loan, the borrower will pay the Fund any income earned thereon
and the Fund may invest any cash collateral in portfolio
26
securities, thereby earning additional income, or receive an agreed upon amount
of income from a borrower who has delivered equivalent collateral. Each Fund
will have the right to regain record ownership of loaned securities or
equivalent securities in order to exercise ownership rights such as voting
rights, subscription rights and rights to dividends, interest or distributions.
A Fund may pay reasonable finders', administrative and custodial fees in
connection with a loan. A Fund will not lend its portfolio securities to any
officer, director, employee or affiliate of the Fund or Alliance.
General. The successful use of the foregoing investment practices draws upon
Alliance's special skills and experience with respect to such instruments and
usually depends on Alliance's ability to forecast price movements, interest
rates or currency exchange rate movements correctly. Should interest rates,
prices or exchange rates move unexpectedly, a Fund may not achieve the
anticipated benefits of the transactions or may realize losses and thus be in a
worse position than if such strategies had not been used. Unlike many
exchange-traded futures contracts and options on futures contracts, there are no
daily price fluctuation limits with respect to certain options and forward
contracts, and adverse market movements could therefore continue to an unlimited
extent over a period of time. In addition, the correlation between movements in
the prices of futures contracts, options and forward contracts and movements in
the prices of the securities and currencies hedged or used for cover will not be
perfect and could produce unanticipated losses.
A Fund's ability to dispose of its position in futures contracts, options and
forward contracts depends on the availability of liquid markets in such
instruments. Markets in options and futures with respect to a number of types of
securities and currencies are relatively new and still developing, and there is
no public market for forward contracts. It is impossible to predict the amount
of trading interest that may exist in various types of futures contracts,
options and forward contracts. If a secondary market does not exist with respect
to an option purchased or written by a Fund, it might not be possible to effect
a closing transaction in the option (i.e., dispose of the option), with the
result that (i) an option purchased by the Fund would have to be exercised in
order for the Fund to realize any profit and (ii) the Fund may not be able to
sell currencies or portfolio securities covering an option written by the Fund
until the option expires or it delivers the underlying security, futures
contract or currency upon exercise. Therefore, no assurance can be given that
the Funds will be able to utilize these instruments effectively for the purposes
set forth above. Furthermore, a Fund's ability to engage in options and futures
transactions may be limited by tax considerations. See "Dividends, Distributions
and Taxes" in the Statement of Additional Information of each Fund that invests
in options and futures.
Future Developments. A Fund may, following written notice to its shareholders,
take advantage of other investment practices that are not currently contemplated
for use by the Fund or are not available but may yet be developed, to the extent
such investment practices are consistent with the Fund's investment objective
and legally permissible for the Fund. Such investment practices, if they arise,
may involve risks that exceed those involved in the activities described above.
Defensive Position. For temporary defensive purposes, each Fund may invest in
certain types of short-term, liquid, high grade or high quality (depending on
the Fund) debt securities. These securities may include U.S. Government
securities, qualifying bank deposits, money market instruments, prime commercial
paper and other types of short-term debt securities including notes and bonds.
For Funds that may invest in foreign countries, such securities may also include
short-term, foreign-currency denominated securities of the type mentioned above
issued by foreign governmental entities, companies and supranational
organizations. For a complete description of the types of securities each Fund
may invest in while in a temporary defensive position, please see such Fund's
Statement of Additional Information.
Portfolio Turnover. Portfolio turnover rates for the existing classes of shares
of the Fund are set forth in the tables that begin on page 38. These portfolio
turnover rates are greater than those of most other investment companies,
including those which emphasize capital appreciation as a basic policy. A high
rate of portfolio turnover involves correspondingly greater brokerage and other
expenses than a lower rate, which must be borne by the Fund and its
shareholders. High portfolio turnover also may result in the realization of
substantial net short-term capital gains. See "Dividends, Distributions and
Taxes" in each Fund's Statement of Additional Information.
CERTAIN FUNDAMENTAL INVESTMENT POLICIES
Each Fund has adopted certain fundamental investment policies listed below,
which may not be changed without the approval of its shareholders. Additional
investment restrictions with respect to a Fund are set forth in its Statement of
Additional Information.
Alliance Fund may not: (i) invest more than 5% of its total assets in the
securities of any one issuer (other than the U.S. Government); (ii) acquire more
than 10% of the voting or other securities of any one issuer; or (iii) buy
securities of any company that (including its predecessors) has not been in
business at least three continuous years. Pursuant to investment policies which
are not fundamental, the Fund does not invest (i) in puts or calls (except as
discussed above); (ii) in straddles, spreads, or any combination thereof; (iii)
in oil, gas or other mineral exploration or development programs; or (iv) more
than 5% of its gross assets in securities the disposition of which would be
subject to restrictions under the federal securities laws.
Growth Fund and Strategic Balanced Fund each may not: (i) invest more than 5% of
its total assets in the securities of any one issuer (other than U.S. Government
securities and repurchase agreements relating thereto), although up to 25% of
each Fund's total assets may be invested without regard to this restriction; or
(ii) invest 25% or more of its total assets in the securities of any one
industry.
27
Premier Growth Fund may not: (i) purchase more than 10% of the outstanding
voting securities of any one issuer; (ii) invest 25% or more of the value of its
total assets in the same industry; (iii) borrow money or issue senior securities
except for temporary or emergency purposes in an amount not exceeding 5% of the
value of its total assets at the time the borrowing is made; (iv) pledge,
mortgage, hypothecate or otherwise encumber any of its assets except in
connection with the writing of call options and except to secure permitted
borrowings; or (v) invest in the securities of any issuer that has a record of
less than three years of continuous operation (including the operation of any
predecessor) if as a result more than 10% of the value of the total assets of
the Fund would be invested in the securities of such issuer or issuers.
Technology Fund may not: (i) with respect to 75% of its total assets, have such
assets represented by other than: (a) cash and cash items, (b) U.S. Government
securities, or (c) securities of any one issuer (other than the U.S. Government
and its agencies or instrumentalities) not greater in value than 5% of the
Fund's total assets, and not more than 10% of the outstanding voting securities
of such issuer; (ii) purchase the securities of any one issuer, other than the
U.S. Government and its agencies or instrumentalities, if as a result (a) the
value of the holdings of the Fund in the securities of such issuer exceeds 25%
of its total assets, or (b) the Fund owns more than 25% of the outstanding
securities of any one class of securities of such issuer; (iii) concentrate its
investments in any one industry, but the Fund has reserved the right to invest
up to 25% of its total assets in a particular industry; and (iv) invest in the
securities of any issuer which has a record of less than three years of
continuous operation (including the operation of any predecessor) if such
purchase would cause 10% or more of its total assets to be invested in the
securities of such issuers.
Quasar Fund may not: (i) purchase the securities of any one issuer, other than
the U.S. Government or any of its agencies or instrumentalities, if as a result
more than 5% of its total assets would be invested in such issuer or the Fund
would own more than 10% of the outstanding voting securities of such issuer,
except that up to 25% of its total assets may be invested without regard to
these 5% and 10% limitations; (ii) invest more than 25% of its total assets in
any particular industry; (iii) borrow money except for temporary or emergency
purposes in an amount not exceeding 5% of its total assets at the time the
borrowing is made; or (iv) invest more than 10% of its assets in restricted
securities.
International Fund may not: (i) invest more than 5% of the value of its total
assets in securities of a single issuer (including repurchase agreements with
any one entity), except U.S. Government securities or foreign government
securities; provided, however, that the Fund may not, with respect to 75% of its
total assets, invest more than 5% of its total assets in securities of any one
foreign government issuer; (ii) own more than 10% of the outstanding securities
of any class of any issuer (for this purpose, all preferred stocks of an issuer
shall be deemed a single class, and all indebtedness of an issuer shall be
deemed a single class), except U.S. Government securities; (iii) invest more
than 25% of the value of its total assets in securities of issuers having their
principal business activities in the same industry; provided, that this
limitation does not apply to U.S. Government securities or foreign government
securities; (iv) invest more than 5% of the value of its total assets in the
securities of any issuer that has a record of less than three years of
continuous operation (including the operation of any predecessor or
unconditional guarantor), except U.S. Government securities or foreign
government securities; (v) invest more than 5% of the value of its total assets
in securities with legal or contractual restrictions on resale, other than
repurchase agreements, or more than 10% of the value of its total assets in
securities that are not readily marketable (including restricted securities and
repurchase agreements not terminable within seven business days); and (vi)
borrow money, except as a temporary measure for extraordinary or emergency
purposes, and then only from banks in amounts not exceeding 5% of its total
assets.
Worldwide Privatization Fund may not: (i) invest 25% or more of its total assets
in securities of issuers conducting their principal business activities in the
same industry, except that this restriction does not apply to (a) U.S.
Government securities, or (b) the purchase of securities of issuers whose
primary business activity is in the national commercial banking industry, so
long as the Fund's Directors determine, on the basis of factors such as
liquidity, availability of investments and anticipated returns, that the Fund's
ability to achieve its investment objective would be adversely affected if the
Fund were not permitted to invest more than 25% of its total assets in those
securities, and so long as the Fund notifies its shareholders of any decision by
the Directors to permit or cease to permit the Fund to invest more than 25% of
its total assets in those securities, such notice to include a discussion of any
increased investment risks to which the Fund may be subjected as a result of the
Directors' determination; (ii) borrow money except from banks for temporary or
emergency purposes, including the meeting of redemption requests that might
require the untimely disposition of securities; borrowing in the aggregate may
not exceed 15%, and borrowing for purposes other than meeting redemptions may
not exceed 5%, of the Fund's total assets (including the amount borrowed) less
liabilities (not including the amount borrowed) at the time the borrowing is
made; outstanding borrowings in excess of 5% of the value of the Fund's total
assets will be repaid before any investments are made; or (iii) pledge,
hypothecate, mortgage or otherwise encumber its assets, except to secure
permitted borrowings. The exception contained in clause (i)(b) above is subject
to the operating policy regarding concentration described in this Prospectus.
New Europe Fund may not: (i) purchase more than 10% of the outstanding voting
securities of any one issuer; (ii) invest more than 15% of its total assets in
the securities of any one issuer or 25% or more of its total assets in the same
industry, provided, however, that the foregoing restriction shall not be
28
deemed to prohibit the Fund from purchasing the securities of any issuer
pursuant to the exercise of rights distributed to the Fund by the issuer, except
that no such purchase may be made if as a result the Fund will fail to meet the
diversification requirements of the Code and any such acquisition in excess of
the foregoing 15% or 25% limits will be sold by the Fund as soon as reasonably
practicable (this restriction does not apply to U.S. Government securities, but
will apply to foreign government securities unless the Commission permits their
exclusion); (iii) borrow money except from banks for temporary or emergency
purposes, including the meeting of redemption requests that might require the
untimely disposition of securities; borrowing in the aggregate may not exceed
15%, and borrowing for purposes other than meeting redemptions may not exceed
5%, of the Fund's total assets (including the amount borrowed) less liabilities
(not including the amount borrowed) at the time the borrowing is made;
outstanding borrowings in excess of 5% of the Fund's total assets will be repaid
before any subsequent investments are made; or (iv) purchase a security (unless
the security is acquired pursuant to a plan of reorganization or an offer of
exchange) if, as a result, the Fund would own any securities of an open-end
investment company or more than 3% of the total outstanding voting stock of any
closed-end investment company, or more than 5% of the value of the Fund's total
assets would be invested in securities of any closed-end investment company, or
more than 10% of such value in closed-end investment companies in general.
All-Asia Investment Fund may not: (i) invest 25% or more of its total assets in
securities of issuers conducting their principal business activities in the same
industry; (ii) borrow money except from banks for temporary or emergency
purposes, including the meeting of redemption requests that might require the
untimely disposition of securities; borrowing in the aggregate may not exceed
15%, and borrowing for purposes other than meeting redemptions may not exceed
5%, of the Fund's total assets (including the amount borrowed) less liabilities
(not including the amount borrowed) at the time the borrowing is made;
outstanding borrowings in excess of 5% of the value of the Fund's total assets
will be repaid before any investments are made; or (iii) pledge, hypothecate,
mortgage or otherwise encumber its assets, except to secure permitted
borrowings.
Global Small Cap Fund may not: (i) purchase the securities of any one issuer,
other than the U.S. Government or any of its agencies or instrumentalities, if
immediately after such purchase more than 5% of the value of its total assets
would be invested in such issuer or the Fund would own more than 10% of the
outstanding voting securities of such issuer, except that up to 25% of the
Fund's total assets may be invested without regard to these 5% and 10%
limitations; (ii) invest 25% or more of its total assets in the same industry;
this restriction does not apply to U.S. Government securities, but will apply to
foreign government securities unless the Commission permits their exclusion;
(iii) borrow money except from banks for emergency or temporary purposes in an
amount not exceeding 5% of the total assets of the Fund; or (iv) make short
sales of securities or maintain a short position, unless at all times when a
short position is open it owns an equal amount of such securities or securities
convertible into or exchangeable for, without payment of any further
consideration, securities of the same issue as, and equal in amount to, the
securities sold short and unless not more than 5% of the Fund's net assets is
held as collateral for such sales at any one time.
Balanced Shares may not: (i) invest more than 5% of its total assets in the
securities of any one issuer, except U.S. Government securities; or (ii) own
more than 10% of the outstanding voting securities of any one issuer.
Income Builder Fund may not: (i) invest 25% or more of its total assets in
securities of companies engaged principally in any one industry, except that
this restriction does not apply to U.S. Government securities; (ii) borrow money
except from banks for temporary or emergency purposes, including the meeting of
redemption requests that might require the untimely disposition of securities;
borrowing in the aggregate may not exceed 15%, and borrowing for purposes other
than meeting redemptions may not exceed 5%, of the Fund's total assets
(including the amount borrowed) less liabilities (not including the amount
borrowed) at the time borrowing is made; securities will not be purchased while
borrowings in excess of 5% of the Fund's total assets are outstanding; or (iii)
pledge, hypothecate, mortgage or otherwise encumber its assets, except to secure
permitted borrowings.
Utility Income Fund may not: (i) invest more than 5% of its total assets in the
securities of any one issuer except the U.S. Government, although with respect
to 25% of its total assets it may invest in any number of issuers; (ii) invest
25% or more of its total assets in the securities of issuers conducting their
principal business activities in any one industry, other than the utilities
industry, except that this restriction does not apply to U.S. Government
securities; (iii) purchase more than 10% of any class of the voting securities
of any one issuer; (iv) borrow money except from banks for temporary or
emergency purposes, including the meeting of redemption requests that might
require the untimely disposition of securities; borrowing in the aggregate may
not exceed 15%, and borrowing for purposes other than meeting redemptions may
not exceed 5%, of the Fund's total assets (including the amount borrowed) less
liabilities (not including the amount borrowed) at the time the borrowing is
made; outstanding borrowings in excess of 5% of the Fund's total assets will be
repaid before any subsequent investments are made; or (v) purchase a security
if, as a result (unless the security is acquired pursuant to a plan of
reorganization or an offer of exchange), the Fund would own any securities of an
open-end investment company or more than 3% of the total outstanding voting
stock of any closed-end investment company or more than 5% of the value of the
Fund's net assets would be invested in securities of any one or more closed-end
investment companies.
Growth and Income Fund may not (i) invest more than 5% of its net assets in the
security of any one issuer, except U.S.
Government obligations or (ii) own more than 10% of the outstanding voting
securities of any issuer.
Real Estate Investment Fund may not: (i) with respect to 75% of its total
assets, have such assets represented by other than: (a) cash and cash items, (b)
U.S. Government securities, or (c) securities of any one issuer (other than the
U.S. Government and its agencies or instrumentalities) not greater in value than
5% of the Fund's total assets, and not more than 10% of the outstanding voting
securities of such issuer; (ii) purchase the securities of any one issuer, other
than the U.S. Government and its agencies or instrumentalities, if as a result
(a) the value of the holdings of the Fund in the securities of such issuer
exceeds 25% of its total assets, or (b) the Fund owns more than 25% of the
outstanding securities of any one class of securities of such issuer; (iii)
invest 25% or more of its total assets in the securities of issuers conducting
their principal businesactivities in any one industry, other than the real
estatindustry in which the Fund will invest at least 25% or morof its total
assets, except that this restriction does not applto U.S. Government securities;
(iv) purchase or sell real estate, except thait may purchase and sell securities
of companies which deain real estate or interests therein, including Real Estate
Equity curities; or (v) borrow money except for temporary or emergey purposes or
to meet redemption requests, in an amount t exceeding 5% of the value of its
total assets at the time the borrowing is mad.
RISK CONSIDERATIONS
Investment in certain of the Funds involves the special risk considerations
described below. These risks may be heightened when investing in emerging
markets.
Investment in Privatized Enterprises by Worldwide Privatization Fund. In certain
jurisdictions, the ability of foreign entities, such as the Fund, to participate
in privatizations may be limited by local law, or the price or terms on which
the Fund may be able to participate may be less advantageous than for local
investors. Moreover, there can be no assurance that governments that have
embarked on privatization programs will continue to divest their ownership of
state enterprises, that proposed privatizations will be successful or that
governments will not re-nationalize enterprises that have been privatized.
Furthermore, in the case of certain of the enterprises in which the Fund may
invest, large blocks of the stock of those enterprises may be held by a small
group of stockholders, even after the initial equity offerings by those
enterprises. The sale of some portion or all of those blocks could have an
adverse effect on the price of the stock of any such enterprise.
Most state enterprises or former state enterprises go through an internal
reorganization of management prior to conducting an initial equity offering in
an attempt to better enable these enterprises to compete in the private sector.
However, certain reorganizations could result in a management team that does not
function as well as the enterprise's prior management and may have a negative
effect on such enterprise. After making an initial equity offering, enterprises
that may have enjoyed preferential treatment from the respective state or
government that owned or controlled them may no longer receive such preferential
treatment and may become subject to market competition from which they were
previously protected. Some of these enterprises may not be able to effectively
operate in a competitive market and may suffer losses or experience bankruptcy
due to such competition. In addition, the privatization of an enterprise by its
government may occur over a number of years, with the government continuing to
hold a controlling position in the enterprise even after the initial equity
offering for the enterprise.
Currency Considerations. Substantially all of the assets of International Fund,
New Europe Fund, All-Asia Investment Fund, and Worldwide Privatization Fund and
a substantial portion of the assets of Global Small Cap Fund will be invested in
securities denominated in foreign currencies, and a corresponding portion of
these Funds' revenues will be received in such currencies. Therefore, the dollar
equivalent of their net assets, distributions and income will be adversely
affected by reductions in the value of certain foreign currencies relative to
the U.S. dollar. If the value of the foreign currencies in which a Fund receives
its income falls relative to the U.S. dollar between receipt of the income and
the making of Fund distributions, the Fund may be required to liquidate
securities in order to make distributions if it has insufficient cash in U.S.
dollars to meet distribution requirements that the Fund must satisfy to qualify
as a regulated investment company for federal income tax purposes. Similarly, if
an exchange rate declines between the time a Fund incurs expenses in U.S.
dollars and the time cash expenses are paid, the amount of the currency required
to be converted into U.S. dollars in order to pay expenses in U.S. dollars could
be greater than the equivalent amount of such expenses in the currency at the
time they were incurred. In light of these risks, a Fund may engage in certain
currency hedging transactions, which themselves involve certain special risks.
See "Additional Investment Practices" above.
Foreign Investment. The securities markets of many foreign countries are
relatively small, with the majority of market capitalization and trading volume
concentrated in a limited number of companies representing a small number of
industries. Consequently, a Fund whose investment portfolio includes such
securities may experience greater price volatility and significantly lower
liquidity than a portfolio invested solely in equity securities of U.S.
companies. These markets may be subject to greater influence by adverse events
generally affecting the market, and by large investors trading significant
blocks of securities, than is usual in the United States. Securities settlements
may in some instances be subject to delays and related administrative
uncertainties. These problems are particularly severe in India, where settlement
is through physical delivery, and, where, currently, a severe shortage of vault
capacity exists among custodial banks, although efforts are being undertaken to
alleviate the shortage. Certain foreign countries require governmental approval
prior to investments by foreign persons or limit investment by foreign persons
to only a specified percentage of an issuer's outstanding securities or a
specific class of securities which may have less advantageous terms (including
price) than securities of the company available
30
for purchase by nationals. These restrictions or controls may at times limit or
preclude investment in certain securities and may increase the costs and
expenses of a Fund. In addition, the repatriation of investment income, capital
or the proceeds of sales of securities from certain countries is controlled
under regulations, including in some cases the need for certain advance
government notification or authority, and if a deterioration occurs in a
country's balance of payments, the country could impose temporary restrictions
on foreign capital remittances.
A Fund could also be adversely affected by delays in, or a refusal to grant, any
required governmental approval for repatriation, as well as by the application
to it of other restrictions on investment. Investing in local markets may
require a Fund to adopt special procedures, which may involve additional costs
to a Fund. The liquidity of a Fund's investments in any country in which any of
these factors exists could be affected and Alliance will monitor the effect of
any such factor or factors on a Fund's investments. Furthermore, transaction
costs including brokerage commissions for transactions both on and off the
securities exchanges in many foreign countries are generally higher than in the
United States.
Issuers of securities in foreign jurisdictions are generally not subject to the
same degree of regulation as are U.S. issuers with respect to such matters as
insider trading rules, restrictions on market manipulation, shareholder proxy
requirements and timely disclosure of information. The reporting, accounting and
auditing standards of foreign countries may differ, in some cases significantly,
from U.S. standards in important respects and less information may be available
to investors in foreign securities than to investors in U.S. securities.
Substantially less information is publicly available about certain non-U.S.
issuers than is available about U.S. issuers.
The economies of individual foreign countries may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross domestic
product or gross national product, rate of inflation, capital reinvestment,
resource self-sufficiency and balance of payments position. Nationalization,
expropriation or confiscatory taxation, currency blockage, political changes,
government regulation, political or social instability or diplomatic
developments could affect adversely the economy of a foreign country or the
Fund's investments in such country. In the event of expropriation,
nationalization or other confiscation, a Fund could lose its entire investment
in the country involved. In addition, laws in foreign countries governing
business organizations, bankruptcy and insolvency may provide less protection to
security holders such as the Fund than that provided by U.S. laws.
Investment in United Kingdom Issuers. Investment in securities of United Kingdom
issuers involves certain considerations not present with investment in
securities of U.S. issuers. As with any investment not denominated in the U.S.
dollar, the U.S. dollar value of the Fund's investment denominated in the
British pound sterling will fluctuate with pound sterling--dollar exchange rate
movements. Between 1972, when the pound sterling was allowed to float against
other currencies, and the end of 1992, the pound sterling generally depreciated
against most major currencies, including the U.S. dollar. Between September and
December 1992, after the United Kingdom's exit from the Exchange Rate Mechanism
of the European Monetary System, the value of the pound sterling fell by almost
20% against the U.S. dollar. The pound sterling continued to fall in early 1993,
but recovered due to interest rate cuts throughout Europe and an upturn in the
economy of the United Kingdom. The average exchange rate of the U.S. dollar to
the pound sterling was 1.50 in 1993 and 1.56 in 1996. On September 30, 1997 the
U.S. dollar-pound sterling exchange rate was 1.61.
The United Kingdom's largest stock exchange is the London Stock Exchange, which
is the third largest exchange in the world. As measured by the FT-SE 100 index,
the performance of the 100 largest companies in the United Kingdom reached
4118.5 at the end of 1996, up approximately 12% from the end of 1995. On
September 30, 1997 the FT-SE 100 index closed at 5,244.2, up approximately 27%
from the end of 1996.
The public sector borrowing requirement, a mandated measure of the amount
required to balance the budget, has been, over the last two fiscal years, higher
than forecast. The general government fiscal deficit has been in excess of the
eligibility limit prescribed by the European Union for countries that intend to
participate in the Economic and Monetary Union ("EMU"), which is scheduled to
take effect in January 1999. The government, however, expects that the deficit
will drop below that limit during calendar year 1997 and will continue to drop
in the 1997-98 and 1998-99 fiscal years. Although the government has not yet
made a formal announcement with respect to the United Kingdom's participation in
the EMU, remarks of the Chancellor of the Exchequer made in mid-October 1997
suggest that the United Kingdom will not participate in the EMU beginning in
January 1999 but may do so thereafter.
From 1979 until 1997 the Conservative Party controlled Parliament. In the May 1,
1997 general elections, however, the Labour Party, led by Tony Blair, won a
majority in Parliament, holding 418 of 658 seats in the House of Commons. Mr.
Blair, who was appointed Prime Minister, has launched a number of reform
initiatives, including an overhaul of the monetary policy framework intended to
protect monetary policy from political forces by vesting responsibility for
setting interest rates in a new Monetary Policy Committee headed by the Governor
of the Bank of England, as opposed to the Treasury. Prime Minister Blair has
also undertaken a comprehensive restructuring of the regulation of the financial
services industry. For further information regarding the United Kingdom, see the
Statement of Additional Information of New Europe Fund.
Investment in Japanese Issuers. Investment in securities of Japanese issuers
involves certain considerations not present with investment in securities of
U.S. issuers. As with any investment not denominated in the U.S. dollar, the
U.S. dollar value of each Fund's investments denominated in the Japanese yen
will fluctuate with yen-dollar exchange rate movements. Between 1985 and 1995,
the Japanese yen generally appreciated against the U.S. dollar, but has fallen
from its post-World War II high (in 1995) against the U.S. dollar.
31
Japan's largest stock exchange is the Tokyo Stock Exchange, the First Section of
which is reserved for larger, established companies. As measured by the TOPIX, a
capitalization-weighted composite index of all common stocks listed in the First
Section, the performance of the First Section reached a peak in 1989.
Thereafter, the TOPIX declined approximately 50% through the end of 1993. In
1994, the TOPIX closed at 1,559.09, up approximately 8% from the end of 1993; in
1995, the TOPIX closed at 1,577.70, up approximately 1% from the end of 1994;
and in 1996, the TOPIX closed at 1,470.94, down approximately 7% from the end of
1995. On September 30, 1997, the TOPIX closed at 1,388.32, down 5.6% from the
end of 1996. Certain valuation measures, such as price-to-book value and
price-to-cash flow ratios, indicate that the Japanese stock market is near its
lowest level in the last twenty years relative to other world markets. The
price/earnings ratios of First Section companies, however, are on average high
in comparison with other major stock markets.
In recent years, Japan has consistently recorded large current account trade
surpluses with the U.S. that have caused difficulties in the relations between
the two countries. On October 1, 1994, the U.S. and Japan reached an agreement
that may lead to more open Japanese markets with respect to trade in certain
goods and services. In June 1995, the two countries agreed in principle to
increase Japanese imports of American automobiles and automotive parts.
Nevertheless it is expected that the continuing friction between the U.S. and
Japan with respect to trade issues will continue for the foreseeable future.
Each Fund's investments in Japanese issuers will be subject to uncertainty
resulting from the instability of recent Japanese ruling coalitions. From 1955
to 1993, Japan's government was controlled by a single political party. Between
August 1993 and October 1996 Japan was ruled by a series of four coalition
governments. As the result of a general election on October 20, 1996, however,
Japan has returned to a single-party government led by Prime Minister Ryutaro
Hashimoto. While Mr. Hashimoto's party does not control a majority of the seats
in the parliament it is only three seats short of the 251 seats required to
attain a majority in the House of Representatives (down from a 12-seat shortfall
just after the October 1996 election). For further information regarding Japan,
see the Statements of Additional Information for All-Asia Investment Fund and
International Fund.
Investment in Smaller, Emerging Companies. The Funds may invest in smaller,
emerging companies. Global Small Cap Fund and New Europe Fund will emphasize
investment in, and All-Asia Investment Fund may emphasize investment in,
smaller, emerging companies. Investment in such companies involves greater risks
than is customarily associated with securities of more established companies.
The securities of smaller companies may have relatively limited marketability
and may be subject to more abrupt or erratic market movements than securities of
larger companies or broad market indices.
The Real Estate Industry. Although Real Estate Investment Fund does not invest
directly in real estate, it does invest primarily in Real Estate Equity
Securities and does have a policy of concentration of its investments in the
real estate industry.
Therefore, an investment in the Fund is subject to certain risks associated with
the direct ownership of real estate and with the real estate industry in
general. These risks include, among others: possible declines in the value of
real estate; risks related to general and local economic conditions; possible
lack of availability of mortgage funds; overbuilding; extended vacancies of
properties; increases in competition, property taxes and operating expenses;
changes in zoning laws; costs resulting from the clean-up of, and liability to
third parties for damages resulting from, environmental problems; casualty or
condemnation losses; uninsured damages from floods, earthquakes or other natural
disasters; limitations on and variations in rents; and changes in interest
rates. To the extent that assets underlying the Fund's investments are
concentrated geographically, by property type or in certain other respects, the
Fund may be subject to certain of the foregoing risks to a greater extent.
In addition, if Real Estate Investment Fund receives rental income or income
from the disposition of real property acquired as a result of a default on
securities the Fund owns, the receipt of such income may adversely affect the
Fund's ability to retain its tax status as a regulated investment company. See
"Dividends, Distributions and Taxes" in the Statement of Additional Information.
Investments by the Fund in securities of companies providing mortgage servicing
will be subject to the risks associated with refinancings and their impact on
servicing rights.
REITs. Investing in REITs involves certain unique risks in addition to those
risks associated with investing in the real estate industry in general. Equity
REITs may be affected by changes in the value of the underlying property owned
by the REITs, while mortgage REITs may be affected by the quality of any credit
extended. REITs are dependent upon management skills, are not diversified, are
subject to heavy cash flow dependency, default by borrowers and
self-liquidation. REITs are also subject to the possibilities of failing to
qualify for tax free pass-through of income under the Code and failing to
maintain their exemptions from registration under the 1940 Act.
REITs (especially mortgage REITs) are also subject to interest rate risks. When
interest rates decline, the value of a REIT's investment in fixed rate
obligations can be expected to rise. Conversely, when interest rates rise, the
value of a REIT's investment in fixed rate obligations can be expected to
decline. In contrast, as interest rates on adjustable rate mortgage loans are
reset periodically, yields on a REIT's investments in such loans will gradually
align themselves to reflect changes in market interest rates, causing the value
of such investments to fluctuate less dramatically in response to interest rate
fluctuations than would investments in fixed rate obligations.
Investing in REITs involves risks similar to those associated with investing in
small capitalization companies. REITs may have limited financial resources, may
trade less frequently and in a limited volume and may be subject to more abrupt
or erratic price movements than larger company securities. Historically, small
capitalization stocks, such as REITs, have been more volatile in price than the
larger capitalization stocks included in the S&P Index of 500 Common Stocks.
32
Mortgage-Backed Securities. As discussed above, investing in Mortgage-Backed
Securities involves certain unique risks in addition to those risks associated
with investment in the real estate industry in general. These risks include the
failure of a counterparty to meet its commitments, adverse interest rate changes
and the effects of prepayments on mortgage cash flows. When interest rates
decline, the value of an investment in fixed rate obligations can be expected to
rise. Conversely, when interest rates rise, the value of an investment in fixed
rate obligations can be expected to decline. In contrast, as interest rates on
adjustable rate mortgage loans are reset periodically, yields on investments in
such loans will gradually align themselves to reflect changes in market interest
rates, causing the value of such investments to fluctuate less dramatically in
response to interest rate fluctuations than would investments in fixed rate
obligations.
Further, the yield characteristics of Mortgage-Backed Securities, such as those
in which Real Estate Investment Fund may invest, differ from those of
traditional fixed-income securities. The major differences typically include
more frequent interest and principal payments (usually monthly), the
adjustability of interest rates, and the possibility that prepayments of
principal may be made substantially earlier than their final distribution dates.
Prepayment rates are influenced by changes in current interest rates and a
variety of economic, geographic, social and other factors, and cannot be
predicted with certainty. Both adjustable rate mortgage loans and fixed rate
mortgage loans may be subject to a greater rate of principal prepayments in a
declining interest rate environment and to a lesser rate of principal
prepayments in an increasing interest rate environment. Early payment associated
with Mortgage-Backed Securities causes these securities to experience
significantly greater price and yield volatility than that experienced by
traditional fixed-income securities. Under certain interest rate and prepayment
rate scenarios, the Fund may fail to recoup fully its investment in
Mortgage-Backed Securities notwithstanding any direct or indirect governmental
or agency guarantee. When the Fund reinvests amounts representing payments and
unscheduled prepayments of principal, it may receive a rate of interest that is
lower than the rate on existing adjustable rate mortgage pass-through
securities. Thus, Mortgage-Backed Securities, and adjustable rate mortgage
pass-through securities in particular, may be less effective than other types of
U.S. Government securities as a means of "locking in" interest rates.
U.S. and Foreign Taxes. A Fund's investment in foreign securities may be subject
to taxes withheld at the source on dividend or interest payments. Foreign taxes
paid by a Fund may be creditable or deductible by U.S. shareholders for U.S.
income tax purposes. No assurance can be given that applicable tax laws and
interpretations will not change in the future. Moreover, non-U.S. investors may
not be able to credit or deduct such foreign taxes. Investors should review
carefully the information discussed under the heading "Dividends, Distributions
and Taxes" and should discuss with their tax advisers the specific tax
consequences of investing in a Fund.
Fixed-Income Securities. The value of each Fund's shares will fluctuate with the
value of its investments. The value of each Fund's investments in fixed-income
securities will change as the general level of interest rates fluctuates. During
periods of falling interest rates, the values of fixed-income securities
generally rise. Conversely, during periods of rising interest rates, the values
of fixed-income securities generally decline.
Under normal market conditions, the average dollar-weighted maturity of a Fund's
portfolio of debt or other fixed-income securities is expected to vary between
five and 30 years in the case of All-Asia Investment Fund, between eight and 15
years in the case of Income Builder Fund, between five and 25 years in the case
of Utility Income Fund and between one year or less and 30 years in the case of
all other Funds that invest in such securities. In periods of increasing
interest rates, each of the Funds may, to the extent it holds mortgage-backed
securities, be subject to the risk that the average dollar-weighted maturity of
the Fund's portfolio of debt or other fixed-income securities may be extended as
a result of lower than anticipated prepayment rates. See "Additional Investment
Practices--Mortgage-Backed Securities."
Securities Ratings. The ratings of securities by S&P, Moody's, Duff & Phelps and
Fitch are a generally accepted barometer of credit risk. They are, however,
subject to certain limitations from an investor's standpoint. The rating of an
issuer is heavily weighted by past developments and does not necessarily reflect
probable future conditions. There is frequently a lag between the time a rating
is assigned and the time it is updated. In addition, there may be varying
degrees of difference in credit risk of securities within each rating category.
Securities rated Aaa by Moody's and AAA by S&P, Duff & Phelps and Fitch are
considered to be of the highest quality; capacity to pay interest and repay
principal is extremely strong. Securities rated Aa by Moody's and AA by S&P,
Duff & Phelps and Fitch are considered to be high quality; capacity to repay
principal is considered very strong, although elements may exist that make risks
appear somewhat larger than exist with securities rated Aaa or AAA. Securities
rated A are considered by Moody's to possess adequate factors giving security to
principal and interest. S&P, Duff & Phelps and Fitch consider such securities to
have a strong capacity to pay interest and repay principal. Such securities are
more susceptible to adverse changes in economic conditions and circumstances
than higher-rated securities.
Securities rated Baa by Moody's and BBB by S&P, Duff & Phelps and Fitch are
considered to have an adequate capacity to pay interest and repay principal.
Such securities are considered to have speculative characteristics and share
some of the same characteristics as lower-rated securities. Sustained periods of
deteriorating economic conditions or of rising interest rates are more likely to
lead to a weakening in the issuer's capacity to pay interest and repay principal
than in the case of higher-rated securities. Securities rated Ba by Moody's and
BB by S&P, Duff & Phelps and Fitch are considered to have speculative
characteristics with respect to
33
capacity to pay interest and repay principal over time; their future cannot be
considered as well-assured. Securities rated B by Moody's, S&P, Duff & Phelps
and Fitch are considered to have highly speculative characteristics with respect
to capacity to pay interest and repay principal. Assurance of interest and
principal payments or of maintenance of other terms of the contract over any
long period of time may be small.
Securities rated Caa by Moody's and CCC by S&P, Duff & Phelps and Fitch are of
poor standing and there is a present danger with respect to payment of principal
or interest. Securities rated Ca by Moody's and CC by S&P and Fitch are
minimally protected, and default in payment of principal or interest is
probable. Securities rated C by Moody's, S&P and Fitch are in imminent default
in payment of principal or interest and have extremely poor prospects of ever
attaining any real investment standing. Securities rated D by S&P and Fitch are
in default. The issuer of securities rated DD by Duff & Phelps is under an order
of liquidation.
Investment in Lower-Rated Fixed-Income Securities. Lower-rated securities, i.e.,
those rated Ba and lower by Moody's or BB and lower by S&P, Duff & Phelps or
Fitch, are subject to greater risk of loss of principal and interest than
higher-rated securities. They are also generally considered to be subject to
greater market risk than higher-rated securities, and the capacity of issuers of
lower-rated securities to pay interest and repay principal is more likely to
weaken than is that of issuers of higher-rated securities in times of
deteriorating economic conditions or rising interest rates. In addition,
lower-rated securities may be more susceptible to real or perceived adverse
economic conditions than investment grade securities.
