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As filed with the Securities and Exchange
Commission on December 23, 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. 2
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 3
_______________________________
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)
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on (date) pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)(1)
X on March 1, 1999 pursuant to paragraph (a)(1)
75 days after filing pursuant to paragraph (a)(2)
on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
This post-effective amendment designates a new effective
date for a previously filed post-effective amendment.
<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
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The Registrant's Prospectus relating to Alliance Growth
Institutional Fund is incorporated herein by reference to Part A
of Post-Effective Amendment No. 1 to the Registrant's
Registration Statement on Form N-1A filed with the Commission on
December 15, 1998.
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ALLIANCE INSTITUTIONAL
FUNDS
PROSPECTUS and APPLICATION
MARCH 1, 1999
-Alliance Premier Growth Institutional Fund
-Alliance Quasar Institutional Fund
-Alliance Real Estate Investment 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
Alliance Premier Growth Institutional Fund
Alliance Quasar Institutional Fund
Alliance Real Estate Investment Institutional Fund
Summary of Principal Risks
Principal Risks by Fund
EXPENSE INFORMATION
GLOSSARY
DESCRIPTION OF THE FUNDS
Investment Objectives and Policies
Description of Investment Practices
Additional Risk Considerations
MANAGEMENT OF THE FUND
PURCHASE AND SALE OF SHARES
How The Funds Value Their Shares
How To Buy Shares
How to Exchange Shares
How To Sell Shares
DIVIDENDS, DISTRIBUTIONS AND TAXES
DISTRIBUTION ARRANGEMENTS
GENERAL INFORMATION
FINANCIAL HIGHLIGHTS
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The Funds' 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
Alliance Institutional Funds. You will find additional
information about each Fund including a detailed description of
the risks of an investment in each Fund after this summary.
The Risk/Return Summary describes the Funds' objectives,
principal investment strategies, risks, and fees. More detailed
descriptions of the Funds can be found further back in the
Prospectus. Please be sure to read the more complete
descriptions of the Funds following this summary, including the
risks associated with investing in the Funds, BEFORE you invest.
Each of the Funds also may at times use certain types of
investment derivatives such as options, futures, forwards and
swaps. The use of these techniques includes special risks that
are discussed in this Prospectus.
The Summary includes a table showing each Fund's average annual
returns and a bar chart showing the Fund's annual returns. The
table and bar chart provide an indication of the historical risk
of an investment in each Fund by showing:
-- how the Fund's average annual returns for one year and
the life of the Fund compare to those of a broad-based
securities market index; and
-- the Fund's annual return for one year.
A Fund's past performance, of course, does not necessarily
indicate how it will perform in the future.
Other important things for you to note:
-- You may gain or lose money by investing in the Funds.
-- An investment in the Funds is not a deposit in a bank
and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
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ALLIANCE PREMIER GROWTH FUND
-- Objective: The Fund's investment objective is long-term
growth of capital through investments in equity
securities of a limited number of large, carefully
selected, high-quality U.S. companies that Alliance
believes are likely to achieve superior earnings growth.
-- Principal Investment Strategies: The Fund invests
primarily in equity securities of U.S. companies. In
contrast to most equity funds, the Fund focuses on a
relatively small number of intensively researched
companies. Alliance selects the Fund's investments from
a research universe of more than 600 companies that have
strong management, superior industry positions,
excellent balance sheets, and superior earnings growth
prospects.
Normally, the Fund invests in about 40-50 companies,
with the 25 most highly regarded of these companies
usually constituting approximately 70% of the Fund's net
assets. During market declines, while adding to
positions in favored stocks, the Fund becomes somewhat
more aggressive, gradually reducing the number of
companies represented in its portfolio. Conversely, in
rising markets, while reducing or eliminating fully-
valued positions, the Fund becomes somewhat more
conservative, gradually increasing the number of
companies represented in its portfolio. Through this
approach, Alliance seeks to gain positive returns in
good markets while providing some measure of protection
in poor markets. The Fund also may invest up to 20% of
its net assets in convertible securities.
Performance Information and Bar Chart
Performance Table
1 Year Life of the Fund
Class A % %
Class B % %
Class C % %
S&P 500 Index % %
Bar Chart
The annual return in the bar chart is for the Fund's Class I
shares and do not reflect sales charges. If sales charges were
reflected, returns would be less than those shown.
4
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[Graphic to be Inserted]
You should consider an investment in the Fund as a long-term
investment. The Fund's returns will, however, fluctuate over
shorter periods. For example, during the period shown in the bar
chart, the Fund's:
Best Quarter was up ____%, ________ quarter, 19__; and
Worst Quarter was down ____%, _______quarter, 19__.
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ALLIANCE QUASAR FUND
-- Objective: The Fund's investment objective is growth
through capital appreciation by pursuing aggressive
investment policies. Current income is incidental to
the Fund's objective.
-- Principal Investment Strategies: The Fund invests
primarily in equity securities of any company and
industry and in any type of security with potential for
capital appreciation. The Fund generally invests in a
widely-diversified portfolio spread among many
industries that offer the possibility of above-average
earnings growth. The Fund invests in well-known and
established companies and in new and unseasoned
companies. When selecting securities, Alliance
considers the economic and political outlook, the values
of specific securities relative to other investments,
trends in the determinants of corporate profits, and
management capabilities and practices. The Fund also
may invest in non-convertible bonds, preferred stocks,
and foreign securities.
Performance Information and Bar Chart
Performance Table
1 Year Life of the Fund
Class A % %
Class B % %
Class C % %
Russell 2000 Index % %
Bar Chart
The annual returns in the bar chart are for the Fund's Class I
shares and do not reflect sales charges. If sales charges were
reflected, returns would be less than those shown.
[Graphic to be Inserted]
You should consider an investment in the Fund as a long-term
investment. The Fund's returns will, however, fluctuate over
shorter periods. For example, during the period shown in the bar
chart, the Fund's:
Best Quarter was up ___%, ______quarter, 19__; and
Worst Quarter was down ___%, ______quarter, 19__.
6
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ALLIANCE REAL ESTATE INVESTMENT FUND
-- Objective: The Fund's investment objective is total
return from long-term growth of capital and income
principally through investing in companies in equity
securities of companies that are primarily engaged in or
related to the real estate industry.
-- Principal Investment Strategies: The Fund invests
primarily in equity securities of real estate investment
trusts or "REITs" and other real estate industry
companies. The Fund invests in real estate companies
that Alliance believes have strong property fundamentals
and management teams. The Fund seeks to invest in real
estate companies whose underlying portfolios are
diversified geographically and by property type. The
Fund may invest up to 35% of its total assets in
mortgage-backed securities, which are securities that
directly or indirectly represent participations in or
are collateralized by and payable from, mortgage loans
secured by real property.
Performance Information and Bar Chart
Performance Table
1 Year Life of the Fund
Class A % %
Class B % %
Class C % %
S&P 500 Index
Bar Chart
The annual return in the bar chart is for the Fund's Class I
shares and do not reflect sales charges. If sales charges were
reflected, returns would be less than those shown.
[Graphic to be Inserted]
You should consider an investment in the Fund as a long-term
investment. The Fund's returns will, however, fluctuate over
shorter periods. For example, during the period shown in the bar
chart, the Fund's:
Best Quarter was up ___%, ______quarter, 19__; and
Worst Quarter was down ___%, ______quarter, 19__.
7
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SUMMARY OF PRINCIPAL RISKS
The value of an investment in a Fund changes with the values of
that Fund's investments. Many factors can affect those values.
In this summary, we describe the principal risks that may affect
a Fund's portfolio as a whole. These risks and the Funds subject
to the risks appear in a chart at the end of the section. All
Funds could be subject to additional principal risks because the
types of investments made by each Fund can change over time.
This Prospectus has additional descriptions of investments that
appear in bold type in the discussions under "Additional
Investment Practices" or "Risk Considerations." These sections
also include more information about the Funds, their investments,
and related risks.
-- Market Risk This is the risk that the value of a Fund's
investments will fluctuate as the stock or bond markets
fluctuate and that prices overall will decline over
short or longer-term periods. All of the Alliance
Institutional Funds are subject to market risk. Market
risk also can apply to a Fund that invest in a
particular industry sector, such as Real Estate
Investment Institutional Fund. Factors affecting that
industry sector could have a major effect on the value
of the Fund's investments.
-- Interest Rate Risk This is the risk that changes in
interest rates will affect the value of a Fund's
investments in income-producing or fixed-income or debt
securities. Increases in interest rates may cause the
value of a Fund's investments to decline. Interest rate
risk is applicable to Funds that invest in fixed income
securities and is greater for those Alliance
Institutional Funds that invest a substantial portion of
their assets in fixed-income or debt securities.
Real Estate Investment Institutional Fund, which invests
in mortgage-backed securities, is more susceptible to
changes in interest rates. Real Estate Investment
Institutional Fund also has more exposure to interest
rate risk because it invests in real estate industry
companies.
-- Management Risk Each Alliance Institutional 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 Funds, but there is no
guarantee that its techniques will produce the intended
result.
8
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-- Focused Portfolio Risk Premium Growth Institutional
Fund, which invests in a limited number of companies may
have more risk because changes in the value of a single
security may have a more significant effect, either
negative or positive, on the Fund's net asset value.
9
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EXPENSE INFORMATION
This table describes the fees and expenses that you may pay if
you buy and hold shares of the Funds
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 Examples
Premier Growth
Institutional Fund Class I Class II Class I Class II
Management fees 1.00% 1.00% After 1 year $ $
12b-1 fees None .30% After 3 years $ $
Other expenses [.10%] After 5 years $ $
Total fund operating After 10 years $ $
expenses
Waiver and/or
Expense
Reimbursement (a)
Net Expenses .90% 1.30%
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Quasar Institutional
Fund Class I Class II Class I Class II
Management fees 1.00% 1.00% After 1 year $ $
12b-1 fees None .30% After 3 years $ $
Other expenses After 5 years $ $
Total fund operating After 10 years $ $
expenses
Waiver and/or
Expense
Reimbursement (a)
Net Expenses 1.20% 1.35%
Real Estate Investment
Institutional Fund CLASS I Class II Class I Class II
Management fees .90% .90% After 1 year $ $
12b-1 fees None .30% After 3 years $ $
Other expenses After 5 years $ $
Total fund operating After 10 years $ $
expenses
Waiver and/or
Expense
Reimbursement (a)
Net Expenses 1.00% 1.40%
(a) Reflects Alliance's waiver of a portion of its advisory fee
and/or reimbursement of a portion of the Fund's operating
expenses. The level of waiver or reimbursement may be
changed upon 60 days' notice to the Fund.
11
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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.
Foreign government securities are securities issued or
guaranteed, as to payment of principal and interest, by
governments, quasi-governmental entities, governmental agencies
or other governmental entities.
Qualifying bank deposits are certificates of deposit, bankers'
acceptances, and interest-bearing savings deposits of banks
having total assets of more than $1 billion and which are members
of the Federal Deposit Insurance Corporation.
Rule 144A securities are securities that may be resold pursuant
to Rule 144A under the Securities Act.
U.S. Government securities are securities issued or guaranteed by
the United States Government, its agencies or instrumentalities.
Rating Agencies, Rated Securities
Duff & Phelps is Duff & Phelps Credit Rating Co.
Fitch is Fitch IBCA, Inc.
Moody's is Moody's Investors Service, Inc.
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.
12
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S&P is Standard & Poor's Ratings Services.
S&P 500 is S&P's 500 Composite Stock Index, a wisely recognized
unmanaged index of market activity.
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.
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Description Of The Funds
This section of the Prospectus provides a more complete
description of the principal investment objectives, strategies,
and risks of the Alliance Institutional Funds. Of course, there
can be no assurance that any Fund will achieve its investment
objective.
Please note that:
-- Additional discussion of the Funds' 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 a Fund may
include risks defined in the SUMMARY OF RISKS above.
Additional information about risks of investing in a
Fund can be found in the discussion under ADDITIONAL
RISK CONSIDERATIONS.
-- Additional descriptions of each Fund's strategies,
investments, and risks can be found in the Fund's
Statement of Additional Information or SAI.
-- Except as noted, (i) the Funds' investment objectives
are "fundamental" and cannot be changed without
shareholder vote, and (ii) the Funds' investment
policies are not fundamental and thus can be changed
without a shareholder vote.
INVESTMENT OBJECTIVES AND POLICIES
Alliance Premier Growth Institutional Fund
Premier Growth Institutional Fund seeks long-term growth of
capital by investing predominantly in the equity securities of a
limited number of large, carefully selected, high-quality U.S.
companies that are judged likely to achieve superior earnings
growth. As a matter of fundamental policy, the Fund normally
invests at least 85% of its total assets in the equity securities
of U.S. companies. A U.S. company is a company that is organized
under United States law, has its principal office in the United
States and issues equity securities that are traded principally
in the United States. Normally, about 40-50 companies will be
represented in the Fund's portfolio, with the 25 most highly
regarded of these companies usually constituting approximately
70% of the Fund's net assets. The Fund is thus atypical from
most equity mutual funds in its focus on a relatively small
number of intensively researched companies. The Fund is designed
for those seeking to accumulate capital over time with less
14
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volatility than that associated with investment in smaller
companies.
Alliance's investment strategy for the Fund emphasizes stock
selection and investment in the securities of a limited number of
issuers. Alliance relies heavily upon the fundamental analysis
and research of its large internal research staff, which
generally follows a primary research universe of more than 600
companies that have strong management, superior industry
positions, excellent balance sheets and superior earnings growth
prospects. An emphasis is placed on identifying companies whose
substantially above average prospective earnings growth is not
fully reflected in current market valuations.
In managing the Fund, Alliance seeks to utilize market volatility
judiciously (assuming no change in company fundamentals),
striving to capitalize on apparently unwarranted price
fluctuations, both to purchase or increase positions on weakness
and to sell or reduce overpriced holdings. The Fund normally
remains nearly fully invested and does not take significant cash
positions for market timing purposes. During market declines,
while adding to positions in favored stocks, the Fund becomes
somewhat more aggressive, gradually reducing the number of
companies represented in its portfolio. Conversely, in rising
markets, while reducing or eliminating fully valued positions,
the Fund becomes somewhat more conservative, gradually increasing
the number of companies represented in its portfolio. Alliance
thus seeks to gain positive returns in good markets while
providing some measure of protection in poor markets.
Alliance expects the average market capitalization of companies
represented in the Fund's portfolio normally to be in the range,
or in excess, of the average market capitalization of companies
included in the S&P 500.
The Fund also may:
-- invest up to 20% of its net assets in convertible
securities of companies whose common stocks are eligible
for purchase by the Fund;
-- invest up to 5% of its net assets in rights or warrants;
-- invest up to 15% of its total assets in securities of
foreign issuers whose common stocks are eligible for
purchase by the Fund;
-- purchase and sell exchange-traded index options and
stock index futures contracts; and
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-- write covered exchange-traded call options on its
securities of up to 15% of its total assets, and
purchase and sell exchange-traded call and put options
on common stocks written by others of up to, for all
options, 10% of its total assets.
Because the Fund invests in a smaller number of securities than
many other equity funds, your investment also has the risk that
changes in the value of a single security may have a more
significant effect, either negative or positive, on the Fund's
net asset value.
Alliance Quasar Institutional Fund
Alliance Quasar Institutional Fund seeks growth of capital by
pursuing aggressive investment policies. The Fund invests for
capital appreciation and only incidentally for current income.
Selecting securities based on the possibility of appreciation
cannot prevent loss in value. Moreover, because the Fund's
investment policies are aggressive, an investment in the Fund is
risky and investors who want assured income or preservation of
capital should not invest in the Fund.
The Fund invests in any company and industry and in any type of
security with potential for capital appreciation. It invests in
well-known and established companies and in new and unseasoned
companies. When selecting securities for the Fund, Alliance
considers the economic and political outlook, the values of
specific securities relative to other investments, trends in the
determinants of corporate profits, and management capability and
practices.
The Fund invests principally in equity securities, but it also
invests to a limited degree in non-convertible bonds and
preferred stocks. The Fund invests in listed and unlisted U.S.
and foreign securities. The Fund periodically invests in special
situations, which occur when the securities of a company are
expected to appreciate due to a development particularly or
uniquely applicable to that company regardless of general
business conditions or movements of the market as a whole.
The Fund also may:
-- make short sales of securities against the box but not
more than 15% of its net assets may be deposited on
short sales; and
-- write covered call options of up to 15% of its total
assets and purchase and sell put and call options
written by others of up to, for all options, 10% of its
total assets.
16
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Investments in smaller companies may have more risk because they
tend to be more volatile than the overall stock market. The
Fund's investments in non-convertible bonds, preferred stocks,
and foreign stocks may have credit risk and foreign risk.
Alliance Real Estate Investment Institutional Fund
Alliance Real Estate Investment Institutional Fund seeks a total
return from long-term growth of capital and from income
principally through investing in a portfolio of equity securities
of issuers that are primarily engaged in or related to the real
estate industry.
The Fund normally invests at least 65% of its total assets in
equity securities of real estate investment trusts, or REITs, and
other real estate industry companies. A "real estate industry
company" is a company that derives at least 50% of its gross
revenues or net profits from the ownership, development,
construction, financing, management or sale of commercial,
industrial or residential real estate or interests in these
properties. The Fund invests in equity securities that include
common stock, shares of beneficial interest of REITs, and
securities with common stock characteristics, such as preferred
stock or convertible securities ("Real Estate Equity
Securities").
The Fund may invest up to 35% of its total assets in
(a) securities that directly or indirectly represent
participations in, or are collateralized by and payable from,
mortgage loans secured by real property ("Mortgage-Backed
Securities"), such as mortgage pass-through certificates, real
estate mortgage investment conduit ("REMIC") certificates and
collateralized mortgage obligations ("CMOs") and (b) short-term
investments. These instruments are described below.
In selecting Real Estate Equity Securities, Alliance's analysis
will focus on determining the degree to which the company
involved can achieve sustainable growth in cash flow and dividend
paying capability. Alliance believes that the primary
determinant of this capability is the economic viability of
property markets in which the company operates and that the
secondary determinant of this capability is the ability of
management to add value through strategic focus and operating
expertise. The Fund will purchase Real Estate Equity Securities
when, in the judgment of Alliance, their market price does not
adequately reflect this potential. In making this determination,
Alliance will take into account fundamental trends in underlying
property markets as determined by proprietary models, site visits
conducted by individuals knowledgeable in local real estate
markets, price-earnings ratios (as defined for real estate
companies), cash flow growth and stability, the relationship
17
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between asset value and market price of the securities, dividend
payment history, and such other factors that Alliance may
determine from time to time to be relevant. Alliance will
attempt to purchase for the Fund Real Estate Equity Securities of
companies whose underlying portfolios are diversified
geographically and by property type.
The Fund may invest without limitation in shares of REITs. REITs
are pooled investment vehicles that invest primarily in income
producing real estate or real estate related loans or interests.
REITs are generally classified as equity REITs, mortgage REITs,
or a combination of equity and mortgage REITs. Equity REITs
invest the majority of their assets directly in real property and
derive income primarily from the collection of rents. Equity
REITs can also realize capital gains by selling properties that
have appreciated in value. Mortgage REITs invest the majority of
their assets in real estate mortgages and derive income from the
collection of interest payments. Similar to investment companies
such as the Fund, REITs are not taxed on income distributed to
shareholders provided they comply with several requirements of
the Code. The Fund will indirectly bear its proportionate share
of expenses incurred by REITs in which the Fund invests in
addition to the expenses incurred directly by the Fund.
The Fund's investment strategy with respect to Real Estate Equity
Securities is based on the premise that property market
fundamentals are the primary determinant of growth underlying the
performance of Real Estate Equity Securities. Value and
management further distinguishes the most attractive Real Estate
Equity Securities. The Fund's research and investment process is
designed to identify those companies with strong property
fundamentals and strong management teams. This process is
comprised of real estate market research, specific property
inspection, and securities analysis. Alliance believes that this
process will result in a portfolio that will consist of Real
Estate Equity Securities of companies that own assets in the most
desirable markets across the country, diversified geographically
and by property type.
To implement the Fund's research and investment process, Alliance
has retained the consulting services of CB Richard Ellis, Inc.
("CBRE"), a publicly held company and the largest real estate
services company in the United States. CBRE business includes
real estate brokerage, property and facilities management, and
real estate finance and investment advisory activities. As
consultant to Alliance, CBRE provides access to its proprietary
model, REIT-Score, which analyzes the approximately 18,000
properties owned by these 142 companies. Using proprietary
databases and algorithms, CBRE analyzes local market rent,
expense, and occupancy trends, market specific transaction
pricing, demographic and economic trends, and leading indicators
18
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of real estate supply such as building permits. Over 1,000
asset-type specific geographic markets are analyzed and ranked on
a relative scale by CBRE in compiling its REIT-Score database.
The relative attractiveness of these real estate industry
companies is similarly ranked based on the composite rankings of
the properties they own.
The universe of property-owning real estate industry firms
consists of approximately 142 companies of sufficient size and
quality to merit consideration for investment by the Fund. Once
the universe of real estate industry companies has been distilled
through the market research process, CBRE's local market presence
provides the capability to perform site specific inspections of
key properties. This analysis examines specific location,
condition, and sub-market trends. CBRE's use of locally based
real estate professionals provides Alliance with a window on the
operations of the portfolio companies as information can
immediately be put in the context of local market events. Only
those companies whose specific property portfolios reflect the
promise of their general markets will be considered for initial
and continued investment by the Fund.
Alliance further screens the universe of real estate industry
companies by using rigorous financial models and by engaging in
regular contact with management of targeted companies. Each
management's strategic plan and ability to execute the plan are
determined and analyzed. Alliance makes extensive use of CBRE's
network of industry analysts in order to assess trends in tenant
industries. This information is then used to further interpret
management's strategic plans. Financial ratio analysis is used
to isolate those companies with the ability to make value-added
acquisitions. This information is combined with property market
trends and used to project future earnings potential.
The Fund may invest in short-term investments including:
corporate commercial paper and other short-term commercial
obligations, in each case rated or issued by companies with
similar securities outstanding that are rated Prime-1, Aa or
better by Moody's or A-1, AA or better by S&P; obligations
(including certificates of deposit, time deposits, demand
deposits, and bankers' acceptances) of banks with securities
outstanding that are rated Prime-1, Aa or better by Moody's or
A-1, AA or better by S&P; and obligations issued or guaranteed by
the U.S. Government or its agencies or instrumentalities with
remaining maturities not exceeding 18 months.
The Fund may invest in debt securities rated BBB or higher by S&P
or Baa or higher by Moody's or, if not rated, of equivalent
credit quality as determined by Alliance. The Fund expects that
it will not retain a debt security that is downgraded below BBB
or Baa or, if not rated, determined by Alliance to have undergone
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similar credit quality deterioration, subsequent to purchase by
the Fund.
The Fund also may:
-- invest up to 10% of its net assets in rights or
warrants;
-- invest up to 15% of its net assets in convertible
securities of companies whose common stocks are eligible
for purchase by the Fund;
-- make loans of portfolio securities of up to 25% of its
total assets;
-- enter into repurchase agreements of up to seven days'
duration;
-- enter into forward commitment transactions as long as
the Fund's aggregate commitments under such transactions
are not more than 30% of the Fund's total assets;
-- enter into standby commitment agreements for up to 25%
of its assets at the time of commitment; and
-- make short sales of securities or maintain a short
position but only if at all times when a short position
is open not more than 25% of the Fund's net assets
(taken at market value) is held as collateral for such
sales.
