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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. __)
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
Alliance Bond Fund, Inc.
- -----------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- -----------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement,
if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rule
14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which
transaction applies:
- ----------------------------------------------------------------
(2) Aggregate number of securities to which
transaction applies:
- ----------------------------------------------------------------
(3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule 0-11 (Set
forth the amount on which the filing fee is calculated and
state how it was determined):
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(4) Proposed maximum aggregate value of
transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
<PAGE>
previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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[Alliance Capital Logo]
Alliance Bond Fund, Inc.
- U.S. Government Portfolio
1345 Avenue of the Americas, New York, New York 10105
January 4, 1999
ALLIANCE BOND FUND, INC.
U.S. GOVERNMENT PORTFOLIO
To the Shareholders of Alliance Bond Fund, Inc., U.S. Government
Portfolio:
The accompanying Notice of Special Meeting of
Shareholders of Alliance Bond Fund, Inc., U.S. Government
Portfolio (the "Portfolio" presents to the shareholders of the
Portfolio proposals designed to modernize the Portfolio's
investment design by expanding the types of U.S. Government
securities in which the Portfolio may invest, permitting the
Portfolio to invest in non-U.S. government securities, and
providing the portfolio manager with the ability to use certain
investment techniques in common use by many other US government
funds but unavailable to the Portfolio under its current design.
As discussed below, your Board of Directors recommends that you
vote to approve the proposal.
These proposals were recommended by the Adviser to
conform the Portfolio's investment charter more closely to those
of more general "government funds" which comprise most of the
Portfolio's competitive universe. This would be achieved by
eliminating the "full faith and credit" limitation in the
Portfolio's current prospectus, and otherwise expanding the
Portfolio's potential investment universe to more conventional
dimensions. The Adviser believes that these changes will enable
the Portfolio to compete more effectively on a total return basis
within its competitive universe.
The Adviser believes that a more conventional
"government fund" with the ability to invest in the broad array
of U.S. Government securities, including those issued by FNMA,
FHLMC and other agency bonds, and the ability to invest up to 35%
of its assets in non-U.S. Government, investment grade asset-
backed and mortgage-related securities, would enable the Adviser
to diversify the Portfolio's investments more broadly and to add
value through sector rotation within the broad U.S. government
and asset-backed market, rather than solely through the
anticipation of interest rate movements in the full faith and
credit market. The ability to invest in these sectors would
allow the Adviser to derive fuller advantage, to the benefit of
shareholders, from the resources and capabilities of its large
fixed income research organization. In addition, such increased
<PAGE>
diversification would provide additional tools for preserving
capital during periods of market volatility.
We welcome your attendance at the Special Meeting of
Shareholders. If you are unable to attend, please sign, date and
return the enclosed proxy card promptly in order to spare
additional proxy solicitation expense.
Sincerely,
/s/John D. Carifa
_________________________
John D. Carifa
Chairman of the Board of Directors
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Alliance Bond Fund, Inc.
- U.S. Government Portfolio
_______________________________________________________________
1345 Avenue of the Americas, New York New York 10105
Toll Free (800) 221-5672
_______________________________________________________________
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
February 18, 1999
To the Stockholders of Alliance Bond Fund, Inc., U.S. Government
Portfolio:
Notice is hereby given that a Special Meeting of
Stockholders (the "Meeting") of Alliance Bond Fund, Inc. (the
Fund") U.S. Government Portfolio (the "Portfolio") will be held
at the offices of the Portfolio, 1345 Avenue of the Americas,
33rd Floor, New York, New York 10105, Thursday, February 18 at
11:00 a.m., for the following purposes, all of which are more
fully described in the accompanying Proxy Statement dated
January 4, 1999:
1. To approve a proposal to expand the types of U.S.
Government securities in which the Portfolio may invest, and to
permit the Portfolio to invest in non-U.S. Government securities
and to employ certain investment techniques. This proposal
involves changes in the Portfolio's investment objective and
certain fundamental and non-fundamental investment policies.
2. To transact such other business as may properly
come before the Meeting.
The Board of Directors has fixed the close of business
on December 18, 1998 as the record date for the determination of
stockholders entitled to notice of, and to vote at, the Meeting
or any adjournment thereof. The enclosed proxy is being
solicited on behalf of the Board of Directors.
By order of the Board of Directors,
Edmund P. Bergan, Jr.
Secretary
New York, New York
January 4, 1999
<PAGE>
THE BOARD OF DIRECTORS OF THE FUND RECOMMEND APPROVAL OF THE
PROPOSAL.
_______________________________________________________________
YOUR VOTE IS IMPORTANT
Please indicate your voting instructions on the enclosed
Proxy Card, sign and date it, and return it in the envelope
provided, which needs no postage if mailed in the United States.
In order to save any additional expense of further solicitation,
please mail your proxy promptly.
_______________________________________________________________
(R) This registered service mark used under license from the
owner, Alliance Capital Management L.P.
<PAGE>
PROXY STATEMENT
Alliance Bond Fund, Inc.
U.S. Government Portfolio
1345 Avenue of the Americas
New York, New York 10105
----------
SPECIAL MEETING OF STOCKHOLDERS
February 18, 1999
----------
INTRODUCTION
This Proxy Statement is furnished in connection with the
solicitation of proxies on behalf of the Board of Directors of
Alliance Bond Fund, Inc., a Maryland corporation (the "Fund"), to
be voted at a Special Meeting of Stockholders of the U.S.
Government Portfolio (the "Portfolio"), to be held at the offices
of the Fund, 1345 Avenue of the Americas, 33rd Floor, New York,
New York 10105, Thursday, February 18, 1999 at 11:00 a.m. (the
"Meeting"). The solicitation will be by mail and the cost will
be borne by the Portfolio. The Notice of Meeting, Proxy
Statement and Proxy Card are being mailed to stockholders on or
about January 4, 1999.
The Board of Directors has fixed the close of business
on December 18, 1998 as the record date for the determination of
stockholders entitled to notice of, and to vote at, the Meeting
and at any adjournment thereof. The outstanding voting shares of
the Portfolio as of that date consisted of a total of [ ]
shares of common stock, each share being entitled to one vote.
