<PAGE>
As filed with the Securities and Exchange
Commission on December 16, 1999
File Nos.
333-90261
811-09687
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. 2
Post-Effective Amendment No.
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No.
_______________________________
ALLIANCE DISCIPLINED VALUE FUND, 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 LLP
One Battery Park Plaza
New York, New York 10004
<PAGE>
It is proposed that this filing will become effective (check
appropriate box)
immediately upon filing pursuant to paragraph (b)
on (date) pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)(1)
on (date) pursuant to paragraph (a)(1)
75 days after filing pursuant to paragraph (a)(2)
on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
This post-effective amendment designates a new effective
date for a previously filed post-effective amendment.
The Registrant hereby amends this Registrant Statement under
the Securities Act of 1933 on such date or dates as may be
necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in
accordance with the provisions of Section 8(a) of the Securities
Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to
Section 8(a), may determine.
<PAGE>
Alliance
Disciplined
Value Fund
Alliance Disciplined Value Fund, Inc. is an open-end management investment
company that offers investors the opportunity to seek long-term growth of
capital by investing primarily in stocks that Alliance believes are undervalued.
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy or accuracy of this Prospectus. Any
representation to the contrary is a criminal offense.
Prospectus and Application
December 20, 1999
AllianceCapital [LOGO](R)
<PAGE>
Investment Products Offered
- -----------------------------
- - Are Not FDIC Insured
- - May Lose Value
- - Are Not Bank Guaranteed
- -----------------------------
2
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Page
RISK/RETURN SUMMARY ...................................................... 3
FEES AND EXPENSES OF THE FUND ............................................ 5
GLOSSARY ................................................................. 6
DESCRIPTION OF THE FUND .................................................. 6
Investment Objective, Principal Policies and Risk
Considerations ........................................................... 6
Description of Additional Investment Practices ........................... 8
Additional Risk Considerations ........................................... 11
MANAGEMENT OF THE FUND ................................................... 13
PURCHASE AND SALE OF SHARES .............................................. 13
How The Fund Values Its Shares ........................................... 13
How To Buy Shares ........................................................ 13
How To Exchange Shares ................................................... 13
How To Sell Shares ....................................................... 14
DIVIDENDS, DISTRIBUTIONS AND TAXES ....................................... 14
DISTRIBUTION ARRANGEMENTS ................................................ 15
GENERAL INFORMATION ...................................................... 16
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.
RISK/RETURN SUMMARY
The following is a summary of certain key information about Alliance Disciplined
Value Fund. This Summary describes the Fund's objective, principal investment
strategies, principal risks and fees. This Summary includes a short discussion
of some of the principal risks of investing in the Fund.
A more detailed description of the Fund, including the risks associated with
investing in the Fund, can be found further back in this Prospectus. Please be
sure to read this additional information BEFORE you invest. As with all
investments, you may lose money by investing in the Fund.
3
<PAGE>
OBJECTIVE:
The Fund's investment objective is long-term growth of capital through the
application of a disciplined value-oriented investment process.
PRINCIPAL INVESTMENT STRATEGIES:
The Fund invests primarily in the equity securities of U.S. companies that
Alliance believes are undervalued. Alliance believes that, over time, a
company's stock price will come to reflect its intrinsic economic value.
Alliance uses a disciplined investment process to evaluate the companies in
Alliance's extensive research universe to identify the stocks of companies that
offer the best combination of value and potential for price appreciation. The
Fund may invest in companies of any size and in any industry. At different
times, the Fund's investments may be in companies with significantly different
market capitalizations and with a greater emphasis on particular industries.
The Fund expects under normal circumstances to invest primarily in equity
securities of about 75 U.S. companies. The Fund may also invest up to 15% of
its total assets in non-U.S. companies.
PRINCIPAL RISKS:
Among the principal risks of investing in the Fund is market risk, which is the
risk of losses from adverse changes in the stock markets. Depending on the
Fund's investments at a particular time, the Fund may also have sector risk,
which is the risk of investments in a particular industry or group of related
industries. In addition, because the Fund may invest in small- to
mid-capitalization companies, it has capitalization risk. These investments may
be more volatile than investments in large-cap companies. To the extent the
Fund invests in non-U.S. companies, it may have foreign risk, which is the risk
of investing in issuers located in foreign countries. These investments also
have currency risk, which is the risk of losses from adverse changes in
currency exchange rates.
BAR CHART AND PERFORMANCE TABLE:
There is no bar chart or performance table for the Fund because it has not
completed a full calendar year of operations.
4
<PAGE>
- --------------------------------------------------------------------------------
FEES AND EXPENSES OF THE FUND
- --------------------------------------------------------------------------------
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
SHAREHOLDER FEES (fees paid directly from your investment)
<TABLE>
<CAPTION>
Class A Shares Class B Shares Class C Shares
-------------- -------------- --------------
<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price) 4.25% None None
Maximum Deferred Sales Charge (Load)
(as a percentage of original purchase price or redemption
proceeds, whichever is lower) None 4.0%* 1.0%**
Exchange Fee None None None
</TABLE>
* Class B Shares automatically convert to Class A Shares after 8 years. The
CDSC decreases over time. For Class B shares, the CDSC decreases 1.00%
annually to 0% after the 4th year.
** For Class C shares, the CDSC is 0% after the 1st year.
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
Operating Expenses
-------------------------------
Class A Class B Class C
------- ------- -------
Management fees .75% .75% .75%
Distribution (12b-1) fees .30% 1.00% 1.00%
Other expenses 2.29% 2.29% 2.29%
---- ---- ----
Total Fund operating expenses 3.34% 4.04% 4.04%
==== ==== ====
Fee Waiver and/or expense
reimbursement (a) (.84)% (.84)% (.84)%
---- ---- ----
Net expenses 2.50% 3.20% 3.20%
==== ==== ====
EXAMPLES
The Examples are to help you compare the cost of investing in the Fund with the
cost of investing in other funds. They assume that you invest $10,000 in the
Fund for the time periods indicated and then redeem all of your shares at the
end of those periods. They also assume that your investment has a 5% return each
year, that the Fund's operating expenses stay the same, and that all dividends
and distributions are reinvested. Your actual costs may be higher or lower.
Examples (b)
----------------------------------------------------
Class A Class B+ Class B++ Class C+ Class C++
------- -------- --------- -------- ---------
After 1 Yr. $667 $723 $323 $423 $323
After 3 Yrs. $1,200 $1,216 $1,016 $1,016 $1.016
- --------------------------------------------------------------------------------
(a) Alliance has contractually agreed to waive its management fees and/or to
bear expenses of the Fund through December 20, 2000 to the extent
necessary to prevent total Fund operating expenses, on an annualized
basis, from exceeding the net expenses reflected in this table. The fees
waived and expenses borne by Alliance during this period may be reimbursed
by the Fund during the three years after commencement of operations. No
reimbursement payment will be made that would cause the Fund's total
annualized operating expenses to exceed the net expenses reflected in the
table or cause the total of the payments to exceed the Fund's total
initial organizational and offering expenses.
(b) These examples assume that Alliance's agreement to waive management fees
and/or to bear operating expenses is not extended beyond its initial
period.
+ Assumes redemption at the end of period.
++ Assumes no redemption at end of period.
5
<PAGE>
- --------------------------------------------------------------------------------
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.
Depositary receipts include American Depositary Receipts ("ADRs"), Global
Depositary Receipts ("GDRs") and other types of depositary receipts.
Equity securities include (i) common stocks, partnership interests, business
trust shares and other equity or ownership interests in business enterprises and
(ii) securities convertible into, and rights and warrants to subscribe for the
purchase of, such stocks, shares and interests.
Lower-rated securities are fixed-income securities rated Ba or below by Moody's
or BB or below by S&P, Duff & Phelps or Fitch, or determined by Alliance to be
of equivalent quality, and are commonly referred to as "junk bonds."
Non-U.S. company is an entity that (i) is organized under the laws of a foreign
country and conducts business in a foreign country, (ii) derives 50% or more of
its total revenues from business in foreign countries, or (iii) issues equity or
debt securities that are traded principally on a stock exchange in a foreign
country.
Qualifying bank deposits are certificates of deposit, bankers' acceptances and
interest-bearing savings deposits of banks that have total assets of more than
$1 billion and are members of the Federal Deposit Insurance Corporation.
Prime commercial paper is commercial paper rated Prime 1 by Moody's or A-1 or
higher by S&P or, if not rated, issued by companies that have an outstanding
debt issue rated Aa or higher by Moody's or AA or higher by S&P.
Rule 144A securities are securities that may be resold under 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
Duff & Phelps is Duff & Phelps Credit Rating Co.
Fitch is Fitch IBCA, Inc.
Moody's is Moody's Investors Service, Inc.
S&P is Standard & Poor's Ratings Services.
OTHER
Code is the Internal Revenue Code of 1986, as amended.
Commission is the Securities and Exchange Commission.
Exchange is the New York Stock Exchange.
Securities Act is the Securities Act of 1933, as amended.
- --------------------------------------------------------------------------------
DESCRIPTION OF THE FUND
- --------------------------------------------------------------------------------
This section of the Prospectus provides a more complete description of the
Fund's investment objective, principal investment policies and risks. Of course,
there can be no assurance that the Fund will achieve its investment objective.
Please note that:
o Additional discussion of the Fund's investments, including the risks of
the investments that appear in bold type can be found in the discussion
under Description of Additional Investment Practices following this
section.
o 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 discussion under Additional Risk
Considerations.
o 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.
o The Fund's investment objective is fundamental and cannot be changed
without a shareholder vote and, except as noted, the Fund's investment
policies are not fundamental and thus can be changed without a shareholder
vote.
INVESTMENT OBJECTIVE, PRINCIPAL POLICIES AND RISK CONSIDERATIONS
Investment Objective
The Fund's investment objective is long-term growth of capital through the
application of a disciplined value-oriented investment process.
How the Fund Pursues Its Objective
In seeking to achieve its objective, the Fund invests primarily in the equity
securities of U.S. companies that Alliance believes are undervalued. Alliance
believes that, over time, a company's stock price will come to reflect its
intrinsic economic value. Alliance uses a disciplined investment process to
evaluate the companies in Alliance's extensive research universe. Through this
process, Alliance seeks to identify the stocks of companies that offer the best
combination of value and potential for price appreciation.
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 follows a primary research universe of approximately 500 largely
domestic companies that are significant participants in their
6
<PAGE>
particular industries. As one of the largest multi-national investment firms,
Alliance has access to considerable information concerning all of the companies
followed, an in-depth understanding of the products, services, markets and
competition of these companies and a good knowledge of the managements of most
of the companies in its research universe. Alliance's analysts prepare their own
earnings estimates and financial models for each company followed.
The disciplined value investment process is grounded in Alliance's research
capabilities. Through its research, Alliance identifies equity securities whose
current market prices do not reflect what Alliance considers to be their
intrinsic economic value. In determining a company's intrinsic economic value,
Alliance takes into account many factors it believes bear on the ability of the
company to perform in the future, including earnings growth, prospective cash
flows, dividend growth and growth in book value. Alliance then ranks, at least
weekly, each of the companies in its research universe in the relative order of
disparity between their intrinsic economic values and their stock prices, with
companies with the greatest disparities receiving the highest rankings (i.e.,
being considered the most undervalued). Alliance anticipates that, normally,
about 75 companies will be represented in the Fund's portfolio, with
substantially all of those companies ranking in the top three deciles of
Alliance's valuation model. Not every security deemed to be undervalued is
subsequently purchased by the Fund; undervalued securities are further analyzed
before being added to the Fund's portfolio. Alliance will use its research
capability to help best evaluate the potential rewards and risks of investing in
competing undervalued securities. It is the interaction between Alliance's
research capabilities and the disciplined value model's perception of value that
determines which securities will be purchased or sold by the Fund.
Alliance recognizes that the perception of what is a "value" stock is relative
and the factors considered in determining whether a stock is a "value" stock
may, and often will, have differing relative significance in different phases of
an economic cycle. Also, at different times, the Fund may be attracted to
investments in companies with different market capitalizations (i.e., large, mid
or small capitalization) or companies engaged in particular types of business
(e.g., banks and other financial institutions), although the Fund does not
intend to concentrate in any particular industries or businesses. The Fund's
portfolio emphasis upon particular industries or sectors will be a by-product
of the stock selection process rather than the result of assigned targets or
ranges.
Although the Fund intends to invest primarily in the equity securities of U.S.
companies, the Fund may also invest up to 15% of its assets in securities of
non-U.S. companies.
In addition to the principal strategies discussed aboves, the Fund may also:
o invest in convertible securities and rights and warrants;
o for hedging purposes, enter into forward commitments, and purchase and
sell futures contracts and options on securities, as well as options on
securities indices and options on futures contracts; and
o for hedging purposes, enter into currency swaps, forward foreign
currency exchange contracts and options on foreign currencies.
Risk Considerations
The value of an investment in the Fund changes with the values of the Fund's
investments. Many factors can affect those values. In the following summary, we
describe the principal risks that may affect the Fund's portfolio as a whole.
The Fund 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 Description of Additional Investment Practices or Additional
Risk Considerations. Those sections also include more information about the
Fund, its investments, and related risks. Among the principal risks of
investing in the Fund are:
o Market Risk This is the risk that the value of the Fund's investments will
fluctuate as the stock or bond markets fluctuate and that prices overall
will decline over short- or long-term periods.
o Sector Risk This is the risk of investments in a particular industry
sector. If the Fund invests more of its assets in companies engaged in a
particular industry or group of related industries, market or economic
factors affecting that industry could have a more significant effect on
the value of the Fund's investments.
o Capitalization Risk This is the risk of investments in small to
mid-capitalization companies. Investments in mid-cap companies may be more
volatile than investments in large-cap companies. Investments in small-cap
companies tend to be more volatile than investments in large-cap or
mid-cap companies. The Fund's investments in smaller capitalization
companies may have additional risks because these companies often have
limited product lines, markets or financial resources.
o Foreign Risk This is the risk of investments in issuers located in foreign
countries. The Fund's investments in foreign securities may experience
rapid and extreme changes in value because the securities markets of many
foreign countries are relatively small, with a limited number of companies
representing a small number of industries. Additionally, foreign
securities issuers are usually not subject to the same degree of
regulation as U.S. issuers. Reporting, accounting and auditing standards
of foreign countries differ, in some cases significantly, from U.S.
standards. Also, nationalization, expropriation or confiscatory taxation,
currency blockage, and 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 in that country.
o Currency Risk This is the risk that fluctuations in the exchange rates
between the U.S. Dollar and foreign
7
<PAGE>
currencies may negatively affect the value of the Fund's investments.
o Management Risk The Fund is subject to management risk because it is an
actively managed investment portfolio. Alliance will apply its investment
techniques and risk analyses in making investment decisions for the Fund,
but there is no guarantee that its decisions will produce the intended
results.
Portfolio Turnover. The Fund is actively managed and, in some cases in response
to market conditions, the 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.
Temporary Defensive Position. For temporary defensive purposes, the Fund may
reduce its position in equity securities and invest, without limit, in certain
types of short-term, liquid, high grade or high quality debt securities and in
lower-rated securities and convertible securities. These securities may include
U.S. Government securities, qualifying bank deposits, money market instruments,
prime commercial paper and other types of debt securities including notes and
bonds. Such securities also may include foreign-currency denominated securities
of the type mentioned above issued by foreign governmental entities, companies,
and supranational organizations. While the Fund invests for temporary defensive
purposes, it may not meet its investment objective.
DESCRIPTION OF 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 securities, which generally
provide a stable stream of income with yields that are generally higher than
those of common stock of the same or similar issuers. The price of a convertible
security will normally vary with changes in the price of the underlying common
stock, although the higher yield tends to make the convertible security less
volatile than the underlying equity security. As with debt securities, the
market value of convertible securities tends to decrease as interest rates rise
and increase as interest rates decline. While convertible securities generally
offer lower interest or dividend yields than non-convertible debt securities of
similar quality, they offer investors the potential to benefit from increases in
the market price of the underlying common stock. Convertible securities that are
rated Baa or lower by Moody's or BBB or lower by S&P, Duff & Phelps or Fitch and
comparable unrated securities as determined by Alliance may share some or all of
the risks of non-convertible debt securities with those ratings.
Currency Swaps. Currency swaps involve the individually negotiated exchange by
the Fund with another party of a series of payments in specified currencies. A
currency swap may involve the delivery at the end of the exchange period of a
substantial amount of one designated currency in exchange for the other
designated currency. Therefore, the entire principal value of a currency swap is
subject to the risk that the other party to the swap will default on its
contractual delivery obligations. The Fund will 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 counterparty to the transaction, the
Fund will have contractual remedies under the transaction agreements.
Depositary Receipts. Depositary receipts may not necessarily be denominated in
the same currency as the underlying securities into which they may be converted.
In addition, the issuers of the stock of unsponsored depositary receipts are not
obligated to disclose material information in the United States and, therefore,
there may not be a correlation between such information and the market value of
the depositary receipts. ADRs are depositary receipts typically issued by an
U.S. bank or trust company that evidence ownership of underlying securities
issued by a foreign corporation. GDRs and other types of depositary receipts are
typically issued by foreign banks or trust companies and evidence ownership of
underlying securities issued by either a foreign or an U.S. company. Generally,
depositary receipts in registered form are designed for use in the U.S.
securities markets, and depositary receipts in bearer form are designed for use
in foreign securities markets.
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.
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 will 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 had not entered into such 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 such securities decline. Such transactions also preclude the
opportunity for gain if the value of the hedged 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 devaluation level it anticipates.
Illiquid Securities. The Fund will limit its investments in illiquid securities
to no more than 15% of its net assets. Illiquid securities generally include (i)
direct placements or other securities that are subject to legal or contractual
restrictions on resale or for which there is no readily available market (e.g.,
8
<PAGE>
when trading in the security is suspended or, in the case of unlisted
securities, when market makers do not exist or will not entertain bids or
offers), including many individually negotiated currency swaps and any assets
used to cover currency swaps, (ii) over-the-counter options and assets used to
cover over-the-counter options, and (iii) repurchase agreements not terminable
within seven days.
Because of the absence of a trading market for illiquid securities, the Fund may
not be able to realize their full value upon sale. Alliance will monitor the
liquidity of the Fund's investments in illiquid securities. Rule 144A securities
generally will not be treated as "illiquid" for purposes of this limit on
investments.
The Fund may not be able to readily sell securities for which there is no ready
market. Such securities are unlike securities that are traded in the open market
and can be expected to be sold immediately if the market is adequate. The sale
price of illiquid securities may be lower or higher than Alliance's most recent
estimate of their fair value. Generally, less public information is available
about the issuers of such securities than about companies whose securities are
traded on an exchange. 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 the length of time the securities may be held or the
manner of resale. However, there may be contractual restrictions on resales of
non-publicly traded foreign securities.
Loans of Portfolio Securities. The Fund may lend its portfolio securities to
third parties for additional interest income. 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. 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 retain record ownership of loaned securities or equivalent
securities in order to exercise ownership rights such as voting rights,
subscription rights and rights to dividends, interest, or distributions. The
Fund may pay reasonable finders', administrative, and custodial fees in
connection with a loan.
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 a specified amount of a security on or before a
fixed date at a predetermined price. A call option written by the Fund is
"covered" if the Fund owns the underlying security, has an absolute and
immediate right to acquire that security upon conversion or exchange of another
security it holds, or holds a call option on the underlying security with an
exercise price equal to or less than that of the call option it has written. A
put option written by the Fund is covered if the Fund holds a put option 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 that the Fund owns or has the right to acquire. 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 were 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 covered call options
could result in increases in the Fund's portfolio turnover rate, especially
during periods when market prices of the underlying securities appreciate.
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.
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.
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 and incur
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. See the Fund's SAI for further
discussion of the use, risks, and costs of options on foreign currencies.
9
<PAGE>
Futures Contracts and Options on Futures Contracts. A "sale" of a futures
contract means the acquisition of a contractual obligation to deliver the
securities or foreign currencies or other commodity called for by the contract
at a specified price on a specified date. A "purchase" of a futures contract
means the incurring of an obligation to acquire the securities, foreign
currencies or other commodity called for by the contract at a specified price
on a specified date. The purchaser of a futures contract on an index agrees to
take or make delivery of an amount of cash equal to the difference between a
specified dollar multiple of the value of the index on the expiration date of
the contract ("current contract value") and the price at which the contract was
originally struck. No physical delivery of the securities underlying the index
is made.
Options on futures contracts are options that call for the delivery of futures
contracts upon exercise. Options on futures contracts written or purchased by
the Fund will be traded on U.S. or foreign exchanges and will be used only for
hedging purposes.
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 50% of its total assets.
The Fund may not purchase or sell a stock index future if immediately thereafter
more than 30% of its total assets would be hedged by stock index futures. The
Fund may not purchase or sell a stock index future if, immediately thereafter,
the sum of the amount of margin deposits on the Fund's existing futures
positions would exceed 5% of the market value of the Fund's total assets.
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 prevented from, selling
the collateral for its benefit. Alliance monitors the creditworthiness of the
vendors with which the Fund enters into repurchase agreements.
Rights and Warrants. The Fund will invest in rights or warrants only if Alliance
deems the underlying equity securities themselves appropriate for inclusion in
the Fund's portfolio. Rights and warrants entitle the holder to buy equity
securities at a specific price for a specific period of time. Rights are similar
to warrants except that they have a substantially shorter duration. Rights and
warrants may be considered more speculative than certain other types of
investments in that they do not entitle a holder to dividends or voting rights
with respect to the underlying securities nor do they represent any rights in
the assets of the issuing company. The value of a right or warrant does not
necessarily change with the value of the underlying security, although the value
of a right or warrant may decline because of a decrease in the value of the
underlying security, the passage of time or a change in perception as to the
potential of the underlying security, or any combination of these factors. If
the market price of the underlying security is below the exercise price of the
warrant on the expiration date, the warrant will expire worthless. Moreover, a
right or warrant ceases to have value if it is not exercised prior to the
expiration date.
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, interest rates, or currency exchange rate
movements correctly. Should prices, interest rates, 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 and forward contracts, and adverse market movements could
therefore continue to an unlimited extent over a period of time. In addition,
the correlation between movements in the prices of futures contracts, options
and forward contracts and movements in the prices of the securities and
currencies hedged or used for cover will not be perfect and could produce
unanticipated losses.
The Fund's ability to dispose of its position in futures contracts, options, and
forward contracts depends on the availability of liquid markets in such
instruments. Markets in options and futures with respect to a number of types of
securities and currencies are relatively new and still developing, and there is
no public market for forward contracts. It is impossible to predict the amount
of trading interest that may exist in various types of futures contracts,
options, and forward contracts. If a secondary market does not exist for an
option purchased or written by 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
currencies or portfolio securities covering an option written by the Fund until
the option expires or it delivers the underlying security, futures contract or
currency upon exercise. Therefore, no assurance can be given that the Fund will
be able to utilize these instruments effectively. In addition, the Fund's
ability to engage in options and futures transactions may be limited by tax
considerations and the use of certain hedging techniques may adversely impact
the
10
<PAGE>
characterization of income to the Fund for U.S. federal income tax purposes.
ADDITIONAL RISK CONSIDERATIONS
Investment in the Fund involves the special risk considerations described below.
Currency Considerations. The Fund may receive a portion of its revenues in
foreign currencies. Therefore, the dollar equivalent of its net assets,
distributions, and income will be adversely affected by reductions in the value
of certain foreign currencies relative to the U.S. Dollar. If the value of the
foreign currencies in which the Fund receives its income falls relative to the
U.S. Dollar between receipt of the income and the making of Fund distributions,
the Fund may be required to liquidate securities in order to make distributions
if it has insufficient cash in U.S. Dollars to meet distribution requirements
that the Fund must satisfy to qualify as a regulated investment company for
federal income tax purposes. Similarly, if an exchange rate declines between the
time the Fund incurs expenses in U.S. Dollars and the time cash expenses are
paid, the amount of the currency required to be converted into U.S. Dollars in
order to pay expenses in U.S. Dollars could be greater than the equivalent
amount of such expenses in the currency at the time they were incurred. In light
of these risks, the Fund may engage in currency hedging transactions, as
described above, which involve certain special risks.
Foreign Securities. 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's portfolio may experience greater price
volatility and significantly lower liquidity than a portfolio invested solely in
equity securities of U.S. companies. These markets may be subject to greater
influence by adverse events generally affecting the market, and by large
investors trading significant blocks of securities, than is usual in the United
States. Securities settlements may in some instances be subject to delays and
related administrative uncertainties.
Certain foreign countries require governmental approval prior to investments by
foreign persons or limit investment by foreign persons to only a specified
percentage of an issuer's outstanding securities or a specific class of
securities that 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. 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.
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.
11
<PAGE>
Extreme Governmental Action; Less Protective Laws. In contrast to investing in
the U.S., foreign investment may involve in certain situations greater risk of
nationalization, expropriation, confiscatory taxation, currency blockage or
other extreme governmental action that could adversely impact the Fund's
investments. In the event of certain such actions, the Fund could lose its
entire investment in the country involved. In addition, laws in various foreign
countries governing, among other subjects, business organization and practices,
securities and securities trading, bankruptcy and insolvency may provide less
protection to investors such as the Fund than provided under United States laws.
Foreign Taxes. The Fund's investment in foreign securities may be subject to
taxes withheld at the source on dividend or interest payments.
Year 2000. Many computer systems and applications that process transactions use
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 "19XX", which could result in processing
inaccuracies and computer system failures at or after the Year 2000. The Fund
and its major service providers, including Alliance, utilize a number of
computer systems and applications that have been either developed internally or
licensed from third-party suppliers. In addition, the Fund and its major service
providers, including Alliance, are dependent on third-party suppliers for
certain systems applications and for the electronic receipt of information
critical to their businesses. Should any of the computer systems employed by the
Fund or its major service providers, including Alliance, fail to process Year
2000 related information properly, that could have a significant negative impact
on the Fund's operations and the services that are provided to the Fund's
shareholders. To the extent that the operations of issuers of securities held by
the Fund are impaired by the Year 2000 problem, the value of the Fund's shares
may be materially affected. In addition, for the Fund's investments in foreign
markets, it is possible that foreign companies and markets will not be as
prepared for Year 2000 as domestic companies and markets.
The Year 2000 issue is a high priority for the Fund and Alliance. During 1997,
Alliance began a formal Year 2000 initiative, which established a structured and
coordinated process to deal with the Year 2000 issue. As part of its initiative,
Alliance established a Year 2000 project office to manage the Year 2000
initiative focusing on both information technology and non-information
technology systems. The Year 2000 project office meets periodically with the
Audit Committee of the Board of Directors of Alliance Capital Management
Corporation, Alliance's general partner, and with Alliance's executive
management to review the status of the Year 2000 efforts. Alliance has also
retained the services of a number of consulting firms which have expertise in
advising and assisting with regard to Year 2000 issues. Alliance reports that by
June 30, 1998, Alliance had completed its inventory and assessment of its
domestic and international computer systems and applications, identified mission
critical systems (those systems where loss of their function would result in
immediate stoppage or significant impairment to core business units) and
nonmission critical systems and determined which of these systems is not Year
2000 compliant. All third-party suppliers of mission critical computer systems
and applications and nonmission critical systems were contacted to verify
whether their systems and applications will be Year 2000 compliant and their
responses are being evaluated. All of those contacted have responded and have
informed Alliance that their systems and applications are or will be Year 2000
compliant. All mission and nonmission critical systems supplied by third parties
have been tested. Alliance expects all testing will be completed before the end
of 1999.
Alliance has remediated, replaced or retired all of its non-compliant mission
critical systems and nonmission critical systems and applications that can
affect the Fund. After each system has been remediated, it is tested with 19XX
dates to determine if it still performs its intended business function
correctly. Next, each system undergoes a simulation test using dates occurring
after December 31, 1999. Inclusive of the replacement and retirement of some of
its systems, Alliance has completed these testing phases for all mission
critical systems and nonmission critical systems. Integrated systems tests were
conducted to verify that the systems would continue to work together. Full
integration testing of all mission critical and nonmission critical systems is
complete. Testing of interfaces with third-party suppliers has been completed.
Alliance reports that it has completed an inventory of its facilities and
related technology applications and has substantially completed and tested these
systems. Alliance reports that it anticipates that these systems will be fully
operable in the Year 2000. Alliance has deferred certain other planned
information technology projects until after the Year 2000 initiative is
completed. Such delay is not expected to have a material adverse effect on
Alliance's financial condition or results of operations. Alliance, with the
assistance of a consulting firm, has developed Year 2000 specific contingency
plans with emphasis on mission critical functions. These plans seek to provide
alternative methods of processing in the event of a failure.
The current cost estimate to Alliance of the Year 2000 initiative is
approximately $45 million. These costs consist principally of modification and
testing and costs to develop formal Year 2000 specific contingency plans. These
costs, which will generally be expensed as incurred, will be funded from
Alliance's operations and the issuance of debt. Through September 30, 1999,
Alliance had incurred approximately $41.0 million of costs related to the Year
2000 initiative. At this time, management of Alliance believes that the costs
associated with resolving the Year 2000 issue will not have a material adverse
effect on Alliance's results of operations, liquidity or capital resources.