Because the Fund invests a substantial portion of its assets in
the real estate market, it has many of the same risks as direct
ownership of real estate. For example, the value of real estate
could decline due to a variety of factors affecting the real
estate market generally, such as overbuilding, increases in
interest rates, or declines in rental rates. In addition, REITs
are dependent on the capability of their managers, may have
limited diversification, and could be significantly affected by
changes in tax laws.
The Fund's investments in mortgage-backed securities have
prepayment risk, which is the risk that mortgage loans will be
repaid when interest rates decline and the Fund will have to
reinvest in securities with lower interest rates. This risk
causes mortgage-backed securities to have significantly greater
price and yield volatility than traditional fixed-income
securities. The Fund's investments in REMICs, CMOs, and other
types of mortgage-backed securities may be subject to special
risks that are described under the Additional Risks Section.
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DESCRIPTION OF INVESTMENT PRACTICES
This section describes the investment practices of the Funds and
risks associated with these practices. Unless otherwise noted, a
Fund's use of any of these practices was specified in the
previous section.
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.
Forward Commitments. Forward commitments for the purchase or
sale of securities may include purchases on a "when-issued" basis
or purchases or sales on a "delayed delivery" basis. In some
cases, a forward commitment may be conditioned upon the
occurrence of a subsequent event, such as approval and
consummation of a merger, corporate reorganization or debt
restructuring (i.e., a "when, as and if issued" trade).
When forward commitment transactions are negotiated, the price is
fixed at the time the commitment is made, but delivery and
payment for the securities take place at a later date. Normally,
the settlement date occurs within two months after the
transaction, but settlements beyond two months may be negotiated.
Securities purchased or sold under a forward commitment are
subject to market fluctuation, and no interest or dividends
accrue to the purchaser prior to the settlement date.
The use of forward commitments enables a Fund to protect against
anticipated changes in interest rates and prices. For instance,
in periods of rising interest rates and falling bond prices, a
Fund might sell securities in its portfolio on a forward
commitment basis to limit its exposure to falling prices. In
periods of falling interest rates and rising bond prices, a Fund
might sell a security in its portfolio and purchase the same or a
similar security on a when-issued or forward commitment basis,
thereby obtaining the benefit of currently higher cash yields.
If, however, Alliance were to forecast incorrectly the direction
of interest rate movements, a Fund might be required to complete
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such when-issued or forward transactions at prices inferior to
the then current market values. When-issued securities and
forward commitments may be sold prior to the settlement date, but
a Fund enters into when-issued and forward commitments only with
the intention of actually receiving securities or delivering
them, as the case may be. If a Fund chooses to dispose of the
right to acquire a when-issued security prior to its acquisition
or dispose of its right to deliver or receive against a forward
commitment, it may incur a gain or loss. Any significant
commitment of Fund assets to the purchase of securities on a
"when, as and if issued" basis may increase the volatility of the
Fund's net asset value. In the event the other party to a
forward commitment transaction were to default, a Fund might lose
the opportunity to invest money at favorable rates or to dispose
of securities at favorable prices.
Illiquid Securities. None of the Funds will maintain more than
15% of its net assets in illiquid securities, except for Quasar
Institutional Fund, which limits its investments in illiquid
securities to 10% of its total assets. Illiquid securities
generally include (i) direct placements or other securities that
are subject to legal or contractual restrictions on resale or for
which there is no readily available market (e.g., when trading in
the security is suspended or, in the case of unlisted securities,
when market makers do not exist or will not entertain bids or
offers), including many 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.
Because of the absence of a trading market for illiquid
securities, a Fund may not be able to realize their full value
upon sale. Alliance will monitor the illiquidity of the Fund's
investments in such securities. 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 a Fund's
Directors.
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 a 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.
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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, Alliance will consider all relevant facts
and circumstances, including the creditworthiness of the
borrower. While securities are on loan, the borrower will pay
the Fund any income 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. Each 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. A Fund may pay reasonable finders',
administrative and custodial fees in connection with a loan.
Mortgage-Backed Securities and Associated Risks. Interest and
principal payments (including prepayments) on the mortgages
underlying mortgage-backed securities are passed through to the
holders of the securities. As a result of the pass-through of
prepayments of principal on the underlying securities, mortgage-
backed securities are often subject to more rapid prepayment of
principal than their stated maturity would indicate. Prepayments
occur when the mortgagor on a mortgage prepays the remaining
principal before the mortgage's scheduled maturity date. Because
the prepayment characteristics of the underlying mortgages vary,
it is impossible to predict accurately the realized yield or
average life of a particular issue of pass-through certificates.
Prepayments are important because of their effect on the yield
and price of the mortgage-backed securities. During periods of
declining interest rates, prepayments can be expected to
accelerate and a Fund that invests in these securities would be
required to reinvest the proceeds at the lower interest rates
then available. Conversely, during periods of rising interest
rates, a reduction in prepayments may increase the effective
maturity of the securities, subjecting them to a greater risk of
decline in market value in response to rising interest rates. In
addition, prepayments of mortgages underlying securities
purchased at a premium could result in capital losses.
Mortgage-Backed Securities include mortgage pass-through
certificates and multiple-class pass-through securities, such as
REMIC pass-through certificates, CMOs and stripped mortgage-
backed securities ("SMBS"), and other types of Mortgage-Backed
Securities that may be available in the future.
Guaranteed Mortgage Pass-Through Securities. Real Estate
Investment Institutional Fund may invest in guaranteed mortgage
pass-through securities that represent participation interests in
pools of residential mortgage loans and are issued by U.S.
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governmental or private lenders and guaranteed by the U.S.
Government or one of its agencies or instrumentalities, including
but not limited to the Government National Mortgage Association
("Ginnie Mae"), the Federal National Mortgage Association
("Fannie Mae") and the Federal Home Loan Mortgage Corporation
("Freddie Mac"). Ginnie Mae certificates are guaranteed by the
full faith and credit of the United States Government for timely
payment of principal and interest on the certificates. Fannie
Mae certificates are guaranteed by Fannie Mae, a federally
chartered and privately-owned corporation for full and timely
payment of principal and interest on the certificates. Freddie
Mac certificates are guaranteed by Freddie Mac, a corporate
instrumentality of the United States Government, for timely
payment of interest and the ultimate collection of all principal
of the related mortgage loans.
Multiple-Class Pass-Through Securities and Collateralized
Mortgage Obligations. Mortgage-Backed Securities also include
CMOs and REMIC pass-through or participation certificates, which
may be issued by, among others, U.S. Government agencies and
instrumentalities as well as private lenders. CMOs and REMIC
certificates are issued in multiple classes and the principal of
and interest on the mortgage assets may be allocated among the
several classes of CMOs or REMIC certificates in various ways.
Each class of CMOs or REMIC certificates, often referred to as a
"tranche," is issued at a specific adjustable or fixed interest
rate and must be fully retired no later than its final
distribution date. Generally, interest is paid or accrues on all
classes of CMOs or REMIC certificates on a monthly basis. Real
Estate Investment Institutional Fund will not invest in the
lowest tranche of CMOs and REMIC certificates.
Typically, CMOs are collateralized by Ginnie Mae or Freddie Mac
certificates but also may be collateralized by other mortgage
assets such as whole loans or private mortgage pass-through
securities. Debt service on CMOs is provided from payments of
principal and interest on collateral of mortgaged assets and any
reinvestment income thereon.
A REMIC is a CMO that qualifies for special tax treatment under
the Code and invests in certain mortgages primarily secured by
interests in real property and other permitted investments.
Investors may purchase "regular" and "residual" interest shares
of beneficial interest in REMIC trusts although the Fund does not
intend to invest in residual interests.
Risks. Investing in Mortgage-Backed Securities involves certain
unique risks in addition to those generally associated with
investing in the real estate industry in general. These unique
risks include the failure of a counterparty to meet its
commitments, adverse interest rate changes and the effects of
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prepayments on mortgage cash flows. See "Risk Considerations-
- -Mortgage-Backed Securities" for a more complete description of
the characteristics of Mortgage-Backed Securities and associated
risks.
Options. An option gives the purchaser of the option, upon
payment of a premium, the right to deliver to (in the case of a
put) or receive from (in the case of a call) the writer a
specified amount of a security on or before a fixed date at a
predetermined price. A call option written by a Fund is
"covered" if the Fund owns the underlying security, has an
absolute and immediate right to acquire that security upon
conversion or exchange of another security it holds, or holds a
call option on the underlying security with an exercise price
equal to or less than that of the call option it has written. A
put option written by a Fund is covered if the Fund holds a put
option on the underlying securities with an exercise price equal
to or greater than that of the put option it has written.
In purchasing an option, a Fund would be in a position to realize
a gain if, during the option period, the price of the underlying
security increased (in the case of a call) or decreased (in the
case of a put) by an amount in excess of the premium paid;
otherwise the Fund would experience a loss equal to the premium
paid for the option.
If an option written by a Fund were exercised, the Fund would be
obligated to purchase (in the case of a put) or sell (in the case
of a call) the underlying security at the exercise price. The
risk involved in writing an option is that, if the option were
exercised, the underlying security would then be purchased or
sold by the Fund at a disadvantageous price. These risks could
be reduced by entering into a closing transaction (i.e., by
disposing of the option prior to its exercise). A Fund retains
the premium received from writing a put or call option whether or
not the option is exercised. The writing of covered call options
could result in increases in a Fund's portfolio turnover rate,
especially during periods when market prices of the underlying
securities appreciate.
A Fund that purchases or writes options on securities in
privately negotiated (i.e., over-the-counter) transactions will
effect such transactions only with investment dealers and other
financial institutions (such as commercial banks or savings and
loan institutions) deemed creditworthy by Alliance, and Alliance
has adopted procedures for monitoring the creditworthiness of
such entities. Options purchased or written by a Fund in
negotiated transactions are illiquid and it may not be possible
for the Fund to effect a closing transaction at an advantageous
time.
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Options on Securities Indices. An option on a securities index
is similar to an option on a security except that, rather than
the right to take or make delivery of a security at a specified
price, an option on a securities index gives the holder the right
to receive, upon exercise of the option, an amount of cash if the
closing level of the chosen index is greater than (in the case of
a call) or less than (in the case of a put) the exercise price of
the option.
Futures Contracts and Options on Futures Contracts. A "sale" of
a futures contract means the acquisition of a contractual
obligation to deliver the securities or foreign currencies or
other commodity called for by the contract at a specified price
on a specified date. A "purchase" of a futures contract means
the incurring of an obligation to acquire the securities, foreign
currencies or other commodity called for by the contract at a
specified price on a specified date. The purchaser of a futures
contract on an index agrees to take or make delivery of an amount
of cash equal to the difference between a specified dollar
multiple of the value of the index on the expiration date of the
contract ("current contract value") and the price at which the
contract was originally struck. No physical delivery of the
securities underlying the index is made.
A Fund will purchase options on futures contracts written or
purchased that are traded on U.S. or foreign exchanges or over-
the-counter. These investment techniques will be used only to
hedge against anticipated future changes in market conditions and
interest or exchange rates which otherwise might either adversely
affect the value of the Fund's portfolio securities or adversely
affect the prices of securities which the Fund intends to
purchase at a later date.
Premier Growth Institutional Fund may not purchase or sell a
stock index future if immediately thereafter more than 30% of its
total assets would be hedged by stock index futures or the sum of
the amount of margin deposits on the Fund's existing futures
positions would exceed 5% of the market value of the Fund's total
assets.
Options on Foreign Currencies. As in the case of other kinds of
options, the writing of an option on a foreign currency
constitutes only a partial hedge, up to the amount of the premium
received, and a Fund could be required to purchase or sell
foreign currencies at disadvantageous exchange rates, thereby
incurring losses. The purchase of an option on a foreign
currency may constitute an effective hedge against fluctuations
in exchange rates although, in the event of rate movements
adverse to a Fund's position, it may forfeit the entire amount of
the premium plus related transaction costs.
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Repurchase Agreements. All of the Funds 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
buyer's money is invested in the security. Such agreements
permit a 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,
a 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, a Fund might be delayed in, or
prevented from, selling the collateral for its benefit. Alliance
monitors the creditworthiness of the vendors with which the Fund
enters into repurchase agreements.
Rights and Warrants. A Fund will invest in rights or warrants
only if Alliance deems the underlying equity securities
themselves appropriate for inclusion in the Fund's portfolio.
Rights and warrants entitle the holder to buy equity securities
at a specific price for a specific period of time. Rights are
similar to warrants except that they have a substantially shorter
duration. Rights and warrants may be considered more speculative
than certain other types of investments in that they do not
entitle a holder to dividends or voting rights with respect to
the underlying securities nor do they represent any rights in the
assets of the issuing company. The value of a right or warrant
does not necessarily change with the value of the underlying
security, although the value of a right or warrant may decline
because of a decrease in the value of the underlying security,
the passage of time, or a change in perception as to the
potential of the underlying security, or any combination 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.
Short Sales. A short sale is effected by selling a security that
a Fund does not own, or if the Fund does own such security, it is
not to be delivered upon consummation of the sale. A short sale
is "against the box" to the extent that a Fund contemporaneously
owns or has the right to obtain securities identical to those
sold short without payment. If the price of the security sold
short increases between the time of the short sale and the time a
Fund replaces the borrowed security, the Fund will incur a loss;
conversely, if the price declines, the Fund will realize a
capital gain. Certain special federal income tax considerations
may apply to short sales entered into by a Fund.
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Standby Commitment Agreements. Standby commitment agreements
commit a Fund, for a stated period of time, to purchase a stated
amount of a security that may be issued and sold to the Fund at
the option of the issuer. The price and coupon of the security
are fixed at the time of the commitment. At the time of entering
into the agreement, the Fund is paid a commitment fee, regardless
of whether the security ultimately is issued, typically equal to
approximately 0.5% of the aggregate purchase price of the
security the Fund has committed to purchase. A Fund will enter
into such agreements only for the purpose of investing in the
security underlying the commitment at a yield and price
considered advantageous to the Fund and unavailable on a firm
commitment basis. No Fund will enter into a standby commitment
with a remaining term in excess of 45 days.
There is no guarantee that a security subject to a standby
commitment will be issued and the value of the security, if
issued, on the delivery date may be more or less than its
purchase price. Since the issuance of the security underlying
the commitment is at the option of the issuer, a Fund will bear
the risk of capital loss in the event the value of the security
declines and may not benefit from an appreciation in the value of
the security during the commitment period if the issuer decides
not to issue and sell the security to the Fund.
Future Developments. A 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, a 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. Unlike many exchange-traded
futures contracts and options on futures contracts, there are no
daily price fluctuation limits for certain options and forward
contracts and adverse market movements could therefore continue
to an unlimited extent over a period of time. In addition, the
correlation between movements in the prices of futures contracts,
options and forward contracts and movements in the prices of the
securities and currencies hedged or used for cover will not be
perfect and could produce unanticipated losses.
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A Fund's ability to dispose of its position in futures contracts,
options, and forward contracts depends on the availability of
liquid markets in such instruments. Markets in options and
futures with respect to a number of types of securities and
currencies are relatively new and still developing, and there is
no public market for forward contracts. It is impossible to
predict the amount of trading interest that may exist in various
types of futures contracts, options, and forward contracts. If a
secondary market does not exist for an option purchased or
written by a Fund, it might not be possible to effect a closing
transaction in the option (i.e., dispose of the option) with the
result that (i) an option purchased by the Fund would have to be
exercised in order for the Fund to realize any profit and
(ii) the Fund may not be able to sell currencies or portfolio
securities covering an option written by the Fund until the
option expires or it delivers the underlying security, futures
contract or currency upon exercise. Therefore, no assurance can
be given that the Funds will be able to utilize these instruments
effectively. In addition, a Fund's ability to engage in options
and futures transactions may be limited by tax considerations.
Portfolio Turnover. The portfolio turnover rate for each Fund is
included in the Financial Highlights section. The Funds are
actively managed and, in some cases in response to market
conditions, a 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.
Higher portfolio turnover also may result in the realization of
substantial net short-term capital gains, which, when
distributed, are taxable to shareholders.
Temporary Defensive Position. For temporary defensive purposes,
each Fund may reduced its position in equity securities and
invest in, without limit, certain types of short-term, liquid,
high grade or high quality (depending on the Fund) debt
securities. These securities may include U.S. Government
securities, qualifying bank deposits, money market instruments,
prime commercial paper, and other types of short-term debt
securities including notes and bonds. For Funds that may invest
in foreign countries, such securities also may include short-
term, foreign-currency denominated securities of the type
mentioned above issued by foreign governmental entities,
companies, and supranational organizations.
ADDITIONAL RISK CONSIDERATIONS
Investment in certain of the Funds involves the special risk
considerations described below.
Foreign Investment. The securities markets of many foreign
countries are relatively small, with the majority of market
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capitalization and trading volume concentrated in a limited
number of companies representing a small number of industries.
Consequently, a Fund whose investment portfolio includes 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 issuer's 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 a Fund. In addition, the
repatriation of investment income, capital or the proceeds of
sales of securities from certain of the countries is controlled
under regulations, including in some cases the need for certain
advance government notification or authority, and if a
deterioration occurs in a country's balance of payments, the
country could impose temporary restrictions on foreign capital
remittances.
A 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 a Fund to
adopt special procedures that may involve additional costs to a
Fund. These factors may affect the liquidity of a Fund's
investments in any country in which any of these factors exists
could be affected and Alliance will monitor the effect of any
such factor or factors on a Fund's 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
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information is publicly available about certain non-U.S. issuers
than is available about U.S. issuers.
The economies of individual foreign countries may differ
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, a 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.
Investment in Smaller, Emerging Companies. The Funds 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.
The Real Estate Industry. Although Real Estate Investment
Institutional Fund does not invest directly in real estate, it
does invest primarily in Real Estate Equity Securities and does
have a policy of concentration of its investments in the real
estate industry. Therefore, an investment in the Fund is subject
to certain risks associated with the direct ownership of real
estate and with the real estate industry in general. These risks
include, among others: possible declines in the value of real
estate; risks related to general and local economic conditions;
possible lack of availability of mortgage funds; overbuilding;
extended vacancies of properties; increases in competition,
property taxes and operating expenses; changes in zoning laws;
costs resulting from the clean-up of, and liability to third
parties for damages resulting from, environmental problems;
casualty or condemnation losses; uninsured damages from floods,
earthquakes or other natural disasters; limitations on and
variations in rents; and changes in interest rates. To the
extent that assets underlying the Fund's investments are
concentrated geographically, by property type or in certain other
respects, the Fund may be subject to certain of these risks to a
greater extent.
In addition, if Real Estate Investment Institutional Fund
receives rental income or income from the disposition of real
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property acquired as a result of a default on securities the Fund
owns, the receipt of such income may adversely affect the Fund's
ability to retain its tax status as a regulated investment
company. Investments by the Fund in securities of companies
providing mortgage servicing will be subject to the risks
associated with refinancings and their impact on servicing
rights.
REITs. Investing in REITs involves certain unique risks in
addition to those risks associated with investing in the real
estate industry in general. Equity REITs may be affected by
changes in the value of the underlying property owned by the
REITs, while mortgage REITs may be affected by the quality of any
credit extended. REITs are dependent upon management skills, are
not diversified, are subject to heavy cash flow dependency,
default by borrowers and self-liquidation. REITs are also
subject to the possibilities of failing to qualify for tax-free
pass-through of income under the Code and failing to maintain
their exemptions from registration under the 1940 Act.
REITs (especially mortgage REITs) are also subject to interest
rate risks. When interest rates decline, the value of a REIT's
investment in fixed rate obligations can be expected to rise.
Conversely, when interest rates rise, the value of a REIT's
investment in fixed rate obligations can be expected to decline.
In contrast, as interest rates on adjustable rate mortgage loans
are reset periodically, yields on a REIT's investments in such
loans will gradually align themselves to reflect changes in
market interest rates, causing the value of such investments to
fluctuate less dramatically in response to interest rate
fluctuations than would investments in fixed rate obligations.
Investing in REITs involves risks similar to those associated
with investing in small capitalization companies. REITs may have
limited financial resources, may trade less frequently and in a
limited volume and may be subject to more abrupt or erratic price
movements than larger company securities. Historically, small
capitalization stocks, such as REITs, have been more volatile in
price than the larger capitalization stocks included in the S&P
500.
Mortgage-Backed Securities. As discussed above, investing in
Mortgage-Backed Securities involves certain unique risks in
addition to those risks associated with investment in the real
estate industry in general. These risks include the failure of a
counterparty to meet its commitments, adverse interest rate
changes and the effects of prepayments on mortgage cash flows.
When interest rates decline, the value of an investment in fixed
rate obligations can be expected to rise. Conversely, when
interest rates rise, the value of an investment in fixed rate
obligations can be expected to decline. In contrast, as interest
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<PAGE>
rates on adjustable rate mortgage loans are reset periodically,
yields on investments in such loans will gradually align
themselves to reflect changes in market interest rates, causing
the value of such investments to fluctuate less dramatically in
response to interest rate fluctuations than would investments in
fixed rate obligations.
Further, the yield characteristics of Mortgage-Backed Securities,
such as those in which Real Estate Investment Institutional Fund
may invest, differ from those of traditional fixed-income
securities. The major differences typically include more
frequent interest and principal payments (usually monthly), the
adjustability of interest rates, and the possibility that
prepayments of principal may be made substantially earlier than
their final distribution dates.
Prepayment rates are influenced by changes in current interest
rates and a variety of economic, geographic, social and other
factors, and cannot be predicted with certainty. Both adjustable
rate mortgage loans and fixed rate mortgage loans may be subject
to a greater rate of principal prepayments in a declining
interest rate environment and to a lesser rate of principal
prepayments in an increasing interest rate environment. Early
payment associated with Mortgage-Backed Securities causes these
securities to experience significantly greater price and yield
volatility than that experienced by traditional fixed-income
securities. Under certain interest rate and prepayment rate
scenarios, the Fund may fail to recoup fully its investment in
Mortgage-Backed Securities notwithstanding any direct or indirect
governmental or agency guarantee. When the Fund reinvests
amounts representing payments and unscheduled prepayments of
principal, it may receive a rate of interest that is lower than
the rate on existing adjustable rate mortgage pass-through
securities. Thus, Mortgage-Backed Securities, and adjustable
rate mortgage pass-through securities in particular, may be less
effective than other types of U.S. Government securities as a
means of "locking in" interest rates.
Fixed-income Securities. The value of each Fund's shares will
fluctuate with the value of its investments. The value of each
Fund's investments in fixed-income securities will change as the
general level of interest rates fluctuates. During periods of
falling interest rates, the values of fixed-income securities
generally rise. Conversely, during periods of rising interest
rates, the values of fixed-income securities generally decline.
Under normal market conditions, the average dollar-weighted
maturity of a Fund's portfolio of debt or other fixed-income
securities is expected to vary between one year or less and 30
years in the case of all Funds that invest in such securities.
In periods of increasing interest rates, each of the Funds may,
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<PAGE>
to the extent it holds mortgage-backed securities, be subject to
the risk that the average dollar-weighted maturity of the Fund's
portfolio of debt or other fixed-income securities may be
extended as a result of lower than anticipated prepayment rates.
Year 2000 and Euro. 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. In
addition to the Year 2000 problem, the European Economic and
Monetary Union has established a single currency, the Euro
Currency ("Euro") that will replace the national currency of
certain European countries effective January 1, 1999. Computer
systems and applications must be adapted in order to be able to
process Euro sensitive information accurately beginning in 1999.
Should any of the computer systems employed by the Funds' major
service providers fail to process Year 2000 or Euro related
information properly, that could have a significant negative
impact on the Funds' operations and the services that are
provided to the Funds' shareholders. In addition, to the extent
that the operations of issuers of securities held by the Funds
are impaired by the Year 2000 problem or the Euro, or prices of
securities held by the Funds decline as a result of real or
perceived problems relating to the Year 2000 or the Euro, the
value of the Funds' shares may be materially affected.
