<PAGE>
As filed with the Securities and Exchange
Commission on December 15, 1998
File Nos. 333-37177
811-08403
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No.
Post-Effective Amendment No. 1
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 2
_______________________________
Alliance Institutional Funds, Inc.
(Exact Name of Registrant as Specified in Charter)
1345 Avenue of the Americas, New York, New York 10105
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including Area Code:(212) 969-1000
_____________________________
EDMUND P. BERGAN, JR.
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, New York 10105
(Name and address of agent for service)
Copies of communications to:
Thomas G. MacDonald
Seward & Kissel
One Battery Park Plaza
New York, New York 10004
It is proposed that this filing will become effective (check
appropriate box)
immediately upon filing pursuant to paragraph (b)
<PAGE>
on (date) pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)(1)
on (date) pursuant to paragraph (a)(1)
75 days after filing pursuant to paragraph (a)(2)
X on March 1, 1999 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.
<PAGE>
CROSS REFERENCE SHEET
(as required by Rule 404(c))
N-1A ITEM NO. LOCATION IN PROSPECTUSES
(CAPTION)
PART A
Item 1. Front and Back Cover Pages..........Cover Pages
Item 2. Risk/Return Summary:
Investments, Risks, and
Performance.........................Risk/Return
Summary
Item 3. Risk/Return Summary:
Fee Table...........................Risk/Return
Summary
Item 4. Investment Objectives,
Principal Investment Strategies,
And Related Risks...................Other
Information
About the
Fund's
Objectives,
Strategies, and
Risks
Item 5. Management's Discussion of
Fund Performance....................Not Applicable
Item 6. Management, Organization,
And Capital Structure...............Management of
the Fund
Item 7. Shareholder Information.............Purchase and
Sale of Shares
Item 8. Distribution Arrangements...........Distribution
Arrangements
Item 9. Financial Highlights
Information.........................Financial
Highlights
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PART B LOCATION IN STATEMENTS
OF ADDITIONAL INFORMATION
(CAPTION)
Item 10. Cover Page and
Table of Contents...................Cover Page
Item 11. Fund History........................Management of
the Fund;
General
Information
Item 12. Description of the Fund And
Its Investments and Risks...........Description of
the Fund
Item 13. Management of the Fund .............Management of
the Fund
Item 14. Control Persons and Principal
Holders of Securities ..............Not Applicable
Item 15. Investment Advisory and
Other Services......................Management of
the Fund,
Expenses of the
Fund, General
Information
Item 16. Brokerage Allocation and
Other Practices.....................Portfolio
Transactions
Item 17. Capital Stock and Other
Securities..........................General
Information
Item 18. Purchase, Redemption and Pricing
of Securities Being Offered.........Purchase of
Shares;
Redemption and
Repurchase of
Shares;
Dividends,
Distributions
and Taxes;
Shareholder
Services
Item 19. Taxation of the Fund................Description of
the Fund,
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Dividends,
Distributions
and Taxes
Item 20. Underwriters........................General
Information
Item 21. Calculation of Performance
Data................................General
Information
Item 22. Financial Statements................Fianacial
Statements and
Report of
Independenrt
Auditors
<PAGE>
The Registrant's Prospectus is incorporated herein by reference
to Part A of the Amendment to the Registrant's Registration
Statement on Form N-1A filed with the Commission on November 21,
1997.
<PAGE>
ALLIANCE INSTITUTIONAL
FUNDS
PROSPECTUS
March 1, 1999
-ALLIANCE GROWTH INSTITUTIONAL FUND
The Securities and Exchange Commission has not approved
or disapproved these securities or passed upon the
adequacy of this prospectus. Any representation
to the contrary is a criminal offense.
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TABLE OF CONTENTS
PAGE
RISK/RETURN SUMMARY
GLOSSARY
DESCRIPTION OF THE FUND
Investment Objective and Policies
Description of Investment Practices
Additional Risk Considerations
MANAGEMENT OF THE FUND
PURCHASE AND SALE OF SHARES
How The Fund Values Its Shares
How To Buy Shares
How To Exchange Shares
How To Sell Shares
DIVIDENDS, DISTRIBUTIONS AND TAXES
DISTRIBUTION ARRANGEMENTS
GENERAL INFORMATION
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Alliance Growth Institutional Fund's investment adviser is
Alliance Capital Management L.P., a global investment manager
providing diversified services to institutions and individuals
through a broad line of investments including more than 100
mutual funds. Since 1971, Alliance has earned a reputation as a
leader in the investment world with over $ __ billion in assets
under management as of December 31, 1998. Alliance provides
investment management services to employee benefit plans for __
of the FORTUNE 100 companies.
RISK/RETURN SUMMARY
The following is a summary of certain key information about the
Fund. You will find additional information about the Fund,
including a detailed description of the risks of an investment in
the Fund, after this summary. Please be sure to read the more
complete description of the Fund following this summary,
including the risks associated with investing in the Fund, BEFORE
you invest.
OBJECTIVE: The Fund's investment objective is capital
appreciation.
PRINCIPAL INVESTMENT STRATEGIES: The Fund invests primarily in
equity securities. The Fund emphasizes investments in companies
that Alliance believes will have superior relative earnings
growth and are selling at reasonable valuations. The Fund seeks
to achieve long-term performance that is significantly better
than that of the S&P 500 Index. Although the Fund typically
invests for the long-term, it also may take advantage of shorter-
term opportunities. In addition, while the Fund tends to invest
predominately in relatively large, well-established companies,
under favorable market conditions the Fund may invest in smaller
companies or business "turnaround" situations.
PRINCIPAL RISKS: The value of an investment in the Fund changes
with the values of the Fund's investments. Many factors can
affect those values. In this summary, we describe the principal
risks that may affect the Fund's portfolio as a whole. The Fund
could be subject to additional principal risks because the types
of investments made by the Fund can change over time. This
Prospectus has additional descriptions of investments that appear
in bold type in the discussions under "Description of Investment
Practices" or "Additional Risk Considerations." These sections
also include more information about the Fund, its investments,
and related risks.
- MARKET RISK This is the risk that the value of the
Fund's investments will fluctuate as the stock market
fluctuates and that prices overall will decline over
short or longer-term periods.
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- MANAGEMENT RISK The Fund is subject to management risk
because it is an actively managed investment portfolio.
Alliance will apply its investment techniques and risk
analyses in making investment decisions for the Fund,
but there is no guarantee that its techniques will
produce the intended result.
Other important things for you to note:
- You may gain or lose money by investing in the Fund.
- An investment in the Fund is not a deposit in a bank and
is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
EXPENSE INFORMATION
This table describes the fees and expenses that you may pay if
you buy and hold shares of the Fund.
SHAREHOLDER TRANSACTION EXPENSES (fees paid directly from your
investment)
Maximum sales charge imposed on purchases None
Sales charge imposed on dividend
reinvestments None
Deferred sales charge None
Exchange fee None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM
FUND ASSETS) AND EXAMPLE
The example is to help you compare the cost of investing in the
Fund with the cost of investing in other funds. It assumes that
you invest $10,000 in the Fund for the time periods indicated and
then redeem all your shares at the end of those periods. It also
assumes that your investment has a 5% return each year and that
the Fund's operating expenses stay the same. Your actual cost
may be higher or lower.
Operating Expenses Example
Class I Class II Class I Class II
Management fees [ ]% [ ]% After 1 year $ $
12b-1 fees None .30% After 3 years $ $
Other expenses [ ]% [ ]% After 5 years $ $
Total Fund operating After 10 years $ $
expenses [ ]% [ ]%
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GLOSSARY
This Prospectus uses the following terms.
TYPES OF SECURITIES
CONVERTIBLE SECURITIES are fixed-income securities that are
convertible into common stock.
DEBT SECURITIES are bonds, debentures, notes, bills, loans, other
direct debt instruments, and other fixed, floating, and variable
rate debt obligations, but do not include convertible securities.
EQUITY SECURITIES are (i) common stocks, partnership interests,
business trust shares, and other equity or ownership interests in
business enterprises, and (ii) securities convertible into, and
rights and warrants to subscribe for the purchase of, such
stocks, shares and interests.
FIXED-INCOME SECURITIES are debt securities and dividend-paying
preferred stocks and include floating rate and variable rate
instruments.
[PRIME COMMERCIAL PAPER is commercial paper rated Prime 1 by
Moody's or A-1 or higher by S&P or, if not rated, issued by
companies that have an outstanding debt issue rated Aa or higher
by Moody's or AA or higher by S&P.]
[QUALIFYING BANK DEPOSITS are certificates of deposit, bankers'
acceptances, and interest-bearing savings deposits of banks
having total assets of more than $1 billion and which are members
of the Federal Deposit Insurance Corporation.]
U.S. GOVERNMENT SECURITIES are securities issued or guaranteed by
the United States Government, its agencies or instrumentalities.
OTHER
1940 ACT is the Investment Company Act of 1940, as amended.
CODE is the Internal Revenue Code of 1986, as amended.
COMMISSION is the Securities and Exchange Commission.
EXCHANGE is the New York Stock Exchange.
SECURITIES ACT is the Securities Act of 1933, as amended.
S&P is Standard & Poor's Ratings Services.
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S&P 500 INDEX is S&P's 500 Composite Stock Price Index, a widely
recognized unmanaged index of market activity.
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DESCRIPTION OF THE FUND
This section of the Prospectus provides a more complete
description of the investment objective and principal strategies
and risks of the Fund. Of course, there can be no assurance that
the Fund will achieve its investment objective.
Please note that:
- Additional discussion of the Fund's investments,
including the risks of the investments, can be found in the
discussion under DESCRIPTION OF INVESTMENT PRACTICES following
this section.
- The description of the principal risks for the Fund
may include risks discussed in the PRINCIPAL RISKS above.
Additional information about risks of investing in the Fund can
be found in the discussion under ADDITIONAL RISK CONSIDERATIONS.
- Additional descriptions of the Fund's strategies,
investments, and risks can be found in the Fund's Statement of
Additional Information or SAI.
- Except as noted, (i) the Fund's investment objectives
are "fundamental" and cannot be changed without shareholder vote,
and (ii) the Fund's investment policies are not fundamental and
thus can be changed without a shareholder vote.
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is capital appreciation. The
Fund invests primarily in equity securities. The Fund emphasizes
investments in companies that Alliance believes will have
superior relative earnings growth and are selling at reasonable
valuations. The Fund seeks to achieve long-term performance that
is significantly better than the S&P 500 Index. In line with
this objective, the Fund may exhibit greater volatility than is
exhibited in the overall market. The Fund usually is fully
invested with no effort made to time the market.
Although the Fund typically invests for the long-term, it also
may take advantage of shorter-term opportunities. In addition,
while the Fund tends to invest predominately in relatively large,
well-established companies, under favorable market conditions the
Fund may invest in smaller companies or business "turnaround"
situations. The Fund may invest up to 15% of its assets in
foreign equity securities.
5
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DESCRIPTION OF INVESTMENT PRACTICES
This section describes the investment practices of the Fund and
risks associated with these 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 yields that are generally higher 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 offer
investors the potential to benefit from increases in the market
price of the underlying common stock.
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.
GENERAL. The successful use of the investment practices
described above draws upon Alliance's special skills and
experience with respect to such instruments and usually depends
on Alliance's ability to forecast price movements, interest rates
or currency exchange rate movements correctly. Should interest
rates, prices, or exchange rates 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.
PORTFOLIO TURNOVER. The Fund is actively managed and, in some
cases in response to market conditions, the Fund's portfolio
turnover rate may exceed 100%. A higher rate of portfolio
turnover increases brokerage and other expenses, which must be
borne by the Fund and its shareholders.
TEMPORARY DEFENSIVE POSITION. For temporary defensive purposes,
the Fund may reduce its position in equity securities and invest
in, without limit, certain types of short-term, liquid, high
grade or high quality debt securities. These securities may
include U.S. Government securities, qualifying bank deposits,
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money market instruments, prime commercial paper, and other types
of short-term debt securities including notes and bonds.
ADDITIONAL RISK CONSIDERATIONS
Investment in the Fund involves the special risk considerations
described below.
FOREIGN INVESTMENT. The portion of the Fund's assets invested in
foreign securities may have more risks than U.S. investments.
Investments in foreign securities may experience more rapid and
extreme changes in value than investments in securities of U.S.
companies. This is because the securities markets of many
foreign countries are relatively small, with a limited number of
companies representing a small number of industries.
Additionally, foreign securities issuers are usually not subject
to the same degree of regulation as U.S. issuers. Reporting,
accounting, and auditing standards of foreign countries differ,
in some cases significantly, from U.S. standards. Also,
nationalization, expropriation or confiscatory taxation, currency
blockage, or diplomatic developments could adversely affect the
Fund's investments in a foreign country. In the event of
nationalization, expropriation, or other confiscation, the Fund
could lose its entire investment.
INVESTMENT IN SMALLER, EMERGING COMPANIES. The Fund may invest
in smaller, emerging companies. Investment in such companies
involves greater risks than is customarily associated with
securities of more established companies. The securities of
smaller companies may have relatively limited marketability and
may be subject to more abrupt or erratic market movements than
securities of larger companies or broad market indices.
YEAR 2000. Many computer systems and applications in use today
process transactions using two-digit date fields for the year of
the transaction, rather than the full four digits. If these
systems are not modified or replaced, transactions occurring
after 1999 could be processed as year "1900", which could result
in processing inaccuracies and computer system failures. This is
commonly known as the Year 2000 problem. Should any of the
computer systems employed by the Fund's major service providers
fail to process Year 2000 related information properly, that
could have a significant negative impact on the Fund's operations
and the services that are provided to the Fund's shareholders.
In addition, to the extent that the operations of issuers of
securities held by the Fund are impaired by the Year 2000
problem, or prices of securities held by the Fund decline as a
result of real or perceived problems relating to the Year 2000,
the value of the Fund's shares may be materially affected.
7
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With respect to the Year 2000, the Fund has been advised that
Alliance, Alliance Fund Distributors, Inc, ("AFD"), the Fund's
principal underwriter, and Alliance Fund Services, Inc. ("AFS"),
the Fund's registrar, transfer agent and dividend disbursing
agent (for the purpose of this discussion collectively,
"Alliance") began to address the Year 2000 issue several years
ago in connection with the replacement or upgrading of certain
computer systems and applications. During 1998, Alliance began a
formal Year 2000 initiative, which established a structured and
coordinated process to deal with the Year 2000 issue. Alliance
reports that it has completed its assessment of the Year 2000
issues on its domestic and international computer systems and
applications. Currently, management of Alliance expects that the
required modifications for the majority of its significant
systems and applications that will be in use on January 1, 2000,
will be completed and tested by the end of 1998. Full
integration testing of these systems and testing of interfaces
with third-party suppliers will continue through 1999. At this
time, management of Alliance believes that the costs associated
with resolving this issue will not have a material adverse effect
on its operations or on its ability to provide the level of
services it currently provides to the Fund.
The Fund and Alliance have been advised by the Fund's Custodian
that they are also in the process of reviewing their systems with
the same goals. As of the date of this prospectus, the Fund and
Alliance have no reason to believe that the Custodian will be
unable to achieve these goals.
MANAGEMENT OF THE FUNDS
INVESTMENT ADVISER
The Fund's Adviser is Alliance Capital Management, L.P.
("Alliance"), 1345 Avenue of the Americas, New York, New York
10105. Alliance is a leading international investment manager
supervising client accounts with assets as of December 31, 1998
totaling more than $___ billion (of which approximately $___
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 __ registered investment
companies managed by Alliance comprising ___ separate investment
portfolios currently have over ___ million shareholders. As of
December 31, 1998, Alliance was an investment manager of employee
benefit plan assets for __ of the FORTUNE 100 companies.
Alliance provides investment advisory services and order
placement facilities for the Fund. For these services, the Fund
pays Alliance as a percentage of net assets: 1.0% of the first
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$50 million; .75% of the next $50 million; and .50% of assets
greater than $100 million.
The person primarily responsible for the day-to-day management of
the Fund will be Jane Mack Gould, Senior Vice President of
Alliance Capital Management Corporation. Ms. Gould has been
associated with Alliance and its affiliates since 1965 and has 30
years experience as a portfolio manager.
PURCHASE AND SALE OF SHARES
HOW THE FUND VALUES ITS SHARES
The Fund's net asset value or NAV is calculated at 4 p.m. Eastern
time each day the Exchange is open for business. To calculate
NAV, the Fund's assets are valued and totaled, liabilities are
subtracted, and the balance, called net assets, is divided by the
number of shares outstanding. The Fund values its securities at
their current market value determined on the basis of market
quotations, or, if such quotations are not readily available,
such other methods as the Fund's directors believe accurately
reflect fair market value.
Your order for purchase, sale, or exchange of shares is priced at
the next NAV calculated after your order is accepted by the Fund.
HOW TO BUY SHARES
You may purchase the Fund's shares through your financial
representative at NAV. Alliance Growth Institutional Fund's
shares are not subject to any initial or contingent sales
charges.
The minimum initial investment in the Fund is $__ million.
The Fund is required to withhold 31% of taxable dividends,
capital gains distributions, and redemptions paid to shareholders
who have not provided the Fund with their certified taxpayer
identification number. To avoid this, you must provide your
correct Tax Identification Number (Social Security Number for
most investors) on your account application.
Generally, a fee-based program must charge an asset-based or
other similar fee and must invest at least $2 million in the Fund
to be approved by AFD for investment in the Fund. The Fund's SAI
has more detailed information about who may purchase and hold
Fund shares.
The Fund may refuse any order to purchase shares. In this regard,
the Fund reserves the right to restrict purchases of shares
(including through exchanges) when there appears to be evidence
9
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of a pattern of frequent purchases and sales made in response to
short-term considerations.
HOW TO EXCHANGE SHARES
You may exchange your shares of the Fund for Class A shares of
any other Alliance Mutual Fund. Exchanges of shares are made at
the next-determined NAV without sales or service charges. You
may request an exchange by mail or telephone. You must call by
4:00 p.m. Eastern time to receive that day's NAV. The Fund may
change, suspend, or terminate the exchange service on 60 days'
notice.
HOW TO SELL SHARES
You may "redeem" your shares (i.e., sell your shares to the Fund)
on any day the Exchange is open, either directly or through your
financial representative. Your sales price will be the next-
determined NAV after the Fund receives your sales request in
proper form. Normally, proceeds will be sent to you within seven
days. If you recently purchased your shares by check or
electronic funds transfer, you cannot redeem any portion of it
until the Fund is reasonably satisfied that the check or
electronic funds transfer has been collected (which may take up
to 15 days).
- SELLING SHARES THROUGH YOUR FINANCIAL REPRESENTATIVE
Your financial representative must receive your sales request by
4:00 p.m. Eastern time, and submit it to the Fund by 5:00 p.m.
Eastern time, for you to receive that day's NAV. Your financial
representative is responsible for submitting all necessary
documentation to the Fund and may charge you for this service.
If you are in doubt about what documents are required by your
fee-based program or other program, you should contact your
financial representative.
- SELLING SHARES DIRECTLY TO THE FUND
BY MAIL:
- Send a signed letter of instruction or stock power form,
along with certificates, to:
Alliance Fund Services
P.O. Box 1520
Secaucus, NJ 07096-1520
1-800-221-5672
- For your protection, a bank, a member firm of a national
stock exchange or other eligible guarantor institution
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must guarantee signatures. 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,
intermediaries, fiduciaries, and surviving joint owners.
If you have any questions about these procedures,
contact AFS.
BY TELEPHONE:
- You may redeem your shares for which no stock
certificates have been issued by telephone request.
Call AFS at 800-221-5672 with instructions on how you
wish to receive your sale proceeds.
- A telephone redemption request must be made by 4 p.m.
Eastern time for you to receive that day's NAV.
- If you have selected electronic funds transfer in your
Subscription Application, the redemption proceeds may be
sent directly to your bank. Otherwise, the proceeds
will be mailed to you.
- Redemption requests by electronic funds transfer may not
exceed $100,000 and redemption requests by check may not
exceed $50,000 per day (except for certain omnibus
accounts).
- 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.
DIVIDENDS, DISTRIBUTIONS, AND TAXES
The Fund's 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 same class of shares of the Fund. If paid in
additional shares, the shares will have an aggregate net asset
value as of the payment date of the dividend or distribution
equal to the cash amount of the income dividend or distribution.
You may make an election to receive dividends and distributions
in cash or shares at the time you purchase shares. Your election
can be changed at any time prior to the record date for a
particular dividend or distribution. Cash dividends can be paid
by check or, at your election, electronically via the ACH
network. There is no sales or other charge on the reinvestment
of Fund dividends and distributions.
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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 same class of the Fund without charge by returning
to Alliance, with appropriate instructions, the check
representing the dividend or distribution. Thereafter, unless
you otherwise specify, you will be deemed to have elected to
reinvest all subsequent dividends and distributions in shares of
the Fund.
The Fund expects that distributions will consist either of net
income or long-term capital gains. For federal income tax
purposes, the Fund's dividend distributions of net income (or
short-term capital gains) will be taxable to you as ordinary
income. Any capital gains distributions may be taxable to you as
capital gains. The Fund's distributions also may be subject to
certain state and local taxes.
While its 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 will 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. The final determination of the amount of a Fund's
return of capital distributions for the period will be made after
the end of each calendar year.
Investment income received by the Fund from sources within
foreign countries may be subject to foreign income taxes withheld
at the source. To the extent that the Fund is liable for foreign
income taxes withheld at the source, the Fund intends, if
possible, to operate so as to meet the requirements of the Code
to "pass through" to the Fund's shareholders credits for foreign
income taxes paid, but there can be no assurance that the Fund
will be able to do so. Furthermore, a shareholder's ability to
claim a foreign tax credit or deduction for foreign taxes paid by
the Fund may be subject to certain limitations imposed by the
Code, as a result of which a shareholders may not be permitted to
claim a full credit or deductions for the amount of such taxes.
Under certain circumstances, if the fund realizes losses (e.g.,
from fluctuations in currency exchange rates) after paying a
dividend, all or a portion of the distributions may subsequently
be characterized as a return of capital. Returns of capital are
generally non-taxable, but will reduce a shareholder's basis in
shares of the Fund. If that basis is reduced to zero (which
could happen if the shareholder does not reinvest distributions
and returns of capital are significant), any further returns of
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capital will be taxable as capital gain. See the Fund's SAI for
a further explanation of these tax issues.
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.
Each year shortly after December 31, the Fund will send you tax
information stating the amount and type of all its distributions
for the year. Consult your tax adviser about the federal, state,
and local tax consequences in your particular circumstances.
DISTRIBUTION ARRANGEMENTS
The Fund offers two classes of shares.
CLASS I SHARES
You may purchase and hold shares of Class I solely:
- through accounts established under a fee-based program
sponsored and maintained by a registered broker-dealer
or other financial intermediary and approved by the
Fund's principal underwriter, Alliance Fund
Distributors, Inc. or AFD;
- through employee plans that have at least $10 million in
assets;
- as investment advisory clients of, and certain other
persons associated with, Alliance and its affiliates or
the Fund; and
- through registered investment advisers or other
financial intermediaries who charge a management,
consulting or other fee for their services and who
purchase shares through a broker or agent approved by
AFD, and clients of such registered investment advisers
or financial intermediaries whose accounts are linked to
the master account of such investment adviser or
financial intermediary on the books of such approved
broker or agent.
CLASS II SHARES.
You may purchase and hold shares of Class II solely:
- through participation in wrap-fee or other similar
programs offered by registered broker-dealers or other
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financial intermediaries that meet certain requirements
established by the Distributor, and
- through employee plans that have at least $10 million in
assets.
For more detailed information about who may purchase and hold the
shares of the Fund, see the Fund's SAI. Fee-based and other
programs may impose different requirements with respect to
investment in the shares of the Fund than described above.
ASSET-BASED SALES CHARGE OR RULE 12B-1 FEES. The Fund has
adopted a plan under Commission Rule 12b-1 that allows the Fund
to pay asset-based sales charges or distribution and service fees
for the distribution and sale of its Class II shares. The amount
of these fees is .30% of the Fund's aggregate net assets.
Because these fees are paid out of the Fund's assets on an on-
going basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales
fees.
CONVERSION FEATURE. As described above, Class I shares may be
held solely through the fee-based program accounts, employee
benefit plans and registered investment advisory or other
financial intermediary relationships, and by investment advisory
clients of, and certain other persons associated with, Alliance
and its affiliates or the Fund. If a holder of Class I shares
(i) ceases to participate in the fee-based program or plan, or to
be associated with an investment advisor or financial
intermediary or (ii) is otherwise no longer eligible to purchase
Class I shares as described in this Prospectus (each, a
"Conversion Event"), then all Class I shares held by the
shareholder will convert automatically and without notice, to
Class II shares of the Fund during the calendar month following
the month in which the Fund is informed of the occurrence of the
Conversion Event.
The failure of a shareholder or a fee-based program to satisfy
the minimum investment requirements to purchase Class I shares
will not constitute a Conversion Event. The conversion would
occur on the basis of the relative NAVs of the two classes and
without the imposition of any sales load, fee or other charge.
OTHER
If you are a Fund shareholder through an account established
under a fee-based or other program, your fee-based or other
program may impose requirements with respect to the purchase,
sale or exchange of shares of the Fund that are different from
those described in this Prospectus. A transaction, service,
administrative or other similar fee may be charged by your
14
<PAGE>
broker-dealer, agent, financial intermediary or other financial
representative with respect to the purchase, sale or exchange of
shares made through such financial representative. Such
financial intermediaries may also impose requirements with
respect to the purchase, sale or exchange of shares that are
different from, or in addition to, those imposed by the Fund,
including requirements as to the minimum initial and subsequent
investment amounts.
In addition to the discount or commission that may be paid to
dealers or agents in connection with the sale of shares of the
Fund, AFD may from time to time pay additional cash or other
incentives to dealers or agents, including EQ Financial
Consultants, Inc., an affiliate of AFD, in connection with such
sales. 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 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.
GENERAL INFORMATION
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 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.
15
<PAGE>
For more information about the Fund, the following documents are
available upon request:
- - ANNUAL/SEMI-ANNUAL REPORTS TO SHAREHOLDERS
The Fund's annual and semi-annual reports to shareholders contain
additional information on the Fund's investments. In the annual
report, you will find a discussion of the market conditions and
investment strategies that significantly affected the Fund's
performance during its last fiscal year.
- - STATEMENT OF ADDITIONAL INFORMATION (SAI)
The Fund has an SAI, which contains more detailed information
about the Fund, including its operations and investment policies.
The Fund's SAI is incorporated by reference into (and is legally
part of) this prospectus.
You may request a free copy of the current annual/semi-annual
report or the SAI, by contacting your broker or other financial
intermediary, or by contacting Alliance:
BY MAIL: c/o Alliance Fund Services, Inc.
P.B. Box 1520
Secaucus, NJ 07096-1520
BY PHONE: For Information: (800) 221-5672
For Literature: (800) 227-4618
Or you may view or obtain these documents from the Commission:
IN PERSON: at the Commission's Public Reference
Room in
Washington, D.C.
BY PHONE: 1-800-SEC-0330
BY MAIL: Public Reference Section
Securities and Exchange Commission
Washington, DC 20549-6009
(duplicating fee required)
ON THE INTERNET: www.sec.gov
Your also may find more information about Alliance and the Fund
on the Internet at: www.Alliancecapital.com
16
<PAGE>
The Registrant's Statements of Additional Information are
incorporated herein by reference to Part B of the Amendment to
the Registrant's Registration Statement on Form N-1A filed with
the Commission on November 14, 1997.
<PAGE>
(LOGO) ALLIANCE INSTITUTIONAL FUNDS, INC.
- ALLIANCE GROWTH INSTITUTIONAL FUND
_________________________________________________________________
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
[ ], 1999
_________________________________________________________________
This Statement of Additional Information is not a
prospectus but supplements and should be read in conjunction with
the Prospectus dated , 1999 (the "Prospectus") for
Alliance Institutional Funds, Inc. - Alliance Growth
Institutional Fund. Copies of the Prospectus may be obtained by
contacting Alliance Fund Services, Inc. at the address or the
"For 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........................
GENERAL INFORMATION.........................................
(R) This registered service mark used under license from the
owner, Alliance Capital Management L.P.
<PAGE>
_________________________________________________________________
DESCRIPTION OF THE FUND
_________________________________________________________________
Alliance Institutional Funds, Inc. (the "Company") is an
open-end management investment company whose shares are offered
in separate series referred to herein as "Funds." Each Fund is a
separate pool of assets constituting, in effect, a separate fund
with its own investment objective and policies. A shareholder in
a Fund will be entitled to his or her pro-rata share of all
dividends and distributions arising from that Fund's assets and,
upon redeeming shares of that Fund, the shareholder will receive
the then current net asset value of the applicable class of
shares of that Fund. (See "Purchase of Shares" and "Redemption
and Repurchase of Shares," in the Prospectus.) The Company is
empowered to establish, without shareholder approval, additional
Funds which may have different investment objectives.
The Company currently has four portfolios: Alliance
Growth Institutional Fund (the "Fund"), which is described in
this Statement of Additional Information, and Alliance Premier
Growth Institutional Fund, Alliance Quasar Institutional Fund and
Alliance Real Estate Investment Institutional Fund which are each
described in a separate Statement of Additional Information,
copies of which can be obtained by contacting Alliance Fund
Services, Inc. at the address or the "For Literature" telephone
number shown on the cover of this Statement of Additional
Information.
Investments will be made based upon their potential for
capital appreciation. Because of the market risks inherent in
any investment, the selection of securities on the basis of their
appreciation possibilities cannot ensure against possible loss in
value, and there is, of course, no assurance that the Fund's
investment objective will be met.