The market for lower-rated securities may be thinner and less active than that
for higher-rated securities, which can adversely affect the prices at which
these securities can be sold. To the extent that there is no established
secondary market for lower-rated securities, a Fund may experience difficulty in
valuing such securities and, in turn, the Fund's assets. In addition, adverse
publicity and investor perceptions about lower-rated securities, whether or not
factual, may tend to impair their market value and liquidity.
Alliance will try to reduce the risk inherent in investment in lower-rated
securities through credit analysis, diversification and attention to current
developments and trends in interest rates and economic and political conditions.
However, there can be no assurance that losses will not occur. Since the risk of
default is higher for lower-rated securities, Alliance's research and credit
analysis are a correspondingly more important aspect of its program for managing
a Fund's securities than would be the case if a Fund did not invest in
lower-rated securities.
In seeking to achieve a Fund's investment objective, there will be times, such
as during periods of rising interest rates, when depreciation and realization of
capital losses on securities in a Fund's portfolio will be unavoidable.
Moreover, medium- and lower-rated securities and non-rated securities of
comparable quality may be subject to wider fluctuations in yield and market
values than higher-rated securities under certain market conditions. Such
fluctuations after a security is acquired do not affect the cash income received
from that security but are reflected in the net asset value of a Fund. See the
Statement of Additional Information for each Fund that invests in lower-rated
securities for a description of the bond ratings of Moody's, S&P, Duff & Phelps
and Fitch.
Certain lower-rated securities in which Growth Fund, Income Builder Fund,
Strategic Balanced Fund and Utility Income Fund may invest may contain call or
buy-back features that permit the issuers thereof to call or repurchase such
securities. Such securities may present risks based on prepayment expectations.
If an issuer exercises such a provision, a Fund may have to replace the called
security with a lower yielding security, resulting in a decreased rate of return
to the Fund.
Non-Diversified Status. Each of Worldwide Privatization Fund, New Europe Fund,
All-Asia Investment Fund and Income Builder Fund is a "non-diversified"
investment company, which means the Fund is not limited in the proportion of its
assets that may be invested in the securities of a single issuer. However, each
Fund intends to conduct its operations so as to qualify to be taxed as a
"regulated investment company" for purposes of the Code, which will relieve the
Fund of any liability for federal income tax to the extent its earnings are
distributed to shareholders. See "Dividends, Distributions and Taxes" in each
Fund's Statement of Additional Information. To so qualify, among other
requirements, the Fund will limit its investments so that, at the close of each
quarter of the taxable year, (i) not more than 25% of the Fund's total assets
will be invested in the securities of a single issuer, and (ii) with respect to
50% of its total assets, not more than 5% of its total assets will be invested
in the securities of a single issuer and the Fund will not own more than 10% of
the outstanding voting securities of a single issuer. A Fund's investments in
U.S. Government securities and other regulated investment companies are not
subject to these limitations. Because each of Worldwide Privatization Fund, New
Europe Fund, All-Asia Investment Fund and Income Builder Fund is a
non-diversified investment company, it may invest in a smaller number of
individual issuers than a diversified investment company, and an investment in
such Fund may, under certain circumstances, present greater risk to an investor
than an investment in a diversified investment company.
Foreign government securities are not treated like U.S. Government securities
for purposes of the diversification tests described in the preceding paragraph,
but instead are subject to these tests in the same manner as the securities of
non-governmental issuers.
34
--------------------------------------------------------------------------------
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,
(ii) through a self-directed defined contribution employee benefit plan (e.g., a
401(k) plan) that has at least 1,000 participants or $25 million in assets,
(iii) by investment advisory clients of, and certain other persons associated
with, Alliance and its affiliates or the Funds, and (iv) through registered
investment advisers or other financial intermediaries who charge a management,
consulting or other fee for their service and who purchase shares through a
broker or agent approved by AFD and clients of such registered investment
advisers or financial intermediaries whose accounts are linked to the master
account of such investment adviser or financial intermediary on the books of
such approved broker or agent. For more detailed information about who may
purchase and hold Advisor Class shares see the Statements of Additional
Information. A shareholder's Advisor Class shares will automatically convert to
Class A shares of the same Fund under certain circumstances. For a more detailed
description of the conversion feature and Class A shares, see "Conversion
Feature."
Generally, a fee-based program must charge an asset-based or other similar fee
and must invest at least $250,000 in Advisor Class shares of each Fund in which
the program invests in order to be approved by AFD for investment in Advisor
Class shares. Share certificates are issued only upon request. See the
Subscription Application and the Statements of Additional Information for more
information.
The Funds may refuse any order to purchase Advisor Class shares. In this regard,
the Funds reserve the right to restrict purchases of Advisor Class shares
(including through exchanges) when there appears to be evidence of a pattern of
frequent purchases and sales made in response to short-term considerations.
How the Funds Value Their Shares
The net asset value of Advisor Class shares of a Fund is calculated by dividing
the value of the Fund's net assets allocable to the Advisor Class by the
outstanding shares of the Advisor Class. Shares are valued each day the New York
Stock Exchange (the "Exchange") is open as of the close of regular trading
(currently 4:00 p.m. Eastern time). The securities in a Fund are valued at their
current market value determined on the basis of market quotations or, if such
quotations are not readily available, such other methods as the Fund's Directors
believe accurately reflects fair market value.
HOW TO SELL SHARES
You may "redeem," i.e., sell your shares in a Fund to the Fund on any day the
Exchange is open, either directly or through your financial representative. The
price you will receive is the net asset value next calculated after the Fund
receives your request in proper form. Proceeds generally will be sent to you
within seven days. However, for shares recently purchased by check or electronic
funds transfer, a Fund will not send proceeds until it is reasonably satisfied
that the check or electronic funds transfer has been collected (which may take
up to 15 days). If you are in doubt about what documents are required by your
fee-based program or employee benefit plan, you should contact your financial
representative.
Selling Shares Through Your Financial Representative
Your financial representative must receive your request before 4:00 p.m. Eastern
time, and your financial representative must transmit your request to the Fund
by 5:00 p.m. Eastern time, for you to receive that day's net asset value. Your
financial representative is responsible for furnishing all necessary
documentation to a Fund and may charge you for this service.
Selling Shares Directly To A Fund
Send a signed letter of instruction or stock power form to AFS along with
certificates, if any, that represent the shares you want to sell. For your
protection, signatures must be guaranteed by a bank, a member firm of a national
stock exchange or other eligible guarantor institution. Stock power forms are
available from your financial representative, AFS, and many commercial banks.
Additional documentation is required for the sale of shares by corporations,
intermediaries, fiduciaries and surviving joint owners. For details contact:
Alliance Fund Services
P.O. Box 1520
Secaucus, NJ 07096-1520
1-800-221-5672
Alternatively, a request for redemption of shares for which no stock
certificates have been issued can also be made by telephone to 800-221-5672.
Telephone redemption requests must be made by 4 p.m. Eastern time on a Fund
business day in order to receive that day's net asset value, and, except for
certain omnibus accounts, may be made only once in any 30-day period. A
shareholder who has completed the Telephone Transactions section of the
Subscription Application, or the Shareholder Options form obtained from AFS, can
elect to have the proceeds of his or her redemption sent to his or her bank via
an electronic funds transfer. Proceeds of telephone redemptions also may be sent
by check to a shareholder's address of record. Except for certain omnibus
accounts, redemption requests by electronic funds transfer may not exceed
$100,000 and redemption requests by check may not exceed $50,000. Telephone
redemption is not available for
35
shares held in nominee or "street name" accounts or retirement plan accounts or
shares held by a shareholder who has changed his or her address of record within
the previous 30 calendar days.
General
The sale of shares is a taxable transaction for federal tax purposes. Under
unusual circumstances, a Fund may suspend redemptions or postpone payment for up
to seven days or longer, as permitted by federal securities law. The Funds
reserve the right to close an account that through redemption has remained below
$200 for 90 days. Shareholders will receive 60 days' written notice to increase
the account value before the account is closed.
During drastic economic or market developments, you might have difficulty
reaching AFS by telephone, in which event you should issue written instructions
to AFS. AFS is not responsible for the authenticity of telephonic requests to
purchase, sell or exchange shares. AFS will employ reasonable procedures to
verify that telephone requests are genuine, and could be liable for losses
resulting from unauthorized transactions if it failed to do so. Dealers and
agents may charge a commission for handling telephonic requests. The telephone
service may be suspended or terminated at any time without notice.
SHAREHOLDER SERVICES
AFS offers a variety of shareholder services. For more information about these
services or your account, call AFS's toll-free number, 800-221-5672.
HOW TO EXCHANGE SHARES
You may exchange your Advisor Class shares of any Fund for Advisor Class shares
of other Alliance Mutual Funds (including AFD Exchange Reserves, a money market
fund managed by Alliance). Exchanges of shares are made at the net asset value
next determined and without sales or service charges. Exchanges may be made by
telephone or written request. Telephone exchange requests must be received by
AFS by 4:00 p.m. Eastern time on a Fund business day in order to receive that
day's net asset value. Please read carefully the prospectus of the mutual fund
into which you are exchanging before submitting the request. Call AFS at
800-221-5672 to exchange uncertificated shares. An exchange is a taxable capital
transaction for federal tax purposes. The exchange service may be changed,
suspended, or terminated on 60 days' written notice.
GENERAL
If you are a Fund shareholder through an account established under a fee-based
program, your fee-based program may impose requirements with respect to the
purchase, sale or exchange of Advisor Class shares of a Fund that are different
from those described in this Prospectus. A transaction, service, administrative
or other similar fee may be charged by your broker-dealer, agent, financial
intermediary or other financial representative with respect to the purchase,
sale or exchange of Advisor Class shares made through such financial
representative. Such financial intermediaries may also impose requirements with
respect to the purchase, sale or exchange of shares that are different from, or
in addition to, those imposed by a Fund, including requirements as to the
minimum initial and subsequent investment amounts.
Each Fund offers three classes of shares other than the Advisor Class, which are
Class A, Class B and Class C. All classes of shares of a Fund have a common
investment objective and investment portfolio. Class A shares are offered with
an initial sales charge and pay a distribution services fee. Class B shares have
a contingent deferred sales charge (a "CDSC") and also pay a distribution
services fee. Class C shares have no initial sales charge or CDSC as long as
they are not redeemed within one year of purchase, but pay a distribution
services fee. Because Advisor Class shares have no initial sales charge or CDSC
and pay no distribution services fee, Advisor Class shares are expected to have
different performance from Class A, Class B or Class C shares. You can obtain
more information about Class A, Class B and Class C shares, which are not
offered by this Prospectus, by contacting AFS by telephone at 1-800-221-5672 or
by contacting your financial representative.
-------------------------------------------------------------------------------
MANAGEMENT OF THE FUNDS
-------------------------------------------------------------------------------
ADVISER
Alliance, which is a Delaware limited partnership with principal offices at 1345
Avenue of the Americas, New York, New York 10105, has been retained under an
advisory agreement (the "Advisory Agreement") to provide investment advice and,
in general, to conduct the management and investment program of each Fund,
subject to the general supervision and control of the Directors of the Fund.
The following table lists the person or persons who are primarily responsible
for the day-to-day management of each Fund's portfolio, the length of time that
each person has been primarily responsible, and each person's principal
occupation during the past five years.
36
Principal occupation
during the past
Fund Employee; year; title five years
--------------------------------------------------------------------------------
The Alliance Fund Alden M. Stewart since 1997-- Associated with
Executive Vice President of Alliance since
Alliance Capital Management 1993; prior
Corporation ("ACMC")* thereto,
associated with
Equitable Capital
Management
Corporation
("Equitable
Capital")**
Randall E. Haase since 1997-- Associated with
Senior Vice President of ACMC Alliance since July
1993; prior
thereto,
associated with
Equitable Capital
Growth Fund Tyler Smith since inception-- Associated with
Senior Vice President of ACMC Alliance since
July 1993; prior
thereto,
associated with
Equitable Capital
Premier Growth Fund Alfred Harrison since inception-- Associated with
Vice Chairman of ACMC Alliance
Technology Fund Peter Anastos since 1992-- Associated with
Senior Vice President of ACMC Alliance
Gerald T. Malone since 1992-- Associated with
Senior Vice President of ACMC Alliance since
1992; prior
thereto
associated with
College
Retirement
Equities Fund
Quasar Fund Alden M. Stewart since 1994-- (see above)
(see above)
Randall E. Haase since 1994-- (see above)
(see above)
International Fund A. Rama Krishna since 1993-- Associated with
Senior Vice President of ACMC Alliance since
and director of Asian Equity 1993, prior
research thereto,
Chief Investment
Strategist and
Director--Equity
Research for CS
First Boston
Worldwide Mark H. Breedon since inception-- Associated with
Privatization Senior Vice President of ACMC Alliance
and Director and Vice President
of Alliance Capital Limited ***
New Europe Fund Steven Beinhacker-- Associated with
Vice President of ACMC Alliance
All-Asia Investment A. Rama Krishna since inception-- (see above)
Fund (see above)
Global Small Cap Alden M. Stewart since 1994-- (see above)
Fund (see above)
Randall E. Haase since 1994-- (see above)
(see above)
Ronald L. Simcoe since 1993-- Associated with
Vice President of ACMC Alliance since
1993; prior thereto,
associated with
Equitable Capital
Strategic Balanced Nicholas D.P. Carn Associated with
Fund Vice President of ACMC Alliance since
1997; prior
thereto, Chief
Investment
Officer and
Portfolio Manager
at Draycott
Partners
Balanced Shares Paul Rissman since 1997-- Associated with
Senior Vice President of ACMC Alliance
Income Builder Fund Andrew M. Aran since 1994-- Associated with
Senior Vice President of ACMC Alliance
Thomas M. Perkins since 1991-- Associated with
Senior Vice President of ACMC Alliance
Vita Marie Pike since 1997-- Associated with
Vice President of ACMC Alliance
Corinne Molof Hill since 1997-- Associated with
Vice President of ACMC Alliance
Utility Income Fund Paul Rissman since 1996-- Associated with
(see above) Alliance
Growth & Income Paul Rissman since 1994-- Associated with
Fund (see above) Alliance
Real Estate Daniel G. Pine since 1996 Associated with
Investment Fund Senior Vice President Alliance since
of ACMC 1996; prior
thereto, Senior
Vice President of
Desai Capital
Management
David Kruth since 1997-- Associated with
Vice President of ACMC Alliance since
1997; prior
thereto Senior
Vice President of
the Yarmouth
Group
----------
* The sole general partner of Alliance.
** Equitable Capital was, prior to Alliance's acquisition of it, a management
firm under common control with Alliance.
*** An indirect wholly-owned subsidiary of Alliance.
Alliance is a leading international investment manager supervising client
accounts with assets as of June 30, 1997 totaling more than $199 billion (of
which approximately $71 billion represented the assets of investment companies).
Alliance's clients are primarily major corporate employee benefit funds, public
employee retirement systems, investment companies, foundations and endowment
funds. The 54 registered investment companies managed by Alliance comprising 116
separate investment portfolios currently have over two million shareholders. As
of June 30, 1997, Alliance was an investment manager of employee benefit plan
assets for 29 of the Fortune 100 companies.
ACMC, the sole general partner of, and the owner of a 1% general partnership
interest in, Alliance, is an indirect wholly-owned subsidiary of The Equitable
Life Assurance Society of the United States ("Equitable"), one of the largest
life insurance companies in the United States, which is a wholly-owned
subsidiary of The Equitable Companies Incorporated, a holding
37
company controlled by AXA-UAP, a French insurance holding company. Certain
information concerning the ownership and control of Equitable by AXA-UAP is set
forth in each Fund's Statement of Additional Information under "Management of
the Funds."
Performance of Similarly Managed Portfolios. In addition to managing the assets
of Premier Growth Fund, Mr. Harrison has ultimate responsibility for the
management of 35 portfolios of discretionary tax-exempt accounts of
institutional clients managed as described below without significant
client-imposed restrictions ("Historical Portfolios"). These accounts have
substantially the same investment objectives and policies and are managed in
accordance with essentially the same investment strategies and techniques as
those for Premier Growth Fund, except for the ability of Premier Growth Fund to
use futures and options as hedging tools and to invest in warrants. The
Historical Portfolios are also not subject to certain limitations,
diversification requirements and other restrictions to which Premier Growth
Fund, as a registered investment company, is subject and which if applicable to
the Historical Portfolios, may have adversely affected the performance results
of the Historical Portfolios. See "Investment Objective and Policies."
Set forth below is performance data provided by Alliance relating to the
Historical Portfolios for each of the eighteen full calendar years during which
Mr. Harrison has managed the Historical Portfolios and cumulatively through
September 30, 1997. As of September 30, 1997, the assets in the Historical
Portfolios totaled approximately $12.4 billion and the average size of an
institutional account in the Historical Portfolio was $355 million. Each
Historical Portfolio has a nearly identical composition of individual investment
holdings and related percentage weightings.
The performance data is gross of advisory fees charged to those accounts. Total
returns would be lower if advisory fees had been taken into account. The
performance data includes the cost of brokerage commissions, but excludes
custodial fees, transfer agency costs and other administrative expenses that
will be payable by Premier Growth Fund and will result in a higher expense ratio
for Premier Growth Fund. Expenses associated with the distribution of Class A,
Class B and Class C shares of Premier Growth Fund in accordance with the plan
adopted by Premier Growth Fund's Board of Directors pursuant to Rule 12b-1 of
the 1940 Act ("distribution fees") are also excluded. See "Expense Information."
The performance data has also not been adjusted for corporate or individual
taxes, if any, payable by the account owners.
Alliance has calculated the investment performance of the Historical Portfolios
on a trade-date basis. Dividends have been accrued at the end of the month and
cash flows weighted daily. Composite investment performance for all portfolios
has been determined on an asset-weighted basis. New accounts are included in the
composite investment performance computations at the beginning of the quarter
following the initial contribution. The composite total returns set forth below
are calculated using a method that links the monthly return amounts for the
disclosed periods, resulting in a time-weighted rate of return.
As reflected below, the Historical Portfolios have over time performed favorably
when compared with the performance of recognized performance indices. The S&P
500 Index is a widely recognized, unmanaged index of market activity based upon
the aggregate performance of a selected portfolio of publicly traded common
stocks, including monthly adjustments to reflect the reinvestment of dividends
and other distributions. The S&P 500 Index reflects the total return of
securities comprising the Index, including changes in market prices as well as
accrued investment income, which is presumed to be reinvested. The Russell 1000
universe of securities is compiled by Frank Russell Company and is segmented
into two style indices, based on the capitalization-weighted median
book-to-price ratio of each of the securities. At each reconstitution, the
Russell 1000 constituents are ranked by their book-to-price ratio. Once so
ranked, the breakpoint for the two styles is determined by the median market
capitalization of the Russell 1000. Thus, those securities falling within the
top fifty percent of the cumulative market capitalization (as ranked by
descending book-to-price) become members of the Russell Price-Driven Indices.
The Russell 1000 Growth Index is, accordingly, designed to include those Russell
1000 securities with a greater-than-average growth orientation. In contrast with
the securities in the Russell Price-Driven Indices, companies in the Growth
Index tend to exhibit higher price-to-book and price-earnings ratios, lower
dividend yield and higher forecasted growth values.
To the extent Premier Growth Fund does not invest in U.S. common stocks or
utilizes investment techniques such as futures or options, the S&P 500 and
Russell 1000 Growth Index may not be substantially comparable to Premier Growth
Fund. The S&P 500 and Russell 1000 Growth Index are included to illustrate
material economic and market factors that existed during the time period shown.
The S&P 500 and Russell 1000 Growth Index do not reflect the deduction of any
fees. If Premier Growth Fund were to purchase a portfolio of securities
substantially identical to the securities comprising the S&P 500 Index or the
Russell 1000 Growth Index, Premier Growth Fund's performance relative to the
index would be reduced by Premier Growth Fund's expenses, including brokerage
commissions, advisory fees, distribution fees, custodial fees, transfer agency
costs and other administrative expenses as well as by the impact on Premier
Growth Fund's shareholders of sales charges and income taxes.
The Lipper Growth Fund Index is prepared by Lipper Analytical Services, Inc. and
represents a composite index of the investment performance for the 30 largest
growth mutual funds. The composite investment performance of the Lipper Growth
Fund Index reflects investment management and administrative fees and other
operating expenses paid by these mutual funds and reinvested income dividends
and capital gain distributions, but excludes the impact of any income taxes and
sales charges.
38
The following performance data is provided solely to illustrate Mr. Harrison's
performance in managing the Historical Portfolios as measured against certain
broad based market indices and against the composite performance of other
open-end growth mutual funds. Investors should not rely on the following
performance data of the Historical Portfolios as an indication of future
performance of Premier Growth Fund. The composite investment performance for the
periods presented may not be indicative of future rates of return. Other methods
of computing investment performance may produce different results, and the
results for different periods may vary.
Schedule of Composite Investment Performance--Historical Portfolios
[Download Table]
Russell Lipper
Historical S&P 500 1000 Growth
Portfolios Index Growth Index Fund Index
Total Return Total Return Total Return Total Return
------------ ------------ ------------ ------------
Year ended:
December 31, 1996 ... 23.22 22.96 23.12 17.48
December 31, 1995** . 41.12 37.58 37.19 32.65
December 31, 1994 ... (3.83) 1.32 2.66 (1.57)
December 31, 1993 ... 11.62 10.08 2.90 11.98
December 31, 1992 ... 13.27 7.62 5.00 7.63
December 31, 1991 ... 40.19 30.47 41.16 35.20
December 31, 1990 ... (0.57) (3.10) (0.26) (5.00)
December 31, 1989 ... 40.08 31.69 35.92 28.60
December 31, 1988 ... 11.96 16.61 11.27 15.80
December 31, 1987 ... 9.57 5.25 5.31 1.00
December 31, 1986 ... 28.60 18.67 15.36 15.90
December 31, 1985 ... 38.68 31.73 32.85 30.30
December 31, 1984 ... (2.33) 6.27 (.95) (2.80)
December 31, 1983 ... 21.95 22.56 15.98 22.30
December 31, 1982 ... 29.23 21.55 20.46 20.20
December 31, 1981 ... (0.10) (4.92) (11.31) (8.40)
December 31, 1980 ... 52.10 32.50 39.57 37.30
December 31, 1979 ... 31.99 18.61 23.91 27.40
Cumulative total return
for the period
January 1, 1979 to
September 30, 1997 ... 3748.17 1888.65 1656.41 1772.84
----------
* Total return is a measure of investment performance that is based upon the
change in value of an investment from the beginning to the end of a
specified period and assumes reinvestment of all dividends and other
distributions. The basis of preparation of this data is described in the
preceding discussion.
** During this period, the Historical Portfolios differed from Premier Growth
Fund in that Premier Growth Fund invested a portion (4.54%) of its net
assets in warrants on equity securities in which the Historical Portfolios
were unable, by their investment restrictions, to purchase. In lieu of
warrants, the Historical Portfolios acquired the common stock upon which
the warrants were based. During this period, Premier Growth Fund's total
return, at net asset value, was 46.87%.
The average annual total returns presented below are based upon the cumulative
total return as of September 30, 1997, and for more than one year assume a
steady compounded rate of return and are not year-by-year results, which
fluctuated over the periods as shown.
[Download Table]
Average Annual Total Returns
------------------------------------------------
Russell Lipper
Historical S&P 500 1000 Growth
Portfolios Index Growth Index Fund Index
---------- ----- ------------ ----------
Three years ............... 33.26 29.92 29.81 24.84
Five years ................ 22.99 20.77 19.66 18.62
Ten years ................. 17.03 14.75 14.66 13.19
Since January 1, 1979 ..... 21.07 11.69 16.51 16.18
ADMINISTRATOR TO ALL-ASIA INVESTMENT FUND
Alliance has been retained by All-Asia Investment Fund under an administration
agreement (the "Administration Agreement") to perform administrative services
necessary for the operation of the Fund. For a description of such services, see
the Statement of Additional Information of the Fund.
CONSULTANT TO ALLIANCE WITH RESPECT TO INVESTMENT IN REAL ESTATE SECURITIES
Alliance, with respect to investment in real estate securities, has retained as
a consultant CB Commercial Real Estate Group, Inc. ("CBC"), a publicly held
company and the largest real estate services company in the United States,
comprised of real estate brokerage, property and facilities management, and real
estate finance and investment advisory activities (CBC in August of 1997
acquired Koll, which previously provided these consulting services to Alliance).
In 1996, CBC (and Koll, on a combined basis) completed 25,000 sale and lease
transactions, managed over 4,100 client properties, created over $3.5 billion in
mortgage originations, and completed over 2,600 appraisal and consulting
assignments. In addition, they advised and managed for institutions over $4
billion in real estate investments. CBC will make available to Alliance the CBC
National Real Estate Index, which gathers, analyzes and publishes targeted
research data for the 65 largest U.S. markets, based on a variety of
public-sector and private-sector sources as well as CBC's proprietary database
of approximately 60,000 property transactions representing over $400 billion of
investment property. This information provides a substantial component of the
research and data used to create the REIT-Score model. As a consultant, CBC
provides to Alliance, at Alliance's expense, such in-depth information regarding
the real estate market, the factors influencing regional valuations and analysts
of recent transactions in office, retail, industrial and multi-family properties
as Alliance shall from time to time request. CBC will not furnish advice or make
recommendations regarding the pruchase or sale of securities by the Fund nor
will it be responsible for making investment decisions involving Fund assets.
CBC is one of the three largest fee-based property management firms in the
United States, the largest commercial real estate lease brokerage firm in the
country, the largest investment property brokerage firm in the country, as well
as one of the largest publishers of real estate research, with approximately
6,000 employees nationwide. CBC will privide Alliance with exclusive access to
its REIT-Score model which ranks approximately 130 REITs based on the relative
attractiveness of the property markets in which they own real estate. This model
scores the approximately 12,000 individual properties owned by these companies.
REIT-Score is in turn based on CBC's National Real Estate Index which gathers,
analyzes and publishes targeted research for the 65 largest U.S. real estate
markets based on a variety of public- and private-sector sources as well as
CBC's proprietary database of 60,000 commercial property transactions
representing over $400 billion of investment property and over 3,000 tracked
39
properties which report rent and expense data quarterly. CBC has previously
provided access to its REIT-Score model results primarily to the institutional
market through subscriptions. The model is no longer provided to any research
publications and the Fund is currently the only mutual fund available to retail
investors that has access to CBC's REIT-Score model.
DISTRIBUTION SERVICES AGREEMENTS
Each Fund has entered into a Distribution Services Agreement with AFD with
respect to the Advisor Class shares. The Glass-Steagall Act and other applicable
laws may limit the ability of a bank or other depository institution to become
an underwriter or distributor of securities. However, in the opinion of the
Funds' management, based on the advice of counsel, these laws do not prohibit
such depository institutions from providing services for investment companies
such as the administrative, accounting and other services referred to in the
Agreements. In the event that a change in these laws prevented a bank from
providing such services, it is expected that other service arrangements would be
made and that shareholders would not be adversely affected. The State of Texas
requires that shares of a Fund may be sold in that state only by dealers or
other financial institutions that are registered there as broker-dealers.
--------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS
--------------------------------------------------------------------------------
AND TAXES
--------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS
If you receive an income dividend or capital gains distribution in cash you may,
within 120 days following the date of its payment, reinvest the dividend or
distribution in additional shares of that Fund without charge by returning to
Alliance, with appropriate instructions, the check representing such dividend or
distribution. Thereafter, unless you otherwise specify, you will be deemed to
have elected to reinvest all subsequent dividends and distributions in shares of
that Fund.
Each income dividend and capital gains distribution, if any, declared by a Fund
on its outstanding shares will, at the election of each shareholder, be paid in
cash or in additional shares of the same class of shares of that Fund having an
aggregate net asset value as of the payment date of such dividend or
distribution equal to the cash amount of such income dividend or distribution.
Election to receive dividends and distributions in cash or shares is made at the
time shares are initially purchased and may be changed at any time prior to the
record date for a particular dividend or distribution. Cash dividends can be
paid by check or, if the shareholder so elects, electronically via the ACH
network. There is no sales or other charge in connection with the reinvestment
of dividends and capital gains distributions.
While it is the intention of each Fund to distribute to its shareholders
substantially all of each fiscal year's net income and net realized capital
gains, if any, the amount and time of any such dividend or distribution must
necessarily depend upon the realization by such Fund of income and capital gains
from investments. There is no fixed dividend rate, and there can be no assurance
that a Fund will pay any dividends or realize any capital gains. Since REITs pay
distributions based on cash flow, without regard to depreciation and
amortization, a portion of the distributions paid to Real Estate Investment Fund
and subsequently distributed to shareholders may be a nontaxable return of
capital. The final determination of the amount of a Fund's return of capital
distributions for the period will be made after the end of each calendar year.
If you buy shares just before a Fund deducts a distribution from its net asset
value, you will pay the full price for the shares and then receive a portion of
the price back as a taxable distribution.
FOREIGN INCOME TAXES
Investment income received by a Fund from sources within foreign countries may
be subject to foreign income taxes withheld at the source. To the extent that
any Fund is liable for foreign income taxes withheld at the source, each Fund
intends, if possible, to operate so as to meet the requirements of the Code to
"pass through" to the Fund's shareholders credits for foreign income taxes
paid (or to permit shareholders to claim a deduction for such foreign taxes),
but there can be no assurance that any Fund will be able to do so.
U.S. FEDERAL INCOME TAXES
Each Fund intends to qualify to be taxed as a "regulated investment company"
under the Code. To the extent that a Fund distributes its taxable income and net
capital gain to its shareholders, qualification as a regulated investment
company relieves that Fund of federal income taxes on that part of its taxable
income including net capital gains which it pays out to its shareholders.
Dividends out of net ordinary income and distributions of net short-term capital
gains are taxable to the recipient shareholders as ordinary income. In the case
of corporate shareholders, such dividends may be eligible for the
dividends-received deduction, except that the amount eligible for the deduction
is limited to the amount of qualifying dividends received by the Fund. Dividends
received from REITs generally do not constitute qualifying dividends. A
corporation's dividends-received deduction generally will be disallowed unless
the corporation holds shares in the Fund at least 46 days during the 90 day
period beginning 45 days before the date on which the corporation becomes
entitled to receive the dividend. Furthermore, the dividends-received deduction
will be disallowed to the extent a corporation's investment in shares of a Fund
is financed with indebtedness.
Distributions of net capital gains are not eligible for the dividends-received
deduction referred to above.
40
Pursuant to the Taxpayer Relief Act of 1997, two different tax rates apply to
net capital gains--that is, the excess of net gains from capital assets held for
more than one year over net losses from capital assets held for not more than
one year. One rate (generally 28%) applies to net gains on capital assets held
for more than one year but not more than 18 months ("mid-term gains"), and a
second rate (generally 20%) applies to the balance of such net capital gains
("adjusted net capital gains"). Distributions of mid-term gains and adjusted net
capital gains will be taxable to shareholders as such, regardless of how long a
shareholder has held shares in the Fund.
Distributions received by a shareholder of Real Estate Investment Fund may
include nontaxable returns of capital, which will reduce a shareholder's basis
in shares of the Fund. If that basis is reduced to zero (which could happen if
the shareholder does not reinvest distributions and returns of capital are
significant) any further returns of capital will be taxable as capital gain.
Under the current federal tax law, the amount of an income dividend or capital
gains distribution declared by a Fund during October, November or December of a
year to shareholders of record as of a specified date in such a month that is
paid during January of the following year is includable in the prior year's
taxable income of shareholders that are calendar year taxpayers.
Any dividend or distribution received by a shareholder on shares of a Fund will
have the effect of reducing the net asset value of such shares by the amount of
such dividend or although in effect a return of capital to that particular
shareholder, would be taxable to him or her as described above. If a shareholder
held shares six months or less and during that period received a distribution of
net capital gains, any loss realized on the sale of such shares during such
six-month period would be a long-term capital loss to the extent of such
distribution.
A dividend or capital gains distribution with respect to shares of a Fund held
by a tax-deferred or qualified plan, generally such as an individual retirement
account, 403(b)(7) retirement plan or corporate pension or profit-sharing plan,
will not be taxable to the plan. Distributions from such plans will be taxable
to individual participants under applicable tax rules without regard to the
character of the income earned by the qualified plan.
Distributions by a Fund may be subject to state and local taxes. Alliance Fund,
Premier Growth Fund, Technology Fund, Income Builder Fund, Quasar Fund, New
Europe Fund, Balanced Shares and Growth and Income Fund are qualified to do
business in the Commonwealth of Pennsylvania and, therefore, are subject to the
Pennsylvania foreign franchise and corporate net income tax in respect of their
business activities in Pennsylvania. Accordingly, shares of such Funds are
exempt from Pennsylvania personal property taxes. These Funds anticipate
continuing such business activities but reserve the right to suspend them at any
time, resulting in the termination of the exemptions.
A Fund will be required to withhold 31% of any payments made to a shareholder if
the shareholder has not provided a certified taxpayer identification number to
the Fund, or the Secretary of the Treasury notifies a Fund that a shareholder
has not reported all interest and dividend income required to be shown on the
shareholder's Federal income tax return.
Under certain circumstances, if a Fund realizes losses from fluctuations in
currency exchange rates after paying a dividend, all or a portion of the
dividend may subsequently be characterized as a return of capital. See
"Dividends, Distributions and Taxes" in the Statement of Additional Information.
Shareholders will be advised annually as to the tax status of dividends and
capital gains and return of capital distributions. Shareholders are urged to
consult their tax advisors regarding their own tax situation.
--------------------------------------------------------------------------------
CONVERSION FEATURE
--------------------------------------------------------------------------------
CONVERSION TO CLASS A SHARES
Advisor Class shares may be held solely through the fee-based program accounts,
employee benefit plans and registered investment advisory or other financial
intermediary relationships described above under "How to Buy Shares," and by
investment advisory clients of, and certain other persons associated with,
Alliance and its affiliates or the Funds. If (i) a holder of Advisor Class
shares ceases to participate in the fee-based program or plan, or to be
associated with an investment advisor or financial intermediary, in each case
that satisfies the requirements to purchase shares set forth under "How to Buy
Shares" or (ii) the holder is otherwise no longer eligible to purchase Advisor
Class shares as described in this Prospectus (each, a "Conversion Event"), then
all Advisor Class shares held by the shareholder will convert automatically and
without notice to the shareholder, other than the notice contained in this
Prospectus, to Class A shares of the Fund during the calendar month following
the month in which the Fund is informed of the occurrence of the Conversion
Event. The failure of a shareholder or a fee-based program to satisfy the
minimum investment requirements to purchase Advisor Class shares will not
constitute a Conversion Event. The conversion would occur on the basis of the
relative net asset values of the two classes and without the imposition of any
sales load, fee or other charge.
DESCRIPTION OF CLASS A SHARES
The following sets forth maximum transaction costs, annual expenses, per share
income and capital charges for Class Ashares of each of the Funds. Class A
shares are subject to a distribution fee that may not exceed an annual rate of
.30%. The higher fees mean a higher expense ratio, so Class A shares pay
correspondingly lower dividends and may have a lower net asset value than
Advisor Class shares.
41
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.
[Download Table]
Class A Shares
--------------
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
--------------------------------------------------------------------------------
[Download Table]
Operating Expenses Examples(a)
--------------------------------------- ------------------------------
Alliance Fund Class A Class A
------- -------
Management fees .70% After 1 year $ 11
12b-1 fees .19% After 3 years $ 33
Other expenses (b) .15% After 5 years $ 57
---- After 10 years $127
Total fund
operating expenses 1.04%
====
Growth Fund Class A Class A
------- -------
Management fees .75% After 1 year $ 13
12b-1 fees .30% After 3 years $ 41
Other expenses (b) .25% After 5 years $ 71
---- After 10 years $157
Total fund
operating expenses 1.30%
====
Premier Growth Fund Class A Class A
------- -------
Management fees 1.00% After 1 year $ 17
12b-1 fees .33% After 3 years $ 52
Other expenses (b) .32% After 5 years $ 90
---- After 10 years $195
Total fund
operating expenses 1.65%
====
Technology Fund Class A Class A
------- -------
Management fees (g) 1.11% After 1 year $ 18
12b-1 fees .30% After 3 years $ 55
Other expenses (b) .33% After 5 years $ 94
---- After 10 years $205
Total fund
operating expenses 1.74%
====
Quasar Fund Class A Class A
------- -------
Management fees (g) 1.15% After 1 year $ 18
12b-1 fees .21% After 3 years $ 56
Other expenses (b) .43% After 5 years $ 97
---- After 10 years $211
Total fund
operating expenses 1.79%
====
International Fund Class A Class A
------- -------
Management fees
(after waiver) (c) .85% After 1 year $ 16
12b-1 fees .17% After 3 years $ 50
Other expenses (b) .56% After 5 years $ 86
---- After 10 years $188
Total fund
operating expenses (d) 1.58%
====
Worldwide Privatization Fund Class A Class A
------- -------
Management fees 1.00% After 1 year $ 17
12b-1 fees .30% After 3 years $ 54
Other expenses (b) .42% After 5 years $ 93
---- After 10 years $203
Total fund
operating expenses 1.72%
====
-------------------------------------------------------------------------------
Please refer to the footnotes on page 44.
