As filed with the Securities and Exchange
Commission on April 18, 1996
File No. 2-33889
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________
FORM N-lA
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF l940
Amendment No. 32
__________________________________
Fiduciary Management Associates
(Exact Name of Registrant as Specified in Charter)
Alliance Capital Management L.P.
1345 Avenue of the Americas, New York, New York l0105
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number,
including Area Code: (800) 221-5672
__________________________________
EDMUND P. BERGAN, JR.
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, New York l0105
(Name and address of agent for service)
Registrant has registered an indefinite number of shares of
Beneficial Interest pursuant to Rule 24f-2 under the Investment
Company Act of 1940. Registrant filed a notice pursuant to such
Rule for its fiscal year ended September 30, 1995 on November 29,
1995.
<PAGE>
CROSS REFERENCE SHEET
(as required by Rule 404(c))
Location in
Confidential Private
Offering Memorandum
N-lA Item No. (Caption)
_____________ ______________________
PARTS A AND B
Item l. Cover Page....................... Not Applicable
Item 2. Synopsis......................... Summary; Expense
Information
Item 3. Condensed Financial Information.. Not Applicable
Item 4. General Description of Registrant Description of the
Portfolio; General
Information
Item 5. Management of the Fund........... Management of the
Portfolio; General
Information
Item 6. Capital Stock and Other
Securities..................... General Information;
Dividends,
Distributions and
Taxes
Item 7. Purchase of Securities Being
Offered........................ Purchase and
Redemption of Shares;
General Information
Item 8. Redemption or Repurchase......... Purchase and
Redemption of Shares
Item 9. Pending Legal Proceedings........ Not Applicable
Item l0. Cover Page....................... Not Applicable
Item ll. Table of Contents................ Not Applicable
<PAGE>
CROSS REFERENCE SHEET
(as required by Rule 404(c))
Item l2. General Information and History.. Fundemental
Investment Policies;
Management of the
Portfolio; General
Information
Item l3. Investment Objectives and
Policies....................... Investment Objectives
and Policies
Item l4. Management of the Registrant..... Management of the
Portfolio
Item l5. Control Persons and Principal
Holders of Securities.......... Management of the
Portfolio
Item l6. Investment Advisory and
Other Services................. Management of the
Portfolio
Item l7. Brokerage Allocation and
Other Practices................ Portfolio
Transactions
Item l8. Capital Stock and Other
Securities..................... General Information
Item l9. Purchase, Redemption and Pricing
of Securities Being Offered.... Purchase and
Redemption of Shares
Item 20. Tax Status....................... Dividends,
Distributions and
Taxes
Item 21. Underwriters..................... General Information
Item 22. Calculation of Performance Data.. General Information
Item 23. Financial Statements............. Not Applicable
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Incorporated by reference herein is (i) the Prospectus of
Fiduciary Management Associates filed pursuant to Rule 497(c) on
February 14, 1996 (File Nos. 2-33889 and 811-01897) (the
"Prospectus") and (ii) the Statement of Additional Information of
Fiduciary Management Associates filed pursuant to Rule 497(c) on
February 14, 1996 (File Nos. 2-33889 and 811-01897) (the
"Statement of Additional Information").
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Memorandum Copy Number:________________
FIDUCIARY MANAGEMENT ASSOCIATES -
LARGE CAPITALIZATION GROWTH PORTFOLIO
CONFIDENTIAL PRIVATE OFFERING MEMORANDUM
dated
April 18, 1996
The Large Capitalization Growth Portfolio (the "Portfolio"),
a non-diversified, open-end management investment company that
seeks long-term growth of capital by investing predominantly in
the equity securities of a limited number of large, carefully
selected, high quality American companies that, in the judgment
of Alliance Capital Management L.P., the Portfolio's investment
adviser, are likely to achieve superior earnings growth. The
Portfolio is a series of Fiduciary Management Associates, a
Massachusetts business trust (the "Fund").
THIS MEMORANDUM IS SUBMITTED TO YOU ON A CONFIDENTIAL BASIS
SOLELY IN CONNECTION WITH YOUR CONSIDERATION OF AN INVESTMENT IN
SHARES OF BENEFICIAL INTEREST, PAR VALUE $.01 PER SHARE OF THE
PORTFOLIO ("SHARES"). THIS MEMORANDUM MAY NOT BE REPRODUCED IN
WHOLE OR IN PART, AND MAY NOT BE DELIVERED TO ANY PERSON WITHOUT
THE PRIOR WRITTEN CONSENT OF THE FUND.
THESE SHARES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE
COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE THE FOREGOING
AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE
ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THIS MEMORANDUM DOES NOT CONSTITUTE AN OFFER OR SOLICITATION IN
ANY STATE OR OTHER JURISDICTION IN WHICH AN OFFER OR SOLICITATION
IS NOT AUTHORIZED.
THE SHARES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THE SHARES MAY
NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT,
AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM.
<PAGE>
_________________________________________________________________
SUMMARY
_________________________________________________________________
The following summary is qualified in its entirety by the
more detailed information contained in this Confidential Private
Offering Memorandum.
The Portfolio's investment adviser is Alliance Capital
Management L.P. (the "Adviser"), a global investment manager
providing diversified services to institutions and individuals
through a broad line of investments including 107 mutual funds.
Since 1971, the Adviser has earned a reputation as a leader in
the investment world with over $156 billion in assets under
management as of March 1, 1996. Alliance provides investment
management services to 34 of the FORTUNE 100 companies.
The Portfolio seeks long-term growth of capital by investing
in the equity securities of a limited number of large, carefully
selected, high-quality American companies from a relatively small
universe of intensively researched companies. The Portfolio
invests principally in a non-diversified portfolio of equity
securities that, in the judgment of the Adviser, are likely to
achieve superior earnings growth. Normally, approximately 40
companies will be represented in the Portfolio's investment
portfolio. The Portfolio's investment in 25 of these companies
most highly regard at any point in time by the Adviser will
usually constitute approximately 70% of the Portfolio's net
assets.
The price of the shares of beneficial interest of the
Portfolio will fluctuate as the daily prices of the individual
securities in which it invests fluctuate, so that your shares,
when redeemed, may be worth more or less than their original
cost. With respect to the Portfolio's investment in foreign
currency denominated securities, these fluctuation may be
magnified by changes in foreign exchange rates. While the
Portfolio invests primarily in common stocks, in order to achieve
its investment objective, the Portfolio may at times use certain
types of investment derivatives, such as options, futures,
forwards and swaps. These involve risks different from, and, in
certain cases, greater than, the risks presented by more
traditional investments. These risks are fully discussed in this
Confidential Private Placement Memorandum.
For detailed information about purchasing and selling shares,
see "Purchase of Shares" and "Redemption."
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LARGE CAPITALIZATION GROWTH PORTFOLIO
_________________________________________________________________
DESCRIPTION OF THE PORTFOLIO
_________________________________________________________________
The Large Capitalization Growth Portfolio (the
"Portfolio") seeks long-term growth of capital by investing in
the equity securities of a limited number of large, carefully
selected, high-quality American companies from a relatively small
universe of intensively researched companies.
The Portfolio is one of four series of Fiduciary
Management Associates (the "Fund"), a Massachusetts business
trust registered under the Investment Company Act of 1940, as
amended (the "1940 Act"), as an open-end, management investment
company. Shares of beneficial interest of the Portfolio are
privately offered from time-to-time pursuant to an exemption from
the registration requirements of the Securities Act of 1933, as
amended (the "Securities Act"). See "Purchase and Redemption of
Shares". The Portfolio is non-diversified, and, therefore, is
not limited in the proportion of its assets that may be invested
in the securities of a single issuer, subject to certain tax
considerations. See "Dividends, Distributions and Taxes."
Except as otherwise indicated, the investment policies
of the Portfolio are not "fundamental policies" and may,
therefore, be changed by the Fund's Board of Trustees without a
shareholder vote. However, the Portfolio will not change its
investment policies without contemporaneous written notice to its
shareholders. In addition, the Portfolio's investment objective
may not be changed without shareholder approval. There can be,
of course, no assurance that the Portfolio will achieve its
investment objective.
Investment Objective and Policies
The Portfolio's investment objective is to seek long-
term growth of capital by investing predominantly in the equity
securities (common stocks, securities convertible into common
stocks and rights and warrants to subscribe for or purchase
common stocks) of a limited number of large, carefully selected,
high-quality American companies that, in the judgment of Alliance
Capital Management L.P., the Portfolio's adviser (the "Adviser"),
are likely to achieve superior earnings growth. The Portfolio's
investments in the 25 of these companies most highly regarded at
any point in time by the Adviser will usually constitute
approximately 70% of the Portfolio's net assets. Normally,
approximately 40 companies will be represented in the Portfolio's
investment portfolio. The Portfolio thus differs from more
3
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typical equity mutual funds by investing most of its assets in a
relatively small number of intensively researched companies. The
Portfolio is designed for the investor who seeks to accumulate
capital over a period of years with less volatility than that
typically associated with a more aggressive strategy of
investment in smaller companies.
As a matter of fundamental policy, the Portfolio will,
under normal circumstances, invest at least 85% of the value of
its total assets in the equity securities of American companies
(except when in a temporarily defensive position). The Portfolio
defines American companies to be entities (i) that are organized
under the laws of the United States and have their principal
office in the United States, and (ii) the equity securities of
which are traded principally in the United States securities
markets. This policy is deemed a "fundamental policy" within the
meaning of the the 1940 Act, and may not be changed without the
approval of a majority of the Portfolio's outstanding voting
securities as defined in the 1940 Act.
Within the investment framework described herein, Alfred
Harrison, who heads the Adviser's "Large Cap Growth Group", is
ultimately responsible for the investment decisions for the
Portfolio. In managing the Portfolio's assets, the Adviser's
investment strategy emphasizes stock selection and investment in
the securities of a limited number of issuers. The Adviser
depends heavily upon the fundamental analysis and research of its
large internal research staff in making investment decisions for
the Portfolio. The research staff generally follows a primary
research universe of approximately 600 companies which are
considered by the Adviser to have strong management, superior
industry positions, excellent balance sheets and the ability to
demonstrate superior earnings growth. As one of the largest
multi-national investment firms, the Adviser 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.
The Adviser's analysts prepare their own earnings
estimates and financial models for each company followed. While
each analyst has responsibility for following companies in one or
more identified sectors and/or industries, the lateral structure
of the Adviser's research organization and constant communication
among the analysts result in decision-making based on the
relative attractiveness of stocks among industry sectors. The
focus during this process is on the early recognition of change
on the premise that value is created through the dynamics of
changing company, industry and economic fundamentals. Research
emphasis is placed on the identification of companies whose
4
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substantially above average prospective earnings growth is not
fully reflected in current market valuations.
The Adviser continually reviews its primary research
universe of approximately 600 companies to maintain a list of
favored securities, the "Alliance 100", considered by the Adviser
to have the most clearly superior earnings potential and
valuation attraction. The Adviser's concentration on a limited
universe of companies allows it to devote its extensive resources
to constant intensive research of these companies. Companies are
constantly added to and deleted from the Alliance 100 as
fundamentals and valuations change. The Adviser's Large Cap
Growth Group, in turn, further refines, on a weekly basis, the
selection process for the Portfolio with each portfolio manager
in the Group selecting 25 such companies which appear to the
manager most attractive at current prices. These individual
ratings are then aggregated and ranked to produce a composite
list of the 25 most highly regarded stocks, the "Favored 25". As
noted above, approximately 70% of the Fund's net assets will
usually be invested in the Favored 25 with the balance of the
Fund's investment portfolio consisting principally of other
stocks in the Alliance 100. Portfolio emphasis upon particular
industries or sectors is a by-product of the stock selection
process rather than the result of assigned targets or ranges.
In the management of the Portfolio's investment
portfolio, the Adviser will seek to utilize market volatility
judiciously (assuming no change in company fundamentals) to
adjust the Portfolio's portfolio positions. The Portfolio will
strive to capitalize on apparently unwarranted price
fluctuations, both to purchase or increase positions on weakness
and to sell or reduce overpriced holdings. Under normal
circumstances, the Portfolio will remain substantially fully
invested in equity securities and will not take significant cash
positions for market timing purposes. Rather, during a market
decline, while adding to positions in favored stocks, the
Portfolio will tend to become somewhat more aggressive, gradually
reducing somewhat the number of companies represented in the
Portfolio's portfolio. Conversely, in rising markets, while
reducing or eliminating fully valued positions, the Portfolio
will tend to become somewhat more conservative, gradually
increasing somewhat the number of companies represented in the
Portfolio's portfolio. Through this "buying into declines" and
"selling into strength," the Adviser seeks to gain positive
returns in good markets while providing some measure of
protection in poor markets.
