-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AqtO5QO/3RIPqJ/0a6NFe1NHjjb1BWj+9tYd+DS35c9yFagRxaeBzE7gl0pW45zo CXlFfHtXpasNTSnJLc2BqQ== 0000936772-99-000315.txt : 19991202 0000936772-99-000315.hdr.sgml : 19991202 ACCESSION NUMBER: 0000936772-99-000315 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991201 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALLIANCE QUASAR FUND INC CENTRAL INDEX KEY: 0000081443 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 132625045 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-01716 FILM NUMBER: 99767408 BUSINESS ADDRESS: STREET 1: 500 PLAZA DRIVE STREET 2: C/O ALLIANCE CAPITAL MANAGEMENT LP CITY: SECAUCUS STATE: NJ ZIP: 07094 BUSINESS PHONE: 2013194105 MAIL ADDRESS: STREET 1: 500 PLAZA DRIVE STREET 2: 1345 AVENUE OF THE AMERICAS CITY: SECAUCUS STATE: NJ ZIP: 07094 FORMER COMPANY: FORMER CONFORMED NAME: ALLIANCE CAPITAL QUASAR FUND INC DATE OF NAME CHANGE: 19930907 FORMER COMPANY: FORMER CONFORMED NAME: QUASAR ASSOCIATES INC DATE OF NAME CHANGE: 19890427 N-30D 1 ALLIANCE - -------------------------------------------------------------------------------- QUASAR - -------------------------------------------------------------------------------- FUND - -------------------------------------------------------------------------------- Annual Report September 30, 1999 Alliance Capital [LOGO](R) LETTER TO SHAREHOLDERS Alliance Quasar Fund ================================================================================ November 10, 1999 Dear Shareholder: This report contains investment results and market commentary for Alliance Quasar Fund (the "Fund") for the annual reporting period ended September 30, 1999. INVESTMENT RESULTS During the six- and 12-month periods under review, the Fund's Class A shares returned 2.58% and 11.89%, respectively, while the Fund's benchmark index, as represented by the Russell 2000 Index, returned 8.25% and 19.07%, respectively. The Fund's underperformance versus its benchmark was largely due to the Fund's relative underweight position in technology and its relatively large exposure to certain other industries such as health care, retail and transportation. We believe that these areas offer much better investments on a risk/reward basis with much less volatility. Other than technology stocks, most other areas of the U.S. market have received little investor interest. As a result, we believe strongly that these areas are where the greatest opportunities lie. - -------------------------------------------------------------------------------- INVESTMENT RESULTS* Periods ended September 30, 1999 Total Return 6 months 12 months -------- --------- Alliance Quasar Fund Class A 2.58% 11.89% Class B 2.16% 11.01% Class C 2.16% 11.05% Russell 2000 Index 8.25% 19.07% * The Fund's investment results represent total returns and are based on the net asset value of each class of shares as of September 30, 1999. Total returns for Advisor Class shares will differ due to different expenses associated with that class. All fees and expenses related to the operation of the Fund have been deducted, but no adjustment has been made for sales charges that may apply when shares are purchased or redeemed. Past performance is no guarantee of future results. The Russell 2000 Index is a capitalization-weighted index that includes 2,000 of the smallest stocks representing approximately 11% of the U.S. equity market. An investor cannot invest directly in an index. Additional investment appear on page 3. - -------------------------------------------------------------------------------- MARKET REVIEW Overall, small-cap stocks continue to underperform large-cap stocks. In fact, if this trend continues, 1999 will mark the sixth consecutive year of underperformance for small-cap stocks as measured by the Russell 2000 Index relative to the Standard & Poor's 500 Stock Index ("S&P 500"). We strongly believe this six-year cycle is a liquidity-driven event. Since 1979, when the Russell 2000 Index was introduced to measure small-cap stocks, there have been four distinct cycles in which either small- or large-cap stocks performed well. For 1999, not only have we just completed six consecutive years, but also the disparity in valuations between small- and large-cap stocks has never been more extreme within this 20-year period. In fact, since the beginning of 1994, when the current period of underperformance for small-cap stocks began, the S&P 500 has outperformed the Russell 2000 Index by practically a two-to-one margin, or approximately 26% versus 13% on an annualized basis for the six-year period. In our view, this is simply not sustainable. We do strongly believe that there are major opportunities to invest in the U.S. in literally thousands of small-cap stocks that offer much better risk/reward tradeoffs than many investors realize. The difficulty, of course, is in determining exactly when investor psychology will change. When it does, however, we believe that the Fund is positioned to do well when the market broadens out and small-cap stocks start to participate. For example, the Fund holds several positions in the retail and apparel sectors. The companies in these sectors typically have strong franchises, dominant market share positions, earnings-per-share growth between 20% and 30% and price-to-earnings ratios between 10 and 20 times earnings. The Fund's holdings in these sectors include Zale Corp., a leading jewelry retailer, Men's Wearhouse Inc., a leading men's retailer of formal wear, and BJ's Wholesale Club Inc., a leading membership-based warehouse club chain. Within the leisure category, we are looking for professionally managed consolidators of fragmented industries who are able to leverage their strengths in building dominant, national franchises. These include Bally Total Fitness Holding Corp., which, with over four million members, is the largest health club provider in the U.S., 1 Alliance Quasar Fund ================================================================================ and Premier Parks Inc., the largest amusement park operator after the Walt Disney Company. In the consumer manufacturing category, the Fund maintains a holding in Monaco Coach Corp., a leading manufacturer of recreational vehicles in the U.S. Health care continues to be an area of focus for the Fund. The congressional balancing of the federal budget and various managed-care concerns have put a lot of pressure on the health care service sector, which in turn has depressed stock prices in this sector. Nevertheless, we have used this as an opportunity to add to the Fund's holdings. These include Health Management Associates Inc., a leading operator of acute care hospitals in rural markets, and Lifepoint Hospitals Inc., a recently spun-out company from Columbia/HCA Healthcare Corp. In addition, the Fund holds a position in Medical Manager Corp., an intranet health care company focusing on managing drug prescriptions via a closed-loop architecture. In the turnaround category, we believe that the sports retailing industry has seen its worst days and that Venator Group Inc., the parent company of both Foot Locker and Champs, should benefit. As the industry becomes more rational, the aggressive expansion in square footage seen over the last five years has essentially come to a halt. In addition, Nike Inc. is seeing its business turning. These factors, as well as the Olympics being only a year away, should help Foot Locker and Champs see a turn in their business and we consequently believe that Venator should do very well. Within the real