42
[Download Table]
Operating Expenses Examples(a)
------------------------------------------ ------------------------------
New Europe Fund Class A Class A
------- -------
Management fees 1.06% After 1 year $ 21
12b-1 fees .30% After 3 years $ 64
Other expenses (b) .69% After 5 years $110
---- After 10 years $238
Total fund
operating expenses 2.05%
====
All-Asia Investment Fund Class A Class A
------- -------
Management fees After 1 year $ 31
(after waiver) (c) .65% After 3 years $ 96
12b-1 fees .30% After 5 years $163
Other expenses After 10 years $343
Administration fees
(after waiver) (d) .00%
Other operating expenses(b) 2.17%
----
Total other expenses 2.17%
----
Total fund
operating expenses (e) 3.12%
====
Global Small Cap Fund Class A Class A
------- -------
Management fees 1.00% After 1 year $ 24
12b-1 fees .30% After 3 years $ 75
Other expenses (b) 1.11% After 5 years $129
---- After 10 years $275
Total fund
operating expenses 2.41%
====
Strategic Balanced Fund Class A Class A
------- -------
Management fees
(after waiver) (c) .09% After 1 year $ 14
12b-1 fees .30% After 3 years $ 44
Other expenses (b) 1.01% After 5 years $ 77
---- After 10 years $168
Total fund
operating expenses (e) 1.40%
====
Balanced Shares Class A Class A
------- -------
Management fees .63% After 1 year $ 15
12b-1 fees .24% After 3 years $ 46
Other expenses (b) .60% After 5 years $ 80
---- After 10 years $176
Total fund
operating expenses 1.47%
====
Income Builder Fund Class A Class A
------- -------
Management fees .75% After 1 year $ 23
12b-1 fees .30% After 3 years $ 70
Other expenses (b) 1.20% After 5 years $120
---- After 10 years $258
Total fund
operating expenses 2.25%
====
Utility Income Fund Class A Class A
------- -------
Management fees
(after waiver) (c) 0.00% After 1 year $ 15
12b-1 fees .30% After 3 years $ 47
Other expenses (b) 1.20% After 5 years $ 82
---- After 10 years $179
Total fund
operating expenses (f) 1.50%
====
Growth and Income Fund Class A Class A
------- -------
Management fees .51% After 1 year $ 10
12b-1 fees .21% After 3 years $ 31
Other expenses (b) .25% After 5 years $ 54
---- After 10 years $119
Total fund
operating expenses .97%
====
-------------------------------------------------------------------------------
Please refer to the footnotes on page 44.
43
[Download Table]
Operating Expenses Examples(a)
--------------------------------------- ------------------------------
Real Estate Investment Fund Class A Class A
------- -------
Management fees .90% After 1 year $ 18
12b-1 fees .30% After 3 years $ 56
Other expenses (b) .57% After 5 years $ 96
----
Total fund
operating expenses 1.77% After 10 years $208
====
-------------------------------------------------------------------------------
(a) Advisor Class shares convert to Class A shares at net asset value and
without the imposition of any sales charge and accordingly the maximum
sales charge of 4.25% on most purchases of Class A shares for cash does not
apply.
(b) These expenses include a transfer agency fee payable to Alliance Fund
Services, Inc., an affiliate of Alliance, based on a fixed dollar amount
charged to the Fund for each shareholder's account.
(c) Net of voluntary fee waiver. In the absence of such waiver, management fees
would be .75% for Strategic Balanced Fund and Utility Income Fund and 1.00%
for All-Asia Investment Fund and 1.01% for International Fund.
International Fund's fee, absent the voluntary fee waiver, is calculated
based on average daily net assets. Maximum contractual rate, based on
quarter-end net assets, is 1.00%.
(d) Net voluntary fee waiver. Absent such fee waiver, administration fees would
have been .15% for the Fund's Class A shares. Reflects the fees payable by
All-Asia Investment Fund to Alliance pursuant to an administration
agreement.
(e) Net of voluntary fee waiver and/or expense reimbursement. In the absence of
such waiver and/or reimbursement, total fund operating expenses for
Strategic Balanced Fund would have been 2.08 for Class A shares. Total fund
operating expenses for All-Asia Investment Fund would have been 3.62% for
Class A shares annualized and total fund operating expenses for
International Fund would have been 1.74%, for Class A, annualized.
(f) Net of expense reimbursements. Absent expense reimbursements, total fund
operating expenses for Utility Income Fund would be 3.38 for Class A
shares.
(g) Calculated based on average daily net assets. Maximum contractual rate,
based on quarter-end net assets, is 1.00% for Quasar Fund and Technology
Fund.
The purpose of the foregoing table is to assist the investor in understanding
the various costs and expenses that an investor in a Fund will bear directly or
indirectly. Long-term shareholders of Class A shares of a Fund may pay aggregate
sales charges totaling more than the economic equivalent of the maximum initial
sales charges permitted by the Conduct Rules of the National Association of
Securities Dealers, Inc. The Rule 12b-1 fee for Class A comprises a service fee
not exceeding .25% of the aggregate average daily net assets of the Fund
attributable to Class A and an asset-based sales charge equal to the remaining
portion of the Rule 12b-1 fee. "Management fees" for International Fund and
All-Asia Investment Fund and "Administration fee" for All-Asia Investment Fund
have been restated to reflect current voluntary fee waivers. The Examples set
forth above assume reinvestment of all dividends and distributions and utilize a
5% annual rate of return as mandated by Commission regulations. The Examples
should not be considered representative of past or future expenses; actual
expenses may be greater or less than those shown.
Financial Highlights.The tables on the following pages present, for each Fund,
per share income and capital changes for a Class A share outstanding throughout
each period indicated. Except as indicated below, the information in the tables
for Alliance Fund, Growth Fund, Premier Growth Fund, Strategic Balanced Fund,
Balanced Shares, Utility Income Fund, Worldwide Privatization Fund and Growth
and Income Fund has been audited by Price Waterhouse LLP, the independent
auditors for each Fund, and for All-Asia Investment Fund, Technology Fund,
Quasar Fund, International Fund, New Europe Fund, Global Small Cap Fund and
Income Builder Fund by Ernst & Young LLP, the independent auditors for each
Fund. A report of Price Waterhouse LLP or Ernst & Young LLP, as the case may be,
on the information with respect to each Fund, appears in the Fund's Statement of
Additional Information. The following information for each Fund should be read
in conjunction with the financial statements and related notes which are
included in the Fund's Statement of Additional Information.
Further information about a Fund's performance is contained in the Fund's annual
report to shareholders, which may be obtained without charge by contacting AFS
at the address or the "For Literature" telephone number shown on the cover of
this Prospectus.
44
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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
Class A
12/1/96 to 5/31/97+++ .. $ 7.71 $(.01)b $ .67 $ .66 $ (.02) $(1.06)
Year ended 11/30/96 .... 7.72 .02 1.06 1.08 (.02) (1.07)
Year ended 11/30/95 .... 6.63 .02 2.08 2.10 (.01) (1.00)
1/1/94 to 11/30/94** ... 6.85 .01 (.23) (.22) 0.00 0.00
Year ended 12/31/93 .... 6.68 .02 .93 .95 (.02) (.76)
Year ended 12/31/92 .... 6.29 .05 .87 .92 (.05) (.48)
Year ended 12/31/91 .... 5.22 .07 1.70 1.77 (.07) (.63)
Year ended 12/31/90 .... 6.87 .09 (.32) (.23) (.18) (1.24)
Year ended 12/31/89 .... 5.60 .12 1.19 1.31 (.04) 0.00
Year ended 12/31/88 .... 5.15 .08 .80 .88 (.08) (.35)
Year ended 12/31/87 .... 6.87 .08 .27 .35 (.13) (1.94)
Year ended 12/31/86 .... 11.15 .11 .87 .98 (.10) (5.16)
Growth Fund (i)
Class A
11/1/96 to 4/30/97+++ .. $34.91 $ (.01)(b) $ 1.91 $ 1.90 $ 0.00 $(1.03)
Year ended 10/31/96 .... 29.48 .05 6.20 6.25 (.19) (.63)
Year ended 10/31/95 .... 25.08 .12 4.80 4.92 (.11) (.41)
5/1/94 to 10/31/94** ... 23.89 .09 1.10 1.19 0.00 0.00
Year ended 4/30/94 ..... 22.67 (.01)(c) 3.55 3.54 0.00 (2.32)
Year ended 4/30/93 ..... 20.31 .05(c) 3.68 3.73 (.14) (1.23)
Year ended 4/30/92 ..... 17.94 .29(c) 3.95 4.24 (.26) (1.61)
9/4/90++ to 4/30/91 .... 13.61 .17(c) 4.22 4.39 (.06) 0.00
Premier Growth Fund
Class A
12/1/96 to 5/31/97+++ .. $17.98 $ (.03)(b) $ 2.64 $ 2.61 $ 0.00 $(1.08)
Year ended 11/30/96 .... 16.09 (.04)(b) 3.20 3.16 0.00 (1.27)
Year ended 11/30/95 .... 11.41 (.03) 5.38 5.35 0.00 (.67)
Year ended 11/30/94 .... 11.78 (.09) (.28) (.37) 0.00 0.00
Year ended 11/30/93 .... 10.79 (.05) 1.05 1.00 (.01) 0.00
9/28/92+ to 11/30/92 ... 10.00 .01 .78 .79 0.00 0.00
Technology Fund
Class A
12/1/96 to 5/31/97+++ .. $51.15 $ (.20)(b) $ .70 $ .50 $ 0.00 $ (.42)
Year ended 11/30/96 .... 46.64 .39(b) 7.28 6.89 0.00 (2.38)
Year ended 11/30/95 .... 31.98 (.30)(b) 18.13 17.83 0.00 (3.17)
1/1/94 to 11/30/94** ... 26.12 (.32) 6.18 5.86 0.00 0.00
Year ended 12/31/93 .... 28.20 (.29) 6.39 6.10 0.00 (8.18)
Year ended 12/31/92 .... 26.38 (.22)(b) 4.31 4.09 0.00 (2.27)
Year ended 12/31/91 .... 19.44 (.02) 10.57 10.55 0.00 (3.61)
Year ended 12/31/90 .... 21.57 (.03) (.56) (.59) 0.00 (1.54)
Year ended 12/31/89 .... 20.35 0.00 1.22 1.22 0.00 0.00
Year ended 12/31/88 .... 20.22 (.03) .16 .13 0.00 0.00
Year ended 12/31/87 .... 23.11 (.10) 4.54 4.44 0.00 (7.33)
Year ended 12/31/86 .... 20.64 (.14) 2.62 2.48 (.01) 0.00
Quasar Fund
Class A
10/1/96 to 3/31/97+++ .. $27.92 $ (.11)(b) $ .27 $ .16 $ 0.00 $(4.11)
Year ended 9/30/96 ..... 24.16 (.25) 8.82 8.57 0.00 (4.81)
Year ended 9/30/95 ..... 22.65 (.22)(b) 5.59 5.37 0.00 (3.86)
Year ended 9/30/94 ..... 24.43 (.60) (.36) (.96) 0.00 (.82)
Year ended 9/30/93 ..... 19.34 (.41) 6.38 5.97 0.00 (.88)
Year ended 9/30/92 ..... 21.27 (.24) (1.53) (1.77) 0.00 (.16)
Year ended 9/30/91 ..... 15.67 (.05) 5.71 5.66 (.06) 0.00
Year ended 9/30/90 ..... 24.84 .03(b) (7.18) (7.15) 0.00 (2.02)
Year ended 9/30/89 ..... 17.60 .02(b) 7.40 7.42 0.00 (.18)
Year ended 9/30/88 ..... 24.47 (.08) (2.08) (2.16) 0.00 (4.71)
Year ended 9/30/87(d) .. 21.80 (.14) 5.88 5.74 0.00 (3.07)
International Fund
Class A
Year ended 6/30/97 ..... $18.32 $ .06(b) $ 1.51 $ 1.57 $ (.12) $(1.08)
Year ended 6/30/96 ..... 16.81 .05(b) 2.51 2.56 0.00 (1.05)
Year ended 6/30/95 ..... 18.38 .04 .01 .05 0.00 (1.62)
Year ended 6/30/94 ..... 16.01 (.09) 3.02 2.93 0.00 (.56)
Year ended 6/30/93 ..... 14.98 (.01) 1.17 1.16 (.04) (.09)
Year ended 6/30/92 ..... 14.00 .01(b) 1.04 1.05 (.07) 0.00
Year ended 6/30/91 ..... 17.99 .05 (3.54) (3.49) (.03) (.47)
Year ended 6/30/90 ..... 17.24 .03 2.87 2.90 (.04) (2.11)
Year ended 6/30/89 ..... 16.09 .05 3.73 3.78 (.13) (2.50)
Year ended 6/30/88 ..... 23.70 .17 (1.22) (1.05) (.21) (6.35)
------------------------------------------------------------------------------------------------------------------------------------
Please refer to the footnotes on page 50.
46
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Total Net Assets Ratio Of Net
Total Net Asset Investment At End Of Ratio Of Investment
Dividends Value Return Based Period Expenses Income (Loss) Average
And End Of on Net Asset (000's To Average To Average Portfolio Commission
Distributions Period Value (a) omitted) Net Assets Net Assets Turnover Rate Rate (k)
------------- ----------- ------------ ------------ ----------- ------------- ------------- ----------
$ (1.08) $ 7.29 10.46% $1,024,652 1.05%* (.16)%* 107% $0.0559
(1.09) 7.71 16.49 999,067 1.04 .30 80 0.0646
(1.01) 7.72 37.87 945,309 1.08 .31 81 --
0.00 6.63 (3.21) 760,679 1.05* .21* 63 --
(.78) 6.85 14.26 831,814 1.01 .27 66 --
(.53) 6.68 14.70 794,733 .81 .79 58 --
(.70) 6.29 33.91 748,226 .83 1.03 74 --
(1.42) 5.22 (4.36) 620,374 .81 1.56 71 --
(.04) 6.87 23.42 837,429 .75 1.79 81 --
(.43) 5.60 17.10 760,619 .82 1.38 65 --
(2.07) 5.15 4.90 695,812 .76 1.03 100 --
(5.26) 6.87 12.60 652,009 .61 1.39 46 --
$ (1.03) $ 35.78 5.46% $ 579,580 1.24%* (.03)%* 19% $0.0537
(.82) 34.91 21.65 499,459 1.30 .15 46 0.0584
(.52) 29.48 20.18 285,161 1.35 .56 61 --
0.00 25.08 4.98 167,800 1.35* .86* 24 --
(2.32) 23.89 15.66 102,406 1.40 (f) .32 87 --
(1.37) 22.67 18.89 13,889 1.40 (f) .20 124 --
(1.87) 20.31 23.61 8,228 1.40 (f) 1.44 137 --
(.06) 17.94 32.40 713 1.40*(f) 1.99* 130 --
$ (1.08) $ 19.51 15.70% $ 215,464 1.57%* (.36)%* 47% $0.0598
(1.27) 17.98 21.52 172,870 1.65 (.27) 95 0.0651
(.67) 16.09 49.95 72,366 1.75 (.28) 114 --
0.00 11.41 (3.14) 35,146 1.96 (.67) 98 --
(.01) 11.78 9.26 40,415 2.18 (.61) 68 --
0.00 10.79 7.90 4,893 2.17*(f) .91* 0 --
$ (.42) $ 51.23 .99% $ 631,967 1.64%* (.81)%* 28% $0.0576
(2.38) 51.15 16.05 594,861 1.74 (.87) 30 0.0612
(3.17) 46.64 61.93 398,262 1.75 (.77) 55 --
0.00 31.98 22.43 202,929 1.66* (1.22)* 55 --
(8.18) 26.12 21.63 173,732 1.73 (1.32) 64 --
(2.27) 28.20 15.50 173,566 1.61 (.90) 73 --
(3.61) 26.38 54.24 191,693 1.71 (.20) 134 --
(1.54) 19.44 (3.08) 131,843 1.77 (.18) 147 --
0.00 21.57 6.00 141,730 1.66 .02 139 --
0.00 20.35 0.64 169,856 1.42(f) (.16) 139 --
(7.33) 20.22 19.16 167,608 1.31(f) (.56) 248 --
(.01) 23.11 12.03 147,733 1.13(f) (.57) 141 --
$ (4.11) $ 23.97 .88% $ 265,131 1.54%* (.81)%* 75% $0.0533
(4.81) 27.92 42.42 229,798 1.79 (1.11) 168 0.0596
(3.86) 24.16 30.73 146,663 1.83 (1.06) 160 --
(.82) 22.65 (4.05) 155,470 1.67 (1.15) 110 --
(.88) 24.43 31.58 228,874 1.65 (1.00) 102 --
(.16) 19.34 (8.34) 252,140 1.62 (.89) 128 --
(.06) 21.27 36.28 333,806 1.64 (.22) 118 --
(2.02) 15.67 (30.81) 251,102 1.66 .16 90 --
(.18) 24.84 42.68 263,099 1.73 .10 90 --
(4.71) 17.60 (8.61) 90,713 1.28(f) (.40) 58 --
(3.07) 24.47 29.61 134,676 1.18(f) (.56) 76 --
$ (1.20) $ 18.69 9.30% $ 190,173 1.74% (l) .31% 94% $0.0363
(1.05) 18.32 15.83 196,261 1.72 .31 78 --
(1.62) 16.81 .59 165,584 1.73 .26 119 --
(.56) 18.38 18.68 201,916 1.90 (.50) 97 --
(.13) 16.01 7.86 161,048 1.88 (.14) 94 --
(.07) 14.98 7.52 179,807 1.82 .07 72 --
(.50) 14.00 (19.34) 214,442 1.73 .37 71 --
(2.15) 17.99 16.98 265,999 1.45 .33 37 --
(2.63) 17.24 27.65 166,003 1.41 .39 87 --
(6.56) 16.09 (4.20) 132,319 1.41 .84 55 --
47
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Net
Asset Realized and Increase Dividends In Excess Distributions
Value Net Unrealized (Decrease) In From Net Of Net From Net
Beginning Of Investment Gain (Loss) On Net Asset Value Investment Investment Realized
Fiscal Year or Period Period Income (Loss) Investments From Operations Income Income Gains
--------------------- ------ ------------- ----------- --------------- ------ ------ -----
Worldwide Privatization Fund
Class A
Year ended 6/30/97 ...... $ 12.13 $ .15(b) $ 2.55 $ 2.70 $ (.15) $ 0.00 $ (1.42)
Year ended 6/30/96 ...... 10.18 .10(b) 1.85 1.95 0.00 0.00 0.00
Year ended 6/30/95 ...... 9.75 .06 .37 .43 0.00 0.00 0.00
6/2/94+ to 6/30/94 ...... 10.00 .01 (.26) (.25) 0.00 0.00 0.00
New Europe Fund
Class A
Year ended 7/31/97 ...... $ 15.84 $ .07(b) $ 4.20 $ 4.27 $ (.15) $ (.03) $ (1.32)
Year ended 7/31/96 ...... 15.11 .18 1.02 1.20 0.00 0.00 (.47)
Year ended 7/31/95 ...... 12.66 .04 2.50 2.54 (.09) 0.00 0.00
Period ended 7/31/94** .. 12.53 .09 .04 .13 0.00 0.00 0.00
Year ended 2/28/94 ...... 9.37 .02(b) 3.14 3.16 0.00 0.00 0.00
Year ended 2/28/93 ...... 9.81 .04 (.33) (.29) (.15) 0.00 0.00
Year ended 2/29/92 ...... 9.76 .02(b) .05 .07 (.02) 0.00 0.00
4/2/90+ to 2/28/91 ...... 11.11(e) .26 (.91) (.65) (.26) 0.00 (.44)
All-Asia Investment Fund
Class A
11/1/96 to 4/30/97+++ ... $ 11.04 $ (.13)(b) $ (.50) $ (.63) $ 0.00 $ 0.00 $ (.34)
Year ended 10/31/96 ..... 10.45 (.21)(b)(c) .88 .67 0.00 0.00 (.08)
11/28/94+ to 10/31/95 ... 10.00 (.19)(c) .64 .45 0.00 0.00 0.00
Global Small Cap Fund
Class A
Year ended 7/31/97 ...... $ 11.61 $ (.15)(b) $ 2.97 $ 2.82 $ 0.00 $ 0.00 $ (1.56)
Year ended 7/31/96 ...... 10.38 (.14)(b) 1.90 1.76 0.00 0.00 (.53)
Year ended 7/31/95 ...... 11.08 (.09) 1.50 1.41 0.00 0.00 (2.11)(j)
Period ended 7/31/94** .. 11.24 (.15)(b) (.01) (.16) 0.00 0.00 0.00
Year ended 9/30/93 ...... 9.33 (.15) 2.49 2.34 0.00 0.00 (.43)
Year ended 9/30/92 ...... 10.55 (.16) (1.03) (1.19) 0.00 0.00 (.03)
Year ended 9/30/91 ...... 8.26 (.06) 2.35 2.29 0.00 0.00 0.00
Year ended 9/30/90 ...... 15.54 (.05)(b) (4.12) (4.17) 0.00 0.00 (3.11)
Year ended 9/30/89 ...... 11.41 (.03) 4.25 4.22 0.00 0.00 (.09)
Year ended 9/30/88 ...... 15.07 (.05) (1.83) (1.88) 0.00 0.00 (1.78)
Year ended 9/30/87 ...... 15.47 (.07) 4.19 4.12 (.04) 0.00 (4.48)
Strategic Balanced Fund (i)
Class A
Year ended 7/31/97 ...... $ 18.48 $ .47(b)(c) $ 3.56 $ 4.03 $ (.39) $ 0.00 $ (2.33)
Year ended 7/31/96 ...... 17.98 .35(b)(c) 1.08 1.43 (.32) 0.00 (.61)
Year ended 7/31/95 ...... 16.26 .34(c) 1.64 1.98 (.22) 0.00 (.04)
Period ended 7/31/94** .. 16.46 .07(c) (.27) (.20) 0.00 0.00 0.00
Year ended 4/30/94 ...... 16.97 .16(c) .74 .90 (.24) 0.00 (1.17)
Year ended 4/30/93 ...... 17.06 .39(c) .59 .98 (.42) 0.00 (.65)
Year ended 4/30/92 ...... 14.48 .27(c) 2.80 3.07 (.17) 0.00 (.32)
9/4/90++ to 4/30/91 ..... 12.51 .34(c) 1.66 2.00 (.03) 0.00 0.00
Balanced Shares
Class A
Year ended 7/31/97 ...... $ 14.01 $ .31(b) $ 3.97 $ 4.28 $ (.32) $ 0.00 $ (.18)
Year ended 7/31/96 ...... 15.08 .37 .45 .82 (.41) 0.00 (1.48)
Year ended 7/31/95 ...... 13.38 .46 1.62 2.08 (.36) 0.00 (.02)
Period ended 7/31/94** .. 14.40 .29 (.74) (.45) (.28) 0.00 (.29)
Year ended 9/30/93 ...... 13.20 .34 1.29 1.63 (.43) 0.00 0.00
Year ended 9/30/92 ...... 12.64 .44 .57 1.01 (.45) 0.00 0.00
Year ended 9/30/91 ...... 10.41 .46 2.17 2.63 (.40) 0.00 0.00
Year ended 9/30/90 ...... 14.13 .45 (2.14) (1.69) (.40) 0.00 (1.63)
Year ended 9/30/89 ...... 12.53 .42 2.18 2.60 (.46) 0.00 (.54)
Year ended 9/30/88 ...... 16.33 .46 (1.07) (.61) (.44) 0.00 (2.75)
Year ended 9/30/87 ...... 14.64 .67 1.62 2.29 (.60) 0.00 0.00
Income Builder Fund (h)
Class A
11/1/96 to 4/30/97+++ ... $ 11.57 $ .24(b) $ .69 $ .93 $ (.25) $ 0.00 $ (.61)
Year ended 10/31/96 ..... 10.70 .56(b) .98 1.54 (.55) 0.00 (.12)
Year ended 10/31/95 ..... 9.69 .93(b) .59 1.52 (.51) 0.00 0.00
3/25/94++ to 10/31/94 ... 10.00 .96 (1.02) (.06) (.05) (g) 0.00 (.20)
Utility Income Fund
Class A
12/1/96 to 5/31/97+++ ... $ 10.59 $ .16(b)(c) $ .07 $ .23 $ (.18) $ 0.00 $ (.13)
Year ended 11/30/96 ..... 10.22 .18(b)(c) .65 .83 (.46) 0.00 0.00
Year ended 11/30/95 ..... 8.97 .27(c) 1.43 1.70 (.45) 0.00 0.00
Year ended 11/30/94 ..... 9.92 .42(c) (.89) (.47) (.48) 0.00 0.00
10/18/93+ to 11/30/93 ... 10.00 .02(c) (.10) (.08) 0.00 0.00 0.00
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Please refer to the footnotes on page 50.
48
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Total Net Assets Ratio Of Net
Total Net Asset Investment At End Of Ratio Of Investment
Dividends Value Return Based Period Expenses Income (Loss) Average
And End Of on Net Asset (000's To Average To Average Portfolio Commission
Distributions Period Value (a) omitted) Net Assets Net Assets Turnover Rate Rate (k)
------------- ------ --------- -------- ---------- ---------- ------------- --------
$ (1.57) $ 13.26 25.16% $561,793 1.72% 1.27% 48% $ 0.0132
0.00 12.13 19.16 672,732 1.87 .95 28 --
0.00 10.18 4.41 13,535 2.56 .66 36 --
0.00 9.75 (2.50) 4,990 2.75* 1.03* 0 --
$ (1.50) $ 18.61 28.78% $ 78,578 2.05%(l) .40% 89% $ 0.0569
(.47) 15.84 8.20 74,026 2.14 1.10 69 --
(.09) 15.11 20.22 86,112 2.09 .37 74 --
0.00 12.66 1.04 86,739 2.06* 1.85* 35 --
0.00 12.53 33.73 90,372 2.30 .17 94 --
(.15) 9.37 (2.82) 79,285 2.25 .47 125 --
(.02) 9.81 .74 108,510 2.24 .16 34 --
(.70) 9.76 (5.63) 188,016 1.52* 2.71* 48 --
$ (.34) $ 10.07 (5.99)% $ 8,840 3.45%* (2.29)%* 56% $ 0.0269
(.08) 11.04 6.43 12,284 3.37(f) (1.75) 66 0.0280
0.00 10.45 4.50 2,870 4.42(f)* (1.87)* 90 --
$ (1.56) $ 12.87 26.47% $ 85,217 2.41%(l) (1.25)% 129% $ 0.0364
(.53) 11.61 17.46 68,623 2.51 (1.22) 139 --
(2.11) 10.38 16.62 60,057 2.54(f) (1.17) 128 --
0.00 11.08 (1.42) 61,372 2.42* (1.26)* 78 --
(.43) 11.24 25.83 65,713 2.53 (1.13) 97 --
(.03) 9.33 (11.30) 58,491 2.34 (.85) 108 --
0.00 10.55 27.72 84,370 2.29 (.55) 104 --
(3.11) 8.26 (31.90) 68,316 1.73 (.46) 89 --
(.09) 15.54 37.34 113,583 1.56 (.17) 106 --
(1.78) 11.41 (8.11) 90,071 1.54(f) (.50) 74 --
(4.52) 15.07 34.11 113,305 1.41(f) (.44) 98 --
$ (2.72) $ 19.79 23.90% $ 20,312 1.41%(f)(l) 2.59% 170% $ 0.0395
(.93) 18.48 8.05 18,329 1.40(f) 1.78 173 --
(.26) 17.98 12.40 10,952 1.40(f) 2.07 172 --
0.00 16.26 (1.22) 9,640 1.40*(f) 1.63* 21 --
(1.41) 16.46 5.06 9,822 1.40(f) 1.67 139 --
(1.07) 16.97 5.85 8,637 1.40(f) 2.29 98 --
(.49) 17.06 20.96 6,843 1.40(f) 1.92 103 --
(.03) 14.48 16.00 443 1.40*(f) 3.54* 137 --
$ (2.12) $ 16.17 33.46% $115,500 1.47%(m) 2.11% 207% $ 0.0552
(1.89) 14.01 5.23 102,567 1.38 2.41 227 --
(.38) 15.08 15.99 122,033 1.32 3.12 179 --
(.57) 13.38 (3.21) 157,637 1.27* 2.50* 116 --
(.43) 14.40 12.52 172,484 1.35 2.50 188 --
(.45) 13.20 8.14 143,883 1.40 3.26 204 --
(.40) 12.64 25.52 154,230 1.44 3.75 70 --
(2.03) 10.41 (13.12) 140,913 1.36 4.01 169 --
(1.00) 14.13 22.27 159,290 1.42 3.29 132 --
(3.19) 12.53 (1.10) 111,515 1.42 3.74 190 --
(.60) 16.33 15.80 129,786 1.17 4.14 136 --
$ (.86) $ 11.64 8.31% $ 1,943 2.30%* 4.22%* 169% $ 0.0519
(.67) 11.57 14.82 2,056 2.20 4.92 108 0.0600
(.51) 10.70 16.22 1,398 2.38 5.44 92 --
(.25) 9.69 (.54) 600 2.52* 6.11* 126 --
$ (.31) $ 10.51 2.19% $ 3,571 1.50%(f)* 3.06%* 23% $ 0.0411
(.46) 10.59 8.47 3,294 1.50(f) 1.67 98 0.0536
(.45) 10.22 19.58 2,748 1.50(f) 2.48 162 --
(.48) 8.97 (4.86) 1,068 1.50(f) 4.13 30 --
0.00 9.92 (.80) 229 1.50*(f) 2.35* 11 --
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49
[Enlarge/Download Table]
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
--------------------- ------ ------------- ----------- --------------- ------ --------------
Growth and Income Fund
Class A
11/1/96 to 4/30/97+++ .. $ 3.00 $ .03 (b) $ .36 $ .39 $ (.03) $ (.38)
Year ended 10/31/96 .... 2.71 .05 .50 .55 (.05) (.21)
Year ended 10/31/95 .... 2.35 .02 .52 .54 (.06) (.12)
Year ended 10/31/94 .... 2.61 .06 (.08) (.02) (.06) (.18)
Year ended 10/31/93 .... 2.48 .06 .29 .35 (.06) (.16)
Year ended 10/31/92 .... 2.52 .06 .11 .17 (.06) (.15)
Year ended 10/31/91 .... 2.28 .07 .56 .63 (.09) (.30)
Year ended 10/31/90 .... 3.02 .09 (.30) (.21) (.10) (.43)
Year ended 10/31/89 .... 3.05 .10 .43 .53 (.08) (.48)
Year ended 10/31/88 .... 3.48 .10 .33 .43 (.08) (.78)
Year ended 10/31/87 .... 3.52 .11 (.03) .08 (.12) 0.00
Real Estate Investment Fund
Class A
10/1/96+ to 8/31/97 .... $ 10.00 $ .30(b) $ 2.88 $ 3.18 $ (.38)(m) $ 0.00
------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
++ Commencement of distribution.
+++ Unaudited.
* Annualized.
** Reflects a change in fiscal year end.
(a) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at the net asset value during the period, and a
redemption on the last day of the period. Initial sales charge or
contingent deferred sales charge is not reflected in the calculation of
total investment return. Total investment returns calculated for periods of
less than one year are not annualized.
(b) Based on average shares outstanding.
(c) Net of fee waiver and/or expense reimbursement.
(d) Adjusted for a 200% stock dividend paid to shareholders of record on
January 15, 1988.
(e) Net of offering costs of ($.05).
(f) Net of expenses assumed and/or waived/reimbursed. If the following Funds
had borne all expenses in their most recent five fiscal years, their
expense ratios, giving effect to the expense offset arrangement described
in (l) below, would have been as follows:
[Download Table]
1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ----
All-Asia Investment Fund
Class A -- -- -- 10.57%# 3.62%
Growth Fund
Class A 1.94% 1.84% 1.46% -- --
Premier Growth
Class A 3.33%# -- -- -- --
Global Small Cap Fund
Class A -- -- -- 2.61% --
Strategic Balanced Fund
Class A -- 1.85% 1.70%1 1.81% 1.76% 2.06%
1.94%#2
Utility Income Fund
Class A -- 145.63%# 13.72% 4.86%# 3.38% 3.41%
--------------
# annualized
1. For the period ended April 30, 1994
2. For the period ended July 31, 1994
For the expense ratios of the Funds in years prior to fiscal year 1992,
assuming the Funds had borne all expenses, please see the Financial
Statements in each Fund's Statement of Additional Information.
(g) "Dividends from Net Investment Income" includes a return of capital. Income
Builder Fund had a return of capital with respect to Class A shares, for
the period ended October 31, 1994, of $(.01).
(h) On March 25, 1994, all existing shares of Income Builder Fund, previously
known as Alliance Multi-Market Income and Growth Trust, were converted into
Class C shares.
(i) Prior to July 22, 1993, Equitable Capital Management Corporation
("Equitable Capital") served as the investment adviser to the predecessor
to The Alliance Portfolios, of which Growth Fund and Strategic Balanced
Fund are series. On July 22, 1993, Alliance acquired the business and
substantially all assets of Equitable Capital and became investment adviser
to the Funds.
(j) "Distributions from Net Realized Gains" includes a return of capital.
Global Small Cap Fund had a return of capital with respect to Class A
shares, for the year ended July 31, 1995, of $(.12).
(k) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades on
which commissions are changed.
(l) The following funds benefitted from an expense offset arrangement with the
transfer agent. Had such expense offsets not been in effect, the ratios of
expenses to average net assets, absent the assumption and/or
waiver/reimbursement of expenses described in (f) above, would have been as
follows:
[Download Table]
1997
-------
International Fund
Class A 1.73%
Global Small Cap Fund
Class A 2.38%
Strategic Balanced Fund
Class A 2.08%
New Europe Fund
Class A 2.04%
Balanced Shares
Class A 1.46%
(m) Distributions from net investment income include a tax return of capital of
$0.08.
50
[Enlarge/Download Table]
Total Net Assets Ratio Of Net
Total Net Asset Investment At End Of Ratio Of Investment
Dividends Value Return Based Period Expenses Income (Loss) Average
And End Of on Net Asset (000's To Average To Average Portfolio Commission
Distributions Period Value (a) omitted) Net Assets Net Assets Turnover Rate Rate (k)
------------- ------ --------- -------- ---------- ---------- ------------- --------
$ (.41) $ 2.98 13.29% $628,306 .91%* 1.76%* 55% $ 0.0585
(.26) 3.00 21.51 553,151 .97 1.73 88 0.0625
(.18) 2.71 24.21 458,158 1.05 1.88 142 --
(.24) 2.35 (.67) 414,386 1.03 2.36 68 --
(.22) 2.61 14.98 459,372 1.07 2.38 91 --
(.21) 2.48 7.23 417,018 1.09 2.63 104 --
(.39) 2.52 31.03 409,597 1.14 2.74 84 --
(.53) 2.28 (8.55) 314,670 1.09 3.40 76 --
(.56) 3.02 21.59 377,168 1.08 3.49 79 --
(.86) 3.05 16.45 350,510 1.09 3.09 66 --
(.12) 3.48 2.04 348,375 .86 2.77 60 --
$ (.38) $ 12.80 32.24% $ 37,638 1.77%(l) 2.73%* 20% $ .0518
51
--------------------------------------------------------------------------------
GENERAL INFORMATION
--------------------------------------------------------------------------------
PORTFOLIO TRANSACTIONS
Consistent with the Conduct Rules of the National Association of Securities
Dealers, Inc., and subject to seeking best price and execution, a Fund may
consider sales of its shares as a factor in the selection of dealers to enter
into portfolio transactions with the Fund.
ORGANIZATION
Each of the following Funds is a Maryland corporation organized in the year
indicated: The Alliance Fund, Inc. (1938), Alliance Balanced Shares, Inc.
(1932), Alliance Premier Growth Fund, Inc. (1992), Alliance Technology Fund,
Inc. (1980), Alliance Quasar Fund, Inc. (1968), Alliance Worldwide Privatization
Fund, Inc. (1994), Alliance New Europe Fund, Inc. (1990), Alliance All-Asia
Investment Fund, Inc. (1994), Alliance Global Small Cap Fund, Inc. (1966),
Alliance Income Builder Fund, Inc. (1991), Alliance Utility Income Fund, Inc.