The Adviser expects the average weighted market
capitalization of companies represented in the Portfolio's
portfolio (i.e., the number of a company's shares outstanding
multiplied by the price per share) to normally be in the range of
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or exceed the average weighted market capitalization of companies
comprising the Standard & Poor's 500 Composite Stock Price Index,
a widely recognized unmanaged index of market activity based upon
the aggregate performance of a selected portfolio of publicly
traded stocks, including monthly adjustments to reflect the
reinvestment of dividends and distributions. Investments will be
made based upon their potential for capital appreciation.
Because of the market risks inherent in any investment, the
selection of securities on the basis of their appreciation
possibilities cannot ensure against possible loss in value, and
there is, of course, no assurance that the Portfolio's investment
objective will be met.
Additional Investment Policies and Practices
The following investment policies and restrictions
supplement those set forth above. However, the Portfolio will
not change its investment policies without contemporaneous
written notice to shareholders.
Convertible Securities. The Portfolio may invest in
convertible securities which include bonds, debentures, corporate
notes and preferred stocks that are convertible at a stated
exchange rate into common stock. Prior to their conversion,
convertible securities have the same general characteristics as
non-convertible debt securities which provide a stable stream of
income with generally higher yields than those of equity
securities of the same or similar issuers. As with all debt
securities, the market value of convertible securities tends to
decline as interest rates increase and, conversely, to increase
as interest rates decline. While convertible securities
generally offer lower interest or dividend yields than non-
convertible debt securities of similar quality, they do enable
the investor to benefit from increases in the market price of the
underlying common stock. When the market price of the common
stock underlying a convertible security increases, the price of
the convertible security increasingly reflects the value of the
underlying common stock and may rise accordingly. As the market
price of the underlying common stock declines, the convertible
security tends to trade increasingly on a yield basis, and thus
may not depreciate to the same extent as the underlying common
stock. Convertible securities rank senior to common stocks on an
issuer's capital structure. They are consequently of higher
quality and entail less risk than the issuer's common stock,
although the extent to which such risk is reduced depends in
large measure upon the degree to which the convertible security
sells above its value as a fixed income security. The Portfolio
may invest up to 20% of its net assets in the convertible
securities of companies whose common stocks are eligible for
purchase by the Portfolio under the investment policies described
above.
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Rights and Warrants. The Portfolio may invest up to 5%
of its net assets in rights or warrants which entitle the holder
to buy equity securities at a specific price for a specific
period of time, but will do so only if the equity securities
themselves are deemed appropriate by the Adviser for inclusion in
the Portfolio's portfolio. Rights and warrants may be considered
more speculative than certain other types of investments in that
they do not entitle a holder to dividends or voting rights with
respect to the securities which may be purchased nor do they
represent any rights in the assets of the issuing company. Also,
the value of a right or warrant does not necessarily change with
the value of the underlying securities and a right or warrant
ceases to have value if it is not exercised prior to the
expiration date.
Foreign Securities. The Portfolio may invest up to 15%
of the value of its total assets in securities of foreign issuers
whose common stocks are eligible for purchase by the Portfolio
under the investment policies described above. Foreign
securities investments are affected by exchange control
regulations as well as by changes in governmental administration,
economic or monetary policy (in the United States and abroad) and
changed circumstances in dealings between nations. Currency
exchange rate movements will increase or reduce the U.S. dollar
value of the Portfolio's net assets and income attributable to
foreign securities. Costs are incurred in connection with the
conversion of currencies held by the Portfolio. There may be
less publicly available information about foreign issuers than
about domestic issuers, and foreign issuers may not be subject to
accounting, auditing and financial reporting standards and
requirements comparable to those of domestic issuers. Securities
of some foreign issuers are less liquid and more volatile than
securities of comparable domestic issuers, and foreign brokerage
commissions are generally higher than in the United States.
Foreign securities markets may also be less liquid, more
volatile, and less subject to governmental supervision than in
the United States. Investments in foreign countries could be
affected by other factors not present in the United States,
including expropriation, confiscatory taxation and potential
difficulties in enforcing contractual obligations.
Illiquid Securities. The Portfolio will not maintain
more than 15% of its net assets in illiquid securities. For this
purpose, illiquid securities include, among others, 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).
7
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Historically, illiquid securities have included
securities subject to contractual or legal restrictions on resale
because they have not been registered under the Securities Act of
1933, as amended (the "Securities Act") and securities which are
otherwise not readily marketable. Securities which have not been
registered under the Securities Act are referred to as private
placements or restricted securities and are purchased directly
from the issuer or in the secondary market. Mutual funds do not
typically hold a significant amount of these restricted or other
illiquid securities because of the potential for delays on resale
and uncertainty in valuation. Limitations on resale may have an
adverse effect on the marketability of portfolio securities and a
mutual fund might be unable to dispose of restricted or other
illiquid securities promptly or at reasonable prices and might
thereby experience difficulty satisfying redemptions within seven
days. A mutual fund might also have to register such restricted
securities in order to dispose of them, resulting in additional
expense and delay. Adverse market conditions could impede 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 foreign securities.
Institutional investors depend on an efficient institutional
market in which the unregistered security can be readily resold
or on an issuer's ability to honor a demand for repayment. The
fact that there are contractual or legal restrictions on resale
to the general public or to certain institutions may not be
indicative of the liquidity of such investments.
Rule 144A under the Securities Act allows a broader
institutional trading market for securities otherwise subject to
restriction on resale to the general public. Rule 144A
establishes a "safe harbor" from the registration requirements of
the Securities Act for resales of certain securities to qualified
institutional buyers. An insufficient number of qualified
institutional buyers interested in purchasing certain restricted
securities held by the Portfolio, 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 Adviser, acting under the supervision of the Board
of Trustees, will monitor the liquidity of restricted securities
in the Portfolio's portfolio that are eligible for resale
8
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pursuant to Rule 144A. In reaching liquidity decisions, the
Fund's Adviser will consider, among others, the following
factors: (1) the frequency of trades and quotes for the security;
(2) the number of dealers making quotations to purchase or sell
the security; (3) the number of other potential purchasers of the
security; (4) the number of dealers undertaking to make a market
in the security; (5) the nature of the security (including its
unregistered nature) and the nature of the marketplace for the
security (e.g., the time needed to dispose of the security, the
method of soliciting offers and the mechanics of the transfer);
and (6) any applicable Securities and Exchange Commission
interpretation or position with respect to such type of
securities.
General. When business or financial conditions warrant,
the Portfolio may assume a temporary defensive position and
invest in high-grade short-term fixed-income securities, which
may include U.S. Government securities, or hold its assets in
cash.
Other Investment Practices
While the Portfolio does not anticipate utilizing them
on a regular basis, the Portfolio may from time to time employ
the following investment practices.
Puts and Calls. The Portfolio may write exchange-traded
call options on common stocks, for which it will receive a
purchase premium from the buyer, and may purchase and sell
exchange-traded call and put options on common stocks written by
others or combinations thereof. The Portfolio will not write put
options. Writing, purchasing and selling call options are highly
specialized activities and entail greater than ordinary
investment risks. A call option gives the purchaser of the
option, in exchange for paying the writer a premium, the right to
call upon the writer to deliver a specified number of shares of a
specified stock on or before a fixed date, at a predetermined
price. A put option gives the buyer of the option, in exchange
for paying the writer a premium, the right to deliver a specified
number of shares of a stock to the writer of the option on or
before a fixed date at a predetermined price.
The writing of call options will, therefore, involve a
potential loss of opportunity to sell securities at higher
prices. In exchange for the premium received, the writer of a
fully collateralized call option assumes the full downside risk
of the securities subject to such option. In addition, the
writer of the call gives up the gain possibility of the stock
protecting the call. Generally, the opportunity for profit from
the writing of options is higher, and consequently the risks are
greater when the stocks involved are lower priced or volatile, or
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both. While an option that has been written is in force, the
maximum profit that may be derived from the optioned stock is the
premium less brokerage commissions and fees. The Portfolio will
not sell a call written by it unless the Portfolio at all times
during the option period owns either (a) the optioned securities
or has an absolute and immediate right to acquire that security
without additional cash consideration (or for additional cash
consideration held in a segregated account by its custodian) upon
conversion or exchange of other securities held in its portfolio
or (b) a call option on the same security and in the same
principal amount as the call written where the exercise price of
the call held (i) is equal to or less than the exercise price of
the call written or (ii) is greater than the exercise price of
the call written if the difference is maintained by the Fund in
cash or U.S. Government securities or other liquid high-quality
debt securities in a segregated account with its Custodian.
Premiums received by the Portfolio in connection with
writing call options will vary widely depending primarily on
supply and demand. Commissions, stock transfer taxes and other
expenses of the Portfolio must be deducted from such premium
receipts. Calls written by the Portfolio will ordinarily be sold
either on a national securities exchange or through put and call
dealers, most, if not all, of whom are members of a national
securities exchange on which options are traded, and will in such
cases be endorsed or guaranteed by a member of a national
securities exchange or qualified broker-dealer, which may be
Donaldson, Lufkin & Jenrette Securities Corporation, an affiliate
of the Adviser. The endorsing or guaranteeing firm requires that
the option writer (in this case the Portfolio) maintain a margin
account containing either corresponding stock or other equity as
required by the endorsing or guaranteeing firm.
The Portfolio will not sell a call option written by it
if, as a result of the sale, the aggregate of the Portfolio's
portfolio securities subject to outstanding call options (valued
at the lower of the option price or market value of such
securities) would exceed 15% of the Portfolio's total assets.
In buying a call, the Portfolio would be in a position
to realize a gain if, during the option period, the price of the
shares increased by an amount in excess of the premium paid and
commissions payable on exercise. 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
and commissions payable on exercise. By buying a put, the
Portfolio would be in a position to realize a gain if, during the
option period, the price of the shares declined by an amount in
excess of the premium paid and commissions payable on exercise.
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
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than the amount of the premium and commissions payable on
exercise. In addition, the Portfolio could realize a gain or
loss on such options by selling them.
As noted above, the Portfolio may also purchase and sell
call and put options written by others or combinations thereof,
but the aggregate cost of all outstanding options purchased and
held by the Fund, including options on market indices as
described below, will at no time exceed 10% of the Portfolio's
total assets. If an option is not sold and expires without being
exercised, the Fund would suffer a loss in the amount of the
premium paid by the Portfolio for the option.
Options on Market Indices. The Portfolio may purchase
and sell exchange-traded index options. 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.
Through the purchase of listed index options, the
Portfolio could achieve many of the same objectives as through
the use of options on individual securities. Price movements in
the Portfolio's portfolio 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 hedged portfolio securities
are greater than gains realized from the options.
Stock Index Futures. The Portfolio may purchase and
sell stock index futures contracts. A stock index assigns
relative values to the common stocks comprising the index. A
stock index futures contract is a bilateral agreement pursuant to
which two parties agree to take or make delivery of an amount of
cash equal to a specified dollar amount multiplied by the
difference between the stock index value at the close of the last
trading day of the contract and the price at which the futures
contract is originally struck. No physical delivery of the
underlying stocks in the index is made. The Portfolio will not
purchase and sell options on stock index futures contracts.
The Portfolio 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. In connection
with its purchase of stock index futures contracts the Portfolio
will deposit in a segregated account with the Portfolio's
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custodian an amount of cash, U.S. Government securities or other
liquid high-quality debt securities equal to the market value of
the futures contracts less any amounts maintained in a margin
account with the Portfolio's broker. The Portfolio may not
purchase or sell a stock index future if, immediately thereafter,
the sum of the amount of margin deposits on the Portfolio's
existing futures positions would exceed 5% of the market value of
the Portfolio's total assets.
For a more detailed description of stock index futures
contracts, see Appendix A.
General. The successful use of the foregoing investment
practices, which may be used as a hedge against changes in the
values of securities resulting from market conditions, draws upon
the Adviser's special skills and experience with respect to such
instruments and usually depends on the Adviser's ability to
forecast movements of specific securities or stock indices
correctly. Should these securities or indices move in an
unexpected manner, the Portfolio may not achieve the anticipated
benefits of options and stock index futures contracts or may
realize losses and, thus, be in a worse position than if such
strategies had not been used. In addition, the correlation
between movements in the prices of such instruments and movements
in the price of securities being hedged or used for cover will
not be perfect and could produce unanticipated losses. The
Portfolio's ability to dispose of its position in options and
stock index futures will depend on the availability of liquid
markets in these instruments. No assurance can be given that the
Portfolio will be able to close a particular option or stock
index futures position. Also, the Portfolio's ability to engage
in options and stock index futures transactions may be limited by
tax considerations. See "Dividends, Distributions and Taxes."
Portfolio Turnover. The Portfolio's investment policies
as described above are based on the Adviser's assessment of
fundamentals in the context of changing market valuations. They
may therefore involve frequent purchases and sales of shares of a
particular issuer as well as the replacement of securities.
