<PAGE>
As filed with the Securities and Exchange
Commission on December 22, 1995
File Nos. 33-63797
811-7391
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. 1 X
Post-Effective Amendment No.
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 1 X
_______________________________
Alliance Global Strategic Income Trust, Inc.
(Exact Name of Registrant as Specified in Charter)
1345 Avenue of the Americas, New York, New York 10105
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including Area Code:(212) 969-1000
_____________________________
EDMUND P. BERGAN, JR.
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, New York 10105
(Name and address of agent for service)
Copies of communications to:
Thomas G. MacDonald
Seward & Kissel
One Battery Park Plaza
New York, New York 10004
It is proposed that this filing will become effective (check
appropriate box)
immediately upon filing pursuant to paragraph (b)
<PAGE>
on (date) pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)(1)
on (date) pursuant to paragraph (a)(1)
75 days after filing pursuant to paragraph (a)(2)
on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
This post-effective amendment designates a new
effective date for a previously filed post-effective amendment.
________________________________________________________________
The Registrant hereby amends this Registration Statement
under the Securities Act of 1933 on such date or dates as may be
necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in
accordance with the provisions of Section 8(a) of the Securities
Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to
Section 8(a), may determine.
________________________________________________________________
<PAGE>
CROSS REFERENCE SHEET
(as required by Rule 404(c))
N-1A Item No. Location in Prospectus (Caption)
PART A
Item 1. Cover Page.....................Cover Page
Item 2. Synopsis.......................Expense Information
Item 3. Condensed Financial
Information....................Not Applicable
Item 4. General Description
of Registrant..................Description of the Fund;
General Information
Item 5. Management of the Fund.........Management of the Fund;
General Information
Item 6. Capital Stock and Other
Securities.....................Dividends, Distributions
and Taxes; General
Information
Item 7. Purchase of Securities
Being Offered..................Purchase and Sale of
Shares; General
Information
Item 8. Redemption or Repurchase.......Purchase and Sale of
Shares; General
Information
Item 9. Pending Legal Proceedings......Not Applicable
Location in Statement of
PART B Additional Information (Caption)
_______ ________________________________
Item 10. Cover Page.....................Cover Page
Item 11. Table of Contents..............Cover Page
Item 12. General Information
and History....................Management of the Fund;
General Information
<PAGE>
Item 13. Investment Objectives
and Policies...................Description of the Fund
Item 14. Management of the Registrant ..Management of the Fund
Item 15. Control Persons and and
Principal Holders of
Securities ....................Not Applicable
Item 16. Investment Advisory and
Other Services.................Management of the Fund,
Expenses of the Fund,
General Information
Item 17. Brokerage Allocation and
Other Practices................Portfolio Transactions
Item 18. Capital Stock and Other
Securities.....................General Information
Item 19. Purchase, Redemption and Pricing
of Securities Being Offered....Purchase of Shares;
Redemption and Repurchase
of Shares; Dividends,
Distributions and Taxes;
Shareholder Services
Item 20. Tax Status.....................Description of the Fund,
Dividends, Distributions
and Taxes
Item 21. Underwriters...................General Information
Item 22. Calculation of Performance
Data...........................General Information
Item 23. Financial Statements...........Financial Statement;
Report of Independent
Accountants
<PAGE>
ALLIANCE
GLOBAL STRATEGIC
INCOME TRUST
P.O. Box 1520, Secaucus, New Jersey 07096-1520
Toll Free (800) 221-5672
For Literature: Toll Free (800) 227-4618
Prospectus and Application
[ ], 1995
<PAGE>
Table of Contents Page
The Fund at a Glance........................................
Expense Information.........................................
Glossary....................................................
Description of the Fund.....................................
Investment Objectives and Policies.......................
Additional Investment Practices..........................
Certain Fundamental Investment
Policies..............................................
Risk Considerations......................................
Purchase and Sale of Shares.................................
Management of the Fund......................................
Dividends, Distributions and Taxes..........................
General Information.........................................
Appendix A: Bond Ratings................................... A-1
Adviser
Alliance Capital Management L.P.
1345 Avenue Of The Americas
New York, New York 10105
2
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Alliance Global Strategic Income Trust, Inc. (the "Fund")
seeks a high level of current income and, secondarily, capital
appreciation. The Fund pursues its objectives through investment
primarily in fixed-income securities of U.S. and non-U.S.
issuers.
The Fund is an open-end management investment company. This
Prospectus sets forth concisely the information that a
prospective investor should know about the Fund before investing.
A "Statement of Additional Information" for the Fund dated
[ ], 1995, which provides further information
regarding certain matters discussed in this Prospectus and other
matters which may be of interest to some investors has been filed
with the Securities and Exchange Commission and is incorporated
herein by reference. For a free copy, call or write Alliance
Fund Services, Inc. at the indicated address or "Literature"
telephone number.
The Fund offers three classes of shares which may be purchased at
the investor's choice at a price equal to their net asset value
(i) plus an initial sales charge imposed at the time of purchase
(the "Class A shares"), (ii) with a contingent deferred sales
charge imposed on most redemptions made within three years of
purchase (the "Class B shares"), or (iii) without any initial or
contingent deferred sales charge (the "Class C shares"). See
"Purchase and Sale of Shares" and "Management of the Fund -
Distribution Services Agreement."
An investment in these securities is not a deposit or obligation
of, or guaranteed or endorsed by, any bank and is not federally
insured by the Federal Deposit Insurance Corporation, the Federal
Reserve Board or any other agency.
Investors are advised to read this Prospectus carefully and to
retain it for future reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Alliance(R)
Mutual funds without
the Mystery.
(R)/SM These are registered marks used under licenses from the
owner, Alliance Capital Management L.P.
3
<PAGE>
The Fund At A Glance
The following summary is qualified in its entirety by the more
detailed information contained inside this Prospectus.
The Fund's Investment Adviser Is... Alliance Capital
Management L.P. ("Alliance"), a global investment adviser
providing diversified services to institutions and individuals
through a broad line of investments including more than 104
mutual funds. Since 1971, Alliance has earned a reputation as a
leader in the investment world with over $140 billion in assets
under management. Alliance provides investment management
services to 29 of the FORTUNE 100 companies.
The Fund
Seeks... Primarily a high level of current income and secondarily
capital appreciation.
Invests primarily in... a non-diversified portfolio of fixed-
income securities of U.S. and non-U.S. issuers.
A Word About Risk...
The price of the shares of the Fund will fluctuate as the daily
prices of the individual bonds in which it invests fluctuate, so
that your shares, when redeemed, may be worth more or less than
their original cost. Price fluctuations may be caused by changes
in the general level of interest rates or changes in bond credit
quality ratings. Changes in interest rates have a greater effect
on bonds with longer maturities than those with shorter
maturities. The prices of non-U.S. dollar denominated bonds also
fluctuate with changes in foreign exchange rates. Investment in
the Fund involves risks not associated with funds that invest
primarily in securities of U.S. issuers. While the Fund invests
principally in bonds and fixed-income securities, in order to
achieve its investment objectives, the Fund may at times use
certain types of derivative instruments such as options, futures,
forwards and swaps. These instruments involve risks different
from, and, in certain cases, greater than, the risks presented by
more traditional investments. These risks are fully discussed in
this Prospectus. See "Description of the Fund--Additional
Investment Practices" and "--Risk Considerations."
Getting Started
Shares of the Fund are available through your financial
representative and most banks, insurance companies and brokerage
firms nationwide. Shares can be purchased for a minimum initial
investment of $250, and subsequent investments can be made for as
4
<PAGE>
little as $50. In addition, the Fund offers several time and
money saving services to investors. Be sure to ask your
financial representative about:
Automatic Reinvestment
Automatic Investment Program
Retirement Plans
Shareholder Communications
Dividend Direction Plans
Auto Exchange
Systematic Withdrawals
A choice of Purchase Plans
Telephone Transactions
24 Hour Information
Alliance(R)
Mutual funds without the Mystery.SM
(R) These are registered marks used under licenses from
the owner, Alliance Capital Management L.P.
5
<PAGE>
_________________________________________________________________
EXPENSE INFORMATION
_________________________________________________________________
Shareholder Transaction Expenses are one of several factors to
consider when you invest in the Fund. The following table
summarizes your maximum transaction costs from investing in the
Fund and estimated annual expenses for each class of shares. The
Examples following the table show the cumulative expenses
attributable to a hypothetical $1,000 investment in each class
for the periods specified.
Class A Class B Class C
Shares Shares Shares
______ _______ _______
Maximum sales charge imposed
on purchases (as a
percentage of offering
price)................... 4.25%(a) None None
Sales charge imposed on
dividend reinvestments... None None None
Deferred sales charge (as a
percentage of original
purchase price or
redemption proceeds,
whichever is lower)...... None 3.0% None
during the
first year,
decreasing 1.0
annually to 0%
after the
third year (b)
Exchange fee............... None None None
_____________________________
(a) Reduced for larger purchases. See "Purchase and Sale of Shares - How to
Buy Shares" -- page [ ].
(b) Class B shares of the Fund automatically convert to Class A shares after
six years. See "Purchase and Sale of Shares - How to Buy Shares" --
page [ ].
Operating Expenses
Class Class Class
A B C
_____ ______ _____
6
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Management fees .75% .75% .75%
12b-1 fees .30% 1.00% 1.00%
Other expenses(a) .64% .64% .64%
___ ____ ____
Total fund
operating expenses 1.69% 2.39% 2.39%
==== ==== ====
Example
Class Class Class Class
A B+ B++ C
After 1 year $59 $54 $24 $24
After 3 years $94 $85 $75 $75
_______________________________________
+ Assumes redemption at end of period.
++ Assumes no redemption at end of period.
(a) These expenses include a transfer agency fee payable to Alliance Fund
Services, Inc., an affiliate of Alliance, based on a fixed dollar amount
charged to the Fund for each shareholder's account.
The purpose of the foregoing table is to assist the investor in understanding
the various costs and expenses that an investor in the Fund will bear directly
or indirectly. Long-term shareholders of the Fund may pay aggregate sales
charges totaling more than the economic equivalent of the maximum initial
sales charges permitted by the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. See "Management of the Fund -
Distribution Services Agreement." "Other Expenses" are based on estimated
amounts for the Fund's current fiscal year. The example set forth above
assume reinvestment of all dividends and distributions and utilizes a 5%
annual rate of return as mandated by Securities and Exchange Commission
regulations. THE EXAMPLE SHOULD NOT BE CONSIDERED REPRESENTATIVE OF PAST OR
FUTURE EXPENSES; ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
7
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_________________________________________________________________
GLOSSARY
_________________________________________________________________
The following terms are frequently used in this
Prospectus. Many of these terms are explained in greater detail
under "Description of the Fund - Additional Investment Practices"
and in Appendix A.
Bonds are fixed, floating and variable rate debt obligations.
Debt securities are bonds, debentures, notes, bills and
repurchase agreements.
Fixed-income securities are debt securities, convertible
securities and preferred stocks and include floating rate and
variable rate instruments. Fixed-income securities may be rated
(or if unrated, for purposes of the Fund's investment policies
may be determined by Alliance to be of equivalent quality to
those rated) 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, Duff & Phelps 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, to take another example, Ba by Moody's
and BB by S&P but B by Fitch), the Fund will use the rating
deemed by Alliance to be the most appropriate under the
circumstances.
Lower-rated securities are fixed-income securities rated Ba and
BB or below, or determined by Alliance to be of equivalent
quality and are commonly referred to as "junk bonds."
Convertible securities are bonds, debentures, corporate notes and
preferred stocks that are convertible into common and preferred
stocks.
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 (see below). U.S.
Government securities include certificates issued by FNMA and
FHLMC (see below).
8
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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:
ARMS, which are adjustable-rate mortgage securities,
SMRS, which are stripped mortgage-related securities,
CMOs, which are collateralized mortgage obligations,
GNMA certificates, which are securities issued by the
Government National Mortgage Association,
FNMA certificates, which are securities issued by the Federal
National Mortgage Association, and
FHLMC certificates, which are securities issued by the
Federal Home Loan Mortgage Corporation.
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
another of which is the principal-only or PO class, which class
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.
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.
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.
World Bank is the commonly used name for the International Bank
for Reconstruction and Development.
LIBOR is the London Interbank Offered Rate.
Moody's is Moody's Investors Service, Inc.
S&P is Standard & Poor's Ratings Services.
Duff & Phelps is Duff & Phelps Credit Rating Co.
9
<PAGE>
Fitch is Fitch Investors Service, Inc.
Prime commercial paper is commercial paper rated Prime-1 or
higher by Moody's, A-1 or higher by S&P, Fitch-1 by Fitch or
Duff 1 by Duff & Phelps.
Qualifying bank deposits are certificates of deposit, bankers'
acceptances and interest-bearing savings deposits of banks having
total assets of more than $1 billion and which are members of the
Federal Deposit Insurance Corporation.
Rule 144A securities are securities that may be resold pursuant
to Rule 144A under the Securities Act of 1933, as amended (the
"Securities Act").
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.
_________________________________________________________________
DESCRIPTION OF THE FUND
_________________________________________________________________
The Fund is a non-diversified investment company. The Fund's
investment objectives are "fundamental" and cannot be changed
without a shareholder vote. Except as noted, the Fund's
investment policies are not fundamental and thus can be changed
without a shareholder vote. The Fund will not change these
policies without notifying its shareholders. There is no
guarantee that the Fund will achieve its investment objectives.
INVESTMENT OBJECTIVES AND POLICIES
The Fund is a non-diversified investment company that seeks
primarily a high level of current income and secondarily capital
appreciation. The Fund pursues its investment objectives by
investing 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 may also use derivative
instruments to enhance income. The average weighted maturity of
the Fund's portfolio of fixed-income securities is expected to
vary between 5 years and 30 years in accordance with Alliance's
changing perceptions of the relative attractiveness of various
maturity ranges.
Under normal market conditions, at least 65% of the value of the
Fund's total assets will be invested in the fixed-income
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securities of issuers located in three countries, one of which
may be the United States. No more than 25% of the value of its
total assets, however, will be invested in the securities of any
one foreign government. U.S. Government securities in which the
Fund may invest include mortgage-related securities and zero
coupon securities. Fixed-income securities in which the Fund may
invest include preferred stock, mortgage-related and other asset-
backed securities, and zero coupon securities. The Fund may also
invest in rights, warrants and loan participations and
assignments.
The Fund will maintain at least 65% of the value of its total
assets in investment grade securities and may maintain not more
than 35% of the value of its total assets in lower-rated
securities. See "Risk Considerations -- Securities Ratings" and
"-- Investment in Lower-Rated Fixed-Income 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. Lower-rated
securities in which the Fund may invest include Brady Bonds and
fixed-income securities of issuers located in emerging markets.
There is no minimum rating requirement applicable to the Fund's
investments in lower-rated fixed-income securities.
The Fund may also: (i) invest in foreign currencies,
(ii) purchase and write put and call options on securities and
foreign currencies, (iii) purchase or sell forward foreign
exchange contracts, (iv) invest in variable, floating and inverse
floating rate instruments, (v) invest in indexed commercial
paper, (vi) invest in structured securities, (vii) lend portfolio
securities amounting to not more than 25% of its total assets,
(viii) enter into repurchase agreements pertaining to the types
of securities in which it invests, (ix) use reverse repurchase
agreements and dollar rolls, (x) purchase and sell securities on
a forward commitment basis, (xi) enter into standby commitments,
(xii) enter into contracts for the purchase or sale for future
delivery of fixed-income securities or foreign currencies, or
contracts based on financial indices, including any index of U.S.
Government securities, foreign government securities or common
stock, and purchase and write options on futures contracts,
(xiii) invest in Eurodollar instruments, (xiv) enter into
interest rate swaps, caps and floors, and (xv) make short sales
of securities or maintain a short position. For additional
information on the use, risks and costs of these policies and
practices see "Additional Investment Practices." The Fund
currently intends to limit its ability to borrow to an amount not
to exceed 25% of its total assets. See "Risk Considerations -
Effect of Borrowing."
11
<PAGE>
ADDITIONAL INVESTMENT PRACTICES
The Fund may engage in the following investment practices to the
extent described in this Prospectus. See the Fund's Statement of
Additional Information for a further discussion of the uses,
risks and costs of engaging in these practices.
Derivatives. The Fund may use derivatives in furtherance of its
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 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 Fund to earn
income and enhance returns, to hedge or adjust the risk profile
of a portfolio, and either in place of more traditional direct
investments or to obtain exposure to otherwise inaccessible
markets. The Fund is permitted to use derivatives for one or
more of these purposes, although the Fund will 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 benefit to Fund
shareholders. Alliance is not an aggressive user of derivatives
with respect to the Fund. However, the 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. The Fund will make extensive use of carefully
selected forwards and other derivatives to achieve the currency
hedging that is an integral part of its investment strategy.
Alliance's use of derivatives is subject to continuous risk
assessment and control from the standpoint of the 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.
12
<PAGE>
There are four principal types of derivative instruments -
options, futures, forwards and swaps - from which virtually any
type of derivative transaction can be created.
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, while 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 would be 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).
Futures - A futures contact 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.
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.
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
13
<PAGE>
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.
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. See "Indexed Commercial Paper"
and "Structured Securities" below. The term "derivative" is
also 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 also involve risks different from, and, in
certain cases, greater than, the risks presented by more
traditional investments. Following is a general discussion
of important risk factors and issues concerning the use of
derivatives that investors should understand before investing
in the Fund.
Market Risk - This is the general risk attendant to all
investments that the value of a particular investment will
change in a way detrimental to the Fund's interest.
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
14
<PAGE>
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 the Fund's portfolio and the ability to forecast
price, interest rate or currency exchange rate movements
correctly.
Credit Risk - This is the risk that a loss may be
sustained by the Fund as a result of the failure of
another party to a derivative (usually referred to as a
"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 Fund considers the
creditworthiness of each counterparty to a privately
negotiated derivative in evaluating potential credit risk.
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.
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.
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 the
15
<PAGE>
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, the 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.
Derivatives Used by the Fund. Following is a description of
specific derivatives that may be used by the Fund.
Options on Securities. In purchasing an option on securities,
the 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, the 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 the Fund were permitted to
expire without being sold or exercised, its premium would
represent a loss to the Fund.
The 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. A call option written by the Fund is "covered" if the
Fund owns the underlying security, has an absolute and immediate
right to acquire that security upon conversion or exchange of
another security it holds, or holds a call option on the
underlying security with an exercise price equal to or less than
that of the call option it has written. A put option written by
the 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.
The risk involved in writing an uncovered put option is that
there could be a decrease in the market value of the underlying
securities. If this occurred, the Fund could be obligated to
purchase the underlying security at a higher price than its
current market value. Conversely, 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 the 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, whereas the risk of loss from writing an uncovered
call option is potentially unlimited.
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The 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." The 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 from other hedging strategies.
The Fund may purchase or write privately negotiated options on
securities. The Fund will effect such transactions only with
investment dealers and other financial institutions (such as
commercial banks or savings and loan institutions) deemed
creditworthy by Alliance, and Alliance has adopted procedures for
monitoring the creditworthiness of such counterparties.
Privately negotiated options purchased or written by the Fund may
be illiquid, and it may not be possible for the Fund to effect a
closing transaction at an advantageous time. See "Illiquid
Securities" below.
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.
Options on Foreign Currencies. The Fund may invest 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
portfolio securities 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,
the Fund may forfeit the entire amount of the premium plus
related transaction costs.
Rights and Warrants. The Fund may invest in rights and warrants,
which are option securities permitting their holders to subscribe
for other securities. The Fund 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
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warrants may be considered more speculative than certain other
types of investments. In addition, the value of a right or
warrant does not necessarily change with the value of the
underlying securities, and a right or warrant ceases to have
value if it is not exercised prior to its expiration date. The
Fund may invest up to 20% of its total assets in rights and
warrants.
Futures Contracts and Options on Futures Contracts. Futures
contracts that the Fund may buy and sell include 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 upon exercise of futures contracts. Options on futures
contracts written or purchased by the Fund will be traded on U.S.
or foreign exchanges.
The Fund will not enter into a futures contract or 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. Nor will the Fund
do so if immediately thereafter the aggregate of initial margin
deposits on all the outstanding futures contracts of the fund and
premiums paid on outstanding options on futures contracts would
exceed 5% of the market value of the total assets of the Fund.
In addition, the Fund will not enter into (i) any futures
contract other than one on fixed-income securities or based on
interest rates, or (ii) any futures contract 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, or (iii) options on futures contracts.
Eurodollar Instruments. Eurodollar instruments are essentially
U.S. Dollar-denominated futures contracts or options thereon 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. The Fund 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. The Fund may
purchase or sell forward contracts on foreign currencies
("forward contracts") to attempt to minimize the risk to it from
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adverse changes in the relationship between the U.S. Dollar and
other currencies. The Fund may enter into a forward contract,
for example, when it enters into a contract for the purchase or
sale of a security denominated in a foreign currency in order to
"lock in" the U.S. Dollar price of the security ("transaction
hedge"). When the Fund believes that a foreign currency may
suffer a substantial decline against the U.S. Dollar, it may
enter a forward sale contract to sell an amount of that foreign
currency approximating the value of some or all of the Fund's
portfolio securities denominated in such foreign currency, or
when the Fund believes that the U.S. Dollar may suffer a
substantial decline against a foreign currency, it may enter into
a forward purchase contract to buy that foreign currency for a
fixed dollar amount ("position hedge"). Instead of entering into
a position hedge, the Fund may, in the alternative, enter into a
forward contract to sell a different foreign currency for a fixed
U.S. Dollar amount where the Fund believes that the U.S. Dollar
value of the currency to be sold pursuant to the forward contract
will fall whenever there is a decline in the U.S. Dollar value of
the currency in which portfolio securities of the Fund are
denominated ("cross-hedge").
Forward Commitments. Forward commitments are forward contracts
for the purchase or sale of securities, including 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. At the
time the Fund enters into a forward commitment, it records the
transaction and thereafter reflects the value of the security
purchased or, if a sale, the proceeds to be received, in
determining its net asset value. Any unrealized appreciation or
depreciation reflected in such valuation would be canceled if the
required conditions did not occur and the trade were canceled.
The use of forward commitments helps the Fund to protect against
anticipated changes in interest rates and prices. For instance,
in periods of rising interest rates and falling bond prices, the
Fund might sell securities in its portfolio on a forward
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commitment basis to limit its exposure to falling bond prices.
In periods of falling interest rates and rising bond prices, the
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 the Fund if, as a
result, the Fund's aggregate forward commitments under such
transactions would be more than 25% of its total assets.
The Fund's right to receive or deliver a security under a forward
commitment may be sold prior to the settlement date. The Fund
enters into forward commitments, however, only with the intention
of actually receiving securities or delivering them, as the case
may be. If the 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 incur a gain or loss.
Interest Rate Transactions (Swaps, Caps and Floors). The Fund
may enter into interest rate swap, cap or floor transactions
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
Fund does not intend to use these transactions in a speculative
manner.
Interest rate swaps involve the exchange by the 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). 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. The 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 the Fund. The Fund may enter into
interest rate swaps involving payments to the same currency or in
different currencies. The Fund will not enter into an interest
rate swap, cap or floor transaction unless the unsecured senior
debt or the claims-paying ability of the other party thereto is
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then rated high quality by at least one nationally recognized
rating organization. The Fund will enter into an interest rate
swap, cap or floor transactions with its respective custodian,
and with other counterparties, but only if: (i) for transactions
with maturities under one year, such other counterparty has
outstanding prime commercial paper; or (ii) for transactions with
maturities greater than one year, the counterparty has
outstanding high quality debt securities.
The swap market has grown substantially in recent years, with a
large number of banks and investment banking firms acting both as
principals and as agents utilizing standardized swap
documentation. As a result, the swap market has become well
established and relatively liquid. Caps and floors are 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 the Fund from interest rate transactions is limited to
the net amount of interest payments that the Fund is
contractually obligated to make.
Standby Commitment Agreements. Standby commitment agreements are
similar to put options that commit the 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 Fund will enter into such agreements
only for the purpose of investing in the security underlying the
commitment at a yield and price considered advantageous and
unavailable on a firm commitment basis. The Fund will not enter
into standby commitments with a remaining term in excess of 45
days and will limit its investments in such commitments so that
the aggregate purchase price of the securities subject to the
commitments does not exceed 25% of its 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, the Fund will bear the risk of
capital loss in the event the value of the security declines and
may not benefit from an appreciation in the value of the security
during the commitment period if the issuer decides not to issue
and sell the security to the Fund.
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
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referenced exchange rate. The Fund may invest in such commercial
paper without limitation. The 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 the 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.
Mortgage-Related Securities. The mortgage-related securities in
which the Fund may invest 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 the Fund) by governmental or private organizations. Mortgage-
related securities issued by GNMA are backed by the full faith
and credit of the United States; those issued by FNMA and FHLMC
are not so backed. 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. However, 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. There are no restrictions
regarding credit quality with respect to non-governmental
mortgage-related securities in which the Fund may invest.
Although the market for mortgage-related securities is becoming
increasingly liquid, those of certain private organizations may
not be readily marketable.
One type of mortgage-related security is of the "pass-through"
variety. The holder of a pass-through security is considered to
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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. Some mortgage-related securities,
such as securities issued by GNMA, are referred to as "modified
pass-through" securities, which, as discussed below, causes
these securities to experience significantly greater price and
yield volatility than experienced by traditional fixed-income
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.
Collateralized mortgage obligations (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 it to be retired substantially earlier
than the stated maturities or final distribution dates. The
principal and interest on the underlying mortgages may be
allocated among several classes of a series of a CMO in many
ways. In a common structure, payments of principal, including
any principal prepayments, on the underlying mortgages are
applied to the classes of the series of a CMO in the order of
their respective stated maturities or final distribution dates,
so that no payment of principal will be made on any class of a
CMO until all other classes having an earlier stated maturity or
final distribution date have been paid in full. One or more
tranches of a CMO may have coupon rates that reset periodically,
or "float", at a specified increment over an index such as LIBOR,
Floating-rate CMOs may be backed by fixed or adjustable rate
mortgages. To date, fixed-rate mortgages have been more common
utilized for this purpose. Floating-rate CMOs are typically
issued with lifetime caps on the coupon rate thereon. These
caps, similar to the caps on adjustable-rate mortgages described
below, represent a ceiling beyond which the coupon rate on a
floating-rate CMO may not be increased regardless of increases in
the interest rate index to which the floating-rate CMO is tied.
The collateral securing the CMOs may consist of a pool of
mortgages, but may also consist of mortgage-backed bonds or pass-
through securities. CMOs may be issued by a U.S. Government
instrumentality or agency or by a private issuer. Although
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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 adjustable-
rate mortgage securities (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 adjustable-rate mortgages or fixed-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). Furthermore, 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
rates are not immediately reflected in the interest rates payable
on the underlying adjustable-rate mortgages.
Stripped mortgage-related securities (SMRS) are mortgage-related
securities that are usually structured with two classes of
securities collateralized by a pool of mortgages or a pool of
mortgaged-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 (IOs) receiving
all of the interest payments from the underlying assets, while
the other class of securities, principal-only securities (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
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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, the Fund will
not rely 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 prepayment of the
underlying mortgages. 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 the Fund may be unable to invest the
proceeds from the early payment of the mortgage-related
securities in an investment that provides as high a yield as the
mortgage-related securities. Consequently, early payment
associated with mortgage-related securities causes these
securities to experience significantly greater price and yield
volatility than 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. During periods of rising
interest rates, the rate of mortgage prepayments usually
decreases, thereby tending to increase the life of mortgage-
related securities. If the life of a mortgage-related security
is inaccurately predicted, the Fund may not be able to realize
the rate of return it expected.
As with fixed-income securities generally, the value of mortgage-
related securities can also be adversely affected by increases in
general interest rates relative to the yield provided by such
securities. Such 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 the Fund to reinvest the prepayment proceeds in
investments yielding the higher current interest rate), as
described above the rate of mortgage prepayments and early
payment of mortgage-related securities generally tends to decline
during a period of rising interest rates.
Although the value of ARMS may not be affected by rising interest
rates as much as the value of fixed-rate mortgage securities is
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affected by rising interest rates, ARMS may still decline in
value as a result of rising interest rates. Although, as
described above, the yield on ARMS varies 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. There have also been proposals to cap
the interest rate that a credit card issuer may charge. 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. Furthermore, in some transactions (such as 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.
U.S. Government Securities. U.S. Government securities may be
backed by the full faith and credit of the United States,
supported only by the right of the issuer to borrow from the U.S.
Treasury or backed only by the credit of the issuing agency
itself. These securities include:
(i) the following U.S. Treasury securities, which are
backed by the full faith and credit of the United
States and differ only in their interest rates,
maturities and times of issuance: U.S. Treasury
bills (maturities of one year or less with no
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interest paid and hence issued at a discount and
repaid at full face value upon maturity), U.S.
Treasury notes (maturities of one to ten years with
interest payable every six months) and U.S.
Treasury bonds (generally maturities of greater
than ten years with interest payable every six
months);
(ii) obligations issued or guaranteed by U.S. Government
agencies and instrumentalities that are supported
by the full faith and credit of the U.S.
Government, such as securities issued by GNMA, the
Farmers Home Administration, the Department of
Housing and Urban Development, the Export-Import
Bank, the General Services Administration and the
Small Business Administration; and
(iii) obligations issued or guaranteed by U.S. Government
agencies and instrumentalities that are not
supported by the full faith and credit of the U.S.
Government, such as securities issued by FNMA and
FHLMC, and governmental CMOs.
The maturities of the U.S. Government securities listed in
paragraphs (i) and (ii) above usually range from three
months to 30 years. Such securities, except GNMA
certificates, normally provide for periodic payments of
interest in fixed amounts with principal payments at
maturity or specified call dates. For information regarding
GNMA, FNMA and FHLMC certificates and CMOs, see "Mortgage-
Related Securities" above.
U.S. Government securities also include zero coupon
securities and principal-only securities and certain SMRS.
In addition, other U.S. Government agencies and
instrumentalities have issued stripped securities that are
similar to SMRS. Such securities include those that are
issued with an I0 class and a PO class. See "Mortgage-
Related Securities" above and "Zero Coupon and Principal-
Only Securities" below. Although these stripped securities
are purchased and sold by institutional investors through
several investment banking firms acting as brokers or
dealers, these securities were only recently developed. As
a result, established trading markets have not yet developed
and, accordingly, these securities may be illiquid.
Guarantees of securities by the U.S. Government or its
agencies or instrumentalities guarantee only the payment of
principal and interest on the securities, and do not
guarantee the securities' yield or value or the yield or
value of the shares of the Fund.
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U.S. Government securities are considered among the safest
of fixed-income investments. As a result, however, their
yields are generally lower than the yields available from
other fixed-income 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
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. There is no
specific limit on the Fund's investment in zero coupon and
principal-only securities.
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 and coupons. 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 instruments are
generally held by a bank in a custodial or trust account).
The staff of the Commission has indicated that, in its view,
these receipts or certificates should be considered as
securities issued by the bank or brokerage firm involved
and, therefore, should not be included in the Fund's
categorization of U.S. Government securities. The Fund
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disagrees with the staff's position but will not treat such
securities as U.S. Government securities until final
resolution of the issue.
Current federal tax law requires that a holder (such as the
Fund) of a zero coupon security accrue a portion of the
discount at which the security was purchased as income each
year even though the holder receives no interest payment in
cash on the security during the year. As a result, in order
to make the distributions necessary for the Fund not to be
subject to federal income or excise taxes, the Fund might be
required to pay out as an income distribution each year an
amount, obtained by liquidation of portfolio securities or
borrowings if necessary, greater than the total amount of
cash that the Fund has actually received as interest during
the year. The Fund believes, however, that it is highly
unlikely that it would be necessary to liquidate portfolio
securities or borrow money in order to make such required
distributions or to meet its investment objective. For a
discussion of the tax treatment of zero coupon Treasury
securities, see "Dividends, Distributions and Taxes-Zero
Coupon Treasury Securities" in the Fund's Statement of
Additional Information.
The Fund may also 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.
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.
The 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
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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.
Structured Securities. Structured securities in which the
Fund may invest represent interests in entities organized
and operated solely for the purpose of restructuring the
investment characteristics of sovereign debt obligations.
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. The Fund
may invest without limit in these types of structured
securities.
Loan Participations and Assignments. The 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. The 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. The 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 the 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
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private negotiations between potential assignees and
potential assignors, however, the rights and obligations
acquired by the 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 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. The 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 is no liquid
market for such securities, such securities 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 securities and the Fund's
ability to dispose of particular assignments or
participations 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 assignments and
participations also may make it more difficult for the Fund
to assign a value to these securities for purposes of
valuing the Fund's portfolio and calculating its net asset
value. The Fund may invest up to 25% of its total assets in
loan participations and assignments.
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"). Brady Bonds have been
issued only recently, and, accordingly, do not have a long
payment history. 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
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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 addition, 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. Convertible securities include
bonds, debentures, corporate notes and preferred stocks that
are convertible into common and preferred stocks. 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
stock, although the higher yield tends to make the
convertible security less volatile than the underlying
common stock. As with debt securities, the market value of
convertible securities tends to decline as interest rates
increase and increase as interest rates decline. While
convertible securities generally offer lower interest or
dividend yields than non-convertible debt securities of
similar quality, they 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, Duff & Phelps or
Fitch and comparable unrated securities may share some or
all of the risks of debt securities with those ratings. For
a description of these risks, see "Risk Considerations-
- -Investment in Lower-Rated Fixed-Income Securities."
Short Sales. A short sale is a transaction in which the
Fund sells a security it does not own but has borrowed in
anticipation that the market price of that security will
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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 and
will consist of cash or highly liquid securities similar to
those borrowed. Depending on the arrangements the Fund
makes with the broker-dealer from which it borrowed the
security regarding remittance of any payments received by
the Fund on such security, the Fund may not receive any
payments (including interest) on its collateral deposited
with the broker-dealer.
If the price of the security sold short increases between
the time of the short sale and the time the 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 the Fund's gain is limited to the price at
which it sold the security short, its potential loss is
theoretically unlimited.
In order to defer realization of gain or loss for U.S.
federal income tax purposes, the Fund may also make short
sales "against the box." In this type of short sale, at the
time of the sale, the Fund owns or has the immediate and
unconditional right to acquire at no additional cost the
identical security. 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. Certain special federal
income tax considerations may apply to short sales entered
into by the Fund. See "Dividends, Distributions and Taxes"
in the Fund's Statement of Additional Information.
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 the Fund to keep
all of its assets at work while retaining "overnight"
flexibility in pursuit of investments of a longer-term
nature. The 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
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obligation, the 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, the Fund
might be delayed in, or prevented from, selling the
collateral for its benefit. There is no percentage
restriction on the Fund's ability to enter into repurchase
agreements. The Fund may enter into repurchase agreements
with member banks of the Federal Reserve System or "primary
dealers" (as designated by the Federal Reserve Bank of New
York).
Reverse Repurchase Agreements and Dollar Rolls. Reverse
repurchase agreements involve sales by the 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 the 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 only
advantageous if the interest cost to the Fund of the reverse
repurchase transaction is less than the cost of otherwise
obtaining the cash.
Dollar rolls involve sales by the 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, the Fund forgoes principal and interest
paid on the securities. The 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 the 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, the 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.
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Reverse repurchase agreements and dollar rolls are
speculative techniques and are considered borrowings by the
Fund. The Fund 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 the Fund will not exceed 25%
of its total assets. See "Risk Considerations - Effects of
Borrowing."
Loans of Portfolio Securities. The 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. The
risks in lending portfolio securities, as with other
extensions of credit, consist of possible loss of rights in
the collateral should the borrower fail financially. In
determining whether to lend securities to a particular
borrower, Alliance will consider all relevant facts and
circumstances, including the creditworthiness of the
borrower. While securities are on loan, the borrower will
pay the Fund any income earned thereon and the Fund may
invest any cash collateral in portfolio securities, thereby
earning additional income, or receive an agreed upon amount
of income from a borrower who has delivered equivalent
collateral. The Fund will have the right to regain record
ownership of loaned securities or equivalent securities in
order to exercise ownership rights such as voting rights,
subscription rights and rights to dividends, interest or
distributions. The Fund may pay reasonable finders',
administrative and custodial fees in connection with a loan.
The Fund will not lend portfolio securities in excess of 25%
of its total assets, nor will the Fund lend portfolio
securities to any officer, director, employee or affiliate
of the Fund or Alliance.
Illiquid Securities. The Fund will not maintain more than
15% of its net assets in illiquid securities. Illiquid
securities generally include (i) direct placements or other
securities that are subject to legal or contractual
restrictions on resale or for which there is no readily
available market (e.g., when trading in the security is
suspended or, in the case of unlisted securities, when
market makers do not exist or will not entertain bids or
offers), including many currency swaps and any assets used
to cover currency swaps, (ii) privately negotiated options
and assets used to cover privately negotiated options, and
(iii) repurchase agreements not terminable within seven
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days. Rule 144A securities that have legal or contractual
restrictions on resale but have a readily available market
are not deemed illiquid. Alliance will monitor the
liquidity of each Fund's Rule 144A portfolio securities
under the supervision of the Directors of that Fund. The
Fund may not be able to sell illiquid securities and may not
be able to realize their full value upon sale.
Future Developments. The Fund may, following written notice
to its shareholders, take advantage of other investment
practices that are not currently contemplated for use by the
Fund or are not available but may yet be developed, to the
extent such investment practices are consistent with the
Fund's investment objective and legally permissible for the
Fund. Such investment practices, if they arise, may involve
risks that exceed those involved in the practices described
above.
Defensive Position. For temporary defensive purposes, the
Fund may invest in certain types of short-term, liquid, high
grade or high quality 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. Such securities may also include short-
term, foreign-currency denominated securities of the type
mentioned above issued by foreign governmental entities,
companies and supranational organizations. For a complete
description of the types of securities in which the Fund may
invest while in a temporary defensive position, see the
Fund's Statement of Additional Information.
Portfolio Turnover. Alliance anticipates that the Fund's
annual rate of turnover will not exceed 500%. A 500%
portfolio turnover rate is greater than that of most other
investment companies. A high rate of portfolio turnover
involves correspondingly greater brokerage and other
expenses than a lower rate, which must be borne by the Fund
and its shareholders. High portfolio turnover also may
result in the realization of substantial net short-term
capital gains. See "Dividends, Distributions and Taxes" in
the Fund's Statement of Additional Information.
CERTAIN FUNDAMENTAL INVESTMENT POLICIES
The Fund has adopted certain fundamental investment policies
listed below, which may not be changed without the approval
of its shareholders. Additional investment restrictions
with respect to the Fund are set forth in its Statement of
Additional Information.
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The Fund may not: (i) borrow money, except the Fund may, in
accordance with provisions of the 1940 Act, (a) borrow from
a bank, if after such borrowing there is asset coverage of
at least 300% as deferred in the 1940 Act, and (b) borrow
for temporary or emergency purposes in an amount not
exceeding 5% of the value if the total assets of the Fund,
or (ii) pledge, hypothecate, mortgage or otherwise encumber
its assets, except to secure permitted borrowings.
RISK CONSIDERATIONS
Fixed-Income Securities. The value of the Fund's shares
will fluctuate with the value of its investments. The value
of the Fund's investments will change as the general level
of interest rates fluctuates. During periods of falling
interest rates, the values of the Fund's securities
generally rise. Conversely, during periods of rising
interest rates, the values of the Fund's securities
generally decline.
In seeking to achieve the 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 the Fund's portfolio will be unavoidable.
Moreover, medium- and lower-rated securities and non-rated
securities of comparable quality may be subject to wider
fluctuations in yield and market values than higher-rated
securities under certain market conditions. Such
fluctuations after a security is acquired do not affect the
cash income received from that security but are reflected in
the net asset value of the Fund.
U.S. Corporate Fixed-Income Securities. The U.S. corporate
fixed-income securities in which the Fund invests 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. Finally, the market price of
such securities may be more volatile to the extent that
expected benefits from the restructuring do not materialize.
The Fund 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 Fund's rights with respect to defaults on
such securities will be subject to applicable U.S.
bankruptcy, moratorium and other similar laws.
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Foreign Investment. The securities markets of many foreign
countries are relatively small, with the majority of market
capitalization and trading volume concentrated in a limited
number of companies representing a small number of
industries. Consequently, the Fund 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 settlements may in
some instances be subject to delays and related
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 the 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. The Fund could
be adversely affected by delays in, or a refusal to grant,
any required governmental approval for repatriation, as well
as by the application to it of other restrictions on
investment. Investing in local markets may require the Fund
to adopt special procedures or seek local governmental
approvals or other actions, any of which may involve
additional costs to the Fund. The liquidity of the Fund's
investments in any country in which any of these factors
exists could be affected and Alliance will monitor the
effect of any such factor or factors on the Fund's
investments. Furthermore, transactions 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
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information is publicly available about certain non-U.S.
issuers than is available about U.S. issuers.
The economies of individual foreign countries may differ
favorable or unfavorably from the U.S. economy in such
respects as growth of gross domestic product or gross
national product, rate of inflation, capital reinvestment,
resource self-sufficiency and balance of payments position.
Nationalization, expropriation or confiscatory taxation,
currency blockage, political changes, government regulation,
political or social instability or diplomatic developments
could affect adversely the economy of a foreign country or
the Fund's investments in such country. In the event of
expropriation, nationalization or other confiscation, the
Fund could lose its entire investment in the country
involved. In addition, laws in foreign countries governing
business organizations, bankruptcy and insolvency may
provide less protection to security holders such as the Fund
than that provided by U.S. laws.
Currency Considerations. The Fund will be adversely
affected by reductions in the value of those currencies
relative to the U.S. Dollar. These changes will affect the
Fund's net assets, distributions and income. If the value
of the foreign currencies in which the Fund receives income
falls relative to the U.S. Dollar between receipt of the
income and the making of Fund distributions the Fund may be
required to liquidate securities in order to make
distributions if 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 the 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 current
at the time they were incurred. In light of these risks,
the Fund may engage in certain currency hedging
transactions, which themselves, involve certain special
risks. See "Additional Investment Practices" above.
Sovereign Debt Obligations. No established secondary
markets may exist for many of the sovereign debt obligations
in which the Fund will invest. Reduced secondary market
liquidity may have an adverse effect on the market price and
the 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
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make it more difficult to the 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 Fund 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,
among other things, in 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 Fund 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 ability of governments to make timely payments on their
obligations is likely to be influenced strongly by the
issuer's balance of payments, including export performance,
and its access to international credits and investments. To
the extent that a country receives payment for its exports
in currencies other than dollars, its ability to make debt
payments denominated in dollars could be adversely affected.
To the extent that a country develops a trade deficit, it
will need to depend on continuing loans from foreign
governments, multi-lateral organizations or private
commercial banks, aid payments from foreign governments and
on inflows of foreign investment. The access of a country
to these forms of external funding may not be certain, and a
withdrawal of external funding could adversely affect the
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capacity of a government to make payments on its
obligations. In addition, the cost of servicing debt
obligations can be affected by a change in international
interest rates since the majority of these obligations carry
interest rates that are adjusted periodically based upon
international rates.
The Fund is 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 Fund's investment objectives.
The Fund 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 issues 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.
Effects of Borrowing. The Fund's loan agreements provide
for additional borrowings and for repayments and
reborrowings from time to time, and the Fund 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 the Fund result in leveraging of the Fund's
shares of common stock. Utilization of leverage, which is
usually considered speculative, however, involves certain
risks to the Fund's shareholders. These include a higher
volatility of the net asset value of the Fund's shares of
common stock and the relatively greater effect on the net
asset value of the shares. So long as the Fund is able to
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
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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 in which the
Fund may be invested. To the extent that the interest
expense on borrowings approaches the net return on the
Fund's investment portfolio, the benefit of leverage to the
Fund's shareholders will be reduced, and if the interest
expense on borrowings were to exceed the net return to
shareholders, the Fund's use of leverage would result in a
lower rate of return than if the Fund were not leveraged.
Similarly, the effect of leverage in a declining market
could be a greater decrease in net asset value per share
than if the Fund were not leveraged. In an extreme case if
the 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, thereby reducing the net asset value of the
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 could adversely affect the Fund's
shareholders, as noted above, or in anticipation of such
changes, the 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. The Fund may also reduce the degree
to which it is leveraged by repaying amounts borrowed.
Under the 1940 Act, the Fund is not permitted to borrow
unless immediately after such borrowing there is "asset
coverage," as that term is defined and used in the 1940 Act,
of at least 300% for all borrowings of the Fund. In
addition, under the 1940 Act, in the event asset coverage
falls below 300%, the Fund must within three days reduce the
amount of its borrowing to such an extent that the asset
coverage of its borrowings is at least 300%. Assuming, for
example, outstanding borrowings representing more more than
one-third of the Fund's total assets less liabilities (other
than such borrowings), the asset coverage of the Fund's
portfolio would be 300%; while outstanding borrowings
representing 25% of the Fund's total assets less liabilities
(other than such borrowings), the asset coverage of the
Fund's portfolio would be 400%. The Fund currently intends
to limit its ability to borrow to an amount not to exceed
25% of its total assets. At all times, however, the Fund
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will maintain asset coverage of outstanding borrowings of at
least 300% and if necessary will, to the extent possible,
reduce the amounts borrowed by making repayments from time
to time in order to do so. Such repayments could require
the Fund to sell portfolio securities at times considered
disadvantageous by Alliance. In the event that the Fund is
required to sell portfolio securities in order to make
repayments, such sales of portfolio securities could cause
the Fund to incur related transaction costs and might cause
the Fund to realize gains on securities held for less than
three months. Because not more than 30% of the Fund's gross
income may be derived from the sale or disposition of stocks
and securities held for less than three months to maintain
the Fund's tax status as a regulated investment company,
such gains would limit the ability of the Fund to sell other
securities held for less than three months that the Fund
might which to sell in the ordinary course of its portfolio
management and thus might adversely affect the Fund's yield.
See "Dividends, Distributions and Taxes."
The Fund may borrow in order to purchase securities or make
other investments. The Fund may also borrow to repurchase
its shares or to meet redemption requests. In addition, the
Fund may borrow for temporary purposes (including the
purposes mentioned in the preceding sentence) in an amount
not exceeding 5% of the value of the assets of the Fund.
Borrowings for temporary purposes are not subject to the
300% asset average limit described above. See "Certain
Fundamental Investment Policies."
Securities Ratings. The ratings of fixed-income securities
by S&P, Moody's, Duff & Phelps and Fitch are a generally
accepted barometer of credit risk. They are, however,
subject to certain limitations from an investor's
standpoint. The rating of an issuer is heavily weighted by
past developments and does not necessarily reflect probable
future conditions. There is frequently a lag between the
time a rating is assigned and the time it is updated. In
addition, there may be varying degrees of difference in
credit risk of securities within each rating category.
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.
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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, although the market values of securities rated
below investment grade and comparable unrated securities
tend to react less to fluctuations in interest rate levels
than do those of higher-rated securities. Securities rated
Baa 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, the Fund may experience
difficulty in valuing such securities and, in turn, the
Fund's assets. Under the Financial Institutions Reform,
Recovery and Enforcement Act of 1989, federally-insured
savings and loan associations were required to have divested
their investments in non-investment grade corporate debt
securities by July 1, 1994. Such divestiture and continuing
restrictions on the ability of such associations to acquire
lower-rated securities could have a material adverse effect
on the market and prices of such securities.
Alliance will try to reduce the risk inherent in investment
in lower-rated securities through credit analysis,
diversification and attention to current developments and
trends in interest rates and economic and political
conditions. However, there can be no assurance that losses
will not occur. Since the risk of default is higher for
lower-rated securities, Alliance's research and credit
analysis are a correspondingly more important aspect of its
program for managing the Fund's securities than would be the
case if the Fund did not invest in lower-rated securities.
In considering investments for the Fund, Alliance will
attempt to identify those high-yielding securities whose
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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.
Non-Rated Securities. Non-rated securities will also be
considered for investment by the Fund when Alliance believes
that the financial condition of the issuers of such
securities, or the protection afforded by the terms of 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.
Non-diversified Status. The Fund is a "non-diversified"
investment company, which means the Fund is not limited in
the proportion of its assets that may be invested in the
securities of a single issuer. However, the Fund intends to
conduct its operations so as to qualify to be taxed as a
"regulated investment company" for purposes of the Code,
which will relieve the Fund of any liability for federal
income tax to the extent its earnings are distributed to
shareholders. See "Dividends, Distributions and Taxes" in
the Fund's Statement of Additional Information. To so
qualify, among other requirements, the Fund will limit its
investments so that, at the close of each quarter of the
taxable year, (i) not more than 25% of the Fund's total
assets will be invested in the securities of a single
issuer, and (ii) with respect to 50% of its total assets,
not more than 5% of its total assets will be invested in the
securities of a single issuer and the Fund will not own more
than 10% of the outstanding voting securities of a single
issuer. The Fund's investments in U.S. Government
securities are not subject to these limitations. Because
the Fund is a non-diversified investment company, it may
invest in a smaller number of individual issuers than a
diversified investment company, and an investment in the
Fund may, under certain circumstances, present greater risk
to an investor than an investment in a diversified
investment company.
Foreign government securities are not treated like U.S.
Government securities for purposes of the diversification
tests described in the preceding paragraph, but instead are
subject to these tests in the same manner as the securities
of non-governmental issuers. In this regard sovereign debt
obligations issued by different issuers located in the same
country are often treated as issued by a single issuer for
purposes of these diversification tests. Certain issuers of
structured securities and loan participations may be treated
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as separate issuers for the purposes of these tests.
Accordingly, in order to meet the diversification tests and
thereby maintain its status as a regulated investment
company, the Fund will be required to diversify its
portfolio of foreign government securities in a manner which
would not be necessary if the Fund had made similar
investments in U.S Government securities.
_________________________________________________________________
PURCHASE AND SALE OF SHARES
_________________________________________________________________
HOW TO BUY SHARES
You can purchase shares of the Fund through broker-dealers, banks
or other financial intermediaries, or directly through Alliance
Fund Distributors, Inc. ("AFD"), the Fund's principal
underwriter. The minimum initial investment is $250. The
minimum for subsequent investments is $50. Investments of $25 or
more are allowed under the automatic investment program. Share
certificates are issued only upon request. See the Subscription
Application and Statement of Additional Information for more
information.
The Fund offers three classes of shares, Class A, Class B and
Class C.
Class A Shares -- Initial Sales Charge Alternative
You can purchase Class A shares at net asset value plus an
initial sales charge, as follows:
Initial Sales Charge
Commission to
As % of As % of Dealer/Agent as
Net Amount Offering % of Offering
Amount Purchased Invested Price Price
Less than $100,000................... 4.44% 4.25% 4.00%
$100,000 to less than $250,000....... 3.36 3.25 3.00
$250,000 to less than $500,000....... 2.30 2.25 2.00
$500,000 to less than $1,000,000..... 1.78 1.75 1.50
On purchases of $1,000,000 or more, you pay no initial sales
charge but may pay a contingent deferred sales charge (a "CDSC")
equal to 1% of the lesser of net asset value at the time of
redemption or original cost if you redeem within one year;
Alliance may pay the dealer or agent a fee of up to 1% of the
dollar amount purchased. Certain purchases of Class A shares may
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qualify for reduced or eliminated sales charges in accordance
with the Fund's Combined Purchase Privilege, Cumulative Quantity
Discount, Statement of Intention, Privilege for Certain
Retirement Plans, Reinstatement Privilege and Sales at Net Asset
Value programs. Consult the Subscription Application and
Statement of Additional Information.
Class B Shares -- Deferred Sales Charge Alternative
You can purchase Class B shares at net asset value without an
initial sales charge. However, you may pay a CDSC if you redeem
shares within three years after purchase. Shares obtained from
dividend or distribution reinvestment are not subject to the
CDSC. The amount of the CDSC (expressed as a percentage of the
lesser of the current net asset value or original cost) will vary
according to the number of years from the purchase of Class B
shares until the redemption of those shares. The amount of the
CDSC on Class B shares is set forth below.
Year Since Purchase CDSC
First................. 3.0%
Second................ 2.0%
Third................. 1.0%
Thereafter............ None
Class B shares are subject to higher distribution fees than
Class A for a period of six years (after which they convert to
Class A shares). The higher fees mean a higher expense ratio, so
Class B shares pay correspondingly lower dividends and may have a
lower net asset value than Class A shares.
Class C Shares -- Asset-Based Sales Charge Alternative
You can purchase Class C shares without any initial sales
charge or a CDSC. The Fund thus receives the full amount of your
purchase, and you will receive the entire net asset value of your
shares upon redemption. Class C shares incur higher distribution
fees than Class A shares and do not convert to any other class of
shares of the Fund. The higher fees mean a higher expense ratio,
so Class C shares pay correspondingly lower dividends and may
have a lower net asset value than Class A shares.
Application of the CDSC
Shares obtained from dividend or distribution reinvestment are
not subject to the CDSC on Class A and Class B shares. The CDSC
is deducted from the amount of the redemption and is paid to AFD.