(1993), Alliance Growth and Income Fund, Inc. (1932) and Real Estate Investment
Fund, Inc. (1996). Each of the following Funds is either a Massachusetts
business trust or a series of a Massachusetts business trust organized in the
year indicated: Alliance Growth Fund and Alliance Strategic Balanced Fund (each
a series of The Alliance Portfolios) (1987), and Alliance International Fund
(1980). Prior to August 2, 1993, The Alliance Portfolios was known as The
Equitable Funds, Growth Fund was known as The Equitable Growth Fund and
Strategic Balanced Fund was known as The Equitable Balanced Fund. Prior to March
22, 1994, Income Builder Fund was known as Alliance Multi-Market Income and
Growth Trust, Inc.
It is anticipated that annual shareholder meetings will not be held; shareholder
meetings will be held only when required by federal or state law. Shareholders
have available certain procedures for the removal of Directors.
A shareholder in a Fund will be entitled to share pro rata with other holders of
the same class of shares all dividends and distributions arising from the Fund's
assets and, upon redeeming shares, will receive the then current net asset value
of the Fund represented by the redeemed shares. The Funds are empowered to
establish, without shareholder approval, additional portfolios, which may have
different investment objectives, and additional classes of shares. If an
additional portfolio or class were established in a Fund, each share of the
portfolio or class would normally be entitled to one vote for all purposes.
Generally, shares of each portfolio and class would vote together as a single
class on matters, such as the election of Directors, that affect each portfolio
and class in substantially the same manner. Advisor Class, Class A, Class B and
Class C shares have identical voting, dividend, liquidation and other rights,
except that each class bears its own transfer agency expenses, each of Class A,
Class B and Class C shares bears its own distribution expenses and Class B and
Advisor Class shares convert to Class A shares under certain circumstances. Each
class of shares votes separately with respect to matters for which separate
class voting is appropriate under applicable law. Shares are freely
transferable, are entitled to dividends as determined by the Directors and, in
liquidation of a Fund, are entitled to receive the net assets of the Fund. Since
this Prospectus sets forth information about all the Funds, it is theoretically
possible that a Fund might be liable for any materially inaccurate or incomplete
disclosure in this Prospectus concerning another Fund. Based on the advice of
counsel, however, the Funds believe that the potential liability of each Fund
with respect to the disclosure in this Prospectus extends only to the disclosure
relating to that Fund. Certain additional matters relating to a Fund's
organization are discussed in its Statement of Additional Information.
REGISTRAR, TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT
AFS, an indirect wholly-owned subsidiary of Alliance, located at 500 Plaza
Drive, Secaucus, New Jersey 07094, acts as each Fund's registrar, transfer agent
and dividend-disbursing agent for a fee based upon the number of shareholder
accounts maintained for the Funds.
PRINCIPAL UNDERWRITER
AFD, an indirect wholly-owned subsidiary of Alliance, located at 1345 Avenue of
the Americas, New York, New York 10105, is the principal underwriter of shares
of the Funds.
PERFORMANCE INFORMATION
From time to time, the Funds advertise their "total return," which is computed
separately for each class of shares, including Advisor Class shares. Such
advertisements disclose a Fund's average annual compounded total return for the
periods prescribed by the Commission. A Fund's total return for each such period
is computed by finding, through the use of a formula prescribed by the
Commission, the average annual compounded rate of return over the period that
would equate an assumed initial amount invested to the value of the investment
at the end of the period. For purposes of computing total return, income
dividends and capital gains distributions paid on shares of a Fund are assumed
to have been reinvested when paid and the maximum sales charges applicable to
purchases and redemptions of a Fund's shares are assumed to have been paid.
Balanced Shares, Growth and Income Fund, Income Builder Fund, Strategic Balanced
Fund and Utility Income Fund may also advertise their "yield," which is also
computed separately for each class of shares, including Advisor Class shares. A
Fund's yield for any 30-day (or one-month) period is computed by dividing the
net investment income per share earned during such period by the maximum public
offering price per share on the last day of the period, and then annualizing
such 30-day (or one-month) yield in accordance with a formula prescribed by the
Commission which provides for compounding on a semi-annual basis.
52
Strategic Balanced Fund, Balanced Shares, Income Builder Fund, Utility Income
Fund and Growth and Income Fund may also state in sales literature an "actual
distribution rate" for each class which is computed in the same manner as yield
except that actual income dividends declared per share during the period in
question are substituted for net investment income per share. The actual
distribution rate is computed separately for each class of shares, including
Advisor Class shares.
A Fund's advertisements may quote performance rankings or ratings of a Fund by
financial publications or independent organizations such as Lipper Analytical
Services, Inc. and Morningstar, Inc. or compare a Fund's performance to various
indices.
ADDITIONAL INFORMATION
This Prospectus and the Statements of Additional Information, which have been
incorporated by reference herein, do not contain all the information set forth
in the Registration Statements filed by the Funds with the Commission under the
Securities Act. Copies of the Registration Statements may be obtained at a
reasonable charge from the Commission or may be examined, without charge, at the
offices of the Commission in Washington, D.C.
This prospectus does not constitute an offering in any state in which such
offering may not lawfully be made.
This prospectus is intended to constitute an offer by each Fund only of the
securities of which it is the issuer and is not intended to constitute an offer
by any Fund of the securities of any other Fund whose securities are also
offered by this prospectus. No Fund intends to make any representation as to the
accuracy or completeness of the disclosure in this prospectus relating to any
other Fund. See "General Information--Organization."
53
(LOGO) ALLIANCE TECHNOLOGY FUND, INC.
________________________________________________________________
P.O. Box 1520, Secaucus, New Jersey 07096-1520
Toll Free (800) 221-5672
For Literature: Toll Free (800) 227-4618
_________________________________________________________________
STATEMENT OF ADDITIONAL INFORMATION
February 3, 1997 (as amended on October 31, 1997)
________________________________________________________________
This Statement of Additional Information is not a prospectus,
but supplements and should be read in conjunction with the
current Prospectus for the Alliance Technology 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........................
PORTFOLIO TRANSACTIONS....................................
GENERAL INFORMATION.......................................
FINANCIAL STATEMENTS AND AUDITOR'S REPORT.................
___________________
(R) This registered service mark under license from the owner,
Alliance Capital Management L.P.
________________________________________________________________
DESCRIPTION OF THE FUND
________________________________________________________________
Except as otherwise indicated, the investment policies
of the Fund are not "fundamental policies" and may, therefore, be
changed by the Board of Directors without a shareholder vote.
However, the Fund will not change its investment policies without
contemporaneous written notice to its shareholders. The Fund's
investment objective, as well as the Fund's 80% investment policy
described below, may not be changed without shareholder approval.
There can be, of course, no assurance that the Fund will achieve
its investment objective.
Investment Objective and Policies
The investment objective of the Fund is to emphasize
growth of capital, and investments will be made based upon their
potential for capital appreciation. Therefore, current income
will be incidental to the objective of capital growth. However,
subject to the limitations referred to under "Options" below, the
Fund may seek to earn income through the writing of listed call
options. In seeking to achieve its objective, the Fund will
invest primarily in securities of companies which are expected to
benefit from technological advances and improvements (i.e.,
companies which use technology extensively in the development of
new or improved products or processes). The Fund will have at
least 80% of its assets invested in the securities of such
companies except when the Fund assumes a temporary defensive
position. There obviously can be no assurance that the Fund's
investment objective will be achieved, and the nature of the
Fund's investment objective and policies may involve a somewhat
greater degree of risk than would be present in a more
conservative investment approach.
How the Fund Pursues Its Objective
The Fund expects under normal circumstances to have
substantially all of its assets invested in equity securities
(common stocks or securities convertible into common stocks or
rights or warrants to subscribe for or purchase common stocks).
When business or financial conditions warrant, the Fund may take
a defensive position and invest without limit in investment grade
debt securities or preferred stocks or hold its assets in cash.
The Fund at times may also invest in debt securities and
preferred stocks offering an opportunity for price appreciation
(e.g., convertible debt securities).
Critical factors which will be considered in the
selection of securities will include the economic and political
2
outlook, the value of individual securities relative to other
investment alternatives, trends in the determinants of corporate
profits, and management capability and practices. Generally
speaking, disposal of a security will be based upon factors such
as (i) actual or potential deterioration of the issuer's earning
power which the Fund believes may adversely affect the price of
its securities, (ii) increases in the price level of the security
or of securities generally which the Fund believes are not fully
warranted by the issuer's earning power, and (iii) changes in the
relative opportunities offered by various securities.
Companies in which the Fund will invest include those
whose processes, products or services are anticipated by Alliance
Capital Management L.P., the Fund's investment adviser (the
"Adviser"), to be significantly benefited by the utilization or
commercial application of scientific discoveries or developments
in such fields as, for example, aerospace, aerodynamics,
astrophysics, biochemistry, chemistry, communications, computers,
conservation, electricity, electronics (including radio,
television and other media), energy (including development,
production and service activities), geology, health care,
mechanical engineering, medicine, metallurgy, nuclear physics,
oceanography and plant physiology.
The Fund will endeavor to invest in companies where the
expected benefits to be derived from the utilization of
technology will significantly enhance the prospects of the
company as a whole (including, in the case of a conglomerate,
affiliated companies). The Fund's investment objective permits
the Fund to seek securities having potential for capital
appreciation in a variety of industries.
Certain of the companies in which the Fund invests may
allocate greater than usual amounts to research and product
development. The securities of such companies may experience
above-average price movements associated with the perceived
prospects of success of the research and development programs.
In addition, companies in which the Fund invests could be
adversely affected by lack of commercial acceptance of a new
product or products or by technological change and obsolescence.
Additional Investment Policies and Practices
Options. In seeking to attain its investment goal of
capital appreciation, the Fund may supplement customary
investment practices by writing and purchasing call options
listed on one or more national securities exchanges and
purchasing listed put options, including put options on market
indices. Upon payment of a premium, a put option gives the buyer
of such option the right to deliver a specified number of shares
of a stock to the writer of the option on or before a fixed date,
3
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.
The writing of call options will involve a potential
loss of opportunity to sell securities at higher prices. In
exchange for the premium received, the writer of a fully
collateralized call option assumes the full downside risk of the
securities subject to such option. In addition, the writer of
the call gives up the gain possibility of the stock protecting
the call. Generally the opportunity for profit from the writing
of options is higher, and consequently the risks are greater,
when the stocks involved are lower priced or volatile, or both.
While an option that has been written is in force, the maximum
profit that may be derived from the optioned stock is the premium
less brokerage commissions and fees. The actual return earned by
the Fund from writing a call option depends on factors such as
the amount of the transaction costs and whether or not the option
is exercised. Option premiums vary widely depending primarily on
supply and demand.
Writing and purchasing options are highly specialized
activities and entail greater than ordinary investment risks. If
an option purchased by the Fund is not sold and is permitted to
expire without being exercised, its premium would be lost by the
Fund. When calls written by the Fund are exercised, the Fund
will be obligated to sell stocks below the current market price.
The Fund will not write a call 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 actual return
earned by the Fund from writing a call depends on factors such as
the amount of the transaction costs and whether or not the option
is exercised. Calls written by the Fund will ordinarily be sold
either on a national securities exchange or through put and call
dealers, most, if not all, of whom are members of a national
securities exchange on which options are traded, and will in such
cases be endorsed or guaranteed by a member of a national
securities exchange or qualified broker-dealer, which may be
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), an
affiliate of the Adviser. The endorsing or guaranteeing firm
4
requires that the option writer (in this case the Fund) maintain
a margin account containing either corresponding stock or other
equity as required by the endorsing or guaranteeing firm.
In purchasing a call option, the Fund would be in a
position to realize a gain if, during the option period, the
price of the security increased over the strike price by an
amount in excess of the premium paid and commissions payable on
exercise. It would realize a loss if the price of the security
declined or remained the same or did not increase over the strike
price during the period by more than the amount of the premium
and commissions payable on exercise. By purchasing a put option,
the Fund would be in a position to realize a gain if, during the
option period, the price of the security declined below the
strike price by an amount in excess of the premium paid and
commissions payable on exercise. It would realize a loss if the
price of the security increased or remained the same or did not
decrease below the strike price during that period by more than
the amount of the premium and commissions payable on exercise.
If a put or call option purchased by the Fund were permitted to
expire without being sold or exercised, its premium would
represent a realized loss to the Fund.
If the Fund desires to sell a particular security from
its portfolio on which it has written an option, the Fund seeks
to effect a "closing purchase transaction" prior to, or
concurrently with, the sale of the security. A closing purchase
transaction is a transaction in which an investor who is
obligated as a writer of an option terminates his obligation by
purchasing an option of the same series as the option previously
written. (Such a purchase does not result in the ownership of an
option.) The Fund may enter into a closing purchase transaction
to realize a profit on a previously written option or to enable
the Fund to write another option on the underlying security with
either a different exercise price or expiration date or both.
The Fund realizes a profit or loss from a closing purchase
transaction if the cost of the transaction is less or more than
the premium received from the writing of the option. The Fund
may not, however, effect a closing purchase transaction with
respect to an option after it has been notified of the exercise
of such option.
The Fund may dispose of an option which it has purchased
by entering into a "closing sale transaction" with the writer of
the option. A closing sale transaction terminates the obligation
of the writer of the option and does not result in the ownership
of an option. The Fund realizes a profit or loss from a closing
sale transaction if the premium received from the transaction is
more than or less than the cost of the option.
5
The 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. 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.
Options on Market Indices. Options on securities
indices 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.
Warrants. The Fund may invest up to 10% of its total
assets in warrants which entitle the holder to buy equity
securities at a specific price for a specific period of time.
Warrants may be considered more speculative than certain other
types of investments in that they do not entitle a holder to
dividends or voting rights with respect to the securities which
may be purchased nor do they represent any rights in the assets
of the issuing company. Also, the value of a 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.
Foreign Securities. Investing in securities of
non-United States companies which are generally denominated in
foreign currencies involves certain considerations comprising
both risk and opportunity not typically associated with investing
in United States companies. These considerations include changes
in exchange rates and exchange control regulation, political and
social instability, expropriation, imposition of foreign taxes,
6
less liquid markets and less available information than are
generally the case in the United States, higher transaction
costs, less government supervision of exchanges and brokers and
issuers, difficulty in enforcing contractual obligations, lack of
uniform accounting and auditing standards and greater price
volatility. Additional risks may be incurred in investing in
particular countries. The Fund will not purchase a foreign
security if such purchase at the time thereof would cause 10% or
more of the value of the Fund's total assets to be invested in
foreign securities.
Restricted Securities. The Fund may invest in
restricted securities and in other assets having no ready market
if such purchases at the time thereof would not cause more than
10% of the value of the Fund's net assets to be invested in all
such restricted or not readily marketable assets. This
limitation does not apply to liquid restricted securities, such
as those eligible for resale under Rule 144A of the Securities
Act of 1933, as amended (the "Securities Act"). Restricted
securities may be sold only in privately negotiated transactions,
in a public offering with respect to which a registration
statement is in effect under the Securities Act or pursuant to
Rules 144 or 144A promulgated under such Act. 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.
Lending of Portfolio Securities. The Fund may seek to
increase income by lending portfolio securities. Under present
regulatory policies, such loans are required to be secured
continuously by collateral consisting of liquid assets maintained
in an amount at least equal to the market value of the securities
loaned. The Fund has the right to call such a loan and obtain
the securities loaned or equivalent securities at any time on
five days' notice. During the existence of a loan, the Fund will
receive the income earned on investment of the collateral. The
aggregate value of the securities loaned by the Fund may not
exceed 30% of the value of the Fund's total assets.
Portfolio Turnover. The investment activities described
above are likely to result in the Fund engaging in a considerable
amount of trading of securities held for less than one year.
Accordingly, it can be expected that the Fund will have a higher
turnover rate than might be expected from investment companies
7
which invest substantially all of their funds on a long-term
basis. Correspondingly heavier brokerage commission expenses can
be expected to be borne by the Fund. Management anticipates that
the Fund's annual rate of portfolio turnover will not be in
excess of 100% in future years. A 100% annual turnover rate
would occur, for example, if all the stocks in the Fund's
portfolio were replaced once in a period of one year. The
portfolio turnover rates of the Fund for the fiscal years ended
in 1996 and 1995 were 30% and 55%, respectively.
Within this basic framework, the policy of the Fund is
to invest in any company and industry and in any type of security
which are believed to offer possibilities for capital
appreciation. Investments may be made in well-known and
established companies as well as in new and unseasoned companies.
Since securities fluctuate in value due to general economic
conditions, corporate earnings and many other factors, the shares
of the Fund will increase or decrease in value accordingly, and
there can be no assurance that the Fund will achieve its
investment goal or be successful.
Fundamental Investment Policies
The following restrictions may not be changed without
approval of a majority of the outstanding voting securities of
the Fund, which means the vote of (i) 67% or more of the shares
represented at a meeting at which more than 50% of the
outstanding shares are represented or (ii) more than 50% of the
outstanding shares, whichever is less.
To maintain portfolio diversification and reduce
investment risk, as a matter of fundamental policy, the 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) securities issued or guaranteed as to principal or interest
by the U.S. Government or its agencies or instrumentalities, 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 immediately after and as a result of such purchase (a) the
value of the holdings of the Fund in the securities of such
issuer exceeds 25% of the value of the Fund's total assets, or
(b) the Fund owns more than 25% of the outstanding securities of
any one class of securities of such issuer;
8
(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;
(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 at
the time thereof would cause 10% or more of the value of the
total assets of the Fund to be invested in the securities of such
issuer or issuers;
(v) make short sales of securities or maintain a short
position or write put options;
(vi) mortgage, pledge or hypothecate or otherwise
encumber its assets, except as may be necessary in connection
with permissible borrowings mentioned in investment restriction
(xiv) listed below;
(vii) purchase the securities of any other investment
company or investment trust, except when such purchase is part of
a merger, consolidation or acquisition of assets;
(viii) purchase or sell real property (including limited
partnership interests but excluding readily marketable interests
in real estate investment trusts or readily marketable securities
of companies which invest in real estate) commodities or
commodity contracts;
(ix) purchase participations or other direct interests
in oil, gas, or other mineral exploration or development
programs;
(x) participate on a joint or joint and several basis
in any securities trading account;
(xi) invest in companies for the purpose of exercising
control;
(xii) purchase securities on margin, but it may obtain
such short-term credits from banks as may be necessary for the
clearance of purchases and sales of securities;
(xiii) make loans of its assets to any other person, which
shall not be considered as including the purchase of a portion of
an issue of publicly-distributed debt securities; except that the
Fund may purchase non-publicly distributed securities subject to
the limitations applicable to restricted or not readily
marketable securities and except for the lending of portfolio
securities as discussed under "Description of the Funds" in the
Prospectus;
9
(xiv) borrow money except for the short-term credits from
banks referred to in paragraph (xii) above and except for
temporary or emergency purposes and then only from banks and in
an aggregate amount not exceeding 5% of the value of its total
assets at the time any borrowing is made. Money borrowed by the
Fund will be repaid before the Fund makes any additional
investments;
(xv) act as an underwriter of securities of other
issuers, except that the Fund may acquire restricted or not
readily marketable securities under circumstances where, if sold,
the Fund might be deemed to be an underwriter for purposes of the
Securities Act (the Fund will not invest more than 10% of its net
assets in aggregate in restricted securities and not readily
marketable securities); and
(xvi) purchase or retain the securities of any issuer if,
to the knowledge of the Fund's management, those officers and
directors of the Fund, and those employees of the Adviser, who
each owns beneficially more than one-half of 1% of the
outstanding securities of such issuer together own more than 5%
of the securities of such issuer.
Whenever any investment policy or restriction states a
minimum or maximum percentage of the Fund's assets which may be
invested in any security or other asset, it is intended that such
minimum or maximum percentage limitation be determined
immediately after and as a result of the Fund's acquisition of
such security or other asset. Accordingly, any later increase or
decrease in percentage beyond the specified limitations resulting
from a change in values or net assets will not be considered a
violation of this percentage limitation. In the event that the
aggregate of restricted and not readily marketable securities
exceeds 10% of the Fund's net assets, the management of the Fund
will consider whether action should be taken to reduce the
percentage of such securities.
The Fund is also subject to other restrictions under the
Investment Company Act of 1940, as amended (the "1940 Act"),
including restrictions on transactions with affiliated persons.
The registration of the Fund under the 1940 Act, however, does
not involve any supervision by any federal or other agency of the
Fund's management or investment practices or policies. In
connection with the qualification or registration of the Fund's
shares for sale under the securities laws of certain states, the
Fund has agreed, in addition to the foregoing investment
restrictions, that it will not invest in 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 at the time thereof would cause more than 5% of the
value of the Fund's total assets to be invested in the securities
10
of such issuer or issuers. The Fund may not purchase or sell
real property (including limited partnership interests but
excluding readily marketable interests in real estate investment
trusts, or readily marketable securities of companies which
invest in real estate) commodities or commodity contracts. In
addition, the Fund may not invest in mineral leases.
________________________________________________________________
MANAGEMENT OF THE FUND
________________________________________________________________
Adviser
Alliance Capital Management L.P., a Delaware limited
partnership with principal offices at 1345 Avenue of the
Americas, New York, New York 10105, has been retained under an
investment advisory agreement (the "Advisory Agreement") to
provide investment advice and, in general, to conduct the
management and investment program of the Fund under the
supervision of the Fund's Board of Directors (see "Management of
the Fund" in the Prospectus).
Alliance is a leading international investment manager
supervising client accounts with assets as of June 30, 1997 of
more than $199 billion (of which more than $71 billion
represented the assets of investment companies). The Adviser's
clients are primarily major corporate employee benefit funds,
public employee retirement systems, investment companies,
foundation and endowment funds. As of June 30, 1997, the Adviser
was an investment manager of employee benefit fund assets for 29
of the FORTUNE 100 companies. As of that date, the Adviser and
its subsidiaries employed approximately 1,500 employees who
operated out of domestic offices and the offices of subsidiaries
in Bahrain, Bangalore, Chennai, Istanbul, London, Madrid, Mumbai,
Paris, Singapore, Tokyo and Toronto and affiliate offices located
in Vienna, Warsaw, Hong Kong, Sao Paulo and Moscow. The 54
registered investment companies comprising more than 116 separate
investment portfolios managed by the Adviser currently have more
than two million shareholders.
Alliance Capital Management Corporation, the sole
general partner of, and the owner of a 1% general partnership
interest in, the Adviser, is an indirect wholly-owned subsidiary
of The Equitable Life Assurance Society of the United States
("Equitable"), one of the largest life insurance companies in the
United States and a wholly-owned subsidiary of The Equitable
Companies Incorporated ("ECI"). ECI is a holding company
controlled by AXA-UAP, a French insurance holding company which
at September 30, 1997, beneficially owned approximately 59% of
the outstanding voting shares of ECI. As of June 30, 1997, ACMC,
11
Inc. and Equitable Capital Management Corporation, each a wholly-
owned direct or indirect subsidiary of Equitable, together with
Equitable, owned in the aggregate approximately 57% of the issued
and outstanding units representing assignments of beneficial
ownership of limited partnership interests in the Adviser.
AXA-UAP is a holding company for an international group
of insurance and related financial services companies. AXA-UAP's
insurance operations include activities in life insurance,
property and casualty insurance and reinsurance. The insurance
operations are diverse geographically, with activities
principally in Western Europe, North America and the Asia/Pacific
area. AXA-UAP is also engaged in asset management, investment
banking, securities trading, brokerage, real estate and other
financial services activities principally in the United States,
as well as in Western Europe and the Asia/Pacific area.
Based on information provided by AXA-UAP, as of
September 30, 1997 more than 25% of the voting power of AXA-UAP
was controlled directly and indirectly by FINAXA, a French
holding company. As of September 30, 1997 more than 25% of the
voting power of FINAXA was controlled directly and indirectly by
four French mutual insurance companies (the "Mutuelles AXA"), one
of which, AXA Assurances I.A.R.D. Mutuelle, itself controlled
directly and indirectly more than 25% of the voting power of
FINAXA. Acting as a group, the Mutuelles AXA control AXA-UAP and
FINAXA.
The Adviser provides office space, investment advisory,
administrative and clerical services, and order placement
facilities for the Fund and pays all compensation of Directors
and officers of the Fund who are affiliated persons of the
Adviser.
Under its Advisory Agreement, the Fund pays a quarterly
fee to the Adviser on the first business day of January, April,
July and October equal to 1/4 of 1% (approximately 1% on an
annual basis) of the aggregate net asset value of the Fund at the
end of the previous quarter.
The Adviser is, under the Advisory Agreement,
responsible for any expenses incurred by the Fund in promoting
the sale of Fund shares (other than the portion of the
promotional expenses borne by the Fund in accordance with an
effective plan pursuant to Rule 12b-1 under the 1940 Act, and the
costs of printing and mailing Fund prospectuses and other reports
to shareholders and all expenses and fees related to proxy
solicitations and registrations and filings with the Securities
and Exchange Commission (the "Commission") and with state
regulatory authorities).
12
The Fund has, under the Advisory Agreement, assumed the
obligation for payment of all of its other expenses. As to the
obtaining of services other than those specifically provided to
the Fund by the Adviser, the Fund may employ its own personnel.
For such services, it also may utilize personnel employed by the
Adviser or its affiliates and, in such event, the services will
be provided to the Fund at cost and the payments therefor must be
specifically approved by the Fund's Board of Directors.
For the fiscal years ended November 30, 1996 and
November 30, 1995 and for the fiscal period ended November 30,
1994, the Adviser received from the Fund advisory fees of
$10,945,614, $4,894,844 and $1,794,378, respectively. For the
fiscal years ended November 30, 1996 and November 30, 1995 and
for the fiscal period ended November 30, 1994, no reimbursements
were required.
The Advisory Agreement became effective on July 22,
1992. The Advisory Agreement was approved by the unanimous vote,
cast in person, of the Fund's Directors, including the Directors
who are not parties to the Advisory Agreement or "interested
persons" as defined in the 1940 Act of any such party, at a
meeting called for that purpose and held on October 22, 1991. At
a meeting held on June 11, 1992, a majority of the outstanding
voting securities of the Fund approved the Advisory Agreement.
The Advisory Agreement continues in effect for
successive twelve-month periods (computed from each January 1),
provided that such continuance is specifically approved at least
annually by the Directors of the Fund or by a majority vote of
the holders of the outstanding voting securities of the Fund,
and, in either case, by a majority of the Directors who are not
parties to the Advisory Agreement or "interested persons" as
defined in the 1940 Act of any such party. Most recently, the
continuance of the Advisory Agreement until December 31, 1998 was
approved by a vote, cast in person, of the Board of Directors,
including a majority of the Directors who are not parties to the
Advisory Agreement or "interested persons" of any such party, at
their Regular Meeting held on October 9, 1997.
The Advisory Agreement is terminable without penalty on
60 days' written notice by a vote of the majority of the Fund's
outstanding voting securities or by a vote of a majority of the
Fund's Directors, or by the Adviser on 60 days' written notice,
and will automatically terminate in the event of assignment. The
Adviser is not liable for any action or inaction in regard to its
obligations under the Advisory Agreement as long as it does not
exhibit willful misfeasance, bad faith, gross negligence, or
reckless disregard of its obligations.
13
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, The Alliance Fund, Inc., Alliance All-Asia
Investment Fund, Inc., Alliance Balanced Shares, Inc., Alliance
Bond Fund, Inc., Alliance Capital Reserves, Alliance Developing
Markets Fund, Inc., Alliance Global Dollar Government Fund, Inc.,
Alliance Global Environment Fund, Inc., Alliance Global Small Cap
Fund, Inc., Alliance Global Strategic Income Trust, Inc.,
Alliance Government Reserves, Alliance Greater China '97 Fund,
Inc., Alliance Growth and Income Fund, Inc., Alliance High Yield
Fund, Inc., Alliance Income Builder Fund, Inc., Alliance
International Fund, Alliance Limited Maturity Government Fund,
Inc., Alliance Money Market Fund, Alliance Mortgage Securities
Income Fund, Inc., Alliance Multi-Market Strategy Trust, Inc.,
Alliance Municipal Income Fund, Inc., Alliance Municipal Income
Fund II, Alliance Municipal Trust, Alliance New Europe Fund,
Inc., Alliance North American Government Income Trust, Inc.,
Alliance Premier Growth Fund, Inc., Alliance Quasar Fund, Inc.,
Alliance Real Estate Investment Fund, Inc., Alliance/Regent
Sector Opportunity Fund, Inc., Alliance Short-Term Multi-Market
Trust, Inc., Alliance Technology Fund, Inc., Alliance Utility
Income Fund, Inc., Alliance Variable Products Series Fund, Inc.,
Alliance World Income Trust, Inc., Alliance Worldwide
Privatization Fund, Inc., The Alliance Portfolios, Fiduciary
Management Associates and The Hudson River Trust, all registered
open-end investment companies; and to ACM Government Income Fund,
Inc., ACM Government Opportunity Fund, Inc., ACM Government
Securities Fund, Inc., ACM Government Spectrum Fund, Inc., ACM
Managed Dollar Fund, Inc., ACM Managed Income Fund, Inc., ACM
Municipal Securities Income Fund, Inc., Alliance All-Market
Advantage Fund, Inc., Alliance World Dollar Government Fund,
Inc., Alliance World Dollar Government Fund II, Inc., The Austria
Fund, Inc., The Korean Investment Fund, Inc., The Southern Africa
14
Fund, Inc. and The Spain Fund, Inc., all registered closed-end
investment companies.
Directors and Officers
The Directors and officers of the Fund, their ages and
their principal occupations during the past five years are set
forth below. Certain of the Directors and Officers are trustees,
directors or officers of other registered investment companies
sponsored by the Adviser. Unless otherwise specified, the
address of each of the following persons is 1345 Avenue of the
Americas, New York, New York, 10105.
Directors
JOHN D. CARIFA,* 52, Chairman of the Board and President
of the Fund, is the President, Chief Operating Officer and a
Director of Alliance Capital Management Corporation ("ACMC"),
with which he has been associated since prior to 1992.
ROBERT C. ALEXANDER, 55, has been President of Alexander
& Associates, Management Consultants, since prior to 1992. His
address is 38 East 29th Street, New York, New York, 10016.
DAVID H. DIEVLER, 68, was formerly a Senior Vice
President of ACMC, with which he had been associated since prior
to 1992 through 1994. He is currently an independent consultant.
His address is P.O. Box 167, Spring Lake, New Jersey 07762.
CHARLES H. FERGUSON, 42, is an Independent Consultant,
and since prior to 1992, Senior Technology Adviser to Tucker
Anthony Incorporated. Until June 1992, he was a Postdoctoral
Research Associate for the M.I.T. Center for Technology, Policy
and Industrial Development. His address is 30-36 Bay State Road,
Cambridge, Massachusetts 02138.
WILLIAM H. FOULK, JR., 65, is an Investment Adviser and
an Independent Consultant. He was formerly Senior Manager of
Barrett Associates, Inc., a registered investment adviser, with
which he had been associated since prior to 1992. His address is
2 Greenwich Plaza, Suite 100, Greenwich, Connecticut 06830.
D. JAMES GUZY, 61, is Chairman of the Board of NTX
Communications Corporation (communications systems), with which
he has been associated since prior to 1992. He is also a
director of Intel Corporation (semi-conductors), Cirrus Logic
Corporation (semi-conductors), Novellus Corporation (semi-
conductor equipment) and the New York Venture Fund, Venture
____________________
* An "interested person" of the Fund as defined in the 1940
Act.
15
Income Plus, Venture MUNI Plus and the Retirement Planning Funds
of America (registered investment companies). His address is
1340 Arbor Road, Menlo Park, California 94025.
PETER J. POWERS, 53, is Chairman of High View Capital
Corporation (investment manager). Until September 1996, he
served as First Deputy Mayor of the City of New York. Prior to
1994, he was engaged in the private practice of law. His address
is 150 East 52 Street, Suite 1800, New York, New York 10022.
MARSHALL C. TURNER, JR., 56, is General Partner of
Taylor & Turner Associates, Ltd. (venture capital partnerships).
He is also an independent consultant and a director of DuPont
Photomasks, Inc. (semiconductor manufacturing services) since
1996, Remanco International Inc. (restaurant operating systems)
since 1992, Delivering The Good, Inc. (logistics software) since
1996, and the Public Broadcasting Service (public television
network) since 1993. His address is 270 Madrona Avenue,
Belvedere, California 94920-2476.
Officers
PETER ANASTOS, Senior Vice President, 55, is a Senior
Vice President of ACMC, with which he has been associated since
prior to 1992.
THOMAS G. BARDONG, Vice President, 52, is a Senior Vice
President of ACMC, with which he has been associated since prior
to 1992.
GERALD T. MALONE, Vice President, 43, is a Senior Vice
President of ACMC, with which he has been associated since 1992.
Prior thereto he was a technology research analyst at College
Retirement Equities Fund since prior to 1992.
DANIEL V. PANKER, Vice President, 58, Senior Vice
President of ACMC, with which he has been associated since prior
to 1992.
MARK D. GERSTEN, Treasurer and Chief Financial Officer,
47, is a Senior Vice President of Alliance Fund Services, Inc.,
with which he has been associated since prior to 1992.
VINCENT S. NOTO, Controller, 33, is an Assistant Vice
President of Alliance Fund Services, Inc., with which he has been
associated since prior to 1992.
EDMUND P. BERGAN, JR., Secretary, 47, is a Senior Vice
President and General Counsel of Alliance Fund Distributors,
Inc., with which he has been associated since prior to 1992.
16
The aggregate compensation paid by the Fund to each of
the Directors during its fiscal year ended November 30, 1996, the
aggregate compensation paid to each of the Directors during
calendar year 1996 by all of the funds to which the Adviser
provides investment advisory services (collectively, the
"Alliance Fund Complex"), and the total number of registered
investment companies in the Alliance Fund Complex with respect to
which each of the Directors serves as a director or trustee, are
set forth below. Neither the Fund nor any fund in the Alliance
Fund Complex provides compensation in the form of pension or
retirement benefits to any of its directors or trustees. Certain
of the Directors are directors or trustees of one or more other
registered investment companies in the Alliance Fund Complex.
Total Number Total Number
of Funds in of Investment
the Alliance Portfolios Within
Total Fund Complex, the Funds,
Compensation Including the Including the
From the Fund, as to Fund, as to
Alliance Fund which the which the
Name of Aggregate Complex, Director is a Director is a
Director Compensation Including the Director or Director or
of the Fund From the Fund Fund Trustee Trustee
___________ ____________ _____________ _____________ _______________
John D. Carifa $0 $0 52 114
Robert C. Alexander 11,250 $11,250 1 1
David H. Dievler $5,265 $182,000 45 79
Charles H. Ferguson $8,750 $8,750 1 1
William H. Foulk, Jr. $15,427 $144,250 34 70
D. James Guzy $12,500 $12,500 1 1
Peter J. Powers $0 $0 1 1
Marshall C. Turner, Jr. $12,500 $12,500 1 1
As of October 15, 1997, the Directors and officers of
the Fund as a group owned less than 1% of the Advisor Class
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
17
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 Commission under the 1940 Act (the
"Rule 12b-1 Plan").
Distribution services fees are accrued daily and paid
monthly and are charged as expenses of the Fund as accrued. The
distribution services fees attributable to the Class B shares and
Class C shares are designed to permit an investor to purchase
such shares through broker-dealers without the assessment of an
initial sales charge, and at the same time to permit the
Principal Underwriter to compensate broker-dealers in connection
with the sale of such shares. In this regard, the purpose and
function of the combined contingent deferred sales charge and
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 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 and was
amended as of April 30, 1993 to permit the distribution of two
additional classes of shares, Class B shares and Class C shares
and July 11, 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
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 November 30, 1996,
the Fund paid distribution services fees for expenditures under
the Agreement to the Principal Underwriter with respect to
Class A in amounts aggregating $1,415,075, which constituted .30
of 1% of the Fund's Class A shares average daily net assets
during the period and the Adviser made payments from its own
resources as described above aggregating $718,894. Of the
$2,133,969 paid by the Fund and the Adviser under the Agreement,
18
$92,347 was spent on advertising, $54,144 on the printing and
mailing of prospectuses for persons other than current
shareholders, $953,095 for compensation to broker-dealers
(including $158,414 to the Fund's Principal Underwriter),
$645,926 for compensation to sales personnel and $388,457 was
spent on the printing of sales literature, due diligence, travel,
entertainment and other promotional expenses.
During the Fund's fiscal year ended November 30, 1996
distribution services fees for expenditures payable to the
Principal Underwriter amounted to, with respect to Class B
shares, $4,446,418 which constituted 1.00% of the Fund's Class B
shares average daily net assets during such fiscal period, and
the Adviser made payments from its own resources as described
above aggregating $11,504,998. Of the $15,951,416 paid by the
Fund and the Adviser under the Plan with respect to Class B
shares, $173,155 was spent on advertising, $84,941 was spent on
the printing and mailing of prospectuses for persons other than
current shareholders, $14,152,244 for compensation to
broker-dealers and other financial intermediaries (including
$301,434 to the Fund's Principal Underwriter), $478,018 for
compensation paid to wholesalers of the Principal Underwriter in
respect of sales of shares of the Fund, $656,789 for interest on
Class B shares financing and $406,269 was spent on the printing
of sales literature, travel, entertainment, due diligence and
other promotional expenses.
