<PAGE>
As filed with the Securities and Exchange
Commission on June 29, 1998
File Nos. 333-8818
811-9176
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. 1 X
Post-Effective Amendment No.
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT 1940
Amendment No. 1 X
_______________________________
Alliance Select Investor 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)
Copies of communications to:
Thomas G. MacDonald
Seward & Kissel
One Battery Park Plaza
New York, New York 10004
<PAGE>
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>
<PAGE>
ALLIANCE SELECT
-------------------
INVESTOR 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
July 13, 1998
- - - --------------------------------------------------------------------------------
Table of Contents Page
The Fund at a Glance .................................................... 2
Expense Information ..................................................... 3
Glossary ................................................................ 4
Description of the Fund ................................................. 5
Investment Objective ................................................. 5
Investment Policies .................................................. 5
Additional Investment Practices ...................................... 6
Risk Considerations .................................................. 12
Purchase and Sale of Shares ............................................. 14
Management of the Fund .................................................. 17
Dividends, Distributions and Taxes ...................................... 20
General Information ..................................................... 21
- - - --------------------------------------------------------------------------------
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 Select
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 sophisticated 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, 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)
Investing without the Mystery.(SM)
(R) This registered mark used under license from the owner, Alliance Capital
Management L.P.
<PAGE>
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.
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 Fund employs leverage and specialized trading techniques including the use
of options, in an effort to achieve maximum total return. These techniques are
riskier than many investment strategies. The use of these techniques will result
in greater volatility, particularly in bear markets, and there is no assurance
that the Fund will be able to defend against short-term market corrections.
The price of shares of the Fund will fluctuate daily as the prices of the
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. The Fund is a "non-diversified" investment
company, which means it is not limited in the proportion of its assets that may
be invested in the securities of a single issuer. As a consequence, the Fund is
subject to certain additional risks not typically associated with funds that
have more diversified portfolios. 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.
Suitability . . .
The Fund is appropriate for the sophisticated investor who understands and is
willing to assume the risks of the Fund's aggressive investment strategies. The
Fund is not a complete investment program and investors should invest only a
portion of their assets in the Fund.
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. The minimum initial
investment is reduced to $10,000 for certain retirement plans and accounts,
including 401(k) plans and IRAs. 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
- - - --------------------------------------------------------------------------------
[LOGO]
Alliance(R)
Investing without the Mystery.(SM)
(R) This registered mark used under license from the owner, Alliance Capital
Management L.P.
2
<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>
<CAPTION>
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 the 1.0% during the
first year, decreasing first year,
1.0% annually to 0% thereafter
0% after the
fourth year(b)
Exchange fee ...................................................... None None None
</TABLE>
- - - --------------------------------------------------------------------------------
(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 14.
(b) Class B shares automatically convert to Class A shares after eight years.
See "Purchase and Sale of Shares--How to Buy Shares"--page 14.
<TABLE>
<CAPTION>
Operating Expenses Class A Class B Class C
------- ------- -------
<S> <C> <C> <C>
Management fees(a) ............................................ 1.10% 1.10% 1.10%
12b-1 fees .................................................... .30% 1.00% 1.00%
Other expenses(b) ............................................. 1.10% 1.10% 1.10%
---- ---- ----
Total fund operating expenses ................................. 2.50% 3.20% 3.20%
</TABLE>
<TABLE>
<CAPTION>
Example Class A Class B+ Class B++ Class C+ Class C++
------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C>
After 1 year .................................................. $67 $72 $32 $42 $32
After 3 years ................................................. $117 $119 $99 $99 $99
</TABLE>
- - - --------------------------------------------------------------------------------
+ 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 (the "Index"). As adjusted, the
advisory fee will range between .80% and 1.40%. During the first year of
operation (through July 31, 1999) the management fee is .80% and may be
increased to 1.40% based on the relative performance of the Class A shares
of the Fund against the Index. 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. Alliance has agreed to waive management fees and bear expenses of
the Fund through July 31, 1999 to the extent necessary to prevent total fund
operating expenses, on an annualized basis, from exceeding the levels disclosed
in the foregoing table. Thereafter, these fees and expenses are subject to
reimbursement by the Fund through October 31, 2001, but no reimbursement payment
will be made that would cause (i) the Fund's total expenses, on an annualized
basis, to exceed the ratios disclosed above or (ii) the total of the payments to
exceed the Fund's total initial organizational and offering expenses. Any
amounts reimbursed will have the effect of increasing expenses otherwise borne
by the Fund. 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.
3
<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.
4
<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 (companies with
market capitalizations generally expected to exceed $5 billion) that possess,
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 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 20% of its total
assets in convertible securities of companies whose common stocks are eligible
for purchase by the Fund, 5% of its total assets in rights or warrants and 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.
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
5
<PAGE>
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.
The Fund may also, subject to the requirements of the 1940 Act, (i) engage in
short sales of securities with respect to up to 30% of its total assets; (ii)
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; (iii) 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; (iv)
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; (v) purchase and write put and call options on foreign currencies;
(vi) purchase or sell forward foreign currency exchange contracts; (vii) enter
into forward commitments for the purchase or sale of securities; (viii) enter
into repurchase agreements pertaining to U.S. Government securities with member
banks of the Federal Reserve System or primary dealers in such securities; (ix)
enter into reverse repurchase agreements and dollar rolls; (x) enter into
standby commitment agreements; (xi) enter into currency swaps for hedging
purposes; and (xii) 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. 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
6
<PAGE>
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 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-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
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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 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
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 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
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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, 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. 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
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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 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 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
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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 the 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.
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 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
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correspondingly greater brokerage and other expenses than a lower rate, which
must be borne by the Fund and its shareholders. High portfolio turnover also may
result in the realization of substantial net short-term capital gains.
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 ability to maintain its
qualification for taxation as a "regulated investment company". See "Dividends,
Distributions and Taxes--U.S. Federal Income Taxes." Without such qualification,
the Fund would be subject to federal income and excise tax and the amount of
distributions to shareholders would be reduced.
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
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
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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 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 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.
13
<PAGE>
- - - --------------------------------------------------------------------------------
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 is $50,000. The minimum initial
investment is reduced to $10,000 for various types of retirement plans and
accounts, including Keogh plans, 401(k) plans and other defined contribution
plans, as well as individual retirement accounts. The minimum initial investment
amount is also reduced to $10,000 for investments by registered representatives
of broker-dealers registered under the Securities Exchange Act of 1934. The Fund
is not a complete investment program and investors should invest only a portion
of their individual portfolios in the Fund. 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.
Class A Shares--Initial Sales Charge Alternative
You can purchase Class A shares at net asset value plus an initial sales charge,
as follows:
<TABLE>
<CAPTION>
Initial Sales Charge
as % of Commission to
Net Amount as % of Dealer/Agent as %
Amount Purchased Invested Offering Price of Offering Price*
- - - --------------------------------------------------------------------------------
<S> <C> <C> <C>
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
- - - --------------------------------------------------------------------------------
</TABLE>
* During the initial offering period and through August 31, 1998, AFD will
"reallow" to dealers the entire amount of the initial sales charge on Class
A shares.
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.
<TABLE>
<CAPTION>
Year Since Purchase CDSC
- - - --------------------------------------------------------------------------------
<S> <C>
First 4.0%
Second 3.0%
Third 2.0%
Fourth 1.0%
Fifth and thereafter None
</TABLE>
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
14
<PAGE>
qualified retirement plans or pursuant to a monthly, bimonthly or quarterly
systematic withdrawal plan. See the Statement of Additional Information.
Initial Offering
It is expected that shares of the Fund will be offered during an initial
offering period which is currently scheduled to end on July 23, 1998. The Fund
will begin its continuous offering of shares on July 24, 1998. During the Fund's
initial offering period, Class A shares will be offered to the public at their
net asset value of $10.00 per share plus a sales charge which will vary with the
size of the purchase as shown in the foregoing table and as described in the
Statement of Additional Information. The maximum offering price of the Class A
shares during the initial offering period is $10.44 per share. Class B and Class
C shares will be offered to the public during the initial offering period at
their net asset value of $10.00 per share.
During the initial offering and through August 31, 1998, AFD will "reallow" to
dealers the entire amount of the initial sales charge on Class A shares.
During the initial offering period, the Fund will not accept subscriptions for
Fund shares other than through authorized dealers and agents, and any
subscription monies sent directly to the Fund will be promptly returned. In
addition, under Commission regulations (e.g., Rule 15c-4 under the Securities
Exchange Act of 1934), authorized dealers and agents will not be permitted to
accept subscription monies from their customers in advance of the purchase date
unless appropriate arrangements are made for the temporary investment or deposit
of such monies. Shares subscribed for during the Fund's initial offering period
will be sold to subscribers on the purchase date, which is expected to occur not
later than three business days following the end of the initial offering
period.
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 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 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.
15
<PAGE>
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:
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 and without limiting the frequency of redemption
requests not made by telephone, 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 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.
16
<PAGE>
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).
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 are members of Alliance's
Large Cap Growth Group and 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(R). 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
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 August 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. The performance period for
each such month will be from August 1998 through the current calendar month,
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 current 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 August 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.
17
<PAGE>
For the period from August 1, 1998 through July 31, 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 August 1, 1998 through July 31, 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 payable to Alliance prior to
August 1999. For any period prior to August 1, 1998, Alliance will receive the
Minimum Fee, without adjustment.
The following table illustrates the full range of permitted increases or
decreases to the Basic Fee.
<TABLE>
<CAPTION>
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
- - - --------------------------------------------------------------------------------
<S> <C> <C>
+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%
</TABLE>
- - - ----------
* 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 August 1, 1998 through July 31, 1999, and thereafter the period from
August 1, 1998 to the most recent month-end until July 31, 2001, 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 by the Fund 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 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. Although All-Market Advantage is a closed-end fund, it 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 17.
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 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
18
<PAGE>
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.
<TABLE>
<CAPTION>
Annualized Rates of Return
Periods Ended March 31, 1998
- - - --------------------------------------------------------------------------------
All-Market Advantage/Benchmarks 1 Year 3 Years Inception*
- - - --------------------------------------------------------------------------------
<S> <C> <C> <C>
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%
<CAPTION>
Cumulative Rates of Return
Periods Ended March 31, 1998
- - - --------------------------------------------------------------------------------
All-Market Advantage/Benchmarks 1 Year 3 Years Inception*
- - - --------------------------------------------------------------------------------
<S> <C> <C> <C>
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%
</TABLE>
- - - ----------
* 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, (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.
19
<PAGE>
The Fund is not obligated under the Plan to pay any distribution services fee in
excess of the amounts set forth above. With respect to Class A shares of the
Fund, distribution expenses accrued by AFD in one fiscal year may not be paid
from distribution services fees received from the Fund in subsequent fiscal
years. AFD's compensation with respect to Class B and Class C shares under the
Plan is directly tied to the expenses incurred by AFD. Actual distribution
expenses for 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.
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. So long as the Fund distributes at least 90% of 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 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.
20
<PAGE>
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.
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 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.
21
<PAGE>
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.
This prospectus does not constitute an offering in any state in which such
offering may not lawfully be made.
22
<PAGE>
(LOGO) ALLIANCE SELECT INVESTOR 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
July 13, 1998
____________________________________________________________
This Statement of Additional Information is not a
prospectus but supplements and should be read in conjunction with
the Prospectus dated July 13, 1998 for the Premier Portfolio (the
"Fund") of Alliance Select Investor 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 Company 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 Alliance Capital
Management L.P. (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
4
<PAGE>
options and purchase put and call options on U.S. and foreign
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
5
<PAGE>
Fund's portfolio were replaced one and one-half times within a
period of one year.
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
6
<PAGE>
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
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
Company, their ages and their principal occupations during
the past five years are set forth below. Each of the
Directors and officers are trustees, directors and officers
of other registered investment companies sponsored by the
Adviser. Unless otherwise specified, the address of each
such person is 1345 Avenue of the Americas, New York, New
York 10105.
Directors
JOHN D. CARIFA,1 52, Chairman and President of the
Fund, is the President, Chief Operating Officer and a
Director of Alliance Capital Management Corporation ("ACMC")
with which he has been associated since prior to 1993.
____________________
1. An "interested person" of the Fund as defined in the
1940 Act.
7
<PAGE>
RUTH BLOCK, 67, was formerly an Executive Vice
President and the Chief Insurance Officer of Equitable. She
is a Director of Ecolab Incorporated (specialty chemicals)
and Amoco Corporation (oil and gas). Her address is P.O.
Box 4653, Stamford, Connecticut 06903.
DAVID H. DIEVLER, 68, was formerly a Senior Vice
President of ACMC with which he had been associated since
prior to 1993. He is currently an independent consultant.
His address is P.O. Box 167, Spring Lake, New Jersey 07762.
JOHN H. DOBKIN, 55, has been the President of
Historic Hudson Valley (historic preservation) since prior
to 1993. Previously, he was Director of the National
Academy of Design. His address is Historic Hudson Valley,
150 White Plains Road, Tarrytown, New York 10591.
WILLIAM H. FOULK, JR., 65, is an investment adviser
and an independent consultant. He was formerly Senior
Manager of Barrett Associates, Inc., a registered investment
adviser, with which he had been associated since prior to
1993. His address is Suite 100, 2 Greenwich Plaza,
Greenwich, Connecticut 06830.
DR. JAMES M. HESTER, 73, is President of the Harry
Frank Guggenheim Foundation with which he has been
associated since prior to 1993. He was formerly President
of New York University, the New York Botanical Garden and
Rector of the United Nations University. His address is 45
East 89th Street, New York, New York 10128.
CLIFFORD L. MICHEL, 58, is a partner in the law
firm of Cahill Gordon & Reindel with which he has been
associated since prior to 1993. He is President, Chief
Executive Officer and Director of Wenonah Development
Company (investments) and a Director of Placer Dome, Inc.
(mining). His address is 80 Pine Street, New York, New York
10005.
DONALD J. ROBINSON, 63, was formerly a senior
partner and a member of the Executive Committee in the law
firm of Orrick, Herrington & Sutcliffe and is currently
senior counsel to that firm. His address is 666 Fifth
Avenue, 19th Floor, New York, New York 10103.
Officers
JOHN D. CARIFA, Chairman and President, see
biography under "Directors," above.
8
<PAGE>
KATHLEEN CORBET, Senior Vice President, 37, has
been a Senior Vice President of ACMC since July 1993.
Previously, she held various responsibilities as head of
Equitable Capital Management Corporation's Fixed Income
Management Department, Private Placement Secondary Trading
and Fund Management since prior to 1993.
ALFRED HARRISON, Senior Vice President, 58, is Vice
Chairman of the Board of ACMC, with which he has been
associated since prior to 1992.
THOMAS BARDONG, Vice President, 51, is a Senior
Vice President of ACMC, with which he has been associated
since prior to 1992.
JOHN A. KOLTES, Vice President, 54, is a Senior
Vice President of ACMC, with which he has been associated
with since prior to 1992.
DANIEL V. PANKER, Vice President, 58, is a Senior
Vice President of ACMC, with which he has been associated
since prior to 1993.
MICHAEL J. REILLY, Vice President, 35, is a Senior
Vice President of ACMC, with which he has been associated
since prior to 1992.
EDMUND P. BERGAN, JR., Secretary, 46, is a Senior
Vice President and General Counsel of Alliance Fund
Distributors and Alliance Fund Services, Inc. and Vice
President and Assistant General Counsel of ACMC, with which
he has been associated since prior to 1992.
DOMENICK PUGLIESE, Assistant Secretary, 35, is a
Vice President and Assistant General Counsel of Alliance
Fund Services, Inc. with which he has been associated since
May 1995. Previously, he was Vice President and Counsel of
Concord Holding Corporation since 1994, Vice President and
Associate General Counsel of Prudential Securities since
1992.
ANDREW L. GANGOLF, Assistant Secretary, 41, has
been Vice President and Assistant General Counsel of
Alliance Fund Distributors, Inc. since December 1994. Prior
thereto, since October 1992, he was Vice President and
Assistant Secretary of Delaware Management Co., Inc. Prior
thereto, he was Vice President and Counsel of Equitable.
MARIE VOGEL, Assistant Secretary, 40, is an
Assistant Vice President of ACMC since December 1997. Prior
thereto, she was an Administrative Officer and Assistant
9
<PAGE>
Secretary of Evergreen Investment Service, Inc., from 1995
to 1997, and a Vice President at Concord Financial, Inc.
with which she was associated with since prior to 1992.
MARK D. GERSTEN, Treasurer and Chief Financial
Officer, 46, is a Senior Vice President of Alliance Fund
Services, Inc. with which he has been associated since prior
to 1992.
VINCENT S. NOTO, Controller, 32, is a Vice
President of Alliance Fund Services, Inc., with which he has
been associated since prior to 1992.
JOSEPH MANTINEO, Assistant Controller, 37, has been
a Vice President of Alliance Fund Services, Inc. since prior
to 1992.
PHYLLIS CLARKE, Assistant Controller, 36, is an
Accounting Manager of Mutual Funds for Alliance Fund
Services, Inc. since prior to 1992.
JOSE HERNANDEZ, Assistant Controller, 40, is a
Manager of Alliance Fund Services, Inc. with which he has
been associated since prior to 1993.
CARLA LAROSE, Assistant Controller, 34, is a
manager of Alliance Fund Services, Inc. with which she has
been associated since 1993.
DANA PAK, Assistant Controller, 31, is an
Accounting Manager of Alliance Fund SErvices, Inc., with
which she has been associated since prior to 1992.
JUAN RODRIQUEZ, Assistant Controller, 40, is an
Assistant Vice President of AFS, with which he has been
associated since prior to 1992.
STEVE YU, Assistant Controller, 37, has been an
Assistant Vice President of ACMC since 1993.
The Company does not pay any fees to, or reimburse
expenses of, its Directors who are considered "interested
persons" of the Company. The aggregate compensation to be
paid by the Company to each of the Directors during the
Company's fiscal year ending October 31, 1999 (estimating
future payments based upon existing arrangements), and the
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
10
<PAGE>
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 Company 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 Investment
Companies in Portfolios Within
the Alliance the Alliance
Total Fund Complex, Fund Complex,
Compensation Including the Including the
From the Company, as Company, as
Aggregate Alliance Fund to which the to which
Compensation Complex, the Director the Director
Name of From the Including the is a Director is a Director or
Director Company* Company or Trustee Trustee
___________ ____________ _____________ _____________ _______________
John D. Carifa $-0- $-0- 55 119
Ruth Block $4,000 $157,500 41 81
David H. Dievler $4,000 $182,000 48 82
John H. Dobkin $4,000 $121,250 45 81
William H. Foulk, Jr. $4,000 $144,250 49 114
James M. Hester $4,000 $148,500 41 77
Clifford L. Michel $4,000 $146,068 42 93
Donald J. Robinson $4,000 $217,358 42 95
_______________
* estimated
As of June 26, 1998, the Directors and officers of the
Company 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
Company's Board of Directors (see "Management of the Fund" in the
Prospectus).
11
<PAGE>
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,
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 three 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
12
<PAGE>
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.
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 Company and pays all compensation of Directors and officers
of the Company who are affiliated persons of the Adviser. The
Adviser or its affiliates also furnishes the Company, without
charge, management supervision and assistance and office
facilities and provides persons satisfactory to the Company's
Board of Directors to serve as the Company's officers.
The Company 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 Company by the Adviser, the Company 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 Company at
cost and the payments specifically approved by the Company's
Board of Directors.
The Advisory Agreement became effective on [June 26],
1998 having been approved by the [unanimous] vote, cast in
person, of the Company'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 [June 26], 1998, and by the
Company's initial shareholder on [June 26], 1998.
The Advisory Agreement will remain in effect until
November 30, 1999 and continue in effect thereafter only so long
13
<PAGE>
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 Company'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.
The Advisory Agreement is terminable without penalty by
a vote of a majority of the Fund's outstanding voting securities
(as defined in the 1940 Act) or by a vote of a majority of the
Company'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 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
Institutional Reserves, Inc., Alliance International Fund,
Alliance International Premier Growth Fund, Inc., Alliance
Limited Maturity Government Fund, Inc., Alliance Money Market
Fund, Alliance Mortgage Securities Income Fund, Inc., Alliance
Multi-Market Strategy Trust, Inc., Alliance Municipal Income
Fund, Inc., Alliance Municipal Income Fund II, Alliance Municipal
Trust, Alliance New Europe Fund, Inc., Alliance North American
Government Income Trust, Inc., Alliance Premier Growth Fund,
Inc., Alliance Quasar Fund, Inc., Alliance Real Estate Investment
Fund, Inc., Alliance/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
14
<PAGE>
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.
___________________________________________________________
EXPENSES OF THE FUND
___________________________________________________________
Distribution Services Agreement
The Company has entered into a Distribution Services
Agreement (the "Agreement") with Alliance Fund Distributors,
Inc., the Company'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 Company
reports the amounts expended under the Rule 12b-1 Plan and the
purposes for which such expenditures were made to the Directors
of the Company on a quarterly basis. Also, the Agreement
provides that the selection and nomination of Directors who are
not "interested persons" of the Company, as defined in the 1940
Act, are committed to the discretion of such disinterested
Directors then in office. The Agreement was initially approved
15
<PAGE>
by the Directors of the Fund at a meeting held on [June 29],
1998.
The Agreement will continue in effect until
[November 30], 1999 and continue in effect thereafter so long as
its continuance is specifically approved at least annually by the
Directors of the Company or by vote of the holders of a majority
of the outstanding voting securities (as defined in the 1940 Act)
of that class, and, in either case, by a majority of the
Directors of the Company 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 (as
defined in the 1940 Act), 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
16
<PAGE>
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
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
17
<PAGE>
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.
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 Company'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
18
<PAGE>
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
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
19
<PAGE>
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
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 Company have determined that
currently no conflict of interest exists between or among the
Class A, Class B and Class C shares of the Fund. On an ongoing
basis, the Directors of the Company, 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
20
<PAGE>
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
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
21
<PAGE>
this example, an investor intending to maintain his or her
investment for a longer period might consider purchasing Class A
shares. This example does not take into account the time value
of money, which further reduces the impact of the Class C
distribution services fees on the investment, fluctuations in net
asset value or the effect of different performance assumptions.
