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This is filed pursuant to Rule 497(e).
Files Nos. 33-18647 and 811-05398.
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LOGO
ALLIANCE VARIABLE PRODUCTS
SERIES FUND, INC.
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P.O. BOX 1520, SECAUCUS, NEW JERSEY 07096-1520 TOLL FREE (800) 221-5672
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Alliance Variable Products Series Fund, Inc. (the "Fund") is an open-end se-
ries investment company designed to fund variable annuity contracts and vari-
able life insurance policies to be offered by the separate accounts of certain
life insurance companies. The Fund currently offers an opportunity to choose
among the separately managed pools of assets (the "Portfolios") described be-
low which have differing investment objectives and policies.
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A DIVERSIFIED SELECTION OF INVESTMENT ALTERNATIVES
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TECHNOLOGY PORTFOLIO -- seeks growth of capital through investment in compa-
nies expected to benefit from advances in technology. The Portfolio invests
principally in a diversified portfolio of securities of companies which use
technology extensively in the development of new or improved products or
processes.
QUASAR PORTFOLIO -- seeks growth of capital by pursuing aggressive investment
policies. The Portfolio invests principally in a diversified portfolio of eq-
uity Securities of any company and industry and in any type of security which
is believed to offer possibilities for capital appreciation.
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PURCHASE INFORMATION
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The Fund will offer and sell its shares only to separate accounts of certain
life insurance companies, for the purpose of funding variable annuity con-
tracts and variable life insurance policies. Sales will be made without sales
charge at each Portfolio's per share net asset value. Further information can
be obtained from Alliance Fund Services, Inc. at the address or telephone num-
ber shown above.
An investment in the Fund is not a deposit or obligation of, or guaranteed or
endorsed by, any bank and is not federally insured by the Federal Deposit In-
surance Corporation, the Federal Reserve Board or any other agency.
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ADDITIONAL INFORMATION
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This Prospectus sets forth concisely the information which a prospective in-
vestor should know about the Fund and each of the Portfolios before applying
for certain variable annuity contracts and variable life insurance policies
offered by participating insurance companies. It should be read in conjunction
with the Prospectus of the separate account of the specific insurance product
which accompanies this Prospectus. A "Statement of Additional Information"
dated May 1, 1996 (as amended as of July 22, 1996), which provides a further
discussion of certain areas in this Prospectus and other matters which may be
of interest to some investors, has been filed with the Securities and Exchange
Commission and is incorporated herein by reference. For a free copy, call or
write Alliance Fund Services, Inc. at the address or telephone number shown
above.
(R) :This is a registered mark used under license from the owner, Alliance
Capital Management L.P.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE AC-
CURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
PROSPECTUS/May 1, 1996 (as amended as of July 22, 1996)
Investors are advised to carefully read this Prospectus and to retain it for
future reference.
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EXPENSE INFORMATION
SHAREHOLDER TRANSACTION EXPENSES
The Fund has no sales load on purchases or reinvested dividends, deferred
sales load, redemption fee or exchange fee.
<TABLE>
<CAPTION>
TECHNOLOGY QUASAR
PORTFOLIO** PORTFOLIO**
----------- -----------
<S> <C> <C>
ANNUAL PORTFOLIO OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees..................................... 0%* 0%*
Other Expenses...................................... .95%* .95%*
--- ---
Total Portfolio Operating Expenses.................. .95% .95%
=== ===
</TABLE>
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* Net of expense reimbursement.
** Estimated
EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming a 5%
annual return (cumulatively through the end of each time period).
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Technology Portfolio............................ $10 $30 $52 $116
Quasar Portfolio................................ $10 $30 $52 $116
</TABLE>
The purpose of the foregoing table is to assist the investor in understand-
ing the various costs and expenses that an investor in the Fund will bear di-
rectly and indirectly. Technology Portfolio and Quasar Portfolio are net of
voluntary expense reimbursements, which are not required to be continued in-
definitely; however, the Adviser intends to continue such reimbursements for
the foreseeable future. The estimated expenses of the Technology Portfolio be-
fore expense reimbursements would be: Management Fees -- 1.00%, Other Ex-
penses -- 1.55% and Total Operating Expenses -- 2.55%. The estimated expenses
of the Quasar Portfolio before expense reimbursements would be: Management
Fees -- 1.00%, Other Expenses -- 1.55% and Total Operating Expenses -- 2.55%.
The example should not be considered representative of future expenses; actual
expenses may be greater or less than those shown.
2
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DESCRIPTION OF THE PORTFOLIOS
INTRODUCTION TO THE FUND
The Fund was established as a corporation in Maryland. The Fund is an open-end
management investment company commonly known as a "mutual fund" whose shares
are offered in separate series each referred to as a "Portfolio." Because the
Fund offers multiple Portfolios, it is known as a "series fund." Each Portfolio
is a separate pool of assets constituting, in effect, a separate fund with its
own investment objectives and policies.
A shareholder in a Portfolio will be entitled to his or her pro rata share of
all dividends and distributions arising from that Portfolio's assets and, upon
redeeming shares of that Portfolio, the shareholder will receive the then cur-
rent net asset value of that Portfolio represented by the redeemed shares. (See
"Purchase and Redemption of Shares"). While the Fund has no present intention
of doing so, the Fund is empowered to establish, without shareholder approval,
additional portfolios which may have different investment objectives.
The Fund currently has 18 Portfolios, 2 of which are offered by this Prospec-
tus: the
Technology Portfolio and the Quasar Portfolio.
The Fund is intended to serve as the investment medium for variable annuity
contracts and variable life insurance policies to be offered by the separate
accounts of certain life insurance companies.
