A Perspective on Markets There is no guarantee that any forecasts or opinions in this material will be realized. Information should not be construed as.

A Perspective on Markets

There is no guarantee that any forecasts or opinions in this material will be realized. Information should not be construed as investment advice.

2

Topics

• Lousy Market Returns

• Compounded by Poor Investor Decisions

• Have We Been Here Before?

• Okay….What Should We Do Now?

3

Nowhere to HideYTD Returns - August 2002

-45

-40

-35

-30

-25

-15

-10

5

0

5%

-43%

TechnologyGrowth

-30%

Small Cap

-25%

Large CapGrowth

-13%

Large CapValue

-11%

International Small CapValue

-9%

1%

Cash

7%

Bonds

Past performance is no guarantee of future results. Technology is represented by the Lipper Science & Technology Funds Average, measuring the average performance of funds in the Lipper science & technology category. Large Cap Growth is represented by the Russell 1000 Growth index, which contains those Russell 1000 securities with a greater-than-average growth orientation and higher price-to-book and price-to-earnings ratios. Small Cap Growth is represented by the Russell 2000 Growth Index which measures the performance of those Russell 2000 securities with a greater than average growth orientation. International is represented by the MSCI EAFE index which measures the performance of stock markets in developed countries in Europe, Australasia and the Far East. Large Cap Value is represented by the Russell 1000 Value Index which measures the performance of those Russell 1000 companies with a less-than-average growth orientation and lower price-to-earnings ratios. Cash is represented by the 90-day Treasury Bill. Bonds are represented by the Lehman Brothers Aggregate Index, comprised of all US investment-grade fixed-rate bonds. Small Cap Value is represented by the Russell 2000 Value index which contains those Russell 2000 companies with a less-than-average growth orientation and lower price-to-earnings ratios. All indices mentioned are unmanaged. An investor cannot invest in an index and its returns are not indicative of the performance of any specific investment, including an Alliance mutual fund.

4

Nowhere To Hide15 Weeks ended August 31, 2002

DJIA

S&P 500

-16.3%

All 30 Stocks Are Down

NASDAQ 100

-17.2%

456/500 Stocks Are Down

-28.9%

92/100 Stocks Are Down

Past performance is no guarantee of future results. DJIA is the Dow Jones Industrial Average which contains 30 stocks widely held by both individual and institutional investors. These 30 stocks represent approx. one-fifth of the value of all US stocks. The S&P 500 stock index is comprised of 500 US stocks and is an indicator of the performance of the overall US stock market. The Nasdaq 100 Index represents the largest and most active non-financial domestic and international issues listed on the Nasdaq Stock Market based on market capitalization. All indices mentioned are unmanaged. An investor cannot invest in an index and its returns are not indicative of the performance of any specific investment, including an Alliance mutual fund.

5

Short Term, Investors Have Suffered -

-15%-17%

-15%

8%

-2%

-11%

9%

0%2%

-2%

8%9%10%

4% 7%

-10%

-40%

-50

-40

-30

-20

-10

0

10

20%

Technology US Small Cap US Large Cap International Bonds

Long Term, Investors Still Positive

-26%

10%

1Yr 3Yr 10Yr

Through August 31, 2002. Past performance is no guarantee of future results. Technology is represented by the Lipper Science & Technology Funds Average, measuring the average performance of funds in the Lipper science & technology category. US Small Cap is represented by the Russell 2000 Index which is comprised of the smallest 2,000 companies in the broad-market Russell 3000 Index. US Large Cap is represented by the Russell 1000 Index which contains those largest securities in the Russell 3000 Index. International is represented by the MSCI EAFE index which measures the performance of markets in developed regions of Europe, Australasia and the Far East. Bonds are represented by the Lehman Brother s Aggregate, comprised of US investment-grade fixed-rate bonds. All indices mentioned are unmanaged. An investor cannot invest in an index, and its results are not indicative of the performance of any specific investment, including an Alliance mutual fund.

