<PAGE>
As filed with the Securities and
Exchange Commission on August 11, 2000
Securities Act File No. 333-[______]
Investment Company Act File No. 811-5207
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
Post-Effective Amendment No.
(Check appropriate box or boxes)
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ACM Government Income Fund, Inc.
(Exact Name of Registrant as Specified in Charter)
(800) 221-5672
(Area Code and Telephone Number)
1345 Avenue of the Americas, New York, New York 10105
(Address of Principal Executive Office) (Zip Code)
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Edmund P. Bergan, Jr.
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, New York 10105
(Name and Address of Agent for Service)
Copies of communications to:
Thomas G. MacDonald
Seward & Kissel LLP
One Battery Park Plaza
New York, New York 10004
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Approximate Date Of Proposed Public Offering:
As soon as practicable after the Registration Statement
becomes effective under the Securities Act of 1933.
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It is proposed that this filing will become effective on
September 10, 2000 pursuant to Rule 488 under the Securities
Act of 1933.
<PAGE>
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933:
Proposed
Proposed Maximum
Title of Amount Maximum Aggregate Amount of
Securities Being Being Offering Price Offering Registration
Registered Registered Per Unit1 Price1 Fee2
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Common Stock 78,226,348 $7.50 $586,697,610
($0.01 par value) 35,235,527 $6.0625 $213,615,382 $234,860.00
12,425,781 $7.1875 $ 89,310,300
$889,623,292
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1. Estimated solely for the purpose of calculating the filing
fee.
2. Paid by wire transfer to the designated lockbox of the
Securities and Exchange Commission in Pittsburgh,
Pennsylvania.
2
<PAGE>
ACM GOVERNMENT INCOME FUND, INC.
ACM GOVERNMENT SECURITIES FUND, INC.
ACM GOVERNMENT SPECTRUM FUND, INC.
ACM GOVERNMENT OPPORTUNITY FUND, INC.
1345 Avenue of the Americas
New York, New York 10105
Toll Free (800) 221-5672
[________], 2000
To the stockholders of ACM Government Income Fund, Inc.
("ACM I"), ACM Government Securities Fund, Inc. ("ACM II"), ACM
Government Spectrum Fund, Inc. ("ACM III") and ACM Government
Opportunity Fund, Inc. ("ACM IV"):
At the Special Meetings of Stockholders of ACM I, ACM II, ACM
III and ACM IV (individually a "Fund" and collectively the
"Funds") to be held on November 9, 2000, stockholders of ACM I
will be asked to consider and approve the acquisition of the
assets and liabilities of each of ACM II, ACM III and ACM IV (the
"Acquired Funds") by ACM I and the stockholders of the Acquired
Funds will be asked to approve the acquisitions of each such
Fund's assets and liabilities by ACM I. Each Fund is a closed-
end management 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.
The Funds are very similar, with closely similar investment
objectives and only relatively narrow differences among their
investment policies. It is anticipated that the proposed
acquisitions will result in benefits to the stockholders of each
of the Funds, as is discussed more fully in the attached combined
Prospectus/Proxy Statement, including projected reductions in the
expense ratios.
The Board of Directors of each Fund has given careful
consideration to the proposed acquisition applicable to it and
has concluded that the acquisition (and, with respect to ACM I,
the acquisitions both individually and collectively) are in the
best interests of the Fund and its stockholders. If the
acquisitions are approved, each Acquired Fund stockholder will
receive ACM I shares 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
<PAGE>
acquisitions. Please note that the closing of one acquisition is
not contingent upon the closing of any of the other acquisitions.
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
2
<PAGE>
[ALLIANCE CAPITAL LOGO(R)]
ACM GOVERNMENT INCOME FUND, INC.
ACM GOVERNMENT SECURITIES FUND, INC.
ACM GOVERNMENT SPECTRUM FUND, INC.
ACM GOVERNMENT OPPORTUNITY FUND, INC.
1345 Avenue of the Americas
New York, New York 10105
Toll Free (800) 221-5672
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NOTICE OF SPECIAL MEETINGS OF STOCKHOLDERS
---------------------------------------------------------------
[________], 2000
To the stockholders of ACM Government Income Fund, Inc. ("ACM
I"), ACM Government Securities Fund, Inc. ("ACM II"), ACM
Government Spectrum Fund, Inc. ("ACM III") and ACM Government
Opportunity Fund, Inc. ("ACM IV"), each a Maryland corporation:
Notice is hereby given that Special Meetings of the
Stockholders of ACM II, ACM III and ACM IV (each an "Acquired
Fund") and ACM I will be held at 1345 Avenue of the Americas,
33rd Floor, New York, New York 10105 on November 9, 2000 at 3:00
p.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 ACM I and each Acquired
Fund, as applicable to such stockholders, providing for
the acquisition by ACM I of all of the assets and
assumption of all of the liabilities of each Acquired
Fund in exchange for ACM I shares. A vote in favor of
this proposal by the stockholders of each Acquired Fund
also will constitute a vote in favor of the liquidation
and dissolution of that Fund and termination of its
registration under the Investment Company Act of 1940.
A vote in favor of this proposal by the stockholders of
ACM I also will constitute a vote in favor of the
issuance of additional shares of ACM I to the
stockholders of the Acquired Funds pursuant to the Plan.
2. Any other business that may properly come before the
Meetings.
The Board of Directors of each Acquired Fund and ACM I have
fixed the close of business on August 25, 2000 as the record date
for determination of stockholders entitled to notice of, and to
vote at, the Meetings and any postponements or adjournments
thereof. The enclosed proxy is being solicited on behalf of the
3
<PAGE>
Boards of Directors. Each stockholder who does not expect to
attend in person is requested to complete, date, sign and
promptly return the enclosed proxy card.
The Board of Directors of ACM I and each Acquired Fund
recommends approval of the Plan.
By Order of the Boards of Directors,
Edmund P. Bergan, Jr.
Secretary
New York, New York
[________], 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.
4
<PAGE>
PROSPECTUS/PROXY STATEMENT
ACQUISITION OF THE ASSETS AND ASSUMPTION
OF THE LIABILITIES OF
ACM GOVERNMENT SECURITIES FUND, INC.
ACM GOVERNMENT SPECTRUM FUND, INC.
ACM GOVERNMENT OPPORTUNITY FUND, INC.
BY, AND IN EXCHANGE FOR SHARES OF,
ACM GOVERNMENT INCOME FUND, INC.
[________], 2000
WHAT IS THIS DOCUMENT AND WHY DID WE SEND IT TO YOU?
On July 19-20, 2000, the Boards of Directors of ACM
Government Securities Fund, Inc. ("ACM II"), ACM Government
Spectrum Fund, Inc. ("ACM III") and ACM Government Opportunity
Fund, Inc. ("ACM IV" and, together with ACM II and ACM III, the
"Acquired Funds") and ACM Government Income Fund, Inc. ("ACM I"
and, together with the Acquired Funds, the "Funds") approved the
acquisition of the Acquired Funds by ACM I. Stockholders of ACM
I and the Acquired Funds are being asked to approve an Agreement
and Plan of Acquisition and Liquidation (a "Plan" and
collectively, the "Plans") between ACM I and each Acquired Fund.
Each Plan provides for (i) the transfer of all the assets of the
Acquired Fund to ACM I, (ii) the assumption by ACM I 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 ACM I, equal in
aggregate net asset value ("NAV") to the NAV of their former
shares (an "Acquisition" and collectively, the "Acquisitions").
Stockholders of an Acquired Fund that participate in the Acquired
Fund's Dividend Reinvestment Plan ("DRIP") will receive full and
fractional shares of ACM I equal to the aggregate NAV of their
shares. All other Acquired Fund stockholders ("Non-DRIP
stockholders") will receive full shares of ACM I plus cash in
lieu of fractional shares equal to the aggregate NAV of their
shares. Approval of the Plans by ACM I stockholders will
constitute their approval of the proposed issuances of ACM I
shares under the Plans. This Prospectus/Proxy Statement contains
the information stockholders should know before voting on the
proposed Acquisitions as applicable to such stockholders 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?
5
<PAGE>
The Acquisitions will involve three steps:
- the transfer of the assets of an Acquired Fund to ACM I
and the assumption by ACM I of the liabilities of the
Acquired Fund in exchange for shares (and cash in lieu of
fractional shares for non-DRIP stockholders) of ACM I of
equivalent value to the assets and liabilities
transferred;
- the pro rata distribution of ACM I shares (and cash in
lieu of fractional shares for non-DRIP stockholders) to
the stockholders of record of the Acquired Fund as of the
effective date of an Acquisition in exchange for those
stockholders' shares in the Acquired Fund; and
- the liquidation and dissolution of the Acquired Fund as
promptly as practicable.
As a result of an Acquisition, stockholders of an Acquired
Fund will instead hold shares of ACM I (or cash in lieu of
fractional shares for non-DRIP stockholders) having the same
aggregate NAV as the shares of the Acquired Fund that they held
immediately before the Acquisition. An Acquisition will not
occur unless it is approved by both the stockholders of ACM I and
the respective Acquired Fund. Assuming approval of the Plans and
Acquisitions by ACM I stockholders, approval of one Plan and the
related Acquisition by an Acquired Fund's stockholders is
independent of approval of the Plans and Acquisitions by
stockholders of the other Acquired Funds. If the stockholders of
one of the Acquired Funds do 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. If the
stockholders of ACM I do not approve the Acquisitions, none of
the Acquisitions will occur and the Directors of each Fund 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 Statement of Additional Information ("SAI") dated [________],
2000 that has been filed with the Securities and Exchange
Commission ("SEC") in connection with this Prospectus/Proxy
Statement. The SAI and each Fund's Annual Report to
Stockholders, which contain financial statements audited by Ernst
& Young LLP for each Fund's fiscal year, are incorporated by
reference into this Prospectus/Proxy Statement. In addition, the
Semi-Annual Reports to Stockholders of ACM I, ACM II and ACM III
for the six months ended June 30, 2000 and the Semi-Annual Report
for ACM IV for the six months ended January 31, 2000 are also
incorporated by reference into this Prospectus/Proxy Statement.
6
<PAGE>
All of this information is in documents filed with the SEC.
You may view or obtain these documents from the SEC:
In person: at the SEC's Public Reference Room in
Washington, DC
By phone: 202-942-8090 (for information on the
operations of the Public Reference
Room only)
By mail: Public Reference Section
Securities and Exchange Commission
Washington, DC 20549-6009
(duplicating fee required)
By electronic mail: [email protected] (duplicating fee
required)
On the Internet: www.sec.gov
The shares of the Funds are listed and publicly traded on the
New York Stock Exchange ("NYSE") under the following symbols: ACM
I - "ACG"; ACM II - "GSI"; ACM III - "SI"; ACM IV - "AOF".
Reports, proxy statements and other information concerning the
Funds may be inspected at the offices of the NYSE. Additional
copies of the Annual Reports, as well as the SAI, 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, NJ 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.
7
<PAGE>
PROPOSAL: APPROVAL OF AN AGREEMENT AND PLAN OF ACQUISITION AND
LIQUIDATION BETWEEN ACM I AND EACH OF THE ACQUIRED
FUNDS
On July 19-20, 2000, the Board of Directors of each Fund
voted to approve the Plan and 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 ACM I and the assumption by ACM I of the
liabilities of the Acquired Fund in exchange for shares of ACM I
having a value in the aggregate equal to the net assets of the
Acquired Fund. Following the transfer of assets, shares of ACM I
will be distributed to stockholders of the Acquired Fund in
liquidation of the Acquired Fund.
Each Acquired Fund stockholder will receive the number of
full shares of ACM I, plus fractional shares for stockholders
that participate in a DRIP and cash in lieu of any fractional
shares for non-DRIP stockholders, having an aggregate NAV that,
on the effective date of the Acquisition, is equal to the
aggregate NAV of the stockholder's shares of the Acquired Fund.
Stockholders of an Acquired Fund will recognize no gain or loss,
except with respect to any cash received in lieu of fractional
ACM I shares by non-DRIP stockholders.
An exchange of Acquired Fund shares for ACM I shares at NAV
may result in an Acquired Fund's stockholders receiving ACM I
shares with an aggregate market value on the date of exchange
that is higher or lower than the market value of their shares
immediately prior to the exchange. The reason for this
difference is that the market price for shares of the Funds in
relation to their NAVs may be different, i.e., a Fund's shares
may trade at different discounts or premiums to its NAV. If
approved by the stockholders of ACM I and an Acquired Fund, 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 Acquisitions require stockholder approval. The
stockholders of ACM I must approve that Fund's Acquisitions of
the net assets of each of ACM II, ACM III and ACM IV and the
stockholders of ACM II, ACM III, and ACM IV must each approve the
Acquisition of the net assets of their respective Fund by ACM I.
Approval of the Acquisitions requires the affirmative vote of:
(i) for ACM I, a majority of the votes cast provided more than
50% of the Fund's outstanding shares are present and (ii) for
each of ACM II, ACM III and ACM IV, a majority of that Fund's
outstanding shares.
The Board of Directors of ACM I and each Acquired Fund
concluded that participation by its Fund in each proposed
Acquisition (and, in the case of ACM I, the acquisitions both
8
<PAGE>
individually and collectively) is in the best interests of the
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
closely similar investment objectives and relatively narrow
differences among the investment policies of the Funds, trading
disparities among the Funds, expense benefits for stockholders
expected to result from the Acquisitions, the cost thereof, and
the tax-free nature of the Acquisition by ACM I of the assets of
the Acquired Funds.
For a more complete discussion of the factors considered by
the Boards of Directors in approving the Acquisitions, see page
[__].
9
<PAGE>
SUMMARY
The following summary highlights differences between ACM I
and ACM II, ACM III and ACM IV. This summary is not complete and
does not contain all of the information that you should consider
before voting on the Acquisition. For more complete information,
please read this entire document.
COMPARISON OF CURRENT FEES
The Acquisitions are expected to result in an operating
expense ratio for the combined Fund that is lower than the
current operating expense ratio of any Fund. As of June 30,
2000, ACM I, ACM II, ACM III and ACM IV had year-to-date average
net assets of approximately $458 million, $608 million, $236 and
$100 million, respectively. If all of the Acquisitions had been
consummated as of that date, the combined Fund would have had net
assets of approximately $1.4 billion. At current asset levels as
of June 30, 2000 and assuming all of the Acquisitions are
approved, the Acquisitions would result in a projected annual
expense ratio reductions (without taking account the expenses of
the Acquisitions) of approximately .04% to the ACM I
stockholders, .04% to ACM II stockholders, .16% to ACM III
stockholders, and .19% to ACM IV stockholders. The Fee Table,
attached as Exhibit A, describes the fees and expenses of each
Fund as of June 30, 2000 and includes pro forma expenses for each
Acquired Fund combined with ACM I separately and for the combined
Fund assuming that all of the Acquisitions are approved. Even if
only one of the Acquisitions takes place, both the Acquired Fund
and ACM I would realize expense ratio benefits, although these
would be smaller than if all three Acquisitions occur.
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 the same. ACM I, ACM II and ACM III seek
high current income consistent with preservation of capital. ACM
IV seeks high current income consistent with prudent investment
risk, with a secondary investment objective of growth of capital.
The investment strategies of the Funds are substantially similar
in that all of the Funds primarily invest in obligations issued
or guaranteed by the U.S. Government, its agencies or
instrumentalities ("U.S. Government securities").
The primary differences in the investment strategies of the
Funds are that ACM I and ACM II may invest in corporate debt
securities, while ACM III and ACM IV may not invest in corporate
debt securities. In lieu of investing in corporate debt
securities, which typically compose about 10% of the portfolios
of ACM I and ACM II, the portfolios of ACM III and ACM IV have
10
<PAGE>
historically held greater weightings in (i) emerging market
government securities, which typically amount to 30%-35% of their
respective net assets as opposed to 25%-30% for ACM I and ACM II,
and (ii) in mortgage securities, which typically represent 5%-10%
of the ACM III and ACM IV portfolios and are usually not held in
ACM I and ACM II portfolios. Only ACM IV can invest in equity
securities, but it has held no equity positions since 1996.
All of the Funds may use leverage to enhance yield by
borrowing money or using other financing alternatives, such as
the issuance of preferred stock. Historically, only ACM I and
ACM II have used leverage through borrowings, currently in the
amount of $90 million in the case of ACM I and $110 million in
the case of ACM II. If the Acquisitions are approved, ACM I will
increase its borrowings in proportion to the increase in ACM I's
assets. ACM I also is authorized to issue preferred stock,
commercial paper, bonds, debentures or notes, in series or
otherwise, with such interest rates, conversion rights and other
terms and provisions as are determined by ACMI's Board of
Directors.
As the Funds pursue similar investment objectives, have
largely similar investment strategies and hold substantially
similar securities, the proposed Acquisitions will not result in
significant portfolio turnover or transaction expenses due to the
disposal of securities that are incompatible with the investment
objective and strategies of ACM I. A more detailed comparison of
the Funds' investment objectives and strategies can be found in
Exhibit D. You can find additional information on the Funds in
the SAI.
PRINCIPAL RISKS
Because of the similarities in investment objectives and
policies, the Funds are subject to substantially similar
investment risks. Among the principal risks of investing in any
of the Funds are market risk, interest rate risk, credit risk,
leveraging risk, foreign risk, emerging markets risk, currency
risk, derivatives risk, liquidity risk and management risk. Each
of these risks is more fully described below. Each Fund could
become subject to additional risks because the types of
investments made by each Fund can change over time.
Market Risk and Net Asset Value of Shares. Market risk is
the risk that the value of a Fund's investments will fluctuate as
the stock or bond markets fluctuate and that prices overall will
decline over shorter or longer-term periods. Shares of common
stock of closed-end investment companies, such as the Funds,
frequently trade at a discount to their NAVs. Whether an
investor will realize gains or losses upon the sale of shares of
a Fund does not depend directly upon changes in the Fund's NAV,
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<PAGE>
but rather upon whether the market price of the shares at the
time of sale is above or below the investor's purchase price for
the shares. The market price of the shares of each Fund is
determined by such factors as relative demand for and supply of
the shares in the market, general market and economic conditions,
changes in the Fund's NAV and other factors beyond the control of
the Fund. This market risk is separate and distinct from the
risk that each Fund's NAV may decrease.
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
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. In
addition, changes in interest rates will affect a Fund's
indebtedness, which, in turn, will affect the return to
stockholders. Because ACM I and ACM II currently employ leverage
for investment purposes, changes in interest rates may affect
these Funds more than ACM III or ACM IV.
Interest rate risk is generally greater for investments in
debt securities with longer maturities. This risk is compounded
for ACM III and ACM IV because these Funds invest a greater
portion of their assets in mortgage-related 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.
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.
Leveraging Risk. When a Fund borrows money or otherwise
leverages its portfolio, the value of an investment in that Fund
will be more volatile and all other risks will tend to be
compounded. Each Fund may create leverage by using derivatives
or engaging in other investment practices, or through borrowings
or use of other financing alternatives. This risk is greater for
ACM I and ACM II because these Funds historically have employed
bank leverage while ACM III and ACM IV have not.
12
<PAGE>
Foreign Risk. This is the risk of investments in issuers
located in foreign countries. Because the Funds may invest in
foreign securities, they are subject to this risk. This risk is
compounded for ACM III and ACM IV because they invest a greater
portion of their assets in foreign securities and, in particular,
emerging market securities than ACM I and ACM II. The Fund's
investments in foreign securities may experience more rapid and
extreme changes in value than investments in securities of U.S.
companies. The securities markets of many foreign countries are
relatively small, with a limited number of companies representing
a large proportion of the available securities. In addition,
foreign companies usually are not subject to the same degree of
regulation as U.S. companies. Reporting, accounting, and
auditing standards of foreign countries differ, in some cases
significantly, from U.S. standards. Nationalization,
expropriation or confiscatory taxation, currency blockage,
capital controls, political changes, or diplomatic developments
could adversely affect a Fund's investments in a foreign country.
In the event of nationalization, expropriation, or other
confiscation, a Fund could lose its entire investment.
Emerging Markets Risk. This is the risk that returns on a
Fund's investments in emerging markets and in developing
countries will be significantly more volatile and differ
substantially from returns in the U.S. markets generally. Market
changes or other factors affecting emerging markets and
developing countries, including political instability and
unpredictable economic conditions, may have a significant effect
on a Fund's net asset value. This risk is greater for ACM III
and ACM IV because these Funds invest a greater portion of their
assets in emerging market securities than ACM I and ACM II.
Currency Risk. This is the risk that fluctuations in the
exchange rates between the U.S. dollar and foreign currencies may
negatively affect the value of a Fund's investments. Because
each Fund invests in securities denominated in, and/or companies
receiving revenues in, foreign currencies it is subject to
currency risk.
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
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<PAGE>
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
The stockholder services of each Fund are generally the same.
The DRIP, which is available to the Funds' stockholders, provides
automatic reinvestment of dividends and capital gain
distributions in additional Fund shares. The DRIP also allows
stockholders to make optional cash investments in Fund shares
through a plan agent. A more detailed discussion of the DRIP and
other stockholder services and procedures is provided in Exhibit
F.
FEDERAL INCOME TAX CONSEQUENCES
No gain or loss will be recognized by the Funds as a result
of the Acquisitions. No gain or loss will be recognized by the
stockholders of the Acquired Funds, except with respect to cash
received in lieu of fractional interests in ACM I shares by non-
DRIP stockholders, as a result of the Acquisitions. The
aggregate tax basis of the shares of ACM I received by a
stockholder of an Acquired Fund (including any fractional shares
to which the stockholder may be entitled) will be the same as the
aggregate tax basis of the stockholder's shares of the Acquired
Fund, decreased by any cash received and increased by any gain
recognized with respect to cash received in lieu of fractional
shares by non-DRIP stockholders. The holding period of the
shares of ACM I received by a stockholder of an Acquired Fund
(including any fractional share to which the stockholder may be
entitled) will include the holding period of the shares of the
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Acquired Fund held by the stockholder, provided that such shares
are held as capital assets by the stockholder of the Acquired
Fund at the time of the Acquisition. The holding period and tax
basis of each asset of an Acquired Fund in the hands of ACM I as
a result of the Acquisition 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 Acquisition. Any gain or loss
realized by a stockholder of the Acquired Fund upon receipt of
cash in lieu of fractional shares of ACM I by non-DRIP
stockholders will be recognized to the stockholder and measured
by the difference between the amount of cash received and the
basis of the fractional share and, provided that the Acquired
Fund shares surrendered constitute capital assets in the hands of
the stockholder, will be capital gain or loss. 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 the 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 AND ADMINISTRATIVE FEES
Each Funds' investment adviser is Alliance Capital Management
L.P. ("Alliance"), 1345 Avenue of the Americas, New York, New
York 10105. 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
nations' 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.
The administrator for ACM I, ACM II and ACM III is Mitchell
Hutchins Asset Management Inc. ("Mitchell Hutchins"), 1285 Avenue
of the Americas, New York, New York 10019. Alliance serves as
administrator for ACM IV.
The combined effective advisory and administration fee rates
for the Funds as of June 30, 2000 were 1.00% for ACM I, 1.01% for
ACM II, 1.07% for ACM III and .90% for ACM IV. Assuming
consummation of all of the Acquisitions as of that date, the
combined effective advisory and administration fee rate for ACM I
is expected to be .98%, which would be below the current rates
for ACM II and ACM III but would be .08% over ACM IV's current
rate of .90%. However, the Acquisitions would, as discussed
above in the Comparison of Current Fees, result in an overall
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.19% expense ratio savings for ACM IV stockholders. The
anticipated reductions in advisory and administration fee rates
expected after the Acquisitions are due to the elimination of
certain incremental costs associated with portfolio
administration and accounting, legal maintenance, and compliance
testing for the Acquired Funds. In addition, because the
Acquisitions would result in Mitchell Hutchins' servicing
additional assets (i.e., those of ACM IV), the Adviser has
negotiated a .02% reduction in the administrative fee rate for
the combined Fund, which is contingent on completion of all three
of the Acquisitions. Additional information about the advisory
and administrative fees is set forth below under "Information
About the Funds-Management of the Funds."
COMPARISON OF BUSINESS STRUCTURES
Generally, 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 Charter, By-Laws and Maryland law. For more
information on the comparison of the business structures of the
Funds, see Exhibit F.
INFORMATION ABOUT THE PROPOSED TRANSACTIONS
INTRODUCTION
This Prospectus/Proxy Statement is provided to you to solicit
your proxy for exercise at the Meetings to approve the
acquisition of the assets and assumption of the liabilities of
each Acquired Fund by ACM I. The Meetings will be held at the
offices of the Funds, 1345 Avenue of the Americas, 33rd Floor,
New York, New York 10105 at 3:00 p.m., Eastern Time, on November
9, 2000. This Prospectus/Proxy Statement, the accompanying
Notice of Special Meetings of Stockholders and the enclosed Proxy
Card are being mailed to stockholders of the Funds on or about
September 11, 2000.
DESCRIPTION OF THE PLANS
As provided in each Plan, ACM I will acquire all the assets
and assume all the liabilities of an Acquired Fund at the
effective time of the Acquisition (the "Effective Time"). In
return, ACM I will issue, and an Acquired Fund will distribute to
its stockholders, a number of full and fractional shares of ACM I
(and cash in lieu of fractional shares for non-DRIP
stockholders), determined by dividing the net value of all the
assets of the Acquired Fund by the NAV of one share of ACM I.
For this purpose, a Plan provides the times for and methods of
determining the net value of the assets of each Fund. The Plans
provide that stockholders of an Acquired Fund will be credited
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with shares of ACM I (or cash in lieu of fractional shares for
non-DRIP stockholders) corresponding to the aggregate NAV of the
Acquired Fund's shares that the stockholder holds of record at
the Effective Time.
Following the distribution of ACM I shares, each Acquired
Fund will cancel its outstanding shares, wind up its affairs, and
dissolve as soon as is reasonably possible after the Acquisition.
In the event the Acquisition do not receive the required
stockholder approval, that Fund will continue its operations and
its directors will consider what future action, if any, is
appropriate. If the stockholders of ACM I do not approve the
Acquisitions, none of them will occur and the Directors of each
Fund will consider what further action, if any, is appropriate.
Alliance has agreed to assume one-quarter of the Acquisition
expenses (estimated to be approximately $600,000 in the
aggregate). Alliance's share of the Acquisition expenses is
expected to be used first to offset ACM I's Acquisition expenses.
To the extent Alliance's share is greater than the amount
allocable to ACMI, it will be used to offset ACM II's Acquisition
expenses. Each of the Funds will otherwise assume its
proportionate share of the expenses.
The Acquisitions are expected to occur late in the last
quarter of this year or early in the first quarter of year 2001.
Each Acquisition is conditioned upon both approval of the Plans
by the stockholders of ACM I and each applicable Fund and each
such Fund satisfying the terms of the applicable Plan. Under
Maryland law, none of the Acquired Funds' stockholders will be
entitled to exercise objecting stockholders' appraisal rights,
i.e., to demand the fair value of their shares in connection with
Acquisitions. Therefore, stockholders will be bound by the terms
of the Acquisition under the Plan to which their Fund is a party.
However, any stockholder of a Fund may sell shares of common
stock on the NYSE prior to the Acquisitions. The shares of each
Acquired Fund may cease trading on the NYSE beginning several
days prior to the date of its Acquisition. Any cessation of
trading will be accomplished in compliance with NYSE rules,
including issuance of a press release.
After an Acquisition, the Acquired Fund's shares of common
stock will be removed from listing on the NYSE and withdrawn from
registration under the Securities Exchange Act of 1934. In
addition, the Acquired Fund will deregister as an investment
company under the Investment Company Act of 1940, as amended (the
"1940 Act") and dissolve under Maryland law.
Completion of the Acquisitions is subject to certain
conditions set forth in each Plan, some of which may be waived by
a party to the Plan. A Plan may be amended in any mutually
agreed manner, except that no amendment may be made subsequent to
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the Meeting 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 the 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 Plan is attached as Exhibit G.
REASONS FOR THE ACQUISITIONS
At regular meetings of the Boards of Directors of the Funds
held on July 19-20, 2000, Alliance recommended that the Boards of
Directors approve and recommend to the Fund's stockholders for
their approval each of the proposed Plans and Acquisitions. 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.
In proposing the Acquisitions to the Boards of Directors,
Alliance noted that the Funds date back to 1987-88, when they
were launched in close succession: ACM I conducted its initial
public offering in August 1987, ACM II in January 1988, ACM III
in May 1988 and ACM IV in August 1988. Alliance explained that
the Funds are very similar, with closely similar investment
objectives and only relatively narrow differences among their
investment policies. Alliance discussed the fact that from the
investment perspective, ACM I and ACM II have always been managed
substantially identically. Alliance noted that ACM I and ACM II
have also both historically employed leverage. In addition to
the use of leverage, the most significant differences between the
investment portfolios of ACM I and ACM II, on the one hand, and
ACM III and ACM IV, on the other, is that in lieu of investing in
high-yield corporate instruments, which typically comprise about
10% of the ACM I and ACM II portfolios, ACM III and ACM IV have
historically held larger weightings in (i) emerging market
government securities, which typically amount to 30-35% of their
respective net assets as opposed to 25-30% for ACM I and II, and
in mortgage securities, which typically represent 5-10% of the
ACM III and ACM IV portfolios, and are not usually held by ACM I
and ACM II. In its earlier years, Alliance noted, ACM IV made
use of its equity investments latitude, but has held no equity
positions since 1996.
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Alliance stated that the relatively narrow differences among
the four Funds' investment design reflected evolving investment
and marketing thought during the period of the Funds' public
offerings. In Alliance's view, however, fundamental changes in
the investment and marketing climate during the subsequent twelve
years have reduced the significance of these differences.
Alliance noted that in more recent years ACM I and ACM II have
tended to outyield ACM III and ACM IV on a yield to NAV basis.
Alliance stated that it believed that as ACM III and ACM IV can
offer no countervailing total return superiority, analysts have
almost uniformly come to regard ACM I and ACM II as more
attractive than ACM III and ACM IV. This view holds that in
these times the ACM I and ACM II combination of modest leverage
and somewhat less exposure to emerging markets offers somewhat
better risk/reward characteristics than the larger emerging
market weighting and lack of leverage in ACM III and ACM IV.
Alliance also discussed the large historical disparities
among the Funds' respective trading characteristics, and stated
its belief that these disparities cannot be accounted for by the
relatively narrow differences among the Funds' investment design.
Historically, ACM I has generally traded at a premium to NAV, and
normally several hundred basis points better than ACM II, which
since 1994 has generally traded at a discount. Since September
1999, however, ACM I has traded at discounts to NAV, although the
discounts have been lower than those of the other Funds. ACM IV
has tended to trade in much the same range as ACM II, except that
ACM IV has had a significantly larger discount during the two
years preceding the elimination of its equity position in 1996.
Alliance also noted that ACM III's trading characteristics have
normally been somewhat inferior to those of ACM II and ACM IV.
Alliance advised the Boards that, as of July 7, 2000, ACM I, ACM
II, ACM II and ACM IV were trading at discounts of, respectively,
7.4%, 10.5%, 12.8% and 9.9%. As of September 1, 2000, ACM I,
ACM II, ACM III and ACM IV were trading at discounts of,
respectively, [___]%, [___]%, [___]% and [___]%.
