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This is filed pursuant to Rule 497(c).
File Nos. 333-37177 and 811-08403.
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Alliance Prospectus and Application
Institutional
Funds May 1, 1999
o Alliance Special Equity
Institutional Fund
Alliance Institutional Funds, Inc. provides a selection of equity investment
alternatives to institutional and other investors through qualifying programs
who seek capital growth or high total return.
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.
Alliance Capital [LOGO](R)
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TABLE OF CONTENTS
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Page
RISK/RETURN SUMMARY ...................................................... 3
FEES AND EXPENSES OF THE FUND ............................................ 5
GLOSSARY ................................................................. 6
DESCRIPTION OF THE FUND .................................................. 6
Investment Objective, Policies and Principal Risks ....................... 6
Description of Investment Practices ...................................... 7
Additional Risk Considerations ........................................... 7
MANAGEMENT OF THE FUND ................................................... 8
PURCHASE AND SALE OF SHARES .............................................. 8
How The Fund Values Its Shares ........................................... 8
How To Buy Shares ........................................................ 8
How To Exchange Shares ................................................... 8
How To Sell Shares ....................................................... 8
DIVIDENDS, DISTRIBUTIONS AND TAXES ....................................... 9
DISTRIBUTION ARRANGEMENTS ................................................ 10
GENERAL INFORMATION ...................................................... 11
Alliance Special Equity Institutional Fund's investment adviser is Alliance
Capital Management L.P., a global investment manager providing diversified
services to institutions and individuals through a broad line of investments
including more than 100 mutual funds.
RISK/RETURN SUMMARY
The following is a summary of certain key information about the Alliance Special
Equity Institutional Fund. This Summary describes the Fund's objectives,
principal investment strategies, principal risks and fees. This Summary includes
a short discussion of some of the principal risks of investing in the Fund.
A more detailed description of the Fund, including the risks associated with
investing in the Fund, can be found further back in this Prospectus. Please be
sure to read this additional information BEFORE you invest.
Other important things for you to note:
o You may lose money by investing in the Fund.
o An investment in the Fund is not a deposit in a bank and is not
insured or guaranteed by the Federal Deposit Insurance Corporation
or any other government agency.
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Alliance Special Equity Institutional Fund
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OBJECTIVE:
The Fund's investment objective is capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES:
The Fund invests primarily in equity securities. The Fund emphasizes investments
in companies that Alliance believes will have superior relative earnings growth
and are selling at reasonable valuations. The Fund seeks to achieve long-term
performance that is significantly better than that of the S&P 500 Index.
Although the Fund typically invests for the long-term, it also may take
advantage of shorter-term opportunities. The weighted average market
capitalization of the companies that the Fund invests in will be less than
that of the S&P 500 Index but greater than those of indices of smaller and
medium capitalization stocks. This reflects the Fund's tendency to invest in
less mature companies and restructuring situations that, in Alliance's
judgment, offer relatively attractive appreciation opportunities.
PRINCIPAL RISKS:
Among the principal risks of investing in the Fund are market risk and
management risk. The Fund also has the risk of investments in small- to
mid-capitalization companies, which may be more volatile than investments in
large-cap companies.
There is no bar chart or performance table for the Fund because it has not
completed a full calendar year of operations.
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FEES AND EXPENSES OF THE FUND
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This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
SHAREHOLDER TRANSACTION EXPENSES (fees paid directly from your investment)
Maximum sales charge imposed on purchases None
Sales charge imposed on dividend reinvestments None
Deferred sales charge None
Exchange fee None
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets) and
EXAMPLES
The Examples are to help you compare the cost of investing in the Fund with the
cost of investing in other funds. They assume 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. They also assume that your investment has a 5% return each
year, that the Fund's operating expenses stay the same and that all dividends
and distributions are reinvested. Your actual costs may be higher or lower.
Operating Expenses
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Class I Class II
------- --------
Management fees .63% 63%
12b-1 fees None .30%
Other expenses .16% .16%
----- -----
Total Fund operating expenses .79% 1.09%
Examples
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Class I Class II
------- --------
After 1 year $ 81 $ 111
After 3 years $252 $ 347
After 5 years $439 $ 601
------ ------
After 10 years $978 $1,329
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GLOSSARY
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This Prospectus uses the following terms.
TYPES OF SECURITIES
Convertible securities are fixed-income securities that are convertible into
common stock.
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.
OTHER
Code is the Internal Revenue Code of 1986, as amended.
Commission is the Securities and Exchange Commission.
Exchange is the New York Stock Exchange.
S&P is Standard & Poor's Ratings Services.
S&P 500 Index is S&P's 500 Composite Stock Price Index, a widely recognized
unmanaged index of market activity.
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DESCRIPTION OF THE FUND
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This section of the Prospectus provides a more complete description of the
investment objective, principal strategies and principal risks of the Fund. Of
course, there can be no assurance that the Fund will achieve its investment
objective.
Please note that:
o Additional discussion of the Fund's investments, including the risks of
the investments, can be found in the discussion under Description of
Investment Practices following this section.
o Additional information about the risks of investing in the Fund can be
found in the discussion under Additional Risk Considerations.
o Additional descriptions of the Fund's strategies, investments, and risks
can be found in the Fund's Statement of Additional Information or SAI.
o The Fund's investment objective is "fundamental" and cannot be changed
without shareholder vote, and except as noted, the Fund's investment
policies are not fundamental and thus can be changed without a shareholder
vote.
INVESTMENT OBJECTIVE, POLICIES AND PRINCIPAL RISKS
The Fund's investment objective is capital appreciation. The Fund invests
primarily in equity securities. The Fund emphasizes investments in companies
that Alliance believes will have superior relative earnings growth and are
selling at reasonable valuations. The Fund seeks to achieve long-term
performance that is significantly better than the S&P 500 Index. In line with
this objective, the Fund may exhibit greater volatility than is exhibited in the
overall market. The Fund usually is fully invested with no effort made to time
the market.
Although the Fund typically invests for the long-term, it also may take
advantage of shorter-term opportunities. The weighted average market
capitalization of the Fund will be less than that of the S&P 500 Index but
greater than those of indices of smaller and medium capitalization stocks. This
reflects the Fund's tendency to invest in less mature companies and
restructuring situations that, in Alliance's judgment, offer relatively
attractive appreciation opportunities. The Fund may invest up to 15% of its
assets in foreign equity securities.
Risk Considerations. The value of an investment in the Fund changes with the
values of the Fund's investments. Many factors can affect these values. Among
the principal risks of investing in the Fund are:
o Market Risk This is the risk that the value of the Fund's investments will
fluctuate as the stock market fluctuates and that prices overall will
decline over short or longer-term periods.
o Management Risk The Fund is subject to management risk because it is an
actively managed investment portfolio. Alliance will apply its investment
techniques and risk analyses in making investment decisions for the Fund,
but there is no guarantee that its techniques will produce the intended
result.
o Capitalization Risk This is the risk of investments in small- to
mid-capitalization companies. Investments in mid-cap companies may be more
volatile than investments in large-cap companies. Investments in small-cap
companies tend to be more volatile than investments in either large-cap or
mid-cap companies. Investments in small-cap companies may have additional
risks because these companies often have limited product lines, markets,
and financial resources.
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DESCRIPTION OF INVESTMENT PRACTICES
This section describes the investment practices of the Fund and risks associated
with these practices.
Convertible Securities. Convertible securities are fixed-income securities that
are convertible into common stocks. Prior to conversion, convertible securities
have the same general characteristics as non-convertible debt securities, which
provide a stable stream of income with yields that are generally higher than
those of equity securities of the same or similar issuers. The price of a
convertible security will normally vary with changes in the price of the
underlying stock, although the higher yield tends to make the convertible
security less volatile than the underlying common stock. As with debt
securities, the market value of convertible securities tends to decline as
interest rates increase and increase as interest rates decline. While
convertible securities generally offer lower interest or dividend yields than
non-convertible debt securities of similar quality, they offer investors the
potential to benefit from increases in the market price of the underlying common
stock.
Future Developments. The Fund may, following written notice to its shareholders,
take advantage of other investment practices that are not currently contemplated
for use by the Fund or are not available but may yet be developed, to the extent
such investment practices are consistent with the Fund's investment objective
and legally permissible for the Fund. Such investment practices, if they arise,
may involve risks that exceed those involved in the activities described above.
General. The successful use of the Fund's investment practices draws upon
Alliance's special skills and experience with respect to such instruments and
usually depends on Alliance's ability to forecast price movements, interest
rates or currency exchange rate movements correctly. Should interest rates,
prices, or exchange rates move unexpectedly, the Fund may not achieve the
anticipated benefits of the transactions or may realize losses and thus be in a
worse position than if such strategies had not been used.
Portfolio Turnover. The Fund is actively managed and, in some cases in response
to market conditions, the Fund's portfolio turnover rate may exceed 100%. A
higher rate of portfolio turnover increases brokerage and other expenses, which
must be borne by the Fund and its shareholders.
Temporary Defensive Position. For temporary defensive purposes, the Fund may
reduce its position in equity securities and invest in, without limit, certain
types of short-term, liquid, high grade or high quality debt securities. These
securities may include U.S. Government securities, qualifying bank deposits,
money market instruments, prime commercial paper, and other types of short-term
debt securities including notes and bonds. While investing for temporary
defensive purposes, the Fund may not achieve its investment objective.
ADDITIONAL RISK CONSIDERATIONS
Investment in the Fund involves the special risk considerations described below.
Foreign Securities. The portion of the Fund's assets invested in foreign
securities may have more risks than U.S. investments. Investments in foreign
securities may experience more rapid and extreme changes in value than
investments in securities of U.S. companies. This is because the securities
markets of many foreign countries are relatively small, with a limited number of
companies representing a small number of industries. Additionally, foreign
securities issuers are usually not subject to the same degree of regulation as
U.S. issuers. Reporting, accounting, and auditing standards of foreign countries
differ, in some cases significantly, from U.S. standards. Also, nationalization,
expropriation or confiscatory taxation, currency blockage, or diplomatic
developments could adversely affect the Fund's investments in a foreign country.
In the event of nationalization, expropriation, or other confiscation, the Fund
could lose its entire investment.
Investment in Smaller, Emerging Companies. The Fund may invest in smaller,
emerging companies. Investment in such companies involves greater risks than is
customarily associated with securities of more established companies. The
securities of smaller companies may have relatively limited marketability and
may be subject to more abrupt or erratic market movements than securities of
larger companies or broad market indices.
Year 2000. Many computer systems and applications in use today process
transactions using two-digit date fields for the year of the transaction, rather
than the full four digits. If these systems are not modified or replaced,
transactions occurring after 1999 could be processed as year "1900", which could
result in processing inaccuracies and computer system failures. This is commonly
known as the Year 2000 problem. Should any of the computer systems employed by
the Fund's major service providers fail to process Year 2000 related information
properly, that could have a significant negative impact on the Fund's operations
and the services that are provided to the Fund's shareholders. In addition, to
the extent that the operations of issuers of securities held by the Fund are
impaired by the Year 2000 problem, or prices of securities held by the Fund
decline as a result of real or perceived problems relating to the Year 2000, the
value of the Fund's shares may be materially affected.
With respect to the Year 2000, the Fund has been advised that Alliance, Alliance
Fund Distributors, Inc. ("AFD"), the Fund's principal underwriter, and Alliance
Fund Services, Inc. ("AFS"), the Fund's registrar, transfer agent and dividend
disbursing agent (for the purpose of this discussion collectively, "Alliance")
began to address the Year 2000 issue several years ago in connection with the
replacement or upgrading of certain computer systems and applications. During
1998, Alliance began a formal Year 2000 initiative, which established a
structured and coordinated process to deal with the Year 2000 issue. Alliance
reports that it has completed its assessment of the Year 2000 issues on its
domestic and international
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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 early 1999. Full integration testing of these systems and testing of
interfaces with third-party suppliers will continue through 1999. At this time,
management of Alliance believes that the costs associated with resolving this
issue will not have a material adverse effect on its operations or on its
ability to provide the level of services it currently provides to the Fund.
The Fund and Alliance have been advised by the Fund's Custodian that they are
also in the process of reviewing their systems with the same goals. As of the
date of this Prospectus, the Fund and Alliance have no reason to believe that
the Custodian will be unable to achieve these goals.
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MANAGEMENT OF THE FUND
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INVESTMENT ADVISER
The Fund's Adviser is Alliance Capital Management, L.P. ("Alliance"), 1345
Avenue of the Americas, New York, New York 10105. Alliance is a leading
international investment manager supervising client accounts with assets as of
December 31, 1998 totaling more than $286 billion (of which approximately $118
billion represented the assets of investment companies). Alliance's clients are
primarily major corporate employee benefit funds, public employee retirement
systems, investment companies, foundations and endowment funds. The 54
registered investment companies managed by Alliance comprising 118 separate
investment portfolios currently have over 3.5 million shareholder accounts. As
of December 31, 1998, Alliance was an investment manager of employee benefit
plan assets for 35 of the FORTUNE 100 companies.
Alliance provides investment advisory services and order placement facilities
for the Fund. For these services, the Fund pays Alliance as a percentage of
average daily net assets: 1.00% of the first $50 million; .75% of the next $50
million; and .50% of assets greater than $100 million.
The person primarily responsible for the day-to-day management of the Fund will
be Jane Mack Gould, Senior Vice President of Alliance Capital Management
Corporation. Ms. Gould has been associated with Alliance and its affiliates
since 1965 and has 30 years experience as a portfolio manager.
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PURCHASE AND SALE OF SHARES
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How The Fund Values Its Shares
The Fund's net asset value or NAV is calculated at 4:00 p.m., Eastern time,
each day the Exchange is open for business. To calculate NAV, the Fund's
assets are valued and totaled, liabilities are subtracted, and the balance,
called net assets, is divided by the number of shares outstanding. The Fund
values its securities at their current market value determined on the basis of
market quotations, or, if such quotations are not readily available, such
other methods as the Fund's directors believe accurately reflect fair market
value.
Your order for purchase, sale, or exchange of shares is priced at the next NAV
calculated after your order is accepted by the Fund.
How To Buy Shares
You may purchase the Fund's shares through your financial representative at NAV.
The Fund's shares are not subject to any initial or contingent sales charges.
The minimum initial investment in the Alliance Institutional Funds is $2
million, which may be invested in any one or more of its portfolios. 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 million in one or more of the portfolios. There is no minimum for
subsequent investments. The minimum initial investment may be waived in the
discretion of the Fund. The Fund's SAI has more detailed information about who
may purchase and hold Fund shares.
The Fund is required to withhold 31% of taxable dividends, capital gains
distributions, and redemptions paid to shareholders who have not provided the
Fund with their certified taxpayer identification number. To avoid this, you
must provide your correct Tax Identification Number (Social Security Number for
most investors) on your account application.