estate sector, we believe that the stocks of real estate investment trusts ("REITs") have come under a lot of pressure as investors focus more on momentum growth and less on yield. There are several well-run companies yielding over 10% with internal growth of 10% to 20%. Therefore, we have about 6% of the Fund's portfolio invested in REITs and currently hold positions in Chelsea GCA Realty Inc., Taubman Centers Inc., and MeriStar Hospitality Corp. In addition, we also like the rental car industry and have positions in Budget Group Inc. and Dollar Thrifty Automotive Group Inc. This industry has gone through a major change in ownership from the auto manufacturers to financial entrepreneurs. We are now seeing real pricing power, better yield management, greater inventory efficiencies, and as a result, a higher level of profitability. We believe these companies have strong fundamentals that are not yet recognized in the marketplace. We remain adverse to establishing an overweight position in the technology sector and, more specifically, in internet stocks. We still believe that a broad majority of these stocks have yet to demonstrate the ability to produce significant earnings and, in some cases, we believe that they probably never will. In our opinion, these stocks remain overpriced, and we therefore maintain a low weighting in these sectors. Thank you for your continued interest in the Alliance Quasar Fund. We look forward to reporting to you on future market activity and investment results. Sincerely, /s/ Alden M. Stewart Alden M. Stewart Chairman and President /s/ Randall E. Haase Randall E. Haase Senior Vice President 2 INVESTMENT OBJECTIVE AND POLICIES Alliance Quasar Fund ================================================================================ The Quasar Fund seeks growth of capital by pursuing aggressive investment policies. The Fund invests in a diversified portfolio of equity securities that offer the possibility of above-average earnings growth. The Fund emphasizes investment in small-capitalization companies. The Fund may also pursue investment opportunities outside of the United States. INVESTMENT RESULTS ================================================================================ NAV and SEC Average Annual Total Returns as of September 30, 1999 -------------- CLASS A SHARES -------------- Without With Sales Charge Sales Charge =============================== One Year 11.89% 7.13% Five Years 15.30% 14.30% Ten Years 8.32% 7.85% -------------- CLASS B SHARES -------------- Without With Sales Charge Sales Charge =============================== One Year 11.01% 7.01% Five Years 14.43% 14.43% Since Inception* (a) 11.89% 11.89% -------------- CLASS C SHARES -------------- Without With Sales Charge Sales Charge =============================== One Year 11.05% 10.05% Five Years 14.44% 14.44% Since Inception* 13.03% 13.03% The Fund's investment results represent average annual total returns. The NAV and SEC returns reflect reinvestment of dividends and/or capital gains distributions in additional shares without (NAV) and with (SEC) the effect of the 4.25% maximum front-end sales charge for Class A or applicable contingent deferred sales charge for Class B (4% year 1, 3% year 2, 2% year 3, 1% year 4); and for Class C shares (1% year 1). Returns for Class A shares do not reflect the imposition of the 1 year 1% contingent deferred sales charge for accounts over $1,000,000. Total return for Advisor Class shares will differ due to different expenses associated with that class. Past performance does not guarantee future results. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. - -------------------------------------------------------------------------------- Shares of the Fund are not deposits or obligations of, guaranteed or endorsed by, any bank; further, such shares are not federally insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other agency. Shares of the Fund involve investment risks, including the possible loss of principal. - -------------------------------------------------------------------------------- * Inception: 9/17/90, Class B; 5/3/93, Class C. (a) Assumes conversion of Class B shares into Class A shares after eight years. 3 Alliance Quasar Fund ================================================================================ ALLIANCE QUASAR FUND GROWTH OF A $10,000 INVESTMENT 9/30/89 TO 9/30/99 [The following table was represented as a mountain chart in the printed material.] Alliance Russell Quasar Fund 2000 Index: Class A: ----------- ----------- 9/30/89 9/30/90 9/30/91 9/30/92 9/30/93 9/30/94 9/30/95 9/30/96 9/30/97 9/30/98 9/30/99 $28,226 $21,298 This chart illustrates the total value of an assumed $10,000 investment in Alliance Quasar Fund Class A shares (from 9/30/89 to 9/30/99) as compared to the performance of an appropriate broad-based index. The chart reflects the deduction of the maximum 4.25% sales charge from the initial $10,000 investment in the Fund and assumes the reinvestment of dividends and capital gains. Performance for Class B, Class C and Advisor Class shares will vary from the results shown above due to differences in expenses charged to those classes. Past performance is not indicative of future results, and is not representative of future gain or loss in capital value or dividend income. The unmanaged Russell 2000 Index is a capitalization-weighted index that includes 2,000 of the smallest stocks representing approximately 11% of the U.S. equity market. When comparing Alliance Quasar Fund to the index shown above, you should note that no charges or expenses are reflected in the performance of the index. 4 TEN LARGEST HOLDINGS September 30, 1999 Alliance Quasar Fund ================================================================================ - -------------------------------------------------------------------------------- COMPANY VALUE PERCENT OF NET ASSETS - -------------------------------------------------------------------------------- Legg Mason, Inc. $ 79,372,006 5.5% - -------------------------------------------------------------------------------- Chelsea GCA Realty, Inc. 54,679,625 3.8 - -------------------------------------------------------------------------------- Premier Parks, Inc. 53,667,400 3.7 - -------------------------------------------------------------------------------- Mohawk Industries, Inc. 40,526,956 2.8 - -------------------------------------------------------------------------------- Venator Group, Inc. 40,181,244 2.8 - -------------------------------------------------------------------------------- Monaco Coach Corp. 38,042,355 2.7 - -------------------------------------------------------------------------------- Carey International, Inc. 36,180,000 2.5 - -------------------------------------------------------------------------------- Sunterra Corp. 34,293,812 2.4 - -------------------------------------------------------------------------------- Zale Corp. 32,274,450 2.2 - -------------------------------------------------------------------------------- BJ's Wholesale Club, Inc. 31,170,700 2.2 - -------------------------------------------------------------------------------- $440,388,548 30.6% - -------------------------------------------------------------------------------- MAJOR PORTFOLIO CHANGES Six Months Ended September 30, 1999 ================================================================================ - -------------------------------------------------------------------------------- SHARES* - -------------------------------------------------------------------------------- PURCHASES