All properly executed proxies received prior to the Meeting will
be voted at the Meeting in accordance with the instructions
marked thereon or otherwise provided therein. With respect to
Proposal One, the adoption of which requires the affirmative vote
of a specified proportion of the total Portfolio shares
outstanding, an abstention or broker non-vote will be considered
present for purposes of determining the existence of a quorum but
will have the effect of a vote against the proposal. Proposal
One is a matter with respect to which brokers and nominees do not
have discretionary power to vote. Any stockholder may revoke
that stockholder's proxy at any time prior to exercise thereof by
giving written notice to the Secretary of the Fund at 1345 Avenue
of the Americas, New York, New York 10105, by signing another
proxy of a later date or by personally voting at the Meeting.
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A quorum for the Meeting will consist of a majority of
the Portfolio shares outstanding and entitled to vote. In the
event that a quorum is not represented at the Meeting or, even if
a quorum is so represented, in the event that sufficient votes in
favor of any proposal set forth in the Notice of Meeting are not
received by February 18, 1999, the persons named as proxies may
propose and vote for one or more adjournments of the Meeting with
no other notice than announcement at the Meeting, and further
solicitation of proxies with respect to such proposal may be
made. Shares represented by proxies indicating a vote against
any proposal will be voted against adjournment.
The Portfolio has engaged Shareholder Communications
Corporation, 17 State Street, New York, New York 10004, to assist
the Portfolio in soliciting proxies for the Meeting. Shareholder
Communications will receive a fee of $15,000 from the Portfolio
for its services, plus reimbursement of out-of-pocket expenses.
PROPOSAL ONE
APPROVAL OF AMENDMENTS TO THE
INVESTMENT OBJECTIVE AND POLICIES OF THE PORTFOLIO
At its October 13-15, 1998 Regular Meeting, the Board of
Directors of the Fund considered and approved the recommendation
of Alliance Capital Management L.P., the investment adviser to
the Portfolio (the "Adviser"), that the Portfolio's investment
objective and certain fundamental and non-fundamental investment
policies be amended to permit the Portfolio: (i) to invest in
U.S. Government securities not backed by the full faith and
credit of the U.S. Government; (ii) to invest up to 35% of its
assets in non-U.S. Government mortgage-related and asset-backed
securities; (iii) to invest in repurchase agreements and reverse
repurchase agreements, forward contracts and dollar rolls
involving the types of securities in which the Portfolio may
invest; and (iv) employ, for hedging purposes only, futures,
options, options on futures, interest rate swaps, caps and
floors.
In making its recommendation, the Adviser noted that the
Portfolio was created in 1985 largely to cater to the investment
needs of Federal and state-chartered savings and loan
institutions, commercial banks and credit unions ("Legal List
Institutions"). The Adviser indicated that as a general
proposition Legal List Institutions were (and continue to be)
precluded by law from investing in debt securities that are not
backed by the full faith and credit of the U.S. Government. The
Adviser stated that to the extent Legal List Institutions are
permitted to invest in mutual funds, they are restricted,
generally speaking, to funds whose investments are also limited
to such "full faith and credit" securities.
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In addition, the Adviser stated that the relative
significance of this Legal List market had steadily diminished
over time. The Adviser indicated that it appeared that only ten
other funds within the Portfolio's Lipper peer group of 185 U.S.
Government funds were "full faith and credit" funds like the
Portfolio. Meantime, the Adviser reported, the proportion of the
Portfolio's assets invested by Legal List Institutions has
steadily diminished to under 3% of the Portfolio's total assets.
The Adviser stated that while the Portfolio's existing
limited investment charter allowed it to be fully competitive on
a yield basis, it precluded the Adviser from adding value, and
thus enhancing the Portfolio's total return, through the use of
other types of U.S. Government securities such as securities
issued by the Federal National Mortgage Association ("FNMA
certificates") and the Federal Home Loan Mortgage Corporation
("FHLMC certificates"), or other investment-grade mortgage and
asset-backed securities that are available to the Portfolio's
most significant competitors funds.
The Adviser stated that it believed that the Portfolio's
shareholders would largely view favorably a redesign of the
Portfolio's investment charter which retains the Portfolio's
essential characteristic, and better enables the Portfolio to
serve their investment needs from a total return perspective.
The Adviser stated that in developing its recommendations, it
reviewed the prospectuses of many of the most significant funds
within the Portfolio's peer group and believed that
implementation of these recommendations would bring the
Portfolio's investment charter squarely within the mainstream of
competing "government funds."
The Adviser further stated that while from a credit
perspective the "full faith and credit" restriction effectively
precludes default risk, broadening of the Portfolio's investment
parameters would, in its view, provide the opportunity to better
diversify the Portfolio and increase its risk-adjusted return.
The Adviser stated that it expected the reconfigured Portfolio's
interest rate risk profile to be similar to that of the current
Portfolio and that the changes contemplated by its
recommendations would not significantly alter the volatility
profile of the Portfolio.
As a matter of fundamental policy, the Portfolio
currently invests solely in U.S. Government securities that are
backed by the full faith and credit of the U.S. Government. This
fundamental policy essentially restricts the Portfolio's
investment to U.S. Treasury securities and securities issued by
the Government National Mortgage Association ("GNMA
certificates"). The proposal would eliminate the "full faith and
credit" requirement and would require that the Portfolio invest
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at least 65% of the value of its total assets in the broader
category of U.S. Government securities. In addition to U.S.
Treasury securities and GNMA certificates, U.S. Government
securities would include obligations issued or guaranteed by U.S.
Government agencies or instrumentalities, such as FNMA
certificates and FHLMC certificates.
The Adviser also recommended restatement of the
Portfolio's investment objective to better reflect the more
mainstream nature of its proposed investment policies. The
Adviser proposed that the current investment objective, which is
to "seek as high a level of current income as is consistent with
safety of principal," be revised to "seek as high a level of
current income as is consistent with prudent investment risk."
The Adviser represented that this proposed investment objective
is comparable to the investment objectives of many other U.S.
Government funds whose investment policies are similar to the
proposed investment policies of the Portfolio.