The following investment policies and restrictions
supplement those set forth in the Prospectus. Except as
otherwise noted, the Fund's investment policies described below
are not designated "fundamental policies" within the meaning of
the Investment Company Act of 1940, as amended, (the "1940 Act")
and may be changed by the Board of Directors of the Company (the
"Board of Directors" or the "Directors") without shareholder
approval. However, the Fund will not change its investment
policies without contemporaneous written notice to shareholders.
Convertible Securities. The Fund may invest in
convertible securities which include bonds, debentures, corporate
notes and preferred stocks that are convertible at a stated
2
<PAGE>
exchange rate into common stock. Prior to their 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. As with all debt
securities, 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 or dividend 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. The Fund may
invest up to [20%] of its net assets in the convertible
securities of companies whose common stocks are eligible for
purchase by the Fund under the investment policies described
above.
Rights and Warrants. The Fund may invest up to [5%] of
its net assets in rights or warrants which entitle the holder to
buy equity securities at a specific price for a specific period
of time, but will do so only if the equity securities themselves
are deemed appropriate by Alliance Capital Management L.P., the
Fund's adviser (the "Adviser") for inclusion in the Fund's
portfolio. 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 securities which may be
purchased nor do they represent any rights in the assets of the
issuing company. Also, 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, a change in perception as to the potential of the
underlying security, or any combination of these factors. If the
market price of the underlying security is below the exercise
price of 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.
3
<PAGE>
Foreign Securities. The Fund may invest up to [15%] of
the value of its total assets in securities of foreign issuers
whose common stocks are eligible for purchase by the Fund under
the investment policies described above. Foreign securities
investments are affected by exchange control regulations as well
as by changes in governmental administration, economic or
monetary policy (in the United States and abroad) and changed
circumstances in dealings between nations. Currency exchange
rate movements will increase or reduce the U.S. dollar value of
the Fund's net assets and income attributable to foreign
securities. Costs are incurred in connection with the conversion
of currencies held by the Fund. There may be less publicly
available information about foreign issuers than about domestic
issuers, and foreign issuers may not be subject to accounting,
auditing and financial reporting standards and requirements
comparable to those of domestic issuers. Securities of some
foreign issuers are less liquid and more volatile than securities
of comparable domestic issuers, and foreign brokerage commissions
are generally higher than in the United States. Foreign
securities markets may also be less liquid, more volatile, and
less subject to governmental supervision than in the United
States. Investments in foreign countries could be affected by
other factors not present in the United States, including
expropriation, confiscatory taxation and potential difficulties
in enforcing contractual obligations.
The securities markets of many foreign countries are
relatively small, with the majority of market capitalization and
trading volume concentrated in a limited number of companies
representing a small number of industries. Consequently, the
portion of the Fund's investment portfolio invested in foreign
securities may experience greater price volatility and
significantly lower liquidity than a portfolio invested solely in
equity securities of U. S. companies. These markets may be
subject to greater influence by adverse events generally
affecting the market, and by large investors trading significant
blocks of securities, than is usual in the United States.
Securities settlements may in some instances be subject
to delays and related administrative uncertainties. Certain
foreign countries require governmental approval prior to
investments by foreign persons or limit investment by foreign
persons to only a specified percentage of an issuers outstanding
securities or a specific class of securities which may have less
advantageous terms (including price) than securities of the
company available for purchase by nationals. These restrictions
or controls may at times limit or preclude investment in certain
securities and may increase the costs and expenses of the Fund.
In addition, the repatriation of investment income, capital or
the proceeds of sales of securities from certain of the countries
is controlled under regulations, including in some cases the need
4
<PAGE>
for certain advance government notification or authority, and if
a deterioration occurs in a country's balance of payments, the
country could impose temporary restrictions on foreign capital
remittances.
The Fund could be adversely affected by delays in, or a
refusal to grant, any required governmental approval for
repatriation, as well as by the application to it of other
restrictions on investment. Investing in local markets may
require the Fund to adopt special procedures that may involve
additional costs to the Fund. These factors may affect the
liquidity of the Fund's investments in any country in which any
of these factors exists. The Adviser will monitor the effect of
any such factor or factors on the Funds investments.
Furthermore, transaction costs including brokerage commissions
for transactions both on and off the securities exchanges in many
foreign countries are generally higher than in the U.S.
Issuers of securities in foreign jurisdictions are
generally not subject to the same degree of regulation as are
U.S. issuers with respect to such matters as insider trading
rules, restrictions on market manipulation, shareholder proxy
requirements, and timely disclosure of information. The
reporting, accounting and auditing standards of foreign countries
may differ, in some cases significantly, from U.S. standards in
important respects and less information may be available to
investors in foreign securities than to investors in U.S.
securities. Substantially less information is publicly available
about certain non-U.S. issuers than is available about U.S.
issuers.
The economies of individual foreign countries may differ
favorably or unfavorably from the U.S. economy in such respects
as growth of gross domestic product or gross national product,
rate of inflation, capital reinvestment, resource self-
sufficiency, and balance of payments position. Nationalization,
expropriation or confiscatory taxation, currency blockage,
political changes, government regulation, political or social
instability, or diplomatic developments could affect adversely
the economy of a foreign country and the Fund's investments. In
the event of expropriation, nationalization, or other
confiscation, the Fund could lose its entire investment in the
country involved. In addition, laws in foreign countries
governing business organizations, bankruptcy and insolvency may
provide less protection to security holders such as the Fund than
that provided by U.S. laws.
Illiquid Securities. The Fund will not maintain more
than 15% of its net assets in illiquid securities. Illiquid
securities generally include (i) direct placements or other
securities that are subject to legal or contractual restrictions
5
<PAGE>
on resale or for which there is no readily available market
(e.g., when trading in the security is suspended or, in the case
of unlisted securities, when market makers do not exist or will
not entertain bids or offers), including many individually
negotiated currency swaps and any assets used to cover currency
swaps and most privately negotiated investments in state
enterprises that have not yet conducted an initial equity
offering, (ii) over-the-counter options and assets used to cover
over-the-counter options, and (iii) repurchase agreements not
terminable within seven days.
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"), and securities which are
otherwise not readily marketable. Securities which have not been
registered under the Securities Act are referred to as private
placements or restricted securities and are purchased directly
from the issuer or in the secondary market. Mutual funds do not
typically hold a significant amount of these restricted or other
illiquid securities because of the potential for delays on resale
and uncertainty in valuation. Limitations on resale may have an
adverse effect on the marketability of portfolio securities, and
a mutual fund might be unable to dispose of restricted or other
illiquid securities promptly or at reasonable prices and might
thereby experience difficulty satisfying redemptions within seven
days. A mutual fund might also have to register such restricted
securities in order to dispose of them, resulting in additional
expense and delay. Adverse market conditions could impede a
public offering of such securities.
In recent years, however, a large institutional market
has developed for certain securities that are not registered
under the Securities Act, including foreign securities.
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 up to 5% of its net assets (taken at
market value) in restricted securities (excluding Rule 144A
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 dealers to institutional investors and in private
transactions; they cannot be resold to the general public without
registration.
6
<PAGE>
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,
which is 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. 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's Adviser, acting under the supervision of the
Board of Directors, will monitor the liquidity of restricted
securities in the Fund's portfolio that are eligible for resale
pursuant to Rule 144A. In reaching liquidity decisions, the
Fund's Adviser will consider, among others, the following
factors: (1) the frequency of trades and quotes for the
security; (2) the number of dealers making quotations to purchase
or sell the security; (3) the number of other potential
purchasers of the security; (4) the number of dealers undertaking
to make a market in the security; (5) the nature of the security
(including its unregistered nature) and the nature of the
marketplace for the security (e.g., the time needed to dispose of
the security, the method of soliciting offers and the mechanics
of the transfer); and (6) any applicable interpretation or
position with respect to such type of securities of the U.S.
Securities and Exchange Commission (the "Commission").
Because of the absence of a trading market for illiquid
securities, the Fund may not be able to realize their full value
upon sale. A Fund that invests in securities for which there is
no ready market may therefore not be able to readily sell such
securities. To the extent that these securities are foreign
securities, there is no law in many of the countries in which the
Fund may invest similar to the Securities Act requiring an issuer
to register the sale of securities with a governmental agency or
imposing legal restrictions on resales of securities, either as
to length of time the securities may be held or manner of resale.
However, there may be contractual restrictions on resale of
securities.
7
<PAGE>
General. When business or financial conditions warrant,
the Fund may assume a temporary defensive position and invest in
high-grade short-term fixed-income securities, which may include
U.S. Government securities, or hold its assets in cash.
Loans of Portfolio Securities. The risk in lending
portfolio securities, as with other extensions of credit,
consists of the possible loss of rights in the collateral should
the borrower fail financially. In determining whether to lend
securities to a particular borrower, the Adviser 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 from the securities.
The Fund may invest any cash collateral in portfolio securities
and earn 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.
Repurchase Agreements. The Fund may enter into
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
buyers 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. The Adviser
monitors the creditworthiness of the vendors with which the Fund
enters into repurchase agreements.
Portfolio Turnover. The Fund's investment policies as
described above (see "Investment Objective" and "How the Fund
Pursues its Objective") are based on the Adviser's assessment of
fundamentals in the context of changing market valuations. They
may therefore involve frequent purchases and sales of shares of a
particular issuer as well as the replacement of securities.
While it is anticipated that the Fund's annual portfolio turnover
rate will not normally exceed 100%, it could, under some
conditions, exceed 100%. A 100% annual turnover rate would
occur, for example, if all of the stocks in the Fund's portfolio
8
<PAGE>
were replaced once in a period of one year. The Fund expects
that more of its portfolio turnover will be attributable to
increases and decreases in the size of particular portfolio
positions rather than to the complete elimination of a particular
issuer's securities from the Fund's portfolio. A high portfolio
turnover rate will cause the Fund to realize short-term capital
gains or losses on the sale of certain securities and
correspondingly greater brokerage commission expenses than would
a lower rate, which expenses must be borne by the Fund and its
shareholders. See "Dividends, Distributions and Taxes."
Certain Fundamental Investment Policies
The following restrictions may not be changed without a
vote of a majority of the Fund's outstanding voting securities.
For this purpose (and for the purpose of changing the Fund's
investment restrictions and approving the Fund's advisory
agreement, each as more fully described below), the approval of a
majority of the Fund's outstanding voting securities means the
affirmative vote of (i) 67% or more of the shares represented at
a meeting at which more than 50% of the outstanding shares are
present in person or by proxy, or (ii) more than 50% of the
outstanding shares, whichever is less.
As a matter of fundamental policy, the Fund may not:
(a) purchase more than 10% of the outstanding
voting securities of any one issuer;
(b) invest 25% or more of the value of its total
assets in the same industry except that this restriction
does not apply to securities issued or guaranteed by the
U.S. Government, its agencies and instrumentalities;
(c) borrow money from banks or issue senior
securities except for temporary or emergency purposes in
an amount not exceeding 5% of the value of its total
assets at the time the borrowing is made;
(d) pledge, mortgage, hypothecate or otherwise
encumber any of its assets except to secure permitted
borrowings;
(e) invest in the securities of any issuer that
has a record of less than three years of continuous
operation (including the operation of any predecessor)
if as a result more than 10% of the value of the total
assets of the Fund would be invested in the securities
of such issuer or issuers;
9
<PAGE>
(f) make loans except through the purchase of debt
obligations in accordance with its investment objective
and policies;
(g) participate on a joint or joint and several
basis in any securities trading account;
(h) invest in companies for the purpose of
exercising control;
(i) write put options;
(j) purchase the securities of any other
investment company or investment trust, except when such
purchase is part of a merger, consolidation or
acquisition of assets; or
(k)(i) purchase or sell real estate except that it
may purchase and sell securities of companies which deal
in real estate or interests therein, (ii) purchase or
sell commodities or commodity contracts, (iii) invest in
interests in oil, gas or other mineral exploration or
development programs except that it may purchase and
sell securities of companies that deal in oil, gas or
other mineral exploration or development programs,
(iv) make short sales of securities or purchase
securities on margin except for such short-term credits
as may be necessary for the clearance of transactions,
or (v) act as an underwriter of securities except that
the Fund may acquire restricted securities or securities
in private placements under circumstances in which, if
such securities were sold, the Fund might be deemed to
be an underwriter within the meaning of the Securities
Act of 1933, as amended (the "Securities Act").
Application of Percentage Limitations
Except as otherwise indicated, whenever any investment
policy or restriction, described in the Prospectus or under the
heading "Description of the Fund," states a maximum percentage of
the Fund's assets which may be invested in any security or other
asset, it is intended that such maximum percentage limitation be
determined immediately after and as a result of the Fund's
acquisition of such securities or other assets. Accordingly, any
later increase or decrease in percentage beyond the specified
limitation resulting from a change in values or net assets will
not be considered a violation of any such maximum.
10
<PAGE>
_________________________________________________________________
MANAGEMENT OF THE FUND
_________________________________________________________________
Adviser
Alliance Capital Management L.P. (the "Adviser"), a
Delaware limited partnership with principal offices at 1345
Avenue of the Americas, New York, New York 10105, has been
retained under an investment advisory agreement (the "Advisory
Agreement") to provide investment advice and, in general, to
conduct the management and investment program of the Fund under
the supervision of the Fund's Board of Directors (see "Management
of the Fund" in the Prospectus).
The Adviser is a leading international investment
manager supervising client accounts with assets as of December
31, 1998, totaling 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. The [ ] registered
investment companies managed by the Adviser, comprising [ ]
separate investment portfolios, currently have more than [3.5]
million shareholders. As of December 31, 1998, the Adviser and
its subsidiaries employed approximately [2,000] employees who
operate out of domestic offices and the offices of subsidiaries
in Bahrain, Bangalore, Cairo, Chennai, Hong Kong, Istanbul,
Johannesburg, London, Luxembourg, Madrid, Moscow, Mumbai, New
Delhi, Paris, Pune, Sao Paolo, Seoul, Singapore, Sydney, Tokyo,
Toronto, Vienna and Warsaw. As of December 31, 1998, the Adviser
was retained as an investment manager for employee benefit plan
assets of [ ] of the FORTUNE 100 companies.
Alliance Capital Management Corporation ("ACMC"), 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"). ECI is a holding
company controlled by AXA-UAP ("AXA") a French insurance holding
company which at March 1, 1998, beneficially owned approximately
59% of the outstanding voting shares of ECI. As of June 30,
1998, 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 57%
of the issued and outstanding units representing assignments of
beneficial ownership of limited partnership interests in the
Adviser.
11
<PAGE>
AXA is a 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
principally in Western Europe, North America and the Asia/Pacific
area. AXA is also engaged in asset management, investment
banking, securities trading, brokerage, real estate and other
financial services activities principally in the United States,as
well as in Western Europe and the Asia/Pacific area.
Based on information provided by AXA, as of March 31,
1998, more than 30% of the voting power of AXA was controlled
directly and indirectly by FINAXA, a French holding company. As
of March 31, 1998 approximately 74% of the voting power of FINAXA
was controlled directly and indirectly by four French mutual
insurance companies (the "Mutuelles AXA"), one of which, AXA
Assurances I.A.R.D. Mutuelle, itself controlled directly and
indirectly more than 42% of the voting power of FINAXA. Acting
as a group, the Mutuelles AXA control AXA and FINAXA.
Under the Advisory Agreement between the Company and the
Adviser (the "Advisory Agreement"), the Adviser furnishes advice
and recommendations with respect to the Fund's portfolio of
securities and investments and provides persons satisfactory to
the Board of Directors to act as officers and employees of the
Company. Such officers and employees may be employees of the
Adviser or its affiliates.
The Adviser is, under the Advisory Agreement,
responsible for certain expenses incurred by the Fund, including,
for example, office facilities and certain administrative
services, and any expenses incurred in promoting the sale of Fund
shares (other than the portion of the promotional expenses borne
by the Fund in accordance with an effective plan pursuant to Rule
12b-1 under the 1940 Act, and the costs of printing Company
prospectuses and other reports to shareholders and fees related
to registration with the Commission and with state regulatory
authorities).
The Fund has, under the Advisory Agreement, assumed the
obligation for payment of all of its other expenses. As to the
obtaining of services other than those specifically provided to
the Fund by the Adviser, the Fund may utilize personnel employed
by the Adviser or by other subsidiaries of Equitable. The Fund
may employ its own personnel or contract for services to be
performed by third parties. In such event, the services will be
provided to the Fund at cost and the payments specifically
approved by the Board of Directors.
12
<PAGE>
For the services rendered by the Adviser under the
Advisory Agreement, the Fund pays the Adviser at an annualized
rate of 1% of the first $50 million, .75 of 1% of the excess over
$50 million up to $100 million and .50 of 1% of the excess over
$100 million of the average daily value of the Fund's net assets.
The fee is accrued daily and paid monthly.
The Advisory Agreement became effective on [ ],
1999, having been approved by the unanimous vote, cast in person,
of the Directors (including the Directors who are not parties to
the Advisory Agreement or interested persons, as defined by the
1940 Act, of any such party) at a meeting called for that purpose
held on that date, and by the Fund's initial shareholder on [
], 1999.
The Advisory Agreement will remain in effect until [
], 1999 and continue in effect thereafter only so long as its
continuance is specifically approved annually by a vote of a
majority of the Fund's outstanding voting securities or by the
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.
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 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.
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 other of its clients
simultaneously with the Fund. If transactions on behalf of more
than one client during the same period increase the demand for
securities being purchased or the supply of securities being
sold, there may be an adverse effect on price or quantity. 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.
13
<PAGE>
The Adviser may act as an investment adviser to other
persons, firms or corporations, including investment companies,
and is investment adviser to Alliance Institutional Reserves,
Inc., AFD Exchange Reserves, The Alliance Fund, Inc., Alliance
All-Asia Investment Fund, Inc., Alliance Balanced Shares, Inc.,
Alliance Bond Fund, Inc., Alliance Capital Reserves, Alliance
Global Dollar Government Fund, Inc., Alliance Global Environment
Fund, Inc., Alliance Global Small Cap Fund, Inc., Alliance
Global Strategic Income Trust, Inc., Alliance Government
Reserves, Alliance Greater China '97 Fund, Inc., Alliance Growth
and Income Fund, Inc., Alliance High Yield Fund, Inc., Alliance
International Fund, Alliance International Premier Growth Fund,
Inc., 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 Quasar Fund, Inc., Alliance
Real Estate Investment Fund, Inc., Alliance/Regent Sector
Opportunity Fund, Inc., Alliance Select Investor Series, Inc.,
Alliance Technology Fund, Inc., Alliance Utility Income Fund,
Inc., Alliance Variable Products Series Fund, Inc., Alliance
Worldwide Privatization Fund, Inc., The Alliance Portfolios 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 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.
Directors and Officers
The Directors and principal officers of the Company,
their ages and their principal occupations during the past five
years are set forth below. Each of the Directors and officers
are trustees, directors and officers of other registered
investment companies sponsored by the Adviser. Unless otherwise
specified, the address of each of the following is 1345 Avenue of
the Americas, New York, New York 10105.
14
<PAGE>
Directors
JOHN D. CARIFA,* 53, Chairman of the Board of
Directors, is the President, Chief Operating Officer and a
Director of Alliance Capital Management Corporation ("ACMC"),
with which he has been associated since prior to 1992.
RUTH BLOCK, 67, was formerly Executive Vice President
and Chief Insurance Officer of Equitable. She is a Director of
Ecolab Incorporated (specialty chemicals) and Amoco Corporation
(oil and gas). Her address is Box 4653, Stamford, Connecticut,
06903.
DAVID H. DIEVLER, 69, is an independent consultant. He
was formerly a Senior Vice President of ACMCuntil 1994. He is
currently an independent consultant. His address is P.O. Box
167, Spring Lake, New Jersey, 07762.
JOHN H. DOBKIN, 56, has been the President of Historic
Hudson Valley (historic preservation) since prior to 1993.
Previously, he was Director of the National Academy of Design.
His address is 150 White Plains Road, Tarrytown, New York 10591.
WILLIAM H. FOULK, JR., 66, is an Investment Advisor and
independent consultant. He was formerly Senior Manager of
Barrett Associates, Inc., a registered investment adviser, since
1986. His address is Suite 100, 2 Greenwich Plaza, Greenwich,
Connecticut 06830.
DR. JAMES M. HESTER, 74, is President of the Harry Frank
Guggenheim Foundation, with which he has been associated since
prior to 1993. He was formerly President of New York University,
the New York Botanical Garden and Rector of the United Nations
University. His address is 25 Cleveland Lane, Princeton, New
Jersey 08540.
CLIFFORD L. MICHEL, 59, is a member of the law firm of
Cahill Gordon & Reindel, with which he has been associated since
prior to 1993. He is President and Chief Executive Officer of
Wenonah Development Company (investments) and a Director of
Placer Dome, Inc. (mining). His address is St. Bernard's Road,
Gladstone, New Jersey 07934.
DONALD J. ROBINSON, 64, is Senior Counsel to the law
firm of Orrick, Herrington & Sutcliffe and was formerly a senior
____________________
* An "interested person" of the Fund as defined in the 1940
Act.
15
<PAGE>
partner and a member of the Executive Committee of that firm. His
address is 98 Hell's Peak Road, Weston, Vermont 05161.
Officers
JOHN D. CARIFA, President, see biography under
"Directors" above.
ALFRED HARRISON, Executive Vice President, 60, is Vice
Chairman of the Board of ACMC, with which he has been associated
since prior to 1993.
ALDEN M. STEWART, Executive Vice President, 52, is an
Executive Vice President of ACMC since July 1993. Previously, he
was associated with ECMC since prior to 1993.
KATHLEEN A. CORBET, Senior Vice President, 38, is an
Executive Vice President of ACMC with which she has been
associated since July 1993. Prior thereto, she headed Equitable
Capital Management Corporation's Fixed Income Management
Department since prior to 1993.
RANDALL E. HAASE, Senior Vice President, 33, has been a
Vice President of ACMC since July, 1993. Prior thereto he was
associated with ECMC.
DANIEL G. PINE, Senior Vice President, 45, has been
associated with the Adviser since 1996. Previously, he was a
Senior Vice President of Desai Capital Management since prior to
1993.
THOMAS BARDONG, Vice President, 53, is a Senior Vice
President of ACMC, with which he has been associated since prior
to 1993.
[DAVID KRUTH, Vice President, 34, is a Vice President of
ACMC, with which he has been associated since 1997. Prior
thereto he was a Senior Vice President of the Yarmouth Group.]
DANIEL PANKER, Vice President, 59, is a Senior Vice
President of ACMC, with which he has been associated since prior
to 1993.
MARK D. GERSTEN, Treasurer and Chief Financial Officer,
48, is a Senior Vice President of Alliance Fund Services, Inc.
("AFS") with which he has been associated since prior to 1993.
VINCENT S. NOTO, Controller, 34, is a Vice President of
AFS, with which he has been associated since prior to 1993.
16
<PAGE>
JOSEPH MANTINEO, Assistant Controller, 38, has been a
Vice President of AFS since prior to 1993.
[PHYLLIS CLARKE, Assistant Controller, 37, is an
Accounting Manager of Mutual Funds for AFS since prior to 1993.]
JUAN J. RODRIGUEZ, Assistant Controller, 41, is an
Assistant Vice President of AFS with which he has been associated
since prior to 1993.
EDMUND P. BERGAN, JR., Secretary, 48, is a Senior Vice
President and General Counsel of Alliance Fund Distributors, Inc.
("AFD") and AFS and Vice President and Assistant General Counsel
of ACMC, with which he has been associated since prior to 1993.
DOMENICK PUGLIESE, Assistant Secretary, 37, is a Vice
President and Assistant General Counsel of AFD, with which he has
been associated since May 1995. Prior thereto, he was Vice
President and Counsel of Concord Holding Corporation since 1994,
Vice President and Associate General Counsel of Prudential
Securities prior to 1993.
The aggregate compensation paid by the Company to each
of the Directors during its fiscal year ended October 31, 1998,
the aggregate compensation paid to each of the Directors during
calendar year 1998 by all of the registered investment companies
to which the Adviser provides investment advisory services
(collectively, the "Alliance Fund Complex") and the total number
of registered investment companies (and separate investment
portfolios within those companies) in the Alliance Fund Complex
with respect to which each of the Directors serves as a director
or trustee, are set forth below. Neither the Fund nor any other
fund in the Alliance Fund Complex provides compensation in the
form of pension 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.
17
<PAGE>
Total Number Total Number
of Investment of Investment
Companies in Portfolios
the Alliance within the
Total Complex, Alliance Fund
Compensation Including the Complex,
from the Company, as including the
Aggregate Alliance Fund to which the Fund, as to
Compensation Complex, Director is a which the
from the Including the Director or Director is a
Name of Director Company Company Trustee Director or Trustee
John D. Carifa $ -0- $ -0-
Ruth Block
David H. Dievler
John H. Dobkin
William H. Foulk, Jr.
Dr. James M. Hester
Clifford L. Michel
Donald J. Robinson
As of March 1, 1999, the Directors and officers of the
Company as a group owned less than 1% of the Class I and Class II
shares of the Fund.
_________________________________________________________________
EXPENSES OF THE FUND
_________________________________________________________________
Distribution Services Agreement
The Company 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 Principal Underwriter to distribute
the Fund's Class I and Class II shares and to permit the Fund to
pay distribution services fees to defray expenses associated with
the distribution of its Class II 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 1940 Act (the "Rule 12b-1 Plan").
Distribution services fees are accrued daily and paid
monthly and are charged as expenses of the Fund as accrued.
Under the Agreement, the Treasurer of the Fund reports the
amounts expended under the Rule 12b-1 Plan and the purposes for
which such expenditures were made to the Directors for their
review on a quarterly basis. Also, the Agreement provides that
the selection and nomination of Directors who are not "interested
persons" of the Company, as defined in the 1940 Act, are
18
<PAGE>
committed to the discretion of such disinterested Directors then
in office. The Agreement was initially approved by the Directors
at a meeting held on [ ], 1999 and by the Fund's initial
shareholder on [ ],1999.
The Agreement became effective on [ ], 1999.
The Agreement will continue in effect so long as its continuance
is specifically approved at least annually by the Directors or by
vote of the holders of a majority of the outstanding voting
securities (as defined in the 1940 Act) of that class, and, in
either case, by a majority of the Directors who are not parties
to the Agreement or interested persons, as defined in the 1940
Act, of any such party (other than as directors of the Fund) and
who have no direct or indirect financial interest in the
operation of the Rule 12b-1 Plan or any agreement related
thereto.
The Adviser may from time to time and from its own funds
or such other resources as may be permitted by rules of the
Commission make payments for distribution services to the
Principal Underwriter; the latter may, in turn, pay part or all
of such compensation to brokers or other persons for their
distribution assistance.
Pursuant to its Rule 12b-1 Plan, the Fund pays to the
Principal Underwriter a Rule 12b-1 distribution services fee with
respect to its Class II shares; which may not exceed an annual
rate of .30% of the Funds aggregate average daily net assets for
distribution expenses. The Rule 12b-1 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
constitutes a service fee used for personal service and/or the
maintenance of shareholder accounts.
The Rule 12b-1 Plan provides that the Principal
Underwriter will use the distribution services fee received from
the Fund in its entirety for payments (i) to compensate broker-
dealers or the 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
Funds shareholders. In this regard, some payments under the Rule
12b-1 Plan are used to compensate financial intermediaries with
trail or maintenance commissions in an amount equal to .25%,
annualized. Distribution services fees received from the Funds,
will not be used to pay any interest expenses, carrying charges
or other financing costs or allocation of overhead of the
Principal Underwriter. The Rule 12b-1 Plan also provides that
the Adviser may use its own resources to finance the distribution
of the Funds shares.
19
<PAGE>
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 Funds 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
Agreements. 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.
All material amendments to the Agreement must be
approved by a vote of the Directors or the holders of the Fund's
outstanding voting securities, voting separately by class, and in
either case, by a majority of the disinterested Directors, cast
in person at a meeting called for the purpose of voting on such
approval; and the Agreement may not be amended in order to
increase materially the costs that the Fund may bear pursuant to
the Agreement without the approval of a majority of the holders
of the outstanding voting shares of the class or classes
affected. The Agreement may be terminated (a) by the Fund
without penalty at any time by a majority vote of the holders of
the outstanding voting securities of the Fund, voting separately
by class, or by a majority vote of the Directors who are not
"interested persons" as defined in the 1940 Act, or (b) by the
Principal Underwriter. To terminate the Agreement, the
terminating party must give the other party 60 days' written
notice; to terminate the Rule 12b-1 Plan only, the Fund need give
no notice to the Principal Underwriter. The Agreement will
terminate automatically in the event of its assignment.
Transfer Agency Agreement
Alliance Fund Services, Inc., an indirect wholly-owned
subsidiary of the Adviser located at 500 Plaza Drive, Secaucus,
New Jersey 07094 ("AFS"), acts as the Fund's registrar, transfer
agent and dividend-disbursing agent. AFS receives a transfer
agency fee per account holder of each of the Class I and Class II
shares of the Fund, plus reimbursement for out-of-pocket
expenses. The transfer agency fee with respect to the Class II
shares is higher than the transfer agency fee with respect to the
Class I shares.
20
<PAGE>
_________________________________________________________________
PURCHASE OF SHARES
_________________________________________________________________
The following information supplements that set forth in
the Prospectus under the heading "Purchase and Sale of Shares-
- -How To Buy Shares."