With respect to the Year 2000, the Funds have been advised that
Alliance, each Fund's investment adviser, Alliance Fund
Distributors, Inc, ("AFD"), each Fund's principal underwriter,
and Alliance Fund Services, Inc. ("AFS"), each Fund's registrar,
transfer agent and dividend disbursing agent (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 1997, 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 Funds.
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<PAGE>
Many computer software systems in use today cannot properly
process date-related information from and after January 1, 2000.
Should any of the computer systems employed by the Funds' major
service providers fail to process this type of information
properly, that could have a negative impact on the Funds'
operations and the services that are provided to the Funds'
shareholders. Alliance, as well as AFD and AFS (both defined
below), have advised the Funds that they are reviewing all of
their computer systems with the goal of modifying or replacing
such systems prior to January 1, 2000, to the extent necessary to
foreclose any such negative impact. In addition, Alliance has
been advised by the Funds' custodian that it is also in the
process of reviewing its systems with the same goal. As of the
date of this Prospectus, the Funds and Alliance have no reason to
believe that these goals will not be achieved. Similarly, the
values of certain of the portfolio securities held by the Funds
may be adversely affected by the inability of the securities'
issuers or of third parties to process this type of information
properly.
With respect to the Euro, the Funds have been advised that
Alliance has established a project team to assess changes that
will be required in connection with the introduction of the Euro.
Alliance reports that its project team has assessed all systems,
including those developed or managed internally, as well as those
provided by vendors, in order to determine the modifications that
will be required to process accurately transactions denominated
in Euro after 1998. At this time, management of Alliance expects
that the required modifications for the introduction of the Euro
will be completed and tested before the end of 1998. 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 Funds.
The Funds and Alliance have been advised by the Funds' Custodians
that they are also in the process of reviewing their systems with
the same goals. As of the date of this prospectus, the Funds and
Alliance have no reason to believe that the Custodians will be
unable to achieve these goals.
MANAGEMENT OF THE FUNDS
Investment Adviser
Each Fund's Advisor 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 $81
billion represented the assets of investment companies).
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<PAGE>
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.
Fee as percentage of net Fiscal Year
Fund assets* Ending
____ ________________________ ___________
Premier Growth
Quasar
Real Estate Investment
* Fees are stated net of waivers and/or reimbursements. See
the "Fee Table" at the beginning of the Prospectus for more
information about fee waivers.
In connection with investments in real estate securities,
Alliance has, at its expense, retained as a consultant CB Richard
Ellis, Inc. ("CBRE"). CBRE is a publicly held company and the
largest real estate services company in the United States,
comprised of real estate brokerage, property and facilities
management, and real estate finance, and investment advisory
services.
Portfolio Manager
The following table lists the person or persons who are primarily
responsible for the day-to-day management of each Fund, the
length of time that each person has been primarily responsible,
and each person's principal occupation during the past five
years.
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<PAGE>
Principal occupation
during the past
Fund Employee; year; title five years
____ _____________________ _____________________
Premier Alfred Harrison since Associated with
Growth inception-Vice Chairman Alliance
Fund of Alliance Capital
Management Corporation
("ACMC")*
Quasar Alden M. Stewart since 1997-- Associated with
Fund Executive Vice President Alliance since 1993
of ACMC
Randall E. Haase since 1997-- Associated with
Senior Vice President of Alliance since 1993
ACMC
Real Daniel G. Pine since 1996-- Associated with
Estate Senior Vice President of Alliance since 1996;
Investment ACMC prior thereto; Senior
Fund Vice President of
Desai Capital
Management
David Kruth since 1997-- Associated with
Vice President of ACMC Alliance since 1997;
prior threto, Senior
Vice President of the
Yarmouth Group
* The sole general partner of Alliance.
Performance of Similarly Managed Investment Companies. Each of
the Funds is identical in its investment objectives, policies and
practices to a currently existing open-end management investment
company managed by Alliance. These Funds are Alliance Premier
Growth Fund, Alliance Quasar Fund, and Alliance Real Estate
Investment Fund (each, a "Retail Fund"). Each Fund is managed by
the same investment personnel, in the identical investment style
and following the same investment strategy, as its corresponding
Retail Fund. Set forth below is performance data for each of the
Retail Funds for the 1, 5 and 10 year (or since inception)
periods through December 31, 1998. As of December 31, 1998, the
assets in the corresponding Retail Funds totaled approximately
$___ billion for Alliance Premier Growth Fund, $___ billion for
Alliance Quasar Fund, and $___ million for Alliance Real Estate
Investment Fund. The following performance data for the Retail
Funds is net of actual fees incurred by those Funds for the
37
<PAGE>
relevant periods and is based on each Fund's Class A shares with
imposition of the maximum 4.25% sales charge.
Year ended 5 years ended 10 years ended
Retail Funds 12/31/98 12/31/98 12/31/98
Alliance Premier % % %*
Growth Fund
Alliance Quasar % % %
Fund
Alliance Real % %* N/A
Estate Investment
Fund
* Inception dates for Alliance Premier Growth Fund--September
28, 1992 and Alliance Real Estate Investment Fund--October 1,
1996
Performance of Similarly Managed Portfolios--Premier Growth
Institutional Fund. In addition to managing the assets of Premier
Growth Institutional Fund, Mr. Harrison has ultimate
responsibility for the management of discretionary tax-exempt
accounts of institutional clients managed as described below
without significant client-imposed restrictions ("Historical
Portfolios"). These accounts have substantially the same
investment objectives and policies and are managed in accordance
with essentially the same investment strategies and techniques as
those for Premier Growth Institutional Fund, except for the
ability of Premier Growth Institutional Fund to use futures and
options as hedging tools and to invest in warrants. The
Historical Portfolios also are not subject to certain
limitations, diversification requirements and other restrictions
imposed under the 1940 Act and the Code to which Premier Growth
Institutional Fund, as a registered investment company, is
subject and which, if applicable to the Historical Portfolios,
may have adversely affected the performance results of the
Historical Portfolios. See "Investment Objective and Policies."
Set forth below is performance data provided by Alliance relating
to the Historical Portfolios for each of the nineteen full
calendar years during which Mr. Harrison has managed the
Historical Portfolios as an employee of Alliance and cumulatively
through December 31, 1998. As of December 31, 1998, the assets
in the Historical Portfolios totaled approximately $___ billion
and the average size of an institutional account in the
Historical Portfolio was $____ million. Each Historical
Portfolio has a nearly identical composition of investment
holdings and related percentage weightings.
38
<PAGE>
The performance data is net of all fees (including brokerage
commissions) charged to those accounts. The performance data is
computed in accordance with standards formulated by the
Association of Investment Management and Research and has not
been adjusted to reflect any fees that will be payable by Premier
Growth Institutional Fund, which are higher than the fees imposed
on the Historical Portfolio and will result in a higher expense
ratio and lower returns for Premier Growth Institutional Fund.
Expenses associated with the distribution of Class I and Class II
shares of Premier Growth Institutional Fund in accordance with
the plan adopted by Premier Growth Institutional Fund's Board of
Directors pursuant to Rule 12b-1 under the 1940 Act
("distribution fees") are also excluded. See "Expense
Information." The performance data has also not been adjusted
for corporate or individual taxes, if any, payable by the account
owners.
Alliance has calculated the investment performance of the
Historical Portfolios on a trade-date basis. Dividends have been
accrued at the end of the month and cash flows weighted daily.
Composite investment performance for all portfolios has been
determined on an asset weighted basis. New accounts are included
in the composite investment performance computations at the
beginning of the quarter following the initial contribution. The
total returns set forth below are calculated using a method that
links the monthly return amounts for the disclosed periods,
resulting in a time-weighted rate of return.
As reflected below, the Historical Portfolios have over time
performed favorably when compared with the performance of
recognized performance indices. The S&P 500 Index is a widely
recognized, unmanaged index of market activity based upon the
aggregate performance of a selected portfolio of publicly traded
common stocks, including monthly adjustments to reflect the
reinvestment of dividends and other distributions. The S&P 500
Index reflects the total return of securities comprising the
Index, including changes in market prices as well as accrued
investment income, which is presumed to be reinvested. The
Russell 1000 universe of securities is compiled by Frank Russell
Company and is segmented into two style indices, based on the
capitalization-weighted median book-to-price ratio of each of the
securities. At each reconstitution, the Russell 1000 constituents
are ranked by their book-to-price ratio. Once so ranked, the
breakpoint for the two styles is determined by the median market
capitalization of the Russell 1000. Thus, those securities
falling within the top fifty percent of the cumulative market
capitalization (as ranked by descending book-to-price) become
members of the Russell Price-Driven Indices. The Russell 1000
Growth Index is, accordingly, designed to include those Russell
1000 securities with a greater-than-average growth orientation.
In contrast with the securities in the Russell Price-Driven
39
<PAGE>
Indices, companies in the Growth Index tend to exhibit higher
price-to-book and price-earnings ratios, lower dividend yield and
higher forecasted growth values.
To the extent Premier Growth Institutional Fund does not invest
in U.S. common stocks or utilizes investment techniques such as
futures or options, the S&P 500 and Russell 1000 Growth Index may
not be substantially comparable to Premier Growth Institutional
Fund. The S&P 500 and Russell 1000 Growth Index are included to
illustrate material economic and market factors that existed
during the time period shown. The S&P 500 and Russell 1000
Growth Index do not reflect the deduction of any fees. If
Premier Growth Institutional Fund were to purchase a portfolio of
securities substantially identical to the securities comprising
the S&P 500 Index or the Russell 1000 Growth Index, Premier
Growth Institutional Fund's performance relative to the index
would be reduced by Premier Growth Institutional Fund's expenses,
including brokerage commissions, advisory fees, distribution
fees, custodial fees, transfer agency costs and other
administrative expenses as well as by the impact on Premier
Growth Institutional Fund's shareholders of sales charges and
income taxes.
The Lipper Growth Fund Index is prepared by Lipper Analytical
Services, Inc. and represents a composite index of the investment
performance for the 30 largest growth mutual funds. The
composite investment performance of the Lipper Growth Fund Index
reflects investment management and administrative fees and other
operating expenses paid by these mutual funds and reinvested
income dividends and capital gain distributions, but excludes the
impact of any income taxes and sales charges.
The following performance data is provided solely to illustrate
Mr. Harrison's performance in managing the Historical Portfolios
as measured against certain broad based market indices and
against the composite performance of other open-end growth mutual
funds. Investors should not rely on the following performance
data of the Historical Portfolios as an indication of future
performance of Premier Growth Institutional Fund. The composite
investment performance for the periods presented may not be
indicative of future rates of return. Other methods of computing
investment performance may produce different results, and the
results for different periods may vary.
40
<PAGE>
Schedule of Composite Investment Performance
-- Historical Portfolios*
Lipper
Premier Growth
Growth Russell Fund
Institutional Historical S&P 500 1000 Index
Fund Portfolios Index Growth Index Total
Total Return Total Return** Total Return Total Return Return
Year ended
December:
1998
1997 27.05% 34.64% 33.36% 30.49% 25.30%
1996 18.84 22.06 22.96 23.12 17.48
1995 40.66 39.83 37.58 37.19 32.65
1994 (9.78) (4.82) (1.32) (1.57)
1993 5.35 10.54 10.08 11.98
1992 --- 12.18 7.62 7.63
1991 --- 38.91 30.47 35.20
1990 --- (1.57) (3.10) (0.26) (5.00)
1989 --- 38.80 31.69 35.92 28.60
1988 --- 10.88 16.61 11.27 15.80
1987 --- 8.49 5.25 5.31 1.00
1986 --- 27.40 18.67 15.36 15.90
1985 --- 37.41 31.73 32.85 30.30
1984 --- (3.31) 6.27 (.95) (2.80)
1983 --- 20.80 22.56 15.98 22.30
1982 --- 28.02 21.55 20.46 20.20
1981 --- (1.09) (4.92) (11.31) (8.40)
1980 --- 50.73 32.50 39.57 37.30
1979 --- 30.76 18.61 23.91 27.40
Cumulative
total
return for
the period
January 1,
1979 to
December
31, 1998
* Total return is a measure of investment performance that is
based upon the change in value of an investment from the
beginning to the end of a specified period and assumes
reinvestment of all dividends and other distributions. The
basis of preparation of this data is described in the
preceding discussion.
** Total returns for Premier Growth Institutional Fund are for
Class I shares.
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<PAGE>
The average annual total returns presented below are based upon
the cumulative total return as of December 31, 1998, and for more
than one year assume a steady compounded rate of return and are
not year-by-year results, which fluctuated over the periods as
shown.
Average Annual Total Returns
Premier Lipper
Growth Russell Growth
Institutional Historical S&P 500 1000 Fund
Fund Portfolios Index Growth Index Index
One year % % % % %
Three years
Five years
Ten years
Since January
1, 1979
The Funds' Statement of Additional Information has more detailed
information about Alliance and other Fund service providers.
PURCHASE AND SALE OF SHARES
How the Funds Value Their Shares
The Funds' net asset value or NAV is calculated at 4 p.m. Eastern
time each day the Exchange is open for business. To calculate
NAV, a 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 Funds' value their 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 Funds' 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 a Funds' shares through your financial
representative at NAV. Alliance Institutional Funds' shares are
not subject to any initial or contingent sales charges. See
"Distribution Arrangements" for a description of who can buy each
class of shares of the Funds.
The minimum initial investment in the Alliance Institutional
Funds is $2 million, which may be invested in any one or more of
the Funds. Investments made through fee-based or wrap-fee
42
<PAGE>
programs will satisfy the minimum initial investment requirement
if the fee-based or wrap-fee program, as a whole, invests at
least $2 million 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.
A 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.
A Fund may refuse any order to purchase shares. In this regard,
the Funds reserve the right to restrict purchases of shares
(including through exchanges) when there appears to be evidence
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 any Fund for the same class of
shares of any other Fund and 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 Funds 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 a 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
43
<PAGE>
fee-based program or other program, you should contact your
financial representative.
- Selling Shares Directly To The Funds
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
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.
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<PAGE>
Dividends, Distributions, and Taxes
Each Fund's income dividend and capital gains distribution, if
any, declared by a 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 that 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 and election to receive dividends and distributions
in cash or shares is made 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 with the
reinvestment of Fund dividends and distributions.
If you receive an income dividend or capital gains distribution
in cash, you may, within 120 days following the date of its
payment, reinvest the dividend or distribution in additional
shares of the same class of that 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
that Fund.
The Funds expect 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. A Fund's distributions also may be subject to
certain state and local taxes.
While its is the intention of each 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 such Fund of income and capital gains from
investments. There is no fixed dividend rate and there can be no
assurance that a Fund will pay any dividends or realize any
capital gains. Since REITs pay distributions based on cash flow,
without regard to depreciation and amortization, it is likely
that a portion of the distributions paid to Real Estate
Investment Fund and subsequently distributed to shareholders may
be a nontaxable return of capital. 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.
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<PAGE>
Investment income received by a Fund from sources within foreign
countries may be subject to foreign income taxes withheld at the
source. To the extent that any Fund is liable for foreign income
taxes withheld at the source, each 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 any 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 a 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 a 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
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 a 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 Funds 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 Funds offer 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;
46
<PAGE>
- if you are an investment advisory client of, or are a
certain other person associated with, Alliance and its
affiliates or the Funds; and
- 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
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:
- if you are an investor participating in wrap-fee or
other similar programs offered by registered broker-
dealers or other 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 each Fund, see the Fund's Statement of Additional
Information. Fee-based and other programs may impose different
requirements with respect to investment in the shares of the
Funds than described above.
Asset-based Sales Charge or Rule 12b-1 Fees. Each 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 Funds' 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 Funds. 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
47
<PAGE>
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 a Fund that are different from
those described in this Prospectus. A transaction, service,
administrative or other similar fee may be charged by your
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 Company,
including requirements as to the minimum initial and subsequent
investment amounts.
General Information
Under unusual circumstances, the Company may suspend redemptions
or postpone payment for up to seven days or longer, as permitted
by federal securities law. The Funds reserve 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.
48
<PAGE>
General
In addition to the discount or commission which may be paid to
dealers or agents in connection with the sale of shares of a
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 Funds. On some occasions,
such cash or other incentives will be conditioned upon the sale
of a specified minimum dollar amount of the shares of a 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.
49
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand
a Fund's financial performance for the period of the Fund's
operations. Certain information reflects financial information
for a single Fund share. The total return in the table
represents the rate that an investor would have earned (or lost)
on an investment in the Fund (assuming investment of all
dividends and distributions). The information has been audited
by ______________, the Fund's independent auditors, whose report,
along with Fund's financial statements, appears in the Statement
of Additional Information, which is available upon request.
Class I
Year Ended
__________
1998
Net asset value,
beginning of period
Income From Investment Operations
Net investment income (Loss)
Net Realized and Unrealized Gain
(Loss) on Investments
Net Increases (Decrease) in Net
Asset Value From Operations
Less: Distributions
Dividends From Net Investment
Income
Dividends From Net Realized Gains
Total Dividends and Distributions
Net asset value, end of period
Total Return
Total investment return based on
net asset value
Ratios/Supplemental Data
Net Assets, end of period
(000's omitted)
Ratio of Expenses To Average
Net Assets
Ratio of Net Investment Income
(Loss) To Average Net Assets
Portfolio Turnover Rate
50
<PAGE>
Class II
Year Ended
__________
1998
Net asset value,
beginning of period
Income From Investment Operations
Net investment income (Loss)
Net Realized and Unrealized Gain
(Loss) on Investments
Net Increases (Decrease) in Net
Asset Value From Operations
Less: Distributions
Dividends From Net Investment
Income
Dividends From Net Realized Gains
Total Dividends and Distributions
Net asset value, end of period
Total Return
Total investment return based on
net asset value
Ratios/Supplemental Data
Net Assets, end of period
(000's omitted)
Ratio of Expenses To Average
Net Assets
Ratio of Net Investment Income
(Loss) To Average Net Assets
Portfolio Turnover Rate
51
<PAGE>
For more information about the Funds, 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 SEC:
In Person: at the SEC'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
52
<PAGE>
The Registrant's Statement of Additional Information relating to
Alliance Growth Institutional Fund is incorporated herein by
reference to Part B of Post-Effective Amendment No. 1 to the
Registrant's Registration Statement on Form N-1A filed with the
Commission on December 15, 1998.
<PAGE>
(LOGO) ALLIANCE INSTITUTIONAL FUNDS, INC.
- ALLIANCE PREMIER GROWTH
INSTITUTIONAL FUND
_________________________________________________________________
c/o Alliance Fund Services, Inc.
P.O. Box 1520, Secaucus, New Jersey 07096-1520
Toll Free (800) 221-5672
For Literature: Toll Free (800) 227-4618
_________________________________________________________________
STATEMENT OF ADDITIONAL INFORMATION
March 1, 1999
_________________________________________________________________
This Statement of Additional Information is not a
prospectus but supplements and should be read in conjunction with
the Prospectus dated March 1, 1999 (the "Prospectus") for
Alliance Institutional Funds, Inc. (the "Company"). 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..........................
PORTFOLIO TRANSACTIONS......................................
GENERAL INFORMATION.........................................
REPORT OF INDEPENDENT AUDITORS AND FINANCIAL
STATEMENTS................................................
APPENDIX A..................................................
- ----------------------
(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 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
Premier Growth Institutional Fund (the "Fund"), which is
described in this Statement of Additional Information, and
Alliance Quasar Institutional Fund, Alliance Real Estate
Investment Institutional Fund and Alliance Growth Institutional
Fund, Inc. 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.
Investment Objective
The Fund's investment objective is to seek long-term
growth of capital by investing predominantly in the equity
securities (common stocks, securities convertible into common
stocks and rights and warrants to subscribe for or purchase
common stocks) of a limited number of large, carefully selected,
high-quality American companies that, in the judgment of Alliance
Capital Management L.P., the Fund's adviser (the "Adviser"), are
likely to achieve superior earnings growth. The Fund's
investments in the 25 of these companies most highly regarded at
any point in time by the Adviser will usually constitute
approximately 70% of the Fund's net assets. Normally,
approximately 40 companies will be represented in the Fund's
investment portfolio. The Fund thus differs from more typical
equity mutual funds by investing most of its assets in a
relatively small number of intensively researched companies. The
Fund is designed for the investor who seeks to accumulate capital
over a period of years with less volatility than that typically
associated with a more aggressive strategy of investment in
smaller companies.
2
<PAGE>
How the Fund Pursues its Objective
As a matter of fundamental policy, the Fund will, under
normal circumstances, invest at least 85% of the value of its
total assets in the equity securities of American companies
(except when in a temporarily defensive position). The Fund
defines American companies to be entities (i) that are organized
under the laws of the United States and have their principal
office in the United States, and (ii) the equity securities of
which are traded principally in the United States securities
markets. This policy is deemed a "fundamental policy" within the
meaning of the Investment Company Act of 1940, as amended (the
"1940 Act"), and may not be changed without the approval 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.
Within the investment framework described herein, Alfred
Harrison, who heads the Adviser's "Large Cap Growth Group," is
ultimately responsible for the investment decisions for the Fund.
In managing the Fund's assets, the Adviser's investment strategy
emphasizes stock selection and investment in the securities of a
limited number of issuers. The Adviser depends heavily upon the
fundamental analysis and research of its large internal research
staff in making investment decisions for the Fund. The research
staff generally follows a primary research universe of
approximately 600 companies which are considered by the Adviser
to have strong managements, superior industry positions,
excellent balance sheets and the ability to demonstrate superior
earnings growth. As one of the largest multi-national investment
advisory firms, the Adviser has access to considerable
information concerning all of the companies followed, an in-depth
understanding of the products, services, markets and competition
of these companies and a good knowledge of the managements of the
companies in its research universe.
The Adviser's analysts prepare their own earnings
estimates and financial models for each company followed. While
each analyst has responsibility for following companies in one or
more identified sectors and/or industries, the lateral structure
of the Adviser's research organization and constant communication
among the analysts result in decision-making based on the
relative attractiveness of stocks among industry sectors. The
focus during this process is on the early recognition of change
on the premise that value is created through the dynamics of
3
<PAGE>
changing company, industry and economic fundamentals. Research
emphasis is placed on the identification of companies whose
substantially above average prospective earnings growth is not
fully reflected in current market valuations.
The Adviser continually reviews its primary research
universe of approximately 600 companies to maintain a list of
favored securities, the "Adviser 100," considered by the Adviser
to have the most clearly superior earnings potential and
valuation attraction. The Adviser's concentration on a limited
universe of companies allows it to devote its extensive resources
to constant intensive research of these companies. Companies are
constantly added to and deleted from the Adviser 100 as
fundamentals and valuations change. The Adviser's Large Cap
Growth Group, in turn, further refines, on a weekly basis, the
selection process for the Fund with each portfolio manager in the
Group selecting 25 such companies which appear to the manager
most attractive at current prices. These individual ratings are
then aggregated and ranked to produce a composite list of the 25
most highly regarded stocks, the "Favored 25." As noted above,
approximately 70% of the Fund's net assets will usually be
invested in the Favored 25 with the balance of the Fund's
investment portfolio consisting principally of other stocks in
the Adviser 100. Portfolio emphasis upon particular industries
or sectors is a by-product of the stock selection process rather
than the result of assigned targets or ranges.
In the management of the Fund's investment portfolio,
the Adviser will seek to utilize market volatility judiciously
(assuming no change in company fundamentals) to adjust the Fund's
portfolio positions. The Fund will strive to capitalize on
apparently unwarranted price fluctuations, both to purchase or
increase positions on weakness and to sell or reduce overpriced
holdings. Under normal circumstances, the Fund will remain
substantially fully invested in equity securities and will not
take significant cash positions for market timing purposes.
