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Filed pursuant to Rule 497(c).
File Nos. 33-18647 and 811-5398.
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ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC.
_________________________________________________________________
P.O. Box 1520, Secaucus, New Jersey 07096-1520
Toll Free (800) 221-5672
_________________________________________________________________
Alliance Variable Products Series Fund, Inc. (the
"Fund") is an open-end series investment company designed to fund
variable annuity contracts and variable life insurance policies
to be offered by the separate accounts of certain life insurance
companies.
_________________________________________________________________
QUASAR PORTFOLIO
_________________________________________________________________
The Quasar Portfolio (the "Portfolio") seeks growth of
capital by pursuing aggressive investment policies. The
Portfolio invests principally in a diversified portfolio of
equity securities of any company and industry and in any type of
security which is believed to offer possibilities for capital
appreciation.
(R) : This is a registered mark used under license from the
owner, Alliance Capital Management L.P.
_________________________________________________________________
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 ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
PROSPECTUS/July 22, 1996
Investors are advised to carefully read this Prospectus
and to retain it for future reference.
<PAGE>
_________________________________________________________________
PURCHASE INFORMATION
_________________________________________________________________
The Fund will offer and sell the Portfolio's shares only
to separate accounts of certain life insurance companies, for the
purpose of funding variable annuity contracts and variable life
insurance policies. Sales will be made without sales charge at
the Portfolio's per share net asset value. Further information
can be obtained from Alliance Fund Services, Inc. at the address
or telephone number shown above.
An investment in the Portfolio is not a deposit or
obligation of, or guaranteed or endorsed by, any bank and is not
federally insured by the Federal Deposit Insurance Corporation,
the Federal Reserve Board or any other agency.
_________________________________________________________________
ADDITIONAL INFORMATION
_________________________________________________________________
This Prospectus sets forth concisely the information
which a prospective investor should know about the Fund and the
Portfolio 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 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.
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_________________________________________________________________
EXPENSE INFORMATION
_________________________________________________________________
Shareholder Transaction Expenses
The Portfolio has no sales load on purchases or
reinvested dividends, deferred sales load, redemption fee or
exchange fee.
Annual Portfolio Operating Expenses
(as a percentage of average net assets)
Management Fees.......................... 0%*
Other Expenses........................... .95%*
_____
Total Portfolio Operating Expenses......... .95%
=====
____________________
* Net of expense reimbursement
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).
1 Year 3 Years
$10 $30
The purpose of the foregoing table is to assist the
investor in understanding the various costs and expenses that an
investor in the Portfolio will bear directly and indirectly.
"Other Expenses" for the Portfolio are based on estimated amounts
for the Portfolio's current fiscal year. The estimated expense
information for the Portfolio is net of voluntary expense
reimbursements which are not required to be continued
indefinitely; however, the Adviser intends to continue such
reimbursements for the foreseeable future. The estimated
Management Fees and Other Expenses of the Portfolio before
expense reimbursements would be 1.00% and 1.55%, respectively.
The example should not be considered representative of future
expenses; actual expenses may be greater or less than those
shown.
3
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_________________________________________________________________
DESCRIPTION OF THE PORTFOLIO
_________________________________________________________________
Introduction to the Fund
The Fund was established as a Maryland corporation in
1987. 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 the Portfolio will be entitled to his
or her pro rata share of all dividends and distributions arising
from the Portfolio's assets and, upon redeeming shares of the
Portfolio, the shareholder will receive the then current net
asset value of the 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.
In addition to the Portfolio, the Fund currently has 17
other portfolios: the Money Market Portfolio, the Premier Growth
Portfolio, the Growth and Income Portfolio, the U.S.
Government/High Grade Securities Portfolio, the High-Yield
Portfolio, the Total Return Portfolio, the International
Portfolio, the Short-Term Multi-Market Portfolio, the Global Bond
Portfolio, the North American Government Income Portfolio, the
Global Dollar Government Portfolio, the Utility Income Portfolio,
the Conservative Investors Portfolio, the Growth Investors
Portfolio, the Growth Portfolio, the Worldwide Privatization
Portfolio and the Technology 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 annuity 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
4
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order to identify any material irreconcilable conflicts which may
possibly arise and to determine what action, if any, should be
taken in response thereto.
The investment objective and policies of the Portfolio
are set forth below. There can be, of course, no assurance that
the Portfolio will achieve its investment objective.
Investment Objective and Policies
General
The Portfolio is a diversified investment company that
seeks growth of capital by pursuing aggressive investment
policies. It invests for capital appreciation and only
incidentally for current income. The selection of securities
based on the possibility of appreciation cannot prevent loss in
value. Moreover, because the Portfolio's investment policies are
aggressive, an investment 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 established companies and in new and
unseasoned companies. When selecting securities, Alliance
Capital Management L.P., the Portfolio's adviser (the "Adviser"),
considers economic and political outlook, the values of specific
securities 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 stocks. The Portfolio invests in listed and
unlisted U.S. and foreign securities. The Portfolio periodically
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 conditions 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 Techniques," below.
5
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The Portfolio's investment objective cannot be changed
without approval by the holders of a majority of the Portfolio's
outstanding voting securities, as defined in the Investment
Company Act of 1940, as amended (the "Act"). Except as otherwise
indicated, the investment policies of the Portfolio are not
"fundamental policies" and may, therefore, be changed by the
Board of Directors without shareholder approval.
Other Investment Policies and Techniques
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 security on or before
a fixed date at a predetermined 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 increased (in the case of a
call) or decreased (in the case of a put) by an amount in excess
of the premium paid; otherwise the Portfolio would experience a
loss 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
underlying security would then be purchased or sold by the
Portfolio at a disadvantageous 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 is exercised. The writing of covered call
options could result in increases in a Fund's portfolio turnover
rate, especially during periods when market prices of the
underlying securities appreciate.
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
6
<PAGE>
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 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 delivered 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 obtain 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
extent 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
monetary policy (in the United States and abroad) or changed
circumstances in dealings between nations. Foreign securities
markets may also be less liquid, more volatile, and less subject
to governmental supervision than in the United States.
Investments in foreign countries could be affected by other
factors not present in the United States, including
expropriation, confiscatory taxation, lack of uniform accounting
and auditing standards and potential difficulties in enforcing
contractual obligations and could be subject to extended
settlement periods.
Portfolio Turnover
Generally, the Fund's policy with respect to turnover of
securities 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
7
<PAGE>
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, Distributions and
Taxes."
Certain Fundamental Investment Policies
The Fund has adopted certain fundamental investment
policies applicable to the Portfolio which may not be changed
without the approval of the shareholders of the Portfolio.
Certain of those fundamental investment policies are set forth
below. For a complete listing of such fundamental investment
policies, see the Statement of Additional Information.
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.
_________________________________________________________________
MANAGEMENT OF THE FUND
_________________________________________________________________
Adviser
Alliance Capital Management L.P., a Delaware limited
partnership with principal offices at 1345 Avenue of the
Americas, New York, New York 10105 has been retained under an
investment advisory agreement (the "Investment Advisory
Agreement") to provide investment advice and, in general, to
conduct the management and investment program of the Portfolio
subject to the general supervision and control of the Board of
Directors of the Fund. The employees of the Adviser principally
8
<PAGE>
responsible for the 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 thereto, Mr. Stewart and Mr. Haase each was
associated with Equitable Capital Management Corporation since
prior to 1991.