It is conceivable that in the future it may be disadvantageous for variable an-
nuity and variable life insurance separate accounts to invest simultaneously in
the Fund. Currently, however, the Fund does not foresee any disadvantage to the
holders of variable annuity contracts and variable life insurance policies
arising from the fact that the interests of the holders of such contracts and
policies may differ. Nevertheless, the Fund's Directors intend to monitor
events in order to identify any material irreconcilable conflicts which may
possibly arise and to determine what action, if any, should be taken in re-
sponse thereto.
The investment objectives and policies of each Portfolio are set forth below.
There can be, of course, no assurance that any of the Portfolios will achieve
its respective investment objectives.
INVESTMENT OBJECTIVES AND POLICIES
GENERAL
Each Portfolio has different investment objectives which it pursues through
separate investment policies as described herein. The differences in objectives
and policies among the Portfolios determine the types of portfolio securities
in which each Portfolio invests, and can be expected to affect the degree of
risk to which each Portfolio is subject and each Portfolio's yield or return.
Each Portfolio's investment objectives cannot be changed without approval by
the holders of a majority of such Portfolio's outstanding voting securities, as
de-
3
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fined in the Investment Company Act of 1940, as amended (the "Act"). The Fund
may change each Portfolio's investment policies that are not designated "fun-
damental policies" within the meaning of the Act upon notice to shareholders
of the Portfolio, but without their approval. The types of portfolio securi-
ties in which each Portfolio may invest are described in greater detail below.
TECHNOLOGY PORTFOLIO
The Technology Portfolio is a diversified investment portfolio that emphasizes
growth of capital and invests for capital appreciation, and only incidentally
for current income. The Portfolio invests primarily in securities of companies
expected to benefit from technological advances and improvements (i.e., compa-
nies that use technology extensively in the development of new or improved
products or processes). The Portfolio will normally have at least 80% of its
assets invested in the securities of these companies. The Portfolio normally
will have substantially all its assets invested in equity securities, but it
also invests in debt securities offering an opportunity for price apprecia-
tion. The Portfolio will invest in listed and unlisted securities and U.S. and
foreign securities, but it will not purchase a foreign security if as a result
10% or more of the Portfolio's total assets would be invested in foreign
securities.
The Technology Portfolio's policy is to invest in any company and industry and
in any type of security with potential for capital appreciation. It invests in
well-known and established companies and in new and unseasoned companies.
The Portfolio may maintain up to 15% of its net assets in illiquid securities,
lend portfolio securities equal in value to not more than 30% of the Technol-
ogy Portfolio's to-tal assets and invest up to 10% of its total assets in for-
eign securities.
Options. In an effort to increase current income and to reduce fluctuations in
net asset value, the Technology Portfolio intends to write covered call op-
tions and purchase put and call options on securities of the types in which it
is permitted to invest that are traded on U.S. and foreign securities ex-
changes. A call option written by the Portfolio is "covered" if the Portfolio
(i) owns the underlying security covered by the call (ii) 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 the
Fund's Custodian) upon conversion or exchange of other portfolio securities,
or (iii) holds a call on the same security in the same principal amount as the
call written where the exercise price of the call held (i) is equal to or less
than the exercise price of the call written or (ii) is greater than the exer-
cise price of the call written if the difference is maintained by the Portfo-
lio in cash and liquid high-grade debt securities in a segregated account with
the Fund's Custodian. The premium paid by the purchaser of an option will re-
flect, among other things, the relationship of the exercise price to the mar-
ket price and volatility of the underlying security, the remaining term of the
option, supply and demand and interest rates.
The Technology Portfolio will not write uncovered call options and will not
write a
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call option if the premium to be received by the Portfolio in doing so would
not produce an annualized return of at least 15% of the then current market
value of the securities subject to the option (without giving effect to com-
missions, stock transfer taxes and other expenses that are deducted from pre-
mium receipts). The Portfolio will not write a call option if, as a result,
the aggregate of the Portfolio's securities subject to outstanding call op-
tions (valued at the lower of the option price or market value of such securi-
ties) would exceed 15% of the Portfolio's total assets or more than 10% of the
Portfolio's assets would be committed to call options that at the time of sale
have a remaining term of more than 100 days. The aggregate cost of all out-
standing options purchased and held by the Portfolio will at no time exceed
10% of the Portfolio's total assets.
The Technology Portfolio may purchase or write options on securities of the
types in which it is permitted to invest in privately negotiated transactions.
The Portfolio will effect such transactions only with investment dealers and
other financial institutions (such as commercial banks or savings and loan in-
stitutions) deemed creditworthy by the Adviser, and the Adviser has adopted
procedures for monitoring the creditworthiness of such entities. Options pur-
chased or written by a Portfolio in negotiated transactions are illiquid and
it may not be possible for the Portfolio to effect a closing transaction at a
time when the Adviser believes it would be advantageous to do so. See "Illiq-
uid Securities." See Appendix D in the Statement of Additional Information for
a further discussion of the use, risks and costs of option trading.
The Technology Portfolio may purchase and sell exchange-traded options on any
securities index composed of the types of securities in which it may invest.
An option on a securities index is similar to an option on a security except
that, rather than the right to take or make delivery of a security at a speci-
fied price, an option on a securities index gives the holder the right to re-
ceive, upon exercise of the option, an amount of cash if the closing level of
the chosen index is greater than (in the case of a call) or less than (in the
case of a put) the exercise price of the option.
Rights and Warrants. The Technology Portfolio may also invest up to 10% of its
total assets in rights and warrants. The Portfolio will invest in right and
warrants only if the underlying equity securities themselves are deemed appro-
priate by the Adviser for inclusion in the Portfolio. Rights and warrants en-
title the holder to buy equity securities at a specific price for a specific
period of time. Right are similar to warrants except that they have a substan-
tially shorter duration. Rights and warrants may be considered more specula-
tive than certain other types of investments in that they do not entitle a
holder to dividends or voting rights with respect to the underlying securities
nor do they represent any rights in the assets of the issuing company. The
value of a warrant does not necessarily change with the value of the under-
lying security, although the value of a right or warrant may decline because
of an increase in the value of the underlying security, the passage of time or
a change in perception as to the potential of the underlying security, or any
combination thereof. If the market price of the underlying security is below
the exer-
5
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cise price set forth in the warrant on the expiration date, the warrant will
expire worthless. Moreover, a right or warrant ceases to have value if it is
not exercised prior to the expiration date.