The Fund may refuse any order to purchase shares. In particular, the Fund
reserves 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 the Fund for Class A shares of any other
Alliance Mutual Fund. Exchanges of shares are made at the next-determined NAV
without sales or service charges. You may request an exchange by mail or
telephone. You must call by 4:00 p.m., Eastern time, to receive that day's NAV.
The Fund may change, suspend, or terminate the exchange service on 60 days'
notice.
How To Sell Shares
You may "redeem" your shares (i.e., sell your shares to the Fund) on any day the
Exchange is open, either directly or through your financial representative. Your
sales price will be the next-
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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, your redemption
payment may be delayed until the Fund is reasonably satisfied that the check
or electronic funds transfer has been collected (which may take up to 15 days).
o Selling Shares Through Your Financial Representative
Your financial representative must receive your sales request by 4:00 p.m.,
Eastern time, and submit it to the Fund by 5:00 p.m. Eastern time, for you to
receive that day's NAV. Your financial representative is responsible for
submitting all necessary documentation to the Fund and may charge you for this
service. If you are in doubt about what documents are required by your fee-based
program or other program, you should contact your financial representative.
o Selling Shares Directly to the Fund
By Mail:
-- Send a signed letter of instruction or stock power form, along with
certificates, to:
Alliance Fund Services, Inc.
P.O. Box 1520
Secaucus, NJ 07096-1520
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 received by 4:00 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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DIVIDENDS, DISTRIBUTIONS
AND TAXES
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The Fund's income dividend and capital gains distribution, if any, declared by
the Fund on its outstanding shares will, at the election of each shareholder, be
paid in cash or in additional shares of the same class of shares of the Fund. If
paid in additional shares, the shares will have an aggregate net asset value as
of the payment date of the dividend or distribution equal to the cash amount of
the income dividend or distribution. You may make an election to receive
dividends and distributions in cash or shares at the time you purchase shares.
Your election can be changed at any time prior to the record date for a
particular dividend or distribution. Cash dividends can be paid by check or, at
your election, electronically via the ACH network. There is no sales or other
charge on the reinvestment of Fund dividends and distributions.
If you receive an income dividend or capital gains distribution in cash, you
may, within 120 days following the date of its payment, reinvest the dividend or
distribution in additional shares of the same class of the Fund without charge
by returning to Alliance, with appropriate instructions, the check representing
the dividend or distribution. Thereafter, unless you otherwise specify, you will
be deemed to have elected to reinvest all subsequent dividends and distributions
in shares of the Fund.
The Fund expects that distributions will consist either of net income or
long-term capital gains. For federal income tax purposes, the Fund's dividend
distributions of net income (or short-term capital gains) will be taxable to you
as ordinary income. Any long-term capital gains distributions may be taxable to
you as long-term capital gains. The Fund's distributions also may be subject
to certain state and local taxes.
While it is the intention of the Fund to distribute to its shareholders
substantially all of each fiscal year's net income and net realized capital
gains, if any, the amount and time of any such dividend or distribution will
depend upon the realization by the Fund of income and capital gains from
investments. There is no fixed dividend rate and there can be no assurance that
the Fund will pay any dividends or realize any capital gains. The final
determination of the amount of a Fund's return of capital distributions for the
period will be made after the end of each calendar year.
Investment income received by the Fund from sources within foreign countries may
be subject to foreign income taxes withheld at the source. To the extent that
the Fund is liable for foreign income taxes withheld at the source, the Fund
intends, if possible, to operate so as to meet the requirements of the Code to
"pass through" to the Fund's shareholders credits for foreign income taxes paid,
but there can be no assurance that the Fund will be able to do so. Furthermore,
a shareholder's ability to claim a foreign tax credit or deduction for foreign
taxes paid by the Fund may be subject to certain limitations imposed by the
Code, as a result of which a shareholder may not be
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permitted to claim a full credit or deductions for the amount of such taxes.
Under certain circumstances, if the Fund realizes losses (e.g., from
fluctuations in currency exchange rates) after paying a dividend, all or a
portion of the distributions may subsequently be characterized as a return of
capital. Returns of capital are generally non-taxable, but will reduce a
shareholder's basis in shares of the Fund. If that basis is reduced to zero
(which could happen if the shareholder does not reinvest distributions and
returns of capital are significant), any further returns of capital will be
taxable as a capital gain. See the Fund's SAI for a further explanation of these
tax issues.
The sale or exchange of Fund shares is a taxable transaction for Federal Income
tax purposes.
If you buy shares just before the Fund deducts a distribution from its net asset
value, you will pay the full price for the shares and then receive a portion of
the price back as a taxable distribution.
Each year shortly after December 31, the Fund will send you tax information
stating the amount and type of all its distributions for the year. Consult your
tax adviser about the federal, state, and local tax consequences in your
particular circumstances.
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DISTRIBUTION ARRANGEMENTS
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Share Classes. The Fund offers two classes of shares.
Class I Shares
You may purchase and hold shares of Class I solely:
o 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;
o through employee plans that have at least $10 million in assets;
o as investment advisory clients of, and certain other persons associated
with, Alliance and its affiliates or the Fund; and
o through registered investment advisers or other financial intermediaries
who charge a management, consulting or other fee for their services and
who purchase shares through a broker or agent approved by AFD, and clients
of such registered investment advisers or financial intermediaries whose
accounts are linked to the master account of such investment adviser or
financial intermediary on the books of such approved broker or agent.
Class II Shares
You may purchase and hold shares of Class II solely:
o through participation in wrap-fee or other similar programs offered by
registered broker-dealers or other financial intermediaries that meet
certain requirements established by AFD, and
o through employee plans that have at least $10 million in assets.
For more detailed information about who may purchase and hold the shares of the
Fund, see the Fund's SAI. Fee-based and other programs may impose different
requirements with respect to investment in the shares of the Fund than described
above.
Asset-based Sales Charge or Rule 12b-1 Fees. The Fund has adopted a plan under
Commission Rule 12b-1 that allows the Fund to pay asset-based sales charges or
distribution and service fees for the distribution and sale of its Class II
shares. The amount of these fees is .30% of the Fund's aggregate average daily
net assets. Because these fees are paid out of the Fund's assets on an on-going
basis, over time these fees will increase the cost of your investment and may
cost you more than paying other types of sales fees.
Conversion Feature. As described above, Class I shares may be held solely
through the fee-based program accounts, employee benefit plans and registered
investment advisory or other financial intermediary relationships, and by
investment advisory clients of, and certain other persons associated with,
Alliance and its affiliates or the Fund. If a holder of Class I shares (i)
ceases to participate in the fee-based program or plan, or to be associated with
an investment advisor or financial intermediary or (ii) is otherwise no longer
eligible to purchase Class I shares as described in this Prospectus (each, a
"Conversion Event"), then all Class I shares held by the shareholder will
convert automatically and without notice, to Class II shares of the Fund during
the calendar month following the month in which the Fund is informed of the
occurrence of the Conversion Event.
The failure of a shareholder or a fee-based program to satisfy the minimum
investment requirements to purchase Class I shares will not constitute a
Conversion Event. The conversion would occur on the basis of the relative NAVs
of the two classes and without the imposition of any sales load, fee or other
charge.
Other. If you are a Fund shareholder through an account established under a fee-
based or other program, your fee-based or other program may impose requirements
with respect to the purchase, sale or exchange of shares of the Fund that are
different from those described in this Prospectus. A transaction, service,
administrative or other similar fee may be charged by your 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
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are different from, or in addition to, those imposed by the Fund, including
requirements as to the minimum initial and subsequent investment amounts.
In addition to the discount or commission that may be paid to dealers or agents
in connection with the sale of shares of the Fund, AFD may from time to time pay
additional cash or other incentives to dealers or agents, including EQ Financial
Consultants, Inc., an affiliate of AFD, in connection with such sales. Such
additional amounts may be utilized, in whole or in part, in some cases together
with other revenues of such dealers or agents, to provide additional
compensation to registered representatives who sell shares of the Fund. On some
occasions, such cash or other incentives will be conditioned upon the sale of a
specified minimum dollar amount of the shares of the Fund and/or other Alliance
Mutual Funds during a specific period of time. Such incentives may take the form
of payment for attendance at seminars, meals, sporting events or theater
performances, or payment for travel, lodging and entertainment incurred in
connection with travel by persons associated with a dealer or agent and their
immediate family members to urban or resort locations within or outside the
United States. Such dealer or agent may elect to receive cash incentives of
equivalent amount in lieu of such payments.
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GENERAL INFORMATION
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Under unusual circumstances, the Fund may suspend redemptions or postpone
payment for up to seven days or longer, as permitted by federal securities law.
The Fund reserves the right to close an account that through redemption has
remained below $200 for 90 days. Shareholders will receive 60 days' written
notice to increase the account value before the account is closed.
During drastic economic or market developments, you might have difficulty
reaching AFS by telephone, in which event you should issue written instructions
to AFS. AFS is not responsible for the authenticity of telephonic requests to
purchase, sell or exchange shares. AFS will employ reasonable procedures to
verify that telephone requests are genuine and could be liable for losses
resulting from unauthorized transactions if it failed to do so. Dealers and
agents may charge a commission for handling telephonic requests. The telephone
service may be suspended or terminated at any time without notice.
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For more information about the Fund, the following documents are available upon
request:
o 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.
o 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.O. Box 1520
Secaucus, NJ 07096-1520
By Phone: For Information: (800) 221-5672
For Literature: (800) 227-4618
Or you may view or obtain these documents from the Commission:
In Person: at the Commission's Public Reference Room
in Washington, D.C.
By Phone: 1-800-SEC-0330
By Mail: Public Reference Section
Securities and Exchange Commission
Washington, DC 20549-6009
(duplicating fee required)
On the Internet: www.sec.gov
You also may find more information about Alliance and the Fund on the Internet
at: www.Alliancecapital.com.
12
<PAGE>
========================
Alliance Special Equity
Institutional Fund
Subscription Application
========================
Special Equity Oriented Fund
To Open Your New Alliance Account...
Please complete the application and mail it to:
Alliance Fund Services, Inc.
P.O. Box 1520
Secaucus, New Jersey 07096-1520
For certified or overnight deliveries, send to:
Alliance Fund Services, Inc.
500 Plaza Drive
Secaucus, New Jersey 07094
Section 1 Your Account Registration (Required)
Complete one of the available choices. To ensure proper tax reporting to the
IRS:
> Individuals, Joint Tenants, Transfer on Death and Gift/Transfer to a
Minor:
o Indicate your name(s) exactly as it appears on your social
security card.
> Transfer on Death:
o Ensure that your state participates
> Trust/Other:
o Indicate the name of the entity exactly as it appeared on the
notice you received from the IRS when your Employer
Identification number was assigned.
Section 2 Your Address (Required) Complete in full.
> Non-Resident Alien:
o Indicate your permanent country of residence.
Section 3 Your Initial Investment (Required)
For the fund in which you are investing: (1) Write the three digit fund number
in the column titled 'Indicate three digit fund number located below'. (2) Write
the dollar amount of your initial purchase in the column titled 'Indicate Dollar
Amount'. (3) Check off a distribution option for your dividends. (4) Check off a
distribution option for your capital gains. All distributions (dividends and
capital gains) will be reinvested into your fund account unless you direct
otherwise. If you want distributions sent directly to your bank account, then
you must complete Section 4B and attach a preprinted, voided check for that
account. If you want your distributions sent to a third party you must complete
Section 4C.
Section 4 Your Shareholder Options
(Complete only those options you want)
A. Telephone Transactions via EFT - Complete this option if you would like to be
able to transact via telephone between your fund account and your bank account.
B Bank Information - If you have elected any options that involve transactions
between your bank account and your fund account or have elected cash
distribution options and would like the payments sent to your bank account,
please tape a preprinted, voided check of the account you wish to use to this
section of the application.
C. Third Party Payment Details - If you have chosen cash distributions and/or a
Systematic Withdrawal Plan and would like the payments sent to a person and/or
address other than those provided in section 1 or 2, complete this option.
Medallion Signature Guarantee is required if your account is not maintained by a
broker dealer.
Section 5 Shareholder Authorization
(Required) All owners must sign. If it is a custodial, corporate, or trust
account, the custodian, an authorized officer, or the trustee respectively must
sign.
If We Can Assist You In Any Way, Please Do Not Hesitate To Call Us At: (800)
221-5672
Or Visit Our Website: www.alliancecapital.com
===================================
For Literature Call: (800) 227-4618
===================================
<PAGE>
Alliance Special Equity Institutional Fund Subscription Application
================================================================================
1. Your Account Registration (Please Print in Capital Letters and Mark
Check Boxes Where Applicable)
================================================================================
|_| Individual Account { |_| Male |_| Female } - or - |_| Joint Account - or -
|_| Transfer on Death { |_| Male |_| Female } - or - |_| Gift/Transfer to a
Minor
|_||_||_||_||_||_||_||_||_||_| |_| |_||_||_||_||_||_||_||_||_||_|
Owner or Custodian (First Name) (MI) (Last Name)
|_||_||_||_||_||_||_||_||_||_| |_| |_||_||_||_||_||_||_||_||_||_|
(First Name) Joint Owner*, (MI) (Last Name)
Transfer On Death Beneficiary
or Minor
|_||_||_| - |_||_| - |_||_||_||_| If Uniform Gift/Transfer to
Social Security Number of Owner Minor Account:
or Minor (required to open account) |_||_| Minor's State of
Residence
If Joint Tenants Account: * The Account
will be registered "Joint Tenants with
right of Survivorship" unless you indicate
otherwise below:
|_| In Common |_| By Entirety |_| Community Property
|_| Trust - or - |_| Corporation - or - |_| Other______________________________
|_||_||_||_||_||_||_||_||_||_| |_| |_||_||_||_||_||_||_||_||_||_|
Name of Trustee if applicable (MI) (Last Name)
(First Name)
|_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_|
Name of Trust or Corporation or Other Entity
|_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_|
Name of Trust or Corporation or Other Entity continued
|_||_||_||_||_||_||_||_| |_||_||_||_||_||_||_||_||_|
Trust Dated (MM,DD,YYYY) Tax ID Number (required to open account)
|_| Employer ID Number - OR - |_| Social Security
Number
================================================================================
2. Your Address
================================================================================
|_||_||_||_||_||_||_| |_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_|
Street Number Street Name
|_||_||_||_||_||_||_||_||_||_||_||_| |_||_| |_||_||_||_||_|
City State Zip code
|_||_||_||_||_||_||_||_||_| |_||_||_| - |_||_||_| - |_||_||_||_|
If Non-U.S., Specify Country Daytime Phone Number
|_| U.S. Citizen |_| Resident Alien |_| Non-Resident Alien
|_______________________________________|
e-mail address
SEINSTAPP499-P1
<PAGE>
================================================================================
3. Your Initial Investment The minimum investment is $2 million, which
may be invested in one or more of the
Alliance Institutional Funds. Different
minimums apply for employee retirement plans.