BOUGHT HOLDINGS 9/30/99 - -------------------------------------------------------------------------------- Applied Power, Inc. Cl.A 583,700 583,700 - -------------------------------------------------------------------------------- Health Management Associates, Inc. Cl.A 3,955,700 3,955,700 - -------------------------------------------------------------------------------- IDEC Pharmaceuticals Corp. 124,300 124,300 - -------------------------------------------------------------------------------- K-Swiss, Inc. 651,500 651,500 - -------------------------------------------------------------------------------- Lifepoint Hospitals, Inc. 2,628,800 2,628,800 - -------------------------------------------------------------------------------- Murphy Oil Corp. 212,300 212,300 - -------------------------------------------------------------------------------- Nielsen Media Research, Inc. 789,700 789,700 - -------------------------------------------------------------------------------- Shopko Stores, Inc. 738,000 738,000 - -------------------------------------------------------------------------------- Summit Technology, Inc. 845,600 845,600 - -------------------------------------------------------------------------------- Visual Networks, Inc. 338,900 338,900 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SALES SOLD HOLDINGS 9/30/99 - -------------------------------------------------------------------------------- Alaska Air Group, Inc. 523,000 731,700 - -------------------------------------------------------------------------------- Bally Total Fitness Holding Corp. 386,700 409,000 - -------------------------------------------------------------------------------- Bethlehem Steel Corp. 4,034,700 -0- - -------------------------------------------------------------------------------- CheckFree Corp. 883,300 -0- - -------------------------------------------------------------------------------- Geltex Pharmaceuticals, Inc. 1,326,600 -0- - -------------------------------------------------------------------------------- Medical Manager Corp. 136,100 257,700 - -------------------------------------------------------------------------------- Pinnicle Holdings, Inc. 1,109,100 -0- - -------------------------------------------------------------------------------- St. Jude Medical, Inc. 366,400 -0- - -------------------------------------------------------------------------------- Tiffany & Co. 843,800 -0- - -------------------------------------------------------------------------------- Tommy Hilfiger Corp. 225,600 -0- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- * Adjusted for Stock Splits. 5 PORTFOLIO OF INVESTMENTS September 30, 1999 Alliance Quasar Fund ================================================================================ Company Shares Value - -------------------------------------------------------------------------------- COMMON STOCKS-97.1% CONSUMER SERVICES-35.0% AIRLINES-3.2% Alaska Air Group, Inc. (a) .................. 731,700 $ 29,771,044 America West Holdings Corp. ................. Cl.B (a) ................................. 778,900 13,484,706 Atlas Air, Inc. (a) ......................... 100,200 2,191,875 -------------- 45,447,625 -------------- APPAREL-3.7% Men's Wearhouse, Inc. (a) ................... 981,050 21,092,575 Zale Corp. (a) .............................. 842,400 32,274,450 -------------- 53,367,025 -------------- BROADCASTING & CABLE-1.3% SFX Entertainment, Inc. ..................... Cl.A (a) ................................. 618,150 18,853,575 -------------- ENTERTAINMENT & LEISURE-10.7% Ackerley Group, Inc. ........................ 539,600 6,643,825 Bally Total Fitness Holding Corp. (a) ................................ 409,000 12,500,063 Cinar Corp. Cl.B (a) ........................ 645,200 19,517,300 Imax Corp. (a) .............................. 472,300 9,446,000 Premier Parks, Inc. (a) ..................... 1,850,600 53,667,400 Sunterra Corp. (a) .......................... 2,887,900 34,293,812 Trans World Entertainment Corp. (a) ................................ 1,421,000 18,028,937 -------------- 154,097,337 -------------- RETAIL - GENERAL MERCHANDISE-12.0% BJ's Wholesale Club, Inc. (a) ............... 1,054,400 31,170,700 Circuit City Stores, Inc. - CarMax Group (a) ......................... 2,887,400 9,744,975 Furniture Brands International, Inc. (a) ................................. 623,700 12,279,094 Industrie Natuzzi SpA (ADR) (Italy) ............................ 1,089,400 21,379,475 Movado Group, Inc. (a) ...................... 783,500 18,020,500 Sharper Image Corp. (a) ..................... 269,700 2,966,700 Shopko Stores, Inc. (a) ..................... 738,000 21,402,000 Stage Stores, Inc. (a) ...................... 2,444,700 15,126,581 Venator Group, Inc. (a) ..................... 4,692,700 40,181,244 -------------- 172,271,269 -------------- MISCELLANEOUS-4.1% Century Business Services, Inc. (a) ................................. 1,255,422 14,594,281 Insight Enterprises, Inc. (a) ............... 447,400 14,540,500 Nielsen Media Research, Inc. ................ 789,700 29,366,969 -------------- 58,501,750 -------------- 502,538,581 -------------- TECHNOLOGY-15.6% COMMUNICATION EQUIPMENT-1.1% TeleSpectrum Worldwide, Inc. (a) ................................. 2,715,000 16,120,312 -------------- COMPUTER HARDWARE-2.2% Apex, Inc. (a) .............................. 1,663,400 31,084,787 -------------- COMPUTER PERIPHERALS-1.2% InterWorld Corp. (a) ........................ 493,700 17,834,912 -------------- COMPUTER SERVICES-2.1% DBT Online, Inc. (a) ........................ 1,131,400 28,214,287 IMRglobal Corp. (a) ......................... 210,800 1,739,100 -------------- 29,953,387 -------------- COMPUTER SOFTWARE-3.5% BackWeb Technologies, Ltd. (a) ................................. 348,000 5,916,000 Business Objects S.A. (a) ................... 65,600 3,870,400 Digex, Inc. (a) ............................. 299,500 7,094,406 Sapient Corp. (a) ........................... 196,400 18,510,700 Visual Networks, Inc. (a) ................... 338,900 14,382,069 -------------- 49,773,575 -------------- ELECTRONIC COMPONENTS-0.4% DII Group, Inc. (a) ......................... 140,900 4,957,919 -------------- NETWORKING SOFTWARE-0.5% MMC Networks, Inc. (a) ...................... 241,000 7,516,188 -------------- SEMI-CONDUCTOR CAPITAL EQUIPMENT-0.9% MKS Instruments, Inc. (a) ................... 585,000 13,016,250 -------------- 6 Alliance Quasar Fund ================================================================================ Company Shares Value - -------------------------------------------------------------------------------- SEMI-CONDUCTOR COMPONENTS-2.4% Fairchild Semiconductor Corp. Cl.A (a) ........................... 490,000 $ 11,515,000 MIPS Technologies, Inc. (a) ................. 291,500 9,273,344 SDL, Inc. (a) ............................... 102,200 7,799,137 Triquint Semiconductor, Inc. (a) ................................. 114,600 6,553,688 -------------- 35,141,169 -------------- TELECOMMUNICATIONS-0.3% GST Telecommunications, Inc. (a) ................................. 606,800 4,266,563 -------------- MISCELLANEOUS-1.0% Excalibur Technologies Corp. (a) ................................ 725,600 5,986,200 Harman International Industries, Inc. ......................... 189,000 7,949,813 -------------- 13,936,013 -------------- 223,601,075 -------------- FINANCE-12.2% BROKERAGE & MONEY MANAGEMENT-5.5% Legg Mason, Inc. ............................ 2,071,700 79,372,006 -------------- REAL ESTATE-4.7% Chelsea GCA Realty, Inc. .................... 