For a further description of the Technology Portfolio's investment policies and
techniques, see "Other Investment Policies and Techniques" below.
QUASAR PORTFOLIO
The Quasar Portfolio is a diversified investment company that seeks growth of
capital by pursuing aggressive investment policies. It invests for capital ap-
preciation and only incidentally for current income. The selection of securi-
ties based on the possibility of appreciation cannot prevent loss in value.
Moreover, because the Portfolio's investment policies are aggressive, an in-
vestment in the Portfolio is risky and investors who want assured income or
preservation of capital should not invest in the Portfolio.
The Portfolio invests in any company and industry and in any type of security
with potential for capital appreciation. It invests in well-known and estab-
lished companies and in new and unseasoned companies. When selecting securi-
ties, Alliance Capital Management L.P., the Portfolio's adviser (the "Advis-
er"), considers economic and Political outlook, the values of specific securi-
ties relative to other investments, trends in the determinants of corporate
profits and management capability and practices.
The Portfolio invests principally in equity securities, but it also invests to
a limited degree in non-convertible bonds and preferred stock. The Portfolio
invests in listed and unlisted U.S. and foreign securities. The Portfolio peri-
odically invests in special situations, which occur when the securities of a
company are expected to appreciate due to a development particularly or
uniquely applicable to that company and regardless of general business condi-
tions or movements of the market as a whole.
The Portfolio may also: (i) invest up to 15% of its total assets in securities
for which there is no ready market; (ii) make short sales of securities
"against the box," but not more than 15% of its net assets may be deposited on
short sales; and (iii) write call options and purchase and sell put and call
options written by others. For additional information on the use, risks and
costs of the Policies and practices, see "Other Investment Policies and Tech-
niques," below.
The Portfolio's investment objective cannot be changed without approval by the
holders of a majority of the Portfolio's outstanding voting securities, as de-
fined in the Investment Company Act of 1940, as amended (the "Act"). Except as
otherwise indicated, the investment policies of the Portfolio are not "funda-
mental policies" and may, therefore, be changed by the Board of Directors with-
out shareholder approval.
Options. The Portfolio may write call options and purchase and sell put and
call options written by others. An option gives the purchaser of the option,
upon payment of a premium, the right to deliver to (in the case of a put) or
receive from (in the case of a call) the writer a specified amount of a secu-
rity on or before a fixed date at a pre-
6
<PAGE>
determined price. A call option written by the Portfolio is "covered" if the
Portfolio owns the underlying security, has an absolute and immediate right to
acquire that security upon conversion or exchange of another security it
holds, or holds a call option on the underlying security with an exercise
price equal to or less than that of the call option it has written.
In purchasing an option, the Portfolio would be in a position to realize a
gain, if, during the option period, the price of the underlying security in-
creased (in the case of a call) or decreased (in the case of a put) by an
amount in excess of the premium paid; otherwise the portfolio would experience
a loss equal to the premium paid for the option.
If a call option written by the Portfolio were exercised, the Portfolio would
be obligated to sell the underlying security at the exercise price. The risk
involved in writing an option is that, if the option were exercised, the un-
derlying security would then be purchased or sold by the Portfolio at a disad-
vantageous price. These risks could be reduced by entering into a closing
transaction (i.e., by disposing of the option prior to its exercise). The
Portfolio retains the premium received from writing a call option whether or
not the option could result in increases in a Fund's portfolio turnover rate,
especially during periods when market prices of the underlying securities ap-
preciate.
The Portfolio will not write a call option if, as a result, the aggregate of
the Portfolio's securities subject to outstanding call options (valued at the
lower of the option price or market value of such securities) would exceed 15%
of the Portfolio's total assets or more than 10% of the Portfolio's assets
would be committed to all options that at time of sale have a remaining term
of more than 100 days. The aggregate cost of all outstanding options purchased
and held by the Portfolio will at no time exceed 10% of the Portfolio's total
assets.
Short Sales. The Portfolio may only make short sales of securities "against
the box". A short sale is effected by selling a security that the Portfolio
does not own, or if the Portfolio does own such security, it is not to be de-
livered upon consummation of the sale. A short sale is "against the box" to
the extent that the Portfolio contemporaneously owns or has the right to ob-
tain securities identical to those sold short without payment. If the price of
the security sold short increases between the time of the short sale and the
time the Portfolio replaces the borrowed security, the Portfolio will incur a
loss; conversely, if the price declines, the Portfolio will realize a capital
gain. Certain special federal income tax considerations may apply to short
sales entered into by the Portfolio. See "Dividends, Distributions and Taxes"
in the Portfolio's Statement of Additional Information.
Foreign Securities. The Portfolio may invest in foreign securities. To the ex-
tent the Portfolio invests in foreign securities, consideration is given to
certain factors comprising both risk and opportunity. The values of foreign
securities investments are affected by changes in currency rates or exchange
control regulations, application of foreign tax laws, including withholding
taxes, changes in governmental administration or economic, taxation or mone-
tary policy (in
7
<PAGE>
the United States and abroad) or changed circumstances in dealings between na-
tions. Foreign securities markets may also be less liquid, more volatile, and
less subject to governmental supervision than in the United States. Invest-
ments 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 en-
forcing contractual obligations and could be subject to extended settlement
periods.
OTHER INVESTMENT POLICIES AND TECHNIQUES
Except as otherwise noted below, the following description of other investment
policies is applicable to all of the Fund's Portfolios:
OPTIONS
The purchaser of an option, upon payment of a premium, obtains, in the case
of a put option the right to deliver to the writer of the option, and in the
case of a call option, the right to call upon the writer to deliver, a speci-
fied amount of a security on or before a fixed date at a predetermined price.