Alliance advised the Boards of Directors that it believed
that the best interests of the Funds' stockholders were no longer
being served by the continued maintenance of the Funds' separate
existence and that the stockholders of the Acquired Funds would
derive significant benefits from an investment in a fund with the
portfolio characteristics of ACM I.
Alliance also expressed its belief that the Acquisitions
would eliminate market confusion about the differences among the
Funds' portfolios and their trading characteristics. Alliance
stated that it expected that, as the surviving Fund, ACM I would
benefit from the elimination of its three most direct competitors
for the attention of analysts, brokers and investors and its
resultant status as the single closed-end "U.S. Government Fund"
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<PAGE>
sponsored by Alliance. Alliance noted, however, that it was
difficult to predict whether ACM I would retain its superior
trading characteristics following the Acquisitions and pointed
out that relatively thin markets for closed-end funds and market
inefficiencies can significantly affect market prices of closed-
end funds.
Alliance also discussed with the Boards of Directors other,
more quantifiable, benefits to stockholders. To varying degrees,
the stockholders of all four Funds would derive expense benefits
from the Acquisitions. Alliance noted that ACM II is the largest
of the four Funds with year-to-date average net assets as of June
30, 2000 of approximately $608 million. For the same period, ACM
I had average net assets of approximately $458 million and ACM
III and ACM IV had average net assets of approximately $236
million and approximately $100 million, respectively. Inasmuch
as ACM I would, after the Acquisitions, be approximately three
times its current size, twice the size of ACM II, and at least
six times as large as either ACM III or ACM IV, stockholders of
every Fund would experience expense ratio reductions as a result
of the Acquisitions. Alliance provided the Boards of Directors
with information about the pro forma annualized operating
expenses for each Fund, individually and for the combined Funds,
assuming the Acquisitions were approved. At current asset levels
and assuming that all of the Acquisitions are approved, the
Acquisitions would result in a projected annualized expense ratio
reduction to the stockholders of ACM I, ACM II, ACM III and ACM
IV of .04%, .04%, .16% and .19%, respectively. Even if only one
of the Acquisitions takes place, stockholders of both the
Acquired Fund and ACM I would realize expense ratio benefits,
although these would be smaller than if all three Acquisitions
occur.
Alliance also discussed the combined effective advisory and
administration fee rates for the Funds, which as of June 30, 2000
were 1.00% for ACM I, 1.01% for ACM II, 1.07% for ACM III and
.90% for ACM IV. Assuming consummation of all of the
Acquisitions as of that date, the combined effective advisory and
administration fee rate for ACM I would be .98%, which would be
below the current rates for ACM II and ACM III but would be .08%
over ACM IV's current rate of .90%. However, the Acquisitions
would result in an overall .19% expense ratio savings for ACM IV
stockholders. The anticipated reductions in advisory and
administration fee rates expected after the Acquisitions are due
to the elimination of certain incremental costs associated with
portfolio administration and accounting, legal maintenance, and
compliance testing for the Acquired Funds. In addition, because
the Acquisitions would result in the Administrator for ACM I,
Mitchell Hutchins Asset Management Inc. servicing additional
assets (i.e., those of ACM IV, in addition to ACM I, ACM II, and
ACM III for which it currently serves as Administrator), the
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<PAGE>
Adviser has negotiated a .02% reduction in the administrative fee
rate for the combined Fund, which is contingent on completion of
all three of the Acquisitions.
Alliance advised the Boards of Directors that the four Funds
have very similar earning power and no significant reserves of
undistributed net investment income. In addition, no Fund had
realized gains that are not offset by sizable loss carryforwards.
Therefore, Alliance did not anticipate that any Fund would be
required to make a special distribution to stockholders prior to
the closing of the Acquisitions, although the Plans provide for
special distributions in the event they are deemed desirable.
Alliance noted that, as of June 30, 2000, ACM II had a capital
loss carryforward substantially in excess of the current realized
capital gain in the Fund's portfolio, ACM III had substantial
capital loss carryforwards but no realized gains in its portfolio
and ACM IV had no capital loss carryforwards and no realized
capital gains. As a result of the Acquisitions, the ability of
ACM I 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 the capital loss carryforwards of ACM I
or of the Acquired Funds that can be utilized by ACM I in a given
year would be limited to an amount equal to the total NAV of the
particular Acquired Fund immediately prior to the Acquisition
involved multiplied by a specified interest rate (currently
5.79%). Notwithstanding these limitations, the amount of capital
loss carryforwards is so substantial that Alliance believes that
the limitations resulting from the Acquisitions will have no
practical effect.
Each Board of Directors also considered, among other things:
(i) the form of the Plans and the terms and conditions of an
Acquisition; (ii) whether an 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, the
continuity of portfolio management associated with the
Acquisition and expectations regarding the yield of the combined
portfolio and the implications for ACM I's dividends, including
plans for the additional borrowings to maintain ACM I's current
leverage ratio; (iv) the effect of the anticipated realignment of
the investment holdings of ACM I after consummation of the
Acquisitions, including the associated costs and the resulting
tax consequences; (v) the benefits of an Acquisition to persons
other than the Fund; (vi) the fact that ACM I will assume all the
liabilities of an Acquired Fund; (vii) the expected federal
income tax consequences of an Acquisition; (viii) historical and
pro forma financial information, including the information set
forth above and information regarding realized and unrealized
gains and losses of a Fund; (ix) whether the Acquisitions would
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<PAGE>
be preferable to acquisitions by potential acquirors other than
ACM I, including funds that are not sponsored by Alliance;
(x) consideration of the fact that the shares of the Funds trade
at market prices that differ from their NAVs, that stockholders
of the Acquired Funds may receive shares with a different market
value than they had before the Acquisitions and that the
Acquisitions may affect the market value of the shares held by
the current stockholders of ACM I; (xi) the costs of the
Acquisitions including the fact that the Adviser had agreed to
bear 25% of the costs of the Acquisitions; (xii) the fact that
the acquisition of one Acquired Fund may or may not be effected
together with the other Acquisitions of the other Acquired Funds;
(xiii) the possibility of the Plans providing for an exchange
ratio based on relative market prices rather than relative NAV;
and (xiv) the effect of the Acquisitions on the advisory and
administrative fees of the Funds.
During their consideration of an Acquisition, the independent
Directors of a 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, each
Fund's Board of Directors determined that the Acquisition
involving its Fund would be in the best interests of the Fund and
its stockholders and would not result in dilution of
stockholders' interests, and recommended that the stockholders of
the Fund approve the Acquisition.
DESCRIPTION OF SECURITIES TO BE ISSUED
Under the Plans, ACM I will issue additional shares of common
stock for distribution to the Acquired Funds. Under its Charter
and By-Laws, ACM I may issue up to 300,000,000 shares of common
stock, par value $.01 per share. Each share of ACM I represents
an equal proportionate interest with other shares of the Fund.
Each share has equal earnings, assets and voting privileges and
is entitled to dividends and other distributions out of the
income earned and gain realized on the assets belonging to the
Fund as authorized by the Board of Directors. Shares of ACM I
entitle their holders to one vote per full share and fractional
votes for fractional shares held. Shares of ACM I issued in the
Acquisitions will be fully paid and non-assessable.
DIVIDENDS AND OTHER DISTRIBUTIONS
On or before the Closing Date, as defined in the Plans, the
Acquired Funds will, if necessary, declare and pay as a
distribution substantially all their undistributed net investment
income, net short-term capital gain, net long-term capital gain
and net gains from foreign currency transactions as applicable to
maintain their treatment as regulated investment companies.
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<PAGE>
SURRENDER AND EXCHANGE OF ACQUIRED FUND STOCK CERTIFICATES
After a Plan's Effective Time, each holder of a certificate
(or certificates) formerly representing shares of an Acquired
Fund will be entitled to receive, upon surrender of the
certificate, a certificate representing the number of ACM I
shares distributable as a result of an Acquisition. PLEASE DO
NOT SEND SHARE CERTIFICATES AT THIS TIME. Promptly after a
Plan's Effective Time, State Street Bank and Trust Company will
mail to an Acquired Fund's certificate holders instructions and a
letter of transmittal for use in surrendering the certificate for
a certificate representing ACM I shares. Although the
certificates will be deemed for all purposes to evidence
ownership of the equivalent number of ACM I shares, no dividends
will be paid to holders of certificates of an Acquired Fund until
the holder surrenders the certificates in accordance with the
instructions and letter of transmittal. Any dividends on ACM I
shares payable after the Effective Time, will be paid to the
certificate holder, without interest, when that holder surrenders
an Acquired Fund share certificate for exchange.
FEDERAL INCOME TAX CONSEQUENCES
Each Fund will receive an opinion of Seward & Kissel LLP, its
counsel, substantially to the following effect: (i) an
Acquisition will constitute a "reorganization" within the meaning
of section 368(a) of the Code and that ACM I and an Acquired Fund
will each be "a party to a reorganization" within the meaning of
section 368(b) of the Code; (ii) a stockholder of an Acquired
Fund will recognize no gain or loss on the exchange of the
stockholder's shares of the Acquired Fund solely for shares of
ACM I, except with respect to cash received in lieu of a
fractional share of ACM I by non-DRIP stockholders in connection
with an Acquisition; (iii) neither an Acquired Fund nor ACM I
will recognize any gain or loss upon the transfer of all of the
assets of an Acquired Fund to ACM I in exchange for shares of
ACM I (plus cash in lieu of certain fractional shares by non-DRIP
stockholders) and the assumption by ACM I of the liabilities of
an Acquired Fund pursuant to a Plan or upon the distribution of
shares of ACM I to stockholders of an Acquired Fund (and cash to
non-DRIP stockholders for their fractional shares) in exchange
for their respective shares of an Acquired Fund; (iv) the holding
period and tax basis of the assets of an Acquired Fund acquired
by ACM I will be the same as the holding period and tax basis
that the Acquired Fund had in such assets immediately prior to an
Acquisition; (v) the aggregate tax basis of shares of ACM I
received in connection with an Acquisition by each stockholder of
an 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, decreased by any cash received by non-DRIP
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stockholders and increased by any gain recognized on the
exchange; (vi) the holding period of shares of ACM I received in
connection with an Acquisition by each stockholder of an 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; (vii) ACM I will
succeed to the capital loss carryovers of an Acquired Fund, if
any, under section 381 of the Code, but the use by ACM I of any
such capital loss carryovers (and of capital loss carryovers of
ACM I) may be subject to limitation under section 383 of the
Code; and (viii) any gain or loss realized by a non-DRIP
stockholder of an Acquired Fund upon the receipt of cash for a
fractional share of ACM I to which the stockholder is entitled
will be recognized to the stockholder and measured by the
difference between the amount of cash received and the basis of
the fractional share and, provided that the Acquired Fund shares
surrendered constitute capital assets in the hands of the
stockholder, will be capital gain or loss.
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.
CAPITALIZATION INFORMATION
For information on the existing and pro forma capitalization
of the Funds, see Exhibit C.
TRADING HISTORY AND SHARE PRICE DATE
For information on the trading history and share price data
for the Funds, see Exhibit B.
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INFORMATION ABOUT THE FUNDS
ACM I, ACM II, ACM III and ACM IV are diversified, closed-end
management investment companies registered under the 1940 Act and
organized as Maryland corporations in 1987, 1987, 1988, and 1988,
respectively.
Management of the Funds
The overall management of the business and affairs of each
Fund is vested with its Board of Directors. Each Board of
Directors approves all significant agreements between the
respective Fund and persons or companies furnishing services to
it, including a Fund's agreements with Alliance and the Fund's
administrator, custodian and transfer and dividend disbursing
agent. The day-to-day operations of a Fund are delegated to its
officers and the Fund's administrator, subject to the Fund's
investment objective and policies and to general supervision by
the Fund's Board of Directors. Subsequent to the consummation of
the Acquisitions, the directors and officers of ACM I will
continue to serve as the directors and officers of the combined
Fund.
The portfolio manager responsible for the day-to-day
management of each Fund is Wayne Lyski, Executive Vice President
of Alliance Capital Management Corporation, with which he has
been associated since 1983.
Advisory Agreement and Fees
Under each Fund's advisory agreement with Alliance (the
"Advisory Agreement"), Alliance provides office space, investment
advisory services, and order placement facilities for the Fund
and pays all compensation of directors and officers of the Fund
who are affiliated persons of Alliance. Under the Advisory
Agreements of ACM I, ACM II and ACM III, the Funds pay Alliance a
monthly management fee in an amount equal to the sum of (x)
1/12th of .30% of the average weekly net assets of the Fund up to
$250 million during the month plus 1/12th of .25% of the Fund's
average weekly net assets in excess of $250 million during the
month and (y) 5.25% of the Fund's daily gross income (i.e.,
income other than gains from the sale of securities or gains
received from options and futures contracts less interest on
money borrowed by the Fund) accrued by the Fund during the month.
These Funds' Advisory Agreements also provide that the monthly
management fee shall not exceed in the aggregate 1/12th of 1% of
the Fund's average weekly net assets during the month
(approximately 1% on an annual basis). Under its Advisory
Agreement, ACM IV pays Alliance a monthly fee equal to .0625 of
1% of the Fund's average weekly net assets during the month
(equal to an annual fee of approximately .75 of 1% of the average
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weekly net assets). In addition to payments to the Adviser under
an Advisory Agreement, a Fund pays certain other costs.
For purposes of the calculation of the fee payable to
Alliance, average weekly net assets are determined on the basis
of the average net assets of a Fund for each weekly period
(ending on the last business day of the week, usually Fridays)
ending during the month. The average net assets for each weekly
period are determined by averaging the net assets on the last
business day of such weekly period with the net assets on the
last business day of the immediately preceding weekly period.
The Advisory Agreements by their terms continue in effect
from year to year if such continuance is specifically approved,
at least annually, by a majority vote of the directors of a Fund
who neither are interested persons of the Fund nor have any
direct or indirect financial interest in the Advisory Agreement,
cast in person at a meeting called for the purpose of voting on
such approval.
Administrator
Under administration agreements, Mitchell Hutchins, a
Delaware corporation, serves as administrator for ACM I, ACM II
and ACM III and Alliance serves as administrator for ACM IV.
Under the administrative agreements, Mitchell Hutchins and
Alliance perform standard administrative services for the Funds.
For these services, ACM I, ACM II and ACM III each pays
Mitchell Hutchins a fee, calculated and paid monthly, at the
annualized rate of 0.20% of the Fund's average weekly net assets
up to $100 million, 0.18% of its next $200 million of average
weekly net assets, and .16% of its average weekly net assets in
excess of $300 million. For services rendered to ACM IV, ACM IV
pays Alliance a monthly fee equal to the annualized rate of 0.15%
of the Fund's average weekly net assets.
Other Service Providers
Alliance Fund Services, Inc. ("AFS"), an affiliate of
Alliance, provides shareholder services for the Funds. The Funds
compensate AFS for these services. State Street Bank and Trust
Company, 225 Franklin Street, Boston, MA 02110, serves as
custodian, dividend paying agent, transfer agent and registrar,
and accounting agent for ACM I, ACM II and ACM III. PFPC, Inc.,
P.O. Box 8030, Boston, MA 02266-8030, serves as dividend paying
agent, transfer agent and registrar for ACM IV. Bank of New
York, One Wall Street, New York, NY 10286 serves as custodian for
ACM IV.
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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 ACM I, ACM II, ACM III and ACM IV as
of that date consisted of a total of [________], [________],
[________], and [________] shares of common stock, respectively,
each share entitled to one vote. Under NYSE rules, the approval
of the stockholders of ACM I is necessary for the consummation of
the Acquisitions.
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 at
http://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 applicable 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 to 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: (1) for ACM I, a
majority of the votes cast provided more than 50% of the Fund's
27
<PAGE>
outstanding shares are present and (2) for ACM II, ACM III and
ACM IV, a majority of each Fund's outstanding shares.
Abstentions and broker non-votes by ACM I stockholders will have
no effect on the outcome of the vote on the Proposal so long as
holders of more than 50% of ACM I's outstanding shares vote on
the Proposal. Abstentions and broker non-votes by ACM II, ACM
III and ACM IV stockholders will have the effect of a vote
against the Proposal. The approval of and closing of one
Acquisition is not contingent upon the approval and closing of
the other Acquisitions. If any proposal, other than the Proposal
to be voted on by the stockholders of each Fund, properly comes
before a Meeting, the shares represented by proxies will be voted
on all such proposals in the discretion of the person or persons
voting the proxies. None of the Funds has received notice of,
and is not otherwise aware of, any other matter to be presented
at the Meetings.
A quorum for the Meetings will consist of the presence in
person or by proxy of the holders of a majority of the shares of
each 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 Funds have engaged Shareholder Communications
Corporation, 17 State Street, New York, New York 10004, to assist
in soliciting proxies for the Meetings. Shareholder
Communications Corporation will receive a fee of $[________] from
the Funds for its solicitation services, plus reimbursement of
out-of-pocket expenses.
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 Ballard Spahr Andrews & Ingersoll, LLP
for certain 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, NY 10019, given on its authority as experts in auditing
and accounting.
28
<PAGE>
THE BOARD OF DIRECTORS OF EACH FUND RECOMMENDS APPROVAL
OF THE RELEVANT PLAN AND THE ACQUISITIONS
29
<PAGE>
EXHIBIT A
Fee Table
The following table describes the various fees and expenses
that you will bear from an investment in the Funds.
Pro Forma
Combined
ACM I ACM II Fund
----- ------ ---------
Annual Expenses (as a percentage of
net assets attributable to common shares)
Management Fees 0.82% 0.84% 0.82%
Interest Payments on Borrowed Funds 1.32% 1.23% 1.26%
Other Expenses 0.33% 0.31% 0.28%
Total Annual Expenses 2.47% 2.38% 2.36%
Total Annual Expenses Net of
Interest Payment on Borrowed Funds 1.15% 1.15% 1.10%
Pro Forma
Combined
ACM I ACM III Fund
----- ------- ---------
Annual Expenses (as a percentage of
net assets attributable to common shares)
Management Fees 0.82% 0.88% 0.82%
Interest Payments on Borrowed Funds 1.32% 1.24% 1.29%
Other Expenses 0.33% 0.39% 0.30%
Total Annual Expenses 2.47% 2.51% 2.41%
Total Annual Expenses Net of Interest
Payment on Borrowed Funds 1.15% 1.27% 1.12%
30
<PAGE>
Pro Forma
Combined
ACM I ACM IV Fund
----- ------ ---------
Annual Expenses (as a percentage of
net assets attributable to common shares)
Management Fees 0.82% 0.75% 0.82%
Interest Payments on Borrowed Funds 1.32% 1.26% 1.31%
Other Expenses 0.33% 0.55% 0.32%
Total Annual Expenses 2.47% 2.56% 2.45%
Total Annual Expenses Net of Interest
Payment on Borrowed Funds 1.15% 1.30% 1.14%
Pro Forma
Combined
ACM I ACM II ACM III ACM IV Fund
----- ------ ------- ------ ---------
Annual Expenses (as a
percentage of net assets
attributable to common shares)
Management Fees 0.82% 0.84% 0.88% 0.75% 0.83%
Interest Payments on
Borrowed Funds 1.32% 1.23% 1.24% 1.26% 1.40%
Other Expenses 0.33% 0.31% 0.39% 0.55% 0.28%
Total Annual Expenses 2.47% 2.38% 2.51% 2.56% 2.51%
Total Annual Expenses Net
of Interest Payment on
Borrowed Funds 1.15% 1.15% 1.27% 1.30% 1.11%
Examples
You would pay the following on a $1,000 investment assuming a 5% annual
return:
Pro Forma
Combined
ACM I ACM II Fund
----- ------ ---------
1 Year $25 $24 $24
3 Years $77 $74 $74
5 Years $132 $127 $126
10 Years $281 $272 $270
31
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Pro Forma
Combined
ACM I ACM III Fund
----- ------ ---------
1 Year $25 $25 $24
3 Years $77 $78 $75
5 Years $132 $134 $129
10 Years $281 $285 $275
Pro Forma
Combined
ACM I ACM IV Fund
----- ------ ---------
1 Year $25 $26 $25
3 Years $77 $80 $76
5 Years $132 $136 $131
10 Years $281 $290 $279
Pro Forma
Combined
ACM I ACM II ACM III ACM IV Fund
----- ------ ------- ------ ---------
1 Year $25 $24 $25 $26 $25
3 Years $77 $74 $78 $80 $78
5 Years $132 $127 $134 $136 $134
10 Years $281 $272 $285 $290 $285
The purpose of the table is to assist the investor in understanding the
various costs and expenses that a stockholder bears directly and indirectly.
The above example is based on an annual expense ratio of 2.47% for ACM I,
2.38% for ACM II, 2.51% for ACM III, 2.56% for ACM IV and 2.51% for the pro
forma combined Fund and reinvestment of all dividends and distributions at net
asset value. The example should not be considered a representation of future
expenses; actual expenses may be greater or less than those shown.
32
<PAGE>
EXHIBIT B
TRADING HISTORY AND SHARE PRICE DATA
Shares of each of the Funds are traded on the NYSE under the
following symbols: ACM I - "ACG"; ACM II - "GSI"; ACM III - "SI";
AND ACM IV - "AOF".
Shares of closed-end management companies frequently trade
at discounts from their NAVS, and the Funds' shares have also
traded at a discount in recent times (although shares of ACM I
have generally traded at a premium). The following tables set
forth for each Fund's fiscal quarter within the two most recent
fiscal years and each Fund's fiscal quarter since the beginning
of the current fiscal year: (a) the per share high and low sales
prices as reported by the NYSE; (b) the NAV per share, based on
the Fund's computation as of 4:00 p.m. on the last NYSE business
day for the week corresponding to the dates on which the
respective high and low prices were recorded; and (c) the
discount or premium to NAV represented by the high and low sales
prices shown. The range of NAVs and of premiums and discounts
for the shares during the periods shown may be broader than is
shown in this table. On June 30, 2000, the closing price per
share was $7.188, $7.00, $5.813 and $7.063, the NAV per share was
$7.97, $7.95, $6.58 and $7.82 and the discount to NAV was (9.8)%,
(11.95)%, (11.66)% and (9.69)%, for ACM I, ACM II, ACM III and
ACM IV, respectively.
(Discount) or
Corresponding Premium to
ACM I Sales Price Net Asset Value Net Asset Value
------ ----------- --------------- ----------------
Quarter
Ended High Low High Low High Low
3/31/98 $11.500 $11.063 $10.49 $10.61 9.03% 4.26%
6/30/98 $11.313 $10.750 $10.67 $10.61 6.02% 4.26%
9/30/98 $11.188 $8.063 $9.88 $8.50 12.60% (4.41)%
12/31/98 $10.000 $8.375 $8.78 $8.48 13.18% 6.13%
3/31/99 $9.500 $8.438 $8.64 $8.23 8.51% 2.52%
6/30/99 $8.625 $8.188 $7.93 $7.77 6.40% 6.18%
9/30/99 $8.750 $8.063 $7.62 $7.52 11.55% 8.88%
12/31/99 $8.188 $6.375 $7.80 $7.64 3.37% (14.92)%
3/3/00 $7.875 $6.625 $7.61 $8.08 1.84% (16.46)%
6/30/00 $7.375 $6.500 $7.82 $7.490 (6.49)% (11.55)%
33
<PAGE>
(Discount) or
Corresponding Premium to
ACM II Sales Price Net Asset Value Net Asset Value
------ ----------- --------------- ----------------
Quarter
Ended High Low High Low High Low
3/31/98 $10.500 $9.875 $10.57 $10.38 (1.84)% (4.26)%
6/30/98 $10.438 $9.438 $10.52 $10.24 (1.97)% (7.84)%
9/30/98 $9.938 $7.813 $9.30 $8.38 4.84% (3.04)%
12/31/98 $9.125 $8.000 $8.76 $8.45 2.03% (5.33)%
3/31/99 $8.625 $7.688 $8.38 $8.23 (0.06)% (6.59)%
6/30/99 $8.313 $7.688 $8.28 $8.19 (3.38)% (6.14)%
9/30/99 $8.188 $7.375 $7.83 $7.48 2.97% (3.07)%
12/31/99 $7.313 $6.250 $7.51 $7.62 (6.79)% (14.70)%
3/3/00 $7.125 $6.500 $7.86 $7.48 (12.53)% (9.76)%
6/30/00 $7.063 $6.250 $7.95 $7.44 (11.95)% (15.15)%
(Discount) or
Corresponding Premium to
ACM III Sales Price Net Asset Value Net Asset Value
------- ----------- --------------- ----------------
Quarter
Ended High Low High Low High Low
3/31/98 $6.875 $6.375 $7.22 $7.19 (6.51)% (10.47)%
6/30/98 $6.563 $6.313 $7.12 $7.12 (8.71)% (9.59)%
9/30/98 $6.438 $6.188 $7.08 $6.97 (9.07)% (9.43)%
12/31/98 $6.375 $6.188 $7.06 $6.99 (9.70)% (10.59)%
3/31/99 $6.250 $5.938 $6.97 $6.84 (12.12)% (12.28)%
6/30/99 $6.125 $5.750 $6.89 $6.62 (12.01)% (11.25)%
9/30/99 $5.875 $5.438 $6.57 $6.46 (10.58)% (14.86)%
12/31/99 $5.750 $5.438 $6.61 $6.58 (13.96)% (17.36)%
3/3/00 $6.000 $5.438 $6.59 $6.52 (11.80)% (14.69)%
6/30/00 $5.938 $5.500 $6.57 $6.51 (10.58)% (13.59)%
(Discount) or
Corresponding Premium to
ACM IV Sales Price Net Asset Value Net Asset Value
------ ----------- --------------- ----------------
Quarter
Ended High Low High Low High Low
10/31/97 $8.125 $7.438 $8.49 $8.31 (4.30)% (10.49)%
1/31/98 $8.438 $7.875 $8.74 $8.48 (5.61)% (7.13)%
4/30/98 $8.313 $7.938 $8.65 $8.61 (5.35)% (7.08)%
7/31/98 $8.250 $7.875 $8.56 $8.44 (5.08)% (5.95)%
10/31/98 $8.188 $7.438 $8.28 $8.23 (3.38)% (9.63)%
1/31/99 $8.250 $7.563 $8.46 $8.29 (3.96)% (5.01)%
4/30/99 $7.875 $7.250 $8.21 $8.11 (6.36)% (10.60)%
7/31/99 $7.688 $7.125 $7.93 $7.76 (4.63)% (8.18)%
34
<PAGE>
10/31/99 $7.188 $6.813 $7.81 $7.64 (7.97)% (10.83)%
1/31/00 $7.438 $6.250 $7.89 $7.82 (11.28)% (20.08)%
4/30/00 $7.938 $6.875 $7.95 $7.95 (6.45)% (11.16)%
35
<PAGE>
EXHIBIT C
EXISTING AND PRO FORMA CAPITALIZATION
The following tables set forth (i) the capitalization of the
Funds and (2) the pro forma capitalization of ACM I as adjusted
giving effect to the proposed acquisition of assets at net asset
value as of June 30, 2000:
Total Net Shares NAV Per
Assets Outstanding Share
--------- ----------- ---------
ACM Government Securities Fund (ACM II) $621,890,365 78,226,348 $7.95
ACM Government Income Fund (ACM I) $468,121,696 58,744,751 $7.97
Pro Forma Combined $1,090,012,061 136,774,797 $7.97
ACM Government Spectrum Fund (ACM III) $231,734,482 35,235,527 $6.58
ACM Government Income Fund (ACM I) $468,121,696 58,744,751 $7.97
Pro Forma Combined $699,856,178 87,835,060 $7.97
ACM Government Opportunity Fund (ACM IV) $97,144,521 12,425,781 $7.82
ACM Government Income Fund (ACM I) $468,121,696 58,744,751 $7.97
Pro Forma Combined $565,266,217 70,936,672 $7.97
ACM Government Securities Fund (ACM II) $621,890,365 78,226,348 $7.95
ACM Government Spectrum Fund (ACM III) $231,734,482 35,235,527 $6.58
ACM Government Opportunity Fund (ACM IV) $97,144,521 12,425,781 $7.82
ACM Government Income Fund (ACM I) $468,121,696 58,744,751 $7.97
Pro Forma Combined $1,418,891,064 178,057,027 $7.97
36
<PAGE>
EXHIBIT D
INVESTMENT OBJECTIVES AND STRATEGIES OF THE FUNDS
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 SAI.
Objectives:
ACM I Seeks high current income consistent with
preservation of capital.
ACM II Seeks high current income consistent with
preservation of capital.
ACM III Seeks high current income consistent with
preservation of capital.
ACM IV Seeks high current income consistent with prudent
investment risk. As a secondary objective the Fund
seeks growth of capital
Investment Strategies:
ACM I The Fund invests primarily in U.S. Government
securities and repurchase agreements pertaining to
U.S. Government securities. The Fund may use other
investment techniques, including options and
futures. The Fund may invest up to 35% of its total
assets in securities other than U.S. Government
securities, including those issued by foreign
government issuers, investment grade corporate debt
securities, certificates of deposit, bankers'
acceptances and interest-bearing savings deposits of
banks that have total assets of more than $1 billion
and that are members of the Federal Deposit
Insurance Corporation ("FDIC"), and commercial paper
of prime quality rated Prime-1 or higher by Moody's
Investors Service, Inc. ("Moody's") or A-1 or higher
by Standard and Poor's Corporation ("S&P") or, if
not rated, issued by companies which have an
outstanding debt issue rated Aa or higher by Moody's
or AA or higher by S&P. The Fund may invest up to
35% of its total assets in "stable countries", with
no more than 25% in any one country. The Fund may
also invest up to 35% of its total assets in
securities rated below Baa by Moody's or below BBB
by S&P. The Fund may also invest up to 20% of its
total assets in illiquid securities.
37
<PAGE>
ACM II The Fund invests primarily in U.S. Government
securities and repurchase agreements pertaining to
U.S. Government securities. The Fund may use other
investment techniques, including options and
futures. The Fund may invest up to 35% of its total
assets in securities other than U.S. Government
securities, including those issued foreign
government issuers, investment grade corporate debt
securities, certificates of deposit, bankers'
acceptances and interest-bearing saving deposits of
banks that have total assets of more than $1 billion
and that are members of the FDIC, and commercial
paper of prime quality rated Prime-1 or higher by
Moody's or A-1 or higher by S&P or, if not rated,
issued by companies which have an outstanding debt
issue rated Aa or higher by Moody's or AA or higher
by S&P. The Fund may invest up to 35% of its total
assets in "stable countries", with no more than 25%
in any one country. The Fund may also invest up to
35% of its total assets in securities rated below
Baa by Moody's or below BBB by S&P. The Fund may
also invest up to 20% of its total assets in
illiquid securities.
ACM III The Fund invests primarily in U.S. Government
securities and repurchase agreements pertaining to
U.S. Government securities. The Fund may use other
investment techniques, including options and
futures. The Fund may invest up to 35% of its total
assets in securities other than U.S. Government
securities, including those issued by foreign
government issuers. The Fund may also invest up to
35% of its total assets in "stable countries", with
no more than 25% in any one country. The Fund may
invest up to 35% of its total assets in securities
rated below Baa by Moody's or below BBB by S&P and
up to 20% of its total assets in illiquid
securities.