The non-fundamental investment policies, which are also
being submitted to stockholders for their ratification but which
may subsequently be changed by the Board of Directors without
further stockholder action, would provide the Portfolio with the
flexibility to invest up to 35% of its total assets in a broad
range of non-U.S. Government mortgage-related and asset-backed
securities that are rated at least investment grade at the time
of investment by a nationally recognized statistical rating
organization. The Adviser stated its belief that inclusion of
investment grade mortgage-related and asset-backed securities
provides the opportunity to enhance yield more effectively than
investment in fixed-rate mortgage-related U.S. Government
securities alone would allow. In addition, the Portfolio would
be permitted to invest in repurchase agreements and reverse
repurchase agreements, forward contracts and dollar rolls
involving the permitted portfolio securities. For hedging
purposes only, the Portfolio would also have the ability to
employ the following investment techniques: futures, options,
options on futures, interest rate swaps, caps and floors
overlying the types of securities in which it may invest. For a
description of certain U.S. Government securities, mortgage-
related and asset-backed securities and the investment techniques
listed in this paragraph and certain associated investment risks,
please refer to Exhibit B hereto.
Based upon the Adviser's presentation, the Board of
Directors of the Fund concluded that the proposed amendments to
the Portfolio's investment objective and to certain fundamental
and non-fundamental investment policies to permit the Portfolio:
(i) to invest in U.S. Government securities not backed by the
full faith and credit of the U.S. Government; (ii) to invest up
to 35% of its assets in non-U.S. Government mortgage-related and
5
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asset-backed securities; (iii) to invest in repurchase agreements
and reverse repurchase agreements, forward contracts and dollar
rolls involving the types of securities in which the Portfolio
may invest; and (iv) employ, for hedging purposes only, futures,
options, options on futures, interest rate swaps, caps and
floors. Accordingly, the Board of Directors approved, and
recommended the proposed amendments to the stockholders of the
Portfolio for approval.
The Board of Directors of the Fund recommends that the
stockholders of the Portfolio vote FOR the approval of the
amendments of the Portfolio's investment objective, fundamental
and non-fundamental investment policies discussed in this Proxy
Statement.
Approval of the amendments to the Portfolio's investment
objective and investment policies will require the affirmative
vote of the lesser of (i) 67% or more of the voting securities of
the Portfolio present or represented at the Meeting, if the
holders of more than 50% of the outstanding voting securities of
the Portfolio are present or represented by proxy, and (ii) more
than 50% of the outstanding voting securities of the Portfolio.
The only voting securities of the Portfolio are its outstanding
shares of common stock. If the stockholders of the Portfolio do
not approve the proposal, the Portfolio will continue to be
required to invest solely in securities backed by the full faith
and credit of the U.S. Government. A vote FOR the proposal will
be considered a vote FOR the amendment of each of the Portfolio's
investment objective, fundamental investment policies and the
non-fundamental investment policies discussed above.
OTHER MATTERS
Management of the Fund does not know of any matters to
be presented at the Meeting other than those mentioned in this
Proxy Statement. If any other matters properly come before the
Meeting, the shares represented by proxies will be voted with
respect thereto in accordance with the best judgment of the
person or persons voting the proxies.
INFORMATION AS TO THE FUND'S PRINCIPAL
OFFICERS, INVESTMENT ADVISER, ADMINISTRATOR
AND PRINCIPAL UNDERWRITER
The principal officers of the Fund, their ages and their
principal occupations during the past five years are set forth
below.
John D. Carifa, 53, Chairman and President of the Fund,
is the President, Chief Operating Officer and a Director of
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Alliance Capital Management Corporation ("ACMC") with which he
has been associated since prior to 1993.
Wayne D. Lyski, 56, Senior Vice President, is an
Executive Vice President of ACMC with which he has been
associated since prior to 1993.
Kathleen A. Corbet, 38, Senior Vice President, is an
Executive Vice President of ACMC since July 1993. Prior thereto,
she headed Equitable Capital Management Corporation's Fixed
Income Department since prior to 1993.
Patricia J. Young, 43, Senior Vice President, is a
Senior Vice President of ACMC with which he has been associated
since prior to 1993.
Jeffrey S. Phlegar, 31, Vice President, is a Vice
President of ACMC with which he has been associated since prior
to 1993.
Edmund P. Bergan, Jr., 48, Secretary, is a Senior Vice
President and the General Counsel of Alliance Fund Distributors,
Inc. ("AFD") and Alliance Fund Services, Inc. ("AFS") with which
he has been associated since prior to 1993.
Domenick Pugliese, 37, Assistant Secretary, is a Vice
President and Assistant General Counsel of AFD with which he has
been associated since May 1995. Prior thereto, he was Vice
President and Counsel of Concord Financial Holding Corporation
since 1994, Vice President and Associate General Counsel of
Prudential Securities since prior to 1993.
Andrew L. Gangolf, 44, Assistant Secretary, is a Vice
President and Assistant General Counsel of AFD with which he has
been associated since December 1994. Prior thereto, he was Vice
President and Assistant Secretary of Delaware Management Co. Inc.
Emilie D. Wrapp, 42, Assistant Secretary, is a Vice
President and Assistant General Counsel of AFD with which she has
been associated since prior to 1993.
Mark D. Gersten, 47, Treasurer and Chief Financial
Officer, is a Vice President of AFD and a Senior Vice President
of Alliance Fund Services, Inc. ("AFS") with which he has been
associated since prior to 1993.
Juan Rodriguez, 40, Controller, is an Assistant Vice
President of AFS with which he has been associated since prior to
1993.
7
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Carla LaRose, 34, Assistant Controller, is a Manager of
AFS with which she has been associated since prior to 1993.
Joseph J. Mantineo, 38, Assistant Controller, is a Vice
President of AFS with which he has been associated since prior to
1993.
Vincent S. Noto, 33, Assistant Controller, is an
Assistant Vice President of AFS with which he has been associated
since prior to 1993.
The investment adviser and administrator for the Fund is
Alliance Capital Management L.P., and the principal underwriter
for the Fund is Alliance Fund Distributors, Inc., each with
principal offices at 1345 Avenue of the Americas, New York, New
York 10105.
SUBMISSION OF PROPOSALS FOR THE NEXT
MEETING OF STOCKHOLDERS
Meetings of stockholders of the Portfolio are not held
on an annual or other regular basis. A stockholder proposal
intended to be presented at any future meeting of stockholders of
the Portfolio must be received by the Portfolio within a
reasonable time before the solicitation relating thereto in order
to be included in the Portfolio's proxy statement and form of
proxy card relating to that meeting. The submission by a
stockholder of a proposal for inclusion in the proxy statement
does not guarantee that it will be included. Stockholder
proposals are subject to certain regulations under federal
securities laws.
