<PAGE>
This is filed pursuant to Rule 497(b).
File Nos. 002-48227 and 811-02383.
<PAGE>
<PAGE>
ALLIANCE MORTGAGE SECURITIES INCOME FUND, INC.
ALLIANCE LIMITED MATURITY GOVERNMENT FUND, INC.
1345 Avenue of the Americas
New York, New York 10105
Toll Free (800) 221-5672
September 14, 2000
To the stockholders of Alliance Mortgage Securities Income Fund, Inc.
("Mortgage Securities") and Alliance Limited Maturity Government Fund, Inc.
("Limited Maturity"):
At the Special Meetings of Stockholders of Mortgage Securities and Limited
Maturity (together the "Acquired Funds") to be held on November 14, 2000,
stockholders of the Acquired Funds will be asked to consider and approve the
acquisition of each such Fund's assets and liabilities by Alliance U.S.
Government Portfolio, a series of Alliance Bond Fund, Inc. ("U.S. Government"
and together with the Acquired Funds, the "Funds"). Each of the Funds is an
open-end investment company registered under the Investment Company Act of
1940, as amended, and advised by Alliance Capital Management L.P. The proposed
acquisitions are described in more detail in the combined Prospectus/Proxy
Statement.
It is anticipated that the proposed transactions will result in substantial
benefits to the stockholders of the Acquired Funds because the transactions
will enable them to acquire an investment in a larger fund with a similar
investment objective and a lower expense ratio. While U.S. Government and
Limited Maturity invest primarily in U.S. Government securities, Mortgage
Securities' investments are limited to, primarily, mortgage-related securities.
In addition, Mortgage Securities and Limited Maturity invest in debt securities
with maturities of not more than ten years. Stockholders should benefit from U.
S. Government's more flexible investment charter, which enables it to diversify
its investments more broadly within the U.S. Government and mortgage-backed
markets and to take advantage of a wider range of maturities in selecting
investments.
The Boards of Directors of Mortgage Securities and Limited Maturity have
given careful consideration to the proposed acquisitions and have concluded
that the acquisitions are in the best interests of the Acquired
<PAGE>
Funds and their stockholders. If approved by stockholders of the Acquired Funds
at the Special Meetings, the acquisitions are expected to occur late in the
last quarter of this year or early in the first quarter of year 2001. At that
time, each Acquired Fund stockholder will receive the same class of shares of
U.S. Government having an aggregate net asset value equal to the aggregate net
asset value of the stockholder's shares in the Acquired Fund. The Acquired Fund
would then cease operations.
Stockholders of the Acquired Funds will not be assessed any sales charges or
other fees in connection with the proposed acquisitions. Please note that the
closing of one acquisition is not contingent upon the closing of the other
acquisition. No gain or loss will be recognized by stockholders of Mortgage
Securities or Limited Maturity for federal income tax purposes as a result of
the transfer of assets to U.S. Government and the subsequent distribution of
shares of U.S. Government to stockholders in exchange for shares of the
respective funds.
We welcome your attendance at the Special Meetings of Stockholders. If you
are unable to attend, please sign, date and return the enclosed Proxy Card
promptly in order to avoid additional proxy solicitation expenses. The Board of
Directors of each Fund recommends that you vote your proxy for the proposed
acquisition.
Sincerely,
John D. Carifa
President and Chairman of the
Boards of Directors
<PAGE>
[LOGO OF ALLIANCE CAPITAL]
ALLIANCE MORTGAGE SECURITIES INCOME FUND, INC.
ALLIANCE LIMITED MATURITY GOVERNMENT FUND, INC.
--------------------------------------------------------------------------------
1345 Avenue of the Americas, New York, New York 10105
Toll Free (800) 221-5672
--------------------------------------------------------------------------------
NOTICE OF SPECIAL MEETINGS OF STOCKHOLDERS
September 14, 2000
To the stockholders of Alliance Mortgage Securities Income Fund, Inc.
("Mortgage Securities") and Alliance Limited Maturity Government Fund, Inc.
("Limited Maturity"):
Notice is hereby given that Special Meetings of the Stockholders of Mortgage
Securities and Limited Maturity (the "Acquired Funds") will be held at 1345
Avenue of the Americas, 33rd Floor, New York, New York 10105 on November 14,
2000 at 11:00 a.m., Eastern Time (the "Meetings"), to consider and vote on the
following, all of which are more fully described in the accompanying
Prospectus/Proxy Statement:
1. Approval of an Agreement and Plan of Acquisition and Liquidation (the
"Plan") between Alliance U.S. Government Portfolio, a series of Alliance Bond
Fund, Inc. ("U.S. Government") and each Acquired Fund. Under the Plan, the
Acquired Fund will transfer all of its assets and liabilities to U.S.
Government in exchange for shares of U.S. Government. A vote in favor of this
proposal also will constitute a vote in favor of liquidation and dissolution of
the Acquired Fund and termination of its registration under the Investment
Company Act of 1940.
2. Any other business that may properly come before the Meetings.
The Board of Directors of each Acquired Fund has fixed the close of business
on August 25, 2000 as the record date for determination of those stockholders
entitled to notice of, and to vote at, the Meetings or any postponements or
adjournments thereof. The enclosed proxy is being solicited on behalf of the
Boards of Directors of the Acquired Funds. Each stockholder who does not expect
to attend in person is requested to complete, date, sign and promptly return
the enclosed Proxy Card.
<PAGE>
The Board of Directors of each Acquired Fund recommends that you vote FOR the
Proposal.
By Order of the Boards of Directors,
Edmund P. Bergan, Jr.
Secretary
New York, New York
September 14, 2000
--------------------------------------------------------------------------------
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. You may also be able to vote by telephone or via
the Internet as described in the accompanying Prospectus/Proxy Statement. Your
vote is very important no matter how many shares you own. In order to save any
additional costs of further proxy solicitation and to allow the Meetings to be
held as scheduled, please vote your proxy promptly.
--------------------------------------------------------------------------------
(R) This registered service mark used under license from the owner, Alliance
Capital Management L.P.
<PAGE>
PROSPECTUS/PROXY STATEMENT
ACQUISITION OF THE ASSETS AND ASSUMPTION
OF THE LIABILITIES OF
ALLIANCE MORTGAGE SECURITIES INCOME FUND, INC.
AND
ALLIANCE LIMITED MATURITY GOVERNMENT FUND, INC.
BY, AND IN EXCHANGE FOR SHARES OF,
ALLIANCE U.S. GOVERNMENT PORTFOLIO
OF ALLIANCE BOND FUND, INC.
September 14, 2000
What is this Document and why did we send it to you?
On July 19-20, 2000, the Boards of Directors of Alliance Mortgage Securities
Income Fund, Inc. ("Mortgage Securities") and Alliance Limited Maturity
Government Fund, Inc. ("Limited Maturity" and, together with Mortgage
Securities, the "Acquired Funds") approved the acquisition of the Acquired
Funds by Alliance U.S. Government Portfolio, a series of Alliance Bond Fund,
Inc. ("U.S. Government" and, together with the Acquired Funds, the "Funds").
Stockholders of the Acquired Funds are being asked to approve an Agreement and
Plan of Acquisition and Liquidation (a "Plan" and collectively, the "Plans")
between U.S. Government and each Acquired Fund. Each Plan provides for (i) the
transfer of all the assets of an Acquired Fund to U.S. Government, (ii) the
assumption by U.S. Government of all the liabilities of that Acquired Fund and
the subsequent liquidation and dissolution of the Acquired Fund and (iii) the
issuance to each Acquired Fund's stockholders of shares of U.S. Government,
equal in aggregate net asset value ("NAV") to the aggregate NAV of their former
shares (an "Acquisition" and collectively, the "Acquisitions"). This
Prospectus/Proxy Statement contains the information stockholders of the
Acquired Funds should know before voting on the proposed Acquisitions and
should be retained for future reference. You may contact a Fund at 1-800-221-
5672 or write to the Fund at 1345 Avenue of the Americas, New York, NY 10105.
How will the Acquisitions Work?
The Acquisitions will involve three steps:
--the transfer of the assets of the Acquired Fund to U.S. Government and
the assumption by U.S. Government of the liabilities of the
1
<PAGE>
Acquired Fund in exchange for shares of U.S. Government of equivalent
value to the assets less the value of the liabilities transferred;
--the pro rata distribution of U.S. Government shares to the stockholders
of record of the Acquired Fund as of the effective date of an
Acquisition in exchange for those stockholders' shares of the Acquired
Fund; and
--the liquidation and dissolution of the Acquired Fund as soon as
practicable.
As a result of an Acquisition, stockholders of an Acquired Fund will instead
hold shares of U.S. Government having the same aggregate NAV as the shares of
the Acquired Fund that they held immediately before the Acquisition.
Stockholder approval of one Acquisition is independent of stockholder approval
of the other Acquisition and the closing of one Acquisition is not contingent
upon the closing of the other. If a majority of the shares of an Acquired Fund
does not approve an Acquisition, that Fund will not participate in an
Acquisition. In such a case, that Fund will continue its operations and its
Directors will consider what further action, if any, is appropriate.
Is Additional Information About the Funds Available?
Yes, additional information about the Funds is available in the:
--Prospectus of The Alliance Bond Funds dated March 1, 2000, which
includes information concerning the Funds;
--Management's Discussion of Fund Performance, included in the Annual
Reports to Shareholders of each of the Funds; and
--Statements of Additional Information ("SAIs") for the Acquired Funds
dated March 1, 2000 and U.S. Government dated November 1, 1999.
All of this information is in documents filed with the Securities and
Exchange Commission ("SEC"). You may view or obtain these documents from the
SEC:
In person:
at the SEC's Public Reference Room in Washington,
D.C.
By phone:
(202) 942-8090 (For information on the operations
of the Public Reference room only)
2
<PAGE>
By mail:
Public Reference Section
Securities and Exchange Commission,
Washington, D.C. 20549-6009
(duplicating fee required)
By electronic mail: [email protected] (duplicating fee required)
On the Internet: www.sec.gov
The information in the Prospectus of The Alliance Bond Funds (the
"Prospectus") relating to Mortgage Securities, Limited Maturity and U.S.
Government is incorporated in this Prospectus/Proxy Statement by reference and
is legally deemed to be part of this document. Each Fund's Annual Report to
Shareholders, the SAI to this Prospectus/Proxy Statement and each Fund's SAI,
are also incorporated in this Prospectus/Proxy Statement by reference and are
legally deemed to be part of this document. The Prospectus and each Fund's
Annual Report to Shareholders, which contain audited financial statements for
each Fund's fiscal year, have been previously mailed to stockholders.
Additional copies of the Prospectus and Annual Report, as well as the SAI of
each Fund, are available upon request without charge by writing to or calling
the address and telephone number listed below.
Alliance Fund Services, Inc.
P.O. Box 1520
Secaucus, N.J. 07096-1520
1-800-221-5672
Other Important Things to Note:
--You may lose money by investing in the Funds.
--The SEC has not approved or disapproved these securities or passed upon
the adequacy of this Prospectus/Proxy Statement. Any representation to
the contrary is a criminal offense.
3
<PAGE>
Proposal: Approval of an Agreement and Plan of Acquisition and Liquidation
Between U.S. Government and the Acquired Fund in Which You Hold
Shares
On July 19-20, 2000, the Board of Directors of each Acquired Fund voted to
approve the Acquisition applicable to it, subject to the approval of the
stockholders of that Fund. Each Acquisition will involve the transfer by an
Acquired Fund of all of its assets to U.S. Government and the assumption by
U.S. Government of the liabilities of the Acquired Fund in exchange for shares
of U.S. Government having a value in the aggregate equal to the net assets of
the Acquired Fund. Following the transfer of assets, shares of U.S. Government
will be distributed to stockholders of the Acquired Fund in liquidation of the
Acquired Fund.
Stockholders of the Acquired Funds will recognize no gain or loss on the
exchange of the stockholders' shares of the Acquired Fund for shares of U.S.
Government. If approved by an Acquired Fund's stockholders, the Acquisition of
such Fund is expected to occur late in the last quarter of this year or early
in the first quarter of year 2001. The expenses of the transaction will be
borne by the Funds' investment adviser, Alliance Capital Management L.P.
("Alliance").
The Board of Directors of each Acquired Fund concluded that participation by
the Acquired Fund in the proposed Acquisitions is in the best interests of the
Acquired Fund and its stockholders. The Boards of Directors also concluded
that the proposed Acquisitions would not dilute stockholders' economic
interests. In reaching this conclusion, the Boards of Directors considered,
among other things: the similarities of the investment objectives and
strategies between U.S. Government and the Acquired Funds; the more flexible
investment charter of U.S. Government in terms of investments in a larger
class of U.S. Government securities and permissible maturities; the improved
operating efficiencies of the combined fund; the lower expense ratio of U.S.
Government as compared to the Acquired Funds; the effect of the Acquisitions
on the advisory fees of the Funds; the prospects for improved performance
since U.S. Government has significantly outperformed Limited Maturity over the
past five years and has recently begun to outperform Mortgage Securities; and
the tax-free nature of the Acquisitions for the Acquired Funds. The Board of
Directors of Alliance Bond Fund, Inc. approved each Acquisition by U.S.
Government on July 19-20, 2000 after concluding that each Acquisition is in
the best interests of U.S. Government and its stockholders, and would not
dilute such stockholders' interests.
For a more complete discussion of the factors considered by the Boards of
Directors in approving the Acquisitions, see page 19.
4
<PAGE>
SUMMARY
The following summary highlights differences between U.S. Government and
Mortgage Securities and Limited Maturity. This summary is not complete and
does not contain all of the information that you should consider before voting
on an Acquisition. For more complete information, please read this entire
document and the Prospectus.
Comparison of Current Fees
The Acquisitions are expected to result in a lower operating expense ratio
for the combined Fund. As of June 30, 2000, Mortgage Securities had total
assets of approximately $436 million, Limited Maturity had total assets of
approximately $62 million, and U.S. Government had total assets of
approximately $745 million. As shown in the Fee Table below, U.S. Government's
expense ratios are significantly lower than those of either of the Acquired
Funds. The Fee Table below, which describes the fees and expenses of each
class of shares of the Funds as of June 30, 2000, includes pro forma expenses
for each Acquisition and for the combined Fund assuming that the Acquisitions
are approved and consummated. Based on the pro forma operating expenses for
Class A shares, at asset levels as of June 30, 2000 and assuming the
Acquisitions are approved, the Acquisitions would result in projected annual
expense ratio reductions of 0.12% for Mortgage Securities, 0.65% for Limited
Maturity and 0.05% for U.S. Government.
If only one of the Acquisitions occurs, the expense ratio benefits would be
reduced. The acquisition of Mortgage Securities alone would produce expense
ratio benefits of 0.04%. The acquisition of Limited Maturity alone would be
expense ratio neutral for U.S. Government because of the small size of that
Fund relative to U.S. Government.
5
<PAGE>
Fee Table
The following table describes the fees and expenses that you may pay if you
buy and hold shares of the Funds.