5Yr

-5%


Lousy Market Returns

Compounded by Poor Investor Decisions

7

- 25%

-22%

39%30%

Investors Chase Returns Large Cap Growth

* Projected 2002 net mutual fund flows off of May 2002 base, performance as of 8/31/02. Source: Financial Research Corporation.Past performance is no guarantee of future results. Large Cap Growth is represented by the Russell 1000 Growth Index. The unmanaged Russell 1000 Growth Index is comprised of those stocks in the larger Russell 1000 Index with a greater-than-average growth orientation and higher-than average price-to-earnings ratios. An investor cannot invest in an index and its returns are not indicative of the performance of any specific investment, including an Alliance mutual fund.

33%

-20%

23%

1996 1997 1998 1999 2000 2001

-60

-40

-20

0

20

40

60

80

100

120%

(60)

(40)

(20)

0

20

40

60

80

100

$120

Returns Cash Flows($ billions)2002*

Net Fund Flows

8

16%

Investors Chase Returns Large Cap Value

7% 7%

-13%

22%

35%

-6%

-60

-40

-20

0

20

40

60

80

100

120%

(60)

(40)

(20)

0

20

40

60

80

100

$1201996 1997 1998 1999 2000 2001


* Projected 2002 net mutual fund flows off of May 2002 base, performance as of 8/31/02. Source: Financial Research Corporation.Past performance is no guarantee of future results. Large Cap Value is represented by the Russell 1000 Value Index. The unmanaged Russell 1000 Value Index is comprised of those stocks in the larger Russell 1000 Index with a less-than-average growth orientation and lower-than average price-to-earnings ratios. An investor cannot invest in an index and its returns are not indicative of the performance of any specific investment, including an Alliance mutual fund.

Net Fund Flows

Investors Chase Returns Large Growth & Large Value

-60

-40

-20

0

20

40

60

80

100

120%

(60)

(40)

(20)

0

20

40

60

80

100

$1201996 1997 1998 1999 2000 2001

Returns Cash Flows($ billions)

9

2002*

* Projected 2002 net mutual fund flows off of May 2002 base, performance as of 8/31/02. Source: Financial Research Corporation.Past performance is no guarantee of future results. Large Cap Value is represented by the Russell 1000 Value Index. The Russell 1000 Value Index is comprised of those stocks in the larger Russell 1000 Index with a less-than-average growth orientation and lower-than average price-to-earnings ratios. Large Cap Growth is represented by the Russell 1000 Growth Index. The Russell 1000 Growth Index is comprised of those stocks in the larger Russell 1000 Index with a greater-than-average growth orientation and higher-than average price-to-earnings ratios. Both indices are unmanaged. An investor cannot invest in an index and its returns are not indicative of the performance of any specific investment, including an Alliance mutual fund.

10

4%

Investors Chase Returns Fixed Income

12%7%

-1%

9%10% 8%

-60

-40

-20

0

20

40

60

80

100

120%

(60)

(40)

(20)

0

20

40

60

80

100

$1201996 1997 1998 1999 2000 2001


* Projected 2002 net mutual fund flows off of May 2002 base, performance as of 8/31/02. Source: Financial Research Corporation.Past performance is no guarantee of future results. Fixed Income is represented by the Lehman Brothers Aggregate Index. This unmanaged Index is comprised of US investment grade fixed-rate bonds and Is an indicator of the performance of the overall US bond market. An investor cannot invest in an index and its returns are not indicative of the performance of any specific investment, including an Alliance mutual fund.

Net Fund Flows

11

Investors Continue To Chase Returns... 76% of June 2002 Net Mutual Fund Flows Went To Fixed Income

Source: Financial Research Corporation.

1 Intermediate-Term Bond $4,538

2 Intermediate-Term Government $2,454

3 Foreign Stock $2,068

4 Short-Term Bond $1,553

5 Ultrashort Bond $1,378

6 Short-Term Government $1,023

7 Muni Short $994

8 Specialty Real Estate $718

9 Domestic Hybrid $621

10 International Hybrid $333

CategoryRank June 2002

15% International

Equity

9%

U.S. Equity

76% Fixed Income

12

The Bottom Line...

• Bad Markets

• Bad Decisions


Lousy Markets Have Happened Before(Maybe We’ll Learn Something?)

14

$10,000

$9,090

$8,010

$6,235

4,000

5,000

6,000

7,000

8,000

9,000

10,000

11,000

August 31, 20021999 2000 2001

$

Internet Bubble - What’s Next?$10,000 Invested in S&P 500 Index - December 1999

?