During the Fund's fiscal year ended November 30, 1996,
distribution services fees for expenditures payable to the
Principal Underwriter amounted to, with respect to Class C
shares, $732,390 which constituted 1.00% of the Fund's Class C
shares average daily net assets during such fiscal period, and
the Adviser made payments from its own resources aggregating
$493,140. Of the $1,225,530 paid by the Fund and the Adviser
under the Plan with respect to Class C shares, $34,222 was spent
on advertising, $18,425 was spent on the printing and mailing of
prospectuses for persons other than current shareholders,
$994,110 for compensation to broker-dealers and other financial
intermediaries (including $58,814 to the Fund's Principal
Underwriter), $96,951 for compensation paid to wholesalers of the
Principal Underwriter in respect of sales of shares of the Fund
and $81,822 was spent on the 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 of the Fund or by vote of the holders
of a majority of the outstanding voting securities (as defined in
the 1940 Act) of that class, and in either case, by a majority of
19
the Directors of the Fund who are not parties to the Agreement or
"interested persons," as defined in the 1940 Act, of any such
party (other than as directors of the Fund) and who have no
direct or indirect financial interest in the operation of the
Rule 12b-1 Plan or any agreement related thereto. Most recently
the continuance of the Agreement until December 31, 1998 was
approved 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 October 9, 1997.
In the event that the Agreement is terminated or not
continued with respect to the Class A shares, Class B shares,
Class C shares or Advisor Class shares, (i) no distribution
services fees (other than current amounts accrued but not yet
paid) would be owed by the Fund to the Principal Underwriter with
respect to that class, and (ii) the Fund would not be obligated
to pay the Principal Underwriter for any amounts expended under
the Agreement not previously recovered by the Principal
Underwriter from distribution services fees in respect of shares
of such class or through deferred sales charges.
All material amendments to the Agreement must be
approved by a vote of the Board of Directors or the holders of
the Fund's outstanding voting securities, voting separately by
class, and in either case by a majority of the disinterested
Directors, cast in person at a meeting called for the purpose of
voting on such approval; and the Agreement may not be amended in
order to increase materially the costs that the Fund may bear
pursuant to the Agreement without the approval of a majority of
the holders of the outstanding voting shares of the class or
classes affected. The Agreement may be terminated (a) by the
Fund without penalty at any time by a majority vote of the
holders of the outstanding voting securities of the Fund, voting
separately by class, or by a majority vote of the Directors who
are not "interested persons," as defined in the 1940 Act, or
(b) by the Principal Underwriter. To terminate the Agreement,
any party must give the other parties 60 days' written notice; to
terminate the Rule 12b-1 Plan only, the Fund need not give 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 shares and Class C shares is
higher than the transfer agency fee with respect to the Class A
20
shares and Advisor Class shares. For the fiscal year ended
November 30, 1996, the Fund paid Alliance Fund Services, Inc.
$1,493,231 for transfer agency services.
________________________________________________________________
PURCHASE OF SHARES
________________________________________________________________
The following information supplements that set forth in
the Fund's Prospectus under the heading "Purchase and Sale of
Shares -- How to Buy Shares."
General
Shares of the Fund are offered on a continuous basis at
a price equal to their net asset value plus an initial sales
charge at the time of purchase ("Class A shares"), with a
contingent deferred sales charge ("Class B shares"), without any
initial sales charge and, as long as the shares are held for one
year or more, without any contingent deferred sales charge
("Class C shares"), or, to investors eligible to purchase Advisor
Class shares, without any initial, contingent deferred or asset-
based sales charge, in each case as described below. Shares of
the Fund that are offered subject to a sales charge are offered
through (i) investment dealers that are members of the National
Association of Securities Dealers, Inc. and have entered into
selected dealer agreements with the Principal Underwriter
("selected dealers"), (ii) depository institutions and other
financial intermediaries or their affiliates, that have entered
into selected agent agreements with the Principal Underwriter
("selected agents") and (iii) the Principal Underwriter.
Advisor Class shares of the Fund may be purchased
and held solely (i) through accounts established under fee-based
programs, sponsored and maintained by registered broker-dealers
or other financial intermediaries and approved by the Principal
Underwriter, (ii) through self-directed defined contribution
employee benefit plans (e.g., 401(k) plans) that have at least
1,000 participants or $25 million in assets, or (iii) by the
categories of investors described in clauses (i) through (iv)
below under "--Sales at Net Asset Value" (other than officers,
directors and present and full-time employees of selected dealers
or agents, or relatives of such person, or any trust, individual
retirement account or retirement plan account for the benefit of
such relative, none of whom is eligible on the basis solely of
such status to purchase and hold Advisor Class shares), or (iv)
by directors and present or retired full-time employees of CB
Commercial Real Estate Group, Inc. Generally, a fee-based
program must charge an asset-based or other similar fee and must
invest at least $250,000 in Advisor Class shares of the Fund in
21
order to be approved by the Principal Underwriter for investment
in Advisor Class shares.
Investors may purchase shares of the Fund either through
selected broker-dealers, agents, financial intermediaries or
other financial representatives or directly through the Principal
Underwriter. A transaction, service, administrative or other
similar fee may be charged by your broker-dealer, agent,
financial intermediary or other financial representative with
respect to the purchase, sale or exchange of Class A, Class B,
Class C or Advisor Class shares made through such financial
representative. Such financial intermediaries may also impose
requirements with respect to the purchase, sale or exchange of
shares that are different from, or in addition to, those imposed
by the Fund, including requirements as to the minimum initial and
subsequent investment amounts. Sales personnel of selected
dealers and agents distributing the Fund's shares may receive
differing compensation for selling Class A, Class B, Class C or
Advisor Class shares.
The Fund may refuse any order for the purchase of
shares. The Fund reserves the right to suspend the sale of its
shares to the public in response to conditions in the securities
markets or for other reasons.
The public offering price of shares of the Fund is their
net asset value, plus, in the case of Class A shares, a sales
charge which will vary depending on the purchase alternative
chosen by the investor, as shown in the table below under
"Class A Shares." On each Fund business day on which a purchase
or redemption order is received by the Fund and trading in the
types of securities in which the Fund invests might materially
affect the value of Fund shares, the per share net asset value is
computed in accordance with the Fund's Articles of Incorporation
and By-Laws as of the next close of regular trading on the New
York Stock Exchange (the "Exchange") (currently 4:00 p.m. Eastern
time) by dividing the value of the Fund's total assets, less its
liabilities, by the total number of its shares then outstanding.
A Fund business day is any day on which the Exchange is open for
trading.
The respective per share net asset values of the
Class A, Class B, Class C and Advisor Class shares are expected
to be substantially the same. Under certain circumstances,
however, the per share net asset values of the Class B and
Class C shares may be lower than the per share net asset values
of the Class A and Advisor Class shares as a result of the
differential daily expense accruals of the distribution and
transfer agency fees applicable with respect to those classes of
shares. Even under those circumstances, the per share net asset
values of the four classes eventually will tend to converge
22
immediately after the payment of dividends, which will differ by
approximately the amount of the expense accrual differential
among the classes.
The Fund will accept unconditional orders for its shares
to be executed at the public offering price equal to their net
asset value next determined (plus applicable Class A sales
charges), as described below. Orders received by the Principal
Underwriter prior to the close of regular trading on the Exchange
on each day the Exchange is open for trading are priced at the
net asset value computed as of the close of regular trading on
the Exchange on that day (plus applicable Class A sales charges).
In the case of orders for purchase of shares placed through
selected dealers, agents or financial representatives, as
applicable, the applicable public offering price will be the net
asset value as so determined, but only if the selected dealer,
agent or financial representative receives the order prior to the
close of regular trading on the Exchange and transmits it to the
Principal Underwriter prior to 5:00 p.m. Eastern time. The
selected dealer, agent or financial representative, 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 "For Literature" telephone
number shown on the cover of this Statement of Additional
Information. Except with respect to certain omnibus accounts,
telephone purchase orders may not exceed $500,000. Payment for
shares purchased by telephone can be made only by electronic
funds transfer from a bank account maintained by the shareholder
at a bank that is a member of the National Automated Clearing
House Association ("NACHA"). If a shareholder's telephone
purchase request is received before 3:00 p.m. Eastern time on a
Fund business day, the order to purchase shares is automatically
placed the following Fund business day, and the applicable public
offering price will be the public offering price determined as of
the close of business on such following business day.
Full and fractional shares are credited to a
subscriber's account in the amount of his or her subscription.
23
As a convenience to the subscriber, and to avoid unnecessary
expense to the Fund, stock certificates representing shares of
the Fund are not issued except upon written request to the Fund
by the shareholder or his or her authorized selected dealer or
agent. This facilitates later redemption and relieves the
shareholder of the responsibility for and inconvenience of lost
or stolen certificates. No certificates are issued for
fractional shares, although such shares remain in the
shareholder's account on the books of the Fund.
In addition to the discount or commission paid to
dealers or agents, the Principal Underwriter from time to time
pays additional cash or other incentives to dealers or agents,
including EQ Financial Consultants, Inc., formerly Equico
Securities, Inc., an affiliate of the Principal Underwriter, in
connection with the sale of shares of the Fund. Such additional
amounts may be utilized, in whole or in part, to provide
additional compensation to registered representatives who sell
shares of the Fund. On some occasions, cash or other incentives
will be conditioned upon the sale of a specified minimum dollar
amount of the shares of the Fund and/or other Alliance Mutual
Funds, as defined below, during a specific period of time. On
some occasions, such cash or other incentives may take the form
of payment for attendance at seminars, meals, sporting events or
theater performances, or payment for travel, lodging and
entertainment incurred in connection with travel taken by persons
associated with a dealer or agent and their immediate family
members to urban or resort locations within or outside the United
States. Such dealer or agent may elect to receive cash
incentives of equivalent amount in lieu of such payments.
Class A, Class B, Class C and Advisor Class shares each
represent an interest in the same portfolio of investments of the
Fund, have the same rights and are identical in all respects,
except that (i) Class A shares bear the expense of the initial
sales charge (or contingent deferred sales charge, when
applicable) and Class B and Class C shares bear the expense of
the deferred sales charge, (ii) Class B shares and Class C shares
each bear the expense of a higher distribution services fee than
that borne by Class A shares, and Advisor Class shares do not
bear such a fee, (iii) Class B and Class C shares bear higher
transfer agency costs than that borne by Class A and Advisor
Class shares, (iv) each of Class A, Class B and Class C 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 and Advisor Class
24
shareholders and the Class A, Class B and Advisor Class
shareholders will vote separately by class, and (v) Class B and
Advisor Class shares are subject to a conversion feature. Each
class has different exchange privileges and certain different
shareholder service options available.
The Directors of the Fund have determined that currently
no conflict of interest exists between or among the Class A,
Class B, Class C and Advisor Class shares. On an ongoing basis,
the Directors of the Fund, pursuant to their fiduciary duties
under the 1940 Act and state law, will seek to ensure that no
such conflict arises.
Alternative Retail Purchase Arrangements--Class A, Class B and
Class C Shares**
The alternative purchase arrangements available with
respect to Class A shares, Class B shares and Class C shares
permit an investor to choose the method of purchasing shares that
is most beneficial given the amount of the purchase, the length
of time the investor expects to hold the shares, and other
circumstances. Investors should consider whether, during the
anticipated life of their investment in the Fund, the accumulated
distribution services fee and contingent deferred sales charge on
Class B shares prior to conversion, or the accumulated
distribution services fee and contingent deferred sales charge on
Class C shares, would be less than the initial sales charge and
accumulated distribution services fee on Class A shares purchased
at the same time, and to what extent such differential would be
offset by the higher return of Class A shares. Class A shares
will normally be more beneficial than Class B shares to the
investor who qualifies for reduced initial sales charges on
Class A shares, as described below. In this regard, the
Principal Underwriter will reject any order (except orders from
certain retirement plans) 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 $1,000,000 for Class C shares.
Class A shares are subject to a lower distribution
services fee and, accordingly, pay correspondingly higher
dividends per share than Class B shares or Class C shares.
However, because initial sales charges are deducted at the time
of purchase, investors purchasing Class A shares would not have
all their funds invested initially and, therefore, would
initially own fewer shares. Investors not qualifying for reduced
____________________
** Advisor Class shares are sold only to investors described
above in this section under "--General."
25
initial sales charges who expect to maintain their investment for
an extended period of time might consider purchasing Class A
shares because the accumulated continuing distribution charges on
Class B shares or Class C shares may exceed the initial sales
charge on Class A shares during the life of the investment.
Again, however, such investors must weigh this consideration
against the fact that, because of such initial sales charges, not
all their funds will be invested initially.
Other investors might determine, however, that it would
be more advantageous to purchase Class B shares or Class C shares
in order to have all their funds invested initially, although
remaining subject to higher continuing distribution charges and,
being subject to a contingent deferred sales charge for a four-
year and one-year period, respectively. For example, based on
current fees and expenses, an investor subject to the 4.25%
initial sales charge would have to hold his or her investment
approximately seven years for the Class C distribution services
fee to exceed the initial sales charge plus the accumulated
distribution services fee of Class A shares. In this example, an
investor intending to maintain his or her investment for a longer
period might consider purchasing Class A shares. This example
does not take into account the time value of money, which further
reduces the impact of the Class C distribution services fees on
the investment, fluctuations in net asset value or the effect of
different performance assumptions.
Those investors who prefer to have all of their funds
invested initially but may not wish to retain Fund shares for the
four-year period during which Class B shares are subject to a
contingent deferred sales charge may find it more advantageous to
purchase Class C shares.
During the Fund's fiscal years ended November 30, 1996
and November 30, 1995, and for the fiscal period ended November
30, 1994, the aggregate amounts of underwriting commission
payable with respect to shares of the Fund were $9,023,480,
$7,533,725 and $483,141, respectively. Of that amount, the
Principal Underwriter, received the amounts of $448,982, $440,810
and $20,381, respectively, representing that portion of the sales
charges paid on shares of the Fund sold during the year which was
not reallowed to selected dealers (and was, accordingly, retained
by the Principal Underwriter). During the Fund's fiscal years
ended in 1996 and 1995 and for the fiscal period ending in 1994,
the Principal Underwriter received contingent deferred sales
charges of $-0-, $-0- and $-0-, respectively, on Class A Shares,
$1,108,455, $367,410 and $27,593 respectively on Class B Shares
and $-0-, $-0- and $-0-, respectively on Class C Shares.
26
Class A Shares
The public offering price of Class A shares is the net
asset value plus a sales charge, as set forth below.
Sales Charge
Discount or
Commission
As % of to Dealers
As % of the or Agents
Net Public As % of
Amount of Amount Offering Offering
Purchase Invested Price Price
________ ________ ________ ____________
Less than
$100,000 4.44% 4.25% 4.00%
$100,000 but less
than $250,000 3.36 3.25 3.00
$250,000 but less
than $500,000 2.30 2.25 2.00
$500,000 but less
than $1,000,000* 1.78 1.75 1.50
_________________
* There is no initial sales charge on transactions of $1,000,000
or more.
With respect to purchases of $1,000,000 or more, Class A
shares redeemed within one year of purchase will be subject to a
contingent deferred sales charge equal to 1% of the lesser of the
cost of the shares being redeemed or their net asset value at the
time of redemption. Accordingly, no sales charge will be imposed
on increases in net asset value above the initial purchase price.
In addition, no charge will be assessed on shares derived from
reinvestment of dividends or capital gains distributions. The
contingent deferred sales charge on Class A shares will be waived
on certain redemptions, as described below under "--Class B
shares." In determining the contingent deferred sales charge
applicable to a redemption of Class A shares, it will be assumed
that the redemption is, first, of any shares that are not subject
to a contingent deferred sales charge (for example, because an
initial sales charge was paid with respect to the shares, or they
have been held beyond the period during which the charge applies
or were acquired upon the reinvestment of dividends and
distributions) and, second, of shares held longest during the
time they are subject to the sales charge. Proceeds from the
contingent deferred sales charge on Class A shares are paid to
the Principal Underwriter and are used by the Principal
27
Underwriter to defray the expenses of the Principal Underwriter
related to providing distribution-related services to the Fund in
connection with the sales of Class A shares, such as the payment
of compensation to selected dealers or agents for selling Class A
shares. With respect to purchases of $1,000,000 or more made
through selected dealers or agents, the Adviser may, pursuant to
the Distribution Services Agreement described above, pay such
dealers or agents from its own resources a fee of up to 1% of the
amount invested to compensate such dealers or agents for their
distribution assistance in connection with such purchases.
No initial sales charge is imposed on Class A shares
issued (i) pursuant to the automatic reinvestment of income
dividends or capital gains distributions, (ii) in exchange for
Class A shares of other "Alliance Mutual Funds" (as that term is
defined under "Combined Purchase Privilege" below), except that
an initial sales charge will be imposed on Class A shares issued
in exchange for Class A shares of AFD Exchange Reserves ("AFDER")
that were purchased for cash without the payment of an initial
sales charge and without being subject to a contingent deferred
sales charge or (iii) upon the automatic conversion of Class B
shares or Advisor Class shares as described below under "--Class
B Shares-- Conversion Feature" and "--Conversion of Advisor Class
Shares to Class A Shares." The Fund receives the entire net
asset value of its Class A shares sold to investors. The
Principal Underwriter's commission is the sales charge shown
above less any applicable discount or commission "reallowed" to
selected dealers and agents. The Principal Underwriter will
reallow discounts to selected dealers and agents in the amounts
indicated in the table above. In this regard, the Principal
Underwriter may elect to reallow the entire sales charge to
selected dealers and agents for all sales with respect to which
orders are placed with the Principal Underwriter. A selected
dealer who receives reallowance in excess of 90% of such a sales
charge may be deemed to be an "underwriter" under the Securities
Act.
Set forth below is an example of the method of computing
the offering price of the Class A shares. The example assumes a
purchase of Class A shares of the Fund aggregating less than
$100,000 subject to the schedule of sales charges set forth above
at a price based upon the net asset value of Class A shares of
the Fund on May 31, 1997.
Net Asset Value per Class A
Share at May 31, 1997 $51.23
Per Share Sales Charge - 4.25%
of offering price (4.43% of
net asset value per share) $ 2.27
Class A Per Share Offering Price
28
to the Public $53.50
Investors choosing the initial sales charge alternative
may under certain circumstances be entitled to pay (i) no initial
sales charge (but be subject in most such cases to a contingent
deferred sales charge) or (ii) a reduced initial sales charge.
The circumstances under which investors may pay a reduced initial
sales charge are described below.
Combined Purchase Privilege. Certain persons may
qualify for the sales charge reductions indicated in the schedule
of such charges above by combining purchases of shares of the
Fund into a single "purchase," if the resulting "purchase" totals
at least $100,000. The term "purchase" refers to: (i) a single
purchase by an individual, or to concurrent purchases, which in
the aggregate are at least equal to the prescribed amounts, by an
individual, his or her spouse and their children under the age of
21 years purchasing shares of the Fund for his, her or their own
account(s); (ii) a single purchase by a trustee or other
fiduciary purchasing shares for a single trust, estate or single
fiduciary account although more than one beneficiary is involved;
or (iii) a single purchase for the employee benefit plans of a
single employer. The term "purchase" also includes purchases by
any "company," as the term is defined in the 1940 Act, but does
not include purchases by any such company which has not been in
existence for at least six months or which has no purpose other
than the purchase of shares of the Fund or shares of other
registered investment companies at a discount. The term
"purchase" does not include purchases by any group of individuals
whose sole organizational nexus is that the participants therein
are credit card holders of a company, policy holders of an
insurance company, customers of either a bank or broker-dealer or
clients of an investment adviser. A "purchase" may also include
shares, purchased at the same time through a single selected
dealer or agent, of any other "Alliance Mutual Fund." Currently,
the Alliance Mutual Funds include:
AFD Exchange Reserves
The Alliance Fund, Inc.
Alliance All-Asia Investment Fund, Inc.
Alliance Balanced Shares, Inc.
Alliance Bond Fund, Inc.
-Corporate Bond Portfolio
-U.S. Government Portfolio
Alliance Developing Markets Fund, Inc.
Alliance Global Dollar Government Fund, Inc.
Alliance Global Environment Fund, Inc.
Alliance Global Small Cap Fund, Inc.
Alliance Global Strategic Income Trust, Inc.
Alliance Greater China '97 Fund, Inc.
Alliance Growth and Income Fund, Inc.
29
Alliance High Yield Fund, Inc.
Alliance Income Builder Fund, Inc.
Alliance International Fund
Alliance Limited Maturity Government Fund, Inc.
Alliance Mortgage Securities Income Fund, Inc.
Alliance Multi-Market Strategy Trust, Inc.
Alliance Municipal Income Fund, Inc.
-California Portfolio
-Insured California Portfolio
-Insured National Portfolio
-National Portfolio
-New York Portfolio
Alliance Municipal Income Fund II
-Arizona Portfolio
-Florida Portfolio
-Massachusetts Portfolio
-Michigan Portfolio
-Minnesota Portfolio
-New Jersey Portfolio
-Ohio Portfolio
-Pennsylvania Portfolio
-Virginia Portfolio
Alliance New Europe Fund, Inc.
Alliance North American Government Income Trust, Inc.
Alliance Premier Growth Fund, Inc.
Alliance Quasar Fund, Inc.
Alliance Real Estate Investment Fund, Inc.
Alliance/Regent Sector Opportunity Fund, Inc.
Alliance Short-Term Multi-Market Trust, Inc.
Alliance Technology Fund, Inc.
Alliance Utility Income Fund, Inc.
Alliance World Income Trust, Inc.
Alliance Worldwide Privatization Fund, Inc.
The Alliance Portfolios
-Alliance Growth Fund
-Alliance Conservative Investors Fund
-Alliance Growth Investors Fund
-Alliance Strategic Balanced Fund
-Alliance Short-Term U.S. Government Fund
Prospectuses for the Alliance Mutual Funds may be
obtained without charge by contacting Alliance Fund Services,
Inc. at the address or the "For Literature" telephone number
shown on the front cover of this Statement of Additional
Information.
Cumulative Quantity Discount (Right of Accumulation). An
investor's purchase of additional Class A shares of the Fund may
qualify for a Cumulative Quantity Discount. The applicable sales
charge will be based on the total of:
30
(i) the investor's current purchase;
(ii) the net asset value (at the close of business on
the previous day) of (a) all shares of the Fund held by the
investor and (b) all shares of any other Alliance Mutual Fund
held by the investor; and
(iii) the net asset value of all shares described in
paragraph (ii) owned by another shareholder eligible to combine
his or her purchase with that of the investor into a single
"purchase" (see above).
For example, if an investor owned shares of an Alliance
Mutual Fund worth $200,000 at their then current net asset value
and, subsequently, purchased Class A shares of the Fund worth an
additional $100,000, the sales charge for the $100,000 purchase
would be at the 2.25% rate applicable to a single $300,000
purchase of shares of the Fund, rather than the 3.25% rate.
To qualify for the Combined Purchase Privilege or to
obtain the Cumulative Quantity Discount on a purchase through a
selected dealer or agent, the investor or selected dealer or
agent must provide the Principal Underwriter with sufficient
information to verify that each purchase qualifies for the
privilege or discount.
Statement of Intention. Class A investors may also
obtain the reduced sales charges shown in the table above by
means of a written Statement of Intention, which expresses the
investor's intention to invest not less than $100,000 within a
period of 13 months in Class A shares (or Class A, Class B,
Class C and/or Advisor Class shares) of the Fund or any other
Alliance Mutual Fund. Each purchase of shares under a Statement
of Intention will be made at the public offering price or prices
applicable at the time of such purchase to a single transaction
of the dollar amount indicated in the Statement of Intention. At
the investor's option, a Statement of Intention may include
purchases of shares of the Fund or any other Alliance Mutual Fund
made not more than 90 days prior to the date that the investor
signs the Statement of Intention; however, the 13-month period
during which the Statement of Intention is in effect will begin
on the date of the earliest purchase to be included.
Investors qualifying for the Combined Purchase Privilege
described above may purchase shares of the Alliance Mutual Funds
under a single Statement of Intention. For example, if at the
time an investor signs a Statement of Intention to invest at
least $100,000 in Class A shares of the Fund, the investor and
the investor's spouse each purchase shares of the Fund worth
$20,000 (for a total of $40,000), it will be necessary to invest
only a total of $60,000 during the following 13 months in shares
31
of the Fund or any other Alliance Mutual Fund, to qualify for the
3.25% sales charge on the total amount being invested (the sales
charge applicable to an investment of $100,000).
The Statement of Intention is not a binding obligation
upon the investor to purchase the full amount indicated. The
minimum initial investment under a Statement of Intention is 5%
of such amount. Shares purchased with the first 5% of such
amount will be held in escrow (while remaining registered in the
name of the investor) to secure payment of the higher sales
charge applicable to the shares actually purchased if the full
amount indicated is not purchased, and such escrowed shares will
be involuntarily redeemed to pay the additional sales charge, if
necessary. Dividends on escrowed shares, whether paid in cash or
reinvested in additional Fund shares, are not subject to escrow.
When the full amount indicated has been purchased, the escrow
will be released. To the extent that an investor purchases more
than the dollar amount indicated on the Statement of Intention
and qualifies for a further reduced sales charge, the sales
charge will be adjusted for the entire amount purchased at the
end of the 13-month period. The difference in the sales charge
will be used to purchase additional shares of the Fund subject to
the rate of the sales charge applicable to the actual amount of
the aggregate purchases.
Investors wishing to enter into a Statement of Intention
in conjunction with their initial investment in Class A shares of
the Fund should complete the appropriate portion of the
Subscription Application found in the Prospectus while current
Class A shareholders desiring to do so can obtain a form of
Statement of Intention by contacting Alliance Fund Services, Inc.
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 the sales charges set forth in this
Statement of Additional Information, to an investment 13 times
larger than such initial purchase. The sales charge applicable
to each succeeding monthly purchase will be that normally
applicable, under such schedule, to an investment equal to the
sum of (i) the total purchase previously made during the 13-month
period and (ii) the current month's purchase multiplied by the
number of months (including the current month) remaining in the
13-month period. Sales charges previously paid during such
period will not be retroactively adjusted on the basis of later
purchases.
32
Reinstatement Privilege. A shareholder who has caused
any or all of his or her Class A or Class B shares of the Fund to
be redeemed or repurchased may reinvest all or any portion of the
redemption or repurchase proceeds in Class A shares of the Fund
at net asset value without any sales charge, provided that (i)
such reinvestment is made within 120 calendar days after the
redemption or repurchase date and (ii) for Class B shares, a
contingent deferred sales charge has been paid and the Principal
Underwriter has approved, at its discretion, the reinvestment of
such shares. Shares are sold to a reinvesting shareholder at the
net asset value next determined as described above. A
reinstatement pursuant to this privilege will not cancel the
redemption or repurchase transaction; therefore, any gain or loss
so realized will be recognized for federal income tax purposes
except that no loss will be recognized to the extent that the
proceeds are reinvested in shares of the Fund within 30 calendar
days after the redemption or repurchase transaction. Investors
may exercise the reinstatement privilege by written request sent
to the Fund at the address shown on the cover of this Statement
of Additional Information.
Sales at Net Asset Value. The Fund may sell its Class A
shares at net asset value (i.e., without an initial sales charge)
and without a contingent deferred sales charge to certain
categories of investors including: (i) investment management
clients of the Adviser or its affiliates; (ii) officers and
present or former Directors of the Fund; present or former
directors and trustees of 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 full-time employees
of selected dealers or agents; or the spouse, sibling, direct
ancestor or direct descendant (collectively, "relatives") of any
such person; or any trust, individual retirement account or
retirement plan account for the benefit of any such person or
relative; or the estate of any such person or relative, if such
shares are purchased for investment purposes (such shares may not
be resold except to the Fund); (iii) the Adviser, the Principal
Underwriter, Alliance Fund Services, Inc. and their affiliates;
certain employee benefit plans for employees of the Adviser, the
Principal Underwriter, Alliance Fund Services, Inc. and their
affiliates; (iv) registered investment advisers or other
financial intermediaries who charge a management, consulting or
other fee for their service and who purchase shares through a
broker or agent approved by the Principal Underwriter and clients
of such registered investment advisers or financial
intermediaries whose accounts are linked to the master account of
such investment adviser or financial intermediary on the books of
such approved broker or agent; (v) persons participating in a
33
fee-based program, sponsored and maintained by a registered
broker-dealer or other financial intermediary and approved by the
Principal Underwriter, pursuant to which such persons pay an
asset-based fee to such broker-dealer or financial intermediary,
or its affiliate or agent, for service in the nature of
investment advisory or administrative services; (vi) persons who
establish to the Principal Underwriter's satisfaction that they
are investing, within such time period as may be designated by
the Principal Underwriter, proceeds of redemption of shares of
such other registered investment companies as may be designated
from time to time by the Principal Underwriter; (vii) employer-
sponsored qualified pension or profit-sharing plans (including
Section 401(k) plans), custodial accounts maintained pursuant to
Section 403(b)(7) retirement plans and individual retirement
accounts (including individual retirement accounts to which
simplified employee pension ("SEP") contributions are made), if
such plans or accounts are established or administered under
programs sponsored by administrators or other persons that have
been approved by the Principal Underwriter; (viii) a unit
investment trust organized and sponsored by Prudential Securities
Incorporated, the portfolio of which consists of Class A shares
of the Fund and stripped U.S. Treasury issued notes or bonds
bearing no current interest (the "Trust"); and (ix) unit holders
of the Trust investing the proceeds of cash distributions from
the Trust under circumstances described in the prospectus of the
Trust, including distributions upon the termination of the Trust
provided that the proceeds of such termination are invested in
the Fund within 30 days of such termination and that the Fund's
principal underwriter is provided with evidence that establishes
to the Fund's satisfaction that the investment in the Fund is
being made exclusively from the proceeds from such distribution.
Class B Shares
Investors may purchase Class B shares at the public
offering price equal to the net asset value per share of the
Class B shares on the date of purchase without the imposition of
a sales charge at the time of purchase. The Class B shares are
sold without an initial sales charge so that the Fund will
receive the full amount of the investor's purchase payment.
Proceeds from the contingent deferred sales charge on
Class B shares are paid to the Principal Underwriter and are used
by the Principal Underwriter to defray the expenses of the
Principal Underwriter related to providing distribution-related
services to the Fund in connection with the sale of the Class B
shares, such as the payment of compensation to selected dealers
and agents for selling Class B shares. The combination of the
contingent deferred sales charge and the distribution services
fee enables the Fund to sell the Class B shares without a sales
charge being deducted at the time of purchase. The higher
34
distribution services fee incurred by Class B shares will cause
such shares to have a higher expense ratio and to pay lower
dividends than those related to Class A shares.
Contingent Deferred Sales Charge. Class B shares that
are redeemed within four years of purchase will be subject to a
contingent deferred sales charge at the rates set forth below
charged as a percentage of the dollar amount subject thereto. The
charge will be assessed on an amount equal to the lesser of the
cost of the shares being redeemed or their net asset value at the
time of redemption. Accordingly, no sales charge will be imposed
on increases in net asset value above the initial purchase price.
In addition, no charge will be assessed on shares derived from
reinvestment of dividends or capital gains distributions.
To illustrate, assume that an investor purchased 100
Class B shares at $10 per share (at a cost of $1,000) and in the
second year after purchase, the net asset value per share is $12
and, during such time, the investor has acquired 10 additional
Class B shares upon dividend reinvestment. If at such time the
investor makes his or her first redemption of 50 Class B shares
(proceeds of $600), 10 Class B shares will not be subject to the
charge because of dividend reinvestment. With respect to the
remaining 40 Class B shares, the charge is applied only to the
original cost of $10 per share and not to the increase in net
asset value of $2 per share. Therefore, $400 of the $600
redemption proceeds will be charged at a rate of 3.0% (the
applicable rate in the second year after purchase, as set forth
below).
The amount of the contingent deferred sales charge, if
any, will vary depending on the number of years from the time of
payment for the purchase of Class B shares until the time of
redemption of such shares.
Contingent Deferred Sales Charge as a %
of Dollar Amount Subject to Charge
Shares Purchased Shares Purchased
on or before on or after
Year Since Purchase November 19, 1993 November 19, 1993
First 5.50% 4.00%
Second 4.50% 3 00%
Third 3.50% 2.00
Fourth 2.50% 1.00%
Fifth 1.50% 1.00%
Sixth 0.50% None
Seventh and thereafter None None
35
In determining the contingent deferred sales charge
applicable to a redemption of Class B shares, it will be assumed
that the redemption is, first, of any shares that were acquired
upon the reinvestment of dividends or distributions and, second,
of shares held longest during the time they are subject to the
sales charge. When shares acquired in an exchange are redeemed,
the applicable contingent deferred sales charge and conversion
schedules will be the schedules that applied at the time of the
purchase of shares of the corresponding class of the Alliance
Mutual Fund originally purchased by the shareholder.
The contingent deferred sales charge is waived on
redemptions of shares (i) following the death or disability, as
defined in the Internal Revenue Code of 1986, as amended (the
"Code"), of a shareholder, (ii) to the extent that the redemption
represents a minimum required distribution from an individual
retirement account or other retirement plan to a shareholder who
has attained the age of 70-1/2, (iii) that had been purchased by
present or former Directors of the Fund, by the relative of any
such person, by any trust, individual retirement account or
retirement plan account for the benefit of any such person or
relative or by the estate of any such person or relative, or
(iv) pursuant to a systematic withdrawal plan (see "Shareholder
Services--Systematic Withdrawal Plan" below).
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
36
tax law. The conversion of Class B shares to Class A shares may
be suspended if such an opinion is no longer available at the
time such conversion is to occur. In that event, no further
conversions of Class B shares would occur, and shares might
continue to be subject to the higher distribution services fee
for an indefinite period which may extend beyond the period
ending eight years after the end of the calendar month in which
the shareholder's purchase order was accepted.
Class C Shares
Investors may purchase Class C shares at the public
offering price equal to the net asset value per share of the
Class C shares on the date of purchase without the imposition of
a sales charge either at the time of purchase or, as long as the
shares are held for one year or more, upon redemption. Class C
shares are sold without an initial sales charge so that the Fund
will receive the full amount of the investor's purchase payment
and, as long as the shares are held for one year or more, without
a contingent deferred sales charge so that the investor will
receive as proceeds upon redemption the entire net asset value of
his or her Class C shares. The Class C distribution services fee
enables the Fund to sell Class C shares without either an initial
or contingent deferred sales charge, as long as the shares are
held for one year or more. Class C shares do not convert to any
other class of shares of the Fund and incur higher distribution
services fees and transfer agency costs than Class A shares and
Advisor Class shares, and will thus have a higher expense ratio
and pay correspondingly lower dividends than Class A shares and
Advisor Class shares.
Class C shares that are redeemed within one year of
purchase will be subject to a contingent deferred sales charge of
1%, charged as a percentage of the dollar amount subject thereto.
The charge will be assessed on an amount equal to the lesser of
the cost of the shares being redeemed or their net asset value at
the time of redemption. Accordingly, no sales charge will be
imposed on increases in net asset value above the initial
purchase price. In addition, no charge will be assessed on shares
derived from reinvestment of dividends or capital gains
distributions. The contingent deferred sales charge on Class C
shares will be waived on certain redemptions, as described above
under "--Class B shares." In determining the contingent deferred
sales charge applicable to a redemption of Class C shares, it
will be assumed that the redemption is, first, of any shares that
are not subject to a contingent deferred sales charge (for
example, because the shares have been held beyond the period
during which the charge applies or were acquired upon the
reinvestment of dividends or distributions) and, second, of
shares held longest during the time they are subject to the sales
charge.
37
Proceeds from the contingent deferred sales charge are
paid to the Principal Underwriter and are used by the Principal
Underwriter to defray the expenses of the Principal Underwriter
related to providing distribution-related services to the Fund in
connection with the sale of the Class C shares, such as the
payment of compensation to selected dealers and agents for
selling Class C shares. The combination of the contingent
deferred sales charge and the distribution services fee enables
the Fund to sell the Class C shares without a sales charge being
deducted at the time of purchase. The higher distribution
services fee incurred by Class C shares will cause such shares to
have a higher expense ratio and to pay lower dividends than those
related to Class A shares and Advisor Class shares.
Conversion of Advisor Class Shares to Class A Shares
Advisor Class shares may be held solely through the fee-
based program accounts and employee benefit plans and registered
investment advisory or other financial intermediary relationships
described above under "Purchase of Shares--General," and by
investment advisory clients of, and by certain other persons
associated with, the Adviser and its affiliates or the Fund. If
(i) a holder of Advisor Class shares ceases to participate in the
fee-based program or plan, or to be associated with the
investment adviser or financial intermediary 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
38
to Class A shares may be suspended if such an opinion is no
longer available at the time such conversion is to occur. In
that event, the Advisor Class shareholder would be required to
redeem his or her Advisor Class shares, which would constitute a
taxable event under federal income tax law.