Rather, during a market decline, while adding to positions in
favored stocks, the Fund will tend to become somewhat more
aggressive, gradually reducing somewhat the number of companies
represented in the Fund's portfolio. Conversely, in rising
markets, while reducing or eliminating fully valued positions,
the Fund will tend to become somewhat more conservative,
gradually increasing somewhat the number of companies represented
in the Fund's portfolio. Through this "buying into declines" and
"selling into strength," the Adviser seeks to gain positive
returns in good markets while providing some measure of
protection in poor markets.
The Adviser expects the average weighted market
capitalization of companies represented in the Fund's portfolio
(i.e., the number of a company's shares outstanding multiplied by
4
<PAGE>
the price per share) to normally be in the range of or exceed the
average weighted market capitalization of companies comprising
the Standard & Poor's 500 Composite Stock Price Index, a widely
recognized unmanaged index of market activity based upon the
aggregate performance of a selected portfolio of publicly traded
stocks, including monthly adjustments to reflect the reinvestment
of dividends and distributions. 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.
Additional Investment Policies and Practices
The following investment policies and practices,
including restrictions, supplement those set forth above and in
the Prospectus. Except as otherwise noted, the Fund's investment
policies and practices described below are not designated
"fundamental policies" within the meaning of 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 and
practices 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
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
5
<PAGE>
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
purchase 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 the Adviser for inclusion in
the Fund's portfolio. 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 securities, and a right or warrant
ceases to have value if it is not exercised prior to its
expiration date. The Fund will not invest in warrants if such
warrants valued at the lower of cost or market would exceed 5% of
the value of the Fund's net assets. Included within such amount,
but not to exceed 2% of the Fund's net assets, may be warrants
which are not listed on the New York Stock Exchange or the
American Stock Exchange. Warrants acquired by the Fund in units
or attached to securities may be deemed to be without value.
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 may be affected by exchange control regulations as
well as by changes in governmental administration, economic or
monetary policies (in the United States and abroad) and changed
circumstances in dealings between nations. Currency exchange
rate movements relative to the U.S. dollar 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 corresponding 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
6
<PAGE>
United States, including expropriation, confiscatory taxation and
potential difficulties in enforcing contractual obligations.
Illiquid Securities. The Fund will not maintain more
than 15% of its net assets in illiquid securities. For this
purpose, illiquid securities include, among others, direct
placements or other securities which are subject to legal or
contractual restrictions on resale or for which there is no
readily available market (e.g., trading in the security is
suspended or, in the case of unlisted securities, market makers
do not exist or will not entertain bids or offers).
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 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 an unregistered security can be more 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.
7
<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, which became effective in April
1990, has produced enhanced liquidity for many restricted
securities, and market liquidity for such securities may continue
to expand as a result of this rule 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.
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").
Other Restrictions. In addition to restrictions
otherwise described herein and in the Prospectus, the Fund has
undertaken as a matter of non-fundamental investment policy not
to purchase the securities of any company that has a record of
less than three years of continuous operation (including that of
predecessors) if such purchase at the time thereof would cause
more than 5% of its total assets, taken at current value, to be
invested in the securities of such companies, that it will not
purchase puts, calls, straddles, spreads and any combination
thereof if by reason thereof the value of its aggregate
investment in such classes of securities will exceed 5% of its
total assets, that it will not engage in option transactions in
the over-the-counter market if such options are available on an
exchange, that it will only transact in over-the-counter options
with major broker-dealer and financial institutions whom the
8
<PAGE>
Adviser considers creditworthy, that it will only engage in
transactions in options which are liquid and readily marketable,
i.e., the market will be of sufficient depth and liquidity so as
not to create undue risk, that the aggregate premiums paid on all
options which are held by the Fund at any time will not exceed
20% of the Fund's total net assets, that it will not purchase or
retain the securities of any issuer if each of the Fund's
officers, directors or investment adviser who owns beneficially
more than one-half of one percent of the securities of such
issuer together own beneficially more than five percent of the
securities of such issuer, that any securities transaction
effected through an affiliated broker-dealer will be fair and
reasonable in compliance with Rule 17e-1 under the 1940 Act, and
that it will not purchase illiquid securities if immediately
after such investment more than 10% of the Fund's net assets
(taken at market value) would be so invested. In addition, the
Fund will not invest in real estate partnerships and will not
invest in mineral leases.
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.
Other Investment Practices
While the Fund does not anticipate utilizing them on a
regular basis, the Fund may from time to time employ the
following investment practices.
Puts and Calls. The Fund may write exchange-traded call
options on common stocks, for which it will receive a purchase
premium from the buyer, and may purchase and sell exchange-traded
call and put options on common stocks written by others or
combinations thereof. The Fund will not write put options.
Writing, purchasing and selling call options are highly
specialized activities and entail greater than ordinary
investment risks. A call option gives the purchaser of the
option, in exchange for paying the writer of the option a
premium, the right to call upon the writer of the option to
deliver a specified number of shares of a specified stock on or
before a fixed date, at a predetermined price. A put option
gives the buyer of the option, in exchange for paying the writer
of the option a premium, the right to deliver a specified number
of shares of a stock to the writer of the option on or before a
fixed date at a predetermined price.
The writing of a call option, therefore, involves a
potential loss of opportunity to sell securities at a higher
price. In exchange for the premium received, the writer of a
fully collateralized call option assumes the full downside risk
9
<PAGE>
of the securities subject to such option. In addition, the
writer of the call gives up the gain possibility of the stock
protecting the call. Generally, the opportunity for profit from
the writing of options is higher, and consequently the risks are
greater, when the stocks involved are lower priced or volatile,
or both. While an option that has been written is in force, the
maximum profit that may be derived from the optioned stock is the
premium less brokerage commissions and fees. The Fund will not
write a call unless the Fund at all times during the option
period owns either (a) the optioned securities or has an absolute
and immediate right to acquire the securities without additional
cash consideration (or for additional cash consideration held in
a segregated account by its custodian) upon conversion or
exchange of other securities held in its portfolio or (b) a call
option on the same security and in the same principal amount as
the call written where the exercise price of the call held (i) is
equal to or less than the exercise price of the call written or
(ii) is greater than the exercise price of the call written if
the difference is maintained by the Fund in liquid assets in a
segregated account with its Custodian.
Premiums received by the Fund in connection with writing
call options will vary widely depending primarily on supply and
demand. Commissions, stock transfer taxes and other expenses of
the Fund must be deducted from such premium receipts. Calls
written by the Fund will ordinarily be sold either on a national
securities exchange or through put and call dealers, most, if not
all, of whom are members of a national securities exchange on
which options are traded, and will in such cases be endorsed or
guaranteed by a member of a national securities exchange or
qualified broker-dealer, which may be Donaldson, Lufkin &
Jenrette Securities Corporation, an affiliate of the Adviser.
The endorsing or guaranteeing firm requires that the option
writer (in this case the Fund) maintain a margin account
containing either corresponding stock or other equity as required
by the endorsing or guaranteeing firm.
The Fund will not write a call option if, as a result,
the aggregate of the Fund's portfolio securities subject to
outstanding call options (valued at the lower of the option
prices or market values of such securities) would exceed 15% of
the Fund's total assets.
In buying a call, the Fund would be in a position to
realize a gain if, during the option period, the price of the
shares increased by an amount in excess of the premium paid and
commissions payable on exercise. It would realize a loss if the
price of the security declined or remained the same or did not
increase during the period by more than the amount of the premium
and commissions payable on exercise. By buying a put, the Fund
would be in a position to realize a gain if, during the option
10
<PAGE>
period, the price of the shares declined by an amount in excess
of the premium paid and commissions payable on exercise. It
would realize a loss if the price of the security increased or
remained the same or did not decrease during that period by more
than the amount of the premium and commissions payable on
exercise. In addition, the Fund could realize a gain or loss on
such options by selling them.
As noted above, the Fund may also purchase and sell call
and put options written by others or combinations thereof, but
the aggregate cost of all outstanding options purchased and held
by the Fund, including options on market indices as described
below, will at no time exceed 10% of the Fund's total assets. If
an option is not sold and expires without being exercised, the
Fund would suffer a loss in the amount of the premium paid by the
Fund for the option.
Options on Market Indices. The Fund may purchase and
sell exchange-traded index options. An option on a securities
index is similar to an option on a security except that, rather
than the right to take or make delivery of a security at a
specified price, an option on a securities index gives the holder
the right to receive, upon exercise of the option, an amount of
cash if the closing level of the chosen index is greater than (in
the case of a call) or less than (in the case of a put) the
exercise price of the option.
Through the purchase of listed index options, the Fund
could achieve many of the same objectives as through the use of
options on individual securities. Price movements in the Fund's
portfolio securities probably will not correlate perfectly with
movements in the level of the index and, therefore, the Fund
would bear a risk of loss on index options purchased by it if
favorable price movements of the hedged portfolio securities do
not equal or exceed losses on the options or if adverse price
movements of the hedged portfolio securities are greater than
gains realized from the options.
Stock Index Futures. The Fund may purchase and sell
stock index futures contracts. A stock index assigns relative
values to the common stocks comprising the index. A stock index
futures contract is a bilateral agreement pursuant to which two
parties agree to take or make delivery of an amount of liquid
assets equal to a specified dollar amount multiplied by the
difference between the stock index value at the close of the last
trading day of the contract and the price at which the futures
contract is originally struck. No physical delivery of the
underlying stocks in the index is made. The Fund will not
purchase and sell options on stock index futures contracts.
11
<PAGE>
The Fund may not purchase or sell a stock index future
if, immediately thereafter, more than 30% of its total assets
would be hedged by stock index futures. In connection with its
purchase of stock index futures contracts the Fund will deposit
in a segregated account with the Fund's custodian an amount of
liquid assets equal to the market value of the futures contracts
less any amount maintained in a margin account with the Fund's
broker. The Fund may not purchase or sell a stock index future
if, immediately thereafter, the sum of the amount of margin
deposits on the Fund's existing futures positions would exceed 5%
of the market value of the Fund's total assets.
For a more detailed description of stock index futures
contracts, see Appendix A.
General. The successful use of the foregoing investment
practices, which may be used as a hedge against changes in the
values of securities resulting from market conditions, draws upon
the Adviser's special skills and experience with respect to such
instruments and usually depends on the Adviser's ability to
forecast movements of specific securities or stock indices
correctly. Should these securities or indices move in an
unexpected manner, the Fund may not achieve the anticipated
benefits of options and stock index futures contracts or may
realize losses and, thus, be in a worse position than if such
strategies had not been used. In addition, the correlation
between movements in the prices of such instruments and movements
in the prices of securities being hedged or used for cover will
not be perfect and could produce unanticipated losses. The
Fund's ability to dispose of its position in options and stock
index futures will depend on the availability of liquid markets
in these instruments. No assurance can be given that the Fund
will be able to close a particular option or stock index futures
position.
Portfolio Turnover
The Fund's investment policies and practices 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 150%, it could, under some
conditions, exceed 150%. A 150% annual turnover rate would
occur, for example, if all of the stocks in the Fund's portfolio
were replaced one and a half times 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
12
<PAGE>
particular issuer's securities from the Fund's portfolio. A
portfolio turnover rate approximating 150% involves
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.
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 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 in connection with the
writing of call options and except to secure permitted
borrowings;
(e) invest in the securities of any issuer which
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 to be invested in the securities of
such issuer or issuers;
(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;
13
<PAGE>
(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 (other than
stock index futures 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 practice, including any 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.
_________________________________________________________________
MANAGEMENT OF THE FUND
_________________________________________________________________
Adviser
Alliance Capital Management L.P., 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
14
<PAGE>
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 __________,
1999 of more than $___ billion (of which more than $__ billion
represented the assets of investment companies). The Adviser's
clients are primarily major corporate employee benefit funds,
public employee retirement systems, investment companies,
foundation and endowment funds. The ___ registered investment
companies managed by the Adviser, comprising ___ investment
portfolios, currently have more than ____ million shareholders.As
of __________, 1999, the Adviser and its subsidiaries employed
approximately ______ employees who operated 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
Paulo, Seoul, Singapore, Sydney, Tokyo, Toronto, Vienna and
Warsaw.As of __________, 1999, the Adviser was an investment
manager of employee benefit fund assets for __ 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, which is 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.
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.
15
<PAGE>
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, 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 space and certain other equipment, investment
advisory and 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. The Fund paid to the Adviser
a total of $____ in respect of such services during the fiscal
year of the Fund ended in 1998.
For the services rendered by the Adviser under the
Advisory Agreement, the Fund pays the Adviser at an annualized
rate of 1.00% 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 November 7,
1997. The Advisory Agreement was 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
16
<PAGE>
for that purpose held on that date, and by the Fund's initial
shareholder on November 3, 1997.
The Advisory Agreement will remain in effect until
November 5, 1999 and continue in effect thereafter only so long
as its continuance is approved annually by a vote of a majority
of the Fund's outstanding voting securities (as defined in the
1940 Act) 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 in the 1940 Act.
The Advisory Agreement may be terminated without penalty
on 60 days' written notice by a vote of a majority of the Fund's
outstanding voting securities, by a vote of a majority of the
Directors, 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 will not be liable for any action or failure to act
in accordance with its duties thereunder.
Certain other clients of the Adviser 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.
The Adviser may act as an investment adviser to other
persons, firms or corporations, including investment companies,
and is investment adviser to the following registered investment
companies: ACM Institutional Reserves, Inc., AFD Exchange
Reserves, 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
17
<PAGE>
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 Premier Growth
Fund, Inc., Alliance North American Government Income Trust,
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., AMC
Managed Multi-Market Trust, 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.
Directors
JOHN D. CARIFA,* 53, Chairman of the Board is the
President, Chief Operating Officer and a Director of ACMC, with
which he has been associated since prior to 1993.
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.
____________________
* An "interested person" of the Fund as defined in the 1940
Act.
18
<PAGE>
DAVID H. DIEVLER, 69, is an independent consultant. He
was formerly a Senior Vice President of ACMC until December 1994.
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 Adviser and
independent consultant. He was formerly Senior Manager of
Barrett Associates, Inc., a registered investment adviser, with
which he has been associated with since prior to 1993. 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 partner 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
partner and a member of the Executive Committee of that firm. He
was also a trustee of the Museum of the City of New York from
1977 to 1995. His address is 98 Hell's Peak Road, Weston,
Vermont 05161.
Officers
JOHN D. CARIFA, President, Chairman and President, see
biography above.
ALFRED HARRISON, Executive Vice President, 59, is Vice
Chairman of the Board of ACMC, with which he has been associated
since prior to 1992.
ALDEN M. STEWART, Executive Vice President, 51, is an
Executive Vice President of ACMC since July 1993. Previously, he
was associated with ECMC since prior to 1992.
19
<PAGE>
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, 32, has been a
Vice President of ACMC since July, 1993. Prior thereto he was
associated with ECMC.
DANIEL G. PINE, Senior Vice President, 44, has been
associated with the Adviser since 1996. Previously, he was a
Senior Vice President of Desai Capital Management since prior to
1992.
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.
with which he has been associated since prior to 1993.
VINCENT S. NOTO, Controller, 34, is a Vice President of
Alliance Fund Services, Inc., with which he has been associated
since prior to 1993.
JOSEPH MANTINEO, Assistant Controller, 38, has been a
Vice President of Alliance Fund Services, Inc. since prior to
1992.
PHYLLIS CLARKE, Assistant Controller, 37, is an
Accounting Manager of Mutual Funds for Alliance Fund Services,
Inc. since prior to 1992.
JUAN J. RODRIGUEZ, Assistant Controller, 40, is an
Assistant Vice President of Alliance Fund Services, Inc. with
which he has been associated since prior to 1992.
EDMUND P. BERGAN, JR., Secretary, 48, is a Senior Vice
President and the General Counsel of Alliance Fund Distributors,
Inc. and Alliance Fund Services, Inc. with which he has been
associated since prior to 1993.
20
<PAGE>
DOMENICK PUGLIESE, Assistant Secretary, 37, is a Vice
President and Assistant General Counsel of Alliance Fund
Distributors, Inc., with which he has been associated since May
1995. Prior thereto, he was Vice President and Counsel of
Concord Holding Corporation since 1994 and Vice President and
Associate General Counsel of Prudential Securities since
1993.
The aggregate compensation paid by the Company to each
of the Directors during its fiscal period 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.
Total Number Total Number
of Investment of Investment
Companies in Portfolios with-
the Alliance in the Alliance
Total Complex, Fund Complex,
Compensation Including the Including the
from the Fund, as to Fund, as to
Aggregate Alliance Fund which the which the
Compensation Complex, Director is a Director is a
from the Including the Director or Director or
Name of Director Company Company Trustee 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 _______, 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.
21
<PAGE>
_________________________________________________________________
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 which 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").
Pursuant to the Rule 12b-1 Plan, the Fund pays to
Alliance Fund Distributors, Inc. 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 Fund's 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 by personal
service and/or the maintenance of shareholder accounts.
The Rule 12b-1 Plan provides that Alliance Fund
Distributors, Inc. 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 Fund's 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 Fund, will not be used to pay any interest
expenses, carrying charges or other financing costs or allocation
of overhead of Alliance Fund Distributors, Inc. The Rule 12b-1
Plan also provides that Alliance may use its own resources to
finance the distribution of the Fund's shares.
During the Fund's fiscal period ended October 31, 1998,
the Fund paid distribution services fees for expenditures under
the Agreement, with respect to Class I shares, in amounts
aggregating $_______ which constituted approximately ____% of the
22
<PAGE>
average daily net assets attributable to Class I shares during
the period, and the Adviser made payments from its own resources
as described above aggregating $_______. Of the $_______ paid by
the Fund and the Adviser with respect to the Class I shares under
the Agreement, $_______ was spent on advertising, $_______ on the
printing and mailing of prospectuses for persons other than
current shareholders, $_______ for compensation to broker-dealers
and other financial intermediaries (including, $_______ to the
Fund's Principal Underwriters), $_______ for compensation to
sales personnel, $_______ was spent on printing of sales
literature, travel, entertainment, due diligence and other
promotional expenses, and $_______ was spent on interest on Class
I shares financing.
During the Fund's fiscal period ended October 31, 1998,
the Fund paid distribution services fees for expenditures under
the Agreement, with respect to Class II shares, in amounts
aggregating $_______, which constituted approximately ____% of
the average daily net assets attributable to Class II shares
during the period, and the Adviser made payments from its own
resources as described above aggregating $_______. Of the
$________ paid by the Fund and the Adviser with respect to the
Class II shares under the Agreement, $_______ was spent on
advertising, $______ on the printing and mailing of prospectuses
for persons other than current shareholders, $________ for
compensation to broker-dealers and other financial intermediaries
(including, $_______ to the Fund's Principal Underwriters),
$______ for compensation to sales personnel, $______ was spent on
printing of sales literature, travel, entertainment, due
diligence and other promotional expenses, and $_______ was spent
on interest on Class II shares financing.
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
committed to the discretion of such disinterested Directors then
in office. The Agreement was initially approved by the Directors
at a meeting held on November 7, 1997, and by the Fund's initial
shareholder on November 3, 1997.
The Agreement became effective on November 7, 1997. The
Agreement will continue in effect so long as its continuance is
specifically approved 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
23
<PAGE>
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.
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.
The Glass-Steagall Act and other applicable laws may
limit the availability of a bank or other depository institution
to become an underwriter or distributor of securities. However,
in the opinion of the Fund's management, based on the advice of
counsel, these laws do not prohibit such depository institutions
from providing services for investment companies such as the
administrative, accounting and other services referred to in the
Agreement. In the event that a change in these laws prevented a
bank from providing such services, it is expected that other
service arrangements would be made and that shareholders would
not be adversely affected.
Transfer Agency Agreement
Alliance Fund Services, an indirect wholly-owned
subsidiary of the Adviser, located at 500 Plaza Drive, Secaucus,
New Jersey 07094, acts as the Fund's registrar, transfer agent
and dividend-disbursing agent for a fee based upon the number of
account holders of each of the Class I and Class II shares of the
24
<PAGE>
Fund, plus reimbursement for its 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.
_________________________________________________________________
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.
25
<PAGE>
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
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
26
<PAGE>
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
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. 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
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.
27
<PAGE>
In addition to the discount or commission which may be
paid to dealers or agents in connection with the sale of the Fund
shares, the Principal Underwriter from time to time pay
additional cash or other incentives to dealers or agents,
including EQ Financial Consultants, Inc., formerly Equico
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
28
<PAGE>
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
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.
29
<PAGE>
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. Payment of the redemption
price will be made within seven days after the Fund's receipt of
such tender for redemption. If a shareholder is in doubt about
what documents are required by his or her fee-based program or
employee benefit plan, the shareholder should contact 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
30
<PAGE>
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
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 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. 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. 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. Telephone
redemption by check is not available with respect to shares
31
<PAGE>
(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.
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 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. Eastern time (certain selected financial
intermediaries may enter into operating agreements permitting
them to transmit purchase information to the Principal
Underwriter after 5:00 p.m. Eastern time and receive that day's
net asset value). 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.
32
<PAGE>
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.
_________________________________________________________________
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.
33
<PAGE>
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
-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 Alliance Mutual Fund whose
shares are being acquired, as applicable. An exchange is
34
<PAGE>
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
the check has cleared, normally up to 15 calendar days following
the purchase date.
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
35
<PAGE>
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
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
36
<PAGE>
under the retirement plan prototype forms available from the
Fund, charges certain nominal fees for establishing an account
and for annual maintenance. A portion of these fees is remitted
to Alliance Fund Services, Inc. as compensation for its services
to the retirement plan accounts maintained with the Fund.
Distributions from retirement plans are subject to
certain Code requirements in addition to normal redemption
procedures. For additional information please contact Alliance
Fund Services, Inc.
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 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 Fund on each Fund 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 Fund 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
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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
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.
("Nasdaq") 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 the 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
38
<PAGE>
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.
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.
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The assets attributable to the Class I shares 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 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 that 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 on 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 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
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<PAGE>
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
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 that particular dividend or distribution.
Furthermore, a dividend or distribution made shortly after the
purchase of Fund shares by a shareholder, although in effect a
return of capital to the 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
41
<PAGE>
shareholder's risk of loss is offset by means of options, short
sales or similar transactions is not counted.
Any loss realized by a shareholder on a sale or exchange
of shares of the Fund will be disallowed to the extent the shares
disposed of are replaced within a period of 61 days beginning 30
days before and ending 30 days after the shares are sold or
exchanged. For this purpose, acquisitions pursuant to the
Dividend Reinvestment Plan would constitute a replacement if made
within 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.
United States Federal Income Taxation of the Fund
The following discussion relates to certain significant
United States federal income tax consequences to the Fund with
respect to the determination of its "investment company taxable
income" each year. This discussion assumes that the Fund will be
taxed as a regulated investment company for each of its taxable
years.
Options, Futures Contracts and Warrants. Regulated
futures contracts and certain listed options are considered
"section 1256 contracts" for federal income tax purposes.
Section 1256 contracts held by the Fund at the end of a taxable
year will be "marked to market" and treated for federal income
tax purposes as though sold for fair market value on the last
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business day of that taxable year. Gain or loss realized by the
Fund on section 1256 contracts generally will be considered 60%
long-term and 40% short-term capital gain or loss. The Fund can
elect to exempt its section 1256 contracts which are part of a
"mixed straddle" (as described below) from the application of
section 1256.