The CDSC will be waived on redemptions of shares following the
death or disability of a shareholder, to meet the requirements of
certain qualified retirement plans or pursuant to a systematic
47
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withdrawal plan. See the Statement of Additional
Information.
How the Fund Values its Shares
The net asset value of each class of shares in the Fund is
calculated by dividing the value of the Fund's net assets
allocable to that class by the outstanding shares of that class.
Shares are valued each day the New York Stock Exchange (the
"Exchange") is open as of the close of regular trading (currently
4:00 p.m. Eastern time). The securities in the Fund are valued
at their current market value determined on the basis of market
quotations or, if such quotations are not readily available, such
other methods as the Fund's Directors believe would accurately
reflect fair market value.
General
The decision as to which class of shares is more beneficial to
you depends on the amount and intended length of your investment.
If you are making a large investment, thus qualifying for a
reduced sales charge, you might consider Class A shares. If you
are making a smaller investment, you might consider Class B
shares because 100% of your purchase is invested immediately. If
you are unsure of the length of your investment, you might
consider Class C shares because there are no initial or
contingent deferred sales charges. Consult your financial agent.
Dealers and agents may receive different 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
$5,000,000. The Fund may refuse any order to purchase
shares.
In addition to the discount or commission paid to dealers or
agents, AFD from time to time pays additional cash or other
incentives to dealers or agents, including Equico Securities,
Inc., an affiliate of AFD, in connection with the sale of shares
of the Fund. Such additional amounts may be utilized, in whole
or in part, in some cases together with other revenues of such
dealers or agents, to provide additional compensation to
registered representatives who sell shares of the Fund. On some
occasions, such cash or other incentives will be conditioned upon
the sale of a specified minimum dollar amount of the shares of
the Fund and/or other Alliance Mutual Funds during a specific
period of time. Such incentives may take the form of payment for
attendance at seminars, meals, sporting events or theater
performances, or payment for travel, lodging and entertainment
incurred in connection with travel by persons associated with a
dealer and their immediate family members to urban or resort
locations within or outside the United States. Such dealer or
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agent may elect to receive cash incentives of equivalent amount
in lieu of such payments.
HOW TO SELL SHARES
You may "redeem", i.e., sell your shares in the Fund to the Fund
on any day the Exchange is open, either directly or through your
financial intermediary. The price you will receive is the net
asset value (less any applicable CDSC for Class A and Class B
shares) next calculated after the Fund receives your request in
proper form. Proceeds generally will be sent to you within seven
days. However, for shares recently purchased by check or
electronic funds transfer, the Fund will not send proceeds until
it is reasonably satisfied that the check or electronic funds
transfer has been collected (which may take up to 15 days).
Selling Shares Through Your Broker
The Fund must receive your broker's request before 4:00 p.m.
Eastern time for you to receive that day's net asset value (less
any applicable CDSC for Class A and Class B shares). Your broker
is responsible for furnishing all necessary documentation to the
Fund and may charge you for this service.
Selling Shares Directly To the Fund
Send a signed letter of instruction or stock power form to
Alliance Fund Services, Inc. ("AFS"), the Fund's registrar,
transfer agent and dividend-disbursing agent, along with
certificates, if any, that represent the shares you want to sell.
For your protection, signatures must be guaranteed by a bank, a
member firm of a national stock exchange or other eligible
guarantor institution. Stock power forms are available from your
financial intermediary, AFS, and many commercial banks.
Additional documentation is required for the sale of shares by
corporations, intermediaries, fiduciaries and surviving joint
owners. For details contact:
Alliance Fund Services
P.O. Box 1520
Secaucus, NJ 07096-1520
800-221-5672
Alternatively, a request for redemption of shares for which no
stock certificates have been issued can also be made by telephone
to 800-221-5672 by a shareholder who has completed the
Subscription Application or an "Autosell" application obtained
from AFS. Telephone redemption requests must be for at least
$500 and may not exceed $100,000, and must be made between 9 a.m.
and 4 p.m. Eastern time on a Fund business day. Proceeds of
telephone redemptions will be sent by electronic funds transfer.
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Proceeds of telephone redemptions also may be sent by check to a
shareholder's address of record, but only once in any 30-day
period and in an amount not exceeding $50,000. Telephone
redemption by check is not available for shares purchased within
15 calendar days prior to the redemption request, shares held in
nominee or "street name" accounts or retirement plan accounts or
shares held by a shareholder who has changed his or her address
of record within the previous 30 calendar days.
General
The sale of shares is a taxable transaction for federal tax
purposes. Under unusual circumstances, the Fund may suspend
redemptions or postpone payment for up to seven days or longer,
as permitted by federal securities law. The Fund reserves 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 in reaching AFS by telephone, in which event you
should issue written instructions to AFS. AFS is not responsible
for the authenticity of telephonic requests to purchase, sell or
exchange shares. AFS will employ reasonable procedures to verify
that telephone requests are genuine, and could be liable for
losses resulting from unauthorized transactions if it failed to
do so. Dealers and agents may charge a commission for handling
telephonic requests. The telephone service may be suspended or
terminated at any time without notice.
SHAREHOLDER SERVICES
AFS offers a variety of shareholder services. For more
information about these services or your account, call AFS's
toll-free number, 800-221-5672. Some services are described in
the attached Subscription Application. A shareholder's manual
explaining all available services will be provided upon request.
To request a shareholder manual, call 800-227-4618.
HOW TO EXCHANGE SHARES
You may exchange your investment in the Fund for shares of the
same class of other Alliance Mutual Funds (including AFD Exchange
Reserves, a money market fund managed by Alliance). Exchanges of
shares are made at the net asset value next determined and
without sales or service charges. Exchanges may be made by
telephone or written request.
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Class A and Class B shares will continue to age without regard to
exchanges for purpose of determining the CDSC, if any, upon
redemption and, in the case of Class B shares, for the purpose of
conversion to Class A shares. After an exchange, your Class B
shares will automatically convert to Class A shares in accordance
with the conversion schedule applicable to the Class B shares of
the Alliance Mutual Fund you originally purchased for cash
("original shares"). When redemption occurs, the CDSC applicable
to the original shares is applied.
Please read carefully the prospectus of the mutual fund into
which you are exchanging before submitting the request. Call AFS
at 800-221-5672 to exchange uncertificated shares. An exchange
is a taxable capital transaction for federal tax purposes. The
exchange service may be changed, suspended, or terminated on 60
days written notice.
_________________________________________________________________
MANAGEMENT OF THE FUND
_________________________________________________________________
ADVISER
Alliance, which is a Delaware limited partnership with principal
offices at 1345 Avenue of the Americas, New York, New York 10105,
has been retained under an advisory agreement (the "Advisory
Agreement") to provide investment advice and, in general, to
conduct the management and investment program of the Fund,
subject to the general supervision and control of the Directors
of the Fund.
The employees of Alliance who are primarily responsible for the
day-to-day management of the Fund's portfolio are Wayne D. Lyski
and Douglas J. Peebles. Mr. Lyski is an Executive Vice President
of Alliance Capital Management Corporation ("ACMC"), the sole
general partner of Alliance, and has been associated with
Alliance since prior to 1990. Mr. Peebles is a Vice President of
and has been associated with Alliance since prior to 1990.
Alliance is a leading international investment manager
supervising client accounts with assets as of September 30, 1995
of more than $140 billion (of which more than $47 billion
represented the assets of investment companies). Alliance's
clients are primarily major corporate employee benefit funds,
public employee retirement systems, investment companies,
foundations and endowment funds. The 50 registered investment
companies managed by Alliance comprising 104 separate investment
portfolios currently have over one million shareholders. As of
September 30, 1995 Alliance was retained as an investment manager
51
<PAGE>
of employee benefit fund assets for 29 of the Fortune 100
companies.
ACMC, the sole general partner of, and the owner of a 1% general
partnership interest in, Alliance, is an indirect wholly-owned
subsidiary of The Equitable Life Assurance Society of the United
States ("Equitable"), one of the largest life insurance companies
in the United States, which is a wholly-owned subsidiary of The
Equitable Companies Incorporated, a holding company controlled by
AXA, a French insurance holding company. Certain information
concerning the ownership and control of Equitable by AXA is set
forth in the Fund's Statement of Additional Information under
"Management of the Fund."
Under the Advisory Agreement, the Fund pays Alliance a fee at the
annual rate of .75% of the Fund's average daily net assets. The
fee is higher than the management fees paid by most U.S.
registered investment companies investing exclusively in
securities of U.S. issuers, although Alliance believes the fee is
generally comparable to the management fees paid by other
open-end registered investment companies that invest in the
securities of foreign issuers. The fee is accrued daily and paid
monthly.
EXPENSES OF THE FUND
In addition to the payments to Alliance under the Advisory
Agreement described above, the Fund pays certain other costs,
including (i) custody, transfer and dividend disbursing expenses,
(ii) fees of the Directors who are not affiliated with Alliance,
(iii) legal and auditing expenses, (iv) clerical, accounting and
other office costs, (v) costs of printing the Fund's prospectuses
and shareholder reports, (vi) costs of maintaining the Fund's
existence, (vii) interest charges, taxes, brokerage fees and
commissions, (viii) costs of stationery and supplies,
(ix) expenses and fees related to registration and filing with
the Commission and with state regulatory authorities, (x) upon
the approval of the Board of Directors, costs of personnel of
Alliance or its affiliate rendering clerical, accounting and
other office services, and (xi) such promotional expenses as may
be contemplated by the Distribution Services Agreement, described
below.
DISTRIBUTION SERVICES AGREEMENT
Rule 12b-1 adopted by the Commission under the 1940 Act permits
an investment company to pay expenses associated with the
distribution of its shares in accordance with a duly adopted
plan. The Fund has adopted a "Rule 12b-1 plan" (the "Plan") and
has entered into a Distribution Services Agreement (the
"Agreement") with AFD. Pursuant to the Plan, the Fund pays to
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AFD a Rule 12b-1 distribution services fee, which may not exceed
an annual rate of .30% of the Fund's aggregate average daily net
assets attributable to the Class A shares, 1.00% of the Fund's
aggregate average daily net assets attributable to the Class B
shares and 1.00% of the Fund's aggregate average daily net assets
attributable to the Class C shares. The Plan provides that a
portion of the distribution services fee in an amount not to
exceed .25% of the aggregate average daily net assets of the Fund
attributable to each class of shares constitutes a service fee
used for personal service and/or the maintenance of shareholder
accounts.
The Plan provides that AFD will use the distribution services fee
received from the Fund in its entirety for payments (i) to
compensate broker-dealers or other persons for providing
distribution assistance, (ii) to otherwise promote the sale of
shares of the Fund, and (iii) to compensate broker-dealers,
depository institutions and other financial intermediaries for
providing administrative, accounting and other services with
respect to the Fund's shareholders. In this regard, some
payments under the Plan are used to compensate financial
intermediaries with trail or maintenance commissions in an amount
equal to .25%, annualized, with respect to Class A shares and
Class B shares, and 1.00%, annualized, with respect to Class C
shares, of the assets maintained in the Fund by its customers.
Distribution services fees received from the Fund with respect to
Class A shares will not be used to pay any interest expenses,
carrying charges or other financing costs or allocation of
overhead of AFD. Distribution services fees received from the
Fund with respect to Class B and Class C shares may be used for
these purposes. The Plan also provides that Alliance may use its
own resources to finance the distribution of the Fund's shares.
The Fund is not obligated under the Plan to pay any distribution
services fee in excess of the amounts set forth above. With
respect to Class A shares of the Fund, distribution expenses
accrued by AFD in one fiscal year may not be paid from
distribution services fees received from the Fund in subsequent
fiscal years. AFD's compensation with respect to Class B and
Class C shares under the Plan is directly tied to the expenses
incurred by AFD. Actual distribution expenses for such Class B
and Class C shares for any given year, however, will probably
exceed the distribution services fees payable under the Plan with
respect to the class involved and, in the case of Class B shares,
payments received from CDSCs. The excess will be carried forward
by AFD and reimbursed from distribution services fees payable
under the Plan with respect to the class involved and, in the
case of Class B shares, payments subsequently received through
CDSCs, so long as the Plan is in effect.
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The Plan is in compliance with rules of the National Association
of Securities Dealers, Inc. which effectively limit the annual
asset-based sales charges and service fees that a mutual fund may
pay on a class of shares to .75% and .25%, respectively, of the
average annual net assets attributable to that class. The rules
also limit the aggregate of all front-end, deferred and asset-
based sales charges imposed with respect to a class of shares by
a mutual fund that also charges a service fee to 6.25% of
cumulative gross sales of shares of that class, plus interest at
the prime rate plus 1% per annum.
The Glass-Steagall Act and other applicable laws may limit the
ability of a bank or other depository institution to become an
underwriter or distributor of securities. However, in the
opinion of the Fund's management, based on the advice of counsel,
these laws do not prohibit such depository institutions from
providing services for investment companies such as the
administrative, accounting and other services referred to in the
Agreement. In the event that a change in these laws prevented a
bank from providing such services, it is expected that other
services arrangements would be made and that shareholders would
not be adversely affected. The State of Texas requires that
shares of the Fund may be sold in that state only by dealers or
other financial institutions that are registered there as broker-
dealers.
_________________________________________________________________
DIVIDENDS, DISTRIBUTIONS AND TAXES
_________________________________________________________________
DIVIDENDS AND DISTRIBUTIONS
Dividends on shares of the Fund will be declared on each Fund
business day from the Fund's net investment income. Dividends on
shares for Saturday, Sunday and holidays will be declared on the
previous business day. The Fund pays dividends on its shares
after the close of business on the 20th day of each month, or if
such day is not a business day, the first business day
thereafter. At your election (which you may change at least 30
days prior to the record date for a particular dividend or
distribution), dividends and distributions are paid in cash or
reinvested without charge in additional shares of the same class
having an aggregate net asset value as of the payment date of the
dividend or distribution equal to the cash amount thereof.
If you receive an income dividend or capital gains distribution
in cash you may, within 30 days following the date of its
payment, reinvest the dividend or distribution in additional
shares of the Fund without charge by returning to Alliance, with
54
<PAGE>
appropriate instructions, the check representing such dividend or
distribution. Thereafter, unless you otherwise specify, you will
be deemed to have elected to reinvest all subsequent dividends
and distributions in shares of the Fund.
Cash dividends can be paid by check or, if the shareholder so
elects, electronically via the ACH network. There is no sales or
other charge in connection with the reinvestment of dividends and
capital gains distributions. Dividends paid by the Fund, if any,
with respect to Class A, Class B and Class C shares will be
calculated in the same manner at the same time on the same day
and will be in the same amount, except that the higher
distribution services fees applicable to Class B and Class C
shares, and any incremental transfer agency costs relating to
Class B shares, will be borne exclusively by the class to which
they relate.
While it is the intention of the Fund to distribute to its
shareholders substantially all of each fiscal year's net income
and net realized capital gains, if any, the amount and time of
any such dividend or distribution must necessarily depend upon
the realization by the Fund or income and capital gains from
investments. There is no fixed dividend rate, and there can be
no assurance that the Fund will pay any dividends or realize any
capital gains.
If you buy shares just before the Fund elects a distribution from
its net asset value, you will pay the full price for the shares
and then receive a portion of the price back as a taxable
distribution.
U.S. FEDERAL INCOME TAXES
The Fund intends to qualify to be taxes as a "regulated
investment company" under the Code. To the extent that the Fund
distributes its taxable income and net capital gain to its
shareholders, qualification as a regulated investment company
relieves the Fund of federal income and excise taxes on that part
of its taxable income including net capital gains which it pays
out to its shareholders. Dividends out of net ordinary income
and distributions of net short-term capital gains are taxable to
the recipient shareholders as ordinary income. In the case of
corporate shareholders, such dividends from the Fund may be
eligible for the dividends-received deduction, except that the
amount eligible for the deduction is limited to the amount of
qualifying dividends received by the Fund. A corporation's
dividends-received deduction will be disallowed unless the
corporation holds shares in the Fund at least 46 days.
Furthermore, the dividends-received deduction will be disallowed
to the extent a corporation's investment in shares of the Fund is
financed with indebtedness.
55
<PAGE>
The excess of net long-term capital gains over the net short-term
capital losses realized and distributed by the Fund to its
shareholders as capital gains distributions is taxable to the
shareholders as long-term capital gains, irrespective of the
length of time a shareholder may have held his or her stock.
Long-term capital gains distributions are not eligible for the
dividends-received deduction referred to above.
Under the current federal tax law the amount of an income
dividend or capital gains distribution declared by the Fund
during October, November or December of a year to shareholders of
record as of a specified date in such a month that is paid during
January of the following year is includable in the prior year's
taxable income of shareholders that are calendar year taxpayers.
Any dividend or distribution received by a shareholder on shares
of the Fund will have the effect of reducing the net asset value
of such shares by the amount of such dividend or distribution.
Furthermore, a dividend or distribution made shortly after the
purchase of such shares by a shareholder, although in effect a
return of capital to that particular shareholder, would be
taxable to him or her as described above. If a shareholder held
shares six months or less and during that period received a
distribution taxable to such shareholder as long-term capital
gain, any loss realized on the sale of such shares during such
six-month period would be a long-term capital loss to the extent
of such distribution.
A dividend or capital gains distribution with respect to shares
of the Fund held by a tax-deferred or qualified plan, such as an
individual retirement account, 403(b)(7) retirement plan or
corporate pension or profit-sharing plan, will not be taxable to
the plan. Distributions from such plans will be taxable to
individual participants under applicable tax rules without regard
to the character of the income earned by the qualified plan.
Distributions by the Fund may be subject to state and local
taxes.
The Fund will be required to withhold 31% of any payments made to
a shareholder if the shareholder has not provided a certified
taxpayer identification number to the Fund, or the Secretary of
the Treasury notifies the Fund that a shareholder has not
reported all interest and dividend income required to be shown on
the shareholder's Federal income tax return.
Shareholders will be advised annually as to the federal tax
status of dividends and capital gains distributions made by the
Fund for the preceding year. Shareholders are urged to consult
their tax advisers regarding their own tax situation.
56
<PAGE>
FOREIGN INCOME TAXES
Investment income received by the Fund from sources within
foreign countries may be subject to income taxes withheld at the
source. To the extent the 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 for foreign income
taxes paid, but there can be no assurance that the Fund will be
able to do so.
_________________________________________________________________
GENERAL INFORMATION
_________________________________________________________________
PORTFOLIO TRANSACTIONS
Consistent with the Rules of Fair Practice of the National
Association of Securities Dealers, Inc., and subject to seeking
best price and execution, the Fund may consider sales of its
shares as a factor in the selection of dealers to enter into
portfolio transactions with the Fund.
ORGANIZATION
Alliance Global Strategic Income Trust, Inc. is a Maryland
corporation organized on October 26, 1995. It is anticipated
that annual shareholder meetings will not be held; shareholder
meetings will be held only when required by federal or state law.
Shareholders have available certain procedures for the removal of
Directors.
A shareholder in the Fund will be entitled to his or her pro rata
share of all dividends and distributions arising from the Fund's
assets and, upon redeeming shares, will receive the then current
net asset value of the Fund represented by the redeemed shares
less any applicable CDSC. The Fund is empowered to establish,
without shareholder approval, additional portfolios, which may
have different investment objectives, and additional classes of
shares. If an additional portfolio or class were established in
the Fund, each share of the portfolio or class would normally be
entitled to one vote for all purposes. Generally, shares of each
portfolio and class would vote as a single series or class on
matters, such as the election of Directors, that affect each
portfolio or class in substantially the same manner. Class A,
Class B and Class C shares have identical voting, dividend,
liquidation and other rights, except that each class bears its
own distribution and transfer agency expenses. Each class of
shares votes separately with respect to the Fund's Rule 12b-1
distribution plan and other matters for which separate class
57
<PAGE>
voting is appropriate under applicable law. Shares are freely
transferable, are entitled to dividends as determined by the
Directors and, in liquidation of the Fund, are entitled to
receive the net assets of the Fund. Certain additional matters
relating to the Fund's organization are discussed in its
Statement of Additional Information.
REGISTRAR, TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT
AFS, an indirect wholly-owned subsidiary of Alliance, located at
500 Plaza Drive, Secaucus, New Jersey 07094, acts as the Fund's
registrar, transfer agent and dividend-disbursing agent for a fee
based upon the number of shareholder accounts maintained for the
Fund. The transfer agency fee with respect to the Class B shares
will be higher than the transfer agency fee with respect to the
Class A shares or Class C shares.
PRINCIPAL UNDERWRITER
AFD, an indirect wholly-owned subsidiary of Alliance, located at
1345 Avenue of the Americas, New York, New York 10105, is the
principal underwriter of shares of the Fund.
PERFORMANCE INFORMATION
From time to time, the Fund advertises its "yield" and "total
return", which is computed separately for Class A, Class B and
Class C shares. Such advertisements disclose the Fund's average
annual compounded total return for the periods prescribed by the
Commission. The Fund's yield for any 30-day (or one-month)
period is computed by dividing the net investment income per
share earned during such period by the maximum public offering
price per share on the last day of the period, and then
annualizing such 30-day (or one-month) yield in accordance with a
formula prescribed by the Commission which provides for
compounding on a semi-annual basis. The Fund may also state in
sales literature an "actual distribution rate" for each class
which is computed in the same manner as yield except that actual
income dividends declared per share during the period in question
are substituted for net investment income per share. The actual
distribution rate is computed separately for Class A, Class B and
Class C shares. Advertisements of the Fund's total return
disclose its average annual compounded total return for the
periods prescribed by the Commission. The Fund's total return
for each such period is computed by finding, through the use of a
formula prescribed by the Commission, the average annual
compounded rate of return over the period that would equate an
assumed initial amount invested to the value of the investment at
the end of the period. For purposes of computing total return,
income, dividends and capital gains distributions paid on shares
of the Fund are assumed to have been reinvested when paid and the
58
<PAGE>
maximum sales charges applicable to purchases and redemptions of
the Fund's shares are assumed to have been paid. The Fund will
include performance data for each class of shares will be
included in any advertisement or sales literature using
performance data of the Fund. These advertisements may quote
performance rankings or ratings of the Fund by financial
publications or independent organizations such as Lipper
Analytical Services, Inc. and Morningstar, Inc. or compare the
Fund's performance to various indices.
Additional Information
This Prospectus and the Statement of Additional Information,
which have been incorporated by reference herein, do not contain
all the information set forth in the Registration Statement filed
by the Fund with the Commission under the Securities Act. Copies
of the Registration Statements may be obtained at a reasonable
charge from the Commission or may be examined, without charge, at
the offices of the Commission in Washington, D.C.
59
00250223.AA0
<PAGE>
Report of Independent Auditors
Shareholder and Board of Directors
Alliance Global Strategic Income Trust, Inc.
We have audited the accompanying statement of assets and
liabilities of Alliance Global Strategic Income Trust, Inc.
as of December 19, 1995. This statement of assets and
liabilities is the responsibility of the Fund's management.
Our responsibility is to express an opinion on this
statement of assets and liabilities based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan
and perform the audit to obtain reasonable assurance about
whether this statement of assets and liabilities is free of
material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures
in the statement of assets and liabilities. An audit also
includes assessing the accounting principles used and
significant estimates made by management, as well as
evaluating the overall statement of assets and liabilities
presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the statement of assets and liabilities
referred to above presents fairly, in all material respects,
the financial position of Alliance Global Strategic Income
Trust, Inc. at December 19, 1995, in conformity with
generally accepted accounting principles.
/s/ Ernst & Young LLP
New York, New York
December 21, 1995
<PAGE>
Alliance Global Strategic Income Trust, Inc.
Statement of Assets and Liabilities
December 19, 1995
ASSETS
Cash . . . . . . . . . . . . . . . . . . . . . . . $100,000
Deferred organization expenses (Note A). . . . . . 136,600
________
Total assets . . . . . . . . . . . . . . . . . . . 236,600
________
LIABILITIES
Deferred organization expenses payable (Note A). . 136,600
________
NET ASSETS
(Applicable to 10,000 shares of Class Y common
stock issued and outstanding, with $.001 par
value and 3,000,000,000 shares authorized.
Class A, Class B and Class C are also authorized
each with $.001 par value and 3,000,000,000
shares authorized.). . . . . . . . . . . . . . . . $100,000
________
CALCULATION OF MAXIMUM OFFERING PRICE
Class Y Shares
Net asset value and redemption price per share
($100,000/10,000 shares issued and outstanding). . $10.00
======
See notes to Statement of Assets and Liabilities
<PAGE>
Alliance Global Strategic Income Trust, Inc.
Notes to Financial Statement
December 19, 1995
Note A-Organization
Alliance Global Strategic Income Trust, Inc. (the "Fund") was
organized as a Maryland corporation on October 25, 1995 and is
registered under the Investment Company Act of 1940 as an
open-end, diversified management investment company. The Fund
has had no operations other than the sale to Alliance Capital
Management L.P. (the "Adviser") of 10,000 shares of Class Y
common stock for the amount of $100,000 on December 18, 1995.
The Fund currently offers one class of shares. Class Y shares
are sold without an initial or contingent deferred sales
charge. Costs incurred and to be incurred in connection with
the organization and initial registration of the Fund will be
paid initially by the Adviser. The Fund will reimburse the
Adviser for such costs, which will be deferred and amortized
by the Fund over the period of benefit, not to exceed 60
months from the date the Fund commences investment operations.
If any of the initial shares of the Fund are redeemed by a
holder thereof during such amortization period, the proceeds
will be reduced by the unamortized organization expenses in
the same ratio as the number of initial shares being redeemed
bears to the number of initial shares outstanding at the time
of redemption.
Note B-Investment Advisory, Transfer Agency and Distribution
Services Agreements
Under the terms of an Investment Advisory Agreement, the Fund
will pay its Adviser an advisory fee at an annual rate of .75%
of the Fund's average daily net assets. Such fee will be
accrued daily and paid monthly.
The Adviser has agreed to reimburse the Fund to the extent
that the aggregate expenses (exclusive of interest, taxes,
brokerage, distribution services fees and extraordinary
expenses, all to the extent permitted by applicable state law
and regulation) exceed the limits prescribed by any state in
which the Fund's shares are qualified for sale. The Fund
believes that the most restrictive expense ratio limitation
imposed by any state is 2.5% of the first $30 million of its
average net assets, 2% of the next $70 million of its average
net assets and 1.5% of its average net assets in excess of
$100 million. Expenses reimbursements, if any, will be
accrued daily and paid monthly.
<PAGE>
The Fund has entered into a Distribution Services Agreement
(the "Agreement") with Alliance Fund Distributors, Inc., (the
"Principal Underwriter"). The Agreement provides that the
Principal Underwriter will use amounts payable under the
Agreement in their entirety for distribution assistance and
promotional activities. The Agreement also provides that the
Adviser will use its own resources to finance the distribution
of the Fund's shares. The Principal Underwriter is a wholly-
owned subsidiary of Alliance Capital Management L.P.
The Fund will compensate Alliance Fund Services, Inc. (a
wholly-owned subsidiary of the Adviser) for performing
transfer agency-related services for the Fund.
2
00250223.AA0
<PAGE>
_________________________________________________________________
APPENDIX A:
BOND RATINGS
_________________________________________________________________
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 higher protected nor poorly
secured. Interest payment 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.
A-1
<PAGE>
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 market 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 not rated 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.
A-2
<PAGE>
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 high rated categories.
BBB - Debt rated BBB is regarded as having an adequate capacity
to pay interest and repay principal. Whereas it normally
exhibits adequate protection parameters, 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 and C is regarded
as having predominately speculative characteristics with respect
to capacity to pay interest and repay principal. BB indicates
the least degree of speculation and CCC the highest. While such
debt will likely have some quality and protective
characteristics, these are outweighted by large uncertainties or
major exposures to adverse conditions.
CI - The rating CI is reserved for income bonds on which no
interest is being paid.
D - Debt rated D is in payment default. The D rating category is
used when interest payments or principal payments are not made on
the date due even if the applicable grace period has not expired,
unless S&P believes that such payments will be made during such
grace period. The D rating also will be used upon the filing of
a bankruptcy petition if debt service payments are jeopardized.
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.
DUFF & PHELPS CREDIT RATING CO.
AAA - Highest claims paying ability. Risk facts are negligible.
AA+, AA, AA- - Very high claims paying ability. Protection
factors are strong. Risk is modest, but may vary slightly over
time due to economic and/or underwriting conditions.
A+, A, A- - High claims paying ability. Protection factors are
average and there is an expectation of variability in risk over
time due to economic and/or underwriting conditions.
A-3
<PAGE>
BBB+, BBB, BBB- - Adequate claims paying ability. Protection
factors are adequate. There is considerable variability in risk
over time due to economic and/or underwriting conditions.
BB+, BB, BB- - Uncertain claims paying ability and less than
investment-grade quality. However, the company is deemed likely
to meet these obligations when due. Protection factors will vary
widely with changes in economic and/or underwriting conditions.
B+, B, B- - Possessing risk that policy holder and contract-
holder obligations will not be paid when due. Protection factors
will vary widely with changes in economic and/or underwriting
conditions or company fortunes.
CCC - There is substantial risk that policy holder and contract
holder obligations will not be paid when due. Company has been
or is likely to be placed under state insurance department
supervision.
DD - Company is under an order of liquidation.
FITCH INVESTORS SERVICE, INC.
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 F-1+.
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.
A-4
<PAGE>
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.
A-5
00250223.AA0
<PAGE>
This prospectus does not constitute an offering in any state in
which such offering may not lawfully be made.
Alliance
Global Strategic
Income
Trust
Goals: Primarily, high level
of current income and,
secondarily, capital appreciation,
through investment primarily
in debt securities of U.S.
and non-U.S. issuers.
Prospectus and Application
______ __, 1995
00250223.AA0
<PAGE>
ALLIANCE GLOBAL STRATEGIC
INCOME TRUST, INC.
________________________________________________________________
P.O. Box 1520, Secaucus, New Jersey 07096-1520
Toll Free (800) 221-5672
For Literature: Toll Free (800) 227-4618
________________________________________________________________
STATEMENT OF ADDITIONAL INFORMATION
[ ], 1995
_________________________________________________________________
This Statement of Additional Information is not a prospectus but
supplements and should be read in conjunction with the current
Prospectus for the Fund dated [ ], 1995. Copies of such
Prospectus may be obtained by contacting Alliance Fund Services,
Inc. at the address or the "Literature" telephone number shown
above.
TABLE OF CONTENTS
Page
Description of the Fund.......................................
Management of the Fund........................................
Expenses of the Fund..........................................
Purchase of Shares............................................
Redemption and Repurchase of Shares...........................
Shareholder Services..........................................
Net Asset Value...............................................
Dividends, Distributions and Taxes............................
Portfolio Transactions........................................
General Information...........................................
Report of Independent Auditors and
Financial Statement.........................................
<PAGE>
Appendix A: Certain Investment
Practices....................................A-1
(R): This registered service mark used under license from the
owner, Alliance Capital Management L.P.
<PAGE>
________________________________________________________________
DESCRIPTION OF THE FUND
________________________________________________________________
Alliance Global Strategic Income Trust, Inc. (the
"Fund") is a non-diversified investment company. The Fund's
investment objectives are "fundamental" and cannot be changed
without a shareholder vote. Except as noted, the Fund's
investment policies are not fundamental and thus can be changed
without a shareholder vote. The Fund will not change these
policies without notifying its shareholders. There is no
guarantee that the Fund will achieve its investment objectives.
Investment Objectives and Policies
The Fund is a non-diversified open-end investment
management company. Its primary investment objective is to seek
a high level of current income. Its secondary investment
objective is capital appreciation. The Fund pursues its
investment objectives by investing 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 may also
use derivative instruments to enhance income. The average
weighted maturity of the Fund's portfolio of fixed-income
securities is expected to vary between 5 years and 30 years in
accordance with the Adviser's changing perceptions of the
relative attractiveness of various maturity ranges.
Under normal market conditions, at least 65% of the
value of the Fund's total assets will be invested in the fixed-
income securities of issuers located in three countries, one of
which may be the United States. No more than 25% of the value of
its total assets, however, will be invested in the securities of
any one foreign government. U.S. Government securities in which
the Fund may invest include mortgage-related securities and zero
coupon securities. Fixed-income securities in which the Fund may
invest include preferred stock, mortgage-related and other asset-
backed securities, and zero coupon securities. The Fund may also
invest in rights, warrants and loan participations and
assignments.
The Fund will maintain at least 65% of the value of its
total assets in investment grade securities and may maintain not
more than 35% of the value of its total assets in lower-rated
securities. See "Risk Considerations -- Securities Ratings" and
"-- Investment in Lower-Rated Fixed-Income Securities" sections
in the Fund's Prospectus. Unrated securities will be considered
for investment by the Fund when Alliance Capital Management L.P.,
the Fund's investment adviser (the "Adviser") believes that the
2
<PAGE>
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. Lower-rated securities in which the
Fund may invest include Brady Bonds and fixed-income securities
of issuers located in emerging markets. There is no minimum
rating requirement applicable to the Fund's investments in
lower-rated fixed-income securities.
Additional Investment Policies and Practices
To the extent not described in the Prospectus, set forth
below and in Appendix A hereto is additional information
regarding the Fund's investment policies and practices. Except
as otherwise noted, the Fund's investment policies are not
designated "fundamental policies" within the meaning of the
Investment Company Act of 1940 (the "1940 Act") and, therefore,
may be changed by the Directors of the Fund without a shareholder
vote. However, the Fund will not change its investment policies
without contemporaneous written notice to shareholders.
Loan Participations. In a typical corporate loan
syndication, a number of lenders, usually banks ("co-lenders"),
lend a corporate borrower a specified sum pursuant to the terms
and conditions of a loan agreement. One of the co-lenders
usually agrees to act as the agent bank with respect to the loan.
The loan agreement among the corporate borrower and the co-
lenders identifies the agent bank as well as sets forth the
rights and duties of the parties. The agreement often (but not
always) provides for the collateralization of the corporate
borrower's obligations thereunder and includes various types of
restrictive covenants which must be met by the borrower.
The participation interests acquired by the Fund may,
depending on the transaction, take the form of a direct co-
lending relationship with the corporate borrower, an assignment
of an interest in the loan by a co-lender or another participant,
or a participation in the seller's share of the loan. Typically,
the Fund will look to the agent bank to collect principal of and
interest on a participation interest, to monitor compliance with
loan covenants, to enforce all credit remedies, such as
foreclosures on collateral, and to notify co-lenders of any
adverse changes in the borrower's financial condition or
declarations of insolvency. The agent bank in such cases will be
qualified under the 1940 Act to serve as a custodian for a
registered investment company such as the Fund. The agent bank
is compensated for these services by the borrower pursuant to the
terms of the loan agreement.
3
<PAGE>
When the Fund acts as co-lender in connection with a
participation interest or when the Fund acquires a participation
interest the terms of which provide that the Fund will be in
primarily with the corporate borrower, the Fund will have direct
recourse against the borrower in the event the borrower fails to
pay scheduled principal and interest. In cases where the Fund
lacks such direct recourse, the Fund will look to the agent bank
to enforce appropriate credit remedies against the borrower.
The Fund believes that the principal credit risk
associated with acquiring participation interests from a co-
lender or another participant is the credit risk associated with
the underlying corporate borrower. The Fund may incur additional
credit risk, however, when the Fund is in the position of a
participant rather than a co-lender because the Fund must assume
the risk of insolvency of the co-lender from which the
participation interest was acquired and that of any person
interpositioned between the Fund and the co-lender. However, in
acquiring participation interests the Fund will conduct analysis
and evaluation of the financial condition of each such co-lender
and participant to ensure that the participation interest meets
the Fund's high quality standard and will continue to do so as
long as it holds a participation.
Brady Bonds. The Portfolio may invest in certain debt
obligations customarily referred to as "Brady Bonds," which are
created through the exchange of existing commercial bank loans to
foreign securities 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").
Brady Plan debt restructurings totalling more than
$120 billion have been implemented to date in Argentina, Bolivia,
Brazil, Costa Rica, the Dominican Republic, Ecuador, Mexico,
Nigeria, the Philippines, Uruguay and Venezuela, with the largest
proportion of Brady Bonds having been issued to date by
Argentina, Brazil, Mexico and Venezuela.
Brady Bonds have been issued only recently, and,
accordingly, do not have a long payment history. They may be
collateralized or uncollateralized and issued in various
currencies (although most are dollar-denominated) and they are
actively traded in the over-the-counter secondary market.
Certain Brady Bonds are collateralized in full as to principal
due at maturity by zero coupon obligations issued or guaranteed
by the U.S. government, its agencies or instrumentalities having
the same maturity ("Collateralized Brady Bonds").
Dollar-denominated, Collateralized Brady Bonds may be
fixed rate bonds or floating rate bonds. Interest payments on
Brady Bonds are often collateralized by cash or securities in an
4
<PAGE>
amount that, in the case of fixed rate bonds, is equal to at
least one year of rolling interest payments or, in the case of
floating rate bonds, initially is equal to a least one year's
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 three or 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 which would have
been due on the Brady Bonds in the normal course. In addition,
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 entitles of countries issuing Brady
Bonds, investments in Brady Bonds are to be viewed as
speculative.
Standby Commitment Agreements. The purchase of a
security subject to a standby commitment agreement and the
related commitment fee will be recorded on the date on which the
security can reasonably be expected to be issued and the value of
the security will thereafter be reflected in the calculation of
the Fund's net asset value. The cost basis of the security will
be adjusted by the amount of the commitment fee. In the event
the security is not issued, the commitment fee will be recorded
as income on the expiration date of the standby commitment.
Eurodollar Instruments. Eurodollar instruments are
essentially U.S. Dollar-denominated further contracts or options
thereon that are linked to the London Interbank Offered Rate and
are subject to the same limitations and risks as other futures
contracts and options thereon, which are described in Appendix A.
Repurchase Agreements. The Fund's Board of Directors
has established procedures, which are periodically reviewed by
the Board, pursuant to which the Adviser monitors the
creditworthiness of the dealers with which the Fund enters into
repurchase agreement transactions.
5
<PAGE>
Illiquid Securities. Historically, illiquid securities
have included securities subject to contractual or legal
restrictions on resale because they have not been registered
under the Securities Act of 1933, as amended (the "Securities
Act"), securities which are otherwise not readily marketable and
repurchase agreements having a maturity of longer than seven
days. Securities which have not been registered under the
Securities Act are referred to as private placements or
restricted securities and are purchased directly from the issuer
or in the secondary market. Mutual funds do not typically hold a
significant amount of these restricted or other illiquid
securities because of the potential for delays on resale and
uncertainty in valuation. Limitations on resale may have an
adverse effect on the marketability of portfolio securities and a
mutual fund might be unable to dispose of restricted or other
illiquid securities promptly or at reasonable prices and might
thereby experience difficulty satisfying redemptions within seven
days. A mutual fund might also have to register such restricted
securities in order to dispose of them resulting in additional
expense and delay. Adverse market conditions could impede such a
public offering of securities.
In recent years, however, a large institutional market
has developed for certain securities that are not registered
under the Securities Act, including repurchase agreements,
commercial paper, foreign securities, municipal securities and
corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security
can be readily resold or on an issuer's ability to honor a demand
for repayment. The fact that there are contractual or legal
restrictions on resale to the general public or to certain
institutions may not be indicative of the liquidity of such
investments.
During the coming year, the Fund may invest up to 5% of
its total assets in restricted securities issued under
Section 4(2) of the Securities Act, which exempts from
registration "transactions by an issuer not involving any public
offering." Section 4(2) instruments are restricted in the sense
that they can only be resold through the issuing dealer to
institutional investors and in private transactions; they cannot
be resold to the general public without registration.
Rule 144A under the Securities Act allows a broader
institutional trading market for securities otherwise subject to
restriction on resale to the general public. Rule 144A
establishes a "safe harbor" from the registration requirements of
the Securities Act for resales of certain securities to qualified
institutional buyers. An insufficient number of qualified
institutional buyers interested in purchasing certain restricted
securities held by the Fund, however, could affect adversely the
6
<PAGE>
marketability of such portfolio securities and the Fund might be
unable to dispose of such securities promptly or at reasonable
prices. Rule 144A has already produced enhanced liquidity for
many restricted securities, and market liquidity for such
securities may continue to expand as a result of this regulation
and the consequent inception of the PORTAL System sponsored by
the National Association of Securities Dealers, Inc., an
automated system for the trading, clearance and settlement of
unregistered securities of domestic and foreign issuers.
The Adviser, under the supervision of the Board of
Directors, will monitor the liquidity of restricted securities in
the Fund's portfolio. In reaching liquidity decisions, the
Adviser will consider, among other factors, the following:
(1) the frequency of trades and quotes for the security; (2) the
number of dealers making quotations to purchase or sell the
security; (3) the number of other potential purchasers of the
security; (4) the number of dealers undertaking to make a market
in the security; (5) the nature of the security (including its
unregistered nature) and the nature of the marketplace for the
security (e.g., the time needed to dispose of the security, the
method of soliciting offers and the mechanics of the transfer);
and (6) any applicable Securities and Exchange Commission (the
"Commission") interpretation or position with respect to such
type of security.
General. The successful use of the foregoing investment
practices draws upon the Adviser's special skills and experience
with respect to such instruments and usually depends on the
Adviser's ability to forecast price movements or currency
exchange rate movements correctly. Should exchange rates move in
an unexpected manner, the Fund may not achieve the anticipated
benefits of futures contracts, options or forward contracts or
may realize losses and thus be in a worse position than if such
strategies had not been used. Unlike many exchange-traded
futures contracts and options on futures contracts, there are no
daily price fluctuation limits with respect to options on
currencies and forward contracts, and adverse market movements
could therefore continue to an unlimited extent over a period of
time. In addition, the correlation between movements in the
prices of such instruments and movements in the prices of the
securities and currencies hedged or used for cover will not be
perfect and could produce unanticipated losses.
The Fund's ability to dispose of its position in futures
contracts, options and forward contracts will depend on the
availability of liquid markets in such instruments. Markets in
options and futures with respect to a number of types of
securities and currencies are relatively new and still
developing, and there is no public market for forward contracts.
It is impossible to predict the amount of trading interest that
7
<PAGE>
may exist in various types of futures contracts, options and
forward contracts. If a secondary market does not exist with
respect to an option purchased or written by the Fund over-the-
counter, it might not be possible to effect a closing transaction
in the option (i.e., dispose of the option) with the result that
(i) an option purchased by the Fund would have to be exercised in
order for the Fund to realize any profit and (ii) the Fund may
not be able to sell currencies or portfolio securities covering
an option written by the Fund until the option expires or it
delivers the underlying futures contract or currency upon
exercise. Therefore, no assurance can be given that the Fund
will be able to utilize these instruments effectively for the
purposes set forth above. Furthermore, the Fund's ability to
engage in options and futures transactions may be limited by tax
considerations. See "Dividends, Distributions and Taxes--U.S.
Federal Income Taxes."
Defensive Position. For temporary defensive purposes,
the Fund may vary from its investment objectives during periods
in which conditions in securities markets or other economic or
political conditions warrant. During such periods, the Fund may
increase without limit its position in short-term, liquid, high-
grade debt securities, which may include securities issued by the
U.S. government, its agencies and, instrumentalities ("U.S.
Government Securities"), bank deposit, money market instruments,
short-term (for this purpose, securities with a remaining
maturity of one year or less) debt securities, including notes
and bonds, and short-term foreign currency denominated debt
securities rated A or higher by Moody's Investors Service, Inc.
("Moody's"), Standard & Poor's Ratings Services ("S&P") Duff &
Phelps Credit Rating Co. ("Duff & Phelps") or Fitch Investors
Service, Inc. ("Fitch") or, if not so rated, of equivalent
investment quality as determined by the Adviser. For this
purpose, the fund will limit its investments in foreign currency
denominated debt securities to securities that are denominated in
currencies in which the Fund anticipates its subsequent
investments will be denominated.
Subject to its policy of investing at least 65% of its
total assets in fixed-income securities of issuers located in
three countries, the Fund may also at any time temporarily invest
funds awaiting reinvestment or held as reserves for dividends and
other distributions to shareholders in money market instruments
referred to above.
Portfolio Turnover. The Fund may engage in active
short-term trading to benefit from yield disparities among
different issues of securities, to seek short-term profits during
periods of fluctuating interest rates, or for other reasons.
Such trading will increase the Fund's rate of turnover and the
incidence of short-term capital gain taxable as ordinary income.
8
<PAGE>
Management anticipates that the annual turnover in the Fund will
not be in excess of 500%. An annual turnover rate of 500%
occurs, for example, when all of the securities in the Fund's
portfolio are replaced five times in a period of one year. A
high rate of portfolio turnover involves correspondingly greater
expenses than a lower rate, which expenses 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. In order to continue to qualify as a regulated investment
company for Federal tax purposes, less than 30% of the annual
gross income of the Fund must be derived from the sale of
securities held by the Fund for less than three months. See
"Dividends, Distributions and Taxes".
U.S. and Foreign Taxes. Foreign taxes paid by the Fund
may be creditable or deductible by U.S. shareholders for U.S.
income tax purposes. No assurance can be given that applicable
tax laws and interpretations will not change in the future.
Moreover, non-U.S. investors may not be able to credit or deduct
such foreign taxes. Investors should review carefully the
information discussed under the heading "Dividends, Distributions
and Taxes" and should discuss with their tax advisers the
specific tax consequences of investing in the Fund.
Certain Fundamental Investment Policies
The following restrictions, which supplement those set
forth in the Fund's Prospectus, may not be changed without
approval by the vote of a majority of the Fund's outstanding
voting securities, which means the affirmative vote of the
holders of (i) 67% or more or the shares represented at a meeting
at which more than 50% of the outstanding shares are represented,
or (ii) more than 50% of the outstanding shares, whichever is
less.
To reduce investment risk, as a matter of fundamental
policy the Fund may not:
(i) invest 25% or more of its total assets in
securities of issuers conducting their principal
business activities in the same industry, except that
this restriction does not apply to U.S. Government
Securities;
(ii) borrow money or issue any senior security
within the meaning of the 1940 Act, except the Fund may,
in accordance with provisions of the 1940 Act,
(a) borrow from a bank if after such borrowing there is
asset coverage of at least 300% as defined in the 1940
Act, and (b) borrow for temporary or emergency purposes
9
<PAGE>
in an amount not exceeding 5% of the value of the total
assets of the Fund;
(iii) pledge, hypothecate, mortgage or otherwise
encumber its assets, except to secure permitted
borrowings;
(iv) make loans except through (a) the purchase of
loan assignments and participations and other debt
obligations in accordance with its investment objectives
and policies; (b) the lending of portfolio securities;
or (c) the use of repurchase agreements;
(v) participate on a joint or joint and several
basis in any securities trading account;
(vi) invest in companies for the purpose of
exercising control;
(vii) make short sales of securities or maintain a
short position, unless not more than 25% of the Fund's
net assets (taken at market value) are held as
collateral for such sales at any one time; or
(viii) (a) purchase or sell real estate, except that
it may purchase and sell securities of companies which
deal in real estate or interests therein; (b) purchase
or sell commodities or commodity contracts including
futures contracts (except foreign currencies, foreign
currency options and futures, options and futures on
securities and securities indices and forward contracts
or contracts for the future acquisition or delivery of
securities and foreign currencies and related options on
futures contracts and similar contracts); (c) invest in
interests in oil, gas, or other mineral exploration or
development programs; (d) purchase securities on margin,
except for such short-term credits as may be necessary
for the clearance of transactions; and (e) act as an
underwriter of securities, except that the Fund may
acquire restricted securities under circumstances in
which, if such securities were sold, the Fund might be
deemed to be an underwriter for purposes of the
Securities Act.
10
<PAGE>
________________________________________________________________
MANAGEMENT OF THE FUND
________________________________________________________________
Directors
JOHN D. CARIFA,* 50, Chairman of the Board and President, is
the President, Chief Operating Officer and a Director of ACMC,**
with which he has been associated since prior to 1990.
RUTH BLOCK, 64, was formerly Executive Vice President and the
Chief Insurance Officer of The Equitable Life Assurance Society
of the United States ("Equitable"). She is a Director of Ecolab
Incorporated (specialty chemicals) and Amoco Corporation (oil and
gas). Her address is P. O. Box 4653, Stamford, Connecticut
06903.
DAVID H. DIEVLER, 65, was formerly Chairman of the Board and
President of the Fund and a Senior Vice President of ACMC with
which he had been associated since prior to 1990 through 1994. He
is currently an independent consultant. His address is P.O. Box
167, Spring Lake, New Jersey 07762.
JOHN H. DOBKIN, 53, has been the President of Historic Hudson
Valley (historic preservation) since 1990. Previously, he was
Director of the National Academy of Design. From 1988 to 1992,
he was a Director of ACMC. His address is 105 West 55th Street,
New York, New York 10019.
WILLIAM H. FOULK, JR., 62, was formerly Senior Manager of
Barrett Associates, Inc., a registered investment adviser, and
President of Competrol (BJI) Limited and Cresent Diversified
Limited (private investments) since prior to 1990. His address
is 2 Hekma Road, Greenwich, Connecticut 06831.
DR. JAMES M. HESTER, 71, is President of the Harry Frank
Guggenheim Foundation and a Director of Union Carbide
Corporation. He was formerly President of New York University,
the New York Botanical Garden and Rector of the United Nations
University. His address is 45 East 89th Street, New York, New
York 10128.
____________________
* An "interested person" of the Fund as defined in the 1940
Act.
** For purposes of this Statement of Additional Information,
ACMC refers to Alliance Capital Management Corporation, the
sole general partner of the Adviser, and to the predecessor
general partner of the Adviser of the same name.
11
<PAGE>
CLIFFORD L. MICHEL, 56, is a partner in the law firm of
Cahill Gordon & Reindel, with which he has been associated since
prior to 1990. He is also Chief Executive Officer of Wenonah
Development Company (investments) and a Director of Placer Dome,
Inc. (mining) and Faber-Castell Corporation (writing products).
His address is St. Bernard's Road, Gladstone, New Jersey 07934.
ROBERT C. WHITE, 74, is an independent consultant. For nine
years ending in 1994, he was Vice President and Chief Financial
Officer of the Howard Hughes Medical Institute. Prior thereto,
he was Assistant Treasurer of Ford Motor Company. His address is
30835 River Crossing, Bingham Farms, Michigan 48025.
Officers
JOHN D. CARIFA, President, see biography, above.
MARK D. GERSTEN, 44, Treasurer and Chief Financial Officer,
is a Senior Vice President of AFS, with which he has been
associated since prior to 1990.
WAYNE D. LYSKI, 53, Senior Vice President, is an Executive
Vice President of ACMC, with which he has been associated since
prior to 1990.
DOUGLAS J. PEEBLES, 30, Vice President, is a Vice President
of ACMC with which he has been associated since prior to 1990.
EDMUND P. BERGAN, JR., 44, Secretary, is a Senior Vice
President and the General Counsel of AFD and Alliance Fund
Services, Inc. ("AFS") and a Vice President and Assistant General
Counsel of ACMC, with which he has been associated since prior to
1990.
DOMENICK PUGLIESE, 34, Assistant Secretary, is a Vice
President and Assistant General Counsel of AFS, with which he has
been associated since May 1995. Previously, he was Vice President
and Counsel of Concord Holding Corporation since 1994, Vice
President and Associate General Counsel of Prudential Securities
since 1991 and an associate with Battle Fowler, since prior to
1990.
PATRICK J. FARRELL, 35, Controller, is a Vice President of
AFS, with which he has been associated since prior to 1990.
STEPHEN M. ATKINS, 30, Assistant Controller, has been a
Manager of International Mutual Fund Accounting of AFS since July
1992. Prior thereto, he was Supervisor in International Mutual
Fund Accounting since prior to 1990.
12
<PAGE>
JOSEPH J. MANTINEO, 36, Assistant Controller, has been a Vice
President of AFS since prior to 1990.
The aggregate compensation to be paid by the Fund to each of
the Directors during its current fiscal year ending October 31,
1996 (estimating future payments based upon existing
arrangements), and the aggregate compensation paid to each of the
Directors during calendar year 1994 by all of the registered
investment companies to which the Adviser provides investment
advisory services (collectively, the "Alliance Fund Complex"),
are set forth below. Neither the Fund nor any other fund in the
Alliance Fund Complex provides compensation in the form of
pensions or retirement benefits to any of its directors or
trustees. Each of the Directors is a director or trustee of one
or more other registered investment companies in the Alliance
Fund Complex.
13
<PAGE>
Total Number of Funds
in the Alliance Fund
Total Complex, Including
Aggregate Compensation the Fund, as to
Name of Director Compensation from the Alliance which the Director is
of the Fund from the Fund* Fund Complex** a Director or Trustee
________________ ______________ _________________ _____________________
John D. Carifa $ -0- $ -0- 49
Ruth Block 3,000 157,000 36
David H. Dievler 3,000 -0-*** 42
John H. Dobkin 3,000 110,750 29
William H. Foulk, Jr. 3,000 141,500 30
Dr. James M. Hester 3,000 154,500 37
Clifford L. Michel 3,000 120,500 36
Robert C. White 3,000 133,500 36
____________________
* The information in this column represents an estimate of
amounts to be paid during the Fund's current fiscal year.