A call option written by a Portfolio is "covered" if the Portfolio (i) owns
the underlying security covered by the call (ii) 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 the Fund's Cus-
todian) upon conversion or exchange of other portfolio securities, or (iii)
holds a call on the same security in the same principal amount as the call
written where the exercise price of the call held (i) is equal to or less than
the exercise price of the call written or (ii) is greater than the exercise
price of the call written if the difference is maintained by the Portfolio in
cash and liquid high-grade debt securities in a segregated account with the
Fund's Custodian. A put option written by a Portfolio is "covered" if the
Portfolio maintains cash or liquid high-grade debt securities with a value
equal to the exercise price in a segregated account with the Fund's Custodian,
or else holds a put on the same security in the same principal amount as the
put written where 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 will reflect, among other things, the relationship of the exer-
cise 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 Portfolio does not
own the underlying security, but seeks to provide a hedge against a decline in
value in another security which the Portfolio owns or has the right to ac-
quire. In such circumstances, the Portfolio collateralizes its obligation un-
der the option (which is not covered) by maintaining in a segregated account
with the Fund's Custodian cash or liquid high-grade debt securities in an
amount not less than the market value of the underlying security, marked to
market daily.
In purchasing a call option, a Portfolio would be in a position to realize a
gain if, during the option period, the price of the underlying security in-
creased by an amount in excess of the premium paid. It
8
<PAGE>
would realize a loss if the price of the underlying security declined or re-
mained the same or did not increase during the period by more than the amount
of the premium. In purchasing a put option, a Portfolio 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 more than the amount of the premium.
If a put or call option purchased by a Portfolio were permitted to expire
without being sold or exercised, its premium would be lost by the Portfolio.
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 op-
tion holder to the Portfolio at a higher price than its current market value.
The risk involved in writing a call option is that there could be an increase
in the market value of the underlying security. If this occurred, the option
could be exercised and the underlying security would then be sold by the Port-
folio at a lower price than its current market value. These risks could be
reduced by entering into a closing transaction. See Appendix D to the State-
ment of Additional Information. A Portfolio retains the premium received from
writing a put or call option whether or not the option is exercised.
A Portfolio may purchase or write options on securities of the types in which
it is permitted to invest in privately negotiated transactions. A Portfolio
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 Portfolio in negotiated transactions are illiquid and it may not be pos-
sible for the Portfolio to effect a closing transaction at a time when the Ad-
viser believes it would be advantageous to do so. See "Illiquid Securities."
See Appendix D to the Statement of Additional Information for a further dis-
cussion of the use, risks and costs of option trading.
LOANS OF PORTFOLIO SECURITIES
The Technology Portfolio may make secured loans of its portfolio securities to
brokers, dealers and financial institutions provided that cash, U.S. Govern-
ment securities, other liquid high-quality debt securities or bank letters of
credit equal to at least 100% of the market value of the securities loaned is
deposited and maintained by the borrower with the Portfolio.
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 borrow-
er, the Adviser (subject to review by the Directors) will consider all rele-
vant facts and circumstances, including the creditworthiness of the borrower.
While securities are on loan, the borrower will pay the Portfolio any income
earned thereon and the Portfolio may invest any cash collateral in portfolio
securities, thereby earning additional income, or receive an agreed
9
<PAGE>
upon amount of income from a borrower who has delivered equivalent collateral.
The Technology Portfolio will have the right to regain record ownership of
loaned securities to exercise beneficial rights such as voting rights, sub-
scription rights and rights to dividends, interest or other distributions. The
Technology Portfolio may pay reasonable finders', administrative and custodial
fees in connection with a loan. The Directors will monitor the lending of se-
curities by the Technology Portfolio. No more than 30% of the value of the as-
sets of the Technology Portfolio may be loaned at any time, nor will the Tech-
nology Portfolio lend its portfolio securities to any officer, director, em-
ployee or affiliate of either the Fund or the Adviser.
FOREIGN SECURITIES
For a description of the investment policies of the Quasar Portfolio with re-
spect to foreign securities, see above. The Technology Portfolio may invest in
listed and unlisted foreign securities. The Technology Portfolio will not pur-
chase a foreign security if such purchase at the time thereof would cause 10%
or more of the value of that Portfolio's total assets to be invested in for-
eign securities. The Portfolios may convert U.S. Dollars into foreign curren-
cy, but only to effect securities transactions on a foreign securities ex-
change and not to hold such currency as an investment.
To the extent that either Portfolio invests in foreign securities, considera-
tion is given to certain factors comprising both risk and opportunity. The
values of foreign securities investments are affected by changes in currency
rates or exchange control regulations, application of foreign tax laws, in-
cluding withholding taxes, changes in governmental administration or economic,
taxation or monetary policy (in the United States and abroad) or changed cir-
cumstances in dealings between nations. Currency exchange rate movements will
increase or reduce the U.S. dollar value of the Portfolio's net assets and in-
come attributable to foreign securities. Costs are incurred in connection with
conversions between various currencies held by a Portfolio. In addition, there
may be substantially less publicly available information about foreign issuers
than about domestic issuers, and foreign issuers may not be subject to ac-
counting, auditing and financial reporting standards and requirements compara-
ble to those of domestic issuers. Foreign issuers are subject to accounting,
auditing and financial standards and requirements that differ, in some cases
significantly, from those applicable to U.S. issuers. In particular, the as-
sets and profits appearing on the financial statements of a foreign issuer may
not reflect its financial position or results of operations in the way they
would be reflected had the financial statements been prepared in accordance
with U.S. generally accepted accounting principles. In addition, for an issuer
that keeps accounting records in local currency, inflation accounting rules in
some of the countries in which a Portfolio will invest require, for both tax
and accounting purposes, that certain assets and liabilities be restated on
the issuer's balance sheet in order to express items in terms of currency of
constant purchasing power. Inflation accounting may indirectly generate losses
or profits. Consequently, financial data may be materially affected by re-
statements for inflation and may not accurately reflect the real condi-
10
<PAGE>
tion of those issuers and securities markets. Securities of some foreign is-
suers are less liquid and more volatile than securities of comparable domestic
issuers, and foreign brokerage commissions are generally higher than in the
United States. Foreign securities markets may also be less liquid, more vola-
tile, and less subject to governmental supervision than in the United States.