Those investors who prefer to have all of their funds
invested initially but may not wish to retain Fund shares for the
four-year period during which Class B shares are subject to a
contingent deferred sales charge may find it more advantageous to
purchase Class C shares.
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
22
<PAGE>
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
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.
23
<PAGE>
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 [29], 1998.
Net Asset Value per Class A Share at
June [29], 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
24
<PAGE>
dealer or agent, of any other "Alliance Mutual Fund." Currently,
the Alliance Mutual Funds include:
AFD Exchange Reserves
The Alliance Fund, Inc.
Alliance All-Asia Investment Fund, Inc.
Alliance Balanced Shares, Inc.
Alliance Bond Fund, Inc.
-Corporate Bond Portfolio
-U.S. Government Portfolio
Alliance Developing Markets Fund, Inc.
Alliance Global Dollar Government Fund, Inc.
Alliance Global 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.
25
<PAGE>
The Alliance Portfolios
-Alliance Growth Fund
-Alliance Conservative Investors Fund
-Alliance Growth Investors Fund
-Alliance Strategic Balanced Fund
-Alliance Short-Term U.S. Government Fund
Prospectuses for the Alliance Mutual Funds may be
obtained without charge by contacting Alliance Fund Services,
Inc. at the address or the "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 $100,000 within a
period of 13 months in Class A shares (or Class A, Class B and/or
26
<PAGE>
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
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
$50,000. 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
27
<PAGE>
Class A shareholders desiring to do so can obtain a form of
Statement of Intention by contacting Alliance Fund Services, Inc.
at the address or telephone numbers shown on the cover of this
Statement of Additional Information.
Certain Retirement Plans. Multiple participant payroll
deduction retirement plans may also purchase shares of the Fund
or any other Alliance Mutual Fund at a reduced sales charge on a
monthly basis during the 13-month period following such a plan's
initial purchase. The sales charge applicable to such initial
purchase of shares of the Fund will be that normally applicable,
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;
28
<PAGE>
(ii) officers and present or former Directors
of the Company; present or former
directors and trustees of other
investment companies managed by the
Adviser; present or retired full-time
employees of the Adviser, the Principal
Underwriter, Alliance Fund Services, Inc.
and their affiliates; officers and
directors of ACMC, the Principal
Underwriter, Alliance Fund Services, Inc.
and their affiliates; officers, directors
and present 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
29
<PAGE>
intermediary, or its affiliate or agent,
for services in the nature of investment
advisory or administrative services;
(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.
30
<PAGE>
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.
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
31
<PAGE>
purchase of shares of the corresponding class of the Alliance
Mutual Fund originally purchased by the shareholder.
The contingent deferred sales charge is waived on
redemptions of shares (i) following the death or disability, as
defined in the Internal Revenue Code of 1986, as amended (the
"Code"), of a shareholder, (ii) to the extent that the redemption
represents a minimum required distribution from an individual
retirement account or other retirement plan to a shareholder who
has attained the age of 70-1/2, (iii) that had been purchased by
present or former Directors of the Company, 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.
32
<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
33
<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
Company'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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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
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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
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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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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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<PAGE>
financial representatives, as applicable, may charge a commission
for handling telephone requests for exchanges.
The exchange privilege is available only in states where
shares of the Alliance Mutual 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 $4,000
(for quarterly or less frequent payments), $5,000 (for bi-monthly
payments) or $10,000 (for monthly payments) may establish a
systematic withdrawal plan under which the shareholder will
periodically receive a payment in a stated amount of not less
than $50 on a selected date. Systematic withdrawal plan
participants must elect to have their dividends and distributions
from the Fund automatically reinvested in additional shares of
the Fund.
Shares of the Fund owned by a participant in the Fund's
systematic withdrawal plan will be redeemed as necessary to meet
withdrawal payments and such payments will be subject to any
taxes applicable to redemptions and, except as discussed below,
any applicable contingent deferred sales charge. Shares acquired
with reinvested dividends and distributions will be liquidated
first to provide such withdrawal payments and thereafter other
shares will be liquidated to the extent necessary, and depending
upon the amount withdrawn, the investor's principal may be
depleted. A systematic withdrawal plan may be terminated at any
time by the shareholder or the Fund.
Withdrawal payments will not automatically end when a
shareholder's account reaches a certain minimum level.
Therefore, redemptions of shares under the plan may reduce or
even liquidate a shareholder's account and may subject the
shareholder to the Fund's involuntary redemption provisions. See
"Redemption and Repurchase of Shares--General." Purchases of
additional shares concurrently with withdrawals are undesirable
because of sales charges when purchases are made. While an
occasional lump-sum investment may be made by a holder of Class A
shares who is maintaining a systematic withdrawal plan, such
investment should normally be an amount equivalent to three times
the annual withdrawal or $5,000, whichever is less.
Payments under a systematic withdrawal plan may be made
by check or electronically via the Automated Clearing House
("ACH") network. Investors wishing to establish a systematic
withdrawal plan in conjunction with their initial investment in
shares of the Fund should complete the appropriate portion of the
Subscription Application found in the Prospectus, while current
Fund shareholders desiring to do so can obtain an application
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 Company's Articles of Incorporation and By-Laws at the
next close of regular trading on the Exchange (ordinarily 4:00
p.m. Eastern time) following receipt of a purchase or redemption
order by the Fund on each Fund business day on which such an
order is received and on such other days as the Board of
Directors deems appropriate or necessary in order to comply with
Rule 22c-1 under the 1940 Act. The Fund's per share net asset
value is calculated by dividing the value of the Fund's total
assets, less its liabilities, by the total number of its shares
then outstanding. A Fund business day is any weekday on which
the Exchange is open for trading.
In accordance with applicable rules under the 1940 Act,
portfolio securities are valued at current market value or at
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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
47
<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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<PAGE>
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
49
<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
50
<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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<PAGE>
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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<PAGE>
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 Company, 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
The Bank of New York, One Wall Street, New York, NY will
act as the Company'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 Company's
Directors, The Bank of New York 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
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<PAGE>
Fund has agreed to indemnify the Principal Underwriter, in the
absence of its willful misfeasance, bad faith, gross negligence
or reckless disregard of its obligations thereunder, against
certain civil liabilities, including liabilities under the
Securities Act.
Counsel
Legal matters in connection with the issuance of the
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
56
<PAGE>
Morningstar, Inc. and advertisements presenting the historical
record of payments of income dividends by the Fund may also from
time to time be sent to investors or placed in newspapers,
magazines such as Barrons, Business Week, Changing Times, Forbes,
Investor's Daily, Money Magazine, The New York Times and The Wall
Street Journal or other media on behalf of the Fund.
Additional Information
Any shareholder inquiries may be directed to the
shareholder's broker or to Alliance Fund Services, Inc. at the
address or telephone 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.
57
<PAGE>
____________________________________________________________
FINANCIAL STATEMENT AND
REPORT OF INDEPENDENT ACCOUNTANTS
____________________________________________________________
Alliance Select Investor Series, Inc. - Premier Portfolio
Statement of Assets and Liabilities
June 29, 1998
Assets
Cash $100,200
Receivable from Adviser (Note B) 62,500
Deferred Offering Expenses (Note A) 216,500
Total Assets 379,200
Liabilities
Organization Costs Payable (Note A) 62,500
Offering Expenses Payable (Note A) 216,500
Total Liabilities 279,000
Net assets
Paid in Capital (Applicable to 10,000
Class A shares issued and outstanding,
10 Class B shares issued and
outstanding, and 10 Class C shares
issued and outstanding; each with $.001
par value;
3,000,000,000 shares of each class
authorized) $100,200
========
Calculation of Maximum Offering Price:
Class A Shares
Net asset value and redemption price
per share ($100,000/10,000 shares
issued and outstanding) $10.00
Sales charge-4.25% of public
offering price .44
Maximum Offering Price $10.44
======
Class B Shares
Net asset value and offering price
per share ($100/10 shares issued and
outstanding) $10.00
======
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<PAGE>
Class C Shares
Net asset value and offering price
per share ($100/10 shares issued and
outstanding) $10.00
======
See notes to financial statements.
59
<PAGE>
Alliance Select Investor Series, Inc. - Premier Portfolio
Notes to Statement of Assets and Liabilities
June 29, 1998
Note A - Organization:
The Premier Portfolio (the "Fund") is the initial series of
Alliance Select Investor Series, Inc., which was organized as a
Maryland corporation on May 21, 1998. The Fund is registered
under the Investment Company Act of 1940 as an open-end, non-
diversified management investment company. The Fund has had no
operations to date, other than the sale to Alliance Capital
Management L.P. (the "Adviser") of 10,000 shares of Class A
common shares for the amount of $100,000, 10 shares of Class B
common shares for the amount of $100, and 10 shares of Class C
common shares for the amount of $100, in each case on June 25,
1998.
The Fund currently offers three classes of shares. Class A shares
are sold with an initial sales charge imposed at the time of
purchase. Class B shares are sold with a contingent deferred
sales charge imposed on most redemptions made within four years
of purchase and higher distribution fees. Class C shares are
sold with a contingent deferred sales charge imposed on
redemptions made within one year of purchase and higher
distribution fees.
Costs incurred and to be incurred in connection with the
organization of the Fund, estimated at $62,500, will be borne by
the Fund, subject to the expense limitation agreement described
in Note B below. Certain costs incurred and to be incurred in
connection with the initial offering of shares of the Fund,
estimated at $216,500, will be paid initially by the Adviser.
The Fund will reimburse the Adviser for such costs, which will be
deferred and amortized by the Fund over the period of benefit,
not to exceed 12 months from the date the Fund commences
operations.
Note B - Investment Advisory, Distribution Services and Transfer
Agency Agreements:
Under the terms of an Investment Advisory Agreement, the Fund
pays the Adviser a monthly 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 Growth Index. For the period from August
1, 1998 through July 31, 1999, the Adviser will receive a minimum fee
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<PAGE>
payable monthly equal to .80% annualized of the average net
assets of the Fund for each day included in such annual period.
The fee paid to the Adviser for this period may be increased to
1.40%, based on the investment performance of the Class A shares
of the Fund in relation to the investment record of the Russell
1000 Growth Index.
The Fund and the Adviser have entered into an Expense Limitation
Agreement (the "Agreement"), dated June 29, 1998, under which the
Adviser has agreed to waive its fees and, if necessary, reimburse
expenses for the period from May 21, 1998 (date of organization
of the Fund) to July 31, 1999, exceeding the annual rate of 2.5%
of average daily net assets for Class A shares and 3.2% of
average daily net assets for Class B shares and Class C shares,
respectively. Under the Agreement, any waivers or reimbursements
made by the Adviser during this period are subject to repayment
by the Fund by July 31, 2001, provided that repayment does not
result in the Fund's aggregate expenses exceeding the foregoing
expense limitations. Further, the aggregate repayment to the
Adviser will not exceed the sum of the Fund's organization costs
and initial offering expenses.
The Fund recorded its initial organization costs of $62,500 as an
expense as of June 25, 1998 and recognized an offsetting expense
reduction as a result of the Adviser's commitment to reimburse
these costs under the Agreement. The Fund may be obliged to
repay some or all of these costs to the Adviser if the
Agreement's conditions are met.
The Fund has adopted a Distribution Services Agreement (the
"Agreement") pursuant to Rule 12b-1 under the Investment Company
Act of 1940. Under the Agreement, the Fund pays a distribution
fee to the Distributor at an annual rate of up to .30% of the
Fund's average daily net assets attributable to Class A shares
and 1% of the average daily net assets attributable to both Class
B and Class C shares. The fees are accrued daily and paid
monthly. The Agreement provides that the Distributor will use
such payments in their entirety for distribution assistance and
promotional activities.
The Fund compensates Alliance Fund Services, Inc., a wholly-owned
subsidiary of the Adviser, under a Transfer Agency Agreement for
providing personnel and facilities to perform transfer agency
services for the Fund.
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<PAGE>
Report of Independent Accountants
To the Shareholder and Board of Directors of
Alliance Select Investor Series, Inc. - Premier Portfolio
In our opinion, the accompanying statement of assets and
liabilities presents fairly, in all material respects, the
financial position of Alliance Select Investor Series, Inc. -
Premier Portfolio (the "Fund") at June 29, 1998, in conformity
with generally accepted accounting principles. This financial
statement is the responsibility of the Fund's management; our
responsibility is to express an opinion on this financial
statement based on our audit. We conducted our audit of this
financial statement in accordance with generally accepted auditing
standards, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statement
is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statement, assessing the accounting principles used
and significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our audit
provides a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
June 29, 1998
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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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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.
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____________________________________________________________
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
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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."
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PART C
OTHER INFORMATION
ITEM 24. Financial Statements and Exhibits.
(a) Financial Statements
Included in Statement of Additional Information:
Statement of Asset and Liabilities.
Notes to Financial Statements.
Report of Independent Auditors.
Included in Part C of the Registration Statement:
All other financial statements or schedules are not
required or the required information is shown in the Statement of
Assets and Liabilities or the notes thereto.
(b) Exhibits
(1) (a) Articles of Incorporation.2
(b) Articles of Amendment of the Registrant dated
June 25th, 1998 - filed herewith.
(2) By-Laws of the Registrant - filed herewith.
(3) Not applicable.
(4) Not applicable.
(5) Advisory Agreement between the Registrant and
Alliance Capital Management L.P. - filed herewith.
(6) (a) 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.*
____________________
2. Incorporated by reference from Registrant's Registration
Statement on Form N-1A (File Nos. 333-8818 and 811-9176)
filed with the securities and Exchange Commission on May 22,
1998.
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(c) Form of Selected Agent Agreement between
Alliance Fund Distributors, Inc. and selected
agents making available shares of Registrant.*
(7) Not applicable.
(8) Custody Agreement between the Registrant and The
Bank of New York - filed herewith.
(9) (a) Transfer Agency Agreement between the
Registrant and Alliance Fund Services, Inc. - filed
herewith.
(b) Expense Limitation Agreement - filed herewith.
(10) (a) Opinion and Consent of Seward & Kissel - filed
herewith.
(b) Opinion and Consent of Venable, Baetjer and
Howard, LLP - filed herewith.
(11) Consent of Independent Accountants - filed
herewith.
(12) Not applicable.
(13) Investment representation letter of Alliance
Capital Management L.P. - filed herewith.
(14) Not applicable.
(15) Rule 12b-1 Plan - See Exhibit 6(a) hereto.
(16) Schedule for computation of performance
quotations.3
(18) Rule 18f-3 Plan - filed herewith.
Other Exhibits:
Powers of Attorney for John D. Carifa, Ruth Block, David
H. Dievler, John H. Dobkin, William H. Foulk, Jr., Dr. James M.
Hester, Clifford L. Michel, Donald J. Robinson - filed herewith.
ITEM 25. Persons Controlled by or under Common Control with
Registrant.
____________________
3. To be filed in a post-effective amendment.
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None. The Registrant is a recently organized
corporation and has no outstanding shares of common stock.
ITEM 26. Number of Holders of Securities.
One. The Registrant is a recently organized corporation
and Alliance Capital Management L.P. owns 100% of its
issued and outstanding common stock.
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
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<PAGE>
only if (1) a final decision on the merits was issued by
the court or other body before whom the proceeding was
brought that the person to be indemnified (the
"indemnitee") was not liable by reason or willful
misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his
office ("disabling conduct") or (2) a reasonable
determination is made, based upon a review of the facts,
that the indemnitee was not liable by reason of
disabling conduct, by (a) the vote of a majority of a
quorum of the directors who are neither "interested
persons" of the Registrant as defined in section
2(a)(19) of the Investment Company Act of 1940 nor
parties to the proceeding ("disinterested, non-party
directors"), or (b) an independent legal counsel in a
written opinion. The Registrant will advance attorneys
fees or other expenses incurred by its directors,
officers, investment adviser or principal underwriters
in defending a proceeding, upon the undertaking by or on
behalf of the indemnitee to repay the advance unless it
is ultimately determined that he is entitled to
indemnification and, as a condition to the advance,
(1) the indemnitee shall provide a security for his
undertaking, (2) the Registrant shall be insured against
losses arising by reason of any lawful advances, or
(3) a majority of a quorum of disinterested, non-party
directors of the Registrant, or an independent legal
counsel in a written opinion, shall determine, based on
a review of readily available facts (as opposed to a
full trial-type inquiry), that there is reason to
believe that the indemnitee ultimately will be found
entitled to indemnification.
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
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Information constituting Parts A and B, respectively, of
this Registration Statement are incorporated by
reference herein.
The information as to the directors and executive
officers of Alliance Capital Management Corporation, the
general partner of Alliance Capital Management L.P., set
forth in Alliance Capital Management L.P.'s Form ADV
filed with the Securities and Exchange Commission on
April 21, 1988 (File No. 801-32361) and amended through
the date hereof, is incorporated by reference.
ITEM 29. Principal Underwriters.
(a) Alliance Fund Distributors, Inc. is the
Registrant's Principal Underwriter in
connection with the sale of shares of the
Registrant. Alliance Fund Distributors, Inc.
also acts as Principal Underwriter or
Distributor for the following investment
companies:
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.
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<PAGE>
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
(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, Secretary
General Counsel and
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
C-8
<PAGE>
and Treasurer
Mark J. Dunbar Senior Vice President
Donald N. Fritts Senior Vice President
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
Susan L. Matteson-King 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
Richard K. Sacculo 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
C-9
<PAGE>
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
John F. Dolan Vice President
John C. Endahl Vice President
Sohaila S. Farsheed Vice President
Gerard J. Friscia Vice President and
Controller
Andrew L. Gangolf Vice President and Assistant Secretary
Assistant General
Counsel
Mark D. Gersten Vice President Treasurer and Chief
Financial Officer
Joseph W. Gibson Vice President
George C. Grant 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
Richard D. Keppler Vice President
Gwenn M. Kessler Vice President
Donna M. Lamback Vice President
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<PAGE>
Henry Michael Lesmeister Vice President
James M. Liptrot Vice President
James P. Luisi Vice President
Christopher J. MacDonald Vice President
Michael F. Mahoney Vice President
Shawn P. McClain Vice President
Jeffrey P. Mellas Vice President
Thomas F. Monnerat Vice President
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 Secretary
Assistant General
Counsel
Bruce W. Reitz Vice President
Dennis A. Sanford Vice President
Karen C. Satterberg Vice President
John P. Schmidt Vice President
Robert C. Schultz Vice President
Raymond S. Sclafani Vice President
Richard J. Sidell Vice President
Teris A. Sinclair Vice President
Scott C. Sipple Vice President
Andrew D. Strauss Vice President
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<PAGE>
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
Emilie D. Wrapp Vice President &
Assistant General 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
Faith C. Dunn Assistant Vice
President
John E. English Assistant Vice
President
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<PAGE>
Duff C. Ferguson Assistant Vice
President
Brian S. Hanigan Assistant Vice
President
James J. Hill Assistant Vice
President
Theresa Iosca Assistant Vice
President
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
Kristine J. Luisi Assistant Vice
President
Patrick Look Assistant Vice
President &
Assistant Treasurer
Kathryn Austin Masters Assistant Vice
President
Richard F. Meier Assistant Vice
President
Mary K. Moore Assistant Vice
President
Richard J. Olszewski Assistant Vice
President
Catherine N. Peterson Assistant Vice
President
Rizwan A. Raja Assistant Vice
President
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<PAGE>
Carol H. Rappa Assistant Vice
President
Clara Sierra Assistant Vice
President
Eileen Stauber 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
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 Bank of New York, the
Registrant's custodian, One Wall Street, New York, New
York 10286. 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.
C-14
<PAGE>
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-15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933, as amended, and the Investment Company Act of 1940, as
amended, the Registrant has duly caused this Amendment to the
Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in The City of New York
and the State of New York, on the 29th day of June, 1998.
Alliance Select Investor Series, Inc.
/s/John D. Carifa, Jr.
________________________
John D. Carifa
Chairman and President
Pursuant to the requirements of the Securities Act of
1933, as amended, this Amendment to the Registration Statement
has been signed below by the following persons in the capacities
and on the date indicated.
Signature Title Date
_____________ __________ ________
(1) Principal Executive Officer:
/s/ John D. Carifa Chairman and June 29, 1998
______________________ President
John D. Carifa
(2) Principal Financial
and Accounting Officer:
/s/ Mark D. Gersten Treasurer June 29, 1998
_____________________ and Chief
Mark D. Gersten Financial
Officer
(3) All of the Directors:
John D. Carifa William H. Foulk
Ruth Block Dr. James M. Hester
David H. Dievler Clifford L. Michel
John H. Dobkin Donald J. Robinson
/s/ Edmund P. Bergan, Jr. June 29, 1998
_________________________
Edmund P. Bergan, Jr.
Attorney-in-Fact
C-16
<PAGE>
Index To Exhibits
(1) (b) Articles of Amendment of the Registrant dated
June 25, 1998.
(2) By-Laws.
(5) Advisory Agreement between the Registrant and
Alliance Capital Management L.P.
(6) (a) Distribution Services Agreement between the
Registrant and Alliance Fund Distributors, Inc.
(8) Custody Agreement between the Registrant and The
Bank of New York.
(9) (a) Transfer Agency Agreement between the
Registrant and Alliance Fund Services, Inc.
(b) Expense Limitation Agreement.
(10) (a) Opinion and Consent of Seward & Kissel.
(b) Opinion and Consent of Venable, Baetjer and
Howard, LLP.
(11) Consent of Independent Auditors.
(13) Investment representation letter of Alliance
Capital Management L.P.
(18) Rule 18f-3 plan.
Other Exhibits:
Powers of Attorney for John D. Carifa, Ruth Block, David H.
Dievler, John H. Dobkin, William H. Foulk, Jr., Dr. James M.
Hester, Clifford L. Michel, Donald J. Robinson.
C-17
00250242.AH0
<PAGE>
ALLIANCE PRIVATE INVESTORS SERIES, INC.
ARTICLES OF AMENDMENT
(Changing its Name to Alliance Select Investor Series, Inc.)