** The information in this column represents amounts actually
paid during calendar year 1994.
*** Until December 31, 1994, Mr. Dievler was an officer of ACMC
and therefore, as an "interested person" of Alliance,
received no compensation in 1994 from the Alliance Fund
Complex.
As of December 21, 1995, the Directors and officers of
the Fund as a group owned less than 1% of the shares of the
Fund.
Adviser
Alliance Capital Management L.P., a New York Stock
Exchange listed company with principal offices at 1345 Avenue of
the Americas, New York, New York 10105, has been retained under
an investment advisory agreement (the "Advisory Agreement") to
provide investment advice and, in general, to conduct the
management and investment program of the Fund under the
supervision and control of the Fund's Board of Directors.
The Adviser is a leading international investment
manager supervising client accounts with assets as of
September 30, 1995 of more than $140 billion (of which more than
$47 billion represented the assets of investment companies). The
Adviser's clients are primarily major corporate employee benefit
funds, public employee retirement systems, investment companies,
14
<PAGE>
foundations and endowment funds and included as of September 30,
1995, 29 of the FORTUNE 100 companies. As of that date, the
Adviser and its subsidiaries employ approximately 1,350 employees
who operated out of domestic offices and the overseas offices of
subsidiaries in Bombay, Istanbul, London, Sydney, Tokyo, Toronto,
Bahrain, Luxembourg and Singapore. The 50 registered investment
companies comprising 104 separate investment portfolios managed
by the Adviser currently have more than two million
shareholders.
Alliance Capital Management Corporation, the sole
general partner of, and the owner of a 1% general partnership
interest in, the Adviser, is an indirect wholly-owned subsidiary
of The Equitable Life Assurance Society of the United States
("Equitable"), one of the largest life insurance companies in the
United States and a wholly-owned subsidiary of The Equitable
Companies Incorporated ("ECI"), a holding company controlled by
AXA, a French insurance holding company. As of June 30, 1995,
ACMC, Inc. and Equitable Capital Management Corporation, each a
wholly-owned direct or indirect subsidiary of Equitable, together
with Equitable, owned in the aggregate approximately 59% of the
issued and outstanding units representing assignments of
beneficial ownership of limited partnership interests in the
Adviser ("Units"). As of June 30, 1995, approximately 33% and 8%
of the Units were owned by the public and employees of the
Adviser and its subsidiaries, respectively, including employees
of the Adviser who serve as Directors of the Fund.
AXA owns approximately 60% of the outstanding voting
shares of common stock of ECI. AXA is the holding company for an
international group of insurance and related financial services
companies. AXA's insurance operations are comprised of
activities in life insurance, property and casualty insurance and
reinsurance. The insurance operations are diverse geographically
with activities in France, the United States, the United Kingdom,
Canada and other countries, principally in Europe. AXA is also
engaged in asset management, investment banking and brokerage,
real estate and other financial services activities in the United
States and Europe. Based on information provided by AXA, as of
January 1, 1995, 42.3% of the issued shares (representing 54.7%
of the voting power) of AXA were owned by Midi Participations, a
French corporation that is a holding company. The voting shares
of Midi Participations are in turn owned 60% by Finaxa, a French
corporation that is a holding company, and 40% by subsidiaries of
Assicurazioni Generali S.p.A., an Italian corporation
("Generali") (one of which, Belgica Insurance Holding S.A., a
Belgian Corporation, owned 34.1%). As of January 1, 1995, 62.1%
of the issued shares (representing 75.7% of the voting power) of
Finaxa were owned by five French mutual insurance companies (the
"Mutuelles AXA") (one of which, AXA Assurances I.A.R.D. Mutuelle,
owned 31.8% of the issued shares) (representing 39.0% of the
15
<PAGE>
voting power), and 26.5% of the voting shares (representing 16.6%
of the voting power) of Finaxa were owned by Banque Paribas, a
French bank ("Paribas"). Including the shares owned by Midi
Participations, as of January 1, 1995, the Mutuelles AXA directly
or indirectly owned 51.3% of the issued shares (representing
65.8% of the voting power) of AXA. In addition, certain
subsidiaries of AXA own 0.4% of the shares of AXA which are not
entitled to be voted. Acting as a group, the Mutuelles AXA
control AXA, Midi Participations and Finaxa.
Under the Advisory Agreement, the Adviser provides
investment advisory services and other placement facilities for
the Fund and pays all compensation of Directors and officers of
the Fund who are affiliated persons of the Adviser. The Adviser
or its affiliates also furnishes the Fund, without charge,
management supervision and assistance and office facilities and
provides persons satisfactory to the Fund's Board of Directors to
serve as the Fund's officers.
The Advisory Agreement is terminable without penalty by
a vote of a majority of the Fund's outstanding voting securities
or by a vote of a majority of the Fund's Directors on 60 days'
written notice, or by the Adviser on 60 days' written notice, and
will automatically terminate in the event of its assignment. The
Advisory Agreement provides that in the absence of willful
misfeasance, bad faith or gross negligence on the part of the
Adviser, or of reckless disregard of its obligations thereunder,
the Adviser shall not be liable for any action or failure to act
in accordance with its duties thereunder.
The Advisory Agreement provides that the Adviser will
reimburse the Fund for its expenses (exclusive of interest,
taxes, brokerage, expenditures pursuant to the Distribution
Services Agreement described below, and extraordinary expenses as
to the extent permitted by applicable state securities laws and
regulations) which in any year exceed the limits prescribed by
any state in which the Fund's shares are qualified for sale. The
Fund may not qualify its shares for the sale in every state. The
Fund believes that presently the most restrictive expense ratio
limitation imposed by any state in which the Fund has qualified
its shares for sale is 2.5% of the first $30 million of the
Fund's average net assets, 2.0% of the next $70 million of its
average net assets and 1.5% of its average net assets in excess
of $100 million. Expense reimbursements, if any, are accrued
daily and paid monthly.
The Advisory Agreement became effective on January 2,
1996. The Advisory Agreement will continue in effect until
December 31, 1997 and thereafter for successive twelve-month
periods (computed from each January 1), provided, however, that
such continuance is specifically approved at least annually by a
16
<PAGE>
vote of a majority of the Fund's outstanding voting securities or
by the Fund's Board of Directors, including in either case
approval by a majority of the Directors who are not parties to
the Advisory Agreement or interested persons of any such party as
defined by the 1940 Act.
Certain other clients of the Adviser may have investment
objectives and policies similar to those of the Fund. The
Adviser may, from time to time, make recommendations which result
in the purchase or sale of a particular security by its other
clients simultaneously with the Fund. If transactions on behalf
of more than one client during the same period increase the
demand for securities being sold, there may be an adverse effect
on price. It is the policy of the Adviser to allocate advisory
recommendations and the placing of orders in a manner which is
deemed equitable by the Adviser to the accounts involved,
including the Fund. When two or more of the clients of the
Adviser (including the Fund) are purchasing or selling the same
security on a given day from the same broker-dealer, such
transactions may be averaged as to price.
The Adviser may act as an investment adviser to other
persons, firms or corporations, including investment companies,
and is investment adviser to the following registered investment
companies: ACM Institutional Reserves, Inc., AFD Exchange
Reserves, Inc., The Alliance Fund, Inc., Alliance All-Asia
Investment Fund, Inc., Alliance Balanced Shares, Inc., Alliance
Bond Fund, Inc., Alliance Capital Reserves, Alliance Counterpoint
Fund, Alliance Developing Markets Fund, Inc., Alliance Global
Dollar Government Fund, Inc., Alliance Global Small Cap Fund,
Inc., Alliance Government Reserves, Alliance Growth and Income
Fund, Inc., Alliance International Fund, Alliance Money Market
Fund, Alliance Mortgage Securities Income Fund, Inc., Alliance
Mortgage Strategy Trust, Inc., Alliance Multi-Market Strategy
Trust, Inc., Alliance Municipal Income Fund, Inc., Alliance
Municipal Income Fund II, Alliance Municipal Trust, Alliance New
Europe Fund, Inc., Alliance North American Government Income
Trust, Inc., Alliance Premier Growth Fund, Inc., Alliance Quasar
Fund, Inc., Alliance Short-Term Multi-Market Trust, Inc.,
Alliance Technology Fund, Inc., Alliance Utility Income Fund,
Inc., Alliance Variable Products Series Fund, Inc., Alliance
World Income Trust, Inc., Alliance Worldwide Privatization Fund,
Inc., The Alliance Portfolios, Fiduciary Management Associates
and The Hudson River Trust, all open-end investment companies;
and to ACM Government Income Fund, Inc., ACM Government
Securities Fund, Inc., ACM Government Spectrum Fund, Inc., ACM
Government Opportunity Fund, Inc., ACM Managed Income Fund, Inc.,
ACM Managed Dollar Income Fund, Inc., ACM Municipal Securities
Income Fund, Inc., Alliance All-Market Advantage Fund, Inc.,
Alliance Global Environment Fund, Inc., Alliance World Dollar
Government Fund, Inc., Alliance World Dollar Government Fund II,
17
<PAGE>
Inc., The Austria Fund, Inc., The Global Privatization Fund,
Inc., The Korean Investment Fund, Inc., The Southern Africa Fund,
Inc. and The Spain Fund, Inc., all closed-end investment
companies.
EXPENSES OF THE FUND
Distribution Services Agreement
The Fund has entered into, a Distribution Services
Agreement (the "Agreement") with Alliance Fund Distributors,
Inc., the Fund's principal underwriter (the "Principal
Underwriter"), to permit the Fund directly or indirectly to pay
expenses associated with distribution of its shares in accordance
with a plan of distribution which is included in the Agreement
and has been duly adopted and approved in accordance with Rule
12b-1 adopted by the Commission under the Act (the "Plan").
Distribution services fees are accrued daily and paid
monthly and are charged as expenses of the Fund as accrued. The
distribution services fees attributable to the Class B shares and
Class C shares are designed to permit an investor to purchase
such shares through broker-dealers without the assessment of an
initial sales charge, and, in the case of Class C shares, without
the assessment of a contingent deferred sales charge, and at the
same time to permit the Principal Underwriter to compensate
broker-dealers in connection with the sale of such shares. In
this regard the purpose and function of the combined contingent
deferred sales charge and distribution services fee on the
Class B shares and the distribution services fee on the Class C
shares, are the same as those of the initial sales charge and
distribution services fee with respect to the Class A shares in
that in each case the sales charge and/or distribution services
fee provide for the financing of the distribution of the Fund's
shares.
Under the Agreement, the Treasurer of the Fund reports
the amounts expended under the Rule 12b-1 Plan and the purposes
for which such expenditures were made to the Directors of the
Fund on a quarterly basis. Also, the Agreement provides that the
selection and nomination of Directors who are not "interested
persons" of the Fund, as defined in the 1940 Act, are committed
to the discretion of such disinterested Directors then in office.
The Agreement became effective on January 2, 1996. The
Agreement will continue in effect until December 31, 1996 and
thereafter for successive twelve-month periods (computed from
18
<PAGE>
each January 1), provided, however, that such continuance is
specifically approved at least annually by the Directors of the
Fund or by vote of the holders of a majority of the outstanding
voting securities (as defined in the 1940 Act) of that class,
and, in either case, by a majority of the Directors of the Fund
who are not parties to the Agreement or interested persons, as
defined in the 1940 Act, of any such party (other than as
directors of the Fund) and who have no direct or indirect
financial interest in the operation of the Rule 12b-1 Plan or any
agreement related thereto.
The Adviser may from time to time and from its own funds
or such other resources as may be permitted by rules of the
Commission make payments for distribution services to the
Principal Underwriter; the latter may in turn pay part or all of
such compensation to brokers or other persons for their
distribution assistance.
In the event that the Agreement is terminated or not
continued with respect to the Class A shares, Class B shares or
Class C shares, (i) no distribution services fees (other than
current amounts accrued but not yet paid) would be owed by the
Fund to the Principal Underwriter with respect to that class, and
(ii) the Fund would not be obligated to pay the Principal
Underwriter for any amounts expended under the Agreement not
previously recovered by the Principal Underwriter from
distribution services fees in respect of shares of such class or
through deferred sales charges.
All material amendments to the Agreement must be
approved by a vote of the Directors or the holders of the Fund's
outstanding voting securities, voting separately by class, and in
either case, by a majority of the disinterested Directors, cast
in person at a meeting called for the purpose of voting on such
approval; and the Agreement may not be amended in order to
increase materially the costs that a particular class may bear
pursuant to the Agreement without the approval of a majority of
the holders of the outstanding voting shares of the class
affected. The Agreement may be terminated (a) by the Fund
without penalty at any time by a majority vote of the holders of
the outstanding voting securities of the Fund, voting separately
by class or by a majority vote of the Directors who are not
"interested persons" as defined in the 1940 Act, or (b) by the
Principal Underwriter. To terminate the Agreement, any party
must give the other parties 60 days' written notice; to terminate
the Rule 12b-1 Plan only, the Fund need give no notice to the
Principal Underwriter. The Agreement will terminate
automatically in the event of its assignment.
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<PAGE>
Transfer Agency Agreement
Alliance Fund Services, Inc., an indirect wholly-owned
subsidiary of the Adviser, receives a transfer agency fee per
account holder of each of the Class A shares, Class B shares and
Class C shares of the Fund, plus reimbursement for out-of-pocket
expenses. The transfer agency fee with respect to the Class B
shares is higher than the transfer agency fee with respect to the
Class A shares reflecting the additional costs associated with
the Class B contingent deferred sales charge.
PURCHASE OF SHARES
The following information supplements that set forth in
the Fund's Prospectus under the heading "Purchase and Sale of
Shares -- How To Buy Shares."
General
Shares of the Fund will be offered on a continuous basis
at a price equal to their net asset value plus an initial sales
charge at the time of purchase (the "initial sales charge
alternative"), with a contingent deferred sales charge (the
"deferred sales charge alternative"), or without any initial or
contingent deferred sales charge (the "asset-based sales charge
alternative"), as described below. Shares of the Fund are
offered on a continuous basis through (i) investment dealers that
are members of the National Association of Securities Dealers,
Inc. and have entered into selected dealer agreements with the
Principal Underwriter ("selected dealers"), (ii) depository
institutions and other financial intermediaries or their
affiliates, that have entered into selected agent agreements with
the Principal Underwriter ("selected agents"), or (iii) the
Principal Underwriter. The minimum for initial investments is
$250; subsequent investments (other than reinvestments of
dividends and capital gains distributions in shares) must be in
the minimum amount of $50. As described under "Shareholder
Services," the Fund offers an automatic investment program and a
403(b)(7) retirement plan which permit investments of $25 or
more. The subscriber may use the Subscription Application found
in the Prospectus for his or her initial investment. Sales
personnel of selected dealers and agents distributing the Fund's
shares may receive differing compensation for selling Class A,
Class B or Class C shares.
Investors may purchase shares of the Fund in the United
States either through selected dealers or agents or directly
through the Principal Underwriter. Shares may also be sold in
20
<PAGE>
foreign countries where permissible. The Fund may refuse any
order for the purchase of shares. The Fund reserves the right to
suspend the sale of its shares to the public in response to
conditions in the securities markets or for other reasons.
The public offering price of shares of the Fund is their
net asset value, plus, in the case of Class A shares, a sales
charge which will vary depending on the purchase alternative
chosen by the investor, as shown in the table below. On each
Fund business day on which a purchase or redemption order is
received by the Fund and trading in the types of securities in
which the Fund invests might materially affect the value of Fund
shares, the per share net asset value is computed in accordance
with the Fund's Articles of Incorporation and By-Laws as of the
next close of regular trading on the New York Stock Exchange (the
"Exchange") (currently 4:00 p.m. Eastern time) by dividing the
value of the Fund's total assets, less its liabilities, by the
total number of its shares then outstanding. The respective per
share net asset values of the Class A, Class B and Class C shares
are expected to be substantially the same. Under certain
circumstances, however, the per share net asset values of the
Class B and Class C shares may be lower than the per share net
asset value of the Class A shares as a result of the daily
expense accruals of the distribution and transfer agency fees
applicable with respect to the Class B and Class C shares. Even
under those circumstances, the per share net asset values of the
three classes eventually will tend to converge immediately after
the payment of dividends, which will differ by approximately the
amount of the expense accrual differential among the classes. A
Fund business day is any weekday, exclusive of national holidays
on which the Exchange is closed and Good Friday. For purposes of
this computation, the securities in the Fund's portfolio are
valued at their current market value determined on the basis of
market quotations. If such quotations are not readily available,
securities will be valued by such other methods as the Directors
believe would accurately reflect fair market value.
The Fund will accept unconditional orders for its shares
to be executed at the public offering price equal to their net
asset value next determined (plus applicable Class A sales
charges), as described below. Orders received by the Principal
Underwriter prior to the close of regular trading on the Exchange
on each day the Exchange is open for trading are priced at the
net asset value computed as of the close of regular trading on
the Exchange on that day (plus applicable Class A sales charges).
In the case of orders for purchase of shares placed through
selected dealers or agents, the applicable public offering price
will be the net asset value as so determined, but only if the
selected dealer or agent receives the order prior to the close of
regular trading on the Exchange and transmits it to the Principal
Underwriter prior to its close of business that same day
21
<PAGE>
(normally 5:00 p.m. Eastern time). The selected dealer or agent
is responsible for transmitting such orders by 5:00 p.m. If the
selected dealer or agent fails to do so, the investor's right to
that day's closing price must be settled between the investor and
the selected dealer or agent. If the selected dealer or agent
receives the order after the close of regular trading on the
Exchange, the price will be based on the net asset value
determined as of the close of regular trading on the Exchange on
the next day it is open for trading.
Following the initial purchase of Fund shares, a
shareholder may place orders to purchase additional shares by
telephone if the shareholder has completed the appropriate
portion of the Subscription Application or an "Autobuy"
application obtained by calling the "Literature" telephone number
shown on the cover of this Statement of Additional Information.
Payment for shares purchased by telephone can be made only by
Electronic Funds Transfer from a bank account maintained by the
shareholder at a bank that is a member of the National Automated
Clearing House Association ("NACHA"). If a shareholder's
telephone purchase request is received before 3:00 p.m. Eastern
time on a Fund business day, the order to purchase shares is
automatically placed the following Fund business day, and the
applicable public offering price will be the public offering
price determined as of the close of business on such following
business day.
Full and fractional shares are credited to a
subscriber's account in the amount of his or her subscription.
As a convenience to the subscriber, and to avoid unnecessary
expense to the Fund, stock certificates representing shares of
the Fund are not issued except upon written request to the Fund
by the shareholder or his or her authorized selected dealer or
agent. This facilitates later redemption and relieves the
shareholder of the responsibility for and inconvenience of lost
or stolen certificates. No certificates are issued for
fractional shares, although such shares remain in the
shareholder's account on the books of the Fund.
In addition to the discount or commission paid to
dealers or agents, the Principal Underwriter from time to time
pays additional cash or other incentives to dealers or agents,
including Equico Securities, Inc., an affiliate of the Principal
Underwriter, in connection with the sale of shares of the Fund.
Such additional amounts may be utilized, in whole or in part, to
provide additional compensation to registered representatives who
sell shares of the Fund. On some occasions, such cash or other
incentives will be conditioned upon the sale of a specified
minimum dollar amount of the shares of the Fund and/or other
Alliance Mutual Funds, as defined below, during a specific period
of time. On some occasions, such cash or other incentives may
22
<PAGE>
take the form of payment for attendance at seminars, meals,
sporting events or theater performances, or payment for travel,
lodging and entertainment incurred in connection with travel
taken by persons associated with a dealer or agent and their
immediate family members to urban or resort locations within or
outside the United States. Such dealer or agent may elect to
receive cash incentives of equivalent amount in lieu of such
payments.
Alternative Purchases Arrangements
The Fund issues three classes of shares: Class A shares
are sold to investors choosing the initial sales charge
alternative, Class B shares are sold to investors choosing the
deferred sales charge alternative, and Class C shares are sold to
investors choosing the asset-based sales charge alternative. The
three classes of shares each represent an interest in the same
portfolio of investments of the Fund, have the same rights and
are identical in all respects, except that (i) Class A shares
bear the expense of the initial sales charge (or contingent
deferred sales charge, when applicable) and Class B shares, bear
the expense of the deferred sales charge, (ii) Class B shares and
Class C shares each bear the expense of a higher distribution
services fee and, in the case of Class B shares higher transfer
agency costs, (iii) each class has exclusive voting rights with
respect to provisions of the Rule 12b-1 Plan pursuant to which
its distribution services fee is paid which relates to a specific
class and other matters for which separate class voting is
appropriate under applicable law, provided that, if the Fund
submits to a vote of both the Class A shareholders and the Class
B shareholders an amendment to the Rule 12b-1 Plan that would
materially increase the amount to be paid thereunder with respect
to the Class A shares, the Class A shareholders and the Class B
shareholders will vote separately by Class, and (iv) only the
Class B shares are subject to a conversion feature. Each class
has different exchange privileges and certain different
shareholder service options available.
The alternative purchase arrangements permit an investor
to choose the method of purchasing shares that is most beneficial
given the amount of the purchase, the length of time the investor
expects to hold the shares, and other circumstances. Investors
should consider whether, during the anticipated life of their
investment in the Fund, the accumulated distribution services fee
and contingent deferred sales charges on Class B shares prior to
conversion, or the accumulated distribution services fee on Class
C shares, would be less than the initial sales charge and
accumulated distribution services fee on Class A shares purchased
at the same time, and to what extent such differential would be
offset by the higher return of Class A shares. Class A shares
will normally be more beneficial than Class B shares to the
23
<PAGE>
investor who qualifies for reduced initial sales charges on Class
A shares, as described below. In this regard, the Principal
Underwriter will reject any order (except orders from certain
retirement plans) for more than $250,000 for Class B shares.
Class C shares will normally not be suitable for the investor who
qualifies to purchase Class A shares at net asset value. For
this reason, the Principal Underwriter will reject any order for
more than $5,000,000 for Class C shares.
Class A shares are subject to a lower distribution
services fee and, accordingly, pay correspondingly higher
dividends per share than Class B shares or Class C shares.
However, because initial sales charges are deducted at the time
of purchase, investors purchasing Class A shares would not have
all their funds invested initially and, therefore, would
initially own fewer shares. Investors not qualifying for reduced
initial sales charges who expect to maintain their investment for
an extended period of time might consider purchasing Class A
shares because the accumulated continuing distribution charges on
Class B shares or Class C shares may exceed the initial sales
charge on Class A shares during the life of the investment.
Again, however, such investors must weigh this consideration
against the fact that, because of such initial sales charges, not
all their funds will be invested initially.
Other investors might determine, however, that it would
be more advantageous to purchase Class B shares or Class C shares
in order to have all their funds invested initially, although
remaining subject to higher continuing distribution charges and,
in the case of Class B shares, being subject to a contingent
deferred sales charge for a three-year period. For example,
based on current fees and expenses, an investor subject to the
4.25% initial sales charge would have to hold his or her
investment approximately seven years for the Class C distribution
services fee to exceed the initial sales charge plus the
accumulated distribution services fee of Class A shares. In this
example, an investor intending to maintain his or her investment
for a longer period might consider purchasing Class A shares.
This example does not take into account the time value of money,
which further reduces the impact of the Class C distribution
services fees on the investment, fluctuations in net asset value
or the effect of different performance assumptions.
Those investors who prefer to have all of their funds
invested initially but may not wish to retain Fund shares for the
three-year period during which Class B shares are subject to a
contingent deferred sales charge may find it more advantageous to
purchase Class C shares.
The Directors of the Fund have determined that currently
no conflict of interest exists between or among the Class A,
24
<PAGE>
Class B and Class C shares. On an ongoing basis, the Directors
of the Fund, pursuant to their fiduciary duties under the 1940
Act and state laws, will seek to ensure that no such conflict
arises.
Initial Sales Charge Alternative--Class A Shares
The public offering price of Class A shares for
purchasers choosing the initial sales charge alternative is the
net asset value plus a sales charge, as set forth below.
Sales Charge Discount or
Commission
As % of to Dealers
As % of the or Agents
Net Public As % of
Amount of Amount Offering Offering
Purchase Invested Price Price
_________ ________ ________ __________
Less than
$100,000. . . 4.44% 4.25% 4.00%
$100,000 but
less than
250,000. . . 3.36 3.25 3.00
250,000 but
less than
500,000. . . 2.30 2.25 2.00
500,000 but
less than
1,000,000*. . . 1.78 1.75 1.50
____________________
* There is no initial sales charge on transactions of
$1,000,000 or more.
With respect to purchases of $1,000,000 or more, Class A
shares redeemed within one year of purchase will be subject to a
contingent deferred sales charge equal to 1% of the lesser of the
cost of the shares being redeemed or their net asset value at the
time of redemption. Accordingly, no sales charge will be imposed
on increases in net asset value above the initial purchase price.
In addition, no charge will be assessed on shares derived from
reinvestment of dividends or capital gains distributions. The
contingent deferred sales charge on Class A shares will be waived
on certain redemptions, and such charge will be applied to
redemptions of shares by shareholders who hold both Class A and
Class B shares, as described below under "Deferred Sales Charge
Alternative--Class B Shares." Proceeds from the contingent
deferred sales charge on Class A shares are paid to the Principal
Underwriter and are used by the Principal Underwriter to defray
the expenses of the Principal Underwriter related to providing
25
<PAGE>
distribution-related services to the Fund in connection with the
sales of Class A shares, such as the payment of compensation to
selected dealers and agents for selling Class A shares. With
respect to purchases of $1,000,000 or more made through selected
dealers or agents, the Adviser may, pursuant to the Agreement
described above, pay such dealers or agents from its own
resources a fee of up to 1% of the amount invested to compensate
such dealers or agents for their distribution assistance in
connection with such purchases.
No initial sales charge is imposed on Class A shares issued
(i) pursuant to the automatic reinvestment of income dividends or
capital gains distributions, or (ii) in exchange for Class A
shares of other "Alliance Mutual Funds" (as that term is defined
under "Combined Purchase Privilege" below), except that an
initial sales charge will be imposed on Class A shares issued in
exchange for Class A shares of AFD Exchange Reserves ("AFDER")
that were purchased for cash without the payment of an initial
sales charge and without being subject to a contingent deferred
sales charge. The Fund receives the entire net asset value of
its Class A shares sold to investors. The Principal
Underwriter's commission is the sales charge shown above less any
applicable discount or commission "reallowed" to selected dealers
and agents. The Principal Underwriter will reallow discounts to
selected dealers and agents in the amounts indicated in the table
above. In this regard, the Principal Underwriter may elect to
reallow the entire sales charge to selected dealers and agents
for all sales with respect to which orders are placed with the
Principal Underwriter. A selected dealer who receives
reallowance in excess of 90% of such a sales charge may be deemed
to be an "underwriter" under the Securities Act of 1933, as
amended.
Set forth below is an example of the method of computing the
offering price of the Class A shares. The example assumes a
purchase of Class A shares of the Fund aggregating less than
$50,000 subject to the schedule of sales charges set forth above
at a price based upon the net asset value of Class A shares of
the Fund on December 22, 1995.
Net Asset Value per Class A Share at $10.00
December 22, 1995
Class A Per Share Sales Charge
- 4.25% of offering price 4.44% of
net asset value per share) .44
Class A Per Share Offering Price to
the public $10.44
26
<PAGE>
Investors choosing the initial sales charge alternative
may under certain circumstances be entitled to pay (i) no initial
sales charge (but subject in most cases to a contingent deferred
sales charge) or (ii) a reduced initial sales charge. The
circumstances under which such investors may pay a reduced
initial sales charge are described below.
Combined Purchase Privilege. Certain persons may
qualify for the sales charge reductions indicated in the schedule
of such charges above by combining purchases of shares of the
Fund into a single "purchase," if the resulting "purchase" totals
at least $100,000. The term "purchase" refers to: (i) a single
purchase by an individual, or to concurrent purchases, which in
the aggregate are at least equal to the prescribed amounts, by an
individual, his or her spouse and their children under the age of
21 years purchasing shares of the Fund for his, her or their own
account(s); (ii) a single purchase by a trustee or other
fiduciary purchasing shares for a single trust, estate or single
fiduciary account although more than one beneficiary is involved;
or (iii) a single purchase for the employee benefit plans of a
single employer. The term "purchase" also includes purchases by
any "company," as the term is defined in the 1940 Act, but does
not include purchases by any such company which has not been in
existence for at least six months or which has no purpose other
than the purchase of shares of the Fund or shares of other
registered investment companies at a discount. The term
"purchase" does not include purchases by any group of individuals
whose sole organizational nexus is that the participants therein
are credit card holders of a company, policy holders of an
insurance company, customers of either a bank or broker-dealer or
clients of an investment adviser. A "purchase" may also include
shares, purchased at the same time through a single selected
dealer or agent, of any other "Alliance Mutual Fund." Currently,
the Alliance Mutual Funds include:
AFD Exchange Reserves
The Alliance Fund, Inc.
Alliance All-Asia Investment Fund, Inc.
Alliance Balanced Shares, Inc.
Alliance Bond Fund, Inc.
-Corporate Bond Portfolio
-U.S. Government Portfolio
Alliance Counterpoint Fund
Alliance Developing Markets Fund, Inc.
Alliance Global Dollar Government Fund, Inc.
Alliance Global Small Cap Fund, Inc.
Alliance Growth and Income Fund, Inc.
Alliance Income Builder Fund, Inc.
Alliance International Fund
Alliance Money Market Fund
Alliance Mortgage Securities Income Fund, Inc.
27
<PAGE>
Alliance Mortgage Strategy Trust, Inc.
Alliance Multi-Market Strategy Trust, Inc.
Alliance Municipal Income Fund, Inc.
-California Portfolio
-Insured California Portfolio
-Insured National Portfolio
-National Portfolio
-New York Portfolio
Alliance Municipal Income Fund II
-Arizona Portfolio
-Florida Portfolio
-Massachusetts Portfolio
-Michigan Portfolio
-Minnesota Portfolio
-New Jersey Portfolio
-Ohio Portfolio
-Pennsylvania Portfolio
-Virginia Portfolio
Alliance New Europe Fund, Inc.
Alliance North American Government Income Trust, Inc.
Alliance Premier Growth Fund, Inc.
Alliance Quasar Fund, Inc.
Alliance Short-Term Multi-Market Trust, Inc.
Alliance Technology Fund, Inc.
Alliance Utility Income Fund, Inc.
Alliance World Income Trust, Inc.
Alliance Worldwide Privatization Fund, Inc.
The Alliance Portfolios.
-Alliance Growth Fund
-Alliance Conservative Investors Fund
-Alliance Growth Investors Fund
-Alliance Strategic Balanced Fund
-Alliance Short-Term U.S. Government Fund
Prospectuses for the Alliance Mutual Funds may be
obtained without charge by contacting Alliance Fund Services,
Inc. at the address or the "Literature" telephone number shown on
the front cover of this Statement of Additional Information.
Cumulative Quantity Discount (Right of Accumulation). An
investor's purchase of additional Class A shares of the Fund may
qualify for a Cumulative Quantity Discount. The applicable sales
charge will be based on the total of:
(i) the investor's current purchase;
(ii) the net asset value (at the close of business on
the previous day) of (a) all Class A, Class B and
Class C shares of the Fund held by the investor and
(b) all shares of any other Alliance Mutual Fund
held by the investor; and
28
<PAGE>
(iii) the net asset value of all shares described in
paragraph (ii) owned by another shareholder
eligible to combine his or her purchase with that
of the investor into a single "purchase" (see
above).
For example, if an investor owned shares of an Alliance
Mutual Fund worth $200,000 at their then current net asset value
and, subsequently, purchased Class A shares of the Fund worth an
additional $100,000, the sales charge for the $100,000 purchase
would be at the 2.25% rate applicable to a single $300,000
purchase of shares of the Fund, rather than the 3.25% rate.
To qualify for the Combined Purchase Privilege or to
obtain the Cumulative Quantity Discount on a purchase through a
selected dealer or agent, the investor or selected dealer or
agent must provide the Principal Underwriter with sufficient
information to verify that each purchase qualifies for the
privilege or discount.
Statement of Intention. Class A investors may also
obtain the reduced sales charges shown in the table above by
means of a written Statement of Intention, which expresses the
investor's intention to invest not less than $100,000 within a
period of 13 months in Class A shares (or Class A, Class B and/or
Class C shares) of the Fund or any other Alliance Mutual Fund.
Each purchase of shares under a Statement of Intention will be
made at the public offering price or prices applicable at the
time of such purchase to a single transaction of the dollar
amount indicated in the Statement of Intention. At the
investor's option, a Statement of Intention may include purchases
of shares of the Fund or any other Alliance Mutual Fund made not
more than 90 days prior to the date that the investor signs a
Statement of Intention; however, the 13-month period during which
the Statement of Intention is in effect will begin on the date of
the earliest purchase to be included.
Investors qualifying for the Combined Purchase Privilege
described above may purchase shares of the Alliance Mutual Funds
under a single Statement of Intention. For example, if at the
time an investor signs a Statement of Intention to invest at
least $100,000 in Class A shares of the Fund, the investor and
the investor's spouse each purchase shares of the Fund worth
$20,000 (for a total of $40,000), it will only be necessary to
invest a total of $60,000 during the following 13 months in
shares of the Fund or any other Alliance Mutual Fund, to qualify
for the 3.25% sales charge on the total amount being invested
(the sales charge applicable to an investment of $100,000).
The Statement of Intention is not a binding obligation
upon the investor to purchase the full amount indicated. The
29
<PAGE>
minimum initial investment under a Statement of Intention is 5%
of such amount. Shares purchased with the first 5% of such
amount will be held in escrow (while remaining registered in the
name of the investor) to secure payment of the higher sales
charge applicable to the shares actually purchased if the full
amount indicated is not purchased, and such escrowed shares will
be involuntarily redeemed to pay the additional sales charge, if
necessary. Dividends on escrowed shares, whether paid in cash or
reinvested in additional Fund shares, are not subject to escrow.
When the full amount indicated has been purchased, the escrow
will be released. To the extent that an investor purchases more
than the dollar amount indicated on the Statement of Intention
and qualifies for a further reduced sales charge, the sales
charge will be adjusted for the entire amount purchased at the
end of the 13-month period. The difference in sales charge will
be used to purchase additional shares of the Fund subject to the
rate of sales charge applicable to the actual amount of the
aggregate purchases.
Investors wishing to enter into a Statement of Intention
in conjunction with their initial investment in Class A shares of
the Fund should complete the appropriate portion of the
Subscription Application found in the Prospectus while current
Class A shareholders desiring to do so can obtain a form of
Statement of Intention by contacting Alliance Fund Services, Inc.
at the address or telephone numbers shown on the cover of this
Statement of Additional Information.
Certain Retirement Plans. Multiple participant payroll
deduction retirement plans may also purchase shares of the Fund
or any other Alliance Mutual Fund at a reduced sales charge on a
monthly basis during the 13-month period following such a plan's
initial purchase. The sales charge applicable to such initial
purchase of shares of the Fund will be that normally applicable,
under the schedule of sales charges set forth in this Statement
of Additional Information, to an investment 13 times larger than
such initial purchase. The sales charge applicable to each
succeeding monthly purchase will be that normally applicable,
under such schedule, to an investment equal to the sum of (i) the
total purchase previously made during the 13-month period, and
(ii) the current month's purchase multiplied by the number of
months (including the current month) remaining in the 13-month
period. Sales charges previously paid during such period will
not be retroactively adjusted on the basis of later purchases.
Reinstatement Privilege. A Class A shareholder who has
caused any or all of his or her shares of the Fund to be redeemed
or repurchased may reinvest all or any portion of the redemption
or repurchase proceeds in Class A shares of the Fund at net asset
value without any sales charge, provided that such reinvestment
is made within 120 calendar days after the redemption or
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repurchase date. Shares are sold to a reinvesting shareholder at
the net asset value next determined as described above. A
reinstatement pursuant to this privilege will not cancel the
redemption or repurchase transaction; therefore, any gain or loss
so realized will be recognized for Federal tax purposes except
that no loss will be recognized to the extent that the proceeds
are reinvested in shares of the Fund. The reinstatement
privilege may be used by the shareholder only once, irrespective
of the number of shares redeemed or repurchased, except that the
privilege may be used without limit in connection with
transactions whose sole purpose is to transfer a shareholder's
interest in the Fund to his or her individual retirement account
or other qualified retirement plan account. Investors may
exercise the reinstatement privilege by written request sent to
the Fund at the address shown on the cover of this Statement of
Additional Information.
Sales at Net Asset Value. The Fund may sell its Class A
shares at net asset value (i.e., without any initial sales
charge) and without any contingent deferred sales charge to
certain categories of investors including: (i) investment
advisory clients of the Adviser or its affiliates; (ii) officers
and present or former Directors of the Fund; present or former
directors and trustees of other investment companies managed by
the Adviser; present or retired full-time employees of the
Adviser, the Principal Underwriter, Alliance Fund Services, Inc.
and their affiliates; officers and directors of ACMC, the
Principal Underwriter, Alliance Fund Services, Inc. and their
affiliates; officers, directors and present and full-time
employees of selected dealers or agents; or the spouse, sibling,
direct ancestor or direct descendant (collectively "relatives")
of any such person; or any trust, individual retirement account
or retirement plan account for the benefit of any such person or
relative; or the estate of any such person or relative, if such
shares are purchased for investment purposes (such shares may not
be resold except to the Fund); (iii) certain employee benefit
plans for employees of the Adviser, the Principal Underwriter,
Alliance Fund Services, Inc. and their affiliates; (iv) persons
participating in a fee-based program, sponsored and maintained by
a registered broker-dealer and approved by the Principal
Underwriter, pursuant to which such persons pay an asset-based
fee to such broker-dealer, or its affiliate or agent, for
services in the nature of investment advisory or administrative
services; (v) persons who establish to the Principal
Underwriter's satisfaction that they are investing, within such
time period as may be designated by the Principal Underwriter,
proceeds of redemption of shares of such other registered
investment companies as may be designated from time to time by
the Principal Underwriter; and (vi) employer-sponsored qualified
pension or profit-sharing plans (including Section 401(k) plans),
custodial accounts maintained pursuant to Section 403(b)(7)
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retirement plans and individual retirement accounts (including
individual retirement accounts to which simplified employee
pension (SEP) contributions are made), if such plans or accounts
are established or administered under programs sponsored by
administrators or other persons that have been approved by the
Principal Underwriter.
Deferred Sales Charge Alternative--Class B Shares
Investors choosing the deferred sales charge alternative
purchase Class B shares at the public offering price equal to the
net asset value per share of the Class B shares on the date of
purchase without the imposition of a sales charge at the time of
purchase. The Class B shares are sold without an initial sales
charge so that the Fund will receive the full amount of the
investor's purchase payment.
Proceeds from the contingent deferred sales charge are
paid to the Principal Underwriter and are used by the Principal
Underwriter to defray the expenses of the Principal Underwriter
related to providing distribution-related services to the Fund in
connection with the sale of the Class B shares, such as the
payment of compensation to selected dealers and agents for
selling Class B shares. The combination of the contingent
deferred sales charge and the distribution services fee enables
the Fund to sell the Class B shares without a sales charge being
deducted at the time of purchase. The higher distribution
services fee incurred by Class B shares will cause such shares to
have a higher expense ratio and to pay lower dividends than those
related to Class A shares.
Contingent Deferred Sales Charge. Class B shares which
are redeemed within three years of purchase will be subject to a
contingent deferred sales charge at the rates set forth below
charged as a percentage of the dollar amount subject thereto.
The charge will be assessed on an amount equal to the lesser of
the cost of the shares being redeemed or their net asset value at
the time of redemption. Accordingly, no sales charge will be
imposed on increases in net asset value above the initial
purchase price. In addition, no charge will be assessed on
shares derived from reinvestment of dividends or capital gains
distributions.
To illustrate, assume that an investor purchased 100
Class B shares at $10 per share (at a cost of $1,000) and in the
second year after purchase, the net asset value per share is $12
and, during such time, the investor has acquired 10 additional
Class B shares upon dividend reinvestment. If at such time the
investor makes his or her first redemption of 50 Class B shares
(proceeds of $600), 10 Class B shares will not be subject to
charge because of dividend reinvestment. With respect to the
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remaining 40 Class B shares, the charge is applied only to the
original cost of $10 per share and not to the increase in net
asset value of $2 per share. Therefore, $400 of the $600
redemption proceeds will be charged at a rate of 2.0% (the
applicable rate in the second year after purchase).
The amount of the contingent deferred sales charge, if
any, will vary depending on the number of years from the time of
payment for the purchase of Class B shares until the time of
redemption of such shares.
Contingent Deferred Sales Charge as a %
Years Since Purchase of Dollar Amount Subject to Charge
First 3%
Second 2%
Third 1%
Thereafter None
In determining the contingent deferred sales charge
applicable to a redemption, it will be assumed that the
redemption is first of any shares in the shareholder's Fund
account that are not subject to a contingent deferred sales
charge, second of Class B shares held for over two years and
third of Class A shares that are subject to a contingent deferred
sales charge held shortest during the one-year period during
which such shares are subject to the sales charge. When Class B
shares acquired in an exchange are redeemed, the applicable
contingent deferred sales charge and conversion schedules will be
the schedules that applied to Class B shares of the Alliance
Mutual Fund originally purchased by the shareholder at the time
of their purchase.
The contingent deferred sales charge is waived on
redemptions of shares (i) following the death or disability, as
defined in the Internal Revenue Code of 1986, as amended (the
"Code"), of a shareholder, (ii) to the extent that the redemption
represents a minimum required distribution from an individual
retirement account or other retirement plan to a shareholder who
has attained the age of 70-1/2, (iii) that had been purchased by
present or former Directors of the Fund, by the relative of any
such person, by any trust, individual retirement account or
retirement plan account for the benefit of any such person or
relative, or by the estate of any such person or relative, or
(iv) pursuant to a systematic withdrawal plan (see "Shareholder
Services-Systematic Withdrawal Plan" below).
Conversion Feature. At the end of the period ending six
years after the end of the calendar month in which the
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<PAGE>
shareholder's purchase order was accepted, Class B shares will
automatically convert to Class A shares and will no longer be
subject to a higher distribution services fee. Such conversion
will be on the basis of the relative net asset values of the two
classes, without the imposition of any sales load, fee or other
charge. The purpose of the conversion feature is to reduce the
distribution services fee paid by holders of Class B shares that
have been outstanding long enough for the Principal Underwriter
to have been compensated for distribution expenses incurred in
the sale of such shares.
For purposes of conversion to Class A, Class B shares
purchased through the reinvestment of dividends and distributions
paid in respect of Class B shares in a shareholder's account will
be considered to be held in a separate sub-account. Each time
any Class B shares in the shareholder's account (other than those
in the sub-account) convert to Class A, an equal pro-rata portion
of the Class B shares in the sub-account will also convert to
Class A.
The conversion of Class B shares to Class A shares is
subject to the continuing availability of an opinion of counsel
to the effect that (i) the assessment of the higher distribution
services fee and transfer agency costs with respect to Class B
shares does not result in the Fund's dividends or distributions
constituting "preferential dividends" under the Code, and
(ii) the conversion of Class B shares to Class A shares does not
constitute a taxable event under federal income tax law. The
conversion of Class B shares to Class A shares may be suspended
if such an opinion is no longer available at the time such
conversion is to occur. In that event, no further conversions of
Class B shares would occur, and shares might continue to be
subject to the higher distribution services fee for an indefinite
period which may extend beyond the period ending six years after
the end of the calendar month in which the shareholder's purchase
order was accepted.
Asset-Based Sales Charge Alternative--Class C Shares
Investors choosing the asset-based sales charge
alternative purchase Class C shares at the public offering price
equal to the net asset value per share of the Class C shares on
the date of purchase without the imposition of a sales charge
either at the time of purchase or upon redemption. Class C
shares are sold without an initial sales charge so that the Fund
will receive the full amount of the investor's purchase payment
and without a contingent deferred sales charge so that the
investor will receive as proceeds upon redemption the entire net
asset value of his or her Class C shares. The Class C
distribution services fee enables the Fund to sell Class C shares
without either an initial or contingent deferred sales charge.
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Class C shares do not convert to any other class of shares of the
Fund and incur higher distribution services fees than Class A
shares, and will thus have a higher expense ratio and pay
correspondingly lower dividends than Class A shares.
__________________________________________________________________
REDEMPTION AND REPURCHASE OF SHARES
__________________________________________________________________
The following information supplements that set forth in
the Fund's Prospectus under the heading "Purchase and Sale of
Shares -- How to Sell Shares."
Redemption
Subject only to the limitations described below, the
Fund's Articles of Incorporation requires that the Fund redeem
the shares tendered to it, as described below, at a redemption
price equal to their net asset value as next computed following
the receipt of shares tendered for redemption in proper form.
Except for any contingent deferred sales charge which may be
applicable to Class A and Class B shares, there is no redemption
charge. Payment of the redemption price will be made within
seven days after the Fund's receipt of such tender for
redemption.
The right of redemption may not be suspended or the date
of payment upon redemption postponed for more than seven days
after shares are tendered for redemption, except for any period
during which the New York Stock Exchange (the "Exchange") is
closed (other than customary weekend and holiday closings) or
during which the Commission determines that trading thereon is
restricted, or for any period during which an emergency (as
determined by the Commission) exists as a result of which
disposal by the Fund of securities owned by it is not reasonably
practicable or as a result of which it is not reasonably
practicable for the Fund fairly to determine the value of its net
assets, or for such other periods as the Commission may by order
permits for the protection of security holders of the Fund.
Payment of the redemption price will be made in cash.
The value of a shareholder's shares on redemption or repurchase
may be more or less than the cost of such shares to the
shareholder, depending upon the market value of the Fund's
portfolio securities at the time of such redemption or
repurchase. Redemption proceeds on Class A shares and Class B
shares will reflect the deduction of the contingent deferred
sales charge, if any. Payment (either in cash or in portfolio
securities) received by a shareholder upon redemption or
repurchase of his shares, assuming the shares constitute capital
35
<PAGE>
assets in his hands, will result in long-term or short-term
capital gains (or loss) depending upon the shareholder's holding
period and basis in respect of the shares redeemed.
To redeem shares of the Fund for which no share
certificates have been issued, the registered owner or owners
should forward a letter to the Fund containing a request for
redemption. The signature or signatures on the letter must be
guaranteed by an institution that is an "eligible guarantor" as
defined in Rule 17Ad-15 under the Securities Exchange Act of
1934, as amended.
Telephone Redemption By Electronic Funds Transfer.
Requests for redemption of shares for which no stock certificates
have been issued can also be made by telephone at (800) 221-5672
by a shareholder who has completed the appropriate portion of the
Subscription Application or, in the case of an existing
shareholder, an "Autosell" application obtained from Alliance
Fund Services, Inc. A telephone redemption request must be for
at least $500 and may not exceed $100,000, and must be made
between 9:00 a.m. and 4:00 p.m. Eastern time on a Fund business
day as defined above. Proceeds of telephone redemptions will be
sent by Electronic Funds Transfer to a shareholder's designated
bank account at a bank selected by the shareholder that is a
member of the NACHA.
Telephone Redemption By Check. Except as noted below,
each Fund shareholder is eligible to request redemption, once in
any 30-day period, of Fund shares by telephone at (800) 221-5672
before 4:00 p.m. Eastern time on a Fund business day in an amount
not exceeding $50,000. Proceeds of such redemptions are remitted
by check to the shareholder's address of record. Telephone
redemption by check is not available with respect to shares
(i) for which certificates have been issued, (ii) held in nominee
or "street name" accounts, (iii) purchased within 15 calendar
days prior to the redemption request, (iv) held by a shareholder
who has changed his or her address of record within the preceding
30 calendar days or (v) held in any retirement plan account. A
shareholder otherwise eligible for telephone redemption by check
may cancel the privilege by written instruction to Alliance Fund
Services, Inc., or by checking the appropriate box on the
Subscription Application found in the Prospectus.
General. During periods of drastic economic or market
developments, such as the market break of October 1987, it is
possible that shareholders would have difficulty in reaching
Alliance Fund Services, Inc. by telephone (although no such
difficulty was apparent at any time in connection with the 1987
market break). If a shareholder were to experience such
difficulty, the shareholder should issue written instructions to
Alliance Fund Services, Inc. at the address shown on the cover of
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<PAGE>
this Statement of Additional Information. The Fund reserves the
right to suspend or terminate its telephone redemption service at
any time without notice. Neither the Fund nor the Adviser, the
Principal Underwriter or Alliance Fund Services, Inc. will be
responsible for the authenticity of telephone requests for
redemptions that the Fund reasonably believes to be genuine. The
Fund will employ reasonable procedures in order to verify that
telephone requests for redemptions are genuine, including, among
others, recording such telephone instructions and causing written
confirmations of the resulting transactions to be sent to
shareholders. If the Fund did not employ such procedures, it
could be liable for losses arising from unauthorized or
fraudulent telephone instructions. Selected dealers or agents
may charge a commission for handling telephone requests for
redemptions.
To redeem shares of the Fund represented by stock
certificates, the investor should forward the appropriate stock
certificate or certificates, endorsed in blank or with blank
stock powers attached, to the Fund with the request that the
shares represented thereby, or a specified portion thereof, be
redeemed. The stock assignment form on the reverse side of each
stock certificate surrendered to the Fund for redemption must be
signed by the registered owner or owners exactly as the
registered name appears on the face of the certificate or,
alternatively, a stock power signed in the same manner may be
attached to the stock certificate or certificates or, where
tender is made by mail, separately mailed to the Fund. The
signature or signatures on the assignment form must be guaranteed
in the manner described above.
Repurchase
The Fund may repurchase shares through the Principal
Underwriter or selected dealers or agents. The repurchase price
will be the net asset value next determined after the Principal
Underwriter receives the request (less the contingent deferred
sales charge, if any, with respect to the Class A and Class B
shares), except that requests placed through selected dealers or
agents before the close of regular trading on the Exchange on any
day will be executed at the net asset value determined as of such
close of regular trading on that day if received by the Principal
Underwriter prior to its close of business on that day (normally
5:00 p.m. Eastern time). The selected dealer or agent is
responsible for transmitting the request to the Principal
Underwriter by 5:00 p.m. If the selected dealer or agent fails
to do so, the shareholder's right to receive that day's closing
price must be settled between the shareholder and the dealer or
agent. A shareholder may offer shares of the Fund to the
Principal Underwriter either directly or through a selected
dealer or agent. Neither the Fund nor the Principal Underwriter
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<PAGE>
charges a fee or commission in connection with the repurchase of
shares (except for the contingent deferred sales charge, if any,
with respect to Class A and Class B shares). Normally, if shares
of the Fund are offered through a selected dealer or agent, the
repurchase is settled by the shareholder as an ordinary
transaction with or through the selected dealer or agent, who may
charge the shareholder for this service. The repurchase of
shares of the Fund as described above is a voluntary service of
the Fund and the Fund may suspend or terminate this practice at
any time.
General
The Fund reserves the right to close out an account that
through redemption has remained below $200 for 90 days.
Shareholders will receive 60 days written notice to increase the
account value before the account is closed. No contingent
deferred sales charge will be deducted from the proceeds of this
redemption. In the case of a redemption or repurchase of shares
of the Fund recently purchased by check, redemption proceeds will
not be made available until the Fund is reasonably assured that
the check has cleared, normally up to 15 calendar days following
the purchase date.
__________________________________________________________________
SHAREHOLDER SERVICES
__________________________________________________________________
The following information supplements that set forth in
the Fund's Prospectus under the heading "Purchase and Sale of
Shares--Shareholder Services." The shareholder services set
forth below are applicable to all three classes of shares of the
Fund.
Automatic Investment Program
Investors may purchase shares of the Fund through an
automatic investment program utilizing "pre-authorized check"
drafts drawn on the investor's own bank account. Under such a
program, pre-authorized monthly drafts for a fixed amount (at
least $25) are used to purchase shares through the selected
dealer or selected agent designated by the investor at the public
offering price next determined after the Principal Underwriter
receives the proceeds from the investor's bank. Drafts may be
made in paper form or, if the investor's bank is a member of the
NACHA, in electronic form. If made in paper form, the draft is
normally made on the 20th day of each month, or the next business
day thereafter. If made in electronic form, drafts can be made
on or about a date each month selected by the shareholder.
Investors wishing to establish an automatic investment program in
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<PAGE>
connection with their initial investment should complete the
appropriate portion of the Subscription Application found in the
Prospectus. Current shareholders should contact Alliance Fund
Services, Inc. at the address or telephone numbers shown on the
cover of this Statement of Additional Information to establish an
automatic investment program.
Exchange Privilege
Class A shareholders of the Fund can exchange their
Class A shares for Class A shares of any the Alliance Mutual Fund
that offers Class A shares and for shares of Alliance World
Income Trust, Inc. without the payment of any sales or service
charges. For purposes of applying any applicable contingent
deferred sales charge upon the newly acquired Class A shares, the
period of time the Class A shares surrendered in the exchange
have been held is added to the period of time the newly acquired
share have been held. Prospectuses for which Alliance Mutual
Fund may be obtained by contacting Alliance Fund Services, Inc.
at the address shown on the cover of this Statement of Additional
Information or by telephone at (800) 227-4618 or, in Illinois,
(800) 227-4170.