Investments in foreign countries could be affected by other factors not pres-
ent in the United States, including expropriation, confiscatory taxation, lack
of uniform accounting and auditing standards and potential difficulties in en-
forcing contractual obligations and could be subject to extended settlement
periods.
General. The successful use of the foregoing investment practices draws upon
the Adviser's special skills and experience with respect to such instruments
and usually depends on the Adviser's ability to forecast market movements cor-
rectly. Should markets move in an unexpected manner, the Portfolio may not
achieve the anticipated benefits of its investment strategies or may realize
losses and thus be in a worse position than if such strategies had not been
used.
A Portfolio's ability to dispose of its positions in options will depend on
the availability of liquid markets in such instruments. If a secondary market
does not exist with respect to an option purchased or written by the Quasar
Portfolio 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 Portfolio would have to be exercised in order
for the Portfolio to realize any profit and (ii) the Portfolio may not be able
to sell portfolio securities covering an option written by the Portfolio until
the option expires or it delivers the underlying security upon exercise.
Therefore, no assurance can be given that a Portfolio will be able to utilize
these instruments effectively for the purposes set forth above. Furthermore,
the Portfolio's ability to engage in options transactions may be limited by
tax considerations.
ILLIQUID SECURITIES
Subject to any more restrictive applicable investment policies, neither of the
Portfolios will maintain more than 15% of its net assets in illiquid securi-
ties. For purposes of each Portfolio's investment objectives and policies and
investment restrictions, illiquid securities include, among others, (a) direct
placements or other securities which are subject to legal or contractual re-
strictions on resale or for which there is no readily available market (e.g.,
trading in the security is suspended or, in the case of unlisted securities,
market makers do not exist or will not entertain bids or offers), (b) options
purchased by the Portfolio over-the-counter and the cover for options written
by the Portfolio over-the-counter, and (c) repurchase agreements not termina-
ble within seven days. Securities eligible for resale under Rule 144A under
the Securities Act of 1933, as amended, that have legal or contractual re-
strictions on resale but have a readily available market are not deemed illiq-
uid for purposes of this limitation. The Adviser will monitor the liquidity of
such securities under the supervision of the Board of Directors. See the
Statement of Additional Information for further discussion of illiquid securi-
ties.
11
<PAGE>
PORTFOLIO TURNOVER
Generally, the Fund's policy with respect to turnover of securities held in
the Portfolios is to purchase securities for investment purposes and not for
the purpose of realizing short-term trading profits or for the purpose of ex-
ercising control. When circumstances warrant, however, securities may be sold
without regard to the length of time held.
Although the Fund cannot accurately predict its annual portfolio turnover
rate, the Adviser does not expect the annual portfolio turnover of the Tech-
nology Portfolio to exceed 100%. A 100% annual portfolio turnover rate would
occur, for example, if all of the stocks in a portfolio were replaced in a pe-
riod of one year. A 100% turnover rate is greater than that of most other in-
vestment companies, including those which emphasize capital appreciation as a
basic policy, and may result in correspondingly greater brokerage commissions
being paid by the Portfolio and a higher incidence of short-term capital gain
taxable as ordinary income. See "Dividends, Distributions and Taxes."
Generally, the Quasar Portfolio's policy with respect to turnover of securi-
ties held in the Portfolio is to purchase securities for investment purposes
and not for the purpose of realizing short-term trading profits or for the
purpose of exercising control. When circumstances warrant, however, securities
may be sold without regard to the length of time held. The Adviser anticipates
that the Portfolio's annual rate of portfolio turnover generally will not be
in excess of 200%.
A high rate of portfolio turnover involves correspondingly greater expenses
than a lower rate, which expenses must be borne by the Portfolio and its
shareholders. High portfolio turnover also may result in the realization of
substantial net short-term capital gains. In order to continue to qualify as a
regulated investment company for Federal tax purposes, less than 30% of the
annual gross income of a Portfolio must be derived from the sale of securities
held by the Portfolio for less than three months. See "Dividends, Distribu-
tions and Taxes."
CERTAIN FUNDAMENTAL INVESTMENT POLICIES
The Fund has adopted certain fundamental investment policies applicable to the
Portfolios which may not be changed with respect to a Portfolio without the
approval of the shareholders of a Portfolio. Certain of those fundamental in-
vestment policies are set forth below. For a complete listing of such funda-
mental investment policies, see the Statement of Additional Information.
With respect to the Technology Portfolio, these fundamental policies provide
that the Portfolio may not: (i) with respect to 75% of its total assets, have
such assets represented by other than: (a) cash and cash items, (b) U.S. Gov-
ernment securities, or (c) securities of any one issuer (other than the U.S.
Government and its agencies or instrumentalities) not greater in value than 5%
of the Technology Portfolio's total assets, and not more than 10% of the out-
standing voting securities of such issuer; (ii) purchase the securities of any
one issuer, other than the U.S. Government and its agencies or instrumentali-
ties, if as a result (a) the value of the holdings of the Technol-
12
<PAGE>
ogy Portfolio in the securities of such issuer exceeds 25% of its total as-
sets, or (b) the Technology Portfolio owns more than 25% of the outstanding
securities of any one class of securities of such issuer; (iii) concentrate
its investments in any one industry, but the Technology Portfolio has reserved
the right to invest up to 25% of its total assets in a particular industry;
and (iv) invest in the securities of any issuer which has a record of less
than three years of continuous operation (including the operation of any pred-
ecessor) if such purchase would cause 10% or more of its total assets to be
invested in the securities of such issuers.