While it is anticipated that the Portfolio's annual portfolio
turnover rate will not normally exceed 100%, it could, under some
conditions, exceed 100%. A 100% annual turnover rate would
occur, for example, if all of the stocks in the Portfolio's
portfolio were replaced once in a period of one year. The
Portfolio expects that more of its portfolio turnover will be
attributable to increases and decreases in the size of particular
portfolio positions rather than to the complete elimination of a
particular issuer's securities from the Portfolio's portfolio. A
high portfolio turnover rate will cause the Portfolio to realize
short-term capital gains or losses on the sale of certain
securities and correspondingly greater brokerage commission
12
<PAGE>
expenses than would a lower rate, which expenses must be borne by
the Portfolio and its shareholders.
Fundamental Investment Policies
The following restrictions may not be changed without a
vote of a majority of the Portfolio's outstanding voting
securities.
As a matter of fundamental policy, the Portfolio may
not:
(a) purchase more than 10% of the outstanding
voting securities of any one issuer;
(b) invest 25% or more of the value of its total
assets in the same industry except that this restriction
does not apply to securities issued or guaranteed by the
U.S. Government, its agencies and instrumentalities;
(c) borrow money or issue senior securities except
for temporary or emergency purposes in an amount not
exceeding 5% of the value of its total assets at the
time the borrowing is made;
(d) pledge, mortgage, hypothecate or otherwise
encumber any of its assets except in connection with the
writing of call options and except to secure permitted
borrowings;
(e) invest in the securities of any issuer which
has a record of less than three years of continuous
operation (including the operation of any predecessor)
if the investment at the time thereof would cause more
than 10% of the value of the total assets of the Fund to
be invested in the securities of such issuer or issuers;
(f) make loans except through the purchase of debt
obligations in accordance with its investment objective
and policies;
(g) participate on a joint or joint and several
basis in any securities trading account;
(h) invest in companies for the purpose of
exercising control;
(i) write put options;
(j) purchase the securities of any other
investment company or investment trust, except when such
13
<PAGE>
purchase is part of a merger, consolidation or
acquisition of assets; or
(k)(i) purchase or sell real estate except that it
may purchase and sell securities of companies which deal
in real estate or interests therein, (ii) purchase or
sell commodities or commodity contracts (other than
stock index futures contracts), (iii) invest in
interests in oil, gas, or other mineral exploration or
development programs, except that it may purchase and
sell securities of companies that deal in oil, gas or
other mineral exploration or development programs,
(iv) make short sales of securities or purchase
securities on margin except for such short-term credits
as may be necessary for the clearance of transactions,
or (v) act as an underwriter of securities, except that
the Fund may acquire restricted securities or securities
in private placements under circumstances in which, if
such securities were sold, the Fund might be deemed to
be an underwriter within the meaning of the Securities
Act.
Whenever any investment restriction states a maximum
percentage of the Portfolio's assets which may be invested in any
security or other asset, it is intended that such maximum
percentage limitation be determined immediately after and as a
result of the Portfolio's acquisition of such securities or other
assets. Accordingly, any later increase or decrease in
percentage beyond the specified limitation resulting from a
change in values or net assets will not be considered a
violation.
_________________________________________________________________
MANAGEMENT OF THE PORTFOLIO
_________________________________________________________________
Adviser
Alliance Capital Management L.P., a New York Stock
Exchange listed company with principal offices at 1345 Avenue of
the Americas, New York, New York 10105, has been retained under
an investment advisory contract (the "Advisory Agreement") to
provide investment advice and, in general, to conduct the
management and investment program of the Portfolio under the
supervision and control of the Fund's Trustees. The employee of
the Adviser principally responsible for the Portfolio's
investment program is John A. Koltes, a Senior Vice President of
14
<PAGE>
Alliance Capital Management Corporation ("ACMC"),* the general
partner of the Adviser. Mr. Koltes has been associated with the
Adviser since prior to 1991.
The Adviser is a leading international investment
manager supervising client accounts with assets as of March 1,
1996 of more than $156 billion (of which more than $48 billion
represented the assets of investment companies). The Adviser's
clients are primarily major corporate employee benefit funds,
public employee retirement systems, investment companies,
foundations and endowment funds and included, as of March 1,
1996, 34 of the FORTUNE 100 Companies. As of that date, the
Adviser and its subsidiaries employed approximately 1,350
employees who operated out of domestic offices and the overseas
offices of subsidiaries in Bombay, Istanbul, London, Sydney,
Tokyo, Toronto, Bahrain, Luxembourg and Singapore. The 50
registered investment companies comprising 107 separate
investment portfolios managed by the Adviser currently have more
than two million shareholders.
ACMC, the sole general partner of, and the owner of a 1%
general partnership interest in, the Adviser, is an indirect
wholly-owned subsidiary of The Equitable Life Assurance Society
of the United States ("Equitable"), one of the largest life
insurance companies in the United States and a wholly-owned
subsidiary of The Equitable Companies Incorporated, a holding
company controlled by AXA, a French insurance holding company.
As of March 1, 1996, ACMC, Inc. and Equitable Capital Management
Corporation, each a wholly-owned direct or indirect subsidiary of
Equitable, together with Equitable, owned in the aggregate
approximately 57.6% of the issued and outstanding units
representing assignments of beneficial ownership of limited
partnership interests in the Adviser ("Units"). As of March 1,
1996, approximately 32.4% and 10.0% of the Units were owned by
the public and employees of the Adviser and its subsidiaries,
respectively, including employees of the Adviser who serve as
Directors of the Fund.
AXA and its subsidiaries own approximately 63.9% of the
issued and outstanding shares of capital stock of ECI. AXA is
the holding company for an international group of insurance and
related financial services companies. AXA's insurance operations
include activities in life insurance, property and casualty
insurance and reinsurance. The insurance operations are diverse
geographically, with activities in France, the United States,
Australia, the United Kingdom, Canada and other countries,
_________________________
*For purposes of this Confidential Private Offering Memorandum,
ACMC refers to Alliance Capital Management Corporation, the sole
general partner of the Adviser, and to the predecessor general
partner of the Adviser of the same name.
15
<PAGE>
principally in Europe and the Asia Pacific area. AXA is also
engaged in asset management, investment banking, securities
trading, brokerage, real estate and other financial services
activities in the United States, Europe and the Asia Pacific
area. Based on information provided by AXA, as of March 1, 1996,
42.1% of the issued ordinary shares (representing 53.4% of the
voting power) of AXA were owned by Midi Participations, a French
holding company ("Midi"). The shares of Midi were, in turn,
owned 61.4% (representing 62.5% of the voting power) by Finaxa, a
French holding company, and 38.6% (representing 37.5% of the
voting power) by subsidiaries of Assicurazioni Generali S.p.A.,
an Italian corporation (one of which, Belgica Insurance Holding
S.A., a Belgian corporation, owned 30.8%, representing 33.1% of
the voting power). As of March 1, 1996, 61.1% of the voting
shares (representing 73.4% of the voting power) of Finaxa were
owned by five French mutual insurance companies (the "Mutuelles
AXA") (one of which, AXA Assurances I.A.R.D. Mutuelle, owned
34.7% of the voting shares representing 40.4% of the voting
power), and 25.5% of the voting shares (representing 16% of the
voting power) of Finaxa were owned by Banque Paribas, a French
bank. Including the ordinary shares owned by Midi, as of
March 1, 1996, the Mutuelles AXA directly or indirectly owned 51%
of the issued ordinary shares (representing 64.7% of the voting
power) of AXA. Acting as a group, the Mutuelles AXA control AXA,
Midi and Finaxa.
Certain other clients of the Adviser may have investment
objectives and policies similar to those of the Portfolio. 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 Portfolio. 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 Portfolio. When two or more of the clients of the
Adviser (including the Portfolio) are purchasing the same
security on a given day from the same broker-dealer, such
transactions may be averaged as to price.
Under the Advisory Agreement, the Adviser provides
investment advisory services and order placement facilities for
each of the Fund's portfolios, including the Portfolio, and pays
all compensation of Trustees and officers of the Fund who are
affiliated persons of the Adviser. The Adviser or its affiliates
also furnish each of the Fund's portfolios, without charge,
management supervision and assistance and office facilities and
provides persons satisfactory to the Fund's Trustees to serve as
the Fund's officers. For the services rendered by the Adviser
16
<PAGE>
under the Advisory Agreement, the Portfolio pays a fee payable to
the Adviser at an annual rate of .65 of 1% of the average daily
value of its net assets.
The Advisory Agreement will remain in effect for
successive twelve-month periods computed from each October 1 with
respect to the Portfolio provided that such continuance is
specifically approved at least annually by the Trustees or by a
majority vote of the holders of the outstanding voting securities
of the Portfolio, and, in either case, by a majority of the
Trustees who are not parties to the Agreement or interested
persons of any such party as defined by the 1940 Act. The
Advisory Agreement may be terminated with respect to the
Portfolio at any time, without the payment of any penalty, by
vote of a majority of the outstanding voting securities of the
Portfolio, or by a vote of a majority of the Trustees on 60 days'
written notice to the Adviser, or by the Adviser with respect to
the ARM Fund on 60 days' written notice and will terminate
automatically upon 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 was approved with
respect to the Portfolio by the Trustees of the Fund on April 13,
1996.
The Portfolio pays for printing of prospectuses and
other reports to existing shareholders and all expenses and fees
related to proxy solicitation and registrations and filings with
the Commission and with state regulatory authorities. The
Portfolio pays all other expenses incurred in its organization
and operation, as described herein. As to the obtaining of
services other than those specifically provided to the Portfolio
by the Adviser, the Portfolio may employ its own personnel. For
such services, it also may utilize personnel employed by the
Adviser or its affiliates and, in such event, the services will
be provided to the Portfolio at cost and the payments therefor
must be specifically approved by the Trust's Board of Trustees.
Expenses of the Portfolio
In addition to the payments to the Adviser under the
Advisory Agreement described above, the Portfolio pays its
portion of certain other costs including (i) custody, transfer
and dividend-disbursing expenses; (ii) fees of Trustees who are
not affiliated with the Adviser; (iii) legal and auditing
expenses; (iv) clerical, accounting and other office costs; (v)
costs of printing the Fund's prospectuses and shareholder
reports; (vi) cost of maintaining the Fund's existence; (vii)
interest charges, taxes, brokerage fees and commissions; (viii)
17
<PAGE>
costs of stationery and supplies; and (ix) expenses and fees
related to registration and filing with the Commission and with
state regulatory authorities.
The Adviser is voluntarily waiving fees and/or
reimbursing the Fund with respect to certain expenses of the
Portfolio so that the net expenses (exclusive of interest, taxes,
brokerage and extraordinary expenses) do not in any year exceed
.90% of the Fund's average net assets. Such waiver and/or
reimbursements may be discontinued at any time. In addition, the
Adviser has agreed to reimburse the Fund for the net expenses
that exceed the limits prescribed by any state in which the
Fund's shares are qualified for sale. The Fund believes that
presently the most restrictive expense ratio limitation imposed
by any state in which the Fund's shares have been qualified for
sale is 2.5% of the first $30 million of the Fund's average net
assets, 2% of the next $70 million of its average net assets and
1.5% of its average net assets in excess of $100 million.
Trustees and Officers
The Trustees and officers of the Fund, their ages and
their principal occupations during the past five years are set
forth below. Each such Trustee and officer is also a trustee,
director or officer of other registered investment companies
sponsored by the Adviser. Unless otherwise specified, the address
of each of the following persons is 1345 Avenue of the Americas,
New York, New York 10105.
Trustees
JOHN D. CARIFA,** 50, - Chairman of the Trustees, is the
President and Chief Operating Officer and a Director of ACMC,
with which he has been associated since prior to 1991.
RUTH BLOCK, 65, - was formerly Executive Vice President
and Chief Insurance Officer of Equitable. She is a Director of
Ecolab Incorporated (specialty chemicals) and Amoco Corporation
(oil and gas). Her address is Box 4653, Stamford, Connecticut,
06903.
DAVID H. DIEVLER, 66, was formerly a Senior Vice
President of ACMC, with which he was associated since prior to
1991 through 1994. He is currently an independent consultant.
His address is P.O. Box 167, Spring Lake, New Jersey, 07762.
JOHN H. DOBKIN, 53, has been the President of Historic
Hudson Valley (historic preservation) since prior to 1991. From
_________________________
**An "interested person" of the Fund as defined in the investment
Company Act of 1940.
18
<PAGE>
1987 to 1992, he was a Director of ACMC. His address is 105 West
55th Street, New York, New York 10019.