REPORTS TO STOCKHOLDERS
The Fund will furnish each person to whom the proxy
statement is delivered with a copy of the Fund's latest annual
report to stockholders upon request and without charge. To
request a copy, please call Alliance Fund Services, Inc. at
(800) 277-4618 or contact Kelly McConvery at Alliance Capital
Management L.P., 1345 Avenue of the Americas, New York, New York
10105.
By order of the Board of Directors,
Edmund P. Bergan, Jr.
Secretary
January 4, 1999
New York, New York
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EXHIBIT A
The following is the proposed restatement of the Portfolio's
investment objective and policies:
U.S. Government Portfolio ("U.S. Government") is a
diversified investment company that seeks a high level of current
income that is consistent with prudent investment risk. As a
matter of fundamental policy, the Portfolio pursues its objective
by investing at least 65% of the value of its total assets in
securities that are issued or guaranteed by the U.S. Government,
its agencies or instrumentalities. The Portfolio may invest the
remaining 35% of the value of its total assets in non-U.S.
Government mortgage-related and asset-backed securities. The
Portfolio will not invest in any security rated below BBB or Baa
by a nationally recognized statistical rating organization. The
Portfolio may invest in unrated securities of equivalent quality
to the rated securities in which it may invest, as determined by
the Adviser. The Portfolio expects, but is not required, to
dispose of securities that are downgraded below BBB and Baa or,
if unrated, are determined by the Adviser to have undergone
similar credit quality deterioration subsequent to their
purchase.
The Portfolio may also (i) enter into repurchase
agreements and reverse repurchase agreements, forward contracts,
and dollar rolls, (ii) enter into various hedging transactions,
such as interest rate swaps, caps and floors, (iii) purchase and
sell futures contracts for hedging purposes, and (iv) purchase
call and put options on futures contracts or on securities for
hedging purposes.
A-1
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EXHIBIT B
If the Stockholders of the Portfolio approve Proposal
One, then the Portfolio would be permitted to: (i) invest in
U.S. Government Securities that are not backed by the full faith
and credit of the U.S. Government; (ii) invest up to 35% of its
assets in non-U.S. Government mortgage-related and asset-backed
securities; (iii) invest in repurchase agreements, reverse
repurchase agreements, forward contracts and dollar rolls
involving the types of securities in which the Portfolio may
invest; and (iv) employ, for hedging purposes only, futures,
options, options on futures, and interest rate swaps, caps and
floors. The following information provides a description of the
types of securities in which the Portfolio would be able to
invest, the various investment techniques that the Portfolio
would be able to use and certain associated investment risks.
Additional Investment Practices
U.S. Government Securities. U.S. Government securities
include obligations issued or guaranteed by U.S. Government
agencies and instrumentalities that are not supported by the full
faith and credit of the U.S. Government, such as securities
issued by the Federal National Mortgage Association ("FNMA") and
the Federal Home Loan Mortgage Corporation ("FHLMC"), and
governmental collateralized mortgage obligations ("CMOs").
U.S. Government securities also include zero coupon
securities and principal-only securities and certain stripped
mortgage-related securities ("SMRS"). In addition, other U.S.
Government agencies and instrumentalities have issued stripped
securities that are similar to SMRS. Such securities include
those that are issued with an interest-only ("IO") class and a
principal-only ("PO") class. Although these stripped securities
are purchased and sold by institutional investors through several
investment banking firms acting as brokers or dealers, these
securities were only recently developed. As a result,
established trading markets have not yet developed and,
accordingly, these securities may be illiquid.
Mortgage-Related Securities. The mortgage-related
securities in which the Portfolio may invest typically are
securities representing interests in pools of mortgage loans made
by lenders such as savings and loan associations, mortgage
bankers and commercial banks and are assembled for sale to
investors (such as the Portfolio) by governmental, government-
related or private organizations.
Pass-Through Mortgage-Related Securities. One type of
mortgage-related security is of the "pass-through" variety. The
B-1
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holder of a pass-through security is considered to own an
undivided beneficial interest in the underlying pool of mortgage
loans and receives a pro rata share of the monthly payments made
by the borrowers on their mortgage loans, net of any fees paid to
the issuer or guarantor of the securities. Prepayments of
mortgages resulting from the sale, refinancing or foreclosure of
the underlying properties are also paid to the holders of these
securities, which, as discussed below, frequently causes these
securities to experience significantly greater price and yield
volatility than experienced by traditional fixed-income
securities. Mortgage-related securities issued by GNMA are
backed by the full faith and credit of the United States; those
issued by FNMA and FHLMC are not so backed. Mortgage-related
securities bear interest at either a fixed rate or an adjustable
rate determined by reference to an index rate. Mortgage-related
securities frequently provide for monthly payments that consist
of both interest and principal, unlike more traditional debt
securities, which normally do not provide for periodic repayments
of principal.
Commercial banks, savings and loan associations, private
mortgage insurance companies, mortgage bankers and other
secondary market issuers create pass-through pools of
conventional residential mortgage loans. Securities representing
interests in pools created by non-governmental private issuers
generally offer a higher rate of interest than securities
representing interests in pools created by governmental issuers
because there are no direct or indirect governmental guarantees
of the underlying mortgage payments. However, private issuers
sometimes obtain committed loan facilities, lines of credit,
letters of credit, surety bonds or other forms of liquidity and
credit enhancement to support the timely payment of interest and
principal with respect to their securities if the borrowers on
the underlying mortgages fail to make their mortgage payments.
The ratings of such non-governmental securities are generally
dependent upon the ratings of the providers of such liquidity and
credit support and would be adversely affected if the rating of
such an enhancer were downgraded.
Commercial Mortgage-Backed Securities. Commercial
mortgage-backed securities are securities that represent an
interest in, or are secured by, mortgage loans secured by
multifamily or commercial properties, such as industrial and
warehouse properties, office buildings, retail space and shopping
malls, and cooperative apartments, hotels and motels, nursing
homes, hospitals and senior living centers. Commercial mortgage-
backed securities have been issued in public and private
transactions by a variety of public and private issuers using a
variety of structures, some of which were developed in the
residential mortgage context, including multi-class structures
featuring senior and subordinated classes. Commercial mortgage-
B-2
<PAGE>
backed securities may pay fixed or floating-rates of interest.
The commercial mortgage loans that underlie commercial mortgage-
related securities have certain distinct risk characteristics.