General
Class I shares of the Fund may be purchased and held
solely (i) through accounts established under a fee-based program
sponsored and maintained by a registered broker-dealer or other
financial intermediary and approved by the Principal Underwriter,
(ii) through employee benefit plans, including defined
contribution and defined benefit plans ("Employee Plans"), that
have at least $10 million in assets, (iii) by investment advisory
clients of the Adviser or its affiliates, (iv) by (a) officers
and present or former Directors of the Company, (b) present or
former directors and trustees of other investment companies
managed by the Adviser, (c) present or retired full-time
employees of the Adviser, the Principal Underwriter, Alliance
Fund Services, Inc. and their affiliates, (d) officers and
directors of ACMC, the Principal Underwriter, Alliance Fund
Services, Inc. and their affiliates, (e) (1) the spouse, sibling,
direct ancestor or direct descendant (collectively "relatives")
of any person listed in (a) through (d), (2) any trust,
individual retirement account or retirement plan account for the
benefit of any person listed in (a) through (d) or a relative of
such person, or (3) the estate of any person listed in (a)
through (d) or a relative of such person, if such shares are
purchased for investment purposes (such shares may not be resold
except to the Fund), (v) by (a) the Adviser, the Principal
Underwriter, Alliance Fund Services, Inc. and their affiliates or
(b) certain employee benefit plans for employees of the Adviser,
the Principal Underwriter, Alliance Fund Services, Inc. and their
affiliates, and (vi) through registered investment advisers or
other financial intermediaries who charge a management,
consulting or other fee for their service and who purchase shares
through a broker or agent approved by the Principal Underwriter,
and clients of such registered investment advisers or financial
intermediaries whose accounts are linked to the master account of
such investment adviser or financial intermediary on the books of
such approved broker or agent.
Class II shares of the Fund may be purchased and held
solely (i) by investors participating in wrap fee or other
similar programs offered by registered broker-dealers or other
financial intermediaries that meet certain requirements
21
<PAGE>
established by the Principal Underwriter, and (ii) Employee Plans
that have at least $10 million in assets.
The shares of the Fund are offered on a continuous basis
at a price equal to their net asset value. The minimum initial
investment in the Company is $2,000,000, which may be invested in
any one or more of the Funds. Investments made through fee-based
or "wrap fee" programs will satisfy the minimum initial
investment requirement if the fee-based or "wrap fee" program, as
a whole, invests at least $2,000,000 in one or more of the Funds.
There is no minimum for subsequent investments. The minimum
initial investment may be waived in the discretion of the
Company.
Investors may purchase shares of the Fund through their
financial representatives. A transaction, service,
administrative or other similar fee may be charged by your
financial representative with respect to the purchase, sale or
exchange of shares made through such financial representative.
Such financial representative may also impose requirements with
respect to the purchase, sale or exchange of shares that are
different from, or in addition to, those imposed by the Fund as
described in the Prospectus and this Statement of Additional
Information, including requirements as to the minimum initial and
subsequent investment amounts.
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. On each Company business day on which a
purchase or redemption order is received by the Fund and trading
in the types of securities in which the Fund invests might
materially affect the value of Fund shares, the per share net
asset value is computed in accordance with the Fund's Articles of
Incorporation and By-Laws as of the next close of regular trading
on the New York Stock Exchange (the "Exchange") (currently 4:00
p.m. Eastern time) by dividing the value of the Fund's total
assets, less its liabilities, by the total number of its shares
then outstanding. A Company business day is any day on which the
Exchange is open for trading.
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 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. In the
22
<PAGE>
case of orders for the purchase of shares placed through
financial representatives, the applicable public offering price
will be the net asset value as so determined, but only if the
financial representative receives the order prior to the close of
regular trading on the Exchange and transmits it to the Principal
Underwriter prior to 5:00 p.m. Eastern time. The financial
representative is responsible for transmitting such orders by
5:00 p.m. Eastern time. If the financial representative fails to
do so, the investor's right to that day's closing price must be
settled between the investor and the financial representative.
If the financial representative 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 "For Literature" telephone
number shown on the cover of this Statement of Additional
Information. Except with respect to certain omnibus accounts,
telephone purchase orders 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
Company business day, the order to purchase shares is
automatically placed the following Company 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 purchased by the subscriber.
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 the subscriber's financial representative.
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 which may be
paid to dealers or agents in connection with the sale of Fund
shares, the Principal Underwriter from time to time may pay
additional cash or other incentives to dealers or agents,
[including EQ Financial Consultants, Inc., formerly Equico
23
<PAGE>
Securities, Inc., an affiliate of the Principal Underwriter,] in
connection with such sales. Such additional amounts may be
utilized, in whole or in part, to provide additional compensation
to registered representatives who sell shares of the Fund. On
some occasions, 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 I and Class II 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 II has exclusive voting rights with respect to
provisions of the Rule 12b-1 Plan pursuant to which its
distribution services fees are paid 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 II
shareholders an amendment to the Rule 12b-1 Plan that would
materially increase the amount to be paid thereunder with respect
to the Class II shares, then such amendment will also be
submitted to the Class I shareholders and the Class II and Class
I shareholders will vote separately thereon by class and
(ii) Class I shares are subject to a conversion feature.
The Directors have determined that currently no conflict
of interest exists between Class I and Class II shares. On an
ongoing basis, the Directors, pursuant to their fiduciary duties
under the 1940 Act and state law, will seek to ensure that no
such conflict arises.
Conversion of Class I
Shares to Class II Shares
Class I shares may be held solely through the fee-based
program accounts, employee benefit plans and registered
investment advisory or other financial intermediary relationships
described under "--General," and by investment advisory clients
of, and certain other persons associated with, the Adviser and
its affiliates or the Fund. If (i) a holder of Class I shares
ceases to participate in the fee-based program or plan, or to be
associated with an investment advisor or financial intermediary,
in each case one that satisfies the requirements to purchase
shares set forth under "--General", or (ii) the holder is
24
<PAGE>
otherwise no longer eligible to purchase Class I shares as
described in this Statement of Additional Information (each, a
"Conversion Event"), then all Class I shares held by the
shareholder will convert automatically and without notice to the
shareholder, other than the notice contained in this Statement of
Additional Information, to Class II shares of the Fund during the
calendar month following the month in which the Fund is informed
or otherwise learns of the occurrence of the Conversion Event.
The failure of a shareholder or a fee-based program to satisfy
the minimum investment requirements to purchase Class I shares
will not constitute a Conversion Event. The conversion would
occur on the basis of the relative net asset values of the two
classes and without the imposition of any sales load, fee or
other charge. Class II shares currently bear a .30% distribution
services fee and have a higher expense ratio than Class I shares.
As a result, Class II shares may pay correspondingly lower
dividends and have a lower net asset value than Class I shares.
The conversion of Class I shares to Class II shares is
subject to the continuing availability of an opinion of counsel
to the effect that the conversion of Class I shares to Class II
shares does not constitute a taxable event under federal income
tax law. The conversion of Class I shares to Class II shares may
be suspended if such an opinion is no longer available at the
time such conversion is to occur. In that event, the Class I
shareholder would be required to redeem his Class I shares, which
would constitute a taxable event under federal income tax law.
_________________________________________________________________
REDEMPTION AND REPURCHASE OF SHARES
_________________________________________________________________
The following information supplements that set forth in
the Prospectus under the heading "Purchase and Sale of Shares-
- -How to Sell Shares." If you are a 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 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 shares made through such financial representative.
Redemption
Subject to the limitations described below, the
Company's Articles of Incorporation require that the Company
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. There is no redemption charge. If a shareholder is in
25
<PAGE>
doubt about what documents are required by his or her fee-based
program or employee benefit plan, the shareholder should contact
the shareholder's 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
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 permit 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. Payment received by a shareholder upon redemption or
repurchase of the shareholder's shares, assuming the shares
constitute capital assets in the shareholder's 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 stock
certificates have been issued, the registered owner or owners
should forward a letter to the Company containing a request for
redemption. The signature or signatures on the letter must be
guaranteed by an institution that is an "eligible guarantor
institution" as defined in Rule 17Ad-15 under the Securities
Exchange Act of 1934, as amended.
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 Company 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 Company for redemption must
be signed by the registered owner or owners exactly as the
registered name appears on the face of the certificate or,
alternatively, a stock power signed in the same manner may be
attached to the stock certificate or certificates or, where
tender is made by mail, separately mailed to the Company. The
26
<PAGE>
signature or signatures on the assignment form must be guaranteed
in the manner described above.
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 Company 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
eligible to request redemption by check, once in any 30-day
period, of shares for which no stock certificates have been
issued by telephone at (800) 221-5672 before 4:00 p.m. Eastern
time on a Company 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 Redemptions - 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
Company reserves the right to suspend or terminate its telephone
redemption service at any time without notice. Neither the
Company nor the Adviser, the Principal Underwriter or Alliance
Fund Services, Inc. will be responsible for the authenticity of
telephone requests for redemptions that the Company reasonably
believes to be genuine. The Company will employ reasonable
27
<PAGE>
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
Company did not employ such procedures, it could be liable for
losses arising from unauthorized or fraudulent telephone
instructions. Financial representatives may charge a commission
for handling telephone requests for redemptions.
Repurchase
The Company may repurchase shares through the Principal
Underwriter or selected financial intermediaries. The repurchase
price will be the net asset value next determined after the
Principal Underwriter receives the request, except that requests
placed through selected financial representatives 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 is
responsible for transmitting the request to the Principal
Underwriter by 5:00 p.m. If the financial intermediary fails to
do so, the shareholder's right to receive that day's closing
price must be settled between the shareholder and the financial
representative. A shareholder may offer shares of the Fund to
the Principal Underwriter either directly or through the
shareholder's financial representative. Neither the Company nor
the Principal Underwriter charges a fee or commission in
connection with the repurchase of shares. Normally, if shares of
the Fund are offered through a financial intermediary, the
repurchase is settled by the shareholder as an ordinary
transaction with or through the financial representative, 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 Company reserves the right to close out an account
that has remained below $200 for at least 90 days. Shareholders
will receive 60 days' written notice to increase the account
value before the account is closed. In the case of a redemption
or repurchase of shares of the Fund recently purchased by check,
redemption proceeds will not be made available until the Company
is reasonably assured that the check has cleared, normally up to
15 calendar days following the purchase date.
28
<PAGE>
_________________________________________________________________
SHAREHOLDER SERVICES
_________________________________________________________________
The following information supplements that set forth in
the Prospectus under the heading "Purchase and Sale of Shares-
- -Shareholder Services." If you are a 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 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 shares made through such financial representative.
Exchange Privilege
You may exchange your investment in the Fund for shares
of the same class of any other Fund and for Class A shares of any
other Alliance Mutual Fund (as defined below). 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 Alliance Fund Services, Inc. by 4:00 p.m. Eastern
time on a Company business day in order to be effected at that
day's net asset value.
Currently, the Alliance Mutual Funds include:
AFD Exchange Reserves
Alliance All-Asia Investment Fund, Inc.
Alliance Balanced Shares, Inc.
Alliance Bond Fund, Inc.
-Corporate Bond Portfolio
-U.S. Government Portfolio
Alliance Global Dollar Government Fund, Inc.
Alliance Global Environment Fund, Inc.
Alliance Global Small Cap Fund, Inc.
Alliance Global Strategic Income Trust, Inc.
Alliance Greater China '97 Fund, Inc.
Alliance Growth and Income Fund, Inc.
Alliance High Yield Fund, Inc.
Alliance International Fund
Alliance International Premier Growth Fund, Inc.
Alliance Limited Maturity Government Fund, Inc.
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
29
<PAGE>
-National Portfolio
-New York Portfolio
Alliance Municipal Income Fund II
-Arizona Portfolio
-Florida Portfolio
-Massachusetts Portfolio
-Michigan Portfolio
-Minnesota Portfolio
-New Jersey Portfolio
-Ohio Portfolio
-Pennsylvania Portfolio
-Virginia Portfolio
Alliance New Europe Fund, Inc.
Alliance North American Government Income Trust, Inc.
Alliance Premier Growth Fund, Inc.
Alliance Quasar Fund, Inc.
Alliance Real Estate Investment Fund, Inc.
Alliance Technology Fund, Inc.
Alliance Utility Income Fund, Inc.
Alliance Worldwide Privatization Fund, Inc.
The Alliance Fund, Inc.
The Alliance Portfolios
-Alliance Growth Fund
-Alliance Conservative Investors Fund
-Alliance Growth Investors Fund
-Alliance Short-Term U.S. Government Fund
Please read carefully the portions of the prospectus of
the Fund or Alliance Mutual Fund, as applicable, into which you
wish to exchange before submitting the request. Call Alliance
Fund Services, Inc. at (800) 221-5672 to exchange uncertificated
shares. Exchanges of shares as described above in this section
are taxable transactions for federal income 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 or the prospectus for the Fund or Alliance Mutual Fund
whose shares are being acquired, as applicable. 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 Fund or the Alliance Mutual Fund, as applicable, whose
shares are being exchanged of (i) proper instructions and all
necessary supporting documents as described in that 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 fund whose
shares have been tendered for exchange is reasonably assured that
30
<PAGE>
the check has cleared, normally up to 15 calendar days following
the purchase date. Exchanges of shares of Funds or Alliance
Mutual Funds will generally result in the realization of a
capital gain or loss for federal income tax purposes.
Each Fund shareholder, and the shareholder's financial
representative, are authorized to make telephone requests for
exchanges unless Alliance Fund Services, Inc., receives a 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 the 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 Company business day as defined
above. Telephone requests for exchange received before 4:00 p.m.
Eastern time on a Company 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.
None of the Company, 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 Company reasonably believes to be
genuine. The Company 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 Company did not employ such
procedures, it could be liable for losses arising from
unauthorized or fraudulent telephone instructions. Financial
representatives, may charge a commission for handling telephone
requests for exchanges.
The exchange privilege is available only in states where
shares of the Alliance Mutual Fund 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
31
<PAGE>
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 Company 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 "For 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
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. The minimum
initial investment requirement may be waived with respect to
certain of these qualified plans.
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
retirement 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 Equitable 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
32
<PAGE>
procedures. For additional information please contact Alliance
Fund Services, Inc.
Statements and Reports
Each shareholder of the Fund receives semi-annual and
annual reports which include a listing of the Fund's investments,
financial statements and, in the case of the annual report, the
report of the Company's independent auditors, Ernst & Young LLP,
as well as a confirmation of each purchase and redemption of
shares by the shareholder. 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 Fund's per share net asset value is computed in
accordance with the Company's Articles of Incorporation and By-
Laws at the next close of regular trading on the Exchange
(ordinarily 4:00 p.m. Eastern time) following receipt of a
purchase or redemption order by the Company, on each Company
business day on which such an order is received and on such other
days as the Board of Directors deems appropriate or necessary in
order to comply with Rule 22c-1 under the 1940 Act. The Fund's
per share net asset value is calculated by dividing the value of
the Fund's total assets, less its liabilities, by the total
number of its shares then outstanding. A Company business day is
any weekday on which the Exchange is open for trading.
In accordance with applicable rules under the 1940 Act,
portfolio securities are valued at current market value or at
fair value as determined in good faith by the Board of Directors.
The Board of Directors has delegated to the Adviser certain of
the Board's duties with respect to the following procedures.
Readily marketable securities listed on the Exchange or on a
foreign securities exchange (other than foreign securities
exchanges whose operations are similar to those of the United
States over-the-counter market) are valued, except as indicted
below, at the last sale price reflected on the consolidated tape
at the close of the Exchange or, in the case of a foreign
securities exchange, at the last quoted sale price, in each case
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 in good faith at fair value by, or in accordance with
procedures established by, the Board of Directors. Readily
33
<PAGE>
marketable securities not listed on the Exchange or on a foreign
securities exchange but listed on other United States national
securities exchanges or traded on The Nasdaq Stock Market, Inc.
are valued in like manner. Portfolio securities traded on the
Exchange and on one or more foreign or other national securities
exchanges, and portfolio securities not traded on the Exchange
but traded on one or more foreign or other national securities
exchanges are valued in accordance with these procedures by
reference to the principal exchange on which the securities are
traded.
Readily marketable securities traded in the over-the-
counter market, securities listed on a foreign securities
exchange whose operations are similar to those of the United
States over-the-counter market, and securities listed on a U.S.
national securities exchange whose primary market is believed to
be over-the-counter (but excluding securities traded on The
Nasdaq Stock Market, Inc.), 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
another comparable sources.
Listed put or call options purchased by the Fund are
valued at the last sale price. If there has been no sale on that
day, such securities will be valued at the closing bid prices on
that day.
Open futures contracts and options thereon will be
valued using the closing settlement price or, in the absence of
such a price, the most recent quoted bid price. If there are no
quotations available for that day of valuations, the last
available closing settlement price will be used.
U.S. Government securities and other debt instruments
having 60 days or less remaining until maturity are valued at
amortized cost if their original maturity was 60 days or less, or
by amortizing their fair value as of the 61st day prior to
maturity if their original term to maturity exceeded 60 days
(unless in either case the Board of Directors determines that
this method does not represent fair value).
Fixed-income securities may be valued on the basis of
prices provided by a pricing service when such prices are
believed to reflect the fair market value of such securities.
The prices provided by pricing service take into account many
factors, including institutional size trading in similar groups
of securities and any developments related to specific
securities.
34
<PAGE>
All other assets of the Fund are valued in good faith at
fair value by, or in accordance with procedures established by,
the Board of Directors.
Trading in securities on Far Eastern and European
securities exchanges and over-the-counter markets is normally
completed well before the close of business of each Fund business
day. In addition, trading in foreign markets may not take place
on all Fund business days. Furthermore, trading may take place
in various foreign markets on days that are not Fund business
days. The Fund's calculation of the net asset value per share,
therefore, does not always take place contemporaneously with the
most recent determination of the prices of portfolio securities
in these markets. Events affecting the values of these portfolio
securities that occur between the time their prices are
determined in accordance with the above procedures and the close
of the Exchange will not be reflected in the Fund's calculation
of net asset value unless it is believed that these prices do not
reflect current market value, in which case the securities will
be valued in good faith by, or in accordance with procedures
established by, the Board of Directors at fair value.
The Board of Directors may suspend the determination of
the Fund's, net asset value (and the offering and sale of
shares), subject to the rules of the Commission and other
governmental rules and regulations, at a time when: (1) the
Exchange is closed, other than customary weekend and holiday
closings, (2) an emergency exists as a result of which it is not
reasonably practicable for the Fund to dispose of securities
owned by it or to determine fairly the value of its net assets,
or (3) for the protection of shareholders, the Commission by
order permits a suspension of the right of redemption or a
postponement of the date of payment on redemption.
For purposes of determining the Fund's net asset value
per share, all assets and liabilities initially expressed in a
foreign currency will be converted into U.S. dollars at the mean
of the current bid and asked prices of such currency against the
U.S. dollar last quoted by a major bank that is a regular
participant in the relevant foreign exchange market or on the
basis of a pricing service that takes into account the quotes
provided by a number of such major banks. If such quotations are
not available as of the close of the Exchange, the rate of
exchange will be determined in good faith by, or under the
direction of, the Board of Directors.
The assets belonging to the Class I and Class II shares
will be invested together in a single portfolio. The net asset
value of each class will be determined separately by subtracting
the liabilities allocated to that class from the assets belonging
to that class in conformance with the provisions of a plan
35
<PAGE>
adopted by the Fund in accordance with Rule 18f-3 under the 1940
Act.
_________________________________________________________________
DIVIDENDS, DISTRIBUTIONS AND TAXES
_________________________________________________________________
United States Federal Income Taxation of Dividends and
Distributions
General
The Fund intends for each taxable year to qualify to be
taxed as a "regulated investment company" under the Code. Such
qualification relieves the Fund of federal income tax liability
on the part of its net ordinary income and net realized capital
gains which it timely distributes to its shareholders. Such
qualification does not, of course, involve governmental
supervision of management or investment practices or policies.
Investors should consult their own counsel for a complete
understanding of the requirements the Fund must meet to qualify
to be taxed as a "regulated investment company."
The information set forth in the Prospectus and the
following discussion relate solely to the significant United
States federal income taxes on dividends and distributions by the
Fund and assumes that the Fund qualifies to be taxed as a
regulated investment company. An investor should consult the
investor's own tax counsel with respect to the specific tax
consequences of being a shareholder of the Fund, including the
effect and applicability of federal, state and local tax laws to
the investor's particular situation and the possible effects of
changes therein.
It is the present policy of the Fund to distribute to
shareholders all net investment income annually and to distribute
net realized capital gains, if any, annually. The amount of any
such distributions necessarily depends upon the realization by
the Fund of income and capital gains from investments.
The Fund intends to declare and distribute dividends in
the amounts and at the times necessary to avoid the application
of the 4% federal excise tax imposed on certain undistributed
income of regulated investment companies. The Fund will be
required to pay the 4% excise tax to the extent it does not
distribute to its shareholders during any calendar year an amount
equal to the sum of (i) 98% of its ordinary taxable income for
the calendar year, (ii) 98% of its capital gain net income and
foreign currency gains for the twelve months ended October 31 of
such year and (iii) any ordinary income or capital gain net
36
<PAGE>
income from the preceding calendar year that was not distributed
during such 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 but actually paid during the following
January will be taxable to these shareholders for the year
declared, and not for the subsequent calendar year in which the
shareholders actually receive the dividend.
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. Dividends paid by
the Fund and received by a corporate shareholder are eligible for
the dividends received deduction to the extent that the Fund's
income is derived from certain dividends received from domestic
corporations, provided the corporate shareholder holds shares in
the Fund for at least 46 days during the 90-day period beginning
45 days before the date on which the shareholder becomes entitled
to receive the dividend. In determining the holding period of
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. In addition, the dividends
received deduction will be disallowed to the extent the
investment in shares of the Fund is financed with indebtedness.
Distributions of net capital gain (i.e., the excess of
net long-term capital gain over net short-term capital loss) are
taxable as long-term capital gain, regardless of how long a
shareholder has held shares in the Fund. 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 the dividend or distribution. Furthermore, a
dividend or distribution made shortly after the purchase of
shares by a shareholder, although in effect a return of capital
to that particular shareholder, would be taxable to the
shareholder as described above. If a shareholder has held shares
in the Fund for six months or less and during that period has
received a distribution of net 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 distribution. 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
37
<PAGE>
exchanged. For this purpose, acquisitions pursuant to the
Dividend Reinvestment Plan would constitute a replacement if made
within that period. If disallowed, the loss will be reflected in
an upward adjustment to the basis of the shares acquired.
Dividends are taxable in the manner discussed regardless
of whether they are paid to a shareholder in cash or are
reinvested in additional shares of the Fund.
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, generally 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 may be required to withhold federal income tax
at the rate of 31% from all taxable distributions payable to
shareholders who fail to provide the Fund with their correct
taxpayer identification numbers or to make required
certifications, or who have been notified by the Internal Revenue
Service that they are subject to backup withholding. Corporate
shareholders and certain other shareholders specified in the Code
are exempt from such backup withholding. Backup withholding is
not an additional tax; any amounts so withheld may be credited
against a shareholder's federal income tax liability or refunded.
Taxation of Foreign Stockholders
The foregoing discussion relates only to United States
federal income tax law as it affects shareholders who are United
States citizens or residents or United States corporations. The
effects of federal income tax law on shareholders who are non-
resident alien individuals or foreign corporations may be
substantially different. Foreign investors should therefore
consult their counsel for further information as to the United
States tax consequences of investing in the Fund.
_________________________________________________________________
BROKERAGE AND PORTFOLIO TRANSACTIONS
_________________________________________________________________
Subject to the general supervision of the Board of
Directors, the Adviser is responsible for the investment
decisions and the placing of orders for portfolio transactions
for the Fund. The Adviser determines the broker to be used in
each specific transaction with the objective of negotiating a
combination of the most favorable commission and the best price
38
<PAGE>
obtainable on each transaction (generally defined as best
execution). When consistent with the objective of obtaining best
execution, brokerage may be directed to persons or firms
supplying investment information to the Adviser. There may be
occasions where the transaction cost charged by a broker may be
greater than that which another broker may charge if the Fund
determines in good faith that the amount of such transaction cost
is reasonable in relation to the value of the brokerage, research
and statistical services provided by the executing broker.
Neither the Company nor the Adviser has entered into
agreements or understandings with any brokers regarding the
placement of securities transactions because of research services
they provide. To the extent that such persons or firms supply
investment information to the Adviser for use in rendering
investment advice to the Fund, such information may be supplied
at no cost to the Adviser and, therefore, may have the effect of
reducing the expenses of the Adviser in rendering advice to the
Fund. While it is impossible to place an actual dollar value on
such investment information, its receipt by the Adviser probably
does not reduce the overall expenses of the Adviser to any
material extent.
The investment information provided to the Adviser is of
the type described in Section 28(e)(3) of the Securities Exchange
Act of 1934 and is designed to augment the Adviser's own internal
research and investment strategy capabilities. Research services
furnished by brokers through which the Fund effects securities
transactions are used by the Adviser in carrying out its
investment responsibilities with respect to all its client
accounts.
The Fund may deal in some instances in securities which
are not listed on a national stock exchange but are traded in the
over-the-counter market. The Fund may also purchase listed
securities through the third market, i.e., from a dealer which is
not a member of the exchange on which a security is listed.
Where transactions are executed in the over-the-counter market or
third market, the Fund will seek to deal with the primary market
makers; but when necessary in order to obtain the best price and
execution, it will utilize the services of others. In all cases,
the Fund will attempt to negotiate best execution.
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
39
<PAGE>
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 Conduct Rules 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 broker-dealers 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 commission. In such instances, the placement of orders
with such brokers would be consistent with the Fund's objective
of obtaining best execution and would not be dependent upon the
fact that DLJ is an affiliate of the Adviser. With respect to
orders placed with DLJ for execution on a national securities
exchange, commissions received must conform to Section
17(e)(2)(A) of the 1940 Act and Rule 17e-1 thereunder, which
permit an affiliated person of a registered investment company
(such as the Company), or any affiliated person of such person,
to receive a brokerage commission from such registered investment
company, provided that such commission is reasonable and fair
compared to the commissions received by other brokers in
connection with comparable transactions involving similar
securities during a comparable period of time.
_________________________________________________________________
GENERAL INFORMATION
_________________________________________________________________
Capitalization
The Company is a Maryland corporation organized on
October 3, 1997. The authorized capital stock of the Company
consists of 24,000,000,000 shares, of which 3,000,000,000 shares
are Class I shares of the Fund and 3,000,000,000 shares are Class
II shares of the Fund, each having $.001 par value. The balance
of the shares of the Company are Class I and Class II shares of
the Company's other three portfolios.
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.
40
<PAGE>
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 and
classes 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 new portfolio, each share of each
portfolio would normally be entitled to one vote for all
purposes. Generally, shares of all 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 portfolios 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, are 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.
A shareholder in the Fund will be entitled to share pro
rata with other holders of the same class of shares 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 Company is
empowered to establish, without shareholder approval, additional
portfolios in the Company, which may have different investment
objectives, and additional classes of shares 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. Each class has identical
voting, dividend, liquidation and other rights, except that each
class bears its own transfer agency expenses, Class II shares
bear their own distribution expenses and Class I shares convert
to Class II shares under certain circumstances. Each class of
shares votes separately with respect to mattes 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.
41
<PAGE>
Custodian
State Street Bank and Trust Company, 225 Franklin
Street, Boston, Massachusetts 02110, will act as the Fund's
custodian for the assets of the Fund but plays no part in
deciding the purchase or sale of portfolio securities. Subject
to the supervision of the Directors, State Street Bank and Trust
Company may enter into sub-custodial agreements for the holding
of the Fund's foreign securities.
Principal Underwriter
Alliance Fund Distributors, Inc., an indirect wholly-
owned subsidiary of the Adviser, located at 1345 Avenue of the
Americas, New York, New York 10105, is the principal underwriter
of shares of the Fund. Under the Distribution Services Agreement
between the Fund and the Principal Underwriter, 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.
Counsel
Legal matters in connection with the issuance of the
shares of Common Stock offered hereby are passed upon by Seward &
Kissel, New York, New York. Seward & Kissel has relied upon the
opinion of Venable, Baetjer and Howard, LLP, Baltimore, Maryland,
for matters relating to Maryland law.
Independent Auditors
Ernst & Young LLP, New York, New York, have been
appointed as independent auditors for the Company.
Performance Information
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 its
most recently completed 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 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 in Fund
shares when paid.
42
<PAGE>
The Fund's total return is computed separately for Class
I and Class II shares. 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 the Fund's 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. 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 Barrons, Business Week, Changing Times, Forbes,
Investor's Daily, Money Magazine, The New York Times and The Wall
Street Journal 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 number 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
Commission. 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.
43
<PAGE>
PART C
OTHER INFORMATION
ITEM 23. Exhibits
(a) Articles of Incorporation of the Registrant -
Incoprorated by reference to Exhibit 1 to the
Registrant's Registration Statement on Form N-1A
(File Nos. 333-37177 and 811-08403) filed with the
Securities and Exchange Commission on October 3,
1997.
(b) By-Laws of the Registrant - Incoprorated by
reference to Exhibit 2 to the Fund's Registration
Statement on Form N-1A (File Nos. 333-37177 and
811-08403) filed with the Securities and Exchange
Commission on October 3, 1997.
(c) Not applicable.
(d) Advisory Agreement between the Registrant and
Alliance Capital Management L.P. - Filed herewith.
(e) (1) Distribution Services Agreement between the
Registrant and Alliance Fund Distributors,
Inc. - Filed herewith.
(2) Form of Selected Dealer Agreement between
Alliance Fund Distributors, Inc. and selected
dealers offering shares of the Registrant -
Incoprorated by reference to Exhibit 6(b) to
Pre-Effective Amendment No. 1 to the
Registrant's Registration Statement on Form N-
1A (File Nos. 333-37177 and 811-08403) filed
with the Securities and Exchange Commission on
November 14, 1997.
(3) Form of Selected Agent Agreement between
Alliance Fund Distributors, Inc. and selected
agents making available shares of the
Registrant - Incoprorated by reference to
Exhibit 6(c) to Pre-Effective Amendment No. 1
to the Registrant's Registration Statement on
Form N-1A (File Nos. 333-37177 and 811-08403)
filed with the Securities and Exchange
Commission on November 14, 1997.