1,729,000 54,679,625 MeriStar Hospitality Corp. .................. 859,800 13,111,950 -------------- 67,791,575 -------------- MISCELLANEOUS-2.0% Taubman Centers, Inc. ....................... 2,439,300 28,051,950 -------------- 175,215,531 -------------- HEALTH CARE-8.9% BIOTECHNOLOGY-1.4% Human Genome Sciences, Inc. (a) ................................. 127,400 9,395,750 IDEC Pharmaceuticals Corp. (a) ................................ 124,300 11,688,084 -------------- 21,083,834 -------------- DRUGS-0.2% Cephalon, Inc. (a) .......................... 148,200 2,662,969 -------------- MEDICAL PRODUCTS-1.5% Novoste Corp. (a) ........................... 331,600 5,916,988 Summit Technology, Inc. (a) ................. 845,600 15,485,050 -------------- 21,402,038 -------------- MEDICAL SERVICES-5.6% Health Management Associates, Inc. Cl.A (a) ................ 3,955,700 29,173,287 Lifepoint Hospitals, Inc. (a) ............... 2,628,800 22,837,700 Medical Manager Corp. (a) ................... 257,700 12,820,575 Orthodontic Centers of America, Inc. (a) ........................ 913,100 15,979,250 -------------- 80,810,812 -------------- MISCELLANEOUS-0.2% Women First Healthcare, Inc. (a) ................................. 380,600 2,687,988 -------------- 128,647,641 -------------- CONSUMER MANUFACTURING-7.7% AUTO & RELATED-6.3% Budget Group, Inc. (a) ...................... 1,341,800 9,476,462 Dollar Thrifty Automotive Group, Inc. (a) .......................... 737,400 15,254,962 Group 1 Automotive, Inc. (a) ................ 1,517,100 27,781,894 Monaco Coach Corp. (a) ...................... 1,560,712 38,042,355 -------------- 90,555,673 -------------- TEXTILE PRODUCTS-1.4% K-Swiss, Inc. ............................... 651,500 20,562,969 -------------- 111,118,642 -------------- CAPITAL GOODS-5.8% MACHINERY-1.7% United Rentals, Inc. (a) .................... 1,124,800 24,464,400 -------------- MISCELLANEOUS-4.1% Applied Power, Inc. Cl.A .................... 583,700 17,729,888 Mohawk Industries, Inc. (a) ................. 2,032,700 40,526,956 -------------- 58,256,844 -------------- 82,721,244 -------------- ENERGY-3.4% OIL - DOMESTIC-0.8% Murphy Oil Corp. ............................ 212,300 11,477,469 -------------- OIL SERVICE-0.6% Oceaneering International, Inc. (a) ................................. 128,900 2,167,131 Santa Fe International Corp. ................ 306,300 6,604,594 -------------- 8,771,725 -------------- PIPELINES-2.0% Southern Union Co. .......................... 1,522,391 28,925,429 -------------- 49,174,623 -------------- 7 PORTFOLIO OF INVESTMENTS (continued) Alliance Quasar Fund ================================================================================ Company Shares Value - -------------------------------------------------------------------------------- BUSINESS SERVICES-2.5% PROFESSIONAL SERVICES-2.5% Carey International, Inc. (a) ............... 1,447,200 $ 36,180,000 -------------- TRANSPORTATION-2.4% SHIPPING-1.2% Teekay Shipping Corp. ....................... 1,133,700 17,714,062 -------------- TRUCKING-1.2% Consolidated Freightways Corp. (a) ................................ 1,706,600 16,852,675 -------------- 34,566,737 -------------- UTILITIES-1.8% TELEPHONE UTILITY-1.8% Millicom International Cellular, SA (Luxembourg) (a) ......................... 931,000 26,475,312 -------------- CONSUMER STAPLES-1.1% RETAIL - FOOD & DRUG-0.4% Whole Foods Market, Inc. (a) ................ 166,700 5,454,216 -------------- MISCELLANEOUS-0.7% FirstService Corp. (a) ...................... 874,000 10,542,625 -------------- 15,996,841 -------------- MULTI-INDUSTRY COMPANIES-0.7% Korn/Ferry International (a) ................ 264,100 6,090,806 Playtex Products, Inc. (a) .................. 315,100 4,647,725 -------------- 10,738,531 -------------- TOTAL INVESTMENTS-97.1% (cost $1,412,771,791) .................... 1,396,974,758 Other assets less liabilities-2.9% ......................... 41,024,023 -------------- NET ASSETS-100% ............................. $1,437,998,781 ============== - -------------------------------------------------------------------------------- (a) Non-income producing security. Glossary: ADR - American Depositary Receipt See notes to financial statements. 8 STATEMENT OF ASSETS AND LIABILITIES September 30, 1999 Alliance Quasar Fund ================================================================================ ASSETS Investments in securities, at value (cost $1,412,771,791) .................... $ 1,396,974,758 Receivable for investment securities sold .................................... 47,911,044 Receivable for capital stock sold ............................................ 26,195,519 Dividends receivable ......................................................... 2,142,660 --------------- Total assets ................................................................. 1,473,223,981 --------------- LIABILITIES Due to Custodian ............................................................. 5,718,191 Payable for capital stock redeemed ........................................... 12,164,047 Payable for investment securities purchased .................................. 12,010,918 Advisory fee payable ......................................................... 3,536,106 Distribution fee payable ..................................................... 767,342 Accrued expenses ............................................................. 1,028,596 --------------- Total liabilities ............................................................ 35,225,200 --------------- NET ASSETS ...................................................................... $ 1,437,998,781 =============== COMPOSITION OF NET ASSETS Shares of capital stock, at par .............................................. $ 128,012 Additional paid-in capital ................................................... 1,571,231,570 Accumulated net investment loss .............................................. (330) Accumulated net realized loss on investment transactions ..................... (117,562,163) Net unrealized depreciation of investments and other assets .................. (15,798,308) --------------- $ 1,437,998,781 =============== CALCULATION OF MAXIMUM OFFERING PRICE Class A Shares Net asset value and redemption price per share ($517,288,932 / 21,698,964) shares of capital stock issued and outstanding) $23.84 Sales charge -- 4.25% of public offering price ............................... 1.06 ------ Maximum offering price ....................................................... $24.90 ====== Class B Shares Net asset value and offering price per share ($587,918,453 / 27,572,202 shares of capital stock issued and outstanding) $21.32 ====== Class C Shares Net asset value and offering price per share ($168,120,092 / 7,877,406 shares of capital stock issued and outstanding) . $21.34 ====== Advisor Class Shares Net asset value, redemption and offering price per share ($164,671,304 / 6,857,580 shares of capital stock issued and outstanding) . $24.01 ======