________________________________________________________________
REDEMPTION AND REPURCHASE OF SHARES
________________________________________________________________
The following information supplements that set forth in
the Fund's Prospectus under the heading "Purchase and Sale of
Shares--How to Sell Shares." If you are an Advisor Class
shareholder through an account established under a fee-based
program your fee-based program may impose requirements with
respect to the purchase, sale or exchange of Advisor Class shares
of the Fund that are different from those described herein. A
transaction fee may be charged by your financial representative
with respect to the purchase, sale or exchange of Advisor Class
shares made through such financial representative.
Redemption
Subject only to the limitations described below, the
Fund's Articles of Incorporation require that the Fund redeem the
shares tendered to it, as described below, at a redemption price
equal to their net asset value as next computed following the
receipt of shares tendered for redemption in proper form. Except
for any contingent deferred sales charge which may be applicable
to Class A shares, Class B shares or Class C shares, there is no
redemption charge. Payment of the redemption price will be made
within seven days after the Fund's receipt of such tender for
redemption. If a shareholder is in doubt about what documents
are required by his or her fee-based program or employee benefit
plan, the shareholder should contact his or her financial
representative.
The right of redemption may not be suspended or the date
of payment upon redemption postponed for more than seven days
after shares are tendered for redemption, except for any period
during which the Exchange is closed (other than customary weekend
and holiday closings) or during which the Commission determines
that trading thereon is restricted, or for any period during
which an emergency (as determined by the Commission) exists as a
result of which disposal by the Fund of securities owned by it is
not reasonably practicable or as a result of which it is not
reasonably practicable for the Fund fairly to determine the value
of its net assets, or for such other periods as the Commission
may by order permit for the protection of security holders of the
Fund.
39
Payment of the redemption price will be made in cash.
The value of a shareholder's shares on redemption or repurchase
may be more or less than the cost of such shares to the
shareholder, depending upon the market value of the Fund's
portfolio securities at the time of such redemption or
repurchase. Redemption proceeds on Class A, Class B and Class C
shares will reflect the deduction of the contingent deferred
sales charge, if any. Payment received by a shareholder upon
redemption or repurchase of his or her shares, assuming the
shares constitute capital assets in his or her hands, will result
in long-term or short-term capital gain (or loss) depending upon
the shareholder's holding period and basis in respect of the
shares redeemed.
To redeem shares of the Fund for which no stock
certificates have been issued, the registered owner or owners
should forward a letter to the Fund containing a request for
redemption. The signature or signatures on the letter must be
guaranteed by an "eligible guarantor institution" as defined in
Rule 17Ad-15 under the Securities Exchange Act of 1934, as
amended.
To redeem shares of the Fund represented by stock
certificates, the investor should forward the appropriate stock
certificate or certificates, endorsed in blank or with blank
stock powers attached, to the Fund with the request that the
shares represented thereby, or a specified portion thereof, be
redeemed. The stock assignment form on the reverse side of each
stock certificate surrendered to the Fund for redemption must be
signed by the registered owner or owners exactly as the
registered name appears on the face of the certificate or,
alternatively, a stock power signed in the same manner may be
attached to the stock certificate or certificates or, where
tender is made by mail, separately mailed to the Fund. The
signature or signatures on the assignment form must be guaranteed
in the manner described above.
Telephone Redemption by Electronic Funds Transfer. Each
Fund shareholder is entitled to request redemption by Electronic
Funds Transfer once in any 30-day period (except for certain
omnibus accounts) of shares for which no stock certificates have
been issued by telephone at 800-221-5672 by a shareholder who has
completed the appropriate portion of the Subscription Application
or, in the case of an existing shareholder, an "Autosell"
application obtained from Alliance Fund Services, Inc. A
telephone redemption request may not exceed $100,000 (except for
certain omnibus accounts), and must be made by 4:00 p.m. Eastern
time on a Fund business day as defined above. Proceeds of
telephone redemptions will be sent by electronic funds transfer
to a shareholder's designated bank account at a bank selected by
the shareholder that is a member of the NACHA.
40
Telephone Redemption by Check. Except for certain
omnibus accounts or as noted below, each Fund shareholder is
eligible to request redemption by check, once in any 30-day
period, of Fund shares for which no stock certificates have been
issued by telephone at 800-221-5672 before 4:00 p.m. Eastern time
on a Fund business day in an amount not exceeding $50,000.
Proceeds of such redemptions are remitted by check to the
shareholder's address of record. Telephone redemption by check is
not available with respect to shares (i) for which certificates
have been issued, (ii) held in nominee or "street name" accounts,
(iii) held by a shareholder who has changed his or her address of
record within the preceding 30 calendar days or (iv) held in any
retirement plan account. A shareholder otherwise eligible for
telephone redemption by check may cancel the privilege by written
instruction to Alliance Fund Services, Inc., or by checking the
appropriate box on the Subscription Application found in the
Prospectus.
Telephone Redemptions -- General. During periods of
drastic economic or market developments, such as the market break
of October 1987, it is possible that shareholders would have
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
41
the close of regular trading on the Exchange on any day will be
executed at the net asset value determined as of such close of
regular trading on that day if received by the Principal
Underwriter prior to its close of business on that day (normally
5:00 p.m. Eastern time). The financial intermediary or selected
dealer or agent is responsible for transmitting the request to
the Principal Underwriter by 5:00 p.m. If the financial
intermediary or selected dealer or agent fails to do so, the
shareholder's right to receive that day's closing price must be
settled between the shareholder and the dealer or agent. A
shareholder may offer shares of the Fund to the Principal
Underwriter either directly or through a selected dealer or
agent. Neither the Fund nor the Principal Underwriter charges a
fee or commission in connection with the repurchase of shares
(except for the contingent deferred sales charge, if any, with
respect to Class A, Class B and Class C shares). Normally, if
shares of the Fund are offered through a financial intermediary
or selected dealer or agent, the repurchase is settled by the
shareholder as an ordinary transaction with or through the
selected dealer or agent, who may charge the shareholder for this
service. The repurchase of shares of the Fund as described above
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
42
herein. A transaction fee may be charged by your financial
representative with respect to the purchase, sale or exchange of
Advisor Class shares made through such financial representative.
Automatic Investment Program
Investors may purchase shares of the Fund through an
automatic investment program utilizing electronic funds transfer
drawn on the investor's own bank account. Under such a program,
pre-authorized monthly drafts for a fixed amount (at least $25)
are used to purchase shares through the selected dealer or
selected agent designated by the investor at the public offering
price next determined after the Principal Underwriter receives
the proceeds from the investor's bank. In electronic form,
drafts can be made on or about a date each month selected by the
shareholder. Investors wishing to establish an automatic
investment program in connection with their initial investment
should complete the appropriate portion of the Subscription
Application found in the Prospectus. Current shareholders should
contact Alliance Fund Services, Inc. at the address or telephone
numbers shown on the cover of this Statement of Additional
Information to establish an automatic investment program.
Exchange Privilege
You may exchange your investment in the Fund for shares
of the same class of other Alliance Mutual Funds (including AFD
Exchange Reserves, a money market fund managed by the Adviser).
In addition, (i) present officers and full-time employees of the
Adviser, (ii) present Directors or Trustees of any Alliance
Mutual Fund and (iii) certain employee benefit plans for
employees of the Adviser, the Principal Underwriter, Alliance
Fund Services, Inc. and their affiliates may, on a tax-free
basis, exchange Class A shares of the Fund for Advisor Class
shares of the Fund. Exchanges of shares are made at the net
asset value next determined and without sales or service charges.
Exchanges may be made by telephone or written request. Telephone
exchange requests must be received by Alliance Fund Services,
Inc. by 4:00 p.m. Eastern time on a Fund business day in order to
receive that day's net asset value.
Shares will continue to age without regard to exchanges
for purpose of determining the CDSC, if any, upon redemption and,
in the case of Class B shares, for the purpose of conversion to
Class A shares. After an exchange, your Class B shares will
automatically convert to Class A shares in accordance with the
conversion schedule applicable to the Class B shares of the
Alliance Mutual Fund you originally purchased for cash ("original
shares"). When redemption occurs, the CDSC applicable to the
original shares is applied.
43
Please read carefully the prospectus of the mutual fund
into which you are exchanging before submitting the request.
Call Alliance Fund Services, Inc. at 800-221-5672 to exchange
uncertificated shares. Except with respect to exchanges of Class
A shares of the Fund for Advisor Class shares of the Fund,
exchanges of shares as described above in this section are
taxable transactions for federal income tax purposes. The
exchange service may be changed, suspended, or terminated on 60
days' written notice.
All exchanges are subject to the minimum investment
requirements and any other applicable terms set forth in the
Prospectus for the Alliance Mutual Fund whose shares are being
acquired. An exchange is effected through the redemption of the
shares tendered for exchange and the purchase of shares being
acquired at their respective net asset values as next determined
following receipt by the Alliance Mutual Fund whose shares are
being exchanged of (i) proper instructions and all necessary
supporting documents as described in such fund's Prospectus, or
(ii) a telephone request for such exchange in accordance with the
procedures set forth in the following paragraph. Exchanges
involving the redemption of shares recently purchased by check
will be permitted only after the Alliance Mutual Fund whose
shares have been tendered for exchange is reasonably assured that
the check has cleared, normally up to 15 calendar days following
the purchase date.
Each Fund shareholder, and the shareholder's selected
dealer, agent or financial representative, as applicable, are
authorized to make telephone requests for exchanges unless
Alliance Fund Services, Inc. receives written instruction to the
contrary from the shareholder, or the shareholder declines the
privilege by checking the appropriate box on the Subscription
Application found in the Prospectus. Such telephone requests
cannot be accepted with respect to shares then represented by
stock certificates. Shares acquired pursuant to a telephone
request for exchange will be held under the same account
registration as the shares redeemed through such exchange.
Eligible shareholders desiring to make an exchange
should telephone Alliance Fund Services, Inc. with their account
number and other details of the exchange, at (800) 221-5672
before 4:00 p.m. Eastern time on a Fund business day as defined
above. Telephone requests for exchange received before 4:00 p.m.
Eastern time on a Fund business day will be processed as of the
close of business on that day. During periods of drastic
economic or market developments, such as the market break of
October 1987, it is possible that shareholders would have
difficulty in reaching Alliance Fund Services, Inc. by telephone
(although no such difficulty was apparent at any time in
connection with the 1987 market break). If a shareholder were to
44
experience such difficulty, the shareholder should issue written
instructions to Alliance Fund Services, Inc. at the address shown
on the cover of this Statement of Additional Information.
A shareholder may elect to initiate a monthly "Auto
Exchange" whereby a specified dollar amount's worth of his or her
Fund shares (minimum $25) is automatically exchanged for shares
of another Alliance Mutual Fund. Auto Exchange transactions
normally occur on the 12th day of each month, or the Fund
business day prior thereto.
None of the Alliance Mutual Funds, the Adviser, the
Principal Underwriter or Alliance Fund Services, Inc. will be
responsible for the authenticity of telephone requests for
exchanges that the Fund reasonably believes to be genuine. The
Fund will employ reasonable procedures in order to verify that
telephone requests for exchanges are genuine, including, among
others, recording such telephone instructions and causing written
confirmations of the resulting transactions to be sent to
shareholders. If the Fund did not employ such procedures, it
could be liable for losses arising from unauthorized or
fraudulent telephone instructions. Selected dealers, agents or
financial representatives, as applicable, may charge a commission
for handling telephone requests for exchanges.
The exchange privilege is available only in states where
shares of the Alliance Mutual Fund being acquired may be legally
sold. Each Alliance Mutual Fund reserves the right, at any time
on 60 days' notice to its shareholders, to reject any order to
acquire its shares through exchange or otherwise to modify,
restrict or terminate the exchange privilege.
Retirement Plans
The Fund may be a suitable investment vehicle for part
or all of the assets held in various types of retirement plans,
such as those listed below. The Fund has available forms of such
plans pursuant to which investments can be made in the Fund and
other Alliance Mutual Funds. Persons desiring information
concerning these plans should contact Alliance Fund Services,
Inc. at the "For Literature" telephone number on the cover of
this Statement of Additional Information, or write to:
Alliance Fund Services, Inc.
Retirement Plans
P.O. Box 1520
Secaucus, New Jersey 07096-1520
Individual Retirement Account ("IRA"). Individuals who
receive compensation, including earnings from self-employment,
are entitled to establish and make contributions to an IRA.
45
Taxation of the income and gains paid to an IRA by the Fund is
deferred until distribution from the IRA. An individual's
eligible contribution to an IRA will be deductible if neither the
individual nor his or her spouse is an active participant in an
employer-sponsored retirement plan. If the individual or his or
her spouse is an active participant in an employer-sponsored
retirement plan, the individual's contributions to an IRA may be
deductible, in whole or in part, depending on the amount of the
adjusted gross income of the individual and his or her spouse.
Employer-Sponsored Qualified Retirement Plans. Sole
proprietors, partnerships and corporations may sponsor qualified
money purchase pension and profit-sharing plans, including
Section 401(k) plans ("qualified plans"), under which annual tax-
deductible contributions are made within prescribed limits based
on compensation paid to participating individuals. The minimum
initial investment requirement may be waived with respect to
certain of these qualified plans.
If the aggregate net asset value of shares of the
Alliance Mutual Funds held by a qualified plan reaches $1 million
on or before December 15 in any year, all Class B or Class C
shares of the Fund held by the plan can be exchanged, at the
plan's request, without any sales charge, for Class A shares of
the Fund.
Simplified Employee Pension Plan ("SEP"). Sole
proprietors, partnerships and corporations may sponsor a SEP
under which they make annual tax-deductible contributions to an
IRA established by each eligible employee within prescribed
limits based on employee compensation.
403(b)(7) Retirement Plan. Certain tax-exempt
organizations and public educational institutions may sponsor
retirement plans under which an employee may agree that monies
deducted from his or her compensation (minimum $25 per pay
period) may be contributed by the employer to a custodial account
established for the employee under the plan.
The Alliance Plans Division of Frontier Trust Company, a
subsidiary of Equitable, which serves as custodian or trustee
under the retirement plan prototype forms available from the
Fund, charges certain nominal fees for establishing an account
and for annual maintenance. A portion of these fees is remitted
to Alliance Fund Services, Inc. as compensation for its services
to the retirement plan accounts maintained with the Fund.
Distributions from retirement plans are subject to
certain Code requirements in addition to normal redemption
procedures. For additional information please contact Alliance
Fund Services, Inc.
46
Dividend Direction Plan
A shareholder who already maintains, in addition to his
or her Class A, Class B, Class C or Advisor Class Fund account, a
Class A, Class B, Class C or Advisor Class account with one or
more other Alliance Mutual Funds may direct that income dividends
and/or capital gains paid on 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 "For Literature" telephone
number shown on the cover of this Statement of Additional
Information. Investors wishing to establish a dividend direction
plan in connection with their initial investment should complete
the appropriate section of the Subscription Application found in
the Prospectus. Current shareholders should contact Alliance
Fund Services, Inc. to establish a dividend direction plan.
Systematic Withdrawal Plan
General. Any shareholder who owns or purchases shares
of the Fund having a current net asset value of at least $4,000
(for quarterly or less frequent payments), $5,000 (for bi-monthly
payments) or $10,000 (for monthly payments) may establish a
systematic withdrawal plan under which the shareholder will
periodically receive a payment in a stated amount of not less
than $50 on a selected date. Systematic withdrawal plan
participants must elect to have their dividends and distributions
from the Fund automatically reinvested in additional shares of
the Fund.
Shares of the Fund owned by a participant in the Fund's
systematic withdrawal plan will be redeemed as necessary to meet
withdrawal payments and such payments will be subject to any
taxes applicable to redemptions and, except as discussed below,
any applicable contingent deferred sales charge. Shares acquired
with reinvested dividends and distributions will be liquidated
first to provide such withdrawal payments and thereafter other
shares will be liquidated to the extent necessary, and depending
upon the amount withdrawn, the investor's principal may be
depleted. A systematic withdrawal plan may be terminated at any
time by the shareholder or the Fund.
Withdrawal payments will not automatically end when a
shareholder's account reaches a certain minimum level. Therefore,
redemptions of shares under the plan may reduce or even liquidate
a shareholder's account and may subject the shareholder to the
Fund's involuntary redemption provisions. See "Redemption and
Repurchase of Shares--General." Purchases of additional shares
concurrently with withdrawals are undesirable because of sales
47
charges when purchases are made. While an occasional lump-sum
investment may be made by a holder of Class A shares who is
maintaining a systematic withdrawal plan, such investment should
normally be an amount equivalent to three times the annual
withdrawal or $5,000, whichever is less.
Payments under a systematic withdrawal plan may be made
by check or electronically via the Automated Clearing House
("ACH") network. Investors wishing to establish a systematic
withdrawal plan in conjunction with their initial investment in
shares of the Fund should complete the appropriate portion of the
Subscription Application found in the Prospectus, while current
Fund shareholders desiring to do so can obtain an application
form by contacting Alliance Fund Services, Inc. at the address or
the "For Literature" telephone number shown on the cover of this
Statement of Additional Information.
CDSC Waiver for Class B Shares and Class C Shares.
Under a systematic withdrawal plan, up to 1% monthly, 2%
bi-monthly or 3% quarterly of the value at the time of redemption
of the Class B or Class C shares in a shareholder's account may
be redeemed free of any contingent deferred sales charge.
With respect to Class B shares, the waiver applies only
with respect to shares acquired after July 1, 1995. Class B
shares that are not subject to a contingent deferred sales charge
(such as shares acquired with reinvested dividends or
distributions) will be redeemed first and will count toward the
foregoing limitations. Remaining Class B shares that are held
the longest will be redeemed next. 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.
48
________________________________________________________________
NET ASSET VALUE
________________________________________________________________
As previously discussed, for purposes of the net asset
value computation, readily marketable portfolio securities listed
on the Exchange are valued at the last sale price reflected on
the consolidated tape at the close of regular trading on the
Exchange on the business day as of which such value is being
determined. If there has been no sale on such day, the securities
are valued at the mean of the closing bid and asked prices on
such day. If no bid or asked prices are quoted on such day, then
the security is valued by such method as the Board of Directors
of the Fund shall determine in good faith to reflect its fair
market value.
Readily marketable securities not listed on the Exchange
but listed on other national securities exchanges or admitted to
trading on the National Association of Securities Dealers
Automated Quotations, Inc. ("NASDAQ") and National List ("List")
are valued in like manner. Portfolio securities traded on more
than one national securities exchange are valued at the last sale
price on the business day as of which such value is being
determined as reflected on the tape at the close of the exchange
representing the principal market for such securities.
Readily marketable securities traded only in the over-
the-counter market, excluding those admitted to trading on the
List, are valued at the mean of the current bid and asked prices
as reported by NASDAQ or, in the case of securities not quoted on
NASDAQ, the National Quotation Bureau or such other comparable
sources as the Board of Directors of the Fund deems appropriate
to reflect their fair market value.
United States Government obligations and other debt
instruments having 60 days or less remaining until maturity are
stated at amortized cost if their original maturity was 60 days
or less, or by amortizing their fair value as of the 61st day
prior to maturity if their original term to maturity exceeded 60
days (unless in either case the Board of Directors determines
that this method does not represent fair value). All other
assets of the Fund, including restricted and not readily
marketable securities, are valued in such manner as the Board of
Directors of the Fund in good faith deems appropriate to reflect
their fair market value.
The assets belonging to the Class A shares, the Class B
shares, the Class C shares and the Advisor Class shares will be
invested together in a single portfolio. The net asset value of
each class will be determined separately by subtracting the
49
expenses and liabilities allocated to that class from the assets
belonging to that class.
________________________________________________________________
DIVIDENDS, DISTRIBUTIONS AND TAXES
________________________________________________________________
United States Federal Income Taxation of Dividends and
Distributions
General
The Fund intends for each taxable year to qualify as a
"regulated investment company" under the Code. Such
qualification relieves the Fund of federal income tax liability
on the part of its investment company taxable income and net
realized capital gains which it timely distributes to its
shareholders. Such qualification does not, of course, involve
governmental supervision of management or investment practices or
policies. Investors should consult their own counsel for a
complete understanding of the requirements the Fund must meet to
qualify to be taxed as a "regulated investment company."
The information set forth in the Prospectus and the
following discussion relate solely to the significant United
States federal income taxes on dividends and distributions by the
Fund and assumes that the Fund qualifies to be taxed as a
regulated investment company. Investors should consult their own
tax counsel with respect to the specific tax consequences of
their being shareholders of the Fund, including the effect and
applicability of federal, state and local tax laws to their own
particular situation and the possible effects of changes therein.
It is the present policy of the Fund to distribute to
shareholders all net investment income and to distribute realized
capital gains. However, there is no fixed dividend rate and
there can be no assurance that the Fund will pay any dividends or
realize any capital gains. The amount of any dividend or
distribution paid on shares of the Fund must necessarily depend
upon the realization of income and capital gains from the Fund's
investments.
The Fund intends to declare and distribute dividends in
the amounts and at the times necessary to avoid the application
of the 4% federal excise tax imposed on certain undistributed
income of regulated investment companies. The Fund will be
required to pay the 4% excise tax to the extent it does not
distribute to its shareholders during any calendar year an amount
equal to at least the sum of (i) 98% of its ordinary income for
the calendar year, (ii) 98% of its capital gain net income and
50
foreign currency gains for the twelve months ended November 30
of such year, and (iii) any ordinary income or capital gains from
the preceding calendar year that was not distributed during such
year. For this purpose, income or gain retained by the Fund that
is subject to corporate income tax will be considered to have
been distributed by the Fund by year-end. For federal income and
excise tax purposes, dividends declared and payable to
shareholders of record as of a date in October, November or
December but actually paid during the following January will be
taxable to these shareholders for the year declared, and not for
the subsequent calendar year in which the shareholders actually
receive the dividend.
Dividends of the Fund's net ordinary income and
distributions of any net realized short-term capital gain are
taxable to shareholders as ordinary income. In view of the
Fund's investment policies, it is expected that dividends from
domestic corporations will be a significant part of the Fund's
gross income and, accordingly, that a significant part of the
Fund's dividends will be eligible for the dividends-received
deduction; however, this is largely dependent on the Fund's
investment activities, and accordingly cannot be predicted with
certainty. The amount of such dividends eligible for the
dividends-received deduction is limited to the amount of
dividends from domestic corporations received by the Fund during
the fiscal year. Under provisions of the tax law a corporation's
dividends-received deduction will be disallowed unless the
corporation holds shares in the Fund on the ex-dividend date and
for at least 45 other days during the 90-day period beginning 45
days prior to the ex-dividend date. In determining the holding
period of such shares for this purpose, any period during which a
shareholder's risk of loss is offset by means of options, short
sales or similar transactions is not counted. Furthermore,
provisions of the tax law disallow the dividends-received
deduction to the extent a corporation's investment in shares of
the Fund is financed with indebtedness.
Pursuant to the Taxpayer Relief Act of 1997, two
different tax rates apply to net capital gains--that is, the
excess of net gains from capital assets held for more than one
year over net losses from capital assets held for not more than
one year. One rate (generally 28%) applies to net gains on
capital assets held for more than one year but not more than 18
months ("mid-term gains"), and a second rate (generally 20%)
applies to the balance of such net capital gains ("adjusted net
capital gains"). Except as noted below, distributions of net
capital gains will be treated in the hands of shareholders as
mid-term gains to the extent designated by the Fund as deriving
from net gains from assets held for more than one year but not
more than 18 months, and the balance will be treated as adjusted
net capital gains. Gains derived from assets sold before May 7,
51
1997 and held for more than 18 months will be treated as mid-term
gains. Gains derived from assets sold after May 6, 1997 and
before July 29, 1997 and held for more than one year will be
treated as adjusted net capital gains. Distributions of mid-term
gains and adjusted net capital gains will be taxable to
shareholders as such, regardless of how long a shareholder has
held shares in the Fund. Any dividend or distribution received
by a shareholder on shares of the Fund will have the effect of
reducing the net asset value of such shares by the amount of such
dividend or distribution. Furthermore, a dividend or
distribution made shortly after the purchase of such shares by a
shareholder, although in effect a return of capital to that
particular shareholder, would be taxable to him as described
above. If a shareholder has held shares in the Fund for six
months or less and during that period has received a distribution
of net capital gains, any loss recognized by the shareholder on
the sale of those shares during the six-month period will be
treated as a long-term capital loss to the extent of the
distribution. In determining the holding period of such shares
for this purpose, any period during which a shareholder's risk of
loss is offset by means of options, short sales or similar
transactions is not counted.
Dividends are taxable in the manner discussed regardless
of whether they are paid to the shareholder in cash or are
reinvested in additional shares of the Fund or another Alliance
Mutual Fund.
The Fund generally will be required to withhold tax at
the rate of 31% with respect to dividends of net ordinary income
and net distributions of realized capital gains payable to a non-
corporate shareholder unless the shareholder certifies on his
subscription application that the social security or taxpayer
identification number provided is correct and that the
shareholder has not been notified by the Internal Revenue Service
that he is subject to backup withholding.
The foregoing discussion relates only to U.S. federal
income tax law as it affects shareholders who are U.S. citizens
or residents or U.S. corporations. The effects of federal income
tax law on shareholders who are non-resident aliens or foreign
corporations may be substantially different. Foreign investors
should consult their counsel for further information as to the
U.S. tax consequences of receipt of income from the Fund.
United States Federal Income Taxation of the Fund
The following discussion relates to certain significant
United States federal income tax consequences to the Fund with
respect to the determination of its "investment company taxable
income" each year. This discussion assumes that the Fund will be
52
taxed as a regulated investment company for each of its taxable
years.
Options. Certain listed nonequity options 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 generally will be
considered 60% long-term and 40% short-term capital gain or loss.
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.
With respect to equity options, 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
options. 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 if 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.
Tax Straddles. Any option 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. Various elections are available to the Fund which
53
may mitigate the effects of the straddle rules, particularly with
respect to mixed straddles. In general, the straddle rules
described above do not apply to any straddles held by the Fund,
all of the offsetting positions of which consist of section 1256
contracts.
________________________________________________________________
PORTFOLIO TRANSACTIONS
________________________________________________________________
Subject to the general supervision of the Board of
Directors of the Fund, the Adviser makes the Fund's portfolio
decisions and determines the broker to be used in specific
transactions with the objective of negotiating a combination of
the most favorable commission and the best price obtainable on
each transaction (generally defined as best execution).
Consistent with the objective of obtaining best execution, the
Fund may use brokers and dealers who supply investment
information to the Adviser.
Neither the Fund nor the Adviser 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. 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.
The Fund may deal in some instances in securities which
are not listed on a national stock exchange but are traded in the
over-the-counter market. The Fund may also purchase listed
securities through the third market, from a dealer which is not a
54
member of the Exchange on which a security is listed. Where
transactions are executed in the over-the-counter market or third
market, the Fund will seek to deal with the primary market
makers; but when necessary in order to obtain the best price and
execution, it will utilize the services of others. In all cases,
the Fund will attempt to negotiate best execution.
The extent to which commissions that will be charged by
broker-dealers selected by the Fund may reflect an element of
value for research cannot presently be determined. To the extent
that research services of value are provided by broker-dealers
with or through whom the Fund places portfolio transactions, the
Adviser may be relieved of expenses which it might otherwise
bear. Research services furnished by broker-dealers could be
useful and of value to the Adviser in servicing its other clients
as well as the Fund; but, on the other hand, certain research
services obtained by the Adviser as a result of the placement of
portfolio brokerage of other clients could be useful and of value
to it in serving the Fund. Consistent with the Conduct Rules of
the National Association of Securities Dealers, Inc. and subject
to seeking best execution, the Fund may consider sales of shares
of the Fund or other investment companies managed by the Adviser
as a factor in the selection of brokers to execute portfolio
transactions for the Fund.
The Fund may from time to time place orders for the
purchase or sale of securities (including listed call options)
with Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"),
an affiliate of the Adviser, and with brokers which may have
their transactions cleared or settled, or both, by the Pershing
Division of DLJ for which DLJ may receive a portion of the
brokerage commission. In such instances the placement of orders
with such brokers would be consistent with the Fund's objective
of obtaining best execution and would not be dependent upon the
fact that DLJ is an affiliate of the Adviser. With respect to
orders placed with DLJ for execution on a national securities
exchange, commissions received must conform to Section
17(e)(2)(A) of the 1940 Act and Rule 17e-1 thereunder, which
permit an affiliated person of a registered investment company
(such as the Fund), or any affiliated person of such person, to
receive a brokerage commission from such registered investment
company provided that such commission is reasonable and fair
compared to the commissions received by other brokers in
connection with comparable transactions involving similar
securities during a comparable period of time.
During the fiscal years ended November 30, 1996 and
November 30, 1995, and for the fiscal period ended November 30,
1994, the Fund incurred brokerage commissions amounting in the
aggregate to $603,145, $330,748 and $96,154, respectively. During
the fiscal years ended November 30, 1996 and November 30, 1995,
55
and for the fiscal period ended November 30, 1994, brokerage
commissions amounting in the aggregate to $-0-, $-0- and $-0-,
respectively, were paid to DLJ and brokerage commissions
amounting in the aggregate of $-0-, $-0- and $-0-, respectively,
were paid to brokers utilizing the Pershing Division of DLJ.
During the fiscal year ended November 30, 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 aggregated brokerage commissions. During the
fiscal year ended November 30, 1996, transactions in portfolio
securities of the Fund aggregating $951,755,372, with associated
brokerage commissions of approximately $603,145 were allocated to
persons or firms supplying research services to the Fund or the
Adviser.
________________________________________________________________
GENERAL INFORMATION
________________________________________________________________
Capitalization
The authorized capital stock of the Fund consists of
100,000,000 shares of Class A Common Stock, 50,000,000 shares of
Class B Common Stock, 50,000,000 shares of Class C Common Stock
and 50,000,000 shares of Advisor Class Common Stock, each having
a par value of $.01 per share. All shares of the Fund when duly
issued will be fully paid and non-assessable.
The Board of Directors is authorized to reclassify and
issue any unissued shares to any number of additional series and
classes without shareholder approval. Accordingly, the Board may
create additional series of shares in the future, for reasons
such as the desire to establish one or more additional portfolios
of the Fund with different investment objectives, policies or
restrictions. Any issuance of shares of another series would be
governed by the 1940 Act and the laws 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 for the election of directors and on any other matter 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 separate series.
At October 15, 1997, there were 36,256,662 shares of
common stock of the Fund outstanding, including 10,989,201 Class
A shares,19,035,861 Class B shares, 3,131,204 Class C shares and
56
3,100,395 Advisor Class shares. To the knowledge of the Fund
there were no persons who owned of record or beneficially 5% or
more of the outstanding shares of the Fund.
Custodian
State Street Bank and Trust Company, 225 Franklin
Street, Boston, Massachusetts, 02110, will act as the Fund's
Custodian for the assets of the Fund but plays no part in
deciding on the purchase or sale of portfolio securities.
Subject to the supervision of the Fund's Directors, State Street
Bank and Trust Company may enter into sub-custodial agreements
for the holding of the Fund's foreign securities.
Principal Underwriter
Alliance Fund Distributors, Inc., 1345 Avenue of the
Americas, New York, New York 10105, serves as the Fund's
Principal Underwriter, and as such may solicit orders from the
public to purchase shares of the Fund. Under the Agreement, the
Fund has agreed to indemnify the distributors, in the absence of
its willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations thereunder, against certain civil
liabilities, including liabilities under the Securities Act.
Counsel
Legal matters in connection with the issuance of the
shares of the Fund offered hereby will be 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
selected as independent auditors for the Fund.
Performance Information
From time to time the Fund advertises its "total
return." Computed separately for each class, the Fund's "total
return" is its average annual compounded total return for its
most recently completed one-, five-, and ten-year periods (or the
period since the Fund's inception). The Fund's total return for
such a period is computed by finding, through the use of a
formula prescribed by the Commission, the average annual
compounded rates 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
57
shares of the Fund are assumed to have been reinvested when
received and the maximum sales charge applicable to purchases of
Fund shares is assumed to have been paid.
The Fund reclassified its shares outstanding prior to
May 3, 1993 as Class A shares. The Fund's average annual
compounded total return for Class A shares was 5.12% for the one-
year period ended May 31, 1997; 26.78% for the five-year period
ended May 31, 1997 and 13.96% for the ten-year period ended May
31, 1997. The Fund's average annual compounded total return for
Class B shares for the one-year period ended May 31, 1997 was
5.01%, and for the period May 3, 1993 (commencement of
distribution) through May 31, 1997 was 28.92%. The Fund's
average annual compounded total return for Class C shares for the
one-year period ended May 31, 1997 was 8.01%, and for the period
May 3, 1993 (commencement of distribution) through May 31, 1997
was 28.92%. The Fund's average annual compounded total return
for Advisor Class shares for the period October 1, 1996
(commencement of distribution) through May 31, 1997 was 9.38%.
The Fund's total return is computed separately for Class
A, Class B, Class C and Advisor Class shares. The Fund's total
return is not fixed and will fluctuate in response to prevailing
market conditions or as a function of the type and quality of the
securities in the Fund's portfolio and its expenses. Total
return information is useful in reviewing the Fund's performance
but such information may not provide a basis for comparison with
bank deposits or other investments which pay a fixed 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 rankings of the Fund
as measured by financial publications or by independent
organizations such as Lipper Analytical Services, Inc. ("Lipper")
and Morningstar, Inc., and advertisements presenting the
historical record of payments of income dividends may from time
to time be sent to investors or placed in newspapers or magazines
such as The New York Times, The Wall Street Journal, Barron's,
Business Week, Changing Times, Fortune, Forbes, Money Magazine,
or other media on behalf of the Fund. The Fund is included in
Lipper rankings under the category "Science and Technology."
Additional Information
Shareholder inquiries may be directed to the
shareholder's broker or to Alliance Fund Services, Inc. at the
address or telephone numbers shown on the front cover of this
Statement of Additional Information. This Statement of
Additional Information does not contain all the information set
forth in the Registration Statement filed by the Fund with the
58
Commission under the Securities Act. 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.
59
ALLIANCE TECHNOLOGY FUND
SEMI-ANNUAL REPORT
MAY 31, 1997
ALLIANCE CAPITAL
PORTFOLIO OF INVESTMENTS
MAY 31, 1997 (UNAUDITED) ALLIANCE TECHNOLOGY FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
-------------------------------------------------------------------------
COMMON STOCKS-83.8%
TECHNOLOGY-81.9%
COMMUNICATIONS EQUIPMENT-8.7%
Ericsson (L.M.) Telephone Co. Cl.B (ADR) (a) 880,000 $ 31,350,000
Motorola, Inc. 400,000 26,550,000
Nokia Corp. (ADR) (b) 358,000 23,628,000
PairGain Technologies, Inc. (c) 616,600 12,871,525
Scientific-Atlanta, Inc. 655,000 11,871,875
Tellabs, Inc. (c) 864,000 43,416,000
------------
149,687,400
COMPUTER HARDWARE-11.2%
COMPAQ Computer Corp. (c) 770,000 83,352,500
Dell Computer Corp. (c) 857,200 96,435,000
Sun Microsystems, Inc. (c) 390,000 12,577,500
------------
192,365,000
COMPUTER PERIPHERALS-1.6%
Seagate Technology, Inc. (c) 578,000 23,481,250
Stormedia, Inc. (c) 303,550 3,604,656
------------
27,085,906
COMPUTER SERVICES-6.7%
Computer Sciences Corp. (c) 372,000 28,783,500
DST Systems, Inc. (c) 418,000 12,853,500
First Data Corp. 810,000 32,400,000
Gartner Group Inc. (c) 756,600 22,035,975
PMT Services, Inc. (c) 443,700 7,099,200
Renaissance Solutions, Inc. (c) 322,000 11,914,000
------------
115,086,175
COMPUTER SOFTWARE-10.6%
HBO & Co. 461,300 29,580,862
I2 Technologies, Inc. (c) 139,400 5,959,350
IONA Technologies Plc (ADR) (c) 173,800 2,998,050
Microsoft Corp. (c) 342,600 42,482,400
Netscape Communications Corp. (c) 670,000 19,806,875
Object Design, Inc. (c) 435,000 3,208,125
Oracle Systems Corp. (c) 1,200,000 55,950,000
Pegasystems, Inc. (c) 237,500 6,739,063
Rational Software Corp. (c) 656,600 12,393,325
Spectrum Holobyte, Inc. (c) 400,000 2,550,000
------------
181,668,050
NETWORK SOFTWARE-15.3%
3Com Corp. (c) 348,500 16,902,250
Ascend Communications, Inc. (c) 511,300 28,504,975
Bay Networks, Inc. (c) 1,495,800 36,647,100
Cabletron Systems, Inc. (c) 643,400 28,309,600
Cascade Communications Corp. (c) 742,800 28,412,100
Cisco Systems, Inc. (c) 1,217,500 82,485,625
Fore Systems (c) 998,200 16,532,687
Newbridge Networks Corp. (c) 640,000 25,680,000
------------
263,474,337
SEMI-CONDUCTOR COMPONENTS-15.3%
Altera Corp. (c) 1,202,000 63,706,000
Atmel Corp. (c) 821,000 23,603,750
Intel Corp. 400,000 60,600,000
LSI Logic Corp. (c) 507,500 21,188,125
Microchip Technology, Inc. (c) 688,655 24,447,253
National Semiconductor Corp. (c) 752,200 21,155,625
Texas Instruments, Inc. 274,700 24,688,662
VLSI Technology, Inc. (c) 947,600 23,038,525
------------
262,427,940
5
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE TECHNOLOGY FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
-------------------------------------------------------------------------
SEMI-CONDUCTOR EQUIPMENT-6.9%
Applied Materials, Inc. (c) 757,500 $ 49,426,875
CFM Technologies, Inc. (c) 441,900 13,422,713
Lam Research Corp. (c) 258,000 9,384,750
Silicon Valley Group, Inc. (c) 814,750 19,503,078
Teradyne, Inc. (c) 678,000 27,798,000
---------------
119,535,416
MISCELLANEOUS-5.6%
Ingram Micro, Inc. Cl.A (c) 853,000 20,365,375
Sanmina Holdings Corp. (c) 730,600 42,329,138
Solectron Corp. (c) 549,700 34,356,250
---------------
97,050,763
------------
1,408,380,987
UTILITIES-1.2%
TELEPHONE UTILITY-1.2%
WorldCom, Inc. (c) 670,450 19,862,081
CONSUMER SERVICES-0.7%
MISCELLANEOUS-0.7%
Equifax, Inc. 400,000 12,500,000
Total Common Stocks (cost $962,711,271) 1,440,743,068
PRINCIPAL
AMOUNT
COMPANY (000) VALUE
-------------------------------------------------------------------------
PRIVATE PLACEMENT-0.0%
Interactive Light Holdings,
Inc. 8.00%, 2/07/99 (d)
(cost $500,000) $ 500 $ 500,000
SHORT-TERM INVESTMENTS-17.8%
American Express Co.