Commercial mortgage loans generally lack standardized terms,
which may complicate their structure, tend to have shorter
maturities than residential mortgage loans and may not be fully
amortizing. Commercial properties themselves tend to be unique
and are more difficult to value than single-family residential
properties. In addition, commercial properties, particularly
industrial and warehouse properties, are subject to environmental
risks and the burdens and costs of compliance with environmental
laws and regulations.
Collateralized Mortgage Obligations. Another form of
mortgage-related security is a "pay-through" security, which is a
debt obligation of the issuer secured by a pool of mortgage loans
pledged as collateral that is legally required to be paid by the
issuer, regardless of whether payments are actually made on the
underlying mortgages. CMOs are the predominant type of
"pay-through" mortgage-related security. In a CMO, a series of
bonds or certificates is issued in multiple classes. Each class
of a CMO, often referred to as a "tranche," is issued at a
specific coupon rate and has a stated maturity or final
distribution date. Principal prepayments on collateral
underlying a CMO may cause one or more tranches of the CMO to be
retired substantially earlier than the stated maturities or final
distribution dates of the collateral. Although payment of the
principal of, and interest on, the underlying collateral securing
privately issued CMOs may be guaranteed by GNMA, FNMA or FHLMC,
these CMOs represent obligations solely of the private issuer and
are not insured or guaranteed by GNMA, FNMA, FHLMC, any other
governmental agency or any other person or entity.
Adjustable-Rate Mortgage Securities. Another type of
mortgage-related security, known as adjustable-rate mortgage
securities (ARMS), bears interest at a rate determined by
reference to a predetermined interest rate or index. ARMS may be
secured by fixed-rate mortgages or adjustable-rate mortgages.
ARMS secured by fixed-rate mortgages generally have lifetime caps
on the coupon rates of the securities. To the extent that
general interest rates increase faster than the interest rates on
the ARMS, these ARMS will decline in value. The adjustable-rate
mortgages that secure ARMS will frequently have caps that limit
the maximum amount by which the interest rate or the monthly
principal and interest payments on the mortgages may increase.
These payment caps can result in negative amortization (i.e., an
increase in the balance of the mortgage loan). Furthermore,
since many adjustable-rate mortgages only reset on an annual
basis, the values of ARMS tend to fluctuate to the extent that
changes in prevailing interest rates are not immediately
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reflected in the interest rates payable on the underlying
adjustable-rate mortgages.
Stripped Securities. Stripped mortgage-related
securities (SMRS) are mortgage related securities that are
usually structured with two classes of securities collateralized
by a pool of mortgages or a pool of mortgage backed bonds or
pass-through securities, with each class receiving different
proportions of the principal and interest payments from the
underlying assets. A common type of SMRS has one class of
interest-only securities (IOs) receiving all of the interest
payments from the underlying assets; while the other class of
securities, principal-only securities (POs), receives all of the
principal payments from the underlying assets. IOs and POs are
extremely sensitive to interest rate changes and are more
volatile than mortgage-related securities that are not stripped.
IOs tend to decrease in value as interest rates decrease, while
POs generally increase in value as interest rates decrease. If
prepayments of the underlying mortgages are greater than
anticipated, the amount of interest earned on the overall pool
will decrease due to the decreasing principal balance of the
assets. Changes in the values of IOs and POs can be substantial
and occur quickly, such as occurred in the first half of 1994
when the value of many POs dropped precipitously due to increases
in interest rates.
Certain Risks. The value of mortgage-related securities
is affected by a number of factors. Unlike traditional debt
securities, which have fixed maturity dates, mortgage-related
securities may be paid earlier than expected as a result of
prepayments of underlying mortgages. Such prepayments generally
occur during periods of falling mortgage interest rates. If
property owners make unscheduled prepayments of their mortgage
loans, these prepayments will result in the early payment of the
applicable mortgage-related securities. In that event, the
Portfolio may be unable to invest the proceeds from the early
payment of the mortgage-related securities in investments that
provide as high a yield as the mortgage-related securities.
Early payments associated with mortgage-related securities cause
these securities to experience significantly greater price and
yield volatility than is experienced by traditional fixed-income
securities. The occurrence of mortgage prepayments is affected
by the level of general interest rates, general economic
conditions and other social and demographic factors. During
periods of falling interest rates, the rate of mortgage
prepayments tends to increase, thereby tending to decrease the
life of mortgage-related securities. Conversely, during periods
of rising interest rates, a reduction in prepayments may increase
the effective life of mortgage-related securities, subjecting
them to greater risk of decline in market value in response to
rising interest rates. If the life of a mortgage-related
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security is inaccurately predicted, the Portfolio may not be able
to realize the rate of return it expected.
Commercial mortgage-related securities, like all fixed-
income securities, generally decline in value as interest rates
rise. Moreover, although generally the value of fixed-income
securities increases during periods of falling interest rates,
this inverse relationship is not as marked in the case of single-
family residential mortgage-related securities, due to the
increased likelihood of prepayments during periods of falling
interest rates, and may not be as marked in the case of
commercial mortgage-related securities. The process used to rate
commercial mortgage-related securities may focus on, among other
factors, the structure of the security, the quality and adequacy
of collateral and insurance, and the creditworthiness of the
originators, servicing companies and providers of credit support.
Although the market for mortgage-related securities is
becoming increasingly liquid, those issued by certain private
organizations may not be readily marketable. In particular, the
secondary markets for CMOs, IOs and POs may be more volatile and
less liquid than those for other mortgage-related securities,
thereby potentially limiting the Portfolio's ability to buy or
sell those securities at any particular time. In addition, the
rating agencies have not had experience in rating commercial
mortgage-related securities through different economic cycles and
in monitoring such ratings on a longer term basis.
As with fixed-income securities generally, the value of
mortgage-related securities can also be adversely affected by
increases in general interest rates relative to the yield
provided by such securities. Such an adverse effect is
especially possible with fixed-rate mortgage securities. If the
yield available on other investments rises above the yield of the
fixed-rate mortgage securities as a result of general increases
in interest rate levels, the value of the mortgage-related
securities will decline.
