<PAGE>
THIS DOCUMENT IS A COPY OF THE N-1A FILED ON MAY 22, 1998
PURSUANT TO A RULE 201 TEMPORARY HARDSHIP EXMEPTION.
As filed with the Securities and Exchange
Commission on May 22, 1998
File Nos.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
Post-Effective Amendment No.
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No.
_______________________________
Alliance Private Investors Series, Inc.
(Exact Name of Registrant as Specified in Charter)
1345 Avenue of the Americas, New York, New York 10105
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including Area Code:(212) 969-1000
_____________________________
EDMUND P. BERGAN, JR.
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, New York 10105
(Name and address of agent for service)
<PAGE>
Copies of communications to:
Thomas G. MacDonald
Seward & Kissel
One Battery Park Plaza
New York, New York 10004
It is proposed that this filing will become effective (check
appropriate box)
immediately upon filing pursuant to paragraph (b)
on (date) pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)(1)
on (date) pursuant to paragraph (a)(1)
75 days after filing pursuant to paragraph (a)(2)
on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
This post-effective amendment designates a new effective
date for a previously filed post-effective amendment.
The Registrant hereby amends this Registrant Statement under
the Securities Act of 1933 on such date or dates as may be
necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in
accordance with the provisions of Section 8(a) of the Securities
Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to
Section 8(a), may determine.
<PAGE>
CROSS REFERENCE SHEET
(as required by Rule 404(c))
N-1A Item No. Location in Prospectus
_____________ (Caption)
_______________________
PART A
Item 1. Cover Page........................ Cover Page
Item 2. Synopsis.......................... Expense Information
Item 3. Condensed Financial
Information....................... Not Applicable
Item 4. General Description
of Registrant..................... Description of the
Fund; General
Information
Item 5. Management of the Fund............ Management of the
Fund; General
Information
Item 6. Capital Stock and Other
Securities........................ Dividends,
Distributions and
Taxes; General
Information
Item 7. Purchase of Securities
Being Offered..................... Purchase and Sale of
Shares; General
Information
Item 8. Redemption or Repurchase.......... Purchase and Sale of
Shares; General
Information
Item 9. Pending Legal Proceedings......... Not Applicable
Location in Statement of
PART B Additional Information
______ (Caption)
________________________
Item 10. Cover Page........................ Cover Page
Item 11. Table of Contents................. Cover Page
<PAGE>
Item 12. General Information
and History....................... Management of the
Fund; General
Information
Item 13. Investment Objectives and
Policies.......................... Description of the
Fund
Item 14. Management of the Registrant ..... Management of the
Fund
Item 15. Control Persons and
Principal Holders of
Securities ....................... Not Applicable
Item 16. Investment Advisory and
Other Services.................... Management of the
Fund, Expenses of
the Fund, General
Information
Item 17. Brokerage Allocation and
Other Practices................... Portfolio
Transactions
Item 18. Capital Stock and Other
Securities........................ General Information
Item 19. Purchase, Redemption and Pricing
of Securities Being Offered....... Purchase of Shares;
Redemption and
Repurchase of
Shares; Dividends,
Distributions and
Taxes; Shareholder
Services
Item 20. Tax Status........................ Description of the
Fund, Dividends,
Distributions and
Taxes
Item 21. Underwriters...................... General Information
Item 22. Calculation of Performance
Data.............................. General Information
Item 23. Financial Statements.............. Not Applicable
<PAGE>
ALLIANCE PRIVATE INVESTORS SERIES
PREMIER PORTFOLIO
c/o Alliance Fund Services, Inc.
P.O. Box 1520, Secaucus, New Jersey 07096-1520
Toll Free (800) 221-5672
For Literature: Toll Free (800) 227-4618
Prospectus and Application
June [ ], 1998
Table of Contents Page
The Fund at a Glance....................................
Expense Information.....................................
Glossary................................................
Description of the Fund.................................
Investment Objective................................
Investment Policies.................................
Additional Investment Practices.....................
Risk Considerations.................................
Purchase and Sale of Shares.............................
Management of the Fund..................................
Dividends, Distributions and Taxes......................
General Information.....................................
Adviser
Alliance Capital Management L.P.
1345 Avenue Of The Americas
New York, New York 10105
The Premier Portfolio (the "Fund") is the initial portfolio of
Alliance Private Investor Series, Inc. (the "Company"), an open-
end management investment company structured as a series fund
which will offer a selection of investment alternatives to the
discerning, high-net-worth investor. The Fund seeks long-term
growth of capital through all market conditions by investing in a
"Core Portfolio" of equity securities of large, intensively
researched, high-quality companies that are judged likely to
achieve superior earnings growth.
This Prospectus sets forth concisely the information that a
prospective investor should know about the Fund and the Company
before investing. A "Statement of Additional Information" for
the Fund, which provides further information regarding certain
matters discussed in this Prospectus and other matters which may
be of interest to some investors, has been filed with the
Securities and Exchange Commission and is incorporated herein by
reference. For a free copy, call or write Alliance Fund Services,
<PAGE>
Inc. at the indicated address or call the "For Literature"
telephone number shown above.
The Fund offers three classes of shares. These shares may be
purchased, at the investor's choice, at a price equal to their
net asset value (i) plus an initial sales charge imposed at the
time of purchase (the "Class A shares"), (ii) with a contingent
deferred sales charge imposed on most redemptions made within
four years of purchase (the "Class B shares"), or (iii) without
any initial or contingent deferred sales charge, as long as the
shares are held for one year or more (the "Class C shares"). See
"Purchase and Sale of Shares."
AN INVESTMENT IN THESE SECURITIES IS NOT A DEPOSIT OR OBLIGATION
OF, OR GUARANTEED OR ENDORSED BY, ANY BANK AND IS NOT FEDERALLY
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY.
INVESTORS ARE ADVISED TO READ THIS PROSPECTUS CAREFULLY AND TO
RETAIN IT FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
[LOGO] Alliance (R)
(R) This registered mark used under license from the owner,
Alliance Capital Management L.P.
The Fund At A Glance
The following summary is qualified in its entirety by the more
detailed information contained inside this Prospectus.
The Fund's Investment Adviser Is . . .
Alliance Capital Management L.P. ("Alliance"), a global
investment manager providing diversified services to institutions
and individuals through a broad line of investments including
more than 100 mutual funds. Since 1971, Alliance has earned a
reputation as a leader in the investment world with over
$248 billion in assets under management as of March 31, 1998.
Alliance provides investment management services to employee
benefit plans for 33 of the FORTUNE 100 companies.
2
<PAGE>
The Fund . . .
Seeks . . . Long-term capital appreciation.
Invests principally in . . . A non-diversified portfolio of
equity securities of large, intensively researched, high quality
companies that are judged likely to achieve superior earnings
growth.
A Word About Risk . . .
The price of shares of the Fund will fluctuate daily as the
prices of the individual stocks and other securities in which it
invests fluctuate, so that your shares, when redeemed, may be
worth more or less than their original cost. Because the Fund is
permitted to invest a portion of its assets in securities of non-
U.S. companies, investment in the Fund involves risks not
associated with funds that invest only in securities of U.S.
issuers. While the Fund invests principally in common stocks and
other equity securities, in order to achieve its investment
objective the Fund may engage in short selling, use certain types
of investment derivatives, such as options, futures and forwards,
and utilize leverage. These involve risks different from, and,
in certain cases, greater than, the risks presented by more
traditional investments. These risks are more fully discussed in
this Prospectus.
Getting Started . . .
Shares of the Fund are available through your financial
representative and most banks, insurance companies and brokerage
firms nationwide. Shares can be purchased for a minimum initial
investment of $50,000. For detailed information about purchasing
and selling shares, see "Purchase and Sale of Shares." In
addition, the Fund offers several time and money saving services
to investors. Be sure to ask your financial representative
about:
AUTOMATIC DIVIDEND REINVESTMENT
AUTOMATIC INVESTMENT PROGRAM
RETIREMENT PLANS
SHAREHOLDER COMMUNICATIONS
DIVIDEND DIRECTION PLANS
AUTO EXCHANGE SYSTEMATIC WITHDRAWALS
A CHOICE OF PURCHASE PLANS
TELEPHONE TRANSACTIONS
24-HOUR INFORMATION
3
<PAGE>
[LOGO] Alliance (R)
(R) This registered mark used under license from the owner,
Alliance Capital Management L.P.
4
<PAGE>
_______________________________________________________________
EXPENSE INFORMATION
_______________________________________________________________
Shareholder Transaction Expenses are one of several factors to
consider when you invest in the Fund. The following table
summarizes your maximum transaction costs and annual expenses for
each class of shares. The Example following the table shows the
cumulative expenses attributable to a hypothetical $1,000
investment in each class for the periods specified.
<TABLE>
Class A Shares Class B Shares Class C Shares
<S> <C> <C> <C>
Maximum sales charge imposed on purchases
(as a percentage of offering price)....... 4.25%(a) None None
Sales charge imposed on dividend
reinvestments............................. None None None
Deferred sales charge (as a percentage of
original purchase price or redemption
proceeds, whichever is lower)............. None(a) 4.0% during 1% during
the first the first
year, decreasing year, 0%
1.0% annually thereafter
to 0% after the
fourth year(b)
Exchange fee.............................. None None None
(a) Reduced for larger purchases. Purchases of $1,000,000 or
more are not subject to an initial sales charge but may be
subject to a 1% deferred sales charge on redemptions within one
year of purchase. See "Purchase and Sale of Shares - How to Buy
Shares" - page [].
(b) Class B shares automatically convert to Class A shares after
eight years. See "Purchase and Sale of Shares--How to Buy
Shares" - page [].
</TABLE>
5
<PAGE>
Operating Expenses Class A Class B Class C
Management fees(a).............. 1.10% 1.10% 1.10%
12b-1 fees...................... .30% 1.00% 1.00%
Other expenses(b)............... [ ]% [ ]% [ ]%
____ ____ ____
Total fund operating expenses... [ ]% [ ]% [ ]%
Example Class A Class B+ Class B++ Class C+ Class C++
After 1 year $ $ $ $ $
After 3 years $ $ $ $ $
+ Assumes redemption at end of period.
++ Assumes no redemption at end of period.
(a) The management fee contains a performance adjustment feature
that permits the Basic Fee of 1.10% to be increased or decreased
by as much as .30%, depending upon the relative performance of
the Class A shares of the Fund against the Russell 1000(R) Growth
Index. As adjusted, the advisory fee will range between .80% and
1.40%. See "Management of the Fund - Adviser".
(b) These expenses include a transfer agency fee payable to
Alliance Fund Services, Inc., an affiliate of Alliance.
The purpose of the foregoing table is to assist the investor in
understanding the various costs and expenses that an investor in
the Fund will bear directly or indirectly. Long-term
shareholders of the Fund may pay aggregate sales charges totaling
more than the economic equivalent of the maximum initial sales
charges permitted by the Conduct Rules of the National
Association of Securities Dealers, Inc. See "Management of the
Fund - Distribution Services Agreement." The Rule 12b-1 fee for
each class comprises a service fee not exceeding .25% of the
aggregate average daily net assets of the Fund attributable to
the class and an asset-based sales charge equal to the remaining
portion of the Rule 12b-1 fee. "Other Expenses" are based on
estimated amounts for the Fund's current fiscal year. The
Example set forth above assumes reinvestment of all dividends and
distributions and utilizes a 5% annual rate of return as mandated
by Securities and Exchange Commission regulations. THE EXAMPLE
SHOULD NOT BE CONSIDERED REPRESENTATIVE OF PAST OR FUTURE
EXPENSES; ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
6
<PAGE>
________________________________________________________________
GLOSSARY
________________________________________________________________
The following terms are frequently used in this Prospectus:
EQUITY SECURITIES are (i) common stocks, partnership interests,
business trust shares and other equity 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.
NON-U.S. COMPANY is an entity that (i) is organized under the
laws of a country other than the United States and has its
principal office in a country other than the United States, or
(ii) the equity securities of which are traded principally in
securities markets outside the United States.
CONVERTIBLE SECURITIES are fixed-income securities that are
convertible into common stock.
FIXED-INCOME SECURITIES are debt securities and dividend-paying
preferred stocks, and include floating rate and variable rate
instruments.
DEBT SECURITIES are bonds, debentures, notes, bills, repurchase
agreements, loans, other direct debt instruments and other fixed,
floating and variable rate debt obligations, but do not include
convertible securities.
U.S. GOVERNMENT SECURITIES are securities issued or guaranteed by
the United States Government, its agencies or instrumentalities.
MOODY'S is Moody's Investors Service, Inc.
S&P is Standard & Poor's Rating Services.
RULE 144A SECURITIES are securities that may be resold pursuant
to Rule 144A under the Securities Act of 1933, as amended (the
"Securities Act").
COMMISSION is the Securities and Exchange Commission.
1940 ACT is the Investment Company Act of 1940, as amended.
CODE is the Internal Revenue Code of 1986, as amended.
EXCHANGE is the New York Stock Exchange, Inc.
7
<PAGE>
________________________________________________________________
DESCRIPTION OF THE FUND
________________________________________________________________
The Fund is non-diversified. The Fund's investment objective is
"fundamental" and cannot be changed without a shareholder vote.
Except as noted, the Fund's investment policies are not
fundamental and thus can be changed without a shareholder vote.
The Fund will not change these policies without notifying its
shareholders. There is no guarantee that the Fund will achieve
its investment objective.
INVESTMENT OBJECTIVE
The Fund's investment objective is to seek long-term growth of
capital through all market conditions.
INVESTMENT POLICIES
Consistent with the investment style of Alliance's Large Cap
Growth Group, the Fund will invest in a "Core Portfolio" of
equity securities of large, intensively researched, high-quality
companies that, in the judgment of Alliance, are likely to
achieve superior earnings growth. In Alliance's view, high-
quality companies are larger capitalization companies possessing,
among other things, relatively long operating histories, strong
management, superior industry positions and excellent balance
sheets. The term "high quality" does not reflect a rating from
any rating agency. The Fund will seek to take advantage of what
Alliance believes are opportunities presented by unwarranted
fluctuations in the prices of securities, both to purchase or
increase positions on weakness and to sell or reduce overpriced
holdings. To take advantage of investment opportunities in both
rising and declining markets, the Fund may engage in short
selling and may use certain other investment practices, including
options, futures and forward contracts and leverage.
The Fund's Core Portfolio, which will constitute at least the
majority of, and at times may constitute substantially all of,
its total assets, will consist of the equity securities of the 25
companies that are most highly regarded by Alliance's Large Cap
Growth Group at any point in time. These Core Portfolio
companies will be predominantly U.S. companies. The maximum
percentage of the Fund's total assets that can be invested in any
one of these 25 companies is limited only by the diversification
requirements for the Fund's qualification as a "regulated
investment company" under the Code and by the Fund's investment
restriction prohibiting it from investing 25% or more of its
total assets in securities of issuers conducting their primary
business activities in the same industry. See "Risk
8
<PAGE>
Considerations - Non-Diversified Status". The balance of the
Fund's portfolio will be invested in equity securities of other
U.S. and non-U.S. companies that Alliance considers to have
exceptional growth potential. Normally, about 40 companies will
be represented in the Fund's portfolio. The Fund thus differs
from more typical equity investment companies because it invests
most of its assets in a relatively small number of intensively
researched companies. The Fund may invest up to 35% of its total
assets in equity securities of non-U.S. companies. Equity
securities of non-U.S. companies will be selected by Alliance for
investment by the Fund on the basis of the same growth potential
and other characteristics as equity securities of U.S. companies.
Investment in equity securities of non-U.S. companies, however,
involves special considerations not generally associated with a
portfolio invested only in equity securities of U.S. companies.
See "Risk Considerations - Foreign Investment." The Fund may
invest up to 5% of its total assets in securities for which there
is no ready market.
Within the Fund's investment framework, Alliance's Large Cap
Growth Group, led by Alfred Harrison, Vice Chairman of Alliance
Capital Management Corporation, the general partner of Alliance,
will make day to day investment decisions for the Fund. See
"Management of the Fund - Adviser." Alliance depends heavily
upon the fundamental analysis and research of its large internal
research staff in making investment decisions for the Fund. The
research staff generally follows a primary research universe of
approximately 600 companies that are considered by Alliance to
have strong management, superior industry positions, excellent
balance sheets and the ability to demonstrate superior earnings
growth. As one of the largest multi-national investment firms,
Alliance has access to considerable information concerning all of
the companies followed, an in-depth understanding of the
products, services, markets and competition of these companies,
and a good knowledge of the managements of most of the companies
in its research universe.
Alliance's analysts prepare their own earnings estimates and
financial models for each company followed. While each analyst
has responsibility for following companies in one or more
identified sectors and/or industries, the lateral structure of
Alliance's research organization and constant communication among
the analysts result in decision-making based on the relative
attractiveness of stocks among industry sectors. The focus
during this process is on the early recognition of change on the
premise that value is created through the dynamics of changing
company, industry and economic fundamentals. Research emphasis
is placed on the identification of companies whose substantially
above average prospective earnings growth is not fully reflected
in current market valuations.
9
<PAGE>
Alliance continually reviews its primary research universe of
approximately 600 companies to maintain a list of favored
securities, the "Alliance 100," considered by Alliance to have
the most clearly superior earnings potential and valuation
attraction. Alliance's concentration on a limited universe of
companies allows it to devote its extensive resources to constant
intensive research of these companies. Companies are continually
added to and deleted from the Alliance 100 as fundamentals and
valuations change. Alliance's Large Cap Growth Group, in turn,
further refines, on a weekly basis, the selection process for the
Fund, with each portfolio manager in the Group selecting the 25
such companies which appear to the manager most attractive at
current prices. These individual ratings are then aggregated and
ranked to produce a composite list of the 25 most highly regarded
stocks, the "Favored 25".
In the management of the Fund's investment portfolio, Alliance
will seek to utilize market volatility judiciously (assuming no
change in company fundamentals) to adjust the Fund's portfolio
positions. The Fund will strive to capitalize on unwarranted
price fluctuations, both to purchase or increase positions on
weakness and to sell or reduce overpriced holdings. Under normal
circumstances, the Fund will remain substantially fully invested
in equity securities and will not take significant cash positions
for market timing purposes. Rather, during a market decline,
while adding to positions in favored stocks, the Fund will tend
to become somewhat more aggressive, gradually reducing the number
of companies represented in the Fund's portfolio. Conversely, in
rising markets, while reducing or eliminating fully valued
positions, the Fund will tend to become somewhat more
conservative, gradually increasing the number of companies
represented in the Fund's portfolio. Through this "buying into
declines" and "selling into strength," Alliance seeks to gain
positive returns in good markets while providing some measure of
protection in poor markets.
The Fund's investment objective and its policy of investing,
under normal circumstances, at least 65% of the value of its
total assets in the equity securities of companies that, in
Alliance's opinion, are likely to achieve superior earnings
growth are fundamental and cannot be changed without a
shareholder vote. Subject to such policy, the Fund may at any
time temporarily invest in money market instruments assets that
are awaiting reinvestment or being held as reserves for dividends
or other distributions to shareholders. The Fund is designed
primarily for long-term investment and investors should not
consider it a trading vehicle. As with all investment companies,
there can be no assurance that the Fund's investment objective
will be achieved.
10
<PAGE>
The Fund may also, subject to the requirements of the 1940 Act,
(i) invest up to 20% of its total assets in convertible
securities of companies whose common stocks are eligible for
purchase by the Fund; (ii) invest up to 5% of its total assets in
rights or warrants; (iii) engage in short sales of securities
with respect to up to 30% of its total assets; (iv) write covered
put and call options and purchase put and call options on U.S.
and foreign securities exchanges and over the counter, including
options on market indices, and write uncovered options for cross
hedging purposes; (v) enter into contracts for the purchase and
sale for future delivery of common stocks and purchase and write
put and call options on such futures contracts; (vi) enter into
contracts for the purchase and sale for the future delivery of
foreign currencies or contracts based on financial indices,
including any index of U.S. Government securities or securities
issued by foreign government entities; (vii) purchase and write
put and call options on foreign currencies; (viii) purchase or
sell forward foreign currency exchange contracts; (ix) enter into
forward commitments for the purchase or sale of securities;
(x) enter into repurchase agreements pertaining to U.S.
Government securities with member banks of the Federal Reserve
System or primary dealers in such securities; (xi) enter into
reverse repurchase agreements and dollar rolls; (xii) enter into
standby commitment agreements; (xiii) enter into currency swaps
for hedging purposes; and (xiv) make secured loans of its
portfolio securities not in excess of 30% of the value of its
total assets to entities with which it is permitted to enter into
repurchase agreements. For additional information on the use,
risks and costs of these policies and practices, see "Additional
Investment Practices."
ADDITIONAL INVESTMENT PRACTICES
The Fund may engage in the following investment practices to the
extent described in this Prospectus.
Convertible Securities. Prior to conversion, convertible
securities have the same general characteristics as
non-convertible debt securities, which generally provide a stable
stream of income with generally higher yields than those of
equity securities of the same or similar issuers. The price of a
convertible security will normally vary with changes in the price
of the underlying equity security, although the higher yield
tends to make the price of the convertible security less volatile
than that of the underlying equity security. As with debt
securities, the market values of convertible securities tend to
decrease as interest rates rise and increase as interest rates
fall. While convertible securities generally offer lower
interest yields than non-convertible debt securities of similar
quality, they offer investors the potential to benefit from
increases in the market prices of the underlying common stocks.
11
<PAGE>
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 will not invest in convertible debt securities rated
below Baa by Moody's and BBB by S&P, or, if not so rated,
determined by Alliance to be of equivalent quality. Securities
rated Baa by Moody's or BBB by S&P, and comparable unrated
securities as determined by Alliance are considered to have
speculative characteristics. Sustained periods of deteriorating
economic conditions or rising interest rates are more likely to
lead to a weakening in the issuer's capacity to pay interest and
repay principal than in the case of higher-rated securities. The
Fund will not retain a convertible debt security that is
downgraded below Baa or BBB, or, if unrated, determined by
Alliance to have undergone similar credit quality deterioration
subsequent to purchase by the Fund.
Rights and Warrants. The Fund will invest in rights or warrants
only if the underlying equity securities themselves are deemed
appropriate by Alliance for inclusion in the Fund's portfolio.
Rights and warrants entitle the holder to buy equity securities
at a specific price for a specific period of time. Rights are
similar to warrants except that they have a substantially shorter
duration. Rights and warrants may be considered more speculative
than certain other types of investments in that they do not
entitle a holder to dividends or voting rights with respect to
the underlying securities nor do they represent any rights in the
assets of the issuing company. The value of a right or warrant
does not necessarily change with the value of the underlying
securities, however, although the value of a right or warrant may
decline because of a decrease in the value of the underlying
stock, the passage of time or a change in perception as to the
potential of the underlying stock, or any combination thereof.
If the market price of the underlying security is below the
exercise price set forth in the warrant on the expiration date,
the warrant will expire worthless. Moreover, a right or warrant
ceases to have value if it is not exercised prior to the
expiration date.
Short Sales. The Fund may utilize short selling in order to
attempt both to protect its portfolio against the effects of
potential downtrends in the securities markets and as a means of
enhancing its overall performance. In identifying short selling
opportunities, the Large Cap Growth Group will use the
fundamental analysis and investment research strategy described
above to identify a small group of companies that it believes may
12
<PAGE>
decline in price as a result of fundamental or market
developments.
A short sale is a transaction in which the Fund sells a security
it does not own but has borrowed in anticipation that the market
price of that security will decline. When the Fund makes a short
sale of a security that it does not own, it must borrow from a
broker-dealer the security sold short and deliver the security to
the broker-dealer upon conclusion of the short sale. The Fund
may be required to pay a fee to borrow particular securities and
is often obligated to pay over any payments received on such
borrowed securities. The Fund's obligation to replace the
borrowed security will be secured by collateral deposited with a
broker-dealer qualified as a custodian and will consist of cash
or highly liquid securities similar to those borrowed. Depending
on the arrangements made with the broker-dealer from which it
borrowed the security, the Fund may or may not receive any
payments (e.g., dividends or interest) on its collateral
deposited with the broker-dealer.
In addition to depositing collateral with a broker-dealer, the
Fund is currently required under the 1940 Act to establish a
segregated account with its custodian and to maintain therein
liquid assets in an amount that, when added to the collateral
deposited with the broker-dealer, will at least equal the market
value of the security sold short.
If the price of the security sold short increases between the
time of the short sale and the time the Fund replaces the
borrowed security, the Fund will incur a loss; conversely, if the
price declines, the Fund will realize a short-term capital gain.
Any gain will be decreased, and any loss increased, by the
transaction costs described above. Although the Fund's gain is
limited to the price at which it sold the security short, its
potential loss is theoretically unlimited.
In order to defer realization of gain or loss for U.S. federal
income tax purposes, the Fund may also make short sales "against
the box". In this type of short sale, at the time of the sale,
the Fund owns or has the immediate and unconditional right to
acquire at no additional cost the identical security.
Illiquid Securities. The Fund will not maintain more than 5% of
its net assets in illiquid securities. Illiquid securities
generally include (i) direct placements or other securities that
are subject to legal or contractual restrictions on resale or for
which there is no readily available market (e.g., when trading in
the security is suspended or, in the case of unlisted securities,
when market makers do not exist or will not entertain bids or
offers), including many individually negotiated currency swaps
and any assets used to cover currency swaps, (ii) over-the-
13
<PAGE>
counter options and assets used to cover over-the-counter
options, and (iii) repurchase agreements not terminable within
seven days.
Because of the absence of a trading market for illiquid
securities, the Fund may not be able to realize the price at
which they are carried on the Fund's books upon sale. Alliance
will monitor the illiquidity of such securities with respect to
the Fund under the supervision of the Directors of the Fund. To
the extent permitted by applicable law, Rule 144A securities will
not be treated as "illiquid" for purposes of the foregoing
restriction so long as such securities meet liquidity guidelines
established by the Fund's Directors.
The Fund may not be able to readily sell securities for which
there is no ready market. 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.
Options on Securities. An option gives the purchaser of the
option, upon payment of a premium, the right to deliver to (in
the case of a put) or receive from (in the case of a call) the
writer of the option a specified amount of a security on or
before a fixed date at a predetermined price. A call option
written by the Fund is "covered" if the Fund owns the underlying
security, has an absolute and immediate right to acquire that
security upon conversion or exchange of another security it holds
or holds a call option on the underlying security with an
exercise price equal to or less than that of the call option it
has written. A put option written by the Fund is "covered" if
the Fund holds a put on the underlying securities with an
exercise price equal to or greater than that of the put option it
has written.
A call option is for cross-hedging purposes if the Fund does not
own the underlying security and is designed to provide a hedge
against a decline in value in another security which the Fund
owns or has the right to acquire. The Fund may write call
options for cross-hedging purposes. The Fund would write a call
option for cross-hedging purposes, instead of writing a covered
call option, when the premium to be received from the cross-hedge
transaction would exceed that which would be received from
writing a covered call option, while at the same time achieving
the desired hedge.
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In purchasing an option, the Fund would be in a position to
realize a gain if, during the option period, the price of the
underlying security increased (in the case of a call) or
decreased (in the case of a put) by an amount in excess of the
premium paid; otherwise the Fund would experience a loss equal to
the premium paid for the option.
If an option written by the Fund were exercised, the Fund would
be obligated to purchase (in the case of a put) or sell (in the
case of a call) the underlying security at the exercise price.
The risk involved in writing an option is that, if the option is
exercised, the underlying security would then be purchased or
sold by the Fund at a disadvantageous price. These risks could
be reduced by entering into a closing transaction (i.e., by
disposing of the option prior to its exercise). The Fund retains
the premium received from writing a put or call option whether or
not the option is exercised. The writing of call options could
result in increases in the Fund's portfolio turnover rate,
especially during periods when market prices of the underlying
securities appreciate.
The Fund will purchase or write options on securities of the
types in which it is permitted to invest in privately negotiated
(i.e., over-the-counter) transactions only with investment
dealers and other financial institutions (such as commercial
banks or savings and loan institutions) deemed creditworthy by
Alliance, and Alliance has adopted procedures for monitoring the
creditworthiness of such entities. Options purchased or written
by the Fund in negotiated transactions are illiquid, and it may
not be possible for the Fund to effect a closing transaction at
an advantageous time. See "Illiquid Securities."
Options on Securities Indices. An option on a securities index
is similar to an option on a security except that, rather than
the right to take or make delivery of a security at a specified
price, an option on a securities index gives the holder the right
to receive, upon exercise of the option, an amount of cash if the
closing level of the chosen index is greater than (in the case of
a call) or less than (in the case of a put) the exercise price of
the option.
Futures Contracts and Options on Futures Contracts. A "sale" of
a futures contract means the acquisition of a contractual
obligation to deliver the securities or foreign currency or other
commodity called for by the contract at a specified price on a
specified date. A "purchase" of a futures contract means the
incurring of an obligation to acquire the securities or foreign
currency or other commodity called for by the contract at a
specified price on a specified date. The purchaser of a futures
contract on an index agrees to take or make delivery of an amount
of cash equal to the difference between a specified dollar
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multiple of the value of the index on the expiration date of the
contract ("current contract value") and the price at which the
contract was originally struck. No physical delivery of the
securities underlying the index is made.
Options on futures contracts written or purchased by the Fund
will be traded on U.S. or foreign exchanges or over-the-counter.
Options on futures contracts will be used only to hedge against
anticipated future changes in market conditions and interest or
exchange rates which otherwise might either adversely affect the
value of the Fund's portfolio securities or adversely affect the
prices of securities which the Fund intends to purchase at a
later date.
The Fund will not enter into any futures contracts or options on
futures contracts if immediately thereafter the market values of
the outstanding futures contracts of the Fund and the currencies
and futures contracts subject to outstanding options written by
the Fund would exceed 100% of its total assets.
Stock Index Futures. The Fund may purchase and sell stock index
futures as a hedge against movements in the equity markets.
There are several risks in connection with the use of stock index
futures by the Fund as a hedging device. One risk arises because
of the imperfect correlation between movements in the price of a
stock index future and movements in the price of the securities
which are the subject of the hedge. The price of a stock index
future may move more than or less than the price of the
securities being hedged. If the price of a stock index future
moves less than the price of the securities which are the subject
of the hedge, the hedge will not be fully effective but, if the
price of the securities being hedged has moved in an unfavorable
direction, the Fund would be in a better position than if it had
not hedged at all. If the price of the securities being hedged
has moved in a favorable direction, this advantage will be
partially offset by the loss on the index futures contract. If
the price of the index future moves more than the price of the
stock, the Fund will experience either a loss or gain on the
futures contract which will not be completely offset by movements
in the price of the securities which are subject to the hedge.
To compensate for the imperfect correlation of movements in the
price of securities being hedged and movements in the price of a
stock index future, the Fund may buy or sell stock index futures
contracts in a greater dollar amount than the dollar amount of
securities being hedged if the volatility over a particular time
period of the prices of such securities has been greater than the
volatility over such time period of the stock index, or if
otherwise deemed to be appropriate by Alliance. Conversely, the
Fund may buy or sell fewer stock index futures contracts if the
volatility over a particular time period of the prices of the
securities being hedged is less than the volatility over such
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time period of the stock index, or it is otherwise deemed to be
appropriate by Alliance. It is also possible that, where the
Fund has sold futures to hedge its portfolio against a decline in
the market, the market may advance and the value of securities
held in the Fund may decline. If this occurred, the Fund would
lose money on the futures and also experience a decline in value
in its portfolio securities. However, over time the value of a
diversified portfolio should tend to move in the same direction
as the market indices upon which the index futures are based,
although there may be deviations arising from differences between
the composition of the Fund and the stocks comprising the index.
Where a stock index futures contract is purchased to hedge
against a possible increase in the price of stock before the Fund
is able to invest its cash (or cash equivalents) in stocks (or
options) in an orderly fashion, it is possible that the market
may decline instead. If the Fund then concludes not to invest in
stock or options at that time because of concern as to possible
further market decline or for other reasons, the Fund will
realize a loss on the futures contract that is not offset by a
reduction in the price of securities purchased.
In addition to the possibility that there may be an imperfect
correlation, or no correlation at all, between movements in stock
index futures and the portion of the portfolio being hedged, the
price of stock index futures may not correlate perfectly with
movement in the stock index due to certain market distortions.
Rather than meeting additional margin deposit requirements,
investors may close futures contracts through offsetting
transactions which could distort the normal relationship between
the index and futures markets. Secondly, from the point of view
of speculators, the deposit requirements in the futures market
are less onerous than margin requirements in the securities
market. Therefore, increased participation by speculators in the
futures market may also cause temporary price distortions. Due
to the possibility of price distortion in the futures market, and
because of the imperfect correlation between the movements in a
stock index and movements in the price of stock index futures, a
correct forecast of general market trends by the investment
adviser may still not result in a successful hedging transaction
over a short time frame.
Positions in stock index futures may be closed out only on an
exchange or board of trade which provides a secondary market for
such futures. Although the Fund intends to purchase or sell
futures only on exchanges or boards of trade where there appear
to be active secondary markets, there is no assurance that a
liquid secondary market on any exchange or board of trade will
exist for any particular futures contract or at any particular
time. In such event, it may not be possible to close a futures
investment position, and in the event of adverse price movements,
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the Fund would continue to be required to make daily cash
payments of variation margin. However, in the event futures
contracts have been used to hedge portfolio securities, such
securities will not be sold until the futures contract can be
terminated. In such circumstances, an increase in the price of
the securities, if any, may partially or completely offset losses
on the futures contract. However, as described above, there is
no guarantee that the price of the securities will in fact
correlate with the price movements in the futures contract and
thus provide an offset on a futures contract.
Options on Foreign Currencies. As in the case of other kinds of
options, the writing of an option on a foreign currency
constitutes only a partial hedge, up to the amount of the premium
received, and the Fund could be required to purchase or sell
foreign currencies at disadvantageous exchange rates, thereby
incurring losses. The purchase of an option on a foreign
currency may constitute an effective hedge against fluctuations
in exchange rates, although, in the event of rate movements
adverse to the Fund's position, the Fund may forfeit the entire
amount of the premium plus related transaction costs. See the
Statement of Additional Information for a further discussion of
the use, risks and costs of options on foreign currencies.
Forward Foreign Currency Exchange Contracts. The Fund may
purchase or sell forward foreign currency exchange contracts so
as to minimize the risk to it from adverse changes in the
relationship between the U.S. dollar and other currencies. A
forward contract is an obligation to purchase or sell a specific
currency for an agreed price at a future date, and is
individually negotiated and privately traded.
The Fund may enter into a forward contract, for example, when it
enters into a contract for the purchase or sale of a security
denominated in a foreign currency in order to "lock in" the U.S.
dollar price of the security ("transaction hedge"). The Fund may
not engage in transaction hedges with respect to the currency of
a particular country to an extent greater than the aggregate
amount of the Fund's transactions in that currency. When the
Fund believes that a foreign currency may suffer a substantial
decline against the U.S. dollar, it may enter into a forward sale
contract to sell an amount of that foreign currency approximating
the value of some or all of the Fund's portfolio securities
denominated in such foreign currency; or when the Fund believes
that the U.S. dollar may suffer a substantial decline against a
foreign currency, it may enter into a forward purchase contract
to buy that foreign currency for a fixed dollar amount ("position
hedge"). The Fund will not position hedge with respect to a
particular currency to an extent greater than the aggregate
market value (at the time of making such sale) of the securities
held in its portfolio denominated or quoted in that currency.
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Instead of entering into a position hedge, the Fund may, in the
alternative, enter into a forward contract to sell a different
foreign currency for a fixed U.S. dollar amount where the Fund
believes that the U.S. dollar value of the currency to be sold
pursuant to the forward contract will fall whenever there is a
decline in the U.S. dollar value of the currency in which
portfolio securities of the Fund are denominated ("cross-hedge").
Unanticipated changes in currency prices may result in poorer
overall performance for the Fund than if it does not enter into
forward contracts.
Hedging against a decline in the value of a currency does not
eliminate fluctuations in the prices of portfolio securities or
prevent losses if the prices of securities decline. These
transactions also preclude the opportunity for gain if the value
of the hedge currency should rise. Moreover, it may not be
possible for the Fund to hedge against a devaluation that is so
generally anticipated that the Fund is not able to contract to
sell the currency at a price above the anticipated devaluation
level.
Forward Commitments. Forward commitments for the purchase or
sale of securities may include purchases on a "when-issued" basis
or purchases or sales on a "delayed delivery" basis. In some
cases, a forward commitment may be conditioned upon the
occurrence of a subsequent event, such as approval and
consummation of a merger, corporate reorganization or debt
restructuring (i.e., a "when, as and if issued" trade).
When forward commitment transactions are negotiated, the price is
fixed at the time the commitment is made, but delivery and
payment for the securities take place at a later date. Normally,
the settlement date occurs within two months after the
transaction, but settlements beyond two months may be negotiated.
Securities purchased or sold under a forward commitment are
subject to market fluctuation, and no interest or dividends
accrue to the purchaser prior to the settlement date. At the
time the Fund intends to enter into a forward commitment, it
records the transaction and thereafter reflects the value of the
security purchased or, if a sale, the proceeds to be received, in
determining its net asset value. Any unrealized appreciation or
depreciation reflected in such valuation of a "when, as and if
issued" security would be canceled in the event that the required
conditions did not occur and the trade was canceled.
When-issued securities and forward commitments may be sold prior
to the settlement date, but the Fund enters into when-issued and
forward commitments only with the intention of actually receiving
securities or delivering them, as the case may be. If the Fund
chose to dispose of the right to acquire a when-issued security
prior to its acquisition or dispose of its right to deliver or
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receive against a forward commitment, it may realize a gain or
incur a loss. Any significant commitment of Fund assets to the
purchase of securities on a "when, as and if issued" basis may
increase the volatility of the Fund's net asset value. No
forward commitments will be entered into if, as a result, the
Fund's aggregate commitments under such transactions would exceed
30% of the value of its total assets. In the event the other
party to a forward commitment transaction were to default, the
Fund might lose the opportunity to invest money at favorable
rates or to dispose of securities at favorable prices.
Standby Commitment Agreements. Standby commitment agreements
commit the Fund, for a stated period of time, to purchase a
stated amount of a security that may be issued and sold to the
Fund at the option of the issuer. The price and coupon of the
security are fixed at the time of the commitment. At the time of
entering into the agreement the Fund is paid a commitment fee,
regardless of whether the security ultimately is issued,
typically equal to approximately 0.5% of the aggregate purchase
price of the security the Fund has committed to purchase. The
Fund will enter into such agreements only for the purpose of
investing in the security underlying the commitment at a yield
and price considered advantageous to the Fund and unavailable on
a firm commitment basis. The Fund will limit its investment in
such commitments so that the aggregate purchase price of the
securities subject to the commitments will not exceed 50% of its
assets taken at the time of making the commitment.
There is no guarantee that the securities subject to a standby
commitment will be issued, and the value of the security, if
issued, on the delivery date may be more or less than its
purchase price. Since the issuance of the security underlying
the commitment is at the option of the issuer, the Fund will bear
the risk of capital loss in the event the value of the security
declines and may not benefit from an appreciation in the value of
the security during the commitment period if the issuer decides
not to issue and sell the security to the Fund.
Currency Swaps. Currency swaps involve the individually
negotiated exchange by the Fund with another party of a series of
payments in specified currencies. A currency swap may involve
the delivery at the end of the exchange period of a substantial
amount of one designated currency in exchange for the other
designated currency. Therefore, the entire principal value of a
currency swap is subject to the risk that the other party to the
swap will default on its contractual delivery obligations. The
Fund will enter into currency swaps for hedging purposes only.
The Fund will not enter into any currency swap unless the credit
quality of the unsecured senior debt or the claims-paying ability
of the other party thereto is rated in the highest rating
category of at least one nationally recognized rating
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organization at the time of entering into the transaction. If
there is a default by the other party to such a transaction, the
Fund will have contractual remedies pursuant to the agreements
related to the transactions.
Repurchase Agreements. A repurchase agreement arises when a
buyer purchases a security and simultaneously agrees to resell it
to the vendor at an agreed-upon future date, normally a day or a
few days later. The resale price is greater than the purchase
price, reflecting an agreed-upon interest rate for the period the
buyer's money is invested in the security. Such agreements
permit the Fund to keep all of its assets at work while retaining
"overnight" flexibility in pursuit of investments of a longer-
term nature. If a vendor defaults on its repurchase obligation,
the Fund would suffer a loss to the extent that the proceeds from
the sale of the collateral were less than the repurchase price.
If a vendor goes bankrupt, the Fund might be delayed in, or be
prevented from, selling the collateral for its benefit. The Fund
may enter into repurchase agreements pertaining to U.S.
Government securities with member banks of the Federal Reserve
System or "primary dealers" (as designated by the Federal Reserve
Bank of New York) in such securities. Alliance will monitor the
creditworthiness of the dealers with which the Fund enters into
repurchase agreements. Currently, the Fund intends to enter into
repurchase agreements only with its custodian and such primary
dealers. There is no percentage restriction on the Fund's
ability to enter into repurchase agreements.
Reverse Repurchase Agreements and Dollar Rolls. Reverse
repurchase agreements involve sales by a Fund of portfolio assets
concurrently with an agreement by a Fund to repurchase the same
assets at a later date at a fixed price. During the reverse
repurchase agreement period, the Fund continues to receive
principal and interest payments on these securities. Generally,
the effect of such a transaction is that a Fund can recover all
or most of the cash invested in the portfolio securities involved
during the term of the reverse repurchase agreement, while it
will be able to keep the interest income associated with those
portfolio securities. Such transactions are only advantageous if
the interest cost to a Fund of the reverse repurchase transaction
is less than the cost of otherwise obtaining the cash.
Dollar rolls involve sales by a Fund of securities for delivery
in the current month and the Fund's simultaneously contracting to
repurchase substantially similar (same type and coupon)
securities on a specified future date. During the roll period,
the Fund forgoes principal and interest paid on the securities. A
Fund is compensated by the difference between the current sales
price and the lower forward price for the future purchase (often
referred to as the "drop") as well as by the interest earned on
the cash proceeds of the initial sale.
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Reverse repurchase agreements and dollar rolls involve the risk
that the market value of the securities a Fund is obligated to
repurchase under the agreement may decline below the repurchase
price. In the event the buyer of securities under a reverse
repurchase agreement or dollar roll files for bankruptcy or
becomes insolvent, the Fund's use of the proceeds of the
agreement may be restricted pending a determination by the other
party, or its trustee or receiver, whether to enforce the Fund's
obligation to repurchase the securities.
Reverse repurchase agreements and dollar rolls are speculative
techniques and are considered borrowings by the Funds. Reverse
repurchase agreements and dollar rolls together with any
borrowings by the Fund will not exceed 33% of its total assets
less liabilities (other than amounts borrowed). See "Risk
Considerations - Effects of Borrowing."
Loans of Portfolio Securities. The Fund may make secured loans
of its portfolio securities to entities with which it can enter
into repurchase agreements, provided that cash and/or liquid high
grade debt securities equal to at least 100% of the market value
of the securities loaned are deposited and maintained by the
borrower with the Fund. The risk in lending portfolio
securities, as with other extensions of credit, consists of the
possible loss of rights in the collateral should the borrower
fail financially. In determining whether to lend securities to a
particular borrower, Alliance (subject to review by the Fund's
Directors) will consider all relevant facts and circumstances,
including the creditworthiness of the borrower. While securities
are on loan, the borrower will be obligated to pay the Fund any
income earned thereon and the Fund may invest any cash collateral
in portfolio securities, thereby earning additional income, or
receive an agreed upon amount of income from a borrower who has
delivered equivalent collateral. The Fund will have the right to
regain record ownership of loaned securities to exercise
beneficial rights such as voting rights, subscription rights and
rights to dividends, interest or distributions. The Fund may pay
reasonable finders', administrative and custodial fees in
connection with a loan. The Fund will not lend portfolio
securities to any officer, director, employee or affiliate of the
Fund or Alliance. The Board of Directors will monitor the Fund's
lending of portfolio securities.
General. The successful use of the foregoing investment
practices draws upon Alliance's special skills and experience
with respect to such instruments and usually depends on
Alliance's ability to forecast price movements or currency
exchange rate movements correctly. Should prices or exchange
rates move unexpectedly, the Fund may not achieve the anticipated
benefits of such practices or may realize losses and thus be in a
worse position than if such strategies had not been used. Unlike
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many exchange-traded futures contracts and options on futures
contracts, there are no daily price fluctuation limits with
respect to options on currencies and forward contracts, and
adverse market movements could therefore continue to an unlimited
extent over a period of time. In addition, the correlation
between movements in the prices of such instruments and movements
in the prices of the securities and currencies hedged or used for
cover will not be perfect and could produce unanticipated losses.
The Fund's ability to dispose of its positions in futures
contracts, options and forward contracts depends on the
availability of liquid markets in such instruments. Markets in
options and futures with respect to a number of types of
securities and currencies are relatively new and still
developing, and there is no public market for forward contracts.
It is impossible to predict the amount of trading interest that
may exist in various types of futures contracts, options and
forward contracts. If a secondary market does not exist with
respect to an option purchased or written by the Fund, it might
not be possible to effect a closing transaction in the option
(i.e., dispose of the option) with the result that (i) an option
purchased by the Fund would have to be exercised in order for the
Fund to realize any profit and (ii) the Fund may not be able to
sell portfolio securities or currencies covering an option
written by the Fund until the option expires or it delivers the
underlying securities, currency or futures contract upon
exercise. Therefore, no assurance can be given that the Fund
will be able to utilize these instruments effectively for the
purposes set forth above.
Future Developments. The Fund may, following written notice to
its shareholders, take advantage of other investment practices
that are not currently contemplated for use by the Fund or are
not available but may yet be developed, to the extent such
investment practices are consistent with the Fund's investment
objective and legally permissible for the Fund. Such investment
practices, if they arise, may involve risks that exceed those
involved in the activities described above.
Defensive Position. For temporary defensive purposes, the Fund
may reduce its position in equity securities and increase without
limit its position in short-term, liquid, high-grade debt
securities, which may include U.S. Government securities, bank
deposits, money market instruments, short-term debt securities,
including notes and bonds, or hold its assets in cash.
Portfolio Turnover. Alliance anticipates that the Fund's annual
rate of turnover generally will not exceed 150%. A 150% annual
turnover rate would occur if all of the securities in the Fund's
portfolio are replaced one and one-half times in a period of one
year. A high rate of portfolio turnover involves correspondingly
23
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greater brokerage and other expenses than a lower rate, which
must be borne by the Fund and its shareholders. High portfolio
turnover also may result in the realization of substantial net
short-term capital gains.
RISK CONSIDERATIONS
Investment in the Fund involves the special risk considerations
referred to below.
Effects of Borrowing
The Fund may, when Alliance believes that market conditions are
appropriate, borrow in order to take full advantage of available
investment opportunities. The Fund may, although it has no
present intention of doing so, borrow money from a bank in a
privately arranged transaction to the maximum extent permitted
under the 1940 Act to increase the money available to the Fund to
invest in securities when the Fund believes that the return from
the securities financed will be greater than the interest expense
paid on the borrowing. The Fund may also borrow to finance
repurchases of or tender offers for its shares when the Fund
deems it desirable in order to avoid the untimely disposition of
portfolio securities. Such borrowings involve additional risk to
the Fund, since the interest expense may be greater than the
income from or appreciation of the securities carried by the
borrowings and since the value of the securities carried may
decline below the amount borrowed.
Under the 1940 Act, the Fund is not permitted to borrow unless
immediately after such borrowing there is "asset coverage," as
that term is defined and used in the 1940 Act, of at least 300%
for all borrowings of the Fund. In addition, under the 1940 Act,
in the event asset coverage falls below 300%, the Fund must
within three days reduce the amount of its borrowings to such an
extent that the asset coverage of its borrowings is at least
300%. Assuming, for example, outstanding borrowings representing
not more than one-third of the Fund's total assets less
liabilities (other than such borrowings), the asset coverage
would be 300%; while outstanding borrowings representing 25% of
the Fund's total assets less liabilities (other than such
borrowings), the asset coverage would be 400%. The Fund will
maintain asset coverage of outstanding borrowings of at least
300% and if necessary will, to the extent possible, reduce the
amounts borrowed by making repayments from time to time in order
to do so. Such repayments could require a Fund to sell portfolio
securities at times considered disadvantageous by Alliance. The
Fund may not make any cash distributions to its shareholders if,
after the distribution, there would be less than 300% asset
coverage. This limitation on the Fund's ability to make
distributions could under certain circumstances impair the Fund's
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ability to maintain its qualification for taxation as a
"regulated investment company". See "Dividends, Distributions
and Taxes - U.S. Federal Income Taxes."