ACM IV The Fund invests primarily in U.S. Government
securities and repurchase agreements pertaining to
U.S. Government securities. The Fund may use other
investment techniques, including options and
futures. The Fund may invest up to 35% of its total
assets in securities other than U.S. Government
securities, including (i) certificates of deposit,
bankers' acceptances and interest-bearing savings
deposits of banks that have total assets of more
than $1 billion and that are members of the FDIC,
and (ii) commercial paper of prime quality rated
Prime 1 or higher by Moody's or A-1 or higher by S&P
38
<PAGE>
or, if not rated, issued by companies which have an
outstanding debt issue rated Aa or higher by Moody's
or AA or higher by S&P. The Fund may invest in
dividend paying equity securities (including
preferred stocks and the securities of foreign
issuers) although it may invest no more than 20% of
its total assets in equity securities. The Fund may
invest up to 35% of its total assets in "stable
countries" and up to 20% of its total assets in
illiquid securities.
39
<PAGE>
EXHIBIT E
SHARE OWNERSHIP INFORMATION
Outstanding Shares
As of June 30, 2000 each Fund had the following number of
shares of common stock outstanding.
Number of Outstanding
Shares of
Fund Common Stock
ACM I 58,744,751
ACM II 78,226,348
ACM III 35,235,527
ACM IV 12,425,781
Share Ownership
As of June 30, 2000, the directors and officers of each Fund
as a group beneficially owned less than 1% of the outstanding
shares of common stock of that Fund and, to the knowledge of each
Fund, the following persons owned either of record or
beneficially, 25% or more of the outstanding shares of the Fund.
Fund and Owner Percentage
ACM I:
Cede & Co. Fast
The Depository Trust Company 80.27%
ACM II:
Cede & Co. Fast
The Depository Trust Company 86.01%
ACM III:
Cede & Co. Fast
The Depository Trust Company 90.09%
ACM IV:
Combined Insurance Co. of America
(AON Corp.) 36.64%
Cede & Co. Fast
The Depository Trust Company 54.42%
40
<PAGE>
EXHIBIT F
OTHER INFORMATION
The following information provides only a summary of the
major similarities and differences between the stockholder
services, organizational structure and governing documents of ACM
I, ACM II, ACM III and ACM IV. Each Fund is organized as a
Maryland corporation. Accordingly, unless noted below, there are
no significant differences between the Funds in terms of their
respective corporate organizational structures.
General
ACM I, ACM II, ACM III and ACM IV are organized as Maryland
corporations and are governed by each of their Charters, By-Laws
and Maryland 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 ACM I and ACM II
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. For ACM III or ACM IV, directors may be removed only with
cause at a meeting 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 a majority of the shares entitled
to be cast constitutes a quorum at any meeting of stockholders of
each Fund. Pursuant to each Fund's Charter, in instances
involving extraordinary corporate action, such as in a merger or
in making amendments to its Charter, generally 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 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.
41
<PAGE>
Shares of Common Stock of the Funds
The Funds' shares have no preemptive, conversion, exchange or
redemption rights. Each share has equal voting, dividend,
distribution and liquidation rights. Stockholders are entitled
to one vote per share. All voting rights for the election of
directors are non-cumulative, which means that the holders of
more than 50% of the shares of common stock of a Fund can elect
100% of the directors then nominated for election if they choose
to do so and, in such event, the holders of the remaining shares
of common stock will not be able to elect any directors. Under
the rules of the NYSE applicable to listed companies, each Fund
is required to hold an annual meeting of stockholders each year.
Repurchase of Shares
Each Fund's Board of Directors has determined that it would
be in the interest of stockholders of a Fund to attempt to reduce
or eliminate any market value discount should it exist. To that
end, each Fund's Board of Directors presently contemplates that a
Fund would from time to time to take action either to repurchase
in the open market or to make a tender offer for its own shares
at net asset value. Each Board of Directors has approved a share
repurchase program for each Fund in January 2000. As of June 30,
2000, only ACM III and ACM IV have made repurchases under this
program. The Boards of Directors presently intend each quarter
to consider the making of a tender offer. A Board of Directors
may at any time, however, decide that a Fund should not make a
tender offer.
Any tender offer made by a Fund will be at a price equal to
the net asset value of the shares on a date subsequent to receipt
by the Fund of all tenders. Each offer will be made and
stockholders notified in accordance with the requirements of the
Securities and Exchange Act of 1934 and the 1940 Act, either by
publication or mailing or both. Each offering document will
contain such information as is prescribed by such laws and the
rules and regulations promulgated thereunder. When a tender
offer is authorized to be made by a Board of Directors, a
stockholder wishing to accept the offer will be required to
tender all (but not less than all) of the shares owned by such
stockholder (or attributed to the stockholder for federal income
tax purposes under Section 318 of the Code). A Fund will
purchase all shares tendered in accordance with the terms of the
offer unless it determines to accept none of them (based upon one
of the conditions set forth above). Each person tendering shares
will be required to submit a check in the amount of $25.00,
payable to the Fund, which will be used to help defray the costs
associated with effecting the tender offer. This $25.00 fee will
be imposed upon each tendering stockholder any of whose tendered
shares are purchased in the offer, and will be imposed regardless
42
<PAGE>
of the number of shares purchased. A Fund expects the cost to
the Fund of effecting a tender offer will exceed the aggregate of
all such fees received from those who tender offer their shares.
Costs associated with the tender offer will be charged against
capital. During the period of the tender offer, a Fund's
stockholders will be able to obtain the Fund's current net asset
value by use of a toll-free telephone number.
Possible Future Conversion to Open-End Investment Company
If, during any fiscal year of a Fund, (i) shares of the
Fund's common stock have traded on the principal securities
exchange where listed at an average discount from net asset value
of more than 10%, determined on the basis of the discount as of
the end of the last trading day in each week during the period of
12 calendar weeks preceding December 31 in such year, and (ii)
during such year the Fund receives written requests from the
holders of 10% or more of the Fund's outstanding shares of common
stock that such a proposal be submitted to the Fund's
shareholders, the Fund will submit to its stockholders at the
next succeeding annual meeting of stockholders a proposal, to the
extent consistent with the 1940 Act, to amend the Fund's Charter.
Such amendment would provide that, upon its adoption by the
holders of 66 2/3% of a Fund's outstanding shares of common
stock, the Fund will convert from a closed-end to an open-end
investment company. The 66 2/3% vote requirement is higher than
the minimum vote required under the 1940 Act. If a Fund
converted to an open-end investment company, it would be able to
continuously issue and offer for the shares of its common stock
and each outstanding share of the Fund's common stock could be
presented to the Fund at the option of the holder thereof for
redemption at net asset value per share. In such event, a Fund
might be required to liquidate portfolio securities to meet
requests for redemption, and its shares would no longer be listed
on the New York Stock Exchange.
A Fund cannot predict whether any repurchase of shares made
while the Fund is a closed-end investment company (as described
under "Repurchase of Shares" above) would increase or decrease
the discount from net asset value. To the extent that any such
repurchase decreased the discount from net asset value to below
10% during the measurement period described in (i) above, a Fund
would not be required to submit to shareholders a proposal to
convert the Fund to an open-end investment company at the next
annual meeting of stockholders.
Certain Anti-Takeover Provisions of the Funds' Charter and
By-Laws
The Funds presently have provisions in their Charters and By-
Laws (together, the "Charter Documents") that are intended to
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limit (i) the ability of other entities or persons to acquired
control of a Fund, (ii) a Fund's freedom to engage in certain
transactions, or (iii) the ability of a Fund's directors or
stockholders to amend the Charter Documents or effect changes in
the Fund's management. These provisions of the Charter Documents
may be regarded as "anti-takeover" provisions. Commencing with
the first annual meeting of a Fund's stockholders, the Board of
Directors was divided into three classes, each having a term of
three years. At each annual meeting of stockholders, the term of
one class of directors expires. Accordingly, only those
directors in one class may be changed in any one year, and it
would require two years to change a majority of the Board of
Directors (although under Maryland law procedures are available
for the removal of directors even if they are not then standing
for reelections and under SEC regulations procedures are
available for including shareholder proposals in management's
annual proxy statement). Such system of electing directors may
have the effect of maintaining the continuity of management and,
thus, make it more difficult for a Fund's stockholders to change
the majority of directors. Under Maryland law and a Fund's
Charter, the affirmative vote of the holders of a majority of the
votes entitled to be cast is generally required for the
consolidation of the Fund with another corporation, a merger of
the Fund with or into another corporation (except for certain
mergers in which the Fund is the successor), a statutory share
exchange in which the Fund is not the successor, a sale or
transfer of all or substantially all of the Fund's assets, the
dissolution of the Fund and amendment to the Fund's Charter. In
addition, the affirmative vote of 75% (which is higher than that
required under Maryland law or the 1940 Act) of the outstanding
shares of common stock of a Fund is required generally to
authorize any of the following transactions or to amend the
provisions of the Charter relating to such transactions:
(i) merger, consolidation or statutory share exchange
of the Fund with or into any other corporation;
(ii) issuance of any securities of the Fund to any
person or entity for cash;
(iii) sale, lease or exchange of all or any substantial
part of the assets of the Fund to any entity or
person (except assets having an aggregate fair
market value of less than $1,000,000); or
(iv) sale, lease or exchange to the Fund, in exchange
for securities of the Fund, of any assets of any
entity or person (except assets having an
aggregate fair market value of less than
$1,000,000);
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<PAGE>
if such corporation, person or entity is directly, or indirectly
through affiliates, the beneficial owner of more than 5% of the
outstanding shares of the Fund (a "principal stockholder").
However, such vote would not be required where, under certain
conditions, the Board of Directors approves the transaction,
although in certain cases involving merger, consolidation or
statutory share exchange or sale of all or substantially all of a
Fund's assets the affirmative vote of a majority of the
outstanding shares of the Fund would nevertheless be required.
The provisions of the Charter Documents described above and a
Fund's right to repurchase or make a tender offer for its common
stock could have the effect of depriving the owners of shares of
opportunities to sell their shares at a premium over prevailing
market prices, by discouraging a third party from seeking to
obtain control of the Fund in a tender offer or similar
transaction. The overall effect of these provisions is to render
more difficult the accomplishment of a merger or the assumption
of control by a principal stockholder. However, they provide the
advantage of potentially requiring persons seeking control of the
Fund to negotiate with its management regarding the price to be
paid and facilitating the continuity of the Fund's management and
investment objective and policies. The Board of Directors of
each Fund has considered the foregoing anti-takeover provisions
and concluded that they are in the best interests of the Fund and
its stockholders.
Dividend Reinvestment Plans
Stockholders of each Fund whose shares are registered in
their own names may elect to be participants in each Fund's
Dividend Reinvestment and Cash Purchase Plan (the "DRIP"), under
which dividends and capital gain distributions to stockholders
will be paid or reinvested in additional shares of the Fund (the
"Dividend Shares"). State Street Bank and Trust Company for ACM
I, ACM II and ACM III and PFPC, Inc. for ACM IV (the "Agent")
acts as agents for participants under the DRIP. Stockholders
whose shares are held in the name of a broker or nominee should
contact such broker or nominee to determine whether or how they
may participate in the DRIP.
Stockholders who do not elect to participate in the DRIP will
receive all distributions in cash paid by check mailed directly
to the stockholder of record (or, if the shares are held in
street or other nominee name, then to the nominee) by State
Street Bank and Trust Company or First Data Investor Services, as
dividend disbursing agent.
The automatic reinvestment of dividends and distributions
will not relieve participants of any income taxes that may be
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<PAGE>
payable (or required to be withheld ) on dividends and
distributions.
A stockholder who has elected to participate in the DRIP may
withdraw from the DRIP at any time. There will be no penalty or
withdrawal from the DRIP and stockholders who have previously
withdrawn from the DRIP may rejoin it at any time. Changes in
elections must be in writing and should include the stockholders
name and address as they appear on the share certificate. An
election to withdraw from the DRIP will, until such election is
changed, be deemed to be an election by a stockholder to take all
subsequent distributions in cash. An election will be effective
only for a distribution declared and having a record dated of at
least 10 days after the date on which the election is received.
A stockholder whose shares are held in the name of a broker or
nominee should contact such broker or nominee concerning changes
in that stockholder's election.
Under a DRIP and commencing not more than five business days
before the dividend payment date, purchases of a Fund's shares
may be made by the Agent, on behalf of the participants in the
DRIP, from time to time to satisfy dividend reinvestments under
the DRIP. Such purchases by the Agent on or before the dividend
payment date may be made on the NYSE or elsewhere at any time
when the price plus estimated commissions of a Fund's common
stock on the NYSE is lower than the Fund's most recently
calculated net asset value per share.
If the Agent determines on the dividend payment date that the
shares purchased as of such date are insufficient to satisfy the
dividend reinvestment requirements, the Agent, on behalf of the
participants in the DRIP, will obtain the necessary additional
shares as follows. To the extent that outstanding shares are not
available at a cost of less than per share net asset value, the
Agent, on behalf of the participants in the DRIP, will accept
payment of the dividend, or the remaining portion thereof, in
authorized but unissued shares of a Fund on the dividend payment
date. Such shares will be issued at a per share price equal to
the higher of (i) the net asset value per share on the payment
date, or (ii) 95% of the closing market price per share on the
payment date. If the closing sale or offer price, plus estimated
commissions, of the common stock on the NYSE on the payment date
is less than a Fund's net asset value per share on such day, then
the Agent will purchase additional outstanding shares on the NYSE
or elsewhere. If before the Agent has completed such purchases,
the market price plus commissions exceeds the net asset value of
a Fund share, the average per share purchase price paid by the
Agent may exceed the net asset value of the Fund's shares,
resulting in the acquisition of fewer shares than if shares had
been issued by the Fund.
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Participants in a DRIP have the option of making additional
cash payments to the Agent, semi-annually, in any amount of $100
or more for investment in a Fund's shares. The Agent uses all
funds received from participants to purchase Fund shares in the
open market on or about each January 15 and July 15.
Participants' cash payments are also used to acquire Fund shares
under the same procedure as that used for reinvestment of
dividends and distributions. To allow ample time for receipt and
processing by the Agent, participants should send in voluntary
cash payments to be received by the Agent not later than five
business days before each January 15 and July 15. To avoid
unnecessary cash accumulations, cash payments received after that
time and cash payments received more than 30 days prior to these
dates will be returned by the Agent and interest will not be paid
on any uninvested cash payments. A participant may withdraw a
voluntary cash payment by written notice, if the notice is
received by the Agent not less than 48 hours before such payment
is to be invested.
There will be no brokerage charges with respect to shares
issued directly by a Fund to satisfy the dividend reinvestment
requirements. However, each participant will pay a pro rata
share of brokerage commissions incurred with respect to the
Agent's open market purchases of shares. In each case, the cost
per share of shares purchased for each stockholder's account will
be the average cost, including brokerage commissions, of any
shares purchased in the open market plus the cost of any shares
issued by a Fund. A participant also will pay brokerage
commissions incurred in purchases from voluntary cash payments
made by the participant.
In the case of foreign participants whose dividends are
subject to U.S. income tax withholding and in the case of any
participants subject to 31% federal backup withholding, the Agent
will reinvest dividend after deduction of the amount required to
be withheld.
All correspondence concerning the DRIPs for ACM I, ACM II and
ACM III should be directed to the Agent at State Street Bank and
Trust Company, P.O. Box 366, Boston, Massachusetts 02101 or for
ACM IV at PFPC, Inc., P.O. Box 8030, Boston, MA 02266-8030.
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 G
FORM OF AGREEMENT AND PLAN OF ACQUISITION AND LIQUIDATION
FORM OF
AGREEMENT AND
PLAN OF
ACQUISITION
AND LIQUIDATION
As of
[________], 2000
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<PAGE>
This Agreement and Plan of Acquisition and Liquidation (the
"Plan") is made as of this [__] day of [________], 2000, by and
between ACM Government Income Fund, Inc., a Maryland corporation
("ACM I"), and [________], a Maryland corporation (the "Acquired
Fund").
WHEREAS, ACM I and the Acquired Fund are closed-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"), and the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and shares of
common stock of each Fund are currently purchased and sold on the
New York Stock Exchange (the "NYSE");
WHEREAS, the parties desire that ACM I acquire the assets and
assume the liabilities of the Acquired Fund in exchange for
shares of equal net asset value of ACM I and the distribution of
such shares of ACM I 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, ACM I and the Acquired Fund will
each be a "party to a reorganization" within the meaning of
section 368(b) of the Code;
Now, therefore, ACM I and the Acquired Fund agree as follows:
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.
ACM I Share A share of common stock of ACM I.
Assets All assets of any kind and all interests,
rights, privileges and powers of or
attributable to the Acquired Fund or its
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
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<PAGE>
receivables (including dividend and
interest receivables) owned by the
Acquired Fund or attributable to its
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.
Fund ACM I and/or the Acquired Fund, as the
case may be.
Liabilities All liabilities of the Acquired Fund,
whether known or unknown, accrued or
unaccrued, absolute or contingent or
conditional or unmatured.
N-14 Registration
Statement The Registration Statement of ACM I on
Form N-14 under the 1940 Act that will
register the ACM I Shares to be issued in
the Acquisition and will include the
proxy materials necessary for the
stockholders of each of the Funds to
approve the Acquisition.
Valuation Time The close of regular session trading on
the NYSE on the Closing Date, when for
purposes of the Plan ACM I determines its
net asset value per ACM I Share and the
Acquired Fund determines the net value of
the Assets.
2. Regulatory Filings.
ACM I shall promptly prepare and file the N-14
Registration Statement with the SEC, and ACM I and the Acquired
Fund also shall make any other required or appropriate filings
with respect to the actions contemplated hereby.
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<PAGE>
3. Stockholder Action
As soon as practicable after the effective date of the
N-14 Registration Statement, each Fund shall hold a stockholders
meeting to consider and approve the Acquisition and this Plan, as
applicable to that Fund, and such other matters as the Board of
Directors of the Fund may determine. Such approval by the
stockholders of a Fund shall, to the extent necessary to permit
the consummation of the transactions contemplated herein without
violating any investment objective, policy or restriction of a
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. ACM I 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 ACM
I, subject to the Liabilities. ACM I 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 ACM I, and (ii) the Liabilities at
the Effective Time shall attach to ACM I, enforceable against ACM
I to the same extent as if initially incurred by ACM I.
(d) Within a reasonable time prior to the Closing Date,
the Acquired Fund shall provide, if requested, a list of the
Assets to ACM I. 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,
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<PAGE>
rights, restrictions or claims not reflected on such list,
without the approval of ACM I. Within a reasonable time after
receipt of the list and prior to the Closing Date, ACM I will
advise the Acquired Fund in writing of any investments shown on
the list that ACM I has determined 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 ACM I
determines that, as a result of the Acquisition, ACM I would own
an aggregate amount of an investment that would exceed a
percentage limitation applicable to ACM I, ACM I 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 ACM I at the Effective Time on the
following basis:
(1) The value of the Assets less the Liabilities,
both determined as of the Valuation Time, shall be divided by
the then net asset value of one ACM I Share, and, in exchange
for the transfer of the Assets, ACM I shall simultaneously
issue and deliver to the Acquired Fund the number of full ACM
I Shares so determined that are allocable to all shares held
by or for those stockholders of the Acquired Fund on a
stockholder by stockholder basis plus fractional ACM I
Shares, rounded to the third decimal place or such other
decimal place as the parties may agree to in writing,
allocable to those stockholders of the Acquired Fund that at
the Effective Time participate in the Acquired Fund's
Dividend Reinvestment Plan ("DRP Stockholders"), regardless
of whether the shares of the Acquired Fund with respect to
which such fractional ACM I Shares are to be issued and
delivered are held by or for the DRP Stockholders directly or
in the Acquired Fund's Dividend Reinvestment Plan. ACM I
shall at the same time deliver to the Acquired Fund cash in
lieu of any fractional ACM I Shares allocable to those
stockholders of the Acquired Fund that are not DRP
Stockholders.
(2) The net asset value of the ACM I Shares to be
delivered to the Acquired Fund shall be determined as of the
Valuation Time in accordance with ACM I's then applicable
valuation procedures, and the net value of the Assets to be
conveyed to ACM I shall be determined as of the Valuation
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<PAGE>
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 ACM I. All cash shall be transferred in the form
of immediately available funds.
(f) Promptly after the Closing Date, the Acquired Fund
will deliver to ACM I a Statement of Assets and Liabilities of
the Acquired Fund as of the Closing Date.
5. Liquidation and Dissolution of the Acquired Fund,
Registration of ACM I Shares and Access to Records. The Acquired
Fund and ACM I 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 the Acquired Fund the
ACM I Shares and cash it receives pursuant to Section 4(e)(1) of
this Plan. ACM I shall record on its books the ownership by the
Acquired Fund's stockholders of the ACM I Shares so transferred
to such stockholders, and the Acquired Fund shall simultaneously
cancel on its books all of the issued and outstanding shares of
the Acquired Fund. ACM I shall not issue certificates
representing ACM I Shares to replace certificates representing
Acquired Fund shares unless the Acquired Fund share certificates
are first surrendered to ACM I. Following distribution by the
Acquired Fund to its stockholders of all ACM I Shares 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 ACM I 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 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 Acquired Fund as required by Section 31 of, and Rules 31a-
1 and 31a-2 under, the 1940 Act.
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<PAGE>
6. Certain Representations and Warranties of the Acquired
Fund. The Acquired Fund represents and warrants to ACM I 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 Acquired Fund is registered
with the SEC as a closed-end management investment company under
the 1940 Act and is duly registered with the SEC under the 1934
Act, and such registrations 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 of 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, 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
54
<PAGE>
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 ACM I, 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 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.
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<PAGE>
(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
ACM I, 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 ACM I. ACM I
represents and warrants to the Acquired Fund as follows:
(a) ACM I is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of
Maryland. ACM I is registered with the SEC as a closed-end
management investment company under the 1940 Act and is duly
registered with the SEC under the 1934 Act, and such
registrations will be in full force and effect as of the
Effective Time.
(b) ACM I 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 into this Plan and
to consummate the transactions contemplated herein.
(c) The Board of Directors of ACM I has duly authorized
execution and delivery of this Plan and the transactions
contemplated herein. Duly authorized officers of ACM I 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
Charter of ACM I, its By-Laws or any material agreement to which
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<PAGE>
ACM I is subject. Except for the approval of its stockholders,
ACM I does not need to take any other action to authorize its
officers to effectuate the Plan and the transactions contemplated
herein.
(d) ACM I 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 ACM I for approval of the Acquisition and at the
Effective Time, insofar as it relates to ACM I 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) ACM I has duly authorized and validly issued all
issued and outstanding ACM I Shares, 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. ACM I has duly
authorized the ACM I Shares referred to in Section 4(e) hereof to
be issued and delivered to the Acquired Fund as of the Effective
Time. When issued and delivered, such ACM I Shares shall be
validly issued, fully paid and non-assessable, and no stockholder
of ACM I 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 ACM I Shares, nor are there any securities convertible into
ACM I Shares.
(g) ACM I does not know of any claims, actions, suits,
investigations or proceedings of any type pending or threatened
against ACM I. There are no facts that ACM I currently has
reason to believe are likely to form the basis for the
institution of any such claim, action, suit, investigation or
proceeding against ACM I. ACM I 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 this Plan.
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<PAGE>
(h) Except for agreements entered into or granted in
the ordinary course of its business, in each case under which no
material default exists, ACM I 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) ACM I 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. ACM I 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 ACM
I, 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 ACM I and the Acquired
Fund. The obligations of ACM I 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. The
stockholders of ACM I shall have approved the Acquisition as
required by the rules and regulations of the NYSE. If
stockholders of the Acquired Fund or ACM I fail to approve the
Acquisition as required, that failure shall release the Funds of
their obligations under this Plan.
(b) ACM I 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 ACM I 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) ACM I 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.
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<PAGE>
(d) There has been no material adverse change in the
financial condition, results of operations, business, properties
or assets of ACM I or the Acquired Fund since [December 1999].
Negative investment performance shall not be considered a
material adverse change.
(e) ACM I 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 ACM I and the
Acquired Fund will each be "a party to a
reorganization" within the meaning of section
368(b) of the Code;
(2) a stockholder of the Acquired Fund will
recognize no gain or loss on the exchange of
the stockholder's shares of the Acquired Fund
solely for ACM I Shares, except with respect
to cash received in lieu of a fractional share
of ACM I in connection with the Acquisition;
(3) neither the Acquired Fund nor ACM I will
recognize any gain or loss upon the transfer
of all of the Assets to ACM I in exchange for
ACM I Shares (plus cash in lieu of fractional
shares) and the assumption by ACM I of the
Liabilities pursuant to this Plan or upon the
distribution of ACM I Shares and cash to
stockholders of the Acquired Fund in exchange
for their respective shares of the Acquired
Fund;
(4) the holding period and tax basis of the Assets
acquired by ACM I 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 ACM I 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
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<PAGE>
the Acquired Fund surrendered in exchange
therefor, decreased by any cash received and
increased by any gain recognized on the
exchange;
(6) the holding period of ACM I 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;
(7) ACM I will succeed to the capital loss
carryovers of the Acquired Fund, if any, under
section 381 of the Code, but the use by ACM I
of any such capital loss carryovers (and of
capital loss carryovers of ACM I) may be
subject to limitation under section 383 of the
Code; and
(8) any gain or loss realized by a stockholder of
the Acquired Fund upon the sale of a
fractional share of ACM I to which the
stockholder is entitled will be recognized to
the stockholder and measured by the difference
between the amount of cash received and the
basis of the fractional share and, provided
that the Acquired Fund shares surrendered
constitute capital assets in the hands of the
stockholder, will be capital gain or loss.
(f) The N-14 Registration Statement shall have become
effective under the 1933 Act as to the ACM I Shares, and the SEC
shall not have instituted and to the knowledge of ACM I 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 proceeding seeking to enjoin consummation of the
Acquisition under Section 25(c) of the 1940 Act.
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<PAGE>
(i) Neither party shall have terminated this Plan with
respect to the Acquisition pursuant to Section 12 of this Plan.
(j) The NYSE shall have approved, upon official notice
of issuance, the listing of the ACM I Shares to be issued and
delivered to the Acquired Fund pursuant hereto.
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, counsel to ACM I, in form and substance
reasonably satisfactory to the Acquired Fund and dated as of the
Closing Date, substantially to the effect that:
(1) ACM I is a corporation duly incorporated,
validly existing and in good standing under
the laws of the State of Maryland and is a
closed-end, management investment company
registered under the 1940 Act and duly
registered under the 1934 Act;
(2) This Plan has been duly authorized, executed
and delivered by ACM I 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 ACM I Shares 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 ACM I;
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<PAGE>
(4) The execution and delivery of this Plan did
not, and the consummation of the Acquisition
will not, violate the Charter of ACM I, its
By-Laws or any agreement of ACM I known to
such counsel, after reasonable inquiry; and
(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 ACM I to enter into this Plan
or carry out its terms, except those that have
been obtained under the 1933 Act, the 1934
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
ACM I.
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 ACM I as to factual
matters.
10. Conditions to the Obligations of ACM I. The obligations
of ACM I with respect to the Acquisition shall be subject to the
following conditions precedent:
(a) ACM I shall have received an opinion of Seward &
Kissel LLP, counsel to the Acquired Fund, in form and substance
reasonably satisfactory to ACM I 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 a closed-end management
investment company registered under the 1940
act and duly registered under the 1934 Act;
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<PAGE>
(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 ACM I, 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 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 1934 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
63
<PAGE>
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).
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 or ACM I approve the Acquisition. However, after
stockholders of either of the Acquired Fund or ACM I 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
64
<PAGE>
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. ACM I 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.
18. Other Matters. Pursuant to Rule 145 under the 1933 Act,
and in connection with the issuance of any shares to any person
who at the time of the Acquisition is, to ACM I's knowledge, an
affiliate of a party to the Acquisition pursuant to Rule 145(c),
ACM I will cause to be affixed upon the certificate(s) issued to
such person (if any) a legend as follows:
THESE SHARES ARE SUBJECT TO RESTRICTIONS ON TRANSFER
UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD OR
OTHERWISE TRANSFERRED EXCEPT TO ACM GOVERNMENT INCOME
FUND, INC. (OR ITS STATUTORY SUCCESSOR) UNLESS (I) A
REGISTRATION STATEMENT WITH RESPECT TO SUCH SHARES IS
EFFECTIVE UNDER THE SECURITIES ACT OF 1933 OR (II) IN
THE OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
FUND, SUCH REGISTRATION IS NOT REQUIRED.
19. 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.
20. 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.
21. Limitation on Liabilities. The obligations of the
Acquired Fund and ACM I shall not bind any of the directors,
65
<PAGE>
stockholders, nominees, officers, agents, employees or agents of
the Acquired Fund or ACM I personally, but shall bind only the
Acquired Fund or ACM I, 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 ACM I, as appropriate.
22. Termination of the Acquired Fund. If the parties
complete the Acquisition, the Acquired Fund shall terminate its
registration under the 1940 Act, the 1934 Act and liquidate and
dissolve.
23. 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
For ACM I:
ACM Government Income Fund, Inc.
1345 Avenue of the Americas
New York, New York 10105
Attention: Secretary
24. Expenses. The investment adviser for the Funds and the
other funds whose assets are to be acquired by ACM I in the
acquisitions described in the N-14 Registration Statement in
connection with this Agreement has agreed to bear 25% of the
expenses incurred in connection with the acquisitions. The
acquisition expenses paid by the investment adviser of the Funds
and each such other fund shall be allocated to ACM I initially,
representing its share of the total acquisition expenses, with
any residual amount allocated to ACM Government Securities Fund,
Inc. The total remaining acquisition expenses shall be paid
proportionately by the Acquired Fund and each such other fund
according to its respective asset size as of the last date that
an acquisition of assets by ACM I, as described in the N-14
Registration Statement, is considered for approval by the
stockholders of ACM I, the Acquired Fund or any of the other
funds involved, whether or not the acquisitions contemplated
hereby and each such other agreement and plan is consummated.
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<PAGE>
25. 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.
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<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:
ACM Government Income Fund,
Inc.
Attest:
___________________________ By:_________________________
Name: Name:
Title: Title:
Accepted and agreed with respect
to Section 24 only:
Alliance Capital Management L.P.
By: Alliance Capital Management
Corporation, its General Partner
By: _____________________________
Name: _______________________
Title: _____________________
68
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TABLE OF CONTENTS PAGE
ACM GOVERNMENT INCOME FUND, INC.
ACM GOVERNMENT SECURITIES FUND, INC.
ACM GOVERNMENT SPECTRUM FUND, INC.
ACM GOVERNMENT OPPORTUNITY FUND, INC.
ALLIANCE CAPITAL LOGO(R)
Alliance Capital Management L.P.
NOTICE OF SPECIAL MEETINGS
OF STOCKHOLDERS AND
PROSPECTUS/PROXY STATEMENT
[________], 2000
69
<PAGE>
PROXY PROXY
ACM GOVERNMENT INCOME FUND, INC.
ACM GOVERNMENT SECURITIES FUND, INC.
ACM GOVERNMENT SPECTRUM FUND, INC.
ACM GOVERNMENT OPPORTUNITY FUND, INC.