<TABLE>
<CAPTION>
Mortgage Securities
-----------------------
Class A Class B Class C
------- ------- -------
<S> <C> <C> <C>
Shareholder Fees
(fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases (as
a percentage of the offering price)................ 4.25% -- --
Maximum Deferred Sales Charge (Load) (as a percentage
of original purchase price or redemption proceeds,
whichever is lower)................................ -- 3.00% 1.00%
</TABLE>
<TABLE>
<CAPTION>
Limited Maturity
-----------------------
Class A Class B Class C
------- ------- -------
<S> <C> <C> <C>
Shareholder Fees
(fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases (as
a percentage of the offering price)................ 4.25% -- --
Maximum Deferred Sales Charge (Load) (as a percentage
of original purchase price or redemption proceeds,
whichever is lower)................................ -- 3.00% 1.00%
</TABLE>
<TABLE>
<CAPTION>
U.S. Government
-----------------------
Class A Class B Class C
------- ------- -------
<S> <C> <C> <C>
Shareholder Fees
(fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases (as
a percentage of the offering price)................ 4.25% -- --
Maximum Deferred Sales Charge (Load) (as a percentage
of original purchase price or redemption proceeds,
whichever is lower)................................ -- 3.00% 1.00%
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Pro Forma
U.S. Government
Combined Fund
-----------------------
Class A Class B Class C
------- ------- -------
<S> <C> <C> <C>
Shareholder Fees
(fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases (as a
percentage of the offering price)................... 4.25% -- --
Maximum Deferred Sales Charge (Load) (as a percentage
of original purchase price or redemption proceeds,
whichever is lower)................................. -- 3.00% 1.00%
</TABLE>
<TABLE>
<CAPTION>
Mortgage Securities
-----------------------
Class A Class B Class C
------- ------- -------
<S> <C> <C> <C>
Annual Fund Operating Expenses
(expenses that are deducted from fund assets)
Management Fees........................................ .54% .54% .54%
Distribution (12b-1) Fees.............................. .30% 1.00% 1.00%
Interest Expense....................................... .80% .80% .80%
Other Expenses......................................... .37% .37% .37%
Total Fund Operating Expenses........................... 2.01% 2.71% 2.71%
</TABLE>
<TABLE>
<CAPTION>
U.S. Government
-----------------------
Class A Class B Class C
------- ------- -------
<S> <C> <C> <C>
Annual Fund Operating Expenses
(expenses that are deducted from fund assets)
Management Fees........................................ .55% .55% .55%
Distribution (12b-1) Fees.............................. .30% 1.00% 1.00%
Interest Expense....................................... .81% .81% .81%
Other Expenses......................................... .28% .28% .28%
Total Fund Operating Expenses........................... 1.94% 2.64% 2.64%
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Pro Forma
U.S. Government
Combined Fund
-----------------------
Class A Class B Class C
------- ------- -------
<S> <C> <C> <C>
Annual Fund Operating Expenses
(expenses that are deducted from fund assets)
Management Fees....................................... .54% .54% .54%
Distribution (12b-1) Fees............................. .30% 1.00% 1.00%
Interest Expense...................................... .81% .81% .81%
Other Expenses........................................ .25% .25% .25%
Total Fund Operating Expenses........................... 1.90% 2.60% 2.60%
</TABLE>
<TABLE>
<CAPTION>
Limited Maturity
-----------------------
Class A Class B Class C
------- ------- -------
<S> <C> <C> <C>
Annual Fund Operating Expenses
(expenses that are deducted from fund assets)
Management Fees....................................... .65% .65% .65%
Distribution (12b-1) Fees............................. .30% 1.00% 1.00%
Interest Expense...................................... .71% .71% .71%
Other Expenses........................................ .88% .88% .88%
Total Fund Operating Expenses........................... 2.54% 3.24% 3.24%
</TABLE>
<TABLE>
<CAPTION>
U.S. Government
-----------------------
Class A Class B Class C
------- ------- -------
<S> <C> <C> <C>
Annual Fund Operating Expenses
(expenses that are deducted from fund assets)
Management Fees....................................... .55% .55% .55%
Distribution (12b-1) Fees............................. .30% 1.00% 1.00%
Interest Expense...................................... .81% .81% .81%
Other Expenses........................................ .28% .28% .28%
Total Fund Operating Expenses........................... 1.94% 2.64% 2.64%
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Pro Forma
U.S. Government
Combined Fund
-----------------------
Class A Class B Class C
------- ------- -------
<S> <C> <C> <C>
Annual Fund Operating Expenses
(expenses that are deducted from fund assets)
Management Fees....................................... .55% .55% .55%
Distribution (12b-1) Fees............................. .30% 1.00% 1.00%
Interest Expense...................................... .80% .80% .80%
Other Expenses........................................ .28% .28% .28%
Total Fund Operating Expenses........................... 1.93% 2.63% 2.63%
</TABLE>
<TABLE>
<CAPTION>
Mortgage Securities
-----------------------
Class A Class B Class C
------- ------- -------
<S> <C> <C> <C>
Annual Fund Operating Expenses
(expenses that are deducted from fund assets)
Management Fees....................................... .54% .54% .54%
Distribution (12b-1) Fees............................. .30% 1.00% 1.00%
Interest Expense...................................... .80% .80% .80%
Other Expenses........................................ .37% .37% .37%
Total Fund Operating Expenses........................... 2.01% 2.71% 2.71%
</TABLE>
<TABLE>
<CAPTION>
Limited Maturity
-----------------------
Class A Class B Class C
------- ------- -------
<S> <C> <C> <C>
Annual Fund Operating Expenses
(expenses that are deducted from fund assets)
Management Fees....................................... .65% .65% .65%
Distribution (12b-1) Fees............................. .30% 1.00% 1.00%
Interest Expense...................................... .71% .71% .71%
Other Expenses........................................ .88% .88% .88%
Total Fund Operating Expenses........................... 2.54% 3.24% 3.24%
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
U.S. Government
-----------------------
Class A Class B Class C
------- ------- -------
<S> <C> <C> <C>
Annual Fund Operating Expenses
(expenses that are deducted from fund assets)
Management Fees....................................... .55% .55% .55%
Distribution (12b-1) Fees............................. .30% 1.00% 1.00%
Interest Expense...................................... .81% .81% .81%
Other Expenses........................................ .28% .28% .28%
Total Fund Operating Expenses........................... 1.94% 2.64% 2.64%
</TABLE>
<TABLE>
<CAPTION>
Pro Forma
U.S. Government
Combined Fund
-----------------------
Class A Class B Class C
------- ------- -------
<S> <C> <C> <C>
Annual Fund Operating Expenses
(expenses that are deducted from fund assets)
Management Fees....................................... .54% .54% .54%
Distribution (12b-1) Fees............................. .30% 1.00% 1.00%
Interest Expense...................................... .80% .80% .80%
Other Expenses........................................ .25% .25% .25%
Total Fund Operating Expenses........................... 1.89% 2.59% 2.59%
</TABLE>
Examples
The Examples are to help you compare the cost of investing in the Funds with
the cost of investing in other funds. They assume that you invest $10,000 in a
Fund for the time periods indicated and then redeem all of your shares at the
end of those periods. They also assume that your investment has a 5% return
each year, that the Funds' operating expense ratios stay the same, and that all
dividends and distributions are reinvested. Your actual costs may be higher or
lower.
<TABLE>
<CAPTION>
Mortgage Securities
----------------------------
Class A Class B* Class C*
-------- -------- --------
<S> <C> <C> <C>
1 year............................................. $ 620 $ 574 $ 374
3 years............................................ $ 1,029 $ 941 $ 841
5 years............................................ $ 1,462 $1,435 $1,435
10 years........................................... $2,663 $2,719 $3,041
</TABLE>
-----------
* Assumes redemption at end of period.
10
<PAGE>
<TABLE>
<CAPTION>
U.S. Government
-------------------------
Class A Class B* Class C*
------- -------- --------
<S> <C> <C> <C>
1 year................................................ $ 614 $ 567 $ 367
3 years............................................... $1,008 $ 920 $ 820
5 years............................................... $1,427 $1,400 $1,400
10 years.............................................. $2,593 $2,649 $2,973
</TABLE>
<TABLE>
<CAPTION>
Pro Forma
U.S. Government
Combined Fund
-------------------------
Class A Class B* Class C*
------- -------- --------
<S> <C> <C> <C>
1 year................................................ $ 610 $ 563 $ 363
3 years............................................... $ 997 $ 908 $ 808
5 years............................................... $1,408 $1,380 $1,380
10 years.............................................. $2,553 $2,609 $2,934
</TABLE>
<TABLE>
<CAPTION>
Limited Maturity
-------------------------
Class A Class B* Class C*
------- -------- --------
<S> <C> <C> <C>
1 year................................................ $ 671 $ 627 $ 427
3 years............................................... $1,182 $1,098 $ 998
5 years............................................... $1,718 $1,693 $1,693
10 years.............................................. $3,178 $3,234 $3,540
</TABLE>
<TABLE>
<CAPTION>
U.S. Government
-------------------------
Class A Class B* Class C*
------- -------- --------
<S> <C> <C> <C>
1 year................................................ $ 614 $ 567 $ 367
3 years............................................... $1,008 $ 920 $ 820
5 years............................................... $1,427 $1,400 $1,400
10 years.............................................. $2,593 $2,649 $2,973
</TABLE>
<TABLE>
<CAPTION>
Pro Forma
U.S. Government
Combined Fund
-------------------------
Class A Class B* Class C*
------- -------- --------
<S> <C> <C> <C>
1 year................................................ $ 613 $ 566 $ 366
3 years............................................... $1,005 $ 917 $ 817
5 years............................................... $1,423 $1,395 $1,395
10 years.............................................. $2,583 $2,639 $2,964
</TABLE>
<TABLE>
<CAPTION>
Mortgage Securities
-------------------------
Class A Class B* Class C*
------- -------- --------
<S> <C> <C> <C>
1 year................................................ $ 620 $ 574 $ 374
3 years............................................... $1,029 $ 941 $ 841
5 years............................................... $1,462 $1,435 $1,435
10 years.............................................. $2,663 $2,719 $3,041
</TABLE>
-----------
* Assumes redemption at end of period.
11
<PAGE>
<TABLE>
<CAPTION>
Limited Maturity
-------------------------
Class A Class B* Class C*
------- -------- --------
<S> <C> <C> <C>
1 year................................................ $ 671 $ 627 $ 427
3 years............................................... $1,182 $1,098 $ 998
5 years............................................... $1,718 $1,693 $1,693
10 years.............................................. $3,178 $3,234 $3,540
</TABLE>
<TABLE>
<CAPTION>
U.S. Government
-------------------------
Class A Class B* Class C*
------- -------- --------
<S> <C> <C> <C>
1 year................................................ $ 614 $ 567 $ 367
3 years............................................... $1,008 $ 920 $ 820
5 years............................................... $1,427 $1,400 $1,400
10 years.............................................. $2,593 $2,649 $2,973
</TABLE>
<TABLE>
<CAPTION>
Pro Forma
U.S. Government
Combined Fund
-------------------------
Class A Class B* Class C*
------- -------- --------
<S> <C> <C> <C>
1 year................................................ $ 609 $ 562 $ 362
3 years............................................... $ 994 $ 905 $ 805
5 years............................................... $1,403 $1,375 $1,375
10 years.............................................. $2,543 $2,598 $2,925
</TABLE>
-----------
* Assumes redemption at end of period.
Comparison of Investment Objectives and Strategies
The following is a comparison of the investment objectives and strategies of
the Funds. The investment objectives of the Funds are substantially similar.
The primary differences in the investment strategies of the Funds are that
U.S. Government and Limited Maturity invest primarily in U.S. Government
securities, while Mortgage Securities invests primarily in mortgage-related
securities. Mortgage Securities may invest up to 35% of its assets in U.S.
Government securities but its investment policies do not require it to invest
primarily in U.S. Government securities. In addition, the dollar-weighted
average maturities of the portfolio of debt securities of Mortgage Securities
and Limited Maturity are not more than ten years. The dollar-weighted average
maturity of the portfolio of debt securities of U.S. Government varies between
one year or less and 30 years. A more detailed comparison of the Funds'
investment objectives and strategies can be found in Exhibit A. You can find
additional information about each of the Funds in the Prospectus and each
Fund's SAI.
Mortgage Securities, Limited Maturity and U.S. Government pursue similar
investment objectives and hold substantially similar securities. As a result,
the proposed Acquisitions will not cause significant portfolio
12
<PAGE>
turnover or transaction expenses due to the disposal of securities that are
incompatible with the investment objective of U.S. Government.
<TABLE>
<CAPTION>
Principal Investment
Fund Investment Objective Strategies
---- -------------------- --------------------
<S> <C> <C>
Mortgage Securities Seeks a high level of The Fund invests
current income to the primarily in a
extent consistent with diversified portfolio of
prudent investment mortgage-related
risk. securities, including
collateralized mortgage
obligations. The dollar-
weighted average maturity
of the Fund's portfolio
of debt securities is
expected to vary between
two and ten years.
Limited Maturity Seeks the highest The Fund invests
level of current primarily in U.S.
income consistent with Government securities,
low volatility of net including mortgage-
asset value. related securities and
repurchase agreements
relating to U.S.
Government securities.
The Fund takes advantage
of a wide range of
maturities of debt
securities and adjusts
the dollar-weighted
average maturity of its
portfolio from time to
time, depending on
Alliance's assessment of
relative yields on
securities of different
maturities and the
expected effect of
changes in interest rates
on the market value of
its portfolio. At all
times, however, each of
the Fund's securities has
either a remaining
maturity of not more than
ten years or a duration
not exceeding that of a
ten-year Treasury note.
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
Principal Investment
Fund Investment Objective Strategies
---- -------------------- --------------------
<S> <C> <C>
U.S. Government Seeks a high level of The Fund invests
current income that is primarily in U.S.
consistent with Government securities,
prudent investment including mortgage-
risk. related securities,
repurchase agreements and
forward contracts
relating to U.S.
Government securities.
The Fund also may invest
in non-U.S. Government
mortgage-related and
asset-backed securities,
and in high grade debt
securities secured by
mortgages on commercial
real estate or
residential properties.
The dollar-weighted
average maturity of the
Fund's investments varies
between one year or less
and 30 years.
</TABLE>
Mortgage Securities and Limited Maturity intend to sell securities and may
reinvest in other securities prior to the Acquisitions, at the request of U.S.
Government and to the extent desirable from the perspective of U.S.
Government's portfolio and practicable and consistent with applicable legal
requirements, including the Fund's investment objectives, policies and
restrictions. It is anticipated that approximately 40% of Limited Maturity's
portfolio, and approximately 60% of Mortgage Security's portfolio would be
liquidated. Given the nature of U.S. Government's portfolio of securities, the
transaction costs associated with this process are expected to be negligible.
Common Risk Considerations
Because of the similarities in investment objectives and strategies,
Mortgage Securities, Limited Maturity and U.S. Government are subject to
substantially similar investment risks, which will be similarly applicable to
the combined Fund after the Acquisitions. You should note, however, that the
value of your investment in a Fund will change with changes in the values of
that Fund's investments. Many factors can affect those values. In addition,
each Fund could be subject to additional principal risks because the types of
investments made by each Fund can change over time.
14
<PAGE>
Among the principal risks of investing in the Funds are interest rate risk,
credit risk, market risk, leverage risk, derivatives risk, liquidity risk and
management risk. Each of these risks is more fully described below. You will
find additional descriptions of specific risks of investing in a Fund in the
Prospectus.
Interest Rate Risk. This is the risk that changes in interest rates will
affect the value of a Fund's investments in debt securities, such as bonds,
notes and mortgage-related or asset-backed securities, or other income-
producing securities. Debt securities are obligations of the issuer to make
payments of principal and/or interest on future dates. Increases in interest
rates may cause the value of a Fund's investments to decline.
Interest rate risk is generally greater for investments in debt securities
with longer maturities. Because U.S. Government may invest in securities with
significantly longer maturities than the Acquired Funds, it may be subject to
greater interest rate risk.
This risk is also compounded for the Funds because they invest a substantial
portion of their assets in mortgage-related or other asset-backed securities.
The value of these securities is affected more by changes in interest rates
because when interest rates rise, the maturities of these types of securities
tend to lengthen and the value of the securities decreases more significantly.
In addition, these types of securities are subject to prepayment when interest
rates fall, which generally results in lower returns because a Fund must
reinvest its assets in debt securities with lower interest rates. Mortgage
Securities may have greater interest rate risk because it may invest more of
its assets in mortgage-related or other asset-backed securities.
Credit Risk. This is the risk that the issuer or the guarantor of a debt
security, or the counterparty to a derivatives contract, will be unable or
unwilling to make timely payments of interest or principal or to otherwise
honor its obligations. The degree of risk for a particular security may be
reflected in its credit rating. Mortgage Securities may have greater credit
risk because it may invest in lower-rated securities. These debt securities
and similar unrated securities (commonly know as "junk bonds") have
speculative elements or are predominantly speculative credit risks.
Market Risk. This is the risk that the value of a Fund's investments will
fluctuate as the bond markets fluctuate and that prices overall will decline
over shorter or longer-term periods.
Leveraging Risk. When a Fund borrows money or otherwise leverages its
portfolio, the value of an investment in that Fund will be
15
<PAGE>
more volatile and all other risks will tend to be compounded. Each Fund may
create leverage by using reverse repurchase agreements, inverse floating rate
instruments or derivatives, or by borrowing money.
Derivatives Risk. Each Fund may use derivatives, which are financial
contracts whose value depends on, or is derived from, the value of an
underlying asset, reference rate, or index. The Funds will sometimes use
derivatives as part of a strategy designed to reduce other risks. Generally,
however, the Funds use derivatives as direct investments to earn income,
enhance yield and broaden Fund diversification, which entail greater risk than
if used solely for hedging purposes. In addition to other risks such as the
credit risk of the counterparty, derivatives involve the risk of difficulties
in pricing and valuation and the risk that changes in the value of the
derivative may not correlate perfectly with relevant underlying assets, rates,
or indices.
Liquidity Risk. Liquidity risk exists when particular investments are
difficult to purchase or sell, possibly preventing a Fund from selling out of
these illiquid securities at an advantageous price. The Funds are subject to
liquidity risk because derivatives and securities involving substantial
interest rate and credit risk tend to involve greater liquidity risk. In
addition, liquidity risk tends to increase to the extent a Fund invests in
debt securities whose sale may be restricted by law or by contract.
Management Risk. Each Fund is subject to management risk because it is an
actively managed investment fund. Alliance will apply its investment
techniques and risk analyses in making investment decisions for the Funds, but
there can be no guarantee that its decisions will produce the desired results.
In some cases, derivative and other investment techniques may be unavailable
or Alliance may determine not to use them, possibly even under market
conditions where their use could benefit a Fund.
Comparison of Stockholder Services and Distribution Arrangements
The stockholder services and distribution arrangements of each Fund are the
same and are described in the Prospectus.
Federal Income Tax Consequences
No gain or loss will be recognized by the Acquired Funds, U.S. Government or
the stockholders of the Acquired Funds as a result of the Acquisitions. The
aggregate tax basis of the shares of U.S. Government received by a stockholder
of an Acquired Fund (including any fractional share to which the stockholder
may be entitled) will be the same as the
16
<PAGE>
aggregate tax basis of the stockholder's shares of the Acquired Fund. The
holding period of the shares of U.S. Government received by a stockholder of
the Acquired Fund (including any fractional share to which the stockholder may
be entitled) will include the holding period of the shares of the Acquired
Fund held by the stockholder, provided that such shares are held as capital
assets by the stockholder of an Acquired Fund at the time of the Acquisitions.
The holding period and tax basis of each asset of an Acquired Fund in the
hands of U.S. Government as a result of the Acquisitions will be the same as
the holding period and tax basis of each such asset in the hands of an
Acquired Fund prior to the Acquisitions. This tax information is based on the
advice of Seward & Kissel LLP, counsel to each of the Funds. It is a condition
to the closing of each Acquisition that such advice be confirmed in a written
opinion of counsel. An opinion of counsel is not binding on the Internal
Revenue Service.
Comparison of Investment Advisory Fees
Alliance, 1345 Avenue of the Americas, New York, New York 10105, is the
investment adviser for each Fund. Alliance is a leading international
investment adviser managing client accounts with assets as of June 30, 2000
totaling more than $388 billion (of which more than $185 billion represented
the assets of investment companies). As of June 30, 2000, Alliance managed
retirement assets for many of the largest public and private employee benefit
plans (including 29 of the nation's FORTUNE 100 companies), for public
employee retirement funds in 33 states, for investment companies, and for
foundations, endowments, banks and insurance companies worldwide. The 52
registered investment companies managed by Alliance, comprising 122 separate
investment portfolios, currently have approximately 6.1 million shareholder
accounts.
