<DOCUMENT>
<TYPE>497
<SEQUENCE>1
<FILENAME>d387018a_497.txt
<TEXT>
This is filed pursuant to Rule 497(e).
Alliance High Yield Fund, Inc.
(File Nos. 333-18505 and 811-09160)
The Alliance
Bond Funds
The Alliance Bond Funds provide a broad selection of investment alternatives to
investors seeking high current income.
Prospectus
March 3, 2003
Investment Grade Funds
> Alliance U.S. Government Portfolio
> Alliance Quality Bond Portfolio
Corporate Bond Funds
> Alliance Corporate Bond Portfolio
> Alliance High Yield Fund
Multi-Sector Fund
> Alliance Global Strategic Income Trust
Global Bond Funds
> Alliance Americas Government Income Trust
> Alliance Emerging Market Debt Fund
> Alliance Multi-Market Strategy Trust
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this Prospectus. Any representation to
the contrary is a criminal offense.
AllianceCapital [LOGO](R)
<PAGE>
Investment Products Offered
---------------------------
> Are Not FDIC Insured
> May Lose Value
> Are Not Bank Guaranteed
---------------------------
<PAGE>
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TABLE OF CONTENTS
--------------------------------------------------------------------------------
Page
RISK/RETURN SUMMARY ....................................................... 3
Investment Grade Funds .................................................... 4
Corporate Bond Funds ...................................................... 6
Multi-Sector Fund ......................................................... 8
Global Bond Funds ......................................................... 9
Summary of Principal Risks ................................................ 12
Principal Risks by Fund ................................................... 14
FEES AND EXPENSES OF THE FUNDS ............................................ 15
GLOSSARY .................................................................. 17
DESCRIPTION OF THE FUNDS .................................................. 18
Investment Objectives and Principal Policies .............................. 18
Description of Additional Investment Practices ............................ 24
Additional Risk Considerations ............................................ 35
MANAGEMENT OF THE FUNDS ................................................... 38
PURCHASE AND SALE OF SHARES ............................................... 41
How The Funds Value Their Shares .......................................... 41
How To Buy Shares ......................................................... 41
How To Exchange Shares .................................................... 41
How To Sell Shares ........................................................ 41
DIVIDENDS, DISTRIBUTIONS AND TAXES ........................................ 42
DISTRIBUTION ARRANGEMENTS ................................................. 43
GENERAL INFORMATION ....................................................... 44
FINANCIAL HIGHLIGHTS ...................................................... 45
APPENDIX A: BOND RATINGS .................................................. 52
APPENDIX B: GENERAL INFORMATION ABOUT
CANADA, MEXICO AND ARGENTINA ............................................ 54
The Funds' investment adviser is Alliance Capital Management L.P., a global
investment manager providing diversified services to institutions and
individuals through a broad line of investments including more than 100 mutual
funds.
RISK/RETURN SUMMARY
The following is a summary of certain key information about the Alliance Bond
Funds. You will find additional information about each Fund, including a
detailed description of the risks of an investment in each Fund, after this
Summary.
The Risk/Return Summary describes the Funds' objectives, principal investment
strategies, principal risks and fees. Each Fund's Summary page includes a short
discussion of some of the principal risks of investing in that Fund. A further
discussion of these and other risks is on pages 12-14.
More detailed descriptions of the Funds, including the risks associated with
investing in the Funds, can be found further back in this Prospectus. Please be
sure to read this additional information BEFORE you invest. Each of the Funds
may at times use certain types of investment derivatives such as options,
futures, forwards, and swaps. The use of these techniques involves special risks
that are discussed in this Prospectus.
The Risk/Return Summary includes a table for each Fund showing its average
annual returns before and after taxes and a bar chart showing its annual
returns. The table and the bar chart provide an indication of the historical
risk of an investment in each Fund by showing:
o how the Fund's average annual returns, before and after taxes, for one,
five, and 10 years (or over the life of the Fund if the Fund is less than
10 years old) compare to those of a broad based securities market index;
and
o changes in the Fund's performance from year to year over 10 years (or over
the life of the Fund if the Fund is less than 10 years old).
A Fund's past performance before and after taxes, of course, does not
necessarily indicate how it will perform in the future. As with all investments,
you may lose money by investing in the Funds.
3
<PAGE>
INVESTMENT GRADE FUNDS
The Investment Grade Funds offer a selection of alternatives to investors
seeking high current income consistent with the preservation of capital through
investments primarily in investment grade (rated Baa or BBB or above)
securities.
Alliance U.S. Government Portfolio
--------------------------------------------------------------------------------
OBJECTIVE:
The Fund's investment objective is a high level of current income that is
consistent with Alliance's determination of prudent investment risk.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests, under normal circumstances, at least 80% of its net assets in
U.S. Government securities, repurchase agreements and forward contracts relating
to U.S. Government securities. The Fund also may invest in non-U.S. Government
mortgage-related and asset-backed securities and in high grade debt securities
secured by mortgages on commercial real estate or residential rental properties.
The average weighted maturity of the Fund's investments varies between one year
or less and 30 years.
Among the principal risks of investing in the Fund are interest rate risk,
credit risk, and market risk. Because the Fund may invest in mortgage-related
and asset-backed securities, it is subject to the risk that mortgage loans or
other obligations will be prepaid when interest rates decline, forcing the Fund
to reinvest in securities with lower interest rates. For this and other reasons,
mortgage-related and asset-backed securities may have significantly greater
price and yield volatility than traditional debt securities.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
Average Annual Total Returns*
(For the periods ended December 31, 2002)
----------------------------------------------------------------------
1 5 10
Year Years Years**
----------------------------------------------------------------------
Class A*** Return Before Taxes 4.55% 5.48% 5.70%
----------------------------------------------------------
Return After Taxes
on Distributions 2.57% 2.83% 2.77%
----------------------------------------------------------
Return After Taxes on
Distributions and
Sale of Fund Shares 2.74% 3.01% 3.00%
----------------------------------------------------------------------
Class B Return Before Taxes 5.44% 5.65% 5.69%
----------------------------------------------------------------------
Class C Return Before Taxes 7.44% 5.67% 5.38%
----------------------------------------------------------------------
Lehman (reflects no
Brothers deduction for
Government fees, expenses,
Bond Index or taxes) 11.50% 7.77% 7.56%
----------------------------------------------------------------------
* Average annual total returns reflect imposition of the maximum front-end
or contingent deferred sales charges as well as conversion of Class B
shares to Class A shares after the applicable period.
** Inception Dates for Class C shares: 5/3/93. Performance information for
periods prior to the inception of Class C shares is the performance of the
Fund's Class A shares adjusted to reflect the higher expense ratio of
Class C shares.
*** After-tax Returns:
-Are shown for Class A shares only and will vary for Class B and C shares
because these Classes have higher expense ratios;
-Are an estimate, which is based on the highest historical individual
federal marginal income tax rates and do not reflect the impact of state
and local taxes; actual after-tax returns depend on an individual
investor's tax situation and are likely to differ from those shown; and
-Are not relevant to investors who hold Fund shares through tax-deferred
arrangements such as 401(k) plans or individual retirement accounts.
BAR CHART
The annual returns in the bar chart are for the Fund's Class A shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown.
[THE FOLLOWING INFORMATION WAS DEPICTED AS A BAR CHART IN THE PRINTED MATERIAL.]
9.72 -4.38 16.55 0.34 8.55 8.60 -3.21 12.42 5.72 9.21
--------------------------------------------------------------------------------
93 94 95 96 97 98 99 00 01 02
Calendar Year End
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best quarter was up 5.73%, 2nd quarter, 1995; and
Worst quarter was down -3.41%, 1st quarter, 1994.
4
<PAGE>
Alliance Quality Bond Portfolio
--------------------------------------------------------------------------------
OBJECTIVE:
The Fund's investment objective is high current income consistent with
preservation of capital by investing in investment grade fixed-income
securities.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests, under normal circumstances, at least 80% of its net assets in
bonds and other debt securities. The Fund invests in readily marketable
securities that do not involve undue risk of capital. The Fund normally invests
all of its assets in securities that are rated at least BBB- by S&P or, if
unrated, are of comparable quality. The Fund has the flexibility to invest in
long- and short-term fixed-income securities depending on Alliance's assessment
of prospective cyclical interest rate changes.
The Fund also may:
o use derivatives strategies;
o invest in convertible debt securities and preferred stock;
o invest in U.S. Government obligations; and
o invest in foreign fixed-income securities.
Among the principal risks of investing in the Fund are interest rate risk,
credit risk, derivatives risk and market risk. To the extent the Fund invests in
foreign fixed-income securities, it has foreign risk and currency risk.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
Average Annual Total Returns*
(For the periods ended December 31, 2002)
-----------------------------------------------------------------
1 Since
Year Inception**
-----------------------------------------------------------------
Class A*** Return Before Taxes 3.09% 6.34%
-----------------------------------------------------
Return After Taxes
on Distributions 1.20% 4.02%
-----------------------------------------------------
Return After Taxes on
Distributions and
Sale of Fund Shares 1.84% 3.89%
-----------------------------------------------------------------
Class B Return Before Taxes 3.92% 6.89%
-----------------------------------------------------------------
Class C Return Before Taxes 5.94% 6.84%
-----------------------------------------------------------------
Lehman (reflects no
Brothers deduction for
Aggregate fees, expenses,
Bond Index or taxes) 10.25% 9.13%
-----------------------------------------------------------------
* Average annual total returns reflect imposition of the maximum front-end
or contingent deferred sales charges as well as conversion of Class B
shares to Class A shares after the applicable period.
** Inception Date for all Classes: 7/1/99.
*** After-tax Returns:
-Are shown for Class A shares only and will vary for Class B and C shares
because these Classes have higher expense ratios;
-Are an estimate, which is based on the highest historical individual
federal marginal income tax rates and do not reflect the impact of state
and local taxes; actual after-tax returns depend on an individual
investor's tax situation and are likely to differ from those shown; and
-Are not relevant to investors who hold Fund shares through tax-deferred
arrangements such as 401(k) plans or individual retirement accounts.
BAR CHART
The annual returns in the bar chart are for the Fund's Class A shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown.
[THE FOLLOWING INFORMATION WAS DEPICTED AS A BAR CHART IN THE PRINTED MATERIAL.]
n/a n/a n/a n/a n/a n/a n/a 11.25 7.36 7.67
--------------------------------------------------------------------------------
93 94 95 96 97 98 99 00 01 02
Calendar Year End
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best quarter was up 4.56%, 3rd quarter,2001; and
Worst quarter was down -0.61%, 1st quarter, 2002.
5
<PAGE>
CORPORATE BOND FUNDS
The Corporate Bond Funds offer a selection of alternatives to investors seeking
to maximize current income through investments in corporate bonds.
Alliance Corporate Bond Portfolio
--------------------------------------------------------------------------------
OBJECTIVE:
The Fund's investment objective is primarily to maximize income over the long
term to the extent consistent with providing reasonable safety in the value of
each shareholder's investment, and secondarily to increase its capital through
appreciation of its investments in order to preserve and, if possible, increase
the purchasing power of each shareholder's investment.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests, under normal circumstances, at least 80% of its net assets in
corporate bonds or other corporate debt securities. The Fund may invest up to
50% of its total assets in foreign fixed-income securities, primarily corporate
debt securities and sovereign debt obligations. All of the Fund's investments,
whether foreign or domestic, will be U.S. Dollar denominated. The Fund also may
invest in income-producing equity securities. While the Fund invests primarily
(currently 65%) in investment grade debt securities, it also may invest a
significant amount of its total assets in lower-rated debt securities. The
average weighted maturity of the Fund's investments varies between one year or
less and 30 years.
The Fund pursues a more aggressive investment strategy than other corporate bond
funds. The Fund's investments tend to have a relatively long average weighted
maturity and duration. The Fund emphasizes both foreign corporate and sovereign
debt obligations, as well as corporate bonds that are expected to benefit from
improvements in their issuers' credit fundamentals.
Among the principal risks of investing in the Fund are interest rate risk,
credit risk, and market risk. Because the Fund emphasizes investments with a
relatively long average weighted maturity and duration, its returns may be more
volatile than other corporate bond funds. To the extent the Fund invests in
lower-rated securities, your investment is subject to more credit risk than an
investment in a fund that invests solely in higher-rated securities. The Fund's
investments in foreign debt obligations have foreign risk.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
Average Annual Total Returns*
(For the periods ended December 31, 2002)
----------------------------------------------------------------------
1 5 10
Year Years Years**
----------------------------------------------------------------------
Class A*** Return Before Taxes -5.99% 2.32% 7.29%
---------------------------------------------------------
Return After Taxes
on Distributions -8.79% -0.93% 3.72%
---------------------------------------------------------
Return After Taxes on
Distributions and
Sale of Fund Shares -3.74% 0.21% 4.05%
----------------------------------------------------------------------
Class B Return Before Taxes -5.26% 2.48% 7.24%
----------------------------------------------------------------------
Class C Return Before Taxes -3.45% 2.48% 7.01%
----------------------------------------------------------------------
Lehman (reflects no
Brothers deduction for
Long Baa fees, expenses,
U.S. Credit or taxes)
Index 9.87% 6.34% 8.28%
----------------------------------------------------------------------
* Average annual total returns reflect imposition of the maximum front-end
or contingent deferred sales charges as well as conversion of Class B
shares to Class A shares after the applicable period.
** Inception Dates for Class B shares: 1/8/93, and Class C shares: 5/3/93.
Performance information for periods prior to the inception of Class B and
Class C shares is the performance of the Fund's Class A shares adjusted to
reflect the higher expense ratio of Class B and Class C shares.
*** After-tax Returns:
-Are shown for Class A shares only and will vary for Class B and C shares
because these Classes have higher expense ratios;
-Are an estimate, which is based on the highest historical individual
federal marginal income tax rates and do not reflect the impact of state
and local taxes; actual after-tax returns depend on an individual
investor's tax situation and are likely to differ from those shown; and
-Are not relevant to investors who hold Fund shares through tax-deferred
arrangements such as 401(k) plans or individual retirement accounts.
BAR CHART
The annual returns in the bar chart are for the Fund's Class A shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown.
[THE FOLLOWING INFORMATION WAS DEPICTED AS A BAR CHART IN THE PRINTED MATERIAL.]
31.09 -12.75 27.98 10.02 11.81 -0.02 1.93 8.12 8.33 -1.85
--------------------------------------------------------------------------------
93 94 95 96 97 98 99 00 01 02
Calendar Year End
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best quarter was up 15.62%, 2nd quarter, 1995; and
Worst quarter was down -8.43%, 1st quarter, 1994.
6
<PAGE>
Alliance High Yield Fund
--------------------------------------------------------------------------------
OBJECTIVE:
The Fund's investment objective is to achieve a high total return by maximizing
current income and, to the extent consistent with that objective, capital
appreciation.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests, under normal circumstances, at least 80% of its net assets in
high yield debt securities. The Fund invests in high yield, below investment
grade debt securities, commonly known as "junk bonds." The Fund seeks to
maximize current income by taking advantage of market developments, yield
disparities, and variations in the creditworthiness of issuers.
Among the principal risks of investing in the Fund are interest rate risk,
credit risk, and market risk. Because the Fund invests in lower-rated
securities, it has significantly more risk than other types of bond funds and
its returns will be more volatile. The Fund's investments in foreign securities
have foreign risk and currency risk.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
Average Annual Total Returns*
(For the periods ended December 31, 2002)
----------------------------------------------------------------------
1 5 Since
Year Years Inception**
----------------------------------------------------------------------
Class A*** Return Before Taxes -7.31% -4.76% -0.47%
----------------------------------------------------------
Return After Taxes
on Distributions -10.74% -8.71% -4.58%
----------------------------------------------------------
Return After Taxes
on Distributions
and Sale of
Fund Shares -4.51% -5.35% -2.11%
----------------------------------------------------------------------
Class B Return Before Taxes -7.62% -4.62% -0.42%
----------------------------------------------------------------------
Class C Return Before Taxes -5.00% -4.62% -0.42%
----------------------------------------------------------------------
First (reflects no
Boston deduction for
High Yield fees, expenses,
Index or taxes) 3.10% 1.44% 2.99%
----------------------------------------------------------------------
* Average annual total returns reflect imposition of the maximum front-end
or contingent deferred sales charges as well as conversion of Class B
shares to Class A shares after the applicable period.
** Inception Date for all Classes: 4/22/97.
*** After-tax Returns:
-Are shown for Class A shares only and will vary for Class B and C shares
because these Classes have higher expense ratios;
-Are an estimate, which is based on the highest historical individual
federal marginal income tax rates and do not reflect the impact of state
and local taxes; actual after-tax returns depend on an individual
investor's tax situation and are likely to differ from those shown; and
-Are not relevant to investors who hold Fund shares through tax-deferred
arrangements such as 401(k) plans or individual retirement accounts.
BAR CHART
The annual returns in the bar chart are for the Fund's Class A shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown.
[THE FOLLOWING INFORMATION WAS DEPICTED AS A BAR CHART IN THE PRINTED MATERIAL.]
n/a n/a n/a n/a n/a -1.67 -1.79 -11.90 -0.59 -3.26
--------------------------------------------------------------------------------
93 94 95 96 97 98 99 00 01 02
Calendar Year End
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best quarter was up 7.73%, 4th quarter, 2001; and
Worst quarter was down -9.63%, 3rd quarter, 1998.
7
<PAGE>
MULTI-SECTOR FUND
The Multi-Sector Fund offers investors seeking high current income the
alternative of investing in a variety of traditional and non-traditional
fixed-income sectors based on Alliance's evaluation of changes in major economic
and credit cycles around the world.
Alliance Global Strategic Income Trust
--------------------------------------------------------------------------------
OBJECTIVE:
The Fund's investment objective is primarily a high level of current income and,
secondarily, capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund primarily invests in debt securities of U.S. and non-U.S. companies,
U.S. Government and foreign governments, and supranational entities. The Fund's
foreign investments are generally denominated in foreign currencies. The Fund,
however, generally seeks to hedge currency risk. The Fund normally invests at
least 65% of its total assets in debt securities of companies located in at
least three countries, one of which may be the United States. The Fund limits
its investments in any one foreign country to 25% of its total assets.
The Fund invests at least 65% of its total assets in investment grade
securities, but also may invest up to 35% of its total assets in lower-rated
securities. The average weighted maturity of the Fund's investments varies
between five and 30 years.
The Fund may use significant borrowings and reverse repurchase agreements and
dollar rolls for leverage. The Fund also may:
o use derivatives strategies;
o invest in structured securities;
o invest in Eurodollar instruments and foreign currencies;
o invest in asset-backed and mortgage-related securities;
o enter into repurchase agreements; and
o invest in floating, variable, and inverse floating rate securities.
Among the principal risks of investing in the Fund are interest rate risk,
credit risk, market risk, and leveraging risk. The Fund's investments in foreign
issuers have foreign risk and currency risk. To the extent the Fund invests in
lower-rated securities, your investment is subject to more credit risk than an
investment in a fund that invests primarily in higher-rated securities. The
Fund's use of derivatives strategies has derivatives risk. In addition, the Fund
is "non-diversified," meaning that it invests more of its assets in a smaller
number of issuers than many other funds. Changes in the value of a single
security may have a more significant effect, either negative or positive, on the
Fund's net asset value.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
Average Annual Total Returns*
(For the periods ended December 31, 2002)
----------------------------------------------------------------------
1 5 Since
Year Years Inception**
----------------------------------------------------------------------
Class A*** Return Before Taxes 0.59% 2.34% 6.69%
----------------------------------------------------------
Return After Taxes
on Distributions -1.87% -1.09% 2.78%
----------------------------------------------------------
Return After Taxes
on Distributions
and Sale of
Fund Shares 0.29% 0.15% 3.41%
----------------------------------------------------------------------
Class B Return Before Taxes 0.51% 2.51% 6.68%
----------------------------------------------------------------------
Class C Return Before Taxes 3.31% 2.51% 6.62%
----------------------------------------------------------------------
Lehman (reflects no
Brothers deduction for
Aggregate fees, expenses,
Bond Index or taxes) 10.25% 7.55% 7.26%
----------------------------------------------------------------------
* Average annual total returns reflect imposition of the maximum front-end
or contingent deferred sales charges as well as conversion of Class B
shares to Class A shares after the applicable period.
** Inception Dates for Class A shares: 1/9/96, and Class B and Class C
shares: 3/21/96. Performance information for periods prior to the
inception of Class B and Class C shares is the performance of the Fund's
Class A shares adjusted to reflect the higher expense ratio of Class B and
Class C shares.
*** After-tax Returns:
-Are shown for Class A shares only and will vary for Class B and C shares
because these Classes have higher expense ratios;
-Are an estimate, which is based on the highest historical individual
federal marginal income tax rates and do not reflect the impact of state
and local taxes; actual after-tax returns depend on an individual
investor's tax situation and are likely to differ from those shown; and
-Are not relevant to investors who hold Fund shares through tax-deferred
arrangements such as 401(k) plans or individual retirement accounts.
BAR CHART
The annual returns in the bar chart are for the Fund's Class A shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown.
[THE FOLLOWING INFORMATION WAS DEPICTED AS A BAR CHART IN THE PRINTED MATERIAL.]
n/a n/a n/a n/a 15.31 1.99 7.63 4.57 -2.81 5.04
--------------------------------------------------------------------------------
93 94 95 96 97 98 99 00 01 02
Calendar Year End
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best quarter was up 7.36%, 4th quarter, 2002; and
Worst quarter was down -5.68%, 3rd quarter, 1998.
8
<PAGE>
GLOBAL BOND FUNDS
The Global Bond Funds offer a selection of alternatives to investors seeking a
high level of current income through investments primarily in foreign government
securities.
Alliance Americas Government Income Trust
--------------------------------------------------------------------------------
OBJECTIVE:
The Fund's investment objective is the highest level of current income,
consistent with what Alliance considers to be prudent investment risk, that is
available from a portfolio of debt securities issued or guaranteed by the
governments of the United States, Canada, or Mexico, their political
subdivisions (including Canadian Provinces but excluding states of the United
States), agencies, instrumentalities or authorities.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund normally invests at least 80% of its net assets in debt securities of
issuers located in countries in North, Central, or South America and at least
80% of its net assets in government securities. The Fund primarily invests in
debt securities issued or guaranteed by: (i) the federal governments of the
United States, Canada, and Mexico; (ii) government-related entities in the
United States, Canada, and Mexico; and (iii) the provincial governments of
Canada and Mexico. The Fund's investments also may include debt securities
issued by governmental entities of other countries located in Central and South
America, including the Caribbean. The Fund may invest up to 25% of its assets in
debt securities issued by governmental entities of Argentina. The Fund invests
at least 80% of its net assets in investment grade debt securities, but may
invest up to 20% of its net assets in lower-rated debt securities or, in either
case, if unrated, determined by Alliance to be of equivalent quality. The Fund's
investments may be denominated in local currency or U.S. Dollar-denominated, but
the Fund expects to maintain at least 25% of its assets in U.S.
Dollar-denominated securities.
The Fund may use significant borrowings for leverage. The Fund also may:
o use derivative strategies; and
o invest in variable, floating, and inverse floating rate instruments.
Among the principal risks of investing in the Fund are interest rate risk,
credit risk, market risk and leveraging risk. The Fund's investments in foreign
debt securities have foreign risk and currency risk. Your investment also has
the risk that market changes or other events affecting foreign countries,
including potential instability and unpredictable economic conditions, may have
a more significant effect on the Fund's net asset value. To the extent the Fund
invests in lower-rated debt securities, your investment is subject to more
credit risk than an investment in a fund that limits its investments to
higher-rated debt securities. In addition, the Fund is "non-diversified,"
meaning that it invests more of its assets in a smaller number of issuers than
many other funds. Changes in the value of a single security may have a more
significant effect, either negative or positive, on the Fund's net asset value.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
Average Annual Total Returns*
(For the periods ended December 31, 2002)
----------------------------------------------------------------------
1 5 10
Year Years Years**
----------------------------------------------------------------------
Class A*** Return Before Taxes 5.98% 7.67% 8.40%
----------------------------------------------------------
Return After Taxes
on Distributions 2.55% 3.70% 4.49%
----------------------------------------------------------
Return After Taxes on
Distributions and
Sale of Fund Shares 3.54% 4.08% 4.67%
----------------------------------------------------------------------
Class B Return Before Taxes 6.90% 7.75% 8.33%
----------------------------------------------------------------------
Class C Return Before Taxes 8.86% 7.80% 7.98%
----------------------------------------------------------------------
Lehman (reflects no
Brothers deduction for
Aggregate fees, expenses,
Bond Index or taxes) 10.25% 7.55% 7.51%
----------------------------------------------------------------------
* Average annual total returns reflect imposition of the maximum front-end
or contingent deferred sales charges as well as conversion of Class B
shares to Class A shares after the applicable period.
** Inception Dates for Class C shares: 5/3/93. Performance information for
periods prior to the inception of Class C shares is the performance of the
Fund's Class A shares adjusted to reflect the higher expense ratio of
Class C shares.
*** After-tax Returns:
-Are shown for Class A shares only and will vary for Class B and C shares
because these Classes have higher expense ratios;
-Are an estimate, which is based on the highest historical individual
federal marginal income tax rates and do not reflect the impact of state
and local taxes; actual after-tax returns depend on an individual
investor's tax situation and are likely to differ from those shown; and
-Are not relevant to investors who hold Fund shares through tax-deferred
arrangements such as 401(k) plans or individual retirement accounts.
BAR CHART
The annual returns in the bar chart are for the Fund's Class A shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown.
[THE FOLLOWING INFORMATION WAS DEPICTED AS A BAR CHART IN THE PRINTED MATERIAL.]
18.64 -30.24 30.96 24.20 14.97 6.54 7.86 18.47 0.31 10.69
--------------------------------------------------------------------------------
93 94 95 96 97 98 99 00 01 02
Calendar Year End
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best quarter was up 17.23%, 2nd quarter, 1995; and
Worst quarter was down -23.19%, 4th quarter, 1994.
9
<PAGE>
Alliance Emerging Market Debt Fund
--------------------------------------------------------------------------------
OBJECTIVE:
The Fund's investment objective is a high level of current income and,
secondarily, capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests, under normal circumstances, at least 80% of its net assets in
emerging markets debt securities. The Fund invests at least 65% of its total
assets in sovereign debt obligations. The Fund also may invest up to 35% of its
total assets in U.S. and non-U.S. corporate fixed-income securities. The Fund
invests substantially all of its assets in lower-rated securities or unrated
securities of equivalent quality. The Fund's investments in sovereign debt
obligations and corporate debt securities are U.S. Dollar-denominated.
The Fund's non-U.S. investments emphasize emerging markets and developing
countries. The Fund limits its investments in the sovereign debt obligations of
any one country to less than 25% of its total assets, although the Fund may
invest up to 30% of its total assets in the sovereign debt obligations and
corporate fixed-income securities of issuers in each of Argentina, Brazil,
Mexico, Morocco, the Philippines, Russia and Venezuela. The Fund expects that it
will not invest more than 10% of its total assets in any other single foreign
country.
The average weighted maturity of the Fund's investments ranges from nine years
to longer than 25 years, depending upon the type of securities.
The Fund may use significant borrowings and reverse repurchase agreements and
dollar rolls for leverage. The Fund also may use derivatives strategies; invest
in structured securities; invest in fixed and floating rate loans to sovereign
debt issuers; enter into repurchase agreements; and invest in variable,
floating, and inverse floating rate securities.
Among the principal risks of investing in the Fund are interest rate risk,
credit risk, market risk, derivatives risk and leveraging risk. Because the Fund
invests in lower-rated securities, it has significantly more risk than other
types of bond funds and its returns will be more volatile. The Fund's
investments in foreign securities have foreign risk and country or geographic
risk. Because the Fund invests in emerging markets and in developing countries,
the Fund's returns will be significantly more volatile and may differ
substantially from returns in the U.S. bond markets generally. Your investment
also has the risk that market changes or other factors affecting emerging
markets and developing countries, including political instability and
unpredictable economic conditions, may have a significant effect on the Fund's
net asset value. In addition, the Fund is "non-diversified," meaning that it
invests more of its assets in a smaller number of issuers than many other funds.
Changes in the value of a single security may have a more significant effect,
either negative or positive, on the Fund's net asset value.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
Average Annual Total Returns*
(For the periods ended December 31, 2002)
--------------------------------------------------------------------------
1 5 Since
Year Years Inception**
--------------------------------------------------------------------------
Class A*** Return Before Taxes 13.73% 6.39% 9.60%
-------------------------------------------------------------
Return After Taxes
on Distributions 9.11% 1.49% 3.71%
-------------------------------------------------------------
Return After Taxes on
Distributions and
Sale of Fund Shares 8.19% 2.39% 4.47%
--------------------------------------------------------------------------
Class B Return Before Taxes 14.59% 6.42% 9.55%
--------------------------------------------------------------------------
Class C Return Before Taxes 16.56% 6.45% 9.26%
--------------------------------------------------------------------------
J.P. Morgan (reflects no
Emerging deduction for
Markets fees, expenses,
Bond Index or taxes)
Plus 14.24% 7.18% 11.04%
--------------------------------------------------------------------------
* Average annual total returns reflect imposition of the maximum front-end
or contingent deferred sales charges as well as conversion of Class B
shares to Class A shares after the applicable period.