================================================================================
I hereby subscribe for shares of the Alliance Special Equity Institutional Fund
and elect distribution options as indicated.
Dividend and Capital Gain Distribution
Options:
R Reinvest distributions into my fund
account.
- --------------------------------------
Broker/Dealer Use Only: Wire Confirm # C Send my distributions in cash to the
address I have provided in Section
|_||_||_||_||_||_||_||_| 2. (Complete Section 4D for direct
- -------------------------------------- deposit to your bank account.
Complete Section 4E for payment to a
third party)
D Direct my distributions to another
Alliance fund. Complete the
appropriate portion of Section 4A to
direct your distributions (dividends
and capital gains) to another
Alliance Fund (the $250 minimum
investment requirement applies to
Funds into which distributions are
directed).
- ----------- -------------- ---------------------- --------------------------
Distributions Options
*Check One*
Indicate three --------------------------
digit Fund --------- --------------
number located Indicate Dollar Amount Dividends Capital Gains
Make all below R C D R C D
checks* -------------- ---------------------- --------- --------------
payable to: |_||_||_| $_____________________ |R||C||D| |R||C||D|
Alliance |_||_||_| $_____________________ |R||C||D| |R||C||D|
Funds
- -----------
- --------------------------
Total Investement $_____________________
- --------------------------
* Cash and money orders are not accepted
- --------------------------------------------------------------------------------
Alliance Institutional Fund Class I Class II
- --------------------------------------------------------------------------------
Alliance Special Equity Institutional Fund 519 619
Alliance Capital [LOGO](R)
SEINSTAPP499-P2
<PAGE>
================================================================================
4. Your Shareholder Options
================================================================================
A. Purchases and Redemptions Via EFT
You can call our toll-free number 1-800-221-5672 and instruct Alliance
Fund Services, Inc. in a recorded conversation to purchase, redeem or
exchange shares for your account. Purchase and redemption requests will be
processed via electronic funds transfer (EFT) to and from your bank
account.
Instructions: > Review the information in the Prospectus about telephone
transaction services.
> If you select the telephone purchase or redemption
privilege, you must write "VOID" across the face of a
check from the bank account you wish to use and attach it
to Section 4D of this application.
|_| Purchases and Redemptions via EFT
I hereby authorize Alliance Fund Services, Inc. to effect the purchase
and/or redemption of Fund shares for my account according to my telephone
instructions or telephone instructions from my Broker/Agent, and to
withdraw money or credit money for such shares via EFT from the bank
account I have selected.
For shares recently purchased by check or electronic funds transfer
redemption proceeds will not be made available until the Fund is
reasonably assured the check or electronic funds transfer has been
collected, normally 15 calendar days after the purchase date.
B. Bank Information This bank account information will be used for:
|_| Distributions (Section 3) |_| Telephone Transactions
(Section 4B)
|_| Automatic Investments |_| Withdrawals (Section 4C)
(Section 4A)
================================================================================
Please Tape a Pre-printed Voided Check Here*
================================================================================
[GRAPHIC OF VOIDED CHECK OMITTED]
* The above services cannot be established without a pre-printed voided check.
For EFT transactions, the fund requires signatures of bank account owners
exactly as they appear on bank records. If the registration at the bank differs
from that on the Alliance mutual fund, all parties must sign in Section 5.
|_||_||_||_||_||_||_||_||_| |_||_||_||_||_||_||_||_||_||_||_||_||_|
Your Bank's ABA Routing Number Your Bank Account Number
|_| Checking Account |_| Savings Account
Alliance Capital [LOGO](R)
SEINSTAPP499-P3
<PAGE>
================================================================================
4. Your Shareholder Options (CONTINUED)
================================================================================
C. Third Party Payment Details Your signature(s) in Section 5 must be
Medallion Signature Guaranteed if your account is not maintained by a
broker/dealer. This third party payee information will be used for:
|_| Distributions (Section 3) |_| Systematic
Withdrawals
(Section 4C)
|_||_||_||_||_||_||_||_||_||_| |_| |_||_||_||_||_||_||_||_||_||_|
Name (First Name) (MI) (Last Name)
|_||_||_||_||_||_||_| |_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_|
Street Number Street Name
|_||_||_||_||_||_||_||_||_||_||_||_| |_||_| |_||_||_||_||_|
City State Zip code
================================================================================
Dealer/Agent Authorization - For selected Dealers or Agents ONLY.
================================================================================
We hereby authorize Alliance Fund Services, Inc. to act as our agent in
connection with transactions under this authorization form; and we guarantee the
signature(s) set forth in Section 5, as well as the legal capacity of the
shareholder.
_________________________________ ____________________________
| | | |
|_________________________________| |____________________________|
Dealer/Agent Firm Authorized Signature
____________________________ _ ____________________________
| | | | | |
|____________________________| |_| |____________________________|
Representative First Name MI Last Name
_________________________________ ____________________________
| | | |
|_________________________________| |____________________________|
Dealer/Agent Firm Number Representative Number
_________________________________ ____________________________
| | | |
|_________________________________| |____________________________|
Branch Number Branch Telephone Number
__________________________________________________________________
| |
|__________________________________________________________________|
Branch Office Address
_________________________________ _ _ _____________________
| | | || | | |
|_________________________________| |_||_| |_____________________|
City State Zip Code
Alliance Capital [LOGO](R)
SEINSTAPP499-P4
<PAGE>
================================================================================
5. Shareholder Authorization -- This section MUST be completed
================================================================================
Telephone Exchanges and Redemptions by Check
Unless I have checked one or both boxes below, these privileges will
automatically apply, and by signing this application, I hereby authorize
Alliance Fund Services, Inc. to act on my telephone instructions, or on
telephone instructions from any person representing himself to be an
authorized employee of an investment dealer or agent requesting a
redemption or exchange on my behalf. (NOTE: Telephone exchanges may only
be processed between accounts that have identical registrations.)
Telephone redemption checks will only be mailed to the name and address of
record; and the address must not have changed within the last 30 days. The
maximum telephone redemption amount is $50,000 for redemptions by check.
|_| I do not elect the telephone exchange service
|_| I do not elect the telephone redemption by check service
By selecting any of the above telephone privileges, I agree that neither
the Fund nor Alliance, Alliance Fund Distributors, Inc., Alliance Fund
Services, Inc. or other Fund Agent will be liable for any loss, injury,
damage or expense as a result of acting upon telephone instructions
purporting to be on my behalf, that the Fund reasonably believes to be
genuine, and that neither the Fund nor any such party will be responsible
for the authenticity of such telephone instructions. I understand that any
or all of these privileges may be discontinued by me or the Fund at any
time. I understand and agree that the Fund reserves the right to refuse
any telephone instructions and that my investment dealer or agent reserves
the right to refuse to issue any telephone instructions I may request.
For non-residents only: Under penalties of perjury, I certify that to the
best of my knowledge and belief, I qualify as a foreign person as
indicated in Section 2.
I am of legal age and capacity and have received and read the Prospectus
and agree to its terms.
I certify under penalty of perjury that the number shown in Section 1 of
this form is my correct tax identification number or I am waiting for a
number to be issued to me and that I have not been notified that this
account is subject to backup withholding.
The Internal Revenue Service does not require your consent to any
provision of this document other than the certification required to avoid
backup withholding.
_______________________________________________________ ______
| | | |
|_______________________________________________________| |______|
Signature Date
_______________________________________________________ ______
| | | |
|_______________________________________________________| |______|
Signature Date
__________________________________________
Medallion Signature Guarantee required if
completing Section 4E and your mutual fund
is not maintained by a broker dealer
Alliance Capital [LOGO](R)
SEINSTAPP499-P5
<PAGE>
This is filed pursuant to Rule 497(c).
File Nos. 333-37177 and 811-08403.
<PAGE>
(LOGO) ALLIANCE INSTITUTIONAL FUNDS, INC.
- ALLIANCE SPECIAL EQUITY 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
May 1, 1999
________________________________________________________________
This Statement of Additional Information is not a
prospectus but supplements and should be read in conjunction with
the Prospectus dated May 1, 1999 (the "Prospectus") for Alliance
Institutional Funds, Inc. - Alliance Special Equity Institutional
Fund. Copies of the Prospectus may be obtained by contacting
Alliance Fund Services, Inc. at the address or the "For
Literature" telephone number shown above.
TABLE OF CONTENTS
PAGE
DESCRIPTION OF THE FUND..................................... 2
MANAGEMENT OF THE FUND...................................... 12
EXPENSES OF THE FUND........................................ 19
PURCHASE OF SHARES.......................................... 21
REDEMPTION AND REPURCHASE OF SHARES......................... 26
SHAREHOLDER SERVICES........................................ 30
NET ASSET VALUE............................................. 35
DIVIDENDS, DISTRIBUTIONS AND TAXES.......................... 38
PORTFOLIO TRANSACTIONS...................................... 41
GENERAL INFORMATION......................................... 43
(R) This registered service mark used under license from the
owner, Alliance Capital Management L.P.
<PAGE>
________________________________________________________________
DESCRIPTION OF THE FUND
________________________________________________________________
Alliance Institutional Funds, Inc. (the "Company") is an
open-end management investment company whose shares are offered
in separate series referred to herein as "Funds." Each Fund is a
separate pool of assets constituting, in effect, a separate fund
with its own investment objective and policies. A shareholder in
a Fund will be entitled to his or her pro-rata share of all
dividends and distributions arising from that Fund's assets and,
upon redeeming shares of that Fund, the shareholder will receive
the then current net asset value of the applicable class of
shares of that Fund. (See "Purchase of Shares" and "Redemption
and Repurchase of Shares," in the Prospectus.) The Company is
empowered to establish, without shareholder approval, additional
Funds which may have different investment objectives.
The Company currently has four portfolios: Alliance
Special Equity Institutional Fund (the "Fund"), which is
described in this Statement of Additional Information, and
Alliance Premier Growth Institutional Fund, Alliance Quasar
Institutional Fund and Alliance Real Estate Investment
Institutional Fund which are each described in a separate
Statement of Additional Information, copies of which can be
obtained by contacting Alliance Fund Services, Inc. at the
address or the "For Literature" telephone number shown on the
cover of this Statement of Additional Information.
Investments will be made based upon their potential for
capital appreciation. Because of the market risks inherent in
any investment, the selection of securities on the basis of their
appreciation possibilities cannot ensure against possible loss in
value, and there is, of course, no assurance that the Fund's
investment objective will be met.
The following investment policies and restrictions
supplement those set forth in the Prospectus. Except as
otherwise noted, the Fund's investment policies described below
are not designated "fundamental policies" within the meaning of
the Investment Company Act of 1940, as amended, (the "1940 Act")
and may be changed by the Board of Directors of the Company (the
"Board of Directors" or the "Directors") without shareholder
approval. However, the Fund will not change its investment
policies without contemporaneous written notice to shareholders.
Convertible Securities. The Fund may invest in
convertible securities which include bonds, debentures, corporate
notes and preferred stocks that are convertible at a stated
exchange rate into common stock. Prior to their conversion,
2
<PAGE>
convertible securities have the same general characteristics as
non-convertible debt securities which provide a stable stream of
income with generally higher yields than those of equity
securities of the same or similar issuers. As with all debt
securities, the market value of convertible securities tends to
decline as interest rates increase and, conversely, to increase
as interest rates decline. While convertible securities
generally offer lower interest or dividend yields than non-
convertible debt securities of similar quality, they do enable
the investor to benefit from increases in the market price of the
underlying common stock. When the market price of the common
stock underlying a convertible security increases, the price of
the convertible security increasingly reflects the value of the
underlying common stock and may rise accordingly. As the market
price of the underlying common stock declines, the convertible
security tends to trade increasingly on a yield basis, and thus
may not depreciate to the same extent as the underlying common
stock. Convertible securities rank senior to common stocks in an
issuer's capital structure. They are consequently of higher
quality and entail less risk than the issuer's common stock,
although the extent to which such risk is reduced depends in
large measure upon the degree to which the convertible security
sells above its value as a fixed income security. The Fund may
invest up to 20% of its net assets in the convertible securities
of companies whose common stocks are eligible for purchase by the
Fund under the investment policies described above.
Rights and Warrants. The Fund may invest up to 5% of
its net assets in rights or warrants which entitle the holder to
buy equity securities at a specific price for a specific period
of time, but will do so only if the equity securities themselves
are deemed appropriate by Alliance Capital Management L.P., the
Fund's adviser (the "Adviser") for inclusion in the Fund's
portfolio. Rights are similar to warrants except that they have
a substantially shorter duration. Rights and warrants may be
considered more speculative than certain other types of
investments in that they do not entitle a holder to dividends or
voting rights with respect to the securities which may be
purchased nor do they represent any rights in the assets of the
issuing company. Also, the value of a right or warrant does not
necessarily change with the value of the underlying security,
although the value of a right or warrant may decline because of a
decrease in the value of the underlying security, the passage of
time, a change in perception as to the potential of the
underlying security, or any combination of these factors. If the
market price of the underlying security is below the exercise
price of the warrant on the expiration date, the warrant will
expire worthless. Moreover, a right or warrant ceases to have
value if it is not exercised prior to the expiration date.
3
<PAGE>
Foreign Securities. The Fund may invest up to 15% of
the value of its total assets in securities of foreign issuers
whose common stocks are eligible for purchase by the Fund under
the investment policies described above. Foreign securities
investments are affected by exchange control regulations as well
as by changes in governmental administration, economic or
monetary policy (in the United States and abroad) and changed
circumstances in dealings between nations. Currency exchange
rate movements will increase or reduce the U.S. dollar value of
the Fund's net assets and income attributable to foreign
securities. Costs are incurred in connection with the conversion
of currencies held by the Fund. There may be less publicly
available information about foreign issuers than about domestic
issuers, and foreign issuers may not be subject to accounting,
auditing and financial reporting standards and requirements
comparable to those of domestic issuers. Securities of some
foreign issuers are less liquid and more volatile than securities
of comparable domestic issuers, and foreign brokerage commissions
are generally higher than in the United States. Foreign
securities markets may also be less liquid, more volatile, and
less subject to governmental supervision than in the United
States. Investments in foreign countries could be affected by
other factors not present in the United States, including
expropriation, confiscatory taxation and potential difficulties
in enforcing contractual obligations.
The securities markets of many foreign countries are
relatively small, with the majority of market capitalization and
trading volume concentrated in a limited number of companies
representing a small number of industries. Consequently, the
portion of the Fund's investment portfolio invested in foreign
securities may experience greater price volatility and
significantly lower liquidity than a portfolio invested solely in
equity securities of U. S. companies. These markets may be
subject to greater influence by adverse events generally
affecting the market, and by large investors trading significant
blocks of securities, than is usual in the United States.
Securities settlements may in some instances be subject
to delays and related administrative uncertainties. Certain
foreign countries require governmental approval prior to
investments by foreign persons or limit investment by foreign
persons to only a specified percentage of an issuers outstanding
securities or a specific class of securities which may have less
advantageous terms (including price) than securities of the
company available for purchase by nationals. These restrictions
or controls may at times limit or preclude investment in certain
securities and may increase the costs and expenses of the Fund.
