As filed with the Securities and Exchange
Commission on July 15, 1996
File Nos.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
Post-Effective Amendment No.
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No.
_______________________________
Alliance Real Estate Investment Fund, 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)
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Copies of communications to:
Patricia A. Poglinco
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)
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 purpose of this Registration Statement is to register the
Registrant under the Investment Company Act of 1940, to register
the shares of the Registrant under the Securities Act of 1933 and
to declare pursuant to Section 24(f) of the Investment Company
Act of 1940 and Rule 24f-2 thereunder that an indefinite number
of its securities is being registered by this Registration
Statement. The filing fee of $500 is being paid herewith.
The Registrant hereby amends this Registrant 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
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Item 11. Table of Contents................. Cover Page
Item 12. General Information
and History....................... Management of the
Fund; General
Information
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
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
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Item 22. Calculation of Performance
Data.............................. General Information
Item 23. Financial Statements.............. Financial
Statements;Report of
Independent
Accountants
00250231.AD1
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ALLIANCE
REAL ESTATE INVESTMENT
FUND
c/o Alliance Fund Services, Inc.
P.O. Box 1520, Secaucus, New Jersey 07096-1520
Toll Free (800) 221-5672
For Literature: Toll Free (800) 227-4618
Prospectus and Application
[ ], 1996
Table of Contents Page
The Fund at a Glance....................................
Expense Information.....................................
Glossary................................................
Description of the Fund.................................
Investment Objective.................................
Investment Policies..................................
Additional Investment Policies and Practices.........
Risk Considerations .................................
Certain Fundamental Investment
Policies..........................................
Purchase and Sale of Shares.............................
Management of the Fund..................................
Dividends, Distributions and Taxes......................
General Information.....................................
Adviser
Alliance Capital Management L.P.
1345 Avenue Of The Americas
New York, New York 10105
Consultant to Adviser
Koll Investment Management
4343 Von Karman Avenue
<PAGE>
Newport Beach, CA 92660
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Alliance Real Estate Investment Fund, Inc. (the "Fund") seeks a
total return on its assets from long-term growth of capital and
income. The Fund will seek to achieve its investment objective
by investing principally in equity securities of issuers which
are principally engaged in or related to the real estate
industry.
The Fund is an open-end, diversified, 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 ______________, 1996, which provides further information
regarding certain matters discussed in this Prospectus and other
matters which may be of interest to some investors, has been
filed with the Securities and Exchange Commission and is
incorporated herein by reference. For a free copy, call or write
Alliance Fund Services, Inc. at the indicated address or call the
"For Literature" telephone number shown above.
The Fund offers three classes of shares through this Prospectus.
These shares may be purchased, at the investor's choice, at a
price equal to their net asset value (i) plus an initial sales
charge imposed at the time of purchase ("Class A shares"),
(ii) with a contingent deferred sales charge imposed on most
redemptions made within three years of purchase ("Class B
shares"), or (iii) without any initial or contingent deferred
sales charge, as long as the shares are held for one year or more
("Class C shares"). See "Purchase and Sale of Shares."
An investment in these securities is not a deposit or obligation
of, or guaranteed or endorsed by, any bank and is not federally
insured by the Federal Deposit Insurance Corporation, the Federal
Reserve Board or any other agency.
Investors are advised to read this Prospectus carefully and to
retain it for future reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
[Alliance Logo]
3
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The Fund At A Glance
The following summary is qualified in its entirety by the more
detailed information contained in 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 107 mutual funds. Since 1971, Alliance has earned a
reputation as a leader in the investment world with over $
billion in assets under management as of June 30, 1996. Alliance
provides investment management services to of the FORTUNE 100
companies.
The Consultant to the Adviser is . . .
Koll, a national real estate property and investment manager that
oversees a $13 billion, 1,000 property portfolio consisting of
client assets which exceed 170 million square feet. Koll will
make available to Alliance the Koll National Real Estate Index,
which gathers, analyzes and publishes targeted research data for
the 65 largest US markets, based on a variety of public-sector
and private-sector sources as well as Koll's proprietary database
of approximately 45,000 property transactions representing over
$250 billion of investment property.
The Fund
Seeks . . . Total return on its assets from long-term growth of
capital and from income.
Invests principally in . . . a diversified portfolio of equity
securities of issuers which are principally engaged in or related
to the real estate industry.
A Word About Risk . . .
The price of shares of the Fund will fluctuate as the daily
prices of the individual stocks and other equity securities in
which it invests fluctuate, so that your shares, when redeemed,
may be worth more or less than their original cost. Investments
in common stocks and other equity securities of real estate
investment trusts and other real estate industry companies and
the use by the Fund of various investment techniques involve
risks different from, and, in certain cases, greater than the
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risks presented by equity securities generally. These risks are
discussed in this Prospectus.
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
little as $50. For detailed information about purchasing and
selling shares, see "Purchase and Sale of Shares." In addition,
the Fund offers several time and money saving services to
investors. Be sure to ask your financial representative about:
Automatic Dividend 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 LOGO
(R)/SM These are registered marks used under license from the
owner, Alliance Capital Management L.P.
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_________________________________________________________________
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 and estimated annual
expenses for each class of shares. The Example following the
table shows the cumulative expenses attributable to a
hypothetical $1,000 investment in each class for the periods
specified.
Class A Shares Class B Shares Class C Shares
Maximum sales charge imposed
on purchases (as a percentage
of offering price)....... 4.25%(a) None None
Sales charge imposed on
dividend reinvestments... None None None
Deferred sales charge (as
a percentage of original
purchase price or
redemption proceeds,
whichever is lower)...... None 4.0% during the 1% during the
first year, first year,
decreasing 1.0% 0% thereafter
annually to 0%
after the fourth
year(b)
Exchange fee............... None None None
____________________________________________________________
(a) Reduced for larger purchases. Purchases of $1,000,000 or more are not
subject to an initial sales charge but may be subject to a 1% deferred
sales charge on redemptions within one year of purchase. See "Purchase
and Sale of Shares--How to Buy Shares"--page __.
(b) Class B shares automatically convert to Class A shares after eight years.
See "Purchase and Sale of Shares--How to Buy Shares"--page __.
6
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Operating Expenses Class A Class B Class C
Management fees [ ]% [ ]% [ ]%
12b-1 fees .30% 1.00% 1.00%
Other expenses(a) [ ]% [ ]% [ ]%
Total fund operating expenses [ ]% [ ]% [ ]%
Example Class A Class B+ Class B++ Class C Class C++
After 1 year $ $ $ $ $
After 3 years $ $ $ $ $
___________________________________________________________
+ 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 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." The Rule 12b-1 fee for
each class comprises a service fee not exceeding .25% of the
aggregate average daily net assets of the Fund attributable to
the class and asset-based sales charge equal to the remaining
portion of the Rule 12b-1 fee. "Other Expenses" are based on
estimated amounts for the Fund's current fiscal year. The
Example set forth above assumes 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 used in this Prospectus. Many of these
terms are explained in greater detail under "Description of the
Fund--Additional Investment Policies and Practices".
U.S. Government securities are securities issued or guaranteed by
the U.S. Government, its agencies or instrumentalities.
Moody's is Moody's Investors Service, Inc.
S&P is Standard & Poor's Ratings Services.
Duff & Phelps is Duff & Phelps Credit Rating Co.
Fitch is Fitch Investors Service, Inc.
Rule 144A securities are securities that may be resold pursuant
to Rule 144A under 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.
Securities Act is the Securities Act of 1933, as amended.
Exchange is the New York Stock Exchange.
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___________________________________________________________
DESCRIPTION OF THE FUND
___________________________________________________________
The Fund is a diversified investment company. The
Fund's investment objective is "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 objective.
INVESTMENT OBJECTIVE
The Fund's investment objective is to seek a total
return on its assets from long-term growth of capital and from
income principally through investing in a portfolio of equity
securities of issuers which are principally engaged in or related
to the real estate industry.
INVESTMENT POLICIES
Under normal circumstances, at least 65% of the Fund's
total assets will be invested in equity securities of real estate
investment trusts ("REITS") and other real estate industry
companies. A "real estate industry company" is a company that
derives at least 50% of its gross revenues or net profits from
the ownership, development, construction, financing, management
or sale of commercial, industrial or residential real estate or
interests therein. The equity securities in which the Fund will
invest for this purpose consist of common stock, shares of
beneficial interest of REITs and securities with common stock
characteristics, such as preferred stock or convertible
securities ("Real Estate Equity Securities").
The Fund may invest up to 35% of its total assets in
(a) securities that directly or indirectly represent
participations in, or are collateralized by and payable from,
mortgage loans secured by real property ("Mortgage-Backed
Securities"), such as mortgage pass-through certificates, real
estate mortgage investment conduit ("REMIC") certificates and
collateralized mortgage obligations ("CMOs") and (b) short-term
investments. These instruments are described below. The risks
associated with the Fund's transactions in REMICs, CMOs and other
types of mortgage-backed securities, which are considered to be
derivative securities, may include some or all of the following:
market risk, leverage and volatility risk, correlation risk,
9
<PAGE>
credit risk and liquidity and valuation risk. See "Risk
Considerations--Risk Factors Associated with the Real Estate
Industry" for a description of these and other risks.
As to any investment in Real Estate Equity Securities,
Alliance's analysis will focus on determining the degree to which
the company involved can achieve sustainable growth in cash flow
and dividend paying capability. Alliance believes that the
primary determinant of this capability is the economic viability
of property markets in which the company operates and that the
secondary determinant of this capability is the ability of
management to add value through strategic focus and operating
expertise. The Fund will purchase Real Estate Equity Securities
when, in the judgment of Alliance, their market price does not
adequately reflect this potential. In making this determination,
Alliance will take into account fundamental trends in underlying
property markets as determined by proprietary models, site visits
conducted by individuals knowledgeable in local real estate
markets, price-earnings ratios (as defined for real estate
companies), cash flow growth and stability, the relationship
between asset value and market price of the securities, dividend
payment history, and such other factors which Alliance may
determine from time to time to be relevant. Alliance will
attempt to purchase for the Fund Real Estate Equity Securities of
companies whose underlying portfolios are diversified
geographically and by property type.
The Fund may invest without limitation in shares of
REITs. REITs are pooled investment vehicles which invest
primarily in income producing real estate or real estate related
loans or interests. REITs are generally classified as equity
REITs, mortgage REITs or a combination of equity and mortgage
REITs. Equity REITs invest the majority of their assets directly
in real property and derive income primarily from the collection
of rents. Equity REITs can also realize capital gains by selling
properties that have appreciated in value. Mortgage REITs invest
the majority of their assets in real estate mortgages and derive
income from the collection of interest payments. Similar to
investment companies such as the Fund, REITs are not taxed on
income distributed to shareholders provided they comply with
several requirements of the Code. The Fund will indirectly bear
its proportionate share of expenses incurred by REITs in which
the Fund invests in addition to the expenses incurred directly by
the Fund.
Investment Process for Real Estate Equity Securities
10
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The Fund's investment strategy with respect to Real
Estate Equity Securities is based on the premise that property
market fundamentals are the primary determinant of growth
underlying the success of Real Estate Equity Securities. Value
added management will further distinguish the most attractive
Real Estate Equity Securities. The Fund's research and
investment process is designed to identify those companies with
strong property fundamentals and strong management teams. This
process is comprised of real estate market research, specific
property inspection and securities analysis.
The universe of property-owning real estate industry
firms consists of approximately 115 companies of sufficient size
and quality to merit consideration for investment by the Fund.
In implementing the Fund's research and investment process,
Alliance will avail itself of the consulting services of Koll, a
national real estate investment and property manager that
oversees a $13 billion, 1,000 property portfolio. As consultant
to Alliance, Koll provides access to a proprietary model (Koll's
National Real Estate Index) that analyzes the approximately 9,000
properties owned by these companies. Using proprietary databases
and algorithms, Koll analyzes local market rent, expense and
occupancy trends, market specific transaction pricing,
demographic and economic trends, and leading indicators of real
estate supply such as building permits. Over 300 asset-type
specific geographic markets are analyzed and ranked on a relative
scale by Koll in compiling its REIT-SCORE database. The relative
attractiveness of these real estate industry companies are
similarly ranked based on the composite rankings of the
properties they own. See "Management of the Fund -- Consultant
to Adviser" for more information about Koll.
Once the universe of real estate industry companies has
been distilled through the market research process, Koll's local
market presence provides the capability to perform site specific
inspections of key properties. This analysis examines specific
property location, condition, and sub-market trends. Koll's use
of locally based real estate professionals provides Alliance with
a window on the operations of the portfolio companies as
information gathered can immediately be put in the context of
local market events. Only those companies whose specific
property portfolios reflect the promise of their general markets
will be considered for initial and continued investment by the
Fund.
Alliance further screens the universe of real estate
industry companies by using rigorous financial models and by
engaging in regular contact with management of targeted
11
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companies. Each management's strategic plan and ability to
execute the plan are determined and analyzed. Alliance will make
extensive use of Koll's network of industry analysts in order to
assess trends in tenant industries. This information is then
used to further interpret management's strategic plans.
Financial ratio analysis is used to isolate those companies with
the ability to make value-added acquisitions. This information
is combined with property market trends and used to project
future earnings potential.
Alliance believes that this process will result in a
portfolio that will consist of Real Estate Equity Securities of
companies that own assets in the most desirable markets across
the country, diversified geographically and by property type.
Mortgage-Backed Securities and Associated Risks
Mortgage-Backed Securities include mortgage pass-through
certificates and multiple-class pass-through securities, such as
REMIC pass-through certificates, CMOs and stripped mortgage-
backed securities ("SMBS"), and other types of Mortgage-Backed
Securities that may be available in the future.
GUARANTEED MORTGAGE PASS-THROUGH SECURITIES. The Fund
may invest in guaranteed mortgage pass-through securities which
represent participation interests in pools of residential
mortgage loans and are issued by U.S. governmental or private
lenders and guaranteed by the U.S. Government or one of its
agencies or instrumentalities, including but not limited to the
Government National Mortgage Association ("Ginnie Mae"), the
Federal National Mortgage Association ("Fannie Mae") and the
Federal Home Loan Mortgage Corporation ("Freddie Mac"). Ginnie
Mae certificates are guaranteed by the full faith and credit of
the United States Government for timely payment of principal and
interest on the certificates. Fannie Mae certificates are
guaranteed by Fannie Mae, a federally chartered and privately-
owned corporation for full and timely payment of principal and
interest on the certificates. Freddie Mac certificates are
guaranteed by Freddie Mac, a corporate instrumentality of the
United States Government, for timely payment of interest and the
ultimate collection of all principal of the related mortgage
loans.
MULTIPLE-CLASS PASS-THROUGH SECURITIES AND
COLLATERALIZED MORTGAGE OBLIGATIONS. Mortgage-Backed Securities
also include CMOs and REMIC pass-through or participation
certificates, which may be issued by, among others, U.S.
Government agencies and instrumentalities as well as private
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lenders. CMOs and REMIC certificates are issued in multiple
classes and the principal of and interest on the mortgage assets
may be allocated among the several classes of CMOs or REMIC
certificates in various ways. Each class of CMOs or REMIC
certificates, often referred to as a "tranche," is issued at a
specific adjustable or fixed interest rate and must be fully
retired no later than its final distribution date. Generally,
interest is paid or accrues on all classes of CMOs or REMIC
certificates on a monthly basis. The Fund will not invest in the
lowest tranche of CMOs and REMIC certificates.
Typically, CMOs are collateralized by Ginnie Mae or
Freddie Mac certificates but also may be collateralized by other
mortgage assets such as whole loans or private mortgage pass-
through securities. Debt service on CMOs is provided from
payments of principal and interest on collateral of mortgaged
assets and any reinvestment income thereon.
A REMIC is a CMO that qualifies for special tax
treatment under the Code and invests in certain mortgages
primarily secured by interests in real property and other
permitted investments. Investors may purchase "regular" and
"residual" interest shares of beneficial interest in REMIC trusts
although the Fund does not intend to invest in residual
interests.
RISKS. Investing in Mortgage-Backed Securities involves
certain unique risks in addition to those generally associated
with investing in the real estate industry in general. These
unique risks include the failure of a counter-party to meet its
commitments, adverse interest rate changes and the effects of
prepayments on mortgage cash flows. See "Risk Considerations-
- -Risk Factors Associated with the Real Estate Industry" for a
more complete description of the characteristics of Mortgage-
Backed Securities and associated risks.
SHORT-TERM INVESTMENTS. The short-term investments in
which the Fund may invest are: corporate commercial paper and
other short-term commercial obligations, in each case rated or
issued by companies with similar securities outstanding that are
rated Prime-1, Aa or better by Moody's or A-1, AA or better by
S&P's; obligations (including certificates of deposit, time
deposits, demand deposits and bankers' acceptances) of banks with
securities outstanding that are rated Prime-1, Aa or better by
Moody's or A-1, AA or better by S&P; and obligations issued or
guaranteed by the U.S. Government or its agencies or
instrumentalities with remaining maturities not exceeding 18
months.
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The Fund may invest in debt securities rated BBB or
higher by S&P or Baa or higher by Moody's or, if not so rated, of
equivalent credit quality as determined by Alliance. Securities
rated BBB by S&P or Baa by Moody's are considered to have
speculative characteristics. Sustained periods of deteriorating
economic conditions or 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. The
Fund expects that it will not retain a debt security which is
downgraded below BBB or Baa or, if unrated, determined by
Alliance to have undergone similar credit quality deterioration,
subsequent to purchase by the Fund.
The Fund may also engage in the following investment
practices to the extent indicated: (i) invest up to 10% of its
net assets in rights or warrants; (ii) invest up to 15% of its
net assets in the convertible securities of companies whose
common stocks are eligible for purchase by the Fund; (iii) lend
portfolio securities equal in value to not more than 25% of total
assets; (iv) enter into repurchase agreements of up to seven
days' duration; (v) enter into forward commitment transactions as
long as the Fund's aggregate commitments under such transactions
are not more than 30% of the Fund's total assets; (vi) enter into
standby commitment agreements; (vii) make short sales of
securities or maintain a short position but only if at all times
when a short position is open not more than 25% of the Fund's
assets (taken at market value) is held as collateral for such
sales; and (viii) invest in illiquid securities unless, as a
result, more than 15% of its net assets would be so invested.
ADDITIONAL INVESTMENT POLICIES AND PRACTICES
CONVERTIBLE SECURITIES. Prior to conversion,
convertible securities have the same general characteristics as
non-convertible debt securities, which provide a stable stream of
income with generally higher yields than those of equity
securities of the same or similar issuers. The price of a
convertible security will normally vary with changes in the price
of the underlying 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.
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RIGHTS AND WARRANTS. The Fund will invest in rights or
warrants only if the underlying equity securities are themselves
deemed appropriate by Alliance for inclusion in the Fund's
portfolio. Rights and warrants entitle the holder to buy equity
securities at a specific price for a specific period of time.
Rights are similar to warrants except that they have a
substantially shorter duration. Rights and warrants may be
considered more speculative than certain other types of
investments in that they do not entitle a holder to dividends or
voting rights with respect to the underlying securities nor do
they represent any rights in the assets of the issuing company.
The value of a right or warrant does not necessarily change with
the value of the underlying security, although the value of a
right or warrant may decline because of a decrease in the value
of the underlying security, the passage of time or a change in
perception as to the potential of the underlying security, or any
combination thereof. If the market price of the underlying
security is below the exercise price set forth in the warrant on
the expiration date, the warrant will expire worthless.
Moreover, a right or warrant ceases to have value if it is not
exercised prior to the expiration date.
ILLIQUID SECURITIES. Subject to any more restrictive
applicable investment policy, the Fund will not maintain more
than 15% of its net assets in illiquid securities. Illiquid
securities will generally include 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) and repurchase agreements not
terminable within seven days.
Because of the absence of a trading market for illiquid
securities, the Fund may not be able to realize their full value
upon sale. Alliance will monitor the illiquidity of such
securities with respect to the Fund under the supervision of the
Directors of the Fund. To the extent permitted by applicable
law, Rule 144A securities will not be treated as "illiquid" for
purposes of the foregoing restriction so long as such securities
meet liquidity guidelines established by the Fund's Directors.
The Fund may not be able to readily sell securities for which
there is no ready market.
FORWARD COMMITMENTS. Forward commitments for the
purchase or sale of securities may include purchases on a "when-
issued" basis or purchases or sales on a "delayed delivery"
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basis. In some cases, a forward commitment may be conditioned
upon the occurrence of a subsequent event, such as approval and
consummation of a merger, corporate reorganization or debt
restructuring (i.e., a "when, as and if issued" trade).
When forward commitment transactions are negotiated, the
price is fixed at the time the commitment is made, but delivery
and payment for the securities take place at a later date.
Normally, the settlement date occurs
within two months after the transaction, but settlements beyond
two months may be negotiated. Securities purchased or sold under
a forward commitment are subject to market fluctuation, and no
interest or dividends accrue to the purchaser prior to the
settlement date. At the time the Fund intends to enter into a
forward commitment, it records the transaction and thereafter
reflects the value of the security purchased or, if a sale, the
proceeds to be received, in determining its net asset value. Any
unrealized appreciation or depreciation reflected in such
valuation of a "when, as and if issued" security would be
canceled in the event that the required conditions did not occur
and the trade was canceled.
The use of forward commitments enables 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 commitment basis to limit its exposure to falling 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. However, if Alliance were to forecast incorrectly the
direction of interest rate movements, the Fund might be required
to complete such when-issued or forward transactions at prices
inferior to the then current market values. When-issued
securities and forward commitments may be sold prior to the
settlement date, but the Fund enters into when-issued and forward
commitments only with the intention of actually receiving
securities or delivering them, as the case may be. If the Fund
chooses to dispose of the right to acquire a when-issued security
prior to its acquisition or dispose of its right to deliver or
receive against a forward commitment, it may incur a gain or
loss. Any significant commitment of Fund assets to the purchase
of securities on a "when, as and if issued" basis may increase
the volatility of the Fund's net asset value. 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.
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<PAGE>
STANDBY COMMITMENT AGREEMENTS. Standby commitment
agreements 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, typically equal to approximately 0.5% of the aggregate
purchase price of the security 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 considered advantageous to the Fund and
unavailable on a firm commitment basis. Investments in standby
commitments will be limited so that the aggregate purchase price
of the securities subject to the commitments will not exceed 25%
of the Fund's total assets taken at the time of making the
commitment.