The Adviser is a leading international investment
manager supervising client accounts with assets as of March 31,
1996 totaling $163 billion (of which more than $53 billion
represented the assets of investment companies). The Adviser's
clients are primarily major corporate employee benefit funds,
public employee retirement systems, investment companies,
foundations and endowment funds. The 50 registered investment
companies managed by the Adviser comprising 107 separate
investment portfolios currently have over two million
shareholders. As of March 31, 1996, the Adviser was retained as
an investment manager by 34 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 Equitable Life Assurance Society
of the United States ("Equitable"), one of the largest life
insurance companies in the United States and a wholly owned
subsidiary of the Equitable Companies Incorporated, a holding
company 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
Additional Information under "Management of the Fund."
The Adviser provides investment advisory services and
order placement facilities 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 Adviser or its
affiliates also furnish the Fund, without charge, management
supervision and assistance and office facilities and provide
persons satisfactory to the Fund's Board of Directors to serve as
the Fund's officers. The Portfolio pays the Adviser at an annual
rate of 1.00% of the average daily value of its net assets. The
fees are accrued daily and paid monthly.
Expenses of the Portfolio
In addition to the payments to the Adviser under the
Investment Advisory Agreement described above, the Portfolio 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 existence, (g) interest charges, taxes,
9
<PAGE>
brokerage fees and commissions, (h) costs of stationery and
supplies, (i) expenses and fees related to registration and
filing with the Securities and Exchange Commission (the
"Commission") and with state regulatory authorities, and (j) cost
of certain personnel of the Adviser or its affiliates rendering
clerical, 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 approved in advance by the Fund's Board of
Directors.
_________________________________________________________________
PURCHASE AND REDEMPTION OF SHARES
_________________________________________________________________
Purchase of Shares
Shares of the Portfolio are offered on a continuous
basis directly by the Fund and by Alliance Fund Distributors,
Inc., the Fund's Principal Underwriter, to the separate accounts
of certain life insurance companies without any sales or other
charge, at the Portfolio's net asset value, as described below.
The separate accounts of insurance companies place orders to
purchase shares of the Portfolio based on, among other things,
the amount of premium payments to be invested and surrender and
transfer requests to be effected on that day pursuant to variable
annuity contracts and variable life insurance policies which are
funded by shares of the Portfolios. The Fund reserves the right
to suspend the sale of the Fund's shares in response to
conditions in the securities markets or for other reasons.
Individuals may not place orders directly with the Fund. See the
Prospectus of the separate account of the participating insurance
company for more information on the purchase of Portfolio shares.
The public offering price of the Portfolio's shares is
their net asset value. The per share net asset value of the
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
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liabilities, by the total number of its shares then outstanding.
A Fund business day is any weekday exclusive of days on which the
Exchange is closed (most national holidays and Good Friday). For
purposes of this computation, the securities in the 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 the Portfolio in its account at any
time at the net asset value per share of the 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 request. Shares redeemed are entitled to earn
dividends, if any, up to and including 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. The right of redemption
may be suspended or the date of payment may be postponed 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 the Portfolio is not reasonably practicable or as a
result of which it is not reasonably practicable for the Fund
fairly to determine the value of the 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 Portfolio will declare and distribute dividends from
net investment income and will distribute its net capital gains,
if any, at least annually. Such income and capital gains
distributions will be made in shares of the Portfolio.
The Portfolio intends to qualify to be taxed as a
regulated investment company under Subchapter M of the Internal
Revenue Code (the "Code"). If so qualified, the Portfolio will
not be subject to Federal income or excise taxes on its
11
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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 the Portfolio are not currently taxable
when left to accumulate within a variable annuity (other than an
annuity interest owned by a person who is not a natural person)
or variable life insurance contract. Distributions of net
investment 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 account of an insurance company be
"adequately diversified," in accordance with Treasury Regulations
promulgated thereunder, in order for the holders of the variable
annuity contracts or variable life insurance policies underlying
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 asset 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 regulated investment company. The Portfolio plans to
satisfy these conditions at all times so that the shares of the
Portfolio owned by a segregated asset account 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.
_________________________________________________________________
GENERAL INFORMATION
_________________________________________________________________
Portfolio Transactions
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 orders for portfolio
transactions for the Portfolio.
12
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The Fund has no obligation to enter into transactions in
portfolio securities with any broker, dealer, issuer, underwriter
or other entity. In placing orders, 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
National 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 transactions with the Fund. The
Fund may from time to time place orders for the purchase or sale
of securities on an agency basis with Donaldson, Lufkin &
Jenrette Securities Corporation, an affiliate of the Adviser, and
with brokers which may have their transactions cleared or
settled, or both, by the Pershing Division of Donaldson, 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 authorized capital stock of the Fund
consists solely of 9,000,000,000 shares of Common Stock having a
par value of $.001 per share, which may, without shareholder
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 election of Directors,
that affect all portfolios in substantially the same manner.
Maryland law does not require a registered investment company to
hold annual meetings of shareholders and it is anticipated that
shareholder meetings will be held only when specifically required
by federal or state law. Shareholders have available certain
procedures for the removal of Directors. Shares of each
portfolio are freely transferable, are entitled to dividends as
determined 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
13
<PAGE>
rights. In accordance with current law, it is anticipated that
an insurance company issuing a variable annuity contract or
variable life insurance policy that participates in the Fund will
request voting instructions from contract or policyholders and
will vote shares in the separate 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 Principal Underwriter of shares
of the Fund.
Custodian
State Street Bank and Trust Company, 225 Franklin
Street, Boston, Massachusetts 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 Adviser, 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 incorporated
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 offering may not lawfully be made.
14
00250292.AW7
<PAGE>
Filed pursuant to Rule 497(c).
File Nos. 33-18647 and 811-5398.
<PAGE>
ALLIANCE VARIABLE PRODUCTS
SERIES FUND, INC.
- Quasar Portfolio
_________________________________________________________________
P. O. Box 1520, Secaucus, New Jersey 07096-1520
Toll Free (800) 221-5672
_________________________________________________________________
STATEMENT OF ADDITIONAL INFORMATION
July 22, 1996
_________________________________________________________________
This Statement of Additional Information is not a
prospectus but supplements and should be read in conjunction with
the Portfolio's current Prospectus dated July 22, 1996. Copies
of such Prospectus may be obtained by contacting Alliance Fund
Services, Inc. at the address or telephone number shown above.
TABLE OF CONTENTS
PAGE
Description of the Portfolio............................ 2
Management of the Fund.................................. 8
Purchase and Redemption of Shares....................... 15
Net Asset Value......................................... 16
Portfolio Transactions.................................. 17
Dividends, Distributions and Taxes...................... 18
General Information..................................... 19
Appendix A: Options..................................... A-1
(R): This registered service mark used under license from the
owner, Alliance Capital Management L.P.
<PAGE>
_________________________________________________________________
DESCRIPTION OF THE PORTFOLIO
_________________________________________________________________
The Quasar Portfolio (the "Portfolio") is a portfolio of
the Alliance Variable Products Series Fund, Inc. ("the Fund"), an
open-end series investment company designed to fund variable
annuity contracts and variable life insurance policies offered by
the separate accounts of certain life insurance companies.