(f) Not applicable.
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<PAGE>
(g) Custodian Contract between the Registrant and State
Street Bank and Trust Company - Filed herewith.
(h) Transfer Agency Agreement between the Registrant
and Alliance Fund Services, Inc. - Filed herewith.
(i) (1) Opinion and Consent of Seward & Kissel -
Incoprorated by reference to Exhibit 10(a) to
Pre-Effective Amendment No. 1 to the
Registrant's Registration Statement on Form N-
1A (File Nos. 333-37177 and 811-08403) filed
with the Securities and Exchange Commission on
November 14, 1997.
(2) Opinion and Consent of Venable, Baetjer and
Howard, LLP. - Incoprorated by reference to
Exhibit 10(b) to Pre-Effective Amendment No. 1
to the Registrant's Registration Statement on
Form N-1A (File Nos. 333-37177 and 811-08403)
filed with the Securities and Exchange
Commission on November 14, 1997.
(j) Not applicable.
(k) Not applicable.
(l) Investment representation letter of Alliance
Capital Management L.P. - Incoprorated by reference
to Exhibit 13 to Pre-Effective Amendment No. 1 to
the Registrant's Registration Statement on Form N-
1A (File Nos. 333-37177 and 811-08403) filed with
the Securities and Exchange Commission on November
14, 1997.
(m) Rule 12b-1 Plan - See Exhibit (e)(1).
(n) Not applicable.
(o) Rule 18f-3 Plan - Filed herewith.
Other Exhibits:
Powers of Attorney for: Ruth Block, John D. Carifa,
David H. Dievler, John H. Dobkin, William H. Foulk,
Jr., James M. Hester, Clifford L. Michel and Donald
J. Robinson - Incorporated by reference to Other
Exhibits to Pre-Effective Amendment No. 1 to the
Registrant's Registration Statement on Form N-1A
(File Nos. 333-37177 and 811-08403) filed with the
Securities and Exchange Commission on November 14,
1997.
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<PAGE>
ITEM 24. Persons Controlled by or under Common Control with the
Fund.
None.
ITEM 25. 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 (b) hereto, and Section 10 of the Distribution
Services Agreement, filed as Exhibit (e)(1) hereto. The
Adviser's liability for any loss suffered by the
Registrant or its shareholders is set forth in Section 4
of the Advisory Agreement, filed as Exhibit (d) hereto.
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
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<PAGE>
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
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 26. Business and Other Connections of Investment Adviser.
The descriptions of Alliance Capital Management L.P.
under the captions "Management of the Funds" 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
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<PAGE>
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 27. Principal Underwriters.
(a) Alliance Fund Distributors, Inc., 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:
AFD Exchange Reserves
Alliance All-Asia Investment Fund, Inc.
Alliance Balanced Shares, Inc.
Alliance Bond Fund, Inc.
Alliance Capital Reserves
Alliance Global Dollar Government Fund, Inc.
Alliance Global Environment Fund, Inc.
Alliance Global Small Cap Fund, Inc.
Alliance Global Strategic Income Trust, Inc.
Alliance Government Reserves
Alliance Greater China 97 Fund, Inc.
Alliance Growth and Income Fund, Inc.
Alliance High Yield Fund, Inc.
Alliance Institutional Reserves, Inc.
Alliance International Fund
Alliance International Premier Growth Fund, Inc.
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 Quasar Fund, Inc.
Alliance Real Estate Investment Fund, Inc.
Alliance Select Investor Series, Inc.
Alliance Technology Fund, Inc.
Alliance Utility Income Fund, Inc.
Alliance Variable Products Series Fund, Inc.
Alliance Worldwide Privatization Fund, Inc.
The Alliance Fund, Inc.
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<PAGE>
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 POSITIONS AND
OFFICES WITH OFFICES WITH
NAME UNDERWRITER REGISTRANT
Michael J. Laughlin Director and Chairman
John D. Carifa Director
Robert L. Errico Director and President
Geoffrey L. Hyde Director and Senior
Vice President
Dave H. Williams Director
David Conine Executive Vice President
Richard K. Saccullo Executive Vice President
Edmund P. Bergan, Jr. Senior Vice President, Secretary
General Counsel and
Secretary
Richard A. Davies Senior Vice President
and Managing Director
Robert H. Joseph, Jr. Senior Vice President
and Chief Financial Officer
Anne S. Drennan Senior Vice President
and Treasurer
Karen J. Bullot Senior Vice President
James S. Comforti Senior Vice President
James L. Cronin Senior Vice President
Daniel J. Dart Senior Vice President
Byron M. Davis Senior Vice President
Mark J. Dunbar Senior Vice President
Donald N. Fritts Senior Vice President
C-6
<PAGE>
Bradley F. Hanson Senior Vice President
Richard E. Khaleel Senior Vice President
Stephen R. Laut Senior Vice President
Susan L. Matteson-King Senior Vice President
Daniel D. McGinley Senior Vice President
Antonios G. Poleondakis Senior Vice President
Robert E. Powers Senior Vice President
Kevin A. Rowell Senior Vice President
Raymond S. Sclafani Senior Vice President
Gregory K. Shannahan Senior Vice President
Joseph F. Sumanski Senior Vice President
Peter J. Szabo Senior Vice President
William C. White Senior Vice President
Nicholas K. Willett Senior Vice President
Richard A. Winge Senior Vice President
Gerard J. Friscia Vice President and
Controller
Ricardo Arreola Vice President
Jamie A. Atkinson Vice President
Benji A. Baer Vice President
Kenneth F. Barkoff Vice President
Casimir F. Bolanowski Vice President
Michael E. Brannan Vice President
Timothy W. Call Vice President
Kevin T. Cannon Vice President
John R. Carl Vice President
C-7
<PAGE>
William W. Collins, Jr. Vice President
Leo H. Cook Vice President
John W. Cronin Vice President
Richard W. Dabney Vice President
Stephen J. Demetrovits Vice President
John F. Dolan Vice President
John C. Endahl Vice President
Sohaila S. Farsheed Vice President
Shawn C. Gage Vice President
Joseph C. Gallagher Vice President
Andrew L. Gangolf Vice President and Assistant
Assistant General Secretary
Counsel
Alex G. Garcia Vice President
Mark D. Gersten Vice President Treasurer and
Chief
Financial
Officer
John Grambone Vice President
Charles M. Greenberg Vice President
Alan Halfenger Vice President
William B. Hanigan Vice President
Michael S. Hart Vice President
Scott F. Heyer Vice President
Timothy A. Hill Vice President
George R. Hrabovsky Vice President
Valerie J. Hugo Vice President
Michael J. Hutten Vice President
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<PAGE>
Scott Hutton Vice President
Richard D. Keppler Vice President
Donna M. Lamback Vice President
P. Dean Lampe Vice President
Henry Michael Lesmeister Vice President
James M. Liptrot Vice President
James P. Luisi Vice President
Jerry W. Lynn Vice President
Christopher J. MacDonald Vice President
Michael F. Mahoney Vice President
Shawn P. McClain Vice President
Jeffrey P. Mellas Vice President
Thomas F. Monnerat Vice President
Timothy S. Mulloy Vice President
Joanna D. Murray Vice President
Nicole Nolan-Koester Vice President
John C. O'Connell Vice President
John J. O'Connor Vice President
James J. Posch Vice President
Domenick Pugliese Vice President and Assistant
Assistant General Secretary
Counsel
Bruce W. Reitz Vice President
Karen C. Satterberg Vice President
John P. Schmidt Vice President
Robert C. Schultz Vice President
Richard J. Sidell Vice President
C-9
<PAGE>
Clara Sierra Vice President
Teris A. Sinclair Vice President
Scott C. Sipple Vice President
Martine H. Stansbery, Jr. Vice President
Andrew D. Strauss Vice President
Michael J. Tobin Vice President
Joseph T. Tocyloski Vice President
David R. Turnbough Vice President
Martha D. Volcker Vice President
Patrick E. Walsh Vice President
Mark E. Westmoreland Vice President
David E. Willis Vice President
Emilie D. Wrapp Vice President and Assistant
Assistant General Secretary
Counsel
Patrick Look Assistant Vice
President and
Assistant Treasurer
Michael W. Alexander Assistant Vice
President
Richard J. Appaluccio Assistant Vice
President
Charles M. Barrett Assistant Vice
President
Robert F. Brendli Assistant Vice
President
John M. Capeci Assistant Vice
President
Maria L. Carreras Assistant Vice
President
C-10
<PAGE>
John P. Chase Assistant Vice
President
Jean A. Coomber Assistant Vice
President
Russell R. Corby Assistant Vice
President
Terri J. Daly Assistant Vice
President
Ralph A. DiMeglio Assistant Vice
President
Faith C. Deutsch Assistant Vice
President
John E. English Assistant Vice
President
Duff C. Ferguson Assistant Vice
President
Theresa Iosca Assistant Vice
President
Erik A. Jorgensen Assistant Vice
President
Eric G. Kalender Assistant Vice
President
Edward W. Kelly Assistant Vice
President
Victor Kopelakis Assistant Vice
President
Michael Laino Assistant Vice
President
Nicholas J. Lapi Assistant Vice
President
Kristine J. Luisi Assistant Vice
President
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<PAGE>
Kathryn Austin Masters Assistant Vice
President
Richard F. Meier Assistant Vice
President
Richard J. Olszewski Assistant Vice
President
Catherine N. Peterson Assistant Vice
President
Rizwan A. Raja Assistant Vice
President
Carol H. Rappa Assistant Vice
President
Mark V. Spina Assistant Vice
President
Gayle S. Stamer Assistant Vice
President
Eileen Stauber Assistant Vice
President
Vincent T. Strangio Assistant Vice
President
Margaret M. Tompkins Assistant Vice
President
Marie R. Vogel Assistant Vice
President
Wesley S. Williams Assistant Vice
President
Matthew Witschel Assistant Vice
President
Christopher J. Zingaro Assistant Vice
President
Mark R. Manley Assistant Secretary
(c) Not applicable.
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<PAGE>
ITEM 28. 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 State Street Bank and Trust
Company, 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 29. Management Services.
Not applicable.
ITEM 30. Undertakings.
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.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933, as amended, and the Investment Company Act of 1940, as
amended, the Registrant has duly caused this Amendment to the
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 14th day of December, 1998.
Alliance Institutional
Funds, Inc.
/s/ John D. Carifa
__________________________________
John D. Carifa
Chairman and President
Pursuant to the requirements of the Securities Act of
1933, as amended, this Amendment to the Registration Statement
has been signed below by the following persons in the capacities
and on the date indicated.
Signature Title Date
_____________ _____ ____
(1) Principal Executive Officer:
/s/ John D. Carifa Chairman and December 14, 1998
______________________ President
John D. Carifa
(2) Principal Financial
and Accounting Officer:
/s/ Mark D. Gersten Treasurer December 14, 1998
_____________________ and Chief
Mark D. Gersten Financial
Officer
(3) All of the Directors:
John D. Carifa William H. Foulk
Ruth Block Dr. James M. Hester
David H. Dievler Clifford L. Michel
John H. Dobkin Donald J. Robinson
/s/ Edmund P. Bergan, Jr.
_________________________ December 14, 1998
Edmund P. Bergan, Jr.
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<PAGE>
Index To Exhibits
(d) Advisory Agreement
(e)(1) Distribution Services Agreement
(g) Custodian Contract
(h) Transfer Agency Agreement
(o) Rule 18f-3 Plan
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00250237.AI8
<PAGE>
ADVISORY AGREEMENT
Alliance Institutional Funds, Inc.
1345 Avenue Of The Americas
New York, New York 10105
November 14, 1997
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, New York 10105
Dear Sirs:
Alliance Institutional Funds, Inc. herewith
confirms our agreement with you as follows:
1. We are an open-end management investment
company registered under the Investment Company Act of 1940,
as amended (the "Act"). We currently have three portfolios,
Alliance Premier Growth Institutional Fund ("Premier
Growth"), Alliance Real Estate Investment Institutional Fund
("Real Estate") and Alliance Quasar Institutional Fund
("Quasar") (each, a "portfolio") as described in the
prospectus and the statements of additional information
constituting parts of our Registration Statement on Form
N-1A filed with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended,
and the Act (the "Registration Statement"). We propose to
engage in the business of investing and reinvesting the
assets of each portfolio in securities ("portfolio assets")
of the type and in accordance with the limitations specified
<PAGE>
in our Articles of Incorporation, By-Laws and Registration
Statement, and any representations made in our prospectus
and statement of additional information, all in such manner
and to such extent as may from time to time be authorized by
our Board of Directors. We enclose a copy of each of the
documents listed above and will from time to time furnish
you with any amendments thereof.
2. (a) With respect to each portfolio, we hereby
employ you to manage the investment and reinvestment of
portfolio assets and, without limiting the generality of the
foregoing, to provide management and other services
specified below.
(b) You will make decisions with respect to
all purchases and sales of portfolio assets. To carry out
such decisions, you are hereby authorized, as our agent and
attorney-in-fact, for our account and at our risk and in our
name, to place orders for the investment and reinvestment of
our assets. In all purchases, sales and other transactions
in each of our portfolios you are authorized to exercise
full discretion and act for us in the same manner and with
the same force and effect as we might or could do with
respect to such purchases, sales or other transactions, as
well as with respect to all other things necessary or
incidental to the furtherance or conduct of such purchases,
sales or other transactions.
2
<PAGE>
(c) You will report to our Board of Directors
at each meeting thereof all changes in each portfolio since
the prior report, and will also keep us in touch with
important developments affecting any portfolio and on your
own initiative will furnish us from time to time with such
information as you may believe appropriate for this purpose,
whether concerning the individual issuers whose securities
are included in our portfolios, the industries in which they
engage, or the conditions prevailing in the economy
generally. You will also furnish us with such statistical
and analytical information with respect to securities in
each of our portfolios as you may believe appropriate or as
we reasonably may request. In making such purchases and
sales in any of our portfolios, you will bear in mind the
policies set from time to time by our Board of Directors as
well as the limitations imposed by our Articles of
Incorporation and in our Registration Statement, in each
case as amended from time to time, the limitations in the
Act and of the Internal Revenue Code of 1986, as amended, in
respect of regulated investment companies and the respective
investment objective or investment objectives, policies and
practices, including restrictions, applicable to each of our
portfolios.
(d) It is understood that you will from time
to time employ or associate with yourselves such persons as
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you believe to be particularly fitted to assist you in the
execution of your duties hereunder, the cost of performance
of such duties to be borne and paid by you. No obligation
may be incurred on our behalf in any such respect. During
the continuance of this Agreement and at our request you
will provide to us persons satisfactory to our Board of
Directors to serve as our officers. You or your affiliates
will also provide persons, who may be our officers, to
render such clerical, accounting and other services to us as
we may from time to time request of you. Such personnel may
be employees of you or your affiliates. We will pay to you
or your affiliates the cost of such personnel for rendering
such services to us, provided that all time devoted to the
investment or reinvestment of the portfolio assets shall be
for your account. Nothing contained herein shall be
construed to restrict our right to hire our own employees or
to contract for services to be performed by third parties.
Furthermore, you or your affiliates shall furnish us without
charge with such management supervision and assistance and
such office facilities as you may believe appropriate or as
we may reasonably request subject to the requirements of any
regulatory authority to which you may be subject. You or
your affiliates shall also be responsible for the payment of
any expenses incurred in promoting the sale of our shares
(other than the portion of the promotional expenses to be
4
<PAGE>
borne by us in accordance with an effective plan pursuant to
Rule 12b-1 under the Act and the costs of printing our
prospectuses and reports to shareholders and fees related to
registration with the Commission and with state regulatory
authorities).
3. We hereby confirm that we shall be responsible
and hereby assume the obligation for payment of all of our
expenses, including: (a) payment to you of the fees provided
for in paragraph 5 below; (b) custody, transfer and dividend
disbursing expenses; (c) fees of directors who are not your
affiliated persons; (d) legal and auditing expenses;
(e) clerical, accounting and other office costs; (f) the
cost of personnel providing services to us, as provided in
subparagraph (d) of paragraph 2 above; (g) costs of printing
our prospectuses and shareholder reports; (h) cost of
maintenance of our corporate existence; (i) interest
charges, taxes, brokerage fees and commissions; (j) costs of
stationery and supplies; (k) expenses and fees related to
registrations and filings with the Commission and with state
regulatory authorities; and (l) such promotional,
shareholder servicing and other expenses as may be
contemplated by one or more effective plans pursuant to Rule
12b-1 under the Act or one or more duly approved and
effective non-Rule 12b-1 shareholder servicing plans, in
each case provided, however, that our payment of such
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promotional, shareholder servicing and other expenses shall
be in the amounts, and in accordance with the procedures,
set forth in such plan or plans.
4. We shall expect of you, and you will give us
the benefit of, your best judgment and efforts in rendering
these services to us, and we agree as an inducement to your
undertaking these services that you shall not be liable
hereunder for any mistake of judgment or in any event
whatsoever, except for lack of good faith, provided that
nothing herein shall be deemed to protect, or purport to
protect, you against any liability to us or to our security
holders to which you would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the
performance of your duties hereunder, or by reason of your
reckless disregard of your obligations and duties hereunder.
5. In consideration of the foregoing, we will pay
you with respect to each of Premier Growth and Quasar a fee
at an annualized rate of 1% of the average daily net assets
of Premier Growth and Quasar, respectively, and with respect
to Real Estate a fee at an annualized rate of 0.90% of the
average daily net assets of Real Estate. These fees shall
be payable in arrears on the last day of each calendar month
for services performed hereunder during such month. If our
initial Registration Statement is declared effective by the
Commission after the beginning of a calendar month or this
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Agreement terminates prior to the end of a calendar month,
the fees for Premier Growth, Quasar and Real Estate shall be
prorated according to the proportion which such portion of
the month bears to the full month.
6. This Agreement shall become effective on the
date hereof and shall remain in effect until November 5,
1999 and continue in effect thereafter with respect to a
portfolio only so long as its continuance with respect to
that portfolio is specifically approved annually by our
Board of Directors or by vote of a majority of the
outstanding voting securities (as defined in the Act) of
such portfolio, and, in either case, by vote, cast in person
at a meeting called for the purpose of voting on such
approval, of a majority of our Directors who are not parties
to this Agreement or interested persons, as defined in the
Act, of any party to this Agreement (other than as our
Directors), and provided further, however, that if the
continuation of this Agreement is not approved as to a
portfolio, you may continue to render to such portfolio the
services described herein in the manner and to the extent
permitted by the Act and the rules and regulations
thereunder. Upon the effectiveness of this Agreement, it
shall supersede all previous agreements between us covering
the subject matter hereof. This Agreement may be terminated
with respect to any portfolio at any time, without the
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payment of any penalty, by vote of a majority of the
outstanding voting securities (as defined in the Act) of
such portfolio, or by a vote of our Board of Directors on 60
days' written notice to you, or by you with respect to any
portfolio on 60 days' written notice to us.
7. This Agreement shall not be amended as to any
portfolio unless such amendment is approved by vote of a
majority of the outstanding voting securities (as defined in
the Act) of such portfolio, and by vote, cast in person at a
meeting called for the purpose of voting on such approval,
of a majority of our Directors who are not parties to this
Agreement or interested persons, as defined in the Act, of
any party to this Agreement (other than as our Directors).
Shareholders of a portfolio not affected by any such
amendment shall have no right to vote with respect to such
amendment.
8. As to any particular portfolio, this Agreement
may not be transferred, assigned, sold or in any manner
hypothecated or pledged by you and as to such portfolio,
this Agreement shall terminate automatically in the event of
any such transfer, assignment, sale, hypothecation or pledge
by you. The terms "transfer", "assignment" and "sale" as
used in this paragraph shall have the meanings ascribed
thereto by governing law and any interpretation thereof
8
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contained in rules or regulations promulgated by the
Commission thereunder.
9. (a) Except to the extent necessary to perform
your obligations hereunder, nothing herein shall be deemed
to limit or restrict your right, or the right of any of your
employees, or any of the officers or directors of Alliance
Capital Management Corporation, your general partner, who
may also be a Director, officer or employee of ours, or
persons otherwise affiliated with us (within the meaning of
the Act), to engage in any other business or to devote time
and attention to the management or other aspects of any
other business, whether of a similar or dissimilar nature,
or to render services of any kind to any other trust,
corporation, firm, individual or association.
(b) You will notify us of any change in the
general partners of your partnership within a reasonable
time after such change.
10. If you cease to act as our investment adviser,
or, in any event, if you so request in writing, we agree to
take all necessary action to change our name to a name not
including the term "Alliance." You may from time to time
make available without charge to us for our use such marks
or symbols owned by you, including marks or symbols
containing the term "Alliance" or any variation thereof, as
you may consider appropriate. Any such marks or symbols so
9
<PAGE>
made available will remain your property and you shall have
the right, upon notice in writing, to require us to cease
the use of such mark or symbol at any time.
11. This Agreement shall be construed in
accordance with the laws of the State of New York, provided,
however, that nothing herein shall be construed as being
inconsistent with the Act.
If the foregoing is in accordance with your
understanding, will you kindly so indicate by signing and
returning to us the enclosed copy hereof.
Very truly yours,
ALLIANCE INSTITUTIONAL
FUNDS, INC.
By /s/ Edmund P. Bergan, Jr.
_________________________
Edmund P. Bergan, Jr.
Agreed to and accepted as of
the date first set forth above
ALLIANCE CAPITAL MANAGEMENT L.P.
By ALLIANCE CAPITAL MANAGEMENT
CORPORATION, its general
partner
By /s/ John D. Carifa
____________________________
John D. Carifa
10
00250237.AC1
<PAGE>
DISTRIBUTION SERVICES AGREEMENT
AGREEMENT made as of November 14, 1997 between
ALLIANCE INSTITUTIONAL FUNDS, INC., a Maryland corporation
(the "Fund"), and ALLIANCE FUND DISTRIBUTORS, INC., a
Delaware corporation (the "Underwriter").
WITNESSETH
WHEREAS, the Fund is registered under the
Investment Company Act of 1940, as amended (the "Investment
Company Act"), as an open-end management investment company
and it is in the interest of the Fund to offer its shares
for sale continuously;
WHEREAS, the Underwriter is a securities firm
engaged in the business of selling shares of investment
companies either directly to purchasers or through other
securities dealers;
WHEREAS, the Fund and the Underwriter wish to enter
into an agreement with each other with respect to the
continuous offering of the Fund's shares in order to promote
the growth of the Fund and facilitate the distribution of
its shares;
NOW, THEREFORE, the parties agree as follows:
SECTION 1. Appointment of the Underwriter. The
Fund hereby appoints the Underwriter as the principal
underwriter and distributor of the Fund to sell to the
public shares of its Class I Common Stock (the "Class I
shares"), Class II Common Stock (the "Class II shares") and
shares of such other class or classes as the Fund and the
Underwriter shall from time to time mutually agree in
writing shall become subject to this Agreement (the "New
shares") (the Class I shares, the Class II shares and the
New shares being collectively referred to herein as the
"shares") and hereby agrees during the term of this
Agreement to sell shares to the Underwriter upon the terms
and conditions herein set forth.
SECTION 2. Exclusive Nature of Duties. The
Underwriter shall be the exclusive representative of the
Fund to act as principal underwriter and distributor of the
shares except that the rights given under this Agreement to
the Underwriter shall not apply to shares issued in
connection with (a) the merger or consolidation of any other
investment company with the Fund, (b) the Fund's acquisition
by purchase or otherwise of all or substantially all of the
<PAGE>
assets or stock of any other investment company or (c) the
reinvestment in shares by the Fund's shareholders of
dividends or other distributions.
SECTION 3. Purchase of Shares from the Fund.
(a) The Underwriter shall have the right to buy
from the Fund the shares needed to fill unconditional orders
for shares of the Fund placed with the Underwriter by
investors or securities dealers, depository institutions or
other financial intermediaries acting as agent for their
customers. The price which the Underwriter shall pay for
the shares so purchased from the Fund shall be the net asset
value, determined as set forth in Section 3(d) hereof, used
in determining the public offering price on which such
orders are based.
(b) The shares are to be resold by the Underwriter
to investors at a public offering price, as set forth in
Section 3(c) hereof, or to securities dealers, depository
institutions or other financial intermediaries acting as
agent for their customers having agreements with the
Underwriter, upon the terms and conditions set forth in
Section 8 hereof.
(c) The public offering price of the shares, i.e.,
the price per share at which the Underwriter or selected
dealers or selected agents (each as defined in Section 8(a)
below) may sell shares to the public, shall be the public
offering price determined in accordance with one or more
then current prospectuses and statements of additional
information of the Fund (each a "Prospectus" and a
"Statement of Additional Information," respectively) under
the Securities Act of 1933, as amended (the "Securities
Act"), relating to such shares, but not to exceed the net
asset value at which the Underwriter is to purchase such
shares. All payments to the Fund hereunder shall be made in
the manner set forth in Section 3(f) hereof.
(d) The net asset value of shares of the Fund
shall be determined by the Fund, or any agent of the Fund,
as of the close of regular trading on the New York Stock
Exchange on each Fund business day in accordance with the
method set forth in the Prospectus and Statement of
Additional Information and guidelines established by the
Directors of the Fund.
(e) The Fund reserves the right to suspend the
offering of its shares at any time in the absolute
discretion of its Directors.
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<PAGE>
(f) The Fund, or any agent of the Fund designated
in writing to the Underwriter by the Fund, shall be promptly
advised by the Underwriter of all purchase orders for shares
received by the Underwriter. Any order may be rejected by
the Fund; provided, however, that the Fund will not
arbitrarily or without reasonable cause refuse to accept or
confirm orders for the purchase of shares. The Fund (or its
agent) will confirm orders upon their receipt, will make
appropriate book entries and, upon receipt by the Fund (or
its agent) of payment thereof, will deliver deposit receipts
or certificates for such shares pursuant to the instructions
of the Underwriter. Payment shall be made to the Fund in
New York Clearing House funds. The Underwriter agrees to
cause such payment and such instructions to be delivered
promptly to the Fund (or its agent).
SECTION 4. Repurchase or Redemption of
Shares by the Fund.
(a) Any of the outstanding shares may be tendered
for redemption at any time, and the Fund agrees to redeem or
repurchase the shares so tendered in accordance with its
obligations as set forth in Section 9(d) of ARTICLE FIFTH of
its Articles of Incorporation and in accordance with the
applicable provisions of the Prospectus and Statement of
Additional Information. The price to be paid to redeem or
repurchase the shares shall be equal to the net asset value
calculated in accordance with the provisions of Section 3(d)
hereof, less any applicable sales charge. All payments by
the Fund hereunder shall be made in the manner set forth
below.
The Fund (or its agent) shall pay the total amount
of the redemption price and, except as may be otherwise
required by the Conduct Rules of the National Association of
Securities Dealers, Inc. (the "NASD") and any
interpretations thereof ("NASD rules and interpretations"),
the deferred sales charges, if any, pursuant to the
instructions of the Underwriter in New York Clearing House
funds on or before the seventh business day subsequent to
its having received the notice of redemption in proper form.
(b) Redemption of shares or payment may be
suspended at times when the New York Stock Exchange is
closed, when trading thereon is restricted, when an
emergency exists as a result of which disposal by the Fund
of securities owned by it is not reasonably practicable or
it is not reasonably practicable for the Fund fairly to
determine the value of its net assets, or during any other
period when the Securities and Exchange Commission, by
order, so permits.
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<PAGE>
SECTION 5. Plan of Distribution.
(a) It is understood that Sections 5, 12 and 16
hereof together constitute a plan of distribution (the
"Plan") within the meaning of Rule 12b-1 adopted by the
Securities and Exchange Commission under the Investment
Company Act ("Rule 12b-1").
(b) Except as may be required by NASD rules and
interpretations, the Fund will pay to the Underwriter each
month a distribution services fee with respect to each
portfolio of the Fund specified by the Fund's Directors (a
"Portfolio") that will not exceed, on an annualized basis,
.30% of the aggregate average daily net assets of the Fund
attributable to the Class II shares of the Portfolio. With
respect to each Portfolio, the distribution services fee
will be used in its entirety by the Underwriter to make
payments (i) to compensate broker-dealers or other persons
for providing distribution assistance, (ii) to otherwise
promote the sale of shares of each Portfolio, including
payment for the preparation, printing and distribution of
prospectuses and sales literature or other promotional
activities, and (iii) to compensate broker-dealers,
depository institutions and other financial intermediaries
for providing administrative, accounting and other services
with respect to each Portfolio's shareholders. A portion of
the distribution services fee that will not exceed, on an
annualized basis, .25% of the aggregate average daily net
assets of the Fund attributable to the Class II shares of
each Portfolio will constitute a service fee that will be
used by the Underwriter for personal service and/or the
maintenance of shareholder accounts within the meaning of
NASD rules and interpretations.
(c) Alliance Capital Management L.P., the Fund's
investment adviser (the "Adviser"), may, with respect to any
and all classes of shares of the Fund, make payments from
time to time from its own resources for the purposes
described in Section 5(b) hereof.
(d) Payments to broker-dealers, depository
institutions and other financial intermediaries for the
purposes set forth in Section 5(b) are subject to the terms
and conditions of the respective written agreements between
the Underwriter and each broker-dealer, depository
institution or other financial intermediary. Such
agreements will be in a form satisfactory to the Directors
of the Fund.
(e) The Treasurer of the Fund will prepare and
furnish to the Fund's Directors, and the Directors will
4
<PAGE>
review, at least quarterly, a written report complying with
the requirements of Rule 12b-1 setting forth all amounts
expended hereunder and the purposes for which such
expenditures were made.