There are many risks associated with Year 2000 issues, including the risks that
the computer systems and applications used by the Fund and its major service
providers will not operate as intended and that the systems and applications of
third-party providers to the Fund and its service providers
12
<PAGE>
will not be Year 2000 compliant. Likewise, there can be no assurance the
compliance schedules outlined above will be met or that actual costs incurred
will not exceed current cost estimates. Should the significant computer systems
and applications used by the Fund or its major service providers, or the
systems of their important third-party suppliers, be unable to process date
sensitive information accurately after 1999, the Fund and its service providers
may be unable to conduct their normal business operations and to provide
shareholders with required services. In addition, the Fund and its service
providers may incur unanticipated expenses, regulatory actions and legal
liabilities. The Fund and Alliance cannot determine which risks, if any, are
most reasonably likely to occur or the effects of any particular failure to be
Year 2000 compliant. Certain statements provided by Alliance in this section
entitled "Year 2000," as such statements relate to Alliance, are
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. To the fullest extent permitted by law, the
foregoing Year 2000 discussion is a "Year 2000 Readiness Disclosure" within the
meaning of The Year 2000 Information and Readiness Disclosure Act, 15 U.S.C.
Sec. 1 (1998).
- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUND
- --------------------------------------------------------------------------------
INVESTMENT ADVISER AND FUND MANAGER
The Fund's investment adviser is Alliance Capital Management L.P., 1345 Avenue
of the Americas, New York, NY 10105. Alliance is a leading international
investment adviser managing client accounts with assets as of September 30, 1999
totaling more than $317 billion (of which more than $143 billion represented
assets of investment companies). As of September 30, 1999, Alliance managed
retirement assets for many of the largest public and private employee benefit
plans (including 28 of the nation's FORTUNE 100 companies), for public employee
retirement funds in 31 states, for investment companies, and for foundations,
endowments, banks and insurance companies worldwide. The 53 registered
investment companies managed by Alliance, comprising 119 separate investment
portfolios, currently have more than 4.8 million shareholder accounts.
The persons primarily responsible for the day-to-day management of the Fund are
Paul Rissman, Senior Vice President of Alliance Capital Management Corporation,
and Frank Caruso, Senior Vice President. Both Messrs. Rissman and Caruso have
been associated with Alliance Capital Management Corporation since prior to
1994.
Alliance provides investment advisory services and order placement facilities
for the Fund. For these advisory services, the Fund pays Alliance a fee at an
annualized rate of .75% of the Fund's average daily net assets. The fee will be
accrued daily and paid monthly.
- --------------------------------------------------------------------------------
PURCHASE AND SALE OF SHARES
- --------------------------------------------------------------------------------
How the Fund Values Its Shares
The Fund's net asset value or NAV is calculated at 4:00 p.m., Eastern time, each
day the Exchange is open for business. To calculate NAV, the Fund's assets are
valued and totaled, liabilities are subtracted, and the balance, called net
assets, is divided by the number of shares outstanding. The Fund values its
securities at their current market value determined on the basis of market
quotations, or, if such quotations are not readily available, such other methods
as the Fund's directors believe accurately reflect fair market value.
Your order for a purchase, sale, or exchange of shares is priced at the next NAV
calculated after your order is received in proper form 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
Distribution Arrangements section of this Prospectus 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:
o Initial: $250
o Subsequent: $ 50
o Automatic Investment Program: $ 25
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 particular, 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.
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.
13
<PAGE>
How to Sell Shares
You may "redeem" your shares (i.e., sell your shares to the Fund) on any day the
Exchange is open, either directly or through your financial 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, your redemption payment may be delayed until the Fund
is reasonably satisfied that the check or electronic funds transfer has been
collected (which may take up to 15 days).
o Selling Shares Through Your 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.
o Selling Shares Directly to the Fund
By Mail:
- -- Send a signed letter of instruction or stock power, along with
certificates, to:
Alliance Fund Services, Inc.
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.
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 will 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
- --------------------------------------------------------------------------------
The income dividends and capital gains distributions, if any, declared by the
Fund on its outstanding shares will, at the election of each shareholder, be
paid in cash or in additional shares of the same class of shares of the Fund. If
paid in additional shares, the shares will have an aggregate net asset value as
of the 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 dividends and distributions.
If you receive an income dividend or capital gains distribution in cash you may,
within 120 days following the date of its payment, reinvest the dividend or
distribution in additional shares of the Fund without charge by returning to
Alliance, with appropriate instructions, the check representing the dividend or
distribution. Thereafter, unless you otherwise specify, you will be deemed to
have elected to reinvest all subsequent dividends and distributions in shares of
the Fund.
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.
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
distributions of long-term capital gains generally will be taxable to you as
long-term capital gains. The Fund's distributions also may be subject to certain
state and local taxes.
Investment income received by the Fund from sources within foreign countries may
be subject to foreign income taxes withheld at the source.
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.
14
<PAGE>
If you buy shares just before the Fund deducts a distribution from its NAV, you
will pay the full price for the 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 with an initial sales charge as follows:
Initial Sales Charge
Commission
to Dealer/
Agent
As % of as % of % of
Net Amount Offering Offering
Amount Purchased Invested Price Price
- --------------------------------------------------------------------------------
Up to $100,000 4.44% 4.25% 4.00%
$100,000 up to $250,000 3.36 3.25 3.00
$250,000 up to $500,000 2.30 2.25 2.00
$500,000 up to $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 or more, 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 depending on the number of years you hold the shares. The CDSC
amounts are:
Year 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 Percentage 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 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.
15
<PAGE>
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. In the case of a partial redemption,
the shares not subject to the CDSC will be redeemed first. 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 for 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 your financial representative. The financial
intermediaries also may impose requirements on 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.
- --------------------------------------------------------------------------------
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 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 of the Fund's classes
of shares. 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.
For more information about the Fund, the following documents are available upon
request:
o Statement of Additional Information (SAI)
The Fund has an SAI, which contains more detailed information about the Fund,
including its operations and investment policies. The Fund's SAI is incorporated
by reference into (and is legally part of) this prospectus.
You may request a free copy of the SAI or make shareholder inquiries of the
Fund, by contacting your broker or other financial intermediary, or by
contacting Alliance:
By Mail: c/o Alliance Fund Services, Inc.
P.O. Box 1520
Secaucus, NJ 07096-1520
By Phone: For Information: (800) 221-5672
For Literature: (800) 227-4618
Or you may view or obtain these documents from the Commission:
o Call the SEC at 1-202-942-8090 for information on the operation of the
Public Reference Room.
o Reports and other information about the Fund are available on the EDGAR
Database on the Commission's Internet site at http://www.sec.gov.
o Copies of the information may be obtained, after paying a duplicating fee,
by electronic request at [email protected], or by writing the
Commission's Public Reference Section, Washington, DC 20549-0102.
You also may find more information about Alliance and the Fund on the Internet
at: www.Alliancecapital.com.
16
SEC File Number: 811-09687
<PAGE>
(LOGO) ALLIANCE DISCIPLINED VALUE FUND, INC.
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
December 20, 1999
_________________________________________________________________
This Statement of Additional Information is not a
prospectus but supplements and should be read in conjunction with
the Prospectus dated December 20, 1999 for Alliance Disciplined
Value Fund, Inc. (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.....................
Portfolio Transactions.................................
General Information....................................
Financial Statements and Report of Independent
Accountants .........................................
Appendix A: Futures Contracts and Options on
Futures Contracts and Foreign Currencies.............
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
_________________________________________________________________
Alliance Disciplined Value Fund, Inc. (the "Fund") is a
diversified open-end management investment company. The Fund was
incorporated under the laws of the State of Maryland on July 6,
1999. The Fund's investment objective is "fundamental" and
cannot be changed without a shareholder vote. Except as noted,
the Fund's investment policies are not fundamental and thus can
be changed without a shareholder vote. The Fund will not change
these policies without notifying its shareholders. There is no
guarantee that the Fund will achieve its investment objective.
Investment Policies and Practices
The Fund's principal investment policies, practices and
risks are set forth in the Prospectus. The information set forth
below concerning the Fund's investment practices and policies
supplements the information in the Prospectus. Except as
otherwise noted, the Fund's investment policies described below
are not designated "fundamental policies" within the meaning of
the Investment Company Act of 1940, as amended (the "1940 Act"),
and may be changed by the Directors of the Fund without
shareholder approval. However, the Fund will not change its
investment policies without contemporaneous written notice to
shareholders.
ADDITIONAL INVESTMENT POLICIES AND PRACTICES
The following information about the Fund's investment
policies and practices supplements the information set forth in
the Prospectus.
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 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
2
<PAGE>
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.
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 is generally 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 within four
months after the transaction, although delayed settlements beyond
four months may be negotiated. Securities purchased or sold
under a forward commitment are subject to market fluctuation, and
no interest accrues to the purchaser prior to the settlement
date. At the time the Fund enters 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 canceled in the event
that the required conditions did not occur and the trade was
canceled.
The use of forward commitments enables the Fund to
protect against anticipated changes in interest rates and prices.
For instance, in periods of rising interest rates and falling
bond prices, the Fund might sell securities in its portfolio on a
forward commitment basis to limit its exposure to falling bond
prices. In periods of falling interest rates and rising bond
prices, the Fund might sell a security in its portfolio and
purchase the same or a similar security on a when-issued or
forward commitment basis, thereby obtaining the benefit of
currently higher cash yields. However, if Alliance Capital
Management L.P., the Fund's investment adviser (the "Adviser"),
were to forecast incorrectly the direction of interest rate
movements, the Fund might be required to complete such when-
issued or forward transactions at prices less favorable than
current market values.
3
<PAGE>
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 the separate account of the Fund,
liquid assets having value equal to, or greater than, any
commitments to purchase securities on a forward commitment basis.
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 can 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.
Although the Fund intends to make such purchases for
speculative purposes, purchases of securities on such bases may
involve more risk than other types of purchases. For example, by
committing to purchase securities in the future, the Fund
subjects itself to a risk of loss on such commitments as well as
on its portfolio securities. Also, the Fund may have to sell
assets that have been set aside in order to meet redemptions. In
addition, if the Fund determines it is advisable as a matter of
investment strategy to sell the forward commitment or when-issued
or delayed delivery securities before delivery, the Fund may
incur a gain or loss because of market fluctuations since the
time the commitment to purchase such securities was made. Any
such gain or loss would be treated as a capital gain or loss and
would be treated for tax purposes as such. When the time comes
to pay for the securities to be purchased under a forward
commitment or on a when-issued or delayed delivery basis, the
Fund will meet its obligations from the then available cash flow
or the sale of securities, or, although it would not normally
expect to do so, from the sale of the forward commitment or when-
issued or delayed delivery securities themselves (which may have
a value greater or less than the Fund's payment obligation).
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
of 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 which 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
4
<PAGE>
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 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. 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 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").
To the extent required by applicable law, the Fund's
Custodian will place liquid assets in a separate 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 assets
placed in a separate account declines, additional liquid assets
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 separate 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. In addition, the
Fund may use such other methods of "cover" as are permitted by
applicable law.
While these contracts are not presently regulated by the
Commodity Futures Trading Commission (the "CFTC"), the CFTC may
in the future assert authority to regulate forward contracts. In
such event the Fund's ability to utilize forward contracts in the
manner set forth in the Prospectus may be restricted.
The Fund will not speculate in forward currency
contracts. The Fund will only enter forward foreign currency
5
<PAGE>
exchange contracts with counterparties that, in the opinion of
the Adviser, do not present undue credit risk. Generally, such
forward contracts will be for a period of less than three months.
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. Unanticipated changes in currency prices may result in
poorer overall performance for the Fund than if it had not
entered into such contracts. The matching of the increase in
value of a forward contract and the decline in the U.S. Dollar
equivalent value of the foreign currency-denominated asset that
is the subject of the hedge generally will not be precise. In
addition, the Fund may not always be able to enter into foreign
currency forward contracts at attractive prices and this will
limit the Fund's ability to use such contract to hedge or cross-
hedge its assets. Also, with regard to the Fund's use of cross-
hedges, there can be no assurance that historical correlations
between the movement of certain foreign currencies relative to
the U.S. Dollar will continue. Thus, at any time poor
correlation may exist between movements in the exchange rates of
the foreign currencies underlying the Fund's cross-hedges and the
movements in the exchange rates of the foreign currencies in
which the Fund's assets that are the subject of such cross-hedges
are denominated.
LENDING OF PORTFOLIO SECURITIES. Consistent with
applicable regulatory requirements, the Fund may lend its
portfolio securities provided the loan is continuously secured by
cash, marketable securities issued or guaranteed by the U.S.
Government or its agencies, or a standby letter of credit issued
by qualified banks equal to no less than the market value,
determined daily, of the securities loaned. In lending its
portfolio securities, the Fund will require that interest or
dividends on securities loaned be paid to the Fund. Where voting
or consent rights with respect to loaned securities pass to the
borrower, the Fund will follow the policy of calling the loan, in
whole or in part as may be appropriate, to permit it to exercise
such voting or consent rights if the exercise of such rights
involves issues having a material effect on the Fund's investment
in the securities loaned. Loans will be made only to firms
deemed by the Adviser to be of good standing and will not be made
unless, in the judgment of the Adviser, the consideration to be
earned from such loans would justify the risk. The Fund may
invest any cash collateral in portfolio securities and earn
additional income, or receive an agreed-upon amount of income
6
<PAGE>
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. The Fund may purchase put and call options
written by others and write covered put and call options
overlying the types of securities in which the Fund may invest.
A put option (sometimes called a "standby commitment") gives the
purchaser of the 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 (sometimes called a "reverse standby commitment") 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.
The Fund may purchase put and call options to provide
protection against adverse price or yield effects from
anticipated changes in prevailing interest rates. For instance
in periods of rising interest rates and falling bond prices, the
Fund might purchase a put option to limit its exposure to falling
prices. In periods of falling interest rates and rising bond
prices, the Fund might purchase a call option. 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 security increased
by an amount in excess of the premium paid. It would realize a
loss if the price of the security declined or remained the same
or did not increase during the period by more than the amount of
the premium. By purchasing a put option, the Fund would be in a
position to realize a gain if, during the option period, the
price of the security declined by an amount in excess of the
premium paid. It would realize a loss if the price of the
security increased or remained the same or did not decrease
during that period by more than the amount of the premium. If a
put or call option purchased by the Fund were permitted to expire
without being sold or exercised, its premium would represent a
loss to the Fund.
When the Fund writes a put option it must either own at
all times during the option period an offsetting put option on
the same security or maintain in a segregated account cash or
liquid assets in an amount adequate to purchase the underlying
security should the put be exercised. When the Fund writes a
call option it must own at all times during the option period
either the underlying securities or an offsetting call option on
the same securities. If a put option written by the Fund were
exercised the Fund would be obligated to purchase the underlying
security at the exercise price. If a call option written by the
7
<PAGE>
Fund were exercised the Fund would be obligated to sell the
underlying security at the exercise price.
The Fund may write put options either to earn additional
income in the form of option premiums (anticipating that the
price of the underlying security will remain stable or rise
during the option period and the option will therefore not be
exercised) or to acquire the underlying security at a net cost
below the current value (e.g., the option is exercised because of
a decline in the price of the underlying security, but the amount
paid by the Fund, offset by the option premium, is less than the
current price).
The Fund will write covered call options both to reduce
the risks associated with certain of its investments and to
increase total investment return through the receipt of premiums.
In return for the premium income, the Fund will give up the
opportunity to profit from an increase in the market price of the
underlying security above the exercise price so long as its
obligations under the contract continue, except insofar as the
premium represents a profit. Moreover, in writing the call
option, the Fund will retain the risk of loss should the price of
the security decline. The premium is intended to offset that loss
in whole or in part. Unlike the situation in which the Fund owns
securities not subject to a call option, the Fund, in writing
call options, must assume that the call may be exercised at any
time prior to the expiration of its obligation as a writer, and
that in such circumstances the net proceeds realized from the
sale of the underlying securities pursuant to the call may be
substantially below the prevailing market 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 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 as described
below. The Fund retains the premium received from writing a put
or call option whether or not the option is exercised.
The Fund may also write covered call options for cross-
hedging purposes. A call option is for cross-hedging purposes if
it is designed 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 the option by
8
<PAGE>
maintaining, in a segregated account with the Custodian, liquid
assets in an amount not less than the market value of the
underlying security, marked to market daily.
The Fund may dispose of an option which it has purchased
by entering into a "closing sale transaction" with the writer of
the option. A closing sale transaction terminates the obligation
of the writer of the option and does not result in the ownership
of an option. The Fund realizes a profit or loss from a closing
sale transaction if the premium received from the transaction is
more than or less than the cost of the option.
The Fund may terminate its obligation to the holder of
an option written by the Fund through a "closing purchase
transaction." The Fund may not, however, effect a closing
purchase transaction with respect to such an option after it has
been notified of the exercise of such option. The Fund realizes
a profit or loss from a closing purchase transaction if the cost
of the transaction is more than or less than the premium received
by the Fund from writing the option. A closing purchase
transaction for exchange-traded options may be made only on a
national securities exchange. There is no assurance that a
liquid secondary market on a national securities exchange will
exist for any particular option, or at any particular time, and
for some options, such as over-the-counter options, no secondary
market on a national securities exchange may exist. If the Fund
is unable to effect a closing purchase transaction, the Fund will
not sell the underlying security until the option expires or the
Fund delivers the underlying security upon exercise.
The Fund may purchase or write options in negotiated
transactions. The Fund effects such transactions only with
investment dealers and other financial institutions (such as
commercial banks or savings and loan institutions) deemed
creditworthy by the Adviser. The Adviser has also adopted
procedures for monitoring the creditworthiness of such entities.
Options traded in the over-the-counter market may not be as
actively traded as those traded on an exchange. Accordingly, it
may be more difficult to value such options. Options purchased
or written by the Fund in negotiated transactions may be
considered illiquid and it may not be possible for the Fund to
effect a closing purchase transaction at a time when the Adviser
believes it would be advantageous to do so.
The Fund may enter into contracts (or amend existing
contracts) with primary dealer(s) with whom it writes
over-the-counter options. The contracts will provide that the
Fund has the absolute right to repurchase an option it writes at
any time at a repurchase price which represents the fair market
value, as determined in good faith through negotiation between
the parties, but which in no event will exceed a price determined
9
<PAGE>
pursuant to a formula contained in the contract. Although the
specific details of the formula may vary between contracts with
different primary dealers, the formula will generally be based on
a multiple of the premium received by the Fund for writing the
option, plus the amount, if any, of the option's intrinsic value
(i.e., the amount the option is "in-the-money"). The formula will
also include a factor to account for the difference between the
price of the security and the strike price of the option if the
option is written "out-of-the-money." Although the Fund has
established standards of creditworthiness for these primary
dealers, the Fund may still be subject to the risk that firms
participating in such transactions will fail to meet their
obligations. With respect to agreements concerning the
over-the-counter options the Fund has written, the Fund will
treat as illiquid only securities equal in amount to the formula
price described above less the amount by which the option is
"in-the-money," i.e., the amount by which the price of the option
exceeds the exercise price.
OPTIONS ON SECURITIES INDICES. The Fund may purchase
put and call options and write covered put and call options on
securities indexes for the purpose of hedging against the risk of
unfavorable price movements adversely affecting the value of the
Fund's securities or securities it intends to purchase. 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. A
call option on a securities index is considered covered, for
example, if, so long as the Fund is obligated as the writer of
the call, it holds securities the price changes of which are, in
the opinion of the Adviser, expected to replicate substantially
the movement of the index or indexes upon which the options
written by the Fund are based. A put on a securities index
written by the Fund will be considered covered if, so long as it
is obligated as the writer of the put, the Fund segregates with
its custodian liquid assets having a value equal to or greater
than the exercise price of the option.
Through the purchase of listed index options, the Fund
could achieve many of the same objectives as through the use of
options on individual securities. Price movements in the Fund's
securities probably will not correlate perfectly with movements
in the level of the index and, therefore, the Fund would bear a
risk of loss on index options purchased by it if favorable price
movements of the hedged portfolio securities do not equal or
exceed losses on the options or if adverse price movements of the
10
<PAGE>
hedged portfolio securities are greater than gains realized from
the options.
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. 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 exchange-traded or traded over-the-
counter. The Fund will write options on foreign currencies only
if they are "covered."
The Fund will not speculate in foreign currency options.
Accordingly, the Fund will not hedge a currency substantially in
excess of the market value of the securities denominated in that
currency which it owns or the expected acquisition price of
securities which it anticipates purchasing.
See Appendix A for further discussion of the use, risks
and costs of options on foreign currencies.
FUTURES CONTRACTS AND OPTIONS THEREON. The Fund may
purchase and sell futures contracts and related options on debt
securities and on indexes of debt securities to hedge against
anticipated changes in interest rates that might otherwise have
an adverse effect on the value of its assets or assets it intends
to acquire. The Fund may also enter into futures contracts and
related options on foreign currencies in order to limit its
exchange rate risk. A "sale" of a futures contract means the
acquisition of a contractual obligation to deliver the securities
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 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 and the price at which the
contract was originally struck. All futures contracts and
related options will be traded on exchanges that are licensed and
regulated by the CFTC. The Fund will only write options on
11
<PAGE>
futures contracts which are "covered." These investment
techniques will be used only to hedge against anticipated future
changes in interest or exchange rates which otherwise might
either adversely affect the value of the Fund's securities or
adversely affect the prices of securities which the Fund intends
to purchase at a later date. These investment techniques will
not be used for speculation.
In general, the Fund will limit its use of futures
contracts and options on futures contracts so that either (i) the
contracts or options thereon are for "bona fide hedging" purposes
as defined under regulations of the CTFC or (2) if for other
purposes, no more than 5% of the liquidation value of the Fund's
total assets will be used for initial margin of option premiums
required to establish non-hedging positions. These instruments
will be used for hedging purposes and not for speculation or to
leverage the Fund.
In instances involving the purchase of futures contracts
or the writing of put options thereon by the Fund, an amount of
liquid assets equal to the cost of such futures contracts or
options written (less any related margin deposits) will be
deposited in a segregated account with its custodian, thereby
insuring that the use of such futures contracts and options is
unleveraged. In instances involving the sale of futures
contracts or the writing of call options thereon by the Fund, the
securities underlying such futures contracts or options will at
all times be maintained by the Fund or, in the case of index
futures and related options, the Fund will own securities the
price changes of which are, in the opinion of the Adviser,
expected to replicate substantially the movement of the index
upon which the futures contract or option is based.
Positions taken in the futures markets are not normally
held until delivery or cash settlement is required, but are
instead liquidated through offsetting transactions which may
result in a gain or a loss. While futures positions taken by the
Fund will usually be liquidated in this manner, the Fund may
instead make or take delivery of underlying securities whenever
it appears economically advantageous to the Fund to do so.
Positions in futures contracts may be closed out only on
an exchange or a board of trade which provides the market for
such futures. Although the Fund intends to purchase or sell
futures only on exchanges or boards of trade where there appears
to be an active market, there is no guarantee that such will
exist for any particular contract or at any particular time. If
there is not a liquid market at a particular time, it may not be
possible to close a futures position at such time, and, in the
event of adverse price movements, the Fund would continue to be
required to make daily cash payments of maintenance margin.
12
<PAGE>
However, in the event futures positions are used to hedge
portfolio securities, the securities will not be sold until the
futures positions can be liquidated. In such circumstances, an
increase in the price of securities, if any, may partially or
completely offset losses on the futures contracts.
See Appendix A for further discussion of the use, risks
and costs of futures contracts and options on futures contracts.
REPURCHASE AGREEMENTS. The Fund may enter into
repurchase agreements pertaining to U.S. Government Securities
with member banks of the Federal Reserve System or "primary
dealers" (as designated by the Federal Reserve Bank of New York)
in such securities. There is no percentage restriction on the
Fund's ability to enter into repurchase agreements. Currently,
the Fund intends to enter into repurchase agreements only with
its custodian and such primary dealers. A repurchase agreement
arises when a buyer purchases a security and simultaneously
agrees to resell it to the vendor at an agreed-upon future date,
normally one day or a few days later. The resale price is
greater than the purchase price, reflecting an agreed-upon
interest rate which is effective for the period of time the
buyer's money is invested in the security and which is related to
the current market rate rather than the coupon rate on the
purchased security. 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.
Repurchase agreements may exhibit the characteristics of
loans by the Fund. During the term of the repurchase agreement,
the Fund retains the security subject to the repurchase agreement
as collateral securing the seller's repurchase obligation,
continually monitors on a daily basis the market value of the
security subject to the agreement and requires the seller to
deposit with the Fund collateral equal to any amount by which the
market value of the security subject to the repurchase agreement
falls below the resale amount provided under the repurchase
agreement.
ILLIQUID SECURITIES. The Fund will not invest more than
15% of its net assets in illiquid securities. For this purpose,
illiquid securities are securities restricted as to disposition
under Federal securities laws and include, among others,
13
<PAGE>
(a) direct placements or other securities which are subject to
legal or contractual restrictions on resale or for which there is
no readily available market (e.g., trading in the security is
suspended or, in the case of unlisted securities, market makers
do not exist or will not entertain bids or offers), and
(b) repurchase agreements not terminable within seven days.
Securities that have legal or contractual restrictions on resale
but have a readily available market are not deemed illiquid for
purposes of this limitation.
Historically, illiquid securities have included
securities subject to contractual or legal restrictions on resale
because they have not been registered under the Securities Act of
1933, as amended (the "Securities Act"), securities which are
otherwise not readily marketable and repurchase agreements having
a maturity of longer than seven days. Securities which have not
been registered under the Securities Act are referred to as
private placements or restricted securities and are purchased
directly from the issuer or in the secondary market. Mutual
funds do not typically hold a significant amount of these
restricted or other illiquid securities because of the potential
for delays on resale and uncertainty in valuation. Limitations
on resale may have an adverse effect on the marketability of
portfolio securities and a mutual fund might be unable to dispose
of restricted or other illiquid securities promptly or at
reasonable prices and might thereby experience difficulty
satisfying redemptions within seven days. A mutual fund might
also have to register such restricted securities in order to
dispose of them resulting in additional expense and delay.
Adverse market conditions could impede such a public offering of
securities.
In recent years, however, a large institutional market
has developed for certain securities that are not registered
under the Securities Act including repurchase agreements,
commercial paper, foreign securities, municipal securities and
corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security
can be readily resold or on an issuer's ability to honor a demand
for repayment. The fact that there are contractual or legal
restrictions on resale to the general public or to certain
institutions may not be indicative of the liquidity of such
investments.
Rule 144A under the Securities Act allows a broader
institutional trading market for securities otherwise subject to
restriction on resale to the general public. Rule 144A
establishes a "safe harbor" from the registration requirements of
the Securities Act for resales of certain securities to qualified
institutional buyers. An insufficient number of qualified
institutional buyers interested in purchasing certain restricted
14
<PAGE>
securities held by the Fund, however, could affect adversely the
marketability of such portfolio securities and the Fund might be
unable to dispose of such securities promptly or at reasonable
prices. Rule 144A has already produced enhanced liquidity for
many restricted securities, and market liquidity for such
securities may continue to expand as a result of this regulation
and the consequent inception of the PORTAL System, which is an
automated system for the trading, clearance and settlement of
unregistered securities of domestic and foreign issuers sponsored
by the National Association of Securities Dealers, Inc. (the
"NASD").
The Adviser, acting under the supervision of the Board
of Directors, will monitor the liquidity of restricted securities
in the Fund that are eligible for resale pursuant to Rule 144A.
In reaching liquidity decisions, the Adviser will consider, among
others, the following factors: (1) the frequency of trades and
quotes for the security; (2) the number of dealers issuing
quotations to purchase or sell the security; (3) the number of
other potential purchasers of the security; (4) the number of
dealers undertaking to make a market in the security; (5) the
nature of the security (including its unregistered nature) and
the nature of the marketplace for the security (e.g., the time
needed to dispose of the security, the method of soliciting
offers and the mechanics of the transfer); and (6) any applicable
Commission interpretation or position with respect to such type
of securities.
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.
PORTFOLIO TURNOVER. Because the Fund will actively use
trading to achieve its investment objective and policies, the
Fund may be subject to a greater degree of turnover and, thus, a
higher incidence of short-term capital gains taxable as ordinary
income than might be expected from investment companies which
invest substantially all of their funds on a long-term basis, and
correspondingly larger mark-up charges can be expected to be
borne by the Fund. Management anticipates that the annual
turnover in the Fund may be in excess of 100%. An annual
turnover rate of 100% occurs, for example, when all of the
securities in the Fund are replaced one time in a period of one
year.
15
<PAGE>
The value of the Fund's shares will be influenced by the
factors which generally affect securities, such as the economic
and political outlook, earnings, dividends and the supply and
demand for various classes of securities. There can be, of
course, no assurance that the Fund's investment objective will be
achieved.
CERTAIN RISK CONSIDERATIONS
RISKS OF INVESTMENTS IN FOREIGN SECURITIES. Foreign
issuers are subject to accounting and financial standards and
requirements that differ, in some cases significantly, from those
applicable to U.S. issuers. In particular, the assets and
profits appearing on the financial statements of a foreign issuer
may not reflect its financial position or results of operations
in the way they would be reflected had the financial statement
been prepared in accordance with U.S. generally accepted
accounting principles. In addition, for an issuer that keeps
accounting records in local currency, inflation accounting rules
in some of the countries in which the Fund will invest require,
for both tax and accounting purposes, that certain assets and
liabilities be restated on the issuer's balance sheet in order to
express items in terms of currency of constant purchasing power.
Inflation accounting may indirectly generate losses or profits.
Consequently, financial data may be materially affected by
restatements for inflation and may not accurately reflect the
real condition of those issuers and securities markets.
Substantially less information is publicly available about
certain non-U.S. issuers than is available about U.S. issuers.
Expropriation, confiscatory taxation, nationalization,
political, economic or social instability or other similar
developments, such as military coups, have occurred in the past
in countries in which the Fund will invest and could adversely
affect the Fund's assets should these conditions or events recur.