Alliance provides investment advisory services and order placement
facilities for the Funds. For these advisory services, the Funds paid Alliance
as a percentage of average daily net assets:
<TABLE>
<CAPTION>
Fee as a percentage of
Fund average daily net assets Fiscal Year Ending
---- ------------------------ ------------------
<S> <C> <C>
Mortgage Securities................. .53% December 31, 1999
Limited Maturity.................... .65% November 30, 1999
U.S. Government..................... .55% June 30, 2000
</TABLE>
Comparison of Business Structures
There are no significant differences between the Funds in terms of their
respective corporate organizational structure. Each Fund is organized as a
Maryland corporation and is governed by its Articles of
17
<PAGE>
Incorporation, as amended, By-Laws and Maryland law. For more information on
the comparison of the business structures of the Funds, see Exhibit B.
INFORMATION ABOUT THE PROPOSED TRANSACTIONS
Introduction
This Prospectus/Proxy Statement is provided to you to solicit your vote for
use at the Meetings to approve the acquisition of the assets and liabilities
of each Acquired Fund by U. S. Government. The Meetings will be held at the
offices of the Funds, 1345 Avenue of the Americas, 33rd Floor, New York, New
York 10105 at 11:00 a.m., Eastern Time, on November 14, 2000 and any
adjournments thereof. This Prospectus/ Proxy Statement, the accompanying
Notice of Special Meetings of Stockholders and the enclosed Proxy Card are
being mailed to stockholders of the Acquired Funds on or about September 14,
2000. The approval of the stockholders of U.S. Government is not being
solicited in connection with the Acquisitions, since their approval or consent
is not necessary for the consummation of the Acquisitions.
Description of the Plans
As provided in the Plans, U. S. Government will acquire all the assets and
assume all the liabilities of each Acquired Fund at the effective time of the
Acquisitions. In return, U.S. Government will issue, and each Acquired Fund
will distribute to its stockholders, a number of full and fractional shares of
U.S. Government, determined by dividing the net value of all the assets of the
Acquired Fund by the NAV of one share of U.S Government. For this purpose, the
Plans provide the times for and methods of determining the net value of the
assets of each Acquired Fund. The Plans provide that each stockholder of an
Acquired Fund will be credited with shares of U.S. Government corresponding to
the aggregate NAV of the class of the Acquired Fund's shares that the
stockholder holds of record at the effective time of the Acquisitions.
Following the distribution of U.S. Government shares, each Acquired Fund
will cancel its outstanding shares, wind up its affairs, and dissolve as soon
as is reasonably possible after an Acquisition. If a majority of the shares of
an Acquired Fund do not approve an Acquisition, that Fund will not be
acquired. In such a case, that Acquired Fund will continue its operations and
its Directors will consider what future action, if any, is appropriate.
Alliance will pay all of the expenses of the Acquisitions.
18
<PAGE>
The Acquisitions are expected to occur late in the last quarter of this year
or early in the first quarter of the year 2001. The Acquisitions are
conditioned upon both stockholder approval and each Fund satisfying the terms
of the Plan applicable to it. After an Acquisition, an Acquired Fund would
deregister as an investment company under the Investment Company Act of 1940,
as amended ("1940 Act") and dissolve under Maryland law.
Completion of the Acquisitions is subject to certain other conditions set
forth in the Plans, some of which may be waived by a party to a Plan. A Plan
may be amended in any mutually agreed manner, except that no amendment may be
made subsequent to the Meetings that materially alters the obligations of
either party. The parties to a Plan may terminate the Plan by mutual consent
and either party has the right to terminate the Plan under certain
circumstances. Among other circumstances, either party may at any time
terminate a Plan unilaterally upon a determination by the party's Board of
Directors that proceeding with the Plan is not in the best interest of its
stockholders.
A copy of a form of the Plans is attached as Exhibit C.
Board Considerations in Recommending the Acquisitions
At regular meetings of the Boards of Directors of the Acquired Funds held on
July 19-20, 2000, Alliance recommended that the Boards of Directors approve and
recommend to the stockholders for their approval a combination of the Acquired
Funds with U.S. Government by means of tax-free acquisitions of the assets and
assumptions of the liabilities of those Funds by U.S. Government in exchange
for shares of U.S. Government, which shares would then be distributed to the
stockholders of the Acquired Funds in liquidation of those Funds. The Funds
have a common Board of Directors. The Directors considered the factors
discussed below from the point of view of the interests of each of the Funds
and its stockholders. After careful consideration, each Board of Directors
accepted Alliance's recommendations, concluded that the Acquisitions and Plans
as applied to its Fund would be in the best interests of that Fund and its
stockholders and recommended that the stockholders of that Fund approve the
proposed Plan and Acquisition.
Alliance made its recommendations to the Boards of Directors in the context
of a general discussion of the substantial growth of the mutual funds advised
by Alliance (the "Alliance Mutual Funds") in recent years. Total Alliance
Mutual Fund assets, which are rapidly approaching the $200 billion level, are
invested in well over 100 operating portfolios
19
<PAGE>
affording investors in all selling channels a highly diversified range of
choices among asset classes, investment disciplines and pricing alternatives.
To a large extent, this growth has been a by-product of the last ten years'
fundamentally different investment climate, which has precipitated
correspondingly dramatic changes in investors' preferences and needs. The long
U.S. bull market, historically low (if recently increasing) interest rates and
the sustained dominance in the marketplace of equity-oriented investment
vehicles have produced conditions that favor many Alliance Mutual Funds, but,
inevitably, disfavor some other funds, which originated in specific response
to earlier different investment conditions. More generally, as the Alliance
Mutual Fund family proliferates, it becomes increasingly important that
Alliance and the funds' principal underwriter, Alliance Fund Distributors,
Inc. ("AFD"), remain alert to instances of particular funds competing with
each other to the point that their consolidation would both benefit their
respective stockholders and represent a logical step from the marketing and
sales standpoints.
After considerable study and analysis, Alliance and AFD concluded that the
three Alliance Mutual Funds that focus on U.S. Government securities--U.S.
Government, Mortgage Securities and Limited Maturity--are no longer
sufficiently distinguishable and independently attractive in the current
environment to warrant their continued operation as separate investment
vehicles. Rather, Alliance and AFD believed that the interests of each Fund's
stockholders would be served by the three Funds' consolidation into the Fund
that they believed is the most viable of the three Funds, which would
thereafter continue as the sole U.S. Government securities fund among the
retail Alliance Mutual Funds.
Alliance advised the Boards of Directors that it believed that, both in the
current environment and over the longer term, U.S. Government is the only
truly viable Fund among the three and is clearly the best positioned to
attract and retain stockholders. U.S. Government has a more flexible
investment charter, in terms of sectors within the large class of U.S.
Government securities and permissible maturities, than either of the other two
Funds. Additionally, U.S. Government has always performed better than Limited
Maturity and has recently had a performance advantage over Mortgage
Securities, largely, Alliance believed, because of the exploitation of its
broader investment charter.
Alliance discussed with the Boards of Directors the investment objectives
and strategies of the Funds. Alliance noted that the three Funds
20
<PAGE>
share similar investment themes and have closely related fundamental
investment objectives. The Funds' investment strategies differ somewhat,
reflecting different emphases within the large government securities market
and, at least as between Mortgage Securities and U.S. Government, differing
investment philosophies. Alliance advised the Boards of Directors that it
believed that an intermediate maturity government fund such as Limited
Maturity, which maintains investments with a remaining maturity of not more
than 10 years or a duration not exceeding that of a ten-year Treasury note,
has little viability. In a market environment in which significant volatility
has become both frequent and foreseeable, Alliance believed that there is
little investment advantage to be had from an attempt to limit volatility by
restricting maturities to the intermediate range. The realities of the current
fixed-income market, by limiting the return that can be expected from what has
proven to be the Fund's risk profile, appear to have made a fund such as
Limited Maturity obsolete.
Alliance also discussed the investment strategies of Mortgage Securities,
which invests primarily in a diversified portfolio of mortgage-related
securities. Alliance advised the Boards of Directors that it had concluded
that a fund such as Mortgage Securities, which is marketed as focusing on the
mortgage sector, is becoming less attractive to fixed-income investors.
Alliance noted that because the Fund's investment charter is so limited,
Alliance's only real opportunity to add value is to attempt to time interest
rate changes. Put differently, Mortgage Securities' compulsory concentration
in the mortgage sector effectively prevents Alliance from employing the
research-intensive, relative value "sector rotation" strategy that Alliance
believes is best suited to both the demands of today's fixed-income markets
and the strengths of Alliance's research process.
Alliance noted that the flexibility of U.S. Government's investment charter
enables Alliance to diversify its investments more broadly and to add value
through sector rotation within the broad U.S. Government and mortgage-backed
markets, rather than solely through the anticipation of interest rate
movements. The ability to invest in these sectors also allows Alliance to take
advantage, to the benefit of stockholders, of the resources and capabilities
of its large fixed-income research organization. In addition, such increased
diversification allows U.S. Government greater opportunities for current
income than either Mortgage Securities or Limited Maturity and provides
additional tools that the portfolio managers may utilize for preserving
capital during periods of market volatility.
In sum, from the perspective of investment strategies, Alliance and AFD
advised the Boards of Directors that they believed that, in the current
21
<PAGE>
and foreseeable environment, the Funds are viewed as effectively competing
with each other and that U.S. Government is better situated to fulfill the
needs and expectations of stockholders and realize the benefits of asset
growth. Therefore, Alliance and AFD concluded that it would be in the best
interests of the stockholders of all three Funds that U.S. Government becomes
Alliance's only open-end Government securities fund.
Alliance also discussed other benefits that it expected would result from
the Acquisitions. U.S. Government's expense ratio is significantly lower than
the expense ratio of Limited Maturity or Mortgage Securities. Alliance
provided the Boards of Directors with a summary of the pro forma operating
expenses of the combined Fund, assuming both Acquisitions take place, that
indicates that, based on the pro forma operating expenses for Class A shares
at asset levels as of June 30, 2000, the Acquisitions would produce expense
ratio benefits to the stockholders of approximately 0.65% for Limited
Maturity, 0.12% for Mortgage Securities and 0.05% for U.S. Government.
Alliance also noted that U.S. Government had significantly outperformed
Limited Maturity over the past five years. While historically Mortgage
Securities has had better performance than U.S. Government, U.S. Government
has begun this year to outperform Mortgage Securities. (Additional information
on the historical performance of the Funds is available in the Prospectus.) In
addition, U.S. Government has recently begun to perform well within its
competitive universe. As of May 31, 2000, the total return performance of U.S.
Government's Class A shares ranked 19 out of 189 general U.S. Government funds
tracked by Lipper Inc. for the year-to-date period. This puts U.S. Government
in the top decile within that competitive universe. In contrast, Limited
Maturity and Mortgage Securities are poorer performers within their Lipper
universes with the total return of each Fund's Class A shares ranking 113 out
of 131 and 22 out of 61, respectively, for the same period.
Alliance also provided information to the Boards of Directors about each
Fund's realized and unrealized capital gains and losses and capital loss
carryforwards as of June 30, 2000. Alliance noted that each Fund has
substantial loss carryforwards and that the ability of U.S. Government to
utilize these loss carryforwards (including its own) in future years will be
subject to restrictions imposed by the Internal Revenue Code of 1986, as
amended (the "Code"). In particular, the amount of capital loss carryforwards
of an Acquired Fund that can be utilized by U.S. Government in a given year
would be limited to an amount equal to the total NAV of the Fund immediately
prior to the Acquisition times a
22
<PAGE>
specified interest rate (which is currently 5.79%). Notwithstanding the
applicable limitations, the substantial amount of the capital loss
carryforwards that will be available from U.S. Government and the Acquired
Funds is such that Alliance believed that the limitations resulting from the
Acquisitions would have no practical effect.
The Boards of Directors also considered, among other things: (i) the form of
the relevant Plan and the terms and conditions of the relevant Acquisition;
(ii) whether the relevant Acquisition would result in the dilution of
stockholders' interests; (iii) the investment objectives, policies and
strategies and portfolio management personnel of the parties to the particular
Acquisition; (iv) the effect of the anticipated realignment of the investment
holdings of the relevant Fund, including the associated costs and the
resulting tax consequences in connection with the possible disposition of
certain portfolio holdings prior to or shortly after the closing of the
relevant Acquisition; (v) the benefits of the relevant Acquisition to persons
other than the relevant Fund (i.e., Alliance and other affiliated persons of
the Fund); (vi) the fact that U.S. Government will assume all the liabilities
of each Acquired Fund; (vii) the expected federal income tax consequences of
the relevant Acquisition; (viii) historical and pro forma information,
including the information set forth above and information regarding realized
and unrealized gains and losses of the Funds; (ix) whether the Acquisitions
would be preferable to acquisitions by potential acquirers other than U.S.
Government, including funds not sponsored by Alliance; (x) the fact that
Alliance has agreed to pay all the expenses of the Acquisitions other than
portfolio realignment costs, and has agreed to indemnify U.S. Government for a
three-year period against undisclosed liabilities of Mortgage Securities and
Limited Maturity to the extent such liabilities are known by Alliance's senior
management at the time of the Acquisitions; (xi) the carryforward of
unreimbursed distribution expenses of AFD for the Acquired Funds under the
U.S. Government Rule 12b-1 plan; (xii) the fact that the relevant Acquisition
might or might not be effected together with the other Acquisition; (xiii) the
respective average account sizes of the Funds; and (xiv) the effect of the
Acquisitions on the advisory fees of the Funds.
During their consideration of the relevant Acquisition, the independent
directors of each Fund (those directors who are not "interested persons" as
defined under the 1940 Act) consulted separately with their legal counsel.
Based on the factors described above, the Boards of Directors each determined
that the relevant Acquisition would be in the best interests of each Acquired
Fund and its stockholders and would not result in dilution of stockholders'
interests, and recommended that the stockholders of each Acquired Fund approve
the proposed Acquisition.
23
<PAGE>
Existing and Pro Forma Capitalization
The following tables set forth (i) the capitalization of the Funds and (2)
the pro forma capitalization of U.S. Government as adjusted giving effect to
the proposed acquisition of assets at net asset value:
<TABLE>
<CAPTION>
Total Shares NAV
Fund (Class) Net Assets Outstanding Per Share
------------ ------------ ----------- ---------
<S> <C> <C> <C>
Mortgage Securities (Class A)................ $396,426,497 48,970,216 $8.10
U.S. Government (Class A).................... $430,895,264 61,617,802 $6.99
Pro Forma Combined........................... $827,321,761 118,364,404 $6.99
Mortgage Securities (Class B)................ $ 23,471,075 2,896,463 $8.10
U.S. Government (Class B).................... $200,282,893 28,614,921 $7.00
Pro Forma Combined........................... $223,753,968 31,966,542 $7.00
Mortgage Securities (Class C)................ $ 16,524,457 2,037,636 $8.11
U.S. Government (Class C).................... $112,807,847 16,109,033 $7.00
Pro Forma Combined........................... $129,332,304 18,469,781 $7.00
Limited Maturity (Class A)................... $ 26,180,635 2,935,453 $8.92
U.S. Government (Class A).................... $430,895,264 61,617,802 $6.99
Pro Forma Combined........................... $457,075,899 65,363,759 $6.99
Limited Maturity (Class B)................... $ 16,122,011 1,807,599 $8.92
U.S. Government (Class B).................... $200,282,893 28,614,921 $7.00
Pro Forma Combined........................... $216,404,904 30,918,319 $7.00
Limited Maturity (Class C)................... $ 19,678,412 2,206,887 $8.92
U.S. Government (Class C).................... $112,807,847 16,109,033 $7.00
Pro Forma Combined........................... $132,486,259 18,921,239 $7.00
Mortgage Securities (Class A)................ $396,426,497 48,970,216 $8.10
Limited Maturity (Class A)................... $ 26,180,635 2,935,453 $8.92
U.S. Government (Class A).................... $430,895,264 61,617,802 $6.99
Pro Forma Combined........................... $853,502,397 122,110,361 $6.99
Mortgage Securities (Class B)................ $ 23,471,075 2,896,463 $8.10
Limited Maturity (Class B)................... $ 16,122,011 1,807,599 $8.92
U.S. Government (Class B).................... $200,282,893 28,614,921 $7.00
Pro Forma Combined........................... $239,875,978 34,269,940 $7.00
Mortgage Securities (Class C)................ $ 16,524,457 2,037,636 $8.11
Limited Maturity (Class C)................... $ 19,678,412 2,206,887 $8.92
U.S. Government (Class C).................... $112,807,847 16,109,033 $7.00
Pro Forma Combined........................... $149,010,716 21,281,986 $7.00
</TABLE>
Distribution Expenses
Each Fund has adopted a plan under SEC Rule 12b-1 ("Rule 12b-1 Plan") that
allows the Fund to pay asset-based sales charge or distribution and service
fees for the distribution and sale of its shares. The amount of these fees as a
percentage of aggregate average daily net assets is for each
24
<PAGE>
Fund's Class A shares .30% and for the Class B and Class C shares 1.00%. As of
June 30, 2000, AFD had incurred distribution expenses for Mortgage Securities
and Limited Maturity in the amount of, respectively, $60,205,458 and
$8,444,665 for Class B shares and $2,952,244 and $5,307,986 for Class C shares
that had not been reimbursed under the Rule 12b-1 Plan or recovered through
contingent deferred sales charges or otherwise. The Boards of Directors have
adopted a resolution providing that, in connection with the Acquisitions, the
amount of these unreimbursed distribution expenses existing at the time of the
closing of the Acquisitions may be defrayed from future fees paid to AFD under
the Rule 12b-1 Plan of U.S. Government, subject to appropriate assurances that
this treatment is consistent with applicable law. While in the past the staff
of the SEC has suggested that such payments by an acquiring fund would be
inappropriate, more recently the staff has indicated that it would not object
to such a "carryforward" if it were implemented in accordance with Rule 12b-1
requirements. It is unlikely that AFD will receive reimbursement for
unreimbursed distribution expenses incurred on behalf of U.S. Government given
the continued growth in U.S. Government's assets in the foreseeable future,
which would be reimbursed before the reimbursement of the carryover of any
unreimbursed distribution expenses of the Acquired Funds. The Boards of
Directors approved the assumption of the Acquired Funds' unreimbursed
expenses, however, on the basis that Alliance will receive adequate assurances
that, in the event of any reimbursements of these expenses, the payments would
be appropriate under applicable regulatory requirements.
