AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION ON MARCH 11, 2011
FILE NO. 333-112207
811-21497
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
Post-Effective Amendment No. 10 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 13 X
---------------------------------
ALLIANCEBERNSTEIN CORPORATE SHARES
(Exact Name of Registrant As Specified In Charter)
1345 Avenue of the Americas, New York, New York 10105
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including Area Code:
(212) 969-1000
---------------------------------
Emilie D. Wrapp
c/o AllianceBernstein L.P.
1345 Avenue of the Americas
New York, New York 10105
(Name and address of agent for service)
Copies of communications to:
Kathleen K. Clarke
Seward & Kissel LLP
Suite 350
1200 G Street, N.W.
Washington, D.C. 20005
It is proposed that this filing will become effective (check appropriate
box)
[_] immediately upon filing pursuant to paragraph (b)
[_] on (date) pursuant to paragraph (b)
[_] 60 days after filing pursuant to paragraph (a)(1)
[_] on (date) pursuant to paragraph (a)(1)
[X] 75 days after filing pursuant to paragraph (a)(2)
[_] on (date) pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
[_] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
This Post-Effective Amendment No. 10 relates solely to shares of the
AllianceBernstein International Focus Income Shares. No information contained in
the Registrant's Registration Statement relating to AllianceBernstein Corporate
Income Shares, AllianceBernstein Municipal Income Shares, AllianceBernstein
Taxable Multi-Sector Income Shares and AllianceBernstein Tax-Aware Real Return
Income Shares is amended and superceded hereby.
[LOGO OMITTED]
AllianceBernstein International Focus Income Shares
--------------------------------------------------------------------------------
PROSPECTUS - [___________], 2011
--------------------------------------------------------------------------------
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this Prospectus. Any representation to
the contrary is a criminal offense.
[LOGO OMITTED]
Investment Products Offered
-------------------------------------------
o Are Not FDIC Insured
o May Lose Value
o Are Not Bank Guaranteed
-------------------------------------------
TABLE OF CONTENTS
SUMMARY INFORMATION.........................................................[__]
ADDITIONAL INFORMATION ABOUT THE FUND'S RISKS AND INVESTMENTS...............[__]
INVESTING IN THE FUND.......................................................[__]
How the Fund Values its Shares..........................................[__]
How to Buy Shares.......................................................[__]
How to Sell Shares......................................................[__]
MANAGEMENT OF THE FUND......................................................[__]
DIVIDENDS, DISTRIBUTIONS AND TAXES..........................................[__]
GENERAL INFORMATION.........................................................[__]
GLOSSARY OF INVESTMENT TERMS................................................[__]
FINANCIAL HIGHLIGHTS........................................................[__]
APPENDIX A - HYPOTHETICAL INVESTMENT AND EXPENSE INFORMATION................[__]
SUMMARY INFORMATION
--------------------------------------------------------------------------------
AllianceBernstein International Focus Income Shares
--------------------------------------------------------------------------------
INVESTMENT OBJECTIVE:
The Fund's investment objective is long-term growth of capital.
FEES AND EXPENSES OF THE FUND:
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
SHAREHOLDER FEES (fees paid directly from your investment)
--------------------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price) None
--------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load)
(as a percentage of original purchase price or
redemption proceeds, whichever is lower) None
--------------------------------------------------------------------------------
Exchange Fee None
ANNUAL FUND OPERATING EXPENSES (expenses that you pay each year as a percentage
of the value of your investment)
This table shows the fees and the Total Fund Operating Expenses of the Fund as
0.00% because the Adviser does not charge any fees or expenses and reimburses
all fund operating expenses, except certain extraordinary expenses, taxes,
brokerage costs and the interest on borrowings or certain leveraged
transactions. Participants in a wrap fee program eligible to invest in the Fund
pay fees to the program sponsor and should review the wrap program brochure
provided by the sponsor for a discussion of fees and expenses charged.
Management Fees 0.00%
Other Expenses 0.00%
-----
Total Fund Operating Expenses 0.00%
=====
EXAMPLES
The Examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. They assume that you invest
$10,000 in the Fund for the time periods indicated and then redeem all of your
shares at the end of those periods. They also assume that your investment has a
5% return each year and that the Fund's operating expenses stay the same.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
After 1 Year $0
After 3 Years $0
You would pay the following expenses if you did not redeem your shares at the
end of the period:
After 1 Year $0
After 3 Years $0
Portfolio Turnover
The Fund will pay transaction costs, such as commissions, when it buys or sells
securities (or "turns over" its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
shares are held in a taxable account. These transaction costs, which are not
reflected in the Annual Fund Operating Expenses or in the Examples, affect the
Fund's performance.
PRINCIPAL STRATEGIES:
The Fund seeks long-term growth of capital for separately managed accounts
("SMA") investors in wrap fee programs. The Fund is not designed as a
stand-alone investment. Its performance and objectives should be evaluated only
in the broader context of an SMA Investor's account, of which an investment in
the Fund is only a part.
The Fund pursues its objective by investing primarily in a focused portfolio of
approximately 20-30 equity securities of non-U.S. companies. Although the Fund
intends to invest substantially all of its assets in non-U.S. issuers under
normal circumstances, the Fund may at times invest in U.S. issuers, particularly
U.S. issuers whose growth prospects depend, in the Adviser's view, on non-U.S.
factors. Under normal market condition, the Fund invests significantly (at least
40%--unless market conditions are not deemed favorable by the Adviser) in
securities of non-U.S. companies. In addition, the Fund invests, under normal
circumstances, in the equity securities of companies located in at least three
countries (and normally substantially more) other than the United States.
In choosing investments, the Fund pursues an opportunistic investment strategy
and is unconstrained by considerations of capitalization range, industry sector
or country. The Fund may invest in any company in any type of industry
(including real-estate related issuers) and in any type of equity security,
listed or unlisted, with the potential for capital appreciation. Because of the
Fund's role as a complement to other investments in SMA Investors' account,
which will be typically comprised of American Depository Receipts, or ADRs, the
Fund may invest substantially in companies whose securities are not available as
ADRs, including companies in the small to mid-capitalization ranges and in
companies in the emerging markets.
The Fund may use derivatives, such as options, futures and forwards, to gain
exposure to certain non-U.S. markets or to hedge its positions or to complement
or hedge positions in SMA Investors' accounts other than Fund shares. The Fund
may also invest in synthetic equity securities, such as various types of
warrants used internationally that entitle a holder to buy or sell underlying
securities and convertible securities.
The Adviser employs a "bottom up" investment process that focuses on a company's
prospective earnings growth, valuation and quality of management. The Fund does
not target particular country or sector weightings. The percentage of the Fund's
assets invested in securities of companies in a particular country or industry
sector (or denominated in a particular currency) varies in accordance with the
Adviser's assessment of the appreciation potential of such securities. The Fund
may periodically invest in the securities of companies that are expected to
appreciate due to a development particularly or uniquely applicable to that
company, regardless of general business conditions or movements of the market as
a whole.
The Fund invests in both developed and emerging market countries. The Fund may
invest in established companies, but also in new and less-seasoned companies.
The Fund's investments in companies with smaller capitalizations may offer more
reward but may also entail greater risk than is generally true of larger, more
established companies.
When selecting securities, the Adviser typically looks for companies that have
strong, experienced management teams and the potential to support greater than
expected earnings growth rates. In making specific investment decisions for the
Fund, the Adviser combines fundamental analysis and quantitative tools in its
stock selection process.
Currencies can have a dramatic impact on equity returns, significantly adding to
returns in some years and greatly diminishing them in others. Currency and
equity positions are evaluated separately. The Adviser may seek to hedge the
currency exposure resulting from the Fund's securities positions when it finds
the currency exposure unattractive. The Adviser may also decide not to hedge
this exposure. To hedge all or a portion of its currency risk, the Fund may from
time to time invest in currency-related derivatives, including forward currency
exchange contracts, futures, options on futures, swaps and options. The Adviser
may also seek investment opportunities by taking long or short positions in
currencies through the use of currency-related derivatives. The Fund's currency
positions may include investment positions to complement positions in SMA
Investors' accounts other than Fund shares and positions intended to hedge
currency exposures relating to SMA Investors' accounts other than Fund shares.
Taking currency positions to complement or hedge currency positions in SMA
Investors' accounts may result in additional leverage for the Fund.
The Fund may make short sales of securities or maintain a short position, and
may use other investment techniques. The Fund may use leverage for investment
purposes to increase income by using the cash made available by derivative
instruments to make other investments in accordance with its investment
objective.
The Fund is non-diversified, meaning that it may invest more of its assets in a
smaller number of issuers.
PRINCIPAL RISKS:
o Market Risk: The value of the Fund's assets will fluctuate as the
equity markets fluctuate. The value of the Fund's investments may
decline, sometimes rapidly and unpredictably, simply because of
economic changes or other events that affect large portions of the
market.
o Foreign (Non-U.S.) Risk: Investments in securities of non-U.S.
issuers may involve more risk than those of U.S. issuers. These
securities may fluctuate more widely in price and may be less liquid
due to adverse market, economic, political, regulatory or other
factors.
o Emerging Market Risk: Investments in emerging market countries may
have more risk because these markets are less developed and less
liquid as well as being subject to increased economic, political,
regulatory, or other uncertainties.
o Currency Risk: Fluctuations in currency exchange risk may negatively
affect the value of the Fund's investments or reduce its returns.
o Focused Portfolio Risk: Investments in a limited number of companies
may have more risk because changes in the value of a single security
may have a more significant effect, either negative or positive, on
the Fund's net asset value ("NAV").
o Derivatives Risk: Investments in derivatives may be illiquid,
difficult to price, and leveraged so that small changes may produce
disproportionate losses for the Fund, and may be subject to
counterparty risk to a greater degree than more traditional
investments.
o Leverage Risk: To the extent the Fund uses leveraging techniques,
its NAV may be more volatile because leverage tends to exaggerate
the effect of changes in interest rates and any increase or decrease
in the value of the Fund's shares.
o Capitalization Risk: Investments in small- and mid-capitalization
companies may be more volatile than investments in large-cap
companies. Investments in small-cap companies may have additional
risks because these companies have limited product lines, markets or
financial resources.
o Real Estate Risk: The Fund's investments in the real estate market
have many of the same risks as direct ownership of real estate,
including the risk that the value of real estate could decline due
to a variety of factors the affect the real estate market generally.
Investments in real estate investment trusts or "REITs" may have
additional risks. REITs are dependent on the capability of their
managers, may have limited diversification, and could be
significantly affected by changes in tax laws.
o Diversification Risk: The Fund may have more risk because it is
"non-diversified", meaning that it can invest more of its asserts in
a smaller number of issuers and that adverse changes in the value of
one security could have a more significant effect on the Fund's NAV.
o Management Risk: The Fund is subject to management risk because it
is an actively managed investment fund. The Adviser will apply its
investment techniques and risk analyses in making investment
decisions, but there is no guarantee that its techniques will
produce the intended results.
As with all investments, you may lose money by investing in the Fund.
PERFORMANCE INFORMATION:
No performance information is available for the Fund because it has not yet been
in operation for a full calendar year.
INVESTMENT ADVISER:
AllianceBernstein L.P. is the investment adviser for the Fund.
PORTFOLIO MANAGERS:
Laurent Saltiel, a Senior Vice President of the Adviser, has been the person
responsible for day-to-day management of the Portfolio's portfolio since its
inception.
PURCHASE AND SALE OF FUND SHARES
You may purchase shares of the Fund at the relevant NAV without a sales charge
or other fee. Shares of the Fund are offered exclusively through registered
investment advisers approved by the Adviser. There are no maximum or minimum
investment requirements.
You may "redeem" your shares through your broker-dealer on any day the New York
Stock Exchange is open.
TAX INFORMATION
The Fund may make income distributions or capital gains distributions, which may
be subject to federal income taxes and taxable as ordinary income or capital
gains, and may also be subject to state and local income taxes.
PAYMENTS TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
If you purchase shares of the Fund through a broker-dealer or other financial
intermediary (such as a bank), the Fund and its related companies may pay the
intermediary for the sale of Fund shares and related services. These payments
may create a conflict of interest by influencing the broker-dealer or other
financial intermediary and your salesperson to recommend the Fund over another
investment. Ask your salesperson or visit your financial intermediary's website
for more information.
ADDITIONAL INFORMATION ABOUT THE FUND'S RISKS AND INVESTMENTS
--------------------------------------------------------------------------------
This section of the Prospectus provides additional information about the Fund's
investment practices and related risks. Most of these investment practices are
discretionary, which means that the Adviser may or may not decide to use them.
This Prospectus does not describe all of the Fund's investment practices and
additional information about the Fund's risks and investments can be found in
the Fund's Statement of Additional Information, or SAI.
Derivatives
The Fund may, but is not required to, use derivatives for risk management
purposes or as part of its investment strategies. Derivatives are financial
contracts whose value depends on, or is derived from, the value of an underlying
asset, reference rate or index. The Fund may use derivatives to earn income and
enhance returns, to hedge or adjust the risk profile of a portfolio, to replace
more traditional direct investments and to obtain exposure to otherwise
inaccessible markets.
There are four principal types of derivatives, including options, futures,
forwards and swaps, which are described below. Derivatives may be (i)
standardized, exchange-traded contracts or (ii) customized, privately negotiated
contracts. Exchange-traded derivatives tend to be more liquid and subject to
less credit risk than those that are privately negotiated.
The Fund's use of derivatives may involve risks that are different from, or
possibly greater than, the risks associated with investing directly in
securities or other more traditional instruments. These risks include the risk
that the value of a derivative instrument may not correlate perfectly, or at
all, with the value of the assets, reference rates, or indices that they are
designed to track. Other risks include the possible absence of a liquid
secondary market for a particular instrument and possible exchange-imposed price
fluctuation limits, either of which may make it difficult or impossible to close
out a position when desired and the risk that the counterparty will not perform
its obligations. Certain derivatives may have a leverage component and involve
leverage risk. Adverse changes in the value or level of the underlying asset,
note or index can result in a loss substantially greater than the Fund's
investment (in some cases, the potential loss is unlimited).
The Fund's investments in derivatives may include, but are not limited to, the
following:
o Forward Contracts-- A forward contract is an agreement that obligates one
party to buy, and the other party to sell, a specific quantity of an
underlying commodity or other tangible asset for an agreed upon price at a
future date. A forward contract is either settled by physical delivery of
the commodity or tangible asset to an agreed-upon location at a future
date, rolled forward into a new forward contract or, in the case of a
non-deliverable forward, by a cash payment at maturity. The Fund's
investments in forward contracts may include the following:
- Forward Currency Exchange Contracts. The Fund may purchase or sell
forward currency exchange contracts for hedging purposes to minimize
the risk from adverse changes in the relationship between the U.S.
Dollar and other currencies or for non-hedging purposes as a means
of making direct investments in foreign currencies, as described
below under "Other Derivatives and Strategies -- Currency
Transactions". The Fund, for example, may enter into a forward
contract as a transaction hedge (to "lock in" the U.S. Dollar price
of a non-U.S. Dollar security), as a position hedge (to protect the
value of securities the Fund owns that are denominated in a foreign
currency against substantial changes in the value of the foreign
currency) or as a cross-hedge (to protect the value of securities
the Fund owns that are denominated in a foreign currency against
substantial changes in the value of that foreign currency by
entering into a forward contract for a different foreign currency
that is expected to change in the same direction as the currency in
which the securities are denominated).
o Futures Contracts and Options on Futures Contracts-- A futures contract is
an agreement that obligates the buyer to buy and the seller to sell a
specified quantity of an underlying asset (or settle for cash the value of
a contract based on an underlying asset, rate or index) at a specific
price on the contract maturity date. Options on futures contracts are
options that call for the delivery of futures contracts upon exercise. The
Fund may purchase or sell futures contracts and options thereon to hedge
against changes in interest rates, securities (through index futures or
options) or currencies. The Fund may also purchase or sell futures
contracts for foreign currencies or options thereon for non-hedging
purposes as a means of making direct investments in foreign currencies, as
described below under "Other Derivatives and Strategies -- Currency
Transactions".
o Options-- An option is an agreement that, for a premium payment or fee,
gives the option holder (the buyer) the right but not the obligation to
buy (a "call option") or sell (a "put option") the underlying asset (or
settle for cash an amount based on an underlying asset, rate or index) at
a specified price (the exercise price) during a period of time or on a
specified date. Investments in options are considered speculative. The
Fund may lose the premium paid for them if the price of the underlying
security or other asset decreased or remained the same (in the case of a
call option) or increased or remained the same (in the case of a put
option). If a put or call option purchased by the Fund were permitted to
expire without being sold or exercised, its premium would represent a loss
to the Fund. The Fund's investments in options include the following:
- Options on Securities. The Fund may purchase or write a put or call
option on securities. The Fund will only exercise an option it
purchased if the price of the security was less (in the case of a
put option) or more (in the case of a call option) than the exercise
price. If the Fund does not exercise an option, the premium it paid
for the option will be lost. The Fund may write covered options,
which means writing an option for securities the Fund owns, and
uncovered options. The Fund may also enter into options on the yield
"spread" or yield differential between two securities. In contrast
to other types of options, this option is based on the difference
between the yields of designated securities, futures or other
instruments. In addition, the Fund may write covered straddles. A
straddle is a combination of a call and a put written on the same
underlying security. In purchasing an option on securities, the Fund
would be in a position to realize a gain if, during the option
period, the price of the underlying securities increased (in the
case of a call) or decreased (in the case of a put) by an amount in
excess of the premium paid; otherwise the Fund would experience a
loss not greater than the premium paid for the option. Thus, the
Fund would realize a loss if the price of the underlying security
declined or remained the same (in the case of a call) or increased
or remained the same (in the case of a put) or otherwise did not
increase (in the case of a put) or decrease (in the case of a call)
by more than the amount of the premium. If a put or call option
purchased by the Fund were permitted to expire without being sold or
exercised, its premium would represent a loss to the Fund.
If the Fund purchases or writes privately negotiated options on
securities, it will effect such transactions only with investment
dealers and other financial institutions (such as commercial banks
or savings and loan institutions) deemed creditworthy by the
Adviser. The Adviser has adopted procedures for monitoring the
creditworthiness of such counterparties.
- Options on Securities Indices. An option on a securities index is
similar to an option on a security except that, rather than taking
or making delivery of a security at a specified price, an option on
a securities index gives the holder the right to receive, upon
exercise of the option, an amount of cash if the closing level of
the chosen index is greater than (in the case of a call) or less
than (in the case of a put) the exercise price of the option.
- Options on Foreign Currencies. The Fund may invest in options on
foreign currencies that are privately negotiated or traded on U.S.
or foreign exchanges for hedging purposes to protect against
declines in the U.S. Dollar value of foreign currency denominated
securities held by the Fund and against increases in the U.S. Dollar
cost of securities to be acquired. The purchase of an option on a
foreign currency may constitute an effective hedge against
fluctuations in exchange rates, although if rates move adversely,
the Fund may forfeit the entire amount of the premium plus related
transaction costs. The Fund may also invest in options on foreign
currencies for non-hedging purposes as a means of making direct
investments in foreign currencies, as described below under "Other
Derivatives and Strategies -- Currency Transactions".
o Swap Transactions-- A swap is an agreement that obligates two parties to
exchange a series of cash flows at specified intervals (payment dates)
based upon or calculated by reference to changes in specified prices or
rates (interest rates in the case of interest rate swaps, currency
exchange rates in the case of currency swaps) for a specified amount of an
underlying asset (the "notional" principal amount). Except for currency
swaps, the notional principal amount is used solely to calculate the
payment stream, but is not exchanged. Swaps are entered into on a net
basis (i.e., the two payment streams are netted out, with the Fund
receiving or paying, as the case may be, only the net amount of the two
payments). The Fund's investments in swap transactions include the
following:
-- Currency Swaps. The Fund may invest in currency swaps for hedging
purposes to protect against adverse changes in exchange rates
between the U.S. Dollar and other currencies or for non-hedging
purposes as a means of making direct investments in foreign
currencies, as described below under "Other Derivatives and
Strategies -- Currency Transactions". Currency swaps involve the
individually negotiated exchange by the Fund with another party of a
series of payments in specified currencies. Actual principal amounts
of currencies may be exchanged by the counterparties at the
initiation, and again upon the termination of the transaction.
Therefore, the entire principal value of a currency swap is subject
to the risk that the swap counterparty will default on its
contractual delivery obligations. If there is a default by the
counterparty to the transaction, the Fund will have contractual
remedies under the transaction agreements.
- Credit Default Swap Agreements. The "buyer" in a credit default swap
contract is obligated to pay the "seller" a periodic stream of
payments over the term of the contract in return for a contingent
payment upon the occurrence of a credit event with respect to an
underlying reference obligation. Generally, a credit event means
bankruptcy, failure to pay, obligation acceleration or modified
restructuring. The Fund may be either the buyer or seller in the
transaction. If the Fund is a seller, the Fund receives a fixed rate
of income throughout the term of the contract, which typically is
between one month and five years, provided that no credit event
occurs. If a credit event occurs, the Fund typically must pay the
contingent payment to the buyer, which is typically the "par value"
(full notional value) of the reference obligation. The contingent
payment may be a cash settlement or by physical delivery of the
reference obligation in return for payment of the face amount of the
obligation. The value of the reference obligation received by the
Fund coupled with the periodic payments previously received may be
less than the full notional value it pays to the buyer, resulting in
a loss of value to the Fund. If the reference obligation is a
defaulted security, physical delivery of the security will cause the
Fund to hold a defaulted security. If the Fund is a buyer and no
credit event occurs, the Fund will lose its periodic stream of
payments over the term of the contract. However, if a credit event
occurs, the buyer typically receives full notional value for a
reference obligation that may have little or no value.
Credit default swaps may involve greater risks than if the Fund had
invested in the reference obligation directly. Credit default swaps
are subject to general market risk, liquidity risk and credit risk.
o Other Derivatives and Strategies--
-- Currency Transactions. The Fund may invest in non-U.S.