** Inception Date for all Classes: 2/25/94.
*** After-tax Returns:
-Are shown for Class A shares only and will vary for Class B and C shares
because these Classes have higher expense ratios;
-Are an estimate, which is based on the highest historical individual
federal marginal income tax rates and do not reflect the impact of state
and local taxes; actual after-tax returns depend on an individual
investor's tax situation and are likely to differ from those shown; and
-Are not relevant to investors who hold Fund shares through tax-deferred
arrangements such as 401(k) plans or individual retirement accounts.
BAR CHART
The annual returns in the bar chart are for the Fund's Class A shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown.
[THE FOLLOWING INFORMATION WAS DEPICTED AS A BAR CHART IN THE PRINTED MATERIAL.]
n/a n/a 25.42 39.45 9.01 -22.06 26.71 14.47 6.10 18.69
--------------------------------------------------------------------------------
93 94 95 96 97 98 99 00 01 02
Calendar Year End
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best quarter was up 26.16%, 2nd quarter, 1995; and
Worst quarter was down -28.68%, 3rd quarter, 1998.
10
<PAGE>
Alliance Multi-Market Strategy Trust
--------------------------------------------------------------------------------
OBJECTIVE:
The Fund's investment objective is the highest level of current income that is
available, consistent with what Alliance considers to be prudent investment
risk, from a portfolio of high-quality debt securities having remaining
maturities of not more than five years.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests in high-quality debt securities having remaining maturities of
not more than five years, with a high proportion of investments in money market
instruments. The Fund seeks investment opportunities in foreign, as well as
domestic, securities markets. Normally, at least 70% of the Fund's debt
securities will be denominated in foreign currencies. The Fund limits its
investments in a single currency other than the U.S. Dollar to 25% of its net
assets, except for the Euro in which the Fund may invest up to 50% of its net
assets.
The Fund concentrates at least 25% of its total assets in debt instruments
issued by domestic and foreign banking companies. The Fund may use significant
borrowings for leverage. The Fund also may:
o use derivatives strategies;
o invest in prime commercial paper or unrated paper of equivalent quality;
o enter into repurchase agreements; and
o invest in variable, floating, and inverse floating rate securities.
Among the principal risks of investing in the Fund are interest rate risk,
credit risk, market risk, and leveraging risk. The Fund's investments in debt
securities denominated in foreign currencies have foreign risk and currency
risk. In addition, the Fund is "non-diversified" meaning that it invests more of
its assets in a smaller number of issuers than many other funds. Changes in the
value of a single security may have a more significant effect, either negative
or positive, on the Fund's net asset value.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
Average Annual Total Returns*
(For the periods ended December 31, 2002)
----------------------------------------------------------------------
1 5 10
Year Years Years**
----------------------------------------------------------------------
Class A*** Return Before Taxes 1.02% 3.97% 4.43%
----------------------------------------------------------
Return After Taxes
on Distributions 0.63% 1.65% 2.04%
----------------------------------------------------------
Return After Taxes on
Distributions and
Sale of Fund Shares 0.63% 1.97% 2.30%
----------------------------------------------------------------------
Class B Return Before Taxes 1.57% 4.03% 4.39%
----------------------------------------------------------------------
Class C Return Before Taxes 3.75% 4.07% 4.06%
----------------------------------------------------------------------
Merrill (reflects no
Lynch deduction for
1-5 Year fees, expenses,
Government or taxes)
Bond Index 7.47% 6.87% 6.44%
----------------------------------------------------------------------
* Average annual total returns reflect imposition of the maximum front-end
or contingent deferred sales charges as well as conversion of Class B
shares to Class A shares after the applicable period.
** Inception Dates for Class C shares: 5/3/93. Performance information for
periods prior to the inception of Class C shares is the performance of the
Fund's Class A shares adjusted to reflect the higher expense ratio of
Class C shares.
*** After-tax Returns:
-Are shown for Class A shares only and will vary for Class B and C shares
because these Classes have higher expense ratios;
-Are an estimate, which is based on the highest historical individual
federal marginal income tax rates and do not reflect the impact of state
and local taxes; actual after-tax returns depend on an individual
investor's tax situation and are likely to differ from those shown; and
-Are not relevant to investors who hold Fund shares through tax-deferred
arrangements such as 401(k) plans or individual retirement accounts.
BAR CHART
The annual returns in the bar chart are for the Fund's Class A shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown.
[THE FOLLOWING INFORMATION WAS DEPICTED AS A BAR CHART IN THE PRINTED MATERIAL.]
10.91 -12.76 5.98 16.20 6.68 6.18 2.58 5.15 4.96 5.49
--------------------------------------------------------------------------------
93 94 95 96 97 98 99 00 01 02
Calendar Year End
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best quarter was up 5.46%, 2nd quarter, 1995; and
Worst quarter was down -8.19%, 4th quarter, 1994.
11
<PAGE>
SUMMARY OF PRINCIPAL RISKS
The value of your investment in a Fund will change with changes in the values of
that Fund's investments. Many factors can affect those values. In this Summary,
we describe the principal risks that may affect a Fund's portfolio as a whole.
These risks and the Funds particularly subject to these risks appear in a chart
at the end of this section. All Funds could be subject to additional principal
risks because the types of investments made by each Fund can change over time.
This Prospectus has additional descriptions of the types of investments that
appear in bold type in the discussions under "Description of Additional
Investment Practices" or "Additional Risk Considerations." These sections also
include more information about the Funds, their investments, and related risks.
INTEREST RATE RISK
This is the risk that changes in interest rates will affect the value of a
Fund's investments in debt securities, such as bonds, notes and asset-backed
securities, or other income-producing securities. Debt securities are
obligations of the issuer to make payments of principal and/or interest on
future dates. All of the Funds have interest rate risk. Increases in interest
rates may cause the value of a Fund's investments to decline.
Even Funds such as the Alliance U.S. Government and Alliance Quality Bond that
invest a substantial portion of their assets in the highest quality debt
securities, including U.S. Government securities, are subject to interest rate
risk. Interest rate risk generally is greater for those Funds that invest a
significant portion of their assets in lower-rated securities or comparable
unrated securities such as Alliance Corporate Bond, Alliance High Yield,
Alliance Global Strategic Income and Alliance Emerging Market Debt.
Interest rate risk is generally greater for Funds that invest in debt securities
with longer maturities, such as Alliance Corporate Bond, Alliance Global
Strategic Income, Alliance Americas Government Income and Alliance Emerging
Market Debt. This risk is compounded for the Funds that invest a substantial
portion of their assets in mortgage-related or other asset-backed securities,
such as Alliance U.S. Government and Alliance Quality Bond. The value of these
securities is affected more by changes in interest rates because when interest
rates rise, the maturities of these types of securities tend to lengthen and the
value of the securities decreases more significantly. In addition, these types
of securities are subject to prepayment when interest rates fall, which
generally results in lower returns because the Funds must reinvest their assets
in debt securities with lower interest rates. Increased interest rate risk also
is likely for Alliance Quality Bond, Alliance Corporate Bond, Alliance Global
Strategic Income and Alliance Emerging Market Debt, which invest in debt
securities paying no current interest, such as zero coupon, principal-only, and
interest-only securities, or paying non-cash interest in the form of other debt
securities (payment-in-kind securities).
CREDIT RISK
This is the risk that the issuer or the guarantor of a debt security, or the
counterparty to a derivatives contract, will be unable or unwilling to make
timely payments of interest or principal or to otherwise honor its obligations.
The degree of risk for a particular security may be reflected in its credit
rating. Credit risk is greater for Funds such as Alliance Corporate Bond,
Alliance High Yield, Alliance Global Strategic Income and Alliance Emerging
Market Debt that invest in lower-rated securities. These debt securities and
similar unrated securities (commonly known as "junk bonds") have speculative
elements or are predominantly speculative credit risks.
Funds such as Alliance High Yield and Alliance Emerging Market Debt may be
subject to greater credit risk because they invest in debt securities issued in
connection with corporate restructurings by highly leveraged issuers and in debt
securities that are not current in the payment of interest or principal or are
in default. Funds such as Alliance Quality Bond, Alliance Corporate Bond,
Alliance High Yield, Alliance Global Strategic Income, Alliance Americas
Government Income, Alliance Emerging Market Debt and Alliance Multi-Market
Strategy that invest in foreign securities also are subject to increased credit
risk because of the difficulties of requiring foreign entities, including
issuers of sovereign debt obligations, to honor their contractual commitments,
and because a number of foreign governments and other issuers are already in
default.
MARKET RISK
This is the risk that the value of a Fund's investments will fluctuate as the
bond markets fluctuate and that prices overall will decline over shorter or
longer-term periods. All of the Funds are subject to this risk.
FOREIGN RISK
This is the risk of investments in issuers located in foreign countries. All
Alliance Bond Funds that invest in foreign securities are subject to this risk,
including Alliance Quality Bond, Alliance Corporate Bond, Alliance High Yield,
Alliance Global Strategic Income, Alliance Americas Government Income, Alliance
Emerging Market Debt and Alliance Multi-Market Strategy. These Funds'
investments in foreign securities may experience more rapid and extreme changes
in value than investments in securities of U.S. companies. The securities
markets of many foreign countries are relatively small, with a limited number of
companies representing a small number of securities. In addition, foreign
companies usually are not subject to the same degree of regulation as U.S.
companies. Reporting, accounting, and auditing standards of foreign countries
12
<PAGE>
differ, in some cases significantly, from U.S. standards. Nationalization,
expropriation or confiscatory taxation, currency blockage, political changes, or
diplomatic developments could adversely affect a Fund's investments in a foreign
country. In the event of a nationalization, expropriation, or other
confiscation, a Fund could lose its entire investment.
Political, social, and economic changes in a particular country could result in
increased risks for Alliance Global Strategic Income and Alliance Emerging
Market Debt, which invest a substantial portion of their assets in sovereign
debt obligations, including Brady Bonds. The investments in emerging market
countries of Alliance Americas Government Income and Alliance Emerging Market
Debt are likely to involve significant risks. These countries, such as Mexico,
Argentina, Brazil, Morocco, the Philippines, Russia, and Venezuela, have a
history of political and economic instability.
CURRENCY RISK
This is the risk that fluctuations in the exchange rates between the U.S. Dollar
and foreign currencies may negatively affect the value of a Fund's investments.
Funds such as Alliance Quality Bond, Alliance Corporate Bond, Alliance High
Yield, Alliance Global Strategic Income, Alliance Americas Government Income and
Alliance Multi-Market Strategy that invest in securities denominated in, and/or
companies receiving revenues in, foreign currencies are subject to currency
risk.
COUNTRY OR GEOGRAPHIC RISK
This is the risk of investments in issuers located in a particular country or
geographic region. Market changes or other factors affecting that country or
region, including political instability and unpredictable economic conditions,
may have a particularly significant effect on a Fund's net asset value. The
Funds particularly subject to this risk are Alliance Americas Government Income
and Alliance Multi-Market Strategy.
DIVERSIFICATION RISK
Most analysts believe that overall risk can be reduced through diversification,
while concentration of investments in a small number of securities increases
risk. Alliance Global Strategic Income, Alliance Americas Government Income,
Alliance Emerging Market Debt and Alliance Multi-Market Strategy are not
"diversified." This means that they can invest more of their assets in a
relatively small number of issuers with greater concentration of risk. Factors
affecting these issuers can have a more significant effect on the Fund's net
asset value. Similarly, a Fund that concentrates its investments in a particular
industry, such as Alliance Multi-Market Strategy, which invests at least 25% of
its assets in the banking industry, could have increased risks because factors
affecting that industry could have a more significant effect on the value of the
Fund's investments.
LEVERAGING RISK
When a Fund borrows money or otherwise leverages its portfolio, the value of an
investment in that Fund will be more volatile and all other risks will tend to
be compounded. Each Fund may create leverage by using reverse repurchase
agreements, inverse floating rate instruments or derivatives, or by borrowing
money.
DERIVATIVES RISK
All Funds may use derivatives, which are financial contracts whose value depends
on, or is derived from, the value of an underlying asset, reference rate, or
index. Alliance will sometimes use derivatives as part of a strategy designed to
reduce other risks. Generally, however, the Funds use derivatives as direct
investments to earn income, enhance yield and broaden Fund diversification,
which entail greater risk than if used solely for hedging purposes. In addition
to other risks such as the credit risk of the counterparty, derivatives involve
the risk of difficulties in pricing and valuation and the risk that changes in
the value of the derivative may not correlate perfectly with relevant underlying
assets, rates, or indices. Funds that invest in structured securities, such as
Alliance Corporate Bond, Alliance Global Strategic Income and Alliance Emerging
Market Debt, could have increased derivatives risk.
LIQUIDITY RISK
Liquidity risk exists when particular investments are difficult to purchase or
sell, possibly preventing a Fund from selling out of these illiquid securities
at an advantageous price. All of the Funds are subject to liquidity risk because
derivatives and securities involving substantial interest rate and credit risk
tend to involve greater liquidity risk. In addition, liquidity risk tends to
increase to the extent a Fund invests in debt securities whose sale may be
restricted by law or by contract.
MANAGEMENT RISK
Each Fund is subject to management risk because it is an actively managed
investment fund. Alliance will apply its investment techniques and risk analyses
in making investment decisions for the Funds, but there can be no guarantee that
its decisions will produce the desired results. In some cases, derivative and
other investment techniques may be unavailable or Alliance may determine not to
use them, possibly even under market conditions where their use could benefit a
Fund.
13
<PAGE>
PRINCIPAL RISKS BY FUND
The following chart summarizes the Principal Risks of each Fund. Risks not
marked for a particular Fund may, however, still apply to some extent to that
Fund at various times.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Country or
Interest Credit Market Foreign Currency Geographic Diversifica- Leveraging Derivatives Liquidity Manage-
Fund Rate Risk Risk Risk Risk Risk Risk tion Risk Risk Risk Risk ment Risk
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Alliance
U.S.
Government o o o o o o
------------------------------------------------------------------------------------------------------------------------------------
Alliance
Quality
Bond o o o o o o o o o
------------------------------------------------------------------------------------------------------------------------------------
Alliance
Corporate
Bond o o o o o o o o o
------------------------------------------------------------------------------------------------------------------------------------
Alliance
High
Yield o o o o o o o o o
------------------------------------------------------------------------------------------------------------------------------------
Alliance
Global
Strategic
Income o o o o o o o o o o
------------------------------------------------------------------------------------------------------------------------------------
Alliance
Americas
Government
Income o o o o o o o o o o o
------------------------------------------------------------------------------------------------------------------------------------
Alliance
Emerging
Market Debt o o o o o o o o o o
------------------------------------------------------------------------------------------------------------------------------------
Alliance
Multi-Market
Strategy o o o o o o o o o o o
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE>
--------------------------------------------------------------------------------
FEES AND EXPENSES OF THE FUNDS
--------------------------------------------------------------------------------
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Funds.
SHAREHOLDER FEES (fees paid directly from your investment)
<TABLE>
<CAPTION>
Class A Shares Class B Shares(a) Class B Shares(b) Class C Shares
-------------- ----------------- ----------------- --------------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on
Purchases (as a percentage of offering price) 4.25% None None None
Maximum Deferred Sales Charge (Load)
(as a percentage of original purchase price or
redemption proceeds, whichever is lower) None 3.0%* 4.0%** 1.0%***
Exchange Fee None None None None
</TABLE>
--------------------------------------------------------------------------------
(a) For all Funds except Alliance High Yield Fund and Alliance Global
Strategic Income Trust.
(b) For Alliance High Yield Fund and Alliance Global Strategic Income Trust.
* Class B shares automatically convert to Class A shares after 6 years. The
CDSC decreases over time. For Class B shares, the CDSC decreases 1.00%
annually to 0% after the 3rd year.
** Class B shares automatically convert to Class A shares after 8 years. The
CDSC decreases over time. For Class B shares, the CDSC decreases 1.00%
annually to 0% after the 4th year.
*** For Class C shares, the CDSC is 0% after the first year.
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) and
EXAMPLES
The Examples are to help you compare the cost of investing in a Fund with the
cost of investing in other funds. They assume that you invest $10,000 in a Fund
for the time periods indicated and then redeem all of your shares at the end of
those periods. They also assume that your investment has a 5% return each year,
that the Fund's operating expenses stay the same, and that all dividends and
distributions are reinvested. Your actual costs may be higher or lower.
<TABLE>
<CAPTION>
Operating Expenses Examples
----------------------------------------------------------- ----------------------------------------------------------------------
Alliance U.S. Government
Portfolio Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees .54% .54% .54% After 1 Year $ 545 $ 496 $ 196 $ 296 $ 196
Distribution (12b-1) Fees .30% 1.00% 1.00% After 3 Years $ 799 $ 706 $ 606 $ 606 $ 606
Interest Expense .14% .13% .14% After 5 Years $1,072 $1,042 $1,042 $1,042 $1,042
Other Expenses .25% .26% .25% After 10 Years $1,850 $1,906 $1,906 $2,254 $2,254
---- ---- ----
Total Fund Operating Expenses 1.23% 1.93% 1.93%
==== ==== ====
<CAPTION>
Alliance Quality Bond
Portfolio Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees .55% .55% .55% After 1 Year $ 521 $ 471 $ 171 $ 271 $ 171
Distribution (12b-1) Fees .30% 1.00% 1.00% After 3 Years++++ $ 826 $ 736 $ 636 $ 636 $ 636
Other Expenses .63% .64% .64% After 5 Years++++ $1,153 $1,128 $1,128 $1,128 $1,128
---- ---- ---- After 10 Years++++ $2,077 $2,138 $2,138 $2,484 $2,484
Total Fund Operating Expenses 1.48% 2.19% 2.19%
==== ==== ====
Waiver and/or Expense
Reimbursement +++ (.50)% (.51)% (.51)%
---- ---- ----
Net Expenses .98% 1.68% 1.68%
==== ==== ====
<CAPTION>
Alliance Corporate Bond
Portfolio Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees .55% .55% .55% After 1 Year $ 534 $ 486 $ 186 $ 285 $ 185
Distribution (12b-1) Fees .30% 1.00% 1.00% After 3 Years $ 766 $ 676 $ 576 $ 573 $ 573
Interest Expense .03% .03% .03% After 5 Years $1,016 $ 990 $ 990 $ 985 $ 985
Other Expenses .24% .25% .24% After 10 Years $1,730 $1,791 $1,791 $2,137 $2,137
---- ---- ----
Total Fund Operating Expenses 1.12% 1.83% 1.82%
==== ==== ====
<CAPTION>
Alliance High Yield Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees .75% .75% .75% After 1 Year $ 564 $ 618 $ 218 $ 317 $ 217
Distribution (12b-1) Fees .30% 1.00% 1.00% After 3 Years $ 858 $ 873 $ 673 $ 670 $ 670
Other Expenses .38% .40% .39% After 5 Years $1,173 $1,154 $1,154 $1,149 $1,149
---- ---- ---- After 10 Years $2,065 $2,300 $2,300 $2,472 $2,472
Total Fund Operating Expenses 1.43% 2.15% 2.14%
==== ==== ====
<CAPTION>
Alliance Global
Strategic Income Trust Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees .75% .75% .75% After 1 Year $ 574 $ 627 $ 227 $ 326 $ 226
Distribution (12b-1) Fees .30% 1.00% 1.00% After 3 Years $ 888 $ 900 $ 700 $ 697 $ 697
Other Expenses .48% .49% .48% After 5 Years $1,224 $1,200 $1,200 $1,195 $1,195
---- ---- ---- After 10 Years $2,171 $2,396 $2,396 $2,565 $2,565
Total Fund Operating Expenses 1.53% 2.24% 2.23%
==== ==== ====
<CAPTION>
Alliance Americas
Government
Income Trust Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees+++++ .73% .73% .73% After 1 Year $ 578 $ 531 $ 231 $ 330 $ 230
Distribution (12b-1) Fees .30% 1.00% 1.00% After 3 Years $ 900 $ 812 $ 712 $ 709 $ 709
Interest Expense .29% .28% .28% After 5 Years $1,244 $1,220 $1,220 $1,215 $1,215
Other Expenses .25% .27% .26% After 10 Years $2,213 $2,274 $2,274 $2,605 $2,605
---- ---- ----
Total Fund Operating Expenses 1.57% 2.28% 2.27%
==== ==== ====
<CAPTION>
Alliance Emerging
Market Debt Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees .75% .75% .75% After 1 Year $ 608 $ 561 $ 261 $ 359 $ 259
Distribution (12b-1) Fees .30% 1.00% 1.00% After 3 Years $ 991 $ 902 $ 802 $ 796 $ 796
Interest Expense .38% .38% .37% After 5 Years $1,398 $1,370 $1,370 $1,360 $1,360
Other Expenses .45% .45% .44% After 10 Years $2,532 $2,588 $2,588 $2,895 $2,895
---- ---- ----
Total Fund Operating Expenses 1.88% 2.58% 2.56%
==== ==== ====
<CAPTION>
Alliance Multi-Market
Strategy Trust Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees .60% .60% .60% After 1 Year $ 570 $ 527 $ 227 $ 323 $ 223
Distribution (12b-1) Fees .30% 1.00% 1.00% After 3 Years $ 876 $ 800 $ 700 $ 688 $ 688
Other Expenses .59% .64% .60% After 5 Years $1,204 $1,200 $1,200 $1,180 $1,180
---- ---- ---- After 10 Years $2,129 $2,213 $2,213 $2,534 $2,534
Total Fund Operating Expenses 1.49% 2.24% 2.20%
==== ==== ====
</TABLE>
--------------------------------------------------------------------------------
+ Assumes redemption at end of period.
++ Assumes no redemption at end of period and, with respect to shares held 10
years, conversion of Class B shares to Class A shares after 6 years, and
for Alliance High Yield Fund and Alliance Global Strategic Income Trust, 8
years.
+++ Reflects Alliance's contractual waiver of a portion of its advisory fee
and/or reimbursement of a portion of the Fund's operating expenses. This
waiver extends through the end of the Fund's current fiscal year and may
be extended by Alliance for additional one year terms.
++++ These examples assume that Alliance's agreement to waive management fees
and/or bear Fund expenses is not extended beyond its initial term.
+++++ Represents .65 of 1% of the Fund's average daily adjusted total net
assets.
15 & 16
<PAGE>
--------------------------------------------------------------------------------
GLOSSARY
--------------------------------------------------------------------------------
This Prospectus uses the following terms.
Types of Securities
Bonds are fixed, floating, and variable rate debt obligations.
Convertible securities are bonds, debentures, corporate notes, and preferred
stocks that are convertible into common and preferred stock.
Debt securities are bonds, debentures, notes, and bills.
Equity securities are common and preferred stocks, securities convertible into
common and preferred stocks, and rights and warrants to subscribe for the
purchase of common and preferred stocks.
Fixed-income securities are debt securities, convertible securities, and
preferred stocks, including floating rate and variable rate instruments.
Fixed-income securities may be rated (or, if unrated, for purposes of the Funds'
investment policies as may be determined by Alliance to be of equivalent
quality) triple-A (Aaa or AAA), high quality (Aa or AA or above), high grade (A
or above) or investment grade (Baa or BBB or above) by, as the case may be,
Moody's, S&P or Fitch, or may be lower-rated securities, as defined below. In
the case of "split-rated" fixed-income securities (i.e., securities assigned
non-equivalent credit quality ratings, such as Baa by Moody's but BB by S&P or
Ba by Moody's and BB by S&P but B by Fitch), a Fund will use the rating deemed
by Alliance to be the most appropriate under the circumstances.
Foreign fixed-income securities consist of foreign government securities and
securities issued by non-U.S. companies.
Foreign government securities are securities issued or guaranteed, as to payment
of principal and interest, by a foreign government or any of its political
subdivisions, authorities, agencies or instrumentalities.
Interest-only or IO securities are debt securities that receive only the
interest payments on an underlying debt that has been structured to have two
classes, one of which is the IO class and the other of which is the
principal-only or PO class, that receives only the principal payments on the
underlying debt obligation. POs are similar to, and are sometimes referred to
as, zero coupon securities, which are debt securities issued without interest
coupons.
Mortgage-related securities are pools of mortgage loans that are assembled for
sale to investors (such as mutual funds) by various governmental,
government-related, and private organizations. These securities include:
o ARMS, which are adjustable-rate mortgage securities;
o SMRS, which are stripped mortgage-related securities;
o CMOs, which are collateralized mortgage obligations;
o GNMA certificates, which are securities issued by the Government
National Mortgage Association or GNMA;
o FNMA certificates, which are securities issued by the Federal
National Mortgage Association or FNMA; and
o FHLMC certificates, which are securities issued by the Federal Home
Loan Mortgage Corporation or FHLMC.
Non-U.S. company is an entity that (i) is organized under the laws of a foreign
country, (ii) has its principal place of business in a foreign country, and
(iii) issues equity or debt securities that are traded principally in a foreign
country.
Qualifying bank deposits are certificates of deposit, bankers' acceptances, and
interest-bearing savings deposits of banks that have total assets of more than
$1 billion and are members of the Federal Deposit Insurance Corporation.
Rule 144A securities are securities that may be resold under Rule 144A under the
Securities Act.
Sovereign debt obligations are foreign government debt securities, loan
participations between foreign governments and financial institutions, and
interests in entities organized and operated for the purpose of restructuring
the investment characteristics of foreign government securities.
U.S. Government securities are securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities. These securities include
securities backed by the full faith and credit of the United States, those
supported by the right of the issuer to borrow from the U.S. Treasury, and those
backed only by the credit of the issuing agency itself. The first category
includes U.S. Treasury securities (which are U.S. Treasury bills, notes and
bonds) and certificates issued by GNMA. U.S. Government securities not backed by
the full faith and credit of the United States include certificates issued by
FNMA and FHLMC.
RATING AGENCIES AND RATED SECURITIES
Fitch is Fitch Ratings, the international rating agency formed through the
merger of Fitch IBCA, Inc. and Duff & Phelps Credit Rating Co.
Higher quality commercial paper is commercial paper rated at least Prime-2 by
Moody's, A-2 by S&P, or F2 by Fitch.
Lower-rated securities are fixed-income securities rated Ba or BB or below, or
determined by Alliance to be of equivalent quality, and are commonly referred to
as "junk bonds."
Moody's is Moody's Investors Service, Inc.
NRSRO is a nationally recognized statistical rating organization.
Prime commercial paper is commercial paper rated Prime-1 or higher by Moody's,
A-1 or higher by S&P, or F1 by Fitch.
S&P is Standard & Poor's Ratings Services.
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OTHER
1940 Act is the Investment Company Act of 1940, as amended.
Code is the Internal Revenue Code of 1986, as amended.
Commission is the Securities and Exchange Commission.
Duration is a measure that relates the price volatility of a security to changes
in interest rates. The duration of a debt security is the weighted average term
to maturity, expressed in years, of the present value of all future cash flows,
including coupon payments and principal repayments. Thus, by definition,
duration is always less than or equal to full maturity.
Exchange is the New York Stock Exchange.
LIBOR is the London Interbank Offered Rate.
Securities Act is the Securities Act of 1933, as amended.
World Bank is the commonly used name for the International Bank for
Reconstruction and Development.
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DESCRIPTION OF THE FUNDS
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This section of the Prospectus provides a more complete description of each
Fund's investment objectives and principal strategies and risks. Of course,
there can be no assurance that any Fund will achieve its investment objective.
Please note that:
o Additional discussion of the Funds' investments, including the risks of
the investments, can be found in the discussion under Description of
Additional Investment Practices following this section.
o The description of the principal risks for a Fund may include risks
described in the Summary of Principal Risks above. Additional information
about the risks of investing in a Fund can be found in the discussion
under Additional Risk Considerations.
o Additional descriptions of each Fund's strategies, investments, and risks
can be found in the Fund's Statement of Additional Information or SAI.
o Except as noted, (i) the Funds' investment objectives are "fundamental"
and cannot be changed without a shareholder vote, and (ii) the Funds'
investment policies are not fundamental and thus can be changed without a
shareholder vote. When an investment policy or restriction has a
percentage limitation, such limitation is applied at the time of
investment. Changes in the market value of securities in a Fund's
portfolio after they are purchased by the Fund will not cause the Fund to
be in violation of such limitations.
INVESTMENT OBJECTIVES AND PRINCIPAL POLICIES
INVESTMENT GRADE FUNDS
The Investment Grade Funds offer investors high current income consistent with
preservation of capital by investing primarily in investment grade (rated Baa or
BBB or above) securities.
Alliance U.S. Government Portfolio
Alliance U.S. Government Portfolio seeks a high level of current income that is
consistent with Alliance's determination of prudent investment risk. The Fund
invests, under normal circumstances, at least 80% of its net assets in U.S.
Government securities, repurchase agreements and forward contracts relating to
U.S. Government securities. For purposes of this policy, net assets include any
borrowings for investment purposes. This policy may not be changed without 60
days' prior written notice to shareholders. The Fund may invest the remaining
20% of its net assets in non-U.S. Government mortgage-related and asset-backed
securities, including high-grade debt securities secured by mortgages on
commercial real estate or residential rental properties.