There is no guarantee 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.
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. If a vendor defaults on its repurchase
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. Alliance monitors the creditworthiness of the vendors
with which the Fund enters into repurchase agreements.
SHORT SALES. A short sale is effected by the Fund's
selling a security that the Fund does not own or a security which
the Fund owns but which the Fund is not to deliver upon
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consummation of the sale. A short sale is "against the box" to
the extent that the Fund contemporaneously owns or has the right
to obtain securities identical to those sold short without
payment. 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 capital gain.
Certain special federal income tax considerations may apply to
short sales entered into by the Fund. See "Dividends,
Distributions and Taxes" in the Statement of Additional
Information.
LOANS OF PORTFOLIO SECURITIES. 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 the Fund is 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 the value of its total assets, nor
will the Fund lend its portfolio securities to any officer,
director, employee or affiliate of the Fund or Alliance. The
Board of Directors will monitor the Fund's lending of portfolio
securities.
GENERAL. The successful use of the foregoing investment
practices draws upon Alliance's special skills and experience
with respect to such instruments and usually depends on
Alliance's ability to forecast price movements correctly. Should
prices move unexpectedly, the Fund may not achieve the
anticipated benefits of the transactions or may realize losses
and thus be in a worse position than if such strategies had not
been used. In addition, the correlation between movements in the
prices of such instruments and movements in the prices of the
securities hedged will not be perfect and could produce
unanticipated losses.
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<PAGE>
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 activities described above.
DEFENSIVE POSITION. For temporary defensive purposes,
the Fund may increase without limit its position in short-term,
liquid, high-grade debt securities, which may include U.S.
Government securities, bank deposits, money market instruments,
short-term debt securities, including notes and bonds. For a
description of the types of securities in which the Fund may
invest while in a temporary defensive position, please see the
Statement of Additional Information.
PORTFOLIO TURNOVER. Alliance anticipates that the
Fund's annual rate of turnover will not exceed 100%. A 100%
annual turnover rate would occur if all of the securities in the
Fund's portfolio are replaced once over one year. A higher 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.
RISK CONSIDERATIONS
RISK FACTORS ASSOCIATED WITH THE REAL ESTATE INDUSTRY.
Although the Fund does not invest directly in real estate, it
does invest primarily in Real Estate Equity Securities and does
concentrate its investments in the real estate industry.
Therefore, an investment in the Fund is subject to certain risks
associated with the direct ownership of real estate and with the
real estate industry in general. These risks include, among
others: possible declines in the value of real estate; risks
related to general and local economic conditions; possible lack
of availability of mortgage funds; overbuilding; extended
vacancies of properties; increases in competition, property taxes
and operating expenses; changes in zoning laws; costs resulting
from the clean-up of, and liability to third parties for damages
resulting from, environmental problems; casualty or condemnation
losses; uninsured damages from floods, earthquakes or other
natural disasters; limitations on and variations in rents; and
changes in interest rates. To the extent that assets underlying
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<PAGE>
the Fund's investments are concentrated geographically, by
property type or in certain other respects, the Fund may be
subject to certain of the foregoing risks to greater extent.
In addition, if the Fund receives rental income or
income from the disposition of real property acquired as a result
of a default on securities the Fund owns, the receipt of such
income may adversely affect the Fund's ability to retain its tax
status as a regulated investment company. See "Dividends,
Distributions and Taxes" in the Statement of Additional
Information. Investments by the Fund in securities of companies
providing mortgage servicing will be subject to the risks
associated with refinancings and their impact on servicing
rights.
REITs. Investing in REITs involves certain unique risks
in addition to those risks associated with investing in the real
estate industry in general. Equity REITs may be affected by
changes in the value of the underlying property owned by the
REITs, while mortgage REITs may be affected by the quality of any
credit extended. REITs are dependent upon management skills, are
not diversified, are subject to heavy cash flow dependency,
default by borrowers and self-liquidation. REITs are also
subject to the possibilities of failing to qualify for tax free
pass-through of income under the Code and failing to maintain
their exemptions from registration under the 1940 Act.
REITs (especially mortgage REITs) are also subject to
interest rate risks. When interest rates decline, the value of a
REIT's investment in fixed rate obligations can be expected to
rise. Conversely, when interest rates rise, the value of a
REIT's investment in fixed rate obligations can be expected to
decline. In contrast, as interest rates on adjustable rate
mortgage loans are reset periodically, yields on a REIT's
investments in such loans will gradually align themselves to
reflect changes in market interest rates, causing the value of
such investments to fluctuate less dramatically in response to
interest rate fluctuations than would investments in fixed rate
obligations.
Investing in REITs involves risks similar to those
associated with investing in small capitalization companies.
REITs may have limited financial resources, may trade less
frequently and in a limited volume and may be subject to more
abrupt or erratic price movements than larger company securities.
Historically, small capitalization stocks, such as REITs, have
been more volatile in price than the larger capitalization stocks
included in the S&P's Index of 500 Common Stocks.
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<PAGE>
MORTGAGE-BACKED SECURITIES. As discussed above,
investing in Mortgage-Backed Securities involves certain unique
risks in addition to those risks associated with investment in
the real estate industry in general. These risks include the
failure of a counter-party to meet its commitments, adverse
interest rate changes and the effects of prepayments on mortgage
cash flows. When interest rates decline, the value of an
investment in fixed rate obligations can be expected to rise.
Conversely, when interest rates rise, the value of an investment
in fixed rate obligations can be expected to decline. In
contrast, as interest rates on adjustable rate mortgage loans are
reset periodically, yields on investments in such loans will
gradually align themselves to reflect changes in market interest
rates, causing the value of such investments to fluctuate less
dramatically in response to interest rate fluctuations than would
investments in fixed rate obligations.
Further, the yield characteristics of Mortgage-Backed
Securities, such as those in which the Fund may invest, differ
from those of traditional fixed income securities. The major
differences typically include more frequent interest and
principal payments (usually monthly), the adjustability of
interest rates, and the possibility that prepayments of principal
may be made substantially earlier than their final distribution
dates.
Prepayment rates are influenced by changes in current
interest rates and a variety of economic, geographic, social and
other factors, and cannot be predicted with certainty. Both
adjustable rate mortgage loans and fixed rate mortgage loans may
be subject to a greater rate of principal prepayments in a
declining interest rate environment and to a lesser rate of
principal prepayments in an increasing interest rate environment.
Early payment associated with Mortgage-Backed Securities causes
these securities to experience significantly greater price and
yield volatility than that experienced by traditional fixed-
income securities. Under certain interest rate and prepayment
rate scenarios, the Fund may fail to recoup fully its investment
in Mortgage-Backed Securities notwithstanding any direct or
indirect governmental or agency guarantee. When the Fund
reinvests amounts representing payments and unscheduled
prepayments of principal, it may receive a rate of interest that
is lower than the rate on existing adjustable rate mortgage pass-
through securities. Thus, Mortgage-Backed Securities, and
adjustable rate mortgage pass-through securities in particular,
may be less effective than other types of U.S. Government
securities as a means of "locking in" interest rates.
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SECURITIES RATINGS. The ratings of securities by S&P,
Moody's, Duff & Phelps and Fitch are a generally accepted
barometer of credit risk. They are, however, subject to certain
limitations from an investor's standpoint. The rating of an
issuer is heavily weighted by past developments and does not
necessarily reflect probable future conditions. There is
frequently a lag between the time a rating is assigned and the
time it is updated. In addition, there may be varying degrees of
difference in credit risk of securities within each rating
category.
CERTAIN FUNDAMENTAL INVESTMENT POLICIES
In addition to its fundamental investment objective, the
Fund has adopted the following fundamental investment policies,
which may not be changed without the approval of its
shareholders. Additional fundamental and non-fundamental
investment policies are set forth in the Statement of Additional
Information.
The Fund may not: (i) with respect to 75% of its total
assets, have such assets represented by other than: (a) cash and
cash items, (b) U.S. Government securities, or (c) securities of
any one issuer (other than the U.S. Government and its agencies
or instrumentalities) not greater in value than 5% of the Fund's
total assets, and not more than 10% of the outstanding voting
securities of such issuer; (ii) purchase the securities of any
one issuer, other than the U.S. Government and its agencies or
instrumentalities, if as a result (a) the value of the holdings
of the Fund in the securities of such issuer exceeds 25% of its
total assets, or (b) the Fund owns more than 25% of the
outstanding securities of any one class of securities of such
issuer; or (iii) purchase or sell real estate, except that it may
purchase and sell securities of companies which deal in real
estate or interests therein, including Real Estate Equity
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
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<PAGE>
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.
Existing shareholders may make subsequent purchases by
electronic funds transfer if they have completed the Telephone
Transactions section of the Subscription Application or the
Shareholder Options form obtained from Alliance Fund Services,
Inc., the Funds registrar, transfer agent and dividend disbursing
agent ("AFS"). Telephone purchase orders can be made by calling
(800) 221-5672, may not exceed $500,000, must be received by the
Fund by 3:00 p.m. Eastern time on a Fund business day and will be
made at the next days net asset value (less any applicable sales
charge).
The Fund offers three classes of shares through this
Prospectus, 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
As % of Commission to
Net Amount As % of Dealer/Agent as %
Amount Purchased Invested Offering of Offering Price
Less than $100,000 4.44% 4.25% 4.00%
$100,000 to
less than $250,000 3.36 3.25 3.00
$250,000 to
less than $500,000 2.30 2.25 2.00
$500,000 to
less than $1,000,000 1.78 1.75 1.50
On purchases of $1,000,000 or more, you pay no initial
sales charge but may pay a contingent deferred sales charge (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
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<PAGE>
dollar amount purchased. Certain purchases of Class A shares may
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 four years after purchase. The amount
of the CDSC (expressed as a percentage of the lesser of the
current net asset value or original cost) will vary according to
the number of years from the purchase of Class B shares until the
redemption of those shares. The amount of the CDSC on Class B
shares is set forth below.
Year Since Purchase CDSC
First................. 4.0%
Second................ 3.0%
Third................. 2.0%
Fourth................ 1.0%
Fifth................. None
Class B shares are subject to higher distribution fees
than Class A for a period of eight 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. The Fund will thus receive the full amount of your
purchase, and, if you hold your shares for one year or more, you
will receive the entire net asset value of your shares upon
redemption. Class C shares incur higher distribution fees than
Class A shares and do not convert to any other class of shares of
the Fund. The higher fees mean a higher expense ratio, so Class
C shares pay correspondingly lower dividends and may have a lower
net asset value than Class A Shares.
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Class C shares redeemed within one year of purchase will
be subject to a CDSC equal to 1% of the lesser of the original
cost of the shares being redeemed or net asset value at the time
of redemption.
Application of the CDSC
Shares obtained from dividend or distribution
reinvestment are not subject to a CDSC. The CDSC is deducted
from the amount of the redemption and is paid to AFD. The CDSC
will be waived on redemptions of shares following the death or
disability of a shareholder, to meet the requirements of certain
qualified retirement plans or pursuant to a monthly, bi-monthly
or quarterly systematic 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 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 is no initial
sales charge and no CDSC as long as the shares are held for one
year or more. Consult your financial agent. Dealers and agents
may receive 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.
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The Fund offers a fourth class of shares, Advisor Class
shares, by means of a separate Prospectus. Advisor Class shares
may be purchased and held solely through (i) accounts established
under a fee-based program, sponsored and maintained by a
registered broker-dealer or other financial intermediary and
approved by AFD, pursuant to which each investor pays an asset-
based fee at an annual rate of at least .50% of the assets in the
investor's account, to the broker-dealer or other financial
intermediary, or its affiliate or agent, or (ii) a self-directed
defined contribution employee benefit plan (e.g., a 401(k) plan)
that has at least 1,000 participants or $25 million in assets.
Advisor Class shares are offered without any initial sales charge
or CDSC and without ongoing distribution expenses and are
expected, therefore, to have different performance than Class A,
Class B or Class C shares. You may obtain more information about
Advisor Class shares by contacting AFS at (800) 221-5672 or by
contacting your financial representative.
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 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 representative. The price you will
receive is the net asset value (less any applicable CDSC) next
calculated after the Fund receives your request in proper form.
Proceeds generally will be sent to you within seven days.
However, for shares recently purchased by check or electronic
funds transfer, the Fund will not send proceeds until it is
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<PAGE>
reasonably satisfied that the check or electronic funds transfer
has been collected (which may take up to 15 days).
Selling Shares Through Your Broker
Your broker must receive your request before 4:00 p.m.
Eastern time, and your broker must transmit your request to the
Fund by 5:00 p.m. Eastern time, for you to receive that day's net
asset value (less any applicable CDSC) . Your broker is
responsible for furnishing all necessary documentation to 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 AFS, along with certificates, if any, that represent the
shares you want to sell. For your protection, signatures must be
guaranteed by a bank, a member firm of a national stock exchange
or other eligible guarantor institution. Stock power forms are
available from your financial intermediary, AFS, and many
commercial banks. Additional documentation is required for the
sale of shares by corporations, intermediaries, fiduciaries and
surviving joint owners. For details contact:
Alliance Fund Services
P.O. Box 1520
Secaucus, NJ 07096-1520
800-221-5672
Alternatively, a request for redemption of shares for
which no stock certificates have been issued can also be made by
telephone to 800-221-5672. Telephone redemption requests must be
made by 4 p.m. Eastern time on a Fund business day in order to
receive that day's net asset value, and may be made only once in
any 30-day period. A shareholder who has completed the Telephone
Transactions section of the Subscription Application, or the
Shareholder Options form obtained from AFS, can elect to have the
proceeds of their redemption sent to their bank via an electronic
funds transfer. Proceeds of telephone redemptions also may be
sent by check to a shareholders address of record. Redemption
requests by electronic funds transfer may not exceed $100,000 and
redemption requests by check may not exceed $50,000. Telephone
redemption is not available for shares held in nominee or street
name 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.
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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' toll-
free number, 800-221-5672. Some services are described in the
attached Subscription Application. A shareholder's manual
explaining all available services will be provided upon request.
To request a shareholder manual, call 800-227-4618.
HOW TO EXCHANGE SHARES
You may exchange your shares of the Fund for shares of
the same class of other Alliance Mutual Funds (which include AFD
Exchange Reserves, a money market fund managed by Alliance).
Exchanges of shares are made at the net asset value next
determined and without sales or service charges. Exchanges may
be made by telephone or written request. Telephone exchange
requests must be received by AFS by 4:00 p.m. Eastern time on a
Fund business day in order to receive that day's net asset value.
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
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<PAGE>
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 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.
Alliance is a leading international investment manager
supervising client accounts with assets as of June 30, 1996 of
more than $ billion (of which more than $ 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 51 registered investment
companies managed by Alliance comprising 108 separate investment
portfolios currently have over one million shareholders. As of
June 30, 1996 Alliance was retained as an investment manager of
employee benefit fund assets for 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."
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Under the Advisory Agreement, the Fund pays Alliance a
fee at the annual rate of % of the Fund's average daily net
assets. The fee is accrued daily and paid monthly.
The person primarily responsible for the day-to-day
management of the Fund's portfolio since inception is Daniel G.
Pine. Mr. Pine has been associated with Alliance since May of
1995. Prior thereto, he was Senior Vice President of Desai
Capital Management since prior to 1991.
Consultant to Adviser
In connection with its provision of advisory services to
the Fund, Alliance has retained at its expense Koll as a
consultant to provide to Alliance such in-depth information
regarding the real estate market, the factors influencing
regional valuations, analysis of recent transactions in office,
retail, industrial and multi-family properties, as Alliance shall
from time to time request. Koll will not furnish investment
advice or make recommendations regarding the purchase or sale of
securities by the Fund nor will it be responsible for making
investment decisions involving Fund assets.
Koll is one of the largest fee-based property management
firms in the United States as well as one of the largest
publishers of real estate research, with approximately 2,700
employees nationwide. Koll will provide Alliance with exclusive
access to its REIT-SCORE model which ranks approximately 115
REITs based on the relative attractiveness of the property
markets in which they own real estate. This model scores the
approximately 9,000 individual properties owned by these
companies. REIT-SCORE is in turn based on Koll's National Real
Estate Index which gathers, analyzes and publishes targeted
research data for the 65 largest US real estate markets based on
a variety of public- and private-sector sources as well Koll's
proprietary database of 45,000 commercial property transactions
representing over $250 billion of investment property and over
2,000 tracked properties which report rent and expense data
quarterly. Koll has previously provided access to its REIT-SCORE
model results primarily to the institutional market through
subscriptions. The model is no longer provided to any research
publications and the Fund is currently the only mutual fund
available to retail investors that has access to Koll's REIT-
SCORE model.
30
<PAGE>
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
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, for distribution expenses.
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 of Class A, Class B
and Class C 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
31
<PAGE>
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 their 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 Place and
payments received from CDSCs. The excess will be carried forward
by AFD and reimbursed from distribution services fees payable
under the Plan and payments subsequently received through CDSCs,
so long as the Plan and the Agreement are in effect.
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
service arrangements would be made and that shareholders would
32
<PAGE>
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
If you receive an income dividend or capital gains
distribution in cash you may, within 120 days following the date
of its payment, reinvest the dividend or distribution in
additional shares of the Fund without charge by returning to
Alliance, with appropriate instructions, the check representing
such dividend or distribution. Thereafter, unless you otherwise
specify, you will be deemed to have elected to reinvest all
subsequent dividends and distributions in shares of the Fund.
Each income dividend and capital gains distribution, if
any, declared by the Fund on its outstanding shares will, at the
election of each shareholder, be paid in cash or in additional
shares of the Fund having an aggregate net asset value as of the
payment date of such dividend or distribution equal to the cash
amount of such income dividend or distribution. Election to
receive income dividends and distributions in cash or shares is
made at the time shares are initially purchased and may be
changed at any time prior to the record date for a particular
dividend or distribution. Cash dividends can be paid by check
or, if the shareholder so elects, electronically via the ACH
network. There is no sales or other charge in connection with
the reinvestment of dividends and capital gains distributions.
Dividends paid by 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 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 of income and capital gains from
investments. There is no fixed dividend rate, and there can be
33
<PAGE>
no assurance that the Fund will pay any dividends or realize any
capital gains.
If you buy shares just before the Fund deducts a
distribution from its net asset value, you will pay the full
price for the shares and then receive a portion of the price back
as a taxable distribution.
U.S. Federal Income Taxes
The Fund intends to qualify to be taxed 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 may be eligible for the
dividends-received deduction, except that the amount eligible for
the deduction is limited to the amount of qualifying dividends
received by the Fund. Dividends received from REITs generally do
not constitute qualifying dividends. A corporation's dividends-
received deduction 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.
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
34
<PAGE>
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.
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. Distributions by the Fund may
be subject to state and local taxes. Shareholders are urged to
consult their tax advisers regarding their own tax situation.
__________________________________________________________________
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.
35
<PAGE>
ORGANIZATION
Alliance Real Estate Investment Fund, Inc. is a Maryland
corporation organized on July , 1996. 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, Class C and Advisor Class
shares have identical voting, dividend, liquidation and other
rights, except that each class bears its own transfer agency
expenses and each of Class A, Class B and Class C shares bears
its own distribution 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 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.
36
<PAGE>
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 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 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 maximum sales charges
applicable to purchases and redemptions of the Fund's shares are
assumed to have been paid. The Fund's 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 has 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 Statement may be
obtained at a reasonable charge from the Commission or may be
examined, without charge, at the offices of the Commission in
Washington, D.C.
37
<PAGE>
This prospectus does not constitute an offering in any state in
which such offering may not lawfully be made.
Alliance
Real Estate Investment
Fund
Goal: Total return through
investment principally in
equity securities
of issuers which are principally
engaged in or related to
the real estate industry
Prospectus and Application
______ __, 1996
38
<PAGE>
ALLIANCE
REAL ESTATE INVESTMENT
FUND
c/o Alliance Fund Services, Inc.
P.O. Box 1520, Secaucus, New Jersey 07096-1520
Toll Free (800) 221-5672
For Literature: Toll Free (800) 227-4618
Prospectus and Application
(Advisor Class)
[ ], 1996
Table of Contents Page
The Fund at a Glance..................................
Expense Information...................................
Glossary..............................................
Description of the Fund...............................
Investment Objective...............................
Investment Policies................................
Additional Investment Policies and Practices.......
Risk Considerations................................
Certain Fundamental Investment Policies............
Purchase and Sale of Shares...........................
Management of the Fund................................
Dividends, Distributions and Taxes....................
General Information...................................
Adviser
Alliance Capital Management L.P.
1345 Avenue Of The Americas
New York, New York 10105
Consultant to Adviser
Koll Investment Management
4343 Von Karman Avenue
Newport Beach, CA 92660
<PAGE>
<PAGE>
Alliance Real Estate Investment Fund, Inc. (the "Fund") seeks a
total return on its assets from long-term growth of capital and
income. The Fund will seek to achieve its investment objective
by investing principally in equity securities of issuers which
are principally engaged in or related to the real estate
industry.
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
______________, 1996, which provides further information
regarding certain matters discussed in this Prospectus and other
matters which may be of interest to some investors, has been
filed with the Securities and Exchange Commission and is
incorporated herein by reference. For a free copy, call or write
Alliance Fund Services, Inc. at the indicated address or call the
"For Literature" telephone number shown above.
This Prospectus offers the Advisor Class shares of the Fund,
which may be purchased at net asset value without any initial or
contingent deferred sales charges and without ongoing
distribution expenses. Advisor Class shares are offered solely
to (i) investors participating in fee-based programs meeting
certain standards established by Alliance Fund Distributors,
Inc., the Fund's principal underwriter and (ii) participants in
self-directed defined contribution employee benefit plans (e.g.,
401(k) plans) that meet certain minimum standards. See "Purchase
and Sale of Shares."
AN INVESTMENT IN THESE SECURITIES IS NOT A DEPOSIT OR OBLIGATION
OF, OR GUARANTEED OR ENDORSED BY, ANY BANK AND IS NOT FEDERALLY
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY.