In addition, the repatriation of investment income, capital or
the proceeds of sales of securities from certain of the countries
is controlled under regulations, including in some cases the need
4
<PAGE>
for certain advance government notification or authority, and if
a deterioration occurs in a country's balance of payments, the
country could impose temporary restrictions on foreign capital
remittances.
The Fund could be adversely affected by delays in, or a
refusal to grant, any required governmental approval for
repatriation, as well as by the application to it of other
restrictions on investment. Investing in local markets may
require the Fund to adopt special procedures that may involve
additional costs to the Fund. These factors may affect the
liquidity of the Fund's investments in any country in which any
of these factors exists. The Adviser will monitor the effect of
any such factor or factors on the Funds investments.
Furthermore, transaction costs including brokerage commissions
for transactions both on and off the securities exchanges in many
foreign countries are generally higher than in the U.S.
Issuers of securities in foreign jurisdictions are
generally not subject to the same degree of regulation as are
U.S. issuers with respect to such matters as insider trading
rules, restrictions on market manipulation, shareholder proxy
requirements, and timely disclosure of information. The
reporting, accounting and auditing standards of foreign countries
may differ, in some cases significantly, from U.S. standards in
important respects and less information may be available to
investors in foreign securities than to investors in U.S.
securities. Substantially less information is publicly available
about certain non-U.S. issuers than is available about U.S.
issuers.
The economies of individual foreign countries may differ
favorably or unfavorably from the U.S. economy in such respects
as growth of gross domestic product or gross national product,
rate of inflation, capital reinvestment, resource self-
sufficiency, and balance of payments position. Nationalization,
expropriation or confiscatory taxation, currency blockage,
political changes, government regulation, political or social
instability, or diplomatic developments could affect adversely
the economy of a foreign country and the Fund's investments. In
the event of expropriation, nationalization, or other
confiscation, the Fund could lose its entire investment in the
country involved. In addition, laws in foreign countries
governing business organizations, bankruptcy and insolvency may
provide less protection to security holders such as the Fund than
that provided by U.S. laws.
Illiquid Securities. The Fund will not maintain more
than 15% of its net assets in illiquid securities. Illiquid
securities generally include (i) direct placements or other
securities that are subject to legal or contractual restrictions
5
<PAGE>
on resale or for which there is no readily available market
(e.g., when trading in the security is suspended or, in the case
of unlisted securities, when market makers do not exist or will
not entertain bids or offers), including many individually
negotiated currency swaps and any assets used to cover currency
swaps and most privately negotiated investments in state
enterprises that have not yet conducted an initial equity
offering, (ii) over-the-counter options and assets used to cover
over-the-counter options, and (iii) repurchase agreements not
terminable within seven days.
Historically, illiquid securities have included
securities subject to contractual or legal restrictions on resale
because they have not been registered under the Securities Act of
1933, as amended (the "Securities Act"), and securities which are
otherwise not readily marketable. Securities which have not been
registered under the Securities Act are referred to as private
placements or restricted securities and are purchased directly
from the issuer or in the secondary market. Mutual funds do not
typically hold a significant amount of these restricted or other
illiquid securities because of the potential for delays on resale
and uncertainty in valuation. Limitations on resale may have an
adverse effect on the marketability of portfolio securities, and
a mutual fund might be unable to dispose of restricted or other
illiquid securities promptly or at reasonable prices and might
thereby experience difficulty satisfying redemptions within seven
days. A mutual fund might also have to register such restricted
securities in order to dispose of them, resulting in additional
expense and delay. Adverse market conditions could impede a
public offering of such securities.
In recent years, however, a large institutional market
has developed for certain securities that are not registered
under the Securities Act, including foreign securities.
Institutional investors depend on an efficient institutional
market in which the unregistered security can be readily resold
or on an issuer's ability to honor a demand for repayment. The
fact that there are contractual or legal restrictions on resale
to the general public or to certain institutions may not be
indicative of the liquidity of such investments.
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
6
<PAGE>
reasonable prices. Rule 144A has already produced enhanced
liquidity for many restricted securities, and market liquidity
for such securities may continue to expand as a result of this
regulation and the consequent inception of the PORTAL System,
which is an automated system for the trading, clearance and
settlement of unregistered securities of domestic and foreign
issuers sponsored by the National Association of Securities
Dealers, Inc. To the extent permitted by applicable law, Rule
144A securities will not be treated as "illiquid" for purposes of
the foregoing restriction so long as such securities meet
liquidity guidelines established by the Fund's Directors.
The Fund's Adviser, acting under the supervision of the
Board of Directors, will monitor the liquidity of restricted
securities in the Fund's portfolio that are eligible for resale
pursuant to Rule 144A. In reaching liquidity decisions, the
Fund's Adviser will consider, among others, the following
factors: (1) the frequency of trades and quotes for the
security; (2) the number of dealers making quotations to purchase
or sell the security; (3) the number of other potential
purchasers of the security; (4) the number of dealers undertaking
to make a market in the security; (5) the nature of the security
(including its unregistered nature) and the nature of the
marketplace for the security (e.g., the time needed to dispose of
the security, the method of soliciting offers and the mechanics
of the transfer); and (6) any applicable interpretation or
position with respect to such type of securities of the U.S.
Securities and Exchange Commission (the "Commission").
Because of the absence of a trading market for illiquid
securities, the Fund may not be able to realize their full value
upon sale. A Fund that invests in securities for which there is
no ready market may therefore not be able to readily sell such
securities. To the extent that these securities are foreign
securities, there is no law in many of the countries in which the
Fund may invest similar to the Securities Act requiring an issuer
to register the sale of securities with a governmental agency or
imposing legal restrictions on resales of securities, either as
to length of time the securities may be held or manner of resale.
However, there may be contractual restrictions on resale of
securities.
General. When business or financial conditions warrant,
the Fund may assume a temporary defensive position and invest in
high-grade short-term fixed-income securities, which may include
U.S. Government securities, or hold its assets in cash.
Loans of Portfolio Securities. The risk in lending
portfolio securities, as with other extensions of credit,
consists of the possible loss of rights in the collateral should
the borrower fail financially. In determining whether to lend
7
<PAGE>
securities to a particular borrower, the Adviser will consider
all relevant facts and circumstances, including the
creditworthiness of the borrower. While securities are on loan,
the borrower will pay the Fund any income from the securities.
The Fund may invest any cash collateral in portfolio securities
and earn additional income, or receive an agreed-upon amount of
income from a borrower who has delivered equivalent collateral.
The Fund will have the right to regain record ownership of loaned
securities or equivalent securities in order to exercise
ownership rights such as voting rights, subscription rights, and
rights to dividends, interest or distributions. The Fund may pay
reasonable finders, administrative and custodial fees in
connection with a loan.
Repurchase Agreements. The Fund may enter into
repurchase agreements. A repurchase agreement arises when a
buyer purchases a security and simultaneously agrees to resell it
to the vendor at an agreed-upon future date, normally a day or a
few days later. The resale price is greater than the purchase
price, reflecting an agreed-upon interest rate for the period the
buyers money is invested in the security. Such agreements permit
the Fund to keep all of its assets at work while retaining
overnight flexibility in pursuit of investments of a longer-term
nature. If a vendor defaults on its repurchase obligation, the
Fund would suffer a loss to the extent that the proceeds from the
sale of the collateral were less than the repurchase price. If a
vendor goes bankrupt, the Fund might be delayed in, or prevented
from, selling the collateral for its benefit. The Adviser
monitors the creditworthiness of the vendors with which the Fund
enters into repurchase agreements.
Portfolio Turnover. The Fund's investment policies as
described above (see "Investment Objective" and "How the Fund
Pursues its Objective") are based on the Adviser's assessment of
fundamentals in the context of changing market valuations. They
may therefore involve frequent purchases and sales of shares of a
particular issuer as well as the replacement of securities.
While it is anticipated that the Fund's annual portfolio turnover
rate will not normally exceed 100%, it could, under some
conditions, exceed 100%. A 100% annual turnover rate would
occur, for example, if all of the stocks in the Fund's portfolio
were replaced once in a period of one year. The Fund expects
that more of its portfolio turnover will be attributable to
increases and decreases in the size of particular portfolio
positions rather than to the complete elimination of a particular
issuer's securities from the Fund's portfolio. A high portfolio
turnover rate will cause the Fund to realize short-term capital
gains or losses on the sale of certain securities and
correspondingly greater brokerage commission expenses than would
a lower rate, which expenses must be borne by the Fund and its
shareholders. See "Dividends, Distributions and Taxes."
8
<PAGE>
Certain Fundamental Investment Policies
The following restrictions may not be changed without a
vote of a majority of the Fund's outstanding voting securities.
For this purpose (and for the purpose of changing the Fund's
investment restrictions and approving the Fund's advisory
agreement, each as more fully described below), the approval of a
majority of the Fund's outstanding voting securities means the
affirmative vote of (i) 67% or more of the shares represented at
a meeting at which more than 50% of the outstanding shares are
present in person or by proxy, or (ii) more than 50% of the
outstanding shares, whichever is less.
As a matter of fundamental policy, the Fund may not:
(a) purchase more than 10% of the outstanding
voting securities of any one issuer;
(b) invest 25% or more of the value of its total
assets in the same industry except that this restriction
does not apply to securities issued or guaranteed by the
U.S. Government, its agencies and instrumentalities;
(c) borrow money from banks or issue senior
securities except for temporary or emergency purposes in
an amount not exceeding 5% of the value of its total
assets at the time the borrowing is made;
(d) pledge, mortgage, hypothecate or otherwise
encumber any of its assets except to secure permitted
borrowings;
(e) invest in the securities of any issuer that
has a record of less than three years of continuous
operation (including the operation of any predecessor)
if as a result more than 10% of the value of the total
assets of the Fund would be invested in the securities
of such issuer or issuers;
(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;
9
<PAGE>
(j) purchase a security if, as a result (unless
the security is acquired pursuant to a plan of
reorganization, merger, consolidation or an offer of
exchange), the Fund would own more than 3% of the total
outstanding voting stock of any investment company, more
than 5% of the value of the Fund's total assets would be
invested in securities of any one investment company or
more than 10% of the value of the Fund's total assets
would be invested in securities of any one or more
investment companies; or
(k)(i) purchase or sell real estate except that it
may purchase and sell securities of companies which deal
in real estate or interests therein, (ii) purchase or
sell commodities or commodity contracts, (iii) invest in
interests in oil, gas or other mineral exploration or
development programs except that it may purchase and
sell securities of companies that deal in oil, gas or
other mineral exploration or development programs,
(iv) make short sales of securities or purchase
securities on margin except for such short-term credits
as may be necessary for the clearance of transactions,
or (v) act as an underwriter of securities except that
the Fund may acquire restricted securities or securities
in private placements under circumstances in which, if
such securities were sold, the Fund might be deemed to
be an underwriter within the meaning of the Securities
Act of 1933, as amended (the "Securities Act").
Application of Percentage Limitations
Except as otherwise indicated, whenever any investment
policy or restriction, described in the Prospectus or under the
heading "Description of the Fund," states a maximum percentage of
the Fund's assets which may be invested in any security or other
asset, it is intended that such maximum percentage limitation be
determined immediately after and as a result of the Fund's
acquisition of such securities or other assets. Accordingly, any
later increase or decrease in percentage beyond the specified
limitation resulting from a change in values or net assets will
not be considered a violation of any such maximum.
10
<PAGE>
________________________________________________________________
MANAGEMENT OF THE FUND
________________________________________________________________
Adviser
Alliance Capital Management L.P. (the "Adviser"), a
Delaware limited partnership with principal offices at 1345
Avenue of the Americas, New York, New York 10105, has been
retained under an investment advisory agreement (the "Advisory
Agreement") to provide investment advice and, in general, to
conduct the management and investment program of the Fund under
the supervision of the Fund's Board of Directors (see "Management
of the Fund" in the Prospectus).
The Adviser is a leading international investment
manager supervising client accounts with assets as of
December 31, 1998, totaling more than $286 billion (of which more
than $118 billion represented the assets of investment
companies). The Adviser's clients are primarily major corporate
employee benefit funds, public employee retirement systems,
investment companies, foundations and endowment funds. The 54
registered investment companies managed by the Adviser,
comprising 118 separate investment portfolios, currently have
more than 3.6 million shareholder accounts. As of December 31,
1998, the Adviser and its subsidiaries employed approximately
2,000 employees who operate out of domestic offices and the
offices of subsidiaries in Bahrain, Bangalore, Cairo, Chennai,
Hong Kong, Istanbul, Johannesburg, London, Luxembourg, Madrid,
Moscow, Mumbai, New Delhi, Paris, Pune, Sao Paolo, Seoul,
Singapore, Sydney, Tokyo, Toronto, Vienna and Warsaw. As of
December 31, 1998, the Adviser was retained as an investment
manager for employee benefit plan assets of 35 of the FORTUNE 100
companies.
Alliance Capital Management Corporation ("ACMC"), the
sole general partner of, and the owner of a 1% general
partnership interest in the Adviser, is an indirect wholly-owned
subsidiary of the Equitable Life Assurance Society of the United
States ("Equitable"), one of the largest life insurance companies
in the United States and a wholly-owned subsidiary of the
Equitable Companies Incorporated ("ECI"). ECI is a holding
company controlled by AXA-UAP ("AXA") a French insurance holding
company which at March 1, 1998, beneficially owned approximately
59% of the outstanding voting shares of ECI. As of June 30,
1998, ACMC, Inc. and Equitable Capital Management Corporation,
each a wholly-owned direct or indirect subsidiary of Equitable,
together with Equitable, owned in the aggregate approximately 57%
of the issued and outstanding units representing assignments of
11
<PAGE>
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 between the Company and the
Adviser (the "Advisory Agreement"), the Adviser furnishes advice
and recommendations with respect to the Fund's portfolio of
securities and investments and provides persons satisfactory to
the Board of Directors to act as officers and employees of the
Company. Such officers and employees may be employees of the
Adviser or its affiliates.
The Adviser is, under the Advisory Agreement,
responsible for certain expenses incurred by the Fund, including,
for example, office facilities and certain administrative
services, and any expenses incurred in promoting the sale of Fund
shares (other than the portion of the promotional expenses borne
by the Fund in accordance with an effective plan pursuant to Rule
12b-1 under the 1940 Act, and the costs of printing Company
prospectuses and other reports to shareholders and fees related
to registration with the Commission and with state regulatory
authorities).
The Fund has, under the Advisory Agreement, assumed the
obligation for payment of all of its other expenses. As to the
obtaining of services other than those specifically provided to
the Fund by the Adviser, the Fund may utilize personnel employed
by the Adviser or by other subsidiaries of Equitable. The Fund
may employ its own personnel or contract for services to be
performed by third parties. In such event, the services will be
12
<PAGE>
provided to the Fund at cost and the payments specifically
approved by the Board of Directors.