5.45%, 6/02/97 22,300 22,296,624
5.52%, 6/02/97 41,600 41,593,621
Ford Motor Credit Corp.
5.48%, 6/04/97 50,000 49,977,167
General Electric Capital Corp.
5.40%, 6/03/97 44,475 44,461,658
Merrill Lynch & Co., Inc.
5.50%, 6/10/97 69,100 69,004,987
Prudential Funding
5.45%, 6/06/97 50,000 49,962,153
5.54%, 6/05/97 28,550 28,532,426
Total Short-Term Investments
(amortized cost $305,828,636) 305,828,636
TOTAL INVESTMENTS-101.6%
(cost $1,269,039,907) 1,747,071,704
Other assets less liabilities-(1.6%) (28,211,290)
NET ASSETS-100% $1,718,860,414
(a) Country of origin--Sweden.
(b) Country of origin--Finland.
(c) Non-income producing security.
(d) Illiquid security, valued at fair value (see Note A).
Glossary:
ADR - American depository receipt
See notes to financial statements.
6
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1997 (UNAUDITED) ALLIANCE TECHNOLOGY FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $1,269,039,907) $1,747,071,704
Cash 5,828
Receivable for investment securities sold 16,463,576
Receivable for capital stock sold 15,366,592
Dividends and interest receivable 198,270
Prepaid expenses 50,556
Total assets 1,779,156,526
LIABILITIES
Payable for investment securities purchased 53,927,457
Advisory fee payable 4,287,251
Payable for capital stock redeemed 1,345,229
Distribution fee payable 293,027
Accrued expenses and other liabilities 443,148
Total liabilities 60,296,112
NET ASSETS $1,718,860,414
COMPOSITION OF NET ASSETS
Capital stock, at par $ 341,764
Additional paid-in capital 1,283,932,206
Accumulated net investment loss (8,695,484)
Accumulated net realized loss on investments (34,749,869)
Net unrealized appreciation of investments 478,031,797
$1,718,860,414
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share ($631,966,677/
12,335,917 shares of capital stock issued and outstanding) $51.23
Sales charge--4.25% of public offering price 2.27
Maximum offering price $53.50
CLASS B SHARES
Net asset value and offering price per share ($864,199,528/
17,406,098 shares of capital stock issued and outstanding) $49.65
CLASS C SHARES
Net asset value and offering price per share ($145,145,731/
2,923,515 shares of capital stock issued and outstanding) $49.65
ADVISOR CLASS SHARES
Net asset value, redemption and offering price per share
($77,548,478/1,510,832 shares of capital stock issued and
outstanding) $51.33
See notes to financial statements.
7
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MAY 31, 1997 (UNAUDITED) ALLIANCE TECHNOLOGY FUND
_______________________________________________________________________________
INVESTMENT INCOME
Interest $5,359,798
Dividends(net of foreign taxes withheld of $79,639) 767,631 $ 6,127,429
EXPENSES
Advisory fee 7,815,364
Distribution fee - Class A 879,377
Distribution fee - Class B 3,591,048
Distribution fee - Class C 597,683
Transfer agency 1,325,110
Printing 150,165
Custodian 106,230
Registration 99,262
Administrative 67,500
Audit and legal 62,202
Taxes 55,530
Directors' fees 40,000
Miscellaneous 33,442
Total expenses 14,822,913
Net investment loss (8,695,484)
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on investment transactions (35,146,025)
Net change in unrealized appreciation of investments 75,969,611
Net gain on investments 40,823,586
NET INCREASE IN NET ASSETS FROM OPERATIONS $32,128,102
See notes to financial statements.
8
STATEMENT OF CHANGES IN NET ASSETS ALLIANCE TECHNOLOGY FUND
_______________________________________________________________________________
SIX MONTHS ENDED YEAR ENDED
MAY 31, 1997 NOVEMBER 30,
(UNAUDITED) 1996
--------------- ---------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment loss $ (8,695,484) $ (12,439,324)
Net realized gain (loss) on investment
transactions (35,146,025) 9,777,700
Net change in unrealized appreciation of
investments 75,969,611 194,911,740
Net increase in net assets from operations 32,128,102 192,250,116
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gain on investments
Class A (4,879,328) (20,562,397)
Class B (5,671,806) (14,814,489)
Class C (916,491) (2,297,287)
Advisor Class (4,489) -0-
CAPITAL STOCK TRANSACTIONS
Net increase 333,368,635 491,726,042
Total increase 354,024,623 646,301,985
NET ASSETS
Beginning of year 1,364,835,791 718,533,806
End of period $1,718,860,414 $1,364,835,791
See notes to financial statements.
9
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1997 (UNAUDITED) ALLIANCE TECHNOLOGY FUND
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Technology 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, Class C and Advisor Class shares. Class A
shares are sold with a front-end sales charge of up to 4.25% for purchases not
exceeding $1,000,000. With respect to purchases of $1,000,000 or more, Class A
shares redeemed within one year of purchase will be subject to a contingent
deferred sales charge of 1%. Class B shares are currently sold with a
contingent deferred sales charge which declines from 4% to zero depending on
the period of time the shares are held. Class B shares will automatically
convert to Class A shares eight years after the end of the calendar month of
purchase. Class C shares purchased on or after July 1, 1996 are subject to a
contingent deferred sales charge of 1% on redemptions made within the first
year after purchase. Advisor Class shares are sold without an initial or
contingent deferred sales charge and are not subject to ongoing distribution
expenses. Advisor Class shares are offered to investors participating in fee
based programs and to certain retirement plans accounts. All four classes of
shares have identical voting, dividend, liquidation and other rights, except
that each class bears different distribution expenses and has exclusive voting
rights with respect to its distribution plan. The following is a summary of
significant accounting policies followed by the Fund.
1. SECURITY VALUATION
Portfolio securities traded on a national securities exchange and
over-the-counter securities listed on the NASDAQ National Market System are
valued at the last reported sales price at the regular close of the New York
Stock Exchange. Over-the-counter securities not listed on the NASDAQ National
Market System are valued at the mean of the closing bid and asked price.
Securities for which current market quotations are not readily available
(including investments which are subject to limitations as to their resale) are
valued at their fair value as determined in good faith by the Board of
Directors. Securities which mature in 60 days or less are valued at amortized
cost, which approximates market value, unless this method does not represent
fair value.
2. TAXES
It is the Fund's policy to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if applicable, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
3. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Dividend income is recorded on the ex-dividend date. Interest income is accrued
daily. Investment transactions are accounted for on the date the securities are
purchased or sold. Investment gains and losses are determined on the identified
cost basis. The Fund accretes discounts as adjustments to interest income.
4. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex-dividend
date and are determined in accordance with income tax regulations.
For federal income tax purposes, the Fund's distributions of income and capital
gains are subject to recharacterization, which may include a tax return of
capital, at the end of the year to reflect the final investment results for
that year.
NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of an investment advisory agreement, the Fund pays Alliance
Capital Management L.P. (the "Adviser"), an advisory fee at a quarterly rate
equal to .25 of 1% (approximately 1% on an annual basis) of the net assets of
the Fund valued on the last business day of the previous quarter.
Pursuant to the advisory agreement, the Fund paid $67,500 to the Adviser
representing the cost of certain legal and accounting services provided to the
Fund by the Adviser for the six months ended May 31, 1997.
The Fund compensates Alliance Fund Services, Inc. (a wholly-owned subsidiary of
the Adviser) under a Transfer Agency Agreement for providing personnel and
facilities to perform transfer agency services for the Fund. Such compensation
amounted to $1,001,624 for the six months ended May 31, 1997.
10
ALLIANCE TECHNOLOGY FUND
_______________________________________________________________________________
Alliance Fund Distributors, Inc. (a wholly-owned subsidiary of the Adviser)
serves as the Distributor of the Fund's shares. The Distributor received
front-end sales charges of $195,833 from the sale of Class A shares and $3,823,
$836,755 and $35,789 in contingent deferred sales charges imposed upon
redemptions by shareholders of Class A, Class B and Class C shares,
respectively, for the six months ended May 31, 1997.
Brokerage commissions paid on investment transactions for the six months ended
May 31, 1997 amounted to $539,130 of which $9,645 was paid to Donaldson, Lufkin
& Jenrette Securities Corp. ("DLJ"), an affiliate of the Adviser.
NOTE C: DISTRIBUTION SERVICES AGREEMENT
The Fund has adopted a Distribution Services Agreement (the "Agreement")
pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the
Agreement, the Fund pays a distribution fee to the Distributor at an annual
rate of up to .30 of 1% of the Fund's average daily net assets attributable to
Class A shares and 1% of the average daily net assets attributable to both
Class B and Class C shares. There is no distribution fee on the Advisor Class
shares. Such fee is accrued daily and paid monthly. The Agreement provides that
the Distributor will use such payments in their entirety for distribution
assistance and promotional activities. The Distributor has incurred expenses in
excess of the distribution costs reimbursed by the Fund in the amount of
$27,353,803 and $1,304,888, 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 Adviser
may use its own resources to finance the distribution of the Fund's shares.
NOTE D: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities, (excluding short-term investments
and U.S. government secutities) aggregated $491,508,095 and $349,627,180,
respectively, for the six months ended May 31, 1997. There were no purchases or
sales of U.S. government and government agency obligations for the six months
ended May 31, 1997.
At May 31, 1997, the cost of securities for federal income tax purposes was
1,273,072,102. Accordingly, gross unrealized appreciation of investments was
$515,079,839 and gross unrealized depreciation of investments was $41,080,237
resulting in net unrealized appreciation of $473,999,602.
OPTION TRANSACTIONS
For investment and hedging purposes, the Fund purchases put and call options on
stock and stock indices that are traded on U.S. securities exchanges and
over-the-counter markets. The risk associated with purchasing an option is that
the Fund pays a premium whether or not the option is exercised. Additionally,
the Fund bears the risk of loss of premium and change in market value should
the counterparty not perform under the contract. Put and call options purchased
are accounted for in the same manner as portfolio securities. The cost of
securities acquired through the exercise of call options is increased by
premiums paid. The proceeds from securities sold through the exercise of put
options are decreased by the premiums paid. For the six months ended May 31,
1997, the Fund did not engage in any options transactions.
11
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE TECHNOLOGY FUND
_______________________________________________________________________________
NOTE E: CAPITAL STOCK
There are 250,000,000 shares of $0.01 par value capital stock authorized,
divided into four classes, designated Class A, Class B, Class C and Advisor
Class shares. Class A shares consist of 100,000,000 authorized shares, Class B,
Class C and Advisor Class each consist of 50,000,000 authorized shares.
Transactions in capital stock were as follows:
SHARES AMOUNT
--------------------------- ------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
MAY 31, 1997 NOVEMBER 30, MAY 31, 1997 NOVEMBER 30,
(UNAUDITED) 1996 (UNAUDITED) 1996
------------ ------------ -------------- --------------
CLASS A
Shares sold 5,032,835 6,739,722 $ 244,947,103 $ 295,599,004
Shares issued in
reinvestment of
distributions 78,495 444,491 3,942,438 18,184,138
Shares converted
from Class B 59,292 71,011 2,876,097 3,227,821
Shares redeemed (4,463,730) (4,165,299) (214,813,687) (185,541,160)
Net increase 706,892 3,089,925 $ 36,951,951 $ 131,469,803
CLASS B
Shares sold 5,426,061 9,295,231 $ 253,881,926 $ 397,304,488
Shares issued in
reinvestment of
distributions 90,200 288,200 4,404,454 11,551,039
Shares converted
to Class A (61,164) (72,846) (2,876,097) (3,227,821)
Shares redeemed (1,331,540) (2,284,157) (62,403,530) (98,298,021)
Net increase 4,123,557 7,226,428 $ 193,006,753 $ 307,329,685
CLASS C
Shares sold 1,538,186 2,488,614 $ 71,549,986 $ 106,395,529
Shares issued in
reinvestment of
distributions 11,824 34,075 577,364 1,366,065
Shares redeemed (806,759) (1,285,491) (37,783,678) (55,371,330)
Net increase 743,251 1,237,198 $ 34,343,672 $ 52,390,264
OCT. 2,1996(A) OCT. 2,1996(A)
TO TO
NOV. 30,1996 NOV. 30,1996
------------ --------------
ADVISOR CLASS
Shares sold 1,542,292 11,363 $ 71,009,525 $ 551,761
Shares issued in
reinvestment of
distributions 89 -0- 4,489 -0-
Shares redeemed (42,606) (306) (1,947,755) (15,471)
Net increase 1,499,775 11,057 $ 69,066,259 $ 536,290
(a) Commencement of distribution.
12
FINANCIAL HIGHLIGHTS ALLIANCE TECHNOLOGY FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
[Enlarge/Download Table]
CLASS A
--------------------------------------------------------------------------------
SIX MONTHS JANUARY 1,
ENDED YEAR ENDED NOVEMBER 30, 1994 TO YEAR ENDED DECEMBER 31,
MAY 31, 1997 ------------------------- NOVEMBER 30, ------------------------
(UNAUDITED) 1996 1995 1994(A) 1993 1992
------------- ------------ ----------- ------------ ----------- -----------
Net asset value, beginning of period $51.15 $46.64 $31.98 $26.12 $28.20 $26.38
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (.20)(b) (.39)(b) (.30)(b) (.32) (.29) (.22)(b)
Net realized and unrealized gain on
investment transactions .70 7.28 18.13 6.18 6.39 4.31
Net increase in net asset value
from operations .50 6.89 17.83 5.86 6.10 4.09
LESS: DISTRIBUTIONS
Distributions from net realized gains (.42) (2.38) (3.17) -0- (8.18) (2.27)
Net asset value, end of period $51.23 $51.15 $46.64 $31.98 $26.12 $28.20
TOTAL RETURN
Total investment return based on net
asset value (c) .99% 16.05% 61.93% 22.43% 21.63% 15.50%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $631,967 $594,861 $398,262 $202,929 $173,732 $173,566
Ratio of expenses to average net assets 1.64%(d) 1.74% 1.75% 1.66%(d) 1.73% 1.61%
Ratio of net investment loss to average
net assets (.81)%(d) (.87)% (.77)% (1.22)%(d) (1.32)% (.90)%
Portfolio turnover rate 28% 30% 55% 55% 64% 73%
Average commission rate (e) $.0576 $.0612 -- -- -- --
See footnote summary on page 16.
13
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE TECHNOLOGY FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
[Enlarge/Download Table]
CLASS B
----------------------------------------------------------------------
SIX MONTHS JANUARY 1, MAY 3,
ENDED YEAR ENDED NOVEMBER 30, 1994 TO 1993(F) TO
MAY 31, 1997 ------------------------- NOVEMBER 30, DECEMBER 31,
(UNAUDITED) 1996 1995 1994(A) 1993
------------- ------------ ----------- ------------- -------------
Net asset value, beginning of period $49.76 $45.76 $31.61 $25.98 $27.44
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (.35)(b) (.70)(b) (.60)(b) (.23) (.12)
Net realized and unrealized gain
on investment transactions .66 7.08 17.92 5.86 6.84
Net increase in net asset value
from operations .31 6.38 17.32 5.63 6.72
LESS: DISTRIBUTIONS
Distributions from net realized gains (.42) (2.38) (3.17) -0- (8.18)
Net asset value, end of period $49.65 $49.76 $45.76 $31.61 $25.98
TOTAL RETURN
Total investment return based on
net asset value (c) .64% 15.20% 60.95% 21.67% 24.49%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $864,200 $660,921 $277,111 $18,397 $1,645
Ratio of expenses to average net assets 2.35%(d) 2.44% 2.48% 2.43%(d) 2.57%(d)
Ratio of net investment loss to average
net assets (1.50)%(d) (1.61)% (1.47)% (1.95)%(d) (2.30)%(d)
Portfolio turnover rate 28% 30% 55% 55% 64%
Average commission rate (e) $.0576 $.0612 -- -- --
See footnote summary on page 16.
14
ALLIANCE TECHNOLOGY FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
[Enlarge/Download Table]
CLASS C
--------------------------------------------------------------------
SIX MONTHS JANUARY 1, MAY 3,
ENDED YEAR ENDED NOVEMBER 30, 1994 TO 1993(F) TO
MAY 31, 1997 ------------------------- NOVEMBER 30, DECEMBER 31,
(UNAUDITED) 1996 1995 1994(A) 1993
------------- ----------- ------------ ------------ ------------
Net asset value, beginning of period $49.76 $45.77 $31.61 $25.98 $27.44
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (.35)(b) (.70)(b) (.58)(b) (.24) (.13)
Net realized and unrealized gain on
investment transactions .66 7.07 17.91 5.87 6.85
Net increase in net asset value from
operations .31 6.37 17.33 5.63 6.72
LESS: DISTRIBUTIONS
Distributions from net realized gains (.42) (2.38) (3.17) -0- (8.18)
Net asset value, end of period $49.65 $49.76 $45.77 $31.61 $25.98
TOTAL RETURN
Total investment return based on net
asset value (c) .64% 15.17% 60.98% 21.67% 24.49%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $145,146 $108,488 $43,161 $7,470 $1,096
Ratio of expenses to average net assets 2.36%(d) 2.44% 2.48% 2.41%(d) 2.52%(d)
Ratio of net investment loss to average
net assets (1.50)%(d) (1.60)% (1.47)% (1.94)%(d) (2.25)%(d)
Portfolio turnover rate 28% 30% 55% 55% 64%
Average commission rate (e) $.0576 $.0612 -- -- --
See footnote summary on page 16.
15
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE TECHNOLOGY FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
ADVISOR CLASS
--------------------------
OCTOBER 2,
SIX MONTHS 1996 (F)
ENDED TO
MAY 31, 1997 NOVEMBER 30,
(UNAUDITED) 1996
------------ ------------
Net asset value, beginning of period $51.17 $47.32
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (b) (.10) (.05)
Net realized and unrealized gain on investment
transactions .68 3.90
Net increase in net asset value from operations .58 3.85
LESS: DISTRIBUTIONS
Distributions from net realized gains (.42) -0-
Net asset value, end of period $51.33 $51.17
TOTAL RETURN
Total investment return based on net asset value (c) 1.15% 8.14%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $77,548 $566
Ratio of expenses to average net assets (d) 1.55% 1.75%
Ratio of net investment loss to average net
assets (d) (.48)% (1.21)%
Portfolio turnover rate 28% 30%
Average commission rate $.0576 $.0612
(a) The Fund changed its fiscal year end from December 31 to November 30.
(b) Based on average shares outstanding.
(c) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Initial sales charge or contingent
deferred sales charge is not reflected in the calculation of total investment
return. Total investment return calculated for a period of less than one year
is not annualized.
(d) Annualized.
(e) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades on which
commissions are charged.
(f) Commencement of distribution.
16
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1996 ALLIANCE TECHNOLOGY FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
-------------------------------------------------------------------------
COMMON STOCKS-92.2%
TECHNOLOGY-91.3%
COMMUNICATION EQUIPMENT-0.2%
Farallon Communications, Inc. (a) 270,000 $ 3,172,500
COMMUNICATIONS-8.9%
DSP Communications, Inc. (a) 337,900 13,135,862
Ericsson (L.M.) Telephone Co. Cl.B (ADR) (b) 880,000 27,170,000
Gandalf Technologies, Inc. (a) 855,000 3,045,938
General Instrument Corp. (a) 400,000 8,850,000
Glenayre Technologies, Inc. (a) 965,000 23,039,375
Nokia Corp. (ADR) (c) 358,000 20,092,750
PairGain Technologies, Inc. (a) 129,900 8,297,363
Picturetel Corp. (a) 150,000 4,162,500
Scientific-Atlanta, Inc. 855,000 13,252,500
------------
121,046,288
COMPUTER HARDWARE-8.5%
COMPAQ Computer Corp. (a) 661,000 52,384,250
Dell Computer Corp. (a) 498,600 50,670,225
Sun Microsystems, Inc. (a) 220,000 12,815,000
------------
115,869,475
COMPUTER PERIPHERALS-4.1%
Seagate Technology, Inc. (a) 831,200 32,832,400
Stormedia, Inc. (a) 503,550 6,420,263
Western Digital Corp. (a) 304,400 16,361,500
------------
55,614,163
COMPUTER SERVICES-10.6%
Affiliated Computer Services, Inc. Cl.A (a) 264,000 7,656,000
Broadway & Seymour, Inc. (a) 370,000 3,515,000
Computer Sciences Corp. (a) 157,500 12,383,437
DST Systems, Inc. (a) 293,000 9,485,875
Electronic Data Systems Corp. 673,600 32,585,400
First Data Corp. 910,000 36,286,250
Gartner Group Inc. (a) 400,000 14,600,000
PMT Services, Inc. (a) 443,700 9,484,088
Renaissance Solutions, Inc. (a) 322,000 12,155,500
Sabre Group Holdings, Inc. Cl.A (a) 177,800 5,200,650
USCS International, Inc. (a) 64,500 1,080,375
------------
144,432,575
COMPUTER SOFTWARE-17.8%
I2 Technologies, Inc. (a) 139,400 5,297,200
Applix, Inc. (a) 330,000 6,517,500
Cognos, Inc. (a) 113,200 4,301,600
Electronic Arts, Inc. (a) 215,000 6,906,875
Forte Software, Inc. (a) 231,800 7,359,650
HBO & Co. 410,000 23,318,750
Informix Corp. (a) 995,800 23,650,250
Integrated Systems, Inc. Cl.A (a) 447,800 9,627,700
Macromedia, Inc. (a) 365,000 6,615,625
Maxis, Inc. (a) 175,000 2,625,000
Microsoft Corp. (a) 110,000 17,256,250
Netscape Communications Corp. (a) 520,000 29,055,000
Object Design, Inc. (a) 285,000 3,669,375
Oracle Systems Corp. (a) 1,200,000 58,800,000
Pegasystems, Inc. (a) 187,500 5,601,562
Rational Software Corp. (a) 598,800 21,107,700
Software 2000, Inc. (a) 648,200 5,347,650
Spectrum Holobyte, Inc. (a) 400,000 2,000,000
Spyglass, Inc. (a) 303,000 3,124,688
Storm Technology, Inc. (a) 101,300 810,400
------------
242,992,775
NETWORK SOFTWARE-18.3%
3Com Corp. (a) 850,000 63,856,250
Ascend Communications, Inc. (a) 421,300 29,964,962
Cabletron Systems, Inc. (a) 643,400 25,977,275
Cascade Communications Corp. (a) 386,800 26,737,550
Cisco Systems, Inc. (a) 926,000 62,852,250
Fore Systems (a) 600,000 23,550,000
6
ALLIANCE TECHNOLOGY FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
-------------------------------------------------------------------------
Newbridge Networks Corp. (a) 317,000 $ 9,430,750
Shiva Corp. (a) 190,000 7,837,500
------------
250,206,537
SEMI-CONDUCTOR COMPONENTS-14.0%
Altera Corp. (a) 651,000 49,150,500
Atmel Corp. (a) 821,000 26,990,375
Intel Corp. 440,000 55,825,000
LSI Logic Corp. (a) 507,500 15,288,438
Microchip Technology, Inc. (a) 423,770 20,235,017
Micron Technology, Inc. 245,400 8,128,875
National Semiconductor Corp. (a) 500,000 12,250,000
Oak Technology, Inc. (a) 278,000 2,745,250
------------
190,613,455
SEMI-CONDUCTOR EQUIPMENT-3.6%
Applied Materials, Inc. (a) 401,400 15,303,375
Lam Research Corp. (a) 369,230 13,246,126
Silicon Valley Group, Inc. (a) 236,000 5,015,000
Teradyne, Inc. (a) 678,000 16,017,750
------------
49,582,251
TELEPHONE UTILITIES-0.8%
MFS Communications, Inc. (a) 234,500 11,314,625
MISCELLANEOUS-4.5%
Ingram Micro, Inc. Cl.A (a) 147,600 3,634,650
Sanmina Holdings Corp. (a) 556,600 24,281,675
SHARES OR
PRINCIPAL
AMOUNT
COMPANY (000) VALUE
-------------------------------------------------------------------------
Solectron Corp. (a) 575,000 $ 33,637,500
---------------
61,553,825
---------------
1,246,398,469
BUSINESS SERVICES-0.9%
COMMERCIAL SERVICES-0.9%
Abacus Direct Corp. (a) 23,300 565,025
CUC International, Inc. (a) 419,908 11,075,073
---------------
11,640,098
Total Common Stocks
(cost $855,976,381) 1,258,038,567
PRIVATE PLACEMENT-0.0%
Interactive Light Holdings, Inc.
8.00%, 2/07/99 (d)
(cost $500,000) $ 500 500,000
SHORT-TERM INVESTMENTS-7.8%
American Express Co.
5.28%, 12/04/96 35,800 35,784,248
General Electric Capital Corp.
5.15%, 12/02/96 32,000 31,995,422
Prudential Funding
5.35%, 12/03/96 34,000 33,989,895
State Street Cayman Islands
5.00%, 12/02/96 4,080 4,080,000
Total Short-Term Investments
(amortized cost $105,849,565) 105,849,565
TOTAL INVESTMENTS-100.0%
(cost $962,325,946) 1,364,388,132
Other assets less liabilities-0.0% 447,659
NET ASSETS-100% $1,364,835,791
(a) Non-income producing security.
(b) Country of origin - Sweden.
(c) Country of origin - Finland.
(d) Illiquid security, valued at fair value (see Notes A & F).
Glossary:
ADR - American Depository Receipt.
See notes to financial statements.
7
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1996 ALLIANCE TECHNOLOGY FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $962,325,946) $1,364,388,132
Cash 1,624
Receivable for investment securities sold 16,164,739
Receivable for capital stock sold 6,965,525
Dividends and interest receivable 250,443
Total assets 1,387,770,463
LIABILITIES
Payable for investment securities purchased 16,482,890
Advisory fee payable 3,412,089
Payable for capital stock redeemed 1,804,761
Distribution fee payable 740,150
Accrued expenses and other liabilities 494,782
Total liabilities 22,934,672
NET ASSETS $1,364,835,791
COMPOSITION OF NET ASSETS
Capital stock, at par $ 271,029
Additional paid-in capital 950,634,306
Accumulated net realized gain on investments 11,868,270
Net unrealized appreciation of investments 402,062,186
$1,364,835,791
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share($594,861,204/
11,629,025 shares of capital stock issued and outstanding) $51.15
Sales charge--4.25% of public offering price 2.27
Maximum offering price $53.42
CLASS B SHARES
Net asset value and offering price per share($660,920,933/
13,282,541 shares of capital stock issued and outstanding) $49.76
CLASS C SHARES
Net asset value and offering price per share($108,487,855/
2,180,264 shares of capital stock issued and outstanding) $49.76
ADVISOR CLASS SHARES
Net asset value, redemption and offering price per share($565,799
/11,057 shares of capital stock issued and outstanding) $51.17
See notes to financial statements.
8
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1996 ALLIANCE TECHNOLOGY FUND
_______________________________________________________________________________
INVESTMENT INCOME
Interest $ 7,263,611
Dividends (net of foreign taxes withheld
of $28,232) 1,153,669 $ 8,417,280
EXPENSES
Advisory fee 10,945,614
Distribution fee - Class A 1,415,075
Distribution fee - Class B 4,446,418
Distribution fee - Class C 732,390
Transfer agency 2,085,004
Registration 332,851
Printing 221,172
Custodian 197,845
Administrative 135,000
Audit and legal 131,933
Directors' fees 80,000
Taxes 53,802
Miscellaneous 79,500
Total expenses 20,856,604
Net investment loss (12,439,324)
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investment transactions 9,777,700
Net change in unrealized appreciation of investments 194,911,740
Net gain on investments 204,689,440
NET INCREASE IN NET ASSETS FROM OPERATIONS $192,250,116
See notes to financial statements.
9
STATEMENT OF CHANGES IN NET ASSETS ALLIANCE TECHNOLOGY FUND
_______________________________________________________________________________
YEAR ENDED YEAR ENDED
NOVEMBER 30, NOVEMBER 30,
1996 1995
--------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment loss $ (12,439,324) $ (4,284,876)
Net realized gain on investment transactions 9,777,700 44,181,728
Net change in unrealized appreciation of
investments 194,911,740 135,347,622
Net increase in net assets from operations 192,250,116 175,244,474
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gain on investments
Class A (20,562,397) (20,080,339)
Class B (14,814,489) (1,920,276)
Class C (2,297,287) (617,474)
CAPITAL STOCK TRANSACTIONS
Net increase 491,726,042 337,111,623
Total increase 646,301,985 489,738,008
NET ASSETS
Beginning of year 718,533,806 228,795,798
End of year $1,364,835,791 $718,533,806
See notes to financial statements.
10
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1996 ALLIANCE TECHNOLOGY FUND
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Technology Fund (the "Fund") is registered under the Investment
Company Act of 1940 as a diversified, open-end management investment company.
On April 15, 1996 the Board of Directors approved the creation of a fourth
class of shares, Advisor Class shares. The Fund offers Class A, Class B, Class
C and Advisor Class shares. Class A shares are sold with a front-end sales
charge of up to 4.25%. Class B shares are sold with a contingent deferred sales
charge which declines from 4% to zero depending on the period of time the
shares are held. Class B shares will automatically convert to Class A shares
eight years after the end of the calendar month of purchase. Class C shares
purchased on or after July 1, 1996 are subject to a contingent deferred sales
charge of 1% on redemptions made within the first year after purchase. Advisor
Class shares are sold without an initial or contingent deferred sales charge
and are not subject to ongoing distribution expenses. Advisor Class shares are
offered solely to investors participating in fee based programs. All four
classes of shares have identical voting, dividend, liquidation and other
rights, except that each class bears different distribution expenses and has
exclusive voting rights with respect to its distribution plan. The following is
a summary of significant accounting policies followed by the Fund.
1. SECURITY VALUATION
Portfolio securities traded on a national securities exchange and
over-the-counter securities listed on the NASDAQ National Market System are
valued at the last reported sales price at the regular close of the New York
Stock Exchange. Over-the-counter securities not listed on the NASDAQ National
Market System are valued at the mean of the closing bid and asked price.
Securities for which current market quotations are not readily available
(including investments which are subject to limitations as to their resale) are
valued at their fair value as determined in good faith by the Board of
Directors. Securities which mature in 60 days or less are valued at amortized
cost, which approximates market value, unless this method does not represent
fair value.
2. TAXES
It is the Fund's policy to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if applicable, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
3. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Dividend income is recorded on the ex-dividend date. Interest income is accrued
daily. Investment transactions are accounted for on the date the securities are
purchased or sold. Investment gains and losses are determined on the identified
cost basis. The Fund accretes discounts as adjustments to interest income.
4. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex-dividend
date and are determined in accordance with income tax regulations.
5. RECLASSIFICATION OF COMPONENTS OF NET ASSETS
Net investment losses may not be utilized to offset net investment income in
future periods for tax purposes. At November 30, 1996 the Fund reclassified
$12,439,324 from accumulated net investment loss to additional paid-in capital.
This reclassification had no effect on net investment loss, net realized gains
and losses and net assets.
NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of an investment advisory agreement, the Fund pays Alliance
Capital Management L.P. ("the Adviser"), an advisory fee at a quarterly rate
equal to .25 of 1% (approximately 1% on an annual basis) of the net assets of
the Fund valued on the last business day of the previous quarter.
Pursuant to the advisory agreement, the Fund paid $135,000 to the Adviser
representing the cost of certain legal and accounting services provided to the
Fund by the Adviser for the year ended November 30, 1996.
The Fund compensates Alliance Fund Services, Inc. (a wholly-owned subsidiary of
the Adviser) under a Transfer Agency Agreement for providing personnel and
facilities to perform transfer agency services for the Fund. Such compensation
amounted to $1,493,231 for the year ended November 30, 1996.
11
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE TECHNOLOGY FUND
_______________________________________________________________________________
Alliance Fund Distributors, Inc. (a wholly-owned subsidiary of the Adviser)
serves as the Distributor of the Fund's shares. The Distributor received
front-end sales charges of $448,982 from the sale of Class A shares and
$1,108,455 and $12,708 in contingent deferred sales charges imposed upon
redemptions by shareholders of Class B and Class C shares, respectively for the
year ended November 30, 1996.
Brokerage commissions paid for the year ended November 30, 1996 on securities
transactions amounted to $603,145, none of which was paid to brokers utilizing
the services of the Pershing Division of Donaldson, Lufkin & Jenrette
Securities Corp. ("DLJ") nor to DLJ directly, an affiliate of the Adviser.
NOTE C: DISTRIBUTION SERVICES AGREEMENT
The Fund has adopted a Distribution Services Agreement (the "Agreement")
pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the
Agreement, the Fund pays a distribution fee to the Distributor at an annual
rate of up to .30 of 1% of the Fund's average daily net assets attributable to
Class A shares and 1% of the average daily net assets attributable to both
Class B and Class C shares. There is no distribution fee on the Advisor Class
shares. Such fee is accrued daily and paid monthly. The Agreement provides that
the Distributor will use such payments in their entirety for distribution
assistance and promotional activities. The Distributor has incurred expenses in
excess of the distribution costs reimbursed by the Fund in the amount of
$20,749,046 and $892,004, 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 Adviser
may use its own resources to finance the distribution of the Fund's shares.
NOTE D: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities, (excluding short-term investments
and U.S. Government obligations) aggregated $691,812,246 and $259,943,126,
respectively, for the year ended November 30, 1996. At November 30, 1996, the
cost of securities for federal income tax purposes was the same as the cost for
financial reporting purposes. Accordingly, gross unrealized appreciation of
investments was $467,332,172 and gross unrealized depreciation of investments
was $65,269,986 resulting in net unrealized appreciation of $402,062,186.
For investment and hedging purposes, the Fund purchases put and call options on
stock and stock indices that are traded on U.S. securities exchanges and
over-the-counter markets. The risk associated with purchasing an option is that
the Fund pays a premium whether or not the option is exercised. Additionally,
the Fund bears the risk of loss of premium and change in market value should
the counterparty not perform under the contract. Put and call options purchased
are accounted for in the same manner as portfolio securities. The cost of
securities acquired through the exercise of call options is increased by
premiums paid. The proceeds from securities sold through the exercise of put
options are decreased by the premiums paid. For the year ended November 30,
1996, the Fund realized losses of $6,455,147 in options transactions.
12
ALLIANCE TECHNOLOGY FUND
_______________________________________________________________________________
NOTE E: CAPITAL STOCK
There are 250,000,000 shares of $0.01 par value capital stock authorized,
divided into four classes, designated Class A, Class B, Class C and Advisor
Class shares. Class A shares consist of 100,000,000 authorized shares, Class B,
Class C and Advisor Class each consist of 50,000,000 authorized shares.