Instructions to the stockholders of ACM Government Income Fund,
Inc. ("ACM I"), ACM Government Securities Fund, Inc. ("ACM II"),
ACM Government Spectrum Fund, Inc. ("ACM III") and ACM Government
Opportunity Fund, Inc. ("ACM IV" and together with ACM II and ACM
III, the "Acquired Funds") in connection with a Special Meeting
of Stockholders to be held on November 9, 2000.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF EACH FUND
The undersigned hereby appoints Reid Conway and Carol H. Rappa,
and or either of them, as proxies for the undersigned, each with
full power to appoint his/her substitute, to attend the Special
Meeting of Stockholders of the ACM I and the Acquired Funds, to
be held at 3:00 p.m., Eastern Time, on November 9, 2000 at the
offices of the Funds, 1345 Avenue of the Americas, 33rd Floor,
New York, New York, 10105, and any adjournments or postponements
thereof to cast on behalf of the undersigned all votes that the
undersigned is entitled to cast at such meeting and otherwise to
represent the undersigned at the meeting with all powers
possessed by the undersigned if personally present at the
meeting. The undersigned hereby revokes any proxy heretofore
given and acknowledges receipt of the Notice of Special Meeting
and accompanying Prospectus/Proxy Statement and hereby instructs
said proxies to vote said shares as indicated hereon.
THE VOTES ENTITLED TO BE CAST BY THE UNDERSIGNED WILL BE CAST AS
INSTRUCTED BELOW. IF THIS PROXY IS EXECUTED BUT NO INSTRUCTION
IS GIVEN, THE VOTES ENTITLED TO BE CAST BY THE UNDERSIGNED WILL
BE CAST "FOR" PROPOSAL 1 AND IN THE DISCRETION OF THE PROXY
HOLDER ON ANY OTHER MATTER THAT MAY PROPERLY COME BEFORE THE
MEETING OR ANY ADJOURNMENT OR POSTPONEMENT THEREOF.
Please sign this proxy exactly as your name appears on the books
of the applicable fund. Joint owners should each sign
personally. Trustees and other fiduciaries should indicate the
capacity in which they sign, and where more than one name
appears, a majority must sign. If a corporation, this signature
should be that of an authorized officer who should state his or
her title.
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<PAGE>
This proxy, if properly executed, will be voted in the manner
directed by the undersigned. If no direction is made, this proxy
will be voted "FOR" the proposal.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK. Example: /X/
FOR AGAINST ABSTAIN
1. To approve separate / / / / / /
Agreements and Plans of
Acquisition and Liquidation
and to approve the transfer
of all of the assets and
liabilities of each of the
Acquired Funds to ACM I in
exchange for shares of
ACM I, the distribution of
such shares to stockholders
of the Acquired Funds in
liquidation of the Acquired
Funds, the subsequent
dissolution of the Acquired
Funds, and the issuance of
shares of ACM I to the
stockholders of the
Acquired Funds pursuant to
such Agreements and Plans.
2. To vote and otherwise
represent the undersigned
on any other matter that
may properly come before
the meeting or any
adjournment or postponement
thereof in the discretion
of the proxy holder.
PLEASE SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
___________________________
Signature
___________________________
Signature (if held jointly)
[________], 2000
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<PAGE>
ACM GOVERNMENT INCOME FUND, INC.
1345 Avenue of the Americas
New York, New York
Toll Free (800) 221-5672
----------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
[________], 2000
This Statement of Additional Information relates
specifically to the proposed Acquisitions (as defined in the
Prospectus/Proxy Statement) wherein ACM Government Income Fund,
Inc. ("ACM I") would acquire all of the assets of ACM Government
Securities Fund, Inc. ("ACM II"), ACM Government Spectrum Fund,
Inc. ("ACM III") and ACM Government Opportunity Fund, Inc. ("ACM
IV" and together with ACM I, ACM II and ACM III, the "Funds") in
exchange solely for shares of ACM I, cash in lieu of fractional
shares for non-DRIP stockholders and the assumption by ACM I of
all the liabilities of ACM II, ACM III and ACM IV (the "Acquired
Funds").
Alliance Capital Management, L.P. (the "Adviser") serves
as investment adviser to the Funds. This Statement of Additional
Information is not a prospectus, but should be read in
conjunction with the Prospectus/Proxy Statement for the Funds
dated [________], 2000. This Statement of Additional Information
does not include all information that a prospective investor
should consider before purchasing shares of the Fund, and
investors should obtain and read the Prospectus/Proxy Statement
prior to purchasing shares. A copy of the Prospectus/Proxy
Statement may be obtained without charge, by calling 800-221-
5672. This Statement of Additional Information incorporates by
reference the entire Prospectus/Proxy Statement.
----------------------------------------------------------------
TABLE OF CONTENTS
PAGE
1
<PAGE>
The following supplements the information contained in
the Prospectus/Proxy Statement concerning the Funds. ACM I, ACM
II, ACM III and ACM IV are each diversified closed-end investment
companies registered under the Investment Company Act of 1940, as
amended (the "1940 Act").
INVESTMENT OBJECTIVES AND POLICIES
GENERAL. The investment objective of each of ACM I, ACM
II and ACM III is high current income consistent with
preservation of capital. The investment objective of ACM IV is
high current income consistent with prudent investment risk, with
a secondary investment objective of growth of capital. In
seeking to achieve its investment objectives, each Fund invests
principally in U.S. Government Securities (as defined below) and
utilizes certain other investment techniques, including options
and futures, intended to enhance income and reduce market risk.
The Funds may also invest in other debt securities including
those of foreign governmental issuers. ACM IV may also invest in
dividend-paying equity securities. The Funds are designed
primarily for long term investment and investors should not
consider any Fund to be a short-term trading vehicle. As with
all investment companies, there can be no assurance that a Fund's
objective will be achieved.
Each Fund has adopted a fundamental policy that it will
invest at least 65% of its total assets in U.S. Government
Securities (as defined below) and repurchase agreements
pertaining to U.S. Government Securities. Each Fund's investment
objective and fundamental policy (and its investment restrictions
set forth below under "Investment Restrictions") may be changed
only with the approval of the holders of a "majority of the
Fund's outstanding voting securities," which means the lesser of
(i) 67% of the shares of the Fund represented at a meeting at
which more than 50% of the outstanding shares are present in
person or represented by proxy, or (ii) more than 50% of the
outstanding shares. A Fund's other investment policies described
below, except as set forth under "Investment Restrictions," are
not fundamental and may be changed by the Fund without
stockholder approval, but the Fund will not change its investment
policies without contemporaneous notice to its stockholders.
U.S. GOVERNMENT SECURITIES. Securities issued or
guaranteed by the United States Government, its agencies or
instrumentalities include: (i) U.S. Treasury obligations, which
differ only in their interest rates, maturities and times of
issuance: U.S. Treasury bills (maturity of one year or less),
U.S. Treasury notes (maturities of one to 10 years), and U.S.
Treasury bonds (generally maturities of greater than 10 years),
all of which are backed by the full faith and credit of the
United States, and (ii) obligations issued or guaranteed by U.S.
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Government agencies or instrumentalities, including government
guaranteed mortgage-related securities, same of which are backed
by the full faith and credit of the U.S. Treasury, e.g., direct
pass-through certificates of the Government National Mortgage
Association; some of which are supported by the right of the
issuer to borrow from the U.S. Government, e.g., obligations of
Federal Home Loan Banks, and some of which are backed only by the
credit of the issuer itself, e.g., obligations of the Student
Loan Marketing Association.
Government Guaranteed Mortgage-Related
Securities--General. Mortgages backing the securities purchased
by a Fund include, among others, conventional thirty-year fixed
rate mortgages, graduated payment mortgages, fifteen-year
mortgages and adjustable rate mortgages. All of these mortgages
can be used to create pass-through securities. A pass-through
security is formed when mortgages are pooled together and
undivided interests in the pool or pools are sold. The cash flow
from the mortgages is passed through to the holders of the
securities in the form of periodic payments of interest,
principal and prepayments (net of a service fee). Prepayments
occur when the holder of an individual mortgage prepays the
remaining principal before the mortgages scheduled maturity date.
As a result of the pass-through of prepayments of principal on
the underlying securities mortgage-backed securities are often
subject to more rapid prepayment of principal than their stated
maturity would indicate. Because the prepayment characteristics
of the underlying mortgages vary, it is not possible to predict
accurately the realized yield or average life of a particular
issue of pass-through certificates. Prepayment rates are
important because of their effect on the yield and price of the
securities. Accelerated prepayments adversely impact yields for
pass-throughs purchased at a premium (i.e., a price in excess of
principal amount) and may involve additional risk of loss of
principal because the premium may not have been fully amortized
at the time the obligation is repaid. The opposite is true for
pass-throughs purchased at a discount. A Fund may purchase
mortgage-related securities at a premium or at a discount.
Principal and interest payments on the mortgage-related
securities are government guaranteed to the extent described
below. Such guarantees do not extend to the value or yield of
the mortgage-related securities themselves or of a Fund's shares
of common stock.
GNMA Certificates. Certificates of the Government
National Mortgage Association ("GNMA Certificates") are
mortgage-backed securities, which evidence an undivided interest
in a pool or pools of mortgages. GNMA Certificates that a Fund
purchases are the "modified pass-through" type, which entitle the
holder to receive timely payment of all interest and principal
payments due on the mortgage pool, net of fees paid to the
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"issuer" and GNMA, regardless of whether or not the mortgagor
actually makes the payment.
The National Housing Act authorizes GNMA to guarantee
the timely payment of principal and interest in securities backed
by a pool of mortgages insured by the Federal Housing
Administration ("FHA") or guaranteed by the Veterans
Administration ("VA"). The GNMA guarantee is backed by the full
faith and credit of the United States. The GNMA is also
empowered to borrow without limitation from the U.S. Treasury if
necessary to make any payments required under its guarantee.
The average life of a GNMA Certificate is likely to be
substantially shorter than the original maturity of the mortgages
underlying the securities. Prepayments of principal by
mortgagors and mortgage foreclosures will usually result in the
return of the greater part of principal investment long before
the maturity of the mortgages in the pool. Foreclosures impose
no risk to principal investment because of the GNMA guarantee,
except to the extent that a Fund has purchased the certificates
above par in the secondary market.
FHLMC Securities. The Federal Home Loan Mortgage
Corporation ("FHLMC") was created in 1970 through enactment of
Title III of the Emergency Rome Finance Act of 1970. Its purpose
is to promote development of a nationwide secondary market in
conventional residential mortgages.
The FHLMC issues two types of mortgage pass-through
securities ("FHLMC Certificates"), mortgage participation
certificates ("PCs") and guaranteed mortgage certificates
("GMCs"). PCs resemble GNMA Certificates in that each PC
represents a pro rata share of all interest and principal
payments made and owed on the underlying pool. The FHMLC
guarantees timely monthly payment of interest on PCs and the
ultimate payment of principal.
GMCs also represent a pro rata interest in a pool of
mortgages. However, these instruments pay interest semi-annually
and return principal once a year in guaranteed minimum payments.
The expected average life of these securities is approximately
ten years. The FHLMC guarantee is not backed by the full faith
and credit of the United States.
FNMA Securities. The Federal National Mortgage
Association ("FNMA") was established in 1938 to create a
secondary market in mortgages insured by the FHA.
FNMA issues guaranteed mortgage pass-through
certificates ("FNMA Certificates"). FNMA Certificates resemble
GNMA Certificates in that each FNMA Certificate represents a pro
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rata share of all interest and principal payments made and owed
on the underlying pool. FNMA guarantees timely payment of
interest and principal on FNMA Certificates. The FNMA guarantee
is not backed by the full faith and credit of the United States.
ZERO COUPON TREASURY SECURITIES. A Fund may invest in
zero coupon Treasury securities. Currently the only U.S.
Treasury security issued without coupons is the Treasury bill.
Although the U.S. Treasury does not itself issue Treasury notes
and bonds without coupons, under the U.S. Treasury STRIPS program
interest and principal payments on certain long term Treasury
securities may be maintained separately in the Federal Reserve
book entry system and may be separately traded and owned. In
addition, in the last few years a number of banks and brokerage
firms have separated ("stripped") the principal portions
("corpus") from the coupon portions of U.S. Treasury bonds and
notes and hold them separately in the form of receipts or
certificates representing undivided interests in these
instruments (which instruments are generally held by a bank in a
custodial or trust account). The staff of the Securities and
Exchange Commission ("SEC") has indicated, that, in its view
these receipts or certificates should be considered as securities
issued by the bank or brokerage firm involved and, therefore,
should not be included in a Fund's categorization of U.S.
Government Securities. The Funds disagree with the staff's
interpretation but has undertaken that it will not invest in such
securities until final resolution of the issue. However, if such
securities are deemed to be U.S. Government Securities a Fund
will not be subject to any limitations on their purchase.
Zero coupon Treasury securities do not entitle the
holder to any periodic payments of interest prior to maturity.
Accordingly, such securities usually trade at a deep discount
from their face or par value and will be subject to greater
fluctuations of market value in response to changing interest
rates than debt obligations of comparable maturity which make
current distributions of interest. Current federal tax law
requires that a holder (such as a Fund) of a zero coupon security
accrue a portion of the discount at which the security was
purchased as income each year even though the Fund receives no
interest payment in cash on the security during the year.
REPURCHASE AGREEMENTS. A Fund may enter into repurchase
agreements pertaining to U.S. Government Securities with member
banks of the Federal Reserve System or "primary dealers" (as
designated by the Federal Reserve Bank of New York) in such
securities. There is no percentage restriction on a Fund's
ability to enter into repurchase agreements. Currently the Funds
plan to enter into repurchase agreements only with its Custodian
and such primary dealers. A repurchase agreement arises when a
buyer such as a Fund purchases a security and simultaneously
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agrees to resell it to the vendor at an agreed-upon future date,
normally one day or a few days later. The resale price is
greater than the purchase price, reflecting an agreed-upon
interest rate which is effective for the period of time the
buyer's money is invested in the security and which is related to
the current market rate rather than the coupon rate on the
purchased security. Such agreements permit a Fund to keep all of
its assets at work while retaining "overnight" flexibility in
pursuit of investments of a longer-term nature. A Fund requires
continual maintenance by its Custodian for its account in the
Federal Reserve/Treasury Book Entry System of collateral in an
amount equal to, or in excess of, the resale price. In the event
a vendor defaulted on its repurchase obligation, a Fund might
suffer a loss to the extent that the proceeds from the sale of
the collateral were less than the repurchase price. In the event
of a vendor's bankruptcy, a Fund might be delayed in, or
prevented from, selling the collateral for the Fund's benefit.
Each Fund's Board of Directors ("Board") has established
procedures, which are periodically reviewed by the Board,
pursuant to which the Fund's Adviser monitor the creditworthiness
of the dealers with which the Fund enters into repurchase
agreement transactions.
General. U.S. Government Securities do not generally
involve the credit risks associated with other types of
interest-bearing securities although, as a result, the yields
available from U.S Government Securities are generally lower than
the yields available from other interest-bearing securities.
Like other fixed-income securities, however, the values of U.S.
Government Securities change as interest rates fluctuate. When
interest rates decline, the values of U.S. Government Securities
can be expected to increase and when interest rates rise, the
values of U.S. Government Securities can be expected to decrease.
OTHER SECURITIES. While the principal investment
strategies of ACM I, ACM II, ACM III and ACM IV emphasize
investment in U.S. Government Securities, a Fund may, where
consistent with its investment objective, invest up to 35% of its
total assets in securities other than U.S. Government Securities,
including (i) Foreign Government Securities and (ii) put and call
options, futures contracts and options on futures contracts,
options on foreign currencies, and forward foreign currency
exchange contracts, as discussed below under the caption
"Investment Practices." Each Fund may also invest up to 35% of
its total assets in (i) "stable countries," with ACM I, ACM II
and ACM III investing no more than 25% in any one country and
(ii) in securities rated below Baa by Moody's Investors Service,
Inc. ("Moody's") or below BBB by Standard and Poor's Corporation
("S&P").
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ACM I, ACM II and ACM IV may also invest up to 35% of
their total assets in (i) certificates of deposit, bankers'
acceptances and interest-bearing savings deposits of banks having
total assets of more than $1 billion and which are members of the
Federal Deposit Insurance Corporation, and (ii) commercial paper
of prime quality rated Prime 1 or higher by Moody's or A-1 or
higher by S&P or, if not rated, issued by companies which have an
outstanding debt issue rated Aa or higher by Moody's or AA or
higher by S&P.
ACM I and ACM II may also invest up to 35% of their
total assets in investment grade corporate debt securities
(including collateralized mortgage obligations). Investment
grade debt securities are those rated Baa or higher by Moody's or
BBB or higher by S&P or, if not so rated, of equivalent
investment quality in the opinion of the Adviser. Securities
rated Baa by Moody's or BBB by S&P normally provide higher yields
than higher-rated securities but may be considered to have
speculative characteristics. Sustained periods of deteriorating
economic conditions or rising interest rates are more likely to
lead to a weakening in the issuer's capacity to pay interest and
repay principal than in the case of higher-rated securities.
These Funds may also maintain no more than 35% of their total
assets in foreign securities rated below Baa by Moody's or below
BBB by S&P or, if not rated, of comparable investment quality as
determined by the Adviser and in corporate debt securities that
have been downgraded below Baa by Moody's and BBB by S&P. Such
high-yield, high-risk securities are considered to have
speculative or, in the case of relatively low ratings,
predominantly speculative characteristics.
ACM IV may also invest in dividend paying equity
securities (including preferred stocks and the securities of
foreign issuers) although it may invest no more than 20% of its
total assets in equity securities.
FOREIGN GOVERNMENT SECURITIES. Each Fund may invest up
to 35% of its total assets in Foreign Government Securities of
issuers considered stable by the Fund's Adviser. Foreign
Government Securities are obligations issued or guaranteed by a
foreign government or any of its political subdivisions,
authorities, agencies, or instrumentalities. The Adviser's
determination that a particular country should be considered
stable depends on the Adviser's evaluation of political and
economic developments affecting the country as well as recent
experience in the markets for Foreign Government Securities of
the country. Examples of foreign governments which the Adviser
currently considers to be stable, among others, are the
governments of Canada. Japan. Sweden, Germany, the United Kingdom
and Mexico. The percentage of a Fund's assets invested in
Foreign Government Securities will vary depending on the relative
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yields of such securities, the economies, financial markets, and
interest rate climates of the countries in which the investments
are made and the relationship of such countries' currencies to
the U.S. dollar. Currency is judged on the basis of fundamental
economic criteria (e.g., relative inflation levels and trends,
growth rate forecasts, balance of payments status, and economic
policies) as well as technical and political data. A Fund's
portfolio of Foreign Government Securities may include those of a
number of foreign countries or, depending upon market conditions,
those of a single country. A Fund may also hold foreign currency
for hedging purposes.
Investing in Foreign Government Securities involves
considerations and possible risks not typically associated with
investing in U.S. Government Securities. The value of Foreign
Government Securities investments will be affected by changes in
currency rates or exchange control regulations, application of
foreign tax laws, including withholding taxes, changes in
governmental administration or economic or monetary policy (in
this country or abroad) or changed circumstances in dealings
between nations. Costs will be incurred in connection with
conversions between currencies. Foreign brokerage commissions
are generally higher than in the United States, and foreign
securities markets may be less liquid, more volatile and less
subject to governmental supervision than in the United States.
Investments in foreign countries could be affected by other
factors not present in the United States, including
expropriation, confiscatory taxation, lack of uniform accounting
and auditing standards and potential difficulties in enforcing
contractual obligations and could be subject to settlement
periods.
COLLATERALIZED MORTGAGE OBLIGATIONS. Collateralized
mortgage obligations are debt obligations issued generally by
finance subsidiaries or trusts that are secured by
mortgage-backed certificate, including in many cases, GNMA
Certificates, FHLMC Certificates and FNMA Certificates, together
with certain funds and other collateral.
Scheduled distributions on the mortgage-backed
certificates pledged to secure the collateralized mortgage
obligations, together with certain funds and other collateral,
are sufficient to make timely payments of interest on the
collateralized mortgage obligations, and to retire the
collateralized mortgage obligations not later than their stated
maturity. Since the rate of payment of principal of the
collateralized mortgage obligations depends on the rate of
payment (including prepayments) of the principal of the
underlying mortgage-backed certificates, the actual maturity of
the collateralized mortgage obligations can occur significantly
earlier than their stated maturity. The collateralized mortgage
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obligations may be subject to redemption under certain
circumstances. Collateralized mortgage obligations bought at a
premium (i.e., a price in excess of principal amount) may involve
additional risk of loss of principal in the event of
unanticipated prepayments of the underlying mortgages because the
premium may not have been fully amortized at the time the
obligation is repaid.
Although payment of the principal of and interest on the
mortgage-backed certificates pledged to secure the collateralized
mortgage obligations may be guaranteed by GNMA, FHLMC or FNMA,
the collateralized mortgage obligations represent obligations
solely of the issuer and are not insured or guaranteed by GNMA,
FHLMC, FNMA or any other governmental agency, of by any other
person or entity. The issuers of collateralized mortgage
obligations typically have no significant assets other than those
pledged as collateral for the obligations.
ILLIQUID SECURITIES. A Fund may invest up to 20% of its
total assets in illiquid securities. These securities include,
among others, (i) direct placements or other securities which are
subject to legal or contractual restrictions on resale or for
which there is no readily available market (e.g., trading in the
security is suspended or, in the case of unlisted securities,
market makers do not exist or will not entertain bids of offers),
including any currency swaps and any assets used to cover
currency swaps, (ii) over-the-counter options and assets used to
cover over-the-counter options, and (iii) repurchase agreements
not terminable within seven days. Securities eligible for resale
under Rule 144A under the Securities Act of 1933, as amended (the
"1933 Act"), that have legal or contractual restrictions on
resale but have a readily available market are not deemed to be
illiquid for purposes of this limitation. The Adviser will
monitor such securities and in reaching decisions concerning
their marketability will consider, among other things, the
following factors: (i) the frequency of trades and quotes for the
security; (ii) the number of dealers wishing to purchase or sell
the security and the number of other potential purchasers; (iii)
dealer undertakings to make a market in the security; (iv) the
nature of the security and the nature of the marketplace trades
(e.g., the time needed to dispose of the security, the method of
soliciting offers and the mechanics of the transfer); and (v) any
applicable SEC interpretation or position with respect to such
type of securities.
INVESTMENT PRACTICES
OPTIONS ON U.S. AND FOREIGN GOVERNMENT SECURITIES. In an
effort to increase current income and to reduce fluctuations in
net asset value, a Fund may write covered put and call options
and purchase put and call options on securities of the types in
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which it is permitted to invest that are traded on U.S. and
foreign exchanges and over-the-counter. A Fund may also write
call options for cross-hedging purposes. There are no specific
limitations on a Fund's writing and purchasing of options.
A put option gives the purchaser of such option, upon
payment of a premium, the right to deliver a specified amount of
a security to the writer of the option on or before a fixed date
at a predetermined price. A call option gives the purchaser of
the option, upon payment of a premium, the right to call upon the
writer to deliver a specified amount of a security on or before a
fixed date at a predetermined price. A call option written by a
Fund is "covered" if the Fund owns the underlying security
covered by the call or has an absolute and immediate right to
acquire that security without additional cash consideration (or
for additional cash consideration held in a segregated account by
its Custodian) upon conversion or exchange of other securities
held in its portfolio. A call option is also covered if a Fund
holds a call on the same security in the same principal amount as
the call written and the exercise price of the call held (a) is
equal to or less than the exercise price of the call or (b) is
greater than the exercise price of the call written and the
difference is maintained by the Fund in cash and liquid
high-grade debt securities in a segregated account with its
Custodian. A put option written by a Fund is "covered" if the
Fund maintains cash not available for investment or liquid
high-grade debt securities with a value equal to the exercise
price in a segregated amount with its Custodian, or else holds a
put on the same security in the same principal amount as the put
written and the exercise price of the put held is equal to or
greater than the exercise price of the put written. The premium
paid by the purchaser of an option reflects, among other things,
the relationship of the exercise price to the market price and
volatility of the underlying security, the remaining term of the
option, supply and demand and interest rates.
A call option is written for cross-hedging purposes if a
Fund does not own the underlying security but seeks to provide a
hedge against a decline in value in another security which the
Fund owns of has the right to acquire, In such circumstances,
the Fund collateralizes the option by maintaining in a segregated
account with its Custodian cash or U.S. Government Securities in
an amount not less than the market value of the underlying
security, marked to market daily. A Fund would write a call
option for cross-hedging purposes, instead of writing a covered
call option, when the premium to be received from the cross-hedge
transaction would exceed that which would be received from
writing a covered call option, while at the same time achieving
the desired hedge.
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In purchasing a call option, a Fund would be in a
position to realize a gain if, during the option period, the
price of the underlying security increased by an amount in excess
of the premium paid. It would realize a loss if the price of the
underlying security declined or remained the same or did not
increase during the period by at least the amount of the premium.
In purchasing a put option, a Fund would be in a position to
realize a gain if, during the option period, the price of the
underlying security declined by an amount in excess of the
premium paid. It would realize a loss if the price of the
underlying security increased or remained the same or did not
decrease during that period by at least the amount of the
premium. If a put or call option purchased by a Fund were
permitted to expire without being sold or exercised, its premium
would be lost by the Fund.
If a put option written by a Fund were exercised the
Fund would be obligated to purchase the underlying security at
the exercise price. If a call option written by a Fund were
exercised the Fund would be obligated to sell the underlying
security at the exercise price. The risk involved in writing a
put option is that there could be a decrease in the market value
of the underlying security. If this occurred, the option could
be exercised and the underlying security would then be sold by
the option holder to the Fund at a higher price than its current
market value. These risks involved in writing a call option is
that there could be an increase in the market value or the
underlying security. If this occurred, the option could be
exercised and the underlying security would then be sold by the
Fund at a lower price than its current market value. These risks
could be reduced by entering into a closing transaction. A Fund
retains the premium received from writing a put or call option
whether or not the option is exercised.
A Fund may purchase or write options on securities of
the types in which it is permitted to invest in privately
negotiated transactions. A Fund will effect such transactions
only with investment dealers and other financial institutions
(such as commercial banks or savings and loan institutions)
deemed creditworthy by the Adviser, and the Adviser has adopted
procedures for monitoring the creditworthiness of such entities.
Options purchased or written by a Fund in negotiated transactions
are illiquid and it may not be possible for the Fund to effect a
closing transaction at a time when the Adviser believes it would
be advantageous to do so.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. A
Fund may enter into contracts for the purchase or sale for future
delivery of U.S. and Foreign Government Securities, or contracts
based on financial indices including any index of U.S. and
Foreign Government Securities ("futures contracts") and may
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purchase and write put and call options to buy or sell futures
contracts ("options on futures contracts"). A "sale" of a
futures contract means the acquisition of a contractual
obligation to deliver the securities called for by the contract
at a specified price on a specified date. A "purchase" of a
futures contract means the incurring of a contractual obligation
to acquire the securities called for by the contract at a
specified price on a specified date. The purchaser of a futures
contract on an index agrees to take or make delivery of an amount
of cash equal to the difference between a specified dollar
multiple of the value of the index on the expiration date of the
contract ("current contract value") and the price at which the
contract was originally struck. No physical delivery of the
fixed-income securities underlying the index is made. Options on
futures contracts to be written or purchased by a Fund will be
traded on U.S. or foreign exchanges or over-the-counter. These
investment techniques are used only to hedge against anticipated
future changes in market conditions and interest rates which
otherwise might either adversely affect the value of a Fund's
portfolio securities or adversely affect the prices of securities
which the Fund intends to purchase at a later date.
Each Fund's Board has adopted the requirement that
futures contracts and options on futures contracts only be used
as a hedge and not for speculation. In addition to this
requirement, the Board has also adopted two percentage
restrictions on the use of futures contracts. The first
restriction is that a Fund will not enter into any futures
contracts or options on futures contracts if immediately
thereafter the aggregate amount of initial margin deposits on all
the futures contracts of the Fund and premiums paid on options on
futures contracts would exceed 5% of the market value of the
total assets of the Fund. The second restriction is that the
aggregate market value of the futures contracts purchased by a
Fund not exceed 50% of the market value of the total assets of
the Fund. Neither of these restrictions will be changed by the
Board without considering the policies and concerns of the
various applicable federal and state regulatory agencies.
OPTIONS ON FOREIGN CURRENCIES. A Fund may purchase and
write put and call options on foreign currencies for the purpose
of protecting against declines in the U.S. dollar value of
foreign currency denominated portfolio securities and against
increases in the U.S. dollar cost of such securities to be
acquired. As in the case of other kinds of options, however, the
writing of an option on a foreign currency will constitute only a
partial hedge, up to the amount of the premium received, and a
Fund could be required to purchase or sell foreign currencies at
disadvantageous exchange rates, thereby incurring losses. The
purchase of an option on a foreign currency may constitute an
effective hedge against fluctuations in exchange rates although,
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in the event of rate movements adverse to a Fund's position, it
may forfeit the entire amount of the premium plus related
transaction costs. Options on foreign currencies to be written
or purchased by a Fund will be traded on U.S. and foreign
exchanges or over the counter. There is no specific percentage
limitation on a Fund's investments in options on foreign
currencies.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. A Fund may
purchase or sell forward foreign currency exchange contracts
("forward contracts") to attempt to minimize the risk to the Fund
from adverse changes in the relationship between the U.S. dollar
and foreign currencies. A forward contract is an obligation to
purchase or sell a specific currency for an agreed price at a
future date, which is individually negotiated and privately
traded by currency traders and their customers. A Fund may enter
into a forward contract, for example, when it enters into a
contract for the purchase or sale of a security denominated in a
foreign currency in order to "lock in" the U.S. dollar price of
the security ("transaction hedge"). Additionally, for example,
when a Fund believes that a foreign currency may suffer a
substantial decline against the U.S. dollar, it may enter into a
forward sale contract to sell an amount of that foreign currency
approximating the value of some or all of the Fund's portfolio
securities denominated in such foreign currency, or when the Fund
believes that the U.S. dollar may suffer a substantial decline
against a foreign currency, it may enter into a forward purchase
contract to buy that foreign currency for a fixed dollar amount
("position hedge"). A Fund's Custodian will place cash not
available for investment or U.S. Government Securities in a
segregated account of the Fund having a value equal to the
aggregate amount of the Fund's commitments under forward
contracts entered into with respect to position hedges. If the
value of the securities placed in the segregated account
declines, additional cash or U.S. Government Securities will be
placed in the account on a daily basis so that the value of the
account will equal the amount of a Fund's commitments with
respect to such contracts. As an alternative to maintaining all
or part of the segregated account, a Fund may purchase a call
option permitting the Fund to purchase the amount of foreign
currency being hedged by a forward sale contract at a price no
higher than the forward contract price or the Fund may purchase a
put option permitting the Fund to sell the amount of foreign
currency subject to a forward purchase contract at a price as
high or higher than the forward contract price. While these
contracts are not presently regulated by the Commodity Futures
Trading Commission ("CFTC"), the CFTC may in the future assert
authority to regulate forward contracts. In such event a Fund's
ability to utilize forward contracts in the manner set forth
above may be restricted. Forward contracts reduce the potential
gain from a positive change in the relationship between the U.S.
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dollar and foreign currencies. Unanticipated changes in currency
prices may result in poorer overall performance for the Fund than
if it had not entered into such contracts.
LENDING OF PORTFOLIO SECURITIES. In order to increase
income, a Fund may from time to time lend securities from its
portfolio to brokers, dealers and financial institutions and
receive collateral in the form of cash of U.S. Government
Securities. Under a Fund's procedures, collateral for such loans
must be maintained at all times in an amount equal to at least
100% of the current market value of the loaned securities
(including interest accrued on the loaned securities). The
interest accruing on the loaned securities will be paid to a Fund
and the Fund will have the right, on demand, to call back the
loaned securities. The risks in lending portfolio securities, as
with other extensions of credit, consist of possible loss of
rights in the collateral should the borrower fail financially.