Dollar-denominated securities on a currency hedged or un-hedged
basis. The Adviser may actively manage the Fund's currency exposures
and may seek investment opportunities by taking long or short
positions in currencies through the use of currency-related
derivatives, including forward currency exchange contracts, futures
and options on futures, swaps and options. The Adviser may enter
into transactions for investment opportunities when it anticipates
that a foreign currency will appreciate or depreciate in value but
securities denominated in that currency are not held by the Fund and
do not present attractive investment opportunities. Such
transactions may also be used when the Adviser believes that it may
be more efficient than a direct investment in a foreign
currency-denominated security. The Fund may also conduct currency
exchange contracts on a spot basis (i.e., for cash at the spot rate
prevailing in the currency exchange market for buying or selling
currencies).
-- Synthetic Foreign Equity Securities. The Fund may invest in
different types of derivatives generally referred to as synthetic
foreign equity securities. These securities may include
international warrants or local access products. International
warrants are financial instruments issued by banks or other
financial institutions, which may or may not be traded on a foreign
exchange. International warrants are a form of derivative security
that may give holders the right to buy or sell an underlying
security or a basket of securities representing an index from or to
the issuer of the warrant for a particular price or may entitle
holders to receive a cash payment relating to the value of the
underlying security or index, in each case upon exercise by the
Fund. Local access products are similar to options in that they are
exercisable by the holder for an underlying security or a cash
payment based upon the value of that security, but are generally
exercisable over a longer term than typical options. These types of
instruments may be American style, which means that they can be
exercised at any time on or before the expiration date of the
international warrant, or European style, which means that they may
be exercised only on the expiration date.
Other types of synthetic foreign equity securities in which the Fund
may invest include covered warrants and low exercise price warrants.
Covered warrants entitle the holder to purchase from the issuer,
typically a financial institution, upon exercise, common stock of an
international company or receive a cash payment (generally in U.S.
Dollars). The issuer of the covered warrant usually owns the
underlying security or has a mechanism, such as owning equity
warrants on the underlying securities, through which they can obtain
the securities. The cash payment is calculated according to a
predetermined formula, which is generally based on the difference
between the value of the underlying security on the date of exercise
and the strike price. Low exercise price warrants are warrants with
an exercise price that is very low relative to the market price of
the underlying instrument at the time of issue (e.g., one cent or
less). The buyer of a low exercise price warrant effectively pays
the full value of the underlying common stock at the outset. In the
case of any exercise of warrants, there may be a time delay between
the time a holder of warrants gives instructions to exercise and the
time the price of the common stock relating to exercise or the
settlement date is determined, during which time the price of the
underlying security could change significantly. In addition, the
exercise or settlement date of the warrants may be affected by
certain market disruption events, such as difficulties relating to
the exchange of a local currency into U.S. Dollars, the imposition
of capital controls by a local jurisdiction or changes in the laws
relating to foreign investments. These events could lead to a change
in the exercise date or settlement currency of the warrants, or
postponement of the settlement date. In some cases, if the market
disruption events continue for a certain period of time, the
warrants may become worthless, resulting in a total loss of the
purchase price of the warrants.
The Fund will acquire synthetic foreign equity securities issued by
entities deemed to be creditworthy by the Adviser, which will
monitor the creditworthiness of the issuers on an on-going basis.
Investments in these instruments involve the risk that the issuer of
the instrument may default on its obligation to deliver the
underlying security or cash in lieu thereof. These instruments may
also be subject to liquidity risk because there may be a limited
secondary market for trading the warrants. They are also subject,
like other investments in foreign securities, to foreign (non-U.S.)
risk and currency risk.
Convertible Securities
Prior to conversion, convertible securities have the same general
characteristics as non-convertible debt securities, which generally provide a
stable stream of income with generally higher yields than those of equity
securities of the same or similar issuers. The price of a convertible security
will normally vary with changes in the price of the underlying equity security,
although the higher yield tends to make the convertible security less volatile
than the underlying equity security. As with debt securities, the market value
of convertible securities tends to decrease as interest rates rise and increase
as interest rates decline. While convertible securities generally offer lower
interest or dividend yields than non-convertible debt securities of similar
quality, they offer investors the potential to benefit from increases in the
market prices of the underlying common stock. Convertible debt securities that
are rated Baa3 or lower by Moody's or BBB- or lower by S&P or Fitch and
comparable unrated securities may share some or all of the risks of debt
securities with those ratings.
Depositary Receipts
The Fund may invest in depositary receipts. Depositary receipts may not
necessarily be denominated in the same currency as the underlying securities
into which they may be converted. In addition, the issuers of the stock of
unsponsored depositary receipts are not obligated to disclose material
information in the United States and, therefore, there may not be a correlation
between such information and the market value of the depositary receipts. ADRs
are depositary receipts typically issued by a U.S. bank or trust company that
evidence ownership of underlying securities issued by a foreign corporation.
Global Depository Receipts, or GDRs, European Depository Receipts, or EDRs and
other types of depositary receipts are typically issued by non-U.S. banks or
trust companies and evidence ownership of underlying securities issued by either
a U.S. or a non-U.S. company. Generally, depositary receipts in registered form
are designed for use in the U.S. securities markets, and depositary receipts in
bearer form are designed for use in securities markets outside of the United
States. For purposes of determining the country of issuance, investments in
depositary receipts of either type are deemed to be investments in the
underlying securities.
Forward Commitments
Forward commitments for the purchase or sale of securities may include purchases
on a when-issued basis or purchases or sales on a delayed delivery basis. In
some cases, a forward commitment may be conditioned upon the occurrence of a
subsequent event, such as approval and consummation of a merger, corporate
reorganization or debt restructuring or approval of a proposed financing by
appropriate authorities (i.e., a "when, as and if issued" trade).
When forward commitments with respect to fixed-income securities are negotiated,
the price, which is generally expressed in yield terms, is fixed at the time the
commitment is made, but payment for and delivery of the securities take place at
a later date. Securities purchased or sold under a forward commitment are
subject to market fluctuation and no interest or dividends accrue to the
purchaser prior to the settlement date. There is the risk of loss if the value
of either a purchased security declines before the settlement date or the
security sold increases before the settlement date. The use of forward
commitments helps the Fund to protect against anticipated changes in interest
rates and prices.
Illiquid Securities
Under current Commission guidelines, the Fund limits its investments in illiquid
securities to 15% of its net assets. The term "illiquid securities" for this
purpose means securities that cannot be disposed of within seven days in the
ordinary course of business at approximately the amount the Fund has valued the
securities. If the Fund invests in illiquid securities, the Fund may not be able
to sell such securities and may not be able to realize their full value upon
sale. Restricted securities (securities subject to legal or contractual
restrictions on resale) may be illiquid. Some restricted securities (such as
securities issued pursuant to Rule 144A under the Securities Act of 1933 (the
"Securities Act") or certain commercial paper) may be treated as liquid,
although they may be less liquid than registered securities traded on
established secondary markets.
Investment in Other Investment Companies
The Fund may invest in other investment companies as permitted by the Investment
Company Act of 1940 (the "1940 Act") or the rules and regulations thereunder.
The Fund intends to invest uninvested cash balances in an affiliated money
market fund as permitted by Rule 12d1-1 under the 1940 Act. If the Fund acquires
shares in investment companies, shareholders would bear, indirectly, the
expenses of such investment companies (which may include management and advisory
fees), which are in addition to the Fund's expenses. The Fund may also invest in
exchange traded funds, subject to the restrictions and limitations of the 1940
Act or any applicable rules, (exemptive orders or regulatory guidance).
Loans of Portfolio Securities
For the purposes of achieving income, the Fund may make secured loans of
portfolio securities to brokers, dealers and financial institutions, provided a
number of conditions are satisfied, including that the loan is fully
collateralized. Securities lending involves the possible loss of rights in the
collateral or delay in the recovery of collateral if the borrower fails to
return the securities loaned or becomes insolvent. When the Fund lends
securities, its investment performance will continue to reflect changes in the
value of the securities loaned, and the Fund will also receive a fee or interest
on the collateral. The Fund may pay reasonable finders', administrative, and
custodial fees in connection with a loan.
Preferred Stock
The Fund may invest in preferred stock. Preferred stock is subordinated to any
debt the issuer has outstanding. Accordingly, preferred stock dividends are not
paid until all debt obligations are first met. Preferred stock may be subject to
more fluctuations in market value, due to changes in market participants'
perceptions of the issuer's ability to continue to pay dividends, than debt of
the same issuer.
Real Estate Investment Trusts
REITs are pooled investment vehicles that invest primarily in income producing
real estate or real estate related loans or interests. REITs are generally
classified as equity REITs, mortgage REITs or a combination of equity and
mortgage REITs. Equity REITs invest the majority of their assets directly in
real property and derive income primarily from the collection of rents. Equity
REITs can also realize capital gains by selling properties that have appreciated
in value. Mortgage REITs invest the majority of their assets in real estate
mortgages and derive income from the collection of interest payments. Similar to
investment companies such as the Fund, REITs are not taxed on income distributed
to shareholders provided they comply with several requirements of the United
States Internal Revenue Code of 1986, as amended (the "Code"). The Fund will
indirectly bear its proportionate share of expenses incurred by REITs in which
the Fund invests in addition to the expenses incurred directly by the Fund.
Repurchase Agreements and Buy/Sell Back Transactions
The Fund may enter into repurchase agreements in which the Fund purchases a
security from a bank or broker-dealer, which agrees to repurchase the security
from the Fund at an agreed-upon future date, normally a day or a few days later.
The purchase and repurchase obligations are transacted under one agreement. The
resale price is greater than the purchase price, reflecting an agreed-upon
interest rate for the period the buyer's money is invested in the security. Such
agreements permit the Fund to keep all of its assets at work while retaining
"overnight" flexibility in pursuit of investments of a longer-term nature. If
the bank or broker-dealer defaults on its repurchase obligation, the Fund would
suffer a loss to the extent that the proceeds from the sale of the security were
less than the repurchase price.
The Fund may enter into buy/sell back transactions, which are similar to
repurchase agreements. In this type of transaction, the Fund enters a trade to
buy securities at one price and simultaneously enters a trade to sell the same
securities at another price on a specified date. Similar to a repurchase
agreement, the repurchase price is higher than the sale price and reflects
current interest rates. Unlike a repurchase agreement, however, the buy/sell
back transaction is considered two separate transactions.
Reverse Repurchase Agreements
A reverse repurchase agreement involves the sale of a security by the Fund and
its agreement to repurchase the instrument at a specified time and price, and
may be considered a form of borrowing for some purposes. Reverse repurchase
agreements are subject to the Fund's limitations on borrowings and create
leverage risk for the Fund. In addition, reverse repurchase agreements involve
the risk that the market value of the securities the Fund is obligated to
repurchase may decline below the purchase price.
Rights and Warrants
Rights and warrants are option securities permitting their holders to subscribe
for other securities. Rights are similar to warrants except that they have a
substantially shorter duration. Rights and warrants do not carry with them
dividend or voting rights with respect to the underlying securities, or any
rights in the assets of the issuer. As a result, an investment in rights and
warrants may be considered more speculative than certain other types of
investments. In addition, the value of a right or a warrant does not necessarily
change with the value of the underlying securities, and a right or a warrant
ceases to have value if it is not exercised prior to its expiration date.
Short Sales
The Fund may make short sales as a part of overall portfolio management or to
offset a potential decline in the value of a security. A short sale involves the
sale of a security that the Fund does not own, or if the Fund owns the security,
is not to be delivered upon consummation of the sale. When the Fund makes a
short sale of a security that it does not own, it must borrow from a
broker-dealer the security sold short and deliver the security to the
broker-dealer upon conclusion of the short sale.
If the price of the security sold short increases between the time of the short
sale and the time the Fund replaces the borrowed security, the Fund will incur a
loss; conversely, if the price declines, the Fund will realize a short-term
capital gain. Although the Fund's gain is limited to the price at which it sold
the security short, its potential loss is theoretically unlimited.
ADDITIONAL RISK AND OTHER CONSIDERATIONS
Investments in the Fund involve the special risk considerations described below.
Certain of these risks may be heightened when investing in emerging markets.
Borrowing and Leverage
The Fund may use borrowings for investment purposes subject to the applicable
statutory or regulatory requirements. Borrowings by the Fund result in
leveraging of the Fund's shares. The Fund may also use leverage transactions for
investment purposes, subject to the applicable statutory or regulatory
requirements, by entering into derivative transactions.
Utilization of leverage, which is usually considered speculative, involves
certain risks to the Fund's shareholders. These include a higher volatility of
the NAV of the Fund's shares and the relatively greater effect on the NAV of the
shares. So long as the Fund is able to realize a net return on its investment
portfolio that is higher than the carrying costs of leveraged transactions or
the interest expense paid on borrowings, the effect of leverage will be to cause
the Fund's shareholders to realize a higher current net investment income than
if the Fund were not leveraged. If the carrying costs of leveraged transactions
or the interest expense paid on borrowings approach the net return on the Fund's
investment portfolio, the benefit of leverage to the Fund's shareholders will be
reduced. If the carrying costs of leveraged transactions or the interest expense
paid on borrowings were to exceed the net return to shareholders, the Fund's use
of leverage would result in a lower rate of return. Similarly, the effect of
leverage in a declining market could be a greater decrease in NAV. In an extreme
case, if the Fund's current investment income were not sufficient to meet the
carrying costs of leveraged transactions or the interest expense paid on
borrowings, it could be necessary for the Fund to liquidate certain of its
investments, thereby reducing its NAV.
Foreign (Non-U.S.) Securities
Investing in foreign securities involves special risks and considerations not
typically associated with investing in U.S. securities. The securities markets
of many foreign countries are relatively small, with the majority of market
capitalization and trading volume concentrated in a limited number of companies
representing a small number of industries. Investments in foreign securities may
experience greater price volatility and significantly lower liquidity than U.S.
portfolios. These markets may be subject to greater influence by adverse events
generally affecting the market, and by large investors trading significant
blocks of securities, than is usual in the United States.
Securities registration, custody, and settlement may in some instances be
subject to delays and legal and administrative uncertainties. Foreign investment
in the securities markets of certain foreign countries is restricted or
controlled to varying degrees. These restrictions or controls may at times limit
or preclude investment in certain securities and may increase the cost and
expenses of the Fund. In addition, the repatriation of investment income,
capital or the proceeds of sales of securities from certain of the countries is
controlled under regulations, including in some cases the need for certain
advance government notification or authority, and if a deterioration occurs in a
country's balance of payments, the country could impose temporary restrictions
on foreign capital remittances.
The Fund also could be adversely affected by delays in, or a refusal to grant,
any required governmental approval for repatriation, as well as by the
application to it of other restrictions on investment. Investing in local
markets may require the Fund to adopt special procedures or seek local
governmental approvals or other actions, any of which may involve additional
costs to the Fund. These factors may affect the liquidity of the Fund's
investments in any country and the Adviser will monitor the effect of any such
factor or factors on the Fund's investments. Transaction costs, including
brokerage commissions for transactions both on and off the securities exchanges,
in many foreign countries are generally higher than in the United States.
Issuers of securities in foreign jurisdictions are generally not subject to the
same degree of regulation as are U.S. issuers with respect to such matters as
insider trading rules, restrictions on market manipulation, shareholder proxy
requirements, and timely disclosure of information. The reporting, accounting,
and auditing standards of foreign countries may differ, in some cases
significantly, from U.S. standards in important respects, and less information
may be available to investors in foreign securities than to investors in U.S.
securities. Substantially less information is publicly available about certain
non-U.S. issuers than is available about most U.S. issuers.
The economies of individual foreign countries may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross domestic
product or gross national product, rate of inflation, capital reinvestment,
resource self-sufficiency, and balance of payments position. Nationalization,
expropriation or confiscatory taxation, currency blockage, political changes,
government regulation, political or social instability, revolutions, wars or
diplomatic developments could affect adversely the economy of a foreign country.
In the event of nationalization, expropriation, or other confiscation, the Fund
could lose its entire investment in securities in the country involved. In
addition, laws in foreign countries governing business organizations, bankruptcy
and insolvency may provide less protection to security holders such as the Fund
than that provided by U.S. laws.
Investments in securities of companies in emerging markets involve special
risks. There are approximately 100 countries identified by the World Bank
(International Bank for Reconstruction and Development) as Low Income, Lower
Middle Income and Upper Middle Income countries that are generally regarded as
Emerging Markets. Emerging market countries that the Adviser currently considers
for investment are listed below. Countries may be added to or removed from this
list at any time.
Algeria Hong Kong Poland
Argentina Hungary Qatar
Belize India Romania
Brazil Indonesia Russia
Bulgaria Israel Singapore
Chile Jamaica Slovakia
China Jordan Slovenia
Colombia Kazakhstan South Africa
Costa Rica Lebanon South Korea
Cote D'Ivoire Malaysia Taiwan
Croatia Mexico Thailand
Czech Republic Morocco Trinidad & Tobago
Dominican Republic Nigeria Tunisia
Ecuador Pakistan Turkey
Egypt Panama Ukraine
El Salvador Peru Uruguay
Guatemala Philippines Venezuela
Investing in emerging market securities imposes risks different from, or greater
than, risks of investing in domestic securities or in the securities of
companies in foreign, developed countries. These risks include: smaller market
capitalization of securities markets, which may suffer periods of relative
illiquidity; significant price volatility; restrictions on foreign investment;
and possible repatriation of investment income and capital. In addition, foreign
investors may be required to register the proceeds of sales; future economic or
political crises could lead to price controls, forced mergers, expropriation or
confiscatory taxation, seizure, nationalization or creation of government
monopolies. The currencies of emerging market countries may experience
significant declines against the U.S. Dollar, and devaluation may occur
subsequent to investments in these currencies by the Fund. Inflation and rapid
fluctuations in inflation rates have had, and may continue to have, negative
effects on the economies and securities markets of certain emerging market
countries.
Additional risks of emerging market securities may include: greater social,
economic and political uncertainty and instability; more substantial
governmental involvement in the economy; less governmental supervision and
regulation; unavailability of currency hedging techniques; companies that are
newly organized and small; differences in auditing and financial reporting
standards, which may result in unavailability of material information about
issuers; and less developed legal systems. In addition, emerging securities
markets may have different clearance and settlement procedures, which may be
unable to keep pace with the volume of securities transactions or otherwise make
it difficult to engage in such transactions. Settlement problems may cause the
Fund to miss attractive investment opportunities, hold a portion of its assets
in cash pending investment, or be delayed in disposing of a portfolio security.
Such a delay could result in possible liability to a purchaser of the security.
Foreign (Non-U.S.) Currencies
The Fund will be adversely affected by reductions in the value of foreign
currencies relative to the U.S. Dollar. Foreign currency exchange rates may
fluctuate significantly. They are determined by supply and demand in the foreign
exchange markets, the relative merits of investments in different countries,
actual or perceived changes in interest rates, and other complex factors.
Currency exchange rates also can be affected unpredictably by intervention (or
the failure to intervene) by U.S. or foreign governments or central banks or by
currency controls or political developments. In light of these risks, the Fund
may engage in certain currency hedging transactions, as described above, which
involve certain special risks.
The Fund may also invest directly in foreign currencies for non-hedging
purposes, directly on a spot basis (i.e., cash) or through derivative
transactions, such as forward currency exchange contracts, futures and options
thereon, swaps and options as described above. These investments will be subject
to the same risks. In addition, currency exchange rates may fluctuate
significantly over short periods of time, causing the Fund's NAV to fluctuate.
Investment in Smaller, Less-Seasoned Companies
Investment in smaller, less-seasoned companies involves greater risks than is
customarily associated with securities of more established companies. Companies
in the earlier stages of their development often have products and management
personnel that have not been thoroughly tested by time or the marketplace; their
financial resources may not be as substantial as those of more established
companies. The securities of smaller, less-seasoned companies may have
relatively limited marketability and may be subject to more abrupt or erratic
market movements than securities of larger, more established companies or broad
market indices. The revenue flow of such companies may be erratic and their
results of operations may fluctuate widely and may also contribute to stock
price volatility.
Future Developments
The Fund may take advantage of other investment practices that are not currently
contemplated for use by the Fund, or are not available but may yet be developed,
to the extent such investment practices are consistent with the Fund's
investment objective and legally permissible for the Fund. Such investment
practices, if they arise, may involve risks that exceed those involved in the
activities described above.
Changes in Investment Objectives and Policies
The AllianceBernstein Corporate Shares's Board of Trustees (the "Board") may
change the Fund's investment objective without shareholder approval. The Fund
will provide shareholders with 60 days' prior written notice of any change to
the Fund's investment objective. Unless otherwise noted, all other investment
policies of the Fund may be changed without shareholder approval.
Temporary Defensive Position
For temporary defensive purposes in an attempt to respond to adverse market,
economic, political or other conditions, the Fund may reduce its position in
equity securities and invest in, without limit, certain types of short-term,
liquid, high-grade or high-quality debt securities. While the Fund is investing
for temporary defensive purposes, it may not meet its investment objectives.
Portfolio Holdings
A description of the Fund's policies and procedures with respect to the
disclosure of portfolio securities is available in the Fund's SAI.
PURCHASE AND SALE OF SHARES
--------------------------------------------------------------------------------
HOW THE FUND VALUES ITS SHARES
The Fund's NAV is calculated at the close of regular trading on the New York
Stock Exchange (the "Exchange") (ordinarily, 4:00 p.m., Eastern time), only on
days when the Exchange is open for business. To calculate NAV, the Fund's assets
are valued and totaled, liabilities are subtracted, and the balance, called net
assets, is divided by the number of shares outstanding.
The Fund values its securities at their current market value determined on the
basis of market quotations or, if market quotations are not readily available or
are unreliable, at "fair value" as determined in accordance with procedures
established by and under the general supervision of the Board. When the Fund
uses fair value pricing, it may take into account any factors it deems
appropriate. The Fund may determine fair value based upon developments related
to a specific security and/or U.S. sector or broader stock market indices. The
prices of securities used by the Fund to calculate its NAV may differ from
quoted or published prices for the same securities. Fair value pricing involves
subjective judgments and it is possible that the fair value determined for a
security is materially different than the value that could be realized upon the
sale of that security.
Securities for which market quotations are not readily available or deemed
unreliable (including restricted securities) are valued at fair market value.