(f) The Fund is not obligated to pay any
distribution expenses in excess of the distribution services
fee described above in Section 5(b) hereof. Any expenses of
distribution of the Fund's Class II shares accrued by the
Underwriter in one fiscal year of the Fund may not be paid
from distribution services fees received from the Fund in
respect of Class II shares in another fiscal year. No
portion of the distribution services fees received from the
Fund in respect of Class II shares may be used to pay any
interest expense, carrying charges or other financing costs
or allocation of overhead of the Underwriter. In the event
this Agreement is terminated by either party or is not
continued with respect to a class of shares as provided in
Section 12 below: (i) no distribution services fees (other
than current amounts accrued but not yet paid) will be owed
by the Fund to the Underwriter with respect to that class,
and (ii) the Fund will not be obligated to pay the
Underwriter for any amounts expended hereunder not
previously reimbursed by the Fund from distribution services
fees in respect of shares of such class. The distribution
services fee of a particular class may not be used to
subsidize the sale of shares of any other class.
SECTION 6. Duties of the Fund.
(a) The Fund shall furnish to the Underwriter
copies of all information, financial statements and other
papers that the Underwriter may reasonably request for use
in connection with the distribution of shares of the Fund,
and this shall include one certified copy, upon request by
the Underwriter, of all financial statements prepared for
the Fund by the Fund's independent public accountants. The
Fund shall make available to the Underwriter such number of
copies of the Prospectus and Statement of Additional
Information as the Underwriter shall reasonably request.
(b) The Fund shall take, from time to time, but
subject to any necessary approval of its shareholders, all
necessary action to fix the number of authorized shares and
such steps as may be necessary to register the same under
the Securities Act, to the end that there will be available
for sale such number of shares as the Underwriter reasonably
may be expected to sell.
(c) The Fund shall use its best efforts to qualify
for sale and maintain the qualification for sale of an
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<PAGE>
appropriate number of its shares under the securities laws
of such states as the Underwriter and the Fund may approve.
Any such qualification may be withheld, terminated or
withdrawn by the Fund at any time in its discretion. As
provided in Section 9(b) hereof, the expense of
qualification and maintenance of qualification shall be
borne by the Fund. The Underwriter shall furnish such
information and other material relating to its affairs and
activities as may be required by the Fund in connection with
such qualification.
(d) The Fund will furnish, in reasonable
quantities upon request by the Underwriter, copies of annual
and interim reports of the Fund.
SECTION 7. Duties of the Underwriter.
(a) The Underwriter shall devote reasonable time
and effort to effect sales of shares of the Fund, but shall
not be obligated to sell any specific number of shares. The
services hereunder of the Underwriter to the Fund are not to
be deemed exclusive as to the Underwriter and nothing in
this Agreement shall prevent the Underwriter from entering
into like arrangements with other investment companies so
long as the performance of its obligations hereunder is not
impaired thereby.
(b) In selling shares of the Fund, the Underwriter
shall use its best efforts in all material respects duly to
conform with the requirements of all federal and state laws
relating to the sale of such securities. Neither the
Underwriter, any selected dealer, any selected agent nor any
other person is authorized by the Fund to give any
information or to make any representations, other than those
contained in the Fund's Registration Statement on Form N-1A
(the "Registration Statement"), as amended from time to
time, under the Securities Act and the Investment Company
Act or the Prospectus and Statement of Additional
Information or in any sales literature specifically approved
in writing by the Fund.
(c) The Underwriter shall adopt and follow
procedures, as approved by the appropriate officers of the
Fund, for the confirmation of sales to investors and
selected dealers, the collection of amounts payable by
investors and selected dealers on such sales, and the
cancellation of unsettled transactions, as may be necessary
to comply with the requirements of the NASD as such
requirements may from time to time exist.
6
<PAGE>
SECTION 8. Selected Dealer and Agent Agreements.
(a) The Underwriter shall have the right to enter
into selected dealer agreements with securities dealers of
its choice ("selected dealers") and selected agent
agreements with depository institutions and other financial
intermediaries of its choice ("selected agents") for the
sale of shares and fix therein the portion of the sales
charge that may be allocated to the selected dealers and
selected agents; provided, that the Fund shall approve the
forms of agreements with selected dealers and selected
agents and the selected dealer and selected agent
compensation set forth therein. Shares sold to selected
dealers or through selected agents shall be for resale by
such selected dealers and for sale through such selected
agents only at the public offering price set forth in the
Prospectus and/or Statement of Additional Information.
(b) Within the United States, the Underwriter
shall offer and sell shares only to such selected dealers as
are members in good standing of the NASD.
SECTION 9. Payment of Expenses.
(a) The Fund shall bear all costs and expenses of
the Fund, including fees and disbursements of its counsel
and auditors, in connection with the preparation and filing
of its Registration Statement and Prospectus and Statement
of Additional Information, and all amendments and
supplements thereto, and preparing and mailing annual and
interim reports and proxy materials to shareholders
(including but not limited to the expense of printing any
such registration statements, prospectuses, annual or
interim reports or proxy materials).
(b) The Fund shall bear the cost of expenses of
qualification of shares for sale, and, if necessary or
advisable in connection therewith, of qualifying the Fund as
an issuer or as a broker or dealer, in such states of the
United States or other jurisdiction as shall be selected by
the Fund and the Underwriter pursuant to Section 6(c) hereof
and the cost and expenses payable to each such state for
continuing qualification therein until the Fund decides to
discontinue such qualification pursuant to Section 6(c)
hereof.
SECTION 10. Indemnification.
(a) The Fund shall indemnify, defend and hold the
Underwriter, and any person who controls the Underwriter
within the meaning of Section 15 of the Securities Act, free
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<PAGE>
and harmless from and against any and all claims, demands,
liabilities and expenses (including the cost of
investigating or defending such claims, demands or
liabilities and any counsel fees incurred in connection
therewith) which the Underwriter or any such controlling
person may incur, under the Securities Act, or under common
law or otherwise, arising out of or based upon any alleged
untrue statement of a material fact contained in the Fund's
Registration Statement, Prospectus or Statement of
Additional Information in effect from time to time under the
Securities Act or arising out of or based upon any alleged
omission to state a material fact required to be stated in
any one thereof or necessary to make the statements in any
one thereof not misleading; provided, however, that in no
event shall anything herein contained be so construed as to
protect the Underwriter against any liability to the Fund or
its security holders to which the Underwriter would
otherwise be subject by reason of willful misfeasance, bad
faith or gross negligence in the performance of its duties,
or by reason of the Underwriter's reckless disregard of its
obligations and duties under this Agreement. The Fund's
agreement to indemnify the Underwriter and any such
controlling person as aforesaid is expressly conditioned
upon the Fund's being notified of the commencement of any
action brought against the Underwriter or any such
controlling person, such notification to be given by letter
or by telegram addressed to the Fund at its principal office
in New York, New York, and sent to the Fund by the person
against whom such action is brought within ten days after
the summons or other first legal process shall have been
served. The failure to so notify the Fund of the
commencement of any such action shall not relieve the Fund
from any liability which it may have to the person against
whom such action is brought by reason of any such alleged
untrue statement or omission otherwise than on account of
the indemnity agreement contained in this Section 10. The
Fund will be entitled to assume the defense of any suit
brought to enforce any such claim, and to retain counsel of
good standing chosen by the Fund and approved by the
Underwriter. In the event the Fund does not elect to assume
the defense of any such suit and retain counsel of good
standing approved by the Underwriter, the defendant or
defendants in such suit shall bear the fees and expenses of
any additional counsel retained by any of them; but if Fund
does not elect to assume the defense of any such suit, or in
case the Underwriter does not approve of counsel chosen by
the Fund, the Fund will reimburse the Underwriter or the
controlling person or persons named as defendant or
defendants in such suit, for the fees and expenses of any
counsel retained by the Underwriter or any such person. The
indemnification agreement contained in this Section 10 shall
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<PAGE>
remain operative and in full force and effect regardless of
any investigation made by or on behalf of the Underwriter or
any controlling person and shall survive the sale of any of
the Fund's shares made pursuant to subscriptions obtained by
the Underwriter. This agreement of indemnity will inure
exclusively to the benefit of the Underwriter, to the
benefit of its successors and assigns, and to the benefit of
any controlling persons and their successors and assigns.
The Fund shall promptly notify the Underwriter of the
commencement of any litigation or proceeding against the
Fund in connection with the issue and sale of any of its
shares.
(b) The Underwriter shall indemnify, defend and
hold the Fund, its several officers and directors, and any
person who controls the Fund within the meaning of Section
15 of the Securities Act, free and harmless from and against
any and all claims, demands, liabilities and expenses
(including the cost of investigating or defending such
claims, demands or liabilities and any counsel fees incurred
in connection therewith) which the Fund, its officers or
directors, or any such controlling person may incur under
the Securities Act or under common law or otherwise, but
only to the extent that such liability, or expense incurred
by the Fund, its officers, directors or such controlling
person resulting from such claims or demands shall arise out
of or be based upon any alleged untrue statement of a
material fact contained in information furnished in writing
by the Underwriter to the Fund for use in its Registration
Statement, Prospectus or Statement of Additional Information
in effect from time to time under the Securities Act, or
shall arise out of or be based upon any alleged omission to
state a material fact in connection with such information
required to be stated in the Registration Statement,
Prospectus or Statement of Additional Information or
necessary to make such information not misleading. The
Underwriter's agreement to indemnify the Fund, its officers
and directors, and any such controlling person as aforesaid
is expressly conditioned upon the Underwriter being notified
of the commencement of any action brought against the Fund,
its officers or directors or any such controlling person,
such notification to be given by letter or telegram
addressed to the Underwriter at its principal office in New
York, and sent to the Underwriter by the person against whom
such action is brought, within ten days after the summons or
other first legal process shall have been served. The
Underwriter shall have a right to control the defense of
such action, with counsel of its own choosing, satisfactory
to the Fund, if such action is based solely upon such
alleged misstatement or omission on its part, and in any
other event the Underwriter and the Fund, and their officers
9
<PAGE>
and directors or such controlling person, shall each have
the right to participate in the defense or preparation of
the defense of any such action. The failure so to notify
the Underwriter of the commencement of any such action shall
not relieve the Underwriter from any liability which it may
have to the Fund, to its officers and directors, or to such
controlling person by reason of any such untrue statement or
omission on the part of the Underwriter otherwise than on
account of the indemnity agreement contained in this Section
10.
SECTION 11. Notification by the Fund.
The Fund shall advise the Underwriter immediately:
(a) of any request by the Securities and Exchange
Commission for any amendment to the Fund's Registration
Statement, Prospectus or Statement of Additional Information
or for additional information,
(b) in the event of the issuance by the Securities
and Exchange Commission of any stop order suspending the
effectiveness of the Fund's Registration Statement,
Prospectus or Statement of Additional Information or the
initiation of any proceeding for that purpose,
(c) of the happening of any material event which
makes untrue any statement made in the Fund's Registration
Statement, Prospectus or Statement of Additional Information
or which requires the making of a change in any one thereof
in order to make the statements therein not misleading, and
(d) of all actions of the Securities and Exchange
Commission with respect to any amendment to the Fund's
Registration Statement, Prospectus or Statement of
Additional Information which may from time to time be filed
with the Securities and Exchange Commission under the
Securities Act.
SECTION 12. Term of Agreement.
(a) This Agreement shall become effective on the
date hereof and shall continue in effect with respect to
each class of shares of a Portfolio of the Fund so long as
its continuance with respect to that Portfolio is
specifically approved annually by the Directors of the Fund
or by vote of the holders of a majority of the outstanding
voting securities (as defined in the Investment Company Act)
of that class, and, in either case, by a majority of the
Directors of the Fund who are not parties to this Agreement
or interested persons, as defined in the Investment Company
10
<PAGE>
Act, of any such party (other than as directors of the Fund)
and who have no direct or indirect financial interest in the
operation of the Plan or any agreement related thereto;
provided further, however, that if the continuation of this
Agreement is not approved as to a class or a Portfolio, the
Underwriter may continue to render to such class or
Portfolio the services described herein in the manner and to
the extent permitted by the Act and the rules and
regulations thereunder. Upon effectiveness of this
Agreement, it shall supersede all previous agreements
between the parties hereto covering the subject matter
hereof. This Agreement may be terminated (i) by the Fund
with respect to any class or Portfolio at any time, without
the payment of any penalty, by the vote of a majority of the
outstanding voting securities (as so defined) of such class
or Portfolio, or by a vote of a majority of the Directors of
the Fund who are not interested persons, as defined in the
Investment Company Act, of the Fund (other than as directors
of the Fund) and have no direct and indirect financial
interest in the operation of the Plan or any agreement
related thereto, in any such event on sixty days' written
notice to the Underwriter; provided, however, that no such
notice shall be required if such termination is stated by
the Fund to relate only to Sections 5 and 16 hereof (in
which event Sections 5 and 16 shall be deemed to have been
severed herefrom and all other provisions of this Agreement
shall continue in full force and effect), or (ii) by the
Underwriter with respect to any Portfolio on sixty days'
written notice to the Fund.
(b) This Agreement may be amended at any time with
the approval of the Directors of the Fund, provided that (i)
any material amendments of the terms hereof will become
effective only upon approval as provided in the first
proviso of the first sentence of Section 12(a) hereof, and
(ii) any amendment to increase materially the amount to be
expended for distribution services fees pursuant to Section
5(b) hereof will be effective only upon the additional
approval by a vote of a majority of the outstanding voting
securities as defined in the Investment Company Act of the
class or Portfolio affected.
SECTION 13. No Assignment. This Agreement may not
be transferred, assigned, sold or in any manner hypothecated
or pledged by either party hereto, and this Agreement shall
terminate automatically in the event of any such transfer,
assignment, sale, hypothecation or pledge. The terms
"transfer", "assignment", and "sale" as used in this
paragraph shall have the meanings ascribed thereto by
governing law and any interpretation thereof contained in
11
<PAGE>
rules or regulations promulgated by the Securities and
Exchange Commission thereunder.
SECTION 14. Notices. Any notice required or
permitted to be given hereunder by either party to the other
shall be deemed sufficiently given if sent by registered
mail, postage prepaid, addressed by the party giving such
notice to the other party at the last address furnished by
such other party to the party given notice, and unless and
until changed pursuant to the foregoing provisions hereof
addressed to the Fund or the Underwriter.
SECTION 15. Governing Law. The provisions of this
Agreement shall be, to the extent applicable, construed and
interpreted in accordance with the laws of the State of New
York.
SECTION 16. Disinterested Directors of the Fund.
While this Agreement is in effect, the selection and
nomination of the Directors who are not "interested persons"
of the Fund (as defined in the Investment Company Act) will
be committed to the discretion of such disinterested
Directors.
12
<PAGE>
IN WITNESS WHEREOF, the parties hereto have
executed this Agreement.
ALLIANCE INSTITUTIONAL
FUNDS, INC.
By /s/ Edmund P. Bergen, Jr.
Edmund P. Bergen, Jr.
ALLIANCE FUND DISTRIBUTORS,
INC.
By /s/ Robert Errico
Robert Errico
Accepted as to
Sections 5, 12 and 16
as of November 14, 1997:
ALLIANCE CAPITAL MANAGEMENT L.P.
By Alliance Capital Management Corporation,
General Partner
By /s/ John D. Carifa
John D. Carifa
13
00250237.AC2
<PAGE>
CUSTODIAN CONTRACT
Between
ALLIANCE INSTITUTIONAL FUNDS, INC.
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
Page
TABLE OF CONTENTS
1. Employment of Custodian and Property to be
Held By It.............................................. 1
2. Duties of the Custodian with Respect to
Property of the Fund Held by the Custodian
in the United States ................................... 2
2.1 Holding Securities................................. 2
2.2 Delivery of Securities ............................ 2
2.3 Registration of Securities......................... 4
2.4 Bank Accounts...................................... 5
2.5 Availability of Federal Funds...................... 5
2.6 Collection of Income............................... 5
2.7 Payment of Fund Monies............................. 5
2.8 Liability for Payment in Advance of
Receipt of Securities Purchased.................... 7
2.9 Appointment of Agents.............................. 7
2.10 Deposit of Fund Assets in U.S.
Securities System.................................. 7
2.11 Fund Assets Held in the Custodian's
Direct Paper System................................ 8
2.12 Segregated Account................................. 9
2.13 Ownership Certificates for Tax Purposes............ 10
2.14 Proxies............................................ 10
2.15 Communications Relating to Portfolio
Securities......................................... 10
3. Duties of the Custodian with Respect to
Property of the Fund Held Outside of the
United States .......................................... 11
3.1 Appointment of Foreign Sub-Custodians.............. 11
3.2 Assets to be Held.................................. 11
3.3 Foreign Securities Systems......................... 11
3.4 Holding Securities................................. 11
3.5 Agreements with Foreign Banking
Institutions....................................... 12
3.6 Access of Independent Accountants of
the Fund........................................... 12
3.7 Reports by Custodian............................... 12
3.8 Transactions in Foreign Custody Account............ 12
3.9 Liability of Foreign Sub-Custodians................ 13
3.10 Liability of Custodian............................. 13
3.11 Reimbursement for Advances......................... 13
3.12 Monitoring Responsibilities........................ 14
3.13 Branches of U.S. Banks............................. 14
3.14 Tax Law............................................ 14
<PAGE>
4. Payments for Sales or Repurchase or
Redemptions of Shares of the Fund ...................... 14
5. Proper Instructions .................................... 15
6. Actions Permitted Without Express Authority............. 15
7. Evidence of Authority .................................. 16
8. Duties of Custodian With Respect to the
Books of Account and Calculation of Net
Asset Value and Net Income ............................. 16
9. Records................................................. 16
10. Opinion of Fund's Independent Accountants............... 17
11. Reports to Fund by Independent Public
Accountants ............................................ 17
12. Compensation of Custodian............................... 17
13. Responsibility of Custodian............................. 17
14. Effective Period, Termination and Amendment............. 19
15. Successor Custodian .................................... 19
16. Interpretive and Additional Provisions.................. 20
17. Additional Funds........................................ 20
18. Massachusetts Law to Apply ............................. 21
19. Prior Contracts......................................... 21
20. Reproduction of Documents .............................. 21
21. Shareholder Communications.............................. 21
<PAGE>
CUSTODIAN CONTRACT
This Custodian Contract between Alliance Institutional
Funds, Inc., a corporation organized and existing under the
laws of Maryland, having its principal place of business at
P.O. Box 1520 Secaucus, New Jersey 07096-1520 hereinafter
called the "Fund", and State Street Bank and Trust Company,
a Massachusetts trust company, having its principal place of
business at 225 Franklin Street, Boston, Massachusetts,
02110, hereinafter called the "Custodian",
WITNESSETH:
WHEREAS, the Fund is authorized to issue shares in
separate series, with each such series representing
interests in a separate portfolio of securities and other
assets; and
WHEREAS, the Fund intends to initially offer shares in
three series, the Alliance Premier Growth Institutional
Fund, Alliance Quasar Institutional Fund, Alliance Real
Estate Investment Institutional Fund (such series together
with all other series subsequently established by the Fund
and made subject to this Contract in accordance with
paragraph 17, being herein referred to as the
"Portfolio(s)");
NOW THEREFORE, in consideration of the mutual covenants
and agreements hereinafter contained, the parties hereto
agree as follows:
1. Employment of Custodian and Property to be Held by It
The Fund hereby employs the Custodian as the custodian
of the assets of the Portfolios of the Fund, including
securities which the Fund, on behalf of the applicable
Portfolio desires to be held in places within the United
States ("domestic securities") and securities it desires to
be held outside the United States ("foreign securities")
pursuant to the provisions of the Articles of Incorporation.
The Fund on behalf of the Portfolio(s) agrees to deliver to
the Custodian all securities and cash of the Portfolios, and
all payments of income, payments of principal or capital
distributions received by it with respect to all securities
owned by the Portfolio(s) from time to time, and the cash
consideration received by it for such new or treasury shares
of capital stock of the Fund representing interests in the
Portfolios, ("Shares") as may be issued or sold from time to
time. The Custodian shall not be responsible for any
property of a Portfolio held or received by the Portfolio
and not delivered to the Custodian.
1
<PAGE>
Upon receipt of "Proper Instructions" (within the
meaning of Article 5), the Custodian shall on behalf of the
applicable Portfolio(s) from time to time employ one or more
sub-custodians, located in the United States but only in
accordance with an applicable vote by the Board of Directors
of the Fund on behalf of the applicable Portfolio(s), and
provided that the Custodian shall have no more or less
responsibility or liability to the Fund on account of any
actions or omissions of any sub-custodian so employed than
any such sub-custodian has to the Custodian. The Custodian
may employ as sub-custodian for the Fund's foreign
securities on behalf of the applicable Portfolio(s) the
foreign banking institutions and foreign securities
depositories designated in Schedule A hereto but only in
accordance with the provisions of Article 3.
2. Duties of the Custodian with Respect to Property of
the Fund Held By the Custodian in the United States
2.1 Holding Securities. The Custodian shall hold and
physically segregate for the account of each
Portfolio all non-cash property, to be held by it
in the United States including all domestic
securities owned by such Portfolio, other than (a)
securities which are maintained pursuant to Section
2.10 in a clearing agency which acts as a
securities depository or in a book-entry system
authorized by the U.S. Department of the Treasury
and certain federal agencies (each, a "U.S.
Securities System") and (b) commercial paper of an
issuer for which State Street Bank and Trust
Company acts as issuing and paying agent ("Direct
Paper") which is deposited and/or maintained in the
Direct Paper System of the Custodian (the "Direct
Paper System") pursuant to Section 2.11.
2.2 Delivery of Securities. The Custodian shall release
and deliver domestic securities owned by a
Portfolio held by the Custodian or in a U.S.
Securities System account of the Custodian or in
the Custodian's Direct Paper book entry system
account ("Direct Paper System Account") only upon
receipt of Proper Instructions from the Fund on
behalf of the applicable Portfolio, which may be
continuing instructions when deemed appropriate by
the parties, and only in the following cases:
1) Upon sale of such securities for the account
of the Portfolio and receipt of payment
therefor;
2
<PAGE>
2) Upon the receipt of payment in connection with
any repurchase agreement related to such
securities entered into by the Portfolio;
3) In the case of a sale effected through a U.S.
Securities System, in accordance with the
provisions of Section 2.10 hereof;
4) To the depository agent in connection with
tender or other similar offers for securities
of the Portfolio;
5) To the issuer thereof or its agent when such
securities are called, redeemed, retired or
otherwise become payable; provided that, in
any such case, the cash or other
consideration is to be delivered to the
Custodian;
6) To the issuer thereof, or its agent, for
transfer into the name of the Portfolio or
into the name of any nominee or nominees of
the Custodian or into the name or nominee name
of any agent appointed pursuant to Section 2.9
or into the name or nominee name of any sub-
custodian appointed pursuant to Article 1; or
for exchange for a different number of bonds,
certificates or other evidence representing
the same aggregate face amount or number of
units; provided that, in any such case, the
new securities are to be delivered to the
Custodian;
7) Upon the sale of such securities for the
account of the Portfolio, to the broker or its
clearing agent, against a receipt, for
examination in accordance with "street
delivery" custom; provided that in any such
case, the Custodian shall have no
responsibility or liability for any loss
arising from the delivery of such securities
prior to receiving payment for such securities
except as may arise from the Custodian's own
negligence or willful misconduct;
8) For exchange or conversion pursuant to any
plan of merger, consolidation,
recapitalization, reorganization or
readjustment of the securities of the issuer
of such securities, or pursuant to provisions
for conversion contained in such securities,
3
<PAGE>
or pursuant to any deposit agreement; provided
that, in any such case, the new securities and
cash, if any, are to be delivered to the
Custodian;
9) In the case of warrants, rights or similar
securities, the surrender thereof in the
exercise of such warrants, rights or similar
securities or the surrender of interim
receipts or temporary securities for
definitive securities; provided that, in any
such case, the new securities and cash, if
any, are to be delivered to the Custodian;
10) For delivery in connection with any loans of
securities made by the Portfolio, but only
against receipt of adequate collateral as
agreed upon from time to time by the Custodian
and the Fund on behalf of the Portfolio, which
may be in the form of cash or obligations
issued by the United States government, its
agencies or instrumentalities, except that in
connection with any loans for which collateral
is to be credited to the Custodian's account
in the book-entry system authorized by the
U.S. Department of the Treasury, the Custodian
will not be held liable or responsible for the
delivery of securities owned by the Portfolio
prior to the receipt of such collateral;
11) For delivery as security in connection with
any borrowings by the Fund on behalf of the
Portfolio requiring a pledge of assets by the
Fund on behalf of the Portfolio, but only
against receipt of amounts borrowed;
12) For delivery in accordance with the provisions
of any agreement among the Fund on behalf of
the Portfolio, the Custodian and a broker-
dealer registered under the Securities
Exchange Act of 1934 (the "Exchange Act") and
a member of The National Association of
Securities Dealers, Inc. ("NASD"), relating to
compliance with the rules of The Options
Clearing Corporation and of any registered
national securities exchange, or of any
similar organization or organizations,
regarding escrow or other arrangements in
connection with transactions by the Portfolio
of the Fund;
4
<PAGE>
13) For delivery in accordance with the provisions
of any agreement among the Fund on behalf of
the Portfolio, the Custodian, and a Futures
Commission Merchant registered under the
Commodity Exchange Act, relating to compliance
with the rules of the Commodity Futures
Trading Commission and/or any Contract Market,
or any similar organization or organizations,
regarding account deposits in connection with
transactions by the Portfolio of the Fund;
14) Upon receipt of instructions from the transfer
agent ("Transfer Agent") for the Fund, for
delivery to such Transfer Agent or to the
holders of shares in connection with
distributions in kind, as may be described
from time to time in the currently effective
prospectus and statement of additional
information of the Fund, related to the
Portfolio ("Prospectus"), in satisfaction of
requests by holders of Shares for repurchase
or redemption; and
15) For any other proper corporate purpose, but
only upon receipt of, in addition to proper
instructions from the Fund on behalf of the
applicable Portfolio from a person authorized
to give same, specifying the securities of the
Portfolio to be delivered, setting forth the
purpose for which such delivery is to be made,
declaring such purpose to be a proper
corporate purpose, and naming the person or
persons to whom delivery of such securities
shall be made.
2.3 Registration of Securities. Domestic securities
held by the Custodian (other than bearer
securities) shall be registered in the name of the
Portfolio or in the name of any nominee of the Fund
on behalf of the Portfolio or of any nominee of the
Custodian which nominee shall be assigned
exclusively to the Portfolio, unless the Fund has
authorized in writing the appointment of a nominee
to be used in common with other registered
investment companies having the same investment
adviser as the Portfolio, or in the name or nominee
name of any agent appointed pursuant to Section 2.9
or in the name or nominee name of any sub-custodian
appointed pursuant to Article 1. All securities
accepted by the Custodian on behalf of the
Portfolio under the terms of this Contract shall be
5
<PAGE>
in "street name" or other good delivery form. If,
however, the Fund directs the Custodian to maintain
securities in "street name", the Custodian shall
utilize its best efforts only to timely collect
income due the Fund on such securities and to
notify the Fund on a best efforts basis only of
relevant corporate actions including, without
limitation, pendency of calls, maturities, tender
or exchange offers.
2.4 Bank Accounts. The Custodian shall open and
maintain a separate bank account or accounts in the
United States in the name of each Portfolio of the
Fund, subject only to draft or order by the
Custodian acting pursuant to the terms of this
Contract, and shall hold in such account or
accounts, subject to the provisions hereof, all
cash received by it from or for the account of the
Portfolio, other than cash maintained by the
Portfolio in a bank account established and used in
accordance with Rule 17f-3 under the Investment
Company Act of 1940. Funds held by the Custodian
for a Portfolio may be deposited by it to its
credit as Custodian in the Banking Department of
the Custodian or in such other banks or trust
companies as it may in its discretion deem
necessary or desirable; provided, however, that
every such bank or trust company shall be qualified
to act as a custodian under the Investment Company
Act of 1940 and that each such bank or trust
company and the funds to be deposited with each
such bank or trust company shall on behalf of each
applicable Portfolio be approved by vote of a
majority of the Board of Directors of the Fund.
Such funds shall be deposited by the Custodian in
its capacity as Custodian and shall be withdrawable
by the Custodian only in that capacity.
2.5 Availability of Federal Funds. Upon mutual
agreement between the Fund on behalf of each
applicable Portfolio and the Custodian, the
Custodian shall, upon the receipt of Proper
Instructions from the Fund on behalf of a
Portfolio, make federal funds available to such
Portfolio as of specified times agreed upon from
time to time by the Fund and the Custodian in the
amount of checks received in payment for Shares of
such Portfolio which are deposited into the
Portfolio's account.
6
<PAGE>
2.6 Collection of Income. Subject to the provisions of
Section 2.3, the Custodian shall collect on a
timely basis all income and other payments with
respect to registered domestic securities held
hereunder to which each Portfolio shall be entitled
either by law or pursuant to custom in the
securities business, and shall collect on a timely
basis all income and other payments with respect to
bearer domestic securities if, on the date of
payment by the issuer, such securities are held by
the Custodian or its agent thereof and shall credit
such income, as collected, to such Portfolio's
custodian account. Without limiting the generality
of the foregoing, the Custodian shall detach and
present for payment all coupons and other income
items requiring presentation as and when they
become due and shall collect interest when due on
securities held hereunder. Income due each
Portfolio on securities loaned pursuant to the
provisions of Section 2.2 (10) shall be the
responsibility of the Fund. The Custodian will have
no duty or responsibility in connection therewith,
other than to provide the Fund with such
information or data as may be necessary to assist
the Fund in arranging for the timely delivery to
the Custodian of the income to which the Portfolio
is properly entitled.