- -------------------------------------------------------------------------------- See notes to financial statements. 9 STATEMENT OF OPERATIONS Year Ended September 30, 1999 Alliance Quasar Fund ================================================================================ INVESTMENT INCOME Dividends (net of foreign taxes withheld of $136,750) ............... $ 9,982,272 Interest ............................................................ 2,635,125 $ 12,617,397 ------------ EXPENSES Advisory fee ........................................................ 16,461,584 Distribution fee - Class A .......................................... 1,494,767 Distribution fee - Class B .......................................... 6,637,963 Distribution fee - Class C .......................................... 1,962,805 Transfer agency ..................................................... 5,289,767 Printing ............................................................ 885,456 Custodian ........................................................... 263,524 Audit and legal ..................................................... 131,119 Administrative ...................................................... 122,000 Taxes ............................................................... 114,188 Registration ........................................................ 86,142 Directors' fees ..................................................... 23,000 Miscellaneous ....................................................... 73,649 ------------ Total expenses ...................................................... 33,545,964 Less: expense offset arrangement (see Note B) ....................... (230,038) ------------ Net expenses ........................................................ 33,315,926 ------------- Net investment loss ................................................. (20,698,529) ------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized loss on investment transactions ........................ (106,576,025) Net change in unrealized depreciation of investments and other assets 329,590,064 ------------- Net gain on investments ............................................. 223,014,039 ------------- NET INCREASE IN NET ASSETS FROM OPERATIONS ............................. $ 202,315,510 =============
- -------------------------------------------------------------------------------- See notes to financial statements. 10 STATEMENT OF CHANGES IN NET ASSETS Alliance Quasar Fund ================================================================================
Year Ended Year Ended September 30, September 30, 1999 1998 --------------- --------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment loss ..................................... $ (20,698,529) $ (14,960,472) Net realized gain (loss) on investment transactions ..... (106,576,025) 79,606,746 Net change in unrealized appreciation/depreciation of investments and other assets ...................... 329,590,064 (516,425,096) --------------- --------------- Net increase (decrease) in net assets from operations ... 202,315,510 (451,778,822) DISTRIBUTIONS TO SHAREHOLDERS FROM: Net realized gain on investments Class A .............................................. (22,822,927) (17,164,110) Class B .............................................. (32,223,330) (24,996,773) Class C .............................................. (9,594,700) (7,133,144) Advisor Class ........................................ (9,530,738) (2,825,501) CAPITAL STOCK TRANSACTIONS Net increase (decrease) ................................. (167,508,661) 868,194,847 --------------- --------------- Total increase (decrease) ............................... (39,364,846) 364,296,497 NET ASSETS Beginning of year ....................................... 1,477,363,627 1,113,067,130 --------------- --------------- End of year ............................................. $ 1,437,998,781 $ 1,477,363,627 =============== ===============
- -------------------------------------------------------------------------------- See notes to financial statements. 11 NOTES TO FINANCIAL STATEMENTS September 30, 1999 Alliance Quasar Fund ================================================================================ NOTE A: Significant Accounting Policies Alliance Quasar Fund, Inc. (the "Fund") is registered under the Investment Company Act of 1940 as a diversified, open-end management investment company. The Fund offers Class A, Class B, Class C and Advisor Class shares. Class A shares are sold with a front-end sales charge of up to 4.25% for purchases not exceeding $1,000,000. With respect to purchases of $1,000,000 or more, Class A shares redeemed within one year of purchase may be subject to a contingent deferred sales charge of 1%. Class B shares are currently sold with a contingent deferred sales charge which declines from 4% to zero depending on the period of time the shares are held. Class B shares will automatically convert to Class A shares eight years after the end of the calendar month of purchase. Class C shares are subject to a contingent deferred sales charge of 1% on redemptions made within the first year after purchase. Advisor Class shares are sold without an initial or contingent deferred sales charge and are not subject to ongoing distribution expenses. Advisor Class shares are offered to investors participating in fee-based programs and to certain retirement plan accounts. All four classes of shares have identical voting, dividend, liquidation and other rights, except that each class bears different distribution expenses and has exclusive voting rights with respect to its distribution plan. The financial statements have been prepared in conformity with generally accepted accounting principles which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of significant accounting policies followed by the Fund. 1. Security Valuation Portfolio securities traded on a national securities exchange are generally valued at the last reported sales price or if no sale occurred, at the mean of the closing bid and asked prices on that day. Securities traded in the over-the-counter market, including securities traded on a national securities exchange whose primary market is believed to be over-the-counter, are valued at the mean of the current bid and asked prices. Readily marketable debt securities are valued at the last sales price. Securities which mature in 60 days or less are valued at amortized cost, unless this method does not represent fair value. Securities for which current market quotations are not readily available are valued at their fair value as determined in good faith by, or in accordance with procedures adopted by, the Board of Directors. Fixed income securities may be valued on the basis of prices obtained from a pricing service when such prices are believed to reflect the fair market value of such securities. 2. Taxes It is the Fund's policy to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its investment company taxable income and net realized gains, if any, to shareholders. Therefore, no provisions for federal income or excise taxes are required. 3. Investment Income and Investment Transactions Dividend income is recorded on the ex-dividend date. Interest income is accrued daily. Investment transactions are accounted for on the date the securities are purchased or sold. The Fund accretes discounts as adjustments to income. Investment gains and losses are determined on the identified cost basis. 4. Income and Expenses All income earned and expenses incurred by the Fund are borne on a pro-rata basis by each outstanding class of shares, based on the proportionate interest in the Fund represented by the net assets of such class, except that the Fund's Class B and Class C shares bear higher distribution and transfer agent fees than Class A shares and the Advisory Class shares have no distribution fees. 5. Dividends and Distributions Dividends and distributions to shareholders are recorded on the ex-dividend date. Income dividends and capital gains distributions are determined in accordance with federal tax regulations and may differ from those determined in accordance with generally accepted accounting principles. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on their federal tax basis treatment; temporary differences, do not require such reclassification. During the current fiscal year, permanent differences, primarily due to net investment loss, 12 Alliance Quasar Fund ================================================================================ resulted in a net increase in accumulated net investment loss and accumulated net realized loss on investment transactions and a corresponding decrease in additional paid-in capital. This reclassification had no effect on net assets. - -------------------------------------------------------------------------------- NOTE B: Advisory Fee and Other Transactions With Affiliates Under the terms of an investment advisory agreement, the Fund pays Alliance Capital Management L.P. (the "Adviser") an advisory fee at a quarterly rate equal to .25% (approximately 1% on an annual basis) of the net assets of the Fund valued on the last business day of the previous quarter. Pursuant to the advisory agreement, the Fund paid $122,000 to the Adviser representing the cost of certain legal and accounting services provided to the Fund by the Adviser for the year ended September 30, 1999. The Fund compensates Alliance Fund Services, Inc., a wholly-owned subsidiary of the Adviser, under a Transfer Agency Agreement for providing personnel and facilities to perform transfer agency services for the Fund. Such compensation amounted to $3,055,959 for the year ended September 30, 1999. In addition, for the year ended September 30, 1999, the Fund's expenses were reduced by $230,038 under an expense offset arrangement with Alliance Fund Services. Alliance Fund Distributors, Inc. (the "Distributor"), a wholly-owned subsidiary of the Adviser, serves as the Distributor of the Fund's shares. The Distributor has advised the Fund that it has received front-end sales charges of $149,975 from the sales of Class A shares and $49,939, $2,587,993 and $144,996 in contingent deferred sales charges imposed upon redemptions by shareholders of Class A, Class B and Class C shares, respectively, for the year ended September 30, 1999. Brokerage commissions paid on investment transactions for the year ended September 30, 1999 amounted to $4,958,576, of which $157,696 was paid to Donaldson, Lufkin & Jenrette Securities Corp., directly and none was paid to the Pershing Division of Donaldson, Lufkin & Jenrette Securities Corp., affiliates of the Adviser. - -------------------------------------------------------------------------------- NOTE C: Distribution Services Agreement The Fund has adopted a Distribution Services Agreement (the "Agreement") pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the Agreement, the Fund pays distribution and servicing fees to the Distributor at an annual rate of up to .30% of the Fund's average daily net assets attributable to Class A shares and 1% of the average daily net assets attributable to both Class B and Class C shares. There are no distribution and servicing fees on the Advisor Class shares. The fees are accrued daily and paid monthly. The Agreement provides that the Distributor will use such payments in their entirety for distribution assistance and promotional activities. The Distributor has advised the Fund that it has incurred expenses in excess of the distribution costs reimbursed by the Fund in the amount of $28,354,921 and $1,856,687 for Class B and Class C shares, respectively; such costs may be recovered from the Fund in future periods so long as the Agreement is in effect. In accordance with the Agreement, there is no provision for recovery of unreimbursed distribution costs incurred by the Distributor beyond the current fiscal year for Class A shares. The Agreement also provides that the Adviser may use its own resources to finance the distribution of the Fund's shares. - -------------------------------------------------------------------------------- NOTE D: Investment Transactions Purchases and sales of investment securities (excluding short-term investments and U.S. government securities) aggregated $1,444,263,303 and $1,680,192,736, respectively, for the year ended September 30, 1999. There were no purchases or sales of U.S. government and government agency obligations for the year ended September 30, 1999. At September 30, 1999, the cost of investments for federal income tax purposes was $1,435,021,378. Accordingly, gross unrealized appreciation of investments was $165,233,174 and gross unrealized 13 NOTES TO FINANCIAL STATEMENTS (continued) Alliance Quasar Fund ================================================================================ depreciation of investments was $203,279,794, resulting in net unrealized depreciation of $38,046,620. At September 30, 1999, the Fund had a capital loss carryforward of $57,376,477 which expires in the year 2007. Capital losses incurred after October 31 ("post-October" losses) within the taxable year are deemed to arise on the first business day of the Fund's next taxable year. The Fund incurred and will elect to defer net capital losses of $37,936,099 during the fiscal year 1999. To the extent that the carryover losses are used to offset future capital gain, it is probable that gain will not be distributed to shareholders. - -------------------------------------------------------------------------------- NOTE E: Capital Stock There are 12,000,000,000 shares of $.002 par value capital stock authorized, divided into four classes, designated Class A, Class B, Class C and Advisor Class shares. Each class consists of 3,000,000,000 authorized shares. Transactions in capital stock were as follows:
--------------------------- ---------------------------------- SHARES AMOUNT --------------------------- ---------------------------------- Year Ended Year Ended Year Ended Year Ended September 30, September 30, September 30, September 30, 1999 1998 1999 1998 ------------ ----------- --------------- --------------- Class A Shares sold .................... 98,790,378 43,817,026 $ 2,400,686,846 $ 1,244,246,754 Shares issued in reinvestment of distributions ............... 905,363 571,457 20,225,926 15,988,123 Shares converted from Class B .. 207,656 165,256 5,081,272 4,647,898 Shares redeemed ................ (100,436,418) (35,561,736) (2,454,577,511) (1,011,637,305) ------------ ----------- --------------- --------------- Net increase (decrease) ........ (533,021) 8,992,003 $ (28,583,467) $ 253,245,470 ============ =========== =============== =============== Class B Shares sold .................... 10,825,928 18,286,351 $ 234,278,096 $ 482,762,932 Shares issued in reinvestment of distributions ............... 1,502,631 923,019 30,216,175 23,536,952 Shares converted to Class A .... (230,997) (181,899) (5,081,272) (4,647,898) Shares redeemed ................ (15,515,244) (6,112,452) (336,327,068) (154,925,238) ------------ ----------- --------------- --------------- Net increase (decrease) ........ (3,417,682) 12,915,019 $ (76,914,069) $ 346,726,748 ============ =========== =============== =============== Class C Shares sold .................... 15,173,234 11,956,015 $ 331,891,743 $ 308,470,104 Shares issued in reinvestment of distributions ............... 445,616 260,405 8,970,452 6,642,958 Shares redeemed ................ (16,765,900) (8,416,893) (368,024,477) (213,847,794) ------------ ----------- --------------- --------------- Net increase (decrease) ........ (1,147,050) 3,799,527 $ (27,162,282) $ 101,265,268 ============ =========== =============== =============== Advisor Class Shares sold .................... 15,459,710 9,129,797 $ 362,260,667 $ 259,655,427 Shares issued in reinvestment of distributions ............... 413,259 95,462 9,281,785 2,676,749 Shares redeemed ................ (16,841,169) (3,452,506) (406,391,295) (95,374,815) ------------ ----------- --------------- --------------- Net increase (decrease) ........ (968,200) 5,772,753 $ (34,848,843) $ 166,957,361 ============ =========== =============== ===============
