<PAGE>
As filed with the Securities and Exchange
Commission on December 23, 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. X
Post-Effective Amendment No. 1
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT 1940
Amendment No. 2 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
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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)
X on March 1, 1999 pursuant to paragraph (a)(1)
75 days after filing pursuant to paragraph (a)(2)
on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
This post-effective amendment designates a new
effective date for a previously filed post-effective
amendment.
<PAGE>
CROSS REFERENCE SHEET
(as required by Rule 404(c))
N-1A Item No. Location in Prospectuses
(Caption)
PART A
Item 1. Front and Back Cover Pages..........Cover Pages
Item 2. Risk/Return Summary:
Investments, Risks, and
Performance.........................Risk/Return
Summary
Item 3. Risk/Return Summary:
Fee Table...........................Risk/Return
Summary
Item 4. Investment Objectives,
Principal Investment Strategies,
And Related Risks...................Other
Information
About the
Fund's
Objectives,
Strategies, and
Risks
Item 5. Management's Discussion of
Fund Performance....................Not Applicable
Item 6. Management, Organization,
And Capital Structure...............Management of
the Fund
Item 7. Shareholder Information.............Purchase and
Sale of Shares
Item 8. Distribution Arrangements...........Distribution
Arrangements
Item 9. Financial Highlights
Information.........................Financial
Highlights
PART B Location in Statements
Of Additional Information
(Caption)
Item 10. Cover Page and
Table of Contents...................Cover Page
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Item 11. Fund History........................Management of
the Fund;
General
Information
Item 12. Description of the Fund and
Its Investments and Risks...........Description of
the Fund
Item 13. Management of the Fund .............Management of
the Fund
Item 14. Control Persons and
Principal Holders of
Securities .........................Not Applicable
Item 15. Investment Advisory and
Other Services......................Management of
the Fund,
Expenses of the
Fund, General
Information
Item 16. Brokerage Allocation and
Other Practices.....................Portfolio
Transactions
Item 17. Capital Stock and Other
Securities..........................General
Information
Item 18. Purchase, Redemption and Pricing
of Shares...........................Purchase of
Shares;
Redemption and
Repurchase of
Shares;
Dividends,
Distributions
and Taxes;
Shareholder
Services
Item 19. Taxation of the Fund................Description of
the Fund,
Dividends,
Distributions
and Taxes
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Item 20. Underwriters........................General
Information
Item 21. Calculation of Performance
Data................................General
Information
Item 22. Financial Statements................Financial
Statements and
Report of
Independent
Auditors
<PAGE>
ALLIANCE SELECT
INVESTOR SERIES
PREMIER
PORTFOLIO
PROSPECTUS and APPLICATION
MARCH 1, 1999
The Securities and Exchange Commission has not approved
or disapproved these securities or passed upon the
adequacy of this prospectus. Any representation
to the contrary is a criminal offense.
<PAGE>
TABLE OF CONTENTS
PAGE
RISK/RETURN SUMMARY
Summary of Principal Risks
Principal Risks of the Fund
EXPENSE INFORMATION
GLOSSARY
DESCRIPTION OF THE FUND
Investment Objectives and Policies
Description of Investment Practices
Additional Risk Considerations
MANAGEMENT OF THE FUND
PURCHASE AND SALE OF SHARES
How The Fund Values Its Shares
How To Buy Shares
How to Exchange Shares
How To Sell Shares
DIVIDENDS, DISTRIBUTIONS AND TAXES
DISTRIBUTION ARRANGEMENTS
GENERAL INFORMATION
FINANCIAL HIGHLIGHTS
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The Fund's investment adviser is Alliance Capital Management
L.P., a global investment manager providing diversified services
to institutions and individuals through a broad line of
investments including more than 100 mutual funds. Since 1971,
Alliance has earned a reputation as a leader in the investment
world with over $ __ billion in assets under management as of
December 31, 1998. Alliance provides investment management
services to employee benefit plans for __ of the FORTUNE 100
companies.
RISK/RETURN SUMMARY
The following is a summary of certain key information about the
Alliance Select Investor Series Premier Portfolio. You will find
additional information about the Fund, including a detailed
description of the risks of an investment in the Fund, after this
summary. Please be sure to read the more complete description of
the Fund following this summary, including the risks associated
with investing in the Fund, BEFORE you invest.
Objective: The Fund's investment objective is to seek long-term
growth of capital through all market conditions.
Principal Investment Strategies: The Fund invests primarily in a
non-diversified Fund of equity securities of large, intensively
researched, high-quality companies that are judged likely to
achieve superior earnings growth. To take advantage of
investment opportunities in both rising and falling markets and
in an effort to enhance returns, the Fund may make substantial
use of short-selling and other investment practices, such as
options, futures, forwards, and leverage. In contrast to most
equity funds, the Fund focuses on a relatively small number of
intensively researched companies. Alliance selects the Fund's
investments from a research universe of more than 600 companies
that have strong management, superior industry positions,
excellent balance sheets, and superior earnings growth prospects.
Normally, the Fund invests in about 40-50 companies, with the 25
most highly regarded of these companies usually constituting
substantially all of the Fund's net assets. 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. The Fund also may
invest up to 35% of its assets in foreign securities and up to
20% of its assets in convertible securities.
Principal Risks: The value of an investment in the Fund changes
with the values of the Fund's investments. Many factors can
affect those values. In this summary, we describe the principal
risks that may affect the Fund's portfolio as a whole. The Fund
3
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could be subject to additional principal risks because the types
of investments made by the Fund can change over time. This
Prospectus has additional descriptions of investments that appear
in bold type in the discussions under "Additional Investment
Practices" or "Risk Considerations." These sections also include
more information about the Fund, its investments, and related
risks. 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.
-- Market Risk This is the risk that the value of the
Fund's investments will fluctuate as the stock or bond
markets fluctuate and that prices overall will decline
over short or longer-term periods.
-- Credit Risk This is the risk that the issuer of a
security will be unable or unwilling to make timely
payments of interest or principal, or to otherwise honor
its obligations. The degree of risk for a particular
security may be reflected in its credit rating.
-- Interest Rate This is the risk that changes in interest
rates will affect the value of a Fund's investments in
income-producing or fixed-income or debt securities.
Increases in interest rates may cause the value of a
Fund's investments to decline.
-- Derivative and Leverage Risk The Fund may make
substantial use of derivatives and employ specialized
trading techniques such as short sales, options,
futures, forwards, and leverage to increase its exposure
to certain selected securities. Alliance employs these
techniques speculatively to enhance returns and not
merely as hedging tools. These techniques are riskier
than many investment strategies and will result in
greater volatility for the Fund, particularly in periods
of market declines.
-- Foreign Risk This is the risk of investments in issuers
located in foreign countries. Investments in foreign
securities may experience more rapid and extreme changes
in value than investments in securities of U.S.
companies. This is because the securities markets of
many foreign countries are relatively small, with a
limited number of companies representing a small number
of industries. Additionally, foreign securities issuers
are usually not subject to the same degree of regulation
as U.S. issuers. Reporting, accounting, and auditing
standards of foreign countries differ, in some cases
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significantly, from U.S. standards. Also,
nationalization, expropriation or confiscatory taxation,
currency blockage, or political changes or diplomatic
developments could adversely affect the Fund's
investments in a foreign country. In the event of
nationalization, expropriation, or other confiscation,
the Fund could lose its entire investment.
-- Currency Risk This is the risk that fluctuations in the
exchange rates between the U.S. dollar and foreign
currencies may negatively affect the value of the Fund's
investments.
-- Management Risk The Fund is subject to management risk
because it is an actively managed investment Fund.
Alliance will apply its investment techniques and risk
analyses in making investment decisions for the Fund,
but there is no guarantee that its techniques will
produce the intended result.
-- Focused Fund Risk This is the risk associated with
investments in a limited number of companies. These
investments may have more risk because changes in the
value of a single security may have a more significant
effect, either negative or positive, on the Fund's net
asset value. Similarly, the Fund may have more risk
because it is "non-diversified" meaning that it invests
its assets in a smaller number of companies than many
other Funds.
Other important things for you to note:
-- You may gain or lose money by investing in the Fund.
-- An investment in the Fund is not a deposit in a bank and
is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
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EXPENSE INFORMATION
This table describes the fees and expenses that you may pay if
you buy and hold shares of the Fund.
SHAREHOLDER TRANSACTION EXPENSES (fees paid directly from your
investment)
Class A Class B Class C
Shares Shares Shares
Maximum Sales Charge (Load) 4.25%(a) None None
Imposed on Purchases (as a
percentage of offering price)
Maximum Deferred Sales Charge None(a) 4.0% during 1.0% during
(Load) (as a percentage of the 1st year, the 1st
original purchase price or decreasing year, 0%
redemption proceeds, 1.0% thereafter
whichever is lower) annually to
0% after
the 4th year*
Exchange Fee None None None
(*) Class B Shares of every Fund automatically convert to Class A
Shares after 8 years.
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from
Fund assets) and EXAMPLE
The example is to help you compare the cost of investing in the
Fund with the cost of investing in other Funds. It assumes that
you invest $10,000 in the Fund for the time periods indicated and
then redeem all of your shares at the end of those periods. It
also assumes that your investment has a 5% return each year and
that the Fund's operating expenses stay the same. Your actual
costs may be higher or lower.
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Operating Expenses Examples
Class Class Class Class Class Class Class Class
A B C A B+ B++ C+ C++
----- ----- ----- ----- ----- ----- ----- -----
Management fees (a) 1.10% 1.10% 1.10% After
Rule 12b-1 fees .30% 1.00% 1.00% 1 Yr. $ $ $ $ $
Other expenses 1.10% 1.10% 1.10%
----- ----- -----
After
Total Fund 3 Yrs. $ $ $ $ $
operating 2.50% 3.20% 3.20%
expenses (b) ===== ===== ===== After
5 Yrs. $ $ $ $ $
After
10 Yrs. $ $ $ $ $
+ Assumes redemption at the end of period.
++ Assumes no redemption at end of period.
(a) The basic management fee is 1.10%, but it may range from .80%
to 1.40% depending on the Fund's performance.
(b) Through July 31, 1999, Alliance has agreed to waive a portion
of its management fee or reimburse a portion of the Fund's
operating expenses so that the Fund's total operating
expenses will not exceed those shown in the table. The Fund
may reimburse Alliance for these fee waivers and expense
reimbursements through October 31, 2001. These
reimbursements will not occur on an annualized basis if they
would cause the Fund's total operating expenses on an
annualized basis to exceed the amounts shown in the table or
the Fund's initial organizational and operating expenses.
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GLOSSARY
This Prospectus uses the following terms.
Types of Securities
Convertible securities are fixed-income securities that are
convertible into common stock.
Debt securities are bonds, debentures, notes, bills, loans, other
direct debt instruments, and other fixed, floating and variable
rate debt obligations, but do not include convertible securities.
Equity securities are (i) common stocks, partnership interests,
business trust shares, and other equity ownership interests in
business enterprises, and (ii) securities convertible into, and
rights and warrants to subscribe for the purchase of, such
stocks, shares, and interests.
Fixed-income securities are debt securities and dividend-paying
preferred stocks, and include floating rate and variable rate
instruments.
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.
Rule 144A securities are securities that may be resold pursuant
to Rule 144A under the Securities Act of 1933.
U.S. Government securities are securities issued or guaranteed by
the United States Government, its agencies or instrumentalities.
Rating Agencies
Moody's is Moody's Investors Service, Inc.
S&P is Standard & Poor's Rating Services.
Other
1940 Act is the Investment Company Act of 1940, as amended.
Code is the Internal Revenue Code of 1986, as amended.
Commission is the Securities and Exchange Commission.
Exchange is the New York Stock Exchange.
Securities Act is the Securities Act of 1933, as amended.
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DESCRIPTION OF THE FUND
This section of the Prospectus provides a more complete
description of the principal investment objectives, strategies,
and risks of the Fund. Of course, there can be no assurance that
the Fund will achieve its investment objective.
Please note:
-- Additional discussion of the Fund's investments,
including the risks of the investments that appear in
bold type can be found in the discussion under
ADDITIONAL INVESTMENT PRACTICES following this section.
-- The description of the Fund's risks may include risks
discussed in the RISK/RETURN SUMMARY above. Additional
Information about risks of investing in the Fund can be
found in the discussions under ADDITIONAL RISK
CONSIDERATIONS.
-- Additional descriptions of the Fund's strategies and
investments, as well as other strategies and investments
not described below, may be found in the Fund's
Statement of Additional Information or SAI.
-- Except as noted, (i) the Fund's investment objectives
are "fundamental" and cannot be changed without a
shareholder vote and (ii) the Fund's investment policies
are not fundamental and thus can be changed without a
shareholder vote.
INVESTMENT OBJECTIVE
The Fund's investment objective is to seek long-term growth of
capital through all market conditions.
HOW THE FUND PURSUES ITS OBJECTIVE
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 are judged likely to achieve superior earnings
growth. As a matter of fundamental policy, the Fund invests at
least 65% of its assets in these type of companies. 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 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,
9
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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 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.
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. 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 it
follows, an in-depth understanding of the products, services,
markets, and competition of these companies, and a good knowledge
of these companies' managements.
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. Alliance's
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research emphasizes identifying 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 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 also may:
-- engage in short sales of securities with respect to up
to 30% of its total assets;
-- invest up to 20% of its assets in convertible
securities;
-- invest up to 5% of its assets in rights or warrants;
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-- 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;
-- 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;
-- 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;
-- purchase and write put 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;
-- enter into reverse repurchase agreements and dollar
rolls;
-- enter into standby commitment agreements;
-- enter into currency swaps for hedging purposes; and
-- make secured loans of its securities of up to 30% of its
total assets.