Foreign investment in certain foreign securities is
restricted or controlled to varying degrees. These restrictions
or controls may at times limit or preclude foreign investment in
certain foreign securities and increase the costs and expenses of
the Fund. Certain countries in which the Fund will invest
require governmental approval prior to investments by foreign
persons, limit the amount of investment by foreign persons in a
particular issuer, limit the investment by foreign persons only
to a specific class of securities of an issuer that may have less
advantageous rights than the classes available for purchase by
domiciliaries of the countries and/or impose additional taxes on
foreign investors.
Certain countries other than those on which the Fund
will focus its investments may require governmental approval for
16
<PAGE>
the repatriation of investment income, capital or the proceeds of
sales of securities by foreign investors. In addition, if a
deterioration occurs in a country's balance of payments, the
country could impose temporary restrictions on foreign capital
remittances.
Income from certain investments held by the Fund could
be reduced by foreign income taxes, including withholding taxes.
It is impossible to determine the effective rate of foreign tax
in advance. The Fund's net asset value may also be affected by
changes in the rates or methods of taxation applicable to the
Fund or to entities in which the Fund has invested. The Adviser
generally will consider the cost of any taxes in determining
whether to acquire any particular investments, but can provide no
assurance that the tax treatment of investments held by the Fund
will not be subject to change.
For many foreign securities, there are U.S. dollar-
denominated American Depository Receipts (ADRs) which are traded
in the United States on exchanges or over-the-counter, are issued
by domestic banks or trust companies and which market quotations
are readily available. ADRs do not lessen the foreign exchange
risk inherent in investing in the securities of foreign issuers.
However, by investing in ADRs rather than directly in stock of
foreign issuers, the Fund can avoid currency risks which might
occur during the settlement period for either purchases or sales.
The Fund may purchase foreign securities directly, as well as
through ADRs.
SECURITIES RATINGS. The ratings of fixed-income
securities by Moody's Investors Service, Inc. and Standard &
Poor's Ratings Services 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.
The Adviser will try to reduce the risk inherent in the
Fund's investment approach through credit analysis,
diversification and attention to current developments and trends
in interest rates and economic conditions. However, there can be
no assurance that losses will not occur. In considering
investments for the Fund, the Adviser will attempt to identify
those high-yielding securities whose financial condition is
adequate to meet future obligations, has improved, or is expected
to improve in the future. The Adviser's analysis focuses on
relative values based on such factors as interest or dividend
17
<PAGE>
coverage, asset coverage, earnings prospects, and the experience
and managerial strength of the issuer.
Non-rated securities will also be considered for
investment by the Fund when the Adviser believes that the
financial condition of the issuers of such securities, or the
protection afforded by the terms of the securities themselves,
limits the risk to the Fund to a degree comparable to that of
rated securities which are consistent with the Fund's objectives
and policies.
1940 ACT RESTRICTIONS. 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 borrowing 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 of the Fund's portfolio would be
300%; while outstanding borrowings representing 25% of the total
assets less liabilities (other than such borrowings), the asset
coverage of the Fund's portfolio 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 and such sales could cause the Fund to incur related
transaction costs and to realize taxable gains.
Under the 1940 Act, the Fund may invest not more than
10% of its total assets in securities of other investment
companies. In addition, under the 1940 Act the Fund may not own
more than 3% of the total outstanding voting stock of any
investment company and not more than 5% of the value of the
Fund's total assets may be invested in the securities of any
investment company.
The Fund may emphasize investments in particular
industries or sectors as a by-product of the stock selection
process rather than as the result of assigned targets or ranges.
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
18
<PAGE>
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.
The Fund may not:
(1) 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;
(2) Borrow money or issue senior securities except to
the extent permitted by the 1940 Act;
(3) Pledge, hypothecate, mortgage or otherwise encumber
its assets, except to secure permitted borrowings;
(4) Invest in companies for the purpose of exercising
control;
(5) (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, futures on securities, currencies and securities
indices and forward contracts or contracts for the future
acquisition or delivery of securities and foreign currencies and
other similar contracts and options on the foregoing); and
(c) act as an underwriter of securities, except that the Fund may
acquire restricted securities under circumstances in which, if
such securities were sold, the Fund might be deemed to be an
underwriter for purposes of the Securities Act; or
(6) Concentrate more than 25% of its assets in any
particular industry or group of industries.
________________________________________________________________
MANAGEMENT OF THE FUND
________________________________________________________________
Directors and Officers
The business and affairs of the Fund are managed under
the direction of the Board of Directors. The Directors and
officers of the Fund, their ages and their principal occupations
during the past five years are set forth below. Each such
Director and officer is also a trustee, director or officer of
19
<PAGE>
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,* 54, Chairman of the Board, is the
President, Chief Operating Officer and a Director of Alliance
Capital Management Corporation ("ACMC"), with which he has been
associated since prior to 1994.
RUTH BLOCK, 69, was formerly an Executive Vice President
and the Chief Insurance Officer of The Equitable Life Assurance
Society of the United States. She is a Director of Ecolab
Incorporated (specialty chemicals) and BP Amoco Corporation (oil
and gas). Her address is P.O. Box 4623, Stamford, Connecticut
06903.
DAVID H. DIEVLER, 70, 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, 57, has been the President of Historic
Hudson Valley (historic preservation) since prior to 1994.
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., 67, 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 1994. His address is
Room 100, 2 Greenwich Plaza, Greenwich, Connecticut 06830.
DR. JAMES M. HESTER, 75, has been President of the Harry
Frank Guggenheim Foundation, with which he has been associated
since prior to 1994. 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, 60, is a member of the law firm of
Cahill Gordon & Reindel, with which he has been associated since
prior to 1994. 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.
____________________
* An "interested person" of the Fund as defined in the 1940
Act.
20
<PAGE>
DONALD J. ROBINSON, 65, is Senior Counsel to the law
firm of Orrick, Herrington & Sutcliffe and was formerly a senior
partner and a member of the Executive Committee of that firm. He
was also a Trustee of the Museum of the City of New York from
1977 to 1995. His address is 98 Hell's Peak Road, Weston,
Vermont 05161.
OFFICERS
JOHN D. CARIFA, Chairman and President, (see biography,
above).
KATHLEEN A. CORBET, Senior Vice President, 39, is an
Executive Vice President of ACMC, with which she has been
associated since prior to 1994.
FRANK V. CARUSO, Senior Vice President, 43, is a Senior
Vice President of Shields/ACMC, with which he has been associated
since prior to 1994.
PAUL C. RISSMAN, Senior Vice President, 43, is a Senior
President of ACMC, with which he has been associated since prior
to 1994.
THOMAS J. BARDONG, Vice President, 54, is a Senior Vice
President of ACMC, with which he has been associated since prior
to 1994.
EDMUND P. BERGAN, JR., Secretary, 49, is a Senior Vice
President and the General Counsel of Alliance Fund Distributors,
Inc. ("AFD") and Alliance Fund Services, Inc. ("AFS"), with which
he has been associated since prior to 1994.
ANDREW L. GANGOLF, Assistant Secretary, 45, is a Vice
President and Assistant General Counsel of AFD, with which he has
been associated since December 1994. Prior thereto, he was a
Vice President and Assistant Secretary of Delaware Management
Co., Inc. since prior to 1994.
DOMENICK PUGLIESE, Assistant Secretary, 38, is a Vice
President and Assistant General Counsel of AFD, with which he has
been associated since May 1995. Prior thereto, he was a Vice
President and Counsel of Concord Financial Holding Corporation
since prior to 1994.
MARK D. GERSTEN, Treasurer and Chief Financial Officer,
49, is a Senior Vice President of AFS and a Vice President of
AFD, with which he has been associated since prior to 1994.
VINCENT S. NOTO, Controller, 34, is a Vice President of
AFS, with which he has been associated since prior to 1994.
21
<PAGE>
The Fund does not pay any fees to, or reimburse expenses
of, its Directors who are considered "interested persons" of the
Fund. The aggregate compensation to be paid by the Fund to each
of the Directors during the Fund's fiscal period ending November
30, 2000 (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 companies to which the Adviser provides investment
advisory services (collectively, the "Alliance Fund Complex"),
and the total number of registered investment companies (and
separate investment portfolios within those companies) in the
Alliance Fund Complex with respect to which each of the Directors
serves as a director or trustee, are set forth below. Neither
the Fund nor any other registered investment company in the
Alliance Fund Complex provides compensation in the form of
pension or retirement benefits to any of its directors or
trustees.
Total Number Total Number
of Investment of Investment
Companies in Portfolios
the Alliance Within the
Total Fund Complex, Alliance
Compensation Including the Fund Complex,
From the Fund, as to Including the
Alliance Fund which the Fund, as to which
Aggregate Complex, Director is a the Director
Name of Compensation Including the Director or is a Director
Director From the Fund Fund Trustee or Trustee
___________ _____________ ______________ _____________ _______________
John D. Carifa $ -0 - $ -0 - 50 114
Ruth Block $3,750 $180,762.50 37 77
David H. Dievler $3,750 $216,287.50 43 80
John H. Dobkin $3,750 $185,362.50 41 91
William H. Foulk, Jr. $3,750 $241,002.50 45 109
Dr. James M. Hester $3,750 $172,912.50 37 74
Clifford L. Michel $3,750 $187,762.50 38 90
Donald J. Robinson $3,750 $193,708.50 41 103
As of December 16, 1999, the Directors and officers of
the Fund as a group owned less than 1% of the shares of the
Fund.
Adviser
The Fund's investment adviser, Alliance Capital
Management L.P., 1345 Avenue of the Americas, New York, New York
10105, is a leading international investment adviser managing
client accounts with assets as of September 30, 1999 totaling
22
<PAGE>
more than $317 billion (of which more than $143 billion
represented the assets of investment companies). As of
September 30, 1999, the Adviser managed retirement assets for
many of the largest public and private employee benefit plans
(including 28 of the nation's FORTUNE 100 companies), for public
employee retirement funds in 31 states, for investment companies,
and for foundations, endowments, banks and insurance companies
worldwide. The 53 registered investment companies managed by the
Adviser, comprising 119 separate investment portfolios, currently
have approximately 4.8 million shareholder accounts.
ACMC is the general partner of the Adviser and a wholly
owned subsidiary of The Equitable Life Assurance Society of the
United States ("Equitable"). Equitable, one of the largest life
insurance companies in the United States, is the beneficial owner
of an approximately 55.4% partnership interest in the Adviser.
Alliance Capital Management Holding L.P. ("Alliance Holding")
owns an approximately 41.9% partnership interest in the
Adviser.** Equity interests in Alliance Holding are traded on
the New York Stock Exchange in the form of units. Approximately
98% of such interests are owned by the public and management or
employees of the Adviser and approximately 2% are owned by
Equitable. Equitable is a wholly owned subsidiary of AXA
Financial, Inc. ("AXA Financial"), a Delaware corporation whose
shares are traded on the New York Stock Exchange. AXA Financial
serves as the holding company for the Adviser, Equitable and
Donaldson, Lufkin & Jenrette, Inc., an integrated investment and
merchant bank. As of June 30, 1999, AXA, a French insurance
holding company, owned approximately 58.2% of the issued and
outstanding shares of common stock of AXA Financial.
Under the Advisory Agreement, the Adviser provides
investment advisory services and order placement facilities for
the Fund and pays all compensation of Directors and officers of
the Fund who are affiliated persons of the Adviser. The Adviser
or its affiliates also furnishes the Fund, without charge,
management supervision and assistance and office facilities and
____________________
** Until October 29, 1999, Alliance Holding served as the
investment adviser to the Fund. On that date, Alliance
Holding reorganized by transferring its business to the
Adviser. Prior thereto, the Adviser had no material
business operations. One result of the organization was
that the Advisory Agreement, then between the Fund and
Alliance Holding, was transferred to the Adviser by means
of a technical assignment, and ownership of Alliance Fund
Distributors, Inc. and Alliance Fund Services, Inc., the
Fund's principal underwriter and transfer agent,
respectively, also was transferred to the Adviser.
23
<PAGE>
provides persons satisfactory to the Fund's Board of Directors to
serve as the Fund's officers.
The Adviser is, under the Advisory Agreement,
responsible for certain expenses incurred by the Fund, including,
for example, office facilities and certain administrative
services, and any expenses incurred in promoting the sale of Fund
shares (other than the portion of the promotional expenses borne
by the Fund in accordance with an effective plan pursuant to Rule
12b-1 under the 1940 Act, and the costs of printing 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 Fund has, under the Advisory Agreement, assumed the
obligation for payment of all of its other expenses. As to the
obtaining of services other than those specifically provided to
the Fund by the Adviser, the Fund may employ its own personnel.
For such services, it also may utilize personnel employed by the
Adviser or by other subsidiaries of Equitable. In such event,
the services will be provided to the Fund at cost and the
payments specifically approved by the Fund's Board of Directors.
For the services rendered by the Adviser under the
Advisory Agreement, the Fund pays the Adviser at an annualized
rate of .75% of the average daily value of the Fund's net assets.
The fee is accrued daily and paid monthly.
The Advisory Agreement became effective on December 6,
1999. The Advisory Agreement was approved by the unanimous vote,
cast in person, of the Fund's Directors including the Directors
who are not parties to the Advisory Agreement or interested
persons as defined in the Act, of any such party, at a meeting
called for the purpose and held on December 6, 1999.
The Advisory Agreement is terminable without penalty on
60 days' written notice by a vote of a majority of the
outstanding voting securities of the Fund or by a vote of a
majority of the Fund's Directors, or by the Adviser on 60 days'
written notice, and will automatically terminate in the event of
its assignment. The Advisory Agreement provides that in the
absence of willful misfeasance, bad faith or gross negligence on
the part of the Adviser, or of reckless disregard of its
obligations thereunder, the Adviser shall not be liable for any
action or failure to act in accordance with its duties
thereunder.
The Advisory Agreement continues in effect until
November 30, 2001, and shall 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
24
<PAGE>
securities or by the Fund's Board of Directors, including in
either case approval by a majority of the Directors who are not
parties to the Advisory Agreement or interested persons of such
parties as defined by the 1940 Act.
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 the 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. 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 or dealer, such transactions may be averaged as
to price.
The Adviser may act as an investment adviser to other
persons, firms or corporations, including investment companies,
and is investment adviser to 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 Health Care 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 Select Investor Series, Inc., Alliance
Technology Fund, Inc., Alliance Utility Income Fund, Inc.,
Alliance Variable Products Series Fund, Inc., Alliance Worldwide
Privatization Fund, Inc., The Alliance Fund, Inc., The Alliance
Portfolios, and The Hudson River Trust, all registered open-end
investment companies; 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,
25
<PAGE>
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 Fund has entered into a Distribution Services
Agreement (the "Agreement") with Alliance Fund Distributors,
Inc., the Fund's principal underwriter (the "Principal
Underwriter"), to permit the Principal Underwriter to distribute
the Fund's shares and to permit the Fund to pay distribution
services fees to defray expenses associated with distribution of
its Class A shares, Class B shares and Class C shares in
accordance with a plan of distribution which is included in the
Agreement and which has been duly adopted and approved in
accordance with Rule 12b-1 adopted by the Commission under the
1940 Act (the "Rule 12b-1 Plan").
Distribution services fees are accrued daily and paid
monthly and charged as expenses of the Fund as accrued. The
distribution services fees attributable to the Class B shares and
Class C shares are designed to permit an investor to purchase
such shares through broker-dealers without the assessment of an
initial sales charge and at the same time to permit the Principal
Underwriter to compensate broker-dealers in connection with the
sale of such shares. In this regard the purpose and function of
the combined contingent deferred sales charge and respective
distribution services fee on the Class B shares and Class C
shares are the same as those of the initial sales charge and
distribution services fee with respect to the Class A shares in
that in each case the sales charge and distribution services fee
provides for the financing of the distribution of the relevant
class of the Fund's shares.
With respect to Class A shares of the Fund, distribution
expenses accrued by AFD in one fiscal year may not be paid from
distribution services fees received from the Fund in subsequent
fiscal years. AFD's compensation with respect to Class B and
Class C shares under the Rule 12b-1 Plan of the Fund is directly
tied to the expenses incurred by AFD. Actual distribution
expenses for Class B and Class C shares for any given year,
however, will probably exceed the distribution services fees
payable under the Rule 12b-1 Plan with respect to the class
involved and, in the case of Class B and Class C shares, payments
26
<PAGE>
received from contingent deferred sales charges ("CDSCs"). The
excess will be carried forward by AFD and reimbursed from
distribution services fees payable under the Rule 12b-1 Plan with
respect to the class involved and, in the case of Class B and
Class C shares, payments subsequently received through CDSCs, so
long as the Rule 12b-1 Plan is 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.
In approving the Rule 12b-1 Plan, the Directors of the
Fund determined that there was a reasonable likelihood that the
Rule 12b-1 Plan would benefit the Fund and its shareholders. The
distribution services fee of a particular class will not be used
to subsidize the provision of distribution services with respect
to any other class.
The Adviser may from time to time and from its own funds
or such other resources as may be permitted by rules of the
Commission make payments for distribution services to the
Principal Underwriter; the latter may in turn pay part or all of
such compensation to brokers or other persons for their
distribution assistance.
The Agreement was initially approved by the Directors of
the Fund at a meeting held on December 6, 1999. The Agreement
will continue in effect until November 30, 2000 and continue in
effect thereafter so long as its continuance is specifically
approved at least annually by the Directors of the Fund or by
vote of the holders of a majority of the outstanding voting
securities (as defined in the 1940 Act) of that class, and, in
either case, by a majority of the Directors of the Fund who are
not parties to the Agreement or interested persons, as defined in
the 1940 Act, of any such party (other than as directors of the
Fund) and who have no direct or indirect financial interest in
the operation of the Rule 12b-1 Plan or any agreement related
thereto.
In the event that the Rule 12b-1 Plan 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
27
<PAGE>
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.
Transfer Agency Agreement
Alliance Fund Services, Inc., an indirect wholly-owned
subsidiary of the Adviser, receives a transfer agency fee per
account holder of each of the Class A shares, Class B shares or
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, reflecting the additional
costs associated with the Class B and Class C contingent deferred
sales charge.
_________________________________________________________________
PURCHASE OF SHARES
_________________________________________________________________
The following information supplements that set forth in
the Fund's Prospectus under the heading "Purchase and Sale of
Shares--How to Buy Shares."
General
Shares of the Fund are offered on a continuous basis at
a price equal to their net asset value plus an initial sales
charge at the time of purchase ("Class A shares"), with a
contingent deferred sales charge ("Class B shares"), or without
any initial sales charge and, as long as the shares are held for
one year or more, without any contingent deferred sales charge
("Class C shares"). Shares of the Fund that are offered subject
to a sales charge are offered through (i) investment dealers that
are members of the National Association of Securities Dealers,
Inc. and have entered into selected dealer agreements with the
Principal Underwriter ("selected dealers"), (ii) depository
institutions and other financial intermediaries or their
affiliates, that have entered into selected agent agreements with
the Principal Underwriter ("selected agents") and (iii) the
Principal Underwriter.
Investors may purchase shares of the Fund either through
selected broker-dealers, agents, financial intermediaries or
other financial representatives or directly through the Principal
Underwriter. A transaction, service, administrative or other
28
<PAGE>
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 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 Fund's Articles of
Incorporation and By-Laws as of the next close of regular trading
on the New York Stock Exchange (the "Exchange") (currently
4:00 p.m. Eastern time) by dividing the value of the Fund's total
assets, less its liabilities, by the total number of its shares
then outstanding. A Fund business day is any day on which the
Exchange is open for trading.
The respective per share net asset values of the
Class A, Class B and Class C shares are expected to be
substantially the same. Under certain circumstances, however,
the per share net asset values of the Class B and Class C shares
may be lower than the per share net asset values of the Class A
shares, as a result of the differential daily expense accruals of
the distribution and transfer agency fees applicable with respect
to those classes of shares. Even under those circumstances, the
per share net asset values of the three classes eventually will
tend to converge immediately after the payment of dividends,
which will differ by approximately the amount of the expense
accrual differential among the classes.
The Fund will accept unconditional orders for its shares
to be executed at the public offering price equal to their net
asset value next determined (plus applicable Class A sales
charges), as described below. Orders received by the Principal
Underwriter prior to the close of regular trading on the Exchange
on each day the Exchange is open for trading are priced at the
29
<PAGE>
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
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.
30
<PAGE>
In addition to the discount or commission paid to
dealers or agents, the Principal Underwriter from time to time
pays additional cash or other incentives to dealers or agents, 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, such cash or other
incentives may take the form of payment for attendance at
seminars, meals, sporting events or theater performances, or
payment for travel, lodging and entertainment incurred in
connection with travel taken by persons associated with a dealer
or agent to 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 contingent 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 each subject to a conversion feature.
Each class has different exchange privileges and certain
different shareholder service options available.
The Directors of the Fund have determined that currently
no conflict of interest exists between or among the Class A,
Class B and Class C shares. On an ongoing basis, the Directors
of the Fund, pursuant to their fiduciary duties under the 1940
Act and state law, will seek to ensure that no such conflict
arises.
31
<PAGE>
Alternative Purchase Arrangements -- Class A, Class B
and Class C Shares
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
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
32
<PAGE>
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.
Class A Shares
The public offering price of Class A shares is the net
asset value plus a sales charge, as set forth below.
Sales Charge
Discount or
Commission
As % of to Dealers
As % of the or Agents
Net Public As % of
Amount of Amount Offering Offering
Purchase Invested Price Price
________ ________ ________ ____________
Less than
$100,000 . . . 4.44% 4.25% 4.00%
$100,000 but
less than
$250,000. . . . 3.36 3.25 3.00
$250,000 but
less than
$500,000. . . . 2.30 2.25 2.00
$500,000 but
less than
$1,000,000*. . . 1.78 1.75 1.50
_____________
* There is no initial sales charge on transactions of $1,000,000
or more.
33
<PAGE>
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
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
34
<PAGE>
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 December 16, 1999.
Net Asset Value per Class A Share at
December 16, 1999 $10.00
Class A Per Share Sales Charge 4.25%
of offering price (4.44% of net asset
value per share) $ .44
Class A Per Share Offering Price to
the Public $10.44
=====
Investors choosing the initial sales charge alternative
may under certain circumstances be entitled to pay (i) no initial
sales charge (but may be subject in most such cases to a
contingent deferred sales charge) or (ii) a reduced initial sales
charge. The circumstances under which such investors may pay a
reduced initial sales charge are described below.
Combined Purchase Privilege. Certain persons may
qualify for the sales charge reductions indicated in the schedule
of such charges above by combining purchases of shares of the
Fund into a single "purchase," if the resulting "purchase" totals
at least $100,000. The term "purchase" refers to: (i) a single
purchase by an individual, or to concurrent purchases, which in
the aggregate are at least equal to the prescribed amounts, by an
individual, his or her spouse and their children under the age of
21 years purchasing shares of the Fund for his, her or their own
account(s); (ii) a single purchase by a trustee or other
fiduciary purchasing shares for a single trust, estate or single
fiduciary account although more than one beneficiary is involved;
or (iii) a single purchase for the employee benefit plans of a
single employer. The term "purchase" also includes purchases by
any "company," as the term is defined in the 1940 Act, but does
not include purchases by any such company which has not been in
existence for at least six months or which has no purpose other
than the purchase of shares of the Fund or shares of other
35
<PAGE>
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
-Quality Bond Portfolio
-U.S. Government Portfolio
Alliance Global Dollar Government Fund, Inc.
Alliance Global Environment Fund, Inc.
Alliance Global Small Cap Fund, Inc.
Alliance Global Strategic Income Trust, Inc.
Alliance Greater China '97 Fund, Inc.
Alliance Growth and Income Fund, Inc.
Alliance Health Care Fund, Inc.
Alliance High Yield Fund, Inc.
Alliance International Fund
Alliance International Premier Growth Fund, Inc.
Alliance Limited Maturity Government Fund, Inc.
Alliance Mortgage Securities Income Fund, Inc.
Alliance Multi-Market Strategy Trust, Inc.
Alliance Municipal Income Fund, Inc.
-California Portfolio
-Insured California Portfolio
-Insured National Portfolio
-National Portfolio
-New York Portfolio
Alliance Municipal Income Fund II
-Arizona Portfolio
-Florida Portfolio
-Massachusetts Portfolio
-Michigan Portfolio
-Minnesota Portfolio
-New Jersey Portfolio
-Ohio Portfolio
-Pennsylvania Portfolio
-Virginia Portfolio
Alliance New Europe Fund, Inc.
Alliance North American Government Income Trust, Inc.
Alliance Premier Growth Fund, Inc.
Alliance Quasar Fund, Inc.
Alliance Real Estate Investment Fund, Inc.
36
<PAGE>
Alliance Technology Fund, Inc.
Alliance Utility Income Fund, Inc.
Alliance Worldwide Privatization Fund, Inc.
The Alliance Fund, Inc.
The Alliance Portfolios
-Alliance Growth Fund
-Alliance Conservative Investors Fund
-Alliance Growth Investors Fund
-Alliance Short-Term U.S. Government Fund
Prospectuses for the Alliance Mutual Funds may be
obtained without charge by contacting Alliance Fund Services,
Inc. at the address or the "For Literature" telephone number
shown on the front cover of this Statement of Additional
Information.
Cumulative Quantity Discount (Right of Accumulation). An
investor's purchase of additional Class A shares of the Fund may
qualify for a Cumulative Quantity Discount. The applicable sales
charge will be based on the total of:
(i) the investor's current purchase;
(ii) the net asset value (at the close of business
on the previous day) of (a) all shares of the
Fund held by the investor and (b) all shares
of any other Alliance Mutual Fund held by the
investor; and
(iii) the net asset value of all shares described in
paragraph (ii) owned by another shareholder
eligible to combine his or her purchase with
that of the investor into a single "purchase"
(see above).
For example, if an investor owned shares of an Alliance
Mutual Fund worth $200,000 at their then current net asset value
and, subsequently, purchased Class A shares of the Fund worth an
additional $100,000, the sales charge for the $100,000 purchase
would be at the 2.25% rate applicable to a single $300,000
purchase of shares of the Fund, rather than the 3.25% rate.
To qualify for the Combined Purchase Privilege or to
obtain the Cumulative Quantity Discount on a purchase through a
selected dealer or agent, the investor or selected dealer or
agent must provide the Principal Underwriter with sufficient
information to verify that each purchase qualifies for the
privilege or discount.
Statement of Intention. Class A investors may also
obtain the reduced sales charges shown in the table above by
37
<PAGE>
means of a written Statement of Intention, which expresses the
investor's intention to invest not less than $250,000 within a
period of 13 months in Class A shares (or Class A, Class B and/or
Class C shares) of the Fund or any other Alliance Mutual Fund.
Class A investors investing pursuant to the Statement of
Intention must invest at least $50,000 with their initial
purchase of shares of the Fund. Each purchase of shares under a
Statement of Intention will be made at the public offering price
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
$20,000 (for a total of $40,000), it will only be necessary to
invest a total of $60,000 during the following 13 months in
shares of the Fund or any other Alliance Mutual Fund, to qualify
for the 3.25% sales charge on the total amount being invested
(the sales charge applicable to an investment of $100,000).
The Statement of Intention is not a binding obligation
upon the investor to purchase the full amount indicated. The
minimum initial investment under a Statement of Intention is 5%
of such amount. Shares purchased with the first 5% of such
amount will be held in escrow (while remaining registered in the
name of the investor) to secure payment of the higher sales
charge applicable to the shares actually purchased if the full
amount indicated is not purchased, and such escrowed shares will
be involuntarily redeemed to pay the additional sales charge, if
necessary. Dividends on escrowed shares, whether paid in cash or
reinvested in additional Fund shares, are not subject to escrow.
When the full amount indicated has been purchased, the escrow
will be released. To the extent that an investor purchases more
than the dollar amount indicated on the Statement of Intention
and qualifies for a further reduced sales charge, the sales
charge will be adjusted for the entire amount purchased at the
end of the 13-month period. The difference in the sales charge
will be used to purchase additional shares of the Fund subject to
the rate of the sales charge applicable to the actual amount of
the aggregate purchases.
38
<PAGE>
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
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)
39
<PAGE>
and without a contingent deferred sales charge to certain
categories of investors including:
(i) investment management clients of the
Adviser or its affiliates;
(ii) officers and present or former Directors
of the Fund; present or former directors
and trustees of other investment
companies managed by the Adviser; present
or retired full-time employees of the
Adviser, the Principal Underwriter,
Alliance Fund Services, Inc. and their
affiliates; officers and directors of
ACMC, the Principal Underwriter, Alliance
Fund Services, Inc. and their affiliates;
officers, directors and present full-time
employees of selected dealers or agents;
or the spouse, sibling, direct ancestor
or direct descendant (collectively,
"relatives") of any such person; or any
trust, individual retirement account or
retirement plan account for the benefit
of any such person or relative; or the
estate of any such person or relative, if
such shares are purchased for investment
purposes (such shares may not be resold
except to the Fund);
(iii) the Adviser, the Principal Underwriter,
Alliance Fund Services, Inc. and their
affiliates; certain employee benefit
plans for employees of the Adviser, the
Principal Underwriter, Alliance Fund
Services, Inc. and their affiliates;
(iv) registered investment advisers or other
financial intermediaries who charge a
management, consulting or other fee for
their services and who purchase shares
through a broker or agent approved by the
Principal Underwriter and clients of such
registered investment advisers or
financial intermediaries whose accounts
are linked to the master account of such
investment adviser or financial
intermediary on the books of such
approved broker or agent;
(v) persons participating in a fee-based
program, sponsored and maintained by a
40
<PAGE>
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
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
41
<PAGE>
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
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
42
<PAGE>
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 Fund, by the relative of any
such person, by any trust, individual retirement account or
retirement plan account for the benefit of any such person or
relative, or by the estate of any such person or relative, or
(iv) pursuant to a systematic withdrawal plan (see "Shareholder
Services -- Systematic Withdrawal Plan" below).