Federal Income Tax Consequences
Each Fund will receive an opinion of Seward & Kissel LLP, its counsel,
substantially to the following effect: (i) the Acquisition to which the Fund
is a party will constitute a "reorganization" within the meaning of section
368(a) of the Code and that U.S. Government and the Acquired Fund in such
Acquisition will each be "a party to a reorganization" within the meaning of
section 368(b) of the Code; (ii) each stockholder of the Acquired Fund will
recognize no gain or loss on such stockholder's receipt of shares of U.S.
Government (including any fractional share to which the stockholder may be
entitled) in exchange for the stockholder's shares of the Acquired Fund in
connection with the Acquisition; (iii) neither the Acquired Fund nor U.S.
Government will recognize any gain or loss upon the transfer of all of the
assets of the Acquired Fund to U.S. Government in exchange for shares of U.S.
Government and the assumption by U.S. Government of the liabilities of the
Acquired Fund pursuant to the applicable Plan or upon the
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<PAGE>
distribution of shares of U.S. Government to stockholders of the Acquired Fund
in exchange for their respective shares of the Acquired Fund; (iv) the holding
period and tax basis of the assets of the Acquired Fund acquired by U.S.
Government will be the same as the holding period and tax basis that the
Acquired Fund had in such assets immediately prior to the Acquisition; (v) the
aggregate tax basis of shares of U.S. Government received in connection with
the Acquisition by each stockholder of the Acquired Fund (including any
fractional share to which the stockholder may be entitled) will be the same as
the aggregate tax basis of the shares of the Acquired Fund surrendered in
exchange therefor; (vi) the holding period of shares of U.S. Government
received in connection with the Acquisition by each stockholder of the
Acquired Fund (including any fractional share to which the stockholder may be
entitled) will include the holding period of the shares of the Acquired Fund
surrendered in exchange therefor, provided that such Acquired Fund shares
constitute capital assets in the hands of the stockholder as of the Closing
Date; and (vii) U.S. Government will succeed to the capital loss carryovers of
the Acquired Fund, if any, under section 381 of the Code, but the use by U.S.
Government of any such capital loss carryovers (and of capital loss carryovers
of U.S. Government) may be subject to limitation under section 383 of the
Code.
Stockholders of an Acquired Fund should consult their tax advisers regarding
the effect, if any, of an Acquisition in light of their individual
circumstances. Because the foregoing only relates to the federal income tax
consequences of an Acquisition, those stockholders also should consult their
tax advisers as to state and local tax consequences, if any, of an
Acquisition.
VOTING INFORMATION
Each Board of Directors has fixed the close of business on August 25, 2000
as the record date for the determination of stockholders entitled to notice
of, and to vote at, the Meetings and at any postponements or adjournments
thereof. The outstanding voting shares of Mortgage Securities as of that date
consisted of a total of 52,750,448 shares of common stock, each share entitled
to one vote, consisting of 48,145,394 Class A shares, 2,599,005 Class B shares
and 2,006,049 Class C shares. The outstanding voting shares of Limited
Maturity as of that date consisted of a total of 7,057,324 shares of common
stock, each share entitled to one vote, consisting of 3,021,395 Class A
shares, 1,832,733 Class B shares and 2,203,196 Class C shares.
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<PAGE>
Those stockholders who hold shares directly and not through a broker or
nominee (that is, a stockholder of record) may vote their shares by completing
a Proxy Card and returning it by mail in the enclosed postage-paid envelope as
well as either telephoning toll free 1-800-597-7836 or via the Internet
website at https://vote.proxy-direct.com. Shares held for a stockholder
through a broker or nominee (who is the stockholder of record for those
shares) should be voted by following the instructions provided to the
stockholder by the broker or nominee. The telephone and Internet voting
instructions to be followed by a stockholder of record, including use of the
Control Number on the stockholder's Proxy Card, are designed to verify
stockholder identities, to allow stockholders to give voting instructions and
to confirm that stockholder instructions have been recorded properly.
Stockholders who vote by telephone or via the Internet should not also return
a Proxy Card. Stockholders who vote via the Internet should be aware that they
are responsible for any applicable telecommunication and access charges. A
stockholder of record 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 voting another proxy
(either by signing and mailing another Proxy Card or, by telephone or via the
Internet as indicated above), or by personally voting at the Meetings.
Properly executed proxies may be returned with instructions to abstain from
voting or withhold authority to vote (an "abstention") or represent a broker
"non-vote" (which is a proxy from a broker or nominee indicating that the
broker or nominee has not received instructions from the beneficial owner or
other person entitled to vote shares on a particular matter with respect to
which the broker or nominee does not have the discretionary power to vote).
Abstentions and broker non-votes will be considered present for purposes of
determining the existence of a quorum for the transaction of business, but
will have the effect of a vote against the Proposal. Approval of the Proposal
requires the affirmative vote of a majority of the total outstanding shares of
each Acquired Fund. The approval and closing of one Acquisition is not
contingent upon the approval and closing of the other Acquisition. If any
proposal, other than the Proposal to be voted on by the stockholders of each
Acquired Fund, properly comes before the Meetings, the shares represented by
proxies will be voted on all such proposals in the discretion of the person or
persons voting the proxies. The Acquired Funds have not received notice of,
and are not otherwise aware of, any other matter to be presented at the
Meetings.
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A quorum for the Meetings will consist of the presence in person or by proxy
of the holders of one-third of the shares of each Acquired Fund entitled to
vote at the Meetings. In the event that a quorum is not represented at the
Meetings or, even if a quorum is so present, in the event that sufficient
votes in favor of the position recommended by the Boards of Directors on the
Proposal are not timely received, the persons named as proxies may propose and
vote for one or more adjournments of the Meetings with no other notice than
announcement at the Meetings, in order to permit further solicitation of
proxies. Shares represented by proxies indicating a vote against the Proposal
will be voted against adjournment.
The Acquired Funds have engaged Shareholder Communications Corporation, 17
State Street, New York, New York 10004, to assist the Acquired Funds in
soliciting proxies for the Meetings. Shareholder Communications Corporation
will receive a fee of $7,500 from Alliance for its solicitation services, plus
reimbursement of out-of-pocket expenses.
Share Information
Outstanding Shares. As of June 30, 2000, each class of each Fund had the
following number of shares of common stock outstanding.
<TABLE>
<CAPTION>
Shares
Fund (Class) Outstanding
------------ -----------
<S> <C>
Mortgage Securities
Class A.......................................................... 48,970,216
Class B.......................................................... 2,896,463
Class C.......................................................... 2,037,636
Limited Maturity
Class A.......................................................... 2,935,453
Class B.......................................................... 1,807,599
Class C.......................................................... 2,206,887
U.S. Government
Class A.......................................................... 61,617,802
Class B.......................................................... 28,614,921
Class C.......................................................... 16,109,033
</TABLE>
Share Ownership. As of June 30, 2000, the officers and Directors of each
Acquired Fund as a group beneficially owned less than 1% of the outstanding
shares of each class of common stock of that Fund and, to the knowledge of the
Aquired Funds, the following persons owned either of
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record or beneficially, 5% or more of the outstanding shares of the indicated
class of each Fund.
<TABLE>
<CAPTION>
Percentage
Fund Ownership
---- ----------
<S> <C>
Mortgage Securities:
MLPF&S Class A.................................................... 9.00%
MLPF&S Class B.................................................... 14.95%
MLPF&S Class C.................................................... 38.79%
Limited Maturity:
MLPF&S Class A.................................................... 15.17%
FleetBoston Robertson Stephens.................................... 6.46%
MLPF&S Class B.................................................... 28.68%
MLPF&S Class C.................................................... 48.18%
U.S. Government:
MLPF&S Class A.................................................... 11.27%
MLPF&S Class B.................................................... 24.01%
MLPF&S Class C.................................................... 36.43%
Ho Chunk Nation................................................... 6.84%
</TABLE>
LEGAL MATTERS
The validity of the shares offered hereby will be passed upon for the Funds
by Seward & Kissel LLP. Seward & Kissel LLP will rely upon the opinion of
Venable, Baetjer and Howard, LLP for matters relating to Maryland law.
EXPERTS
The audited financial information in the Prospectus/Proxy Statement and the
SAI has been included in reliance on the report of Ernst & Young LLP,
independent auditors, 787 Seventh Avenue, New York, New York 10019, given on
its authority as experts in auditing and accounting.
The Boards of Directors of Mortgage Securities and Limited Maturity
recommend approval of the Proposal.
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<PAGE>
EXHIBIT A
COMPARISON OF INVESTMENT OBJECTIVES AND STRATEGIES
This discussion provides a more complete description of each Fund's
investment objectives and principal strategies. Additional discussion of a
Fund's investments and the risks of investing in a Fund can be found in the
Prospectus and the Funds' SAIs.
Fund Investment Objective
Mortgage Securities:
Seeks a high level of current income to the extent
consistent with prudent investment risk.
Limited Maturity:
Seeks the highest level of current income consistent
with low volatility of net asset value.
U.S. Government:
Seeks a high level of current income that is
consistent with prudent investment risk.
Fund Investment Strategies
Mortgage Securities: The Fund maintains at least 65% of its total assets
in mortgage-related securities, including
Collateralized Mortgage Obligations. The average
weighted maturity of the Fund's portfolio of fixed-
income securities is expected to vary between two
and ten years.
The Fund expects that governmental, government-
related, or private entities may create mortgage
loan pools offering pass- through investments in
addition to those described in this Prospectus. The
mortgages underlying these securities may be
instruments whose principal or interest payments may
vary or whose terms to maturity may differ from
customary long-term fixed-rate mortgages. As new
types of mortgage-related securities are developed
and offered to investors, the Fund will consider
making investments in these new types of securities.
The Fund may invest up to 20% of its total assets in
lower-rated mortgage-related securities.
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The Fund may invest up to 35% of its total assets
in:
. U.S. Government securities;
. qualifying bank deposits;
. prime commercial paper or, if unrated, issued by
companies that have an outstanding high quality
debt issue; and
. high-grade asset-backed securities.
Limited Maturity: As a matter of fundamental policy, the Fund normally
invests at least 65% of its total assets in U.S.
Government securities, including mortgage-related
securities and repurchase agreements relating to
U.S. Government securities.
In pursuing its investment objective and policies,
the Fund takes advantage of a wide range of
maturities of debt securities and adjusts the
dollar-weighted average maturity of its portfolio
from time to time, depending on its assessment of
relative yields on securities of different
maturities and the expected effect of future changes
in interest rates on the market value of the Fund's
portfolio. At all times, however, each security held
by the Fund has either a remaining maturity of not
more than ten years or a duration not exceeding that
of a ten-year Treasury note.
The Fund may invest up to 35% of its total assets
in:
. high quality asset-backed securities, including
mortgage-related securities that are not U.S.
Government securities;
. treasury securities issued by private corporate
issuers;
. qualifying bank deposits;
. high quality commercial paper or, if unrated,
issued by companies that have high quality debt
issues outstanding; and
. high quality debt securities of corporate issuers.
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<PAGE>
The Fund may invest up to 15% of its total assets in
high-quality debt securities denominated in U.S.
Dollars or in foreign currencies and issued or
guaranteed by foreign governments or issued by
foreign non-governmental issuers. The amount of Fund
investments in foreign debt securities will vary and
may include those of a number of foreign countries
or, depending upon market conditions, those of a
single country.
U.S. Government: As a matter of fundamental policy, the Fund pursues
its objective by investing at least 65% of its total
assets in U.S. Government securities, repurchase
agreements and forward contracts relating to U.S.
Government securities. The Fund may invest the
remaining 35% of its total assets in non-U.S.
Government mortgage-related and asset-backed
securities, including high-grade debt securities
secured by mortgages on commercial real estate or
residential rental properties.
The Fund will not invest in any security rated below
BBB or Baa. The Fund may invest in unrated
securities of equivalent quality to the rated
securities in which it may invest, as determined by
Alliance. The Fund expects, but is not required, to
dispose of securities that are downgraded below BBB
and Baa or, if unrated, that are determined by
Alliance to have undergone similar credit quality
deterioration.
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<PAGE>
EXHIBIT B
COMPARISON OF BUSINESS STRUCTURES
The following information provides only a summary of the major similarities
and differences between the organizational structure and governing documents
of U.S. Government, Mortgage Securities and Limited Maturity. All three Funds
are organized as Maryland corporations. Accordingly, unless noted below, there
are no significant differences between the Funds in terms of their respective
corporate organizational structure. Copies of the Charter and By-laws of U.S.
Government, Mortgage Securities and Limited Maturity are a part of each Fund's
respective Registration Statement filed with the SEC and may be obtained as
provided below.
General. U.S. Government, Mortgage Securities and Limited Maturity are
organized as Maryland corporations and are governed by each of their Charters,
By-Laws and Maryland law. The Funds are not required to hold annual meetings
of stockholders and each will do so only under certain specified circumstances
or when required under Federal law. Each Fund has procedures available to its
respective stockholders for calling stockholders' meetings for the removal of
Directors.
Pursuant to Maryland law, any Director of a Fund may be removed, either with
or without cause, at any meeting of stockholders duly called and at which a
quorum is present by the affirmative vote of the majority of the votes
entitled to be cast.
The Directors of a Fund are required to promptly call a meeting of
stockholders for the purpose of voting upon the question of removal when
requested to do so in writing by the record holders of not less than 10% of
the outstanding shares. In addition, special meetings of stockholders for any
other purpose shall be called by a Fund's Secretary upon the written request
of holders of shares entitled to cast not less than 25% of all the votes
entitled to be cast at the meeting.
Except as otherwise required by law, the presence in person or by proxy of
the holders of one-third of the shares entitled to be cast constitutes a
quorum at any meeting of stockholders of each Fund. Pursuant to each Charter,
in instances involving extraordinary corporate action, such as in a merger or
in making amendments to its Charter, the vote of a majority of the aggregate
number of votes entitled to be cast on a matter is required in order to take
or authorize any such action for which approval of the stockholders is sought.
With respect to other
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<PAGE>
matters, the By-Laws of each Fund provide that when a quorum is present at any
meeting, the affirmative vote of a majority of the votes (or with respect to
the election of Directors, a plurality of votes) cast shall decide any
question brought before such meeting.
Shares. U.S. Government has authorized capital stock of 200,000,000 shares
of Class A Common Stock, 200,000,000 shares of Class B Common Stock,
200,000,000 shares of Class C Common Stock and 200,000,000 shares of Advisor
Class Common Stock, each having a par value of $.001 per share. Limited
Maturity has authorized capital stock of 3,000,000,000 shares of Class A
Common Stock, 3,000,000,000 shares of Class B Common Stock, 3,000,000,000
shares of Class C Common Stock and 3,000,000,000 shares of Advisor Class
Common Stock, each having a par value of $.001 per share. Mortgage Securities
has authorized capital stock of 600,000,000 shares of Class A Common Stock,
600,000,000 shares of Class B Common Stock, 600,000,000 shares of Class C
Common Stock and 600,000,000 shares of Advisor Class Common Stock, each having
a par value of $.01 per share.
Liability of Directors and Officers. Each of the Funds indemnifies its
officers and Directors, as applicable, to the full extent permitted by law.
This indemnification does not protect any such person against any liability to
a Fund or any stockholder thereof to which such person would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the satisfaction of such person's
office.
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<PAGE>
EXHIBIT C
FORM OF AGREEMENT AND
PLAN OF ACQUISITION AND LIQUIDATION
As of
[ ], 2000
This Agreement and Plan of Acquisition and Liquidation (the "Plan") is made
as of this [ ] day of [ ], 2000, by and between U.S. Government Portfolio
of Alliance Bond Fund, Inc., a Maryland corporation ("U.S. Government"), and
[ ], a Maryland corporation (the "Acquired Fund").
WHEREAS, U.S. Government and the Acquired Fund are open-end management
investment companies registered with the Securities and Exchange Commission
(the "SEC") under the Investment Company Act of 1940, as amended (the "1940
Act");
WHEREAS, the parties desire that U.S. Government acquire the assets and
assume the liabilities of the Acquired Fund in exchange for shares of equal net
asset value of U.S. Government and the distribution of such shares of U.S.
Government to the stockholders of the Acquired Fund (the "Acquisition") and
that the Acquired Fund thereafter liquidate and dissolve; and
WHEREAS, the parties intend that the Acquisition qualify as a
"reorganization" within the meaning of section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code"), and that with respect to the
Acquisition, U.S. Government and the Acquired Fund will each be a "party to a
reorganization" within the meaning of section 368(b) of the Code;
Now, therefore, U.S. Government and the Acquired Fund agree as follows:
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<PAGE>
1. Definitions
In addition to the terms elsewhere defined herein, each of the following
terms shall have the meaning indicated for that term as follows:
1933 Act Securities Act of 1933, as amended.
1934 Act Securities Exchange Act of 1934, as
amended.
Assets All assets of any kind and all
interests, rights, privileges and powers
of or attributable to the Acquired Fund
or any class of the Acquired Fund's
shares, as appropriate, whether or not
determinable at the appropriate
Effective Time and wherever located,
including, without limitation, all cash,
cash equivalents, securities, claims
(whether absolute or contingent, known
or unknown, accrued or unaccrued or
conditional or unmatured), contract
rights and receivables (including
dividend and interest receivables) owned
by the Acquired Fund or attributable to
any class of the Acquired Fund's shares
and any deferred or prepaid expense
shown as an asset on the Acquired Fund's
books.
Closing Date Such date prior to July 1, 2001 as the
parties agree to.
Effective Time 5:00 p.m. Eastern time on the Closing
Date, or such other time as the parties
may agree to in writing.
Financial Statements
The audited financial statements of the
relevant Fund for its most recently
completed fiscal year and, if
applicable, the unaudited financial
statements of that Fund for its most
recently completed semi-annual period.
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<PAGE>
Fund
U.S. Government and/or the Acquired
Fund, as the case may be.
Liabilities All liabilities of the Acquired Fund or
any class thereof, whether known or
unknown, accrued or unaccrued, absolute
or contingent or conditional or
unmatured.
N-14 Registration Statement The Registration Statement of U.S.