WILLIAM H. FOULK, JR., 63, is an investment Advisor and
Independent Consultant. He was formerly Senior Manager of
Barrett Associates, Inc., a registered investment adviser, since
prior to 1991. His address is 2 Hekma Road, Greenwich,
Connecticut 06831.
DR. JAMES M. HESTER, 71, is President of the Harry Frank
Guggenheim Foundation and a Director of Union Carbide
Corporation, with which he has been associated since prior to
1991. He was formerly President of New York University, the New
York Botanical Garden and Rector of the United Nations
University. His address is 45 East 89th Street, New York, New
York 10128.
CLIFFORD L. MICHEL, 56, is a partner in the law firm of
Cahill Gordon & Reindel, with which he has been associated since
prior to 1991. He is Chief Executive Officer of Wenonah
Development Company (investments) and Director of Placer Dome,
Inc., and Faber-Castell Corporation (writing products). His
address is 80 Pine Street, New York, New York 10005.
DONALD J. ROBINSON, 61, was formerly a partner at
Orrick, Herrington & Sutcliffe and is currently of counsel to
that firm. His address is 599 Lexington Avenue, 26th Floor, New
York, New York 10022.
Officers
JOHN D. CARIFA, Chairman, see Biography above.
ALDEN M. STEWART, President, 49, has been an Executive
Vice President of ACMC since July 1993. Prior thereto he was
associated with ECMC.
JOHN A. KOLTES, Vice President, 52, is a Senior Vice
President of ACMC with which he has been associated since prior
to 1991.
THOMAS J. BARDONG, Vice President, 50, is a Senior Vice
President of ACMC, with which he has been associated since prior
to 1991.
RANDALL E. HAASE, Vice President, 31, has been a Vice
President of ACMC since July, 1993. Prior thereto he was
associated with ECMC.
TIMOTHY D. RICE, Vice President, 28, is a Vice President
of ACMC with which he has been associated since prior to 1991.
19
<PAGE>
PATRICIA J. YOUNG, Vice President, 40, is a Senior Vice
President of ACMC, with which she has been associated since March
1992. Previously, she was a Managing Director and Portfolio
Manager for Hyperion Capital since March 1991. Prior thereto,
she was a Managing Director with Fischer, Francis, Trees & Watts
since prior to 1991.
PAUL A. ULLMAN, Vice President, 37, is a Vice President
of ACMC, with which he has been associated since March 1992.
Previously, he was a Director and Portfolio Manager at Hyperion
Capital since prior to 1991.
EDMUND P. BERGAN, JR., Secretary, 45, is a Senior Vice
President and the General Counsel of Alliance Fund Distributors,
Inc. ("AFD") with which he has been associated since prior to
1991.
DOMENICK PUGLIESE, Assistant Secretary, 34, is a Vice
President and Associate General Counsel of AFD, with which he has
been associated since May 1995. Previously, he was Vice
President and Counsel of Concord Holding Corporation since 1994,
Vice President and Associate General Counsel of Prudential
Securities since 1991 and an associate with Battle Fowler since
prior to 1991.
MARK D. GERSTEN, Treasurer and Chief Financial Officer,
44, is a Senior Vice President of Alliance Fund Services, Inc.
("AFS"), with which he has been associated since prior to 1991.
VINCENT S. NOTO, Controller, 31, is a Vice President of
AFS, with which he has been associated since prior to 1991.
The aggregate compensation paid by the Fund to each of
the Trustees during its fiscal year ended September 30, 1995, the
aggregate compensation paid to each of the Trustees during
calendar year 1995 by all of the funds to which the Adviser
provides investment advisory services (collectively, the
"Alliance Fund Complex") and the total number of registered
investment companies in the Alliance Fund Complex with respect to
which each of the Trustees serves as a director or trustee, are
set forth below. Neither the Fund nor any other fund in the
Alliance Fund Complex provides compensation in the form of
pension or retirement benefits to any of its directors or
trustees. Each of the Trustees is a director or trustee of one
or more other registered investment companies in the Alliance
Fund Complex.
20
<PAGE>
Total Number of Funds
Total in the Alliance Fund
Compensation Complex, Including the
Aggregate From the Alliance Fund, as to which the
Name of Director Compensation Fund Complex, Director is a
of the Fund from the Fund Including the Fund Trustee or Director
_______________ ____________ __________________ ______________________
John D. Carifa $-0- $-0- 50
Ruth Block $5,000 $159,000 37
David H. Dievler $5,000 $179,200 43
John H. Dobkin $5,000 $117,200 30
William H. Foulk, Jr. $5,000 $143,500 30
Dr. James M. Hester $5,000 $156,000 38
Clifford L. Michel $5,000 $131,500 37
Donald J. Robinson $-0- $24,000 9
As of April 1, 1996, the Trustees and officers of the
Fund as a group owned less than 1% of the shares of the Fund.
_________________________________________________________________
PURCHASE AND REDEMPTION OF SHARES
_________________________________________________________________
Purchase of Shares
The shares of beneficial interest offered hereby have
not been, and will not be, registered under the Securities Act.
The shares may not be offered, sold, transferred or delivered,
directly or indirectly, except pursuant to an exemption from the
registration requirements under the Securities Act. The shares
are being offered to a limited number of investors pursuant to
Section 4(2) of the Securities Act. Purchasers of shares may
resell such shares only pursuant to an exemption from, or in a
transaction not subject to, the registration requirements under
the Securities Act.
Shares of the Portfolio are offered at net asset value,
without any sales or other charge, directly by the Fund. Shares
of the Portfolio may be purchased only by investment management
clients of the Adviser or its affiliates and by institutional and
corporate investors. The minimum for initial investments in a
Portfolio is $1,000,000, except that investment management
clients of the Adviser or its affiliates may invest in any
amount. The Fund may, in its discretion, waive the minimum for
initial investments. There is no minimum for subsequent
investments.
The net asset value per share of shares of the Portfolio
is computed in accordance with the Fund's Agreement and
21
<PAGE>
Declaration of Trust and By-Laws, at the next close of regular
trading on the New York Stock Exchange (the "Exchange")
(currently 4:00 p.m. New York time) following receipt of a
purchase or redemption for shares of the Portfolio, on each Fund
business day on which such an order is received and trading in
the types of securities in which the Portfolio invests might
materially affect the value of its shares. A Fund business day
is any weekday exclusive of national holidays on which the
Exchange is closed and Good Friday. Net asset value per share of
the Portfolio is calculated by adding the market value of all
securities held in such Portfolio and other assets, subtracting
the Portfolio's liabilities incurred or accrued, and dividing by
the number of shares of that Portfolio outstanding.
The subscriber should use the subscription application
that accompanies this Memorandum for its initial investment.
Purchases may be made by wiring Federal funds to the Portfolio or
by sending with the subscription application to the address
listed on the cover of this Memorandum a check payable to the
Fund in the amount of the subscription.
Orders for shares of the Portfolio received by the
Portfolio prior to the close of regular trading on the Exchange
on a Fund business day are priced at the net asset value of
shares of the Portfolio computed as of the close of regular
trading on the Exchange on that day. If orders are received
after the close of regular trading on the Exchange on a Fund
business day, such orders are priced as of the close of regular
trading on the Exchange on the next succeeding Fund business day.
Requests for purchases by wire must be communicated to the
Distributor prior to 3:00 p.m. New York time on a Fund business
day for purchase orders to receive the applicable public offering
price determined as of the close of regular trading on the
Exchange on that day. The Fund reserves the right to reject any
subscription in its sole discretion or to suspend the sale of its
shares to the public in response to market conditions or for
other reasons.
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 Portfolio, certificates representing shares of the
Portfolio are not issued except upon written request of the
shareholder. 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 Portfolio.
22
<PAGE>
Redemption
Subject only to the limitations described below, the
Fund's Agreement and Declaration of Trust requires that the Fund
redeem the shares of the Portfolio at a redemption price equal to
their net asset value as next computed following the receipt of
shares tendered for redemption in proper form. There is no
redemption charge. Payment of the redemption price will be made
within seven days after the Fund's receipt of such tender for
redemption.
To redeem shares of Portfolio for which no share
certificates have been issued, the registered owner or owners can
forward a letter to the Fund containing a request for redemption
of shares of the Portfolio. The signature or signatures on the
letter must be guaranteed by an institution that is an "eligible
guarantor" as defined in Rule 17Ad-15 under the Securities
Exchange Act of 1934, as amended.
Requests for redemption of shares of the Portfolio for
which no share certificates have been issued can also be made by
telephone by a shareholder who has completed the appropriate
portion of the subscription application. Requests for redemption
to be sent by wire via Federal funds to the shareholder's
designated bank account identified on the subscription
application must be received prior to 4:00 p.m. New York time on
a Fund business day. Redemption proceeds will normally be wired
on the next Fund business day but may be made within seven days
after receipt of a properly executed redemption request.
To redeem shares represented by share certificates, the
investor should forward the appropriate share 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 share
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
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.
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
23
<PAGE>
which an emergency (as determined by the Commission) exists as a
result of which disposal by the Portfolio of securities owned by
it is not reasonably practicable or as a result of which it is
not reasonably practical for the Portfolio fairly to determine
the value of its net assets of the Portfolio, or for such other
periods as the Commission may by order permit for the protection
of security holders of Portfolio.
Payment of the redemption price may be made either in
cash or in portfolio securities (selected in the discretion of
the Trustees of the Fund and taken at their value used in
determining the redemption price), or partly in cash and partly
in investment portfolio securities. However, payments will be
made wholly in cash unless the Trustees believe that economic
conditions exist which would make such a practice detrimental to
the best interests of the Portfolio. If payment for shares
redeemed is made wholly or partly in investment portfolio
securities, brokerage costs may be incurred by the investor in
converting the securities to cash.
General
The Portfolio reserves the right to close out an account
in the Portfolio that through redemption has dropped below
$1,000,000 after at least 60 days' written notice to the
shareholder unless the balance in such account is increased to at
least that amount during such period. In the case of a
redemption of shares of the Portfolio recently purchased by
check, redemption proceeds will not be made available until the
Portfolio is reasonably assured that the check has cleared,
normally up to 15 calendar days following the purchase date.
_________________________________________________________________
NET ASSET VALUE
_________________________________________________________________
The net asset value of each share of beneficial interest
of the Portfolio on which the subscription and redemption prices
are based is determined by the market value of the securities and
other assets owned by that Portfolio less its liabilities. The
net asset value of each share of the Portfolio is computed in
accordance with the Agreement and Declaration of Trust and
By-Laws of the Fund as of the next close of regular trading on
the Exchange following receipt of a purchase or redemption order
(and on such other days as the Trustees of the Fund deems
necessary in order to comply with Rule 22c-1 under the Investment
Company Act of 1940) by dividing the value, as of such closing,
of the net assets of the Portfolio (i.e., the value of the assets
of the Portfolio less its liabilities, including expenses payable
or accrued but excluding capital stock and surplus) by the total
24
<PAGE>
number of shares of beneficial interest of such Portfolio then
outstanding at such closing. For purposes of this computation,
readily marketable portfolio securities listed on the Exchange
are valued at the last sale price reflected on the consolidated
tape at the close of regular trading on the Exchange on the
business day as of which such value is being determined. If there
has been no sale on such day, the securities are valued at the
mean of the closing bid and asked prices on such day. If no bid
and asked prices are quoted on such day, then the security is
valued by such method as the Trustees of the Fund shall determine
in good faith to reflect its fair market value. Readily
marketable securities not listed on the Exchange but listed on
other national securities exchanges or admitted to trading on the
National Association of Securities Dealers Automated Quotations,
Inc. ("NASDAQ") National Market System are valued in like manner.
Portfolio securities traded on more than one national securities
exchange are valued at the last sale price on the business day as
of which such value is being determined as reflected on the tape
at the close of the exchange representing the principal market
for such securities.
Portfolio securities that are actively traded in the
over-the-counter market, including listed securities for which
the primary market is believed to be over-the-counter, are valued
at the mean between the most recently quoted bid and asked prices
provided by the principal market makers. Any security for which
the primary market is on an exchange is valued at the last sale
price on such exchange on the day of valuation or, if there was
no sale on such day, the last bid price quoted on such day.
Options will be valued at market value or fair value if no market
exists. Futures contracts will be valued in a like manner, except
that open futures contracts sales will be valued using the
closing settlement price or, in the absence of such a price, the
most recently quoted asked price. Securities and assets for which
market quotations are not readily available are valued at fair
value as determined in good faith by or under the direction of
the Trustees of the Fund. However, readily marketable
fixed-income securities may be valued on the basis of prices
provided by a pricing service when such prices are believed by
the Adviser to reflect the fair market value of such securities.
The prices provided by a pricing service take into account
institutional size trading in similar groups of securities and
any developments related to specific securities. U.S. Government
Securities and other debt instruments having 60 days or less
remaining until maturity are stated 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 Trustees determine that this method does not represent
fair value).