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ADDITIONAL INVESTMENT PRACTICES
This section describes the investment practices of the Fund and
risks associated with these practices. Unless otherwise noted,
the Fund's use of any of these practices was specified in the
previous section.
Convertible Securities. Prior to conversion, convertible
securities have the same general characteristics as non-
convertible debt securities, which 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 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.
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 swap counterparty
will default on its contractual delivery obligations. The Fund
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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 counterparty 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.
Forward Commitments. Forward commitments for the purchase or
sale of securities may include purchases on a "when-issued" basis
or purchases or sales on a "delayed delivery" basis. In some
cases, a forward commitment may be conditioned upon the
occurrence of a subsequent event, such as approval and
consummation of a merger, corporate reorganization or debt
restructuring (i.e., a "when, as and if issued" trade).
When forward commitment transactions are negotiated, the price is
fixed at the time the commitment is made, but delivery and
payment for the securities take place at a later date. Normally,
the settlement date occurs within two months after the
transaction, but settlements beyond two months may be negotiated.
Securities purchased or sold under a forward commitment are
subject to market fluctuation, and no interest or dividends
accrue to the purchaser prior to the settlement date.
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 the transactions would be more
than 30% 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.
Forward Foreign Currency Exchange Contracts. The Fund may
purchase or sell forward foreign currency exchange contracts to
minimize the risk of 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.
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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.
Illiquid Securities. The Fund may invest up to 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
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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 the Fund's investments in such
securities. To the extent permitted by applicable law, Rule 144A
securities will not be treated as "illiquid" for purposes of the
foregoing restriction so long as such securities meet liquidity
guidelines established by 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. There may, however, be contractual
restrictions on resale of securities.
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 will consider all relevant facts
and circumstances, including the creditworthiness of the
borrower. While securities are on loan, the borrower will pay
the Fund any income from the securities. The Fund may invest any
cash collateral in portfolio securities and earn additional
income, or receive an agreed-upon amount of income from a
borrower who has delivered equivalent collateral. The Fund will
have the right to regain record ownership of loaned securities 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.
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
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security upon conversion or exchange of another security it
holds, or holds a call option on the underlying security with an
exercise price equal to or less than that of the call option it
has written. A put option written by the Fund is "covered" if
the Fund holds a put on the underlying securities with an
exercise price equal to or greater than that of the put option it
has written.
A call option is for cross-hedging purposes if the Fund does not
own the underlying security and is designed to provide a hedge
against a decline in value in another security which the Fund
owns or has the right to acquire. The Fund may write call
options for cross-hedging purposes. The Fund would write a call
option for cross-hedging purposes, instead of writing a covered
call option, when the premium to be received from the cross-hedge
transaction would exceed that which would be received from
writing a covered call option, while at the same time achieving
the desired hedge.
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. Entering into a
closing transaction (i.e., by disposing of the option prior to
its exercise) could reduce these risks. 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. 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.
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Options on Securities Indices. An option on a securities index
is similar to an option on a security except that, rather than
the right to take or make delivery of a security at a specified
price, an option on a securities index gives the holder the right
to receive, upon exercise of the option, an amount of cash if the
closing level of the chosen index is greater than (in the case of
a call) or less than (in the case of a put) the exercise price of
the option.
Futures Contracts and Options on Futures Contracts. A "sale" of
a futures contract means the acquisition of a contractual
obligation to deliver the securities or foreign 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.
The Fund will purchase options on futures contracts written or
purchased that are traded on U.S. or foreign exchanges or over-
the-counter. These investment techniques will be used only to
hedge against anticipated future changes in market conditions and
interest or exchange rates which otherwise might either adversely
affect the value of the Fund's portfolio securities or adversely
affect the prices of securities which the Fund intends to
purchase at a later date.
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.
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.
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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.
Reverse Repurchase Agreements and Dollar Rolls. 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. 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 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.
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.
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.
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. Reverse repurchase
agreements and dollar rolls are speculative techniques and are
considered borrowings by the Funds.
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Rights and Warrants. The Fund will invest in rights or warrants
only if the underlying equity securities themselves are deemed
appropriate by Alliance for inclusion in the Fund's portfolio.
Rights and warrants entitle the holder to buy equity securities
at a specific price for a specific period of time. Rights are
similar to warrants except that they have a substantially shorter
duration. Rights and warrants may be considered more speculative
than certain other types of investments in that they do not
entitle a holder to dividends or voting rights with respect to
the underlying securities nor do they represent any rights in the
assets of the issuing company. The value of a right or warrant
does not necessarily change with the value of the underlying
securities, 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 of these factors.
If the market price of the underlying security is below the
exercise price of the warrant on the expiration date, the warrant
will expire worthless. Moreover, a right or warrant ceases to
have value if it is not exercised prior to the expiration date.
Short Sales. 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. The Fund may be required to
pay a fee to borrow the security and to pay over to the lender
any payments received on the security.
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 capital gain. Although
the Fund's gain is limited by the price at which it sold the
security short, its potential loss is 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.
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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.
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
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<PAGE>
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 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. 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.
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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. As described above, however, 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.
Future Developments. The Fund may, following written notice to
its shareholders, take advantage of other investment practices
that are not currently contemplated for use by the Fund or are
not available but may yet be developed, to the extent such
investment practices are consistent with the Fund's investment
objective and legally permissible for the Fund. Such investment
practices, if they arise, may involve risks that exceed those
involved in the activities described above.
General. The successful use of the investment practices
described above draws upon Alliance's special skills and
experience 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 the transactions or may
realize losses and thus be in a worse position than if such
strategies had not been used. Unlike many exchange-traded
futures contracts and options on futures contracts, there are no
daily price fluctuation limits for certain options 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
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developing, and there is no public market for forward contracts.
It is impossible to predict the amount of trading interest that
may exist in various types of futures contracts, options, and
forward contracts. If a secondary market does not exist for an
option purchased or written by 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.
Portfolio Turnover. The Fund's portfolio turnover rate is
included in the Financial Highlights section. The Fund is
actively managed and, in some cases in response to market
conditions, a Fund's portfolio turnover may exceed 100%. A higher
rate of portfolio turnover increases brokerage and other
expenses, 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, which when distributed,
are taxable to shareholders.
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.
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ADDITIONAL RISK CONSIDERATIONS
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 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.
Borrowings may involve additional risk to the Fund because the
interest expense may be greater than the income from or
appreciation of the securities carried by the borrowings and the
value of the securities carried may decline below the amount
borrowed.
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 the Fund result in leveraging of the Fund's shares
of common stock. Utilization of leverage, which is usually
considered speculative, involves certain risks to the Fund's
shareholders. These include a higher volatility of the net asset
value of the Fund's shares of common stock and the relatively
greater effect on the net asset value of the shares. So long as
the 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 the 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, the
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Fund's use of leverage would result in a lower rate of return
than if the 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 the 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 the 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 includes
foreign securities, may experience greater price volatility and
significantly lower liquidity than a portfolio invested solely in
equity securities of U.S. companies. These markets may be
subject to greater influence by adverse events generally
affecting the market, and by large investors trading significant
blocks of securities, than is usual in the United States.
Securities 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 of other restrictions
on investment. Investing in local markets may require the Fund
to adopt special procedures, that may involve additional costs to
the Fund. These factors may affect the liquidity of the Fund's
investments in any country 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.
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Issuers of securities in foreign jurisdictions are generally not
subject to the same degree of regulation as are U.S. issuers with
respect to such matters as insider trading rules, restrictions on
market manipulation, shareholder proxy requirements, and timely
disclosure of information. The reporting, accounting, and
auditing standards of foreign countries may differ, in some cases
significantly, from U.S. standards in important respects and less
information may be available to investors in foreign securities
than to investors in U.S. securities. Substantially less
information is publicly available about certain non-U.S. issuers
than is available about U.S. issuers.
The economies of individual foreign countries may differ
favorably or unfavorably from the U.S. economy in such respects
as growth of gross domestic product or gross national product,
rate of inflation, capital reinvestment, resource self-
sufficiency, and balance of payments position. Nationalization,
expropriation or confiscatory taxation, currency blockage,
political changes, government regulation, political or social
instability, or diplomatic developments could affect adversely
the economy of a foreign country and the Fund's investments. In
the event of expropriation, nationalization or other
confiscation, the Fund could lose its entire investment in the
country involved. In addition, laws in foreign countries
governing business organizations, bankruptcy and insolvency may
provide less protection to security holders, such as, the Fund
than that provided by U.S. laws.
Year 2000 and Euro. Many computer systems and applications in
use today process transactions using two-digit date fields for
the year of the transaction, rather than the full four digits.
If these systems are not modified or replaced, transactions
occurring after 1999 could be processed as year "1900", which
could result in processing inaccuracies and computer system
failures. This is commonly known as the Year 2000 problem. In
addition to the Year 2000 problem, the European Economic and
Monetary Union has established a single currency, the Euro
Currency ("Euro") that will replace the national currency of
certain European countries effective January 1, 1999. Computer
systems and applications must be adapted in order to be able to
process Euro sensitive information accurately beginning in 1999.
Should any of the computer systems employed by the Funds' major
service providers fail to process Year 2000 or Euro related
information properly, that could have a significant negative
impact on the Funds' operations and the services that are
provided to the Funds' shareholders. In addition, to the extent
that the operations of issuers of securities held by the Funds
are impaired by the Year 2000 problem or the Euro, or prices of
securities held by the Funds decline as a result of real or
perceived problems relating to the Year 2000 or the Euro, the
value of the Funds' shares may be materially affected.
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With respect to the Year 2000, the Funds have been advised that
Alliance, each Fund's investment adviser, Alliance Fund
Distributors, Inc, ("AFD"), each Fund's principal underwriter,
and Alliance Fund Services, Inc. ("AFS"), each Fund's registrar,
transfer agent and dividend disbursing agent (collectively,
"Alliance") began to address the Year 2000 issue several years
ago in connection with the replacement or upgrading of certain
computer systems and applications. During 1997, Alliance began a
formal Year 2000 initiative, which established a structured and
coordinated process to deal with the Year 2000 issue. Alliance
reports that it has completed its assessment of the Year 2000
issues on its domestic and international computer systems and
applications. Currently, management of Alliance expects that the
required modifications for the majority of its significant
systems and applications that will be in use on January 1, 2000,
will be completed and tested by the end of 1998. Full
integration testing of these systems and testing of interfaces
with third-party suppliers will continue through 1999. At this
time, management of Alliance believes that the costs associated
with resolving this issue will not have a material adverse effect
on its operations or on its ability to provide the level of
services it currently provides to the Funds.
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.
With respect to the Euro, the Funds have been advised that
Alliance has established a project team to assess changes that
will be required in connection with the introduction of the Euro.
Alliance reports that its project team has assessed all systems,
including those developed or managed internally, as well as those
provided by vendors, in order to determine the modifications that
will be required to process accurately transactions denominated
in Euro after 1998. At this time, management of Alliance expects
28
<PAGE>
that the required modifications for the introduction of the Euro
will be completed and tested before the end of 1998. Management
of Alliance believes that the costs associated with resolving
this issue will not have a material adverse effect on its
operations or on its ability to provide the level of services it
currently provides to the Funds.
The Funds and Alliance have been advised by the Funds' Custodians
that they are also in the process of reviewing their systems with
the same goals. As of the date of this prospectus, the Funds and
Alliance have no reason to believe that the Custodians will be
unable to achieve these goals.
29
<PAGE>
MANAGEMENT OF THE FUND
INVESTMENT ADVISER AND FUND MANAGER
The Fund's Adviser is Alliance Capital Management, L.P., 1345
Avenue of the Americas, New York, New York 10105. Alliance is a
leading international investment adviser supervising client
accounts with assets as of December 31, totaling more than $___
billion (of which approximately $___ billion represented the
assets of investment companies). Alliance's clients are primarily
major corporate employee benefit funds, public employee
retirement systems, investment companies, foundations, and
endowment funds. The __ registered investment companies managed
by Alliance, with more than ___ separate portfolios, currently
have over ____ million shareholders. As of December 31, Alliance
was retained as an investment manager for employee benefit plan
assets of __ of the FORTUNE 100 companies.
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(R) 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(R) 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
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<PAGE>
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.
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.
The following table illustrates the full range of permitted
increases or decreases to the Basic Fee.
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Percentage Point Difference*
Between Performance of
Class A Shares and Russell Adjustment to Annual Fee
1000(R) Growth Index ** 1.10% Basic Fee Rate as Adjusted
______________________________ _________________ ________________
+8 +.30% 1.40%
+7 +.25% 1.35%
+6 +.20% 1.30%
+5 +.15% 1.25%
+4 +.10% 1.20%
+3 +.05% 1.15%
+/-2 0 1.10%
-3 -.05% 1.05%
-4 -.10% 1.00%
-5 -.15% .95%
-6 -.20% .90%
-7 -.25% .85%
-8 -.30% .80%
* Fractions of a percentage point will be rounded to the nearer
whole point (to the higher whole point if exactly one-half).
** Measured over the performance period, which will be a twelve-
month period from 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 ("NAV") of a Class A
share of the Fund and (ii) the sum of (a) the closing NAV 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
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<PAGE>
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 __. The
S&P 500 is a widely recognized, unmanaged index of market
activity based upon the aggregate performance of a selected Fund
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 company,
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<PAGE>
All-Market Advantage, unlike an open-end investment company such
as the Fund, is not required to manage its Fund 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 Fund 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 December
31, 1998, the assets in All-Market Advantage totaled
approximately $91 million.