In determining whether to lend securities to a particular
borrower, a Fund's Adviser (subject to review by the Board) will
consider all relevant facts and circumstances, including the
creditworthiness of the borrower. While securities are on loan,
the borrower will pay a Fund any income earned thereon and the
Fund may invest any cash collateral in portfolio securities,
thereby earning additional income, or receive an agreed upon
amount of income from a borrower who has delivered equivalent
collateral. A Fund may pay fees to arrange the loans. A Fund
will not lend portfolio securities in excess of 30% of the value
of its total assets nor lend its portfolio securities to any
officer, Director, employee or affiliate of the Fund or the
Adviser.
FORWARD COMMITMENTS. A Fund may enter into forward
commitments for the purchase or sale of securities. Such
transactions may include purchases on a "when-issued" basis or
purchases or sales on a "delayed delivery" basis. In some cases,
a forward commitment may be conditioned upon the occurrence of a
subsequent event such as approval of a proposed financing by
appropriate municipal authorities (i.e., a "when, as and if
issued" trade).
When forward commitment transactions are negotiated, the
price. which is generally expressed in yield terms, is fixed at
the time the commitment is made, but delivery and payment for the
securities take place at a later date. Normally, the settlement
date occurs within two months after the transaction, but delayed
settlements beyond two months may be negotiated. Securities
purchased or sold under a forward commitment are subject to
market fluctuation, and no interest accrues to the purchaser
prior to the settlement date. At the time a Fund enters into a
forward commitment, it will record the transaction and thereafter
reflect the value of the security purchased or, if sold, the
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<PAGE>
proceeds to be received, in determining the net asset value
("NAV") of its shares. Any unrealized appreciation or
depreciation reflected in such valuation of a "when, as and if
issued" security would be cancelled in the event that the
required condition did not occur and the trade was cancelled.
The use of forward commitments enables a Fund to protect
against anticipated changes in interest rates and prices. For
instance, in periods of rising interest rate and falling bond
prices, a Fund might sell securities in its portfolio on a
forward commitment basis to limit its exposure to falling prices.
In periods of falling interest rates and rising bond prices, a
Fund might sell a security in its portfolio and purchase the same
or a similar security on a when-issued or forward commitment
basis, thereby obtaining the benefit of currently higher cash
yields. However, if a Fund's Adviser were to forecast
incorrectly the direction of interest rate movements, the Fund
might be required to complete such when-issued of forward
transactions at prices inferior to then current market values.
No forward commitments will be made by a Fund if, as a result,
the Fund's aggregate commitments under such transactions would be
more than 30% of the then current value of the Fund's total
assets.
A Fund's right to receive or deliver a security under a
forward commitment may be sold prior to the settlement date, but
the Fund enters into forward commitments only with the intention
of actually receiving or delivering the securities, as the case
may be. To facilitate such transactions, a Fund's Custodian will
maintain, in a segregated account of the Fund, cash or liquid
high-grade debt securities having value equal to, or greater
than, any commitments to purchase securities on a forward
commitment basis and, with respect to forward commitments to sell
portfolio securities of the Fund, the portfolio securities,
themselves. If a Fund, however, chooses to dispose of the right
to receive or deliver a security subject to a forward commitment
prior to the settlement date of the transaction, it can incur a
gain or loss. In the event the other party to a forward
commitment transaction were to default, a Fund might lose the
opportunity to invest money at favorable rates or to dispose of
securities at favorable prices.
GENERAL INFORMATION REGARDING FUTURES, OPTIONS AND
FORWARD CONTRACTS. The successful use of the foregoing
investment practices draws upon the Adviser's special skill and
experience with respect to such instruments and usually depends
on the Adviser's ability to forecast interest and exchange rate
movements correctly. Should interest or exchange rates move in
an unexpected manner, a Fund may not achieve the anticipated
benefits of the use of these techniques or may realize losses and
thus be in a worse position than if such strategies had not been
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<PAGE>
used. Unlike many exchange-traded futures contracts and options
on futures contracts, there are no daily price fluctuation limits
with respect to forward contracts, and adverse market movements
could therefore continue to an unlimited extent over a period of
time. In addition, the correlation between movements in the
prices of such instruments and movements in the price of the
securities hedged of used for cover will not be perfect and could
produce unanticipated losses.
A Fund's ability to dispose of its positions in futures
contracts, options and forward contracts will depend on the
availability of liquid markets in such instruments. It is
impossible to predict the amount of trading interest that may
exist in various types of futures contracts, options and forward
contracts. If a secondary market does not exist with respect to
an option purchased or written by a Fund over-the-counter, it
might not be possible to effect a closing transaction in the
option (i.e., dispose of the option) with the result that (i) an
option purchased by the Fund would have to be exercised in order
for the Fund to realize any profit and (ii) the Fund may not be
able to sell portfolio securities covering an option written by
the Fund until the option expires or it delivers the underlying
security or futures contract upon exercise. Therefore, no
assurance can be given that a Fund will be able to utilize these
instruments at all or utilize them effectively for the purposes
set forth above. Furthermore, a Fund's ability to engage in
options and futures transactions may be limited by tax
considerations.
REVERSE REPURCHASE AGREEMENTS. Reverse repurchase
agreements involve sales by a Fund of portfolio assets
concurrently with an agreement by the Fund to repurchase the same
assets at a later date at a fixed price. During the reverse
repurchase agreement period, the Fund continues to receive
principal and interest payments on these securities. Generally,
the effect of such a transaction is that a Fund can recover all
or most of the cash invested in the portfolio securities involved
during the term of the reverse repurchase agreement, while it
will be able to keep the interest income associated with those
portfolio securities. Such transactions are advantageous only if
the interest cost to a Fund of the reverse repurchase transaction
is less than the cost of otherwise obtaining the cash.
Reverse repurchase agreements involve the risk that the
market value of the securities a Fund is obligated to repurchase
under the agreement may decline below the repurchase price. In
the event the buyer of securities under a reverse repurchase
agreement files for bankruptcy or becomes insolvent, a Fund's use
of the proceeds of the agreement may be restricted pending a
determination by the other party, or its trustee or receiver,
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<PAGE>
whether to enforce the Fund's obligation to repurchase the
securities.
SHORT SALES. A Fund may make short sales of securities
or maintain a short position, provided that at all times when a
short position is open the Fund owns an equal amount of such
securities of the same issue as, and equal in amount to, the
securities sold short. In addition, a Fund may not make a short
sale if more than 10% of the Fund's net assets (taken at market
value) is held as collateral for short sales at any one time. If
the price of the security sold short increases between the time
of the short sale and the time a Fund replaces the borrowed
security, the Fund will incur a loss; conversely, if the price
declines, the Fund will realize a capital gain. Although a
Fund's gain is limited to the price at which it sold the security
short, its potential loss is unlimited. It is the Funds' present
intention to make such sales only for the purpose of deferring
realization of gain or loss for federal income tax purposes.
Certain special federal income tax considerations may apply to
short sales, which are entered into by a Fund.
SWAP AGREEMENTS. The Funds may enter into swaps on
sovereign debt obligations to protect themselves from interest
rate fluctuations on the underlying debt instruments and for
investment purposes. A swap is an agreement that obligates two
parties to exchange a series of cash flows at specified intervals
based upon or calculated by reference to changes in specified
prices or rates for a specified amount of an underlying asset.
The payment flows are usually netted against each other, with the
difference being paid by one party to the other. Risks may arise
as a result of the failure of the counterparty to the swap
contract to comply with the terms of the swap contract. The loss
incurred by the failure of a counterparty is generally limited to
the net interest payment to be received by a Fund, and/or the
termination value at the end of the contract. Therefore, a Fund
considers the creditworthiness of each counterparty to a swap
contract in evaluating potential credit risk. Additionally,
risks may arise from unanticipated movements in interest rates or
in the value of the underlying securities.
FUTURE DEVELOPMENTS. A Fund may, following written
notice to its stockholders, take advantage of other investment
practices which are not at present contemplated for use by the
Fund or which currently are not available but which may be
developed, to the extent such investment practices are both
consistent with the Fund's investment objective and legally
permissible for the Fund. Such investment practices, if they
arise, may involve risks that exceed those involved in the
activities described above.
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INVESTMENT RESTRICTIONS
Each Fund has adopted the following investment
restrictions, which may not be changed without the approval of
the holders of a majority of that Fund's outstanding voting
securities as defined above. The percentage limitations set
forth below, as well as those described in the Prospectus/Proxy
Statement and elsewhere in this Statement of Additional
Information, apply only at the time an investment is made or
other relevant action is taken by a Fund.
Each Fund will not:
1. Invest 25% or more of its total assets in
securities of issuers conducting their principal
business activities in the same industry, provided
that this limitation shall not apply with respect
to investments in U.S. Government Securities;
2. Make loans except through (a) the purchase of debt
obligations in accordance with its investment
objective and policies; (b) the lending of
portfolio securities; or (c) the use of repurchase
agreements;
3. Borrow money, except a Fund may borrow (a) from a
bank or other entity in a privately arranged
transaction and issue commercial paper, bonds,
debentures or notes, in series or otherwise, with
such interest rates, conversion rights and other
terms and provisions as are determined by the
Fund's Board, if after such borrowing or issuance
there is asset coverage of at least 300% as defined
in the 1940 Act, and (b) for temporary purposes in
an amount not exceeding 5% of the value of the
total assets of the Fund;
4. Pledge, hypothecate, mortgage or otherwise encumber
its assets, except to secure permitted borrowings;
5. Participate on a joint or joint and several basis
in any securities trading account;
6. Invest in companies for the purpose of exercising
control;
7. Invest in illiquid securities, including direct
placements or other securities which are subject to
legal or contractual restriction on resale or for
which there is no readily available market (e.g.,
trading in the security is suspended or, in the
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<PAGE>
case of unlisted securities, market makers do not
exist or will not entertain bids or offers), if
more than 20% of the Fund's net assets (taken at
market value) would be invested in such securities.
For purposes of this restriction, repurchase
agreements not terminable within seven days will be
deemed illiquid. Options purchased by the Fund in
privately negotiated transactions and the
securities covering options written by the Fund in
privately negotiated transactions are not subject
to this limitation;
8. Make short sales of securities or maintain a short
position, unless at all times when a short position
is open it owns an equal amount of such securities
or securities convertible into or exchangeable for,
without payment of any further consideration,
securities of the same issue as, and equal in
amount to, the securities sold short ("short sales
against the box"), and unless not more than 10% of
the Fund's net assets (taken at market value) is
held as collateral for such sales at any one time
(it is the Fund's present intention to make such
sales only for the purpose of deferring realization
of gain or loss for federal income tax purposes);
or
9. (a) Purchase or sell real estate, except that it
may purchase and sell securities of companies which
deal in real estate or interests therein; (b)
purchase or sell commodities or commodity contracts
(except currencies, currency futures, forward
contracts or contracts for the future acquisition
or delivery of fixed income securities and related
options and other similar contracts); (c) invest in
interests in oil, gas, or other mineral exploration
or development programs; (d) purchase securities on
margin, except for such short-term credits as may
be necessary for the clearance of transactions; and
(e) act as an underwriter of securities, except
that the Fund may acquire restricted securities
under circumstances in which, if such securities
were sold, the Fund might be deemed to be an
underwriter for purposes of the 1933 Act.
ACM IV has an additional investment restriction in that
it will not purchase a security if, as a result (unless the
security is acquired pursuant to a plan of reorganization or an
offer of exchange), the Fund would own any securities of an open-
end investment company or more than 3% of the total outstanding
voting stock of any closed-end investment company or more than 5%
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of the value of the Fund's total assets would be invested in
securities of any closed-end investment company or more than 10%
of such value in closed-end investment companies in general.
RISK FACTORS AND SPECIAL CONSIDERATIONS
GENERAL. The NAV of shares of a Fund varies as the
aggregate value of the Fund's portfolio securities increases or
decreases. A Fund's NAV changes as the general levels of
interest rates fluctuate. When interest rates decline, the value
of a portfolio invested in fixed-income securities can be
expected to rise. Conversely, when interest rates rise, the
value of a portfolio invested in fixed-income securities can be
expected to decline. If the Adviser's expectation of changes in
interest rates or its evaluation of the normal yield
relationships in the fixed-income markets proves to be incorrect,
a Fund's income, NAV and potential capital gain may be decreased
or its potential capital loss may be increased.
Although changes in the value of a Fund's portfolio
securities subsequent to their acquisition are reflected in the
Fund's NAV, such changes will not affect the income received by
the Fund from such securities. The dividends paid by a Fund
increase or decrease in relation to the income received by the
Fund from its investments, which is reduced by the Fund's
expenses before being distributed to the Fund's shareholders.
The Fund's use of options, futures contracts, options on
futures contracts, forward contracts and options on foreign
currencies may result in the loss of principal under certain
market conditions.
For these reasons, an investment in shares of the Fund
should not constitute a complete investment program and may not
be appropriate for investors who cannot assume the greater risk
of capital depreciation inherent in seeking higher income.
BORROWING. A Fund may, if and when market conditions
dictate, borrow, including on a secured basis, from bank or other
entities in privately arranged transactions to increase the money
available to the Fund to invest in securities when the Fund
believes that the income from the securities financed will be
greater than the interest expense paid on the borrowing.
Currently, ACM I and ACM II have outstanding bank loans in the
amount of $90,000,000 and $110,000,000, respectively. Such
borrowings involve additional risk to a Fund, since the interest
expense may be greater than the income from or appreciation of
the securities carried by the borrowings and since the value of
the securities carried may decline below the amount borrowed. A
Fund may also borrow to finance repurchases of or tender offers
for its shares when the Fund deems it desirable in order to avoid
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the untimely disposition of portfolio securities. A Fund
reserves the right to issue preferred stock, commercial paper,
bonds, debentures or notes, in series or otherwise, with such
interest rates, conversion rights and other terms and provisions
as are determined by the Fund's Board of Directors.
A Fund may borrow to the maximum extent permitted under
the 1940 Act. The 1940 Act requires a Fund to maintain "asset
coverage" of not less than 300% of its "senior securities
representing indebtedness," as those terms are defined and used
in the 1940 Act. In addition, a Fund may not make any cash
distributions to its stockholders if, after the distribution,
there would be less than 300% asset coverage of a senior security
representing indebtedness for borrowings (excluding for this
purpose certain evidences of indebtedness made by a bank or other
entity and privately arranged, and not intended to be publicly
distributed). This limitation on a Fund's ability to make
distributions could under certain circumstances impair the Fund's
ability to maintain its qualification for taxation as a
registered investment company.
A Fund may also borrow for temporary purposes in an
amount not exceeding 5% of the value of the total assets of the
Fund Such borrowings are not subject to the asset coverage
restrictions set forth in the preceding paragraph.
Any investment gains made with the proceeds obtained
from borrowings in excess or interest paid on the borrowings will
cause the net income per share or the NAV per share of a Fund's
common stock to be greater than would otherwise be the case. On
the other hand, if the investment performance of the additional
securities purchased fails to cover their cost (including any
interest paid on the money borrowed) to a Fund, then the net
income per share or NAV per share of the Fund's common stock will
be less than would otherwise be the case. This is the
speculative factor know as "leverage."
EFFECTS OF LEVERAGE. As of June 30, 2000, ACM I and ACM
II had outstanding bank loans in the amount of $90,000,000 and
$110,000,000, respectively, which represented 16% and 15% of each
Fund's total net assets, for the purpose of utilizing investment
leverage. Utilization of leverage, which is usually considered
speculative, involves certain risks to stockholders. These
include a higher volatility of the NAV of the common stock,
caused by favorable or adverse changes in currency exchange
rates. In addition, fluctuations in the interest rates on a
Fund's indebtedness will affect the return to stockholders, with
increases in such rates decreasing such return.
To the extent that the current interest rate on a Fund's
indebtedness approaches the net return on the leveraged portion
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of the Fund's investment portfolio, the benefit of leverage to
stockholders will be reduced, and if the current interest rate on
the indebtedness were to exceed the net return on such portion of
the Funds' portfolio, the Fund's leverage would result in a lower
rate of return to stockholders and in a lower NAV than if a Fund
were not leveraged. In an extreme case, if a Fund's current
investment income were not sufficient to meet interest
requirements on the indebtedness or if a Fund failed to maintain
the asset coverage required by the 1940 Act, it could be
necessary for the Fund to liquidated certain of its investments
at a time when it may be disadvantageous to do so, thereby
reducing its NAV.
INVESTMENTS IN FOREIGN GOVERNMENT SECURITIES. Investing
in Foreign Government Securities involves considerations and
possible risks not typically associated with investing in U.S.
Government Securities. The value of Foreign Government
Securities investments will be affected by changes in currency
rates or exchange control regulations, application of foreign tax
laws, including withholding taxes, changes in governmental
administration or economic or monetary policy (in this country or
abroad) or changed circumstances in dealings between nations.
Costs will be incurred in connections with conversions between
various currencies. Foreign brokerage commissions are generally
higher than in the United States, and foreign securities markets
may be less liquid, more volatile and less subject to
governmental supervision than in the United States. Investments
in foreign countries could be affected by other factors not
present in the United States, including expropriation,
confiscatory taxation, lack of uniform accounting and auditing
standards, and potential difficulties in enforcing contractual
obligations, and could be subject to extended settlement periods.
INVESTMENTS IN LOWER-RATED SECURITIES. Securities rated
below investment grade, i.e., Ba and lower by Moody's or BB and
lower by S&P ("lower-rated securities"), or, if not rated,
determined by the Adviser to be of equivalent quality, are
subject to greater risk of loss of principal and interest than
higher-rated securities and are considered to be predominantly
speculative with respect to the issuer's capacity to pay interest
and repay principal, which may in any case decline during
sustained periods of deteriorating economic conditions or rising
interest rates. They are also generally considered to be subject
to greater market risk than higher-rated securities in times of
deteriorating economic conditions. In addition, lower-rated
securities may be more susceptible to real or perceived adverse
economic conditions than investment grade securities, although
the market values of securities rated below investment grade and
comparable unrated securities tend to react less to fluctuations
in interest rate levels than do those of higher-rated securities.
Securities rated Ba by Moody's or BB by S&P are judged to have
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speculative characteristics or to be predominantly speculative
with respect to the issuer's ability to pay interest and repay
principal. Securities rated B by Moody's and S&P are judged to
have highly speculative characteristics or to be predominantly
speculative. Such securities may have small assurance of
interest and principal payments.
The market for lower-rated securities may be thinner and
less active than that for higher-rated securities, which can
adversely affect the prices at which these securities can be
sold. To the extent that there is no established secondary
market for lower-rated securities, a Fund may experience
difficulty in valuing such securities and, in turn, the Fund's
assets.
The Adviser will try to reduce risk inherent in
investment in lower-rated securities through credit analysis,
diversification and attention to current developments and trends
in interest rates and economic and political conditions.
However, there can be no assurance that losses will not occur.
Since the risk of default is higher for lower-rated securities,
the Adviser's research and credit analysis are a correspondingly
more important aspect of its program for managing a Fund's
securities than would be the case if the Fund did not invest in
lower-rated securities.
In seeking to achieve a Fund's investment objective,
there will be times, such as during periods of rising interest
rates, when depreciation and realization of capital losses on
securities in the Fund's portfolio will be unavoidable.
Moreover, medium- and lower-rated securities and non-rated
securities of comparable quality may be subject to wider
fluctuations in yield and market values than higher-rated
securities under certain market conditions. Such fluctuations
after a security is acquired do not affect the cash income
received from that security but are reflected in the NAV of the
Fund.
Ratings of securities by Moody's and S&P are a generally
accepted barometer of credit risk. They are, however, subject to
certain limitations from an investor's standpoint. The rating of
a securities is heavily weighted by past developments and does
not necessarily reflect probable future conditions. There is
frequently a lag between the time a rating is assigned and the
time it is updated. In addition, there may be varying degrees of
difference in the credit risk of securities within each rating
category. See Appendix A for a description of Moody's and S&P's
bond ratings.
Certain lower-rated securities in which a Fund may
invest may contain call or buy-back features that permit the
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<PAGE>
issuers thereof to call or repurchase such securities. Such
securities may present risks based on prepayment expectations.
If an issuer exercises such a provision, a Fund may have to
replace the called security with a lower yielding security,
resulting in a decreased rate of return to the Fund.
REPURCHASE OF SHARES. In recognition of the possibility
that a Fund's shares might trade at a discount to NAV, each
Fund's Board has determined that it would be in the interest of
stockholders for the Fund to attempt to reduce or eliminate such
a market value discount should it exist. To that end, each Fund's
Board presently contemplates that a Fund may from time to time
take action either to repurchase in the open market or to make a
tender offer for its own shares at NAV. Each Fund's Board
presently intends each quarter to consider the making of a tender
offer. The Boards may at any time, however, decide that a Fund
should not make a tender offer.
Subject to a Fund's fundamental policy with respect to
borrowings, the Fund may incur debt to finance repurchases and/or
tender offers. Interest on any such borrowing will reduce the
Fund's net income.
There can be no assurance that repurchases and/or tender
offers will result in a Fund's shares trading at a price equal to
their NAV. Each Fund anticipates that the market price of its
shares will from time to time vary from NAV. The market price of
a Fund's shares will, among other things, be affected by the
relative demand for and supply of such shares in the market, the
Fund's investment performance, the Fund's dividends and yield and
investor perception of the Fund's overall attractiveness as an
investment as compared with other investment alternatives.
Nevertheless, the fact that a Fund's shares may be the subject of
tender offers at NAV from time to time may reduce the spread that
might otherwise exist between market price and NAV. In the
opinion of the Adviser, sellers may be less inclined to accept a
significant discount if they have a reasonable expectation of
being able to recover NAV in conjunction with a possible tender
offer.
Although each Fund's Board believes that share
repurchases and tender offers might, in certain circumstances
have a favorable effect an the market price of a Fund's shares,
it should be recognized that the acquisition of shares by the
Fund would decrease the total assets of the Fund and therefore
have the effect of increasing the Fund's expense ratio. Because
of the nature of a Fund's investment objective, policies and
portfolio, the Fund's Adviser does not anticipate that
repurchases and tenders should have an adverse effect on the
Fund's investment performance and does not anticipate any
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<PAGE>
material difficulty in disposing of portfolio securities in order
to consummate stock repurchases and tenders.
Even if a tender offer has been made, it is a Board's
announced policy, which may be changed by the Board, not to
accept tenders or effect repurchases if (1) such transactions if
consummated, would (a) result in the delisting of the Fund's
shares from the New York Stock Exchange ("NYSE") (the NYSE having
advised the Fund that it would consider delisting if the
aggregate market value of the Fund's outstanding shares is less
than $5,000,000, the number of publicly held shares falls below
600,000 or the number of round-lot holders fall below 1,200), or
(b) impair the Fund's status as a regulated investment company
under the Code (which would make the Fund a taxable entity,
causing the Fund's income to be taxed at the corporate level in
addition to the taxation of stockholders who receive dividends
from the Fund); (2) the Fund would not be able to liquidate
portfolio securities in an orderly manner and consistent with the
Fund's investment policies and objective in order to repurchase
shares; or (3) there is, in the Board's judgment, any material
(a) legal action or proceeding instituted or threatened
challenging such transactions or otherwise materially adversely
affecting the Fund, (b) suspension of or limitation on prices for
trading securities generally on the NYSE of any foreign exchange
on which portfolio securities of the Fund are traded, (c)
declaration of a banking moratorium by federal, state or foreign
authorities or any suspension of payment by banks in the United
States, New York State or foreign countries in which the Fund
invests, (d) limitation affecting the Fund or the issuers of its
portfolio securities imposed by federal, state or foreign
authorities on the extension of credit by lending institutions or
on the exchange of foreign currency, (e) commencement of war,
armed hostilities or other international or national calamity
directly or indirectly involving the United States or other
countries in which the Fund invests or (f) other event or
condition which would have a material adverse effect on the Fund
or its shareholders if shares were repurchased. A Board may
modify these conditions in light of experience.
Any tender offer made by a Fund will be at a price equal
to the NAV of the shares on a date subsequent to the Fund's
receipt of all tenders. Each offer will be made and stockholders
notified in accordance with the requirements of the Securities
Exchange Act of 1934, as amended and the 1940 Act, either by
publication or mailing or both. Each offering document will
contain such information as is prescribed by such laws and the
rules and regulations promulgated thereunder. When a tender
offer is authorized to be made by a Fund's Board, a stockholder
wishing to accept the offer will be required to tender all (but
not less thin all) of the shares owned by such stockholder (or
attributed to the stockholder for federal income tax purposes
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under Section 318 of the Code). A Fund will purchase all shares
tendered in accordance with the terms of the offer unless it
determines to accept none of them (based upon one of the
conditions set forth above). Each person tendering shares will be
required to submit a check in the amount of $25.00, payable to
the Fund, which will be used to help defray the costs associated
with effecting the tender offer. This $25.00 fee will be imposed
upon each tendering stockholder any of whose tendered shares are
purchased in the offer, and will be imposed regardless of the
number of shares purchased. A Fund expects the cost to the Fund
of effecting a tender offer will exceed the aggregate of all such
fees received from those who tender offer their shares. Costs
associated with the tender offer will be charged against capital.
During the period of the tender offer, a Fund's stockholders will
be able to obtain the Fund's current NAV by use of a toll-free
telephone number.
If a Fund must liquidate portfolio securities in order
to purchase Fund shares tendered, the Fund may realize gains and
losses. If the portfolio securities sold are "Section 998"
items, a Fund's distributable net investment income could be
positively or adversely affected. The portfolio turnover rate of
a Fund may or may not be affected by the Fund's repurchase of
shares pursuant to a tender offer.
POSSIBLE FUTURE CONVERSION TO OPEN-END INVESTMENT
COMPANY. If, during any fiscal year of a Fund, (i) shares of the
Fund's common stock have traded on the principal securities
exchange where listed at an average discount from NAV of more
than 10%, determined on the basis of the discount as of the end
of the last trading day in each week during the period of 12
calendar weeks preceding December 31 in such year, and (ii)
during such year the Fund receives written requests from the
holders of 10% or more of the Fund's outstanding shares of common
stock that such a proposal be submitted to the Fund's
stockholders, the Fund will submit to its stockholders at the
next succeeding annual meeting of stockholders a proposal, to the
extent consistent with the 1940 Act, to amend the Fund's Charter.
Such amendment would provide that, upon its adoption by the
holders of 66 2/3% of the Fund's outstanding shares of common
stock, the Fund will convert from a closed-end to an open-end
investment company. The 66 2/3% vote requirement is higher than
the minimum vote required under the 1940 Act. If a Fund
converted to an open-end investment company, it would be able to
continuously issue and offer for sale the shares of its common
stock and each outstanding share of the Fund's common stock could
be presented to the Fund at the option of the holder thereof for
redemption at NAV per share. In such event, the Fund might be
required to liquidate portfolio securities to meet requests for
redemption, and its shares would no longer be listed on the NYSE.
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A Fund cannot predict whether any repurchase of shares
made while the Fund is a closed-end investment company (as
described under "Repurchase of Shares" above) would increase or
decrease the discount from NAV. To the extent that any such
repurchase decreased the discount from NAV to below 10% during
the measurement period described in (i) above, the Fund would not
be required to submit to stockholders a proposal to convert the
Fund to an open-end investment company at the next annual meeting
of stockholders.
MANAGEMENT OF THE FUNDS
Directors and Officers
The Directors and principal officers of a Fund and their
principal occupations during the past five years are set forth
below. Unless otherwise specified, the address of each such
person is 1345 Avenue of the Americas, New York, NY 10105. Each
Director and officer is affiliated as such with one or more of
the other registered investment companies sponsored by Alliance.
Directors
PRINCIPAL OCCUPATION
DURING THE PAST FIVE
YEARS AND OTHER
NAME, ADDRESS AND AGE FUND OFFICE AFFILIATIONS
John D. Carifa* (55) ACM I Chairman President, Chief
ACM II of the Board Operating Officer
ACM III of Directors and a Director of
ACM IV Alliance Capital
Management Corporation
("ACMC"), the general
partner of Alliance,
which he has been
associated with since
prior to 1995.
Ruth Block (69) ACM I Director Formerly an Executive
Box 4623 ACMII Vice President
Stamford, CT 06903 ACM III and Chief Insurance
ACM IV Officer of The Equitable
Life Assurance Society
of the United States.
She is a Director of
Ecolab Incorporated
(specialty chemicals)
and BP Amoco Corporation
(oil and gas).
27
<PAGE>
David H. Dievler (70) ACM I Director Independent Consultant.
P.O. Box 167 ACM II Formerly a Senior Vice
Spring Lake, NJ 07762 ACM IIII President of ACMC until
ACM IV December 1994.
28
<PAGE>
John H. Dobkin (58) ACM I Director President of Historic
150 White Plains Road ACM II Hudson Valley (historic
Tarrytown, NY 10591 ACM III preservation) since
ACM IV prior to 1995.
Previously, he was a
Director of the National
Academy of Design.
William H. Foulk,Jr. (67) ACM I Director Investment Adviser and
Suite 100 ACM II Independent Consultant.
2 Greenwich Plaza ACM III He was formerly Senior
Greenwich, CT 06830 ACM IV Manager of Barrett
Associates, Inc., a
registered investment
adviser, with which he
had been associated
since prior to 1995.
Dr. James M. Hester (76) ACM I Director President of the Harry
25 Cleveland Lane ACM II Frank Guggenheim
Princeton, NJ 08540 ACM II Foundation, with which
ACM IV he has been associated
since prior to 1995. He
was formerly President
of New York University
and The New York
Botanical Garden and
Rector of The United
Nations University.
Clifford L. Michel (61) ACM I Director Member of the law firm
St. Bernhard's Road ACM II of Cahill Gordon &
Gladstone, NJ 07934 ACM III Reindel, with which
ACM IV he has been associated
since prior to 1995. He
is President and Chief
Executive Officer of
Wenonah Development
Company (investment
holding company) and a
Director of Placer Dome,
Inc. (mining).
Donald J. Robinson (66) ACM I Director Senior Counsel of the
98 Hell's Peak Road ACM II law firm of Orrick,
Weston VT 05161 ACM III Herrington & Sutcliffe
ACM IV since January 1995. He
was formerly a senior
partner and a member of
the Executive Committee
of that firm. He was
29
<PAGE>
also a Trustee of the
Museum of the City of
New York from 1977-1995.
Robert C. White (79) ACM I Director Formerly Assistant
ACM II Treasurer of Ford
ACM III Company and, until
ACM IV September 30, 1994, a
Vice President and the
Chief Financial Officer
of the Howard Hughes
Medical Institute.
Officers
Wayne D. Lyski (58) ACM I President Executive Vice President
ACM II (Senior Vice of ACMC, with which he
ACM III President for has been associated
ACM IV ACM IV) since prior to 1995.
Kathleen A. Corbet (40) ACM I Senior Vice Executive Vice President
ACM II President of ACMC, with which she
ACM III has been associated
ACM IV since prior to 1995.
Bruce W. Calvert (53) ACM IV Senior Vice Chairman and Chief
President Executive Officer of
ACMC, with which he has
been associated since
prior to 1995.