Other Asset-Backed Securities. The securitization
techniques used to develop mortgage-related securities are being
applied to a broad range of financial assets. Through the use of
trusts and special purpose corporations, various types of assets,
including automobile loans and leases, credit card receivables,
home equity loans, equipment leases and trade receivables, are
being securitized in structures similar to the structures used in
mortgage securitizations. These asset-backed securities are
subject to risks associated with changes in interest rates and
prepayment of underlying obligations similar to the risks of
investment in mortgage-related securities discussed above.
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Each type of asset-backed security also entails unique
risks depending on the type of assets involved and the legal
structure used. For example, credit card receivables are
generally unsecured obligations of the credit card holder and the
debtors are entitled to the protection of a number of state and
federal consumer credit laws, many of which give such debtors the
right to set off certain amounts owed on the credit cards,
thereby reducing the balance due. There have also been proposals
to cap the interest rate that a credit card issuer may charge.
In some transactions, the value of the asset-backed security is
dependent on the performance of a third party acting as credit
enhancer or servicer. Furthermore, in some transactions (such as
those involving the securitization of vehicle loans or leases) it
may be administratively burdensome to perfect the interest of the
security issuer in the underlying collateral and the underlying
collateral may become damaged or stolen.
Forwards Contracts. A forward contract is an obligation
by one party to buy, and the other party to sell, a specific
quantity of an underlying commodity or other tangible asset for
an agreed upon price at a future date. Forward contracts are
customized, privately negotiated agreements designed to satisfy
the objectives of each party. A forward contract usually results
in the delivery of the underlying asset upon maturity of the
contract in return for the agreed upon payment.
Reverse Repurchase Agreements and Dollar Rolls. Reverse
repurchase agreements involve sales by the Portfolio of portfolio
assets concurrently with an agreement by the Portfolio to
repurchase the same assets at a later date at a fixed price.
During the reverse repurchase agreement period, the Portfolio
continues to receive principal and interest payments on these
securities. Generally, the effect of such a transaction is that
the Portfolio can recover all or most of the cash invested in the
portfolio securities involved during the term of the reverse
repurchase agreement, while it will be able to keep the interest
income associated with those portfolio securities. Such
transactions are advantageous only if the interest cost to the
Portfolio of the reverse repurchase transaction is less than the
cost of otherwise obtaining the cash.
Dollar rolls involve sales by the Portfolio of
securities for delivery in the current month and the Portfolio's
simultaneously contracting to repurchase substantially similar
(same type and coupon) securities on a specified future date.
During the roll period, the Portfolio forgoes principal and
interest paid on the securities. The Portfolio is compensated by
the difference between the current sales price and the lower
forward price for the future purchase (often referred to as the
"drop") as well as by the interest earned on the cash proceeds of
the initial sale.
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Reverse repurchase agreements and dollar rolls involve
the risk that the market value of the securities the Portfolio is
obligated to repurchase under the agreement may decline below the
repurchase price. In the event the buyer of securities under a
reverse repurchase agreement or dollar roll files for bankruptcy
or becomes insolvent, the Portfolio's use of the proceeds of the
agreement may be restricted pending a determination by the other
party, or its trustee or receiver, whether to enforce the
Portfolio's obligation to repurchase the securities. Under
normal circumstances, the Adviser does not expect to engage in
reverse repurchase agreements and dollar rolls with respect to
greater than 50% of the Portfolio's total assets.
Derivatives--General. The Portfolio may use, for
hedging purposes only, futures, options, options on futures,
interest rate swaps, caps and floors. These investment practices
are known as derivatives. Derivatives are financial contracts
whose value depends on, or is derived from, the value of an
underlying asset, reference rate or index. These assets, rates,
and indices may include bonds, stocks, mortgages, commodities,
interest rates, currency exchange rates, bond indices and stock
indices. Derivatives can be used by investors to earn income and
enhance returns, to hedge or adjust the risk profile of a
portfolio and either to replace more traditional direct
investments or to obtain exposure to otherwise inaccessible
markets. The Portfolio may only use the above-referenced
derivatives for hedging purposes.
Options. An option, which may be standardized and
exchange-traded, or customized and privately negotiated, is an
agreement that, for a premium payment or fee, gives the option
holder (the buyer) the right but not the obligation to buy or
sell the underlying asset (or settle for cash an amount based on
an underlying asset, rate or index) at a specified price (the
exercise price) during a period of time or on a specified date.
A call option entitles the holder to purchase, and a put option
entitles the holder to sell, the underlying asset (or settle for
cash an amount based on an underlying asset, rate or index).
Likewise, when an option is exercised the writer of the option is
obligated to sell (in the case of a call option) or to purchase
(in the case of a put option) the underlying asset (or settle for
cash an amount based on an underlying asset, rate or index).
Futures. A futures contract is an agreement that
obligates the buyer to buy and the seller to sell a specified
quantity of an underlying asset (or settle for cash the value of
a contract based on an underlying asset, rate or index) at a
specific price on the contract maturity date. Futures contracts
are standardized, exchange-traded instruments and are fungible
(i.e., considered to be perfect substitutes for each other).
This fungibility allows futures contracts to be readily offset or
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cancelled through the acquisition of equal but opposite
positions, which is the primary method in which futures contracts
are liquidated. A cash-settled futures contract does not require
physical delivery of the underlying asset but instead is settled
for cash equal to the difference between the values of the
contract on the date it is entered into and its maturity date.
Options on Futures. Options on futures contracts are
options that call for the delivery of futures contracts upon
exercise.
1. Swaps. A swap is a customized, privately
negotiated agreement that obligates two parties to exchange a
series of cash flows at specified intervals (payment dates) based
upon or calculated by reference to changes in specified prices or
rates (interest rates in the case of interest rate swaps,
currency exchange rates in the case of currency swaps) for a
specified amount of an underlying asset (the "notional" principal
amount). The payment flows are netted against each other, with
the difference being paid by one party to the other. Except for
currency swaps, the notional principal amount is used solely to
calculate the payment streams but is not exchanged. With respect
to currency swaps, actual principal amounts of currencies may be
exchanged by the counterparties at the initiation, and again upon
the termination, of the transaction.
2. Risks. Investment techniques employing such
derivatives involve risks different from, and, in certain cases,
greater than, the risks presented by more traditional
investments. Following is a general discussion of important risk
factors and issues concerning the use of derivatives that
investors should understand in considering the proposed amendment
of the Portfolio's investment policies.
-- Market Risk--This is the general risk attendant to
all investments that the value of a particular
investment will change in a way detrimental to the
Portfolio's interest.