Conversion Feature. Eight years after the end of the
calendar month in which the shareholder's purchase order was
accepted, Class B shares will automatically convert to Class A
shares and will no longer be subject to a higher distribution
services fee. Such conversion will occur on the basis of the
relative net asset values of the two classes, without the
imposition of any sales load, fee or other charge. The purpose
of the conversion feature is to reduce the distribution services
fee paid by holders of Class B shares that have been outstanding
long enough for the Principal Underwriter to have been
compensated for distribution expenses incurred in the sale of
such shares.
For purposes of conversion to Class A, Class B shares
purchased through the reinvestment of dividends and distributions
paid in respect of Class B shares in a shareholder's account will
be considered to be held in a separate sub-account. Each time
any Class B shares in the shareholder's account (other than those
in the sub-account) convert to Class A, an equal pro-rata portion
of the Class B shares in the sub-account will also convert to
Class A.
The conversion of Class B shares to Class A shares is
subject to the continuing availability of an opinion of counsel
to the effect that the conversion of Class B shares to Class A
shares does not constitute a taxable event under federal income
tax law. The conversion of Class B shares to Class A shares may
be suspended if such an opinion is no longer available at the
time such conversion is to occur. In that event, no further
43
<PAGE>
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
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
44
<PAGE>
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."
Redemption
Subject only to the limitations described below, the
Fund's Articles of Incorporation require that the Fund redeem the
shares tendered to it, as described below, at a redemption price
equal to their net asset value as next computed following the
receipt of shares tendered for redemption in proper form. Except
for any contingent deferred sales charge which may be applicable
to Class A, Class B or Class C shares, there is no redemption
charge. Payment of the redemption price will be made within
seven days after the Fund's receipt of such tender for
redemption. If a shareholder is in doubt about what documents
are required by his or her fee-based program or employee benefit
plan, the shareholder should contact his or her financial
representative.
The right of redemption may not be suspended or the date
of payment upon redemption postponed for more than seven days
after shares are tendered for redemption, except for any period
during which the Exchange is closed (other than customary weekend
and holiday closings) or during which the Commission determines
that trading thereon is restricted, or for any period during
which an emergency (as determined by the Commission) exists as a
result of which disposal by the Fund of securities owned by it is
not reasonably practicable or as a result of which it is not
reasonably practicable for the Fund fairly to determine the value
of its net assets, or for such other periods as the Commission
may by order permit for the protection of security holders of the
Fund.
45
<PAGE>
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.
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.
46
<PAGE>
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
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
47
<PAGE>
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.
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,
48
<PAGE>
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
be made by telephone or written request. Telephone exchange
requests must be received by Alliance Fund Services, Inc. by
4:00 p.m. Eastern time on a Fund business day in order to receive
that day's net asset value.
Shares will continue to age without regard to exchanges
for purpose of determining the CDSC, if any, upon redemption and,
in the case of Class B shares, for the purpose of conversion to
Class A shares. After an exchange, your Class B shares will
automatically convert to Class A shares in accordance with the
conversion schedule applicable to the Class B shares of the
Alliance Mutual Fund you originally purchased for cash ("original
shares"). When redemption occurs, the CDSC applicable to the
original shares is applied.
Please read carefully the prospectus of the mutual fund
into which you are exchanging before submitting the request.
Call Alliance Fund Services, Inc. at (800) 221-5672 to exchange
uncertificated shares. Exchanges of shares as described above in
this section are taxable transactions for federal income tax
purposes. The exchange service may be changed, suspended or
terminated on 60 days' written notice.
All exchanges are subject to the minimum investment
requirements and any other applicable terms set forth in the
Prospectus for the Alliance Mutual Fund whose shares are being
acquired. An exchange is effected through the redemption of the
shares tendered for exchange and the purchase of shares being
acquired at their respective net asset values as next determined
49
<PAGE>
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.
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
50
<PAGE>
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
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
51
<PAGE>
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.
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
52
<PAGE>
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
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
53
<PAGE>
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.
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 auditors, Ernst & Young LLP, as
well as a confirmation of each purchase and redemption. By
contacting his or her broker or Alliance Fund Services, Inc., a
shareholder can arrange for copies of his or her account
statements to be sent to another person.
_________________________________________________________________
NET ASSET VALUE
_________________________________________________________________
The per share net asset value is computed in accordance
with the Fund's Articles of Incorporation and By-Laws at the next
close of regular trading on the Exchange (ordinarily 4:00 p.m.
Eastern time) following receipt of a purchase or redemption order
by the Fund on each Fund business day on which such an order is
received and on such other days as the Board of Directors deems
appropriate or necessary in order to comply with Rule 22c-1 under
the 1940 Act. The Fund's per share net asset value is calculated
by dividing the value of the Fund's total assets, less its
liabilities, by the total number of its shares then outstanding.
54
<PAGE>
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 indicated
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 quoted bid prices on such day. If no bid prices are
quoted on such day, then the security is valued at the mean of
the bid and asked prices at the close of the Exchange on such day
as obtained from one or more dealers regularly making a market in
such security. Where a bid and asked price can be obtained from
only one such dealer, such security is valued at the mean of the
bid and asked price obtained from such dealer unless it is
determined that such price does not represent current market
value, in which case the security shall be value in good faith at
fair value by, or pursuant to procedures established by, the
Board of Directors. Securities for which no bid and asked price
quotations are readily available are 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 are valued in
like manner. Portfolio securities traded on the Exchange and on
one or more foreign or other national securities exchanges, and
portfolio securities not traded on the Exchange but traded on one
or more foreign or other national securities exchanges are valued
in accordance with these procedures by reference to the principal
exchange on which the securities are traded.
Readily marketable securities traded only 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 debt securities listed on a
U.S. national securities exchange whose primary market is
believed to be over-the-counter, are valued at the mean of the
bid and asked prices at the close of the Exchange on such day as
obtained from two or more dealers regularly making a market in
such security. Where a bid and asked price can be obtained from
only one such dealer, such security is valued at the mean of the
bid and asked price obtained from such dealer unless it is
determined that such price does not represent current market
55
<PAGE>
value, in which case the security shall be value in good faith at
fair value by, or pursuant to procedures established by, the
Board of Directors.
Open futures contracts will be valued using the closing
settlement price or, in the absence of such a price, the most
recent quoted bid price, If there are no quotations available for
the day of valuations, the last available closing settlement
price will be used.
U.S. Government securities and other debt instruments
having 60 days or less remaining until maturity are valued at
amortized cost if their original maturity was 60 days or less, or
by amortizing their fair value as of the 61st day prior to
maturity if their original term to maturity exceeded 60 days
(unless in either case the Board of Directors determines that
this method does not represent fair value).
Fixed-income securities may be valued on the basis of
prices provided by a pricing service when such prices are
believed to reflect the fair market value of such securities.
The prices provided by pricing service take into account many
factors, including institutional size trading in similar groups
of securities and any developments related to specific
securities.
All other assets of the Fund are valued in good faith at
fair value by, or in accordance with procedures established by,
the Board of Directors.
Trading in securities on Far Eastern and European
securities exchanges and over-the-counter markets is normally
completed well before the close of business of each Fund business
day. In addition, trading in foreign markets may not take place
on all Fund business days. Furthermore, trading may take place
in various foreign markets on days that are not Fund business
days. The Fund's calculation of the net asset value per share,
therefore, does not always take place contemporaneously with the
most recent determination of the prices of portfolio securities
in these markets. Events affecting the values of these portfolio
securities that occur between the time their prices are
determined in accordance with the above procedures and the close
of the Exchange will not be reflected in the Fund's calculation
of net asset value unless these prices do not reflect current
market value, in which case the securities will be valued in good
faith at fair value by, or in accordance with procedures
established by, the Board of Directors.
The Board of Directors may suspend the determination of
the Fund's net asset value (and the offering and sales of
shares), subject to the rules of the Commission and other
56
<PAGE>
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.
_________________________________________________________________
DIVIDENDS, DISTRIBUTIONS AND TAXES
_________________________________________________________________
Dividends paid by the Fund, if any, with respect to
Class A, Class B and Class C shares will be calculated in the
same manner at the same time on the same day and will be in the
same amount, except that the higher distribution services
applicable to Class B and C shares, and any incremental transfer
agency costs relating to Class B and Class C shares, will be
borne exclusively by the class to which they relate.
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
Internal Revenue Code of 1986, as amended (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
57
<PAGE>
the sale or other disposition of stock or securities or foreign
currency, or certain other income (including, but not limited to,
gains from options, futures and forward contracts) derived with
respect to its business of investing in stock, securities or
currency; and (ii) diversify its holdings so that, at the end of
each quarter of its taxable year, the following two conditions
are met: (a) at least 50% of the value of the Fund's assets is
represented by cash, U.S. Government Securities, securities of
other regulated investment companies and other securities with
respect to which the Fund's investment is limited, in respect of
any one issuer, to an amount not greater than 5% of the Fund's
assets and 10% of the outstanding voting securities of such
issuer, and (b) not more than 25% of the value of the Fund's
assets is invested in securities of any one issuer (other than
U.S. Government Securities or securities of other regulated
investment companies).
If the Fund qualifies as a regulated investment company
for any taxable year and makes timely distributions to its
shareholders of 90% or more of its 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
58
<PAGE>
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 ex-dividend date. In
determining the holding period of such shares for this purpose,
any period during which the corporation's risk of loss is offset
by means of options, short sales or similar transactions is not
counted. Furthermore, the dividends-received deduction will be
disallowed to the extent a corporation's investment in shares of
the Fund is financed with indebtedness.
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.
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 account
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.
59
<PAGE>
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.
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.
Foreign Taxes. Income received by the Fund may also be
subject to foreign income taxes, including withholding taxes. The
United States has entered into tax treaties with many foreign
countries which entitle the Fund to a reduced rate of such taxes
or exemption from taxes on such income. It is impossible to
determine the effective rate of foreign tax in advance since the
amount of the Fund's assets to be invested within various
countries is not known.
Backup Withholding. The Fund may be required to
withhold federal income tax at the rate of 31% of all
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
60
<PAGE>
amounts so withheld may be credited against a shareholder's
federal income tax liability or refunded.
United States Federal Income Taxation of the Fund
The following discussion relates to certain significant
United States federal income tax consequences to the Fund with
respect to the determination of its "investment company income"
each year. This discussion assumes that the Fund will be taxed
as a regulated investment company for each of its taxable years.
Currency Fluctuations-"Section 988" Gains or Losses.
Under the Code, gains or losses attributable to fluctuations in
exchange rates which occur between the time the Fund accrues
interest or other receivables or accrues expenses or other
liabilities denominated in a foreign currency and the time the
Fund actually collects such receivables or pays such liabilities
are treated as ordinary income or ordinary loss. Similarly,
gains or losses from the disposition of foreign currencies, from
the disposition of debt securities denominated in a foreign
currency, or from the disposition of a forward contract
denominated in a foreign currency, which are attributable to
fluctuations in the value of the foreign currency between the
date of acquisition of the asset and the date of disposition also
are treated as ordinary income 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.
Futures and Forward Contracts. Certain 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
61
<PAGE>
therefore be characterized as ordinary income or loss and will
increase or decrease the amount of the Fund's investment company
taxable 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.
Tax Straddles. Any futures contract, forward foreign
currency contract, or other position entered into or held by the
Fund in conjunction with any other position held by the Fund may
constitute a "straddle" for federal income tax purposes. A
straddle of which at least one, but not all, the positions are
section 1256 contracts may constitute a "mixed straddle". In
general, straddles are subject to certain rules that may affect
the character and timing of the Fund's gains and losses with
respect to straddle positions by requiring, among other things,
that (i) loss realized on disposition of one position of a
straddle not be recognized to the extent that the Fund has
unrealized gains with respect to the other position in such
straddle; (ii) the Fund's holding period in straddle positions be
suspended while the straddle exists (possibly resulting in gain
being treated as short-term capital gain rather than long-term
capital gain); (iii) losses recognized with respect to certain
straddle positions which are part of a mixed straddle and which
are non-section 1256 positions be treated as 60% long-term and
40% short-term capital loss; (iv) losses recognized with respect
to certain straddle positions which would otherwise constitute
short-term capital losses be treated as long-term capital losses;
and (v) the deduction of interest and carrying charges
attributable to certain straddle positions may be deferred. The
Treasury Department is authorized to issue regulations providing
for the proper treatment of a mixed straddle where at least one
position is ordinary and at least one position is capital. No
such regulations have yet been issued. Various elections are
available to the Fund which may mitigate the effects of the
straddle rules, particularly with respect to mixed straddles. In
general, the straddle rules described above do not apply to any
straddles held by the Fund all of the offsetting positions of
which consist of section 1256 contracts.
62
<PAGE>
Taxation of Foreign Stockholders
The foregoing discussion relates only to United States
federal income tax law as it affects shareholders who are United
States citizens or residents or United States corporations. The
effects of federal income tax law on shareholders who are non-
resident alien individuals or foreign corporations may be
substantially different. Foreign investors should therefore
consult their counsel for further information as to the United
States tax consequences of receipt of income from the Fund.
Other Taxation
The Fund may be subject to other state and local
taxes.
_________________________________________________________________
PORTFOLIO TRANSACTIONS
_________________________________________________________________
The management of the Fund has the responsibility for
allocating its brokerage orders and may direct orders to any
broker. It is the Fund's general policy to seek favorable net
prices and prompt reliable execution in connection with the
purchase or sale of all portfolio securities. In the purchase
and sale of over-the-counter securities, it is the Fund's policy
to use the primary market makers except when a better price can
be obtained by using a broker. The Board of Directors has
approved, as in the best interests of the Fund and the
shareholders, a policy of considering, among other factors, sales
of the Fund's shares as a factor in the selection of
broker-dealers to execute portfolio transactions, subject to best
execution. The Adviser is authorized under the Advisory
Agreement to place brokerage business with such brokers and
dealers. The use of brokers who supply supplemental research and
analysis and other services may result in the payment of higher
commissions than those available from other brokers and dealers
who provide only the execution of portfolio transactions. In
addition, the supplemental research and analysis and other
services that may be obtained from brokers and dealers through
which brokerage transactions are effected may be useful to the
Adviser in connection with advisory clients other than the Fund.
Investment decisions for the Fund are made independently
from those for other investment companies and other advisory
accounts managed by the Adviser. It may happen, on occasion,
that the same security is held in the portfolio of the Fund and
one or more of such other companies or accounts. Simultaneous
transactions are likely when several funds or accounts are
managed by the same adviser, particularly when a security is
63
<PAGE>
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
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
64
<PAGE>
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 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, 3,000,000,000
shares of Class C Common Stock and 3,000,000,000 shares of
Advisor Class Common Stock, each having a par value of $.001 per
share. (The Fund is not currently offering shares of Advisor
Class Common Stock.) All shares of the Fund, when issued, are
fully paid and non-assessable. The Directors are authorized to
reclassify any unissued shares to any number of additional series
and classes without shareholder approval. Accordingly, the
Directors in the future, for reasons such as the desire to
establish one or more additional portfolios with different
investment objectives, policies or restrictions, may create
additional classes or series of shares. Any issuance of shares
of another class or series would be governed by the 1940 Act and
the law of the State of Maryland. If shares of another series
were issued in connection with the creation of a second
portfolio, each share of either portfolio would normally be
entitled to one vote for all purposes. Generally, shares of both
portfolios would vote as a single series on matters, such as the
election of Directors, that affected both portfolios in
substantially the same manner. As to matters affecting each
portfolio differently, such as approval of the Investment
Advisory Contract and changes in investment policy, shares of
each portfolio would vote as a separate series. Procedures for
calling a shareholders' meeting for the removal of Directors of
the Fund, similar to those set forth in Section 16(c) of the 1940
Act will be available to shareholders of the Fund. The rights of
the holders of shares of a series may not be modified except by
the vote of a majority of the outstanding shares of such series.
It is anticipated that annual shareholder meetings will
not be held; shareholder meetings will be held only when required
65
<PAGE>
by federal or state law. Shareholders have available certain
procedures for the removal of Directors.
A shareholder will be entitled to share pro rata with
other holders of the same class of shares all dividends and
distributions arising from the Fund's assets and, upon redeeming
shares, will receive the then current net asset value of the
class of the Fund represented by the redeemed shares less any
applicable CDSC. The Fund is empowered to establish, without
shareholder approval, additional portfolios, which may have
different investment objectives and policies than those of the
Fund, and additional classes of shares within the Fund. If an
additional portfolio or class were established in the Fund, each
share of the portfolio or class would normally be entitled to one
vote for all purposes. Generally, shares of each portfolio and
class would vote together as a single class on matters, such as
the election of Directors, that affect each portfolio and class
in substantially the same manner. Class A, B and C shares 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 of the Fund bears its own
distribution expenses and Class B shares convert to Class A
shares under certain circumstances. 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 as determined by the
Directors and, in liquidation of the Fund, are entitled to
receive the net assets of the Fund.
Custodian
State Street Bank and Trust Company ("State Street"),
225 Franklin Street, Boston, Massachusetts 02110, will act as the
Fund's custodian for the assets of the Fund but will play no part
in deciding the purchase or sale of portfolio securities.
Subject to the supervision of the Fund's Directors, State Street
may enter into sub-custodial agreements for the holding of the
Fund's foreign securities.
Principal Underwriter
Alliance Fund Distributors, Inc., 1345 Avenue of the
Americas, New York, New York 10105, serves as the Fund's
Principal Underwriter, and as such may solicit orders from the
public to purchase shares of the Fund. Under the Agreement, the
Fund has agreed to indemnify the Principal Underwriter, in the
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.
66
<PAGE>
Counsel
Legal matters in connection with the issuance of the
common stock offered hereby are passed upon by Seward & Kissel
LLP, New York, New York. Seward & Kissel LLP has relied upon the
opinion of Venable, Baetjer and Howard, LLP, Baltimore, Maryland,
for matters relating to Maryland law.
Independent Accountants
Ernst & Young LLP, New York, New York, has been
appointed as independent auditors for the Fund.
Performance Information
From time to time the Fund advertises its "total
return." Computed separately for each class, the Fund's "total
return" is its average annual compounded total return for its
most recently completed one, five, and ten-year periods (or the
period since the Fund's inception). The Fund's total return for
such a period is computed by finding, through the use of a
formula prescribed by the Commission, the average annual
compounded rate of return over the period that would equate an
assumed initial amount invested to the value of such investment
at the end of the period. For purposes of computing total
return, income dividends and capital gains distributions paid on
shares of the Fund are assumed to have been reinvested when paid
and the maximum sales charge applicable to purchases of Fund
shares is assumed to have been paid.
The Fund's total return is computed separately for
Class A, Class B and Class C shares. The Fund's total return is
not fixed and will fluctuate in response to prevailing market
conditions or as a function of the type and quality of the
securities in the Fund's portfolio and its expenses. Total
return information is useful in reviewing the Fund's performance
but such information may not provide a basis for comparison with
bank deposits or other investments which pay a fixed yield for a
stated period of time. An investor's principal invested in the
Fund is not fixed and will fluctuate in response to prevailing
market conditions.
Advertisements quoting performance rankings of the Fund
as measured by financial publications or by independent
organizations such as Lipper, Inc., and Morningstar, Inc. and
advertisements presenting the historical record of payments of
income dividends by the Fund may also from time to time be sent
to investors or placed in newspapers, magazines such as Barron's,
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.
67
<PAGE>
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.
68
<PAGE>
________________________________________________________________
FINANCIAL STATEMENTS AND
REPORT OF INDEPENDENT ACCOUNTANTS
________________________________________________________________
69
<PAGE>
ALLIANCE DISCIPLINED VALUE FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 14, 1999
ASSETS
Cash $100,200
Receivable from Adviser (Note B) 37,000
Deferred Offering Expenses (Note A) 155,725
--------
Total Assets 292,925
--------
LIABILITIES
Organization Costs Payable (Note A) 37,000
Offering Expenses Payable (Note A) 155,725
--------
Total Liabilities 192,725
--------
NET ASSETS
Paid in Capital (Applicable to 10,000
Class A shares issued and outstanding,
10 Class B shares issued and
outstanding, 10 Class C shares issued
and outstanding; each with $.001 par
value; 3,000,000,000 shares of each
class authorized)
$100,200
=======
CALCULATION OF MAXIMUM OFFERING PRICE:
Class A Shares
Net asset value and redemption price
per share ($100,000/10,000 shares
issued and outstanding) $10.00
Sales charge - 4.25% of public
offering price .44
---------
Maximum offering price $10.44
=========
Class B Shares
Net asset value and offering price
per share
($100/10 shares issued and
outstanding) $10.00
=========
Class C Shares
70
<PAGE>
Net asset value and offering price
per share
($100/10 shares issued and
outstanding) $10.00
=========
See notes to financial statements.
71
<PAGE>
ALLIANCE DISCIPLINED VALUE FUND, INC.
STATEMENT OF OPERATIONS
FOR THE PERIOD JULY 1, 1999 (DATE OF ORGANIZATION) TO
DECEMBER 14, 1999
INVESTMENT INCOME $ 0
==========
EXPENSES
Organization Expenses $37,000
Expenses reimbursed by the Adviser (37,000)
----------
Net Investment Income $ 0
==========
See Notes to Financial Statements.
72
00250250.AE8
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Shareholder and Board of Directors
Alliance Disciplined Value Fund, Inc.
We have audited the accompanying statement of assets and
liabilities of Alliance Disciplined Value Fund, Inc. (the "Fund")
as of December 14, 1999, and the related statement of operations
for the period from July 1, 1999 (date of incorporation) to
December 14, 1999. These financial statements are the
responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements based on our
audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Alliance Disciplined Value Fund, Inc. at December 14, 1999,
the results of its operations for the period from July 1, 1999
(date of incorporation) to December 14, 1999, in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
New York, New York
December 15, 1999
00250250.AE9
<PAGE>
_________________________________________________________________
APPENDIX A
FUTURES CONTRACTS AND OPTIONS ON
FUTURES CONTRACTS AND FOREIGN CURRENCIES
_________________________________________________________________
FUTURES CONTRACTS
The Fund may enter into contracts for the purchase or
sale for future delivery of securities or foreign currencies, or
contracts based on financial indices. U.S. futures contracts
have been designed by exchanges which have been designated
"contracts markets" by the 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.
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%-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 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.
A-1
<PAGE>
The purpose of the acquisition or sale of a futures
contract may be to attempt to protect the Fund from fluctuations
in foreign exchange rates without actually buying or selling
foreign currencies. For example, if an exchange rate were
expected to decrease, thereby making a foreign currency less
expensive, the Fund might enter into futures contracts for the
sale of the currency. Such a sale would have much the same
effect as selling an equivalent value of the currency. If
exchange rates did decrease, the value of the securities
denominated in the particular currency in the portfolio would
decline, but the value of the futures contracts to the Fund would
increase at approximately the same rate, thereby keeping the net
asset value of the Fund from declining as much as it otherwise
would have.
The ordinary spreads between prices in the cash and
futures markets, due to differences in the nature of those
markets, are subject to distortions. First, all participants in
the futures market are subject to initial deposit and variation
margin requirements. Rather than meeting additional variation
margin requirements, investors may close futures contracts
through offsetting transactions which could distort the normal
relationship between the cash and futures markets. Second, the
liquidity of the futures market depends on participants entering
into offsetting transactions rather than making or taking
delivery. To the extent participants decide to make or take
delivery, liquidity in the futures market could be reduced, thus
producing distortion. Third, from the point of view of
speculators, the margin 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 cause temporary price
distortions. Due to the possibility of distortion, a correct
forecast of general interest rate trends by the Adviser may still
not result in a successful transaction.
By establishing an appropriate "short" position in index
futures, the Fund may seek to protect the value of its portfolio
against an overall decline in the market for such securities.
Alternatively, in anticipation of a generally rising market, the
Fund can seek to avoid losing the benefit of apparently low
current prices by establishing a "long" position in securities
index futures and later liquidating that position as particular
securities, are acquired. To the extent that these hedging
strategies are successful, the Fund will be affected to a lesser
degree by adverse overall market price movements than would
otherwise be the case.
In addition, futures contracts entail risks. Although
the Fund believes that use of such contracts will benefit the
Fund, if the Adviser's investment judgment about the general
A-2
<PAGE>
direction of exchange rates is incorrect, the Fund's overall
performance would be poorer than if it had not entered into any
such contract. For example, if the Fund has hedged against the
possibility of a change in exchange rates which would adversely
affect the values of securities held in its portfolio and
exchange rates instead move in the opposite direction, the Fund
will lose part or all of the benefit of the increased value of
its securities which it has hedged because it will have
offsetting losses in its futures positions. In addition, in such
situations, if the Fund has insufficient cash, it may have to
sell securities from its portfolio to meet daily variation margin
requirements. The Fund may have to sell securities at a time
when it may be disadvantageous to do so.
OPTIONS ON FUTURES CONTRACTS
The Fund intends to purchase and write options on
futures contracts for hedging purposes. 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 securities, it may or may not be less risky than
ownership of the futures contract or underlying 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 a market advance due to increasing
exchange rates.
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. 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
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. 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
A-3
<PAGE>
the value of portfolio securities. The Fund will not write
"uncovered" options on futures contracts.
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
against the risk of rising interest rates.
Upon the exercise of a call, the writer of the option is
obligated to sell the futures contract (to deliver a "long"
position to the option holder) at the option exercise price,
which will presumably be lower than the current market price of
the contract in the futures market. Upon exercise of a put, the
writer of the option is obligated to purchase the futures
contract (deliver a "short" position to the option holder) at the
option exercise price which will presumably be higher than the
current market price of the contract in the futures market. When
the holder of an option exercises it and assumes a long futures
position, in the case of call, or a short futures position in the
case of a put, its gain will be credited to its futures margin
account, while the loss suffered by the writer of the option will
be debited to its futures margin account and must be immediately
paid by the writer. However, as with the trading of futures,
most participants in the options markets do not seek to realize
their gains or losses by exercise of their option rights.
Instead, the holder of an option will usually realize a gain or
loss by buying or selling an offsetting option at a market price
that will reflect an increase or a decrease from the premium
originally paid.
Options on futures contracts can be used by a Fund to
hedge substantially the same risks as might be addressed by the
direct purchase or sale of the underlying futures contracts. If
the Fund purchases an option on a futures contract, it may obtain
benefits similar to those that would result if it held the
futures position itself. Purchases of options on futures
contracts may present less risk in hedging than the purchase and
sale of the underlying futures contracts since the potential loss
is limited to the amount of the premium plus related transaction
costs.
If the Fund writes options on futures contracts, the
Fund will receive a premium but will assume a risk of adverse
movement in the price of the underlying futures contract
comparable to that involved in holding a futures position. If
the option is not exercised, the Fund will realize a gain in the
amount of the premium, which may partially offset unfavorable
changes in the value of securities held in or to be acquired for
the Fund. If the option is exercised, the Fund will incur a loss
in the option transaction, which will be reduced by the amount of
A-4
<PAGE>
the premium it has received, but which will offset any favorable
changes in the value of its portfolio securities or, in the case
of a put, lower prices of securities it intends to acquire.
While the holder or writer of an option on a futures
contract may normally terminate its position by selling or
purchasing an offsetting option of the same series, the Fund's
ability to establish and close out options positions at fairly
established prices will be subject to the existence of a liquid
market. The Fund will not purchase or write options on futures
contracts unless, in the Adviser's opinion, the market for such
options has sufficient liquidity that the risks associated with
such options transactions are not at unacceptable levels.
OPTIONS ON FOREIGN CURRENCIES
The Fund may purchase and write options on foreign
currencies for hedging purposes in a manner similar to that in
which futures contracts on foreign currencies, or forward
contracts, will be utilized. 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.
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
A-5
<PAGE>
option on the relevant currency. If the expected decline occurs,
the option will most likely not be exercised, and the diminution
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 will write options on foreign currencies only
if they are covered. A put option on a foreign currency written
by the Fund will be considered "covered" if, so long as the Fund
is obligated as the writer of the put, it segregates with the
Fund's custodian liquid assets equal at all times to the
aggregate exercise price of the put. A call option on a foreign
currency written by the Fund will be considered "covered" only if
the Fund owns short term debt securities with a value equal to
the face amount of the option contract and denominated in the
currency upon which the call is written.
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 currencies 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. For example, there are no daily price fluctuation
limits, and adverse market movements could therefore continue to
an unlimited extent over a period of time. Although the purchase
A-6
<PAGE>
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
OCC may, if it determines that foreign governmental restrictions
or taxes would prevent the orderly settlement of foreign currency
option exercises, 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
A-7
<PAGE>
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
requirements than in the United States, and (v) lesser trading
volume.
A-8
<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 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
B-1
<PAGE>
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
00250250.AD6
<PAGE>
PART C
OTHER INFORMATION
ITEM 23. Exhibits
(a) Articles of Incorporation - Incorporated by reference to
Exhibit (a) to the Registrant's Registration Statement
on Form N-1A, filed with the Securities and Exchange
Commission on November 3, 1999.
(b) By-Laws of the Registrant - Incorporated by reference to
Exhibit (b) to the Registrant's Registration Statement
on Form N-1A, filed with the Securities and Exchange
Commission on November 3, 1999.
(c) Not applicable.
(d) Advisory Agreement between the Registrant and Alliance
Capital Management L.P. - Filed herewith.