The Fund may also borrow for temporary purposes in an amount not
exceeding 5% of the value of the total assets of the Fund. Such
borrowings are not subject to the asset coverage restrictions set
forth in the preceding paragraph.
Any investment gains made with the proceeds obtained from
borrowings in excess of interest paid on the borrowings will
cause the net income per share and the net asset value per share
of the Fund's common stock to be greater than would otherwise be
the case. On the other hand, if the investment performance of
the additional securities purchased fails to cover their cost
(including any interest paid on the money borrowed) to the Fund,
then the net income per share and net asset value per share of
the Fund's Common Stock will be less than would otherwise be the
case. This is the speculative factor known as "leverage".
Borrowings by a Fund result in leveraging of the Fund's shares of
common stock. Utilization of leverage, which is usually
considered speculative, involves certain risks to a Fund's
shareholders. These include a higher volatility of the net asset
value of a Fund's shares of common stock and the relatively
greater effect on the net asset value of the shares. So long as
a Fund is able to realize a net return on its investment
portfolio that is higher than the interest expense paid on
borrowings, the effect of leverage will be to cause the Fund's
shareholders to realize a higher current net investment income
than if the Fund were not leveraged. On the other hand, interest
rate on U.S. Dollar-denominated and foreign currency-denominated
obligations change from time to time as does their relationship
to each other, depending upon such factors as supply and demand
forces, monetary and tax policies within each country and
investor expectations. Changes in such factors could cause the
relationship between such rates to change so that rates on U.S.
Dollar-denominated obligations may substantially increase
relative to the foreign currency-denominated obligations in which
the Fund may be invested. To the extent that the interest
expense on borrowings approaches the net return on a Fund's
investment portfolio, the benefit of leverage to the Fund's
shareholders will be reduced, and if the interest expense on
borrowings were to exceed the net return to shareholders, a
Fund's use of leverage would result in a lower rate of return
than if a Fund were not leveraged. Similarly, the effect of
leverage in a declining market could be a greater decrease in net
asset value per share than if the Fund were not leveraged. In an
extreme case, if a Fund's current investment income were not
sufficient to meet the interest expense on borrowings, it could
be necessary for the Fund to liquidate certain of its
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investments, thereby reducing the net asset value of a Fund's
share.
Foreign Investment
The securities markets of many foreign countries are relatively
small, with the majority of market capitalization and trading
volume concentrated in a limited number of companies representing
a small number of industries. Consequently, the Fund, whose
investment portfolio will include such 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 registration, custody and settlements
may in some instances be subject to delays and legal and
administrative uncertainties. Certain foreign countries require
governmental approval prior to investments by foreign persons or
limit investment by foreign persons to only a specified
percentage of an issuer's outstanding securities or a specific
class of securities which may have less advantageous terms
(including price) than securities of the company available for
purchase by nationals. These restrictions or controls may at
times limit or preclude investment in certain securities and may
increase the costs and expenses of the Fund. In addition, the
repatriation of investment income, capital or the proceeds of
sales of securities from certain countries is controlled under
regulations, including in some cases the need for certain advance
government notification or authority, and if a deterioration
occurs in a country's balance of payments, the country could
impose temporary restrictions on foreign capital remittances.
The Fund also 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, which may involve
additional costs to the Fund. The liquidity of the Fund's
investments in any country in which any of these factors exists
could be affected and Alliance will monitor the effect of any
such factor or factors on the Fund's investments. Furthermore,
transaction costs including brokerage commissions for
transactions both on and off the securities exchanges in many
foreign countries are generally higher than in the United States.
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
26
<PAGE>
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 or the Fund's investments in such
country. In the event of expropriation, nationalization or other
confiscation, the Fund could lose its entire investment in the
country involved. In addition, laws in foreign countries
governing business organizations, bankruptcy and insolvency may
provide less protection to security holders such as the Fund than
that provided by U.S. laws.
Non-Diversified Status
The Fund is a "non-diversified" investment company, which means
the Fund is not limited in the proportion of its assets that may
be invested in the securities of a single issuer. However, the
Fund intends to conduct its operations so as to qualify to be
taxed as a "regulated investment company" for purposes of the
Code, which will relieve the Fund of any liability for federal
income tax to the extent its earnings are distributed to
shareholders. See "Dividends, Distributions and Taxes -U.S.
Federal Income Taxes." To so qualify, among other requirements,
the Fund will limit its investments so that, at the close of each
quarter of the taxable year, (i) not more than 25% of the market
value of the Fund's total assets will be invested in the
securities of a single issuer (other than the U.S. Government),
and (ii) at least 50% of the market value of the Fund's total
assets will be comprised of cash and cash items, U.S. Government
securities, and other securities with respect to which the Fund's
investment is limited, in respect of any one issuer, to an amount
not greater than 5% of the Fund's assets and 10% of the
outstanding voting securities of such issuer. Because the Fund,
as a non-diversified investment company, may invest in a smaller
number of individual issuers than a diversified investment
company, an investment in the Fund may, under certain
circumstances, present greater risk to an investor than an
investment in a diversified investment company.
Year 2000. Many computer software systems in use today cannot
properly process date-related information from and after
27
<PAGE>
January 1, 2000. Should any of the computer systems employed by
the Fund's major service providers fail to process this type of
information properly, that could have a negative impact on the
Fund's operations and the services that are provided to the
Fund's shareholders. Alliance, as well as AFD and AFS (both
defined below), have advised the Fund that they are reviewing all
of their computer systems with the goal of modifying or replacing
such systems prior to January 1, 2000, to the extent necessary to
foreclose any such negative impact. In addition, Alliance has
been advised by the Fund's custodian that it is also in the
process of reviewing its systems with the same goal. As of the
date of this Prospectus, the Fund and Alliance have no reason to
believe that these goals will not be achieved. Similarly, the
values of certain of the portfolio securities held by the Fund
may be adversely affected by the inability of the securities'
issuers or of third parties to process this type of information
properly.
________________________________________________________________
PURCHASE AND SALE OF SHARES
________________________________________________________________
HOW TO BUY SHARES
You can purchase shares of the Fund at a price based on the next
calculated net asset value after receipt of a proper purchase
order either through broker-dealers, banks or other financial
intermediaries, or directly through Alliance Fund Distributors,
Inc. ("AFD"), the Fund's principal underwriter. The minimum
initial investment in the Fund (whether by cash or through
exchange from another Alliance Fund) is $50,000. Share
certificates are issued only upon request. See the Subscription
Application and Statement of Additional Information for more
information.
Existing shareholders may make subsequent purchases by electronic
funds transfer if they have completed the appropriate section of
the Subscription Application or the Shareholder Options form
obtained from Alliance Fund Services, Inc. ("AFS"), the Fund's
registrar, transfer agent and dividend disbursing agent.
Telephone purchase orders can be made by calling 800-221-5672 and
may not exceed $500,000.
The Fund offers three classes of shares, Class A, Class B and
Class C. The Fund may refuse any order to purchase shares. In
this regard, the Fund reserves the right to restrict purchases of
shares (including through exchanges) when they appear to evidence
a pattern of frequent purchases and sales made in response to
short-term considerations.
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<PAGE>
Class A Shares--Initial Sales Charge Alternative
You can purchase Class A shares at net asset value plus an
initial sales charge, as follows:
Initial Sales Charge
as % of Commission to
Net Amount as % of Dealer/Agent as %
Amount Purchased Invested Offering Price of Offering Price
Less than $100,000 4.44% 4.25 4.00%
$100,000 to
less than $250,000 3.36 3.25 3.00
$250,000 to less
than $500,000 2.30 2.25 2.00
$500,000 to less
than $1,000,000 1.78 1.75 1.50
On purchases of $1,000,000 or more, you pay no initial sales
charge but may pay a contingent deferred sales charge ("CDSC")
equal to 1% of the lesser of net asset value at the time of
redemption or original cost if you redeem within one year;
Alliance may pay the dealer or agent a fee of up to 1% of the
dollar amount purchased. Certain purchases of Class A shares may
qualify for reduced or eliminated sales charges in accordance
with the Fund's Combined Purchase Privilege, Cumulative Quantity
Discount, Statement of Intention, Privilege for Certain
Retirement Plans, Reinstatement Privilege and Sales at Net Asset
Value programs. Consult the Subscription Application and
Statement of Additional Information.
Class B Shares--Deferred Sales Charge Alternative
You can purchase Class B shares at net asset value without an
initial sales charge. The Fund will thus receive the full amount
of your purchase. However, you may pay a CDSC if you redeem
shares within four years after purchase. The amount of the CDSC
(expressed as a percentage of the lesser of the current net asset
value or original cost) will vary according to the number of
years from the purchase of Class B shares until the redemption of
those shares. The amount of the CDSC on Class B shares is set
forth below.
29
<PAGE>
Year Since Purchase CDSC
First 4.0%
Second 3.0%
Third 2.0%
Fourth 1.0%
Fifth and thereafter None
Class B shares are subject to higher distribution fees than
Class A shares for a period of eight years (after which they
convert to Class A shares). The higher fees mean a higher
expense ratio, so Class B shares pay correspondingly lower
dividends and may have a lower net asset value than Class A
shares.
Class C Shares--Asset-Based Sales Charge Alternative
You can purchase Class C shares at net asset value without any
initial sales charge. The Fund will thus receive the full amount
of your purchase, and, if you hold your shares for one year or
more, you will receive the entire net asset value of your shares
upon redemption. Class C shares incur higher distribution fees
than Class A shares and do not convert to any other class of
shares of the Fund. The higher fees mean a higher expense ratio,
so Class C shares pay correspondingly lower dividends and may
have a lower net asset value than Class A shares.
Class C shares redeemed within one year of purchase will be
subject to a CDSC equal to 1% of the lesser of their original
cost or net asset value at the time of redemption.
Application of the CDSC
Shares obtained from dividend or distribution reinvestment are
not subject to the CDSC. The CDSC is deducted from the amount of
the redemption and is paid to AFD. The CDSC will be waived on
redemptions of shares following the death or disability of a
shareholder, to meet the requirements of certain qualified
retirement plans or pursuant to a monthly, bimonthly or quarterly
systematic withdrawal plan. See the Statement of Additional
Information.
How the Fund Values its Shares
The net asset value of each class of shares of the Fund is
calculated by dividing the value of the Fund's net assets
allocable to that class by the number of outstanding shares of
that class. Shares are valued each day the Exchange is open as
of the close of regular trading (currently 4:00 p.m. Eastern
time). The securities in the Fund are valued at their current
market value determined on the basis of market quotations or, if
such quotations are not readily available, such other methods as
30
<PAGE>
the Fund's Directors believe accurately reflect fair market
value.
Employee Benefit Plans
Certain employee benefit plans, including employer-sponsored tax-
qualified 401(k) plans and other defined-contribution retirement
plans ("Employee Benefit Plans"), may establish requirements as
to the purchase, sale or exchange of shares, including maximum
and minimum initial investment requirements, that are different
from those described in this Prospectus. Employee Benefit Plans
also may not offer all classes of shares of the Fund. In order
to enable participants investing through Employee Benefit Plans
to purchase shares of the Fund, the maximum and minimum
investment amounts may be different for shares purchased through
Employee Benefit Plans from those described in this Prospectus.
In addition, the Class A, Class B and Class C CDSC may be waived
for investments made through Employee Benefit Plans.
General
The decision as to which class of shares is more beneficial to
you depends on the amount and intended length of your investment.
If you are making a large investment, thus qualifying for a
reduced sales charge, you might consider Class A shares. If you
are making a smaller investment, you might consider Class B
shares because 100% of your purchase is invested immediately. If
you are unsure of the length of your investment, you might
consider Class C shares because there is no initial sales charge
and, as long as the shares are held for one year or more, no
CDSC. Consult your financial agent. Dealers and agents may
receive differing compensation for selling Class A, Class B or
Class C shares. There is no size limit on purchases of Class A
shares. The maximum purchase of Class B shares is $250,000. The
maximum purchase of Class C shares is $1,000,000.
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 Class A, Class B or Class C shares made
through such financial representative. Such financial
intermediaries may also impose requirements with respect to the
purchase, sale or exchange of shares that are different from, or
in addition to, those imposed by the Fund, including requirements
as to the minimum initial and subsequent investment amounts.
In addition to the discount or commission paid to dealers or
agents, AFD from time to time pays additional cash or other
incentives to dealers or agents, including EQ Financial
Consultants, Inc., an affiliate of AFD, in connection with the
sale of shares of the Fund. Such additional amounts may be
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<PAGE>
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.
HOW TO SELL SHARES
You may "redeem" your shares (i.e., sell, your shares in the Fund
to the Fund) on any day the Exchange is open, either directly or
through your financial intermediary. The price you will receive
is the net asset value (less any applicable CDSC) next calculated
after the Fund receives your request in proper form. Proceeds
generally will be sent to you within seven days. However, for
shares recently purchased by check or electronic funds transfer,
the Fund will not send proceeds until it is reasonably satisfied
that the check or electronic funds transfer has been collected
(which may take up to 15 days).
Selling Shares Through Your Broker
Your broker must receive your request before 4:00 p.m. Eastern
time, and your broker must transmit your request to the Fund by
5:00 p.m. Eastern time, for you to receive that day's net asset
value (less any applicable CDSC). Your broker is responsible for
furnishing all necessary documentation to the Fund and may charge
you for this service.
Selling Shares Directly To The Fund
Send a signed letter of instruction or stock power form to AFS
along with certificates, if any, that represent the shares you
want to sell. For your protection, signatures must be guaranteed
by a bank, a member firm of a national stock exchange or other
eligible guarantor institution. Stock power forms are available
from your financial intermediary, AFS, and many commercial banks.
Additional documentation is required for the sale of shares by
corporations, intermediaries, fiduciaries and surviving joint
owners. For details contact:
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<PAGE>
Alliance Fund Services
P.O. Box 1520
Secaucus, NJ 07096-1520
800-221-5672
Alternatively, a request for redemption of shares for which no
stock certificates have been issued can also be made by telephone
to 800-221-5672. Telephone redemption requests must be made by
4:00 p.m. Eastern time on a Fund business day in order to receive
that day's net asset value, and, except for certain omnibus
accounts, may be made only once per day. A shareholder who has
completed the appropriate section of the Subscription
Application, or a Shareholder Options form obtained from AFS, can
elect to have the proceeds of his or her redemption sent to his
or her bank via an electronic funds transfer. Proceeds of
telephone redemptions also may be sent by check to a
shareholder's address of record. Redemption requests by
electronic funds transfer may not exceed $100,000 and redemption
requests by check may not exceed $50,000. Telephone redemption
is not available for shares held in nominee or "street name"
accounts or retirement plan accounts or shares held by a
shareholder who has changed his or her address of record within
the previous 30 calendar days.
General
The sale of shares is a taxable transaction for federal tax
purposes. Under unusual circumstances, the Fund may suspend
redemptions or postpone payment for up to seven days or longer,
as permitted by federal securities law. The Fund reserves the
right to close an account that through redemption has remained
below $200 for 90 days. Shareholders will receive 60 days'
written notice to increase the account value before the account
is closed.
During drastic economic or market developments, you might have
difficulty 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 fails to do
so. Dealers and agents may charge a commission for handling
telephonic requests. The telephone service may be suspended or
terminated at any time without notice.
SHAREHOLDER SERVICES
AFS offers a variety of shareholder services. For more
information about these services or your account, call AFS's
toll-free number, 800-221-5672. Some services are described in
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<PAGE>
the attached Subscription Application. A shareholder manual
explaining all available services will be provided upon request.
To request a shareholder manual, call 800-227-4618.
HOW TO EXCHANGE SHARES
You may exchange your shares of the Fund for shares of the same
class of other Alliance Mutual Funds (including AFD Exchange
Reserves, a money market fund managed by Alliance). Exchanges of
shares are made at the net asset values next determined, without
sales or service charges. Exchanges may be made by telephone or
written request. Telephone exchange requests must be received by
AFS by 4:00 p.m. Eastern time on a Fund business day in order to
receive that day's net asset value.
Shares will continue to age without regard to exchanges for
purposes of determining the CDSC, if any, upon redemption and, in
the case of Class B shares, for purposes of conversion to Class A
shares. After an exchange, your Class B shares will
automatically convert to Class A shares in accordance with the
conversion schedule applicable to the Class B shares of the
Alliance Mutual Fund you originally purchased for cash ("original
shares"). When redemption occurs, the CDSC applicable to the
original shares is applied.
Please read carefully the Prospectus of the mutual fund into
which you are exchanging before submitting the request. Call AFS
at 800-221-5672 to exchange uncertificated shares. An exchange
is a taxable transaction for federal tax purposes. The exchange
service may be changed, suspended, or terminated on 60 days'
written notice.
________________________________________________________________
MANAGEMENT OF THE FUND
________________________________________________________________
ADVISER
Alliance, which is a Delaware limited partnership with principal
offices at 1345 Avenue of the Americas, New York, New York 10105,
has been retained under an advisory agreement (the "Advisory
Agreement") to provide investment advice and, in general, to
conduct the management and investment program of the Fund,
subject to the general supervision and control of the Directors
of the Fund.
Alliance is a leading international investment manager
supervising client accounts with assets as of March 31, 1998
totaling more than $248 billion (of which approximately
$98 billion represented the assets of investment companies).
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<PAGE>
Alliance's clients are primarily major corporate employee benefit
funds, public employee retirement systems, investment companies,
foundations and endowment funds. The 57 registered investment
companies managed by Alliance comprising more than 122 separate
investment portfolios currently have over three million
shareholder accounts. As of March 31, 1998, Alliance was
retained as an investment manager for employee benefit plan
assets of 33 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, Alliance, is an indirect wholly-owned subsidiary of
The Equitable Life Assurance Society of the United States
("Equitable"), one of the largest life insurance companies in the
United States, which is a wholly-owned subsidiary of The
Equitable Companies Incorporated, a holding company controlled by
AXA-UAP, a French insurance holding company. Certain information
concerning the ownership and control of Equitable by AXA-UAP is
set forth in the Fund's Statement of Additional Information under
"Management of the Fund."
The persons primarily responsible for the day-to-day management
of the Fund will be Alfred Harrison, Vice Chairman of ACMC, and
Michael J. Reilly, Senior Vice President of ACMC. Both Messrs.
Harrison and Reilly have been associated with Alliance since
prior to 1993.
Under the Advisory Agreement, Alliance will receive a basic fee
at an annualized rate of 1.10% of the Fund's average daily net
assets (the "Basic Fee") and an adjustment to the Basic Fee based
on the investment performance of the Class A shares of the Fund
in relation to the investment record of the Russell 1000(R)
Growth Index (the "Index") for certain prescribed periods as
described below. The fee will be accrued daily and paid monthly,
except as described below.
The Russell 1000 universe of securities is compiled by Frank
Russell Company and is segmented into two style indices, the
Russell 1000(R) Growth Index and the Russell 1000(R) Value Index,
both based on the capitalization-weighted median book-to-price
ratio of each of the securities. At each reconstitution, the
Russell 1000(R) constituents are ranked by their book-to-price
ratio. Once so ranked, the breakpoint for the two styles is
determined by the median market capitalization of the
Russell 1000. Thus, those securities falling within the top
fifty percent of the cumulative market capitalization (as ranked
by descending book-to-price ratio) become members of the
Russell 1000(R) Value Index and the remaining fifty percent
become members of the Russell 1000(R) Growth Index. The
Russell 1000(R) Growth Index is, accordingly, designed to include
those Russell 1000 securities with a greater-than-average growth
35
<PAGE>
orientation. In contrast with the securities in the
Russell 1000(R) Value Index, companies in the Growth Index tend
to exhibit higher price-to-book and price-earnings ratios, lower
dividend yields and higher forecasted growth values. The
Russell 1000(R) Growth Index reflects changes in market prices,
and assumes reinvestment of investment income.
Beginning with the month of July 1999 and for each succeeding
month, the Basic Fee will be a monthly fee equal to 1/12th of
1.10% (1.10% on an annualized basis) of the average of the net
assets of the Fund for each day included in the applicable
performance period. The performance period for each such month
will be from July 1998 to the most recent month-end, until the
Advisory Agreement has been in effect for 36 full calendar
months, when it will become a rolling 36-month period ending with
the most recent calendar month. The Basic Fee for each such
month may be increased or decreased at the rate of 1/12th of .05%
per percentage point, depending on the extent, if any, by which
the investment performance of the Class A shares of the Fund
exceeds by more than two percentage points, or is exceeded by
more than two percentage points by, the percentage change in the
investment record of the Index for the applicable performance
period. The maximum increase or decrease in the Basic Fee for
any month may not exceed 1/12th of .30%. Accordingly, for each
month, commencing with the month of July 1999, the maximum
monthly fee as adjusted for performance is 1/12th of 1.40% and
would be payable if the investment performance of the Class A
shares of the Fund exceeded the percentage change in the
investment record of the Index by eight or more percentage points
for the performance period, and the minimum monthly fee rate as
adjusted for performance is 1/12th of .80% and would be payable
if the percentage change in the investment record of the Index
exceeded the investment performance of the Class A shares of the
Fund by eight or more percentage points for the performance
period.
For the period from July 1, 1998 through June 30, 1999, Alliance
will receive a minimum fee (the "Minimum Fee"), payable monthly,
equal to .80%, annualized, of the average of the net assets of
the Fund for each day included in such annual period. The
performance period relating to such annual period will be from
July 1, 1998 through June 30, 1999. The fee receivable by
Alliance for such annual period may be increased to 1.40% from
the Minimum Fee. The increase, if any, will be equal to the
difference between (i) the Basic Fee as adjusted for such annual
period in accordance with the preceding paragraph and (ii) the
Minimum Fee. The maximum increase for such annual period may not
exceed .60% annualized. Any such increased amount will not be
accrued by the Fund nor be payable to Alliance prior to July
1999. For the period prior to July 1, 1998, Alliance will
receive the Minimum Fee.
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<PAGE>
The following table illustrates the full range of permitted
increases or decreases to the Basic Fee.
Percentage Point
Difference* Between
Performance of Class A Adjustment
Shares and Russell 1000(R) to 1.10% Annual Fee
Growth Index ** Basic Fee Rate as Adjusted
+8 +.30% 1.40%
+7 +.25% 1.35%
+6 +.20% 1.30%
+5 +.15% 1.25%
+4 +.10% 1.20%
+3 +.05% 1.15%
+/-2 0 1.10%
-3 -.05% 1.05%
-4 -.10% 1.00%
-5 -.15% .95%
-6 -.20% .90%
-7 -.25% .85%
-8 -.30% .80%
_____________________
* Fractions of a percentage point will be rounded to the
nearer whole point (to the higher whole point if exactly
one-half).
** Measured over the performance period, which will be a
twelve-month period from July 1, 1998 through June 30, 1999,
and thereafter the period from July 1998 to the most recent
month-end until the Advisory Agreement has been in effect
for 36 full calendar months, at which time the performance
period will become a rolling 36-month period ending with the
most recent calendar month.
The investment performance of the Class A shares during any
performance period will be measured by the percentage difference
between (i) the opening net asset value of a Class A share of the
Fund and (ii) the sum of (a) the closing net asset value of a
Class A share of the Fund, (b) the value of any dividends and
distributions on such share during the period treated as if
reinvested in Class A shares of the Fund and (c) the value of any
capital gains taxes per Class A share paid or payable on
undistributed realized long-term capital gains. The measurement
of the performance of the Class A shares will not include any
effects resulting from the issuance, sale, repurchase or
redemption of shares of the Fund. The performance of the Index
is measured by the percentage change in the Index between the
beginning and the end of the performance period with cash
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<PAGE>
distributions on the securities that constitute the Index being
treated as reinvested in the Index.
Because the adjustment to the Basic Fee is based on the
comparative performance of the Class A shares with the record of
the Index, the controlling factor is not whether the performance
of the Class A shares is up or down, but whether that performance
is up or down more than or less than that of the Index.
Moreover, the comparative investment performance of the Class A
shares is based solely on the relevant performance period without
regard to the cumulative performance over a longer or shorter
period of time. The Class A shares of the Fund have lower
expenses and pay correspondingly higher dividends than Class B
and Class C shares and thus will have better performance than the
Class B and Class C shares.
From time to time, the Directors may determine that another
securities index is a more appropriate benchmark than the Index
for purposes of evaluating the performance of the Fund. In that
event, the other index may be substituted for the Index in
prospectively calculating the adjustment to the Basic Fee. The
Fund's performance relative to the Index would still be used in
calculating the adjustment with respect to portions of any
performance period prior to the replacement of the Index.
PERFORMANCE OF A SIMILARLY MANAGED FUND
Alliance is the investment adviser of a non-diversified closed-
end management investment company, Alliance All-Market Advantage
Fund, Inc. ("All-Market Advantage"), that has substantially the
same investment objective and policies as those of the Fund and
has been managed in accordance with substantially the same
investment strategies and techniques as are intended to be
employed with respect to the Fund. As reflected below, All-
Market Advantage has performed favorably when compared with the
performance of recognized performance indices. Alfred Harrison
and Michael Reilly are the two persons primarily responsible for
the day-to-day management of the Fund and are also the persons
who have been primarily responsible for the day-to-day management
of All-Market Advantage since its inception in October 1994.
The performance results for All-Market Advantage since its
inception, together with those of the Russell 1000(R) Growth
Index (the "Index") and the Standard & Poor's 500 Composite Stock
Price Index (the "S&P 500"), as comparative benchmarks, are set
forth below. For a description of the Index, see page [ ].
The S&P 500 is a widely recognized, unmanaged index of market
activity based upon the aggregate performance of a selected
portfolio of publicly traded common stocks, including monthly
adjustments to reflect the reinvestment of dividends and other
distributions. The S&P 500 reflects the total return of
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<PAGE>
securities constituting the index, including changes in market
prices and accrued investment income, which is presumed to be
reinvested.
The performance data for All-Market Advantage have not been
adjusted to reflect the Fund's higher expenses, which, if
reflected, would have the effect of lowering the performance
results shown below. The performance data have not been adjusted
for corporate or individual taxes, if any, payable with respect
to All-Market Advantage. As a closed-end investment company,
All-Market Advantage, unlike an open-end investment company such
as the Fund, is not required to manage its portfolio while also
being subject to daily increases or decreases in net assets
caused by net sales and net redemptions of shares. The rates of
return shown for All-Market Advantage are not an estimate or
guarantee of future investment performance of the Fund.
To the extent the Fund does not invest in U.S. common stocks or
utilizes investment techniques such as futures or options, the
Index and the S&P 500 may not be substantially comparable to the
Fund. The Index and the S&P 500 are included to illustrate
material economic and market factors that existed during the time
periods shown. The Index and the S&P 500 do not reflect the
deduction of any fees. If the Fund were to purchase a portfolio
of securities substantially identical to those constituting the
Index or the S&P 500, the Fund's performance relative thereto
would be reduced by its expenses, including brokerage
commissions, advisory fees, distribution fees, custodial fees,
transfer agency costs and other administrative expenses, as well
as by the effect on Fund shareholders of sales charges and income
taxes.
The performance results presented below are based on percentage
changes in net asset values of All-Market Advantage with
dividends and capital gains reinvested. Cumulative rates of
return reflect performance over a stated period of time.
Annualized rates of return represent the rate of growth that
would have produced the corresponding cumulative return had
performance been constant over the entire period. As of
March 31, 1998, the assets in All-Market Advantage totaled
approximately $91 million.
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Annualized Rates of Return
Periods Ended March 31, 1998
________________________________________________________________
All-Market Advantage/Benchmarks 1 Year 3 Years Inception*
________________________________________________________________
Alliance All-Market
Advantage Fund, Inc. 70.84% 36.19% 33.47%
Russell 1000(R) Growth Index 49.46% 32.33% 30.73%
Standard & Poor's 500 Composite
Stock Price Index 47.96% 32.79% 30.95%
Cumulative Rates of Return
Periods Ended March 31, 1998
________________________________________________________________
All-Market Advantage/Benchmarks 1 Year 3 Years Inception*
________________________________________________________________
Alliance All-Market
Advantage Fund, Inc. 70.84% 152.62% 168.80%
Russell 1000(R) Growth Index 49.46% 131.73% 149.80%
Standard & Poor's 500 Composite
Stock Price Index 47.96% 134.14% 151.24%
_____________________
* October 28, 1994, in the case of All-Market Advantage; for
the period beginning October 31, 1994, in the case of the
Index and the S&P 500.
Source: Lipper Analytical Services, Inc.
EXPENSES OF THE FUND
In addition to the payments to Alliance under the Advisory
Agreement described above, the Fund pays certain other costs,
including (i) custody, transfer and dividend disbursing expenses,
(ii) fees of the Directors who are not affiliated with Alliance,
(iii) legal and auditing expenses, (iv) clerical, accounting and
other office costs, (v) costs of printing the Fund's prospectuses
and shareholder reports, (vi) costs of maintaining the Fund's
existence, (vii) interest charges, taxes, brokerage fees and
commissions, (viii) costs of stationery and supplies,
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(ix) expenses and fees related to registration and filing with
the Commission and with state regulatory authorities, (x) upon
the approval of the Board of Directors, costs of personnel of
Alliance or its affiliates rendering clerical, accounting and
other office services and (xi) such promotional, shareholder
servicing and other expenses as may be contemplated by the
Distribution Services Agreement, described below.
DISTRIBUTION SERVICES AGREEMENT
Rule 12b-1 adopted by the Commission under the 1940 Act permits
an investment company to pay expenses associated with the
distribution of its shares in accordance with a duly adopted
plan. The Fund adopted a "Rule 12b-1 plan" (the "Plan") and
entered into a Distribution Services Agreement (the "Agreement")
with AFD. Pursuant to the Plan, the Fund pays to AFD a Rule
12b-1 distribution services fee, which may not exceed an annual
rate of .30% of the Fund's aggregate average daily net assets
attributable to the Class A shares, 1.00% of the Fund's aggregate
average daily net assets attributable to the Class B shares and
1.00% of the Fund's aggregate average daily net assets
attributable to the Class C shares, for distribution expenses.
The Plan provides that a portion of the distribution services fee
in an amount not to exceed .25% of the aggregate average daily
net assets of the Fund attributable to each of the Class A,
Class B and Class C shares constitutes a service fee used for
personal service and/or the maintenance of shareholder accounts.
The Plan provides that AFD will use the distribution services fee
received from the Fund in its entirety for payments (i) to
compensate broker-dealers or other persons for providing
distribution assistance, (ii) to otherwise promote the sale of
shares of the Fund and (iii) to compensate broker-dealers,
depository institutions and other financial intermediaries for
providing administrative, accounting and other services with
respect to the Fund's shareholders. In this regard, some
payments under the Plan are used to compensate financial
intermediaries with trail or maintenance commissions in an amount
equal to .25%, annualized, with respect to Class A shares and
Class B shares, and 1.00%, annualized, with respect to Class C
shares, of the assets maintained in the Fund by their customers.
Distribution services fees received from the Fund with respect to
Class A shares will not be used to pay any interest expenses,
carrying charges or other financing costs or allocation of
overhead of AFD. Distribution services fees received from the
Fund with respect to Class B and Class C shares may be used for
these purposes. The Plan also provides that Alliance may use its
own resources to finance the distribution of the Fund's shares.
The Fund is not obligated under the Plan to pay any distribution
services fee in excess of the amounts set forth above. With
41
<PAGE>
respect to Class A shares of the Fund, distribution expenses
accrued by AFD in one fiscal year may not be paid from
distribution services fees received from the Fund in subsequent
fiscal years. AFD's compensation with respect to Class B and
Class C shares under the Plan is directly tied to the expenses
incurred by AFD. Actual distribution expenses for Class B and
Class C shares for any given year, however, will probably exceed
the distribution services fees payable under the Plan and
payments received from CDSCs. The excess will be carried forward
by AFD and reimbursed from distribution services fees payable
under the Plan and payments subsequently received through CDSCs,
so long as the Plan and the Agreement are in effect.
The Plan is in compliance with rules of the National Association
of Securities Dealers, Inc. which effectively limit the annual
asset-based sales charges and service fees that a mutual fund may
pay on a class of shares to .75% and .25%, respectively, of the
average annual net assets attributable to that class. The rules
also limit the aggregate of all front-end, deferred and
asset-based sales charges imposed with respect to a class of
shares by a mutual fund that also charges a service fee to 6.25%
of cumulative gross sales of shares of that class, plus interest
at the prime rate plus 1% per annum.
The Glass-Steagall Act and other applicable laws may limit the
ability of a bank or other depository institution to become an
underwriter or distributor of securities. However, in the
opinion of the Fund's management, based on the advice of counsel,
these laws do not prohibit such depository institutions from
providing services for investment companies such as the
administrative, accounting and other services referred to in the
Agreement. In the event that a change in these laws prevented a
bank from providing such services, it is expected that other
service arrangements would be made and that shareholders would
not be adversely affected.
_________________________________________________________________
DIVIDENDS, DISTRIBUTIONS AND TAXES
________________________________________________________________
DIVIDENDS AND DISTRIBUTIONS
If you receive an income dividend or capital gains distribution
in cash you may, within 120 days following the date of its
payment, reinvest the dividend or distribution in additional
shares of the Fund without charge by returning to Alliance, with
appropriate instructions, the check representing such dividend or
distribution. Thereafter, unless you otherwise specify, you will
be deemed to have elected to reinvest all subsequent dividends
and distributions in shares of the Fund.
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<PAGE>
Each income dividend and capital gains distribution, if any,
declared by the Fund on its outstanding shares will, at the
election of each shareholder, be paid in cash or in additional
shares of the Fund having an aggregate net asset value as of the
payment date of such dividend or distribution equal to the cash
amount of such dividend or distribution. Election to receive
dividends and distributions in cash or shares is made at the time
shares are initially purchased and may be changed at any time
prior to the record date for a particular dividend or
distribution. Cash dividends and distributions can be paid by
check or, if the shareholder so elects, electronically via the
ACH network. There is no sales or other charge in connection
with the reinvestment of dividends and capital gains
distributions. Dividends and distributions paid by the Fund, if
any, with respect to Class A, Class B and Class C shares will be
calculated in the same manner at the same time on the same day
and will be in the same amount, except that the higher
distribution services fees applicable to Class B and C shares and
any incremental transfer agency costs relating to Class B shares,
will be borne exclusively by the class to which they relate.
FOREIGN INCOME TAXES
Investment income and capital gains received by the Fund from
sources within foreign countries may be subject to foreign income
taxes withheld at the source.
U.S. FEDERAL INCOME TAXES
The Fund intends to qualify to be taxed as a "regulated
investment company" under the Code. To the extent that the Fund
distributes its taxable income and net capital gain to its
shareholders, qualification as a regulated investment company
relieves the Fund of federal income and excise taxes on that part
of its taxable income including net capital gains which it pays
out to its shareholders. Dividends out of net ordinary income
and distributions of net short-term capital gains are taxable to
the recipient shareholders as ordinary income. In the case of
corporate shareholders, such dividends may be eligible for the
dividends-received deduction, except that the amount eligible for
the deduction is limited to the amount of qualifying dividends
received by the Fund. A corporation's dividends-received
deduction generally will be disallowed unless the corporation
holds shares in the Fund at least 46 days during the 90-day
period beginning 45 days before the ex-dividend date.
Furthermore, the dividends-received deduction will be disallowed
to the extent a corporation's investment in shares of the Fund is
financed with indebtedness.
Pursuant to the Taxpayer Relief Act of 1997, two different tax
rates apply to net capital gains--that is, the excess of net
43
<PAGE>
gains from capital assets held for more than one year over net
losses from capital assets held for not more than one year. One
rate (generally 28%) applies to net gains on capital assets held
for more than one year but not more than 18 months ("mid-term
gains"), and a second rate (generally 20%) applies to the balance
of such net capital gains ("adjusted net capital gains").
Distributions of mid-term gains and adjusted net capital gains
will be taxable to shareholders as such, regardless of how long a
shareholder has held shares in the Fund.
Distributions received by a shareholder may include nontaxable
returns of capital, which will reduce a shareholder's basis in
shares of the Fund. If that basis is reduced to zero (which
could happen if the shareholder does not reinvest distributions
and returns of capital are significant), any further returns of
capital will be taxable as capital gain.
Under current federal tax law, the amount of an income dividend
or capital gains distribution declared by a Fund during October,
November or December of a year to shareholders of record as of a
specified date in such a month that is paid during January of the
following year is includable in the prior year's taxable income
of shareholders that are calendar year taxpayers.
Any dividend or distribution received by a shareholder on shares
of the Fund will have the effect of reducing the net asset value
of such shares by the amount of such dividend or distribution.
Furthermore, a dividend or distribution made shortly after the
purchase of such shares by a shareholder, although in effect a
return of capital to that particular shareholder, would be
taxable to the shareholder as described above. If a shareholder
held shares six months or less and during that period received a
distribution of net capital gains, any loss realized on the sale
of such shares during such six-month period would be a long-term
capital loss to the extent of such distribution.
A dividend or capital gains distribution with respect to shares
of the Fund held by a tax-deferred or qualified plan, such as an
individual retirement account, 403(b)(7) retirement plan or
corporate pension or profit-sharing plan, 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 will be required to withhold 31% of any payments made to
a shareholder if the shareholder has not provided a certified
taxpayer identification number to the Fund, or the Secretary of
the Treasury notifies the Fund that a shareholder has not
reported all interest and dividend income required to be shown on
the shareholder's federal income tax return.
44
<PAGE>
Shareholders will be advised annually as to the federal tax
status of dividends and capital gains distributions made by the
Fund for the preceding year. Distributions by the Fund may be
subject to state and local taxes. Shareholders are urged to
consult their tax advisors regarding their own tax situation.
________________________________________________________________
GENERAL INFORMATION
________________________________________________________________
PORTFOLIO TRANSACTIONS
Consistent with the Conduct Rules of the National Association of
Securities Dealers, Inc., and subject to seeking best price and
execution, the Fund may consider sales of its shares as a factor
in the selection of dealers to enter into portfolio transactions
with the Fund.
ORGANIZATION
The Company is a Maryland corporation organized as of May 21,
1998. It is anticipated that annual shareholder meetings will
not be held; shareholder meetings will be held only when required
by federal or state law. Shareholders have available certain
procedures for the removal of Directors.
A shareholder in the Fund will be entitled to share pro rata with
other holders of the same class of shares in all dividends and
distributions arising from the Fund's assets and, upon redeeming
shares, will receive the then current net asset value of the Fund
represented by the redeemed shares less any applicable CDSC. The
Company is empowered to establish, without shareholder approval,
additional portfolios, which may have different investment
objectives and policies than those of the Fund, and additional
classes of shares within the Fund. If an additional portfolio or
class were established by the Company, each share of the
portfolio or class would normally be entitled to one vote for all
purposes. Generally, shares of each portfolio and class would
vote as a single series or class on matters, such as the election
of Directors, that affect each portfolio or class in
substantially the same manner. Class A, Class B and Class C
shares of the Fund have identical voting, dividend, liquidation
and other rights, except that each class bears its own transfer
agency expenses, each of Class A, Class B and Class C shares
bears its own distribution expenses, and Class B shares convert
to Class A shares after eight years. Each class of shares of the
Fund votes separately with respect to the Fund's Rule 12b-1
distribution plan and other matters for which separate class
voting is appropriate under applicable law. Shares are freely
transferable, are entitled to dividends and distributions as
45
<PAGE>
determined by the Directors and, in liquidation of the Fund, are
entitled to receive the net assets of the Fund. Certain
additional matters relating to the Company's organization are
discussed in its Statement of Additional Information.
REGISTRAR, TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT
AFS, an indirect wholly-owned subsidiary of Alliance, located at
500 Plaza Drive, Secaucus, New Jersey 07094, acts as the Fund's
registrar, transfer agent and dividend-disbursing agent for a fee
based upon the number of shareholder accounts maintained for the
Fund. The transfer agency fee with respect to the Class B shares
will be higher than the transfer agency fee with respect to the
Class A shares or Class C shares.
PRINCIPAL UNDERWRITER
AFD, an indirect wholly-owned subsidiary of Alliance, located at
1345 Avenue of the Americas, New York, New York 10105, is the
principal underwriter of shares of the Fund.
PERFORMANCE INFORMATION
From time to time, the Fund advertises its total return, which is
computed separately for Class A, Class B and Class C shares.
Such advertisements disclose the Fund's average annual compounded
total return for the periods prescribed by the Commission. The
Fund's total return for each such period is computed by
determining, through the use of a formula prescribed by the
Commission, the average annual compounded rate of return over the
period that would equate an assumed initial amount invested to
the value of the investment at the end of the period. For
purposes of computing total return, income dividends and capital
gains distributions paid on shares of the Fund are assumed to
have been reinvested when paid, and the maximum sales charges
applicable to purchases and redemptions of the Fund's shares are
assumed to have been paid. The Fund's advertisements may quote
performance rankings or ratings of the Fund by financial
publications or independent organizations such as Lipper
Analytical Services, Inc. and Morningstar, Inc. or compare the
Fund's performance to various indices.
ADDITIONAL INFORMATION
This Prospectus and the Statement of Additional Information,
which has been incorporated by reference herein, do not contain
all the information set forth in the Registration Statement filed
by the Fund with the Commission under the Securities Act. Copies
of the Registration Statement may be obtained at a reasonable
charge from the Commission or may be examined, without charge, at
the offices of the Commission in Washington, D.C.
46
<PAGE>
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY STATE IN
WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE.
47
<PAGE>
(LOGO) ALLIANCE PRIVATE INVESTORS SERIES, INC.
PREMIER PORTFOLIO
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
June [ ], 1998
____________________________________________________________
This Statement of Additional Information is not a
prospectus but supplements and should be read in conjunction with
the Prospectus dated June [ ], 1998 for the Premier Portfolio
(the "Fund") of Alliance Private Investors Series, Inc. (the
"Company") (the "Prospectus"). Copies of the Prospectus may be
obtained by contacting Alliance Fund Services, Inc. at the
address or the "For Literature" telephone number shown above.
TABLE OF CONTENTS
Page
Description of the Fund................................
Management of the Fund.................................
Expenses of the Fund...................................
Purchase of Shares.....................................
Redemption and Repurchase of Shares....................
Shareholder Services...................................
Net Asset Value........................................
Dividends, Distributions and Taxes.....................
Brokerage and Portfolio Transactions...................
General Information....................................
Financial Statement and Report of Independent
Accountants .........................................
Appendix A: Certain Investment Practices
Appendix B: Certain Employee Benefit Plans
(R): This registered service mark used under license from the
owner, Alliance Capital Management L.P.
<PAGE>
____________________________________________________________
DESCRIPTION OF THE FUND
____________________________________________________________
The Fund is non-diversified. The Fund's investment
objective is "fundamental" and cannot be changed without a
shareholder vote. Except as noted, the Fund's investment
policies are not fundamental and thus can be changed without a
shareholder vote. The Fund will not change these policies
without notifying its shareholders. There is no guarantee that
the Fund will achieve its investment objective.
Investment Policies and Practices
The following investment policies and practices
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 Directors of the Fund without
shareholder approval. However, the Fund will not change its
investment policies without contemporaneous written notice to
shareholders.
Short Sales. The Fund will utilize the market technique
of short selling in order to attempt both to protect the Fund's
investment portfolio against the effects of potential downtrends
in the securities markets and as a means of enhancing the Fund's
overall performance. In identifying short selling opportunities,
the Large Cap Growth Group will use the fundamental analysis and
investment research strategy described above to identify a small
group of companies that it believes may decline in price as a
result of fundamental or market developments. The Fund is
permitted to engage in short sales of securities with respect to
up to 30% of its total assets, subject to the requirements of the
1940 Act.
A short sale is a transaction in which the Fund sells a
security it does not own but has borrowed in anticipation that
the market price of that security will decline. When the Fund
makes a short sale of a security that it does not own, it must
borrow from a broker-dealer the security sold short and deliver
the security to the broker-dealer upon conclusion of the short
sale. The Fund may be required to pay a fee to borrow particular
securities and is often obligated to pay over any payments
received on such borrowed securities. The Fund's obligation to
replace the borrowed security will be secured by collateral
deposited with a broker- dealer qualified as a custodian and will
consist of cash or highly liquid securities similar to those
borrowed. Depending on the arrangements the Fund makes with the
2
<PAGE>
broker-dealer from which it borrowed the security regarding
remittance of any payments received by the Fund on such security,
the Fund may not receive any payments (including interest) on its
collateral deposited with the broker-dealer. In addition to
depositing collateral with a broker-dealer, the Fund is currently
required under the 1940 Act to establish a segregated account
with its custodian and to maintain therein liquid assets in an
amount that, when added to cash or liquid high grade debt
securities deposited with the broker-dealer, will at all times
equal at least 100% of the current market value of the security
sold short.
If the price of the security sold short increases
between the time of the short sale and the time the Fund replaces
the borrowed security, the Fund will incur a loss; conversely, if
the price declines, the Fund will realize a short-term capital
gain. Any gain will be decreased, and any loss increased, by the
transaction costs described above. Although the Fund's gain is
limited to the price at which it sold the security short, its
potential loss is theoretically unlimited.
In order to defer realization of gain or loss for U.S.
federal income tax purposes, the Fund may also make short sales
"against the box." In this type of short sale, at the time of
the sale, the Fund owns or has the immediate and unconditional
right to acquire at no additional cost the identical security.
Pursuant to the Taxpayer Relief Act of 1997, if the Fund has
unrealized gain with respect to a security and enters into a
short sale with respect to such security, the Fund generally will
be deemed to have sold the appreciated security and thus will
recognize gain for tax purposes.
Rights and Warrants. The Fund may invest up to 5% of
its total 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 the Adviser for inclusion in
the Fund's portfolio. Rights and warrants may be considered more
speculative than certain other types of investments in that they
do not entitle a holder to dividends or voting rights with
respect to the securities which may be purchased nor do they
represent any rights in the assets of the issuing company. Also,
the value of a right or warrant does not necessarily change with
the value of the underlying securities and a right or warrant
ceases to have value if it is not exercised prior to the
expiration date.
Convertible Securities. The Fund may invest up to 20%
of its total assets in the convertible securities of companies
whose common stocks are eligible for purchase by the Fund under
the investment policies described above. Convertible securities
3
<PAGE>
include bonds, debentures, corporate notes and preferred stocks
that are convertible at a stated exchange rate into common stock.
Prior to their conversion, convertible securities have the same
general characteristics as non-convertible debt securities which
provide a stable stream of income with generally higher yields
than those of equity securities of the same or similar issuers.
As with all debt securities, the market value of convertible
securities tends to decline as interest rates increase and,
conversely, to increase as interest rates decline. While
convertible securities generally offer lower interest 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 will not invest in convertible debt
securities rated below Baa by Moody's Investors Service, Inc.
("Moody's") and BBB by Standard and Poor's Ratings Services
("S&P") or, if not so rated, determined by the Adviser to be of
equivalent quality. Securities rated Baa by Moody's are
considered to have speculative characteristics. Sustained
periods of deteriorating economic conditions or rising interest
rates are more likely to lead to a weakening in the issuer's
capacity to pay interest and repay principal than in the case of
higher-rated securities. The Fund will not retain a convertible
debt security which is downgraded below BBB or Baa, or, if
unrated, determined by the Adviser to have undergone similar
credit quality deterioration subsequent to purchase by the Fund.
Other Investment Practices
The Fund may, but is not required to, utilize various
investment strategies to hedge its portfolio against currency and
other risks. Such strategies are generally accepted by
professional investment managers and are regularly utilized by
many investment companies and other institutional investors.
These investment strategies entail risks. Although the Adviser
believes that these investment strategies may further the Fund's
investment objective, no assurance can be given that they will
achieve this result. The Fund may write covered put and call
options and purchase put and call options on U.S. and foreign
4
<PAGE>
securities exchanges and over-the-counter, enter into contracts
for the purchase and sale for future delivery of common stocks
and purchase and write put and call options on such futures
contracts. The Fund may, but has no present intention to, enter
into contracts for the purchase and sale for future delivery of
foreign currencies or contracts based on financial indices,
including any index of U.S. Government Securities or securities
issued by foreign government entities, or write puts and call
options on foreign currencies, purchase or sell forward foreign
currency exchange contracts, enter into forward commitments for
the purchase or sale of securities, enter into repurchase
agreements, reverse repurchase agreements, dollar rolls, standby
commitment agreements and currency swaps and make secured loans
of its portfolio securities. Each of these investment strategies
is discussed in Appendix A.