For the services rendered by the Adviser under the
Advisory Agreement, the Fund pays the Adviser at an annualized
rate of 1% of the first $50 million, .75 of 1% of the excess over
$50 million up to $100 million and .50 of 1% of the excess over
$100 million of the average daily value of the Fund's net assets.
The fee is accrued daily and paid monthly.
The Advisory Agreement became effective on November 7,
1997, having been approved by the unanimous vote, cast in person,
of the Directors (including the Directors who are not parties to
the Advisory Agreement or interested persons, as defined by the
1940 Act, of any such party) at a meeting called for that purpose
held on that date, and by the Company's initial shareholder on
November 3, 1997. It was amended on May 1, 1999 with respect to
the establishment of the Fund.
The Advisory Agreement will remain in effect until
November 5, 1999 and continue in effect thereafter only so long
as its continuance is specifically approved annually by a vote of
a majority of the Fund's outstanding voting securities or by the
Board of Directors, including in either case, approval by a
majority of the Directors who are not parties to the Advisory
Agreement or interested persons of any such party as defined by
the 1940 Act.
The Advisory Agreement is terminable without penalty by
a vote of a majority of the Fund's outstanding voting securities
or by a vote of a majority of the Directors on 60 days' written
notice, or by the Adviser on 60 days' written notice, and will
automatically terminate in the event of its assignment. The
Advisory Agreement provides that in the absence of willful
misfeasance, bad faith or gross negligence on the part of the
Adviser, or of reckless disregard of its obligations thereunder,
the Adviser shall not be liable for any action or failure to act
in accordance with its duties thereunder.
Certain other clients of the Adviser may have investment
objectives and policies similar to those of the Fund. The Adviser
may, from time to time, make recommendations which result in the
purchase or sale of a particular security by other of its clients
simultaneously with the Fund. If transactions on behalf of more
than one client during the same period increase the demand for
securities being purchased or the supply of securities being
sold, there may be an adverse effect on price or quantity. It is
the policy of the Adviser to allocate advisory recommendations
and the placing of orders in a manner which is deemed equitable
by the Adviser to the accounts involved, including the Fund.
When two or more of the clients of the Adviser (including the
13
<PAGE>
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 Alliance Institutional Reserves,
Inc., AFD Exchange Reserves, The Alliance Fund, Inc., Alliance
All-Asia Investment Fund, Inc., Alliance Balanced Shares, Inc.,
Alliance Bond Fund, Inc., Alliance Capital Reserves, Alliance
Global Dollar Government Fund, Inc., Alliance Global Environment
Fund, Inc., Alliance Global Small Cap Fund, Inc., Alliance
Global Strategic Income Trust, Inc., Alliance Government
Reserves, Alliance Greater China '97 Fund, Inc., Alliance Growth
and Income Fund, Inc., Alliance High Yield Fund, Inc., Alliance
International Fund, Alliance International Premier Growth Fund,
Inc., Alliance Limited Maturity Government Fund, Inc., Alliance
Money Market Fund, Alliance Mortgage Securities Income Fund,
Inc., Alliance Multi-Market Strategy Trust, Inc., Alliance
Municipal Income Fund, Inc., Alliance Municipal Income Fund II,
Alliance Municipal Trust, Alliance New Europe Fund, Inc.,
Alliance North American Government Income Trust, Inc., Alliance
Premier Growth Fund, Inc., Alliance Quasar Fund, Inc., Alliance
Real Estate Investment Fund, Inc., Alliance Select Investor
Series, Inc., Alliance Technology Fund, Inc., Alliance Utility
Income Fund, Inc., Alliance Variable Products Series Fund, Inc.,
Alliance Worldwide Privatization Fund, Inc., The Alliance
Portfolios and The Hudson River Trust, all registered open-end
investment companies; and to ACM Government Income Fund, Inc.,
ACM Government Securities Fund, Inc., ACM Government Spectrum
Fund, Inc., ACM Government Opportunity Fund, Inc., ACM Managed
Income Fund, Inc., ACM Managed Dollar Income Fund, Inc., ACM
Municipal Securities Income Fund, Inc., Alliance All-Market
Advantage Fund, Inc., Alliance World Dollar Government Fund,
Inc., Alliance World Dollar Government Fund II, Inc., The Austria
Fund, Inc., The Korean Investment Fund, Inc., The Southern Africa
Fund, Inc., and The Spain Fund, Inc., all registered closed-end
investment companies.
Directors and Officers
The Directors and principal officers of the Company,
their ages and their principal occupations during the past five
years are set forth below. Each of the Directors and officers
are trustees, directors and officers of other registered
investment companies sponsored by the Adviser. Unless otherwise
specified, the address of each of the following is 1345 Avenue of
the Americas, New York, New York 10105.
14
<PAGE>
Directors
JOHN D. CARIFA,* 53, Chairman of the Board of Directors,
is the President, Chief Operating Officer and a Director of
Alliance Capital Management Corporation ("ACMC"), with which he
has been associated since prior to 1994.
RUTH BLOCK, 68, was formerly Executive Vice President
and Chief Insurance Officer of Equitable. She is a Director of
Ecolab Incorporated (specialty chemicals) and BP Amoco
Corporation (oil and gas). Her address is Box 4657, Stamford,
Connecticut, 06903.
DAVID H. DIEVLER, 69, is an independent consultant. He
was formerly a Senior Vice President of ACMC until 1994. He is
currently an independent consultant. His address is P.O. Box
167, Spring Lake, New Jersey, 07762.
JOHN H. DOBKIN, 57, has been the President of Historic
Hudson Valley (historic preservation) since prior to 1993.
Previously, he was Director of the National Academy of Design.
His address is 150 White Plains Road, Tarrytown, New York 10591.
WILLIAM H. FOULK, JR., 66, is an Investment Advisor and
independent consultant. He was formerly Senior Manager of
Barrett Associates, Inc., a registered investment adviser, since
1986. His address is Suite 100, 2 Greenwich Plaza, Greenwich,
Connecticut 06830.
DR. JAMES M. HESTER, 74, is President of the Harry Frank
Guggenheim Foundation, with which he has been associated since
prior to 1993. He was formerly President of New York University,
the New York Botanical Garden and Rector of the United Nations
University. His address is 25 Cleveland Lane, Princeton, New
Jersey 08540.
CLIFFORD L. MICHEL, 59, is a member of the law firm of
Cahill Gordon & Reindel, with which he has been associated since
prior to 1993. He is President and Chief Executive Officer of
Wenonah Development Company (investments) and a Director of
Placer Dome, Inc. (mining). His address is St. Bernard's Road,
Gladstone, New Jersey 07934.
DONALD J. ROBINSON, 64, is Senior Counsel to the law
firm of Orrick, Herrington & Sutcliffe and was formerly a senior
partner and a member of the Executive Committee of that firm. His
address is 98 Hell's Peak Road, Weston, Vermont 05161.
____________________
* An "interested person" of the Fund as defined in the 1940
Act.
15
<PAGE>
Officers
JOHN D. CARIFA, President, see biography under
"Directors" above.
ALFRED HARRISON, Executive Vice President, 61, is Vice
Chairman of the Board of ACMC, with which he has been associated
since prior to 1994.
ALDEN M. STEWART, Executive Vice President, 53, is an
Executive Vice President of ACMC, with which he has been
associated since prior to 1994.
KATHLEEN A. CORBET, Senior Vice President, 39, is an
Executive Vice President of ACMC, with which she has been
associated since prior to 1994.
RANDALL E. HAASE, Senior Vice President, 35, has been a
Vice President of ACMC, with which he has been associated with
since prior to 1994..
DANIEL G. PINE, Senior Vice President, 47, has been
associated with the Adviser since 1996. Previously, he was a
Senior Vice President of Desai Capital Management since prior to
1994.
THOMAS BARDONG, Vice President, 53, is a Senior Vice
President of ACMC, with which he has been associated since prior
to 1994.
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.
MARK D. GERSTEN, Treasurer and Chief Financial Officer,
48, is a Senior Vice President of Alliance Fund Services, Inc.
("AFS") with which he has been associated since prior to 1994.
VINCENT S. NOTO, Controller, 34, is a Vice President of
AFS, with which he has been associated since prior to 1994.
EDMUND P. BERGAN, JR., Secretary, 48, is a Senior Vice
President and General Counsel of Alliance Fund Distributors, Inc.
("AFD") and AFS and Vice President and Assistant General Counsel
of ACMC, with which he has been associated since prior to 1994.
DOMENICK PUGLIESE, Assistant Secretary, 37, is a Vice
President and Assistant General Counsel of AFD, with which he has
been associated since May 1995. Prior thereto, he was Vice
President and Counsel of Concord Holding Corporation since 1994,
16
<PAGE>
Vice President and Associate General Counsel of Prudential
Securities prior to 1994.
ANDREW L. GANGOLF, Assistant Secretary, 44, is a Vice
President and Assistant General Counsel of AFD, with which he has
been associated since December 1994. Prior thereto he was a Vice
President and Assistant Secretary of Delaware Management Company,
Inc.
EMILIE D. WRAPP, Assistant Secretary, 43, is a Vice
President and Assistant General Counsel of AFD, with which she
has been associated since prior to 1994.
The aggregate compensation paid by the Fund to each of
the Directors during its fiscal year ended October 31, 1998, the
aggregate compensation paid to each of the Directors during
calendar year 1998 by all of the registered investment companies
to which the Adviser provides investment advisory services
(collectively, the "Alliance Fund Complex") and the total number
of registered investment companies (and separate investment
portfolios within those companies) in the Alliance Fund Complex
with respect to which each of the Directors serves as a director
or trustee, are set forth below. Neither the Fund nor any other
fund in the Alliance Fund Complex provides compensation in the
form of pension or retirement benefits to any of its directors or
trustees. Each of the Directors is a director or trustee of one
or more other registered investment companies in the Alliance
Fund Complex.
Total Number
Total Number of Investment
of Investment Portfolios
Companies in Within the
the Alliance Alliance Fund
Total Complex, Complex,
Compensation Including Including the
from the the Company, Fund, as to
Aggregate Alliance Fund as to which which the
Compensation Complex, the Director Director is a
from the Including the is a Director Director or
Name of Director Company Company or Trustee Trustee
- ---------------- ------------ ------------- ------------- --------------
John D. Carifa $ -0- $ -0- 50 114
Ruth Block $1,613 $180,763 37 77
David H. Dievler $1,613 $216,288 43 80
John H. Dobkin $1,604 $185,363 41 91
William H. Foulk, Jr. $1,611 $241,003 45 109
Dr. James M. Hester $1,616 $172,913 37 74
Clifford L. Michel $1,616 $187,763 38 90
Donald J. Robinson $1,613 $193,709 41 103
17
<PAGE>
As of May 1, 1999, the Directors and officers of the
Company as a group owned less than 1% of the Class I and Class II
shares of the Fund.
________________________________________________________________
EXPENSES OF THE FUND
________________________________________________________________
Distribution Services Agreement
The Company has entered into a Distribution Services
Agreement (the "Agreement") with Alliance Fund Distributors,
Inc., the Fund's principal underwriter (the "Principal
Underwriter"), to permit the Principal Underwriter to distribute
the Fund's Class I and Class II shares and to permit the Fund to
pay distribution services fees to defray expenses associated with
the distribution of its Class II shares in accordance with a plan
of distribution which is included in the Agreement and has been
duly adopted and approved in accordance with Rule 12b-1 adopted
by the Commission under the 1940 Act (the "Rule 12b-1 Plan").
Pursuant to its Rule 12b-1 Plan, the Fund pays to the Principal
Underwriter a Rule 12b-1 distribution services fee with respect
to its Class II shares which may not exceed an annual rate of
.30% of the Funds aggregate average daily net assets for
distribution expenses.
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 became effective on November 14, 1997.
The Agreement will continue in effect so long as its continuance
is specifically approved at least annually by the Directors or by
vote of the holders of a majority of the outstanding voting
securities (as defined in the 1940 Act) of that class, and, in
either case, by a majority of the Directors who are not parties
to the Agreement or interested persons, as defined in the 1940
Act, of any such party (other than as directors of the Fund) and
who have no direct or indirect financial interest in the
operation of the Rule 12b-1 Plan or any agreement related
thereto.
18
<PAGE>
In approving the Rule 12b-1 Plan, the Directors of the
Fund determined that there was a reasonable likelihood that the
Rule 12b-1 Plan would benefit the Fund and its Class II
shareholders. The distribution services fee of a particular
class will not be used to subsidize the provision of distribution
services with respect to any other class.
The Adviser may from time to time and from its own funds
or such other resources as may be permitted by rules of the
Commission make payments for distribution services to the
Principal Underwriter; the latter may, in turn, pay part or all
of such compensation to brokers or other persons for their
distribution assistance.
In the event that the Rule 12b-1 Plan is terminated or
not continued with respect to the Class II shares (i) no
distribution services fee (other than current amounts accrued but
not yet paid) would be owed by the Fund to the Principal
Underwriter with respect to that class, and (ii) the Fund would
not be obligated to pay the Principal Underwriter for any amounts
expended under the Agreement not previously recovered by the
Principal Underwriter from distribution services fees in respect
of shares of such class.
The Glass-Steagall Act and other applicable laws may
limit the ability of a bank or other depository institution to
become an underwriter or distributor of securities. However, in
the opinion of the Funds management, based on the advice of
counsel, these laws do not prohibit such depository institutions
from providing services for investment companies such as the
administrative, accounting and other services referred to in the
Agreements. In the event that a change in these laws prevented a
bank from providing such services, it is expected that other
service arrangements would be made and that shareholders would
not be adversely affected.
Transfer Agency Agreement
Alliance Fund Services, Inc., an indirect wholly-owned
subsidiary of the Adviser located at 500 Plaza Drive, Secaucus,
New Jersey 07094 ("AFS"), acts as the Fund's registrar, transfer
agent and dividend-disbursing agent. AFS receives a transfer
agency fee per account holder of each of the Class I and Class II
shares of the Fund, plus reimbursement for out-of-pocket
expenses. The transfer agency fee with respect to the Class II
shares is higher than the transfer agency fee with respect to the
Class I shares.
19
<PAGE>
________________________________________________________________
PURCHASE OF SHARES
________________________________________________________________
The following information supplements that set forth in
the Prospectus under the heading "Purchase and Sale of Shares--
How To Buy Shares."