-- Management Risk--Derivative products are
highly specialized instruments that require
investment techniques and risk analyses different
from those associated with stocks and bonds. The
use of a derivative requires an understanding not
only of the underlying instrument but also of the
derivative itself, without the benefit of observing
the performance of the derivative under all
possible market conditions. In particular, the use
and complexity of derivatives require the
maintenance of adequate controls to monitor the
transactions entered into, the ability to assess
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the risk that a derivative adds to the Portfolio's
investment portfolio, and the ability to forecast
price, interest rate or currency exchange rate
movements correctly.
-- Credit Risk--This is the risk that a loss may
be sustained by the Portfolio as a result of the
failure of another party to a derivative (usually
referred to as a "counterparty") to comply with the
terms of the derivative contract. The credit risk
for exchange-traded derivatives is generally less
than for privately negotiated derivatives, since
the clearing house, which is the issuer or
counterparty to each exchange-traded derivative,
provides a guarantee of performance. This
guarantee is supported by a daily payment system
(i.e., margin requirements) operated by the
clearing house in order to reduce overall credit
risk. For privately negotiated derivatives, there
is no similar clearing agency guarantee.
Therefore, the Portfolio considers the
creditworthiness of each counterparty to a
privately negotiated derivative in evaluating
potential credit risk.
-- Liquidity Risk--Liquidity risk exists when a
particular instrument is difficult to purchase or
sell. If a derivative transaction is particularly
large or if the relevant market is illiquid (as is
the case with many privately negotiated
derivatives), it may not be possible to initiate a
transaction or liquidate a position at an
advantageous price.
-- Leverage Risk--Since many derivatives have a
leverage component, adverse changes in the value or
level of the underlying asset, rate or index can
result in a loss substantially greater than the
amount invested in the derivative itself. In the
case of swaps, the risk of loss generally is
related to a notional principal amount, even if the
parties have not made any initial investment.
Certain derivatives have the potential for
unlimited loss, regardless of the size of the
initial investment.
-- Other Risks--Other risks in using derivatives
include the risk of mispricing or improper
valuation of derivatives and the inability of
derivatives to correlate perfectly with underlying
assets, rates and indices. Many derivatives, in
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particular privately negotiated derivatives, are
complex and often valued subjectively. Improper
valuations can result in increased cash payment
requirements to counterparties or a loss of value
to the Portfolio. Derivatives do not always
perfectly or even highly correlate or track the
value of the assets, rates or indices they are
designed to closely track. Consequently, the
Portfolio's use of derivatives may not always be an
effective means of, and sometimes could be
counterproductive to, furthering the Portfolio's
investment objective.
Use of Options, Futures and Interest Rate Transactions by the
Portfolio
Options on Securities. In purchasing an option on
securities, the Portfolio would be in a position to realize a
gain if, during the option period, the price of the underlying
securities increased (in the case of a call) or decreased (in the
case of a put) by an amount in excess of the premium paid;
otherwise the Portfolio would experience a loss not greater than
the premium paid for the option. Thus, the Portfolio would
realize a loss if the price of the underlying security declined
or remained the same (in the case of a call) or increased or
remained the same (in the case of a call) or increased or
remained the same (in the case of a put) or decrease (in the case
of a call) by more than the amount of the premium. If a put or
call option purchased by the Portfolio were permitted to expire
without being sold or exercised, its premium would represent a
loss to the Portfolio.
The Portfolio may write a put or call option in return
for a premium, which is retained by the Portfolio whether or not
the option is exercised. Except with respect to uncovered call
options written for cross-hedging purposes, the Portfolio will
not write uncovered call or put options on securities. A call
option written by the Portfolio is "covered" if the Portfolio
owns the underlying security, has an absolute and immediate right
to acquire that security upon conversion or exchange of another
security it holds, or holds a call option on the underlying
security with an exercise price equal to or less than of the call
option it has written. A put option written by the Portfolio is
covered if the Portfolio holds a put option on the underlying
securities with an exercise price equal to or greater than of the
put option it has written.
The risk involved in writing an uncovered put option is
that there could be a decrease in the market value of the
underlying securities. If this occurred, the Portfolio could be
obligated to purchase the underlying security at a higher price
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than its current market value. Conversely, the risk involved in
writing an uncovered call option is that there could be an
increase in the market value of the underlying security, and the
Portfolio could be obligated to acquire the underlying security
at its current price and sell it at a lower price. The risk of
loss from writing an uncovered put option is limited to the
exercise price of the option, whereas the risk of loss from
writing an uncovered call option is potentially unlimited.
The Portfolio may write a call option on a security that
it does not own in order to hedge against a decline in the value
of a security that it owns or has the right to acquire, a
technique referred to as "cross-hedging." The Portfolio would
write a call option for cross-hedging purposes, instead of
writing a covered call option, when the premium to be received
from the cross-hedge transaction exceeds that to be received from
writing a covered call option, while at the same time achieving
the desired hedge. The correlation risk involved in cross-
hedging may be greater than the correlation risk involved with
other hedging strategies.
The Portfolio will not purchase an option on a security
if, immediately thereafter, the aggregate cost of all outstanding
options would exceed 2% of the Portfolio's total assets. In
addition, the Portfolio will not write an option if, immediately
thereafter, the aggregate value of the Portfolio's securities
subject to outstanding options would exceed 15% of the
Portfolio's total assets.
Options on Securities Indices. An option on a
securities index is similar to an option on a security except
that, rather than taking or making delivery of a security at a
specified price, an option on a securities index gives the holder
the right to receive, upon exercise of the option, an amount of
cash if the closing level of the chosen index is greater than (in
the case of a call) or less than (in the case of a put) the
exercise price of the option.
Futures Contracts and Options on Futures Contracts.
Futures contracts that the Portfolio may buy and sell may include
futures contracts on fixed-income or other securities, and
contracts based on interest rates or financial indices, including
any index of U.S. Government securities.
Options on futures contracts are options that call for
the delivery of futures contracts upon exercise. Options on
futures contracts written or purchased by the Portfolio will be
traded on U.S. exchanges and, will be used only for hedging
purposes.