Alliance Private Investors Series, Inc., a Maryland
corporation having its principal office in Maryland in Baltimore
City, Maryland (hereinafter called the "Corporation"), certifies
to the State Department of Assessments and Taxation of Maryland
that:
FIRST: The charter of the Corporation is hereby amended
by striking out Article SECOND of the Articles of Incorporation
and inserting in lieu thereof the following:
SECOND: The name of the corporation (hereinafter called
the Corporation) is Alliance Select Investor Series,
Inc.
SECOND: The charter of the Corporation is hereby
amended by changing the designations of all of the authorized
shares of the Corporation as follows:
Current Name Amended Name
Class A Common Stock Premier Portfolio Class A Common Stock
Class B Common Stock Premier Portfolio Class B Common Stock
Class C Common Stock Premier Portfolio Class C Common Stock
THIRD: The amendment to the charter of the Corporation
as herein set forth was approved by a majority of the entire
Board of Directors of the Corporation. The charter amendment is
limited to changes expressly permitted by Section 2-605 of the
Maryland General Corporation Law to be made without action by the
stockholders of the Corporation. The Corporation is registered
as an open-end investment company under the Investment Company
Act of 1940.
IN WITNESS WHEREOF, Alliance Private Investors Series,
Inc., has caused these Articles of Amendment to be executed in
its name and on its behalf by Kathleen A. Corbet, Senior Vice
President of the Corporation, and witnessed by Edmund P. Bergan,
Jr., the Secretary of the Corporation, this 25th day of June,
1998. The undersigned Senior Vice President of the Corporation
acknowledges these Articles of Amendment to be the corporate act
of the Corporation and states that to the best of her knowledge,
information and belief, the matters and facts set forth in these
Articles with respect to the authorization and approval of the
<PAGE>
amendment of the Corporation's charter are true in all material
respects, and that this statement is made under the penalties of
perjury.
ALLIANCE PRIVATE INVESTORS
SERIES, INC.
By: /s/ Kathleen A. Corbet
___________________________
Kathleen A. Corbet
Senior Vice President
WITNESS:
/s/Edmund P. Bergan, Jr.
_____________________
Edmund P. Bergan, Jr.
Secretary
2
00250242.AH1
<PAGE>
BY-LAWS
OF
ALLIANCE SELECT INVESTOR 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
2
<PAGE>
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
3
<PAGE>
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,
4
<PAGE>
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
5
<PAGE>
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
6
<PAGE>
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
7
<PAGE>
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
8
<PAGE>
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
9
<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
10
<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,
11
<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
12
<PAGE>
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
13
<PAGE>
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.
14
<PAGE>
Section 4. Chairman of the Board of Directors. The
chairman of the Board of Directors shall preside at all meetings
of the stockholders and of the Board of Directors. He shall be
the chief executive officer and shall have general and active
management of the business of the Corporation and shall see that
all orders and resolutions of the Board of Directors are carried
into effect. He shall be ex officio a member of all committees
designated by the Board of Directors except as otherwise
determined by the Board of Directors. He shall execute bonds,
mortgages and other contracts requiring a seal, under the seal of
the Corporation, except where required or permitted by law to be
otherwise signed and executed and except where the signing and
execution thereof shall be expressly delegated by the Board of
Directors to some other officer or agent of the Corporation.
Section 5. President. The president shall act under
the direction of the chairman and in the absence or disability of
the chairman shall perform the duties and exercise the powers of
the chairman. He shall perform such other duties and have such
other powers as the chairman or the Board of Directors may from
time to time prescribe. He shall execute on behalf of the
Corporation, and may affix the seal or cause the seal to be
affixed to, all instruments requiring such execution except to
the extent that signing and execution thereof shall be expressly
delegated by the Board of Directors to some other officer or
agent of the Corporation.
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Section 6. Vice Presidents. The vice presidents shall
act under the direction of the chairman and in the absence or
disability of the president shall perform the duties and exercise
the powers of the president. They shall perform such other
duties and have such other powers as the chairman or the Board of
Directors may from time to time prescribe. The Board of
Directors may designate one or more executive vice presidents or
may otherwise specify the order of seniority of the vice
presidents and, in that event, the duties and powers of the
president shall descend to the vice presidents in the specified
order of seniority.
Section 7. Secretary. The secretary shall act under
the direction of the chairman. Subject to the direction of the
chairman he shall attend all meetings of the Board of Directors
and all meetings of stockholders and record the proceedings in a
book to be kept for that purpose and shall perform like duties
for the committees designated by the Board of Directors when
required. He shall give, or cause to be given, notice of all
meetings of stockholders and special meetings of the Board of
Directors, and shall perform such other duties as may be
prescribed by the chairman or the Board of Directors. He shall
keep in safe custody the seal of the Corporation and shall affix
the seal or cause it to be affixed to any instrument requiring
it.
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Section 8. Assistant Secretaries. The assistant
secretaries in the order of their seniority, unless otherwise
determined by the chairman or the Board of Directors, shall, in
the absence or disability of the secretary, perform the duties
and exercise the powers of the secretary. They shall perform
such other duties and have such other powers as the chairman or
the Board of Directors may from time to time prescribe.
Section 9. Treasurer. The treasurer shall act under
the direction of the chairman. Subject to the direction of the
chairman he shall have the custody of the corporate funds and
securities and shall keep full and accurate accounts of receipts
and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to
the credit of the Corporation in such depositories as may be
designated by the Board of Directors. He shall disburse the
funds of the Corporation as may be ordered by the chairman or the
Board of Directors, taking proper vouchers for such
disbursements, and shall render to the chairman and the Board of
Directors, at its regular meetings, or when the Board of
Directors so requires, an account of all his transactions as
treasurer and of the financial condition of the Corporation.
Section 10. Assistant Treasurers. The assistant
treasurers in the order of their seniority, unless otherwise
determined by the chairman or the Board of Directors, shall, in
the absence or disability of the treasurer, perform the duties
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and exercise the powers of the treasurer. They shall perform
such other duties and have such other powers as the chairman or
the Board of Directors may from time to time prescribe.
ARTICLE VI
Certificates of Stock
Section 1. General. Every holder of stock of the
Corporation who has made full payment of the consideration for
such stock shall be entitled upon request to have a certificate,
signed by, or in the name of the Corporation by, the chairman,
the president or a vice president and countersigned by the
treasurer or an assistant treasurer or the secretary or an
assistant secretary of the Corporation, certifying the number
and, if additional shares of stock should be authorized, the
class of whole shares of stock owned by him in the Corporation.
Section 2. Fractional Share Interests. The Corporation
may issue fractions of a share of stock. Fractional shares of
stock shall have proportionately to the respective fractions
represented thereby all the rights of whole shares, including the
right to vote, the right to receive dividends and distributions
and the right to participate upon liquidation of the Corporation,
excluding, however, the right to receive a stock certificate
representing such fractional shares.
Section 3. Signatures on Certificates. Any of or all
the signatures on a certificate may be a facsimile. In case any
officer who has signed or whose facsimile signature has been
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placed upon a certificate shall cease to be such officer before
such certificate is issued, it may be issued with the same effect
as if he were such officer at the date of issue. The seal of the
Corporation or a facsimile thereof may, but need not, be affixed
to certificates of stock.
Section 4. Lost, Stolen or Destroyed Certificates. The
Board of Directors may direct a new certificate or certificates
to be issued in place of any certificate or certificates
theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon the making of any affidavit of that
fact by the person claiming the certificate or certificates to be
lost, stolen or destroyed. When authorizing such issue of a new
certificate or certificates, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof,
require the owner of such lost, stolen or destroyed certificate
or certificates, or his legal representative, to give the
Corporation a bond in such sum as it may direct as indemnity
against any claim that may be made against the Corporation with
respect to the certificate or certificates alleged to have been
lost, stolen or destroyed.
Section 5. Transfer of Shares. Upon request by the
registered owner of shares, and if a certificate has been issued
to represent such shares upon surrender to the Corporation or a
transfer agent of the Corporation of a certificate for shares of
stock duly endorsed or accompanied by proper evidence of
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succession, assignment or authority to transfer, it shall be the
duty of the Corporation, if it is satisfied that all provisions
of the Articles of Incorporation, of the By-Laws and of the law
regarding the transfer of shares have been duly complied with, to
record the transaction upon its books, issue a new certificate to
the person entitled thereto upon request for such certificate,
and cancel the old certificate, if any.
Section 6. Registered Owners. The Corporation shall be
entitled to recognize the person registered on its books as the
owner of shares to be the exclusive owner for all purposes
including voting and dividends, and the Corporation shall not be
bound to recognize any equitable or other claim to or interest in
such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as
otherwise provided by the laws of Maryland.
ARTICLE VII
Miscellaneous
Section 1. Reserves. There may be set aside out of any
funds of the Corporation available for dividends such sum or sums
as the Board of Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet
contingencies, or for such other purpose as the Board of
Directors shall think conducive to the interest of the
Corporation, and the Board of Directors may modify or abolish any
such reserve.
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Section 2. Dividends. Dividends upon the stock of the
Corporation may, subject to the provisions of the Articles of
Incorporation and of applicable law, be declared by the Board of
Directors at any time. Dividends may be paid in cash, in
property or in shares of the Corporation's stock, subject to the
provisions of the Articles of Incorporation and of applicable
law.
Section 3. Capital Gains Distributions. The amount and
number of capital gains distributions paid to the stockholders
during each fiscal year shall be determined by the Board of
Directors. Each such payment shall be accompanied by a statement
as to the source of such payment, to the extent required by law.
Section 4. Checks. All checks or demands for money and
notes of the Corporation shall be signed by such officer or
officers or such other person or persons as the Board of
Directors may from time to time designate.
Section 5. Fiscal Year. The fiscal year of the
Corporation shall be fixed by resolution of the Board of
Directors.
Section 6. Seal. The corporate seal shall have
inscribed thereon the name of the Corporation, the year of its
organization and the words "Corporate Seal, Maryland." The seal
may be used by causing it or a facsimile thereof to be impressed
or affixed or in another manner reproduced.
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Section 7. Insurance Against Certain Liabilities. The
Corporation shall not bear the cost of insurance that protects or
purports to protect directors and officers of the Corporation
against any liabilities to the Corporation or its security
holders to which any such director or officer would otherwise be
subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
conduct of his office.
ARTICLE VIII
Indemnification
Section 1. Indemnification of Directors and Officers.
The Corporation shall indemnify its directors to the full extent
that indemnification of directors is permitted by the Maryland
General Corporation Law. The Corporation shall indemnify its
officers to the same extent as its directors and to such further
extent as is consistent with law. The Corporation shall
indemnify its directors and officers who while serving as
directors or officers also serve at the request of the
Corporation as a director, officer, partner, trustee, employee,
agent or fiduciary of another corporation, partnership, joint
venture, trust, other enterprise or employee benefit plan to the
full extent consistent with law. The indemnification and other
rights provided by this Article shall continue as to a person who
has ceased to be a director or officer and shall inure to the
benefit of the heirs, executors and administrators of such a
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person. This Article shall not protect any such person against
any liability to the Corporation or any stockholder thereof to
which such person would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his office ("disabling
conduct").
Section 2. Advances. Any current or former director or
officer of the Corporation seeking indemnification within the
scope of this Article shall be entitled to advances from the
Corporation for payment of the reasonable expenses incurred by
him in connection with the matter as to which he is seeking
indemnification in the manner and to the full extent permissible
under the Maryland General Corporation Law. The person seeking
indemnification shall provide to the Corporation a written
affirmation of his good faith belief that the standard of conduct
necessary for indemnification by the Corporation has been met and
a written undertaking to repay any such advance if it should
ultimately be determined that the standard of conduct has not
been met. In addition, at least one of the following additional
conditions shall be met: (a) the person seeking indemnification
shall provide a security in form and amount acceptable to the
Corporation for his undertaking; (b) the Corporation is insured
against losses arising by reason of the advance; or (c) a
majority of a quorum of directors of the Corporation who are
neither "interested persons" as defined in Section 2(a)(19) of
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the Investment Company Act of 1940, as amended, nor parties to
the proceeding ("disinterested non-party directors"), or
independent legal counsel, in a written opinion, shall have
determined, based on a review of facts readily available to the
Corporation at the time the advance is proposed to be made, that
there is reason to believe that the person seeking
indemnification will ultimately be found to be entitled to
indemnification.
Section 3. Procedure. At the request of any person
claiming indemnification under this Article, the Board of
Directors shall determine, or cause to be determined, in a manner
consistent with the Maryland General Corporation Law, whether the
standards required by this Article have been met.
Indemnification shall be made only following: (a) a final
decision on the merits by a court or other body before whom the
proceeding was brought that the person to be indemnified was not
liable by reason of disabling conduct or (b) in the absence of
such a decision, a reasonable determination, based upon a review
of the facts, that the person to be indemnified was not liable by
reason of disabling conduct by (i) the vote of a majority of a
quorum of disinterested non-party directors or (ii) an
independent legal counsel in a written opinion.
Section 4. Indemnification of Employees and Agents.
Employees and agents who are not officers or directors of the
Corporation may be indemnified, and reasonable expenses may be
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advanced to such employees or agents, as may be provided by
action of the Board of Directors or by contract, subject to any
limitations imposed by the Investment Company Act of 1940.
Section 5. Other Rights. The Board of Directors may
make further provision consistent with law for indemnification
and advance of expenses to directors, officers, employees and
agents by resolution, agreement or otherwise. The
indemnification provided by this Article shall not be deemed
exclusive of any other right, with respect to indemnification or
otherwise, to which those seeking indemnification may be entitled
under any insurance or other agreement or resolution of
stockholders or disinterested directors or otherwise. The rights
provided to any person by this Article shall be enforceable
against the Corporation by such person who shall be presumed to
have relied upon it in serving or continuing to serve as a
director, officer, employee, or agent as provided above.
Section 6. Amendments. References in this Article are
to the Maryland General Corporation Law and to the Investment
Company Act of 1940 as from time to time amended. No amendment
of these By-laws shall affect any right of any person under this
Article based on any event, omission or proceeding prior to the
amendment.
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ARTICLE IX
Amendments
The Board of Directors shall have the power to make,
alter and repeal By-laws of the Corporation.
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00250242.AB9
<PAGE>
ADVISORY AGREEMENT
ALLIANCE SELECT INVESTOR SERIES, INC.
1345 Avenue Of The Americas
New York, New York 10105
June 26, 1998
ALLIANCE CAPITAL MANAGEMENT L.P.
1345 Avenue of the Americas
New York, New York 10105
Dear Sirs:
Alliance Select Investor 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
our portfolios in securities ("the portfolio assets") of the type
<PAGE>
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.
(c) You will report to our Board of Directors at
each meeting thereof all changes in the portfolio assets since
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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
to be borne and paid by you. No obligation may be incurred on
our behalf in any such respect. During the continuance of this
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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).
3. We hereby confirm that we shall be responsible and
hereby assume the obligation for payment of all of our expenses,
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<PAGE>
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
mistake of judgment or in any event whatsoever, except for lack
of good faith, provided that nothing herein shall be deemed to
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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, in the case of the Premier Portfolio, 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 Premier
Portfolio 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 August 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
daily net assets of the Premier Portfolio. The performance
period for each such month shall be from August 1998 through the
current calendar month, until this agreement has been in effect
for 36 full calendar months, when it shall become a rolling 36-
month period ending with the current calendar month. The Basic
Fee for each such month shall be (i) increased 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
a point), that the investment performance of the Class A shares
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of the Premier Portfolio 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), and (ii) 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 Premier
Portfolio for such performance period (up to a maximum of eight
percentage points). Such increase or decrease ("performance
adjustment") will be applied to the average of the net assets of
the Premier Portfolio determined as of the close of business on
each business day included in the applicable performance period.
The maximum performance adjustment 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 August 1, 1998 through July 31,
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 Premier Portfolio for each day included in such
annual period. The performance period relating to such annual
period will be from August 1, 1998 throughJuly 31, 1999. The fee
receivable by you for such annual period may be increased to
1.40% from the Minimum Fee. The increase, if any, will be equal
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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 August 1, 1998.
(c) The investment performance of the Class A shares of
the Premier Portfolio for any period, expressed as a percentage
of the Premier Portfolio'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 Premier Portfolio's net asset value per
Class A share during such period; (ii) the value of the Premier
Portfolio'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 of the Premier Portfolio 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 the Premier Portfolio of
realized capital gains, of dividends per Class A share of the
Premier Portfolio paid from investment income and of capital
gains taxes per Class A share of the Premier Portfolio paid or
payable on undistributed realized long-term capital gains shall
be treated as reinvested in Class A shares of the Premier
Portfolio at the net asset value per share in effect at the close
of business on the record date for the payment of such
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distributions and dividends and the date on which provision is
made for such taxes, after giving effect to such distributions,
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 Premier Portfolio for any period shall not include,
and there shall be excluded from the change in the Premier
Portfolio' net asset value per Class A share during such period
and the value of the Premier Portfolio'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 Premier Portfolio 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.
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(e) Any calculation of the investment performance of the
Class A shares of the Premier Portfolio and the investment record
of the Index shall be in 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 November 30, 1999 and
continue in effect thereafter with respect to a portfolio only so
long as its continuance with respect to that portfolio is
specifically approved 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
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Act and the rules and regulations thereunder. Upon the
effectiveness of this Agreement, it shall supersede all previous
agreements between us covering the subject matter hereof. This
Agreement may be terminated with respect to any portfolio at any
time, without the 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
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shall have the meanings ascribed thereto by governing law and any
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
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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.
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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 SELECT INVESTOR
SERIES, INC.
/s/ Edmund P. Bergan, Jr.
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
/s/ John D. Carifa
By_______________________________
14
00250242.AH5
<PAGE>
DISTRIBUTION SERVICES AGREEMENT
AGREEMENT made as of June 29, 1998 between ALLIANCE
SELECT INVESTOR 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 November 30, 1998 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 SELECT INVESTOR
SERIES, INC.
/s/ Edmund P. Bergan, Jr.
By
ALLIANCE FUND DISTRIBUTORS,
INC.
/s/ Robert Errico
By
Accepted as to
Sections 5, 12 and 16
as of June 29, 1998:
ALLIANCE CAPITAL MANAGEMENT L.P.
By Alliance Capital Management Corporation,
General Partner
/s/ John D. Carifa
By
12
00250242.AD1
<PAGE>
CUSTODY AGREEMENT
Agreement made as of this 26th day of June, 1998, between
ALLIANCE SELECT INVESTORS SERIES, INC., a Maryland corporation
organized and existing under the laws of the State of Maryland,
having its principal office and place of business at 1345 Avenue
of the Americas, New York, New York 10105 (hereinafter called
the "Fund"), and THE BANK OF NEW YORK, a New York corporation
authorized to do a banking business, having its principal office
and place of business at One Wall Street, New York, New York
10286 (hereinafter called the "Custodian").
W I T N E S S E T H :
that for and in consideration of the mutual promises hereinafter
set forth, the Fund and the Custodian agree as follows:
ARTICLE I.
DEFINITIONS
Whenever used in this Agreement, the following words and
phrases, unless the context otherwise requires, shall have the
following meanings:
1. "Authorized Persons" shall be deemed to include any
person, whether or not such person is an officer or employee of
the Fund, duly authorized by the Board of Directors of the Fund
to execute any Certificate, instruction, notice or other
instrument on behalf of the Fund and listed in the Certificate
annexed hereto as Appendix A or such other Certificate as may be
received by the Custodian from time to time.
2. "Book-Entry System" shall mean the Federal
Reserve/Treasury book-entry system for United States and federal
agency securities, its successor or successors and its nominee or
nominees.
3. "Call Option" shall mean an exchange traded option with
respect to Securities other than Stock Index Options, Futures
Contracts, and Futures Contract Options entitling the holder,
upon timely exercise and payment of the exercise price, as
specified therein, to purchase from the writer thereof the
specified underlying Securities.
4. "Certificate" shall mean any notice, instruction, or
other instrument in writing, authorized or required by this
Agreement to be given to the Custodian which is actually received
by the Custodian and signed on behalf of the Fund by any two
Authorized Persons, and the term Certificate shall also include
Instructions.
<PAGE>
5. "Clearing Member" shall mean a registered broker-dealer
which is a clearing member under the rules of O.C.C. and a member
of a national securities exchange qualified to act as a custodian
for an investment company, or any broker-dealer reasonably
believed by the Custodian to be such a clearing member.
6. "Collateral Account" shall mean a segregated account so
denominated which is specifically allocated to a Series and
pledged to the Custodian as security for, and in consideration
of, the Custodian's issuance of (a) any Put Option guarantee
letter or similar document described in paragraph 8 of Article V
herein, or (b) any receipt described in Article V or VIII herein.
7. "Composite Currency Unit" shall mean the European
Currency Unit or any other composite unit consisting of the
aggregate of specified amounts of specified Currencies as such
unit may be constituted from time to time.
8. "Covered Call Option" shall mean an exchange traded
option entitling the holder, upon timely exercise and payment of
the exercise price, as specified therein, to purchase from the
writer thereof the specified underlying Securities (excluding
Futures Contracts) which are owned by the writer thereof and
subject to appropriate restrictions.
9. "Currency" shall mean money denominated in a lawful
currency of any country or the European Currency Unit.
10. "Depository" shall mean The Depository Trust Company
("DTC"), a clearing agency registered with the Securities and
Exchange Commission, its successor or successors and its nominee
or nominees. The term "Depository" shall further mean and
include any other person authorized to act as a depository under
the Investment Company Act of 1940, its successor or successors
and its nominee or nominees, specifically identified in a
certified copy of a resolution of the Fund's Board of Directors
specifically approving deposits therein by the Custodian.
11. "Financial Futures Contract" shall mean the firm
commitment to buy or sell fixed income securities including,
without limitation, U.S. Treasury Bills, U.S. Treasury Notes,
U.S. Treasury Bonds, domestic bank certificates of deposit, and
Eurodollar certificates of deposit, during a specified month at
an agreed upon price.
12. "Futures Contract" shall mean a Financial Futures
Contract and/or Stock Index Futures Contracts.
13. "Futures Contract Option" shall mean an option with
respect to a Futures Contract.
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<PAGE>
14. "FX Transaction" shall mean any transaction for the
purchase by one party of an agreed amount in one Currency against
the sale by it to the other party of an agreed amount in another
Currency.