Annualized Rates of Return
Periods Ended December 31, 1998
- ----------------------------------------------------------------
All-Market 1 Year 3 Years Inception*
Advantage/Benchmarks
- ----------------------------------------------------------------
Alliance All-Market % % %
Advantage Fund, Inc.
Russell 1000(R) Growth Index % % %
Standard & Poor's 500 % % %
Composite Stock Price Index
34
<PAGE>
Cumulative Rates of Return
Periods Ended December 31, 1998
- ----------------------------------------------------------------
All-Market 1 Year 3 Years Inception*
Advantage/Benchmarks
- ----------------------------------------------------------------
Alliance All-Market % % %
Advantage Fund, Inc.
Russell 1000(R) Growth Index % % %
Standard & Poor's % % %
500 Composite
Stock Price Index
* 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.
35
<PAGE>
PURCHASE AND SALE OF SHARES
How the Fund Values Its Shares
The Fund's net asset value or NAV is calculated at 4 p.m. Eastern
time each day the Exchange is open for business. To calculate
NAV, the Fund's assets are valued and totaled, liabilities are
subtracted, and the balance, called net assets, is divided by the
number of shares outstanding. The Fund values its securities at
their current market value determined on the basis of market
quotations, or, if such quotations are not readily available,
such other methods as the Fund's directors believe accurately
reflect fair market value.
Your order for purchase, sale, or exchange of shares is priced at
the next NAV calculated after your order is accepted by the Fund.
Your purchase of Fund shares may be subject to an initial sales
charge. Sales of Fund shares may be subject to a contingent
deferred sales charge or CDSC. See the next section of this
Prospectus, DISTRIBUTION ARRANGEMENTS, for details.
How to Buy Shares
You may purchase the Fund's shares through broker-dealers, banks,
or other financial intermediaries. You also may purchase shares
directly from the Fund's principal underwriter, Alliance Fund
Distributors, Inc., or AFD.
Minimum investment amounts are:
-- Initial $50,000
-- Retirement Plans (Initial) $10,000
For investments by registered representatives of broker-dealers,
the minimum initial investment is $10,000. If you are an
existing Fund shareholder, you may purchase shares by electronic
funds transfer in amounts not exceeding $500,000 if you have
completed the appropriate section of the Shareholder Application.
Call 800-221-5672 to arrange a transfer from your bank account.
The Fund is required to withhold 31% of taxable dividends,
capital gains distributions, and redemptions paid to shareholders
who have not provided the Fund with their certified taxpayer
identification number. To avoid this, you must provide your
correct Tax Identification Number (Social Security Number for
most investors) on your account application.
The Fund may refuse any order to purchase shares. In this
regard, the Fund reserves the right to restrict purchases of
shares (including through exchanges) when they appear to evidence
a pattern of frequent purchases and sales made in response to
short-term considerations.
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<PAGE>
How to Exchange Shares
You may exchange your Fund shares 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 next-determined NAV, without sales or service
charges. You may request an exchange by mail or telephone. You
must call by 4:00 p.m. Eastern time to receive that day's NAV.
The Fund may change, suspend, or terminate the exchange service
on 60 days' written notice.
How to Sell Shares
You may "redeem" your shares (i.e., sell your shares to a Fund)
on any day the NYSE is open, either directly or through your
financial intermediary. Your sales price will be the next-
determined NAV, less any applicable CDSC, after the Fund receives
your sales request in proper form. Normally, proceeds will be
sent to you within 7 days. If you recently purchased your shares
by check or electronic funds transfer, you cannot redeem any
portion of it until the Fund is reasonably satisfied that the
check or electronic funds transfer has been collected (which may
take up to 15 days).
- -- Selling Shares Through Your Broker
Your broker must receive your sales request by 4:00 p.m., Eastern
time, and submit it to the Fund by 5:00 p.m., Eastern time, for
you to receive that day's NAV, less any applicable CDSC. Your
broker is responsible for submitting all necessary documentation
to the Fund and may charge you for this service.
- -- Selling Shares Directly to the Fund
By Mail:
-- Send a signed letter of instruction or stock power,
along with certificates, to:
Alliance Fund Services
P.O. Box 1520
Secaucus, N.J. 07906-1520
800-221-5672
-- For your protection, a bank, a member firm of a national
stock exchange, or other eligible guarantor institution,
must guarantee signatures. Stock power forms are
available from your financial intermediary, AFS, and
many commercial banks. Additional documentation is
required for the sale of shares by corporations,
intermediaries, fiduciaries, and surviving joint owners.
If you have any questions about these procedures,
contact AFS.
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<PAGE>
By Telephone:
-- You may redeem your shares for which no stock
certificates have been issued by telephone request.
Call AFS at 800-221-5672 with instructions on how you
wish to receive your sale proceeds.
-- A telephone redemption request must be received by
4:00 p.m. Eastern time for you to receive that day's
NAV, less any applicable CDSC.
-- If you have selected electronic funds transfer in your
Shareholder Application, the redemption proceeds may be
sent directly to your bank. Otherwise, the proceeds
will be mailed to you.
-- Redemption requests by electronic funds transfer
may not exceed $100,000 per day and redemption
requests by check cannot exceed $50,000 per day.
-- Telephone redemption is not available for shares
held in nominee or "street name" accounts,
retirement plan accounts, or shares held by a
shareholder who has changed his or her address of
record within the previous 30 calendar days.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Dividends and Distributions
The Fund's income dividend and capital gains distribution, if
any, declared by the Fund on its outstanding shares will, at the
election of each shareholder, be paid in cash or in additional
shares of the same class of shares of the Fund. If paid in
additional shares, the shares will have an aggregate NAV as of
the close of business on the day following the declaration date
of the dividend or distribution equal to the cash amount of the
dividend or distribution. You may make an election to receive
dividends and distributions in cash or in shares at the time you
purchase shares. Your election can be changed at any time prior
to a record date for a dividend. There is no sales or other
charge in connection with the reinvestment of dividends or
capital gains distributions. Cash dividends may be paid in
check, or at your election, electronically via the ACH network.
There is no sales or other charge on the reinvestment of Fund
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 the dividend or
38
<PAGE>
distribution. Thereafter, unless you otherwise specify, you will
be deemed to have elected to reinvest all subsequent dividends
and distributions in shares of the Fund.
The Fund expects that distributions will consist either of net
income or long-term capital gains. For federal income tax
purposes, the Fund's dividend distributions of net income (or
short-term taxable gains) will be taxable to you as ordinary
income. Any capital gains distributions may be taxable to you as
capital gains. The Fund's distributions also may be subject to
certain state and local taxes.
While it is the intention of the Fund to distribute to its
shareholders substantially all of each fiscal year's net income
and net realized capital gains, if any, the amount and time of
any dividend or distribution will depend on the realization by
the Fund of income and capital gains from investments. There is
no fixed dividend rate and there can be no assurance that the
Fund will pay any dividends or realize any capital gains. The
final determination of the amount of the Fund's return of capital
distributions for the period will be made after the end of each
calendar year.
Investment income received by the Fund from sources within
foreign countries may be subject to foreign income taxes withheld
at the source. To the extent that the Fund is liable for foreign
income taxes withheld at the source, the Fund intends, if
possible, to operate so as to meet the requirements of the Code
to "pass through" to the Fund's shareholders credits for foreign
income taxes paid (or to permit shareholders to claim a deduction
for such foreign taxes), but there can be no assurance that the
Fund will be able to do so. Furthermore, a shareholder's ability
to claim a foreign tax credit or deduction in respect of foreign
taxes paid by the Fund may be subject to certain limitations
imposed by the Code, as a result of which a shareholder may not
be permitted to claim a full credit or deduction for the amount
of such taxes.
Under certain circumstances, if the Fund realizes losses (e.g.,
from fluctuations in currency exchange rates) after paying a
dividend, all or a portion of the dividend may subsequently be
characterized as a return of capital. Returns of capital are
generally nontaxable, but will reduce a shareholder's basis in
shares of the Fund. If that basis is reduced to zero (which
could happen if the shareholder does not reinvest distributions
and returns of capital are significant), any further returns of
capital will be taxable as capital gain. See the Fund's SAI for
a further explanation of these tax issues.
If you buy shares just before the Fund deducts a distribution
from its net asset value, you will pay the full price for the
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<PAGE>
shares and then receive a portion of the price back as a taxable
distribution.
The sale or exchange of Fund shares is a taxable transaction for
Federal income tax purposes.
Each year shortly after December 31, the Fund will send you tax
information stating the amount and type of all its distributions
for the year. Consult your tax adviser about the federal, state,
and local tax consequences in your particular circumstances.
DISTRIBUTION ARRANGEMENTS
Share Classes. The Fund offers three classes of shares.
Class A Shares---Initial Sales Charge Alternative
You can purchase Class A shares at NAV plus an initial sales
charge, as follows:
Initial Sales Charge
as % of Commission to
Amount Net Amount as % of Dealer/Agent as %
Purchased Invested Offering Price of Offering Price
- --=------- ---------- -------------- -----------------
Less than $100,000 4.44% 4.25% 4.00%
$100,000 to less
than $250,000 3.36 3.25 3.00
$250,000 to less
than $500,000 2.30 2.25 2.00
$500,000 to less
than $1,000,000 1.78 1.75 1.50
You pay no initial sales charge on purchases of Class A Shares in
the amount of $1,000,000, but may pay a 1% CDSC if you redeem
your shares within 1 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 under 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 the Fund's SAI for additional information about
these options.
Class B Shares--Deferred Sales Charge Alternative
You can purchase Class B Shares at NAV without an initial sales
charge. The Fund will thus receive the full amount of your
purchase. Your investment, however, will be subject to a CDSC if
you redeem shares within 4 years of purchase. The CDSC varies
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<PAGE>
depending of the number of years you hold the shares. The CDSC
amounts are:
Years Since Purchase CDSC
First 4.0%
Second 3.0%
Third 2.0%
Fourth 1.0%
Fifth None
If you exchange your shares for the Class B shares of another
Alliance Mutual Fund, the CDSC also will apply to those Class B
shares. The CDSC period begins with the date of your original
purchase, not the date of exchange for the other Class B shares.
The Fund's Class B shares purchased for cash automatically
convert to Class A shares eight years after the end of the month
of your purchase. If you purchase shares by exchange for the
Class B shares of another Alliance Mutual Fund, the conversion
period runs from the date of your original purchase.
Class C Shares--Asset-Based Sales Charge Alternative
You can purchase shares at NAV without an initial sales charge.
The Fund will thus receive the full amount of your purchase.
Your investment, however, will be subject to a 1% CDSC if you
redeem your shares within 1 year. If you exchange your shares
for the Class C shares of another Alliance Mutual Fund, the 1%
CDSC also will apply to those Class C shares. The 1-year period
for the CDSC begins with the date of your original purchase, not
the date of the exchange for the other Class C shares.
Class C shares do not convert to any other class of shares of the
Fund.
Asset-based Sales Charge or Rule 12b-1 Fees. The Fund has
adopted a plan under Commission Rule 12b-1 that allows the Fund
to pay asset-based sales charges or distribution and service fees
for the distribution and sale of its shares. The amount of these
fees for each class of the Fund's shares is:
RULE 12B-1 FEE (AS A PERCENT OF
AGGREGATE AVERAGE DAILY NET ASSETS)
Class A .30%
Class B 1.00%
Class C 1.00%
Because these fees are paid out of the Fund's assets on an on-
going basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales
fees. Class B and Class C shares are subject to higher
41
<PAGE>
distribution fees than Class A shares (Class B shares are subject
to these higher fees 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 and Class C shares pay correspondingly
lower dividends and may have a lower net asset value than Class A
shares.
Choosing a Class of Shares. 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 purchasing Class A shares. If you are making a smaller
investment, you might consider purchasing 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 no CDSC as
long as the shares are held for one year or more. 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.
You should consult your financial agent to assist in choosing a
class of Fund shares.
Application of the CDSC. The CDSC is applied to the lesser of the
original cost of shares being redeemed or NAV at the time of
redemption (or, as to Fund shares acquired through an exchange,
the cost of the Alliance Mutual Fund shares originally purchased
for cash). Shares obtained from dividend or distribution
reinvestment are not subject to the CDSC. The Fund may waive the
CDSC on redemptions of shares following the death or disability
of a shareholder, to meet the requirements of certain qualified
retirement plans, or under a monthly, bimonthly, or quarterly
systematic withdrawal plan. See the Fund's SAI or further
information about CDSC waivers.
Other. 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 a 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 for the sale of shares of the
Fund. Such additional amounts may be utilized, in whole or in
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<PAGE>
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 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.
Shares obtained from dividend or distribution reinvestment are
not subject to the CDSC. The CDSC is deducted from the amount of
the redemption and is paid to AFD. The CDSC will be waived on
redemptions of shares following the death or disability of a
shareholder, to meet the requirements of certain qualified
retirement plans or pursuant to a monthly, bimonthly or quarterly
systematic withdrawal plan.
GENERAL INFORMATION
Under unusual circumstances, the Fund may suspend redemptions or
postpone payment for up to seven days or longer, as permitted by
federal securities law. The Fund reserves the right to close an
account that through redemption has remained below $200 for 90
days. Shareholders will receive 60 days' written notice to
increase the account value before the account is closed.
During drastic economic or market developments, you might have
difficulty in reaching AFS by telephone, in which event you
should issue written instructions to AFS. AFS is not responsible
for the authenticity of telephone requests to purchase, sell, or
exchange shares. AFS will employ reasonable procedures to verify
that telephone requests are genuine, and could be liable for
losses resulting from unauthorized transactions if it failed to
do so. Dealers and agents may charge a commission for handling
telephone 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.