Paul J. DeNoon (38) ACM I Vice Senior Vice President
ACM II President of ACMC, with which
ACM III he has been associated
ACM IV since prior to 1995.
Thomas Bardong (55) ACM IV Vice Senior Vice President of
President ACMC, with which he has
been associated since
prior to 1995.
Christian G. Wilson (32) ACM I Vice Vice President of
ACM II President ACMC, with which he
ACM III has been associated
ACM IV since prior to 1995.
Michael Mon (31) ACM I Vice Vice President of ACMC,
ACM II President with which he has been
ACM III Associated since June
ACM IV 1999. Prior thereto he
was a Portfolio Manager
30
<PAGE>
at Brundage, Stroy and
Rose since 1998.
Previously, he was
employed as an Assistant
Vice President at
Mitchell Hutchins Asset
Management since prior
to 1995.
Edmund P. Bergan, Jr. (50) ACM I Secretary Senior Vice President
ACM II and General Counsel
ACM III of Alliance Fund
ACM IV Distributors, Inc.
("AFD") and Alliance
Fund Services, Inc.
("AFS"), with which he
has been associated
since prior to 1995.
Mark D. Gersten (49) ACM I Treasurer & Senior Vice President
ACM II Chief of AFS and Vice
ACM III Financial President of AFD,
ACM IV Officer with which he has been
associated since prior
to 1995.
Juan J. Rodriguez (42) ACM I Controller Vice President of AFS,
ACM II with which he has been
ACM III associated since prior
ACM IV to 1995.
________________________________
* "Interested person" as defined in the Investment Company Act of 1940, as
amended, of each Fund because of an affiliation with each Fund's
investment adviser, Alliance Capital Management L.P.
A Fund does not pay any fees to, or reimburse expenses
of, any Director during a time when such Director is considered
an "interested person" of the Fund, as defined by the 1940 Act.
The aggregate compensation paid by each Fund to each of its
Directors during it respective fiscal year ended in 1999, the
aggregate compensation paid to each of the Directors during
calendar year 1999 by all of the investment companies in the
Alliance Fund Complex, and the total number of investment
companies (and separate investment portfolios within those
companies) in the Alliance Fund Complex with respect to which
each of the Directors serves as a director or trustee, are set
forth below. Neither the Funds nor any other investment company
in the Alliance Fund Complex provides compensation in the form of
31
<PAGE>
pension or retirement benefits to any of its directors or
trustees.
<TABLE>
<CAPTION>
TOTAL TOTAL NUMBER OF TOTAL NUMBER OF
AGGREGATE COMPENSATION INVESTMENT COMPANIES INVESTMENT PORTFOLIOS
COMPENSATION FROM THE IN THE ALLIANCE FUND WITHIN THE ALLIANCE
FROM EACH FUND ALLIANCE FUND COMPLEX, INCLUDING FUND COMPLEX,
DURING ITS COMPLEX, INCLUDING THE FUNDS, AS TO INCLUDING THE FUNDS, AS
FISCAL YEAR THE FUNDS, DURING WHICH THE DIRECTOR TO WHICH THE DIRECTOR
ENDED IN CALENDAR YEAR IS A DIRECTOR OR IS A DIRECTOR OR
NAME OF DIRECTOR 1999 1999 A TRUSTEE A TRUSTEE
<S> <C> <C> <C> <C>
John D. Carifa $0 $0 50 103
Ruth Block $3,957 ACM I
$3,957 ACM II
$3,707 ACM III
$3,444 ACM IV $154,263 38 80
David H. Dievler $3,830 ACM I
$3,830 ACM II
$4,205 ACM III
$3,567 ACM IV $210,188 45 87
John H. Dobkin $4,080 ACM I
$4,080 ACM II
$4,205 ACM III
$3,567 ACM IV $206,488 42 84
William H. Foulk, Jr. $4,080 ACM I
$4,080 ACM II
$4,205 ACM III
$3,567 ACM IV $246,413 45 98
Dr. James M. Hester $4,080 ACM I
$4,080 ACM II
$4,205 ACM III
$3,567 ACM IV $164,138 39 81
Clifford L. Michel $4,080 ACM I
$4,080 ACM II
$4,205 ACM III
$3,567 ACM IV $183,388 39 83
Donald J. Robinson $3,347 ACM I
$3,347 ACM II
$3,472 ACM III
$2,833 ACM IV $140,813 41 92
32
<PAGE>
Robert C. White $8,600 ACM I
$8,600 ACM II
$8,600 ACM III
$7,050 ACM IV $85,000 10 10
</TABLE>
As of June 30, 2000, each of the Directors of each Fund
owned less than 1% of the shares of such Fund and the Directors
and officers of each Fund as a group owned less than 1% of the
shares of each such Fund. During each Fund's most recently
completed fiscal year, none of the Funds' Directors engaged in a
purchase or sale of the securities of Alliance or any of its
parents or subsidiaries in an amount exceeding 1% of the relevant
class of securities.
Each Fund, Alliance and each Fund's principal
underwriter have adopted a Code of Ethics under Rule 17j-1 of the
1940 Act. These Codes do permit personnel subject to the Codes
to invest in securities, including securities that may be
purchased or held by the Fund. These Codes may be reviewed and
copied at the SEC's Public Reference Room in Washington, DC. For
information on the operation of the Public Reference Room call
the SEC at 1-202-942-8090. In addition, these Codes are
available on the SEC's Internet site at http://www.sec.gov or
upon request (for a duplicating fee) at the following E-mail
address: [email protected] or by writing the SEC's Public
Reference Section, Washington, DC 20549-0102
Adviser
The Funds' investment adviser, Alliance Capital
Management L.P. ("Alliance"), 1345 Avenue of the Americas, New
York, NY 10105, 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
nations' 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 Capital Management Corporation ("ACMC") is the
general partner of Alliance and a wholly owned subsidiary of The
Equitable Life Assurance Society of the United States
("Equitable"). Equitable, one of the largest life insurance
companies in the United States, is the beneficial owner of an
approximately 55.4% partnership interest in Alliance. Alliance
33
<PAGE>
Capital Management Holding L.P. ("Alliance Holding") owns
approximately 41.9% partnership interest in the Adviser.1 Equity
interests in Alliance Holding are traded on the New York Stock
Exchange in the form of units. Approximately 98% of such
interests are owned by the public and management or employees of
Alliance and approximately 2% are owned by Equitable. Equitable
is a wholly owned subsidiary of AXA Financial, Inc. ("AXA
Financial"), a Delaware corporation whose shares are traded on
the New York Stock Exchange. AXA Financial serves as the holding
company for Alliance, Equitable and Donaldson, Lufkin & Jenrette,
Inc., an integrated investment and merchant bank. As of June
30, 1999, AXA, a French insurance holding company, owned
approximately 58.2% of the issued and outstanding shares of
common stock of AXA Financial.
The Advisory Agreements for ACM I, ACM II, ACM III and
ACM IV became effective on April 21, 1988, April 21, 1988, May
26, 1988 and August 25, 1988, respectively. Each Fund's Advisory
Agreement was amended on July 22, 1992. Each Fund's Advisory
Agreement was approved by the vote, cast in person, of the Fund's
Directors including the Directors who are not parties to the
Advisory Agreement or interested persons as defined in the 1940
Act, of any such party, at a meeting called for that purpose and
held on April 2, 1992.
Alliance provides investment advisory services and order
placement facilities for each of the Fund's and pays all
compensation of Directors and officers of the Fund who are
affiliated persons of Alliance. Alliance or its affiliates also
furnish a Fund, without charge, management supervision and
assistance and office facilities and provide persons satisfactory
to a Fund's Board to serve as the Fund's officers. Each Fund has,
under the Advisory Agreement, assumed obligation to pay for all
other expenses. As to the obtaining of services other than those
specifically provided to a Fund by Alliance, the Fund may employ
its own personnel. For such services, the Fund may also utilize
personnel employed by Alliance or its affiliates and, in such
event, the services will be provided to the Fund at cost and the
____________________
1. Until October 29, 1999, Alliance Holding served as the
investment adviser to the Fund. On that date, Alliance
Holding reorganized by transferring its business to the
Adviser. Prior thereto, the Adviser had no material business
operations. One result of the reorganization was that the
Advisory Agreement , then between the Fund and Alliance
Holding, was transferred to the Adviser by means of a
technical assignment, and ownership of Alliance Fund
Distributors, Inc. and Alliance Fund Services, Inc. the
Fund's principal underwriter and transfer agent,
respectively, also was transferred to the Adviser.
34
<PAGE>
payments therefore must be specifically approved by the Fund's
Board.
Under their Advisory Agreements, ACM I, ACM II and ACM
III pay Alliance a monthly management fee in an amount equal to
the sum of (x) 1/12th of .30% of the average weekly net assets of
the Fund up to $250 million during the month plus 1/12th of .25%
of the Fund's average weekly net assets in excess of $250 million
during the month and (y) 5.25% of the Fund's daily gross income
(i.e., income other than gains from the sale of securities or
gains received from options and futures contracts less interest
on money borrowed by the Fund) accrued by the Fund during the
month. These Funds' Advisory Agreements provide that the monthly
management fee shall not exceed in the aggregate 1/12th of 1% of
the Fund's average weekly net assets during the month
(approximately 1% on an annual basis). Under its Advisory
Agreement, ACM IV pays Alliance a monthly fee equal to .0625 of
1% of the Fund's average weekly net assets during the month
(equal to an annual fee of approximately .75 of 1% of the average
weekly net assets).
For the fiscal years ended December 31, 1999, 1998 and
1997, ACM I, ACM II and ACM III paid advisory fees to Alliance
that, in the aggregate, amounted to $4,005,912, $4,517,809 and
$4,828,660; $5,290,831, $5,886,351 and $6,168,048; $2,048,567,
$1,898,639 and $1,964,382, respectively. For the fiscal year
ended July 31, 1999, 1998 and 1997, ACM IV paid advisory fees to
Alliance that, in the aggregate, amounted to $805,157, $833,478
and $813,268, respectively.
For purposes of the calculation of the fee payable to
Alliance, average weekly net assets are determined on the basis
of the average net assets of a Fund for each weekly period
(ending on Fridays) ending during the month. The net assets for
each weekly period are determined by averaging the net assets on
Friday of such weekly period with the net assets on Friday of the
immediately preceding weekly period. When a Friday is not a Fund
business day, then the calculation will be based on the net
assets of a Fund on the Fund business day immediately preceding
such Friday. This advisory fee may be greater than that paid by
most funds. In addition to payments to the Adviser under the
Advisory Agreement, the Fund pays certain other costs.
Certain other clients of Alliance may have investment
objectives and policies similar to those of the Funds. Alliance
may, from time to time, make recommendations which result in the
purchase or sale of the particular security by its other clients
simultaneously with a Fund. If transactions on behalf of more
than one client during the same period increase the demand for
securities being purchased or the supply of securities being
sold, there may be an adverse effect on price. It is the policy
35
<PAGE>
of Alliance to allocate advisory recommendations and the placing
of orders in a manner which is deemed equitable by Alliance to
the accounts involved, including the Funds. When two or more of
the clients of Alliance (including a Fund) are purchasing or
selling the same security on a given day from the same broker or
dealer, such transactions may be averaged as to price.
As to the obtaining of services other than those
specifically provided to a Fund by Alliance, a Fund may employ
its own personnel. For such services, it also may utilize
personnel employed by Alliance or by other subsidiaries of
Equitable. In such event, the services will be provided to a
Fund at cost and the payments specifically approved by the Fund's
Board.
Each Fund's Advisory Agreement is terminable with
respect to that Fund without penalty on 60 days written notice by
a vote of a majority of the outstanding voting securities of such
Fund or by a vote of a majority of the Fund's Directors, or by
Alliance on 60 days written notice, and will automatically
terminate in the event of its assignment. Each Fund's Advisory
Agreement provides that in the absence of willful misfeasance,
bad faith or gross negligence on the part of Alliance, or of
reckless disregard of its obligations thereunder, Alliance shall
not be liable for any action or failure to act in accordance with
its duties thereunder.
The Advisory Agreements for ACM I, ACM II and ACM III
continue in effect, provided that such continuance is
specifically approved at least annually by a vote of a majority
of the Fund's outstanding voting securities or by the Fund's
Board, including in either case approval by a majority of the
Directors who are not parties to the Advisory Agreement or
interested persons of such parties as defined by the 1940 Act.
Most recently, continuance of the Advisory Agreements of ACM I,
ACM II and ACM III was approved by the Board, including a
majority of the Directors who are not parties to the Advisory
Agreements or interested persons of any such party, at a Meeting
held on October 13, 1999.
Alliance may act as an investment adviser to other
persons, firms or corporations, including investment companies,
and is investment adviser to AFD Exchange Reserves, Alliance All-
Asia Investment Fund, Inc., Alliance Balanced Shares, Inc.,
Alliance Bond Fund, Inc., Alliance Capital Reserves, Alliance
Disciplined Value Fund, Inc., Alliance Global Dollar Government
Fund, Inc., Alliance Global Small Cap Fund, Inc., Alliance Global
Strategic Income Trust, Inc., Alliance Government Reserves,
Alliance Greater China '97 Fund, Inc., Alliance Growth and Income
Fund, Inc., Alliance Health Care Fund, Inc., Alliance High Yield
Fund, Inc., Alliance Institutional Funds, Inc., Alliance
36
<PAGE>
Institutional Reserves, Inc., Alliance International Fund,
Alliance International Premier Growth Fund, Inc., Alliance
Limited Maturity Government Fund, Inc., Alliance Money Market
Fund, Alliance Mortgage Securities Income Fund, Inc., Alliance
Multi-Market Strategy Trust, Inc., Alliance Municipal Income
Fund, Inc., Alliance Municipal Income Fund II, Inc., Alliance
Municipal Trust, Alliance New Europe Fund, Inc., Alliance North
American Government Income Trust, Inc., Alliance Premier Growth
Fund, Inc., Alliance Quasar Fund, Inc., Alliance Real Estate
Investment Fund, Inc., Alliance Select Investors Series, Inc.,
Alliance Technology Fund, Inc., Alliance Utility Income Fund,
Inc., Alliance Variable Products Series Fund, Inc., Alliance
Worldwide Privatization Fund, The Alliance Fund, Inc., The
Alliance Portfolios, and EQ Advisors Trust, all registered open-
end investment companies; ACM Managed Dollar Income Fund, Inc.,
ACM Managed Income Fund, Inc., ACM Municipal Securities Income
Fund, Inc., Alliance All-Market Advantage Fund, Inc., Alliance
World Dollar Government Fund, Inc., Alliance World Dollar
Government Fund II, Inc., The Austria Fund, Inc., The Korean
Investment Fund, Inc., The Southern Africa Fund, Inc. and The
Spain Fund, Inc., all registered closed-end investment companies.
Administrator
Under Administrative Agreements, Mitchell Hutchins Asset
Management Inc. ("Mitchell Hutchins"), a Delaware corporation
with principal offices at 1285 Avenue of the Americas, New York,
NY 10019 serves as administrator for ACM I, ACM II and ACM III
and Alliance serves as administrator for ACM IV. Under these
Administrative Agreements, Mitchell Hutchins and Alliance perform
standard administrative services for the Funds.
For the services rendered to ACM I, ACM II and ACM III,
these Funds pay Mitchell Hutchins a fee, calculated and paid
monthly, at the annualized rate of 0.20 of 1% of a Fund's average
weekly net assets up to $100 million, 0.18 of 1% of the Fund's
next $200 million of average weekly net assets, and 0.16 of 1% of
the Fund's average weekly net assets in excess of $300 million.
For services rendered to ACM IV, ACM IV pays Alliance a monthly
fee equal to the annualized rate of 0.15 of 1% of the Fund's
average weekly net assets. If the Acquisitions are approved, the
combined fund would pay Mitchell Hutchins a fee, calculated and
paid monthly, at an annualized rate of 0.18 of 1% of the combined
fund's average weekly net assets up $100 million, 0.16 of 1% of
the combined fund's next $200 million of average weekly net
assets, and 0.15 of 1% of the combined fund's average weekly net
assets in excess of $300 million. For the fiscal years ended
December 31, 1999, 1998 and 1997, ACM I, ACM II and ACM III paid
administrative fees to Mitchell Hutchins that, in the aggregate,
amounted to $833,756, $982,489 and $1,040,518; $1,075,090,
$1,281,004 and $1,328,236; $464,910, $497,633 and 487,961,
37
<PAGE>
respectively. For the fiscal years ended July 31, 1999, 1998,
and 1997, ACM IV paid administrative fees to Alliance that, in
the aggregate, amounted to $161,032, $166,691 and $162,654.
Shareholder Servicing
Alliance Fund Services, Inc. ("AFS"), an affiliate of
Alliance, provides shareholder services for the Funds. The Funds
reimburse AFS for these services. For these services and for the
fiscal years ended December 31, 1999, 1998 and 1997 ACM I, ACM II
and ACM III paid AFS $3,925, $5,605 and $5,292; $4,690, $4,230
and $4,515; $2,310, $3,420 and $3,925, respectively. For these
services and for its fiscal years ended July 31, 1999, 1998 and
1997 ACM IV paid AFS $965, $1,160 and $3,717.
Custodian, Dividend Paying Agent, Transfer Agent and Registrar
State Street Bank and Trust Company ("State Street"),
225 Franklin Street, Boston, MA 02110, serves as custodian,
dividend paying agent, transfer agent and registrar for ACM I,
ACM II and ACM III. State Street also acts as accounting agent
for ACM I, ACM II and ACM III. The Bank of New York serves as
custodian and accounting agent for ACM IV. PFPC, Inc., P.O. Box
8030, Boston, MA 02266-8030, serves as dividend paying agent,
transfer agent and registrar for ACM IV.
For these services and for the fiscal years ended
December 31, 1999, 1998 and 1997 ACM I, ACM II and ACM III paid
State Street $384,324, $425,406 and $387,986; $410,195, $480,125
and $422,512; $206,816, $197,628 and $263,369, respectively. For
these services and for its fiscal years ended July 31, 1999, 1998
and 1997, ACM IV paid PFPC $40,969, $49,165 and $91,344. For
these services and for its fiscal years ended July 31, 1999, 1998
and 1997, ACM IV paid Bank of New York $102,049, $120,841 and
$102,049.
VALUATION OF PORTFOLIO SECURITIES
Each Fund calculates and makes available for weekly
publication the NAV of its shares of common stock. The NAV per
share of a Fund's common stock is determined as of the close of
trading on the NYSE each Friday or, when Friday is not a Fund
business day, on the immediately preceding Fund business day, by
adding the market value of all securities in the Fund's portfolio
and other assets, subtracting liabilities incurred or accrued and
dividing by the total number of the Fund's shares of common stock
then outstanding.
In accordance with applicable rules under the 1940 Act,
portfolio securities are valued at current market value or at
fair value as determined in good faith by the Board of Directors.
38
<PAGE>
The Board of Directors has delegated to the Adviser certain of
the Board' s duties with respect to the following procedures.
Readily marketable securities listed on the Exchange or on a
foreign securities exchange (other than foreign securities
exchanges whose operations are similar to those of the United
States over-the-counter market) are valued, except as indicated
below, at the last sale price reflected on the consolidated tape
at the close of the Exchange or, in the case of a foreign
securities exchange, at the last quoted sale price, in each case
on the business day as of which such value is being determined.
If there has been no sale on such day, the securities are valued
at the quoted bid prices on such day. If no bid prices are
quoted on such day, then the security is valued at the mean of
the bid and asked prices at the close of the Exchange on such day
as obtained from one or more dealers regularly making a market in
such security. Where a bid and asked price can be obtained from
only one such dealer, such security is valued at the mean of the
bid and asked price obtained from such dealer unless it is
determined that such price does not represent current market
value, in which case the security shall be valued in good faith
at fair value by, or pursuant to procedures established by, the
Board of Directors. Securities for which no bid and asked price
quotations are readily available are valued in good faith at
faire value by, or in accordance with procedures established by,
the Board of Directors. Readily marketable securities not listed
on the Exchange or on a foreign securities exchange are valued in
like manner. Portfolio securities traded on the Exchange and on
one or more other foreign or other national securities exchanges,
and portfolio securities not traded on the Exchange but traded on
one or more foreign or other national securities exchanges are
valued in accordance with these procedures by reference to the
principal exchange on which the securities are traded.
Readily marketable securities traded only in the over-
the-counter market, securities listed on a foreign securities
exchange whose operations are similar to those of the United
Stated over-the-counter market, and debt securities listed on a
U.S. national securities exchange whose primary market is
believed to be over-the-counter, are valued at the mean of the
bid and asked prices at the close of the Exchange on such day as
obtained from two or more dealers regularly making a market in
such security. Where a bid and asked price can be obtained from
only one such dealer, such security is valued at the mean of the
bid and asked price obtained from such dealer unless it is
determined that such price does not represent current market
value, in which case the security shall be valued in good faith
at fair value by, or in accordance with procedures established
by, the Board of Directors.
Listed put and call options purchased by a Fund are
valued at the last sale price. If there has been no sale on that
39
<PAGE>
day, such securities will be valued at the closing bid prices on
that day.
Open futures contracts and options thereon will be
valued using the closing settlement price or, in the absence of
such a price, the most recent quoted bid price. If there are no
quotations available for the day of valuations, the last
available closing settlement price will be used.
U.S. Government Securities and other debt instruments
having 60 days or less remaining until maturity are valued at
amortized cost if their original maturity was 60 days or less, or
by amortizing their fair value as of the 61st day prior to
maturity if their original term to maturity exceeded 60 days
(unless in either case the Board of Directors determines that
this method does not represent fair value.)
Fixed-income securities may be valued on the basis of
prices provided by a pricing service when such prices are
believed to reflect the fair market value of such securities.
The prices provided by a pricing service take into account may
factors, including institutional size trading in similar groups
of securities and any developments related to specific
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/dealers 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.
All other assets of a Fund are valued in good faith at
fair value by, or in accordance with procedures established by,
the Board of Directors.
Trading in securities on Far Eastern and European
securities exchanges and over-the-counter markets is normally
competed well before the close of business of each Fund business
day. In addition, trading in foreign markets may not take place
on all Fund business days. Furthermore, trading may take place
in various foreign markets on days that are not Fund business
days. A Fund's calculation of the net asset value per share,
therefore, does not always take place contemporaneously with the
most recent determination of the prices of portfolio securities
in these markets. Events affecting the values of these portfolio
securities that occur between the time their prices are
determined in accordance with the above procedures and the close
of the Exchange will not be reflected in the Fund's calculation
of net asset value unless these prices do not reflect current
market value, in which case the securities will be valued in good
40
<PAGE>
faith by fair value by, or in accordance with procedures
established by, the Board of Directors.
The Board of Directors may suspend the determination of
a Fund's net asset value subject to the rules of the SEC and
other governmental rules and regulations, at a time when: (1) the
Exchange is closed, other than customary weekend and holiday
closings, (2) an emergency exists as a result of which it is not
reasonably practicable for the Fund to dispose of securities
owned by it or to determine fairly the value of its net assets.
For purposes of determining a Fund's net asset value per share,
all assets and liabilities initially expressed in a foreign
currency will be converted into U.S. Dollars at the mean of the
current bid and asked prices of such currency against the U.S.
Dollar last quoted by a major bank that is a regular participant
in the relevant foreign exchange market or on the basis of a
pricing service that takes into account the quotes provided by a
number of such major banks. If such quotations are not available
as of the close of the Exchange, the rate of exchange will be
determined in good faith by, or under the direction of, the Board
of Directors.
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
Stockholders of each Fund whose shares are registered in
their own names may elect to be participants in each Fund's
Dividend Reinvestment and Cash Purchase Plan (the "DRIP"), under
which dividends and capital gain distributions to stockholders
will be paid or reinvested in additional shares of a Fund (the
"Dividend Shares"). State Street Bank and Trust Company for ACM
I, ACM II and ACM III, and PFPC, Inc. for ACM IV (the "Agent")
act as agents for participants under the DRIP. Stockholders
whose shares are held in the name of a broker or nominee should
contact such broker or nominee to determine whether or how they
may participate in the DRIP.
Stockholders who do not elect to participate in the DRIP
will receive all distributions in cash paid by check mailed
directly to the stockholder of record (or, if the shares are held
in street or other nominee name, then to the nominee) by State
Street Bank and PFPC, as dividend disbursing agent.
The automatic reinvestment of dividends and
distributions will not relieve participants of any income taxes
that may be payable (or required to be withheld) on dividends and
distributions. The federal income tax treatment of reinvestment
is described under "Taxation."
A stockholder who has elected to participate in the DRIP
may withdraw from the DRIP at any time. There will be no penalty
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or withdrawal from the DRIP and stockholders who have previously
withdrawn from the DRIP may rejoin it at any time. Changes in
elections must be in writing and should include the stockholders
name and address as they appear on the share certificate. An
election to withdraw from the DRIP will, until such election is
changed, be deemed to be an election by a stockholder to take all
subsequent distributions in cash. An election will be effective
only for a distribution declared and having a record date of at
least 10 days after the date on which the election is received.
A stockholder whose shares are held in the name of a broker or
nominee should contact such broker or nominee concerning changes
in that stockholder's election.
Under a DRIP and commencing not more than five business
days before the dividend payment date, purchases of a Fund's
shares may be made by the Agent, on behalf of the participants in
the DRIP, from time to time to satisfy dividend reinvestments
under the DRIP. Such purchases by the Agent on or before the
dividend payment date may be made on the NYSE or elsewhere at any
time when the price plus estimated commissions of a Fund's common
stock on the NYSE is lower than the Fund's most recently
calculated NAV per share.
If the Agent determines on the dividend payment date
that the shares purchased as of such date are insufficient to
satisfy the dividend reinvestment requirements, the Agent, on
behalf of the participants in the DRIP, will obtain the necessary
additional shares as follows. To the extent that outstanding
shares are not available at a cost of less than per share NAV,
the Agent, on behalf of the participants in the DRIP, will accept
payment of the dividend, or the remaining portion thereof, in
authorized but unissued shares of a Fund on the dividend payment
date. Such shares will be issued at a per share price equal to
the higher of (1) the NAV per share on the payment date, or (2)
95% of the closing market price per share on the payment date.
If the closing sale or offer price, plus estimated commissions,
of the common stock on the NYSE on the payment date is less than
a Fund's NAV per share on such day, then the Agent will purchase
additional outstanding shares on the NYSE or elsewhere. If
before the Agent has completed such purchases, the market price
plus commissions exceeds the NAV of a Fund share, the average per
share purchase price paid by the Agent may exceed the NAV of the
Fund's shares, resulting in the acquisition of fewer shares than
if shares had been issued by the Fund.
Participants in a DRIP have the option of making
additional cash payments to the Agent, semi-annually, in any
amount of $100 or more for investment in a Fund's shares. The
Agent uses all funds received from participants to purchase Fund
shares in the open market on or about each January 15 and July
15. Participants' cash payments are also used to acquire Fund
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shares under the same procedure as that used for reinvestment of
dividends and distributions. To allow ample time for receipt and
processing by the Agent, participants should send in voluntary
cash payments to be received by the Agent not later than five
business days before each January 15 and July 15. To avoid
unnecessary cash accumulations, cash payments received after that
time and cash payments received more than 30 days prior to these
dates will be returned by the Agent and interest will not be paid
on any uninvested cash payments. A participant may withdraw a
voluntary cash payment by written notice, if the notice is
received by the Agent not less than 48 hours before such payment
is to be invested.
The Agent will maintain all stockholders' accounts in a
DRIP and furnish written confirmation of all transactions in the
account, including information needed by stockholders for tax
records. Shares in the account of each DRIP participant will be
held by the Agent in non-certificated form in the name of the
participant, and each stockholder's proxy will include those
shares purchased or received pursuant to the DRIP.
In the case of stockholders such as banks, brokers or
nominees, which hold shares for others who are the beneficial
owners, the Agent will administer the DRIP on the basis of the
number of shares certificated from time to time by the record
stockholders as representing the total amount registered in the
record stockholders' name and held for the account of beneficial
owners who are to participate in the DRIP.
There will be no brokerage charges with respect to
shares issued directly by the Fund to satisfy the dividend
reinvestment requirements. However, each participant will pay a
pro rata share of brokerage commissions incurred with respect to
the Agent's open market purchases of shares. In each case, the
cost per share of shares purchased for each stockholder's account
will be the average cost, including brokerage commissions, of any
shares purchased in the open market plus the cost of any shares
issued by the Fund. A participant also will pay brokerage
commissions incurred in purchases from voluntary cash payments
made by the participant.
Stockholders participating in a DRIP may receive
benefits not available to stockholders not participating in a
Plan. If the market price plus commissions of a Fund's shares is
above the NAV, participants in a DRIP will receive shares of a
Fund at a discount of up to 5% from the current market value.
However, if the market price plus commissions is below the NAV,
participants will receive distributions in shares with a NAV
greater than the value of any cash distribution they would have
received on their shares. There may be insufficient shares
available in the market to make distributions in shares at prices
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below NAV. Also, since a Fund does not redeem it shares, the
price on resale may be more or less than the NAV.
In the case of foreign participants whose dividends are
subject to U.S. income tax withholding and in the case of any
participants subject to 31% federal backup withholding, the Agent
will reinvest dividends after deduction of the amount required to
be withheld.
Experience under a DRIP may indicate that changes are
desirable. Accordingly, a Fund reserves the right to amend or
terminate a DRIP as applied to any voluntary cash payments made
and any dividend or distribution paid subsequent to written
notice of the change sent to participants in the DRIP at least 90
days before the record date for such dividend or distribution. A
DRIP may also be amended or terminated by the Agent on at least
90 days' written notice to participants in the DRIP. There is no
service charge to participants in a DRIP; however, a Fund
reserves the right to amend the DRIP to include a service charge
payable to the Agent by the participants. All correspondence
concerning the DRIPs for ACM I, ACM II and ACM III should be
directed to the Agent at State Street Bank and Trust Company,
P.O. Box 366, Boston, MA 02101 or for ACM IV at PFPC, Inc., P.O.
Box 8030, Boston, MA 02266-8030.
DESCRIPTION OF COMMON STOCK
Common Stock of the Funds
Each Fund is authorized to issue up to 300,000,000
shares of common stock, par value $.01 per share. As of June 30,
2000, ACM I, ACM II, ACM III and ACM IV had 58,744,751,
78,226,348, 35,235,527 and 12,425,781 shares outstanding,
respectively. The Funds' shares have no preemptive, conversion,
exchange or redemption rights. Each share has equal voting,
dividend, distribution and liquidation rights. The shares of
each Fund outstanding are, and the shares of ACM I, when issued
upon the Acquisitions will be, fully paid and nonassessable.
Stockholders are entitled to one vote per share. All voting
rights for the election of Directors are noncumulative, which
means that the holders of more than 50% of the shares of common
stock of a Fund can elect 100% of the Directors then nominated
for election if they choose to do so and, in such event, the
holders of the remaining shares of common stock will not be able
to elect any Directors. Under the rules of the NYSE applicable
to listed companies, each Fund is required to hold an annual
meeting of stockholders each year.