INVESTORS ARE ADVISED TO READ THIS PROSPECTUS CAREFULLY AND TO
RETAIN IT FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
[Alliance Logo]
<PAGE>
The Fund At A Glance
The following summary is qualified in its entirety by the more
detailed information contained in the 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 107 mutual funds. Since 1971, Alliance has earned a
reputation as a leader in the investment world with over $
billion in assets under management as of June 30, 1996. Alliance
provides investment management services to of the FORTUNE 100
companies.
The Consultant to the Adviser is . . .
Koll, a national real estate property and investment manager that
oversees a $13 billion, 1,000 property portfolio consisting of
client assets which exceed 170 million square feet. Koll will
make available to Alliance the Koll National Real Estate Index,
which gathers, analyzes and publishes targeted research data for
the 65 largest US markets, based on a variety of public-sector
and private-sector sources as well as Koll's proprietary database
of approximately 45,000 property transactions representing over
$250 billion of investment property.
The Fund
Seeks . . . Total return on its assets from long-term growth of
capital and from income.
Invests principally in . . . a diversified portfolio of equity
securities of issuers which are principally engaged in or related
to the real estate industry.
A Word About Risk . . .
The price of shares of the Fund will fluctuate as the daily
prices of the individual stocks and other equity securities in
which it invests fluctuate, so that your shares, when redeemed,
may be worth more or less than their original cost. Investments
in common stocks and other equity securities of real estate
investment trusts and other real estate industry companies and
the use by the Fund of various investment techniques involve
risks different from, and, in certain cases, greater than the
<PAGE>
risks presented by equity securities generally. These risks are
discussed in this Prospectus.
Getting Started. . .
Shares of the Fund are available through your financial
representative. The Fund offers multiple classes of shares, of
which only the Advisor Class is offered by this Prospectus.
Advisor Class shares may be purchased at net asset value without
any initial or contingent deferred sales charges and are not
subject to ongoing distribution expenses. Advisor Class shares
may be purchased and held solely through (i) accounts
established under a fee-based program, sponsored and maintained
by a registered broker-dealer or other financial intermediary and
approved by Alliance Fund Distributors, Inc., the Fund's
principal underwriter, pursuant to which each investor pays an
asset-based fee at an annual rate of at least .50% of the assets
in the investor's account, to the broker-dealer or financial
intermediary, or its affiliate or agent, or (ii) a self-directed
defined contribution employee benefit plan (e.g., a 401(k) plan)
that has at least 1,000 participants or $25 million in assets.
Shares can be purchased for a minimum initial investment of $250,
and subsequent investments can be made for as little as $50.
Fee-based programs through which Advisor Class shares may be
purchased may impose different requirements with respect to
minimal initial and subsequent investment levels than described
above. For detailed information about purchasing and selling
shares, see "Purchase and Sale of Shares."
[ALLIANCE LOGO]
[(R)/SM These are registered marks used under license from the
owner, Alliance Capital Management L.P.]
<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
Advisor Class shares of the Fund and estimated annual expenses
for Advisor Class shares of the Fund. For the Fund, the
"Example" following the table below shows the cumulative expenses
attributable to a hypothetical $1,000 investment in Advisor Class
shares for the periods specified.
3
<PAGE>
Advisor
Class Shares
Maximum sales charge imposed on
purchases (as a percentage of
offering price)........................... None
Sales charge imposed on dividend
reinvestments............................. None
Deferred sales charge....................... None
Exchange fee................................ None
________________________________________________________________
Operating Expenses Advisor Class
Management fees................................. [ ]%
12b-1 fees...................................... None
Other expenses (a).............................. [ ]%
Total fund operating
expenses...................................... [ ]%
Example Advisor Class
After 1 year.................................... $
After 3 years................................... $
________________________________________________________________
Please refer to the footnotes on page [ ] and the discussion
following these tables on page [ ].
(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. The Example does not
reflect any charges or expenses imposed by your financial
representative or your employee benefit plan. "Other Expenses"
are based on estimated amounts for the Fund's current fiscal
year. The Example set forth above assumes reinvestment of all
4
<PAGE>
dividends and distributions and utilize a 5% annual rate of
return as mandated by Commission regulations. "Other Expenses"
are based on estimated amounts for the Fund's current fiscal
year. The Example should not be considered representative of
past or future expenses; actual expenses may be greater or less
than those shown.
5
<PAGE>
________________________________________________________________
GLOSSARY
________________________________________________________________
The following terms are used in this Prospectus. Many of these
terms are explained in greater detail under "Description of the
Fund--Additional Investment Policies and Practices".
U.S. Government securities are securities issued or guaranteed by
the U.S. Government, its agencies or instrumentalities.
Moody's is Moody's Investors Service, Inc.
S&P is Standard & Poor's Ratings Services.
Duff & Phelps is Duff & Phelps Credit Rating Co.
Fitch is Fitch Investors Service, Inc.
Rule 144A securities are securities that may be resold pursuant
to Rule 144A under 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.
Securities Act is the Securities Act of 1933, as amended.
Exchange is the New York Stock Exchange.
6
<PAGE>
_________________________________________________________________
DESCRIPTION OF THE FUND
_________________________________________________________________
The Fund is a diversified investment company. The
Fund's investment objective is "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 objective.
INVESTMENT OBJECTIVE
The Fund's investment objective is to seek a total
return on its assets from long-term growth of capital and from
income principally through investing in a portfolio of equity
securities of issuers which are principally engaged in or related
to the real estate industry.
INVESTMENT POLICIES
Under normal circumstances, at least 65% of the Fund's
total assets will be invested in equity securities of real estate
investment trusts ("REITs") and other real estate industry
companies. A "real estate industry company" is a company that
derives at least 50% of its gross revenues or net profits from
the ownership, development, construction, financing, management
or sale of commercial, industrial or residential real estate or
interests therein. The equity securities in which the Fund will
invest for this purpose consist of common stock, shares of
beneficial interest of REITs and securities with common stock
characteristics, such as preferred stock or convertible
securities ("Real Estate Equity Securities").
The Fund may invest up to 35% of its total assets in
(a) securities that directly or indirectly represent
participations in, or are collateralized by and payable from,
mortgage loans secured by real property ("Mortgage-Backed
Securities"), such as mortgage pass-through certificates, real
estate mortgage investment conduit ("REMIC") certificates and
collateralized mortgage obligations ("CMOs") and (b) short-term
investments. These instruments are described below. The risks
associated with the Fund's transactions in REMICs, CMOs and other
types of mortgage-backed securities, which are considered to be
derivative securities, may include some or all of the following:
market risk, leverage and volatility risk, correlation risk,
7
<PAGE>
credit risk and liquidity and valuation risk. See "Risk
Considerations--Risk Factors Associated with the Real Estate
Industry" for a description of these and other risks.
As to any investment in Real Estate Equity Securities,
Alliance's analysis will focus on determining the degree to which
the company involved can achieve sustainable growth in cash flow
and dividend paying capability. Alliance believes that the
primary determinant of this capability is the economic viability
of property markets in which the company operates and that the
secondary determinant of this capability is the ability of
management to add value through strategic focus and operating
expertise. The Fund will purchase Real Estate Equity Securities
when, in the judgment of Alliance, their market price does not
adequately reflect this potential. In making this determination,
Alliance will take into account fundamental trends in underlying
property markets as determined by proprietary models, site visits
conducted by individuals knowledgeable in local real estate
markets, price-earnings ratios (as defined for real estate
companies), cash flow growth and stability, the relationship
between asset value and market price of the securities, dividend
payment history, and such other factors which Alliance may
determine from time to time to be relevant. Alliance will
attempt to purchase for the Fund Real Estate Equity Securities of
companies whose underlying portfolios are diversified
geographically and by property type.
The Fund may invest without limitation in shares of
REITs. REITs are pooled investment vehicles which invest
primarily in income producing real estate or real estate related
loans or interests. REITs are generally classified as equity
REITs, mortgage REITs or a combination of equity and mortgage
REITs. Equity REITs invest the majority of their assets directly
in real property and derive income primarily from the collection
of rents. Equity REITs can also realize capital gains by selling
properties that have appreciated in value. Mortgage REITs invest
the majority of their assets in real estate mortgages and derive
income from the collection of interest payments. Similar to
investment companies such as the Fund, REITs are not taxed on
income distributed to shareholders provided they comply with
several requirements of the Code. The Fund will indirectly bear
its proportionate share of expenses incurred by REITs in which
the Fund invests in addition to the expenses incurred directly by
the Fund.
8
<PAGE>
Investment Process for Real Estate Equity Securities
The Fund's investment strategy with respect to Real
Estate Equity Securities is based on the premise that property
market fundamentals are the primary determinant of growth
underlying the success of Real Estate Equity Securities. Value
added management will further distinguish the most attractive
Real Estate Equity Securities. The Fund's research and
investment process is designed to identify those companies with
strong property fundamentals and strong management teams. This
process is comprised of real estate market research, specific
property inspection and securities analysis.
The universe of property-owning real estate industry
firms consists of approximately 115 companies of sufficient size
and quality to merit consideration for investment by the Fund.
In implementing the Fund's research and investment process,
Alliance will avail itself of the consulting services of Koll, a
national real estate investment and property manager that
oversees a $13 billion, 1,000 property portfolio. As consultant
to Alliance, Koll provides access to a proprietary model (Koll's
National Real Estate Index) that analyzes the approximately 9,000
properties owned by these companies. Using proprietary databases
and algorithms, Koll analyzes local market rent, expense and
occupancy trends, market specific transaction pricing,
demographic and economic trends, and leading indicators of real
estate supply such as building permits. Over 300 asset-type
specific geographic markets are analyzed and ranked on a relative
scale by Koll in compiling its REIT-SCORE model. The relative
attractiveness of these real estate industry companies are
similarly ranked based on the composite rankings of the
properties they own. See "Management of the Fund -- Consultant
to Adviser" for more information about Koll.
Once the universe of real estate industry companies has
been distilled through the market research process, Koll's local
market presence provides the capability to perform site specific
inspections of key properties. This analysis examines specific
property location, condition, and sub-market trends. Koll's use
of locally based real estate professionals provides Alliance with
a window on the operations of the portfolio companies as
information gathered can immediately be put in the context of
local market events. Only those companies whose specific
property portfolios reflect the promise of their general markets
will be considered for initial and continued investment by the
Fund.
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Alliance further screens the universe of real estate
industry companies by using rigorous financial models and by
engaging in regular contact with management of targeted
companies. Each management's strategic plan and ability to
execute the plan are determined and analyzed. Alliance will make
extensive use of Koll's network of industry analysts in order to
assess trends in tenant industries. This information is then
used to further interpret management's strategic plans.
Financial ratio analysis is used to isolate those companies with
the ability to make value-added acquisitions. This information
is combined with property market trends and used to project
future earnings potential.
Alliance believes that this process will result in a
portfolio that will consist of Real Estate Equity Securities of
companies that own assets in the most desirable markets across
the country, diversified geographically and by property type.
Mortgage-Backed Securities and Associated Risks
Mortgage-Backed Securities include mortgage pass-through
certificates and multiple-class pass-through securities, such as
REMIC pass-through certificates, CMOs and stripped mortgage-
backed securities ("SMBS"), and other types of Mortgage-Backed
Securities that may be available in the future.
GUARANTEED MORTGAGE PASS-THROUGH SECURITIES. The Fund
may invest in guaranteed mortgage pass-through securities which
represent participation interests in pools of residential
mortgage loans and are issued by U.S. governmental or private
lenders and guaranteed by the U.S. Government or one of its
agencies or instrumentalities, including but not limited to the
Government National Mortgage Association ("Ginnie Mae"), the
Federal National Mortgage Association ("Fannie Mae") and the
Federal Home Loan Mortgage Corporation ("Freddie Mac"). Ginnie
Mae certificates are guaranteed by the full faith and credit of
the United States Government for timely payment of principal and
interest on the certificates. Fannie Mae certificates are
guaranteed by Fannie Mae, a federally chartered and privately-
owned corporation for full and timely payment of principal and
interest on the certificates. Freddie Mac certificates are
guaranteed by Freddie Mac, a corporate instrumentality of the
United States Government, for timely payment of interest and the
ultimate collection of all principal of the related mortgage
loans.
MULTIPLE-CLASS PASS-THROUGH SECURITIES AND
COLLATERALIZED MORTGAGE OBLIGATIONS. Mortgage-Backed Securities
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<PAGE>
also include CMOs and REMIC pass-through or participation
certificates, which may be issued by, among others, U.S.
Government agencies and instrumentalities as well as private
lenders. CMOs and REMIC certificates are issued in multiple
classes and the principal of and interest on the mortgage assets
may be allocated among the several classes of CMOs or REMIC
certificates in various ways. Each class of CMOs or REMIC
certificates, often referred to as a "tranche," is issued at a
specific adjustable or fixed interest rate and must be fully
retired no later than its final distribution date. Generally,
interest is paid or accrues on all classes of CMOs or REMIC
certificates on a monthly basis. The Fund will not invest in the
lowest tranche of CMOs and REMIC certificates.
Typically, CMOs are collateralized by Ginnie Mae or
Freddie Mac certificates but also may be collateralized by other
mortgage assets such as whole loans or private mortgage pass-
through securities. Debt service on CMOs is provided from
payments of principal and interest on collateral of mortgaged
assets and any reinvestment income thereon.
A REMIC is a CMO that qualifies for special tax
treatment under the Code and invests in certain mortgages
primarily secured by interests in real property and other
permitted investments. Investors may purchase "regular" and
"residual" interest shares of beneficial interest in REMIC trusts
although the Fund does not intend to invest in residual
interests.
RISKS. Investing in Mortgage-Backed Securities involves
certain unique risks in addition to those generally associated
with investing in the real estate industry in general. These
unique risks include the failure of a counter-party to meet its
commitments, adverse interest rate changes and the effects of
prepayments on mortgage cash flows. See "Risk Considerations-
- -Risk Factors Associated with the Real Estate Industry" for a
more complete description of the characteristics of Mortgage-
Backed Securities and associated risks.
SHORT-TERM INVESTMENTS. The short-term investments in
which the Fund may invest are: corporate commercial paper and
other short-term commercial obligations, in each case rated or
issued by companies with similar securities outstanding that are
rated Prime-1, Aa or better by Moody's or A-1, AA or better by
S&P's; obligations (including certificates of deposit, time
deposits, demand deposits and bankers' acceptances) of banks with
securities outstanding that are rated Prime-1, Aa or better by
Moody's or A-1, AA or better by S&P; and obligations issued or
11
<PAGE>
guaranteed by the U.S. Government or its agencies or
instrumentalities with remaining maturities not exceeding 18
months.
The Fund may invest in debt securities rated BBB or higher by
S&P or Baa or higher by Moody's or, if not so rated, of
equivalent credit quality as determined by Alliance. Securities
rated BBB by S&P or Baa by Moody's are considered to have
speculative characteristics. Sustained periods of deteriorating
economic conditions or 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. The
Fund expects that it will not retain a debt security which is
downgraded below BBB or Baa or, if unrated, determined by
Alliance to have undergone similar credit quality deterioration,
subsequent to purchase by the Fund.
The Fund may also engage in the following investment
practices to the extent indicated: (i) invest up to 10% of its
net assets in rights or warrants; (ii) invest up to 15% of its
net assets in the convertible securities of companies whose
common stocks are eligible for purchase by the Fund; (iii) lend
portfolio securities equal in value to not more than 25% of total
assets; (iv) enter into repurchase agreements of up to seven
days' duration; (v) enter into forward commitment transactions as
long as the Fund's aggregate commitments under such transactions
are not more than 30% of the Fund's total assets; (vi) enter into
standby commitment agreements; (vii) make short sales of
securities or maintain a short position but only if at all times
when a short position is open not more than 25% of the Fund's
assets (taken at market value) is held as collateral for such
sales; and (viii) invest in illiquid securities unless, as a
result, more than 15% of its net assets would be so invested.
ADDITIONAL INVESTMENT POLICIES AND PRACTICES
CONVERTIBLE SECURITIES. Prior to conversion,
convertible securities have the same general characteristics as
non-convertible debt securities, which provide a stable stream of
income with generally higher yields than those of equity
securities of the same or similar issuers. The price of a
convertible security will normally vary with changes in the price
of the underlying 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-
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<PAGE>
convertible debt securities of similar quality, they enable
investors to benefit from increases in the market price of the
underlying common stock.
RIGHTS AND WARRANTS. The Fund will invest in rights or
warrants only if the underlying equity securities are themselves
deemed appropriate by Alliance for inclusion in the Fund's
portfolio. Rights and warrants entitle the holder to buy equity
securities at a specific price for a specific period of time.
Rights are similar to warrants except that they have a
substantially shorter duration. Rights and warrants may be
considered more speculative than certain other types of
investments in that they do not entitle a holder to dividends or
voting rights with respect to the underlying securities nor do
they represent any rights in the assets of the issuing company.
The value of a right or warrant does not necessarily change with
the value of the underlying security, although the value of a
right or warrant may decline because of a decrease in the value
of the underlying security, the passage of time or a change in
perception as to the potential of the underlying security, or any
combination thereof. If the market price of the underlying
security is below the exercise price set forth in the warrant on
the expiration date, the warrant will expire worthless.
Moreover, a right or warrant ceases to have value if it is not
exercised prior to the expiration date.
ILLIQUID SECURITIES. Subject to any more restrictive
applicable investment policy, the Fund will not maintain more
than 15% of its net assets in illiquid securities. Illiquid
securities will generally include 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) and repurchase agreements not
terminable within seven days.
Because of the absence of a trading market for illiquid
securities, the Fund may not be able to realize their full value
upon sale. Alliance will monitor the illiquidity of such
securities with respect to the Fund under the supervision of the
Directors of the Fund. To the extent permitted by applicable
law, Rule 144A securities will not be treated as "illiquid" for
purposes of the foregoing restriction so long as such securities
meet liquidity guidelines established by the Fund's Directors.
The Fund may not be able to readily sell securities for which
there is no ready market.
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<PAGE>
FORWARD COMMITMENTS. Forward commitments for the
purchase or sale of securities may include purchases on a "when-
issued" basis or purchases or sales on a "delayed delivery"
basis. In some cases, a forward commitment may be conditioned
upon the occurrence of a subsequent event, such as approval and
consummation of a merger, corporate reorganization or debt
restructuring (i.e., a "when, as and if issued" trade).
When forward commitment transactions are negotiated, the
price is fixed at the time the commitment is made, but delivery
and payment for the securities take place at a later date.
Normally, the settlement date occurs within two months after the
transaction, but settlements beyond two months may be negotiated.
Securities purchased or sold under a forward commitment are
subject to market fluctuation, and no interest or dividends
accrue to the purchaser prior to the settlement date. At the
time the Fund intends to enter into a forward commitment, it
records the transaction and thereafter reflects the value of the
security purchased or, if a sale, the proceeds to be received, in
determining its net asset value. Any unrealized appreciation or
depreciation reflected in such valuation of a "when, as and if
issued" security would be canceled in the event that the required
conditions did not occur and the trade was canceled.
The use of forward commitments enables 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 commitment basis to limit its exposure to falling 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. However, if Alliance were to forecast incorrectly the
direction of interest rate movements, the Fund might be required
to complete such when-issued or forward transactions at prices
inferior to the then current market values. When-issued
securities and forward commitments may be sold prior to the
settlement date, but the Fund enters into when-issued and forward
commitments only with the intention of actually receiving
securities or delivering them, as the case may be. If the Fund
chooses to dispose of the right to acquire a when-issued security
prior to its acquisition or dispose of its right to deliver or
receive against a forward commitment, it may incur a gain or
loss. Any significant commitment of Fund assets to the purchase
of securities on a "when, as and if issued" basis may increase
the volatility of the Fund's net asset value. In the event the
other party to a forward commitment transaction were to default,
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<PAGE>
the Fund might lose the opportunity to invest money at favorable
rates or to dispose of securities at favorable prices.
STANDBY COMMITMENT AGREEMENTS. Standby commitment
agreements commit 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, typically equal to approximately 0.5% of the aggregate
purchase price of the security 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 considered advantageous to the Fund and
unavailable on a firm commitment basis. Investments in standby
commitments will be limited so that the aggregate purchase price
of the securities subject to the commitments will not exceed 25%
of the Fund's total assets taken at the time of making the
commitment.
There is no guarantee 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.
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. If a vendor defaults on its repurchase
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. Alliance monitors the creditworthiness of the vendors
with which the Fund enters into repurchase agreements.
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<PAGE>
SHORT SALES. A short sale is effected by the Fund's
selling a security that the Fund does not own or a security which
the Fund owns but which the Fund is not to deliver upon
consummation of the sale. A short sale is "against the box" to
the extent that the Fund contemporaneously owns or has the right
to obtain securities identical to those sold short without
payment. 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 capital gain.
Certain special federal income tax considerations may apply to
short sales entered into by the Fund. See "Dividends,
Distributions and Taxes" in the Statement of Additional
Information.
LOANS OF PORTFOLIO SECURITIES. 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 the Fund is 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 the value of its total assets, nor
will the Fund lend its portfolio securities to any officer,
director, employee or affiliate of the Fund or Alliance. The
Board of Directors will monitor the Fund's lending of portfolio
securities.
GENERAL. The successful use of the foregoing investment
practices draws upon Alliance's special skills and experience
with respect to such instruments and usually depends on
Alliance's ability to forecast price movements correctly. Should
prices move unexpectedly, the Fund may not achieve the
anticipated benefits of the transactions or may realize losses
and thus be in a worse position than if such strategies had not
been used. In addition, the correlation between movements in the
prices of such instruments and movements in the prices of the
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<PAGE>
securities hedged will not be perfect and could produce
unanticipated losses.
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 activities described above.
DEFENSIVE POSITION. For temporary defensive purposes,
the Fund may increase without limit its position in short-term,
liquid, high-grade debt securities, which may include U.S.
Government securities, bank deposits, money market instruments,
short-term debt securities, including notes and bonds. For a
description of the types of securities in which the Fund may
invest while in a temporary defensive position, please see the
Statement of Additional Information.
PORTFOLIO TURNOVER. Alliance anticipates that the
Fund's annual rate of turnover will not exceed 100%. A 100%
annual turnover rate would occur if all of the securities in the
Fund's portfolio are replaced once over one year. A higher 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.
RISK CONSIDERATIONS
RISK FACTORS ASSOCIATED WITH THE REAL ESTATE INDUSTRY.
Although the Fund does not invest directly in real estate, it
does invest primarily in Real Estate Equity Securities and does
concentrate its investments in the real estate industry.