The successful use of the foregoing investment practices
draws upon the Adviser's special skills and experience with
respect to such instruments and usually depends on the Adviser's
ability to forecast price movements or currency exchange rate
movements correctly. Should prices or exchange rates move in an
unexpected manner, the Fund may not achieve the anticipated
benefits of futures contracts, options or forward contracts or
may realize losses and thus be in a worse position than if such
strategies had not been used. In addition, the correlation
between movements in the prices of such instruments and movements
in the prices of the securities or currencies hedged or used for
cover will not be perfect and could produce unanticipated losses.
The Fund's ability to dispose of its position in futures
contracts, options and forward contracts will depend on the
availability of liquid markets in such instruments. Markets in
options and futures with respect to a number of types of
securities and currencies are relatively new and still developing
and there is no public market for forward contracts. It is
impossible to predict the amount of trading interest that may
exist in various types of futures contracts, options and forward
contracts. Therefore, no assurance can be given that the Fund
will be able to utilize these instruments effectively for the
purposes set forth above.
Portfolio Turnover. It is the Fund's policy to sell any
security whenever, in the judgment of the Adviser, its
appreciation possibilities have been substantially realized or
the business or market prospects for such security have
deteriorated, irrespective of the length of time that such
security has been held. The Adviser anticipates that the Fund's
annual rate of portfolio turnover will not exceed 150%. A 150%
annual turnover rate would occur if all the securities in the
Fund's portfolio were replaced one and one-half times within a
period of one year.
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<PAGE>
Certain Fundamental Investment Policies
The Fund has adopted the following investment
restrictions, which may not be changed without the approval of
the holders of a majority of the Fund's outstanding voting
securities. 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:
1. Purchase more than 10% of the outstanding
voting securities of any one issuer;
2. Invest 25% or more of its total assets in
securities of issuers conducting their principal
business activities in the same industry, except
that this restriction does not apply to U.S.
Government Securities;
3. Make loans except through (a) the
purchase of debt obligations in accordance with its
investment objective and policies; (b) the lending
of portfolio securities; or (c) the use of
repurchase agreements;
4. Borrow money or issue senior securities
except the Fund may, in accordance with the
provisions of the 1940 Act, (i) borrow from a bank
in a privately arranged transaction or through
reverse repurchase agreements or dollar rolls if
after such borrowing there is asset coverage of at
least 300% as defined in the 1940 Act and
(ii) borrow for temporary purposes in an amount not
exceeding 5% of the value of the total assets of
the Fund;
5. Pledge, hypothecate, mortgage or
otherwise encumber its assets, except to secure
permitted borrowings;
6. Invest in companies for the purpose of
exercising control; or
7. (a) Purchase or sell real estate, except
that it may purchase and sell securities of
companies which deal in real estate or interests
therein and securities that are secured by real
6
<PAGE>
estate, provided such securities are securities of
the type in which the Fund may invest; (b) purchase
or sell commodities or commodity contracts,
including futures contracts (except foreign
currencies, foreign currency options and futures,
options and futures on securities and securities
indices and forward contracts or contracts for the
future acquisition or delivery of securities and
foreign currencies and related options on futures
contracts and other similar contracts); (c) invest
in interests in oil, gas, or other mineral
exploration or development programs; (d) purchase
securities on margin, except for such short-term
credits as may be necessary for the clearance of
transactions; and (e) act as an underwriter of
securities, except that the Fund may acquire
restricted securities under circumstances in which,
if such securities were sold, the Fund might be
deemed to be an underwriter for purposes of the
U.S. Securities Act of 1933 (the "1933 Act").
___________________________________________________________
MANAGEMENT OF THE FUND
___________________________________________________________
Directors and Officers
The Directors and principal officers of the Fund,
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 such person
is 1345 Avenue of the Americas, New York, New York 10105.
Directors
[TO BE ADDED]
Officers
[TO BE ADDED]
The Fund does not pay any fees to, or reimburse
expenses of, its Directors who are considered "interested
persons" of the Fund. The aggregate compensation to be paid
by the Fund to each of the Directors during the Fund's
fiscal period ending [ ], 1999 (estimating future
payments based upon existing arrangements), and the
7
<PAGE>
aggregate compensation paid to each of the Directors during
calendar year 1997 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 registered investment
company in the Alliance Fund Complex provides compensation
in the form of pension or retirement benefits to any of its
directors or trustees.
Total Number
Total Number of Investment
of Companies Portfolios Within
Total in the Alliance the Alliance
Compensation Fund Complex, Fund Complex,
From the the Fund, as Including the
Alliance Fund to which the Fund, as to which
Name of Aggregate Complex, the Director the Director
Director Compensation Including the is a Director is a Director or
of the Fund From the Fund Fund or Trustee Trustee
___________ _____________ ______________ _____________ _______________
_______________
** estimated
As of June [ ], 1998, the Directors and officers of the
Fund as a group owned less than 1% of the shares of the Fund.
Adviser
Alliance Capital Management L.P., a Delaware limited
partnership with principal offices at 1345 Avenue of the
Americas, New York, New York 10105, has been retained under an
advisory agreement (the "Advisory Agreement") to provide
investment advice and, in general, to conduct the management and
investment program of the Fund 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 March 31,
1998 totaling more than $248 billion (of which more than $98
billion represented the assets of investment companies). The
Adviser's clients are primarily major corporate employee benefit
funds, public employee retirement systems, investment companies,
8
<PAGE>
foundations and endowment funds. As of March 31, 1998, the
Adviser was an investment manager of employee benefit assets for
33 of the FORTUNE 100 companies. As of that date, the Adviser and
its subsidiaries employed approximately 1,700 employees who
operated out of domestic offices and the offices of subsidiaries
in Bahrain, Boston, Chennai, Istanbul, Johannesburg, London,
Luxembourg, Madrid, Mumbai, Paris, Singapore, Sydney, Tokyo and
Toronto and affiliate offices located in Vienna, Warsaw, Hong
Kong, Sao Paulo, Seoul and Moscow. The 57 registered investment
companies comprising more than 121 separate investment portfolios
managed by the Adviser currently have more than 3.4 million
shareholders.
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 March 1, 1998,
ACMC, Inc. and Equitable Capital Management Corporation, each a
wholly-owned direct or indirect subsidiary of Equitable, together
with Equitable, owned in the aggregate approximately 57% of the
issued and outstanding units representing assignments of
beneficial ownership of limited partnership interests in the
Adviser.
AXA is a holding company for an international group of
insurance and related financial services companies. AXA's
insurance operations include activities in life insurance,
property and casualty insurance and reinsurance. The insurance
operations are diverse geographically, with activities
principally in Western Europe, North America and the Asia/Pacific
area. AXA is also engaged in asset management, investment
banking, securities trading, brokerage, real estate and other
financial services activities principally in the United States,
as well as in Western Europe and the Asia/Pacific area.
Based on information provided by AXA, as of March 1,
1998, more than 30% of the voting power of AXA was controlled
directly and indirectly by FINAXA, a French holding company. As
of March 1, 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.
9
<PAGE>
Certain other clients of the Adviser may have investment
objectives and policies similar to those of the Fund. The
Adviser may, from time to time, make recommendations which result
in the purchase or sale of a particular security by its other
clients simultaneously with the Fund. If transactions on behalf
of more than one client during the same period increase the
demand for securities being purchased or the supply of securities
being sold, there may be an adverse effect on price or quantity.
It is the policy of the Adviser to allocate advisory
recommendations and the placing of orders in a manner which is
deemed equitable by the Adviser to the accounts involved,
including the Fund. When two or more of the clients of the
Adviser (including the Fund) are purchasing or selling the same
security on a given day from the same broker-dealer, such
transactions may be averaged as to price.
Under the Advisory Agreement, the Adviser provides
investment advisory services and order placement facilities for
the Fund and pays all compensation of Directors and officers of
the Fund who are affiliated persons of the Adviser. The Adviser
or its affiliates also furnishes the Fund, without charge,
management supervision and assistance and office facilities and
provides persons satisfactory to the Fund's Board of Directors to
serve as the Fund's officers.
The 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 employ its own personnel.
For such services, it also may utilize personnel employed by the
Adviser or by other subsidiaries of Equitable. In such event,
the services will be provided to the Fund at cost and the
payments specifically approved by the Fund's Board of Directors.
The Advisory Agreement became effective on [ ],
1998 having been approved by the [unanimous] vote, cast in
person, of the Fund's Directors, including the Directors who are
not parties to the Advisory Agreement or interested persons as
defined in the 1940 Act of any such party, at a meeting called
for that purpose and held on [ ], 1998, and by the
Fund's initial shareholder on [ ], 1998.
The Advisory Agreement will remain in effect until
[ ], 2000 and continue in effect thereafter only so long
as its continuance is specifically approved at least annually by
a vote of a majority of the Fund's outstanding voting securities
or by the Fund's Board of Directors, including in either case,
approval by a majority of the Directors who are not parties to
the Advisory Agreement or interested persons of any such party as
defined by the 1940 Act.
10
<PAGE>
The Advisory Agreement is terminable without penalty by
a vote of a majority of the Fund's outstanding voting securities
or by a vote of a majority of the Fund's Directors on 60 days'
written notice, or by the Adviser on 60 days' written notice, and
will automatically terminate in the event of its assignment. The
Advisory Agreement provides that in the absence of willful
misfeasance, bad faith or gross negligence on the part of the
Adviser, or of reckless disregard of its obligations thereunder,
the Adviser shall not be liable for any action or failure to act
in accordance with its duties thereunder.
The Adviser may act as an investment adviser to other
persons, firms or corporations, including investment companies,
and is investment adviser to ACM Institutional Reserves, Inc.,
AFD Exchange Reserves, Alliance All-Asia Investment Fund, Inc.,
The Alliance Fund, Inc., Alliance Balanced Shares, Inc., Alliance
Bond Fund, Inc., Alliance Capital Reserves, Alliance Developing
Markets Fund, Inc., Alliance Global Dollar Government Fund, Inc.,
Alliance Global 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 Income Builder Fund, Inc., Alliance
Institutional Funds, Inc., Alliance International Fund, Alliance
International Premier Growth Fund, Inc., Alliance Limited
Maturity Government Fund, Inc., Alliance Money Market Fund,
Alliance Mortgage Securities Income Fund, Inc., Alliance Multi-
Market Strategy Trust, Inc., Alliance Municipal Income Fund,
Inc., Alliance Municipal Income Fund II, Alliance Municipal
Trust, Alliance New Europe Fund, Inc., Alliance North American
Government Income Trust, Inc., Alliance Premier Growth Fund,
Inc., Alliance Quasar Fund, Inc., Alliance Real Estate Investment
Fund, Inc., Alliance/Regent Sector Opportunity Fund, Inc.,
Alliance Short-Term Multi-Market Trust, Inc., Alliance Technology
Fund, Inc., Alliance Utility Income Fund, Inc., Alliance Variable
Products Series Fund, Inc., Alliance World Income Trust, Inc.,
Alliance Worldwide Privatization Fund, Inc., The Alliance
Portfolios 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
Dollar Income Fund, Inc., ACM Managed 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.
11
<PAGE>
___________________________________________________________
EXPENSES OF THE FUND
___________________________________________________________
Distribution Services Agreement
The Fund has entered into a Distribution Services
Agreement (the "Agreement") with Alliance Fund Distributors,
Inc., the Fund's principal underwriter (the "Principal
Underwriter"), to permit the Principal Underwriter to distribute
the Fund's shares and to permit the Fund to pay distribution
services fees to defray expenses associated with distribution of
its Class A shares, Class B shares and Class C shares in
accordance with a plan of distribution which is included in the
Agreement and which has been duly adopted and approved in
accordance with Rule 12b-1 adopted by the Securities and Exchange
Commission (the "Commission") under the 1940 Act (the "Rule 12b-1
Plan").
Distribution services fees are accrued daily and paid
monthly and charged as expenses of the Fund as accrued. The
distribution services fees attributable to the Class B shares and
Class C shares are designed to permit an investor to purchase
such shares through broker-dealers without the assessment of an
initial sales charge and at the same time to permit the Principal
Underwriter to compensate broker-dealers in connection with the
sale of such shares. In this regard the purpose and function of
the combined contingent deferred sales charge and respective
distribution services fee on the Class B shares and Class C
shares are the same as those of the initial sales charge and
distribution services fee with respect to the Class A shares in
that in each case the sales charge and distribution services fee
provides for the financing of the distribution of the relevant
class of the Fund's shares.
Under the Agreement, the Treasurer of the Fund reports
the amounts expended under the Rule 12b-1 Plan and the purposes
for which such expenditures were made to the Directors of the
Fund on a quarterly basis. Also, the Agreement provides that the
selection and nomination of Directors who are not "interested
persons" of the Fund, as defined in the 1940 Act, are committed
to the discretion of such disinterested Directors then in office.
The Agreement was initially approved by the Directors of the Fund
at a meeting held on [ ], 1998.
The Agreement will continue in effect until [ ],
1999 and continue in effect thereafter so long as its continuance
is specifically approved at least annually by the Directors of
the Fund or by vote of the holders of a majority of the
outstanding voting securities (as defined in the 1940 Act) of
12
<PAGE>
that class, and, in either case, by a majority of the Directors
of the Fund who are not parties to the Agreement or interested
persons, as defined in the 1940 Act, of any such party (other
than as directors of the Fund) and who have no direct or indirect
financial interest in the operation of the Rule 12b-1 Plan or any
agreement related thereto.
The Adviser may from time to time and from its own funds
or such other resources as may be permitted by rules of the
Commission make payments for distribution services to the
Principal Underwriter; the latter may in turn pay part or all of
such compensation to brokers or other persons for their
distribution assistance.
In the event that the Agreement is terminated or not
continued with respect to the Class A shares, Class B shares or
Class C shares, (i) no distribution services fees (other than
current amounts accrued but not yet paid) would be owed by the
Fund to the Principal Underwriter with respect to that class and
(ii) the Fund would not be obligated to pay the Principal
Underwriter for any amounts expended under the Agreement not
previously recovered by the Principal Underwriter from
distribution services fees in respect of shares of such class or
through deferred sales charges.
All material amendments to the Agreement must be
approved by a vote of the Directors or the holders of a majority
of the Fund's outstanding voting securities, voting separately by
class, and in either case, by a majority of the disinterested
Directors, cast in person at a meeting called for the purpose of
voting on such approval; and the Agreement may not be amended in
order to increase materially the costs that the Fund may bear
pursuant to the Agreement without the approval of a majority of
the holders of the outstanding voting securities of the class or
classes affected. The Agreement may be terminated (a) by the
Fund without penalty at any time by a majority vote of the
holders of the outstanding voting securities of the Fund, voting
separately by class, or by a majority vote of the Directors who
are not "interested persons" as defined in the 1940 Act, or
(b) by the Principal Underwriter. To terminate the Agreement,
any party must give the other parties 60 days' written notice.
To terminate the Rule 12b-1 Plan only, the Fund need give no
notice to the Principal Underwriter. The Agreement will
terminate automatically in the event of its assignment.
Transfer Agency Agreement
Alliance Fund Services, Inc., an indirect wholly-owned
subsidiary of the Adviser, receives a transfer agency fee per
account holder of each of the Class A shares, Class B shares and
Class C shares of the Fund, plus reimbursement for out-of-pocket
13
<PAGE>
expenses. The transfer agency fee with respect to the Class B
shares and Class C shares is higher than the transfer agency fee
with respect to the Class A shares.
_______________________________________________________________
PURCHASE OF SHARES
_______________________________________________________________
The following information supplements that set forth in
the Fund's Prospectus under the heading "Purchase and Sale of
Shares--How to Buy Shares."
General
Shares of the Fund are offered on a continuous basis at
a price equal to their net asset value plus an initial sales
charge at the time of purchase ("Class A shares"), with a
contingent deferred sales charge ("Class B shares"), or without
any initial sales charge and, as long as the shares are held for
one year or more, without any contingent deferred sales charge
("Class C shares"). Shares of the Fund that are offered subject
to a sales charge are offered through (i) investment dealers that
are members of the National Association of Securities Dealers,
Inc. and have entered into selected dealer agreements with the
Principal Underwriter ("selected dealers"), (ii) depository
institutions and other financial intermediaries or their
affiliates, that have entered into selected agent agreements with
the Principal Underwriter ("selected agents") and (iii) the
Principal Underwriter.
Investors may purchase shares of the Fund either through
selected broker-dealers, agents, financial intermediaries or
other financial representatives or directly through the Principal
Underwriter. 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 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, including requirements as to the
minimum initial and subsequent investment amounts. Sales
personnel of selected dealers and agents distributing the Fund's
shares may receive differing compensation for selling Class A,
Class B or Class C shares. 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.
14
<PAGE>
The public offering price of shares of the Fund is their
net asset value, plus, in the case of Class A shares, a sales
charge which will vary depending on the purchase alternative
chosen by the investor, as shown in the table below under
"--Class A Shares". On each Fund business day on which a
purchase or redemption order is received by the Fund and trading
in the types of securities in which the Fund invests might
materially affect the value of Fund shares, the per share net
asset value is computed in accordance with the Fund's Articles of
Incorporation and By-Laws as of the next close of regular trading
on the New York Stock Exchange (the "Exchange") (currently
4:00 p.m. Eastern time) by dividing the value of the Fund's total
assets, less its liabilities, by the total number of its shares
then outstanding. A Fund business day is any day on which the
Exchange is open for trading.
The respective per share net asset values of the
Class A, Class B and Class C shares are expected to be
substantially the same. Under certain circumstances, however,
the per share net asset values of the Class B and Class C shares
may be lower than the per share net asset values of the Class A
shares, as a result of the differential daily expense accruals of
the distribution and transfer agency fees applicable with respect
to those classes of shares. Even under those circumstances, the
per share net asset values of the three classes eventually will
tend to converge immediately after the payment of dividends,
which will differ by approximately the amount of the expense
accrual differential among the classes.
The Fund will accept unconditional orders for its shares
to be executed at the public offering price equal to their net
asset value next determined (plus applicable Class A sales
charges), as described below. Orders received by the Principal
Underwriter prior to the close of regular trading on the Exchange
on each day the Exchange is open for trading are priced at the
net asset value computed as of the close of regular trading on
the Exchange on that day (plus applicable Class A sales charges).
In the case of orders for purchase of shares placed through
selected dealers, agents or financial representatives, as
applicable, the applicable public offering price will be the net
asset value as so determined, but only if the selected dealer,
agent or financial representative receives the order prior to the
close of regular trading on the Exchange and transmits it to the
Principal Underwriter prior to 5:00 p.m. Eastern time. The
selected dealer, agent or financial representative, as
applicable, is responsible for transmitting such orders by
5:00 p.m. If the selected dealer, agent or financial
representative fails to do so, the investor's right to that day's
closing price must be settled between the investor and the
selected dealer, agent or financial representative, as
applicable. If the selected dealer, agent or financial
15
<PAGE>
representative, as applicable, receives the order after the close
of regular trading on the Exchange, the price will be based on
the net asset value determined as of the close of regular trading
on the Exchange on the next day it is open for trading.
Following the initial purchase of Fund shares, a
shareholder may place orders to purchase additional shares by
telephone if the shareholder has completed the appropriate
portion of the Subscription Application or an "Autobuy"
application obtained by calling the "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
Fund business day, the order to purchase shares is automatically
placed the following Fund business day, and the applicable public
offering price will be the public offering price determined as of
the close of business on such following business day.
Full and fractional shares are credited to a
subscriber's account in the amount of his or her subscription.
As a convenience to the subscriber, and to avoid unnecessary
expense to the Fund, stock certificates representing shares of
the Fund are not issued except upon written request to the Fund
by the shareholder or his or her authorized selected dealer or
agent. This facilitates later redemption and relieves the
shareholder of the responsibility for and inconvenience of lost
or stolen certificates. No certificates are issued for
fractional shares, although such shares remain in the
shareholder's account on the books of the Fund.
In addition to the discount or commission amount paid to
dealers or agents, the Principal Underwriter from time to time
pays additional cash or other incentives to dealers or agents,
including EQ Financial Consultants, Inc., formerly Equico
Securities, Inc., an affiliate of the Principal Underwriter, in
connection with the sale of shares of the Fund. Such additional
amounts may be utilized, in whole or in part to provide
additional compensation to registered representatives who sell
shares of the Fund. On some occasions, 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 will 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
16
<PAGE>
associated with a dealer or agent and their immediate family
members to urban or resort locations within or outside the United
States. Such dealer or agent may elect to receive cash
incentives of equivalent amount in lieu of such payments.
Class A, Class B and Class C shares each represent an
interest in the same portfolio of investments of the Fund, have
the same rights and are identical in all respects, except that
(i) Class A shares bear the expense of the initial sales charge
(or contingent deferred sales charge when applicable) and Class B
and Class C shares bear the expense of the deferred sales charge,
(ii) Class B shares and Class C shares each bear the expense of a
higher distribution services fee than that borne by Class A
shares, (iii) Class B shares and Class C shares bear higher
transfer agency costs than those borne by Class A shares,
(iv) each of Class A, Class B and Class C shares has exclusive
voting rights with respect to provisions of the Rule 12b-1 Plan
pursuant to which its distribution services fee is 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 A shareholders, an amendment to the Rule 12b-1 Plan
that would materially increase the amount to be paid thereunder
with respect to the Class A shares, then such amendment will also
be submitted to the Class B shareholders and the Class A and
Class B shareholders will vote separately by class, and
(v) Class B shares are subject to a conversion feature. Each
class has different exchange privileges and certain different
shareholder service options available.
The Directors of the Fund have determined that currently
no conflict of interest exists between or among the Class A,
Class B and Class C shares. On an ongoing basis, the Directors
of the Fund, pursuant to their fiduciary duties under the 1940
Act and state law, will seek to ensure that no such conflict
arises.
Alternative Purchase Arrangements
The alternative purchase arrangements available with
respect to Class A shares, Class B shares and Class C shares
permit an investor to choose the method of purchasing shares that
is most beneficial given the amount of the purchase, the length
of time the investor expects to hold the shares, and other
circumstances. Investors should consider whether, during the
anticipated life of their investment in the Fund, the accumulated
distribution services fee and contingent deferred sales charge on
Class B shares prior to conversion, or the accumulated
distribution services fee and contingent deferred sales charge on
Class C shares, would be less than the initial sales charge and
accumulated distribution services fee on Class A shares purchased
at the same time, and to what extent such differential would be
17
<PAGE>
offset by the higher return of Class A shares. Class A shares
will normally be more beneficial than Class B shares to the
investor who qualifies for reduced initial sales charges on
Class A shares, as described below. In this regard, the
Principal Underwriter will reject any order (except orders from
certain retirement plans and certain employee benefit plans) for
more than $250,000 for Class B shares. (See Appendix B for
information concerning the eligibility of certain employee
benefit plans to purchase Class B shares at net asset value
without being subject to a contingent deferred sales charge and
the ineligibility of certain such plans to purchase Class A
shares.) Class C shares will normally not be suitable for the
investor who qualifies to purchase Class A shares at net asset
value. For this reason, the Principal Underwriter will reject
any order for more than $1,000,000 for Class C shares.
Class A shares are subject to a lower distribution
services fee and, accordingly, pay correspondingly higher
dividends per share than Class B shares or Class C shares.
However, because initial sales charges are deducted at the time
of purchase, investors purchasing Class A shares would not have
all their funds invested initially and, therefore, would
initially own fewer shares. Investors not qualifying for reduced
initial sales charges who expect to maintain their investment for
an extended period of time might consider purchasing Class A
shares because the accumulated continuing distribution charges on
Class B shares or Class C shares may exceed the initial sales
charge on Class A shares during the life of the investment.
Again, however, such investors must weigh this consideration
against the fact that, because of such initial sales charges, not
all their funds will be invested initially.
Other investors might determine, however, that it would
be more advantageous to purchase Class B shares or Class C shares
in order to have all their funds invested initially, although
remaining subject to higher continuing distribution charges and
being subject to a contingent deferred sales charge for a four-
year and one-year period, respectively. For example, based on
current fees and expenses, an investor subject to the 4.25%
initial sales charge on Class A shares would have to hold his or
her investment approximately seven years for the Class C
distribution services fee to exceed the initial sales charge plus
the accumulated distribution services fee of Class A shares. In
this example, an investor intending to maintain his or her
investment for a longer period might consider purchasing Class A
shares. This example does not take into account the time value
of money, which further reduces the impact of the Class C
distribution services fees on the investment, fluctuations in net
asset value or the effect of different performance assumptions.
18
<PAGE>
Those investors who prefer to have all of their funds
invested initially but may not wish to retain Fund shares for the
four-year period during which Class B shares are subject to a
contingent deferred sales charge may find it more advantageous to
purchase Class C shares.
Class A Shares
The public offering price of Class A shares is the net
asset value plus a sales charge, as set forth below.
Sales Charge
Discount or
Commission
As % of to Dealers
As % of the or Agents
Net Public As % of
Amount of Amount Offering Offering
Purchase Invested Price Price
________ ________ ________ ____________
Less than
$100,000 . . . 4.44% 4.25% 4.00%
$100,000 but
less than
$250,000. . . . 3.36 3.25 3.00
$250,000 but
less than
$500,000. . . . 2.30 2.25 2.00
$500,000 but
less than
$1,000,000*. . . 1.78 1.75 1.50
_____________
* There is no initial sales charge on transactions of $1,000,000
or more.
With respect to purchases of $1,000,000 or more, Class A
shares redeemed within one year of purchase will be subject to a
contingent deferred sales charge equal to 1% of the lesser of the
cost of the shares being redeemed or their net asset value at the
time of redemption. Accordingly, no sales charge will be imposed
on increases in net asset value above the initial purchase price.
In addition, no charge will be assessed on shares derived from
reinvestment of dividends or capital gains distributions. The
contingent deferred sales charge on Class A shares will be waived
on certain redemptions, as described below under "--Class B
Shares." In determining the contingent deferred sales charge
applicable to a redemption of Class A shares, it will be assumed
that the redemption is, first, of any shares that are not subject
to a contingent deferred sales charge (for example, because an
19
<PAGE>
initial sales charge was paid with respect to the shares, or they
have been held beyond the period during which the charge applies
or were acquired upon the reinvestment of dividends or
distributions) and, second, of shares held longest during the
time they are subject to the sales charge. Proceeds from the
contingent deferred sales charge on Class A shares are paid to
the Principal Underwriter and are used by the Principal
Underwriter to defray the expenses of the Principal Underwriter
related to providing distribution-related services to the Fund in
connection with the sales of Class A shares, such as the payment
of compensation to selected dealers and agents for selling
Class A shares. With respect to purchases of $1,000,000 or more
made through selected dealers or agents, the Adviser may,
pursuant to the Distribution Services Agreement described above,
pay such dealers or agents from its own resources a fee of up to
1% of the amount invested to compensate such dealers or agents
for their distribution assistance in connection with such
purchases.
No initial sales charge is imposed on Class A shares
issued (i) pursuant to the automatic reinvestment of income
dividends or capital gains distributions, (ii) in exchange for
Class A shares of other "Alliance Mutual Funds" (as that term is
defined under "Combined Purchase Privilege" below), except that
an initial sales charge will be imposed on Class A shares issued
in exchange for Class A shares of AFD Exchange Reserves ("AFDER")
that were purchased for cash without the payment of an initial
sales charge and without being subject to a contingent deferred
sales charge or (iii) upon the automatic conversion of Class B
shares as described below under "Class B Shares-Conversion
Feature." The Fund receives the entire net asset value of its
Class A shares sold to investors. The Principal Underwriter's
commission is the sales charge shown above less any applicable
discount or commission "reallowed" to selected dealers and
agents. The Principal Underwriter will reallow discounts to
selected dealers and agents in the amounts indicated in the table
above. In this regard, the Principal Underwriter may elect to
reallow the entire sales charge to selected dealers and agents
for all sales with respect to which orders are placed with the
Principal Underwriter. A selected dealer who receives
reallowance in excess of 90% of such a sales charge may be deemed
to be an "underwriter" under the Securities Act.
Set forth below is an example of the method of computing
the offering price of the Class A shares. The example assumes a
purchase of Class A shares of the Fund aggregating less than
$100,000 subject to the schedule of sales charges set forth above
at a price based upon the net asset value of Class A shares of
the Fund on June [ ], 1998.
20
<PAGE>
Net Asset Value per Class A Share at
June [ ], 1998 $10.00
Class A Per Share Sales Charge 4.25%
of offering price (4.44% of net asset
value per share) $ .44
Class A Per Share Offering Price to
the Public $10.44
=======
Investors choosing the initial sales charge alternative
may under certain circumstances be entitled to pay (i) no initial
sales charge (but may be subject in most such cases to a
contingent deferred sales charge) or (ii) a reduced initial sales
charge. The circumstances under which such investors may pay a
reduced initial sales charge are described below.
Combined Purchase Privilege. Certain persons may
qualify for the sales charge reductions indicated in the schedule
of such charges above by combining purchases of shares of the
Fund into a single "purchase," if the resulting "purchase" totals
at least $100,000. The term "purchase" refers to: (i) a single
purchase by an individual, or to concurrent purchases, which in
the aggregate are at least equal to the prescribed amounts, by an
individual, his or her spouse and their children under the age of
21 years purchasing shares of the Fund for his, her or their own
account(s); (ii) a single purchase by a trustee or other
fiduciary purchasing shares for a single trust, estate or single
fiduciary account although more than one beneficiary is involved;
or (iii) a single purchase for the employee benefit plans of a
single employer. The term "purchase" also includes purchases by
any "company," as the term is defined in the 1940 Act, but does
not include purchases by any such company which has not been in
existence for at least six months or which has no purpose other
than the purchase of shares of the Fund or shares of other
registered investment companies at a discount. The term
"purchase" does not include purchases by any group of individuals
whose sole organizational nexus is that the participants therein
are credit card holders of a company, policy holders of an
insurance company, customers of either a bank or broker-dealer or
clients of an investment adviser. A "purchase" may also include
shares, purchased at the same time through a single selected
dealer or agent, of any other "Alliance Mutual Fund." Currently,
the Alliance Mutual Funds include:
AFD Exchange Reserves
The Alliance Fund, Inc.
Alliance All-Asia Investment Fund, Inc.
Alliance Balanced Shares, Inc.
Alliance Bond Fund, Inc.
21
<PAGE>
-Corporate Bond Portfolio
-U.S. Government Portfolio
Alliance Developing Markets Fund, Inc.
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 Income Builder Fund, Inc.
Alliance International Fund
Alliance International Premier Growth Fund, Inc.
Alliance Limited Maturity Government Fund, Inc.
Alliance Mortgage Securities Income Fund, Inc.
Alliance Multi-Market Strategy Trust, Inc.
Alliance Municipal Income Fund, Inc.
-California Portfolio
-Insured California Portfolio
-Insured National Portfolio
-National Portfolio
-New York Portfolio
Alliance Municipal Income Fund II
-Arizona Portfolio
-Florida Portfolio
-Massachusetts Portfolio
-Michigan Portfolio
-Minnesota Portfolio
-New Jersey Portfolio
-Ohio Portfolio
-Pennsylvania Portfolio
-Virginia Portfolio
Alliance New Europe Fund, Inc.
Alliance North American Government Income Trust, Inc.
Alliance Premier Growth Fund, Inc.
Alliance Quasar Fund, Inc.
Alliance Real Estate Investment Fund, Inc.
Alliance/Regent Sector Opportunity Fund, Inc.
Alliance Short-Term Multi-Market Trust, Inc.
Alliance Technology Fund, Inc.
Alliance Utility Income Fund, Inc.
Alliance World Income Trust, Inc.
Alliance Worldwide Privatization Fund, Inc.
The Alliance Portfolios
-Alliance Growth Fund
-Alliance Conservative Investors Fund
-Alliance Growth Investors Fund
-Alliance Strategic Balanced Fund
22
<PAGE>
-Alliance Short-Term U.S. Government Fund
Prospectuses for the Alliance Mutual Funds may be
obtained without charge by contacting Alliance Fund Services,
Inc. at the address or the "For Literature" telephone number
shown on the front cover of this Statement of Additional
Information.
Cumulative Quantity Discount (Right of Accumulation). An
investor's purchase of additional Class A shares of the Fund may
qualify for a Cumulative Quantity Discount. The applicable sales
charge will be based on the total of:
(i) the investor's current purchase;
(ii) the net asset value (at the close of business
on the previous day) of (a) all shares of the
Fund held by the investor and (b) all shares
of any other Alliance Mutual Fund held by the
investor; and
(iii) the net asset value of all shares described in
paragraph (ii) owned by another shareholder
eligible to combine his or her purchase with
that of the investor into a single "purchase"
(see above).
For example, if an investor owned shares of an Alliance
Mutual Fund worth $200,000 at their then current net asset value
and, subsequently, purchased Class A shares of the Fund worth an
additional $100,000, the sales charge for the $100,000 purchase
would be at the 2.25% rate applicable to a single $300,000
purchase of shares of the Fund, rather than the 3.25% rate.
To qualify for the Combined Purchase Privilege or to
obtain the Cumulative Quantity Discount on a purchase through a
selected dealer or agent, the investor or selected dealer or
agent must provide the Principal Underwriter with sufficient
information to verify that each purchase qualifies for the
privilege or discount.
Statement of Intention. Class A investors may also
obtain the reduced sales charges shown in the table above by
means of a written Statement of Intention, which expresses the
investor's intention to invest not less than $250,000 within a
period of 13 months in Class A shares (or Class A, Class B and/or
Class C shares) of the Fund or any other Alliance Mutual Fund.
Class A investors investing pursuant to the Statement of
Intention must invest at least $50,000 with their initial
purchase of shares of the Fund. Each purchase of shares under a
Statement of Intention will be made at the public offering price
23
<PAGE>
or prices applicable at the time of such purchase to a single
transaction of the dollar amount indicated in the Statement of
Intention. At the investor's option, a Statement of Intention
may include purchases of shares of the Fund or any other Alliance
Mutual Fund made not more than 90 days prior to the date that the
investor signs the Statement of Intention; however, the 13-month
period during which the Statement of Intention is in effect will
begin on the date of the earliest purchase to be included.
Investors qualifying for the Combined Purchase Privilege
described above may purchase shares of the Alliance Mutual Funds
under a single Statement of Intention. For example, if at the
time an investor signs a Statement of Intention to invest at
least $100,000 in Class A shares of the Fund, the investor and
the investor's spouse each purchase shares of the Fund worth
$50,000 (for a total of $100,000), it will only be necessary to
invest a total of $150,000 during the following 13 months in
shares of the Fund or any other Alliance Mutual Fund, to qualify
for the 2.25% sales charge on the total amount being invested
(the sales charge applicable to an investment of $250,000).
The Statement of Intention is not a binding obligation
upon the investor to purchase the full amount indicated. The
minimum initial investment under a Statement of Intention is 5%
of such amount. Shares purchased with the first 5% of such
amount will be held in escrow (while remaining registered in the
name of the investor) to secure payment of the higher sales
charge applicable to the shares actually purchased if the full
amount indicated is not purchased, and such escrowed shares will
be involuntarily redeemed to pay the additional sales charge, if
necessary. Dividends on escrowed shares, whether paid in cash or
reinvested in additional Fund shares, are not subject to escrow.
When the full amount indicated has been purchased, the escrow
will be released. To the extent that an investor purchases more
than the dollar amount indicated on the Statement of Intention
and qualifies for a further reduced sales charge, the sales
charge will be adjusted for the entire amount purchased at the
end of the 13-month period. The difference in the sales charge
will be used to purchase additional shares of the Fund subject to
the rate of the sales charge applicable to the actual amount of
the aggregate purchases.
Investors wishing to enter into a Statement of Intention
in conjunction with their initial investment in Class A shares of
the Fund should complete the appropriate portion of the
Subscription Application found in the Prospectus while current
Class A shareholders desiring to do so can obtain a form of
Statement of Intention by contacting Alliance Fund Services, Inc.
at the address or telephone numbers shown on the cover of this
Statement of Additional Information.
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<PAGE>
Certain Retirement Plans. Multiple participant payroll
deduction retirement plans may also purchase shares of the Fund
or any other Alliance Mutual Fund at a reduced sales charge on a
monthly basis during the 13-month period following such a plan's
initial purchase. The sales charge applicable to such initial
purchase of shares of the Fund will be that normally applicable,
under the schedule of the sales charges set forth in this
Statement of Additional Information, to an investment 13 times
larger than such initial purchase. The sales charge applicable
to each succeeding monthly purchase will be that normally
applicable, under such schedule, to an investment equal to the
sum of (i) the total purchase previously made during the 13-month
period and (ii) the current month's purchase multiplied by the
number of months (including the current month) remaining in the
13-month period. Sales charges previously paid during such
period will not be retroactively adjusted on the basis of later
purchases.
Reinstatement Privilege. A shareholder who has caused
any or all of his or her Class A or Class B shares of the Fund to
be redeemed or repurchased may reinvest all or any portion of the
redemption or repurchase proceeds in Class A shares of the Fund
at net asset value without any sales charge, provided that
(i) such reinvestment is made within 120 calendar days after the
redemption or repurchase date, and (ii) for Class B shares, a
contingent deferred sales charge has been paid and the Principal
Underwriter has approved, at its discretion, the reinvestment of
such shares. Shares are sold to a reinvesting shareholder at the
net asset value next determined as described above. A
reinstatement pursuant to this privilege will not cancel the
redemption or repurchase transaction; therefore, any gain or loss
so realized will be recognized for federal income tax purposes,
except that no loss will be recognized to the extent that the
proceeds are reinvested in shares of the Fund within 30 calendar
days after the redemption or repurchase transaction. Investors
may exercise the reinstatement privilege by written request sent
to the Fund at the address shown on the cover of this Statement
of Additional Information.
Sales at Net Asset Value. The Fund may sell its Class A
shares at net asset value (i.e., without an initial sales charge)
and without a contingent deferred sales charge to certain
categories of investors including:
(i) investment management clients of the
Adviser or its affiliates;
(ii) officers and present or former Directors
of the Fund; present or former directors
and trustees of other investment
companies managed by the Adviser; present
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<PAGE>
or retired full-time employees of the
Adviser, the Principal Underwriter,
Alliance Fund Services, Inc. and their
affiliates; officers and directors of
ACMC, the Principal Underwriter, Alliance
Fund Services, Inc. and their affiliates;
officers, directors and present full-time
employees of selected dealers or agents;
or the spouse, sibling, direct ancestor
or direct descendant (collectively,
"relatives") of any such person; or any
trust, individual retirement account or
retirement plan account for the benefit
of any such person or relative; or the
estate of any such person or relative, if
such shares are purchased for investment
purposes (such shares may not be resold
except to the Fund);
(iii) the Adviser, the Principal Underwriter,
Alliance Fund Services, Inc. and their
affiliates; certain employee benefit
plans for employees of the Adviser, the
Principal Underwriter, Alliance Fund
Services, Inc. and their affiliates;
(iv) 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 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;
(v) persons participating in a fee-based
program, sponsored and maintained by a
registered broker-dealer or other
financial intermediary and approved by
the Principal Underwriter, pursuant to
which such persons pay an asset-based fee
to such broker-dealer or financial
intermediary, or its affiliate or agent,
for services in the nature of investment
advisory or administrative services;
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<PAGE>
(vi) persons who establish to the Principal
Underwriter's satisfaction that they are
investing, within such time period as may
be designated by the Principal
Underwriter, proceeds of redemption of
shares of such other registered
investment companies as may be designated
from time to time by the Principal
Underwriter; and
(vii) employer-sponsored qualified pension or
profit-sharing plans (including Section
401(k) plans), custodial accounts
maintained pursuant to Section 403(b)(7),
retirement plans and individual
retirement accounts (including individual
retirement accounts to which simplified
employee pension ("SEP") contributions
are made), if such plans or accounts are
established or administered under
programs sponsored by administrators or
other persons that have been approved by
the Principal Underwriter.
Class B Shares
Investors may purchase Class B shares at the public
offering price equal to the net asset value per share of the
Class B shares on the date of purchase without the imposition of
a sales charge at the time of purchase. The Class B shares are
sold without an initial sales charge so that the Fund will
receive the full amount of the investor's purchase payment.
Proceeds from the contingent deferred sales charge on
the Class B shares are paid to the Principal Underwriter and are
used by the Principal Underwriter to defray the expenses of the
Principal Underwriter related to providing distribution-related
services to the Fund in connection with the sale of the Class B
shares, such as the payment of compensation to selected dealers
and agents for selling Class B shares. The combination of the
contingent deferred sales charge and the distribution services
fee enables the Fund to sell the Class B shares without a sales
charge being deducted at the time of purchase. The higher
distribution services fee incurred by Class B shares will cause
such shares to have a higher expense ratio and to pay lower
dividends than those related to Class A shares.
Contingent Deferred Sales Charge. Class B shares that
are redeemed within four years of purchase will be subject to a
contingent deferred sales charge at the rates set forth below
charged as a percentage of the dollar amount subject thereto.
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<PAGE>
The charge will be assessed on an amount equal to the lesser of
the cost of the shares being redeemed or their net asset value at
the time of redemption. Accordingly, no sales charge will be
imposed on increases in net asset value above the initial
purchase price. In addition, no charge will be assessed on
shares derived from reinvestment of dividends or capital gains
distributions.
To illustrate, assume that an investor purchased 10,000
Class B shares at $10 per share (at a cost of $100,000) and in
the second year after purchase, the net asset value per share is
$12 and, during such time, the investor has acquired 1,000
additional Class B shares upon dividend reinvestment. If at such
time the investor makes his or her first redemption of 5,000
Class B shares (proceeds of $60,000), 1,000 Class B shares will
not be subject to the charge because of dividend reinvestment.
With respect to the remaining 4,000 Class B shares, the charge is
applied only to the original cost of $10 per share and not to the
increase in net asset value of $2 per share. Therefore, $40,000
of the $60,000 redemption proceeds will be charged at a rate of
3.0% (the applicable rate in the second year after purchase, as
set forth below).
The amount of the contingent deferred sales charge, if
any, will vary depending on the number of years from the time of
payment for the purchase of Class B shares until the time of
redemption of such shares.
Contingent Deferred Sales Charge as a
Year Since Purchase % of Dollar Amount Subject to Charge
____________________ ____________________________________
First 4.0%
Second 3.0%
Third 2.0%
Fourth 1.0%
Fifth and thereafter None
In determining the contingent deferred sales charge
applicable to a redemption of Class B shares, it will be assumed
that the redemption is, first, of any shares that were acquired
upon the reinvestment of dividends or distributions and, second,
of shares held longest during the time they are subject to the
sales charge. When shares acquired in an exchange are redeemed,
the applicable contingent deferred sales charge and conversion
schedules will be the schedules that applied at the time of the
purchase of shares of the corresponding class of the Alliance
Mutual Fund originally purchased by the shareholder.
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<PAGE>
The contingent deferred sales charge is waived on
redemptions of shares (i) following the death or disability, as
defined in the Internal Revenue Code of 1986, as amended (the
"Code"), of a shareholder, (ii) to the extent that the redemption
represents a minimum required distribution from an individual
retirement account or other retirement plan to a shareholder who
has attained the age of 70-1/2, (iii) that had been purchased by
present or former Directors of the Fund, by the relative of any
such person, by any trust, individual retirement account or
retirement plan account for the benefit of any such person or
relative, or by the estate of any such person or relative, or
(iv) pursuant to a systematic withdrawal plan (see "Shareholder
Services -- Systematic Withdrawal Plan" below).
Conversion Feature. Eight years after the end of the
calendar month in which the shareholder's purchase order was
accepted, Class B shares will automatically convert to Class A
shares and will no longer be subject to a higher distribution
services fee. Such conversion will occur on the basis of the
relative net asset values of the two classes, without the
imposition of any sales load, fee or other charge. The purpose
of the conversion feature is to reduce the distribution services
fee paid by holders of Class B shares that have been outstanding
long enough for the Principal Underwriter to have been
compensated for distribution expenses incurred in the sale of
such shares.
For purposes of conversion to Class A, Class B shares
purchased through the reinvestment of dividends and distributions
paid in respect of Class B shares in a shareholder's account will
be considered to be held in a separate sub-account. Each time
any Class B shares in the shareholder's account (other than those
in the sub-account) convert to Class A, an equal pro-rata portion
of the Class B shares in the sub-account will also convert to
Class A.
The conversion of Class B shares to Class A shares is
subject to the continuing availability of an opinion of counsel
to the effect that the conversion of Class B shares to Class A
shares does not constitute a taxable event under federal income
tax law. The conversion of Class B shares to Class A shares may
be suspended if such an opinion is no longer available at the
time such conversion is to occur. In that event, no further
conversions of Class B shares would occur, and shares might
continue to be subject to the higher distribution services fee
for an indefinite period which may extend beyond the period
ending eight years after the end of the calendar month in which
the shareholder's purchase order was accepted.
29
<PAGE>
Class C Shares
Investors may purchase Class C shares at the public
offering price equal to the net asset value per share of the
Class C shares on the date of purchase without the imposition of
a sales charge either at the time of purchase or, as long as the
shares are held for one year or more, upon redemption. Class C
shares are sold without an initial sales charge so that the Fund
will receive the full amount of the investor's purchase payment
and, as long as the shares are held for one year or more, without
a contingent deferred sales charge so that the investor will
receive as proceeds upon redemption the entire net asset value of
his or her Class C shares. The Class C distribution services fee
enables the Fund to sell Class C shares without either an initial
or contingent deferred sales charge, as long as the shares are
held for one year or more. Class C shares do not convert to any
other class of shares of the Fund and incur higher distribution
services fees and transfer agency costs than Class A shares, and
will thus have a higher expense ratio and pay correspondingly
lower dividends than Class A shares.
Class C shares that are redeemed within one year of
purchase will be subject to a contingent deferred sales charge of
1%, charged as a percentage of the dollar amount subject thereto.
The charge will be assessed on an amount equal to the lesser of
the cost of the shares being redeemed or their net asset value at
the time of redemption. Accordingly, no sales charge will be
imposed on increases in net asset value above the initial
purchase price. In addition, no charge will be assessed on
shares derived from reinvestment of dividends or capital gains
distributions. The contingent deferred sales charge on Class C
shares will be waived on certain redemptions, as described above
under "--Class B Shares." In determining the contingent deferred
sales charge applicable to a redemption of Class C shares, it
will be assumed that the redemption is, first, of any shares that
are not subject to a contingent deferred sales charge (for
example, because the shares have been held beyond the period
during which the charge applies or were acquired upon the
reinvestment of dividends or distributions) and, second, of
shares held longest during the time they are subject to the sales
charge.
Proceeds from the contingent deferred sales charge are
paid to the Principal Underwriter and are used by the Principal
Underwriter to defray the expenses of the Principal Underwriter
related to providing distribution-related services to the Fund in
connection with the sale of the Class C shares, such as the
payment of compensation to selected dealers and agents for
selling Class C shares. The combination of the contingent
deferred sales charge and the distribution services fee enables
the Fund to sell the Class C shares without a sales charge being
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<PAGE>
deducted at the time of purchase. The higher distribution
services fee incurred by Class C shares will cause such shares to
have a higher expense ratio and to pay lower dividends than those
related to Class A shares.
_______________________________________________________________
REDEMPTION AND REPURCHASE OF SHARES
_______________________________________________________________
The following information supplements that set forth in
the Fund's Prospectus under the heading "Purchase and Sale of
Shares -- How to Sell Shares."
Redemption
Subject only to the limitations described below, the
Fund's Articles of Incorporation require that the Fund redeem the
shares tendered to it, as described below, at a redemption price
equal to their net asset value as next computed following the
receipt of shares tendered for redemption in proper form. Except
for any contingent deferred sales charge which may be applicable
to Class A, Class B or Class C shares, there is no redemption
charge. Payment of the redemption price will be made within
seven days after the Fund's receipt of such tender for
redemption. If a shareholder is in doubt about what documents
are required by his or her fee-based program or employee benefit
plan, the shareholder should contact his or her financial
representative.
The right of redemption may not be suspended or the date
of payment upon redemption postponed for more than seven days
after shares are tendered for redemption, except for any period
during which the Exchange is closed (other than customary weekend
and holiday closings) or during which the Commission determines
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. Redemption proceeds on Class A, Class B and Class C
shares will reflect the deduction of the contingent deferred
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<PAGE>
sales charge, if any. Payment received by a shareholder upon
redemption or repurchase of his shares, assuming the shares
constitute capital assets in his hands, will result in long-term
or short-term capital gains (or loss) depending upon the
shareholder's holding period and basis in respect of the shares
redeemed.
To redeem shares of the Fund for which no stock
certificates have been issued, the registered owner or owners
should forward a letter to the Fund containing a request for
redemption. The signature or signatures on the letter must be
guaranteed by an "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 Fund with the request that the
shares represented thereby, or a specified portion thereof, be
redeemed. The stock assignment form on the reverse side of each
stock certificate surrendered to the Fund for redemption must be
signed by the registered owner or owners exactly as the
registered name appears on the face of the certificate or,
alternatively, a stock power signed in the same manner may be
attached to the stock certificate or certificates or, where
tender is made by mail, separately mailed to the Fund. The
signature or signatures on the assignment form must be guaranteed
in the manner described above.