Factors considered in making this determination may include, but are not limited
to, information obtained by contacting the issuer or analysts, or by analysis of
the issuer's financial statements. The Fund may value these securities using
fair value prices based on independent pricing services or third party vendor
tools to the extent available. Subject to the Board's oversight, the Board has
delegated responsibility for valuing the Fund's assets to the Adviser. The
Adviser has established a Valuation Committee, which operates under policies and
procedures approved by the Board, to value the Fund's assets on behalf of the
Fund. The Valuation Committee values Fund assets as described above. The Fund
expects to use fair value pricing for securities primarily traded on U.S.
exchanges only under very limited circumstances, such as the early closing of
the exchange on which a security is traded or suspension of trading in the
security.
HOW TO BUY SHARES
You may purchase shares of the Fund at the relevant NAV without a sales charge
or other fee. Your order for purchase, sale, or exchange of shares is priced at
the next-determined NAV calculated after your order is received in proper form
by the Fund.
Shares of the Fund are offered exclusively through registered investment
advisers approved by the Adviser.
Initial and Additional Investments
You may purchase shares only through accounts established under a wrap-fee
program sponsored and maintained by a registered investment adviser approved by
the Adviser. There are no maximum or minimum investment requirements. In most
cases, purchase orders are made based on instructions from your registered
investment adviser to the broker-dealer who executes trades for your account. To
make a purchase, your broker-dealer must submit a purchase order to the Fund's
transfer agent, AllianceBernstein Investor Services, Inc. ("ABIS"), P.O. Box
786003, San Antonio, Texas 78278-6003, (1-800-221-5672), either directly or
through an appropriate clearing agency (e.g., the National Securities Clearing
Corporation - Fund/SERV).
Other Purchase Information
The Fund may issue shares upon purchase in full and fractional shares.
Certificates for shares will not be issued. The payment for shares to be
purchased shall be wired to ABIS. Wiring instructions may be obtained by calling
1-800-221-5672.
The Fund may, at its sole option, accept securities as payment for shares if the
Adviser believes that the securities are appropriate investments for the Fund.
The securities are valued by the method described under "How the Fund Values its
Shares" above as of the date the Fund receives the securities and corresponding
documentation necessary to transfer the securities to the Fund. This is a
taxable transaction to the shareholder.
The Fund is required by law to obtain, verify and record certain personal
information from you or persons on your behalf in order to establish your
account. Required information includes name, date of birth, permanent
residential address and social security/taxpayer identification number. The Fund
may also ask to see other identifying documents. If you do not provide the
information, the Fund will not be able to open your account. If the Fund is
unable to verify your identity, or that of another person(s) authorized to act
on your behalf, or if the Fund believes it has identified potentially criminal
activity, the Fund reserves the right to take action as it deems appropriate,
which may include closing your account. If you are not a U.S. citizen or
Resident Alien, your account must be affiliated with a Financial Industry
Regulatory Authority ("FINRA") member firm.
The Fund is required to withhold 28% of taxable dividends, capital gains
distributions, and redemptions paid to shareholders who have not provided the
Fund with his or her current taxpayer identification number. To avoid this, you
must provide your correct Tax Identification Number on your account application.
The Fund may refuse any order to purchase shares. The Fund reserves the right to
suspend the sale of its shares in response to conditions in the securities
markets or for other reasons.
HOW TO SELL SHARES
You may "redeem" your shares (i.e., sell your shares to the Fund) through your
broker-dealer on any day the Exchange is open. Redemption requests for Fund
shares are effected at the NAV per share next determined after receipt of a
redemption request by ABIS. A redemption request received by ABIS prior to 4:00
p.m., Eastern time, on a day the Fund is open for business is effected on that
day. A redemption request received after that time is effected on the next
business day.
Redemption proceeds will ordinarily be wired within one business day after the
redemption request, but may take up to three business days. Redemption proceeds
will be sent by wire only. The Fund may suspend the right of redemption or
postpone the payment date at times when the Exchange is closed, or during
certain other periods as permitted under the federal securities laws.
Shares of the Fund will be held only by investors participating in an approved
wrap-fee program and cannot be transferred. The Fund reserves the right to
redeem shares of any investor at the then-current value of such shares (which
will be paid promptly to the investor) if the investor ceases to be a
participant in a wrap-fee program approved by the Adviser. Affected investors
will receive advance notice of any such mandatory redemption.
FREQUENT PURCHASES AND REDEMPTIONS OF FUND SHARES
The Board has adopted policies and procedures designed to detect and deter
frequent purchases and redemptions of Fund shares or excessive or short-term
trading that may disadvantage long-term Fund shareholders. These policies are
described below. There is no guarantee that the Fund will be able to detect
excessive or short-term trading and to identify shareholders engaged in such
practices, particularly with respect to transactions in omnibus accounts.
Shareholders should be aware that application of these policies may have adverse
consequences, as described below, and avoid frequent trading in Fund shares
through purchases, sales and exchanges of shares. The Fund reserves the right to
restrict, reject or cancel, without any prior notice, any purchase or exchange
order for any reason, including any purchase or exchange order accepted by any
shareholder's financial intermediary.
Risks Associated With Excessive Or Short-Term Trading Generally. While the Fund
will try to prevent market timing by utilizing the procedures described below,
these procedures may not be successful in identifying or stopping excessive or
short-term trading in all circumstances. By realizing profits through short-term
trading, shareholders that engage in rapid purchases and sales or exchanges of
the Fund's shares dilute the value of shares held by long-term shareholders.
Volatility resulting from excessive purchases and sales or exchanges of Fund
shares, especially involving large dollar amounts, may disrupt efficient
portfolio management and cause the Fund to sell shares at inopportune times to
accommodate redemptions relating to short-term trading. In particular, the Fund
may have difficulty implementing its long-term investment strategies if it is
forced to maintain a higher level of its assets in cash to accommodate
significant short-term trading activity. In addition, the Fund may incur
increased administrative and other expenses due to excessive or short-term
trading, including increased brokerage costs and realization of taxable capital
gains.
Investments in foreign securities may be particularly susceptible to short-term
trading strategies. This is because foreign securities are typically traded on
markets that close well before the time a fund calculates its NAV at 4:00 p.m.,
Eastern time, which gives rise to the possibility that developments may have
occurred in the interim that would affect the value of these securities. The
time zone differences among international stock markets can allow a shareholder
engaging in a short-term trading strategy to exploit differences in fund share
prices that are based on closing prices of foreign securities established some
time before the fund calculates its own share price (referred to as "time zone
arbitrage").
A shareholder engaging in a short-term trading strategy may also target a fund
that does not invest primarily in foreign securities. Any fund that invests in
securities that are, among other things, thinly traded, traded infrequently or
relatively illiquid has the risk that the current market price for the
securities may not accurately reflect current market values. A shareholder may
seek to engage in short-term trading to take advantage of these pricing
differences (referred to as "price arbitrage"). The Fund may be adversely
affected by price arbitrage.
Policy Regarding Short-term Trading. Purchases and exchanges of shares of the
Fund should be made for investment purposes only. The Fund will seek to prevent
patterns of excessive purchases and sales of Fund shares to the extent they are
detected by the procedures described below. The Fund reserves the right to
modify this policy, including any surveillance or account blocking procedures
established from time to time to effectuate this policy, at any time without
notice.
o Transaction Surveillance Procedures. The Fund, through its agents,
AllianceBernstein Investments, Inc., or ABI, and ABIS, maintains
surveillance procedures to detect excessive or short-term trading in Fund
shares. This surveillance process involves several factors, which include
scrutinizing transactions in Fund shares that exceed certain monetary
thresholds or numerical limits within a specified period of time.
Generally, more than two exchanges of Fund shares during any 90-day period
or purchases of shares followed by a sale within 90 days will be
identified by these surveillance procedures. For purposes of these
transaction surveillance procedures, the Fund may consider trading
activity in multiple accounts under common ownership, control or
influence. Trading activity identified by either, or a combination, of
these factors, or as a result of any other information available at the
time, will be evaluated to determine whether such activity might
constitute excessive or short-term trading. These surveillance procedures
may be modified from time to time, as necessary or appropriate to improve
the detection of excessive or short-term trading or to address specific
circumstances.
o Account Blocking Procedures. If the Fund determines, in its sole
discretion, that a particular transaction or pattern of transactions
identified by the transaction surveillance procedures described above is
excessive or short-term trading in nature, the relevant Fund account(s)
will be immediately "blocked" and no future purchase or exchange activity
will be permitted. However, sales of Fund shares back to the Fund or
redemptions will continue to be permitted in accordance with the terms of
the Fund's current Prospectus. As a result, unless the shareholder redeems
his or her shares, which may have consequences if the shares have declined
in value, a CDSC is applicable or adverse tax consequences may result, the
shareholder may be "locked" into an unsuitable investment. In the event an
account is blocked, certain account-related privileges, such as the
ability to place purchase, sale and exchange orders over the internet or
by phone, may also be suspended. A blocked account will generally remain
blocked unless and until the account holder or the associated broker,
dealer or other financial intermediary provides evidence or assurance
acceptable to the Fund that the account holder did not or will not in the
future engage in excessive or short-term trading.
o Applications of Surveillance Procedures and Restrictions to Omnibus
Accounts. Omnibus account arrangements are common forms of holding shares
of the Fund, particularly among certain brokers, dealers and other
financial intermediaries, including sponsors of retirement plans and
variable insurance products. The Fund applies its surveillance procedures
to these omnibus account arrangements. As required by the Commission
rules, the Fund has entered into agreements with all of its financial
intermediaries that require the financial intermediaries to provide the
Fund, upon the request of the Fund or its agents, with individual account
level information about their transactions. If the Fund detects excessive
trading through its monitoring of omnibus accounts, including trading at
the individual account level, the financial intermediaries will also
execute instructions from the Fund to take actions to curtail the
activity, which may include applying blocks to accounts to prohibit future
purchases and exchanges of Fund shares. For certain retirement plan
accounts, the Fund may request that the retirement plan or other
intermediary revoke the relevant participant's privilege to effect
transactions in Fund shares via the internet or telephone, in which case
the relevant participant must submit future transaction orders via the
U.S. Postal Service (i.e., regular mail).
MANAGEMENT OF THE FUND
--------------------------------------------------------------------------------
INVESTMENT ADVISER
The Fund's investment adviser is AllianceBernstein L.P. (the "Adviser"), 1345
Avenue of the Americas, New York, NY 10105. The Adviser is a leading
international investment adviser supervising client accounts with assets as of
[___________], 2011, totaling over $[______] billion (of which more than $[____]
billion are the assets of registered investment companies sponsored by the
Adviser). As of [_____________], 2011, the Adviser managed retirement assets for
many of the largest public and private employee benefit plans (including [___]
of the nation's FORTUNE 100 companies), for public employee retirement funds in
[___] states, for investment companies, and for foundations, endowments, banks
and insurance companies worldwide. Currently, the [___] registered investment
companies managed by the Adviser, comprising [___] separate investment
portfolios, have approximately [____] million retail accounts.
The Adviser provides investment advisory services and order placement facilities
for the Fund. The Fund pays no advisory or other fees for these services.
The Adviser may act as an investment adviser to other persons, firms or
corporations, including investment companies, hedge funds, pension funds and
other institutional investors. The Adviser may receive management fees,
including performance fees, that may be higher or lower than the advisory fees
it receives for managing the Fund. Certain other clients of the Adviser may have
investment objectives and policies similar to those of the Fund. The Adviser
may, from time to time, make recommendations which result in the purchase or
sale of a particular security by its other clients simultaneously with the Fund.
If transactions on behalf of more than one client during the same period
increase the demand for securities being purchased or the supply of securities
being sold, there may be an adverse effect on price or quantity. It is the
policy of the Adviser to allocate advisory recommendations and the placing of
orders in a manner that is deemed equitable by the Adviser to the accounts
involved, including the Fund. When two or more of the clients of the Adviser
(including the Fund) are purchasing or selling the same security on a given day
from the same broker-dealer, such transactions may be averaged as to price.
PORTFOLIO MANAGERS
The day-to-day management of, and investment decisions for, the Fund is made by
Laurent Saltiel. Mr. Saltiel is a Senior Vice President of the Adviser, with
which he has been associated since June 2010. Prior thereto, he was associated
with Janus Capital since prior to 2006.
Additional information about the portfolio manager may be found in the Fund's
SAI.
TRANSFER AGENCY SERVICES
ABIS acts as the transfer agent for the AllianceBernstein mutual funds. ABIS, an
indirect wholly-owned subsidiary of the Adviser, registers the transfer,
issuance and redemption of Fund shares and disburses dividends and other
distributions to Fund shareholders.
DIVIDENDS, DISTRIBUTIONS AND TAXES
--------------------------------------------------------------------------------
The income dividends and capital gains distributions, if any, declared by the
Fund on its outstanding shares will, at the election of each shareholder, be
paid in cash or in additional shares of the Fund, depending on the terms of the
shareholder's wrap-fee program. If paid in additional shares, the shares will
have an aggregate NAV as of the close of business on the declaration date of the
dividend or distribution equal to the cash amount of the dividend or
distribution. As permitted by the terms of your wrap-fee program, you may make
an election to receive dividends and distributions in cash or in shares at the
time you purchase shares. If permitted by the program, your election can be
changed at any time prior to a record date for a dividend. There is no sales or
other charge in connection with the reinvestment of dividends or capital gains
distributions. Cash dividends may be paid by check, or, at your election,
electronically via the ACH network.
For federal income tax purposes, distributions of investment income are
generally taxable as ordinary income. Taxes on distributions that are properly
designated as capital gains are determined by how long the Fund owned the
investments that generated them, rather than on how long you have owned your
shares. Distributions of net capital gains from the sale of investments that the
Fund owned for more than one year and that are properly designated by the Fund
as capital gain dividends will be taxable as long-term capital gains.
Distributions of gains from the sale of investments that the Fund owned for one
year or less will be taxable as ordinary income. For taxable years beginning on
or before December 31, 2012, distributions of investment income designated by
the Fund as derived from "qualified dividend income"--as further defined in the
Fund's SAI--will be taxed in the hands of individuals at the rates applicable to
long-term capital gain provided holding period and other requirements are met at
both the shareholder and the Fund level. The Fund does not expect a significant
portion of Fund distributions to be derived from qualified dividend income.
While it is the intention of the Fund to distribute to its shareholders
substantially all of each fiscal year's net income and net realized capital
gains, if any, the amount and timing of any dividend or distribution will depend
on the realization by the Fund of income and capital gains from investments.
There is no fixed dividend rate and there can be no assurance that the Fund will
pay any dividends or realize any capital gains.
The Fund's investments in certain debt obligations may cause the Fund to
recognize taxable income in excess of the cash generated by such obligations.
Thus, the Fund may be required to liquidate other investments, including at
times when it is not advantageous to do so, in order to satisfy its distribution
requirements and to eliminate tax at the Fund level.
If you buy shares just before the Fund deducts a distribution from its NAV, you
will pay the full price for the shares and then receive a portion of the price
back as a taxable distribution.
For tax purposes, an exchange is treated as a sale of Fund shares. The sale or
exchange of Fund shares is a taxable transaction for federal income tax
purposes.
Each year shortly after December 31, the Fund will send you tax information
stating the amount and type of all its distributions for the year. Consult your
tax adviser about the federal, state, and local tax consequences in your
particular circumstances.
As stated above under the heading "Investment Adviser", the Adviser does not
receive a fee from the Fund for providing investment advisory services, but the
Adviser may benefit from the Fund being an investment option in wrap programs
sponsored by financial intermediaries. Under recent amendments to the Internal
Revenue Code, this fee arrangement will not prevent the dividends paid by the
Fund from qualifying for the dividends-paid deduction under Section 561 of the
Code.
Non-U.S. Shareholders
If you are a nonresident alien individual or a foreign corporation for federal
income tax purposes, please see the Fund's SAI for information on how you may be
affected by the American Jobs Creation Act of 2004, including new rules for Fund
distributions of gain attributable to "U.S. real property interests".
GENERAL INFORMATION
--------------------------------------------------------------------------------
Under unusual circumstances, the Fund may suspend redemptions or postpone
payment for up to seven days or longer, as permitted by federal securities law.
The Fund reserves the right to close an account that has remained below $[1,000]
for 90 days.
During drastic economic or market developments, you might have difficulty
reaching ABIS by telephone, in which event you should issue written instructions
to ABIS. ABIS is not responsible for the authenticity of telephone requests to
purchase, sell, or exchange shares. ABIS will employ reasonable procedures to
verify that telephone requests are genuine, and could be liable for losses
resulting from unauthorized transactions if it failed to do so. Dealers and
agents may charge a commission for handling telephone requests. The telephone
service may be suspended or terminated at any time without notice.
Shareholder Services. ABIS offers a variety of shareholder services. For more
information about these services or your account, call ABIS's toll-free number,
800-221-5672. Some services are described in the Mutual Fund application.
Householding. Many shareholders of the AllianceBernstein Mutual Funds have
family members living in the same home who also own shares of the same Fund. In
order to reduce the amount of duplicative mail that is sent to homes with more
than one Fund account and to reduce expenses of the Fund, all AllianceBernstein
Mutual Funds will, until notified otherwise, send only one copy of each
prospectus, shareholder report and proxy statement to each household address.
This process, known as "householding", does not apply to account statements,
confirmations, or personal tax information. If you do not wish to participate in
householding, or wish to discontinue householding at any time, call ABIS at
800-221-5672. We will resume separate mailings for your account within 30 days
of your request.
GLOSSARY OF INVESTMENT TERMS
--------------------------------------------------------------------------------
Non-U.S. company or non-U.S. issuer is an entity that (i) is organized under the
laws of a foreign country and conducts business in a foreign country, (ii)
derives 50% or more of its total revenues from business in foreign countries, or
(iii) issues equity or debt securities that are traded principally on a stock
exchange in a foreign country.
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
Financial highlights information is not available because the Fund has not yet
commenced operations.
APPENDIX A
--------------------------------------------------------------------------------
HYPOTHETICAL INVESTMENT AND EXPENSE INFORMATION
The Fund is available only to participants in "wrap-fee" programs sponsored by
investment advisers unaffiliated with the Fund or AllianceBernstein L.P. You
should be aware that a participant in a "wrap-fee" program typically pays a fee
to the sponsoring investment adviser for all costs and expenses of the program,
including fees paid by the sponsoring investment adviser to sub-advisers who
provide investment advice and portfolio execution. You should read carefully the
"wrap-fee" program brochure provided to you by your sponsoring investment
adviser. That brochure is required to include information about the total fees
paid by you to your sponsoring investment adviser, as well as information about
the sub-advisory fee paid by your sponsoring investment adviser to
AllianceBernstein L.P.
A mutual fund's expense ratio is the percentage of fund assets used by the fund
to pay an investment advisory fee to AllianceBernstein L.P. and to pay the
fund's direct operating expenses (such as accounting, transfer agency and
custody fees). The following supplemental chart provides information about the
effect of a hypothetical annual expense ratio of [_____]% on the Fund's returns
over a 10-year period. The annual expense ratio is hypothetical because
AllianceBernstein L.P. has agreed irrevocably to waive all fees and pay or
reimburse all expenses, except extraordinary expenses, incurred by the Fund.
The chart assumes a return of 5% each year on a hypothetical investment of
$10,000 in shares of the Fund. The chart also assumes that the current
hypothetical annual expense ratio of [_____]% stays the same throughout the
10-year period. The chart does not reflect the fees, including the "wrap fee",
paid by you to your sponsoring investment adviser. The chart also does not
reflect the sub-advisory fee paid by your sponsoring investment adviser to
AllianceBernstein L.P.
--------------------------------------------------------------------------------
Hypothetical Investment Hypothetical
Hypothetical Performance After Hypothetical Ending
Year Investment Earnings Returns Expenses Investment
--------------------------------------------------------------------------------
1 $10,000.00 $500.00 $10,500.00 $[_______] $[_______]
2 $[_______] $[_______] $[_______] $[_______] $[_______]
3 $[_______] $[_______] $[_______] $[_______] $[_______]
4 $[_______] $[_______] $[_______] $[_______] $[_______]
5 $[_______] $[_______] $[_______] $[_______] $[_______]
6 $[_______] $[_______] $[_______] $[_______] $[_______]
7 $[_______] $[_______] $[_______] $[_______] $[_______]
8 $[_______] $[_______] $[_______] $[_______] $[_______]
9 $[_______] $[_______] $[_______] $[_______] $[_______]
10 $[_______] $[_______] $[_______] $[_______] $[_______]
--------------------------------------------------------------------------------
Cumulative $[_______] $[_______]
For more information about the Fund, the following documents are available upon
request:
Statement of Additional Information (SAI)
The Fund has an SAI, which contains more detailed information about the Fund,
including its operations and investment policies. The Fund's SAI, the
independent registered public accounting firm's report and financial statements
in the Fund's most recent annual report to shareholders are incorporated by
reference into (and are legally part of) this Prospectus.
You may request a free copy of the current annual/semi-annual report or the SAI,
or make inquiries concerning the Fund, by contacting your broker or other
financial intermediary, or by contacting the Adviser:
By Mail: c/o AllianceBernstein Investor Services, Inc.
P.O. Box 786003
San Antonio, TX 78278-6003
By Phone: For Information: (800) 221-5672
For Literature: (800) 227-4618
Or you may view or obtain these documents from the Securities and Exchange
Commission (the "Commission"):
o Call the Commission at 1-202-551-8090 for information on the operation of
the Public Reference Room.
o Reports and other information about the Fund are available on the EDGAR
Database on the Commission's Internet site at http://www.sec.gov.
o Copies of the information may be obtained, after paying a duplicating fee,
by electronic request at [email protected], or by writing the
Commission's Public Reference Section, Washington, DC 20549-1520.
On the Internet: www.sec.gov
You also may find more information about the Adviser and other AllianceBernstein
Mutual Funds on the Internet at: www.AllianceBernstein.com. Information about
the Fund will not be available at that website because shares of the Fund are
offered exclusively through registered investment advisers approved by the
Adviser.
AllianceBernstein(R) and the AB Logo are registered trademarks and service marks
used by permission of the owner, AllianceBernstein L.P.
The Fund's SEC File Number is 811-21497.
SK 00250 0454 1176538v1
[AB LOGO]
AllianceBernstein
Investments
ALLIANCEBERNSTEIN CORPORATE SHARES
-ALLIANCEBERNSTEIN INTERNATIONAL FOCUS INCOME SHARES
--------------------------------------------------------------------------------
Address: AllianceBernstein Investor Services, Inc.