With respect to the Quasar Portfolio these fundamental policies provide that
the Portfolio may not: (i) purchase the securities of any one issuer, other
than the U.S. Government or any of its agencies or instrumentalities, if as a
result more than 5% of its total assets would be invested in such issuer or
the Portfolio would own more than 10% of the outstanding voting securities of
such issuer, except that up to 25% of its total assets may be invested without
regard to these 5% and 10% limitations; (ii) invest more than 25% of its total
assets in any particular industry; and (iii) borrow money except for temporary
or emergency purposes in an amount not exceeding 5% of its total assets at the
time the borrowing is made.
In addition, the Fund has adopted an investment policy, which is not desig-
nated a "fundamental policy" within the meaning of the Act, of intending to
have each Portfolio comply at all times with the diversification requirements
prescribed in Section 817(h) of the Internal Revenue Code or any successor
thereto and the applicable Treasury Regulations thereunder. This policy may be
changed upon notice to shareholders of the Fund, but without their approval.
MANAGEMENT OF THE FUND
DIRECTORS
John D. Carifa, Chairman of the Board and President, is President of Alliance
Capital Management Corporation ("ACMC"), the sole general partner of the Ad-
viser, with which he has been associated since prior to 1991.
Ruth Block is a Director of Ecolab Incorporated (specialty chemicals) and
Amoco Corporation (oil and gas). She was formerly an Executive Vice President
and the Chief Insurance Officer of The Equitable Life Assurance Society of the
United States since prior to 1991.
David H. Dievler was formerly President of the Fund, and a Senior Vice Presi-
dent of ACMC, with which he had been associated since prior to 1991.
John H. Dobkin is President of Historic Hudson Valley (historic preservation)
since prior to 1991. Previously, he was Director of the National Academy of
Design. From 1987 to 1992, he was a Director of ACMC.
William H. Foulk, Jr. was formerly a Senior Manager of Barrett Associates,
Inc., a registered investment adviser, with which he had been associated since
prior to 1991.
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<PAGE>
Dr. James M. Hester is President of the Harry Frank Guggenheim Foundation and
a Director of Union Carbide Corporation since prior to 1991. He was formerly
President of New York University, The New York Botanical Garden and Rector of
the United Nations University.
Clifford L. Michel is a member of the law firm of Cahill Gordon & Reindel,
with which he has been associated since prior to 1991.
Robert C. White is a Vice President and the Chief Financial Officer of the
Howard Hughes Medical Institute, with which he has been associated since prior
to 1991.
ADVISER
Alliance Capital Management L.P. (the "Adviser"), a Delaware limited partner-
ship with principal offices at 1345 Avenue of the Americas, New York, New York
10105 has been retained under an investment advisory agreement (the "Invest-
ment Advisory Agreement") to provide investment advice and, in general, to
conduct the management and investment program of each of the Fund's Portfolios
subject to the general supervision and control of the Board of Directors of
the Fund. The employees of the Adviser principally responsible for the invest-
ment program since inception of the Technology Portfolio are Peter Anastos and
Gerald T. Malone. Mr. Anastos has been associated with the Adviser since prior
to 1991 and Mr. Malone has been associated with the Adviser since 1992. Prior
thereto, Mr. Malone was associated with College Retirement Equities Fund since
prior to 1991. The employees of the Adviser principally responsible for the
Quasar Portfolio's investment program since its inception are Alden M. Stewart
and Randall E. Haase. Mr. Stewart and Mr. Haase have each been associated with
the Adviser since 1993. Prior hereto, Mr. Stewart and Mr. Haase each was asso-
ciated with Equitable Capital Management Corporation since prior to 1991.
The Adviser has retained under a subadvisory agreement a sub-adviser, AIGAM
International Limited (the "Sub-Adviser"), an indirect, majority owned subsid-
iary of American International Group, Inc., a major international financial
service company to provide research and management services to the Global Bond
Portfolio. In 1994, the Sub-Adviser changed its name from Dempsey & Company
International Limited, which was founded in 1988.
The Adviser is a leading international investment manager supervising client
accounts with assets as of June 30, 1996 totaling more than $168 billion (of
which approximately $56 billion represented the assets of investment compa-
nies). The Adviser's clients are primarily major corporate employee benefit
funds, public employee retirement systems, investment companies, foundations
and endowment funds. The 50 registered investment companies managed by the Ad-
viser comprising 107 separate investment portfolios currently have over two
million shareholders. As of June 30, 1996, the Adviser was retained as an in-
vestment manager by 33 of the Fortune 100 companies.
ACMC, the sole general partner of, and the owner of a 1% general partnership
interest in, the Adviser, is an indirect wholly- owned subsidiary of The Equi-
table Life As-
14
<PAGE>
surance Society of the United States ("Equitable"), one of the largest life
insurance companies in the United States and a wholly owned subsidiary of the
Equitable Companies Incorporated, a holding company which is controlled by
AXA, a French insurance holding company. Certain information concerning the
ownership and control of Equitable by AXA is set forth in the Statement of Ad-
ditional Information under "Management of the Fund."
The Sub-Adviser is an asset management firm specializing in global fixed-in-
come money management. The Sub-Adviser manages a range of institutional spe-
cialty funds, investment companies, and dedicated institutional portfolios.