14 Alliance Quasar Fund ================================================================================ NOTE F: Bank Borrowing A number of open-end mutual funds managed by the Adviser, including the Fund, participate in a $750 million revolving credit facility (the "Facility") intended to provide short-term financing if necessary, subject to certain restrictions, in connection with abnormal redemption activity. Commitment fees related to the Facility are paid by the participating funds and are included in miscellaneous expenses in the statement of operations. The Fund did not utilize the Facility during the year ended September 30, 1999. 15 FINANCIAL HIGHLIGHTS Alliance Quasar Fund ================================================================================ Selected Data For A Share Of Capital Stock Outstanding Throughout Each Year
----------------------------------------------------------------------- CLASS A ----------------------------------------------------------------------- Year Ended September 30, ----------------------------------------------------------------------- 1999 1998 1997 1996 1995 ---------- ---------- ---------- ---------- ---------- Net asset value, beginning of year ................... $22.27 $30.37 $27.92 $24.16 $22.65 ------ ------ ------ ------ ------ Income From Investment Operations Net investment loss .................................. (.22)(a) (.17)(a) (.24)(a) (.25) (.22)(a) Net realized and unrealized gain (loss) on investment transactions ...................................... 2.80 (6.70) 6.80 8.82 5.59 ------ ------ ------ ------ ------ Net increase (decrease) in net asset value from operations ........................................ 2.58 (6.87) 6.56 8.57 5.37 ------ ------ ------ ------ ------ Less: Distributions Distributions from net realized gains ................ (1.01) (1.23) (4.11) (4.81) (3.86) ------ ------ ------ ------ ------ Net asset value, end of year ......................... $23.84 $22.27 $30.37 $27.92 $24.16 ====== ====== ====== ====== ====== Total Return Total investment return based on net asset value (b) . 11.89% (23.45)% 27.81% 42.42% 30.73% Ratios/Supplemental Data Net assets, end of year (000's omitted) .............. $517,289 $495,070 $402,081 $229,798 $146,663 Ratio of expenses to average net assets .............. 1.69%(c) 1.61%(c) 1.67% 1.79% 1.83% Ratio of net investment loss to average net assets ... (.90)% (.59)% (.91)% (1.11)% (1.06)% Portfolio turnover rate .............................. 91% 109% 135% 168% 160%
- -------------------------------------------------------------------------------- See footnote summary on page 19. 16 Alliance Quasar Fund ================================================================================ Selected Data For A Share Of Capital Stock Outstanding Throughout Each Year
----------------------------------------------------------------------- CLASS B ----------------------------------------------------------------------- Year Ended September 30, ----------------------------------------------------------------------- 1999 1998 1997 1996 1995 ---------- ---------- ---------- ---------- ---------- Net asset value, beginning of year ................... $20.17 $27.83 $26.13 $23.03 $21.92 ------ ------ ------ ------ ------ Income From Investment Operations Net investment loss .................................. (.37)(a) (.36)(a) (.42)(a) (.20) (.37)(a) Net realized and unrealized gain (loss) on investment transactions ...................................... 2.53 (6.07) 6.23 8.11 5.34 ------ ------ ------ ------ ------ Net increase (decrease) in net asset value from operations ........................................ 2.16 (6.43) 5.81 7.91 4.97 ------ ------ ------ ------ ------ Less: Distributions Distributions from net realized gains ................ (1.01) (1.23) (4.11) (4.81) (3.86) ------ ------ ------ ------ ------ Net asset value, end of year ......................... $21.32 $20.17 $27.83 $26.13 $23.03 ====== ====== ====== ====== ====== Total Return Total investment return based on net asset value (b) . 11.01% (24.03)% 26.70% 41.48% 29.78% Ratios/Supplemental Data Net assets, end of year (000's omitted) .............. $587,919 $625,147 $503,037 $112,490 $16,604 Ratio of expenses to average net assets .............. 2.46%(c) 2.39%(c) 2.51% 2.62% 2.65% Ratio of net investment loss to average net assets ... (1.68)% (1.36)% (1.73)% (1.96)% (1.88)% Portfolio turnover rate .............................. 91% 109% 135% 168% 160%
- -------------------------------------------------------------------------------- See footnote summary on page 19. 17 FINANCIAL HIGHLIGHTS (continued) Alliance Quasar Fund ================================================================================ Selected Data For A Share Of Capital Stock Outstanding Throughout Each Year
----------------------------------------------------------------------- CLASS C ----------------------------------------------------------------------- Year Ended September 30, ----------------------------------------------------------------------- 1999 1998 1997 1996 1995 ---------- ---------- ---------- ---------- ---------- Net asset value, beginning of year ................... $20.18 $27.85 $26.14 $23.05 $21.92 ------ ------ ------ ------ ------ Income From Investment Operations Net investment loss .................................. (.36)(a) (.35)(a) (.42)(a) (.20) (.37)(a) Net realized and unrealized gain (loss) on investment transactions ...................................... 2.53 (6.09) 6.24 8.10 5.36 ------ ------ ------ ------ ------ Net increase (decrease) in net asset value from operations ........................................ 2.17 (6.44) 5.82 7.90 4.99 ------ ------ ------ ------ ------ Less: Distributions Distributions from net realized gains ................ (1.01) (1.23) (4.11) (4.81) (3.86) ------ ------ ------ ------ ------ Net asset value, end of year ......................... $21.34 $20.18 $27.85 $26.14 $23.05 ====== ====== ====== ====== ====== Total Return Total investment return based on net asset value (b) . 11.05% (24.05)% 26.74% 41.46% 29.87% Ratios/Supplemental Data Net assets, end of year (000's omitted) .............. $168,120 $182,110 $145,494 $28,541 $1,611 Ratio of expenses to average net assets .............. 2.45%(c) 2.38%(c) 2.50% 2.61% 2.64% Ratio of net investment loss to average net assets ... (1.66)% (1.35)% (1.72)% (1.94)% (1.76)% Portfolio turnover rate .............................. 91% 109% 135% 168% 160%
- -------------------------------------------------------------------------------- See footnote summary on page 19. 18 Alliance Quasar Fund ================================================================================ Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