The investment objective of the Portfolio is growth of
capital by pursuing aggressive investment policies. Investments
will be made based upon their potential for capital appreciation.
Therefore, current income will be incidental to the objective of
capital growth. Because of the market risks inherent in any
investment, the selection of securities on the basis of their
appreciation possibilities cannot ensure against possible loss in
value. Moreover, to the extent the Portfolio seeks to achieve its
objective through the more aggressive investment policies
described below, risk of loss increases. The Portfolio is
therefore not intended for investors whose principal objective is
assured income or preservation of capital.
Except as otherwise indicated, the investment policies
of the Portfolio are not "fundamental policies" and may,
therefore, be changed by the Board of Directors without a
shareholder vote. However, the Portfolio will not change its
investment policies without contemporaneous written notice to its
shareholders. The Portfolio's investment objective, may not be
changed without shareholder approval.
Within this basic framework, the policy of the Portfolio
is to invest in any companies and industries and in any types of
securities which are believed to offer possibilities for capital
appreciation. Investments may be made in well-known and
established companies as well as in new and unseasoned companies.
Critical factors considered in the selection of securities
include the economic and political outlook, the values of
individual securities relative to other investment alternatives,
trends in the determinants of corporate profits, and management
capability and practices.
It is the policy of the Portfolio to invest principally
in equity securities (common stocks, securities convertible into
common stocks or rights or warrants to subscribe for or purchase
common stocks); however, it may also invest to a limited degree
in non-convertible bonds and preferred stocks when, in the
judgment of Alliance Capital Management L.P., the Portfolio's
adviser (the "Adviser"), such investments are warranted to
achieve the Fund's investment objective. When business or
2
<PAGE>
financial conditions warrant, a more defensive position may be
assumed and the Portfolio may invest in short-term fixed-income
securities, in investment grade debt securities, in preferred
stocks or hold its assets in cash.
The Portfolio may invest in both listed and unlisted
domestic and foreign securities, in restricted securities, and in
other assets having no ready market, but not more than 15% of the
Portfolio's total assets may be invested in all such restricted
or not readily marketable assets at any one time. Restricted
securities may be sold only in privately negotiated transactions
or in a public offering with respect to which a registration
statement is in effect under Rule 144 or 144A promulgated under
the Securities Act of 1933, as amended (the "Securities Act").
Where registration is required, the Portfolio may be obligated to
pay all or part of the registration expense, and a considerable
period may elapse between the time of the decision to sell and
the time the Portfolio may be permitted to sell a security under
an effective registration statement. If, during such a period
adverse market conditions were to develop, the Portfolio might
obtain a less favorable price than that which prevailed when it
decided to sell. Restricted securities and other not readily
marketable assets will be valued in such manner as the Board of
Directors of the Fund in good faith deems appropriate to reflect
their fair market value.
The Portfolio intends to invest in special situations
from time to time. A special situation arises when, in the
opinion of the Fund's management, the securities of a particular
company will, within a reasonably estimable period of time, be
accorded market recognition at an appreciated value solely by
reason of a development particularly or uniquely applicable to
that company and regardless of general business conditions or
movements of the market as a whole. Developments creating
special situations might include, among others, the following:
liquidations, reorganizations, recapitalizations or mergers,
material litigation, technological breakthroughs and new
management or management policies. Although large and well-known
companies may be involved, special situations often involve much
greater risk than is inherent in ordinary investment securities.
The Portfolio will not, however, purchase securities of any
company with a record of less than three years continuous
operation (including that of predecessors) if such purchase would
cause the Portfolio's investments in such companies, taken at
cost, to exceed 25% of the value of the Portfolio's total assets.
Additional Investment Policies And Practices
The following additional investment policies supplement
those set forth above.
3
<PAGE>
General. In seeking to attain its investment objective
of growth of capital, the Portfolio will supplement customary
investment practices by engaging in a broad range of investment
techniques including short sales "against the box," writing call
options, purchases and sales of put and call options written by
others and investing in special situations. These techniques are
speculative, may entail greater risk, may be considered of a more
short-term nature, and to the extent used, may result in greater
turnover of the Portfolio's portfolio and a greater expense than
is customary for most investment companies. Consequently, the
Portfolio is not a complete investment program and is not a
suitable investment for those who cannot afford to take such
risks or whose objective is income or preservation of capital.
No assurance can be given that the Portfolio will achieve its
investment objective. However, by buying shares in the Portfolio
an investor may receive advantages he would not readily obtain as
an individual, including professional management and continuous
supervision of investments. The Portfolio will be subject to the
overall limitation (in addition to the specific restrictions
referred to below) that the aggregate value of all restricted and
not readily marketable securities of the Portfolio, and of all
cash and securities covering outstanding call options written or
guaranteed by the Portfolio, shall at no time exceed 15% of the
value of the total assets of the Portfolio.
There is also no assurance that the Portfolio will at
any particular time engage in all or any of the investment
activities in which it is authorized to engage. In the opinion
of the Portfolio's management, however, the power to engage in
such activities provides an opportunity which is deemed to be
desirable in order to achieve the Portfolio's investment
objective.
Short Sales. The Portfolio may only make short sales of
securities "against the box." A short sale is effected by selling
a security which the Portfolio does not own, or if the Portfolio
does own such security, it is not to be delivered 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 obtain securities identical to those sold short without
payment. Short sales may be used by the Portfolio to defer the
realization of gain or loss for Federal income tax purposes on
securities then owned by the Portfolio. Gains or losses will be
short- or long-term for Federal income tax purposes depending
upon the length of the period the securities are held by the
Portfolio before closing out the short sales by delivery to the
lender. The Portfolio may, in certain instances, realize short-
term gain on short sales "against the box" by covering the short
position through a subsequent purchase. Not more than 15% of the
value of the Portfolio's net assets will be in deposits on short
sales "against the box".
4
<PAGE>
Puts and Calls. The Portfolio may write call options
and may purchase and sell put and call options written by others,
combinations thereof, or similar options. The Portfolio may not
write put options. A put option gives the buyer of such option,
upon payment of a premium, the right to deliver a specified
number of shares of a stock to the writer of the option on or
before a fixed date at a predetermined price. 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 number of
shares of a specified stock on or before a fixed date, at a
predetermined price, usually the market price at the time the
contract is negotiated. When calls written by the Portfolio are
exercised, the Portfolio will be obligated to sell stocks below
the current market price.
The writing of call options will, therefore, involve a
potential loss of opportunity to sell securities at higher
prices. In exchange for the premium received, the writer of a
fully collateralized call option assumes the full downside risk
of the securities subject to such option. In addition, the
writer of the call gives up the gain possibility of the stock
protecting the call. Generally, the opportunity for profit from
the writing of options is higher, and consequently the risks are
greater when the stocks involved are lower priced or volatile, or
both. While an option that has been written is in force, the
maximum profit that may be derived from the optioned stock is the
premium less brokerage commissions and fees. (For a discussion
regarding certain tax consequences of the writing of call options
by the Fund, see "Dividends, Distributions and Taxes".)
Writing, purchasing and selling call options are highly
specialized activities and entail greater than ordinary
investment risks. It is the Portfolio's policy not to write a
call option if the premium to be received by the Portfolio in
connection with such option would not produce an annualized
return of at least 15% of the then market value of the securities
subject to option. Commissions, stock transfer taxes and other
expenses of the Fund must be deducted from such premium receipts.