General
Class I shares of the Fund may be purchased and held
solely (i) through accounts established under a fee-based program
sponsored and maintained by a registered broker-dealer or other
financial intermediary and approved by the Principal Underwriter,
(ii) through employee benefit plans, including defined
contribution and defined benefit plans ("Employee Plans"), that
have at least $10 million in assets, (iii) by investment advisory
clients of the Adviser or its affiliates, (iv) by (a) officers
and present or former Directors of the Company, (b) present or
former directors and trustees of other investment companies
managed by the Adviser, (c) present or retired full-time
employees of the Adviser, the Principal Underwriter, Alliance
Fund Services, Inc. and their affiliates, (d) officers and
directors of ACMC, the Principal Underwriter, Alliance Fund
Services, Inc. and their affiliates, (e) (1) the spouse, sibling,
direct ancestor or direct descendant (collectively "relatives")
of any person listed in (a) through (d), (2) any trust,
individual retirement account or retirement plan account for the
benefit of any person listed in (a) through (d) or a relative of
such person, or (3) the estate of any person listed in (a)
through (d) or a relative of such person, if such shares are
purchased for investment purposes (such shares may not be resold
except to the Fund), (v) by (a) the Adviser, the Principal
Underwriter, Alliance Fund Services, Inc. and their affiliates or
(b) certain employee benefit plans for employees of the Adviser,
the Principal Underwriter, Alliance Fund Services, Inc. and their
affiliates, and (vi) through registered investment advisers or
other financial intermediaries who charge a management,
consulting or other fee for their service and who purchase shares
through a broker or agent approved by the Principal Underwriter,
and clients of such registered investment advisers or financial
intermediaries whose accounts are linked to the master account of
such investment adviser or financial intermediary on the books of
such approved broker or agent.
Class II shares of the Fund may be purchased and held
solely (i) by investors participating in wrap fee or other
similar programs offered by registered broker-dealers or other
financial intermediaries that meet certain requirements
20
<PAGE>
established by the Principal Underwriter, and (ii) Employee Plans
that have at least $10 million in assets.
The shares of the Fund are offered on a continuous basis
at a price equal to their net asset value. The minimum initial
investment in the Company is $2,000,000, which may be invested in
any one or more of the Funds. Investments made through fee-based
or "wrap fee" programs will satisfy the minimum initial
investment requirement if the fee-based or "wrap fee" program, as
a whole, invests at least $2,000,000 in one or more of the Funds.
There is no minimum for subsequent investments. The minimum
initial investment may be waived in the discretion of the
Company.
Investors may purchase shares of the Fund through their
financial representatives. A transaction, service,
administrative or other similar fee may be charged by your
financial representative with respect to the purchase, sale or
exchange of shares made through such financial representative.
Such financial representative may also impose requirements with
respect to the purchase, sale or exchange of shares that are
different from, or in addition to, those imposed by the Fund as
described in the Prospectus and this Statement of Additional
Information, including requirements as to the minimum initial and
subsequent investment amounts.
The Fund may refuse any order for the purchase of
shares. The Fund reserves the right to suspend the sale of its
shares to the public in response to conditions in the securities
markets or for other reasons.
The public offering price of shares of the Fund is their
net asset value. On each Company business day on which a
purchase or redemption order is received by the Fund and trading
in the types of securities in which the Fund invests might
materially affect the value of Fund shares, the per share net
asset value is computed in accordance with the Fund's Articles of
Incorporation and By-Laws as of the next close of regular trading
on the New York Stock Exchange (the "Exchange") (currently 4:00
p.m. Eastern time) by dividing the value of the Fund's total
assets, less its liabilities, by the total number of its shares
then outstanding. A Company business day is any day on which the
Exchange is open for trading.
The Fund will accept unconditional orders for its shares
to be executed at the public offering price equal to their net
asset value next determined as described below. Orders received
by the Principal Underwriter prior to the close of regular
trading on the Exchange on each day the Exchange is open for
trading are priced at the net asset value computed as of the
close of regular trading on the Exchange on that day. In the
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case of orders for the purchase of shares placed through
financial representatives, the applicable public offering price
will be the net asset value as so determined, but only if the
financial representative receives the order prior to the close of
regular trading on the Exchange and transmits it to the Principal
Underwriter prior to 5:00 p.m. Eastern time. The financial
representative is responsible for transmitting such orders by
5:00 p.m. Eastern time. If the financial representative fails to
do so, the investor's right to that day's closing price must be
settled between the investor and the financial representative.
If the financial representative receives the order after the
close of regular trading on the Exchange, the price will be based
on the net asset value determined as of the close of regular
trading on the Exchange on the next day it is open for trading.
Following the initial purchase of Fund shares, a
shareholder may place orders to purchase additional shares by
telephone if the shareholder has completed the appropriate
portion of the Subscription Application or an "Autobuy"
application obtained by calling the "For Literature" telephone
number shown on the cover of this Statement of Additional
Information. Except with respect to certain omnibus accounts,
telephone purchase orders may not exceed $500,000. Payment for
shares purchased by telephone can be made only by electronic
funds transfer from a bank account maintained by the shareholder
at a bank that is a member of the National Automated Clearing
House Association ("NACHA"). If a shareholder's telephone
purchase request is received before 3:00 p.m. Eastern time on a
Company business day, the order to purchase shares is
automatically placed the following Company business day, and the
applicable public offering price will be the public offering
price determined as of the close of business on such following
business day.
Full and fractional shares are credited to a
subscriber's account in the amount purchased by the subscriber.
As a convenience to the subscriber, and to avoid unnecessary
expense to the Fund, stock certificates representing shares of
the Fund are not issued except upon written request to the Fund
by the shareholder or the subscriber's financial representative.
This facilitates later redemption and relieves the shareholder of
the responsibility for and inconvenience of lost or stolen
certificates. No certificates are issued for fractional shares,
although such shares remain in the shareholder's account on the
books of the Fund.
In addition to the discount or commission which may be
paid to dealers or agents in connection with the sale of Fund
shares, the Principal Underwriter from time to time may pay
additional cash or other incentives to dealers or agents,
including EQ Financial Consultants, Inc., formerly Equico
22
<PAGE>
Securities, Inc., an affiliate of the Principal Underwriter, in
connection with such sales. Such additional amounts may be
utilized, in whole or in part, to provide additional compensation
to registered representatives who sell shares of the Fund. On
some occasions, cash or other incentives will be conditioned upon
the sale of a specified minimum dollar amount of the shares of
the Fund and/or other Alliance Mutual Funds, as defined below,
during a specific period of time. On some occasions, such cash
or other incentives may take the form of payment for attendance
at seminars, meals, sporting events or theater performances, or
payment for travel, lodging and entertainment incurred in
connection with travel taken by persons associated with a dealer
or agent and their immediate family members to urban or resort
locations within or outside the United States. Such dealer or
agent may elect to receive cash incentives of equivalent amount
in lieu of such payments.
Class I and Class II shares each represent an interest
in the same portfolio of investments of the Fund, have the same
rights and are identical in all respects, except that
(i) Class II has exclusive voting rights with respect to
provisions of the Rule 12b-1 Plan pursuant to which its
distribution services fees are paid and other matters for which
separate class voting is appropriate under applicable law,
provided that, if the Fund submits to a vote of the Class II
shareholders an amendment to the Rule 12b-1 Plan that would
materially increase the amount to be paid thereunder with respect
to the Class II shares, then such amendment will also be
submitted to the Class I shareholders and the Class II and Class
I shareholders will vote separately thereon by class and
(ii) Class I shares are subject to a conversion feature.
The Directors have determined that currently no conflict
of interest exists between Class I and Class II shares. On an
ongoing basis, the Directors, pursuant to their fiduciary duties
under the 1940 Act and state law, will seek to ensure that no
such conflict arises.
Conversion of Class I Shares to Class II Shares
Class I shares may be held solely through the fee-based
program accounts, employee benefit plans and registered
investment advisory or other financial intermediary relationships
described under "--General," and by investment advisory clients
of, and certain other persons associated with, the Adviser and
its affiliates or the Fund. If (i) a holder of Class I shares
ceases to participate in the fee-based program or plan, or to be
associated with an investment advisor or financial intermediary,
in each case one that satisfies the requirements to purchase
shares set forth under "--General", or (ii) the holder is
otherwise no longer eligible to purchase Class I shares as
23
<PAGE>
described in this Statement of Additional Information (each, a
"Conversion Event"), then all Class I shares held by the
shareholder will convert automatically and without notice to the
shareholder, other than the notice contained in this Statement of
Additional Information, to Class II shares of the Fund during the
calendar month following the month in which the Fund is informed
or otherwise learns of the occurrence of the Conversion Event.
The failure of a shareholder or a fee-based program to satisfy
the minimum investment requirements to purchase Class I shares
will not constitute a Conversion Event. The conversion would
occur on the basis of the relative net asset values of the two
classes and without the imposition of any sales load, fee or
other charge. Class II shares currently bear a .30% distribution
services fee and have a higher expense ratio than Class I shares.
As a result, Class II shares may pay correspondingly lower
dividends and have a lower net asset value than Class I shares.
The conversion of Class I shares to Class II shares is
subject to the continuing availability of an opinion of counsel
to the effect that the conversion of Class I shares to Class II
shares does not constitute a taxable event under federal income
tax law. The conversion of Class I shares to Class II shares may
be suspended if such an opinion is no longer available at the
time such conversion is to occur. In that event, the Class I
shareholder would be required to redeem his Class I shares, which
would constitute a taxable event under federal income tax law.
________________________________________________________________
REDEMPTION AND REPURCHASE OF SHARES
________________________________________________________________
The following information supplements that set forth in
the Prospectus under the heading "Purchase and Sale of Shares-
- -How to Sell Shares." If you are a shareholder through an
account established under a fee-based program, your fee-based
program may impose requirements with respect to the purchase,
sale or exchange of shares of the Fund that are different from
those described herein. A transaction fee may be charged by your
financial representative with respect to the purchase, sale or
exchange of shares made through such financial representative.
Redemption
Subject to the limitations described below, the
Company's Articles of Incorporation require that the Company
redeem the shares tendered to it, as described below, at a
redemption price equal to their net asset value as next computed
following the receipt of shares tendered for redemption in proper
form. There is no redemption charge. If a shareholder is in
doubt about what documents are required by his or her fee-based
24
<PAGE>
program or employee benefit plan, the shareholder should contact
the shareholder's financial representative.
The right of redemption may not be suspended or the date
of payment upon redemption postponed for more than seven days
after shares are tendered for redemption, except for any period
during which the Exchange is closed (other than customary weekend
and holiday closings) or during which the Commission determines
that trading thereon is restricted, or for any period during
which an emergency (as determined by the Commission) exists as a
result of which disposal by the Fund of securities owned by it is
not reasonably practicable or as a result of which it is not
reasonably practicable for the Fund fairly to determine the value
of its net assets, or for such other periods as the Commission
may by order permit for the protection of security holders of the
Fund.
Payment of the redemption price will be made in cash.
The value of a shareholder's shares on redemption or repurchase
may be more or less than the cost of such shares to the
shareholder, depending upon the market value of the Fund's
portfolio securities at the time of such redemption or
repurchase. Payment received by a shareholder upon redemption or
repurchase of the shareholder's shares, assuming the shares
constitute capital assets in the shareholder's hands, will result
in long-term or short-term capital gains (or loss) depending upon
the shareholder's holding period and basis in respect of the
shares redeemed.
To redeem shares of the Fund for which no stock
certificates have been issued, the registered owner or owners
should forward a letter to the Company containing a request for
redemption. The signature or signatures on the letter must be
guaranteed by an institution that is an "eligible guarantor
institution" as defined in Rule 17Ad-15 under the Securities
Exchange Act of 1934, as amended.
To redeem shares of the Fund represented by stock
certificates, the investor should forward the appropriate stock
certificate or certificates, endorsed in blank or with blank
stock powers attached, to the Company with the request that the
shares represented thereby, or a specified portion thereof, be
redeemed. The stock assignment form on the reverse side of each
stock certificate surrendered to the Company for redemption must
be signed by the registered owner or owners exactly as the
registered name appears on the face of the certificate or,
alternatively, a stock power signed in the same manner may be
attached to the stock certificate or certificates or, where
tender is made by mail, separately mailed to the Company. The
signature or signatures on the assignment form must be guaranteed
in the manner described above.
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<PAGE>
Telephone Redemption by Electronic Funds Transfer. Each
Fund shareholder is entitled to request redemption by electronic
funds transfer once in any 30-day period (except for certain
omnibus accounts), of shares for which no stock certificates have
been issued by telephone at (800) 221-5672 by a shareholder who
has completed the appropriate portion of the Subscription
Application or, in the case of an existing shareholder, an
"Autosell" application obtained from Alliance Fund Services, Inc.
A telephone redemption request may not exceed $100,000 (except
for certain omnibus accounts) and must be made by 4:00 p.m.
Eastern time on a Company business day as defined above.
Proceeds of telephone redemptions will be sent by electronic
funds transfer to a shareholder's designated bank account at a
bank selected by the shareholder that is a member of the NACHA.
Telephone Redemption by Check. Except for certain
omnibus accounts or as noted below, each Fund shareholder is
eligible to request redemption by check, once in any 30-day
period, of shares for which no stock certificates have been
issued by telephone at (800) 221-5672 before 4:00 p.m. Eastern
time on a Company business day in an amount not exceeding
$50,000. Proceeds of such redemptions are remitted by check to
the shareholder's address of record. Telephone redemption by
check is not available with respect to shares (i) for which
certificates have been issued, (ii) held in nominee or "street
name" accounts, (iii) held by a shareholder who has changed his
or her address of record within the preceding 30 calendar days or
(iv) held in any retirement plan account. A shareholder
otherwise eligible for telephone redemption by check may cancel
the privilege by written instruction to Alliance Fund Services,
Inc., or by checking the appropriate box on the Subscription
Application found in the Prospectus.
Telephone Redemptions - General. During periods of
drastic economic or market developments, such as the market break
of October 1987, it is possible that shareholders would have
difficulty in reaching Alliance Fund Services, Inc. by telephone
(although no such difficulty was apparent at any time in
connection with the 1987 market break). If a shareholder were to
experience such difficulty, the shareholder should issue written
instructions to Alliance Fund Services, Inc. at the address shown
on the cover of this Statement of Additional Information. The
Company reserves the right to suspend or terminate its telephone
redemption service at any time without notice. Neither the
Company nor the Adviser, the Principal Underwriter or Alliance
Fund Services, Inc. will be responsible for the authenticity of
telephone requests for redemptions that the Company reasonably
believes to be genuine. The Company will employ reasonable
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
26
<PAGE>
resulting transactions to be sent to shareholders. If the
Company did not employ such procedures, it could be liable for
losses arising from unauthorized or fraudulent telephone
instructions. Financial representatives may charge a commission
for handling telephone requests for redemptions.