The Adviser provides investment advisory services and order placement facili-
ties for each of the Fund's Portfolios and pays all compensation of Directors
and officers of the Fund who are affiliated persons of the Adviser. The Ad-
viser or its affiliates also furnish the Fund, without charge, management su-
pervision and assistance and office facilities and provide persons satisfac-
tory to the Fund's Board of Directors to serve as the Fund's officers. Each of
the Portfolios pays the Adviser at the following annual percentage rate of its
average daily net asset value:
<TABLE>
<S> <C>
Technology Portfolio 1.000%
Quasar Portfolio 1.000%
</TABLE>
The Commission takes the position that the rates of fees applicable to the
Technology Portfolio and the Quasar Portfolio are higher than those paid by
most other investment companies; however, the Adviser believes the fees are
comparable to those paid by investment companies of similar investment orien-
tation.
EXPENSES OF THE FUND
In addition to the payments to the Adviser under the Investment Advisory
Agreement described above, the Fund pays certain other costs including (a)
custody, transfer and dividend disbursing expenses, (b) fees of Directors who
are not affiliated with the Adviser, (c) legal and auditing expenses, (d)
clerical, accounting and other office costs, (e) costs of printing the Fund's
prospectuses and shareholder reports, (f) cost of maintaining the Fund's ex-
istence, (g) interest charges, taxes, brokerage fees and commissions, (h)
costs of stationery and supplies, (i) expenses and fees related to registra-
tion and filing with the Commission and with state regulatory authorities, and
(j) cost of certain personnel of the Adviser or its affiliates rendering cler-
ical, accounting and other services to the Fund.
As to the obtaining of clerical and accounting services not required to be
provided to the Fund by the Adviser under the Investment Advisory Agreement,
the Fund may employ its own personnel. For such services, it may also utilize
personnel employed by the Adviser or by its affiliates; in such event, the
services are provided to the Fund at cost and the payments specifically ap-
proved in advance by the Fund's Board of Directors.
15
<PAGE>
PURCHASE AND REDEMPTION OF SHARES
PURCHASE OF SHARES
Shares of each Portfolio of the Fund are offered on a continuous basis di-
rectly by the Fund and by Alliance Fund Distributors, Inc., the Fund's Princi-
pal Underwriter, to the separate accounts of certain life insurance companies
without any sales or other charge, at each Portfolio's net asset value, as de-
scribed below. The separate accounts of insurance companies place orders to
purchase shares of each Portfolio based on, among other things, the amount of
premium payments to be invested and surrender and transfer requests to be ef-
fected on that day pursuant to variable annuity contracts and variable life
insurance policies which are funded by shares of the Portfolios. The Fund re-
serves the right to suspend the sale of the Fund's shares in response to con-
ditions in the securities markets or for other reasons. Individuals may not
place orders directly with the Fund. See the Prospectus of the separate ac-
count of the participating insurance company for more information on the pur-
chase of Portfolio shares.
The public offering price of each Portfolio's shares is their net asset value.
The per share net asset value of each Portfolio is computed in accordance with
the Fund's Articles of Incorporation and By-Laws, at the next close of regular
trading on the New York Stock Exchange (the "Exchange") (currently 4:00 p.m.
Eastern time), following receipt of a purchase or redemption order by the
Fund, on each Fund business day on which such an order is received and trading
in the types of securities in which the Fund invests might materially affect
the value of Fund shares. The Fund's per share net asset value is computed by
dividing the value of the Fund's total assets, less its liabilities, by the
total number of its shares then outstanding. A Fund business day is any week-
day exclusive of days on which the Exchange is closed (most national holidays
and Good Friday). For purposes of this computation, the securities in each
Portfolio are valued at their current market value determined on the basis of
market quotations or, if such quotations are not readily available, such other
methods as the Directors believe would accurately reflect fair market value.
Portfolio securities may also be valued on the basis of prices provided by a
pricing service when such prices are believed by the Adviser to reflect the
fair market value of such securities.
REDEMPTION OF SHARES
An insurance company separate account may redeem all or any portion of the
shares of any Portfolio in its account at any time at the net asset value per
share of that Portfolio next determined after a redemption request in proper
form is furnished to the Fund or the Principal Underwriter. Any certificates
representing shares being redeemed must be submitted with the redemption re-
quest. Shares redeemed are en titled to earn dividends, if any, up to and in-
cluding the day redemption is effected. There is no redemption charge. Payment
of the redemption price will normally be made within seven days after receipt
of such tender for redemption.
16
<PAGE>
The right of redemption may be suspended or the date of payment may be post-
poned for any period during which the Exchange is closed (other than customary
weekend and holiday closings) or during which the Commission determines that
trading thereon is restricted, or for any period during which an emergency (as
determined by the Commission) exists as a result of which disposal by the Fund
of securities owned by a Portfolio is not reasonably practicable or as a re-
sult of which it is not reasonably practicable for the Fund fairly to deter-
mine the value of a Portfolio's net assets, or for such other periods as the
Commission may by order permit for the protection of security holders of the
Fund.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Technology Portfolio and the Quasar Portfolio will each declare and dis-
tribute dividends from net investment income and will distribute its net capi-
tal gains, if any, at least annually. Such income and capital gains distribu-
tions will be made in shares of such Portfolios. Net income consists of all
accrued interest income on Portfolio assets less the Portfolio's expenses (in-
cluding accrued expenses and fees payable to the Adviser) applicable to that
dividend period. Realized gains and losses are reflected in net asset value
and are not included in net income.
Each Portfolio of the Fund qualified and intends to continue to qualify to be
taxed as a regulated investment company under Subchapter M of the Internal
Revenue Code (the "Code"). If so qualified, each Portfolio will not be subject
to Federal income or excise taxes on its investment company taxable income and
net capital gains to the extent such investment company taxable income and net
capital gains are distributed to the separate accounts of insurance companies
which hold its shares. Under current tax law, capital gains or dividends from
any Portfolio are not currently taxable when left to accumulate within a vari-
able annuity (other than an annuity interest owned by a person who is not a
natural person) or variable life insurance contract. Distributions of net in-
vestment income and net short-term capital gain will be treated as ordinary
income and distributions of net long-term capital gain will be treated as
long-term capital gain in the hands of the insurance companies.