Option premiums vary widely depending primarily on supply and
demand. Calls written by the Portfolio will ordinarily be sold
either on a national securities exchange or through put and call
dealers, most, if not all, of whom are members of a national
securities exchange on which options are traded, and will in such
cases be endorsed or guaranteed by a member of a national
securities exchange or qualified broker-dealer, which may be
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), an
affiliate of the Adviser. The endorsing or guaranteeing firm
requires that the option writer (in this case the Portfolio)
maintain a margin account containing either corresponding stock
or other equity as required by the endorsing or guaranteeing
firm. A call written by the Portfolio will not be sold unless
5
<PAGE>
the Portfolio at all times during the option period owns either
(a) the optioned securities, or securities convertible into or
carrying rights to acquire the optioned securities or (b) an
offsetting call option on the same securities.
The Portfolio will not sell a call option written or
guaranteed by it if, as a result of such sale, the aggregate of
the Portfolio's portfolio securities subject to outstanding call
options (valued at the lower of the option price or market value
of such securities) would exceed 15% of the Portfolio's total
assets. The Portfolio will not sell any call option if such sale
would result in more than 10% of the Portfolio's assets being
committed to call options written by the Portfolio, which, at the
time of sale by the Portfolio, have a remaining term of more than
100 days. The aggregate cost of all outstanding options
purchased and held by the Portfolio shall at no time exceed 10%
of the Portfolio's total assets.
In buying a call, the Portfolio would be in a position
to realize a gain if, during the option period, the price of the
shares increased by an amount in excess of the premium paid and
commissions payable on exercise. It would realize a loss if the
price of the security declined or remained the same or did not
increase during the period by more than the amount of the premium
and commissions payable on exercise. By buying a put, the
Portfolio would be in a position to realize a gain if, during the
option period, the price of the shares declined by an amount in
excess of the premium paid and commissions payable on exercise.
It would realize a loss if the price of the security increased or
remained the same or did not decrease during that period by more
than the amount of the premium and commissions payable on
exercise. In addition, the Portfolio could realize a gain or
loss on such options by selling them.
As noted above, the Portfolio may purchase and sell put
and call options written by others, combinations thereof, or
similar options. There are markets for put and call options
written by others and the Portfolio may from time to time sell or
purchase such options in such markets. If an option is not so
sold and is permitted to expire without being exercised, its
premium would be lost by the Portfolio.
Portfolio Turnover. Generally, the Portfolio's policy
with respect to portfolio turnover is to purchase securities with
a view to holding them for periods of time sufficient to assure
long-term capital gains treatment upon their sale and not for
trading purposes. However, it is also the Portfolio's policy to
sell any security whenever, in the judgment of the Adviser, its
appreciation possibilities have been substantially realized or
the business or market prospects for such security have
deteriorated, irrespective of the length of time that such
6
<PAGE>
security has been held. This policy may result in the Portfolio
realizing short-term capital gains or losses on the sale of
certain securities. See "Dividends, Distributions and Taxes". It
is anticipated that the Portfolio's rate of portfolio turnover
will not exceed 200% during the current fiscal year. A 200%
annual turnover rate would occur, for example, if all the stocks
in the Portfolio's portfolio were replaced twice within a period
of one year. A portfolio turnover rate approximating 200%
involves correspondingly greater brokerage commission expenses
than would a lower rate, which expenses must be borne by the
Portfolio and its shareholders.
Investment Restrictions. The following restrictions may
not be changed without approval of a majority of the outstanding
voting securities of the Portfolio, which means the vote of
(i) 67% or more of the shares represented at a meeting at which
more than 50% of the outstanding shares are represented or
(ii) more than 50% of the outstanding shares, whichever is less.
As a matter of fundamental policy, 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 immediately after such
purchase more than 5% of the value 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 the value of the
Portfolio's total assets may be invested without
regard to such 5% and 10% limitations;
(ii) invest more than 25% of the value of its total
assets in any particular industry;
(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;
(iv) purchase or sell real estate;
(v) participate on a joint or joint and several basis
in any securities trading account;
(vi) invest in companies for the purpose of exercising
control;
(vii) purchase or sell commodities or commodity
contracts;
7
<PAGE>
(viii) except as permitted in connection with short sales
of securities "against the box" described under the
heading "Short Sales" above, make short sales of
securities;
(ix) make loans of its funds or assets to any other
person, which shall not be considered as including
the purchase of a portion of an issue of publicly
distributed bonds, debentures, or other securities,
whether or not the purchase was made upon the
original issuance of the securities; except that
the Portfolio may not purchase non-publicly
distributed securities subject to the limitations
applicable to restricted securities;
(x) except as permitted in connection with short sales
of securities or writing of call options, described
under the headings "Short Sales" and "Puts and
Calls" above, pledge, mortgage or hypothecate any
of its assets;
(xi) except as permitted in connection with short sales
of securities "against the box" described under the
heading "Additional Investment Policies and
Practices" above, make short sales of securities;
and
(xii) purchase securities on margin, but it may obtain
such short-term credits as may be necessary for the
clearance of purchases and sales of securities.
_________________________________________________________________
MANAGEMENT OF THE FUND
_________________________________________________________________
DIRECTORS AND OFFICERS
The Directors and principal officers of the Fund, their
ages and their primary occupations during the past five years are
set forth below. Each such Director and officer is also a
trustee, director or officer of other registered investment
companies sponsored by the Adviser. Unless otherwise specified,
the address of each such persons is 1345 Avenue of the Americas,
New York, New York 10105.
8
<PAGE>
DIRECTORS
JOHN D. CARIFA*, 51, Chairman of the Board, is the
President, Chief Operating Officer and a Director of Alliance
Capital Management Corporation ("ACMC"**), the sole general
partner of the Adviser, with which he has been associated since
prior to 1991.
RUTH BLOCK, 65, was formerly Executive Vice President
and the Chief Insurance Officer of The Equitable Life Assurance
Society of the United States. She is a Director of Ecolab
Incorporated (specialty chemicals) and Amoco Corporation (oil and
gas). Her address is Box 4653, Stamford, Connecticut 06905.
DAVID H. DIEVLER, 66, was formerly Chairman and
President of the Fund and a Senior Vice President of ACMC, with
which he had been associated since prior to 1991 through 1994.
He is currently an independent consultant. His address is P.O.
Box 167, Spring Lake, New Jersey 07762.
JOHN H. DOBKIN, 54, has been the 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. His address is
Historic Hudson Valley, 150 White Plains Rd., Tarrytown, New York
10591.
WILLIAM H. FOULK, JR., 63, is an investment adviser and
independent consultant. He was formerly Senior Manager of
Barrett Associates, Inc., a registered investment adviser since
prior to 1991. His address is 2 Hekma Road, Greenwich,
Connecticut 06831.
- ----------------------
* An "interested person" of the Fund, as defined in the 1940
Act.
** For purposes of this Statement of Additional Information, ACMC
refers to Alliance Capital Management Corporation, the sole
general partner of the Adviser, and to the predecessor general
partner of the Adviser of the same name.