Class B shareholders of the Fund an exchange their
Class B shares ("original Class B shares") or Class B shares of
any other Alliance Mutual Fund that offers Class B shares ("new
Class B shares") without the payment of any contingent deferred
sales or service charges. For purposes of computing both the
time remaining before the new Class B shares convert to Class A
shares of that fund and the contingent deferred sales charge
payable upon disposition of the new Class B shares, the period of
time for which the original Class B shares have been held is
added to the period of time for which the new Class B shares have
been held. After an exchange, new Class B shares will
automatically convert into Class A shares in accordance with the
conversion schedule applicable to the Alliance Mutual Fund Class
B shares originally purchased for cash, and when redemption
occurs, the contingent deferred sales charge schedule applicable
to the Class B shares originally purchased for cash is applied.
Class C shareholders of the Fund can exchange their
Class C share. of any other Alliance Mutual Fund that offers
Class C shares.
All exchanges are subject to the minimum investment
requirements and any other applicable terms set forth in the
Prospectus for the Alliance Mutual Fund whose shares are being
acquired. An exchange is effected through the redemption of the
shares tendered for exchange and the purchase of shares being
acquired at their respective net asset values as next determined
following receipt by the Alliance Mutual Fund whose shares are
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<PAGE>
being exchanged of (i) proper instructions and all necessary
supporting documents as described in such fund's Prospectus, or
(ii) a telephone request for such exchange in accordance with the
procedures set forth in the following paragraph. Exchanges
involving the redemption of shares recently purchased by check
will be permitted only after the Alliance Mutual Fund whose
shares have been tendered for exchange is reasonably assured that
the check has cleared, normally up to 15 calendar days following
the purchase date. Exchanges of shares of Alliance Mutual Funds
will generally result in the realization of a capital gain or
loss for Federal income tax purposes.
Each Fund shareholder, and the shareholder's selected
dealer or agent, are authorized to make telephone requests for
exchanges unless Alliance Fund Services, Inc., receives written
instruction to the contrary from the shareholder, or the
shareholder declines the privilege by checking the appropriate
box on the Subscription Application found in the Prospectus.
Such telephone requests cannot be accepted with respect to shares
then represented by stock certificates. Shares acquired pursuant
to a telephone request for exchange will be held under the same
account registration as the shares redeemed through such
exchange.
Eligible shareholders desiring to make an exchange
should telephone Alliance Fund Services, Inc. with their account
number and other details of the exchange, at (800) 221-5672
between 9:00 a.m. and 4:00 p.m., Eastern time, on a Fund business
day as defined above. Telephone requests for exchange received
before 4:00 p.m. Eastern time on a Fund business day will be
processed as of the close of business on that day. During
periods of drastic economic or market developments, such as the
market break of October 1987, it is possible that shareholders
would have difficulty in reaching Alliance Fund Services, Inc. by
telephone (although no such difficulty was apparent at any time
in connection with the 1987 market break). If a shareholder were
to experience such difficulty, the shareholder should issue
written instructions to Alliance Fund Services, Inc. at the
address shown on the cover of this Statement of Additional
Information.
A shareholder may elect to initiate a monthly "Auto
Exchange" whereby a specified dollar amount's worth of his or her
Fund shares (minimum $25) is automatically exchanged for shares
of another Alliance Mutual Fund. Auto Exchange transactions
normally occur on the 12th day of each month, or the Fund
business day prior thereto.
None of the Alliance Funds, the Adviser, the Principal
Underwriter or Alliance Fund Services, Inc. will be responsible
for the authenticity of telephone requests for exchanges that the
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<PAGE>
Fund reasonably believes to be genuine. The Fund will employ
reasonable procedures in order to verify that telephone requests
for exchanges are genuine, including, among others, recording
such telephone instructions and causing written confirmations of
the resulting transactions to be sent to shareholders. If the
Fund did not employ such procedures, it could be liable for
losses arising from unauthorized or fraudulent telephone
instructions. Selected dealers or agents may charge a commission
for handling telephone requests for exchanges.
The exchange privilege is available only in states where
shares of the Alliance Mutual Funds being acquired may be legally
sold. Each Alliance Mutual Fund reserves the right, at any time
on 60 days' notice to its shareholders, to reject any order to
acquire its shares through exchange or otherwise to modify,
restrict or terminate the exchange privilege.
Retirement Plans
The Fund may be a suitable investment vehicle for part
or all of the assets held in various types of retirement plans,
such as those listed below. The Fund has available forms of such
plans pursuant to which investments can be made in the Fund and
other Alliance Mutual Funds. Persons desiring information
concerning these plans should contact Alliance Fund Services,
Inc. at the "Literature" telephone number on the cover of this
Statement of Additional Information, or write to:
Alliance Fund Services, Inc.
Retirement Plans
P.O. Box 1520
Secaucus, New Jersey 07096-1520
Individual Retirement Account ("IRA"). Individuals who
receive compensation, including earnings from self-employment,
are entitled to establish and make contributions to an IRA.
Taxation of the income and gains paid to an IRA by the Fund is
deferred until distribution from the IRA. An individual's
eligible contribution to an IRA will be deductible if neither the
individual nor his or her spouse is an active participant in an
employer-sponsored retirement plan. If the individual or his or
her spouse is an active participant in an employer-sponsored
retirement plan, the individual's contributions to an IRA may be
deductible, in whole or in part, depending on the amount of the
adjusted gross income of the individual and his or her spouse.
Employer-Sponsored Qualified Retirement Plans. Sole
proprietors, partnerships and corporations may sponsor qualified
money purchase pension and profit-sharing plans, including
Section 401(k) plans ("qualified plans"), under which annual tax-
41
<PAGE>
deductible contributions are made within prescribed limits based
on compensation paid to participating individuals.
If the aggregate net asset value of shares of the
Alliance Mutual Funds held by the qualified plan reaches $5
million on or before December 15 in any year, all Class B or C
shares of the Fund held by such plan can be exchanged, at the
Plan's request, without any sales charge, for Class A shares of
such Fund.
Simplified Employee Pension Plan ("SEP"). Sole
proprietors, partnerships and corporations may sponsor a SEP
under which they make annual tax-deductible contributions to an
IRA established by each eligible employee within prescribed
limits based on employee compensation.
403(b)(7) Retirement Plan. Certain tax-exempt
organizations and public educational institutions may sponsor
retirements plans under which an employee may agree that monies
deducted from his or her compensation (minimum $25 per pay
period) may be contributed by the employer to a custodial account
established for the employee under the plan.
The Alliance Plans Division of Frontier Trust Company, a
subsidiary of The Equitable Life Assurance Society of the United
States, which serves as custodian or trustee under the retirement
plan prototype forms available from the Fund, charges certain
nominal fees for establishing an account and for annual
maintenance. A portion of these fees is remitted to Alliance
Fund Services, Inc. as compensation for its services to the
retirement plan accounts maintained with the Fund.
Distributions from retirement plans are subject to
certain Code requirements in addition to normal redemption
procedures. For additional information please contact Alliance
Fund Services, Inc.
Dividend Direction Plan
A shareholder who already maintains, in addition to his
or her Class A, Class B or Class C Fund account, a Class A, Class
B or Class C account(s) with one or more other Alliance Mutual
Funds may direct that income dividends and/or capital gains paid
on his or her Class A, Class B or Class C Fund shares be
automatically reinvested, in any amount, without the payment of
any sales or service charges, in shares of the same class of such
other Alliance Mutual Fund(s). Further information can be
obtained by contacting Alliance Fund Services, Inc. at the
address or the "Literature" telephone number shown on the cover
of this Statement of Additional Information. Investors wishing
to establish a dividend direction plan in connection with their
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<PAGE>
initial investment should complete the appropriate section of the
Subscription Application found in the Prospectus. Current
shareholders should contact Alliance Fund Services, Inc. to
establish a dividend direction plan.
Systematic Withdrawal Plan
General. Any shareholder who owns or purchases shares
of the Fund having a current net asset value of at least $4,000
(for quarterly or less frequent payments), $5,000 (for bi-monthly
payments) or $10,000 (for monthly payments) may establish a
systematic withdrawal plan under which the shareholder will
periodically receive a payment in a stated amount of not less
than $50 on a selected date. Systematic withdrawal plan
participants must elect to have their dividends and distributions
from the Fund automatically reinvested in additional shares of
the Fund.
Shares of the Fund owned by a participant in the Fund's
systematic withdrawal plan will be redeemed as necessary to meet
withdrawal payments and such payments will be subject to any
taxes applicable to redemptions and, except as discussed below,
any applicable contingent deferred sales charge. Shares acquired
with reinvested dividends and distributions will be liquidated
first to provide such withdrawal payments and thereafter other
shares will be liquidated to the extent necessary, and depending
upon the amount withdrawn, the investor's principal may be
depleted. A systematic withdrawal plan may be terminated at any
time by the shareholder or the Fund.
Withdrawal payments will not automatically end when a
shareholder's account reaches a certain minimum level.
Therefore, redemptions of shares under the plan may reduce or
even liquidate a shareholder's account and may subject the
shareholder to the Fund's involuntary redemption provisions. See
"Redemption and Repurchase of Shares - General." Purchases of
additional shares concurrently with withdrawals are undesirable
because of sales charges when purchases are made. While an
occasional lump-sum investment may be made by a holder of Class A
shares who is maintaining a systematic withdrawal plan, such
investment should normally be an amount equivalent to three times
the annual withdrawal or $5,000, whichever is less.
Payments under a systematic withdrawal plan may be made
by check or electronically via the Automated Clearing House
("ACH") network. Investors wishing to establish a systematic
withdrawal plan in conjunction with their initial investment in
shares of the Fund should complete the appropriate portion of the
Subscription Application found in the Prospectus, while current
Fund shareholders desiring to do so can obtain an application
form by contacting Alliance Fund Services, Inc. at the address or
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the "Literature" telephone number shown on the cover of this
Statement of Additional Information.
Class B CDSC Waiver. Under a systematic withdrawal
plan, up to 1% monthly, 2% bi-monthly or 3% quarterly of the
value at the time of redemption of the Class B shares in a
shareholder's account acquired after July 1, 1995 may be redeemed
free of any contingent deferred sales charge. Class B shares
acquired after July 1, 1995 that are not subject to a contingent
deferred sales charge (such as shares acquired with reinvested
dividends or distributions) will be redeemed first and will count
toward these limitations. Remaining Class B shares acquired
after July 1, 1995 that are held the longest will be redeemed
next. Redemptions of Class B shares acquired after July 1, 1995
in excess of the foregoing limitations and redemptions of Class B
shares acquired before July 1, 1995 will be subject to any
otherwise applicable contingent deferred sales charge.
Statements and Reports
Each shareholder of the Fund receives semi-annual and
annual reports which include a portfolio of investments,
financial statements and, in the case of the annual report, the
report of the Fund's independent auditors, Ernst & Young LLP, as
well as a confirmation of each purchase and redemption. By
contacting his or her broker or Alliance Fund Services, Inc., a
shareholder can arrange for copies of his or her account
statements to be sent to another person.
SHAREHOLDER SERVICES APPLICABLE TO
CLASS A AND CLASS C SHAREHOLDERS ONLY
Checkwriting
A Class A or Class C investor may fill out the Signature
Card which is included in this Prospectus to authorize the Fund
to arrange for a checkwriting service through State Street Bank
and Trust Company (the "Bank") to draw against Class A or Class C
shares of the Fund redeemed from the investor's account. Under
this service, checks may be made payable to any payee in any
amount not less than $500 and not more than 90% of the net asset
value of the Class A or Class C shares in the investor's account
(excluding for this purpose the current month's accumulated
dividends and shares for which certificates have been issued). A
Class A or Class C shareholder wishing to establish this
checkwriting service subsequent to the opening of his or her
account should contact the Fund by telephone or mail.
Corporations, fiduciaries and institutional investors are
required to furnish a certified resolution or other evidence of
authorization. This checkwriting service will be subject to the
Bank's customary rules and regulations governing checking
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accounts, and the Fund and the Bank each reserve the right to
change or suspend the checkwriting service. There is no charge to
the shareholder for the initiation and maintenance of this
service or for the clearance of any checks.
When a check is presented to the Bank for payment, the
Bank, as the shareholder's agent, causes the Fund to redeem, at
the net asset value next determined, a sufficient number of full
and fractional shares in the shareholder's account to cover the
check. Because the level of net assets in a shareholder's account
constantly changes, due, among various factors, to market
fluctuations, a shareholder should not attempt to close his or
her account by use of a check. In this regard, the Bank has the
right to return check (marked "insufficient funds") unpaid to the
presenting bank if the amount of the check exceeds 90% of the
assets in the account. Cancelled (paid) checks are returned to
the shareholder. The checkwriting service enables the
shareholder to receive the daily dividends declared on the shares
to be redeemed until the day that the check is presented to the
Bank for payment.
NET ASSET VALUE
The per share net asset value is computed in accordance
with the Fund's Articles of Incorporation and By-Laws at the next
close of regular trading on the Exchange following receipt of a
purchase or redemption order (and on such other days as the
Directors of the Fund deem necessary in order to comply with Rule
22c-1 under the 1940 Act). The Fund's per share net asset value
is calculated by dividing the value of the Fund's total assets,
less its liabilities, by the total number of its shares then
outstanding. The net asset value is calculated at the close of
business on each Fund business day.
For purposes of this computation, portfolio securities
that are actively traded in the over-the-counter market,
including listed securities for which the primary market is
believed to be over-the-counter, are valued at the mean between
the most recently quoted bid and asked prices provided by the
principal market makers. Publicly traded portfolio securities
are typically traded on an over-the-counter market. Because of
the nature of the markets for the securities in which the Fund
will invest, quotations from several sources will be obtained so
that the Fund's investment portfolio will not generally be priced
by a single source. Any security for which the primary market is
on an exchange is valued at the last sale price on such exchange
on the day of valuation or, if there was no sale on such day, the
last bid price quoted on such day. Options will be valued at
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market value or fair value if no market exists. Securities and
assets for which market quotations are not readily available are
valued at fair value as determined in good faith by or under the
direction of the Board of Directors of the Fund. However,
readily marketable portfolio securities may be valued on the
basis of prices provided by a pricing service when such prices
are believed by the Adviser to reflect the fair market value of
such securities. The prices provided by a pricing service take
into account institutional size trading in similar groups of
securities and any developments related to specific securities.
U.S. Government Securities and other debt instruments having 60
days or less remaining until maturity are stated at amortized
cost if their original maturity was 60 days or less, or by
amortizing their fair value as of the 61st day prior to maturity
if their original term to maturity exceeded 60 days (unless in
either case the Fund's Board of Directors determines that this
method does not represent fair value).
The assets belonging to the Class A shares, Class B
shares and Class C shares will be invested together in a single
portfolio. The net asset value of each class will be determined
separately by subtracting the expenses and liabilities allocated
to that class from the assets belonging to that class in
conformance with the provisions of a plan adopted by the Fund in
accordance with Rule 18f-3 under the 1940 Act.
DIVIDENDS, DISTRIBUTIONS AND TAXES
United States Federal Income Taxes
General. The Fund intends to qualify and elect to be
treated as a "regulated investment company" under sections 851
through 855 of the Code. To so qualify, the Fund must, among
other things, (i) derive at least 90% of its gross income in each
taxable year from dividends, interest, payments with respect to
securities loans, gains from the sale or other disposition of
stock or securities or foreign currency, or certain other income
(including, but not limited to, gains from options, futures and
forward contracts) derived with respect to its business of
investing in stock, securities or currency; (ii) derive less than
30% of its gross income in each taxable year from the sale or
other disposition within three months of their acquisition by the
Fund of stocks, securities, options, futures or forward contracts
and foreign currencies (or options, futures or forward contracts
on foreign currencies) that are not directly related to the
Fund's principal business of investing in stock or securities (or
options and futures with respect to stocks or securities); and
(iii) diversify its holdings so that, at the end of each quarter
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of its taxable year, the following two conditions are
met: (a) at least 50% of the value of the Fund's assets is
represented by cash, U.S. Government Securities, securities of
other regulated investment companies and other securities with
respect to which the Fund's investment is limited, in respect of
any one issuer, to an amount not greater than 5% of the Fund's
assets and 10% of the outstanding voting securities of such
issuer, and (b) not more than 25% of the value of the Fund's
assets is invested in securities of any one issuer (other than
U.S. Government Securities or securities of other regulated
investment companies). These requirements, among other things,
may limit the Fund's ability to sell securities short and write
and purchase options, futures and forward foreign currency
contracts.
If the Fund qualifies as a regulated investment company
for any taxable year and makes timely distributions to its
shareholders of 90% or more of its net investment income for that
year (calculated without regard to its net capital gain, i.e.,
the excess of its net long-term capital gain over its net short-
term capital loss), it will not be subject to federal income tax
on the portion of its taxable income for the year (including any
net capital gain) that it distributes to shareholders.
The Fund intends to also avoid the 4% federal excise tax
that would otherwise apply to certain undistributed income for a
given calendar year if it makes timely distributions to the
shareholders equal to the sum of (i) 98% of its ordinary income
for that year; (ii) 98% of its capital gain net income and
foreign currency gains for the twelve-month period ending on
October 31 of that year; and (iii) any ordinary income or capital
gain net income from the preceding calendar year that was not
distributed during that year. For this purpose, income or gain
retained by the Fund that is subject to corporate income tax will
be considered to have been distributed by the Fund by year-end.
For federal income and excise tax purposes, dividends declared
and payable to shareholders of record as of a date in October,
November or December of a given year but actually paid during the
immediately following January will be treated as if paid by the
Fund on December 31 of that calendar year, and will be taxable to
these shareholders for the year declared, and not for the year in
which the shareholders actually receive the dividend.
The Fund intends to make timely distributions of the
Fund's taxable income (including any net capital gain) so that
the Fund will not be subject to federal income or excise taxes.
However, exchange control or other regulations on the
repatriation of investment income, capital or the proceeds of
securities sales, if any exist or are enacted in the future, may
limit the Fund's ability to make distributions sufficient in
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amount to avoid being subject to one or both of such federal
taxes.
Dividends and Distributions. The Fund intends to make
timely distributions of the Fund's taxable income (including any
net capital gain) so that the Fund will not be subject to federal
income and excise taxes. Dividends of the Fund's net ordinary
income and distributions of any net realized short-term capital
gain are taxable to shareholders as ordinary income.
The excess of net long-term capital gains over the net
short-term capital losses realized and distributed by the Fund to
its shareholders will be taxable to the shareholders as long-term
capital gains, irrespective of the length of time a shareholder
may have held his Fund shares. Any dividend or distribution
received by a shareholder on shares of the Fund will have the
effect of reducing the net asset value of such shares by the
amount of such dividend or distribution. Furthermore, a dividend
or distribution made shortly after the purchase of such shares by
a shareholder, although in effect a return of capital to that
particular shareholder, would be taxable to him as described
above. Dividends are taxable in the manner discussed regardless
of whether they are paid to the shareholder in cash or are
reinvested in additional shares of the Fund.
After the end of the taxable year, the Fund will notify
shareholders of the federal income tax status of any
distributions made by the Fund to shareholders during such year.
It is the present policy of the Fund to distribute to
shareholders all net investment income and to distribute realized
capital gains, if any, annually. There is no fixed dividend rate
and there can be no assurance that the Fund will pay any
dividends. The amount of any dividend or distribution paid on
shares of the Fund must necessarily depend upon the realization
of income and capital gains from the Fund's investments.
Sales and Redemptions. Any gain or loss arising from a
sale or redemption of Fund shares generally will be capital gain
or loss except in the case of a dealer or a financial
institution, and will be long-term capital gain or loss if such
shareholder has held such shares for more than one year at the
time of the sale or redemption; otherwise it will be short-term
capital gain or loss. However, if a shareholder has held shares
in the Fund for six months or less and during that period has
received a distribution taxable to the shareholder as a long-term
capital gain, any loss recognized by the shareholder on the sale
of those shares during the six-month period will be treated as a
long-term capital loss to the extent of the dividend. In
determining the holding period of such shares for this purpose,
any period during which a shareholder's risk of loss is offset by
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means of options, short sales or similar transactions is not
counted.
Any loss realized by a shareholder on a sale or exchange
of shares of the Fund will be disallowed to the extent the shares
disposed of are replaced within a period of 61 days beginning 30
days before and ending 30 days after the shares are sold or
exchanged. For this purpose, acquisitions pursuant to the
Dividend Reinvestment Plan would constitute a replacement if made
within the period. If disallowed, the loss will be reflected in
an upward adjustment to the basis of the shares acquired.
Foreign Taxes. Income received by the Fund may also be
subject to foreign income taxes, including withholding taxes.
The United States has entered into tax treaties with many foreign
countries which entitle the Fund to a reduced rate of such taxes
or exemption from taxes on such income. It is impossible to
determine the effective rate of foreign tax in advance since the
amount of the Fund's assets to be invested within various
countries is not known. If more than 50% of the value of the
Fund's total assets at the close of its taxable year consists of
stocks or securities of foreign corporations, the Fund will be
eligible and intends to file an election with the Internal
Revenue Service to pass through to its shareholders the amount of
foreign taxes paid by the Fund. However, there can be no
assurance that the Fund will be able to do so. Pursuant to this
election a United States shareholder will be required to
(i) include in gross income (in addition to taxable dividends
actually received) his pro rata share of foreign taxes paid by
the Fund, (ii) treat his pro rata share of such foreign taxes as
having been paid by him, and (iii) either deduct such pro rata
share of foreign taxes in computing his taxable income or treat
such foreign taxes as a credit against United States federal
income taxes. Shareholders who are not liable for federal income
taxes, such as retirement plans qualified under section 401 of
the Code, will not be affected by any such pass through of taxes
by the Fund. No deduction for foreign taxes may be claimed by an
individual United States shareholder who does not itemize
deductions. In addition, certain individual United States
shareholders may be subject to rules which limit or reduce their
availability to fully deduct their pro rata share of the foreign
taxes paid by the Fund. Each shareholder will be notified within
60 days after the close of the Fund's taxable year whether the
foreign taxes paid by the Fund will pass through for that year
and, if so, such notification will designate (i) the
shareholder's portion of the foreign taxes paid to each such
country and (ii) the portion of dividends that represents income
derived from sources within each such country.
Generally, a credit for foreign taxes may not
exceed the shareholder's United States tax attributable to the
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shareholder's total foreign source taxable income. Generally, the
source of the Fund's income flows through to its shareholders.
The overall limitation on a foreign tax credit is also applied
separately to specific categories of foreign source income,
including foreign source impassive income," including dividends,
interest and capital gains. Further, the foreign tax credit is
allowed to offset only 90% of any alternative minimum tax to
which a shareholder may be subject. As a result of these rules,
certain shareholders may be unable to claim a credit for the full
amount of their proportionate share of the foreign taxes paid by
the Fund. If a shareholder could not credit his full share of
the foreign tax paid, double taxation of such income could be
mitigated only by deducting the foreign tax paid, which may be
"subject to limitation as described above.
The federal income tax status of each year's
distributions by the Fund will be purported to shareholders and
to the Internal Revenue Service. The foregoing is only a general
description of the treatment of foreign taxes under the United
States federal income tax laws. Because the availability of a
foreign tax credit or deduction will depend on the particular
circumstances of each shareholder, potential investors are
advised to consult their own tax advisers.
Backup Withholding. The Fund may be required to
withhold United States federal income tax at the rate of 31% of
all taxable distributions payable to shareholders who fail to
provide the Fund with their correct taxpayer identification
numbers or to make required certifications, or who have been
notified by the Internal Revenue Service that they are subject to
backup withholding. Corporate shareholders and certain other
shareholders specified in the Code are exempt from such backup
withholding. Backup withholding is not an additional tax; any
amounts so withheld may be credited against a United States
Shareholder's United States federal income tax liability or
refunded.
United States Federal Income Taxation of the Fund
The following discussion relates to certain significant
United States federal income tax consequences to the Fund with
respect to the determination of its "investment company taxable
income" each year. This discussion assumes that the Fund will be
taxed as a regulated investment company for each of its taxable
years.
Passive Foreign Investment Companies. If the Fund owns
shares in a foreign corporation that constitutes a "passive
foreign investment company" (a "PFIC") for federal income tax
purposes and the Fund does not elect to treat the foreign
corporation as a "qualified electing fund" within the meaning of
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the Code, the Fund may be subject to United States federal income
taxation on a portion of any "excess distribution" it receives
from the PFIC or any gain it derives from the disposition of such
shares, even if such income is distributed as a taxable dividend
by the Fund to its shareholders. The Fund may also be subject to
additional interest charges in respect of deferred taxes arising
from such distributions or gains. Any tax paid by the Fund as a
result of its ownership of shares in a PFIC will not give rise to
any deduction or credit to the Fund or to any shareholder. A
PFIC means any foreign corporation if, for the taxable year
involved, either (i) it derives at least 75% of its gross income
from "passive income" (including, but not limited to, interest,
dividends, royalties, rents and annuities), or (ii) on average,
at least 50% of the value (or adjusted tax basis, if elected ) of
the assets held by the corporation produce "passive income." The
Treasury has issued proposed regulations which would provide a
"marked to market" election solely with respect to gain inherent
in PFIC stock held by a regulated investment company, such as the
Fund, which does not elect to treat the PFIC as a "qualified
electing fund." If the proposed regulations are adopted in final
form and the election provided therein were to be made by the
Fund, the Fund would recognize a gain as of the last business day
of its taxable year equal to the excess of the fair market value
of each share of stock in the PFIC over the Fund's adjusted tax
basis in that share. This gain, which would be treated as
derived from securities held by the Fund for at least three
months, generally would not be subject to the deferred tax and
interest charge amounts to which it might otherwise be subject,
as discussed above, in the event of an "excess distribution" or
gain with regard to shares of a PFIC. If the Fund purchases
shares in a PFIC and the Fund does elect to treat the foreign
corporation as a "qualified electing fund" under the Code, the
Fund may be required to include in its income each year a portion
of the ordinary income and net capital gains of the foreign
corporation, even if this income is not distributed to the Fund.
Any such income would be subject to the 90% and calendar year
distribution requirements described above.
Currency Fluctuations-"Section 988" Gains or Losses.
Under the Code, gains or losses attributable to fluctuations in
exchange rates which occur between the time the Fund accrues
interest or other receivables or accrues expenses or other
liabilities denominated in a foreign currency and the time the
Fund actually collects such receivables or pays such liabilities
are treated as ordinary income or ordinary loss. Similarly,
gains or losses from the disposition of foreign currencies, from
the disposition of debt securities denominated in a foreign
currency, or from the disposition of a forward contract
denominated in a foreign currency which are attributable to
fluctuations in the value of the foreign currency between the
date of acquisition of the asset and the date of disposition also
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are treated as ordinary gain or loss. These gains or losses,
referred to under the Code as "section 988" gains or losses,
increase or decrease the amount of the Fund's investment company
taxable income available to be distributed to its shareholders as
ordinary income, rather than increasing or decreasing the amount
of the Fund's net capital gain. Because section 988 losses
reduce the amount of ordinary dividends the Fund will be allowed
to distribute for a taxable year, such section 988 losses may
result in all or a portion of prior dividend distributions for
such year being recharacterized as a non-taxable return of
capital to shareholders, rather than as an ordinary dividend,
reducing each shareholder's basis in his Fund shares. To the
extent that such distributions exceed such shareholder's basis,
each distribution will be treated as a gain from the sale of
shares.
Options, Futures and Forward Contracts. Certain listed
options, regulated futures contracts, and forward foreign
currency contracts are considered "section 1256 contracts" for
federal income tax purposes. Section 1256 contracts held by the
Fund at the end of each taxable year will be "marked to market"
and treated for federal income tax purposes as though sold for
fair market value on the last business day of such taxable year.
Gain or loss realized by the Fund on section 1256 contracts other
than forward foreign currency contracts will be considered 60%
long-term and 40% short-term capital gain or loss. Gain or loss
realized by the Fund on forward foreign currency contracts will
be treated as section 988 gain or loss and will therefore be
characterized as ordinary income or loss and will increase or
decrease the amount of the Fund's net investment income available
to be distributed to shareholders as ordinary income, as
described above. The Fund can elect to exempt its section 1256
contracts which are part of a "mixed straddle" (as described
below) from the application of section 1256.
The Treasury Department has the authority to issue
regulations that would permit or require the Fund either to
integrate a foreign currency hedging transaction with the
investment that is hedged and treat the two as a single
transaction, or otherwise to treat the hedging transaction in a
manner that is consistent with the hedged investment. The
regulations issued under this authority generally should not
apply to the type of hedging transactions in which the Fund
intends to engage.
With respect to equity options or options traded over-
the-counter or on certain foreign exchanges, gain or loss
realized by the Fund upon the lapse or sale of such options held
by the Fund will be either long-term or short-term capital gain
or loss depending upon the Fund's holding period with respect to
such option. However, gain or loss realized upon the lapse or
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closing out of such options that are written by the Fund will be
treated as short-term capital gain or loss. In general, if the
Fund exercises an option, or an option that the Fund has written
is exercised, gain or loss on the option will not be separately
recognized but the premium received or paid will be included in
the calculation of gain or loss upon disposition of the property
underlying the option.
Gain or loss realized by the Fund on the lapse or sale
of put and call options on foreign currencies which are traded
over-the-counter or on certain foreign exchanges will be treated
as section 988 gain or loss and will therefore be characterized
as ordinary income or loss and will increase or decrease the
amount of the Fund's net investment income available to be
distributed to shareholders as ordinary income, as described
above. The amount of such gain or loss shall be determined by
subtracting the amount paid, if any, for or with respect to the
option (including any amount paid by the Fund upon termination of
an option written by the Fund) from the amount received, if any,
for or with respect to the option (including any amount received
by the Fund upon termination of an option held by the Fund). In
general, if the Fund exercises such an option on a foreign
currency, or such an option that the Fund has written is
exercised, gain or loss on the option will be recognized in the
same manner as if the Fund had sold the option (or paid another
person to assume the Fund's obligation to make delivery under the
option) on the date on which the option is exercised, for the
fair market value of the option. The foregoing rules will also
apply to other put and call options which have as their
underlying property foreign currency and which are traded over-
the-counter or on certain foreign exchanges to the extent gain or
loss with respect to such options is attributable to fluctuations
in foreign currency exchange rates.
Tax Straddles. Any option, futures contract, forward
foreign currency contract, currency swaps, short sale or other
position entered into or held by the Fund in conjunction with any
other position held by the Fund may constitute a "straddle" for
federal income tax purposes. A straddle of which at least one,
but not all, the positions are section 1256 contracts may
constitute a "mixed straddle". In general, straddles are subject
to certain rules that may affect the character and timing of the
Fund's gains and losses with respect to straddle positions by
requiring, among other things, that (i) loss realized on
disposition of one position of a straddle not be recognized to
the extent that the Fund has unrealized gains with respect to the
other position in such straddle; (ii) the Fund's holding period
in straddle positions be suspended while the straddle exists
(possibly resulting in gain being treated as short-term capital
gain rather than long-term capital gain); (iii) losses recognized
with respect to certain straddle positions which are part of a
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mixed straddle and which are non-section 1256 positions be
treated as 60% long-term and 40% short-term capital loss;
(iv) losses recognized with respect to certain straddle positions
which would otherwise constitute short-term capital losses be
treated as long-term capital losses; and (v) the deduction of
interest and carrying charges attributable to certain straddle
positions may be deferred. The Treasury Department is authorized
to issue regulations providing for the proper treatment of a
mixed straddle where at least one position is ordinary and at
least one position is capital. No such regulations have yet been
issued. Various elections are available to the Fund which may
mitigate the effects of the straddle rules, particularly with
respect to mixed straddles. In general, the straddle rules
described above do not apply to any straddles held by the Fund
all of the offsetting positions of which consist of section 1256
contracts.
Short Sales. In general, gain or loss realized by the
Fund on the closing of a short sale will be considered to be
short-term capital gain or loss. In addition, with regard to the
requirement discussed above that the Fund derive less than 30% of
its gross income from the dispostion of certain types of property
within three months of their acquisition by the Fund, any gain
from the closing of a short sale will be treated as gain from the
sale of property held three months or less, regardless of how
long the position has been kept open by the Fund, unless the Fund
closes the short sale with securities that were held by the Fund
for more than three months at the time of the short sale.
Taxation of Foreign Stockholders
The foregoing discussion relates only to United States
federal income tax law as it affects shareholders who are United
States citizens or residents or United States corporations. The
effects of federal income tax law on shareholders who are non-
resident alien individuals or foreign corporations may be
substantially different. Foreign investors should therefore
consult their counsel for further information as to the United
States tax consequences of receipt of income from the Fund.
PORTFOLIO TRANSACTIONS
Subject to the general supervision of the Directors of
the Fund, the Adviser makes the investment decisions and places
the orders for portfolio securities for the Fund and determines
the broker or dealer to be used in each specific transaction.
Most transactions made by the Fund will be principal transactions
at net prices and the Fund will incur little or no brokerage
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costs. Where possible, securities will be purchased directly
from the issuer or from an underwriter or market maker for the
securities unless the Adviser believes a better price and
execution is available elsewhere. Purchases from underwriters of
newly-issued securities for inclusion in the Fund's portfolio
usually will include a concession paid to the underwriter by the
issuer and purchases from dealers serving as market makers will
include the spread between the bid and asked price.
The Fund has no obligation to enter into transactions in
portfolio securities with any broker, dealer, issuer, underwriter
or other entity. In placing orders, it is the policy of the Fund
to obtain the best price and execution for its transactions.
Where best price and execution may be obtained from more than one
broker or dealer, the Adviser may, in its discretion, purchase
and sell securities through brokers and dealers who provide
research, statistical and other information to the Adviser. Such
services may be used by the Adviser for all of its investment
advisory accounts and, accordingly, not all such services may be
used by the Adviser in connection with the Fund. The
supplemental information received from a dealer is in addition to
the services required to be performed by the Adviser under the
Advisory Agreement, and the expenses of the Adviser will not
necessarily be reduced as a result of the receipt of such
information. Consistent with the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., and subject to
seeking best price and execution, the Fund may consider sales of
shares of the Fund as a factor in the selection of dealers to
enter into portfolio transactions with the Fund.
No transactions for the Fund will be executed through
any broker or dealer affiliated with the Fund's Adviser, Alliance
Capital Management L.P., or with Donaldson, Lufkin & Jenrette
Securities Corporation, an affiliate of the Adviser.
GENERAL INFORMATION
Capitalization
The authorized capital stock of the Fund currently
consists of 3,000,000,000 shares of Class A Common Stock,
3,000,000,000 shares of Class B Common Stock, 3,000,000,000
shares of Class C Common Stock and 3,000,000,000 shares of
Class Y Common Stock, each having a par value of $.001 per share.
All shares of the Fund, when issued, are fully paid and non-
assessable. The Directors are authorized to reclassify and issue
any unissued shares to any number of additional series without
shareholder approval. Accordingly, the Directors in the future,
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for reasons such as the desire to establish one or more
additional portfolios with different investment objectives,
policies or restrictions, may create additional classes or series
of shares. Any issuance of shares of another class or series
would be governed by the 1940 Act and the law of the State of
Maryland. If shares of another series were issued in connection
with the creation of a second portfolio, each share of either
portfolio would normally be entitled to one vote for all
purposes. Generally, shares of both portfolios would vote as a
single series on matters, such as the election of Directors, that
affected both portfolios in substantially the same manner. As to
matters affecting each portfolio differently, such as approval of
the Advisory Agreement and changes in investment policy, shares
of each portfolio would vote as a separate series.
Procedures for calling a shareholders' meeting for the
removal of Directors of the Fund, similar to those set forth in
Section 16(c) of the 1940 Act will be available to shareholders
of the Fund. The rights of the holders of shares of a series may
not be modified except by the vote of a majority of the
outstanding shares of such series.
Custodian
Brown Brothers Harriman & Co., 40 Wall Street, Boston,
Massachusetts 02109 ("Brown Brothers") will act as the Fund's
custodian. The Fund's securities and cash are held under a
custodian agreement by Brown Brothers. Rules adopted under the
1940 Act permit the Fund to maintain its securities and cash in
the custody of certain eligible banks and securities
depositories. Pursuant to those rules, the Fund's portfolio of
securities and cash, when invested in securities of foreign
countries, will be held by its subcustodians, subject to approval
by the Board of Directors of the Fund as and when appropriate in
accordance with the rules of the Securities and Exchange
Commission. Selection of the subcustodians will be made by the
Board of Directors of the Fund following a consideration of a
number of factors, including, but not limited to, the reliability
and financial stability of the institution, the ability of the
institution to capably perform custodial services of the Fund,
the reputation of the institution in its national market, the
political and economic stability of the countries in which the
subcustodians will be located, and risks of potential
nationalization or exportation of Fund assets. In addition, the
1940 Act requires that foreign bank subcustodians, among other
things, have shareholder equity in excess of $200,000,000, have
no lien on the Fund's asset and maintain adequate and accessible
records.
56
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Principal Underwriter
Alliance Fund Distributors, Inc., 1345 Avenue of the
Americas, New York, New York 10105, serves as the Fund's
Principal Underwriter, and as such may solicit orders from the
public to purchase shares of the Fund. Under the Distribution
Services Agreement, the Fund has agreed to indemnify the
Principal Underwriter, in the absence of its willful misfeasance,
bad faith, gross negligence or reckless disregard of its
obligations thereunder, against certain civil liabilities,
including liabilities under the Securities Act of 1933, as
amended.
Counsel
Legal matters in connection with the issuance of the
shares offered hereby are passed upon by Seward & Kissel, One
Battery Park Plaza, New York, New York 10004. Seward & Kissel
has relied upon the opinion of Venable, Baetjer and Howard, LLP,
1800 Mercantile Bank & Trust Building, 2 Hopkins Place,
Baltimore, Maryland 22201, for matters relating to Maryland law.
Independent Auditors
Ernst & Young LLP, 787 Seventh Avenue, New York, New
York 10172 has been appointed as independent auditors for the
Fund.
Yield and Total Return Quotations
From time to time the Fund advertises its "yield,"
"actual distribution rate" and "total return". The Fund's yield
for any 30-day (or one-month) period is computed by dividing the
net investment income per share earned during such period by the
maximum public offering price per share on the last day of the
period, and then annualizing such 30-day (or one-month) yield in
accordance with a formula prescribed by the Commission which
provides for compounding on a semi-annual basis. The Fund's
actual distribution rate, which may be advertised in items of
sales literature, is computed in the same manner as yield except
that actual income dividends declared per share during the period
in question is substituted for net investment income per share.
The actual distribution rate is computed separately for Class A,
Class B and Class C shares. Advertisements of the Fund's total
return disclose the Fund's average annual compounded total return
for its most recently completed one, five and ten year periods
(or the period since the Fund's inception). The Fund's total
return for each such period is computed by finding, through the
use of a formula prescribed by the Commission, the average annual
compounded rate of return over the period that would equate an
assumed initial amount invested in the value of such investment
57
<PAGE>
at the end of the period. For purposes of computing total
return, income dividends and capital gains distributions paid on
shares of the Fund are assumed to have been reinvested when
received and the maximum sales charge applicable to purchases of
Fund shares is assumed to have been paid.
Yield and total return are computed separately for Class
A, Class B and Class C shares. Yield and total return are not
fixed and will fluctuate in response to prevailing market
conditions or as a function of the type, and quality of the
securities in the Fund's portfolio, the Fund's average portfolio
maturity and its expenses. Quotations of yield and total return
do not include any provision for the effect of individual income
taxes. An investor's principal invested in the Fund is not fixed
and will fluctuate in response to prevailing market conditions.
The Fund may advertise the fluctuation of its net a~set value
over certain time periods and compare its performance to that
available from other investments, including money market funds
and certificates of deposit, the later of which, unlike the Fund,
are insured and have fixed rates of return.
Advertisements quoting performance rankings of the Fund
as measured by financial publications or by independent
organizations such as Lipper Analytical Services, Inc. ("Lipper")
and Morningstar, Inc., and advertisements presenting the
historical record of payments of income dividends by the Fund may
also from time to time be sent to investors or placed in
newspapers, magazines such as The Wall Street Journal, The New
York Times, Barrons, Investor's Daily, Money Magazine, Changing
Times, Business Week and Forbes or other media on behalf of the
Fund.
Additional Information
Any shareholder inquiries may be directed to the
shareholder's broker or to Alliance Fund Services, Inc. at the
address or telephone numbers shown on the front cover of this
Statement of Additional Information. This Statement of
Additional Information does not contain all the information set
forth in the Registration Statement filed by the Fund with the
Securities and Exchange Commission under the Securities Act of
1933. Copies of the Registration Statement may be obtained at a
reasonable charge from the Securities and Exchange Commission or
may be examined, without charge, at the offices of the Securities
and Exchange Commission in Washington, D.C.
58
00250223.AA0
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APPENDIX A: CERTAIN INVESTMENT PRACTICES
The following investment practices in which the Fund is
authorized to engage may not be currently permitted under the
laws or regulations or may otherwise be unavailable in many
countries. The Fund intends to engage in these investment
practices to the extent such practices become available and
permissible in the future.
Options
The Fund may write covered put and call options and
purchase put and call options on securities of the types in which
it is permitted to invest that are traded on U.S. and foreign
securities exchanges and over-the-counter, including options on
market indices. The Fund will only write "covered" put and call
options unless such options are written for cross-hedging
purposes. There are no specific limitations on the Fund's
writing and purchasing of options.
The Fund may purchase put options to hedge against a
decline in the value of its portfolio. By using put options in
this way, the Fund will reduce any profit it might otherwise have
realized in the underlying security by the amount of the premium
paid for the put option and by transaction costs. The Fund may
purchase call options to hedge against an increase in the price
of securities that the Fund anticipates purchasing in the future.
The premium paid for the call option plus any transaction costs
will reduce the benefit, if any, realized by the Fund upon
exercise of the option, and, unless the price of the underlying
security rises sufficiently, the option may expire worthless to
the Fund.
A put option gives the purchaser of such option, upon
payment of a premium, the right to deliver a specified amount of
a security to the writer of the option on or before a fixed date
at a predetermined price. A call option gives the purchaser of
the option, upon payment of a premium, the right to call upon the
writer to deliver a specified amount of a security on or before a
fixed date at a predetermined price. A call option written by
the Fund is "covered" if the Fund owns the underlying security
covered by the call or has an absolute and immediate right to
acquire that security without additional cash consideration (or
for additional cash consideration held in a segregated account by
its custodian) upon conversion or exchange of other securities
held in its portfolio. A call option is also covered if the Fund
holds a call on the same security and in the same principal
amount as the call written where the exercise price of the call
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held (i) is equal to or less than the exercise price of the call
written or (ii) is greater than the exercise price of the call
written if the difference is maintained by the Fund in cash and
liquid high-grade debt securities in a segregated account with
its custodian. A put option written by the Fund is "covered" if
the Fund maintains cash or liquid high-grade debt securities with
a value equal to the exercise price in a segregated account with
its custodian, or else holds a put on the same security and in
the same principal amount as the put written where the exercise
price of the put held is equal to or greater than the exercise
price of the put written. The premium paid by the purchaser of
an option will reflect, among other things, the relationship of
the exercise price to the market price and volatility of the
underlying security, the remaining term of the option, supply and
demand and interest rates.
A call option is for cross-hedging purposes if the Fund
does not own the underlying security but seeks to provide a hedge
against a decline in value in another security which the Fund
owns or has the right to acquire. In such circumstances, the
Fund collateralizes its obligation under the option by
maintaining in a segregated account with the Fund's custodian
cash or liquid high-grade debt securities in an amount not less
than the market value of the underlying security, marked to
market daily. The Fund would write a call option for cross-
hedging purposes, instead of writing a covered call option, when
the premium to be received from the cross-hedge transaction would
exceed that which would be received from writing a covered call
option, while at the same time achieving the desired hedge.
In purchasing a call option, the Fund would be in a
position to realize a gain if, during the option period, the
price of the underlying security increased by an amount in excess
of the premium paid. It would realize a loss if the price of the
underlying security declined or remained the same or did not
increase during the period, by more than the amount of the
premium. In purchasing a put option, the Fund would be in a
position to realize a gain if, during the option period, the
price of the underlying security declined by an amount in excess
of the premium paid. It would realize a loss if the price of the
underlying security increased or remained the same or did not
decrease during that period by more than the amount of the
premium. If a put or call option purchased by the Fund were
permitted to expire without being sold or exercised, its premium
would be lost by the Fund.
If a put option written by the Fund were exercised, the
Fund would be obligated to purchase the underlying security at
the exercise price. If a call option written by the Fund were
exercised, the Fund would be obligated to sell the underlying
security at the exercise price. The risk involved in writing a
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put option is that there could be a decrease in the market value
of the underlying security caused by rising interest rates or
other factors. If this occurred, the option could be exercised
and the underlying security would then be sold by the option
holder to the Fund at a higher price than its current market
value. The risk involved in writing a call option is that there
could be an increase in the market value of the underlying
security caused by declining interest rates or other factors. If
this occurred, the option could be exercised and the underlying
security would then be sold by the Fund at a lower price than its
current market value. These risks could be reduced by entering
into a closing transaction prior to the option expiration dates
if a liquid market is available. The Fund retains the premium
received from writing a put or call option whether or not the
option is exercised.
The Fund may purchase or write options on securities of
the types in which it is permitted to invest in privately
negotiated (i.e., over-the-counter) transactions. The Fund will
effect such transactions only with investment dealers and other
financial institutions (such as commercial banks or savings and
loan institutions) deemed creditworthy by the Adviser, and the
Adviser has adopted procedures for monitoring the
creditworthiness of such entities. Options purchased or written
by the Fund in negotiated transactions are illiquid and it may
not be possible for the Fund to effect a closing transaction at a
time when the Adviser believes it would be advantageous to do so.
An option on a securities index is similar to an option
on a security except that, rather than the right to take or make
delivery of a security at a specified price, an option on a
securities index gives the holder the right to receive, upon
exercises 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. There are no specific limitations on the Fund's
purchasing and selling of options on securities indices.
The writer of an option may have no control over when
the underlying securities must be sold, in the case of a call
option, or purchased, in the case of a put option, since with
regard to certain options, the writer may be assigned an exercise
notice at any time prior to the termination of the obligation.
Whether or not an option expires unexercised, the writer retains
the amount of the premium. This amount, of course, may, in the
case of a covered call option, be offset by a decline in the
market value of the underlying security during the option period.
If a call option is exercised, the writer experiences a profit or
loss from the sale of the underlying security. If a put option
is exercised, the writer must fulfill the obligation to purchase
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the underlying security at the exercise price, which will usually
exceed the then market value of the underlying security.
The writer of a listed option that wishes to terminate
its obligation may effect a "closing purchase transaction." This
is accomplished by buying an option of the same series as the
option previously written. The effect of the purchase is that
the writer's position will be cancelled by the clearing
corporation. However, a writer may not effect a closing purchase
transaction after being notified of the exercise of an option.
Likewise, an investor who is the holder of a listed option may
liquidate its position by effecting a "closing sale transaction."
This is accomplished by selling an option of the same series as
the option previously purchased. There can be no guarantee that
either a closing purchase or a closing sale transaction can be
effected in any particular situation.
Effecting a closing transaction in the case of a written
call option will permit the Fund to write another call option on
the underlying security with either a different exercise price or
expiration date or both, or in the case of a written put option
will permit the Fund to write another put option to the extent
that the exercise price thereof is secured by deposited cash or
short-term securities. Also, effecting a closing transaction
will permit the cash or proceeds from the concurrent sale of any
securities subject to the option to be used for other Fund
investments. If the Fund desires to sell a particular security
from its portfolio on which it has written a call option, it will
effect a closing transaction prior to or concurrent with the sale
of the security.
The Fund will realize a profit from a closing
transaction if the price of the transaction is less than the
premium received from writing the option or is more than the
premium paid to purchase the option; the Fund will realize a loss
from a closing transaction if the price of the transaction is
more than the premium received from writing the option or is less
than the premium paid to purchase the option. Because increases
in the market price of a call option will generally reflect
increases in the market price of the underlying security, any
loss resulting from the repurchase of a call option is likely to
be offset in whole or in part by appreciation of the underlying
security owned by the Fund.
An option position may be closed out only where there
exists a secondary market for an option of the same series. If a
secondary market does not exist, it might not be possible to
effect closing transactions in particular options with the result
that the Fund would have to exercise the options in order to
realize any profit. If the Fund is unable to effect a closing
purchase transaction in a secondary market, it will not be able
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to sell the underlying security until the option expires or it
delivers the underlying security upon exercise. Reasons for the
absence of a liquid secondary market include the following:
(i) there may be insufficient trading interest in certain
options, (ii) restrictions may be imposed by a national
securities exchange ("Exchange") on opening transactions or
closing transactions or both, (iii) trading halts, suspensions or
other restrictions may be imposed with respect to particular
classes or series of options or underlying securities,
(iv) unusual or unforeseen circumstances may interrupt normal
operations on an Exchange, (v) the facilities of an Exchange or
the Options Clearing Corporation may not at all times be adequate
to handle current trading volume, or (vi) one or more Exchanges
could, for economic or other reasons, decide or be compelled at
some future date to discontinue the trading of options (or a
particular class or series of options), in which event the
secondary market on that Exchange (or in that class or series of
options) would cease to exist, although outstanding options on
that Exchange that had been issued by the Options Clearing
Corporation as a result of trades on that Exchange would continue
to be exercisable in accordance with their terms.
The Fund may write options in connection with buy-and-
write transactions; that is, the Fund may purchase a security and
then write a call option against that security. The exercise
price of the call the Fund determines to write will depend upon
the expected price movement of the underlying security. The
exercise price of a call option may be below ("in-the-money"),
equal to ("at-the-money") or above ("out-of-the-money") the
current value of the underlying security at the time the option
is written. Buy-and-write transactions using in-the-money call
options may be used when it is expected that the price of the
underlying security will remain flat or decline moderately during
the option period. Buy-and-write transactions using at-the-money
call options may be used when it is expected that the price of
the underlying security will remain fixed or advance moderately
during the option period. Buy-and-write transactions using out-
of-the-money call options may be used when it is expected that
the premiums received from writing the call option plus the
appreciation in the market price of the underlying security up to
the exercise price will be greater than the appreciation in the
price of the underlying security alone. If the call options are
exercised in such transactions, the Fund's maximum gain will be
the premium received by it for writing the option, adjusted
upwards or downwards by the difference between the Fund's
purchase price of the security and the exercise price. If the
options are not exercised and the price of the underlying
security declines, the amount of such decline will be offset in
part, or entirely, by the premium received.
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The writing of covered put options is similar in terms
of risk/return characteristics to buy-and-write transactions. If
the market price of the underlying security rises or otherwise is
above the exercise price, the put option will expire worthless
and the Fund's gain will be limited to the premium received. If
the market price of the underlying security declines or otherwise
is below the exercise price, the Fund may elect to close the
position or take delivery of the security at the exercise price
and the Fund's return will be the premium received from the put
option minus the amount by which the market price of the security
is below the exercise price. Out-of-the-money, at-the-money, and
in-the-money put options may be used by the Fund in the same
market environments that call options are used in equivalent buy-
and-write transactions.
Futures Contracts and Options on Futures Contracts
The Fund may enter into contracts for the purchase or
sale for future delivery of foreign currencies, or contracts
based on financial indices, including any index of U.S.
Government Securities, securities issued by foreign government
entities, or common stocks ("futures contracts") and may purchase
and write put and call options to buy or sell futures contracts
("options on futures contracts"). A "sale" of a futures contract
means the acquisition of a contractual obligation to deliver the
securities or foreign currencies called for by the contract at a
specified price on a specified date. A "purchase" of a futures
contract means the incurring of a contractual obligation to
acquire the securities or foreign currencies called for by the
contract at a specified price on a specified date. The purchaser
of a futures contract on an index agrees to take or make delivery
of an amount of cash equal to the difference between a specified
dollar multiple of the value of the index on the expiration date
of the contract ("current contract value") and the price at which
the contract was originally struck. No physical delivery of the
securities underlying the index is made.
Options on futures contracts written or purchased by the
Fund will be traded on U.S. or foreign exchanges or over-the-
counter. These investment techniques will be used only to hedge
against anticipated future changes in market conditions and
interest or exchange rates which otherwise might either adversely
affect the value of the Fund's portfolio securities or adversely
affect the prices of securities which the Fund intends to
purchase at a later date.
The purchase of a call option on a futures contract is
similar in some respects to the purchase of a call option on an
individual security. Depending on the pricing of the option
compared to either the price of the futures contract upon which
it is based or the price of the underlying debt securities, it
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may or may not be less risky than ownership of the futures
contract or underlying debt securities. As with the purchase of
futures contracts, when the Fund is not fully invested it may
purchase a call option on a futures contract to hedge against
adverse market conditions.