Section 817(h) of the Code requires that the investments of a segregated asset
ac-count of an insurance company be "adequately diversified," in accordance
with Treasury Regulations promulgated there- under, in order for the holders
of the variable annuity contracts or variable life insur ance policies under-
lying the account to receive the tax-deferred or tax-free treatment generally
afforded holders of annuities or life insurance policies under the Code. The
Department of the Treasury has issued Regulations under section 817(h) which,
among other things, provide the manner in which a segregated asset account
will treat investments in a regulated investment company for purposes of the
applicable diversification requirements. Under the Regulations, if a regulated
investment company satisfies certain conditions, a segregated as-
17
<PAGE>
set account owning shares of the regulated investment company will not be
treated as a single investment for these purposes, but rather the account will
be treated as owning its proportionate share of each of the assets of the reg-
ulated investment company. Each Portfolio plans to satisfy these conditions at
all times so that the shares of each Portfolio owned by a segregated asset ac-
count of a life insurance company will be subject to this treatment under the
Code.
For information concerning federal income tax consequences for the holders of
variable annuity contracts and variable rate insurance policies, such holders
should consult the prospectus used in connection with the issuance of their
particular contracts or policies.
PORTFOLIO TRANSACTIONS
GENERAL INFORMATION
Subject to the general supervision of the Board of Directors of the Fund, the
Adviser is responsible for the investment decisions and the placing of the or-
ders for portfolio transactions for the Fund. Transactions for the Technology
Portfolio and the Quasar Portfolio are normally effected by brokers.
The Fund has no obligation to enter into transactions in portfolio securities
with any broker, dealer, issuer, underwriter or other entity. In placing or-
ders, it is the policy of the Fund to obtain the best price and execution for
its transactions. Consistent with the objective of obtaining best execution,
the Fund may use brokers and dealers who provide research, statistical and
other information to the Adviser.
There may be occasions where the transaction cost charged by a broker may be
greater than that which another broker may charge if the Fund determines in
good faith that the amount of such transaction cost is reasonable in relation
to the value of the brokerage and research and statistical services provided
by the executing broker. Consistent with the Rules of Fair Practice of the Na-
tional Association of Securities Dealers, Inc., and subject to seeking best
price and execution, the Fund may consider sales of shares of the Fund as a
factor in the selection of brokers and dealers to enter into portfolio trans-
actions with the Fund.
The Fund may from time to time place orders for the purchase or sale of secu-
rities on an agency basis with Donaldson, Lufkin & Jenrette Securities Corpo-
ration, an affiliate of the Adviser, and with brokers which may have their
transactions cleared or settled, or both, by the Pershing Division of Donald-
son, Lufkin and Jenrette Securities Corporation, for which Donaldson, Lufkin
and Jenrette Securities Corporation may receive a portion of the brokerage
commission. In such instances, the placement of orders with such brokers would
be consistent with the Fund's objective of obtaining best execution and would
not be dependent upon the fact that Donaldson, Lufkin & Jenrette Securities
Corporation is an affiliate of the Adviser.
ORGANIZATION
The Fund is a Maryland corporation organized on November 17, 1987. The autho-
18
<PAGE>
rized capital stock of the Fund consists solely of 9,500,000,000 shares of
Common Stock having a par value of $.001 per share, which may, without share-
holder approval, be divided into an unlimited number of series. Such shares
are currently divided into 18 series, one underlying each Portfolio. Shares of
each Portfolio are normally entitled to one vote for all purposes. Generally,
shares of all Portfolios vote as a single series on matters, such as the elec-
tion of Directors, that affect all Portfolios in substantially the same man-
ner. Maryland law does not require a registered investment company to hold an-
nual meetings of shareholders and it is anticipated that shareholder meetings
will be held only when specifically required by federal or state law. Share-
holders have available certain procedures for the removal of Directors. Shares
of each Portfolio are freely transferable, are entitled to dividends as deter-
mined by the Board of Directors and, in liquidation of the Fund, are entitled
to receive the net assets of that Portfolio. Shareholders have no preference,
pre-emptive or conversion rights. In accordance with current law, it is antic-
ipated that an insurance company issuing a variable annuity contract or vari-
able life insurance policy that participates in the Fund will request voting
instructions from contract or policyholders and will vote shares in the sepa-
rate account in accordance with the voting instructions received.
PRINCIPAL UNDERWRITER
Alliance Fund Distributors, Inc., 1345 Avenue of the Americas, New York, New
York 10105, an indirect wholly-owned subsidiary of the Adviser, is the Princi-
pal Underwriter of shares of the Fund.
CUSTODIAN
State Street Bank and Trust Company, 225 Franklin Street, Boston, Massachu-
setts 02110, acts as Custodian for the securities and cash of the Fund and as
its dividend disbursing agent, but plays no part in deciding on the purchase
or sale of portfolio securities.
REGISTRAR AND DIVIDEND-DISBURSING AGENT
Alliance Fund Services, Inc., an indirect wholly-owned subsidiary of the Ad-
viser, located at 500 Plaza Drive, Secaucus, New Jersey, 07094, acts as the
Fund's registrar and dividend-disbursing agent.
ADDITIONAL INFORMATION
Any shareholder inquiries may be directed to Alliance Fund Services, Inc. at
the address or telephone number shown on the front cover of this Prospectus.
This Prospectus and the Statement of Additional Information which has been in-
corporated by reference herein, does not contain all the information set forth
in the Registration Statement filed by the Fund with the Commission under the
Securities Act of 1933, as amended. Copies of the Registration Statement may
be obtained at a reasonable charge from the Commission or may be examined,
without charge, at the offices of the Commission in Washington, D.C.
This Prospectus does not constitute an offering in any state in which such of-
fering may not lawfully be made.
19