As a matter of fundamental policy, the Fund pursues its objective by investing
at least 65% of its total assets in U.S. Government securities, repurchase
agreements and forward contracts relating to U.S. Government securities. The
Fund will not invest in any security rated below BBB or Baa. The Fund may invest
in unrated securities of equivalent quality to the rated securities in which it
may invest, as determined by Alliance. The Fund expects, but is not required, to
dispose of securities that are downgraded below BBB and Baa or, if unrated, that
are determined by Alliance to have undergone similar credit quality
deterioration.
The Fund expects to engage in active and frequent trading of portfolio
securities to achieve its principal investment strategies. A higher rate of
portfolio turnover increases transaction expenses, which may negatively affect
the Fund's performance. High portfolio turnover also may result in the
realization of substantial net short-term capital gains, which, when
distributed, are taxable to shareholders.
The Fund also may:
o enter into reverse repurchase agreements and dollar rolls;
o enter into various hedging transactions, such as swap transactions;
o enter into forward contracts;
o purchase and sell futures contracts for hedging purposes;
o purchase call and put options on futures contracts or on securities for
hedging purposes;
o make secured loans of portfolio securities; and
o enter into repurchase agreements.
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Alliance Quality Bond Portfolio
Alliance Quality Bond Portfolio seeks high current income consistent with
preservation of capital by investing in investment grade fixed-income
securities. The Fund invests, under normal circumstances, at least 80% of its
net assets in bonds and other debt securities. For purposes of this policy, net
assets include any borrowings for investment purposes. This policy may not be
changed without 60 days' prior written notice to shareholders. The Fund invests
in readily marketable securities with relatively attractive yields that do not
involve undue risk of loss of capital. The Fund normally invests all of its
assets in securities that are rated at least BBB- by S&P or Baa3 by Moody's or
that are of comparable quality. The Fund normally maintains an average aggregate
quality rating of its portfolio securities of at least A (S&P and Moody's). The
Fund has the flexibility to invest in long- and short-term fixed-income
securities (including debt securities, convertible debt securities and U.S.
Government obligations) and preferred stocks based on Alliance's assessment of
prospective cyclical interest rate changes.
In the event that the credit rating of a security held by the Fund falls below
investment grade (or, if in the case of unrated securities, Alliance determines
that the quality of a security has deteriorated below investment grade), the
Fund will not be obligated to dispose of that security and may continue to hold
the security if, in the opinion of Alliance, such investment is appropriate in
the circumstances.
The Fund expects to engage in active and frequent trading of portfolio
securities to achieve its principal investment strategies. A higher rate of
portfolio turnover increases transaction expenses, which may negatively affect
the Fund's performance. High portfolio turnover also may result in the
realization of substantial net short-term capital gains, which, when
distributed, are taxable to shareholders.
The Fund also may:
o invest in foreign fixed-income securities, but only up to 20% of its total
assets;
o enter into dollar rolls;
o purchase and sell interest rate futures contracts and options;
o enter into swap transactions;
o purchase put and call options and write covered put and call options on
securities it may purchase;
o write covered call options for cross-hedging purposes;
o enter into foreign currency futures contracts and related options;
o enter into forward foreign currency exchange contracts and options on
foreign currencies for hedging purposes;
o invest in CMOs;
o invest in zero coupon securities and "pay-in-kind" debentures; and
o make secured loans of portfolio securities.
CORPORATE BOND FUNDS
The Corporate Bond Funds offer a selection of alternatives to investors seeking
to maximize current income through investments in corporate bonds.
Alliance Corporate Bond Portfolio
Alliance Corporate Bond Portfolio seeks primarily to maximize income over the
long term to the extent consistent with providing reasonable safety in the value
of each shareholder's investment and secondarily to increase its capital through
appreciation of its investments in order to preserve and, if possible, increase
the purchasing power of each shareholder's investment. In pursuing these
objectives, the Fund's policy is to invest in readily marketable securities that
give promise of relatively attractive yields but do not involve substantial risk
of loss of capital. The Fund invests, under normal circumstances, at least 80%
of its net assets in corporate bonds and other corporate debt securities. For
purposes of this policy, net assets include any borrowings for investment
purposes. This policy may not be changed without 60 days' prior written notice
to shareholders. Although the Fund invests at least 80% of its net assets in
corporate bonds and other corporate debt securities, it also may invest in
securities of non-corporate issuers. The Fund expects that the average weighted
maturity of its portfolio of fixed-income securities will vary between one year
or less and 30 years.
The Fund follows an investment strategy that in certain respects can be regarded
as more aggressive than the strategies of many other funds investing primarily
in corporate bonds. The Fund's investments normally tend to have a relatively
long average weighted maturity and duration. The Fund places significant
emphasis on both foreign corporate and sovereign debt obligations and corporate
bonds that are expected to benefit from improvement in their issuers' credit
fundamentals. In recent years the Fund frequently has had greater net asset
value volatility than most other corporate bond funds. Prospective investors in
the Fund should therefore be prepared to accept the degree of volatility
associated with its investment strategy.
The Fund's investments in fixed-income securities have no minimum rating
requirement, except the Fund expects that it will not retain a security that is
downgraded below B, or if unrated, determined to have undergone similar credit
quality deterioration after purchase. Currently, the Fund believes its
objectives and policies may best be implemented by investing at least 65% of its
total assets in fixed-income securities considered investment grade or higher.
The Fund may invest the remainder of its assets in lower-rated fixed-
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<PAGE>
income securities. As of June 30, 2002, the Fund's investments were rated (or
equivalent quality):
o A or above 23.50%
o Baa or BBB 53.79%
o Ba or BB 8.28%
o B 5.40%
o NR 9.03%
The Fund may invest up to 50% of its total assets in foreign fixed-income
securities. The Fund invests no more than 15% of its total assets in sovereign
debt obligations in the form of foreign government loan participations and
assignments, which may be lower rated and considered to be predominantly
speculative with respect to the issuer's capacity to pay interest and repay
principal. All of the Fund's investments, whether foreign or domestic, are U.S.
Dollar-denominated.
Within these limitations, the Fund has complete flexibility as to the types and
relative proportions of securities in which it will invest. The Fund plans to
vary the proportions of its holdings of long- and short-term fixed-income
securities and of equity securities in order to reflect its assessment of
prospective cyclical changes even if such action may adversely affect current
income. Substantially all of the Fund's investments, however, will be income
producing.
The Fund expects to engage in active and frequent trading of portfolio
securities to achieve its principal investment strategies. A higher rate of
portfolio turnover increases transaction expenses, which may negatively affect
the Fund's performance. High portfolio turnover also may result in the
realization of substantial net short-term capital gains, which, when
distributed, are taxable to shareholders.
The Fund also may:
o invest in structured securities;
o invest in fixed and floating rate loans that are arranged through private
negotiations between an issuer of sovereign debt obligations and one or
more financial institutions and in participations in and assignments of
these type of loans;
o for hedging purposes, purchase put and call options written by others and
write covered put and call options;
o for hedging purposes, enter into various hedging transactions, such as
swap transactions;
o invest in variable, floating, and inverse floating rate instruments;
o invest in zero coupon and pay-in-kind securities; and
o invest in CMOs and multi-class pass-through mortgage-related securities.
Alliance High Yield Fund
Alliance High Yield Fund seeks primarily to achieve high total return by
maximizing current income and, to the extent consistent with that objective,
capital appreciation. The Fund invests, under normal circumstances, at least 80%
of its net assets in high yield debt securities. For purposes of this policy,
net assets include any borrowings for investment purposes. This policy may not
be changed without 60 days' prior written notice to shareholders. The Fund
invests in a diversified mix of high yield, below investment grade debt
securities, known as "junk bonds." These securities involve greater volatility
of price and risk of principal and income than higher quality debt securities.
The Fund is managed to maximize current income by taking advantage of market
developments, yield disparities, and variations in the creditworthiness of
issuers. The Fund uses various strategies in attempting to achieve its
objective.
The Fund normally invests in high yield debt securities rated below investment
grade by two or more NRSROs (i.e., rated lower than Baa by Moody's or lower than
BBB by S&P) or, if unrated, of equivalent quality. The Fund may not invest more
than 10% of its total assets in (i) fixed-income securities which are rated
lower than B3 or B- or their equivalents by two or more NRSROs or, if unrated,
of equivalent quality, and (ii) money market instruments of any entity which has
an outstanding issue of unsecured debt that is rated lower than B3 or B- or
their equivalents by two or more NRSROs or, if unrated, of equivalent quality.
As of August 31, 2002, the Fund's investments were rated (or equivalent
quality):
o A and above 7.28%
o BBB 4.69%
o Ba or BB 22.69%
o B 59.98%
o CCC 4.04%
o CC .03%
o D .16%
o Unrated 1.13%
The Fund may invest a portion of its assets in foreign fixed-income securities.
The Fund may buy and sell foreign currencies principally for the purpose of
preserving the value of foreign securities or in anticipation of purchasing
foreign securities.
The Fund also may invest in:
o U.S. Government securities;
o certificates of deposit, bankers' acceptances, bank notes, time deposits
and interest bearing savings deposits issued or guaranteed by certain
domestic and foreign banks;
o commercial paper (rated at least A-1 by S&P or Prime-1 by Moody's or, if
unrated, issued by domestic or foreign companies having high quality
outstanding debt securities) and participation interests in loans extended
by banks to these companies;
o corporate debt obligations with remaining maturities of less than one year
rated at least high quality as well as corporate debt obligations rated at
least high grade
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<PAGE>
provided the corporation also has outstanding an issue of commercial paper
rated at least A-1 by S&P or Prime-1 by Moody's; and
o floating rate or master demand notes.
The Fund also may:
o invest in mortgage-related and asset-backed securities;
o invest in loan participations and assignments of loans to corporate,
governmental, or other borrowers originally made by institutional lenders
or lending syndicates;
o enter into forward commitments;
o write covered put and call options on debt securities, securities indices
and foreign currencies and purchase put or call options on debt
securities, securities indices and foreign currencies;
o purchase and sell futures contracts and related options on debt securities
and on indices of debt securities;
o enter into contracts for the purchase or sale of a specific currency for
hedging purposes only;
o make secured loans of portfolio securities; and
o enter into repurchase agreements.
MULTI-SECTOR FUND
The Multi-Sector Fund offers investors seeking high current income the
alternative of investing in a variety of traditional and non-traditional
fixed-income sectors based on Alliance's evaluation of changes in major economic
and credit cycles around the world.
Alliance Global Strategic Income Trust
Alliance Global Strategic Income Trust seeks primarily a high level of current
income and secondarily capital appreciation. The Fund invests primarily in a
portfolio of fixed-income securities of U.S. and non-U.S. companies and U.S.
Government and foreign government securities and supranational entities,
including lower-rated securities. The Fund also may use derivative instruments
to attempt to enhance income. The Fund expects that the average weighted
maturity of its portfolio of fixed-income securities will vary between five
years and 30 years in accordance with Alliance's changing perceptions of the
relative attractiveness of various maturity ranges.
The Fund normally invests at least 65% of its total assets in fixed-income
securities of issuers located in at least three countries, one of which may be
the United States. The Fund limits its investments in the securities of any one
foreign government to 25% of its total assets. The Fund's investments in U.S.
Government securities may include mortgage-related securities and zero coupon
securities. The Fund's investments in fixed-income securities may include
preferred stock, mortgage-related and other asset-backed securities, and zero
coupon securities.
The Fund will maintain at least 65% of its total assets in investment grade
securities and may maintain not more than 35% of its total assets in lower-rated
securities. Unrated securities will be considered for investment by the Fund
when Alliance believes that the financial condition of the issuers of such
obligations and the protection afforded by the terms of the obligations limit
the risk to the Fund to a degree comparable to that of rated securities that are
consistent with the Fund's investment objectives and policies. Lower-rated
securities in which the Fund may invest include Brady Bonds and fixed-income
securities of issuers located in emerging markets.
The Fund expects to engage in active and frequent trading of portfolio
securities to achieve its principal investment strategies. A higher rate of
portfolio turnover increases transaction expenses, which may negatively affect
the Fund's performance. High portfolio turnover also may result in the
realization of substantial net short-term capital gains, which, when
distributed, are taxable to shareholders.
The Fund also may:
o invest in rights and warrants;
o invest in loan participations and assignments;
o invest in foreign currencies;
o purchase and write put and call options on securities and foreign
currencies;
o purchase or sell forward foreign exchange contracts;
o invest in variable, floating, and inverse floating rate instruments;
o invest in indexed commercial paper;
o invest in structured securities;
o purchase and sell securities on a forward commitment basis;
o enter into standby commitments;
o enter into the purchase or sale of futures contracts on fixed-income
securities or foreign currencies, or futures contracts based on financial
indices, including any index of U.S. Government securities, foreign
government securities or common stock, and purchase and write options on
futures contracts;
o invest in Eurodollar instruments;
o enter into swap transactions;
o make short sales of securities or maintain a short position;
o enter into reverse repurchase agreements and dollar rolls;
o make secured loans of portfolio securities; and
o enter into repurchase agreements.
The Fund may borrow in order to purchase securities or make other investments,
although it currently limits its borrowings to 25% of its total assets.
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GLOBAL BOND FUNDS
The Global Bond Funds are non-diversified investment companies that offer
investors a high level of current income through investments primarily in
foreign government securities.
Alliance Americas Government Income Trust
Alliance Americas Government Income Trust seeks the highest level of current
income, consistent with what Alliance considers to be prudent investment risk,
that is available from a portfolio of debt securities issued or guaranteed by
the federal government of the United States, Canada, and Mexico, their political
subdivisions (including Canadian provinces but excluding states of the United
States), agencies, instrumentalities or authorities.
The Fund invests at least 65% of its net assets in debt securities issued or
guaranteed by: (i) the federal governments of the United States, Canada, and
Mexico; (ii) government-related entities in the United States, Canada, and
Mexico; and (iii) the provincial governments of Canada and Mexico. However, the
Fund normally invests at least 80% of its net assets in debt securities of
countries in North, Central, and South America. The Fund also invests, under
normal circumstances, at least 80%, and normally substantially more, of its net
assets in government securities. For purposes of both of these 80% policies, net
assets include any borrowings for investment purposes and the policies may not
be changed without 60 days' prior written notice to shareholders. The Fund's
investments may be denominated in local currency or U.S. Dollar-denominated, but
the Fund expects to maintain at least 25% of its assets in U.S.
Dollar-denominated securities.
The Fund also may invest in debt securities issued by, and denominated in either
the U.S. Dollar or the respective local currencies of, governments of countries
located in Central and South America, including the Caribbean, or any of their
political subdivisions, agencies, instrumentalities or authorities. The Fund may
invest up to 25% of its total assets in debt securities issued by governmental
entities of Argentina ("Argentine Government securities"). The Fund limits its
investments in debt securities issued by the governmental entities of any one
such country, except for Argentine Government securities, to 10% of its total
assets.
The average weighted maturity of the Fund's portfolio of debt securities is
expected to vary between one year or less and 30 years. The Fund currently
maintains borrowings of approximately one-third of its net assets.
As a matter of fundamental policy, the Fund invests at least 80% of its net
assets in debt securities rated investment grade at the time of investment and
may invest up to 20% of its net assets in non-investment grade debt securities
rated, at the time of investment, at least B- by S&P or Fitch or B3 by Moody's,
or, if unrated, determined by Alliance to be of equivalent quality. The Fund
expects that it will not retain a debt security that is downgraded below these
credit rating standards or, if unrated, determined by Alliance to have undergone
similar credit quality deterioration. The Fund may conclude, under certain
circumstances, that it is in the best interests of the shareholders to retain
its holdings in securities of that issuer.
Alliance believes that the increasingly integrated economic relationship among
the United States, Canada and Mexico, characterized by the reduction and
projected elimination of most barriers to free trade among the three nations and
the growing coordination of their fiscal and monetary policies, will, over the
long term, benefit the economic performance of all three countries and promote
greater correlation of currency fluctuation among the U.S. and Canadian Dollars
and the Mexican Peso. Alliance anticipates that, over time, Central and South
America will tend to benefit as well from such broadening economic convergence.
Alliance will actively manage the Fund's assets in relation to market conditions
and general economic conditions and adjust the Fund's investments in an effort
to best enable the Fund to achieve its investment objective. Thus, the
percentage of the Fund's assets invested in a particular country or denominated
in a particular currency will vary in accordance with Alliance's assessment of
the relative yield and appreciation potential of such securities and the
relationship of the country's currency to the U.S. Dollar.
The Fund also may:
o enter into futures contracts and purchase and write options on futures
contracts for hedging purposes;
o purchase and write put and call options on foreign currencies;
o purchase or sell forward foreign currency exchange contracts;
o write covered put and call options and purchase put and call options on
U.S. Government and foreign government securities traded on U.S. and
foreign securities exchanges, and write put and call options for
cross-hedging purposes;
o enter into swap transactions;
o enter into forward commitments;
o invest in variable, floating, and inverse floating rate instruments;
o make secured loans of portfolio securities; and
o enter into repurchase agreements.
Alliance Emerging Market Debt Fund
Alliance Emerging Market Debt Fund seeks primarily a high level of current
income and secondarily capital appreciation. The Fund invests, under normal
circumstances, at least 80% of its net assets in emerging market debt
securities. For purposes of this policy, net assets include any borrowings for
investment purposes. This policy may not be changed without 60 days' prior
written notice to shareholders. The Fund invests at least 65% of its
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total assets in sovereign debt obligations. The Fund's investments in sovereign
debt obligations will emphasize obligations referred to as "Brady Bonds," which
are issued as part of debt restructurings and collateralized in full as to
principal due at maturity by zero coupon U.S. Government securities.
The Fund also may invest up to 35% of its total assets in U.S. and non-U.S.
corporate fixed-income securities. The Fund will limit its investments in
sovereign debt obligations and U.S. and non-U.S. corporate fixed-income
securities to U.S. Dollar-denominated securities. Alliance expects the average
weighted maturity of the Fund's investments will be approximately:
o for U.S. fixed-income securities, nine to 15 years;
o for non-U.S. fixed-income securities, 15 to 25 years; and
o for sovereign debt obligations, longer than 25 years.
Substantially all of the Fund's assets will be invested in lower-rated
securities, which may include securities having the lowest rating for
non-subordinated debt instruments (i.e., rated C by Moody's or CCC or lower by
S&P and Fitch) and unrated securities of equivalent investment quality. These
securities may have extremely poor prospects of ever attaining any real
investment standing and a current identifiable vulnerability to default, be
unlikely to have the capacity to pay interest and repay principal when due in
the event of adverse business, financial or economic conditions, and be in
default or not current in the payment of interest or principal.
The Fund also may invest in investment grade securities. Unrated securities will
be considered for investment by the Fund when Alliance believes that the
financial condition of the issuers of such obligations and the protection
afforded by the terms of the obligations themselves limit the risk to the Fund
to a degree comparable to that of rated securities which are consistent with the
Fund's investment objectives and policies.
As of August 31, 2002, securities ratings (or equivalent quality) of the Fund's
securities were:
o A and above .79%
o Baa or BBB 24.05%
o Ba or BB 41.71%
o B 29.64%
o CCC 2.89%
o CC .33%
o Unrated .59%
The Fund's investments in sovereign debt obligations and non-U.S. corporate
fixed-income securities emphasize countries that are considered at the time of
purchase to be emerging markets or developing countries by the World Bank. A
substantial part of the Fund's investment focus is in obligations of or
securities of issuers in Argentina, Brazil, Mexico, Morocco, the Philippines,
Russia and Venezuela because these countries are now, or are expected in the
future to be, the principal participants in debt restructuring programs
(including, in the case of Argentina, Mexico, the Philippines and Venezuela,
issuers of currently outstanding Brady Bonds) that, in Alliance's opinion, will
provide the most attractive investment opportunities for the Fund. Alliance
anticipates that other countries that will provide investment opportunities for
the Fund include, among others, Bolivia, Costa Rica, the Dominican Republic,
Ecuador, Jordan, Nigeria, Panama, Peru, Poland, Thailand, Turkey and Uruguay.
The Fund limits its investments in the sovereign debt obligations of any single
foreign country to less than 25% of its total assets, although the Fund may
invest up to 30% of its total assets in the sovereign debt obligations of and
corporate fixed-income securities of issuers in each of Argentina, Brazil,
Mexico, Morocco, the Philippines, Russia and Venezuela. The Fund expects that it
will limit its investments in any other single foreign country to not more than
10% of its total assets.
The Fund also may:
o invest in structured securities;
o invest in fixed and floating rate loans that are arranged through private
negotiations between an issuer of sovereign debt obligations and one or
more financial institutions and in participations in and assignments of
these types of loans;
o invest in other investment companies;
o invest in warrants;
o enter into swap transactions;
o enter into forward commitments;
o enter into standby commitment agreements;
o make short sales of securities or maintain a short position;
o write put and call options on securities of the types in which it is
permitted to invest and write call options for cross-hedging purposes;
o purchase and sell exchange-traded options on any securities index of the
types of securities in which it may invest;
o invest in variable, floating, and inverse floating rate instruments;
o enter into reverse repurchase agreements and dollar rolls;
o make secured loans of portfolio securities; and
o enter into repurchase agreements.
While it does not currently intend to do so, the Fund reserves the right to
borrow an amount not to exceed one-third of the Fund's net assets.
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Alliance Multi-Market Strategy Trust
Alliance Multi-Market Strategy Trust seeks the highest level of current income,
consistent with what Alliance considers to be prudent investment risk, that is
available from a portfolio of high-quality debt securities having remaining
maturities of not more than five years. The Fund is a non-diversified investment
company that offers investors a higher yield than a money market fund and less
fluctuation in net asset value than a longer-term bond fund. The Fund invests in
a portfolio of debt securities denominated in the U.S. Dollar and selected
foreign currencies. The Fund seeks investment opportunities in foreign, as well
as domestic, securities markets. The Fund normally expects to maintain at least
70% of its assets in debt securities denominated in foreign currencies. The Fund
limits its investments in a single currency other than the U.S. Dollar to 25% of
its net assets, except for the Euro in which the Fund may invest up to 50% of
its net assets.
In pursuing its investment objective, the Fund seeks to minimize credit risk and
fluctuations in net asset value by investing only in short-term debt securities.
Normally, a high proportion of the Fund's portfolio consists of money market
instruments. Alliance actively manages the Fund's portfolio in accordance with a
multi-market investment strategy, allocating the Fund's investments among
securities denominated in the U.S. Dollar and the currencies of a number of
foreign countries and, within each such country, among different types of debt
securities. Alliance adjusts the Fund's exposure to each currency so that the
percentage of assets invested in securities of a particular country or
denominated in a particular currency varies in accordance with Alliance's
assessment of the relative yield and appreciation potential of such securities
and the relative strength of a country's currency. Fundamental economic
strength, credit quality, and interest rate trends are the principal factors
considered by Alliance in determining whether to increase or decrease the
emphasis placed upon a particular type of security or industry sector within a
Fund's investment portfolio.
The returns available from short-term foreign currency-denominated debt
instruments can be adversely affected by changes in exchange rates. Alliance
believes that the use of foreign currency hedging techniques, including
"cross-hedges", can help protect against declines in the U.S. Dollar value of
income available for distribution to shareholders and declines in the net asset
value of the Fund's shares resulting from adverse changes in currency exchange
rates. The Fund invests in debt securities denominated in the currencies of
countries whose governments are considered stable by Alliance.
An issuer of debt securities purchased by the Fund may be domiciled in a country
other than the country in whose currency the instrument is denominated. In
addition, the Fund may purchase debt securities (sometimes referred to as
"linked" securities) that are denominated in one currency while the principal
amounts of, and value of interest payments on, such securities are determined
with reference to another currency.
The Fund seeks to minimize investment risk by limiting its investments to debt
securities of high quality and invests in:
o U.S. Government securities;
o high-quality foreign government securities;
o obligations issued by supranational entities and corporate debt securities
having a high-quality rating;
o certificates of deposit and bankers' acceptances issued or guaranteed by,
or time deposits maintained at, banks (including foreign branches of
foreign banks) having total assets of more than $500 million, and
determined by Alliance to be of high quality; and
o prime commercial paper or unrated commercial paper of equivalent quality
and issued by U.S. or foreign companies having outstanding high-quality
debt securities.
As a matter of fundamental policy, the Fund concentrates at least 25% of its
total assets in debt instruments issued by domestic and foreign companies
engaged in the banking industry, including bank holding companies. These
investments may include certificates of deposit, time deposits, bankers'
acceptances, and obligations issued by bank holding companies, as well as
repurchase agreements entered into with banks.
The Fund also may:
o invest in indexed commercial paper;
o enter into futures contracts and purchase and write options on futures
contracts;
o purchase and write put and call options on foreign currencies;
o purchase or sell forward foreign currency exchange contracts;
o enter into swap transactions;
o invest in variable, floating, and inverse floating rate instruments;
o make secured loans of portfolio securities; and
o enter into repurchase agreements.
DESCRIPTION OF ADDITIONAL INVESTMENT PRACTICES
This section describes certain investment practices and associated risks that
are common to a number of Funds. There can be no assurance that at any given
time a Fund will engage in any of these derivative or other practices.
Derivatives. The Funds may use derivatives to achieve their investment
objectives. Derivatives are financial contracts whose value depends on, or is
derived from, the value of an underlying asset, reference rate or index. These
assets, rates, and indices may include bonds, stocks, mortgages, commodities,
interest rates, currency exchange rates, bond
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indices, and stock indices. Derivatives can be used to earn income or protect
against risk, or both. For example, one party with unwanted risk may agree to
pass that risk to another party who is willing to accept the risk, the second
party being motivated, for example, by the desire either to earn income in the
form of a fee or premium from the first party, or to reduce its own unwanted
risk by attempting to pass all or part of that risk to the first party.
Derivatives can be used by investors such as the Funds to earn income and
enhance returns, to hedge or adjust the risk profile of a portfolio, and either
to replace more traditional direct investments or to obtain exposure to
otherwise inaccessible markets. Each of the Funds is permitted to use
derivatives for one or more of these purposes, although most of the Funds
generally use derivatives primarily as direct investments in order to enhance
yields and broaden portfolio diversification. Each of these uses entails greater
risk than if derivatives were used solely for hedging purposes. Derivatives are
a valuable tool, which, when used properly, can provide significant benefits to
Fund shareholders. A Fund may take a significant position in those derivatives
that are within its investment policies if, in Alliance's judgment, this
represents the most effective response to current or anticipated market
conditions. Alliance High Yield, Alliance Global Strategic Income and Alliance
Multi-Market Strategy in particular, generally make extensive use of carefully
selected forwards and other derivatives to achieve the currency hedging that is
an integral part of their investment strategy. Alliance's use of derivatives is
subject to continuous risk assessment and control from the standpoint of each
Fund's investment objectives and policies.
Derivatives may be (i) standardized, exchange-traded contracts or (ii)
customized, privately-negotiated contracts. Exchange-traded derivatives tend to
be more liquid and subject to less credit risk than those that are privately
negotiated.
There are four principal types of derivative instruments--options, futures,
forwards, and swaps--from which virtually any type of derivative transaction can
be created.
o Options--An option, which may be standardized and exchange-traded, or
customized and privately negotiated, is an agreement that, for a premium
payment or fee, gives the option holder (the buyer) the right but not the
obligation to buy or sell the underlying asset (or settle for cash an
amount based on an underlying asset, rate or index) at a specified price
(the exercise price) during a period of time or on a specified date. A
call option entitles the holder to purchase, and a put option entitles the
holder to sell, the underlying asset (or settle for cash an amount based
on an underlying asset, rate or index). Likewise, when an option is
exercised the writer of the option is obligated to sell (in the case of a
call option) or to purchase (in the case of a put option) the underlying
asset (or settle for cash an amount based on an underlying asset, rate or
index).
o Futures--A futures contract is an agreement that obligates the buyer to
buy and the seller to sell a specified quantity of an underlying asset (or
settle for cash the value of a contract based on an underlying asset, rate
or index) at a specific price on the contract maturity date. Futures
contracts are standardized, exchange-traded instruments and are fungible
(i.e., considered to be perfect substitutes for each other). This
fungibility allows futures contracts to be readily offset or cancelled
through the acquisition of equal but opposite positions, which is the
primary method in which futures contracts are liquidated. A cash-settled
futures contract does not require physical delivery of the underlying
asset but instead is settled for cash equal to the difference between the
values of the contract on the date it is entered into and its maturity
date.
o Forwards--A forward contract is an obligation by one party to buy, and the
other party to sell, a specific quantity of an underlying commodity or
other tangible asset for an agreed upon price at a future date. Forward
contracts are customized, privately negotiated agreements designed to
satisfy the objectives of each party. A forward contract usually results
in the delivery of the underlying asset upon maturity of the contract in
return for the agreed upon payment.
o Swaps--A swap is a customized, privately negotiated agreement that
obligates two parties to exchange a series of cash flows at specified
intervals (payment dates) based upon or calculated by reference to changes
in specified prices or rates (interest rates in the case of interest rate
swaps, currency exchange rates in the case of currency swaps) for a
specified amount of an underlying asset (the "notional" principal amount).
The payment flows are netted against each other, with the difference being
paid by one party to the other. Except for currency swaps, the notional
principal amount is used solely to calculate the payment streams but is
not exchanged. With respect to currency swaps, actual principal amounts of
currencies may be exchanged by the counterparties at the initiation, and
again upon the termination, of the transaction. Swap transactions also
include credit default swaps in which one party pays a periodic fee,
typically expressed in basis points on a notional amount, in return for a
contingent payment, by the counterparty following a credit event in a
specific debt obligation or obligations. A credit event is typically a
default and the contingent payment may be a cash settlement or by physical
delivery of the reference obligation in return for payment of its face
amount.