Therefore, an investment in the Fund is subject to certain risks
associated with the direct ownership of real estate and with the
real estate industry in general. These risks include, among
others: possible declines in the value of real estate; risks
related to general and local economic conditions; possible lack
of availability of mortgage funds; overbuilding; extended
vacancies of properties; increases in competition, property taxes
and operating expenses; changes in zoning laws; costs resulting
from the clean-up of, and liability to third parties for damages
resulting from, environmental problems; casualty or condemnation
17
<PAGE>
losses; uninsured damages from floods, earthquakes or other
natural disasters; limitations on and variations in rents; and
changes in interest rates. To the extent that assets underlying
the Fund's investments are concentrated geographically, by
property type or in certain other respects, the Fund may be
subject to certain of the foregoing risks to greater extent.
In addition, if the Fund receives rental income or
income from the disposition of real property acquired as a result
of a default on securities the Fund owns, the receipt of such
income may adversely affect the Fund's ability to retain its tax
status as a regulated investment company. See "Dividends,
Distributions and Taxes" in the Statement of Additional
Information. Investments by the Fund in securities of companies
providing mortgage servicing will be subject to the risks
associated with refinancings and their impact on servicing
rights.
REITS. Investing in REITs involves certain unique risks
in addition to those risks associated with investing in the real
estate industry in general. Equity REITs may be affected by
changes in the value of the underlying property owned by the
REITs, while mortgage REITs may be affected by the quality of any
credit extended. REITs are dependent upon management skills, are
not diversified, are subject to heavy cash flow dependency,
default by borrowers and self-liquidation. REITs are also
subject to the possibilities of failing to qualify for tax free
pass-through of income under the Code and failing to maintain
their exemptions from registration under the 1940 Act.
REITs (especially mortgage REITs) are also subject to
interest rate risks. When interest rates decline, the value of a
REIT's investment in fixed rate obligations can be expected to
rise. Conversely, when interest rates rise, the value of a
REIT's investment in fixed rate obligations can be expected to
decline. In contrast, as interest rates on adjustable rate
mortgage loans are reset periodically, yields on a REIT's
investments in such loans will gradually align themselves to
reflect changes in market interest rates, causing the value of
such investments to fluctuate less dramatically in response to
interest rate fluctuations than would investments in fixed rate
obligations.
Investing in REITs involves risks similar to those
associated with investing in small capitalization companies.
REITs may have limited financial resources, may trade less
frequently and in a limited volume and may be subject to more
abrupt or erratic price movements than larger company securities.
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Historically, small capitalization stocks, such as REITs, have
been more volatile in price than the larger capitalization stocks
included in the S&P's Index of 500 Common Stocks.
MORTGAGE-BACKED SECURITIES. As discussed above,
investing in Mortgage-Backed Securities involves certain unique
risks in addition to those risks associated with investment in
the real estate industry in general. These risks include the
failure of a counter-party to meet its commitments, adverse
interest rate changes and the effects of prepayments on mortgage
cash flows. When interest rates decline, the value of an
investment in fixed rate obligations can be expected to rise.
Conversely, when interest rates rise, the value of an investment
in fixed rate obligations can be expected to decline. In
contrast, as interest rates on adjustable rate mortgage loans are
reset periodically, yields on investments in such loans will
gradually align themselves to reflect changes in market interest
rates, causing the value of such investments to fluctuate less
dramatically in response to interest rate fluctuations than would
investments in fixed rate obligations.
Further, the yield characteristics of Mortgage-Backed
Securities, such as those in which the Fund may invest, differ
from those of traditional fixed income securities. The major
differences typically include more frequent interest and
principal payments (usually monthly), the adjustability of
interest rates, and the possibility that prepayments of principal
may be made substantially earlier than their final distribution
dates.
Prepayment rates are influenced by changes in current
interest rates and a variety of economic, geographic, social and
other factors, and cannot be predicted with certainty. Both
adjustable rate mortgage loans and fixed rate mortgage loans may
be subject to a greater rate of principal prepayments in a
declining interest rate environment and to a lesser rate of
principal prepayments in an increasing interest rate environment.
Early payment associated with Mortgage-Backed Securities causes
these securities to experience significantly greater price and
yield volatility than that experienced by traditional fixed-
income securities. Under certain interest rate and prepayment
rate scenarios, the Fund may fail to recoup fully its investment
in Mortgage-Backed Securities notwithstanding any direct or
indirect governmental or agency guarantee. When the Fund
reinvests amounts representing payments and unscheduled
prepayments of principal, it may receive a rate of interest that
is lower than the rate on existing adjustable rate mortgage pass-
through securities. Thus, Mortgage-Backed Securities, and
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adjustable rate mortgage pass-through securities in particular,
may be less effective than other types of U.S. Government
securities as a means of "locking in" interest rates.
SECURITIES RATINGS. The ratings of securities by S&P,
Moody's, Duff & Phelps and Fitch are a generally accepted
barometer of credit risk. They are, however, subject to certain
limitations from an investor's standpoint. The rating of an
issuer is heavily weighted by past developments and does not
necessarily reflect probable future conditions. There is
frequently a lag between the time a rating is assigned and the
time it is updated. In addition, there may be varying degrees of
difference in credit risk of securities within each rating
category.
CERTAIN FUNDAMENTAL INVESTMENT POLICIES
In addition to its fundamental investment objective, the
Fund has adopted the following fundamental investment policies,
which may not be changed without the approval of its
shareholders. Additional fundamental and non-fundamental
investment policies are set forth in the Statement of Additional
Information.
The Fund may not: (i) with respect to 75% of its total
assets, have such assets represented by other than: (a) cash and
cash items, (b) U.S. Government securities, or (c) securities of
any one issuer (other than the U.S. Government and its agencies
or instrumentalities) not greater in value than 5% of the Fund's
total assets, and not more than 10% of the outstanding voting
securities of such issuer; (ii) purchase the securities of any
one issuer, other than the U.S. Government and its agencies or
instrumentalities, if as a result (a) the value of the holdings
of the Fund in the securities of such issuer exceeds 25% of its
total assets, or (b) the Fund owns more than 25% of the
outstanding securities of any one class of securities of such
issuer; or (iii) purchase or sell real estate, except that it may
purchase and sell securities of companies which deal in real
estate or interests therein, including Real Estate Equity
Securities.
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________________________________________________________________
PURCHASE AND SALE OF SHARES
________________________________________________________________
HOW TO BUY SHARES
The Fund offers multiple classes of shares, of which
only the Advisor Class is offered by this Prospectus. Advisor
Class shares of the Fund may be purchased through your financial
representative at net asset value without any initial or
contingent deferred sales charges and are not subject to ongoing
distribution expenses. Advisor Class shares may be purchased and
held solely through (i) accounts established under a fee-based
program, sponsored and maintained by a registered broker-dealer
or other financial intermediary and approved by Alliance Fund
Distributors, Inc. ("AFD"), the Fund's principal underwriter,
pursuant to which each investor pays an asset-based fee at an
annual rate of at least .50% of the assets in the investor's
account to the broker-dealer or financial intermediary, or its
affiliate or agent, or (ii) a self-directed defined contribution
employee benefit plan (e.g., a 401(k) plan) that has at least
1,000 participants or $25 million in assets. The minimum initial
investment in the Fund is $250. The minimum for subsequent
investments in the Fund is $50. Investments of $25 or more are
allowed under the automatic investment program of the Fund and
under a 403(b)(7) retirement plan. Share certificates are issued
only upon request. See the Subscription Application and
Statement of Additional Information for more information.
The Fund may refuse any order to purchase Advisor Class
shares. In this regard, the Fund reserves the right to restrict
purchases of Advisor Class shares (including exchanges) when
there appears to be evidence of a pattern of frequent purchases
and sales made in response to short-term fluctuations in share
price.
How the Fund Values its Shares
The net asset value of Advisor Class shares of the Fund
is calculated by dividing the value of the Fund's net assets
allocable to the Advisor Class by the outstanding shares of the
Advisor Class. Shares are valued each day the 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
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the Fund's Directors believe would accurately reflect fair market
value.
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 representative. The price you will
receive is the net asset value next calculated after the Fund
receives your request in proper form. Proceeds generally will be
sent to you within seven days. However, for shares recently
purchased by check or electronic funds transfer, 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). If you are in doubt about what documents are
required by your fee based program or employee benefit plan, you
should contact your financial representative.
Selling Shares Through Your Financial Representative
Your financial representative must receive your request
before 4:00 p.m. Eastern time, and your financial representative
must transmit your request to the Fund by 5:00 p.m. Eastern time,
for you to receive that day's net asset value. Your financial
representative is responsible for furnishing all necessary
documentation to 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"), along with certificates,
if any, that represent the shares you want to sell. For your
protection, signatures must be guaranteed by a bank, a member
firm of a national stock exchange or other eligible guarantor
institution. Stock power forms are available from your financial
representative, AFS, and many commercial banks. Additional
documentation is required for the sale of shares by corporations,
representative, 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. Telephone redemption requests must be
22
<PAGE>
made by 4 p.m. Eastern time on a Fund business day in order to
receive that day's net asset value, and except for certain
omnibus accounts, may be made only once in any 30-day period. A
shareholder who has completed the Telephone Transactions section
of the Subscription Application, or the Shareholder Options form
obtained from AFS, can elect to have the proceeds of their
redemption sent to their bank via an electronic funds transfer.
Proceeds of telephone redemptions also may be sent by check to a
shareholder's address of record. Except for certain omnibus
accounts, redemption requests by electronic funds transfer may
not exceed $100,000 and redemption requests by check may not
exceed $50,000. Telephone redemption is not available for 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.
HOW TO EXCHANGE SHARES
You may exchange your Advisor Class shares of the Fund
for Advisor Class shares of other Alliance Mutual Funds
(including AFD Exchange Reserves, a money market fund managed by
23
<PAGE>
Alliance). Exchanges of shares are made at the net asset value
next determined and without sales or service charges. Exchanges
may be made by telephone or written request. Telephone exchange
requests must be received by AFS by 4:00 p.m. Eastern time on a
Fund business day in order to receive that day's net asset value.
Please read carefully the prospectus of the mutual fund
into which you are exchanging before submitting the request.
Call AFS at 800-221-5672 to exchange uncertificated shares. An
exchange is a taxable capital transaction for federal tax
purposes. The exchange service may be changed, suspended, or
terminated on 60 days' written notice.
GENERAL
If you are a Fund shareholder through an account
established under a fee-based program, your fee-based program may
impose requirements with respect to the purchase, sale or
exchange of Advisor Class shares of the Fund that are different
from those described in this Prospectus. A transaction fee may
be charged by your financial representative with respect to the
purchase, sale or exchange of Advisor Class shares made through
such financial representative.
The Fund offers three classes of shares other than the
Advisor Class, which are Class A, Class B and Class C. All
classes of shares of the Fund have a common investment objective
and investment portfolio. Class A shares are offered with an
initial sales charge and pay a distribution services fee.
Class B shares have a contingent deferred sales charge (a "CDSC")
and also pay a distribution services fee. Class C shares have no
initial sales charge or CDSC as long as they are not redeemed
within one year of purchase, but pay a distribution services fee.
Because Advisor Class shares have no initial sales charge or CDSC
and pay no distribution services fee, Advisor Class shares are
expected to have different performance from Class A, Class B or
Class C shares. You may obtain more information about Class A,
Class B and Class C shares, which are not offered by this
Prospectus, by contacting AFS by telephone at 1-800-221-5672 or
by contacting your financial representative.
24
<PAGE>
________________________________________________________________
MANAGEMENT OF THE FUND
________________________________________________________________
ADVISER
Alliance 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.
Alliance is a leading international investment manager
supervising client accounts with assets as of June 30, 1996 of
more than $ billion (of which more than $ 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 51 registered investment
companies managed by Alliance comprising 108 separate investment
portfolios currently have over one million shareholders. As of
June 30, 1996 Alliance was retained as an investment manager of
employee benefit fund assets for 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 % of the Fund's average daily net
assets. The fee is accrued daily and paid monthly.
The person primarily responsible for the day-to-day
management of the Fund's portfolio since inception is Daniel G.
Pine. Mr. Pine has been associated with Alliance since May of
1995. Prior thereto, he was Senior Vice President of Desai
Capital Management since prior to 1991.
25
<PAGE>
Consultant to Adviser
In connection with its provision of advisory services to
the Fund, Alliance has retained at its expense Koll as a
consultant to provide to Alliance such in-depth information
regarding the real estate market, the factors influencing
regional valuations, analysis of recent transactions in office,
retail, industrial and multi-family properties, as Alliance shall
from time to time request. Koll will not furnish investment
advice or make recommendations regarding the purchase or sale of
securities by the Fund nor will it be responsible for making
investment decisions involving Fund assets.
Koll is one of the largest fee-based property management
firms in the United States as well as one of the largest
publishers of real estate research, with approximately 2,700
employees nationwide. Koll will provide Alliance with exclusive
access to its REIT-SCORE model which ranks approximately 115
REITs based on the relative attractiveness of the property
markets in which they own real estate. This model scores the
approximately 9,000 individual properties owned by these
companies. REIT-SCORE is in turn based on Koll's National Real
Estate Index which gathers, analyzes and publishes targeted
research data for the 65 largest US real estate markets based on
a variety of public- and private-sector sources as well Koll's
proprietary database of 45,000 commercial property transactions
representing over $250 billion of investment property and over
2,000 tracked properties which report rent and expense data
quarterly. Koll has previously provided access to its REIT-SCORE
model results primarily to the institutional market through
subscriptions. The model is no longer provided to any research
publications and the Fund is currently the only mutual fund
available to retail investors that has access to Koll's REIT-
SCORE model.
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,
26
<PAGE>
(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
The Fund has entered into a Distribution Services
Agreement with AFD with respect to the Advisor Class shares. The
Glass-Steagall Act and other applicable laws may limit the
ability of a bank or other depository institution to become an
underwriter or distributor of securities. However, in the opinion
of the 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 service
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
If you receive an income dividend or capital gains
distribution in cash you may, within 120 days following the date
of its payment, reinvest the dividend or distribution in
additional shares of the Fund without charge by returning to
Alliance, with appropriate instructions, the check representing
such dividend or distribution. Thereafter, unless you otherwise
specify, you will be deemed to have elected to reinvest all
subsequent dividends and distributions in shares of the Fund.
Each income dividend and capital gains distribution, if
any, declared by the Fund on its outstanding shares will, at the
election of each shareholder, be paid in cash or in additional
shares of the Fund having an aggregate net asset value as of the
payment date of such dividend or distribution equal to the cash
amount of such income dividend or distribution. Election to
receive income dividends and distributions in cash or shares is
27
<PAGE>
made at the time shares are initially purchased and may be
changed at any time prior to the record date for a particular
dividend or distribution. Cash dividends can be paid by check
or, if the shareholder so elects, electronically via the ACH
network. There is no sales or other charge in connection with
the reinvestment of dividends and capital gains distributions.
While it is the intention of 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 of 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 deducts a
distribution from its net asset value, you will pay the full
price for the shares and then receive a portion of the price back
as a taxable distribution.
U.S. Federal Income Taxes
The Fund intends to qualify to be taxed 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 may be eligible for the
dividends-received deduction, except that the amount eligible for
the deduction is limited to the amount of qualifying dividends
received by the Fund. Dividends received from REITs generally do
not constitute qualifying dividends. A corporation's
dividends-received deduction 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.
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.
28
<PAGE>
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.
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 tax
status of dividends and capital gains distributions.
Shareholders are urged to consult their tax advisers regarding
their own tax situation.
29
<PAGE>
________________________________________________________________
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 Real Estate Investment Fund, Inc. is a Maryland
corporation organized on July , 1996. 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. 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 together as a single class on
matters, such as the election of Directors, that affect each
portfolio and class in substantially the same manner. Advisor
Class, Class A, Class B and Class C shares have identical voting,
dividend, liquidation and other rights, except that each class
bears its own transfer agency expenses and each of Class A,
Class B and Class C shares bears its own distribution expenses.
Each class of shares votes separately with respect to matters for
which separate class voting is appropriate under applicable law.
Shares are freely transferable, are entitled to dividends as
determined by the Directors and, in liquidation of the Fund, are
entitled to receive the net assets of the Fund. Certain
additional matters relating to the Fund's organization are
discussed in the Statement of Additional Information.
30
<PAGE>
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.
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 total return,
which is computed separately for each class of shares, including
Advisor Class shares. Such advertisements disclose the Fund's
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 maximum sales
charges applicable to purchases and redemptions of the Fund's
shares are assumed to have been paid. The Fund's 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.
31
<PAGE>
This prospectus does not constitute an offering in any state in
which such offering may not lawfully be made.
Alliance
________________________________________________________________
Real Estate Investment
________________________________________________________________
Fund
Goal: Total return through
investment principally in
equity securities
of issuers which are
principally engaged in or
related to the real estate industry
Prospectus and Application
______ __, 1996
<PAGE>
ALLIANCE REAL ESTATE
[LOGO](R) INVESTMENT FUND, INC.
_________________________________________________________________
P.O. Box 1520, Secaucus, New Jersey 07096-1520
Toll Free (800) 221-5672
For Literature: Toll Free (800) 227-4618
_________________________________________________________________
STATEMENT OF ADDITIONAL INFORMATION
, 1996
_________________________________________________________________
This Statement of Additional Information is not a prospectus but
supplements and should be read in conjunction with the current
Prospectus for the Fund that offers the Class A, Class B and
Class C shares of the Fund dated , 1996 and the current
Prospectus for the Fund that offers the Advisor class shares of
the Fund dated , 1996 (each such Prospectus will be
referred to collectively as the "Prospectus"). 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...................
Brokerage and Portfolio Transactions.................
<PAGE>
General Information..................................
(R): This registered service mark used under license from the
owner, Alliance Capital Management L.P.
<PAGE>
________________________________________________________________
DESCRIPTION OF THE FUND
________________________________________________________________
Alliance Real Estate Investment Fund, Inc. (the "Fund")
is a diversified investment company. The Fund's investment
objective is "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 objective.
Investment Objective
The Fund's investment objective is to seek a total
return on its assets from long-term growth of capital and from
income principally through investing in a portfolio of equity
securities of issuers which are principally engaged in or related
to the real estate industry.
Investment Policies
Under normal circumstances, at least 65% of the Fund's
total assets will be invested in equity securities of real estate
investment trusts ("REITs") and other real estate industry
companies. A "real estate industry company" is a company that
derives at least 50% of its gross revenues or net profits from
the ownership, development, construction, financing, management
or sale of commercial, industrial or residential real estate or
interests therein. The equity securities in which the Fund will
invest for this purpose consist of common stock, shares of
beneficial interest of REITs and securities with common stock
characteristics, such as preferred stock or convertible
securities ("Real Estate Equity Securities").
The Fund may invest up to 35% of its total assets in
(a) securities that directly or indirectly represent
participations in, or are collateralized by and payable from,
mortgage loans secured by real property ("Mortgage-Backed
Securities"), such as mortgage pass-through certificates, real
estate mortgage investment conduit ("REMIC") certificates and
collateralized mortgage obligations ("CMOs") and (b) short-term
investments. These instruments are described below. The risks
associated with the Fund's transactions in REMICs, CMOs and other
types of mortgage-backed securities, which are considered to be
derivative securities, may include some or all of the following:
2
<PAGE>
market risk, leverage and volatility risk, correlation risk,
credit risk and liquidity and valuation risk. See "Risk
Considerations--Risk Factors Associated with the Real Estate
Industry" in the Prospectus for a description of these and other
risks.
As to any investment in Real Estate Equity Securities,
the analysis of Alliance Capital Management, L.P., the Fund's
investment adviser (the "Adviser") will focus on determining the
degree to which the company involved can achieve sustainable
growth in cash flow and dividend paying capability. The Adviser
believes that the primary determinant of this capability is the
economic viability of property markets in which the company
operates and that the secondary determinant of this capability is
the ability of management to add value through strategic focus
and operating expertise. The Fund will purchase Real Estate
Equity Securities when, in the judgment of the Adviser, their
market price does not adequately reflect this potential. In
making this determination, the Adviser will take into account
fundamental trends in underlying property markets as determined
by proprietary models, site visits conducted by individuals
knowledgeable in local real estate markets, price-earnings ratios
(as defined for real estate companies), cash flow growth and
stability, the relationship between asset value and market price
of the securities, dividend payment history, and such other
factors which the Adviser may determine from time to time to be
relevant. The Adviser will attempt to purchase for the Fund Real
Estate Equity Securities of companies whose underlying portfolios
are diversified geographically and by property type.
The Fund may invest without limitation in shares of
REITs. REITs are pooled investment vehicles which invest
primarily in income producing real estate or real estate related
loans or interests. REITs are generally classified as equity
REITs, mortgage REITs or a combination of equity and mortgage
REITs. Equity REITs invest the majority of their assets directly
in real property and derive income primarily from the collection
of rents. Equity REITs can also realize capital gains by selling
properties that have appreciated in value. Mortgage REITs invest
the majority of their assets in real estate mortgages and derive
income from the collection of interest payments. Similar to
investment companies such as the Fund, REITs are not taxed on
income distributed to shareholders provided they comply with
several requirements of the Internal Revenue Code of 1986, as
amended (the "Code"). The Fund will indirectly bear its
proportionate share of expenses incurred by REITs in which the
Fund invests in addition to the expenses incurred directly by the
Fund. The Fund may invest up to 5% of its total assets in
3
<PAGE>
R.E.I.T of non-US issues. The Fund may invest up to 5% of its
total assets in Real Estate Equity Securities of non-U.S.
issuers.
Additional Investment Policies and Practices
To the extent not described in the Prospectus, set forth
below 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, as
amended (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.
Convertible Securities. The Fund may invest up to 25%
of its total assets in convertible securities of issuers whose
common stocks are eligible for purchase by the Fund under the
investment policies described above. Convertible securities
include bonds, debentures, corporate notes and preferred stocks.
Convertible securities are instruments that are convertible at a
stated exchange rate into common stock. Prior to their
conversion, convertible securities have the same general
characteristics as non-convertible securities which provide a
stable stream of income with generally higher yields than those
of equity securities of the same or similar issuers. The market
value of convertible securities tends to decline as interest
rates increase and, conversely, to increase as interest rates
decline. While convertible securities generally offer lower
interest yields than non-convertible debt securities of similar
quality, they do enable the investor to benefit from increases in
the market price of the underlying common stock.