Government on Form N-14 under the 1940
Act that will register the shares of
U.S. Government to be issued in the
Acquisition and will include the proxy
materials necessary for the stockholders
of the Acquired Fund to approve the
Acquisition.
Valuation Time The time on the Closing Date, or the
business day immediately preceding the
Closing Date if the Closing Date is not
a business day or such other date as the
parties may agree to in writing, when
for purposes of the Plan U.S. Government
determines its net asset value per share
and the Acquired Fund determines the net
value of the Assets.
2. Regulatory Filings
U.S. Government shall promptly prepare and file the N-14 Registration
Statement with the SEC, and U.S. Government and the Acquired Fund also shall
make any other required or appropriate filings with respect to the actions
contemplated hereby.
3. Stockholder Action
As soon as practicable after the effective date of the N-14 Registration
Statement, the Acquired Fund shall hold a stockholders meeting to consider and
approve the Acquisition and this Plan, and such other matters as the Board of
Directors of the Acquired Fund may determine. Such approval by the
stockholders of the Acquired Fund shall, to the extent necessary to permit the
consummation of the transactions contemplated herein without violating any
investment objective, policy or
37
<PAGE>
restriction of the Acquired Fund, be deemed to constitute approval by the
stockholders of a temporary amendment of any investment objective, policy or
restriction that would otherwise be inconsistent with or violated upon the
consummation of such transactions solely for the purpose of consummating such
transactions.
4. Transfer of the Acquired Fund's Assets. U.S. Government and the Acquired
Fund shall take the following steps with respect to the Acquisition, as
applicable:
(a) On or prior to the Closing Date, the Acquired Fund shall pay or
provide for the payment of all of the Liabilities, expenses, costs and
charges of or attributable to the Acquired Fund that are known to the
Acquired Fund and that are due and payable prior to or as of the Closing
Date.
(b) Prior to the Effective Time, the Acquired Fund shall declare and pay
to its stockholders on its normal monthly schedule a dividend and/or other
distribution in an amount such that it will have distributed substantially
all of its theretofore undistributed investment company taxable income, if
any (as defined in Code section 852), and net capital gain, if any (as
defined in Code section 1222).
(c) At the Effective Time, pursuant to Articles of Transfer accepted for
record by the State Department of Assessments and Taxation of Maryland
(the "SDAT"), the Acquired Fund shall assign, transfer, deliver and convey
the Assets to U.S. Government, subject to the Liabilities. U.S. Government
shall then accept the Assets and assume the Liabilities such that at and
after the Effective Time (i) the Assets at or after the Effective Time
shall become and be assets of U.S. Government, and (ii) the Liabilities at
the Effective Time shall attach to U.S. Government, enforceable against
U.S. Government to the same extent as if initially incurred by U.S.
Government.
(d) Within a reasonable time prior to the Closing Date, the Acquired
Fund shall provide, if requested, a list of the Assets to U.S. Government.
The Acquired Fund may sell any Asset on such list prior to the Effective
Time. After the Acquired Fund provides such list, the Acquired Fund will
not acquire any additional securities or permit to exist any encumbrances,
rights, restrictions or claims not reflected on such list, without the
approval of U.S. Government. Within a reasonable time after receipt of the
list and prior to the Closing Date, U.S. Government will advise the
Acquired Fund in writing of any investments shown on the list that U.S.
Government has determined
38
<PAGE>
to be inconsistent with its investment objective, policies and
restrictions. The Acquired Fund will dispose of any such securities prior
to the Closing Date to the extent practicable and consistent with
applicable legal requirements, including the Acquired Fund's investment
objectives, policies and restrictions. In addition, if U.S. Government
determines that, as a result of the Acquisition, U.S. Government would own
an aggregate amount of an investment that would exceed a percentage
limitation applicable to U.S. Government, U.S. Government will advise the
Acquired Fund in writing of any such limitation and the Acquired Fund
shall dispose of a sufficient amount of such investment as may be
necessary to avoid the limitation as of the Effective Time, to the extent
practicable and consistent with applicable legal requirements, including
the Acquired Fund's investment objectives, policies and restrictions.
(e) The Acquired Fund shall assign, transfer, deliver and convey the
Assets to U.S. Government at the Effective Time on the following basis:
(1) U.S. Government shall simultaneously issue and deliver to the
Acquired Fund that number of full and fractional shares of common
stock of each class of U.S. Government, rounded to the third decimal
place or such other decimal place as the parties may agree to in
writing, determined by dividing the value of the Assets less the
Liabilities attributable to a class of the Acquired Fund by the net
asset value per share of the corresponding class of U.S. Government.
(2) The net asset value of the shares of U.S. Government to be
delivered to the Acquired Fund shall be determined as of the
Valuation Time in accordance with U.S. Government's then applicable
valuation procedures, and for this purpose, the net value of the
Assets to be conveyed to U.S. Government shall be determined as of
the Valuation Time in accordance with the then applicable valuation
procedures of the Acquired Fund.
(3) The Acquired Fund shall deliver the Assets with good and
marketable title to the custodian for the account of U.S. Government.
All cash shall be transferred in the form of immediately available
funds payable to the order of U.S. Government's custodian.
(f) Promptly after the Closing Date, the Acquired Fund will deliver to
U.S. Government a Statement of Assets and Liabilities of the Acquired Fund
as of the Closing Date.
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<PAGE>
5. Liquidation and Dissolution of the Acquired Fund, Registration of Shares
of U.S. Government and Access to Records. The Acquired Fund and U.S.
Government also shall take the following steps, as applicable:
(a) At or as soon as reasonably practical after the Effective Time, the
Acquired Fund shall liquidate and dissolve by transferring to stockholders
of record of each class of the Acquired Fund full and fractional shares of
common stock of the corresponding class of U. S. Government equal in value
to the shares of the class of the Acquired Fund held by the stockholder.
Each stockholder also shall have the right to receive any unpaid dividends
or other distributions that the Acquired Fund declared with respect to the
class of the Acquired Fund's shares held by the stockholder before the
Effective Time. U.S. Government shall record on its books the ownership by
the Acquired Fund's stockholders of U.S. Government shares so transferred
to such stockholders and the Acquired Fund shall simultaneously redeem and
cancel on its books all of the issued and outstanding shares of each class
of the Acquired Fund. U.S. Government shall issue certificates
representing U.S. Government shares in accordance with the then current
U.S. Government prospectus; provided, however, that U.S. Government shall
not issue certificates representing U.S. Government shares to replace
certificates representing Acquired Fund shares unless the Acquired Fund
share certificates are first surrendered to U.S. Government. Following
distribution by the Acquired Fund to its stockholders of all of the shares
of U.S. Government delivered to the Acquired Fund, the Acquired Fund shall
wind up its affairs and shall take all steps as are necessary and proper
to dissolve as soon as is reasonably possible after the Effective Time,
including filing Articles of Dissolution with the SDAT.
(b) At and after the Closing Date, the Acquired Fund shall provide U.S.
Government and its transfer agent with immediate access to: (i) all
records containing the names, addresses and taxpayer identification
numbers of all of the Acquired Fund's stockholders and the number and
percentage ownership of the outstanding shares of each class of the
Acquired Fund owned by stockholders as of the Effective Time, and (ii) all
original documentation (including all applicable Internal Revenue Service
forms, certificates, certifications and correspondence) relating to the
Acquired Fund stockholders' taxpayer identification numbers and their
liability for or exemption from back-up withholding. The Acquired Fund
shall preserve and maintain, or shall direct its service providers to
preserve and maintain, records with respect to the
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<PAGE>
Acquired Fund as required by Section 31 of, and Rules 31a-1 and 31a-2
under, the 1940 Act.
6. Certain Representations and Warranties of the Acquired Fund. The Acquired
Fund represents and warrants to U.S. Government as follows:
(a) The Acquired Fund is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Maryland. The
Board of Directors of the Acquired Fund duly established and designated
each class of the Acquired Fund as a class of the Acquired Fund. The
Acquired Fund is registered with the SEC as an open-end management
investment company under the 1940 Act, and such registration will be in
full force and effect as of the Effective Time.
(b) The Acquired Fund has the power and all necessary federal, state and
local qualifications and authorizations to own all the Assets, to carry on
its business, to enter into this Plan and to consummate the transactions
contemplated herein.
(c) The Board of Directors of the Acquired Fund has duly authorized the
execution and delivery of this Plan and the transactions contemplated
herein. Duly authorized officers of the Acquired Fund have executed and
delivered the Plan. The Plan represents a valid and binding contract,
enforceable in accordance with its terms, subject as to enforcement to
bankruptcy, insolvency, reorganization, arrangement, moratorium, and other
similar laws of general applicability relating to or affecting creditors'
rights and to general equity principles. The execution and delivery of
this Plan does not, and, subject to the approval of its stockholders
referred to in Section 3 hereof, the consummation of the transactions
contemplated by this Plan will not, violate the Acquired Fund's Charter,
its By-Laws or any material agreement to which the Acquired Fund is
subject. Except for the approval of its stockholders, the Acquired Fund
does not need to take any other action to authorize its officers to
effectuate this Plan and the transactions contemplated herein.
(d) The Acquired Fund has qualified as a regulated investment company
under Part I of Subchapter M of Subtitle A, Chapter 1, of the Code, in
respect of each taxable year since the commencement of its operations and
intends to continue to qualify as a regulated investment company for its
taxable year ending upon its liquidation.
(e) The information pertaining to the Acquired Fund included within the
N-14 Registration Statement when filed with the SEC,
41
<PAGE>
when Part A of the N-14 Registration Statement is distributed to
stockholders, at the time of the stockholders meeting of the Acquired Fund
for approval of the Acquisition and at the Effective Time shall (i) comply
in all material respects with the applicable provisions of the 1933 Act,
the 1934 Act and the 1940 Act, and the rules and regulations thereunder
and applicable state securities laws, and (ii) not contain any untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements made therein not
misleading.
(f) The Acquired Fund has duly authorized and validly issued all of its
issued and outstanding shares of common stock, and all such shares are
fully paid and non-assessable and were offered for sale and sold in
conformity with the registration requirements of all applicable federal
and state securities laws. There are no outstanding options, warrants or
other rights to subscribe for or purchase any of the shares of the
Acquired Fund, nor are there any securities convertible into shares of the
Acquired Fund.
(g) The Acquired Fund shall operate its business in the ordinary course
between the date hereof and the Effective Time. Such ordinary course of
business will include the declaration and payment of customary dividends
and distributions and any other dividends and distributions referred to in
Section 4(b) hereof.
(h) At the Effective Time, the Acquired Fund will have good and
marketable title to the Assets and full right, power and authority to
assign, transfer, deliver and convey the Assets.
(i) The Financial Statements of the Acquired Fund, a copy of which has
been previously delivered to U.S. Government, fairly present the financial
position of the Acquired Fund as of the Acquired Fund's most recent fiscal
year-end and the results of the Acquired Fund's operations and changes in
the Acquired Fund's net assets for the periods indicated.
(j) To the knowledge of the Acquired Fund, the Acquired Fund has no
liabilities, whether or not determined or determinable, other than the
Liabilities disclosed or provided for in its Financial Statements or
Liabilities incurred in the ordinary course of business subsequent to the
date of the most recent Financial Statement referencing Liabilities.
(k) The Acquired Fund does not know of any claims, actions, suits,
investigations or proceedings of any type pending or threatened against
the Acquired Fund. There are no facts that the Acquired
42
<PAGE>
Fund has reason to believe are likely to form the basis for the
institution of any such claim, action, suit, investigation or proceeding
against the Acquired Fund. The Acquired Fund is not a party to or subject
to the provisions of any order, decree or judgment of any court or
governmental body that adversely affects, or is reasonably likely to
adversely affect, its financial condition, results of operations, or the
Assets or its ability to consummate the transactions contemplated by the
Plan.
(l) Except for agreements entered into or granted in the ordinary course
of its business, in each case under which no material default exists, the
Acquired Fund is not a party to or subject to any material contract, debt
instrument, employee benefit plan, lease, franchise, license or permit of
any kind or nature whatsoever.
(m) The Acquired Fund has filed its federal income tax returns, copies
of which have been previously made available to U.S. Government, for all
taxable years for which such returns are due and has paid all taxes
payable pursuant to such returns. No such return is currently under audit
and no unpaid assessment has been asserted with respect to such returns.
The Acquired Fund will timely file its federal income tax return for each
subsequent taxable year including its current taxable year.
(n) Since the date of the Financial Statements of the Acquired Fund,
there has been no material adverse change in its financial condition,
results of operations, business or Assets. For this purpose, negative
investment performance shall not be considered a material adverse change.
7. Certain Representations and Warranties of U.S. Government. Alliance Bond
Fund, Inc. ("Bond Fund"), on behalf of U.S. Government, represents and
warrants to the Acquired Fund as follows:
(a) Bond Fund is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Maryland. The Board of
Directors of Bond Fund duly established and designated U.S. Government as
a series of Bond Fund and each class of shares of U.S. Government as a
class of U.S. Government. Bond Fund is registered with the SEC as an open-
end management investment company under the 1940 Act, and such
registration will be in full force and effect as of the Effective Time.
(b) On behalf of U.S. Government, Bond Fund has the power and all
necessary federal, state and local qualifications and authorizations to
own all of its assets, to carry on its business, to enter
43
<PAGE>
into this Plan and to consummate the transactions contemplated herein.
(c) On behalf of U.S. Government, the Board of Directors of Bond Fund
has duly authorized execution and delivery of this Plan and the
transactions contemplated herein. Duly authorized officers of Bond Fund
have executed and delivered the Plan. The Plan represents a valid and
binding contract, enforceable in accordance with its terms, subject as to
enforcement to bankruptcy, insolvency, reorganization, arrangement,
moratorium and other similar laws of general applicability relating to or
affecting creditors' rights and to general equity principles. The
execution and delivery of this Plan does not, and the consummation of the
transactions contemplated by this Plan will not, violate the Charter of
Bond Fund, its By-Laws or any material agreement to which U.S. Government
is subject. Bond Fund does not need to take any other action to authorize
its officers to effectuate the Plan and the transactions contemplated
herein.
(d) U.S. Government has qualified as a regulated investment company
under Part I of Subchapter M of Subtitle A, Chapter 1, of the Code in
respect of each taxable year since the commencement of its operations and
qualifies and intends to continue to qualify as a regulated investment
company for its current taxable year.
(e) The N-14 Registration Statement, when filed with the SEC, when Part
A of the N-14 Registration Statement is distributed to stockholders, at
the time of the stockholder meeting of the Acquired Fund for the approval
of the Acquisition and at the Effective Time, insofar as it relates to
U.S. Government shall (i) comply in all material respects with the
applicable provisions of the 1933 Act, the 1934 Act and the 1940 Act, and
the rules and regulations thereunder and applicable state securities laws,
and (ii) not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements made therein not misleading.
(f) On behalf of U.S. Government, Bond Fund has duly authorized and
validly issued all of the issued and outstanding shares of common stock of
U.S. Government, and all such shares are fully paid and non-assessable and
were offered for sale and sold in conformity with the registration
requirements of all applicable federal and state securities laws. Bond
Fund has duly authorized shares of U.S. Government to be issued and
delivered to the Acquired Fund as of the Effective Time. When issued and
delivered, such shares of U.S. Government shall be validly issued, fully
paid and non-
44
<PAGE>
assessable, and no stockholder of U.S. Government shall have any
preemptive right of subscription or purchase in respect of any such share.
There are no outstanding options, warrants or other rights to subscribe
for or purchase any shares of U.S. Government, nor are there any
securities convertible into shares of U.S. Government.
(g) U.S. Government does not know of any claims, actions, suits,
investigations or proceedings of any type pending or threatened against
U.S. Government. There are no facts that U.S. Government currently has
reason to believe are likely to form the basis for the institution of any
such claim, action, suit, investigation or proceeding against U.S.
Government. U.S. Government is not a party to or subject to the provisions
of any order, decree or judgment of any court or governmental body that
adversely affects, or is reasonably likely to adversely affect, its
financial condition, results of operations, its assets or its ability to
consummate the transactions contemplated by the Plan.
(h) Except for agreements entered into or granted in the ordinary course
of its business, in each case under which no material default exists, U.S.
Government is not a party to or subject to any material contract, debt
instrument, employee benefit plan, lease, franchise, license or permit of
any kind or nature whatsoever.
(i) Bond Fund has filed its federal income tax returns, copies of which
have been previously made available to the Acquired Fund, for all taxable
years for which such returns are due and has paid all taxes payable
pursuant to such returns. No such return is currently under audit and no
unpaid assessment has been asserted with respect to such returns. Bond
Fund will timely file its federal income tax return for each subsequent
taxable year including its current taxable year.
(j) Since the date of the Financial Statements of U.S. Government, there
has been no material adverse change in its financial condition, results of
operations, business or assets. Negative investment performance shall not
be considered a material adverse change.
8. Conditions to the Obligations of U.S. Government and the Acquired
Fund. The obligations of U.S. Government and the Acquired Fund with respect to
the Acquisition shall be subject to the following conditions precedent:
(a) The stockholders of the Acquired Fund shall have approved the
Acquisition in the manner required by the Charter of the Acquired Fund,
its By-Laws and applicable law. If stockholders of the
45
<PAGE>
Acquired Fund fail to approve the Acquisition, that failure shall release
the Funds of their obligations under this Plan.
(b) U.S. Government and the Acquired Fund shall have delivered to the
other party a certificate dated as of the Closing Date and executed in its
name by its Secretary or an Assistant Secretary, in a form reasonably
satisfactory to the receiving party, stating that the representations and
warranties of U.S. Government or the Acquired Fund, as applicable, in this
Plan that apply to the Acquisition are true and correct in all material
respects at and as of the Valuation Time.
(c) Bond Fund, on behalf of U.S. Government, and the Acquired Fund shall
have performed and complied in all material respects with each of its
representations and warranties required by this Plan to be performed or
complied with by it prior to or at the Valuation Time and the Effective
Time.
(d) There has been no material adverse change in the financial
condition, results of operations, business, properties or assets of the
Acquired Fund or U.S. Government since [December 1999]. Negative
investment performance shall not be considered a material adverse change.