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The Portfolio will not enter into a futures contract or
write or purchase an option on a futures contract if immediately
thereafter the market values of the outstanding futures contracts
of the Portfolio and the futures contracts subject to outstanding
options written by the Portfolio would exceed 50% of the
Portfolio's total assets. Nor will the Portfolio enter into a
futures contract or write or purchase an option on a futures
contract if immediately thereafter the aggregate of initial
margin deposits on all the outstanding futures contracts of the
Portfolio and premiums paid on outstanding options on futures
contracts would exceed 5% of the Portfolio's total assets.
Interest Rate Transactions (Swaps, Caps and Floors).
The Portfolio may enter into interest rate swap, cap or floor
transactions for hedging purposes, which may include preserving a
return or spread on a particular investment or portion of its
portfolio or protecting against an increase in the price of
securities the Portfolio anticipates purchasing at a later date.
The Adviser does not intend to use these transactions in a
speculative manner.
Interest rate swaps involve the exchange by the
Portfolio with another party of their respective commitments to
pay or receive interest (e.g., an exchange of floating rate
payments for fixed rate payments) computed based on a
contractually-based principal (or "notional") amount. Interest
rate swaps are entered into on a net basis (i.e., the two payment
streams are netted out, with the Portfolio receiving or paying,
as the case may be, only the net amount of the two payments).
Interest rate caps and floors are similar to options in that the
purchase of an interest rate cap or floor entitles the purchaser,
to the extent that a specified index exceeds (in the case of a
cap) or falls below (in the case of a floor) a predetermined
interest rate, to receive payments of interest on a notional
amount from the party selling the interest rate cap or floor.
The Portfolio may enter into interest rate swaps, caps and floors
on either an asset-based or liability-based basis, depending upon
whether it is hedging its assets or liabilities.
The swap market has grown substantially in recent years,
with a large number of banks and investment banking firms acting
both as principals and as agents utilizing standardized swap
documentation. As a result, the swap market has become well
established and relatively liquid. Caps and floors are less
liquid than swaps. These transactions do not involve the delivery
of securities or other underlying assets or principal.
Accordingly, unless there is a counterparty default, the risk of
loss to the Portfolio from interest rate transactions is limited
to the net amount of interest payments that the Portfolio is
contractually obligated to make. The Portfolio will not enter
into any interest rate swap, cap or floor transaction unless the
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unsecured senior debt or claims paying ability of the
counterparty is then rated in the highest rating category of at
least one NRSRO.
Securities Ratings
The ratings of fixed-income securities by nationally
recognized statistical rating organizations including Standard &
Poor's Rating Services, Moody's Investors Services, Inc., Duff &
Phelps Credit Rating Co. and Fitch IBCA, Inc. are a generally
accepted barometer of credit risk. They are, however, subject to
certain limitations from an investor's standpoint. The rating of
an issuer is heavily weighted by past developments and does not
necessarily reflect probable future conditions. There is
frequently a lag between the time a rating is assigned and the
time it is updated. In addition, there may be varying degrees of
difference in credit risk of securities within each rating
category.
The Portfolio may invest in non-U.S. government
mortgage-related and asset-based securities that are rated at
least Baa or BBB or, if unrated, determined by the Adviser to be
of equivalent credit quality. Securities rated Baa or BBB are
considered to have speculative characteristics and share some of
the same characteristics as lower-rated securities. Sustained
periods of deteriorating economic conditions or of rising
interest rates are more likely to lead to a weakening in the
issuer's capacity to pay interest and repay principal than in the
case of higher-rated securities. The Adviser expects, but is not
required, to dispose of securities that are downgraded below Baa
or BBB, or, if unrated, are determined by the Adviser to have
undergone similar credit quality deterioration.
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TABLE OF CONTENTS Page
_________________________________________________________________
Introduction.................................
Proposal One: Approval of Amendments to the
Investment Objective and Certain Fundamental
and Non-Fundamental Investment Policies of
the Portfolio.............................
Other Matters...............................
Information as to the Fund's Principal
Officers, Investment Adviser, Administrator
and Principal Underwriter.................
Submission of Proposals for the Next
Meeting of Stockholders...................
Reports to Stockholders.....................
Exhibit A...................................
Exhibit B...................................
Alliance Bond Fund, Inc.
U.S. Government Portfolio
_______________________________________________________________
Alliance Capital Management L.P.
_______________________________________________________________
NOTICE OF SPECIAL MEETING
OF STOCKHOLDERS AND
PROXY STATEMENT
January 4, 1999
<PAGE>
APPENDIX
PROXY PROXY
ALLIANCE BOND FUND, INC.
U.S. GOVERNMENT PORTFOLIO
Instructions to the Shareholders of the Fund in connection
with the Special Meeting of Shareholders to be held on
February 18, 1999.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF THE FUND.
The undersigned hereby appoints Ms. Kelly McConvery and Ms. Carol
Rappa, and each of them, as proxies, each with the power to
appoint her substitute, and authorizes each of them to represent
and to vote, as designated on the reverse hereof, all the shares
of beneficial interest of Alliance Bond Fund, Inc. (the "Fund")
U.S. Government Portfolio (the "Portfolio") registered in the
name of the undersigned on December 18, 1998 at the Special
Meeting of Stockholders of the Portfolio to be held at
11:00 a.m., Eastern Standard Time, on February 18, 1999 at the
offices of the Fund, 1345 Avenue of the Americas, 33rd Floor, New
York, New York, 10105, and at all adjournments thereof. The
undersigned hereby revokes any proxy or proxies heretofore given
and acknowledges receipt of the Notice of Meeting and
accompanying Proxy Statement and hereby instructs said proxies to
vote said shares as indicated hereon.
NOTE: Please sign this proxy exactly
as your name appears on the books of
the Fund. Joint owners should each
sign personally. Trustees and other
fiduciaries should indicate the
capacity in which they sign, and where
more than one name appears, a majority
must sign. If a corporation, this
signature should be that of an
authorized officer who should state
his or her title.
___________________________
Signature
___________________________
Signature (if held jointly)
___________________________
Date
<PAGE>
This proxy, if properly executed, will be voted in the manner
directed by the undersigned. If no direction is made, this proxy
will be voted "FOR" the proposal.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK. Example: /X/
FOR AGAINST ABSTAIN
1. Approval of amendments to
the Portfolio's investment / / / / / /
objective and certain
fundamental and non-
fundamental investment
policies.
2. In their discretion, on
all such other matters / / / / / /
that may properly come
before the Meeting or
any adjournments thereof.
PLEASE SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
16
00250123.AT1