You also may request a shareholder's manual explaining all
available services by calling 800-227-4618.
Employee Benefit Plans. Certain employee benefit plans,
including employer-sponsored tax-qualified 401(k) plans and other
43
<PAGE>
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.
44
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand
a Fund's financial performance for the period of the Fund's
operations. Certain information reflects financial information
for a single Fund share. The total return in the table
represents the rate that an investor would have earned (or lost)
on an investment in the Fund (assuming investment of all
dividends and distributions). The information has been audited
by ______________, the Fund's independent auditors, whose report,
along with Fund's financial statements, appears in the Statement
of Additional Information, which is available upon request.
Class A
Year Ended
__________
1998
Net asset value,
beginning of period $
Income From Investment Operations
Net investment income (Loss)
Net Realized and Unrealized Gain
(Loss) on Investments
Net Increases (Decrease) in Net
Asset Value From Operations
Less: Distributions
Dividends From Net Investment
Income
Dividends From Net Realized Gains
Total Dividends and Distributions
Net asset value, end of period
Total Return
Total investment return based on
net asset value
Ratios/Supplemental Data
Net Assets, end of period
(000's omitted)
Ratio of Expenses To Average
Net Assets
Ration of Net Investment Income
(Loss) To Average Net Assets
Portfolio Turnover Rate
45
<PAGE>
Class B
Year Ended
__________
1998
Net asset value,
beginning of period
Income From Investment Operations
Net investment income (Loss)
Net Realized and Unrealized Gain
(Loss) on Investments
Net Increases (Decrease) in Net
Asset Value From Operations
Less: Distributions
Dividends From Net Investment
Income
Dividends From Net Realized Gains
Total Dividends and Distributions
Net asset value, end of period
Total Return
Total investment return based on
net asset value
Ratios/Supplemental Data
Net Assets, end of period
(000's omitted)
Ratio of Expenses To Average
Net Assets
Ration of Net Investment Income
(Loss) To Average Net Assets
Portfolio Turnover Rate
46
<PAGE>
Class C
Year Ended
__________
1998
Net asset value,
beginning of period
Income From Investment Operations
Net investment income (Loss)
Net Realized and Unrealized
Gain (Loss) on Investments
Net Increases (Decrease) in Net
Asset Value From Operations
Less: Distributions
Dividends From Net Investment
Income
Dividends From Net Realized Gains
Total Dividends and Distributions
Net asset value, end of period
Total Return
Total investment return based on
net asset value
ratios/Supplemental Data
Net Assets, end of period
(000's omitted)
Ratio of Expenses To Average
Net Assets
Ration of Net Investment Income
(Loss) To Average Net Assets
Portfolio Turnover Rate
47
<PAGE>
For more information about the Funds, the following documents are
available upon request:
- -- Annual/Semi-Annual Reports to Shareholders
The Fund's annual and semi-annual reports to shareholders contain
additional information on the Fund's investments. In the annual
report, you will find a discussion of the market conditions and
investment strategies that significantly affected the Fund's
performance during its last fiscal year.
- -- Statement of Additional Information (SAI)
The Fund has an SAI, which contains more detailed information
about the Fund, including its operations and investment policies.
The Fund's SAI is incorporated by reference into (and is legally
part of) this prospectus.
You may request a free copy of the current annual/semi-annual
report or the SAI, by contacting your broker or other financial
intermediary, or by contacting Alliance:
By Mail: c/o Alliance Fund Services, Inc.
P.B. Box 1520
Secaucus, NJ 07096-1520
By Phone: For Information: (800) 221-5672
For Literature: (800) 227-4618
Or you may view or obtain these documents from the SEC:
In Person: at the SEC's Public Reference Room in
Washington, D.C.
By Phone: 1-800-SEC-0330
By Mail: Public Reference Section
Securities and Exchange Commission
Washington, DC 20549-6009
(duplicating fee required)
On the Internet: www.sec.gov
Your also may find more information about Alliance and the Fund
on the Internet at: www.Alliancecapital.com
48
<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
March 1, 1999
____________________________________________________________
This Statement of Additional Information is not a
prospectus but supplements and should be read in conjunction with
the Prospectus dated March 1, 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 Statements 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 Premier Portfolio (the "Fund"), a series of the
Alliance Select Investor Series, Inc. (the "Company") is a non-
diversified, open-end investment company. 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.
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 Internal Revenue Code of 1986, as
amended (the "Code"), which will relieve the Fund of any
liability for federal income tax to the extent its earnings are
distributed to shareholders. 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.
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.
2
<PAGE>
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
broker-dealer from which it borrowed the security regarding
remittance of any payments received by the Fund on such 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 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
3
<PAGE>
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
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
4
<PAGE>
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.
Borrowing by the Fund.
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 the Fund to sell
portfolio securities at times considered disadvantageous by the
Adviser. 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. 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.
Borrowings by the Fund result in leveraging of the
Fund's shares of common stock. Utilization of leverage, which is
5
<PAGE>
usually considered speculative, involves certain risks to the
Fund's shareholders. These include a higher volatility of the
net asset value of the Fund's shares of common stock and the
relatively greater effect on the net asset value of the shares.
So long as the 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 the 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, the
Fund's use of leverage would result in a lower rate of return
than if the 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 the 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 the Fund's
share.
Securities Ratings. The ratings of fixed-income
securities by S&P, Moody's, Duff & Phelps Credit Rating Co.
("Duff & Phelps") and Fitch IBCA, Inc. ("Fitch") are a generally
accepted barometer of credit risk. They are, however, subject to
certain limitations from an investor's standpoint. The rating of
an issuer is heavily weighted by past developments and does not
necessarily reflect probable future conditions. There is
frequently a lag between the time a rating is assigned and the
time it is updated. In addition, there may be varying degrees of
difference in credit risk of securities within each rating
category.
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.
6
<PAGE>
These investment strategies entail risks. Although the Adviser
believes that these investment strategies may further the Fund's
investment objective, no assurance can be given that they will
achieve this result. The Fund may write covered put and call
options and purchase put and call options on U.S. and foreign
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
7
<PAGE>
security has been held. The Adviser anticipates that the Fund's
annual rate of portfolio turnover will not exceed 150%. A 150%
annual turnover rate would occur if all the securities in the
Fund's portfolio were replaced one and one-half times within a
period of one year.
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;
8
<PAGE>
6. Invest in companies for the purpose of
exercising control; or
7. (a) Purchase or sell real estate, except
that it may purchase and sell securities of
companies which deal in real estate or interests
therein and securities that are secured by real
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,* 53, Chairman of the Board, is the
President, Chief Operating Officer and a Director of
____________________
* An "interested person" of the Fund as defined in the
1940 Act.
9
<PAGE>
Alliance Capital Management Corporation ("ACMC") with which
he has been associated since prior to 1993.
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, 69, is an independent consultant.
He was formerly a Senior Vice President of ACMC until
December 1994. His address is P.O. Box 167, Spring Lake,
New Jersey 07762.
JOHN H. DOBKIN, 56, has been the President of
Historic Hudson Valley (historic preservation) since prior
to 1993. Previously, he was Director of the National
Academy of Design. His address is 150 White Plains Road,
Tarrytown, New York 10591.
WILLIAM H. FOULK, JR., 66, is an investment adviser
and 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 Room 100, 2 Greenwich Plaza,
Greenwich, Connecticut 06830.
DR. JAMES M. HESTER, 74, is President of the Harry
Frank Guggenheim Foundation with which he has been
associated since prior to 1993. He was formerly President
of New York University, the New York Botanical Garden and
Rector of the United Nations University. His address is
25 Cleveland Lane, Princeton, New Jersey 08540.
CLIFFORD L. MICHEL, 59, is a partner in the law
firm of Cahill Gordon & Reindel with which he has been
associated since prior to 1993. He is President and Chief
Executive Officer of Wenonah Development Company
(investments) and a Director of Placer Dome, Inc. (mining).
His address is St. Bernard's Road, Gladstone, New Jersey
07934.
DONALD J. ROBINSON, 64, is Senior Counsel to the
law firm of Orrick, Herrington & Sutcliffe and was formerly
a senior partner and a member of the Executive Committee of
that firm. He was also a Trustee of the Museum of the City
of New York from 1977 to 1995. His address is 98 Hell's
Peak Road, Weston, Vermont 05161.
10
<PAGE>
Officers
JOHN D. CARIFA, Chairman and President, see
biography under "Directors," above.
KATHLEEN CORBET, Senior Vice President, 38, is an
Executive Vice President of ACMC with which she has been
associated since July 1993. Prior thereto, she headed
Equitable Capital Management Corporation's Fixed Income
Management Department .
ALFRED HARRISON, Senior Vice President, 58, is Vice
Chairman of the Board of ACMC, with which he has been
associated since prior to 1993.
THOMAS BARDONG, Vice President, 51, is a Senior
Vice President of ACMC, with which he has been associated
since prior to 1993.
JOHN A. KOLTES, Vice President, 54, is a Senior
Vice President of ACMC, with which he has been associated
with since prior to 1993.
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 1993.
EDMUND P. BERGAN, JR., Secretary, 48, is a Senior
Vice President and General Counsel of Alliance Fund
Distributors, Inc. and Alliance Fund Services, Inc. and Vice
President and Assistant General Counsel of ACMC, with which
he has been associated since prior to 1993.
DOMENICK PUGLIESE, Assistant Secretary, 37, is a
Vice President and Assistant General Counsel of 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
1993.
ANDREW L. GANGOLF, Assistant Secretary, 44, has
been Vice President and Assistant General Counsel of
Alliance Fund Distributors, Inc. since December 1994. Prior
thereto, he was Vice President and Assistant Secretary of
Delaware Management Co., Inc.
11
<PAGE>
MARIE VOGEL, Assistant Secretary, 40, is an
Assistant Vice President of ACMC since December 1997. Prior
thereto, she was an Administrative Officer and Assistant
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 1993.
MARK D. GERSTEN, Treasurer and Chief Financial
Officer, 47, is a Senior Vice President of Alliance Fund
Services, Inc. with which he has been associated since prior
to 1993.
VINCENT S. NOTO, Controller, 33, is a Vice
President of Alliance Fund Services, Inc., with which he has
been associated since prior to 1993.
JOSEPH MANTINEO, Assistant Controller, 38, has been
a Vice President of Alliance Fund Services, Inc. since prior
to 1993.
PHYLLIS CLARKE, Assistant Controller, 36, is an
Accounting Manager of Mutual Funds for Alliance Fund
Services, Inc. since prior to 1993.
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 1993.
JUAN RODRIGUEZ, Assistant Controller, 40, is an
Assistant Vice President of Alliance Fund Services, Inc.,
with which he has been associated since prior to 1993.
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 1998 by all of the registered investment
12
<PAGE>
companies to which the Adviser provides investment advisory
services (collectively, the "Alliance Fund Complex"), and
the total number of registered investment companies (and
separate investment portfolios within those companies) in
the Alliance Fund Complex with respect to which each of the
Directors serves as a director or trustee, are set forth
below. Neither the 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- __ __
Ruth Block $4,000 $____ __ __
David H. Dievler $4,000 $____ __ __
John H. Dobkin $4,000 $____ __ __
William H. Foulk, Jr. $4,000 $____ __ __
James M. Hester $4,000 $____ __ __
Clifford L. Michel $4,000 $____ __ __
Donald J. Robinson $4,000 $____ __ __
_______________
* estimated
As of _______, 1999, 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
investment advisory agreement (the "Advisory Agreement") to
provide investment advice and, in general, to conduct the
management and investment program of the Fund under the
13
<PAGE>
supervision of the Fund's Board of Directors (see "Management of
the Fund" in the Prospectus).
The Adviser is a leading international investment
manager supervising client accounts with assets as of __________,
1999 totaling more than $___ billion (of which more than $___
billion represented the assets of investment companies). The
Adviser's clients are primarily major corporate employee benefit
funds, public employee retirement systems, investment companies,
foundations and endowment funds. The __ registered investment
companies managed by the Adviser, comprising ___ separate
investment portfolios, currently have more than ___ million
shareholders. As of ___________, 1999, the Adviser and its
subsidiaries employed approximately _____ employees who operate
out of domestic offices and the offices of subsidiaries in
Bahrain, Bangalore, Cairo, Chennai, Hong Kong, Istanbul,
Johannesburg, London, Luxembourg, Madrid, Moscow, Mumbai, New
Delhi, Paris, Pune, Sao Paolo, Seoul, Singapore, Sydney, Tokyo,
Toronto, Vienna and Warsaw. As of _________, 1999, the Adviser
was retained as an investment manager for employee benefit plan
assets of __ of the FORTUNE 100 companies.
Alliance Capital Management Corporation ("ACMC"), the
sole general partner of, and the owner of a 1% general
partnership interest in the Adviser, is an indirect wholly-owned
subsidiary of the Equitable Life Assurance Society of the United
States ("Equitable"), one of the largest life insurance companies
in the United States and a wholly-owned subsidiary of the
Equitable Companies Incorporated ("ECI"). ECI is a holding
company controlled by AXA-UAP ("AXA") a French insurance holding
company which at March 1, 1998, beneficially owned approximately
59% of the outstanding voting shares of ECI. As of June 30,
1998, ACMC, Inc. and Equitable Capital Management Corporation,
each a wholly-owned direct or indirect subsidiary of Equitable,
together with Equitable, owned in the aggregate approximately 57%
of the issued and outstanding units representing assignments of
beneficial ownership of limited partnership interests in the
Adviser.
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.