Telephone Redemption By Electronic Funds Transfer. Each
Fund shareholder is entitled to request redemption by electronic
funds transfer of shares for which no stock certificates have
been issued by telephone at (800) 221-5672 by a shareholder who
has completed the appropriate portion of the Subscription
Application or, in the case of an existing shareholder, an
"Autosell" application obtained from Alliance Fund Services, Inc.
A telephone redemption request by electronic funds transfer may
not exceed $100,000 (except for certain omnibus accounts), and
must be made by 4:00 p.m. Eastern time on a Fund business day as
defined above. Proceeds of telephone redemptions will be sent by
electronic funds transfer to a shareholder's designated bank
account at a bank selected by the shareholder that is a member of
the NACHA.
Telephone Redemption By Check. Each Fund shareholder is
eligible to request redemption by check of Fund shares for which
no stock certificates have been issued by telephone at (800)
221-5672 before 4:00 p.m. Eastern time on a Fund business day in
an amount not exceeding $50,000. Proceeds of such redemptions
are remitted by check to the shareholder's address of record. A
32
<PAGE>
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
Fund reserves the right to suspend or terminate its telephone
redemption service at any time without notice. Telephone
redemption is not available with respect to shares (i) for which
certificates have been issued, (ii) held in nominee or "street
name" accounts, (iii) held by a shareholder who has changed his
or her address of record within the preceding 30 calendar days or
(iv) held in any retirement plan account. Neither the Fund nor
the Adviser, the Principal Underwriter or Alliance Fund Services,
Inc. will be responsible for the authenticity of telephone
requests for redemptions that the Fund reasonably believes to be
genuine. The Fund will employ reasonable procedures in order to
verify that telephone requests for redemptions are genuine,
including, among others, recording such telephone instructions
and causing written confirmations of the resulting transactions
to be sent to shareholders. If the Fund did not employ such
procedures, it could be liable for losses arising from
unauthorized or fraudulent telephone instructions. Selected
dealers or agents may charge a commission for handling telephone
requests for redemptions.
Repurchase
The Fund may repurchase shares through the Principal
Underwriter, selected financial intermediaries or selected
dealers or agents. The repurchase price will be the net asset
value next determined after the Principal Underwriter receives
the request (less the contingent deferred sales charge, if any,
with respect to the Class A, Class B and Class C shares), except
that requests placed through selected dealers or agents before
the close of regular trading on the Exchange on any day will be
executed at the net asset value determined as of such close of
regular trading on that day if received by the Principal
Underwriter prior to its close of business on that day (normally
5:00 p.m. Eastern time). The financial intermediary or selected
dealer or agent is responsible for transmitting the request to
the Principal Underwriter by 5:00 p.m. If the financial
intermediary or selected dealer or agent fails to do so, the
33
<PAGE>
shareholder's right to receive that day's closing price must be
settled between the shareholder and the dealer or agent. A
shareholder may offer shares of the Fund to the Principal
Underwriter either directly or through a selected dealer or
agent. Neither the Fund nor the Principal Underwriter charges a
fee or commission in connection with the repurchase of shares
(except for the contingent deferred sales charge, if any, with
respect to Class A, Class B and Class C shares). Normally, if
shares of the Fund are offered through a financial intermediary
or selected dealer or agent, the repurchase is settled by the
shareholder as an ordinary transaction with or through the
selected dealer or agent, who may charge the shareholder for this
service. The repurchase of shares of the Fund as described above
is a voluntary service of the Fund and the Fund may suspend or
terminate this practice at any time.
General
The Fund reserves the right to close out an account that
through redemption has remained below $200 for 90 days.
Shareholders will receive 60 days' written notice to increase the
account value before the account is closed. No contingent
deferred sales charge will be deducted from the proceeds of this
redemption. In the case of a redemption or repurchase of shares
of the Fund recently purchased by check, redemption proceeds will
not be made available until the Fund is reasonably assured that
the check has cleared, normally up to 15 calendar days following
the purchase date.
_______________________________________________________________
SHAREHOLDER SERVICES
_______________________________________________________________
The following information supplements that set forth in
the Fund's Prospectus under the heading "Purchase and Sale of
Shares--Shareholder Services." The shareholder services set
forth below are applicable to Class A, Class B and Class C shares
unless otherwise indicated.
Automatic Investment Program
Investors may purchase shares of the Fund through an
automatic investment program utilizing electronic funds transfer
drawn on the investor's own bank account. Under such a program,
pre-authorized monthly drafts for a fixed amount (at least
$50,000 for the initial purchase) are used to purchase shares
through the selected dealer or selected agent designated by the
investor at the public offering price next determined after the
Principal Underwriter receives the proceeds from the investor's
bank. In electronic form, drafts can be made on or about a date
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<PAGE>
each month selected by the shareholder. Investors wishing to
establish an automatic investment program in connection with
their initial investment should complete the appropriate portion
of the Subscription Application found in the Prospectus. Current
shareholders should contact Alliance Fund Services, Inc. at the
address or telephone numbers shown on the cover of this Statement
of Additional Information to establish an automatic investment
program.
Exchange Privilege
You may exchange your investment in the Fund for shares
of the same class of other Alliance Mutual Funds (including AFD
Exchange Reserves, a money market fund managed by the Adviser).
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 Fund business day in order to receive
that day's net asset value.
Shares will continue to age without regard to exchanges
for purpose of determining the CDSC, if any, upon redemption and,
in the case of Class B shares, for the purpose of conversion to
Class A shares. After an exchange, your Class B shares will
automatically convert to Class A shares in accordance with the
conversion schedule applicable to the Class B shares of the
Alliance Mutual Fund you originally purchased for cash ("original
shares"). When redemption occurs, the CDSC applicable to the
original shares is applied.
Please read carefully the prospectus of the mutual fund
into which you are exchanging before submitting the request.
Call 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 for the Alliance Mutual Fund whose shares are being
acquired. An exchange is effected through the redemption of the
shares tendered for exchange and the purchase of shares being
acquired at their respective net asset values as next determined
following receipt by the Alliance Mutual Fund whose shares are
being exchanged of (i) proper instructions and all necessary
supporting documents as described in such fund's Prospectus, or
(ii) a telephone request for such exchange in accordance with the
procedures set forth in the following paragraph. Exchanges
involving the redemption of shares recently purchased by check
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will be permitted only after the Alliance Mutual Fund whose
shares have been tendered for exchange is reasonably assured that
the check has cleared, normally up to 15 calendar days following
the purchase date.
Each Fund shareholder, and the shareholder's selected
dealer, agent or financial representative, as applicable, are
authorized to make telephone requests for exchanges unless
Alliance Fund Services, Inc., receives written instruction to the
contrary from the shareholder, or the shareholder declines the
privilege by checking the appropriate box on the Subscription
Application found in the Prospectus. Such telephone requests
cannot be accepted with respect to shares then represented by
stock certificates. Shares acquired pursuant to a telephone
request for exchange will be held under the same account
registration as the shares redeemed through such exchange.
Eligible shareholders desiring to make an exchange
should telephone Alliance Fund Services, Inc. with their account
number and other details of the exchange, at (800) 221-5672
before 4:00 p.m., Eastern time, on a Fund business day as defined
above. Telephone requests for exchange received before 4:00 p.m.
Eastern time on a Fund business day will be processed as of the
close of business on that day. During periods of drastic
economic or market developments, such as the market break of
October 1987, it is possible that shareholders would have
difficulty in reaching Alliance Fund Services, Inc. by telephone
(although no such difficulty was apparent at any time in
connection with the 1987 market break). If a shareholder were to
experience such difficulty, the shareholder should issue written
instructions to Alliance Fund Services, Inc. at the address shown
on the cover of this Statement of Additional Information.
A shareholder may elect to initiate a monthly "Auto
Exchange" whereby a specified dollar amount's worth of his or her
Fund shares (minimum $25) is automatically exchanged for shares
of another Alliance Mutual Fund. Auto Exchange transactions
normally occur on the 12th day of each month, or the Fund
business day prior thereto.
None of the Alliance Mutual Funds, the Adviser, the
Principal Underwriter or Alliance Fund Services, Inc. will be
responsible for the authenticity of telephone requests for
exchanges that the Fund reasonably believes to be genuine. The
Fund will employ reasonable procedures in order to verify that
telephone requests for exchanges are genuine, including, among
others, recording such telephone instructions and causing written
confirmations of the resulting transactions to be sent to
shareholders. If the Fund did not employ such procedures, it
could be liable for losses arising from unauthorized or
fraudulent telephone instructions. Selected dealers, agents or
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financial representatives, as applicable, may charge a commission
for handling telephone requests for exchanges.
The exchange privilege is available only in states where
shares of the Alliance Mutual Fund being acquired may be legally
sold. Each Alliance Mutual Fund reserves the right, at any time
on 60 days' notice to its shareholders, to reject any order to
acquire its shares through exchange or otherwise to modify,
restrict or terminate the exchange privilege.
Retirement Plans
The Fund may be a suitable investment vehicle for part
or all of the assets held in various types of retirement plans,
such as those listed below. The Fund has available forms of such
plans pursuant to which investments can be made in the Fund and
other Alliance Mutual Funds. Persons desiring information
concerning these plans should contact Alliance Fund Services,
Inc. at the "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
Individual Retirement Account ("IRA"). Individuals who
receive compensation, including earnings from self-employment,
are entitled to establish and make contributions to an IRA.
Taxation of the income and gains paid to an IRA by the Fund is
deferred until distribution from the IRA. An individual's
eligible contribution to an IRA will be deductible if neither the
individual nor his or her spouse is an active participant in an
employer-sponsored retirement plan. If the individual or his or
her spouse is an active participant in an employer-sponsored
retirement plan, the individual's contributions to an IRA may be
deductible, in whole or in part, depending on the amount of the
adjusted gross income of the individual and his or her spouse.
Employer-Sponsored Qualified Retirement Plans. Sole
proprietors, partnerships and corporations may sponsor qualified
money purchase pension and profit-sharing plans, including
Section 401(k) plans ("qualified plans"), under which annual tax-
deductible contributions are made within prescribed limits based
on compensation paid to participating individuals. The minimum
initial investment requirement may be waived with respect to
certain of these qualified plans.
If the aggregate net asset value of shares of the
Alliance Mutual Funds held by a qualified plan reaches $1 million
on or before December 15 in any year, all Class B or Class C
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shares of the Fund held by the plan can be exchanged at the
plan's request without any sales charge, for Class A shares of
the Fund.
Simplified Employee Pension Plan ("SEP"). Sole
proprietors, partnerships and corporations may sponsor a SEP
under which they make annual tax-deductible contributions to an
IRA established by each eligible employee within prescribed
limits based on employee compensation.
403(b)(7) Retirement Plan. Certain tax-exempt
organizations and public educational institutions may sponsor
retirement plans under which an employee may agree that monies
deducted from his or her compensation (minimum $25 per pay
period) may be contributed by the employer to a custodial account
established for the employee under the plan.
The Alliance Plans Division of Frontier Trust Company, a
subsidiary of Equitable, which serves as custodian or trustee
under the retirement plan prototype forms available from the
Fund, charges certain nominal fees for establishing an account
and for annual maintenance. A portion of these fees is remitted
to Alliance Fund Services, Inc. as compensation for its services
to the retirement plan accounts maintained with the Fund.
Distributions from retirement plans are subject to
certain Code requirements in addition to normal redemption
procedures. For additional information please contact Alliance
Fund Services, Inc.
Dividend Direction Plan
A shareholder who already maintains, in addition to his
or her Class A, Class B or Class C Fund account, a Class A,
Class B or Class C account with one or more other Alliance Mutual
Funds may direct that income dividends and/or capital gains paid
on the shareholder's Class A, Class B or Class C Fund shares be
automatically reinvested, in any amount, without the payment of
any sales or service charges, in shares of the same class of such
other Alliance Mutual Fund(s). Further information can be
obtained by contacting Alliance Fund Services, Inc. at the
address or the "For Literature" telephone number shown on the
cover of this Statement of Additional Information. Investors
wishing to establish a dividend direction plan in connection with
their initial investment should complete the appropriate section
of the Subscription Application found in the Prospectus. Current
shareholders should contact Alliance Fund Services, Inc. to
establish a dividend direction plan.
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Systematic Withdrawal Plan
General. Any shareholder who owns or purchases shares
of the Fund having a current net asset value of at least $[ ]
(for quarterly or less frequent payments), $[ ] (for
bi-monthly payments) or $[ ] (for monthly payments) may
establish a systematic withdrawal plan under which the
shareholder will periodically receive a payment in a stated
amount of not less than $[ ] on a selected date. Systematic
withdrawal plan participants must elect to have their dividends
and distributions from the Fund automatically reinvested in
additional shares of the Fund.
Shares of the Fund owned by a participant in the Fund's
systematic withdrawal plan will be redeemed as necessary to meet
withdrawal payments and such payments will be subject to any
taxes applicable to redemptions and, except as discussed below,
any applicable contingent deferred sales charge. Shares acquired
with reinvested dividends and distributions will be liquidated
first to provide such withdrawal payments and thereafter other
shares will be liquidated to the extent necessary, and depending
upon the amount withdrawn, the investor's principal may be
depleted. A systematic withdrawal plan may be terminated at any
time by the shareholder or the Fund.
Withdrawal payments will not automatically end when a
shareholder's account reaches a certain minimum level.
Therefore, redemptions of shares under the plan may reduce or
even liquidate a shareholder's account and may subject the
shareholder to the Fund's involuntary redemption provisions. See
"Redemption and Repurchase of Shares--General." Purchases of
additional shares concurrently with withdrawals are undesirable
because of sales charges when purchases are made. While an
occasional lump-sum investment may be made by a holder of Class A
shares who is maintaining a systematic withdrawal plan, such
investment should normally be an amount equivalent to three times
the annual withdrawal or $[ ], whichever is less.
Payments under a systematic withdrawal plan may be made
by check or electronically via the Automated Clearing House
("ACH") network. Investors wishing to establish a systematic
withdrawal plan in conjunction with their initial investment in
shares of the Fund should complete the appropriate portion of the
Subscription Application found in the Prospectus, while current
Fund shareholders desiring to do so can obtain an application
form by contacting Alliance Fund Services, Inc. at the address or
the "For Literature" telephone number shown on the cover of this
Statement of Additional Information.
CDSC Waiver for Class B Shares and Class C Shares.
Under a systematic withdrawal plan, up to 1% monthly, 2%
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bi-monthly or 3% quarterly of the value at the time of redemption
of the Class B or Class C shares in a shareholder's account may
be redeemed free of any contingent deferred sales charge.
With respect to Class B shares, the waiver applies only
with respect to shares acquired after July 1, 1995. Class B
shares that are not subject to a contingent deferred sales charge
(such as shares acquired with reinvested dividends or
distributions) will be redeemed first and will count toward the
foregoing limitations. Remaining Class B shares that are held
the longest will be redeemed next. Redemptions of Class B shares
in excess of the foregoing limitations will be subject to any
otherwise applicable contingent deferred sales charge.
With respect to Class C shares, shares held the longest
will be redeemed first and will count toward the foregoing
limitations. Redemptions in excess of those limitations will be
subject to any otherwise applicable contingent deferred sales
charge.
Statements and Reports
Each shareholder of the Fund receives semi-annual and
annual reports which include a portfolio of investments,
financial statements and, in the case of the annual report, the
report of the Fund's independent accountants, Price Waterhouse
LLP, as well as a confirmation of each purchase and redemption.
By contacting his or her broker or Alliance Fund Services, Inc.,
a shareholder can arrange for copies of his or her account
statements to be sent to another person.
_______________________________________________________________
NET ASSET VALUE
_______________________________________________________________
The per share net asset value is computed in accordance
with the Fund's Articles of Incorporation and By-Laws at the next
close of regular trading on the Exchange (ordinarily 4:00 p.m.
Eastern time) following receipt of a purchase or redemption order
by the Fund on each Fund business day on which such an order is
received and on such other days as the Board of Directors deems
appropriate or necessary in order to comply with Rule 22c-1 under
the 1940 Act. The Fund's per share net asset value is calculated
by dividing the value of the Fund's total assets, less its
liabilities, by the total number of its shares then outstanding.
A Fund business day is any weekday on which the Exchange is open
for trading.
In accordance with applicable rules under the 1940 Act,
portfolio securities are valued at current market value or at
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fair value as determined in good faith by the Board of Directors.
The Board of Directors has delegated to the Adviser certain of
the Board's duties with respect to the following procedures.
Readily marketable securities listed on the Exchange or on a
foreign securities exchange (other than foreign securities
exchanges whose operations are similar to those of the United
States over-the-counter market) are valued, except as indicted
below, at the last sale price reflected on the consolidated tape
at the close of the Exchange or, in the case of a foreign
securities exchange, at the last quoted sale price, in each case
on the business day as of which such value is being determined.
If there has been no sale on such day, the securities are valued
at the mean of the closing bid and asked prices on such day. If
no bid or asked prices are quoted on such day, then the security
is valued in good faith at fair value by, or in accordance with
procedures established by, the Board of Directors. Readily
marketable securities not listed on the Exchange or on a foreign
securities exchange but listed on other United States national
securities exchanges or traded on The Nasdaq Stock Market, Inc.
are valued in like manner. Portfolio securities traded on the
Exchange and on one or more foreign or other national securities
exchanges, and portfolio securities not traded on the Exchange
but traded on one or more foreign or other national securities
exchanges are valued in accordance with these procedures by
reference to the principal exchange on which the securities are
traded.
Readily marketable securities traded in the over-the-
counter market, securities listed on a foreign securities
exchange whose operations are similar to those of the United
States over-the-counter market, and securities listed on a U.S.
national securities exchange whose primary market is believed to
be over-the-counter (but excluding securities traded on The
Nasdaq Stock Market, Inc.), are valued at the mean of the current
bid and asked prices as reported by Nasdaq or, in the case of
securities not quoted by Nasdaq, the National Quotation Bureau or
another comparable sources.
Listed put or call options purchased by the Fund are
valued at the last sale price. If there has been no sale on that
day, such securities will be valued at the closing bid prices on
that day.
Open futures contracts and options thereon will be
valued using the closing settlement price or, in the absence of
such a price, the most recent quoted bid price, If there are no
quotations available for the day of valuations, the last
available closing settlement price will be used.
U.S. Government securities and other debt instruments
having 60 days or less remaining until maturity are valued at
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amortized cost if their original maturity was 60 days or less, or
by amortizing their fair value as of the 61st day prior to
maturity if their original term to maturity exceeded 60 days
(unless in either case the Board of Directors determines that
this method does not represent fair value).
Fixed-income securities may be valued on the basis of
prices provided by a pricing service when such prices are
believed to reflect the fair market value of such securities.
The prices provided by pricing service take into account many
factors, including institutional size trading in similar groups
of securities and any developments related to specific
securities.
All other assets of the Fund are valued in good faith at
fair value by, or in accordance with procedures established by,
the Board of Directors.
Trading in securities on Far Eastern and European
securities exchanges and over-the-counter markets is normally
completed well before the close of business of each Fund business
day. In addition, trading in foreign markets may not take place
on all Fund business days. Furthermore, trading may take place
in various foreign markets on days that are not Fund business
days. The Fund's calculation of the net asset value per share,
therefore, does not always take place contemporaneously with the
most recent determination of the prices of portfolio securities
in these markets. Events affecting the values of these portfolio
securities that occur between the time their prices are
determined in accordance with the above procedures and the close
of the Exchange will not be reflected in the Fund's calculation
of net asset value unless it is believed that these prices do not
reflect current market value, in which case the securities will
be valued in good faith by, or in accordance with procedures
established by, the Board of Directors at fair value.
The Board of Directors may suspend the determination of
the Fund's, net asset value (and the offering and sale of
shares), subject to the rules of the Commission and other
governmental rules and regulations, at a time when: (1) the
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
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of the current bid and asked prices of such currency against the
U.S. dollar last quoted by a major bank that is a regular
participant in the relevant foreign exchange market or on the
basis of a pricing service that takes into account the quotes
provided by a number of such major banks. If such quotations are
not available as of the close of the Exchange, the rate of
exchange will be determined in good faith by, or under the
direction of, the Board of Directors.
The assets attributable to the Class A shares, Class B
shares and Class C shares will be invested together in a single
portfolio. The net asset value of each class will be determined
separately by subtracting the liabilities allocated to that class
from the assets belonging to that class in conformance with the
provisions of a plan adopted by the Fund in accordance with Rule
18f-3 under the 1940 Act.
_______________________________________________________________
DIVIDENDS, DISTRIBUTIONS AND TAXES
_______________________________________________________________
The following summary only addresses principal United
States federal income tax considerations pertinent to the Fund
and to shareholders of the Fund who are United States citizens or
residents or United States corporations. The effects of federal
income tax law on shareholders who are nonresident alien
individuals, foreign corporations or other foreign persons may be
substantially different. The summary is based upon the advice of
counsel for the Fund and upon current law and interpretations
thereof. No confirmation has been obtained from the relevant tax
authorities. There is no assurance that the applicable laws and
interpretations will not change.
In view of the individual nature of tax consequences,
each shareholder is advised to consult the shareholder's own tax
adviser with respect to the specific tax consequences of being a
shareholder of the Fund, including the effect and applicability
of federal, state, local, foreign and other tax laws and the
effects of changes therein.
United States Federal Income Taxation
of Dividends and Distributions
General. The Fund intends for each taxable year to
qualify as a "regulated investment company" under sections 851
through 855 of the Code. To so qualify, the Fund must, among
other things, (i) derive at least 90% of its gross income in each
taxable year from dividends, interest, payments with respect to
securities loans, gains from the sale or other disposition of
stock, securities or foreign currency, or certain other income
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(including, but not limited to, gains from options, futures and
forward contracts) derived with respect to its business of
investing in stock, securities or currency; and (ii) diversify
its holdings so that, at the end of each quarter of its taxable
year, the following two conditions are met: (a) at least 50% of
the value of the Fund's assets is represented by cash, U.S.
Government securities, securities of other regulated investment
companies and other securities with respect to which the Fund's
investment is limited, in respect of any one issuer, to an amount
not greater than 5% of the Fund's assets and 10% of the
outstanding voting securities of such issuer, and (b) not more
than 25% of the value of the Fund's assets is invested in
securities of any one issuer (other than U.S. Government
securities or securities of other regulated investment companies)
or of two or more issuers which the Fund controls and which are
determined to be engaged in the same or similar trades or
businesses or related trades or businesses.
If the Fund qualifies as a regulated investment company
for any taxable year and makes timely distributions to its
shareholders of 90% or more of its investment company taxable
income for that year (calculated without regard to its net
capital gain, i.e., the excess of its net long-term capital gain
over its net short-term capital loss), it will not be subject to
federal income tax on the portion of its taxable income for the
year (including any net capital gain) that it distributes to
shareholders.
The Fund will also avoid the 4% federal excise tax that
would otherwise apply to certain undistributed income for a given
calendar year if it makes timely distributions to the
shareholders equal to at least the sum of (i) 98% of its ordinary
income for that year; (ii) 98% of its capital gain net income and
foreign currency gains for the twelve-month period ending on
October 31 of that year; and (iii) any ordinary income or capital
gain net income from the preceding calendar year that was not
distributed during that year. For this purpose, income or gain
retained by the Fund that is subject to corporate income tax will
be considered to have been distributed by the Fund by year-end.
For federal income and excise tax purposes, dividends declared
and payable to shareholders of record as of a date in October,
November or December of a given year but actually paid during the
immediately following January will be treated as if paid by the
Fund on December 31 of that calendar year, and will be taxable to
these shareholders for the year declared, and not for the year in
which the shareholders actually receive the dividend.
The Fund intends to make timely distributions of the
Fund's taxable income (including any net capital gain) so that
the Fund will not be subject to federal income or excise taxes.
However, exchange control or other regulations on the
44
<PAGE>
repatriation of investment income, capital or the proceeds of
securities sales, if any exist or are enacted in the future, may
limit the Fund's ability to make distributions sufficient in
amount to avoid being subject to one or both of such federal
taxes.
Dividends and Distributions. Dividends of the Fund's
net ordinary income and distributions of any net realized short-
term capital gain will be taxable to shareholders as ordinary
income. In the case of corporate shareholders, such dividends
may be eligible for the dividends-received deduction, except that
the amount eligible for the deduction is limited to the amount of
qualifying dividends received by the Fund. A corporation's
dividends-received deduction will be disallowed unless the
corporation holds shares in the Fund at least 46 days during the
90-day period beginning 45 days before the date on which the
corporation becomes entitled to receive the dividend. In
determining the holding period of such shares for this purpose,
any period during which the corporation's risk of loss is offset
by means of options, short sales or similar transactions is not
counted. Furthermore, the dividends-received deduction will be
disallowed to the extent a corporation's investment in shares of
the Fund is financed with indebtedness.
Pursuant to the Taxpayer Relief Act of 1997, two
different tax rates apply to net capital gains--that is, the
excess of net gains from capital assets held for more than one
year over net losses from capital assets held for not more than
one year. One rate (generally 28%) applies to net gains on
capital assets held for more than one year but not more than 18
months ("mid-term gains"), and a second rate (generally 20%)
applies to the balance of such net capital gains ("adjusted net
capital gains"). Distributions of mid-term gains and adjusted
net capital gains will be taxable to shareholders as such,
regardless of how long a shareholder has held shares in the Fund.
Distributions of net capital gains are not eligible for the
dividends-received deduction referred to above.
Any dividend or distribution received by a shareholder
on shares of the Fund will have the effect of reducing the net
asset value of such shares by the amount of such dividend or
distribution. Furthermore, a dividend or distribution made
shortly after the purchase of such shares by a shareholder,
although in effect a return of capital to that particular
shareholder, would be taxable to him as described above.
Dividends are taxable in the manner discussed regardless of
whether they are paid to the shareholder in cash or are
reinvested in additional shares of the Fund.
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After the end of the taxable year, the Fund will notify
shareholders of the federal income tax status of any
distributions made by the Fund to shareholders during such year.
It is the present policy of the Fund to distribute to
shareholders all net investment income and to distribute realized
capital gains, if any, annually. There is no fixed dividend rate
and there can be no assurance that the Fund will pay any
dividends. The amount of any dividend or distribution paid on
shares of the Fund must necessarily depend upon the realization
of income and capital gains from the Fund's investments.
Sales and Redemptions. Any gain or loss arising from a
sale or redemption of Fund shares generally will be capital gain
or loss except in the case of dealers or certain financial
institutions. Such gain or loss will be long-term capital gain
or loss if such shareholder has held such shares for more than
one year at the time of the sale or redemption; and otherwise
short-term capital gain or loss. In the case of an individual
shareholder, the applicable tax rate imposed on long-term capital
gain differs depending on whether the shares were held at the
time of the sale or redemption for more than eighteen months, or
for more than one year but not more than eighteen months. 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
gains, any loss recognized by the shareholder on the sale of
those shares during the six-month period will be treated as a
long-term capital loss to the extent of the distribution. In
determining the holding period of such shares for this purpose,
any period during which a shareholder's risk of loss is offset by
means of options, short sales or similar transactions is not
counted.
Any loss realized by a shareholder on a sale or exchange
of shares of the Fund will be disallowed to the extent the shares
disposed of are replaced within a period of 61 days beginning 30
days before and ending 30 days after the shares are sold or
exchanged. For this purpose, acquisitions pursuant to the
Dividend Reinvestment Plan would constitute a replacement if made
within the period. If disallowed, the loss will be reflected in
an upward adjustment to the basis of the shares acquired.
Backup Withholding. The Fund may be required to
withhold federal income tax at the rate of 31% of all taxable
distributions payable to shareholders who fail to provide the
Fund with their correct taxpayer identification numbers or to
make required certifications, or who have been notified by the
Internal Revenue Service that they are subject to backup
withholding. Corporate shareholders and certain other
shareholders specified in the Code are exempt from such backup
withholding. Backup withholding is not an additional tax; any
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<PAGE>
amounts so withheld may be credited against a shareholder's
federal income tax liability or refunded.
United States Federal Income Taxation of the Fund
The following discussion relates to certain significant
United States federal income tax consequences to the Fund with
respect to the determination of its "investment company taxable
income" each year. This discussion assumes that the Fund will be
taxed as a regulated investment company for each of its taxable
years.
Currency Fluctuations-"Section 988" Gains or Losses.
Under the Code, gains or losses attributable to fluctuations in
exchange rates which occur between the time the Fund accrues
interest or other receivables or accrues expenses or other
liabilities denominated in a foreign currency and the time the
Fund actually collects such receivables or pays such liabilities
are treated as ordinary income or ordinary loss. Similarly,
gains or losses from the disposition of foreign currencies, from
the disposition of debt securities denominated in a foreign
currency, or from the disposition of a forward contract
denominated in a foreign currency, which are attributable to
fluctuations in the value of the foreign currency between the
date of acquisition of the asset and the date of disposition also
are treated as ordinary gain or loss. These gains or losses,
referred to under the Code as "section 988" gains or losses,
increase or decrease the amount of the Fund's investment company
taxable income available to be distributed to its shareholders as
ordinary income, rather than increasing or decreasing the amount
of the Fund's net capital gain. Because section 988 losses
reduce the amount of ordinary dividends the Fund will be allowed
to distribute for a taxable year, such section 988 losses may
result in all or a portion of prior dividend distributions for
such year being recharacterized as a non-taxable return of
capital to shareholders, rather than as an ordinary dividend,
reducing each shareholder's basis in his Fund shares. If such
distributions exceed such shareholder's basis, such excess will
be treated as a gain from the sale of shares.
Options, Futures and Forward Contracts. Certain listed
options, regulated futures contracts, and forward foreign
currency contracts are considered "section 1256 contracts" for
federal income tax purposes. Section 1256 contracts held by the
Fund at the end of each taxable year will be "marked to market"
and treated for federal income tax purposes as though sold for
fair market value on the last business day of such taxable year.
Gain or loss realized by the Fund on section 1256 contracts other
than forward foreign currency contracts will be considered 60%
long-term and 40% short-term capital gain or loss. Gain or loss
realized by the Fund on forward foreign currency contracts
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<PAGE>
generally will be treated as section 988 gain or loss and will
therefore be characterized as ordinary income or loss and will
increase or decrease the amount of the Fund's net investment
income available to be distributed to shareholders as ordinary
income, as described above. The Fund can elect to exempt its
section 1256 contracts which are part of a "mixed straddle" (as
described below) from the application of section 1256.
The Treasury Department has the authority to issue
regulations that would permit or require the Fund either to
integrate a foreign currency hedging transaction with the
investment that is hedged and treat the two as a single
transaction, or otherwise to treat the hedging transaction in a
manner that is consistent with the hedged investment. The
regulations issued under this authority generally should not
apply to the type of hedging transactions in which the Fund
intends to engage.
With respect to equity options or options traded over-
the-counter or on certain foreign exchanges, gain or loss
realized by the Fund upon the lapse or sale of such options held
by the Fund will be either long-term or short-term capital gain
or loss depending upon the Fund's holding period with respect to
such option. However, gain or loss realized upon the lapse or
closing out of such options that are written by the Fund will be
treated as short-term capital gain or loss. In general, if the
Fund exercises an option, or an option that the Fund has written
is exercised, gain or loss on the option will not be separately
recognized but the premium received or paid will be included in
the calculation of gain or loss upon disposition of the property
underlying the option.
Gain or loss realized by the Fund on the lapse or sale
of put and call options on foreign currencies which are traded
over-the-counter or on certain foreign exchanges will be treated
as section 988 gain or loss and will therefore be characterized
as ordinary income or loss and will increase or decrease the
amount of the Fund's net investment income available to be
distributed to shareholders as ordinary income, as described
above. The amount of such gain or loss shall be determined by
subtracting the amount paid, if any, for or with respect to the
option (including any amount paid by the Fund upon termination of
an option written by the Fund) from the amount received, if any,
for or with respect to the option (including any amount received
by the Fund upon termination of an option held by the Fund). In
general, if the Fund exercises such an option on a foreign
currency, or such an option that the Fund has written is
exercised, gain or loss on the option will be recognized in the
same manner as if the Fund had sold the option (or paid another
person to assume the Fund's obligation to make delivery under the
option) on the date on which the option is exercised, for the
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fair market value of the option. The foregoing rules will also
apply to other put and call options which have as their
underlying property foreign currency and which are traded over-
the-counter or on certain foreign exchanges to the extent gain or
loss with respect to such options is attributable to fluctuations
in foreign currency exchange rates.
Tax Straddles. Any option, futures contract, forward
foreign currency contract, currency swap, or other position
entered into or held by the Fund in conjunction with any other
position held by the Fund may constitute a "straddle" for federal
income tax purposes. A straddle of which at least one, but not
all, the positions are section 1256 contracts may constitute a
"mixed straddle". In general, straddles are subject to certain
rules that may affect the character and timing of the Fund's
gains and losses with respect to straddle positions by requiring,
among other things, that (i) loss realized on disposition of one
position of a straddle not be recognized to the extent that the
Fund has unrealized gains with respect to the other position in
such straddle; (ii) the Fund's holding period in straddle
positions be suspended while the straddle exists (possibly
resulting in gain being treated as short-term capital gain rather
than long-term capital gain); (iii) losses recognized with
respect to certain straddle positions which are part of a mixed
straddle and which are non-section 1256 positions be treated as
60% long-term and 40% short-term capital loss; (iv) losses
recognized with respect to certain straddle positions which would
otherwise constitute short-term capital losses be treated as
long-term capital losses; and (v) the deduction of interest and
carrying charges attributable to certain straddle positions may
be deferred. The Treasury Department is authorized to issue
regulations providing for the proper treatment of a mixed
straddle where at least one position is ordinary and at least one
position is capital. No such regulations have yet been issued.
Various elections are available to the Fund which may mitigate
the effects of the straddle rules, particularly with respect to
mixed straddles. In general, the straddle rules described above
do not apply to any straddles held by the Fund all of the
offsetting positions of which consist of section 1256 contracts.
Other Taxation
Income received by the Fund may also be subject to
foreign income taxes, including withholding taxes. It is not
possible to determine the effective rate of foreign tax in
advance since the amount of the Fund's assets to be invested
within various countries is not known. The Fund may also be
subject to state and local taxes. Also, distributions by the
Fund may be subject to additional state, local and foreign taxes
depending on each shareholder's particular circumstances.
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_______________________________________________________________
BROKERAGE AND PORTFOLIO TRANSACTIONS
_______________________________________________________________
The management of the Fund has the responsibility for
allocating its brokerage orders and may direct orders to any
broker. It is the Fund's general policy to seek favorable net
prices and prompt reliable execution in connection with the
purchase or sale of all portfolio securities. In the purchase
and sale of over-the-counter securities, it is the Fund's policy
to use the primary market makers except when a better price can
be obtained by using a broker. The Board of Directors has
approved, as in the best interests of the Fund and the
shareholders, a policy of considering, among other factors, sales
of the Fund's shares as a factor in the selection of
broker-dealers to execute portfolio transactions, subject to best
execution. The Adviser is authorized under the Advisory
Agreement to place brokerage business with such brokers and
dealers. The use of brokers who supply supplemental research and
analysis and other services may result in the payment of higher
commissions than those available from other brokers and dealers
who provide only the execution of portfolio transactions. In
addition, the supplemental research and analysis and other
services that may be obtained from brokers and dealers through
which brokerage transactions are effected may be useful to the
Adviser in connection with advisory clients other than the Fund.
Investment decisions for the Fund are made independently
from those for other investment companies and other advisory
accounts managed by the Adviser. It may happen, on occasion,
that the same security is held in the portfolio of the Fund and
one or more of such other companies or accounts. Simultaneous
transactions are likely when several funds or accounts are
managed by the same adviser, particularly when a security is
suitable for the investment objectives of more than one of such
companies or accounts. When two or more companies or accounts
managed by the Adviser are simultaneously engaged in the purchase
or sale of the same security, the transactions are allocated to
the respective companies or accounts both as to amount and price,
in accordance with a method deemed equitable to each company or
account. In some cases this system may adversely affect the
price paid or received by the Fund or the size of the position
obtainable for the Fund.
Allocations are made by the officers of the Fund or of
the Adviser. Purchases and sales of portfolio securities are
determined by the Adviser and are placed with broker-dealers by
the order department of the Adviser.
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The extent to which commissions that will be charged by
broker-dealers selected by the Fund may reflect an element of
value for research cannot presently be determined. To the extent
that research services of value are provided by broker-dealers
with or through whom the Fund places portfolio transactions, the
Adviser may be relieved of expenses which it might otherwise
bear. Research services furnished by broker-dealers could be
useful and of value to the Adviser in servicing its other clients
as well as the Fund; but, on the other hand, certain research
services obtained by the Adviser as a result of the placement of
portfolio brokerage of other clients could be useful and of value
to it in serving the Fund. Consistent with the Conduct Rules of
the National Association of Securities Dealers, Inc., and subject
to seeking best execution, the Fund may consider sales of shares
of the Fund or other investment companies managed by the Adviser
as a factor in the selection of brokers to execute portfolio
transactions for the Fund.
The Fund may from time to time place orders for the
purchase or sale of securities (including listed call options)
with Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"),
an affiliate of the Adviser, and with brokers which may have
their transactions cleared or settled, or both, by the Pershing
Division of DLJ, for which DLJ may receive a portion of the
brokerage commissions. In such instances, the placement of
orders with such brokers would be consistent with the Fund's
objective of obtaining best execution and would not be dependent
upon the fact that DLJ is an affiliate of the Adviser.
Some of the Fund's portfolio transactions in equity
securities may occur on foreign stock exchanges. Transactions on
stock exchanges involve the payment of brokerage commissions. On
many foreign stock exchanges these commissions are fixed.
Securities traded in foreign over-the-counter markets (including
most fixed-income securities) are purchased from and sold to
dealers acting as principal. Over-the-counter transactions
generally do not involve the payment of a stated commission, but
the price usually includes an undisclosed commission or markup.
The prices of underwritten offerings, however, generally include
a stated underwriter's discount. The Adviser expects to effect
the bulk of its transactions in securities of companies based in
foreign countries through brokers, dealers or underwriters
located in such countries. U.S. Government or other U.S.
securities constituting permissible investments will be purchased
and sold through U.S. brokers, dealers or underwriters.
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_______________________________________________________________
GENERAL INFORMATION
_______________________________________________________________
Capitalization
The authorized capital stock of the Fund currently
consists of 3,000,000,000 shares of Class A Common Stock,
3,000,000,000 shares of Class B Common Stock and 3,000,000,000
shares of Class C Common Stock, each having a par value of $.001
per share. All shares of the Fund, when issued, are fully paid
and non-assessable. The Directors are authorized to reclassify
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 second portfolio, each share of either
portfolio would normally be entitled to one vote for all
purposes. Generally, shares of both portfolios would vote as a
single series on matters, such as the election of Directors, that
affected both portfolios in substantially the same manner. As to
matters affecting each portfolio differently, such as approval of
the Investment Advisory Contract and changes in investment
policy, shares of each portfolio would vote as a separate series.
Procedures for calling a shareholders' meeting for the removal of
Directors of the Fund, similar to those set forth in Section
16(c) of the 1940 Act will be available to shareholders of the
Fund. The rights of the holders of shares of a series may not be
modified except by the vote of a majority of the outstanding
shares of such series.
Custodian
[ ] will act as the Fund's custodian 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
Fund's Directors, [ ] may enter into sub-custodial
agreements for the holding of the Fund's foreign securities.
Principal Underwriter
Alliance Fund Distributors, Inc., 1345 Avenue of the
Americas, New York, New York 10105, serves as the Fund's
Principal Underwriter, and as such may solicit orders from the
public to purchase shares of the Fund. Under the Agreement, the
Fund has agreed to indemnify the Principal Underwriter, in the
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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
common stock offered hereby are passed upon by Seward & Kissel,
New York, New York. Seward & Kissel has relied upon the opinion
of Venable, Baetjer and Howard, LLP, Baltimore, Maryland, for
matters relating to Maryland law.
Independent Accountants
Price Waterhouse LLP, New York, New York, have been
appointed as independent accountants for the Fund.
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 when paid
and the maximum sales charge applicable to purchases of Fund
shares is assumed to have been paid.
The Fund's total return is computed separately for
Class A, Class B and Class C 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 its expenses. Total
return information is useful in reviewing the Fund's performance
but such information may not provide a basis for comparison with
bank deposits or other investments which pay a fixed yield for a
stated period of time. An investor's principal invested in the
Fund is not fixed and will fluctuate in response to prevailing
market conditions.
Advertisements quoting performance rankings of the Fund
as measured by financial publications or by independent
organizations such as Lipper Analytical Services, Inc., and
Morningstar, Inc. and advertisements presenting the historical
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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 numbers shown on the front cover of this
Statement of Additional Information. This Statement of
Additional Information does not contain all the information set
forth in the Registration Statement filed by the Fund with the
Commission under the Securities Act. Copies of the Registration
Statement may be obtained at a reasonable charge from the
Commission or may be examined, without charge, at the offices of
the Commission in Washington, D.C.
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____________________________________________________________
FINANCIAL STATEMENT AND
REPORT OF INDEPENDENT ACCOUNTANTS
____________________________________________________________
[To be included by means of a pre-effective amendment.]
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____________________________________________________________
APPENDIX A:
CERTAIN INVESTMENT PRACTICES
____________________________________________________________
The information in this Appendix concerns investment
practices in which the Fund is authorized to engage, but in which
the Fund is not required to engage and which may not currently be
permitted under applicable laws or regulations or may otherwise
be unavailable in certain countries. The Fund's investment
policies and restrictions authorize it to engage in these
practices to the extent such practices become available and
permissible in the future.
Options
The Fund may write covered put and call options and
purchase put and call options on securities of the types in which
it is permitted to invest that are traded on U.S. and foreign
securities exchanges and over-the-counter, including options on
market indices. The Fund will only write "covered" put and call
options unless such options are written for cross-hedging
purposes. There are no specific limitations on the Fund's
writing and purchasing of options.
The Fund may purchase put options to hedge against a
decline in the value of its portfolio. By using put options in
this way, the Fund will reduce any profit it might otherwise have
realized in the underlying security by the amount of the premium
paid for the put option and by transaction costs. The Fund may
purchase call options to hedge against an increase in the price
of securities that the Fund anticipates purchasing in the future.
The premium paid for the call option plus any transaction costs
will reduce the benefit, if any, realized by the Fund upon
exercise of the option, and, unless the price of the underlying
security rises sufficiently, the option may expire worthless to
the Fund.
A put option gives the purchaser of such option, upon
payment of a premium, the right to deliver a specified amount of
a security to the writer of the option on or before a fixed date
at a predetermined price. A call option gives the purchaser of
the option, upon payment of a premium, the right to call upon the
writer to deliver a specified amount of a security on or before a
fixed date at a predetermined price. A call option written by
the Fund is "covered" if the Fund owns the underlying security
covered by the call or has an absolute and immediate right to
acquire that security without additional cash consideration (or
for additional cash consideration held in a segregated account by
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its custodian) upon conversion or exchange of other securities
held in its portfolio. A call option is also covered if the Fund
holds a call on the same security and in the same principal
amount as the call written where the exercise price of the call
held (i) is equal to or less than the exercise price of the call
written or (ii) is greater than the exercise price of the call
written if the difference is maintained by the Fund in liquid
assets in a segregated account with its custodian. A put option
written by the Fund is "covered" if the Fund maintains liquid
assets with a value equal to the exercise price in a segregated
account with its custodian, or else holds a put on the same
security and in the same principal amount as the put written
where the exercise price of the put held is equal to or greater
than the exercise price of the put written. The premium paid by
the purchaser of an option will reflect, among other things, the
relationship of the exercise price to the market price and
volatility of the underlying security, the remaining term of the
option, supply and demand and interest rates.
A call option is for cross-hedging purposes if the Fund
does not own the underlying security but seeks to provide a hedge
against a decline in value in another security which the Fund
owns or has the right to acquire. In such circumstances, the
Fund collateralizes its obligation under the option by
maintaining in a segregated account with the Fund's custodian
liquid assets in an amount not less than the market value of the
underlying security, marked to market daily. The Fund would
write a call option for cross-hedging purposes, instead of
writing a covered call option, when the premium to be received
from the cross-hedge transaction would exceed that which would be
received from writing a covered call option, while at the same
time achieving the desired hedge.
In purchasing a call option, the Fund would be in a
position to realize a gain if, during the option period, the
price of the underlying security increased by an amount in excess
of the premium paid. It would realize a loss if the price of the
underlying security declined or remained the same or did not
increase during the period by more than the amount of the
premium. In purchasing a put option, the Fund would be in a
position to realize a gain if, during the option period, the
price of the underlying security declined by an amount in excess
of the premium paid. It would realize a loss if the price of the
underlying security increased or remained the same or did not
decrease during that period by more than the amount of the
premium. If a put or call option purchased by the Fund were
permitted to expire without being sold or exercised, its premium
would be lost by the Fund.
If a put option written by the Fund were exercised, the
Fund would be obligated to purchase the underlying security at
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the exercise price. If a call option written by the Fund were
exercised, the Fund would be obligated to sell the underlying
security at the exercise price. The risk involved in writing a
put option is that there could be a decrease in the market value
of the underlying security caused by rising interest rates or
other factors. If this occurred, the option could be exercised
and the underlying security would then be sold by the option
holder to the Fund at a higher price than its current market
value. The risk involved in writing a call option is that there
could be an increase in the market value of the underlying
security caused by declining interest rates or other factors. If
this occurred, the option could be exercised and the underlying
security would then be sold by the Fund at a lower price than its
current market value. These risks could be reduced by entering
into a closing transaction prior to the option expiration dates
if a liquid market is available. The Fund retains the premium
received from writing a put or call option whether or not the
option is exercised.
The Fund may purchase or write options on securities of
the types in which it is permitted to invest in privately
negotiated (i.e., over-the-counter) transactions. The Fund will
effect such transactions only with investment dealers and other
financial institutions (such as commercial banks or savings and
loan institutions) deemed creditworthy by the Adviser, and the
Adviser has adopted procedures for monitoring the
creditworthiness of such entities. Options purchased or written
by the Fund in negotiated transactions are illiquid and it may
not be possible for the Fund to effect a closing transaction at a
time when the Adviser believes it would be advantageous to do so.
An option on a securities index is similar to an option
on a security except that, rather than the right to take or make
delivery of a security at a specified price, an option on a
securities index gives the holder the right to receive, upon
exercises of the option, an amount of cash if the closing level
of the chosen index is greater than (in the case of a call) or
less than (in the case of a put) the exercise price of the
option. There are no specific limitations on the Fund's
purchasing and selling of options on securities indices.
The writer of an option may have no control over when
the underlying securities must be sold, in the case of a call
option, or purchased, in the case of a put option, since with
regard to certain options, the writer may be assigned an exercise
notice at any time prior to the termination of the obligation.
Whether or not an option expires unexercised, the writer retains
the amount of the premium. This amount, of course, may, in the
case of a covered call option, be offset by a decline in the
market value of the underlying security during the option period.
If a call option is exercised, the writer experiences a profit or
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loss from the sale of the underlying security. If a put option
is exercised, the writer must fulfill the obligation to purchase
the underlying security at the exercise price, which will usually
exceed the then market value of the underlying security.
The writer of a listed option that wishes to terminate
its obligation may effect a "closing purchase transaction." This
is accomplished by buying an option of the same series as the
option previously written. The effect of the purchase is that
the writer's position will be cancelled by the clearing
corporation. However, a writer may not effect a closing purchase
transaction after being notified of the exercise of an option.
Likewise, an investor who is the holder of a listed option may
liquidate its position by effecting a "closing sale transaction."
This is accomplished by selling an option of the same series as
the option previously purchased. There can be no guarantee that
either a closing purchase or a closing sale transaction can be
effected in any particular situation.
Effecting a closing transaction in the case of a written
call option will permit the Fund to write another call option on
the underlying security with either a different exercise price or
expiration date or both, or in the case of a written put option
will permit the Fund to write another put option to the extent
that the exercise price thereof is secured by deposited cash or
short-term securities. Also, effecting a closing transaction
will permit the cash or proceeds from the concurrent sale of any
securities subject to the option to be used for other Fund
investments. If the Fund desires to sell a particular security
from its portfolio on which it has written a call option, it will
effect a closing transaction prior to or concurrent with the sale
of the security.