P.O. Box 786003
San Antonio, Texas 78278-6003
Toll Free: For Information: (800) 221-5672
For Literature: (800) 227-4618
--------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
Dated: [_____________], 2011
--------------------------------------------------------------------------------
This Statement of Additional Information ("SAI") is not a prospectus but
supplements and should be read in conjunction with the current prospectus (the
"Prospectus"), dated [_________], 2011, for AllianceBernstein International
Focus Income Shares (the "Fund") of AllianceBernstein Corporate Shares (the
"Company"). Copies of the Prospectus may be obtained by contacting
AllianceBernstein Investor Services, Inc. ("ABIS") at the address or the "For
Literature" telephone number shown above [or on the Internet at
www.AllianceBernstein.com].
TABLE OF CONTENTS
-----------------
Page
INFORMATION ABOUT THE FUND AND ITS INVESTMENTS..............................[__]
INVESTMENT RESTRICTIONS.....................................................[__]
MANAGEMENT OF THE FUND......................................................[__]
EXPENSES OF THE FUND........................................................[__]
PURCHASE OF SHARES..........................................................[__]
REDEMPTION AND REPURCHASE OF SHARES.........................................[__]
SHAREHOLDER SERVICES........................................................[__]
NET ASSET VALUE.............................................................[__]
FUND TRANSACTIONS...........................................................[__]
DIVIDENDS, DISTRIBUTIONS AND TAXES..........................................[__]
GENERAL INFORMATION.........................................................[__]
GLOSSARY OF INVESTMENT TERMS................................................[__]
FINANCIAL STATEMENTS AND REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.........................[__]
--------------------------------
AllianceBernstein(R) and the AB Logo are registered trademarks and service marks
used by permission of the owner, AllianceBernstein L.P.
--------------------------------------------------------------------------------
INFORMATION ABOUT THE FUND AND ITS INVESTMENTS
--------------------------------------------------------------------------------
Introduction to the Fund
Except as otherwise noted, the Fund's investment objective and
policies described below are not "fundamental policies" within the meaning of
the Investment Company Act of 1940, as amended (the "1940 Act"), and may,
therefore, be changed by the Board of Trustees of the Company (the "Board" or
the "Trustees") without shareholder approval. However, the Fund will not change
its investment objective without at least 60 days' prior written notice to
shareholders. There is no guarantee that the Fund will achieve its investment
objective. Whenever any investment policy or restriction states a percentage of
the Fund's assets that may be invested in any security or other asset, it is
intended that such percentage limitation be determined immediately after and as
a result of the Fund's acquisition of such securities or other assets.
Accordingly, any later increases or decreases in percentage beyond the specified
limitations resulting from a change in values or net assets will not be
considered a violation of this percentage limitation.
Additional Investment Policies and Practices
The following information about the Fund's investment policies and
practices supplements the information set forth in the Prospectuses.
Convertible Securities
Convertible securities include bonds, debentures, corporate notes
and preferred stocks that are convertible at a stated exchange rate into shares
of the underlying common stock. Prior to their conversion, convertible
securities have the same general characteristics as non-convertible debt
securities, which provide a stable stream of income with generally higher yields
than those of equity securities of the same or similar issuers. As with all debt
securities, the market value of convertible securities tends to decline as
interest rates increase and, conversely, to increase as interest rates decline.
While convertible securities generally offer lower interest or dividend yields
than non-convertible debt securities of similar quality, they do enable the
investor to benefit from increases in the market price of the underlying common
stock.
When the market price of the common stock underlying a convertible
security increases, the price of the convertible security increasingly reflects
the value of the underlying common stock and may rise accordingly. As the market
price of the underlying common stock declines, the convertible security tends to
trade increasingly on a yield basis, and thus may not depreciate to the same
extent as the underlying common stock. Convertible securities rank senior to
common stocks on an issuer's capital structure. They are consequently of higher
quality and entail less risk than the issuer's common stock, although the extent
to which such risk is reduced depends in large measure upon the degree to which
the convertible security sells above its value as a fixed-income security.
Depositary Receipts
The Fund may invest in American Depositary Receipts ("ADRs"),
European Depositary Receipts ("EDRs"), Global Depositary Receipts ("GDRs") or
other securities representing securities of companies based in countries other
than the U.S. Transactions in these securities may not necessarily be settled in
the same currency as transactions in the securities into which they represent.
Generally, ADRs, in registered form, are designed for use in the U.S. securities
markets, EDRs, in bearer form, are designed for use in European securities
markets and GDRs, in bearer form, are designed for use in two or more securities
markets, such as Europe and Asia.
Derivatives
The Fund may, but is not required to, use derivatives for risk
management purposes as part of its investment practices. Derivatives are
financial contracts whose value depends on, or is derived from, the value of an
underlying asset, reference rate or index. These assets, rates, and indices may
include bonds, stocks, mortgages, commodities, interest rates, currency exchange
rates, bond indices and stock indices.
There are four principal types of derivatives, including options,
futures, forwards and swaps. The four principal types of derivative instruments,
as well as the methods in which they may be used by the Fund are described
below. Derivatives may be (i) standardized, exchange-traded contracts or (ii)
customized, privately-negotiated contracts. Exchange-traded derivatives tend to
be more liquid and subject to less credit risk than those that are privately
negotiated. The Fund may use derivatives to earn income and enhance returns, to
hedge or adjust the risk profile of a portfolio and either to replace more
traditional direct investments or to obtain exposure to otherwise inaccessible
markets.
Forward Contracts. A forward contract, which may be standardized and
exchange-traded or customized and privately negotiated, is an agreement for one
party to buy, and the other party to sell, a specific quantity of an underlying
commodity or other tangible asset for an agreed-upon price at a future date. A
forward contract generally is settled by physical delivery of the commodity or
other tangible asset underlying the forward contract to an agreed upon location
at a future date (rather than settled by cash) or will be rolled forward into a
new forward contract. Non-deliverable forwards ("NDFs") specify a cash payment
upon maturity.
Futures Contracts and Options on Futures Contracts. A futures
contract is an agreement that obligates the buyer to buy and the seller to sell
a specified quantity of an underlying asset (or settle for cash the value of a
contract based on an underlying asset, rate or index) at a specific price on the
contract maturity date. Options on futures contracts are options that call for
the delivery of futures contracts upon exercise. Futures contracts are
standardized, exchange-traded instruments and are fungible (i.e., considered to
be perfect substitutes for each other). This fungibility allows futures
contracts to be readily offset or cancelled through the acquisition of equal but
opposite positions, which is the primary method in which futures contracts are
liquidated. A cash-settled futures contract does not require physical delivery
of the underlying asset but instead is settled for cash equal to the difference
between the values of the contract on the date it is entered into and its
maturity date.
Options. An option, which may be standardized and exchange-traded,
or customized and privately negotiated, is an agreement that, for a premium
payment or fee, gives the option holder (the buyer) the right but not the
obligation to buy (a "call") or sell (a "put") the underlying asset (or settle
for cash an amount based on an underlying asset, rate or index) at a specified
price (the exercise price) during a period of time or on a specified date.
Likewise, when an option is exercised the writer of the option is obligated to
sell (in the case of a call option) or to purchase (in the case of a put option)
the underlying asset (or settle for cash an amount based on an underlying asset,
rate or index).
Swaps. A swap, which may be standardized and exchange-traded or
customized and privately negotiated, is an agreement that obligates two parties
to exchange a series of cash flows at specified intervals (payment dates) based
upon or calculated by reference to changes in specified prices or rates
(interest rates in the case of interest rate swaps, currency exchange rates in
the case of currency swaps) for a specified amount of an underlying asset (the
"notional" principal amount). Swaps are entered into on a net basis (i.e., the
two payment streams are netted out, with a fund receiving or paying, as the case
may be, only the net amount of the two payments). Except for currency swaps, the
notional principal amount is used solely to calculate the payment streams but is
not exchanged. With respect to currency swaps, actual principal amounts of
currencies may be exchanged by the counterparties at the initiation, and again
upon the termination, of the transaction.
Risks of Derivatives. Investment techniques employing such
derivatives involve risks different from, and, in certain cases, greater than,
the risks presented by more traditional investments. Following is a general
discussion of important risk factors and issues concerning the use of
derivatives.
-- Market Risk. This is the general risk attendant to all
investments that the value of a particular investment will change in
a way detrimental to the Fund's interest.
-- Management Risk. Derivative products are highly specialized
instruments that require investment techniques and risk analyses
different from those associated with stocks and bonds. The use of a
derivative requires an understanding not only of the underlying
instrument but also of the derivative itself, without the benefit of
observing the performance of the derivative under all possible
market conditions. In particular, the use and complexity of
derivatives require the maintenance of adequate controls to monitor
the transactions entered into, the ability to assess the risk that a
derivative adds to the Fund's investment portfolio, and the ability
to forecast price, interest rate or currency exchange rate movements
correctly.
-- Credit Risk. This is the risk that a loss may be sustained by the
Fund as a result of the failure of another party to a derivative
(usually referred to as a "counterparty") to comply with the terms
of the derivative contract. The credit risk for exchange-traded
derivatives is generally less than for privately negotiated
derivatives, since the clearinghouse, which is the issuer or
counterparty to each exchange-traded derivative, provides a
guarantee of performance. This guarantee is supported by a daily
payment system (i.e., margin requirements) operated by the
clearinghouse in order to reduce overall credit risk. For privately
negotiated derivatives, there is no similar clearing agency
guarantee. Therefore, the Fund considers the creditworthiness of
each counterparty to a privately negotiated derivative in evaluating
potential credit risk.
-- Liquidity Risk. Liquidity risk exists when a particular
instrument is difficult to purchase or sell. If a derivative
transaction is particularly large or if the relevant market is
illiquid (as is the case with many privately negotiated
derivatives), it may not be possible to initiate a transaction or
liquidate a position at an advantageous price.
-- Leverage Risk. Since many derivatives have a leverage component,
adverse changes in the value or level of the underlying asset, rate
or index can result in a loss substantially greater than the amount
invested in the derivative itself. In the case of swaps, the risk of
loss generally is related to a notional principal amount, even if
the parties have not made any initial investment. Certain
derivatives have the potential for unlimited loss, regardless of the
size of the initial investment.
-- Risk of Potential Governmental Regulation of Derivatives. Recent
legislation and regulatory developments will eventually require the
clearing and exchange trading of most over-the-counter derivatives
investments. It is possible that new regulation of various types of
derivative instruments, including futures and swap agreements, may
affect the Fund's ability to use such instruments as a part of its
investment strategy.
-- Other Risks. Other risks in using derivatives include the risk of
mispricing or improper valuation of derivatives and the inability of
derivatives to correlate perfectly with underlying assets, rates and
indices. Many derivatives, in particular privately negotiated
derivatives, are complex and often valued subjectively. Improper
valuations can result in increased cash payment requirements to
counterparties or a loss of value to the Fund. Derivatives do not
always perfectly or even highly correlate or track the value of the
assets, rates or indices they are designed to closely track.
Consequently, the Fund's use of derivatives may not always be an
effective means of, and sometimes could be counterproductive to,
furthering the Fund's investment objective.
Use of Options, Futures, Forwards and Swaps by the Fund
--Forward Currency Exchange Contracts. A forward currency exchange
contract is an obligation by one party to buy, and the other party to sell, a
specific amount of a currency for an agreed upon price at a future date. A
forward currency exchange contract may result in the delivery of the underlying
asset upon maturity of the contract in return for the agreed upon payment. NDFs
specify a cash payment upon maturity. NDFs are normally used when the market for
physical settlement of the currency is underdeveloped, heavily regulated or
highly taxed.
The Fund may, for example, enter into forward currency exchange
contracts to attempt to minimize the risk to the Fund from adverse changes in
the relationship between the U.S. Dollar and other currencies. The Fund may
purchase or sell forward currency exchange contracts for hedging purposes
similar to those described below in connection with its transactions in foreign
currency futures contracts. The Fund may also purchase or sell forward currency
exchange contracts for non-hedging purposes as a means of making direct
investments in foreign currencies, as described below under "Currency
Transactions".
If a hedging transaction in forward currency exchange contracts is
successful, the decline in the value of portfolio securities or the increase in
the cost of securities to be acquired may be offset, at least in part, by
profits on the forward currency exchange contract. Nevertheless, by entering
into such forward currency exchange contracts, the Fund may be required to
forego all or a portion of the benefits which otherwise could have been obtained
from favorable movements in exchange rates.
The Fund may also use forward currency exchange contracts to seek to
increase total return when AllianceBernstein L.P., the Fund's Adviser (the
"Adviser") anticipates that a foreign currency will appreciate or depreciate in
value but securities denominated in that currency are not held by the Fund and
do not present attractive investment opportunities. For example, the Fund may
enter into a foreign currency exchange contract to purchase a currency if the
Adviser expects the currency to increase in value. The Fund would recognize a
gain if the market value of the currency is more than the contract value of the
currency at the time of settlement of the contract. Similarly, the Fund may
enter into a foreign currency exchange contract to sell a currency if the
Adviser expects the currency to decrease in value. The Fund would recognize a
gain if the market value of the currency is less than the contract value of the
currency at the time of settlement of the contract.
The cost of engaging in forward currency exchange contracts varies
with such factors as the currencies involved, the length of the contract period
and the market conditions then prevailing. Since transactions in foreign
currencies are usually conducted on a principal basis, no fees or commissions
are involved.
--Options On Securities. The Fund may write and purchase call and
put options on securities. In purchasing an option on securities, the Fund would
be in a position to realize a gain if, during the option period, the price of
the underlying securities increased (in the case of a call) or decreased (in the
case of a put) by an amount in excess of the premium paid; otherwise the Fund
would experience a loss not greater than the premium paid for the option. Thus,
the Fund would realize a loss if the price of the underlying security declined
or remained the same (in the case of a call) or increased or remained the same
(in the case of a put) or otherwise did not increase (in the case of a put) or
decrease (in the case of a call) by more than the amount of the premium. If a
put or call option purchased by the Fund were permitted to expire without being
sold or exercised, its premium would represent a loss to the Fund.
The Fund may also purchase call options to hedge against an increase
in the price of securities that the Fund anticipates purchasing in the future.
If such increase occurs, the call option will permit the Fund to purchase the
securities at the exercise price, or to close out the options at a profit. The
premium paid for the call option plus any transaction costs will reduce the
benefit, if any, realized by the Fund upon exercise of the option, and, unless
the price of the underlying security rises sufficiently, the option may expire
worthless to the Fund and the Fund will suffer a loss on the transaction to the
extent of the premium paid.
The Fund may write a put or call option in return for a premium,
which is retained by the Fund whether or not the option is exercised. The Fund
may write covered options or uncovered options. A call option written by the
Fund is "covered" if the Fund 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 the call option it has written. A put
option written by the Fund is covered if the Fund holds a put option on the
underlying securities with an exercise price equal to or greater than the put
option it has written. Uncovered options or "naked options" are riskier than
covered options. For example, if the Fund wrote a naked call option and the
price of the underlying security increased, the Fund would have to purchase the
underlying security for delivery to the call buyer and sustain a loss equal to
the difference between the option price and the market price of the security.
The Fund also may, as an example, write combinations of put and call
options on the same security, known as "straddles", with the same exercise and
expiration date. By writing a straddle, the Fund undertakes a simultaneous
obligation to sell and purchase the same security in the event that one of the
options is exercised. If the price of the security subsequently rises above the
exercise price, the call will likely be exercised and the Fund will be required
to sell the underlying security at or below market price. This loss may be
offset, however, in whole or part, by the premiums received on the writing of
the two options. Conversely, if the price of the security declines by a
sufficient amount, the put will likely be exercised. The writing of straddles
will likely be effective, therefore, only where the price of the security
remains stable and neither the call nor the put is exercised. In those instances
where one of the options is exercised, the loss on the purchase or sale of the
underlying security may exceed the amount of the premiums received.
By writing a call option, the Fund limits its opportunity to profit
from any increase in the market value of the underlying security above the
exercise price of the option. By writing a put option, the Fund assumes the risk
that it may be required to purchase the underlying security for an exercise
price above its then current market value, resulting in a capital loss unless
the security subsequently appreciates in value. Where options are written for
hedging purposes, such transactions constitute only a partial hedge against
declines in the value of portfolio securities or against increases in the value
of securities to be acquired, up to the amount of the premium. The Fund may
purchase put options to hedge against a decline in the value of portfolio
securities. If such decline occurs, the put options will permit the Fund to sell
the securities at the exercise price or to close out the options at a profit. By
using put options in this way, the Fund will reduce any profit it might
otherwise have realized on the underlying security by the amount of the premium
paid for the put option and by transaction costs.
The Fund may purchase or write options on securities of the types in
which it is permitted to invest in privately negotiated (i.e., over-the-counter)
transactions. The Fund will effect such transactions only with investment
dealers and other financial institutions (such as commercial banks or savings
and loan institutions) deemed creditworthy by the Adviser, and the Adviser has
adopted procedures for monitoring the creditworthiness of such entities. Options
purchased or written in negotiated transactions may be illiquid and it may not
be possible for the Fund to effect a closing transaction at a time when the
Adviser believes it would be advantageous to do so.
--Options On Securities Indices. An option on a securities index is
similar to an option on a security except that, rather than taking or making
delivery of a security at a specified price, an option on a securities index
gives the holder the right to receive, upon exercise of the option, an amount of
cash if the closing level of the chosen index is greater than (in the case of a
call) or less than (in the case of a put) the exercise price of the option.
The Fund may write (sell) call and put options and purchase call and
put options on securities indices. If the Fund purchases put options on
securities indices to hedge its investments against a decline in the value of
portfolio securities, it will seek to offset a decline in the value of
securities it owns through appreciation of the put option. If the value of the
Fund's investments does not decline as anticipated, or if the value of the
option does not increase, the Fund's loss will be limited to the premium paid
for the option. The success of this strategy will largely depend on the accuracy
of the correlation between the changes in value of the index and the changes in
value of the Fund's security holdings.
The purchase of call options on securities indices may be used by
the Fund to attempt to reduce the risk of missing a broad market advance, or an
advance in an industry or market segment, at a time when the Fund holds
uninvested cash or short-term debt securities awaiting investment. When
purchasing call options for this purpose, the Fund will also bear the risk of
losing all or a portion of the premium paid if the value of the index does not
rise. The purchase of call options on stock indices when the Fund is
substantially fully invested is a form of leverage, up to the amount of the
premium and related transaction costs, and involves risks of loss and of
increased volatility similar to those involved in purchasing call options on
securities the Fund owns.
--Options On Foreign Currencies. The Fund may purchase and write
options on foreign currencies for hedging purposes. For example, a decline in
the dollar value of a foreign currency in which portfolio securities are
denominated will reduce the dollar value of such securities, even if their value
in the foreign currency remains constant. In order to protect against such
diminutions in the value of portfolio securities, the Fund may purchase put
options on the foreign currency. If the value of the currency does decline, the
Fund will have the right to sell such currency for a fixed amount in dollars and
could thereby offset, in whole or in part, the adverse effect on its portfolio
which otherwise would have resulted.
Conversely, where a rise in the dollar value of a currency in which
securities to be acquired are denominated is projected, thereby increasing the
cost of such securities, the Fund may purchase call options thereon. The
purchase of such options could offset, at least partially, the effects of the
adverse movements in exchange rates. As in the case of other types of options,
however, the benefit to the Fund from purchases of foreign currency options will
be reduced by the amount of the premium and related transaction costs. In
addition, where currency exchange rates do not move in the direction or to the
extent anticipated, the Fund could sustain losses on transactions in foreign
currency options which would require it to forego a portion or all of the
benefits of advantageous changes in such rates.
The Fund may write options on foreign currencies for hedging
purposes or to increase return. For example, where the Fund anticipates a
decline in the dollar value of non-U.S. Dollar-denominated securities due to
adverse fluctuations in exchange rates it could, instead of purchasing a put
option, write a call option on the relevant currency. If the expected decline
occurs, the option will most likely not be exercised, and the diminution in
value of portfolio securities could be offset by the amount of the premium
received.
Similarly, instead of purchasing a call option to hedge against an
anticipated increase in the dollar cost of securities to be acquired, the Fund
could write a put option on the relevant currency, which, if rates move in the
manner projected, will expire unexercised and allow the Fund to hedge such
increased cost up to the amount of the premium. As in the case of other types of
options, however, the writing of a foreign currency option will constitute only
a partial hedge up to the amount of the premium, and only if rates move in the
expected direction. If this does not occur, the option may be exercised and the
Fund will be required to purchase or sell the underlying currency at a loss
which may not be offset by the amount of the premium. Through the writing of
options on foreign currencies, the Fund also may be required to forego all or a
portion of the benefits that might otherwise have been obtained from favorable
movements in exchange rates.
In addition to using options for the hedging purposes described
above, the Fund may also invest in options on foreign currencies for non-hedging
purposes as a means of making direct investments in foreign currencies. The Fund
may use options on currency to seek to increase total return when the Adviser
anticipates that a foreign currency will appreciate or depreciate in value but
securities denominated in that currency are not held by the Fund and do not
present attractive investment opportunities. For example, the Fund may purchase
call options in anticipation of an increase in the market value of a currency.
The Fund would ordinarily realize a gain if, during the option period, the value
of such currency exceeded the sum of the exercise price, the premium paid and
transaction costs. Otherwise, the Fund would realize no gain or loss on the
purchase of the call option. Put options may be purchased by the Fund for the
purpose of benefiting from a decline in the value of a currency that the Fund
does not own. The Fund would normally realize a gain if, during the option
period, the value of the underlying currency decreased below the exercise price
sufficiently to more than cover the premium and transaction costs. Otherwise,
the Fund would realize no gain or loss on the purchase of the put option. For
additional information on the use of options on foreign currencies for
non-hedging purposes, see "Currency Transactions" below.
Special Risks Associated with Options on Currency. An exchange
traded options position may be closed out only on an options exchange that
provides a secondary market for an option of the same series. Although the Fund
will generally purchase or sell options for which there appears to be an active
secondary market, there is no assurance that a liquid secondary market on an
exchange will exist for any particular option, or at any particular time. For
some options, no secondary market on an exchange may exist. In such event, it
might not be possible to effect closing transactions in particular options, with
the result that the Fund would have to exercise its options in order to realize
any profit and would incur transaction costs on the sale of the underlying
currency.