When the market price of the common stock underlying a
convertible security increases, the price of the convertible
security increasingly reflects the value of the underlying common
stock and may rise accordingly. As the market price of the
underlying common stock declines, the convertible security tends
to trade increasingly on a yield basis, and thus may not
depreciate to the same extent as the underlying common stock.
Convertible securities rank senior to common stocks in an
issuer's capital structure. They are consequently of higher
quality and entail less risk than the issuer's common stock,
although the extent to which such risk is reduced depends in
large measure upon the degree to which the convertible security
sells above its value as a fixed income security.
4
<PAGE>
Forward Commitments. No forward commitments will be
made by the Fund if, as a result, the Fund's aggregate
commitments under such transactions would be more than 30% of the
then current value of the Fund's total assets. 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 securities
having value equal 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.
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. The
Fund will at all times maintain a segregated account with its
custodian of cash and/or securities in an aggregate amount 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.
Repurchase Agreements. The Fund may enter into
repurchase agreements pertaining to U.S. Government Securities
with member banks of the Federal Reserve System or "primary
5
<PAGE>
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. This results in a fixed rate of return
insulated from market fluctuations during such period. 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 Alliance monitors the
creditworthiness of the dealers with which the Fund enters into
repurchase agreement transactions.
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
6
<PAGE>
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.
The Fund may invest 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
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, an automated
system for the trading, clearance and settlement of unregistered
securities of domestic and foreign issuers sponsored by the
National Association of Securities Dealers, Inc.
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
7
<PAGE>
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.
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.
Subject to its policy of investing at least 65% of its
total assets in equity securities of real estate investment
trusts and other real estate industry companies, 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. Generally, the Fund's policy with
respect to portfolio turnover is to purchase securities with a
view to holding them for periods of time sufficient to assure
that the Fund will realize less than 30% of its gross income from
the sale or other disposition of securities held for less than
three months (see "Dividends, Distributions and Taxes") and to
hold its securities for six months or longer. However, it is also
the Fund's policy to sell any security whenever, in the judgment
of the Adviser, its appreciation possibilities have been
substantially realized or the business or market prospects for
such security have deteriorated, irrespective of the length of
time that such security has been held. The Adviser anticipates
that the Fund's annual rate of portfolio turnover will not exceed
100%. A 100% annual turnover rate would occur if all the
8
<PAGE>
securities in the Fund's portfolio were replaced once within a
period of one year. The turnover rate has a direct effect on the
transaction costs to be borne by the Fund, and as portfolio
turnover increases it is more likely that the Fund will realize
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."
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) borrow money except for temporary or emergency
purposes or to meet redemption requests, in an amount
not exceeding 5% of the value of its total assets at the
time the borrowing is made;
(ii) pledge, hypothecate, mortgage or otherwise
encumber its assets, except to secure permitted
borrowings;
(iii) make loans except through (a) the purchase of
debt obligations in accordance with its investment
objectives and policies; (b) the lending of portfolio
securities; or (c) the use of repurchase agreements;
(iv) participate on a joint or joint and several
basis in any securities trading account;
(v) invest in companies for the purpose of
exercising control;
(vi) issue any senior security within the meaning
of the 1940 Act.
9
<PAGE>
(vii) make short sales of securities or maintain a
short position, unless at all times when a short
position is open not more than 25% of the Fund's net
assets (taken at market value) is held as collateral for
such sales at any one time;
(viii) (a) purchase or sell commodities or commodity
contracts including futures contracts; (b) invest in
interests in oil, gas, or other mineral exploration or
development programs; (c) purchase securities on margin,
except for such short-term credits as may be necessary
for the clearance of transactions; and (d) 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.
In connection with the qualification or registration of
the Fund's shares for sale under the securities laws of certain
states, the Fund has agreed, in addition to the foregoing
investment restrictions, and as a matter of non-fundamental
investment policy, that it will not (i) invest more than 10% of
its total assets in warrants, except for warrants acquired by the
Fund as a part of a unit or attached to securities, (ii) make
short sales in the securities of any one issuer in excess of the
lesser of 5% of the Fund's net assets or 5% of the securities of
any class of such issuer, except for short sales against the box,
(iii) purchase puts, calls, straddles, spreads or any combination
thereof in excess of 5% of the Funds total assets, (iv) purchase
securities of other investment companies except for purchases in
the open market where no commission or profit to the sponsor
results, other than customary brokers commission, or except as
part of a plan of merger, consolidation, reorganization or
liquidation, (v) purchase the securities of any company that has
a record of less than three years of continuous operation
(including that of predecessors) if such purchase would cause
more than 5% of its total assets to be invested in such
securities, and (vi) purchase the securities of any issuer if, as
to 75% of the Funds portfolio, more than 10% of the issuer's
voting securities would be held by the Fund.
10
<PAGE>
________________________________________________________________
MANAGEMENT OF THE FUND
________________________________________________________________
[TO BE PROVIDED BY SUBSEQUENT PRE-EFFECTIVE AMENDMENT]
The aggregate compensation to be paid by the Fund to
each of the Directors during its current fiscal year ending
[ ], 199[ ] (estimating future payments based upon
existing arrangements), and the aggregate compensation paid to
each of the Directors during calendar year 1995 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.
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
________________ ______________ _________________ _____________________
____________________
* The information in this column represents an estimate of
amounts to be paid during the Fund's current fiscal year.
** The information in this columns represents amounts actually
paid during calendar year 1995.
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
11
<PAGE>
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 June 30,
1996 of more than $[ ]billion (of which more than
$[ ] billion represented the assets of investment companies).
The Adviser's clients are primarily major corporate employee
benefit funds, public employee retirement systems, investment
companies, foundations and endowment funds and included as of
June 30, 1996, [ ] 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 offices of
subsidiaries in Bombay, Istanbul, London, Paris, Sao Paulo,
Sydney, Tokyo, Toronto, Bahrain, Luxembourg and Singapore. The
[ ] registered investment companies comprising [ ] 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 [ ], 1996,
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 [ ]% of
the issued and outstanding units representing assignments of
beneficial ownership of limited partnership interests in the
Adviser ("Units"). As of [ ], 1996, approximately [ ]%
and [ ]% 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 and its subsidiaries own approximately 63.9% of the
issued and outstanding shares of capital stock of ECI. AXA is
the holding company for an international group of insurance and
related financial services companies. AXA's insurance operations
include activities in life insurance, property and casualty
insurance and reinsurance. The insurance operations are diverse
geographically, with activities in France, the United States,
Australia, the United Kingdom, Canada and other countries,
principally in Europe and the Asia Pacific area. AXA is also
engaged in asset management, investment banking, securities
trading, brokerage, real estate and other financial services
12
<PAGE>
activities in the United States, Europe and the Asia Pacific
area. Based on information provided by AXA, as of March 31,
1996, 42.1% of the issued ordinary shares (representing 53.4% of
the voting power) of AXA were owned by Midi Participations, a
French holding company ("Midi"). The shares of Midi were, in
turn, owned 61.4% (representing 62.5% of the voting power) by
Finaxa, a French holding company, and 38.6% (representing 37.5%
of the voting power) by subsidiaries of Assicurazioni Generali
S.p.A., an Italian corporation (one of which, Belgica Insurance
Holding S.A., a Belgian corporation, owned 30.8%, representing
33.1% of the voting power). As of March 31, 1996, 61.1% of the
voting shares (representing 73.4% 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 34.7% of the voting shares representing 40.4% of the voting
power), and 25.5% of the voting shares (representing 16% of the
voting power) of Finaxa were owned by Banque Paribas, a French
bank. Including the ordinary shares owned by Midi, as of
March 31, 1996, the Mutuelles AXA directly or indirectly owned
51% of the issued ordinary shares (representing 64.7% of the
voting power) of AXA. Acting as a group, the Mutuelles AXA
control AXA, Midi and Finaxa.
Under the Advisory Agreement, the Adviser provides
investment advisory services and order placement facilities for
the Fund and pays all compensation of Directors and officers of
the Fund who are affiliated persons of the Adviser. 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
13
<PAGE>
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 [ ],
1996. The Advisory Agreement will continue in effect until
[ ], 199[ ] and thereafter for successive twelve-month
periods (computed from each [ ]), provided, however,
that such continuance is specifically approved at least annually
by a 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 Developing
Markets Fund, Inc., Alliance Global Dollar Government Fund, Inc.,
Alliance Global Small Cap Fund, Inc., Alliance Global Strategic
Income Trust, Inc., Alliance Government Reserves, Alliance Growth
and Income Fund, Inc., Alliance Income Builder Fund, Inc.,
14
<PAGE>
Alliance International Fund, Alliance Limited Maturity Government
Fund, Inc., Alliance Money Market Fund, Alliance Mortgage
Securities Income Fund, Inc., Alliance Multi-Market Strategy
Trust, Inc., Alliance Municipal Income Fund, Inc., Alliance
Municipal Income Fund II, Alliance Municipal Trust, Alliance New
Europe Fund, Inc., Alliance North American Government Income
Trust, Inc., Alliance Premier Growth Fund, Inc., Alliance/Regent
Sector Opportunity 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 registered 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, Inc., The
Austria Fund, Inc., The Korean Investment Fund, Inc., The
Southern Africa Fund, Inc. and The Spain Fund, Inc., all
registered 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").
The Agreement became effective on __________, 1996. The
Agreement will continue in effect for successive twelve-month
periods with respect to Class A, Class B, Class C and Advisor
Class shares (computed from each [ ] 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
15
<PAGE>
the 1940 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 1940 Act, of any such
party (other than as directors of the Fund). All amendments to
the Agreement must be approved by a vote of the Directors of the
Fund.
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 and Advisor Class shares of the Fund, plus reimbursement
for out-of-pocket expenses. The transfer agency fee with respect
to the Class B and Class C shares is higher, and that with
respect to the Advisor Class shares is lower, than that with
respect to the Class A shares reflecting the differential costs
associated with the Class B and Class C contingent deferred sales
charge and the nature of the accounts in which Advisor Class
shares are held.
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 ("Class A shares"), with a
contingent deferred sales charge ("Class B shares"), without any
initial sales charge and, as long as the shares are held for one
year or more, without any contingent deferred sales charge
("Class C shares"), or, to investors eligible to purchase Advisor
Class shares, without any initial, contingent deferred or asset-
based sales charge, in each case as described below. Shares of
the Fund that are offered subject to a sales charge are offered
through (i) investment dealers that are members of the National
Association of Securities Dealers, Inc. and have entered into
selected dealer agreements with the Principal Underwriter
("selected dealers"), (ii) depository institutions and other
financial intermediaries or their affiliates, that have entered
16
<PAGE>
into selected agent agreements with the Principal Underwriter
("selected agents"), or (iii) the Principal Underwriter.
Investors may purchase and hold Advisor Class shares of
the Fund solely through (i) accounts established under fee-based
programs, sponsored and maintained by registered broker-dealers
or other financial intermediaries and approved by the Principal
Underwriter, pursuant to which each investor pays an asset-based
fee at an annual rate of at least .50% of the assets in the
investor's account, to the sponsor, or its affiliate or agent, or
(ii) self-directed defined contribution employee benefit plans
(e.g., a 401(k) plans) that have at least 1,000 participants or
$25 million in assets.
If you are a Fund shareholder through an account
established under a fee-based program, your fee-based program may
impose requirements with respect to the purchase, sale or
exchange of Advisor Class shares of the Fund that are different
from those described in the Prospectus and this Statement of
Additional Information. A transaction fee may be charged by your
financial representative with respect to the purchase, sale or
exchange of Advisor Class shares made through such financial
representative.
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, Class C or Advisor
Class shares.
Investors may purchase shares of the Fund either through
selected dealers or agents or directly through the Principal
Underwriter. 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
17
<PAGE>
by the Fund and trading in the types of securities in which the
Fund invests might materially affect the value of Fund shares,
the per share net asset value is computed in accordance with the
Fund's Articles of Incorporation and By-Laws as of the next close
of regular trading on the New York Stock Exchange (the
"Exchange") (currently 4:00 p.m. Eastern time) by dividing the
value of the Fund's total assets, less its liabilities, by the
total number of its shares then outstanding. A Fund business day
is any weekday, exclusive of national holidays on which the
Exchange is closed and Good Friday.
The respective per share net asset values of the
Class A, Class B, Class C and Advisor Class shares are expected
to be substantially the same. Under certain circumstances,
however, the per share net asset values of the Class B and
Class C shares may be lower than the per share net asset value of
the Class A and Advisor Class shares, and the per share net asset
value of the Class A shares may be lower than that of the Advisor
Class shares, as a result of the differential daily expense
accruals of the distribution and transfer agency fees applicable
with respect to those classes of shares. Even under those
circumstances, the per share net asset values of the four classes
eventually will tend to converge immediately after the payment of
dividends, which will differ by approximately the amount of the
expense accrual differential among the classes. 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 purchases of shares placed through
selected dealers, agents or financial representatives, as
applicable, the applicable public offering price will be the net
asset value as so determined, but only if the selected dealer,
agent or financial representative receives the order prior to the
close of regular trading on the Exchange and transmits it to the
Principal Underwriter prior to its close of business that same
day (normally 5:00 p.m. Eastern time). The selected dealer,
agent or financial representative, as applicable, is responsible
18
<PAGE>
for transmitting such orders by 5:00 p.m. If the selected
dealer, agent or financial representative fails to do so, the
investor's right to that day's closing price must be settled
between the investor and the selected dealer, agent or financial
representative as applicable. If the selected dealer, agent or
financial representative, as applicable, receives the order after
the close of regular trading on the Exchange, the price will be
based on the net asset value determined as of the close of
regular trading on the Exchange on the next day it is open for
trading.
Following the initial purchase of Fund shares, a
shareholder may place orders to purchase additional shares by
telephone if the shareholder has completed the appropriate
portion of the Subscription Application or an "Autobuy"
application obtained by calling the "Literature" telephone number
shown on the cover of this Statement of Additional Information.
Except with respect to certain omnibus accounts, telephone
purchase order may not exceed $500,000. Payment for shares
purchased by telephone can be made only by Electronic Funds
Transfer from a bank account maintained by the shareholder at a
bank that is a member of the National Automated Clearing House
Association ("NACHA"). If a shareholder's telephone purchase
request is received before 3:00 p.m. Eastern time on a Fund
business day, the order to purchase shares is automatically
placed the following Fund business day, and the applicable public
offering price will be the public offering price determined as of
the close of business on such following business day.
Full and fractional shares are credited to a
subscriber's account in the amount of his or her subscription. 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
19
<PAGE>
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
take the form of payment for attendance at seminars, meals,
sporting events or theater performances, or payment for travel,
lodging and entertainment incurred in connection with travel
taken by persons associated with a dealer or agent and their
immediate family members to urban or resort locations within or
outside the United States. Such dealer or agent may elect to
receive cash incentives of equivalent amount in lieu of such
payments.
Class A, Class B, Class C and Advisor Class shares each
represent an interest in the same portfolio of investments of the
Fund, have the same rights and are identical in all respects,
except that (i) Class A shares bear the expense of the initial
sales charge (or contingent deferred sales charge, when
applicable) and Class B and Class C shares bear the expense of
the deferred sales charge, (ii) Class B shares and Class C shares
each bear the expense of a higher distribution services fee than
do Class A shares, and Advisor Class shares do not bear such a
fee, (iii) Class B and Class C shares bear higher transfer agency
costs, and Advisor Class shares bear lower transfer agency costs,
than do Class A shares, (iv) 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 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 (v) 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 Directors of the Fund have determined that currently
no conflict of interest exists between or among the Class A,
Class B, Class C and Advisor Class shares. On an ongoing basis,
the Directors of the Fund, pursuant to their fiduciary duties
under the 1940 Act and state law, will seek to ensure that no
such conflict arises.
Alternative Retail Purchase Arrangements -- Class A, Class B and
20
<PAGE>
Class C Shares1
Class A, Class B and Class C shares have the following
alternative purchase arrangements: 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. These 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 and contingent deferred
sales charges on Class C shares, would be less than the initial
sales charge and accumulated distribution services fee on Class A
shares purchased at the same time, and to what extent such
differential would be offset by the higher return of Class A
shares. Class A shares will normally be more beneficial than
Class B shares to the investor who qualifies for reduced initial
sales charges on Class A shares, as described below. In this
regard, the Principal Underwriter will reject any order (except
orders from certain retirement plans) for more than $250,000 for
Class B shares. Class C shares will normally not be suitable for
the investor who qualifies to purchase Class A shares at net
asset value. For this reason, the Principal Underwriter will
reject any order for more than $[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.
_________________________
1. Advisor Class shares are sold only to investors described
above in this section under "--General."
21
<PAGE>
Other investors might determine, however, that it would
be more advantageous to purchase Class B shares or Class C shares
in order to have all their funds invested initially, although
remaining subject to higher continuing distribution charges and
being subject to a contingent deferred sales charge for a four-
year and one-year period, respectively. For example, based on
current fees and expenses, an investor subject to the 4.25%
initial sales charge would have to hold his or her investment
approximately seven years for the Class C distribution services
fee to exceed the initial sales charge plus the accumulated
distribution services fee of Class A shares. In this example, an
investor intending to maintain his or her investment for a longer
period might consider purchasing Class A shares. This example
does not take into account the time value of money, which further
reduces the impact of the Class C distribution services fees on
the investment, fluctuations in net asset value or the effect of
different performance assumptions.
Those investors who prefer to have all of their funds
invested initially but may not wish to retain Fund shares for the
four-year period during which Class B shares are subject to a
contingent deferred sales charge may find it more advantageous to
purchase Class C shares.
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.
22
<PAGE>
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 will be applied to redemptions of
shares by shareholders who hold both Class A shares and shares of
one or more other classes that are subject to a contingent
deferred sales charge, 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 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
23
<PAGE>
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 ______________, 1996.
Net Asset Value per Class A Share at $10.00
_________, 1996
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
======
24
<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 Developing Markets Fund, Inc.
Alliance Global Dollar Government Fund, Inc.
Alliance Global Small Cap Fund, Inc.
Alliance Global Strategic Income Trust, Inc.
Alliance Growth and Income Fund, Inc.
25
<PAGE>
Alliance Income Builder Fund, Inc.
Alliance International Fund
Alliance Limited Maturity Government Fund, Inc.
Alliance Money Market Fund
Alliance Mortgage Securities Income Fund, Inc.
Alliance Multi-Market Strategy Trust, Inc.
Alliance Municipal Income Fund, Inc.
-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 Real Estate Investment Fund, Inc.
Alliance/Regency Sector Opportunity 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
26
<PAGE>
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 shares of the Fund
held by the investor and (b) all shares of any
other Alliance Mutual Fund held by the investor;
and
(iii) the net asset value of all shares described in
paragraph (ii) owned by another shareholder
eligible to combine his or her purchase with that
of the investor into a single "purchase" (see
above).
For example, if an investor owned shares of an Alliance
Mutual Fund worth $200,000 at their then current net asset value
and, subsequently, purchased Class A shares of the Fund worth an
additional $100,000, the sales charge for the $100,000 purchase
would be at the 2.25% rate applicable to a single $300,000
purchase of shares of the Fund, rather than the 3.25% rate.
To qualify for the Combined Purchase Privilege or to
obtain the Cumulative Quantity Discount on a purchase through a
selected dealer or agent, the investor or selected dealer or
agent must provide the Principal Underwriter with sufficient
information to verify that each purchase qualifies for the
privilege or discount.
Statement of Intention. Class A investors may also
obtain the reduced sales charges shown in the table above by
means of a written Statement of Intention, which expresses the
investor's intention to invest not less than $100,000 within a
period of 13 months in Class A shares (or Class A, Class B, Class
C and/or Advisor Class shares) of the Fund or any other Alliance
Mutual Fund. Each purchase of shares under a Statement of
Intention will be made at the public offering price or prices
applicable at the time of such purchase to a single transaction
of the dollar amount indicated in the Statement of Intention. At
the investor's option, a Statement of Intention may include
purchases of shares of the Fund or any other Alliance Mutual Fund
made not more than 90 days prior to the date that the investor
signs 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.
27
<PAGE>
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
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,
28
<PAGE>
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
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")
29
<PAGE>
of any such person; or any trust, individual retirement account
or retirement plan account for the benefit of any such person or
relative; or the estate of any such person or relative, if such
shares are purchased for investment purposes (such shares may not
be resold except to the Fund); (iii) the Adviser, the Principal
Underwriter, Alliance Fund Services, Inc. and their affiliates;
and 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) 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
30
<PAGE>
services fee incurred by Class B shares will cause such shares to
have a higher expense ratio and to pay lower dividends than those
related to Class A shares.
Contingent Deferred Sales Charge. Class B shares that
are redeemed within 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
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 4%
Second 3%
Third 2%
Fourth 1%
Thereafter None
In determining the contingent deferred sales charge
applicable to a redemption, it will be assumed that the
31
<PAGE>
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 three years, third
of any Class C shares that are subject to a contingent deferred
sales charge, and fourth of any 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 shares acquired in an exchange are redeemed, the
applicable contingent deferred sales charge and conversion
schedules will be the schedules that applied at the time of
purchase to shares of the corresponding class of the Alliance
Mutual Fund originally purchased by the shareholder.
The contingent deferred sales charge is waived on
redemptions of shares (i) following the death or disability, as
defined in the Internal Revenue Code of 1986, as amended (the
"Code"), of a shareholder, (ii) to the extent that the redemption
represents a minimum required distribution from an individual
retirement account or other retirement plan to a shareholder who
has attained the age of 70-1/2, (iii) that had been purchased by
present or former Directors of the Fund, by the relative of any
such person, by any trust, individual retirement account or
retirement plan account for the benefit of any such person or
relative, or by the estate of any such person or relative, or
(iv) pursuant to a systematic withdrawal plan (see "Shareholder
Services-Systematic Withdrawal Plan" below).
Conversion Feature. At the end of the period ending
eight years after the end of the calendar month in which the
shareholder's purchase order was accepted, Class B shares will
automatically convert to Class A shares and will no longer be
subject to a higher distribution services fee. Such conversion
will occur on the basis of the relative net asset values of the
two classes, without the imposition of any sales load, fee or
other charge. The purpose of the conversion feature is to reduce
the distribution services fee paid by holders of Class B shares
that have been outstanding long enough for the Principal
Underwriter to have been compensated for distribution expenses
incurred in the sale of such shares.