The Fund will realize a profit from a closing
transaction if the price of the transaction is less than the
premium received from writing the option or is more than the
premium paid to purchase the option; the Fund will realize a loss
from a closing transaction if the price of the transaction is
more than the premium received from writing the option or is less
than the premium paid to purchase the option. Because increases
in the market price of a call option will generally reflect
increases in the market price of the underlying security, any
loss resulting from the repurchase of a call option is likely to
be offset in whole or in part by appreciation of the underlying
security owned by the Fund.
An option position may be closed out only where there
exists a secondary market for an option of the same series. If a
secondary market does not exist, it might not be possible to
effect closing transactions in particular options with the result
that the Fund would have to exercise the options in order to
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<PAGE>
realize any profit. If the Fund is unable to effect a closing
purchase transaction in a secondary market, it will not be able
to sell the underlying security until the option expires or it
delivers the underlying security upon exercise. Reasons for the
absence of a liquid secondary market include the following: (i)
there may be insufficient trading interest in certain options,
(ii) restrictions may be imposed by a national securities
exchange ("Securities Exchange") on opening transactions or
closing transactions or both, (iii) trading halts, suspensions or
other restrictions may be imposed with respect to particular
classes or series of options or underlying securities, (iv)
unusual or unforeseen circumstances may interrupt normal
operations on a Securities Exchange, (v) the facilities of a
Securities Exchange or the Options Clearing Corporation may not
at all times be adequate to handle current trading volume, or
(vi) one or more Securities Exchanges could, for economic or
other reasons, decide or be compelled at some future date to
discontinue the trading of options (or a particular class or
series of options), in which event the secondary market on that
Securities Exchange (or in that class or series of options) would
cease to exist, although outstanding options on that Securities
Exchange that had been issued by the Options Clearing Corporation
as a result of trades on that Securities Exchange would continue
to be exercisable in accordance with their terms.
The Fund may write options in connection with buy-and-
write transactions; that is, the Fund may purchase a security and
then write a call option against that security. The exercise
price of the call the Fund determines to write will depend upon
the expected price movement of the underlying security. The
exercise price of a call option may be below ("in-the-money"),
equal to ("at-the-money") or above ("out-of-the- money") the
current value of the underlying security at the time the option
is written. Buy-and-write transactions using in-the-money call
options may be used when it is expected that the price of the
underlying security will remain flat or decline moderately during
the option period. Buy-and-write transactions using at-the-money
call options may be used when it is expected that the price of
the underlying security will remain fixed or advance moderately
during the option period. Buy-and-write transactions using
out-of-the-money call options may be used when it is expected
that the premiums received from writing the call option plus the
appreciation in the market price of the underlying security up to
the exercise price will be greater than the appreciation in the
price of the underlying security alone. If the call options are
exercised in such transactions, the Fund's maximum gain will be
the premium received by it for writing the option, adjusted
upwards or downwards by the difference between the Fund's
purchase price of the security and the exercise price. If the
options are not exercised and the price of the underlying
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security declines, the amount of such decline will be offset in
part, or entirely, by the premium received.
The writing of covered put options is similar in terms
of risk/return characteristics to buy-and-write transactions. If
the market price of the underlying security rises or otherwise is
above the exercise price, the put option will expire worthless
and the Fund's gain will be limited to the premium received. If
the market price of the underlying security declines or otherwise
is below the exercise price, the Fund may elect to close the
position or take delivery of the security at the exercise price
and the Fund's return will be the premium received from the put
option minus the amount by which the market price of the security
is below the exercise price. Out-of-the-money, at-the-money, and
in-the-money put options may be used by the Fund in the same
market environments that call options are used in equivalent buy-
and-write transactions.
Futures Contracts and Options on Futures Contracts
The Fund may enter into contracts for the purchase or
sale for future delivery of foreign currencies, or contracts
based on financial indices, including any index of U.S.
Government Securities, securities issued by foreign government
entities, or common stocks ("futures contracts") and may purchase
and write put and call options to buy or sell futures contracts
("options on futures contracts"). A "sale" of a futures contract
means the acquisition of a contractual obligation to deliver the
securities or foreign currencies called for by the contract at a
specified price on a specified date. A "purchase" of a futures
contract means the incurring of a contractual obligation to
acquire the securities or foreign currencies called for by the
contract at a specified price on a specified date. The purchaser
of a futures contract on an index agrees to take or make delivery
of an amount of cash equal to the difference between a specified
dollar multiple of the value of the index on the expiration date
of the contract ("current contract value") and the price at which
the contract was originally struck. No physical delivery of the
securities underlying the index is made.
Options on futures contracts written or purchased by the
Fund will be traded on U.S. or foreign exchanges or over-the-
counter. These investment techniques will be used only to hedge
against anticipated future changes in market conditions and
interest or exchange rates which otherwise might either adversely
affect the value of the Fund's portfolio securities or adversely
affect the prices of securities which the Fund intends to
purchase at a later date. The Fund will not enter into any
futures contracts or options on futures contracts if immediately
thereafter the aggregate of the market value of the outstanding
futures contracts of the Fund and the market value of the
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currencies and futures contracts subject to outstanding options
written by the Fund would exceed 50% of the market value of the
total assets of the Fund.
The purchase of a call option on a futures contract is
similar in some respects to the purchase of a call option on an
individual security. Depending on the pricing of the option
compared to either the price of the futures contract upon which
it is based or the price of the underlying debt securities, it
may or may not be less risky than ownership of the futures
contract or underlying debt securities. As with the purchase of
futures contracts, when the Fund is not fully invested it may
purchase a call option on a futures contract to hedge against
adverse market conditions.
The writing of a call option on a futures contract
constitutes a partial hedge against declining prices of the
security or foreign currency which is deliverable upon exercise
of the futures contract or securities comprising an index. If
the futures price at expiration of the option is below the
exercise price, the Fund will retain the full amount of the
option premium which provides a partial hedge against any decline
that may have occurred in the Fund's portfolio holdings. The
writing of a put option on a futures contract constitutes a
partial hedge against increasing prices of the security or
foreign currency which is deliverable upon exercise of the
futures contract or securities comprising an index. If the
futures price at expiration of the option is higher than the
exercise price, the Fund will retain the full amount of the
option premium which provides a partial hedge against any
increase in the price of securities which the Fund intends to
purchase. If a put or call option the Fund has written is
exercised, the Fund will incur a loss which will be reduced by
the amount of the premium it receives. Depending on the degree
of correlation between changes in the value of its portfolio
securities and changes in the value of its futures positions, the
Fund's losses from existing options on futures may to some extent
be reduced or increased by changes in the value of portfolio
securities.
The purchase of a put option on a futures contract is
similar in some respects to the purchase of protective put
options on portfolio securities. For example, the Fund may
purchase a put option on a futures contract to hedge the Fund's
portfolio against the risk of rising interest rates.
The amount of risk the Fund assumes when it purchases an
option on a futures contract is the premium paid for the option
plus related transaction costs. In addition to the correlation
risks discussed above, the purchase of an option also entails the
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risk that changes in the value of the underlying futures contract
will not be fully reflected in the value of the option purchased.
U.S. futures contracts have been designed by exchanges
which have been designated "contracts markets" by the Commodity
Futures Trading Commission ("CFTC"), and must be executed through
a futures commission merchant, or brokerage firm, which is a
member of the relevant contract market. Futures contracts trade
on a number of exchange markets, and, through their clearing
corporations, the exchanges guarantee performance of the
contracts as between the clearing members of the exchange. The
Fund is not a commodity pool and all transactions in futures
contracts and options on futures contracts engaged in by the Fund
must constitute bona fide hedging or other permissible
transactions in accordance with the rules and regulations
promulgated by the CFTC.
At the same time a futures contract is purchased or
sold, the Fund must allocate cash or securities as a deposit
payment ("initial deposit"). It is expected that the initial
deposit would be approximately 1 1/2% to 5% of a contract's face
value. Daily thereafter, the futures contract is valued and the
payment of "variation margin" may be required, since each day the
Fund would provide or receive cash that reflects any decline or
increase in the contract's value.
At the time of delivery of securities pursuant to such a
contract, adjustments are made to recognize differences in value
arising from the delivery of securities with a different price or
interest rate from that specified in the contract. In some (but
not many) cases, securities called for by a futures contract may
not have been issued when the contract was written.
Although futures contracts by their terms call for the
actual delivery or acquisition of securities, in most cases the
contractual obligation is fulfilled before the date of the
contract without having to make or take delivery of the
securities. The offsetting of a contractual obligation is
accomplished by buying (or selling, as the case may be) on a
commodities exchange an identical futures contract calling for
delivery in the same month. Such a transaction, which is
effected through a member of an exchange, cancels the obligation
to make or take delivery of the securities. Since all
transactions in the futures market are made, offset or fulfilled
through a clearinghouse associated with the exchange on which the
contracts are traded, the Fund will incur brokerage fees when it
purchases or sells futures contracts.
The Fund's Custodian will place liquid assets in a
separate account of the Fund having a value equal to the
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aggregate amount of the Fund's commitments under futures
contracts.
Stock Index Futures
The Fund may purchase and sell stock index futures as a
hedge against movements in the equity markets. There are several
risks in connection with the use of stock index futures by the
Fund as a hedging device. One risk arises because of the
imperfect correlation between movements in the price of the stock
index futures and movements in the price of the securities which
are the subject of the hedge. The price of the stock index
futures may move more than or less than the price of the
securities being hedged. If the price of the stock index futures
moves less than the price of the securities which are the subject
of the hedge, the hedge will not be fully effective but, if the
price of the securities being hedged has moved in an unfavorable
direction, the Fund would be in a better position than if it had
not hedged at all. If the price of the securities being hedged
has moved in a favorable direction, this advantage will be
partially offset by the loss on the index future. If the price
of the future moves more than the price of the stock, the Fund
will experience either a loss or gain on the future which will
not be completely offset by movements in the price of the
securities which are subject to the hedge. To compensate for the
imperfect correlation of movements in the price of securities
being hedged and movements in the price of the stock index
futures, the Fund may buy or sell stock index futures contracts
in a greater dollar amount than the dollar amount of securities
being hedged if the volatility over a particular time period of
the prices of such securities has been greater than the
volatility over such time period of the index, or if otherwise
deemed to be appropriate by the Adviser. Conversely, the Fund
may buy or sell fewer stock index futures contracts if the
volatility over a particular time period of the prices of the
securities being hedged is less than the volatility over such
time period of the stock index, or it is otherwise deemed to be
appropriate by the Adviser. It is also possible that, where the
Fund has sold futures to hedge its portfolio against a decline in
the market, the market may advance and the value of securities
held in the Fund may decline. If this occurred, the Fund would
lose money on the futures and also experience a decline in value
in its portfolio securities. However, over time the value of a
diversified portfolio should tend to move in the same direction
as the market indices upon which the futures are based, although
there may be deviations arising from differences between the
composition of the Fund and the stocks comprising the index.
Where futures are purchased to hedge against a possible
increase in the price of stock before the Fund is able to invest
its cash (or cash equivalents) in stocks (or options) in an
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orderly fashion, it is possible that the market may decline
instead. If the Fund then concludes not to invest in stock or
options at that time because of concern as to possible further
market decline or for other reasons, the Fund will realize a loss
on the futures contract that is not offset by a reduction in the
price of securities purchased.
In addition to the possibility that there may be an
imperfect correlation, or no correlation at all, between
movements in the stock index futures and the portion of the
portfolio being hedged, the price of stock index futures may not
correlate perfectly with movement in the stock index due to
certain market distortions. Rather than meeting additional
margin deposit requirements, investors may close futures
contracts through offsetting transactions which could distort the
normal relationship between the index and futures markets.
Secondly, from the point of view of speculators, the deposit
requirements in the futures market are less onerous than margin
requirements in the securities market. Therefore, increased
participation by speculators in the futures market may also cause
temporary price distortions. Due to the possibility of price
distortion in the futures market, and because of the imperfect
correlation between the movements in the stock index and
movements in the price of stock index futures, a correct forecast
of general market trends by the investment adviser may still not
result in a successful hedging transaction over a short time
frame.
Positions in stock index futures may be closed out only
on an exchange or board of trade which provides a secondary
market for such futures. Although the Fund intends to purchase
or sell futures only on exchanges or boards of trade where there
appear to be active secondary markets, there is no assurance that
a liquid secondary market on any exchange or board of trade will
exist for any particular contract or at any particular time. In
such event, it may not be possible to close a futures investment
position, and in the event of adverse price movements, the Fund
would continue to be required to make daily cash payments of
variation margin. However, in the event futures contracts have
been used to hedge portfolio securities, such securities will not
be sold until the futures contract can be terminated. In such
circumstances, an increase in the price of the securities, if
any, may partially or completely offset losses on the futures
contract. However, as described above, there is no guarantee
that the price of the securities will in fact correlate with the
price movements in the futures contract and thus provide an
offset on a futures contract.
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Options on Foreign Currencies
The Fund may purchase and write put and call options on
foreign currencies for the purpose of protecting against declines
in the U.S. dollar value of foreign currency-denominated
portfolio securities and against increases in the U.S. dollar
cost of such securities to be acquired. For example, a decline
in the dollar value of a foreign currency in which portfolio
securities are denominated will reduce the dollar value of such
securities, even if their value in the foreign currency remains
constant. In order to protect against such diminutions in the
value of portfolio securities, the Fund may purchase put options
on the foreign currency. If the value of the currency does
decline, the Fund will have the right to sell such currency for a
fixed amount in dollars and will thereby offset, in whole or in
part, the adverse effect on its portfolio which otherwise would
have resulted. As in the case of other kinds of options,
however, the writing of an option on a foreign currency
constitutes only a partial hedge, up to the amount of the premium
received, and the Fund could be required to purchase or sell
foreign currencies at disadvantageous exchange rates, thereby
incurring losses. The purchase of an option on a foreign
currency may constitute an effective hedge against fluctuations
in exchange rates although, in the event of rate movements
adverse to the Fund's position, it may forfeit the entire amount
of the premium plus related transaction costs. Options on
foreign currencies to be written or purchased by the Fund are
traded on U.S. and foreign exchanges or over-the-counter.
Conversely, where a rise in the dollar value of a
currency in which securities to be acquired are denominated is
projected, thereby increasing the cost of such securities, the
Fund may purchase call options thereon. The purchase of such
options could offset, at least partially, the effects of the
adverse movements in exchange rates. As in the case of other
types of options, however, the benefit to the Fund deriving from
purchases of foreign currency options will be reduced by the
amount of the premium and related transaction costs. In
addition, where currency exchange rates do not move in the
direction or to the extent anticipated, the Fund could sustain
losses on transactions in foreign currency options which would
require it to forego a portion or all of the benefits of
advantageous changes in such rates.
The Fund may write options on foreign currencies for the
same types of hedging purposes. For example, where the Fund
anticipates a decline in the dollar value of foreign currency
denominated securities due to adverse fluctuations in exchange
rates it could, instead of purchasing a put option, write a call
option on the relevant currency. If the expected decline occurs,
the option will most likely not be exercised, and the diminution
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in value of portfolio securities will be offset by the amount of
the premium received.
Similarly, instead of purchasing a call option to hedge
against an anticipated increase in the dollar cost of securities
to be acquired, the Fund could write a put option on the relevant
currency which, if rates move in the manner projected, will
expire unexercised and allow the Fund to hedge such increased
cost up to the amount of the premium. As in the case of other
types of options, however, the writing of a foreign currency
option will constitute only a partial hedge up to the amount of
the premium, and only if rates move in the expected direction.
If this does not occur, the option may be exercised and the Fund
would be required to purchase or sell the underlying currency at
a loss which may not be offset by the amount of the premium.
Through the writing of options on foreign currencies, the Fund
also may be required to forego all or a portion of the benefits
which might otherwise have been obtained from favorable movements
in exchange rates.
The Fund intends to write covered call options on
foreign currencies. A call option written on a foreign currency
by the Fund is "covered" if the Fund owns the underlying foreign
currency covered by the call or has an absolute and immediate
right to acquire that foreign currency without additional cash
consideration (or for additional cash consideration held in a
segregated account by its custodian) upon conversation or
exchange of other foreign currency held in its portfolio. A call
option is also covered if the Fund has a call on the same foreign
currency and in the same principal amount as the call written
where the exercise price of the call held (a) is equal to or less
than the exercise price of the call written or (b) is greater
than the exercise price of the call written if the difference is
maintained by the Fund in liquid assets in a segregated account
with its custodian.
The Fund also intends to write call options on foreign
currencies for cross-hedging purposes. An option that is cross-
hedged is not covered, but is designed to provide a hedge against
a decline in the U.S. dollar value of a security which the Fund
owns or has the right to acquire and which is denominated in the
currency underlying the option due to an adverse change in the
exchange rate. In such circumstances, the Fund collateralizes
the option by maintaining in a segregated account with the Fund's
custodian, liquid assets in an amount not less than the value of
the underlying foreign currency in U.S. dollars marked to market
daily. There is no specific percentage limitation on the Fund's
investment in options on foreign currencies.
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Additional Risks of Options on Futures Contracts, Forward
Contracts and Options on Foreign Currencies
Unlike transactions entered into by the Fund in futures
contracts, options on foreign currencies and forward contracts
are not traded on contract markets regulated by the CFTC or (with
the exception of certain foreign currency options) by the
Commission. To the contrary, such instruments are traded through
financial institutions acting as market-makers, although foreign
currency options are also traded on certain national securities
exchanges, such as the Philadelphia Stock Exchange and the
Chicago Board Options Exchange, subject to Commission regulation.
Similarly, options on securities may be traded over-the-counter.
In an over-the-counter trading environment, many of the
protections afforded to exchange participants will not be
available. Although the purchaser of an option cannot lose more
than the amount of the premium plus related transaction costs,
this entire amount could be lost. Moreover, the option writer
and a trader of forward contracts could lose amounts
substantially in excess of their initial investments, due to the
margin and collateral requirements associated with such
positions.
Options on foreign currencies traded on national
securities exchanges are within the jurisdiction of the
Commission, as are other securities traded on such exchanges. As
a result, many of the protections provided to traders, on
organized exchanges will be available with respect to such
transactions. In particular, all foreign currency option
positions entered into on a national securities exchange are
cleared and guaranteed by the Options Clearing Corporation
("OCC"), thereby reducing the risk of counterparty default.
Further, a liquid secondary market in options traded on a
national securities exchange may be more readily available than
in the over-the-counter market, potentially permitting the Fund
to liquidate open positions at a profit prior to exercise or
expiration, or to limit losses in the event of adverse market
movements.
The purchase and sale of exchange-traded foreign
currency options, however, is subject to the risks of the
availability of a liquid secondary market described above, as
well as the risks regarding adverse market movements, margining
of options written, the nature of the foreign currency market,
possible intervention by governmental authorities and the effects
of other political and economic events. In addition, exchange-
traded options on foreign currencies involve certain risks not
presented by the over-the-counter market. For example, exercise
and settlement of such options must be made exclusively through
the OCC, which has established banking relationships in
applicable foreign countries for this purpose. As a result, the
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OCC may, if it determines that foreign governmental restrictions
or taxes would prevent the orderly settlement of foreign currency
option exercise, or would result in undue burdens on the OCC or
its clearing member, impose special procedures on exercise and
settlement, such as technical changes in the mechanics of
delivery of currency, the fixing of dollar settlement prices or
prohibitions on exercise.
In addition, futures contracts, options on futures
contracts, forward contracts and options on foreign currencies
may be traded on foreign exchanges. Such transactions are
subject to the risk of governmental actions affecting trading in
or the prices of foreign currencies or securities. The value of
such positions also could be adversely affected by (i) other
complex foreign political and economic factors, (ii) lesser
availability than in the United States of data on which to make
trading decisions, (iii) delays in the Fund's ability to act upon
economic events occurring in foreign markets during nonbusiness
hours in the United States, (iv) the imposition of different
exercise and settlement terms and procedures and margin
requirements than in the United States, and (v) lesser trading
volume.
Forward Foreign Currency Exchange Contracts
The Fund may purchase or sell forward foreign currency
exchange contracts ("forward contracts") to attempt to minimize
the risk to the Fund from adverse changes in the relationship
between the U.S. dollar and foreign currencies. A forward
contract is an obligation to purchase or sell a specific currency
for an agreed price at a future date, and is individually
negotiated and privately traded by currency traders and their
customers. The Fund may enter into a forward contract, for
example, when it enters into a contract for the purchase or sale
of a security denominated in a foreign currency in order to "lock
in" the U.S. dollar price of the security ("transaction hedge").
The Fund may not engage in transaction hedges with respect to the
currency of a particular country to an extent greater than the
aggregate amount of the Fund's transactions in that currency.
Additionally, for example, when the Fund believes that a foreign
currency may suffer a substantial decline against the U.S.
dollar, it may enter into a forward sale contract to sell an
amount of that foreign currency approximating the value of some
or all of the Fund's portfolio securities denominated in such
foreign currency, or when the Fund believes that the U.S. dollar
may suffer a substantial decline against a foreign currency, it
may enter into a forward purchase contract to buy that foreign
currency for a fixed dollar amount ("position hedge"). In this
situation the Fund may, in the alternative, enter into a forward
contract to sell a different foreign currency for a fixed U.S.
dollar amount where the Fund believes that the U.S. dollar value
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of the currency to be sold pursuant to the forward contract will
fall whenever there is a decline in the U.S. dollar value of the
currency in which portfolio securities of the Fund are
denominated ("cross-hedge"). The Fund's custodian will place
liquid assets in a segregated account of the Fund having a value
equal to the aggregate amount of the Fund's commitments under
forward contracts entered into with respect to position hedges
and cross-hedges. If the value of the securities placed in a
segregated account declines, additional cash or securities will
be placed in the account on a daily basis so that the value of
the account will equal the amount of the Fund's commitments with
respect to such contracts. As an alternative to maintaining all
or part of the segregated account, the Fund may purchase a call
option permitting the Fund to purchase the amount of foreign
currency being hedged by a forward sale contract at a price no
higher than the forward contract price or the Fund may purchase a
put option permitting the Fund to sell the amount of foreign
currency subject to a forward purchase contract at a price as
high or higher than the forward contract price. Unanticipated
changes in currency prices may result in poorer overall
performance for the Fund than if it had not entered into such
contracts.
Forward Commitments
The Fund may enter into forward commitments for the
purchase or sale of securities. Such transactions may include
purchases on a "when-issued" basis or purchases or sales on a
"delayed delivery" basis. In some cases, a forward commitment
may be conditioned upon the occurrence of a subsequent event,
such as approval and consummation of a merger, corporate
reorganization or debt restructuring (i.e., a "when, as and if
issued" trade).
When forward commitment transactions are negotiated, the
price, which generally is expressed in yield terms, is fixed at
the time the commitment is made, but delivery and payment for the
securities take place at a later date. Normally, the settlement
date occurs within two months after the transaction, but delayed
settlements beyond two months may be negotiated. Securities
purchased or sold under a forward commitment are subject to
market fluctuation, and no interest or dividends accrue to the
purchaser prior to the settlement date. At the time the Fund
intends to enter into a forward commitment, it will record the
transaction and thereafter reflect the value of the security
purchased or, if a sale, the proceeds to be received, in
determining its net asset value. Any unrealized appreciation or
depreciation reflected in such valuation of a "when, as and if
issued" security would be cancelled in the event that the
required conditions did not occur and the trade was cancelled.
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The Fund's right to receive or deliver a security under
a forward commitment may be sold prior to the settlement date,
but the Fund will enter into forward commitments only with the
intention of actually receiving or delivering the securities, as
the case may be. To facilitate such transactions, the Fund's
custodian will maintain, in a segregated account of the Fund,
liquid assets having value equal to, or greater than, any
commitments to purchase securities on a forward commitment basis
and, with respect to forward commitments to sell portfolio
securities of the Fund, the portfolio securities themselves. If
the Fund, however, chooses to dispose of the right to receive or
deliver a security subject to a forward commitment prior to the
settlement date of the transaction, it may incur a gain or loss.
In the event the other party to a forward commitment transaction
were to default, the Fund might lose the opportunity to invest
money at favorable rates or to dispose of securities at favorable
prices. No forward commitments will be made by the Fund if, as a
result, the Fund's aggregate commitments under such transactions
would be more than 30% of the then current value of the Fund's
total assets.
Repurchase Agreements
The Fund may enter into agreements pertaining to U.S.
Government Securities with member banks of the Federal Reserve
System or "primary dealers" (as designated by the Federal Reserve
Bank of New York) in such securities. There is no percentage
restriction on the Fund's ability to enter into repurchase
agreements. Currently, the Fund intends to enter into repurchase
agreements only with its custodian and such primary dealers. A
repurchase agreement arises when a buyer purchases a security and
simultaneously agrees to resell it to the vendor at an agreed-
upon future date, normally one day or a few days later. The
resale price is greater than the purchase price, reflecting, an
agreed-upon interest rate which is effective for the period of
time the buyer's money is invested in the security and which is
related to the current market rate rather than the coupon rate on
the purchased security. Such agreements permit the Fund to keep
all of its assets at work while retaining "overnight" flexibility
in pursuit of investments of a longer-term nature. The Fund
requires continual maintenance by its custodian for its account
in the Federal Reserve/Treasury Book Entry System of collateral
in an amount equal to, or in excess of, the resale price. In the
event a vendor defaulted on its repurchase obligation, the Fund
might suffer a loss to the extent that the proceeds from the sale
of the collateral were less than the repurchase price. In the
event of a vendor's bankruptcy, the Fund might be delayed in, or
prevented from, selling the collateral for its benefit. The
Fund's Board of Directors has established procedures, which are
periodically reviewed by the Board, pursuant to which the Fund's
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Adviser monitors the creditworthiness of the dealers with which
the Fund enters into repurchase agreement transactions.
Reverse Repurchase Agreements and Dollar Rolls
The Fund may use reverse repurchase agreements and
dollar rolls as part of its investment strategy. Reverse
repurchase agreements involve sales by the Fund of portfolio
assets concurrently with an agreement by the Fund to repurchase
the same assets at a later date at a fixed price. Generally, the
effect of such a transaction is that the Fund can recover all or
most of the cash invested in the portfolio securities involved
during the term of the reverse repurchase agreement, while it
will be able to keep the interest income associated with those
portfolio securities. Such transactions are only advantageous if
the interest cost to the Fund of the reverse repurchase
transaction is less than the cost of otherwise obtaining the
cash.
The Fund may enter into dollar rolls in which the Fund
sells securities for delivery in the current month and
simultaneously contracts to repurchase substantially similar
(same type and coupon) securities on a specified future date.
During the roll period, the Fund forgoes principal and interest
paid on the securities. The Fund is compensated by the
difference between the current sales price and the lower forward
price for the future purchase (often referred to as the "drop")
as well as by the interest earned on the cash proceeds of the
initial sale.
The Fund will establish a segregated account with its
custodian in which it will maintain liquid assets equal in value
to its obligations in respect of reverse repurchase agreements
and dollar rolls. Reverse repurchase agreements and dollar rolls
involve the risk that the market value of the securities the Fund
is obligated to repurchase under the agreement may decline below
the repurchase price. In the event the buyer of securities under
a reverse repurchase agreement or dollar roll files for
bankruptcy or becomes insolvent, the Fund's use of the proceeds
of the agreement may be restricted pending a determination by the
other party, or its trustee or receiver, whether to enforce the
Fund's obligation to repurchase the securities.
Standby Commitment Agreements
The Fund may from time to time enter into standby
commitment agreements. Such agreements commit the Fund, for a
stated period of time, to purchase a stated amount of a security
which may be issued and sold to the Fund at the option of the
issuer. The price and coupon of the security are fixed at the
time of the commitment. At the time of entering into the
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agreement the Fund is paid a commitment fee, regardless of
whether or not the security ultimately is issued, which is
typically approximately 0.5% of the aggregate purchase price of
the security which the Fund has committed to purchase. The Fund
will enter into such agreements only for the purpose of investing
in the security underlying the commitment at a yield and price
which are considered advantageous to the Fund and which are
unavailable on a firm commitment basis. The Fund will not enter
into a standby commitment with a remaining term in excess of 45
days and will limit its investment in such commitments so that
the aggregate purchase price of the securities subject to the
commitments will not exceed 50% of its assets taken at the time
of acquisition of such commitment. The Fund will at all times
maintain a segregated account with its custodian of liquid assets
in an aggregate amount equal to the purchase price of the
securities underlying the commitment.
There can be no assurance that the securities subject to
a standby commitment will be issued and the value of the
security, if issued, on the delivery date may be more or less
than its purchase price. Since the issuance of the security
underlying the commitment is at the option of the issuer, the
Fund will bear the risk of capital loss in the event the value of
the security declines and may not benefit from an appreciation in
the value of the security during the commitment period if the
issuer decides not to issue and sell the security to the Fund.
The purchase of a security subject to a standby
commitment agreement and the related commitment fee will be
recorded on the date on which the security can reasonably be
expected to be issued and the value of the security will
thereafter be reflected in the calculation of the Fund's net
asset value. The cost basis of the security will be adjusted by
the amount of the commitment fee. In the event the security is
not issued, the commitment fee will be recorded as income on the
expiration date of the standby commitment.
Currency Swaps
The Fund may enter into currency swaps for hedging
purposes. Currency swaps involve the exchange by the Fund with
another party of a series of payments in specified currencies.
Since currency swaps are individually negotiated, the Fund
expects to achieve an acceptable degree of correlation between
its portfolio investments and its currency swaps positions. A
currency swap may involve the delivery at the end of the exchange
period of a substantial amount of one designated currency in
exchange for the other designated currency. Therefore the entire
principal value of a currency swap is subject to the risk that
the other party to the swap will default on its contractual
delivery obligations. The net amount of the excess, if any, of
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the Fund's obligations over its entitlements with respect to each
currency swap will be accrued on a daily basis and an amount of
liquid assets having an aggregate net asset value at least equal
to the accrued excess will be maintained in a segregated account
by the Fund's custodian. The Fund will not enter into any
currency swap unless the credit quality of the unsecured senior
debt or the claims-paying ability of the other party thereto is
rated in the highest rating category of at least one nationally
recognized rating organization at the time of entering into the
transaction. If there is a default by the other party to such a
transaction, the Fund will have contractual remedies pursuant to
the agreements related to the transactions.
Loans of Portfolio Securities
The Fund may make secured loans of its portfolio
securities to entities with which it can enter into repurchase
agreements, provided that cash and/or liquid high grade debt
securities equal to at least 100% of the market value of the
securities loaned are deposited and maintained by the borrower
with the Fund. See "Repurchase Agreements" above. The risks in
lending portfolio securities, as with other extensions of credit,
consist of possible loss of rights in the collateral should the
borrower fail financially. In determining whether to lend
securities to a particular borrower, the Adviser (subject to
review by the Board of Directors) will consider all relevant
facts and circumstances, including the creditworthiness of the
borrower. While securities are on loan, the borrower will pay
the Fund any income earned thereon and the Fund may invest any
cash collateral in portfolio securities, thereby earning
additional income, or receive an agreed upon amount of income
from a borrower who has delivered equivalent collateral. The
Fund will have the right to regain record ownership of loaned
securities to exercise beneficial rights such as voting rights,
subscription rights and rights to dividends, interest or
distributions. The Fund may pay reasonable finders',
administrative and custodial fees in connection with a loan. The
Fund will not lend portfolio securities in excess of 30% of the
value of its total assets, nor will the Fund lend its portfolio
securities to any officer, director, employee or affiliate of the
Fund or the Adviser. The Board of Directors will monitor the
Fund's lending of portfolio securities.
General
The successful use of the foregoing investment
practices draws upon the Adviser's special skills and experience
with respect to such instruments and usually depends on the
Adviser's ability to forecast price movements or currency
exchange rate movements correctly. Should exchange rates move in
an unexpected manner, the Fund may not achieve the anticipated
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benefits of futures contracts, options or forward contracts or
may realize losses and thus be in a worse position than if such
strategies had not been used. Unlike many exchange-traded
futures contracts and options on futures contracts, there are no
daily price fluctuation limits with respect to options on
currencies and forward contracts, and adverse market movements
could therefore continue to an unlimited extent over a period of
time. In addition, the correlation between movements in the
prices of such instruments and movements in the prices of the
securities and currencies hedged or used for cover will not be
perfect and could produce unanticipated losses.
The Fund's ability to dispose of its position in
futures contracts, options and forward contracts will depend on
the availability of liquid markets in such instruments. Markets
in options and futures with respect to a number of fixed income
securities and currencies are relatively new and still
developing. It is impossible to predict the amount of trading
interest that may exist in various types of futures contracts,
options and forward contracts. If a secondary market does not
exist with respect to an option purchased or written by the Fund
over-the-counter, it might not be possible to effect a closing
transaction in the option (i.e., dispose of the option) with the
result that (i) an option purchased by the Fund would have to be
exercised in order for the Fund to realize any profit and (ii)
the Fund may not be able to sell currencies or portfolio
securities covering an option written by the Fund until the
option expires or it delivers the underlying futures contract or
currency upon exercise. Therefore, no assurance can be given
that the Fund will be able to utilize these instruments
effectively for the purposes set forth above. Furthermore, the
Fund's ability to engage in options and futures transactions may
be limited by tax considerations. See "Taxation-United States
Federal Income Taxes-General."
Future Developments
The Fund may, following written notice to its
shareholders, take advantage of other investment practices which
are not at present contemplated for use by the Fund or which
currently are not available but which may be developed, to the
extent such investment practices are both consistent with the
Fund's investment objective and legally permissible for the Fund.
Such investment practices, if they arise, may involve risks which
exceed those involved in the activities described above.
A-20
<PAGE>
____________________________________________________________
APPENDIX B:
CERTAIN EMPLOYEE BENEFIT PLANS
____________________________________________________________
Employee benefit plans described below which are
intended to be tax-qualified under section 401(a) of the Internal
Revenue Code of 1986, as amended ("Tax Qualified Plans"), for
which Merrill Lynch, Pierce, Fenner & Smith Incorporated or an
affiliate thereof ("Merrill Lynch") is recordkeeper (or with
respect to which recordkeeping services are provided pursuant to
certain arrangements as described in paragraph (ii) below)
("Merrill Lynch Plans") are subject to specific requirements as
to the Fund shares which they may purchase. Notwithstanding
anything to the contrary contained elsewhere in this Statement of
Additional Information, the following Merrill Lynch Plans are not
eligible to purchase Class A shares and are eligible to purchase
Class B shares of the Fund at net asset value without being
subject to a contingent deferred sales charge:
(i) Plans for which Merrill Lynch is the recordkeeper on a
daily valuation basis, if when the plan is established
as an active plan on Merrill Lynch's recordkeeping
system:
(a) the plan is one which is not already
investing in shares of mutual funds or
interests in other commingled investment
vehicles of which Merrill Lynch Asset
Management, L.P. is investment adviser or
manager ("MLAM Funds"), and either (A) the
aggregate assets of the plan are less than
$3 million or (B) the total of the sum of
(x) the employees eligible to participate in
the plan and (y) those persons, not
including any such employees, for whom a
plan account having a balance therein is
maintained, is less than 500, each of (A)
and (B) to be determined by Merrill Lynch in
the normal course prior to the date the plan
is established as an active plan on Merrill
Lynch's recordkeeping system (an "Active
Plan"); or
(b) the plan is one which is already investing
in shares of or interests in MLAM Funds and
the assets of the plan have an aggregate
value of less than $5 million, as determined
B-1
<PAGE>
by Merrill Lynch as of the date the plan
becomes an Active Plan.
For purposes of applying (a) and (b), there
are to be aggregated all assets of any Tax-
Qualified Plan maintained by the sponsor of
the Merrill Lynch Plan (or any of the
sponsor's affiliates) (determined to be such
by Merrill Lynch) which are being invested
in shares of or interests in MLAM Funds,
Alliance Mutual Funds or other mutual funds
made available pursuant to an agreement
between Merrill Lynch and the principal
underwriter thereof (or one of its
affiliates) and which are being held in a
Merrill Lynch account.
(ii) Plans for which the recordkeeper is not Merrill Lynch,
but which are recordkept on a daily valuation basis by
a recordkeeper with which Merrill Lynch has a
subcontracting or other alliance arrangement for the
performance of recordkeeping services, if the plan is
determined by Merrill Lynch to be so eligible and the
assets of the plan are less than $3 million.
Class B shares of the Fund held by any of the
above-described Merrill Lynch Plans are to be replaced at
Merrill Lynch's direction through conversion, exchange or
otherwise by Class A shares of the Fund on the earlier of
the date that the value of the plan's aggregate assets first
equals or exceeds $5 million or the date on which any Class
B share of the Fund held by the plan would convert to a
Class A share of the Fund as described under "Purchase of
Shares" and "Redemption and Repurchase of Shares."
Any Tax Qualified Plan, including any Merrill Lynch
Plan, which does not purchase Class B shares of the Fund
without being subject to a contingent deferred sales charge
under the above criteria is eligible to purchase Class B
shares subject to a contingent deferred sales charge as well
as other classes of shares of the Fund as set forth above
under "Purchase of Shares" and "Redemption and Repurchase of
Shares."
B-2
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. Financial Statements and Exhibits.
(a) Financial Statements
No financial statements are included in this
Registration Statement since, on the date of filing, the
Registrant, being a newly organized corporation, has no
assets or known liabilities and has sold no shares of common
stock. Prior to the effective date of this Registration
Statement, the necessary financial statements will be filed
by amendment hereto.
(b) Exhibits
(1) Copy of Articles of Incorporation - filed herewith.
(2) Form of proposed By-Laws of the Registrant - filed
herewith.
(3) Not applicable.
(4) Not applicable.
(5) Form of proposed Advisory Agreement between the
Registrant and Alliance Capital Management L.P. -
filed herewith.
(6) (a) Form of proposed Distribution Services
Agreement between the Registrant and Alliance Fund
Distributors, Inc. - filed herewith.
(b) Form of Selected Dealer Agreement between
Alliance Fund Distributors, Inc. and selected
dealers offering shares of Registrant - filed
herewith.
(c) Form of Selected Agent Agreement between
Alliance Fund Distributors, Inc. and selected
agents making available shares of Registrant -
filed herewith.
C-1
<PAGE>
(7) Not applicable.
(8) Custodian Contract.*
(9) Form of proposed Transfer Agency Agreement between
the Registrant and Alliance Fund Services, Inc. -
filed herewith.
(10) (a) Opinion and Consent of Seward & Kissel.*
(b) Opinion and Consent of Venable, Baetjer and
Howard, LLP.*
(11) Consent of Independent Accountants.*
(12) Not applicable.
(13) Investment representation letter of Alliance
Capital Management L.P.*
(14) Not applicable.
(15) Form of proposed Rule 12b-1 Plan - See Exhibit 6(a)
hereto.
(16) Schedule for computation of performance
quotations.**
(18) Form of proposed Rule 18f - 3 Plan - filed
herewith.
Other Exhibits - Powers of Attorney.*
ITEM 25. Persons Controlled by or under Common Control with
Registrant.
None. The Registrant is a recently organized
corporation and has no outstanding shares of common stock.
___________________________
* To be filed in a pre-effective amendment
** To be filed in a post-effective amendment.
C-2
<PAGE>
ITEM 26. Number of Holders of Securities.
None. The Registrant is a recently organized
corporation and has not issued any securities as of the
date of this Registration Statement.
ITEM 27. Indemnification.
It is the Registrant's policy to indemnify its directors
and officers, employees and other agents to the maximum
extent permitted by Section 2-418 of the General
Corporation Law of the State of Maryland, which is
incorporated by reference herein, and as set forth in
Article EIGHTH of Registrant's Articles of
Incorporation, filed as Exhibit 1 hereto, Article VII
and Article VIII of Registrant's By-Laws, filed as
Exhibit 2 hereto, and Section 10 of the proposed
Distribution Services Agreement, filed as Exhibit 6(a)
hereto. The Adviser's liability for any loss suffered
by the Registrant or its shareholders is set forth in
Section 4 of the proposed Advisory Agreement, filed as
Exhibit 5 hereto.
Insofar as indemnification for liabilities arising under
the Securities Act may be permitted to directors,
officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that, in the opinion of the
Securities and Exchange Commission, such indemnification
is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that
a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection
with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question of
whether such indemnification by it is against public
policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
In accordance with Release No. IC-11330 (September 2,
1980), the Registrant will indemnify its directors,
officers, investment manager and principal underwriters
only if (1) a final decision on the merits was issued by
the court or other body before whom the proceeding was
brought that the person to be indemnified (the
C-3
<PAGE>
"indemnitee") was not liable by reason or willful
misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his
office ("disabling conduct") or (2) a reasonable
determination is made, based upon a review of the facts,
that the indemnitee was not liable by reason of
disabling conduct, by (a) the vote of a majority of a
quorum of the directors who are neither "interested
persons" of the Registrant as defined in section
2(a)(19) of the Investment Company Act of 1940 nor
parties to the proceeding ("disinterested, non-party
directors"), or (b) an independent legal counsel in a
written opinion. The Registrant will advance attorneys
fees or other expenses incurred by its directors,
officers, investment adviser or principal underwriters
in defending a proceeding, upon the undertaking by or on
behalf of the indemnitee to repay the advance unless it
is ultimately determined that he is entitled to
indemnification and, as a condition to the advance,
(1) the indemnitee shall provide a security for his
undertaking, (2) the Registrant shall be insured against
losses arising by reason of any lawful advances, or
(3) a majority of a quorum of disinterested, non-party
directors of the Registrant, or an independent legal
counsel in a written opinion, shall determine, based on
a review of readily available facts (as opposed to a
full trial-type inquiry), that there is reason to
believe that the indemnitee ultimately will be found
entitled to indemnification.
The Registrant participates in a joint
trustees/directors and officers liability insurance
policy issued by the ICI Mutual Insurance Company.
Coverage under this policy has been extended to
directors, trustees and officers of the investment
companies managed by Alliance Capital Management L.P.
Under this policy, outside trustees and directors are
covered up to the limits specified for any claim against
them for acts committed in their capacities as trustee
or director. A pro rata share of the premium for this
coverage is charged to each investment company and to
the Adviser.
ITEM 28. Business and Other Connections of Investment Adviser.
The descriptions of Alliance Capital Management L.P.
under the captions "Management of the Fund" in the
Prospectus and in the Statement of Additional
Information constituting Parts A and B, respectively, of
this Registration Statement are incorporated by
reference herein.
C-4
<PAGE>
The information as to the directors and executive
officers of Alliance Capital Management Corporation, the
general partner of Alliance Capital Management L.P., set
forth in Alliance Capital Management L.P.'s Form ADV
filed with the Securities and Exchange Commission on
April 21, 1988 (File No. 801-32361) and amended through
the date hereof, is incorporated by reference.
ITEM 29. Principal Underwriters.
(a) Alliance Fund Distributors, Inc. is the
Registrant's Principal Underwriter in
connection with the sale of shares of the
Registrant. Alliance Fund Distributors, Inc.
also acts as Principal Underwriter or
Distributor for the following investment
companies:
ACM Institutional Reserves, Inc.
AFD Exchange Reserves
The Alliance Fund, Inc.
Alliance All-Asia Investment Fund, Inc.
Alliance Balanced Shares, Inc.
Alliance Bond Fund, Inc.
Alliance Capital Reserves
Alliance Developing Markets Fund, Inc.
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 Income Builder Fund, Inc.
Alliance Institutional Funds, 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.
C-5
<PAGE>
Alliance Real Estate Investment Fund, Inc.
Alliance Regent/Sector Opportunity Fund, Inc.
Alliance Short-Term Multi-Market Trust, Inc.
Alliance Technology Fund, Inc.
Alliance Utility Income Fund, Inc.
Alliance Variable Products Series Fund, Inc.
Alliance World Income Trust, Inc.
Alliance Worldwide Privatization Fund, Inc.
The Alliance Portfolios
(b) The following are the Directors and officers of Alliance
Fund Distributors, Inc., the principal place of business
of which is 1345 Avenue of the Americas, New York, New
York, 10105.
NAME POSITIONS AND OFFICES POSITIONS AND OFFICES
WITH UNDERWRITER WITH REGISTRANT
Michael J. Laughlin Chairman
Robert L. Errico President
David Conine Executive Vice
President
Richard K. Saccullo Executive Vice
President
Edmund P. Bergan, Jr. Senior Vice President, Chairman and
General Counsel and President
Secretary
Karen J. Bullot Senior Vice President
James S. Comforti Senior Vice President
James L. Cronin Senior Vice President
Daniel J. Dart Senior Vice President
Richard A. Davies Senior Vice President,
Managing Director
Byron M. Davis Senior Vice President
Anne S. Drennan Senior Vice President
and Treasurer
Mark J. Dunbar Senior Vice President
Donald N. Fritts Senior Vice President
C-6
<PAGE>
Bradley F. Hanson Senior Vice President
Geoffrey L. Hyde Senior Vice President
Robert H. Joseph, Jr. Senior Vice President
and Chief Financial Officer
Richard E. Khaleel Senior Vice President
Stephen R. Laut Senior Vice President
Daniel D. McGinley Senior Vice President
Ryne A. Nishimi Senior Vice President
Antonios G. Poleondakis Senior Vice President
Robert E. Powers Senior Vice President
Gregory K. Shannahan Senior Vice President
Joseph F. Sumanski Senior Vice President
Peter J. Szabo Senior Vice President
Nicholas K. Willett Senior Vice President
Richard A. Winge Senior Vice President
Jamie A. Atkinson Vice President
Benji A. Baer Vice President
Kenneth F. Barkoff Vice President
Casimir F. Bolanowski Vice President
Michael E. Brannan Vice President
Timothy W. Call Vice President
Kevin T. Cannon Vice President
John R. Carl Vice President
William W. Collins, Jr. Vice President
Leo H. Cook Vice President
Richard W. Dabney Vice President
C-7
<PAGE>
John F. Dolan Vice President
John C. Endahl Vice President
Sohaila S. Farsheed Vice President
William C. Fisher Vice President
Gerard J. Friscia Vice President and
Controller
Andrew L. Gangolf Vice President and
Assistant General
Counsel
Mark D. Gersten Vice President Treasurer and Chief
Financial Officer
Joseph W. Gibson Vice President
John Grambone Vice President
Charles M. Greenberg Vice President
Alan Halfenger Vice President
William B. Hanigan Vice President
Scott F. Heyer Vice President
George R. Hrabovsky Vice President
Valerie J. Hugo Vice President
Scott Hutton Vice President
Thomas K. Intoccia Vice President
Larry P. Johns Vice President
Richard D. Keppler Vice President
Gwenn M. Kessler Vice President
Donna M. Lamback Vice President
James M. Liptrot Vice President
James P. Luisi Vice President
Christopher J. MacDonald Vice President
C-8
<PAGE>
Michael F. Mahoney Vice President
Shawn P. McClain Vice President
Jeffrey P. Mellas Vice President
Thomas F. Monnerat Vice President
Christopher W. Moore Vice President
Joanna D. Murray Vice President
Nicole Nolan-Koester Vice President
John C. O'Connell Vice President
John J. O'Connor Vice President
James J. Posch Vice President
Domenick Pugliese Vice President & Assistant
Assistant General Secretary
Counsel
Bruce W. Reitz Vice President
Dennis A. Sanford Vice President
Karen C. Satterberg Vice President
Robert C. Schultz Vice President
Raymond S. Sclafani Vice President
Richard J. Sidell Vice President
Teris A. Sinclair Vice President
Andrew D. Strauss Vice President
Michael J. Tobin Vice President
Joseph T. Tocyloski Vice President
Thomas J. Vaughn Vice President
Martha D. Volcker Vice President
Patrick E. Walsh Vice President
William C. White Vice President
C-9
<PAGE>
Emilie D. Wrapp Vice President &
Special Counsel
Michael W. Alexander Assistant Vice
President
Richard J. Appaluccio Assistant Vice
President
Charles M. Barrett Assistant Vice
President
Robert F. Brendli Assistant Vice
President
Maria L. Carreras Assistant Vice
President
John P. Chase Assistant Vice
President
Russell R. Corby Assistant Vice
President
Jean A. Cronin Assistant Vice
President
John W. Cronin Assistant Vice
President
Terri J. Daly Assistant Vice
President
Ralph A. DiMeglio Assistant Vice
President
Faith C. Dunn Assistant Vice
President
John E. English Assistant Vice
President
Duff C. Ferguson Assistant Vice
President
Brian S. Hanigan Assistant Vice
President
James J. Hill Assistant Vice
President
C-10
<PAGE>
Eric. G. Kalender Assistant Vice
President
Robin L. Kraebel Assistant Vice
President
Edward W. Kelly Assistant Vice
President
Michael Laino Assistant Vice
President
Nicholas J. Lapi Assistant Vice
President
Patrick Look Assistant Vice
President &
Assistant Treasurer
Kristine J. Luisi Assistant Vice
President
Richard F. Meier Assistant Vice
President
Richard J. Olszewski Assistant Vice
President
Catherine N. Peterson Assistant Vice
President
Rizwan A. Raja Assistant Vice
President
Carol H. Rappa Assistant Vice
President
Clara Sierra Assistant Vice
President
Gayle S. Stamer Assistant Vice
President
Vincent T. Strangio Assistant Vice
President
Marie R. Vogel Assistent Vice
President
Wesley S. Williams Assistant Vice
President
C-11
<PAGE>
Matthew Witschel Assitant Vice
President
Christopher J. Zingaro Assistant Vice
President
Mark R. Manley Assistant Secretary
(c) Not applicable. Registrant is a newly organized
corporation.