2.7 Payment of Fund Monies. Upon receipt of Proper
Instructions from the Fund on behalf of the
applicable Portfolio, which may be continuing
instructions when deemed appropriate by the
parties, the Custodian shall pay out monies of a
Portfolio in the following cases only:
1) Upon the purchase of domestic securities,
options, futures contracts or options on
futures contracts for the account of the
Portfolio but only (a) against the delivery of
such securities or evidence of title to such
options, futures contracts or options on
futures contracts to the Custodian (or any
bank, banking firm or trust company doing
business in the United States or abroad which
is qualified under the Investment Company Act
of 1940, as amended, to act as a custodian and
has been designated by the Custodian as its
agent for this purpose) registered in the name
of the Portfolio or in the name of a nominee
of the Custodian referred to in Section 2.3
hereof or in proper form for transfer; (b) in
7
<PAGE>
the case of a purchase effected through a U.S.
Securities System, in accordance with the
conditions set forth in Section 2.10 hereof;
(c) in the case of a purchase involving the
Direct Paper System, in accordance with the
conditions set forth in Section 2.11; (d) in
the case of repurchase agreements entered into
between the Fund on behalf of the Portfolio
and the Custodian, or another bank, or a
broker-dealer which is a member of NASD, (i)
against delivery of the securities either in
certificate form or through an entry crediting
the Custodian's account at the Federal Reserve
Bank with such securities or (ii) against
delivery of the receipt evidencing purchase by
the Portfolio of securities owned by the
Custodian along with written evidence of the
agreement by the Custodian to repurchase such
securities from the Portfolio or (e) for
transfer to a time deposit account of the Fund
in any bank, whether domestic or foreign; such
transfer may be effected prior to receipt of a
confirmation from a broker and/or the
applicable bank pursuant to Proper
Instructions from the Fund as defined in
Article 5;
2) In connection with conversion, exchange or
surrender of securities owned by the Portfolio
as set forth in Section 2.2 hereof;
3) For the redemption or repurchase of Shares
issued by the Portfolio as set forth in
Article 4 hereof;
4) For the payment of any expense or liability
incurred by the Portfolio, including but not
limited to the following payments for the
account of the Portfolio: interest, taxes,
management, accounting, transfer agent and
legal fees, and operating expenses of the Fund
whether or not such expenses are to be in
whole or part capitalized or treated as
deferred expenses;
5) For the payment of any dividends on Shares of
the Portfolio declared pursuant to the
governing documents of the Fund;
8
<PAGE>
6) For payment of the amount of dividends
received in respect of securities sold short;
and
7) For any other proper purpose, but only upon
receipt of Proper Instructions from the Fund
on behalf of the applicable Portfolio, from a
person authorized to give same, specifying the
amount of such payment, setting forth the
purpose for which such payment is to be made,
declaring such purpose to be a proper purpose,
and naming the person or persons to whom such
payment is to be made.
2.8 Liability for Payment in Advance of Receipt of
Securities Purchased. Except as specifically stated
otherwise in this Contract, in any and every case
where payment for purchase of domestic securities
for the account of a Portfolio is made by the
Custodian in advance of receipt of the securities
purchased in the absence of specific written
instructions from the Fund on behalf of such
Portfolio to so pay in advance, the Custodian shall
be absolutely liable to the Fund for such
securities to the same extent as if the securities
had been received by the Custodian.
2.9 Appointment of Agents. The Custodian may at any
time or times in its discretion appoint (and may at
any time remove) any other bank or trust company
which is itself qualified under the Investment
Company Act of 1940, as amended, to act as a
custodian, as its agent to carry out such of the
provisions of this Article 2 as the Custodian may
from time to time direct; provided, however, that
the appointment of any agent shall not relieve the
Custodian of its responsibilities or liabilities
hereunder.
2.10 Deposit of Fund Assets in U.S. Securities Systems.
The Custodian may deposit and/or maintain
securities owned by a Portfolio in a clearing
agency registered with the Securities and Exchange
Commission under Section 17A of the Securities
Exchange Act of 1934, which acts as a securities
depository, or in the book-entry system authorized
by the U.S. Department of the Treasury and certain
federal agencies, collectively referred to herein
as "U.S. Securities System" in accordance with
applicable Federal Reserve Board and Securities and
9
<PAGE>
Exchange Commission rules and regulations, if any,
and subject to the following provisions:
1) The Custodian may keep securities of the
Portfolio in a U.S. Securities System provided
that such securities are represented in an
account ( for the purposes of this Section
2.10, the "Account") of the Custodian in the
U.S. Securities System which shall not include
any assets of the Custodian other than assets
held as a fiduciary, custodian or otherwise
for customers;
2) The records of the Custodian with respect to
securities of the Portfolio which are
maintained in a U.S. Securities System shall
identify by book-entry those securities
belonging to the Portfolio;
3) The Custodian shall pay for securities
purchased for the account of the Portfolio
upon (i) receipt of advice from the U.S.
Securities System that such securities have
been transferred to the Account, and (ii) the
making of an entry on the records of the
Custodian to reflect such payment and transfer
for the account of the Portfolio. The
Custodian shall transfer securities sold for
the account of the Portfolio upon (i) receipt
of advice from the U.S. Securities System that
payment for such securities has been
transferred to the Account, and (ii) the
making of an entry on the records of the
Custodian to reflect such transfer and payment
for the account of the Portfolio. Copies of
all advices from the U.S. Securities System of
transfers of securities for the account of the
Portfolio shall identify the Portfolio, be
maintained for the Portfolio by the Custodian
and be provided to the Fund at its request.
Upon request, the Custodian shall furnish the
Fund on behalf of the Portfolio confirmation
of each transfer to or from the account of the
Portfolio in the form of a written advice or
notice and shall furnish to the Fund on behalf
of the Portfolio copies of daily transaction
sheets reflecting each day's transactions in
the U.S. Securities System for the account of
the Portfolio;
10
<PAGE>
4) The Custodian shall provide the Fund for the
Portfolio with any report obtained by the
Custodian on the U.S. Securities System's
accounting system, internal accounting control
and procedures for safeguarding securities
deposited in the U.S. Securities System;
5) The Custodian shall have received from the
Fund on behalf of the Portfolio the initial or
annual certificate, as the case may be,
required by Article 14 hereof; and
6) Anything to the contrary in this Contract
notwithstanding, the Custodian shall be liable
to the Fund for the benefit of the Portfolio
for any loss or damage to the Portfolio
resulting from use of the U.S. Securities
System by reason of any negligence,
misfeasance or misconduct of the Custodian or
any of its agents or of any of its or their
employees or from failure of the Custodian or
any such agent to enforce effectively such
rights as it may have against the U.S.
Securities System; at the election of the
Fund, it shall be entitled to be subrogated to
the rights of the Custodian with respect to
any claim against the U.S. Securities System
or any other person which the Custodian may
have as a consequence of any such loss or
damage if and to the extent that the Portfolio
has not been made whole for any such loss or
damage.
2.11 Fund Assets Held in the Custodian's Direct Paper
System. The Custodian may deposit and/or maintain
securities owned by a Portfolio in the Direct Paper
System of the Custodian subject to the following
provisions:
1) No transaction relating to securities in the
Direct Paper System will be effected in the
absence of Proper Instructions from the Fund
on behalf of the Portfolio;
2) The Custodian may keep securities of the
Portfolio in the Direct Paper System only if
such securities are represented in the Direct
Paper system Account, which Account shall not
include any assets of the Custodian other than
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assets held as a fiduciary, custodian or
otherwise for customers;
3) The records of the Custodian with respect to
securities of the Portfolio which are
maintained in the Direct Paper System shall
identify by book-entry those securities
belonging to the Portfolio;
4) The Custodian shall pay for securities
purchased for the account of the Portfolio
upon the making of an entry on the records of
the Custodian to reflect such payment and
transfer of securities to the account of the
Portfolio. The Custodian shall transfer
securities sold for the account of the
Portfolio upon the making of an entry on the
records of the Custodian to reflect such
transfer and receipt of payment for the
account of the Portfolio;
5) The Custodian shall furnish the Fund on behalf
of the Portfolio confirmation of each transfer
to or from the account of the Portfolio, in
the form of a written advice or notice, of
Direct Paper on the next business day
following such transfer and shall furnish to
the Fund on behalf of the Portfolio copies of
daily transaction sheets reflecting each day's
transaction in the U.S. Securities System for
the account of the Portfolio; and
6) The Custodian shall provide the Fund on behalf
of the Portfolio with any report on its system
of internal accounting control as the Fund may
reasonably request from time to time.
2.12 Segregated Account. The Custodian shall upon
receipt of Proper Instructions from the Fund on
behalf of each applicable Portfolio establish and
maintain a segregated account or accounts for and
on behalf of each such Portfolio, into which
account or accounts may be transferred cash and/or
securities, including securities maintained in an
account by the Custodian pursuant to Section 2.10
hereof, (i) in accordance with the provisions of
any agreement among the Fund on behalf of the
Portfolio, the Custodian and a broker-dealer
registered under the Exchange Act and a member of
the NASD (or any futures commission merchant
registered under the Commodity Exchange Act),
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relating to compliance with the rules of The
Options Clearing Corporation and of any registered
national securities exchange (or the Commodity
Futures Trading Commission or any registered
contract market), or of any similar organization or
organizations, regarding escrow or other
arrangements in connection with transactions by the
Portfolio, (ii) for purposes of segregating cash or
government securities in connection with options
purchased, sold or written by the Portfolio or
commodity futures contracts or options thereon
purchased or sold by the Portfolio, (iii) for the
purposes of compliance by the Portfolio with the
procedures required by Investment Company Act
Release No. 10666, or any subsequent release or
releases of the Securities and Exchange Commission
relating to the maintenance of segregated accounts
by registered investment companies and (iv) for
other proper corporate purposes, but only, in the
case of clause (iv), upon receipt of, Proper
Instructions on behalf of the applicable Portfolio
from a person authorized to give same, setting
forth the purpose or purposes of such segregated
account and declaring such purposes to be proper
corporate purposes.
2.13 Ownership Certificates for Tax Purposes. The
Custodian shall execute ownership and other
certificates and affidavits for all federal and
state tax purposes in connection with receipt of
income or other payments with respect to domestic
securities of each Portfolio held by it and in
connection with transfers of securities.
2.14 Proxies. The Custodian shall, with respect to the
domestic securities held hereunder, cause to be
promptly executed by the registered holder of such
securities, if the securities are registered
otherwise than in the name of the Portfolio or a
nominee of the Portfolio, all proxies, without
indication of the manner in which such proxies are
to be voted, and shall promptly deliver to the
Portfolio such proxies, all proxy soliciting
materials and all notices relating to such
securities.
2.15 Communications Relating to Portfolio Securities.
Subject to the provisions of Section 2.3, the
Custodian shall transmit promptly to the Fund for
each Portfolio all written information (including,
without limitation, pendency of calls and
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maturities of domestic securities and expirations
of rights in connection therewith and notices of
exercise of call and put options written by the
Fund on behalf of the Portfolio and the maturity of
futures contracts purchased or sold by the
Portfolio) received by the Custodian from issuers
of the securities being held for the Portfolio.
With respect to tender or exchange offers, the
Custodian shall transmit promptly to the Portfolio
all written information received by the Custodian
from issuers of the securities whose tender or
exchange is sought and from the party (or his
agents) making the tender or exchange offer. If the
Portfolio desires to take action with respect to
any tender offer, exchange offer or any other
similar transaction, the Portfolio shall notify the
Custodian at least three business days prior to the
date on which the Custodian is to take such action.
3. Duties of the Custodian with Respect to Property of
the Fund Held Outside of the United States
3.1 Appointment of Foreign Sub-Custodians. The Fund
hereby authorizes and instructs the Custodian to
employ as sub-custodians for the Portfolio's
securities and other assets maintained outside the
United States the foreign banking institutions and
foreign securities depositories designated on
Schedule A hereto ("foreign sub-custodians"). Upon
receipt of "Proper Instructions", as defined in
Section 5 of this Contract, together with a
certified resolution of the Fund's Board of
Directors, the Custodian and the Fund may agree to
amend Schedule A hereto from time to time to
designate additional foreign banking institutions
and foreign securities depositories to act as sub-
custodian. Upon receipt of Proper Instructions, the
Fund may instruct the Custodian to cease the
employment of any one or more such sub-custodians
for maintaining custody of the Portfolio's assets.
3.2 Assets to be Held. The Custodian shall limit the
securities and other assets maintained in the
custody of the foreign sub-custodians to: (a)
"foreign securities", as defined in paragraph
(c)(1) of Rule 17f-5 under the Investment Company
Act of 1940, and (b) cash and cash equivalents in
such amounts as the Custodian or the Fund may
determine to be reasonably necessary to effect the
Portfolio's foreign securities transactions. The
Custodian shall identify on its books as belonging
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<PAGE>
to the Fund, the foreign securities of the Fund
held by each foreign sub-custodian.
3.3 Foreign Securities Systems. Except as may otherwise
be agreed upon in writing by the Custodian and the
Fund, assets of the Portfolios shall be maintained
in a clearing agency which acts as a securities
depository or in a book-entry system for the
central handling of securities located outside of
the United States (each a "Foreign Securities
System") only through arrangements implemented by
the foreign banking institutions serving as sub-
custodians pursuant to the terms hereof (Foreign
Securities Systems and U.S. Securities Systems are
collectively referred to herein as the "Securities
Systems"). Where possible, such arrangements shall
include entry into agreements containing the
provisions set forth in Section 3.5 hereof.
3.4 Holding Securities. The Custodian may hold
securities and other non-cash property for all of
its customers, including the Fund, with a foreign
sub-custodian in a single account that is
identified as belonging to the Custodian for the
benefit of its customers, provided however, that
(i) the records of the Custodian with respect to
securities and other non-cash property of the Fund
which are maintained in such account shall identify
by book-entry those securities and other non-cash
property belonging to the Fund and (ii) the
Custodian shall require that securities and other
non-cash property so held by the foreign sub-
custodian be held separately from any assets of the
foreign sub-custodian or of others.
3.5 Agreements with Foreign Banking Institutions. Each
agreement with a foreign banking institution shall
provide that: (a) the assets of each Portfolio will
not be subject to any right, charge, security
interest, lien or claim of any kind in favor of the
foreign banking institution or its creditors or
agent, except a claim of payment for their safe
custody or administration; (b) beneficial ownership
for the assets of each Portfolio will be freely
transferable without the payment of money or value
other than for custody or administration; (c)
adequate records will be maintained identifying the
assets as belonging to each applicable Portfolio;
(d) officers of or auditors employed by, or other
representatives of the Custodian, including to the
extent permitted under applicable law the
15
<PAGE>
independent public accountants for the Fund, will
be given access to the books and records of the
foreign banking institution relating to its actions
under its agreement with the Custodian; and (e)
assets of the Portfolios held by the foreign sub-
custodian will be subject only to the instructions
of the Custodian or its agents.
3.6 Access of Independent Accountants of the Fund. Upon
request of the Fund, the Custodian will use its
best efforts to arrange for the independent
accountants of the Fund to be afforded access to
the books and records of any foreign banking
institution employed as a foreign sub-custodian
insofar as such books and records relate to the
performance of such foreign banking institution
under its agreement with the Custodian.
3.7 Reports by Custodian. The Custodian will supply to
the Fund from time to time, as mutually agreed
upon, statements in respect of the securities and
other assets of the Portfolio(s) held by foreign
sub-custodians, including but not limited to an
identification of entities having possession of the
Portfolio(s) securities and other assets and
advices or notifications of any transfers of
securities to or from each custodial account
maintained by a foreign banking institution for the
Custodian on behalf of each applicable Portfolio
indicating, as to securities acquired for a
Portfolio, the identity of the entity having
physical possession of such securities.
3.8 Transactions in Foreign Custody Account. (a) Except
as otherwise provided in paragraph (b) of this
Section 3.8, the provision of Sections 2.2 and 2.7
of this Contract shall apply, mutatis mutandis to
the foreign securities of the Fund held outside the
United States by foreign sub-custodians. (b)
Notwithstanding any provision of this Contract to
the contrary, settlement and payment for securities
received for the account of each applicable
Portfolio and delivery of securities maintained for
the account of each applicable Portfolio may be
effected in accordance with the customary
established securities trading or securities
processing practices and procedures in the
jurisdiction or market in which the transaction
occurs, including, without limitation, delivering
securities to the purchaser thereof or to a dealer
therefor (or an agent for such purchaser or dealer)
16
<PAGE>
against a receipt with the expectation of receiving
later payment for such securities from such
purchaser or dealer. (c) Securities maintained in
the custody of a foreign sub-custodian may be
maintained in the name of such entity's nominee to
the same extent as set forth in Section 2.3 of this
Contract, and the Fund agrees to hold any such
nominee harmless from any liability as a holder of
record of such securities.
3.9 Liability of Foreign Sub-Custodians. Each agreement
pursuant to which the Custodian employs a foreign
banking institution as a foreign sub-custodian
shall require the institution to exercise
reasonable care in the performance of its duties
and to indemnify, and hold harmless, the Custodian
and Fund from and against any loss, damage, cost,
expense, liability or claim arising out of or in
connection with the institution's performance of
such obligations. At the election of the Fund, it
shall be entitled to be subrogated to the rights of
the Custodian with respect to any claims against a
foreign banking institution as a consequence of any
such loss, damage, cost, expense, liability or
claim if and to the extent that the Fund has not
been made whole for any such loss, damage, cost,
expense, liability or claim.
3.10 Liability of Custodian. The Custodian shall be
liable for the acts or omissions of a foreign
banking institution to the same extent as set forth
with respect to sub-custodians generally in this
Contract and, regardless of whether assets are
maintained in the custody of a foreign banking
institution, a foreign securities depository or a
branch of a U.S. bank as contemplated by paragraph
3.13 hereof, the Custodian shall not be liable for
any loss, damage, cost, expense, liability or claim
resulting from nationalization, expropriation,
currency restrictions, or acts of war or terrorism
or any loss where the sub-custodian has otherwise
exercised reasonable care. Notwithstanding the
foregoing provisions of this paragraph 3.10, in
delegating custody duties to State Street London
Ltd., the Custodian shall not be relieved of any
responsibility to the Fund for any loss due to such
delegation, except such loss as may result from (a)
political risk (including, but not limited to,
exchange control restrictions, confiscation,
expropriation, nationalization, insurrection, civil
strife or armed hostilities) or (b) other losses
17
<PAGE>
(excluding a bankruptcy or insolvency of State
Street London Ltd. not caused by political risk)
due to Acts of God, nuclear incident or other
losses under circumstances where the Custodian and
State Street London Ltd. have exercised reasonable
care.
3.11 Reimbursement for Advances. If the Fund requires
the Custodian to advance cash or securities for any
purpose for the benefit of a Portfolio including
the purchase or sale of foreign exchange or of
contracts for foreign exchange, or in the event
that the Custodian or its nominee shall incur or be
assessed any taxes, charges, expenses, assessments,
claims or liabilities in connection with the
performance of this Contract, except such as may
arise from its or its nominee's own negligent
action, negligent failure to act or willful
misconduct, any property at any time held for the
account of the applicable Portfolio shall be
security therefor and should the Fund fail to repay
the Custodian promptly, the Custodian shall be
entitled to utilize available cash and to dispose
of such Portfolio's assets to the extent necessary
to obtain reimbursement.
3.12 Monitoring Responsibilities. The Custodian shall
furnish annually to the Fund, during the month of
June, information concerning the foreign sub-
custodians employed by the Custodian. Such
information shall be similar in kind and scope to
that furnished to the Fund in connection with the
initial approval of this Contract. In addition, the
Custodian will promptly inform the Fund in the
event that the Custodian learns of a material
adverse change in the financial condition of a
foreign sub-custodian or any material loss of the
assets of the Fund or in the case of any foreign
sub-custodian not the subject of an exemptive order
from the Securities and Exchange Commission is
notified by such foreign sub-custodian that there
appears to be a substantial likelihood that its
shareholders' equity will decline below $200
million (U.S. dollars or the equivalent thereof) or
that its shareholders' equity has declined below
$200 million (in each case computed in accordance
with generally accepted U.S. accounting
principles).
3.13 Branches of U.S. Banks. (a) Except as otherwise set
forth in this Contract, the provisions hereof shall
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<PAGE>
not apply where the custody of the Portfolios
assets are maintained in a foreign branch of a
banking institution which is a "bank" as defined by
Section 2(a)(5) of the Investment Company Act of
1940 meeting the qualification set forth in Section
26(a) of said Act. The appointment of any such
branch as a sub-custodian shall be governed by
paragraph 1 of this Contract. (b) Cash held for
each Portfolio of the Fund in the United Kingdom
shall be maintained in an interest bearing account
established for the Fund with the Custodian's
London branch, which account shall be subject to
the direction of the Custodian, State Street London
Ltd. or both.
3.14 Tax Law. The Custodian shall have no responsibility
or liability for any obligations now or hereafter
imposed on the Fund or the Custodian as custodian
of the Fund by the tax law of the United States of
America or any state or political subdivision
thereof. It shall be the responsibility of the Fund
to notify the Custodian of the obligations imposed
on the Fund or the Custodian as custodian of the
Fund by the tax law of jurisdictions other than
those mentioned in the above sentence, including
responsibility for withholding and other taxes,
assessments or other governmental charges,
certifications and governmental reporting. The sole
responsibility of the Custodian with regard to such
tax law shall be to use reasonable efforts to
assist the Fund with respect to any claim for
exemption or refund under the tax law of
jurisdictions for which the Fund has provided such
information.
4. Payments for Sales or Repurchases or Redemptions of
Shares of the Fund
The Custodian shall receive from the distributor for the
Shares or from the Transfer Agent of the Fund and deposit
into the account of the appropriate Portfolio such payments
as are received for Shares of that Portfolio issued or sold
from time to time by the Fund. The Custodian will provide
timely notification to the Fund on behalf of each such
Portfolio and the Transfer Agent of any receipt by it of
payments for Shares of such Portfolio.
From such funds as may be available for the purpose but
subject to the limitations of the Articles of Incorporation
and any applicable votes of the Board of Directors of the
Fund pursuant thereto, the Custodian shall, upon receipt of
19
<PAGE>
instructions from the Transfer Agent, make funds available
for payment to holders of Shares who have delivered to the
Transfer Agent a request for redemption or repurchase of
their Shares. In connection with the redemption or
repurchase of Shares of a Portfolio, the Custodian is
authorized upon receipt of instructions from the Transfer
Agent to wire funds to or through a commercial bank
designated by the redeeming shareholders. In connection with
the redemption or repurchase of Shares of the Fund, the
Custodian shall honor checks drawn on the Custodian by a
holder of Shares, which checks have been furnished by the
Fund to the holder of Shares, when presented to the
Custodian in accordance with such procedures and controls as
are mutually agreed upon from time to time between the Fund
and the Custodian.
5. Proper Instructions
Proper Instructions as used throughout this Contract
means a writing signed or initialed by one or more person or
persons as the Board of Directors shall have from time to
time authorized. Each such writing shall set forth the
specific transaction or type of transaction involved,
including a specific statement of the purpose for which such
action is requested. Oral instructions will be considered
Proper Instructions if the Custodian reasonably believes
them to have been given by a person authorized to give such
instructions with respect to the transaction involved. The
Fund shall cause all oral instructions to be confirmed in
writing. Upon receipt of a certificate of the Secretary or
an Assistant Secretary as to the authorization by the Board
of Directors of the Fund accompanied by a detailed
description of procedures approved by the Board of
Directors, Proper Instructions may include communications
effected directly between electro-mechanical or electronic
devices provided that the Board of Directors and the
Custodian are satisfied that such procedures afford adequate
safeguards for the Portfolios' assets. For purposes of this
Section, Proper Instructions shall include instructions
received by the Custodian pursuant to any three-party
agreement which requires a segregated asset account in
accordance with Section 2.12.
6. Actions Permitted without Express Authority
The Custodian may in its discretion, without express
authority from the Fund on behalf of each applicable
Portfolio:
1) make payments to itself or others for minor
expenses of handling securities or other similar
20
<PAGE>
items relating to its duties under this Contract,
provided that all such payments shall be accounted
for to the Fund on behalf of the Portfolio;
2) surrender securities in temporary form for
securities in definitive form;
3) endorse for collection, in the name of the
Portfolio, checks, drafts and other negotiable
instruments; and
4) in general, attend to all non-discretionary details
in connection with the sale, exchange,
substitution, purchase, transfer and other dealings
with the securities and property of the Portfolio
except as otherwise directed by the Board of
Directors of the Fund.
7. Evidence of Authority
The Custodian shall be protected in acting upon any
instructions, notice, request, consent, certificate or other
instrument or paper believed by it to be genuine and to have
been properly executed by or on behalf of the Fund. The
Custodian may receive and accept a certified copy of a vote
of the Board of Directors of the Fund as conclusive evidence
(a) of the authority of any person to act in accordance with
such vote or (b) of any determination or of any action by
the Board of Directors pursuant to the Articles of
Incorporation as described in such vote, and such vote may
be considered as in full force and effect until receipt by
the Custodian of written notice to the contrary.
8. Duties of Custodian with Respect to the Books of Account
and Calculation of Net Asset Value and Net Income
The Custodian shall cooperate with and supply necessary
information to the entity or entities appointed by the Board
of Directors of the Fund to keep the books of account of
each Portfolio and/or compute the net asset value per share
of the outstanding shares of each Portfolio or, if directed
in writing to do so by the Fund on behalf of the Portfolio,
shall itself keep such books of account and/or compute such
net asset value per share. If so directed, the Custodian
shall also calculate daily the net income of the Portfolio
as described in the Fund's currently effective prospectus
related to such Portfolio and shall advise the Fund and the
Transfer Agent daily of the total amounts of such net income
and, if instructed in writing by an officer of the Fund to
do so, shall advise the Transfer Agent periodically of the
division of such net income among its various components.
21
<PAGE>
The calculations of the net asset value per share and the
daily income of each Portfolio shall be made at the time or
times described from time to time in the Fund's currently
effective prospectus related to such Portfolio.
9. Records
The Custodian shall with respect to each Portfolio
create and maintain all records relating to its activities
and obligations under this Contract in such manner as will
meet the obligations of the Fund under the Investment
Company Act of 1940, with particular attention to Section 31
thereof and Rules 3la-1 and 3la-2 thereunder. All such
records shall be the property of the Fund and shall at all
times during the regular business hours of the Custodian be
open for inspection by duly authorized officers, employees
or agents of the Fund and employees and agents of the
Securities and Exchange Commission. The Custodian shall, at
the Fund's request, supply the Fund with a tabulation of
securities owned by each Portfolio and held by the Custodian
and shall, when requested to do so by the Fund and for such
compensation as shall be agreed upon between the Fund and
the Custodian, include certificate numbers in such
tabulations.
10. Opinion of Fund's Independent Accountant
The Custodian shall take all reasonable action, as the
Fund on behalf of each applicable Portfolio may from time to
time request, to obtain from year to year favorable opinions
from the Fund's independent accountants with respect to its
activities hereunder in connection with the preparation of
the Fund's Form N-1A, and Form N-SAR or other annual reports
to the Securities and Exchange Commission and with respect
to any other requirements of such Commission.
11. Reports to Fund by Independent Public Accountants
The Custodian shall provide the Fund, on behalf of each
of the Portfolios at such times as the Fund may reasonably
require, with reports by independent public accountants on
the accounting system, internal accounting control and
procedures for safeguarding securities, futures contracts
and options on futures contracts, including securities
deposited and/or maintained in a Securities System, relating
to the services provided by the Custodian under this
Contract; such reports, shall be of sufficient scope and in
sufficient detail, as may reasonably be required by the Fund
to provide reasonable assurance that any material
inadequacies would be disclosed by such examination, and, if
there are no such inadequacies, the reports shall so state.
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<PAGE>
12. Compensation of Custodian
The Custodian shall be entitled to reasonable
compensation for its services and expenses as Custodian, as
agreed upon from time to time between the Fund on behalf of
each applicable Portfolio and the Custodian.
13. Responsibility of Custodian
So long as and to the extent that it is in the exercise
of reasonable care, the Custodian shall not be responsible
for the title, validity or genuineness of any property or
evidence of title thereto received by it or delivered by it
pursuant to this Contract and shall be held harmless in
acting upon any notice, request, consent, certificate or
other instrument reasonably believed by it to be genuine and
to be signed by the proper party or parties, including any
futures commission merchant acting pursuant to the terms of
a three-party futures or options agreement. The Custodian
shall be held to the exercise of reasonable care in carrying
out the provisions of this Contract, but shall be kept
indemnified by and shall be without liability to the Fund
for any action taken or omitted by it in good faith without
negligence. It shall be entitled to rely on and may act upon
advice of counsel (who may be counsel for the Fund) on all
matters, and shall be without liability for any action
reasonably taken or omitted pursuant to such advice.
Except as may arise from the Custodian's own negligence
or willful misconduct or the negligence or willful
misconduct of a sub-custodian or agent, the Custodian shall
be without liability to the Fund for any loss, liability,
claim or expense resulting from or caused by; (i) events or
circumstances beyond the reasonable control of the Custodian
or any sub-custodian or Securities System or any agent or
nominee of any of the foregoing, including, without
limitation, nationalization or expropriation, imposition of
currency controls or restrictions, the interruption,
suspension or restriction of trading on or the closure of
any securities market, power or other mechanical or
technological failures or interruptions, computer viruses or
communications disruptions, acts of war or terrorism, riots,
revolutions, work stoppages, natural disasters or other
similar events or acts; (ii) errors by the Fund or the
Investment Advisor in their instructions to the Custodian
provided such instructions have been in accordance with this
Contract; (iii) the insolvency of or acts or omissions by a
Securities System; (iv) any delay or failure of any broker,
agent or intermediary, central bank or other commercially
prevalent payment or clearing system to deliver to the
Custodian's sub-custodian or agent securities purchased or
23
<PAGE>
in the remittance or payment made in connection with
securities sold; (v) any delay or failure of any company,
corporation, or other body in charge of registering or
transferring securities in the name of the Custodian, the
Fund, the Custodian's sub-custodians, nominees or agents or
any consequential losses arising out of such delay or
failure to transfer such securities including non-receipt of
bonus, dividends and rights and other accretions or
benefits; (vi) delays or inability to perform its duties due
to any disorder in market infrastructure with respect to any
particular security or Securities System; and (vii) any
provision of any present or future law or regulation or
order of the United States of America, or any state thereof,
or any other country, or political subdivision thereof or of
any court of competent jurisdiction.