15. "Instructions" shall mean instructions communications
transmitted by electronic or telecommunications media including
S.W.I.F.T., computer-to-computer interface, dedicated
transmission line, facsimile transmission (which may be signed by
an Authorized Person or unsigned) and tested telex.
16. "Margin Account" shall mean a segregated account in the
name of a broker, dealer, futures commission merchant, or a
Clearing Member, or in the name of the Fund for the benefit of a
broker, dealer, futures commission merchant, or Clearing Member,
or otherwise, in accordance with an agreement between the Fund,
the Custodian and a broker, dealer, futures commission merchant
or a Clearing Member (a "Margin Account Agreement"), separate and
distinct from the custody account, in which certain Securities
and/or money of the Fund shall be deposited and withdrawn from
time to time in connection with such transactions as the Fund may
from time to time determine. Securities held in the Book-Entry
System or the Depository shall be deemed to have been deposited
in, or withdrawn from, a Margin Account upon the Custodian's
effecting an appropriate entry in its books and records.
17. "Money Market Security" shall be deemed to include,
without limitation, certain Reverse Repurchase Agreements, debt
obligations issued or guaranteed as to interest and principal by
the government of the United States or agencies or
instrumentalities thereof, any tax, bond or revenue anticipation
note issued by any state or municipal government or public
authority, commercial paper, certificates of deposit and bankers'
acceptances, repurchase agreements with respect to the same and
bank time deposits, where the purchase and sale of such
securities normally requires settlement in federal funds on the
same day as such purchase or sale.
18. "O.C.C." shall mean the Options Clearing Corporation, a
clearing agency registered under Section 17A of the Securities
Exchange Act of 1934, its successor or successors, and its
nominee or nominees.
19. "Option" shall mean a Call Option, Covered Call Option,
Stock Index Option and/or a Put Option.
20. "Oral Instructions" shall mean verbal instructions
actually received by the Custodian from an Authorized Person or
from a person reasonably believed by the Custodian to be an
Authorized Person.
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<PAGE>
21. "Put Option" shall mean an exchange traded option with
respect to Securities other than Stock Index Options, Futures
Contracts, and Futures Contract Options entitling the holder,
upon timely exercise and tender of the specified underlying
Securities, to sell such Securities to the writer thereof for the
exercise price.
22. "Reverse Repurchase Agreement" shall mean an agreement
pursuant to which the Fund sells Securities and agrees to
repurchase such Securities at a described or specified date and
price.
23. "Security" shall be deemed to include, without
limitation, Money Market Securities, Call Options, Put Options,
Stock Index Options, Stock Index Futures Contracts, Stock Index
Futures Contract Options, Financial Futures Contracts, Financial
Futures Contract Options, Reverse Repurchase Agreements, common
stocks and other securities having characteristics similar to
common stocks, preferred stocks, debt obligations issued by state
or municipal governments and by public authorities, (including,
without limitation, general obligation bonds, revenue bonds,
industrial bonds and industrial development bonds), bonds,
debentures, notes, mortgages or other obligations, and any
certificates, receipts, warrants or other instruments
representing rights to receive, purchase, sell or subscribe for
the same, or evidencing or representing any other rights or
interest therein, or any property or assets.
24. "Senior Security Account" shall mean an account
maintained and specifically allocated to a Series under the terms
of this Agreement as a segregated account, by recordation or
otherwise, within the custody account in which certain Securities
and/or other assets of the Fund specifically allocated to such
Series shall be deposited and withdrawn from time to time in
accordance with Certificates received by the Custodian in
connection with such transactions as the Fund may from time to
time determine.
25. "Series" shall mean the various portfolios, if any, of
the Fund listed on Appendix B hereto as amended from time to
time.
26. "Shares" shall mean the shares of capital stock of the
Fund, each of which is, in the case of a Fund having Series,
allocated to a particular Series.
27. "Stock Index Futures Contract" shall mean a bilateral
agreement pursuant to which the parties agree to take or make
delivery of an amount of cash equal to a specified dollar amount
times the difference between the value of a particular stock
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<PAGE>
index at the close of the last business day of the contract and
the price at which the futures contract is originally struck.
28. "Stock Index Option" shall mean an exchange traded
option entitling the holder, upon timely exercise, to receive an
amount of cash determined by reference to the difference between
the exercise price and the value of the index on the date of
exercise.
ARTICLE II.
APPOINTMENT OF CUSTODIAN
1. The Fund hereby constitutes and appoints the Custodian
as custodian of the Securities and money at any time owned by the
Fund during the period of this Agreement.
2. The Custodian hereby accepts appointment as such
custodian and agrees to perform the duties thereof as hereinafter
set forth.
ARTICLE III.
CUSTODY OF CASH AND SECURITIES
1. Except as otherwise provided in paragraph 7 of this
Article and in Article VIII, the Fund will deliver or cause to be
delivered to the Custodian all Securities and all money owned by
it, at any time during the period of this Agreement, and shall
specify with respect to such Securities and money the Series to
which the same are specifically allocated. The Custodian shall
segregate, keep and maintain the assets of the Series separate
and apart. The Custodian will not be responsible for any
Securities and money not actually received by it. The Custodian
will be entitled to reverse any credits made on the Fund's behalf
where such credits have been previously made and money is not
finally collected. The Fund shall deliver to the Custodian a
certified resolution of the Board of Directors of the Fund,
substantially in the form of Exhibit A hereto, approving,
authorizing and instructing the Custodian on a continuous and on-
going basis to deposit in the Book-Entry System all Securities
eligible for deposit therein, regardless of the Series to which
the same are specifically allocated and to utilize the Book-Entry
System to the extent possible in connection with its performance
hereunder, including, without limitation, in connection with
settlements of purchases and sales of Securities, loans of
Securities and deliveries and returns of Securities collateral.
Prior to a deposit of Securities specifically allocated to a
Series in the Depository, the Fund shall deliver to the Custodian
a certified resolution of the Board of Directors of the Fund,
substantially in the form of Exhibit B hereto, approving,
5
<PAGE>
authorizing and instructing the Custodian on a continuous and
ongoing basis until instructed to the contrary by a Certificate
actually received by the Custodian to deposit in the Depository
all Securities specifically allocated to such Series eligible for
deposit therein, and to utilize the Depository to the extent
possible with respect to such Securities in connection with its
performance hereunder, including, without limitation, in
connection with settlements of purchases and sales of Securities,
loans of Securities, and deliveries and returns of Securities
collateral. Securities and money deposited in either the Book-
Entry System or the Depository will be represented in accounts
which include only assets held by the Custodian for customers,
including, but not limited to, accounts in which the Custodian
acts in a fiduciary or representative capacity and will be
specifically allocated on the Custodian's books to the separate
account for the applicable Series. Prior to the Custodian's
accepting, utilizing and acting with respect to Clearing Member
confirmations for Options and transactions in Options for a
Series as provided in this Agreement, the Custodian shall have
received a certified resolution of the Fund's Board of Directors,
substantially in the form of Exhibit C hereto, approving,
authorizing and instructing the Custodian on a continuous and on-
going basis, until instructed to the contrary by a Certificate
actually received by the Custodian, to accept, utilize and act in
accordance with such confirmations as provided in this Agreement
with respect to such Series.
2. The Custodian shall establish and maintain separate
accounts, in the name of each Series, and shall credit to the
separate account for each Series all money received by it for the
account of the Fund with respect to such Series. Money credited
to a separate account for a Series shall be disbursed by the
Custodian only:
(a) as hereinafter provided;
(b) pursuant to Certificates setting forth the name and
address of the person to whom the payment is to be made, the
Series account from which payment is to be made and the purpose
for which payment is to be made; or
(c) in payment of the fees and in reimbursement of the
expenses and liabilities of the Custodian attributable to such
Series.
3. Promptly after the close of business on each day, the
Custodian shall furnish the Fund with confirmations and a
summary, on a per Series basis, of all transfers to or from the
account of the Fund for a Series, either hereunder or with any
co-custodian or sub-custodian appointed in accordance with this
Agreement during said day. Where Securities are transferred to
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<PAGE>
the account of the Fund for a Series, the Custodian shall also by
book-entry or otherwise identify as belonging to such Series a
quantity of Securities in a fungible bulk of Securities
registered in the name of the Custodian (or its nominee) or shown
on the Custodian's account on the books of the Book-Entry System
or the Depository. At least monthly and from time to time, the
Custodian shall furnish the Fund with a detailed statement, on a
per Series basis, of the Securities and money held by the
Custodian for the Fund.
4. Except as otherwise provided in paragraph 7 of this
Article and in Article VIII, all Securities held by the Custodian
hereunder, which are issued or issuable only in bearer form,
except such Securities as are held in the Book-Entry System,
shall be held by the Custodian in that form; all other Securities
held hereunder may be registered in the name of the Fund, in the
name of any duly appointed registered nominee of the Custodian as
the Custodian may from time to time determine, or in the name of
the Book-Entry System or the Depository or their successor or
successors, or their nominee or nominees. The Fund agrees to
furnish to the Custodian appropriate instruments to enable the
Custodian to hold or deliver in proper form for transfer, or to
register in the name of its registered nominee or in the name of
the Book-Entry System or the Depository any Securities which it
may hold hereunder and which may from time to time be registered
in the name of the Fund. The Custodian shall hold all such
Securities specifically allocated to a Series which are not held
in the Book-Entry System or in the Depository in a separate
account in the name of such Series physically segregated at all
times from those of any other person or persons.
5. Except as otherwise provided in this Agreement and
unless otherwise instructed to the contrary by a Certificate, the
Custodian by itself, or through the use of the Book-Entry System
or the Depository with respect to Securities held hereunder and
therein deposited, shall with respect to all Securities held for
the Fund hereunder in accordance with preceding paragraph 4:
(a) collect all income, dividends and distributions due
or payable;
(b) give notice to the Fund and present payment and
collect the amount payable upon such Securities which are called,
but only if either (i) the Custodian receives a written notice of
such call, or (ii) notice of such call appears in one or more of
the publications listed in Appendix C annexed hereto, which may
be amended at any time by the Custodian without the prior
notification or consent of the Fund;
(c) present for payment and collect the amount payable
upon all Securities which mature;
7
<PAGE>
(d) surrender Securities in temporary form for
definitive Securities;
(e) execute, as custodian, any necessary declarations
or certificates of ownership under the Federal Income Tax Laws or
the laws or regulations of any other taxing authority now or
hereafter in effect;
(f) hold directly, or through the Book-Entry System or
the Depository with respect to Securities therein deposited, for
the account of a Series, all rights and similar securities issued
with respect to any Securities held by the Custodian for such
Series hereunder; and
(g) deliver to the Fund all notices, proxies, proxy
soliciting materials, consents and other written information
(including, without limitation, notices of tender offers and
exchange offers, pendency of calls, maturities of Securities and
expiration of rights) relating to Securities held pursuant to
this Agreement which are actually received by the Custodian, such
proxies and other similar materials to be executed by the
registered owner (if Securities are registered otherwise than in
the name of the Fund), but without indicating the manner in which
proxies or consents are to be voted.
6. Upon receipt of a Certificate and not otherwise, the
Custodian, directly or through the use of the Book-Entry System
or the Depository, shall:
(a) execute and deliver to such persons as may be
designated in such Certificate proxies, consents, authorizations,
and any other instruments whereby the authority of the Fund as
owner of any Securities held by the Custodian hereunder for the
Series specified in such Certificate may be exercised;
(b) deliver any Securities held by the Custodian
hereunder for the Series specified in such Certificate in
exchange for other Securities or cash issued or paid in
connection with the liquidation, reorganization, refinancing,
merger, consolidation or recapitalization of any corporation, or
the exercise of any conversion privilege and receive and hold
hereunder specifically allocated to such Series any cash or other
Securities received in exchange;
(c) deliver any Securities held by the Custodian
hereunder for the Series specified in such Certificate to any
protective committee, reorganization committee or other person in
connection with the reorganization, refinancing, merger,
consolidation, recapitalization or sale of assets of any
corporation, and receive and hold hereunder specifically
allocated to such Series such certificates of deposit, interim
8
<PAGE>
receipts or other instruments or documents as may be issued to it
to evidence such delivery;
(d) make such transfers or exchanges of the assets of
the Series specified in such Certificate, and take such other
steps as shall be stated in such Certificate to be for the
purpose of effectuating any duly authorized plan of liquidation,
reorganization, merger, consolidation or recapitalization of the
Fund; and
(e) present for payment and collect the amount payable
upon Securities not described in preceding paragraph 5(b) of this
Article which may be called as specified in the Certificate.
7. Notwithstanding any provision elsewhere contained
herein, the Custodian shall not be required to obtain possession
of any instrument or certificate representing any Futures
Contract, any Option, or any Futures Contract Option until after
it shall have determined, or shall have received a Certificate
from the Fund stating, that any such instruments or certificates
are available. The Fund shall deliver to the Custodian such a
Certificate no later than the business day preceding the
availability of any such instrument or certificate. Prior to
such availability, the Custodian shall comply with Section 17(f)
of the Investment Company Act of 1940, as amended, in connection
with the purchase, sale, settlement, closing out or writing of
Futures Contracts, Options, or Futures Contract Options by making
payments or deliveries specified in Certificates received by the
Custodian in connection with any such purchase, sale, writing,
settlement or closing out upon its receipt from a broker, dealer,
or futures commission merchant of a statement or confirmation
reasonably believed by the Custodian to be in the form
customarily used by brokers, dealers, or futures commission
merchants with respect to such Futures Contracts, Options, or
Futures Contract Options, as the case may be, confirming that
such Security is held by such broker, dealer or futures
commission merchant, in book-entry form or otherwise, in the name
of the Custodian (or any nominee of the Custodian) as custodian
for the Fund, provided, however, that notwithstanding the
foregoing, payments to or deliveries from the Margin Account, and
payments with respect to Securities to which a Margin Account
relates, shall be made in accordance with the terms and
conditions of the Margin Account Agreement. Whenever any such
instruments or certificates are available, the Custodian shall,
notwithstanding any provision in this Agreement to the contrary,
make payment for any Futures Contract, Option, or Futures
Contract Option for which such instruments or such certificates
are available only against the delivery to the Custodian of such
instrument or such certificate, and deliver any Futures Contract,
Option or Futures Contract Option for which such instruments or
such certificates are available only against receipt by the
9
<PAGE>
Custodian of payment therefor. Any such instrument or
certificate delivered to the Custodian shall be held by the
Custodian hereunder in accordance with, and subject to, the
provisions of this Agreement.
ARTICLE IV.
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
OTHER THAN OPTIONS, FUTURES CONTRACTS AND
FUTURES CONTRACT OPTIONS
1. Promptly after each purchase of Securities by the Fund,
other than a purchase of an Option, a Futures Contract, or a
Futures Contract Option, the Fund shall deliver to the Custodian
(i) with respect to each purchase of Securities which are not
Money Market Securities, a Certificate, and (ii) with respect to
each purchase of Money Market Securities, a Certificate or Oral
Instructions, specifying with respect to each such purchase: (a)
the Series to which such Securities are to be specifically
allocated; (b) the name of the issuer and the title of the
Securities; (c) the number of shares or the principal amount
purchased and accrued interest, if any; (d) the date of purchase
and settlement; (e) the purchase price per unit; (f) the total
amount payable upon such purchase; (g) the name of the person
from whom or the broker through whom the purchase was made, and
the name of the clearing broker, if any; and (h) the name of the
broker to whom payment is to be made. The Custodian shall, upon
receipt of Securities purchased by or for the Fund, pay to the
broker specified in the Certificate out of the money held for the
account of such Series the total amount payable upon such
purchase, provided that the same conforms to the total amount
payable as set forth in such Certificate or Oral Instructions.
2. Promptly after each sale of Securities by the Fund,
other than a sale of any Option, Futures Contract, Futures
Contract Option, or any Reverse Repurchase Agreement, the Fund
shall deliver to the Custodian (i) with respect to each sale of
Securities which are not Money Market Securities, a Certificate,
and (ii) with respect to each sale of Money Market Securities, a
Certificate or Oral Instructions, specifying with respect to each
such sale: (a) the Series to which such Securities were
specifically allocated; (b) the name of the issuer and the title
of the Security; (c) the number of shares or principal amount
sold, and accrued interest, if any; (d) the date of sale; (e) the
sale price per unit; (f) the total amount payable to the Fund
upon such sale; (g) the name of the broker through whom or the
person to whom the sale was made, and the name of the clearing
broker, if any; and (h) the name of the broker to whom the
Securities are to be delivered. The Custodian shall deliver the
Securities specifically allocated to such Series to the broker
specified in the Certificate against payment of the total amount
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<PAGE>
payable to the Fund upon such sale, provided that the same
conforms to the total amount payable as set forth in such
Certificate or Oral Instructions.
ARTICLE V.
OPTIONS
1. Promptly after the purchase of any Option by the Fund,
the Fund shall deliver to the Custodian a Certificate specifying
with respect to each Option purchased: (a) the Series to which
such Option is specifically allocated; (b) the type of Option
(put or call); (c) the name of the issuer and the title and
number of shares subject to such Option or, in the case of a
Stock Index Option, the stock index to which such Option relates
and the number of Stock Index Options purchased; (d) the
expiration date; (e) the exercise price; (f) the dates of
purchase and settlement; (g) the total amount payable by the Fund
in connection with such purchase; (h) the name of the Clearing
Member through whom such Option was purchased; and (i) the name
of the broker to whom payment is to be made. The Custodian shall
pay, upon receipt of a Clearing Member's statement confirming the
purchase of such Option held by such Clearing Member for the
account of the Custodian (or any duly appointed and registered
nominee of the Custodian) as custodian for the Fund, out of money
held for the account of the Series to which such Option is to be
specifically allocated, the total amount payable upon such
purchase to the Clearing Member through whom the purchase was
made, provided that the same conforms to the total amount payable
as set forth in such Certificate.
2. Promptly after the sale of any Option purchased by the
Fund pursuant to paragraph 1 hereof, the Fund shall deliver to
the Custodian a Certificate specifying with respect to each such
sale: (a) the Series to which such Option was specifically
allocated; (b) the type of Option (put or call); (c) the name of
the issuer and the title and number of shares subject to such
Option or, in the case of a Stock Index Option, the stock index
to which such Option relates and the number of Stock Index
Options sold; (d) the date of sale; (e) the sale price; (f) the
date of settlement; (g) the total amount payable to the Fund upon
such sale; and (h) the name of the Clearing Member through whom
the sale was made. The Custodian shall consent to the delivery
of the Option sold by the Clearing Member which previously
supplied the confirmation described in preceding paragraph 1 of
this Article with respect to such Option against payment to the
Custodian of the total amount payable to the Fund, provided that
the same conforms to the total amount payable as set forth in
such Certificate.
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<PAGE>
3. Promptly after the exercise by the Fund of any Call
Option purchased by the Fund pursuant to paragraph 1 hereof, the
Fund shall deliver to the Custodian a Certificate specifying with
respect to such Call Option: (a) the Series to which such Call
Option was specifically allocated; (b) the name of the issuer and
the title and number of shares subject to the Call Option; (c)
the expiration date; (d) the date of exercise and settlement; (e)
the exercise price per share; (f) the total amount to be paid by
the Fund upon such exercise; and (g) the name of the Clearing
Member through whom such Call Option was exercised. The
Custodian shall, upon receipt of the Securities underlying the
Call Option which was exercised, pay out of the money held for
the account of the Series to which such Call Option was
specifically allocated the total amount payable to the Clearing
Member through whom the Call Option was exercised, provided that
the same conforms to the total amount payable as set forth in
such Certificate.
4. Promptly after the exercise by the Fund of any Put
Option purchased by the Fund pursuant to paragraph 1 hereof, the
Fund shall deliver to the Custodian a Certificate specifying with
respect to such Put Option: (a) the Series to which such Put
Option was specifically allocated; (b) the name of the issuer and
the title and number of shares subject to the Put Option; (c) the
expiration date; (d) the date of exercise and settlement; (e) the
exercise price per share; (f) the total amount to be paid to the
Fund upon such exercise; and (g) the name of the Clearing Member
through whom such Put Option was exercised. The Custodian shall,
upon receipt of the amount payable upon the exercise of the Put
Option, deliver or direct the Depository to deliver the
Securities specifically allocated to such Series, provided the
same conforms to the amount payable to the Fund as set forth in
such Certificate.
5. Promptly after the exercise by the Fund of any Stock
Index Option purchased by the Fund pursuant to paragraph 1
hereof, the Fund shall deliver to the Custodian a Certificate
specifying with respect to such Stock Index Option: (a) the
Series to which such Stock Index Option was specifically
allocated; (b) the type of Stock Index Option (put or call); (c)
the number of Options being exercised; (d) the stock index to
which such Option relates; (e) the expiration date; (f) the
exercise price; (g) the total amount to be received by the Fund
in connection with such exercise; and (h) the Clearing Member
from whom such payment is to be received.
6. Whenever the Fund writes a Covered Call Option, the Fund
shall promptly deliver to the Custodian a Certificate specifying
with respect to such Covered Call Option: (a) the Series for
which such Covered Call Option was written; (b) the name of the
issuer and the title and number of shares for which the Covered
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<PAGE>
Call Option was written and which underlie the same; (c) the
expiration date; (d) the exercise price; (e) the premium to be
received by the Fund; (f) the date such Covered Call Option was
written; and (g) the name of the Clearing Member through whom the
premium is to be received. The Custodian shall deliver or cause
to be delivered, in exchange for receipt of the premium specified
in the Certificate with respect to such Covered Call Option, such
receipts as are required in accordance with the customs
prevailing among Clearing Members dealing in Covered Call Options
and shall impose, or direct the Depository to impose, upon the
underlying Securities specified in the Certificate specifically
allocated to such Series such restrictions as may be required by
such receipts. Notwithstanding the foregoing, the Custodian has
the right, upon prior written notification to the Fund, at any
time to refuse to issue any receipts for Securities in the
possession of the Custodian and not deposited with the Depository
underlying a Covered Call Option.