9
<PAGE>
DR. JAMES M. HESTER, 72, is President of the Harry Frank
Guggenheim Foundation and a Director of Union Carbide Corporation
with which he has been associated since prior to 1991. He was
formerly President of New York University, The New York Botanical
Garden and Rector of the United Nations University. His address
is 45 East 89th Street, New York, New York 10128.
CLIFFORD L. MICHEL, 56, is a partner in the law firm of
Cahill Gordon & Reindel, with which he has been associated since
prior to 1991. He is Chief Executive Officer of Wenonah
Development Company (investments) and a Director of Placer Dome,
Inc. (mining) and Faber-Castell Corporation (writing products).
His address is 80 Pine Street, New York, New York 10005.
ROBERT C. WHITE, 75, is a retired Trustee of St. Clair
Fixed Income Fund, St. Clair Tax-Free Fund and St. Clair Equity
Fund (registered investment companies) and a retired Director of
MEDSTAT Systems, Inc. (health care information). Formerly, he
was Assistant Treasurer of the Ford Motor Company and a Vice
President and the Chief Financial Officer of the Howard Hughes
Medical Institute. His address is 30835 River Crossing, Bingham
Farms, Michigan 48025.
OFFICERS
ALFRED L. HARRISON, SENIOR VICE PRESIDENT, 57, is a Vice
Chairman of ACMC, with which he has been associated with since
prior to 1991.
WAYNE D. LYSKI, SENIOR VICE PRESIDENT, 53, is an
Executive Vice President of ACMC, with which he has been
associated with since prior to 1991.
KATHLEEN A. CORBET, 35, Senior Vice President, has been
a Senior Vice President of ACMC since July 1993. Previously, she
held various responsibilities as head of Equitable Capital
Management Corporation's Fixed Income Management Department,
Private Placement Secondary Trading and Fund Management since
prior to 1991.
EDMUND P. BERGAN, Jr., 45, Secretary, is a Senior Vice
President and General Counsel of Alliance Fund Distributors, Inc.
and Alliance Fund Services, Inc. and is a Vice President and
Assistant General Counsel of ACMC with which he has been
associated since prior to 1991.
MARK D. GERSTEN, TREASURER AND CHIEF FINANCIAL OFFICER,
45, is a Senior Vice President of Alliance Fund Services, Inc.
("AFS"), with which he has been associated since prior to 1991.
10
<PAGE>
ANDREW GANGOLF, ASSISTANT SECRETARY, 41, has been a Vice
President and Assistant General Counsel of AFD since December
1994. Prior thereto he was a Vice President and Assistant
Secretary of Delaware Management Company, Inc. since October 1992
and a Vice President and Counsel to Equitable Life Assurance
Society of the United States since prior to 1991.
LAURA MAH, CONTROLLER, 39, has been a Vice President of
ACMC since July 1992. Previously she was associated with
Equitable Capital Management Corporation ("ECMC") since prior to
1991.
THOMAS R. MANLEY, ASSISTANT CONTROLLER, 43, has been an
Assistant Vice President of ACMC since July 1993. Previously he
was associated with ECMC since prior to 1991.
STEVEN YU, ASSISTANT CONTROLLER, 35, has been an
Assistant Vice President of ACMC since 1993. Previously he was
associated with ECMC since prior to 1991.
The aggregate compensation paid by the Fund to each of
the Directors during its fiscal year ended December 31, 1995,
the aggregate compensation paid to each of the Directors during
calendar year 1995 by all of the registered investment companies
to which the Adviser provides investment advisory services
(collectively, the "Alliance Fund Complex") and the total number
of registered investment companies in the Alliance Fund Complex
with respect to which each of the Directors serves as a director
or trustee, are set forth below. Neither the Fund nor any other
Fund in the Alliance Fund Complex provides compensation in the
form of pension or retirement benefits to any of its directors
or trustees. Each of the Directors is a director or trustee of
one or more other registered investment companies in the
Alliance Fund Complex.
11
<PAGE>
Total Total Number
Compensation of Funds in the
from the Alliance Fund
Alliance Fund Complex, Including
Aggregate Complex, the Fund, as to which
Name of Director Compensation Including the the Director is a
of the Fund from the Fund Fund Director or Trustee
_______________ _____________ _____________ _____________________
John D. Carifa $-0- $-0- 49
Ruth Block $3,165 $ 159,000 36
David H. Dievler $3,300 $ 179,200 42
John H. Dobkin $3,165 $ 117,200 29
William H. Foulk, Jr. $3,300 $ 143,500 30
Dr. James M. Hester $3,165 $ 156,000 37
Clifford L. Michel $3,165 $ 131,500 36
Robert C. White $3,165 $ 133,200 36
___________________________
As of April 30, 1996, the Directors and officers of the Fund as a
group owned less than 1% of the shares of the Fund.
ADVISER
The Adviser is a leading international investment
manager supervising client accounts with assets as of March 31,
1996 of $163 billion (of which more than $53 billion represented
the assets of investment companies). The Adviser's clients are
primarily major corporate employee benefit funds, public employee
retirement systems, investment companies, foundations and
endowment funds and included, as of March 31, 1996, 34 of the
FORTUNE 100 Companies. As of that date, the Adviser and its
subsidiaries employed approximately 1,350 employees who operated
out of domestic offices and the overseas offices of subsidiaries
in Bombay, Istanbul, London, Sydney, Tokyo, Toronto, Bahrain,
Luxembourg and Singapore. The 50 registered investment companies
comprising 107 separate investment portfolios managed by the
Adviser currently have more than two million shareholders.
Alliance Capital Management Corporation, the sole
general partner of, and the owner of a 1% general partnership
interest in, the Adviser, is an indirect wholly-owned subsidiary
of The Equitable Life Assurance Society of the United States
("Equitable"), one of the largest life insurance companies in the
United States and a wholly-owned subsidiary of The Equitable
Companies Incorporated ("ECI"), a holding company controlled by
AXA, a French insurance holding company. As of March 31, 1996,
ACMC, Inc. and Equitable Capital Management Corporation, each a
wholly-owned direct or indirect subsidiary of Equitable, together
with Equitable, owned in the aggregate approximately 57.6% of the
12
<PAGE>
issued and outstanding units representing assignments of
beneficial ownership of limited partnership interests in the
Adviser ("Units"). As of March 31, 1996, approximately 32.4% and
10.0% of the Units were owned by the public and employees of the
Adviser and its subsidiaries, respectively, including employees
of the Adviser who serve as Directors of the Fund.
AXA and its subsidiaries own approximately 63.9% of the
issued and outstanding shares of capital stock of ECI. AXA is
the holding company for an international group of insurance and
related financial services companies. AXA's insurance operations
include activities in life insurance, property and casualty
insurance and reinsurance. The insurance operations are diverse
geographically, with activities in France, the United States,
Australia, the United Kingdom, Canada and other countries,
principally in Europe and the Asia Pacific area. AXA is also
engaged in asset management, investment banking, securities
trading, brokerage, real estate and other financial services
activities in the United States, Europe and the Asia Pacific
area. Based on information provided by AXA, as of March 1, 1996,
42.1% of the issued ordinary shares (representing 53.4% of the
voting power) of AXA were owned by Midi Participations, a French
holding company ("Midi"). The shares of Midi were, in turn,
owned 61.4% (representing 62.5% of the voting power) by Finaxa, a
French holding company, and 38.6% (representing 37.5% of the
voting power) by subsidiaries of Assicurazioni Generali S.p.A.,
an Italian corporation (one of which, Belgica Insurance Holding
S.A., a Belgian corporation, owned 30.8%, representing 33.1% of
the voting power). As of March 1, 1996, 61.1% of the voting
shares (representing 73.4% of the voting power) of Finaxa were
owned by five French mutual insurance companies (the "Mutuelles
AXA") (one of which, AXA Assurances I.A.R.D. Mutuelle, owned
34.7% of the voting shares representing 40.4% of the voting
power), and 25.5% of the voting shares (representing 16% of the
voting power) of Finaxa were owned by Banque Paribas, a French
bank. Including the ordinary shares owned by Midi, as of
March 1, 1996, the Mutuelles AXA directly or indirectly owned 51%
of the issued ordinary shares (representing 64.7% of the voting
power) of AXA. Acting as a group, the Mutuelles AXA control AXA,
Midi and Finaxa.