14
<PAGE>
Based on information provided by AXA, as of March 31,
1998, more than 30% of the voting power of AXA was controlled
directly and indirectly by FINAXA, a French holding company. As
of March 31, 1998 approximately 74% of the voting power of FINAXA
was controlled directly and indirectly by four French mutual
insurance companies (the "Mutuelles AXA"), one of which, AXA
Assurances I.A.R.D. Mutuelle, itself controlled directly and
indirectly more than 42% of the voting power of FINAXA. Acting
as a group, the Mutuelles AXA control AXA and FINAXA.
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 Adviser is, under the Advisory Agreement,
responsible for certain expenses incurred by the Company,
including, for example, office facilities and certain
administrative services, and any expenses incurred in promoting
the sale of Fund shares (other than the portion of the
promotional expenses borne by the Fund in accordance with an
effective plan pursuant to Rule 12b-1 under the 1940 Act, and the
costs of printing Fund prospectuses and other reports to
shareholders and fees related to registration with the Securities
and Exchange Commission (the "Commission") and with state
regulatory authorities.)
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
15
<PAGE>
personnel. For such services, it also may utilize personnel
employed by the Adviser or by other subsidiaries of Equitable.
In such event, the services are provided to the Company at cost
and the payments specifically approved by the Company's Board of
Directors. The Company paid to the Adviser a total of $_______
in respect of such services during the fiscal period of the
Company ended October 31, 1998.
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
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 Global Dollar Government Fund, Inc., Alliance
Global Environment Fund, Inc., Alliance Global Small Cap Fund,
Inc., Alliance Global Strategic Income Trust, Inc., Alliance
Government Reserves, Alliance Greater China '97 Fund, Inc.,
Alliance Growth and Income Fund, Inc., Alliance High Yield Fund,
Inc., Alliance Institutional 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,
16
<PAGE>
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 Technology Fund, Inc., Alliance Utility Income Fund,
Inc., Alliance Variable Products Series Fund, Inc., Alliance
Worldwide Privatization Fund, Inc., The Alliance Portfolios and
The Hudson River Trust, all registered open-end investment
companies; and to ACM Government Income Fund, Inc., ACM
Government Securities Fund, Inc., ACM Government Spectrum Fund,
Inc., ACM Government Opportunity Fund, Inc., ACM Managed Dollar
Income Fund, Inc., ACM Managed Income Fund, Inc., ACM Municipal
Securities Income Fund, Inc., Alliance All-Market Advantage Fund,
Inc., Alliance World Dollar Government Fund, Inc., Alliance World
Dollar Government Fund II, Inc., The Austria Fund, Inc., The
Korean Investment Fund, Inc., The Southern Africa Fund, Inc. and
The Spain Fund, Inc., all registered closed-end investment
companies.
___________________________________________________________
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").
Pursuant to the Rule 12b-1 Plan, the Fund pays to
Alliance Fund Distributors Inc, 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 Rule 12b-1 Plan provides
that a portion of the distribution services fee in an amount not
17
<PAGE>
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.
During the period from _____________ (Commencement of
Operations) to October 31, 1998, the Fund paid distribution
services fees for expenditures under the Agreement, with respect
to Class A shares, in amounts aggregating $__________, which
constituted approximately ___% of the average daily net assets
attributable to Class A shares during such fiscal year, and the
Adviser made payments from its own resources as described above
aggregating $__________. Of the $_____________ paid by the Fund
and the Adviser with respect to Class A shares under the
Agreement, $__________ was spent on advertising, $___________ on
the printing and mailing of prospectuses for persons other than
current shareholders, $_____________ for compensation to broker-
dealers and other financial intermediaries (including
$___________ to the Fund's Principal Underwriter), $_____________
for compensation to sales personnel, and $__________ was spent on
the printing of sales literature, travel, entertainment, due
diligence and other promotional expenses.
During the period from ________________ (Commencement of
Operations) to October 31, 1998, the Fund paid distribution
services fees for expenditures under the Agreement, with respect
to Class B shares, in amounts aggregating $____________, which
constituted approximately __% of the Fund's average daily net
assets attributable to Class B shares during such fiscal year,
and the Adviser made payments from its own resources as described
above aggregating $______. Of the $_____________ paid by the
Fund and the Adviser under the Rule 12b-1 Plan with respect to
Class B shares, $___________ was spent on advertising, $________
on the printing and mailing of prospectuses for persons other
than current shareholders, $___________ for compensation to
broker-dealers and other financial intermediaries (including
$_________ to the Fund's Principal Underwriter), $__________ for
compensation to sales personnel, $____________ was spent on the
printing of sales literature, travel, entertainment, due
diligence, other promotional expenses and $____________ was spent
on interest on Class B shares financing. The additional
$_________ in payments to the Principal Underwriter will be
carried forward and offset against future distribution service
fees payable under the Rule 12b-1 Plan.
During the period from ________________ (Commencement of
Operations) to October 31, 1998, the Fund paid distribution
services fees for expenditures under the Agreement, with respect
to Class C shares, in amounts aggregating $__________, which
constituted __% of the Fund's average daily net assets
attributable to Class C shares during such fiscal year, and the
18
<PAGE>
Adviser made payments from its own resources as described above
aggregating $__________. Of the $___________ paid by the Fund
and the Adviser under the Rule 12b-1 Plan with respect to Class C
shares under the Agreement, $____________ was spent on
advertising, $_________ on the printing and mailing of
prospectuses for persons other than current shareholders,
$________ for compensation to broker-dealers and other financial
intermediaries (including $_________ to the Fund's Principal
Underwriter), $________ for compensation to sales personnel,
$_______ was spent on the printing of sales literature, travel,
entertainment, due diligence and other promotional expenses and
$_______ was spend on interest on Class C shares financing.
In addition to the payments to the Adviser 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
Adviser, (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 the Adviser 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 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.
The Rule 12b-1 Plan provides that Alliance Fund
Distributors Inc. will use the distribution services fee received
from the Fund in its entirety for payments (i) to compensate
broker-dealers or other persons for providing distribution
assistance, (ii) to otherwise promote the sale of shares of the
19
<PAGE>
Fund and (iii) to compensate broker-dealers, depository
institutions and other financial intermediaries for providing
administrative, accounting and other services with respect to the
Fund's shareholders. In this regard, some payments under the
Rule 12b-1 Plan are used to compensate financial intermediaries
with trail or maintenance commissions in an amount equal to .25%,
annualized, 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
Alliance Fund Distributors Inc. Distribution services fees
received from the Fund with respect to Class B and Class C shares
may be used for these purposes. The Rule 12b-1 Plan also
provides that the Adviser may use its own resources to finance
the distribution of the Fund's shares.
The Fund is not obligated under the Rule 12b-1 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 Alliance Fund Distributors Inc.
in one fiscal year may not be paid from distribution services
fees received from the Fund in subsequent fiscal years. Alliance
Fund Distributors Inc. compensation with respect to Class B and
Class C shares under the Rule 12b-1 Plan is directly tied to the
expenses incurred by Alliance Fund Distributors Inc. 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 Rule 12b-1 Plan and payments
received from Contingent Deferred Sales Charges ("CDSCs"). The
excess will be carried forward by Alliance Fund Distributors,
Inc. and reimbursed from distribution services fees payable under
the Rule 12b-1 Plan and payments subsequently received through
CDSCs, so long as the Rule 12b-1 Plan and the Agreement are in
effect.
The Rule 12b-1 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.
Unreimbursed distribution expenses incurred as of the
end of the Fund's most recently completed fiscal period, and
20
<PAGE>
carried over for reimbursement in future years in respect of the
Class B and Class C shares for the Fund, were, as of that time
$______ (___% as a percentage of Net Assets of Class B Shares)
and $______ (___% as a percentage of Net Assets of Class C
Shares), respectively.
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
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
21
<PAGE>
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
Agreement will terminate automatically in the event of its
assignment.
Transfer Agency Agreement
Alliance Fund Services, Inc., an indirect wholly-owned
subsidiary of the Adviser, located at 500 Plaza Drive, Secaucus,
New Jersey 07094, acts as the Fund's registrar, transfer agent
and dividend-disbursing agent for a fee based upon the number of
account holders of each of the Class 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
22
<PAGE>
affiliates, that have entered into selected agent agreements with
the Principal Underwriter ("selected agents") and (iii) the
Principal Underwriter.
Investors may purchase shares of the Fund either through
selected broker-dealers, agents, financial intermediaries or
other financial representatives or directly through the Principal
Underwriter. A transaction, service, administrative or other
similar fee may be charged by your broker-dealer, agent,
financial intermediary or other financial representative with
respect to the purchase, sale or exchange of shares made through
such financial representative. Such financial representative may
also impose requirements with respect to the purchase, sale or
exchange of shares that are different from, or in addition to,
those imposed by the Fund, including requirements as to the
minimum initial and subsequent investment amounts. Sales
personnel of selected dealers and agents distributing the Fund's
shares may receive differing compensation for selling Class A,
Class B or Class C shares. The Fund may refuse any order for the
purchase of shares. The Fund reserves the right to suspend the
sale of its shares to the public in response to conditions in the
securities markets or for other reasons.
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.
23
<PAGE>
The Fund will accept unconditional orders for its shares
to be executed at the public offering price equal to their net
asset value next determined (plus applicable Class A sales
charges), as described below. Orders received by the Principal
Underwriter prior to the close of regular trading on the Exchange
on each day the Exchange is open for trading are priced at the
net asset value computed as of the close of regular trading on
the Exchange on that day (plus applicable Class A sales charges).
In the case of orders for purchase of shares placed through
selected dealers, agents or financial representatives, as
applicable, the applicable public offering price will be the net
asset value as so determined, but only if the selected dealer,
agent or financial representative receives the order prior to the
close of regular trading on the Exchange and transmits it to the
Principal Underwriter prior to 5:00 p.m. Eastern time. The
selected dealer, agent or financial representative, as
applicable, is responsible for transmitting such orders by
5:00 p.m. If the selected dealer, agent or financial
representative fails to do so, the investor's right to that day's
closing price must be settled between the investor and the
selected dealer, agent or financial representative, as
applicable. If the selected dealer, agent or financial
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
24
<PAGE>
agent. This facilitates later redemption and relieves the
shareholder of the responsibility for and inconvenience of lost
or stolen certificates. No certificates are issued for
fractional shares, although such shares remain in the
shareholder's account on the books of the Fund.
In addition to the discount or commission amount paid to
dealers or agents, the Principal Underwriter from time to time
pays additional cash or other incentives to dealers or agents,
including EQ Financial Consultants, Inc., formerly Equico
Securities, Inc., an affiliate of the Principal Underwriter, in
connection with the sale of shares of the Fund. Such additional
amounts may be utilized, in whole or in part to provide
additional compensation to registered representatives who sell
shares of the Fund. On some occasions, cash or other incentives
will be conditioned upon the sale of a specified minimum dollar
amount of the shares of the Fund and/or other Alliance Mutual
Funds, as defined below, during a specific period of time. On
some occasions, such cash or other incentives will take the form
of payment for attendance at seminars, meals, sporting events or
theater performances, or payment for travel, lodging and
entertainment incurred in connection with travel taken by persons
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.
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<PAGE>
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
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
26
<PAGE>
against the fact that, because of such initial sales charges, not
all their funds will be invested initially.
Other investors might determine, however, that it would
be more advantageous to purchase Class B shares or Class C shares
in order to have all their funds invested initially, although
remaining subject to higher continuing distribution charges and
being subject to a contingent deferred sales charge for a four-
year and one-year period, respectively. For example, based on
current fees and expenses, an investor subject to the 4.25%
initial sales charge on Class A shares would have to hold his or
her investment approximately seven years for the Class C
distribution services fee to exceed the initial sales charge plus
the accumulated distribution services fee of Class A shares. In
this example, an investor intending to maintain his or her
investment for a longer period might consider purchasing Class A
shares. This example does not take into account the time value
of money, which further reduces the impact of the Class C
distribution services fees on the investment, fluctuations in net
asset value or the effect of different performance assumptions.
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.
During the period _________, 1998 (commencement of
operations) to October 31, 1998, the aggregate amount of
underwriting commission payable with respect to shares of the
Fund was $_________. Of that amount, the Principal Underwriter
received $_________, representing that portion of the sales
charges paid on shares of the Fund sold during the period which
was not reallowed to selected dealers (and was, accordingly,
retained by the Principal Underwriter). During the period
________, 1998 (commencement of operations) to October 31, 1998
the Principal Underwriter received contingent deferred sales
charges of $______, on Class A shares, $______ on Class B shares,
and $_________, on 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.
27
<PAGE>
Sales Charge
Discount or
Commission
As % of to Dealers
As % of the or Agents
Net Public As % of
Amount of Amount Offering Offering
Purchase Invested Price Price
________ ________ ________ ____________
Less than
$100,000 . . . 4.44% 4.25% 4.00%
$100,000 but
less than
$250,000. . . . 3.36 3.25 3.00
$250,000 but
less than
$500,000. . . . 2.30 2.25 2.00
$500,000 but
less than
$1,000,000*. . . 1.78 1.75 1.50
_____________
* There is no initial sales charge on transactions of $1,000,000
or more.
With respect to purchases of $1,000,000 or more, Class A
shares redeemed within one year of purchase will be subject to a
contingent deferred sales charge equal to 1% of the lesser of the
cost of the shares being redeemed or their net asset value at the
time of redemption. Accordingly, no sales charge will be imposed
on increases in net asset value above the initial purchase price.