ITEM 30. Location of Accounts and Records.
The majority of the accounts, books and other documents
required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and the rules thereunder
are maintained as follows: journals, ledgers,
securities records and other original records are
maintained principally at the offices of Alliance Fund
Services, Inc., 500 Plaza Drive, Secaucus, New Jersey,
07094 and at the offices of [ ], the
Registrant's custodian, [ ]. All other
records so required to be maintained are maintained at
the offices of Alliance Capital Management L.P., 1345
Avenue of the Americas, New York, New York, 10105.
ITEM 31. Management Services.
Not applicable.
ITEM 32. Undertakings.
The Registrant undertakes to provide assistance to
shareholders in communications concerning the removal of
any Director of the Fund in accordance with Section 16
of the Investment Company Act of 1940.
C-12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933, as amended, and the Investment Company Act of 1940, as
amended, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in The City of New York and the State
of New York, on the 22nd day of May, 1998.
Alliance Private Investors Series, Inc.
/s/Edmund P. Bergan, Jr.
________________________
Edmund P. Bergan, Jr.
Chairman and President
Pursuant to the requirements of the Securities Act of
1933, as amended, this Registration Statement has been signed
below by the following persons in the capacities and on the date
indicated.
Signature Title Date
_____________ __________ ________
(1) Principal Executive Officer:
/s/ Edmund P. Bergan, Jr. Chairman and May 22, 1998
______________________ President
Edmund P. Bergan, Jr.
(2) Principal Financial
and Accounting Officer:
/s/ Mark D. Gersten Treasurer May 22, 1998
_____________________ and Chief
Mark D. Gersten Financial
Officer
(3) Sole Director:
/s/ Edmund P. Bergan, Jr.
_________________________ May 22, 1998
Edmund P. Bergan, Jr.
C-13
<PAGE>
Index To Exhibits
(1) Articles of Incorporation.
(2) Form of proposed By-Laws.
(5) Form of proposed Advisory Agreement between the
Registrant and Alliance Capital Management L.P.
(6) (a) Form of proposed Distribution Services
Agreement between the Registrant and Alliance Fund Distributors,
Inc.
(b) Form of Selected Dealer Agreement between
Alliance Fund Distributors, Inc. and selected dealers offering
shares of the Registrant.
(c) Form of Selected Agent Agreement between
Alliance Fund Distributors, Inc., and selected agents making
available shares of the Registrant.
(9) Form of proposed Transfer Agency Agreement between
the Registrant and Alliance Fund Services, Inc.
(18) Form of proposed Rule 18f-3 plan.
C-14
00250242.AE5
<PAGE>
ARTICLES OF INCORPORATION
OF
ALLIANCE PRIVATE INVESTORS SERIES, INC.
FIRST: (1) The name of the incorporator is Maureen
R. Hurley.
(2) The incorporator's post office address is
One Battery Park Plaza, New York, New York 10004.
(3) The incorporator is over eighteen years
of age.
(4) The incorporator is forming the
corporation named in these Articles of Incorporation under the
general laws of the State of Maryland.
SECOND: The name of the corporation (hereinafter
called the Corporation) is Alliance Private Investors Series,
Inc.
THIRD: (1) The purposes for which the Corporation is
formed are to conduct, operate and carry on the business of an
investment company.
(2) The Corporation may engage in any other
business and shall have all powers conferred upon or permitted to
corporations by the Maryland General Corporation Law.
FOURTH: The post office address of the principal
office of the Corporation within the State of Maryland is 300
East Lombard Street, Baltimore, Maryland 21202 in care of The
Corporation Trust, Incorporated. The resident agent of the
Corporation in the State of Maryland is The Corporation Trust,
Incorporated, 300 East Lombard Street, Baltimore, Maryland 21202,
a Maryland Corporation.
FIFTH: (1) The total number of shares of capital
stock which the Corporation shall have authority to issue is nine
billion (9,000,000,000), all of which shall be Common Stock
having a par value of one-tenth of one cent ($.001) per share and
an aggregate par value of nine million dollars ($9,000,000).
Until such time as the Board of Directors shall provide otherwise
in accordance with paragraph (1)(d) of Article SEVENTH hereof,
three billion (3,000,000,000) of the authorized shares of Common
Stock of the Corporation are designated as Class A Common Stock,
three billion (3,000,000,000) of such shares are designated as
<PAGE>
Class B Common Stock and three billion (3,000,000,000) of such
shares are designated as Class C Common Stock.
(2) As more fully set forth hereafter, the assets
and liabilities and the income and expenses of each class of the
Corporation's stock shall be determined separately from those of
each other class of the Corporation's stock and, accordingly, the
net asset value, the dividends and distributions payable to
holders, and the amounts distributable in the event of
dissolution of the Corporation to holders of shares of the
Corporation's stock may vary from class to class.
(3) Except as otherwise provided herein, all
consideration received by the Corporation for the issuance or
sale of shares of a class of stock of the Corporation, together
with all funds derived from any investment and reinvestment
thereof, shall irrevocably belong to that class for all purposes,
subject only to any automatic conversion of one class of stock
into another, as hereinafter provided for, and to the rights of
creditors, and shall be so recorded upon the books of account of
the Corporation, and are herein referred to as "assets belonging
to" such class.
(4) The assets belonging to a class shall be
charged with the liabilities of the Corporation in respect of
such class and with such class' share of the general liabilities
of the Corporation, in the latter case in the proportion that the
net asset value of such class bears to the net asset value of all
classes or as otherwise determined by the Board of Directors in
accordance with law. The determination of the Board of Directors
shall be conclusive as to the allocation of liabilities,
including accrued expenses and reserves, to a class.
(5) The assets attributable to the Class A Common
Stock, the assets attributable to the Class B Common Stock and
the assets attributable to the Class C Common Stock shall be
invested in the same investment portfolio of the Corporation, and
notwithstanding the foregoing provisions of paragraphs (3) and
(4) of this Article FIFTH, the allocation of investment income
and realized and unrealized capital gains and losses and expenses
and liabilities of the Corporation among the classes of stock of
the Corporation shall be determined by the Board of Directors in
a manner that is consistent with the Investment Company Act of
1940, the rules and regulations thereunder, and the
interpretations thereof, in each case as from time to time
amended, modified or superseded. The determination of the Board
of Directors shall be conclusive as to the allocation of
investment income and realized and unrealized capital gains and
losses, expenses and liabilities (including accrued expenses and
reserves) and assets to a particular class or classes.
2
<PAGE>
(6) Shares of each class of stock shall be
entitled to such dividends or distributions, in stock or in cash
or both, as may be declared from time to time by the Board of
Directors with respect to such class. Specifically, and without
limiting the generality of the foregoing, the dividends and
distributions of investment income and capital gains with respect
to the Class A Common Stock, Class B Common Stock and Class C
Common Stock may vary with respect to each such class to reflect
differing allocations of the expenses of the Corporation among
the holders of the classes and any resultant differences between
the net asset values per share of the classes, to such extent and
for such purposes as the Board of Directors may deem appropriate.
The Board of Directors may provide that dividends shall be
payable only with respect to those shares of stock that have been
held of record continuously by the stockholder for a specified
period, not to exceed 72 hours, prior to the record date of the
dividend.
(7) Except as provided below, on each matter
submitted to a vote of the stockholders, each holder of stock
shall be entitled to one vote for each share standing in his or
her name on the books of the Corporation. Subject to any
applicable requirements of the Investment Company Act of 1940, as
from time to time in effect, or rules or orders of the Securities
and Exchange Commission or any successor thereto, or other
applicable law, all holders of shares of stock shall vote as a
single class except with respect to any matter which affects only
one or more (but less than all) classes of stock, in which case
only the holders of shares of the classes affected shall be
entitled to vote. Without limiting the generality of the
foregoing, and subject to any applicable requirements of the
Investment Company Act of 1940, as from time to time in effect,
or rules or orders of the Securities and Exchange Commission or
any successor thereto, or other applicable law, the holders of
each of the Class A Common Stock, Class B Common Stock and
Class C Common Stock shall have, respectively, with respect to
any matter submitted to a vote of stockholders (i) exclusive
voting rights with respect to any such matter that only affects
the class of Common Stock of which they are holders, including,
without limitation, the provisions of any distribution plan
adopted by the Corporation pursuant to Rule 12b-1 under the
Investment Company Act of 1940 (a "Plan") with respect to the
class of which they are holders and (ii) no voting rights with
respect to the provisions of any Plan that affects one or more of
such other classes of Common Stock, but not the class of which
they are holders, or with respect to any other matter that does
not affect the class of Common Stock of which they are holders.
(8) In the event of the liquidation or dissolution
of the Corporation, stockholders of each class of the
Corporation's stock shall be entitled to receive, as a class, out
3
<PAGE>
of the assets of the Corporation available for distribution to
stockholders, but other than general assets not attributable to
any particular class of stock, the assets attributable to the
class less the liabilities allocated to that class; and the
assets so distributable to the stockholders of any class of stock
shall be distributed among such stockholders in proportion to the
number of shares of the class held by them and recorded on the
books of the Corporation. In the event that there are any
general assets not attributable to any particular class of stock,
and such assets are available for distribution, the distribution
shall be made to the holders of all classes in proportion to the
net asset value of the respective classes or as otherwise
determined by the Board of Directors.
(9) (a) Each holder of stock may require the
Corporation to redeem all or any part of the stock owned by that
holder, upon request to the Corporation or its designated agent,
at the net asset value of the shares of stock next determined
following receipt of the request in a form approved by the
Corporation and accompanied by surrender of the certificate or
certificates for the shares, if any, less the amount of any
applicable redemption charge, deferred sales charge, redemption
fee or other amount imposed by the Board of Directors (to the
extent consistent with applicable law). The Board of Directors
may establish procedures for redemption of stock.
(b) The proceeds of the redemption of a share
(including a fractional share) of any class of capital stock of
the Corporation shall be reduced by the amount of any contingent
deferred sales charge, redemption fee or other amount payable on
such redemption pursuant to the terms of issuance of such share.
(c) (i) The term "Minimum Amount" when used
herein shall mean two hundred dollars ($200) unless otherwise
fixed by the Board of Directors from time to time, provided that
the Minimum Amount may not in any event exceed five million
dollars ($5,000,000). The Board of Directors may establish
differing Minimum Amounts for categories of holders of stock
based on such criteria as the Board of Directors may deem
appropriate.
(ii) If the net asset value of the
shares of a class of stock held by a stockholder shall be less
than the Minimum Amount then in effect with respect to the
category of holders in which the stockholder is included, the
Corporation may redeem all of those shares, upon notice given to
the holder in accordance with paragraph (iii) of this
subsection (c), to the extent that the Corporation may lawfully
effect such redemption under the laws of the State of Maryland.
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(iii) The notice referred to in
paragraph (ii) of this subsection (c) shall be in writing
personally delivered or deposited in the mail, at least thirty
days (or such other number of days as may be specified from time
to time by the Board of Directors) prior to such redemption. If
mailed, the notice shall be addressed to the stockholder at his
post office address as shown on the books of the Corporation, and
sent by first class mail, postage prepaid. The price for shares
acquired by the Corporation pursuant to this subsection (c) shall
be an amount equal to the net asset value of such shares, less
the amount of any applicable redemption charge, deferred sales
charge, redemption fee or other amount payable on such
redemptions pursuant to the terms of issuance of such shares or
imposed by the Board of Directors (to the extent consistent with
applicable law) or provided for in the charter of the
Corporation.
(d) Payment by the Corporation for
shares of stock of the Corporation surrendered to it for
redemption shall be made by the Corporation within seven days of
such surrender out of the funds legally available therefor,
provided that the Corporation may suspend the right of the
stockholders to redeem shares of stock and may postpone the right
of those holders to receive payment for any shares when permitted
or required to do so by applicable statutes or regulations.
Payment of the aggregate price of shares surrendered for
redemption may be made in cash or, at the option of the
Corporation, wholly or partly in such portfolio securities of the
Corporation as the Corporation shall select.
(10) At such times as may be determined by the
Board of Directors (or with the authorization of the Board of
Directors, by the officers of the Corporation) in accordance with
the Investment Company Act of 1940, applicable rules and
regulations thereunder and applicable rules and regulations of
the National Association of Securities Dealers, Inc. and from
time to time reflected in the registration statement of the
Corporation (the "Corporation's Registration Statement"), shares
of a particular class of stock of the Corporation or certain
shares of a particular class of stock of the Corporation may be
automatically converted into shares of another class of stock of
the Corporation based on the relative net asset values of such
classes at the time of conversion, subject, however, to any
conditions of conversion that may be imposed by the Board of
Directors (or with the authorization of the Board of Directors,
by the officers of the Corporation) and reflected in the
Corporation's Registration Statement. The terms and conditions
of such conversion may vary within and among the classes to the
extent determined by the Board of Directors (or with the
authorization of the Board of Directors, by the officers of the
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Corporation) and set forth in the Corporation's Registration
Statement.
(11) For the purpose of allowing the net asset
value per share of a class of the Corporation's stock to remain
constant, the Corporation shall be entitled to declare and pay
and/or credit as dividends daily the net income (which may
include or give effect to realized and unrealized gains and
losses, as determined in accordance with the Corporation's
accounting and portfolio valuation policies) of the Corporation
attributable to the assets attributable to that class. If the
amount so determined for any day is negative, the Corporation
shall be entitled, without the payment of monetary compensation
but in consideration of the interest of the Corporation and its
stockholders in maintaining a constant net asset value per share
of that class, to redeem pro rata from all the holders of record
of shares of that class at the time of such redemption (in
proportion to their respective holdings thereof) sufficient
outstanding shares of that class, or fractions thereof, as shall
permit the net asset value per share of that class to remain
constant.
(12) The Corporation may issue shares of stock in
fractional denominations to the same extent as its whole shares,
and shares in fractional denominations shall be shares of stock
having proportionately to the respective fractions represented
thereby all the rights of whole shares, including, without
limitation, the right to vote, the right to receive dividends and
distributions, and the right to participate upon liquidation of
the Corporation, but excluding any right to receive a stock
certificate representing fractional shares.
(13) No stockholder shall be entitled to any
preemptive right other than as the Board of Directors may
establish.
SIXTH: The initial number of directors of the
Corporation shall be one. The number of directors of the
Corporation may be changed pursuant to the By-Laws of the
Corporation. The name of the person who shall act as director of
the Corporation until the first annual meeting or until his
successor is chosen and qualified is Edmund P. Bergan, Jr.
SEVENTH: The following provisions are inserted for the
purpose of defining, limiting and regulating the powers of the
Corporation and of the Board of Directors and stockholders.
(1) In addition to its other powers explicitly or
implicitly granted under these Articles of Incorporation, by law
or otherwise, the Board of Directors of the Corporation:
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(a) is expressly authorized to make, alter,
amend or repeal the By-Laws of the Corporation;
(b) may from time to time determine whether,
to what extent, at what times and places, and under what
conditions and regulations the accounts and books of the
Corporation, or any of them, shall be open to the inspection of
the stockholders, and no stockholder shall have any right to
inspect any account, book or document of the Corporation except
as conferred by statute or as authorized by the Board of
Directors of the Corporation;
(c) is empowered to authorize, without
stockholder approval, the issuance and sale from time to time of
shares of stock of any class or classes of the Corporation
whether now or hereafter authorized and securities convertible
into shares of stock of the Corporation of any class or classes,
whether now or hereafter authorized, for such consideration as
the Board may deem advisable.
(d) is authorized to classify or to
reclassify, from time to time, any unissued shares of stock of
the Corporation, whether now or hereafter authorized, by setting,
changing or eliminating the preferences, conversion or other
rights, voting powers, restrictions, limitations as to dividends,
qualifications or terms and conditions of or rights to require
redemption of the stock. The provisions of these Articles of
Incorporation (including those in Article FIFTH hereof) shall
apply to each class of stock unless otherwise provided by the
Board of Directors prior to issuance of any shares of that class;
and
(e) is authorized to adopt procedures for
determination of and to maintain constant the net asset value of
shares of any class of the Corporation's stock.
(2) Notwithstanding any provision of the Maryland
General Corporation Law requiring a greater proportion than a
majority of the votes of all classes or of any class of the
Corporation's stock entitled to be cast in order to take or
authorize any action, any such action may be taken or authorized
upon the concurrence of a majority of the aggregate number of
votes entitled to be cast thereon subject to any applicable
requirements of the Investment Company Act of 1940, as from time
to time in effect, or rules or orders of the Securities and
Exchange Commission or any successor thereto.
(3) The presence in person or by proxy of the
holders of shares entitled to cast one-third of the votes
entitled to be cast (without regard to class) shall constitute a
quorum at any meeting of the stockholders, except with respect to
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any matter which, under applicable statutes or regulatory
requirements, requires approval by a separate vote of one or more
classes of stock, in which case the presence in person or by
proxy of the holders of shares entitled to cast one-third of the
votes entitled to be cast by each class entitled to vote as a
class on the matter shall constitute a quorum.
(4) Any determination made in good faith by or
pursuant to the direction of the Board of Directors, as to the
amount of the assets, debts, obligations, or liabilities of the
Corporation as to the amount of any reserves or charges set up
and the propriety thereof, as to the time of or purpose for
creating such reserves or charges, as to the use, alteration or
cancellation of any reserves or charges (whether or not any debt,
obligation, or liability for which such reserves or charges shall
have been created shall be then or thereafter required to be paid
or discharged), as to the value of or the method of valuing any
investment owned or held by the Corporation, as to market value
or fair value of any investment or fair value of any other asset
of the Corporation, as to the allocation of any asset of the
Corporation to a particular class or classes of the Corporation's
stock, as to the charging of any liability of the Corporation to
a particular class or classes of the Corporation's stock, as to
the number of shares of the Corporation outstanding, as to the
estimated expense to the Corporation in connection with purchases
of its shares, as to the ability to liquidate investments in
orderly fashion, or as to any other matters relating to the
issue, sale, redemption or other acquisition or disposition of
investments or shares of the Corporation, shall be final and
conclusive and shall be binding upon the Corporation and all
holders of its shares, past, present and future, and shares of
the Corporation are issued and sold on the condition and
understanding that any and all such determinations shall be
binding as aforesaid.
EIGHTH: (1) To the full extent that limitations on
the liability of directors and officers are permitted by the
Maryland General Corporation Law, no director or officer of the
Corporation shall have any liability to the Corporation or its
stockholders for money damages. This limitation on liability
applies to events occurring at the time a person serves as a
director or officer of the Corporation whether or not that person
is a director or officer at the time of any proceeding in which
liability is asserted.
(2) The Corporation shall indemnify and
advance expenses to its currently acting and its former directors
to the full extent that indemnification of directors is permitted
by the Maryland General Corporation Law. The Corporation shall
indemnify and advance expenses to its officers to the same extent
as its directors and may do so to such further extent as is
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consistent with law. The Board of Directors may by By-Law,
resolution or agreement make further provision for
indemnification of directors, officers, employees and agents to
the full extent permitted by the Maryland General Corporation
Law.
(3) No provision of this Article shall be
effective to protect or purport to protect any director or
officer of the Corporation against any liability to the
Corporation or its stockholders to which he or she would
otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in
the conduct of his or her office.
(4) References to the Maryland General
Corporation Law in this Article are to that law as from time to
time amended. No amendment to the Charter of the Corporation
shall affect any right of any person under this Article based on
any event, omission or proceeding prior to the amendment.
NINTH: The Corporation reserves the right to amend,
alter, change or repeal any provision contained in its Charter in
the manner now or hereafter prescribed by the laws of the State
of Maryland, including any amendment which alters the contract
rights, as expressly set forth in the Charter, of any outstanding
stock, and all rights conferred upon stockholders herein are
granted subject to this reservation.
IN WITNESS WHEREOF, the undersigned, being the
incorporator of the Corporation, has adopted and signed these
Articles of Incorporation and does hereby acknowledge that the
adoption and signing are her act.
/s/ Maureen R. Hurley
_______________________________
Maureen R. Hurley
Dated: May 20, 1998
9
00250242.AD5
<PAGE>
BY-LAWS
OF
ALLIANCE PRIVATE INVESTORS SERIES, INC.
________________
ARTICLE I
Offices
Section 1. Principal Office in Maryland. The
Corporation shall have a principal office in the City of
Baltimore, State of Maryland.
Section 2. Other Offices. The Corporation may have
offices also at such other places within and without the State of
Maryland as the Board of Directors may from time to time
determine or as the business of the Corporation may require.
ARTICLE II
Meetings of Stockholders
Section 1. Place of Meeting. Meetings of stockholders
shall be held at such place, either within the State of Maryland
or at such other place within the United States, as shall be
fixed from time to time by the Board of Directors.
Section 2. Annual Meetings. Annual meetings of
stockholders shall be held on a date fixed from time to time by
the Board of Directors not less than ninety nor more than one
hundred twenty days following the end of each fiscal year of the
Corporation, for the election of directors and the transaction of
any other business within the powers of the Corporation;
<PAGE>
provided, however, that the Corporation shall not be required to
hold an annual meeting in any year in which the election of
directors is not required to be acted on by stockholders under
the Investment Company Act of 1940.
Section 3. Notice of Annual Meeting. Written or
printed notice of the annual meeting, stating the place, date and
hour thereof, shall be given to each stockholder entitled to vote
thereat and each other stockholder entitled to notice thereof not
less than ten nor more than ninety days before the date of the
meeting.
Section 4. Special Meetings. Special meetings of
stockholders may be called by the chairman, the president or by
the Board of Directors and shall be called by the secretary upon
the written request of holders of shares entitled to cast not
less than a majority of all the votes entitled to be cast at such
meeting. Such request shall state the purpose or purposes of
such meeting and the matters proposed to be acted on thereat. In
the case of such request for a special meeting, upon payment by
such stockholders to the Corporation of the estimated reasonable
cost of preparing and mailing a notice of such meeting, the
secretary shall give the notice of such meeting. The secretary
shall not be required to call a special meeting to consider any
matter which is substantially the same as a matter acted upon at
any special meeting of stockholders held within the preceding
twelve months unless requested to do so by holders of shares
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entitled to cast not less than a majority of all votes entitled
to be cast at such meeting. Notwithstanding the foregoing,
special meetings of stockholders for the purpose of voting upon
the question of removal of any director or directors of the
Corporation shall be called by the secretary upon the written
request of holders of shares entitled to cast not less than ten
percent of all the votes entitled to be cast at such meeting.
Section 5. Notice of Special Meeting. Written or
printed notice of a special meeting of stockholders, stating the
place, date, hour and purpose thereof, shall be given by the
secretary to each stockholder entitled to vote thereat and each
other stockholder entitled to notice thereof not less than ten
nor more than ninety days before the date fixed for the meeting.
Section 6. Business of Special Meetings. Business
transacted at any special meeting of stockholders shall be
limited to the purposes stated in the notice thereof.
Section 7. Quorum. The holders of shares entitled to
cast one-third of the votes entitled to be cast thereat, present
in person or represented by proxy, shall constitute a quorum at
all meetings of the stockholders for the transaction of business,
except with respect to any matter which, under applicable
statutes or regulatory requirements, requires approval by a
separate vote of one or more classes of stock, in which case the
presence in person or by proxy of the holders of one-third of the
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shares of stock of each class required to vote as a class on the
matter shall constitute a quorum.
Section 8. Voting. When a quorum is present at any
meeting, the affirmative vote of a majority of the votes cast,
or, with respect to any matter requiring a class vote, the
affirmative vote of a majority of the votes cast of each class
entitled to vote as a class on the matter, shall decide any
question brought before such meeting (except that directors may
be elected by the affirmative vote of a plurality of the votes
cast), unless the question is one upon which by express provision
of the Investment Company Act of 1940, as from time to time in
effect, or other statutes or rules or orders of the Securities
and Exchange Commission or any successor thereto or of the
Articles of Incorporation a different vote is required, in which
case such express provision shall govern and control the decision
of such question.
Section 9. Proxies. Each stockholder shall at every
meeting of stockholders be entitled to one vote in person or by
proxy for each share of the stock having voting power held by
such stockholder, but no proxy shall be voted after eleven months
from its date, unless otherwise provided in the proxy.
Section 10. Record Date. In order that the Corporation
may determine the stockholders entitled to notice of or to vote
at any meeting of stockholders or any adjournment thereof, to
express consent to corporate action in writing without a meeting,
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or to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board of Directors may
fix, in advance, a record date which shall be not more than
ninety days and, in the case of a meeting of stockholders, not
less than ten days prior to the date on which the particular
action requiring such determination of stockholders is to be
taken. In lieu of fixing a record date, the Board of Directors
may provide that the stock transfer books shall be closed for a
stated period, but not to exceed, in any case, twenty days. If
the stock transfer books are closed for the purpose of
determining stockholders entitled to notice of or to vote at a
meeting of stockholders, such books shall be closed for at least
ten days immediately preceding such meeting. If no record date
is fixed and the stock transfer books are not closed for the
determination of stockholders: (1) The record date for the
determination of stockholders entitled to notice of, or to vote
at, a meeting of stockholders shall be at the close of business
on the day on which notice of the meeting of stockholders is
mailed or the day thirty days before the meeting, whichever is
the closer date to the meeting; and (2) The record date for the
determination of stockholders entitled to receive payment of a
dividend or an allotment of any rights shall be at the close of
business on the day on which the resolution of the Board of
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Directors, declaring the dividend or allotment of rights, is
adopted, provided that the payment or allotment date shall not be
more than sixty days after the date of the adoption of such
resolution.
Section 11. Inspectors of Election. The directors, in
advance of any meeting, may, but need not, appoint one or more
inspectors to act at the meeting or any adjournment thereof. If
an inspector or inspectors are not appointed, the person
presiding at the meeting may, but need not, appoint one or more
inspectors. In case any person who may be appointed as an
inspector fails to appear or act, the vacancy may be filled by
appointment made by the directors in advance of the meeting or at
the meeting by the person presiding thereat. Each inspector, if
any, before entering upon the discharge of his duties, shall take
and sign an oath faithfully to execute the duties of inspector at
such meeting with strict impartiality and according to the best
of his ability. The inspectors, if any, shall determine the
number of shares outstanding and the voting power of each, the
shares represented at the meeting, the existence of a quorum, the
validity and effect of proxies, and shall receive votes, ballots
or consents, hear and determine all challenges and questions
arising in connection with the right to vote, count and tabulate
all votes, ballots or consents, determine the result, and do such
acts as are proper to conduct the election or vote with fairness
to all stockholders. On request of the person presiding at the
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meeting or any stockholder, the inspector or inspectors, if any,
shall make a report in writing of any challenge, question or
matter determined by him or them and execute a certificate of any
fact found by him or them.
Section 12. Informal Action by Stockholders. Except to
the extent prohibited by the Investment Company Act of 1940, as
from time to time in effect, or rules or orders of the Securities
and Exchange Commission or any successor thereto, any action
required or permitted to be taken at any meeting of stockholders
may be taken without a meeting if a consent in writing, setting
forth such action, is signed by all the stockholders entitled to
vote on the subject matter thereof and any other stockholders
entitled to notice of a meeting of stockholders (but not to vote
thereat) have waived in writing any rights which they may have to
dissent from such action, and such consent and waiver are filed
with the records of the Corporation.
Section 13. Adjournment. Any meeting of the
stockholders may be adjourned from time to time, without notice
other than by announcement at the meeting at which the
adjournment was taken. In the absence of a quorum, the
stockholders present in person or by proxy, by majority vote of
those present and without notice other than by announcement at
the meeting, may adjourn the meeting from time to time as
provided for in this Section 13 of Article II. At any adjourned
meeting at which a quorum shall be present, any action may be
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taken that could have been taken at the meeting originally
called. A meeting of the stockholders may not be adjourned
without further notice to a date more than 120 (one hundred and
twenty) days after the original record date determined pursuant
to Section 10 of this Article II.
ARTICLE III
Board of Directors
Section 1. Number of Directors. The number of
directors constituting the entire Board of Directors (which
initially was fixed at one in the Corporation's Articles of
Incorporation) may be increased or decreased from time to time by
the vote of a majority of the entire Board of Directors within
the limits permitted by law but at no time may be more than
twenty, but the tenure of office of a director in office at the
time of any decrease in the number of directors shall not be
affected as a result thereof. The directors shall be elected to
hold offices at the annual meeting of stockholders, except as
provided in Section 2 of this Article, and each director shall
hold office until the next annual meeting of stockholders or
until his successor is elected and qualified. Any director may
resign at any time upon written notice to the Corporation. Any
director may be removed, either with or without cause, at any
meeting of stockholders duly called and at which a quorum is
present by the affirmative vote of the majority of the votes
entitled to be cast thereon, and the vacancy in the Board of
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Directors caused by such removal may be filled by the
stockholders at the time of such removal. Directors need not be
stockholders.
Section 2. Vacancies and Newly-Created Directorships.
Any vacancy occurring in the Board of Directors for any cause
other than by reason of an increase in the number of directors
may be filled by a majority of the remaining members of the Board
of Directors although such majority is less than a quorum. Any
vacancy occurring by reason of an increase in the number of
directors may be filled by a majority of the entire Board of
Directors then in office. A director elected by the Board of
Directors to fill a vacancy shall be elected to hold office until
the next annual meeting of stockholders or until his successor is
elected and qualifies.
Section 3. Powers. The business and affairs of the
Corporation shall be managed by or under the direction of the
Board of Directors which may exercise all such powers of the
Corporation and do all such lawful acts and things as are not by
statute or by the Articles of Incorporation or by these By-Laws
conferred upon or reserved to the stockholders.
Section 4. Meetings. The Board of Directors of the
Corporation or any committee thereof may hold meetings, both
regular and special, either within or without the State of
Maryland. Regular meetings of the Board of Directors may be held
without notice at such time and at such place as shall from time
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<PAGE>
to time be determined by the Board of Directors. Special
meetings of the Board of Directors may be called by the chairman,
the president or by two or more directors. Notice of special
meetings of the Board of Directors shall be given by the
secretary to each director at least three days before the meeting
if by mail or at least 24 hours before the meeting if given in
person or by telephone or by telegraph. The notice need not
specify the business to be transacted.
Section 5. Quorum and Voting. During such times when
the Board of Directors shall consist of more than one director, a
quorum for the transaction of business at meetings of the Board
of Directors shall consist of two of the directors in office at
the time but in no event shall a quorum consist of less than one-
third of the entire Board of Directors. The action of a majority
of the directors present at a meeting at which a quorum is
present shall be the action of the Board of Directors. If a
quorum shall not be present at any meeting of the Board of
Directors, the directors present thereat may adjourn the meeting
from time to time, without notice other than announcement at the
meeting, until a quorum shall be present.
Section 6. Committees. The Board of Directors may
appoint from among its members an executive committee and other
committees of the Board of Directors, each committee to be
composed of two or more of the directors of the Corporation. The
Board of Directors may delegate to such committees any of the
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<PAGE>
powers of the Board of Directors except those which may not by
law be delegated to a committee. Such committee or committees
shall have the name or names as may be determined from time to
time by resolution adopted by the Board of Directors. Unless the
Board of Directors designates one or more directors as alternate
members of any committee, who may replace an absent or
disqualified member at any meeting of the committee, the members
of any such committee present at any meeting and not disqualified
from voting may, whether or not they constitute a quorum, appoint
another member of the Board of Directors to act at the meeting in
the place of any absent or disqualified member of such committee.
At meetings of any such committee, a majority of the members or
alternate members of such committee shall constitute a quorum for
the transaction of business and the act of a majority of the
members or alternate members present at any meeting at which a
quorum is present shall be the act of the committee.
Section 7. Minutes of Committee Meetings. The
committees shall keep regular minutes of their proceedings.
Section 8. Informal Action by Board of Directors and
Committees. Any action required or permitted to be taken at any
meeting of the Board of Directors or of any committee thereof may
be taken without a meeting if a written consent thereto is signed
by all members of the Board of Directors or of such committee, as
the case may be, and such written consent is filed with the
minutes of proceedings of the Board of Directors or committee,
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<PAGE>
provided, however, that such written consent shall not constitute
approval of any matter which pursuant to the Investment Company
Act of 1940 and the rules thereunder requires the approval of
directors by vote cast in person at a meeting.
Section 9. Meetings by Conference Telephone. The
members of the Board of Directors or any committee thereof may
participate in a meeting of the Board of Directors or committee
by means of a conference telephone or similar communications
equipment by means of which all persons participating in the
meeting can hear each other at the same time and such
participation shall constitute presence in person at such
meeting, provided, however, that such participation shall not
constitute presence in person with respect to matters which
pursuant to the Investment Company Act of 1940 and the rules
thereunder require the approval of directors by vote cast in
person at a meeting.
Section 10. Fees and Expenses. The directors may be
paid their expenses of attendance at each meeting of the Board of
Directors and may be paid a fixed sum for attendance at each
meeting of the Board of Directors, a stated salary as director or
such other compensation as the Board of Directors may approve.
No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be
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allowed like reimbursement and compensation for attending
committee meetings.
ARTICLE IV
Notices
Section 1. General. Notices to directors and
stockholders mailed to them at their post office addresses
appearing on the books of the Corporation shall be deemed to be
given at the time when deposited in the United States mail.
Section 2. Waiver of Notice. Whenever any notice is
required to be given under the provisions of the statutes, of the
Articles of Incorporation or of these By-Laws, a waiver thereof
in writing, signed by the person or persons entitled to said
notice, whether before or after the time stated therein, shall be
deemed the equivalent of notice and such waiver shall be filed
with the records of the meeting. Attendance of a person at a
meeting shall constitute a waiver of notice of such meeting
except when the person attends a meeting for the express purpose
of objecting, at the beginning of the meeting, to the transaction
of any business because the meeting is not lawfully called or
convened.
ARTICLE V
Officers
Section 1. General. The officers of the Corporation
shall be chosen by the Board of Directors at its first meeting
after each annual meeting of stockholders and shall be a chairman
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of the Board of Directors, a president, a secretary and a
treasurer. The Board of Directors may choose also such vice
presidents and additional officers or assistant officers as it
may deem advisable. Any number of offices, except the offices of
president and vice president and chairman and vice president, may
be held by the same person. No officer shall execute,
acknowledge or verify any instrument in more than one capacity if
such instrument is required by law to be executed, acknowledged
or verified by two or more officers.
Section 2. Other Officers and Agents. The Board of
Directors may appoint such other officers and agents as it
desires who shall hold their offices for such terms and shall
exercise such powers and perform such duties as shall be
determined from time to time by the Board of Directors.
Section 3. Tenure of Officers. The officers of the
Corporation shall hold office at the pleasure of the Board of
Directors. Each officer shall hold his office until his
successor is elected and qualifies or until his earlier
resignation or removal. Any officer may resign at any time upon
written notice to the Corporation. Any officer elected or
appointed by the Board of Directors may be removed at any time by
the Board of Directors when, in its judgment, the best interests
of the Corporation will be served thereby. Any vacancy occurring
in any office of the Corporation by death, resignation, removal
or otherwise shall be filled by the Board of Directors.
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Section 4. Chairman of the Board of Directors. The
chairman of the Board of Directors shall preside at all meetings
of the stockholders and of the Board of Directors. He shall be
the chief executive officer and shall have general and active
management of the business of the Corporation and shall see that
all orders and resolutions of the Board of Directors are carried
into effect. He shall be ex officio a member of all committees
designated by the Board of Directors except as otherwise
determined by the Board of Directors. He shall execute bonds,
mortgages and other contracts requiring a seal, under the seal of
the Corporation, except where required or permitted by law to be
otherwise signed and executed and except where the signing and
execution thereof shall be expressly delegated by the Board of
Directors to some other officer or agent of the Corporation.
Section 5. President. The president shall act under
the direction of the chairman and in the absence or disability of
the chairman shall perform the duties and exercise the powers of
the chairman. He shall perform such other duties and have such
other powers as the chairman or the Board of Directors may from
time to time prescribe. He shall execute on behalf of the
Corporation, and may affix the seal or cause the seal to be
affixed to, all instruments requiring such execution except to
the extent that signing and execution thereof shall be expressly
delegated by the Board of Directors to some other officer or
agent of the Corporation.
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Section 6. Vice Presidents. The vice presidents shall
act under the direction of the chairman and in the absence or
disability of the president shall perform the duties and exercise
the powers of the president. They shall perform such other
duties and have such other powers as the chairman or the Board of
Directors may from time to time prescribe. The Board of
Directors may designate one or more executive vice presidents or
may otherwise specify the order of seniority of the vice
presidents and, in that event, the duties and powers of the
president shall descend to the vice presidents in the specified
order of seniority.
Section 7. Secretary. The secretary shall act under
the direction of the chairman. Subject to the direction of the
chairman he shall attend all meetings of the Board of Directors
and all meetings of stockholders and record the proceedings in a
book to be kept for that purpose and shall perform like duties
for the committees designated by the Board of Directors when
required. He shall give, or cause to be given, notice of all
meetings of stockholders and special meetings of the Board of
Directors, and shall perform such other duties as may be
prescribed by the chairman or the Board of Directors. He shall
keep in safe custody the seal of the Corporation and shall affix
the seal or cause it to be affixed to any instrument requiring
it.
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Section 8. Assistant Secretaries. The assistant
secretaries in the order of their seniority, unless otherwise
determined by the chairman or the Board of Directors, shall, in
the absence or disability of the secretary, perform the duties
and exercise the powers of the secretary. They shall perform
such other duties and have such other powers as the chairman or
the Board of Directors may from time to time prescribe.
Section 9. Treasurer. The treasurer shall act under
the direction of the chairman. Subject to the direction of the
chairman he shall have the custody of the corporate funds and
securities and shall keep full and accurate accounts of receipts
and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to
the credit of the Corporation in such depositories as may be
designated by the Board of Directors. He shall disburse the
funds of the Corporation as may be ordered by the chairman or the
Board of Directors, taking proper vouchers for such
disbursements, and shall render to the chairman and the Board of
Directors, at its regular meetings, or when the Board of
Directors so requires, an account of all his transactions as
treasurer and of the financial condition of the Corporation.
Section 10. Assistant Treasurers. The assistant
treasurers in the order of their seniority, unless otherwise
determined by the chairman or the Board of Directors, shall, in
the absence or disability of the treasurer, perform the duties
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and exercise the powers of the treasurer. They shall perform
such other duties and have such other powers as the chairman or
the Board of Directors may from time to time prescribe.
ARTICLE VI
Certificates of Stock
Section 1. General. Every holder of stock of the
Corporation who has made full payment of the consideration for
such stock shall be entitled upon request to have a certificate,
signed by, or in the name of the Corporation by, the chairman,
the president or a vice president and countersigned by the
treasurer or an assistant treasurer or the secretary or an
assistant secretary of the Corporation, certifying the number
and, if additional shares of stock should be authorized, the
class of whole shares of stock owned by him in the Corporation.
Section 2. Fractional Share Interests. The Corporation
may issue fractions of a share of stock. Fractional shares of
stock shall have proportionately to the respective fractions
represented thereby all the rights of whole shares, including the
right to vote, the right to receive dividends and distributions
and the right to participate upon liquidation of the Corporation,
excluding, however, the right to receive a stock certificate
representing such fractional shares.
Section 3. Signatures on Certificates. Any of or all
the signatures on a certificate may be a facsimile. In case any
officer who has signed or whose facsimile signature has been
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placed upon a certificate shall cease to be such officer before
such certificate is issued, it may be issued with the same effect
as if he were such officer at the date of issue. The seal of the
Corporation or a facsimile thereof may, but need not, be affixed
to certificates of stock.
Section 4. Lost, Stolen or Destroyed Certificates. The
Board of Directors may direct a new certificate or certificates
to be issued in place of any certificate or certificates
theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon the making of any affidavit of that
fact by the person claiming the certificate or certificates to be
lost, stolen or destroyed. When authorizing such issue of a new
certificate or certificates, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof,
require the owner of such lost, stolen or destroyed certificate
or certificates, or his legal representative, to give the
Corporation a bond in such sum as it may direct as indemnity
against any claim that may be made against the Corporation with
respect to the certificate or certificates alleged to have been
lost, stolen or destroyed.
Section 5. Transfer of Shares. Upon request by the
registered owner of shares, and if a certificate has been issued
to represent such shares upon surrender to the Corporation or a
transfer agent of the Corporation of a certificate for shares of
stock duly endorsed or accompanied by proper evidence of
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succession, assignment or authority to transfer, it shall be the
duty of the Corporation, if it is satisfied that all provisions
of the Articles of Incorporation, of the By-Laws and of the law
regarding the transfer of shares have been duly complied with, to
record the transaction upon its books, issue a new certificate to
the person entitled thereto upon request for such certificate,
and cancel the old certificate, if any.
Section 6. Registered Owners. The Corporation shall be
entitled to recognize the person registered on its books as the
owner of shares to be the exclusive owner for all purposes
including voting and dividends, and the Corporation shall not be
bound to recognize any equitable or other claim to or interest in
such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as
otherwise provided by the laws of Maryland.
ARTICLE VII
Miscellaneous
Section 1. Reserves. There may be set aside out of any
funds of the Corporation available for dividends such sum or sums
as the Board of Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet
contingencies, or for such other purpose as the Board of
Directors shall think conducive to the interest of the
Corporation, and the Board of Directors may modify or abolish any
such reserve.
20
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Section 2. Dividends. Dividends upon the stock of the
Corporation may, subject to the provisions of the Articles of
Incorporation and of applicable law, be declared by the Board of
Directors at any time. Dividends may be paid in cash, in
property or in shares of the Corporation's stock, subject to the
provisions of the Articles of Incorporation and of applicable
law.
Section 3. Capital Gains Distributions. The amount and
number of capital gains distributions paid to the stockholders
during each fiscal year shall be determined by the Board of
Directors. Each such payment shall be accompanied by a statement
as to the source of such payment, to the extent required by law.
Section 4. Checks. All checks or demands for money and
notes of the Corporation shall be signed by such officer or
officers or such other person or persons as the Board of
Directors may from time to time designate.
Section 5. Fiscal Year. The fiscal year of the
Corporation shall be fixed by resolution of the Board of
Directors.
Section 6. Seal. The corporate seal shall have
inscribed thereon the name of the Corporation, the year of its
organization and the words "Corporate Seal, Maryland." The seal
may be used by causing it or a facsimile thereof to be impressed
or affixed or in another manner reproduced.
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Section 7. Insurance Against Certain Liabilities. The
Corporation shall not bear the cost of insurance that protects or
purports to protect directors and officers of the Corporation
against any liabilities to the Corporation or its security
holders to which any such director or officer would otherwise be
subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
conduct of his office.
ARTICLE VIII
Indemnification
Section 1. Indemnification of Directors and Officers.
The Corporation shall indemnify its directors to the full extent
that indemnification of directors is permitted by the Maryland
General Corporation Law. The Corporation shall indemnify its
officers to the same extent as its directors and to such further
extent as is consistent with law. The Corporation shall
indemnify its directors and officers who while serving as
directors or officers also serve at the request of the
Corporation as a director, officer, partner, trustee, employee,
agent or fiduciary of another corporation, partnership, joint
venture, trust, other enterprise or employee benefit plan to the
full extent consistent with law. The indemnification and other
rights provided by this Article shall continue as to a person who
has ceased to be a director or officer and shall inure to the
benefit of the heirs, executors and administrators of such a
22
<PAGE>
person. This Article shall not protect any such person against
any liability to the Corporation or any stockholder thereof to
which such person would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his office ("disabling
conduct").
Section 2. Advances. Any current or former director or
officer of the Corporation seeking indemnification within the
scope of this Article shall be entitled to advances from the
Corporation for payment of the reasonable expenses incurred by
him in connection with the matter as to which he is seeking
indemnification in the manner and to the full extent permissible
under the Maryland General Corporation Law. The person seeking
indemnification shall provide to the Corporation a written
affirmation of his good faith belief that the standard of conduct
necessary for indemnification by the Corporation has been met and
a written undertaking to repay any such advance if it should
ultimately be determined that the standard of conduct has not
been met. In addition, at least one of the following additional
conditions shall be met: (a) the person seeking indemnification
shall provide a security in form and amount acceptable to the
Corporation for his undertaking; (b) the Corporation is insured
against losses arising by reason of the advance; or (c) a
majority of a quorum of directors of the Corporation who are
neither "interested persons" as defined in Section 2(a)(19) of
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<PAGE>
the Investment Company Act of 1940, as amended, nor parties to
the proceeding ("disinterested non-party directors"), or
independent legal counsel, in a written opinion, shall have
determined, based on a review of facts readily available to the
Corporation at the time the advance is proposed to be made, that
there is reason to believe that the person seeking
indemnification will ultimately be found to be entitled to
indemnification.
Section 3. Procedure. At the request of any person
claiming indemnification under this Article, the Board of
Directors shall determine, or cause to be determined, in a manner
consistent with the Maryland General Corporation Law, whether the
standards required by this Article have been met.
Indemnification shall be made only following: (a) a final
decision on the merits by a court or other body before whom the
proceeding was brought that the person to be indemnified was not
liable by reason of disabling conduct or (b) in the absence of
such a decision, a reasonable determination, based upon a review
of the facts, that the person to be indemnified was not liable by
reason of disabling conduct by (i) the vote of a majority of a
quorum of disinterested non-party directors or (ii) an
independent legal counsel in a written opinion.
Section 4. Indemnification of Employees and Agents.
Employees and agents who are not officers or directors of the
Corporation may be indemnified, and reasonable expenses may be
24
<PAGE>
advanced to such employees or agents, as may be provided by
action of the Board of Directors or by contract, subject to any
limitations imposed by the Investment Company Act of 1940.
Section 5. Other Rights. The Board of Directors may
make further provision consistent with law for indemnification
and advance of expenses to directors, officers, employees and
agents by resolution, agreement or otherwise. The
indemnification provided by this Article shall not be deemed
exclusive of any other right, with respect to indemnification or
otherwise, to which those seeking indemnification may be entitled
under any insurance or other agreement or resolution of
stockholders or disinterested directors or otherwise. The rights
provided to any person by this Article shall be enforceable
against the Corporation by such person who shall be presumed to
have relied upon it in serving or continuing to serve as a
director, officer, employee, or agent as provided above.
Section 6. Amendments. References in this Article are
to the Maryland General Corporation Law and to the Investment
Company Act of 1940 as from time to time amended. No amendment
of these By-laws shall affect any right of any person under this
Article based on any event, omission or proceeding prior to the
amendment.
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ARTICLE IX
Amendments
The Board of Directors shall have the power to make,
alter and repeal By-laws of the Corporation.
26
00250242.AB9
<PAGE>
ADVISORY AGREEMENT
ALLIANCE PRIVATE INVESTORS SERIES, INC.
1345 Avenue Of The Americas
New York, New York 10105
June [ ], 1998
ALLIANCE CAPITAL MANAGEMENT L.P.
1345 Avenue of the Americas
New York, New York 10105
Dear Sirs:
Alliance Private Investors Series, Inc. herewith
confirms our agreement with you as follows:
1. We are an open-end, non-diversified management
investment company registered under the Investment Company Act of
1940, as amended (the "Act"). We are currently authorized to
issue separate classes of shares and our Directors are authorized
to reclassify and issue any unissued shares to any number of
additional classes or series (portfolios) each having its own
investment objective, policies and restrictions, all as more
fully described in the prospectus and the statement of additional
information constituting parts of our Registration Statement on
Form N-1A filed with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended, and
the Act (the "Registration Statement"). We propose to engage in
the business of investing and reinvesting the assets of each of
<PAGE>
our portfolios in securities ("the portfolio assets") of the type
and in accordance with the limitations specified in our Articles
of Incorporation, By-Laws and Registration Statement, and any
representations made in our prospectus and statement of
additional information, all in such manner and to such extent as
may from time to time be authorized by our Board of Directors.
We enclose copies of the documents listed above and will from
time to time furnish you with any amendments thereof.
2. (a) We hereby employ you to manage the investment
and reinvestment of the portfolio assets as above specified and,
without limiting the generality of the foregoing, to provide
management and other services specified below.