(e) U.S. Government and the Acquired Fund shall have received an opinion
of Seward & Kissel LLP, in form and substance reasonably satisfactory to
each of them, based upon representations made in certificates provided by
the Funds, their affiliates and/or principal stockholders and dated as of
the Closing Date, substantially to the effect that, based on facts and
assumptions stated therein, for federal income tax purposes:
(1) the Acquisition will constitute a "reorganization" within the
meaning of section 368(a) of the Code and that U.S. Government and
the Acquired Fund will each be "a party to a reorganization" within
the meaning of section 368(b) of the Code;
(2) each stockholder of the Acquired Fund will recognize no gain or
loss on such stockholder's receipt of shares of U.S. Government
(including any fractional share to which the stockholder may be
entitled) in exchange for the stockholder's shares of the Acquired
Fund in connection with the Acquisition;
(3) neither the Acquired Fund nor U.S. Government will recognize
any gain or loss upon the transfer of all of the Assets to U.S.
Government in exchange for shares of U.S. Government
46
<PAGE>
and the assumption by U.S. Government of the Liabilities pursuant to
this Plan or upon the distribution of shares of U.S. Government to
stockholders of the Acquired Fund in exchange for their respective
shares of Acquired Fund;
(4) the holding period and tax basis of the Assets acquired by U.S.
Government will be the same as the holding period and tax basis that
the Acquired Fund had in such Assets immediately prior to the
Acquisition;
(5) the aggregate tax basis of U.S. Government shares received in
connection with the Acquisition by each stockholder of the Acquired
Fund (including any fractional share to which the stockholder may be
entitled) will be the same as the aggregate tax basis of the shares
of the Acquired Fund surrendered in exchange therefor;
(6) the holding period of U.S. Government shares received in
connection with the Acquisition by each stockholder of the Acquired
Fund (including any fractional share to which the stockholder may be
entitled) will include the holding period of the shares of the
Acquired Fund surrendered in exchange therefor, provided that such
Acquired Fund shares constitute capital assets in the hands of the
stockholder as of the Closing Date; and
(7) U.S. Government will succeed to the capital loss carryovers of
the Acquired Fund, if any, under Section 381 of the Code, but the use
by U.S. Government of any such capital loss carryovers (and of
capital loss carryovers of U.S. Government) may be subject to
limitation under section 383 of the Code.
(f) The N-14 Registration Statement shall have become effective under
the 1933 Act as to the shares of U.S. Government, and the SEC shall not
have instituted and to the knowledge of U.S. Government is not
contemplating instituting, any stop order suspending the effectiveness of
the N-14 Registration Statement.
(g) No action, suit or other proceeding shall be threatened or pending
before any court or governmental agency in which it is sought to restrain
or prohibit, or obtain damages or other relief in connection with, the
Acquisition.
(h) The SEC shall not have issued any unfavorable advisory report under
Section 25(b) of the 1940 Act nor instituted any
47
<PAGE>
proceeding seeking to enjoin consummation of the Acquisition under Section
25(c) of the 1940 Act.
(i) Neither party shall have terminated this Plan with respect to the
Acquisition pursuant to Section 12 of this Plan.
9. Conditions to the Obligations of the Acquired Fund. The obligations of
the Acquired Fund with respect to the Acquisition shall be subject to the
following conditions precedent:
(a) The Acquired Fund shall have received an opinion of Seward & Kissel
LLP, as counsel to U.S. Government, in form and substance reasonably
satisfactory to the Acquired Fund and dated as of the Closing Date,
substantially to the effect that:
(1) Bond Fund is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Maryland and is
an open-end, management investment company registered under the 1940
Act;
(2) This Plan has been duly authorized, executed and delivered by
U.S. Government and, assuming due authorization, execution and
delivery of this Plan by the Acquired Fund, represents a legal, valid
and binding contract, enforceable in accordance with its terms,
subject to the effect of bankruptcy, insolvency, moratorium,
fraudulent conveyance and transfer and similar laws relating to or
affecting creditors' rights generally and court decisions with
respect thereto, and further subject to the application of equitable
principles in any proceeding, whether at law or in equity or with
respect to the enforcement of provisions of the Plan and the effect
of judicial decisions which have held that certain provisions are
unenforceable when their enforcement would violate an implied
covenant of good faith and fair dealing or would be commercially
unreasonable or when default under the Plan is not material;
(3) The shares of U.S. Government to be delivered as provided for
by this Plan are duly authorized and upon delivery will be validly
issued, fully paid and non-assessable by U.S. Government;
(4) The execution and delivery of this Plan did not, and the
consummation of the Acquisition will not, violate the Charter of Bond
Fund, its By-Laws or any agreement of U.S. Government known to such
counsel, after reasonable inquiry; and
48
<PAGE>
(5) To the knowledge of such counsel, no consent, approval,
authorization or order of any federal or state court or
administrative or regulatory agency, other than the acceptance of
record of Articles of Transfer by the SDAT, is required for U.S.
Government to enter into this Plan or carry out its terms, except
those that have been obtained under the 1933 Act, the 1940 Act and
the rules and regulations under those Acts or that may be required
under state securities laws, or subsequent to the Effective Time or
when the failure to obtain the consent, approval, authorization or
order would not have a material adverse effect on the operation of
U.S. Government.
In rendering such opinion, Seward & Kissel LLP may (i) rely on the opinion
of other counsel to the extent set forth in such opinion, (ii) make
assumptions regarding the authenticity, genuineness and/or conformity of
documents and copies thereof without independent verification thereof,
(iii) limit such opinion to applicable federal and state law, (iv) define
the word "knowledge" and related terms to mean the knowledge of attorneys
then with such firm who have devoted substantive attention to matters
directly related to this Plan and (v) rely on certificates of officers or
directors of Bond Fund as to factual matters.
10. Conditions to the Obligations of U.S. Government. The obligations of
U.S. Government with respect to the Acquisition shall be subject to the
following conditions precedent:
(a) U.S. Government shall have received an opinion of Seward & Kissel
LLP, as counsel to the Acquired Fund, in form and substance reasonably
satisfactory to U.S. Government and dated as of the Closing Date,
substantially to the effect that:
(1) The Acquired Fund is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Maryland
and is an open-end, management investment company registered under
the 1940 Act;
(2) This Plan has been duly authorized, executed and delivered by
the Acquired Fund and, assuming due authorization, execution and
delivery of this Plan by Bond Fund, represents a legal, valid and
binding contract, enforceable in accordance with its terms, subject
to the effect of bankruptcy, insolvency, moratorium, fraudulent
conveyance and transfer and similar laws relating to or affecting
creditors' rights generally and court decisions with respect thereto,
and further subject to the
49
<PAGE>
application of equitable principles in any proceeding, whether at law
or in equity or with respect to the enforcement of provisions of the
Plan and the effect of judicial decisions which have held that
certain provisions are unenforceable when their enforcement would
violate an implied covenant of good faith and fair dealing or would
be commercially unreasonable or when default under the Plan is not
material;
(3) The execution and delivery of this Plan did not, and the
consummation of the Acquisition will not, violate the Charter of the
Acquired Fund, its By-Laws or any agreement of the Acquired Fund,
known to such counsel, after reasonable inquiry; and
(4) To the knowledge of such counsel, no consent, approval,
authorization or order of any federal or state court or
administrative or regulatory agency, other than the acceptance of
record of Articles of Transfer by the SDAT, is required for the
Acquired Fund to enter into the Plan or carry out its terms, except
those that have been obtained under the 1933 Act, the 1940 Act and
the rules and regulations under those Acts or that may be required
under state securities laws or subsequent to the Effective Time or
when the failure to obtain the consent, approval, authorization or
order would not have a material adverse effect on the operation of
the Acquired Fund.
In rendering such opinion, Seward & Kissel LLP may (i) rely on the opinion
of other counsel to the extent set forth in such opinion, (ii) make
assumptions regarding the authenticity, genuineness and/or conformity of
documents and copies thereof without independent verification thereof,
(iii) limit such opinion to applicable federal and state law, (iv) define
the word "knowledge" and related terms to mean the knowledge of attorneys
then with such firm who have devoted substantive attention to matters
directly related to this Plan and (v) rely on certificates of officers or
directors of the Acquired Fund as to factual matters.
(b) Except to the extent prohibited by Rule 19b-1 under the 1940 Act,
the Acquired Fund shall have declared a dividend or dividends that,
together with all previous such dividends, shall have the effect of
distributing to the stockholders of the Acquired Fund substantially all of
its investment company taxable income, if any (as defined in Code section
852), and all of its net capital gain, if any, (as defined in Code section
1222).
50
<PAGE>
11. Survival of Representations and Warranties. No representations,
warranties or covenants in or pursuant to this Plan (including certificates of
officers) hereto shall survive the completion of the transactions contemplated
herein.
12. Termination of Plan. A majority of either Fund's Board of Directors may
terminate this Plan with respect to that Fund at any time before the
applicable Effective Time if: (i) the Fund's conditions precedent set forth in
Sections 8, 9 or 10 as appropriate, are not satisfied; or (ii) the Board of
Directors determines that the consummation of the Acquisition is not in the
best interests of the Fund or its stockholders and gives notice of such
termination to the other party.
13. Governing Law. This Plan and the transactions contemplated hereby shall
be governed, construed and enforced in accordance with the laws of the State
of New York, except to the extent preempted by federal law, without regard to
conflicts of law principles.
14. Brokerage Fees. Each party represents and warrants that there are no
brokers or finders entitled to receive any payments in connection with the
transactions provided for in the Plan.
15. Amendments. The parties may, by agreement in writing authorized by their
respective Board of Directors, amend this Plan at any time before or after the
stockholders of the Acquired Fund approve the Acquisition. However, after
stockholders of the Acquired Fund approve the Acquisition, the parties may not
amend this Plan in a manner that materially alters the obligations of either
party. This Section shall not preclude the parties from changing the Closing
Date or the Effective Time by mutual agreement.
16. Waivers. At any time prior to the Closing Date, either party may by
written instrument signed by it (i) waive the effect of any inaccuracies in
the representations and warranties made to it contained herein and (ii) waive
compliance with any of the agreements, covenants or conditions made for its
benefit contained herein. Any waiver shall apply only to the particular
inaccuracy or requirement for compliance waived, and not any other or future
inaccuracy or lack of compliance.
17. Indemnification of Directors. On behalf of U.S. Government, Bond Fund
will assume all obligations of the Acquired Fund to exculpate and indemnify
its current and former directors and officers, acting in their capacities as
such.
51
<PAGE>
18. Cooperation and Further Assurances. Each party will cooperate with the
other in fulfilling its obligations under this Plan and will provide such
information and documentation as is reasonably requested by the other in
carrying out the Plan's terms. Each party will provide such further assurances
concerning the performance of its obligations hereunder and execute all
documents for or in connection with the consummation of the Acquisition as,
with respect to such assurances or documents, the other shall deem necessary
or appropriate.
19. Updating of N-14 Registration Statement. If at any time prior to the
Effective Time, a party becomes aware of any untrue statement of a material
fact or omission to state a material fact required to be stated therein or
necessary to make the statements made not misleading in the N-14 Registration
Statement, the party discovering the item shall notify the other party and the
parties shall cooperate in promptly preparing, filing and clearing with the
SEC and, if appropriate, distributing to stockholders appropriate disclosure
with respect to the item.
20. Limitation on Liabilities. The obligations of the Acquired Fund and U.S.
Government shall not bind any of the directors, stockholders, nominees,
officers, employees or agents of the Acquired Fund or Bond Fund personally,
but shall bind only the Acquired Fund or U.S. Government, as appropriate. The
execution and delivery of this Plan by an officer of either party shall not be
deemed to have been made by the officer individually or to impose any
liability on the officer personally, but shall bind only the Acquired Fund or
Bond Fund, on behalf of U.S. Government, as appropriate.
21. Termination of the Acquired Fund. If the parties complete the
Acquisition, the Acquired Fund shall terminate its registration under the 1940
Act and liquidate and dissolve.
22. Notices. Any notice, report, statement, certificate or demand required
or permitted by any provision of the Plan shall be in writing and shall be
given in person or by telecopy, certified mail or overnight express courier
to:
For the Acquired Fund:
[Acquired Fund]
1345 Avenue of the Americas
New York, New York 10105
Attention: Secretary
52
<PAGE>
For U.S. Government:
U.S. Government Portfolio of Alliance Bond Fund, Inc.
1345 Avenue of the Americas
New York, New York 10105
Attention: Secretary
23. Expenses. Alliance Capital Management L.P., the investment adviser to
each party hereto, will bear all expenses incurred in connection with this
Agreement and Plan of Acquisition and Liquidation, and all transactions
contemplated hereby, whether or not the Acquisition is consummated.
24. General. This Plan supersedes all prior agreements between the parties
with respect to the subject matter hereof and may be amended only in writing
signed by both parties. The headings contained in this Plan are for reference
only and shall not affect in any way the meaning or interpretation of this
Plan. Whenever the context so requires, the use in the Plan of the singular
will be deemed to include the plural and vice versa. Nothing in this Plan,
expressed or implied, confers upon any other person any rights or remedies
under or by reason of this Plan. Neither party may assign or transfer any
right or obligation under this Plan without the written consent of the other
party.
53
<PAGE>
In Witness Whereof, the parties hereto have executed this Plan as of the day
and year first above written.
[Acquired Fund]
Attest:
__________________________ By: __________________________________
Name: Name:
Title: Title:
U.S. Government Portfolio of
Alliance Bond Fund, Inc.
Attest:
__________________________ By: __________________________________
Name: Name:
Title: Title:
Accepted and agreed with respect
to Section 23 only:
Alliance Capital Management L.P.
By:Alliance Capital Management
Corporation, its General Partner
By: _________________________________________________
Name: ___________________________________________
Title: __________________________________________
54
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS Page
--------------------------------------------------------------------------------
<S> <C>
Proposal: Approval of an Agreement and Plan of Acquisition and Liquidation
Between U.S. Government and the Acquired Fund in Which You Hold Shares.. 4
SUMMARY................................................................... 5
Comparison of Current Fees............................................... 5
Fee Table................................................................ 6
Comparison of Investment Objectives and Strategies....................... 12
Common Risk Considerations............................................... 14
Comparison of Stockholder Services and Distribution Arrangements......... 16
Federal Income Tax Consequences.......................................... 16
Comparison of Investment Advisory Fees................................... 17
Comparison of Business Structures........................................ 17
INFORMATION ABOUT THE PROPOSED TRANSACTIONS............................... 18
Introduction............................................................. 18
Description of the Plans................................................. 18
Board Considerations in Recommending the Acquisitions.................... 19
Existing and Pro Forma Capitalization.................................... 24
Distribution Expenses.................................................... 24
Federal Income Tax Consequences.......................................... 25
VOTING INFORMATION........................................................ 26
Share Information........................................................ 28
LEGAL MATTERS............................................................. 29
EXPERTS................................................................... 29
EXHIBIT A................................................................. 30
EXHIBIT B................................................................. 33
EXHIBIT C................................................................. 35
</TABLE>
Alliance Mortgage
Securities Income
Fund, Inc.
Alliance Limited
Maturity Government
Fund, Inc.
--------------------------------------------------------------------------------
[LOGO OF ALLIANCE CAPITAL]
Alliance Capital Management L.P.
--------------------------------------------------------------------------------
NOTICE OF SPECIAL MEETINGS
OF STOCKHOLDERS AND
PROSPECTUS/PROXY STATEMENT
September 14, 2000
<PAGE>
This is filed pursuant to Rule 497(b).
File Nos. 002-48227 and 811-02383.
<PAGE>
Part B
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information or SAI relating to
the proposed acquisitions of the assets and assumption of the
liabilities of Alliance Mortgage Securities Income Fund Inc.
("Mortgage Securities") and Alliance Limited Maturity Government
Fund, Inc. ("Limited Maturity") by Alliance U.S. Government
Portfolio, a series of the Alliance Bond Fund, Inc. ("U.S.
Government") in exchange for shares of U.S. Government consists
of this cover page and the following described documents, each of
which is attached hereto or incorporated herein by reference:
(1) The SAI of Mortgage Securities dated March 1, 2000.
(2) Semi-Annual Report to Shareholders of Mortgage
Securities dated June 30, 2000.
(3) The SAI of Limited Maturity dated March 1, 2000.
(4) Semi-Annual Report to Shareholders of Limited Maturity
dated May 31, 2000.
(5) The SAI of U.S. Government dated November 1, 1999.
(6) Annual Report to Shareholders of U.S. Government dated
June 30, 2000.
(7) Unaudited pro forma combined financial information as of
June 30, 2000. The pro forma financial statements give
effect to the acquisitions as if they had occurred for
the periods presented.
This SAI is not a prospectus and should be read in
conjunction with the Prospectus/Proxy Statement, dated September
14, 2000. The Prospectus/Proxy Statement and SAI may be obtained
without charge by calling 1-800-221-5672 or writing to Alliance
U.S. Government Portfolio, 1345 Avenue of the Americas, New York,
NY 10105.
This SAI is dated September 14, 2000.
00250236.AM3
<PAGE>
This is filed pursuant to Rule 497(b).
File Nos. 002-48227 and 811-02383.
<PAGE>
PRO-FORMA COMBINED
--------------------------
FINANCIAL STATEMENTS
--------------------------
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
ALLIANCE MORTGAGE SECURITIES INCOME FUND
ALLIANCE BOND FUND U.S. GOVERNMENT PORTFOLIO
JUNE 30, 2000
(unaudited)
<PAGE>
PORTFOLIO OF INVESTMENTS Alliance Limited Maturity Government Fund
PRO-FORMA COMBINED Alliance Mortgage Securities Income Fund
June 30, 2000 (unaudited) Alliance Bond Fund U.S. Government Portfolio
================================================================================
<TABLE>
<CAPTION>
Alliance Alliance Alliance
Limited Mortgage Bond Fund
Combined Maturity Securities U.S.