The swap market has grown substantially in recent years, with a large
number of banks and investment banking firms acting as principals and as
agents utilizing standard swap documentation. As a result, the swap market
has become well established and relatively liquid. The Funds will enter
into swap transactions only with counterparties whose debt securities have
ratings of at least A (or the
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equivalent) from any one nationally recognized statistical rating
organization or counterparties with guarantors with debt securities having
such a rating.
Debt instruments that incorporate one or more of these building blocks for the
purpose of determining the principal amount of and/or rate of interest payable
on the debt instruments are often referred to as "structured securities." An
example of this type of structured security is indexed commercial paper. The
term is also used to describe certain securities issued in connection with the
restructuring of certain foreign obligations. The term "derivative" also is
sometimes used to describe securities involving rights to a portion of the cash
flows from an underlying pool of mortgages or other assets from which payments
are passed through to the owner of, or that collateralize, the securities. These
securities are described below under Mortgage-Related Securities and Other
Asset-Backed Securities.
While the judicious use of derivatives by highly-experienced investment managers
such as Alliance can be quite beneficial, derivatives involve risks different
from, and, in certain cases, greater than, the risks presented by more
traditional investments. The following is a general discussion of important risk
factors and issues relating to the use of derivatives that investors should
understand before investing in a Fund.
o Market Risk--This is the general risk of all investments that the value of
a particular investment will change in a way detrimental to the Fund's
interest based on changes in the bond market generally.
o Management Risk--Derivative products are highly specialized instruments
that require investment techniques and risk analyses different from those
associated with stocks and bonds. The use of a derivative requires an
understanding not only of the underlying instrument but also of the
derivative itself, without the benefit of observing the performance of the
derivative under all possible market conditions. In particular, the use
and complexity of derivatives require the maintenance of adequate controls
to monitor the transactions entered into, the ability to assess the risk
that a derivative adds to a Fund's portfolio, and the ability to forecast
price, interest rate, or currency exchange rate movements correctly.
o Credit Risk--This is the risk that a loss may be sustained by a Fund as a
result of the failure of a derivative counterparty to comply with the
terms of the derivative contract. The credit risk for exchange-traded
derivatives is generally less than for privately negotiated derivatives,
since the clearing house, which is the issuer or counterparty to each
exchange-traded derivative, provides a guarantee of performance. This
guarantee is supported by a daily payment system (i.e., margin
requirements) operated by the clearing house in order to reduce overall
credit risk. For privately negotiated derivatives, there is no similar
clearing agency guarantee. Therefore, the Funds consider the
creditworthiness of each counterparty to a privately negotiated derivative
in evaluating potential credit risk.
o Liquidity Risk--Liquidity risk exists when a particular instrument is
difficult to purchase or sell. If a derivative transaction is particularly
large or if the relevant market is illiquid (as is the case with many
privately negotiated derivatives), it may not be possible to initiate a
transaction or liquidate a position at an advantageous price.
o Leverage Risk--Since many derivatives have a leverage component, adverse
changes in the value or level of the underlying asset, rate or index can
result in a loss substantially greater than the amount invested in the
derivative itself. In the case of swaps, the risk of loss generally is
related to a notional principal amount, even if the parties have not made
any initial investment. Certain derivatives have the potential for
unlimited loss, regardless of the size of the initial investment.
o Other Risks--Other risks in using derivatives include the risk of
mispricing or improper valuation of derivatives and the inability of
derivatives to correlate perfectly with underlying assets, rates and
indices. Many derivatives, in particular privately negotiated derivatives,
are complex and often valued subjectively. Improper valuations can result
in increased cash payment requirements to counterparties or a loss of
value to a Fund. Derivatives do not always perfectly or even highly
correlate or track the value of the assets, rates or indices they are
designed to closely track. Consequently, a Fund's use of derivatives may
not always be an effective means of, and sometimes could be
counterproductive to, furthering the Fund's investment objective. In
addition, there is no guarantee that a specific derivative will be
available for a Fund to utilize at any given time.
Derivatives Used by the Funds. The following describes specific derivatives that
one or more of the Funds may use.
Credit Default Swap Agreements. The "buyer" in a credit default swap contract is
obligated to pay the "seller" a periodic stream of payments over the term of the
contract in return for a contingent payment upon the occurrence of a credit
event with respect to an underlying reference obligation. Generally, a credit
event means bankruptcy, failure to pay, obligation acceleration or modified
restructuring. A Fund may be either the buyer or seller in the transaction. As a
seller, a Fund receives a fixed rate of income throughout the term of the
contract, which typically is between one month and five years, provided that no
credit event occurs. If a credit event occurs, a Fund typically must pay the
contingent payment to the buyer, which is typically the "par value" (full
notional value) of the reference obligation. The contingent payment may be a
cash settlement or by physical delivery of the reference obligation in return
for payment of the face amount of the obligation. If a Fund is a buyer and no
credit event occurs, the Fund may lose its investment and recover nothing.
However, if a credit
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event occurs, the buyer typically receives full notional value for a reference
obligation that may have little or no value.
Credit default swaps may involve greater risks than if a Fund had invested in
the reference obligation directly. Credit default swaps are subject to general
market risk, liquidity risk and credit risk. As noted above, if a Fund is a
buyer and no credit event occurs, it will lose its investment. In addition, the
value of the reference obligation received by a Fund as a seller if a credit
event occurs, coupled with the periodic payments previously received, may be
less than the full notional value it pays to the buyer, resulting in a loss of
value to the Fund.
Eurodollar Instruments. Eurodollar instruments are essentially U.S.
Dollar-denominated futures contracts or options that are linked to LIBOR.
Eurodollar futures contracts enable purchasers to obtain a fixed rate for the
lending of funds and sellers to obtain a fixed rate for borrowings. Alliance
Global Strategic Income intends to use Eurodollar futures contracts and options
thereon to hedge against changes in LIBOR (to which many short-term borrowings
and floating rate securities in which the Fund invests are linked).
Forward Foreign Currency Exchange Contracts. A Fund purchases or sells forward
foreign currency exchange contracts ("forward contracts") to minimize the risk
from adverse changes in the relationship between the U.S. Dollar and other
currencies. A Fund may enter into a forward contract, for example, when it
enters into a contract for the purchase or sale of a security denominated in a
foreign currency in order to "lock in" the U.S. Dollar price of the security (a
"transaction hedge"). When a Fund believes that a foreign currency may suffer a
substantial decline against the U.S. Dollar, it may enter into a forward sale
contract to sell an amount of that foreign currency approximating the value of
some or all of the Fund's portfolio securities denominated in such foreign
currency, or when the Fund believes that the U.S. Dollar may suffer a
substantial decline against a foreign currency, it may enter into a forward
purchase contract to buy that foreign currency for a fixed dollar amount (a
"position hedge"). Instead of entering into a position hedge, a Fund may, in the
alternative, enter into a forward contract to sell a different foreign currency
for a fixed U.S. Dollar amount where the Fund believes that the U.S. Dollar
value of the currency to be sold pursuant to the forward contract will fall
whenever there is a decline in the U.S. Dollar value of the currency in which
portfolio securities of the Fund are denominated (a "cross-hedge").
Futures Contracts and Options on Futures Contracts. A Fund may buy and sell
futures contracts on fixed-income or other securities or foreign currencies, and
contracts based on interest rates or financial indices, including any index of
U.S. Government securities, foreign government securities or corporate debt
securities.
Options on futures contracts are options that call for the delivery of futures
contracts upon exercise. Options on futures contracts written or purchased by a
Fund will be traded on U.S. or foreign exchanges and, except for Alliance Global
Strategic Income, will be used only for hedging purposes.
Alliance U.S. Government, Alliance Global Strategic Income, Alliance Americas
Government Income and Alliance Multi-Market Strategy will not enter into a
futures contract or write or purchase an option on a futures contract if
immediately thereafter the market values of the outstanding futures contracts of
the Fund and the currencies and futures contracts subject to outstanding options
written by the Fund would exceed 50% of its total assets. Alliance U.S.
Government, Alliance Global Strategic Income, Alliance Americas Government
Income and Alliance Multi-Market Strategy will not enter into a futures contract
or, if otherwise permitted, write or purchase an option on a futures contract,
if immediately thereafter the aggregate of initial margin deposits on all the
outstanding futures contracts of the Fund and premiums paid on outstanding
options on futures contracts would exceed 5% of the market value of the total
assets of the Fund. Alliance High Yield will not purchase or sell futures
contracts or options on futures contracts unless either (i) the futures
contracts or options thereon are for "bona fide hedging" purposes (as that term
is defined under the Commodities Futures Trading Commission regulations) or (ii)
if for other purposes, the sum of amounts of initial margin deposits and
premiums required to establish non-hedging positions would not exceed 5% of the
Fund's liquidation value. In addition, Alliance Global Strategic Income will not
enter into any futures contract (i) other than one on fixed-income securities or
based on interest rates, or (ii) if immediately thereafter the sum of the then
aggregate futures market prices of financial instruments required to be
delivered under open futures contract sales and the aggregate futures market
prices of instruments required to be delivered under open futures contract
purchases would exceed 30% of the value of the Fund's total assets.
Interest Rate Transactions (Swaps, Caps, and Floors). Each Fund that may enter
into interest rate swap, cap, or floor transactions expects to do so primarily
for hedging purposes, which may include preserving a return or spread on a
particular investment or portion of its portfolio or protecting against an
increase in the price of securities the Fund anticipates purchasing at a later
date. The Funds do not intend to use these transactions in a speculative manner.
Interest rate swaps involve the exchange by a Fund with another party of their
respective commitments to pay or receive interest (e.g., an exchange of floating
rate payments for fixed rate payments) computed based on a contractually-based
principal (or "notional") amount. Interest rate swaps are entered into on a net
basis (i.e., the two payment streams are netted out, with the Fund receiving or
paying, as the case may be, only the net amount of the two payments).
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Interest rate caps and floors are similar to options in that the purchase of an
interest rate cap or floor entitles the purchaser, to the extent that a
specified index exceeds (in the case of a cap) or falls below (in the case of a
floor) a predetermined interest rate, to receive payments of interest on a
notional amount from the party selling the interest rate cap or floor. A Fund
may enter into interest rate swaps, caps, and floors on either an asset-based or
liability-based basis, depending upon whether it is hedging its assets or
liabilities.
There is no limit on the amount of interest rate transactions that may be
entered into by a Fund that is permitted to enter into such transactions.
Alliance Global Strategic Income, Alliance Americas Government Income and
Alliance Multi-Market Strategy, may enter into interest rate swaps involving
payments in the same currency or in different currencies. Caps and floors may be
less liquid than swaps. These transactions do not involve the delivery of
securities or other underlying assets or principal. Accordingly, unless there is
a counterparty default, the risk of loss to a Fund from interest rate
transactions is limited to the net amount of interest payments that the Fund is
contractually obligated to make.
Options on Foreign Currencies. A Fund invests in options on foreign currencies
that are privately negotiated or traded on U.S. or foreign exchanges for the
purpose of protecting against declines in the U.S. Dollar value of foreign
currency denominated securities held by a Fund and against increases in the U.S.
Dollar cost of securities to be acquired. The purchase of an option on a foreign
currency may constitute an effective hedge against fluctuations in exchange
rates, although if rates move adversely, a Fund may forfeit the entire amount of
the premium plus related transaction costs.
Options on Securities. In purchasing an option on securities, a Fund would be in
a position to realize a gain if, during the option period, the price of the
underlying securities increased (in the case of a call) or decreased (in the
case of a put) by an amount in excess of the premium paid; otherwise the Fund
would experience a loss not greater than the premium paid for the option. Thus,
a Fund would realize a loss if the price of the underlying security declined or
remained the same (in the case of a call) or increased or remained the same (in
the case of a put) or otherwise did not increase (in the case of a put) or
decrease (in the case of a call) by more than the amount of the premium. If a
put or call option purchased by a Fund were permitted to expire without being
sold or exercised, its premium would represent a loss to the Fund.
A Fund may write a put or call option in return for a premium, which is retained
by the Fund whether or not the option is exercised. Except with respect to
uncovered call options written for cross-hedging purposes, none of the Funds
will write uncovered call or put options on securities. A call option written by
a Fund is "covered" if the Fund owns the underlying security, has an absolute
and immediate right to acquire that security upon conversion or exchange of
another security it holds, or holds a call option on the underlying security
with an exercise price equal to or less than that of the call option it has
written (or it holds a call option with an exercise price that is greater than
that of the call option it has written, if the difference is maintained by the
Fund in liquid assets in a segregated account). 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 or
if the Fund maintains liquid assets in a segregated account with a value equal
to the exercise price.
The risk involved in writing an uncovered call option is that there could be an
increase in the market value of the underlying security, and a Fund could be
obligated to acquire the underlying security at its current price and sell it at
a lower price. The risk of loss from writing an uncovered put option is limited
to the exercise price of the option.
A Fund may write a call option on a security that it does not own in order to
hedge against a decline in the value of a security that it owns or has the right
to acquire, a technique referred to as "cross-hedging." A Fund would write a
call option for cross-hedging purposes, instead of writing a covered call
option, when the premium to be received from the cross-hedge transaction exceeds
that to be received from writing a covered call option, while at the same time
achieving the desired hedge. The correlation risk involved in cross-hedging may
be greater than the correlation risk involved with other hedging strategies.
Alliance U.S. Government, Alliance Quality Bond, Alliance Corporate Bond,
Alliance High Yield, Alliance Global Strategic Income, Alliance Americas
Government Income and Alliance Emerging Market Debt, generally purchase or write
privately negotiated options on securities. A Fund that does so will effect such
transactions only with investment dealers and other financial institutions (such
as commercial banks or savings and loan institutions) deemed creditworthy by
Alliance. Privately negotiated options purchased or written by a Fund may be
illiquid and it may not be possible for the Fund to effect a closing transaction
at an advantageous time. Alliance U.S. Government and Alliance Corporate Bond
will not purchase an option on a security if, immediately thereafter, the
aggregate cost of all outstanding options purchased by the Fund would exceed 2%
of the Fund's total assets. Nor will these Funds write an option if, immediately
thereafter, the aggregate value of the Fund's portfolio securities subject to
outstanding options would exceed 15% of the Fund's total assets.
Options on Securities Indices. An option on a securities index is similar to an
option on a security except that, rather than taking or making delivery of a
security at a specified price, an option on a securities index gives the holder
the right to receive, upon exercise of the option, an amount of cash if the
closing level of the chosen index is greater than (in the case of a call) or
less than (in the case of a put) the exercise price of the option.
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Brady Bonds. Brady Bonds are created through the exchange of existing commercial
bank loans to foreign entities for new obligations in connection with debt
restructurings under a plan introduced by former U.S. Secretary of the Treasury,
Nicholas F. Brady (the "Brady Plan").They may be collateralized or
uncollateralized and issued in various currencies (although most are U.S.
Dollar-denominated) and they are actively traded in the over-the-counter
secondary market.
U.S. Dollar-denominated, collateralized Brady Bonds, which may be fixed-rate par
bonds or floating rate discount bonds, are generally collateralized in full as
to principal due at maturity by U.S. Treasury zero coupon obligations that have
the same maturity as the Brady Bonds. Interest payments on these Brady Bonds
generally are collateralized by cash or securities in an amount that, in the
case of fixed rate bonds, is equal to at least one year of rolling interest
payments based on the applicable interest rate at that time and is adjusted at
regular intervals thereafter. Certain Brady Bonds are entitled to "value
recovery payments" in certain circumstances, which in effect constitute
supplemental interest payments but generally are not collateralized. Brady Bonds
are often viewed as having up to four valuation components: (i) collateralized
repayment of principal at final maturity, (ii) collateralized interest payments,
(iii) uncollateralized interest payments, and (iv) any uncollateralized
repayment of principal at maturity (these uncollateralized amounts constitute
the "residual risk"). In the event of a default with respect to collateralized
Brady Bonds as a result of which the payment obligations of the issuer are
accelerated, the U.S. Treasury zero coupon obligations held as collateral for
the payment of principal will not be distributed to investors, nor will such
obligations be sold and the proceeds distributed. The collateral will be held by
the collateral agent to the scheduled maturity of the defaulted Brady Bonds,
which will continue to be outstanding, at which time the face amount of the
collateral will equal the principal payments that would have then been due on
the Brady Bonds in the normal course. In light of the residual risk of Brady
Bonds and, among other factors, the history of defaults with respect to
commercial bank loans by public and private entities of countries issuing Brady
Bonds, investments in Brady Bonds are to be viewed as speculative.
Convertible Securities. Prior to conversion, convertible securities have the
same general characteristics as non-convertible debt securities, which provide a
stable stream of income with generally higher yields than those of equity
securities of the same or similar issuers. The price of a convertible security
will normally vary with changes in the price of the underlying equity security,
although the higher yield tends to make the convertible security less volatile
than the underlying equity security. As with debt securities, the market value
of convertible securities tends to decrease as interest rates rise and increase
as interest rates decline. While convertible securities generally offer lower
interest or dividend yields than non-convertible debt securities of similar
quality, they enable investors to benefit from increases in the market price of
the underlying common stock. Convertible debt securities that are rated Baa or
lower by Moody's or BBB or lower by S&P or Fitch and comparable unrated
securities may share some or all of the risks of debt securities with those
ratings.
Forward Commitments. Forward commitments for the purchase or sale of securities
may include purchases on a when-issued basis or purchases or sales on a delayed
delivery basis. In some cases, a forward commitment may be conditioned upon the
occurrence of a subsequent event, such as approval and consummation of a merger,
corporate reorganization or debt restructuring or approval of a proposed
financing by appropriate authorities (i.e., a "when, as and if issued" trade).
When forward commitments with respect to fixed-income securities are negotiated,
the price, which is generally expressed in yield terms, is fixed at the time the
commitment is made, but payment for and delivery of the securities take place at
a later date. Normally, the settlement date occurs within two months after the
transaction, but settlements beyond two months may be negotiated. Securities
purchased or sold under a forward commitment are subject to market fluctuation
and no interest or dividends accrues to the purchaser prior to the settlement
date.
The use of forward commitments helps a Fund to protect against anticipated
changes in interest rates and prices. For instance, in periods of rising
interest rates and falling bond prices, a Fund might sell securities in its
portfolio on a forward commitment basis to limit its exposure to falling bond
prices. In periods of falling interest rates and rising bond prices, a Fund
might sell a security in its portfolio and purchase the same or a similar
security on a when-issued or forward commitment basis, thereby obtaining the
benefit of currently higher cash yields. No forward commitments will be made by
Alliance Global Strategic Income, Alliance Americas Government Income or
Alliance Emerging Market Debt if, as a result, the Fund's aggregate forward
commitments under such transactions would be more than 25% of the total assets
of Alliance Global Strategic Income and 30% of the total assets of each of the
other Funds.
A Fund's right to receive or deliver a security under a forward commitment may
be sold prior to the settlement date. The Funds enter into forward commitments,
however, only with the intention of actually receiving securities or delivering
them, as the case may be. If a Fund, however, chooses to dispose of the right to
acquire a when-issued security prior to its acquisition or dispose of its right
to deliver or receive against a forward commitment, it may realize a gain or
incur a loss.
Illiquid Securities. The Funds will limit their investments in illiquid
securities to 15% of their net assets, except that the limit is 10% for Alliance
Americas Government Income and Alliance Multi-Market Strategy. As a matter of
fundamental policy, Alliance Corporate Bond cannot purchase illiquid
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securities. Illiquid securities generally include (i) direct placements or other
securities that are subject to legal or contractual restrictions on resale or
for which there is no readily available market (e.g., when trading in the
security is suspended or, in the case of unlisted securities, when market makers
do not exist or will not entertain bids or offers), including many currency
swaps and any assets used to cover currency swaps, (ii) over-the-counter options
and assets used to cover over-the-counter options, and (iii) repurchase
agreements not terminable within seven days.
A Fund that invests in illiquid securities may not be able to sell such
securities and may not be able to realize their full value upon sale. Alliance
will monitor each Fund's investments in illiquid securities. Rule 144A
securities will not be treated as "illiquid" for the purposes of the limit on
investments so long as the securities meet liquidity guidelines established by
the Board of Directors.
Indexed Commercial Paper. Indexed commercial paper may have its principal linked
to changes in foreign currency exchange rates whereby its principal amount is
adjusted upwards or downwards (but not below zero) at maturity to reflect
changes in the referenced exchange rate. Each Fund that invests in indexed
commercial paper may do so without limitation. A Fund will receive interest and
principal payments on such commercial paper in the currency in which such
commercial paper is denominated, but the amount of principal payable by the
issuer at maturity will change in proportion to the change (if any) in the
exchange rate between the two specified currencies between the date the
instrument is issued and the date the instrument matures. While such commercial
paper entails the risk of loss of principal, the potential for realizing gains
as a result of changes in foreign currency exchange rates enables a Fund to
hedge (or cross-hedge) against a decline in the U.S. Dollar value of investments
denominated in foreign currencies while providing an attractive money market
rate of return. A Fund will purchase such commercial paper for hedging purposes
only, not for speculation.
Investment in Other Investment Companies. Alliance Emerging Market Debt may
invest in other investment companies whose investment objectives and policies
are consistent with those of the Fund. If the Fund acquires shares in investment
companies, shareholders would bear both their proportionate share of expenses in
the Fund (including management and advisory fees) and, indirectly, the expenses
of such investment companies (including management and advisory fees).
Loans of Portfolio Securities. A Fund may make secured loans of portfolio
securities to brokers, dealers and financial institutions, provided that cash,
liquid high grade debt securities or bank letters of credit equal to at least
100% of the market value of the securities loaned is deposited and maintained by
the borrower with the Fund. A principal risk in lending portfolio securities, as
with other collateralized extensions of credit, consists of possible loss of
rights in the collateral should the borrower fail financially. In addition, the
Fund will be exposed to the risk that the sale of any collateral realized upon a
borrower's default will not yield proceeds sufficient to replace the loaned
securities.
In determining whether to lend securities to a particular borrower, Alliance
will consider all relevant facts and circumstances, including the
creditworthiness of the borrower. While securities are on loan, the borrower
will pay the Fund any income earned from the securities. A Fund may invest any
cash collateral directly or indirectly in short-term, high-quality debt
instruments and earn additional income or receive an agreed-upon amount of
income from a borrower who has delivered equivalent collateral. Any such
investment of cash collateral will be subject to the Fund's investment risks.
The Fund will have the right to regain record ownership of loaned securities to
exercise beneficial rights such as voting rights, subscription rights, and
rights to dividends, interest or distributions. The Fund may pay reasonable
finders', administrative, and custodial fees in connection with a loan. Lending
of portfolio securities is limited to 50% of total assets for Alliance Quality
Bond and Alliance High Yield, 331/3% of total assets (including collateral) for
Alliance U.S. Government, 25% of net assets for Alliance Global Strategic
Income, 20% of net assets for Alliance Americas Government Income and Alliance
Emerging Market Debt and 20% of total assets for Alliance Multi-Market Strategy.
Loan Participations and Assignments. A Fund's investments in loans are expected
in most instances to be in the form of participations in loans and assignments
of all or a portion of loans from third parties. A Fund's investment in loan
participations typically will result in the Fund having a contractual
relationship only with the lender and not with the borrower. A Fund will acquire
participations only if the lender interpositioned between the Fund and the
borrower is a lender having total assets of more than $25 billion and whose
senior unsecured debt is rated investment grade or higher. When a Fund purchases
a loan assignment from a lender it will acquire direct rights against the
borrower on the loan. Because loan assignments are arranged through private
negotiations between potential assignees and potential assignors, however, the
rights and obligations acquired by a Fund as the purchaser of an assignment may
differ from, and be more limited than, those held by the assigning lender.
The assignability of certain sovereign debt obligations, with respect to
Alliance Global Strategic Income and Alliance Emerging Market Debt, or foreign
government securities, with respect to Alliance Corporate Bond and Alliance High
Yield, is restricted by the governing documentation as to the nature of the
assignee such that the only way in which the Fund may acquire an interest in a
loan is through a participation and not an assignment. A Fund may have
difficulty disposing of assignments and participations because to do so it will
have to assign such securities to a third party. Because there may not be a
liquid market
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for such investments, they can probably be sold only to a limited number of
institutional investors. The lack of a liquid secondary market may have an
adverse effect on the value of such investments and a Fund's ability to dispose
of particular participations and assignments when necessary to meet its
liquidity needs in response to a specific economic event such as a deterioration
in the creditworthiness of the borrower. The lack of a liquid secondary market
for participations and assignments also may make it more difficult for the Fund
to assign a value to these investments for purposes of valuing the Fund's
portfolio and calculating its net asset value.
Alliance Global Strategic Income and Alliance Emerging Market Debt may invest up
to 25%, and Alliance Corporate Bond may invest up to 15%, of their total assets
in loan participations and assignments.
Mortgage-Related Securities. The Funds' investments in mortgage-related
securities typically are securities representing interests in pools of mortgage
loans made to home owners. The mortgage loan pools may be assembled for sale to
investors (such as a Fund) by governmental or private organizations.
Mortgage-related securities bear interest at either a fixed rate or an
adjustable rate determined by reference to an index rate. Mortgage-related
securities frequently provide for monthly payments that consist of both interest
and principal, unlike more traditional debt securities, which normally do not
provide for periodic repayments of principal.
Securities representing interests in pools created by private issuers generally
offer a higher rate of interest than securities representing interests in pools
created by governmental issuers because there are no direct or indirect
governmental guarantees of the underlying mortgage payments. Private issuers
sometimes obtain committed loan facilities, lines of credit, letters of credit,
surety bonds or other forms of liquidity and credit enhancement to support the
timely payment of interest and principal with respect to their securities if the
borrowers on the underlying mortgages fail to make their mortgage payments. The
ratings of such non-governmental securities are generally dependent upon the
ratings of the providers of such liquidity and credit support and would be
adversely affected if the rating of such an enhancer were downgraded. A Fund may
buy mortgage-related securities without credit enhancement if the securities
meet the Fund's investment standards.
One type of mortgage-related security is of the "pass-through" variety. The
holder of a pass-through security is considered to own an undivided beneficial
interest in the underlying pool of mortgage loans and receives a pro rata share
of the monthly payments made by the borrowers on their mortgage loans, net of
any fees paid to the issuer or guarantor of the securities. Prepayments of
mortgages resulting from the sale, refinancing, or foreclosure of the underlying
properties are also paid to the holders of these securities, which, as discussed
below, frequently causes these securities to experience significantly greater
price and yield volatility than experienced by traditional fixed-income
securities. Some mortgage-related securities, such as securities issued by GNMA,
are referred to as "modified pass-through" securities. The holders of these
securities are entitled to the full and timely payment of principal and
interest, net of certain fees, regardless of whether payments are actually made
on the underlying mortgages.
Another form of mortgage-related security is a "pay-through" security, which is
a debt obligation of the issuer secured by a pool of mortgage loans pledged as
collateral that is legally required to be paid by the issuer, regardless of
whether payments are actually made on the underlying mortgages. CMOs are the
predominant type of "pay-through" mortgage-related security. In a CMO, a series
of bonds or certificates is issued in multiple classes. Each class of a CMO,
often referred to as a "tranche," is issued at a specific coupon rate and has a
stated maturity or final distribution date. Principal prepayments on collateral
underlying a CMO may cause one or more tranches of the CMO to be retired
substantially earlier than the stated maturities or final distribution dates of
the collateral. The principal and interest on the underlying mortgages may be
allocated among several classes of a series of a CMO in many ways. CMOs may be
issued by a U.S. Government instrumentality or agency or by a private issuer.
Although payment of the principal of, and interest on, the underlying collateral
securing privately issued CMOs may be guaranteed by GNMA, FNMA or FHLMC, these
CMOs represent obligations solely of the private issuer and are not insured or
guaranteed by GNMA, FNMA, FHLMC, any other governmental agency or any other
person or entity.
Another type of mortgage-related security, known as ARMS, bears interest at a
rate determined by reference to a predetermined interest rate or index. There
are two main categories of rates or indices: (i) rates based on the yield on
U.S. Treasury securities; and (ii) indices derived from a calculated measure
such as a cost of funds index or a moving average of mortgage rates. Some rates
and indices closely mirror changes in market interest rate levels, while others
tend to lag changes in market rate levels and tend to be somewhat less volatile.
ARMS may be secured by fixed-rate mortgages or adjustable-rate mortgages. ARMS
secured by fixed-rate mortgages generally have lifetime caps on the coupon rates
of the securities. To the extent that general interest rates increase faster
than the interest rates on the ARMS, these ARMS will decline in value. The
adjustable-rate mortgages that secure ARMS will frequently have caps that limit
the maximum amount by which the interest rate or the monthly principal and
interest payments on the mortgages may increase. These payment caps can result
in negative amortization (i.e., an increase in the balance of the mortgage
loan). Since many adjustable-rate mortgages only reset on an annual basis, the
values of ARMS tend to fluctuate to the extent that changes in prevailing
interest
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rates are not immediately reflected in the interest rates payable on the
underlying adjustable-rate mortgages.