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All other assets of the Portfolio, including restricted
and not readily marketable securities, are valued in such manner
as the Trustees of the Fund in good faith deem appropriate to
reflect their fair market value.
For purposes of determining the Portfolio's net asset
value per share, all assets and liabilities initially expressed
in foreign currencies will be converted into U.S. Dollars at the
mean of the bid and asked prices of such currencies against the
U.S. Dollar last quoted by a major bank which is a regular
participant in the institutional foreign exchange markets or on
the basis of a pricing service which takes into account the
quotes provided by a number of such major banks.
_________________________________________________________________
DIVIDENDS, DISTRIBUTIONS AND TAXES
_________________________________________________________________
United States Federal Income Taxation
of Dividends and Distributions
General
The Portfolio intends to qualify as a "regulated
investment company" under the Code. In order to so qualify, the
Code requires, among other things, that (a) at least 90% of the
Portfolio's annual gross income, without offset for losses from
the sale or other disposition of securities, be derived from
interest, payments with respect to securities loans, dividends
and gains from the sale or other disposition of securities or
options thereon and certain other qualifying income; (b) the
Portfolio derive less than 30% of its gross income from gains
(without offset for losses) from the sale or other disposition of
securities or options thereon held for less than three months;
and (c) the Portfolio diversify its holdings so that, at the end
of each quarter of the taxable year, (i) at least 50% of the
market value of the Portfolio's assets is represented by cash,
government securities and other securities limited in respect of
any one issuer to an amount not greater than 5% of the
Portfolio's assets and 10% of the outstanding voting securities
of such issuer, and (ii) not more than 25% of the value of its
assets is invested in the securities of any one issuer (other
than government securities). In addition, in order to qualify as
a regulated investment company, the Portfolio must distribute to
its shareholders as ordinary dividends at least 90% of its net
investment income other than net capital gains earned in each
year. Such qualification relieves the Portfolio of federal
income tax liability on the part of its net ordinary income and
net realized capital gains which it timely distributes to its
shareholders. Such qualification does not, of course, involve
26
<PAGE>
governmental supervision of or investment practices or policies.
Investors should consult their own counsel for a complete
understanding of the requirements the Portfolio must meet to
qualify to be taxed as a "regulated investment company."
The information set forth in this Memorandum and the
following discussion relate solely to the significant United
States federal income taxes on dividends and distributions by the
Portfolio and assumes that the Portfolio qualifies to be taxed as
a regulated investment company. An investor should consult his
or her own tax counsel with respect to the specific tax
consequences of being a shareholder of the Portfolio, including
the effect and applicability of federal, state and local tax laws
to his or her own particular situation and the possible effects
of changes therein.
It is the present policy of the Portfolio to distribute
to shareholders all net investment income annually and to
distribute net realized capital gains, if any, annually. The
amount of any such distributions must necessarily depend upon the
realization by the Portfolio of income and capital gains from
investments.
The Portfolio intends to declare and distribute
dividends in the amounts and at the times necessary to avoid the
application of the 4% federal excise tax imposed on certain
undistributed income of regulated investment companies. The
Portfolio will be required to pay the 4% excise tax to the extent
it does not distribute to its shareholders during any calendar
year an amount equal to the sum of (i) 98% of its ordinary
taxable income for the calendar year, (ii) 98% of its capital
gain net income and foreign currency gains for the twelve months
ended September 30 (or October 31 if elected by the Portfolio) of
such year and (iii) any ordinary income or capital gain net
income from the preceding calendar year that was not distributed
during such year. For this purpose, income or gain retained by
the Portfolio that is subject to corporate income tax will be
considered to have been distributed by the Portfolio by year-end.
For federal income and excise tax purposes, dividends declared
and payable to shareholders of record as of a date in October,
November or December but actually paid during the following
January will be taxable to these shareholders for the year
declared, and not for the subsequent calendar year in which the
shareholders actually receive the dividend.
Dividends of the Portfolio's net ordinary income and
distributions of any net realized short-term capital gain are
taxable to shareholders as ordinary income. Dividends paid by
the Portfolio and received by a corporate shareholder are
eligible for the dividends received deduction to the extent that
the Portfolio's income is derived from certain dividends received
27
<PAGE>
from domestic corporations, provided the corporate shareholder
holds shares in the Portfolio for at least 46 days. In addition,
the dividends received deduction will be disallowed to the extent
the investment in shares of the Portfolio is financed with
indebtedness.
The excess of net long-term capital gains over the net
short-term capital losses realized and distributed by the
Portfolio to its shareholders will be taxable to the shareholders
as long-term capital gains, irrespective of the length of time a
shareholder may have held his or her Portfolio shares. Any
dividend or distribution received by a shareholder on shares of
the Portfolio 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 or her as described above.
If a shareholder has held shares in the Portfolio for six months
or less and during that period has received a distribution
taxable to the shareholder as a long-term 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 dividend.
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 Portfolio.
It is the present policy of the Portfolio to distribute
to shareholders all net investment income quarterly and to
distribute net realized capital gains, if any, annually. The
amount of any such distributions must necessarily depend upon the
realization by the Portfolio of income and capital gains from
investments.
The Portfolio generally will be required to withhold tax
at the rate of 31% with respect to dividends of net ordinary
income and net distributions of realized capital gains payable to
a noncorporate shareholder unless the shareholder certifies on
his or her subscription application that the social security or
taxpayer identification number provided is correct and that the
shareholder has not been notified by the Internal Revenue Service
that he or she is subject to backup withholding.
United States Federal Income Taxation of the Portfolio
The following discussion relates to certain significant
United States federal income tax consequences to the Portfolio
with respect to the determination of its "investment company
taxable income" each year. This discussion assumes that the
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Portfolio will be taxed as a regulated investment company for
each of its taxable years.
Options, Futures Contracts and Warrants. Regulated
futures contracts are considered "section 1256 contracts" for
federal income tax purposes. Section 1256 contracts held by the
Portfolio 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 Portfolio on section
1256 contracts generally will be considered 60% long-term and 40%
short-term capital gain or loss. The Portfolio can elect to
exempt its section 1256 contracts which are part of a "mixed
straddle" (as described below) from the application of section
1256.
With respect to put and call equity options, gain or
loss realized by the Portfolio upon the lapse or sale of such
options held by the Portfolio will be either long-term or short-
term capital gain or loss depending upon the Portfolio's holding
period with respect to such option. However, gain or loss
realized upon the lapse or closing out of such options that are
written by the Portfolio will be treated as short-term capital
gain or loss. In general, if the Portfolio exercises an option,
or if an option that the Portfolio has written is exercised, gain
or loss on the option will not be separately recognized but the
premium received or paid will be included in the calculation of
gain or loss upon disposition of the property underlying the
option. Warrants which are invested in by the Portfolio will
generally be treated in the same manner for federal income tax
purposes as options held by the Portfolio.
Tax Straddles. Any option, futures contract, or other
position entered into or held by the Portfolio in conjunction
with any other position held by the Portfolio 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 Portfolio'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 Portfolio has
unrealized gains with respect to the other position in such
straddle; (ii) the Portfolio'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
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<PAGE>
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. Various elections are available to the Portfolio
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 Portfolio all of the offsetting positions of which consist
of section 1256 contracts.
_________________________________________________________________
PORTFOLIO TRANSACTIONS
_________________________________________________________________
Subject to the general supervision of the Trustees of
the Trust, the Adviser is responsible for the investment
decisions and the placing of orders for portfolio transactions
for the Portfolio. The Adviser determines the broker to be used
in each specific transaction with the objective of negotiating a
combination of the most favorable commission and the best price
obtainable on each transaction (generally defined as best
execution). When consistent with the objective of obtaining best
execution, brokerage may be directed to persons or firms
supplying investment information to the Adviser. There may be
occasions where the transaction cost charged by a broker may be
greater than that which another broker may charge if the Fund
determines in good faith that the amount of such transaction cost
is reasonable in relation to the value of the brokerage, research
and statistical services provided by the executing broker.
Neither the Portfolio nor the Adviser has entered into
agreements or understandings with any brokers regarding the
placement of securities transactions because of research services
they provide. To the extent that such persons or firms supply
investment information to the Adviser for use in rendering
investment advice to the Fund, such information may be supplied
at no cost to the Adviser and, therefore, may have the effect of
reducing the expenses of the Adviser in rendering advice to the
Portfolio. While it is impossible to place an actual dollar
value on such investment information, its receipt by the Adviser
probably does not reduce the overall expenses of the Adviser to
any material extent.
The investment information provided to the Adviser is of
the type described in Section 28(e)(3) of the Securities Exchange
Act of 1934 and is designed to augment the Adviser's own internal
research and investment strategy capabilities. Research services
furnished by brokers through which the Portfolio effects
securities transactions are used by the Adviser in carrying out
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<PAGE>
its investment responsibilities with respect to all its client
accounts.
The Portfolio may deal in some instances in securities
which are not listed on a national stock exchange but are traded
in the over-the-counter market. The Portfolio may also purchase
listed securities through the third market, i.e., from a dealer
which is not a member of the exchange on which a security is
listed. Where transactions are executed in the over-the-counter
market or third market, the Portfolio will seek to deal with the
primary market makers; but when necessary in order to obtain the
best price and execution, it will utilize the services of others.
In all cases, the Fund will attempt to negotiate best execution.
The Portfolio may from time to time place orders for the
purchase or sale of securities (including listed call options)
with Donald, Lufkin & Jenrette Securities Corporation, an
affiliate of the Adviser ("DLJ"), and with brokers which may have
their transactions cleared or settled, or both, by the Pershing
Division of DLJ, for which DLJ may receive a portion of the
brokerage commission. In such instances, the placement of orders
with such brokers would be consistent with the Portfolio's
objective of obtaining best execution and would not be dependent
upon the fact that DLJ is an affiliate of the Adviser. With
respect to orders placed with DLJ for execution on a national
securities exchange, commissions received must conform to Section
17(e)(2)(A) of the 1940 Act and Rule 17e-1 thereunder, which
permit an affiliated person of a registered investment company
(such as the Portfolio), or any affiliated person of such person,
to receive a brokerage commission from such registered investment
company provided that such commission is reasonable and fair
compared to the commissions received by other brokers in
connection with comparable transactions involving similar
securities during a comparable period of time.
_________________________________________________________________
GENERAL INFORMATION
_________________________________________________________________
Capitalization
Fiduciary Management Associates, which is a diversified,
open-end management investment company, was organized as a
Delaware corporation on May 12, 1969 under the name "Fiduciary
Growth Associates, Incorporated." As of March 12, 1986, the Fund
was reorganized under its current name as a business trust under
the laws of Massachusetts. The Fund has an unlimited number of
authorized shares of beneficial interest, par value $.01 per
share, which may, without shareholder approval, be divided into
an unlimited number of series. Such shares are currently divided
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<PAGE>
into four series, one underlying each portfolio of the Fund.
Shares of each portfolio are normally entitled to one vote for
all purposes. Generally, shares of each portfolio would vote as
a single series on matters that affected all portfolios in
substantially the same manner, such as the election of Trustees.
Massachusetts law does not require annual meetings of
shareholders and it is anticipated that shareholder meetings will
be held only when required by Federal law. Shareholders have
available certain procedures for the removal of Trustees. Shares
of each portfolio are freely transferable, are entitled to
dividends as determined by the Trustees and, in liquidation of
the Fund, are entitled to receive the net assets of that
portfolio. Shareholders have no preemptive rights.
Custodian
State Street Bank and Trust Company, 225 Franklin
Street, Boston, Massachusetts 02110, acts as custodian for the
securities and cash of the Fund, but plays no part in deciding on
the purchase or sale of securities.
Registrar, Transfer Agent and Dividend-Disbursing Agent
Alliance Fund Services, Inc. ("AFS"), an indirect
wholly-owned subsidiary of the Adviser, located at 500 Plaza
Drive, Secaucus, New Jersey 07094, acts as the Portfolio's
registrar, transfer agent and dividend-disbursing agent.
Counsel and Independent Auditors
Legal matters in connection with the issuance of the
shares of beneficial interest offered hereby are passed upon by
Seward & Kissel, One Battery Park Plaza, New York, New York
l0004.
Ernst & Young LLP, 787 Seventh Avenue, New York, New
York l0019, has been appointed as independent auditors for the
Fund.
Performance Information
From time to time, the Fund advertises the total return
of the Portfolio. Advertisements of the Portfolio's total return
disclose the Portfolio's average annual compounded total return
for its most recently completed one, five and ten-year periods
(or the period since the Portfolio's inception). The Portfolio's
total return for each such 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 in the value of such
investment at the end of the period. For purposes of computing
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<PAGE>
total return, income dividends and capital gains distributions
paid on shares of the Portfolio are assumed to have been
reinvested when paid.