In addition, no charge will be assessed on shares derived from
reinvestment of dividends or capital gains distributions. The
contingent deferred sales charge on Class A shares will be waived
on certain redemptions, as described below under "--Class B
Shares." In determining the contingent deferred sales charge
applicable to a redemption of Class A shares, it will be assumed
that the redemption is, first, of any shares that are not subject
to a contingent deferred sales charge (for example, because an
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
28
<PAGE>
Class A shares. With respect to purchases of $1,000,000 or more
made through selected dealers or agents, the Adviser may,
pursuant to the Distribution Services Agreement described above,
pay such dealers or agents from its own resources a fee of up to
1% of the amount invested to compensate such dealers or agents
for their distribution assistance in connection with such
purchases.
No initial sales charge is imposed on Class A shares
issued (i) pursuant to the automatic reinvestment of income
dividends or capital gains distributions, (ii) in exchange for
Class A shares of other "Alliance Mutual Funds" (as that term is
defined under "Combined Purchase Privilege" below), except that
an initial sales charge will be imposed on Class A shares issued
in exchange for Class A shares of AFD Exchange Reserves ("AFDER")
that were purchased for cash without the payment of an initial
sales charge and without being subject to a contingent deferred
sales charge or (iii) upon the automatic conversion of Class B
shares as described below under "Class B Shares-Conversion
Feature." The Fund receives the entire net asset value of its
Class A shares sold to investors. The Principal Underwriter's
commission is the sales charge shown above less any applicable
discount or commission "reallowed" to selected dealers and
agents. The Principal Underwriter will reallow discounts to
selected dealers and agents in the amounts indicated in the table
above. In this regard, the Principal Underwriter may elect to
reallow the entire sales charge to selected dealers and agents
for all sales with respect to which orders are placed with the
Principal Underwriter. A selected dealer who receives
reallowance in excess of 90% of such a sales charge may be deemed
to be an "underwriter" under the Securities Act.
Set forth below is an example of the method of computing
the offering price of the Class A shares. The example assumes a
purchase of Class A shares of the Fund aggregating less than
$100,000 subject to the schedule of sales charges set forth above
at a price based upon the net asset value of Class A shares of
the Fund on October 31, 1998.
Net Asset Value per Class A Share at
October 31, 1998 $_____
Class A Per Share Sales Charge 4.25%
of offering price (4.44% of net asset
value per share) $_____
Class A Per Share Offering Price to
the Public $=======
29
<PAGE>
Investors choosing the initial sales charge alternative
may under certain circumstances be entitled to pay (i) no initial
sales charge (but may be subject in most such cases to a
contingent deferred sales charge) or (ii) a reduced initial sales
charge. The circumstances under which such investors may pay a
reduced initial sales charge are described below.
Combined Purchase Privilege. Certain persons may
qualify for the sales charge reductions indicated in the schedule
of such charges above by combining purchases of shares of the
Fund into a single "purchase," if the resulting "purchase" totals
at least $100,000. The term "purchase" refers to: (i) a single
purchase by an individual, or to concurrent purchases, which in
the aggregate are at least equal to the prescribed amounts, by an
individual, his or her spouse and their children under the age of
21 years purchasing shares of the Fund for his, her or their own
account(s); (ii) a single purchase by a trustee or other
fiduciary purchasing shares for a single trust, estate or single
fiduciary account although more than one beneficiary is involved;
or (iii) a single purchase for the employee benefit plans of a
single employer. The term "purchase" also includes purchases by
any "company," as the term is defined in the 1940 Act, but does
not include purchases by any such company which has not been in
existence for at least six months or which has no purpose other
than the purchase of shares of the Fund or shares of other
registered investment companies at a discount. The term
"purchase" does not include purchases by any group of individuals
whose sole organizational nexus is that the participants therein
are credit card holders of a company, policy holders of an
insurance company, customers of either a bank or broker-dealer or
clients of an investment adviser. A "purchase" may also include
shares, purchased at the same time through a single selected
dealer or agent, of any other "Alliance Mutual Fund." Currently,
the Alliance Mutual Funds include:
AFD Exchange Reserves
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
30
<PAGE>
Alliance International Premier Growth Fund, Inc.
Alliance Limited Maturity Government Fund, Inc.
Alliance Mortgage Securities Income Fund, Inc.
Alliance Multi-Market Strategy Trust, Inc.
Alliance Municipal Income Fund, Inc.
-California Portfolio
-Insured California Portfolio
-Insured National Portfolio
-National Portfolio
-New York Portfolio
Alliance Municipal Income Fund II
-Arizona Portfolio
-Florida Portfolio
-Massachusetts Portfolio
-Michigan Portfolio
-Minnesota Portfolio
-New Jersey Portfolio
-Ohio Portfolio
-Pennsylvania Portfolio
-Virginia Portfolio
Alliance New Europe Fund, Inc.
Alliance North American Government Income Trust, Inc.
Alliance Premier Growth Fund, Inc.
Alliance Quasar Fund, Inc.
Alliance Real Estate Investment Fund, Inc.
Alliance/Regent Sector Opportunity Fund, Inc.
Alliance Short-Term Multi-Market Trust, Inc.
Alliance Technology Fund, Inc.
Alliance Utility Income Fund, Inc.
Alliance World Income Trust, Inc.
Alliance Worldwide Privatization Fund, Inc.
The Alliance Fund, Inc.
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;
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<PAGE>
(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
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
32
<PAGE>
$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
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
33
<PAGE>
period will not be retroactively adjusted on the basis of later
purchases.
Reinstatement Privilege. A shareholder who has caused
any or all of his or her Class A or Class B shares of the Fund to
be redeemed or repurchased may reinvest all or any portion of the
redemption or repurchase proceeds in Class A shares of the Fund
at net asset value without any sales charge, provided that
(i) such reinvestment is made within 120 calendar days after the
redemption or repurchase date, and (ii) for Class B shares, a
contingent deferred sales charge has been paid and the Principal
Underwriter has approved, at its discretion, the reinvestment of
such shares. Shares are sold to a reinvesting shareholder at the
net asset value next determined as described above. A
reinstatement pursuant to this privilege will not cancel the
redemption or repurchase transaction; therefore, any gain or loss
so realized will be recognized for federal income tax purposes,
except that no loss will be recognized to the extent that the
proceeds are reinvested in shares of the Fund within 30 calendar
days after the redemption or repurchase transaction. Investors
may exercise the reinstatement privilege by written request sent
to the Fund at the address shown on the cover of this Statement
of Additional Information.
Sales at Net Asset Value. The Fund may sell its Class A
shares at net asset value (i.e., without an initial sales charge)
and without a contingent deferred sales charge to certain
categories of investors including:
(i) investment management clients of the
Adviser or its affiliates;
(ii) officers and present or former Directors
of the 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
34
<PAGE>
estate of any such person or relative, if
such shares are purchased for investment
purposes (such shares may not be resold
except to the Fund);
(iii) the Adviser, the Principal Underwriter,
Alliance Fund Services, Inc. and their
affiliates; certain employee benefit
plans for employees of the Adviser, the
Principal Underwriter, Alliance Fund
Services, Inc. and their affiliates;
(iv) registered investment advisers or other
financial intermediaries who charge a
management, consulting or other fee for
their services and who purchase shares
through a broker or agent approved by the
Principal Underwriter and clients of such
registered investment advisers or
financial intermediaries whose accounts
are linked to the master account of such
investment adviser or financial
intermediary on the books of such
approved broker or agent;
(v) persons participating in a fee-based
program, sponsored and maintained by a
registered broker-dealer or other
financial intermediary and approved by
the Principal Underwriter, pursuant to
which such persons pay an asset-based fee
to such broker-dealer or financial
intermediary, or its affiliate or agent,
for services in the nature of investment
advisory or administrative services;
(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
35
<PAGE>
retirement accounts (including individual
retirement accounts to which simplified
employee pension ("SEP") contributions
are made), if such plans or accounts are
established or administered under
programs sponsored by administrators or
other persons that have been approved by
the Principal Underwriter.
Class B Shares
Investors may purchase Class B shares at the public
offering price equal to the net asset value per share of the
Class B shares on the date of purchase without the imposition of
a sales charge at the time of purchase. The Class B shares are
sold without an initial sales charge so that the Fund will
receive the full amount of the investor's purchase payment.
Proceeds from the contingent deferred sales charge on
the Class B shares are paid to the Principal Underwriter and are
used by the Principal Underwriter to defray the expenses of the
Principal Underwriter related to providing distribution-related
services to the Fund in connection with the sale of the Class B
shares, such as the payment of compensation to selected dealers
and agents for selling Class B shares. The combination of the
contingent deferred sales charge and the distribution services
fee enables the Fund to sell the Class B shares without a sales
charge being deducted at the time of purchase. The higher
distribution services fee incurred by Class B shares will cause
such shares to have a higher expense ratio and to pay lower
dividends than those related to Class A shares.
Contingent Deferred Sales Charge. Class B shares that
are redeemed within four years of purchase will be subject to a
contingent deferred sales charge at the rates set forth below
charged as a percentage of the dollar amount subject thereto.
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
36
<PAGE>
not be subject to the charge because of dividend reinvestment.
With respect to the remaining 4,000 Class B shares, the charge is
applied only to the original cost of $10 per share and not to the
increase in net asset value of $2 per share. Therefore, $40,000
of the $60,000 redemption proceeds will be charged at a rate of
3.0% (the applicable rate in the second year after purchase, as
set forth below).
The amount of the contingent deferred sales charge, if
any, will vary depending on the number of years from the time of
payment for the purchase of Class B shares until the time of
redemption of such shares.
Contingent Deferred Sales Charge as a
Year Since Purchase % of Dollar Amount Subject to Charge
____________________ ____________________________________
First 4.0%
Second 3.0%
Third 2.0%
Fourth 1.0%
Fifth and thereafter None
In determining the contingent deferred sales charge
applicable to a redemption of Class B shares, it will be assumed
that the redemption is, first, of any shares that were acquired
upon the reinvestment of dividends or distributions and, second,
of shares held longest during the time they are subject to the
sales charge. When shares acquired in an exchange are redeemed,
the applicable contingent deferred sales charge and conversion
schedules will be the schedules that applied at the time of the
purchase of shares of the corresponding class of the Alliance
Mutual Fund originally purchased by the shareholder.
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
37
<PAGE>
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.
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
38
<PAGE>
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
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."
39
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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
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.
40
<PAGE>
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
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
41
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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
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.
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<PAGE>
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
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
43
<PAGE>
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, as applicable. An exchange is effected through the
redemption of the shares tendered for exchange and the purchase
of shares being acquired at their respective net asset values as
next determined following receipt by the 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 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.
44
<PAGE>
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
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
45
<PAGE>
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
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.
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<PAGE>
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.
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
47
<PAGE>
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%
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.
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<PAGE>
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
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
49
<PAGE>
Exchange and on one or more foreign or other national securities
exchanges, and portfolio securities not traded on the Exchange
but traded on one or more foreign or other national securities
exchanges are valued in accordance with these procedures by
reference to the principal exchange on which the securities are
traded.
Readily marketable securities traded in the over-the-
counter market, securities listed on a foreign securities
exchange whose operations are similar to those of the United
States over-the-counter market, and securities listed on a U.S.
national securities exchange whose primary market is believed to
be over-the-counter (but excluding securities traded on The
Nasdaq Stock Market, Inc.), are valued at the mean of the current
bid and asked prices as reported by Nasdaq or, in the case of
securities not quoted by Nasdaq, the National Quotation Bureau or
another comparable sources.
Listed put or call options purchased by the Fund are
valued at the last sale price. If there has been no sale on that
day, such securities will be valued at the closing bid prices on
that day.
Open futures contracts and options thereon will be
valued using the closing settlement price or, in the absence of
such a price, the most recent quoted bid price, If there are no
quotations available for the day of valuations, the last
available closing settlement price will be used.
U.S. Government securities and other debt instruments
having 60 days or less remaining until maturity are valued at
amortized cost if their original maturity was 60 days or less, or
by amortizing their fair value as of the 61st day prior to
maturity if their original term to maturity exceeded 60 days
(unless in either case the Board of Directors determines that
this method does not represent fair value).
Fixed-income securities may be valued on the basis of
prices provided by a pricing service when such prices are
believed to reflect the fair market value of such securities.
The prices provided by pricing service take into account many
factors, including institutional size trading in similar groups
of securities and any developments related to specific
securities.
All other assets of the Fund are valued in good faith at
fair value by, or in accordance with procedures established by,
the Board of Directors.
Trading in securities on Far Eastern and European
securities exchanges and over-the-counter markets is normally
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<PAGE>
completed well before the close of business of each Fund business
day. In addition, trading in foreign markets may not take place
on all Fund business days. Furthermore, trading may take place
in various foreign markets on days that are not Fund business
days. The Fund's calculation of the net asset value per share,
therefore, does not always take place contemporaneously with the
most recent determination of the prices of portfolio securities
in these markets. Events affecting the values of these portfolio
securities that occur between the time their prices are
determined in accordance with the above procedures and the close
of the Exchange will not be reflected in the Fund's calculation
of net asset value unless it is believed that these prices do not
reflect current market value, in which case the securities will
be valued in good faith by, or in accordance with procedures
established by, the Board of Directors at fair value.
The Board of Directors may suspend the determination of
the Fund's net asset value (and the offering and sale of shares),
subject to the rules of the Commission and other governmental
rules and regulations, at a time when: (1) the Exchange is
closed, other than customary weekend and holiday closings, (2) an
emergency exists as a result of which it is not reasonably
practicable for the Fund to dispose of securities owned by it or
to determine fairly the value of its net assets, or (3) for the
protection of shareholders, the Commission by order permits a
suspension of the right of redemption or a postponement of the
date of payment on redemption.