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Certain Anti-Takeover Provisions of the Fund's Charters,
Articles of Incorporation and By-Laws
The Funds presently have provisions in their Charters,
and By-Laws (together, the "Charter Documents") that are intended
to limit (i) the ability of other entities or persons to acquired
control of a Fund, (ii) a Fund's freedom to engage in certain
transactions, or (iii) the ability of a Fund's Directors or
stockholders to amend the Charter Documents or effect changes in
the Fund's management. These provisions of the Charter Documents
may be regarded as "anti-takeover" provisions. Commencing with
the first annual meeting of a Fund's stockholders, the Board of
Directors was divided into three classes, each having a term of
three years. At each annual meeting of stockholders, the term of
one class of Directors expires. Accordingly, only those
Directors in one class maybe changed in any one year, and it
would require two years to change a majority of the Board of
Directors (although under Maryland law procedures are available
for the removal of Directors even if they are not then standing
for reelections and under SEC regulations procedures are
available for including stockholders proposals in management's
annual proxy statement). Such system of electing Directors may
have the effect of maintaining the continuity of management and,
thus, make it more difficult for the Fund's stockholders to
change the majority of Directors. Under Maryland law and a
Fund's Charter, the affirmative vote of the holders of a majority
of the votes entitles to be cast is required for the
consolidation of the Fund with another corporation, a merger of
the Fund with or into another corporation (except for certain
mergers in which the Fund is the successor), a statutory share
exchange in which the Fund is not the successor, a sale or
transfer of all or substantially all of the Fund's assets, the
dissolution of the Fund and amendment to the Fund's Charter. In
addition, the affirmative vote of 75% (which is higher than that
required under Maryland law or the 1940 Act) of the outstanding
shares of common stock of a Fund is required generally to
authorize any of the following transactions or to amend the
provisions of the Articles of Incorporation relating to such
transactions:
(i) merger, consolidation or statutory share exchange
of the Fund with or into any other corporation;
(ii) issuance of any securities of the Fund to any
person or entity for cash;
(iii) sale, lease ore exchange of all or any substantial
part of the assets of the Fund to any entity or
person (except assets having an aggregate fair
market value of less than $1,000,000); or
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(iv) sale, lease or exchange to the Fund, in exchange
for securities of the Fund, of any assets of any
entity or person (except assets having an aggregate
fair market value of less than $1,000,000);
If such corporation, person or entity is directly, or indirectly
through affiliates, the beneficial owner of more than 5% of the
outstanding shares of the Fund (a "principal stockholder").
However, such vote would not be required where, under certain
condition, the Board of Directors approves the transaction,
although in certain cases involving merger, consolidation or
statutory share exchange or sale of all or substantially all of
the Fund's assets the affirmative vote of a majority of the
outstanding shares of a Fund would nevertheless be required.
The provisions of the Charter Documents described above
and a Fund's right to repurchase or make a tender offer for its
common stock could have the effect of depriving the owners of
shares of opportunities to sell their shares at a premium over
prevailing market prices, by discouraging a third party from
seeking to obtain control of a Fund in a tender offer or similar
transaction. The overall effect of these provisions is to
render more difficult the accomplishment of a merger or the
assumption of control by a principal stockholder. However, they
provide the advantage of potentially requiring persons seeking
control of a Fund to negotiate with its management regarding the
price to be paid and facilitating the continuity of the Fund's
management and investment objective and policies. The Board of
Directors of each Fund has considered the foregoing anti-takeover
provisions and concluded that they are in the best interests of
the fund and its stockholders.
PORTFOLIO TRANSACTIONS
Subject to the general supervision of a Fund's Board,
the Adviser is responsible for the investment decisions and the
placing of orders for portfolio transactions for the Fund. A
Fund's portfolio transactions occur primarily with issuers,
underwriters or major dealers acting as principals. Such
transactions are normally on a net basis, which does not involve
payment of brokerage commissions. The cost of securities
purchased from an underwriter usually includes a commission paid
by the issuer to the underwriters; transactions with dealers
normally reflect the spread between bid and asked prices.
Premiums are paid with respect to options purchased by a Fund and
brokerage commissions are payable with respect to transactions in
exchange-traded futures contracts.
A Fund has no obligation to enter into transactions in
portfolio securities with any dealer, issuer, underwriter or
other entity. In placing orders, it is the policy of each Fund
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to obtain the best price and execution for its transactions.
Where best price and execution may be obtained from more than one
dealer, the Adviser may, in its discretion, purchase and sell
securities through dealers who provide research, statistical and
other information to the Adviser. Such services may be used by
the Adviser for all of its investment advisory accounts and,
accordingly, not all such services may be used by the Adviser in
connection with a Fund. The supplemental information received
from a dealer is in addition to the services required to be
performed by the Adviser under the Advisory Agreement, and the
expenses of the Adviser will not necessarily be reduced as a
result of the receipt of such information. Consistent with the
Rules of Fair Practice of the National Association of Securities
Dealers, Inc., and subject to seeking best price and execution, a
Fund may consider sales of shares of the Fund as a factor in the
selection of dealers to enter into portfolio transactions with
the Fund.
BROKERAGE ALLOCATION AND OTHER PRACTICES
Neither a Fund nor Alliance has entered into agreements
or understandings with any brokers or dealers regarding the
placement of securities transactions because of research or
statistical services they provide. To the extent that such
persons or firms supply investment information to Alliance for
use in rendering investment advice to a Fund, such information
may be supplied at no cost to Alliance and, therefore, may have
the effect of reducing the expenses of Alliance in rendering
advice to the Fund. While it is impossible to place an actual
dollar value on such investment information, its receipt by
Alliance probably does not reduce the overall expenses of
Alliance to any material extent.
The investment information provided to Alliance is of
the types described in Section 28(e)(3) of the Securities
Exchange Act of 1934 and is designed to augment Alliance's own
internal research and investment strategy capabilities. Research
and statistical services furnished by brokers through whom a Fund
effects securities transactions are used by Alliance in carrying
out its investment management responsibilities with respect to
all its client accounts but not all such services may be utilized
by Alliance in connection with the fund. A fund will deal in
some instances in equity securities, which are not listed on a
national stock exchange but are traded in the over-the-counter
market. Where transactions are executed in the over-the-counter
market, a fund will seek to deal with the primary market makers,
but when necessary in order to obtain the best price and
execution, it will utilize the services of others. In all cases,
a fund will attempt to negotiate best execution. A Fund may from
time to time place orders for the purchase or sale of securities
(including listed call options) with Donaldson, Lufkin & Jenrette
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Securities Corporation ("DLJ"), an affiliate of Alliance, a
Fund's distributor, and with brokers which may have their
transactions cleared or settled, or both, by the Pershing
Division of DLJ for which DLJ may receive a portion of the
brokerage commission. With respect to orders placed with DLJ for
execution on a national securities exchange, commissions received
must conform to Section 17(e)(2)(a) of the 1940 Act and Rule
17e-1 thereunder, which permit an affiliated person of a
registered investment company (such as a fund), or any affiliated
person of such person, to receive a brokerage commission from
such registered investment company provided that such commission
is reasonable and fair compared to the commissions received by
other brokers in connection with comparable transactions
involving similar securities during a comparable period of time.
The following table shows the brokerage commission paid on
investment transactions for the last three fiscal years:
FUND BROKERAGE
COMMISSION PAID ($)
ACM I (Fiscal Year End -
December 31)
1997 $0
1998 $0
1999 $0
ACM II (Fiscal Year End - December 31)
1997 $0
1998 $0
1999 $0
ACM III (Fiscal Year End - December 31)
1997 $0
1998 $0
1999 $0
ACM IV (Fiscal Year End - July 31)
1997 $26,368
1998 $0
1999 $0
No brokerage commissions were paid to brokers utilizing the
Pershing Division of Donaldson, Lufkin & Jenrette Securities
Corporation during each Fund's respective fiscal year ended for
the past three years.
DISTRIBUTIONS
Each Fund intends to distribute monthly its net investment
income. Net short-term capital gains, if any, will normally be
distributed quarterly and net long-term capital gains, if any,
will normally be distributed annually.
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TAXATION
General
Each Fund intends for each taxable year to qualify as a
"regulated investment company" under the Code. To so qualify, a
Fund must, among other things, (i) derive at least 90% of its
gross income in each taxable year from dividends, interest,
payments with respect to securities loans, gains from the sale or
other disposition of stock or securities or foreign currency, or
certain other income (including but not limited to, gains from
options, futures and forward contracts) derived with respect to
its business of investing in stock, securities or currency; and
(ii) diversify its holdings so that, at the end of each quarter
of its taxable year, the following two conditions are met: (a) at
least 50% of the value of the Fund's assets is represented by
cash, U.S. Government Securities, securities of other regulated
investment companies and other securities with respect to which
the Fund's investment if limited, in respect of any one issuer,
to an amount not greater than 5% of the Fund's total assets and
10% of the outstanding voting securities of such issuer and (b)
not more than 25% of the value of the Fund's assets is invested
in securities of any one issuer (other than U.S. Government
Securities or securities of other regulated investment
companies).
The Treasury Department is authorized to issue regulations to
provide that foreign currency gains that are "not directly
related" to a Fund's principal business of investing in stock or
securities may be excluded from the income which qualifies for
purposes of the 90% gross income requirement described above with
respect to the Fund's qualification as a "regulated investment
company." No such regulations have yet been issued.
If a Fund qualifies as a regulated investment company for any
taxable year and makes timely distributions to its stockholders
of 90% or more of its net investment income for that year
(calculated without regard to its net capital gain, i.e., the
excess of its net long-term capital gain over its net short-term
capital loss), it will not be subject to federal income tax on
the portion of its taxable income for the year (including any net
capital gain) that it distributes to shareholders. Investors
should consult their own counsel for a complete understanding of
the requirements the Fund must meet to qualify to be taxed as a
"regulated investment company."
The information set forth in the following discussion relates
solely to the significant United States federal income tax
consequences of dividends and distributions by a Fund and of
sales or redemptions of Fund shares, and assumes that a Fund
qualifies to be taxed as a regulated investment company.
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Investors should consult their own tax counsel with respect to
the specific tax consequences of their being stockholders of a
Fund, including the effect and applicability of federal, state
and local tax laws to their own particular situation and the
possible effects of changes therein.
Dividends and Distributions
Each Fund intends to make timely distributions of its taxable
income (including any net capital gain) so that the Fund will not
be subject to federal income taxes. Each Fund also intends to
declare and distribute dividends in the amounts and at the times
necessary to avoid the application of the 4% federal excise tax
imposed on certain undistributed income of regulated investment
companies. A Fund will be required to pay the 4% excise tax to
the extent it does not distribute to its shareholders during any
calendar year an amount equal to the sum of (i) 98% of its
ordinary taxable income for the calendar year, (ii) 98% of its
capital gain net income and foreign currency gains for the twelve
months ended October 31 of such year (or December 31 if elected
by the Fund) and (iii) any ordinary income or capital gain net
income from the preceding calendar year that was not distributed
during such year. For this purpose, income or gain retained by a
Fund that is subject to corporate income tax will be considered
to have been distributed by the Fund by year-end. For federal
income and excise tax purposes, dividends declared and payable to
stockholders of record as of a date in October, November or
December but actually paid during the following January will be
taxable to these stockholders for the year declared, and not for
the subsequent calendar year in which the stockholders actually
received the dividend.
Dividends of a Fund's net ordinary income and distributions
of any net realized short-term capital gain are taxable to
stockholders as ordinary income. Since each Fund expects to
derive substantially all of its gross income from sources other
than dividends, it is expected that none of the Fund's dividends
or distributions will qualify for the dividends-received
deduction for corporations.
Distributions of net capital gain by a Fund to its
stockholders will be taxable to the stockholders as long-term
capital gains, irrespective of the length of time a stockholder
may have held his Fund shares. Any dividend or distribution
received by a stockholder on shares of a Fund will have the
effect of reducing the NAV of such shares by the amount of such
dividend or distribution. Furthermore, a dividend or
distribution made shortly after the purchase of such shares by a
stockholder, although in effect a return of capital to that
particular stockholder, would be taxable to him as described
above. Dividends are taxable in the manner discussed regardless
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of whether they are paid to the stockholder in cash or are
reinvested in additional shares of a Fund.
After the end of the taxable year, a Fund will notify
stockholders of the federal income tax status of any
distributions made by the Fund to stockholders during such year.
Sales
Any gain or loss arising from a sale of Fund shares generally
will be capital gain or loss except in the case of a dealer or a
financial institution, and will be long-term capital gain or loss
if such stockholder has held such shares for more than one year
at the time of the sale; otherwise it will be short-term capital
gain or loss. However, if a stockholder has held shares in a
Fund for six months or less and during that period has received a
distribution of net capital gain, any loss recognized by the
stockholder on the sale of those shares during the six-month
period will be treated as a long-term capital loss to the extent
of such distribution. In determining the holding period of such
shares for this purpose, any period during which a stockholder's
risk of loss is offset by means of options, short sales or
similar transactions is not counted.
Any loss realized by a stockholder on a sale or exchange of
shares of a Fund will be disallowed to the extent the shares
disposed of are replaced within a period of 61 days beginning 30
days before and ending 30 days after the shares are sold or
exchanged. For this purpose, acquisitions pursuant to a Fund's
DRIP would constitute a replacement if made within the period.
If disallowed, the loss will be reflected in an upward adjustment
to the basis of the shares acquired.
Backup Withholding
A Fund generally will be required to withhold tax at the rate
of 31% of reportable payments (which may include dividends and
distributions of net capital gain) payable to a noncorporate
stockholder unless the stockholder certified on his subscription
application that the social security or taxpayer identification
number provided is correct and that the stockholder has not been
notified by the Internal Revenue Service that he is subject to
backup withholding.
United States Federal Income Taxation of a Fund
The following discussion relates to certain significant
United States federal income tax consequences to a Fund with
respect to the determination of its "investment company taxable
income" each year. This discussion assumes that a Fund will be
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taxed as a regulated investment company for each of its taxable
years.
Currency Fluctuations --"Section 988" Gains or Losses
Under the Code, gains or losses attributable to fluctuations
in exchange rates which occur between the time a Fund accrues
interest or other receivables or accrues expenses or other
liabilities denominated in a foreign currency and the time the
Fund actually collects such receivables or pays such liabilities
are treated as ordinary income or ordinary loss. Similarly,
gains or losses from the disposition of foreign currencies, from
the disposition of debt securities denominated in a foreign
currency, or from the disposition of a forward contract
denominated in a foreign currency which are attributable to
fluctuations in the value of the foreign currency between the
date of acquisition of the asset and the date of disposition also
are treated as ordinary income or loss. These gains or losses,
referred to under the Code as "section 988" gains or losses,
increase or decrease the amount of a Fund's investment company
taxable income available to be distributed to its stockholders as
ordinary income, rather than increasing or decreasing the amount
of the Fund's net capital gain. Because section 988 losses
reduce the amount of ordinary dividends a Fund will be allowed to
distribute for a taxable year, such section 988 losses may result
in all or a portion of prior dividend distributions for such year
being recharacterized as a non-taxable return of capital to
stockholders, rather than as an ordinary dividend, reducing each
stockholder's basis in his Fund shares. To the extent that such
distributions exceed such stockholder's basis, each will be
treated as a gain from the sale of shares.
Options Futures Contracts, and Forward Foreign Currency Contracts
Certain listed options, regulated futures contracts, and
forward foreign currency contracts are considered "section 1256
contracts" for federal income tax purposes. Section 1256
contracts held by a Fund at the end of each taxable year will be
"marked to market" and treated for federal income tax purposes as
though sold for fair market value on the last business day of
such taxable year. Gain or loss realized by a Fund on section
1256 contracts other than forward foreign currency contracts will
be considered 60% long-term and 40% short-term capital gain or
loss. Gain or loss realized by a Fund on forward foreign
currency contracts will be treated as section 988 gain or loss
and will therefore be characterized as ordinary income or loss
and will increase or decrease the amount of the Fund's net
investment income available to be distributed to shareholders as
ordinary income, as described above. A Fund can elect to exempt
its section 1256 contracts which are part of a "mixed straddle"
(as described below) from the application of section 1256.
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The Treasury Department has the authority to issue
regulations that would permit or require a Fund either to
integrate a foreign currency hedging transaction with the
investment that is hedged and treat the two as a single
transaction, or otherwise to treat the hedging transaction in a
manner that is consistent with the hedged investment. The
regulations issued under this authority generally should not
apply to the type of hedging transactions in which a Fund intends
to engage.
With respect to over-the-counter put and call options or
options traded on certain foreign exchanges, gain or loss
realized by a Fund upon the lapse or sale of such options held by
the Fund will be either long-term or short-term capital gain or
loss depending upon the Fund's holding period with respect to
such option. However, gain or loss realized upon the lapse or
closing out of such options that are written by a Fund will be
treated as short-term capital gain or loss. In general, if a
Fund exercises an option, or if an option that the Fund has
written is exercised, gain or loss on the option will not be
separately recognized but the premium received or paid will be
included in the calculation of gain or loss upon disposition of
the property underlying the option.
Gain or loss realized by a Fund on the lapse or sale of put
and call options on foreign currencies which are traded over-the-
counter or on certain foreign exchanges will be treated as
section 988 gain or loss and will therefore be characterized as
ordinary income or loss and will increase or decrease the amount
of the Fund's net investment income available to be distributed
to shareholders as ordinary income, as described above. The
amount of such gain or loss shall be determined by subtracting
the amount paid, if any, for or with respect to the option
(including any amount paid by a Fund upon termination of an
option written by the Fund) from the amount received, if any, for
or with respect to the option (including any amount received by
the Fund upon termination of an option held by the Fund). In
general, if a Fund exercises such an option on a foreign
currency, or such an option that the Fund has written is
exercised, gain or loss on the option will be recognized in the
same manner as if the Fund had sold the option (or paid another
person to assume the Fund's obligation to make delivery under the
option) on the date on which the option is exercised, for the
fair market value of the option. The foregoing rules will also
apply to other put and call options which have as their
underlying property foreign currency and which are traded over-
the-counter or on certain foreign exchanges to the extent gain or
loss with respect to such options is attributable to fluctuations
in foreign currency exchange rates.
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Tax Straddles
Any option, futures contract, forward foreign currency
contract, other forward contract, or other position entered into
or held by a Fund in conjunction with any other position held by
the Fund may constitute a "straddle" for federal income tax
purposes. A straddle of which at least one, but not all, the
positions are section 1256 contracts may constitute a "mixed
straddle." In general, straddles are subject to certain rules
that may affect the character and timing of a Fund's gains and
losses with respect to straddle positions by requiring, among
other things, that (i) loss realized on disposition of one
position of a straddle not be recognized to the extent that the
Fund has unrealized gains with respect to the other position in
such straddle; (ii) the Fund's holding period in straddle
positions be suspended while the straddle exists (possibly
resulting in gain being treated as short-term capital gain rather
than long-term capital gain); (iii) losses recognized with
respect to certain straddle positions which are part of a mixed
straddle and which are non-section 1256 positions be treated as
60% long-term and 40% short-term capital loss; (iv) losses
recognized with respect to certain straddle positions which would
otherwise constitute short-term capital losses be treated as
long-term capital losses; and (v) the deduction of interest and
carrying charges attributable to certain straddle positions may
be deferred. The Treasury Department is authorized to issue
regulations providing for the proper treatment of a mixed
straddle where at least one position is capital. No such
regulations have yet been issued. Various elections are
available to a Fund which may mitigate the effects of the
straddle rules, particularly with respect to mixed straddles. In
general, the straddle rules described above do not apply to any
straddles held by a Fund all of the offsetting positions of which
consist of section 1256 contracts.
Zero Coupon Treasury Securities
Under current federal tax law, a Fund will receive net
investment income in the form of interest by virtue of holding
Treasury bills, notes and bonds, and will recognize interest
attributable to it under the original issue discount rules of the
Code from holding zero coupon Treasury securities. Current
federal tax law requires that a holder (such as a Fund) of a zero
coupon security accrue a portion of the discount at which the
security was purchased as income each year even though the Fund
receives no interest payment in cash on the security during the
year. Accordingly, a Fund may be required to pay out as an
income distribution each year an amount which is greater than the
total amount of cash interest the Fund actually received. Such
distributions will be made from the cash assets of a Fund or by
liquidation of portfolio securities, if necessary. A Fund may
54
<PAGE>
realize a gain or loss from such sales. In the event a Fund
realize net capital gains from such transactions, its
stockholders may receive a larger capital gain distribution, if
any, than they would have received in the absence of such
transactions.
Government Guaranteed Mortgage Pass-through Securities
Mortgage pass-through securities such as GNMA Certificates,
FNMA Certificates, and FHLMC Certificates generally are taxable
as trusts for Federal income tax purposes, with the certificate
holders treated as the owners of the trust involved. As a
result, payments of interest, principal and prepayments made on
the underlying mortgage pool are taxed directly to certificate
holders such as a Fund. Payments of interest, principal and
prepayments made on the underlying mortgage pool will therefore
generally maintain their character when received by a Fund.
Foreign Taxes
Investment income received by a Fund from foreign government
securities may be subject to foreign income taxes, including
taxes withheld at the source. The United States has entered into
tax treaties with many foreign countries which entitles a Fund to
a reduced rate of such taxes or exemption from taxes on such
income. It is impossible to determine the effective rate of
foreign tax in advance since the amount of a Fund's assets to be
invested within various countries is not known. To the extent
that investment income of a Fund is subject to foreign income
taxes, the Fund will be entitled to claim a deduction or credit
for the amount of such taxes for United States federal income tax
purposes. However, any such taxes will reduce the income
available for distribution to a Fund's stockholders.
Other Taxation
The foregoing is a brief summary of the federal tax laws
applicable to investors in the Funds. Investors may also be
subject to state and local taxes, although distributions of a
Fund that are derived from interest on certain obligations to the
U.S. Government and agencies thereof may be exempt from state and
local taxes in certain states.
LEGAL MATTERS
Certain legal matters concerning the Funds and their
participation in the Acquisitions, the issuance of ACM I shares
in connection with the Acquisitions and the tax consequences of
the Acquisitions will be passed upon by Seward & Kissel LLP, One
Battery Park Plaza, New York, NY 10004, counsel to the Funds.
55
<PAGE>
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, NY 10019, given on its authority as experts in auditing
and accounting.
56
<PAGE>
----------------------------------------------------------------
FINANCIAL STATEMENTS
----------------------------------------------------------------
57
<PAGE>
<PAGE>
PRO-FORMA COMBINED
----------------------------------------
FINANCIAL STATEMENTS
----------------------------------------
ACM GOVERNMENT OPPORTUNITY FUND
ACM GOVERNMENT SECURITIES FUND
ACM GOVERNMENT SPECTRUM FUND
ACM GOVERNMENT INCOME FUND
JUNE 30, 2000
(unaudited)
<PAGE>
PORTFOLIO OF INVESTMENTS ACM Government Opportunity Fund
PRO-FORMA COMBINED ACM Government Securities Fund
June 30, 2000 (unaudited) ACM Government Spectrum Fund
ACM Government Income Fund
--------------------------------------------------------------------------------
Principal
Amount
(000) U.S. $ Value
--------------------------------------------------------------------------------
U.S. GOVERNMENT AND
AGENCY OBLIGATIONS--92.6%
U.S. TREASURY BONDS--47.6%
6.25%, 5/15/30 ....................... $ 5,000 $ 5,246,100
8.125%, 8/15/19 (a) .................. 159,790 193,171,729
8.75%, 8/15/20 (a) ................... 1,750 2,249,835
8.875%, 2/15/19 ...................... 1,400 1,801,842
10.75%, 8/15/05 ...................... 13,600 16,211,608
12.00%, 8/15/13 (a) .................. 45,250 61,087,500
12.375%, 5/15/04 ..................... 9,000 10,822,500
12.75%, 11/15/10 ..................... 11,075 14,167,361
13.25%, 5/15/14 (a) .................. 64,500 94,099,696
13.75%, 8/15/04 (b) .................. 22,350 28,258,669
14.00%, 11/15/11 (a)(b) .............. 178,300 247,614,125
--------------
674,730,965
--------------
U.S. TREASURY STRIPS--35.2%
Zero coupon, 5/15/10 (a) ............... 288,260 157,436,082
Zero coupon, 5/15/12 (a) ............... 415,000 199,353,549
Zero coupon, 8/15/12 ................... 78,000 36,913,500
Zero coupon, 5/15/15 ................... 72,000 28,797,120
Zero coupon, 5/15/17 (a) ............... 55,000 19,462,300
Zero coupon, 2/15/19 (a) ............... 60,000 19,095,000
Zero coupon, 11/15/21 (a) .............. 140,000 37,938,600
--------------
498,996,151
--------------
U.S. TREASURY NOTES--7.7%
4.50%, 9/30/00 (b) ................... 10,000 9,957,800
5.875%, 11/30/01 (b) ................. 20,000 19,837,400
6.50%, 2/15/10 (a) ................... 31,500 32,577,930
6.875%, 5/15/06 ...................... 13,690 14,090,022
7.50%, 11/15/01 ...................... 21,250 21,519,025
7.875%, 11/15/04 ..................... 11,000 11,648,009
--------------
109,630,186
--------------
MORTGAGE RELATED SECURITIES--2.1%
Federal National Mortgage
Association
7.50%, 11/01/29 ...................... 16,011 15,782,135
8.00%, 6/01/28 ....................... 6,106 6,159,876
Government National Mortgage
Association
6.50%, 2/15/29 ....................... 8,661 8,220,113
--------------
30,162,124
--------------
Total U.S. Government and
Agency Obligations
(cost $1,359,523,910) ................ 1,313,519,426
--------------
SOVEREIGN DEBT
OBLIGATIONS--30.7%
ARGENTINA--1.9%
Republic of Argentina
7.875%, 3/31/23 FRN (c) .............. 6,100 4,903,180
11.75%, 6/15/15 (c) .................. 15,833 14,368,448
12.00%, 2/01/20 (c) .................. 8,750 8,148,875
--------------
27,420,503
--------------
BRAZIL--5.3%
Republic of Brazil
Discount Bonds FRN 7.375%,
4/15/24 (d) .......................... $ 5,000 $ 3,931,500
Global Bonds
12.25%, 3/06/30 (c) .................. 13,500 12,355,625
12.75%, 1/15/20 (c) .................. 50,000 47,625,000
14.50%, 10/15/09 ..................... 10,000 10,663,000
--------------
74,575,125
--------------
BULGARIA--0.4%
Republic of Bulgaria
IAB FRN
7.0625%, 7/28/11 (e) ................... 7,150 5,639,920
--------------
COLOMBIA--0.2%
Republic of Colombia
8.70%, 2/15/16 (c) ................... 2,500 1,618,750
9.75%, 4/23/09 (c) ................... 800 630,000
--------------
2,248,750
--------------
MEXICO--8.2%
Mexican Treasury Bill
21.86%, 9/07/00 (f) ................ MXN 37,097 3,650,748
United Mexican States
6.25%, 12/31/19 .................... $ 5,500 4,551,250
7.80%, 12/31/19 FRN ................ 5,750 5,635,000
9.875%, 2/01/10 (c) ................ 7,500 7,762,500
10.375%, 2/17/09 ................... 13,500 14,310,000
11.375%, 9/15/16 (c) ............... 70,000 79,891,000
Rights, expiring 2003 (g) .......... 8,845 0
--------------
115,800,498
--------------
PANAMA--0.8%
Republic of Panama
8.875%, 9/30/27 (c) .................. 3,000 2,538,750
9.375%, 4/01/29 ...................... 10,000 9,575,000
--------------
12,113,750
--------------
PERU--0.1%
Republic of Peru
FLIRB
3.75%, 3/07/17 (h)(i) ................ 3,000 1,811,400
--------------
PHILIPPINES--2.0%
Republic of Philippines
9.875%, 1/15/19 ...................... 5,250 4,285,575
10.625%, 3/16/25 (c) ................. 29,000 24,867,500
--------------
29,153,075
--------------
POLAND--0.4%
Government of Poland
10.00%, 6/12/04 ...................... PLN 31,000 5,951,505
--------------
1
<PAGE>
PORTFOLIO OF INVESTMENTS ACM Government Opportunity Fund
PRO-FORMA COMBINED ACM Government Securities Fund
June 30, 2000 (unaudited) ACM Government Spectrum Fund
ACM Government Income Fund
--------------------------------------------------------------------------------
Principal
Amount
(000) U.S. $ Value
--------------------------------------------------------------------------------
QATAR--0.6%
State of Qatar
9.75%, 6/15/30 (i) ................ $ 8,400 $ 8,263,080
--------------
RUSSIA--8.1%
City of St. Petersburgh
9.50%, 6/18/02 (i) ................ 26,000 21,944,000
Ministry of Finance
3.00%, 5/14/03 (c) ................ 41,500 18,052,500
12.75%, 6/24/28 (i) ............... 750 642,225
Russian Federation WI
2.25%, 3/31/30 (i) ................ 196,725 74,020,531
--------------
114,659,256
--------------
SOUTH AFRICA--1.2%
Development Bank of
South Africa
Zero coupon, 12/31/27 ............. ZAR 370,000 1,199,993
European Bank for
Reconstruction and
Development
Zero coupon, 4/07/27 .............. 160,335 744,520
International Bank for
Reconstruction and
Development
Zero coupon, 12/31/25 ............. 420,000 2,123,041
Zero coupon, 2/17/26 .............. 360,000 1,788,464
Zero coupon, 7/14/27 .............. 345,000 1,615,287
Republic of South Africa
9.125%, 5/19/09 (c) ............... $ 7,500 7,331,251
13.00%, 8/31/10 ................... ZAR 21,250 2,930,660
--------------
17,733,216
--------------
TURKEY--1.4%
Turkey Treasury Bills
Zero Coupon, 8/23/00 .............. TRL 3,895,000,000 5,551,698
Republic of Turkey
11.75%, 6/15/10 (c) ............... $ 5,250 5,380,312
11.875%, 1/15/30 .................. 4,250 4,530,000
Turkey Government Bond
72.00%, 10/03/01 .................. TRL 1,940,000,000 3,809,981
--------------
19,271,991
--------------
VENEZUELA--0.1%
Republic of Venezuela
9.25%, 9/15/27 (c) ................ $ 2,000 1,315,000
--------------
Total Sovereign Debt
Obligations
(cost $445,609,547) ............... 435,957,069
--------------
Shares or
Principal
Amount
(000) U.S. $ Value
--------------------------------------------------------------------------------
CORPORATE DEBT
OBLIGATIONS--6.8%
CANADA--0.5%
Clearnet Communications Inc.
10.40%, 5/15/08 (c)(j) ............ CAD 11,000 $4,496,622
11.75%, 8/13/07 (c) ............... 5,000 2,339,527
--------------
6,836,149
--------------
INDIA--2.0%
Reliance Industries Ltd.
10.50%, 8/06/46 (i) ............... $ 30,885 27,942,061
--------------
UNITED KINGDOM--1.2%
NTL Communications Corp.
9.75%, 4/15/09 (i) ................ GBP 22,300 17,545,904
--------------
UNITED STATES--3.1%
Dresdner Funding Trust
8.151%, 6/30/31 (b)(i) ............ $ 50,000 43,669,450
--------------
Total Corporate Debt
Obligations
(cost $102,993,617) ............... 95,993,564
--------------
PREFERRED STOCK--3.4%
Abbey National PLC (c)(k) ......... 10,000,000 18,081,541
Bank of Scotland (c)(k) ........... 8,250,000 15,198,140
Centaur Funding Corp.,
Series B (i) ...................... 15,000,000 14,784,989
--------------
Total Preferred Stock
(cost $60,876,980) .................. 48,064,670
--------------
TIME DEPOSIT--0.1%
Bank of New York
5.75%, 7/03/00
(cost $2,000,000).................. $ 2,000 2,000,000
--------------
2
<PAGE>
PORTFOLIO OF INVESTMENTS ACM Government Opportunity Fund
PRO-FORMA COMBINED ACM Government Securities Fund
June 30, 2000 (unaudited) ACM Government Spectrum Fund
ACM Government Income Fund
--------------------------------------------------------------------------------
Principal
Amount
(000) U.S. $ Value
--------------------------------------------------------------------------------
REPURCHASE AGREEMENTS--4.6%
Merrill Lynch, Inc.