With respect to put and call equity options, gain or
loss realized by the Fund upon the lapse or sale of such options
held by the Fund will be either long-term or short-term capital
gain or loss depending upon the Fund's holding period with
respect to such option. However, gain or loss realized upon the
lapse or closing out of such options that are written by the Fund
will be treated as short-term capital gain or loss. In general,
if the Fund exercises an option, or if an option that the Fund
has written is exercised, gain or loss on the option will not be
separately recognized but the premium received or paid will be
included in the calculation of gain or loss upon disposition of
the property underlying the option. Warrants which are invested
in by the Fund will generally be treated in the same manner for
federal income tax purposes as options held by the Fund.
Tax Straddles. Any option, futures contract or other
position entered into or held by the Fund in conjunction with any
other position held by the Fund may constitute a "straddle" for
federal income tax purposes. A straddle of which at least one,
but not all, of the positions involved are section 1256 contracts
may constitute a "mixed straddle." In general, straddles are
subject to certain rules that may affect the character and timing
of the Fund's gains and losses with respect to straddle positions
by requiring, among other things, that (i) loss realized on
disposition of one position of a straddle not be recognized to
the extent that the Fund has unrealized gains with respect to the
other position in the straddle; (ii) the Fund's holding period in
straddle positions be suspended while the straddle exists
(possibly resulting in gain being treated as short-term capital
gain rather than long-term capital gain); (iii) losses recognized
with respect to certain straddle positions which are part of a
mixed straddle and which are non-section 1256 positions be
treated as 60% long-term and 40% short-term capital loss;
(iv) losses recognized with respect to certain straddle positions
which would otherwise constitute short-term capital losses be
treated as long-term capital losses; and (v) the deduction of
interest and carrying charges attributable to certain straddle
positions may be deferred. Various elections are available to
the Fund which may mitigate the effects of the straddle rules,
particularly with respect to mixed straddles. In general, the
straddle rules described above do not apply to any straddles held
by the Fund all of the offsetting positions of which consist of
section 1256 contracts.
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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.
_________________________________________________________________
PORTFOLIO TRANSACTIONS
_________________________________________________________________
Subject to the general supervision and control of the
Directors of the Company, the Adviser makes the Fund's portfolio
decisions and determines the broker to be used in each specific
transaction with the objective of negotiating best price and
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.
Consistent with the Rules of Fair Practice of the National
Association of Securities Dealers, Inc., and subject to seeking
best execution, the Fund may consider sales of shares of the Fund
as a factor in the selection of broker-dealers to execute
portfolio transactions for the Fund.
Neither the Company nor the Adviser has entered into
agreements or understandings with any brokers regarding the
placement of securities transactions because of research or
statistical 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. 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 and
statistical services furnished by brokers through which the Fund
effects securities transactions are used by the Adviser in
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<PAGE>
carrying out its investment management responsibilities with
respect to all its client accounts but not all such services may
be used by the Adviser in connection with the Fund.
The extent to which commissions that will be charged by
broker-dealers selected by the Fund may reflect an element of
value for research cannot presently be determined. To the extent
that research services of value are provided by broker-dealers
with or through whom the Fund places portfolio transactions, the
Adviser may be relieved of expenses which it might otherwise
bear. Research services furnished by broker-dealers could be
useful and of value to the Adviser in servicing its other clients
as well as the Fund; but, on the other hand, certain research
services obtained by the Adviser as a result of the placement of
portfolio brokerage of other clients could be useful and of value
to it in serving the Fund. Consistent with the 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 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.
With respect to orders placed with Donaldson, Lufkin &
Jenrette Securities Corporation (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 Fund), 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.
During the fiscal period _______ (commencement of the
operations) to October 31, 1998, the Fund incurred brokerage
commissions amounted in the aggregate to $__________ and
$_________, respectively. During the fiscal period _______
(commencement of operations) to October 31, 1998, brokerage
commissions amounting in the aggregate to $__________ and
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$_______, respectively, were paid to DLJ and brokerage
commissions amounting in the aggregate to $__________ and
$_________, respectively, were paid to brokers utilizing the
Pershing Division of DLJ. During the fiscal period _________
(commencement of operations) to October 31, 1998, the brokerage
commissions paid to DLJ constituted ___% and ___%, respectively,
of the Fund's aggregate brokerage commissions and the brokerage
commissions paid to brokers utilizing the Pershing Division of
DLJ constituted ___% and ___%, respectively, of the Fund's
aggregate brokerage commissions. During the fiscal period ______
(commencement of operations) to October 31, 1998, of the Fund's
aggregate dollar amount of brokerage transactions involving the
payment of commissions, ___% and ___%, respectively, were
effected through DLJ and ___% and ___%, respectively, were
effected through brokers utilizing the Pershing Division of DLJ.
During the fiscal period _______ (commencement of operations) to
October 31, 1998, transactions in portfolio securities of the
Fund aggregating $__________ and $_________, respectively, with
associated brokerage commissions of approximately $_________ and
$________, respectively, were allocated to persons or firms
supplying research services to the Fund or the Adviser.
_________________________________________________________________
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.
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
46
<PAGE>
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.
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.
At __________, 1999 there were ___________ shares of
common stock of the Fund outstanding. To the knowledge of the
Fund, ____________ owned of record or beneficially, 5% or more of
a class of the outstanding shares of the Fund as of
___________.
Custodian
State Street Bank and Trust Company, 225 Franklin
Street, Boston, Massachusetts, will act as the Fund's custodian
for the assets of the Fund but plays no part in decisions as to
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
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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." Such advertisements disclose the Fund's average annual
compounded total return for the periods prescribed by the
Commission. 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 when paid
and the maximum sales charges applicable to purchases and
redemptions of the Fund's shares are assumed to have been
paid.
The Fund's 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 may quote performance rankings or ratings
of the Fund as measured by financial publications or by
independent organizations such as Lipper Analytical Services,
Inc. and Morningstar, Inc. or may compare the Fund's performance
to various indices. 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.
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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.
_______________________________________________________________
REPORT OF INDEPENDENT AUDITORS AND FINANCIAL STATEMENTS
_______________________________________________________________
To be provided by subsequent post-effective amendment
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_________________________________________________________________
APPENDIX A
_________________________________________________________________
Stock Index Futures Characteristics. Currently, stock
index futures contracts can be purchased or sold with respect to
the Standard & Poor's 500 Stock Index on the Chicago Mercantile
Exchange, the New York Stock Exchange Composite Index on the New
York Futures Exchange and the Value Line Stock Index on the
Kansas City Board of Trade. The Adviser does not believe that
differences in composition of the three indices will create any
differences in the price movements of the stock index futures
contracts in relation to the movements in such indices. However,
such differences in the indices may result in differences in
correlation of the futures contracts with movements in the value
of the securities being hedged. The Fund reserves the right to
purchase or sell stock index futures contracts that may be
created in the future. Certain exchanges and Boards of Trade
have established daily limits on the amount that the price of a
stock index futures contract may vary, either up or down, from
the previous day's settlement price, which limitations may
restrict the Fund's ability to purchase or sell certain stock
index futures contracts on a particular day.
Unlike the purchase or sale of a specific security by
the Fund, no price is paid or received by the Fund upon the
purchase or sale of a futures contract. Initially, the Fund will
be required to deposit with the broker through which such
transaction is effected or in a segregated account with the
Fund's Custodian an amount of cash, U.S. Government securities or
other liquid high-quality debt securities equal to the market
value of the stock index futures contract less any amounts
maintained in a margin account with the Fund's broker. This
amount is known as initial margin. The nature of initial margin
in futures transactions is different from that of margin in
security transactions in that futures contract margin does not
involve the borrowing of funds to finance transactions. Rather,
the initial margin is in the nature of a performance bond or good
faith deposit on the contract which is returned to the Fund upon
termination of the futures contract, assuming all contractual
obligations have been satisfied. Additional payments of cash,
Government securities or other liquid high-quality debt
securities, called variation margin, to and from the broker may
be made on a daily basis as the price of the underlying stock
index fluctuates, a process known as marking to the market. For
example, when the Fund has purchased a stock index futures
contract and the price of the futures contract has risen in
response to a rise in the underlying stock index, that position
will have increased in value and the Fund will receive from the
broker a variation margin payment equal to that increase in
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value. Conversely, where the Fund has purchased a stock index
futures contract and the price of the futures contract has
declined in response to a decrease in the underlying stock index,
the position would be less valuable and the Fund would be
required to make a variation margin payment to the broker. At
any time prior to expiration of the futures contract, the Adviser
may elect to close the position by taking an opposite position
which will operate to terminate the Fund's position in the
futures contract. A final determination of variation margin is
then made, additional cash is required to be paid by or released
to the Fund, and the Fund realizes a loss or gain.
Risks of Transactions in Stock Index Futures. There are
several risks in connection with the use of stock index futures
by the Fund as a hedging device. One risk arises because of the
imperfect correlation between movements in the price of stock
index futures and movements in the price of the securities which
are the subject of the hedge. The price of a stock index futures
may move more than or less than the price of the securities being
hedged. If the price of the stock index futures moves less than
the price of the securities which are the subject of the hedge,
the hedge will not be fully effective, but, if the price of the
securities being hedged has moved in an unfavorable direction,
the Fund would be in a better position than if it had not hedged
at all. If the price of the securities being hedged has moved in
a favorable direction, this advantage will be partially offset by
the loss on the index future. If the price of the future moves
more than the price of the stock, the Fund will experience either
a loss or gain on the future which will not be completely offset
by movements in the price of the securities which are the subject
of the hedge. To compensate for the imperfect correlation of
movements in the price of securities being hedged and movements
in the price of the stock index futures, the Fund may buy or sell
stock index futures contracts in a greater dollar amount than the
dollar amount of securities being hedged if the volatility over a
particular time period of the prices of such securities has been
greater than the volatility over such time period for the index,
or if otherwise deemed to be appropriate by the Adviser.
Conversely, the Fund may buy or sell fewer stock index futures
contracts if the volatility over a particular time period of the
prices of the securities being hedged is less than the volatility
over such time period of the stock index, or if otherwise deemed
to be appropriate by the Adviser. It is also possible that where
the Fund has sold futures to hedge its portfolio against a
decline in the market, the market may advance and the value of
securities held in the Fund may decline. If this occurs, the
Fund would lose money on the futures contract and also experience
a decline in value in its portfolio securities. However, over
time the value of the Fund's portfolio should tend to move in the
same direction as the market indices upon which the futures
contracts are based, although there may be deviations arising
A-2
<PAGE>
from differences between the composition of the Fund and the
stocks comprising the index.
Where stock index futures contracts are purchased to
hedge against a possible increase in the price of stocks before
the Fund is able to invest its cash (or cash equivalents) in
stocks (or options) in an orderly fashion, it is possible that
the market may decline instead. If the Fund then concludes not
to invest in stocks or options at that time because of concern as
to a possible further market decline or for other reasons, the
Fund will realize a loss on the futures contract that is not
offset by a reduction in the price of securities purchased.
In addition to the possibility that there may be an
imperfect correlation, or no correlation at all, between
movements in stock index futures and the portion of the portfolio
being hedged, the price of stock index futures may not correlate
perfectly with movement in the stock index due to market
distortions. Rather than meeting additional margin deposit
requirements, investors may close futures contracts through off-
setting transactions which could distort the normal relationship
between the index and futures markets. Secondly, from the point
of view of speculators, the deposit requirements in the futures
market are less onerous than margin requirements in the
securities market. Therefore, increased participation by
speculators in the futures market may also cause temporary price
distortions. Due to the possibility of price distortions in the
futures market, and because of the imperfect correlation between
the movements in the stock index and movements in the price of
stock index futures, a correct forecast of general market trends
by the Adviser may still not result in a successful hedging
transaction over a short time frame.
Positions in stock index futures contracts may be closed
out only on an exchange or board of trade which provides a
secondary market for such futures. Although the Fund intends to
purchase or sell futures contracts only on exchanges or boards of
trade where there appear to be active secondary markets, there is
no assurance that a liquid secondary market on any exchange or
board of trade will exist for any particular contract or at any
particular time. In that event, it may not be possible to close
a futures investment position, and in the event of adverse price
movements, the Fund would continue to be required to make daily
cash payments of variation margin. However, in the event futures
contracts have been used to hedge portfolio securities, such
securities will not be sold until the futures contract can be
terminated. In such circumstances, an increase in the price of
the securities, if any, may partially or completely offset losses
on the futures contract. However, as described above, there is no
guarantee that the price of securities will in fact correlate
A-3
<PAGE>
with price movements in futures contract and thus provide an
offset on the futures contract.
The Fund's Adviser intends to purchase and sell futures
contracts on the stock index for which it can obtain the best
price with due consideration to liquidity.
Successful use of stock index futures by the Fund is
also subject to the Adviser's ability to predict correctly
movements in the direction of the market. For example, if the
Fund has hedged against the possibility of a decline in the
market adversely affecting stocks held in its portfolio and stock
prices increase instead, the Fund will lose part or all of the
benefit of the increased value of its stock which it has hedged
because it will have offsetting losses in its futures positions.
In addition, in such situations, if the Fund has insufficient
cash, it may have to sell securities to meet daily variation
margin requirements. Such sales of securities may be, but will
not necessarily be, at increased prices which reflect the rising
market. The Fund may have to sell securities at a time when it
may be disadvantageous to do so.
A-4
<PAGE>
The Registrant's Statement of Additional Information relating to
Alliance Growth Institutional Fund is incorporated herein by
reference to Part B of Post-Effective Amendment No. 1 to the
Registrant's Registration Statement on Form N-1A filed with the
Commission on December 15, 1998.
<PAGE>
(LOGO) ALLIANCE INSTITUTIONAL FUNDS, INC.
- ALLIANCE QUASAR
INSTITUTIONAL FUND
____________________________________________________________
c/o Alliance Fund Services, Inc.
P.O. Box 1520, Secaucus, New Jersey 07096-1520
Toll Free (800) 221-5672
For Literature: Toll Free (800) 227-4618
_______________________________________________________________
STATEMENT OF ADDITIONAL INFORMATION
March 1, 1999
_______________________________________________________________
This Statement of Additional Information is not a
prospectus but supplements and should be read in conjunction with
the Prospectus dated March 1, 1999 (the "Prospectus") for
Alliance Institutional Funds, Inc. (the "Company"). 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.......................
PORTFOLIO TRANSACTIONS...................................
GENERAL INFORMATION......................................
REPORT OF INDEPENDENT AUDITORS AND FINANCIAL
STATEMENTS.............................................
____________________
(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 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 three portfolios: Alliance
Quasar Institutional Fund (the "Fund"), which is described in
this Statement of Additional Information, and Alliance Premier
Growth Institutional Fund, Alliance Real Estate Investment
Institutional Fund and Alliance Growth Institutional Fund, Inc.
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.
Except as otherwise indicated, the investment policies
of the Fund are not "fundamental policies" within the meaning of
the Investment Company Act of 1940, as amended (the "1940 Act"),
and may, therefore, be changed by the Company's Board of
Directors (the "Board of Directors" or the "Directors") without a
shareholder vote. However, the Fund will not change its
investment policies without contemporaneous written notice to its
shareholders. The Fund's investment objective may not be changed
without shareholder approval. There can be, of course, no
assurance that the Fund will achieve its investment objective.
Investment Objective
The investment objective of the Fund is growth of
capital by pursuing aggressive investment policies. Investments
will be made based upon their potential for capital appreciation.
Therefore, current income will be incidental to the objective of
capital growth. 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. Moreover, to the extent the Fund seeks to achieve its
2
<PAGE>
objective through the more aggressive investment policies
described below, risk of loss increases. The Fund is therefore
not intended for investors whose principal objective is assured
income or preservation of capital.
How The Fund Pursues Its Objective
Within this basic framework, the policy of the Fund is
to invest in any companies and industries and in any types of
securities which are believed to offer possibilities for capital
appreciation. Investments may be made in well-known and
established companies as well as in new and unseasoned companies.
Critical factors considered in the selection of securities
include the economic and political outlook, the values of
individual securities relative to other investment alternatives,
trends in the determinants of corporate profits, and management
capability and practices.
It is the policy of the Fund to invest principally in
equity securities (common stocks, securities convertible into
common stocks or rights or warrants to subscribe for or purchase
common stocks); however, it may also invest to a limited degree
in non-convertible bonds and preferred stocks when, in the
judgment of Alliance Capital Management L.P., the Fund's Adviser
(the "Adviser"), such investments are warranted to achieve the
Fund's investment objective. When business or financial
conditions warrant, a more defensive position may be assumed and
the Fund may invest in short-term fixed-income securities, in
investment grade debt securities, in preferred stocks or may hold
its assets in cash.
The Fund may invest in both listed and unlisted domestic
and foreign securities, in restricted securities, and in other
assets having no ready market, but not more than 10% of the
Fund's total assets may be invested in all such restricted or not
readily marketable assets at any one time. Restricted securities
may be sold only in privately negotiated transactions or in a
public offering with respect to which a registration statement is
in effect under Rule 144 or 144A promulgated under the Securities
Act of 1933, as amended (the "Securities Act"). Where
registration is required, the Fund may be obligated to pay all or
part of the registration expense, and a considerable period may
elapse between the time of the decision to sell and the time the
Fund may be permitted to sell a security under an effective
registration statement. If during such a period adverse market
conditions were to develop, the Fund might obtain a less
favorable price than that which prevailed when it decided to
sell. Restricted securities and other not readily marketable
assets will be valued in such manner as the Board of Directors in
good faith deems appropriate to reflect their fair market value.
3
<PAGE>
The Fund intends to invest in special situations from
time to time. A special situation arises when, in the opinion of
the Fund's management, the securities of a particular company
will, within a reasonably estimable period of time, be accorded
market recognition at an appreciated value solely by reason of a
development particularly or uniquely applicable to that company
and regardless of general business conditions or movements of the
market as a whole. Developments creating special situations
might include, among others, the following: liquidations,
reorganizations, recapitalizations or mergers, material
litigation, technological breakthroughs and new management or
management policies. Although large and well-known companies may
be involved, special situations often involve much greater risk
than is inherent in ordinary investment securities. The Fund
will not, however, purchase securities of any company with a
record of less than three years continuous operation (including
that of predecessors) if such purchase would cause the Fund's
investments in such companies, taken at cost, to exceed 25% of
the value of the Fund's total assets.
Additional Investment Policies And Practices
The following additional investment policies and
practices, including restrictions, supplement those set forth
above and in the Prospectus.
General. In seeking to attain its investment objective
of growth of capital, the Fund will supplement customary
investment practices by engaging in a broad range of investment
techniques including short sales "against the box," writing call
options, purchases and sales of put and call options written by
others and investing in special situations. These techniques are
speculative, may entail greater risk, may be considered of a more
short-term nature, and to the extent used, may result in greater
turnover of the Fund's portfolio and a greater expense than is
customary for most investment companies. Consequently, the Fund
is not a complete investment program and is not a suitable
investment for those who cannot afford to take such risks or
whose objective is income or preservation of capital. No
assurance can be given that the Fund will achieve its investment
objective. However, by buying shares in the Fund an investor may
receive advantages he would not readily obtain as an individual,
including professional management and continuous supervision of
investments. The Fund will be subject to the overall limitation
(in addition to the specific restrictions referred to below) that
the aggregate value of all restricted and not readily marketable
securities of the Fund, and of all cash and securities covering
outstanding call options written or guaranteed by the Fund, shall
at no time exceed 15% of the value of the total assets of the
Fund.
4
<PAGE>
There is also no assurance that the Fund will at any
particular time engage in all or any of the investment activities
in which it is authorized to engage. In the opinion of the
Fund's management, however, the power to engage in such
activities provides an opportunity which is deemed to be
desirable in order to achieve the Fund's investment objective.
Short Sales. The Fund may only make short sales of
securities "against the box." A short sale is effected by
selling a security which the Fund does not own, or if the Fund
does own such security, it is not to be delivered upon
consummation of the sale. A short sale is "against the box" to
the extent that the Fund contemporaneously owns or has the right
to obtain securities identical to those sold short without
payment. Short sales may be used by the Fund to defer the
realization of gain or loss for federal income tax purposes on
securities then owned by the Fund. Gains or losses will be short-
or long-term for federal income tax purposes depending upon the
length of the period the securities are held by the Fund before
closing out the short sales by delivery to the lender. The Fund
may, in certain instances, realize short-term gain on short sales
"against the box" by covering the short position through a
subsequent purchase. Not more than 15% of the value of the
Fund's net assets will be in deposits on short sales "against the
box". Pursuant to the Taxpayer Relief Act of 1997, if the Fund
has unrealized gain with respect to a security and enters into a
short sale with respect to such security, the Fund generally will
be deemed to have sold the appreciated security and thus will
recognize gain for tax purposes.
Puts and Calls. The Fund may write call options and may
purchase and sell put and call options written by others,
combinations thereof, or similar options. The Fund may not write
put options. A put option gives the buyer of such option, upon
payment of a premium, the right to deliver a specified number of
shares of a stock to the writer of the option on or before a
fixed date at a predetermined price. A call option gives the
purchaser of the option, upon payment of a premium, the right to
call upon the writer to deliver a specified number of shares of a
specified stock on or before a fixed date, at a predetermined
price, usually the market price at the time the contract is
negotiated. When calls written by the Fund are exercised, the
Fund will be obligated to sell stocks below the current market
price.
The writing of call options will, therefore, involve a
potential loss of opportunity to sell securities at higher
prices. In exchange for the premium received, the writer of a
fully collateralized call option assumes the full downside risk
of the securities subject to such option. In addition, the
writer of the call gives up the gain possibility of the stock
5
<PAGE>
protecting the call. Generally, the opportunity for profit from
the writing of options is higher, and consequently the risks are
greater when the stocks involved are lower priced or volatile, or
both. While an option that has been written is in force, the
maximum profit that may be derived from the optioned stock is the
premium less brokerage commissions and fees. (For a discussion
regarding certain tax consequences of the writing of call options
by the Fund, see "Dividends, Distributions and Taxes".)
Writing, purchasing and selling call options are highly
specialized activities and entail greater than ordinary
investment risks. It is the Fund's policy not to write a call
option if the premium to be received by the Fund in connection
with such option would not produce an annualized return of at
least 15% of the then market value of the securities subject to
option. Commissions, stock transfer taxes and other expenses of
the Fund must be deducted from such premium receipts. Option
premiums vary widely depending primarily on supply and demand.
Calls written by the Fund will ordinarily be sold either on a
national securities exchange or through put and call dealers,
most, if not all, of whom are members of a national securities
exchange on which options are traded, and will in such cases be
endorsed or guaranteed by a member of a national securities
exchange or qualified broker-dealer, which may be Donaldson,
Lufkin & Jenrette Securities Corporation ("DLJ"), an affiliate of
the Adviser. The endorsing or guaranteeing firm requires that
the option writer (in this case the Fund) maintain a margin
account containing either corresponding stock or other equity as
required by the endorsing or guaranteeing firm. A call written
by the Fund will not be sold unless the Fund at all times during
the option period owns either (a) the optioned securities, or
securities convertible into or carrying rights to acquire the
optioned securities or (b) an offsetting call option on the same
securities.
The Fund will not sell a call option written or
guaranteed by it if, as a result of such sale, the aggregate of
the Fund's portfolio securities subject to outstanding call
options (valued at the lower of the option price or market value
of such securities) would exceed 15% of the Fund's total assets.
The Fund will not sell any call option if such sale would result
in more than 10% of the Fund's assets being committed to call
options written by the Fund, which, at the time of sale by the
Fund, have a remaining term of more than 100 days. The aggregate
cost of all outstanding options purchased and held by the Fund
shall at no time exceed 10% of the Fund's total assets.