Past performance is no guarantee of future results. The S&P 500 stock index is comprised of 500 US stocks and is an indicator of the performance of the overall US stock market. An investor cannot invest in an index, and its returns are not indicative of the performance of any specific investment, including an Alliance mutual fund.

15

Historical Points of Reference Only 3 Other Times When the S&P 500 Has Been Down 2 or More Years in A Row

1929 30

3132

Duration Context

4 Years The Great Depression

3 Years World War II

2 Years Recession - Oil Crisis

2+ Years? Internet Bubble

197374

19394041

200001

02

Years

Past performance is no guarantee of future results.

16

Historically, Patience Paid Off $10,000 Invested in S&P 500 Index

The Great Depression


Market BottomJune 1, 1932

$6,900

$10,000

$2,200

$5,400

$10,700

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

11,000

12,000

1928 1929 1930 1931 1932 1933 1934 1935 1936

$

17

Investor Experience - The Great Depression (1928-36)

Did Nothing Recovered in 4 Yrs 4 mos

Bought More Recovered in 3 Months($10,000 additional investment)

Sold Out Realized 78% Loss

1-Yr Recovery From Bottom + 137.6%

Market Bottom - June 1, 1932


18


World War II


Market BottomApril 28, 1942

$12,000

$6,900

$10,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

11,000

12,000

13,000

1938 1939 1940 1941 1942 1943

$

19

Investor Experience - World War II (1938-46)

Did Nothing Recovered in 9 months




Market Bottom - April 28, 1942


20


Recession - Oil Crisis

Market BottomOctober 3, 1974


$10,700

$5,600

$10,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

11,000

12,000

1972 1973 1974 1975 1976

$

21

Investor Experience - Oil Crisis (1972-76)

Did Nothing Recovered in 1 yr 8 mos




Market Bottom - October 3, 1974


22

Investors Who Time...

12 Months After The Bottom

June 1933

April 1942

October 1975

One Year Return

137.6%

64.3%

44.4%

Miss The Recovery


• Picking the Bottom is Hard!

• Close is Good Enough!

23

24

Investing Near the Bottom -- Short-Term RecoveryS&P Cumulative Returns From Market Bottom

Past performance is no guarantee of future results. The S&P 500 stock index is comprised of 500 US stocks and is an indicator of the performance of the overall US stock market. An investor cannot invest in an index and its returns are not indicative of the performance of any specific investment, including an Alliance mutual fund.

The Great Depression 12/31 - 6/33 6/32 - 6/33 12/32 - 6/33

48% 50%

138%

1 Yr Return From Bottom

Return From 6 Months

Before Bottom

Return From6 Months

After Bottom

World War II

10/41 - 4/43 4/42 - 4/43 10/42 - 4/43

43% 27%

64%

Oil Crisis 4/74 - 10/75 10/74 - 10/75 4/75 - 10/75

16% 8%

44%

25

World War II

10/41 - 4/47 4/42 - 4/47 10/42 - 4/47

98% 91%148%

Investing Near the Bottom -- Long-Term RecoveryS&P Cumulative Returns From Market Bottom

Past performance is no guarantee of future results. The S&P 500 stock index is comprised of 500 US stocks and is an indicator of the performance of the overall US stock market. An investor cannot invest in an index and its returns are not indicative of the performance of any specific investment, including an Alliance mutual fund.

The Great Depression 12/31 - 6/37 6/32 - 6/37 12/32 - 6/37

127% 192%

364%

5 Yr Return From Market Bottom

Return From 6 Months

Before Bottom

Return From6 Months

After Bottom

Oil Crisis 4/74 - 10/79 10/74 - 10/79 4/75 - 10/79

51% 66%123%


Okay…What Should We Do?

27

What Should We Do?

• Establish a Plan Suited to Your Needs

• Stick With It

• Systematically Invest and Rebalance

28

Professional Advice and Asset AllocationCase Study: Typical Investor Allocation 1997

Bonds20%

Technology10%

Large Growth

25%

Small Cap10%

Large Value25%

International Equities

10%

The following study is hypothetical and does not necessarily represent the actual experience of any investor.