7. Whenever a Covered Call Option written by the Fund and
described in the preceding paragraph of this Article is
exercised, the Fund shall promptly deliver to the Custodian a
Certificate instructing the Custodian to deliver, or to direct
the Depository to deliver, the Securities subject to such Covered
Call Option and specifying: (a) the Series for which such
Covered Call Option was written; (b) the name of the issuer and
the title and number of shares subject to the Covered Call
Option; (c) the Clearing Member to whom the underlying Securities
are to be delivered; and (d) the total amount payable to the Fund
upon such delivery. Upon the return and/or cancellation of any
receipts delivered pursuant to paragraph 6 of this Article, the
Custodian shall deliver, or direct the Depository to deliver, the
underlying Securities as specified in the Certificate against
payment of the amount to be received as set forth in such
Certificate.
8. Whenever the Fund writes a Put Option, the Fund shall
promptly deliver to the Custodian a Certificate specifying with
respect to such Put Option: (a) the Series for which such Put
Option was written; (b) the name of the issuer and the title and
number of shares for which the Put Option is written and which
underlie the same; (c) the expiration date; (d) the exercise
price; (e) the premium to be received by the Fund; (f) the date
such Put Option is written; (g) the name of the Clearing Member
through whom the premium is to be received and to whom a Put
Option guarantee letter is to be delivered; (h) the amount of
cash, and/or the amount and kind of Securities, if any,
specifically allocated to such Series to be deposited in the
Senior Security Account for such Series; and (i) the amount of
cash and/or the amount and kind of Securities specifically
allocated to such Series to be deposited into the Collateral
Account for such Series. The Custodian shall, after making the
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<PAGE>
deposits into the Collateral Account specified in the
Certificate, issue a Put Option guarantee letter substantially in
the form utilized by the Custodian on the date hereof, and
deliver the same to the Clearing Member specified in the
Certificate against receipt of the premium specified in said
Certificate. Notwithstanding the foregoing, the Custodian shall
be under no obligation to issue any Put Option guarantee letter
or similar document if it is unable to make any of the
representations contained therein.
9. Whenever a Put Option written by the Fund and described
in the preceding paragraph is exercised, the Fund shall promptly
deliver to the Custodian a Certificate specifying: (a) the
Series to which such Put Option was written; (b) the name of the
issuer and title and number of shares subject to the Put Option;
(c) the Clearing Member from whom the underlying Securities are
to be received; (d) the total amount payable by the Fund upon
such delivery; (e) the amount of cash and/or the amount and kind
of Securities specifically allocated to such Series to be
withdrawn from the Collateral Account for such Series and (f) the
amount of cash and/or the amount and kind of Securities,
specifically allocated to such Series, if any, to be withdrawn
from the Senior Security Account. Upon the return and/or
cancellation of any Put Option guarantee letter or similar
document issued by the Custodian in connection with such Put
Option, the Custodian shall pay out of the money held for the
account of the Series to which such Put Option was specifically
allocated the total amount payable to the Clearing Member
specified in the Certificate as set forth in such Certificate
against delivery of such Securities, and shall make the
withdrawals specified in such Certificate.
10. Whenever the Fund writes a Stock Index Option, the Fund
shall promptly deliver to the Custodian a Certificate specifying
with respect to such Stock Index Option: (a) the Series for
which such Stock Index Option was written; (b) whether such Stock
Index Option is a put or a call; (c) the number of options
written; (d) the stock index to which such Option relates; (e)
the expiration date; (f) the exercise price; (g) the Clearing
Member through whom such Option was written; (h) the premium to
be received by the Fund; (i) the amount of cash and/or the amount
and kind of Securities, if any, specifically allocated to such
Series to be deposited in the Senior Security Account for such
Series; (j) the amount of cash and/or the amount and kind of
Securities, if any, specifically allocated to such Series to be
deposited in the Collateral Account for such Series; and (k) the
amount of cash and/or the amount and kind of Securities, if any,
specifically allocated to such Series to be deposited in a Margin
Account, and the name in which such account is to be or has been
established. The Custodian shall, upon receipt of the premium
specified in the Certificate, make the deposits, if any, into the
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Senior Security Account specified in the Certificate, and either
(1) deliver such receipts, if any, which the Custodian has
specifically agreed to issue, which are in accordance with the
customs prevailing among Clearing Members in Stock Index Options
and make the deposits into the Collateral Account specified in
the Certificate, or (2) make the deposits into the Margin Account
specified in the Certificate.
11. Whenever a Stock Index Option written by the Fund and
described in the preceding paragraph of this Article is
exercised, the Fund shall promptly deliver to the Custodian a
Certificate specifying with respect to such Stock Index Option:
(a) the Series for which such Stock Index Option was written; (b)
such information as may be necessary to identify the Stock Index
Option being exercised; (c) the Clearing Member through whom such
Stock Index Option is being exercised; (d) the total amount
payable upon such exercise, and whether such amount is to be paid
by or to the Fund; (e) the amount of cash and/or amount and kind
of Securities, if any, to be withdrawn from the Margin Account;
and (f) the amount of cash and/or amount and kind of Securities,
if any, to be withdrawn from the Senior Security Account for such
Series; and the amount of cash and/or the amount and kind of
Securities, if any, to be withdrawn from the Collateral Account
for such Series. Upon the return and/or cancellation of the
receipt, if any, delivered pursuant to the preceding paragraph of
this Article, the Custodian shall pay out of the money held for
the account of the Series to which such Stock Index Option was
specifically allocated to the Clearing Member specified in the
Certificate the total amount payable, if any, as specified
therein.
12. Whenever the Fund purchases any Option identical to a
previously written Option described in paragraphs, 6, 8 or 10 of
this Article in a transaction expressly designated as a "Closing
Purchase Transaction" in order to liquidate its position as a
writer of an Option, the Fund shall promptly deliver to the
Custodian a Certificate specifying with respect to the Option
being purchased: (a) that the transaction is a Closing Purchase
Transaction; (b) the Series for which the Option was written; (c)
the name of the issuer and the title and number of shares subject
to the Option, or, in the case of a Stock Index Option, the stock
index to which such Option relates and the number of Options
held; (d) the exercise price; (e) the premium to be paid by the
Fund; (f) the expiration date; (g) the type of Option (put or
call); (h) the date of such purchase; (i) the name of the
Clearing Member to whom the premium is to be paid; and (j) the
amount of cash and/or the amount and kind of Securities, if any,
to be withdrawn from the Collateral Account, a specified Margin
Account, or the Senior Security Account for such Series. Upon
the Custodian's payment of the premium and the return and/or
cancellation of any receipt issued pursuant to paragraphs 6, 8 or
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<PAGE>
10 of this Article with respect to the Option being liquidated
through the Closing Purchase Transaction, the Custodian shall
remove, or direct the Depository to remove, the previously
imposed restrictions on the Securities underlying the Call
Option.
13. Upon the expiration, exercise or consummation of a
Closing Purchase Transaction with respect to any Option purchased
or written by the Fund and described in this Article, the
Custodian shall delete such Option from the statements delivered
to the Fund pursuant to paragraph 3 of Article III herein, and
upon the return and/or cancellation of any receipts issued by the
Custodian, shall make such withdrawals from the Collateral
Account, and the Margin Account and/or the Senior Security
Account as may be specified in a Certificate received in
connection with such expiration, exercise, or consummation.
ARTICLE VI.
FUTURES CONTRACTS
1. Whenever the Fund shall enter into a Futures Contract,
the Fund shall deliver to the Custodian a Certificate specifying
with respect to such Futures Contract, (or with respect to any
number of identical Futures Contract(s)): (a) the Series for
which the Futures Contract is being entered; (b) the category of
Futures Contract (the name of the underlying stock index or
financial instrument); (c) the number of identical Futures
Contracts entered into; (d) the delivery or settlement date of
the Futures Contract(s); (e) the date the Futures Contract(s) was
(were) entered into and the maturity date; (f) whether the Fund
is buying (going long) or selling (going short) on such Futures
Contract(s); (g) the amount of cash and/or the amount and kind of
Securities, if any, to be deposited in the Senior Security
Account for such Series; (h) the name of the broker, dealer, or
futures commission merchant through whom the Futures Contract was
entered into; and (i) the amount of fee or commission, if any, to
be paid and the name of the broker, dealer, or futures commission
merchant to whom such amount is to be paid. The Custodian shall
make the deposits, if any, to the Margin Account in accordance
with the terms and conditions of the Margin Account Agreement.
The Custodian shall make payment out of the money specifically
allocated to such Series of the fee or commission, if any,
specified in the Certificate and deposit in the Senior Security
Account for such Series the amount of cash and/or the amount and
kind of Securities specified in said Certificate.
2. (a) Any variation margin payment or similar payment
required to be made by the Fund to a broker, dealer, or futures
commission merchant with respect to an outstanding Futures
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<PAGE>
Contract, shall be made by the Custodian in accordance with the
terms and conditions of the Margin Account Agreement.
(b) Any variation margin payment or similar payment
from a broker, dealer, or futures commission merchant to the Fund
with respect to an outstanding Futures Contract, shall be
received and dealt with by the Custodian in accordance with the
terms and conditions of the Margin Account Agreement.
3. Whenever a Futures Contract held by the Custodian
hereunder is retained by the Fund until delivery or settlement is
made on such Futures Contract, the Fund shall deliver to the
Custodian a Certificate specifying: (a) the Futures Contract and
the Series to which the same relates; (b) with respect to a Stock
Index Futures Contract, the total cash settlement amount to be
paid or received, and with respect to a Financial Futures
Contract, the Securities and/or amount of cash to be delivered or
received; (c) the broker, dealer, or futures commission merchant
to or from whom payment or delivery is to be made or received;
and (d) the amount of cash and/or Securities to be withdrawn from
the Senior Security Account for such Series. The Custodian shall
make the payment or delivery specified in the Certificate, and
delete such Futures Contract from the statements delivered to the
Fund pursuant to paragraph 3 of Article III herein.
4. Whenever the Fund shall enter into a Futures Contract to
offset a Futures Contract held by the Custodian hereunder, the
Fund shall deliver to the Custodian a Certificate specifying:
(a) the items of information required in a Certificate described
in paragraph 1 of this Article, and (b) the Futures Contract
being offset. The Custodian shall make payment out of the money
specifically allocated to such Series of the fee or commission,
if any, specified in the Certificate and delete the Futures
Contract being offset from the statements delivered to the Fund
pursuant to paragraph 3 of Article III herein, and make such
withdrawals from the Senior Security Account for such Series as
may be specified in such Certificate. The withdrawals, if any,
to be made from the Margin Account shall be made by the Custodian
in accordance with the terms and conditions of the Margin Account
Agreement.
5. Notwithstanding any other provision in this Agreement to
the contrary, the Custodian shall deliver cash and Securities to
a futures commission merchant upon receipt of a Certificate from
the Fund specifying: (a) the name of the futures commission
merchant; (b) the specific cash and Securities to be delivered;
(c) the date of such delivery; and (d) the date of the agreement
between the Fund and such futures commission merchant entered
pursuant to Rule 17f-6 under the Investment Company Act 1940, as
amended. Each delivery of such a Certificate by the Fund shall
constitute (x) a representation and warranty by the Fund that the
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<PAGE>
Rule 17f-6 agreement has been duly authorized, executed and
delivered by the Fund and the futures commission merchant and
complies with Rule 17f-6, and (y) an agreement by the Fund that
the Custodian shall not be liable for the acts or omissions of
any such futures commission merchant.
ARTICLE VII.
FUTURES CONTRACT OPTIONS
1. Promptly after the purchase of any Futures Contract
Option by the Fund, the Fund shall promptly deliver to the
Custodian a Certificate specifying with respect to such Futures
Contract Option: (a) the Series to which such Option is
specifically allocated; (b) the type of Futures Contract Option
(put or call); (c) the type of Futures Contract and such other
information as may be necessary to identify the Futures Contract
underlying the Futures Contract Option purchased; (d) the
expiration date; (e) the exercise price; (f) the dates of
purchase and settlement; (g) the amount of premium to be paid by
the Fund upon such purchase; (h) the name of the broker or
futures commission merchant through whom such option was
purchased; and (i) the name of the broker, or futures commission
merchant, to whom payment is to be made. The Custodian shall pay
out of the money specifically allocated to such Series, the total
amount to be paid upon such purchase to the broker or futures
commissions merchant through whom the purchase was made, provided
that the same conforms to the amount set forth in such
Certificate.
2. Promptly after the sale of any Futures Contract Option
purchased by the Fund pursuant to paragraph 1 hereof, the Fund
shall promptly deliver to the Custodian a Certificate specifying
with respect to each such sale: (a) the Series to which such
Futures Contract Option was specifically allocated; (b) the type
of Futures Contract Option (put or call); (c) the type of Futures
Contract and such other information as may be necessary to
identify the Futures Contract underlying the Futures Contract
Option; (d) the date of sale; (e) the sale price; (f) the date of
settlement; (g) the total amount payable to the Fund upon such
sale; and (h) the name of the broker or futures commission
merchant through whom the sale was made. The Custodian shall
consent to the cancellation of the Futures Contract Option being
closed against payment to the Custodian of the total amount
payable to the Fund, provided the same conforms to the total
amount payable as set forth in such Certificate.
3. Whenever a Futures Contract Option purchased by the Fund
pursuant to paragraph 1 is exercised by the Fund, the Fund shall
promptly deliver to the Custodian a Certificate specifying: (a)
the Series to which such Futures Contract Option was specifically
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<PAGE>
allocated; (b) the particular Futures Contract Option (put or
call) being exercised; (c) the type of Futures Contract
underlying the Futures Contract Option; (d) the date of exercise;
(e)the name of the broker or futures commission merchant through
whom the Futures Contract Option is exercised; (f) the net total
amount, if any, payable by the Fund; (g) the amount, if any, to
be received by the Fund; and (h) the amount of cash and/or the
amount and kind of Securities to be deposited in the Senior
Security Account for such Series. The Custodian shall make, out
of the money and Securities specifically allocated to such
Series, the payments, if any, and the deposits, if any, into the
Senior Security Account as specified in the Certificate. The
deposits, if any, to be made to the Margin Account shall be made
by the Custodian in accordance with the terms and conditions of
the Margin Account Agreement.
4. Whenever the Fund writes a Futures Contract Option, the
Fund shall promptly deliver to the Custodian a Certificate
specifying with respect to such Futures Contract Option: (a) the
Series for which such Futures Contract Option was written; (b)
the type of Futures Contract Option (put or call); (c) the type
of Futures Contract and such other information as may be
necessary to identify the Futures Contract underlying the Futures
Contract Option; (d) the expiration date; (e) the exercise price;
(f) the premium to be received by the Fund; (g) the name of the
broker or futures commission merchant through whom the premium is
to be received; and (h) the amount of cash and/or the amount and
kind of Securities, if any, to be deposited in the Senior
Security Account for such Series. The Custodian shall, upon
receipt of the premium specified in the Certificate, make out of
the money and Securities specifically allocated to such Series
the deposits into the Senior Security Account, if any, as
specified in the Certificate. The deposits, if any, to be made
to the Margin Account shall be made by the Custodian in
accordance with the terms and conditions of the Margin Account
Agreement.
5. Whenever a Futures Contract Option written by the Fund
which is a call is exercised, the Fund shall promptly deliver to
the Custodian a Certificate specifying: (a) the Series to which
such Futures Contract Option was specifically allocated; (b) the
particular Futures Contract Option exercised; (c) the type of
Futures Contract underlying the Futures Contract Option; (d) the
name of the broker or futures commission merchant through whom
such Futures Contract Option was exercised; (e) the net total
amount, if any, payable to the Fund upon such exercise; (f) the
net total amount, if any, payable by the Fund upon such exercise;
and (g) the amount of cash and/or the amount and kind of
Securities to be deposited in the Senior Security Account for
such Series. The Custodian shall, upon its receipt of the net
total amount payable to the Fund, if any, specified in such
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<PAGE>
Certificate make the payments, if any, and the deposits, if any,
into the Senior Security Account as specified in the Certificate.
The deposits, if any, to be made to the Margin Account shall be
made by the Custodian in accordance with the terms and conditions
of the Margin Account Agreement.
6. Whenever a Futures Contract Option which is written by
the Fund and which is a put is exercised, the Fund shall promptly
deliver to the Custodian a Certificate specifying: (a) the
Series to which such Option was specifically allocated; (b) the
particular Futures Contract Option exercised; (c) the type of
Futures Contract underlying such Futures Contract Option; (d) the
name of the broker or futures commission merchant through whom
such Futures Contract Option is exercised; (e) the net total
amount, if any, payable to the Fund upon such exercise; (f) the
net total amount, if any, payable by the Fund upon such exercise;
and (g) the amount and kind of Securities and/or cash to be
withdrawn from or deposited in, the Senior Security Account for
such Series, if any. The Custodian shall, upon its receipt of
the net total amount payable to the Fund, if any, specified in
the Certificate, make out of the money and Securities
specifically allocated to such Series, the payments, if any, and
the deposits, if any, into the Senior Security Account as
specified in the Certificate. The deposits to and/or withdrawals
from the Margin Account, if any, shall be made by the Custodian
in accordance with the terms and conditions of the Margin Account
Agreement.
7. Whenever the Fund purchases any Futures Contract Option
identical to a previously written Futures Contract Option
described in this Article in order to liquidate its position as a
writer of such Futures Contract Option, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to
the Futures Contract Option being purchased: (a) the Series to
which such Option is specifically allocated; (b) that the
transaction is a closing transaction; (c) the type of Futures
Contract and such other information as may be necessary to
identify the Futures Contract underlying the Futures Option
Contract; (d) the exercise price; (e) the premium to be paid by
the Fund; (f) the expiration date; (g) the name of the broker or
futures commission merchant to whom the premium is to be paid;
and (h) the amount of cash and/or the amount and kind of
Securities, if any, to be withdrawn from the Senior Security
Account for such Series. The Custodian shall effect the
withdrawals from the Senior Security Account specified in the
Certificate. The withdrawals, if any, to be made from the Margin
Account shall be made by the Custodian in accordance with the
terms and conditions of the Margin Account Agreement.
8. Upon the expiration, exercise, or consummation of a
closing transaction with respect to, any Futures Contract Option
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<PAGE>
written or purchased by the Fund and described in this Article,
the Custodian shall (a) delete such Futures Contract Option from
the statements delivered to the Fund pursuant to paragraph 3 of
Article III herein and, (b) make such withdrawals from and/or in
the case of an exercise such deposits into the Senior Security
Account as may be specified in a Certificate. The deposits to
and/or withdrawals from the Margin Account, if any, shall be made
by the Custodian in accordance with the terms and conditions of
the Margin Account Agreement.
9. Futures Contracts acquired by the Fund through the
exercise of a Futures Contract Option described in this Article
shall be subject to Article VI hereof.
10. Notwithstanding any other provision in this Agreement to
the contrary, the Custodian shall deliver cash and Securities to
a futures commission merchant upon receipt of a Certificate from
the Fund specifying: (a) the name of the futures commission
merchant; (b) the specific cash and Securities to be delivered;
(c) the date of such delivery; and (d) the date of the agreement
between the Fund and such futures commission merchant entered
pursuant to Rule 17f-6 under the Investment Company Act 1940, as
amended. Each delivery of such a Certificate by the Fund shall
constitute (x) a representation and warranty by the Fund that the
Rule 17f-6 agreement has been duly authorized, executed and
delivered by the Fund and the futures commission merchant and
complies with Rule 17f-6, and (y) an agreement by the Fund that
the Custodian shall not be liable for the acts or omissions of
any such futures commission merchant.
ARTICLE VIII.
SHORT SALES
1. Promptly after any short sales by any Series of the
Fund, the Fund shall promptly deliver to the Custodian a
Certificate specifying: (a) the Series for which such short sale
was made; (b) the name of the issuer and the title of the
Security; (c) the number of shares or principal amount sold, and
accrued interest or dividends, if any; (d) the dates of the sale
and settlement; (e) the sale price per unit; (f) the total amount
credited to the Fund upon such sale, if any, (g) the amount of
cash and/or the amount and kind of Securities, if any, which are
to be deposited in a Margin Account and the name in which such
Margin Account has been or is to be established; (h) the amount
of cash and/or the amount and kind of Securities, if any, to be
deposited in a Senior Security Account, and (i) the name of the
broker through whom such short sale was made. The Custodian
shall upon its receipt of a statement from such broker confirming
such sale and that the total amount credited to the Fund upon
such sale, if any, as specified in the Certificate is held by
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<PAGE>
such broker for the account of the Custodian (or any nominee of
the Custodian) as custodian of the Fund, issue a receipt or make
the deposits into the Margin Account and the Senior Security
Account specified in the Certificate.
2. In connection with the closing-out of any short sale,
the Fund shall promptly deliver to the Custodian a Certificate
specifying with respect to each such closing out: (a) the Series
for which such transaction is being made; (b) the name of the
issuer and the title of the Security; (c) the number of shares or
the principal amount, and accrued interest or dividends, if any,
required to effect such closing-out to be delivered to the
broker; (d) the dates of closing-out and settlement; (e) the
purchase price per unit; (f) the net total amount payable to the
Fund upon such closing-out; (g) the net total amount payable to
the broker upon such closing-out; (h) the amount of cash and the
amount and kind of Securities to be withdrawn, if any, from the
Margin Account; (i) the amount of cash and/or the amount and kind
of Securities, if any, to be withdrawn from the Senior Security
Account; and (j) the name of the broker through whom the Fund is
effecting such closing-out. The Custodian shall, upon receipt of
the net total amount payable to the Fund upon such closing-out,
and the return and/or cancellation of the receipts, if any,
issued by the Custodian with respect to the short sale being
closed-out, pay out of the money held for the account of the Fund
to the broker the net total amount payable to the broker, and
make the withdrawals from the Margin Account and the Senior
Security Account, as the same are specified in the Certificate.
ARTICLE IX.