In buying a call, the Fund would be in a position to
realize a gain if, during the option period, the price of the
shares increased by an amount in excess of the premium paid and
commissions payable on exercise. It would realize a loss if the
6
<PAGE>
price of the security declined or remained the same or did not
increase during the period by more than the amount of the premium
and commissions payable on exercise. By buying a put, the Fund
would be in a position to realize a gain if, during the option
period, the price of the shares declined by an amount in excess
of the premium paid and commissions payable on exercise. It
would realize a loss if the price of the security increased or
remained the same or did not decrease during that period by more
than the amount of the premium and commissions payable on
exercise. In addition, the Fund could realize a gain or loss on
such options by selling them.
As noted above, the Fund may purchase and sell put and
call options written by others, combinations thereof, or similar
options. There are markets for put and call options written by
others and the Fund may from time to time sell or purchase such
options in such markets. If an option is not so sold and is
permitted to expire without being exercised, its premium would be
lost by the Fund.
Portfolio Turnover
Generally, the Fund's policy with respect to portfolio
turnover is to purchase securities with a view to holding them
for periods of time sufficient to assure long-term capital gains
treatment upon their sale and not for trading purposes. However,
it is also the Fund's policy to sell any security whenever, in
the judgment of the Adviser, its appreciation possibilities have
been substantially realized or the business or market prospects
for such security have deteriorated, irrespective of the length
of time that such security has been held. This policy may result
in the Fund realizing short-term capital gains or losses on the
sale of certain securities. See "Dividends, Distributions and
Taxes". It is anticipated that the Fund's rate of portfolio
turnover will not exceed 150% during the current fiscal year. A
150% annual turnover rate would occur, for example, if all the
stocks in the Fund's portfolio were replaced one and a half times
within a period of one year. A portfolio turnover rate
approximating 150% involves correspondingly greater brokerage
commission expenses than would a lower rate, which expenses must
be borne by the Fund and its shareholders.
Other Restrictions
In addition to the investment restrictions described
below, the Fund has undertaken as a matter of non-fundamental
policy that it (i) will not invest more than 10% of its total
assets in the securities of any one issuer; (ii) will not invest
more than 5% of its total assets in securities of issuers which
have been in operation for less than three years, including the
operations of any predecessors, and any equity securities of
7
<PAGE>
issuers which are not readily marketable; (iii) will not invest
more than 5% of its total assets in puts, calls, straddles,
spreads or any combination thereof nor more than 2% of its net
assets in puts or calls written by others; (iv) will not invest
more than 5% of its net assets in warrants nor more than 2% of
its net assets in unlisted warrants; (v) will not invest in real
estate (including limited partnership interests), excluding
readily marketable securities or participations or other direct
interests in oil, gas or other mineral leases, exploration or
development programs; and (vi) will not purchase or retain the
securities of any issuer if those officers and directors of the
Company or its Adviser owning individually more than 1/2 of 1% of
such issuer together own more than 5% of the securities of such
issuer.
Fundamental Investment Policies
In addition to the investment objective and policies
described above, the Fund has adopted certain fundamental
investment policies which may not be changed without approval by
the vote of a majority of the Fund's outstanding voting
securities which means the vote of (1) 67% or more of the shares
represented at a meeting at which more than 50% of the
outstanding shares of the Fund are represented or (2) more than
50% of the outstanding shares of the Fund, whichever is less.
Briefly, these policies provide that the Fund may not:
(i) purchase the securities of any one issuer, other
than the U.S. Government or any of its agencies
or instrumentalities, if as a result more than 5%
of its total assets would be invested in such
issuer or the Fund would own more than 10% of the
outstanding voting securities of such issuer,
except that up to 25% of its total assets may be
invested without regard to such 5% and 10%
limitations;
(ii) invest more than 25% of the value of its total
assets in any particular industry;
(iii) borrow money except for temporary or emergency
purposes in an amount not exceeding 5% of its
total assets at the time the borrowing is made;
(iv) invest more than 10% of its assets in restricted
securities;
(v) purchase or sell real estate;
8
<PAGE>
(vi) participate on a joint or joint and several basis
in any securities trading account;
(vii) invest in companies for the purpose of exercising
control;
(viii) purchase or sell commodities or commodity
contracts;
(ix) write put options;
(x) except as permitted in connection with short
sales of securities "against the box" described
under the heading "Short Sales" above, make short
sales of securities;
(xi) make loans of its funds or assets to any other
person, which shall not be considered as
including the purchase of a portion of an issue
of publicly distributed bonds, debentures, or
other securities, whether or not the purchase was
made upon the original issuance of the
securities; except that the Fund may not purchase
non-publicly distributed securities subject to
the limitations applicable to restricted
securities;
(xii) except as permitted in connection with short
sales of securities or writing of call options,
described under the headings "--Short Sales" and
"--Puts and Calls" above, pledge, mortgage or
hypothecate any of its assets;
(xiii) except as permitted in connection with short
sales of securities "against the box" described
under the heading "Additional Investment Policies
and Practices" above, make short sales of
securities; and
(xiv) purchase securities on margin, but it may obtain
such short-term credits as may be necessary for
the clearance of purchases and sales of
securities.
Application of Percentage Limitations
Except as otherwise indicated, whenever any investment
policy or practice, including any 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
9
<PAGE>
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.
_______________________________________________________________
MANAGEMENT OF THE FUND
_______________________________________________________________
Adviser
Alliance Capital Management L.P., 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
___________, 1999 of more than $___ billion (of which more than
$__ billion represented the assets of investment companies). The
Adviser's clients are primarily major corporate employee benefit
funds, public employee retirement systems, investment companies,
foundation and endowment funds. The ___ registered investment
companies managed by the Adviser, comprising ___ investment
portfolios, currently have more than ___ million shareholders.As
of ____________, 1999, the Adviser and its subsidiaries employed
approximately _____ employees who operated 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
Paulo, Seoul, Singapore, Sydney, Tokyo, Toronto, Vienna and
Warsaw. As of ___________, 1999, the Adviser was an investment
manager of employee benefit fund assets for __ 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, which is 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
10
<PAGE>
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.
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, 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 space and certain other equipment, investment
advisory and 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
11
<PAGE>
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. The Fund paid to the Adviser
a total of $____ in respect of such services during the fiscal
year of the Fund ended in 1998.
For the services rendered by the Adviser under the
Advisory Agreement, the Fund pays the Adviser at an annualized
rate of 1.00% 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 November 7,
1997. The Advisory Agreement was 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 November 3, 1997.
The Advisory Agreement will remain in effect until
November 5, 1999 and continue in effect thereafter only so long
as its continuance is approved annually by a vote of a majority
of the Fund's outstanding voting securities (as defined in the
1940 Act) 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 in the 1940 Act.
The Advisory Agreement may be terminated without penalty
on 60 days' written notice by a vote of a majority of the Fund's
outstanding voting securities, by a vote of a majority of the
Directors, 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 will not be liable for any action or failure to act
in accordance with its duties thereunder.
Certain other clients of the Adviser 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
12
<PAGE>
deemed equitable by the Adviser to the accounts involved,
including the Fund. When two or more of the clients of the
Adviser (including the Fund) are purchasing or selling the same
security on a given day from the same broker-dealer, such
transactions may be averaged as to price.
The Adviser may act as an investment adviser to other
persons, firms or corporations, including investment companies,
and is investment adviser to the following registered investment
companies: ACM Institutional Reserves, Inc., AFD Exchange
Reserves, 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 Premier Growth
Fund, Inc., Alliance North American Government Income Trust,
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., AMC
Managed Multi-Market Trust, 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
13
<PAGE>
specified, the address of each of the following is 1345 Avenue of
the Americas, New York, New York 10105.
Directors
JOHN D. CARIFA,** 53, Chairman of the Board is the
President, Chief Operating Officer and a Director of ACMC, with
which he has been associated since prior to 1993.
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 ACMC until December 1994.
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 Adviser and
independent consultant. He was formerly Senior Manager of
Barrett Associates, Inc., a registered investment adviser, with
which he has been associated with since prior to 1993. 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 partner 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.
14
<PAGE>
partner and a member of the Executive Committee of that firm. He
was also a trustee of the Museum of the City of New York from
1977 to 1995. His address is 98 Hell's Peak Road, Weston,
Vermont 05161.
Officers
JOHN D. CARIFA, President, Chairman and President, see
biography above.
ALFRED HARRISON, Executive Vice President, 59, is Vice
Chairman of the Board of ACMC, with which he has been associated
since prior to 1992.
ALDEN M. STEWART, Executive Vice President, 51, is an
Executive Vice President of ACMC since July 1993. Previously, he
was associated with ECMC since prior to 1992.
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, 32, has been a
Vice President of ACMC since July, 1993. Prior thereto he was
associated with ECMC.
DANIEL G. PINE, Senior Vice President, 44, has been
associated with the Adviser since 1996. Previously, he was a
Senior Vice President of Desai Capital Management since prior to
1992.
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.
with which he has been associated since prior to 1993.
15
<PAGE>
VINCENT S. NOTO, Controller, 34, is a Vice President of
Alliance Fund Services, Inc., with which he has been associated
since prior to 1993.
JOSEPH MANTINEO, Assistant Controller, 38, has been a
Vice President of Alliance Fund Services, Inc. since prior to
1992.
PHYLLIS CLARKE, Assistant Controller, 37, is an
Accounting Manager of Mutual Funds for Alliance Fund Services,
Inc. since prior to 1992.
JUAN J. RODRIGUEZ, Assistant Controller, 40, is an
Assistant Vice President of Alliance Fund Services, Inc. with
which he has been associated since prior to 1992.
EDMUND P. BERGAN, JR., Secretary, 48, is a Senior Vice
President and the General Counsel of Alliance Fund Distributors,
Inc. and Alliance Fund Services, Inc. with which he has been
associated since prior to 1993.
DOMENICK PUGLIESE, Assistant Secretary, 37, is a Vice
President and Assistant General Counsel of Alliance Fund
Distributors, Inc., with which he has been associated since May
1995. Prior thereto, he was Vice President and Counsel of
Concord Holding Corporation since 1994 and Vice President and
Associate General Counsel of Prudential Securities since
1993.
The aggregate compensation paid by the Company to each
of the Directors during its fiscal period 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.
Total Number
Total Number of Investment
of Investment Portfolios
Companies in within the
the Alliance Alliance
Total Complex, Fund Complex
16
<PAGE>
Compensation Including the Including the
from the Fund, as to Fund, as to
Aggregate Alliance Fund which the which the
Compensation Complex, Director is a Director is
from the Including the Director or a Director or
Name of Director Company Company Trustee 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 _______, 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 which 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").
Pursuant to the Rule 12b-1 Plan, the Fund pays to
Alliance Fund Distributors, Inc. 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 Fund's 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 by personal
service and/or the maintenance of shareholder accounts.
17
<PAGE>
The Rule 12b-1 Plan provides that Alliance Fund
Distributors, Inc. 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 Fund's 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 Fund, will not be used to pay any interest
expenses, carrying charges or other financing costs or allocation
of overhead of Alliance Fund Distributors, Inc. The Rule 12b-1
Plan also provides that Alliance may use its own resources to
finance the distribution of the Fund's shares.
During the Fund's fiscal period ended October 31, 1998,
the Fund paid distribution services fees for expenditures under
the Agreement, with respect to Class I shares, in amounts
aggregating $_______ which constituted approximately ____% of the
average daily net assets attributable to Class I shares during
the period, and the Adviser made payments from its own resources
as described above aggregating $_______. Of the $_______ paid by
the Fund and the Adviser with respect to the Class I shares under
the Agreement, $_______ was spent on advertising, $_______ on the
printing and mailing of prospectuses for persons other than
current shareholders, $_______ for compensation to broker-dealers
and other financial intermediaries (including, $_______ to the
Fund's Principal Underwriters), $_______ for compensation to
sales personnel, $_______ was spent on printing of sales
literature, travel, entertainment, due diligence and other
promotional expenses, and $_______ was spent on interest on
Class I shares financing.
During the Fund's fiscal period ended October 31, 1998,
the Fund paid distribution services fees for expenditures under
the Agreement, with respect to Class II shares, in amounts
aggregating $_______, which constituted approximately ____% of
the average daily net assets attributable to Class II shares
during the period, and the Adviser made payments from its own
resources as described above aggregating $_______. Of the
$________ paid by the Fund and the Adviser with respect to the
Class II shares under the Agreement, $_______ was spent on
advertising, $______ on the printing and mailing of prospectuses
for persons other than current shareholders, $________ for
compensation to broker-dealers and other financial intermediaries
(including, $_______ to the Fund's Principal Underwriters),
$______ for compensation to sales personnel, $______ was spent on
printing of sales literature, travel, entertainment, due
18
<PAGE>
diligence and other promotional expenses, and $_______ was spent
on interest on Class II shares financing.
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
committed to the discretion of such disinterested Directors then
in office. The Agreement was initially approved by the Directors
at a meeting held on November 7, 1997, and by the Fund's initial
shareholder on November 3, 1997.
The Agreement became effective on November 7, 1997. The
Agreement will continue in effect so long as its continuance is
specifically approved 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.
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
19
<PAGE>
no notice to the Principal Underwriter. The Agreement will
terminate automatically in the event of its assignment.
The Glass-Steagall Act and other applicable laws may
limit the availability of a bank or other depository institution
to become an underwriter or distributor of securities. However,
in the opinion of the Fund's management, based on the advice of
counsel, these laws do not prohibit such depository institutions
from providing services for investment companies such as the
administrative, accounting and other services referred to in the
Agreement. In the event that a change in these laws prevented a
bank from providing such services, it is expected that other
service arrangements would be made and that shareholders would
not be adversely affected.
Transfer Agency Agreement
Alliance Fund Services, an indirect wholly-owned
subsidiary of the Adviser, located at 500 Plaza Drive, Secaucus,
New Jersey 07094, acts as the Fund's registrar, transfer agent
and dividend-disbursing agent for a fee based upon the number of
account holders of each of the Class I and Class II shares of the
Fund, plus reimbursement for its 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.
_________________________________________________________________
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
20
<PAGE>
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
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.
21
<PAGE>
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
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. 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
22
<PAGE>
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
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
23
<PAGE>
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
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
24
<PAGE>
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. Payment of the redemption
price will be made within seven days after the Fund's receipt of
such tender for redemption. If a shareholder is in doubt about
what documents are required by his or her fee-based program or
employee benefit plan, the shareholder should contact 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
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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
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 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. 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
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$50,000. Proceeds of such redemptions are remitted by check to
the shareholder's address of record. 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. 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.
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 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. Eastern time (certain selected financial
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intermediaries may enter into operating agreements permitting
them to transmit purchase information to the Principal
Underwriter after 5:00 p.m. Eastern time, and receive that day's
net asset value). 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.
_________________________________________________________________
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
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<PAGE>
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
-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.
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<PAGE>
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 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
the check has cleared, normally up to 15 calendar days following
the purchase date.
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
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<PAGE>
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
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
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<PAGE>
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
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 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
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redemption order by the Fund on each Fund 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 Fund 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
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.
("Nasdaq") 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
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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 the 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.
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
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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 attributable to the Class I shares 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 adopted by the Fund in accordance with Rule 18f-3 under
the 1940 Act.
_______________________________________________________________
DIVIDENDS, DISTRIBUTIONS AND TAXES
_______________________________________________________________
General
The Fund intends for each taxable year to qualify to be
taxed as a "regulated investment company" under the Code. To the
extent that a Fund distributes its taxable income and net capital
gains, such qualification relieves the Fund of federal income
taxes on that part of its taxable income including net capital
gains which it pays out 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 for such treatment.
The information set forth in the Prospectus and the following
discussion relate solely to federal income taxes on dividends and
distributions by the Fund and assumes that the Fund qualifies as
a regulated investment company. Investors should consult their
own counsel for further details and for the application of state
and local tax laws to his or her particular situation.
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Each 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 reinvested in
additional full or fractional shares of the same class of common
stock of the Fund having an aggregate net asset value as of the
payment date of such dividend or distribution equal to the cash
amount of such dividend or distribution. Election to receive
dividends and distributions in cash or full or fractional shares
is made at the time the shares are initially purchased and may be
changed at any time prior to the record date for a particular
dividend or distribution. Cash dividends can be paid by check
or, if the shareholder so elects, electronically via the ACH
network. There is no sales or other charge in connection with
the reinvestment of dividends and capital gains distributions.
Dividends of net ordinary income and distributions of
any net short-term capital gains are taxable to shareholders as
ordinary income. The dividends-received deduction for
corporations should also be applicable to the Fund's dividends of
net investment income and distributions of net realized short-
term capital gains. The amount of such dividends and
distributions eligible for the dividends-received deduction is
limited to the amount of qualifying dividends from domestic
corporations received by the Fund during the fiscal year. Under
provisions of the tax law, a corporate shareholder's dividends
received deduction will be disallowed unless the shareholder
holds shares in the Fund at least 46 days during the 90-day
period beginning 45 days before the date on which the shareholder
becomes entitled to receive the dividends. 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. Furthermore,
provisions of the tax law disallow the dividends-received
deduction to the extent a corporation's 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. Capital gains
distributions are not eligible for the dividends received
deduction referred to above. Any dividend or distribution
received by a shareholder on shares of the Fund will have the
effect of reducing the net asset value of such shares by the
amount of such dividend or distribution. Furthermore, a dividend
or distribution made shortly after the purchase of such shares by
a shareholder, although in effect a return of capital to that
particular shareholder, would be taxable to him as described
above. For federal income 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
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<PAGE>
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 and distributions are taxable in the manner
described above regardless of whether they are paid to the
shareholder in cash or are reinvested in additional shares of the
Fund's common stock. Any gain or loss arising from a sale or
redemption of Fund shares generally will be capital gain or loss
except in the case of a dealer or a financial institution, and
will be long-term capital gain or loss if such shareholder has
held such shares for more than one year at the time of the sale
or redemption; otherwise it will be short-term capital gain or
loss. 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.
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.
Foreign Tax Credits
Income received by the Fund may also be subject to
foreign income taxes, including withholding taxes. It is
impossible to determine the effective rate of foreign tax in
advance since the amount of the Fund's assets to be invested
within various countries is not known. If more than 50% of the
value of the Fund's total assets at the close of its taxable year
consists of stocks or securities of foreign corporations, the
Fund will be eligible and intends to file an election with the
Internal Revenue Service to pass through to its shareholders the
amount of foreign taxes paid by the Fund. However, there can be
no assurance that the Fund will be able to do so. Pursuant to
this election a shareholder will be required to (i) include in
gross income (in addition to taxable dividends actually received)
his pro rata share of foreign taxes paid by the Fund, (ii) treat
his pro rata share of such foreign taxes as having been paid by
him, and (iii) either deduct such pro rata share of foreign taxes
in computing his taxable income or treat such foreign taxes as a
37
<PAGE>
credit against United States federal income taxes. Shareholders
who are not liable for federal income taxes, such as retirement
plans qualified under section 401 of the Code, will not be
affected by any such pass-through of taxes by the Fund. No
deduction for foreign taxes may be claimed by an individual
shareholder who does not itemize deductions. In addition,
certain shareholders may be subject to rules which limit or
reduce their ability to fully deduct, or claim a credit for,
their pro rata share of the foreign taxes paid by the Fund. A
shareholder's foreign tax credit with respect to a dividend
received from the Fund will be disallowed unless the shareholder
holds shares in the Fund on the ex-dividend date and for at least
15 other days during the 30-day period beginning 15 days prior to
the ex-dividend date. Each shareholder will be notified within
60 days after the close of the Fund's taxable year whether the
foreign taxes paid by the Fund will pass through for that year
and, if so, such notification will designate (i) the
shareholder's portion of the foreign taxes paid to each such
country and (ii) the portion of dividends that represents income
derived from sources within each such country.
The federal income tax status of each year's
distributions by the Fund will be reported to shareholders and to
the Internal Revenue Service. The foregoing is only a general
description of the treatment of foreign taxes under the United
States federal income tax laws. Because the availability of a
foreign tax credit or deduction will depend on the particular
circumstances of each shareholder, potential investors are
advised to consult their own tax advisers.
The foregoing discussion relates only to U.S. federal
income tax law as it affects shareholders who are U.S. residents
or U.S. corporations. The effects of Federal income tax law on
shareholders who are non-resident aliens or foreign corporations
may be substantially different. Foreign investors should consult
their counsel for further information as to the U.S. tax
consequences of receipt of income from the Fund.
For Federal income tax purposes, when equity call
options which the Fund has written expire unexercised, the
premiums received by the Fund give rise to short-term capital
gains at the time of expiration. When a call written by the Fund
is exercised, the selling price or purchase price of stock is
increased by the amount of the premium, and the gain or loss on
the sale of stock becomes long-term or short-term depending on
the holding period of the stock. There may be short-term gains
or losses associated with closing purchase transactions.
38
<PAGE>
_______________________________________________________________
PORTFOLIO TRANSACTIONS
_______________________________________________________________
Subject to the general supervision of the Board of
Directors of the Fund, 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 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 and
statistical services furnished by brokers through which the Fund
effects securities transactions are used by the Adviser in
carrying out its investment management responsibilities with
respect to all its client accounts but not all such services may
be used by the Adviser in connection with the Fund.
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
39
<PAGE>
useful and of value to the Adviser in servicing its other clients
as well as the Fund; but, on the other hand, certain research
services obtained by the Adviser as a result of the placement of
portfolio brokerage of other clients could be useful and of value
to it in serving the Fund. Consistent with the 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 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.
With respect to orders placed with Donaldson, Lufkin &
Jenrette Securities Corporation (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 Fund), 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.
During the fiscal period _______ (commencement of the
operations) to October 31, 1998, the Fund incurred brokerage
commissions amounted in the aggregate to $__________ and
$_________, respectively. During the fiscal period _______
(commencement of operations) to October 31, 1998, brokerage
commissions amounting in the aggregate to $__________ and
$_______, respectively, were paid to DLJ and brokerage
commissions amounting in the aggregate to $__________ and
$_________, respectively, were paid to brokers utilizing the
Pershing Division of DLJ. During the fiscal period _________
(commencement of operations) to October 31, 1998, the brokerage
commissions paid to DLJ constituted ___% and ___%, respectively,
of the Fund's aggregate brokerage commissions and the brokerage
commissions paid to brokers utilizing the Pershing Division of
DLJ constituted ___% and ___%, respectively, of the Fund's
aggregate brokerage commissions. During the fiscal period ______
(commencement of operations) to October 31, 1998, of the Fund's
40
<PAGE>
aggregate dollar amount of brokerage transactions involving the
payment of commissions, ___% and ___%, respectively, were
effected through DLJ and ___% and ___%, respectively, were
effected through brokers utilizing the Pershing Division of DLJ.
During the fiscal period _______ (commencement of operations) to
October 31, 1998, transactions in portfolio securities of the
Fund aggregating $__________ and $_________, respectively, with
associated brokerage commissions of approximately $_________ and
$________, respectively, were allocated to persons or firms
supplying research services to the Fund or the Adviser.
_______________________________________________________________
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.
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.
41
<PAGE>
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.
At ____________, 1999 there were ____________ shares of
common stock of the Fund outstanding. To the knowledge of the
Fund, ____________ owned of record or beneficially, 5% or more of
a class of the outstanding shares of the Fund as of
____________.
Custodian
State Street Bank and Trust Company, 225 Franklin
Street, Boston, Massachusetts, will act as the Fund's custodian
for the assets of the Fund but plays no part in decisions as to
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." Such advertisements disclose the Fund's average annual
compounded total return for the periods prescribed by the
42
<PAGE>
Commission. 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 when paid
and the maximum sales charges applicable to purchases and
redemptions of the Fund's shares are assumed to have been
paid.