------------------------------------------------ ADVISOR CLASS ------------------------------------------------ October 2, 1996(d) Year Ended September 30, to ------------------------ September 30, 1999 1998 1997 ------ ------ ------ Net asset value, beginning of period ................ $22.37 $30.42 $27.82 ------ ------ ------ Income from Investment Operations Net investment loss (a) ............................. (.15) (.09) (.17) Net realized and unrealized gain (loss) on investment transactions ..................................... 2.80 (6.73) 6.88 ------ ------ ------ Net increase (decrease) in net asset value from operations ....................................... 2.65 (6.82) 6.71 ------ ------ ------ Less: Distributions Distributions from net realized gains ............... (1.01) (1.23) (4.11) ------ ------ ------ Net asset value, end of period ...................... $24.01 $22.37 $30.42 ====== ====== ====== Total Return Total investment return based on net asset value (b) 12.16% (23.24)% 28.47% Ratios/Supplemental Data Net assets, end of period (000's omitted) ........... $164,671 $175,037 $62,455 Ratio of expenses to average net assets ............. 1.42%(c) 1.38%(c) 1.58%(e) Ratio of net investment loss to average net assets .. (.62)% (.32)% (.74)%(e) Portfolio turnover rate ............................. 91% 109% 135%
- -------------------------------------------------------------------------------- (a) Based on average shares outstanding. (b) Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption on the last day of the period. Initial sales charges or contingent deferred sales charges are not reflected in the calculation of total investment return. Total investment return calculated for a period of less than one year is not annualized. (c) Ratios reflect expenses grossed up for expense offset arrangement with the Transfer Agent. For the year ended September 30, 1999, and the year ended September 30, 1998, the ratios of expenses to average net assets were 1.68% and 1.60% for Class A shares, 2.45% and 2.38% for Class B shares, 2.44% and 2.37% for Class C shares and 1.41% and 1.37% for Advisor Class shares, respectively. (d) Commencement of distribution. (e) Annualized. 19 REPORT OF ERNST & YOUNG LLP INDEPENDENT AUDITORS Alliance Quasar Fund ================================================================================ To the Shareholders and Board of Directors Alliance Quasar Fund, Inc. We have audited the accompanying statement of assets and liabilities of Alliance Quasar Fund, Inc. (the "Fund"), including the portfolio of investments, as of September 30, 1999, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of September 30, 1999, by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Alliance Quasar Fund, Inc. at September 30, 1999, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the indicated periods, in conformity with generally accepted accounting principles. /s/ Ernst & Young LLP New York, New York November 2, 1999 FEDERAL INCOME TAX INFORMATION (unaudited) ================================================================================ In order to meet certain requirements of the Internal Revenue Code we are advising you that $60,952,977 of the capital gain distributions paid by the Fund during the fiscal year September 30, 1999 are subject to a maximum tax rate of 20%. Shareholders should not use the above information to prepare their tax returns. The information necessary to complete your income tax returns will be included with your Form 1099 DIV which will be sent to you separately in January 2000. 20 Alliance Quasar Fund ================================================================================ BOARD OF DIRECTORS John D. Carifa, Chairman Ruth Block (1) David H. Dievler (1) John H. Dobkin (1) William H. Foulk, Jr. (1) Dr. James M. Hester (1) Clifford L. Michel (1) Donald J. Robinson (1) OFFICERS Alden M. Stewart, President Kathleen A. Corbet, Senior Vice President Randall E. Haase, Senior Vice President Thomas J. Bardong, Vice President Edmund P. Bergan, Jr., Secretary Mark D. Gersten, Treasurer & Chief Financial Officer Vincent S. Noto, Controller CUSTODIAN State Street Bank & Trust Company 225 Franklin Street Boston, MA 02110 DISTRIBUTOR Alliance Fund Distributors, Inc. 1345 Avenue of the Americas New York, NY 10105 LEGAL COUNSEL Seward & Kissel LLP One Battery Park Plaza New York, NY 10004 TRANSFER AGENT Alliance Fund Services, Inc. P.O. Box 1520 Secaucus, NJ 07096-1520 Toll-free 1-(800) 221-5672 INDEPENDENT AUDITORS Ernst & Young LLP 787 Seventh Avenue New York, NY 10019 - -------------------------------------------------------------------------------- (1) Member of the Audit Committee. 21 (This page left intentionally blank.) THE ALLIANCE FAMILY OF MUTUAL FUNDS ================================================================================ Fixed Income Alliance Bond Fund U.S. Government Portfolio Corporate Bond Portfolio Quality Bond Portfolio Alliance Global Dollar Government Fund Alliance Global Strategic Income Trust Alliance High Yield Fund Alliance Mortgage Securities Income Fund Alliance Limited Maturity Government Fund Alliance Multi-Market Strategy Trust Alliance North American Government Income Trust Alliance Short-Term U.S. Government Fund Tax-Free Income Alliance Municipal Income Fund California Portfolio Insured California Portfolio Insured National Portfolio National Portfolio New York Portfolio Alliance Municipal Income Fund II Arizona Portfolio Florida Portfolio Massachusetts Portfolio Michigan Portfolio Minnesota Portfolio New Jersey Portfolio Ohio Portfolio Pennsylvania Portfolio Virginia Portfolio Money Market AFD Exchange Reserves Growth The Alliance Fund Alliance Global Environment Fund Alliance Growth Fund Alliance Premier Growth Fund Select Investors Series - Premier Portfolio Growth & Income Alliance Balanced Shares Alliance Conservative Investors Fund Alliance Growth & Income Fund Alliance Growth Investors Fund Alliance Real Estate Investment Fund Alliance Utility Income Fund Aggressive Growth Alliance Global Small Cap Fund Alliance Quasar Fund Alliance Technology Fund International Alliance All-Asia Investment Fund Alliance Greater China '97 Fund Alliance International Fund Alliance International Premier Growth Fund Alliance New Europe Fund Alliance Worldwide Privatization Fund Institutional Premier Growth Quasar Real Estate Investment Closed-End Funds Alliance All-Market Advantage Fund ACM Government Income Fund ACM Government Opportunity Fund ACM Government Securities Fund ACM Government Spectrum Fund ACM Managed Dollar Income Fund ACM Managed Income Fund ACM Municipal Securities Income Fund Alliance World Dollar Government Fund Alliance World Dollar Government Fund II The Austria Fund The Korean Investment Fund The Spain Fund The Southern Africa Fund Cash Management Services Alliance Capital Reserves Alliance Government Reserves Alliance Institutional Reserves Prime Portfolio Government Portfolio Tax-Free Portfolio Treasury Portfolio Trust Portfolio Alliance Insured Account Alliance Money Reserves Alliance Municipal Trust California Portfolio Connecticut Portfolio Florida Portfolio General Portfolio Massachusetts Portfolio New Jersey Portfolio New York Portfolio Virginia Portfolio Alliance Treasury Reserves Alliance Money Market Fund Prime Portfolio General Municipal Portfolio Government Portfolio 23 --------------- ALLIANCE QUASAR FUND BULK RATE 1345 Avenue of the Americas U.S. POSTAGE New York, NY 10105 PAID (800) 221-5672 New York, NY Permit No. 7131 --------------- Alliance Capital [LOGO](R) This report is intended solely for distribution to current shareholders of the Fund. (R) These registered service marks used under license from the owner, Alliance Capital Management L.P. QSRAR999 -----END PRIVACY-ENHANCED MESSAGE-----