(e) (1) Distribution Services Agreement between the
Registrant and Alliance Fund Distributors, Inc. -
Filed herewith.
(2) Selected Dealer Agreement between Alliance Fund
Distributors, Inc. and selected dealers offering
shares of Registrant - Filed herewith.
(3) Selected Agent Agreement between Alliance Fund
Distributors, Inc. and selected agents making
available shares of Registrant - Filed
herewith.
(f) Not applicable.
(g) Custodian Contract.***
(h) (1) Transfer Agency Agreement between the Registrant
and Alliance Fund Services, Inc. - Filed
herewith.
(2) Expense Limitation Agreement between the Registrant
and Alliance Capital Management L.P. - Filed
herewith.
(i) (1) Opinion and Consent of Seward & Kissel LLP - Filed
herewith.
____________________
*** To be filed in a post-effective amendment hereto.
C-1
<PAGE>
(2) Opinion and Consent of Venable, Baetjer and Howard,
LLP - Filed herewith.
(j) Consent of Independent Accountants - Filed herewith.
(k) Not applicable.
(l) Investment representation letter of Alliance Capital
Management L.P. - Filed herewith.
(m) Rule 12b-1 Plan - See Exhibit (e)(1).
(n) Not applicable.
(o) Rule 18f-3 Plan - Filed herewith.
Other Exhibits - Powers of Attorney - Incorporated by
reference to Other Exhibits to the Registrant's
Registration Statement on Form N-1A, filed with the
Securities and Exchange Commission on December 9,
1999.
ITEM 24. Persons Controlled by or under Common Control with
Registrant.
None. The Registrant is a recently organized
corporation and has no outstanding shares of common
stock.
C-2
<PAGE>
ITEM 25. Indemnification.
It is the Registrant's policy to indemnify its directors
and officers, employees and other agents to the maximum
extent permitted by Section 2-418 of the General
Corporation Law of the State of Maryland, which is
incorporated by reference herein, and as set forth in
Article EIGHTH of Registrant's Articles of
Incorporation, filed as Exhibit (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
C-3
<PAGE>
disabling conduct, by (a) the vote of a majority of a
quorum of the directors who are neither "interested
persons" of the Registrant as defined in section
2(a)(19) of the Investment Company Act of 1940 nor
parties to the proceeding ("disinterested, non-party
directors"), or (b) an independent legal counsel in a
written opinion. The Registrant will advance attorneys
fees or other expenses incurred by its directors,
officers, investment adviser or principal underwriters
in defending a proceeding, upon the undertaking by or on
behalf of the indemnitee to repay the advance unless it
is ultimately determined that he is entitled to
indemnification and, as a condition to the advance,
(1) the indemnitee shall provide a security for his
undertaking, (2) the Registrant shall be insured against
losses arising by reason of any lawful advances, or
(3) a majority of a quorum of disinterested, non-party
directors of the Registrant, or an independent legal
counsel in a written opinion, shall determine, based on
a review of readily available facts (as opposed to a
full trial-type inquiry), that there is reason to
believe that the indemnitee ultimately will be found
entitled to indemnification.
The Registrant participates in a joint
trustees/directors and officers liability insurance
policy issued by the ICI Mutual Insurance Company.
Coverage under this policy has been extended to
directors, trustees and officers of the investment
companies managed by Alliance Capital Management L.P.
Under this policy, outside trustees and directors are
covered up to the limits specified for any claim against
them for acts committed in their capacities as trustee
or director. A pro rata share of the premium for this
coverage is charged to each investment company and to
the Adviser.
ITEM 26. Business and Other Connections of 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
C-4
<PAGE>
April 21, 1988 (File No. 801-32361) and amended through
the date hereof, is incorporated by reference.
ITEM 27. Principal Underwriters.
(a) Alliance Fund Distributors, Inc., the Registrant's
Principal Underwriter in connection with the sale of
shares of the Registrant. Alliance Fund Distributors,
Inc. 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 Health Care 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 Select Investor Series, Inc.
Alliance Technology Fund, Inc.
Alliance Utility Income Fund, Inc.
Alliance Variable Products Series Fund, Inc.
Alliance Worldwide Privatization Fund, Inc.
The Alliance Fund, Inc.
The Alliance Portfolios
(b) The following are the Directors and Officers of Alliance
Fund Distributors, Inc., the principal place of business
C-5
<PAGE>
of which is 1345 Avenue of the Americas, New York, New
York, 10105.
POSITIONS AND POSITIONS AND
OFFICES WITH OFFICES WITH
NAME UNDERWRITER REGISTRANT
Michael J. Laughlin Director and Chairman
John D. Carifa Director President,
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
Benji A. Baer Senior Vice President
Karen J. Bullot Senior Vice President
John R. Carl 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
C-6
<PAGE>
Donald N. Fritts Senior Vice President
Bradley F. Hanson Senior Vice President
George H. Keith Senior Vice President
Richard E. Khaleel Senior Vice President
Stephen R. Laut Senior Vice President
Susan L. Matteson-King Senior Vice President
Daniel D. McGinley Senior Vice President
Antonios G. Poleondakis Senior Vice President
Robert E. Powers Senior Vice President
Kevin A. Rowell Senior Vice President
Raymond S. Sclafani Senior Vice President
Gregory K. Shannahan Senior Vice President
Joseph F. Sumanski Senior Vice President
Peter J. Szabo Senior Vice President
William C. White Senior Vice President
Nicholas K. Willett Senior Vice President
Richard A. Winge Senior Vice President
Gerard J. Friscia Vice President and
Controller
Ricardo Arreola Vice President
Kenneth F. Barkoff Vice President
Charles M. Barrett Vice President
Gregory P. Best Vice President
Casimir F. Bolanowski Vice President
Robert F. Brendli Vice President
Christopher L. Butts Vice President
C-7
<PAGE>
Timothy W. Call Vice President
Jonathan W. Cangalosi Vice President
Kevin T. Cannon Vice President
William W. Collins, Jr. Vice President
Leo H. Cook Vice President
Russell R. Corby Vice President
John W. Cronin Vice President
William J. Crouch Vice President
Robert J. Cruz Vice President
Richard W. Dabney Vice President
John F. Dolan Vice President
Richard P. Dyson Vice President
John C. Endahl Vice President
John E. English Vice President
Sohaila S. Farsheed Vice President
Duff C. Ferguson Vice President
Daniel J. Frank Vice President
Shawn C. Gage Vice President
Andrew L. Gangolf Vice President and Assistant
Assistant General Secretary
Counsel
Alex G. Garcia Vice President
Michael J. Germain Vice President
Mark D. Gersten Vice President Treasurer and
Chief
Financial
Officer
John Grambone Vice President
C-8
<PAGE>
Charles M. Greenberg Vice President
Alan Halfenger Vice President
William B. Hanigan Vice President
Michael S. Hart Vice President
Timothy A. Hill Vice President
Brian R. Hoegee Vice President
George R. Hrabovsky Vice President
Valerie J. Hugo Vice President
Michael J. Hutten Vice President
Scott Hutton Vice President
Oscar J. Isoba Vice President
Richard D. Keppler Vice President
Richard D. Kozlowski Vice President
Daniel W. Krause Vice President
Donna M. Lamback Vice President
P. Dean Lampe Vice President
Nicholas J. Lapi Vice President
Henry Michael Lesmeister Vice President
Eric L. Levinson Vice President
James M. Liptrot Vice President
James P. Luisi Vice President
Jerry W. Lynn Vice President
Michael F. Mahoney Vice President
Shawn P. McClain Vice President
David L. McGuire Vice President
Jeffrey P. Mellas Vice President
C-9
<PAGE>
Michael V. Miller Vice President
Thomas F. Monnerat Vice President
Timothy S. Mulloy Vice President
Joanna D. Murray Vice President
Michael F. Nash, Jr. Vice President
Nicole Nolan-Koester Vice President
Daniel A. Notto Vice President
Peter J. O'Brien Vice President
John C. O'Connell Vice President
John J. O'Connor Vice President
Christopher W. Olson Vice President
Richard J. Olszewski Vice President
Catherine N. Peterson Vice President
James J. Posch Vice President
Domenick Pugliese Vice President and Assistant
Assistant General Secretary
Counsel
Bruce W. Reitz Vice President
Karen C. Satterberg Vice President
John P. Schmidt Vice President
Robert C. Schultz Vice President
Richard J. Sidell Vice President
Clara Sierra Vice President
Teris A. Sinclair Vice President
Scott C. Sipple Vice President
Martine H. Stansbery, Jr. Vice President
Vincent T. Strangio Vice President
C-10
<PAGE>
Andrew D. Strauss Vice President
Michael J. Tobin Vice President
Joseph T. Tocyloski Vice President
Benjamin H. Travers 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
Stephen P. Wood Vice President
Emilie D. Wrapp Vice President and
Assistant General
Counsel
Michael W. Alexander Assistant Vice
President
Richard J. Appaluccio Assistant Vice
President
Paul G. Bishop Assistant Vice
President
Mark S. Burns Assistant Vice
President
John M. Capeci Assistant Vice
President
Maria L. Carreras Assistant Vice
President
John P. Chase Assistant Vice
President
William P. Condon Assistant Vice
President
C-11
<PAGE>
Jean A. Coomber Assistant Vice
President
Terri J. Daly Assistant Vice
President
Ralph A. DiMeglio Assistant Vice
President
Faith C. Deutsch Assistant Vice
President
Timothy J. Donegan Assistant Vice
President
Adam E. Engelhardt Assistant Vice
President
Michele Grossman 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
Evamarie C. Lombardo Assistant Vice
President
Kristine J. Luisi Assistant Vice
President
Kathryn Austin Masters Assistant Vice
President
Richard F. Meier Assistant Vice
President
C-12
<PAGE>
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
Margaret M. Tompkins Assistant Vice
President
Marie R. Vogel Assistant Vice Assistant
President Secretary
Wesley S. Williams Assistant Vice
President
Matthew Witschel Assistant Vice
President
David M. Wolf Assistant Vice
President
Mark R. Manley Assistant Secretary
(c) Not applicable.
ITEM 28. Location of Accounts and Records.
The majority of the accounts, books and other documents
required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and the rules thereunder
are maintained as follows: journals, ledgers,
securities records and other original records are
maintained principally at the offices of Alliance Fund
Services, Inc., 500 Plaza Drive, Secaucus, New Jersey,
07094 and at the offices of State Street Bank and Trust
Company, the Registrant's custodian, 225 Franklin
Street, Boston, Massachusetts 02110. All other records
so required to be maintained are maintained at the
offices of Alliance Capital Management L.P., 1345 Avenue
of the Americas, New York, New York, 10105.
C-13
<PAGE>
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 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 16th day of December, 1999.
Alliance Disciplined Value Fund, Inc.
/s/John D. Carifa
________________________
John D. Carifa
Chairman
Pursuant to the requirements of the Securities Act of 1933,
as amended, this Registration Statement has been signed below by
the following persons in the capacities and on the date
indicated.
Signature Title Date
_____________ __________ ________
(1) Principal Executive Officer:
/s/ John D. Carifa Chairman and December 16, 1999
______________________ President
John D. Carifa
(2) Principal Financial
and Accounting Officer:
/s/ Mark D. Gersten Treasurer December 16, 1999
_____________________ 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 16, 1999
Edmund P. Bergan, Jr.
Attorney-in-Fact
C-15
<PAGE>
Index To Exhibits
(d) Advisory Agreement.
(e) (1) Distribution Services Agreement.
(2) Selected Dealer Agreement.
(3) Selected Agent Agreement.
(h) (1) Transfer Agency Agreement.
(2) Expense Limitation Agreement
(i) (1) Opinion and Consent of Seward & Kissel LLP.
(2) Opinion and Consent of Venable, Baetjer and Howard LLP.
(j) Consent of independent auditors.
(l) Investment representation letter.
(o) 18f-3 Plan
C-16
00250250.AD7
<PAGE>
Exhibit (d)
ADVISORY AGREEMENT
ALLIANCE DISCIPLINED VALUE FUND, INC.
1345 Avenue Of The Americas
New York, New York 10105
December 6, 1999
ALLIANCE CAPITAL MANAGEMENT L.P.
1345 Avenue of the Americas
New York, New York 10105
Dear Sirs:
Alliance Disciplined Value Fund, Inc. (the "Fund")
herewith confirms our agreement with you as follows:
1. We are an open-end, diversified management
investment company registered under the Investment Company Act of
1940, as amended (the "Act"). We are currently authorized to
issue separate classes of shares and our Directors are authorized
to reclassify and issue any unissued shares to any number of
additional classes or series (portfolios) each having its own
investment objective, policies and restrictions, all as more
fully described in the prospectus and the statement of additional
information constituting parts of our Registration Statement on
Form N-1A filed with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended, and
the Act (the "Registration Statement"). We propose to engage in
<PAGE>
the business of investing and reinvesting the assets of each of
our portfolios in securities ("the portfolio assets") of the type
and in accordance with the limitations specified in our Articles
of Incorporation, By-Laws and Registration Statement, and any
representations made in our prospectus and statement of
additional information, all in such manner and to such extent as
may from time to time be authorized by our Board of Directors.
We enclose copies of the documents listed above and will from
time to time furnish you with any amendments thereof.
2. (a) We hereby employ you to manage the investment
and reinvestment of the portfolio assets as above specified and,
without limiting the generality of the foregoing, to provide
management and other services specified below.
(b) You will make decisions with respect to all
purchases and sales of the portfolio assets. To carry out such
decisions, you are hereby authorized, as our agent and attorney-
in-fact, for our account and at our risk and in our name, to
place orders for the investment and reinvestment of the portfolio
assets. In all purchases, sales and other transactions in the
portfolio assets you are authorized to exercise full discretion
and act for us in the same manner and with the same force and
effect as we might or could do with respect to such purchases,
sales or other transactions, as well as with respect to all other
things necessary or incidental to the furtherance or conduct of
such purchases, sales or other transactions.
2
<PAGE>
(c) You will report to our Board of Directors at
each meeting thereof all changes in the portfolio assets since
the prior report, and will also keep us in touch with important
developments affecting the portfolio assets and on your own
initiative will furnish us from time to time with such
information as you may believe appropriate for this purpose,
whether concerning the individual issuers whose securities are
included in the portfolio assets, the industries in which they
engage, or the conditions prevailing in the economy generally.
You will also furnish us with such statistical and analytical
information with respect to the portfolio assets as you may
believe appropriate or as we reasonably may request. In making
such purchases and sales of the portfolio assets, you will bear
in mind the policies set from time to time by our Board of
Directors as well as the limitations imposed by our Articles of
Incorporation and in our Registration Statement, in each case as
amended from time to time, the limitations in the Act and of the
Internal Revenue Code of 1986, as amended, in respect of
regulated investment companies and the investment objective,
policies and practices, including restrictions applicable to each
of our portfolios.
(d) It is understood that you will from time to
time employ or associate with yourselves such persons as you
believe to be particularly fitted to assist you in the execution
of your duties hereunder, the cost of performance of such duties
3
<PAGE>
to be borne and paid by you. No obligation may be incurred on
our behalf in any such respect. During the continuance of this
Agreement and at our request you will provide to us persons
satisfactory to our Board of Directors to serve as our officers.
You or your affiliates will also provide persons, who may be our
officers, to render such clerical, accounting and other services
to us as we may from time to time request of you. Such personnel
may be employees of you or your affiliates. We will pay to you
or your affiliates the cost of such personnel for rendering such
services to us, provided that all time devoted to the investment
or reinvestment of the portfolio assets shall be for your
account. Nothing contained herein shall be construed to restrict
our right to hire our own employees or to contract for services
to be performed by third parties. Furthermore, you or your
affiliates shall furnish us without charge with such management
supervision and assistance and such office facilities as you may
believe appropriate or as we may reasonably request subject to
the requirements of any regulatory authority to which you may be
subject. You or your affiliates shall also be responsible for
the payment of any expenses incurred in promoting the sale of our
shares (other than the portion of the promotional expenses to be
borne by us in accordance with an effective plan pursuant to Rule
12b-1 under the Act and the costs of printing our prospectuses
and reports to shareholders and fees related to registration with
the Commission and with state regulatory authorities).
4
<PAGE>
3. We hereby confirm that we shall be responsible and
hereby assume the obligation for payment of all of our expenses,
including: (a) payment to you of the fee provided for in
paragraph 5 below; (b) custody, transfer and dividend disbursing
expenses; (c) fees of directors who are not your affiliated
persons; (d) legal and auditing expenses; (e) clerical,
accounting and other office costs; (f) the cost of personnel
providing services to us, as provided in subparagraph (d) of
paragraph 2 above; (g) costs of printing our prospectuses and
shareholder reports; (h) cost of maintenance of our corporate
existence; (i) interest charges, taxes, brokerage fees and
commissions; (j) costs of stationery and supplies; (k) expenses
and fees related to registration and filing with the Commission
and with state regulatory authorities; and (l) such promotional,
shareholder servicing and other expenses as may be contemplated
by one or more effective plans pursuant to Rule 12b-1 under the
Act or one or more duly approved and effective non-Rule 12b-1
shareholder servicing plans, in each case provided, however, that
our payment of such promotional, shareholder servicing and other
expenses shall be in the amounts, and in accordance with the
procedures, set forth in such plan or plans.
4. We shall expect of you, and you will give us the
benefit of, your best judgment and efforts in rendering these
services to us, and we agree as an inducement to your undertaking
these services that you shall not be liable hereunder for any
5
<PAGE>
mistake of judgment or in any event whatsoever, except for lack
of good faith, provided that nothing herein shall be deemed to
protect, or purport to protect, you against any liability to us
or to our security holders to which you would otherwise be
subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of your duties hereunder, or by
reason of your reckless disregard of your obligations and duties
hereunder.
5. In consideration of the foregoing we will pay you a
monthly fee at an annualized rate of .75% of our average daily
net assets. Your compensation for the period from the date
hereof through the last day of the month of the effective date
hereof will be prorated based on the proportion that such period
bears to the full month. In the event of any termination of this
Agreement, your compensation will be calculated on the basis of a
period ending on the last day on which this Agreement is in
effect, subject to proration based on the number of days elapsed
in the current period as a percentage of the total number of days
in such period.
6. This Agreement shall become effective on the date
hereof and shall remain in effect until November 30, 2001 and
continue in effect thereafter with respect to a portfolio only so
long as its continuance with respect to that portfolio is
specifically approved at least annually by our Board of Directors
or by a vote of a majority of the outstanding voting securities
6
<PAGE>
(as defined in the Act) of such portfolio, and, in either case,
by a vote, cast in person at a meeting called for the purpose of
voting on such approval, of a majority of our Directors who are
not parties to this Agreement or interested persons, as defined
in the Act, of any party to this Agreement (other than as our
Directors), and provided further, however, that if the
continuation of this Agreement is not approved as to a portfolio,
you may continue to render to such portfolio the services
described herein in the manner and to the extent permitted by the
Act and the rules and regulations thereunder. Upon the
effectiveness of this Agreement, it shall supersede all previous
agreements between us covering the subject matter hereof. This
Agreement may be terminated with respect to any portfolio at any
time, without the payment of any penalty, by vote of a majority
of the outstanding voting securities (as defined in the Act) of
such portfolio, or by a vote of our Board of Directors on 60
days' written notice to you, or by you with respect to any
portfolio on 60 days' written notice to us.
7. This Agreement shall not be amended as to any
portfolio unless such amendment is approved by vote, cast in
person at a meeting called for the purpose of voting on such
approval, of a majority of our Directors who are not parties to
this Agreement or interested persons, as defined in the Act, of
any party to this Agreement (other than as our Directors), and,
if required by law, by vote of a majority of the outstanding
7
<PAGE>
voting securities (as defined in the Act) of such portfolio.
Shareholders of a portfolio not affected by any such amendment
shall have no right to participate in any such vote.
8. As to any particular portfolio, this Agreement may
not be assigned by you and, as to such portfolio, this Agreement
shall terminate automatically in the event of any assignment by
you. The term "assignment" as used in this paragraph shall have
the meaning ascribed thereto by the Act and any regulations or
interpretations of the Commission thereunder.
9. (a) Except to the extent necessary to perform your
obligations hereunder, nothing herein shall be deemed to limit or
restrict your right, or the right of any of your employees, or
any of the officers or directors of Alliance Capital Management
Corporation, your general partner, who may also be a Director,
officer or employee of ours, or persons otherwise affiliated with
us (within the meaning of the Act), to engage in any other
business or to devote time and attention to the management or
other aspects of any other business, whether of a similar or
dissimilar nature, or to render services of any kind to any other
trust, corporation, firm, individual or association.
(b) You will notify us of any change in the general
partners of your partnership within a reasonable time after such
change.
10. If you cease to act as our investment adviser, or,
in any event, if you so request in writing, we agree to take all
8
<PAGE>
necessary action to change our name to a name not including the
term "Alliance." You may from time to time make available
without charge to us for our use such marks or symbols owned by
you, including marks or symbols containing the term "Alliance" or
any variation thereof, as you may consider appropriate. Any such
marks or symbols so made available will remain your property and
you shall have the right, upon notice in writing, to require us
to cease the use of such mark or symbol at any time.
11. This Agreement shall be construed in accordance
with the laws of the State of New York, provided, however, that
nothing herein shall be construed as being inconsistent with the
Act.
9
<PAGE>
If the foregoing is in accordance with your
understanding, will you kindly so indicate by signing and
returning to us the enclosed copy hereof.
Very truly yours,
ALLIANCE DISCIPLINED VALUE FUND,
INC.
By: /s/ Edmund P. Bergan, Jr.
______________________________
Edmund P. Bergan, Jr.
Secretary
Agreed to and accepted
as of the date first set forth above.
ALLIANCE CAPITAL MANAGEMENT L.P.
By: ALLIANCE CAPITAL MANAGEMENT
CORPORATION, its general
partner
By: /s/ John D. Carifa
___________________________
John D. Carifa
President
10
00250250.AE3
<PAGE>
Exhibit (e)(1)
DISTRIBUTION SERVICES AGREEMENT
AGREEMENT made as of December 6, 1999 between ALLIANCE
DISCIPLINED VALUE FUND, INC., a Maryland corporation (the
"Fund"), and ALLIANCE FUND DISTRIBUTORS, INC., a Delaware
corporation (the "Underwriter").
WITNESSETH
WHEREAS, the Fund is registered under the Investment
Company Act of 1940, as amended (the "Investment Company Act"),
as a diversified, open-end management investment company and it
is in the interest of the Fund to offer its shares for sale
continuously;
WHEREAS, the Underwriter is a securities firm engaged in
the business of selling shares of investment companies either
directly to purchasers or through other securities dealers;
WHEREAS, the Fund and the Underwriter wish to enter into
an agreement with each other with respect to the continuous
offering of the Fund's shares in order to promote the growth of
the Fund and facilitate the distribution of its shares;
NOW, THEREFORE, the parties agree as follows:
SECTION 1. Appointment of the Underwriter. The Fund
hereby appoints the Underwriter as the principal underwriter and
distributor of the Fund to sell to the public shares of its Class
A Common Stock (the "Class A shares"), Class B Common Stock (the
"Class B shares"), Class C Common Stock (the "Class C shares")
and shares of such other class or classes as the Fund and the
Underwriter shall from time to time mutually agree in writing
shall become subject to this Agreement (the "New shares") (the
Class A shares, the Class B shares, the Class C shares and the
New shares being collectively referred to herein as the "shares")
and hereby agrees during the term of this Agreement to sell
shares to the Underwriter upon the terms and conditions herein
set forth.
SECTION 2. Exclusive Nature of Duties. The Underwriter
shall be the exclusive representative of the Fund to act as
principal underwriter and distributor of the shares except that
the rights given under this Agreement to the Underwriter shall
not apply to shares issued in connection with (a) the merger or
consolidation of any other investment company with the Fund, (b)
<PAGE>
the Fund's acquisition by purchase or otherwise of all or
substantially all of the assets or stock of any other investment
company or (c) the reinvestment in shares by the Fund's
shareholders of dividends or other distributions.
SECTION 3. Purchase of Shares from the Fund.
(a) Prior to the continuous offering of the shares
commencing on a date agreed upon by the Fund and the Underwriter,
the Underwriter agrees to solicit subscriptions for shares during
an initial offering period which shall last for such period as
may be agreed upon by the parties hereto. The subscriptions will
be payable within three business days after the termination of
the initial offering period.
(b) After a period of time following the termination of
the initial offering period, which will be determined by the
Fund, the Fund will commence a continuous offering of its shares
and thereafter the Underwriter shall have the right to buy from
the Fund the shares needed to fill unconditional orders for
shares of the Fund placed with the Underwriter by investors or
securities dealers, depository institutions or other financial
intermediaries acting as agent for their customers. The price
which the Underwriter shall pay for the shares so purchased from
the Fund shall be the net asset value, determined as set forth in
Section 3(d) hereof, used in determining the public offering
price on which such orders are based.
(c) The shares are to be resold by the Underwriter to
investors at a public offering price, as set forth in Section
3(d) hereof, or to securities dealers, depository institutions or
other financial intermediaries acting as agent for their
customers having agreements with the Underwriter upon the terms
and conditions set forth in Section 8 hereof.
(d) The public offering price of the shares, i.e., the
price per share at which the Underwriter or selected dealers or
selected agents (each as defined in Section 8(a) below) may sell
shares to the public, shall be the public offering price
determined in accordance with one or more then current
prospectuses and statements of additional information of the Fund
(each a "Prospectus" and a "Statement of Additional Information,"
respectively) under the Securities Act of 1933, as amended (the
"Securities Act"), relating to such shares, but not to exceed the
net asset value at which the Underwriter is to purchase such
shares, plus, in the case of Class A shares, an initial sales
charge equal to a specified percentage or percentages of the
public offering price of the Class A shares as set forth in the
Prospectus. Class A shares may be sold without such a sales
charge to certain classes of persons as from time to time set
forth in the Prospectus and Statement of Additional Information.
2
<PAGE>
All payments to the Fund hereunder shall be made in the manner
set forth in Section 3(g) hereof.
(e) The net asset value of shares of the Fund shall be
determined by the Fund, or any agent of the Fund, as of the close
of regular trading on the New York Stock Exchange on each Fund
business day in accordance with the method set forth in the
Prospectus and Statement of Additional Information and guidelines
established by the Directors of the Fund.
(f) The Fund reserves the right to suspend the offering
of its shares at any time in the absolute discretion of its
Directors.
(g) The Fund, or any agent of the Fund designated in
writing to the Underwriter by the Fund, shall be promptly advised
by the Underwriter of all purchase orders for shares received by
the Underwriter. Any order may be rejected by the Fund;
provided, however, that the Fund will not arbitrarily or without
reasonable cause refuse to accept or confirm orders for the
purchase of shares. The Fund (or its agent) will confirm orders
upon their receipt, will make appropriate book entries and, upon
receipt by the Fund (or its agent) of payment thereof, will
deliver deposit receipts or certificates for such shares pursuant
to the instructions of the Underwriter. Payment shall be made to
the Fund in New York Clearing House funds. The Underwriter
agrees to cause such payment and such instructions to be
delivered promptly to the Fund (or its agent).
SECTION 4. Repurchase or Redemption of
Shares by the Fund.
(a) Any of the outstanding shares may be tendered for
redemption at any time, and the Fund agrees to redeem or
repurchase the shares so tendered in accordance with its
obligations as set forth in paragraph 9(d) of ARTICLE FIFTH of
its Articles of Incorporation and in accordance with the
applicable provisions set forth in the Prospectus and Statement
of Additional Information. The price to be paid to redeem or
repurchase the shares shall be equal to the net asset value
calculated in accordance with the provisions of Section 3(e)
hereof, less any applicable sales charge or redemption fee. All
payments by the Fund hereunder shall be made in the manner set
forth below. The redemption or repurchase by the Fund of any of
the Class A shares purchased by or through the Underwriter will
not affect the initial sales charge secured by the Underwriter or
any selected dealer or compensation paid to any selected agent
(unless such selected dealer or selected agent has otherwise
agreed with the Underwriter), in the course of the original sale,
regardless of the length of the time period between purchase by
an investor and his tendering for redemption or repurchase.
3
<PAGE>
The Fund (or its agent) shall pay the total amount of
the redemption price and, except as may be otherwise required by
the Conduct Rules of the National Association of Securities
Dealers, Inc. (the "NASD") and any interpretations thereof ("NASD
rules and interpretations"), the deferred sales charges, if any,
pursuant to the instructions of the Underwriter in New York
Clearing House funds on or before the seventh business day
subsequent to its having received the notice of redemption in
proper form.
(b) Redemption of shares or payment may be suspended at
times when the New York Stock Exchange is closed, when trading
thereon is restricted, when an emergency exists as a result of
which disposal by the Fund of securities owned by it is not
reasonably practicable or it is not reasonably practicable for
the Fund fairly to determine the value of its net assets, or
during any other period when the Securities and Exchange
Commission, by order, so permits.
SECTION 5. Plan of Distribution.
(a) It is understood that Sections 5, 12 and 16 hereof
together constitute a plan of distribution (the "Plan") within
the meaning of Rule 12b-1 adopted by the Securities and Exchange
Commission under the Investment Company Act ("Rule 12b-1").