The Portfolio'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 held by the
Portfolio and the Portfolio's expenses. An investor's principal
invested in the Portfolio is not fixed and will fluctuate in
response to prevailing market conditions.
Additional Information
This Memorandum does not contain all the information set
forth in the Registration Statement filed by the Fund with the
Commission under the 1940 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.
33
00250061.AE1
<PAGE>
APPENDIX A
Stock Index Futures Characteristics. Currently, stock
index futures contracts can be purchased or sold with respect to
the Standard & Poor's 500 Composite Stock Price Index on the
Chicago Mercantile Exchange, the New York Stock Exchange
Composite Index on the New York Futures Exchange and the Value
Line Stock Index on the Kansas City Board of Trade. The Adviser
does not believe that differences in composition of the three
indices will create any differences in the price movements of the
stock index futures contracts in relation to the movements in
such indices. However, such differences in the indices may
result in differences in correlation of the futures contracts
with movements in the value of the securities being hedged. The
Portfolio reserves the right to purchase or sell stock index
futures contracts that may be created in the future. Certain
exchanges and Boards of Trade have established daily limits on
the amount that the price of a stock index futures contract may
vary, either up or down, from the previous day's settlement price
which limitations may restrict the Portfolio's ability to
purchase or sell certain stock index futures contracts on a
particular day.
Unlike the purchase or sale of a specific security by
the Portfolio, no price is paid or received by the Portfolio upon
the purchase or sale of a futures contract. Initially, the
Portfolio will be required to deposit with the broker through
which such transaction is effected or in a segregated account
with the Portfolio's Custodian an amount of cash or U.S.
Government securities or other liquid high-quality debt
securities equal to the market value of the stock index futures
contract less any amounts maintained in a margin account with the
Portfolio's broker. This amount is known as initial margin. The
nature of initial margin in futures transactions is different
from that of margin in security transactions in that futures
contract margin does not involve the borrowing of funds to
finance transactions. Rather, the initial margin is in the
nature of a performance bond or good faith deposit on the
contract which is returned to the Portfolio upon termination of
the futures contract, assuming all contractual obligations have
been satisfied. Additional payments of cash, Government
securities or other liquid high-quality debt securities, called
variation margin, to and from the broker may be made on a daily
basis as the price of the underlying stock index fluctuates, a
process known as marking to the market. For example, when the
Portfolio has purchased a stock index futures contract and the
price of the futures contract has risen in response to a rise in
the underlying stock index, that position will have increased in
value and the Portfolio will receive from the broker a variation
A-1
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margin payment equal to that increase in value. Conversely,
where the Portfolio has purchased a stock index futures contract
and the price of the futures contract has declined in response to
a decrease in the underlying stock index, the position would be
less valuable and the Portfolio would be required to make a
variation margin payment to the broker. At any time prior to
expiration of the futures contract, the Adviser may elect to
close the position by taking an opposite position which will
operate to terminate the Portfolio's position in the futures
contract. A final determination of variation margin is then
made, additional cash is required to be paid by or released to
the Portfolio, and the Portfolio realizes a loss or gain.
Risks of Transactions in Stock Index Futures. There are
several risks in connection with the use of stock index futures
by the Portfolio as a hedging device. One risk arises because of
the imperfect correlation between movements in the price of the
stock index futures and movements in the price of the securities
which are the subject of the hedge. The price of the stock index
futures may move more than or less than the price of the
securities being hedged. If the price of the stock index futures
moves less than the price of the securities which are the subject
of the hedge, the hedge will not be fully effective but, if the
price of the securities being hedged has moved in an unfavorable
direction, the Portfolio would be in a better position than if it
had not hedged at all. If the price of the securities being
hedged has moved in a favorable direction, this advantage will be
partially offset by the loss on the index future. If the price
of the future moves more than the price of the stock, the
Portfolio will experience either a loss or gain on the future
which will not be completely offset by movements in the price of
the securities which are the subject of the hedge. To compensate
for the imperfect correlation of movements in the price of
securities being hedged and movements in the price of the stock
index futures, the Portfolio may buy or sell stock index futures
contracts in a greater dollar amount than the dollar amount of
securities being hedged if the volatility over a particular time
period of the prices of such securities has been greater than the
volatility over such time period for the index, or if otherwise
deemed to be appropriate by the Adviser. Conversely, the
Portfolio may buy or sell fewer stock index futures contracts if
the volatility over a particular time period of the prices of the
securities being hedged is less than the volatility over such
time period of the stock index, or if otherwise deemed to be
appropriate by the Adviser. It is also possible that, where the
Portfolio has sold futures to hedge its portfolio against a
decline in the market, the market may advance and the value of
securities held in the Portfolio may decline. If this occurred,
the Portfolio would lose money on the futures contract and also
experience a decline in value in its portfolio securities.
However, over time the value of the Portfolio's portfolio should
A-2
<PAGE>
tend to move in the same direction as the market indices upon
which the futures are based, although there may be deviations
arising from differences between the composition of the Portfolio
and the stocks comprising the index.
Where futures are purchased to hedge against a possible
increase in the price of stock before the Portfolio is able to
invest its cash (or cash equivalents) in stocks (or options) in
an orderly fashion, it is possible that the market may decline
instead. If the Portfolio then concludes not to invest in stock
or options at that time because of concern as to possible further
market decline or for other reasons, the Portfolio will realize a
loss on the futures contract that is not offset by a reduction in
the price of securities purchased.
In addition to the possibility that there may be an
imperfect correlation, or no correlation at all, between
movements in the stock index futures and the portion of the
portfolio being hedged, the price of stock index futures may not
correlate perfectly with movement in the stock index due to
certain market distortions. Rather than meeting additional margin
deposit requirements, investors may close futures contracts
through off-setting transactions which could distort the normal
relationship between the index and futures markets. Secondly,
from the point of view of speculators, the deposit requirements
in the futures market are less onerous than margin requirements
in the securities market. Therefore, increased participation by
speculators in the futures market may also cause temporary price
distortions. Due to the possibility of price distortion in the
futures market, and because of the imperfect correlation between
the movements in the stock index and movements in the price of
stock index futures, a correct forecast of general market trends
by the Adviser may still not result in a successful hedging
transaction over a short time frame.
Positions in stock index futures may be closed out only
on an exchange or board of trade which provides a secondary
market for such futures. Although the Portfolio intends to
purchase or sell futures only on exchanges or boards of trade
where there appear to be active secondary markets, there is no
assurance that a liquid secondary market on any exchange or board
of trade will exist for any particular contract or at any
particular time. In such event, it may not be possible to close
a futures investment position, and in the event of adverse price
movements, the Portfolio would continue to be required to make
daily cash payments of variation margin. However, in the event
futures contracts have been used to hedge portfolio securities,
such securities will not be sold until the futures contract can
be terminated. In such circumstances, an increase in the price
of the securities, if any, may partially or completely offset
losses on the futures contract. However, as described above,
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there is no guarantee that the price of the securities will in
fact correlate with the price movements in the futures contract
and thus provide an offset on a futures contract.
The Portfolio's Adviser intends to purchase and sell
futures contracts on the stock index for which it can obtain the
best price with due consideration to liquidity.
Successful use of stock index futures by the Portfolio
is also subject to the Adviser's ability to predict correctly
movements in the direction of the market. For example, if the
Portfolio has hedged against the possibility of a decline in the
market adversely affecting stocks held in its portfolio and stock
prices increase instead, the Portfolio will lose part or all of
the benefit of the increased value of its stock which it has
hedged because it will have offsetting losses in its futures
positions. In addition, in such situations, if the Portfolio has
insufficient cash, it may have to sell securities to meet daily
variation margin requirements. Such sales of securities may be,
but will not necessarily be, at increased prices which reflect
the rising market. The Portfolio may have to sell securities at
a time when it may be disadvantageous to do so.
A-4
<PAGE>
FIDUCIARY MANAGEMENT ASSOCIATES
LARGE CAPITALIZATION GROWTH PORTFOLIO
SUBSCRIPTION APPLICATION
1. NAME OF SUBSCRIBER
Indicate name of corporation, other organization or fiduciary
capacity; if trustee, include date of trust instrument
Tax Ident. No.
2. ADDRESS
street
city state zip
telephone number
3. INITIAL INVESTMENT
The Subscriber hereby subscribes for the largest number of full
and fractional shares of the Large Capitalization Growth
Portfolio (the "Portfolio") of Fiduciary Management Associates
(the "Fund") that may be purchased with Federal funds or the
enclosed check or draft payable to the Portfolio for $__________.
Such Federal funds, check or draft is to be allocated to the
purchase of the largest possible number of full and fractional
shares of the Portfolio.
4. TELEPHONE TRANSACTIONS
You can call (201) 319-4447 to purchase or redeem shares for your
account. Purchase and redemption requests will be processed via
Federal funds to and from your bank account.
Instructions:
- - Review the information in the Confidential Private Offering
Memorandum about telephone transaction services.
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<PAGE>
- - Check the line next to the telephone transaction service(s) you
desire.
Purchases
___ Payment by wire transfer. If payment is to be made by
wire, provide wire instructions below:
Agent Bank:
ABA or CHIPS Number:
Account Number at Agent Bank:
Reference:
Contact at Agent Bank:
Name:
Phone Number:
Fax Number:
___ If payment is to be wired outside the United States, please
complete the following information for the U.S.
correspondent bank of the bank listed above:
U.S. Correspondent Bank:
ABA or CHIPS Number:
Acct. Number at Correspondent Bank:
Reference:
Contact at Correspondent Bank:
Name:
Phone Number:
Fax Number:
2
<PAGE>
Redemptions
___ I hereby authorize the Fund to effect the redemption of
Portfolio shares from my account according to my telephone
instructions, and to send the proceeds to the bank account
I have selected above.*
5. DISTRIBUTION OPTIONS
Income Dividends
Elect
__ reinvest dividends
__ pay dividends in cash
Capital Gains Distributions
Elect
__ reinvest capital gains one
__ pay capital gains in cash
If no election is made, dividends and capital gains will be
automatically reinvested in additional shares at net asset value.
6. Representations of Subscriber.
The Subscriber represents, warrants, acknowledges and
agrees that:
(a) It is entering into this Application relying
solely on the facts and terms set forth in this Application and
the Confidential Private Offering Memorandum of the Portfolio
dated April 22, 1996.
(b) It has such knowledge and experience in
financial and business matters that it is capable of evaluating
the merits and risks of an investment in the Portfolio; and it is
able to bear the economic risks of an investment in the
Portfolio;
(c) It will be acquiring the shares of beneficial
interest of the Portfolio for investment, for its own account and
not for the interest of any other person and not for distribution
or resale to others, and it will not permit any other person to
acquire a beneficial interest in the shares without the consent
of the Fund. It understands that the shares of beneficial
interest have not been registered under the Securities Act of
3
<PAGE>
1933, as amended (the ``Act''), and it agrees that its interest
in the Portfolio may not be sold, transferred, or otherwise
disposed of except pursuant to an exemption from registration
under the Act.
(d) It understands the effect of the limitations on
disposition and of its representation that its interest in the
Portfolio will not be sold, transferred or otherwise disposed of
except pursuant to an exemption from registration under the Act.
It understands that transfers can be made only with the consent
of the Fund, in its sole discretion.
(e) The person executing this Application on behalf of
the Subscriber has the full power and authority under the
Subscriber's governing instruments to do so and the Subscriber
has the full power and authority under its governing instruments
to become a shareholder in the Portfolio.
7. SIGNATURE AND TAXPAYER IDENTIFICATION NUMBER CERTIFICATION
The Subscriber certifies under penalty of perjury that the
taxpayer identification number shown in Item 1 of this form is
correct and that it has not been notified that this account is
subject to backup withholding.
Subscriber
Date: By:
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4
00250061.AE1
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PART C
OTHER INFORMATION
ITEM 24. Financial Statements and Exhibits
(a) Financial Statements - Growth Portfolio
Included in the Prospectus: Financial Highlights
Included in the Statement of Additional Information:
Portfolio of Investments, September 30, 1995
Statement of Assets and Liabilities, September 30,
1995
Statement of Operations, year ended September 30,
1995
Statement of Changes in Net Assets, years ended
September 30, 1994 and September 30, 1995
Notes to Financial Statements, September 30, 1995
Financial Highlights - for the years ended
September 30, 1991 through September 30, 1995
Report of Independent Auditors - November 3, 1995
Included in Part C of the Registration Statement
All other schedules are either inapplicable or the
required information is contained in the financial
statements.
(b) Exhibits
(1) Agreement and Declaration of Trust - Incorporated
by reference to Exhibit 1 to Post-Effective Amendment
No. 30 of Registrant's Registration Statement (File No.