(b) You will make decisions with respect to all
purchases and sales of the portfolio assets. To carry out such
decisions, you are hereby authorized, as our agent and attorney-
in-fact, for our account and at our risk and in our name, to
place orders for the investment and reinvestment of the portfolio
assets. In all purchases, sales and other transactions in the
portfolio assets you are authorized to exercise full discretion
and act for us in the same manner and with the same force and
effect as we might or could do with respect to such purchases,
sales or other transactions, as well as with respect to all other
things necessary or incidental to the furtherance or conduct of
such purchases, sales or other transactions.
2
<PAGE>
(c) You will report to our Board of Directors at
each meeting thereof all changes in the portfolio assets since
the prior report, and will also keep us in touch with important
developments affecting the portfolio assets and on your own
initiative will furnish us from time to time with such
information as you may believe appropriate for this purpose,
whether concerning the individual issuers whose securities are
included in the portfolio assets, the industries in which they
engage, or the conditions prevailing in the economy generally.
You will also furnish us with such statistical and analytical
information with respect to the portfolio assets as you may
believe appropriate or as we reasonably may request. In making
such purchases and sales of the portfolio assets, you will bear
in mind the policies set from time to time by our Board of
Directors as well as the limitations imposed by our Articles of
Incorporation and in our Registration Statement, in each case as
amended from time to time, the limitations in the Act and of the
Internal Revenue Code of 1986, as amended, in respect of
regulated investment companies and the investment objective,
policies and practices, including restrictions applicable to each
of our portfolios.
(d) It is understood that you will from time to
time employ or associate with yourselves such persons as you
believe to be particularly fitted to assist you in the execution
of your duties hereunder, the cost of performance of such duties
3
<PAGE>
to be borne and paid by you. No obligation may be incurred on
our behalf in any such respect. During the continuance of this
Agreement and at our request you will provide to us persons
satisfactory to our Board of Directors to serve as our officers.
You or your affiliates will also provide persons, who may be our
officers, to render such clerical, accounting and other services
to us as we may from time to time request of you. Such personnel
may be employees of you or your affiliates. We will pay to you
or your affiliates the cost of such personnel for rendering such
services to us, provided that all time devoted to the investment
or reinvestment of the portfolio assets shall be for your
account. Nothing contained herein shall be construed to restrict
our right to hire our own employees or to contract for services
to be performed by third parties. Furthermore, you or your
affiliates shall furnish us without charge with such management
supervision and assistance and such office facilities as you may
believe appropriate or as we may reasonably request subject to
the requirements of any regulatory authority to which you may be
subject. You or your affiliates shall also be responsible for
the payment of any expenses incurred in promoting the sale of our
shares (other than the portion of the promotional expenses to be
borne by us in accordance with an effective plan pursuant to Rule
12b-1 under the Act and the costs of printing our prospectuses
and reports to shareholders and fees related to registration with
the Commission and with state regulatory authorities).
4
<PAGE>
3. We hereby confirm that we shall be responsible and
hereby assume the obligation for payment of all of our expenses,
including: (a) payment to you of the fee provided for in
paragraph 5 below; (b) custody, transfer and dividend disbursing
expenses; (c) fees of directors who are not your affiliated
persons; (d) legal and auditing expenses; (e) clerical,
accounting and other office costs; (f) the cost of personnel
providing services to us, as provided in subparagraph (d) of
paragraph 2 above; (g) costs of printing our prospectuses and
shareholder reports; (h) cost of maintenance of our corporate
existence; (i) interest charges, taxes, brokerage fees and
commissions; (j) costs of stationery and supplies; (k) expenses
and fees related to registration and filing with the Commission
and with state regulatory authorities; and (l) such promotional,
shareholder servicing and other expenses as may be contemplated
by one or more effective plans pursuant to Rule 12b-1 under the
Act or one or more duly approved and effective non-Rule 12b-1
shareholder servicing plans, in each case provided, however, that
our payment of such promotional, shareholder servicing and other
expenses shall be in the amounts, and in accordance with the
procedures, set forth in such plan or plans.
4. We shall expect of you, and you will give us the
benefit of, your best judgment and efforts in rendering these
services to us, and we agree as an inducement to your undertaking
these services that you shall not be liable hereunder for any
5
<PAGE>
mistake of judgment or in any event whatsoever, except for lack
of good faith, provided that nothing herein shall be deemed to
protect, or purport to protect, you against any liability to us
or to our security holders to which you would otherwise be
subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of your duties hereunder, or by
reason of your reckless disregard of your obligations and duties
hereunder.
5. In consideration of the foregoing we will pay you a
fee comprised of a basic fee (the "Basic Fee") and an adjustment
to the Basic Fee based on the investment performance of the Class
A shares of the Fund in relation to the investment record of the
Russell 1000(R) Growth Index (the "Index"). Such fee shall be
calculated and payable as described below.
(a) Beginning with the month of July 1999 and for each
succeeding month, the Basic Fee shall be a monthly fee equal to
1/12th of 1.10% (1.10% on an annualized basis) of the average of
the net assets of the Fund for each day included in the
applicable performance period. The performance period for each
such month shall be from July 1998 to the most recent month end,
until this agreement has been in effect for 36 full calendar
months, when it shall become a rolling 36-month period ending
with the most recent calendar month. The Basic Fee for each such
month shall be increased at the rate of 1/12th of .05% for each
percentage point in excess of two, rounded to the nearer point
6
<PAGE>
(the higher point if exactly one-half a point), that the
investment performance of the Class A shares of the Fund for the
performance period then ended exceeds the percentage change in
the investment record of the Index for such performance period
(up to a maximum of eight percentage points). If, however, the
investment performance of the Class A shares of the Fund for such
performance period shall be exceeded by the percentage change in
the investment record of the Index for such performance period,
then such Basic Fee shall be decreased at the rate of 1/12th of
.05% for each percentage point in excess of two, rounded to the
nearer point (the higher point if exactly one-half), that the
percentage change in the investment record of the Index exceeds
the investment performance of the Class A shares of the Fund for
such performance period (up to a maximum of eight percentage
points). The maximum increase or decrease in the Basic Fee for
any month may not exceed 1/12th of .30%; the maximum monthly fee,
as adjusted, may not exceed 1/12th of 1.40%; and the minimum
monthly fee, as adjusted, may not be less than 1/12th of .80%.
(b) For the period from July 1, 1998 through June 30,
1999, you will receive a minimum fee (the "Minimum Fee"), payable
monthly, equal to .80%, annualized, of the average of the net
assets of the Fund for each day included in such annual period.
The performance period relating to such annual period will be
from July 1, 1998 through June 30, 1999. The fee receivable by
you for such annual period may be increased to 1.40% from the
7
<PAGE>
Minimum Fee. The increase, if any, will be equal to the
difference between (i) the Basic Fee as adjusted for such annual
period in accordance with the preceding paragraph and (ii) the
Minimum Fee. The maximum increase in the Minimum Fee for such
annual period may not exceed .60%, with the rate of any increase
being applied on an annualized basis. You will receive the
Minimum Fee for any period prior to July 1, 1998.
(c) The investment performance of the Class A shares of
the Fund for any period, expressed as a percentage of the Fund's
net asset value per Class A share at the beginning of such
period, shall mean and be the sum of: (i) the change in the
Fund's net asset value per Class A share during such period;
(ii) the value of the Fund's cash distributions per Class A share
accumulated to the end of such period; and (iii) the value of
capital gains taxes per Class A share paid or payable on
undistributed realized long-term capital gains accumulated to the
end of such period. For this purpose, the value of distributions
per Class A share of realized capital gains, of dividends per
Class A share paid from investment income and of capital gains
taxes per Class A share paid or payable on undistributed realized
long-term capital gains shall be treated as reinvested in Class A
shares of the Fund at the net asset value per share in effect at
the close of business on the record date for the payment of such
distributions and dividends and the date on which provision is
made for such taxes, after giving effect to such distributions,
8
<PAGE>
dividends and taxes. Notwithstanding any provisions of this
subparagraph (c) or of the other subparagraphs of Paragraph 5
hereof to the contrary, the investment performance of the Class A
shares of the Fund for any period shall not include, and there
shall be excluded from the change in the Fund's net asset value
per Class A share during such period and the value of the Fund's
cash distributions per Class A share accumulated to the end of
such period shall be adjusted for, any increase or decrease in
the investment performance of the Fund for such period computed
as set forth in the preceding two sentences and resulting from
the Fund's issuance, sale, repurchase or redemption of any shares
of Common Stock of the Fund.
(d) The investment record of the Index for any period,
expressed as a percentage of the Index level at the beginning of
such period, shall mean and be the sum of (i) the change in the
level of the Index during such period; and (ii) the value,
computed consistently with the Index, of cash distributions made
by companies whose securities comprise the Index accumulated to
the end of such period. For this purpose, cash distributions on
the securities which comprise the Index shall be treated as
reinvested in the Index at the end of each calendar month
following the payment of the dividend.
(e) Any calculation of the investment performance of the
Fund and the investment record of the Index shall be in
9
<PAGE>
accordance with any then applicable rules of the Securities and
Exchange Commission.
(f) In the event of any termination of this agreement,
the fee provided for in this Paragraph 5 shall be calculated on
the basis of a period ending on the last day on which this
agreement is in effect, subject to a pro rata adjustment based on
the number of days elapsed in the current period as a percentage
of the total number of days in such period.
6. This Agreement shall become effective on the date
hereof and shall remain in effect until , 2000 and
continue in effect thereafter with respect to a portfolio only so
long as its continuance with respect to that portfolio is
specifically approved at least annually by our Board of Directors
or by a vote of a majority of the outstanding voting securities
(as defined in the Act) of such portfolio, and, in either case,
by a vote, cast in person at a meeting called for the purpose of
voting on such approval, of a majority of our Directors who are
not parties to this Agreement or interested persons, as defined
in the Act, of any party to this Agreement (other than as our
Directors), and provided further, however, that if the
continuation of this Agreement is not approved as to a portfolio,
you may continue to render to such portfolio the services
described herein in the manner and to the extent permitted by the
Act and the rules and regulations thereunder. Upon the
effectiveness of this Agreement, it shall supersede all previous
10
<PAGE>
agreements between us covering the subject matter hereof. This
Agreement may be terminated with respect to any portfolio at any
time, without the payment of any penalty, by vote of a majority
of the outstanding voting securities (as defined in the Act) of
such portfolio, or by a vote of our Board of Directors on 60
days' written notice to you, or by you with respect to any
portfolio on 60 days' written notice to us.
7. This Agreement shall not be amended as to any
portfolio unless such amendment is approved by vote, cast in
person at a meeting called for the purpose of voting on such
approval, of a majority of our Directors who are not parties to
this Agreement or interested persons, as defined in the Act, of
any party to this Agreement (other than as our Directors), and,
if required by law, by vote of a majority of the outstanding
voting securities (as defined in the Act) of such portfolio.
Shareholders of a portfolio not affected by any such amendment
shall have no right to participate in any such vote.
8. As to any particular portfolio, this Agreement may
not be transferred, assigned, sold or in any manner hypothecated
or pledged by you and, as to such portfolio, this Agreement shall
terminate automatically in the event of any such transfer,
assignment, sale, hypothecation or pledge by you. The terms
"transfer", "assignment" and "sale" as used in this paragraph
shall have the meanings ascribed thereto by governing law and any
11
<PAGE>
interpretation thereof contained in rules or regulations
promulgated by the Commission thereunder.
9. (a) Except to the extent necessary to perform your
obligations hereunder, nothing herein shall be deemed to limit or
restrict your right, or the right of any of your employees, or
any of the officers or directors of Alliance Capital Management
Corporation, your general partner, who may also be a Director,
officer or employee of ours, or persons otherwise affiliated with
us (within the meaning of the Act), to engage in any other
business or to devote time and attention to the management or
other aspects of any other business, whether of a similar or
dissimilar nature, or to render services of any kind to any other
trust, corporation, firm, individual or association.
(b) You will notify us of any change in the general
partners of your partnership within a reasonable time after such
change.
10. If you cease to act as our investment adviser, or, in
any event, if you so request in writing, we agree to take all
necessary action to change our name to a name not including the
term "Alliance." You may from time to time make available
without charge to us for our use such marks or symbols owned by
you, including marks or symbols containing the term "Alliance" or
any variation thereof, as you may consider appropriate. Any such
marks or symbols so made available will remain your property and
12
<PAGE>
you shall have the right, upon notice in writing, to require us
to cease the use of such mark or symbol at any time.
11. This Agreement shall be construed in accordance with the
laws of the State of New York, provided, however, that nothing
herein shall be construed as being inconsistent with the Act.
13
<PAGE>
If the foregoing is in accordance with your
understanding, will you kindly so indicate by signing and
returning to us the enclosed copy hereof.
Very truly yours,
ALLIANCE PRIVATE INVESTORS
SERIES, INC.
By__________________________
Agreed to and accepted
as of the date first set forth above.
ALLIANCE CAPITAL MANAGEMENT L.P.
By ALLIANCE CAPITAL MANAGEMENT
CORPORATION, its general
partner
By_______________________________
14
00250242.AA3
<PAGE>
DISTRIBUTION SERVICES AGREEMENT
AGREEMENT made as of [ ], 1998 between ALLIANCE
PRIVATE INVESTORS SERIES, INC., a Maryland corporation (the
"Fund"), and ALLIANCE FUND DISTRIBUTORS, INC., a Delaware
corporation (the "Underwriter").
WITNESSETH
WHEREAS, the Fund is registered under the Investment
Company Act of 1940, as amended (the "Investment Company Act"),
as a non-diversified, open-end management investment company and
it is in the interest of the Fund to offer its shares for sale
continuously;
WHEREAS, the Underwriter is a securities firm engaged in
the business of selling shares of investment companies either
directly to purchasers or through other securities dealers;
WHEREAS, the Fund and the Underwriter wish to enter into
an agreement with each other with respect to the continuous
offering of the Fund's shares in order to promote the growth of
the Fund and facilitate the distribution of its shares;
NOW, THEREFORE, the parties agree as follows:
SECTION 1. Appointment of the Underwriter. The Fund
hereby appoints the Underwriter as the principal underwriter and
distributor of the Fund to sell to the public shares of its Class
A Common Stock (the "Class A shares"), Class B Common Stock (the
"Class B shares"), Class C Common Stock (the "Class C shares")
and shares of such other class or classes as the Fund and the
Underwriter shall from time to time mutually agree in writing
shall become subject to this Agreement (the "New shares") (the
Class A shares, the Class B shares, the Class C shares and New
shares being collectively referred to herein as the "shares") and
hereby agrees during the term of this Agreement to sell shares to
the Underwriter upon the terms and conditions herein set forth.
SECTION 2. Exclusive Nature of Duties. The Underwriter
shall be the exclusive representative of the Fund to act as
principal underwriter and distributor of the shares except that
the rights given under this Agreement to the Underwriter shall
not apply to shares issued in connection with (a) the merger or
consolidation of any other investment company with the Fund, (b)
the Fund's acquisition by purchase or otherwise of all or
substantially all of the assets or stock of any other investment
company or (c) the reinvestment in shares by the Fund's
shareholders of dividends or other distributions.
<PAGE>
SECTION 3. Purchase of Shares from the Fund.
(a) The Underwriter shall have the right to buy from
the Fund the shares needed to fill unconditional orders for
shares of the Fund placed with the Underwriter by investors or
securities dealers, depository institutions or other financial
intermediaries acting as agent for their customers. The price
which the Underwriter shall pay for the shares so purchased from
the Fund shall be the net asset value, determined as set forth in
Section 3(d) hereof, used in determining the public offering
price on which such orders are based.
(b) The shares are to be resold by the Underwriter to
investors at a public offering price, as set forth in Section
3(c) hereof, or to securities dealers, depository institutions or
other financial intermediaries acting as agent for their
customers having agreements with the Underwriter upon the terms
and conditions set forth in Section 8 hereof.
(c) The public offering price of the shares, i.e., the
price per share at which the Underwriter or selected dealers or
selected agents (each as defined in Section 8(a) below) may sell
shares to the public, shall be the public offering price
determined in accordance with one or more then current
prospectuses and statements of additional information of the Fund
(each a "Prospectus" and a "Statement of Additional Information,"
respectively) under the Securities Act of 1933, as amended (the
"Securities Act"), relating to such shares, but not to exceed the
net asset value at which the Underwriter is to purchase such
shares, plus, in the case of Class A shares, an initial sales
charge equal to a specified percentage or percentages of the
public offering price of the Class A shares as set forth in the
Prospectus. Class A shares may be sold without such a sales
charge to certain classes of persons as from time to time set
forth in the Prospectus and Statement of Additional Information.
All payments to the Fund hereunder shall be made in the manner
set forth in Section 3(f) hereof.
(d) The net asset value of shares of the Fund shall be
determined by the Fund, or any agent of the Fund, as of the close
of regular trading on the New York Stock Exchange on each Fund
business day in accordance with the method set forth in the
Prospectus and Statement of Additional Information and guidelines
established by the Directors of the Fund.
(e) The Fund reserves the right to suspend the offering
of its shares at any time in the absolute discretion of its
Directors.
(f) The Fund, or any agent of the Fund designated in
writing to the Underwriter by the Fund, shall be promptly advised
2
<PAGE>
by the Underwriter of all purchase orders for shares received by
the Underwriter. Any order may be rejected by the Fund;
provided, however, that the Fund will not arbitrarily or without
reasonable cause refuse to accept or confirm orders for the
purchase of shares. The Fund (or its agent) will confirm orders
upon their receipt, will make appropriate book entries and, upon
receipt by the Fund (or its agent) of payment thereof, will
deliver deposit receipts or certificates for such shares pursuant
to the instructions of the Underwriter. Payment shall be made to
the Fund in New York Clearing House funds. The Underwriter
agrees to cause such payment and such instructions to be
delivered promptly to the Fund (or its agent).
SECTION 4. Repurchase or Redemption of
Shares by the Fund.
(a) Any of the outstanding shares may be tendered for
redemption at any time, and the Fund agrees to redeem or
repurchase the shares so tendered in accordance with its
obligations as set forth in paragraph 9(d) of ARTICLE FIFTH of
its Articles of Incorporation and in accordance with the
applicable provisions set forth in the Prospectus and Statement
of Additional Information. The price to be paid to redeem or
repurchase the shares shall be equal to the net asset value
calculated in accordance with the provisions of Section 3(d)
hereof, less any applicable sales charge or redemption fee. All
payments by the Fund hereunder shall be made in the manner set
forth below. The redemption or repurchase by the Fund of any of
the Class A shares purchased by or through the Underwriter will
not affect the initial sales charge secured by the Underwriter or
any selected dealer or compensation paid to any selected agent
(unless such selected dealer or selected agent has otherwise
agreed with the Underwriter), in the course of the original sale,
regardless of the length of the time period between purchase by
an investor and his tendering for redemption or repurchase.
The Fund (or its agent) shall pay the total amount of
the redemption price and, except as may be otherwise required by
the Conduct Rules of the National Association of Securities
Dealers, Inc. (the "NASD") and any interpretations thereof ("NASD
rules and interpretations"), the deferred sales charges, if any,
pursuant to the instructions of the Underwriter in New York
Clearing House funds on or before the seventh business day
subsequent to its having received the notice of redemption in
proper form.
(b) Redemption of shares or payment may be suspended at
times when the New York Stock Exchange is closed, when trading
thereon is restricted, when an emergency exists as a result of
which disposal by the Fund of securities owned by it is not
reasonably practicable or it is not reasonably practicable for
3
<PAGE>
the Fund fairly to determine the value of its net assets, or
during any other period when the Securities and Exchange
Commission, by order, so permits.
SECTION 5. Plan of Distribution.
(a) It is understood that Sections 5, 12 and 16 hereof
together constitute a plan of distribution (the "Plan") within
the meaning of Rule 12b-1 adopted by the Securities and Exchange
Commission under the Investment Company Act ("Rule 12b-1").
(b) Except as may be required by NASD rules and
interpretations, the Fund will pay to the Underwriter each month
a distribution services fee with respect to each portfolio of the
Fund specified by the Fund's Directors (a "Portfolio") that will
not exceed, on an annualized basis, .30% of the aggregate average
daily net assets of the Fund attributable to the Class A shares,
1.00% of the aggregate average daily net assets of the Fund
attributable to the Class B shares and 1.00% of the aggregate
average daily net assets of the Fund attributable to the Class C
shares. With respect to each Portfolio, the distribution
services fee will be used in its entirety by the Underwriter to
make payments (i) to compensate broker-dealers or other persons
for providing distribution assistance, (ii) to otherwise promote
the sale of shares of each Portfolio, including payment for the
preparation, printing and distribution of prospectuses and sales
literature or other promotional activities, and (iii) to
compensate broker-dealers, depository institutions and other
financial intermediaries for providing administrative, accounting
and other services with respect to each Portfolio's shareholders.
A portion of the distribution services fee that will not exceed,
on an annualized basis, .25% of the aggregate average daily net
assets of the Fund attributable to each of the Class A shares,
Class B shares and Class C shares will constitute a service fee
that will be used by the Underwriter for personal service and/or
the maintenance of shareholder accounts within the meaning of
NASD rules and interpretations.
(c) Alliance Capital Management L.P., the Fund's
investment adviser (the "Adviser"), may, with respect to any and
all classes of shares of the Fund, make payments from time to
time from its own resources for the purposes described in Section
5(b) hereof.
(d) Payments to broker-dealers, depository institutions
and other financial intermediaries for the purposes set forth in
Section 5(b) are subject to the terms and conditions of the
respective written agreements between the Underwriter and each
broker-dealer, depository institution or other financial
intermediary. Such agreements will be in a form satisfactory to
the Directors of the Fund.
4
<PAGE>
(e) The Treasurer of the Fund will prepare and furnish
to the Fund's Directors, and the Directors will review, at least
quarterly, a written report complying with the requirements of
Rule 12b-1 setting forth all amounts expended hereunder and the
purposes for which such expenditures were made.
(f) The Fund is not obligated to pay any distribution
expenses in excess of the distribution services fee described
above in Section 5(b) hereof. Any expenses of distribution of
the Fund's Class A shares accrued by the Underwriter in one
fiscal year of the Fund may not be paid from distribution
services fees received from the Fund in respect of Class A shares
in another fiscal year. Any expenses of distribution of the
Fund's Class B shares or Class C shares accrued by the
Underwriter in one fiscal year of the Fund may be carried forward
and paid from distribution services fees received from the Fund
in respect of such class of shares in another fiscal year. No
portion of the distribution services fees received from the Fund
in respect of Class A shares may be used to pay any interest
expense, carrying charges or other financing costs or allocation
of overhead of the Underwriter. The distribution services fees
received from the Fund in respect of Class B shares and Class C
shares may be used to pay interest expenses, carrying charges and
other financing costs or allocation of overhead of the
Underwriter to the extent permitted by Securities and Exchange
Commission rules, regulations or Securities and Exchange
Commission staff no-action or interpretative positions in effect
from time to time. In the event this Agreement is terminated by
either party or is not continued with respect to a class of
shares as provided in Section 12 below: (i) no distribution
services fees (other than current amounts accrued but not yet
paid) will be owed by the Fund to the Underwriter with respect to
that class, and (ii) the Fund will not be obligated to pay the
Underwriter for any amounts expended hereunder not previously
reimbursed by the Fund from distribution services fees in respect
of shares of such class or recovered through deferred sales
charges. The distribution services fee of a particular class may
not be used to subsidize the sale of shares of any other class.
SECTION 6. Duties of the Fund.
(a) The Fund shall furnish to the Underwriter copies of
all information, financial statements and other papers that the
Underwriter may reasonably request for use in connection with the
distribution of shares of the Fund, and this shall include one
certified copy, upon request by the Underwriter, of all financial
statements prepared for the Fund by the Fund's independent public
accountants. The Fund shall make available to the Underwriter
such number of copies of the Prospectus and Statement of
Additional Information as the Underwriter shall reasonably
request.
5
<PAGE>
(b) The Fund shall take, from time to time, but subject
to any necessary approval of its shareholders, all necessary
action to fix the number of authorized shares and such steps as
may be necessary to register the same under the Securities Act,
to the end that there will be available for sale such number of
shares as the Underwriter reasonably may be expected to sell.
(c) The Fund shall use its best efforts to qualify for
sale and maintain the qualification for sale of an appropriate
number of its shares under the securities laws of such states as
the Underwriter and the Fund may approve. Any such qualification
may be withheld, terminated or withdrawn by the Fund at any time
in its discretion. As provided in Section 9(b) hereof, the
expense of qualification and maintenance of qualification shall
be borne by the Fund. The Underwriter shall furnish such
information and other material relating to its affairs and
activities as may be required by the Fund in connection with such
qualification.
(d) The Fund will furnish, in reasonable quantities
upon request by the Underwriter, copies of annual and interim
reports of the Fund.
SECTION 7. Duties of the Underwriter.
(a) The Underwriter shall devote reasonable time and
effort to effect sales of shares of the Fund, but shall not be
obligated to sell any specific number of shares. The services
hereunder of the Underwriter to the Fund are not to be deemed
exclusive as to the Underwriter and nothing in this Agreement
shall prevent the Underwriter from entering into like
arrangements with other investment companies so long as the
performance of its obligations hereunder is not impaired thereby.
(b) In selling shares of the Fund, the Underwriter
shall use its best efforts in all material respects duly to
conform with the requirements of all federal and state laws
relating to the sale of such securities. Neither the
Underwriter, any selected dealer, any selected agent nor any
other person is authorized by the Fund to give any information or
to make any representations, other than those contained in the
Fund's Registration Statement on Form N-1A (the "Registration
Statement"), as amended from time to time, under the Securities
Act and the Investment Company Act or the Prospectus and
Statement of Additional Information or in any sales literature
specifically approved in writing by the Fund.
(c) The Underwriter shall adopt and follow procedures,
as approved by the appropriate officers of the Fund, for the
confirmation of sales to investors and selected dealers, the
collection of amounts payable by investors and selected dealers
6
<PAGE>
on such sales, and the cancellation of unsettled transactions, as
may be necessary to comply with the requirements of the NASD, as
such requirements may from time to time exist.
SECTION 8. Selected Dealer and Agent Agreements.
(a) The Underwriter shall have the right to enter into
selected dealer agreements with securities dealers of its choice
("selected dealers") and selected agent agreements with
depository institutions and other financial intermediaries of its
choice ("selected agents") for the sale of shares and fix therein
the portion of the sales charge that may be allocated to the
selected dealers and selected agents; provided, that the Fund
shall approve the forms of agreements with selected dealers and
selected agents and the selected dealer and selected agent
compensation set forth therein. Shares sold to selected dealers
or through selected agents shall be for resale by such selected
dealers and for sale through such selected agents only at the
public offering price set forth in the Prospectus and/or
Statement of Additional Information.
(b) Within the United States, the Underwriter shall
offer and sell shares only to such selected dealers as are
members in good standing of the NASD.
SECTION 9. Payment of Expenses.
(a) The Fund shall bear all costs and expenses of the
Fund, including fees and disbursements of its counsel and
auditors, in connection with the preparation and filing of its
Registration Statement and Prospectus and Statement of Additional
Information, and all amendments and supplements thereto, and
preparing and mailing annual and interim reports and proxy
materials to shareholders (including but not limited to the
expense of printing any such registration statements,
prospectuses, annual or interim reports or proxy materials).
(b) The Fund shall bear the cost of expenses of
qualification of shares for sale, and, if necessary or advisable
in connection therewith, of qualifying the Fund as an issuer or
as a broker or dealer, in such states of the United States or
other jurisdiction as shall be selected by the Fund and the
Underwriter pursuant to Section 6(c) hereof and the cost and
expenses payable to each such state for continuing qualification
therein until the Fund decides to discontinue such qualification
pursuant to Section 6(c) hereof.
SECTION 10. Indemnification.
(a) The Fund shall indemnify, defend and hold the
Underwriter, and any person who controls the Underwriter within
7
<PAGE>
the meaning of Section 15 of the Securities Act, free and
harmless from and against any and all claims, demands,
liabilities and expenses (including the cost of investigating or
defending such claims, demands or liabilities and any counsel
fees incurred in connection therewith) which the Underwriter or
any such controlling person may incur, under the Securities Act,
or under common law or otherwise, arising out of or based upon
any alleged untrue statement of a material fact contained in the
Fund's Registration Statement, Prospectus or Statement of
Additional Information in effect from time to time under the
Securities Act or arising out of or based upon any alleged
omission to state a material fact required to be stated in any
one thereof or necessary to make the statements in any one
thereof not misleading; provided, however, that in no event shall
anything herein contained be so construed as to protect the
Underwriter against any liability to the Fund or its security
holders to which the Underwriter would otherwise be subject by
reason of willful misfeasance, bad faith or gross negligence in
the performance of its duties, or by reason of the Underwriter's
reckless disregard of its obligations and duties under this
Agreement. The Fund's agreement to indemnify the Underwriter and
any such controlling person as aforesaid is expressly conditioned
upon the Fund's being notified of the commencement of any action
brought against the Underwriter or any such controlling person,
such notification to be given by letter or by telegram addressed
to the Fund at its principal office in New York, New York, and
sent to the Fund by the person against whom such action is
brought within ten days after the summons or other first legal
process shall have been served. The failure to so notify the
Fund of the commencement of any such action shall not relieve the
Fund from any liability which it may have to the person against
whom such action is brought by reason of any such alleged untrue
statement or omission otherwise than on account of the indemnity
agreement contained in this Section 10. The Fund will be
entitled to assume the defense of any suit brought to enforce any
such claim, and to retain counsel of good standing chosen by the
Fund and approved by the Underwriter. In the event the Fund does
not elect to assume the defense of any such suit and retain
counsel of good standing approved by the Underwriter, the
defendant or defendants in such suit shall bear the fees and
expenses of any additional counsel retained by any of them; but
if Fund does not elect to assume the defense of any such suit, or
in case the Underwriter does not approve of counsel chosen by the
Fund, the Fund will reimburse the Underwriter or the controlling
person or persons named as defendant or defendants in such suit,
for the fees and expenses of any counsel retained by the
Underwriter or any such person. The indemnification agreement
contained in this Section 10 shall remain operative and in full
force and effect regardless of any investigation made by or on
behalf of the Underwriter or any controlling person and shall
survive the sale of any of the Fund's shares made pursuant to
8
<PAGE>
subscriptions obtained by the Underwriter. This agreement of
indemnity will inure exclusively to the benefit of the
Underwriter, to the benefit of its successors and assigns, and to
the benefit of any controlling persons and their successors and
assigns. The Fund shall promptly notify the Underwriter of the
commencement of any litigation or proceeding against the Fund in
connection with the issue and sale of any of its shares.
(b) The Underwriter shall indemnify, defend and hold
the Fund, its several officers and directors, and any person who
controls the Fund within the meaning of Section 15 of the
Securities Act, free and harmless from and against any and all
claims, demands, liabilities, and expenses (including the cost of
investigating or defending such claims, demands or liabilities
and any counsel fees incurred in connection therewith) which the
Fund, its officers or directors, or any such controlling person
may incur under the Securities Act or under common law or
otherwise, but only to the extent that such liability, or expense
incurred by the Fund, its officers, directors or such controlling
person resulting from such claims or demands shall arise out of
or be based upon any alleged untrue statement of a material fact
contained in information furnished in writing by the Underwriter
to the Fund for use in its Registration Statement, Prospectus or
Statement of Additional Information in effect from time to time
under the Securities Act, or shall arise out of or be based upon
any alleged omission to state a material fact in connection with
such information required to be stated in the Registration
Statement, Prospectus or Statement of Additional Information or
necessary to make such information not misleading. The
Underwriter's agreement to indemnify the Fund, its officers and
directors, and any such controlling person as aforesaid is
expressly conditioned upon the Underwriter being notified of the
commencement of any action brought against the Fund, its officers
or directors or any such controlling person, such notification to
be given by letter or telegram addressed to the Underwriter at
its principal office in New York, and sent to the Underwriter by
the person against whom such action is brought, within ten days
after the summons or other first legal process shall have been
served. The Underwriter shall have a right to control the
defense of such action, with counsel of its own choosing,
satisfactory to the Fund, if such action is based solely upon
such alleged misstatement or omission on its part, and in any
other event the Underwriter and the Fund, and their officers and
directors or such controlling person, shall each have the right
to participate in the defense or preparation of the defense of
any such action. The failure so to notify the Underwriter of the
commencement of any such action shall not relieve the Underwriter
from any liability which it may have to the Fund, to its officers
and directors, or to such controlling person by reason of any
such untrue statement or omission on the part of the Underwriter
9
<PAGE>
otherwise than on account of the indemnity agreement contained in
this Section 10.
SECTION 11. Notification by the Fund.
The Fund shall advise the Underwriter immediately:
(a) of any request by the Securities and Exchange
Commission for any amendment to the Fund's Registration
Statement, Prospectus or Statement of Additional Information or
for additional information,
(b) in the event of the issuance by the Securities and
Exchange Commission of any stop order suspending the
effectiveness of the Fund's Registration Statement, Prospectus or
Statement of Additional Information or the initiation of any
proceeding for that purpose,
(c) of the happening of any material event which makes
untrue any statement made in the Fund's Registration Statement,
Prospectus or Statement of Additional Information or which
requires the making of a change in any one thereof in order to
make the statements therein not misleading, and
(d) of all actions of the Securities and Exchange
Commission with respect to any amendment to the Fund's
Registration Statement, Prospectus or Statement of Additional
Information which may from time to time be filed with the
Securities and Exchange Commission under the Securities Act.
SECTION 12. Term of Agreement.
(a) This Agreement shall become effective on the date
hereof and shall continue in effect until [ ], 1999 and
continue in effect thereafter with respect to each class of
shares of a Portfolio of the Fund so long as its continuance with
respect to that class is specifically approved annually by the
Directors of the Fund or by vote of the holders of a majority of
the outstanding voting securities (as defined in the Investment
Company Act) of that class, and, in either case, by a majority of
the Directors of the Fund who are not parties to this Agreement
or interested persons, as defined in the Investment Company Act,
of any such party (other than as directors of the Fund) and who
have no direct or indirect financial interest in the operation of
the Plan or any agreement related thereto; provided, however,
that if the continuation of this Agreement is not approved as to
a class or a Portfolio, the Underwriter may continue to render to
such class or Portfolio the services described herein in the
manner and to the extent permitted by the Act and the rules and
regulations thereunder. Upon effectiveness of this Agreement, it
shall supersede all previous agreements between the parties
10
<PAGE>
hereto covering the subject matter hereof. This Agreement may be
terminated (i) by the Fund with respect to any class or Portfolio
at any time, without the payment of any penalty, by the vote of a
majority of the outstanding voting securities (as so defined) of
such class or Portfolio, or by a vote of a majority of the
Directors of the Fund who are not interested persons, as defined
in the Investment Company Act, of the Fund (other than as
directors of the Fund) and have no direct and indirect financial
interest in the operation of the Plan or any agreement related
thereto, in any such event on sixty days' written notice to the
Underwriter; provided, however, that no such notice shall be
required if such termination is stated by the Fund to relate only
to Sections 5 and 16 hereof (in which event Sections 5 and 16
shall be deemed to have been severed herefrom and all other
provisions of this Agreement shall continue in full force and
effect), or (ii) by the Underwriter with respect to any Portfolio
on sixty days' written notice to the Fund.
(b) This Agreement may be amended at any time with the
approval of the Directors of the Fund, provided that (i) any
material amendments of the terms hereof will become effective
only upon approval as provided in the first sentence of Section
12(a) hereof, and (ii) any amendment to increase materially the
amount to be expended for distribution services fees pursuant to
Section 5(b) hereof will be effective only upon the additional
approval by a vote of a majority of the outstanding voting
securities as defined in the Investment Company Act of the class
affected.
SECTION 13. No Assignment. This Agreement may not be
transferred, assigned, sold or in any manner hypothecated or
pledged by either party hereto, and this Agreement shall
terminate automatically in the event of any such transfer,
assignment, sale, hypothecation or pledge. The terms "transfer",
"assignment", and "sale" as used in this paragraph shall have the
meanings ascribed thereto by governing law and any interpretation
thereof contained in rules or regulations promulgated by the
Securities and Exchange Commission thereunder.
SECTION 14. Notices. Any notice required or permitted
to be given hereunder by either party to the other shall be
deemed sufficiently given if sent by registered mail, postage
prepaid, addressed by the party giving such notice to the other
party at the last address furnished by such other party to the
party given notice, and unless and until changed pursuant to the
foregoing provisions hereof addressed to the Fund or the
Underwriter.
SECTION 15. Governing Law. The provisions of this
Agreement shall be, to the extent applicable, construed and
interpreted in accordance with the laws of the State of New York.
11
<PAGE>
SECTION 16. Disinterested Directors of the Fund. While
this Agreement is in effect, the selection and nomination of the
Directors who are not "interested persons" of the Fund (as
defined in the Investment Company Act) will be committed to the
discretion of such disinterested Directors.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement.
ALLIANCE PRIVATE INVESTORS
SERIES, INC.
By
ALLIANCE FUND DISTRIBUTORS,
INC.
By
Accepted as to
Sections 5, 12 and 16
as of [ ], 1998:
ALLIANCE CAPITAL MANAGEMENT L.P.
By Alliance Capital Management Corporation,
General Partner
By
12
00250242.AD1
<PAGE>
ALLIANCE FUND DISTRIBUTORS, INC.
1345 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10105
(800) 221-5672
(LOGO)
, 199
Selected Dealer Agreement
For Broker/Dealers (other than Bank Subsidiaries)
Dear Sirs:
As the principal underwriter of shares of certain registered
investment companies presently or hereafter managed by Alliance
Capital Management L.P., shares of which companies are
distributed by us pursuant to our Distribution Services
Agreements with such companies (the "Funds"), we invite you to
participate as principal in the distribution of shares of any and
all of the Funds upon the following terms and conditions:
1. You are to offer and sell such shares only at the public
offering prices which shall be currently in effect, in accordance
with the terms of the then current prospectuses and statements of
additional information of the Funds. You agree to act only as
principal in such transactions and shall not have authority to
act as agent for the Funds, for us, or for any other dealer in
any respect. All orders are subject to acceptance by us and
become effective only upon confirmation by us.
2. On each purchase of shares by you from us, the total
sales charges and discount to selected dealer, if any, shall be
as stated in each Fund's then current prospectus.
Such sales charges and discount to selected dealers are
subject to reductions under a variety of circumstances as
described in each Fund's then current prospectus and statement of
additional information. To obtain these reductions, we must be
notified when the sale takes place which would qualify for the
reduced charge.
There is no sales charge or discount to selected dealers on
the reinvestment of dividends.
3. As a selected dealer, you are hereby authorized (i) to
place orders directly with the Funds for their shares to be
resold by us to you subject to the applicable terms and
<PAGE>
conditions governing the placement of orders by us set forth in
the Distribution Services Agreement between each Fund and us and
subject to the applicable compensation provisions set forth in
each Fund's then current prospectus and statement of additional
information and (ii) to tender shares directly to the Funds or
their agent for redemption subject to the applicable terms and
conditions set forth in the Distribution Services Agreement.
4. Repurchases of shares will be made at the net asset
value of such shares in accordance with the then current
prospectuses and statements of additional information of the
Funds.
5. You represent that you are a member of the National
Association of Securities Dealers, Inc. and that you agree to
abide by the Rules of Fair Practice of such Association.
6. This Agreement is in all respects subject to Rule 26 of
the rules of Fair Practice of the National Association of
Securities Dealers, Inc. which shall control any provisions to
the contrary in this Agreement.
7. You agree:
(a) To purchase shares only from us or only from
your customers.
(b) To purchase shares from us only for the
purpose of covering purchase orders already
received or for your own bona fide investment.
(c) That you will not purchase any shares from
your customers at prices lower than the
redemption or repurchase prices then quoted by
the Fund. You shall, however, be permitted to
sell shares for the account of their record
owners to the Funds at the repurchase prices
currently established for such shares and may
charge the owner a fair commission for handing
the transaction.
(d) That you will not withhold placing customers'
orders for shares so as to profit yourself as
a result of such withholding.
(e) That if any shares confirmed to you hereunder
are redeemed or repurchased by any of the
Funds within seven business days after such
confirmation of your original order, you shall
forthwith refund to us the full discount
allowed to you on such sales. We shall notify
2
<PAGE>
you of such redemption or repurchase within
ten days from the date of delivery of the
request therefor or certificates to us or such
Fund. Termination or cancellation of this
Agreement shall not relieve you or us from the
requirements of this subparagraph.
8. We shall not accept from you any conditional orders
for shares. Delivery of certificates for shares purchased shall
be made by the Funds only against receipt of the purchase price,
subject to deduction for the discount reallowed to you and our
portion of the sales charge on such sales. If payment for the
shares purchased is not received within the time customary for
such payments, the sale may be cancelled forthwith without any
responsibility or liability on our part or on the part of the
Funds (in which case you will be responsible for any loss,
including loss of profit, suffered by the Funds resulting from
your failure to make payment as aforesaid), or, at our option, we
may sell the shares ordered back to the Funds (in which case we
may hold you responsible for any loss, including loss of profit
suffered by us resulting from your failure to make payment as
aforesaid).
9. You will not offer or sell any of the shares except
under circumstances that will result in compliance with the
applicable Federal and State securities laws and in connection
with sales and offers to sell shares you will furnish to each
person to whom any such sale or offer is made a copy of the
applicable then current prospectus. We shall be under no
liability to you except for lack of good faith and for
obligations expressly assumed by us herein. Nothing herein
contained, however, shall be deemed to be a condition,
stipulation or provision binding any persons acquiring any
security to waive compliance with any provision of the Securities
Act of 1933, or of the Rules and Regulations of the Securities
and Exchange Commission, or to relieve the parties hereto from
any liability arising under the Securities Act of 1933.
10. From time to time during the term of this Agreement
we may make payments to you pursuant to one or more of the
distribution plans adopted by certain of the Funds pursuant to
Rule 12b-1 under the Investment Company Act of 1940 (the "Act")
in consideration, with respect to each such Fund, of your
furnishing distribution services hereunder and providing
administrative, accounting and other services, including personal
service and/or the maintenance of shareholder accounts. We have
no obligation to make any such payments and you waive any such
payment until we receive monies therefor from the Fund. Any such
payments made pursuant to this Section 10 shall be subject to the
following terms and conditions:
3
<PAGE>
(a) Any such payments shall be in such amounts as
we may from time to time advise you in writing
but in any event not in excess of the amounts
permitted by the plan in effect with respect
to each particular Fund. Any such payments
shall be in addition to the selling
concession, if any, allowed to you pursuant to
this Agreement. Such payments shall include a
service fee in the amount of .25 of 1% per
annum of the average daily net assets of
certain Funds attributable to your clients.
Any such service fee shall be paid to you
solely for personal service and/or the
maintenance of shareholder accounts.
(b) The provisions of this Section 10 relate to
the plan adopted by a particular Fund pursuant
to Rule 12b-1. In accordance with Rule 12b-1,
any person authorized to direct the
disposition of monies paid or payable by a
Fund pursuant to this Section 10 shall provide
the Fund's Board of Directors, and the
Directors shall review, at least quarterly, a
written report of the amounts so expended and
the purposes for which such expenditures were
made.
(c) The provisions of this Section 10 applicable
to each Fund shall remain in effect for not
more than a year and thereafter for successive
annual periods only so long as such
continuance is specifically approved at least
annually in conformity with Rule 12b-1 and the
Act. The provisions of this Section 10 shall
automatically terminate with respect to a
particular Plan in the event of the assignment
(as defined by the Act) of this Agreement, in
the event such Plan terminates or is not
continued or in the event this Agreement
terminates or ceases to remain in effect. In
addition, the provisions of this Section 10
may be terminated at any time, without
penalty, by either party with respect to any
particular Plan on not more than 60 days' nor
less than 30 days' written notice delivered or
mailed by registered mail, postage prepaid, to
the other party.
11. No person is authorized to make any representations
concerning shares of the Funds except those contained in the
current prospectus, statement of additional information, and
4
<PAGE>
printed information issued by each Fund or by us as information
supplemental to each prospectus. We shall supply prospectuses
and statements of additional information, reasonable quantities
of reports to shareholders, supplemental sales literature, sales
bulletins, and additional information as issued. You agree to
distribute prospectuses and reports to shareholders of the Funds
to your customers in compliance with the applicable requirements,
except to the extent that we expressly undertake to do so on your
behalf. You agree not to use other advertising or sales material
relating to the Funds, unless approved in writing by us in
advance of such use. Any printed information furnished by us
other than the then current prospectus and statement of
additional information for each Fund, periodic reports and proxy
solicitation materials are our sole responsibility and not the
responsibility of the Funds, and you agree that the Funds shall
have no liability or responsibility to you in these respects
unless expressly assumed in connection therewith.
12. In connection with your distribution of shares of a
Fund, you shall conform to such written compliance standards as
we have provided you in the past or may from time to time provide
to you in the future.
13. We, our affiliates and the Funds shall not be
liable for any loss, expense, damages, costs or other claim
arising out of any redemption or exchange pursuant to telephone
instructions from any person or our refusal to execute such
instructions for any reason.
14. Either party to this Agreement may cancel this
Agreement by giving written notice to the other. Such notice
shall be deemed to have been given on the date on which it was
either delivered personally to the other party or any officer or
member thereof, or was mailed postpaid or delivered to a
telegraph office for transmission to the other party at his or
its address as shown below. This Agreement may be amended by us
at any time and your placing of an order after the effective date
of any such amendment shall constitute your acceptance thereof.
5
<PAGE>
15. This Agreement shall be construed in accordance
with the laws of the State of New York and shall be binding upon
both parties thereto when signed by us and accepted by you in the
space provided below.
Very truly yours,
ALLIANCE FUND DISTRIBUTORS, INC.
By:_____________________________
(Authorized Signature)
Bank or Firm Name _______________________________________________
Address _________________________________________________________
City _____________________ State ____________ Zip Code __________
ACCEPTED BY (signature) _____________________ Title _____________
Name (print) ________________________________ Title _____________
Date _____________________ 199__ Phone # ________________________
Please return two signed copies of this Agreement (one of
which will be signed above by us and thereafter returned to you)
in the accompanying return envelope to:
Alliance Fund Distributors, Inc.
1345 Avenue of the Americas, 38th Floor
New York, NY 10105
6
00250242.AC2
<PAGE>
ALLIANCE FUND DISTRIBUTORS, INC.
1345 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10105
(800) 221-5672
(LOGO)
, 199
Selected Agent Agreement
For Depository Institutions and Their Subsidiaries
Dear Sirs:
As the principal underwriter of shares of certain registered
investment companies presently or hereafter managed by Alliance
Capital Management L.P., shares of which companies are
distributed by us pursuant to our Distribution Services
Agreements with such companies (the "Funds"), we invite you,
acting as agent for your customers, to make available to your
customers shares of any or all of the Funds upon the following
terms and conditions:
1. The customers in question will be for all purposes your
customers. We shall execute transactions in shares of the Funds
for each of your customers only upon your authorization, it being
understood in all cases that (a) you are acting as the agent for
the customer; (b) each transaction is initiated solely upon the
order of the customer; (c) each transaction is for the account of
the customer and not for your account; (d) the transactions are
without recourse against you by the customer; (e) except as we
otherwise agree, each transaction is effected on a fully
disclosed basis; (f) as between you and the customer, the
customer will have full beneficial ownership of the shares;
(g) you shall provide no investment advice and exercise no
investment discretion regarding the purchase, sale, or redemption
of the shares; and (h) you shall make appropriate disclosure to
your customers that any Fund's shares are not endorsed by you, do
not constitute your obligation and are not entitled to federal
deposit insurance.
2. You are to sell shares of the Funds only at the public
offering prices which shall be currently in effect, in accordance
with the terms of the then current prospectuses and statements of
additional information of the Funds. You agree to act only as
agent for your customers in such transactions and shall not have
authority to act as agent for the Funds or for us in any respect.
<PAGE>
All orders are subject to acceptance by us and become effective
only upon confirmation by us.
3. On each purchase of shares of a Fund authorized by you,
the total sales charge and commission, if any, shall be as stated
in the Fund's then current prospectus. Such sales charges and
commissions are subject to reductions under a variety of
circumstances as described in each Fund's then current prospectus
and statement of additional information. To obtain such a
reduction, you must provide us with such information as we may
request to establish that a particular transaction qualifies for
the reduction. There is no sales charge or commission to
selected agents on the reinvestment of dividends.
4. As a selected agent, you are hereby authorized (i) to
place orders directly with the Funds for their shares to be
resold by us through you subject to the applicable terms and
conditions governing the placement of orders by us set forth in
the Distribution Services Agreement between each Fund and us and
subject to the applicable compensation provisions set forth in
each Fund's then current prospectus and statement of additional
information, and (ii) to tender shares directly to the Funds or
their agent for redemption or repurchase subject to the
applicable terms and conditions set forth in the Distribution
Services Agreement.