Repurchase
The Company may repurchase shares through the Principal
Underwriter or selected financial intermediaries. The repurchase
price will be the net asset value next determined after the
Principal Underwriter receives the request, except that requests
placed through selected financial representatives before the
close of regular trading on the Exchange on any day will be
executed at the net asset value determined as of such close of
regular trading on that day if received by the Principal
Underwriter prior to its close of business on that day (normally
5:00 p.m. Eastern time). The financial intermediary is
responsible for transmitting the request to the Principal
Underwriter by 5:00 p.m. If the financial intermediary fails to
do so, the shareholder's right to receive that day's closing
price must be settled between the shareholder and the financial
representative. A shareholder may offer shares of the Fund to
the Principal Underwriter either directly or through the
shareholder's financial representative. Neither the Company nor
the Principal Underwriter charges a fee or commission in
connection with the repurchase of shares. Normally, if shares of
the Fund are offered through a financial intermediary, the
repurchase is settled by the shareholder as an ordinary
transaction with or through the financial representative, who may
charge the shareholder for this service. The repurchase of
shares of the Fund as described above is a voluntary service of
the Fund and the Fund may suspend or terminate this practice at
any time.
General
The Company reserves the right to close out an account
that has remained below $200 for at least 90 days. Shareholders
will receive 60 days' written notice to increase the account
value before the account is closed. In the case of a redemption
or repurchase of shares of the Fund recently purchased by check,
redemption proceeds will not be made available until the Company
is reasonably assured that the check has cleared, normally up to
15 calendar days following the purchase date.
27
<PAGE>
________________________________________________________________
SHAREHOLDER SERVICES
________________________________________________________________
The following information supplements that set forth in
the Prospectus under the heading "Purchase and Sale of Shares-
- -Shareholder Services." If you are a shareholder through an
account established under a fee-based program, your fee-based
program may impose requirements with respect to the purchase,
sale or exchange of shares of the Fund that are different from
those described herein. A transaction fee may be charged by your
financial representative with respect to the purchase, sale or
exchange of shares made through such financial representative.
Exchange Privilege
You may exchange your investment in the Fund for shares
of the same class of any other Fund and for Class A shares of any
other Alliance Mutual Fund (as defined below). Exchanges of
shares are made at the net asset value next determined and
without sales or service charges. Exchanges may be made by
telephone or written request. Telephone exchange requests must
be received by Alliance Fund Services, Inc. by 4:00 p.m. Eastern
time on a Company business day in order to be effected at that
day's net asset value.
Currently, the Alliance Mutual Funds include:
AFD Exchange Reserves
Alliance All-Asia Investment Fund, Inc.
Alliance Balanced Shares, Inc.
Alliance Bond Fund, Inc.
-Corporate Bond Portfolio
-U.S. Government Portfolio
Alliance Global Dollar Government Fund, Inc.
Alliance Global Environment Fund, Inc.
Alliance Global Small Cap Fund, Inc.
Alliance Global Strategic Income Trust, Inc.
Alliance Greater China '97 Fund, Inc.
Alliance Growth and Income Fund, Inc.
Alliance High Yield Fund, Inc.
Alliance International Fund
Alliance International Premier Growth Fund, Inc.
Alliance Limited Maturity Government Fund, Inc.
Alliance Mortgage Securities Income Fund, Inc.
Alliance Multi-Market Strategy Trust, Inc.
Alliance Municipal Income Fund, Inc.
-California Portfolio
-Insured California Portfolio
-Insured National Portfolio
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<PAGE>
-National Portfolio
-New York Portfolio
Alliance Municipal Income Fund II
-Arizona Portfolio
-Florida Portfolio
-Massachusetts Portfolio
-Michigan Portfolio
-Minnesota Portfolio
-New Jersey Portfolio
-Ohio Portfolio
-Pennsylvania Portfolio
-Virginia Portfolio
Alliance New Europe Fund, Inc.
Alliance North American Government Income Trust, Inc.
Alliance Premier Growth Fund, Inc.
Alliance Quasar Fund, Inc.
Alliance Real Estate Investment Fund, Inc.
Alliance Technology Fund, Inc.
Alliance Utility Income Fund, Inc.
Alliance Worldwide Privatization Fund, Inc.
The Alliance Fund, Inc.
The Alliance Portfolios
-Alliance Growth Fund
-Alliance Conservative Investors Fund
-Alliance Growth Investors Fund
-Alliance Short-Term U.S. Government Fund
Please read carefully the portions of the prospectus of
the Fund or Alliance Mutual Fund, as applicable, into which you
wish to exchange before submitting the request. Call Alliance
Fund Services, Inc. at (800) 221-5672 to exchange uncertificated
shares. Exchanges of shares as described above in this section
are taxable transactions for federal income tax purposes. The
exchange service may be changed, suspended or terminated on 60
days' written notice.
All exchanges are subject to the minimum investment
requirements and any other applicable terms set forth in the
Prospectus or the prospectus for the Fund or Alliance Mutual Fund
whose shares are being acquired, as applicable. An exchange is
effected through the redemption of the shares tendered for
exchange and the purchase of shares being acquired at their
respective net asset values as next determined following receipt
by the Fund or the Alliance Mutual Fund, as applicable, whose
shares are being exchanged of (i) proper instructions and all
necessary supporting documents as described in that fund's
prospectus, or (ii) a telephone request for such exchange in
accordance with the procedures set forth in the following
paragraph. Exchanges involving the redemption of shares recently
purchased by check will be permitted only after the fund whose
shares have been tendered for exchange is reasonably assured that
29
<PAGE>
the check has cleared, normally up to 15 calendar days following
the purchase date. Exchanges of shares of Funds or Alliance
Mutual Funds will generally result in the realization of a
capital gain or loss for federal income tax purposes.
Each Fund shareholder, and the shareholder's financial
representative, are authorized to make telephone requests for
exchanges unless Alliance Fund Services, Inc., receives a written
instruction to the contrary from the shareholder, or the
shareholder declines the privilege by checking the appropriate
box on the Subscription Application found in the Prospectus.
Such telephone requests cannot be accepted with respect to shares
then represented by stock certificates. Shares acquired pursuant
to a telephone request for exchange will be held under the same
account registration as the shares redeemed through the exchange.
Eligible shareholders desiring to make an exchange
should telephone Alliance Fund Services, Inc. with their account
number and other details of the exchange at (800) 221-5672 before
4:00 p.m., Eastern time, on a Company business day as defined
above. Telephone requests for exchange received before 4:00 p.m.
Eastern time on a Company business day will be processed as of
the close of business on that day. During periods of drastic
economic or market developments, such as the market break of
October 1987, it is possible that shareholders would have
difficulty in reaching Alliance Fund Services, Inc. by telephone
(although no such difficulty was apparent at any time in
connection with the 1987 market break). If a shareholder were to
experience such difficulty, the shareholder should issue written
instructions to Alliance Fund Services, Inc. at the address shown
on the cover of this Statement of Additional Information.
None of the Company, the Alliance Mutual Funds, the
Adviser, the Principal Underwriter or Alliance Fund Services,
Inc. will be responsible for the authenticity of telephone
requests for exchanges that the Company reasonably believes to be
genuine. The Company will employ reasonable procedures in order
to verify that telephone requests for exchanges are genuine,
including, among others, recording such telephone instructions
and causing written confirmations of the resulting transactions
to be sent to shareholders. If the Company did not employ such
procedures, it could be liable for losses arising from
unauthorized or fraudulent telephone instructions. Financial
representatives, may charge a commission for handling telephone
requests for exchanges.
The exchange privilege is available only in states where
shares of the Alliance Mutual Fund being acquired may be legally
sold. Each Alliance Mutual Fund reserves the right, at any time
on 60 days' notice to its shareholders, to reject any order to
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<PAGE>
acquire its shares through exchange or otherwise to modify,
restrict or terminate the exchange privilege.
Retirement Plans
The Fund may be a suitable investment vehicle for part
or all of the assets held in various types of retirement plans,
such as those listed below. The Company has available forms of
such plans pursuant to which investments can be made in the Fund
and other Alliance Mutual Funds. Persons desiring information
concerning these plans should contact Alliance Fund Services,
Inc. at the "For Literature" telephone number on the cover of
this Statement of Additional Information, or write to:
Alliance Fund Services, Inc.
Retirement Plans
P.O. Box 1520
Secaucus, New Jersey 07096-1520
Employer-Sponsored Qualified Retirement Plans. Sole
proprietors, partnerships and corporations may sponsor qualified
money purchase pension and profit-sharing plans, including
Section 401(k) plans ("qualified plans"), under which annual tax-
deductible contributions are made within prescribed limits based
on compensation paid to participating individuals. The minimum
initial investment requirement may be waived with respect to
certain of these qualified plans.
Simplified Employee Pension Plan ("SEP"). Sole
proprietors, partnerships and corporations may sponsor a SEP
under which they make annual tax-deductible contributions to an
IRA established by each eligible employee within prescribed
limits based on employee compensation.
403(b)(7) Retirement Plan. Certain tax-exempt
organizations and public educational institutions may sponsor
retirement plans under which an employee may agree that monies
deducted from his or her compensation (minimum $25 per pay
period) may be contributed by the employer to a custodial account
established for the employee under the plan.
The Alliance Plans Division of Frontier Trust Company, a
subsidiary of Equitable which serves as custodian or trustee
under the retirement plan prototype forms available from the
Fund, charges certain nominal fees for establishing an account
and for annual maintenance. A portion of these fees is remitted
to Alliance Fund Services, Inc. as compensation for its services
to the retirement plan accounts maintained with the Fund.
Distributions from retirement plans are subject to
certain Code requirements in addition to normal redemption
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<PAGE>
procedures. For additional information please contact Alliance
Fund Services, Inc.
Statements and Reports
Each shareholder of the Fund receives semi-annual and
annual reports which include a listing of the Fund's investments,
financial statements and, in the case of the annual report, the
report of the Company's independent auditors, Ernst & Young LLP,
as well as a confirmation of each purchase and redemption of
shares by the shareholder. By contacting his or her broker or
Alliance Fund Services, Inc., a shareholder can arrange for
copies of his or her account statements to be sent to another
person.
________________________________________________________________
NET ASSET VALUE
________________________________________________________________
The Fund's per share net asset value is computed in
accordance with the Company's Articles of Incorporation and By-
Laws at the next close of regular trading on the Exchange
(ordinarily 4:00 p.m. Eastern time) following receipt of a
purchase or redemption order by the Company, on each Company
business day on which such an order is received and on such other
days as the Board of Directors deems appropriate or necessary in
order to comply with Rule 22c-1 under the 1940 Act. The Fund's
per share net asset value is calculated by dividing the value of
the Fund's total assets, less its liabilities, by the total
number of its shares then outstanding. A Company business day is
any weekday on which the Exchange is open for trading.
In accordance with applicable rules under the 1940 Act,
portfolio securities are valued at current market value or at
fair value as determined in good faith by the Board of Directors.
The Board of Directors has delegated to the Adviser certain of
the Board's duties with respect to the following procedures.
Readily marketable securities listed on the Exchange or on a
foreign securities exchange (other than foreign securities
exchanges whose operations are similar to those of the United
States over-the-counter market) are valued, except as indicted
below, at the last sale price reflected on the consolidated tape
at the close of the Exchange or, in the case of a foreign
securities exchange, at the last quoted sale price, in each case
on the business day as of which such value is being determined.
If there has been no sale on such day, the securities are valued
at the mean of the closing bid and asked prices on such day. If
no bid or asked prices are quoted on such day, then the security
is valued in good faith at fair value by, or in accordance with
procedures established by, the Board of Directors. Readily
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<PAGE>
marketable securities not listed on the Exchange or on a foreign
securities exchange but listed on other United States national
securities exchanges or traded on The Nasdaq Stock Market, Inc.
are valued in like manner. Portfolio securities traded on the
Exchange and on one or more foreign or other national securities
exchanges, and portfolio securities not traded on the Exchange
but traded on one or more foreign or other national securities
exchanges are valued in accordance with these procedures by
reference to the principal exchange on which the securities are
traded.
Readily marketable securities traded in the over-the-
counter market, securities listed on a foreign securities
exchange whose operations are similar to those of the United
States over-the-counter market, and securities listed on a U.S.
national securities exchange whose primary market is believed to
be over-the-counter (but excluding securities traded on The
Nasdaq Stock Market, Inc.), are valued at the mean of the current
bid and asked prices as reported by Nasdaq or, in the case of
securities not quoted by Nasdaq, the National Quotation Bureau or
another comparable sources.
Listed put or call options purchased by the Fund are
valued at the last sale price. If there has been no sale on that
day, such securities will be valued at the closing bid prices on
that day.
Open futures contracts and options thereon will be
valued using the closing settlement price or, in the absence of
such a price, the most recent quoted bid price. If there are no
quotations available for that day of valuations, the last
available closing settlement price will be used.
U.S. Government securities and other debt instruments
having 60 days or less remaining until maturity are valued at
amortized cost if their original maturity was 60 days or less, or
by amortizing their fair value as of the 61st day prior to
maturity if their original term to maturity exceeded 60 days
(unless in either case the Board of Directors determines that
this method does not represent fair value).
Fixed-income securities may be valued on the basis of
prices provided by a pricing service when such prices are
believed to reflect the fair market value of such securities.
The prices provided by pricing service take into account many
factors, including institutional size trading in similar groups
of securities and any developments related to specific
securities.
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<PAGE>
All other assets of the Fund are valued in good faith at
fair value by, or in accordance with procedures established by,
the Board of Directors.
Trading in securities on Far Eastern and European
securities exchanges and over-the-counter markets is normally
completed well before the close of business of each Fund business
day. In addition, trading in foreign markets may not take place
on all Fund business days. Furthermore, trading may take place
in various foreign markets on days that are not Fund business
days. The Fund's calculation of the net asset value per share,
therefore, does not always take place contemporaneously with the
most recent determination of the prices of portfolio securities
in these markets. Events affecting the values of these portfolio
securities that occur between the time their prices are
determined in accordance with the above procedures and the close
of the Exchange will not be reflected in the Fund's calculation
of net asset value unless it is believed that these prices do not
reflect current market value, in which case the securities will
be valued in good faith by, or in accordance with procedures
established by, the Board of Directors at fair value.
The Board of Directors may suspend the determination of
the Fund's, net asset value (and the offering and sale of
shares), subject to the rules of the Commission and other
governmental rules and regulations, at a time when: (1) the
Exchange is closed, other than customary weekend and holiday
closings, (2) an emergency exists as a result of which it is not
reasonably practicable for the Fund to dispose of securities
owned by it or to determine fairly the value of its net assets,
or (3) for the protection of shareholders, the Commission by
order permits a suspension of the right of redemption or a
postponement of the date of payment on redemption.
For purposes of determining the Fund's net asset value
per share, all assets and liabilities initially expressed in a
foreign currency will be converted into U.S. dollars at the mean
of the current bid and asked prices of such currency against the
U.S. dollar last quoted by a major bank that is a regular
participant in the relevant foreign exchange market or on the
basis of a pricing service that takes into account the quotes
provided by a number of such major banks. If such quotations are
not available as of the close of the Exchange, the rate of
exchange will be determined in good faith by, or under the
direction of, the Board of Directors.