The Adviser provides investment advisory services and
order placement facilities for the Portfolio and pays all
compensation of Directors and officers of the Fund who are
affiliated persons of the Adviser. The Adviser or its affiliates
also furnish the Fund, without charge, management supervision and
assistance and office facilities and provide persons satisfactory
to the Fund's Board of Directors to serve as the Fund's officers.
The Portfolio pays the Adviser at an annual rate of 1.00% of the
average daily value of its net assets.
13
<PAGE>
Certain other clients of the Adviser may have investment
objectives and policies similar to those of the Portfolio. The
Adviser may, from time to time, make recommendations which result
in the purchase or sale of the particular security by its other
clients simultaneously with the Portfolio. If transactions on
behalf of more than one client during the same period increase
the demand for securities being purchased or the supply of
securities being sold, there may be an adverse effect on price.
It is the policy of the Adviser to allocate advisory
recommendations and the placing of orders in a manner which is
deemed equitable by the Adviser to the accounts involved,
including the Portfolio. When two or more of the clients of the
Adviser (including the Portfolio) are purchasing 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 the Portfolio by the Adviser, the
Portfolio may employ its own personnel. For such services, it
also may utilize personnel employed by the Adviser or by other
subsidiaries of Equitable. In such event, the services will be
provided to the Portfolio at cost and the payments specifically
approved by the Fund's Board of Directors.
The Investment Advisory Agreement is terminable with
respect to the Portfolio without penalty on 60 days' written
notice by a vote of a majority of the outstanding voting
securities of such Portfolio or by a vote of a majority of the
Fund's Directors, or by the Adviser on 60 days' written notice,
and will automatically terminate in the event of its assignment.
The Advisory Agreement provides that in the absence of willful
misfeasance, bad faith or gross negligence on the part of the
Adviser, or of reckless disregard of its obligations thereunder,
the Adviser shall not be liable for any action or failure to act
in accordance with its duties thereunder.
The Investment Advisory Agreement continues in effect
until each December 31, and thereafter for successive twelve
month periods computed from each January 1, 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 of Directors, 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.
The Investment Advisory Agreement provides that the
Adviser will reimburse the Fund as to the Portfolio for its
expenses (exclusive of interest, taxes, brokerage, expenditures
pursuant to the Distribution Services Agreement and extraordinary
expenses to the extent permitted by applicable state securities
14
<PAGE>
laws and regulations) which in any year exceed the limits
prescribed by any state in which the Fund's shares are qualified
for sale. The Fund may not qualify its shares for sale in every
state.
The Adviser may act as an investment adviser to other
persons, firms or corporations, including investment companies,
and is investment adviser to the following registered investment
companies: ACM Institutional Reserves, Inc., AFD Exchange
Reserves, The Alliance Fund, Inc., Alliance All-Asia Investment
Fund, Inc., Alliance Balanced Shares, Inc., Alliance Bond Fund,
Inc., Alliance Capital Reserves, Alliance Developing Markets
Fund, Inc., Alliance Global Dollar Government Fund, Inc.,
Alliance Global Small Cap Fund, Inc., Alliance Global Strategic
Income Trust, Inc., Alliance Government Reserves, Alliance Growth
and Income Fund, Inc., Alliance Income Builder Fund, Inc.,
Alliance International Fund, Alliance Limited Maturity Government
Fund, Inc., Alliance Money Market Fund, Alliance Mortgage
Securities Income Fund, Inc., Alliance Multi-Market Strategy
Trust, Inc., Alliance Municipal Income Fund, Inc., Alliance
Municipal Income Fund II, 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 Short-Term Multi-
Market Trust, Inc., Alliance Technology Fund, Inc., Alliance
Utility Income Fund, Inc., Alliance World Income Trust, Inc.,
Alliance Worldwide Privatization Fund, Inc., Fiduciary Management
Associates, The Alliance Portfolios, and The Hudson River Trust,
all open-end investment companies; and to ACM Government Income
Fund, Inc., ACM Government Opportunity Fund, Inc., ACM Government
Securities Fund, Inc., ACM Government Spectrum Fund, Inc., ACM
Managed Dollar Income Fund, Inc., ACM Managed Income Fund, Inc.,
ACM Municipal Securities Income Fund, Inc., Alliance All-Market
Advantage Fund, Inc., Alliance Global Environment Fund, Inc.,
Alliance World Dollar Government Fund, Inc., Alliance World
Dollar Government Fund II, Inc., The Austria Fund, Inc., The
Global Privatization Fund, Inc., The Korean Investment Fund,
Inc., The Southern Africa Fund, Inc. and The Spain Fund, Inc.,
all closed-end investment companies.
_________________________________________________________________
PURCHASE AND REDEMPTION OF SHARES
_________________________________________________________________
The following information supplements that set forth in
the Portfolio's Prospectus under the heading "Purchase and
Redemption of Shares."
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REDEMPTION OF SHARES
The value of a shareholder's shares on redemption or
repurchase may be more or less than the cost of such shares to
the shareholder, depending upon the market value of the
Portfolio's securities at the time of such redemption or
repurchase. Payment either in cash or in portfolio securities
received by a shareholder upon redemption or repurchase of his
shares, assuming the shares constitute capital assets in his
hands, will result in long-term or short-term capital gains (or
loss) depending upon the shareholder's holding period and basis
in respect of the shares redeemed.
_________________________________________________________________
NET ASSET VALUE
_________________________________________________________________
The net asset value of shares of the Portfolio on which
the subscription and redemption prices are based is computed in
accordance with the Articles of Incorporation and By-Laws of the
Fund 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 Portfolio invests
might materially affect the value of the Portfolio's shares, by
dividing the value of the Portfolio's assets less its
liabilities, by the total number of shares then outstanding. For
this purpose, a Fund business day is any weekday exclusive of
days on which the Exchange is closed (most national holidays and
Good Friday).
Portfolio securities that are actively traded in the
over-the-counter market, including listed securities for which
the primary market is believed to be over-the-counter, are valued
at the mean between the most recently quoted bid and asked prices
provided by the principal market makers. Any security for which
the primary market is on an exchange is valued at the last sale
price on such exchange on the day of valuation or, if there was
no sale on such day, the last bid price quoted on such day.