Transactions in capital stock were as follows:
SHARES AMOUNT
-------------------------- ------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
NOVEMBER 30, NOVEMBER 30, NOVEMBER 30, NOVEMBER 30,
1996 1995 1996 1995
------------ ------------ -------------- --------------
Shares sold 6,739,722 5,476,959 $295,599,004 $217,962,229
Shares issued in
reinvestment of
distributions 444,491 650,071 18,184,138 18,676,512
Shares converted
from Class B 71,011 -0- 3,227,821 -0-
Shares redeemed (4,165,299) (3,934,390) (185,541,160) (148,687,714)
Net increase 3,089,925 2,192,640 $131,469,803 $ 87,951,027
CLASS B
Shares sold 9,295,231 6,758,431 $397,304,488 $273,611,720
Shares issued in
reinvestment of
distributions 288,200 50,219 11,551,039 1,424,212
Shares converted
to Class A (72,846) -0- (3,227,821) -0-
Shares redeemed (2,284,157) (1,334,495) (98,298,021) (54,629,325)
Net increase 7,226,428 5,474,155 $307,329,685 $220,406,607
CLASS C
Shares sold 2,488,614 1,323,714 $106,395,529 $ 53,165,092
Shares issued in
reinvestment of
distributions 34,075 12,351 1,366,065 350,273
Shares redeemed (1,285,491) (629,320) (55,371,330) (24,761,376)
Net increase 1,237,198 706,745 $ 52,390,264 $ 28,753,989
OCT. 2,1996* OCT. 2,1996*
TO TO
NOV. 30,1996 NOV. 30,1996
------------ -------------
ADVISOR CLASS
Shares sold 11,363 $ 551,761
Shares issued in
reinvestment of
distributions -0- -0-
Shares redeemed (306) (15,471)
Net increase 11,057 $ 536,290
* Commencement of distribution.
13
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE TECHNOLOGY FUND
_______________________________________________________________________________
NOTE F: ILLIQUID SECURITY
DATE ACQUIRED COST
------------- ------------
Interactive Light Holdings, Inc.
8.00%, 2/07/99 1/27/94 $500,000
The security shown above is illiquid and has been valued at fair value in
accordance with the procedures described in Note A. The value of this security
at November 30, 1996 was $500,000, representing .04% of net assets.
14
FINANCIAL HIGHLIGHTS ALLIANCE TECHNOLOGY FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
[Enlarge/Download Table]
CLASS A
---------------------------------------------------------------------
JANUARY 1,
YEAR ENDED NOVEMBER 30, 1994 TO YEAR ENDED DECEMBER 31,
--------------------------- NOVEMBER 30, -------------------------
1996 1995 1994(A) 1993 1992
------------- ------------ ------------- ----------- ------------
Net asset value, beginning of period $46.64 $31.98 $26.12 $28.20 $26.38
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (.39)(b) (.30)(b) (.32) (.29) (.22)(b)
Net realized and unrealized gain on
investments 7.28 18.13 6.18 6.39 4.31
Net increase in net asset value from
operations 6.89 17.83 5.86 6.10 4.09
LESS: DISTRIBUTIONS
Distributions from net realized gains (2.38) (3.17) -0- (8.18) (2.27)
Net asset value, end of period $51.15 $46.64 $31.98 $26.12 $28.20
TOTAL RETURN
Total investment return based on net
asset value (c) 16.05% 61.93% 22.43% 21.63% 15.50%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $594,861 $398,262 $202,929 $173,732 $173,566
Ratio of expenses to average net assets 1.74% 1.75% 1.66%(d) 1.73% 1.61%
Ratio of net investment loss to average
net assets (.87)% (.77)% (1.22)%(d) (1.32)% (.90)%
Portfolio turnover rate 30% 55% 55% 64% 73%
Average commission rate (e) $.0612 -- -- -- --
See footnote summary on page 18.
15
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE TECHNOLOGY FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
[Enlarge/Download Table]
CLASS B
---------------------------------------------------------
JANUARY 1, MAY 3,
YEAR ENDED NOVEMBER 30, 1994 TO 1993(F) TO
--------------------------- NOVEMBER 30, DECEMBER 31,
1996 1995 1994(A) 1993
------------- ------------ ------------- -------------
Net asset value, beginning of period $45.76 $31.61 $25.98 $27.44
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (.70)(b) (.60)(b) (.23) (.12)
Net realized and unrealized gain on
investments 7.08 17.92 5.86 6.84
Net increase in net asset value from
operations 6.38 17.32 5.63 6.72
LESS: DISTRIBUTIONS
Distributions from net realized gains (2.38) (3.17) -0- (8.18)
Net asset value, end of period $49.76 $45.76 $31.61 $25.98
TOTAL RETURN
Total investment return based on net
asset value (c) 15.20% 60.95% 21.67% 24.49%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period(000's omitted) $660,921 $277,111 $18,397 $1,645
Ratio of expenses to average net assets 2.44% 2.48% 2.43%(d) 2.57%(d)
Ratio of net investment loss to average
net assets (1.61)% (1.47)% (1.95)%(d) (2.30)%(d)
Portfolio turnover rate 30% 55% 55% 64%
Average commission rate (e) $.0612 -- -- --
See footnote summary on page 18.
16
ALLIANCE TECHNOLOGY FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
[Enlarge/Download Table]
CLASS C
---------------------------------------------------------
JANUARY 1, MAY 3,
YEAR ENDED NOVEMBER 30, 1994 TO 1993(F) TO
--------------------------- NOVEMBER 30, DECEMBER 31,
1996 1995 1994(A) 1993
------------- ------------ ------------- -------------
Net asset value, beginning of period $45.77 $31.61 $25.98 $27.44
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (.70)(b) (.58)(b) (.24) (.13)
Net realized and unrealized gain on
investments 7.07 17.91 5.87 6.85
Net increase in net asset value from
operations 6.37 17.33 5.63 6.72
LESS: DISTRIBUTIONS
Distributions from net realized gains (2.38) (3.17) -0- (8.18)
Net asset value, end of period $49.76 $45.77 $31.61 $25.98
TOTAL RETURN
Total investment return based on net
asset value (c) 15.17% 60.98% 21.67% 24.49%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period(000's omitted) $108,488 $43,161 $7,470 $1,096
Ratio of expenses to average net assets 2.44% 2.48% 2.41%(d) 2.52%(d)
Ratio of net investment loss to average
net assets (1.60)% (1.47)% (1.94)%(d) (2.25)%(d)
Portfolio turnover rate 30% 55% 55% 64%
Average commission rate (e) $.0612 -- -- --
See footnote summary on page 18.
17
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE TECHNOLOGY FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
ADVISOR CLASS
---------------
OCT. 2,1996 (F)
TO
NOV. 30,1996
---------------
Net asset value, beginning of period $47.32
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (.05)(b)
Net realized and unrealized gain on investments 3.90
Net increase in net asset value from operations 3.85
Net asset value, end of period $51.17
TOTAL RETURN
Total investment return based on net asset value (c) 8.14%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $566
Ratio of expenses to average net assets 1.75%(d)
Ratio of net investment loss to average net assets (1.21)%(d)
Portfolio turnover rate 30%
Average commission rate (e) $.0612
(a) The Fund changed its fiscal year end from December 31 to November 30.
(b) Based on average shares outstanding.
(c) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Initial sales charge or contingent
deferred sales charge is not reflected in the calculation of total investment
return. Total investment return calculated for a period of less than one year
is not annualized.
(d) Annualized.
(e) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades on which
commissions are charged.
(f) Commencement of distribution.
18
REPORT OF ERNST & YOUNG LLP
INDEPENDENT AUDITORS ALLIANCE TECHNOLOGY FUND
_______________________________________________________________________________
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
ALLIANCE TECHNOLOGY FUND, INC.
We have audited the accompanying statement of assets and liabilities of
Alliance Technology Fund, Inc. (the "Fund"), including the portfolio of
investments, as of November 30, 1996, and the related statement of operations
for the year then ended, the statement of changes in net assets for each of the
two years in the period then ended, and the financial highlights for each of
the periods indicated therein. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
November 30, 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 Technology Fund, Inc. at November 30, 1996, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each
of the indicated periods, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
New York, New York
January 9, 1997
PART C
OTHER INFORMATION
ITEM 24. Financial Statements and Exhibits
(a) Financial Highlights
Included in the Prospectus:
Financial Highlights
Included in the Statement of Additional Information:
Investment Results as of November 30, 1996.
Portfolio of Investments, November 30,
1996.
Statement of Assets and Liabilities,
November 30, 1996.
Statement of Operations for the fiscal year
ended November 30, 1996.
Statement of Changes in Net Assets, years ended
November 30, 1996 and November 30, 1995.
Notes to Financial Statements, November 30, 1996.
Financial Highlights - Selected Data for a Share of
Capital Stock Outstanding for the years ended
December 31, 1991 through November 30, 1996 for
Class A shares and for the period May 3, 1993
(commencement of distribution) to November 30,
1996 for Class B shares and Class C shares and
for the period October 2, 1996 (commencement of
distribution) to November 30, 1996 for Advisor
Class Shares.
Report of Independent Auditors.
Investment Results as of May 31, 1997.
Portfolio of Investments, May 31, 1997 (unaudited).
Statement of Assets and Liabilities, May 31, 1997
(unaudited).
Statement of Operations for the six months ended
May 31, 1997 (unaudited).
Statement of Changes in Net Assets, year ended
November 30, 1996 and six months ended May 31,
1997 (unaudited).
Notes to Financial Statements, May 31, 1997
(unaudited).
Financial Highlights - Selected Data for a Share of
Capital Stock Outstanding for the years ended
December 31, 1991 through November 30, 1996 and
for the six months ended May 31, 1997 (unaudited)
for Class A shares and for the period May 3, 1993
(commencement of distribution) to November 30,
C-1
1996 and for the six months ended May 31, 1997
(unaudited) for Class B shares and Class C shares
and for the period October 2, 1996 (commencement
of distribution) to November 30, 1996 and for the
six months ended May 31, 1997 (unaudited) for the
Advisor Class.
Report of Independent Auditors.
Included in Part C of the Registration Statement
All other schedules are either omitted because they
are not required under the related instructions,
they are inapplicable, or the required information
is presented in the financial statements or notes
which are included in the Statement of Additional
Information of the Registration Statement.
(b) Exhibits:
(1)(a) Copy of Articles of Incorporation of the
Registrant dated December 23, 1980 -
Filed herewith.
(1)(b) Articles of Amendment dated December 21,
1981 - Filed herewith
(1)(c) Articles of Amendment dated October 16,
1989 - Filed herewith
(1)(d) Articles Supplementary - Filed
herewith
(1)(e) Articles Supplementary - Filed
herewith
(2) Existing By-Laws of the Registrant -
Filed herewith.
(3) Not applicable.
(4)(a) Form of Certificate of shares of Common
Stock of the Registrant - Incorporated
herein by reference (filed as Exhibit 4
of Registration Statement on Form N-1,
filed December 29, 1980 - File No. 2-
70427).
(4)(b) Form of Certificate of shares of Common
Stock of the Registrant for Class B
Shares - Incorporated herein by reference
(filed as Exhibit 4a to Post- Effective
C-2
Amendment No. 20 of Registration
Statement on Form N-1A, filed April 29,
1994 - File No. 2-70427).
(4)(c) Form of Certificate of shares of Common
Stock of the Registrant for Class C
Shares - Incorporated herein by reference
(filed as Exhibit 4b to Post- Effective
Amendment No. 20 of Registration
Statement on Form N-1A, filed April 29,
1994 - File No. 2-70427).
(5) Investment Advisory Agreement between the
Registrant and Alliance Capital
Management L.P. - Filed herewith.
(6)(a) Distribution Services Agreement between
the Registrant and Alliance Fund
Distributors, Inc. - Filed herewith.
(b) Amendment to Distribution Services
Agreement - Filed herewith
(c) Revised form of Selected Dealer Agreement
to be between Alliance Fund Distributors,
Inc. and selected dealers offering shares
of Registrant - Filed herewith.
(d) Revised form of Selected Agent Agreement
between Alliance Fund Distributors, Inc.
and selected agents making available
shares of Registrant - Filed
herewith.
(7) Not applicable.
(8)(a) Registrant's Custodian Contract with
State Street Bank and Trust Company -
Filed herewith.
(b) Amendment to Custodian Contract - Filed
herewith.
(9) Transfer Agency Agreement between the
Registrant and Alliance Fund Services,
Inc. - Filed herewith.
(10)(a) Opinion of Seward & Kissel - Incorporated
herein by reference (filed as Exhibit
10(a) to Pre- Effective Amendment No. 1
C-3
of Registration Statement on Form N-1A,
filed March 1, 1982 - File No. 2-70427).
(b) Opinion and consent of Messrs. Venable,
Baetjer and Howard, LLP - Incorporated
herein by reference (filed as Exhibit
10(b) to Pre-Effective Amendment No. 1,
filed March 1, 1982 - File No. 2-70427).
(11) Consent of Independent Auditors - Filed
herewith.
(12) Not applicable.
(13) Not applicable.
(14) Not applicable.
(15) Rule 12b-1 Plan - See Exhibit 6(a)
hereto.
(16) Schedule for Computation of Total Return
Performance - Filed herewith.
(17) Financial Data Schedule - Incorporated by
reference to the (i) Financial Data
Schedule contained in the Registrant's
most recent Semi-Annual Report on Form
N-SAR with respect to a fiscal year ended
and (ii) Financial Data Schedule
contained in any more recent such report
of the Registrant with respect to a
six-month period ended.
(18) Rule 18f-3 Plan - Incorporated herein by
reference (filed as Exhibit 18 to Post-
Effective Amendment No. 25 of
Registration Statement on Form N-1A,
filed January 31, 1996 - File No. 2-
70427).
Other Exhibits:
Power of Attorney of Philip Von Blon,
Fred B. Bialek, John D. Carifa, Thomas C.
Drees, James B. Glavin, D. James Guzy and
Thomas M. Perkins - Incorporated herein
by reference (filed as Other Exhibit to
Post-Effective Amendment No. 10 of
Registration Statement on Form N-1A,
filed February 28, 1989 - File No. 2-
70427).
C-4
Power of Attorney of David H. Dievler -
Incorporated herein by reference (filed
as Other Exhibit to Post-Effective
Amendment No. 12 of Registration
Statement on Form N-1A, filed April 30,
1990 - File No. 2-70427).
Power of Attorney of Dr. Anthony G.
Athos, Dr. Charles H. Ferguson, William
H. Foulk, Jr., Richard Hermon-Taylor and
Marshall C. Turner, Jr. -Incorporated
herein by reference (filed as Other
Exhibit to Post-Effective Amendment No.
18 of Registration Statement on Form N-
1A, filed March 1, 1993 - File No. 2-
70427).
Power of Attorney of Robert C. Alexander
and Elliot Stein, Jr. - (filed as Other
Exhibit to Post Effective Amendment No.
23 of Registration Statement of Form N1-
A, filed January 25, 1995 - File No. 2-
70427).
Power of Attorney of Robert C. Alexander,
John D. Carifa, David H. Dievler, Dr.
Charles H. Ferguson, William H. Foulk,
Jr., D. James Guzy, Peter J. Powers and
Marshall C. Turner, Jr. - Filed herewith.
ITEM 25. Persons Controlled by or under Common Control with
Registrant.
None.
ITEM 26. Number of Holders of Securities.
Registrant had, as of October 15, 1997, record holders
of shares of common stock as follows:
Class A Shares 54,168
Class B Shares 97,134
Class C Shares 12,718
Advisor Class Shares 2,740
ITEM 27. Indemnification
It is the Registrant's policy to indemnify its directors
and officers, employees and other agents to the maximum
extent permitted by Section 2-418 of the General
Corporation Law of the State of Maryland and as set
C-5
forth in Article ELEVENTH of Registrant's Articles of
Incorporation, filed as Exhibit 1, and Section 10 of the
Distribution Services Agreement filed as Exhibit 6(a),
all as set forth below. The liability of the
Registrant's directors and officers is dealt with in
Article ELEVENTH of Registrant's Articles of
Incorporation, as set forth below. The Adviser's
liability for any loss suffered by the Registrant or its
shareholders is set forth in Section 4 of the Advisory
Agreement filed as Exhibit 5 to this Registration
Statement, as set forth below.
Section 2-418 of the Maryland General Corporation
Law reads as follows:
"2-418 INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES AND AGENTS.--(a) In this section the
following words have the meaning indicated.
(1) "Director" means any person who is or was
a director of a corporation and any person who, while a
director of a corporation, is or was serving at the
request of the corporation as a director, officer,
partner, trustee, employee, or agent of another foreign
or domestic corporation, partnership, joint venture,
trust, other enterprise, or employee benefit plan.
(2) "Corporation" includes any domestic or
foreign predecessor entity of a corporation in a merger,
consolidation, or other transaction in which the
predecessor's existence ceased upon consummation of the
transaction.
(3) "Expenses" include attorney's fees.
(4) "Official capacity" means the following:
(i) When used with respect to a
director, the office of director in the corporation; and
(ii) When used with respect to a person
other than a director as contemplated in subsection (j),
the elective or appointive office in the corporation
held by the officer, or the employment or agency
relationship undertaken by the employee or agent in
behalf of the corporation.
(iii) "Official capacity" does not include
service for any other foreign or domestic corporation or
any partnership, joint venture, trust, other enterprise,
or employee benefit plan.
C-6
(5) "Party" includes a person who was, is, or
is threatened to be made a named defendant or respondent
in a proceeding.
(6) "Proceeding" means any threatened,
pending or completed action, suit or proceeding, whether
civil, criminal, administrative, or investigative.
(b)(1) A corporation may indemnify any
director made a party to any proceeding by reason of
service in that capacity unless it is established that:
(i) The act or omission of the director was
material to the matter giving rise to the proceeding;
and
1. Was committed in bad faith; or
2. Was the result of active and deliberate
dishonesty; or
(ii) The director actually received an
improper personal benefit in money, property, or
services; or
(iii) In the case of any criminal proceeding,
the director had reasonable cause to believe that the
act or omission was unlawful.
(2) (i) Indemnification may be against judgments,
penalties, fines, settlements, and reasonable expenses
actually incurred by the director in connection with the
proceeding.
(ii) However, if the proceeding was one by or
in the right of the corporation, indemnification may not
be made in respect of any proceeding in which the
director shall have been adjudged to be liable to the
corporation.
(3) (i) The termination of any proceeding by
judgment, order or settlement does not create a
presumption that the director did not meet the requisite
standard of conduct set forth in this subsection.
(ii) The termination of any proceeding by
conviction, or a plea of nolo contendere or its
equivalent, or an entry of an order of probation prior
to judgment, creates a rebuttable presumption that the
director did not meet that standard of conduct.
C-7
(c) A director may not be indemnified under
subsection (b) of this section in respect of any
proceeding charging improper personal benefit to the
director, whether or not involving action in the
director's official capacity, in which the director was
adjudged to be liable on the basis that personal benefit
was improperly received.
(d) Unless limited by the charter:
(1) A director who has been successful, on the
merits or otherwise, in the defense of any proceeding
referred to in subsection (b) of this section shall be
indemnified against reasonable expenses incurred by the
director in connection with the proceeding.
(2) A court of appropriate jurisdiction upon
application of a director and such notice as the court
shall require, may order indemnification in the
following circumstances:
(i) If it determines a director is entitled
to reimbursement under paragraph (1) of this subsection,
the court shall order indemnification, in which case the
director shall be entitled to recover the expenses of
securing such reimbursement; or
(ii) If it determines that the director is
fairly and reasonably entitled to indemnification in
view of all the relevant circumstances, whether or not
the director has met the standards of conduct set forth
in subsection (b) of this section or has been adjudged
liable under the circumstances described in subsection
(c) of this section, the court may order such
indemnification as the court shall deem proper. However,
indemnification with respect to any proceeding by or in
the right of the corporation or in which liability shall
have been adjudged in the circumstances described in
subsection (c) shall be limited to expenses.
(3) A court of appropriate jurisdiction may be the
same court in which the proceeding involving the
director's liability took place.
(e)(1) Indemnification under subsection (b) of
this section may not be made by the corporation unless
authorized for a specific proceeding after a
determination has been made that indemnification of the
director is permissible in the circumstances because the
director has met the standard of conduct set forth in
subsection (b) of this section.
C-8
(2) Such determination shall be made:
(i) By the board of directors by a
majority vote of a quorum consisting of directors not,
at the time, parties to the proceeding, or, if such a
quorum cannot be obtained, then by a majority vote of a
committee of the board consisting solely of two or more
directors not, at the time, parties to such proceeding
and who were duly designated to act in the matter by a
majority vote of the full board in which the designated
directors who are parties may participate;
(ii) By special legal counsel selected
by the board or a committee of the board by vote as set
forth in subparagraph (I) of this paragraph, or, if the
requisite quorum of the full board cannot be obtained
therefor and the committee cannot be established, by a
majority vote of the full board in which director who
are parties may participate; or
(iii) By the stockholders.
(3) Authorization of indemnification and
determination as to reasonableness of expenses shall be
made in the same manner as the determination that
indemnification is permissible. However, if the
determination that indemnification is permissible is
made by special legal counsel, authorization of
indemnification and determination as to reasonableness
of expenses shall be made in the manner specified in
subparagraph (ii) of paragraph (2) of this subsection
for selection of such counsel.
(4) Shares held by directors who are parties
to the proceeding may not be voted on the subject matter
under this subsection.
(f)(1) Reasonable expenses incurred by a
director who is a party to a proceeding may be paid or
reimbursed by the corporation in advance of the final
disposition of the proceeding, upon receipt by the
corporation of:
(i) A written affirmation by the
director of the director's good
faith belief that the standard of
conduct necessary for
indemnification by the corporation
as authorized in this section has
been met; and
C-9
(ii) A written undertaking by or on
behalf of the director to repay the amount if it shall
ultimately be determined that the standard of conduct
has not been met.
(2) The undertaking required by subparagraph
(ii) of paragraph (1) of this subsection shall be an
unlimited general obligation of the director but need
not be secured and may be accepted without reference to
financial ability to make the repayment.
(3) Payments under this subsection shall be
made as provided by the charter, bylaws, or contract or
as specified in subsection (e) of this section.
(g) The indemnification and advancement of
expenses provided or authorized by this section may not
be deemed exclusive of any other rights, by
indemnification or otherwise, to which a director may be
entitled under the charter, the bylaws, a resolution of
stockholders or directors, an agreement or otherwise,
both as to action in an official capacity and as to
action in another capacity while holding such office.
(h) This section does not limit the corporation's
power to pay or reimburse expenses incurred by a
director in connection with an appearance as a witness
in a proceeding at a time when the director has not been
made a named defendant or respondent in the proceeding.
(i) For purposes of this section:
(1) The corporation shall be deemed to have
requested a director to serve an employee benefit plan
where the performance of the director's duties to the
corporation also imposes duties on, or otherwise
involves services by, the director to the plan or
participants or beneficiaries of the plan:
(2) Excise taxes assessed on a director with
respect to an employee benefit plan pursuant to
applicable law shall be deemed fines; and
(3) Action taken or omitted by the director
with respect to an employee benefit plan in the
performance of the director's duties for a purpose
reasonably believed by the director to be in the
interest of the participants and beneficiaries of the
plan shall be deemed to be for a purpose which is not
opposed to the best interests of the corporation.
C-10
(j) Unless limited by the charter:
(1) An officer of the corporation shall be
indemnified as and to the extent provided in subsection
(d) of this section for a director and shall be
entitled, to the same extent as a director, to seek
indemnification pursuant to the provisions of subsection
(d);
(2) A corporation may indemnify and advance
expenses to an officer, employee, or agent of the
corporation to the same extent that it may indemnify
directors under this section; and
(3) A corporation, in addition, may indemnify
and advance expenses to an officer, employee, or agent
who is not a director to such further extent, consistent
with law, as may be provided by its charter, bylaws,
general or specific action of its board of directors or
contract.
(k)(1) A corporation may purchase and maintain
insurance on behalf of any person who is or was a
director, officer, employee, or agent of the
corporation, or who, while a director, officer,
employee, or agent of the corporation, is or was serving
at the request, of the corporation as a director,
officer, partner, trustee, employee, or agent of another
foreign or domestic corporation, partnership, joint
venture, trust, other enterprise, or employee benefit
plan against any liability asserted against and incurred
by such person in any such capacity or arising out of
such person's position, whether or not the corporation
would have the power to indemnify against liability
under the provisions of this section.
(2) A corporation may provide similar
protection, including a trust fund, letter of credit, or
surety bond, not inconsistent with this section.
(3) The insurance or similar protection may
be provided by a subsidiary or an affiliate of the
corporation.
(l) Any indemnification of, or advance of expenses
to, a director in accordance with this section, if
arising out of a proceeding by or in the right of the
corporation, shall be reported in writing to the
stockholders with the notice of the next stockholders'
meeting or prior to the meeting."
C-11
"Article ELEVENTH of the Registrant's Articles
of Incorporation reads as follows: A director or
officer of the Corporation shall not be liable to the
Corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director or officer,
except to the extent such exemption from liability or
limitation thereof is not permitted by law (including
the Investment Company Act of 1940) as currently in
effect or as the same may hereafter be amended. No
amendment, modification or repeal of this Article
ELEVENTH shall adversely affect any right or protection
of a director or officer that exists at the time of such
amendment, modification or repeal."
The Advisory Agreement between the Registrant and
Alliance Capital Management L.P. provides that Alliance
Capital Management L.P. will not be liable under such
agreement for any mistake of judgment or in any event
whatsoever except for lack of good faith and that
nothing therein shall be deemed to protect Alliance
Capital Management L.P. against any liability to the
Registrant or its security holders to which it would
otherwise be subject by reason of willful misfeasance,
bad faith or gross negligence in the performance of its
duties thereunder, or by reason of reckless disregard of
its duties or obligations thereunder.
The Distribution Services Agreement between the
Registrant and Alliance Fund Distributors, Inc. provides
that the Registrant will indemnify, defend and hold
Alliance Fund Distributors, Inc., and any person who
controls it within the meaning of Section 15 of the
Investment Company Act of 1940, free and harmless from
and against any and all claims, demands, liabilities and
expenses which Alliance Fund Distributors, Inc. or any
controlling person may incur arising out of or based
upon any alleged untrue statement of a material fact
contained in Registrant's Registration Statement or
Prospectus or arising out of, or based upon any alleged
omission to state a material fact required to be stated
in either of the foregoing or necessary to make the
statements in either of the foregoing not misleading,
provided that nothing therein shall be so construed as
to protect Alliance Fund Distributors, Inc. against any
liability to the Registrant or its security holders to
which it would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence in the
performance of its duties thereunder or by reason of
reckless disregard of its obligations and duties
thereunder.
C-12
The foregoing summaries are qualified by the entire
text of Registrant's Articles of Incorporation, the
Advisory Agreement between the Registrant and Alliance
Capital Management L.P. and the Distribution Services
Agreement between the Registrant and Alliance Fund
Distributors, Inc. which are filed herewith as Exhibits
5, and 6, respectively, in response to Item 24 and each
of which are incorporated by reference herein.
Insofar as indemnification for liabilities arising
under the Securities Act of 1933 (the "Securities Act")
may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been
advised that, in the opinion of the Securities and
Exchange Commission, such indemnification is against
public policy as expressed in the Securities Act and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid
by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit
or proceeding) is asserted by such director, officer or
controlling person in connection with the securities
being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such
indemnification by it is against public policy as
expressed in the Securities Act and will be governed by
the final adjudication of such issue.
The Registrant participates in a joint directors
and officers liability insurance policy issued by the
ICI Mutual Insurance Company. Coverage under this
policy has been extended to directors, trustees and
officers of the investment companies managed by Alliance
Capital Management L.P. Under this policy, outside
trustees and directors are covered up to the limits
specified for any claim against them for acts committed
in their capacities as trustee or director. A pro rata
share of the premium for this coverage is charged to
each investment company and to the Adviser.
ITEM 28. Business and Other Connections of Investment Adviser.
The descriptions of Alliance Capital Management L.P.
under the caption "The Adviser" in the Prospectus and
"Management of the Fund" in the Prospectus and in the
Statement of Additional Information constituting Parts A
C-13
and B, respectively, of this Registration Statement are
incorporated by reference herein.
The information as to the directors and executive
officers of Alliance Capital Management Corporation, the
general partner of Alliance Capital Management L.P., set
forth in Alliance Capital Management L.P.'s Form ADV
filed with the Securities and Exchange Commission on
April 21, 1988 (File No. 801-32361) and amended through
the date hereof, is incorporated by reference.
ITEM 29. Principal Underwriters
(a) Alliance Fund Distributors, Inc., the Registrant's
Principal Underwriter in connection with the sale
of shares of the Registrant, also acts as Principal
Underwriter for the following registered investment
companies:
ACM Institutional Reserves, Inc.
AFD Exchange Reserves
Alliance All-Asia Investment Fund, Inc.
Alliance Balanced Shares, Inc.
Alliance Bond Fund, Inc.
Alliance Capital Reserves
Alliance Developing Markets Fund, Inc.
Alliance Global Dollar Government Fund, Inc.
Alliance Global Small Cap Fund, Inc.
Alliance Global Strategic Income Trust, Inc.
Alliance Government Reserves
Alliance Growth and Income Fund, Inc.
Alliance Greater China '97 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/Regent Sector Opportunity Fund, Inc.
Alliance Short-Term Multi-Market Trust, Inc.
Alliance Utility Income Fund, Inc.
Alliance Variable Products Series Fund, Inc.
Alliance World Income Trust, Inc.
C-14
Alliance Worldwide Privatization Fund, Inc.
Fiduciary Management Associates
The Alliance Fund, Inc.
The Alliance Portfolios
(b) The following are the Directors and Officers of
Alliance Fund Distributors, Inc., the principal
place of business of which is 1345 Avenue of the
Americas, New York, New York, 10105.
Name Positions and Positions and
Offices With Offices With
Underwriter Registrant
Michael J. Laughlin Chairman
Robert L. Errico President
Edmund P. Bergan, Jr. Senior Vice President, Secretary
Secretary &
General Counsel
James S. Comforti Senior Vice President
James L. Cronin Senior Vice President
Daniel J. Dart Senior Vice President
Richard A. Davies Senior Vice President,
Managing Director
Byron M. Davis Senior Vice President
Anne S. Drennan Senior Vice President
& Treasurer
Mark J. Dunbar Senior Vice President
Bradley F. Hanson Senior Vice President
Geoffrey L. Hyde Senior Vice President
Robert H. Joseph, Jr. Senior Vice President
& Chief Financial Officer
Richard E. Khaleel Senior Vice President
Stephen R. Laut Senior Vice President
Daniel D. McGinley Senior Vice President
Ryne A. Nishimi Senior Vice President
C-15
Antonios G. Poleonadkis Senior Vice President
Robert E. Powers Senior Vice President
Richard K. Saccullo Senior Vice President
Gregory K. Shannahan Senior Vice President
Joseph F. Sumanski Senior Vice President
Peter J. Szabo Senior Vice President
Nicholas K. Willett Senior Vice President
Richard A. Winge Senior Vice President
Jamie A. Atkinson Vice President
Benji A. Baer Vice President
Kenneth F. Barkoff Vice President
Casimir F. Bolanowski Vice President
Timothy W. Call Vice President
Kevin T. Cannon Vice President
John R. Carl Vice President
William W. Collins, Jr. Vice President
Leo H. Cook Vice President
Richard W. Dabney Vice President
John F. Dolan Vice President
Sohaila S. Farsheed Vice President
William C. Fisher Vice President
Gerard J. Friscia Vice President
& Controller
Andrew L. Gangolf Vice President & Assistant
Assistant General Secretary
Counsel
C-16
Mark D. Gersten Vice President Treasurer
& Chief
Financial
Officer
Joseph W. Gibson Vice President
Charles M. Greenberg Vice President
Alan Halfenger Vice President
William B. Hanigan Vice President
Daniel M. Hazard Vice President
George R. Hrabovsky Vice President
Valerie J. Hugo Vice President
Scott Hutton Vice President
Thomas K. Intoccia Vice President
Larry P. Johns Vice President
Richard D. Keppler Vice President
Gwenn M. Kessler Vice President
Donna M. Lamback Vice President
James M. Liptrot Vice President
James P. Luisi Vice President
Shawn P. McClain Vice President
Christopher J.
MacDonald Vice President
Michael F. Mahoney Vice President
Lori E. Master Vice President
Shawn P. McClain Vice President
Maura A. McGrath Vice President
Thomas F. Monnerat Vice President
Joanna D. Murray Vice President
C-17
Jeanette M. Nardella Vice President
Nicole Nolan-Koester Vice President
John C. O'Connell Vice President
John J. O'Connor Vice President
Robert T. Pigozzi Vice President
James J. Posch Vice President
Domenick Pugliese Vice President Assistant
& Assistant Secretary
General Counsel
Bruce W. Reitz Vice President
Dennis A. Sanford Vice President
Karen C. Satterberg Vice President
Robert C. Schultz Vice President
Raymond S. Sclafani Vice President
Richard J. Sidell Vice President
Andrew D. Strauss Vice President
Michael J. Tobin Vice President
Joseph T. Tocyloski Vice President
Martha D. Volcker Vice President
Patrick E. Walsh Vice President
William C. White Vice President
Emilie D. Wrapp Vice President Assistant
& Special Counsel Secretary
Charles M. Barrett Assistant Vice President
Robert F. Brendli Assistant Vice President
Maria L. Carreras Assistant Vice President
John W. Cronin Assistant Vice President
C-18
John P. Chase Assistant Vice President
Russell R. Corby Assistant Vice President
Ralph A. DiMeglio Assistant Vice President
Faith Dunn Assistant Vice President
John C. Endahl Assistant Vice President
John E. English Assistant Vice President
Duff C. Ferguson Assistant Vice President
John Grambone Assistant Vice President
Brian S. Hanigan Assistant Vice President
James J. Hill Assistant Vice President
Edward W. Kelly Assistant Vice President
Michael Laino Assistant Vice President
Nicholas J. Lapi Assistant Vice President
Patrick Look Assistant Vice President
& Assistant Treasurer
Richard F. Meier Assistant Vice President
Catherine N. Peterson Assistant Vice President
Carol H. Rappa Assistant Vice President
Clara Sierra Assistant Vice President
Vincent T. Strangio Assistant Vice President
Wesley S. Williams Assistant Vice President
Christopher J. Zingaro Assistant Vice President
Mark R. Manley Assistant Secretary
(c) Not applicable.
ITEM 30. Location of Accounts and Records.
The majority of the accounts, books and other documents
required to be maintained by Section 31(a) of the
C-19
Investment Company Act of 1940 and the Rules thereunder
are maintained as follows: journals, ledgers, securities
records and other original records are maintained
principally at the offices of Alliance Fund Services,
Inc. 500 Plaza Drive, Secaucus, New Jersey 07094-1520
and at the offices of State Street Bank and Trust
Company, the Registrant's Custodian, 225 Franklin
Street, Boston, Massachusetts 02110. All other records
so required to be maintained are maintained at the
offices of Alliance Capital Management L.P., 1345 Avenue
of the Americas, New York, New York 10105.
ITEM 31. Management Services.
Not applicable.
ITEM 32. Undertakings
The Registrant undertakes to furnish each person to whom
a prospectus is delivered with a copy of the
Registrant's latest report to shareholders, upon request
and without charge.
The Registrant undertakes to provide assistance to
shareholders in communications concerning the removal of
any Director of the Fund in accordance with Section 16
of the Investment Company Act of 1940.
C-20
SIGNATURE
Pursuant to the requirements of the Securities Act of 1933, as
amended, and the Investment Company Act of 1940, as amended, the
Registrant certifies that it meets all of the requirements for
effectiveness of this Amendment to its Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has
duly caused this amendment to its Registration Statement to be
signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York and State of New York, on the
31st day of October, 1997.
ALLIANCE TECHNOLOGY FUND, INC.
by /s/ John D. Carifa
___________________________
John D. Carifa
Chairman and President
Pursuant to the requirements of the Securities Act of 1933 this
Amendment to the Registration Statement has been signed below by
the following persons in the capacities and on the dates
indicated:
Signature Title Date
1) Principal
Executive Officer
/s/ John D. Carifa Chairman and
__________________________ President October 31, 1997
John D. Carifa
2) Principal Financial
and Accounting Officer
/s/ Mark D. Gersten Treasurer and Chief
__________________________ Financial Officer October 31, 1997
Mark D. Gersten
C-21
3) All of the Directors
Robert C. Alexander William H. Foulk, Jr.
John D. Carifa D. James Guzy
David H. Dievler Peter J. Powers
Dr. Charles H. Ferguson Marshall C. Turner, Jr.
by (Attorney-in-fact)
/s/ Edmund P. Bergan, Jr. October 31, 1997
__________________________
Edmund P. Bergan, Jr.
C-22
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Index to Exhibits
Page
(1)(a) Articles of Incorporation
(b) Articles of Amendment
(c) Articles of Amendment
(d) Articles Supplementary
(e) Articles Supplementary
(2) By-Laws
(5) Advisory Agreement
(6)(a) Distribution Services Agreement
(b) Amendment to Distribution Agreement
(c) Selected Dealer Agreement
(d) Selected Agent Agreement
(8)(a) Custodian Contract
(b) Amendment to Custodian Contract
(9) Transfer Agency Agreement
(11) Consent of Independent Auditors
(16) Schedule of Computation of Performance Quotation
C-23
00250200.AM8
Dates Referenced Herein and Documents Incorporated by Reference
5 Subsequent Filings that Reference this Filing
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