REVERSE REPURCHASE AGREEMENTS
1. Promptly after the Fund enters into a Reverse Repurchase
Agreement with respect to Securities and money held by the
Custodian hereunder, the Fund shall deliver to the Custodian a
Certificate, or in the event such Reverse Repurchase Agreement is
a Money Market Security, a Certificate or Oral Instructions
specifying: (a) the Series for which the Reverse Repurchase
Agreement is entered; (b) the total amount payable to the Fund in
connection with such Reverse Repurchase Agreement and
specifically allocated to such Series; (c) the broker or dealer
through or with whom the Reverse Repurchase Agreement is entered;
(d) the amount and kind of Securities to be delivered by the Fund
to such broker or dealer; (e) the date of such Reverse Repurchase
Agreement; and (f) the amount of cash and/or the amount and kind
of Securities, if any, specifically allocated to such Series to
be deposited in a Senior Security Account for such Series in
connection with such Reverse Repurchase Agreement. The Custodian
shall, upon receipt of the total amount payable to the Fund
specified in the Certificate or Oral Instructions make the
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delivery to the broker or dealer, and the deposits, if any, to
the Senior Security Account, specified in such Certificate or
Oral Instructions.
2. Upon the termination of a Reverse Repurchase Agreement
described in preceding paragraph 1 of this Article, the Fund
shall promptly deliver a Certificate or, in the event such
Reverse Repurchase Agreement is a Money Market Security, a
Certificate or Oral Instructions to the Custodian specifying:
(a) the Reverse Repurchase Agreement being terminated and the
Series for which same was entered; (b) the total amount payable
by the Fund in connection with such termination; (c) the amount
and kind of Securities to be received by the Fund and
specifically allocated to such Series in connection with such
termination; (d) the date of termination; (e) the name of the
broker or dealer with or through whom the Reverse Repurchase
Agreement is to be terminated; and (f) the amount of cash and/or
the amount and kind of Securities to be withdrawn from the Senior
Securities Account for such Series. The Custodian shall, upon
receipt of the amount and kind of Securities to be received by
the Fund specified in the Certificate or Oral Instructions, make
the payment to the broker or dealer, and the withdrawals, if any,
from the Senior Security Account, specified in such Certificate
or Oral Instructions.
ARTICLE X.
LOAN OF PORTFOLIO SECURITIES OF THE FUND
1. Promptly after each loan of portfolio Securities
specifically allocated to a Series held by the Custodian
hereunder, the Fund shall deliver or cause to be delivered to the
Custodian a Certificate specifying with respect to each such
loan: (a) the Series to which the loaned Securities are
specifically allocated; (b) the name of the issuer and the title
of the Securities, (c) the number of shares or the principal
amount loaned, (d) the date of loan and delivery, (e) the total
amount to be delivered to the Custodian against the loan of the
Securities, including the amount of cash collateral and the
premium, if any, separately identified, and (f) the name of the
broker, dealer, or financial institution to which the loan was
made. The Custodian shall deliver the Securities thus designated
to the broker, dealer or financial institution to which the loan
was made upon receipt of the total amount designated as to be
delivered against the loan of Securities. The Custodian may
accept payment in connection with a delivery otherwise than
through the Book-Entry System or Depository only in the form of a
certified or bank cashier's check payable to the order of the
Fund or the Custodian drawn on New York Clearing House funds and
may deliver Securities in accordance with the customs prevailing
among dealers in securities.
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<PAGE>
2. Promptly after each termination of the loan of
Securities by the Fund, the Fund shall deliver or cause to be
delivered to the Custodian a Certificate specifying with respect
to each such loan termination and return of Securities: (a) the
Series to which the loaned Securities are specifically allocated;
(b) the name of the issuer and the title of the Securities to be
returned, (c) the number of shares or the principal amount to be
returned, (d) the date of termination, (e) the total amount to be
delivered by the Custodian (including the cash collateral for
such Securities minus any offsetting credits as described in said
Certificate), and (f) the name of the broker, dealer, or
financial institution from which the Securities will be returned.
The Custodian shall receive all Securities returned from the
broker, dealer, or financial institution to which such Securities
were loaned and upon receipt thereof shall pay, out of the money
held for the account of the Fund, the total amount payable upon
such return of Securities as set forth in the Certificate.
ARTICLE XI.
CONCERNING MARGIN ACCOUNTS, SENIOR SECURITY
ACCOUNTS, AND COLLATERAL ACCOUNTS
1. The Custodian shall, from time to time, make such
deposits to, or withdrawals from, a Senior Security Account as
specified in a Certificate received by the Custodian. Such
Certificate shall specify the Series for which such deposit or
withdrawal is to be made and the amount of cash and/or the amount
and kind of Securities specifically allocated to such Series to
be deposited in, or withdrawn from, such Senior Security Account
for such Series. In the event that the Fund fails to specify in
a Certificate the Series, the name of the issuer, the title and
the number of shares or the principal amount of any particular
Securities to be deposited by the Custodian into, or withdrawn
from, a Senior Securities Account, the Custodian shall be under
no obligation to make any such deposit or withdrawal and shall so
notify the Fund.
2. The Custodian shall make deliveries or payments from a
Margin Account to the broker, dealer, futures commission merchant
or Clearing Member in whose name, or for whose benefit, the
account was established as specified in the Margin Account
Agreement.
3. Amounts received by the Custodian as payments or
distributions with respect to Securities deposited in any Margin
Account shall be dealt with in accordance with the terms and
conditions of the Margin Account Agreement.
4. The Custodian shall have a continuing lien and security
interest in and to any property at any time held by the Custodian
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<PAGE>
in any Collateral Account described herein. In accordance with
applicable law the Custodian may enforce its lien and realize on
any such property whenever the Custodian has made payment or
delivery pursuant to any Put Option guarantee letter or similar
document or any receipt issued hereunder by the Custodian. In
the event the Custodian should realize on any such property net
proceeds which are less than the Custodian's obligations under
any Put Option guarantee letter or similar document or any
receipt, such deficiency shall be a debt owed the Custodian by
the Fund within the scope of Article XIV herein.
5. On each business day the Custodian shall furnish the
Fund with a statement with respect to each Margin Account in
which money or Securities are held specifying as of the close of
business on the previous business day: (a) the name of the
Margin Account; (b) the amount and kind of Securities held
therein; and (c) the amount of money held therein. The Custodian
shall make available upon request to any broker, dealer, or
futures commission merchant specified in the name of a Margin
Account a copy of the statement furnished the Fund with respect
to such Margin Account.
6. Promptly after the close of business on each business
day in which cash and/or Securities are maintained in a
Collateral Account for any Series, the Custodian shall furnish
the Fund with a statement with respect to such Collateral Account
specifying the amount of cash and/or the amount and kind of
Securities held therein. No later than the close of business
next succeeding the delivery to the Fund of such statement, the
Fund shall furnish to the Custodian a Certificate specifying the
then market value of the Securities described in such statement.
In the event such then market value is indicated to be less than
the Custodian's obligation with respect to any outstanding Put
Option guarantee letter or similar document, the Fund shall
promptly specify in a Certificate the additional cash and/or
Securities to be deposited in such Collateral Account to
eliminate such deficiency.
ARTICLE XII.
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
1. The Fund shall furnish to the Custodian a copy of the
resolution of the Board of Directors of the Fund, certified by
the Secretary or any Assistant Secretary, either (i) setting
forth with respect to the Series specified therein the date of
the declaration of a dividend or distribution, the date of
payment thereof, the record date as of which shareholders
entitled to payment shall be determined, the amount payable per
Share of such Series to the shareholders of record as of that
date and the total amount payable to the Dividend Agent and any
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sub-dividend agent or co-dividend agent of the Fund on the
payment date, or (ii) authorizing with respect to the Series
specified therein the declaration of dividends and distributions
on a daily basis and authorizing the Custodian to rely on Oral
Instructions or a Certificate setting forth the date of the
declaration of such dividend or distribution, the date of payment
thereof, the record date as of which shareholders entitled to
payment shall be determined, the amount payable per Share of such
Series to the shareholders of record as of that date and the
total amount payable to the Dividend Agent on the payment date.
2. Upon the payment date specified in such resolution, Oral
Instructions or Certificate, as the case may be, the Custodian
shall pay out of the money held for the account of each Series
the total amount payable to the Dividend Agent and any sub-
dividend agent or co-dividend agent of the Fund with respect to
such Series.
ARTICLE XIII.
SALE AND REDEMPTION OF SHARES
1. Whenever the Fund shall sell any Shares, it shall
deliver to the Custodian a Certificate duly specifying:
(a) the Series, the number of Shares sold, trade date,
and price; and
(b) the amount of money to be received by the Custodian
for the sale of such Shares and specifically allocated to the
separate account in the name of such Series.
2. Upon receipt of such money from the Transfer Agent, the
Custodian shall credit such money to the separate account in the
name of the Series for which such money was received.
3. Upon issuance of any Shares of any Series described in
the foregoing provisions of this Article, the Custodian shall
pay, out of the money held for the account of such Series, all
original issue or other taxes required to be paid by the Fund in
connection with such issuance upon the receipt of a Certificate
specifying the amount to be paid.
4. Except as provided hereinafter, whenever the Fund
desires the Custodian to make payment out of the money held by
the Custodian hereunder in connection with a redemption of any
Shares, it shall furnish to the Custodian a Certificate
specifying:
(a) the number and Series of Shares redeemed; and
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(b) the amount to be paid for such Shares.
5. Upon receipt from the Transfer Agent of an advice
setting forth the Series and number of Shares received by the
Transfer Agent for redemption and that such Shares are in good
form for redemption, the Custodian shall make payment to the
Transfer Agent out of the money held in the separate account in
the name of the Series the total amount specified in the
Certificate issued pursuant to the foregoing paragraph 4 of this
Article.
6. Notwithstanding the above provisions regarding the
redemption of any Shares, whenever any Shares are redeemed
pursuant to any check redemption privilege which may from time to
time be offered by the Fund, the Custodian, unless otherwise
instructed by a Certificate, shall, upon receipt of an advice
from the Fund or its agent setting forth that the redemption is
in good form for redemption in accordance with the check
redemption procedure, honor the check presented as part of such
check redemption privilege out of the money held in the separate
account of the Series of the Shares being redeemed.
ARTICLE XIV.
OVERDRAFTS OR INDEBTEDNESS
1. If the Custodian should in its sole discretion advance
funds on behalf of any Series which results in an overdraft
because the money held by the Custodian in the separate account
for such Series shall be insufficient to pay the total amount
payable upon a purchase of Securities specifically allocated to
such Series, as set forth in a Certificate or Oral Instructions,
or which results in an overdraft in the separate account of such
Series for some other reason, or if the Fund is for any other
reason indebted to the Custodian with respect to a Series,
including any indebtedness to The Bank of New York under the
Fund's Cash Management and Related Services Agreement (except a
borrowing for investment or for temporary or emergency purposes
using Securities as collateral pursuant to a separate agreement
and subject to the provisions of paragraph 2 of this Article),
such overdraft or indebtedness shall be deemed to be a loan made
by the Custodian to the Fund for such Series payable on demand
and shall bear interest from the date incurred at a rate per
annum (based on a 360-day year for the actual number of days
involved) equal to 1/2% over Custodian's prime commercial lending
rate in effect from time to time, such rate to be adjusted on the
effective date of any change in such prime commercial lending
rate but in no event to be less than 6% per annum. In addition,
the Fund hereby agrees that the Custodian shall have a continuing
lien, security interest, and security entitlement in and to any
property including any investment property or any financial asset
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specifically allocated to such Series at any time held by it for
the benefit of such Series or in which the Fund may have an
interest which is then in the Custodian's possession or control
or in possession or control of any third party acting in the
Custodian's behalf. The Fund authorizes the Custodian, in its
sole discretion, at any time to charge any such overdraft or
indebtedness together with interest due thereon against any
balance of account standing to such Series' credit on the
Custodian's books. In addition, the Fund hereby covenants that
on each Business Day on which either it intends to enter a
Reverse Repurchase Agreement and/or otherwise borrow from a third
party, or which next succeeds a Business Day on which at the
close of business the Fund had outstanding a Reverse Repurchase
Agreement or such a borrowing, it shall prior to 9 a.m., New York
City time, advise the Custodian, in writing, of each such
borrowing, shall specify the Series to which the same relates,
and shall not incur any indebtedness not so specified other than
from the Custodian.
2. The Fund will cause to be delivered to the Custodian by
any bank (including, if the borrowing is pursuant to a separate
agreement, the Custodian) from which it borrows money for
investment or for temporary or emergency purposes using
Securities held by the Custodian hereunder as collateral for such
borrowings, a notice or undertaking in the form currently
employed by any such bank setting forth the amount which such
bank will loan to the Fund against delivery of a stated amount of
collateral. The Fund shall promptly deliver to the Custodian a
Certificate specifying with respect to each such borrowing: (a)
the Series to which such borrowing relates; (b) the name of the
bank, (c) the amount and terms of the borrowing, which may be set
forth by incorporating by reference an attached promissory note,
duly endorsed by the Fund, or other loan agreement,(d) the time
and date, if known, on which the loan is to be entered into, (e)
the date on which the loan becomes due and payable, (f) the total
amount payable to the Fund on the borrowing date, (g) the market
value of Securities to be delivered as collateral for such loan,
including the name of the issuer, the title and the number of
shares or the principal amount of any particular Securities, and
(h) a statement specifying whether such loan is for investment
purposes or for temporary or emergency purposes and that such
loan is in conformance with the Investment Company Act of 1940
and the Fund's prospectus. The Custodian shall deliver on the
borrowing date specified in a Certificate the specified
collateral and the executed promissory note, if any, against
delivery by the lending bank of the total amount of the loan
payable, provided that the same conforms to the total amount
payable as set forth in the Certificate. The Custodian may, at
the option of the lending bank, keep such collateral in its
possession, but such collateral shall be subject to all rights
therein given the lending bank by virtue of any promissory note
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or loan agreement. The Custodian shall deliver such Securities
as additional collateral as may be specified in a Certificate to
collateralize further any transaction described in this
paragraph. The Fund shall cause all Securities released from
collateral status to be returned directly to the Custodian, and
the Custodian shall receive from time to time such return of
collateral as may be tendered to it. In the event that the Fund
fails to specify in a Certificate the Series, the name of the
issuer, the title and number of shares or the principal amount of
any particular Securities to be delivered as collateral by the
Custodian, the Custodian shall not be under any obligation to
deliver any Securities.
ARTICLE XV.
INSTRUCTIONS
1. With respect to any software provided by the Custodian
to a Fund in order for the Fund to transmit Instructions to the
Custodian (the "Software"), the Custodian grants to such Fund a
personal, nontransferable and nonexclusive license to use the
Software solely for the purpose of transmitting Instructions to,
and receiving communications from, the Custodian in connection
with its account(s). The Fund shall use the Software solely for
its own internal and proper business purposes, and not in the
operation of a service bureau, and agrees not to sell, reproduce,
lease or otherwise provide, directly or indirectly, the Software
or any portion thereof to any third party without the prior
written consent of the Custodian. The Fund acknowledges that the
Custodian and its suppliers have title and exclusive proprietary
rights to the Software, including any trade secrets or other
ideas, concepts, know how, methodologies, or information
incorporated therein and the exclusive rights to any copyrights,
trademarks and patents (including registrations and applications
for registration of either) or statutory or legal protections
available with respect thereof. The Fund further acknowledges
that all or a part of the Software may be copyrighted or
trademarked (or a registration or claim made therefor) by the
Custodian or its suppliers. The Fund shall not take any action
with respect to the Software inconsistent with the foregoing
acknowledgments, nor shall the Fund attempt to decompile, reverse
engineer or modify the Software. The Fund may not copy, sell,
lease or provide, directly or indirectly, any of the Software or
any portion thereof to any other person or entity without the
Custodian's prior written consent. The Fund may not remove any
statutory copyright notice, or other notice including the
software or on any media containing the Software. The Fund shall
reproduce any such notice on any reproduction of the Software and
shall add statutory copyright notice or other notice to the
Software or media upon the Bank's request. Custodian agrees to
provide reasonable training, instruction manuals and access to
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Custodian's "help desk" in connection with the Fund's user
support necessary to use of the Software. At the Fund's request,
Custodian agrees to permit reasonable testing of the Software by
the Fund.
2. The Fund shall obtain and maintain at its own cost and
expense all equipment and services, including but not limited to
communications services, necessary for it to utilize the Software
and transmit Instructions to the Custodian. The Custodian shall
not be responsible for the reliability, compatibility with the
Software or availability of any such equipment or services or the
performance or nonperformance by any nonparty to this Custody
Agreement.
3. The Fund acknowledges that the Software, all data bases
made available to the Fund by utilizing the Software (other than
data bases relating solely to the assets of the Fund and
transactions with respect thereto), and any proprietary data,
processes, information and documentation (other than which are or
become part of the public domain or are legally required to be
made available to the public) (collectively, the "Information"),
are the exclusive and confidential property of the Custodian.
The Fund shall keep the Information confidential by using the
same care and discretion that the Fund uses with respect to its
own confidential property and trade secrets and shall neither
make nor permit any disclosure without the prior written consent
of the Custodian. Upon termination of this Agreement or the
Software license granted hereunder for any reason, the Fund shall
return to the Custodian all copies of the Information which are
in its possession or under its control or which the Fund
distributed to third parties. The provisions of this Article
shall not affect the copyright status of any of the Information
which may be copyrighted and shall apply to all Information
whether or not copyrighted.
4. The Custodian reserves the right to modify, at its own
expense, the Software from time to time without prior notice and
the Fund shall install new releases of the Software as the
Custodian may direct. The Fund agrees not to modify or attempt
to modify the Software without the Custodian's prior written
consent. The Fund acknowledges that any modifications to the
Software, whether by the Fund or the Custodian and whether with
or without the Custodian's consent, shall become the property of
the Custodian.
5. The Custodian and its manufacturers and suppliers make
no warranties or representations of any kind with regard to the
Software or the method(s) by which the Fund may transmit
Instructions to the Custodian, express or implied, including but
not limited to any implied warranties of merchantability or
fitness for a particular purpose.
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6. EXPORT RESTRICTIONS. EXPORT OF THE SOFTWARE IS
PROHIBITED BY UNITED STATES LAW. THE FUND AGREES THAT IT WILL
NOT UNDER ANY CIRCUMSTANCES RESELL, DIVERT, TRANSFER, TRANSSHIP
OR OTHERWISE DISPOSE OF THE SOFTWARE (IN ANY FORM) IN OR TO ANY
OTHER COUNTRY. IF THE CUSTODIAN DELIVERS THE SOFTWARE TO THE
FUND OUTSIDE THE UNITED STATES, THE SOFTWARE WAS EXPORTED FROM
THE UNITED STATES IN ACCORDANCE WITH EXPORT ADMINISTRATIVE
REGULATIONS. DIVERSION CONTRARY TO U.S. LAWS PROHIBITED. The
Fund hereby authorizes Custodian to report its name and address
to government agencies to which Custodian is required to provide
such information by law.
7. Where the method for transmitting Instructions by the
Fund involves an automatic systems acknowledgment by the
Custodian of its receipt of such Instructions, then in the
absence of such acknowledgment the Custodian shall not be liable
for any failure to act pursuant to such Instructions, the Fund
may not claim that such Instructions were received by the
Custodian, and the Fund shall deliver a Certificate by some other
means.
8. (a) The Fund agrees that where it delivers to the
Custodian Instructions hereunder, it shall be the Fund's sole
responsibility to ensure that only persons duly authorized by the
Fund transmit such Instructions to the Custodian. The Fund will
cause all persons transmitting Instructions to the Custodian to
treat applicable user and authorization codes, passwords and
authentication keys with extreme care, and irrevocably authorizes
the Custodian to act in accordance with and rely upon
Instructions received by it pursuant hereto.
(b) The Fund hereby represents, acknowledges and agrees
that it is fully informed of the protections and risks associated
with the various methods of transmitting Instructions to the
Custodian and that there may be more secure methods of
transmitting instructions to the Custodian than the method(s)
selected by the Fund. The Fund hereby agrees that the security
procedures (if any) to be followed in connection with the Fund's
transmission of Instructions provide to it a commercially
reasonable degree of protection in light of its particular needs
and circumstances.
9. The Fund hereby represents, warrants and covenants to
the Custodian that this Agreement has been duly approved by a
resolution of its Board of Directors, and that its transmission
of Instructions pursuant hereto shall at all times comply with
the Investment Company Act.
10. The Fund shall notify the Custodian of any errors,
omissions or interruptions in, or delay or unavailability of, its
ability to send Instructions as promptly as practicable, and in
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any event within 24 hours after the earliest of (i) discovery
thereof, (ii) the Business Day on which discovery should have
occurred through the exercise of reasonable care and (iii) in the
case of any error, the date of actual receipt of the earliest
notice which reflects such error, it being agreed that discovery
and receipt of notice may only occur on a business day. The
Custodian shall promptly advise the Fund whenever the Custodian
learns of any errors, omissions or interruption in, or delay or
unavailability of, the Fund's ability to send Instructions.
11. Custodian will indemnify and hold harmless the Fund with
respect to any liability, damages, loss or claim incurred by or
brought against Fund by reason any claim or infringement against
any patent, copyright, license or other property right arising
out or by reason of the Fund's use of the Software in the form
provided under this Section. Custodian at its own expense will
defend such action or claim brought against Fund to the extent
that it is based on a claim that the Software in the form
provided by Custodian infringes any patents, copyrights, license
or other property right, provided that Custodian is provided with
reasonable written notice of such claim, provided that the Fund
has not settled, compromised or confessed any such claim without
the Custodian's written consent, in which event Custodian shall
have no liability or obligation hereunder, and provided Fund
cooperates with and assists Custodian in the defense of such
claim. Custodian shall have the right to control the defense of
all such claims, lawsuits and other proceedings. If, as a result
of any claim of infringement against any patent, copyright,
license or other property right, Custodian is enjoined from using
the Software, or if Custodian believes that the System is likely
to become the subject of a claim of infringement, Custodian at
its option may in its sole discretion either (a) at its expenses
procure the right for the Fund to continue to use the Software,
or (b), replace or modify the Software so as to make it non-
infringing, or (c) may discontinue the license granted herein
upon written notice to Customer.
ARTICLE XVI.
DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY
OF ANY SERIES HELD OUTSIDE OF THE UNITED STATES
1. The Custodian is authorized and instructed to employ, as
sub-custodian for each Series' Securities for which the primary
market is outside the United States ("Foreign Securities") and
other assets, the foreign banking institutions and foreign
securities depositories and clearing agencies designated on
Schedule I hereto ("Foreign Sub-Custodians"). The Fund may
designate any additional foreign sub-custodian with which the
Custodian has an agreement for such entity to act as the
Custodian's agent, as its sub-custodian and any such additional
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foreign sub-custodian shall be deemed added to Schedule I. Upon
receipt of a Certificate from the Fund, the Custodian shall cease
the employment of any one or more Foreign Sub-Custodians for
maintaining custody of the Fund's assets and such Foreign Sub-
Custodian shall be deemed deleted from Schedule I.
2. Each delivery of a Certificate to the Custodian in
connection with a transaction involving the use of a Foreign Sub-
Custodian shall constitute a representation and warranty by the
Fund that its Board of Directors, or its third party foreign
custody manager as defined in Rule 17f-5 under the Investment
Company Act of 1940, as amended, if any, has determined that use
of such Foreign Sub-Custodian satisfies the requirements of such
Investment Company Act of 1940 and such Rule 17f-5 thereunder.
3. The Custodian shall identify on its books as belonging
to each Series of the Fund the Foreign Securities of such Series
held by each Foreign Sub-Custodian. At the election of the Fund,
it shall be entitled to be subrogated to the rights of the
Custodian with respect to any claims by the Fund or any Series
against a Foreign Sub-Custodian as a consequence of any loss,
damage, cost, expense, liability or claim sustained or incurred
by the Fund or any Series if and to the extent that the Fund or
such Series has not been made whole for any such loss, damage,
cost, expense, liability or claim.
4. Upon request of the Fund, the Custodian will, consistent
with the terms of the applicable Foreign Sub-Custodian agreement,
use reasonable efforts to arrange for the independent accountants
of the Fund to be afforded access to the books and records of any
Foreign Sub-Custodian insofar as such books and records relate to
the performance of such Foreign Sub-Custodian under its agreement
with the Custodian on behalf of the Fund.
5. The Custodian will supply to the Fund from time to time,
as mutually agreed upon, statements in respect of the securities
and other assets of each Series held by Foreign Sub-Custodians,
including but not limited to an identification of entities having
possession of each Series' Foreign Securities and other assets,
and advices or notifications of any transfers of Foreign
Securities to or from each custodial account maintained by a
Foreign Sub-Custodian for the Custodian on behalf of the Series.
6. The Custodian shall transmit promptly to the Fund all
notices, reports or other written information received pertaining
to the Fund's Foreign Securities, including without limitation,
notices of corporate action, proxies and proxy solicitation
materials.
7. Notwithstanding any provision of this Agreement to the
contrary, settlement and payment for securities received for the
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account of any Series and delivery of securities maintained for
the account of such Series may be effected in accordance with the
customary or established securities trading or securities
processing practices and procedures in the jurisdiction or market
in which the transaction occurs, including, without limitation,
delivery of securities to the purchaser thereof or to a dealer
therefor (or an agent for such purchaser or dealer) against a
receipt with the expectation of receiving later payment for such
securities from such purchaser or dealer.
8. Notwithstanding any other provision in this Agreement to
the contrary, with respect to any losses or damages arising out
of or relating to any actions or omissions of any Foreign Sub-
Custodian the sole responsibility and liability of the Custodian
shall be to take appropriate action at the Fund's expense to
recover such loss or damage from the Foreign Sub-Custodian. It
is expressly understood and agreed that the Custodian's sole
responsibility and liability shall be limited to amounts so
recovered from the Foreign Sub-Custodian.
ARTICLE XVII.
FX TRANSACTIONS
1. Whenever the Fund shall enter into an FX Transaction,
the Fund shall promptly deliver to the Custodian a Certificate or
Oral Instructions specifying with respect to such FX Transaction:
(a) the Series to which such FX Transaction is specifically
allocated; (b) the type and amount of Currency to be purchased by
the Fund; (c) the type and amount of Currency to be sold by the
Fund; (d) the date on which the Currency to be purchased is to be
delivered; (e) the date on which the Currency to be sold is to be
delivered; and (f) the name of the person from whom or through
whom such currencies are to be purchased and sold. Unless
otherwise instructed by a Certificate or Oral Instructions, the
Custodian shall deliver, or shall instruct a Foreign Sub-
Custodian to deliver, the Currency to be sold on the date on
which such delivery is to be made, as set forth in the
Certificate, and shall receive, or instruct a Foreign Sub-
Custodian to receive, the Currency to be purchased on the date as
set forth in the Certificate.
2. Where the Currency to be sold is to be delivered on the
same day as the Currency to be purchased, as specified in the
Certificate or Oral Instructions, the Custodian or a Foreign Sub-
Custodian may arrange for such deliveries and receipts to be made
in accordance with the customs prevailing from time to time among
brokers or dealers in Currencies, and such receipt and delivery
may not be completed simultaneously. The Fund assumes all
responsibility and liability for all credit risks involved in
connection with such receipts and deliveries, which
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responsibility and liability shall continue until the Currency to
be received by the Fund has been received in full.
3. Any FX Transaction effected by the Custodian in
connection with this Agreement may be entered with the Custodian,
any office, branch or subsidiary of The Bank of New York Company,
Inc., or any Foreign Sub-Custodian acting as principal or
otherwise through customary banking channels. The Fund may issue
a standing Certificate with respect to FX Transaction but the
Custodian may establish rules or limitations concerning any
foreign exchange facility made available to the Fund. The Fund
shall bear all risks of investing in Securities or holding
Currency. Without limiting the foregoing, the Fund shall bear
the risks that rules or procedures imposed by a Foreign Sub-
Custodian or foreign depositories, exchange controls, asset
freezes or other laws, rules, regulations or orders shall
prohibit or impose burdens or costs on the transfer to, by or for
the account of the Fund of Securities or any cash held outside
the Fund's jurisdiction or denominated in Currency other than its
home jurisdiction or the conversion of cash from one Currency
into another currency. The Custodian shall not be obligated to
substitute another Currency for a Currency (including a Currency
that is a component of a Composite Currency Unit) whose
transferability, convertibility or availability has been affected
by such law, regulation, rule or procedure. Neither the
Custodian nor any Foreign Sub-Custodian shall be liable to the
Fund for any loss resulting from any of the foregoing events.
ARTICLE XVIII.
CONCERNING THE CUSTODIAN
1. Except as hereinafter provided, or as provided in
Article XVI, neither the Custodian nor its nominee shall be
liable for any loss or damage, including counsel fees, resulting
from its action or omission to act or otherwise, either hereunder
or under any Margin Account Agreement, except for any such loss
or damage arising out of its own negligence or willful
misconduct. In no event shall the Custodian be liable to the
Fund or any third party for special, indirect or consequential
damages or lost profits or loss of business, arising under or in
connection with this Agreement, even if previously informed of
the possibility of such damages and regardless of the form of
action. The Custodian may, with respect to questions of law
arising hereunder or under any Margin Account Agreement, apply
for and obtain the advice and opinion of counsel to the Fund, or
of its own counsel, at the expense of the Fund, and shall be
fully protected with respect to anything done or omitted by it in
good faith in conformity with such advice or opinion. The
Custodian shall be liable to the Fund for any loss or damage
resulting from the use of the Book-Entry System or any Depository
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arising by reason of any negligence or willful misconduct on the
part of the Custodian or any of its employees or agents.
2. Without limiting the generality of the foregoing, the
Custodian shall be under no obligation to inquire into, and shall
not be liable for:
(a) the validity of the issue of any Securities
purchased, sold, or written by or for the Fund, the legality of
the purchase, sale or writing thereof, or the propriety of the
amount paid or received therefor;
(b) the legality of the sale or redemption of any
Shares, or the propriety of the amount to be received or paid
therefor;
(c) the legality of the declaration or payment of any
dividend by the Fund;
(d) the legality of any borrowing by the Fund using
Securities as collateral;
(e) the legality of any loan of portfolio Securities,
nor shall the Custodian be under any duty or obligation to see to
it that any cash collateral delivered to it by a broker, dealer,
or financial institution or held by it at any time as a result of
such loan of portfolio Securities of the Fund is adequate
collateral for the Fund against any loss it might sustain as a
result of such loan. The Custodian specifically, but not by way
of limitation, shall not be under any duty or obligation
periodically to check or notify the Fund that the amount of such
cash collateral held by it for the Fund is sufficient collateral
for the Fund, but such duty or obligation shall be the sole
responsibility of the Fund. In addition, the Custodian shall be
under no duty or obligation to see that any broker, dealer or
financial institution to which portfolio Securities of the Fund
are lent pursuant to Article X of this Agreement makes payment to
it of any dividends or interest which are payable to or for the
account of the Fund during the period of such loan or at the
termination of such loan, provided, however, that the Custodian
shall promptly notify the Fund in the event that such dividends
or interest are not paid and received when due; or
(f) the sufficiency or value of any amounts of money
and/or Securities held in any Margin Account, Senior Security
Account or Collateral Account in connection with transactions by
the Fund. In addition, the Custodian shall be under no duty or
obligation to see that any broker, dealer, futures commission
merchant or Clearing Member makes payment to the Fund of any
variation margin payment or similar payment which the Fund may be
entitled to receive from such broker, dealer, futures commission
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merchant or Clearing Member, to see that any payment received by
the Custodian from any broker, dealer, futures commission
merchant or Clearing Member is the amount the Fund is entitled to
receive, or to notify the Fund of the Custodian's receipt or non-
receipt of any such payment.
3. The Custodian shall not be liable for, or considered to
be the Custodian of, any money, whether or not represented by any
check, draft, or other instrument for the payment of money,
received by it on behalf of the Fund until the Custodian actually
receives and collects such money directly or by the final
crediting of the account representing the Fund's interest at the
Book-Entry System or the Depository.
4. The Custodian shall have no responsibility and shall not
be liable for ascertaining or acting upon any calls, conversions,
exchange offers, tenders, interest rate changes or similar
matters relating to Securities held in the Depository, unless the
Custodian shall have actually received timely notice from the
Depository. In no event shall the Custodian have any
responsibility or liability for the failure of the Depository to
collect, or for the late collection or late crediting by the
Depository of any amount payable upon Securities deposited in the
Depository which may mature or be redeemed, retired, called or
otherwise become payable. However, upon receipt of a Certificate
from the Fund of an overdue amount on Securities held in the
Depository the Custodian shall make a claim against the
Depository on behalf of the Fund, except that the Custodian shall
not be under any obligation to appear in, prosecute or defend any
action, suit or proceeding in respect to any Securities held by
the Depository which in its opinion may involve it in expense or
liability, unless indemnity satisfactory to it against all
expense and liability be furnished as often as may be required.
5. The Custodian shall not be under any duty or obligation
to take action to effect collection of any amount due to the Fund
from the Transfer Agent of the Fund nor to take any action to
effect payment or distribution by the Transfer Agent of the Fund
of any amount paid by the Custodian to the Transfer Agent of the
Fund in accordance with this Agreement.
6. The Custodian shall not be under any duty or obligation
to take action to effect collection of any amount if the
Securities upon which such amount is payable are in default, or
if payment is refused after due demand or presentation, unless
and until (i) it shall be directed to take such action by a
Certificate and (ii) it shall be assured to its satisfaction of
reimbursement of its costs and expenses in connection with any
such action.
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<PAGE>
7. The Custodian may in addition to the employment of
Foreign Sub-Custodians pursuant to Article XVI appoint one or
more banking institutions as Depository or Depositories, as Sub-
Custodian or Sub-Custodians, or as Co-Custodian or Co-Custodians
including, but not limited to, banking institutions located in
foreign countries, of Securities and money at any time owned by
the Fund, upon such terms and conditions as may be approved in a
Certificate or contained in an agreement executed by the
Custodian, the Fund and the appointed institution.
8. The Custodian shall not be under any duty or obligation
(a) to ascertain whether any Securities at any time delivered to,
or held by it or by any Foreign Sub-Custodian, for the account of
the Fund and specifically allocated to a Series are such as
properly may be held by the Fund or such Series under the
provisions of its then current prospectus, or (b) to ascertain
whether any transactions by the Fund, whether or not involving
the Custodian, are such transactions as may properly be engaged
in by the Fund.
9. The Custodian shall be entitled to receive and the Fund
agrees to pay to the Custodian all out-of-pocket expenses and
such compensation as may be agreed upon from time to time between
the Custodian and the Fund. The Custodian may charge such
compensation and any expenses with respect to a Series incurred
by the Custodian in the performance of its duties pursuant to
such agreement against any money specifically allocated to such
Series. Unless and until the Fund instructs the Custodian by a
Certificate to apportion any loss, damage, liability or expense
among the Series in a specified manner, the Custodian shall also
be entitled to charge against any money held by it for the
account of a Series such Series' pro rata share (based on such
Series, net asset value at the time of the charge to the
aggregate net asset value of all Series at that time) of the
amount of any loss, damage, liability or expense, including
counsel fees, for which it shall be entitled to reimbursement
under the provisions of this Agreement. The expenses for which
the Custodian shall be entitled to reimbursement hereunder shall
include, but are not limited to, the expenses of sub-custodians
and foreign branches of the Custodian incurred in settling
outside of New York City transactions involving the purchase and
sale of Securities of the Fund.
10. The Custodian shall be entitled to rely upon any
Certificate, notice or other instrument in writing received by
the Custodian and reasonably believed by the Custodian to be a
Certificate. The Custodian shall be entitled to rely upon any
Oral Instructions actually received by the Custodian hereinabove
provided for. The Fund agrees to forward to the Custodian a
Certificate or facsimile thereof confirming such Oral
Instructions in such manner so that such Certificate or facsimile
38
<PAGE>
thereof is received by the Custodian, whether by hand delivery,
telecopier or other similar device, or otherwise, by the close of
business of the same day that such Oral Instructions are given to
the Custodian. The Fund agrees that the fact that such
confirming instructions are not received, or that contrary
instructions are received, by the Custodian shall in no way
affect the validity of the transactions or enforceability of the
transactions hereby authorized by the Fund. The Fund agrees that
the Custodian shall incur no liability to the Fund in acting upon
Oral Instructions given to the Custodian hereunder concerning
such transactions provided such instructions reasonably appear to
have been received from an Authorized Person.
11. The Custodian shall be entitled to rely upon any
instrument, instruction or notice received by the Custodian and
reasonably believed by the Custodian to be given in accordance
with the terms and conditions of any Margin Account Agreement.
Without limiting the generality of the foregoing, the Custodian
shall be under no duty to inquire into, and shall not be liable
for, the accuracy of any statements or representations contained
in any such instrument or other notice including, without
limitation, any specification of any amount to be paid to a
broker, dealer, futures commission merchant or Clearing Member.
12. The books and records pertaining to the Fund which are
in the possession of the Custodian shall be the property of the
Fund. Such books and records shall be prepared and maintained as
required by the Investment Company Act of 1940, as amended, and
other applicable securities laws and rules and regulations. The
Fund, or the Fund's authorized representatives, shall have access
to such books and records during the Custodian's normal business
hours. Upon the reasonable request of the Fund, copies of any
such books and records shall be provided by the Custodian to the
Fund or the Fund's authorized representative, and the Fund shall
reimburse the Custodian its expenses of providing such copies.
Upon reasonable request of the Fund, the Custodian shall provide
in hard copy or on micro-film, whichever the Custodian elects,
any records included in any such delivery which are maintained by
the Custodian on a computer disc, or are similarly maintained,
and the Fund shall reimburse the Custodian for its expenses of
providing such hard copy or micro-film.
13. The Custodian shall provide the Fund with any report
obtained by the Custodian on the system of internal accounting
control of the Book-Entry System, the Depository or O.C.C., and
with such reports on its own systems of internal accounting
control as the Fund may reasonably request from time to time.
14. The Fund agrees to indemnify the Custodian against and
save the Custodian harmless from all liability, claims, losses
and demands whatsoever, including attorney's fees, howsoever
39
<PAGE>
arising or incurred because of or in connection with this
Agreement, including the Custodian's payment or non-payment of
checks pursuant to paragraph 6 of Article XIII as part of any
check redemption privilege program of the Fund, except for any
such liability, claim, loss and demand arising out of the
Custodian's own negligence or willful misconduct.
15. Subject to the foregoing provisions of this Agreement,
including, without limitation, those contained in Article XVI and
XVII the Custodian may deliver and receive Securities, and
receipts with respect to such Securities, and arrange for
payments to be made and received by the Custodian in accordance
with the customs prevailing from time to time among brokers or
dealers in such Securities. When the Custodian is instructed to
deliver Securities against payment, delivery of such Securities
and receipt of payment therefor may not be completed
simultaneously. The Fund assumes all responsibility and
liability for all credit risks involved in connection with the
Custodian's delivery of Securities pursuant to instructions of
the Fund, which responsibility and liability shall continue until
final payment in full has been received by the Custodian.
16. The Custodian shall have no duties or responsibilities
whatsoever except such duties and responsibilities as are
specifically set forth in this Agreement, and no covenant or
obligation shall be implied in this Agreement against the
Custodian.
ARTICLE XIX.
TERMINATION
1. Either of the parties hereto may terminate this
Agreement by giving to the other party a notice in writing
specifying the date of such termination, which shall be not less
than ninety (90) days after the date of giving of such notice.
In the event such notice is given by the Fund, it shall be
accompanied by a copy of a resolution of the Board of Directors
of the Fund, certified by the Secretary or any Assistant
Secretary, electing to terminate this Agreement and designating a
successor custodian or custodians, each of which shall be a bank
or trust company having not less than $2,000,000 aggregate
capital, surplus and undivided profits. In the event such notice
is given by the Custodian, the Fund shall, on or before the
termination date, deliver to the Custodian a copy of a resolution
of the Board of Directors of the Fund, certified by the Secretary
or any Assistant Secretary, designating a successor custodian or
custodians. In the absence of such designation by the Fund, the
Custodian may designate a successor custodian which shall be a
bank or trust company having not less than $2,000,000 aggregate
capital, surplus and undivided profits. Upon the date set forth
40
<PAGE>
in such notice this Agreement shall terminate, and the Custodian
shall upon receipt of a notice of acceptance by the successor
custodian on that date deliver directly to the successor
custodian all Securities and money then owned by the Fund and
held by it as Custodian, after deducting all fees, expenses and
other amounts for the payment or reimbursement of which it shall
then be entitled.
2. If a successor custodian is not designated by the Fund
or the Custodian in accordance with the preceding paragraph, the
Fund shall upon the date specified in the notice of termination
of this Agreement and upon the delivery by the Custodian of all
Securities (other than Securities held in the Book-Entry System
which cannot be delivered to the Fund) and money then owned by
the Fund be deemed to be its own custodian and the Custodian
shall thereby be relieved of all duties and responsibilities
pursuant to this Agreement, other than the duty with respect to
Securities held in the Book Entry System which cannot be
delivered to the Fund to hold such Securities hereunder in
accordance with this Agreement.
ARTICLE XX.
MISCELLANEOUS
1. Annexed hereto as Appendix A is a Certificate signed by
two of the present Authorized Persons of the Fund under its seal,
setting forth the names and the signatures of the present
Authorized Persons of the Fund. The Fund agrees to furnish to
the Custodian a new Certificate in similar form in the event that
any such present Authorized Person ceases to be an Authorized
Person of the Fund, or in the event that other or additional
Authorized Persons are elected or appointed. Until such new
Certificate shall be received, the Custodian shall be fully
protected in acting under the provisions of this Agreement or
Oral Instructions upon the signatures of the Authorized Persons
as set forth in the last delivered Certificate.
2. Any notice or other instrument in writing, authorized or
required by this Agreement to be given to the Custodian, shall be
sufficiently given if addressed to the Custodian and mailed or
delivered to it at its offices at 90 Washington Street, New York,
New York 10286, or at such other place as the Custodian may from
time to time designate in writing.
3. Any notice or other instrument in writing, authorized or
required by this Agreement to be given to the Fund shall be
sufficiently given if addressed to the Fund and mailed or
delivered to it at its office at the address for the Fund first
above written, or at such other place as the Fund may from time
to time designate in writing.
41
<PAGE>
4. This Agreement may not be amended or modified in any
manner except by a written agreement executed by both parties
with the same formality as this Agreement and approved by a
resolution of the Board of Directors of the Fund.
5. This Agreement shall extend to and shall be binding upon
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 the Custodian, or by the
Custodian without the written consent of the Fund, authorized or
approved by a resolution of the Fund's Board of Directors.
6. This Agreement shall be construed in accordance with the
laws of the State of New York without giving effect to conflict
of laws principles thereof. Each party hereby consents to the
jurisdiction of a state or federal court situated in New York
City, New York in connection with any dispute arising hereunder
and hereby waives its right to trial by jury.
7. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original,
but such counterparts shall, together, constitute only one
instrument.
42
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers, thereunto
duly authorized and their respective seals to be hereunto
affixed, as of the day and year first above written.
ALLIANCE SELECT INVESTORS
SERIES, INC.
/s/ Edmund P. Bergan, Jr.
[SEAL] By:_______________________
Attest:
/s/ Domenick Pugliese
_______________________
THE BANK OF NEW YORK
/s/ George Ramos
[SEAL] By:_______________________
Name: George Ramos
Title: President
Attest:
_______________________
43
00250242.AG7
<PAGE>
APPENDIX A
I, , and I,
, of ALLIANCE
SELECT INVESTORS SERIES, INC., a Maryland corporation (the
"Fund"), do hereby certify that:
The following persons have been duly authorized in conformity
with the Fund's Declaration of Trust and By-Laws to execute any
Certificate, instruction, notice or other instrument on behalf of
the Fund, and the signatures set forth opposite their respective
names are their true and correct signatures:
Name Position Signature
____________________ ___________________ _________________
<PAGE>
APPENDIX B
SERIES
<PAGE>
APPENDIX C
I, Jorge E. Ramos, a Vice President with THE BANK OF NEW YORK
do hereby designate the following publications:
The Bond Buyer
Depository Trust Company Notices
Financial Daily Card Service
JJ Kenney Municipal Bond Service
London Financial Times
New York Times
Standard & Poor's Called Bond Record
Wall Street Journal
<PAGE>
EXHIBIT A
CERTIFICATION
The undersigned, , hereby certifies
that he or she is the duly elected and acting of
ALLIANCE SELECT INVESTORS SERIES, INC., a Maryland corporation
(the "Fund"), and further certifies that the following resolution
was adopted by the Board of Directors of the Fund at a meeting
duly held on , 1998, at which a quorum was at
all times present and that such resolution has not been modified
or rescinded and is in full force and effect as of the date
hereof.