Principal Government Income Government Pro-Forma
Amount Fund Fund Portfolio Adjustment(s) Combined
(000) (Value) (Value) (Value) (Value) (Value)
---------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT &
AGENCY
OBLIGATIONS-98.4%
FEDERAL NATIONAL
MORTGAGE
ASSOCIATION-37.7%
<S> <C> <C> <C> <C> <C> <C>
zero coupon, 2/15/08 ......... $22,130 $ -0- $ -0- $13,034,858 $ -0- $ 13,034,858
6.00%, 1/01/29-12/31/99 ...... 39,184 -0- 35,851,647 -0- -0- 35,851,647
6.50%, 12/01/99 .............. 15,000 -0- -0- 14,142,150 -0- 14,142,150
6.50%, 4/01/11-6/01/29 (a) ... 34,902 -0- 33,479,159 -0- -0- 33,479,159
7.00%, 9/01/14-12/31/99 (a) .. 74,797 -0- 72,984,293 -0- -0- 72,984,293
7.00%, 12/01/14-2/01/15 ...... 4,179 4,099,301 -0- -0- -0- 4,099,301
7.50%, 2/01/15-12/31/99 (a) .. 54,571 -0- 54,239,178 -0- -0- 54,239,178
7.50%, 4/01/15-12/31/99 ...... 80,750 -0- -0- 80,343,305 -0- 80,343,305
7.50%, TBA ................... 8,782 8,752,504 -0- -0- -0- 8,752,504
8.00%, 8/01/28-6/01/30 ....... 24,652 -0- 24,752,247 -0- -0- 24,752,247
8.00%, 6/01/30-12/31/99 ...... 50,335 -0- -0- 50,547,322 -0- 50,547,322
8.00%, TBA ................... 5,000 5,021,100 -0- -0- -0- 5,021,100
8.50%, 8/01/11 (a) ........... 15,009 -0- 15,266,583 -0- -0- 15,266,583
8.50%, TBA ................... 2,000 2,037,180 -0- -0- -0- 2,037,180
9.00%, 8/01/21 ............... 2,896 -0- 2,982,745 -0- -0- 2,982,745
10.00%, 10/01/14 ............. 33,235 -0- -0- 35,665,616 -0- 35,665,616
10.00%, 10/01/14 (a) ......... 8,973 -0- 9,629,397 -0- -0- 9,629,397
11.00%, 7/15/16 .............. 2,401 -0- 2,571,601 -0- -0- 2,571,601
11.25%, 2/01/16 .............. 754 819,896 -0- -0- -0- 819,896
11.50%, 9/15/20 .............. 1,486 -0- 1,597,777 -0- -0- 1,597,777
------------ ------------ ----------- ---------- ------------
20,729,981 253,354,627 193,733,251 -0- 467,817,859
------------ ------------ ----------- ---------- ------------
U.S. TREASURY
SECURITIES-36.1%
U.S. TREASURY BONDS-32.0%
6.375%, 8/15/27 .............. 10,000 -0- -0- 10,298,400 -0- 10,298,400
6.875%, 8/15/25 .............. 20,000 -0- -0- 21,796,800 -0- 21,796,800
8.125%, 5/15/21 .............. 29,100 -0- -0- 35,506,656 -0- 35,506,656
8.875%, 8/15/17 .............. 24,000 -0- -0- 30,592,560 -0- 30,592,560
10.75%, 2/15/03 .............. 80,000 -0- -0- 88,024,800 -0- 88,024,800
12.50%, 8/15/14 .............. 65,150 -0- -0- 92,339,701 -0- 92,339,701
14.00%, 11/15/11 ............. 85,900 -0- -0- 119,293,625 -0- 119,293,625
------------ ------------ ----------- ---------- ------------
-0- -0- 397,852,542 -0- 397,852,542
------------ ------------ ----------- ---------- ------------
U.S. TREASURY NOTES-3.9%
5.875%, 11/15/04 ............. 2,975 2,931,773 -0- -0- -0- 2,931,773
6.00%, 8/15/09 ............... 7,065 7,008,692 -0- -0- -0- 7,008,692
6.50%, 2/15/10 ............... 30,500 4,136,880 -0- 27,406,830 -0- 31,543,710
6.625%, 5/31/02 .............. 1,100 1,104,125 -0- -0- -0- 1,104,125
6.75%, 5/15/05 ............... 6,125 6,267,590 -0- -0- -0- 6,267,590
------------ ------------ ----------- ---------- ------------
21,449,060 -0- 27,406,830 -0- 48,855,890
------------ ------------ ----------- ---------- ------------
</TABLE>
|1|
<PAGE>
PORTFOLIO OF INVESTMENTS Alliance Limited Maturity Government Fund
PRO-FORMA COMBINED Alliance Mortgage Securities Income Fund
(continued) Alliance Bond Fund U.S. Government Portfolio
================================================================================
<TABLE>
<CAPTION>
Alliance Alliance Alliance
Limited Mortgage Bond Fund
Combined Maturity Securities U.S.
Principal Government Income Government Pro-Forma
Amount Fund Fund Portfolio Adjustment(s) Combined
(000) (Value) (Value) (Value) (Value) (Value)
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
U.S. TREASURY BILLS-0.2%
Zero coupon, 7/06/00 ........ $ 2,640 $ -0- $ 589,535 $ 2,048,387 $ -0- $ 2,637,922
5.47%, 7/06/00 .............. 50 49,962 -0- -0- -0- 49,962
5.65%, 7/06/00 .............. 20 19,984 -0- -0- -0- 19,984
------------ ------------ ----------- ------------ ------------
69,946 589,535 2,048,387 -0- 2,707,868
------------ ------------ ----------- ------------ ------------
GOVERNMENT NATIONAL
MORTGAGE
ASSOCIATION-14.2%
Single Family Homes
6.50%, 12/15/27-2/15/30 ..... 45,993 -0- 43,650,477 -0- -0- 43,650,477
7.00%, 1/15/23-8/15/28 ...... 50,744 -0- 49,342,239 -0- -0- 49,342,239
7.50%, 12/15/21-5/15/30 ..... 2,880 2,860,871 -0- -0- -0- 2,860,871
8.00%, 12/31/99 ............. 41,705 -0- 42,148,324 -0- -0- 42,148,324
8.00%, 3/15/12 .............. 28,038 -0- -0- 28,458,312 -0- 28,458,312
8.15%, 9/15/20 .............. 5,133 -0- -0- 5,235,594 -0- 5,235,594
8.50%, 8/15/27-6/15/30 ...... 2,875 2,943,281 -0- -0- -0- 2,943,281
9.00%, 12/15/19 ............. 2 -0- 1,929 -0- -0- 1,929
9.00%, 7/20/24-9/20/24 ...... 2,058 -0- -0- 2,114,304 -0- 2,114,304
------------ ------------ ----------- ------------ ------------
5,804,152 135,142,969 35,808,210 -0- 176,755,331
------------ ------------ ----------- ------------ ------------
FEDERAL HOME LOAN
MORTGAGE CORP.-6.2%
5.75%, 6/15/01 .............. 3,310 3,276,900 -0- -0- -0- 3,276,900
6.50%, 2/01/26-12/01/28 ..... 12,071 -0- 11,392,422 -0- -0- 11,392,422
7.50%, 9/01/29-4/01/30 ...... 40,768 -0- 40,158,063 -0- -0- 40,158,063
8.00%, 9/01/09 (b) .......... 3,568 -0- 3,597,575 -0- -0- 3,597,575
9.50%, 9/01/20 .............. 2,425 -0- 2,522,147 -0- -0- 2,522,147
11.00%, 1/01/11-9/01/20 ..... 702 761,624 -0- -0- -0- 761,624
11.50%, 10/01/10-6/01/20 .... 1,394 -0- 1,531,881 -0- -0- 1,531,881
12.00%, 8/01/15-7/01/20 ..... 10,021 -0- 10,936,214 -0- -0- 10,936,214
12.25%, 8/01/13 ............. 16 -0- 17,199 -0- -0- 17,199
12.50%, 6/01/19 ............. 1,616 -0- 1,811,784 -0- -0- 1,811,784
13.00%, 5/01/14-12/01/18 .... 511 -0- 578,784 -0- -0- 578,784
------------ ------------ ----------- ------------ ------------
4,038,524 72,546,069 -0- -0- 76,584,593
------------ ------------ ----------- ------------ ------------
COLLATERALIZED
MORTGAGE
OBLIGATIONS-4.2%
Federal Home Loan
Mortgage Corp.
Series 1955 Cl. K
7.50%, 2/20/24 .............. 5,000 -0- -0- 5,000,000 -0- 5,000,000
Series 1748 Cl. B
8.00%, 6/15/23 .............. 13,400 -0- -0- 13,534,000 -0- 13,534,000
</TABLE>
|2|
<PAGE>
PORTFOLIO OF INVESTMENTS Alliance Limited Maturity Government Fund
PRO-FORMA COMBINED Alliance Mortgage Securities Income Fund
(continued) Alliance Bond Fund U.S. Government Portfolio
================================================================================
<TABLE>
<CAPTION>
Alliance Alliance Alliance
Limited Mortgage Bond Fund
Combined Maturity Securities U.S.
Principal Government Income Government Pro-Forma
Amount Fund Fund Portfolio Adjustment(s) Combined
(000) (Value) (Value) (Value) (Value) (Value)
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Federal National Mortgage
Association
Series 1997-44 Cl. PE
7.00%, 6/18/21 ............ $23,884 $ -0- $ -0- $23,757,176 $ -0- $ 23,757,176
Government National Mortgage
Association
Series 1997-8 Cl. PI
7.00%, 9/16/21 ............ 9,392 -0- -0- 9,346,449 -0- 9,346,449
------------ ------------ ----------- ------------- --------------
-0- -0- 51,637,625 -0- 51,637,625
------------ ------------ ----------- ------------- --------------
Total U.S. Government &
Agency Obligations
(cost $1,252,143,559) ..... 52,091,663 461,633,200 708,486,845 -0- 1,222,211,708
------------ ------------ ----------- ------------- --------------
COLLATERALIZED
MORTGAGE
OBLIGATIONS-11.1%
BA Mortgage Securities, Inc.
Series 1997-1 Cl. A8
7.10%, 7/25/26 ............ 3,845 -0- -0- 3,813,539 -0- 3,813,539
Chase Mortgage Finance Corp.
Series 1993-3 Cl. B8
7.40%, 10/30/24 ........... 3,108 -0- -0- 3,046,122 -0- 3,046,122
Series 1993-3 Cl. B9
7.40%, 10/30/24 ........... 2,954 -0- -0- 2,895,265 -0- 2,895,265
Series 1993-3 Cl. B10
7.40%, 10/30/24 ........... 2,646 -0- -0- 2,593,552 -0- 2,593,552
Citicorp Mortgage Securities,
Inc.
Series 1987-3 Cl. A1
9.00%, 5/01/17 ............ 5,685 -0- 5,706,456 -0- -0- 5,706,456
Collateralized Mortgage
Obligation Trust
Series 63 Cl. Z
9.00%, 10/20/20 ........... 13,958 -0- -0- 14,350,021 -0- 14,350,021
Delta Funding Home Equity
Loan Trust
Series 1999-2 Cl. A1F
6.14%, 3/15/18 ............ 1,984 1,959,387 -0- -0- -0- 1,959,387
Deutsche Mortgage & Asset
Receiving Corp.
Series 1998-C1 Cl. A2
6.538%, 2/15/08 ........... 9,425 -0- -0- 8,849,227 -0- 8,849,227
First Union National Bank
Commercial Mortgage
Series 2000-C1 Cl. IO
0.776%, 9/15/29 ........... 6,208 248,334 -0- -0- -0- 248,334
Series 2000-C1 Cl. A2
7.841%, 3/15/10 ........... 2,000 2,034,380 -0- -0- -0- 2,034,380
</TABLE>
|3|
<PAGE>
PORTFOLIO OF INVESTMENTS Alliance Limited Maturity Government Fund
PRO-FORMA COMBINED Alliance Mortgage Securities Income Fund
(continued) Alliance Bond Fund U.S. Government Portfolio
================================================================================
<TABLE>
<CAPTION>
Alliance Alliance Alliance
Limited Mortgage Bond Fund
Combined Maturity Securities U.S.
Principal Government Income Government Pro-Forma
Amount Fund Fund Portfolio Adjustment(s) Combined
(000) (Value) (Value) (Value) (Value) (Value)
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Honda Auto Lease Trust
Series 1999-A Cl. A4
6.45%, 9/16/02 .............. $ 3,000 $ 2,970,780 $ -0- $ -0- $ -0- $ 2,970,780
MLCC Mortgage Investors, Inc.
Series 1995-B Cl. B
6.94%, 11/15/20 (a) ......... 4,544 -0- 3,879,817 -0- -0- 3,879,817
Series 1996-B Cl. B
6.94%, 7/15/21 (b) .......... 9,274 -0- 8,021,730 -0- -0- 8,021,730
Prudential Home Mortgage
Securities
Series 1994-29 Cl. A7
7.00%, 10/25/24 ............. 10,000 -0- 9,178,100 -0- -0- 9,178,100
Series 1992-33 Cl. B1
7.50%, 11/25/22 ............. 12,284 -0- -0- 11,949,801 -0- 11,949,801
Sears Mortgage Securities Corp.
Series 1992-18A Cl. A1
8.086%, 9/25/22 ............. 1,101 1,100,782 -0- -0- -0- 1,100,782
Securitized Asset Sales, Inc.
Series 1993-J Cl. 1B 1
6.8076%, 11/28/23 ........... 5,263 -0- -0- 4,892,647 -0- 4,892,647
Starwood Asset Receivables
Trust
Series 2000-1 Cl. E
9.401%, 1/25/05 ............. 25,000 -0- -0- 25,000,000 -0- 25,000,000
WMC Mortgage Loan
Pass-Through Certificate
Series 2000-A Cl. A
6.991%, 5/15/30 ............. 1,591 1,590,062 -0- -0- -0- 1,590,062
------------ ------------ ----------- ------------ ------------
Total Collateralized Mortgage
Obligations
(cost $115,914,553) ......... 9,903,725 26,786,103 77,390,174 -0- 114,080,002
------------ ------------ ----------- ------------ ------------
STRIPPED MORTGAGE
BACKED
SECURITIES-7.8%
Bear Stearns
Series 1997 Cl. 2-X I/O
1.520%, 8/25/36 (b)(c) ...... 5,893 -0- 2,918,163 -0- -0- 2,918,163
First Union National Bank
Commercial Mortgage
Series 2000-C1 Cl. I/0
0.776%, 9/15/29 ............. 63,576 -0- 1,490,001 2,483,335 -0- 3,973,336
Series 2000-C1 Cl. A2
7.841%, 3/15/10 ............. 13,000 -0- -0- 13,223,470 -0- 13,223,470
</TABLE>
|4|
<PAGE>
PORTFOLIO OF INVESTMENTS Alliance Limited Maturity Government Fund
PRO-FORMA COMBINED Alliance Mortgage Securities Income Fund
(continued) Alliance Bond Fund U.S. Government Portfolio
================================================================================
<TABLE>
<CAPTION>
Alliance Alliance Alliance
Limited Mortgage Bond Fund
Combined Maturity Securities U.S.
Principal Government Income Government Pro-Forma
Amount Fund Fund Portfolio Adjustment(s) Combined
(000) (Value) (Value) (Value) (Value) (Value)
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
LB Commercial Conduit
Mortgage Trust
Series 1998-C4 Cl. X I/O
0.561%, 9/15/23 (c) ........ $ 7,134 $ -0- $ 6,865,281 $ -0- $ -0- $ 6,865,281
Series 1999-C1 Cl. X
0.69%, 7/15/23 ............. 256,974 -0- -0- 10,278,957 -0- 10,278,957
Series 1999-C2 Cl. X
0.665%, 10/15/32 ........... 60,093 -0- 2,444,432 2,356,119 -0- 4,800,551
Mortgage Capital Funding, Inc.
Series 1996-MC2 Cl. X I/O
1.973%, 12/21/26 (c) ....... 10,793 -0- 9,088,507 -0- -0- 9,088,507
Series 1996-MC2 Cl. X
2.095%, 12/21/26 ........... 17,679 1,198,813 -0- -0- -0- 1,198,813
Prudential Securities Secured
Financing Corp.
Series 1999-NRF1 Cl. AEC
0.986%, 10/15/18 ........... 364,678 -0- -0- 17,435,244 -0- 17,435,244
Salomon Brothers Mortgage
Securities VII
Series 2000-FL1 Cl. A
6.1583%, 4/05/01 (b) ....... 15,951 -0- -0- 15,951,137 -0- 15,951,137
Salomon Brothers Mortgage
Securities Inc.
Series 1999-5
3.128%, 6/25/28 ............ 3,213 -0- 4,236,661 -0- -0- 4,236,661
Series 1999-5
10.34%, 6/25/28 ............ 112,541 -0- -0- 6,576,912 -0- 6,576,912
------------ ------------ ----------- ------------ ------------
Total Stripped Mortgage
Backed Securities
(cost $100,265,462) ........ 1,198,813 27,043,045 68,305,174 -0- 96,547,032
------------ ------------ ----------- ------------ ------------
COMMERCIAL
MORTGAGE BACKED
SECURITIES-7.0%
Allied Capital Commercial
Mortgage Trust
Series 1998-1-A Cl. A
6.31%, 9/25/03 (b) ......... 6,065 743,431 -0- 5,239,737 -0- 5,983,168
BTC Mortgage Investors Trust
Series 1997-S1 Cl. D
6.95%, 12/31/09 (b) ........ 944 -0- -0- 943,854 -0- 943,854
BTR 2 Trust
Series 1999-S1A Cl. C
7.664%, 2/28/04 (b) ........ 5,000 -0- -0- 5,006,250 -0- 5,006,250
</TABLE>
|5|
<PAGE>
PORTFOLIO OF INVESTMENTS Alliance Limited Maturity Government Fund
PRO-FORMA COMBINED Alliance Mortgage Securities Income Fund
(continued) Alliance Bond Fund U.S. Government Portfolio
================================================================================
<TABLE>
<CAPTION>
Alliance Alliance Alliance
Limited Mortgage Bond Fund
Combined Maturity Securities U.S.