For purposes of conversion to Class A, Class B shares
purchased through the reinvestment of dividends and distributions
paid in respect of Class B shares in a shareholder's account will
be considered to be held in a separate sub-account. Each time
any Class B shares in the shareholder's account (other than those
in the sub-account) convert to Class A, an equal pro-rata portion
of the Class B shares in the sub-account will also convert to
Class A.
32
<PAGE>
The conversion of Class B shares to Class A shares is
subject to the continuing availability of an opinion of counsel
to the effect that the conversion of Class B shares to Class A
shares does not constitute a taxable event under federal income
tax law. The conversion of Class B shares to Class A shares may
be suspended if such an opinion is no longer available at the
time such conversion is to occur. In that event, no further
conversions of Class B shares would occur, and shares might
continue to be subject to the higher distribution services fee
for an indefinite period which may extend beyond the period
ending eight years after the end of the calendar month in which
the shareholder's purchase order was accepted.
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, as long as the shares are held
for one year or more, upon redemption. Class C shares are sold
without an initial sales charge so that the Fund will receive the
full amount of the investor's purchase payment and, as long as
the shares are held for one year or more, without a contingent
deferred sales charge so that the investor will receive as
proceeds upon redemption the entire net asset value of his or her
Class C shares. The Class C distribution services fee enables
the Fund to sell Class C shares without either an initial or
contingent deferred sales charge, as long as the shares are held
for one year or more. Class C shares do not convert to any other
class of shares of the Fund and incur higher distribution
services fees than Class A shares, and will thus have a higher
expense ratio and pay correspondingly lower dividends than Class
A shares.
Class C shares that are redeemed within one year of
purchase will be subject to a contingent deferred sales charge of
1%, charged as a percentage of the dollar amount subject thereto.
The charge will be assessed on an amount equal to the lesser of
the cost of the shares being redeemed or their net asset value at
the time of redemption. Accordingly, no sales charge will be
imposed on increases in net asset value above the initial
purchase price. In addition, no charge will be assessed on
shares derived from reinvestment of dividends or capital gains
distributions. The contingent deferred sales charge on Class C
shares will be waived on certain redemptions, and will be applied
to redemptions of shares by shareholders who hold both Class C
33
<PAGE>
shares and shares of one or more other classes subject to a
contingent deferred sales charge, as described above under "--
Deferred Sales Charge Alternative -- Class B Shares."
Proceeds from the contingent deferred sales charge are
paid to the Principal Underwriter and are used by the Principal
Underwriter to defray the expenses of the Principal Underwriter
related to providing distribution-related services to the Fund in
connection with the sale of the Class C shares, such as the
payment of compensation to selected dealers and agents for
selling Class C shares. The combination of the contingent
deferred sales charge and the distribution services fee enables
the Fund to sell the Class C shares without a sales charge being
deducted at the time of purchase. The higher distribution
services fee incurred by Class C shares will cause such shares to
have a higher expense ratio and to pay lower dividends than those
related to Class A shares.
________________________________________________________________
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 require that the Fund redeem the
shares tendered to it, as described below, at a redemption price
equal to their net asset value as next computed following the
receipt of shares tendered for redemption in proper form. Except
for any contingent deferred sales charge that may be applicable
to Class A, Class B and Class C shares, there is no redemption
charge. Payment of the redemption price will be made within
seven days after the Fund's receipt of such tender for
redemption. If a shareholder is in doubt about what documents
are required by his or her fee-based program or employee benefit
plan, the shareholder should contact his or her financial
representative.
The right of redemption may not be suspended or the date
of payment upon redemption postponed for more than seven days
after shares are tendered for redemption, except for any period
during which the Exchange is closed (other than customary weekend
and holiday closings) or during which the Commission determines
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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, Class B and
Class C 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 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. Each
Fund shareholder is entitled to request redemption by electronic
funds transfer once in any 30 day period (except for certain
omnibus accounts) of shares for which no stock certificates have
been issued by telephone at (800) 221-5672 by a shareholder who
has completed the appropriate portion of the Subscription
Application or, in the case of an existing shareholder, an
"Autosell" application obtained from Alliance Fund Services, Inc.
A telephone redemption request may not exceed $100,000 (except
for certain omnibus accounts), and must be made by 4:00 p.m.
Eastern time on a Fund business day as defined above. Proceeds
of telephone redemptions will be sent by Electronic Funds
Transfer to a shareholder's designated bank account at a bank
selected by the shareholder that is a member of the NACHA.
Telephone Redemption By Check. Except for certain
omnibus accounts or as noted below, each Fund shareholder is
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<PAGE>
eligible to request redemption by check, once in any 30-day
period, of Fund shares for which no stock certificates have been
issued by telephone at (800) 221-5672 before 4:00 p.m. Eastern
time on a Fund business day in an amount not exceeding $50,000.
Proceeds of such redemptions are remitted by check to the
shareholder's address of record. Telephone redemption by check
is not available with respect to shares (i) for which
certificates have been issued, (ii) held in nominee or "street
name" accounts, (iii) held by a shareholder who has changed his
or her address of record within the preceding 30 calendar days or
(iv) held in any retirement plan account. A shareholder
otherwise eligible for telephone redemption by check may cancel
the privilege by written instruction to Alliance Fund Services,
Inc., or by checking the appropriate box on the Subscription
Application found in the Prospectus.
Telephone Redemption--General. During periods of
drastic economic or market developments, such as the market break
of October 1987, it is possible that shareholders would have
difficulty in reaching Alliance Fund Services, Inc. by telephone
(although no such difficulty was apparent at any time in
connection with the 1987 market break). If a shareholder were to
experience such difficulty, the shareholder should issue written
instructions to Alliance Fund Services, Inc. at the address shown
on the cover of this Statement of Additional Information. The
Fund reserves the right to suspend or terminate its telephone
redemption service at any time without notice. Neither the Fund
nor the Adviser, the Principal Underwriter or Alliance Fund
Services, Inc. will be responsible for the authenticity of
telephone requests for redemptions that the Fund reasonably
believes to be genuine. The Fund will employ reasonable
procedures in order to verify that telephone requests for
redemptions are genuine, including, among others, recording such
telephone instructions and causing written confirmations of the
resulting transactions to be sent to shareholders. If the Fund
did not employ such procedures, it could be liable for losses
arising from unauthorized or fraudulent telephone instructions.
Selected dealers or agents may charge a commission for handling
telephone requests for redemptions.
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
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<PAGE>
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, selected financial intermediaries or selected
dealers or agents. The repurchase price will be the net asset
value next determined after the Principal Underwriter receives
the request (less the contingent deferred sales charge, if any,
with respect to the Class A, Class B and Class C shares), except
that requests placed through selected dealers or agents before
the close of regular trading on the Exchange on any day will be
executed at the net asset value determined as of such close of
regular trading on that day if received by the Principal
Underwriter prior to its close of business on that day (normally
5:00 p.m. Eastern time). The financial intermediary or selected
dealer or agent is responsible for transmitting the request to
the Principal Underwriter by 5:00 p.m. If the financial
intermediary or selected dealer or agent fails to do so, the
shareholder's right to receive that day's closing price must be
settled between the shareholder and the dealer or agent. A
shareholder may offer shares of the Fund to the Principal
Underwriter either directly or through a selected dealer or
agent. Neither the Fund nor the Principal Underwriter charges a
fee or commission in connection with the repurchase of shares
(except for the contingent deferred sales charge, if any, with
respect to Class A, Class B and Class C shares). Normally, if
shares of the Fund are offered through a financial intermediary
or selected dealer or agent, the repurchase is settled by the
shareholder as an ordinary transaction with or through the
selected dealer or agent, who may charge the shareholder for this
service. The repurchase of shares of the Fund as described above
is a voluntary service of the Fund and the Fund may suspend or
terminate this practice at any time.
General
The Fund reserves the right to close out an account that
through redemption has remained below $200 for 90 days.
Shareholders will receive 60 days' written notice to increase the
account value before the account is closed. No contingent
deferred sales charge will be deducted from the proceeds of this
redemption. In the case of a redemption or repurchase of shares
37
<PAGE>
of the Fund recently purchased by check, redemption proceeds will
not be made available until the Fund is reasonably assured that
the check has cleared, normally up to 15 calendar days following
the purchase date.
________________________________________________________________
SHAREHOLDER SERVICES
________________________________________________________________
The following information supplements that set forth in
the Fund's Prospectus under the heading "Purchase and Sale of
Shares--Shareholder Services." The shareholder services set
forth below are applicable to Class A, Class B, Class C and
Advisor Class shares unless otherwise indicated. If you are an
Advisor Class shareholder through an account established under a
fee-based program your fee-based program may impose requirements
with respect to the purchase, sale or exchange of Advisor Class
shares of the Fund that are different from those described
herein. A transaction fee may be charged by your financial
representative with respect to the purchase, sale or exchange of
Advisor Class shares made through such financial representative.
Automatic Investment Program
Investors may purchase shares of the Fund through an
automatic investment program utilizing "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
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.
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Exchange Privilege
You may exchange your investment in the Fund for shares
of the same class of other Alliance Mutual Funds (including AFD
Exchange Reserves, a money market fund managed by Alliance). If
you make an exchange, you may exchange the shares of AFD Exchange
Reserves received in return only for shares of the Fund.
Exchanges of shares are made at the net asset value next
determined and without sales or service charges. Exchanges may
be made by telephone or written request. Telephone exchange
requests must be received by AFS by 4:00 p.m. Eastern time on a
Fund business day in order to receive that day's net asset value.
Shares will continue to age without regard to exchanges
for 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.
All exchanges are subject to the minimum investment
requirements and any other applicable terms set forth in the
Prospectus for the Alliance Mutual Fund whose shares are being
acquired. An exchange is effected through the redemption of the
shares tendered for exchange and the purchase of shares being
acquired at their respective net asset values as next determined
following receipt by the Alliance Mutual Fund whose shares are
being exchanged of (i) proper instructions and all necessary
supporting documents as described in such fund's Prospectus, or
(ii) a telephone request for such exchange in accordance with the
procedures set forth in the following paragraph. Exchanges
involving the redemption of shares recently purchased by check
will be permitted only after the Alliance Mutual Fund whose
shares have been tendered for exchange is reasonably assured that
the check has cleared, normally up to 15 calendar days following
the purchase date. Exchanges of shares of Alliance Mutual Funds
will generally result in the realization of a capital gain or
loss for Federal income tax purposes.
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Each Fund shareholder, and the shareholder's selected
dealer, agent or financial representative, as applicable, are
authorized to make telephone requests for exchanges unless
Alliance Fund Services, Inc., receives written instruction to the
contrary from the shareholder, or the shareholder declines the
privilege by checking the appropriate box on the Subscription
Application found in the Prospectus. Such telephone requests
cannot be accepted with respect to shares then represented by
stock certificates. Shares acquired pursuant to a telephone
request for exchange will be held under the same account
registration as the shares redeemed through such exchange.
Eligible shareholders desiring to make an exchange
should telephone Alliance Fund Services, Inc. with their account
number and other details of the exchange, at (800) 221-5672
before 4:00 p.m., Eastern time, on a Fund business day as defined
above. Telephone requests for exchange received before 4:00 p.m.
Eastern time on a Fund business day will be processed as of the
close of business on that day. During periods of drastic
economic or market developments, such as the market break of
October 1987, it is possible that shareholders would have
difficulty in reaching Alliance Fund Services, Inc. by telephone
(although no such difficulty was apparent at any time in
connection with the 1987 market break). If a shareholder were to
experience such difficulty, the shareholder should issue written
instructions to Alliance Fund Services, Inc. at the address shown
on the cover of this Statement of Additional Information.
A shareholder may elect to initiate a monthly "Auto
Exchange" whereby a specified dollar amount's worth of his or her
Fund shares (minimum $25) is automatically exchanged for shares
of another Alliance Mutual Fund. Auto Exchange transactions
normally occur on the 12th day of each month, or the Fund
business day prior thereto.
None of the Alliance Mutual Funds, the Adviser, the
Principal Underwriter or Alliance Fund Services, Inc. will be
responsible for the authenticity of telephone requests for
exchanges that the Fund reasonably believes to be genuine. The
Fund will employ reasonable procedures in order to verify that
telephone requests for exchanges are genuine, including, among
others, recording such telephone instructions and causing written
confirmations of the resulting transactions to be sent to
shareholders. If the Fund did not employ such procedures, it
could be liable for losses arising from unauthorized or
fraudulent telephone instructions. Selected dealers, agents or
40
<PAGE>
financial representatives, as applicable may charge a commission
for handling telephone requests for exchanges.
The exchange privilege is available only in states where
shares of the Alliance Mutual 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-
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
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<PAGE>
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
initial investment should complete the appropriate section of the
Subscription Application found in the Prospectus. Current
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<PAGE>
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
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<PAGE>
form by contacting Alliance Fund Services, Inc. at the address or
the "Literature" telephone number shown on the cover of this
Statement of Additional Information.
Class B and Class C 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 and the Class C
shares in a shareholder's account acquired on or after July 1,
1996 may be redeemed free of any contingent deferred sales
charge. Class B shares acquired after July 1, 1995 and Class C
shares acquired on or after July 1, 1996 that are not subject to
a contingent deferred sales charge (such as shares acquired with
reinvested dividends or distributions or shares held beyond the
period during which shares are subject to a contingent deferred
sales charge) will be redeemed first and will count toward these
limitations. Remaining Class B shares acquired after July 1,
1995 that are held the longest and remaining Class C shares
acquired on or after July 1, 1996 that are held the longest will
be redeemed next. Redemptions of Class B shares acquired after
July 1, 1995 and Class C shares acquired on or after July 1, 1996
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.
________________________________________________________________
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,
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<PAGE>
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, readily marketable
portfolio securities listed on the Exchange are valued, except as
indicated below, at the last sale price reflected on the
consolidated tape at the close of the Exchange on the business
day as of which such value is being determined. If there has
been no sale on such day, the securities are valued at the mean
of the closing bid and asked prices on such day. If no bid or
asked prices are quoted on such day, then the security is valued
by such method as the Directors of the Fund shall determine in
good faith to reflect its fair market value. Readily marketable
securities not listed on the Exchange but listed on other
national securities exchanges or admitted to trading on the
National Association of Securities Dealers Automatic Quotations,
Inc. ("NASDAQ") National List ("List") are valued in like manner.
Portfolio securities traded on more than one national securities
exchange are valued at the last sale price on the business day as
of which such value is being determined as reflected on the tape
at the close of the exchange representing the principal market
for such securities.
Readily marketable securities traded only in the over-
the-counter market, including listed securities whose primary
market is believed by the Adviser to be over-the-counter but
excluding those admitted to trading on the List, are valued at
the mean of the current bid and asked prices as reported by
NASDAQ or, in the case of securities not quoted by NASDAQ, the
National Quotation Bureau or such other comparable sources as the
Directors of the Fund deem appropriate to reflect their fair
market value. United States Government obligations and other
debt instruments having sixty days or less remaining until
maturity are stated at amortized cost which approximates market
value. All other assets of the Fund, including restricted and
not readily marketable securities, are valued in such manner as
the Directors of the Fund in good faith deem appropriate to
reflect their fair market value.
The assets belonging to the Class A shares, Class B
shares, Class C shares and Advisor Class shares will be invested
together in a single portfolio. The net asset value of each
class will be determined separately by subtracting the 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.
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________________________________________________________________
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
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.
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.
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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
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
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<PAGE>
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
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.
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
48
<PAGE>
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.
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 disposition 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.
BROKERAGE AND PORTFOLIO TRANSACTIONS
The management of the Fund has the responsibility for
allocating its brokerage orders and may direct orders to any
broker. It is the Fund's general policy to seek favorable net
prices and prompt reliable execution in connection with the
purchase or sale of all portfolio securities. In the purchase
and sale of over-the-counter securities, it is the Fund's policy
to use the primary market makers except when a better price can
be obtained by using a broker. The Board of Directors has
approved, as in the best interests of the Fund and the
shareholders, a policy of considering, among other factors, sales
of the Fund's shares as a factor in the selection of broker-
dealers to execute portfolio transactions, subject to best
execution. The Adviser is authorized under the Advisory
Agreement to place brokerage business with such brokers and
dealers. The use of brokers who supply supplemental research and
analysis and other services may result in the payment of higher
commissions than those available from other brokers and dealers
who provide only the execution of portfolio transactions. In
addition, the supplemental research and analysis and other
services that may be obtained from brokers and dealers through
which brokerage transactions are affected may be useful to the
Adviser in connection with advisory clients other than the Fund.
49
<PAGE>
Investment decisions for the Fund are made independently
from those for other investment companies and other advisory
accounts managed by the Adviser. It may happen, on occasion,
that the same security is held in the portfolio of the Fund and
one or more of such other companies or accounts. Simultaneous
transactions are likely when several funds or accounts are
managed by the same Adviser, particularly when a security is
suitable for the investment objectives of more than one of such
companies or accounts. When two or more companies or accounts
managed by the Adviser are simultaneously engaged in the purchase
or sale of the same security, the transactions are allocated to
the respective companies or accounts both as to amount and price,
in accordance with a method deemed equitable to each company or
account. In some cases this system may adversely affect the
price paid or received by the Fund or the size of the position
obtainable for the Fund.
Allocations are made by the officers of the Fund or of
the Adviser. Purchases and sales of portfolio securities are
determined by the Adviser and are placed with broker-dealers by
the order department of the Adviser.
The extent to which commissions that will be charged by
broker-dealers selected by the Fund may reflect an element of
value for research cannot presently be determined. To the extent
that research services of value are provided by broker-dealers
with or through whom the Fund places portfolio transactions, the
Adviser may be relieved of expenses which it might otherwise
bear. Research services furnished by broker-dealers could be
useful and of value to the Adviser in servicing its other clients
as well as the Fund; but, on the other hand, certain research
services obtained by the Adviser as a result of the placement of
portfolio brokerage of other clients could be useful and of value
to it in serving the Fund. Consistent with the Rules of Fair
Practice of the National Association of Securities Dealers, Inc.
and subject to seeking best execution, the Fund may consider
sales of shares of the Fund or other investment companies managed
by the Adviser as a factor in the selection of brokers to execute
portfolio transactions for the Fund.
The Fund may from time to time place orders for the
purchase or sale of securities (including listed call options)
with Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"),
an affiliate of the Adviser, and with brokers which may have
their transactions cleared or settled, or both, by the Pershing
Division of DLJ for which DLJ may receive a portion of the
brokerage commissions. In such instances, the placement of
orders with such brokers would be consistent with the Fund's
50
<PAGE>
objective of obtaining best execution and would not be dependent
upon the fact that DLJ is 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 designated as Advisor Class 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, 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
[ ] will act
as the Fund's custodian. The Fund's securities and cash are held
under a custodian agreement by [ ]. Rules adopted
under the 1940 Act permit the Fund to maintain its securities and
51
<PAGE>
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 Commission.
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
[ ] have been
appointed as independent auditors for the Fund.
Total Return Quotations
From time to time the Fund advertises its "total
return." Computed separately for each class, the Fund's "total
return" is its average annual compounded total return for recent
one, five, and ten-year periods (or the period since the Fund's
inception). The Fund's total return for such a period is
computed by finding, through the use of a formula prescribed by
the Securities and Exchange Commission, the average annual
compounded rate of return over the period that would equate an
assumed initial amount invested to the value of such investment
at the end of the period. For purposes of computing total
return, income dividends and capital gains distributions paid on
shares of the Fund are assumed to have been reinvested when paid
52
<PAGE>
and the maximum sales charge applicable to purchases of Fund
shares is assumed to have been paid. The Fund will include
performance data for all classes of shares of the Fund in any
advertisement or information including performance data of the
Fund.
The Fund's total return is not fixed and will fluctuate
in response to prevailing market conditions or as a function of
the type and quality of the securities in the Fund's portfolio
and its expenses. Total return information is useful in
reviewing the Fund's performance but such information may not
provide a basis for comparison with bank deposits or other
investments which pay a fixed yield for a stated period of time.
An investor's principal invested in the Fund is not fixed and
will fluctuate in response to prevailing market conditions.
Advertisements quoting performance rankings of the Fund
as measured by financial publications or by independent
organizations such as Lipper Analytical Services, Inc. ("Lipper")
and Morningstar, Inc., and advertisements presenting the
historical record of payments of income dividends 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.
53
00250231.AD1
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. Financial Statements and Exhibits.
(a) Financial Statements
No financial statements are included in this
Registration Statement since, on the date of filing, the
Registrant, being a newly organized corporation, has no
assets or known liabilities and has sold no shares of
common stock. Prior to the effective date of this
Registration Statement, the necessary financial
statements will be filed by amendment hereto.
(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.2
(b) Form of Share Certificate for Class B Shares.*
(c) Form of Share Certificate for Class C Shares.*
(d) Form of Share Certificate for Advisor Class
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.*
_________________________
2. To be filed in a subsequent pre-effective amendment.
C-1
<PAGE>
(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 [ ].*
(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 &
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.*
ITEM 25. Persons Controlled by or under Common Control with
Registrant.
None. The Registrant is a recently organized
corporation and has no outstanding shares of common
stock.
___________________________
* To be filed in a subsequent pre-effective amendment
** To be filed in a post-effective amendment.
C-2
<PAGE>
ITEM 26. Number of Holders of Securities.
None. The Registrant is a recently organized
corporation and has not issued any securities as of the
date of this Registration Statement.
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, which is
incorporated by reference herein, and as set forth in
Article EIGHTH of Registrant's Articles of
Incorporation, filed as Exhibit 1 hereto, Article VII
and Article VIII of Registrant's By-Laws, filed as
Exhibit 2 hereto, and Section 10 of the proposed
Distribution Services Agreement, to be filed by Pre-
Effective Amendment as Exhibit 6(a) hereto. 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, to be filed by Pre-
Effective Amendment as Exhibit 5 hereto.
C-3
<PAGE>
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
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
directors"), 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
C-4
<PAGE>
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.
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. is the
Registrant's Principal Underwriter in connection
with the sale of shares of the Registrant.