Options will be valued at market value or fair market value if no
market exists. Securities and assets for which market quotations
are not readily available are valued at fair value as determined
in good faith by or under the direction of the Board of Directors
of the Fund. However, readily marketable fixed-income securities
may be valued on the basis of prices provided by a pricing
service when such prices are believed by the Adviser to reflect
the fair market value of such securities. The prices provided by
a pricing service take into account institutional size trading in
similar groups of securities and any developments related to
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specific securities. U.S. Government Securities and other debt
instruments having 60 days or less remaining until maturity are
stated at amortized cost if their original maturity was 60 days
or less, or by amortizing their fair value as of the 61st day
prior to maturity if their original term to maturity exceeded 60
days (unless in either case the Fund's Board of Directors
determines that this method does not represent fair value). All
assets of the Portfolio, including restricted and not readily
marketable securities, are valued in such manner as the Board of
Directors of the Fund in good faith deems appropriate to reflect
their fair market value.
_________________________________________________________________
PORTFOLIO TRANSACTIONS
_________________________________________________________________
Neither the Fund nor the Adviser 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 the
Adviser for use in rendering investment advice to the Fund, such
information may be supplied at no cost to the Adviser and,
therefore, may have the effect of reducing the expenses of the
Adviser in rendering advice to the Fund. While it is impossible
to place an actual dollar value on such investment information,
its receipt by the Adviser probably does not reduce the overall
expenses of the Adviser to any material extent.
The investment information provided to the Adviser is of
the types described in Section 28(e)(3) of the Securities
Exchange Act of 1934 and is designed to augment the Adviser's own
internal research and investment strategy capabilities. Research
and statistical services furnished by brokers through which the
Fund effects securities transactions are used by the Adviser in
carrying out its investment management responsibilities with
respect to all its client accounts but not all such services may
be utilized by the Adviser in connection with the Fund.
The 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, the 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, the Fund will attempt to
negotiate best execution.
The Fund may from time to time place orders for the
purchase or sale of securities (including listed call options)
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with Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"),
an affiliate of the Adviser, the 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 the 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.
_________________________________________________________________
DIVIDENDS, DISTRIBUTIONS AND TAXES
_________________________________________________________________
The Portfolio intends to qualify to be taxed as a
"regulated investment company" under the Internal Revenue Code of
1986 (the "Code"). If so qualified, the Portfolio will not be
subject to federal income and 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 variable annuity or variable life
insurance contract. Distributions of net investment income and
net short-term capital gains will be treated as ordinary income
and distributions of net long-term capital gains will be treated
as long-term capital gain in the hands of the insurance
companies.
Investment income received by the Portfolio from sources
within foreign countries may be subject to foreign income taxes
withheld at the source. If more than 50% of the value of the
Portfolio's total assets at the close of its taxable year
consists of stocks or securities of foreign corporations (which
for this purpose should include obligations issued by foreign
governments), the Portfolio will be eligible to file an election
with the Internal Revenue Service to pass through to its
shareholders the amount of foreign taxes paid by the Portfolio.
If eligible, the Portfolio intends to file such an election,
although there can be no assurance that such Portfolio will be
able to do so.
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Section 817(h) of the Code requires that the investments
of a segregated asset account of an insurance company be
"adequately diversified", in accordance with Treasury Regulations
promulgated thereunder, in order for the holders of the variable
annuity contracts or variable life insurance policies underlying
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 asset 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 regulated investment company. The Portfolio plans to
satisfy these conditions at all times so that the shares of the
Portfolio owned by a segregated asset account of a life insurance
company will be subject to this treatment under the Code.
For information concerning the 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.
________________________________________________________________
GENERAL INFORMATION
________________________________________________________________
COMMON STOCK; VOTING RIGHTS
The Fund's shares have non-cumulative voting rights,
which means that the holders of more than 50% of the shares
voting for the election of Directors can elect 100% of the
Directors if they choose to do so, and in such election of
Directors will not be able to elect any person or persons to the
Board of Directors.
All shares of the Fund when duly issued will be fully
paid and nonassessable. The Board of Directors is authorized to
reclassify and issue any unissued shares to any number of
additional series without shareholder approval. Accordingly, the
Board of Directors in the future, for reasons such as the desire
to establish one or more additional portfolios with different
investment objectives, policies or restrictions, may create
additional series of shares. Any issuance of shares of such
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additional series would be governed by the 1940 Act and the law
of the State of Maryland.
If shares of another series were issued in connection
with the creation of the new portfolio, each share of any of the
Fund's portfolios would normally be entitled to one vote for all
purposes. Generally, shares of each portfolio would vote as a
single series for the election of directors and on any other
matter that affected each portfolios in substantially the same
manner. As to matters affecting each portfolio differently, such
as approval of the Investment Advisory Agreement and changes in
investment policy, shares of each portfolio would vote as
separate series.
Procedures for calling a shareholders' meeting for the
removal of Directors of the Fund, similar to those set forth in
Section 16(c) of the 1940 Act, are available to any shareholder
of the Fund. Meetings of shareholders may be called by 10% of the
Fund's outstanding shareholders.
CUSTODIAN
State Street Bank and Trust Company, 225 Franklin
Street, Boston, Massachusetts 02110, acts as Custodian for the
securities and cash of the Fund but plays no part in deciding the
purchase or sale of portfolio securities.
PRINCIPAL UNDERWRITER
Alliance Fund Distributors, Inc., 1345 Avenue of the
Americas, New York, New York 10105, serves as the Fund's
Principal Underwriter, and as such may solicit orders from the
public to purchase shares of the Fund. Under the Distribution
Services Agreement between the Fund and the Principal
Underwriter, the Fund has agreed to indemnify the distributor, in
the absence of its willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations thereunder,
against certain civil liabilities, including liabilities under
the Securities Act.
COUNSEL
Legal matters in connection with the issuance of the
shares of the Fund offered hereby will be passed upon by Seward &
Kissel, One Battery Park Plaza, New York, New York 10004.
INDEPENDENT AUDITORS
Ernst & Young LLP, 787 Seventh Avenue, New York, New
York 10019, have been appointed as independent auditors for the
Fund.
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SHAREHOLDER APPROVAL
The capitalized term "Shareholder Approval" as used in
this Statement of Additional Information means (1) the vote of
67% or more of the shares of the Portfolio represented at a
meeting at which more than 50% of the outstanding shares are
represented or (2) more than 50% of the outstanding shares of the
Portfolio, whichever is less.
Total Return Quotations
From time to time the Portfolio advertises its "total
return." The Portfolio's "total return" is its average annual
compounded total return for recent one, five, and ten-year
periods (or the period since the Portfolio's inception). The
Portfolio's total return for such a period is computed by
finding, through the use of a formula prescribed by the
Securities and Exchange Commission, the average annual compounded
rate of return over the period that would equate an assumed
initial amount invested to the value of such investment at the
end of the period. For purposes of computing total return,
income dividends and capital gains distributions paid on shares
of the Portfolio are assumed to have been reinvested when paid.
The Portfolio's total return is not fixed and will
fluctuate in response to prevailing market conditions or as a
function of the type and quality of the securities in the
Portfolio's portfolio and its expenses. Total return information
is useful in reviewing the Portfolio's performance but such
information may not provide a basis for comparison with bank
deposits or other investments which pay a fixed yield for a
stated period of time. An investor's principal invested in the
Portfolio is not fixed and will fluctuate in response to
prevailing market conditions.