Principal Government Income Government Pro-Forma
Amount Fund Fund Portfolio Adjustment(s) Combined
(000) (Value) (Value) (Value) (Value) (Value)
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Credit Suisse First Boston
Mortgage
Series 1998-FL1A Cl. F
7.74%, 1/10/01 (b) ........ $21,350 $ -0- $ -0- $21,329,931 $ -0- $ 21,329,931
Series 1998-Fl2 Cl. 1AC
7.79875%, 8/15/01 ......... 1,600 -0- -0- 1,602,000 -0- 1,602,000
Series 1998-Fl2A Cl. D
8.048%, 10/15/01 (b) ...... 15,000 -0- -0- 14,925,000 -0- 14,925,000
First Chicago/Lennar Trust
Series 1997-CHL1 Cl. A
7.68%, 4/29/05 ............ 15,361 -0- -0- 15,034,131 -0- 15,034,131
Forum Finance Corp.
Series 1 Cl. A1
7.125%, 5/15/04 (b) ....... 11,875 -0- -0- 11,904,094 -0- 11,904,094
Merrill Lynch Mortgage
Investors, Inc.
Series 1998-ASP1 Cl. B
7.508%, 10/01/03 (b) ...... 5,000 -0- -0- 5,037,500 -0- 5,037,500
Nationslink Funding Corp.
Series 1999-SL Cl. A1
5.805%, 2/10/01 ........... 5,460 -0- -0- 5,405,573 -0- 5,405,573
------------ ------------ ----------- ------------ ------------
Total Commercial Mortgage
Backed Securities
(cost $87,312,478) ........ 743,431 -0- 86,428,070 -0- 87,171,501
------------ ------------ ----------- ------------ ------------
CORPORATE
OBLIGATION-3.0%
Beverly Finance
8.36%, 7/15/04 (b) ........ 37,200 1,213,932 21,243,810 15,174,150 -0- 37,631,892
------------ ------------ ----------- ------------ ------------
Total Corporate Obligation
(cost $39,010,146) ........ 1,213,932 21,243,810 15,174,150 -0- 37,631,892
------------ ------------ ----------- ------------ ------------
ASSET BACKED
SECURITIES-0.7%
Green Tree Home Improvement
Loan Trust
Series 1998-D Cl. HEA4
6.25%, 8/15/29 ............ 23,000 2,910,930 19,406,200 -0- -0- 22,317,130
Series 1997-A Cl. HEA5
7.21%, 3/15/28 ............ 1,699 -0- -0- 1,698,950 -0- 1,698,950
Option One Mortgage
Securities Corp.
Series 1999-B Cl. CTFS
9.66%, 6/25/29 (b) ........ 1,537 -0- 1,503,942 -0- -0- 1,503,942
Series 1999-2
9.66%, 6/25/29 (b) ........ 1,537 -0- -0- 1,503,942 -0- 1,503,942
Series 2000-1 Cl. CTFS
9.85%, 5/25/30 (b) ........ 5,012 -0- -0- 5,012,288 -0- 5,012,288
------------ ------------ ----------- ------------ ------------
Total Asset Backed Securities
(cost $32,780,300) ........ 2,910,930 20,910,142 8,215,180 -0- 32,036,252
------------ ------------ ----------- ------------ ------------
</TABLE>
|6|
<PAGE>
PORTFOLIO OF INVESTMENTS Alliance Limited Maturity Government Fund
PRO-FORMA COMBINED Alliance Mortgage Securities Income Fund
(continued) Alliance Bond Fund U.S. Government Portfolio
================================================================================
<TABLE>
<CAPTION>
Alliance Alliance Alliance
Limited Mortgage Bond Fund
Combined Maturity Securities U.S.
Principal Government Income Government Pro-Forma
Amount Fund Fund Portfolio Adjustment(s) Combined
(000) (Value) (Value) (Value) (Value) (Value)
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
REPURCHASE
AGREEMENTs-0.9%
Lehman Brothers, Inc.
6.50%, dated 6/30/00, due
7/03/00 in the amount of
$10,754,822 (cost $10,749,000;
collateralized by $11,264,791
FNMA, 6.75%, 3/25/21,
value $10,964,021) ............. $10,749 $ 10,749,000 $ -0- $ -0- $ -0- $ 10,749,000
State Street Bank and Trust Co.
6.25%, dated 6/30/00, due
7/03/00 in the amount of
$586,305 (cost $586,000;
collateralized by $600,000
FNMA, 6.30%, 11/21/01,
value $599,250) ................ 586 -0- -0- 586,000 -0- 586,000
------------ ------------- ------------ ------------- --------------
Total Repurchase Agreements
(amortized
cost $11,335,000) .............. 10,749,000 -0- 586,000 -0- 11,335,000
------------ ------------- ------------ ------------- --------------
TOTAL INVESTMENTS-128.9%
(cost $1,638,761,498) .......... 78,811,494 557,616,300 964,585,593 -0- 1,601,013,387
Other assets less
liabilities-(28.9%) ............ (16,830,436) (121,194,271) (220,599,589) -0- (358,624,296)
------------ ------------- ------------ ------------- --------------
NET ASSETS-100% ................... $ 61,981,058 $ 436,422,029 $743,986,004 $ -0- $1,242,389,091
============ ============= ============ ============= ==============
</TABLE>
--------------------------------------------------------------------------------
(a) 15 year mortgage.
(b) Securities exempt from Registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At June 30,
2000, these securities amounted to $129,651,161 of 10.4% of net assets.
(c) Interest rate represents yield to maturity and principal amount represents
amortized cost.
See notes to financial statements.
|7|
<PAGE>
Alliance Limited Maturity Government Fund
STATEMENT OF ASSETS AND LIABILITIES Alliance Mortgage Securities Income Fund
June 30, 2000 (unaudited) Alliance Bond Fund U.S. Government Portfolio
================================================================================
<TABLE>
<CAPTION>
Alliance Alliance Alliance
Limited Mortgage Bond Fund
Maturity Securities U.S.
Government Income Government Pro-Forma
Fund Fund Portfolio Adjustment(s) Combined
----------- ------------ -------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments in securities, at value
(cost $1,638,761,498) .............. $78,811,494 $557,616,300 $ 964,585,593 $ -0- $1,601,013,387
Cash ................................. 46,541 139,741 2,700,271 -0- 2,886,553
Receivable for investment securities
sold ............................... 5,006,840 7,296,958 50,068,403 -0- 62,372,201
Interest receivable .................. 581,401 4,713,120 13,438,179 -0- 18,732,700
Receivable for capital stock sold .... 6,653 2,819 4,641,151 -0- 4,650,623
----------- ------------ -------------- ---------- --------------
Total assets ......................... 84,452,929 569,768,938 1,035,433,597 -0- 1,689,655,464
----------- ------------ -------------- ---------- --------------
LIABILITIES
Payable for investment securities
purchased .......................... 17,751,404 78,616,380 183,623,325 -0- 279,991,109
Reverse repurchase agreement ......... 4,183,048 -0- 98,292,335 -0- 102,475,383
Payable for capital stock redeemed ... 196,907 372,830 6,319,681 -0- 6,889,418
Dividends payable .................... 81,718 725,434 1,380,656 -0- 2,187,808
Distribution fee payable ............. 36,384 130,884 365,567 -0- 532,835
Advisory fee payable ................. 33,223 625,618 1,050,158 -0- 1,708,999
Variation margin payable on futures
contracts .......................... 14,983 -0- -0- -0- 14,983
Deposit for securities loaned ........ -0- 52,315,344 -0- -0- 52,315,344
Accrued expenses and other liabilities 174,204 560,419 415,871 0 1,150,494
----------- ------------ -------------- ---------- --------------
Total liabilities .................... 22,471,871 133,346,909 291,447,593 -0- 447,266,373
----------- ------------ -------------- ---------- --------------
NET ASSETS .............................. $61,981,058 $436,422,029 $ 743,986,004 $ -0- $1,242,389,091
=========== ============ ============== ========== ==============
Class A Shares
Net assets ........................... $26,180,635 $396,426,497 $ 430,895,264 $ 853,502,396
Shares of capital stock outstanding .. 2,935,453 48,970,216 61,617,802 8,586,890 122,110,361
Net asset value and redemption
price per share .................... $ 8.92 $ 8.10 $ 6.99 $ 6.99
Sales charge--4.25% of public
offering price ..................... .40 .36 .31 .31
----------- ------------ -------------- --------------
$ 9.32 $ 8.46 $ 7.30 $ 7.30
=========== ============ ============== ==============
Class B Shares
Net assets ........................... $16,122,011 $ 23,471,075 $ 200,282,893 $ 239,875,979
Shares of capital stock outstanding .. 1,807,599 2,896,463 28,614,921 950,957 34,269,940
Net asset value and redemption
price per share .................... $ 8.92 $ 8.10 $ 7.00 $ 7.00
=========== ============ ============== ==============
Class C Shares
Net assets ........................... $19,678,412 $ 16,524,457 $ 112,807,847 $ 149,010,716
Shares of capital stock outstanding .. 2,206,887 2,037,636 16,109,034 928,429 21,281,986
Net asset value and redemption
price per share .................... $ 8.92 $ 8.11 $ 7.00 $ 7.00
=========== ============ ============== ==============
</TABLE>
--------------------------------------------------------------------------------
See notes to financial statements.
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<PAGE>
STATEMENT OF OPERATIONS Alliance Limited Maturity Government Fund
Twelve Months Ended June 30, Alliance Mortgage Securities Income Fund
2000 (unaudited) Alliance Bond Fund U.S. Government Portfolio
================================================================================
<TABLE>
<CAPTION>
Alliance Alliance Alliance
Limited Mortgage Bond Fund
Maturity Securities U.S.
Government Income Government Pro-Forma
Fund Fund Portfolio Adjustment(s) Combined*
----------- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Interest .............................. $ 5,629,863 $ 45,633,563 $ 75,347,516 $ -0- $ 126,610,942
EXPENSES
Advisory fee .......................... 487,252 2,678,227 4,512,662 (966,196) 6,711,945(a)
Distribution fee - Class A ............ 84,298 1,290,439 1,279,649 (63,599) 2,590,787(b)
Distribution fee - Class B ............ 237,457 484,757 2,642,382 (965,836) 2,398,760(c)
Distribution fee - Class C ............ 231,166 189,997 1,287,011 (218,067) 1,490,107(c)
Transfer agency ....................... 146,425 1,041,940 1,349,201 (437,566) 2,100,000(d)
Administrative ........................ 127,580 147,852 114,349 (269,781) 120,000(d)
Audit and legal ....................... 119,250 146,318 113,585 (264,153) 115,000(d)
Custodian ............................. 103,908 290,922 266,418 (357,248) 304,000(e)
Printing .............................. 47,795 183,282 250,622 (166,699) 315,000(d)
Registration .......................... 46,129 50,660 105,931 (102,720) 100,000(d)
Directors' fees ....................... 22,895 26,796 11,814 (49,505) 12,000(d)
Miscellaneous ......................... 17,059 20,481 61,666 (34,206) 65,000(d)
----------- ------------ ------------ ----------- -------------
Total expenses before interest ........ 1,671,214 6,551,671 11,995,290 (3,895,576) 16,322,599
Interest expense ...................... 432,147 5,387,800 8,163,954 -0- 13,983,901
----------- ------------ ------------ ----------- -------------
Total expenses ........................ 2,103,361 11,939,471 20,159,244 (3,895,576) 30,306,500
----------- ------------ ------------ ----------- -------------
Net investment income ................. 3,526,502 33,694,092 55,188,272 3,895,576 96,304,442
----------- ------------ ------------ ----------- -------------
REALIZED AND UNREALIZED LOSS
ON INVESTMENTS
Net realized loss on investment
transactions ........................ (3,787,820) (21,570,094) (23,827,379) -0- (49,185,293)
Net realized loss on options
transactions ........................ (2,755) (995) (6,310) -0- (10,060)
Net realized gain (loss) on futures
transactions ........................ 32,586 (502,224) 1,130,988 -0- 661,350
Net change in unrealized appreciation /
depreciation of:
Investments ......................... 1,732,154 10,982,768 (2,400,040) -0- 10,314,882
Futures transactions ................ (87,137) -0- -0- -0- (87,137)
----------- ------------ ------------ ----------- -------------
Net loss on investments ............... (2,112,972) (11,090,545) (25,102,741) -0- (38,306,258)
----------- ------------ ------------ ----------- -------------
NET INCREASE IN NET ASSETS
FROM OPERATIONS .......................... $ 1,413,530 $ 22,603,547 $ 30,085,531 $ 3,895,576 $ 57,998,184
=========== ============ ============ =========== =============
</TABLE>
--------------------------------------------------------------------------------
* Based on combined net assets as of 6/30/00.
(a) Advisory fee based on an annual rate of .55% of the total combined average
net assets for the twelve months ended June 30, 2000.
(b) Distribution fee based on an annual rate of .30% of the total combined
average net assets for the twelve months ended June 30, 2000.
(c) Distribution fee based on an annual rate of 1.00% of the total combined
average net assets for the twelve months ended June 30, 2000.
(d) Expenses are based on one fund.
(e) Custodian fees are based on monthly fixed fees and on average net assets.
See notes to financial statements.
|9|
<PAGE>
NOTES TO PRO-FORMA COMBINED Alliance Limited Maturity Government Fund
FINANCIAL STATEMENTS Alliance Mortgage Securities Income Fund
June 30, 2000 (unaudited) Alliance Bond Fund U.S. Government Portfolio
================================================================================
NOTE A: General
The Pro-Forma Financial Statements give effect to the proposed acquisition of
the assets of Alliance Limited Maturity Government Fund and Alliance Mortgage
Securities Income Fund by Alliance Bond Fund U.S. Government Portfolio (the
"Portfolio") pursuant to agreements and plans of acquisition and liquidation.
The acquisitions would be accomplished by a tax-free exchange of the assets of
Alliance Limited Maturity Government Fund and Alliance Mortgage Securities
Income Fund for shares of the Portfolio.
The unaudited Pro-Forma Statements of Investments, of Assets and Liabilities and
of Operations have been prepared as though the acquisitions had been effective
June 30, 2000 and should be read in conjunction with the historical financial
statements and schedules of investments of the Portfolio, included in the
Statement of Additional Information. The Pro-Forma Statement of Operations has
been prepared under the assumption that certain expenses would be lower for the
combined entity as a result of the acquisitions. The expense of the
acquisitions, including the cost of proxy solicitation, will be borne by
Alliance Capital Management L.P.
--------------------------------------------------------------------------------
NOTE B: Significant Accounting Policies
The financial statements have been prepared in accordance with accounting
principles generally accepted in the United States which require management to
make certain estimates and assumptions that affect the reported amounts of
assets and liabilities in the financial statements and amounts of income and
expenses during the reporting period. Actual results could differ from those
estimates.
1. Security Valuation
Portfolio securities traded on a national securities exchange are valued at the
last reported 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. If no bid prices
are quoted, then the security is valued at the mean of the bid and asked prices
as obtained on that day from one or more dealers regularly making a market in
that security. Securities traded on the over-the-counter market are valued at
the mean of the closing bid and asked prices provided by two or more dealers
regularly making a market in such securities. U.S. government securities and
other debt securities which mature in 60 days or less are valued at amortized
cost unless this method does not represent fair value. Securities for which
market quotations are not readily available are valued at fair value as
determined in good faith by, or in accordance with procedures approved by, the
Board of Directors. Fixed income securities may be valued on the basis of prices
provided by a pricing service when such prices are believed to reflect the fair
market value of such securities. Mortgage backed and asset backed securities may
be valued at prices obtained from a bond pricing service or at a price obtained
from one or more of the major broker/dealers in such securities. In cases where
broker/dealer quotes are obtained, the Adviser may establish procedures whereby
changes in market yields or spreads are used to adjust, on a daily basis, a
recently obtained quoted bid price on a security.
2. Taxes
It is the Portfolio's policy to meet the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if any, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
3. Investment Income and Investment Transactions
Interest income is accrued daily. Investment transactions are accounted for on
the date securities are purchased or sold. The Portfolio amortizes premiums and
accretes discounts as adjustments to interest income. Investment gains and
losses are determined on the identified cost basis.
4. Income and Expenses
All income earned and expenses incurred by the Portfolio are borne on a pro-rata
basis by each settled class of shares, based on the proportionate interest in
the Portfolio represented by the net assets of such class, except that the
Portfolio's Class B and Class C shares bear higher distribution and transfer
agent fees than Class A shares.
5. Dividends and Distributions
Dividends and distributions to shareholders are recorded on the ex-dividend
date. Income dividends and capital
|10|
<PAGE>
Alliance Limited Maturity Government Fund
Alliance Mortgage Securities Income Fund
Alliance Bond Fund U.S. Government Portfolio
================================================================================
gains distributions are determined in accordance with federal tax regulations
and may differ from those determined in accordance with accounting principles
generally accepted in the United States. To the extent these differences are
permanent, such amounts are reclassified within the capital accounts based on
their federal tax basis treatment; temporary differences do not require such
reclassification.
--------------------------------------------------------------------------------
NOTE C: Advisory Fee
Under the terms of an investment advisory agreement, the Portfolio pays Alliance
Capital Management L.P. (the "Adviser") an advisory fee at a quarterly rate of
.15 of 1% (approximately .60 of 1% on an annual basis) of the first $500 million
of the Portfolio's net assets and .125 of 1% (approximately .50 of 1% on an
annual basis) of its net assets over $500 million, valued on the last business
day of the previous quarter.
--------------------------------------------------------------------------------
NOTE D: Distribution Services Agreement
The Portfolio has adopted a Distribution Services Agreement (the "Agreement")
pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the
Agreement, the Portfolio pays a distribution fee to the Distributor at an annual
rate of up to .30 of 1% of the Portfolio's average daily net assets attributable
to Class A shares and 1% of the average daily net assets attributable to both
Class B and Class C shares. The fees are accrued daily and paid monthly. The
Agreement provides that the Distributor will use such payments in their entirety
for distribution assistance and promotional activities.
|11|
<PAGE>
This is filed pursuant to Rule 497(b).
File Nos. 002-48227 and 811-02383.
<PAGE>