Alliance Fund Distributors, Inc. also acts as
Principal Underwriter or Distributor for the
following investment companies:
C-5
ACM Institutional Reserves, Inc.
AFD Exchange Reserves
Alliance All-Asia Investment Fund, Inc.
Alliance Balanced Shares, Inc.
Alliance Bond Fund, Inc.
Alliance Capital Reserves
Alliance Developing Markets Fund, Inc.
Alliance Global Dollar Government Fund, Inc.
Alliance Global Small Cap Fund, Inc.
Alliance Global Strategic Income Trust, Inc.
Alliance Government Reserves
Alliance Growth and Income Fund, Inc.
Alliance Income Builder Fund, Inc.
Alliance International Fund
Alliance Limited Maturity Government Fund, Inc.
Alliance Money Market Fund
Alliance Mortgage Securities Income Fund, Inc.
Alliance Multi-Market Strategy Trust, Inc.
Alliance Municipal Income Fund, Inc.
Alliance Municipal Income Fund, 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 Variable Products Series Fund, Inc.
Alliance World Income Trust, Inc.
Alliance Worldwide Privatization Fund, Inc.
Fiduciary Management Associates
The Alliance Fund, Inc.
The Alliance Portfolios
(b) The following are the Directors and officers of
Alliance Fund Distributors, Inc., the principal
place of business of which is 1345 Avenue of the
Americas, New York, New York, 10105.
Positions and Offices Positions and Offices
Name With Underwriter With Registrant
____ ____________________ _____________________
Michael J. Laughlin Chairman
C-6
Robert L. Errico President
Edmund P. Bergan, Jr. Senior Vice President, Secretary
General Counsel, and
Secretary
Daniel J. Dart Senior Vice President
Richard A. Davies Senior Vice President,
Managing Director
Byron M. Davis Senior Vice President
Kimberly A. Gardner Senior Vice President
Geoffrey L. Hyde Senior Vice President
Richard S. Khaleel Senior Vice President
Barbara J. Krumseik Senior Vice President
Stephen R. Laut Senior Vice President
Daniel D. McGinley Senior Vice President
Dusty W. Paschall Senior Vice President
Antonios G. Poleonadkis Senior Vice President
Gregory K. Shannahan Senior Vice President
Joseph F. Sumanski Senior Vice President
Peter J. Szabo Senior Vice President
Nicholas K. Willett Senior Vice President
Richard A. Winge Senior Vice President
Jamie A. Atkinson Vice President
Warren C. Babcock, III Vice President
Benji A. Baer Vice President
Kenneth F. Barkoff Vice President
William P. Beanblossum Vice President
C-7
Jack C. Bixler Vice President
Casimir F. Bolanowski Vice President
Kevin T. Cannon Vice President
William W. Collins, Jr. Vice President
Leo H. Cook Vice President
Richard W. Dabney Vice President
John F. Dolan Vice President
Mark J. Dunbar Vice President
Sohaila S. Farsheed 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 Secretary
& Assistant General
Counsel
Mark D. Gersten Vice President Treasurer and
Chief
Financial
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
Daniel M. Hazard Vice President
C-8
George R. Hrabovsky Vice President
Valerie J. Hugo Vice President
Thomas K. Intoccia Vice President
Robert H. Joseph, Jr. Vice President & Treasurer
Richard D. Keppler Vice President
Sheila F. Lamb Vice President
Donna M. Lamback Vice President
Thomas Leavitt, III Vice President
James M. Liptrot Vice President
Shawn P. McClain Vice President
James P. Luisi Vice President
Christopher J. MacDonald Vice President
Michael F. Mahoney Vice President
Maura A. McGrath Vice President
Matthew P. Mintzer Vice President
Joanna D. Murray Vice President
Nicole Nolan-Koester Vice President
Daniel J. Phillips Vice President
Robert T. Pigozzi Vice President
James J. Posch Vice President
Robert E. Powers Vice President
Domenick Pugliese Vice President &
Associate General
Counsel
Bruce W. Reitz Vice President
C-9
Dennis A. Sanford Vice President
Karen C. Satterberg Vice President
Raymond S. Sclafani Vice President
Richard J. Sidell Vice President
J. William Strott, Jr. Vice President
Richard E. Tambourine Vice President
Joseph T. Tocyloski Vice President
Neil S. Wood Vice President
Emilie D. Wrapp Vice President &
Special Counsel
Maria L. Carreras Assistant Vice President
John W. Cronin Assistant Vice President
Leon M. Fern Assistant Vice President
William B. Hanigan Assistant Vice President
John C. Hershock Assistant Vice President
James J. Hill Assistant Vice President
Edward W. Kelly Assistant Vice President
Nicholas J. Lapi Assistant Vice President
Patrick Look Assistant Vice President &
Assistant Treasurer
Thomas F. Monnerat Assistant Vice President
Jeanette M. Nardella Assistant Vice President
Carol H. Rappa Assistant Vice President
Lisa Robinson-Cronin Assistant Vice President
Robert M. Smith Assistant Vice President
C-10
Wesley S. Williams Assistant Vice President
Mark R. Manley 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 [ ] the
Registrant's custodian, [ ]. All other
records so required to be maintained are maintained at
the offices of Alliance Capital Management L.P., 1345
Avenue of the Americas, New York, New York, 10105.
ITEM 31. Management Services.
Not applicable.
ITEM 32. Undertakings.
(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-11
00250231.AD1
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 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 15th day of July 1996.
Alliance Real Estate Investment
Fund, Inc.
/s/ John D. Carifa
__________________________________
John D. Carifa
Chairman and President
Pursuant to the requirements of the Securities Act of
1933, as amended, this 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 July 15, 1996
______________________ President
John D. Carifa
(2) Principal Financial
and Accounting Officer:
/s/ Mark D. Gersten Treasurer July 15, 1996
_____________________ and Chief
Mark D. Gersten Financial
Officer
(3) Sole Director:
/s/ Edmund P. Bergan, Jr.
_________________________ July 15, 1996
Edmund P. Bergan, Jr.
C-12
00250231.AD1
Index To Exhibits
Page
1 Copy of Articles of Incorporation.................
2 Copy of By-Laws of the Registrant.................
00250231.AD1
<PAGE>
ARTICLES OF INCORPORATION
OF
ALLIANCE REAL ESTATE INVESTMENT FUND, INC.
FIRST: (1) The name of the incorporator is William
E. Schwartz.
(2) The incorporator's post office address is
One Battery Park Plaza, New York, New York 10004.
(3) The incorporator is over eighteen years
of age.
(4) The incorporator is forming the
corporation named in these Articles of Incorporation under the
general laws of the State of Maryland.
SECOND: The name of the corporation (hereinafter
called the Corporation) is Alliance Real Estate Investment Fund,
Inc.
THIRD: (1) The purposes for which the Corporation is
formed is to conduct, operate and carry on the business of an
investment company.
(2) The Corporation may engage in any other
business and shall have all powers conferred upon or permitted to
corporations by the Maryland General Corporation Law.
FOURTH: The post office address of the principal
office of the Corporation within the State of Maryland is 32
South Street, Baltimore, Maryland 21202 in care of The
Corporation Trust, Incorporated. The resident agent of the
Corporation in the State of Maryland is The Corporation Trust,
Incorporated, 32 South Street, Baltimore, Maryland 21202, a
Maryland Corporation.
FIFTH: (1) The total number of shares of capital
stock which the Corporation shall have authority to issue is
twelve billion (12,000,000,000), all of which shall be Common
Stock having a par value of one-tenth of one cent ($.001) per
share and an aggregate par value of twelve million dollars
($12,000,000). Until such time as the Board of Directors shall
provide otherwise in accordance with paragraph (1)(d) of
Article SEVENTH hereof, three billion (3,000,000,000) of the
authorized shares of Common Stock of the Corporation are
designated as Class A Common Stock, three billion (3,000,000,000)
of such shares are designated as Class B Common Stock, three
<PAGE>
billion (3,000,000,000) of such shares are designated as Class C
Common Stock and three billion (3,000,000,000) of such shares are
designated as Class Y Common Stock.
(2) As more fully set forth hereafter, the
assets and liabilities and the income and expenses of each class
of the Corporation's stock shall be determined separately from
those of each other class of the Corporation's stock and,
accordingly, the net asset value, the dividends and distributions
payable to holders, and the amounts distributable in the event of
dissolution of the Corporation to holders of shares of the
Corporation's stock may vary from class to class. Except for
these differences and certain other differences hereafter set
forth or provided for, each class of the Corporation's stock
shall have the same preferences, conversion and other rights,
voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of and rights to require
redemption of each other class of the Corporation's stock except
as otherwise provided for by the Board of Directors pursuant to
paragraph (1)(d) of Article SEVENTH hereof.
(3) All consideration received by the
Corporation for the issue or sale of shares of a class of the
Corporation's stock, together with all funds derived from any
investment and reinvestment thereof, shall irrevocably remain
attributable to that class for all purposes, subject only to any
automatic conversion of one class of stock into another, as
hereinafter provided for, and the rights of creditors, and shall
be so recorded upon the books of account of the Corporation. The
assets attributable to the Class A Common Stock, the assets
attributable to the Class B Common Stock, the assets attributable
to the Class C Common Stock and the assets attributable to
Class Y Common Stock shall be invested in the same investment
portfolio of the Corporation.
(4) The allocation of investment income and
capital gains and expenses and liabilities of the Corporation
among the Class A Common Stock, Class B Common Stock, Class C
Common Stock and Class Y Common Stock shall be determined by the
Board of Directors in a manner that is consistent with the
Investment Company Act of 1940, the rules and regulations
thereunder, and the interpretations thereof, in each case as from
time to time amended, modified or superseded. The determination
of the Board of Directors shall be conclusive as to the
allocation of investment income or capital gains, expenses and
liabilities (including accrued expenses and reserves) and assets
to a particular class or classes.
(5) Shares of each class of stock shall be
entitled to such dividends or distributions, in stock or in cash
or both, as may be declared from time to time by the Board of
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Directors with respect to such class. Specifically, and without
limiting the generality of the foregoing, the dividends and
distributions of investment income and capital gains with respect
to the Class A Common Stock, Class B Common Stock, Class C Common
Stock and Class Y Common Stock may vary with respect to each such
class to reflect differing allocations of the expenses of the
Corporation among the holders of the four classes and any
resultant differences between the net asset values per share of
the four classes, to such extent and for such purposes as the
Board of Directors may deem appropriate. The Board of Directors
may provide that dividends shall be payable only with respect to
those shares of stock that have been held of record continuously
by the stockholder for a specified period, not to exceed 72
hours, prior to the record date of the dividend.
(6) On each matter submitted to a vote of the
stockholders, each holder of stock shall be entitled to one vote
for each share standing in his or her name on the books of the
Corporation. Subject to any applicable requirements of the
Investment Company Act of 1940, as from time to time in effect,
or rules or orders of the Securities and Exchange Commission or
any successor thereto, or other applicable law, all holders of
shares of stock shall vote as a single class except with respect
to any matter which affects only one or more (but less than all)
classes of stock, in which case only the holders of shares of the
classes affected shall be entitled to vote. Without limiting the
generality of the foregoing, and subject to any applicable
requirements of the Investment Company Act of 1940, as from time
to time in effect, or rules or orders of the Securities and
Exchange Commission or any successor thereto, or other applicable
law, the holders of each of the Class A Common Stock, Class B
Common Stock, Class C Common Stock, and Class Y Common Stock
shall have, respectively, with respect to any matter submitted to
a vote of stockholders (i) exclusive voting rights with respect
to any such matter that only affects the class of Common Stock of
which they are holders, including, without limitation, the
provisions of any distribution plan adopted by the Corporation
pursuant to Rule 12b-1 under the Investment Company Act of 1940
(a "Plan") with respect to the class of which they are holders
and (ii) no voting rights with respect to the provisions of any
Plan that affects one or more of such other classes of Common
Stock, but not the class of which they are holders, or with
respect to any other matter that does not affect the class of
Common Stock of which they are holders.
(7) In the event of the liquidation or
dissolution of the Corporation, stockholders of each class of the
Corporation's stock shall be entitled to receive, as a class, out
of the assets of the Corporation available for distribution to
stockholders, but other than general assets not attributable to
any particular class of stock, the assets attributable to the
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class less the liabilities allocated to that class; and the
assets so distributable to the stockholders of any class of stock
shall be distributed among such stockholders in proportion to the
number of shares of the class held by them and recorded on the
books of the Corporation. In the event that there are any
general assets not attributable to any particular class of stock,
and such assets are available for distribution, the distribution
shall be made to the holders of all classes in proportion to the
net asset value of the respective classes or as otherwise
determined by the Board of Directors.
(8) (a) Each holder of stock may require the
Corporation to redeem all or any part of the stock owned by that
holder, upon request to the Corporation or its designated agent,
at the net asset value of the shares of stock next determined
following receipt of the request in a form approved by the
Corporation and accompanied by surrender of the certificate or
certificates for the shares, if any, less the amount of any
applicable redemption charge or deferred sales charge or other
amount imposed by the Board of Directors (to the extent
consistent with applicable law). The Board of Directors may
establish procedures for redemption of stock.
(b) The proceeds of the redemption of a
share (including a fractional share) of any class of capital
stock of the Corporation shall be reduced by the amount of any
contingent deferred sales charge, redemption fee or other amount
payable on such redemption pursuant to the terms of issuance of
such share.
(c) (i) The term "Minimum Amount" when
used herein shall mean two hundred dollars ($200) unless
otherwise fixed by the Board of Directors from time to time,
provided that the Minimum Amount may not in any event exceed
twenty-five thousand dollars ($25,000). The Board of Directors
may establish differing Minimum Amounts for categories of holders
of stock based on such criteria as the Board of Directors may
deem appropriate.
(ii) If the net asset value of the
shares of a class of stock held by a stockholder shall be less
than the Minimum Amount then in effect with respect to the
category of holders in which the stockholder is included, the
Corporation may redeem all of those shares, upon notice given to
the holder in accordance with paragraph (iii) of this
subsection (c), to the extent that the Corporation may lawfully
effect such redemption under the laws of the State of Maryland.
(iii) The notice referred to in
paragraph (ii) of this subsection (c) shall be in writing
personally delivered or deposited in the mail, at least thirty
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days (or such other number of days as may be specified from time
to time by the Board of Directors) prior to such redemption. If
mailed, the notice shall be addressed to the stockholder at his
post office address as shown on the books of the Corporation, and
sent by first class mail, postage prepaid. The price for shares
acquired by the Corporation pursuant to this subsection (c) shall
be an amount equal to the net asset value of such shares.
(d) Payment by the Corporation for
shares of stock of the Corporation surrendered to it for
redemption shall be made by the Corporation within seven days of
such surrender out of the funds legally available therefor,
provided that the Corporation may suspend the right of the
stockholders to redeem shares of stock and may postpone the right
of those holders to receive payment for any shares when permitted
or required to do so by applicable statutes or regulations.
Payment of the aggregate price of shares surrendered for
redemption may be made in cash or, at the option of the
Corporation, wholly or partly in such portfolio securities of the
Corporation as the Corporation shall select.
(9) At such times as may be determined by the
Board of Directors (or with the authorization of the Board of
Directors, by the officers of the Corporation) in accordance with
the Investment Company Act of 1940, applicable rules and
regulations thereunder and applicable rules and regulations of
the National Association of Securities Dealers, Inc. and from
time to time reflected in the registration statement of the
Corporation (the "Corporation's Registration Statement"), shares
of a particular class of stock of the Corporation or certain
shares of a particular class of stock of the Corporation may be
automatically converted into shares of another class of stock of
the Corporation based on the relative net asset values of such
classes at the time of conversion, subject, however, to any
conditions of conversion that may be imposed by the Board of
Directors (or with the authorization of the Board of Directors,
by the officers of the Corporation) and reflected in the
Corporation's Registration Statement. The terms and conditions
of such conversion may vary within and among the classes to the
extent determined by the Board of Directors (or with the
authorization of the Board of Directors, by the officers of the
Corporation) and set forth in the Corporation's Registration
Statement.
(10) For the purpose of allowing the net
asset value per share of a class of the Corporation's stock to
remain constant, the Corporation shall be entitled to declare and
pay and/or credit as dividends daily the net income (which may
include or give effect to realized and unrealized gains and
losses, as determined in accordance with the Corporation's
accounting and portfolio valuation policies) of the Corporation
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attributable to the assets attributable to that class. If the
amount so determined for any day is negative, the Corporation
shall be entitled, without the payment of monetary compensation
but in consideration of the interest of the Corporation and its
stockholders in maintaining a constant net asset value per share
of that class, to redeem pro rata from all the holders of record
of shares of that class at the time of such redemption (in
proportion to their respective holdings thereof) sufficient
outstanding shares of that class, or fractions thereof, as shall
permit the net asset value per share of that class to remain
constant.
(11) The Corporation may issue shares of
stock in fractional denominations to the same extent as its whole
shares, and shares in fractional denominations shall be shares of
stock having proportionately to the respective fractions
represented thereby all the rights of whole shares, including,
without limitation, the right to vote, the right to receive
dividends and distributions, and the right to participate upon
liquidation of the Corporation, but excluding the right to
receive a stock certificate representing fractional shares.
(12) No stockholder shall be entitled to any
preemptive right other than as the Board of Directors may
establish.
SIXTH: The number of directors of the Corporation
shall be one. The number of directors of the Corporation may be
changed pursuant to the By-Laws of the Corporation. The name of
the person who shall act as director of the Corporation until the
first annual meeting or until his successor is chosen and
qualified is Edmund P. Bergan, Jr.
SEVENTH: The following provisions are inserted for the
purpose of defining, limiting and regulating the powers of the
Corporation and of the Board of Directors and stockholders.
(1) In addition to its other powers explicitly or
implicitly granted under these Articles of Incorporation, by law
or otherwise, the Board of Directors of the Corporation:
(a) is expressly authorized to make, alter,
amend or repeal the By-Laws of the Corporation;
(b) may from time to time determine whether,
to what extent, at what times and places, and under what
conditions and regulations the accounts and books of the
Corporation, or any of them, shall be open to the inspection of
the stockholders, and no stockholder shall have any right to
inspect any account, book or document of the Corporation except
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as conferred by statute or as authorized by the Board of
Directors of the Corporation;
(c) is empowered to authorize, without
stockholder approval, the issuance and sale from time to time of
shares of stock of the Corporation whether now or hereafter
authorized and securities convertible into shares of stock of the
Corporation of any class or classes, whether now or hereafter
authorized, for such consideration as the Board may deem
advisable.
(d) is authorized to classify or to
reclassify, from time to time, any unissued shares of stock of
the Corporation, whether now or hereafter authorized, by setting,
changing or eliminating the preferences, conversion or other
rights, voting powers, restrictions, limitations as to dividends,
qualifications or terms and conditions of or rights to require
redemption of the stock. The provisions of these Articles of
Incorporation (including those in Article FIFTH hereof) shall
apply to each class of stock unless otherwise provided by the
Board of Directors prior to issuance of any shares of that class;
and
(e) is authorized to adopt procedures for
determination of and to maintain constant the net asset value of
shares of any class of the Corporation's stock.
(2) Notwithstanding any provision of the Maryland
General Corporation Law requiring a greater proportion than a
majority of the votes of all classes or of any class of the
Corporation's stock entitled to be cast in order to take or
authorize any action, any such action may be taken or authorized
upon the concurrence of a majority of the aggregate number of
votes entitled to be cast thereon subject to any applicable
requirements of the Investment Company Act of 1940, as from time
to time in effect, or rules or orders of the Securities and
Exchange Commission or any successor thereto.
(3) The presence in person or by proxy of the
holders of shares entitled to cast one-third of the votes
entitled to be cast (without regard to class) shall constitute a
quorum at any meeting of the stockholders, except with respect to
any matter which, under applicable statutes or regulatory
requirements, requires approval by a separate vote of one or more
classes of stock, in which case the presence in person or by
proxy of the holders of shares entitled to cast one-third of the
votes entitled to be cast by each class entitled to vote as a
class on the matter shall constitute a quorum.
(4) Any determination made in good faith by or
pursuant to the direction of the Board of Directors, as to the
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amount of the assets, debts, obligations, or liabilities of the
Corporation as to the amount of any reserves or charges set up
and the propriety thereof, as to the time of or purpose for
creating such reserves or charges, as to the use, alteration or
cancellation of any reserves or charges (whether or not any debt,
obligation, or liability for which such reserves or charges shall
have been created shall be then or thereafter required to be paid
or discharged), as to the value of or the method of valuing any
investment owned or held by the Corporation, as to market value
or fair value of any investment or fair value of any other asset
of the Corporation, as to the allocation of any asset of the
Corporation to a particular class or classes of the Corporation's
stock, as to the charging of any liability of the Corporation to
a particular class or classes of the Corporation's stock, as to
the number of shares of the Corporation outstanding, as to the
estimated expense to the Corporation in connection with purchases
of its shares, as to the ability to liquidate investments in
orderly fashion, or as to any other matters relating to the
issue, sale, redemption or other acquisition or disposition of
investments or shares of the Corporation, shall be final and
conclusive and shall be binding upon the Corporation and all
holders of its shares, past, present and future, and shares of
the Corporation are issued and sold on the condition and
understanding that any and all such determinations shall be
binding as aforesaid.
EIGHTH: (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 that 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
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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.
NINTH: The Corporation reserves the right to amend,
alter, change or repeal any provision contained in its Charter in
the manner now or hereafter prescribed by the laws of the State
of Maryland, including any amendment which alters the contract
rights, as expressly set forth in the Charter, of any outstanding
stock, and all rights conferred upon stockholders herein are
granted subject to this reservation.
IN WITNESS WHEREOF, the undersigned, being the
incorporator of the Corporation, has adopted and signed these
Articles of Incorporation and does hereby acknowledge that the
adoption and signing are his act.
/s/ William E. Schwartz
_______________________________
Dated: July 9, 1996
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00250231.AA9
<PAGE>
BY-LAWS
OF
ALLIANCE REAL ESTATE INVESTMENT FUND, INC.
________________
ARTICLE I
Offices
Section 1. Principal Office in Maryland. The
Corporation shall have a principal office in the City of
Baltimore, State of Maryland.
Section 2. Other Offices. The Corporation may have
offices also at such other places within and without the State of
Maryland as the Board of Directors may from time to time
determine or as the business of the Corporation may require.