--Futures Contracts and Options On Futures Contracts. Futures
contracts that the Fund may buy and sell may include futures contracts on
fixed-income or other securities, and contracts based on interest rates, foreign
currencies or financial indices, including any index of U.S. Government
securities. The Fund may, for example, purchase or sell futures contracts and
options thereon to hedge against changes in interest rates, securities (through
index futures or options) or currencies.
Interest rate futures contracts are purchased or sold for hedging
purposes to attempt to protect against the effects of interest rate changes on
the Fund's current or intended investments in fixed-income securities. For
example, if the Fund owned long-term bonds and interest rates were expected to
increase, the Fund might sell interest rate futures contracts. Such a sale would
have much the same effect as selling some of the long-term bonds in the Fund's
portfolio. However, since the futures market is more liquid than the cash
market, the use of interest rate futures contracts as a hedging technique allows
the Fund to hedge its interest rate risk without having to sell its portfolio
securities. If interest rates were to increase, the value of the debt securities
in the portfolio would decline, but the value of the Fund's interest rate
futures contracts would be expected to increase at approximately the same rate,
thereby keeping the net asset value ("NAV") of the Fund from declining as much
as it otherwise would have. On the other hand, if interest rates were expected
to decline, interest rate futures contracts could be purchased to hedge in
anticipation of subsequent purchases of long-term bonds at higher prices.
Because the fluctuations in the value of the interest rate futures contracts
should be similar to those of long-term bonds, the Fund could protect itself
against the effects of the anticipated rise in the value of long-term bonds
without actually buying them until the necessary cash becomes available or the
market has stabilized. At that time, the interest rate futures contracts could
be liquidated and the Fund's cash reserves could then be used to buy long-term
bonds on the cash market.
The Fund may purchase and sell foreign currency futures contracts
for hedging purposes in order to protect against fluctuations in currency
exchange rates. Such fluctuations could reduce the dollar value of portfolio
securities denominated in foreign currencies, or increase the cost of non-U.S.
Dollar-denominated securities to be acquired, even if the value of such
securities in the currencies in which they are denominated remains constant. The
Fund may sell futures contracts on a foreign currency, for example, when it
holds securities denominated in such currency and it anticipates a decline in
the value of such currency relative to the dollar. If such a decline were to
occur, the resulting adverse effect on the value of non-U.S. Dollar -denominated
securities may be offset, in whole or in part, by gains on the futures
contracts. However, if the value of the foreign currency increases relative to
the dollar, the Fund's loss on the foreign currency futures contract may or may
not be offset by an increase in the value of the securities because a decline in
the price of the security stated in terms of the foreign currency may be greater
than the increase in value as a result of the change in exchange rates.
Conversely, the Fund could protect against a rise in the dollar cost
of non-U.S. Dollar-denominated securities to be acquired by purchasing futures
contracts on the relevant currency, which could offset, in whole or in part, the
increased cost of such securities resulting from a rise in the dollar value of
the underlying currencies. When the Fund purchases futures contracts under such
circumstances, however, and the price in dollars of securities to be acquired
instead declines as a result of appreciation of the dollar, the Fund will
sustain losses on its futures position which could reduce or eliminate the
benefits of the reduced cost of portfolio securities to be acquired.
The Fund may also engage in currency "cross hedging" when, in the
opinion of the Adviser, the historical relationship among foreign currencies
suggests that the Fund may achieve protection against fluctuations in currency
exchange rates similar to that described above at a reduced cost through the use
of a futures contract relating to a currency other than the U.S. Dollar or the
currency in which the foreign security is denominated. Such "cross hedging" is
subject to the same risks as those described above with respect to an
unanticipated increase or decline in the value of the subject currency relative
to the U.S. Dollar.
The Fund may also use foreign currency futures contracts and options
on such contracts for non-hedging purposes. Similar to options on currencies
described above, the Fund may use foreign currency futures contracts and options
on such contracts to seek to increase total return when the Adviser anticipates
that a foreign currency will appreciate or depreciate in value but securities
denominated in that currency are not held by the Fund and do not present
attractive investment opportunities. The risks associated with foreign currency
futures contracts and options on futures are similar to those associated with
options on foreign currencies, as described above. For additional information on
the use of options on foreign currencies for non-hedging purposes, see "Currency
Transactions" below.
Purchases or sales of stock or bond index futures contracts may be
used for hedging purposes to attempt to protect the Fund's current or intended
investments from broad fluctuations in stock or bond prices. For example, the
Fund may sell stock or bond index futures contracts in anticipation of or during
a market decline to attempt to offset the decrease in market value of the Fund's
portfolio securities that might otherwise result. If such decline occurs, the
loss in value of portfolio securities may be offset, in whole or part, by gains
on the futures position. When the Fund is not fully invested in the securities
market and anticipates a significant market advance, it may purchase stock or
bond index futures contracts in order to gain rapid market exposure that may, in
whole or in part, offset increases in the cost of securities that the Fund
intends to purchase. As such purchases are made, the corresponding positions in
stock or bond index futures contracts will be closed out.
The Fund has claimed an exclusion from the definition of the term
"commodity pool operator" under the Commodity Exchange Act and therefore is not
subject to registration or regulation as a pool operator under that Act.
Options on futures contracts are options that call for the delivery
of futures contracts upon exercise. Options on futures contracts written or
purchased by the Fund will be traded on U.S. exchanges.
The writing of a call option on a futures contract constitutes a
partial hedge against declining prices of the securities in the Fund's
portfolio. If the futures price at expiration of the option is below the
exercise price, the Fund will retain the full amount of the option premium,
which provides a partial hedge against any decline that may have occurred in the
Fund's portfolio holdings. The writing of a put option on a futures contract
constitutes a partial hedge against increasing prices of the securities or other
instruments required to be delivered under the terms of the futures contract. If
the futures price at expiration of the put option is higher than the exercise
price, the Fund will retain the full amount of the option premium, which
provides a partial hedge against any increase in the price of securities which
the Fund intends to purchase. If a put or call option the Fund has written is
exercised, the Fund will incur a loss which will be reduced by the amount of the
premium it receives. Depending on the degree of correlation between changes in
the value of its portfolio securities and changes in the value of its options on
futures positions, the Fund's losses from exercised options on futures may to
some extent be reduced or increased by changes in the value of portfolio
securities.
The Fund may purchase options on futures contracts for hedging
purposes instead of purchasing or selling the underlying futures contracts. For
example, where a decrease in the value of portfolio securities is anticipated as
a result of a projected market-wide decline or changes in interest or exchange
rates, the Fund could, in lieu of selling futures contracts, purchase put
options thereon. In the event that such decrease were to occur, it may be
offset, in whole or part, by a profit on the option. If the anticipated market
decline were not to occur, the Fund will suffer a loss equal to the price of the
put. Where it is projected that the value of securities to be acquired by the
Fund will increase prior to acquisition due to a market advance or changes in
interest or exchange rates, the Fund could purchase call options on futures
contracts, rather than purchasing the underlying futures contracts. If the
market advances, the increased cost of securities to be purchased may be offset
by a profit on the call. However, if the market declines, the Fund will suffer a
loss equal to the price of the call, but the securities which the Fund intends
to purchase may be less expensive.
--Credit Default Swap Agreements. The "buyer" in a credit default
swap contract is obligated to pay the "seller" a periodic stream of payments
over the term of the contract in return for a contingent payment upon the
occurrence of a credit event with respect to an underlying reference obligation.
Generally, a credit event means bankruptcy, failure to pay, obligation
acceleration or modified restructuring. The Fund may be either the buyer or
seller in the transaction. As a seller, the Fund receives a fixed rate of income
throughout the term of the contract, which typically is between one month and
five years, provided that no credit event occurs. If a credit event occurs, the
Fund typically must pay the contingent payment to the buyer, which is typically
the "par value" (full notional value) of the reference obligation. The
contingent payment may be a cash settlement or by physical delivery of the
reference obligation in return for payment of the face amount of the obligation.
If the Fund is a buyer and no credit event occurs, the Fund will lose its
periodic stream of payments over the term of the contract. However, if a credit
event occurs, the buyer typically receives full notional value for a reference
obligation that may have little or no value.
Credit default swaps may involve greater risks than if a Fund had
invested in the reference obligation directly. Credit default swaps are subject
to general market risk, liquidity risk and credit risk.
The Fund will not enter into a credit default swap if the swap
provides for settlement by physical delivery and such delivery would result in
the Fund investing in securities rated below BBB- or Baa3 or not maintaining an
average aggregate credit rating of at least A- (or the equivalent) from any
nationally recognized statistical rating organization ("NRSRO").
--Currency Swaps. The Fund may enter into currency swaps for hedging
purposes in an attempt to protect against adverse changes in exchange rates
between the U.S. Dollar and other currencies or for non-hedging purposes as a
means of making direct investments in foreign currencies, as described below
under "Currency Transactions". Currency swaps involve the exchange by the Fund
with another party of a series of payments in specified currencies. Actual
principal amounts of currencies may be exchanged by the counterparties at the
initiation and again upon termination of the transaction. Since currency swaps
are individually negotiated, the Fund expects to achieve an acceptable degree of
correlation between its portfolio investments and its currency swaps positions.
Therefore, the entire principal value of a currency swap is subject to the risk
that the other party to the swap will default on its contractual delivery
obligations. The Fund will not enter into any currency swap unless the credit
quality of the unsecured senior debt or the claims-paying ability of the other
party thereto is rated in the highest rating category of at least one nationally
recognized statistical rating organization at the time of entering into the
transaction. If there is a default by the other party to such a transaction, the
Fund will have contractual remedies pursuant to the agreements related to the
transactions.
--Synthetic Foreign Equity Securities. The Fund may invest in
different types of derivatives generally referred to as synthetic foreign equity
securities. These securities may include international warrants or local access
products. International warrants are financial instruments issued by banks or
other financial institutions, which may or may not be traded on a foreign
exchange. International warrants are a form of derivative security that may give
holders the right to buy or sell an underlying security or a basket of
securities representing an index from or to the issuer of the warrant for a
particular price or may entitle holders to receive a cash payment relating to
the value of the underlying security or index, in each case upon exercise by the
Fund. Local access products are similar to options in that they are exercisable
by the holder for an underlying security or a cash payment based upon the value
of that security, but are generally exercisable over a longer term than typical
options. These types of instruments may be American style, which means that they
can be exercised at any time on or before the expiration date of the
international warrant, or European style, which means that they may be exercised
only on the expiration date.
Other types of synthetic foreign equity securities in which the Fund
may invest include covered warrants and low exercise price warrants. Covered
warrants entitle the holder to purchase from the issuer, typically a financial
institution, upon exercise, common stock of an international company or receive
a cash payment (generally in U.S. Dollars). The issuer of the covered warrant
usually owns the underlying security or has a mechanism, such as owning equity
warrants on the underlying securities, through which they can obtain the
securities. The cash payment is calculated according to a predetermined formula,
which is generally based on the difference between the value of the underlying
security on the date of exercise and the strike price. Low exercise price
warrants are warrants with an exercise price that is very low relative to the
market price of the underlying instrument at the time of issue (e.g., one cent
or less). The buyer of a low exercise price warrant effectively pays the full
value of the underlying common stock at the outset. In the case of any exercise
of warrants, there may be a time delay between the time a holder of warrants
gives instructions to exercise and the time the price of the common stock
relating to exercise or the settlement date is determined, during which time the
price of the underlying security could change significantly. In addition, the
exercise or settlement date of the warrants may be affected by certain market
disruption events, such as difficulties relating to the exchange of a local
currency into U.S. Dollars, the imposition of capital controls by a local
jurisdiction or changes in the laws relating to foreign investments. These
events could lead to a change in the exercise date or settlement currency of the
warrants, or postponement of the settlement date. In some cases, if the market
disruption events continue for a certain period of time, the warrants may become
worthless resulting in a total loss of the purchase price of the warrants.
The Fund's investments in synthetic foreign equity securities will
be those issued by entities deemed to be creditworthy by the Adviser, which will
monitor the creditworthiness of the issuers on an ongoing basis. Investments in
these instruments involve the risk that the issuer of the instrument may default
on its obligation to deliver the underlying security or cash in lieu thereof.
These instruments may also be subject to liquidity risk because there may be a
limited secondary market for trading the warrants. They are also subject, like
other investments in foreign securities, to foreign risk and currency risk.
International warrants also include equity warrants, index warrants,
and interest rate warrants. Equity warrants are generally issued in conjunction
with an issue of bonds or shares, although they also may be issued as part of a
rights issue or scrip issue. When issued with bonds or shares, they usually
trade separately from the bonds or shares after issuance. Most warrants trade in
the same currency as the underlying stock (domestic warrants), but also may be
traded in different currency (euro-warrants). Equity warrants are traded on a
number of foreign exchanges and in over-the-counter markets. Index warrants and
interest rate warrants are rights created by an issuer, typically a financial
institution, entitling the holder to purchase, in the case of a call, or sell,
in the case of a put, respectively, an equity index or a specific bond issue or
interest rate index at a certain level over a fixed period of time. Index
warrants transactions settle in cash, while interest rate warrants can typically
be exercised in the underlying instrument or settle in cash.
The Fund also may invest in long-term options of, or relating to,
international issuers. Long-term options operate much like covered warrants.
Like covered warrants, long-term options are call options created by an issuer,
typically a financial institution, entitling the holder to purchase from the
issuer outstanding securities of another issuer. Long-term options have an
initial period of one year or more, but generally have terms between three and
five years. Unlike U.S. options, long-term European options do not settle
through a clearing corporation that guarantees the performance of the
counterparty. Instead, they are traded on an exchange and subject to the
exchange's trading regulations.
--Eurodollar Instruments. Eurodollar instruments are essentially
U.S. Dollar-denominated futures contracts or options thereon that are linked to
the London Interbank Offered Rate and are subject to the same limitations and
risks as other futures contracts and options.
--Currency Transactions. The Fund may invest in non-U.S.
Dollar-denominated securities on a currency hedged or un-hedged basis. The
Adviser may actively manage the Fund's currency exposures and may seek
investment opportunities by taking long or short positions in currencies through
the use of currency-related derivatives, including forward currency exchange
contracts, futures and options on futures, swaps and options. The Adviser may
enter into transactions for investment opportunities when it anticipates that a
foreign currency will appreciate or depreciate in value but securities
denominated in that currency are not held by the Fund and do not present
attractive investment opportunities. Such transactions may also be used when the
Adviser believes that it may be more efficient than a direct investment in a
foreign currency-denominated security. The Fund may also conduct currency
exchange contracts on a spot basis (i.e., for cash at the spot rate prevailing
in the currency exchange market for buying or selling securities).
Forward Commitments and When-Issued and Delayed Delivery Securities
Forward commitments for the purchase or sale of securities may
include purchases on a "when-issued" basis or purchases or sales on a "delayed
delivery" basis. In some cases, a forward commitment may be conditioned upon the
occurrence of a subsequent event, such as approval and consummation of a merger,
corporate reorganization or debt restructuring (i.e., a "when, as and if issued"
trade). When forward commitment transactions are negotiated, the price is fixed
at the time the commitment is made, the Fund assumes the rights and risks of
ownership of the security, but the Fund does not pay for the securities until
they are received. If the Fund is fully or almost fully invested when forward
commitment purchases are outstanding, such purchases may result in a form of
leverage. Leveraging the portfolio in this manner may increase the Fund's
volatility of returns.
The use of forward commitments enables the Fund to protect against
anticipated changes in exchange rates, interest rates and/or prices. For
instance, the Fund may enter into a forward contract when it enters into a
contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. Dollar price of the security
("transaction hedge"). In addition, when the Fund believes that a foreign
currency may suffer a substantial decline against the U.S. Dollar, it may enter
into a forward sale contract to sell an amount of that foreign currency
approximating the value of some or all of the Fund's securities denominated in
such foreign currency, or when the Fund believes that the U.S. Dollar may suffer
a substantial decline against a foreign currency, it may enter into a forward
purchase contract to buy that foreign currency for a fixed dollar amount
("position hedge"). If the Adviser were to forecast incorrectly the direction of
exchange rate movements, the Fund might be required to complete such when-issued
or forward transactions at prices inferior to the then current market values.
When-issued securities and forward commitments may be sold prior to the
settlement date. If the Fund chooses to dispose of the right to acquire a
when-issued security prior to its acquisition or dispose of its right to deliver
or receive against a forward commitment, it may incur a gain or loss. Any
significant commitment of Fund assets to the purchase of securities on a "when,
as and if issued" basis may increase the volatility of the Fund's NAV.
At the time the Fund intends to enter into a forward commitment, it
will record the transaction and thereafter reflect the value of the security
purchased or, if a sale, the proceeds to be received, in determining its NAV.
Any unrealized appreciation or depreciation reflected in such valuation of a
"when, as and if issued" security would be canceled in the event that the
required conditions did not occur and the trade was canceled.
Purchases of securities on a forward commitment or when-issued basis
may involve more risk than other types of purchases. For example, by committing
to purchase securities in the future, the Fund subjects itself to a risk of loss
on such commitments as well as on its portfolio securities. Also, the Fund may
have to sell assets which have been set aside in order to meet redemptions. In
addition, if the Fund determines it is advisable as a matter of investment
strategy to sell the forward commitment or "when-issued" or "delayed delivery"
securities before delivery, the Fund may incur a gain or loss because of market
fluctuations since the time the commitment to purchase such securities was made.
Any such gain or loss would be treated as a capital gain or loss for tax
purposes. When the time comes to pay for the securities to be purchased under a
forward commitment or on a "when-issued" or "delayed delivery" basis, the Fund
will meet its obligations from the then available cash flow or the sale of
securities, or, although it would not normally expect to do so, from the sale of
the forward commitment or "when-issued" or "delayed delivery" securities
themselves (which may have a value greater or less than the Fund's payment
obligation). No interest or dividends accrue to the purchaser prior to the
settlement date for securities purchased or sold under a forward commitment. In
addition, in the event the other party to the transaction files for bankruptcy,
becomes insolvent, or defaults on its obligation, a Fund may be adversely
affected.
Illiquid Securities
The Fund will not invest in illiquid securities if immediately after
such investment more than 15% or such other amount permitted by guidance
regarding the 1940 Act of the Fund's net assets would be invested in such
securities. For this purpose, illiquid securities include, among others, (a)
direct placements or other securities which are subject to legal or contractual
restrictions on resale or for which there is no readily available market (e.g.,
trading in the security is suspended or, in the case of unlisted securities,
market makers do not exist or will not entertain bids or offers), (b) options
purchased by the Fund over-the-counter and the cover for options written by the
Fund over-the-counter, and (c) repurchase agreements not terminable within seven
days. Securities that have legal or contractual restrictions on resale but have
a readily available market are not deemed illiquid for purposes of this
limitation.
Mutual funds do not typically hold a significant amount of
restricted securities (securities that are subject to restrictions on resale to
the general public) or other illiquid securities because of the potential for
delays on resale and uncertainty in valuation. Limitations on resale may have an
adverse effect on the marketability of portfolio securities and a mutual fund
might be unable to dispose of restricted or other illiquid securities promptly
or at reasonable prices and might thereby experience difficulty satisfying
redemptions within seven days. A mutual fund may also have to take certain steps
or wait a certain amount of time in order to remove the transfer restrictions
for such restricted securities in order to dispose of them, resulting in
additional expense and delay.
Rule 144A under the Securities Act of 1933, as amended, (the
"Securities Act") allows a broader institutional trading market for securities
otherwise subject to restriction on resale to the general public. Rule 144A
establishes a "safe harbor" from the registration requirements of the Securities
Act for resales of certain securities to qualified institutional buyers. An
insufficient number of qualified institutional buyers interested in purchasing
certain restricted securities held by the Fund, however, could affect adversely
the marketability of such portfolio securities and the Fund might be unable to
dispose of such securities promptly or at reasonable prices.
The Adviser, acting under the oversight of the Board, will monitor
the liquidity of restricted securities in the Fund's portfolio that are eligible
for resale pursuant to Rule 144A. In reaching liquidity decisions, the Fund's
Adviser will consider, among others, the following factors: (1) the frequency of
trades and quotes for the security; (2) the number of dealers issuing quotations
to purchase or sell the security; (3) the number of other potential purchasers
of the security; (4) the number of dealers undertaking to make a market in the
security; (5) the nature of the security (including its unregistered nature) and
the nature of the marketplace for the security (e.g., the time needed to dispose
of the security, the method of soliciting offers and the mechanics of the
transfer); and (6) any applicable Securities and Exchange Commission ("SEC")
interpretation or position with respect to such type of securities.
Investments in Other Investment Companies
The Fund may invest in securities of other investment companies to
the extent permitted under the 1940 Act or the rules and regulations thereunder
(as such statute, rules or regulations may be amended from time to time) or by
guidance regarding, interpretations of, or exemptive orders under, the 1940 Act
or the rules or regulations thereunder published by appropriate regulatory
authorities. The Fund intends to invest uninvested cash balances in an
affiliated money market fund as permitted by Rule 12d1-1 under the 1940 Act. If
the Fund acquires shares in investment companies, shareholders would bear,
indirectly, the expenses of such investment companies (which may include
management and advisory fees), which are in addition to the Fund's expenses. The
Fund may also invest in exchange-traded funds, subject to the restrictions and
limitations of the 1940 Act.
Lending of Portfolio Securities
The Fund may seek to increase income by lending portfolio
securities. A principal risk in lending portfolio securities, as with other
extensions of credit, consists of the possible loss of rights in the collateral
should the borrower fail financially. In addition, the Fund may be exposed to
the risk that the sale of any collateral realized upon the borrower's default
will not yield proceeds sufficient to replace the loaned securities. In
determining whether to lend securities to a particular borrower, the Adviser
(subject to oversight by the Board) will consider all relevant facts and
circumstances, including the creditworthiness of the borrower. The loans would
be made only to firms deemed by the Adviser to be of good standing, and when, in
the judgment of the Adviser, the consideration that can be earned currently from
securities loans of this type justifies the attendant risk. The Fund may lend
portfolio securities to the extent permitted under the 1940 Act or the rules and
regulations thereunder (as such statute, rules or regulations may be amended
from time to time) or by guidance regarding, interpretations of, or exemptive
orders under, the 1940 Act.