(b) Except as may be required by NASD rules and
interpretations, the Fund will pay to the Underwriter each month
a distribution services fee with respect to each portfolio of the
Fund specified by the Fund's Directors (a "Portfolio") that will
not exceed, on an annualized basis, .30% of the aggregate average
daily net assets of the Fund attributable to the Class A shares,
1.00% of the aggregate average daily net assets of the Fund
attributable to the Class B shares and 1.00% of the aggregate
average daily net assets of the Fund attributable to the Class C
shares. With respect to each Portfolio, the distribution
services fee will be used in its entirety by the Underwriter to
make payments (i) to compensate broker-dealers or other persons
for providing distribution assistance, (ii) to otherwise promote
the sale of shares of each Portfolio, including payment for the
preparation, printing and distribution of prospectuses and sales
literature or other promotional activities, and (iii) to
compensate broker-dealers, depository institutions and other
financial intermediaries for providing administrative, accounting
and other services with respect to each Portfolio's shareholders.
A portion of the distribution services fee that will not exceed,
on an annualized basis, .25% of the aggregate average daily net
assets of the Fund attributable to each of the Class A shares,
Class B shares and Class C shares will constitute a service fee
that will be used by the Underwriter for personal service and/or
4
<PAGE>
the maintenance of shareholder accounts within the meaning of
NASD rules and interpretations.
(c) Alliance Capital Management L.P., the Fund's
investment adviser (the "Adviser"), may, with respect to any and
all classes of shares of the Fund, make payments from time to
time from its own resources for the purposes described in Section
5(b) hereof.
(d) Payments to broker-dealers, depository institutions
and other financial intermediaries for the purposes set forth in
Section 5(b) are subject to the terms and conditions of the
respective written agreements between the Underwriter and each
broker-dealer, depository institution or other financial
intermediary. Such agreements will be in a form satisfactory to
the Directors of the Fund.
(e) The Treasurer of the Fund will prepare and furnish
to the Fund's Directors, and the Directors will review, at least
quarterly, a written report complying with the requirements of
Rule 12b-1 setting forth all amounts expended hereunder and the
purposes for which such expenditures were made.
(f) The Fund is not obligated to pay any distribution
expenses in excess of the distribution services fee described
above in Section 5(b) hereof. Any expenses of distribution of
the Fund's Class A shares accrued by the Underwriter in one
fiscal year of the Fund may not be paid from distribution
services fees received from the Fund in respect of Class A shares
in another fiscal year. Any expenses of distribution of the
Fund's Class B shares or Class C shares accrued by the
Underwriter in one fiscal year of the Fund may be carried forward
and paid from distribution services fees received from the Fund
in respect of such class of shares in another fiscal year. No
portion of the distribution services fees received from the Fund
in respect of Class A shares may be used to pay any interest
expense, carrying charges or other financing costs or allocation
of overhead of the Underwriter. The distribution services fees
received from the Fund in respect of Class B shares and Class C
shares may be used to pay interest expenses, carrying charges and
other financing costs or allocation of overhead of the
Underwriter to the extent permitted by Securities and Exchange
Commission rules, regulations or Securities and Exchange
Commission staff no-action or interpretative positions in effect
from time to time. In the event this Agreement is terminated by
either party or is not continued with respect to a class of
shares as provided in Section 12 below: (i) no distribution
services fees (other than current amounts accrued but not yet
paid) will be owed by the Fund to the Underwriter with respect to
that class, and (ii) the Fund will not be obligated to pay the
Underwriter for any amounts expended hereunder not previously
5
<PAGE>
reimbursed by the Fund from distribution services fees in respect
of shares of such class or recovered through deferred sales
charges. The distribution services fee of a particular class may
not be used to subsidize the sale of shares of any other class.
SECTION 6. Duties of the Fund.
(a) The Fund shall furnish to the Underwriter copies of
all information, financial statements and other papers that the
Underwriter may reasonably request for use in connection with the
distribution of shares of the Fund, and this shall include one
certified copy, upon request by the Underwriter, of all financial
statements prepared for the Fund by the Fund's independent public
accountants. The Fund shall make available to the Underwriter
such number of copies of the Prospectus and Statement of
Additional Information as the Underwriter shall reasonably
request.
(b) The Fund shall take, from time to time, but subject
to any necessary approval of its shareholders, all necessary
action to fix the number of authorized shares and such steps as
may be necessary to register the same under the Securities Act,
to the end that there will be available for sale such number of
shares as the Underwriter reasonably may be expected to sell.
(c) The Fund shall use its best efforts to qualify for
sale and maintain the qualification for sale of an appropriate
number of its shares under the securities laws of such states as
the Underwriter and the Fund may approve. Any such qualification
may be withheld, terminated or withdrawn by the Fund at any time
in its discretion. As provided in Section 9(b) hereof, the
expense of qualification and maintenance of qualification shall
be borne by the Fund. The Underwriter shall furnish such
information and other material relating to its affairs and
activities as may be required by the Fund in connection with such
qualification.
(d) The Fund will furnish, in reasonable quantities
upon request by the Underwriter, copies of annual and interim
reports of the Fund.
SECTION 7. Duties of the Underwriter.
(a) The Underwriter shall devote reasonable time and
effort to effect sales of shares of the Fund, but shall not be
obligated to sell any specific number of shares. The services
hereunder of the Underwriter to the Fund are not to be deemed
exclusive as to the Underwriter and nothing in this Agreement
shall prevent the Underwriter from entering into like
arrangements with other investment companies so long as the
performance of its obligations hereunder is not impaired thereby.
6
<PAGE>
(b) In selling shares of the Fund, the Underwriter
shall use its best efforts in all material respects duly to
conform with the requirements of all federal and state laws
relating to the sale of such securities. Neither the
Underwriter, any selected dealer, any selected agent nor any
other person is authorized by the Fund to give any information or
to make any representations, other than those contained in the
Fund's Registration Statement on Form N-1A (the "Registration
Statement"), as amended from time to time, under the Securities
Act and the Investment Company Act or the Prospectus and
Statement of Additional Information or in any sales literature
specifically approved in writing by the Fund.
(c) The Underwriter shall adopt and follow procedures,
as approved by the appropriate officers of the Fund, for the
confirmation of sales to investors and selected dealers, the
collection of amounts payable by investors and selected dealers
on such sales, and the cancellation of unsettled transactions, as
may be necessary to comply with the requirements of the NASD, as
such requirements may from time to time exist.
SECTION 8. Selected Dealer and Agent Agreements.
(a) The Underwriter shall have the right to enter into
selected dealer agreements with securities dealers of its choice
("selected dealers") and selected agent agreements with
depository institutions and other financial intermediaries of its
choice ("selected agents") for the sale of shares and fix therein
the portion of the sales charge that may be allocated to the
selected dealers and selected agents; provided, that the Fund
shall approve the forms of agreements with selected dealers and
selected agents and the selected dealer and selected agent
compensation set forth therein. Shares sold to selected dealers
or through selected agents shall be for resale by such selected
dealers and for sale through such selected agents only at the
public offering price set forth in the Prospectus and/or
Statement of Additional Information.
(b) Within the United States, the Underwriter shall
offer and sell shares only to such selected dealers as are
members in good standing of the NASD.
SECTION 9. Payment of Expenses.
(a) The Fund shall bear all costs and expenses of the
Fund, including fees and disbursements of its counsel and
auditors, in connection with the preparation and filing of its
Registration Statement and Prospectus and Statement of Additional
Information, and all amendments and supplements thereto, and
preparing and mailing annual and interim reports and proxy
materials to shareholders (including but not limited to the
7
<PAGE>
expense of printing any such registration statements,
prospectuses, annual or interim reports or proxy materials).
(b) The Fund shall bear the cost of expenses of
qualification of shares for sale, and, if necessary or advisable
in connection therewith, of qualifying the Fund as an issuer or
as a broker or dealer, in such states of the United States or
other jurisdiction as shall be selected by the Fund and the
Underwriter pursuant to Section 6(c) hereof and the cost and
expenses payable to each such state for continuing qualification
therein until the Fund decides to discontinue such qualification
pursuant to Section 6(c) hereof.
SECTION 10. Indemnification.
(a) The Fund shall indemnify, defend and hold the
Underwriter, and any person who controls the Underwriter within
the meaning of Section 15 of the Securities Act, free and
harmless from and against any and all claims, demands,
liabilities and expenses (including the cost of investigating or
defending such claims, demands or liabilities and any counsel
fees incurred in connection therewith) which the Underwriter or
any such controlling person may incur, under the Securities Act,
or under common law or otherwise, arising out of or based upon
any alleged untrue statement of a material fact contained in the
Fund's Registration Statement, Prospectus or Statement of
Additional Information in effect from time to time under the
Securities Act or arising out of or based upon any alleged
omission to state a material fact required to be stated in any
one thereof or necessary to make the statements in any one
thereof not misleading; provided, however, that in no event shall
anything herein contained be so construed as to protect the
Underwriter against any liability to the Fund or its security
holders to which the Underwriter would otherwise be subject by
reason of willful misfeasance, bad faith or gross negligence in
the performance of its duties, or by reason of the Underwriter's
reckless disregard of its obligations and duties under this
Agreement. The Fund's agreement to indemnify the Underwriter and
any such controlling person as aforesaid is expressly conditioned
upon the Fund's being notified of the commencement of any action
brought against the Underwriter or any such controlling person,
such notification to be given by letter or by telegram addressed
to the Fund at its principal office in New York, New York, and
sent to the Fund by the person against whom such action is
brought within ten days after the summons or other first legal
process shall have been served. The failure to so notify the
Fund of the commencement of any such action shall not relieve the
Fund from any liability which it may have to the person against
whom such action is brought by reason of any such alleged untrue
statement or omission otherwise than on account of the indemnity
agreement contained in this Section 10. The Fund will be
8
<PAGE>
entitled to assume the defense of any suit brought to enforce any
such claim, and to retain counsel of good standing chosen by the
Fund and approved by the Underwriter. In the event the Fund does
not elect to assume the defense of any such suit and retain
counsel of good standing approved by the Underwriter, the
defendant or defendants in such suit shall bear the fees and
expenses of any additional counsel retained by any of them; but
if Fund does not elect to assume the defense of any such suit, or
in case the Underwriter does not approve of counsel chosen by the
Fund, the Fund will reimburse the Underwriter or the controlling
person or persons named as defendant or defendants in such suit,
for the fees and expenses of any counsel retained by the
Underwriter or any such person. The indemnification agreement
contained in this Section 10 shall remain operative and in full
force and effect regardless of any investigation made by or on
behalf of the Underwriter or any controlling person and shall
survive the sale of any of the Fund's shares made pursuant to
subscriptions obtained by the Underwriter. This agreement of
indemnity will inure exclusively to the benefit of the
Underwriter, to the benefit of its successors and assigns, and to
the benefit of any controlling persons and their successors and
assigns. The Fund shall promptly notify the Underwriter of the
commencement of any litigation or proceeding against the Fund in
connection with the issue and sale of any of its shares.
(b) The Underwriter shall indemnify, defend and hold
the Fund, its several officers and directors, and any person who
controls the Fund within the meaning of Section 15 of the
Securities Act, free and harmless from and against any and all
claims, demands, liabilities, and expenses (including the cost of
investigating or defending such claims, demands or liabilities
and any counsel fees incurred in connection therewith) which the
Fund, its officers or directors, or any such controlling person
may incur under the Securities Act or under common law or
otherwise, but only to the extent that such liability, or expense
incurred by the Fund, its officers, directors or such controlling
person resulting from such claims or demands shall arise out of
or be based upon any alleged untrue statement of a material fact
contained in information furnished in writing by the Underwriter
to the Fund for use in its Registration Statement, Prospectus or
Statement of Additional Information in effect from time to time
under the Securities Act, or shall arise out of or be based upon
any alleged omission to state a material fact in connection with
such information required to be stated in the Registration
Statement, Prospectus or Statement of Additional Information or
necessary to make such information not misleading. The
Underwriter's agreement to indemnify the Fund, its officers and
directors, and any such controlling person as aforesaid is
expressly conditioned upon the Underwriter being notified of the
commencement of any action brought against the Fund, its officers
or directors or any such controlling person, such notification to
9
<PAGE>
be given by letter or telegram addressed to the Underwriter at
its principal office in New York, and sent to the Underwriter by
the person against whom such action is brought, within ten days
after the summons or other first legal process shall have been
served. The Underwriter shall have a right to control the
defense of such action, with counsel of its own choosing,
satisfactory to the Fund, if such action is based solely upon
such alleged misstatement or omission on its part, and in any
other event the Underwriter and the Fund, and their officers and
directors or such controlling person, shall each have the right
to participate in the defense or preparation of the defense of
any such action. The failure so to notify the Underwriter of the
commencement of any such action shall not relieve the Underwriter
from any liability which it may have to the Fund, to its officers
and directors, or to such controlling person by reason of any
such untrue statement or omission on the part of the Underwriter
otherwise than on account of the indemnity agreement contained in
this Section 10.
SECTION 11. Notification by the Fund.
The Fund shall advise the Underwriter immediately:
(a) of any request by the Securities and Exchange
Commission for any amendment to the Fund's Registration
Statement, Prospectus or Statement of Additional Information or
for additional information,
(b) in the event of the issuance by the Securities and
Exchange Commission of any stop order suspending the
effectiveness of the Fund's Registration Statement, Prospectus or
Statement of Additional Information or the initiation of any
proceeding for that purpose,
(c) of the happening of any material event which makes
untrue any statement made in the Fund's Registration Statement,
Prospectus or Statement of Additional Information or which
requires the making of a change in any one thereof in order to
make the statements therein not misleading, and
(d) of all actions of the Securities and Exchange
Commission with respect to any amendment to the Fund's
Registration Statement, Prospectus or Statement of Additional
Information which may from time to time be filed with the
Securities and Exchange Commission under the Securities Act.
SECTION 12. Term of Agreement.
(a) This Agreement shall become effective on the date
hereof and shall continue in effect until November 30, 2000 and
continue in effect thereafter with respect to each class of
10
<PAGE>
shares of a Portfolio of the Fund so long as its continuance with
respect to that class is specifically approved annually by the
Directors of the Fund or by vote of the holders of a majority of
the outstanding voting securities (as defined in the Investment
Company Act) of that class, and, in either case, by a majority of
the Directors of the Fund who are not parties to this Agreement
or interested persons, as defined in the Investment Company Act,
of any such party (other than as directors of the Fund) and who
have no direct or indirect financial interest in the operation of
the Plan or any agreement related thereto; provided, however,
that if the continuation of this Agreement is not approved as to
a class or a Portfolio, the Underwriter may continue to render to
such class or Portfolio the services described herein in the
manner and to the extent permitted by the Act and the rules and
regulations thereunder. Upon effectiveness of this Agreement, it
shall supersede all previous agreements between the parties
hereto covering the subject matter hereof. This Agreement may be
terminated (i) by the Fund with respect to any class or Portfolio
at any time, without the payment of any penalty, by the vote of a
majority of the outstanding voting securities (as so defined) of
such class or Portfolio, or by a vote of a majority of the
Directors of the Fund who are not interested persons, as defined
in the Investment Company Act, of the Fund (other than as
directors of the Fund) and have no direct and indirect financial
interest in the operation of the Plan or any agreement related
thereto, in any such event on sixty days' written notice to the
Underwriter; provided, however, that no such notice shall be
required if such termination is stated by the Fund to relate only
to Sections 5 and 16 hereof (in which event Sections 5 and 16
shall be deemed to have been severed herefrom and all other
provisions of this Agreement shall continue in full force and
effect), or (ii) by the Underwriter with respect to any Portfolio
on sixty days' written notice to the Fund.
(b) This Agreement may be amended at any time with the
approval of the Directors of the Fund, provided that (i) any
material amendments of the terms hereof will become effective
only upon approval as provided in the first sentence of Section
12(a) hereof, and (ii) any amendment to increase materially the
amount to be expended for distribution services fees pursuant to
Section 5(b) hereof will be effective only upon the additional
approval by a vote of a majority of the outstanding voting
securities as defined in the Investment Company Act of the class
affected.
SECTION 13. No Assignment. This Agreement may not be
transferred, assigned, sold or in any manner hypothecated or
pledged by either party hereto, and this Agreement shall
terminate automatically in the event of any such transfer,
assignment, sale, hypothecation or pledge. The terms "transfer",
"assignment", and "sale" as used in this paragraph shall have the
11
<PAGE>
meanings ascribed thereto by governing law and any interpretation
thereof contained in rules or regulations promulgated by the
Securities and Exchange Commission thereunder.
SECTION 14. Notices. Any notice required or permitted
to be given hereunder by either party to the other shall be
deemed sufficiently given if sent by registered mail, postage
prepaid, addressed by the party giving such notice to the other
party at the last address furnished by such other party to the
party given notice, and unless and until changed pursuant to the
foregoing provisions hereof addressed to the Fund or the
Underwriter.
SECTION 15. Governing Law. The provisions of this
Agreement shall be, to the extent applicable, construed and
interpreted in accordance with the laws of the State of New York.
SECTION 16. Disinterested Directors of the Fund. While
this Agreement is in effect, the selection and nomination of the
Directors who are not "interested persons" of the Fund (as
defined in the Investment Company Act) will be committed to the
discretion of such disinterested Directors.
12
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement.
ALLIANCE DISCIPLINED VALUE FUND, INC.
By: /s/ Edmund P. Bergan, Jr.
_________________________________
Edmund P. Bergan, Jr.
Secretary
ALLIANCE FUND DISTRIBUTORS, INC.
By: /s/ Robert L. Errico
_________________________________
Robert L. Errico
President
Accepted as to
Sections 5, 12 and 16
as of December 6, 1999:
ALLIANCE CAPITAL MANAGEMENT L.P.
By: Alliance Capital Management Corporation,
General Partner
By: /s/ John D. Carifa
___________________________
John D. Carifa
President
13
00250250.AE2
<PAGE>
Exhibit (e)(2)
(LOGO) ALLIANCE FUND DISTRIBUTORS, INC.
1345 AVENUE OF THE AMERICAS
NEW YORK, N.Y. 10105
(800) 221-5672
Selected Dealer Agreement
For Broker/Dealers (other than Bank Subsidiaries)
Dear Sirs:
As the principal underwriter of shares of certain
registered investment companies presently or hereafter managed by
Alliance Capital Management L.P., shares of which companies are
distributed by us pursuant to our Distribution Services Agreements
with such companies (the "Funds"), we invite you to participate as
principal in the distribution of shares of any and all of the
Funds upon the following terms and conditions:
1. You are to offer and sell such shares only at the
public offering prices which shall be currently in effect, in
accordance with the terms of the then current prospectuses and
statements of additional information of the Funds. You agree to
act only as principal in such transactions and shall not have
authority to act as agent for the Funds, for us, or for any other
dealer in any respect. All orders are subject to acceptance by us
and become effective only upon confirmation by us.
2. On each purchase of shares by you from us, the total
sales charges and discount to selected dealer, if any, shall be as
stated in each Fund's then current prospectus.
Such sales charges and discount to selected dealers are
subject to reductions under a variety of circumstances as
described in each Fund's then current prospectus and statement of
additional information. To obtain these reductions, we must be
notified when the sale takes place which would qualify for the
reduced charge.
There is no sales charge or discount to selected dealers
on the reinvestment of dividends.
3. As a selected dealer, you are hereby authorized
(i) to place orders directly with the Funds for their shares to be
<PAGE>
resold by us to you subject to the applicable terms and conditions
governing the placement of orders by us set forth in the
Distribution Services Agreement between each Fund and us and
subject to the applicable compensation provisions set forth in
each Fund's then current prospectus and statement of additional
information and (ii) to tender shares directly to the Funds or
their agent for redemption subjected to the applicable terms and
conditions set forth in the Distribution Services Agreement.
4. Repurchases of shares will be made at the net asset
value of such shares in accordance with the then current
prospectuses and statements of additional information of the
Funds.
5. You represent that you are a member of the National
Association of Securities Dealers, Inc. and that you agree to
abide by the Rules of Fair Practice of such Association.
6. This Agreement is in all respects subject to Rule 26
of the Rules of Fair Practice of the National Association of
Securities Dealer, Inc. which shall control any provision to the
contrary in this Agreement.
7. You agree:
(a) To purchase shares only from us or only from
your customers.
(b) To purchase shares from us only for the purpose
of covering purchase orders already received or
for your own bona fide investment.
(c) That you will not purchase any shares from your
customers at prices lower than the redemption
or repurchase prices then quoted by the Fund.
You shall, however, be permitted to sell shares
for the account of their record owners to the
Funds at the repurchase prices currently
established for such shares and may charge to
owner a fair commission for handling the
transaction.
(d) That you will not withhold placing customers'
orders for shares so as to profit yourself as a
result of such withholding.
(e) That if any shares confirmed to you hereunder
are redeemed or repurchased by any of the Funds
within seven business days after such
confirmation of your original order, you shall
forth with refund to us the full discount
2
<PAGE>
allowed to you on such sales. We shall notify
you of such redemption or repurchase within ten
days from the date of delivery of the request
therefor or certificates to us or such fund.
Termination or cancellation of this Agreement
shall not relieve you or us from the
requirements of this subparagraph.
8. We shall not accept from you conditional orders for
shares. Delivery of certificates for shares purchased shall be
made by the Funds only against receipt of the purchase price,
subject to deduction for the discount reallowed to you and our
portion of the sales charge on such sales. If payment for the
shares purchased is not received within the time customary for
such payments, the sale may be cancelled forthwith without any
responsibility or liability on our part or on the part of the
Funds (in which case we may hold you responsible for any loss,
including loss of profit, suffered by the Funds resulting from
your failure to make payment as aforesaid), or, at our option, we
may sell the shares ordered back to the Funds (in which case we
may hold you responsible for any loss, including loss of profit
suffered by us resulting from your failure to make payments as
aforesaid).
9. You will not offer or sell any of the shares except
under circumstances that will result in compliance with the
applicable Federal and State securities laws and in connection
with sales and offers to sell shares you will furnish to each
person to whom any such sale or offer is made a copy of the
applicable then current prospectus. We shall be under no
liability to you except for lack of good faith and for obligations
expressly assumed by us herein. Nothing herein contained however,
shall be deemed to be a condition, stipulation or provision
binding any persons acquiring any security to waive compliance
with any provision of the Securities Act of 1933, or of the Rules
and Regulations of the Securities and Exchanges Commission, or to
relieve the parties hereto from any liability arising under the
Securities Act of 1933.
10. From time to time during the term of this Agreement
we may make payments to you pursuant to one or more of the
distribution plans adopted by certain of the Funds pursuant to
Rule 12b-1 under the Investment Company Act of 1940 (the "Act") in
consideration, with respect to each such Fund, of your furnishing
distribution services hereunder and providing administrative,
accounting and other services, including personal service and/or
the maintenance of shareholder accounts. We have no obligation to
make any such payments and you waive any such payment until we
receive monies therefor from the Fund. Any such payments made
pursuant to this Section 10 shall be subject to the following
terms and conditions:
3
<PAGE>
(a) Any such payments shall be in such amounts as
we may from time to time advise you in writing
but in any event not in excess of the amounts
permitted by the plan in effect with respect to
each particular Fund. Any such payments shall
be in addition to the selling concession, if
any, allowed to you pursuant to this Agreement.
Such payments shall include a service fee in
the amount of .25 of 1% per annum of the
average daily net assets of certain Funds
attributable to you clients. Any such service
fee shall be paid to you solely for personal
service and/or the maintenance of shareholder
accounts.
(b) The provisions of this Section 10 relate to the
plan adopted by a particular Fund pursuant to
Rule 12b-1. In accordance with Rule 12b-1, any
person authorized to direct the disposition of
monies paid or payable by a Fund pursuant to
this Section 10 shall provide the Fund's Board
of Directors, and the Directors shall review,
at least quarterly, a written report of the
amounts so expended and the purposes for which
such expenditures were made.
(c) The provisions of this Section 10 applicable to
each Fund shall remain in effect for not more
than a year and thereafter for successive
annual periods only so long as such continuance
is specifically approved at least annually in
conformity with Rule 12b-1 and the Act. The
provisions of this Section 10 shall
automatically terminate with respect to a
particular Plan in the event of the assignment
(as defined by the Act) of this Agreement, in
the event such Plan terminates or is not
continued or in the event this Agreement
terminates or ceases to remain in effect. In
addition, the provisions of this Section 10 may
be terminated any any time, without penalty, by
either party with respect to any particular
Plan on not more than 60 days' nor less than 30
days' written notice delivered or mailed by
registered mail, postage prepaid, to the other
party.
11. No person is authorized to make any representations
concerning shares of the Funds except those contained in the
current prospectus, statement of additional information, and
printed information issued by each Fund or by us as information
4
<PAGE>
supplemental to each prospectus. We shall supply prospectuses and
statements of additional information, reasonable quantities of
reports to shareholders, supplemental sales literature, sales
bulletins, and additional information as issued. You agree to
distribute prospectuses and reports to shareholders of the Funds
to your customers in compliance with the applicable requirements,
except to the extent that we expressly undertake to do so on your
behalf. You agree not to use other advertising or sales material
relating to the Funds, unless approved in writing by us in advance
of such use. Any printed information furnished by us other than
the then current prospectus and statement of additional
information for each Fund, periodic reports and proxy solicitation
materials are our sole responsibility and not the responsibility
of the Funds, and you agree that the Funds shall have no liability
or responsibility to you in these respects unless expressly assume
in connection therewith.
12. In connection with your distribution of shares of a
Fund, you shall conform to such written compliance standards as we
have provided you in the past or may from time to time provide to
you in the future.
13. We, our affiliates and the Funds shall not be liable
for any loss, expense, damages, costs or other claim arising out
of any redemption or exchange pursuant to telephone instructions
from any person or our refusal to execute such instructions for
any reason.
14. Either party to this Agreement may cancel this
Agreement by giving written notice to the other. Such notice
shall be deemed to have been given on the date on which it was
either delivered personally to the other party or any officer or
member thereof, or was mailed postpaid or delivered to a telegraph
office for transmission to the other party at his or its address
as shown below. This Agreement may be amended by us at any time
and your placing of an order after the effective date of any such
amendment shall constitute your acceptance thereof.
5
<PAGE>
15. This Agreement shall be construed in accordance with
the laws of the State of New York and shall be binding upon both
parties thereto when signed by us and accepted by you in the space
provided below.
Very truly yours,
ALLIANCE FUND DISTRIBUTORS, INC.
By:________________________________
(Authorized Signature)
Firm Name_______________________________________________________
Address_________________________________________________________
City____________________________ State_________ Zip Code________
ACCEPTED BY (signature)__________________ Title_________________
Name(printed)____________________________ Title_________________
Date____________________________ 199_____ Phone #_______________
Please return two signed copies of this Agreement
(one of which will be signed above by us
and thereafter returned to you)
in the accompanying return envelope to:
Alliance Fund Distributors, Inc.
1345 Avenue of the Americas, 38th Floor
New York, NY 10105
6
00250250.AD4
<PAGE>
Exhibit (e)(3)
(LOGO) ALLIANCE FUND DISTRIBUTORS, INC.
1345 AVENUE OF THE AMERICAS
NEW YORK, N.Y. 10105
(800) 221-5672
Selected Agent Agreement
For Depository Institutions and Their Subsidiaries
Dear Sirs:
As the principal underwriter of shares of certain
registered investment companies presently or hereafter managed by
Alliance Capital Management L.P., shares of which companies are
distributed by us pursuant to our Distribution Services Agreements
with such companies (the "Funds"), we invite you, acting as agent
for your customers, to make available to your customers shares of
any or all of the funds upon the following terms and conditions:
1. The customers in question will be for all purposes
your customers. We all execute transactions in shares of the
Funds for each of your customers only upon your authorization, if
being understood in all causes that (a) you are acting as the
agent for the customer; (b) each transaction is initiated solely
upon the order of the customer; (c) each transaction is for the
account of the customer and not for your account; (d) the
transactions are without recourse against you by the customer;
(e) except as we otherwise agree, each transaction is reflected on
a fully disclosed basis; (f) as between you and the customer, the
customer will have full beneficial ownership of the shares;
(g) you shall provide no investment advice and exercise no
investment discretion regarding the purchase, sale, or redemption
of the shares; and (h) you shall make appropriate disclosure to
your customer that any Fund's shares are not endorsed by you, do
not constitute your obligation and are not entitled to federal
deposit insurance.
2. You are to sell shares of the Funds only at the
public offering prices which shall be currently in effect, in
accordance with the terms of the then current prospectuses and
statements of additional information of the Funds. You agree to
act only as agent for your customers in such transactions and
shall not have authority to act as agent for the Funds or for us
<PAGE>
in any respect. All orders are subject to acceptance by us and
become effective only upon confirmation by us.
3. On each purchase of shares of a Fund authorized by
you, the total sales charge and commission, if any, shall be as
stated in the Fund's then current prospectus. Such sales charges
and commissions are subject to reductions under a variety of
circumstances as described in each Fund's then current prospectus
and statement of additional information. To obtain such a
reduction, you must provide us with such information as we may
request to establish that a particular transaction qualifies for
the reduction. There is no sales charge or commission to selected
agents on the reinvestment of dividends.
4. As a selected agent, you are hereby authorized
(i) to place orders directly with the Funds for their shares to be
resold by us through you subject to the applicable terms and
conditions governing the placement of orders by us set forth in
the Distribution Services Agreement between each Fund and us and
subject to the applicable compensation provisions set forth in
each Fund's then current prospectus and statement of additional
information, and (ii) to tender shares directly to the Funds or
their agent for redemption or repurchase subject to the applicable
terms and conditions set forth in the Distribution Services
Agreement.
5. Redemptions and repurchases of shares will be made
at the net asset value of such shares in accordance with the then
current prospectuses and statements of additional information of
the Funds.