The Fund's 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 may quote performance rankings or ratings
of the Fund as measured by financial publications or by
independent organizations such as Lipper Analytical Services,
Inc. and Morningstar, Inc. or may compare the Fund's performance
to various indices. 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 or
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 numbers shown on the front cover of this
Statement of Additional Information. This Statement of
Additional Information does not contain all the information set
forth in the Registration Statement filed by the Fund with the
Commission under the Securities Act. Copies of the Registration
Statement may be obtained at a reasonable charge from the
Commission or may be examined, without charge, at the offices of
the Commission in Washington, D.C.
43
<PAGE>
_______________________________________________________________
REPORT OF INDEPENDENT AUDITORS AND FINANCIAL STATEMENTS
_______________________________________________________________
To be provided by subsequent post-effective amendment.
44
<PAGE>
The Registrant's Statement of Additional Information
relating to Alliance Growth Institutional Fund is
incorporated herein by reference to Part B of Post-Effective
Amendment No. 1 to the Registrant's Registration Statement
on Form N-1A filed with the Commission on December 15, 1998.
45
<PAGE>
(LOGO) ALLIANCE INSTITUTIONAL FUNDS, INC.
- ALLIANCE REAL ESTATE INVESTMENT
INSTITUTIONAL FUND
_______________________________________________________________
c/o Alliance Fund Services, Inc.
P.O. Box 1520, Secaucus, New Jersey 07096-1520
Toll Free (800) 221-5672
For Literature: Toll Free (800) 227-4618
_______________________________________________________________
STATEMENT OF ADDITIONAL INFORMATION
March 1, 1999
_______________________________________________________________
This Statement of Additional Information is not a
prospectus but supplements and should be read in conjunction with
the Prospectus dated March 1, 1999 (the "Prospectus") for
Alliance Institutional Funds, Inc. (the "Company"). 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.......................
PORTFOLIO TRANSACTIONS...................................
GENERAL INFORMATION......................................
REPORT OF INDEPENDENT AUDITORS AND
FINANCIAL STATEMENTS...................................
(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 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 three portfolios: Alliance
Real Estate Investment 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 Growth Institutional Fund, Inc.
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.
The Fund's investment objective is "fundamental" and
cannot be changed without a shareholder vote. Except as noted,
the Fund's investment policies are not fundamental and thus can
be changed without a shareholder vote. The Fund will not change
these policies without notifying its shareholders. There is no
guarantee that the Fund will achieve its investment objective.
Investment Objective
The Fund's investment objective is to seek a total
return on its assets from long-term growth of capital and from
income principally through investing in a portfolio of equity
securities of issuers that are primarily engaged in or related to
the real estate industry.
Investment Policies
Under normal circumstances, at least 65% of the Fund's
total assets will be invested in equity securities of real estate
investment trusts ("REITs") and other real estate industry
companies. A "real estate industry company" is a company that
2
<PAGE>
derives at least 50% of its gross revenues or net profits from
the ownership, development, construction, financing, management
or sale of commercial, industrial or residential real estate or
interests therein. The equity securities in which the Fund will
invest for this purpose consist of common stock, shares of
beneficial interest of REITs and securities with common stock
characteristics, such as preferred stock or convertible
securities ("Real Estate Equity Securities").
The Fund may invest up to 35% of its total assets in
(a) securities that directly or indirectly represent
participations in, or are collateralized by and payable from,
mortgage loans secured by real property ("Mortgage-Backed
Securities"), such as mortgage pass-through certificates, real
estate mortgage investment conduit ("REMIC") certificates and
collateralized mortgage obligations ("CMOs") and (b) short-term
investments. These instruments are described below. The risks
associated with the Fund's transactions in REMICs, CMOs and other
types of mortgage-backed securities, which are considered to be
derivative securities, may include some or all of the following:
market risk, leverage and volatility risk, correlation risk,
credit risk and liquidity and valuation risk. See "Risk
Considerations--Risk Factors Associated with the Real Estate
Industry" in the Prospectus for a description of these and other
risks.
As to any investment in Real Estate Equity Securities,
the analysis of Alliance Capital Management, L.P., the Fund's
investment adviser (the "Adviser") will focus on determining the
degree to which the company involved can achieve sustainable
growth in cash flow and dividend paying capability. The Adviser
believes that the primary determinant of this capability is the
economic viability of property markets in which the company
operates and that the secondary determinant of this capability is
the ability of management to add value through strategic focus
and operating expertise. The Fund will purchase Real Estate
Equity Securities when, in the judgment of the Adviser, their
market price does not adequately reflect this potential. In
making this determination, the Adviser will take into account
fundamental trends in underlying property markets as determined
by proprietary models, site visits conducted by individuals
knowledgeable in local real estate markets, price-earnings ratios
(as defined for real estate companies), cash flow growth and
stability, the relationship between asset value and market price
of the securities, dividend payment history, and such other
factors which the Adviser may determine from time to time to be
relevant. The Adviser will attempt to purchase for the Fund Real
Estate Equity Securities of companies whose underlying portfolios
are diversified geographically and by property type.
3
<PAGE>
The Fund may invest without limitation in shares of
REITs. REITs are pooled investment vehicles which invest
primarily in income producing real estate or real estate related
loans or interests. REITs are generally classified as equity
REITs, mortgage REITs or a combination of equity and mortgage
REITs. Equity REITs invest the majority of their assets directly
in real property and derive income primarily from the collection
of rents. Equity REITs can also realize capital gains by selling
properties that have appreciated in value. Mortgage REITs invest
the majority of their assets in real estate mortgages and derive
income from the collection of interest payments. Similar to
investment companies such as the Fund, REITs are not taxed on
income distributed to shareholders provided they comply with
several requirements of the Internal Revenue Code of 1986, as
amended (the "Code"). The Fund will indirectly bear its
proportionate share of expenses incurred by REITs in which the
Fund invests in addition to the expenses incurred directly by the
Fund. The Fund may invest up to 5% of its total assets in Real
Estate Equity Securities of non-U.S. issuers.
Additional Investment Policies and Practices
To the extent not described in the Prospectus, set forth
below is additional information regarding the Fund's investment
policies and practices, including restrictions. Except as
otherwise noted, the Fund's investment policies and are not
designated "fundamental policies" within the meaning of the
Investment Company Act of 1940, as amended (the "1940 Act") and,
therefore, may be changed by the Board of Directors of the
Company (the "Board of Directors" or the "Directors") without a
shareholder vote. However, the Fund will not change its
investment policies and practices without contemporaneous written
notice to shareholders.
Convertible Securities. The Fund may invest up to 15%
of its total assets in convertible securities of issuers whose
common stocks are eligible for purchase by the Fund under the
investment policies described above. Convertible securities
include bonds, debentures, corporate notes and preferred stocks.
Convertible securities are instruments that are convertible at a
stated exchange rate into common stock. Prior to their
conversion, convertible securities have the same general
characteristics as non-convertible securities which provide a
stable stream of income with generally higher yields than those
of equity securities of the same or similar issuers. The market
value of convertible securities tends to decline as interest
rates increase and, conversely, to increase as interest rates
decline. While convertible securities generally offer lower
interest yields than non-convertible debt securities of similar
quality, they do enable the investor to benefit from increases in
the market price of the underlying common stock.
4
<PAGE>
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.
Forward Commitments. No forward commitments will be
made by the Fund if, as a result, the Fund's aggregate
commitments under such transactions would be more than 30% of the
then current value of the Fund's total assets. The Fund's right
to receive or deliver a security under a forward commitment may
be sold prior to the settlement date, but the Fund will enter
into forward commitments only with the intention of actually
receiving or delivering the securities, as the case may be. To
facilitate such transactions, the Fund's custodian will maintain,
in a segregated account of the Fund, liquid assets having value
equal to, or greater than, any commitments to purchase securities
on a forward commitment basis and, with respect to forward
commitments to sell portfolio securities of the Fund, the
portfolio securities themselves. If the Fund, however, chooses
to dispose of the right to receive or deliver a security subject
to a forward commitment prior to the settlement date of the
transaction, it may incur a gain or loss. In the event the other
party to a forward commitment transaction were to default, the
Fund might lose the opportunity to invest money at favorable
rates or to dispose of securities at favorable prices.
Standby Commitment Agreements. The purchase of a
security subject to a standby commitment agreement and the
related commitment fee will be recorded on the date on which the
security can reasonably be expected to be issued and the value of
the security will thereafter be reflected in the calculation of
the Fund's net asset value. The cost basis of the security will
be adjusted by the amount of the commitment fee. In the event
the security is not issued, the commitment fee will be recorded
as income on the expiration date of the standby commitment. The
Fund will at all times maintain a segregated account with its
custodian of liquid assets in an aggregate amount equal to the
purchase price of the securities underlying the commitment.
There can be no assurance that the securities subject to
a standby commitment will be issued and the value of the
security, if issued, on the delivery date may be more or less
5
<PAGE>
than its purchase price. Since the issuance of the security
underlying the commitment is at the option of the issuer, the
Fund will bear the risk of capital loss in the event the value of
the security declines and may not benefit from an appreciation in
the value of the security during the commitment period if the
issuer decides not to issue and sell the security to the Fund.
Repurchase Agreements. The Fund may enter into
repurchase agreements pertaining to U.S. Government Securities
with member banks of the Federal Reserve System or "primary
dealers" (as designated by the Federal Reserve Bank of New York)
in such securities. There is no percentage restriction on the
Fund's ability to enter into repurchase agreements. Currently,
the Fund intends to enter into repurchase agreements only with
its custodian and such primary dealers. A repurchase agreement
arises when a buyer purchases a security and simultaneously
agrees to resell it to the vendor at an agreed-upon future date,
normally one day or a few days later. The resale price is
greater than the purchase price, reflecting an agreed-upon
interest rate which is effective for the period of time the
buyer's money is invested in the security and which is related to
the current market rate rather than the coupon rate on the
purchased security. This results in a fixed rate of return
insulated from market fluctuations during such period. Such
agreements permit the Fund to keep all of its assets at work
while retaining "overnight" flexibility in pursuit of investments
of a longer-term nature. The Fund requires continual maintenance
by its Custodian for its account in the Federal Reserve/Treasury
Book Entry System of collateral in an amount equal to, or in
excess of, the resale price. In the event a vendor defaulted on
its repurchase obligation, the Fund might suffer a loss to the
extent that the proceeds from the sale of the collateral were
less than the repurchase price. In the event of a vendor's
bankruptcy, the Fund might be delayed in, or prevented from,
selling the collateral for its benefit. The Board of Directors
has established procedures, which are periodically reviewed by
the Board, pursuant to which the Adviser monitors the
creditworthiness of the dealers with which the Fund enters into
repurchase agreement transactions.
Short Sales. When engaging in a short sale, in addition
to depositing collateral with a broker-dealer, the Fund is
currently required under the 1940 Act to establish a segregated
account with its custodian and to maintain therein liquid assets
in an amount that, when added to cash or securities deposited
with the broker-dealer, will at all times equal at least 100% of
the current market value of the security sold short.
Illiquid Securities. Historically, illiquid securities
have included securities subject to contractual or legal
restrictions on resale because they have not been registered
6
<PAGE>
under the Securities Act of 1933, as amended (the "Securities
Act"), securities which are otherwise not readily marketable and
repurchase agreements having a maturity of longer than seven
days. Securities which have not been registered under the
Securities Act are referred to as private placements or
restricted securities and are purchased directly from the issuer
or in the secondary market. Mutual funds do not typically hold a
significant amount of these restricted or other illiquid
securities because of the potential for delays on resale and
uncertainty in valuation. Limitations on resale may have an
adverse effect on the marketability of portfolio securities and a
mutual fund might be unable to dispose of restricted or other
illiquid securities promptly or at reasonable prices and might
thereby experience difficulty satisfying redemptions within seven
days. A mutual fund might also have to register such restricted
securities in order to dispose of them resulting in additional
expense and delay. Adverse market conditions could impede such a
public offering of securities.
In recent years, however, a large institutional market
has developed for certain securities that are not registered
under the Securities Act, including repurchase agreements,
commercial paper, foreign securities, municipal securities and
corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security
can be readily resold or on an issuer's ability to honor a demand
for repayment. The fact that there are contractual or legal
restrictions on resale to the general public or to certain
institutions may not be indicative of the liquidity of such
investments.
The Fund may invest in restricted securities issued
under Section 4(2) of the Securities Act, which exempts from
registration "transactions by an issuer not involving any public
offering." Section 4(2) instruments are restricted in the sense
that they can only be resold through the issuing dealer to
institutional investors and in private transactions; they cannot
be resold to the general public without registration.
Rule 144A under the Securities Act allows a broader
institutional trading market for securities otherwise subject to
restriction on resale to the general public. Rule 144A
establishes a "safe harbor" from the registration requirements of
the Securities Act for resales of certain securities to qualified
institutional buyers. An insufficient number of qualified
institutional buyers interested in purchasing certain restricted
securities held by the Fund, however, could affect adversely the
marketability of such portfolio securities and the Fund might be
unable to dispose of such securities promptly or at reasonable
prices. Rule 144A has already produced enhanced liquidity for
many restricted securities, and market liquidity for such
7
<PAGE>
securities may continue to expand as a result of this regulation
and the consequent inception of the PORTAL System, an automated
system for the trading, clearance and settlement of unregistered
securities of domestic and foreign issuers sponsored by the
National Association of Securities Dealers, Inc.
The Adviser, under the supervision of the Board of
Directors, will monitor the liquidity of restricted securities in
the Fund's portfolio. In reaching liquidity decisions, the
Adviser will consider, among other factors, the following:
(1) the frequency of trades and quotes for the security; (2) the
number of dealers making quotations to purchase or sell the
security; (3) the number of other potential purchasers of the
security; (4) the number of dealers undertaking to make a market
in the security; (5) the nature of the security (including its
unregistered nature) and the nature of the marketplace for the
security (e.g., the time needed to dispose of the security, the
method of soliciting offers and the mechanics of the transfer);
and (6) any applicable Securities and Exchange Commission (the
"Commission") interpretation or position with respect to such
type of security.
Defensive Position. For temporary defensive purposes,
the Fund may vary from its investment objectives during periods
in which conditions in securities markets or other economic or
political conditions warrant. During such periods, the Fund may
increase without limit its position in short-term, liquid, high-
grade debt securities, which may include securities issued by the
U.S. government, its agencies and, instrumentalities ("U.S.
Government Securities"), bank deposit, money market instruments,
short-term (for this purpose, securities with a remaining
maturity of one year or less) debt securities, including notes
and bonds, and short-term foreign currency denominated debt
securities rated A or higher by Moody's Investors Service, Inc.
("Moody's"), Standard & Poor's Ratings Services ("S&P") Duff &
Phelps Credit Rating Co. ("Duff & Phelps") or Fitch IBCA, Inc.
("Fitch") or, if not so rated, of equivalent investment quality
as determined by the Adviser.
Subject to its policy of investing at least 65% of its
total assets in equity securities of real estate investment
trusts and other real estate industry companies, the Fund may
also at any time temporarily invest funds awaiting reinvestment
or held as reserves for dividends and other distributions to
shareholders in money market instruments referred to above.
Portfolio Turnover
Generally, the Fund's policy with respect to portfolio
turnover is to sell any security whenever, in the judgment of the
Adviser, its appreciation possibilities have been substantially
8
<PAGE>
realized or the business or market prospects for such security
have deteriorated, irrespective of the length of time that such
security has been held. The Adviser anticipates that the Fund's
annual rate of portfolio turnover will not exceed 100%. A 100%
annual turnover rate would occur if all the securities in the
Fund's portfolio were replaced once within a period of one year.
The turnover rate has a direct effect on the transaction costs to
be borne by the Fund, and as portfolio turnover increases it is
more likely that the Fund will realize short-term capital gains.
Other Restrictions
In addition to the investment restrictions described
below, the Fund has undertaken as a matter of non-fundamental
investment policy that it will not (i) invest more than 5% of its
total assets in warrants, except for warrants acquired by the
Fund as a part of a unit or attached to securities, provided that
not more than 2% of the Fund's net assets may be invested in
warrants that are not listed on the New York Stock Exchange or
American Stock Exchange; (ii) purchase or sell real property
(excluding REITs and readily marketable securities of companies
which invest in real estate); or (iii) invest more than 10% of
its total assets in restricted securities (excluding securities
that may be resold pursuant to Rule 144A under the Securities
Act).
Certain Fundamental Investment Policies
The following restrictions, which supplement those set
forth in the Fund's Prospectus, may not be changed without
approval by the vote of a majority of the Fund's outstanding
voting securities, which means the affirmative vote of the
holders of (i) 67% or more or the shares represented at a meeting
at which more than 50% of the outstanding shares are represented,
or (ii) more than 50% of the outstanding shares, whichever is
less.
To reduce investment risk, as a matter of fundamental
policy the Fund may not:
(i) with respect to 75% of its total assets, have
such assets represented by other than: (a) cash and
cash items, (b) U.S. Government securities, or (c)
securities of any one issuer (other than the U.S.
Government and its agencies or instrumentalities) not
greater in value than 5% of the Fund's total assets, and
not more than 10% of the outstanding voting securities
of such issuer;
(ii) purchase the securities of any one issuer,
other than the U.S. Government and its agencies or
9
<PAGE>
instrumentalities, if as a result (a) the value of the
holdings of the Fund in the securities of such issuer
exceeds 25% of its total assets, or (b) the Fund owns
more than 25% of the outstanding securities of any one
class of securities of such issuer;
(iii) invest 25% or more of its total assets in the
securities of issuers conducting their principal
business activities in any one industry, other than the
real estate industry in which the Fund will invest at
least 25% or more of its total assets, except that this
restriction does not apply to U.S. Government
securities;
(iv) purchase or sell real estate, except that it
may purchase and sell securities of companies which deal
in real estate or interests therein, including Real
Estate Equity Securities;
(v) borrow money except for temporary or emergency
purposes or to meet redemption requests, in an amount
not exceeding 5% of the value of its total assets at the
time the borrowing is made;
(vi) pledge, hypothecate, mortgage or otherwise
encumber its assets, except to secure permitted
borrowings;
(vii) make loans except through (a) the purchase of
debt obligations in accordance with its investment
objectives and policies; (b) the lending of portfolio
securities; or (c) the use of repurchase agreements;
(viii) participate on a joint or joint and several
basis in any securities trading account;
(ix) invest in companies for the purpose of
exercising control;
(x) issue any senior security within the meaning
of the 1940 Act;
(xi) make short sales of securities or maintain a
short position, unless at all times when a short
position is open not more than 25% of the Fund's net
assets (taken at market value) is held as collateral for
such sales at any one time; or
(xii) (a) purchase or sell commodities or commodity
contracts including futures contracts; (b) invest in
interests in oil, gas, or other mineral exploration or
10
<PAGE>
development programs; (c) purchase securities on margin,
except for such short-term credits as may be necessary
for the clearance of transactions; and (d) act as an
underwriter of securities, except that the Fund may
acquire restricted securities under circumstances in
which, if such securities were sold, the Fund might be
deemed to be an underwriter for purposes of the
Securities Act.
Application of Percentage Limitations
Except as otherwise indicated, whenever any investment
policy or practice, including any 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.
_______________________________________________________________
MANAGEMENT OF THE FUND
_______________________________________________________________
Adviser
Alliance Capital Management L.P., 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
____________, 1999 of more than $___ billion (of which more than
$__ billion represented the assets of investment companies). The
Adviser's clients are primarily major corporate employee benefit
funds, public employee retirement systems, investment companies,
foundation and endowment funds. The ___ registered investment
companies managed by the Adviser, comprising ___ investment
portfolios, currently have more than ____ million shareholders.As
of ___________, 1999, the Adviser and its subsidiaries employed
approximately _____ employees who operated out of domestic
offices and the offices of subsidiaries in Bahrain, Bangalore,
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<PAGE>
Cairo, Chennai, Hong Kong, Istanbul, Johannesburg, London,
Luxembourg, Madrid, Moscow, Mumbai, New Delhi, Paris, Pune, Sao
Paulo, Seoul, Singapore, Sydney, Tokyo, Toronto, Vienna and
Warsaw.As of _______________, 1999, the Adviser was an investment
manager of employee benefit fund assets for __ 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, which is 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.
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, 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.
12
<PAGE>
The Adviser is, under the Advisory Agreement,
responsible for certain expenses incurred by the Fund, including,
for example, office space and certain other equipment, investment
advisory and 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. The Fund paid to the Adviser
a total of $____ in respect of such services during the fiscal
year of the Fund ended in 1998.
For the services rendered by the Adviser under the
Advisory Agreement, the Fund pays the Adviser at an annualized
rate of 1.00% 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 November 7,
1997. The Advisory Agreement was 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 November 3, 1997.
The Advisory Agreement will remain in effect until
November 5, 1999 and continue in effect thereafter only so long
as its continuance is approved annually by a vote of a majority
of the Fund's outstanding voting securities (as defined in the
1940 Act) 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 in the 1940 Act.
The Advisory Agreement may be terminated without penalty
on 60 days' written notice by a vote of a majority of the Fund's
outstanding voting securities, by a vote of a majority of the
Directors, 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
13
<PAGE>
misfeasance, bad faith or gross negligence on the part of the
Adviser, or of reckless disregard of its obligations thereunder,
the Adviser will not be liable for any action or failure to act
in accordance with its duties thereunder.
Certain other clients of the Adviser 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.
The Adviser may act as an investment adviser to other
persons, firms or corporations, including investment companies,
and is investment adviser to the following registered investment
companies: ACM Institutional Reserves, Inc., AFD Exchange
Reserves, 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 Premier Growth
Fund, Inc., Alliance North American Government Income Trust,
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., AMC
Managed Multi-Market Trust, Inc., ACM Managed Dollar Income Fund,
14
<PAGE>
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.
Consultant to the Adviser With Respect
to Investment in Real Estate Securities
The Adviser, with respect to investment in real estate
securities, has retained as a consultant CB Richard Ellis, Inc.
("CBRE"), a publicly held company and the largest real estate
services company in the United States, comprised of real estate
brokerage, property and facilities management, and real estate
finance and investment advisory activities. In 1997, CBRE
completed 22,100 sale and lease transactions, managed over 6,600
client properties, created over $5 billion in mortgage
originations, and completed over 3,600 appraisal and consulting
assignments. In addition, they advised and managed for
institutions over $4 billion in real estate investments. CBRE
will make available to the Adviser the CBRE National Real Estate
Index, which gathers, analyzes and publishes targeted research
data for the 66 largest U.S. markets, based on a variety of
public- sector and private-sector sources as well as CBRE's
proprietary database of approximately 80,000 property
transactions representing over $500 billion of investment
property. This information provides a substantial component of
the research and data used to create the REIT/Score model. As a
consultant, CBRE provides to the Adviser, at the Adviser's
expense, such in-depth information regarding the real estate
market, the factors influencing regional valuations and analysts
of recent transactions in office, retail, industrial and multi-
family properties as the Adviser shall from time to time request.
CBRE will not furnish advice or make recommendations regarding
the purchase or sale of securities by the Fund nor will it be
responsible for making investment decisions involving Fund
assets.
CBRE is one of the three largest fee-based property
management firms in the United States, the largest commercial
real estate lease brokerage firm in the country, the largest
investment property brokerage firm in the country, as well as one
of the largest publishers of real estate research, with
approximately 8,000 employees worldwide. CBRE will provided the
Adviser with exclusive access to its REIT/Score model which ranks
approximately 143 REITs based on the relative attractiveness of
the property markets in which they own real estate. This model
scores the approximately 18,000 individual properties owned by
these companies. REIT/Score is in turn based on CBRE's National
Real Estate Index which gathers, analyzes and publishes targeted
15
<PAGE>
research for the 66 largest U.S. real estate markets based on a
variety of public-and private-sector sources as well as CBRE's
proprietary database of 80,000 commercial property transactions
representing over $500 billion of investment property and over
2,500 tracked properties which report rent and expense data
quarterly. CBRE has previously provided access to its REIT/Score
model results primarily to the institutional market through
subscriptions. The model is no longer provided to any research
publications and Real Estate Investment Institutional Fund is
currently the only mutual fund available to retain investors that
has access to CBRE's REIT/Score model.