Under present regulatory policies, including those of the Board of
Governors of the Federal Reserve System and the SEC, such loans may be made only
to member firms of the New York Stock Exchange (the "Exchange") and will be
required to be secured continuously by collateral in cash, cash equivalents, or
U.S. Treasury Bills maintained on a current basis at an amount at least equal to
the market value of the securities loaned. The Fund will have the right to call
a loan and obtain the securities loaned at any time on five days' notice. While
securities are on loan, the borrower will pay the Fund any income from the
securities.
The Fund may invest any cash collateral in portfolio securities and
earn additional income or receive an agreed-upon amount of income from a
borrower who has delivered equivalent collateral. Any such investment of cash
collateral will be subject to the Fund's investment risks.
The Fund will not, however, have the right to vote any securities
having voting rights during the existence of the loan. The Fund will have the
right to regain record ownership of loaned securities or equivalent securities
in order to exercise ownership rights such as voting rights, subscription rights
and rights to dividends, interest, or distributions.
The Funds may pay reasonable finders', administrative, and custodial
fees in connection with a loan.
Preferred Stock
The Fund may invest in preferred stock. Preferred stock is an equity
security that has features of debt because it generally entitles the holder to
periodic payments at a fixed rate of return. Preferred stock is subordinated to
any debt the issuer has outstanding but has liquidation preference over common
stock. Accordingly, preferred stock dividends are not paid until all debt
obligations are first met. Preferred stock may be subject to more fluctuations
in market value, due to changes in market participants' perceptions of the
issuer's ability to continue to pay dividends, than debt of the same issuer.
Real Estate Investment Trusts
Real Estate Investment Trusts ("REITs") are pooled investment
vehicles that invest primarily in income producing real estate or real estate
related loans or interests. REITs are generally classified as equity REITs,
mortgage REITs or a combination of equity and mortgage REITs. Equity REITs
invest the majority of their assets directly in real property and derive income
primarily from the collection of rents. Equity REITs can also realize capital
gains by selling properties that have appreciated in value. Mortgage REITs
invest the majority of their assets in real estate mortgages and derive income
from the collection of interest payments. Similar to investment companies such
as the Fund, REITs are not taxed on income distributed to shareholders provided
they comply with several requirements of the United States Internal Revenue Code
of 1986, as amended (the "Code"). The Fund will indirectly bear its
proportionate share of expenses incurred by REITs in which the Fund invests in
addition to the expenses incurred directly by the Fund.
Investing in REITs involves certain unique risks in addition to
those risks associated with investing in the real estate industry in general.
Equity REITs may be affected by changes in the value of the underlying property
owned by the REITs, while mortgage REITs may be affected by the quality of any
credit extended. REITs are dependent upon management skills, are not
diversified, and are subject to heavy cash flow dependency, default by borrowers
and self-liquidation.
Investing in REITs involves risks similar to those associated with
investing in small capitalization companies. REITs may have limited financial
resources, may trade less frequently and in a limited volume and may be subject
to more abrupt or erratic price movements than larger company securities.
Historically, small capitalization stocks, such as REITs, have had more price
volatility than larger capitalization stocks.
REITs are subject to the possibilities of failing to qualify for
tax-free pass-through of income under the Code and failing to maintain their
exemptions from registration under the 1940 Act. REITs (especially mortgage
REITs) also are subject to interest rate risks. When interest rates decline, the
value of a REIT's investment in fixed-rate obligations can be expected to rise.
Conversely, when interest rates rise, the value of a REIT's investment in
fixed-rate obligations can be expected to decline. In contrast, as interest
rates on adjustable rate mortgage loans are reset periodically, yields on a
REIT's investments in such loans will gradually align themselves to reflect
changes in market interest rates, causing the value of such investments to
fluctuate less dramatically in response to interest rate fluctuations than would
investments in fixed rate obligations.
Repurchase Agreements and Buy/Sell Back Transactions
A repurchase agreement is an agreement by which the Fund purchases a
security and obtains a simultaneous commitment from the seller to repurchase the
security at an agreed upon price and date, normally one day or a week later. The
purchase and repurchase obligations are transacted under one document. The
resale price is greater than the purchase price, reflecting an agreed-upon
"interest rate" that is effective for the period of time the buyer's money is
invested in the security, and which is related to the current market rate of the
purchased security rather than its coupon rate. During the term of the
repurchase agreement, the Fund monitors on a daily basis the market value of the
securities subject to the agreement and, if the market value of the securities
falls below the resale amount provided under the repurchase agreement, the
seller under the repurchase agreement is required to provide additional
securities or cash equal to the amount by which the market value of the
securities falls below the resale amount. Because a repurchase agreement permits
the Fund to invest temporarily available cash on a fully-collateralized basis,
repurchase agreements permit the Fund to earn a return on temporarily available
cash while retaining "overnight" flexibility in pursuit of investments of a
longer-term nature. Repurchase agreements may exhibit the characteristics of
loans by the Fund.
The obligation of the seller under the repurchase agreement is not
guaranteed, and there is a risk that the seller may fail to repurchase the
underlying security, whether because of the seller's bankruptcy or otherwise. In
such event, the Fund would attempt to exercise its rights with respect to the
underlying security, including possible sale of the securities. The Fund may
incur various expenses in connection with the exercise of its rights and may be
subject to various delays and risks of loss, including (a) possible declines in
the value of the underlying securities, (b) possible reduction in levels of
income and (c) lack of access to the securities (if they are held through a
third-party custodian) and possible inability to enforce the Fund's rights. The
Board has established procedures, which are periodically reviewed by the Board,
pursuant to which the Adviser monitors the creditworthiness of the dealers with
which the Fund enters into repurchase agreement transactions.
The Fund may enter into repurchase agreements pertaining to U.S.
Government securities with member banks of the Federal Reserve System or
"primary dealers" (as designated by the Federal Reserve Bank of New York) in
such securities. There is no percentage restriction on the Fund's ability to
enter into repurchase agreements. Currently, the Fund intends to enter into
repurchase agreements only with its custodian and such primary dealers.
The Fund may enter into buy/sell back transactions, which are
similar to repurchase agreements. In this type of transaction, the Fund enters a
trade to buy securities at one price and simultaneously enters a trade to sell
the same securities at another price on a specified date. Similar to a
repurchase agreement, the repurchase price is higher than the sale price and
reflects current interest rates. Unlike a repurchase agreement, however, the
buy/sell transaction, though done simultaneously, is two separate legal
agreements. A buy/sell transaction also differs from a repurchase agreement in
that the seller is not required to provide margin payments if the value of the
securities falls below the repurchase price because the transaction is two
separate transactions. The Fund has the risk of changes in the value of the
purchased security during the term of the buy/sell agreement although these
agreements typically provide for the repricing of the original transaction at a
new market price if the value of the security changes by a specific amount.
Reverse Repurchase Agreements
Reverse repurchase agreements involve sales by the Fund of portfolio
assets concurrently with an agreement by the Fund to repurchase the same assets
at a later date at a fixed price. During the reverse repurchase agreement
period, the Fund continues to receive principal and interest payments on these
securities. Generally, the effect of such a transaction is that the Fund can
recover all or most of the cash invested in the portfolio securities involved
during the term of the reverse repurchase agreement, while it will be able to
keep the interest income associated with those portfolio securities. Such
transactions are advantageous only if the interest cost to the Fund of the
reverse repurchase transaction is less than the cost of otherwise obtaining the
cash.
Reverse repurchase agreements are considered to be a loan to the
Fund by the counterparty, collateralized by the assets subject to repurchase
because the incidents of ownership are retained by the Fund. By entering into
reverse repurchase agreements, the Fund obtains additional cash to invest on
other securities. The Fund may use reverse repurchase agreements for borrowing
purposes if it believes that the cost of this form of borrowing will be lower
than the cost of bank borrowing. Reverse repurchase agreements create leverage
and are speculative transactions because they allow the Fund to achieve a return
on a larger capital base relative to its NAV. The use of leverage creates the
opportunity for increased income for the Fund's shareholders when the Fund
achieves a higher rate of return on the investment of the reverse repurchase
agreement proceeds than it pays in interest on the reverse repurchase
transactions. However, there is the risk that returns could be reduced if the
rates of interest on the investment proceeds do not exceed the interest paid by
the Fund on the reverse repurchase transactions.
Reverse repurchase agreements involve the risk that the market value
of the securities the Fund is obligated to repurchase under the agreement may
decline below the repurchase price. In the event the buyer of securities under a
reverse repurchase agreement files for bankruptcy or becomes insolvent, the
Fund's use of the proceeds of the agreement may be restricted pending a
determination by the other party, or its trustee or receiver, whether to enforce
the Fund's obligation to repurchase the securities.
Rights and Warrants
The Fund may invest in rights and warrants which entitle the holder
to buy equity securities at a specific price for a specific period of time, but
will do so only if the equity securities themselves are deemed appropriate by
the Adviser for inclusion in the Fund's portfolio. Rights and warrants may be
considered more speculative than certain other types of investments in that they
do not entitle a holder to dividends or voting rights with respect to the
securities which may be purchased nor do they represent any rights in the assets
of the issuing company. Also, the value of a right or warrant does not
necessarily change with the value of the underlying securities and a right or
warrant ceases to have value if it is not exercised prior to the expiration
date.
Short Sales
A short sale is effected by selling a security that the Fund does
not own, or if the Fund does own such security, it is not to be delivered upon
consummation of sale. A short sale is against the box to the extent that the
Fund contemporaneously owns or has the right to obtain securities identical to
those sold. A short sale of a security involves the risk that, instead of
declining, the price of the security sold short will rise. If the price of the
securities sold short increases between the time of a short sale and the time
the Fund replaces the borrowed security, the Fund will incur a loss; conversely,
if the price declines, the Fund will realize a gain. The potential for the price
of a fixed-income security sold short to rise is a function of both the
remaining maturity of the obligation, its creditworthiness and its yield. Unlike
short sales of equities or other instruments, potential for the price of a
fixed-income security to rise may be limited due to the fact that the security
will be no more than par at maturity. However, the short sale of other
instruments or securities generally, including fixed-income securities
convertible into equities or other instruments, a fixed-income security trading
at a deep discount from par or which pays a coupon that is high in relative or
absolute terms, or which is denominated in a currency other than the U.S.
Dollar, involves the possibility of a theoretically unlimited loss since there
is a theoretically unlimited potential for the market price of the security sold
short to increase. Short sales may be used in some cases by the Fund to defer
the realization of gain or loss for federal income tax purposes on securities
then owned by the Fund. See "Dividends, Distributions and Taxes-Tax Straddles"
for a discussion of certain special federal income tax considerations that may
apply to short sales which are entered into by the Fund.
Certain Risk and Other Considerations
Borrowing and Use of Leverage. The Fund may use borrowings for
investment purposes subject to the restrictions of the 1940 Act. The Fund may
also use leverage for investment purposes by entering into transactions such as
reverse repurchase agreements, forward contracts and dollar rolls. This means
that the Fund uses the cash proceeds made available during the term of these
transactions to make investments in other securities.
Borrowings by the Fund result in leveraging of the Fund's shares of
common stock. The proceeds of such borrowings will be invested in accordance
with the Fund's investment objective and policies. The Adviser anticipates that
the difference between the interest expense paid by the Fund on borrowings and
the rates received by the Fund from its investment portfolio issuers will
provide the Fund's shareholders with a potentially higher yield.
Utilization of leverage, which is usually considered speculative,
however, involves certain risks to the Fund's shareholders. These include a
higher volatility of the NAV of the Fund's shares of common stock and the
relatively greater effect on the NAV of the shares caused by favorable or
adverse changes in market conditions or interest rates. So long as the Fund is
able to realize a net return on the leveraged portion of its investment
portfolio that is higher than the interest expense paid on borrowings or the
carrying costs of leveraged transactions, the effect of leverage will be to
cause the Fund's shareholders to realize higher current net investment income
than if the Fund were not leveraged. However, to the extent that the interest
expense on borrowings or the carrying costs of leveraged transactions approaches
the net return on the leveraged portion of the Fund's investment portfolio, the
benefit of leverage to the Fund's shareholders will be reduced, and if the
interest expense on borrowings or the carrying costs of leveraged transactions
were to exceed the net return to shareholders, the Fund's use of leverage would
result in a lower rate of return than if the Fund were not leveraged. Similarly,
the effect of leverage in a declining market could be a greater decrease in NAV
per share than if the Fund were not leveraged. In an extreme case, if the Fund's
current investment income were not sufficient to meet the interest expense on
borrowings or the carrying costs of leveraged transactions, it could be
necessary for the Fund to liquidate certain of its investments, thereby reducing
the NAV of the Fund's shares.
Certain transactions, such as derivatives transactions, forward
commitments, reverse repurchase agreements and short sales, involve leverage and
may expose the Fund to potential losses that, in some cases, may exceed the
amount originally invested by the Fund. When the Fund engages in such
transactions, it will, in accordance with guidance provided by the SEC or its
staff in, among other things, regulations, interpretative releases and no-action
letters, deposit in a segregated account certain liquid assets with a value at
least equal to the Fund's exposure, on a marked-to-market or other relevant
basis, to the transaction. Transactions for which assets have been segregated
will not be considered "senior securities" for purposes of the Fund's investment
restriction concerning senior securities. The segregation of assets is intended
to enable the Fund to have assets available to satisfy its obligations with
respect to these transactions, but will not limit the Fund's exposure to loss.
Additional Risks of Options on Futures Contracts, Forward Contracts
and Options on Foreign Currencies. Unlike transactions entered into by the Funds
in futures contracts, options on foreign currencies and forward contracts may
not be traded on contract markets regulated by the Commodity Futures Trading
Commission ("CFTC") or (with the exception of certain foreign currency options)
by the SEC. Such instruments may be traded through financial institutions acting
as market makers, although foreign currency options are also traded on certain
national securities exchanges, such as the Philadelphia Stock Exchange and the
Chicago Board Options Exchange, subject to SEC regulation. Similarly, options on
currencies may be traded over-the-counter. In an over-the-counter trading
environment, many of the protections afforded to exchange participants will not
be available. For example, there are no daily price fluctuation limits, and
adverse market movements could therefore continue to an unlimited extent over a
period of time. Although the purchase of an option cannot lose more than the
amount of the premium plus related transaction costs, this entire amount could
be lost. Moreover, the option writer and a trader of forward contracts could
lose amounts substantially in excess of their initial investments, due to the
margin and collateral requirements associated with such positions.
Options on foreign currencies traded on national securities
exchanges are within the jurisdiction of the SEC, as are other securities traded
on such exchanges. As a result, many of the protections provided to traders on
organized exchanges will be available with respect to such transactions. In
particular, all foreign currency option positions entered into on a national
securities exchange are cleared and guaranteed by the Options
Clearing Corporation ("OCC"), thereby reducing the risk of counterparty default.
Further, a liquid secondary market in options traded on a national securities
exchange may be more readily available than in the over-the-counter market,
potentially permitting the Fund to liquidate open positions at a profit prior to
exercise or expiration, or to limit losses in the event of adverse market
movements.
The purchase and sale of exchange-traded foreign currency options,
however, is subject to the risks of the availability of a liquid secondary
market described above, as well as the risks regarding adverse market movements,
margining of options written, the nature of the foreign currency market,
possible intervention by governmental authorities and the effects of other
political and economic events. In addition, exchange-traded options on foreign
currencies involve certain risks not presented by the over-the-counter market.
For example, exercise and settlement of such options must be made exclusively
through the OCC, which has established banking relationships in applicable
foreign countries for this purpose. As a result, the OCC may, if it determines
that foreign governmental restrictions or taxes would prevent the orderly
settlement of foreign currency option exercises, or would result in undue
burdens on the OCC or its clearing member, impose special procedures on exercise
and settlement, such as technical changes in the mechanics of delivery of
currency, the fixing of dollar settlement prices or prohibitions, on exercise.
In addition, futures contracts, options on futures contracts,
forward contracts and options on foreign currencies may be traded on foreign
exchanges. Such transactions are subject to the risk of governmental actions
affecting trading in or the prices of foreign currencies or securities. The
value of such positions also could be adversely affected by (i) other complex
foreign political and economic factors, (ii) lesser availability than in the
United States of data on which to make trading decisions, (iii) delays in the
Fund's ability to act upon economic events occurring in foreign markets during
nonbusiness hours in the United States, (iv) the imposition of different
requirements than in the United States, and (v) lesser trading volume.
Risks of Investments in Foreign Securities. Investors should
understand and consider carefully the substantial risks involved in securities
of foreign companies and governments of foreign nations, some of which are
referred to below, and which are in addition to the usual risks inherent in
domestic investments. Investing in securities of non-United States companies
which are generally denominated in foreign currencies, and utilization of
derivative investment products denominated in, or the value of which is
dependent upon movements in the relative value of, a foreign currency, involve
certain considerations comprising both risk and opportunity not typically
associated with investing in United States companies. These considerations
include changes in exchange rates and exchange control regulations, political
and social instability, expropriation, imposition of foreign taxes, less liquid
markets and less available information than are generally the case in the United
States, higher transaction costs, less government supervision of exchanges,
brokers and issuers, difficulty in enforcing contractual obligations, lack of
uniform accounting and auditing standards and greater price volatility.
There is generally less publicly available information about foreign
companies comparable to reports and ratings that are published about companies
in the United States. Foreign issuers are subject to accounting and financial
standards and requirements that differ, in some cases significantly, from those
applicable to U.S. issuers. In particular, the assets and profits appearing on
the financial statements of a foreign issuer may not reflect its financial
position or results of operations in the way they would be reflected had the
financial statement been prepared in accordance with U.S. generally accepted
accounting principles. In addition, for an issuer that keeps accounting records
in local currency, inflation accounting rules in some of the countries in which
the Fund may invest require, for both tax and accounting purposes, that certain
assets and liabilities be restated on the issuer's balance sheet in order to
express items in terms of currency of constant purchasing power. Inflation
accounting may indirectly generate losses or profits. Consequently, financial
data may be materially affected by restatements for inflation and may not
accurately reflect the real condition of those issuers and securities markets.
Substantially less information is publicly available about certain non-U.S.
issuers than is available about U.S. issuers.
It is contemplated that foreign securities will be purchased in
over-the-counter markets or on stock exchanges located in the countries in which
the respective principal offices of the issuers of the various securities are
located, if that is the best available market. Foreign securities markets are
generally not as developed or efficient as those in the United States. While
growing in volume, they usually have substantially less volume than the
Exchange, and securities of some foreign companies are less liquid and more
volatile than securities of comparable United States companies. Similarly,
volume and liquidity in most foreign bond markets is less than in the United
States and, at times, volatility of price can be greater than in the United
States. Fixed commissions on foreign stock exchanges are generally higher than
negotiated commissions on United States exchanges, although the Fund will
endeavor to achieve the most favorable net results on its portfolio
transactions. There is generally less government supervision and regulation of
stock exchanges, brokers and listed companies than in the United States.
Expropriation, confiscatory taxation, nationalization, political,
economic or social instability or other similar developments, such as military
coups, have occurred in the past in countries in which the Fund may invest and
could adversely affect the Fund's assets should these conditions or events
recur.
Foreign investment in certain foreign securities is restricted or
controlled to varying degrees. These restrictions or controls may at times limit
or preclude foreign investment in certain foreign securities and increase the
costs and expenses of the Fund. Certain countries in which the Fund may invest
require governmental approval prior to investments by foreign persons, limit the
amount of investment by foreign persons in a particular issuer, limit the
investment by foreign persons only to a specific class of securities of an
issuer that may have less advantageous rights than the classes available for
purchase by domiciliaries of the countries and/or impose additional taxes on
foreign investors.
Certain countries may require governmental approval for the
repatriation of investment income, capital or the proceeds of sales of
securities by foreign investors. In addition, if a deterioration occurs in a
country's balance of payments, the country could impose temporary restrictions
on foreign capital remittances.
Income from certain investments held by the Fund could be reduced by
foreign income taxes, including withholding taxes. It is impossible to determine
the effective rate of foreign tax in advance. The Fund's NAV may also be
affected by changes in the rates or methods of taxation applicable to the Fund
or to entities in which the Fund has invested. The Adviser generally will
consider the cost of any taxes in determining whether to acquire any particular
investments, but can provide no assurance that the tax treatment of investments
held by the Fund will not be subject to change. A shareholder otherwise subject
to United States federal income taxes may, subject to certain limitations, be
entitled to claim a credit or deduction for U.S. federal income tax purposes for
his or her proportionate share of such foreign taxes paid by the Fund. See "U.S.
Federal Income Taxes".
Although the Fund may value its assets in terms of U.S. Dollars, the
Funds do not intend to convert their holdings of foreign currencies into U.S.
Dollars on a daily basis. The Fund will do so from time to time, and investors
should be aware of the costs of currency conversion. Although foreign exchange
dealers do not charge a fee for conversion, they do realize a profit based on
the difference (commonly known as the "spread") between the price at which they
are buying and selling various currencies. Thus, a dealer may offer to sell a
foreign currency to the Fund at one rate, while offering a lesser rate of
exchange should the Fund desire to resell that currency to the dealer. Investors
should understand that the expense ratio of the Fund investing in foreign
securities may be higher than investment companies investing only in domestic
securities since, among other things, the cost of maintaining the custody of
foreign securities is higher and the purchase and sale of portfolio securities
may be subject to higher transaction charges, such as stamp duties and turnover
taxes.
For many foreign securities, there are U.S. Dollar-denominated ADRs
which are traded in the United States on exchanges or over-the-counter and are
issued by domestic banks or trust companies and for which market quotations are
readily available. ADRs do not lessen the foreign exchange risk inherent in
investing in the securities of foreign issuers. However, by investing in ADRs
rather than directly in stock of foreign issuers, the Fund can avoid currency
risks which might occur during the settlement period for either purchases or
sales. The Fund may purchase foreign securities directly, as well as through
ADRs.