5. Redemptions and repurchases of shares will be made at
the net asset value of such shares in accordance with the then
current prospectuses and statements of additional information of
the Funds.
6. You represent that you are either:
(a) a bank as defined in Section 3(a)(6) of the
Securities Exchange Act of 1934, as amended
(the "1934 Act"), duly authorized to engage in
the transactions to be performed hereunder and
not required to register as a broker-dealer
pursuant to the 1934 Act; or
(b) a bank (as so defined) or an affiliate of a
bank, in either case registered as a broker-
dealer pursuant to the 1934 Act and a member
of the National Association of Securities
Dealers, Inc., and that you agree to abide by
the rules and regulations of the National
Association of Securities Dealers, Inc.
2
<PAGE>
7. You agree:
(a) to order shares of the Funds only from us and
to act as agent only for your customers;
(b) to order shares from us only for the purpose
of covering purchase orders already received;
(c) that you will not purchase any shares from
your customers at prices lower than the
redemption or repurchase prices then quoted by
the Funds, provided, however, that you shall
be permitted to sell shares for the accounts
of their record owners to the Funds at the
repurchase prices currently established for
such shares and may charge the owner a fair
commission for handling the transaction;
(d) that you will not withhold placing customers'
orders for shares so as to profit yourself as
a result of such withholding; and
(e) that if any shares confirmed through you
hereunder are redeemed or repurchased by any
of the Funds within seven business days after
such confirmation of your original order, you
shall forthwith refund to us the full
commission reallowed to you on such sales. We
shall notify you of such redemption or
repurchase within ten days from the date of
delivery of the request therefor or
certificates to us or such Fund. Termination
or cancellation of this Agreement shall not
relieve you or us from the requirements of
this subparagraph.
8. We shall not accept from you any conditional orders
for shares. Delivery of certificates for shares purchased shall
be made by the Funds only against receipt of the purchase price,
subject to deduction for the commission reallowed to you and our
portion of the sales charge on such sale. If payment for the
shares purchased is not received within the time customary for
such payments, the sale may be cancelled forthwith without any
responsibility or liability on our part or on the part of the
Funds (in which case you will be responsible for any loss,
including loss of profit, suffered by the Funds resulting from
your failure to make payment as aforesaid).
9. You will not accept orders for shares of any of the
Funds except under circumstances that will result in compliance
with the applicable Federal and State securities laws and banking
3
<PAGE>
laws, and in connection with sales of shares to your customers
you will furnish, unless we agree otherwise, to each customer who
has ordered shares a copy of the applicable then current
prospectus. We shall be under no liability to you except for
lack of good faith and for obligations expressly assumed by us
herein. Nothing herein contained, however, shall be deemed to be
a condition, stipulation or provision binding any persons
acquiring any security to waive compliance with any provision of
the Securities Act of 1933 or of the rules and regulations of the
Securities and Exchange Commission, or to relieve the parties
hereto from any liability arising under the Securities Act of
1933.
10. From time to time during the term of this Agreement
we may make payments to you pursuant to one or more of the
distribution plans adopted by certain of the Funds pursuant to
rule 12b-1 under the Investment Company Act of 1940 (the "Act"),
to compensate you with respect to the shareholder accounts of
your customers in such Funds for providing administrative,
accounting and other services, including personal service and/or
the maintenance of such accounts. We have no obligation to make
any such payments and you waive any such payment until we receive
monies therefor from the fund. Any such payments made pursuant
to this Section 10 shall be subject to the following terms and
conditions:
(a) Any such payments shall be in such amounts as
we may from time to time advise you in writing
but in any event not in excess of the amounts
permitted by the plan in effect with respect
to each particular Fund. Such payments shall
include a service fee in the amount of .25 of
1% per annum of the average daily net assets
of certain Funds attributable to your clients.
Any such service fee shall be paid to you
solely for personal service and/or the
maintenance of shareholder accounts.
(b) The provisions of this Section 10 relate to
the plan adopted by a particular Fund pursuant
to Rule 12b-1. In accordance with Rule 12b-1,
any person authorized to direct the
disposition of monies paid or payable by a
Fund pursuant to this Section 10 shall provide
the Fund's Board of Directors, and the
Directors shall review, at lest quarterly, a
written report of the amounts so expended and
the purposes for which such expenditures were
made.
4
<PAGE>
(c) The provisions of this Section 10 applicable
to each Fund remain in effect for not more
than a year and thereafter for successive
annual periods only so long as such
continuance is specifically approved at least
annually in conformity with Rule 12b-1 and the
Act. The provisions of this Section 10 shall
automatically terminate with respect to a
particular Plan in the event of the assignment
(as defined by the Act) of this Agreement, in
the event such Plan terminates or is not
continued or in the event this Agreement
terminates or ceases to remain in effect. In
addition, the provisions of this Section 10
may be terminated at any time, without
penalty, by either party with respect to any
particular Plan on not more than 60 days' nor
less than 30 days' written notice delivered or
mailed by registered mail, postage prepaid, to
the other party.
11. No person is authorized to make any representation
concerning shares of the Funds except those contained in the
current prospectus, statement of additional information, and
printed information issued by each Fund or by us as information
supplemental to each prospectus. We shall supply prospectuses
and statements of additional information, reasonable quantities
of reports to shareholders, supplemental sales literature, sales
bulletins, and additional information as issued. You agree to
distribute prospectuses and reports to shareholders of the Funds
to your customers in compliance with applicable requirements,
except to the extent that we expressly undertake to do so on your
behalf. You agree not to use other advertising or sales material
relating to the Funds except in compliance with all laws and
regulations applicable to you and unless approved in writing by
us in advance of such use. Any printed information furnished by
us other than the then current prospectus and statement of
additional information for each Fund, periodic reports and proxy
solicitation materials are our sole responsibility and not the
responsibility of the Funds, and you agree that the Funds shall
have no liability or responsibility to you in these respects
unless expressly assumed in connection therewith.
12. In connection with your making shares of a Fund
available to your customers, you shall conform to such written
compliance standards as we have provided you in the past or may
from time to time provide to you in the future.
13. We, our affiliates and the Funds shall not be
liable for any loss, expense, damages, costs or other claim
arising out of any redemption or exchange pursuant to telephone
5
<PAGE>
instructions from any person or our refusal to execute such
instructions for any reason.
14. Either party to this Agreement may cancel this
Agreement by giving written notice to the other. Such notice
shall be deemed to have been given as of the date on which it was
either delivered personally to the other party or any officer or
member thereof, or was mailed postpaid or delivered to a
telegraph office for transmission to the other party at his or
its address as shown below. This Agreement may be amended by us
at any time and your placing of an order after the effective date
of any such amendment shall constitute your acceptance thereof.
If you are a bank or an affiliate of a bank, this Agreement will
automatically terminate if you cease to be, or the bank of which
you are an affiliate ceases to be, a bank as defined in the 1934
Act.
15. This Agreement shall be construed in accordance
with the laws of the State of New York and shall be binding upon
both parties hereto when signed by us and accepted by you in the
space provided below.
Very truly yours,
ALLIANCE FUND DISTRIBUTORS, INC.
By:_____________________________
(Authorized Signature)
Bank or Firm Name _______________________________________________
Address _________________________________________________________
City _____________________ State ____________ Zip Code __________
ACCEPTED BY (signature) _____________________ Title _____________
Name (print) ________________________________ Title _____________
Date _____________________ 199__ Phone # ________________________
Please return two signed copies of this Agreement (one of
which will be signed by us and thereafter returned to you)
in the accompanying return envelope to:
Alliance Fund Distributors, Inc.
1345 Avenue of the Americas, 38th Floor
New York, NY 10105
6
00250242.AC1
<PAGE>
ALLIANCE PRIVATE INVESTORS SERIES, INC.
TRANSFER AGENCY AGREEMENT
AGREEMENT, dated as of January __, 1998, between
ALLIANCE PRIVATE INVESTORS SERIES, INC., a Maryland corporation
and an open-end investment company registered with the Securities
and Exchange Commission (the "SEC") under the Investment Company
Act of 1940 (the "Investment Company Act"), having its principal
place of business at 1345 Avenue of Americas, New York, New York
10105 (the "Fund"), and ALLIANCE FUND SERVICES, INC., a Delaware
corporation registered with the SEC as a transfer agent under the
Securities Exchange Act of 1934, having its principal place of
business at 500 Plaza Drive, Secaucus, New Jersey 07094 ("Fund
Services"), provides as follows:
WHEREAS, Fund Services has agreed to act as transfer
agent to the Fund for the purpose of recording the transfer,
issuance and redemption of shares of each series of the shares of
beneficial interest of the Fund ("Shares" or "Shares of a
Series"), transferring the Shares, disbursing dividends and other
distributions to shareholders of the Fund, and performing such
other services as may be agreed to pursuant hereto;
NOW THEREFORE, for and in consideration of the mutual
covenants and agreements contained herein, the parties do hereby
agree as follows:
SECTION 1. The Fund hereby appoints Fund Services as
its transfer agent, dividend disbursing agent and shareholder
<PAGE>
servicing agent for the Shares, and Fund Services agrees to act
in such capacities upon the terms set forth in this Agreement.
Capitalized terms used in this Agreement and not otherwise
defined shall have the meanings assigned to them in SECTION 30.
SECTION 2.
(a) The Fund shall provide Fund Services with copies
of the following documents:
(1) Specimens of all forms of certificates for Shares;
(2) Specimens of all account application forms and
other documents relating to Shareholders' accounts;
(3) Copies of each Prospectus;
(4) Specimens of all documents relating to withdrawal
plans instituted by the Fund, as described in SECTION 16; and
(5) Specimens of all amendments to any of the
foregoing documents.
(b) The Fund shall furnish to Fund Services a supply
of blank Share Certificates for the Shares and, from time to
time, will renew such supply upon Fund Services' request. Blank
Share Certificates shall be signed manually or by facsimile
signatures of officers of the Fund authorized to sign by law or
pursuant to the by-laws of the Fund and, if required by Fund
Services, shall bear the Fund's seal or a facsimile thereof.
SECTION 3. Fund Services shall make original issues of
Shares in accordance with SECTIONS 13 and 14 and the Prospectus
upon receipt of (i) Written Instructions requesting the issuance,
2
<PAGE>
(ii) a certified copy of a resolution of the Fund's Directors
authorizing the issuance, (iii) necessary funds for the payment
of any original issue tax applicable to such Shares, and (iv) an
opinion of the Fund's counsel as to the legality and validity of
the issuance, which opinion may provide that it is contingent
upon the filing by the Fund of an appropriate notice with the
SEC, as required by Rule 24f-2 of the Investment Company Act, as
amended from time to time.
SECTION 4. Transfers of Shares shall be registered and,
subject to the provisions of SECTION 10 in the case of Shares
evidenced by Share Certificates, new Share Certificates shall be
issued by Fund Services upon surrender of outstanding Share
Certificates in the form deemed by Fund Services to be properly
endorsed for transfer, which form shall include (i) all necessary
endorsers' signatures guaranteed by a member firm of a national
securities exchange or a domestic commercial bank or through
other procedures mutually agreed to between the Fund and Fund
Services, (ii) such assurances as Fund Services may deem
necessary to evidence the genuineness and effectiveness of each
endorsement and (iii) satisfactory evidence of compliance with
all applicable laws relating to the payment or collection of
taxes.
SECTION 5. Fund Services shall forward Share
Certificates in "non-negotiable" form by first-class or
registered mail, or by whatever means Fund Services deems equally
3
<PAGE>
reliable and expeditious. While in transit to the addressee, all
deliveries of Share Certificates shall be insured by Fund
Services as it deems appropriate. Fund Services shall not mail
Share Certificates in "negotiable" form, unless requested in
writing by the Fund and fully indemnified by the Fund to Fund
Services' satisfaction.
SECTION 6. In registering transfers of Shares, Fund
Services may rely upon the Uniform Commercial Code as in effect
from time to time in the State in which the Fund is incorporated
or organized or, if appropriate, in the State of New Jersey;
provided, that Fund Services may rely in addition or
alternatively on any other statutes in effect in the State of New
Jersey or in the state under the laws of which the Fund is
incorporated or organized that, in the opinion of Fund Services'
counsel, protect Fund Services and the Fund from liability
arising from (i) not requiring complete documentation in
connection with an issuance or transfer, (ii) registering a
transfer without an adverse claim inquiry, (iii) delaying
registration for purposes of an adverse claim inquiry or
(iv) refusing registration in connection with an adverse claim.
SECTION 7. Fund Services may issue new Share
Certificates in place of those lost, destroyed or stolen, upon
receiving indemnity satisfactory to Fund Services; and may issue
new Share Certificates in exchange for, and upon surrender of,
mutilated Share Certificates as Fund Services deems appropriate.
4
<PAGE>
SECTION 8. Unless otherwise directed by the Fund, Fund
Services may issue or register Share Certificates reflecting the
signature, or facsimile thereof, of an officer who has died,
resigned or been removed by the Fund. The Fund shall file
promptly with Fund Services' approval, adoption or ratification
of such action as may be required by law or by Fund Services.
SECTION 9. Fund Services shall maintain customary stock
registry records for Shares of each series noting the issuance,
transfer or redemption of Shares and the issuance and transfer of
Share Certificates. Fund Services may also maintain for Shares
of each Series an account entitled "Unissued Certificate
Account," in which Fund Services will record the Shares, and
fractions thereof, issued and outstanding from time to time for
which issuance of Share Certificates has not been requested.
Fund Services is authorized to keep records for Shares of each
Series containing the names and addresses of record of
Shareholders, and the number of Shares, and fractions thereof,
from time to time owned by them for which no Share Certificates
are outstanding. Each Shareholder will be assigned a single
account number for Shares of each Series, even though Shares for
which Certificates have been issued will be accounted for
separately.
SECTION 10. Fund Services shall issue Share
Certificates for Shares only upon receipt of a written request
from a Shareholder and as authorized by the Fund. If Shares are
5
<PAGE>
purchased or transferred without a request for the issuance of a
Share Certificate, Fund Services shall merely note on its stock
registry records the issuance or transfer of the Shares and
fractions thereof and credit or debit, as appropriate, the
Unissued Certificate Account and the respective Shareholders'
accounts with the Shares. Whenever Shares, and fractions
thereof, owned by Shareholders are surrendered for redemption,
Fund Services may process the transactions by making appropriate
entries in the stock transfer records, and debiting the Unissued
Certificate Account and the record of issued Shares outstanding;
it shall be unnecessary for Fund. Services to reissue Share
Certificates in the name of the Fund.
SECTION 11. Fund Services shall also perform the usual
duties and function required of a stock transfer agent for a
corporation, including but not limited to (i) issuing Share
Certificates as treasury Shares, as directed by Written
Instructions, and (ii) transferring Share Certificates from one
Shareholder to another in the usual manner. Fund Services may
rely conclusively and act without further investigation upon any
list, instruction, certification, authorization, Share
Certificate or other instrument or paper reasonably believed by
it in good faith to be genuine and unaltered, and to have been
signed, countersigned or executed or authorized by a duly-
authorized person or persons, or by the Fund, or upon the advice
of counsel for the Fund or for Fund Services. Fund Services may
6
<PAGE>
record any transfer of Share Certificates which it reasonably
believes in good faith to have been duly authorized, or may
refuse to record,any transfer of Share Certificates if, in good
faith, it reasonably deems such refusal necessary in order to
avoid any liability on the part of either the Fund or Fund
Services.
SECTION 12. Fund Services shall notify the Fund of any
request or demand for the inspection of the Fund's share records.
Fund Services shall abide by the Fund's instructions for granting
or denying the inspection; provided, however, Fund Services may
grant the inspection without such instructions if it is advised
by its counsel that failure to do so will result in liability to
Fund Services.
SECTION 13. Fund Services shall observe the following
procedures in handling funds received:
(a) Upon receipt at the office designated by the Fund
of any check or other order drawn or endorsed to the Fund or
otherwise identified as being for the account of the Fund, and,
in the case of a new account, accompanied by a new account
application or sufficient information to establish an account as
provided in the Prospectus, Fund Services shall stamp the
transmittal document accompanying such check or other order with
the name of the Fund and the time and date of receipt and shall
forthwith deposit the proceeds thereof in the custodial account
of the Fund.
7
<PAGE>
(b) In the event that any check or other order for
purchase of Shares is returned unpaid for any reason, Fund
Services shall, in the absence of other instructions from the
Fund, advise the Fund of the returned check and prepare such
documents and information as may be necessary to cancel promptly
any Shares purchased on the basis of such returned check and any
accumulated income dividends and capital gains distributions paid
on such Shares.
(c) As soon as possible after 4:00 p.m., Eastern time
or at such other times as the Fund may specify in Written or Oral
Instructions for any Series (the "Valuation Time") on each
Business Day Fund Services shall Obtain from the Fund's Adviser a
quotation (on which it may conclusively rely) of the net asset
value, determined as of the Valuation Time on that day. On each
Business Day Fund Services shall use the net asset value(s)
determined by the Fund's Adviser to compute the number of Shares
and fractional Shares to be purchased and the aggregate purchase
proceeds to be deposited with the Custodian. As necessary but no
more frequently than daily (unless a more frequent basis is
agreed to by Fund Services), Fund Services shall place a purchase
order with the Custodian for the proper number of Shares and
fractional Shares to be purchased and promptly thereafter shall
send written confirmation of such purchase to the Custodian and
the Fund.
8
<PAGE>
SECTION 14. Having made the calculations required by
SECTION 13, Fund Services shall thereupon pay the Custodian the
aggregate net asset value of the Shares purchased. The aggregate
number of Shares and fractional Shares purchased shall then be
issued daily and credited by Fund Services to the Unissued
Certificate Account. Fund Services shall also credit each
Shareholder's separate account with the number of Shares
purchased by such Shareholder. Fund Services shall mail written
confirmation of the purchase to each Shareholder or the
Shareholder's representative and to the Fund if requested. Each
confirmation shall indicate the prior Share balance, the new
Share balance, the Shares for which Stock Certificates are
outstanding (if any), the amount invested and the price paid for
the newly-purchased Shares.
SECTION 15. Prior to the Valuation Time on each
Business Day, as specified in accordance with SECTION 13, Fund
Services shall process all requests to redeem Shares and, with
respect to each Series, shall advise the Custodian of (i) the
total number of Shares available for redemption and (ii) the
number of shares and fractional Shares requested to be redeemed.
Upon confirmation of the net asset value by the Fund's Adviser,
Fund Services shall notify the Fund and the Custodian of the
redemption, apply the redemption proceeds in accordance with
SECTION 16 and the Prospectus, record the redemption in the stock
registry books, and debit the redeemed Shares from the Unissued
9
<PAGE>
Certificates Account and the individual account of the
Shareholder.
In lieu of carrying out the redemption procedures
described in the preceding paragraph, Fund Services may, at the
request of the Fund, sell Shares to the Fund as repurchases from
Shareholders, provided that the sale price is not less than the
applicable redemption price. The redemption procedures shall
then be appropriately modified.
SECTION 16. Fund Services will carry out the following
procedures with respect to Share redemptions:
(a) As to each request received by the Fund from or on
behalf of a Shareholder for the redemption of Shares, and unless
the right of redemption has been suspended as contemplated by the
Prospectus, Fund Services shall, within seven days after receipt
of such redemption request, either (i) mail a check in the amount
of the proceeds of such redemption to the person designated by
the Shareholder or other person to receive such proceeds or,
(ii) in the event redemption proceeds are to be wired through the
Federal Reserve Wire System or by bank wire pursuant to
procedures described in the Prospectus, cause such proceeds to be
wired in Federal funds to the bank or trust company account
designated by the Shareholder to receive such proceeds. Funds
Services shall also prepare and send a confirmation of such
redemption to the Shareholder. Redemptions in kind shall be made
only in accordance with such Written Instructions as Fund
10
<PAGE>
Services may receive from the Fund. The requirements as to
instruments of transfer and other documentation, the
determination of the appropriate redemption price and the time of
payment shall be as provided in the Prospectus, subject to such
additional requirements consistent therewith as may be
established by mutual agreement between the Fund and Fund
Services. In the case of a request for redemption that does not
comply in all respects with the requirements for redemption, Fund
Services shall promptly so notify the Shareholder and shall
effect such redemption at the price in effect at the time of
receipt of documents complying with such requirements. Fund
Services shall notify the Fund's Custodian and the Fund on each
Business Day of the amount of cash required to meet payments made
pursuant to the provisions of this paragraph and thereupon the
Fund shall instruct the Custodian to make available to Fund
Services in timely fashion sufficient funds therefor.
(b) Procedures and standards for effecting and
accepting redemption orders from Shareholders by telephone or by
such check writing service as the Fund may institute may be
established by mutual agreement between Fund Services and the
Fund consistent with the Prospectus.
(c) For purposes of redemption of Shares that have
been purchased by check within fifteen (15) days prior to receipt
of the redemption request, the Fund shall provide Fund Services
11
<PAGE>
with Written Instructions concerning the time within which such
requests may be honored.
(d) Fund Services shall process withdrawal orders duly
executed by Shareholders in accordance with the terms of any
withdrawal plan instituted by the Fund and described in the
Prospectus. Payments upon such withdrawal orders and redemptions
of Shares held in withdrawal plan accounts in connection with
such payments shall be made at such times as the Fund may
determine in accordance with the Prospectus.
(e) The authority of Fund Services to perform its
responsibilities under SECTIONS 15 and 16 with respect to the
Shares of any Series shall be suspended if Fund Services receives
notice of the suspension of the determination of the net asset
value of the Series.
SECTION 17. Upon the declaration of each dividend and
each capital gains distribution by the Fund's Directors, the Fund
shall notify Fund Services of the date of such declaration, the
amount payable per Share, the record date for determining the
Shareholders entitled to payment, the payment and the
reinvestment date price.
SECTION 18. Upon being advised by the Fund of the
declaration of any income dividend or capital gains distribution
on account of its Shares, Fund Services shall compute and prepare
for the Fund records crediting such distributions to
Shareholders. Fund Services shall, on or before the payment date
12
<PAGE>
of any dividend or distribution, notify the Fund and the
custodian of the estimated amount required to pay any portion of
a dividend or distribution which is payable in cash, and
thereupon the Fund shall, on or before the payment date of such
dividend or distribution, instruct the Custodian to make
available to Fund Services sufficient funds for the payment of
such cash amount. Fund Services will, on the designated payment
date, reinvest all dividends in additional shares and promptly
mail to each Shareholder at his address of record a statement
showing the number of full and fractional Shares (rounded to
three decimal places) then owned by the Shareholder and the net
asset value of such Shares; provided, however, that if a
Shareholder elects to receive dividends in cash, Fund Services
shall prepare a check in the appropriate amount and mail it to
the Shareholder at his address of record within five (5) business
days after the designated payment date, or transmit the
appropriate amount in Federal funds in accordance with the
Shareholder's agreement with the Fund.
SECTION 19. Fund Services shall prepare and maintain
for the Fund records showing for each Shareholder's account the
following:
A. The name, address and tax identification number of
the Shareholder;
B. The number of Shares of each Series held by the
Shareholder;
13
<PAGE>
C. Historical information including dividends paid
and date and price for all transactions;
D. Any stop or restraining order placed against such
account;
E. Information with respect to the withholding of any
portion of income dividends or capital gains distributions as are
required to be withheld under applicable law;
F. Any dividend or distribution reinvestment
election, withdrawal plan application, and correspondence
relating to the current maintenance of the account;
G. The certificate numbers and denominations of any
Share Certificates issued to the Shareholder; and
H. Any additional information required by Fund
Services to perform the services contemplated by this Agreement.
Fund Services agrees to make available upon request by the Fund
or the Fund's Adviser and to preserve for the periods prescribed
in Rule 31a-2 of the Investment Company Act any records related
to services provided under this Agreement and required to be
maintained by Rule 31a-1 of that Act, including:
(i) Copies of the daily transaction register for each
Business Day of the Fund;
(ii) Copies of all dividend, distribution and
reinvestment blotters;
(iii) Schedules of the quantities of Shares of each
Series distributed in each state for purposes of any state's laws
14
<PAGE>
or regulations as specified in Oral or Written Instructions given
to Fund Services from time to time by the Fund or its agents; and
(iv) Such other information, including Shareholder
lists, and statistical information as may be agreed upon from
time to time by the Fund and Fund Services.
SECTION 20. Fund Services shall maintain those records
necessary to enable the Fund to file, in a timely manner, form
N-SAR (Semi-Annual Report) or any successor report required by
the Investment Company Act or rules and regulations thereunder.
SECTION 21. Fund Services shall cooperate with the
Fund's independent public accountants and shall take reasonable
action to make all necessary information available to such
accountants for the performance of their duties.
SECTION 22. In addition to the services described
above, Fund Services will perform other services for the Fund as
may be mutually agreed upon in writing from time to time, which
may include preparing and filing Federal tax forms with the
Internal Revenue Service, and, subject to supervisory oversight
by the Fund's Adviser, mailing Federal tax information to
Shareholders, mailing semi-annual Shareholder reports, preparing
the annual list of Shareholders, mailing notices of Shareholders'
meetings, proxies and proxy statements and tabulating proxies.
Fund Services shall answer the inquiries of certain Shareholders
related to their share accounts and other correspondence
requiring an answer from the Fund. Fund Services shall maintain
15
<PAGE>
dated copies of written communications from Shareholders, and
replies thereto.
SECTION 23. Nothing contained in this Agreement is
intended to or shall require Fund Services, in any capacity
hereunder, to perform any functions or duties on any day other
than a Business Day. Functions or duties normally scheduled to
be performed on any day which is not a Business Day shall be
performed on, and as of, the next Business Day, unless otherwise
required by law.
SECTION 24. For the services rendered by Fund Services
as described above, the Fund shall pay to Fund Services an
annualized fee at a rate to be mutually agreed upon from time to
time. Such fee shall be prorated for the months in which this
Agreement becomes effective or is terminated. In addition, the
Fund shall pay, or Fund Services shall be reimbursed for, all
out-of-pocket expenses incurred in the performance of this
Agreement, including but not, limited to the cost of stationery,
forms, supplies, blank checks, stock certificates, proxies and
proxy solicitation and tabulation costs, all forms and statements
used by Fund Services in communicating with Shareholders of the
Fund or especially prepared for use in connection with its
services hereunder, specific software enhancements as requested
by the Fund, costs associated with maintaining withholding
accounts (including non-resident alien, Federal government and
state), postage, telephone, telegraph (or similar electronic
16
<PAGE>
media) used in communicating with Shareholders or their
representatives, outside mailing services, microfiche/micro film,
freight charges and off-site record storage. It is agreed in
this regard that Fund Services, prior to ordering any form in
such supply as it estimates will be adequate for more than two
years' use, shall obtain the written consent of the Fund. All
forms for which Fund Services has received reimbursement from the
Fund shall be the property of the Fund.
SECTION 25. Fund Services shall not be liable for any
taxes, assessments or governmental charges that may be levied or
assessed on any basis whatsoever in connection with the Fund or
any Shareholder, excluding taxes assessed against Fund Services
for compensation received by it hereunder.
SECTION 26.
(a) Fund Services shall at all times act in good faith
and with reasonable care in performing the services to be
provided by it under this Agreement, but shall not be liable for
any loss or damage unless such loss or damage is caused by the
negligence, bad faith or willful misconduct of Fund Services or
its employees or agents.
(b) The Fund shall indemnify and hold Fund Services
harmless from all loss, cost, damage and expense, including
reasonable expenses for counsel, incurred by it resulting from
any claim, demand, action or suit in connection with the
performance of its duties hereunder, or as a result of acting
17
<PAGE>
upon any instruction reasonably believed by it to have been
properly given by a duly authorized officer of the Fund, or upon
any information, data, records or documents provided to Fund
Services or its agents by computer tape, telex, CRT data entry or
other similar means authorized by the Fund; provided that this
indemnification shall not apply to actions or omissions of Fund
Services in cases of its own bad faith, willful misconduct or
negligence, and provided further that if in any case the Fund may
be asked to indemnify or hold Fund Services harmless pursuant to
this Section, the Fund shall have been fully and promptly advised
by Fund Services of all material facts concerning the situation
in question. The Fund shall have the option to defend Fund
Services against any claim which may be the subject of this
indemnification, and in the event that the Fund so elects it will
so notify Fund Services, and thereupon the Fund shall retain
competent counsel to undertake defense of the claim, and Fund
Services shall in such situations incur no further legal or other
expenses for which it may seek indemnification under this
paragraph. Fund Services shall in no case confess any claim or
make any compromise in any case in which the Fund may be asked to
indemnify Fund Services except with the Fund's prior written
consent.
18
<PAGE>
Without limiting the foregoing:
(i) Fund Services may rely upon the advice of the Fund
or counsel to the Fund or Fund Services, and upon statements of
accountants, brokers and other persons believed by Fund Services
in good faith to be expert in the matters upon which they are
consulted. Fund Services shall not be liable for any action
taken in good faith reliance upon such advice or statements;
(ii) Fund Services shall not be liable for any action
reasonably taken in good faith reliance upon any Written
Instructions or certified copy of any resolution of the Fund's
Directors, including a Written Instruction authorizing Fund
Services to make payment upon redemption of Shares without a
signature guarantee; provided, however, that upon receipt of a
Written Instruction countermanding a prior Instruction that has
not been fully executed by Fund Services, Fund Services shall
verify the content of the second Instruction and honor it, to the
extent possible. Fund Services may rely upon the genuineness of
any such document, or copy thereof, reasonably believed by Fund
Services in good faith to have been validly executed;
(iii) Fund Services may rely, and shall be protected by
the Fund in acting, upon any signature, instruction, request,
letter of transmittal, certificate, opinion of counsel,
statement, instrument, report, notice, consent, order, or other
paper or document reasonably believed by it in good faith to be
19
<PAGE>
genuine and to have been signed or presented by the purchaser,
the Fund or other proper party or parties; and
(d) Fund Services may, with the consent of the Fund,
subcontract the performance of any portion of any service to be
provided hereunder, including with respect to any Shareholder or
group of Shareholders, to any agent of Fund Services and may
reimburse the agent for the services it performs at such rates as
Fund Services may determine; provided that no such reimbursement
will increase the amount payable by the Fund pursuant to this
Agreement; and provided further, that Fund Services shall remain
ultimately responsible as transfer agent to the Fund.
SECTION 27. The Fund shall deliver or cause to be
delivered over to Fund Services (i) an accurate list of
Shareholders, showing each Shareholder's address of record,
number of Shares of each Series owned and whether such Shares are
represented by outstanding Share Certificates or by non-
certificated Share accounts and (ii) all Shareholder records,
files, and other materials necessary or appropriate for proper
performance of the functions assumed by the under this Agreement
(collectively referred to as the "Materials"). The Fund shall
indemnify Fund Service s and hold it harmless from any and all
expenses, damages, claims, suits, liabilities, actions, demands
and losses arising out of or in connection with any error,
omission, inaccuracy or other deficiency of such Materials, or
out of the failure of the Fund to provide any portion of the
20
<PAGE>
Materials or to provide any information in the Fund's possession
needed by Fund Services to knowledgeably perform its functions;
provided the Fund shall have no obligation to indemnify Fund
Services or hold it harmless with respect to any expenses,
damages, claims, suits, liabilities, actions, demands or losses
caused directly or indirectly by acts or omissions of Fund
Services or the Fund's Adviser.
SECTION 28. This Agreement may be amended from time to
time by a written supplemental agreement executed by the Fund and
Fund Services and without notice to or approval of the
Shareholders; provided this Agreement may not be amended in any
manner which would substantially increase the Fund's obligations
hereunder unless the amendment is first approved by the Fund's
Directors, including a majority of the Directors who are not a
party to this Agreement or interested persons of any such party,
at a meeting called for such purpose, and thereafter is approved
by the Fund's Shareholders if such approval is required under the
Investment Company Act or the rules and regulations thereunder.
The parties hereto may adopt procedures as may be appropriate or
practical under the circumstances, and Fund Services may
conclusively rely on the determination of the Fund that any
procedure that has been approved by the Fund does not conflict
with or violate any requirement of its Articles of Incorporation
or Declaration of Trust, By-Laws or Prospectus, or any rule,
regulation or requirement of any regulatory body.
21
<PAGE>
SECTION 29. The Fund shall file with Fund Services a
certified copy of each operative resolution of its Directors
authorizing the execution of Written Instructions or the
transmittal of Oral Instructions and setting forth authentic
signatures of all signatories authorized to sign on behalf of the
Fund and specifying the person or persons authorized to give Oral
Instructions on behalf of the Fund. Such resolution shall
constitute conclusive evidence of the authority of the person or
persons designated therein to act and shall be considered in full
force and effect, with Fund Services fully protected in acting in
reliance therein, until Fund Services receives a certified copy
of a replacement resolution adding or deleting a person or
persons authorized to give Written or Oral Instructions. If the
officer certifying the resolution is authorized to give Oral
Instructions, the certification shall also be signed by a second
officer of the Fund.
SECTION 30. The terms, as defined in this Section,
whenever used in this Agreement or in any amendment or supplement
hereto, shall have the meanings specified below, insofar as the
context will allow.
(a) Business Day: Any day on which the Fund is open
for business as described in the Prospectus.
(b) Custodian: The term Custodian shall mean the
Fund's current custodian or any successor custodian acting as
such for the Fund.
22
<PAGE>
(c) Fund's Adviser: The term Fund's Adviser shall
mean Alliance Capital Management L.P. or any successor thereto
who acts as the investment adviser or manager of the Fund.
(d) Oral Instructions: The term Oral Instructions
shall mean an authorization, instruction, approval, item or set
of data, or information of any kind transmitted to Fund Services
in person or by telephone, vocal telegram or other electronic
means, by a person or persons reasonably believed in good faith
by Fund Services to be a person or persons authorized by a
resolution of the Directors of the Fund to give Oral Instructions
on behalf of the Fund. Each Oral Instruction shall specify
whether it is applicable to the entire Fund or a specific Series
of the Fund.
(e) Prospectus: The term Prospectus shall mean a
prospectus and related statement of additional information
forming part of a currently effective registration statement
under the Investment Company Act and, as used with the respect to
Shares or Shares of a Series, shall mean the prospectuses and
related statements of additional information covering the Shares
or Shares of the Series.
(f) Securities: The term Securities shall mean bonds,
debentures, notes, stocks, shares, evidences of indebtedness, and
other securities and investments from time to time owned by the
Fund.
23
<PAGE>
(g) Series: The term Series shall mean any series of
Shares of the common stock of the Fund that the Fund may
establish from time to time.
(h) Share Certificates: The term Share Certificates
shall mean the stock certificates for the Shares.
(i) Shareholders: The term Shareholders shall mean
the registered owners from time to time of the Shares, as
reflected on the stock registry records of the Fund.
(j) Written Instructions: The term Written
Instructions shall mean an authorization, instruction, approval,
item or set of data, or information of any kind transmitted to
Fund Services in original writing containing original signatures,
or a copy of such document transmitted by telecopy, including
transmission of such signature, or other mechanical or
documentary means, at the request of a person or persons
reasonably believed in good faith by Fund Services to be a person
or persons authorized by a resolution of the Directors of the
Fund to give Written Instruction shall specify whether it is
applicable to the entire Fund or a specific Series of the Fund.
SECTION 31. Fund Services shall not be liable for the
loss of all or part of any record maintained or preserved by it
pursuant to this Agreement or for any delays or errors occurring
by reason of circumstances beyond its control, including but not
limited to acts of civil or military authorities, national
emergencies, fire, flood or catastrophe, acts of God,
24
<PAGE>
insurrection, war, riot, or failure of transportation,
communication or power supply, except to the extent that Fund
Services shall have failed to use its best efforts to minimize
the likelihood of occurrence of such circumstances or to mitigate
any loss or damage to the Fund caused by such circumstances.
SECTION 32. The Fund may give Fund Services sixty (60)
days and Fund Services may give the Fund (90) days written notice
of the termination of this Agreement, such termination to take
effect at the time specified in the notice. Upon notice of
termination, the Fund shall use its best efforts to obtain a
successor transfer agent. If a successor transfer agent is not
appointed within ninety (90) days after the date of the notice of
termination, the Directors of the Fund shall, by resolution,
designate the Fund as its own transfer agent. Upon receipt of
written notice from the Fund of the appointment of the successor
transfer agent and upon receipt of Oral or Written Instructions
Fund Services shall, upon request of the Fund and the successor
transfer agent and upon payment of Fund Services reasonable
charges and disbursements, promptly transfer to the successor
transfer agent the original or copies of all books and records
maintained by Fund Services hereunder and cooperate with, and
provide reasonable assistance to, the successor transfer agent in
the establishment of the books and records necessary to carry out
its responsibilities hereunder.
25
<PAGE>
SECTION 33. Any notice or other communication required
by or permitted to be given in connection with this Agreement
shall be in writing, and shall be delivered in person or sent by
first-class mail, postage prepaid, to the respective parties.
Notice to the Fund shall be given as follows until
further notice:
Alliance Private Investors Series, Inc.
1345 Avenue of the America
New York, New York 10105
Attention: Secretary
Notice to Fund Services shall be given as follows until further
notice:
Alliance Fund Services, Inc.
500 Plaza Drive
Secaucus, New Jersey 07094
SECTION 34. The Fund represents and warrants to Fund
Services that the execution and delivery of this Agreement by the
undersigned officer of the Fund has been duly and validly
authorized by resolution of the Fund's Directors. Fund Services
represents and warrants to the Fund that the execution and
delivery of this Agreement by the undersigned officer of Fund
Services has also been duly and validly authorized.
SECTION 35. This Agreement may be executed in more than
one counterpart, each of which shall be deemed to be an original,
and shall become effective on the last date of signature below
unless otherwise agreed by the parties. Unless sooner terminated
pursuant to SECTION 32, this Agreement will continue in effect so
long as its continuance is specifically approved at least
26
<PAGE>
annually by the Directors or by a vote of the stockholders of the
Fund and in either case by a majority of the Directors who are
not parties to this Agreement or interested persons of any such
party, at a meeting called for the purpose of voting on this
Agreement.
SECTION 36. This Agreement shall extend to and shall
bind the parties hereto and their respective successors and
assigns; provided, however, that this Agreement shall not be
assignable by the Fund without the written consent of Fund
Services or by Fund Services without the written consent of the
Fund, authorized or approved by a resolution of the Fund's
Directors. Notwithstanding the foregoing, either party may
assign this Agreement without the consent of the other party so
long as the assignee is an affiliate, parent or subsidiary of the
assigning party and is qualified to act under the Investment
Company Act, as amended from time to time.
SECTION 37. This Agreement shall be governed by the
laws of the State of New Jersey.
WITNESS the following signatures:
ALLIANCE PRIVATE INVESTORS
SERIES, INC.
By:____________________________
ALLIANCE FUND SERVICES, INC.
By:____________________________
27
00250242.AC3
<PAGE>
ALLIANCE PRIVATE INVESTORS SERIES, INC.
Plan pursuant to Rule 18f-3
under the Investment Company Act of 1940
This Plan (the "Plan") pursuant to Rule 18f-3 under the
Investment Company Act of 1940 (the "Act") of Alliance Private
Investors Series, Inc. (the "Fund") sets forth the general
characteristics of, and the general conditions under which the
Fund may offer, multiple classes of shares of its now existing
and hereafter created portfolios.1 This Plan may be revised or
amended from time to time as provided below.
Class Designations
The Fund2 may from time to time issue one or more of the
following classes of shares: Class A shares, Class B shares and
Class C shares. Each of the three classes of shares will
represent interests in the same portfolio of investments of the
Fund and, except as described herein, shall have the same rights
and obligations as each other class. Each class shall be subject
to such investment minimums and other conditions of eligibility
as are set forth in one or more prospectuses or statements of
additional information through which such shares are issued, as
from time to time in effect (collectively, the "Prospectus").
Class Characteristics
Class A shares are offered at a public offering price that is
equal to their net asset value ("NAV") plus an initial sales
charge, as set forth in the Prospectus. Class A shares may also
be subject to a Rule 12b-1 fee, which may include a service fee
and, under certain circumstances, a contingent deferred sales
charge ("CDSC"), as described in the Prospectus.
____________________
1. This Plan is intended to allow the Fund to offer multiple
classes of shares to the full extent and in the manner
permitted by Rule 18f-3 under the Act (the "Rule"), subject
to the requirements and conditions imposed by the Rule.
2. For purposes of this Plan, if the Fund has existing more than
one portfolio pursuant to which multiple classes of shares
are issued, then references in this Plan to the "Fund" shall
be deemed to refer instead to each portfolio.
Class B shares are offered at their NAV, without an initial
sales charge, and may be subject to a CDSC and a Rule 12b-1 fee,
which may include a service fee, as described in the Prospectus.
Class C shares are offered at their NAV, without an initial
sales charge, and may be subject to a CDSC and a Rule 12b-1 fee,
which may include a service fee, as described in the Prospectus.
The initial sales charge on Class A shares and CDSC on
Class A, B and C shares are each subject to reduction or waiver
as permitted by the Act, and as described in the Prospectus.
Allocations to Each Class
Expense Allocations
The following expenses shall be allocated, to the extent
practicable, on a class-by-class basis: (i) Rule 12b-1 fees
payable by the Fund to the distributor or principal underwriter
of the Fund's shares (the "Distributor"), and (ii) transfer
agency costs attributable to each class. Subject to the approval
of the Fund's Board of Directors, including a majority of the
independent Directors, the following "Class Expenses" may be
allocated on a class-by-class basis: (a) printing and postage
expenses related to preparing and distributing materials such as
shareholder reports, prospectuses and proxy statements to current
shareholders of a specific class, (b) SEC registration fees
incurred with respect to a specific class, (c) blue sky and
foreign registration fees and expenses incurred with respect to a
specific class, (d) the expenses of administrative personnel and
services required to support shareholders of a specific class
(including, but not limited to, maintaining telephone lines and
personnel to answer shareholder inquiries about their accounts or
about the Fund), (e) litigation and other legal expenses relating
to a specific class of shares, (f) Directors' fees or expenses
incurred as a result of issues relating to a specific class of
shares, (g) accounting and consulting expenses relating to a
specific class of shares, (h) any fees imposed pursuant to a non-
Rule 12b-1 shareholder services plan that relate to a specific
class of shares, and (i) any additional expenses, not including
advisory or custodial fees or other expenses related to the
management of the Fund's assets, if these expenses are actually
incurred in a different amount with respect to a class, or if
services are provided with respect to a class that are of a
different kind or to a different degree than with respect to one
or more other classes.
All expenses not now or hereafter designated as Class
Expenses ("Fund Expenses") will be allocated to each class on the
basis of the net asset value of that class in relation to the net
asset value of the Fund.
2
Waivers and Reimbursements
The Adviser or Distributor may choose to waive or reimburse
Rule 12b-1 fees, transfer agency fees or any Class Expenses on a
voluntary, temporary basis. Such waiver or reimbursement may be
applicable to some or all of the classes and may be in different
amounts for one or more classes.
Income, Gains and Losses
Income, and realized and unrealized capital gains and losses
shall be allocated to each class on the basis of the net asset
value of that class in relation to the net asset value of the
Fund.
Conversion and Exchange Features
Conversion Features
Class B shares of the Fund automatically convert to Class A
shares of the Fund after a certain number of months or years
after the end of the calendar month in which the shareholder's
purchase order was accepted as described in the Prospectus.
Class B shares purchased through reinvestment of dividends and
distributions will be treated as Class B shares for all purposes
except that such Class B shares will be considered held in a
separate sub-account. Each time any Class B shares in the
shareholder's account convert to Class A shares, an equal pro-
rata portion of the Class B shares in the sub-account will also
convert to Class A shares.
The conversion of Class B shares to Class A shares may be
suspended if the opinion of counsel obtained by the Fund that the
conversion does not constitute a taxable event under current
federal income tax law is no longer available. Class B shares
will convert into Class A shares on the basis of the relative net
asset value of the two classes, without the imposition of any
sales load, fee or other charge.
In the event of any material increase in payments authorized
under the Rule 12b-1 Plan (or, if presented to shareholders, any
material increase in payments authorized by a non-Rule 12b-1
shareholder services plan) applicable to Class A shares, existing
Class B shares will stop converting into Class A shares unless
the Class B shareholders, voting separately as a class, approve
the increase in such payments. Pending approval of such
increase, or if such increase is not approved, the Directors
shall take such action as is necessary to ensure that existing
Class B shares are exchanged or converted into a new class of
shares ("New Class A") identical in all material respects to
Class A shares as existed prior to the implementation of the
3
increase in payments, no later than such shares were previously
scheduled to convert to Class A shares. If deemed advisable by
the Directors to implement the foregoing, such action may include
the exchange of all existing Class B shares for a new class of
shares ("New Class B") identical to existing Class B shares,
except that New Class B shares shall convert to New Class A
shares. Exchanges or conversions described in this paragraph
shall be effected in a manner that the Directors reasonably
believe will not be subject to federal income taxation. Any
additional cost associated with the creation, exchange or
conversion of New Class A and New Class B shares shall be borne
by the Adviser and the Distributor. Class B shares sold after
the implementation of the fee increase may convert into Class A
shares subject to the higher maximum payment, provided that the
material features of the Class A plan and the relationship of
such plan to the Class B shares are disclosed in an effective
registration statement.
Exchange Features
Shares of each class generally will be permitted to be
exchanged only for shares of a class with similar characteristics
in another Alliance Mutual Fund and shares of certain Alliance
money market funds. If the aggregate net asset value of shares
of all Alliance Mutual Funds held by an investor in the Fund
reaches the minimum amount at which an investor may purchase
Class A shares at net asset value without a front-end sales load
on or before December 15 in any year, then all Class B and
Class C shares of the Fund held by that investor may thereafter
be exchanged, at the investor's request, at net asset value and
without any front-end sales load or CDSC for Class A shares of
the Fund. All exchange features applicable to each class will be
described in the Prospectus.
Dividends
Dividends paid by the Fund with respect to its Class A,
Class B and Class C shares, to the extent any dividends are paid,
will be calculated in the same manner, at the same time and will
be in the same amount, except that any Rule 12b-1 fee payments
relating to a class of shares will be borne exclusively by that
class and any incremental transfer agency costs or, if
applicable, Class Expenses relating to a class shall be borne
exclusively by that class.
Voting Rights
Each share of a Fund entitles the shareholder of record to
one vote. Each class of shares of the Fund will vote separately
as a class with respect to the Rule 12b-1 plan applicable to that
class and on other matters for which class voting is required
4
under applicable law. Class A and Class B shareholders will vote
as two separate classes to approve any material increase in
payments authorized under the Rule 12b-1 plan applicable to
Class A shares.
Responsibilities of the Directors
On an ongoing basis, the Directors will monitor the Fund for
the existence of any material conflicts among the interests of
the classes of shares. The Directors shall further monitor on an
ongoing basis the use of waivers or reimbursement by the Adviser
and the Distributor of expenses to guard against cross-
subsidization between classes. The Directors, including a
majority of the independent Directors, shall take such action as
is reasonably necessary to eliminate any such conflict that may
develop. If a conflict arises, the Adviser and Distributor, at
their own cost, will remedy such conflict up to and including
establishing one or more new registered management investment
companies.
Reports to the Directors
The Adviser and Distributor will be responsible for reporting
any potential or existing conflicts among the classes of shares
to the Directors. In addition, the Directors will receive
quarterly and annual statements concerning distributions and
shareholder servicing expenditures complying with paragraph
(b)(3)(ii) of Rule 12b-1. In the statements, only expenditures
properly attributable to the sale or servicing of a particular
class of shares shall be used to justify any distribution or
service fee charged to that class. The statements, including the
allocations upon which they are based, will be subject to the
review of the independent Directors in the exercise of their
fiduciary duties. At least annually, the Directors shall receive
a report from an expert, acceptable to the Directors, (the
"Expert"), with respect to the methodology and procedures for
calculating the net asset value, dividends and distributions for
the classes, and the proper allocation of income and expenses
among the classes. The report of the Expert shall also address
whether the Fund has adequate facilities in place to ensure the
implementation of the methodology and procedures for calculating
the net asset value, dividends and distributions for the classes,
and the proper allocation of income and expenses among the
classes. The Fund and the Adviser will take immediate corrective
measures in the event of any irregularities reported by the
Expert.
5
Amendments
The Plan may be amended from time to time in accordance with
the provisions and requirements of Rule 18f-3 under the Act.
Adopted by action of the Board of Directors the [ ] day of
[ ], 1998.
By:
6
00250242.AC0