ARTICLE II
Meetings of Stockholders
Section 1. Place of Meeting. Meetings of stockholders
shall be held at such place, either within the State of Maryland
or at such other place within the United States, as shall be
fixed from time to time by the Board of Directors.
Section 2. Annual Meetings. Annual meetings of
stockholders shall be held on a date fixed from time to time by
the Board of Directors not less than ninety nor more than one
hundred twenty days following the end of each fiscal year of the
Corporation, for the election of directors and the transaction of
any other business within the powers of the Corporation;
<PAGE>
provided, however, that the Corporation shall not be required to
hold an annual meeting in any year in which the election of
directors is not required to be acted on by stockholders under
the Investment Company Act of 1940.
Section 3. Notice of Annual Meeting. Written or
printed notice of the annual meeting, stating the place, date and
hour thereof, shall be given to each stockholder entitled to vote
thereat and each other stockholder entitled to notice thereof not
less than ten nor more than ninety days before the date of the
meeting.
Section 4. Special Meetings. Special meetings of
stockholders may be called by the chairman, the president or by
the Board of Directors and shall be called by the secretary upon
the written request of holders of shares entitled to cast not
less than twenty-five percent of all the votes entitled to be
cast at such meeting. Such request shall state the purpose or
purposes of such meeting and the matters proposed to be acted on
thereat. In the case of such request for a special meeting, upon
payment by such stockholders to the Corporation of the estimated
reasonable cost of preparing and mailing a notice of such
meeting, the secretary shall give the notice of such meeting.
The secretary shall not be required to call a special meeting to
consider any matter which is substantially the same as a matter
acted upon at any special meeting of stockholders held within the
preceding twelve months unless requested to do so by holders of
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shares entitled to cast not less than a majority of all votes
entitled to be cast at such meeting. Notwithstanding the
foregoing, special meetings of stockholders for the purpose of
voting upon the question of removal of any director or directors
of the Corporation shall be called by the secretary upon the
written request of holders of shares entitled to cast not less
than ten percent of all the votes entitled to be cast at such
meeting.
Section 5. Notice of Special Meeting. Written or
printed notice of a special meeting of stockholders, stating the
place, date, hour and purpose thereof, shall be given by the
secretary to each stockholder entitled to vote thereat and each
other stockholder entitled to notice thereof not less than ten
nor more than ninety days before the date fixed for the meeting.
Section 6. Business of Special Meetings. Business
transacted at any special meeting of stockholders shall be
limited to the purposes stated in the notice thereof.
Section 7. Quorum. The holders of shares entitled to
cast one-third of the votes entitled to be cast thereat, present
in person or represented by proxy, shall constitute a quorum at
all meetings of the stockholders for the transaction of business,
except with respect to any matter which, under applicable
statutes or regulatory requirements, requires approval by a
separate vote of one or more classes of stock, in which case the
presence in person or by proxy of the holders of one-third of the
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shares of stock of each class required to vote as a class on the
matter shall constitute a quorum.
Section 8. Voting. When a quorum is present at any
meeting, the affirmative vote of a majority of the votes cast,
or, with respect to any matter requiring a class vote, the
affirmative vote of a majority of the votes cast of each class
entitled to vote as a class on the matter, shall decide any
question brought before such meeting (except that directors may
be elected by the affirmative vote of a plurality of the votes
cast), unless the question is one upon which by express provision
of the Investment Company Act of 1940, as from time to time in
effect, or other statutes or rules or orders of the Securities
and Exchange Commission or any successor thereto or of the
Articles of Incorporation a different vote is required, in which
case such express provision shall govern and control the decision
of such question.
Section 9. Proxies. Each stockholder shall at every
meeting of stockholders be entitled to one vote in person or by
proxy for each share of the stock having voting power held by
such stockholder, but no proxy shall be voted after eleven months
from its date, unless otherwise provided in the proxy.
Section 10. Record Date. In order that the Corporation
may determine the stockholders entitled to notice of or to vote
at any meeting of stockholders or any adjournment thereof, to
express consent to corporate action in writing without a meeting,
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or to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board of Directors may
fix, in advance, a record date which shall be not more than
ninety days and, in the case of a meeting of stockholders, not
less than ten days prior to the date on which the particular
action requiring such determination of stockholders is to be
taken. In lieu of fixing a record date, the Board of Directors
may provide that the stock transfer books shall be closed for a
stated period, but not to exceed, in any case, twenty days. If
the stock transfer books are closed for the purpose of
determining stockholders entitled to notice of or to vote at a
meeting of stockholders, such books shall be closed for at least
ten days immediately preceding such meeting. If no record date
is fixed and the stock transfer books are not closed for the
determination of stockholders: (1) The record date for the
determination of stockholders entitled to notice of, or to vote
at, a meeting of stockholders shall be at the close of business
on the day on which notice of the meeting of stockholders is
mailed or the day thirty days before the meeting, whichever is
the closer date to the meeting; and (2) The record date for the
determination of stockholders entitled to receive payment of a
dividend or an allotment of any rights shall be at the close of
business on the day on which the resolution of the Board of
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Directors, declaring the dividend or allotment of rights, is
adopted, provided that the payment or allotment date shall not be
more than sixty days after the date of the adoption of such
resolution.
Section 11. Inspectors of Election. The directors, in
advance of any meeting, may, but need not, appoint one or more
inspectors to act at the meeting or any adjournment thereof. If
an inspector or inspectors are not appointed, the person
presiding at the meeting may, but need not, appoint one or more
inspectors. In case any person who may be appointed as an
inspector fails to appear or act, the vacancy may be filled by
appointment made by the directors in advance of the meeting or at
the meeting by the person presiding thereat. Each inspector, if
any, before entering upon the discharge of his duties, shall take
and sign an oath faithfully to execute the duties of inspector at
such meeting with strict impartiality and according to the best
of his ability. The inspectors, if any, shall determine the
number of shares outstanding and the voting power of each, the
shares represented at the meeting, the existence of a quorum, the
validity and effect of proxies, and shall receive votes, ballots
or consents, hear and determine all challenges and questions
arising in connection with the right to vote, count and tabulate
all votes, ballots or consents, determine the result, and do such
acts as are proper to conduct the election or vote with fairness
to all stockholders. On request of the person presiding at the
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meeting or any stockholder, the inspector or inspectors, if any,
shall make a report in writing of any challenge, question or
matter determined by him or them and execute a certificate of any
fact found by him or them.
Section 12. Informal Action by Stockholders. Except to
the extent prohibited by the Investment Company Act of 1940, as
from time to time in effect, or rules or orders of the Securities
and Exchange Commission or any successor thereto, any action
required or permitted to be taken at any meeting of stockholders
may be taken without a meeting if a consent in writing, setting
forth such action, is signed by all the stockholders entitled to
vote on the subject matter thereof and any other stockholders
entitled to notice of a meeting of stockholders (but not to vote
thereat) have waived in writing any rights which they may have to
dissent from such action, and such consent and waiver are filed
with the records of the Corporation.
Section 13. Adjournment. Any meeting of the
stockholders may be adjourned from time to time, without notice
other than by announcement at the meeting at which the
adjournment was taken. In the absence of a quorum, the
stockholders present in person or by proxy, by majority vote of
those present and without notice other than by announcement at
the meeting, may adjourn the meeting from time to time as
provided for in this Section 13 of Article II. At any adjourned
meeting at which a quorum shall be present, any action may be
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taken that could have been taken at the meeting originally
called. A meeting of the stockholders may not be adjourned
without further notice to a date more than 120 (one hundred and
twenty) days after the original record date determined pursuant
to Section 10 of this Article II.
ARTICLE III
Board of Directors
Section 1. Number of Directors. The number of
directors constituting the entire Board of Directors (which
initially was fixed at one in the Corporation's Articles of
Incorporation) may be increased or decreased from time to time by
the vote of a majority of the entire Board of Directors within
the limits permitted by law but at no time may be more than
twenty, but the tenure of office of a director in office at the
time of any decrease in the number of directors shall not be
affected as a result thereof. The directors shall be elected to
hold offices at the annual meeting of stockholders, except as
provided in Section 2 of this Article, and each director shall
hold office until the next annual meeting of stockholders or
until his successor is elected and qualified. Any director may
resign at any time upon written notice to the Corporation. Any
director may be removed, either with or without cause, at any
meeting of stockholders duly called and at which a quorum is
present by the affirmative vote of the majority of the votes
entitled to be cast thereon, and the vacancy in the Board of
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Directors caused by such removal may be filled by the
stockholders at the time of such removal. Directors need not be
stockholders.
Section 2. Vacancies and Newly-Created Directorships.
Any vacancy occurring in the Board of Directors for any cause
other than by reason of an increase in the number of directors
may be filled by a majority of the remaining members of the Board
of Directors although such majority is less than a quorum. Any
vacancy occurring by reason of an increase in the number of
directors may be filled by a majority of the entire Board of
Directors then in office. A director elected by the Board of
Directors to fill a vacancy shall be elected to hold office until
the next annual meeting of stockholders or until his successor is
elected and qualifies.
Section 3. Powers. The business and affairs of the
Corporation shall be managed by or under the direction of the
Board of Directors which may exercise all such powers of the
Corporation and do all such lawful acts and things as are not by
statute or by the Articles of Incorporation or by these By-Laws
conferred upon or reserved to the stockholders.
Section 4. Meetings. The Board of Directors of the
Corporation or any committee thereof may hold meetings, both
regular and special, either within or without the State of
Maryland. Regular meetings of the Board of Directors may be held
without notice at such time and at such place as shall from time
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<PAGE>
to time be determined by the Board of Directors. Special
meetings of the Board of Directors may be called by the chairman,
the president or by two or more directors. Notice of special
meetings of the Board of Directors shall be given by the
secretary to each director at least three days before the meeting
if by mail or at least 24 hours before the meeting if given in
person or by telephone or by telegraph. The notice need not
specify the business to be transacted.
Section 5. Quorum and Voting. During such times when
the Board of Directors shall consist of more than one director, a
quorum for the transaction of business at meetings of the Board
of Directors shall consist of two of the directors in office at
the time but in no event shall a quorum consist of less than one-
third of the entire Board of Directors. The action of a majority
of the directors present at a meeting at which a quorum is
present shall be the action of the Board of Directors. If a
quorum shall not be present at any meeting of the Board of
Directors, the directors present thereat may adjourn the meeting
from time to time, without notice other than announcement at the
meeting, until a quorum shall be present.
Section 6. Committees. The Board of Directors may
appoint from among its members an executive committee and other
committees of the Board of Directors, each committee to be
composed of two or more of the directors of the Corporation. The
Board of Directors may delegate to such committees any of the
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powers of the Board of Directors except those which may not by
law be delegated to a committee. Such committee or committees
shall have the name or names as may be determined from time to
time by resolution adopted by the Board of Directors. Unless the
Board of Directors designates one or more directors as alternate
members of any committee, who may replace an absent or
disqualified member at any meeting of the committee, the members
of any such committee present at any meeting and not disqualified
from voting may, whether or not they constitute a quorum, appoint
another member of the Board of Directors to act at the meeting in
the place of any absent or disqualified member of such committee.
At meetings of any such committee, a majority of the members or
alternate members of such committee shall constitute a quorum for
the transaction of business and the act of a majority of the
members or alternate members present at any meeting at which a
quorum is present shall be the act of the committee.
Section 7. Minutes of Committee Meetings. The
committees shall keep regular minutes of their proceedings.
Section 8. Informal Action by Board of Directors and
Committees. Any action required or permitted to be taken at any
meeting of the Board of Directors or of any committee thereof may
be taken without a meeting if a written consent thereto is signed
by all members of the Board of Directors or of such committee, as
the case may be, and such written consent is filed with the
minutes of proceedings of the Board of Directors or committee,
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provided, however, that such written consent shall not constitute
approval of any matter which pursuant to the Investment Company
Act of 1940 and the rules thereunder requires the approval of
directors by vote cast in person at a meeting.
Section 9. Meetings by Conference Telephone. The
members of the Board of Directors or any committee thereof may
participate in a meeting of the Board of Directors or committee
by means of a conference telephone or similar communications
equipment by means of which all persons participating in the
meeting can hear each other at the same time and such
participation shall constitute presence in person at such
meeting, provided, however, that such participation shall not
constitute presence in person with respect to matters which
pursuant to the Investment Company Act of 1940 and the rules
thereunder require the approval of directors by vote cast in
person at a meeting.
Section 10. Fees and Expenses. The directors may be
paid their expenses of attendance at each meeting of the Board of
Directors and may be paid a fixed sum for attendance at each
meeting of the Board of Directors, a stated salary as director or
such other compensation as the Board of Directors may approve.
No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be
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allowed like reimbursement and compensation for attending
committee meetings.
ARTICLE IV
Notices
Section 1. General. Notices to directors and
stockholders mailed to them at their post office addresses
appearing on the books of the Corporation shall be deemed to be
given at the time when deposited in the United States mail.
Section 2. Waiver of Notice. Whenever any notice is
required to be given under the provisions of the statutes, of the
Articles of Incorporation or of these By-Laws, a waiver thereof
in writing, signed by the person or persons entitled to said
notice, whether before or after the time stated therein, shall be
deemed the equivalent of notice and such waiver shall be filed
with the records of the meeting. Attendance of a person at a
meeting shall constitute a waiver of notice of such meeting
except when the person attends a meeting for the express purpose
of objecting, at the beginning of the meeting, to the transaction
of any business because the meeting is not lawfully called or
convened.
ARTICLE V
Officers
Section 1. General. The officers of the Corporation
shall be chosen by the Board of Directors at its first meeting
after each annual meeting of stockholders and shall be a chairman
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of the Board of Directors, a president, a secretary and a
treasurer. The Board of Directors may choose also such vice
presidents and additional officers or assistant officers as it
may deem advisable. Any number of offices, except the offices of
president and vice president and chairman and vice president, may
be held by the same person. No officer shall execute,
acknowledge or verify any instrument in more than one capacity if
such instrument is required by law to be executed, acknowledged
or verified by two or more officers.
Section 2. Other Officers and Agents. The Board of
Directors may appoint such other officers and agents as it
desires who shall hold their offices for such terms and shall
exercise such powers and perform such duties as shall be
determined from time to time by the Board of Directors.
Section 3. Tenure of Officers. The officers of the
Corporation shall hold office at the pleasure of the Board of
Directors. Each officer shall hold his office until his
successor is elected and qualifies or until his earlier
resignation or removal. Any officer may resign at any time upon
written notice to the Corporation. Any officer elected or
appointed by the Board of Directors may be removed at any time by
the Board of Directors when, in its judgment, the best interests
of the Corporation will be served thereby. Any vacancy occurring
in any office of the Corporation by death, resignation, removal
or otherwise shall be filled by the Board of Directors.
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Section 4. Chairman of the Board of Directors. The
chairman of the Board of Directors shall preside at all meetings
of the stockholders and of the Board of Directors. He shall be
the chief executive officer and shall have general and active
management of the business of the Corporation and shall see that
all orders and resolutions of the Board of Directors are carried
into effect. He shall be ex officio a member of all committees
designated by the Board of Directors except as otherwise
determined by the Board of Directors. He shall execute bonds,
mortgages and other contracts requiring a seal, under the seal of
the Corporation, except where required or permitted by law to be
otherwise signed and executed and except where the signing and
execution thereof shall be expressly delegated by the Board of
Directors to some other officer or agent of the Corporation.
Section 5. President. The president shall act under
the direction of the chairman and in the absence or disability of
the chairman shall perform the duties and exercise the powers of
the chairman. He shall perform such other duties and have such
other powers as the chairman or the Board of Directors may from
time to time prescribe. He shall execute on behalf of the
Corporation, and may affix the seal or cause the seal to be
affixed to, all instruments requiring such execution except to
the extent that signing and execution thereof shall be expressly
delegated by the Board of Directors to some other officer or
agent of the Corporation.
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Section 6. Vice Presidents. The vice presidents shall
act under the direction of the chairman and in the absence or
disability of the president shall perform the duties and exercise
the powers of the president. They shall perform such other
duties and have such other powers as the chairman or the Board of
Directors may from time to time prescribe. The Board of
Directors may designate one or more executive vice presidents or
may otherwise specify the order of seniority of the vice
presidents and, in that event, the duties and powers of the
president shall descend to the vice presidents in the specified
order of seniority.
Section 7. Secretary. The secretary shall act under
the direction of the chairman. Subject to the direction of the
chairman he shall attend all meetings of the Board of Directors
and all meetings of stockholders and record the proceedings in a
book to be kept for that purpose and shall perform like duties
for the committees designated by the Board of Directors when
required. He shall give, or cause to be given, notice of all
meetings of stockholders and special meetings of the Board of
Directors, and shall perform such other duties as may be
prescribed by the chairman or the Board of Directors. He shall
keep in safe custody the seal of the Corporation and shall affix
the seal or cause it to be affixed to any instrument requiring
it.
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Section 8. Assistant Secretaries. The assistant
secretaries in the order of their seniority, unless otherwise
determined by the chairman or the Board of Directors, shall, in
the absence or disability of the secretary, perform the duties
and exercise the powers of the secretary. They shall perform
such other duties and have such other powers as the chairman or
the Board of Directors may from time to time prescribe.
Section 9. Treasurer. The treasurer shall act under
the direction of the chairman. Subject to the direction of the
chairman he shall have the custody of the corporate funds and
securities and shall keep full and accurate accounts of receipts
and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to
the credit of the Corporation in such depositories as may be
designated by the Board of Directors. He shall disburse the
funds of the Corporation as may be ordered by the chairman or the
Board of Directors, taking proper vouchers for such
disbursements, and shall render to the chairman and the Board of
Directors, at its regular meetings, or when the Board of
Directors so requires, an account of all his transactions as
treasurer and of the financial condition of the Corporation.
Section 10. Assistant Treasurers. The assistant
treasurers in the order of their seniority, unless otherwise
determined by the chairman or the Board of Directors, shall, in
the absence or disability of the treasurer, perform the duties
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and exercise the powers of the treasurer. They shall perform
such other duties and have such other powers as the chairman or
the Board of Directors may from time to time prescribe.
ARTICLE VI
Certificates of Stock
Section 1. General. Every holder of stock of the
Corporation who has made full payment of the consideration for
such stock shall be entitled upon request to have a certificate,
signed by, or in the name of the Corporation by, the chairman,
the president or a vice president and countersigned by the
treasurer or an assistant treasurer or the secretary or an
assistant secretary of the Corporation, certifying the number
and, if additional shares of stock should be authorized, the
class of whole shares of stock owned by him in the Corporation.
Section 2. Fractional Share Interests. The Corporation
may issue fractions of a share of stock. Fractional shares of
stock shall have proportionately to the respective fractions
represented thereby all the rights of whole shares, including the
right to vote, the right to receive dividends and distributions
and the right to participate upon liquidation of the Corporation,
excluding, however, the right to receive a stock certificate
representing such fractional shares.
Section 3. Signatures on Certificates. Any of or all
the signatures on a certificate may be a facsimile. In case any
officer who has signed or whose facsimile signature has been
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placed upon a certificate shall cease to be such officer before
such certificate is issued, it may be issued with the same effect
as if he were such officer at the date of issue. The seal of the
Corporation or a facsimile thereof may, but need not, be affixed
to certificates of stock.
Section 4. Lost, Stolen or Destroyed Certificates. The
Board of Directors may direct a new certificate or certificates
to be issued in place of any certificate or certificates
theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon the making of any affidavit of that
fact by the person claiming the certificate or certificates to be
lost, stolen or destroyed. When authorizing such issue of a new
certificate or certificates, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof,
require the owner of such lost, stolen or destroyed certificate
or certificates, or his legal representative, to give the
Corporation a bond in such sum as it may direct as indemnity
against any claim that may be made against the Corporation with
respect to the certificate or certificates alleged to have been
lost, stolen or destroyed.
Section 5. Transfer of Shares. Upon request by the
registered owner of shares, and if a certificate has been issued
to represent such shares upon surrender to the Corporation or a
transfer agent of the Corporation of a certificate for shares of
stock duly endorsed or accompanied by proper evidence of
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succession, assignment or authority to transfer, it shall be the
duty of the Corporation, if it is satisfied that all provisions
of the Articles of Incorporation, of the By-Laws and of the law
regarding the transfer of shares have been duly complied with, to
record the transaction upon its books, issue a new certificate to
the person entitled thereto upon request for such certificate,
and cancel the old certificate, if any.
Section 6. Registered Owners. The Corporation shall be
entitled to recognize the person registered on its books as the
owner of shares to be the exclusive owner for all purposes
including voting and dividends, and the Corporation shall not be
bound to recognize any equitable or other claim to or interest in
such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as
otherwise provided by the laws of Maryland.
ARTICLE VII
Miscellaneous
Section 1. Reserves. There may be set aside out of any
funds of the Corporation available for dividends such sum or sums
as the Board of Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet
contingencies, or for such other purpose as the Board of
Directors shall think conducive to the interest of the
Corporation, and the Board of Directors may modify or abolish any
such reserve.
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Section 2. Dividends. Dividends upon the stock of the
Corporation may, subject to the provisions of the Articles of
Incorporation and of applicable law, be declared by the Board of
Directors at any time. Dividends may be paid in cash, in
property or in shares of the Corporation's stock, subject to the
provisions of the Articles of Incorporation and of applicable
law.
Section 3. Capital Gains Distributions. The amount and
number of capital gains distributions paid to the stockholders
during each fiscal year shall be determined by the Board of
Directors. Each such payment shall be accompanied by a statement
as to the source of such payment, to the extent required by law.
Section 4. Checks. All checks or demands for money and
notes of the Corporation shall be signed by such officer or
officers or such other person or persons as the Board of
Directors may from time to time designate.
Section 5. Fiscal Year. The fiscal year of the
Corporation shall be fixed by resolution of the Board of
Directors.
Section 6. Seal. The corporate seal shall have
inscribed thereon the name of the Corporation, the year of its
organization and the words "Corporate Seal, Maryland." The seal
may be used by causing it or a facsimile thereof to be impressed
or affixed or in another manner reproduced.
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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
Indemnification
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
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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 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
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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 indemnified, and reasonable expenses may be
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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.
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ARTICLE IX
Amendments
The Board of Directors shall have the power to make,
alter and repeal By-laws of the Corporation.
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