6. You represent that you are either:
(a) a bank as defined in Section 3(o)(6) of the
Securities Exchange Act of 1934, as amended
(the "1934 Act"), duly authorized to engage in
the transactions to be performed hereunder and
not required to register as a broker-dealer
pursuant to the 1934 Act; or
(b) a bank (as so defined) or an affiliate of a
bank, in either case registered as a
broker-dealer pursuant to the 1934 Act and a
member of the National Association of
Securities Dealers, Inc., and that you agree to
abide by the rules and regulations of the
National Association of Securities Dealers,
Inc., and that you agree to abide by the rules
and regulations of the National Association of
Securities Dealers, Inc.
2
<PAGE>
7. You agree:
(a) to order shares of the Funds only from us and
to act as agent only for your customers;
(b) to order shares from us only for the purpose of
covering purchase orders already received;
(c) that you will not purchase any shares from your
customers at prices lower than the redemption
or repurchase prices then quoted by the Funds,
provided, however, that you shall be permitted
to sell shares for the accounts of their record
owners to the Funds at the repurchase prices
currently established for such shares and may
charge the owner a fair commission for handling
the transaction; repurchase prices currently
established for such shares and may charge the
owner a fair commission for handling the
transaction;
(d) that you will not withhold placing customers'
orders for shares so as to profit yourself as a
result of such withholding; and
(e) that if any shares confirmed through you
hereunder are redeemed or repurchased by any of
the Funds within seven business days after such
confirmation of your original order, you shall
forthwith refund to us the full commission
reallowed to you on such sales. We shall
notify you of such redemption or repurchase
within ten days from the date of delivery of
the request therefor or certificates to us or
such Fund. Termination or cancellation of this
Agreement shall not relieve you or us from the
requirements of this subparagraph.
8. We shall not accept from you any conditional orders
for shares. Delivery of certificates for shares purchased shall
be made by the Funds only against receipt of the purchase price,
subject to deduction for the commission reallowed to you and our
portion of the sales charge on such sale. If payment for the
shares purchased is not received within the time customary for
such payments, the sale may be cancelled forthwith without any
responsibility or liability on our part or on the part of the
Funds (in which case you will be responsible for any loss,
including loss of profit, suffered by the Funds resulting from
your failure to make payment as aforesaid).
3
<PAGE>
9. You will not accept orders for shares of any of the
Funds except under circumstances that will result in compliance
with the applicable Federal and State securities laws and banking
laws, and in connection with sale of shares to your customers you
will furnish, unless we agree otherwise, to each customer who has
ordered shares a copy of the applicable then current prospectus.
We shall be under no liability to you except for lack of good
faith and for obligations expressly assumed by us herein. Nothing
herein contained, however, shall be deemed to be a condition,
stipulation or provision binding any persons acquiring any
security to waive compliance with any provision of the Securities
Act of 1933 or of the rules and regulations of the Securities and
Exchange Commission, or to relieve the parties hereto from any
liability arising under the Securities Act of 1933.
10. From time to time during the term of this Agreement
we may make payments to you pursuant to one or more of the
distribution plans adopted by certain of the Funds pursuant to
Rule 12b-1 under the Investment Company Act of 1940 (the "Act"),
to compensate you with respect to the shareholder accounts of your
customers in such Funds for providing administrative, accounting
and other services, including personal service and/or the
maintenance of such accounts. We have no obligation to make any
such payments and you waive any such payment until we receive
monies therefor from the Fund. Any such payments made pursuant to
this Section 10 shall be subject to the following terms and
conditions.
(a) Any such payments shall be in such amounts as
we may from time to time advise you in writing
but in any event not in excess of the amounts
permitted by the plan in effect with respect to
each particular Fund. Such payments shall
include a service fee in the amount of .25% of
1% per annum of the average daily net assets of
certain Funds attributable to your clients.
Any such service fee shall be paid to you
solely for personal service and/or the
maintenance of shareholder accounts.
(b) The provisions of this Section 10 relate to the
plan adopted by a particular Fund pursuant to
Rule 12b-1. In accordance with Rule 12b-1, any
person authorized to direct the disposition of
monies paid or payable by a Fund pursuant to
this Section 10 shall provide the Fund's Board
of Directors, and the Directors shall review,
at least quarterly, a written report of the
amounts so expended and the purposes for which
such expenditures were made.
4
<PAGE>
(c) The provisions of this Section 10 applicable to
each fund remain in effect for not more than a
year and thereafter for successive annual
periods only so long as such continuance is
specifically approved at least annually in
conformity with Rule 12~1 and the Act. The
provisions of this Section 10 shall
automatically terminate with respect to a
particular Plan in the event of the assignment
(as defined by the Act) of this Agreement, in
the event such Plan terminates or in the event
this Agreement terminates or ceases to remain
in effect. In addition, the provisions of this
Section 10 may be terminated at any time,
without penalty, by either party with respect
to any particular Plan on not more than 60
days' nor less than 30 days' written notice
delivered or mailed by registered mail, postage
prepaid, to the other party.
11. No person is authorized to make any representation
concerning shares of the Fund except those contained in the
current prospectus, statement of additional information, and
printed information issued by each Fund or by us as information
supplemental to each prospectus. We shall supply prospectuses and
statements of additional information, reasonable quantities of
reports to shareholders, supplemental sales literature, sales
bulletins, and additional information as issued. You agree to
distribute prospectuses and reports to shareholders of the Funds
to your customers in compliance with applicable requirements,
except to the extent that we expressly undertake to do so on your
behalf. You agree to use other advertising or sales material
relating to the Funds except in compliance with all laws and
regulations applicable to you and unless approved in writing by us
in advance of such use. Any printed information furnished by us
other than the current prospectus and statement of additional
information for each Fund, periodic reports and proxy solicitation
material are our sole responsibility and not the responsibility of
the Funds, and you agree that the Funds shall have no liability or
responsibility to you in these respects unless expressly assumed
in connection therewith.
12. In connection with your making shares of a Fund
available to your customers, you shall conform to such written
compliance standards as we have provided you in the past or may
from time to time provide to you in the future.
13. We, our affiliates and the Funds shall not be liable
for any loss, expense, damages, costs or other claim arising out
of any redemption or exchange pursuant to telephone instruction
5
<PAGE>
from any person or our refusal to execute such instruction for any
reason.
14. Either party to this Agreement may cancel this
Agreement by giving written notice to the other. Such notice
shall be deemed to have been given as of the date on which it was
either delivered personally to the other party or any officer or
member thereof, or was mailed postpaid or delivered to a telegraph
office for transmission to the other party at his or its address
as show below. This Agreement may be amended by us at any time
and your placing of an order after the effective date of any such
amendment shall constitute your acceptance thereof. If you are a
bank or an affiliate of a bank, this agreement will automatically
terminate if you cease to be, or the bank of which you are an
affiliate ceases to be, a bank as defined in the 1934 Act.
15. The Agreement shall be construed in accordance with
the laws of the State of New York and shall be binding upon both
parties hereto when signed by us and accepted by you in the space
provided below.
Very truly yours,
ALLIANCE FUND DISTRIBUTORS, INC.
By:_________________________________
(Authorized Signature)
Bank or Firm Name_______________________________________________
Address_________________________________________________________
City____________________________ State_________ Zip Code________
ACCEPTED BY (signature)
Name (print)____________________________ Title__________________
Date____________________________199_____ Phone #________________
Please return two signed copies of this Agreement
(one of which will be signed by us and
thereafter returned to you) in the
accompanying return envelope to:
Alliance Fund Distributors, Inc.
1345 Avenue of the Americas, 38th Floor
New York, NY 10105
6
00250250.AD5
<PAGE>
Exhibit (h)(1)
ALLIANCE DISCIPLINED VALUE FUND, INC.
TRANSFER AGENCY AGREEMENT
AGREEMENT, dated as of December 6, 1999, between
Alliance Disciplined Value Fund, Inc., a Maryland Corporation and
an open-end investment company registered with the Securities and
Exchange Commission (the "SEC") under the Investment Company Act
of 1940 (the "Investment Company Act"), having its principal
place of business at 1345 Avenue of the Americas, New York, New
York 10105 (the "Fund"), and ALLIANCE FUND SERVICES, INC., a
Delaware corporation registered with the SEC as a transfer agent
under the Securities Exchange Act of 1934, having its principal
place of business at 500 Plaza Drive, Secaucus, New Jersey 07094
("Fund Services"), provides as follows:
WHEREAS, Fund Services has agreed to act as transfer
agent to the Fund for the purpose of recording the transfer,
issuance and redemption of shares of each series of the shares of
beneficial interest of the Fund ("Shares" or "Shares of a
Series"), transferring the Shares, disbursing dividends and other
distributions to shareholders of the Fund, and performing such
other services as may be agreed to pursuant hereto;
<PAGE>
NOW THEREFORE, for and in consideration of the mutual
covenants and agreements contained herein, the parties do hereby
agree as follows:
SECTION 1. The Fund hereby appoints Fund Services as
its transfer agent, dividend disbursing agent and shareholder
servicing agent for the Shares, and Fund Services agrees to act
in such capacities upon the terms set forth in this Agreement.
Capitalized terms used in this Agreement and not otherwise
defined shall have the meanings assigned to them in SECTION 30.
SECTION 2.
(a) The Fund shall provide Fund Services with copies of
the following documents:
(1) Specimens of all forms of certificates for Shares;
(2) Specimens of all account application forms and
other documents relating to Shareholders' accounts;
(3) Copies of each Prospectus;
(4) Specimens of all documents relating to withdrawal
plans instituted by the Fund, as described in SECTION 16; and
(5) Specimens of all amendments to any of the foregoing
documents.
(b) The Fund shall furnish to Fund Services a supply of
blank Share Certificates for the Shares and, from time to time,
will renew such supply upon Fund Services' request. Blank Share
Certificates shall be signed manually or by facsimile signatures
of officers of the Fund authorized to sign by law or pursuant to
2
<PAGE>
the by-laws of the Fund and, if required by Fund Services, shall
bear the Fund's seal or a facsimile thereof.
SECTION 3. Fund Services shall make original issues of
Shares in accordance with SECTIONS 13 and 14 and the Prospectus
upon receipt of (i) Written Instructions requesting the issuance,
(ii) a certified copy of a resolution of the Fund's Directors
authorizing the issuance, (iii) necessary funds for the payment
of any original issue tax applicable to such Shares, and (iv) an
opinion of the Fund's counsel as to the legality and validity of
the issuance, which opinion may provide that it is contingent
upon the filing by the Fund of an appropriate notice with the
SEC, as required by Rule 24f-2 of the Investment Company Act, as
amended from time to time.
SECTION 4. Transfers of Shares shall be registered and,
subject to the provisions of SECTION 10 in the case of Shares
evidenced by Share Certificates, new Share Certificates shall be
issued by Fund Services upon surrender of outstanding Share
Certificates in the form deemed by Fund Services to be properly
endorsed for transfer, which form shall include (i) all necessary
endorsers' signatures guaranteed by a member firm of a national
securities exchange or a domestic commercial bank or through
other procedures mutually agreed to between the Fund and Fund
Services, (ii) such assurances as Fund Services may deem
necessary to evidence the genuineness and effectiveness of each
endorsement and (iii) satisfactory evidence of compliance with
3
<PAGE>
all applicable laws relating to the payment or collection of
taxes.
SECTION 5. Fund Services shall forward Share
Certificates in "non-negotiable" form by first-class or
registered mail, or by whatever means Fund Services deems equally
reliable and expeditious. While in transit to the addressee, all
deliveries of Share Certificates shall be insured by Fund
Services as it deems appropriate. Fund Services shall not mail
Share Certificates in "negotiable" form, unless requested in
writing by the Fund and fully indemnified by the Fund to Fund
Services' satisfaction.
SECTION 6. In registering transfers of Shares, Fund
Services may rely upon the Uniform Commercial Code as in effect
from time to time in the State in which the Fund is incorporated
or organized or, if appropriate, in the State of New Jersey;
provided, that Fund Services may rely in addition or
alternatively on any other statutes in effect in the State of New
Jersey or in the state under the laws of which the Fund is
incorporated or organized that, in the opinion of Fund Services'
counsel, protect Fund Services and the Fund from liability
arising from (i) not requiring complete documentation in
connection with an issuance or transfer, (ii) registering a
transfer without an adverse claim inquiry, (iii) delaying
registration for purposes of an adverse claim inquiry or (iv)
refusing registration in connection with an adverse claim.
4
<PAGE>
SECTION 7. Fund Services may issue new Share
Certificates in place of those lost, destroyed or stolen, upon
receiving indemnity satisfactory to Fund Services; and may issue
new Share Certificates in exchange for, and upon surrender of,
mutilated Share Certificates as Fund Services deems appropriate.
SECTION 8. Unless otherwise directed by the Fund, Fund
Services may issue or register Share Certificates reflecting the
signature, or facsimile thereof, of an officer who has died,
resigned or been removed by the Fund. The Fund shall file
promptly with Fund Services' approval, adoption or ratification
of such action as may be required by law or by Fund Services.
SECTION 9. Fund Services shall maintain customary stock
registry records for Shares of each Series noting the issuance,
transfer or redemption of Shares and the issuance and transfer of
Share Certificates. Fund Services may also maintain for Shares
of each Series an account entitled "Unissued Certificate
Account," in which Fund Services will record the Shares, and
fractions thereof, issued and outstanding from time to time for
which issuance of Share Certificates has not been requested.
Fund Services is authorized to keep records for Shares of each
Series containing the names and addresses of record of
Shareholders, and the number of Shares, and fractions thereof,
from time to time owned by them for which no Share Certificates
are outstanding. Each Shareholder will be assigned a single
account number for Shares of each Series, even though Shares for
5
<PAGE>
which Certificates have been issued will be accounted for
separately.
SECTION 10. Fund Services shall issue Share
Certificates for Shares only upon receipt of a written request
from a Shareholder and as authorized by the Fund. If Shares are
purchased or transferred without a request for the issuance of a
Share Certificate, Fund Services shall merely note on its stock
registry records the issuance or transfer of the Shares and
fractions thereof and credit or debit, as appropriate, the
Unissued Certificate Account and the respective Shareholders'
accounts with the Shares. Whenever Shares, and fractions
thereof, owned by Shareholders are surrendered for redemption,
Fund Services may process the transactions by making appropriate
entries in the stock transfer records, and debiting the Unissued
Certificate Account and the record of issued Shares outstanding;
it shall be unnecessary for Fund Services to reissue Share
Certificates in the name of the Fund.
SECTION 11. Fund Services shall also perform the usual
duties and function required of a stock transfer agent for a
corporation, including but not limited to (i) issuing Share
Certificates as treasury Shares, as directed by Written
Instructions, and (ii) transferring Share Certificates from one
Shareholder to another in the usual manner. Fund Services may
rely conclusively and act without further investigation upon any
list, instruction, certification, authorization, Share
6
<PAGE>
Certificate or other instrument or paper reasonably believed by
it in good faith to be genuine and unaltered, and to have been
signed, countersigned or executed or authorized by a duly-
authorized person or persons, or by the Fund, or upon the advice
of counsel for the Fund or for Fund Services. Fund Services may
record any transfer of Share Certificates which it reasonably
believes in good faith to have been duly authorized, or may
refuse to record any transfer of Share Certificates if, in good
faith, it reasonably deems such refusal necessary in order to
avoid any liability on the part of either the Fund or Fund
Services.
SECTION 12. Fund Services shall notify the Fund of any
request or demand for the inspection of the Fund's share records.
Fund Services shall abide by the Fund's instructions for granting
or denying the inspection; provided, however, Fund Services may
grant the inspection without such instructions if it is advised
by its counsel that failure to do so will result in liability to
Fund Services.
SECTION 13. Fund Services shall observe the following
procedures in handling funds received:
(a) Upon receipt at the office designated by the Fund
of any check or other order drawn or endorsed to the Fund or
otherwise identified as being for the account of the Fund, and,
in the case of a new account, accompanied by a new account
application or sufficient information to establish an account as
7
<PAGE>
provided in the Prospectus, Fund Services shall stamp the
transmittal document accompanying such check or other order with
the name of the Fund and the time and date of receipt and shall
forthwith deposit the proceeds thereof in the custodial account
of the Fund.
(b) In the event that any check or other order for the
purchase of Shares is returned unpaid for any reason, Fund
Services shall, in the absence of other instructions from the
Fund, advise the Fund of the returned check and prepare such
documents and information as may be necessary to cancel promptly
any Shares purchased on the basis of such returned check and any
accumulated income dividends and capital gains distributions paid
on such Shares.
(c) As soon as possible after 4:00 p.m., Eastern time
or at such other times as the Fund may specify in Written or Oral
Instructions for any Series (the "Valuation Time") on each
Business Day Fund Services shall obtain from the Fund's Adviser a
quotation (on which it may conclusively rely) of the net asset
value, determined as of the Valuation Time on that day. On each
Business Day Fund Services shall use the net asset value(s)
determined by the Fund's Adviser to compute the number of Shares
and fractional Shares to be purchased and the aggregate purchase
proceeds to be deposited with the Custodian. As necessary but no
more frequently than daily (unless a more frequent basis is
agreed to by Fund Services), Fund Services shall place a purchase
8
<PAGE>
order with the Custodian for the proper number of Shares and
fractional Shares to be purchased and promptly thereafter shall
send written confirmation of such purchase to the Custodian and
the Fund.
SECTION 14. Having made the calculations required by
SECTION 13, Fund Services shall thereupon pay the Custodian the
aggregate net asset value of the Shares purchased. The aggregate
number of Shares and fractional Shares purchased shall then be
issued daily and credited by Fund Services to the Unissued
Certificate Account. Fund Services shall also credit each
Shareholder's separate account with the number of Shares
purchased by such Shareholder. Fund Services shall mail written
confirmation of the purchase to each Shareholder or the
Shareholder's representative and to the Fund if requested. Each
confirmation shall indicate the prior Share balance, the new
Share balance, the Shares for which Stock Certificates are
outstanding (if any), the amount invested and the price paid for
the newly-purchased Shares.
SECTION 15. Prior to the Valuation Time on each
Business Day, as specified in accordance with SECTION 13, Fund
Services shall process all requests to redeem Shares and, with
respect to each Series, shall advise the Custodian of (i) the
total number of Shares available for redemption and (ii) the
number of Shares and fractional Shares requested to be redeemed.
Upon confirmation of the net asset value by the Fund's Adviser,
9
<PAGE>
Fund Services shall notify the Fund and the Custodian of the
redemption, apply the redemption proceeds in accordance with
SECTION 16 and the Prospectus, record the redemption in the stock
registry books, and debit the redeemed Shares from the Unissued
Certificates Account and the individual account of the
Shareholder.
In lieu of carrying out the redemption procedures
described in the preceding paragraph, Fund Services may, at the
request of the Fund, sell Shares to the Fund as repurchases from
Shareholders, provided that the sale price is not less than the
applicable redemption price. The redemption procedures shall
then be appropriately modified.
SECTION 16. Fund Services will carry out the following
procedures with respect to Share redemptions:
(a) As to each request received by the Fund from or on
behalf of a Shareholder for the redemption of Shares, and unless
the right of redemption has been suspended as contemplated by the
Prospectus, Fund Services shall, within seven days after receipt
of such redemption request, either (i) mail a check in the amount
of the proceeds of such redemption to the person designated by
the Shareholder or other person to receive such proceeds or, (ii)
in the event redemption proceeds are to be wired through the
Federal Reserve Wire System or by bank wire pursuant to
procedures described in the Prospectus, cause such proceeds to be
wired in Federal funds to the bank or trust company account
10
<PAGE>
designated by the Shareholder to receive such proceeds. Funds
Services shall also prepare and send a confirmation of such
redemption to the Shareholder. Redemptions in kind shall be made
only in accordance with such Written Instructions as Fund
Services may receive from the Fund. The requirements as to
instruments of transfer and other documentation, the
determination of the appropriate redemption price and the time of
payment shall be as provided in the Prospectus, subject to such
additional requirements consistent therewith as may be
established by mutual agreement between the Fund and Fund
Services. In the case of a request for redemption that does not
comply in all respects with the requirements for redemption, Fund
Services shall promptly so notify the Shareholder and shall
effect such redemption at the price in effect at the time of
receipt of documents complying with such requirements. Fund
Services shall notify the Fund's Custodian and the Fund on each
Business Day of the amount of cash required to meet payments made
pursuant to the provisions of this paragraph and thereupon the
Fund shall instruct the Custodian to make available to Fund
Services in timely fashion sufficient funds therefor.
(b) Procedures and standards for effecting and
accepting redemption orders from Shareholders by telephone or by
such check writing service as the Fund may institute may be
established by mutual agreement between Fund Services and the
Fund consistent with the Prospectus.
11
<PAGE>
(c) For purposes of redemption of Shares that have been
purchased by check within fifteen (15) days prior to receipt of
the redemption request, the Fund shall provide Fund Services with
Written Instructions concerning the time within which such
requests may be honored.
(d) Fund Services shall process withdrawal orders duly
executed by Shareholders in accordance with the terms of any
withdrawal plan instituted by the Fund and described in the
Prospectus. Payments upon such withdrawal orders and redemptions
of Shares held in withdrawal plan accounts in connection with
such payments shall be made at such times as the Fund may
determine in accordance with the Prospectus.
(e) The authority of Fund Services to perform its
responsibilities under SECTIONS 15 and 16 with respect to the
Shares of any Series shall be suspended if Fund Services receives
notice of the suspension of the determination of the net asset
value of the Series.
SECTION 17. Upon the declaration of each dividend and
each capital gains distribution by the Fund's Directors, the Fund
shall notify Fund Services of the date of such declaration, the
amount payable per Share, the record date for determining the
Shareholders entitled to payment, the payment and the
reinvestment date price.
SECTION 18. Upon being advised by the Fund of the
declaration of any income dividend or capital gains distribution
12
<PAGE>
on account of its Shares, Fund Services shall compute and prepare
for the Fund records crediting such distributions to
Shareholders. Fund Services shall, on or before the payment date
of any dividend or distribution, notify the Fund and the
Custodian of the estimated amount required to pay any portion of
a dividend or distribution which is payable in cash, and
thereupon the Fund shall, on or before the payment date of such
dividend or distribution, instruct the Custodian to make
available to Fund Services sufficient funds for the payment of
such cash amount. Fund Services will, on the designated payment
date, reinvest all dividends in additional shares and promptly
mail to each Shareholder at his address of record a statement
showing the number of full and fractional Shares (rounded to
three decimal places) then owned by the Shareholder and the net
asset value of such Shares; provided, however, that if a
Shareholder elects to receive dividends in cash, Fund Services
shall prepare a check in the appropriate amount and mail it to
the Shareholder at his address of record within five (5) business
days after the designated payment date, or transmit the
appropriate amount in Federal funds in accordance with the
Shareholder's agreement with the Fund.
SECTION 19. Fund Services shall prepare and maintain
for the Fund records showing for each Shareholder's account the
following:
13
<PAGE>
A. The name, address and tax identification number of
the Shareholder;
B. The number of Shares of each Series held by the
Shareholder;
C. Historical information including dividends paid and
date and price for all transactions;
D. Any stop or restraining order placed against such
account;
E. Information with respect to the withholding of any
portion of income dividends or capital gains distributions as are
required to be withheld under applicable law;
F. Any dividend or distribution reinvestment election,
withdrawal plan application, and correspondence relating to the
current maintenance of the account;
G. The certificate numbers and denominations of any
Share Certificates issued to the Shareholder; and
H. Any additional information required by Fund
Services to perform the services contemplated by this Agreement.
Fund Services agrees to make available upon request by the Fund
or the Fund's Adviser and to preserve for the periods prescribed
in Rule 31a-2 of the Investment Company Act any records related
to services provided under this Agreement and required to be
maintained by Rule 31a-1 of that Act, including:
(i) Copies of the daily transaction register for each
Business Day of the Fund;
14
<PAGE>
(ii) Copies of all dividend, distribution and
reinvestment blotters;
(iii) Schedules of the quantities of Shares of each
Series distributed in each state for purposes of any state's laws
or regulations as specified in Oral or Written Instructions given
to Fund Services from time to time by the Fund or its agents; and
(iv) Such other information, including Shareholder
lists, and statistical information as may be agreed upon from
time to time by the Fund and Fund Services.
SECTION 20. Fund Services shall maintain those records
necessary to enable the Fund to file, in a timely manner, form N-
SAR (Semi-Annual Report) or any successor report required by the
Investment Company Act or rules and regulations thereunder.
SECTION 21. Fund Services shall cooperate with the
Fund's independent public accountants and shall take reasonable
action to make all necessary information available to such
accountants for the performance of their duties.
SECTION 22. In addition to the services described
above, Fund Services will perform other services for the Fund as
may be mutually agreed upon in writing from time to time, which
may include preparing and filing Federal tax forms with the
Internal Revenue Service, and, subject to supervisory oversight
by the Fund's Adviser, mailing Federal tax information to
Shareholders, mailing semi-annual Shareholder reports, preparing
the annual list of Shareholders, mailing notices of Shareholders'
15
<PAGE>
meetings, proxies and proxy statements and tabulating proxies.
Fund Services shall answer the inquiries of certain Shareholders
related to their share accounts and other correspondence
requiring an answer from the Fund. Fund Services shall maintain
dated copies of written communications from Shareholders, and
replies thereto.
SECTION 23. Nothing contained in this Agreement is
intended to or shall require Fund Services, in any capacity
hereunder, to perform any functions or duties on any day other
than a Business Day. Functions or duties normally scheduled to
be performed on any day which is not a Business Day shall be
performed on, and as of, the next Business Day, unless otherwise
required by law.
SECTION 24. For the services rendered by Fund Services
as described above, the Fund shall pay to Fund Services an
annualized fee at a rate to be mutually agreed upon from time to
time. Such fee shall be prorated for the months in which this
Agreement becomes effective or is terminated. In addition, the
Fund shall pay, or Fund Services shall be reimbursed for, all
out-of-pocket expenses incurred in the performance of this
Agreement, including but not limited to the cost of stationery,
forms, supplies, blank checks, stock certificates, proxies and
proxy solicitation and tabulation costs, all forms and statements
used by Fund Services in communicating with Shareholders of the
Fund or especially prepared for use in connection with its
16
<PAGE>
services hereunder, specific software enhancements as requested
by the Fund, costs associated with maintaining withholding
accounts (including non-resident alien, Federal government and
state), postage, telephone, telegraph (or similar electronic
media) used in communicating with Shareholders or their
representatives, outside mailing services, microfiche/microfilm,
freight charges and off-site record storage. It is agreed in
this regard that Fund Services, prior to ordering any form in
such supply as it estimates will be adequate for more than two
years' use, shall obtain the written consent of the Fund. All
forms for which Fund Services has received reimbursement from the
Fund shall be the property of the Fund.
SECTION 25. Fund Services shall not be liable for any
taxes, assessments or governmental charges that may be levied or
assessed on any basis whatsoever in connection with the Fund or
any Shareholder, excluding taxes assessed against Fund Services
for compensation received by it hereunder.
SECTION 26.
(a) Fund Services shall at all times act in good faith
and with reasonable care in performing the services to be
provided by it under this Agreement, but shall not be liable for
any loss or damage unless such loss or damage is caused by the
negligence, bad faith or willful misconduct of Fund Services or
its employees or agents.
17
<PAGE>
(b) The Fund shall indemnify and hold Fund Services
harmless from all loss, cost, damage and expense, including
reasonable expenses for counsel, incurred by it resulting from
any claim, demand, action or suit in connection with the
performance of its duties hereunder, or as a result of acting
upon any instruction reasonably believed by it to have been
properly given by a duly authorized officer of the Fund, or upon
any information, data, records or documents provided to Fund
Services or its agents by computer tape, telex, CRT data entry or
other similar means authorized by the Fund; provided that this
indemnification shall not apply to actions or omissions of Fund
Services in cases of its own bad faith, willful misconduct or
negligence, and provided further that if in any case the Fund may
be asked to indemnify or hold Fund Services harmless pursuant to
this Section, the Fund shall have been fully and promptly advised
by Fund Services of all material facts concerning the situation
in question. The Fund shall have the option to defend Fund
Services against any claim which may be the subject of this
indemnification, and in the event that the Fund so elects it will
so notify Fund Services, and thereupon the Fund shall retain
competent counsel to undertake defense of the claim, and Fund
Services shall in such situations incur no further legal or other
expenses for which it may seek indemnification under this
paragraph. Fund Services shall in no case confess any claim or
make any compromise in any case in which the Fund may be asked to
18
<PAGE>
indemnify Fund Services except with the Fund's prior written
consent.
Without limiting the foregoing:
(i) Fund Services may rely upon the advice of the Fund
or counsel to the Fund or Fund Services, and upon statements of
accountants, brokers and other persons believed by Fund Services
in good faith to be expert in the matters upon which they are
consulted. Fund Services shall not be liable for any action
taken in good faith reliance upon such advice or statements;
(ii) Fund Services shall not be liable for any action
reasonably taken in good faith reliance upon any Written
Instructions or certified copy of any resolution of the Fund's
Directors, including a Written Instruction authorizing Fund
Services to make payment upon redemption of Shares without a
signature guarantee; provided, however, that upon receipt of a
Written Instruction countermanding a prior Instruction that has
not been fully executed by Fund Services, Fund Services shall
verify the content of the second Instruction and honor it, to the
extent possible. Fund Services may rely upon the genuineness of
any such document, or copy thereof, reasonably believed by Fund
Services in good faith to have been validly executed;
(iii) Fund Services may rely, and shall be protected by
the Fund in acting, upon any signature, instruction, request,
letter of transmittal, certificate, opinion of counsel,
statement, instrument, report, notice, consent, order, or other
19
<PAGE>
paper or document reasonably believed by it in good faith to be
genuine and to have been signed or presented by the purchaser,
the Fund or other proper party or parties; and
(d) Fund Services may, with the consent of the Fund,
subcontract the performance of any portion of any service to be
provided hereunder, including with respect to any Shareholder or
group of Shareholders, to any agent of Fund Services and may
reimburse the agent for the services it performs at such rates as
Fund Services may determine; provided that no such reimbursement
will increase the amount payable by the Fund pursuant to this
Agreement; and provided further, that Fund Services shall remain
ultimately responsible as transfer agent to the Fund.