Foreign Currency Transactions. The Fund may invest in securities
denominated in foreign currencies and a corresponding portion of the Fund's
revenues will be received in such currencies. In addition, the Fund may conduct
foreign currency transactions for hedging and non-hedging purposes on a spot
(i.e., cash) basis or through the use of derivatives transactions, such as
forward currency exchange contracts, currency futures and options thereon, and
options on currencies as described above. The dollar equivalent of the Fund's
net assets and distributions will be adversely affected by reductions in the
value of certain foreign currencies relative to the U.S. Dollar. Such changes
will also affect the Fund's income. The Fund will, however, have the ability to
attempt to protect itself against adverse changes in the values of foreign
currencies by engaging in certain of the investment practices listed above.
While the Fund has this ability, there is no certainty as to whether and to what
extent the Fund will engage in these practices.
Currency exchange rates may fluctuate significantly over short
periods of time causing, along with other factors, the Fund's NAV to fluctuate.
Currency exchange rates generally are determined by the forces of supply and
demand in the foreign exchange markets and the relative merits of investments in
different countries, actual or anticipated changes in interest rates and other
complex factors, as seen from an international perspective. Currency exchange
rates also can be affected unpredictably by the intervention of U.S. or foreign
governments or central banks, or the failure to intervene, or by currency
controls or political developments in the United States or abroad. To the extent
the Fund's total assets adjusted to reflect the Fund's net position after giving
effect to currency transactions is denominated or quoted in the currencies of
foreign countries, the Fund will be more susceptible to the risk of adverse
economic and political developments within those countries.
The Fund will incur costs in connection with conversions between
various currencies. The Fund may hold foreign currency received in connection
with investments when, in the judgment of the Adviser, it would be beneficial to
convert such currency into U.S. Dollars at a later date, based on anticipated
changes in the relevant exchange rate. If the value of the foreign currencies in
which the Fund receives its income falls relative to the U.S. Dollar between
receipt of the income and the making of Fund distributions, the Fund may be
required to liquidate securities in order to make distributions if the Fund has
insufficient cash in U.S. Dollars to meet distribution requirements.
If the value of the foreign currencies in which the Fund receives
income falls relative to the U.S. Dollar between receipt of the income and the
making of Fund distributions, the Fund may be required to liquidate securities
in order to make distributions if the Fund has insufficient cash in U.S. Dollars
to meet the distribution requirements that the Fund must satisfy to qualify as a
regulated investment company for federal income tax purposes. Similarly, if the
value of a particular foreign currency declines between the time the Fund incurs
expenses in U.S. Dollars and the time cash expenses are paid, the amount of the
currency required to be converted into U.S. Dollars in order to pay expenses in
U.S. Dollars could be greater than the equivalent amount of such expenses in the
currency at the time they were incurred. In light of these risks, the Fund may
engage in certain currency hedging transactions, which themselves, involve
certain special risks.
--------------------------------------------------------------------------------
INVESTMENT RESTRICTIONS
--------------------------------------------------------------------------------
Fundamental Investment Policies
The following investment restrictions may not be changed without
approval by the vote of a majority of the Fund's outstanding voting securities,
which means the affirmative vote of the holders of (1) 67% or more of the shares
of the Fund represented at a meeting at which more than 50% of the outstanding
shares are present in person or by proxy, or (2) more than 50% of the
outstanding shares of the Fund, whichever is less.
As a matter of fundamental policy, the Fund:
(1) may not concentrate investments in an industry, as
concentration may be defined under the 1940 Act or the rules and
regulations thereunder (as such statute, rules or regulations may be
amended from time to time) or by guidance regarding, interpretations
of, or exemptive orders under, the 1940 Act or the rules or
regulations thereunder published by appropriate regulatory
authorities;
(2) may not issue any senior security (as that term is
defined in the 1940 Act) or borrow money, except to the extent
permitted by the 1940 Act or the rules and regulations thereunder
(as such statute, rules or regulations may be amended from time to
time) or by guidance regarding, or interpretations of, or exemptive
orders under, the 1940 Act or the rules or regulations thereunder
published by appropriate regulatory authorities. For the purposes of
this restriction, margin and collateral arrangements, including, for
example, with respect to permitted borrowings, options, futures
contracts, options on futures contracts and other derivatives such
as swaps are not deemed to involve the issuance of a senior
security;
(3) may not make loans except through (i) the purchase of
debt obligations in accordance with its investment objectives and
policies; (ii) the lending of portfolio securities; (iii) the use of
repurchase agreements; or (iv) the making of loans to affiliated
funds as permitted under the 1940 Act, the rules and regulations
thereunder (as such statutes, rules or regulations may be amended
from time to time), or by guidance regarding, and interpretations
of, or exemptive orders under, the 1940 Act;
(4) may not act as an underwriter of securities, except that
the Fund may acquire restricted securities under circumstances in
which, if such securities were sold, the Fund might be deemed to be
an underwriter for purposes of the Securities Act;
(5) may purchase or sell commodities or options thereon to
the extent permitted by applicable law; or
(6) may not purchase or sell real estate except that it may
dispose of real estate acquired as a result of the ownership of
securities or other instruments. This restriction does not prohibit
the Fund from investing in securities or other instruments backed by
real estate or in securities of companies engaged in the real estate
business;
As a matter of fundamental policy, the Fund is a "non-diversified"
investment company, which means the Fund is not limited in the proportion of its
assets that may be invested in the securities of a single issuer. This policy
may be changed without a shareholder vote. However, the Fund intends to limit
its investments so as to qualify to be taxed as a "regulated investment company"
for purposes of the Code, which will relieve the Fund of any liability for
federal income tax to the extent its earnings are distributed to shareholders.
See "Dividends, Distributions and Taxes". To so qualify, among other
requirements, the Fund will limit its investment so that, at the close of each
quarter of the taxable year, (i) not more than 25% of the Fund's total assets
will be invested in the securities of a single issuer, and (ii) with respect to
50% of its total assets, not more than 5% of its total assets will be invested
in the securities of a single issuer and the Fund will not own more than 10% of
the outstanding voting securities of a single issuer. The Fund's investments in
U.S. Government securities are not subject to these limitations.
Because the Fund is a non-diversified investment company, it may
invest in a smaller number of individual issuers than a diversified investment
company, and an investment in the Fund may, under certain circumstances, present
greater risk to an investor than an investment in a diversified investment
company. Foreign government securities are not treated like U.S. Government
securities for purposes of the diversification tests described in the preceding
paragraph, but instead are subject to these tests in the same manner as the
securities of non-governmental issuers. In this regard sovereign debt
obligations issued by different issuers located in the same country are often
treated as issued by a single issuer for purposes of these diversification
tests. Certain issuers of structured securities and loan participations may be
treated as separate issuers for the purposes of these tests.
Non-fundamental Investment Policies
The Fund may not purchase securities on margin, except (i) as
otherwise provided under rules adopted by the SEC under the 1940 Act or by
guidance regarding the 1940 Act, or interpretations thereof, and (ii) that the
Fund may obtain such short-term credits as are necessary for the clearance of
portfolio transactions, and the Fund may make margin payments in connection with
futures contracts, options, forward contracts, swaps, caps, floors, collars and
other financial instruments.
--------------------------------------------------------------------------------
MANAGEMENT OF THE FUND
--------------------------------------------------------------------------------
Board of Trustees Information
The business and affairs of the Fund are managed under the direction
of the Board. Certain information concerning the Trustees is set forth below.
PORTFOLIOS OTHER PUBLIC COMPANY
NAME, ADDRESS*, IN FUND COMPLEX DIRECTORSHIPS HELD
AGE AND PRINCIPAL OCCUPATION(S) DURING OVERSEEN BY BY TRUSTEE IN PAST
(YEAR FIRST ELECTED**) PAST FIVE YEARS OR LONGER TRUSTEE FIVE YEARS
---------------------- ------------------------------- --------------- --------------------
INDEPENDENT TRUSTEES
Chairman of the Board
William H. Foulk, Jr.,#,## Investment Adviser and an 97 None
78 Independent Consultant since
(1998) prior to 2006. Previously, he was
Senior Manager of Barrett
Associates, Inc., a registered
investment adviser. He was
formerly Deputy Comptroller and
Chief Investment Officer of the
State of New York and, prior
thereto, Chief Investment Officer
of the New York Bank for Savings.
He has served as a director or
trustee of various
AllianceBernstein Funds since
1983 and has been Chairman of the
AllianceBernstein Funds and of
the Independent Directors
Committee of such Funds since
2003.
John H. Dobkin,# Independent Consultant since 96 None
69 prior to 2006. Formerly,
(1998) President of Save Venice, Inc.
(preservation organization) from
2001-2002; Senior Advisor from
June 1999-June 2000 and President
of Historic Hudson Valley
(historic preservation) from
December 1989-May 1999.
Previously, Director of the
National Academy of Design. He
has served as a director or
trustee of various
AllianceBernstein Funds since
1992.
Michael J. Downey,# Private Investor since prior to 96 Asia Pacific Fund, Inc.
67 2006. Formerly, managing partner and The Merger Fund
(2005) of Lexington Capital, LLC since prior to 2006,
(investment advisory firm) from and Prospect
December 1997 until December Acquisition Corp.
2003. From 1987 until 1993, (financial services)
Chairman and CEO of Prudential from 2007 until 2009
Mutual Fund Management, director
of the Prudential Mutual Funds
and member of the Executive
Committee of Prudential
Securities Inc. He has served as
a director or trustee of the
AllianceBernstein Funds since
2005.
D. James Guzy,# Chairman of the Board of PLX 96 Cirrus Logic
74 Technology (semi-conductors) and Corporation
(2005) of SRC Computers Inc., with which (semi-conductors) and
he has been associated since PLX Technology, Inc.
prior to 2006. He was a director (semi-conductors) since
of Intel Corporation prior to 2005 and Intel
(semi-conductors) from 1969 until Corporation
2008, and served as Chairman of (semi-conductors) since
the Finance Committee of such prior to 2005 until
company for several years until 2008.
May 2008. He has served as a
director or trustee of one or
more of the AllianceBernstein
Funds since 1982.
Nancy P. Jacklin,# Professorial Lecturer at the 96 None
62 Johns Hopkins School of Advanced
(2006) International Studies since 2008.
Formerly, U.S. Executive Director
of the International Monetary
Fund (December 2002-May 2006);
Partner, Clifford Chance
(1992-2002); Sector Counsel,
International Banking and
Finance, and Associate General
Counsel, Citicorp (1985-1992);
Assistant General Counsel
(International), Federal Reserve
Board of Governors (1982-1985);
and Attorney Advisor, U.S.
Department of the Treasury
(1973-1982). Member of the Bar
of the District of Columbia and
New York; and member of the
Council on Foreign Relations. She
has served as a director or
trustee of the AllianceBernstein
Funds since 2006.
Garry L. Moody,# Independent Consultant. Formerly, 96 None
59 Partner, Deloitte & Touche LLP
(2008) (1995-2008) where he held a
number of senior positions,
including Vice Chairman, and U.S.
and Global Investment Management
Practice Managing Partner;
President, Fidelity Accounting
and Custody Services Company
(1993-1995); and Partner, Ernst &
Young LLP (1975-1993), where he
served as the National Director
of Mutual Fund Tax Services. He
has served as a director or
trustee, and as Chairman of the
Audit Committee, of most of the
AllianceBernstein Funds since
2008.
Marshall C. Turner, Jr.,# Private Investor since prior to 96 Xilinx, Inc.
69 2006. Interim CEO of MEMC (programmable logic
(2005) Electronic Materials, Inc. semi-conductors) and
(semi-conductor and solar cell MEMC Electronic
substrates) from November 2008 Materials, Inc.
until March 2009. He was (semi-conductor and
Chairman and CEO of Dupont solar cell substrates)
Photomasks, Inc. (components of since prior to 2005
semi-conductor manufacturing),
2003-2005, and President and CEO,
2005-2006, after the company was
acquired and renamed Toppan
Photomasks, Inc. He has served as
a director or trustee of one or
more of the AllianceBernstein
Funds since 1992.
Earl D. Weiner,# Of Counsel, and Partner prior to 96 None
71 January 2007, of the law firm
(2007) Sullivan & Cromwell LLP, and
member of ABA Federal Regulation
of Securities Committee Task
Force to draft editions of the
Fund Director's Guidebook. He has
served as a director or trustee
of the AllianceBernstein Funds
since 2007 and is Chairman of the
Governance and Nominating
Committee of most of the Funds.
INTERESTED TRUSTEE
Robert M. Keith,+,++ Senior Vice President of the 97 None
1345 Avenue of the Americas, Adviser+++ and head of
New York, NY 10105 AllianceBernstein Investments,
50 Inc. ("ABI")+++ since July 2008;
Director of ABI and President of
the AllianceBernstein Mutual
Funds. Previously, he served as
Executive Managing Director of
ABI from December 2006 to June
2008. Prior to joining ABI in
2006, Executive Managing Director
of Bernstein Global Wealth
Management, and prior thereto,
Senior Managing Director and
Global Head of Client Service and
Sales of the Adviser's
institutional investment
management business since 2004.
Prior thereto, Managing Director
and Head of North American Client
Service and Sales in the
Adviser's institutional
investment management business,
with which he had been associated
since prior to 2004.
--------
* The address for each of the Company's Independent Trustees is c/o
AllianceBernstein L.P., Attention: Philip Kirstein, 1345 Avenue of the
Americas, New York, NY 10105.
** There is no stated term of office for the Company's Trustees.
# Member of the Audit Committee, the Governance and Nominating Committee
and the Independent Directors Committee.
## Member of the Fair Value Pricing Committee. Mr. Foulk is the sole
member of Fair Value Pricing Committee.
+ Mr. Keith became a Trustee of the Company as of [December 16, 2010].
++ Mr. Keith is an "interested person", as defined in Section 2(a)(19) of
the 1940 Act, of the Fund due to his position as a Senior Vice President
of the Adviser.
+++ The Adviser and ABI are affiliates of the Fund.
The business and affairs of the Fund are managed under the direction
of the Board. Trustees who are not "interested persons" of the Fund as defined
in the 1940 Act, are referred to as "Independent Trustees", and Trustees who are
"interested persons" of the Fund are referred to as "Interested Trustees".
Certain information concerning the Fund's governance structure and each Trustee
is set forth below.
Experience, Skills, Attributes, and Qualifications of the Trustees.
The Governance and Nominating Committee of the Board, which is composed of
Independent Trustees, reviews the experience, qualifications, attributes and
skills of potential candidates for nomination or election by the Board, and
conducts a similar review in connection with the proposed nomination of current
Trustees for re-election by stockholders at any annual or special meeting of
stockholders. In evaluating a candidate for nomination or election as a Trustee
the Governance and Nominating Committee takes into account the contribution that
the candidate would be expected to make to the diverse mix of experience,
qualifications, attributes and skills that the Governance and Nominating
Committee believes contributes to good governance for the Fund. Additional
information concerning the Governance and Nominating Committee's consideration
of nominees appears in the description of the Committee below.
The Board believes that, collectively, the Trustees have balanced
and diverse experience, qualifications, attributes, and skills, which allow the
Board to operate effectively in governing the Fund and protecting the interests
of shareholders. The Board has concluded that, based on each Trustee's
experience, qualifications, attributes or skills on an individual basis and in
combination with those of the other Trustees, each Trustee is qualified and
should continue to serve as such.
In determining that a particular Trustee was and continues to be
qualified to serve as a Trustee, the Board has considered a variety of criteria,
none of which, in isolation, was controlling. In addition, the Board has taken
into account the actual service and commitment of each Trustee during his or her
tenure (including the Trustee's commitment and participation in Board and
committee meetings, as well as his or her current and prior leadership of
standing and ad hoc committees) in concluding that each should continue to
serve. Additional information about the specific experience, skills, attributes
and qualifications of each Trustee, which in each case led to the Board's
conclusion that the Trustee should serve (or continue to serve) as trustee or
director of the Fund, is provided in the table above and in the next paragraph.
Among other attributes and qualifications common to all Trustees are
their ability to review critically, evaluate, question and discuss information
provided to them (including information requested by the Trustees), to interact
effectively with the Adviser, other service providers, counsel and the Fund's
independent registered public accounting firm, and to exercise effective
business judgment in the performance of their duties as Trustees. In addition to
his or her service as a Trustee of the Fund and other AllianceBernstein Funds as
noted in the table above: Mr. Dobkin has experience as an executive of a number
of organizations and served as Chairman of the Audit Committee of many of the
AllianceBernstein Funds from 2001 to 2008; Mr. Downey has experience in the
investment advisory business including as Chairman and Chief Executive Officer
of a large fund complex and as director of a number of non-AllianceBernstein
funds and as Chairman of a non-AllianceBernstein closed-end fund; Mr. Foulk has
experience in the investment advisory and securities businesses, including as
Deputy Controller and Chief Investment Officer of the State of New York (where
his responsibilities included bond issuances, cash management and oversight of
the New York Common Retirement Fund), has served as Chairman of the
AllianceBernstein Funds and of the Independent Trustees Committee since 2003,
and is active in a number of mutual fund related organizations and committees;
Mr. Guzy has experience as a corporate director including as Chairman of a
public company and Chairman of the Finance Committee of a large public
technology company; Ms. Jacklin has experience as a financial services regulator
including as U.S. Executive Trustee of the International Monetary Fund, which is
responsible for ensuring the stability of the international monetary system, and
as a financial services lawyer in private practice; Mr. Keith has experience as
an executive of the Adviser with responsibility for, among other things, the
AllianceBernstein Funds; Mr. Moody has experience as a certified public
accountant including experience as Vice Chairman and U.S. and Global Investment
Management Practice Partner for a major accounting firm, is a member of the
governing council of an organization of independent directors of mutual funds,
and has served as Chairman of the Audit Committee of most of the
AllianceBernstein Funds since 2008; Mr. Turner has experience as a director
(including as Chairman and Chief Executive officer of a number of companies) and
as a venture capital investor including prior service as general partner of
three institutional venture capital partnerships; and Mr. Weiner has experience
as a securities lawyer whose practice includes registered investment companies
and as Chairman, director or trustee of a number of boards, and has served as
Chairman of the Governance and Nominating Committee of most of the
AllianceBernstein Funds since 2007. The disclosure herein of a Trustee's
experience, qualifications, attributes and skills does not impose on such
Trustee any duties, obligations, or liability that are greater than the duties,
obligations, and liability imposed on such Trustee as a member of the Board and
any committee thereof in the absence of such experience, qualifications,
attributes and skills.
Board Structure and Oversight Function. The Board is responsible for
oversight of the Fund. The Fund has engaged the Adviser to manage the Fund on a
day-to-day basis. The Board is responsible for overseeing the Adviser and the
Fund's other service providers in the operations of the Fund in accordance with
the Fund's investment objective and policies and otherwise in accordance with
its prospectus, the requirements of the 1940 Act and other applicable Federal,
state and other securities and other laws, and the Fund's charter and bylaws.
The Board typically meets in-person at regularly scheduled meetings eight times
throughout the year. In addition, the Trustees may meet in-person or by
telephone at special meetings or on an informal basis at other times. The
Independent Trustees also regularly meet without the presence of any
representatives of management. As described below, the Board has established
four standing committees - the Audit, Governance and Nominating, Independent
Directors, and Fair Value Pricing Committees - and may establish ad hoc
committees or working groups from time to time, to assist the Board in
fulfilling its oversight responsibilities. Each committee is composed
exclusively of Independent Trustees. The responsibilities of each committee,
including its oversight responsibilities, are described further below. The
Independent Trustees have also engaged independent legal counsel, and may from
time to time engage consultants and other advisors, to assist them in performing
their oversight responsibilities.
An Independent Trustee serves as Chairman of the Board. The
Chairman's duties include setting the agenda for each Board meeting in
consultation with management, presiding at each Board meeting, meeting with
management between Board meetings, and facilitating communication and
coordination between the Independent Trustees and management. The Trustees have
determined that the Board's leadership by an Independent Trustee and its
committees composed exclusively of Independent Trustees is appropriate because
they believe it sets the proper tone to the relationships between the Fund, on
the one hand, and the Adviser and other service providers, on the other, and
facilitates the exercise of the Board's independent judgment in evaluating and
managing the relationships. In addition, the Fund is required to have an
Independent Trustee as Chairman pursuant to certain 2003 regulatory settlements
involving the Adviser.
Risk Oversight. The Fund is subject to a number of risks, including
investment, compliance and operational risks. Day-to-day risk management with
respect to the Fund resides with the Adviser or other service providers
(depending on the nature of the risk), subject to supervision by the Adviser.
The Board has charged the Adviser and its affiliates with (i) identifying events
or circumstances the occurrence of which could have demonstrable and material
adverse effects on the Fund; (ii) to the extent appropriate, reasonable or
practicable, implementing processes and controls reasonably designed to lessen
the possibility that such events or circumstances occur or to mitigate the
effects of such events or circumstances if they do occur; and (iii) creating and
maintaining a system designed to evaluate continuously, and to revise as
appropriate, the processes and controls described in (i) and (ii) above.
Risk oversight forms part of the Board's general oversight of the
Fund's investment program and operations and is addressed as part of various
regular Board and committee activities. The Fund's investment management and
business affairs are carried out by or through the Adviser and other service
providers. Each of these persons has an independent interest in risk management
but the policies and the methods by which one or more risk management functions
are carried out may differ from the Fund's and each other's in the setting of
priorities, the resources available or the effectiveness of relevant controls.
Oversight of risk management is provided by the Board and the Audit Committee.
The Trustees regularly receive reports from, among others, management (including
the Global Heads of Investment Risk and Trading Risk of the Adviser), the Fund's
Senior Officer (who is also the Fund's chief compliance officer), its
independent registered public accounting firm, counsel, and internal auditors
for the Adviser, as appropriate, regarding risks faced by the Fund and the
Adviser's risk management programs.
Not all risks that may affect the Fund can be identified, nor can
controls be developed to eliminate or mitigate their occurrence or effects. It
may not be practical or cost-effective to eliminate or mitigate certain risks,
the processes and controls employed to address certain risks may be limited in
their effectiveness, and some risks are simply beyond the reasonable control of
the Fund or the Adviser, its affiliates or other service providers. Moreover, it
is necessary to bear certain risks (such as investment-related risks) to achieve
the Fund's goals. As a result of the foregoing and other factors the Fund's
ability to manage risk is subject to substantial limitations.
The Board has four standing committees -- an Audit Committee, a
Governance and Nominating Committee, a Fair Value Pricing Committee and an
Independent Directors Committee. The members of the Audit, Governance and
Nominating, Fair Value Pricing and Independent Directors Committees are
identified above.