SMRS are mortgage-related securities that are usually structured with two
classes of securities collateralized by a pool of mortgages or a pool of
mortgage-backed bonds or pass-through securities, with each class receiving
different proportions of the principal and interest payments from the underlying
assets. A common type of SMRS has one class of interest-only securities or IOs
receiving all of the interest payments from the underlying assets; while the
other class of securities, principal-only securities or POs, receives all of the
principal payments from the underlying assets. IOs and POs are extremely
sensitive to interest rate changes and are more volatile than mortgage-related
securities that are not stripped. IOs tend to decrease in value as interest
rates decrease, while POs generally increase in value as interest rates
decrease. If prepayments of the underlying mortgages are greater than
anticipated, the amount of interest earned on the overall pool will decrease due
to the decreasing principal balance of the assets. Changes in the values of IOs
and POs can be substantial and occur quickly, such as occurred in the first half
of 1994 when the value of many POs dropped precipitously due to increases in
interest rates. For this reason, none of the Funds relies on IOs and POs as the
principal means of furthering its investment objective.
The value of mortgage-related securities is affected by a number of factors.
Unlike traditional debt securities, which have fixed maturity dates,
mortgage-related securities may be paid earlier than expected as a result of
prepayments of underlying mortgages. Such prepayments generally occur during
periods of falling mortgage interest rates. If property owners make unscheduled
prepayments of their mortgage loans, these prepayments will result in the early
payment of the applicable mortgage-related securities. In that event, a Fund may
be unable to invest the proceeds from the early payment of the mortgage-related
securities in investments that provide as high a yield as the mortgage-related
securities. Early payments associated with mortgage-related securities cause
these securities to experience significantly greater price and yield volatility
than is experienced by traditional fixed-income securities. The occurrence of
mortgage prepayments is affected by the level of general interest rates, general
economic conditions, and other social and demographic factors. During periods of
falling interest rates, the rate of mortgage prepayments tends to increase,
thereby tending to decrease the life of mortgage-related securities. Conversely,
during periods of rising interest rates, a reduction in prepayments may increase
the effective life of mortgage-related securities, subjecting them to greater
risk of decline in market value in response to rising interest rates. If the
life of a mortgage-related security is inaccurately predicted, a Fund may not be
able to realize the rate of return it expected.
Although the market for mortgage-related securities is becoming increasingly
liquid, those issued by certain private organizations may not be readily
marketable. In particular, the secondary markets for CMOs, IOs, and POs may be
more volatile and less liquid than those for other mortgage-related securities,
thereby potentially limiting a Fund's ability to buy or sell those securities at
any particular time.
As with fixed-income securities generally, the value of mortgage-related
securities also can be adversely affected by increases in general interest rates
relative to the yield provided by such securities. Such an adverse effect is
especially possible with fixed-rate mortgage securities. If the yield available
on other investments rises above the yield of the fixed-rate mortgage securities
as a result of general increases in interest rate levels, the value of the
mortgage-related securities will decline. Although the negative effect could be
lessened if the mortgage-related securities were to be paid earlier (thus
permitting a Fund to reinvest the prepayment proceeds in investments yielding
the higher current interest rate), as described above the rates of mortgage
prepayments and early payments of mortgage-related securities generally tend to
decline during a period of rising interest rates.
Although the values of ARMS may not be affected as much as the values of
fixed-rate mortgage securities by rising interest rates, ARMS may still decline
in value as a result of rising interest rates. Although, as described above, the
yields on ARMS vary with changes in the applicable interest rate or index, there
is often a lag between increases in general interest rates and increases in the
yield on ARMS as a result of relatively infrequent interest rate reset dates. In
addition, adjustable-rate mortgages and ARMS often have interest rate or payment
caps that limit the ability of the adjustable-rate mortgages or ARMS to fully
reflect increases in the general level of interest rates.
Other Asset-Backed Securities. The securitization techniques used to develop
mortgage-related securities are being applied to a broad range of financial
assets. Through the use of trusts and special purpose corporations, various
types of assets, including automobile loans and leases, credit card receivables,
home equity loans, equipment leases and trade receivables, are being securitized
in structures similar to the structures used in mortgage securitizations. These
asset-backed securities are subject to risks associated with changes in interest
rates and prepayment of underlying obligations similar to the risks of
investment in mortgage-related securities discussed above.
Each type of asset-backed security also entails unique risks depending on the
type of assets involved and the legal structure used. For example, credit card
receivables are generally unsecured obligations of the credit card holder and
the debtors are entitled to the protection of a number of state and federal
consumer credit laws, many of which give such debtors the right to set off
certain amounts owed on the credit cards, thereby reducing the balance due. In
some transactions, the value of the asset-backed security is dependent on the
performance of a third party acting as credit enhancer or servicer. In some
transactions (such as
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those involving the securitization of vehicle loans or leases) it may be
administratively burdensome to perfect the interest of the security issuer in
the underlying collateral and the underlying collateral may become damaged or
stolen.
Repurchase Agreements. A repurchase agreement arises when a buyer purchases a
security and simultaneously agrees to resell it to the vendor at an agreed-upon
future date, normally a day or a few days later. The resale price is greater
than the purchase price, reflecting an agreed-upon interest rate for the period
the buyer's money is invested in the security. Such agreements permit a Fund to
keep all of its assets at work while retaining "overnight" flexibility in
pursuit of investments of a longer-term nature. A Fund requires continual
maintenance of collateral in an amount equal to, or in excess of, the resale
price. If a vendor defaults on its repurchase obligation, a Fund would suffer a
loss to the extent that the proceeds from the sale of the collateral were less
than the repurchase price. If a vendor goes bankrupt, a Fund might be delayed
in, or prevented from, selling the collateral for its benefit.
Reverse Repurchase Agreements and Dollar Rolls. Reverse repurchase agreements
involve sales by a Fund of portfolio assets concurrently with an agreement by
the Fund to repurchase the same assets at a later date at a fixed price. During
the reverse repurchase agreement period, the Fund continues to receive principal
and interest payments on these securities. Generally, the effect of such a
transaction is that a Fund can recover all or most of the cash invested in the
portfolio securities involved during the term of the reverse repurchase
agreement, while it will be able to keep the interest income associated with
those portfolio securities. Such transactions are advantageous only if the
interest cost to a Fund of the reverse repurchase transaction is less than the
cost of otherwise obtaining the cash.
Dollar rolls involve sales by a Fund of securities for delivery in the current
month and the Fund's simultaneously contracting to repurchase substantially
similar (same type and coupon) securities on a specified future date. During the
roll period, a Fund forgoes principal and interest paid on the securities. A
Fund is compensated by the difference between the current sales price and the
lower forward price for the future purchase (often referred to as the "drop") as
well as by the interest earned on the cash proceeds of the initial sale.
Reverse repurchase agreements and dollar rolls involve the risk that the market
value of the securities a Fund is obligated to repurchase under the agreement
may decline below the repurchase price. In the event the buyer of securities
under a reverse repurchase agreement or dollar roll files for bankruptcy or
becomes insolvent, a Fund's use of the proceeds of the agreement may be
restricted pending a determination by the other party, or its trustee or
receiver, whether to enforce the Fund's obligation to repurchase the securities.
Reverse repurchase agreements and dollar rolls are speculative techniques and
are considered borrowings by the Funds. Under normal circumstances, Alliance
U.S. Government and Alliance Corporate Bond do not expect to engage in reverse
repurchase agreements and dollar rolls with respect to greater than 50% of their
total assets. Reverse repurchase agreements and dollar rolls together with any
borrowings by Alliance Emerging Market Debt will not exceed 33% of its total
assets less liabilities (other than amounts borrowed). Alliance Global Strategic
Income may enter into reverse repurchase agreements with commercial banks and
registered broker-dealers in order to increase income, in an amount up to 25% of
its total assets. Reverse repurchase agreements and dollar rolls together with
any borrowings by Alliance Global Strategic Income will not exceed 25% of its
total assets.
Rights and Warrants. Rights and warrants are option securities permitting their
holders to subscribe for other securities. Alliance Emerging Market Debt may
invest in warrants and Alliance Global Strategic Income may invest in rights and
warrants, for debt securities or for equity securities that are acquired in
connection with debt instruments. Rights are similar to warrants except that
they have a substantially shorter duration. Rights and warrants do not carry
with them dividend or voting rights with respect to the underlying securities,
or any rights in the assets of the issuer. As a result, an investment in rights
and warrants may be considered more speculative than certain other types of
investments. In addition, the value of a right or a warrant does not necessarily
change with the value of the underlying securities, and a right or a warrant
ceases to have value if it is not exercised prior to its expiration date.
Alliance Global Strategic Income may invest up to 20% of its total assets in
rights and warrants.
Short Sales. A short sale is effected by selling a security that a Fund does not
own, or if the Fund owns the security, is not to be delivered upon consummation
of the sale. A short sale is "against the box" if a Fund owns or has the right
to obtain without payment securities identical to those sold short. Alliance
Emerging Market Debt may make short sales only against the box and only for the
purpose of deferring realization of a gain or loss for U.S. federal income tax
purposes. In addition, the Fund may not make a short sale if, as a result, more
than 10% of its net assets (taken at market value) would be held as collateral
for short sales.
Alliance Global Strategic Income may make a short sale in anticipation that the
market price of that security will decline. When the Fund makes a short sale of
a security that it does not own, it must borrow from a broker-dealer the
security sold short and deliver the security to the broker-dealer upon
conclusion of the short sale. The Fund may be required to pay a fee to borrow
particular securities and is often obligated to pay over any payments received
on such borrowed securities. The Fund's obligation to replace the borrowed
security will be secured by collateral deposited with a broker-dealer qualified
as a custodian. Depending on the arrangements the Fund makes with the
broker-dealer from which it borrowed the security regarding remittance
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of any payments received by the Fund on such security, the Fund may or may not
receive any payments (e.g., dividends or interest) on its collateral deposited
with the broker-dealer.
In order to defer realization of a gain or loss for U.S. federal income tax
purposes, Alliance Global Strategic Income may also make short sales "against
the box" of securities which are eligible for such deferral. The Fund may not
make a short sale, if as a result, more than 25% of its total assets would be
held as collateral for short sales.
If the price of the security sold short increases between the time of the short
sale and the time a Fund replaces the borrowed security, the Fund will incur a
loss; conversely, if the price declines, the Fund will realize a short-term
capital gain. Any gain will be decreased, and any loss increased, by the
transaction costs described above. Although a Fund's gain is limited to the
price at which it sold the security short, its potential loss is theoretically
unlimited.
Standby Commitment Agreements. Standby commitment agreements are similar to put
options that commit a Fund, for a stated period of time, to purchase a stated
amount of a security that may be issued and sold to the Fund at the option of
the issuer. The price and coupon of the security are fixed at the time of the
commitment. At the time of entering into the agreement, the Fund is paid a
commitment fee regardless of whether the security ultimately is issued. The
Funds will enter into such agreements only for the purpose of investing in the
security underlying the commitment at a yield and price considered advantageous
and unavailable on a firm commitment basis. No Fund will enter into a standby
commitment with a remaining term in excess of 45 days. The Funds will limit
their investments in standby commitments so that the aggregate purchase price of
the securities subject to the commitments does not exceed 20%, or 25% with
respect to Alliance Global Strategic Income, of their assets.
There is no guarantee that the security subject to a standby commitment will be
issued. In addition, the value of the security, if issued, on the delivery date
may be more or less than its purchase price. Since the issuance of the security
is at the option of the issuer, a Fund will bear the risk of capital loss in the
event that the value of the security declines and may not benefit from an
appreciation in the value of the security during the commitment period if the
issuer decides not to issue and sell the security to the Fund.
Structured Securities. Structured securities in which Alliance Emerging Market
Debt, Alliance Global Strategic Income and Alliance Corporate Bond may invest
represent interests in entities organized and operated solely for the purpose of
restructuring the investment characteristics of sovereign debt obligations, with
respect to Alliance Emerging Market Debt and Alliance Global Strategic Income,
or foreign government securities, with respect to Alliance Corporate Bond. This
type of restructuring involves the deposit with or purchase by an entity, such
as a corporation or trust, of specified instruments (such as commercial bank
loans or Brady Bonds) and the issuance by that entity of one or more classes of
structured securities backed by, or representing interests in, the underlying
instruments. The cash flow on the underlying instruments may be apportioned
among the newly issued structured securities to create securities with different
investment characteristics such as varying maturities, payment priorities and
interest rate provisions, and the extent of the payments made with respect to
structured securities is dependent on the extent of the cash flow on the
underlying instruments. Because structured securities typically involve no
credit enhancement, their credit risk generally will be equivalent to that of
the underlying instruments. Structured securities of a given class may be either
subordinated or unsubordinated to the right of payment of another class.
Subordinated structured securities typically have higher yields and present
greater risks than unsubordinated structured securities. Alliance Emerging
Market Debt may invest up to 25% of its total assets, and Alliance Global
Strategic Income and Alliance Corporate Bond may invest without limit, in these
types of structured securities.
Variable, Floating and Inverse Floating Rate Instruments. Fixed-income
securities may have fixed, variable or floating rates of interest. Variable and
floating rate securities pay interest at rates that are adjusted periodically,
according to a specified formula. A "variable" interest rate adjusts at
predetermined intervals (e.g., daily, weekly or monthly), while a "floating"
interest rate adjusts whenever a specified benchmark rate (such as the bank
prime lending rate) changes.
A Fund may invest in fixed-income securities that pay interest at a coupon rate
equal to a base rate, plus additional interest for a certain period of time if
short-term interest rates rise above a predetermined level or "cap." The amount
of such an additional interest payment typically is calculated under a formula
based on a short-term interest rate index multiplied by a designated factor.
Leveraged inverse floating rate debt instruments are sometimes known as inverse
floaters. The interest rate on an inverse floater resets in the opposite
direction from the market rate of interest to which the inverse floater is
indexed. An inverse floater may be considered to be leveraged to the extent that
its interest rate varies by a magnitude that exceeds the magnitude of the change
in the index rate of interest. The higher degree of leverage inherent in inverse
floaters is associated with greater volatility in market value, such that,
during periods of rising interest rates, the market values of inverse floaters
will tend to decrease more rapidly than those of fixed rate securities.
Zero Coupon and Principal-Only Securities. Zero coupon securities and
principal-only (PO) securities are debt securities that have been issued without
interest coupons or stripped of their unmatured interest coupons, and include
receipts or certificates representing interests in such stripped debt
obligations and coupons. Such a security pays no interest to its holder during
its life. Its value to an
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investor consists of the difference between its face value at the time of
maturity and the price for which it was acquired, which is generally an amount
significantly less than its face value. Such securities usually trade at a deep
discount from their face or par value and are subject to greater fluctuations in
market value in response to changing interest rates than debt obligations of
comparable maturities and credit quality that make current distributions of
interest. On the other hand, because there are no periodic interest payments to
be reinvested prior to maturity, these securities eliminate reinvestment risk
and "lock in" a rate of return to maturity.
Zero coupon Treasury securities are U.S. Treasury bills issued without interest
coupons. Principal-only Treasury securities are U.S. Treasury notes and bonds
that have been stripped of their unmatured interest coupons, and receipts or
certificates representing interests in such stripped debt obligations. Currently
the only U.S. Treasury security issued without coupons is the Treasury bill.
Although the U.S. Treasury does not itself issue Treasury notes and bonds
without coupons, under the U.S. Treasury STRIPS program interest and principal
payments on certain long-term Treasury securities may be maintained separately
in the Federal Reserve book entry system and may be separately traded and owned.
In addition, in the last few years a number of banks and brokerage firms have
separated ("stripped") the principal portions from the coupon portions of U.S.
Treasury bonds and notes and sold them separately in the form of receipts or
certificates representing undivided interests in these instruments (which are
generally held by a bank in a custodial or trust account).
Alliance Quality Bond, Alliance Corporate Bond and Alliance Global Strategic
Income also may invest in pay-in-kind debentures (i.e., debt obligations the
interest on which may be paid in the form of obligations of the same type rather
than cash), which have characteristics similar to zero coupon securities.
Future Developments. A Fund may, following written notice to its shareholders,
take advantage of other investment practices that are not currently contemplated
for use by the Fund, or are not available but may yet be developed, to the
extent such investment practices are consistent with the Fund's investment
objective and legally permissible for the Fund. Such investment practices, if
they arise, may involve risks that are different from or exceed those involved
in the practices described above.
Portfolio Turnover. The portfolio turnover rate for each Fund is included in the
Financial Highlights section. Generally, the Funds are actively managed and a
Fund's portfolio turnover may exceed 100%, in some cases in response to market
conditions or as otherwise discussed with respect to a specific Fund. A higher
rate of portfolio turnover increases brokerage and other expenses, which must be
borne by the Fund and its shareholders. High portfolio turnover also may result
in the realization of substantial net short-term capital gains, which, when
distributed, are taxable to shareholders.
Temporary Defensive Position. For temporary defensive purposes, each Fund may
invest in certain types of short-term, liquid, high grade or high quality
(depending on the Fund) debt securities. These securities may include U.S.
Government securities, qualifying bank deposits, money market instruments, prime
commercial paper and other types of short-term debt securities, including notes
and bonds. For Funds that may invest in foreign countries, such securities may
also include short-term, foreign-currency denominated securities of the type
mentioned above issued by foreign governmental entities, companies and
supranational organizations. While a Fund is investing for temporary defensive
purposes, it may not meet its investment objectives.
ADDITIONAL RISK CONSIDERATIONS
Investment in certain of the Funds involves the special risk considerations
described below. Certain of these risks may be heightened when investing in
emerging markets.
Currency Considerations. Those Funds that invest some portion of their assets in
securities denominated in, and receive revenues in, foreign currencies will be
adversely affected by reductions in the value of those currencies relative to
the U.S. Dollar. These changes will affect a Fund's net assets, distributions
and income. If the value of the foreign currencies in which a Fund receives
income falls relative to the U.S. Dollar between receipt of the income and the
making of Fund distributions, a Fund may be required to liquidate securities in
order to make distributions if the Fund has insufficient cash in U.S. Dollars to
meet the distribution requirements that the Fund must satisfy to qualify as a
regulated investment company for federal income tax purposes. Similarly, if an
exchange rate declines between the time a Fund incurs expenses in U.S. Dollars
and the time cash expenses are paid, the amount of the currency required to be
converted into U.S. Dollars in order to pay expenses in U.S. Dollars could be
greater than the equivalent amount of such expenses in the currency at the time
they were incurred. In light of these risks, a Fund may engage in certain
currency hedging transactions, as described above, which involve certain special
risks.
Effects of Borrowing. A Fund's loan agreements provide for additional borrowings
and for repayments and reborrowings from time to time, and each Fund that may
borrow expects to effect borrowings and repayments at such times and in such
amounts as will maintain investment leverage in an amount approximately equal to
its borrowing target. The loan agreements provide for a selection of interest
rates that are based on the bank's short-term funding costs in the U.S. and
London markets.
Borrowings by a Fund result in leveraging of the Fund's shares. Utilization of
leverage, which is usually considered speculative, involves certain risks to a
Fund's shareholders. These include a higher volatility of the net asset value of
a Fund's shares and the relatively greater effect on the net asset value of the
shares. So long as a Fund is able to
35
<PAGE>
realize a net return on its investment portfolio that is higher than the
interest expense paid on borrowings, the effect of leverage will be to cause the
Fund's shareholders to realize a higher current net investment income than if
the Fund were not leveraged. On the other hand, interest rates on U.S.
Dollar-denominated and foreign currency-denominated obligations change from time
to time as does their relationship to each other, depending upon such factors as
supply and demand forces, monetary and tax policies within each country and
investor expectations. Changes in such factors could cause the relationship
between such rates to change so that rates on U.S. Dollar-denominated
obligations may substantially increase relative to the foreign
currency-denominated obligations of a Fund's investments. If the interest
expense on borrowings approaches the net return on a Fund's investment
portfolio, the benefit of leverage to the Fund's shareholders will be reduced.
If the interest expense on borrowings were to exceed the net return to
shareholders, a Fund's use of leverage would result in a lower rate of return.
Similarly, the effect of leverage in a declining market could be a greater
decrease in net asset value per share. In an extreme case, if a Fund's current
investment income were not sufficient to meet the interest expense on
borrowings, it could be necessary for the Fund to liquidate certain of its
investments and reduce the net asset value of a Fund's shares.
In the event of an increase in rates on U.S. Government securities or other
changed market conditions, to the point where leverage by Alliance Quality Bond,
Alliance Global Strategic Income, Alliance Americas Government Income or
Alliance Multi-Market Strategy could adversely affect the Funds' shareholders,
as noted above, or in anticipation of such changes, each Fund may increase the
percentage of its investment portfolio invested in U.S. Government securities,
which would tend to offset the negative impact of leverage on Fund shareholders.
Each Fund may also reduce the degree to which it is leveraged by repaying
amounts borrowed.
Fixed-Income Securities. The value of each Fund's shares will fluctuate with the
value of its investments. The value of each Fund's investments will change as
the general level of interest rates fluctuates. During periods of falling
interest rates, the values of a Fund's securities will generally rise, although
if falling interest rates are viewed as a precursor to a recession, the values
of a Fund's securities may fall along with interest rates. Conversely, during
periods of rising interest rates, the values of a Fund's securities will
generally decline. Changes in interest rates have a greater effect on
fixed-income securities with longer maturities and durations than those with
shorter maturities and durations.
In seeking to achieve a Fund's investment objective, there will be times, such
as during periods of rising interest rates, when depreciation and realization of
capital losses on securities in a Fund's portfolio will be unavoidable.
Moreover, medium- and lower-rated securities and non-rated securities of
comparable quality may be subject to wider fluctuations in yield and market
values than higher-rated securities under certain market conditions. Such
fluctuations after a security is acquired do not affect the cash income received
from that security but will be reflected in the net asset value of a Fund.
Foreign Securities. The securities markets of many foreign countries are
relatively small, with the majority of market capitalization and trading volume
concentrated in a limited number of companies representing a small number of
industries. Consequently, a Fund that invests in foreign securities, including
foreign fixed-income securities, may experience greater price volatility and
significantly lower liquidity than a portfolio invested solely in securities of
U.S. companies. These markets may be subject to greater influence by adverse
events generally affecting the market, and by large investors trading
significant blocks of securities, than is usual in the United States.
Securities registration, custody and settlements may in some instances be
subject to delays and legal and administrative uncertainties. Furthermore,
foreign investment in the securities markets of certain foreign countries is
restricted or controlled to varying degrees. These restrictions or controls may
at times limit or preclude investment in certain securities and may increase the
cost and expenses of a Fund. In addition, the repatriation of investment income,
capital or the proceeds of sales of securities from certain of the countries is
controlled under regulations, including in some cases the need for certain
advance government notification or authority, and if a deterioration occurs in a
country's balance of payments, the country could impose temporary restrictions
on foreign capital remittances.
A Fund also could be adversely affected by delays in, or a refusal to grant, any
required governmental approval for repatriation, as well as by the application
to it of other restrictions on investment. Investing in local markets may
require a Fund to adopt special procedures or seek local governmental approvals
or other actions, any of which may involve additional costs to a Fund. These
factors may affect the liquidity of a Fund's investments in any country and
Alliance will monitor the effect of any such factor or factors on a Fund's
investments. Furthermore, transaction costs including brokerage commissions for
transactions both on and off the securities exchanges in many foreign countries
are generally higher than in the U.S.
Issuers of securities in foreign jurisdictions are generally not subject to the
same degree of regulation as are U.S. issuers with respect to such matters as
insider trading rules, restrictions on market manipulation, shareholder proxy
requirements, and timely disclosure of information. The reporting, accounting,
and auditing standards of foreign countries may differ, in some cases
significantly, from U.S. standards in important respects, and less information
may be available to investors in foreign securities than to investors in U.S.
securities. Substantially less information is publicly available about certain
non-U.S. issuers than is available about most U.S. issuers.
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<PAGE>
The economies of individual foreign countries may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross domestic
product or gross national product, rate of inflation, capital reinvestment,
resource self-sufficiency, and balance of payments position. Nationalization,
expropriation or confiscatory taxation, currency blockage, political changes,
government regulation, political or social instability, revolutions, wars or
diplomatic developments could affect adversely the economy of a foreign country.
In the event of nationalization, expropriation or other confiscation, a Fund
could lose its entire investment in securities in the country involved. In
addition, laws in foreign countries governing business organizations, bankruptcy
and insolvency may provide less protection to security holders such as the Fund
than that provided by U.S. laws.
Alliance believes that, except for currency fluctuations between the U.S. Dollar
and the Canadian Dollar, the matters described above are not likely to have a
material adverse effect on Alliance Americas Government Income's investments in
the securities of Canadian issuers or investments denominated in Canadian
Dollars. The factors described above are more likely to have a material adverse
effect on the Fund's investments in the securities of Mexican and other
non-Canadian foreign issuers, including investments in securities denominated in
Mexican Pesos or other non-Canadian foreign currencies. If not hedged, however,
currency fluctuations could affect the unrealized appreciation and depreciation
of Canadian Government securities as expressed in U.S. Dollars.
Investment in the Banking Industry. Due to its investment policies with respect
to investments in the banking industry, Alliance Multi-Market Strategy will have
greater exposure to the risk factors which are characteristic of such
investments. In particular, the value of and investment return on the Fund's
shares will be affected by economic or regulatory developments in or related to
the banking industry. Sustained increases in interest rates can adversely affect
the availability and cost of funds for a bank's lending activities, and a
deterioration in general economic conditions could increase the exposure to
credit losses. The banking industry is also subject to the effects of the
concentration of loan portfolios in particular businesses such as real estate,
energy, agriculture or high technology-related companies; competition within
those industries as well as with other types of financial institutions; and
national and local governmental regulation. In addition, the Fund's investments
in commercial banks located in several foreign countries are subject to
additional risks due to the combination in such banks of commercial banking and
diversified securities activities. As discussed above, however, the Fund will
seek to minimize their exposure to such risks by investing only in debt
securities which are determined to be of high quality.
Investment in Fixed-Income Securities Rated Baa and BBB. Securities rated Baa or
BBB are considered to have speculative characteristics and share some of the
same characteristics as lower-rated securities, as described below. Sustained
periods of deteriorating economic conditions or of rising interest rates are
more likely to lead to a weakening in the issuer's capacity to pay interest and
repay principal than in the case of higher-rated securities.
Investment in Lower-Rated Fixed-Income Securities. Lower-rated securities are
subject to greater risk of loss of principal and interest than higher-rated
securities. They are also generally considered to be subject to greater market
risk than higher-rated securities, and the capacity of issuers of lower-rated
securities to pay interest and repay principal is more likely to weaken than is
that of issuers of higher-rated securities in times of deteriorating economic
conditions or rising interest rates. In addition, lower-rated securities may be
more susceptible to real or perceived adverse economic conditions than
investment grade securities. Securities rated Ba or BB are judged to have
speculative elements or to be predominantly speculative with respect to the
issuer's ability to pay interest and repay principal. Securities rated B are
judged to have highly speculative elements or to be predominantly speculative.
Such securities may have small assurance of interest and principal payments.
Securities rated Baa by Moody's are also judged to have speculative
characteristics.
The market for lower-rated securities may be thinner and less active than that
for higher-rated securities, which can adversely affect the prices at which
these securities can be sold. To the extent that there is no established
secondary market for lower-rated securities, a Fund may experience difficulty in
valuing such securities and, in turn, the Fund's assets.
Alliance will try to reduce the risk inherent in investment in lower-rated
securities through credit analysis, diversification, and attention to current
developments and trends in interest rates and economic and political conditions.
There can be no assurance, however, that losses will not occur. Since the risk
of default is higher for lower-rated securities, Alliance's research and credit
analysis are a correspondingly more important aspect of its program for managing
a Fund's securities than would be the case if a Fund did not invest in
lower-rated securities. In considering investments for the Fund, Alliance will
attempt to identify those high-yielding securities whose financial condition is
adequate to meet future obligations, has improved, or is expected to improve in
the future. Alliance's analysis focuses on relative values based on such factors
as interest or dividend coverage, asset coverage, earnings prospects, and the
experience and managerial strength of the issuer.
Unrated Securities. Unrated securities will also be considered for investment by
Alliance Quality Bond, Alliance Corporate Bond, Alliance High Yield, Alliance
Global Strategic Income, Alliance Americas Government Income and Alliance
Emerging Market Debt when Alliance believes that the financial condition of the
issuers of such securities, or the protection afforded by the terms of
37
<PAGE>
the securities themselves, limits the risk to the Fund to a degree comparable to
that of rated securities which are consistent with the Fund's objective and
policies.
Sovereign Debt Obligations. No established secondary markets may exist for many
of the sovereign debt obligations in which Alliance Global Strategic Income,
Alliance Americas Government Income and Alliance Emerging Market Debt will
invest. Reduced secondary market liquidity may have an adverse effect on the
market price and a Fund's ability to dispose of particular instruments when
necessary to meet its liquidity requirements or in response to specific economic
events such as a deterioration in the creditworthiness of the issuer. Reduced
secondary market liquidity for certain sovereign debt obligations may also make
it more difficult for a Fund to obtain accurate market quotations for the
purpose of valuing its portfolio. Market quotations are generally available on
many sovereign debt obligations only from a limited number of dealers and may
not necessarily represent firm bids of those dealers or prices for actual sales.