SECTION 27. The Fund shall deliver or cause to be
delivered over to Fund Services (i) an accurate list of
Shareholders, showing each Shareholder's address of record,
number of Shares of each Series owned and whether such Shares are
represented by outstanding Share Certificates or by non-
certificated Share accounts and (ii) all Shareholder records,
files, and other materials necessary or appropriate for proper
performance of the functions assumed by Fund Services under this
Agreement (collectively referred to as the "Materials"). The
Fund shall indemnify Fund Services and hold it harmless from any
and all expenses, damages, claims, suits, liabilities, actions,
demands and losses arising out of or in connection with any
error, omission, inaccuracy or other deficiency of such
20
<PAGE>
Materials, or out of the failure of the Fund to provide any
portion of the Materials or to provide any information in the
Fund's possession needed by Fund Services to knowledgeably
perform its functions; provided the Fund shall have no obligation
to indemnify Fund Services or hold it harmless with respect to
any expenses, damages, claims, suits, liabilities, actions,
demands or losses caused directly or indirectly by acts or
omissions of Fund Services or the Fund's Adviser.
SECTION 28. This Agreement may be amended from time to
time by a written supplemental agreement executed by the Fund and
Fund Services and without notice to or approval of the
Shareholders; provided this Agreement may not be amended in any
manner which would substantially increase the Fund's obligations
hereunder unless the amendment is first approved by the Fund's
Directors, including a majority of the Directors who are not a
party to this Agreement or interested persons of any such party,
at a meeting called for such purpose, and thereafter is approved
by the Fund's Shareholders if such approval is required under the
Investment Company Act or the rules and regulations thereunder.
The parties hereto may adopt procedures as may be appropriate or
practical under the circumstances, and Fund Services may
conclusively rely on the determination of the Fund that any
procedure that has been approved by the Fund does not conflict
with or violate any requirement of its Articles of Incorporation
21
<PAGE>
or Declaration of Trust, By-Laws or Prospectus, or any rule,
regulation or requirement of any regulatory body.
SECTION 29. The Fund shall file with Fund Services a
certified copy of each operative resolution of its Directors
authorizing the execution of Written Instructions or the
transmittal of Oral Instructions and setting forth authentic
signatures of all signatories authorized to sign on behalf of the
Fund and specifying the person or persons authorized to give Oral
Instructions on behalf of the Fund. Such resolution shall
constitute conclusive evidence of the authority of the person or
persons designated therein to act and shall be considered in full
force and effect, with Fund Services fully protected in acting in
reliance therein, until Fund Services receives a certified copy
of a replacement resolution adding or deleting a person or
persons authorized to give Written or Oral Instructions. If the
officer certifying the resolution is authorized to give Oral
Instructions, the certification shall also be signed by a second
officer of the Fund.
SECTION 30. The terms, as defined in this Section,
whenever used in this Agreement or in any amendment or supplement
hereto, shall have the meanings specified below, insofar as the
context will allow.
(a) Business Day: Any day on which the Fund is open
for business as described in the Prospectus.
22
<PAGE>
(b) Custodian: The term Custodian shall mean the
Fund's current custodian or any successor custodian acting as
such for the Fund.
(c) Fund's Adviser: The term Fund's Adviser shall mean
Alliance Capital Management L.P. or any successor thereto who
acts as the investment adviser or manager of the Fund.
(d) Oral Instructions: The term Oral Instructions
shall mean an authorization, instruction, approval, item or set
of data, or information of any kind transmitted to Fund Services
in person or by telephone, vocal telegram or other electronic
means, by a person or persons reasonably believed in good faith
by Fund Services to be a person or persons authorized by a
resolution of the Directors of the Fund to give Oral Instructions
on behalf of the Fund. Each Oral Instruction shall specify
whether it is applicable to the entire Fund or a specific Series
of the Fund.
(e) Prospectus: The term Prospectus shall mean a
prospectus and related statement of additional information
forming part of a currently effective registration statement
under the Investment Company Act and, as used with the respect to
Shares or Shares of a Series, shall mean the prospectuses and
related statements of additional information covering the Shares
or Shares of the Series.
(f) Securities: The term Securities shall mean bonds,
debentures, notes, stocks, shares, evidences of indebtedness, and
23
<PAGE>
other securities and investments from time to time owned by the
Fund.
(g) Series: The term Series shall mean any series of
Shares of the common stock of the Fund that the Fund may
establish from time to time.
(h) Share Certificates: The term Share Certificates
shall mean the stock certificates for the Shares.
(i) Shareholders: The term Shareholders shall mean the
registered owners from time to time of the Shares, as reflected
on the stock registry records of the Fund.
(j) Written Instructions: The term Written
Instructions shall mean an authorization, instruction, approval,
item or set of data, or information of any kind transmitted to
Fund Services in original writing containing original signatures,
or a copy of such document transmitted by telecopy, including
transmission of such signature, or other mechanical or
documentary means, at the request of a person or persons
reasonably believed in good faith by Fund Services to be a person
or persons authorized by a resolution of the Directors of the
Fund to give Written Instruction shall specify whether it is
applicable to the entire Fund or a specific Series of the Fund.
SECTION 31. Fund Services shall not be liable for the
loss of all or part of any record maintained or preserved by it
pursuant to this Agreement or for any delays or errors occurring
by reason of circumstances beyond its control, including but not
24
<PAGE>
limited to acts of civil or military authorities, national
emergencies, fire, flood or catastrophe, acts of God,
insurrection, war, riot, or failure of transportation,
communication or power supply, except to the extent that Fund
Services shall have failed to use its best efforts to minimize
the likelihood of occurrence of such circumstances or to mitigate
any loss or damage to the Fund caused by such circumstances.
SECTION 32. The Fund may give Fund Services sixty (60)
days and Fund Services may give the Fund (90) days written notice
of the termination of this Agreement, such termination to take
effect at the time specified in the notice. Upon notice of
termination, the Fund shall use its best efforts to obtain a
successor transfer agent. If a successor transfer agent is not
appointed within ninety (90) days after the date of the notice of
termination, the Directors of the Fund shall, by resolution,
designate the Fund as its own transfer agent. Upon receipt of
written notice from the Fund of the appointment of the successor
transfer agent and upon receipt of Oral or Written Instructions
Fund Services shall, upon request of the Fund and the successor
transfer agent and upon payment of Fund Services reasonable
charges and disbursements, promptly transfer to the successor
transfer agent the original or copies of all books and records
maintained by Fund Services hereunder and cooperate with, and
provide reasonable assistance to, the successor transfer agent in
25
<PAGE>
the establishment of the books and records necessary to carry out
its responsibilities hereunder.
SECTION 33. Any notice or other communication required
by or permitted to be given in connection with this Agreement
shall be in writing, and shall be delivered in person or sent by
first-class mail, postage prepaid, to the respective parties.
Notice to the Fund shall be given as follows until
further notice:
Alliance Disciplined Value Fund, Inc.
1345 Avenue of the Americas
New York, New York 10105
Attention: Secretary
Notice to Fund Services shall be given as follows until further
notice:
Alliance Fund Services, Inc.
500 Plaza Drive
Secaucus, New Jersey 07094
SECTION 34. The Fund represents and warrants to Fund
Services that the execution and delivery of this Agreement by the
undersigned officer of the Fund has been duly and validly
authorized by resolution of the Fund's Directors. Fund Services
represents and warrants to the Fund that the execution and
delivery of this Agreement by the undersigned officer of Fund
Services has also been duly and validly authorized.
SECTION 35. This Agreement may be executed in more than
one counterpart, each of which shall be deemed to be an original,
and shall become effective on the last date of signature below
unless otherwise agreed by the parties. Unless sooner terminated
26
<PAGE>
pursuant to SECTION 32, this Agreement will continue in effect so
long as its continuance is specifically approved at least
annually by the Directors or by a vote of the stockholders of the
Fund and in either case by a majority of the Directors who are
not parties to this Agreement or interested persons of any such
party, at a meeting called for the purpose of voting on this
Agreement.
SECTION 36. This Agreement shall extend to and shall
bind the parties hereto and their respective successors and
assigns; provided, however, that this Agreement shall not be
assignable by the Fund without the written consent of Fund
Services or by Fund Services without the written consent of the
Fund, authorized or approved by a resolution of the Fund's
Directors. Notwithstanding the foregoing, either party may
assign this Agreement without the consent of the other party so
long as the assignee is an affiliate, parent or subsidiary of the
assigning party and is qualified to act under the Investment
Company Act, as amended from time to time.
SECTION 37. This Agreement shall be governed by the
laws of the State of New Jersey.
27
<PAGE>
WITNESS the following signatures:
ALLIANCE DISCIPLINED VALUE FUND,
INC.
BY: /s/ John D. Carifa
------------------------------
John D. Carifa
TITLE: President
ALLIANCE FUND SERVICES, INC.
BY: /s/ George Hrabovsky
------------------------------
George Hrabovsky
TITLE: President
28
00250250.AD8
<PAGE>
Exhibit (h)(2)
EXPENSE LIMITATION AGREEMENT
ALLIANCE CAPITAL MANAGEMENT L.P.
1345 Avenue of the Americas
New York, New York 10105
December 6, 1999
Alliance Disciplined Value Fund, Inc.
1345 Avenue of the Americas
New York, New York 10105
Dear Sirs:
Alliance Capital Management L.P. herewith confirms our
agreement with you as follows:
1. You are an open-end, diversified management
investment company registered under the Investment Company Act of
1940, as amended (the "Act"). You propose to engage in the
business of investing and reinvesting your assets in accordance
with applicable limitations. Pursuant to an Advisory Agreement
dated as of December 6, 1999 (the "Advisory Agreement"), you have
employed us to manage the investment and reinvestment of such
assets.
2. We hereby agree that, notwithstanding any provision
to the contrary contained in the Advisory Agreement, we shall
limit as provided herein the aggregate expenses of every
character incurred by you, including but not limited to the fees
("Advisory Fees") payable to us pursuant to the Advisory
Agreement (the "Limitation"). Under the Limitation, we agree
that, through December 20, 2000, such expenses shall not exceed a
percentage (the "Percentage Expense Limitation") of your average
daily net assets equal to, on an annualized basis, 2.50% in the
case of the Class A shares, and 3.20% in the case of the Class B
shares and the Class C shares. To determine our liability for
expenses in excess of the Percentage Expense Limitation, the
amount of allowable fiscal-year-to-date expenses shall be
computed daily by prorating the Percentage Expense Limitation
based on the number of days elapsed within the fiscal year, or
limitation period, if shorter (the "Prorated Limitation"). The
Prorated Limitation shall be compared to your expenses recorded
<PAGE>
through the current day in order to produce the allowable
expenses to be recorded for the current day (the "Allowable
Expenses"). If Advisory Fees and your other expenses for the
current day exceed the Allowable Expenses, Advisory Fees for the
current day shall be reduced by such excess ("Unaccrued Fees").
In the event such excess exceeds the amount due as Advisory Fees,
we shall be responsible for the additional excess ("Other
Expenses Exceeding Limit"). Cumulative Unaccrued Fees or
cumulative Other Expenses Exceeding Limit shall be paid to us in
the future, provided that (1) no such payment shall be made to us
after December 20, 2002, (2) such payment shall be made only to
the extent that it does not cause your aggregate expenses, on an
annualized basis, to exceed the Percentage Expense Limitation,
and (3) no such payment shall be made to us to the extent that
the aggregate of such payments would exceed the amount of
organizational and offering expenses (as defined by the Financial
Accounting Standards Board) recorded by you for financial
reporting purposes on or before December 20, 2000.
3. Nothing in this Agreement shall be construed as
preventing us from voluntarily limiting, waiving or reimbursing
your expenses outside the contours of this Agreement during any
time period before or after December 20, 2000; nor shall anything
herein be construed as requiring that we limit, waive or
reimburse any of your expenses incurred after December 20, 2000,
or, except as expressly set forth herein, prior to such date.
4. This Agreement shall become effective on the date
hereof and remain in effect until December 20, 2002. This
Agreement may be terminated by either party hereto upon not less
than 60 days' prior written notice to the other party. Upon the
termination or expiration hereof, we shall have no claim against
you for any amounts not reimbursed to us pursuant to the
provisions of paragraph 2.
5. This Agreement shall be construed in accordance
with the laws of the State of New York, provided, however, that
nothing herein shall be construed as being inconsistent with the
Act.
2
<PAGE>
If the foregoing is in accordance with your
understanding, will you kindly so indicate by signing and
returning to us the enclosed copy hereof.
Very truly yours,
ALLIANCE CAPITAL MANAGEMENT L.P.
By ALLIANCE CAPITAL MANAGEMENT
CORPORATION, its general
partner
By /s/ John D. Carifa
___________________________
John D. Carifa
President
Agreed to and accepted
as of the date first set forth above.
ALLIANCE DISCIPLINED VALUE FUND, INC.
By /s/ Edmund P. Bergan, Jr.
____________________________
Edmund P. Bergan, Jr.
Secretary
3
00250250.AE0
<PAGE>
Exhibit (i)(1)
SEWARD & KISSEL LLP
One Battery Park Plaza
New York, NY 10004
Telephone: (212) 574-1200
Facsimile: (212) 480-8421
www.sewkis.com
December 16, 1999
Alliance Disciplined Value Fund, Inc.
1345 Avenue of the Americas
New York, New York 10105
Ladies and Gentlemen:
We have acted as counsel for Alliance Disciplined Value
Fund, Inc., a Maryland corporation (the "Company"), in connection
with the registration of an indefinite number of shares of the
Company's common stock, par value $.001 per share (the "Common
Stock"), under the Securities Act of 1933, as amended. The
Common Stock is divided into four classes.
As counsel for the Company, we have participated in the
preparation of Pre-Effective Amendment No. 2 to the Company's
Registration Statement on Form N-1A relating to such shares (File
Nos. 333-90261 and 811-09687) (the "Registration Statement"). We
have examined the Charter and By-Laws of the Company and have
relied upon a certificate of an Assistant Secretary of the
Company certifying the resolutions of the Board of Directors of
the Company authorizing the issuance of shares of the classes of
Common Stock. We have also examined and relied upon such
corporate records of the Company and such other documents and
certificates as to factual matters as we have deemed to be
necessary to render the opinion expressed herein.
Based on such examination, we are of the opinion that
the shares of Common Stock of the Company to be offered for sale
pursuant to the Registration Statement are, to the extent of the
number of shares of each respective class authorized to be issued
by the Company in its Charter, duly authorized, and, when sold,
issued and paid for as contemplated by the Registration
Statement, will have been validly issued and will be fully paid
<PAGE>
and nonassessable shares of Common Stock of the Company under the
laws of the State of Maryland.
As to matters of Maryland law relevant to the foregoing
opinion, we have relied on the opinion of Venable, Baetjer and
Howard, LLP of Baltimore, Maryland, dated December 16, 1999, a
copy of which is included in the Registration Statement as
Exhibit (i)(2).
We hereby consent to the filing of this opinion with the
Securities and Exchange Commission as an exhibit to the
Registration Statement and to the reference to our firm under the
caption "General Information--Counsel" in the Statement of
Additional Information included therein.
Very truly yours,
/s/ Seward & Kissel LLP
2
00250250.AD2
<PAGE>
Exhibit (i)(2)
December 16, 1999
Seward & Kissel LLP
One Battery Park Plaza
New York, NY 10004
Re: Alliance Disciplined Value Fund, Inc.
Ladies and Gentlemen:
We have acted as special Maryland counsel for Alliance
Disciplined Value Fund, Inc., a Maryland corporation (the
"Fund"), in connection with the organization of the Fund and the
issuance of shares of its Class A Common Stock, Class B Common
Stock, and Class C Common Stock, par value $.001 per share (each
a "Class" and, collectively the "Shares").
As special Maryland counsel for the Fund, we are
familiar with its Charter and Bylaws. We have examined the
prospectus included in its Registration Statement on Form N-1A,
Files Nos. 333-90261; 811-09687 (the "Registration Statement"),
substantially in the form in which it is to become effective (the
"Prospectus"). We have further examined and relied upon a
certificate of the Maryland State Department of Assessments and
Taxation to the effect that the Fund is duly incorporated and
existing under the laws of the State of Maryland and is in good
standing and duly authorized to transact business in the State of
Maryland.
We have also examined and relied upon such corporate
records of the Fund and other documents and certificates with
respect to factual matters as we have deemed necessary to render
the opinion expressed herein. We have assumed, without
independent verification, the genuineness of all signatures on
documents submitted to us, the authenticity of all documents
submitted to us as originals, and the conformity with originals
of all documents submitted to us as copies.
Based on such examination, we are of the opinion that:
1. The Fund is duly organized and validly existing as
a corporation in good standing under the laws of
the State of Maryland.
<PAGE>
2. The Shares of the Fund to be offered for sale
pursuant to the Registration Statement are, to the
extent of the respective number of Shares of each
Class authorized to be issued by the Fund in its
Charter, duly authorized and, when sold, issued and
paid for as contemplated by the Registration
Statement, will have been validly and legally
issued and will be fully paid and nonassessable
under the laws of the State of Maryland.
This letter expressed our opinion with respect to the
Maryland General Corporation Law. It does not extend to the
securities or "blue sky" laws of Maryland, to federal securities
laws or to other laws.
You may rely upon our foregoing opinion in rendering
your opinion to the Fund that is to be filed as an exhibit to the
Registration Statement. We consent to the filing of this opinion
as an exhibit to the Registration Statement and to the reference
to us in the Statement of Additional Information supplementing
the Prospectus under the caption "Counsel". We do not thereby
admit that we are "experts" within the meaning of the Securities
Act of 1933 and the regulations thereunder. This opinion may not
be relied upon by any other person or for any other purpose
without our prior written consent.
Very truly yours,
/s/ Venable, Baetjer
and Howard, LLP
2
00250250.AE1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions
"Shareholder Services - Statements and Reports" and "General
Information - Independent Auditors" and to the use of our
report dated December 15, 1999 included in this Registration
Statement (Form N-1A Nos. 333-90261 and 811-09687) of the
Alliance Disciplined Value Fund, Inc.
ERNST & YOUNG LLP
New York, New York
December 15, 1999
<PAGE>
Exhibit (l)
ALLIANCE CAPITAL MANAGEMENT L.P.
1345 Avenue of the Americas
New York, New York 10105
December 14, 1999
Alliance Disciplined Value Fund, Inc.
1345 Avenue of the Americas
New York, New York 10105
Gentlemen:
In connection with our purchase from you and your
issuance to us of 10,000 shares of Class A Common Stock, ten
shares of Class B Common Stock and ten shares of Class C Common
Stock for an aggregate cash consideration of One Hundred Thousand
Two Hundred Dollars ($100,200), this will confirm that we are
buying such shares for investment for our account only and not
with a view to reselling or otherwise distributing them.
Very truly yours,
Alliance Capital Management L.P.
By: Alliance Capital Management
Corporation,
its General Partner
By: /s/ Robert H. Joseph, Jr.
Name: Robert H. Joseph, Jr.
Title: Senior Vice President
and Chief Financial Officer
00250250.AD9
<PAGE>
Exhibit (o)
ALLIANCE DISCIPLINED VALUE FUND, INC.
Plan pursuant to Rule 18f-3
under the Investment Company Act of 1940
This Plan (the "Plan") pursuant to Rule 18f-3 under the
Investment Company Act of 1940 (the "Act") of Alliance
Disciplined Value Fund, Inc. (the "Fund") assets forth the
general characteristics of, and the general conditions under
which the Fund may offer, multiple classes of shares of its now
existing and hereafter created portfolios.1 This Plan may be
revised or amended from time to time as provided below.
CLASS DESIGNATIONS
The Fund2 may from time to time issue one or more of the
following classes of shares: Class A shares, Class B shares and
Class C shares. Each of the three classes of shares will
represent interests in the same portfolio of investments of the
Fund and, except as described herein, shall have the same rights
and obligations as each other class. Each class shall be subject
to such investment minimums and other conditions of eligibility
as are set forth in one or more prospectuses or statements of
additional information through which such shares are issued, as
from time to time in effect (collectively, the "Prospectus").
CLASS CHARACTERISTICS
Class A shares are offered at a public offering price that is
equal to their net asset value ("NAV") plus an initial sales
charge, as set forth in the Prospectus. Class A shares may also
be subject to a Rule 12b-1 fee, which may include a service fee
and, under certain circumstances, a contingent deferred sales
charge ("CDSC"), as described in the Prospectus.
_________________________
1 This Plan is intended to allow the Fund to offer multiple
classes of shares to the full extent and in the manner
permitted by Rule 18f-3 under the Act (the "Rule"), subject to
the requirements and conditions imposed by the Rule.
2 For purposes of this Plan, if the Fund has existing more than
one portfolio pursuant to which multiple classes of shares are
issued, then references in this Plan to the "Fund" shall be
deemed to refer instead to each portfolio.
<PAGE>
Class B shares are offered at their NAV, without an initial
sales charge, and may be subject to a CDSC and a Rule 12b-1 fee,
which may include a service fee, as described in the Prospectus.
Class C shares are offered at their NAV, without an initial
sales charge, and may be subject to a CDSC and a Rule 12b-1 fee,
which may include a service fee, as described in the Prospectus.
The initial sales charge on Class A shares and CDSC on
Class A, B and C shares are each subject to reduction or waiver
as permitted by the Act, and as described in the Prospectus.
ALLOCATIONS TO EACH CLASS
EXPENSE ALLOCATIONS
The following expenses shall be allocated, to the extent
practicable, on a class-by-class basis: (i) Rule 12b-1 fees
payable by the Fund to the distributor or principal underwriter
of the Fund's shares (the "Distributor"), and (ii) transfer
agency costs attributable to each class. Subject to the approval
of the Fund's Board of Directors, including a majority of the
independent Directors, the following "Class Expenses" may be
allocated on a class-by-class basis: (a) printing and postage
expenses related to preparing and distributing materials such as
shareholder reports, prospectuses and proxy statements to current
shareholders of a specific class, (b) SEC registration fees
incurred with respect to a specific class, (c) blue sky and
foreign registration fees and expenses incurred with respect to a
specific class, (d) the expenses of administrative personnel and
services required to support shareholders of a specific class
(including, but not limited to, maintaining telephone lines and
personnel to answer shareholder inquiries about their accounts or
about the Fund), (e) litigation and other legal expenses relating
to a specific class of shares, (f) Directors' fees or expenses
incurred as a result of issues relating to a specific class of
shares, (g) accounting and consulting expenses relating to a
specific class of shares, (h) any fees imposed pursuant to a non-
Rule 12b-1 shareholder services plan that relate to a specific
class of shares, and (i) any additional expenses, not including
advisory or custodial fees or other expenses related to the
management of the Fund's assets, if these expenses are actually
incurred in a different amount with respect to a class, or if
services are provided with respect to a class that are of a
different kind or to a different degree than with respect to one
or more other classes.
All expenses not now or hereafter designated as Class
Expenses ("Fund Expenses") will be allocated to each class on the
basis of the net asset value of that class in relation to the net
asset value of the Fund.
2
<PAGE>
WAIVERS AND REIMBURSEMENTS
The investment adviser of the Fund (the "Adviser") or the
Distributor may choose to waive or reimburse Rule 12b-1 fees,
transfer agency fees or any Class Expenses on a voluntary,
temporary basis. Such waiver or reimbursement may be applicable
to some or all of the classes and may be in different amounts for
one or more classes.
INCOME, GAINS AND LOSSES
Income, and realized and unrealized capital gains and losses
shall be allocated to each class on the basis of the net asset
value of that class in relation to the net asset value of the
Fund.
CONVERSION AND EXCHANGE FEATURES
CONVERSION FEATURES
Class B shares of the Fund automatically convert to Class A
shares of the Fund after a certain number of months or years
after the end of the calendar month in which the shareholder's
purchase order was accepted as described in the Prospectus.
Class B shares purchased through reinvestment of dividends and
distributions will be treated as Class B shares for all purposes
except that such Class B shares will be considered held in a
separate sub-account. Each time any Class B shares in the
shareholder's account convert to Class A shares, an equal pro-
rata portion of the Class B shares in the sub-account will also
convert to Class A shares.
The conversion of Class B shares to Class A shares may be
suspended if the opinion of counsel obtained by the Fund that the
conversion does not constitute a taxable event under current
federal income tax law is no longer available. Class B shares
will convert into Class A shares on the basis of the relative net
asset value of the two classes, without the imposition of any
sales load, fee or other charge.
In the event of any material increase in payments authorized
under the Rule 12b-1 Plan (or, if presented to shareholders, any
material increase in payments authorized by a non-Rule 12b-1
shareholder services plan) applicable to Class A shares, existing
Class B shares will stop converting into Class A shares unless
the Class B shareholders, voting separately as a class, approve
the increase in such payments. Pending approval of such
increase, or if such increase is not approved, the Directors
shall take such action as is necessary to ensure that existing
Class B shares are exchanged or converted into a new class of
shares ("New Class A") identical in all material respects to
3
<PAGE>
Class A shares as existed prior to the implementation of the
increase in payments, no later than such shares were previously
scheduled to convert to Class A shares. If deemed advisable by
the Directors to implement the foregoing, such action may include
the exchange of all existing Class B shares for a new class of
shares ("New Class B") identical to existing Class B shares,
except that New Class B shares shall convert to New Class A
shares. Exchanges or conversions described in this paragraph
shall be effected in a manner that the Directors reasonably
believe will not be subject to federal income taxation. Any
additional cost associated with the creation, exchange or
conversion of New Class A and New Class B shares shall be borne
by the Adviser and the Distributor. Class B shares sold after
the implementation of the fee increase may convert into Class A
shares subject to the higher maximum payment, provided that the
material features of the Class A plan and the relationship of
such plan to the Class B shares are disclosed in an effective
registration statement.
EXCHANGE FEATURES
Shares of each class generally will be permitted to be
exchanged only for shares of a class with similar characteristics
in another Alliance Mutual Fund and shares of certain Alliance
money market funds. If the aggregate net asset value of shares
of all Alliance Mutual Funds held by an investor in the Fund
reaches the minimum amount at which an investor may purchase
Class A shares at net asset value without a front-end sales load
on or before December 15 in any year, then all Class B and
Class C shares of the Fund held by that investor may thereafter
be exchanged, at the investor's request, at net asset value and
without any front-end sales load or CDSC for Class A shares of
the Fund. All exchange features applicable to each class will be
described in the Prospectus.
DIVIDENDS
Dividends paid by the Fund with respect to its Class A,
Class B and Class C shares, to the extent any dividends are paid,
will be calculated in the same manner, at the same time and will
be in the same amount, except that any Rule 12b-1 fee payments
relating to a class of shares will be borne exclusively by that
class and any incremental transfer agency costs or, if
applicable, Class Expenses relating to a class shall be borne
exclusively by that class.
VOTING RIGHTS
Each share of a Fund entitles the shareholder of record to
one vote. Each class of shares of the Fund will vote separately
as a class with respect to the Rule 12b-1 plan applicable to that
4
<PAGE>
class and on other matters for which class voting is required
under applicable law. Class A and Class B shareholders will each
vote as a separate class (i.e., as two separate classes) to
approve any material increase in payments authorized under the
Rule 12b-1 plan applicable to Class A shares.
RESPONSIBILITIES OF THE DIRECTORS
On an ongoing basis, the Directors will monitor the Fund for
the existence of any material conflicts among the interests of
the classes of shares. The Directors shall further monitor on an
ongoing basis the use of waivers or reimbursement by the Adviser
and the Distributor of expenses to guard against cross-
subsidization between classes. The Directors, including a
majority of the independent Directors, shall take such action as
is reasonably necessary to eliminate any such conflict that may
develop. If a conflict arises, the Adviser and Distributor, at
their own cost, will remedy such conflict up to and including
establishing one or more new registered management investment
companies.
REPORTS TO THE DIRECTORS
The Adviser and Distributor will be responsible for reporting
any potential or existing conflicts among the classes of shares
to the Directors. In addition, the Directors will receive
quarterly and annual statements concerning distributions and
shareholder servicing expenditures complying with paragraph
(b)(3)(ii) of Rule 12b-1. In the statements, only expenditures
properly attributable to the sale or servicing of a particular
class of shares shall be used to justify any distribution or
service fee charged to that class. The statements, including the
allocations upon which they are based, will be subject to the
review of the independent Directors in the exercise of their
fiduciary duties. At least annually, the Directors shall receive
a report from an expert, acceptable to the Directors, (the
"Expert"), with respect to the methodology and procedures for
calculating the net asset value, dividends and distributions for
the classes, and the proper allocation of income and expenses
among the classes. The report of the Expert shall also address
whether the Fund has adequate facilities in place to ensure the
implementation of the methodology and procedures for calculating
the net asset value, dividends and distributions for the classes,
and the proper allocation of income and expenses among the
classes. The Fund and the Adviser will take immediate corrective
measures in the event of any irregularities reported by the
Expert.
5
<PAGE>
AMENDMENTS
The Plan may be amended from time to time in accordance with
the provisions and requirements of Rule 18f-3 under the Act.
Adopted by action of the Board of
Directors the 6th day of December, 1999.
By: /s/ Edmund P. Bergan, Jr.
_____________________
Edmund P. Bergan, Jr.
Secretary
6
00250250.AE5