The assets belonging to the Class I and Class II shares
will be invested together in a single portfolio. The net asset
value of each class will be determined separately by subtracting
the liabilities allocated to that class from the assets belonging
to that class in conformance with the provisions of a plan
34
<PAGE>
adopted by the Fund in accordance with Rule 18f-3 under the 1940
Act.
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DIVIDENDS, DISTRIBUTIONS AND TAXES
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United States Federal Income Taxation
of Dividends and Distributions
General
The Fund intends for each taxable year to qualify to be
taxed as a "regulated investment company" under the Code. Such
qualification relieves the Fund of federal income tax liability
on the part of its net ordinary income and net realized capital
gains which it timely distributes to its shareholders. Such
qualification does not, of course, involve governmental
supervision of management or investment practices or policies.
Investors should consult their own counsel for a complete
understanding of the requirements the Fund must meet to qualify
to be taxed as a "regulated investment company."
The information set forth in the Prospectus and the
following discussion relate solely to the significant United
States federal income taxes on dividends and distributions by the
Fund and assumes that the Fund qualifies to be taxed as a
regulated investment company. An investor should consult the
investor's own tax counsel with respect to the specific tax
consequences of being a shareholder of the Fund, including the
effect and applicability of federal, state and local tax laws to
the investor's particular situation and the possible effects of
changes therein.
It is the present policy of the Fund to distribute to
shareholders all net investment income annually and to distribute
net realized capital gains, if any, annually. The amount of any
such distributions necessarily depends upon the realization by
the Fund of income and capital gains from investments.
The Fund intends to declare and distribute dividends in
the amounts and at the times necessary to avoid the application
of the 4% federal excise tax imposed on certain undistributed
income of regulated investment companies. The Fund will be
required to pay the 4% excise tax to the extent it does not
distribute to its shareholders during any calendar year an amount
equal to the sum of (i) 98% of its ordinary taxable income for
the calendar year, (ii) 98% of its capital gain net income and
foreign currency gains for the twelve months ended October 31 of
such year and (iii) any ordinary income or capital gain net
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income from the preceding calendar year that was not distributed
during such year. For this purpose, income or gain retained by
the Fund that is subject to corporate income tax will be
considered to have been distributed by the Fund by year-end. For
federal income and excise tax purposes, dividends declared and
payable to shareholders of record as of a date in October,
November or December but actually paid during the following
January will be taxable to these shareholders for the year
declared, and not for the subsequent calendar year in which the
shareholders actually receive the dividend.
Dividends of the Fund's net ordinary income and
distributions of any net realized short-term capital gain are
taxable to shareholders as ordinary income. Dividends paid by
the Fund and received by a corporate shareholder are eligible for
the dividends received deduction to the extent that the Fund's
income is derived from certain dividends received from domestic
corporations, provided the corporate shareholder holds shares in
the Fund for at least 46 days during the 90-day period beginning
45 days before the date on which the shareholder becomes entitled
to receive the dividend. In determining the holding period of
shares for this purpose, any period during which a shareholder's
risk of loss is offset by means of options, short sales or
similar transactions is not counted. In addition, the dividends
received deduction will be disallowed to the extent the
investment in shares of the Fund is financed with indebtedness.
Distributions of net capital gain (i.e., the excess of
net long-term capital gain over net short-term capital loss) are
taxable as long-term capital gain, regardless of how long a
shareholder has held shares in the Fund. Any dividend or
distribution received by a shareholder on shares of the Fund will
have the effect of reducing the net asset value of such shares by
the amount of the dividend or distribution. Furthermore, a
dividend or distribution made shortly after the purchase of
shares by a shareholder, although in effect a return of capital
to that particular shareholder, would be taxable to the
shareholder as described above. If a shareholder has held shares
in the Fund for six months or less and during that period has
received a distribution of net capital gain, any loss recognized
by the shareholder on the sale of those shares during the six-
month period will be treated as a long-term capital loss to the
extent of the distribution. In determining the holding period of
such shares for this purpose, any period during which a
shareholder's risk of loss is offset by means of options, short
sales or similar transactions is not counted.
Any loss realized by a shareholder on a sale or exchange
of shares of the Fund will be disallowed to the extent the shares
disposed of are replaced within a period of 61 days beginning 30
days before and ending 30 days after the shares are sold or
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exchanged. For this purpose, acquisitions pursuant to the
Dividend Reinvestment Plan would constitute a replacement if made
within that period. If disallowed, the loss will be reflected in
an upward adjustment to the basis of the shares acquired.
Dividends are taxable in the manner discussed regardless
of whether they are paid to a shareholder in cash or are
reinvested in additional shares of the Fund.
A dividend or capital gains distribution with respect to
shares of the Fund held by a tax-deferred or qualified plan, such
as an individual retirement account, 403(b)(7) retirement plan or
corporate pension or profit-sharing plan, generally will not be
taxable to the plan. Distributions from such plans will be
taxable to individual participants under applicable tax rules
without regard to the character of the income earned by the
qualified plan.
The Fund may be required to withhold federal income tax
at the rate of 31% from all taxable distributions payable to
shareholders who fail to provide the Fund with their correct
taxpayer identification numbers or to make required
certifications, or who have been notified by the Internal Revenue
Service that they are subject to backup withholding. Corporate
shareholders and certain other shareholders specified in the Code
are exempt from such backup withholding. Backup withholding is
not an additional tax; any amounts so withheld may be credited
against a shareholder's federal income tax liability or refunded.
Taxation of Foreign Stockholders
The foregoing discussion relates only to United States
federal income tax law as it affects shareholders who are United
States citizens or residents or United States corporations. The
effects of federal income tax law on shareholders who are non-
resident alien individuals or foreign corporations may be
substantially different. Foreign investors should therefore
consult their counsel for further information as to the United
States tax consequences of investing in the Fund.
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PORTFOLIO TRANSACTIONS
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Subject to the general supervision of the Board of
Directors, the Adviser is responsible for the investment
decisions and the placing of orders for portfolio transactions
for the Fund. The Adviser determines the broker to be used in
each specific transaction with the objective of negotiating a
combination of the most favorable commission and the best price
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obtainable on each transaction (generally defined as best
execution). When consistent with the objective of obtaining best
execution, brokerage may be directed to persons or firms
supplying investment information to the Adviser. There may be
occasions where the transaction cost charged by a broker may be
greater than that which another broker may charge if the Fund
determines in good faith that the amount of such transaction cost
is reasonable in relation to the value of the brokerage, research
and statistical services provided by the executing broker.
Neither the Company nor the Adviser has entered into
agreements or understandings with any brokers regarding the
placement of securities transactions because of research services
they provide. To the extent that such persons or firms supply
investment information to the Adviser for use in rendering
investment advice to the Fund, such information may be supplied
at no cost to the Adviser and, therefore, may have the effect of
reducing the expenses of the Adviser in rendering advice to the
Fund. While it is impossible to place an actual dollar value on
such investment information, its receipt by the Adviser probably
does not reduce the overall expenses of the Adviser to any
material extent.
The investment information provided to the Adviser is of
the type described in Section 28(e)(3) of the Securities Exchange
Act of 1934 and is designed to augment the Adviser's own internal
research and investment strategy capabilities. Research services
furnished by brokers through which the Fund effects securities
transactions are used by the Adviser in carrying out its
investment responsibilities with respect to all its client
accounts.
The Fund may deal in some instances in securities which
are not listed on a national stock exchange but are traded in the
over-the-counter market. The Fund may also purchase listed
securities through the third market, i.e., from a dealer which is
not a member of the exchange on which a security is listed.
Where transactions are executed in the over-the-counter market or
third market, the Fund will seek to deal with the primary market
makers; but when necessary in order to obtain the best price and
execution, it will utilize the services of others. In all cases,
the Fund will attempt to negotiate best execution.
The extent to which commissions that will be charged by
broker-dealers selected by the Fund may reflect an element of
value for research cannot presently be determined. To the extent
that research services of value are provided by broker-dealers
with or through whom the Fund places portfolio transactions, the
Adviser may be relieved of expenses which it might otherwise
bear. Research services furnished by broker-dealers could be
useful and of value to the Adviser in servicing its other clients
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as well as the Fund; but, on the other hand, certain research
services obtained by the Adviser as a result of the placement of
portfolio brokerage of other clients could be useful and of value
to it in serving the Fund. Consistent with the Conduct Rules of
the National Association of Securities Dealers, Inc., and subject
to seeking best execution, the Fund may consider sales of shares
of the Fund or other investment companies managed by the Adviser
as a factor in the selection of broker-dealers to execute
portfolio transactions for the Fund.
The Fund may from time to time place orders for the
purchase or sale of securities (including listed call options)
with Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"),
an affiliate of the Adviser, and with brokers which may have
their transactions cleared or settled, or both, by the Pershing
Division of DLJ, for which DLJ may receive a portion of the
brokerage commission. In such instances, the placement of orders
with such brokers would be consistent with the Fund's objective
of obtaining best execution and would not be dependent upon the
fact that DLJ is an affiliate of the Adviser. With respect to
orders placed with DLJ for execution on a national securities
exchange, commissions received must conform to Section
17(e)(2)(A) of the 1940 Act and Rule 17e-1 thereunder, which
permit an affiliated person of a registered investment company
(such as the Company), or any affiliated person of such person,
to receive a brokerage commission from such registered investment
company, provided that such commission is reasonable and fair
compared to the commissions received by other brokers in
connection with comparable transactions involving similar
securities during a comparable period of time.
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GENERAL INFORMATION
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Capitalization
The Company is a Maryland corporation organized on
October 3, 1997. The authorized capital stock of the Company
consists of 24,000,000,000 shares, of which 3,000,000,000 shares
are Class I shares of the Fund and 3,000,000,000 shares are Class
II shares of the Fund, each having $.001 par value. The balance
of the shares of the Company are Class I and Class II shares of
the Company's other three portfolios.
It is anticipated that annual shareholder meetings will
not be held; shareholder meetings will be held only when required
by federal or state law. Shareholders have available certain
procedures for the removal of Directors.
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All shares of the Fund, when issued, are fully paid and
non-assessable. The Directors are authorized to reclassify and
issue any unissued shares to any number of additional series and
classes without shareholder approval. Accordingly, the Directors
in the future, for reasons such as the desire to establish one or
more additional portfolios with different investment objectives,
policies or restrictions, may create additional classes or series
of shares. Any issuance of shares of another class or series
would be governed by the 1940 Act and the law of the State of
Maryland. If shares of another series were issued in connection
with the creation of a new portfolio, each share of each
portfolio would normally be entitled to one vote for all
purposes. Generally, shares of all portfolios would vote as a
single series on matters, such as the election of Directors, that
affected both portfolios in substantially the same manner. As to
matters affecting portfolios differently, such as approval of the
Advisory Agreement and changes in investment policy, shares of
each portfolio would vote as a separate series. Procedures for
calling a shareholders' meeting for the removal of Directors of
the Fund, similar to those set forth in Section 16(c) of the 1940
Act, are available to shareholders of the Fund. The rights of
the holders of shares of a series may not be modified except by
the vote of a majority of the outstanding shares of such series.
A shareholder in the Fund will be entitled to share pro
rata with other holders of the same class of shares all dividends
and distributions arising from the Fund's assets and, upon
redeeming shares, will receive the then current net asset value
of the Fund represented by the redeemed shares. The Company is
empowered to establish, without shareholder approval, additional
portfolios in the Company, which may have different investment
objectives, and additional classes of shares in the Fund, each
share of the portfolio or class would normally be entitled to one
vote for all purposes. Generally, shares of each portfolio and
class would vote together as a single class on matters, such as
the election of Directors, that affect each portfolio and class
in substantially the same manner. Each class has identical
voting, dividend, liquidation and other rights, except that each
class bears its own transfer agency expenses, Class II shares
bear their own distribution expenses and Class I shares convert
to Class II shares under certain circumstances. Each class of
shares votes separately with respect to mattes for which separate
class voting is appropriate under applicable law. Shares are
freely transferable, are entitled to dividends as determined by
the Directors and, in liquidation of the Fund, are entitled to
receive the net assets of the Fund.
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Custodian
State Street Bank and Trust Company, 225 Franklin
Street, Boston, Massachusetts 02110, will act as the Fund's
custodian for the assets of the Fund but plays no part in
deciding the purchase or sale of portfolio securities. Subject
to the supervision of the Directors, State Street Bank and Trust
Company may enter into sub-custodial agreements for the holding
of the Fund's foreign securities.
Principal Underwriter
Alliance Fund Distributors, Inc., an indirect wholly-
owned subsidiary of the Adviser, located at 1345 Avenue of the
Americas, New York, New York 10105, is the principal underwriter
of shares of the Fund. Under the Distribution Services Agreement
between the Fund and the Principal Underwriter, the Fund has
agreed to indemnify the Principal Underwriter, in the absence of
its willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations thereunder, against certain civil
liabilities, including liabilities under the Securities Act.
Counsel
Legal matters in connection with the issuance of the
shares of Common Stock offered hereby are passed upon by Seward &
Kissel LLP, New York, New York. Seward & Kissel LLP 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, has been
appointed as independent auditors for the Company.
Performance Information
From time to time the Fund advertises its "total
return." Computed separately for each class, the Fund's "total
return" is its average annual compounded total return for its
most recently completed one, five and ten-year periods (or the
period since the Fund's inception). The Fund's total return for
such a period is computed by finding, through the use of a
formula prescribed by the Commission, the average annual
compounded rate of return over the period that would equate an
assumed initial amount invested to the value of such investment
at the end of the period. For purposes of computing total
return, income dividends and capital gains distributions paid on
shares of the Fund are assumed to have been reinvested in Fund
shares when paid.
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The Fund's total return is computed separately for Class
I and Class II shares. The Fund's total return is not fixed and
will fluctuate in response to prevailing market conditions or as
a function of the type and quality of the securities in the
Fund's portfolio and the Fund's expenses. Total return
information is useful in reviewing the Fund's performance, but
such information may not provide a basis for comparison with bank
deposits or other investments which pay a fixed yield for a
stated period of time. An investor's principal invested in the
Fund is not fixed and will fluctuate in response to prevailing
market conditions.
Advertisements quoting performance rankings of the Fund
as measured by financial publications or by independent
organizations such as Lipper Analytical Services, Inc. and
Morningstar, Inc., and advertisements presenting the historical
record of payments of income dividends by the Fund may also from
time to time be sent to investors or placed in newspapers,
magazines such as Barrons, Business Week, Changing Times, Forbes,
Investor's Daily, Money Magazine, The New York Times and The Wall
Street Journal or other media on behalf of the Fund.
Additional Information
Any shareholder inquiries may be directed to the
shareholder's broker or to Alliance Fund Services, Inc. at the
address or telephone number shown on the front cover of this
Statement of Additional Information. This Statement of
Additional Information does not contain all the information set
forth in the Registration Statement filed by the Fund with the
Commission. Copies of the Registration Statement may be obtained
at a reasonable charge from the Commission or may be examined,
without charge, at the offices of the Commission in Washington,
D.C.
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00250244.AA5