The Custodian shall be liable for the acts or omissions
of a foreign banking institution to the same extent as set
forth with respect to sub-custodians generally in this
Contract.
If the Fund on behalf of a Portfolio requires the
Custodian to take any action with respect to securities,
which action involves the payment of money or which action
may, in the opinion of the Custodian, result in the
Custodian or its nominee assigned to the Fund or the
Portfolio being liable for the payment of money or incurring
liability of some other form, the Fund on behalf of the
Portfolio, as a prerequisite to requiring the Custodian to
take such action, shall provide indemnity to the Custodian
in an amount and form satisfactory to it.
If the Fund requires the Custodian, its affiliates,
subsidiaries or agents, to advance cash or securities for
any purpose (including but not limited to securities
settlements, foreign exchange contracts and assumed
settlement) or in the event that the Custodian or its
nominee shall incur or be assessed any taxes, charges,
expenses, assessments, claims or liabilities in connection
with the performance of this Contract, except such as may
arise from its or its nominee's own negligent action,
negligent failure to act or willful misconduct, any property
at any time held for the account of the applicable Portfolio
shall be security therefor and should the Fund fail to repay
the Custodian promptly, the Custodian shall be entitled to
utilize available cash and to dispose of such Portfolios
assets to the extent necessary to obtain reimbursement.
In no event shall the Custodian be liable for indirect,
special or consequential damages.
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<PAGE>
14. Effective Period Termination and Amendment
This Contract shall become effective as of its
execution, shall continue in full force and effect until
terminated as hereinafter provided, may be amended at any
time by mutual agreement of the parties hereto and may be
terminated by either party by an instrument in writing
delivered or mailed, postage prepaid to the other party,
such termination to take effect not sooner than thirty (30)
days after the date of such delivery or mailing; provided,
however that the Custodian shall not with respect to a
Portfolio act under Section 2.l0 hereof in the absence of
receipt of an initial certificate of the Secretary or an
Assistant Secretary that the Board of Directors of the Fund
has approved the initial use of a particular Securities
System by such Portfolio, as required by Rule 17f-4 under
the Investment Company Act of 1940, as amended and that the
Custodian shall not with respect to a Portfolio act under
Section 2.11 hereof in the absence of receipt of an initial
certificate of the Secretary or an Assistant Secretary that
the Board of Directors has approved the initial use of the
Direct Paper System by such Portfolio; provided further,
however, that the Fund shall not amend or terminate this
Contract in contravention of any applicable federal or state
regulations, or any provision of the Articles of
Incorporation, and further provided, that the Fund on behalf
of one or more of the Portfolios may at any time by action
of its Board of Directors (i) substitute another bank or
trust company for the Custodian by giving notice as
described above to the Custodian, or (ii) immediately
terminate this Contract in the event of the appointment of a
conservator or receiver for the Custodian by the Comptroller
of the Currency or upon the happening of a like event at the
direction of an appropriate regulatory agency or court of
competent jurisdiction.
Upon termination of the Contract, the Fund on behalf of
each applicable Portfolio shall pay to the Custodian such
compensation as may be due as of the date of such
termination and shall likewise reimburse the Custodian for
its costs, expenses and disbursements.
15. Successor Custodian
If a successor custodian for the Fund, of one or more of
the Portfolios shall be appointed by the Board of Directors
of the Fund, the Custodian shall, upon termination, deliver
to such successor custodian at the office of the Custodian,
duly endorsed and in the form for transfer, all securities
of each applicable Portfolio then held by it hereunder and
shall transfer to an account of the successor custodian all
25
<PAGE>
of the securities of each such Portfolio held in a
Securities System.
If no such successor custodian shall be appointed, the
Custodian shall, in like manner, upon receipt of a certified
copy of a vote of the Board of Directors of the Fund,
deliver at the office of the Custodian and transfer such
securities, funds and other properties in accordance with
such vote.
In the event that no written order designating a
successor custodian or certified copy of a vote of the Board
of Directors shall have been delivered to the Custodian on
or before the date when such termination shall become
effective, then the Custodian shall have the right to
deliver to a bank or trust company, which is a "bank" as
defined in the Investment Company Act of 1940, doing
business in Boston, Massachusetts, of its own selection,
having an aggregate capital, surplus, and undivided profits,
as shown by its last published report, of not less than
$25,000,000, all securities, funds and other properties held
by the Custodian on behalf of each applicable Portfolio and
all instruments held by the Custodian relative thereto and
all other property held by it under this Contract on behalf
of each applicable Portfolio and to transfer to an account
of such successor custodian all of the securities of each
such Portfolio held in any Securities System. Thereafter,
such bank or trust company shall be the successor of the
Custodian under this Contract.
In the event that securities, funds and other properties
remain in the possession of the Custodian after the date of
termination hereof owing to failure of the Fund to procure
the certified copy of the vote referred to or of the Board
of Directors to appoint a successor custodian, the Custodian
shall be entitled to fair compensation for its services
during such period as the Custodian retains possession of
such securities, funds and other properties and the
provisions of this Contract relating to the duties and
obligations of the Custodian shall remain in full force and
effect.
16. Interpretive and Additional Provisions
In connection with the operation of this Contract, the
Custodian and the Fund on behalf of each of the Portfolios,
may from time to time agree on such provisions interpretive
of or in addition to the provisions of this Contract as may
in their joint opinion be consistent with the general tenor
of this Contract. Any such interpretive or additional
provisions shall be in a writing signed by both parties and
26
<PAGE>
shall be annexed hereto, provided that no such interpretive
or additional provisions shall contravene any applicable
federal or state regulations or any provision of the
Articles of Incorporation of the Fund. No interpretive or
additional provisions made as provided in the preceding
sentence shall be deemed to be an amendment of this
Contract.
17. Additional Funds
In the event that the Fund establishes one or more
series of Shares in addition to the Alliance Premier Growth
Institutional Fund, Alliance Quasar Institutional Fund,
Alliance Real Estate Investment Institutional Fund with
respect to which it desires to have the Custodian render
services as custodian under the terms hereof, it shall so
notify the Custodian in writing, and if the Custodian agrees
in writing to provide such services, such series of Shares
shall become a Portfolio hereunder.
18. Massachusetts Law to Apply
This Contract shall be construed and the provisions
thereof interpreted under and in accordance with laws of The
Commonwealth of Massachusetts.
19. Prior Contracts
This Contract supersedes and terminates, as of the date
hereof, all prior contracts between the Fund on behalf of
each of the Portfolios and the Custodian relating to the
custody of the Fund's assets.
20. Reproduction of Documents
This Contract and all schedules, exhibits, attachments
and amendments hereto may be reproduced by any photographic,
photostatic, microfilm, micro-card, miniature photographic
or other similar process. The parties hereto all/each agree
that any such reproduction shall be admissible in evidence
as the original itself in any judicial or administrative
proceeding, whether or not the original is in existence and
whether or not such reproduction was made by a party in the
regular course of business, and that any enlargement,
facsimile or further reproduction of such reproduction shall
likewise be admissible in evidence.
27
<PAGE>
21. Shareholder Communications
Securities and Exchange Commission Rule 14b-2 requires
banks which hold securities for the account of customers to
respond to requests by issuers of securities for the names,
addresses and holdings of beneficial owners of securities of
that issuer held by the bank unless the beneficial owner has
expressly objected to disclosure of this information. In
order to comply with the rule, the Custodian needs the Fund
to indicate whether the Fund authorizes the Custodian to
provide the Fund's name, address, and share position to
requesting companies whose stock the Fund owns. If the Fund
tells the Custodian "no", the Custodian will not provide
this information to requesting companies. If the Fund tells
the Custodian "yes" or do not check either "yes" or "no"
below, the Custodian is required by the rule to treat the
Fund as consenting to disclosure of this information for all
securities owned by the Fund or any funds or accounts
established by the Fund. For the Fund's protection, the Rule
prohibits the requesting company from using the Fund's name
and address for any purpose other than corporate
communications. Please indicate below whether the Fund
consent or object by checking one of the alternatives below.
YES [ ] The Custodian is authorized to release the
Fund's name, address, and share positions.
NO [ x ] The Custodian is not authorized to release the
Fund's name, address, and share positions.
28
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this
instrument to be executed in its name and behalf by its duly
authorized representative and its seal to be hereunder
affixed as of the 10th day of December, 1997.
ATTEST ALLIANCE INSTITUTIONAL FUND
/s/ Domenick Pugliese By: /s/ Edmund P. Bergan, Jr.
Name: Domenick Pugliese Name: Edmund P. Bergan, Jr.
Title: Secretary
ATTEST STATE STREET BANK AND TRUST COMPANY
/s/ Glenn Ciotti By: /s/ Ronald E. Logue
Glenn Ciotti Ronald E. Logue
Vice President and Executive Vice President
Associate Counsel
29
<PAGE>
Schedule A
17f-5 Approval
The Board of Directors/Trustees of ALLIANCE
INSTITUTIONAL FUNDS, INC., has approved certain foreign banking
institutions and foreign securities depositories within State
Street's Global Custody Network for use as subcustodians for the
Fund's securities, cash and cash equivalents held outside of the
United States. Board approval is as indicated by the Fund's
Authorized Officer:
Fund
Officer
Initials Country Subcustodian Central Depository
________ ______ ____________ ___________________
_______ State Street's entire Global Custody Network listed below
_______ Argentina Citibank, N.A. Caja de Valores S.A.
_______ Australia Westpac Banking Corporation Austraclear Limited;
Reserve Bank Information
and Transfer System
(RITS)
_______ Austria Erste Bank der Oesterreichische
oesterreichischen Kontrollbank AG
Sparkasen AG (Wertpapiersammelbank
Division)
_______ Bahrain The British Bank of the Middle None
East (as delegate of the
Hongkong Shanghai Banking
Corporation Limited)
_______ Bangladesh Standard Chartered Bank None
_______ Belgium Generale Bank Caisse
Interprofessionnelle de
Depots et de Virements
de Titres S.A. (CIK);
Banque Nationale de
Belgique
_______ Bermuda The Bank of Bermuda Limited None
<PAGE>
_______ Botswana Barclays Bank of Botswana None
Limited
_______ Brazil Citibank, N.A. Camera de Liquidacao de
Sao Paula;
Banco Central do Brasil,
Systema Especial de
Liquidacao e Custodia
(SELIC)
_______ Bulgaria ING Bank N.V. Central Depository AD
_______ Canada Canada Trustco Mortgage Company The Canadian Depository
for Securities Limited
(CDS)
_______ Chile Citibank, N.A. None
_______ People's The Hongkong and Shanghai Shanghai Securities
Republic Banking Corporation Limited, Central Clearing and
of China Shanghai and Shenzhen branches Registration Corporation
(SSCCRC)
Shenzhen Securities
Central Clearing Co.,
Ltd. (SSCC)
________ Colombia Cititrust Colombia S.A. None
Sociedad Fiduciaria
________ Croatia Privredna Banka Zagreb d.d. Ministry of Finance
________ Cyprus Barclays Bank PLC None
Cyprus Offshore Banking Unit
________ Czech Ceskoslovenska Obchodni Stredisko cennych
Republic Banka A.S. papira (SCP)
Czech National Bank
(CNB)
________ Denmark Den Danske Bank Vaerdipapircentralen -
The Danish Securities
Center (VP)
________ Ecuador Citibank, N.A. None
________ Egypt National Bank of Egypt Misr Company for
Clearing, Settlement,
and Central Depository
(MCSD)
2
<PAGE>
________ Finland Merita Bank Ltd. The Finnish Central
Securities Depository
(CSD)
________ France Banque Paribas Societe
Interprofessionnelle
pour la Compensation des
Valeurs Mobilieres
(SICOVAM)
Banque de France,
Saturne System
________ Germany Dresdner Bank AG The Deutscher
Kassenverein AG
________ Ghana Barclays Bank of Ghana Limited None
________ Greece National Bank of Greece S.A The Central Securities
Depository (Apothetirion
Titlon A.E.);
Bank of Greece
________ Hong Kong Standard Chartered Bank The Central Clearing and
Settlement System
(CCASS); The Central
Money Markets Unit (CMU)
________ Hungary Citibank Rt., Budapest The Central Depository
and Clearing House
(Budapest) Ltd. (KELER
Ltd.)
________ India Deutsche Bank AG The National Securities
Depository Limited
The Hongkong and Shanghai The National Securities
Banking Corporation Limited Depository Limited
________ Indonesia Standard Chartered Bank None
________ Ireland Bank of Ireland None;
The Central Bank of
Ireland, The Gilt
Settlement Office (GSO)
________ Israel Bank Hapoalim B.M. The Clearing House of
the Tel Aviv Stock
Exchange;
3
<PAGE>
Bank of Israel
________ Italy Banque Paribas Monte Titoli S.p.A.;
Banca d'Italia
________ Ivory Coast Societe Generale de Banques None
en Cote d'lvoire
________ Japan The Daiwa Bank, Limited Japan Securities
Depository Center
(JASDEC);
Bank of Japan Net System
The Fuji Bank, Limited Japan Securities
Depository Center
(JASDEC);
Bank of Japan Net System
________ The Sumitomo Trust & Banking Japan Securities
Co., Ltd. Depository Center
(JASDEC);
Bank of Japan Net System
________ Jordan The British Bank of the Middle None
East (as delegate of the
Hongkong and Shanghai Banking
Corporation Limited)
________ Kenya Barclays Bank of Kenya Limited None
________ Republic of SEOULBANK Korea Securities
Korea Depository (KSD)
________ Lebanon The British Bank of the Middle Custodian and Clearing
East (as delegate of the Center of Financial
Hongkong and Shanghai Banking Instruments for Lebanon
Corporation Ltd.) (MIDCLEAR) S.A.L.;
The Central Bank of
Lebanon
________ Malaysia Standard Chartered Bank Malaysian Central
Malaysia Berhad Depository Sdn. (MCD);
Bank Negara Malaysia,
Scripless Securities
4
<PAGE>
Trading and Safekeeping
Systems (SSTS)
________ Mauritius The Hongkong and Shanghai The Central Depository &
Banking Corporation Limited Settlement System (CDS)
________ Mexico Citibank Mexico, S.A. S.D. INDEVAL, S.A. de
C.V. (Instituto para el
Deposito de Valores)
________ Morocco Banque Commerciale du Maroc None
________ The MeesPierson N.V. Nederlands Centraal
Netherlands Instituut voor Giraal
Effectenverkeer B.V.
(NECIGEF)
________ New Zealand ANZ Banking Group New Zealand Central
(New Zealand) Limited Securities Depository
Limited (NZCSD)
________ Norway Christiania Bank og Verdipapirsentralen -
Kreditkasse The Norwegian Registry
of Securities (VPS)
________ Oman The British Bank of the Middle Muscat Securities Market
East (as delegate of the (MSM)
Hongkong and Shanghai Banking
Corporation Limited
________ Pakistan Deutsche Bank AG Central Depository
Company of Pakistan Ltd.
________ Peru Citibank, N.A. Caja de Valores y
Liquidaciones (CAVALI,
S.A.)
________ Philippines Standard Chartered Bank The Philippines Central
Depository Inc. (PCD);
The Book-Entry-System
(BES) of Bangko Sentral
ng Pilipinas; The
Registry of Scripless
Securities (ROSS) of the
Bureau of Treasury
________ Poland Citibank Poland S.A. The National Depository
of Securities (Krajowy
Depozyt Papierow
Wartosciowych);
5
<PAGE>
National Bank of Poland
________ Portugal Banco Comercial Portugues Central de Valores
Mobiliarios (Central)
________ Romainia ING Bank N.V. - Bucharest National Securities
Clearing, Settlement and
Depository Company
________ Russia Credit Suisse First Boston, None
Zurich via Credit Suisse
First Boston Limited, Moscow
________ Singapore The Development Bank The Central Depository
of Singapore Ltd. (Pte) Limited (CDP)
________ Slovak Ceskoslovenska Obchodna Stredisko Cennych
Republic Banka S.A. Papierov (SCP);
National Bank of
Slovakia
________ Slovenia Banka Creditanstalt d.d. Klirinsko Depotna Bruzba
________ South Standard Bank of South Africa The Central Depository
Africa Limited Limited
________ Spain Banco Santander, S.A. Servicio de Compensacion
y Liquidacion de
Valores, S.A. (SCLV);
Banco de Espana,
Anotaciones en Cuenta
________ Sri Lanka The Hongkong and Shanghai Central Depository
Banking Corporation Limited System (Pvt) Limited
________ Swaziland Barclays Bank of Swaziland None
Limited
________ Sweden Skandinaviska Enskilda Banken Vardepapperscentralen
VPC AB - The Swedish
Central Securities
Depository
________ Switzerland Union Bank of Switzerland Schweizerische
Effekten - Giro AG
(SEGA);
INTERSETTLE
6
<PAGE>
________ Taiwan - Central Trust of China The Taiwan Securities
R.O.C. or Central Depository
Company, Ltd. (TSCD)
_________________________
(Client Designated Subcustodian
________ Thailand Standard Chartered Bank Thailand Securities
Depository Company
Limited (TSD)
________ Turkey Citibank, N.A. Takas ve Saklama Bankasi
A.S. (TAKASBANK);
Central Bank of Turkey
________ United State Street Bank and Trust None;
Kingdom Company
The Bank of England,
The Central Gilts Office
(CGO);
The Central Moneymarkets
Office (CMO);
________ Uruguay Citibank, N.A. None
________ Venezeula Citibank, N.A. None
________ Zambia Barclays Bank of Zambia Limited Lusaka Central
Depository (LCD)
________ Zimbabwe Barclays Bank of Zimbabwe None
Limited
________ Euroclear (The Euroclear System)/State Street London Limited
________ Cedel (Cedel Bank, societe anonyme)/State Street London Limited
Certified By:
/s/ February 10, 1998
Fund's Authorized Officer Date
7
00250237.AJ2
<PAGE>
ALLIANCE INSTITUTIONAL FUNDS, INC.
TRANSFER AGENCY AGREEMENT
AGREEMENT, dated as of November 14, 1997, between
ALLIANCE INSTITUTIONAL FUNDS, INC., a Maryland corporation and an
open-end investment company registered with the Securities and
Exchange Commission (the "SEC") under the Investment Company Act
of 1940 (the "Investment Company Act"), having its principal
place of business at 1345 Avenue of Americas, New York, New York
10105 (the "Fund"), and ALLIANCE FUND SERVICES, INC., a Delaware
corporation registered with the SEC as a transfer agent under the
Securities Exchange Act of 1934, having its principal place of
business at 500 Plaza Drive, Secaucus, New Jersey 07094 ("Fund
Services"), provides as follows:
WHEREAS, Fund Services has agreed to act as transfer
agent to the Fund for the purpose of recording the transfer,
issuance and redemption of shares of each series of the shares of
common stock of the Fund ("Shares" or "Shares of a Series"),
transferring the Shares, disbursing dividends and other
distributions to shareholders of the Fund, and performing such
other services as may be agreed to pursuant hereto;
NOW THEREFORE, for and in consideration of the mutual
covenants and agreements contained herein, the parties do hereby
agree as follows:
SECTION 1. The Fund hereby appoints Fund Services as
its transfer agent, dividend disbursing agent and shareholder
<PAGE>
servicing agent for the Shares, and Fund Services agrees to act
in such capacities upon the terms set forth in this Agreement.
Capitalized terms used in this Agreement and not otherwise
defined shall have the meanings assigned to them in SECTION 30.
SECTION 2.
(a) The Fund shall provide Fund Services with copies of
the following documents:
(1) Specimens of all forms of certificates for Shares;
(2) Specimens of all account application forms and
other documents relating to Shareholders' accounts;
(3) Copies of each Prospectus;
(4) Specimens of all documents relating to withdrawal
plans instituted by the Fund, as described in SECTION 16; and
(5) Specimens of all amendments to any of the foregoing
documents.
(b) The Fund shall furnish to Fund Services a supply of
blank Share Certificates for the Shares and, from time to time,
will renew such supply upon Fund Services' request. Blank Share
Certificates shall be signed manually or by facsimile signatures
of officers of the Fund authorized to sign by law or pursuant to
the by-laws of the Fund and, if required by Fund Services, shall
bear the Fund's seal or a facsimile thereof.
SECTION 3. Fund Services shall make original issues of
Shares in accordance with SECTIONS 13 and 14 and the Prospectus
upon receipt of (i) Written Instructions requesting the issuance,
2
<PAGE>
(ii) a certified copy of a resolution of the Fund's Directors
authorizing the issuance, (iii) necessary funds for the payment
of any original issue tax applicable to such Shares, and (iv) an
opinion of the Fund's counsel as to the legality and validity of
the issuance, which opinion may provide that it is contingent
upon the filing by the Fund of an appropriate notice with the
SEC, as required by Rule 24f-2 of the Investment Company Act, as
amended from time to time.
SECTION 4. Transfers of Shares shall be registered and,
subject to the provisions of SECTION 10 in the case of Shares
evidenced by Share Certificates, new Share Certificates shall be
issued by Fund Services upon surrender of outstanding Share
Certificates in the form deemed by Fund Services to be properly
endorsed for transfer, which form shall include (i) all necessary
endorsers' signatures guaranteed by a member firm of a national
securities exchange or a domestic commercial bank or through
other procedures mutually agreed to between the Fund and Fund
Services, (ii) such assurances as Fund Services may deem
necessary to evidence the genuineness and effectiveness of each
endorsement and (iii) satisfactory evidence of compliance with
all applicable laws relating to the payment or collection of
taxes.
SECTION 5. Fund Services shall forward Share
Certificates in "non-negotiable" form by first-class or
registered mail, or by whatever means Fund Services deems equally
3
<PAGE>
reliable and expeditious. While in transit to the addressee, all
deliveries of Share Certificates shall be insured by Fund
Services as it deems appropriate. Fund Services shall not mail
Share Certificates in "negotiable" form, unless requested in
writing by the Fund and fully indemnified by the Fund to Fund
Services' satisfaction.
SECTION 6. In registering transfers of Shares, Fund
Services may rely upon the Uniform Commercial Code as in effect
from time to time in the State in which the Fund is incorporated
or organized or, if appropriate, in the State of New Jersey;
provided, that Fund Services may rely in addition or
alternatively on any other statutes in effect in the State of New
Jersey or in the state under the laws of which the Fund is
incorporated or organized that, in the opinion of Fund Services'
counsel, protect Fund Services and the Fund from liability
arising from (i) not requiring complete documentation in
connection with an issuance or transfer, (ii) registering a
transfer without an adverse claim inquiry, (iii) delaying
registration for purposes of an adverse claim inquiry or
(iv) refusing registration in connection with an adverse claim.
SECTION 7. Fund Services may issue new Share
Certificates in place of those lost, destroyed or stolen, upon
receiving indemnity satisfactory to Fund Services; and may issue
new Share Certificates in exchange for, and upon surrender of,
mutilated Share Certificates as Fund Services deems appropriate.
4
<PAGE>
SECTION 8. Unless otherwise directed by the Fund, Fund
Services may issue or register Share Certificates reflecting the
signature, or facsimile thereof, of an officer who has died,
resigned or been removed by the Fund. The Fund shall file
promptly with Fund Services' approval, adoption or ratification
of such action as may be required by law or by Fund Services.
SECTION 9. Fund Services shall maintain customary stock
registry records for Shares of each Series noting the issuance,
transfer or redemption of Shares and the issuance and transfer of
Share Certificates. Fund Services may also maintain for Shares
of each Series an account entitled "Unissued Certificate
Account," in which Fund Services will record the Shares, and
fractions thereof, issued and outstanding from time to time for
which issuance of Share Certificates has not been requested.
Fund Services is authorized to keep records for Shares of each
Series containing the names and addresses of record of
Shareholders, and the number of Shares, and fractions thereof,
from time to time owned by them for which no Share Certificates
are outstanding. Each Shareholder will be assigned a single
account number for Shares of each Series, even though Shares for
which Certificates have been issued will be accounted for
separately.
SECTION 10. Fund Services shall issue Share
Certificates for Shares only upon receipt of a written request
from a Shareholder and as authorized by the Fund. If Shares are
5
<PAGE>
purchased or transferred without a request for the issuance of a
Share Certificate, Fund Services shall merely note on its stock
registry records the issuance or transfer of the Shares and
fractions thereof and credit or debit, as appropriate, the
Unissued Certificate Account and the respective Shareholders'
accounts with the Shares. Whenever Shares, and fractions
thereof, owned by Shareholders are surrendered for redemption,
Fund Services may process the transactions by making appropriate
entries in the stock transfer records, and debiting the Unissued
Certificate Account and the record of issued Shares outstanding;
it shall be unnecessary for Fund Services to reissue Share
Certificates in the name of the Fund.
SECTION 11. Fund Services shall also perform the usual
duties and function required of a stock transfer agent for a
corporation, including but not limited to (i) issuing Share
Certificates as treasury Shares, as directed by Written
Instructions, and (ii) transferring Share Certificates from one
Shareholder to another in the usual manner. Fund Services may
rely conclusively and act without further investigation upon any
list, instruction, certification, authorization, Share
Certificate or other instrument or paper reasonably believed by
it in good faith to be genuine and unaltered, and to have been
signed, countersigned or executed or authorized by a duly-
authorized person or persons, or by the Fund, or upon the advice
of counsel for the Fund or for Fund Services. Fund Services may
6
<PAGE>
record any transfer of Share Certificates which it reasonably
believes in good faith to have been duly authorized, or may
refuse to record any transfer of Share Certificates if, in good
faith, it reasonably deems such refusal necessary in order to
avoid any liability on the part of either the Fund or Fund
Services.
SECTION 12. Fund Services shall notify the Fund of any
request or demand for the inspection of the Fund's share records.
Fund Services shall abide by the Fund's instructions for granting
or denying the inspection; provided, however, Fund Services may
grant the inspection without such instructions if it is advised
by its counsel that failure to do so will result in liability to
Fund Services.
SECTION 13. Fund Services shall observe the following
procedures in handling funds received:
(a) Upon receipt at the office designated by the Fund
of any check or other order drawn or endorsed to the Fund or
otherwise identified as being for the account of the Fund, and,
in the case of a new account, accompanied by a new account
application or sufficient information to establish an account as
provided in the Prospectus, Fund Services shall stamp the
transmittal document accompanying such check or other order with
the name of the Fund and the time and date of receipt and shall
forthwith deposit the proceeds thereof in the custodial account
of the Fund.
7
<PAGE>
(b) In the event that any check or other order for the
purchase of Shares is returned unpaid for any reason, Fund
Services shall, in the absence of other instructions from the
Fund, advise the Fund of the returned check and prepare such
documents and information as may be necessary to cancel promptly
any Shares purchased on the basis of such returned check and any
accumulated income dividends and capital gains distributions paid
on such Shares.
(c) As soon as possible after 4:00 p.m., Eastern time
or at such other times as the Fund may specify in Written or Oral
Instructions for any Series (the "Valuation Time") on each
Business Day, Fund Services shall obtain from the Fund's Adviser
a quotation (on which it may conclusively rely) of the net asset
value, determined as of the Valuation Time on that day. On each
Business Day, Fund Services shall use the net asset value(s)
determined by the Fund's Adviser to compute the number of Shares
and fractional Shares to be purchased and the aggregate purchase
proceeds to be deposited with the Custodian. As necessary but no
more frequently than daily (unless a more frequent basis is
agreed to by Fund Services), Fund Services shall place a purchase
order with the Custodian for the proper number of Shares and
fractional Shares to be purchased and promptly thereafter shall
send written confirmation of such purchase to the Custodian and
the Fund.
8
<PAGE>
SECTION 14. Having made the calculations required by
SECTION 13, Fund Services shall thereupon pay the Custodian the
aggregate net asset value of the Shares purchased. The aggregate
number of Shares and fractional Shares purchased shall then be
issued daily and credited by Fund Services to the Unissued
Certificate Account. Fund Services shall also credit each
Shareholder's separate account with the number of Shares
purchased by such Shareholder. Fund Services shall mail written
confirmation of the purchase to each Shareholder or the
Shareholder's representative and to the Fund if requested. Each
confirmation shall indicate the prior Share balance, the new
Share balance, the Shares for which Stock Certificates are
outstanding (if any), the amount invested and the price paid for
the newly-purchased Shares.
SECTION 15. Prior to the Valuation Time on each
Business Day, as specified in accordance with SECTION 13, Fund
Services shall process all requests to redeem Shares and, with
respect to each Series, shall advise the Custodian of (i) the
total number of Shares available for redemption and (ii) the
number of Shares and fractional Shares requested to be redeemed.
Upon confirmation of the net asset value by the Fund's Adviser,
Fund Services shall notify the Fund and the Custodian of the
redemption, apply the redemption proceeds in accordance with
SECTION 16 and the Prospectus, record the redemption in the stock
registry books, and debit the redeemed Shares from the Unissued
9
<PAGE>
Certificates Account and the individual account of the
Shareholder.
In lieu of carrying out the redemption procedures
described in the preceding paragraph, Fund Services may, at the
request of the Fund, sell Shares to the Fund as repurchases from
Shareholders, provided that the sale price is not less than the
applicable redemption price. The redemption procedures shall
then be appropriately modified.