Advertisements quoting performance ratings of the
Portfolio as measured by financial publications or by independent
organizations such as Lipper Analytical Services, Inc. ("Lipper")
and advertisements presenting the historical record of payments
of income dividends by the Portfolio may also from time to time
be sent to investors or placed in newspapers and magazines such
as BARRONS, BUSINESS WEEK, CHANGING TIMES, FORBES, INVESTOR'S
DAILY, MONEY MAGAZINE, THE NEW YORK TIMES and THE WALL STREET
JOURNAL or other media on behalf of the Portfolio.
Additional Information
Any shareholder inquiries may be directed to the
shareholder's broker or to Alliance Fund Services, Inc. at the
address or telephone numbers shown on the front cover of this
Statement of Additional Information. This Statement of
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<PAGE>
Additional Information does not contain all the information set
forth in the Registration Statement filed by the Fund with the
Securities and Exchange Commission under the Securities Act of
1933. Copies of the Registration Statement may be obtained at a
reasonable charge from the Securities and Exchange Commission or
may be examined, without charge, at the offices of the Securities
and Exchange Commission in Washington, D.C.
22
00250292.AW7
<PAGE>
APPENDIX A
OPTIONS
The Portfolio will only write "covered" put and call
options, unless such options are written for cross-hedging
purposes. The manner in which such options will be deemed
"covered" is described in the Prospectus under the heading "Other
Investment Policies and Techniques -- Options."
The writer of an option may have no control over when
the underlying securities must be sold, in the case of a call
option, or purchased, in the case of a put option, since with
regard to certain options, the writer may be assigned an exercise
notice at any time prior to the termination of the obligation.
Whether or not an option expires unexercised, the writer retains
the amount of the premium. This amount, of course, may, in the
case of a covered call option, be offset by a decline in the
market value of the underlying security during the option period.
If a call option is exercised, the writer experiences a profit or
loss from the sale of the underlying security. If a put option
is exercised, the writer must fulfill the obligation to purchase
the underlying security at the exercise price, which will usually
exceed the then market value of the underlying security.
The writer of a listed option that wishes to terminate
its obligation may effect a "closing purchase transaction." This
is accomplished by buying an option of the same series as the
option previously written. The effect of the purchase is that
the writer's position will be cancelled by the clearing
corporation. However, a writer may not effect a closing purchase
transaction after being notified of the exercise of an option.
Likewise, an investor who is the holder of a listed option may
liquidate its position by effecting a "closing sale transaction".
This is accomplished by selling an option of the same series as
the option previously purchased. There is no guarantee that
either a closing purchase or a closing sale transaction can be
effected.
Effecting a closing transaction in the case of a written
call option will permit the Portfolio to write another call
option on the underlying security with either a different
exercise price or expiration date or both, or in the case of a
written put option will permit the Portfolio to write another put
option to the extent that the exercise price thereof is secured
by deposited cash or short-term securities. Also, effecting a
closing transaction will permit the cash or proceeds from the
concurrent sale of any securities subject to the option to be
used for other Portfolio investments. If the Portfolio desires
to sell a particular security from its portfolio on which it has
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written a call option, it will effect a closing transaction prior
to or concurrent with the sale of the security.
The Portfolio will realize a profit from a closing
transaction if the price of the transaction is less than the
premium received from writing the option or is more than the
premium paid to purchase the option; the Portfolio will realize a
loss from a closing transaction if the price of the transaction
is more than the premium received from writing the option or is
less than the premium paid to purchase the option. Because
increases in the market price of a call option will generally
reflect increases in the market price of the underlying security,
any loss resulting from the repurchase of a call option is likely
to be offset in whole or in part by appreciation of the
underlying security owned by the Portfolio.
An option position may be closed out only where there
exists a secondary market for an option of the same series. If a
secondary market does not exist, it might not be possible to
effect closing transactions in particular options with the result
that the Portfolio would have to exercise the options in order to
realize any profit. If the Portfolio is unable to effect a
closing purchase transaction in a secondary market, it will not
be able to sell the underlying security until the option expires
or it delivers the underlying security upon exercise. Reasons
for the absence of a liquid secondary market include the
following: (i) there may be insufficient trading interest in
certain options, (ii) restrictions may be imposed by a national
securities exchange ("Exchange") on opening transactions or
closing transactions or both, (iii) trading halts, suspensions or
other restrictions may be imposed with respect to particular
classes or series of options or underlying securities, (iv)
unusual or unforeseen circumstances may interrupt normal
operations on an Exchange, (v) the facilities of an Exchange or
the Options Clearing Corporation may not at all times be adequate
to handle current trading volume, or (vi) one or more Exchanges
could, for economic or other reasons, decide or be compelled at
some future date to discontinue the trading of options (or a
particular class or series of options), in which event the
secondary market on that Exchange (or in that class or series of
options) would cease to exist, although outstanding options on
that Exchange that had been issued by the Options Clearing
Corporation as a result of trades on that Exchange would continue
to be exercisable in accordance with their terms.
The Portfolio may write options in connection with buy-
and-write transactions; that is, the Portfolio may purchase a
security and then write a call option against that security. The
exercise price of the call the Portfolio determines to write will
depend upon the expected price movement of the underlying
security. The exercise price of a call option may be below ("in-
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the-money"), equal to ("at-the-money") or above ("out-of-the-
money") the current value of the underlying security at the time
the option is written. Buy-and-write transactions using in-the-
money call options may be used when it is expected that the price
of the underlying security will remain flat or decline moderately
during the option period. Buy-and-write transactions using at-
the-money call options may be used when it is expected that the
price of the underlying security will remain fixed or advance
moderately during the option period. Buy-and-write transactions
using out- of-the-money call options may be used when it is
expected that the premiums received from writing the call option
plus the appreciation in the market price of the underlying
security up to the exercise price will be greater than the
appreciation in the price of the underlying security alone. If
the call options are exercised in such transactions, the
Portfolio's maximum gain will be the premium received by it for
writing the option, adjusted upwards or downwards by the
difference between the Portfolio's purchase price of the security
and the exercise price. If the options are not exercised and the
price of the underlying security declines, the amount of such
decline will be offset in part, or entirely, by the premium
received.
The writing of covered put options is similar in terms
of risk/return characteristics to buy-and-write transactions. If
the market price of the underlying security rises or otherwise is
above the exercise price, the put option will expire worthless
and the Portfolio's gain will be limited to the premium received.
If the market price of the underlying security declines or
otherwise is below the exercise price, the Portfolio may elect to
close the position or take delivery of the security at the
exercise price and the Portfolio's return will be the premium
received from the put option minus the amount by which the market
price of the security is below the exercise price. Out-of-the-
money, at-the-money, and in-the-money put options may be used by
the Portfolio in the same market environments that call options
are used in equivalent buy- and-write transactions.
A portfolio may purchase put options to hedge against a
decline in the value of its portfolio. By using put options in
this way, the Portfolio will reduce any profit it might otherwise
have realized in the underlying security by the amount of the
premium paid for the put option and by transaction costs.
The Portfolio may purchase call options to hedge against
an increase in the price of securities that the Portfolio
anticipates purchasing in the future. The premium paid for the
call option plus any transaction costs will reduce the benefit,
if any, realized by the Portfolio upon exercise of the option,
and, unless the price of the underlying security rises
sufficiently, the option may expire worthless to the Portfolio.
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