29

Case Study: $100,000 Initial Investment & $10,000 Annual Contribution

Investor A: Rebalanced...

$179,059

Investor B: Chased Returns...

$153,569

Capital Invested

$150,000

Aug 2002

100,000

150,000

200,000

1996 1997 1998 1999 2000 2001Source: Financial Research Corporation & Lipper, Inc. This case study is hypothetical and doesn’t necessarily represent the experience of any investor. This example assumes the following: Investor A invested $100,000 on January 1, 1997, $10,000 at the beginning of each of the next five years, and annually rebalanced according the following asset allocation: 10% Technology Equity, 20% Bonds, 10% International Equity, 25% Large Cap Value Equity, 10% Small Cap Equity, and 25% Large Cap Growth Equity. Investor B invested $100,000 on January 1, 1997, according to the following asset allocation: 10% Technology Equity, 20% Bonds, 10% International Equity, 25% Large Cap Value Equity, 10% Small Cap Equity, and 25% Large Cap Growth Equity. At the beginning of each of the next five years, Investor B invested $10,000 per year and annually rebalanced based on the percentage of mutual fund net flows into each category. Technology is represented by the Morningstar Category Specialty Technology Average; Bonds are represented by the Lehman Brothers Aggregate Index; International Equity is represented by the MSCI EAFE; Large Cap Value is represented by the Russell 1000 Value Index; Small Cap Equity is represented by the Russell 2000 Index; Large Cap Growth is represented by the Russell 1000 Growth Index. An investor cannot invest in an index and its results are not indicative of any specific investment, including an Alliance mutual fund.

30

Lessons Learned

• Asset Allocation Matters

• Investing is a Long Term Proposition

• Chasing Returns is a Losers Game

• A Paper Loss is a Paper Loss

• Stocks Have Outperformed Bonds, Cash and InflationOver Long Periods of Time

• Recoveries are Hard to Time

• Miss the Recovery and You Miss the Boat

31

50

60

70

80

90

100

Week1

Week16

Week31

Week46

Week61

Week76

Week91

Week106

Week121

Week136

Week151

Week166

Week181

Week196

Week211

Week226

Week241

Week256

January 1973- December 1976 March 2000-Present

?

1973-1976

Have We Been Here Before?S&P 500 Peak and Troughs- 1970’s and 1990’s


32

Are The Fundamentals Intact?Economic Indicators at Bottom in 1970’s and Today

Fed Funds Rate

Federal Funds Rate Source: National Bureau Economic Research

Oct ‘74

10.1%

1.7%

Jul ‘02

Oil Prices

Real Crude Oil Prices (WTI SPOT) in US. $ 2001Source: Merrill Lynch

$43.6

$23.7

Oct ‘74 July ‘02

Unemployment

Civilian Unemployment Rate Source: National Bureau Economic Research

6.0%5.9%

Oct ‘74 Jul ‘02

Inflation

Consumer Price Index Source: National Bureau Economic Research & Alliance Capital

11.9%

Oct ‘74 July ‘02

2.5%

33

What To Advise Clients To Do?

• Do Nothing

• Move To Cash

• Buy More…Asset Allocate

34

50

60

70

80

90

100

Week1

Week16

Week31

Week46

Week61

Week76

Week91

Week106

Week121

Week136

Week151

Week166

Week181

Week196

Week211

Week226

Week241

Week256

January 1973- December 1976 March 2000-Present

1973-1976

Have We Been Here Before?S&P 500 Peak and Troughs- 1970’s and 1990’s


?

35

The Wall Street JournalAugust 8th, 2002

36

There is no guarantee that any forecasts or opinions contained in this material will be realized.This information should not be construed as investment advice.

A Word About Risk

Investment Products Offered:

Are Not FDIC Insured May Lose Value Are Not Bank Guaranteed

Alliance Fund Distributors, Inc., the principal underwriter of Alliance mutual funds and an affiliate of Alliance Capital Management, L.P.,

the manager of the funds, is a member of the NASD.

A Perspective on Markets There is no guarantee that any forecasts or opinions in this material will be realized. Information should not be construed as.

Documents

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value index

large cap growth

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