Directors and Officers
The Directors and principal officers of the Company,
their ages and their primary 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 such person is 1345 Avenue of the
Americas, New York, New York 10105.
Directors
JOHN D. CARIFA,*** 53, Chairman of the Board is the
President, Chief Operating Officer and a Director of ACMC, with
which he has been associated since prior to 1993.
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 ACMC until December 1994.
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 Adviser and
independent consultant. He was formerly Senior Manager of
Barrett Associates, Inc., a registered investment adviser, with
which he has been associated with since prior to 1993. His
____________________
*** An "interested person" of the Fund as defined in the 1940
Act.
16
<PAGE>
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 partner 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
partner and a member of the Executive Committee of that firm. He
was also a trustee of the Museum of the City of New York from
1977 to 1995. His address is 98 Hell's Peak Road, Weston,
Vermont 05161.
Officers
JOHN D. CARIFA, President, Chairman and President, see
biography above.
ALFRED HARRISON, Executive Vice President, 59, is Vice
Chairman of the Board of ACMC, with which he has been associated
since prior to 1992.
ALDEN M. STEWART, Executive Vice President, 51, is an
Executive Vice President of ACMC since July 1993. Previously, he
was associated with ECMC since prior to 1992.
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, 32, has been a
Vice President of ACMC since July, 1993. Prior thereto he was
associated with ECMC.
DANIEL G. PINE, Senior Vice President, 44, has been
associated with the Adviser since 1996. Previously, he was a
Senior Vice President of Desai Capital Management since prior to
1992.
17
<PAGE>
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.
with which he has been associated since prior to 1993.
VINCENT S. NOTO, Controller, 34, is a Vice President of
Alliance Fund Services, Inc., with which he has been associated
since prior to 1993.
JOSEPH MANTINEO, Assistant Controller, 38, has been a
Vice President of Alliance Fund Services, Inc. since prior to
1992.
PHYLLIS CLARKE, Assistant Controller, 37, is an
Accounting Manager of Mutual Funds for Alliance Fund Services,
Inc. since prior to 1992.
JUAN J. RODRIGUEZ, Assistant Controller, 40, is an
Assistant Vice President of Alliance Fund Services, Inc. with
which he has been associated since prior to 1992.
EDMUND P. BERGAN, JR., Secretary, 48, is a Senior Vice
President and the General Counsel of Alliance Fund Distributors,
Inc. and Alliance Fund Services, Inc. with which he has been
associated since prior to 1993.
DOMENICK PUGLIESE, Assistant Secretary, 37, is a Vice
President and Assistant General Counsel of Alliance Fund
Distributors, Inc., with which he has been associated since May
1995. Prior thereto, he was Vice President and Counsel of
Concord Holding Corporation since 1994 and Vice President and
Associate General Counsel of Prudential Securities since
1993.
The aggregate compensation paid by the Company to each
of the Directors during its fiscal period 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
18
<PAGE>
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.
Total Number
Total Number of Investment
of Investment Portfolios
Companies in within the
the Alliance Alliance Fund
Total Complex, Complex,
Compensation Including the Including
from the Fund, as to the Fund, as
Aggregate Alliance Fund which the to which the
Compensation Complex, Director is a Director is a
from the Including the Director or Director or
Name of Director Company Company Trustee 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 ______, 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 which has
19
<PAGE>
been duly adopted and approved in accordance with Rule 12b-1
adopted by the Commission under the 1940 Act (the "Rule 12b-1
Plan").
Pursuant to the Rule 12b-1 Plan, the Fund pays to
Alliance Fund Distributors, Inc. 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 Fund's 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 by personal
service and/or the maintenance of shareholder accounts.
The Rule 12b-1 Plan provides that Alliance Fund
Distributors, Inc. 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 Fund's 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 Fund, will not be used to pay any interest
expenses, carrying charges or other financing costs or allocation
of overhead of Alliance Fund Distributors, Inc. The Rule 12b-1
Plan also provides that Alliance may use its own resources to
finance the distribution of the Fund's shares.
During the Fund's fiscal period ended October 31, 1998,
the Fund paid distribution services fees for expenditures under
the Agreement, with respect to Class I shares, in amounts
aggregating $_______ which constituted approximately ____% of the
average daily net assets attributable to Class I shares during
the period, and the Adviser made payments from its own resources
as described above aggregating $_______. Of the $_______ paid by
the Fund and the Adviser with respect to the Class I shares under
the Agreement, $_______ was spent on advertising, $_______ on the
printing and mailing of prospectuses for persons other than
current shareholders, $_______ for compensation to broker-dealers
and other financial intermediaries (including, $_______ to the
Fund's Principal Underwriters), $_______ for compensation to
sales personnel, $_______ was spent on printing of sales
literature, travel, entertainment, due diligence and other
promotional expenses, and $_______ was spent on interest on Class
I shares financing.
20
<PAGE>
During the Fund's fiscal period ended October 31, 1998,
the Fund paid distribution services fees for expenditures under
the Agreement, with respect to Class II shares, in amounts
aggregating $_______, which constituted approximately ____% of
the average daily net assets attributable to Class II shares
during the period, and the Adviser made payments from its own
resources as described above aggregating $_______. Of the
$________ paid by the Fund and the Adviser with respect to the
Class II shares under the Agreement, $_______ was spent on
advertising, $______ on the printing and mailing of prospectuses
for persons other than current shareholders, $________ for
compensation to broker-dealers and other financial intermediaries
(including, $_______ to the Fund's Principal Underwriters),
$______ for compensation to sales personnel, $______ was spent on
printing of sales literature, travel, entertainment, due
diligence and other promotional expenses, and $_______ was spent
on interest on Class II shares financing.
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
committed to the discretion of such disinterested Directors then
in office. The Agreement was initially approved by the Directors
at a meeting held on November 7, 1997, and by the Fund's initial
shareholder on November 3, 1997.
The Agreement became effective on November 7, 1997. The
Agreement will continue in effect so long as its continuance is
specifically approved 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.
All material amendments to the Agreement must be
approved by a vote of the Directors or the holders of the Fund's
21
<PAGE>
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.
The Glass-Steagall Act and other applicable laws may
limit the ability of a bank or other depository institution to
become an underwriter or distributor of securities. However, in
the opinion of the Fund's management, based on the advice of
counsel, these laws do not prohibit such depository institutions
from providing services for investment companies such as the
administrative, accounting and other services referred to in the
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.
Transfer Agency Agreement
Alliance Fund Services, Inc., an indirect wholly-owned
subsidiary of Alliance, located at 500 Plaza Drive, Secaucus, New
Jersey 07094, acts as the Fund's registrar, transfer agent and
dividend-disbursing agent for a fee based upon the number of
account holders of each of the Class I and Class II shares of the
Fund, plus reimbursement for its 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.
_________________________________________________________________
PURCHASE OF SHARES
_________________________________________________________________
The following information supplements that set forth in
the Prospectus under the heading "Purchase and Sale of Shares-
22
<PAGE>
- -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, (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 and (vii) by directors and present
or retired full-time employees of CBRE.
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
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
23
<PAGE>
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
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
24
<PAGE>
5:00 p.m. 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
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,
25
<PAGE>
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
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
26
<PAGE>
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. Payment of the redemption
price will be made within seven days after the Fund's receipt of
such tender for redemption. If a shareholder is in doubt about
what documents are required by his or her fee-based program or
employee benefit plan, the shareholder should contact the
shareholder's financial representative.
27
<PAGE>
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
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
28
<PAGE>
funds transfer 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. 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. 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. 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.
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 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
29
<PAGE>
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. Eastern time (certain selected financial
intermediaries may enter into operating agreements permitting
them to transmit purchase information to the Principal
Underwriter after 5:00 p.m. Eastern time and receive that day's
net asset value). 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.
30
<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.
International Premier Growth Fund, Inc.
Alliance International Fund
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
31
<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 Alliance Mutual Fund whose
shares are being acquired. An exchange is effected through the
redemption of the shares tendered for exchange and the purchase
of shares being acquired at their respective net asset values as
next determined following receipt by the 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
32
<PAGE>
reasonably assured that the check has cleared, normally up to 15
calendar days following the purchase date.
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
acquire its shares through exchange or otherwise to modify,
restrict or terminate the exchange privilege.
33
<PAGE>
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
procedures. For additional information please contact Alliance
Fund Services, Inc.
34
<PAGE>
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 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 Fund on each Fund 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 Fund 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
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.
35
<PAGE>
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 the 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.
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.
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<PAGE>
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 attributable to the Class I shares 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 adopted by the Fund in accordance with Rule 18f-3 under
the 1940 Act.
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<PAGE>
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
adopted by the Fund in accordance with Rule 18f-3 under the 1940
Act.
_______________________________________________________________
DIVIDENDS, DISTRIBUTIONS AND TAXES
_______________________________________________________________
United States Federal Income Taxes
General. The Fund intends for each taxable year to
qualify to be taxed as a "regulated investment company" under the
Code. To so qualify, the Fund must, among other things,
(i) derive at least 90% of its gross income in each taxable year
from dividends, interest, payments with respect to securities
loans, gains from the sale or other disposition of stock or
securities or foreign currency, or certain other income
(including, but not limited to, gains from options, futures and
forward contracts) derived with respect to its business of
investing in stock, securities or currency; and (ii) diversify
its holdings so that, at the end of each quarter of its taxable
year, the following two conditions are met: (a) at least 50% of
the value of the Fund's assets is represented by cash, U.S.
Government Securities, securities of other regulated investment
companies and other securities with respect to which the Fund's
investment is limited, in respect of any one issuer, to an amount
not greater than 5% of the Fund's assets and 10% of the
outstanding voting securities of such issuer, and (b) not more
than 25% of the value of the Fund's assets is invested in
securities of any one issuer (other than U.S. Government
Securities or securities of other regulated investment
companies).
If the Fund qualifies as a regulated investment company
for any taxable year and makes timely distributions to its
shareholders of 90% or more of its net investment income for that
year (calculated without regard to its net capital gain, i.e.,
the excess of its net long-term capital gain over its net short-
term capital loss), it will not be subject to federal income tax
on the portion of its taxable income for the year (including any
net capital gain) that it distributes to shareholders.
The Fund intends to also avoid the 4% federal excise tax
that would otherwise apply to certain undistributed income for a
given calendar year if it makes timely distributions to the
shareholders equal to at least the sum of (i) 98% of its ordinary
38
<PAGE>
income for that year; (ii) 98% of its capital gain net income and
foreign currency gains for the twelve-month period ending on
October 31 of that year; and (iii) any ordinary income or capital
gain net income from the preceding calendar year that was not
distributed during that year. For this purpose, income or gain
retained by the Fund that is subject to corporate income tax will
be considered to have been distributed by the Fund by year-end.
For federal income tax purposes, dividends declared and payable
to shareholders of record as of a date in October, November or
December of a given year but actually paid during the immediately
following January will be treated as if paid by the Fund on
December 31 of that calendar year, and will be taxable to these
shareholders for the year declared, and not for the year in which
the shareholders actually receive the dividend.
The Fund intends to make timely distributions of the
Fund's taxable income (including any net capital gain) so that
the Fund will not be subject to federal income or excise taxes.
However, exchange control or other regulations on the
repatriation of investment income, capital or the proceeds of
securities sales, if any exist or are enacted in the future, may
limit the Fund's ability to make distributions sufficient in
amount to avoid being subject to one or both of such federal
taxes.
Dividends and Distributions. The Fund intends to make
timely distributions of the Fund's taxable income (including any
net capital gain) so that the Fund will not be subject to federal
income and excise taxes. Dividends of the Fund's net ordinary
income and distributions of any net realized short-term capital
gain are taxable to shareholders as ordinary income. Due to
distributions of amounts representing a return of capital the
Fund will receive from REITs in which the Fund is invested,
distributions made by the Fund may also include nontaxable
returns of capital, which will reduce a shareholder's basis in
shares of the Fund. If a shareholder's 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 capital will be taxable as capital gain.
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 qualifying
dividends received from domestic corporations. Dividends
received from REITs generally do not constitute qualifying
dividends. A corporate shareholder's dividends received
deduction generally will be disallowed unless 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
39
<PAGE>
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 will be taxable to
shareholders 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 such dividend or distribution. Furthermore, a
dividend or distribution made shortly after the purchase of such
shares by a shareholder, although in effect a return of capital
to that particular shareholder, would be taxable to him as
described above. Dividends are taxable in the manner discussed
regardless of whether they are paid to the shareholder in cash or
are reinvested in additional shares of the Fund.
After the end of the taxable year, the Fund will notify
shareholders of the federal income tax status of any
distributions made by the Fund to shareholders during such year.
It is the present policy of the Fund to distribute to
shareholders all net investment income and realized capital
gains, if any, quarterly. There is no fixed dividend rate and
there can be no assurance that the Fund will pay any dividends.
The amount of any dividend or distribution paid on shares of the
Fund must necessarily depend upon the realization of income and
capital gains from the Fund's investments.
Sales and Redemptions. Any gain or loss arising from a
sale or redemption of Fund shares generally will be capital gain
or loss except in the case of a dealer or a financial
institution, and will be long-term capital gain or loss if such
shareholder has held such shares for more than one year at the
time of the sale or redemption; otherwise it will be short-term
capital gain or loss. 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
exchanged. For this purpose, acquisitions pursuant to the
40
<PAGE>
Dividend Reinvestment Plan would constitute a replacement if made
within the period. If disallowed, the loss will be reflected in
an upward adjustment to the basis of the shares acquired.
Qualified Plans. 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.
Backup Withholding. The Fund may be required to
withhold United States federal income tax at the rate of 31% of
all taxable distributions payable to shareholders who fail to
provide the Fund with their correct taxpayer identification
numbers or to make required certifications, or who have been
notified by the Internal Revenue Service that they are subject to
backup withholding. Corporate shareholders and certain other
shareholders specified in the Code are exempt from such backup
withholding. Backup withholding is not an additional tax; any
amounts so withheld may be credited against a shareholder's
United States federal income tax liability or refunded.
Taxation of Foreign Shareholders. The foregoing
discussion relates only to United States federal income tax law
as it affects shareholders who are United States citizens or
residents or United States corporations. The effects of federal
income tax law on shareholders who are non-resident alien
individuals or foreign corporations may be substantially
different. Foreign investors should therefore consult their
counsel for further information as to the United States tax
consequences of receipt of income from the Fund.
Short Sales. In general, gain or loss realized by the
Fund on the closing of a short sale will be considered to be
short-term capital gain or loss.
Real Estate Mortgage Investment Conduits. The Fund may
invest in REMICs. Interests in REMICs are classified as either
"regular" interests or "residual" interests. Regular interests
in a REMIC are treated as debt instruments for federal income tax
purposes to which the rules generally applicable to debt
obligations apply. If regular interests in a REMIC are issued at
a discount, application of the original issue discount provisions
of the Code may increase the amount of the Fund's net investment
income available to be distributed to shareholders, potentially
causing the Fund to pay out as an income distribution each year
an amount which is greater than the total amount of cash interest
the Fund actually received.
41
<PAGE>
Under the Code, special rules apply with respect to the
treatment of a portion of the Fund income from REMIC residual
interests. (Such portion is referred to herein as "Excess
Inclusion Income".) Excess Inclusion Income generally cannot be
offset by net operating losses and, in addition, constitutes
unrelated business taxable income to entities which are subject
to the unrelated business income tax. The Code provides that a
portion of Excess Inclusion Income attributable to REMIC residual
interests held by regulated investment companies such as the Fund
shall, pursuant to regulations, be allocated to the shareholders
of such regulated investment company in proportion to the
dividends received by such shareholders. Accordingly,
shareholders of the Fund will generally not be able to use net
operating losses to offset such Excess Inclusion Income. In
addition, if a shareholder of the Fund is a tax-exempt entity not
subject to the unrelated business income tax and is allocated any
amount of Excess Inclusion Income, the Fund must pay a tax on the
amount of Excess Inclusion Income allocated to such shareholder
at the highest corporate rate. Any tax paid by the Fund as a
result of this requirement may be deducted by the Fund from the
gross income of the residual interest involved. A shareholder
subject to the unrelated business income tax may be required to
file a return and pay a tax on such Excess Inclusion Income even
though a shareholder might not have been required to pay such tax
or file such return absent the receipt of such Excess Inclusion
Income. It is anticipated that only a small portion, if any, of
the assets of the Fund will be invested in REMIC residual
interests. Accordingly, the amount of Excess Inclusion Income,
if any, received by the Fund and allocated to its shareholders
should be quite small. Shareholders that are subject to the
unrelated business income tax should consult their own tax
advisor regarding the treatment of their income derived from the
Fund.
_______________________________________________________________
PORTFOLIO TRANSACTIONS
_______________________________________________________________
Subject to the general supervision of the Board of
Directors of the Fund, 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 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
42
<PAGE>
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 and
statistical services furnished by brokers through which the Fund
effects securities transactions are used by the Adviser in
carrying out its investment management responsibilities with
respect to all its client accounts but not all such services may
be used by the Adviser in connection with the Fund.
The extent to which commissions that will be charged by
broker-dealers selected by the Fund may reflect an element of
value for research cannot presently be determined. To the extent
that research services of value are provided by broker-dealers
with or through whom the Fund places portfolio transactions, the
Adviser may be relieved of expenses which it might otherwise
bear. Research services furnished by broker-dealers could be
useful and of value to the Adviser in servicing its other clients
as well as the Fund; but, on the other hand, certain research
services obtained by the Adviser as a result of the placement of
portfolio brokerage of other clients could be useful and of value
to it in serving the Fund. Consistent with the 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 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
43
<PAGE>
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.
With respect to orders placed with Donaldson, Lufkin &
Jenrette Securities Corporation (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 Fund), 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.
During the fiscal period _______ (commencement of the
operations) to October 31, 1998, the Fund incurred brokerage
commissions amounted in the aggregate to $__________ and
$_________, respectively. During the fiscal period _______
(commencement of operations) to October 31, 1998, brokerage
commissions amounting in the aggregate to $__________ and
$_______, respectively, were paid to DLJ and brokerage
commissions amounting in the aggregate to $__________ and
$_________, respectively, were paid to brokers utilizing the
Pershing Division of DLJ. During the fiscal period _________
(commencement of operations) to October 31, 1998, the brokerage
commissions paid to DLJ constituted ___% and ___%, respectively,
of the Fund's aggregate brokerage commissions and the brokerage
commissions paid to brokers utilizing the Pershing Division of
DLJ constituted ___% and ___%, respectively, of the Fund's
aggregate brokerage commissions. During the fiscal period ______
(commencement of operations) to October 31, 1998, of the Fund's
aggregate dollar amount of brokerage transactions involving the
payment of commissions, ___% and ___%, respectively, were
effected through DLJ and ___% and ___%, respectively, were
effected through brokers utilizing the Pershing Division of DLJ.
During the fiscal period _______ (commencement of operations) to
October 31, 1998, transactions in portfolio securities of the
Fund aggregating $__________ and $_________, respectively, with
associated brokerage commissions of approximately $_________ and
$________, respectively, were allocated to persons or firms
supplying research services to the Fund or the Adviser.
44
<PAGE>
_______________________________________________________________
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.
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.
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.
At ____________, 1999 there were ____________ shares of
common stock of the Fund outstanding. To the knowledge of the
Fund, ____________ owned of record or beneficially, 5% or more of
a class of the outstanding shares of the Fund as of
____________.
45
<PAGE>
Custodian
State Street Bank and Trust Company, 225 Franklin
Street, Boston, Massachusetts, will act as the Fund's custodian
for the assets of the Fund but plays no part in decisions as to
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." Such advertisements disclose the Fund's average annual
compounded total return for the periods prescribed by the
Commission. 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 when paid
46
<PAGE>
and the maximum sales charges applicable to purchases and
redemptions of the Fund's shares are assumed to have been paid.
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 may quote performance rankings or ratings
of the Fund as measured by financial publications or by
independent organizations such as Lipper Analytical Services,
Inc. and Morningstar, Inc. or may compare the Fund's performance
to various indices. Advertisements presenting the historical
record of payments of income dividends by the Fund may also from
time to time be sent to investors or placed in newspapers,
magazines such as The Wall Street Journal, The New York Times,
Barrons, Investor's Daily, Money Magazine, Changing Times,
Business Week and Forbes or other media on behalf of the
Fund.
Additional Information
Any shareholder inquiries may be directed to the
shareholder's broker or to Alliance Fund Services, Inc. at the
address or telephone 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 under the Securities Act. Copies of the Registration
Statement may be obtained at a reasonable charge from the
Commission or may be examined, without charge, at the offices of
the Commission in Washington, D.C.
_______________________________________________________________
REPORT OF INDEPENDENT AUDITORS AND FINANCIAL STATEMENTS
_______________________________________________________________
To be provided by subsequent post-effective amendment.
47
<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. - Incoprorated by
reference to Exhibit (d) to Post-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 December 15, 1998.
(e) (1) Distribution Services Agreement between the
Registrant and Alliance Fund Distributors,
Inc. - Incoprorated by reference to Exhibit
(e)(1) to Post-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 December 15, 1998.
(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
C-1
<PAGE>
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.
(g) Custodian Contract between the Registrant and State
Street Bank and Trust Company - Incoprorated by
reference to Exhibit (g) to Post-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 December 15, 1998.
(h) Transfer Agency Agreement between the Registrant
and Alliance Fund Services, Inc. - Incoprorated by
reference to Exhibit (h) to Post-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 December 15, 1998.
(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
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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 - Incoprorated by reference to
Exhibit (0) to Post-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 December
15, 1998.
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.
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
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is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that
a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection
with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question of
whether such indemnification by it is against public
policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
In accordance with Release No. IC-11330 (September 2,
1980), the Registrant will indemnify its directors,
officers, investment manager and principal underwriters
only if (1) a final decision on the merits was issued by
the court or other body before whom the proceeding was
brought that the person to be indemnified (the
"indemnitee") was not liable by reason or willful
misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his
office ("disabling conduct") or (2) a reasonable
determination is made, based upon a review of the facts,
that the indemnitee was not liable by reason of
disabling conduct, by (a) the vote of a majority of a
quorum of the directors who are neither "interested
persons" of the Registrant as defined in section
2(a)(19) of the Investment Company Act of 1940 nor
parties to the proceeding ("disinterested, non-party
directors"), or (b) an independent legal counsel in a
written opinion. The Registrant will advance attorneys
fees or other expenses incurred by its directors,
officers, investment adviser or principal underwriters
in defending a proceeding, upon the undertaking by or on
behalf of the indemnitee to repay the advance unless it
is ultimately determined that he is entitled to
indemnification and, as a condition to the advance,
(1) the indemnitee shall provide a security for his
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.
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<PAGE>
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
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.
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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.
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
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<PAGE>
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
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
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<PAGE>
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
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
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<PAGE>
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
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
C-9
<PAGE>
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
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
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<PAGE>
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
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
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<PAGE>
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
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
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<PAGE>
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.
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.SIGNATURES
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<PAGE>
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 22nd 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 22, 1998
______________________ President
John D. Carifa
(2) Principal Financial
and Accounting Officer:
/s/ Mark D. Gersten Treasurer December 22, 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 22, 1998
Edmund P. Bergan, Jr.
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Index To Exhibits
None.
C-15
00250237.AH7