2-33889) on Form N-1A filed March 13, 1986.
(2) By-Laws - Incorporated by reference to Exhibit 2 to
Post-Effective Amendment No. 30 of Registrant's
Registration Statement (File No. 2-33889) on Form N-1A
filed March 13, 1986.
(3) Not applicable.
(4) (a) Specimen of Share Certificate for the Growth
Portfolio - Incorporated by reference to Exhibit 4 to
Post-Effective Amendment No. 34 of Registrant's
Registration Statement (File No. 2-33889) on Form N-1A
filed January 29, 1988.
(b) Specimen of Share Certificate for the
Short-Term Global Income Portfolio - Incorporated by
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reference to Exhibit 4 to Post-Effective Amendment No.
43 of Registrant's Registration Statement (File No.
2-33889) on Form N-1A filed January 29, 1992.
(5) Advisory Agreement between the Registrant and
Alliance Capital Management L.P. - Incorporated by
reference to Exhibit 5 to Post-Effective Amendment No.
50 of Registrant's Registration Statement (File No.
2-33889) on Form N-1A filed January 27, 1995.
(6) Distribution Agreement between the Registrant and
Alliance Fund Distributors, Inc. - Incorporated by
reference to Exhibit 6 to Post-Effective Amendment No.
50 of Registrant's Registration Statement (File No.
2-33889) on Form N-1A filed January 27, 1995.
(7) Not applicable.
(8) (a) Custodian Contract between the Registrant and
State Street Bank and Trust Company - Incorporated by
reference to Exhibit 8 to Post-Effective Amendment No.
38 of Registrant's Registration Statement (File No.
2-33889) on Form N-1A filed January 30, 1990.
(b) Custodian Contract between Registrant and Brown
Brothers Harriman & Company - Incorporated by reference
to Exhibit 8 to Post-Effective Amendment No. 43 of
Registrant's Registration Statement (File No. 2-33889)
on Form N-1A filed January 29, 1992.
(9) Transfer Agency Agreement between the Registrant
and Alliance Fund Services, Inc. - Incorporated by
reference to Exhibit 9 to Post-Effective Amendment No.
36 of Registrant's Registration Statement (File No.
2-33889) on Form N-1A filed January 30, 1989.
(10) Not applicable.
(11) Consent of Independent Auditors - included
herewith.
(12) Not applicable.
(13) Not applicable
(14) Not applicable.
(15) Not applicable.
(16) Schedule for computation of total return
performance - Incorporated by reference to Exhibit 16 to
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Post-Effective Amendment No. 40 of Registrant's
Registration Statement (File No. 2-33889) on Form N-1A
filed January 10, 1991.
(27) Financial Data Schedule - Incorporated by reference
to Post-Effective Amendment No. 51 of Registrant's
Registration Statement on Form N-1A (File No. 2-33889)
filed January 31, 1996.
ITEM 25. Persons Controlled by or under Common Control with
Registrant.
None.
ITEM 26. Number of Holders of Securities.
Number of Record Holders
Title of Class (as of April 8, 1996)
Shares of Beneficial (Growth Portfolio)
Interest par value $.01
Growth Portfolio 20
ITEM 27. Indemnification
It is the Registrant's policy to indemnify its trustees
and officers, employees and other agents as set forth in
Article VIII and Article III of Registrant's Agreement
and Declaration of Trust, filed as Exhibit 1 in response
to Item 24 and Section 6 of the Distribution Services
Agreement filed as Exhibit 6 in response to Item 24, all
as set forth below. The liability of the Registrant's
trustees and officers is dealt with in Article VIII of
Registrant's Agreement and Declaration of Trust, as set
forth below. The Adviser's liability for loss suffered
by the Registrant or its shareholders is set forth in
Section 4 in response to Item 24, as set forth below.
Article VIII of Registrant's Agreement and Declaration
of Trust reads as follows:
"SECTION 8.1 Trustees, Shareholders, etc. Not
Personally Liable; Notice. The Trustees and officers of
the Trust, in incurring any debts, liabilities or
obligations, or in limiting or omitting any other
actions for or in connection with the Trust, are or
shall be deemed to be acting as Trustees or officers of
the Trust and not in their own capacities. No
Shareholder shall be subject to any personal liability
whatsoever in tort, contract or otherwise to any other
Person or Persons in connection with the assets or the
affairs of the Trust or of any Portfolio, and subject to
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Section 8.4 hereof, no Trustee, officer, employee or
agent of the Trust shall be subject to any personal
liability whatsoever in tort, contract, or otherwise, to
any other Person or Persons in connection with the
assets or affairs of the Trust or of any Portfolio, save
only that arising from his own willful misfeasance, bad
faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office or the
discharge of his functions. The Trust (or if the matter
relates only to a particular Portfolio, that Portfolio)
shall be solely liable for any and all debts, claims,
demands, judgments, decrees, liabilities or obligations
of any and every kind, against or with respect to the
Trust or such Portfolio in tort, contract or otherwise
in connection with the assets or the affairs of the
Trust or such Portfolio, and all Persons dealing with
the Trust or any Portfolio shall be deemed to have
agreed that resort shall be had solely to the Trust
Property of the Trust or the Portfolio Assets of such
Portfolio, as the case may be, for the payment or
performance thereof.
The Trustees shall use their best efforts to ensure that
every note, bond, contract, instrument, certificate or
undertaking made or issued by the Trustees or by any
officers or officer shall give notice that this
Declaration of Trust is on file with the Secretary of
The Commonwealth of Massachusetts and shall recite to
the effect that the same was executed or made by or on
behalf of the Trust or by them as Trustees or Trustee or
as officers or officer, and not individually, and that
the obligations of such instrument are not binding upon
any of them or the Shareholders individually but are
binding only upon the assets and property of the Trust,
or the particular Portfolio in question, as the case may
be, but the omission thereof shall not operate to bind
any Trustees or Trustee or officers or officer or
Shareholders or Shareholder individually, or to subject
the Portfolio Assets of any Portfolio to the obligations
of any other Portfolio.
SECTION 8.2 Trustees' Good Faith Action; Expert Advice;
No Bond or Surety. The exercise by the Trustees of their
powers and discretions hereunder shall be binding upon
everyone interested. Subject to Section 8.4 hereof, a
Trustee shall be liable for his own willful misfeasance,
bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of the office of Trustee,
and for nothing else, and shall not be liable for errors
of judgment or mistakes of fact or law. Subject to the
foregoing, (i) the Trustees shall not be responsible or
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liable in any event for any neglect or wrongdoing of any
officer, agent, employee, consultant, Investment
Advisor, Administrator, Distributor or Principal
Underwriter, Custodian or Transfer Agent, Dividend
Disbursing Agent, Shareholder Servicing Agent or
Accounting Agent of the Trust, nor shall any Trustee be
responsible for the act or omission of any other
Trustee; (ii) the Trustees may take advice of counsel or
other experts with respect to the meaning and operation
of this Declaration of Trust and their duties as
Trustees, and shall be under no liability for any act or
omission in accordance with such advice or for failing
to follow such advice; and (iii) in discharging their
duties, the Trustees, when acting in good faith, shall
be entitled to rely upon the books of account of the
Trust and upon written reports made to the Trustees by
any officer appointed by them, any independent public
accountant, and (with respect to the subject matter of
the contract involved) any officer, partner or
responsible employee of a Contracting Party appointed by
the Trustees pursuant to Section 5.2 hereof. The
Trustees as such shall not be required to give any bond
or surety or any other security for the performance of
their duties.
SECTION 8.3 Indemnification of Shareholders. If any
Shareholder (or former Shareholder) of the Trust shall
be charged or held to be personally liable for any
obligation or liability of the Trust solely by reason of
being or having been a Shareholder and not because of
such Shareholder's acts or omissions or for some other
reason, the Trust (upon proper and timely request by the
Shareholder) shall assume the defense against such
charge and satisfy any judgment thereon, and the
Shareholder or former Shareholder (or the heirs,
executors, administrators or other legal representatives
thereof, or in the case of a corporation or other
entity, its corporate or other general successor) shall
be entitled (but solely out of the assets of the
Portfolio of which such Shareholder or former
Shareholder is or was the holder of Shares) to be held
harmless from and indemnified against all loss and
expense arising from such liability.
SECTION 8.4 Indemnification of Trustees, Officers, etc.
Subject to the limitations set forth hereinafter in this
Section 8.4, the Trust shall indemnify (from the assets
of the Portfolio or Portfolios to which the conduct in
question relates) each of its Trustees and officers
(including Persons who serve at the Trust's request as
directors, officers or trustees of another organization
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in which the Trust has any interest as a shareholder,
creditor or otherwise [hereinafter, together with such
Person's heirs, executors, administrators or personal
representative, referred to as a "Covered Person"])
against all liabilities, including but not limited to
amounts paid in satisfaction of judgments, in compromise
or as fines and penalties, and expenses, including
reasonable accountants' and counsel fees, incurred by
any Covered Person in connection with the defense or
disposition of any action, suit or other proceeding,
whether civil or criminal, before any court or
administrative or legislative body, in which such
Covered Person may be or may have been involved as a
party or otherwise or with which such Covered Person may
be or may have been threatened, while in office or
thereafter, by reason of being or having been such a
Trustee or officer, director or trustee, except with
respect to any matter as to which it has been determined
that such Covered Person (i) did not act in good faith
in the reasonable belief that such Covered Person's
action was in or not opposed to the best interests of
the Trust or (ii) had acted with willful misfeasance,
bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of such Covered Person's
office (either and both of the conduct described in (i)
and (ii) being referred to hereafter as "Disabling
Conduct"). A determination that the Covered Person is
entitled to indemnification may be made by (i) a final
decision on the merits by a court or other body before
whom the proceeding was brought that the Covered Person
to be indemnified was not liable by reason of Disabling
Conduct, (ii) dismissal of a court action or an
administrative proceeding against a Covered Person for
insufficiency of evidence of Disabling Conduct, or (iii)
a reasonable determination, based upon a review of the
facts, that the indemnitee was not liable by reason of
Disabling Conduct by (a) a vote of a majority of a
quorum of Trustees who are neither "interested persons"
of the Trust as defined in Section 2(a)(19) of the 1940
Act nor parties to the proceeding, or (b) an independent
legal counsel in a written opinion. Expenses, including
accountants' and counsel fees so incurred by any such
Covered Person (but excluding amounts paid in
satisfaction of judgments, in compromise or as fines or
penalties), may be paid from time to time by the
Portfolio or Portfolios to which the conduct in question
related in advance of the final disposition of any such
action, suit or proceeding; provided, that the Covered
Person shall have undertaken to repay the amounts so
paid to such Portfolio or Portfolios if it is ultimately
determined that indemnification of such expenses is not
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authorized under this Article VIII and (i) the Covered
Person shall have provided security for such
undertaking, (ii) the Trust shall be insured against
losses arising by reason of any lawful advances, or
(iii) a majority of a quorum of the disinterested
Trustees, or an independent legal counsel in a written
opinion, shall have determined, based on a review of
readily available facts (as opposed to a full trial-type
inquiry), that there is reason to believe that the
Covered Person ultimately will be found entitled to
indemnification.
SECTION 8.5 Compromise Payment. As to any matter
disposed of by a compromise payment by any such Covered
Person referred to in Section 8.4 hereof, pursuant to a
consent decree or otherwise, no such indemnification
either for said payment or for any other expenses shall
be provided unless such indemnification shall be
approved (i) by a majority of a quorum of the
disinterested Trustees or (ii) by an independent legal
counsel in a written opinion. Approval by the Trustees
pursuant to clause (i) or by independent legal counsel
pursuant to clause (ii) shall not prevent the recovery
from any Covered Person of any amount paid to such
Covered Person in accordance with either of such clauses
as indemnification if such Covered Person is
subsequently adjudicated by a court of competent
jurisdiction not to have acted in good faith in the
reasonable belief that such Covered Person's action was
in or not opposed to the best interests of the Trust or
to have been liable to the Trust or its Shareholders by
reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved
in the conduct of such Covered Person's office.
SECTION 8.6 Indemnification Not Exclusive, etc. The
right of indemnification provided by this Article VIII
shall not be exclusive of or affect any other rights to
which any such Covered Person may be entitled. As used
in this Article VIII, a "disinterested" Person is one
against whom none of the actions, suits or other
proceedings in question, and no other action, suit or
other proceeding on the same or similar grounds is then
or has been pending or threatened. Nothing contained in
this Article VIII shall affect any rights to
indemnification to which personnel of the Trust, other
than Trustees and officers, and other Persons may be
entitled by contract or otherwise under law, nor the
power of the Trust to purchase and maintain liability
insurance on behalf of any such Person.