The writing of a call option on a futures contract
constitutes a partial hedge against declining prices of the
security or foreign currency which is deliverable upon exercise
of the futures contract or securities comprising an index. If
the futures price at expiration of the option is below the
exercise price, the Fund will retain the full amount of the
option premium which provides a partial hedge against any decline
that may have occurred in the Fund's portfolio holdings. The
writing of a put option on a futures contract constitutes a
partial hedge against increasing prices of the security or
foreign currency which is deliverable upon exercise of the
futures contract or securities comprising an index. If the
futures price at expiration of the option is higher than the
exercise price, the Fund will retain the full amount of the
option premium which provides a partial hedge against any
increase in the price of securities which the Fund intends to
purchase. If a put or call option the Fund has written is
exercised, the Fund will incur a loss which will be reduced by
the amount of the premium it receives. Depending on the degree
of correlation between changes in the value of its portfolio
securities and changes in the value of its futures positions, the
Fund's losses from existing options on futures may to some extent
be reduced or increased by changes in the value of portfolio
securities.
The purchase of a put option on a futures contract is
similar in some respects to the purchase of protective put
options on portfolio securities. For example, the Fund may
purchase a put option on a futures contract to hedge the Fund's
portfolio against the risk of rising interest rates.
The amount of risk the Fund assumes when it purchases an
option on a futures contract is the premium paid for the option
plus related transaction costs. In addition to the correlation
risks discussed above, the purchase of an option also entails the
risk that changes in the value of the underlying futures contract
will not be fully reflected in the value of the option purchased.
U.S. futures contracts have been designed by exchanges
which have been designated "contracts markets" by the Commodity
Futures Trading Commission ("CFTC"), and must be executed through
a futures commission merchant, or brokerage firm, which is a
member of the relevant contract market. Futures contracts trade
on a number of exchange markets, and, through their clearing
corporations, the exchanges guarantee performance of the
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contracts as between the clearing members of the exchange. The
Fund is not a commodity pool and all transactions in futures
contracts and options on futures contracts engaged in by the Fund
must constitute bona fide hedging or other permissible
transactions in accordance with the rules and regulations
promulgated by the CFTC.
At the same time a futures contract is purchased or
sold, the Fund must allocate cash or securities as a deposit
payment ("initial deposit"). It is expected that the initial
deposit would be approximately 1 l/2% to 5% of a contract's face
value. Daily thereafter, the futures contract is valued and the
payment of "variation margin" may be required, since each day the
Fund would provide or receive cash that reflects any decline or
increase in the contract's value.
At the time of delivery of securities pursuant to such a
contract, adjustments are made to recognize differences in value
arising from the delivery of securities with a different price or
interest rate from that specified in the contract. In some (but
not many) cases, securities called for by a futures contract may
not have been issued when the contract was written.
Although futures contracts by their terms call for the
actual delivery or acquisition of securities, in most cases the
contractual obligation is fulfilled before the date of the
contract without having to make or take delivery of the
securities. The offsetting of a contractual obligation is
accomplished by buying (or selling, as the case may be) on a
commodities exchange an identical futures contract calling for
delivery in the same month. Such a transaction, which is
effected through a member of an exchange, cancels the obligation
to make or take delivery of the securities. Since all
transactions in the futures market are made, offset or fulfilled
through a clearinghouse associated with the exchange on which the
contracts are traded, the Fund will incur brokerage fees when it
purchases or sells futures contracts.
The Fund's Custodian will place cash not available for
investment or liquid high grade debt securities in a separate
account of the Fund having a value equal to the aggregate amount
of the Fund's commitments under futures contracts.
Options on Foreign Currencies
The Fund may purchase and write put and call options on
foreign currencies for the purpose of protecting against declines
in the U.S. dollar value of foreign currency-denominated
portfolio securities and against increases in the U.S. dollar
cost of such securities to be acquired. For example, a decline
in the dollar value of a foreign currency in which portfolio
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securities are denominated will reduce the dollar value of such
securities, even if their value in the foreign currency remains
constant. In order to protect against such diminutions in the
value of portfolio securities, the Fund may purchase put options
on the foreign currency. If the value of the currency does
decline, the Fund will have the right to sell such currency for a
fixed amount in dollars and will thereby offset, in whole or in
part, the adverse effect on its portfolio which otherwise would
have resulted. As in the case of other kinds of options,
however, the writing of an option on a foreign currency
constitutes only a partial hedge, up to the amount of the premium
received, and the Fund could be required to purchase or sell
foreign currencies at disadvantageous exchange rates, thereby
incurring losses. The purchase of an option on a foreign
currency may constitute an effective hedge against fluctuations
in exchange rates although, in the event of rate movements
adverse to the Fund's position, it may forfeit the entire amount
of the premium plus related transaction costs. Options on
foreign currencies to be written or purchased by the Fund are
traded on U.S. and foreign exchanges or over-the-counter.
Conversely, where a rise in the dollar value of a
currency in which securities to be acquired are denominated is
projected, thereby increasing the cost of such securities, the
Fund may purchase call options thereon. The purchase of such
options could offset, at least partially, the effects of the
adverse movements in exchange rates. As in the case of other
types of options, however, the benefit to the Fund deriving from
purchases of foreign currency options will be reduced by the
amount of the premium and related transaction costs. In
addition, where currency exchange rates do not move in the
direction or to the extent anticipated, the Fund could sustain
losses on transactions in foreign currency options which would
require it to forego a portion or all of the benefits of
advantageous changes in such rates.
The Fund may write options on foreign currencies for the
same types of hedging purposes For example, where the Fund
anticipates a decline in the dollar value of foreign currency
denominated securities due to adverse fluctuations in exchange
rates it could, instead of purchasing a put option, write a call
option on the relevant currency. If the expected decline occurs,
the option will most likely not be exercised, and the diminution
in value of portfolio securities will be offset by the amount of
the premium received.
Similarly, instead of purchasing a call option to hedge
against an anticipated increase in the dollar cost of securities
to be acquired, the Fund could write a put option on the relevant
currency which, if rates move in the manner projected, will
expire unexercised and allow the Fund to hedge such increased
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cost up to the amount of the premium. As in the case of other
types of options, however, the writing of a foreign currency
option will constitute only a partial hedge up to the amount of
the premium, and only if rates move in the expected direction.
If this does not occur, the option may be exercised and the Fund
would be required to purchase or sell the underlying currency at
a loss which may not be offset by the amount of the premium.
Through the writing of options on foreign currencies, the Fund
also may be required to forego all or a portion of the benefits
which might otherwise have been obtained from favorable movements
in exchange rates.
The Fund intends to write covered call options on
foreign currencies. A call option written on a foreign currency
by the Fund is "covered" if the Fund owns the underlying foreign
currency covered by the call or has an absolute and immediate
right to acquire that foreign currency without additional cash
consideration (or for additional cash consideration held in a
segregated account by its custodian) upon conversion or exchange
of other foreign currency held in its portfolio. A call option
is also covered if the Fund has a call on the same foreign
currency and in the same principal amount as the call written
where the exercise price of the call held (a) is equal to or less
than the exercise price of the call written or (b) is greater
than the exercise price of the call written if the difference is
maintained by the Fund in cash and high-grade liquid debt
securities in a segregated account with its custodian.
The Fund also intends to write call options on foreign
currencies for cross-hedging purposes. An option that is cross-
hedged is not covered, but is designed to provide a hedge against
a decline in the U.S. dollar value of a security which the Fund
owns or has the right to acquire and which is denominated in the
currency underlying the option due to an adverse change in the
exchange rate. In such circumstances, the Fund collateralizes
the option by maintaining in a segregated account with the Fund's
custodian, cash or high-grade liquid debt securities in an amount
not less than the value of the underlying foreign currency in
U.S. dollars marked to market daily. There is no specific
percentage limitation on the Fund's investment in options on
foreign currencies.
Additional Risks of Options on Futures Contracts, Forward
Contracts and Options on Foreign Currencies
Unlike transactions entered into by the Fund in futures
contracts, options on foreign currencies and forward contracts
are not traded on contract markets regulated by the CFTC or (with
the exception of certain foreign currency options) by the
Securities and Exchange Commission. To the contrary, such
instruments are traded through financial institutions acting as
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market-makers, although foreign currency options are also traded
on certain national securities exchanges, such as the
Philadelphia Stock Exchange and the Chicago Board Options
Exchange, subject to Securities and Exchange Commission
regulation. Similarly, options on securities may be traded over-
the-counter. In an over-the-counter trading environment, many of
the protections afforded to exchange participants will not be
available. Although the purchaser of an option cannot lose more
than the amount of the premium plus related transaction costs,
this entire amount could be lost. Moreover, the option writer
and a trader of forward contracts could lose amounts
substantially in excess of their initial investments, due to the
margin and collateral requirements associated with such
positions.
Options on foreign currencies traded on national
securities exchanges are within the jurisdiction of the SEC, as
are other securities traded on such exchanges. As a result, many
of the protections provided to traders on organized exchanges
will be available with respect to such transactions. In
particular, all foreign currency option positions entered into on
a national securities exchange are cleared and guaranteed by the
Options Clearing Corporation ("OCC"), thereby reducing the risk
of counterparty default. Further, a liquid secondary market in
options traded on a national securities exchange may be more
readily available than in the over-the-counter market,
potentially permitting the Fund to liquidate open positions at a
profit prior to exercise or expiration, or to limit losses in the
event of adverse market movements.
The purchase and sale of exchange-traded foreign
currency options, however, is subject to the risks of the
availability of a liquid secondary market described above, as
well as the risks regarding adverse market movements, margining
of options written, the nature of the foreign currency market,
possible intervention by governmental authorities and the effects
of other political and economic events. In addition, exchange-
traded options on foreign currencies involve certain risks not
presented by the over-the-counter market. For example, exercise
and settlement of such options must be made exclusively through
the OCC, which has established banking relationships in
applicable foreign countries for this purpose. As a result, the
OCC may, if it determines that foreign governmental restrictions
or taxes would prevent the orderly settlement of foreign currency
option exercise, or would result in undue burdens on the OCC or
its clearing member, impose special procedures on exercise and
settlement, such as technical changes in the mechanics of
delivery of currency, the fixing of dollar settlement prices or
prohibitions on exercise.
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In addition, futures contracts, options on futures
contracts, forward contracts and options on foreign currencies
may be traded on foreign exchanges. Such transactions are
subject to the risk of governmental actions affecting trading in
or the prices of foreign currencies or securities. The value of
such positions also could be adversely affected by (i) other
complex foreign political and economic factors, (ii) lesser
availability than in the United States of data on which to make
trading decisions, (iii) delays in the Fund's ability to act upon
economic events occurring in foreign markets during nonbusiness
hours in the United States, (iv) the imposition of different
exercise and settlement terms and procedures and margin
requirements than in the United States, and (v) lesser trading
volume.
Forward Foreign Currency Exchange Contracts
The Fund may purchase or sell forward foreign currency
exchange contracts ("forward contracts") to attempt to minimize
the risk to the Fund from adverse changes in the relationship
between the U.S. dollar and foreign currencies. A forward
contract is an obligation to purchase or sell a specific currency
for an agreed price at a future date, and is individually
negotiated and privately traded by currency traders and their
customers. The Fund may enter into a forward contract, for
example, when it enters into a contract for the purchase or sale
of a security denominated in a foreign currency in order to "lock
in" the U.S. dollar price of the security ("transaction hedge").
The Fund may not engage in transaction hedges with respect to the
currency of a particular country to an extent greater than the
aggregate amount of the Fund's transactions in that currency.
Additionally, for example, when the Fund believes that a foreign
currency may suffer a substantial decline against the U.S.
dollar, it may enter into a forward sale contract to sell an
amount of that foreign currency approximating the value of some
or all of the Fund's portfolio securities denominated in such
foreign currency, or when the Fund believes that the U.S. dollar
may suffer a substantial decline against a foreign currency, it
may enter into a forward purchase contract to buy that foreign
currency for a fixed dollar amount ("position hedge"). In this
situation the Fund may, in the alternative, enter into a forward
contract to sell a different foreign currency for a fixed U.S.
dollar amount where the Fund believes that the U.S. dollar value
of the currency to be sold pursuant to the forward contract will
fall whenever there is a decline in the U.S. dollar value of the
currency in which portfolio securities of the Fund are
denominated ("cross-hedge"). The Fund's custodian will place
cash not available for investment or liquid high-grade debt
securities in a segregated account of the Fund having a value
equal to the aggregate amount of the Fund's commitments under
forward contracts entered into with respect to position hedges
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and cross-hedges. If the value of the securities placed in a
segregated account declines, additional cash or securities will
be placed in the account on a daily basis so that the value of
the account will equal the amount of the Fund's commitments with
respect to such contracts. As an alternative to maintaining all
or part of the segregated account, the Fund may purchase a call
option permitting the Fund to purchase the amount of foreign
currency being hedged by a forward sale contract at a price no
higher than the forward contract price or the Fund may purchase a
put option permitting the Fund to sell the amount of foreign
currency subject to a forward purchase contract at a price as
high or higher than the forward contract price. Unanticipated
changes in currency prices may result in poorer overall
performance for the Fund than if it had not entered into such
contracts.
Forward Commitments
The Fund may enter into forward commitments for the
purchase or sale of securities. Such transactions may include
purchases on a "when-issued" basis or purchases or sales on a
"delayed delivery" basis. In some cases, a forward commitment
may be conditioned upon the occurrence of a subsequent event,
such as approval and consummation of a merger, corporate
reorganization or debt restructuring (i.e., a "when, as and if
issued" trade).
When forward commitment transactions are negotiated, the
price, which generally is expressed in yield terms, is fixed at
the time the commitment is made, but delivery and payment for the
securities take place at a later date. Normally, the settlement
date occurs within two months after the transaction, but delayed
settlements beyond two months may be negotiated. Securities
purchased or sold under a forward commitment are subject to
market fluctuation, and no interest or dividends accrue to the
purchaser prior to the settlement date. At the time the Fund
intends to enter into a forward commitment, it will record the
transaction and thereafter reflect the value of the security
purchased or, if a sale, the proceeds to be received, in
determining its net asset value. Any unrealized appreciation or
depreciation reflected in such valuation of a "when, as and if
issued" security would be cancelled in the event that the
required conditions did not occur and the trade was cancelled.
The Fund's right to receive or deliver a security under
a forward commitment may be sold prior to the settlement date,
but the Fund will enter into forward commitments only with the
intention of actually receiving or delivering the securities, as
the case may be. To facilitate such transactions, the Fund's
custodian will maintain, in a segregated account of the Fund,
cash and/or liquid high grade debt securities having value equal
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to, or greater than, any commitments to purchase securities on a
forward commitment basis and, with respect to forward commitments
to sell portfolio securities of the Fund, the portfolio
securities themselves. If the Fund, however, chooses to dispose
of the right to receive or deliver a security subject to a
forward commitment prior to the settlement date of the
transaction, it may incur a gain or loss. In the event the other
party to a forward commitment transaction were to default, the
Fund might lose the opportunity to invest money at favorable
rates or to dispose of securities at favorable prices.
Repurchase Agreements
The Fund may enter into agreements pertaining to U.S.
Government Securities with member banks of the Federal Reserve
System or "primary dealers" (as designated by the Federal Reserve
Bank of New York) in such securities. There is no percentage
restriction on the Fund's ability to enter into repurchase
agreements. Currently, the Fund intends to enter into repurchase
agreements only with its custodian and such primary dealers. 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 one day or a few days later. The
resale price is greater than the purchase price, reflecting an
agreed-upon interest rate which is effective for the period of
time the buyer's money is invested in the security and which is
related to the current market rate rather than the coupon rate on
the purchased security. Such agreements permit the Fund to keep
all of its assets at work while retaining "overnight" flexibility
in pursuit of investments of a longer-term nature. The Fund
requires continual maintenance by its custodian for its account
in the Federal Reserve/Treasury Book Entry System of collateral
in an amount equal to, or in excess of, the resale price. In the
event a vendor defaulted on its repurchase obligation, the Fund
might suffer a loss to the extent that the proceeds from the sale
of the collateral were less than the repurchase price. In the
event of a vendor's bankruptcy, the Fund might be delayed in, or
prevented from, selling the collateral for its benefit. The
Fund's Board of Directors has established procedures, which are
periodically reviewed by the Board, pursuant to which the Fund's
Adviser monitors the creditworthiness of the dealers with which
the Fund enters into repurchase agreement transactions.
Reverse Repurchase Agreements and Dollar Rolls
The Fund may use reverse repurchase agreements and
dollar rolls as part of its investment strategy. Reverse
repurchase agreements involve sales by the Fund of portfolio
assets concurrently with an agreement by the Fund to repurchase
the same assets at a later date at a fixed price. Generally, the
effect of such a transaction is that the Fund can recover all or
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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 only advantageous if
the interest cost to the Fund of the reverse repurchase
transaction is less than the cost of otherwise obtaining the
cash.
The Fund may enter into dollar rolls in which the Fund
sells securities for delivery in the current month and
simultaneously contracts to repurchase substantially similar
(same type and coupon) securities on a specified future date.
During the roll period, the Fund forgoes principal and interest
paid on the securities. The 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.
The Fund will establish a segregated account with its
custodian in which it will maintain cash and/or liquid high grade
debt securities equal in value to its obligations in respect of
reverse repurchase agreements and dollar rolls. Reverse
repurchase agreements and dollar rolls involve the risk that the
market value of the securities the 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, the 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.
Standby Commitment Agreements
The Fund may from time to time enter into standby
commitment agreements. Such agreements commit the Fund, for a
stated period of time, to purchase a stated amount of a security
which 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 or not the security ultimately is issued, which is
typically approximately 0.5% of the aggregate purchase price of
the security which the Fund has committed to purchase. The Fund
will enter into such agreements only for the purpose of investing
in the security underlying the commitment at a yield and price
which are considered advantageous to the Fund and which are
unavailable on a firm commitment basis. The Fund will at all
times maintain a segregated account with its custodian of cash
and/or liquid high grade debt securities in an aggregate amount
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equal to the purchase price of the securities underlying the
commitment.
There can be no assurance that the securities subject to
a standby commitment will be issued and the value of the
security, if issued, on the delivery date may be more or less
than its purchase price. Since the issuance of the security
underlying the commitment is at the option of the issuer, the
Fund will bear the risk of capital loss in the event the value of
the security declines and may not benefit from an appreciation in
the value of the security during the commitment period if the
issuer decides not to issue and sell the security to the Fund.
The purchase of a security subject to a standby
commitment agreement and the related commitment fee will be
recorded on the date on which the security can reasonably be
expected to be issued and the value of the security will
thereafter be reflected in the calculation of the Fund's net
asset value. The cost basis of the security will be adjusted by
the amount of the commitment fee. In the event the security is
not issued, the commitment fee will be recorded as income on the
expiration date of the standby commitment.
Currency Swaps
The Fund may enter into currency swaps for hedging
purposes. Currency swaps involve the exchange by the Fund with
another party of a series of payments in specified currencies.
Since currency swaps are individually negotiated, the Fund
expects to achieve an acceptable degree of correlation between
its portfolio investments and its currency swaps positions. A
currency swap may involve the delivery at the end of the exchange
period of a substantial amount of one designated currency in
exchange for the other designated currency. Therefore the entire
principal value of a currency swap is subject to the risk that
the other party to the swap will default on its contractual
delivery obligations. The net amount of the excess, if any, of
the Fund's obligations over its entitlements with respect to each
currency swap will be accrued on a daily basis and an amount of
cash or high-grade liquid debt securities having an aggregate net
asset value at least equal to the accrued excess will be
maintained in a segregated account by the Fund's custodian. The
Fund will not enter into any currency swap unless the credit
quality of the unsecured senior debt or the claims-paying ability
of the other party thereto is rated in the highest rating
category of at least one nationally recognized rating
organization at the time of entering into the transaction. If
there is a default by the other party to such a transaction, the
Fund will have contractual remedies pursuant to the agreements
related to the transactions.
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<PAGE>
Interest Rate Transactions (Swaps, Caps and Floors)
The Fund may enter into interest rate swap, cap or floor
transactions 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 Fund does not intend to use these transactions in a
speculative manner.
Interest rate swaps involve the exchange by the 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). 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. The Fund may enter into
interest rate swaps, caps and floors on either an asset-based or
liability-based basis, depending upon whether it is hedging its
assets or liabilities.
The net amount of the excess, if any, of the Fund's
obligations over its entitlements with respect to each interest
rate swap is accrued daily, and an amount of cash or liquid
high-grade debt securities having an aggregate net asset value at
least equal to the accrued excess is maintained in a segregated
account by the Fund's custodian. To the extent the Fund sells
(i.e., writes) caps and floors, it will maintain segregated
account assets having an aggregate value at least equal to the
full amount, accrued daily, of its obligations with respect to
any caps or floors.
Loans of Portfolio Securities
The Fund may make secured loans of its portfolio
securities to entities with which it can enter into repurchase
agreements, provided that cash and/or liquid high grade debt
securities equal to at least 100% of the market value of the
securities loaned are deposited and maintained by the borrower
with the Fund. See "Repurchase Agreements" above. The risks in
lending portfolio securities, as with other extensions of credit,
consist of possible loss of rights in the collateral should the
borrower fail financially. In determining whether to lend
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securities to a particular borrower, the Adviser (subject to
review by the Board of Directors) will consider all relevant
facts and circumstances, including the creditworthiness of the
borrower. While securities are on loan, the borrower will pay
the Fund any income earned thereon and the Fund may invest any
cash collateral in portfolio securities, thereby earning
additional income, or receive an agreed upon amount of income
from a borrower who has delivered equivalent collateral. 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.
Short Sales
When engaging in a short sale, in addition to depositing
collateral with a broker-dealer, the Fund is currently required
under the 1940 Act to establish a segregated account with its
custodian and to maintain therein cash or liquid high grade debt
securities in an amount that, when added to cash or liquid high
grade debt securities deposited with the broker-dealer, will at
all times equal at least 100% of the current market value of the
security sold short. The Securities and Exchange Commission (the
"Commission") is currently reviewing whether equity securities
deposited with a broker-dealer as collateral or held by a fund's
custodian may be used to satisfy this obligation. Until the
Commission has approved the use of equity securities for such
purpose, the Fund will maintain cash or liquid high grade debt
securities with the broker-dealer and/or in a segregated account
with its custodian in an aggregate amount equal to the market
value of the securities sold short. To the extent that in the
future the Fund is permitted to satisfy all or part of its
segregation obligation with equity securities, the Fund intends
to utilize securities that are similar to those borrowed,
including, to the extent practicable, equity securities of
companies from the same industry that have comparable
characteristics.
General
The successful use of the foregoing investment practices
draws upon the Adviser's special skills and experience with
respect to such instruments and usually depends on the Adviser's
ability to forecast price movements or currency exchange rate
movements correctly. Should exchange rates move in an unexpected
manner, the Fund may not achieve the anticipated benefits of
futures contracts, options or forward contracts or may realize
losses and thus be in a worse position than if such strategies
had not been used. Unlike many exchange-traded futures contracts
and options on futures contracts, there are no daily price
A-18
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fluctuation limits with respect to options on currencies and
forward contracts, and adverse market movements could therefore
continue to an unlimited extent over a period of time. In
addition, the correlation between movements in the prices of such
instruments and movements in the prices of the securities and
currencies hedged or used for cover will not be perfect and could
produce unanticipated losses.
The Fund's ability to dispose of its position in futures
contracts, options and forward contracts will depend on the
availability of liquid markets in such instruments. Markets in
options and futures with respect to a number of fixed income
securities and currencies are relatively new and still
developing. It is impossible to predict the amount of trading
interest that may exist in various types of futures contracts,
options and forward contracts. If a secondary market does not
exist with respect to an option purchased or written by the Fund
over-the-counter, it might not be possible to effect a closing
transaction in the option (i.e., dispose of the option) with the
result that (i) an option purchased by the Fund would have to be
exercised in order for the Fund to realize any profit and
(ii) the Fund may not be able to sell currencies or portfolio
securities covering an option written by the Fund until the
option expires or it delivers the underlying futures contract or
currency upon exercise. Therefore, no assurance can be given
that the Fund will be able to utilize these instruments
effectively for the purposes set forth above. Furthermore, the
Fund's ability to engage in options and futures transactions may
be limited by tax considerations. See "Taxation-United States
Federal Income Taxes-General."
Future Developments
The Fund may, following written notice to its
shareholders, take advantage of other investment practices which
are not at present contemplated for use by the Fund or which
currently are not available but which may be developed, to the
extent such investment practices are both consistent with the
Fund's investment objective and legally permissible for the Fund.
Such investment practices, if they arise, may involve risks which
exceed those involved in the activities described above.
A-19
00250223.AA0
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. Financial Statements and Exhibits.
(a) Financial Statements
Included in the Registrant's Statement of Additional
Information.
Statement of Assets and Liabilities.
Notes to Financial Statements.
Report of Independent Auditors.
Included in Part C of the Registration Statement.
All other financial statements or schedules are not
required or the required information is shown in the
Statement of Assets and Liabilities or the notes
thereto.
(b) Exhibits
(1) Copy of Articles of Incorporation.***
(2) Copy of By-Laws of the Registrant.*
(3) Not applicable.
(4) (a) Form of Share Certificate for Class A Shares.
(b) Form of Share Certificate for Class B Shares.
(c) Form of Share Certificate for Class C Shares.
(d) Form of Share Certificate for Class Y
Shares.****
(5) Copy of proposed Advisory Agreement between the
Registrant and Alliance Capital Management L.P.
____________________
*** Incorporated by reference from Registrant's Registration
Statement on Form N-1A (File Nos. 33-63797 and 811-7391)
filed with the Securities and Exchange Commission on October
27, 1995.
****To be filed by a subsequent post-effective amendment.
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(6) (a) Copy of proposed Distribution Services
Agreement between the Registrant and Alliance
Fund Distributors, Inc.
(b) Form of Selected Dealer Agreement between
Alliance Fund Distributors, Inc. and selected
dealers offering shares of Registrant.
(c) Form of Selected Agent Agreement between
Alliance Fund Distributors, Inc. and selected
agents making available shares of
Registrant.
(7) Not applicable.
(8) Copy of proposed Custodian Contract between the
Registrant and Brown Brothers Harriman & Co.
(9) (a) Copy of proposed Transfer Agency Agreement
between the Registrant and Alliance Fund
Services, Inc.
(10) (a) Opinion and Consent of Seward & Kissel.
(b) Opinion and Consent of Venable, Baetjer &
Howard, LLP.
(11) Consent of Independent Accountants.
(12) Not applicable.
(13) Investment representation letter of Alliance
Capital Management L.P.
(14) Not applicable.
(15) Rule 12b-1 Plan - See Exhibit 6(a) hereto.
(16) Schedule for computation of performance
quotations.**
(18) Rule 18f-3 Plan.
______________________
** To be filed in a post-effective amendment.
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OTHER EXHIBIT: Powers of Attorney of John D. Carifa, Ruth
Block, David M. Dievler, James M. Hester,
Clifford L. Michel, Robert C. White.
ITEM 25. Persons Controlled by or under Common Control with
Registrant.
The Registrant is a recently organized corporation and
Alliance Capital Management L.P. owns 100% of its issued
and outstanding common stock.
ITEM 26. Number of Holders of Securities.
One. The Registrant is a recently organized corporation
and Alliance Capital Management L.P. owns 100% of its
issued and outstanding common stock.
ITEM 27. Indemnification.
It is the Registrant's policy to indemnify its directors
and officers, employees and other agents to the maximum
extent permitted by Section 2-418 of the General
Corporation Law of the State of Maryland and as set
forth in Article EIGHTH of Registrant's Articles of
Incorporation, filed as Exhibit 1 in response to
Item 24, Article VII and Article VIII of Registrant's
By-Laws, filed as Exhibit 2 in response to Item 24, and
Section 10 of the proposed Distribution Services
Agreement, filed as Exhibit 6(a) in response to Item 24,
all as set forth below. The liability of the
Registrant's directors and officers is dealt with in
Article EIGHTH of Registrant's Articles of
Incorporation, as set forth below. The Adviser's
liability for any loss suffered by the Registrant or its
shareholders is set forth in Section 4 of the proposed
Advisory Agreement, filed as Exhibit 5 in response to
Item 24, as set forth below.
Section 2-418 of the Maryland General Corporation Law
reads as follows:
"2-418 INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES AND AGENTS.--(a) In this section the
following words have the meanings indicated.
(1) "Director" means any person who is or was
a director of a corporation and any person who,
while a director of a corporation, is or was
serving at the request of the corporation as a
director, officer, partner, trustee, employee, or
agent of another foreign or domestic corporation,
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<PAGE>
partnership, joint venture, trust, other
enterprise, or employee benefit plan.
(2) "Corporation" includes any domestic or
foreign predecessor entity of a corporation in a
merger, consolidation, or other transaction in
which the predecessor's existence ceased upon
consummation of the transaction.
(3) "Expenses" include attorney's fees.
(4) "Official capacity" means the following:
(i) When used with respect to a director,
the office of director in the corporation; and
(ii) When used with respect to a person
other than a director as contemplated in subsection
(j), the elective or appointive office in the
corporation held by the officer, or the employment
or agency relationship undertaken by the employee
or agent in behalf of the corporation.
(iii) "Official capacity" does not include
service for any other foreign or domestic
corporation or any partnership, joint venture,
trust, other enterprise, or employee benefit plan.
(5) "Party" includes a person who was, is, or
is threatened to be made a named defendant or
respondent in a proceeding.
(6) "Proceeding" means any threatened,
pending or completed action, suit or proceeding,
whether civil, criminal, administrative, or
investigative.
(b)(1) A corporation may indemnify any
director made a party to any proceeding by reason
of service in that capacity unless it is
established that:
(i) The act or omission of the director
was material to the matter giving rise to the
proceeding; and
1. Was committed in bad faith; or
2. Was the result of active and
deliberate dishonesty; or
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<PAGE>
(ii) The director actually received an
improper personal benefit in money, property, or
services; or
(iii) In the case of any criminal
proceeding, the director had reasonable cause to
believe that the act or omission was unlawful.
(2) (i) Indemnification may be against
judgments, penalties, fines, settlements, and
reasonable expenses actually incurred by the
director in connection with the proceeding.
(ii) However, if the proceeding was one by
or in the right of the corporation, indemnification
may not be made in respect of any proceeding in
which the director shall have been adjudged to be
liable to the corporation.
(3) (i) The termination of any proceeding by
judgment, order or settlement does not create a
presumption that the director did not meet the
requisite standard of conduct set forth in this
subsection.
(ii) The termination of any proceeding by
conviction, or a plea of nolo contendere or its
equivalent, or an entry of an order of probation
prior to judgment, creates a rebuttable presumption
that the director did not meet that standard of
conduct.
(c) A director may not be indemnified under
subsection (b) of this section in respect of any
proceeding charging improper personal benefit to
the director, whether or not involving action in
the director's official capacity, in which the
director was adjudged to be liable on the basis
that personal benefit was improperly received.
(d) Unless limited by the charter:
(1) A director who has been successful, on
the merits or otherwise, in the defense of any
proceeding referred to in subsection (b) of this
section shall be indemnified against reasonable
expenses incurred by the director in connection
with the proceeding.
(2) A court of appropriate jurisdiction upon
application of a director and such notice as the
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<PAGE>
court shall require, may order indemnification in
the following circumstances:
(i) If it determines a director is
entitled to reimbursement under paragraph (1) of
this subsection, the court shall order
indemnification, in which case the director shall
be entitled to recover the expenses of securing
such reimbursement; or
(ii) If it determines that the director is
fairly and reasonably entitled to indemnification
in view of all the relevant circumstances, whether
or not the director has met the standards of
conduct set forth in subsection (b) of this section
or has been adjudged liable under the circumstances
described in subsection (c) of this section, the
court may order such indemnification as the court
shall deem proper. However, indemnification with
respect to any proceeding by or in the right of the
corporation or in which liability shall have been
adjudged in the circumstances described in
subsection (c) shall be limited to expenses.
(3) A court of appropriate jurisdiction may
be the same court in which the proceeding involving
the director's liability took place.
(e)(1) Indemnification under subsection (b)
of this section may not be made by the corporation
unless authorized for a specific proceeding after a
determination has been made that indemnification of
the director is permissible in the circumstances
because the director has met the standard of
conduct set forth in subsection (b) of this
section.
(2) Such determination shall be made:
(i) By the board of directors by a
majority vote of a quorum consisting of directors
not, at the time, parties to the proceeding, or, if
such a quorum cannot be obtained, then by a
majority vote of a committee of the board
consisting solely of two or more directors not, at
the time, parties to such proceeding and who were
duly designated to act in the matter by a majority
vote of the full board in which the designated
directors who are parties may participate;
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<PAGE>
(ii) By special legal counsel selected by
the board of directors or a committee of the board
by vote as set forth in subparagraph (i) of this
paragraph, or, if the requisite quorum of the full
board cannot be obtained therefor and the committee
cannot be established, by a majority vote of the
full board in which directors who are parties may
participate; or
(iii) By the stockholders.
(3) Authorization of indemnification and
determination as to reasonableness of expenses
shall be made in the same manner as the
determination that indemnification is permissible.
However, if the determination that indemnification
is permissible is made by special legal counsel,
authorization of indemnification and determination
as to reasonableness of expenses shall be made in
the manner specified in subparagraph (ii) of
paragraph (2) of this subsection for selection of
such counsel.
(4) Shares held by directors who are parties
to the proceeding may not be voted on the subject
matter under this subsection.
(f)(1) Reasonable expenses incurred by a
director who is a party to a proceeding may be paid
or reimbursed by the corporation in advance of the
final disposition of the proceeding, upon receipt
by the corporation of:
(i) A written affirmation by the director
of the director's good faith belief that the
standard of conduct necessary for indemnification
by the corporation as authorized in this section
has been met; and
(ii) A written undertaking by or on behalf
of the director to repay the amount if it shall
ultimately be determined that the standard of
conduct has not been met.
(2) The undertaking required by subparagraph
(ii) of paragraph (1) of this subsection shall be
an unlimited general obligation of the director but
need not be secured and may be accepted without
reference to financial ability to make the
repayment.
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(3) Payments under this subsection shall be
made as provided by the charter, bylaws, or
contract or as specified in subsection (e) of this
section.
(g) The indemnification and advancement of
expenses provided or authorized by this section may
not be deemed exclusive of any other rights, by
indemnification or otherwise, to which a director
may be entitled under the charter, the bylaws, a
resolution of stockholders or directors, an
agreement or otherwise, both as to action in an
official capacity and as to action in another
capacity while holding such office.
(h) This section does not limit the
corporation's power to pay or reimburse expenses
incurred by a director in connection with an
appearance as a witness in a proceeding at a time
when the director has not been made a named
defendant or respondent in the proceeding.
(i) For purposes of this section:
(1) The corporation shall be deemed to have
requested a director to serve an employee benefit
plan where the performance of the director's duties
to the corporation also imposes duties on, or
otherwise involves services by, the director to the
plan or participants or beneficiaries of the plan:
(2) Excise taxes assessed on a director with
respect to an employee benefit plan pursuant to
applicable law shall be deemed fines; and
(3) Action taken or omitted by the director
with respect to an employee benefit plan in the
performance of the director's duties for a purpose
reasonably believed by the director to be in the
interest of the participants and beneficiaries of
the plan shall be deemed to be for a purpose which
is not opposed to the best interests of the
corporation.
(j) Unless limited by the charter:
(1) An officer of the corporation shall be
indemnified as and to the extent provided in
subsection (d) of this section for a director and
shall be entitled, to the same extent as a
C-8
<PAGE>
director, to seek indemnification pursuant to the
provisions of subsection (d);
(2) A corporation may indemnify and advance
expenses to an officer, employee, or agent of the
corporation to the same extent that it may
indemnify directors under this section; and
(3) A corporation, in addition, may indemnify
and advance expenses to an officer, employee, or
agent who is not a director to such further extent,
consistent with law, as may be provided by its
charter, bylaws, general or specific action of its
board of directors or contract.
(k)(1) A corporation may purchase and maintain
insurance on behalf of any person who is or was a
director, officer, employee, or agent of the
corporation, or who, while a director, officer,
employee, or agent of the corporation, is or was
serving at the request, of the corporation as a
director, officer, partner, trustee, employee, or
agent of another foreign or domestic corporation,
partnership, joint venture, trust, other
enterprise, or employee benefit plan against any
liability asserted against and incurred by such
person in any such capacity or arising out of such
person's position, whether or not the corporation
would have the power to indemnify against liability
under the provisions of this section.
(2) A corporation may provide similar
protection, including a trust fund, letter of
credit, or surety bond, not inconsistent with this
section.
(3) The insurance or similar protection may
be provided by a subsidiary or an affiliate of the
corporation.
(l) Any indemnification of, or advance of
expenses to, a director in accordance with this
section, if arising out of a proceeding by or in
the right of the corporation, shall be reported in
writing to the stockholders with the notice of the
next stockholders' meeting or prior to the
meeting."
Article EIGHTH of the Registrant's Articles of
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<PAGE>
Incorporation reads as follows:
"(1) To the full extent that limitations on the
liability of directors and officers are permitted
by the Maryland General Corporation Law, no
director or officer of the Corporation shall have
any liability to the Corporation or its
stockholders for money damages. This limitation
on liability applies to events occurring at the
time a person serves as a director or officer of
the Corporation whether or not such person is a
director or officer at the time of any proceeding
in which liability is asserted.
"(2) The Corporation shall indemnify and advance
expenses to its currently acting and its former
directors to the full extent that indemnification
of directors is permitted by the Maryland General
Corporation Law. The Corporation shall indemnify
and advance expenses to its officers to the same
extent as its directors and may do so to such
further extent as is consistent with law. The
Board of Directors may by By-Law, resolution or
agreement make further provision for
indemnification of directors, officers, employees
and agents to the full extent permitted by the
Maryland General Corporation Law.
"(3) No provision of this Article shall be
effective to protect or purport to protect any
director or officer of the Corporation against
any liability to the Corporation or its
stockholders to which he or she would otherwise
be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of
the duties involved in the conduct of his or her
office.
"(4) References to the Maryland General
Corporation Law in this Article are to that law
as from time to time amended. No amendment to
the charter of the Corporation shall affect any
right of any person under this Article based on
any event, omission or proceeding prior to the
amendment."
Article VII, Section 7 of the Registrant's By-Laws reads
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<PAGE>
as follows:
Section 7. Insurance Against Certain
Liabilities. The Corporation shall not bear the
cost of insurance that protects or purports to
protect directors and officers of the Corporation
against any liabilities to the Corporation or its
security holders to which any such director or
officer would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in
the conduct of his office.
ARTICLE VIII of the Registrant's By-Laws reads as
follows:
Section 1. Indemnification of Directors and
Officers. The Corporation shall indemnify its
directors to the full extent that indemnification
of directors is permitted by the Maryland General
Corporation Law. The Corporation shall indemnify
its officers to the same extent as its directors
and to such further extent as is consistent with
law. The Corporation shall indemnify its
directors and officers who while serving as
directors or officers also serve at the request
of the Corporation as a director, officer,
partner, trustee, employee, agent or fiduciary of
another corporation, partnership, joint venture,
trust, other enterprise or employee benefit plan
to the full extent consistent with law. The
indemnification and other rights provided by this
Article shall continue as to a person who has
ceased to be a director or officer and shall
inure to the benefit of the heirs, executors and
administrators of such a person. This Article
shall not protect any such person against any
liability to the Corporation or any stockholder
thereof to which such person would otherwise be
subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of
the duties involved in the conduct of his office
("disabling conduct").
Section 2. Advances. Any current or former
director or officer of the Corporation seeking
indemnification within the scope of this Article
shall be entitled to advances from the
Corporation for payment of the reasonable
expenses incurred by him in connection with the
matter as to which he is seeking indemnification
C-11
<PAGE>
in the manner and to the full extent permissible
under the Maryland General Corporation Law. The
person seeking indemnification shall provide to
the Corporation a written affirmation of his good
faith belief that the standard of conduct
necessary for indemnification by the Corporation
has been met and a written undertaking to repay
any such advance if it should ultimately be
determined that the standard of conduct has not
been met. In addition, at least one of the
following additional conditions shall be met:
(a) the person seeking indemnification shall
provide a security in form and amount acceptable
to the Corporation for his undertaking; (b) the
Corporation is insured against losses arising by
reason of the advance; or (c) a majority of a
quorum of directors of the Corporation who are
neither "interested persons" as defined in
Section 2(a)(19) of the Investment Company Act of
1940, as amended, nor parties to the proceeding
("disinterested non-party directors"), or
independent legal counsel, in a written opinion,
shall have determined, based on a review of facts
readily available to the Corporation at the time
the advance is proposed to be made, that there is
reason to believe that the person seeking
indemnification will ultimately be found to be
entitled to indemnification.
Section 3. Procedure. At the request of any
person claiming indemnification under this
Article, the Board of Directors shall determine,
or cause to be determined, in a manner consistent
with the Maryland General Corporation Law,
whether the standards required by this Article
have been met. Indemnification shall be made
only following: (a) a final decision on the
merits by a court or other body before whom the
proceeding was brought that the person to be
indemnified was not liable by reason of disabling
conduct or (b) in the absence of such a decision,
a reasonable determination, based upon a review
of the facts, that the person to be indemnified
was not liable by reason of disabling conduct by
(i) the vote of a majority of a quorum of
disinterested non-party directors or (ii) an
independent legal counsel in a written opinion.
Section 4. Indemnification of Employees and
Agents. Employees and agents who are not
officers or directors of the Corporation may be
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<PAGE>
indemnified, and reasonable expenses may be
advanced to such employees or agents, as may be
provided by action of the Board of Directors or
by contract, subject to any limitations imposed
by the Investment Company Act of 1940.
Section 5. Other Rights. The Board of Directors
may make further provision consistent with law
for indemnification and advance of expenses to
directors, officers, employees and agents by
resolution, agreement or otherwise. The
indemnification provided by this Article shall
not be deemed exclusive of any other right, with
respect to indemnification or otherwise, to which
those seeking indemnification may be entitled
under any insurance or other agreement or
resolution of stockholders or disinterested
directors or otherwise. The rights provided to
any person by this Article shall be enforceable
against the Corporation by such person who shall
be presumed to have relied upon it in serving or
continuing to serve as a director, officer,
employee, or agent as provided above.
Section 6. Amendments. References in this
Article are to the Maryland General Corporation
Law and to the Investment Company Act of 1940 as
from time to time amended. No amendment of these
By-laws shall affect any right of any person
under this Article based on any event, omission
or proceeding prior to the amendment.
The proposed Advisory Agreement to be between the
Registrant and Alliance Capital Management L.P. provides
that Alliance Capital Management L.P. will not be liable
under such agreements for any mistake of judgment or in
any event whatsoever except for lack of good faith and
that nothing therein shall be deemed to protect Alliance
Capital Management L.P. against any liability to the
Registrant or its security holders to which it would
otherwise be subject by reason of willful misfeasance,
bad faith or gross negligence in the performance of its
duties thereunder, or by reason of reckless disregard of
its duties and obligations thereunder.
The proposed Distribution Services Agreement between the
Registrant and Alliance Fund Distributors, Inc. provides
that the Registrant will indemnify, defend and hold
Alliance Fund Distributors, Inc., and any person who
controls it within the meaning of Section 15 of the
Securities Act of 1933 (the ``Securities Act"), free and
C-13
<PAGE>
harmless from and against any and all claims, demands,
liabilities and expenses which Alliance Fund
Distributors, Inc. or any controlling person may incur
arising out of or based upon any alleged untrue
statement of a material fact contained in the
Registrant's Registration Statement, Prospectus or
Statement of Additional Information or arising out of,
or based upon any alleged omission to state a material
fact required to be stated in any one of the foregoing
or necessary to make the statements in any one of the
foregoing not misleading.
The foregoing summaries are qualified by the entire text
of Registrant's Articles of Incorporation and By-Laws,
the proposed Advisory Agreement between Registrant and
Alliance Capital Management L.P. and the proposed
Distribution Services Agreement between Registrant and
Alliance Fund Distributors, Inc. which are filed
herewith as Exhibits 1, 2, 5 and 6(a), respectively, in
response to Item 24 and each of which are incorporated
by reference herein.
Insofar as indemnification for liabilities arising under
the Securities Act may be permitted to directors,
officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that, in the opinion of the
Securities and Exchange Commission, such indemnification
is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that
a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection
with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question of
whether such indemnification by it is against public
policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
In accordance with Release No. IC-11330 (September 2,
1980), the Registrant will indemnify its directors,
officers, investment manager and principal underwriters
only if (1) a final decision on the merits was issued by
the court or other body before whom the proceeding was
brought that the person to be indemnified (the
"indemnitee") was not liable by reason or willful
C-14
<PAGE>
misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his
office ("disabling conduct") or (2) a reasonable
determination is made, based upon a review of the facts,
that the indemnitee was not liable by reason of
disabling conduct, by (a) the vote of a majority of a
quorum of the directors who are neither "interested
persons" of the Registrant as defined in section
2(a)(19) of the Investment Company Act of 1940 nor
parties to the proceeding ("disinterested, non-party
trustees"), or (b) an independent legal counsel in a
written opinion. The Registrant will advance attorneys
fees or other expenses incurred by its directors,
officers, investment adviser or principal underwriters
in defending a proceeding, upon the undertaking by or on
behalf of the indemnitee to repay the advance unless it
is ultimately determined that he is entitled to
indemnification and, as a condition to the advance,
(1) the indemnitee shall provide a security for his
undertaking, (2) the Registrant shall be insured against
losses arising by reason of any lawful advances, or
(3) a majority of a quorum of disinterested, non-party
directors of the Registrant, or an independent legal
counsel in a written opinion, shall determine, based on
a review of readily available facts (as opposed to a
full trial-type inquiry), that there is reason to
believe that the indemnitee ultimately will be found
entitled to indemnification.
The Registrant participates in a joint
trustees/directors and officers liability insurance
policy issued by the ICI Mutual Insurance Company.
Coverage under this policy has been extended to
directors, trustees and officers of the investment
companies managed by Alliance Capital Management L.P.
Under this policy, outside trustees and directors are
covered up to the limits specified for any claim against
them for acts committed in their capacities as trustee
or director. A pro rata share of the premium for this
coverage is charged to each investment company and to
the Adviser.
ITEM 28. Business and Other Connections of Investment Adviser.
The descriptions of Alliance Capital Management L.P.
under the captions "Management of the Fund" in the
Prospectus and in the Statement of Additional
Information constituting Parts A and B, respectively, of
this Registration Statement are incorporated by
reference herein.
C-15
<PAGE>
The information as to the directors and executive
officers of Alliance Capital Management Corporation, the
general partner of Alliance Capital Management L.P., set
forth in Alliance Capital Management L.P.'s Form ADV
filed with the Securities and Exchange Commission on
April 21, 1988 (File No. 801-32361) and amended through
the date hereof, is incorporated by reference.
ITEM 29. Principal Underwriters.
(a) Alliance Fund Distributors, Inc., the Registrant's
Principal Underwriter in connection with the sale
of shares of the Registrant, also acts as Principal
Underwriter or Distributor for the following
investment companies:
ACM Institutional Reserves, Inc.
AFD Exchange Reserves
Alliance All-Asia Investment Fund, Inc.
Alliance Balanced Shares, Inc.
Alliance Bond Fund, Inc.
Alliance Capital Reserves
Alliance Counterpoint Fund
Alliance Developing Markets Fund, Inc.
Alliance Global Fund
Alliance Global Small Cap Fund, Inc.
Alliance Government Reserves
Alliance Growth and Income Fund, Inc.
Alliance International Fund
Alliance Money Market Fund
Alliance Mortgage Securities Income Fund, Inc.
Alliance Mortgage Strategy Trust, Inc.
Alliance Multi-Market Strategy Trust, Inc.
Alliance Municipal Income Fund, Inc.
Alliance Municipal Income Fund, Inc. II
Alliance Municipal Trust
Alliance New Europe Fund, Inc.
Alliance North American Government Income Trust,
Inc.
Alliance Premier Growth Fund, Inc.
Alliance Quasar Fund, Inc.
Alliance Short-Term Multi-Market Trust, Inc.
Alliance Technology Fund, Inc.
Alliance Utility Income Fund, Inc.
Alliance Worldwide Privatization Fund, Inc.
Fiduciary Management Associates
The Alliance Portfolios
(b) The following are the Directors and officers of
Alliance Fund Distributors, Inc., the principal
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<PAGE>
place of business of which is 1345 Avenue of the
Americas, New York, New York, 10105.
C-17
<PAGE>
Positions and Offices Positions and Offices
Name With Underwriter With Registrant
_______ ___________________ ____________________
Michael J. Laughlin Chairman
Robert L. Errico President
Kimberly A. Baumgardner Senior Vice President
Edmund P. Bergan, Jr. Senior Vice President Secretary
and General Counsel
Daniel J. Dart Senior Vice President
Byron M. Davis Senior Vice President
Geoffrey L. Hyde Senior Vice President
Barbara J. Krumseik Senior Vice President
Stephen R. Laut Senior Vice President
Dusty W. Paschall Senior Vice President
Antonios G. Poleondakis Senior Vice President
Gregory K. Shannahan Senior Vice President
James P. Syrett Senior Vice President
Peter J. Szabo Senior Vice President
Richard A. Winge Senior Vice President
Benji A. Baer Vice President
Warren W. Babcock, III Vice President
Kenneth F. Barkoff Vice President
William P. Beanblossom Vice President
Jack C. Bixler Vice President
Casimir F. Bolanowski Vice President
Kevin T. Cannon Vice President
Leo H. Cook Vice President
C-18
<PAGE>
Richard W. Dabney Vice President
Mark J. Dunbar Vice President
Linda A. Finnerty Vice President
William C. Fisher Vice President
Robert M. Frank Vice President
Gerard J. Friscia Vice President
& Controller
Andrew L. Gangolf Vice President
Mark D. Gersten Vice President, Treasurer and
Treasurer and Chief Financial
Chief Financial Officer
Officer
Joseph W. Gibson Vice President
Troy L. Glawe Vice President
Herbert H. Goldman Vice President
James E. Gunter Vice President
Alan Halfenger Vice President
George R. Hrabovsky Vice President
Valerie J. Hugo Vice President
Robert H. Joseph, Jr. Vice President
and Treasurer
Richard D. Keppler Vice President
Shelia F. Lamb Vice President
Donna M. Lamback Vice President
Thomas Leavitt, III Vice President
James M. Liptrot Vice President
Christopher J. MacDonald Vice President
Daniel D. McGinley Vice President
C-19
<PAGE>
Maura A. McGrath Vice President
Mark R. Manley Vice President, Counsel
and Assistant Secretary
Matthew P. Mintzer Vice President
Nicole Nolan-Koester Vice President
Robert T. Pigozzi Vice President
James J. Posch Vice President
Robert E. Powers Vice President
Domenick Pugliese Vice President Assistant
Secretary
Bruce W. Reitz Vice President
Dennis A. Sanford Vice President
Raymond S. Sclafani Vice President
J. William Strott, Jr. Vice President
Richard E. Tambourine Vice President
Nicholas K. Willett Vice President
Neil S. Wood Vice President
Emilie D. Wrapp Vice President
Maria L. Carreras Assistant Vice President
Sarah A. Chodera Assistant Vice President
John W. Cronin Assistant Vice President
Sohaila S. Farsheed Assistant Vice President
Leon M. Fern Assistant Vice President
William B. Hanigan Assistant Vice President
Vicky M. Hayes Assistant Vice President
Daniel M. Hazard Assistant Vice President
John C. Hershock Assistant Vice President
C-20
<PAGE>
James J. Hill Assistant Vice President
Kalen H. Holliday Assistant Vice President
Thomas K. Intoccia Assistant Vice President
Edward W. Kelly Assistant Vice President
Patrick Look Assistant Vice President
Michael F. Mahoney Assistant Vice President
Shawn P. McClain Assistant Vice President
Thomas F. Monnerat Assistant Vice President
Joanna D. Murray Assistant Vice President
Jeanette M. Nardella Assistant Vice President
Camilo R. Pedraza Assistant Vice President
Carol H. Rappa Assistant Vice President
Karen C. Satterberg Assistant Vice President
Robert M. Smith Assistant Vice President
Joseph T. Tocyloski Assistant Vice President
(c) Not applicable. Registrant is a newly organized
corporation.
ITEM 30. Location of Accounts and Records.
The majority of the accounts, books and other documents
required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and the rules thereunder
are maintained as follows: journals, ledgers,
securities records and other original records are
maintained principally at the offices of Alliance Fund
Services, Inc., 500 Plaza Drive, Secaucus, New Jersey,
07094 and at the offices of Brown Brothers Harriman &
Co., the Registrant's custodian, 40 Water Street,
Boston, Massachusetts 02109. All other records so
required to be maintained are maintained at the offices
of Alliance Capital Management L.P., 1345 Avenue of the
Americas, New York, New York, 10105.
C-21
<PAGE>
ITEM 31. Management Services.
Not applicable.