SECTION 16. Fund Services will carry out the following
procedures with respect to Share redemptions:
(a) As to each request received by the Fund from or on
behalf of a Shareholder for the redemption of Shares, and unless
the right of redemption has been suspended as contemplated by the
Prospectus, Fund Services shall, within seven days after receipt
of such redemption request, either (i) mail a check in the amount
of the proceeds of such redemption to the person designated by
the Shareholder or other person to receive such proceeds or,
(ii) in the event redemption proceeds are to be wired through the
Federal Reserve Wire System or by bank wire pursuant to
procedures described in the Prospectus, cause such proceeds to be
wired in Federal funds to the bank or trust company account
designated by the Shareholder to receive such proceeds. Fund
Services shall also prepare and send a confirmation of such
redemption to the Shareholder. Redemptions in kind shall be made
only in accordance with such Written Instructions as Fund
10
<PAGE>
Services may receive from the Fund. The requirements as to
instruments of transfer and other documentation, the
determination of the appropriate redemption price and the time of
payment shall be as provided in the Prospectus, subject to such
additional requirements consistent therewith as may be
established by mutual agreement between the Fund and Fund
Services. In the case of a request for redemption that does not
comply in all respects with the requirements for redemption, Fund
Services shall promptly so notify the Shareholder and shall
effect such redemption at the price in effect at the time of
receipt of documents complying with such requirements. Fund
Services shall notify the Fund's Custodian and the Fund on each
Business Day of the amount of cash required to meet payments made
pursuant to the provisions of this paragraph and thereupon the
Fund shall instruct the Custodian to make available to Fund
Services in timely fashion sufficient funds therefor.
(b) Procedures and standards for effecting and
accepting redemption orders from Shareholders by telephone or by
such check writing service as the Fund may institute may be
established by mutual agreement between Fund Services and the
Fund consistent with the Prospectus.
(c) For purposes of redemption of Shares that have been
purchased by check within fifteen (15) days prior to receipt of
the redemption request, the Fund shall provide Fund Services with
11
<PAGE>
Written Instructions concerning the time within which such
requests may be honored.
(d) Fund Services shall process withdrawal orders duly
executed by Shareholders in accordance with the terms of any
withdrawal plan instituted by the Fund and described in the
Prospectus. Payments upon such withdrawal orders and redemptions
of Shares held in withdrawal plan accounts in connection with
such payments shall be made at such times as the Fund may
determine in accordance with the Prospectus.
(e) The authority of Fund Services to perform its
responsibilities under SECTIONS 15 and 16 with respect to the
Shares of any Series shall be suspended if Fund Services receives
notice of the suspension of the determination of the net asset
value of the Series.
SECTION 17. Upon the declaration of each dividend and
each capital gains distribution by the Fund's Directors, the Fund
shall notify Fund Services of the date of such declaration, the
amount payable per Share, the record date for determining the
Shareholders entitled to payment, the payment and the
reinvestment date price.
SECTION 18. Upon being advised by the Fund of the
declaration of any income dividend or capital gains distribution
on account of its Shares, Fund Services shall compute and prepare
for the Fund records crediting such distributions to
Shareholders. Fund Services shall, on or before the payment date
12
<PAGE>
of any dividend or distribution, notify the Fund and the
Custodian of the estimated amount required to pay any portion of
a dividend or distribution which is payable in cash, and
thereupon the Fund shall, on or before the payment date of such
dividend or distribution, instruct the Custodian to make
available to Fund Services sufficient funds for the payment of
such cash amount. Fund Services will, on the designated payment
date, reinvest all dividends in additional shares and promptly
mail to each Shareholder at his address of record a statement
showing the number of full and fractional Shares (rounded to
three decimal places) then owned by the Shareholder and the net
asset value of such Shares; provided, however, that if a
Shareholder elects to receive dividends in cash, Fund Services
shall prepare a check in the appropriate amount and mail it to
the Shareholder at his address of record within five (5) business
days after the designated payment date, or transmit the
appropriate amount in Federal funds in accordance with the
Shareholder's agreement with the Fund.
SECTION 19. Fund Services shall prepare and maintain
for the Fund records showing for each Shareholder's account the
following:
A. The name, address and tax identification number of
the Shareholder;
B. The number of Shares of each Series held by the
Shareholder;
13
<PAGE>
C. Historical information including dividends paid and
date and price for all transactions;
D. Any stop or restraining order placed against such
account;
E. Information with respect to the withholding of any
portion of income dividends or capital gains distributions as are
required to be withheld under applicable law;
F. Any dividend or distribution reinvestment election,
withdrawal plan application, and correspondence relating to the
current maintenance of the account;
G. The certificate numbers and denominations of any
Share Certificates issued to the Shareholder; and
H. Any additional information required by Fund
Services to perform the services contemplated by this Agreement.
Fund Services agrees to make available upon request by
the Fund or the Fund's Adviser and to preserve for the periods
prescribed in Rule 31a-2 of the Investment Company Act any
records related to services provided under this Agreement and
required to be maintained by Rule 31a-1 of that Act, including:
(i) Copies of the daily transaction register for each
Business Day of the Fund;
(ii) Copies of all dividend, distribution and
reinvestment blotters;
(iii) Schedules of the quantities of Shares of each
Series distributed in each state for purposes of any state's laws
14
<PAGE>
or regulations as specified in Oral or Written Instructions given
to Fund Services from time to time by the Fund or its agents; and
(iv) Such other information, including Shareholder
lists, and statistical information as may be agreed upon from
time to time by the Fund and Fund Services.
SECTION 20. Fund Services shall maintain those records
necessary to enable the Fund to file, in a timely manner, form
N-SAR (Semi-Annual Report) or any successor report required by
the Investment Company Act or rules and regulations thereunder.
SECTION 21. Fund Services shall cooperate with the
Fund's independent public accountants and shall take reasonable
action to make all necessary information available to such
accountants for the performance of their duties.
SECTION 22. In addition to the services described
above, Fund Services will perform other services for the Fund as
may be mutually agreed upon in writing from time to time, which
may include preparing and filing Federal tax forms with the
Internal Revenue Service, and, subject to supervisory oversight
by the Fund's Adviser, mailing Federal tax information to
Shareholders, mailing semi-annual Shareholder reports, preparing
the annual list of Shareholders, mailing notices of Shareholders'
meetings, proxies and proxy statements and tabulating proxies.
Fund Services shall answer the inquiries of certain Shareholders
related to their share accounts and other correspondence
requiring an answer from the Fund. Fund Services shall maintain
15
<PAGE>
dated copies of written communications from Shareholders, and
replies thereto.
SECTION 23. Nothing contained in this Agreement is
intended to or shall require Fund Services, in any capacity
hereunder, to perform any functions or duties on any day other
than a Business Day. Functions or duties normally scheduled to
be performed on any day which is not a Business Day shall be
performed on, and as of, the next Business Day, unless otherwise
required by law.
SECTION 24. For the services rendered by Fund Services
as described above, the Fund shall pay to Fund Services an
annualized fee at a rate to be mutually agreed upon from time to
time. Such fee shall be prorated for the months in which this
Agreement becomes effective or is terminated. In addition, the
Fund shall pay, or Fund Services shall be reimbursed for, all
out-of-pocket expenses incurred in the performance of this
Agreement, including but not limited to the cost of stationery,
forms, supplies, blank checks, stock certificates, proxies and
proxy solicitation and tabulation costs, all forms and statements
used by Fund Services in communicating with Shareholders of the
Fund or especially prepared for use in connection with its
services hereunder, specific software enhancements as requested
by the Fund, costs associated with maintaining withholding
accounts (including non-resident alien, Federal government and
state), postage, telephone, telegraph (or similar electronic
16
<PAGE>
media) used in communicating with Shareholders or their
representatives, outside mailing services, microfiche/microfilm,
freight charges and off-site record storage. It is agreed in
this regard that Fund Services, prior to ordering any form in
such supply as it estimates will be adequate for more than two
years' use, shall obtain the written consent of the Fund. All
forms for which Fund Services has received reimbursement from the
Fund shall be the property of the Fund.
SECTION 25. Fund Services shall not be liable for any
taxes, assessments or governmental charges that may be levied or
assessed on any basis whatsoever in connection with the Fund or
any Shareholder, excluding taxes assessed against Fund Services
for compensation received by it hereunder.
SECTION 26.
(a) Fund Services shall at all times act in good faith
and with reasonable care in performing the services to be
provided by it under this Agreement, but shall not be liable for
any loss or damage unless such loss or damage is caused by the
negligence, bad faith or willful misconduct of Fund Services or
its employees or agents.
(b) The Fund shall indemnify and hold Fund Services
harmless from all loss, cost, damage and expense, including
reasonable expenses for counsel, incurred by it resulting from
any claim, demand, action or suit in connection with the
performance of its duties hereunder, or as a result of acting
17
<PAGE>
upon any instruction reasonably believed by it to have been
properly given by a duly authorized officer of the Fund, or upon
any information, data, records or documents provided to Fund
Services or its agents by computer tape, telex, CRT data entry or
other similar means authorized by the Fund; provided that this
indemnification shall not apply to actions or omissions of Fund
Services in cases of its own bad faith, willful misconduct or
negligence, and provided further that if in any case the Fund may
be asked to indemnify or hold Fund Services harmless pursuant to
this Section, the Fund shall have been fully and promptly advised
by Fund Services of all material facts concerning the situation
in question. The Fund shall have the option to defend Fund
Services against any claim which may be the subject of this
indemnification, and in the event that the Fund so elects it will
so notify Fund Services, and thereupon the Fund shall retain
competent counsel to undertake defense of the claim, and Fund
Services shall in such situations incur no further legal or other
expenses for which it may seek indemnification under this
paragraph. Fund Services shall in no case confess any claim or
make any compromise in any case in which the Fund may be asked to
indemnify Fund Services except with the Fund's prior written
consent.
18
<PAGE>
Without limiting the foregoing:
(i) Fund Services may rely upon the advice of the Fund
or counsel to the Fund or Fund Services, and upon statements of
accountants, brokers and other persons believed by Fund Services
in good faith to be expert in the matters upon which they are
consulted. Fund Services shall not be liable for any action
taken in good faith reliance upon such advice or statements;
(ii) Fund Services shall not be liable for any action
reasonably taken in good faith reliance upon any Written
Instructions or certified copy of any resolution of the Fund's
Directors, including a Written Instruction authorizing Fund
Services to make payment upon redemption of Shares without a
signature guarantee; provided, however, that upon receipt of a
Written Instruction countermanding a prior Instruction that has
not been fully executed by Fund Services, Fund Services shall
verify the content of the second Instruction and honor it, to the
extent possible. Fund Services may rely upon the genuineness of
any such document, or copy thereof, reasonably believed by Fund
Services in good faith to have been validly executed;
(iii) Fund Services may rely, and shall be protected by
the Fund in acting, upon any signature, instruction, request,
letter of transmittal, certificate, opinion of counsel,
statement, instrument, report, notice, consent, order, or other
paper or document reasonably believed by it in good faith to be
19
<PAGE>
genuine and to have been signed or presented by the purchaser,
the Fund or other proper party or parties; and
(c) Fund Services may, with the consent of the Fund,
subcontract the performance of any portion of any service to be
provided hereunder, including with respect to any Shareholder or
group of Shareholders, to any agent of Fund Services and may
reimburse the agent for the services it performs at such rates as
Fund Services may determine; provided that no such reimbursement
will increase the amount payable by the Fund pursuant to this
Agreement; and provided further, that Fund Services shall remain
ultimately responsible as transfer agent to the Fund.
SECTION 27. The Fund shall deliver or cause to be
delivered over to Fund Services (i) an accurate list of
Shareholders, showing each Shareholder's address of record,
number of Shares of each Series owned and whether such Shares are
represented by outstanding Share Certificates or by
non-certificated Share accounts and (ii) all Shareholder records,
files, and other materials necessary or appropriate for proper
performance of the functions assumed under this Agreement
(collectively referred to as the "Materials"). The Fund shall
indemnify Fund Services and hold it harmless from any and all
expenses, damages, claims, suits, liabilities, actions, demands
and losses arising out of or in connection with any error,
omission, inaccuracy or other deficiency of such Materials, or
out of the failure of the Fund to provide any portion of the
20
<PAGE>
Materials or to provide any information in the Fund's possession
needed by Fund Services to knowledgeably perform its functions;
provided the Fund shall have no obligation to indemnify Fund
Services or hold it harmless with respect to any expenses,
damages, claims, suits, liabilities, actions, demands or losses
caused directly or indirectly by acts or omissions of Fund
Services or the Fund's Adviser.
SECTION 28. This Agreement may be amended from time to
time by a written supplemental agreement executed by the Fund and
Fund Services and without notice to or approval of the
Shareholders; provided this Agreement may not be amended in any
manner which would substantially increase the Fund's obligations
hereunder unless the amendment is first approved by the Fund's
Directors, including a majority of the Directors who are not a
party to this Agreement or interested persons of any such party,
at a meeting called for such purpose, and thereafter is approved
by the Fund's Shareholders if such approval is required under the
Investment Company Act or the rules and regulations thereunder.
The parties hereto may adopt procedures as may be appropriate or
practical under the circumstances, and Fund Services may
conclusively rely on the determination of the Fund that any
procedure that has been approved by the Fund does not conflict
with or violate any requirement of its Articles of Incorporation
or Declaration of Trust, By-Laws or Prospectus, or any rule,
regulation or requirement of any regulatory body.
21
<PAGE>
SECTION 29. The Fund shall file with Fund Services a
certified copy of each operative resolution of its Directors
authorizing the execution of Written Instructions or the
transmittal of Oral Instructions and setting forth authentic
signatures of all signatories authorized to sign on behalf of the
Fund and specifying the person or persons authorized to give Oral
Instructions on behalf of the Fund. Such resolution shall
constitute conclusive evidence of the authority of the person or
persons designated therein to act and shall be considered in full
force and effect, with Fund Services fully protected in acting in
reliance therein, until Fund Services receives a certified copy
of a replacement resolution adding or deleting a person or
persons authorized to give Written or Oral Instructions. If the
officer certifying the resolution is authorized to give Oral
Instructions, the certification shall also be signed by a second
officer of the Fund.
SECTION 30. The terms, as defined in this Section,
whenever used in this Agreement or in any amendment or supplement
hereto, shall have the meanings specified below, insofar as the
context will allow.
(a) Business Day: Any day on which the Fund is open
for business as described in the Prospectus.
(b) Custodian: The term Custodian shall mean the
Fund's current custodian or any successor custodian acting as
such for the Fund.
22
<PAGE>
(c) Fund's Adviser: The term Fund's Adviser shall mean
Alliance Capital Management L.P. or any successor thereto who
acts as the investment adviser or manager of the Fund.
(d) Oral Instructions: The term Oral Instructions
shall mean an authorization, instruction, approval, item or set
of data, or information of any kind transmitted to Fund Services
in person or by telephone, vocal telegram or other electronic
means, by a person or persons reasonably believed in good faith
by Fund Services to be a person or persons authorized by a
resolution of the Directors of the Fund to give Oral Instructions
on behalf of the Fund. Each Oral Instruction shall specify
whether it is applicable to the entire Fund or a specific Series
of the Fund.
(e) Prospectus: The term Prospectus shall mean a
prospectus and related statement of additional information
forming part of a currently effective registration statement
under the Investment Company Act and, as used with the respect to
Shares or Shares of a Series, shall mean the prospectuses and
related statements of additional information covering the Shares
or Shares of the Series.
(f) Securities: The term Securities shall mean bonds,
debentures, notes, stocks, shares, evidences of indebtedness, and
other securities and investments from time to time owned by the
Fund.
23
<PAGE>
(g) Series: The term Series shall mean any series of
Shares of the common stock of the Fund that the Fund may
establish from time to time.
(h) Share Certificates: The term Share Certificates
shall mean the stock certificates for the Shares.
(i) Shareholders: The term Shareholders shall mean the
registered owners from time to time of the Shares, as reflected
on the stock registry records of the Fund.
(j) Written Instructions: The term Written
Instructions shall mean an authorization, instruction, approval,
item or set of data, or information of any kind transmitted to
Fund Services in original writing containing original signatures,
or a copy of such document transmitted by telecopy, including
transmission of such signature, or other mechanical or
documentary means, at the request of a person or persons
reasonably believed in good faith by Fund Services to be a person
or persons authorized by a resolution of the Directors of the
Fund to give Written Instruction shall specify whether it is
applicable to the entire Fund or a specific Series of the Fund.
SECTION 31. Fund Services shall not be liable for the
loss of all or part of any record maintained or preserved by it
pursuant to this Agreement or for any delays or errors occurring
by reason of circumstances beyond its control, including but not
limited to acts of civil or military authorities, national
emergencies, fire, flood or catastrophe, acts of God,
24
<PAGE>
insurrection, war, riot, or failure of transportation,
communication or power supply, except to the extent that Fund
Services shall have failed to use its best efforts to minimize
the likelihood of occurrence of such circumstances or to mitigate
any loss or damage to the Fund caused by such circumstances.
SECTION 32. The Fund may give Fund Services sixty (60)
days and Fund Services may give the Fund (90) days written notice
of the termination of this Agreement, such termination to take
effect at the time specified in the notice. Upon notice of
termination, the Fund shall use its best efforts to obtain a
successor transfer agent. If a successor transfer agent is not
appointed within ninety (90) days after the date of the notice of
termination, the Directors of the Fund shall, by resolution,
designate the Fund as its own transfer agent. Upon receipt of
written notice from the Fund of the appointment of the successor
transfer agent and upon receipt of Oral or Written Instructions
Fund Services shall, upon request of the Fund and the successor
transfer agent and upon payment of Fund Services reasonable
charges and disbursements, promptly transfer to the successor
transfer agent the original or copies of all books and records
maintained by Fund Services hereunder and cooperate with, and
provide reasonable assistance to, the successor transfer agent in
the establishment of the books and records necessary to carry out
its responsibilities hereunder.
25
<PAGE>
SECTION 33. Any notice or other communication required
by or permitted to be given in connection with this Agreement
shall be in writing, and shall be delivered in person or sent by
first-class mail, postage prepaid, to the respective parties.
Notice to the Fund shall be given as follows until
further notice:
Alliance Institutional Funds, Inc.
1345 Avenue of the Americas
New York, New York 10105
Attention: Secretary
Notice to Fund Services shall be given as follows until
further notice:
Alliance Fund Services, Inc.
500 Plaza Drive
Secaucus, New Jersey 07094
SECTION 34. The Fund represents and warrants to Fund
Services that the execution and delivery of this Agreement by the
undersigned officer of the Fund has been duly and validly
authorized by resolution of the Fund's Directors. Fund Services
represents and warrants to the Fund that the execution and
delivery of this Agreement by the undersigned officer of Fund
Services has also been duly and validly authorized.
SECTION 35. This Agreement may be executed in more than
one counterpart, each of which shall be deemed to be an original,
and shall become effective on the last date of signature below
unless otherwise agreed by the parties. Unless sooner terminated
pursuant to SECTION 32, this Agreement will continue in effect so
long as its continuance is specifically approved at least
26
<PAGE>
annually by the Directors or by a vote of the stockholders of the
Fund and in either case by a majority of the Directors who are
not parties to this Agreement or interested persons of any such
party, at a meeting called for the purpose of voting on this
Agreement.
SECTION 36. This Agreement shall extend to and shall
bind the parties hereto and their respective successors and
assigns; provided, however, that this Agreement shall not be
assignable by the Fund without the written consent of Fund
Services or by Fund Services without the written consent of the
Fund, authorized or approved by a resolution of the Fund's
Directors. Notwithstanding the foregoing, either party may
assign this Agreement without the consent of the other party so
long as the assignee is an affiliate, parent or subsidiary of the
assigning party and is qualified to act under the Investment
Company Act, as amended from time to time.
SECTION 38. This Agreement shall be governed by the
laws of the State of New Jersey.
27
<PAGE>
WITNESS the following signatures:
ALLIANCE INSTITUTIONAL FUNDS, INC.
BY: /s/ John D. Carifa
_____________________________
John D. Carifa
TITLE: President
_____________________________
ALLIANCE FUND SERVICES, INC.
BY: /s/ George Hrabovsky
_____________________________
George Hrabovsky
TITLE: President
_____________________________
28
00250237.AB2
<PAGE>
ALLIANCE INSTITUTIONAL FUNDS, INC.
Plan pursuant to Rule 18f-3
under the Investment Company Act of 1940
This Plan (the "Plan") pursuant to Rule 18f-3 under the
Investment Company Act of 1940 (the "Act") of Alliance
Institutional Funds, Inc. (the "Fund") sets forth the general
characteristics of, and the general conditions under which the
Fund may offer, multiple classes of shares of its now existing
and hereafter created portfolios.1 This Plan may be revised or
amended from time to time as provided below.
Class Designations
The Fund2 may from time to time issue one or more of the
following classes of shares: Class I shares and Class II shares.
Each of the two classes of shares will represent interests in the
same portfolio of investments of the Fund and, except as
described herein, shall have the same rights and obligations as
each other class. Each class shall be subject to such investment
minimums and other conditions of eligibility as are set forth in
one or more prospectuses or statements of additional information
through which such shares are issued, as from time to time in
effect (collectively, the "Prospectus").
Class Characteristics
Class I shares are offered at a public offering price
that is equal to their net asset value ("NAV") without any
initial sales charge, contingent deferred sales charge ("CDSC")
or Rule 12b-1 fee.
Class II shares are offered at their NAV, without an
initial sales charge or CDSC and may be subject to a Rule 12b-1
fee, which may include a service fee, as described in the
Prospectus.
____________________
1. This Plan is intended to allow the Fund to offer multiple
classes of shares to the full extent and in the manner
permitted by Rule 18f-3 under the Act (the "Rule"), subject
to the requirements and conditions imposed by the Rule.
2. For purposes of this Plan, when the Fund has existing more
than one portfolio pursuant to which multiple classes of
shares are issued, then references in this Plan to the "Fund"
shall be deemed to refer instead to each portfolio.
<PAGE>
Allocations to Each Class
Expense Allocations
The following expenses shall be allocated, to the extent
practicable, on a class-by-class basis: (i) Rule 12b-1 fees
payable by the Fund to the distributor or principal underwriter
of the Fund's shares (the "Distributor"), and (ii) transfer
agency costs attributable to each class. Subject to the approval
of the Fund's Board of Directors, including a majority of the
independent Directors, the following "Class Expenses" may be
allocated on a class-by-class basis: (a) printing and postage
expenses related to preparing and distributing materials such as
shareholder reports, prospectuses and proxy statements to current
shareholders of a specific class,3 (b) SEC registration fees
incurred with respect to a specific class, (c) blue sky and
foreign registration fees and expenses incurred with respect to a
specific class, (d) the expenses of administrative personnel and
services required to support shareholders of a specific class
(including, but not limited to, maintaining telephone lines and
personnel to answer shareholder inquiries about their accounts or
about the Fund), (e) litigation and other legal expenses relating
to a specific class of shares, (f) Directors' fees or expenses
incurred as a result of issues relating to a specific class of
shares, (g) accounting and consulting expenses relating to a
specific class of shares, (h) any fees imposed pursuant to a non-
Rule 12b-1 shareholder services plan that relate to a specific
class of shares, and (i) any additional expenses, not including
advisory or custodial fees or other expenses related to the
management of the Fund's assets, if these expenses are actually
incurred in a different amount with respect to a class, or if
services are provided with respect to a class that are of a
different kind or to a different degree than with respect to one
or more other classes.
All expenses not now or hereafter designated as Class
Expenses ("Fund Expenses") will be allocated to each class on the
basis of the net asset value of that class in relation to the net
asset value of the Fund.
However, notwithstanding the above, the Fund may
allocate all expenses other than Class Expenses on the basis of
relative net assets (settled shares), as permitted by Rule
18f-3(c)(2) under the Act.
____________________
3. For Class I shares, the expenses of preparation, printing and
distribution of prospectuses and shareholder reports, as well
as other distribution-related expenses, will be borne by the
investment adviser of the Fund (the "Adviser") or the
Distributor from their own resources.
2
<PAGE>
Waivers and Reimbursements
The Adviser or Distributor may choose to waive or
reimburse Rule 12b-1 fees, transfer agency fees or any Class
Expenses on a voluntary, temporary basis. Such waiver or
reimbursement may be applicable to some or all of the classes and
may be in different amounts for one or more classes.
Income, Gains and Losses
Income, and realized and unrealized capital gains and
losses shall be allocated to each class on the basis of the net
asset value of that class in relation to the net asset value of
the Fund.
Conversion and Exchange Features
Conversion Features
Class I shares of the Fund automatically convert to
Class II shares of the Fund during the calendar month following
the month in which the Fund is informed or otherwise learns that
the beneficial owner of the Class I shares has ceased to
participate in a fee-based program or plan that satisfies the
requirements to purchase Class I shares as described in the
Prospectus or the shareholder is otherwise no longer eligible to
purchase Class I shares as provided in the Prospectus.
The conversion of Class I shares to Class II shares may
be suspended if the opinion of counsel obtained by the Fund that
the conversion does not constitute a taxable event under current
federal income tax law is no longer available. Class I shares
will convert into Class II shares on the basis of the relative
net asset value of the two classes, without the imposition of any
sales load, fee or other charge.
In the event any material increase in payments
authorized under the Rule 12b-1 Plan (or, if presented to
shareholders, any material increase in payments authorized by a
non-Rule 12b-1 shareholder services plan) applicable to Class II
shares is approved by the Class II shareholders, existing Class I
shares will stop converting into Class II shares unless the
Class I shareholders, voting separately as a class, approve the
increase in such payments. Pending approval of such increase, or
if such increase is not approved by the Class I shareholders, the
Directors shall take such action as is necessary to ensure that
existing Class I shares are exchanged or converted into a new
class of shares ("New Class II") identical in all material
respects to Class II shares as existed prior to the
implementation of the increase in payments, no later than such
shares were previously scheduled to convert to Class II shares.
3
<PAGE>
If deemed advisable by the Directors to implement the foregoing,
such action may include the exchange of all existing Class I
shares for a new class of shares ("New Class I") identical to
existing Class I shares, except that New Class I shares shall
convert to New Class II shares. Exchanges or conversions
described in this paragraph shall be effected in a manner that
the Directors reasonably believe will not be subject to federal
income taxation. Any additional cost associated with the
creation, exchange or conversion of New Class I or New Class II
shares shall be borne by the Adviser and the Distributor.
Class I shares sold after the implementation of the fee increase
may convert into Class II shares subject to the higher maximum
payment, provided that the material features of the Class II plan
and the relationship of such plan to the Class I shares are
disclosed in an effective registration statement.
Exchange Features
Shares of each class of a portfolio of the Fund
generally will be permitted to be exchanged only for shares of
the same class of another portfolio of the Fund and for Class A
shares of any other Alliance Mutual Fund. All exchange features
applicable to each class will be described in the Prospectus.
Dividends
Dividends paid by the Fund with respect to its Class I
and Class II shares, to the extent any dividends are paid, will
be calculated in the same manner, at the same time and will be in
the same amount, except that any Rule 12b-1 fee payments relating
to a class of shares will be borne exclusively by that class and
any incremental transfer agency costs or, if applicable, Class
Expenses relating to a class shall be borne exclusively by that
class.
Voting Rights
Each share of a Fund entitles the shareholder of record
to one vote. Each class of shares of the Fund will vote
separately as a class with respect to the Rule 12b-1 plan
applicable to that class and on other matters for which class
voting is required under applicable law. Class I and Class II
shareholders will be considered as owners of separate classes
with respect to voting to approve any material increase in
payments authorized under the Rule 12b-1 plan applicable to
Class II shares.
4
<PAGE>
Responsibilities of the Directors
On an ongoing basis, the Directors will monitor the Fund
for the existence of any material conflicts among the interests
of the classes of shares. The Directors shall further monitor on
an ongoing basis the use of waivers or reimbursement by the
Adviser and the Distributor of expenses to guard against cross-
subsidization between classes. The Directors, including a
majority of the independent Directors, shall take such action as
is reasonably necessary to eliminate any such conflict that may
develop. If a conflict arises, the Adviser and Distributor, at
their own cost, will remedy such conflict up to and including
establishing one or more new registered management investment
companies.
Reports to the Directors
The Adviser and Distributor will be responsible for
reporting any potential or existing conflicts among the classes
of shares to the Directors. In addition, the Directors will
receive quarterly and annual statements concerning distributions
and shareholder servicing expenditures complying with paragraph
(b)(3)(ii) of Rule 12b-1. In the statements, only expenditures
properly attributable to the sale or servicing of a particular
class of shares shall be used to justify any distribution or
service fee charged to that class. The statements, including the
allocations upon which they are based, will be subject to the
review of the independent Directors in the exercise of their
fiduciary duties. At least annually, the Directors shall receive
a report from an expert, acceptable to the Directors, (the
"Expert"), with respect to the methodology and procedures for
calculating the net asset value, dividends and distributions for
the classes, and the proper allocation of income and expenses
among the classes. The report of the Expert shall also address
whether the Fund has adequate facilities in place to ensure the
implementation of the methodology and procedures for calculating
the net asset value, dividends and distributions for the classes,
and the proper allocation of income and expenses among the
classes. The Fund and the Adviser will take immediate corrective
measures in the event of any irregularities reported by the
Expert.
5
<PAGE>
Amendments
The Plan may be amended from time to time in accordance
with the provisions and requirements of Rule 18f-3 under the Act.
Adopted by action of the Board of Directors this 14th day of
November, 1997.
By: /s/ Edmund P. Bergan, Jr.
__________________________
Edmund P. Bergan, Jr.
Secretary
6
00250237.AC3