By investing in sovereign debt obligations, the Funds will be exposed to the
direct or indirect consequences of political, social, and economic changes in
various countries. Political changes in a country may affect the willingness of
a foreign government to make or provide for timely payments of its obligations.
The country's economic status, as reflected in, among other things, its
inflation rate, the amount of its external debt and its gross domestic product,
will also affect the government's ability to honor its obligations.
The sovereign debt obligations in which the Funds will invest in many cases
pertain to countries that are among the world's largest debtors to commercial
banks, foreign governments, international financial organizations, and other
financial institutions. In recent years, the governments of some of these
countries have encountered difficulties in servicing their external debt
obligations, which led to defaults on certain obligations and the restructuring
of certain indebtedness. Restructuring arrangements have included, among other
things, reducing and rescheduling interest and principal payments by negotiating
new or amended credit agreements or converting outstanding principal and unpaid
interest to Brady Bonds, and obtaining new credit to finance interest payments.
Certain governments have not been able to make payments of interest on or
principal of sovereign debt obligations as those payments have come due.
Obligations arising from past restructuring agreements may affect the economic
performance and political and social stability of those issuers.
The Funds are permitted to invest in sovereign debt obligations that are not
current in the payment of interest or principal or are in default so long as
Alliance believes it to be consistent with the Funds' investment objectives. The
Funds may have limited legal recourse in the event of a default with respect to
certain sovereign debt obligations it holds. For example, remedies from defaults
on certain sovereign debt obligations, unlike those on private debt, must, in
some cases, be pursued in the courts of the defaulting party itself. Legal
recourse therefore may be significantly diminished. Bankruptcy, moratorium and
other similar laws applicable to issuers of sovereign debt obligations may be
substantially different from those applicable to issuers of private debt
obligations. The political context, expressed as the willingness of an issuer of
sovereign debt obligations to meet the terms of the debt obligation, for
example, is of considerable importance. In addition, no assurance can be given
that the holders of commercial bank debt will not contest payments to the
holders of securities issued by foreign governments in the event of default
under commercial bank loan agreements.
U.S. Corporate Fixed-Income Securities. The U.S. corporate fixed-income
securities in which Alliance High Yield and Alliance Emerging Market Debt invest
may include securities issued in connection with corporate restructurings such
as takeovers or leveraged buyouts, which may pose particular risks. Securities
issued to finance corporate restructurings may have special credit risks due to
the highly leveraged conditions of the issuer. In addition, such issuers may
lose experienced management as a result of the restructuring. Furthermore, the
market price of such securities may be more volatile to the extent that expected
benefits from the restructuring do not materialize. The Funds may also invest in
U.S. corporate fixed-income securities that are not current in the payment of
interest or principal or are in default, so long as Alliance believes such
investment is consistent with the Fund's investment objectives. The Funds'
rights with respect to defaults on such securities will be subject to applicable
U.S. bankruptcy, moratorium and other similar laws.
--------------------------------------------------------------------------------
MANAGEMENT OF THE FUNDS
--------------------------------------------------------------------------------
INVESTMENT ADVISER
Each Fund's Adviser is Alliance Capital Management L.P., 1345 Avenue of the
Americas, New York, New York 10105. Alliance is a leading international
investment adviser managing client accounts with assets as of December 31, 2002,
totaling more than $386 billion (of which approximately $140 billion represented
assets of investment companies). As of December 31, 2002, Alliance managed
retirement assets for many of the largest public and private employee benefit
plans (including 43 of the nation's FORTUNE 100 companies), for public employee
retirement funds in 44 states, for investment companies, and for foundations,
endowments, banks and insurance companies worldwide. The 54 registered
investment companies, managed by Alliance, comprising 126 separate investment
portfolios, currently have more than 7 million shareholder accounts.
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<PAGE>
Alliance provides investment advisory services and order placement facilities
for the Funds. For these advisory services, the Funds paid Alliance as a
percentage of average daily net assets:
Fee as a
percentage of
average daily Fiscal
Fund net assets Year Ending
---- -------------- -----------
Alliance U.S. Government .54% 6/30/02
Alliance Quality Bond .10* 6/30/02
Alliance Corporate Bond .55 6/30/02
Alliance High Yield .75 8/31/02
Alliance Global
Strategic Income .75 10/31/02
Alliance Americas
Government Income .73 11/30/02
Alliance Emerging
Market Debt .75 8/31/02
Alliance Multi-Market Strategy .60 10/31/02
--------------------------------------------------------------------------------
* Fee stated net of any waivers and/or reimbursements. See the "Fee Table"
at the beginning of the Prospectus for more information about fee waivers.
PORTFOLIO MANAGERS
The following table lists the person or persons who are primarily responsible
for the day-to-day management of each Fund's portfolio, the length of time that
each person has been primarily responsible for the Fund's portfolio, and each
person's principal occupation during the past five years.
Principal occupation
Employee; time period; during the past
Fund title with ACMC five years*
--------------------------------------------------------------------------------
U.S. Government Sean Kelleher; Associated with
since August 2002; Alliance since 1999;
Senior Vice President prior thereto, managed
the MBS swaps desk at
Deutsche Bank from 1998
to 1999.
Quality Bond Matthew Bloom; Associated with
since inception; Alliance
Senior Vice President
Corporate Bond Lawrence J. Shaw; since Associated with
August 2002; Alliance
Senior Vice President
Michael A. Snyder; Associated with
since August 2002; Alliance since May
Senior Vice President 2001, prior thereto
Managing Director in the high
yield asset management group
at both Donaldson, Lufkin, &
Jenrette Corporation from
1998 to 2001.
High Yield Michael A. Snyder; (see above)
since July 2001;
Senior Vice President
Global Strategic Douglas J. Peebles; Associated with
Income since inception; Alliance
Senior Vice President
Americas Paul J. DeNoon; since Associated with
Government August 2002; Alliance
Income Senior Vice President
Ivan Rudolph-Shabinsky; Associated with
since August 2002; Alliance
Vice President
Sean Kelleher; since (see above)
August 2002;
Senior Vice President
Emerging Paul J. DeNoon; since (see above)
Market Debt August 2002;
Senior Vice President
Multi-Market Douglas J. Peebles; (see above)
Strategy since inception;
(see above)
--------------------------------------------------------------------------------
* Unless indicated otherwise, persons associated with Alliance have been
employed in a portfolio management, research or investment capacity.
PERFORMANCE OF SIMILARLY MANAGED PORTFOLIOS
Alliance is the investment adviser of a portfolio (the "Historical Portfolio")
of a registered investment company, sold only to separate accounts of insurance
companies in connection with variable life insurance contracts and variable
annuities certificates and contracts (the "Contracts"), that has substantially
the same investment objective and policies and has been managed in accordance
with essentially the same investment strategies and techniques as those of
Alliance High Yield. Alliance since July 22, 1993, and prior thereto, Equitable
Capital Management Corporation, whose advisory business Alliance acquired on
that date, have served as investment adviser to the Historical Portfolio since
its inception in 1987.
The following tables set forth performance results for the Historical Portfolio
since its inception (January 2, 1987), together with those of Alliance High
Yield and the Lipper High Current Yield Mutual Funds Average as a comparative
benchmark. As of December 31, 2002, the assets in the Historical Portfolio
totalled approximately $566 million.
The performance data do not reflect account charges applicable to the Contracts
or imposed at the insurance company separate account level, which, if reflected,
would lower the performance of the Historical Portfolio. In addition, the
performance data do not reflect the Fund's higher expenses, which, if reflected,
would lower the performance of the Historical Portfolio. The performance data
have not been adjusted for corporate or individual taxes, if any, payable with
respect to the Historical Portfolio. The rates of return shown for the
Historical Portfolio are not an estimate or guarantee of future investment
performance of the Fund.
The Lipper High Current Yield Funds Average is a survey of the performance of a
large number of mutual funds the investment objective of each of which is
similar to that of the Fund. Nonetheless, the investment policies pursued by
39
<PAGE>
funds in the survey may differ from those of Alliance High Yield and the
Historical Portfolio. This survey is published by Lipper Inc. ("Lipper"), a firm
recognized for its reporting of performance of actively managed funds. According
to Lipper, performance data are presented net of investment management fees,
operating expenses and, for funds with Rule 12b-1 plans, asset-based sales
charges.
The performance results presented below are based on percent changes in net
asset values of the Historical Portfolio with dividends and capital gains
reinvested. Cumulative rates of return reflect performance over a stated period
of time. Annualized rates of return represent the rate of growth that would have
produced the corresponding cumulative return had performance been constant over
the entire period. Rates of return for Alliance High Yield Class A shares assume
the imposition of the maximum 4.25% sales charge. The inception date for the
Historical Portfolio and Lipper data is January 2, 1987 and for Alliance High
Yield is April 22, 1997.
Annualized Rates of Return
Periods Ended December 31, 2002
--------------------------------------------------------------------------------
Portfolio/Benchmark 1 Year 3 Years 5 Years 10 Years Inception
--------------------------------------------------------------------------------
Historical Portfolio -2.72% -3.58% -3.86% 5.56% 6.81%
Lipper Underlying
Fund High Current
Yield Funds
Average -0.69 -2.38 -1.12 5.10 6.68
Alliance High Yield -7.31 -6.74 -4.76 n/a -0.47
Cumulative Rates of Return
Periods Ending December 31, 2002
--------------------------------------------------------------------------------
Portfolio/Benchmark 1 Year 3 Years 5 Years 10 Years Inception
--------------------------------------------------------------------------------
Historical Portfolio -2.72 -10.36 -17.86% 71.74% 186.71%
Lipper Underlying
Fund High Current
Yield Funds
Average -0.69 -6.27 -4.26 67.72 194.39
Alliance High Yield -7.31 -18.89 -21.64 n/a -2.64
Alliance is also the investment adviser of a portfolio (the "Historical Fund")
of a registered investment company, sold only to separate accounts of insurance
companies in connection with variable life insurance contracts and variable
annuities certificates and contracts (the "Contracts"), that has substantially
the same investment objective and policies and has been managed in accordance
with substantially the same investment strategies and techniques as those of
Alliance Quality Bond. Alliance has served as investment adviser to the
Historical Fund since its inception in 1993.
The following tables set forth performance results for the Historical Fund since
its inception on October 1, 1993, together with those of the Lipper Corporate
Debt Funds BBB Rated Average and the Lehman Aggregate Bond Index as comparative
benchmarks. As of December 31, 2002, the assets in the Historical Fund totalled
approximately $534 million.
The performance data do not reflect account charges applicable to the Contracts
or imposed at the insurance company separate account level, which, if reflected,
would lower the performance of the Historical Fund. In addition, the performance
data do not reflect Alliance Quality Bond's higher expenses, which, if
reflected, would lower the performance of the Historical Fund. The performance
data have not been adjusted for corporate or individual taxes, if any, payable
with respect to the Historical Fund. The rates of return shown for the
Historical Fund are not an estimate or guarantee of future investment
performance of Alliance Quality Bond.
The Lipper Corporate Debt Funds BBB Rated Average is a survey of the performance
of a large number of mutual funds the investment objective of each of which is
similar to that of Alliance Quality Bond. Nonetheless, the investment policies
pursued by funds in the survey may differ from those of Alliance Quality Bond
and the Historical Fund. This survey is published by Lipper Inc., a firm
recognized for its reporting of performance of actively managed funds. According
to Lipper, performance data are presented net of investment management fees,
operating expenses and, for funds with Rule 12b-1 plans, asset-based sales
charges. The Lehman Aggregate Bond Index is an Index comprised of investment
grade fixed-income securities, including U.S. Treasury, mortgage-backed,
corporate and "Yankee bonds" (U.S. dollar-denominated bonds issued outside the
United States).
The performance results presented below are based on percent changes in net
asset values of the Historical Fund with dividends and capital gains reinvested.
Cumulative rates of return reflect performance over a stated period of time.
Annualized rates of return represent the rate of growth that would have produced
the corresponding cumulative return had performance been constant over the
entire period. The inception date for the Historical Fund, the Lipper data and
the Lehman Index date is October 1, 1993 and for Alliance Quality Bond is July
1, 1999.
Annualized Rates of Return
Periods Ended December 31, 2002
--------------------------------------------------------------------------------
Portfolio/Benchmark 1 Year 3 Years 5 Years Inception
--------------------------------------------------------------------------------
Historical Fund 7.91% 9.24% 6.78% 6.33%
Lehman Aggregate
Bond Index 10.25 10.10 7.55 7.10
Lipper Underlying
Fund Corporate Debt
Funds BBB Rated
Average 8.19 8.18 5.97 6.29
Alliance Quality Bond 3.09 7.20 n/a 6.34
40
<PAGE>
Cumulative Rates of Return
Periods Ended December 31, 2002
--------------------------------------------------------------------------------
Portfolio/Benchmark 1 Year 3 Years 5 Years Inception
--------------------------------------------------------------------------------
Historical Fund 7.91% 30.37% 38.81% 76.35%
Lehman Aggregate
Bond Index 10.25 33.47 43.87 87.45
Lipper Underlying
Fund Corporate Debt
Funds BBB Rated
Average 8.19 26.72 33.79 75.06
Alliance Quality Bond 3.09 23.19 n/a 24.01
--------------------------------------------------------------------------------
PURCHASE AND SALE OF SHARES
--------------------------------------------------------------------------------
HOW THE FUNDS VALUE THEIR SHARES
The Funds' net asset value or NAV is calculated at 4:00 p.m., Eastern time, each
day the Exchange is open for business. To calculate NAV, a Fund's assets are
valued and totaled, liabilities are subtracted, and the balance, called net
assets, is divided by the number of shares outstanding. The Funds value their
securities at their current market value determined on the basis of market
quotations or, if such quotations are not readily available, such other methods
as the Funds' Directors or Trustees believe accurately reflect fair market
value.
Your order for purchase, sale, or exchange of shares is priced at the next NAV
calculated after your order is received in proper form by the Fund. Your
purchase of Fund shares may be subject to an initial sales charge. Sales of Fund
shares may be subject to a contingent deferred sales charge or CDSC. See the
Distribution Arrangements section of this Prospectus for details.
HOW TO BUY SHARES
You may purchase a Fund's shares through broker-dealers, banks, or other
financial intermediaries. You also may purchase shares directly from the Funds'
principal underwriter, Alliance Fund Distributors, Inc. or AFD.
Minimum investment amounts are:
o Initial $1,000
o Subsequent $ 50
o Automatic Investment Program $ 25
If you are an existing Fund shareholder, you may purchase shares by electronic
funds transfer in amounts not exceeding $500,000 if you have completed the
appropriate section of the Subscription Application or the Shareholder Options
form obtained from Alliance Global Investor Services, Inc., or AGIS. Call
800-221-5672 to arrange a transfer from your bank account.
A Fund is required to withhold 30% of taxable dividends, capital gains
distributions, and redemptions paid to shareholders who have not provided the
Fund with their certified taxpayer identification number. To avoid this, you
must provide your correct Tax Identification Number (Social Security Number for
most investors) on your account application.
Each Fund 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. Each 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.
HOW TO EXCHANGE SHARES
You may exchange your Fund shares for shares of the same class of other Alliance
Mutual Funds (including AFD Exchange Reserves, a money market fund managed by
Alliance). Exchanges of shares are made at next-determined NAV, without sales or
service charges. You may request an exchange by mail or telephone. You must call
by 4:00 p.m., Eastern time, to receive that day's NAV. The Funds may modify,
restrict, or terminate the exchange service on 60 days' written notice.
HOW TO SELL SHARES
You may "redeem" your shares (i.e., sell your shares to a Fund) on any day the
Exchange is open, either directly or through your financial intermediary. Your
sales price will be the next-determined NAV, less any applicable CDSC, after the
Fund receives your request in proper form. Normally, proceeds will be sent to
you within seven days. If you recently purchased your shares by check or
electronic funds transfer, your redemption payment may be delayed until the Fund
is reasonably satisfied that the check or electronic funds transfer has been
collected (which may take up to 15 days).
o Selling Shares Through Your Broker
Your broker must receive your request by 4:00 p.m., Eastern time, and submit it
to the Fund by 5:00 p.m., Eastern time, for you to receive that day's NAV, less
any applicable CDSC. Your broker is responsible for furnishing all necessary
documentation to a Fund and may charge you for this service.
o Selling Shares Directly to a Fund
By Mail
-- Send a signed letter of instruction or stock power, along with
certificates, to:
Alliance Global Investor Services, Inc.
P.O. Box 786003
San Antonio, TX 78278-6003
800-221-5672
-- For certified or overnight deliveries, send to:
Alliance Global Investor Services, Inc.
8000 IH 10 W, 4th Floor
San Antonio, TX 78230
41
<PAGE>
-- For your protection, a bank, a member firm of a national stock exchange or
other eligible guarantor institution must guarantee signatures. Stock
power forms are available from your financial intermediary, AGIS, and many
commercial banks. Additional documentation is required for the sale of
shares by corporations, intermediaries, fiduciaries, and surviving joint
owners. If you have any questions about these procedures, contact AGIS.
By Telephone
-- You may redeem your shares for which no stock certificates have been
issued by telephone request. Call AGIS at 800-221-5672 with instructions
on how you wish to receive your sale proceeds.
-- A telephone redemption request must be made by 4:00 p.m., Eastern time,
for you to receive that day's NAV, less any applicable CDSC and, except
for certain omnibus accounts, may be made only once per day.
-- If you have selected electronic funds transfer in your Subscription
Application, the redemption proceeds may be sent directly to your bank.
Otherwise, the proceeds will be mailed to you.
-- Redemption requests by electronic funds transfer may not exceed $100,000
per day and redemption requests by check cannot exceed $50,000 per day.
-- Telephone redemption is not available for shares held in nominees or
"street name" accounts or retirement plan accounts or shares held by a
shareholder who has changed his or her address of record within the
previous 30 calendar days.
--------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS
AND TAXES
--------------------------------------------------------------------------------
The Funds declare dividends on their shares each Fund business day. For
Saturdays, Sundays, and holidays, dividends will be as of the previous business
day. Each Fund pays dividends on its shares after the close of business on the
twentieth day of each month or on the first business day after that day if the
day is not a business day.
The income dividends and capital gains distributions, if any, declared by a Fund
on its outstanding shares will, at the election of each shareholder, be paid in
cash or in additional shares of the same class of shares of that Fund. If paid
in additional shares, the shares will have an aggregate net asset value as of
the close of business on the declaration date of the dividend or distribution
equal to the cash amount of the dividend or distribution. You may make an
election to receive dividends and distributions in cash or in shares at the time
you purchase shares. Your election can be changed at any time prior to a record
date for a dividend. There is no sales or other charge in connection with the
reinvestment of dividends or capital gains distributions. Cash dividends may be
paid in check, or at your election, electronically via the ACH network.
If you receive an income dividend or capital gains distribution in cash you may,
within 120 days following the date of its payment, reinvest the dividend or
distribution in additional shares of that Fund without charge by returning to
Alliance, with appropriate instructions, the check representing the dividend or
distribution. Thereafter, unless you otherwise specify, you will be deemed to
have elected to reinvest all subsequent dividends and distributions in shares of
that Fund.
While it is the intention of each Fund to distribute to its shareholders
substantially all of each fiscal year's net income and net realized capital
gains, if any, the amount and timing of any such dividend or distribution must
necessarily depend upon the realization by such Fund of income and capital gains
from investments. There is no fixed dividend rate and there can be no assurance
that a Fund will pay any dividends or realize any capital gains.
For federal income tax purposes, a Fund's distributions of net income (or
short-term capital gains) will be taxable to you as ordinary income.
Distributions of long-term capital gains generally will be taxable to you as
long-term capital gains. A Fund's distributions also may be subject to certain
state and local taxes. Dividends and distributions are taxable whether you
receive them in cash or shares or reinvest a cash distribution in additional
shares.
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 a
Fund is liable for foreign income taxes withheld at the source, the Fund
intends, if possible, to operate so as to meet the requirements of the Code to
"pass through" to the Fund's shareholders credits or deductions for foreign
income taxes paid, but there can be no assurance that any Fund will be able to
do so. Furthermore, a shareholder's ability to claim a foreign tax credit or
deduction for foreign taxes paid by a Fund may be subject to certain limitations
imposed by the Code, as a result of which a shareholder may not be permitted to
claim all or a portion of a credit or deduction for the amount of such taxes.
Under certain circumstances, if a Fund realizes losses (e.g., from fluctuations
in currency exchange rates) after paying a dividend, all or a portion of the
dividend may subsequently be characterized as a return of capital. Returns of
capital are generally nontaxable, but will reduce a shareholder's basis in
shares of a Fund. If that basis is reduced to zero (which could happen if the
shareholder does not reinvest distributions and returns of capital are
significant), any further returns of capital will be taxable as a capital gain.
42
<PAGE>
If you buy shares just before a Fund deducts a distribution from its NAV, you
will pay the full price for the shares and then receive a portion of the price
back as a taxable distribution.
The sale or exchange of Fund shares is a taxable transaction for federal income
tax purposes.
Each year shortly after December 31, a Fund will send you tax information
stating the amount and type of all its distributions for the year. Consult your
tax adviser about the federal, state, and local tax consequences in your
particular circumstances.
--------------------------------------------------------------------------------
DISTRIBUTION ARRANGEMENTS
--------------------------------------------------------------------------------
Share Classes. The Funds offer three classes of shares in this Prospectus.
Class A Shares--Initial Sales Charge Alternative
You can purchase Class A shares at NAV plus an initial sales charge, as follows:
Initial Sales Charge
----------------------------------------------
As % of Commission to
Net Amount As % of Dealer/Agent as %
Amount Purchased Invested Offering Price of Offering Price
---------------- ---------- -------------- -----------------
Up to $100,000 ......... 4.44% 4.25% 4.00%
$100,000 up to
$250,000.............. 3.36 3.25 3.00
$250,000 up to
$500,000.............. 2.30 2.25 2.00
$500,000 up to
$1,000,000............ 1.78 1.75 1.50
You pay no initial sales charge on purchases of Class A shares in the amount of
$1,000,000 or more, but may pay a 1% CDSC if you redeem your shares 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 under a Fund's Combined Purchase Privilege, Cumulative
Quantity Discount, Statement of Intention, Privilege for Certain Retirement
Plans, Reinstatement Privilege, and Sales at Net Asset Value Programs. Consult
the Subscription Application and a Fund's SAI for additional information about
these options.
Class B Shares--Deferred Sales Charge Alternative
You can purchase Class B shares at NAV without an initial sales charge. A Fund
will thus receive the full amount of your purchase. Your investment, however,
will be subject to a CDSC if you redeem shares within three years (four years in
the case of Alliance Global Strategic Income and Alliance High Yield) after
purchase. The CDSC varies depending on the number of years you hold the shares.
The CDSC amounts are:
Alliance Global Strategic Income and Alliance High Yield:
Years Since Purchase CDSC
-------------------- ----
First 4.0%
Second 3.0%
Third 2.0%
Fourth 1.0%
Fifth None
All Other Funds:
Years Since Purchase CDSC
-------------------- ----
First 3.0%
Second 2.0%
Third 1.0%
Fourth None
If you exchange your shares for the Class B shares of another Alliance Mutual
Fund, the CDSC also will apply to those Class B shares. The CDSC period begins
with the date of your original purchase, not the date of exchange for the other
Class B shares.
The Fund's Class B shares purchased for cash automatically convert to Class A
shares six years after the end of the month of your purchase (except for Class B
shares of Alliance High Yield Fund and Alliance Global Strategic Income Trust,
which automatically convert to Class A shares eight years after the end of the
month of purchase). If you purchase shares by exchange for the Class B shares of
another Alliance Mutual Fund, the conversion period runs from the date of your
original purchase.
Class C Shares--Asset-Based Sales Charge Alternative
You can purchase Class C shares at NAV without any initial sales charge. A Fund
will thus receive the full amount of your purchase. Your investment, however,
will be subject to a 1% CDSC if you redeem your shares within one year. If you
exchange your shares for the Class C shares of another Alliance Mutual Fund, the
1% CDSC also will apply to those Class C shares. The one-year period for the
CDSC begins with the date of your original purchase, not the date of the
exchange for the other Class C shares.
Class C shares do not convert to any other class of shares of the Fund.
Asset-based Sales Charge or Rule 12b-1 Fees. Each Fund has adopted a plan under
Commission Rule 12b-1 that allows the Fund to pay asset-based sales charges or
distribution and service fees for the distribution and sale of its shares. The
amount of these fees for each class of the Fund's shares is:
Rule 12b-1 Fee (as a percent of
aggregate average daily net assets)
-----------------------------------
Class A .30%
Class B 1.00%
Class C 1.00%
Because these fees are paid out of the Fund's assets on an on-going basis, over
time these fees will increase the cost of your investment and may cost you more
than paying other types of sales fees. Class B and Class C shares are subject to
higher distribution fees than Class A shares (Class B
43
<PAGE>
shares are subject to these higher fees for a period of six years, after which
they convert to Class A shares except for Alliance High Yield Fund and Alliance
Global Strategic Income Trust's Class B shares which convert to Class A shares
after eight years). The higher fees mean a higher expense ratio, so Class B and
Class C shares pay correspondingly lower dividends and may have a lower net
asset value than Class A shares.
Choosing a Class of Shares. The decision as to which class of shares is more
beneficial to you depends on the amount and intended length of your investment.
If you are making a large investment, thus qualifying for a reduced sales
charge, you might consider purchasing Class A shares. If you are making a
smaller investment, you might consider purchasing Class B shares because 100% of
your purchase is invested immediately. If you are unsure of the length of your
investment, you might consider Class C shares because there is no initial sales
charge and no CDSC as long as the shares are held for one year or more. Dealers
and agents may receive differing compensation for selling Class A, Class B, or
Class C shares. There is no size limit on purchases of Class A shares. The
maximum purchase of Class B shares is $250,000. The maximum purchase of Class C
shares is $1,000,000.
You should consult your financial agent to assist in choosing a class of Fund
shares.
Application of the CDSC. The CDSC is applied to the lesser of the original cost
of shares being redeemed or NAV at the time of redemption (or, as to Fund shares
acquired through an exchange, the cost of the Alliance Fund shares originally
purchased for cash). Shares obtained from dividend or distribution reinvestment
are not subject to the CDSC. The Fund may waive the CDSC on redemptions of
shares following the death or disability of a shareholder, to meet the
requirements of certain qualified retirement plans, or under a monthly,
bi-monthly, or quarterly systematic withdrawal plan. See the Fund's SAI for
further information about CDSC waivers.
Other. A transaction, service, administrative, or other similar fee may be
charged by your broker-dealer, agent, financial intermediary, or other financial
representative with respect to the purchase, sale, or exchange of Class A, Class
B or Class C shares made through your financial representative. The financial
intermediaries also may impose requirements on the purchase, sale, or exchange
of shares that are different from, or in addition to, those imposed by a Fund,
including requirements as to the minimum initial and subsequent investment
amounts.
--------------------------------------------------------------------------------
GENERAL INFORMATION
--------------------------------------------------------------------------------
Under unusual circumstances, a Fund may suspend redemptions or postpone payment
for up to seven days or longer, as permitted by federal securities law. The
Funds reserve the right to close an account that through redemption has remained
below $200 for 90 days. Shareholders will receive 60 days' written notice to
increase the account value before the account is closed.
During drastic economic or market developments, you might have difficulty
reaching AGIS by telephone, in which event you should issue written instructions
to AGIS. AGIS is not responsible for the authenticity of telephonic requests to
purchase, sell, or exchange shares. AGIS 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. AGIS offers a variety of shareholder services. For more
information about these services or your account, call AGIS's toll-free number,
800-221-5672. Some services are described in the Subscription Application. You
may request a shareholder's manual explaining all available services by calling
800-227-4618.
Employee Benefit Plans. Certain employee benefit plans, including
employer-sponsored tax-qualified 401(k) plans and other defined contribution
retirement plans ("Employee Benefit Plans"), may establish requirements as to
the purchase, sale or exchange of shares of the Funds, including maximum and
minimum initial investment requirements, that are different from those described
in this Prospectus. Employee Benefit Plans also may not offer all classes of
shares of the Funds. In order to enable participants investing through Employee
Benefit Plans to purchase shares of the Funds, the maximum and minimum
investment amounts may be different for shares purchased through Employee
Benefit Plans from those described in this Prospectus. In addition, the Class A,
Class B and Class C CDSC may be waived for investments made through Employee
Benefit Plans.
Householding. Many shareholders of the Alliance Mutual Funds have family members
living in the same home who also own shares of the same Funds. In order to
reduce the amount of duplicative mail that is sent to homes with more than one
Fund account and to reduce expenses of the Fund, all Alliance Mutual Funds will,
until notified otherwise, send only one copy of each prospectus, shareholder
report and proxy statement to each household address. This process, known as
"householding", does not apply to account statements, confirmations, or personal
tax information. If you do not wish to participate in householding, or wish to
discontinue householding at any time, call AGIS at 1-800-221-5672. We will
resume separate mailings for your account within 30 days of your request.
44
<PAGE>
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
The financial highlights table is intended to help you understand each Fund's
financial performance for the past 5 years (or, if shorter, the period of the
Fund's operations). Certain information reflects financial results for a single
share of each Fund. The total returns in the table represent the rate that an
investor would have earned (or lost) on an investment in the Fund (assuming
reinvestment of all dividends and distributions). Except as otherwise indicated,
this information has been audited by Ernst & Young LLP, the independent auditors
for the Funds, whose reports, along with each Fund's financial statements, are
included in each Fund's Annual Report, which is available upon request.