RESOLVED, that The Bank of New York, as Custodian
pursuant to a Custody Agreement between The Bank of New York and
the Fund dated as of , 1998, (the "Custody
Agreement") is authorized and instructed on a continuous and
ongoing basis to deposit in the Book-Entry System, as defined in
the Custody Agreement, all securities eligible for deposit
therein, regardless of the Series to which the same are
specifically allocated, and to utilize the Book-Entry System to
the extent possible in connection with its performance
thereunder, including, without limitation, in connection with
settlements of purchases and sales of securities, loans of
securities, and deliveries and returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal
of ALLIANCE SELECT INVESTORS SERIES, INC., as of the day of
, 1998.
[SEAL]
<PAGE>
EXHIBIT B
CERTIFICATION
The undersigned, , hereby certifies
that he or she is the duly elected and acting of
ALLIANCE SELECT INVESTORS SERIES, INC., a Maryland corporation
(the "Fund"), and further certifies that the following resolution
was adopted by the Board of Directors of the Fund at a meeting
duly held on , 1998, at which a quorum was at
all times present and that such resolution has not been modified
or rescinded and is in full force and effect as of the date
hereof.
RESOLVED, that The Bank of New York, as Custodian
pursuant to a Custody Agreement between The Bank of New York and
the Fund dated as of , 1998, (the "Custody
Agreement") is authorized and instructed on a continuous and
ongoing basis until such time as it receives a Certificate, as
defined in the Custody Agreement, to the contrary to deposit in
the Depository, as defined in the Custody Agreement, all
securities eligible for deposit therein, regardless of the Series
to which the same are specifically allocated, and to utilize the
Depository to the extent possible in connection with its
performance thereunder, including, without limitation, in
connection with settlements of purchases and sales of securities,
loans of securities, and deliveries and returns of securities
collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal
of ALLIANCE SELECT INVESTORS SERIES, INC., as of the day of
, 1998.
[SEAL]
<PAGE>
EXHIBIT B-1
CERTIFICATION
The undersigned, , hereby certifies
that he or she is the duly elected and acting of
ALLIANCE SELECT INVESTORS SERIES, INC., a Maryland corporation
(the "Fund"), and further certifies that the following resolution
was adopted by the Board of Directors of the Fund at a meeting
duly held on , 1998, at which a quorum was at
all times present and that such resolution has not been modified
or rescinded and is in full force and effect as of the date
hereof.
RESOLVED, that The Bank of New York, as Custodian
pursuant to a Custody Agreement between The Bank of New York and
the Fund dated as of , 1998, (the "Custody
Agreement") is authorized and instructed on a continuous and
ongoing basis until such time as it receives a Certificate, as
defined in the Custody Agreement, to the contrary to deposit in
the Participants Trust Company as Depository, as defined in the
Custody Agreement, all securities eligible for deposit therein,
regardless of the Series to which the same are specifically
allocated, and to utilize the Participants Trust Company to the
extent possible in connection with its performance thereunder,
including, without limitation, in connection with settlements of
purchases and sales of securities, loans of securities, and
deliveries and returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal
of ALLIANCE SELECT INVESTORS SERIES, INC., as of the day of
, 1998.
[SEAL]
<PAGE>
EXHIBIT C
CERTIFICATION
The undersigned, , hereby certifies
that he or she is the duly elected and acting of
ALLIANCE SELECT INVESTORS SERIES, INC., a Maryland corporation
(the "Fund"), and further certifies that the following resolution
was adopted by the Board of Directors of the Fund at a meeting
duly held on , 1998, at which a quorum was
at all times present and that such resolution has not been
modified or rescinded and is in full force and effect as of the
date hereof.
RESOLVED, that The Bank of New York, as Custodian
pursuant to a Custody Agreement between The Bank of New York and
the Fund dated as of , 1998, (the "Custody
Agreement") is authorized and instructed on a continuous and
ongoing basis until such time as it receives a Certificate, as
defined in the Custody Agreement, to the contrary, to accept,
utilize and act with respect to Clearing Member confirmations for
Options and transaction in Options, regardless of the Series to
which the same are specifically allocated, as such terms are
defined in the Custody Agreement, as provided in the Custody
Agreement.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal
of ALLIANCE SELECT INVESTORS SERIES, INC., as of the day of
, 1998.
[SEAL]
<PAGE>
EXHIBIT D
The undersigned, , hereby certifies
that he or she is the duly elected and acting of
ALLIANCE SELECT INVESTORS SERIES, INC., a Maryland corporation
(the "Fund"), further certifies that the following resolutions
were adopted by the Board of Directors of the Fund at a meeting
duly held on , 1998, at which a quorum was at all
times present and that such resolutions have not been modified or
rescinded and are in full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian
pursuant to the Custody Agreement between The Bank of New York
and the Fund dated as of , 1998 (the "Custody
Agreement") is authorized and instructed on a continuous and
ongoing basis to act in accordance with, and to rely on
Instructions (as defined in the Custody Agreement).
RESOLVED, that the Fund shall establish access codes and
grant use of such access codes only to Authorized Persons of the
Fund as defined in the Custody Agreement, shall establish
internal safekeeping procedures to safeguard and protect the
confidentiality and availability of user and access codes,
passwords and authentication keys, and shall use Instructions
only in a manner that does not contravene the Investment Company
Act of 1940, as amended, or the rules and regulations thereunder.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal
of ALLIANCE SELECT INVESTORS SERIES, INC., as of the day of
, 1998.
[SEAL]
00250242.AG7
<PAGE>
ALLIANCE SELECT INVESTOR SERIES, INC.
TRANSFER AGENCY AGREEMENT
AGREEMENT, dated as of June 29, 1998, between ALLIANCE
SELECT INVESTOR 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 Select Investor 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.
27
<PAGE>
WITNESS the following signatures:
ALLIANCE SELECT INVESTOR
SERIES, INC.
/s/ John D. Carifa
By:____________________________
ALLIANCE FUND SERVICES, INC.
/s/ George R. Hrabovsky
By:____________________________
28
00250242.AC3
<PAGE>
EXPENSE LIMITATION AGREEMENT
ALLIANCE CAPITAL MANAGEMENT L.P.
1345 Avenue of the Americas
New York, New York 10105
June 29, 1998
ALLIANCE SELECT INVESTOR SERIES, INC.
1345 Avenue Of The Americas
New York, New York 10105
Dear Sirs:
Alliance Capital Management L.P. herewith confirms our
agreement with you as follows:
1. You are an open-end, non-diversified management
investment company registered under the Investment Company Act of
1940, as amended (the "Act"), and are authorized to issue shares
of separate series (portfolios), with each portfolio having its
own investment objective, policies and restrictions. You propose
to engage in the business of investing and reinvesting the assets
of each of your portfolios in accordance with applicable
limitations. Pursuant to an Advisory Agreement dated as of
June 26, 1998 (the "Advisory Agreement"), you have employed us to
manage the investment and reinvestment of such assets.
2. We hereby agree that, notwithstanding any provision
to the contrary contained in the Advisory Agreement, we shall
<PAGE>
limit as provided herein the aggregate expenses of every
character incurred by your Premier Portfolio (the "Portfolio"),
including but not limited to the fees ("Advisory Fees") payable
to us pursuant to the Advisory Agreement (the "Limitation").
Under the Limitation, we agree that, through July 31, 1999, such
expenses shall not exceed a percentage (the "Percentage Expense
Limitation") of the average daily net assets of the Portfolio
equal to, on an annualized basis, 2.50% in the case of the
Class A shares and 3.20% in the case of the Class B shares and
the Class C shares. To determine our liability for the
Portfolio's expenses in excess of the Percentage Expense
Limitation, the amount of allowable fiscal-year-to-date expenses
shall be computed daily by prorating the Percentage Expense
Limitation based on the number of days elapsed within the fiscal
year of the Portfolio, or limitation period, if shorter (the
"Prorated Limitation"). The Prorated Limitation shall be
compared to the expenses of the Portfolio recorded through the
current day in order to produce the allowable expenses to be
recorded for the current day (the "Allowable Expenses"). If
Advisory Fees and other expenses of the Portfolio for the current
day exceed the Allowable Expenses, Advisory Fees for the current
day shall be reduced by such excess ("Unaccrued Fees"). In the
event such excess exceeds the amount due as Advisory Fees, we
shall be responsible to the Portfolio for the additional excess
("Other Expenses Exceeding Limit"). If cumulative Unaccrued Fees
2
<PAGE>
or cumulative Other Expenses Exceeding Limit remain at July 31,
1999, these amounts shall be paid to us in the future, provided
that (1) no such payment shall be made to us after October 31,
2001, (2) such payment shall be made only to the extent that it
does not cause the Portfolio's aggregate expenses, on an
annualized basis, to exceed the Percentage Expense Limitation,
and (3) no such payment shall be made to us to the extent that
the aggregate of such payments would exceed the amount of
organizational and offering expenses (as defined by the Financial
Accounting Standards Board) recorded by you for financial
reporting purposes on or before July 31, 1999.
3. Nothing in this Agreement shall be construed as
preventing us from voluntarily limiting, waiving or reimbursing
your expenses outside the contours of this Agreement during any
time period before or after July 31, 1999; nor shall anything
herein be construed as requiring that we limit, waive or
reimburse any of your expenses incurred after July 31, 1999, or,
except as expressly set forth herein, prior to such date.
4. This Agreement shall become effective on the date
hereof and remain in effect until October 31, 2001. This
Agreement may be terminated by either party hereto upon not less
than 60 days' prior written notice to the other party. Upon the
termination or expiration hereof, we shall have no claim against
3
<PAGE>
you for any amounts not reimbursed to us pursuant to the
provisions of paragraph 2.
5. 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.
4
<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 CAPITAL MANAGEMENT L.P.
By ALLIANCE CAPITAL MANAGEMENT
CORPORATION, its general
partner
/s/ John D. Carifa
By_____________________________
Agreed to and accepted
as of the date first set forth above.
ALLIANCE SELECT INVESTOR SERIES, INC.
/s/ Edmund P. Bergan, Jr.
By__________________________
5
00250242.AG9
<PAGE>
SEWARD & KISSEL
ONE BATTERY PARK PLAZA
NEW YORK, NY 10004
TELEPHONE: (212) 574-1200
FACSIMILE: (212) 480-8421
June 29, 1998
Alliance Select Investor Series, Inc.
1345 Avenue of the Americas
New York, New York 10105
Dear Sirs:
We have acted as counsel for Alliance Select Investor
Series, Inc., a Maryland corporation (the "Company"), in
connection with the organization of the Company, the registration
of the Company under the Investment Company Act of 1940, as
amended, and the registration of an indefinite number of shares
of its common stock, par value $.001 per share (the "Common
Stock"), under the Securities Act of 1933, as amended.
As counsel for the Company we have participated in the
preparation of the Registration Statement on Form N-1A relating
to such shares (the "Registration Statement") and have examined
and relied upon such corporate records of the Company and such
other documents and certificates as to factual matters as we have
deemed to be necessary to render the opinion expressed herein.
Based on such examination, we are of the opinion that:
1. The Company is duly organized and validly existing
as a corporation in good standing under the laws of the State of
Maryland.
2. The shares of Common Stock of the Company to be
offered for sale pursuant to the Registration Statement are, to
the extent of the number of shares authorized to be issued by the
Company in its Charter, duly authorized and, when sold, issued
and paid for as contemplated by the Registration Statement, will
have been validly and legally issued and will be fully paid and
nonassessable shares of Common Stock of the Company under the
laws of the State of Maryland.
As to matters of Maryland law contained in the foregoing
opinion, we have relied on the opinion of Venable, Baetjer and
Howard, LLP of Baltimore, Maryland, dated June 29, 1998, a copy
<PAGE>
of which is included in the Registration Statement as Exhibit
10(b).
We hereby consent to the filing of this opinion with the
Securities and Exchange Commission as an exhibit to the
Registration Statement and to the reference to our firm under the
caption "General Information--Counsel" in the Statement of
Additional Information included therein.
Very truly yours,
/s/ Seward & Kissel
2
00250242.AG5
<PAGE>
June 29, 1998
Seward & Kissel
One Battery Park Plaza
New York, NY 10004
Re: Alliance Select Investor Series, Inc.
Ladies and Gentlemen:
We have acted as special Maryland counsel for Alliance
Select Investor Series, Inc., a Maryland corporation (the
"Fund"), in connection with the organization of the Fund and the
issuance of shares of the Class A Common Stock, Class B Common
Stock, and Class C Common Stock of its Premier Portfolio, par
value $.001 per share (each a "Class" and, collectively, the
"Shares").
As special Maryland counsel for the Fund, we are
familiar with its Charter and Bylaws. We have examined the
prospectus included in its Registration Statement on Form N-1A,
File Nos. 333-8818; 811-9176 (the "Registration Statement"),
substantially in the form in which it is to become effective (the
"Prospectus"). We have further examined and relied upon a
certificate of the Maryland State Department of Assessments and
Taxation to the effect that the Fund is duly incorporated and
existing under the laws of the State of Maryland and is in good
standing and duly authorized to transact business in the State of
Maryland.
We have also examined and relied upon such corporate
records of the Fund and other documents and certificates with
respect to factual matters as we have deemed necessary to render
the opinion expressed herein. We have assumed, without
independent verification, the genuineness of all signatures on
documents submitted to us, the authenticity of all documents
submitted to us as originals, and the conformity with originals
of all documents submitted to us as copies.
Based on such examination, we are of the opinion that:
1. The Fund is duly organized and validly existing as
a corporation in good standing under the laws of
the State of Maryland.
2. The Shares of the Fund to be offered for sale
pursuant to the Prospectus are, to the extent of
<PAGE>
the respective number of Shares of each Class of
the Premier Portfolio authorized to be issued by
the Fund in its Charter, duly authorized and, when
sold, issued and paid for as contemplated by the
Registration Statement, will have been validly and
legally issued and will be fully paid and
nonassessable under the laws of the State of
Maryland.
This letter expresses our opinion with respect to the
Maryland General Corporation Law. It does not extend to the
securities or "blue sky" laws of Maryland, to federal securities
laws or to other laws.
You may rely upon our foregoing opinion in rendering
your opinion to the Fund that is to be filed as an exhibit to the
Registration Statement. This opinion may not be relied upon by
any other person or for any other purpose without our prior
written consent. We consent to the filing of this opinion as an
exhibit to the Registration Statement and to the reference to us
in the Statement of Additional Information supplementing the
Prospectus under the caption "Counsel". We do not thereby admit
that we are "experts" within the meaning of the Securities Act of
1933 and the regulations thereunder.
Very truly yours,
/s/ Venable, Baetjer and Howard, LLP
2
00250242.AF9
Consent of Independent Accountants
We hereby consent to the use in the Statement of Additional
Information constituting part of this Pre-Effective Amendment No.
1 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated June 29, 1998, relating to the
statement of assets and liabilities of Alliance Select Investor
Series - Premier Portfolio, which appears in such Statement of
Additional Information. We also consent to the reference to us
under the heading "General Information - Independent Accountants"
in such Statement of Additional Information.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
June 29, 1998
<PAGE>
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, New York 10105
June 26, 1998
Alliance Select Investor Series, Inc.
1345 Avenue of the Americas
New York, New York 10105
Gentlemen:
In connection with our purchase from you and your
issuance to us of 10,000 shares of Class A Common Stock, ten
shares of Class B Common Stock and ten shares of Class C Common
Stock for an aggregate cash consideration of One Hundred Thousand
Two Hundred Dollars ($100,200), this will confirm that we are
buying such shares for investment for our account only and not
with a view to reselling or otherwise distributing them.
Very truly yours,
ALLIANCE CAPITAL MANAGEMENT L.P.
By: Alliance Capital Management
Corporation,
its General Partner
By: /s/ Robert H. Joseph
_________________________
Name: Robert H. Joseph
Title: Senior Vice President
and Chief Financial
Officer
00250242.AH4
<PAGE>
ALLIANCE SELECT INVESTOR 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 Select
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 12th day of June,
1998.
/s/Edmund P. Bergan, Jr.
By:
6
00250242.AC0
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person
whose signature appears below hereby revokes all prior
powers granted by the undersigned to the extent inconsistent
herewith and constitutes and appoints Edmund P. Bergan, Jr.
and Domenick Pugliese, and each of them, to act severally as
attorneys-in-fact and agents, with power of substitution and
resubstitution, for the undersigned in any and all
capacities, solely for the purpose of signing the
Registration Statement, and any amendments thereto, on Form
N-1A of Alliance Select Investor Series, Inc. and filing the
same, with exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that said
attorneys-in-fact, or their substitute or substitutes, may
do or cause to be done by virtue hereof.
/S/ John D. Carifa
__________________________
John D. Carifa
Dated: June 29, 1998
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person
whose signature appears below hereby revokes all prior
powers granted by the undersigned to the extent inconsistent
herewith and constitutes and appoints John D. Carifa, Edmund
P. Bergan, Jr., and Domenick Pugliese, and each of them, to
act severally as attorneys-in-fact and agents, with power of
substitution and resubstitution, for the undersigned in any
and all capacities, solely for the purpose of signing the
Registration Statement, and any amendments thereto, on Form
N-1A of Alliance Select Investor Series, Inc. and filing the
same, with exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that said
attorneys-in-fact, or their substitute or substitutes, may
do or cause to be done by virtue hereof.
/S/ David H. Dievler
__________________________
David H. Dievler
Dated: June 29, 1998
00250242.AH2
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person
whose signature appears below hereby revokes all prior
powers granted by the undersigned to the extent inconsistent
herewith and constitutes and appoints John D. Carifa, Edmund
P. Bergan, Jr., and Domenick Pugliese, and each of them, to
act severally as attorneys-in-fact and agents, with power of
substitution and resubstitution, for the undersigned in any
and all capacities, solely for the purpose of signing the
Registration Statement, and any amendments thereto, on Form
N-1A of Alliance Select Investor Series, Inc. and filing the
same, with exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that said
attorneys-in-fact, or their substitute or substitutes, may
do or cause to be done by virtue hereof.
/S/ William H. Foulk, Jr.
__________________________
William H. Foulk, Jr.
Dated: June 29, 1998
00250242.AH2
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person
whose signature appears below hereby revokes all prior
powers granted by the undersigned to the extent inconsistent
herewith and constitutes and appoints John D. Carifa, Edmund
P. Bergan, Jr., and Domenick Pugliese, and each of them, to
act severally as attorneys-in-fact and agents, with power of
substitution and resubstitution, for the undersigned in any
and all capacities, solely for the purpose of signing the
Registration Statement, and any amendments thereto, on Form
N-1A of Alliance Select Investor Series, Inc. and filing the
same, with exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that said
attorneys-in-fact, or their substitute or substitutes, may
do or cause to be done by virtue hereof.
/S/ Ruth Block
_________________________
Ruth Block
Dated: June 29, 1998
00250242.AH2
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person
whose signature appears below hereby revokes all prior
powers granted by the undersigned to the extent inconsistent
herewith and constitutes and appoints John D. Carifa, Edmund
P. Bergan, Jr., and Domenick Pugliese, and each of them, to
act severally as attorneys-in-fact and agents, with power of
substitution and resubstitution, for the undersigned in any
and all capacities, solely for the purpose of signing the
Registration Statement, and any amendments thereto, on Form
N-1A of Alliance Select Investor Series, Inc. and filing the
same, with exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that said
attorneys-in-fact, or their substitute or substitutes, may
do or cause to be done by virtue hereof.
/S/ John H. Dobkin
_________________________
John H. Dobkin
Dated: June 29, 1998
00250242.AH2
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person
whose signature appears below hereby revokes all prior
powers granted by the undersigned to the extent inconsistent
herewith and constitutes and appoints John D. Carifa, Edmund
P. Bergan, Jr., and Domenick Pugliese, and each of them, to
act severally as attorneys-in-fact and agents, with power of
substitution and resubstitution, for the undersigned in any
and all capacities, solely for the purpose of signing the
Registration Statement, and any amendments thereto, on Form
N-1A of Alliance Select Investor Series, Inc. and filing the
same, with exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that said
attorneys-in-fact, or their substitute or substitutes, may
do or cause to be done by virtue hereof.
/S/ Dr. James M. Hester
_________________________
Dr. James M. Hester
Dated: June 29, 1998
00250242.AH2
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person
whose signature appears below hereby revokes all prior
powers granted by the undersigned to the extent inconsistent
herewith and constitutes and appoints John D. Carifa, Edmund
P. Bergan, Jr., and Domenick Pugliese, and each of them, to
act severally as attorneys-in-fact and agents, with power of
substitution and resubstitution, for the undersigned in any
and all capacities, solely for the purpose of signing the
Registration Statement, and any amendments thereto, on Form
N-1A of Alliance Select Investor Series, Inc. and filing the
same, with exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that said
attorneys-in-fact, or their substitute or substitutes, may
do or cause to be done by virtue hereof.
/S/ Clifford L. Michel
_________________________
Clifford L. Michel
Dated: June 29, 1998
00250242.AH2
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person
whose signature appears below hereby revokes all prior
powers granted by the undersigned to the extent inconsistent
herewith and constitutes and appoints John D. Carifa, Edmund
P. Bergan, Jr., and Domenick Pugliese, and each of them, to
act severally as attorneys-in-fact and agents, with power of
substitution and resubstitution, for the undersigned in any
and all capacities, solely for the purpose of signing the
Registration Statement, and any amendments thereto, on Form
N-1A of Alliance Select Investor Series, Inc. and filing the
same, with exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that said
attorneys-in-fact, or their substitute or substitutes, may
do or cause to be done by virtue hereof.
/S/ Donald J. Robinson
_________________________
Donald J. Robinson
Dated: June 29, 1998
0025042.AH2