For purposes of determining the Fund's net asset value
per share, all assets and liabilities initially expressed in a
foreign currency will be converted into U.S. dollars at the mean
of the current bid and asked prices of such currency against the
U.S. dollar last quoted by a major bank that is a regular
participant in the relevant foreign exchange market or on the
basis of a pricing service that takes into account the quotes
provided by a number of such major banks. If such quotations are
not available as of the close of the Exchange, the rate of
exchange will be determined in good faith by, or under the
direction of, the Board of Directors.
The assets attributable to the Class 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.
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<PAGE>
_______________________________________________________________
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 to be taxed as a "regulated investment company" under the
Code. To so qualify, the Fund must, among other things,
(i) derive at least 90% of its gross income in each taxable year
from dividends, interest, payments with respect to securities
loans, gains from the sale or other disposition of stock,
securities or foreign currency, or certain other income
(including, but not limited to, gains from options, futures and
forward contracts) derived with respect to its business of
investing in stock, securities or currency; and (ii) diversify
its holdings so that, at the end of each quarter of its taxable
year, the following two conditions are met: (a) at least 50% of
the value of the Fund's assets is represented by cash, U.S.
Government securities, securities of other regulated investment
companies and other securities with respect to which the Fund's
investment is limited, in respect of any one issuer, to an amount
not greater than 5% of the Fund's assets and 10% of the
outstanding voting securities of such issuer, and (b) not more
than 25% of the value of the Fund's assets is invested in
securities of any one issuer (other than U.S. Government
securities or securities of other regulated investment companies)
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.
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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
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,
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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.
Distributions of net capital gain will be taxable to
shareholders as long-term capital gain, regardless of how long a
shareholder has held shares in the Fund. Distributions of net
capital gain 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.
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. If a shareholder has held
shares in the Fund for six months or less and during that period
has received a distribution of net capital gain, any loss
recognized by the shareholder on the sale of those shares during
the six-month period will be treated as a long-term capital loss
to the extent of the distribution. In determining the holding
period of such shares for this purpose, any period during which a
shareholder's risk of loss is offset by means of options, short
sales or similar transactions is not counted.
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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.
Qualified Plans. A dividend or capital gains
distribution with respect to shares of the fund held by a tax-
deferred or qualified plan, such as an individual retirement
account, 403(b)(7) retirement plan or corporate pension or
profit-sharing plan, generally will not be taxable to the plan.
Distributions from such plans will be taxable to individual
participants under applicable tax rules without regard to the
character of the income earned by the qualified plan.
Backup Withholding. The Fund may be required to
withhold federal income tax at the rate of 31% of all taxable
distributions payable to shareholders who fail to provide the
Fund with their correct taxpayer identification numbers or to
make required certifications, or who have been notified by the
Internal Revenue Service that they are subject to backup
withholding. Corporate shareholders and certain other
shareholders specified in the Code are exempt from such backup
withholding. Backup withholding is not an additional tax; any
amounts so withheld may be credited against a shareholder's
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
55
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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
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
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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
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
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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.
_______________________________________________________________
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
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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.
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
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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.
_______________________________________________________________
GENERAL INFORMATION
_______________________________________________________________
Capitalization
The Company is a Maryland corporation organized in 1998.
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. Any issuance of shares of another class
or series would be governed by the 1940 Act and the law of the
State of Maryland.
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
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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. 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.
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 this Statement of Additional Information.
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.
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.
As of the close of business on , _____________, 1999,
there were __________ shares of common stock outstanding. Of
this amount, __________ shares were Class A shares, ________
shares were Class B shares and _________ shares were Class C
shares. To the knowledge of the Fund, the following persons
owned of record, or beneficially, 5% or more of the outstanding
shares of the Fund as of _______________, 1999:
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.
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Principal Underwriter
Alliance Fund Distributors, Inc., a wholly-owned
subsidiary of the Adviser, located at 1345 Avenue of the
Americas, New York, New York 10105, is the Principal Underwriter
of shares of the Fund, and as such may solicit orders from the
public to purchase shares of the Fund. Under the Agreement, the
Fund has agreed to indemnify the Principal Underwriter, in the
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
PricewaterhouseCoopers 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. 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.
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.
The Fund's yields for the month ended October 31, 1998
were ___%, ___% and ___% for Class A shares, Class B shares and
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Class C shares, respectively. The Fund's actual distribution
rates for the month ended October 31, 1998 were ___%, ___% and
___% for Class A shares, Class B shares and Class C shares,
respectively. The Fund's total returns for the period _______,
1998 (commencement of operations) to October 31, were ____%,
____% and ____% for Class A, Class B and Class C shares,
respectively.
Yield and total return are computed separately for each
class of shares. Yield and total return are 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, the Fund's average portfolio maturity and its
expenses. Quotations of yield and total return do not include
any provision for the effect of individual income taxes. An
investor's principal invested in the Fund is not fixed and will
fluctuate in response to prevailing market conditions. The Fund
may advertise the fluctuation of its net asset value over certain
time periods and compare its performance to that available from
other investments, including money market funds and certificates
of deposit, the later of which, unlike the Fund, are insured and
have fixed rates of return.
Advertisements quoting performance rankings or ratings
of the Fund as measured by financial publications or by
independent organizations such as Lipper Analytical Services,
Inc., and Morningstar, Inc. (or comparisons between the Fund's
performance and those of various indices) 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.
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______________________________________________________________
FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT ACCOUNTANTS
______________________________________________________________
To be filed by subsequent post-effective amendment.
<R/>
<PAGE>
____________________________________________________________
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
A-1
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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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<PAGE>
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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<PAGE>
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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<PAGE>
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 benefits of
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<PAGE>
futures contracts, options or forward contracts or may realize
losses and thus be in a worse position than if such strategies
had not been used. Unlike many exchange-traded futures contracts
and options on futures contracts, there are no daily price
fluctuation limits with respect to options on currencies and
forward contracts, and adverse market movements could therefore
continue to an unlimited extent over a period of time. In
addition, the correlation between movements in the prices of such
instruments and movements in the prices of the securities and
currencies hedged or used for cover will not be perfect and could
produce unanticipated losses.
The Fund's ability to dispose of its position in futures
contracts, options and forward contracts will depend on the
availability of liquid markets in such instruments. Markets in
options and futures with respect to a number of fixed income
securities and currencies are relatively new and still
developing. It is impossible to predict the amount of trading
interest that may exist in various types of futures contracts,
options and forward contracts. If a secondary market does not
exist with respect to an option purchased or written by the Fund
over-the-counter, it might not be possible to effect a closing
transaction in the option (i.e., dispose of the option) with the
result that (i) an option purchased by the Fund would have to be
exercised in order for the Fund to realize any profit and (ii)
the Fund may not be able to sell currencies or portfolio
securities covering an option written by the Fund until the
option expires or it delivers the underlying futures contract or
currency upon exercise. Therefore, no assurance can be given
that the Fund will be able to utilize these instruments
effectively for the purposes set forth above. Furthermore, the
Fund's ability to engage in options and futures transactions may
be limited by tax considerations. See "Taxation-United States
Federal Income Taxes-General."
Future Developments
The Fund may, following written notice to its
shareholders, take advantage of other investment practices which
are not at present contemplated for use by the Fund or which
currently are not available but which may be developed, to the
extent such investment practices are both consistent with the
Fund's investment objective and legally permissible for the Fund.
Such investment practices, if they arise, may involve risks which
exceed those involved in the activities described above.
A-20
<PAGE>
____________________________________________________________
APPENDIX B:
CERTAIN EMPLOYEE BENEFIT PLANS
____________________________________________________________
Employee benefit plans described below which are
intended to be tax-qualified under section 401(a) of the Internal
Revenue Code of 1986, as amended ("Tax Qualified Plans"), for
which Merrill Lynch, Pierce, Fenner & Smith Incorporated or an
affiliate thereof ("Merrill Lynch") is recordkeeper (or with
respect to which recordkeeping services are provided pursuant to
certain arrangements as described in paragraph (ii) below)
("Merrill Lynch Plans") are subject to specific requirements as
to the Fund shares which they may purchase. Notwithstanding
anything to the contrary contained elsewhere in this Statement of
Additional Information, the following Merrill Lynch Plans are not
eligible to purchase Class A shares and are eligible to purchase
Class B shares of the Fund at net asset value without being
subject to a contingent deferred sales charge:
(i) Plans for which Merrill Lynch is the recordkeeper on a
daily valuation basis, if when the plan is established
as an active plan on Merrill Lynch's recordkeeping
system:
(a) the plan is one which is not already
investing in shares of mutual funds or
interests in other commingled investment
vehicles of which Merrill Lynch Asset
Management, L.P. is investment adviser or
manager ("MLAM Funds"), and either (A) the
aggregate assets of the plan are less than
$3 million or (B) the total of the sum of
(x) the employees eligible to participate in
the plan and (y) those persons, not
including any such employees, for whom a
plan account having a balance therein is
maintained, is less than 500, each of (A)
and (B) to be determined by Merrill Lynch in
the normal course prior to the date the plan
is established as an active plan on Merrill
Lynch's recordkeeping system (an "Active
Plan"); or
(b) the plan is one which is already investing
in shares of or interests in MLAM Funds and
the assets of the plan have an aggregate
value of less than $5 million, as determined
B-1
<PAGE>
by Merrill Lynch as of the date the plan
becomes an Active Plan.
For purposes of applying (a) and (b), there
are to be aggregated all assets of any Tax-
Qualified Plan maintained by the sponsor of
the Merrill Lynch Plan (or any of the
sponsor's affiliates) (determined to be such
by Merrill Lynch) which are being invested
in shares of or interests in MLAM Funds,
Alliance Mutual Funds or other mutual funds
made available pursuant to an agreement
between Merrill Lynch and the principal
underwriter thereof (or one of its
affiliates) and which are being held in a
Merrill Lynch account.
(ii) Plans for which the recordkeeper is not Merrill Lynch,
but which are recordkept on a daily valuation basis by
a recordkeeper with which Merrill Lynch has a
subcontracting or other alliance arrangement for the
performance of recordkeeping services, if the plan is
determined by Merrill Lynch to be so eligible and the
assets of the plan are less than $3 million.
Class B shares of the Fund held by any of the
above-described Merrill Lynch Plans are to be replaced at
Merrill Lynch's direction through conversion, exchange or
otherwise by Class A shares of the Fund on the earlier of
the date that the value of the plan's aggregate assets first
equals or exceeds $5 million or the date on which any Class
B share of the Fund held by the plan would convert to a
Class A share of the Fund as described under "Purchase of
Shares" and "Redemption and Repurchase of Shares."
Any Tax Qualified Plan, including any Merrill Lynch
Plan, which does not purchase Class B shares of the Fund
without being subject to a contingent deferred sales charge
under the above criteria is eligible to purchase Class B
shares subject to a contingent deferred sales charge as well
as other classes of shares of the Fund as set forth above
under "Purchase of Shares" and "Redemption and Repurchase of
Shares."
B-2
<PAGE>
PART C
OTHER INFORMATION
ITEM 23. Exhibits
(a) (1) Articles of Incorporation - Incorporated by
reference to Exhibit 1 to the Fund'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.
(2) Articles of Amendment of the Fund's Articles
of Incorporation dated June 25th, 1998 -
Incorporated by reference to Exhibit 1(b) to Pre-
Effective Amendment No. 1 of the Fund's
Registration Statement on Form N-1A (File
Nos. 333-8818 and 811-9176) filed with the
Securities and Exchange Commission on June 29,
1998.
(b) By-Laws of the Fund - Incorporated by reference to
Exhibit 2 to Pre-Effective Amendment No. 1 of the
Fund's Registration Statement on Form N-1A (File
Nos. 333-8818 and 811-9176) filed with the
Securities and Exchange Commission on June 29,
1998.
(c) Not applicable.
(d) Advisory Agreement between the Fund and Alliance
Capital Management L.P. - Incorporated by reference
to Exhibit 5 to Pre-Effective Amendment No. 1 of
the Fund's Registration Statement on Form N-1A
(File Nos. 333-8818 and 811-9176) filed with the
Securities and Exchange Commission on June 29,
1998.
(e) (1) Distribution Services Agreement between the
Fund and Alliance Fund Distributors, Inc. -
Incorporated by reference to Exhibit 6(a) to Pre-
Effective Amendment No. 1 of the Fund's
Registration Statement on Form N-1A (File
Nos. 333-8818 and 811-9176) filed with the
Securities and Exchange Commission on June 29,
1998.
(2) Form of Selected Dealer Agreement between
Alliance Fund Distributors, Inc. and selected
dealers offering shares of the Fund - Incorporated
by reference to Exhibit 6(b) to the Fund's
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<PAGE>
Registration Statement on Form N-1A (File
Nos. 333-8818 and 811-9176) filed with the
Securities and Exchange Commission on May 22, 1998.
(3) Form of Selected Agent Agreement between
Alliance Fund Distributors, Inc. and selected
agents making available shares of the Fund -
Incorporated by reference to Exhibit 6(c) to the
Fund'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.
(f) Not applicable.
(g) Custody Agreement between the Fund and The Bank of
New York - Incorporated by reference to Exhibit 8
to Pre-Effective Amendment No. 1 of the Fund's
Registration Statement on Form N-1A (File
Nos. 333-8818 and 811-9176) filed with the
Securities and Exchange Commission on June 29,
1998.
(h) (1) Transfer Agency Agreement between the
Registrant and Alliance Fund Services, Inc. -
Incorporated by reference to Exhibit 9(a) to Pre-
Effective Amendment No. 1 of the Fund's
Registration Statement on Form N-1A (File
Nos. 333-8818 and 811-9176) filed with the
Securities and Exchange Commission on June 29,
1998.