45
<PAGE>
<TABLE>
<CAPTION>
Income from Investment Operations
-----------------------------------------------
Net
Net Net Increase
Asset Realized and (Decrease) in
Value, Unrealized Net Asset
Beginning of Net Investment Gain (Loss) on Value From
Fiscal Year or Period Period Income(a) Investments Operations
--------------------- ------------ -------------- -------------- --------------
<S> <C> <C> <C> <C>
U.S. Government
Class A
Year Ended 6/30/02 (c) .. $ 7.14 $ .37 $ .13 $ .50
Year Ended 6/30/01 ...... 6.99 .47 .17 .64
Year Ended 6/30/00 ...... 7.19 .50 (.20) .30
Year Ended 6/30/99 ...... 7.57 .52 (.37) .15
Year Ended 6/30/98 ...... 7.41 .54 .18 .72
Class B
Year Ended 6/30/02 (c) .. $ 7.14 $ .32 $ .13 $ .45
Year Ended 6/30/01 ...... 7.00 .42 .16 .58
Year Ended 6/30/00 ...... 7.20 .44 (.19) .25
Year Ended 6/30/99 ...... 7.57 .46 (.36) .10
Year Ended 6/30/98 ...... 7.41 .48 .18 .66
Class C
Year Ended 6/30/02 (c) .. $ 7.15 $ .32 $ .13 $ .45
Year Ended 6/30/01 ...... 7.00 .43 .16 .59
Year Ended 6/30/00 ...... 7.20 .45 (.20) .25
Year Ended 6/30/99 ...... 7.57 .46 (.36) .10
Year Ended 6/30/98 ...... 7.41 .48 .18 .66
Quality Bond
Class A
Year Ended 6/30/02 (c) .. $ 10.22 $ .46(d) $ .17 $ .63
Year Ended 6/30/01 ...... 9.85 .55(d) .42 .97
Year Ended 6/30/00 ...... 10.00 .60(d) (.21) .39
Class B
Year Ended 6/30/02 (c) .. $ 10.21 $ .38(d) $ .16 $ .54
Year Ended 6/30/01 ...... 9.84 .47(d) .43 .90
Year Ended 6/30/00 ...... 10.00 .50(d) (.18) .32
Class C
Year Ended 6/30/02 (c) .. $ 10.19 $ .38(d) $ .17 $ .55
Year Ended 6/30/01 ...... 9.83 .48(d) .41 .89
Year Ended 6/30/00 ...... 10.00 .51(d) (.20) .31
Corporate Bond
Class A
Year Ended 6/30/02 (c) .. $ 12.29 $ .94 $ (1.55) $ (.61)
Year Ended 6/30/01 ...... 11.91 .97 .42 1.39
Year Ended 6/30/00 ...... 12.49 1.04 (.55) .49
Year Ended 6/30/99 ...... 14.19 1.06 (1.64) (.58)
Year Ended 6/30/98 ...... 14.19 1.08 .12 1.20
Class B
Year Ended 6/30/02 (c) .. $ 12.30 $ .85 $ (1.55) $ (.70)
Year Ended 6/30/01 ...... 11.92 .88 .42 1.30
Year Ended 6/30/00 ...... 12.49 .95 (.54) .41
Year Ended 6/30/99 ...... 14.19 .97 (1.64) (.67)
Year Ended 6/30/98 ...... 14.19 .98 .13 1.11
Class C
Year Ended 6/30/02 (c) .. $ 12.30 $ .85 $ (1.55) $ (.70)
Year Ended 6/30/01 ...... 11.91 .89 .42 1.31
Year Ended 6/30/00 ...... 12.49 .94 (.54) .40
Year Ended 6/30/99 ...... 14.19 .97 (1.64) (.67)
Year Ended 6/30/98 ...... 14.19 .99 .12 1.11
High Yield
Class A
Year Ended 8/31/02 (c) .. $ 6.49 $ .60 $ (1,16) $ (.56)
Year Ended 8/31/01 ...... 8.10 .76 (1.50) (.74)
Year Ended 8/31/00 ...... 9.47 .92 (1.26) (.34)
Year Ended 8/31/99 ...... 10.76 1.02 (1.08) (.06)
Year Ended 8/31/98 ...... 11.17 1.03 (.27) .76
Class B
Year Ended 8/31/02 (c) .. $ 6.50 $ .56 $ (1.17) $ (.61)
Year Ended 8/31/01 ...... 8.10 .70 (1.48) (.78)
Year Ended 8/31/00 ...... 9.46 .86 (1.26) (.40)
Year Ended 8/31/99 ...... 10.75 .95 (1.08) (.13)
Year Ended 8/31/98 ...... 11.17 .96 (.28) .68
Class C
Year Ended 8/31/02 (c) .. $ 6.50 $ .56 $ (1.17) $ (.61)
Year Ended 8/31/01 ...... 8.10 .70 (1.48) (.78)
Year Ended 8/31/00 ...... 9.47 .86 (1.27) (.41)
Year Ended 8/31/99 ...... 10.75 .95 (1.07) (.12)
Year Ended 8/31/98 ...... 11.17 .96 (.28) .68
<CAPTION>
Less Dividends and Distributions Less Distributions
----------------------------------------------- ---------------------------------------------
Distributions Distributions
in Excess Distributions in Excess of Tax Total
Dividends From of Net From Net Net Realized Return Dividends
Net Investment Investment Realized Gain Gain on of and
Fiscal Year or Period Income Income on Investments Investments Capital Distributions
--------------------- --------------- ------------- -------------- ------------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
U.S. Government
Class A
Year Ended 6/30/02 (c) .. $ (.37) $ (.03) $ 0.00 $ 0.00 $ (.03) $ (.43)
Year Ended 6/30/01 ...... (.47) (.01) 0.00 0.00 (.01) (.49)
Year Ended 6/30/00 ...... (.49) 0.00 0.00 0.00 (.01) (.50)
Year Ended 6/30/99 ...... (.52) (.01) 0.00 0.00 0.00 (.53)
Year Ended 6/30/98 ...... (.54) 0.00 0.00 0.00 (.02) (.56)
Class B
Year Ended 6/30/02 (c) .. $ (.32) $ (.03) $ 0.00 $ 0.00 $ (.03) $ (.38)
Year Ended 6/30/01 ...... (.42) (.01) 0.00 0.00 (.01) (.44)
Year Ended 6/30/00 ...... (.44) 0.00 0.00 0.00 (.01) (.45)
Year Ended 6/30/99 ...... (.46) (.01) 0.00 0.00 0.00 (.47)
Year Ended 6/30/98 ...... (.48) 0.00 0.00 0.00 (.02) (.50)
Class C
Year Ended 6/30/02 (c) .. $ (.32) $ (.03) $ 0.00 $ 0.00 $ (.03) $ (.38)
Year Ended 6/30/01 ...... (.43) (.01) 0.00 0.00 0.00 (.44)
Year Ended 6/30/00 ...... (.44) 0.00 0.00 0.00 (.01) (.45)
Year Ended 6/30/99 ...... (.46) (.01) 0.00 0.00 0.00 (.47)
Year Ended 6/30/98 ...... (.48) 0.00 0.00 0.00 (.02) (.50)
Quality Bond
Class A
Year Ended 6/30/02 (c) .. $ (.46) $ (.10) $ (.01) $ (.03) $ 0.00 $ (.60)
Year Ended 6/30/01 ...... (.55) (.04) (.01) 0.00 0.00 (.60)
Year Ended 6/30/00 ...... (.54) 0.00 0.00 0.00 0.00 (.54)
Class B
Year Ended 6/30/02 (c) .. $ (.38) $ (.09) $ (.01) $ (.03) $ 0.00 $ (.51)
Year Ended 6/30/01 ...... (.47) (.05) (.01) 0.00 0.00 (.53)
Year Ended 6/30/00 ...... (.48) 0.00 0.00 0.00 0.00 (.48)
Class C
Year Ended 6/30/02 (c) .. $ (.38) $ (.09) $ (.01) $ (.03) $ 0.00 $ (.51)
Year Ended 6/30/01 ...... (.48) (.04) (.01) 0.00 0.00 (.53)
Year Ended 6/30/00 ...... (.48) 0.00 0.00 0.00 0.00 (.48)
Corporate Bond
Class A
Year Ended 6/30/02 (c) .. $ (.94) $ 0.00 $ 0.00 $ 0.00 $ (.04) $ (.98)
Year Ended 6/30/01 ...... (.97) (.01) 0.00 0.00 (.03) (1.01)
Year Ended 6/30/00 ...... (1.04) 0.00 0.00 0.00 (.03) (1.07)
Year Ended 6/30/99 ...... (1.07) (.01) 0.00 0.00 (.04) (1.12)
Year Ended 6/30/98 ...... (1.08) (.12) 0.00 0.00 0.00 (1.20)
Class B
Year Ended 6/30/02 (c) .. $ (.85) $ (.01) $ 0.00 $ 0.00 $ (.04) $ (.90)
Year Ended 6/30/01 ...... (.88) (.01) 0.00 0.00 (.03) (.92)
Year Ended 6/30/00 ...... (.95) 0.00 0.00 0.00 (.03) (.98)
Year Ended 6/30/99 ...... (.98) (.01) 0.00 0.00 (.04) (1.03)
Year Ended 6/30/98 ...... (.98) (.13) 0.00 0.00 0.00 (1.11)
Class C
Year Ended 6/30/02 (c) .. $ (.85) $ (.01) $ 0.00 $ 0.00 $ (.04) $ (.90)
Year Ended 6/30/01 ...... (.89) 0.00 0.00 0.00 (.03) (.92)
Year Ended 6/30/00 ...... (.95) 0.00 0.00 0.00 (.03) (.98)
Year Ended 6/30/99 ...... (.98) (.01) 0.00 0.00 (.04) (1.03)
Year Ended 6/30/98 ...... (.99) (.12) 0.00 0.00 0.00 (1.11)
High Yield
Class A
Year Ended 8/31/02 (c) .. $ (.58) $ 0.00 $ 0.00 $ 0.00 $ (.02) $ (.60)
Year Ended 8/31/01 ...... (.72) 0.00 0.00 0.00 (.15) (.87)
Year Ended 8/31/00 ...... (.98) 0.00 0.00 0.00 (.05) (1.03)
Year Ended 8/31/99 ...... (1.02) (.05) (.15) 0.00 (.01) (1.23)
Year Ended 8/31/98 ...... (1.02) (.01) (.14) 0.00 0.00 (1.17)
Class B
Year Ended 8/31/02 (c) .. $ (.54) $ 0.00 $ 0.00 $ 0.00 $ (.02) $ (.56)
Year Ended 8/31/01 ...... (.68) 0.00 0.00 0.00 (.14) (.82)
Year Ended 8/31/00 ...... (.91) 0.00 0.00 0.00 (.05) (.96)
Year Ended 8/31/99 ...... (.95) (.05) (.15) 0.00 (.01) (1.16)
Year Ended 8/31/98 ...... (.95) (.01) (.14) 0.00 0.00 (1.10)
Class C
Year Ended 8/31/02 (c) .. $ (.54) $ 0.00 $ 0.00 $ 0.00 $ (.02) $ (.56)
Year Ended 8/31/01 ...... (.68) 0.00 0.00 0.00 (.14) (.82)
Year Ended 8/31/00 ...... (.91) 0.00 0.00 0.00 (.05) (.96)
Year Ended 8/31/99 ...... (.95) (.05) (.15) 0.00 (.01) (1.16)
Year Ended 8/31/98 ...... (.95) (.01) (.14) 0.00 0.00 (1.10)
<CAPTION>
Ratios / Supplemental Data
-------------------------------------------------------
Total Net Assets, Ratio of Net
Investment End of Ratio Investment
Net Asset Return Period of Expenses Income Portfolio
Value, End Based on Net (000's to Average to Average Turnover
Fiscal Year or Period of Period Asset Value (b) omitted) Net Assets Net Assets Rate
--------------------- ---------- --------------- ----------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
U.S. Government
Class A
Year Ended 6/30/02 (c) .. $ 7.21 7.11% $865,739 1.23%(e) 5.15% 1009%
Year Ended 6/30/01 ...... 7.14 9.30 884,574 2.11(e) 6.57 712
Year Ended 6/30/00 ...... 6.99 4.41 430,895 2.14(e) 7.13 398
Year Ended 6/30/99 ...... 7.19 1.83 426,167 1.17(e) 6.86 320
Year Ended 6/30/98 ...... 7.57 10.02 352,749 1.06 7.08 153
Class B
Year Ended 6/30/02 (c) .. $ 7.21 6.36% $400,221 1.93%(e) 4.41% 1009%
Year Ended 6/30/01 ...... 7.14 8.39 276,308 2.90(e) 5.95 712
Year Ended 6/30/00 ...... 7.00 3.64 200,283 2.80(e) 6.28 398
Year Ended 6/30/99 ...... 7.20 1.22 338,310 1.87(e) 6.13 320
Year Ended 6/30/98 ...... 7.57 9.20 390,253 1.76 6.37 153
Class C
Year Ended 6/30/02 (c) .. $ 7.22 6.35% $202,030 1.93%(e) 4.42% 1009%
Year Ended 6/30/01 ...... 7.15 8.54 169,213 2.89(e) 5.94 712
Year Ended 6/30/00 ...... 7.00 3.64 112,808 2.82(e) 6.35 398
Year Ended 6/30/99 ...... 7.20 1.22 144,145 1.87(e) 6.13 320
Year Ended 6/30/98 ...... 7.57 9.21 114,392 1.76 6.38 153
Quality Bond
Class A
Year Ended 6/30/02 (c) .. $ 10.25 6.23% $ 44,852 .98%(f) 4.39% 573%
Year Ended 6/30/01 ...... 10.22 10.09 20,068 .98(f) 5.49 385
Year Ended 6/30/00 ...... 9.85 4.40 5,071 .98(f) 5.96 215
Class B
Year Ended 6/30/02 (c) .. $ 10.24 5.52% $ 50,354 1.68%(f) 3.70% 573%
Year Ended 6/30/01 ...... 10.21 9.34 13,960 1.68(f) 4.82 385
Year Ended 6/30/00 ...... 9.84 3.56 1,007 1.68(f) 5.32 215
Class C
Year Ended 6/30/02 (c) .. $ 10.23 5.63% $ 16,131 1.68%(f) 3.71% 573%
Year Ended 6/30/01 ...... 10.19 9.25 4,315 1.68(f) 4.88 385
Year Ended 6/30/00 ...... 9.83 3.47 514 1.68(f) 5.35 215
Corporate Bond
Class A
Year Ended 6/30/02 (c) .. $ 10.70 (5.51)% $520,984 1.12%(e) 7.79% 276%
Year Ended 6/30/01 ...... 12.29 12.03 530,446 1.31(e) 7.95 340
Year Ended 6/30/00 ...... 11.91 4.11 473,578 1.12(e) 8.51 302
Year Ended 6/30/99 ...... 12.49 (4.08) 476,141 1.11 8.13 281
Year Ended 6/30/98 ...... 14.19 8.66 510,397 1.05 7.52 244
Class B
Year Ended 6/30/02 (c) .. $ 10.70 (6.23)% $458,394 1.83%(e) 7.05% 276%
Year Ended 6/30/01 ...... 12.30 11.24 509,953 2.03(e) 7.18 340
Year Ended 6/30/00 ...... 11.92 3.39 477,259 1.83(e) 7.77 302
Year Ended 6/30/99 ...... 12.49 (4.77) 630,631 1.82 7.41 281
Year Ended 6/30/98 ...... 14.19 7.95 672,374 1.75 6.80 244
Class C
Year Ended 6/30/02 (c) .. $ 10.70 (6.23)% $179,418 1.82%(e) 7.07% 276%
Year Ended 6/30/01 ...... 12.30 11.33 185,022 2.03(e) 7.22 340
Year Ended 6/30/00 ...... 11.91 3.30 176,814 1.83(e) 7.75 302
Year Ended 6/30/99 ...... 12.49 (4.77) 204,271 1.81 7.37 281
Year Ended 6/30/98 ...... 14.19 7.95 254,530 1.75 6.83 244
High Yield
Class A
Year Ended 8/31/02 (c) .. $ 5.33 (9.14)% $ 72,455 1.43% 10.06% 57%
Year Ended 8/31/01 ...... 6.49 (9.39) 78,053 1.34 10.62 98
Year Ended 8/31/00 ...... 8.10 (3.79) 83,645 1.33 10.92 102
Year Ended 8/31/99 ...... 9.47 (.58) 102,400 1.31 10.21 182
Year Ended 8/31/98 ...... 10.76 6.42 43,960 1.43(f) 8.89 311
Class B
Year Ended 8/31/02 (c) .. $ 5.33 (9.94)% $256,533 2.15% 9.34% 57%
Year Ended 8/31/01 ...... 6.50 (9.94) 356,062 2.06 9.97 98
Year Ended 8/31/00 ...... 8.10 (4.40) 421,105 2.04 10.21 102
Year Ended 8/31/99 ...... 9.46 (1.26) 527,337 2.03 9.52 182
Year Ended 8/31/98 ...... 10.75 5.69 269,426 2.13(f) 8.18 311
Class C
Year Ended 8/31/02 (c) .. $ 5.33 (9.94)% $ 48,448 2.14% 9.35% 57%
Year Ended 8/31/01 ...... 6.50 (9.94) 67,360 2.04 9.97 98
Year Ended 8/31/00 ...... 8.10 (4.51) 79,826 2.03 10.23 102
Year Ended 8/31/99 ...... 9.47 (1.16) 99,927 2.02 9.54 182
Year Ended 8/31/98 ...... 10.75 5.69 48,337 2.13(f) 8.17 311
</TABLE>
--------------------------------------------------------------------------------
Please refer to the footnotes on pages 50 and 51.
46 & 47
<PAGE>
<TABLE>
<CAPTION>
Income from Investment Operations
-----------------------------------------------
Net
Net Net Increase
Asset Realized and (Decrease) in
Value, Unrealized Net Asset
Beginning of Net Investment Gain (Loss) on Value From
Fiscal Year or Period Period Income(a) Investments Operations
--------------------- ------------ -------------- -------------- --------------
<S> <C> <C> <C> <C>
Global Strategic Income
Class A
Year Ended 10/31/02 (c) .... $ 8.43 $ .63 $ (.67) $ (.04)
Year Ended 10/31/01 ........ 9.53 .78 (.90) (.12)
Year Ended 10/31/00 ........ 9.91 .83 (.22) .61
Year Ended 10/31/99 ........ 10.18 .94 (.22) .72
Year Ended 10/31/98 ........ 11.46 .78(d) (.64) .14
Class B
Year Ended 10/31/02 (c) .... $ 8.42 $ .57 $ (.67) $ (.10)
Year Ended 10/31/01 ........ 9.52 .71 (.90) (.19)
Year Ended 10/31/00 ........ 9.90 .76 (.23) .53
Year Ended 10/31/99 ........ 10.17 .87 (.22) .65
Year Ended 10/31/98 ........ 11.46 .69(d) (.63) .06
Class C
Year Ended 10/31/02 (c) .... $ 8.43 $ .57 $ (.67) $ (.10)
Year Ended 10/31/01 ........ 9.52 .72 (.90) (.18)
Year Ended 10/31/00 ........ 9.90 .77 (.24) .53
Year Ended 10/31/99 ........ 10.17 .88 (.23) .65
Year Ended 10/31/98 ........ 11.46 .68(d) (.62) .06
Americas Government Income
Class A
Year Ended 11/30/02 (c) .... $ 7.07 $ .56 $ (.11) $ .45
Year Ended 11/30/01 ........ 7.55 .77 (.50) .27
Year Ended 11/30/00 ........ 7.28 .75 .34 1.09
Year Ended 11/30/99 ........ 7.59 .87 (.25) .62
Year Ended 11/30/98 ........ 8.02 .87 (.33) .54
Class B
Year Ended 11/30/02 (c) .... $ 7.07 $ .51 $ (.11) $ .40
Year Ended 11/30/01 ........ 7.58 .69 (.50) .19
Year Ended 11/30/00 ........ 7.31 .69 .36 1.05
Year Ended 11/30/99 ........ 7.61 .81 (.25) .56
Year Ended 11/30/98 ........ 8.02 .81 (.32) .49
Class C
Year Ended 11/30/02 (c) .... $ 7.09 $ .52 $ (.12) $ .40
Year Ended 11/30/01 ........ 7.58 .71 (.50) .21
Year Ended 11/30/00 ........ 7.31 .70 .35 1.05
Year Ended 11/30/99 ........ 7.61 .81 (.25) .56
Year Ended 11/30/98 ........ 8.02 .82 (.33) .49
Emerging Market Debt
Class A
Year Ended 8/31/02 (c) ..... $ 6.37 $ .69 $ (.24) $ .45
Year Ended 8/31/01 ......... 7.06 .85 (.76) .09
Year Ended 8/31/00 ......... 5.69 .75 1.40 2.15
Year Ended 8/31/99 ......... 5.05 .71 .74 1.45
Year Ended 8/31/98 ......... 10.64 .73 (4.03) (3.30)
Class B
Year Ended 8/31/02 (c) ..... $ 6.45 $ .64 $ (.24) $ .40
Year Ended 8/31/01 ......... 7.14 .79 (.76) .03
Year Ended 8/31/00 ......... 5.74 .71 1.40 2.11
Year Ended 8/31/99 ......... 5.05 .67 .76 1.43
Year Ended 8/31/98 ......... 10.64 .67 (4.05) (3.38)
Class C
Year Ended 8/31/02 (c) ..... $ 6.46 $ .64 $ (.24) $ .40
Year Ended 8/31/01 ......... 7.15 .79 (.76) .03
Year Ended 8/31/00 ......... 5.74 .71 1.41 2.12
Year Ended 8/31/99 ......... 5.05 .67 .76 1.43
Year Ended 8/31/98 ......... 10.64 .67 (4.05) (3.38)
Multi-Market Strategy
Class A
Year Ended 10/31/02 (c) .... $ 5.99 $ .19 $ .02 $ .21
Year Ended 10/31/01 ........ 6.08 .35 .13 .48
Year Ended 10/31/00 ........ 6.29 .38 (.19) .19
Year Ended 10/31/99 ........ 6.64 .42 (.22) .20
Year Ended 10/31/98 ........ 7.11 .44 .02 .46
Class B
Year Ended 10/31/02 (c) .... $ 6.01 $ .14 $ .02 $ .16
Year Ended 10/31/01 ........ 6.10 .30 .13 .43
Year Ended 10/31/00 ........ 6.32 .33 (.19) .14
Year Ended 10/31/99 ........ 6.66 .36 (.22) .14
Year Ended 10/31/98 ........ 7.11 .36 .05 .41
Class C
Year Ended 10/31/02 (c) .... $ 6.01 $ .14 $ .02 $ .16
Year Ended 10/31/01 ........ 6.10 .30 .13 .43
Year Ended 10/31/00 ........ 6.31 .34 (.19) .15
Year Ended 10/31/99 ........ 6.65 .36 (.22) .14
Year Ended 10/31/98 ........ 7.11 .25 .16 .41
<CAPTION>
Less Dividends and Distributions Less Distributions
----------------------------------------------- ---------------------------------------------
Distributions Distributions
in Excess Distributions in Excess of Tax Total
Dividends From of Net From Net Net Realized Return Dividends
Net Investment Investment Realized Gain Gain on of and
Fiscal Year or Period Income Income on Investments Investments Capital Distributions
--------------------- -------------- ------------- -------------- ------------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Global Strategic Income
Class A
Year Ended 10/31/02 (c) .... $ (.52) $ 0.00 $ 0.00 $ 0.00 $ (.12) $ (.64)
Year Ended 10/31/01 ........ (.71) 0.00 0.00 0.00 (.27) (.98)
Year Ended 10/31/00 ........ (.83) (.16) 0.00 0.00 0.00 (.99)
Year Ended 10/31/99 ........ (.94) (.05) 0.00 0.00 0.00 (.99)
Year Ended 10/31/98 ........ (.78) (.28) (.36) 0.00 0.00 (1.42)
Class B
Year Ended 10/31/02 (c) .... $ (.47) $ 0.00 $ 0.00 $ 0.00 $ (.11) $ (.58)
Year Ended 10/31/01 ........ (.65) 0.00 0.00 0.00 (.26) (.91)
Year Ended 10/31/00 ........ (.76) (.15) 0.00 0.00 0.00 (.91)
Year Ended 10/31/99 ........ (.87) (.05) 0.00 0.00 0.00 (.92)
Year Ended 10/31/98 ........ (.69) (.30) (.36) 0.00 0.00 (1.35)
Class C
Year Ended 10/31/02 (c) .... $ (.47) $ 0.00 $ 0.00 $ 0.00 $ (.11) $ (.58)
Year Ended 10/31/01 ........ (.65) 0.00 0.00 0.00 (.26) (.91)
Year Ended 10/31/00 ........ (.76) (.15) 0.00 0.00 0.00 (.91)
Year Ended 10/31/99 ........ (.88) (.04) 0.00 0.00 0.00 (.92)
Year Ended 10/31/98 ........ (.68) (.31) (.36) 0.00 0.00 (1.35)
Americas Government Income
Class A
Year Ended 11/30/02 (c) .... $ (.60) $ 0.00 $ 0.00 $ 0.00 $ (.06) $ (.66)
Year Ended 11/30/01 ........ (.75) 0.00 0.00 0.00 0.00 (.75)
Year Ended 11/30/00 ........ (.49) 0.00 0.00 0.00 (.33) (.82)
Year Ended 11/30/99 ........ (.64) (.11) 0.00 0.00 (.18) (.93)
Year Ended 11/30/98 ........ (.87) (.07) 0.00 0.00 (.03) (.97)
Class B
Year Ended 11/30/02 (c) .... $ (.55) $ 0.00 $ 0.00 $ 0.00 $ (.06) $ (.61)
Year Ended 11/30/01 ........ (.70) 0.00 0.00 0.00 0.00 (.70)
Year Ended 11/30/00 ........ (.48) 0.00 0.00 0.00 (.30) (.78)
Year Ended 11/30/99 ........ (.59) (.10) 0.00 0.00 (.17) (.86)
Year Ended 11/30/98 ........ (.81) (.06) 0.00 0.00 (.03) (.90)
Class C
Year Ended 11/30/02 (c) .... $ (.55) $ 0.00 $ 0.00 $ 0.00 $ (.06) $ (.61)
Year Ended 11/30/01 ........ (.70) 0.00 0.00 0.00 0.00 (.70)
Year Ended 11/30/00 ........ (.47) 0.00 0.00 0.00 (.31) (.78)
Year Ended 11/30/99 ........ (.59) (.10) 0.00 0.00 (.17) (.86)
Year Ended 11/30/98 ........ (.82) (.05) 0.00 0.00 (.03) (.90)
Emerging Market Debt
Class A
Year Ended 8/31/02 (c) ..... $ (.74) $ 0.00 $ 0.00 $ 0.00 $ (.06) $ (.80)
Year Ended 8/31/01 ......... (.78) 0.00 0.00 0.00 0.00 (.78)
Year Ended 8/31/00 ......... (.75) 0.00 0.00 0.00 (.03) (.78)
Year Ended 8/31/99 ......... (.74) (.04) 0.00 0.00 (.03) (.81)
Year Ended 8/31/98 ......... (.73) (.04) (1.37) 0.00 (.15) (2.29)
Class B
Year Ended 8/31/02 (c) ..... $ (.70) $ 0.00 $ 0.00 $ 0.00 $ (.06) $ (.76)
Year Ended 8/31/01 ......... (.72) 0.00 0.00 0.00 0.00 (.72)
Year Ended 8/31/00 ......... (.68) 0.00 0.00 0.00 (.03) (.71)
Year Ended 8/31/99 ......... (.68) (.03) 0.00 0.00 (.03) (.74)
Year Ended 8/31/98 ......... (.67) (.04) (1.36) 0.00 (.14) (2.21)
Class C
Year Ended 8/31/02 (c) ..... $ (.70) $ 0.00 $ 0.00 $ 0.00 $ (.06) $ (.76)
Year Ended 8/31/01 ......... (.72) 0.00 0.00 0.00 0.00 (.72)
Year Ended 8/31/00 ......... (.68) 0.00 0.00 0.00 (.03) (.71)
Year Ended 8/31/99 ......... (.68) (.03) 0.00 0.00 (.03) (.74)
Year Ended 8/31/98 ......... (.67) (.04) (1.36) 0.00 (.14) (2.21)
Multi-Market Strategy
Class A
Year Ended 10/31/02 (c) .... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ (.31) $ (.31)
Year Ended 10/31/01 ........ (.32) 0.00 0.00 0.00 (.25) (.57)
Year Ended 10/31/00 ........ (.38) (.02) 0.00 0.00 0.00 (.40)
Year Ended 10/31/99 ........ (.42) (.02) 0.00 0.00 (.11) (.55)
Year Ended 10/31/98 ........ (.44) (.42) 0.00 0.00 (.07) (.93)
Class B
Year Ended 10/31/02 (c) .... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ (.27) $ (.27)
Year Ended 10/31/01 ........ (.29) 0.00 0.00 0.00 (.23) (.52)
Year Ended 10/31/00 ........ (.34) (.02) 0.00 0.00 0.00 (.36)
Year Ended 10/31/99 ........ (.36) (.02) 0.00 0.00 (.10) (.48)
Year Ended 10/31/98 ........ (.36) (.43) 0.00 0.00 (.07) (.86)
Class C
Year Ended 10/31/02 (c) .... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ (.27) $ (.27)
Year Ended 10/31/01 ........ (.29) 0.00 0.00 0.00 (.23) (.52)
Year Ended 10/31/00 ........ (.34) (.02) 0.00 0.00 0.00 (.36)
Year Ended 10/31/99 ........ (.36) (.02) 0.00 0.00 (.10) (.48)
Year Ended 10/31/98 ........ (.41) (.42) 0.00 0.00 (.04) (.87)
<CAPTION>
Ratios / Supplemental Data
-------------------------------------------------------
Total Net Assets, Ratio of Net
Investment End of Ratio Investment
Net Asset Return Period of Expenses Income Portfolio
Value, End Based on Net (000's to Average to Average Turnover
Fiscal Year or Period of Period Asset Value (b) omitted) Net Assets Net Assets Rate
--------------------- ---------- --------------- ----------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Global Strategic Income
Class A
Year Ended 10/31/02 (c) .... $ 7.75 (.50)% $ 38,631 1.53% 7.71% 268%
Year Ended 10/31/01 ........ 8.43 (1.50) 57,667 1.45 8.60 304
Year Ended 10/31/00 ........ 9.53 6.12 52,561 1.54 8.32 321
Year Ended 10/31/99 ........ 9.91 7.17 33,813 1.77 9.34 254
Year Ended 10/31/98 ........ 10.18 1.00 24,576 1.89(f) 7.08(d) 183
Class B
Year Ended 10/31/02 (c) .... $ 7.74 (1.23)% $ 117,529 2.24% 7.02% 268%
Year Ended 10/31/01 ........ 8.42 (2.24) 156,948 2.16 7.85 304
Year Ended 10/31/00 ........ 9.52 5.38 118,356 2.27 7.66 321
Year Ended 10/31/99 ........ 9.90 6.44 79,085 2.47 8.54 254
Year Ended 10/31/98 ........ 10.17 .27 58,058 2.58(f) 6.41(d) 183
Class C
Year Ended 10/31/02 (c) .... $ 7.75 (1.22)% $ 20,113 2.23% 7.00% 268%
Year Ended 10/31/01 ........ 8.43 (2.13) 33,035 2.15 7.90 304
Year Ended 10/31/00 ........ 9.52 5.38 32,345 2.25 7.68 321
Year Ended 10/31/99 ........ 9.90 6.44 22,598 2.46 8.52 254
Year Ended 10/31/98 ........ 10.17 .27 16,067 2.58(f) 6.43(d) 183
Americas Government Income
Class A
Year Ended 11/30/02 (c) .... $ 6.86 6.69% $ 947,300 1.57%(e) 8.19% 160%
Year Ended 11/30/01 ........ 7.07 3.32 1,009,606 1.96(e) 10.07 315
Year Ended 11/30/00 ........ 7.55 15.80 979,126 2.26(e) 10.03 234
Year Ended 11/30/99 ........ 7.28 8.56 730,468 2.09(e) 11.72 158
Year Ended 11/30/98 ........ 7.59 7.14 740,066 2.04(e) 11.17 175
Class B
Year Ended 11/30/02 (c) .... $ 6.86 5.92% $ 740,782 2.28%(e) 7.47%* 160%
Year Ended 11/30/01 ........ 7.07 2.20 888,457 2.66(e) 9.06 315
Year Ended 11/30/00 ........ 7.58 14.99 826,340 2.93(e) 9.37 234
Year Ended 11/30/99 ........ 7.31 7.79 1,011,395 2.78(e) 10.97 158
Year Ended 11/30/98 ........ 7.61 6.46 1,300,519 2.75(e) 10.44 175
Class C
Year Ended 11/30/02 (c) .... $ 6.88 5.91% $ 277,015 2.27%(e) 7.45% 160%
Year Ended 11/30/01 ........ 7.09 2.48 310,985 2.65(e) 9.34 315
Year Ended 11/30/00 ........ 7.58 14.99 267,646 2.95(e) 9.35 234
Year Ended 11/30/99 ........ 7.31 7.79 258,696 2.78(e) 10.98 158
Year Ended 11/30/98 ........ 7.61 6.46 276,073 2.74(e) 10.45 175
Emerging Market Debt
Class A
Year Ended 8/31/02 (c) ..... $ 6.02 7.38% $ 76,397 1.88%(e) 11.02% 170%
Year Ended 8/31/01 ......... 6.37 1.55 66,750 2.20(e) 12.78 150
Year Ended 8/31/00 ......... 7.06 39.76 66,075 1.76(e) 11.59 173
Year Ended 8/31/99 ......... 5.69 29.40 50,540 1.59 12.34 179
Year Ended 8/31/98 ......... 5.05 (38.56) 32,365 1.48 8.51 188
Class B
Year Ended 8/31/02 (c) ..... $ 6.09 6.50% $ 80,064 2.58%(e) 10.25% 170%
Year Ended 8/31/01 ......... 6.45 .63 83,706 2.88(e) 11.80 150
Year Ended 8/31/00 ......... 7.14 38.41 108,075 2.45(e) 10.85 173
Year Ended 8/31/99 ......... 5.74 28.85 110,003 2.31 11.59 179
Year Ended 8/31/98 ......... 5.05 (39.11) 79,660 2.22 7.78 188
Class C
Year Ended 8/31/02 (c) ..... $ 6.10 6.50% $ 45,527 2.56%(e) 10.16% 170%
Year Ended 8/31/01 ......... 6.46 .63 40,667 2.87(e) 11.81 150
Year Ended 8/31/00 ......... 7.15 38.58 48,960 2.45(e) 10.78 173
Year Ended 8/31/99 ......... 5.74 28.85 39,024 2.30 11.56 179
Year Ended 8/31/98 ......... 5.05 (39.09) 23,711 2.19 7.75 188
Multi-Market Strategy
Class A
Year Ended 10/31/02 (c) .... $ 5.89 3.74% $ 264,978 1.49% 3.22% 115%
Year Ended 10/31/01 ........ 5.99 8.27 289,265 1.48 5.87 79
Year Ended 10/31/00 ........ 6.08 3.17 305,610 1.52(g) 6.25 82
Year Ended 10/31/99 ........ 6.29 2.95 396,867 1.44(g) 6.23 124
Year Ended 10/31/98 ........ 6.64 6.90 95,568 1.74(g) 6.46 240
Class B
Year Ended 10/31/02 (c) .... $ 5.90 2.84% $ 13,150 2.24% 2.44% 115%
Year Ended 10/31/01 ........ 6.01 7.49 11,311 2.24 5.05 79
Year Ended 10/31/00 ........ 6.10 2.30 13,052 2.28(g) 5.44 82
Year Ended 10/31/99 ........ 6.32 2.13 18,129 2.15(g) 5.46 124
Year Ended 10/31/98 ........ 6.66 6.24 7,217 2.41(g) 5.64 240
Class C
Year Ended 10/31/02 (c) .... $ 5.90 2.83% $ 17,592 2.20% 2.48% 115%
Year Ended 10/31/01 ........ 6.01 7.48 15,208 2.19 5.10 79
Year Ended 10/31/00 ........ 6.10 2.46 16,578 2.22(g) 5.52 82
Year Ended 10/31/99 ........ 6.31 2.13 19,076 2.15(g) 5.50 124
Year Ended 10/31/98 ........ 6.65 6.10 16,518 2.61(g) 5.28 240
</TABLE>
--------------------------------------------------------------------------------
Please refer to the footnotes on pages 50 and 51.