6.50%, dated 6/30/00,
due 7/03/00 in the amount of
$17,509,479 (cost $17,500,000;
collateralized by $17,765,000
FNMA 6.50%, 8/15/04,
value $17,853,825)................ $17,500 $ 17,500,000
Merrill Lynch, Inc.
6.50%, dated 6/30/00, due
7/03/00 in the amount of
$47,825,892 (cost $47,800,000;
collateralized by $48,515,000
FNMA 6.50%, 8/15/04,
value $48,757,575) ................ $47,800 $ 47,800,000
--------------
Total Repurchase Agreements
(cost $65,300,000)................. 65,300,000
--------------
TOTAL INVESTMENTS--138.2%
(cost $2,036,304,054) 1,960,834,729
Other assets less
liabilities--(38.2%) (541,943,665)
--------------
NET ASSETS--100.0% $1,418,891,064
==============
--------------------------------------------------------------------------------
(a) Securities, or portions thereof, have been segregated to collateralize the
loan outstanding. Total value of segregated securities amounted to
$822,687,307 at June 30, 2000.
(b) Securities, or portions thereof, loaned at June 30, 2000, with an aggregate
market value of $92,879,515 and cash collateral received from the
counterparties of Lehman Brothers and Merrill Lynch in the amount of
$93,965,625.
(c) Securities, or portions thereof, have been segregated to collateralize open
forward foreign currency contracts. Total value of segregated securities
amounted to $252,729,807 at June 30, 2000.
(d) Collateralized Brady bond.
(e) Non-collateralized Brady bond.
(f) Interest rate represents annualized yield to maturity at purchase date.
(g) Non-income producing security.
(h) Coupon increases periodically based upon a predetermined schedule. Stated
interest rate in effect at June 30, 2000.
(i) Security 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 $210,623,640 or 14.84% of net assets.
(j) Indicates a security that has a zero coupon that remains in effect until a
predetermined date at which time the stated coupon rate becomes effective
until final maturity.
(k) Denominated in British Pounds.
Glossary of Terms:
FLIRB-Front Loaded Interest Reduction Bond
FNMA-Federal National Mortgage Association
FRN-Floating Rate Note
IAB-Interest Arrears Bond
WI-When Issued
See notes to pro-forma combined financial statements.
3
<PAGE>
ACM Government Opportunity Fund
ACM Government Securities Fund
STATEMENT OF ASSETS AND LIABILITIES ACM Government Spectrum Fund
June 30, 2000 (unaudited) ACM Government Income Fund
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ACM Government ACM Government ACM Government ACM Government Pro-forma
Opportunity Fund Securities Fund Spectrum Fund Income Fund Adjustments Combined
---------------- --------------- --------------- --------------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments in securities,
at value (cost $132,651,007,
$930,727,472, $309,543,730,
and $663,381,845,
respectively) ................ $126,612,389 $896,363,288 $295,201,153 $642,657,899 $ 0 $1,960,834,729
Cash ........................... 0 0 2,464,944 0 96,722,788(a) 99,187,732
Receivable for investment
securities sold .............. 5,267,509 0 0 0 0 5,267,509
Interest receivable ............ 2,270,745 12,678,285 5,844,112 9,481,815 0 30,274,957
Prepaid expenses ............... 5,863 137,897 21,350 109,975 0 275,085
------------ ------------ ------------ ------------ ----------- --------------
Total assets ................... 134,156,506 909,179,470 303,531,559 652,249,689 96,722,788 2,095,840,012
------------ ------------ ------------ ------------ ----------- --------------
LIABILITIES
Loan payable ................. 0 110,000,000 0 90,000,000 100,000,000(a) 300,000,000
Deposit for securities
loaned ..................... 28,925,625 0 65,040,000 0 0 93,965,625
Payable for investment
securities purchased ....... 6,503,986 172,988,351 6,257,221 90,459,930 0 276,209,488
Payable to custodian ......... 1,368,902 1,117,535 0 790,775 (3,277,212) 0
Interest payable on securities
lending .................... 61,022 0 116,627 0 0 177,649
Advisory fee payable ......... 55,460 494,763 216,610 360,114 0 1,126,947
Administrative fee payable ... 24,988 100,685 41,241 77,870 0 244,784
Loan interest payable ........ 0 2,254,947 0 2,146,039 0 4,400,986
Unrealized depreciation
on forward exchange
currency contracts ......... 0 137,878 0 97,004 0 234,882
Accrued expenses ............. 72,002 194,946 125,378 196,261 0 588,587
------------ ------------ ------------ ------------ ----------- --------------
Total liabilities ............ 37,011,985 287,289,105 71,797,077 184,127,993 96,722,788 676,948,948
------------ ------------ ------------ ------------ ----------- --------------
NET ASSETS ................... $ 97,144,521 $621,890,365 $231,734,482 $468,121,696 $ 0 $1,418,891,064
============ ============ ============ ============ =========== ==============
Shares outstanding ........... 12,425,781 78,226,348 35,235,527 58,744,751 0 178,057,027
============ ============ ============ ============ =========== ==============
Net asset value per share .... $ 7.82 $ 7.95 $ 6.58 $ 7.97 $ 0 $ 7.97
============ ============ ============ ============ =========== ==============
</TABLE>
--------------------------------------------------------------------------------
(a) Merged Fund includes an increase in loan of $100,000,000 (see Note A).
See notes to pro-forma combined financial statements.
4
<PAGE>
ACM Government Opportunity Fund
ACM Government Securities Fund
STATEMENT OF OPERATIONS ACM Government Spectrum Fund
Twelve Months Ended June 30, 2000 (unaudited) ACM Government Income Fund
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ACM Government ACM Government ACM Government ACM Government Pro-forma
Opportunity Fund Securities Fund Spectrum Fund Income Fund Adjustments Combined
---------------- --------------- --------------- --------------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Interest ....................... $ 12,174,339 $ 73,640,896 $ 29,060,320 $ 55,207,680 $ 0 $170,083,235
Dividends (net of foreign
taxes withheld of $0,
$162,886, $0 and $108,592,
respectively) ................ 0 1,533,283 0 1,034,069 0 2,567,352
------------ ------------ ------------ ------------ ----------- ------------
12,174,339 75,174,179 29,060,320 56,241,749 0 172,650,587
EXPENSES
Advisory fee ................. 757,881 5,232,843 2,243,558 3,922,231 (498,440) 11,658,073(a)
Custodian .................... 164,486 233,860 129,678 198,406 (46,430) 680,000(b)
Administrative fee ........... 151,577 1,047,381 451,059 813,422 (308,943) 2,154,496(c)
Reports and notices to
shareholders ............... 56,473 177,305 80,988 129,750 (204,516) 240,000(d)
Audit and legal .............. 46,024 91,105 72,300 90,150 (194,579) 105,000(d)
Transfer agency .............. 37,210 224,280 75,684 202,792 (59,966) 480,000(d)
Directors' fees .............. 35,891 37,958 35,504 43,946 (115,299) 38,000(d)
Registration fee ............. 25,177 70,587 29,020 54,576 (69,360) 110,000(d)
Miscellaneous ................ 29,092 98,059 15,280 86,204 (183,635) 45,000(d)
------------ ------------ ------------ ------------ ----------- ------------
Total expenses before
interest ................... 1,303,811 7,213,378 3,133,071 5,541,477 (1,681,168) 15,510,569
Interest expense ............. 648,893 6,965,305 1,484,871 5,808,479 6,450,000 21,357,548(e)
------------ ------------ ------------ ------------ ----------- ------------
Total expenses ............... 1,952,704 14,178,683 4,617,942 11,349,956 4,768,832 36,868,117
------------ ------------ ------------ ------------ ----------- ------------
Net investment income ........ 10,221,635 60,995,496 24,442,378 44,891,793 (4,768,832) 135,782,470
------------ ------------ ------------ ------------ ----------- ------------
REALIZED AND UNREALIZED
GAINS (LOSSES) ON INVESTMENTS,
SWAP CONTRACTS AND FOREIGN
CURRENCY TRANSACTIONS
Net realized losses on
investment transactions .... (3,821,296) (8,273,725) (8,851,633) (12,129,969) 0 (33,076,623)
Net realized gains on
swap contracts ............. 0 4,938,401 0 7,750,722 0 12,689,123
Net realized gains (losses)
on foreign currency
transactions ............... (433,193) 2,734,499 (941,146) 1,953,339 0 3,313,499
Net change in unrealized
appreciation/depreciation of:
Investments and swap
contracts .................. 2,470,430 5,744,128 4,125,502 4,763,590 0 17,103,650
Foreign currency
transactions ............... (235,068) (947,901) (223,281) (658,806) 0 (2,065,056)
------------ ------------ ------------ ------------ ----------- ------------
Net gain (loss) on investments,
swap contracts and foreign
currency transactions .......... (2,019,127) 4,195,402 (5,890,558) 1,678,876 0 (2,035,407)
------------ ------------ ------------ ------------ ----------- ------------
NET INCREASE IN NET ASSETS FROM
OPERATIONS ..................... $ 8,202,508 $ 65,190,898 $ 18,551,820 $ 46,570,669 $(4,768,832) $133,747,063
============ ============ ============ ============ =========== ============
</TABLE>
(a) Monthly advisory fee equal to the sum of 1/12th of .30% of the Fund's
average weekly net assets up to $250 million, 1/12th of .25% of the Fund's
average weekly net assets in excess of $250 million, and 5.25% of the daily
gross income accrued by the Fund during the month (not to exceed
approximately 1% on an annual basis).
(b) Custodian fees are based on monthly fixed fees and on average net assets.
(c) Administrative fee consists of a monthly fee equal to the annualized rate
of .18 of 1% of the Fund's average weekly net assets up to $100 million,
.16 of 1% of the Fund's next $200 million of average weekly net assets, and
.15 of 1% of the Fund's average weekly net assets in excess of $300
million.
(d) Expenses are based on one fund.
(e) Includes interest expense on $100,000,000 increase in loan.
See notes to pro-forma combined financial statements.
5
<PAGE>
ACM Government Opportunity Fund
NOTES TO PRO-FORMA COMBINED ACM Government Securities Fund
FINANCIAL STATEMENTS ACM Government Spectrum Fund
June 30, 2000 (unaudited) ACM Government Income Fund
--------------------------------------------------------------------------------
NOTE A: General
The Pro-forma Financial Statements give effect to the proposed acquisition of
the assets of ACM Government Opportunity Fund, ACM Government Securities Fund
and ACM Government Spectrum Fund by ACM Government Income Fund (the "Fund")
pursuant to agreements and plans of acquisition and liquidation. The
acquisitions would be accomplished by a tax-free exchange of the assets of ACM
Government Opportunity Fund, ACM Government Securities Fund and ACM Government
Spectrum Fund for shares of ACM Government Income Fund.
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 Fund, 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 Pro-forma Statements of
Assets and Liabilities and of Operations, also assumed the addition of $100
million in investment leverage for the combined entity through an increase in
the amount available under the Fund's current leverage facility with Societe
Generale, as the Administrative agent, and Barton Capital Corporation, as
lender. The expense of the acquisitions, including costs of the proxy
solicitation, will be shared between the Adviser and ACM Government Opportunity
Fund, ACM Government Securities Fund, ACM Government Spectrum Fund and ACM
Government Income Fund.
NOTE B: Significant Accounting Policies
The Pro-forma combined financial statements have been prepared in conformity
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 or on a foreign
securities exchange (other than foreign securities exchanges whose operations
are similar to those of the United States over-the-counter market) are generally
valued at the last reported sale price 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, securities listed on a
foreign securities exchange whose operations are similar to the United States
over-the-counter market and securities listed on a national securities exchange
whose primary market is believed to be over-the-counter are valued at the mean
of the closing bid and asked price 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. Listed put and call options purchased by the Fund are
valued at the last sale price. If there is no sale on that day, such securities
are valued at the closing bid prices on that day.
2. Taxes
It is the Fund'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. At June 30, 2000, the Fund's cost of investments for federal income
tax purposes was, on a pro-forma combined basis, substantially the same as for
financial reporting purposes.
3. Investment Income and Investment Transactions
Interest income is accrued daily. Dividend income is recorded on the ex-dividend
date. Investment transactions are accounted for on the date securities are
purchased or sold. Investment gains and losses are determined on the identified
cost basis. The Fund accretes discounts as adjustments to interest income.
4. Currency Translation
Assets and liabilities denominated in foreign currencies and commitments under
forward exchange currency contracts are translated into U.S. dollars at the mean
of the quoted bid and asked prices of such currencies against the U.S. dollar.
Purchases and sales of portfolio securities are translated into U.S. dollars at
the rates of exchange prevailing when such securities were acquired or sold.
Income and expenses are translated into U.S. dollars at the rates of exchange
prevailing when accrued. Net realized gain or loss on foreign currency
transactions represents foreign exchange gains and losses from sales and
maturities of foreign securities, holding of foreign currencies, options on
foreign currencies, closed forward exchange currency contracts, exchange gains
and losses realized between the trade and settlement dates on foreign security
transactions, and the difference between the amounts of interest and foreign
withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of
the amounts actually received or paid. Net foreign currency gains and losses
from valuing foreign currency denominated assets and liabilities at period end
exchange rates are reflected as a component of net unrealized
appreciation/depreciation of investments, swap contracts and foreign currency
transactions.
6
<PAGE>
ACM Government Opportunity Fund
NOTES TO PRO-FORMA COMBINED ACM Government Securities Fund
FINANCIAL STATEMENTS ACM Government Spectrum Fund
June 30, 2000 (unaudited) ACM Government Income Fund
--------------------------------------------------------------------------------
5. Dividends and Distributions
Dividends and distributions to shareholders are recorded on the ex-dividend
date. Income and capital 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, Administrative Fees and
Other Transactions with Affiliates
Under the terms of an investment advisory agreement, the Fund pays Alliance
Capital Management L.P., (the "Adviser") a monthly advisory fee in an amount
equal to the sum of 1/12th of .30% of the Fund's average weekly net assets up to
$250 million, 1/12th of .25% of the Fund's average weekly net assets in excess
of $250 million, and 5.25% of the daily gross income (i.e., income other than
gains from the sale of securities and foreign currency transactions or gains
realized from options and futures contracts less interest on money borrowed by
the Fund) accrued by the Fund during the month. However, such monthly advisory
fee shall not exceed in the aggregate 1/12th of 1% of the Fund's average weekly
net assets during the month (approximately 1% on an annual basis).
Under the terms of an Administrative Agreement, the Fund pays its Administrator,
Mitchell Hutchins Asset Management Inc., a monthly fee equal to the annualized
rate of .18 of 1% of the Fund's average weekly net assets up to $100 million,
.16 of 1% of the Fund's next $200 million of average weekly net assets, and .15
of 1% of the Fund's average weekly net assets in excess of $300 million. The
Administrator prepares financial and regulatory reports for the Fund and
provides other clerical services.
7
<PAGE>
APPENDIX A
BOND RATINGS
MOODY'S INVESTORS SERVICE, INC.
Aaa Bonds which are rated Aaa are judged to be of
the best quality. They carry the smallest
degree of investment risk and are generally
referred to as "gilt edge." Interest payments
are protected by a large or by an
exceptionally stable margin and principal is
secure. While the various protective elements
are likely to change, such changes as can be
visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa Bonds which are rated Aa are judged to be of
high quality by all standards. Together with
the Aaa group they comprise what are generally
known as high grade bonds. They are rated
lower than the best bonds because margins of
protection may not be as large as in Aaa
securities or fluctuation of protective
elements may be of greater amplitude or there
may be other elements present which make the
long-term risks appear somewhat larger than
the Aaa securities.
A Bonds which are rated A possess many favorable
investment attributes and are to be considered
as upper-medium-grade obligations. Factors
giving security to principal and interest are
considered adequate but elements may be
present which suggest a susceptibility to
impairment some time in the future.
Baa Bonds which are rated Baa are considered as
medium-grade obligations, i.e., they are
neither highly protected nor poorly secured.
Interest payments and principal security
appear adequate for the present but certain
protective elements may be lacking or may be
characteristically unreliable over any great
length of time. Such bonds lack outstanding
investment characteristics and in fact have
speculative characteristics as well.
Ba Bonds which are rated Ba are judged to have
speculative elements; their future cannot be
considered as well-assured. Often the
A-1
<PAGE>
protection of interest and principal payments
may be very moderate and thereby not well
safeguarded during both good and bad times
over the future. Uncertainty of position
characterizes bonds in this class.
B Bonds which are rated B generally lack
characteristics of the desirable investment.
Assurance of interest and principal payments
or of maintenance of other terms of the
contract over any long period of time may be
small.
Caa Bonds which are rated Caa are of poor
standing. Such issues may be in default or
there may be present elements of danger with
respect to principal or interest.
Ca Bonds which are rated Ca represent obligations
which are speculative in a high degree. Such
issues are often in default or have other
marked shortcomings.
C Bonds which are rated C are the lowest rated
class of bonds and issues so rated can be
regarded as having extremely poor prospects of
ever attaining any real investment standing.
Absence of Rating When no rating has been assigned or where a
rating has been suspended or withdrawn, it may
be for reasons unrelated to the quality of the
issue.
Should no rating be assigned, the reason may be one of the
following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities or
companies that are unrated as a matter of policy.
3. There is a lack of essential data pertaining to the issue or
issuer.
4. The issue was privately placed, in which case the rating is
not published in Moody's publications.
Suspension or withdrawal may occur if new and material
circumstances arise, the effects of which preclude satisfactory
analysis; if there is no longer available reasonable up-to-date
A-2
<PAGE>
data to permit a judgment to be formed; if a bond is called for
redemption; or for other reasons.
Note Moody's applies numerical modifiers, 1, 2 and
3 in each generic rating classification from
Aa through B in its corporate bond rating
system. The modifier 1 indicates that the
security ranks in the higher end of its
generic rating category; the modifier 2
indicates a mid-range ranking; and the
modifier 3 indicates that the issue ranks in
the lower end of its generic rating category.
STANDARD'S & POOR'S RATINGS SERVICES
AAA Debt rated AAA has the highest rating assigned
by S&P. Capacity to pay interest and repay
principal is extremely strong.
AA Debt rated AA has a very strong capacity to
pay interest and repay principal and differs
from the highest rated issues only in small
degree.
A Debt rated A has a strong capacity to pay
interest and repay principal although it is
somewhat more susceptible to the adverse
effects of changes in circumstances and
economic conditions than debt in higher rated
categories.
BBB Debt rated BBB normally exhibits adequate
protection parameters. However, adverse
economic conditions or changing circumstances
are more likely to lead to a weakened capacity
to pay interest and repay principal for debt
in this category than in higher rated
categories.
BB, B, CCC, CC, C Debt rated BB, B, CCC, CC or C is regarded as
having significant speculative
characteristics. BB indicates the lowest
degree of speculation and C the highest.
While such debt will likely have some quality
and protective characteristics, these are
outweighed by large uncertainties or major
exposures to adverse conditions.
BB Debt rated BB is less vulnerable to nonpayment
than other speculative debt. However, it
faces major ongoing uncertainties or exposure
A-3
<PAGE>
to adverse business, financial or economic
conditions which could lead to an inadequate
capacity to pay interest and repay principal.
B Debt rated B is more vulnerable to nonpayment
than debt rated BB, but there is capacity to
pay interest and repay principal. Adverse
business, financial or economic conditions
will likely impair the capacity or willingness
to pay principal or repay interest.
CCC Debt rated CCC is currently vulnerable to
nonpayment, and is dependent upon favorable
business, financial and economic conditions to
pay interest and repay principal. In the event
of adverse business, financial or economic
conditions, there is not likely to be capacity
to pay interest or repay principal.
CC Debt rated
CC is currently highly vulnerable to
nonpayment.
C The C rating may be used to cover a situation
where a bankruptcy petition has been filed or
similar action has been taken, but payments
are being continued.
D The D rating, unlike other ratings, is not
prospective; rather, it is used only where a
default has actually occurred.
Plus (+) or
Minus (-) The ratings from AA to CCC may be modified by
the addition of a plus or minus sign to show
relative standing within the major rating
categories.
NR Not rated.
DUFF & PHELPS CREDIT RATING CO.
AAA Highest credit quality. The risk factors are
negligible, being only slightly more than for
risk-free U.S. Treasury debt.
AA+, AA, AA- High credit quality. Protection factors are
strong. Risk is modest but may vary slightly
from time to time because of economic
conditions.
A-4
<PAGE>
A+, A, A- Protection factors are average but adequate.
However, risk factors are more variable and
greater in periods of economic stress.
BBB+, BBB, BBB- Below average protection factors but still
considered sufficient for prudent investment.
Considerable variability in risk during
economic cycles.
BB+, BB, BB- Below investment grade but deemed likely to
meet obligations when due. Present or
prospective financial protection factors
fluctuate according to industry conditions or
company fortunes. Overall quality may move up
or down frequently within this category.
B+, B, B- Below investment grade and possessing risk
that obligations will not be met when due.
Financial protection factors will fluctuate
widely according to economic cycles, industry
conditions and/or company fortunes.
Potential exists for frequent changes in the
rating within this category or into a higher
or lower rating grade.
CCC Well below investment grade securities.
Considerable uncertainty exists as to timely
payment of principal, interest or preferred
dividends. Protection factors are narrow and
risk can be substantial with unfavorable
economic/industry conditions, and/or with
unfavorable company developments.
DD Defaulted debt obligations. Issuer failed to
meet scheduled principal and/or interest
payments.
DP Preferred stock with dividend arrearages.
FITCH IBCA, INC.
AAA Bonds considered to be investment grade and of
the highest credit quality. The obligor has
an exceptionally strong ability to pay
interest and repay principal, which is
unlikely to be affected by reasonably
foreseeable events.
AA Bonds considered to be investment grade and of
very high credit quality. The obligor's
ability to pay interest and repay principal is
A-5
<PAGE>
very strong, although not quite as strong as
bonds rated AAA. Because bonds rated in the
AAA and AA categories are not significantly
vulnerable to foreseeable future developments,
short-term debt of these issuers is generally
rated F- 1+.
A Bonds considered to be investment grade and of
high credit quality. The obligor's ability to
pay interest and repay principal is considered
to be strong, but may be more vulnerable to
adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB Bonds considered to be investment grade and of
satisfactory credit quality. The obligor's
ability to pay interest and repay principal is
considered to be adequate. Adverse changes in
economic conditions and circumstances,
however, are more likely to have adverse
impact on these bonds, and therefore impair
timely payment. The likelihood that the
ratings of these bonds will fall below
investment grade is higher than for bonds with
higher ratings.
BB Bonds are considered speculative. The
obligor's ability to pay interest and repay
principal may be affected over time by adverse
economic changes. However, business and
financial alternatives can be identified which
could assist the obligor in satisfying its
debt service requirements.
B Bonds are considered highly speculative. While
bonds in this class are currently meeting debt
service requirements, the probability of
continued timely payment of principal and
interest reflects the obligor's limited margin
of safety and the need for reasonable business
and economic activity throughout the life of
the issue.
CCC Bonds have certain identifiable
characteristics which, if not remedied, may
lead to default. The ability to meet
obligations requires an advantageous business
and economic environment.
A-6
<PAGE>
CC Bonds are minimally protected. Default in
payment of interest and/or principal seems
probable over time.
C Bonds are in imminent default in payment of
interest or principal.
DDD, DD, D Bonds are in default on interest and/or
principal payments. Such bonds are extremely
speculative and should be valued on the basis
of their ultimate recovery value in
liquidation or reorganization of the obligor.
DDD represents the highest potential for
recovery on these bonds, and D represents the
lowest potential for recovery.
Plus (+)
Minus (-) Plus and minus signs are used with a rating
symbol to indicate the relative position of a
credit within the rating category. Plus and
minus signs, however, are not used in the AAA,
DDD, DD or D categories.
NR Indicates that Fitch does not rate the
specific issue.
A-7
<PAGE>
PART C
OTHER INFORMATION
Item 15. Indemnification.
__________________________
Incorporated by reference to Item 3 of Part II of the
Registrant's Amendment No. 3 to its Registration Statement on
Form N-2, File Nos. 33-15044 and 811-5207, as filed with the
Securities and Exchange Commission on November 15, 1988.
Item 16. Exhibits.
___________________
(1)(a) Articles of Incorporation of the Registrant2
(1)(b) Articles of Amendment to the Articles of Incorporation
dated August 14, 19873
(1)(c) Articles of Amendment to the Articles of Incorporation
dated April 14, 19894
(2)(a) By-Laws2
(2)(b) Amendment to By-Laws3
(3) Not applicable
(4) Plan of Acquisition and Liquidation.5
____________________
2. Incorporated by reference from Pre-Effective Amendment No. 1
to Registrant's Registration Statement on Form N-2 (File Nos.
33-15044 and 811-5207) filed on July 21, 1987; filed
electronically as an Exhibit herewith in accordance with
Regulation Sec. 232.102.
3. Incorporated by reference from Pre-Effective Amendment No. 2
to Registrant's Registration Statement on Form N-2 (File Nos.
33-15044 and 811-5207) filed on August 21, 1987; filed
electronically as an Exhibit herewith in accordance with
Regulation Sec. 232.102.
4. Incorporated by reference from Amendment No. 4 to
Registrant's Registration Statement on Form N-2 (File No.
811-5207) filed on May 3, 1989; filed electronically as an
Exhibit herewith in accordance with Regulation Sec. 232.102.
5. Filed herewith as Exhibit G to Part A.
C-1
<PAGE>
(5) Not applicable.
(6)(a) Investment Advisory Agreement between the Registrant and
Alliance Capital Management L.P.6
(6)(b) Administration Agreement between the Registrant and
Mitchell Hutchins Asset Management, Inc.7
(7) Not applicable
(8) Not applicable
(9)(a) Custodian Agreement between the Registrant and State
Street Bank and Trust Company7
(9)(b) Amendment to Custodian Agreement3
(9)(c) Amendment to Custodian Agreement8
(9)(d) Amendment to Custodian Agreement8
(10) Not applicable
(11)(a) Opinion of Seward & Kissel LLP as to the legality of the
securities being registered8
(11)(b) Opinion of Ballard Spahr Andrews & Ingersoll LLP as to
the legality of the securities being registered8
(12) Opinion of Seward & Kissel LLP as to tax consequences9
(13)(a) Transfer Agency Agreement between the Registrant and
State Street Bank and Trust Company7
____________________
6. Incorporated by reference from Amendment No. 8 to
Registrant's Registration Statement on Form N-2 (File No.
811-5207) filed on July 23, 1993; filed electronically as an
Exhibit herewith in accordance with Regulation Sec. 232.102.
7. Incorporated by reference from Amendment No. 3 to
Registrant's Registration Statement on Form N-2 (File Nos.
33-15044 and 811-5207) filed on November 15, 1988; filed
electronically as an Exhibit herewith in accordance with
Regulation Sec. 232.102.
8. Filed herewith.
9. To be filed by means of a Post-Effective Amendment hereto.
C-2
<PAGE>
(13)(b) Shareholder Inquiry Agency Agreement with Alliance Fund
Services, Inc.8
(13)(c) Accounting Agency Agreement between the Registrant and
State Street Bank and Trust Company10
(13)(d) Dividend Reinvestment and Cash Purchase Plan7
(14) Consent of Ernst & Young LLP, independent auditors for
ACM II, ACM III, ACM IV and the Registrant8
(15) Not applicable
(16) Powers of Attorney8
____________________
10. See Exhibit (9)(a) - Custodian Agreement.
C-3
<PAGE>
Item 17. Undertakings.
(1) The undersigned Registrant agrees that prior to any
public reoffering of the securities registered through
the use of a prospectus which is a part of this
Registration Statement by any person or party who is
deemed to be an underwriter within the meaning of
Rule 145(c) under the Securities Act of 1933 (17
CFR 230.145c), the reoffering prospectus will contain
the information called for by the applicable
registration form for reofferings by persons who may be
deemed underwriters, in addition to the information
called for by the other items of the applicable form.
(2) The undersigned Registrant agrees that every prospectus
that is filed under paragraph (1) above will be filed
as a part of an amendment to the Registration Statement
and will not be used until the amendment is effective,
and that, in determining any liability under the 1933
Act, each post-effective amendment shall be deemed to
be a new registration statement for the securities
offered therein, and the offering of the securities at
that time shall be deemed to be the initial bona fide
offering of them.
(3) The undersigned Registrant agrees to file a copy of
each tax opinion required to be filed as an exhibit to
the Registration Statement by Item 16(12) of Form N-14
under the Securities Act of 1933, as amended, by means
of a post-effective amendment to the Registration
Statement.
C-4
<PAGE>
SIGNATURES
As required by the Securities Act of 1933, this
Registration Statement has been signed on behalf of the
Registrant in the City and State of New York, on the 8th day of
August, 2000.
ACM GOVERNMENT INCOME FUND, INC.
By: /s/ John D. Carifa
______________________
John D. Carifa
Chairman
As required by the Securities Act of 1933, this
Registration Statement has been signed by the following persons
in the capacities and on the dates indicated:
Signature Title Date
_________ _____ ____
1) Principal
Executive Officer
/s/ Wayne D. Lyski President August 8, 2000
____________________
John D. Carifa
2) Principal Financial
and Accounting Officer
/s/ Mark D. Gersten Treasurer and August 8, 2000
____________________ Chief Financial
Mark D. Gersten Officer
3) Directors
Ruth Block
John D. Carifa
David H. Dievler
John H. Dobkin
William H. Foulk, Jr.
James M. Hester
Clifford L. Michel
Donald J. Robinson
Robert C. White
C-5
<PAGE>
/s/ Edmund P. Bergan, Jr. August 8, 2000
_________________________
By: Edmund P. Bergan, Jr.
(Attorney-in-fact)
C-6
<PAGE>
INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT
(1)(a) Articles of Incorporation of the
Registrant
(1)(b) Articles of Amendment to the
Articles of Incorporation dated
August 14, 1987
(1)(c) Articles of Amendment to the
Articles of Incorporation dated
April 14, 1989
(2)(a) By-Laws
(2)(b) Amendment to By-Laws
(6)(a) Investment Advisory Agreement
(6)(b) Administration Agreement
(9)(a) Custodian Agreement
(9)(b) Amendment to Custodian Agreement
(9)(c) Amendment to Custodian Agreement
(9)(d) Amendment to Custodian Agreement
(11)(a) Opinion of Seward & Kissel LLP
(11)(b) Opinion of Ballard, Spahr Andrew &
Ingersoll, LLP
(13)(a) Transfer Agency Agreement
(13)(b) Shareholder Inquiry Agency Agreement
(13)(d) Dividend Reinvestment and Cash
Purchase Plan
(14) Consent of Ernst & Young LLP,
independent auditors for ACM II, ACM
III, ACM IV and the Registrant
(16) Powers of Attorney
C-7
00250236.AJ7