ITEM 32. Undertakings.
(b) Registrant undertakes to file a Post-Effective
Amendment, using financial statements which need not be
certified, within four to six months from the effective
date of its Securities Act of 1933 Registration
Statement.
The Registrant undertakes to provide assistance to
shareholders in communications concerning the removal of
any Director of the Fund in accordance with Section 16
of the Investment Company Act of 1940.
C-22
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933, as amended, and the Investment Company Act of 1940, as
amended, the Registrant has duly caused this Amendment to its
Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in The City of New York
and the State of New York, on the 22nd day of December 1995.
ALLIANCE GLOBAL STRATEGIC INCOME
TRUST, INC.
/s/ John D. Carifa
__________________________________
John D. Carifa
Chairman and President
Pursuant to the requirements of the Securities Act of
1933, as amended, this Amendment to its Registration Statement
has been signed below by the following persons in the capacities
and on the date indicated.
Signature Title Date
_____________ __________ ________
(1) Principal Executive Officer:
/s/John D. Carifa Chairman and December 22, 1995
_________________________ President
John D. Carifa
(2) Principal Financial
and Accounting Officer:
/s/ Mark D. Gersten Treasurer and December 22, 1995
_________________________ Chief Financial
Mark D. Gersten Officer
(3) Majority of Directors:
John D. Carifa
Ruth Block
David M. Dievler
James M. Hester
Clifford L. Michel
Robert C. White
C-23
<PAGE>
By: /s/ Edmund P. Bergan, Jr. December 22, 1995
__________________________
Edmund P. Bergan, Jr.
Attorney-in-Fact
C-24
00250223.AA0
<PAGE>
Index to Exhibits
(4) (a) Form of Share Certificate for Class A
Shares............................................
(b) Form of Share Certificate for Class B
Shares............................................
(c) Form of Share Certificate for Class C
Shares............................................
(5) Copy of proposed Advisory Agreement between
the Registrant and Alliance Capital
Management L.P. .......................................
(6) (a) Copy of proposed Distribution Services
Agreement between the Registrant and
Alliance Fund Distributors, Inc...................
(b) Form of Selected Dealer Agreement
between Alliance Fund Distributors,
Inc. and selected dealers offering
shares of Registrant..............................
(c) Form of Selected Agent Agreement
between Alliance Fund Distributors,
Inc. and selected agents making
available shares of Registrant....................
(8) Copy of proposed Custodian Contract between
the Registrant and Brown Brothers Harriman
& Co...................................................
(9) Copy of proposed Transfer Agency Agreement
between the Registrant and Alliance Fund
Services, Inc..........................................
(10) (a) Opinion and Consent of Seward & Kissel............
(b) Opinion and Consent of Venable,
Baetjer and Howard, LLP...........................
(11) Consent of Independent Accountants.....................
(13) Investment representation letter of
Alliance Capital Management L.P........................
(18) Rule 18f-3 Plan........................................
C-25
00250223.AA0
<PAGE>
OTHER EXHIBIT: Powers of Attorney of John D. Carifa, Ruth
Block, David M. Dievler, James M. Hester,
Clifford L. Michel, Robert C. White.
00250223.AA0
<PAGE>
Alliance Global Strategic Income Trust, Inc.
Class A Common Stock
Incorporated Under the Laws of the State of Maryland
Account No. Alpha Code CUSIP 01859N 109
THIS IS TO CERTIFY THAT
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF CLASS A COMMON
STOCK OF THE PAR VALUE OF $.001 EACH OF -- ALLIANCE GLOBAL
STRATEGIC INCOME TRUST, INC.-CLASS A COMMON STOCK -- transferable
on the books of the said Corporation by the holder hereof in
person, or by duly authorized attorney, upon surrender of this
Certificate duly endorsed. This Certificate and the shares
represented hereby are issued and shall be held subject to all of
the provisions of the Articles of Incorporation and By-Laws of
the said Corporation and amendments thereto, copies of which are
on file in the offices of the Corporation and Transfer Agent, to
all of which the holder by the acceptance hereof assents.
The Corporation is authorized to issue more than one
class of capital stock. The Corporation will furnish a full
statement of the designations and any preferences, conversion and
other rights, voting powers, restrictions, limitations as to
dividends, qualifications and terms and conditions of redemption
of the stock of each class which the Corporation is authorized to
issue to any stockholder on request and without charge.
This Certificate is not valid until countersigned by the
Transfer Agent.
IN WITNESS WHEREOF, the Corporation has caused the
facsimile signatures of its proper officers and its facsimile
seal to be affixed hereto.
Dated:
______________________
Secretary
______________________
Chairman
<PAGE>
The following abbreviations, when used in the
inscription on the face of this certificate, shall be construed
as though they were written out in full according to applicable
laws or regulations:
TEN IN COM - as tenants in common
TEN BY ENT - as tenants by the entities
JTWROS - as joint tenants with right of
survivorship and not as tenants
in common
UNIF GIFTS TO MA - Uniform Gifts to Minor Act
Additional abbreviations not shown in the above list may
be used.
* * * * * * * * *
FOR VALUE RECEIVED, I, We hereby sell, assign, and transfer unto
________________________________________________________________
shares represented by the within certificate and hereby
irrevocably constitute and appoint: ____________________________
attorney to transfer said shares upon the books of said
Corporation with full power of substitution in the premises.
Dated:
NOTE THE SIGNATURE(S) ON THIS ASSIGNMENT
MUST CORRESPOND EXACTLY WITH THE NAME(S)
AS INDICATED ON THE BACK OF THIS CERTIFICATE.
__________________________
(Signature of Seller)
SIGNATURE(S) GUARANTEED
__________________________
(Signature of Co-Owner)
NOTE SIGNATURE(S) MUST BE GUARANTEED BY
A COMMERCIAL BANK (see a savings bank) OR
BY A MEMBER FIRM OF THE NEW YORK, BOSTON,
PHILADELPHIA, MIDWEST OR PACIFIC STOCK
EXCHANGES.
_______________________________
-2-
00250223.AF4
<PAGE>
Alliance Global Strategic Income Trust, Inc.
Class B Common Stock
Incorporated Under the Laws of the State of Maryland
Account No. Alpha Code CUSIP 01859N 208
THIS IS TO CERTIFY THAT
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF CLASS B COMMON
STOCK OF THE PAR VALUE OF $.001 EACH OF -- ALLIANCE GLOBAL
STRATEGIC INCOME TRUST, INC.-CLASS B COMMON STOCK -- transferable
on the books of the said Corporation by the holder hereof in
person, or by duly authorized attorney, upon surrender of this
Certificate duly endorsed. This Certificate and the shares
represented hereby are issued and shall be held subject to all of
the provisions of the Articles of Incorporation and By-Laws of
the said Corporation and amendments thereto, copies of which are
on file in the offices of the Corporation and Transfer Agent, to
all of which the holder by the acceptance hereof assents.
The Corporation is authorized to issue more than one
class of capital stock. The Corporation will furnish a full
statement of the designations and any preferences, conversion and
other rights, voting powers, restrictions, limitations as to
dividends, qualifications and terms and conditions of redemption
of the stock of each class which the Corporation is authorized to
issue to any stockholder on request and without charge.
This Certificate is not valid until countersigned by the
Transfer Agent.
IN WITNESS WHEREOF, the Corporation has caused the
facsimile signatures of its proper officers and its facsimile
seal to be affixed hereto.
Dated:
______________________
Secretary
______________________
Chairman
<PAGE>
The following abbreviations, when used in the
inscription on the face of this certificate, shall be construed
as though they were written out in full according to applicable
laws or regulations:
TEN IN COM - as tenants in common
TEN BY ENT - as tenants by the entities
JTWROS - as joint tenants with right of
survivorship and not as tenants
in common
UNIF GIFTS TO MA - Uniform Gifts to Minor Act
Additional abbreviations not shown in the above list may
be used.
* * * * * * * * *
FOR VALUE RECEIVED, I, We hereby sell, assign, and transfer unto
________________________________________________________________
shares represented by the within certificate and hereby
irrevocably constitute and appoint: ____________________________
attorney to transfer said shares upon the books of said
Corporation with full power of substitution in the premises.
Dated:
NOTE THE SIGNATURE(S) ON THIS ASSIGNMENT
MUST CORRESPOND EXACTLY WITH THE NAME(S)
AS INDICATED ON THE BACK OF THIS CERTIFICATE.
__________________________
(Signature of Seller)
SIGNATURE(S) GUARANTEED
__________________________
(Signature of Co-Owner)
NOTE SIGNATURE(S) MUST BE GUARANTEED BY
A COMMERCIAL BANK (see a savings bank) OR
BY A MEMBER FIRM OF THE NEW YORK, BOSTON,
PHILADELPHIA, MIDWEST OR PACIFIC STOCK
EXCHANGES.
_______________________________
-2-
00250223.AF5
<PAGE>
Alliance Global Strategic Income Trust, Inc.
Class C Common Stock
Incorporated Under the Laws of the State of Maryland
Account No. Alpha Code CUSIP 01859N 307
THIS IS TO CERTIFY THAT
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF CLASS C COMMON
STOCK OF THE PAR VALUE OF $.001 EACH OF -- ALLIANCE GLOBAL
STRATEGIC INCOME TRUST, INC.-CLASS C COMMON STOCK -- transferable
on the books of the said Corporation by the holder hereof in
person, or by duly authorized attorney, upon surrender of this
Certificate duly endorsed. This Certificate and the shares
represented hereby are issued and shall be held subject to all of
the provisions of the Articles of Incorporation and By-Laws of
the said Corporation and amendments thereto, copies of which are
on file in the offices of the Corporation and Transfer Agent, to
all of which the holder by the acceptance hereof assents.
The Corporation is authorized to issue more than one
class of capital stock. The Corporation will furnish a full
statement of the designations and any preferences, conversion and
other rights, voting powers, restrictions, limitations as to
dividends, qualifications and terms and conditions of redemption
of the stock of each class which the Corporation is authorized to
issue to any stockholder on request and without charge.
This Certificate is not valid until countersigned by the
Transfer Agent.
IN WITNESS WHEREOF, the Corporation has caused the
facsimile signatures of its proper officers and its facsimile
seal to be affixed hereto.
Dated:
______________________
Secretary
______________________
Chairman
<PAGE>
The following abbreviations, when used in the
inscription on the face of this certificate, shall be construed
as though they were written out in full according to applicable
laws or regulations:
TEN IN COM - as tenants in common
TEN BY ENT - as tenants by the entities
JTWROS - as joint tenants with right of
survivorship and not as tenants
in common
UNIF GIFTS TO MA - Uniform Gifts to Minor Act
Additional abbreviations not shown in the above list may
be used.
* * * * * * * * *
FOR VALUE RECEIVED, I, We hereby sell, assign, and transfer unto
________________________________________________________________
shares represented by the within certificate and hereby
irrevocably constitute and appoint: ____________________________
attorney to transfer said shares upon the books of said
Corporation with full power of substitution in the premises.
Dated:
NOTE THE SIGNATURE(S) ON THIS ASSIGNMENT
MUST CORRESPOND EXACTLY WITH THE NAME(S)
AS INDICATED ON THE BACK OF THIS CERTIFICATE.
__________________________
(Signature of Seller)
SIGNATURE(S) GUARANTEED
__________________________
(Signature of Co-Owner)
NOTE SIGNATURE(S) MUST BE GUARANTEED BY
A COMMERCIAL BANK (see a savings bank) OR
BY A MEMBER FIRM OF THE NEW YORK, BOSTON,
PHILADELPHIA, MIDWEST OR PACIFIC STOCK
EXCHANGES.
_______________________________
-2-
00250223.AF3
<PAGE>
ADVISORY AGREEMENT
ALLIANCE GLOBAL STRATEGIC INCOME TRUST, INC.
1345 Avenue Of The Americas
New York, New York 10105
[ ], 1995
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, New York 10105
Dear Sirs:
We, the undersigned Alliance Global Strategic
Income Trust, Inc. herewith confirm our agreement with you
as follows:
1. We are an open-end, non-diversified management
investment company registered under the Investment Company
Act of 1940, as amended (the "Act"). We are currently
authorized to issue separate classes of shares and our
Directors are authorized to reclassify and issue any
unissued shares to any number of additional classes or
series (portfolios) each having its own investment
objective, policies and restrictions, all as more fully
described in the prospectus and the statement of additional
information constituting parts of the Registration Statement
filed on our behalf under the Securities Act of 1933, as
amended, and the Act. We propose to engage in the business
of investing and reinvesting the assets of each of our
<PAGE>
portfolios in securities ("the portfolio assets") of the
type and in accordance with the limitations specified in our
Charter, By-Laws, Registration Statement on Form N-1A filed
with the Securities and Exchange Commission under the
Securities Act of 1933 and the Act ("Registration
Statement"), and any representations made in our prospectus
and statement of additional information, all in such manner
and to such extent as may from time to time be authorized by
our Board of Directors. We enclose copies of the documents
listed above and will from time to time furnish you with any
amendments thereof.
2. (a) We hereby employ you to manage the
investment and reinvestment of the portfolio assets as above
specified and, without limiting the generality of the
foregoing, to provide management and other services
specified below.
(b) You will make decisions with respect to
all purchases and sales of the portfolio assets. To carry
out such decisions, you are hereby authorized, as our agent
and attorney-in-fact, for our account and at our risk and in
our name, to place orders for the investment and
reinvestment of the portfolio assets. In all purchases,
sales and other transactions in the portfolio assets you are
authorized to exercise full discretion and act for us in the
2
<PAGE>
same manner and with the same force and effect as we might
or could do with respect to such purchases, sales or other
transactions, as well as with respect to all other things
necessary or incidental to the furtherance or conduct of
such purchases, sales or other transactions.
(c) You will report to our Board of Directors
at each meeting thereof all changes in the portfolio assets
since the prior report, and will also keep us in touch with
important developments affecting the portfolio assets and on
your own initiative will furnish us from time to time with
such information as you may believe appropriate for this
purpose, whether concerning the individual issuers whose
securities are included in the portfolio assets, the
industries in which they engage, or the conditions
prevailing in the economy generally. You will also furnish
us with such statistical and analytical information with
respect to the portfolio assets as you may believe
appropriate or as we reasonably may request. In making such
purchases and sales of the portfolio assets, you will bear
in mind the policies set from time to time by our Board of
Directors as well as the limitations imposed by our Charter
and in our Registration Statement, the limitations in the
Act and of the Internal Revenue Code of 1986, as amended, in
respect of regulated investment companies and the investment
3
<PAGE>
objective, policies and restrictions applicable to each of
our portfolios.
(d) It is understood that you will from time
to time employ or associate with yourselves such persons as
you believe to be particularly fitted to assist you in the
execution of your duties hereunder, the cost of performance
of such duties to be borne and paid by you. No obligation
may be incurred on our behalf in any such respect. During
the continuance of this agreement and at our request you
will provide to us persons satisfactory to our Board of
Directors to serve as our officers. You or your affiliates
will also provide persons, who may be our officers, to
render such clerical, accounting and other services to us as
we may from time to time request of you. Such personnel may
be employees of you or your affiliates. We will pay to you
or your affiliates the cost of such personnel for rendering
such services to us, provided that all time devoted to the
investment or reinvestment of the portfolio assets shall be
for your account. Nothing contained herein shall be
construed to restrict our right to hire our own employees or
to contract for services to be performed by third parties.
Furthermore, you or your affiliates shall furnish us without
charge with such management supervision and assistance and
such office facilities as you may believe appropriate or as
we may reasonably request subject to the requirements of any
4
<PAGE>
regulatory authority to which you may be subject. You or
your affiliates shall also be responsible for the payment of
any expenses incurred in promoting the sale of our shares
(other than the portion of the promotional expenses to be
borne by us in accordance with an effective plan pursuant to
Rule 12b-1 under the Act and the costs of printing our
prospectuses and other reports to shareholders and fees
related to registration with the Securities and Exchange
Commission and with state regulatory authorities).
3. It is further agreed that you shall be
responsible for the portion of the net expenses of each of
our portfolios (except interest, taxes, brokerage, fees paid
in accordance with an effective plan pursuant to Rule 12b-1
under the Act, expenditures which are capitalized in
accordance with generally accepted accounting principles and
extraordinary expenses, all to the extent permitted by
applicable state law and regulation) incurred by us during
each of our fiscal years or portion thereof that this
agreement is in effect between us which, as to a portfolio,
in any such year exceeds the limits applicable to such
portfolio under the laws or regulations of any state in
which our shares are qualified for sale (reduced pro rata
for any portion of less than a year). We hereby confirm
that, subject to the foregoing, we shall be responsible and
hereby assume the obligation for payment of all our other
5
<PAGE>
expenses, including: (a) payment of the fee payable to you
under paragraph 5 hereof; (b) custody, transfer and dividend
disbursing, and administration expenses; (c) fees of
directors who are not your affiliated persons; (d) legal and
auditing expenses; (e) clerical, accounting and other office
costs; (f) the cost of personnel providing services to us,
as provided in subparagraph (d) of paragraph 2 above; (g)
costs of printing our prospectuses and shareholder reports;
(h) cost of maintenance of our corporate existence; (i)
interest charges, taxes, brokerage fees and commissions; (j)
costs of stationery and supplies; (k) expenses and fees
related to registration and filing with the Securities and
Exchange Commission and with state regulatory authorities;
and (l) such promotional expenses as may be contemplated by
an effective plan pursuant to Rule 12b-1 under the Act
provided, however, that our payment of such promotional
expenses shall be in the amounts, and in accordance with the
procedures, set forth in such plan.
4. We shall expect of you, and you will give us
the benefit of, your best judgment and efforts in rendering
these services to us, and we agree as an inducement to your
undertaking these services that you shall not be liable
hereunder for any mistake of judgment or in any event
whatsoever, except for lack of good faith, provided that
nothing herein shall be deemed to protect, or purport to
6
<PAGE>
protect, you against any liability to us or to our security
holders to which you would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the
performance of your duties hereunder, or by reason of your
reckless disregard of your obligations and duties hereunder.
5. In consideration of the foregoing, we will pay
you a monthly fee at an annualized rate of .75% of our
average daily net assets. Such fee shall be payable in
arrears on the last day of each calendar month for services
performed hereunder during such month. If our initial
Registration Statement is declared effective by the
Securities and Exchange Commission after the beginning of a
month or this agreement terminates prior to the end of a
month, such fee shall be prorated according to the
proportion which such portion of the month bears to the full
month.
6. This agreement shall become effective on the
date on which our pending Registration Statement relating to
our shares becomes effective and shall remain in effect
until December 31, 1997 and may be continued for successive
twelve-month periods (computed from each January 1
thereafter) with respect to each portfolio provided that
such continuance is specifically approved at least annually
by the Board of Directors or by the vote of a majority of
the outstanding voting securities of such portfolio (as
7
<PAGE>
defined in the Act), and, in either case, by a majority of
the Board of Directors who are not parties to this agreement
or interested persons, as defined in the Act, of any party
to this agreement (other than as Directors of our
corporation), provided further, however, that if the
continuation of this agreement is not approved as to a
portfolio, you may continue to render to such portfolio the
services described herein in the manner and to the extent
permitted by the Act and the rules and regulations
thereunder. Upon the effectiveness of this agreement, it
shall supersede all previous agreements between us covering
the subject matter hereof. This agreement may be terminated
with respect to any portfolio at any time, without the
payment of any penalty, by vote of a majority of the
outstanding voting securities (as so defined) of such
portfolio, or by a vote of the Board of Directors on 60
days' written notice to you, or by you with respect to any
portfolio on 60 days' written notice to us.
7. This agreement may not be transferred,
assigned, sold or in any manner hypothecated or pledged by
you and this agreement shall terminate automatically in the
event of any such transfer, assignment, sale, hypothecation
or pledge by you. The terms "transfer", "assignment" and
"sale" as used in this paragraph shall have the meanings
ascribed thereto by governing law and any interpretation
8
<PAGE>
thereof contained in rules or regulations promulgated by the
Securities and Exchange Commission thereunder.
8. (a) Except to the extent necessary to perform
your obligations hereunder, nothing herein shall be deemed
to limit or restrict your right, or the right of any of your
employees, or any of the officers or directors of Alliance
Capital Management Corporation, your general partner, who
may also be a Director, officer or employee of ours, or
persons otherwise affiliated with us (within the meaning of
the Act) to engage in any other business or to devote time
and attention to the management or other aspects of any
other business, whether of a similar or dissimilar nature,
or to render services of any kind to any other trust,
corporation, firm, individual or association.
(b) You will notify us of any change in the
general partners of your partnership within a reasonable
time after such change.
9. If you cease to act as our investment adviser,
or, in any event, if you so request in writing, we agree to
take all necessary action to change our name to a name not
including the term "Alliance." You may from time to time
make available without charge to us for our use such marks
or symbols owned by you, including marks or symbols
containing the term "Alliance" or any variation thereof, as
you may consider appropriate. Any such marks or symbols so
9
<PAGE>
made available will remain your property and you shall have
the right, upon notice in writing, to require us to cease
the use of such mark or symbol at any time.
10. This Agreement shall be construed in
accordance with the laws of the State of New York, provided,
however, that nothing herein shall be construed as being
inconsistent with the Act.
10
<PAGE>
If the foregoing is in accordance with your
understanding, will you kindly so indicate by signing and
returning to us the enclosed copy hereof.
Very truly yours,
ALLIANCE GLOBAL STRATEGIC
INCOME TRUST, INC.
By__________________________
Agreed to and accepted
as of the date first set forth above
ALLIANCE CAPITAL MANAGEMENT L.P.
By ALLIANCE CAPITAL MANAGEMENT
CORPORATION, its general
partner
By_______________________________
11
00250223.AD2
<PAGE>
DISTRIBUTION SERVICES AGREEMENT
AGREEMENT made as of [ ], 1995 between
ALLIANCE GLOBAL STRATEGIC INCOME TRUST, INC., a Maryland
corporation (the "Fund"), and ALLIANCE FUND DISTRIBUTORS,
INC., a Delaware corporation (the "Underwriter").
WITNESSETH
WHEREAS, the Fund is registered under the
Investment Company Act of 1940, as amended (the "Investment
Company Act"), as a non-diversified, open-end management
investment company and it is in the interest of the Fund to
offer its shares for sale continuously;
WHEREAS, the Underwriter is a securities firm
engaged in the business of selling shares of investment
companies either directly to purchasers or through other
securities dealers;
WHEREAS, the Fund and the Underwriter wish to enter
into an agreement with each other with respect to the
continuous offering of the Fund's shares in order to promote
the growth of the Fund and facilitate the distribution of
its shares;
NOW, THEREFORE, the parties agree as follows:
SECTION 1. Appointment of the Underwriter. The
Fund hereby appoints the Underwriter as the principal
underwriter and distributor of the Fund to sell to the
public shares and of its Class A Common Stock (the "Class A
shares"), Class B Common Stock (the "Class B shares"),
Class C Common Stock (the "Class C shares") and Class Y
Common Stock (the "Class Y shares") (the Class A shares,
Class B shares, the Class C shares and the Class Y shares
being collectively referred to herein as the "shares") and
hereby agrees during the term of this Agreement to sell
shares to the Underwriter upon the terms and conditions
herein set forth.
SECTION 2. Exclusive Nature of Duties. The
Underwriter shall be the exclusive representative of the
Fund to act as principal underwriter and distributor of the
shares except that the rights given under this Agreement to
the Underwriter shall not apply to shares issued in
<PAGE>
connection with (a) the merger or consolidation of any other
investment company with the Fund, (b) the Fund's acquisition
by purchase or otherwise of all or substantially all of the
assets or stock of any other investment company or (c) the
reinvestment in shares by the Fund's shareholders of
dividends or other distributions.
SECTION 3. Purchase of Shares from the Fund.
(a) The Underwriter shall have the right to buy
from the Fund the shares needed to fill unconditional orders
for shares of the Fund placed with the Underwriter by
investors or securities dealers, depository institutions or
other financial intermediaries acting as agent for their
customers. The price which the Underwriter shall pay for
the shares so purchased from the Fund shall be the net asset
value, determined as set forth in Section 3(d) hereof, used
in determining the public offering price on which such
orders are based.
(b) The shares are to be resold by the Underwriter
to investors at a public offering price, as set forth in
Section 3(c) hereof, or to securities dealers, depository
institutions or other financial intermediaries acting as
agent for their customers having agreements with the
Underwriter upon the terms and conditions set forth in
Section 8 hereof.
(c) The public offering price of the shares, i.e.,
the price per share at which the Underwriter or selected
dealers or selected agents (each as defined in Section 8(a)
below) may sell shares to the public, shall be the public
offering price determined in accordance with the then
current Prospectus and Statement of Additional Information
of the Fund (the "Prospectus" and "Statement of Additional
Information," respectively) under the Securities Act of
1933, as amended (the "Securities Act"), relating to such
shares, but not to exceed the net asset value at which the
Underwriter is to purchase such shares, plus, in the case of
Class A shares, an initial sales charge equal to a specified
percentage or percentages of the public offering price of
the Class A shares as set forth in the Prospectus. Class A
shares may be sold without such a sales charge to certain
classes of persons as from time to time set forth in the
Prospectus and Statement of Additional Information. All
payments to the Fund hereunder shall be made in the manner
set forth in Section 3(f) hereof.
(d) The net asset value of shares of the Fund
shall be determined by the Fund, or any agent of the Fund,
as of the close of regular trading on the New York Stock
2
<PAGE>
Exchange on each Fund business day in accordance with the
method set forth in the Prospectus and Statement of
Additional Information and guidelines established by the
Directors of the Fund.
(e) The Fund reserves the right to suspend the
offering of its shares at any time in the absolute
discretion of its Directors.
(f) The Fund, or any agent of the Fund designated
in writing to the Underwriter by the Fund, shall be promptly
advised by the Underwriter of all purchase orders for shares
received by the Underwriter. Any order may be rejected by
the Fund; provided, however, that the Fund will not
arbitrarily or without reasonable cause refuse to accept or
confirm orders for the purchase of shares. The Fund (or its
agent) will confirm orders upon their receipt, will make
appropriate book entries and upon receipt by the Fund (or
its agent) of payment thereof, will deliver deposit receipts
or certificates for such shares pursuant to the instructions
of the Underwriter. Payment shall be made to the Fund in
New York Clearing House funds. The Underwriter agrees to
cause such payment and such instructions to be delivered
promptly to the Fund (or its agent).
SECTION 4. Repurchase or Redemption of
Shares by the Fund.
(a) Any of the outstanding shares may be tendered
for redemption at any time, and the Fund agrees to redeem or
repurchase the shares so tendered in accordance with its
obligations as set forth in Section 8(d) of ARTICLE FIFTH of
its Articles of Incorporation and in accordance with the
applicable provisions set forth in the Prospectus and
Statement of Additional Information. The price to be paid
to redeem or repurchase the shares shall be equal to the net
asset value calculated in accordance with the provisions of
Section 3(c) hereof, less any applicable sales charge. All
payments by the Fund hereunder shall be made in the manner
set forth below. The redemption or repurchase by the Fund
of any of the Class A shares purchased by or through the
Underwriter will not affect the initial sales charge secured
by the Underwriter or any selected dealer or compensation
paid to any selected agent (unless such selected dealer or
selected agent has otherwise agreed with the Underwriter),
in the course of the original sale, regardless of the length
of the time period between purchase by an investor and his
tendering for redemption or repurchase.
The Fund (or its agent) shall pay the total amount
of the redemption price and, except as may be otherwise
3
<PAGE>
required by the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. (the "NASD") and any
interpretations thereof ("NASD rules and interpretations"),
the deferred sales charges, if any, pursuant to the
instructions of the Underwriter in New York Clearing House
funds on or before the seventh business day subsequent to
its having received the notice of redemption in proper form.
(b) Redemption of shares or payment may be
suspended at times when the New York Stock Exchange is
closed, when trading thereon is closed, when trading thereon
is restricted, when an emergency exists as a result of which
disposal by the Fund of securities owned by it is not
reasonably practicable or it is not reasonably practicable
for the Fund fairly to determine the value of its net
assets, or during any other period when the Securities and
Exchange Commission, by order, so permits.
SECTION 5. Plan of Distribution.
(a) It is understood that Sections 5, 12, and 16
hereof together constitute a plan of distribution (the
"Plan") within the meaning of Rule 12b-1 adopted by the
Securities and Exchange Commission under the Investment
Company Act ("Rule 12b-1").
(b) Except as may be required by NASD rules and
interpretations, the Fund will pay to the Underwriter each
month a distribution services fee with respect to each
portfolio of the Fund ("Portfolio") that will not exceed, on
an annualized basis, .30% of the aggregate average daily net
assets of the Fund attributable to the Class A shares, 1.00%
of the aggregate average daily net assets of the Fund
attributable to the Class B shares and 1.00% of the
aggregate average daily net assets of the Fund attributable
to the Class C shares. With respect to each Portfolio, the
distribution services fee will be used in its entirety by
the Underwriter to make payments (i) to compensate broker-
dealers or other persons for providing distribution
assistance, (ii) to otherwise promote the sale of shares of
each Portfolio, including payment for the preparation,
printing and distribution of prospectuses and sales
literature or other promotional activities, and (iii) to
compensate broker-dealers, depository institutions and other
financial intermediaries for providing administrative,
accounting and other services with respect to each
Portfolio's shareholders. A portion of the distribution
services fee that will not exceed, on an annualized basis,
.25% of the aggregate average daily net assets of the Fund
attributable to each of the Class A shares, Class B shares
and Class C shares will constitute a service fee that will
4
<PAGE>
be used by the Underwriter for personal service and/or the
maintenance of shareholder accounts within the meaning of
NASD rules and interpretations.
(c) Alliance Capital Management L.P., the Fund's
investment adviser (the "Adviser"), may make payments from
time to time from its own resources for the purposes
described in Section 5(b) hereof.
(d) Payment for any expenses incurred for the
purposes described in Section 5(b) by the Underwriter with
respect to the Class Y shares will be made by the Adviser or
the Underwriter or any of their affiliates (other than the
Fund) from their own resources.
(d) Payments to broker-dealers, depository
institutions and other financial intermediaries for the
purposes set forth in Section 5(b) are subject to the terms
and conditions of the written agreements between the
Underwriter and each broker-dealer, depository institution
or other financial intermediary. Such agreements will be in
a form satisfactory to the Directors of the Fund.
(e) The Treasurer of the Fund will prepare and
furnish to the Fund's Directors, and the Directors will
review, at least quarterly, a written report complying with
the requirements of Rule 12b-1 setting forth all amounts
expended hereunder and the purposes for which such
expenditures were made.
(f) The Fund is not obligated to pay any
distribution expense in excess of the distribution services
fee described above in Section 5(b) hereof. Any expenses of
distribution of the Fund's Class A shares accrued by the
Underwriter in one fiscal year of the Fund may not be paid
from distribution services fees received from the Fund in
respect of Class A shares in another fiscal year. Any
expenses of distribution of the Fund's Class B shares or
Class C shares accrued by the Underwriter in one fiscal year
of the Fund may be carried forward and paid from
distribution services fees received from the Fund in respect
of such class of shares in another fiscal year. No portion
of the distribution services fees received from the Fund in
respect of Class A shares may be used to pay any interest
expense, carrying charges or other financing costs or
allocation of overhead of the Underwriter. The distribution
services fees received from the Fund in respect of Class B
shares and Class C shares may be used to pay interest
expenses, carrying charges and other financing costs or
allocation of overhead of the Underwriter to the extent
permitted by Securities and Exchange Commission rules,
5
<PAGE>
regulations or Securities and Exchange Commission staff no-
action or interpretative positions in effect from time to
time. In the event this Agreement is terminated by either
party or is not continued with respect to a class as
provided in Section 12 below: (i) no distribution services
fees (other than current amounts accrued but not yet paid)
will be owed by the Fund to the Underwriter with respect to
that class, and (ii) the Fund will not be obligated to pay
the Underwriter for any amounts expended hereunder not
previously reimbursed by the Fund from distribution services
fees in respect of shares of such class or recovered through
deferred sales charges. The distribution services fee of a
particular class may not be used to subsidize the sale of
shares of any other class.
SECTION 6. Duties of the Fund.
(a) The Fund shall furnish to the Underwriter
copies of all information, financial statements and other
papers that the Underwriter may reasonably request for use
in connection with the distribution of shares of the Fund,
and this shall include one certified copy, upon request by
the Underwriter, of all financial statements prepared for
the Fund by independent public accountants. The Fund shall
make available to the Underwriter such number of copies of
the Prospectus as the Underwriter shall reasonably request.
(b) The Fund shall take, from time to time, but
subject to the necessary approval of its shareholders, all
necessary action to fix the number of authorized shares and
such steps as may be necessary to register the same under
the Securities Act, to the end that there will be available
for sale such number of shares as the Underwriter reasonably
may be expected to sell.
(c) The Fund shall use its best efforts to qualify
and maintain the qualification of an appropriate number of
its shares under the securities laws of such states as the
Underwriter and the Fund may approve. Any such
qualification may be withheld, terminated or withdrawn by
the Fund at any time in its discretion. As provided in
Section 9(b) hereof, the expense of qualification and
maintenance of qualification shall be borne by the Fund.
The Underwriter shall furnish such information and other
material relating to its affairs and activities as may be
required by the Fund in connection with such qualification.
(d) The Fund will furnish, in reasonable
quantities upon request by the Underwriter, copies of annual
and interim reports of the Fund.
6
<PAGE>
SECTION 7. Duties of the Underwriter.
(a) The Underwriter shall devote reasonable time
and effort to effect sales of shares of the Fund, but shall
not be obligated to sell any specific number of shares. The
services of the Underwriter to the Fund hereunder are not to
be deemed exclusive and nothing in this Agreement shall
prevent the Underwriter from entering into like arrangements
with other investment companies so long as the performance
of its obligations hereunder is not impaired thereby.
(b) In selling shares of the Fund, the Underwriter
shall use its best efforts in all material respects duly to
conform with the requirements of all federal and state laws
relating to the sale of such securities. Neither the
Underwriter, any selected dealer, any selected agent nor any
other person is authorized by the Fund to give any
information or to make any representations, other than those
contained in the Fund's Registration Statement on Form N-1A
(the "Registration Statement"), as amended from time to
time, under the Securities Act and the Investment Company
Act or the Prospectus and Statement of Additional
Information or any sales literature specifically approved in
writing by the Fund.
(c) The Underwriter shall adopt and follow
procedures, as approved by the officers of the Fund, for the
confirmation of sales to investors and selected dealers, the
collection of amounts payable by investors and selected
dealers on such sales, and the cancellation of unsettled
transactions, as may be necessary to comply with the
requirements of the NASD, as such requirements may from time
to time exist.
SECTION 8. Selected Dealer and Agent Agreements.
(a) The Underwriter shall have the right to enter
into selected dealer agreements with securities dealers of
its choice ("selected dealers") and selected agent
agreements with depository institutions and other financial
intermediaries of its choice ("selected agents") for the
sale of shares and fix therein the portion of the sales
charge that may be allocated to the selected dealers and
selected agents; provided, that the Fund shall approve the
forms of agreements with selected dealers and selected
agents and the selected dealer and selected agent
compensation set forth therein and shall evidence such
approval by filing said forms and amendments thereto as
exhibits to its then currently effective Registration
Statement. Shares sold to selected dealers or through
selected agents shall be for resale by such selected dealers
7
<PAGE>
and selected agents only at the public offering price set
forth in the Prospectus and Statement of Additional
Information.
(b) Within the United States, the Underwriter
shall offer and sell shares only to such selected dealers as
are members in good standing of the NASD.
SECTION 9. Payment of Expenses.
(a) The Fund shall bear all costs and expenses of
the Fund, including fees and disbursements of its counsel
and auditors, in connection with the preparation and filing
of its Registration Statement and Prospectus and Statement
of Additional Information, and all amendments and
supplements thereto, and preparing and mailing annual and
interim reports and proxy materials to shareholders
(including but not limited to the expense of setting in type
any such registration statements, prospectuses, annual or
interim reports or proxy materials).
(b) The Fund shall bear the cost of expenses of
qualification of shares for sale, and, if necessary or
advisable in connection therewith, of qualifying the Fund as
an issuer or as a broker or dealer, in such states of the
United States or other jurisdiction as shall be selected by
the Fund and the Underwriter pursuant to Section 6(c) hereof
and the cost and expenses payable to each such state for
continuing qualification therein until the Fund decides to
discontinue such qualification pursuant to Section 6(c)
hereof.
SECTION 10. Indemnification.
(a) The Fund agrees to indemnify, defend and hold
the Underwriter, and any person who controls the Underwriter
within the meaning of Section 15 of the Securities Act, free
and harmless from and against any and all claims, demands,
liabilities and expenses (including the cost of
investigating or defending such claims, demands or
liabilities and any counsel fees incurred in connection
therewith) which the Underwriter or any such controlling
person may incur, under the Securities Act, or under common
law or otherwise, arising out of or based upon any alleged
untrue statement of a material fact contained in the Fund's
Registration Statement, Prospectus or Statement of
Additional Information in effect from time to time under the
Securities Act or arising out of or based upon any alleged
omission to state a material fact required to be stated in
any one thereof or necessary to make the statements in any
one thereof not misleading; provided, however, that in no
8
<PAGE>
event shall anything herein contained be so construed as to
protect the Underwriter against any liability to the Fund or
its security holders to which the Underwriter would
otherwise be subject by reason of willful misfeasance, bad
faith or gross negligence in the performance of its duties,
or by reason of the Underwriter's reckless disregard of its
obligations and duties under this Agreement. The Fund's
agreement to indemnify the Underwriter and any such
controlling person as aforesaid is expressly conditioned
upon the Fund's being notified of the commencement of any
action brought against the Underwriter or any such
controlling person, such notification to be given by letter
or by telegram addressed to the Fund at its principal office
in New York, New York, and sent to the Fund by the person
against whom such action is brought within ten days after
the summons or other first legal process shall have been
served. The failure to so notify the Fund of the
commencement of any such action shall not relieve the Fund
from any liability which it may have to the person against
whom such action is brought by reason of any such alleged
untrue statement or omission otherwise than on account of
the indemnity agreement contained in this Section 10. The
Fund will be entitled to assume the defense of any suit
brought to enforce any such claim, and to retain counsel of
good standing chosen by the Fund and approved by the
Underwriter. In the event the Fund does not elect to assume
the defense of any such suit and retain counsel of good
standing approved by the Underwriter, the defendant or
defendants in such suit shall bear the fees and expenses of
any additional counsel retained by any of them; but in case
the Fund does not elect to assume the defense of any such
suit, or in case the Underwriter does not approve of counsel
chosen by the Fund, the Fund will reimburse the Underwriter
or the controlling person or persons named as defendant or
defendants in such suit, for the fees and expenses of any
counsel retained by the Underwriter or such persons. The
indemnification agreement contained in this Section 10 shall
remain operative and in full force and effect regardless of
any investigation made by or on behalf of the Underwriter or
any controlling person and shall survive the sale of any of
the Fund's shares made pursuant to subscriptions obtained by
the Underwriter. This agreement of indemnity will inure
exclusively to the benefit of the Underwriter, to the
benefit of its successors and assigns, and to the benefit of
any controlling persons and their successors and assigns.
The Fund agrees promptly to notify the Underwriter of the
commencement of any litigation or proceeding against the
Fund in connection with the issue and sale of any of its
shares.
9
<PAGE>
(b) The Underwriter agrees to indemnify, defend
and hold the Fund, its several officers and directors, and
any person who controls the Fund within the meaning of
Section 15 of the Securities Act, free and harmless from and
against any and all claims, demands, liabilities, and
expenses (including the cost of investigating or defending
such claims, demands or liabilities and any counsel fees
incurred in connection therewith) which the Fund, its
officers or directors, or any such controlling person may
incur under the Securities Act or under common law or
otherwise, but only to the extent that such liability, or
expense incurred by the Fund, its officers, directors or
such controlling person resulting from such claims or
demands shall arise out of or be based upon any alleged
untrue statement of a material fact contained in information
furnished in writing by the Underwriter to the Fund for use
in its Registration Statement, Prospectus or Statement of
Additional Information in effect from time to time under the
Securities Act, or shall arise out of or be based upon any
alleged omission to state a material fact in connection with
such information required to be stated in the Registration
Statement, Prospectus or Statement of Additional Information
or necessary to make such information not misleading. The
Underwriter's agreement to indemnify the Fund, its officers
and directors, and any such controlling person as aforesaid
is expressly conditioned upon the Underwriter being notified
of the commencement of any action brought against the Fund,
its officers or directors or any such controlling person,
such notification to be given by letter or telegram
addressed to the Underwriter at its principal office in New
York, and sent to the Underwriter by the person against whom
such action is brought, within ten days after the summons or
other first legal process shall have been served. The
Underwriter shall have a right to control the defense of
such action, with counsel of its own choosing, satisfactory
to the Fund, if such action is based solely upon such
alleged misstatement or omission on its part, and in any
other event the Underwriter and the Fund, and their officers
and directors or such controlling person, shall each have
the right to participate in the defense or preparation of
the defense of any such action. The failure so to notify
the Underwriter of the commencement of any such action shall
not relieve the Underwriter from any liability which it may
have to the Fund, to its officers and trustees, or to such
controlling person by reason of any such untrue statement or
omission on the part of the Underwriter otherwise than on
account of the indemnity agreement contained in this Section
10.
10
<PAGE>
SECTION 11. Notification by the Fund.
The Fund agrees to advise the Underwriter
immediately:
(a) of any request by the Securities and Exchange
Commission for amendments to the Fund's Registration
Statement, Prospectus or Statement of Additional Information
or for additional information,
(b) in the event of the issuance by the Securities
and Exchange Commission of any stop order suspending the
effectiveness of the Fund's Registration Statement,
Prospectus or Statement of Additional Information or the
initiation of any proceeding for that purpose,
(c) of the happening of any material event which
makes untrue any statement made in the Fund's Registration
Statement, Prospectus or Statement of Additional Information
or which requires the making of a change in any one thereof
in order to make the statements therein not misleading, and
(d) of all actions of the Securities and Exchange
Commission with respect to any amendments to the Fund's
Registration Statement, Prospectus or Statement of
Additional Information which may from time to time be filed
with the Securities and Exchange Commission under the
Securities Act.
SECTION 12. Term of Agreement.
(a) This Agreement shall become effective on the
date hereof and shall continue in effect until December 31,
1996, and thereafter for successive twelve-month periods
(computed from each January 1) with respect to each class;
provided, however, that such continuance is specifically
approved at least annually by the Directors of the Fund or
by vote of the holders of a majority of the outstanding
voting securities (as defined in the Investment Company Act)
of that class, and, in either case, by a majority of the
Directors of the Fund who are not parties to this Agreement
or interested persons, as defined in the Investment Company
Act, of any such party (other than as directors of the Fund)
and who have no direct or indirect financial interest in the
operation of the Plan or any agreement related thereto;
provided further, however, that if the continuation of this
Agreement is not approved as to a class or a Portfolio, the
Underwriter may continue to render to such class or
Portfolio the services described herein in the manner and to
the extent permitted by the Act and the rules and
regulations thereunder. Upon effectiveness of this
11
<PAGE>
Agreement, it shall supersede all previous agreements
between the parties hereto covering the subject matter
hereof. This Agreement may be terminated (i) by the Fund
with respect to any class or Portfolio at any time, without
the payment of any penalty, by the vote of a majority of the
outstanding voting securities (as so defined) of such class
or Portfolio, or by a vote of a majority of the Directors of
the Fund who are not interested persons, as defined in the
Investment Company Act, of the Fund (other than as directors
of the Fund) and have no direct and indirect financial
interest in the operation of the Plan or any agreement
related thereto, in any such event on sixty days' written
notice to the Underwriter; provided, however, that no such
notice shall be required if such termination is stated by
the Fund to relate only to Sections 5 and 16 hereof (in
which event Sections 5 and 16 shall be deemed to have been
severed herefrom and all other provisions of this Agreement
shall continue in full force and effect), or (ii) by the
Underwriter with respect to any Portfolio on sixty days'
written notice to the Fund.
(b) This Agreement may be amended at any time with
the approval of the Directors of the Fund, provided that
(i) any material amendments of the terms hereof will become
effective only upon approval as provided in the first
proviso of the first sentence of Section 12(a) hereof, and
(ii) any amendment to increase materially the amount to be
expended for distribution services fees pursuant to Section
5(b) hereof will be effective only upon the additional
approval by a vote of a majority of the outstanding voting
securities as defined in the Investment Company Act of the
class or Portfolio affected.
SECTION 13. No Assignment. This Agreement may not
be transferred, assigned, sold or in any manner hypothecated
or pledged by either party hereto and this Agreement shall
terminate automatically in the event of any such transfer,
assignment, sale, hypothecation or pledge. The terms
"transfer", "assignment", and "sale" as used in this
paragraph shall have the meanings ascribed thereto by
governing law and any interpretation thereof contained in
rules or regulations promulgated by the Securities and
Exchange Commission thereunder.
SECTION 14. Notices. Any notice required or
permitted to be given hereunder by either party to the other
shall be deemed sufficiently given if sent by registered
mail, postage prepaid, addressed by the party giving such
notice to the other party at the last address furnished by
such other party to the party given notice, and unless and
12
<PAGE>
until changed pursuant to the foregoing provisions hereof
addressed to the Fund or the Underwriter.
SECTION 15. Governing Law. The provisions of this
Agreement shall be, to the extent applicable, construed and
interpreted in accordance with the laws of the State of New
York.
SECTION 16. Disinterested Directors of the Fund.
While the Agreement is in effect, the selection and
nomination of the Directors who are not "interested persons"
of the Fund (as defined in the Investment Company Act) will
be committed to the discretion of such disinterested
Directors.
IN WITNESS WHEREOF, the parties hereto have
executed this Agreement.
ALLIANCE GLOBAL STRATEGIC
INCOME TRUST, INC.
By
ALLIANCE FUND DISTRIBUTORS,
INC.
By
Accepted as to
Sections 5, 12 and 16
as of [ ], 1995:
ALLIANCE CAPITAL MANAGEMENT L.P.
By Alliance Capital Management Corporation,
General Partner
By
13
00250223.AD3
<PAGE>
ALLIANCE FUND DISTRIBUTORS, INC.
1345 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10105
(800) 221-5672
(LOGO)
, 199
Selected Dealer Agreement
For Broker/Dealers (other than Bank Subsidiaries)
Dear Sirs:
As the principal underwriter of shares of certain
registered investment companies presently or hereafter managed by
Alliance Capital Management L.P., shares of which companies are
distributed by us pursuant to our Distribution Services
Agreements with such companies (the "Funds"), we invite you to
participate as principal in the distribution of shares of any and
all of the Funds upon the following terms and conditions:
1. You are to offer and sell such shares only at the
public offering prices which shall be currently in effect, in
accordance with the terms of the then current prospectuses and
statements of additional information of the Funds. You agree to
act only as principal in such transactions and shall not have
authority to act as agent for the Funds, for us, or for any other
dealer in any respect. All orders are subject to acceptance by
us and become effective only upon confirmation by us.
2. On each purchase of shares by you from us, the
total sales charges and discount to selected dealer, if any,
shall be as stated in each Fund's then current prospectus.
Such sales charges and discount to selected dealers are
subject to reductions under a variety of circumstances as
described in each Fund's then current prospectus and statement of
additional information. To obtain these reductions, we must be
notified when the sale takes place which would qualify for the
reduced charge.
There is no sales charge or discount to selected dealers
on the reinvestment of dividends.
3. As a selected dealer, you are hereby authorized
(i) to place orders directly with the Funds for their shares to
be resold by us to you subject to the applicable terms and
<PAGE>
conditions governing the placement of orders by us set forth in
the Distribution Services Agreement between each Fund and us and
subject to the applicable compensation provisions set forth in
each Fund's then current prospectus and statement of additional
information and (ii) to tender shares directly to the Funds or
their agent for redemption subject to the applicable terms and
conditions set forth in the Distribution Services Agreement.
4. Repurchases of shares will be made at the net asset
value of such shares in accordance with the then current
prospectuses and statements of additional information of the
Funds.
5. You represent that you are a member of the National
Association of Securities Dealers, Inc. and that you agree to
abide by the Rules of Fair Practice of such Association.
6. This Agreement is in all respects subject to
Rule 26 of the rules of Fair Practice of the National Association
of Securities Dealers, Inc. which shall control any provisions to
the contrary in this Agreement.
7. You agree:
(a) To purchase shares only from us or only from
your customers.
(b) To purchase shares from us only for the
purpose of covering purchase orders already
received or for your own bona fide investment.
(c) That you will not purchase any shares from
your customers at prices lower than the
redemption or repurchase prices then quoted by
the Fund. You shall, however, be permitted to
sell shares for the account of their record
owners to the Funds at the repurchase prices
currently established for such shares and may
charge the owner a fair commission for handing
the transaction.
(d) That you will not withhold placing customers'
orders for shares so as to profit yourself as
a result of such withholding.
(e) That if any shares confirmed to you hereunder
are redeemed or repurchased by any of the
Funds within seven business days after such
confirmation of your original order, you shall
forthwith refund to us the full discount
allowed to you on such sales. We shall notify
2
<PAGE>
you of such redemption or repurchase within
ten days from the date of delivery of the
request therefor or certificates to us or such
Fund. Termination or cancellation of this
Agreement shall not relieve you or us from the
requirements of this subparagraph.
8. We shall not accept from you any conditional orders
for shares. Delivery of certificates for shares purchased shall
be made by the Funds only against receipt of the purchase price,
subject to deduction for the discount reallowed to you and our
portion of the sales charge on such sales. If payment for the
shares purchased is not received within the time customary for
such payments, the sale may be cancelled forthwith without any
responsibility or liability on our part or on the part of the
Funds (in which case you will be responsible for any loss,
including loss of profit, suffered by the Funds resulting from
your failure to make payment as aforesaid), or, at our option, we
may sell the shares ordered back to the Funds (in which case we
may hold you responsible for any loss, including loss of profit
suffered by us resulting from your failure to make payment as
aforesaid).
9. You will not offer or sell any of the shares except
under circumstances that will result in compliance with the
applicable Federal and State securities laws and in connection
with sales and offers to sell shares you will furnish to each
person to whom any such sale or offer is made a copy of the
applicable then current prospectus. We shall be under no
liability to you except for lack of good faith and for
obligations expressly assumed by us herein. Nothing herein
contained, however, shall be deemed to be a condition,
stipulation or provision binding any persons acquiring any
security to waive compliance with any provision of the Securities
Act of 1933, or of the Rules and Regulations of the Securities
and Exchange Commission, or to relieve the parties hereto from
any liability arising under the Securities Act of 1933.
10. From time to time during the term of this Agreement
we may make payments to you pursuant to one or more of the
distribution plans adopted by certain of the Funds pursuant to
Rule 12b-1 under the Investment Company Act of 1940 (the "Act")
in consideration, with respect to each such Fund, of your
furnishing distribution services hereunder and providing
administrative, accounting and other services, including personal
service and/or the maintenance of shareholder accounts. We have
no obligation to make any such payments and you waive any such
payment until we receive monies therefor from the Fund. Any such
payments made pursuant to this Section 10 shall be subject to the
following terms and conditions:
3
<PAGE>
(a) Any such payments shall be in such amounts as
we may from time to time advise you in writing
but in any event not in excess of the amounts
permitted by the plan in effect with respect
to each particular Fund. Any such payments
shall be in addition to the selling
concession, if any, allowed to you pursuant to
this Agreement. Such payments shall include a
service fee in the amount of .25 of 1% per
annum of the average daily net assets of
certain Funds attributable to your clients.
Any such service fee shall be paid to you
solely for personal service and/or the
maintenance of shareholder accounts.
(b) The provisions of this Section 10 relate to
the plan adopted by a particular Fund pursuant
to Rule 12b-1. In accordance with Rule 12b-1,
any person authorized to direct the
disposition of monies paid or payable by a
Fund pursuant to this Section 10 shall provide
the Fund's Board of Directors, and the
Directors shall review, at least quarterly, a
written report of the amounts so expended and
the purposes for which such expenditures were
made.
(c) The provisions of this Section 10 applicable
to each Fund shall remain in effect for not
more than a year and thereafter for successive
annual periods only so long as such
continuance is specifically approved at least
annually in conformity with Rule 12b-1 and the
Act. The provisions of this Section 10 shall
automatically terminate with respect to a
particular Plan in the event of the assignment
(as defined by the Act) of this Agreement, in
the event such Plan terminates or is not
continued or in the event this Agreement
terminates or ceases to remain in effect. In
addition, the provisions of this Section 10
may be terminated at any time, without
penalty, by either party with respect to any
particular Plan on not more than 60 days' nor
less than 30 days' written notice delivered or
mailed by registered mail, postage prepaid, to
the other party.