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SECTION 8.7 Liability of Third Persons Dealing with
Trustees. No person dealing with the Trustees shall be
bound to make any inquiry concerning the validity of any
transaction made or to be made by the Trustees or to see
to the application of any payments made or property
transferred to the Trust or upon its order.
Article III of Registrant's Agreement and Declaration of
Trust reads, in pertinent part, as follows:
"Without limiting the foregoing and to the extent not
inconsistent with the 1940 Act or other applicable law,
the Trustees shall have power and authority:
(s) Indemnification. In addition to the mandatory
indemnification provided for in Article VIII hereof
and to the extent permitted by law, to
indemnification with any Person with whom this
Trust has dealings, including, without limitation,
any independent contractor, to such extent as the
Trustees shall determine."
The Advisory Agreement between the Registrant and
Alliance Capital Management L.P. provides that Alliance
Capital Management L.P. will not be liable under such
agreement for any mistake of judgment or in any event
whatsoever except for lack of good faith and that
nothing therein shall be deemed to protect, or purport
to protect, Alliance Capital Management L.P. against any
liability to Registrant or its security holders to which
it would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the
performance of its duties thereunder, or by reason of
reckless disregard of its obligations and duties
thereunder.
The Distribution Agreement between the Registrant and
Alliance Fund Distributors, Inc. provides that the
Registrant will indemnify, defend and hold Alliance Fund
Distributors, Inc., and any person who controls it
within the meaning of Section 15 of the Investment
Company Act of 1940, free and harmless from and against
any and all claims, demands, liabilities and expenses
which Alliance Fund Distributors, Inc. or any
controlling person may incur arising out of or based
upon any alleged untrue statement of a material fact
contained in Registrant's Registration Statement or
Prospectus and Statement of Additional Information or
Confidential Private Offering Memorandum or arising out
of, or based upon any alleged omission to state a
material fact required to be stated in or necessary to
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make the statements in either thereof any one of the
foregoing not misleading, provided that nothing therein
shall be so construed as to protect Alliance Fund
Distributors, Inc. against any liability to Registrant
or its security holders to which it would otherwise be
subject by reason of willful misfeasance, bad faith or
gross negligence in the performance of its duties
thereunder, or by reason of reckless disregard of its
obligations and duties thereunder.
The foregoing summaries are qualified by the entire text
of Registrant's Agreement and Declaration of Trust, the
Advisory Agreement between Registrant and Alliance
Capital Management L.P. and the Distribution Services
Agreement between Registrant and Alliance Fund
Distributors, Inc.
Insofar as indemnification for liabilities arising under
the Securities Act of 1933 (the "Securities Act") may be
permitted to trustees, 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 trustee, officer or controlling person of the
Registrant in the successful defense of any action, suit
or proceeding) is asserted by such trustee, 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 trustees,
officers, investment adviser 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 of 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,
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that the indemnitee was not liable by reason of
disabling conduct, by (a) the vote of a majority of a
quorum of the trustees 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
trustees"), or (b) an independent legal counsel in a
written opinion. The Registrant will advance attorneys
fees or other expenses incurred by its trustees,
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
trustees of the Registrant, or an independent legal
counsel in a written opinion, shall determine, based on
a review of readily available facts (as opposed to a
full trial-type inquiry), that there is reason to
believe that the indemnitee ultimately will be found
entitled to indemnification.
The Registrant participates in a joint trustees/
directors and officers liability insurance policy issued
by the ICI Mutual Insurance Company. Coverage under
this policy has been extended to directors, trustees and
officers of the investment companies managed by Alliance
Capital Management L.P. Under this policy, outside
trustees and directors are covered up to the limits
specified for any claim against them for acts committed
in their capacities as trustee or director. A pro rata
share of the premium for this coverage is charged to
each investment company and to the Adviser.
Item 28. Business and Other Connections of Adviser.
The descriptions of Alliance Capital Management L.P.
under the caption "Management of the Portfolio" in the
Confidential Private Offering Memorandum 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
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April 21, 1988 (File No. 801-32361) and amended through
the date hereof, is incorporated by reference.
Item 29. Principal Underwriters
(a) Alliance Fund Distributors, Inc., the Registrant's
Principal Underwriter in connection with the sale
of shares of the Registrant. Alliance Fund
Distributors, Inc. also acts as Principal
Underwriter or Distributor for the following
investment companies:
ACM Institutional Reserves, Inc.
AFD Exchange Reserves
Alliance All-Asia Investment Fund, Inc.
Alliance Balanced Shares, Inc.
Alliance Bond Fund, Inc.
Alliance Capital Reserves
Alliance Developing Markets Fund, Inc.
Alliance Global Dollar Government Fund, Inc.
Alliance Global Small Cap Fund, Inc.
Alliance Global Strategic Income Trust, Inc.
Alliance Government Reserves
Alliance Growth and Income Fund, Inc.
Alliance Income Builder Fund, Inc.
Alliance International Fund
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 Short-Term Multi-Market Trust, Inc.
Alliance Technology Fund, Inc.
Alliance Utility Income Fund, Inc.
Alliance Variable Products Series Fund, Inc.
Alliance World Income Trust, Inc.
Alliance Worldwide Privatization Fund, Inc.
Fiduciary Management Associates
The Alliance Fund, Inc.
The Alliance Portfolios
(b) The following are the Directors and Officers
of Alliance Fund Distributors, Inc., the
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principal place of business of which is 1345
Avenue of the Americas, New York, New York,
10105.
POSITIONS AND POSITIONS AND
OFFICES WITH OFFICES
NAME UNDERWRITER WITH REGISTRANT
Michael J. Laughlin Chairman
Robert L. Errico President
Edmund P. Bergan, Jr. Senior Vice President, Secretary
General Counsel
and Secretary
Daniel J. Dart Senior Vice President
Richard A. Davies Senior Vice President,
Managing Director
Byron M. Davis Senior Vice President
Kimberly A. Gardner Senior Vice President
Geoffrey L. Hyde Senior Vice President
Barbara J. Krumsiek Senior Vice President
Stephen R. Laut Senior Vice President
Daniel D. McGinley Senior Vice President
Dusty W. Paschall Senior Vice President
Antonios G. Poleondakis Senior Vice President
Gregory K. Shannahan Senior Vice President
Joseph F. Sumanski Senior Vice President
Peter J. Szabo Senior Vice President
Nicholas K. Willett Senior Vice President
Richard A. Winge Senior Vice President
Benji A. Baer Vice President
Warren W. Babcock III Vice President
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Kenneth F. Barkoff Vice President
William P. Beanblossom Vice President
Jack C. Bixler Vice President
Casimir F. Bolanowski Vice President
Kevin T. Cannon Vice President
William W. Collins, Jr. Vice President
Leo H. Cook Vice President
Richard W. Dabney Vice President
John F. Dolan Vice President
Mark J. Dunbar Vice President
Sohaila S. Farsheed Vice President
Linda A. Finnerty Vice President
William C. Fisher Vice President
Robert M. Frank Vice President
Gerard J. Friscia Vice President &
Controller
Andrew L. Gangolf Vice President
Mark D. Gersten Vice President Treasurer and
Chief Financial
Officer
Joseph W. Gibson Vice President
Troy L. Glawe Vice President
Herbert H. Goldman Vice President
James E. Gunter Vice President
Alan Halfenger Vice President
Daniel M. Hazard Vice President
George R. Hrabovsky Vice President
Valerie J. Hugo Vice President
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Robert H. Joseph, Jr. Vice President
and Treasurer
Richard D. Keppler Vice President
Sheila F. Lamb Vice President
Donna M. Lamback Vice President
Thomas Leavitt, III Vice President
James M. Liptrot Vice President
James P. Luisi Vice President
Christopher J. MacDonald Vice President
Michael F. Mahoney Vice President
Maura A. McGrath Vice President
Matthew P. Mintzer Vice President
Joanna D. Murray Vice President
Nicole Nolan-Koester Vice President
Daniel J. Phillips Vice President
Robert T. Pigozzi Vice President
James J. Posch Vice President
Robert E. Powers Vice President
Domenick Pugliese Vice President & Assistant
Associate General Secretary
Counsel
Bruce W. Reitz Vice President
Dennis A. Sanford Vice President
Raymond S. Sclafani Vice President
Richard J. Sidell Vice President
J. William Strott, Jr. Vice President
Richard E. Tambourine Vice President
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Joseph T. Tocyloski Vice President
Neil S. Wood Vice President
Emilie D. Wrapp Vice President &
Special Counsel
Maria L. Carreras Assistant Vice President
Sarah A. Chodera Assistant Vice President
John W. Cronin Assistant Vice President
Leon M. Fern Assistant Vice President
William B. Hanigan Assistant Vice President
Vicky M. Hayes Assistant Vice President
Daniel M. Hazard Assistant Vice President
John C. Hershock Assistant Vice President
James J. Hill Assistant Vice President
Kalen H. Holliday Assistant Vice President
Thomas K. Intoccia Assistant Vice President
Edward W. Kelly Assistant Vice President
Patrick Look Assistant Vice President &
Assistant Treasurer
Michael F. Mahoney Assistant Vice President
Shawn P. McClain Assistant Vice President
Thomas F. Monnerat Assistant Vice President
Jeanette M. Nardella Assistant Vice President
Carol H. Rappa Assistant Vice President
Lisa Robinson-Cronin Assistant Vice President
Karen C. Satterberg Assistant Vice President
Robert M. Smith Assistant Vice President
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Wesley S. Williams Assistant Vice President
Mark R. Manley Assistant Secretary
ITEM 30. Location of Accounts and Records.
The majority of the accounts, books and other documents
required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and the Rules thereunder
are maintained as follows: journals, ledgers,
securities records and other original records are
maintained principally at the offices of Alliance Fund
Services, Inc., 500 Plaza Drive, Secaucus, New Jersey
07094 and at the offices of (i) State Street Bank and
Trust Company, the Registrant's Custodian with respect
to the Growth Portfolio and the South Africa-Free
International Portfolio, 225 Franklin Street, Boston,
Massachusetts 02110 and (ii) Brown Brothers Harriman &
Co., the Registrant's Custodian with respect to the
Short-Term Global Income Portfolio, 40 Water Street,
Boston, Massachusetts 02109. All other records so
required to be maintained are maintained at the offices
of Alliance Capital Management L.P., 1345 Avenue of the
Americas, New York, New York, 10105.
ITEM 31. Management Services. Not applicable.
ITEM 32. Undertakings.
(c) The Registrant undertakes to furnish each person to
whom a Prospectus is delivered a copy of the
Registrant's latest annual report to shareholders, upon
request and without charge.
The Registrant undertakes to provide assistance to
shareholders in communications concerning the removal of
any Trustee of the Fund in accordance with Section 16 of
the Investment Company Act of 1940.
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SIGNATURE
Pursuant to the requirements of the Securities Act of 1933
and the Investment Company Act of 1940, the Registrant certifies
that it meets all of the requirements for effectiveness of this
Amendment to its Registration Statement pursuant to Rule 485(b)
under the Securities Act of 1933 and has duly caused this
Amendment to its Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City
and State of New York, on the 18th day of April, 1996.
FIDUCIARY MANAGEMENT ASSOCIATES
By /s/ John D. Carifa
_____________________________
John D. Carifa
Chairman
Pursuant to the requirements of the Securities Act of
1933, this Amendment to the Registration Statement has been
signed below by the following persons in the capacities and on
the date indicated:
Signature
Title
Date
(1) Principal Executive
Officer
/s/ John D. Carifa
______________________ Chairman April 18, 1996
John D. Carifa
(2) Principal Financial and
Accounting Officer
/s/ Mark D. Gersten Treasurer and
______________________ Chief Financial April 18, 1996
Mark D. Gersten Officer
C-17
<PAGE>
(3) All of the Trustees
Ruth Block
John D. Carifa
David H. Dievler
John H. Dobkin
William H. Foulk, Jr.
Dr. James M. Hester
Clifford L. Michel
Donald J. Robinson
/s/ Edmund P. Bergan, Jr.
by ______________________
(Attorney-in-fact) April 18, 1996
Edmund P. Bergan, Jr.
C-18
<PAGE>
Index to Exhibits
(11) Consent of Independent Auditors
C-19
00250061.AE1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the
caption "General Information - Counsel and Independent
Auditors" in this Registration Statement (Form N-1A 2-33889)
of Fiduciary Management Associates.
We also consent to the use of our report dated
November 3, 1995 and to the references to our firm under the
captions "Financial Highlights" and "General Information -
Independent Auditors" included in the Registration Statement
of Fiduciary Management Associates filed on February 14,
1996 which is incorporated by reference in this registration
statement.
/s/ ERNST & YOUNG LLP
ERNST & YOUNG LLP
New York, New York
April 18, 1996
00250061.AE2