48 & 49
<PAGE>
(a) Based on average shares outstanding.
(b) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at 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 return does not reflect the
deduction of taxes that a shareholder would pay on fund distributions or
the redemption of fund shares. Total investment returns calculated for
periods of less than one year are not annualized.
(c) As required, the Funds have adopted the provisions of the AICPA Audit and
Accounting Guide, Audits of Investment Companies, and began amortizing
premium on debt securities for financial statement reporting purposes
only. For each Fund, the effective data and impact of this change to each
class of shares is as follows:
<TABLE>
<CAPTION>
Increase
(Decrease) in
Net Realized
Decrease in and Unrealized
Net Investment Gain (Loss) on Decrease in Ratio of Net Investment
Effective Income per Investments Income to Average Net Assets:
Date Share per Share From: To:
--------- -------------- -------------- ------ -----
<S> <C> <C> <C> <C> <C>
Alliance U.S. Government
Portfolio 7/1/01
Class A (0.03) 0.03 5.56% 5.15%
Class B (0.03) 0.03 4.82% 4.41%
Class C (0.03) 0.03 4.83% 4.42%
Alliance Quality Bond
Portfolio 7/1/01
Class A (0.05) 0.05 4.93% 4.39%
Class B (0.05) 0.05 4.24% 3.70%
Class C (0.05) 0.05 4.25% 3.71%
Alliance Corporate Bond
Portfolio 7/1/01
Class A (0.01) (0.01) 7.82% 7.79%
Class B (0.01) (0.01) 7.08% 7.05%
Class C (0.01) (0.01) 7.10% 7.07%
Alliance High Yield Fund 9/1/01
Class A (0.01) (0.01) 10.19% 10.06%
Class B (0.01) (0.01) 9.47% 9.34%
Class C (0.01) (0.01) 9.47% 9.35%
Alliance Global Strategic
Income Trust 11/1/01
Class A (0.03) (0.03) 8.03% 7.71%
Class B (0.03) (0.03) 7.34% 7.02%
Class C (0.03) (0.03) 7.32% 7.00%
Alliance Americas Government
Income Trust 12/1/01
Class A (0.04) (0.04) 8.83% 8.19%
Class B (0.04) (0.04) 8.10% 7.47%
Class C (0.04) (0.04) 8.09% 7.45%
Alliance Emerging Market
Debt Fund 9/1/01
Class A (0.01) (0.01) 11.10% 11.02%
Class B (0.01) (0.01) 10.34% 10.25%
Class C (0.01) (0.01) 10.24% 10.16%
Alliance Multi-Market
Strategy Trust 11/1/01
Class A (0.14) (0.14) 5.56% 3.22%
Class B (0.14) (0.14) 4.79% 2.44%
Class C (0.14) (0.14) 4.83% 2.48%
</TABLE>
(d) Net of expenses waived/reimbursed by the Adviser.
50
<PAGE>
(e) Includes interest expense. If the following Funds had not borne interest
expense, the ratio of expenses to average net assets would have been as
follows:
<TABLE>
<CAPTION>
2002 2001 2000 1999 1998
---- ---- ---- ---- ----
Alliance U.S. Government
<S> <C> <C> <C> <C> <C>
Class A 1.09% 1.13% 1.12% 1.08% --
Class B 1.80% 1.83% 1.83% 1.79% --
Class C 1.79% 1.83% 1.83% 1.78% --
Alliance Corporate Bond
Class A 1.09% 1.09% 1.11% -- --
Class B 1.80% 1.81% 1.83% -- --
Class C 1.79% 1.81% 1.82% -- --
Alliance Americas Government Income
Class A 1.28% 1.23% 1.33% 1.38% 1.36%
Class B 2.00% 1.94% 2.03% 2.08% 2.07%
Class C 1.99% 1.93% 2.03% 2.08% 2.06%
Alliance Emerging Market Debt
Class A 1.50% 1.47% 1.51% -- --
Class B 2.20% 2.17% 2.21% -- --
Class C 2.19% 2.16% 2.20% -- --
</TABLE>
(f) Net of expenses assumed and/or waived/reimbursed. If Alliance High Yield
had borne all expenses for the fiscal year ended August 31, 1998, the
expense ratios would have been with respect to Class A shares, 1.46%; with
respect to Class B shares, 2.16%; and with respect to Class C shares,
2.16%. If Alliance Global Strategic Income had borne all expenses for the
fiscal year ended 1998, the expense ratio would have been with respect to
Class A shares, 2.08%; with respect to Class B shares, 2.76%; and with
respect to Class C shares, 2.77%. If Alliance Quality Bond had borne all
expenses for the fiscal years ended June 30, 2002, 2001 and 2000, the
expense ratios would have been with respect to Class A shares, 1.48%,
2.85% and 13.10%, with respect to Class B shares, 2.19%, 3.36% and 11.29%,
and with respect to Class C shares, 2.19%, 3.42% and 11.75%, respectively.
(g) Amounts do not reflect the impact of expense offset arrangement with the
transfer agent. Taking into account such expense offset arrangements, the
ratio of expenses to average net assets, for Alliance Multi-Market
Strategy would have been with respect to Class A shares 1.73% for 1998,
1.42% for 1999 and 1.50% for 2000, with respect to Class B shares 2.40%
for 1998, 2.14% for 1999 and 2.27% for 2000, and with respect to Class C
shares 2.60% for 1998, 2.14% for 1999 and 2.21% for 2000.
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APPENDIX A
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BOND RATINGS
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MOODY'S INVESTORS SERVICE, INC.
Aaa--Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa--Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than the Aaa
securities.
A--Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment some time in the future.
Baa--Bonds which are rated Baa are considered as medium-grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba--Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B--Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa--Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
or interest.
Ca--Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.
C--Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Absence of Rating--When no rating has been assigned or where a rating has been
suspended or withdrawn, it may be for reasons unrelated to the quality of the
issue.
Should no rating be assigned, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities or companies that are
unrated as a matter of policy.
3. There is a lack of essential data pertaining to the issue or issuer.
4. The issue was privately placed, in which case the rating is not published
in Moody's publications.
Suspension or withdrawal may occur if new and material circumstances arise, the
effects of which preclude satisfactory analysis; if there is no longer available
reasonable up-to-date data to permit a judgment to be formed; if a bond is
called for redemption; or for other reasons.
Note--Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
STANDARD & POOR'S RATINGS SERVICES
AAA--Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA--Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the highest rated issues only in small degree.
A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB--Debt rated BBB normally exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead
to a weakened capacity to pay interest and repay principal for debt in this
category than in higher rated categories.
BB, B, CCC, CC, C--Debt rated BB, B, CCC, CC or C is regarded as having
significant speculative characteristics. BB indicates the lowest degree of
speculation and C the highest. While such debt will likely have some quality
and
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protective characteristics, these are outweighed by large uncertainties or
major exposures to adverse conditions.
BB--Debt rated BB is less vulnerable to nonpayment than other speculative debt.
However, it faces major ongoing uncertainties or exposure to adverse business,
financial or economic conditions which could lead to an inadequate capacity to
pay interest and repay principal.
B--Debt rated B is more vulnerable to nonpayment than debt rated BB, but there
is capacity to pay interest and repay principal. Adverse business, financial
or economic conditions will likely impair the capacity or willingness to pay
principal or repay interest.
CCC--Debt rated CCC is currently vulnerable to nonpayment, and is dependent upon
favorable business, financial and economic conditions to pay interest and
repay principal. In the event of adverse business, financial or economic
conditions, there is not likely to be capacity to pay interest or repay
principal.
CC--Debt rated CC is currently highly vulnerable to nonpayment.
C--The C rating may be used to cover a situation where a bankruptcy petition has
been filed or similar action has been taken, but payments are being continued.
D--The D rating, unlike other ratings, is not prospective; rather, it is used
only where a default has actually occurred.
Plus (+) or Minus (-)--The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
NR--Not rated.
FITCH RATINGS
AAA--Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA--Bonds considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated AAA. Because bonds rated in the AAA and AA
categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated F1+.
A--Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions
and circumstances than bonds with higher ratings.
BBB--Bonds considered to be investment grade and of satisfactory credit quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however,
are more likely to have adverse impact on these bonds, and therefore impair
timely payment. The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.
BB--Bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes.
However, business and financial alternatives can be identified which could
assist the obligor in satisfying its debt service requirements.
B--Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued
timely payment of principal and interest reflects the obligor's limited margin
of safety and the need for reasonable business and economic activity
throughout the life of the issue.
CCC--Bonds have certain identifiable characteristics which, if not remedied, may
lead to default. The ability to meet obligations requires an advantageous
business and economic environment.
CC--Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C--Bonds are in imminent default in payment of interest or principal.
DDD, DD, D--Bonds are in default on interest and/or principal payments. Such
bonds are extremely speculative and should be valued on the basis of their
ultimate recovery value in liquidation or reorganization of the obligor. DDD
represents the highest potential for recovery on these bonds, and D represents
the lowest potential for recovery.
Plus (+) Minus (-)--Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within the rating category. Plus
and minus signs, however, are not used in the AAA, DDD, DD or D categories.
NR--Indicates that Fitch does not rate the specific issue.
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APPENDIX B
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GENERAL INFORMATION
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ABOUT CANADA, MEXICO
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AND ARGENTINA
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GENERAL INFORMATION ABOUT CANADA
Canada consists of a federation of ten Provinces and three federal territories
(which generally fall under federal authority) with a constitutional division of
powers between the federal and Provincial governments. The Parliament of Canada
has jurisdiction over all areas not assigned exclusively to the Provincial
legislatures, and has jurisdiction over such matters as the federal public debt
and property, the regulation of trade and commerce, currency and coinage, banks
and banking, national defense, the postal services, navigation and shipping and
unemployment insurance.
The Canadian economy is based on the free enterprise system, with business
organizations ranging from small owner-operated businesses to large
multinational corporations. Manufacturing and resource industries are large
contributors to the country's economic output, but as in many other highly
developed countries, there has been a gradual shift from a largely
goods-producing economy to a predominantly service-based one. Agriculture and
other primary production play a small but key role in the economy. Canada is
also an exporter of energy to the United States in the form of natural gas (of
which Canada has substantial reserves) and hydroelectric power, and has
significant mineral resources.
Canadian Dollars are fully exchangeable into U.S. Dollars without foreign
exchange controls or other legal restriction. Since the major developed-country
currencies were permitted to float freely against one another, the range of
fluctuation in the Canadian Dollar-U.S. Dollar exchange rate generally has been
narrower than the range of fluctuation between the U.S. Dollar and most other
major currencies. Since 1991, Canada generally has experienced a weakening of
its currency. The Canadian Dollar reached an all-time low of 1.6128 Canadian
Dollars per U.S. Dollar on January 18, 2002. On December 31, 2002, the Canadian
Dollar-U.S. Dollar exchange rate was 1.5723. The range of fluctuation that has
occurred in the past is not necessarily indicative of the range of fluctuation
that will occur in the future. Future rates of exchange cannot be accurately
predicted.
GENERAL INFORMATION ABOUT THE UNITED MEXICAN STATES
The United Mexican States ("Mexico") is a nation formed by 31 states and a
Federal District (Mexico City). The Political Constitution of Mexico, which took
effect on May 1, 1917, established Mexico as a Federal Republic and provides for
the separation of executive, legislative and judicial branches. The President
and the members of the General Congress are elected by popular vote.
Prior to 1994, when Mexico experienced an economic crisis that led to the
devaluation of the Peso in December 1994, the Mexican economy experienced
improvement in a number of areas, including growth in gross domestic product and
a substantial reduction in the rate of inflation and in the public sector
financial deficit. Much of the past improvement in the Mexican economy was due
to a series of economic policy initiatives intended to modernize and reform the
Mexican economy, control inflation, reduce the financial deficit, increase
public revenues through the reform of the tax system, establish a competitive
and stable currency exchange rate, liberalize trade restrictions and increase
investment and productivity, while reducing the government's role in the
economy. In this regard, the Mexican government launched a program for
privatizing certain state owned enterprises, developing and modernizing the
securities markets, increasing investment in the private sector and permitting
increased levels of foreign investment.
In 1994, Mexico faced internal and external conditions that resulted in an
economic crisis that continues to affect the Mexican economy adversely. Growing
trade and current account deficits, which could no longer be financed by inflows
of foreign capital, were factors contributing to the crisis. A weakening economy
and unsettling political and social developments caused investors to lose
confidence in the Mexican economy. This resulted in a large decline in foreign
reserves followed by a sharp and rapid devaluation of the Mexican Peso. The
ensuing economic and financial crisis resulted in higher inflation and domestic
interest rates, a contraction in real gross domestic product and a liquidity
crisis.
In response to the adverse economic conditions that developed at the end of
1994, the Mexican government instituted a new economic program; and the
government and the business and labor sectors of the economy entered into a new
accord in an effort to stabilize the economy and the financial markets. To help
relieve Mexico's liquidity crisis and restore financial stability to Mexico's
economy, the Mexican government also obtained financial assistance from the
United States, other countries and certain international agencies conditioned
upon the implementation and continuation of the economic reform program.
In October 1995, and again in October 1996, the Mexican government announced new
accords designed to encourage economic growth and reduce inflation. While it
cannot be accurately predicted whether these accords will continue to achieve
their objectives, the Mexican economy has stabilized since the economic crisis
of 1994, and the high inflation and high interest rates that continued to be a
factor after 1994 have subsided as well. After declining for five consecutive
quarters beginning with the first quarter of 1995, Mexico's gross domestic
product began to grow in
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the second quarter of 1996. That growth was sustained through 2000, resulting in
increases of 5.1%, 6.8%, 4.9%, 3.8% and 6.9% in 1996, 1997, 1998, 1999 and 2000,
respectively. After contracting by 0.3% in 2001, Mexico's gross domestic product
grew by 0.6% during the first nine months of 2002. In addition, inflation
dropped from a 52% annual rate in 1995 to a 5.7% annual rate in 2002. Mexico's
economy is influenced by international economic conditions, particularly those
in the United States, and by world prices for oil and other commodities.
Reflecting Mexico's strengthened economy, S&P upgraded Mexico's sovereign debt
rating on February 7, 2002 to investment grade. Fitch and Moody's took similar
actions on January 22, 2002 and March 4, 2000, respectively. The continuing
recovery of the economy will require economic and fiscal discipline as well as
stable political and social conditions. In addition, there is no assurance that
Mexico's economic policy initiatives will be successful or that the current
President and succeeding administrations will continue these initiatives.
Under economic policy initiatives implemented on and after December 1987, the
Mexican government introduced a series of schedules allowing for the gradual
devaluation of the Mexican Peso against the U.S. Dollar. These gradual
devaluations continued until December 1994. On December 22, 1994, the Mexican
government announced that it would permit the Peso to float freely against other
currencies, resulting in a precipitous decline against the U.S. Dollar. By
December 31, 1996, the Peso-Dollar exchange rate had decreased approximately 40%
from that on December 22, 1994. After dropping approximately 55% from 1994
through 1996, from 1997 through 1999 the Peso-Dollar exchange rate decreased
approximately 20%. There has been relatively little change in the Peso-Dollar
exchange rate since 1999.
Mexico has in the past imposed strict foreign exchange controls. There is no
assurance that future regulatory actions in Mexico would not affect the Fund's
ability to obtain U.S. Dollars in exchange for Mexican Pesos.
GENERAL INFORMATION ABOUT THE REPUBLIC OF ARGENTINA
The Republic of Argentina ("Argentina") consists of 23 provinces and the federal
capital of Buenos Aires. Its federal constitution provides for an executive
branch headed by a President, a legislative branch and a judicial branch. Each
province has its own constitution, and elects its own governor, legislators and
judges, without the intervention of the federal government.
Shortly after taking office in 1989, the country's then President adopted
market-oriented and reformist policies, including an aggressive privatization
program, a reduction in the size of the public sector and an opening of the
economy to international competition.
In the decade prior to the announcement of a new economic plan in March 1991,
the Argentine economy was characterized by low and erratic growth, declining
investment rates and rapidly worsening inflation. Despite its strengths, which
include a well-balanced natural resource base and a high literacy rate, the
Argentine economy failed to respond to a series of economic plans in the 1980's.
The 1991 economic plan represented a pronounced departure from its predecessors
in calling for raising revenues, cutting expenditures and reducing the public
deficit. The extensive privatization program commenced in 1989 was accelerated,
the domestic economy deregulated and opened up to foreign trade and the
framework for foreign investment reformed. As a result of the economic
stabilization reforms, inflation was brought under control and gross domestic
product increased each year between 1991 and 1998, with the exception of 1995.
Since the fourth quarter of 1998, however, Argentina's economy has been
contracting, with GDP growth rates of -3.4%, -0.8% and -4.4% recorded for 1999,
2000 and 2001, respectively. During the second quarter of 2002, the economy
contracted by 13.6%, year-on-year, but grew by 0.9% over the first quarter.
Argentina's protracted recession has contributed to a serious fiscal crisis that
has resulted in a suspension of payment on Argentina's foreign debt, as
announced by the government in late December 2001, as well as a suspension of
its loan repayments to the International Monetary Fund and other multilateral
lending bodies, as announced by the government in late September 2002. Amidst
the country's worsening economic and fiscal condition, and associated civil
unrest that ensued, Argentina's President Fernando de la Rua was forced to
resign on December 20, 2001. Thereafter, Argentina had several interim
Presidents. On January 1, 2002 Eduardo Duhalde, who pledged sweeping economic,
fiscal and social reforms, became the fourth interim President. President
Duhalde has been unable, however, to achieve the necessary political consensus
to meet the difficult challenges that Argentina faces. As a result, while there
is some evidence that the economy has stabilized, Argentina's fragile condition
has persisted into 2003.
The Argentine Peso has been the Argentine currency since January 1, 1992. Until
February 11, 2002, the rate of exchange from the Argentine Peso to the U.S.
Dollar remained approximately one to one. The fixed exchange rate was
instrumental in stabilizing the economy, but in recent years has been viewed as
an impediment to economic growth. Since February 11, 2002, the Argentine Peso
has been allowed to float freely against the U.S. Dollar. There is no assurance
that ending the fixed exchange rate will achieve its desired result. On December
31, 2002, the Argentine Peso-U.S. Dollar exchange rate was 3.3647. The
devaluation of the Argentine Peso has resulted in the reappearance of high
inflation, as evidenced by the 40% rise in the consumer price index during the
first ten months of 2002. The Argentine foreign exchange market was highly
controlled until December 1989, when a free exchange rate was established for
all foreign currency transactions. Argentina has eliminated restrictions on
foreign direct investment and capital repatriation. In 1993, legislation was
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<PAGE>
adopted abolishing previous requirements of a three-year waiting period for
capital repatriation. Under the legislation, foreign investors are permitted to
remit profits at any time.
For more information about the Funds, the following documents are available upon
request:
Annual/Semi-Annual Reports to Shareholders
The Funds' annual and semi-annual reports to shareholders contain additional
information on the Funds' investments. In the annual report, you will find a
discussion of the market conditions and investment strategies that significantly
affected a Fund's performance during its last fiscal year.
Statement of Additional Information (SAI)
Each Fund has an SAI, which contains more detailed information about the Fund,
including its operations and investment policies. The Funds' SAIs are
incorporated by reference into (and are legally part of) this Prospectus.
You may request a free copy of the current annual/semi-annual report or the SAI,
or make inquiries concerning the Funds, by contacting your broker or other
financial intermediary, or by contacting Alliance:
By mail: c/o Alliance Global Investor Services, Inc.
P.O. Box 786003
San Antonio, TX 78278-6003
By phone: For Information: (800) 221-5672
For Literature: (800) 227-4618
Or you may view or obtain these documents from the Commission:
o Call the Commision at 1-202-942-8090 for information on the operation of
the Public Reference Room.
o Reports and other information about the Fund are available on the EDGAR
Database on the Commission's Internet site at http://www.sec.gov.
o Copies of the information may be obtained, after paying a duplicating fee,
by electronic request at publicinfo@sec.gov, or by writing the
Commission's Public Reference Section, Wash. DC 20549-0102.
You also may find more information about Alliance and the Funds on the Internet
at: www.Alliancecapital.com.
Fund SEC File No.
----- ------------
U.S. Government 811-02383
Quality Bond 811-02383
Corporate Bond 811-02383
High Yield 811-9160
Global Strategic Income 811-07391
Americas Government Income 811-06554
Emerging Market Debt 811-08188
Multi-Market Strategy 811-06251
--------------------------------------------------------------------------------
Privacy Notice (This information is not part of the Prospectus.)
Alliance, the Alliance Family of Funds and Alliance Fund Distributors,
Inc. (collectively, "Alliance" or "we") understand the importance of maintaining
the confidentiality of our customers' nonpublic personal information. In order
to provide financial products and services to our customers efficiently and
accurately, we may collect nonpublic personal information about our customers
from the following sources: (1) information we receive from account
documentation, including applications or other forms (which may include
information such as a customer's name, address, social security number, assets
and income) and (2) information about our customers' transactions with us, our
affiliates and others (including information such as a customer's account
balances and account activity).
It is our policy not to disclose nonpublic personal information about our
customers (or former customers) except to our affiliates, or to others as
permitted or required by law. From time to time, Alliance may disclose nonpublic
personal information that we collect about our customers (or former customers),
as described above, to non-affiliated third party providers, including those
that perform processing or servicing functions and those that provide marketing
services for us or on our behalf pursuant to a joint marketing agreement that
requires the third party provider to adhere to Alliance's privacy policy. We
have policies and procedures to safeguard nonpublic personal information about
our customers (or former customers) which include: (1) restricting access to
such nonpublic personal information and (2) maintaining physical, electronic and
procedural safeguards that comply with federal standards to safeguard such
nonpublic personal information.
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56
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