(2) Expense Limitation Agreement between the Fund
and Alliance Capital Management, L.P. -
Incorporated by reference to Exhibit 9(b) to Pre-
Effective Amendment No. 1 of the Fund's
Registration Statement on Form N-1A (File
Nos. 333-8818 and 811-9176) filed with the
Securities and Exchange Commission on June 29,
1998.
(i) (1) Opinion and Consent of Seward & Kissel -
Incorporated by reference to Exhibit 10(a) to Pre-
Effective Amendment No. 1 of the Fund's
Registration Statement on Form N-1A (File
Nos. 333-8818 and 811-9176) filed with the
Securities and Exchange Commission on June 29,
1998.
(2) Opinion and Consent of Venable, Baetjer and
Howard, LLP - Incorporated by reference to Exhibit
10(b) to Pre-Effective Amendment No. 1 of the
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<PAGE>
Fund's Registration Statement on Form N-1A (File
Nos. 333-8818 and 811-9176) filed with the
Securities and Exchange Commission on June 29,
1998.
(j) Not applicable.
(k) Not applicable.
(l) Investment representation letter of Alliance
Capital Management L.P. - Incorporated by reference
to Exhibit 13 to Pre-Effective Amendment No. 1 of
the Fund's Registration Statement on Form N-1A
(File Nos. 333-8818 and 811-9176) filed with the
Securities and Exchange Commission on June 29,
1998.
(m) Rule 12b-1 Plan - See Exhibit (e)(1) hereto.
(n) Not applicable.
(o) Rule 18f-3 Plan - Incorporated by reference to
Exhibit 18 to Pre-Effective Amendment No. 1 of the
Fund's Registration Statement on Form N-1A (File
Nos. 333-8818 and 811-9176) filed with the
Securities and Exchange Commission on June 29,
1998.
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 - Incorporated by
reference to Exhibit 1(b) to Pre-Effective Amendment No. 1 of the
Fund's Registration Statement on Form N-1A (File Nos. 333-8818
and 811-9176) filed with the Securities and Exchange Commission
on June 29, 1998.
ITEM 24. Persons Controlled by or under Common Control with the
Fund.
None.
ITEM 25. Indemnification.
It is the Registrant's policy to indemnify its directors
and officers, employees and other agents to the maximum
extent permitted by Section 2-418 of the General
Corporation Law of the State of Maryland, which is
incorporated by reference herein, and as set forth in
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<PAGE>
Article EIGHTH of Registrant's Articles of
Incorporation, filed as Exhibit (a) hereto, Article VII
and Article VIII of Registrant's By-Laws, filed as
Exhibit (b) hereto, and Section 10 of the proposed
Distribution Services Agreement, filed as Exhibit (e)(1)
hereto. The Adviser's liability for any loss suffered
by the Registrant or its shareholders is set forth in
Section 4 of the proposed Advisory Agreement, filed as
Exhibit (d) hereto.
Insofar as indemnification for liabilities arising under
the Securities Act may be permitted to directors,
officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that, in the opinion of the
Securities and Exchange Commission, such indemnification
is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that
a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection
with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question of
whether such indemnification by it is against public
policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
In accordance with Release No. IC-11330 (September 2,
1980), the Registrant will indemnify its directors,
officers, investment manager and principal underwriters
only if (1) a final decision on the merits was issued by
the court or other body before whom the proceeding was
brought that the person to be indemnified (the
"indemnitee") was not liable by reason or willful
misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his
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
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<PAGE>
fees or other expenses incurred by its directors,
officers, investment adviser or principal underwriters
in defending a proceeding, upon the undertaking by or on
behalf of the indemnitee to repay the advance unless it
is ultimately determined that he is entitled to
indemnification and, as a condition to the advance,
(1) the indemnitee shall provide a security for his
undertaking, (2) the Registrant shall be insured against
losses arising by reason of any lawful advances, or
(3) a majority of a quorum of disinterested, non-party
directors of the Registrant, or an independent legal
counsel in a written opinion, shall determine, based on
a review of readily available facts (as opposed to a
full trial-type inquiry), that there is reason to
believe that the indemnitee ultimately will be found
entitled to indemnification.
The Registrant participates in a joint
trustees/directors and officers liability insurance
policy issued by the ICI Mutual Insurance Company.
Coverage under this policy has been extended to
directors, trustees and officers of the investment
companies managed by Alliance Capital Management L.P.
Under this policy, outside trustees and directors are
covered up to the limits specified for any claim against
them for acts committed in their capacities as trustee
or director. A pro rata share of the premium for this
coverage is charged to each investment company and to
the Adviser.
ITEM 26. Business and Other Connections of Investment Adviser.
The descriptions of Alliance Capital Management L.P.
under the captions "Management of the Fund" in the
Prospectus and in the Statement of Additional
Information constituting Parts A and B, respectively, of
this Registration Statement are incorporated by
reference herein.
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.
C-5
<PAGE>
ITEM 27. Principal Underwriters.
(a) Alliance Fund Distributors, Inc., the Registrant's
Principal Underwriter in connection with the sale of shares of
the Registrant. Alliance Fund Distributors, Inc. also acts as
Principal Underwriter or Distributor for the following investment
companies:
AFD Exchange Reserves
Alliance All-Asia Investment Fund, Inc.
Alliance Balanced Shares, Inc.
Alliance Bond Fund, Inc.
Alliance Capital Reserves
Alliance Global Dollar Government Fund, Inc.
Alliance Global Environment Fund, Inc.
Alliance Global Small Cap Fund, Inc.
Alliance Global Strategic Income Trust, Inc.
Alliance Government Reserves
Alliance Greater China 97 Fund, Inc.
Alliance Growth and Income Fund, Inc.
Alliance High Yield Fund, Inc.
Alliance Institutional 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 Technology Fund, Inc.
Alliance Utility Income Fund, Inc.
Alliance Variable Products Series Fund, Inc.
Alliance Worldwide Privatization Fund, Inc.
The Alliance Fund, Inc.
The Alliance Portfolios
(b) The following are the Directors and Officers of Alliance
Fund Distributors, Inc., the principal place of business of which
is 1345 Avenue of the Americas, New York, New York, 10105.
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<PAGE>
POSITIONS AND POSITIONS AND
OFFICES WITH OFFICES WITH
NAME UNDERWRITER REGISTRANT
Michael J. Laughlin Director and Chairman
John D. Carifa Director
Robert L. Errico Director and President
Geoffrey L. Hyde Director and Senior
Vice President
Dave H. Williams Director
David Conine Executive Vice President
Richard K. Saccullo Executive Vice President
Edmund P. Bergan, Jr. Senior Vice President, Secretary
General Counsel and
Secretary
Richard A. Davies Senior Vice President
and Managing Director
Robert H. Joseph, Jr. Senior Vice President
and Chief Financial Officer
Anne S. Drennan Senior Vice President
and Treasurer
Karen J. Bullot Senior Vice President
James S. Comforti Senior Vice President
James L. Cronin Senior Vice President
Daniel J. Dart Senior Vice President
Byron M. Davis Senior Vice President
Mark J. Dunbar Senior Vice President
Donald N. Fritts Senior Vice President
Bradley F. Hanson Senior Vice President
Richard E. Khaleel Senior Vice President
Stephen R. Laut Senior Vice President
C-7
<PAGE>
Susan L. Matteson-King Senior Vice President
Daniel D. McGinley Senior Vice President
Antonios G. Poleondakis Senior Vice President
Robert E. Powers Senior Vice President
Kevin A. Rowell Senior Vice President
Raymond S. Sclafani Senior Vice President
Gregory K. Shannahan Senior Vice President
Joseph F. Sumanski Senior Vice President
Peter J. Szabo Senior Vice President
William C. White Senior Vice President
Nicholas K. Willett Senior Vice President
Richard A. Winge Senior Vice President
Gerard J. Friscia Vice President and
Controller
Ricardo Arreola Vice President
Jamie A. Atkinson Vice President
Benji A. Baer Vice President
Kenneth F. Barkoff Vice President
Casimir F. Bolanowski Vice President
Michael E. Brannan Vice President
Timothy W. Call Vice President
Kevin T. Cannon Vice President
John R. Carl Vice President
William W. Collins, Jr. Vice President
Leo H. Cook Vice President
John W. Cronin Vice President
C-8
<PAGE>
Richard W. Dabney Vice President
Stephen J. Demetrovits Vice President
John F. Dolan Vice President
John C. Endahl Vice President
Sohaila S. Farsheed Vice President
Shawn C. Gage Vice President
Joseph C. Gallagher Vice President
Andrew L. Gangolf Vice President and Assistant
Assistant General Secretary
Counsel
Alex G. Garcia Vice President
Mark D. Gersten Vice President Treasurer and
Chief
Financial
Officer
John Grambone Vice President
Charles M. Greenberg Vice President
Alan Halfenger Vice President
William B. Hanigan Vice President
Michael S. Hart Vice President
Scott F. Heyer Vice President
Timothy A. Hill Vice President
George R. Hrabovsky Vice President
Valerie J. Hugo Vice President
Michael J. Hutten Vice President
Scott Hutton Vice President
Richard D. Keppler Vice President
Donna M. Lamback Vice President
C-9
<PAGE>
P. Dean Lampe Vice President
Henry Michael Lesmeister Vice President
James M. Liptrot Vice President
James P. Luisi Vice President
Jerry W. Lynn Vice President
Christopher J. MacDonald Vice President
Michael F. Mahoney Vice President
Shawn P. McClain Vice President
Jeffrey P. Mellas Vice President
Thomas F. Monnerat Vice President
Timothy S. Mulloy Vice President
Joanna D. Murray Vice President
Nicole Nolan-Koester Vice President
John C. O'Connell Vice President
John J. O'Connor Vice President
James J. Posch Vice President
Domenick Pugliese Vice President and Assistant
Assistant General Secretary
Counsel
Bruce W. Reitz Vice President
Karen C. Satterberg Vice President
John P. Schmidt Vice President
Robert C. Schultz Vice President
Richard J. Sidell Vice President
Clara Sierra Vice President
Teris A. Sinclair Vice President
Scott C. Sipple Vice President
C-10
<PAGE>
Martine H. Stansbery, Jr. Vice President
Andrew D. Strauss Vice President
Michael J. Tobin Vice President
Joseph T. Tocyloski Vice President
David R. Turnbough Vice President
Martha D. Volcker Vice President
Patrick E. Walsh Vice President
Mark E. Westmoreland Vice President
David E. Willis Vice President
Emilie D. Wrapp Vice President and Assistant
Assistant General Secretary
Counsel
Patrick Look Assistant Vice
President and
Assistant Treasurer
Michael W. Alexander Assistant Vice
President
Richard J. Appaluccio Assistant Vice
President
Charles M. Barrett Assistant Vice
President
Robert F. Brendli Assistant Vice
President
John M. Capeci Assistant Vice
President
Maria L. Carreras Assistant Vice
President
John P. Chase Assistant Vice
President
Jean A. Coomber Assistant Vice
President
C-11
<PAGE>
Russell R. Corby Assistant Vice
President
Terri J. Daly Assistant Vice
President
Ralph A. DiMeglio Assistant Vice
President
Faith C. Deutsch Assistant Vice
President
John E. English Assistant Vice
President
Duff C. Ferguson Assistant Vice
President
Theresa Iosca Assistant Vice
President
Erik A. Jorgensen Assistant Vice
President
Eric G. Kalender Assistant Vice
President
Edward W. Kelly Assistant Vice
President
Victor Kopelakis Assistant Vice
President
Michael Laino Assistant Vice
President
Nicholas J. Lapi Assistant Vice
President
Kristine J. Luisi Assistant Vice
President
Kathryn Austin Masters Assistant Vice
President
Richard F. Meier Assistant Vice
President
C-12
<PAGE>
Richard J. Olszewski Assistant Vice
President
Catherine N. Peterson Assistant Vice
President
Rizwan A. Raja Assistant Vice
President
Carol H. Rappa Assistant Vice
President
Mark V. Spina Assistant Vice
President
Gayle S. Stamer Assistant Vice
President
Eileen Stauber Assistant Vice
President
Vincent T. Strangio Assistant Vice
President
Margaret M. Tompkins Assistant Vice
President
Marie R. Vogel Assistant Vice
President
Wesley S. Williams Assistant Vice
President
Matthew Witschel Assistant Vice
President
Christopher J. Zingaro Assistant Vice
President
Mark R. Manley Assistant Secretary
(c) Not applicable.
ITEM 28. Location of Accounts and Records.
The majority of the accounts, books and other documents
required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and the rules thereunder
are maintained as follows: journals, ledgers,
securities records and other original records are
maintained principally at the offices of Alliance Fund
C-13
<PAGE>
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.
ITEM 29. Management Services.
Not applicable.
ITEM 30. Undertakings.
The Registrant undertakes to provide assistance to
shareholders in communications concerning the removal of
any Director of the Fund in accordance with Section 16
of the Investment Company Act of 1940.
C-14
<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 22nd day of December, 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 December 22, 1998
______________________ President
John D. Carifa
(2) Principal Financial
and Accounting Officer:
/s/ Mark D. Gersten Treasurer December 22, 1998
_____________________ and Chief
Mark D. Gersten Financial
Officer
(3) All of the Directors:
John D. Carifa William H. Foulk
Ruth Block Dr. James M. Hester
David H. Dievler Clifford L. Michel
John H. Dobkin Donald J. Robinson
/s/ Edmund P. Bergan, Jr. December 22, 1998
_________________________
Edmund P. Bergan, Jr.
Attorney-in-Fact
C-15
<PAGE>
Index To Exhibits
None.
C-16
00250242.AI2