11. No person is authorized to make any representations
concerning shares of the Funds except those contained in the
current prospectus, statement of additional information, and
4
<PAGE>
printed information issued by each Fund or by us as information
supplemental to each prospectus. We shall supply prospectuses
and statements of additional information, reasonable quantities
of reports to shareholders, supplemental sales literature, sales
bulletins, and additional information as issued. You agree to
distribute prospectuses and reports to shareholders of the Funds
to your customers in compliance with the applicable requirements,
except to the extent that we expressly undertake to do so on your
behalf. You agree not to use other advertising or sales material
relating to the Funds, unless approved in writing by us in
advance of such use. Any printed information furnished by us
other than the then current prospectus and statement of
additional information for each Fund, periodic reports and proxy
solicitation materials are our sole responsibility and not the
responsibility of the Funds, and you agree that the Funds shall
have no liability or responsibility to you in these respects
unless expressly assumed in connection therewith.
12. In connection with your distribution of shares of a
Fund, you shall conform to such written compliance standards as
we have provided you in the past or may from time to time provide
to you in the future.
13. We, our affiliates and the Funds shall not be
liable for any loss, expense, damages, costs or other claim
arising out of any redemption or exchange pursuant to telephone
instructions from any person or our refusal to execute such
instructions for any reason.
14. Either party to this Agreement may cancel this
Agreement by giving written notice to the other. Such notice
shall be deemed to have been given on the date on which it was
either delivered personally to the other party or any officer or
member thereof, or was mailed postpaid or delivered to a
telegraph office for transmission to the other party at his or
its address as shown below. This Agreement may be amended by us
at any time and your placing of an order after the effective date
of any such amendment shall constitute your acceptance thereof.
5
<PAGE>
15. This Agreement shall be construed in accordance
with the laws of the State of New York and shall be binding upon
both parties thereto when signed by us and accepted by you in the
space provided below.
Very truly yours,
ALLIANCE FUND DISTRIBUTORS, INC.
By:_____________________________
(Authorized Signature)
Bank or Firm Name _______________________________________________
Address _________________________________________________________
City _____________________ State ____________ Zip Code __________
ACCEPTED BY (signature) _____________________ Title _____________
Name (print) ________________________________ Title _____________
Date _____________________ 199__ Phone # ________________________
Please return two signed copies of this Agreement (one of
which will be signed by us and thereafter returned to you)
in the accompanying return envelope to:
Alliance Fund Distributors, Inc.
1345 Avenue of the Americas, 38th Floor
New York, NY 10105
6
00250223.AE6
<PAGE>
ALLIANCE FUND DISTRIBUTORS, INC.
1345 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10105
(800) 221-5672
(LOGO)
, 199
Selected Agent Agreement
For Depository Institutions and Their Subsidiaries
Dear Sirs:
As the principal underwriter of shares of certain
registered investment companies presently or hereafter managed by
Alliance Capital Management L.P., shares of which companies are
distributed by us pursuant to our Distribution Services
Agreements with such companies (the "Funds"), we invite you,
acting as agent for your customers, to make available to your
customers shares of any or all of the Funds upon the following
terms and conditions:
1. The customers in question will be for all purposes
your customers. We shall execute transactions in shares of the
Funds for each of your customers only upon your authorization, it
being understood in all cases that (a) you are acting as the
agent for the customer; (b) each transaction is initiated solely
upon the order of the customer; (c) each transaction is for the
account of the customer and not for your account; (d) the
transactions are without recourse against you by the customer;
(e) except as we otherwise agree, each transaction is effected on
a fully disclosed basis; (f) as between you and the customer, the
customer will have full beneficial ownership of the shares;
(g) you shall provide no investment advice and exercise no
investment discretion regarding the purchase, sale, or redemption
of the shares; and (h) you shall make appropriate disclosure to
your customers that any Fund's shares are not endorsed by you, do
not constitute your obligation and are not entitled to federal
deposit insurance.
2. You are to sell shares of the Funds only at the
public offering prices which shall be currently in effect, in
accordance with the terms of the then current prospectuses and
statements of additional information of the Funds. You agree to
act only as agent for your customers in such transactions and
shall not have authority to act as agent for the Funds or for us
<PAGE>
in any respect. All orders are subject to acceptance by us and
become effective only upon confirmation by us.
3. On each purchase of shares of a Fund authorized by
you, the total sales charge and commission, if any, shall be as
stated in the Fund's then current prospectus. Such sales charges
and commissions are subject to reductions under a variety of
circumstances as described in each Fund's then current prospectus
and statement of additional information. To obtain such a
reduction, you must provide us with such information as we may
request to establish that a particular transaction qualifies for
the reduction. There is no sales charge or commission to
selected agents on the reinvestment of dividends.
4. As a selected agent, you are hereby authorized
(i) to place orders directly with the Funds for their shares to
be resold by us through you subject to the applicable terms and
conditions governing the placement of orders by us set forth in
the Distribution Services Agreement between each Fund and us and
subject to the applicable compensation provisions set forth in
each Fund's then current prospectus and statement of additional
information, and (ii) to tender shares directly to the Funds or
their agent for redemption or repurchase subject to the
applicable terms and conditions set forth in the Distribution
Services Agreement.
5. Redemptions and repurchases of shares will be made
at the net asset value of such shares in accordance with the then
current prospectuses and statements of additional information of
the Funds.
6. You represent that you are either:
(a) a bank as defined in Section 3(a)(6) of the
Securities Exchange Act of 1934, as amended
(the "1934 Act"), duly authorized to engage in
the transactions to be performed hereunder and
not required to register as a broker-dealer
pursuant to the 1934 Act; or
(b) a bank (as so defined) or an affiliate of a
bank, in either case registered as a broker-
dealer pursuant to the 1934 Act and a member
of the National Association of Securities
Dealers, Inc., and that you agree to abide by
the rules and regulations of the National
Association of Securities Dealers, Inc.
2
<PAGE>
7. You agree:
(a) to order shares of the Funds only from us and
to act as agent only for your customers;
(b) to order shares from us only for the purpose
of covering purchase orders already received;
(c) that you will not purchase any shares from
your customers at prices lower than the
redemption or repurchase prices then quoted by
the Funds, provided, however, that you shall
be permitted to sell shares for the accounts
of their record owners to the Funds at the
repurchase prices currently established for
such shares and may charge the owner a fair
commission for handling the transaction;
(d) that you will not withhold placing customers'
orders for shares so as to profit yourself as
a result of such withholding; and
(e) that if any shares confirmed through you
hereunder are redeemed or repurchased by any
of the Funds within seven business days after
such confirmation of your original order, you
shall forthwith refund to us the full
commission reallowed to you on such sales. We
shall notify you of such redemption or
repurchase within ten days from the date of
delivery of the request therefor or
certificates to us or such Fund. Termination
or cancellation of this Agreement shall not
relieve you or us from the requirements of
this subparagraph.
8. We shall not accept from you any conditional orders
for shares. Delivery of certificates for shares purchased shall
be made by the Funds only against receipt of the purchase price,
subject to deduction for the commission reallowed to you and our
portion of the sales charge on such sale. If payment for the
shares purchased is not received within the time customary for
such payments, the sale may be cancelled forthwith without any
responsibility or liability on our part or on the part of the
Funds (in which case you will be responsible for any loss,
including loss of profit, suffered by the Funds resulting from
your failure to make payment as aforesaid).
9. You will not accept orders for shares of any of the
Funds except under circumstances that will result in compliance
with the applicable Federal and State securities laws and banking
3
<PAGE>
laws, and in connection with sales of shares to your customers
you will furnish, unless we agree otherwise, to each customer who
has ordered shares a copy of the applicable then current
prospectus. We shall be under no liability to you except for
lack of good faith and for obligations expressly assumed by us
herein. Nothing herein contained, however, shall be deemed to be
a condition, stipulation or provision binding any persons
acquiring any security to waive compliance with any provision of
the Securities Act of 1933 or of the rules and regulations of the
Securities and Exchange Commission, or to relieve the parties
hereto from any liability arising under the Securities Act of
1933.
10. From time to time during the term of this Agreement
we may make payments to you pursuant to one or more of the
distribution plans adopted by certain of the Funds pursuant to
rule 12b-1 under the Investment Company Act of 1940 (the "Act"),
to compensate you with respect to the shareholder accounts of
your customers in such Funds for providing administrative,
accounting and other services, including personal service and/or
the maintenance of such accounts. We have no obligation to make
any such payments and you waive any such payment until we receive
monies therefor from the fund. Any such payments made pursuant
to this Section 10 shall be subject to the following terms and
conditions:
(a) Any such payments shall be in such amounts as
we may from time to time advise you in writing
but in any event not in excess of the amounts
permitted by the plan in effect with respect
to each particular Fund. Such payments shall
include a service fee in the amount of .25 of
1% per annum of the average daily net assets
of certain Funds attributable to your clients.
Any such service fee shall be paid to you
solely for personal service and/or the
maintenance of shareholder accounts.
(b) The provisions of this Section 10 relate to
the plan adopted by a particular Fund pursuant
to Rule 12b-1. In accordance with Rule 12b-1,
any person authorized to direct the
disposition of monies paid or payable by a
Fund pursuant to this Section 10 shall provide
the Fund's Board of Directors, and the
Directors shall review, at lest quarterly, a
written report of the amounts so expended and
the purposes for which such expenditures were
made.
4
<PAGE>
(c) The provisions of this Section 10 applicable
to each Fund remain in effect for not more
than a year and thereafter for successive
annual periods only so long as such
continuance is specifically approved at least
annually in conformity with Rule 12b-1 and the
Act. The provisions of this Section 10 shall
automatically terminate with respect to a
particular Plan in the event of the assignment
(as defined by the Act) of this Agreement, in
the event such Plan terminates or is not
continued or in the event this Agreement
terminates or ceases to remain in effect. In
addition, the provisions of this Section 10
may be terminated at any time, without
penalty, by either party with respect to any
particular Plan on not more than 60 days' nor
less than 30 days' written notice delivered or
mailed by registered mail, postage prepaid, to
the other party.
11. No person is authorized to make any representation
concerning shares of the Funds except those contained in the
current prospectus, statement of additional information, and
printed information issued by each Fund or by us as information
supplemental to each prospectus. We shall supply prospectuses
and statements of additional information, reasonable quantities
of reports to shareholders, supplemental sales literature, sales
bulletins, and additional information as issued. You agree to
distribute prospectuses and reports to shareholders of the Funds
to your customers in compliance with applicable requirements,
except to the extent that we expressly undertake to do so on your
behalf. You agree not to use other advertising or sales material
relating to the Funds except in compliance with all laws and
regulations applicable to you and unless approved in writing by
us in advance of such use. Any printed information furnished by
us other than the then current prospectus and statement of
additional information for each Fund, periodic reports and proxy
solicitation materials are our sole responsibility and not the
responsibility of the Funds, and you agree that the Funds shall
have no liability or responsibility to you in these respects
unless expressly assumed in connection therewith.
12. In connection with your making shares of a Fund
available to your customers, you shall conform to such written
compliance standards as we have provided you in the past or may
from time to time provide to you in the future.
13. We, our affiliates and the Funds shall not be
liable for any loss, expense, damages, costs or other claim
arising out of any redemption or exchange pursuant to telephone
5
<PAGE>
instructions from any person or our refusal to execute such
instructions for any reason.
14. Either party to this Agreement may cancel this
Agreement by giving written notice to the other. Such notice
shall be deemed to have been given as of the date on which it was
either delivered personally to the other party or any officer or
member thereof, or was mailed postpaid or delivered to a
telegraph office for transmission to the other party at his or
its address as shown below. This Agreement may be amended by us
at any time and your placing of an order after the effective date
of any such amendment shall constitute your acceptance thereof.
If you are a bank or an affiliate of a bank, this Agreement will
automatically terminate if you cease to be, or the bank of which
you are an affiliate ceases to be, a bank as defined in the 1934
Act.
15. This Agreement shall be construed in accordance
with the laws of the State of New York and shall be binding upon
both parties hereto when signed by us and accepted by you in the
space provided below.
Very truly yours,
ALLIANCE FUND DISTRIBUTORS, INC.
By:_____________________________
(Authorized Signature)
Bank or Firm Name _______________________________________________
Address _________________________________________________________
City _____________________ State ____________ Zip Code __________
ACCEPTED BY (signature) _____________________ Title _____________
Name (print) ________________________________ Title _____________
Date _____________________ 199__ Phone # ________________________
Please return two signed copies of this Agreement (one of
which will be signed by us and thereafter returned to you)
in the accompanying return envelope to:
Alliance Fund Distributors, Inc.
1345 Avenue of the Americas, 38th Floor
New York, NY 10105
6
00250223.AE5
<PAGE>
AGREEMENT BETWEEN
BROWN BROTHERS HARRIMAN & CO.
AND
ALLIANCE GLOBAL STRATEGIC INCOME TRUST, INC.
<PAGE>
CUSTODIAN AGREEMENT
AGREEMENT made this _________ of ___________________,
1995 between ALLIANCE GLOBAL STRATEGIC INCOME TRUST, INC. (the
"Fund") and Brown Brothers Harriman & Co. (the "Custodian").
WITNESSETH: That in consideration of the mutual
covenants and agreements herein contained, the parties hereto
agree as follows:
1. The Fund hereby employs and appoints the Custodian
as a custodian for the term and subject to the provisions of this
Agreement. The Custodian shall not be under any duty or
obligation to require the Fund to deliver to it any securities or
funds owned by the Fund and shall have no responsibility or
liability for or on account of securities or funds not so
delivered. The Fund will deposit with the Custodian copies of the
Articles of Incorporation and By-Laws (or comparable documents)
of the Fund and all amendments thereto, and copies of such votes
and other proceedings of the Fund as may be necessary for or
convenient to the Custodian in the performance of its duties.
2. Except for securities and funds held by
subcustodians appointed pursuant to the provisions of Section 3
hereof, the Custodian shall have and perform the following powers
and duties:
A. Safekeeping - To keep safely the securities of
the Fund that have been delivered to the Custodian and from time
to time to receive delivery of securities for safekeeping.
2
<PAGE>
B. Manner of Holding Securities - To hold
securities of the Fund (1) by physical possession of the share
certificates or other instruments representing such securities in
registered or bearer form, or (2) in book-entry form by a
Securities System (as said term is defined in Section 2U).
C. Registered Name; Nominee - To hold registered
securities of the Fund (1) in the name or any nominee name of the
Custodian or the Fund, or in the name or any nominee name of any
agent appointed pursuant to Section 6E, or (2) in street
certificate form, so-called, and in any case with or without any
indication of fiduciary capacity.
D. Purchases - Upon receipt of Proper
Instructions, as defined in Section Y on Page 17, insofar as
funds are available for the purpose, to pay for and receive
securities purchased for the account of the Fund, payment being
made only upon receipt of the securities (1) by the Custodian, or
(2) by a clearing corporation of a national securities exchange
of which the Custodian is a member, or (3) by a Securities
System. However, (i) in the case of repurchase agreements entered
into by the Fund, the Custodian (as well as an Agent) may release
funds to a Securities System or to a Subcustodian prior to the
receipt of advice from the Securities System or Subcustodian that
the securities underlying such repurchase agreement have been
transferred by book entry into the Account (as defined in Section
2U) of the Custodian (or such Agent) maintained with such
3
<PAGE>
Securities System or Subcustodian, so long as such payment
instructions to the Securities System or Subcustodian include a
requirement that delivery is only against payment for securities,
(ii) in the case of foreign exchange contracts, options, time
deposits, call account deposits, currency deposits and other
deposits, contracts or options pursuant to Sections 2J, 2L, 2M
and 2N, the Custodian may make payment therefor without receiving
an instrument evidencing said deposit, contract or option so long
as such payment instructions detail specific securities to be
acquired, and (iii) in the case of securities in which payment
for the security and receipt of the instrument evidencing the
security are under generally accepted trade practice or the terms
of the instrument representing the security expected to take
place in different locations or through separate parties, such as
commercial paper which is indexed to foreign currency exchange
rates, derivatives and similar securities, the Custodian may make
payment for such securities prior to delivery thereof in
accordance with such generally accepted trade practice or the
terms of the instrument representing such security.
E. Exchanges - Upon receipt of proper instructions to
exchange securities held by it for the account of the Fund for
other securities in connection with any reorganization,
recapitalization, split-up of shares, change of par value,
conversion or other event, and to deposit any such securities in
accordance with the terms of any reorganization or protective
4
<PAGE>
plan. Without such instructions, the Custodian may surrender
securities in temporary form for definitive securities, may
surrender securities for transfer into a name or nominee name as
permitted in Section 2C, and may surrender securities for a
different number of certificates or instruments representing the
same number of shares or same principal amount of indebtedness,
provided the securities to be issued are to be delivered to the
Custodian and further provided custodian shall at the time of .
surrendering securities or instruments receive a receipt or other
evidence of ownership thereof.
F. Sales of Securities - Upon receipt of proper
instructions, to make delivery of securities which have been sold
for the account of the Fund, but only against payment therefor
(1) in cash, by a certified check, bank cashier's check, bank
credit, or bank wire transfer, or (2) by credit to the account of
the Custodian with a clearing corporation of a national
securities exchange of which the Custodian is a member, or (3) by
credit to the account of the Custodian or an Agent of the
Custodian with a Securities System; provided, however, that (i)
in the case of delivery of physical certificates or instruments
representing securities, the Custodian may make delivery to the
broker buying the securities, against receipt therefor, for
examination in accordance with "street delivery" custom, provided
that the payment therefor is to be made to the Custodian (which
payment may be made by a broker's check) or that such securities
5
<PAGE>
are to be returned to the Custodian, and (ii) in the case of
securities referred to in clause (iii) of the last sentence of
Section 2D, the Custodian may make settlement, including with
respect to the form of payment, in accordance with generally
accepted trade practice relating to such securities or the terms
of the instrument representing said security.
G. Depositary Receipts - Upon receipt of proper
instructions, to instruct a subcustodian appointed pursuant-to
Section 3 hereof (a "Subcustodian") or an agent of the Custodian
appointed pursuant to Section 6E hereof (an "Agent") to surrender
securities to the depositary used by an issuer of American
Depositary Receipts or International Depositary Receipts
(hereinafter collectively referred to as "ADRs") for such
securities against a written receipt therefor adequately
describing such securities and written evidence satisfactory to
the Subcustodian or Agent that the depositary has acknowledged
receipt of instructions to issue with respect to such securities
ADRs in the name of the Custodian, or a nominee of the Custodian,
for delivery to the Custodian in Boston, Massachusetts, or at
such other place as the Custodian may from time to time
designate.
Upon receipt of proper instructions, to surrender ADRs
to the issuer thereof against a written receipt therefor
adequately describing the ADRs surrendered and written evidence
satisfactory to the Custodian that the issuer of the ADRs has
6
<PAGE>
acknowledged receipt of instructions to cause its depositary to
deliver the securities underlying such ADRs to a Subcustodian or
an Agent.
H. Exercise of Rights; Tender Offers - Upon timely
receipt of proper instructions, to deliver to the issuer or
trustee thereof, or to the agent of either, warrants, puts,
calls, rights or similar securities for the purpose of being
exercised or sold, provided that the new securities and cash, if
any, acquired by such action are to be delivered to the
Custodian, and, upon receipt of proper instructions, to deposit
securities upon invitations for tenders of securities, provided
that the consideration is to be paid or delivered or the tendered
securities are to be returned to the Custodian.
I. Stock Dividends Rights, Etc. - To receive and
collect all stock dividends, rights and other items of like
nature; and to deal with the same pursuant to proper instructions
relative thereto.
J. Options - Upon receipt of proper instructions, to
receive and retain confirmations or other documents evidencing
the purchase of writing of an option on a security or securities
index by the Fund; to deposit and maintain in a segregated
account, either physically or by book-entry in a Securities
System, securities subject to a covered call option written by
the Fund; and to release and/or transfer such securities or other
assets only in accordance with a notice or other communication
7
<PAGE>
evidencing the expiration, termination or exercise of such
covered option furnished by The Options Clearing Corporation, the
securities or options exchange on which such covered option is
traded or such other organization as may be responsible for
handling such options transactions.
K. Borrowings - Upon receipt of proper instructions to
deliver securities of the Fund to lenders or their agents as
collateral for borrowings effected by the Fund, provided that
such borrowed money is payable to or upon the Custodian's order
as Custodian for the Fund.
L. Demand Deposit Bank Accounts - To open and operate
an account or accounts in the name of the Fund on the Custodian's
books subject only to draft or order by the Custodian. All funds
received by the Custodian from or for the account of the Fund
shall be deposited in said account(s). The responsibilities of
the Custodian to the Fund for deposits accepted on the
Custodian's books shall be that of a U. S. bank for a similar
deposit.
If and when authorized by proper instructions, the
Custodian may open and operate an additional account(s) in such
other banks or trust companies as may be designated by the Fund
in such instructions (any such bank or trust company so
designated by the Fund being referred to hereafter as a "Banking
Institution"), provided that such account(s) shall be in the name
of the Custodian for account of the Fund and subject only to the
8
<PAGE>
Custodian's draft or order. Such accounts may be opened with
Banking Institutions in the United States and in other countries
and may be denominated in either U. S. Dollars or other
currencies as the Fund may determine. All such deposits shall be
deemed to be portfolio securities of the Fund and accordingly the
responsibility of the Custodian therefore shall be the same as
and no greater than the Custodian's responsibility in respect of
other portfolio securities of the Fund.
M. Interest Bearing Call or Time Deposits - To place
interest bearing fixed term and call deposits with such banks and
in such amounts as the Fund may authorize pursuant to proper
instructions. Such deposits may be placed with the Custodian or
with Subcustodians or other Banking Institutions as the Fund may
determine. Deposits may be denominated in U. S. Dollars or other
currencies and need not be evidenced by the issuance or delivery
of a certificate to the Custodian, provided that the Custodian
shall include in its records with respect to the assets of the
Fund, appropriate notation as to the amount and currency of each
such deposit, the accepting Banking Institution, and other
appropriate details. Such deposits, other than those placed with
the Custodian, shall be deemed portfolio securities of the Fund
and the responsibilities of the Custodian therefor shall be the
same as those for demand deposit bank accounts placed with other
banks, as described in Section L of this agreement. The
responsibility of the Custodian for such deposits accepted on the
9
<PAGE>
Custodian's books shall be that of a U. S. bank for a similar
deposit.
N. Foreign Exchange Transactions and Futures Contracts
Pursuant to proper instructions, to enter into foreign exchange
contracts or options to purchase and sell foreign currencies for
spot and future delivery on behalf and for the account of the
Fund. Such transactions may be undertaken by the Custodian with
such Banking Institutions, including the Custodian and
Subcustodian(s) as principals, as approved and authorized by the
Fund. Foreign exchange contracts and options other than those
executed with the Custodian, shall be deemed to be portfolio
securities of the Fund and the responsibilities of the Custodian
therefor shall be the same as those for demand deposit bank
accounts placed with other banks as described in Section 2-L of
this agreement. Upon receipt of proper instructions, to receive
and retain confirmations evidencing the purchase or sale of a
futures contract or an option on a futures contract by the Fund;
to deposit and maintain in a segregated account, for the benefit
of any futures commission merchant or to pay to such futures
commission merchant, assets designated by the fund as initial,
maintenance or variation "margin" deposits intended to secure the
Fund's performance of its obligations under any futures contracts
purchased or sold or any options on futures contracts written by
the Fund, in accordance with the provisions of any agreement or
agreements among any of the Fund, the Custodian and such futures
10
<PAGE>
commission merchant, designated to comply with the rules of the
Commodity Futures Trading Commission and/or any contract market,
or any similar organization or organizations, regarding such
margin deposits; and to release and/or transfer assets in such
margin accounts only in accordance with any such agreements or
rules.
O. Stock Loans. Upon receipt of proper instructions,
to deliver securities of the Fund, in connection with loans of
securities by the Fund, to the borrower thereof upon the receipt
of the cash collateral, if any, for such borrowing. In the event
U. S. Government securities are to be used as collateral, the
Custodian will not release the securities to be loaned until it
has received confirmation that such collateral has been delivered
to the Custodian. The Custodian and Fund understand that the
timing of receipt of such confirmation will normally require that
the delivery of securities to be loaned will be made one day
after receipt of the U. S. Government collateral.
P. Collections. To collect, receive and deposit in
said account or accounts all income, payments of principal and
other payments with respect to the securities held hereunder, and
in connection therewith to deliver the certificates or other
instruments representing the securities to the issuer thereof or
its agent when securities are called, redeemed, retired or
otherwise become payable; provided, that the payment is to be
made in such form and manner and at such time, which may be after
11
<PAGE>
delivery by the Custodian of the instrument representing the
security, as is in accordance with the terms of the instrument
representing the security, or such proper instructions as the
Custodian may receive, or governmental regulations, the rules of
Securities Systems or other U.S. securities depositories and
clearing agencies or, with respect to securities referred to in
clause (iii) of the last sentence of Section 2D, in accordance
with generally accepted trade practice; (ii) to execute ownership
and other certificates and affidavits for all federal and state
tax purposes in connection with receipt of income or other
payments with respect to securities of the Fund or in connection
with transfer of securities, and (iii) pursuant to proper
instructions to take such other actions with respect to
collection or receipt of funds or transfer of securities which
involve an investment decision.
Q. Dividends, Distributions and Redemptions. Upon
receipt of proper instructions from the Fund, or upon receipt of
instructions from the Fund's shareholder servicing agent or agent
with comparable duties (the "Shareholder Servicing Agent") (given
by such person or persons and in such manner on behalf of the
Shareholder Servicing Agent as the Fund shall have authorized),
the Custodian shall release funds or securities to the
Shareholder Servicing Agent or otherwise apply funds or
securities, insofar as available, for the payment of dividends or
other distributions to Fund shareholders. Upon receipt of proper
12
<PAGE>
instructions from the Fund, or upon receipt of instructions from
the Shareholder Servicing Agent (given by such person or persons
and in such manner on behalf of the Shareholder Servicing Agent
as the Fund shall have authorized), the Custodian shall release
funds or securities, insofar as available, to the Shareholder
Servicing Agent or as such Agent shall otherwise instruct for
payment to Fund shareholders who have delivered to such Agent a
request for repurchase or redemption of their shares of capital
stock of the Fund.
R. Proxies, Notices, Etc. - Promptly to deliver or
mail to the Fund all forms of proxies and all notices of meetings
and any other notices or announcements affecting or relating to
securities owned by the Fund that are received by the Custodian,
and upon receipt of proper instructions, to execute and deliver
or cause its nominee to execute and deliver such proxies or other
authorizations as may be required. Neither the Custodian nor its
nominee shall vote upon any of such securities or execute any
proxy to vote thereon or give any consent or take any other
action with respect thereto (except as otherwise herein provided)
unless ordered to do so by proper instructions.
S. Nondiscretionary Details - Without the necessity of
express authorization from the Fund, (1) to attend to all
nondiscretionary details in connection with the sale, exchange,
substitution, purchase, transfer or other dealings with
securities, funds or other-property of the Portfolio held by the
13
<PAGE>
Custodian except as otherwise directed from time to time by the
Directors of the Fund, and (2) to make payments to itself or
others for minor expenses of handling securities or other similar
items relating to the Custodian's duties under this Agreement,
provided that all such payments shall be accounted for to the
Fund.
T. Bills - Upon receipt of proper instructions to pay
or cause to be paid, insofar as funds are available for the
purpose, bills, statements, or other obligations of the Fund.
U. Deposit of Fund Assets in Securities Systems - The
Custodian may deposit and/or maintain securities owned by the
Fund in (i) The Depository Trust Company, (ii) any book-entry
system as provided in Subpart O of Treasury Circular No. 300, 31
CFR 306, Subpart B of 31 CFR Part 350, or the book-entry
regulations of federal agencies substantially in the form of
Subpart O, or (iii) any other domestic clearing agency registered
with the Securities and Exchange Commission under Section 17A of
the Securities Exchange Act of 1934 which acts as a securities
depository and whose use the Fund has previously approved in
writing (each of the foregoing being referred to in this
Agreement as a "Securities System"). Utilization of a Securities
System shall be in accordance with applicable Federal Reserve
Board and Securities and Exchange Commission rules and
regulations, if any, and subject to the following provisions:
14
<PAGE>
1) The Custodian may deposit and/or maintain Fund
securities, either directly or through one or more Agents
appointed by the Custodian (provided that any such agent shall be
qualified to act as a custodian of the Fund pursuant to the
Investment Company Act of 1940 and the rules and regulations
thereunder), in a Securities System provided that such securities
are represented in an account ("Account") of the Custodian or
such Agent in the Securities System which shall not include any
assets of the Custodian or Agent other than assets held as a
fiduciary, custodian, or otherwise for customers;
2) The records of the Custodian with respect to
securities of the Fund which are maintained in a Securities
System shall identify by book-entry those securities belonging to
the Fund;
3) The Custodian shall pay for securities purchased
for the account of the Fund upon (i) receipt of advice from the
Securities System that such securities have been transferred to
the Account, and (ii) the making of an entry on the records of
the Custodian to reflect such payment and transfer for the
account of the Fund. The Custodian shall Transfer securities sold
for the account of the Fund upon (i) receipt of advice from the
Securities System that payment for such securities has been
transferred to the Account, and (ii) the making of an entry on
the records of the Custodian to reflect such transfer and payment
for the account of the Fund. Copies of all advices from the
15
<PAGE>
Securities System of transfers of securities for the account of
the Fund shall identify the Fund, be maintained for the Fund by
the Custodian or an Agent as referred to above, and be provided
to the Fund at its request. The Custodian shall furnish the Fund
confirmation of each transfer to or from the account of the Fund
in the form of a written advice or notice and shall furnish to
the Fund copies of daily transaction sheets reflecting each day's
transactions in the Securities System for the account of the Fund
on the next business day;
4) The Custodian shall provide the Fund with any
report obtained by the Custodian or any Agent as referred to
above on the Securities System's accounting system, internal
accounting control and procedures for safeguarding securities
deposited in the Securities System; and the Custodian and such
Agents shall send to the Fund such reports on their own systems
of internal accounting control as the Fund may reasonably request
from time to time.
5) At the written request of the Fund, the Custodian
will terminate the use of any such Securities System on behalf of
the Fund as promptly as practicable.
V. Other Transfers - Upon receipt of Proper
Instructions, to deliver securities, funds and other property of
the Fund to a Subcustodian or another custodian of the Fund; and,
upon receipt of proper instructions, to make such other
disposition of securities, funds or other property of the Fund in
16
<PAGE>
a manner other than or for purposes other than as enumerated
elsewhere in this Agreement, provided that the instructions
relating to such disposition shall include a statement of the
purpose for which the delivery is to be made, the amount of
securities to be delivered and the name of the person or persons
to whom delivery is to be made.
W. Investment Limitations - In performing its duties
generally, and more particularly in connection with the purchase,
sale and exchange of securities made by or for the Fund, the
Custodian may assume unless and until notified in writing to the
contrary that proper instructions received by it are not in
conflict with or in any way contrary to any provisions of the
Fund's Articles of Incorporation or By-Laws (or comparable
documents) or votes or proceedings of the shareholders or
Directors of the Fund. The Custodian shall in no event be liable
to the Fund and shall be indemnified by the Fund for any
violation which occurs in the course of carrying out instructions
given by the Fund of any investment limitations to which the Fund
is subject or other limitations with respect to the Fund's powers
to make expenditures, encumber securities, borrow or take similar
actions affecting its portfolio.
X. Restricted Securities - Notwithstanding any other
provision of this Agreement, the Custodian shall not be liable
for failure to take any action in respect of a "restricted
security" (as hereafter defined) if the Custodian has not
17
<PAGE>
received Proper Instructions to take such action (including but
not limited to the failure to exercise in a timely manner any
right in respect of any restricted security) unless the
Custodian's responsibility to take such action is set forth in a
writing, agreed upon by the Custodian and the Fund or the
investment adviser of the Fund, which specifies particular
actions the Custodian is to take without Proper Instructions in
respect of specified rights and obligations pertaining to a
particular restricted security. Further, the Custodian shall not
be responsible for transmitting to the Fund information
concerning a restricted security, such as with respect to
exercise periods and expiration dates for rights relating to the
restricted security, except such information which the Custodian
actually receives or which is published in a source which is
publicly distributed and generally recognized as a major source -
of information with respect to corporate actions of securities
similar to the particular restricted security. As used herein,
the term "restricted securities" shall mean securities which are
subject to restrictions on transfer, whether by reason of
contractual restrictions or federal, state or foreign securities
or similar laws, or securities which have special rights or
contractual features which do not apply to publicly traded shares
of, or comparable interests representing, such security.
Y. Proper Instructions - Proper instructions shall
mean a tested telex from the Fund or a written request,
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<PAGE>
direction, instruction or certification signed or initialed on
behalf of the Fund by one or more person or persons as the Board
of Directors of the Fund shall have from time to time authorized,
provided, however, that no such instructions directing the
delivery of securities or the payment of funds to an authorized
signatory of the Fund shall be signed by such person. Those
persons authorized to give proper instructions may be identified
by the Board of Directors by name, title or position and will
include at least one officer empowered by the Board to name other
individuals who are authorized to give proper instructions on
behalf of the Fund. Telephonic or other oral instructions given
by any one of the above persons will be considered proper
instructions if the Custodian reasonably believes them to have
been given by a person authorized to give such instructions with
respect to the transaction involved. Oral instructions will be
confirmed by tested telex or in writing in the manner set forth
above but the lack of such confirmation shall in no way affect
any action taken by the Custodian in reliance upon such oral
instructions. The Fund authorizes the Custodian to tape record
any and all telephonic or other oral instructions given to the
Custodian by or on behalf of the Fund (including any of its
officers, Directors, employees or agents) and will deliver to the
Custodian a similar authorization from any investment manager or
adviser or person or entity with similar responsibilities which
is authorized to give proper instructions on behalf of the Fund
19
<PAGE>
to the Custodian. Proper instructions may relate to specific
transactions or to types or classes of transactions, and may be
in the form of standing instructions.
Proper instructions may include communications effected
directly between electro-mechanical or electronic devices or
systems, in addition to tested telex, provided that the Fund and
the Custodian agree to the use of such device or system.
3. Securities, funds and other property of the Fund
may be held by subcustodians appointed pursuant to the provisions
of this Section 3 (a "Subcustodian"). The Custodian may, at any
time and from time to time, appoint any bank or trust company
(meeting the requirements of a custodian or a foreign custodian
under the Investment Company Act of 1940 and the rules and
regulations thereunder) to act as a Subcustodian for the Fund,
provided that the Fund shall have approved in writing (l) any
such bank or trust company and the subcustodian agreement to be
entered into between such bank or trust company and the
Custodian, and (2) if the subcustodian is a bank organized under
the laws of a country other than the United States, the holding
of securities, cash and other property of the Fund in the country
in which it is proposed to utilize the services of such
subcustodian. Upon such approval by the Fund, the Custodian is
authorized on behalf of the Fund to notify each Subcustodian of
its appointment as such. The Custodian may, at any time in its
discretion, remove any bank or trust company that has been
20
<PAGE>
appointed as a Subcustodian but will promptly notify the Fund of
any such action.
Those Subcustodians, their offices or branches which the
Fund has approved to date are set forth on Appendix A hereto.
Such Appendix shall be amended from time to time as
Subcustodians, branches or offices are changed, added or deleted.
The Fund shall be responsible for informing the Custodian
sufficiently in advance of a proposed investment which is to be
held at a location not listed on Appendix A, in order that there
shall be sufficient time for the Fund to give the approval
required by the preceding paragraph and for the Custodian to put
the appropriate arrangements in place with such Subcustodian
pursuant to such subcustodian agreement.
Although the Fund does not intend to invest in a country
before the foregoing procedures have been completed, in the event
that an investment is made prior to approval, if practical, such
security shall be removed to an approved location or if not
practical such security shall be held by such agent as the
Custodian may appoint. In such event, the Custodian shall be
liable to the Fund for the actions of such agent if and only to
the extent the Custodian shall have recovered from such agent for
any damages caused the Fund by such agent and provided that the
Custodian shall pursue its rights against such agent.
With respect to the securities and funds held by a
Subcustodian, either directly or indirectly, including demand and
21
<PAGE>
interest bearing deposits, currencies or other deposits and
foreign exchange contracts as referred to in Sections 2K, 2L or
2M, the Custodian shall be liable to the Fund if and only to the
extent that such Subcustodian is liable to the Custodian;
provided, however, that the Custodian shall be liable to the Fund
for losses resulting from the bankruptcy or insolvency of a
Subcustodian if and only to the extent that such Subcustodian is
liable to the Custodian and the Custodian recovers from such
Subcustodian under the applicable subcustodian agreement. The
Custodian shall nevertheless be liable to the Fund for its own
negligence in transmitting any instructions received by it from
the Fund and for its own negligence in connection with the
delivery of any securities or funds held by it to any such
Subcustodian.
In the event that any Subcustodian appointed pursuant to
the provisions of this Section 3 fails to perform any of its
obligations under the terms and conditions of the applicable
subcustodian agreement, the Custodian shall use its best efforts
to cause such Suboustodians to perform such obligations. In the
event that the Custodian is unable to cause such Subcustodian to
perform fully its obligations thereunder, the Custodian shall
forthwith upon the Fund's request terminate such Subcustodian
and, if necessary or desirable, appoint another subcustodian in
accordance with the provisions of this Section 3. At the election
of the Fund, it shall have the right to enforce, to the extent
22
<PAGE>
permitted by the subcustodian agreement and applicable law, the
Custodian's rights against any such Subcustodian for loss or
damage caused the Fund by such Subcustodian.
At the written request of the Fund, the Custodian will
terminate any subcustodian appointed pursuant to the provisions
of this Section 3 in accordance with the termination provisions
under the applicable subcustodian agreement. The Custodian will
not amend any subcustodian agreement or agree to change or permit
any changes thereunder except upon the prior written approval of
the Fund.
In the event the Custodian receives a claim from a
Subcustodian under the indemnification provisions of any
subcustodian agreement, the Custodian shall promptly give written
notice to the Fund of such claim. No more than thirty days after
written notice to the Fund of the Custodian's intention to make
such payment, the Fund will reimburse the Custodian the amount of
such payment except in respect of any negligence or misconduct of
the Custodian.
4. The Custodian may assist generally in the
preparation of reports to Fund shareholders and others, audits of
accounts, and other ministerial matters of like nature.
5. The Fund hereby also appoints the Custodian as its
financial agent. With respect to the appointment as financial
agent, the Custodian shall have and perform the following powers
and duties:
23
<PAGE>
A. Records - To create, maintain and retain such
records relating to its activities and obligations under this
Agreement as are required under the Investment Company Act of
1940 and the rules and regulations thereunder (including Section
31 thereof and Rules 31a-1 and 31a-2 thereunder) and under
applicable Federal and State tax laws. All such records will be
the property of the Fund and in the event of termination of this
Agreement shall be delivered to the successor custodian, and the
Custodian agrees to cooperate with the Fund in execution of
documents and other action necessary or desirable in order to
substitute the successor custodian for the custodian under their
agreement.
B. Accounts - To keep books of account and render
statements, including interim monthly and complete quarterly
financial statements, or copies thereof, from time to time as
reasonably requested by proper instructions.
C. Access to Records - Subject to security
requirements of the Custodian applicable to its own employees
having access to similar records within the Custodian and such
regulations as may be reasonably imposed by the Custodian, the
books and records maintained by the Custodian pursuant to
Sections 5A and 5B shall be open to inspection and audit at
reasonable times by officers of attorneys for and auditors
employed by, the Fund.
24
<PAGE>
D. Calculation of Net Asset Value - To compute and
determine the net asset value per share of capital stock of the
Fund as of the close of business on the New York Stock Exchange
on each day on which such Exchange is open, unless otherwise
directed by proper instructions. Such computation and
determination shall be made in accordance with (1) the provisions
of the Fund's Articles of Incorporation or By Laws of the Fund,
as they may from time to time be amended and delivered to the
Custodian, (2) the votes of the Board of Directors of the Fund at
the time in force and applicable, as they may from time to time
be delivered to the Custodian, and (3) proper instructions from
such officers of the Fund or other persons as are from time to
time authorized by the Board of Directors of the Fund to give
instructions with respect to computation and determination of the
net asset value. On each day that the Custodian shall compute the
net asset value per share of the Fund, the Custodian shall
provide the Fund with written reports which permit the Fund to
verify that portfolio transactions have been recorded in
accordance with the Fund's instructions.
In computing the net asset value, the Custodian may rely
upon any information furnished by proper instructions, including
without limitation any information (1) as to accrual of
liabilities of the Fund and as to liabilities of the Fund not
appearing on the books of account kept by the custodian, (2) as
to the existence, status and proper treatment of reserves, if
25
<PAGE>
any, authorized by the fund, (3) as to the sources of quotations
to be used in computing the net asset value, including those
listed in Appendix B, (4) as to the fair value to be assigned to
any securities or other property for which price quotations are
not readily available, and (5) as to the sources of information
with respect to "corporate actions" affecting portfolio
securities of the fund, including those listed in Appendix B.
(Information as to "corporate actions" shall include information
as to dividends, distributions, stock splits, stock dividends,
rights offerings, conversions, exchanges, recapitalizations,
mergers, redemptions, calls, maturity dates and similar
transactions, including the ex and record dates and the amounts
or other terms thereof.)
In like manner, the Custodian shall compute and
determine the net asset value as of such other times as the Board
of Directors of the Fund from time to time may reasonably
request.
Notwithstanding any other provisions of this Agreement,
including Section 6C, the following provisions shall apply with
respect to the Custodian's foregoing responsibilities in this
Section 5D: The Custodian shall be held to the exercise of
reasonable care in computing and determining net asset value as
provided in this Section 5D, but shall not be held accountable or
liable for any losses, damages or expenses the Fund or any
shareholder or former shareholder of the Fund may suffer or incur
26
<PAGE>
arising from or based upon errors or delays in the determination
of such net asset value unless such error or delay was due to the
Custodian's negligence, gross negligence or reckless or willful
misconduct in determination of such net asset value. (The parties
hereto acknowledge, however, that the Custodian's causing an
error or delay in the determination of net asset value may, but
does not in and of itself, constitute negligence, gross
negligence or reckless or willful misconduct.) In no event shall
the Custodian be liable or responsible to the Fund, any present
or former shareholder of the fund or any other party for any
error or delay which continued or was undetected after the date
of an audit performed by the certified public accountants
employed by the Fund if, in the exercise of reasonable care in
accordance with generally accepted accounting standards, such
accountants should have become aware of such error or delay in
the course of performing such audit. The Custodian's liability
for any such negligence, gross negligence or reckless or willful
misconduct which results in an error in determination of such net
asset value shall be limited to the direct, out of pocket loss
the Fund, shareholder or former shareholder shall actually incur,
measured by the difference between the actual and the erroneously
computed net asset value, and any expenses the fund shall incur
in connection with correcting the records of the Fund affected by
such error (including charges made by the Fund's registrar and
transfer agent for making such corrections) or communicating with
27
<PAGE>
shareholders or former shareholders of the Fund affected by such
error.
Without limiting the foregoing, the Custodian shall not
be held accountable or liable to the Fund, any shareholder or
former shareholder thereof or any other person for any delays or
losses, damages or expenses any of them may suffer or incur
resulting from (1) the Custodian's failure to receive timely and
suitable notification concerning quotations or corporate actions
relating to or affecting portfolio securities of the fund or (2)
any errors in the computation of the net asset value based upon
or arising out of quotations or information as to corporate
actions if received by the Custodian either (i) from a source
which the Custodian was authorized pursuant to the second
paragraph of this Section 5D to rely upon, or (ii) from a source
which in the Custodian's reasonable judgment was as reliable a
source for such quotations or information as the sources
authorized pursuant to that paragraph. Nevertheless, the
Custodian will use its best judgment in determining whether to
verify through other sources any information it has received as
to quotations or corporate actions if the Custodian has reason to
believe that any such information might be incorrect.
In the event of any error or delay in the determination
of such net asset value for which the Custodian may be liable,
the Fund and the Custodian will consult and make good faith
efforts to reach agreement on what actions should be taken in
28
<PAGE>
order to mitigate any loss suffered by the Fund or its present or
former shareholders, in order that the custodian's exposure to
liability shall be reduced to the extent possible after taking
into account all relevant factors and alternatives. Such actions
might include the Fund or the custodian taking reasonable steps
to collect from any shareholder or former shareholder who has
received any overpayment upon redemption of shares such overpaid
amount or to collect from any shareholder who has underpaid upon
a purchase of shares the amount of such underpayment or to reduce
the number of shares issued to such shareholder. It is understood
that in attempting to reach agreement on the actions to be taken
or the amount of the loss which should appropriately be borne by
the Custodian, the Fund and the Custodian will consider such
relevant factors as the amount of the loss involved, the Fund's
desire to avoid loss of shareholder good will, the fact that
other persons or entitles could have been reasonably expected to
have detected the error sooner than the time it was actually
discovered, the appropriateness of limiting or eliminating the
benefit which shareholders or former shareholders might have
obtained by reason of the error, and the possibility that other
parties providing services to the Fund might be induced to absorb
a portion of the loss incurred.
E. Disbursements - Upon receipt of proper
instructions, to pay or cause to be paid, insofar as funds are
available for the purpose, bills, statements and other
29
<PAGE>
obligations of the Fund (including but not limited to interest
charges, taxes, management fees, compensation to Fund officers
and employees, and other operating expenses of the Fund).
6. A. The Custodian shall not be liable for any
action taken or omitted in reliance upon proper instructions
believed by it to be genuine or upon any other written notice,
request, direction, instruction, certificate or other instrument
believed by it to be genuine and signed by the proper party or
parties.
The Secretary or Assistant Secretary of the Fund shall
certify to the Custodian the names, signatures and scope of
authority of all persons authorized to give proper instructions
or any other such notice, request, direction, instruction,
certificate or instrument on behalf of the Fund, the names and
signatures of the officers of the Fund, the name and address of
the Shareholder Servicing Agent, and any resolutions, votes,
instructions or directions of the Fund's Board of Directors or
shareholders. Such certificate may be accepted and relied upon by
the Custodian as conclusive evidence of the facts set forth
therein and may be considered in full force and effect until
receipt of a similar certificate to the contrary.
So long as and to the extent that it is in the exercise
of reasonable care, the Custodian shall not be responsible for
the title, validity or genuineness of any property or evidence of
30
<PAGE>
title thereto received by it or delivered by it pursuant to this
Agreement.
The Custodian shall be entitled, at the expense of the
Fund, to receive and act upon advice of counsel (who may be
counsel for the Fund) on all matters, and the Custodian shall be
without liability for any action reasonably taken or omitted
pursuant to such advice.
B. With respect to the portfolio securities, cash and
other property of the Fund held by a Securities System, the
Custodian shall be liable to the Fund only for any loss or damage
to the Fund resulting from use of the Securities System if caused
by any negligence, misfeasance or misconduct of the Custodian or
any of its agents or of any of its or their employees or from any
failure of the Custodian or any such agent to enforce effectively
such rights as it may have against the Securities System.
C. Except as may otherwise be set forth in this
Agreement with respect to particular matters, the Custodian shall
be held only to the exercise of reasonable care and diligence in
carrying out the provisions of this Agreement, provided that the
Custodian shall not thereby be required to take any action which
is in contravention of any applicable law. However, nothing
herein shall exempt the Custodian from liability due to its own
negligence or willful misconduct. The Fund agrees to indemnify
and hold harmless the Custodian and its nominees from all claims
and liabilities (including counsel fees) incurred or assessed
31
<PAGE>
against it or its nominees in connection with the performance of
this Agreement, except such as may arise from its or its
nominee's breach of the relevant standard of conduct set forth in
this Agreement. Without limiting the foregoing indemnification
obligation of the Fund, the Fund agrees to indemnify the
Custodian and its nominees against any liability the Custodian or
such nominee may incur by reason of taxes assessed to the
Custodian or such nominee or other costs, liability or expense
incurred by the Custodian or such nominee resulting directly or
indirectly from the fact that portfolio securities or other
property of the Fund is registered in the name of the Custodian
or such nominee.
In order that the indemnification provisions contained
in this Paragraph 6-C shall apply, however, it is understood that
if in any case the Fund may be asked to indemnify or hold the
Custodian harmless, the Fund shall be fully and promptly advised
of all pertinent facts concerning the situation in question, and
it is further understood that the Custodian will use all
reasonable care to identify and notify the Fund promptly
concerning any situation which presents or appears likely to
present the probability of such a claim for indemnification
against the Fund. The Fund shall have the option to defend the
Custodian against any claim which may be the subject of this
indemnification, and in the event that the Fund so elects it will
so notify the Custodian, and thereupon the Fund shall take over
32
<PAGE>
complete defense of the claim, and the Custodian shall in such
situation initiate no further legal or other expenses for which
it shall seek indemnification under this Paragraph 6-C. The
Custodian shall in no case confess any claim or make any
compromise in any case in which the Fund will be asked to
indemnify the Custodian except with the Fund's prior written
consent.
It is also understood that the Custodian shall not be
liable for any loss involving any securities, currencies,
deposits or other property of the Fund, whether maintained by it,
a Subcustodian, an agent of the Custodian or a Subcustodian, a
Securities System, or a Banking Institution, or a loss arising
from a foreign currency transaction or contract, resulting from a
Sovereign Risk. A "Sovereign Risk" shall mean nationalization,
expropriation, devaluation, revaluation, confiscation, seizure,
cancellation, destruction or similar action by any governmental
authority, de facto or de jure; or enactment, promulgation,
imposition or enforcement by any such governmental authority of
currency restrictions, exchange controls, taxes, levies or other
charges affecting the Fund's property; or acts of war, terrorism,
insurrection or revolution; or any other similar act or event
beyond the Custodian's control.
D. The Custodian shall be entitled to receive
reimbursement from the Fund on demand, in the manner provided in
Section 7, for its cash disbursements, expenses and charges
33
<PAGE>
(including the fees and expenses of any Subcustodian or any
Agent) in connection with this Agreement, but excluding salaries
and usual overhead expenses.
E. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or
trust company as its agent (an "Agent") to carry out such of the
provisions of this Agreement as the Custodian may from time to
time direct, provided, however, that the appointment of such
Agent (other than an Agent appointed pursuant to the third
paragraph of Section 3) shall not relieve the Custodian of any of
its responsibilities under this agreement.
F. Upon request, the Fund shall deliver to the
Custodian such proxies, powers of attorney or other instruments
as may be reasonable and necessary or desirable in connection
with the performance by the Custodian or any Subcustodian of
their respective obligations under this Agreement or any
applicable subcustodian agreement.
7. The Fund shall pay the Custodian a custody fee
based on such fee schedule as may from time to time be agreed
upon in writing by the Custodian and the Fund. Such fee, together
with all amounts for which the Custodian is to be reimbursed in
accordance with Section 6D, shall be billed to the Fund in such a
manner as to permit payment by a direct cash payment to the
Custodian.
34
<PAGE>
8. This Agreement shall continue in full force and
effect until terminated by either party by an instrument in
writing delivered or mailed, postage prepaid, to the other party,
such termination to take effect not sooner than seventy five (75)
days after the date of such delivery or mailing. In the event of
termination the Custodian shall be entitled to receive prior to
delivery of the securities, funds and other property held by it
and all accrued fees and unreimbursed expenses, the payment of
which is contemplated by Sections 6D and 7, upon receipt by the
Fund of a statement setting forth such fees and expenses.
In the event of the appointment of a successor
custodian, it is agreed that the funds and securities owned by
the Fund and held by the Custodian or any Subcustodian shall be
delivered to the successor custodian, and the Custodian agrees to
cooperate with the Fund in execution of documents and performance
of other actions necessary or desirable in order to substitute
the successor custodian for the Custodian under this Agreement.
9. This Agreement constitutes the entire understanding
and agreement of the parties hereto with respect to the subject
matter hereof. No provision of this Agreement may be amended or
terminated except by a statement in writing signed by the party
against which enforcement of the amendment or termination is
sought.
In connection with the operation of this Agreement, the
Custodian and the Fund may agree in writing from time to time on
35
<PAGE>
such provisions interpretative of or in addition to the
provisions of this Agreement as may in their joint opinion be
consistent with the general tenor of this Agreement. No
interpretative or additional provisions made as provided in the
preceding sentence shall be deemed to be an amendment of this
Agreement.
10. This instrument is executed and delivered in The
Commonwealth of Massachusetts and shall be governed by and
construed according to the laws of said Commonwealth.
11. Notices and other writings delivered or mailed
postage prepaid to the Fund addressed to the Fund at 500 Plaza
Drive 3rd Floor, Secaucus, NJ 07094 or to such other address as
the Fund may have designated to the Custodian in writing, or to
the Custodian at 40 Water Street, Boston, Massachusetts 02109,
Attention: Manager, Securities Department, or to such other
address as the Custodian may have designated to the Fund in
writing, shall be deemed to have been properly delivered or given
hereunder to the respective addressee.
12. This Agreement shall be binding on and shall inure
to the benefit of the Fund and the Custodian and their respective
successors and assigns, provided that neither party hereto may
assign this Agreement or any of its rights or obligations
hereunder without the prior written consent of the other party.
13. This Agreement may be executed in any number of
counterparts each of which shall be deemed an original. This
36
<PAGE>
Agreement shall become effective when one or more counterparts
have been signed and delivered by each of the parties.
IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be executed in its name and behalf on the day and
year first above written.
ALLIANCE GLOBAL STRATEGIC BROWN BROTHERS HARRIMAN & CO.
INCOME TRUST, INC.
By__________________________ per pro______________________
37
<PAGE>
APPENDIX B
ALLIANCE GLOBAL STRATEGIC INCOME TRUST. INC.
THE FOLLOWING AUTHORIZED SOURCES ARE TO BE USED FOR PRICING AND
FOREIGN EXCHANGE QUOTATIONS, CORPORATE ACTIONS, DIVIDENDS AND
RIGHTS OFFERINGS:
AUTHORIZED SOURCES
QUOTRON
REUTERS
INTERACTIVE DATA CORPORATION
VALORINFORM (GENEVA)
TELEKURS
SUBSCRIPTION BANKS
FUND MANAGERS
EXTEL (LONDON)
REPUTABLE FOREIGN BROKERS
APPROVED: ______________________________
DATE
38
00250223.AE4
<PAGE>
ALLIANCE GLOBAL STRATEGIC INCOME TRUST, INC.
TRANSFER AGENCY AGREEMENT
AGREEMENT, dated as of [ ], 1995, between
Alliance Global Strategic Income Trust, Inc., a Maryland
Corporation and an open-end investment company registered with
the Securities and Exchange Commission (the "SEC") under the
Investment Company Act of 1940 (the "Investment Company Act"),
having its principal place of business at 1345 Avenue of
Americas, New York, New York 10105 (the "Fund"), and ALLIANCE
FUND SERVICES, INC., a Delaware corporation registered with the
SEC as a transfer agent under the Securities Exchange Act of
1934, having its principal place of business at 500 Plaza Drive,
Secaucus, New Jersey 07094 ("Fund Services"), provides as
follows:
WHEREAS, Fund Services has agreed to act as transfer
agent to the Fund for the purpose of recording the transfer,
issuance and redemption of shares of each series of the shares of
beneficial interest of the Fund ("Shares" or "Shares of a
Series"), transferring the Shares, disbursing dividends and other
distributions to shareholders of the Fund, and performing such
other services as may be agreed to pursuant hereto;
NOW THEREFORE, for and in consideration of the mutual
covenants and agreements contained herein, the parties do hereby
agree as follows:
<PAGE>
SECTION 1. The Fund hereby appoints Fund Services as
its transfer agent, dividend disbursing agent and shareholder
servicing agent for the Shares, and Fund Services agrees to act
in such capacities upon the terms set forth in this Agreement.
Capitalized terms used in this Agreement and not otherwise
defined shall have the meanings assigned to them in SECTION 30.
SECTION 2.
(a) The Fund shall provide Fund Services with copies of
the following documents:
(1) Specimens of all forms of certificates for Shares;
(2) Specimens of all account application forms and
other documents relating to Shareholders' accounts;
(3) Copies of each Prospectus;
(4) Specimens of all documents relating to withdrawal
plans instituted by the Fund, as described in SECTION 16; and
(5) Specimens of all amendments to any of the foregoing
documents.
(b) The Fund shall furnish to Fund Services a supply of
blank Share Certificates for the Shares and, from time to time,
will renew such supply upon Fund Services' request. Blank Share
Certificates shall be signed manually or by facsimile signatures
of officers of the Fund authorized to sign by law or pursuant to
the by-laws of the Fund and, if required by Fund Services, shall
bear the Fund's seal or a facsimile thereof.
2
<PAGE>
SECTION 3. Fund Services shall make original issues of
Shares in accordance with SECTIONS 13 and 14 and the Prospectus
upon receipt of (i) Written Instructions requesting the issuance,
(ii) a certified copy of a resolution of the Fund's Directors
authorizing the issuance, (iii) necessary funds for the payment
of any original issue tax applicable to such Shares, and (iv) an
opinion of the Fund's counsel as to the legality and validity of
the issuance, which opinion may provide that it is contingent
upon the filing by the Fund of an appropriate notice with the
SEC, as required by Rule 24f-2 of the Investment Company Act, as
amended from time to time.
SECTION 4. Transfers of Shares shall be registered and,
subject to the provisions of SECTION 10 in the case of Shares
evidenced by Share Certificates, new Share Certificates shall be
issued by Fund Services upon surrender of outstanding Share
Certificates in the form deemed by Fund Services to be properly
endorsed for transfer, which form shall include (i) all necessary
endorsers' signatures guaranteed by a member firm of a national
securities exchange or a domestic commercial bank or through
other procedures mutually agreed to between the Fund and Fund
Services, (ii) such assurances as Fund Services may deem
necessary to evidence the genuineness and effectiveness of each
endorsement and (iii) satisfactory evidence of compliance with
all applicable laws relating to the payment or collection of
taxes.
3
<PAGE>
SECTION 5. Fund Services shall forward Share
Certificates in "non-negotiable" form by first-class or
registered mail, or by whatever means Fund Services deems equally
reliable and expeditious. While in transit to the addressee, all
deliveries of Share Certificates shall be insured by Fund
Services as it deems appropriate. Fund Services shall not mail
Share Certificates in "negotiable" form, unless requested in
writing by the Fund and fully indemnified by the Fund to Fund
Services' satisfaction.
SECTION 6. In registering transfers of Shares, Fund
Services may rely upon the Uniform Commercial Code as in effect
from time to time in the State in which the Fund is incorporated
or organized or, if appropriate, in the State of New Jersey;
provided, that Fund Services may rely in addition or
alternatively on any other statutes in effect in the State of New
Jersey or in the state under the laws of which the Fund is
incorporated or organized that, in the opinion of Fund Services'
counsel, protect Fund Services and the Fund from liability
arising from (i) not requiring complete documentation in
connection with an issuance or transfer, (ii) registering a
transfer without an adverse claim inquiry, (iii) delaying
registration for purposes of an adverse claim inquiry or
(iv) refusing registration in connection with an adverse claim.
SECTION 7. Fund Services may issue new Share
Certificates in place of those lost, destroyed or stolen, upon
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<PAGE>
receiving indemnity satisfactory to Fund Services; and may issue
new Share Certificates in exchange for, and upon surrender of,
mutilated Share Certificates as Fund Services deems appropriate.
SECTION 8. Unless otherwise directed by the Fund, Fund
Services may issue or register Share Certificates reflecting the
signature, or facsimile thereof, of an officer who has
died,resigned or been removed by the Fund. The Fund shall file
promptly with Fund Services' approval, adoption or ratification
of such action as may be required by law or by Fund Services.
SECTION 9. Fund Services shall maintain customary stock
registry records for Shares of each Series noting the issuance,
transfer or redemption of Shares and the issuance and transfer of
Share Certificates. Fund Services may also maintain for Shares
of each Series an account entitled "Unissued Certificate
Account," in which Fund Services will record the Shares, and
fractions thereof, issued and outstanding from time to time for
which issuance of Share Certificates has not been requested.
Fund Services is authorized to keep records for Shares of each
Series containing the names and addresses of record of
Shareholders, and the number of Shares, and fractions thereof,
from time to time owned by them for which no Share Certificates
are outstanding. Each Shareholder will be assigned a single
account number for Shares of each Series, even though Shares for
which Certificates have been issued will be accounted for
separately.
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SECTION 10. Fund Services shall issue Share
Certificates for Shares only upon receipt of a written request
from a Shareholder and as authorized by the Fund. If Shares are
purchased or transferred without a request for the issuance of a
Share Certificate, Fund Services shall merely note on its stock
registry records the issuance or transfer of the Shares and
fractions thereof and credit or debit, as appropriate, the
Unissued Certificate Account and the respective Shareholders'
accounts with the Shares. Whenever Shares, and fractions
thereof, owned by Shareholders are surrendered for redemption,
Fund Services may process the transactions by making appropriate
entries in the stock transfer records, and debiting the Unissued
Certificate Account and the record of issued Shares outstanding;
it shall be unnecessary for Fund Services to reissue Share
Certificates in the name of the Fund.
SECTION 11. Fund Services shall also perform the usual
duties and function required of a stock transfer agent for a
corporation, including but not limited to (i) issuing Share
Certificates as treasury Shares, as directed by Written
Instructions, and (ii) transferring Share Certificates from one
Shareholder to another in the usual manner. Fund Services may
rely conclusively and act without further investigation upon any
list, instruction, certification, authorization, Share
Certificate or other instrument or paper reasonably believed by
it in good faith to be genuine and unaltered, and to have been
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<PAGE>
signed, countersigned or executed or authorized by a duly-
authorized person or persons, or by the Fund, or upon the advice
of counsel for the Fund or for Fund Services. Fund Services may
record any transfer of Share Certificates which it reasonably
believes in good faith to have been duly authorized, or may
refuse to record any transfer of Share Certificates if, in good
faith, it reasonably deems such refusal necessary in order to
avoid any liability on the part of either the Fund or Fund
Services.
SECTION 12. Fund Services shall notify the Fund of any
request or demand for the inspection of the Fund's share records.
Fund Services shall abide by the Fund's instructions for granting
or denying the inspection; provided, however, Fund Services may
grant the inspection without such instructions if it is advised
by its counsel that failure to do so will result in liability to
Fund Services.
SECTION 13. Fund Services shall observe the following
procedures in handling funds received:
(a) Upon receipt at the office designated by the Fund
of any check or other order drawn or endorsed to the Fund or
otherwise identified as being for the account of the Fund, and,
in the case of a new account, accompanied by a new account
application or sufficient information to establish an account as
provided in the Prospectus, Fund Services shall stamp the
transmittal document accompanying such check or other order with
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<PAGE>
the name of the Fund and the time and date of receipt and shall
forthwith deposit the proceeds thereof in the custodial account
of the Fund.
(b) In the event that any check or other order for the
purchase of Shares is returned unpaid for any reason, Fund
Services shall, in the absence of other instructions from the
Fund, advise the Fund of the returned check and prepare such
documents and information as may be necessary to cancel promptly
any Shares purchased on the basis of such returned check and any
accumulated income dividends and capital gains distributions paid
on such Shares.
(c) As soon as possible after 4:00 p.m., Eastern time
or at such other times as the Fund may specify in Written or Oral
Instructions for any Series (the "Valuation Time") on each
Business Day Fund Services shall obtain from the Fund's Adviser a
quotation (on which it may conclusively rely) of the net asset
value, determined as of the Valuation Time on that day. On each
Business Day Fund Services shall use the net asset value(s)
determined by the Fund's Adviser to compute the number of Shares
and fractional Shares to be purchased and the aggregate purchase
proceeds to be deposited with the Custodian. As necessary but no
more frequently than daily (unless a more frequent basis is
agreed to by Fund Services), Fund Services shall place a purchase
order with the Custodian for the proper number of Shares and
fractional Shares to be purchased and promptly thereafter shall
8
<PAGE>
send written confirmation of such purchase to the Custodian and
the Fund.
SECTION 14. Having made the calculations required by
SECTION 13, Fund Services shall thereupon pay the Custodian the
aggregate net asset value of the Shares purchased. The aggregate
number of Shares and fractional Shares purchased shall then be
issued daily and credited by Fund Services to the Unissued
Certificate Account. Fund Services shall also credit each
Shareholder's separate account with the number of Shares
purchased by such Shareholder. Fund Services shall mail written
confirmation of the purchase to each Shareholder or the
Shareholder's representative and to the Fund if requested. Each
confirmation shall indicate the prior Share balance, the new
Share balance, the Shares for which Stock Certificates are
outstanding (if any), the amount invested and the price paid for
the newly-purchased Shares.
SECTION 15. Prior to the Valuation Time on each
Business Day, as specified in accordance with SECTION 13, Fund
Services shall process all requests to redeem Shares and, with
respect to each Series, shall advise the Custodian of (i) the
total number of Shares available for redemption and (ii) the
number of Shares and fractional Shares requested to be redeemed.
Upon confirmation of the net asset value by the Fund's Adviser,
Fund Services shall notify the Fund and the Custodian of the
redemption, apply the redemption proceeds in accordance with
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<PAGE>
SECTION 16 and the Prospectus, record the redemption in the stock
registry books, and debit the redeemed Shares from the Unissued
Certificates Account and the individual account of the
Shareholder.
In lieu of carrying out the redemption procedures
described in the preceding paragraph, Fund Services may, at the
request of the Fund, sell Shares to the Fund as repurchases from
Shareholders, provided that the sale price is not less than the
applicable redemption price. The redemption procedures shall
then be appropriately modified.
SECTION 16. Fund Services will carry out the following
procedures with respect to Share redemptions:
(a) As to each request received by the Fund from or on
behalf of a Shareholder for the redemption of Shares, and unless
the right of redemption has been suspended as contemplated by the
Prospectus, Fund Services shall, within seven days after receipt
of such redemption request, either (i) mail a check in the amount
of the proceeds of such redemption to the person designated by
the Shareholder or other person to receive such proceeds or,
(ii) in the event redemption proceeds are to be wired through the
Federal Reserve Wire System or by bank wire pursuant to
procedures described in the Prospectus, cause such proceeds to be
wired in Federal funds to the bank or trust company account
designated by the Shareholder to receive such proceeds. Funds
Services shall also prepare and send a confirmation of such
10
<PAGE>
redemption to the Shareholder. Redemptions in kind shall be made
only in accordance with such Written Instructions as Fund
Services may receive from the Fund. The requirements as to
instruments of transfer and other documentation, the
determination of the appropriate redemption price and the time of
payment shall be as provided in the Prospectus, subject to such
additional requirements consistent therewith as may be
established by mutual agreement between the Fund and Fund
Services. In the case of a request for redemption that does not
comply in all respects with the requirements for redemption, Fund
Services shall promptly so notify the Shareholder and shall
effect such redemption at the price in effect at the time of
receipt of documents complying with such requirements. Fund
Services shall notify the Fund's Custodian and the Fund on each
Business Day of the amount of cash required to meet payments made
pursuant to the provisions of this paragraph and thereupon the
Fund shall instruct the Custodian to make available to Fund
Services in timely fashion sufficient funds therefor.
(b) Procedures and standards for effecting and
accepting redemption orders from Shareholders by telephone or by
such check writing service as the Fund may institute may be
established by mutual agreement between Fund Services and the
Fund consistent with the Prospectus.
(c) For purposes of redemption of Shares that have been
purchased by check within fifteen (15) days prior to receipt of
11
<PAGE>
the redemption request, the Fund shall provide Fund Services with
Written Instructions concerning the time within which such
requests may be honored.
(d) Fund Services shall process withdrawal orders duly
executed by Shareholders in accordance with the terms of any
withdrawal plan instituted by the Fund and described in the
Prospectus. Payments upon such withdrawal orders and redemptions
of Shares held in withdrawal plan accounts in connection with
such payments shall be made at such times as the Fund may
determine in accordance with the Prospectus.
(e) The authority of Fund Services to perform its
responsibilities under SECTIONS 15 and 16 with respect to the
Shares of any Series shall be suspended if Fund Services receives
notice of the suspension of the determination of the net asset
value of the Series.
SECTION 17. Upon the declaration of each dividend and
each capital gains distribution by the Fund's Directors, the Fund
shall notify Fund Services of the date of such declaration, the
amount payable per Share, the record date for determining the
Shareholders entitled to payment, the payment and the
reinvestment date price.
SECTION 18. Upon being advised by the Fund of the
declaration of any income dividend or capital gains distribution
on account of its Shares, Fund Services shall compute and prepare
for the Fund records crediting such distributions to
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<PAGE>
Shareholders. Fund Services shall, on or before the payment date
of any dividend or distribution, notify the Fund and the
Custodian of the estimated amount required to pay any portion of
a dividend or distribution which is payable in cash, and
thereupon the Fund shall, on or before the payment date of such
dividend or distribution, instruct the Custodian to make
available to Fund Services sufficient funds for the payment of
such cash amount. Fund Services will, on the designated payment
date, reinvest all dividends in additional shares and promptly
mail to each Shareholder at his address of record a statement
showing the number of full and fractional Shares (rounded to
three decimal places) then owned by the Shareholder and the net
asset value of such Shares; provided, however, that if a
Shareholder elects to receive dividends in cash, Fund Services
shall prepare a check in the appropriate amount and mail it to
the Shareholder at his address of record within five (5) business
days after the designated payment date, or transmit the
appropriate amount in Federal funds in accordance with the
Shareholder's agreement with the Fund.
SECTION 19. Fund Services shall prepare and maintain
for the Fund records showing for each Shareholder's account the
following:
A. The name, address and tax identification number of
the Shareholder;
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<PAGE>
B. The number of Shares of each Series held by the
Shareholder;
C. Historical information including dividends paid and
date and price for all transactions;
D. Any stop or restraining order placed against such
account;
E. Information with respect to the withholding of any
portion of income dividends or capital gains distributions as are
required to be withheld under applicable law;
F. Any dividend or distribution reinvestment election,
withdrawal plan application, and correspondence relating to the
current maintenance of the account;
G. The certificate numbers and denominations of any
Share Certificates issued to the Shareholder; and
H. Any additional information required by Fund
Services to perform the services contemplated by this Agreement.
Fund Services agrees to make available upon request by
the Fund or the Fund's Adviser and to preserve for the periods
prescribed in Rule 31a-2 of the Investment Company Act any
records related to services provided under this Agreement and
required to be maintained by Rule 31a-1 of that Act, including:
(i) Copies of the daily transaction register for each
Business Day of the Fund;
(ii) Copies of all dividend, distribution and
reinvestment blotters;
14
<PAGE>
(iii) Schedules of the quantities of Shares of each
Series distributed in each state for purposes of any state's laws
or regulations as specified in Oral or Written Instructions given
to Fund Services from time to time by the Fund or its agents; and
(iv) Such other information, including Shareholder
lists, and statistical information as may be agreed upon from
time to time by the Fund and Fund Services.
SECTION 20. Fund Services shall maintain those records
necessary to enable the Fund to file, in a timely manner, form
N-SAR (Semi-Annual Report) or any successor report required by
the Investment Company Act or rules and regulations thereunder.
SECTION 21. Fund Services shall cooperate with the
Fund's independent public accountants and shall take reasonable
action to make all necessary information available to such
accountants for the performance of their duties.
SECTION 22. In addition to the services described
above, Fund Services will perform other services for the Fund as
may be mutually agreed upon in writing from time to time, which
may include preparing and filing Federal tax forms with the
Internal Revenue Service, and, subject to supervisory oversight
by the Fund's Adviser, mailing Federal tax information to
Shareholders, mailing semi-annual Shareholder reports, preparing
the annual list of Shareholders, mailing notices of Shareholders'
meetings, proxies and proxy statements and tabulating proxies.
Fund Services shall answer the inquiries of certain Shareholders
15
<PAGE>
related to their share accounts and other correspondence
requiring an answer from the Fund. Fund Services shall maintain
dated copies of written communications from Shareholders, and
replies thereto.
SECTION 23. Nothing contained in this Agreement is
intended to or shall require Fund Services, in any capacity
hereunder, to perform any functions or duties on any day other
than a Business Day. Functions or duties normally scheduled to
be performed on any day which is not a Business Day shall be
performed on, and as of, the next Business Day, unless otherwise
required by law.
SECTION 24. For the services rendered by Fund Services
as described above, the Fund shall pay to Fund Services an
annualized fee at a rate to be mutually agreed upon from time to
time. Such fee shall be prorated for the months in which this
Agreement becomes effective or is terminated. In addition, the
Fund shall pay, or Fund Services shall be reimbursed for, all
out-of-pocket expenses incurred in the performance of this
Agreement, including but not limited to the cost of stationery,
forms, supplies, blank checks, stock certificates, proxies and
proxy solicitation and tabulation costs, all forms and statements
used by Fund Services in communicating with Shareholders of the
Fund or especially prepared for use in connection with its
services hereunder, specific software enhancements as requested
by the Fund, costs associated with maintaining withholding
16
<PAGE>
accounts (including non-resident alien, Federal government and
state), postage, telephone, telegraph (or similar electronic
media) used in communicating with Shareholders or their
representatives, outside mailing services, microfiche/microfilm,
freight charges and off-site record storage. It is agreed in
this regard that Fund Services, prior to ordering any form in
such supply as it estimates will be adequate for more than two
years' use, shall obtain the written consent of the Fund. All
forms for which Fund Services has received reimbursement from the
Fund shall be the property of the Fund.
SECTION 25. Fund Services shall not be liable for any
taxes, assessments or governmental charges that may be levied or
assessed on any basis whatsoever in connection with the Fund or
any Shareholder, excluding taxes assessed against Fund Services
for compensation received by it hereunder.
SECTION 26.
(a) Fund Services shall at all times act in good faith
and with reasonable care in performing the services to be
provided by it under this Agreement, but shall not be liable for
any loss or damage unless such loss or damage is caused by the
negligence, bad faith or willful misconduct of Fund Services or
its employees or agents.
(b) The Fund shall indemnify and hold Fund Services
harmless from all loss, cost, damage and expense, including
reasonable expenses for counsel, incurred by it resulting from
17
<PAGE>
any claim, demand, action or suit in connection with the
performance of its duties hereunder, or as a result of acting
upon any instruction reasonably believed by it to have been
properly given by a duly authorized officer of the Fund, or upon
any information, data, records or documents provided to Fund
Services or its agents by computer tape, telex, CRT data entry or
other similar means authorized by the Fund; provided that this
indemnification shall not apply to actions or omissions of Fund
Services in cases of its own bad faith, willful misconduct or
negligence, and provided further that if in any case the Fund may
be asked to indemnify or hold Fund Services harmless pursuant to
this Section, the Fund shall have been fully and promptly advised
by Fund Services of all material facts concerning the situation
in question. The Fund shall have the option to defend Fund
Services against any claim which may be the subject of this
indemnification, and in the event that the Fund so elects it will
so notify Fund Services, and thereupon the Fund shall retain
competent counsel to undertake defense of the claim, and Fund
Services shall in such situations incur no further legal or other
expenses for which it may seek indemnification under this
paragraph. Fund Services shall in no case confess any claim or
make any compromise in any case in which the Fund may be asked to
indemnify Fund Services except with the Fund's prior written
consent.
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<PAGE>
Without limiting the foregoing:
(i) Fund Services may rely upon the advice of the Fund
or counsel to the Fund or Fund Services, and upon statements of
accountants, brokers and other persons believed by Fund Services
in good faith to be expert in the matters upon which they are
consulted. Fund Services shall not be liable for any action
taken in good faith reliance upon such advice or statements;
(ii) Fund Services shall not be liable for any action
reasonably taken in good faith reliance upon any Written
Instructions or certified copy of any resolution of the Fund's
Directors, including a Written Instruction authorizing Fund
Services to make payment upon redemption of Shares without a
signature guarantee; provided, however, that upon receipt of a
Written Instruction countermanding a prior Instruction that has
not been fully executed by Fund Services, Fund Services shall
verify the content of the second Instruction and honor it, to the
extent possible. Fund Services may rely upon the genuineness of
any such document, or copy thereof, reasonably believed by Fund
Services in good faith to have been validly executed;
(iii) Fund Services may rely, and shall be protected by
the Fund in acting, upon any signature, instruction, request,
letter of transmittal, certificate, opinion of counsel,
statement, instrument, report, notice, consent, order, or other
paper or document reasonably believed by it in good faith to be
19
<PAGE>
genuine and to have been signed or presented by the purchaser,
the Fund or other proper party or parties; and
(d) Fund Services may, with the consent of the Fund,
subcontract the performance of any portion of any service to be
provided hereunder, including with respect to any Shareholder or
group of Shareholders, to any agent of Fund Services and may
reimburse the agent for the services it performs at such rates as
Fund Services may determine; provided that no such reimbursement
will increase the amount payable by the Fund pursuant to this
Agreement; and provided further, that Fund Services shall remain
ultimately responsible as transfer agent to the Fund.
SECTION 27. The Fund shall deliver or cause
to be delivered over to Fund Services (i) an accurate list of
Shareholders, showing each Shareholder's address of record,
number of Shares of each Series owned and whether such Shares are
represented by outstanding Share Certificates or by non-
certificated Share accounts and (ii) all Shareholder records,
files, and other materials necessary or appropriate for proper
performance of the functions assumed by Fund Services under this
Agreement (collectively referred to as the "Materials"). The
Fund shall indemnify Fund Services and hold it harmless from any
and all expenses, damages, claims, suits, liabilities, actions,
demands and losses arising out of or in connection with any
error, omission, inaccuracy or other deficiency of such
Materials, or out of the failure of the Fund to provide any
20
<PAGE>
portion of the Materials or to provide any information in the
Fund's possession needed by Fund Services to knowledgeably
perform its functions; provided the Fund shall have no obligation
to indemnify Fund Services or hold it harmless with respect to
any expenses, damages, claims, suits, liabilities, actions,
demands or losses caused directly or indirectly by acts or
omissions of Fund Services or the Fund's Adviser.
SECTION 28. This Agreement may be amended from time to
time by a written supplemental agreement executed by the Fund and
Fund Services and without notice to or approval of the
Shareholders; provided this Agreement may not be amended in any
manner which would substantially increase the Fund's obligations
hereunder unless the amendment is first approved by the Fund's
Directors, including a majority of the Directors who are not a
party to this Agreement or interested persons of any such party,
at a meeting called for such purpose, and thereafter is approved
by the Fund's Shareholders if such approval is required under the
Investment Company Act or the rules and regulations thereunder.
The parties hereto may adopt procedures as may be appropriate or
practical under the circumstances, and Fund Services may
conclusively rely on the determination of the Fund that any
procedure that has been approved by the Fund does not conflict
with or violate any requirement of its Articles of Incorporation
or Declaration of Trust, By-Laws or Prospectus, or any rule,
regulation or requirement of any regulatory body.
21
<PAGE>
SECTION 29. The Fund shall file with Fund Services a
certified copy of each operative resolution of its Directors
authorizing the execution of Written Instructions or the
transmittal of Oral Instructions and setting forth authentic
signatures of all signatories authorized to sign on behalf of the
Fund and specifying the person or persons authorized to give Oral
Instructions on behalf of the Fund. Such resolution shall
constitute conclusive evidence of the authority of the person or
persons designated therein to act and shall be considered in full
force and effect, with Fund Services fully protected in acting in
reliance therein, until Fund Services receives a certified copy
of a replacement resolution adding or deleting a person or
persons authorized to give Written or Oral Instructions. If the
officer certifying the resolution is authorized to give Oral
Instructions, the certification shall also be signed by a second
officer of the Fund.
SECTION 30. The terms, as defined in this Section,
whenever used in this Agreement or in any amendment or supplement
hereto, shall have the meanings specified below, insofar as the
context will allow.
(a) Business Day: Any day on which the Fund is open
for business as described in the Prospectus.
(b) Custodian: The term Custodian shall mean the
Fund's current custodian or any successor custodian acting as
such for the Fund.
22
<PAGE>
(c) Fund's Adviser: The term Fund's Adviser shall mean
Alliance Capital Management L.P. or any successor thereto who
acts as the investment adviser or manager of the Fund.
(d) Oral Instructions: The term Oral Instructions
shall mean an authorization, instruction, approval, item or set
of data, or information of any kind transmitted to Fund Services
in person or by telephone, vocal telegram or other electronic
means, by a person or persons reasonably believed in good faith
by Fund Services to be a person or persons authorized by a
resolution of the Directors of the Fund to give Oral Instructions
on behalf of the Fund. Each Oral Instruction shall specify
whether it is applicable to the entire Fund or a specific Series
of the Fund.
(e) Prospectus: The term Prospectus shall mean a
prospectus and related statement of additional information
forming part of a currently effective registration statement
under the Investment Company Act and, as used with the respect to
Shares or Shares of a Series, shall mean the prospectuses and
related statements of additional information covering the Shares
or Shares of the Series.
(f) Securities: The term Securities shall mean bonds,
debentures, notes, stocks, shares, evidences of indebtedness, and
other securities and investments from time to time owned by the
Fund.
23
<PAGE>
(g) Series: The term Series shall mean any series of
Shares of the common stock of the Fund that the Fund may
establish from time to time.
(h) Share Certificates: The term Share Certificates
shall mean the stock certificates for the Shares.
(i) Shareholders: The term Shareholders shall mean the
registered owners from time to time of the Shares, as reflected
on the stock registry records of the Fund.
(j) Written Instructions: The term Written
Instructions shall mean an authorization, instruction, approval,
item or set of data, or information of any kind transmitted to
Fund Services in original writing containing original signatures,
or a copy of such document transmitted by telecopy, including
transmission of such signature, or other mechanical or
documentary means, at the request of a person or persons
reasonably believed in good faith by Fund Services to be a person
or persons authorized by a resolution of the Directors of the
Fund to give Written Instruction shall specify whether it is
applicable to the entire Fund or a specific Series of the Fund.
SECTION 31. Fund Services shall not be liable for the
loss of all or part of any record maintained or preserved by it
pursuant to this Agreement or for any delays or errors occurring
by reason of circumstances beyond its control, including but not
limited to acts of civil or military authorities, national
emergencies, fire, flood or catastrophe, acts of God,
24
<PAGE>
insurrection, war, riot, or failure of transportation,
communication or power supply, except to the extent that Fund
Services shall have failed to use its best efforts to minimize
the likelihood of occurrence of such circumstances or to mitigate
any loss or damage to the Fund caused by such circumstances.
SECTION 32. The Fund may give Fund Services sixty (60)
days and Fund Services may give the Fund (90) days written notice
of the termination of this Agreement, such termination to take
effect at the time specified in the notice. Upon notice of
termination, the Fund shall use its best efforts to obtain a
successor transfer agent. If a successor transfer agent is not
appointed within ninety (90) days after the date of the notice of
termination, the Directors of the Fund shall, by resolution,
designate the Fund as its own transfer agent. Upon receipt of
written notice from the Fund of the appointment of the successor
transfer agent and upon receipt of Oral or Written Instructions
Fund Services shall, upon request of the Fund and the successor
transfer agent and upon payment of Fund Services reasonable
charges and disbursements, promptly transfer to the successor
transfer agent the original or copies of all books and records
maintained by Fund Services hereunder and cooperate with, and
provide reasonable assistance to, the successor transfer agent in
the establishment of the books and records necessary to carry out
its responsibilities hereunder.
25
<PAGE>
SECTION 33. Any notice or other communication required
by or permitted to be given in connection with this Agreement
shall be in writing, and shall be delivered in person or sent by
first-class mail, postage prepaid, to the respective parties.
Notice to the Fund shall be given as follows until
further notice:
Alliance Global Strategic Income Trust, Inc.
1345 Avenue of the Americas
New York, New York 10105
Attention: Secretary
Notice to Fund Services shall be given as follows until
further notice:
Alliance Fund Services, Inc.
500 Plaza Drive
Secaucus, New Jersey 07094
SECTION 34. The Fund represents and warrants to Fund
Services that the execution and delivery of this Agreement by the
undersigned officer of the Fund has been duly and validly
authorized by resolution of the Fund's Directors. Fund Services
represents and warrants to the Fund that the execution and
delivery of this Agreement by the undersigned officer of Fund
Services has also been duly and validly authorized.
SECTION 35. This Agreement may be executed in more than
one counterpart, each of which shall be deemed to be an original,
and shall become effective on the last date of signature below
unless otherwise agreed by the parties. Unless sooner terminated
pursuant to SECTION 32, this Agreement will continue until
December 31, 1996 and will continue in effect thereafter for
26
<PAGE>
successive 12 month periods only if such continuance is
specifically approved at least annually by the Directors or by a
vote of the stockholders of the Fund and in either case by a
majority of the Directors who are not parties to this Agreement
or interested persons of any such party, at a meeting called for
the purpose of voting on this Agreement.
SECTION 36. This Agreement shall extend to and shall
bind the parties hereto and their respective successors and
assigns; provided, however, that this Agreement shall not be
assignable by the Fund without the written consent of Fund
Services or by Fund Services without the written consent of the
Fund, authorized or approved by a resolution of the Fund's
Directors. Notwithstanding the foregoing, either party may
assign this Agreement without the consent of the other party so
long as the assignee is an affiliate, parent or subsidiary of the
assigning party and is qualified to act under the Investment
Company Act, as amended from time to time.
27
<PAGE>
SECTION 38. This Agreement shall be governed by the
laws of the State of New Jersey.
WITNESS the following signatures:
ALLIANCE GLOBAL STRATEGIC
INCOME TRUST, INC.
BY:___________________________
TITLE: President
ALLIANCE FUND SERVICES, INC.
BY:___________________________
TITLE: President
28
00250223.AE2
<PAGE>
SEWARD & KISSEL
One Battery Park Plaza
New York, New York 10004
Telephone: (212) 574-1200
Facsimile: (212) 480-8421
December 22, 1995
Alliance Global Strategic
Income Trust, Inc.
1345 Avenue of the Americas
New York, New York 10105
Dear Sirs:
We have acted as counsel for Alliance Global
Strategic Income Trust, Inc., a Maryland corporation (the
"Company"), in connection with the organization of the
Company, the registration of the Company under the
Investment Company Act of 1940, as amended, and the
registration of an indefinite number of shares of its common
stock, par value $.001 per share (the "Common Stock"), under
the Securities Act of 1933, as amended.
As counsel for the Company we have participated in
the preparation of the Registration Statement on Form N-1A
relating to such shares (the "Registration Statement") and
have examined and relied upon such corporate records of the
Company and such other documents and certificates as to
factual matters as we have deemed to be necessary to render
the opinion expressed herein.
Based on such examination, we are of the opinion
that:
1. The Company is duly organized and validly
existing as a corporation in good standing under the laws of
the State of Maryland.
2. The shares of Common Stock of the Company to
be offered for sale pursuant to the Registration Statement
are, to the extent of the number of shares authorized to be
issued by the Company in its Charter, duly authorized and,
when sold, issued and paid for as contemplated by the
<PAGE>
Registration Statement, will have been validly and legally
issued and will be fully paid and nonassessable shares of
Common Stock of the Company under the laws of the State of
Maryland (assuming that the sale price of each share is not
less than the par value thereof).
As to matters of Maryland law contained in the
foregoing opinion, we have relied on the opinion of Venable,
Baetjer and Howard of Baltimore, Maryland, dated
December 22, 1995, a copy of which is included in the
Registration Statement as Exhibit 10(b).
We hereby consent to the filing of this opinion
with the Securities and Exchange Commission as an exhibit to
the Registration Statement and to the reference to our firm
under the caption "General Information--Counsel" in the
Statement of Additional Information included therein.
Very truly yours,
/s/ Seward & Kissel
00250223.AE7
<PAGE>
VENABLE, BAETJER AND HOWARD, LLP
Including professional corporations
1800 Mercantile Bank & Trust Building
Two Hopkins Plaza
Baltimore, Maryland 21201-2978
(410) 244-7400, Fax (410) 244-7742
December 22, 1995
Seward & Kissel
One Battery Park Plaza
New York, NY 10004
Re: Alliance Global Strategic Income Trust, Inc.
____________________________________________
Ladies and Gentlemen:
We have acted as special Maryland counsel for Alliance
Global Strategic Income Trust, Inc., a Maryland corporation
(the "Fund"), in connection with the organization of the
Fund and the issuance of shares of its Class A Common Stock,
Class B Common Stock and Class C Common Stock, par value
$.001 per share (each a "Class" and, collectively the
"Shares").
As special Maryland counsel for the Fund, we are
familiar with its Charter and Bylaws. We have examined the
prospectus included in its Registration Statement on Form N-
1A, File Nos. 33-63799; 811-7391 (the "Registration
Statement"), substantially in the form in which it is to
become effective (the "Prospectus"). We have further
examined and relied upon a certificate of the Maryland State
Department of Assessments and Taxation to the effect that
the Fund is duly incorporated and existing under the laws of
the State of Maryland and is in good standing and duly
authorized to transact business in the State of Maryland.
We have also examined and relied upon such corporate
records of the Fund and other documents and certificates
with respect to factual matters as we have deemed necessary
to render the opinion expressed herein. We have assumed,
without independent verification, the genuineness of all
signatures, the authenticity of all documents submitted to
us as originals and the conformity with originals of all
documents submitted to us as copies.
<PAGE>
Based on such examination, we are of the opinion and so
advise you that:
1. The Fund is duly organized and validly
existing as a corporation in good standing
under the laws of the State of Maryland.
2. The Shares of the Fund to be offered for sale
pursuant to the Prospectus are, to the extent
of the respective number of Shares of each
Class authorized to be issued by the Fund in
its Charter, duly authorized and, when sold,
issued and paid for as contemplated by the
Registration Statement, will have been validly
and legally issued and will be fully paid and
nonassessable under the laws of the State of
Maryland (assuming that the sale price of each
share is not less than the par value thereof).
This letter expresses our opinion with respect to the
Maryland General Corporation Law governing matters such as
due organization and the authorization and issuance of
stock. It does not extend to the securities or "blue sky"
laws of Maryland, to federal securities laws or to other
laws.
You may rely upon our foregoing opinion in rendering
your opinion to the Fund that is to be filed as an exhibit
to the Registration Statement. We consent to the filing of
this opinion as an exhibit to the Registration Statement and
to the reference to us in the Statement of Additional
Information supplementing the Prospectus under the caption
"Counsel". We do not thereby admit that we are "experts"
within the meaning of the Securities Act of 1933 and the
regulations thereunder.
Very truly yours,
Venable, Baetjer and Howard, LLP
00250223.AG5
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions
"Shareholder Services-Statements and Reports" and "General
Information-Independent Auditors" and to the use of our
report dated December 21, 1995, in this Registration
Statement (Form N-1A No. 33-63797) of Alliance Global
Strategic Income Trust, Inc.
/s/ Ernst & Young LLP
New York, New York
December 21, 1995
00250223.AH2
<PAGE>
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, New York 10105
December 19, 1995
Alliance Global Strategic Income Trust, Inc.
1345 Avenue of the Americas
New York, New York 10105
Gentlemen:
In connection with our purchase of 10,000 shares of
Class Y Common Stock of Alliance Global Strategic Income
Trust, Inc. (the "Corporation") for an aggregate cash
consideration of One Hundred Thousand Dollars ($100,000),
this will confirm that we are buying such shares for
investment for our account only, and not with a view to
reselling or otherwise distributing them.
Very truly yours,
ALLIANCE CAPITAL MANAGEMENT L.P.
By: Alliance Capital Management
Corporation,
its General Partner
By: John D. Carifa
___________________________
00250223.AF7
<PAGE>
ALLIANCE GLOBAL STRATEGIC INCOME TRUST, INC.
Plan pursuant to Rule 18f-3 under the
Investment Company Act of 1940
Effective , 1995
This Plan (the "Plan") is adopted by Alliance Global
Strategic Income Fund, Inc. (the "Fund") pursuant to Rule 18f-3
under the Investment Company Act of 1940 (the "Act") and sets
forth the general characteristics of, and the general conditions
under which the Fund may offer, multiple classes of shares of its
now existing and hereafter created portfolios.1 This Plan may be
revised or amended from time to time as provided below.
Class Designations
The Fund2 may from time to time issue one or more of the
following classes of shares: Class A shares, Class B shares,
Class C shares and Class Y shares. Each of the four classes of
shares will represent interests in the same portfolio of
investments of the Fund and, except as described herein, shall
have the same rights and obligations as each other class. Each
class shall be subject to such investment minimums and other
conditions of eligibility as are set forth in the Fund's
prospectus or statement of additional information as from time to
time in effect (the "Prospectus").
Class Characteristics
Class A shares will be offered at a public offering
price that is equal to their net asset value ("NAV") plus an
initial sales charge, as set forth in the Prospectus. Class A
shares may also be subject to a Rule 12b-1 fee, which may include
a service fee and, under certain circumstances, a contingent
deferred sales charge ("CDSC"), as described in the Prospectus.
____________________
1. This Plan is intended to allow the Fund to offer multiple
classes of shares to the full extent and in the manner
permitted by Rule 18f-3 under the Act (the "Rule"), subject
to the requirements and conditions imposed by the Rule.
2. For purposes of this Plan, if the Fund has existing more than
one portfolio pursuant to which multiple classes of shares
are issued, then references in this Plan to the "Fund" shall
be deemed to refer instead to each portfolio.
<PAGE>
Class B shares will be offered at their NAV, without an
initial sales charge, but may be subject to a CDSC and a Rule
12b-1 fee, which may include a service fee, as described in the
Prospectus.
Class C shares will be offered at their NAV, without an
initial sales charge, and may be subject to a Rule 12b-1 fee,
which may include a service fee, as described in the Prospectus.
Class Y Shares will be offered at their NAV, without any
initial sales charge, CDSC or Rule 12b-1 fee.
The initial sales charge on Class A shares and CDSC on
Class A, B and C shares each will be subject to reduction or
waiver as permitted by the Act, and as described in the
Prospectus.
Allocations to Each Class
Expense Allocations
The following expenses shall be allocated, to the extent
practicable, on a class-by-class basis: (i) Rule 12b-1 fees
payable by the Fund to the distributor or principal underwriter
of the Fund's shares (the "Distributor"), and (ii) transfer
agency costs attributable to each class. Subject to the approval
of the Fund's Board of Directors, including a majority of the
independent Directors, the following "Class Expenses" may be
allocated on a class-by-class basis: (a) printing and postage
expenses related to preparing and distributing materials such as
shareholder reports, prospectuses and proxy statements to current
shareholders of a specific class,3 (b) SEC registration fees
incurred with respect to a specific class, (c) blue sky and
foreign registration fees and expenses incurred with respect to a
specific class, (d) the expenses of administrative personnel and
services required to support shareholders of a specific class
(including, but not limited to, maintaining telephone lines and
personnel to answer shareholder inquiries about their accounts or
about the Fund), (e) litigation and other legal expenses relating
to a specific class of shares, (f) Directors' fees or expenses
incurred as a result of issues relating to a specific class of
shares, (g) accounting and consulting expenses relating to a
specific class of shares, (h) any fees imposed pursuant to a non-
Rule 12b-1 shareholder services plan that relate to a specific
____________________
3. For Class Y shares, the expenses of preparation, printing and
distribution of prospectuses and shareholder reports, as well
as other distribution-related expenses, will be borne by the
investment adviser of the Fund (the "Adviser") or the
Distributor from their own resources.
2
<PAGE>
class of shares, and (i) any additional expenses, not including
advisory or custodial fees or other expenses related to the
management of the Fund's assets, if these expenses are actually
incurred in a different amount with respect to a class, or if
services are provided with respect to a class that are of a
different kind or to a different degree than with respect to one
or more other classes.
All expenses not now or hereafter designated as Class
Expenses ("Fund Expenses") will be allocated to each class on the
basis of the net asset value of that class in relation to the net
asset value of the Fund.
However, notwithstanding the above, the Fund may
allocate all expenses other than Class Expenses on the basis of
relative net assets (settled shares), as permitted by rule 18f-
3(c)(2) under the Act.
Waivers and Reimbursements
The Adviser or Distributor may choose to waive or
reimburse Rule 12b-1 fees, transfer agency fees or any Class
Expenses on a voluntary, temporary basis. Such waiver or
reimbursement may be applicable to some or all of the classes and
may be in different amounts for one or more classes.
Income, Gains and Losses
Income, and realized and unrealized capital gains and
losses shall be allocated to each class on the basis of the net
asset value of that class in relation to the net asset value of
the Fund.
The Fund may allocate income, and realized and
unrealized capital gains and losses to each share based on
relative net assets (i.e. settled shares), as permitted by Rule
18f-3(c)(2) under the Act.
Conversion and Exchange Features
Conversion Features
Class B shares of the Fund automatically convert to
Class A shares of the Fund after a certain number of months or
years after the end of the calendar month in which the
shareholder's purchase order was accepted as described in the
Prospectus. Class B shares purchased through reinvestment of
dividends and distributions will be treated as Class B shares for
all purposes except that such Class B shares will be considered
held in a separate sub-account. Each time any Class B shares in
the shareholder's account convert to Class A shares, an equal
3
<PAGE>
pro- rata portion of the Class B shares in the sub-account will
also convert to Class A shares. The conversion of Class B shares
to Class A shares may be suspended if the opinion of counsel
obtained by the Fund that the conversion does not constitute a
taxable event under current federal income tax law is no longer
available. Class B shares will convert into Class A shares on
the basis of the relative net asset value of the two classes,
without the imposition of any sales load, fee or other charge.
In the event of any material increase in payments
authorized under the Rule 12b-1 Plan (or, if presented to
shareholders, any material increase in payments authorized by a
non-Rule 12b-1 shareholder services plan) applicable to Class A
shares, existing Class B shares will stop converting into Class A
shares unless the Class B shareholders, voting separately as a
class, approve the increase in such payments. Pending approval
of such increase, or if such increase is not approved, the
Directors shall take such action as is necessary to ensure that
existing Class B shares are exchanged or converted into a new
class of shares ("New Class A") identical in all material
respects to Class A shares as existed prior to the implementation
of the increase in payments, no later than such shares were
previously scheduled to convert to Class A shares. If deemed
advisable by the Directors to implement the foregoing, such
action may include the exchange of all existing Class B shares
for a new class of shares ("New Class B"), identical to existing
Class B shares, except that New Class B shares shall convert to
New Class A shares. Exchanges or conversions described in this
paragraph shall be effected in a manner that the Directors
reasonably believe will not be subject to federal taxation. Any
additional cost associated with the creation, exchange or
conversion of New Class A or New Class B shares shall be borne by
the Adviser and the Distributor. Class B shares sold after the
implementation of the fee increase may convert into Class A
shares subject to the higher maximum payment, provided that the
material features of the Class A plan and the relationship of
such plan to the Class B shares are disclosed in an effective
registration statement.
Exchange Features
Shares of each class generally will be permitted to be
exchanged only for shares of a class with similar characteristics
in another Alliance Mutual Fund and shares of certain Alliance
money market funds. Class Y shares may be exchanged for Class Y
shares of another Alliance Mutual Fund and shares of certain
Alliance money market funds. If the aggregate net asset value of
shares of all Alliance Mutual Funds held by an investor in the
Fund reaches the minimum amount at which an investor may purchase
Class A shares at net asset value without a front-end sales load
on or before December 15 in any year, then all Class B and
4
<PAGE>
Class C shares of the Fund held by that investor may thereafter
be exchanged, at the investor's request, at net asset value and
without any front-end sales load or CDSC for Class A shares of
the Fund. All exchange features applicable to each class will be
described in the Prospectus.
Dividends
Dividends paid by the Fund with respect to its Class A,
Class B, Class C and Class Y shares, to the extent any dividends
are paid, will be calculated in the same manner, at the same time
and will be in the same amount, except that any Rule 12b-1 fee
payments relating to a class of shares will be borne exclusively
by that class and any incremental transfer agency costs or, if
applicable, Class Expenses relating to a class shall be borne
exclusively by that class.
Voting Rights
Each share of a Fund entitles the shareholder of record
to one vote. Each class of shares of the Fund will vote
separately as a class with respect to the Rule 12b-1 plan
applicable to that class and on other matters for which class
voting is required under applicable law. Both Class A and
Class B shareholders will vote separately as a class to approve
any material increase in payments authorized under the Rule 12b-1
plan applicable to Class A shares.
Responsibilities of the Directors
On an ongoing basis, the Directors will monitor the Fund
for the existence of any material conflicts among the interests
of the four classes of shares. The Directors shall further
monitor on an ongoing basis the use of waivers or reimbursement
by the Adviser and the Distributor of expenses to guard against
cross- subsidization between classes. The Directors, including a
majority of the independent Directors, shall take such action as
is reasonably necessary to eliminate any such conflict that may
develop. If a conflict arises, the Adviser and Distributor, at
their own cost, will remedy such conflict up to and including
establishing one or more new registered management investment
companies.
Reports to the Directors
The Adviser and Distributor will be responsible for
reporting any potential or existing conflicts among the four
classes of shares to the Directors. In addition, the Directors
will receive quarterly and annual statements concerning
distributions and shareholder servicing expenditures complying
with paragraph (b)(3)(ii) of Rule 12b-1. In the statements, only
5
<PAGE>
expenditures properly attributable to the sale or servicing of a
particular class of shares shall be used to justify any
distribution or service fee charged to that class. The
statements, including the allocations upon which they are based,
will be subject to the review of the independent Directors in the
exercise of their fiduciary duties. At least annually, the
Directors shall receive a report from an expert, acceptable to
the Directors, (the "Expert"), with respect to the methodology
and procedures for calculating the net asset value, dividends and
distributions for the classes, and the proper allocation of
income and expenses among the classes. The report of the Expert
shall also address whether the Fund has adequate facilities in
place to ensure the implementation of the methodology and
procedures for calculating the net asset value, dividends and
distributions for the classes, and the proper allocation of
income and expenses among the classes. The Fund and the Adviser
will take immediate corrective measures in the event of any
irregularities reported by the Expert.
Amendments
The Plan may be amended from time to time in accordance
with the provisions and requirements of Rule 18f-3 under the Act.
The undersigned certifies that this Plan was adopted by the Board
of Directors on December 12, 1995, to take effect on [ ],
1995
Edmund P. Bergan, Jr.
Secretary
6
00250223.AE1
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person
whose signature appears below hereby revokes all prior
powers granted by the undersigned to the extent inconsistent
herewith and constitutes and appoints John D. Carifa, Edmund
P. Bergan, Jr., and Domenick Pugliese and each of them, to
act severally as attorneys-in-fact and agents, with power of
substitution and resubstitution, for the undersigned in any
and all capacities, solely for the purpose of signing the
Registration Statement, and any amendments thereto, on Form
N-1A of Alliance Global Strategic Income Trust, Inc. and
filing the same, with exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that said
attorneys-in-fact, or their substitute or substitutes, may
do or cause to be done by virtue hereof.
/s/ John D. Carifa
Dated: December 21, 1995
00250223.AF2
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person
whose signature appears below hereby revokes all prior
powers granted by the undersigned to the extent inconsistent
herewith and constitutes and appoints John D. Carifa, Edmund
P. Bergan, Jr., and Domenick Pugliese and each of them, to
act severally as attorneys-in-fact and agents, with power of
substitution and resubstitution, for the undersigned in any
and all capacities, solely for the purpose of signing the
Registration Statement, and any amendments thereto, on Form
N-1A of Alliance Global Strategic Income Trust, Inc. and
filing the same, with exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that said
attorneys-in-fact, or their substitute or substitutes, may
do or cause to be done by virtue hereof.
/s/ Ruth Block
Dated: December 21, 1995
00250223.AF2
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person
whose signature appears below hereby revokes all prior
powers granted by the undersigned to the extent inconsistent
herewith and constitutes and appoints John D. Carifa, Edmund
P. Bergan, Jr., and Domenick Pugliese and each of them, to
act severally as attorneys-in-fact and agents, with power of
substitution and resubstitution, for the undersigned in any
and all capacities, solely for the purpose of signing the
Registration Statement, and any amendments thereto, on Form
N-1A of Alliance Global Strategic Income Trust, Inc. and
filing the same, with exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that said
attorneys-in-fact, or their substitute or substitutes, may
do or cause to be done by virtue hereof.
/s/ David H. Dievler
Dated: December 21, 1995
00250223.AF2
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person
whose signature appears below hereby revokes all prior
powers granted by the undersigned to the extent inconsistent
herewith and constitutes and appoints John D. Carifa, Edmund
P. Bergan, Jr., and Domenick Pugliese and each of them, to
act severally as attorneys-in-fact and agents, with power of
substitution and resubstitution, for the undersigned in any
and all capacities, solely for the purpose of signing the
Registration Statement, and any amendments thereto, on Form
N-1A of Alliance Global Strategic Income Trust, Inc. and
filing the same, with exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that said
attorneys-in-fact, or their substitute or substitutes, may
do or cause to be done by virtue hereof.
/s/ James M. Hester
Dated: December 21, 1995
00250223.AF2
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person
whose signature appears below hereby revokes all prior
powers granted by the undersigned to the extent inconsistent
herewith and constitutes and appoints John D. Carifa, Edmund
P. Bergan, Jr., and Domenick Pugliese and each of them, to
act severally as attorneys-in-fact and agents, with power of
substitution and resubstitution, for the undersigned in any
and all capacities, solely for the purpose of signing the
Registration Statement, and any amendments thereto, on Form
N-1A of Alliance Global Strategic Income Trust, Inc. and
filing the same, with exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that said
attorneys-in-fact, or their substitute or substitutes, may
do or cause to be done by virtue hereof.
/s/ Clifford L. Michel
Dated: December 21, 1995
00250223.AF2
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person
whose signature appears below hereby revokes all prior
powers granted by the undersigned to the extent inconsistent
herewith and constitutes and appoints John D. Carifa, Edmund
P. Bergan, Jr., and Domenick Pugliese and each of them, to
act severally as attorneys-in-fact and agents, with power of
substitution and resubstitution, for the undersigned in any
and all capacities, solely for the purpose of signing the
Registration Statement, and any amendments thereto, on Form
N-1A of Alliance Global Strategic Income Trust, Inc. and
filing the same, with exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that said
attorneys-in-fact, or their substitute or substitutes, may
do or cause to be done by virtue hereof.
/s/ Robert C. White
Dated: December 21, 1995
00250223.AF2