[None of these Committees have met in connection with the Fund
because it only recently commenced operations except the Independent Directors
Committee met on [__________], 2011 to approve the Advisory Agreement for the
Fund.]
The function of the Audit Committee is to assist the Board in its
oversight of the Fund's financial reporting process. The Audit Committee has not
yet met.
The function of the Governance and Nominating Committee includes the
nomination of persons to fill any vacancies or newly created positions on the
Board. The Governance and Nominating Committee has not yet met.
The Board has adopted a charter for its Governance and Nominating
Committee, which is available at www.alliancebernstein.com (click on
AllianceBernstein Mutual Fund Investors then U.S. then Investment
Products/Mutual Funds/Equity). Pursuant to the charter of the Governance and
Nominating Committee, the Committee assists the Board in carrying out its
responsibilities with respect to governance of the Fund and identifies,
evaluates, selects and nominates candidates for the Board. The Committee may
also set standards or qualifications for Trustees and reviews at least annually
the performance of each Trustee, taking into account factors such as attendance
at meetings, adherence to Board policies, preparation for and participation at
meetings, commitment and contribution to the overall work of the Board and its
committees, and whether there are health or other reasons that might affect the
Trustee's ability to perform his or her duties. The Committee may consider
candidates as Trustees submitted by the Fund's current Board members, officers,
the Adviser, stockholders and other appropriate sources.
The Governance and Nominating Committee will consider candidates for
nomination as a trustee submitted by a shareholder or group of shareholders who
have beneficially owned at least 5% of the Fund's common stock or shares of
beneficial interest for at least two years prior to the time of submission and
who timely provide specified information about the candidates and the nominating
shareholder or group. To be timely for consideration by the Governance and
Nominating Committee, the submission, including all required information, must
be submitted in writing to the attention of the Secretary at the principal
executive offices of the Fund no less than 120 days before the date of the proxy
statement for the previous year's annual meeting of shareholders. If the Fund
did not hold an annual meeting of shareholders in the previous year, the
submission must be delivered or mailed and received within a reasonable amount
of time before the Fund begins to print and mail its proxy materials. Public
notice of such upcoming annual meeting of shareholders may be given in a
shareholder report or other mailing to shareholders or by other means deemed by
the Governance and Nominating Committee or the Board to be reasonably calculated
to inform shareholders.
Shareholders submitting a candidate for consideration by the
Governance and Nominating Committee must provide the following information to
the Governance and Nominating Committee: (i) a statement in writing setting
forth (A) the name, date of birth, business address and residence address of the
candidate; (B) any position or business relationship of the candidate, currently
or within the preceding five years, with the shareholder or an associated person
of the shareholder as defined below; (C) the class or series and number of all
shares of the Fund owned of record or beneficially by the candidate; (D) any
other information regarding the candidate that is required to be disclosed about
a nominee in a proxy statement or other filing required to be made in connection
with the solicitation of proxies for election of Trustees pursuant to Section 20
of the 1940 Act and the rules and regulations promulgated thereunder; (E)
whether the shareholder believes that the candidate is or will be an "interested
person" of the Fund (as defined in the 1940 Act) and, if believed not to be an
"interested person", information regarding the candidate that will be sufficient
for the Fund to make such determination; and (F) information as to the
candidate's knowledge of the investment company industry, experience as a
director or senior officer of public companies, directorships on the boards of
other registered investment companies and educational background; (ii) the
written and signed consent of the candidate to be named as a nominee and to
serve as a Trustee if elected; (iii) the written and signed agreement of the
candidate to complete a trustees' and officers' questionnaire if elected; (iv)
the shareholder's consent to be named as such by the Fund; (v) the class or
series and number of all shares of the Fund owned beneficially and of record by
the shareholder and any associated person of the shareholder and the dates on
which such shares were acquired, specifying the number of shares owned
beneficially but not of record by each, and stating the names of each as they
appear on the Fund's record books and the names of any nominee holders for each;
and (vi) a description of all arrangements or understandings between the
shareholder, the candidate and/or any other person or persons (including their
names) pursuant to which the recommendation is being made by the shareholder.
"Associated Person of the shareholder" means any person who is required to be
identified under clause (vi) of this paragraph and any other person controlling,
controlled by or under common control with, directly or indirectly, (a) the
shareholder or (b) the associated person of the shareholder.
The Governance and Nominating Committee may require the shareholder
to furnish such other information as it may reasonably require or deem necessary
to verify any information furnished pursuant to the nominating procedures
described above or to determine the qualifications and eligibility of the
candidate proposed by the shareholder to serve on the Board. If the shareholder
fails to provide such other information in writing within seven days of receipt
of written request from the Governance and Nominating Committee, the
recommendation of such candidate as a nominee will be deemed not properly
submitted for consideration, and will not be considered, by the Committee.
The Governance and Nominating Committee will consider only one
candidate submitted by such a shareholder or group for nomination for election
at an annual meeting of shareholders. The Governance and Nominating Committee
will not consider self-nominated candidates. The Governance and Nominating
Committee will consider and evaluate candidates submitted by shareholders on the
basis of the same criteria as those used to consider and evaluate candidates
submitted from other sources. These criteria include the candidate's relevant
knowledge, experience, and expertise, the candidate's ability to carry out his
or her duties in the best interests of the Fund, the candidate's ability to
qualify as an Independent Trustee. When assessing a candidate for nomination,
the Committee considers whether the individual's background, skills, and
experience will complement the background, skills, and experience of other
nominees and will contribute to the diversity of the Board.
The function of the Fair Value Pricing Committee is to consider, in
advance if possible, any fair valuation decision of the Adviser's Valuation
Committee relating to a security held by the Fund made under unique or highly
unusual circumstances not previously addressed by the Valuation Committee that
would result in a change in the Fund's NAV by more than $0.01 per share. The
Fair Value Pricing Committee has not yet met.
The function of the Independent Directors Committee is to consider
and take action on matters that the Board or Committee believes should be
addressed in executive session of the independent Trustees, such as review and
approval of the Advisory Agreement. The Independent Directors Committee met on
[__________], 2011.
The dollar range of the Fund's securities owned by each Trustee and
the aggregate dollar range of securities owned in all of the registered
investment companies to which the Adviser provides investment advisory services
(collectively, the "AllianceBernstein Fund Complex") owned by each Trustee are
set forth below.
DOLLAR RANGE OF AGGREGATE DOLLAR RANGE OF
EQUITY SECURITIES EQUITY SECURITIES IN THE
IN THE FUND AS OF ALLIANCEBERNSTEIN FUND COMPLEX
DECEMBER 31, 2010+ AS OF DECEMBER 31, 2010
------------------ ------------------------------
John H. Dobkin None Over $100,000
Michael J. Downey None Over $100,000
William H. Foulk, Jr. None Over $100,000
D. James Guzy None Over $100,000
Nancy P. Jacklin None Over $100,000
Robert M. Keith None None
Marshall C. Turner, Jr. None Over $100,000
Earl D. Weiner None Over $100,000
---------------------------------
+ The Fund is offered exclusively to registered investment advisers approved
by the Adviser.
Officer Information
Certain information concerning the Fund's officers is set forth
below.
NAME, ADDRESS,* POSITION(S) PRINCIPAL OCCUPATION
AND AGE HELD WITH FUND DURING PAST 5 YEARS
-------------- -------------- -------------------
Robert M. Keith, President and Chief See above.
50 Executive Officer
Philip L. Kirstein, Senior Vice President Senior Vice President and
66 and Independent Compliance Independent Compliance
Officer Officer of the Alliance-
Bernstein Mutual Funds,
with which he has been
associated since October
2004. Prior thereto, he was
Of Counsel to Kirkpatrick &
Lockhart, LLP from October
2003 to October 2004, and
General Counsel of Merrill
Lynch Investment Managers,
L.P. since prior to March
2003.
Laurent Saltiel, [Senior Vice President] [Senior Vice President] of
[__] the Adviser,** with which
she has been associated
since prior to 2006.
Emilie D. Wrapp, Secretary Senior Vice President,
55 Assistant General Counsel
and Assistant Secretary of
ABI,** with which she has
been associated since
prior to 2006.
Joseph J. Mantineo, Treasurer and Chief Senior Vice President of
52 Financial Officer ABIS,** with which he has
been associated since prior
to 2006.
Phyllis J. Clarke, Controller Vice President of ABIS,**
50 with which she has been
associated since prior to
2006.
--------------------------
* The address for each of the Fund's Officers is 1345 Avenue of the
Americas, New York, NY 10105.
** The Adviser, ABI and ABIS are affiliates of the Fund.
The Company does not pay any fees to, or reimburse expenses of, its
Trustees who are considered an "interested person" of the Company. The aggregate
compensation that will be paid by the Company to each of the Trustees during its
current fiscal year ended [_________], 2011, the aggregate compensation paid to
each of the Trustees during calendar year 2010 by the AllianceBernstein Fund
Complex, and the total number of registered investment companies (and separate
investment portfolios within those companies) in the AllianceBernstein Fund
Complex with respect to which each of the Trustees serves as a director or
trustee are set forth below. Neither the Company nor any other registered
investment company in the AllianceBernstein Fund Complex provides compensation
in the form of pension or retirement benefits to any of its directors or
trustees. Each of the Trustees is a director or trustee of one or more other
registered investment companies in the AllianceBernstein Fund Complex.
Total Number of Total Number of
Investment Investment Funds
Companies in the within the
AllianceBernstein AllianceBernstein
Total Compensation Fund Complex, Fund Complex,
Aggregate from the Including the Including the
Compensation to AllianceBernstein Fund, as to which Fund, as to which
be paid by the Fund Complex, the Trustee is a the Trustee is a
Name of Trustee Company* Including the Company Director or Trustee Director or Trustee
------------------------ --------------- --------------------- ------------------- -------------------
John H. Dobkin $[_______] $236,900 33 96
Michael J. Downey $[_______] $236,900 33 96
William H. Foulk, Jr. $[_______] $482,300 34 97
D. James Guzy $[_______] $236,900 33 96
Nancy P. Jacklin $[_______] $236,900 33 96
Robert M. Keith $ 0 $ 0 34 97
Garry L. Moody $[_______] $264,900 33 96
Marshall C. Turner, Jr. $[_______] $236,900 33 96
Earl D. Weiner $[_______] $254,900 33 96
--------------------
* Compensation paid by the Adviser.
As of [________], 2011, the Trustees and Officers of the Company as
a group owned less than 1% of the shares of the Fund.
The Adviser
The Adviser, a Delaware limited partnership with principal offices
at 1345 Avenue of the Americas, New York, New York, 10105, has been retained
under the investment advisory agreement ("Advisory Agreement") to provide
investment advice and, in general, to conduct the management and investment
program of the Fund under the supervision of the Board. The Adviser is an
investment adviser registered under the Investment Advisers Act of 1940, as
amended.
The Adviser is a leading global investment management firm
supervising client accounts with assets as of [______________], 2011, totaling
over $[____] billion. The Adviser provides management services for many of the
largest U.S. public and private employee benefit plans, endowments, foundations,
public employee retirement funds, banks, insurance companies and high net worth
individuals worldwide and is also one of the largest mutual fund sponsors, with
a diverse family of globally distributed mutual fund portfolios. As one of the
world's leading global investment management organizations, the Adviser is able
to compete for virtually any portfolio assignment in any developed capital
market in the world.
As of [______________], 2011, AXA, a societe anonyme organized under
the laws of France and the holding company for an international group of
insurance and related financial services companies, through certain of its
subsidiaries ("AXA and its subsidiaries") owned approximately 1.4% of the issued
and outstanding units representing assignments of beneficial ownership of
limited partnership interests ("Holding Units") in AllianceBernstein Holding
L.P., a Delaware limited partnership ("Holding"). Holding Units trade publicly
on the Exchange under the ticker symbol "AB".
As of [___________], 2011, the ownership structure of the Adviser,
expressed as a percentage of general and limited.
AXA and its subsidiaries [____]%
Holding [____]
Unaffiliated holders [____]
--------------
100.0%
==============
AllianceBernstein Corporation (an indirect wholly-owned subsidiary
of AXA) is the general partner of both Holding and the Adviser.
AllianceBernstein Corporation owns 100,000 general partnership units in Holding
and a 1% general partnership interest in the Adviser. Including both the general
partnership and limited partnership interests in Holding and the Adviser, AXA
and its subsidiaries had an approximate [_____]% economic interest in the
Adviser as of [___________], 2011.
AXA, a French company, is the holding company for an international
group of companies and a worldwide leader in financial protection and wealth
management. AXA operates primarily in Western Europe, North America and the
Asia/Pacific region and, to a lesser extent, in other regions including the
Middle East, Africa and South America. AXA has five operating business segments:
life and savings, property and casualty insurance, international insurance
(including reinsurance), asset management and other financial services. AXA
Financial, Inc. is a wholly-owned subsidiary of AXA. AXA Equitable Life
Insurance Company is an indirect wholly-owned subsidiary of AXA Financial, Inc.
Advisory Agreements and Expenses
The Adviser is, under the Investment Advisory Agreement, responsible
for certain expenses incurred by the Fund, including, for example, certain
administrative services, costs of printing Fund prospectuses and other reports
to shareholders, and any expenses incurred in promoting the sale of Fund shares.
The Fund has, under the Investment Advisory Agreement, assumed the
obligation for payment of certain of its other expenses, including any taxes
levied against the Fund, brokerage fees, commissions in connection with the
purchase and sale of portfolio securities, leverage expenses and other
extraordinary expenses. The Fund may employ its own personnel to perform
services other than those specifically provided to the Fund by the Adviser. For
such services it may also utilize or employ personnel employed by the Adviser.
Under the terms of the Investment Advisory Agreement, the Fund pays
no fees to the Adviser. You should be aware, however, that the Fund is an
integral part of "wrap-fee" programs sponsored by investment advisers
unaffiliated with the Fund or the Adviser. Typically, participants in these
programs pay a "wrap fee" to their investment adviser. You should read carefully
the wrap-fee brochure provided to you by your investment adviser. The brochure
is required to include information about the fees charged by your adviser and
the fees paid by your adviser to the Adviser.
The Investment Advisory Agreement became effective on [___________],
2011. The Investment Advisory Agreement was approved by the unanimous vote, cast
in person, of the Independent Trustees at a meeting called for that purpose and
held on [_________], 2011.
The Investment Advisory Agreement provides that it shall remain in
effect for two years and continue in effect thereafter only if its continuance
is specifically approved at least annually by a vote of a majority of the Fund's
outstanding voting securities or by the Board, and in either case, by a majority
of the Trustees who are not parties to the Investment Advisory Agreement or
"interested persons" of such parties, as defined by the 1940 Act.
The Adviser may act as an investment adviser to other persons, firms
or corporations, including investment companies, and is the investment adviser
to AllianceBernstein Balanced Shares, Inc., AllianceBernstein Blended Style
Series, Inc., AllianceBernstein Bond Fund, Inc., AllianceBernstein Cap Fund,
Inc., AllianceBernstein Core Opportunities Fund, Inc., AllianceBernstein Equity
Income Fund, Inc., AllianceBernstein Exchange Reserves, AllianceBernstein
Fixed-Income Shares, Inc., AllianceBernstein Global Bond Fund, Inc.,
AllianceBernstein Global Growth Fund, Inc., AllianceBernstein Global Real Estate
Investment Fund, Inc., AllianceBernstein Global Thematic Growth Fund, Inc.,
AllianceBernstein Greater China '97 Fund, Inc., AllianceBernstein Growth and
Income Fund, Inc., AllianceBernstein High Income Fund, Inc., AllianceBernstein
Institutional Funds, Inc., AllianceBernstein International Growth Fund, Inc.,
AllianceBernstein Large Cap Growth Fund, Inc., AllianceBernstein Municipal
Income Fund, Inc., AllianceBernstein Municipal Income Fund II, AllianceBernstein
Small/Mid Cap Growth Fund, Inc., AllianceBernstein Trust, AllianceBernstein
Unconstrained Bond Fund, Inc., AllianceBernstein Variable Products Series Fund,
Inc., Sanford C. Bernstein Fund, Inc., Sanford C. Bernstein Fund II, Inc., The
AllianceBernstein Pooling Portfolios and The AllianceBernstein Portfolios, all
open-end investment companies; and to AllianceBernstein Global High Income Fund,
Inc., AllianceBernstein Income Fund, Inc., AllianceBernstein National Municipal
Income Fund, Inc., Alliance California Municipal Income Fund, Inc., Alliance New
York Municipal Income Fund, Inc., and The Ibero-America Fund, Inc., all
closed-end investment companies.
Additional Information About the Fund's Portfolio Manager(s)
Laurent Saltiel is the investment professional(1) primarily
responsible for the day-to-day management of the Fund's portfolio. For
additional information about the portfolio management of the Fund, see
"Management of the Fund - Portfolio Managers" in the Fund's Prospectuses. As of
[__________], 2011, the portfolio managers owned none of the Fund's equity
securities.
-----------------
(1) Investment professionals at the Adviser include portfolio managers and
research analysts. Investment professionals are part of investment groups
(or teams) that service individual fund portfolios. The number of
investment professionals assigned to a particular fund will vary from fund
to fund.
The following tables provide information regarding registered
investment companies other than the Fund, other pooled investment vehicles and
other accounts over which the Portfolio Manger also has day-to-day management
responsibilities. The tables provide the numbers of such accounts, the total
assets in such accounts and the number of accounts and total assets whose fees
are based on performance. The information is provided as of [__________], 2011.
--------------------------------------------------------------------------------
REGISTERED INVESTMENT COMPANIES (excluding the Fund)
--------------------------------------------------------------------------------
Number of Total Assets
Registered of Registered
Total Number Total Assets Investment Investment
of Registered of Registered Companies Companies
Investment Investment Managed with Managed with
Companies Companies Performance- Performance-
Portfolio Manager Managed Managed based Fees based Fees
--------------------------------------------------------------------------------
Laurent Saltiel [____] $[________] [None] [None]
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
POOLED INVESTMENT VEHICLES
--------------------------------------------------------------------------------
Number of Total Assets
Pooled of Pooled
Total Number Total Assets Investment Investment
of Pooled of Pooled Vehicles Vehicles
Investment Investment Managed with Managed with
Vehicles Vehicles Performance- Performance-
Portfolio Manager Managed Managed based Fees based Fees
--------------------------------------------------------------------------------
Laurent Saltiel [____] $[________] [None] [None]
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
OTHER ACCOUNTS
--------------------------------------------------------------------------------
Number of Total Assets
Other of Other
Accounts Accounts
Total Number Total Assets Managed Managed
of Other of Other with with
Accounts Accounts Performance- Performance-
Portfolio Manager Managed Managed based Fees based Fees
--------------------------------------------------------------------------------
Laurent Saltiel [____] $[________] [None] [None]
--------------------------------------------------------------------------------
Investment Professional Conflict of Interest Disclosure
As an investment adviser and fiduciary, the Adviser owes its clients
and shareholders an undivided duty of loyalty. We recognize that conflicts of
interest are inherent in our business and accordingly have developed policies
and procedures (including oversight monitoring) reasonably designed to detect,
manage and mitigate the effects of actual or potential conflicts of interest in
the area of employee personal trading, managing multiple accounts for multiple
clients, including AllianceBernstein Mutual Funds, and allocating investment
opportunities. Investment professionals, including portfolio managers and
research analysts, are subject to the above mentioned policies and oversight
monitoring to ensure that all clients are treated equitably. We place the
interests of our clients first and expect all of our employees to meet their
fiduciary duties.
Employee Personal Trading
The Adviser has adopted a Code of Business Conduct and Ethics that
is designed to detect and prevent conflicts of interest when investment
professionals and other personnel of the Adviser own, buy or sell securities
which may be owned by, or bought or sold for, clients. Personal securities
transactions by an employee may raise a potential conflict of interest when an
employee owns or trades in a security that is owned or considered for purchase
or sale by a client, or recommended for purchase or sale by an employee to a
client. Subject to the reporting requirements and other limitations of its Code
of Business Conduct and Ethics, the Adviser permits its employees to engage in
personal securities transactions, and also allows them to acquire investments in
the AllianceBernstein Mutual Funds through direct purchase and/or notionally in
connection with deferred incentive compensation awards. The Adviser's Code of
Ethics and Business Conduct requires disclosure of all personal accounts and
maintenance of brokerage accounts with designated broker-dealers approved by the
Adviser. The Code also requires pre-clearance of all securities transactions
(except transactions in open-end mutual funds) and imposes a 90-day holding
period for securities purchased by employees to discourage short-term trading.
Managing Multiple Accounts for Multiple Clients
The Adviser has compliance policies and oversight monitoring in
place to address conflicts of interest relating to the management of multiple
accounts for multiple clients. Conflicts of interest may arise when an
investment professional has responsibilities for the investments of more than
one account because the investment professional may be unable to devote equal
time and attention to each account. The investment professional or investment
professional teams for each client may have responsibilities for managing all or
a portion of the investments of multiple accounts with a common investment
strategy, including other registered investment companies, unregistered
investment vehicles, such as hedge funds, pension plans, separate accounts,
collective trusts and charitable foundations. Among other things, the Adviser's
policies and procedures provide for the prompt dissemination to investment
professionals of initial or changed investment recommendations by analysts so
that investment professionals are better able to develop investment strategies
for all accounts they manage. In addition, investment decisions by investment
professionals are reviewed for the purpose of maintaining uniformity among
similar accounts and ensuring that accounts are treated equitably. No investment
professional who manages client accounts carrying performance fees is
compensated directly or specifically for the performance of those accounts.
Investment professional compensation reflects a broad contribution in multiple
dimensions to long-term investment success for our clients and is not tied
specifically to the performance of any particular client's account, nor is it
directly tied to the level or change in level of assets under management.
Allocating Investment Opportunities
The Adviser has policies and procedures intended to address
conflicts of interest relating to the allocation of investment opportunities.
These policies and procedures are designed to ensure that information relevant
to investment decisions is disseminated promptly within its portfolio management
teams and investment opportunities are allocated equitably among different
clients. The investment professionals at the Adviser routinely are required to
select and allocate investment opportunities among accounts. Portfolio holdings,
position sizes, and industry and sector exposures tend to be similar across
similar accounts, which minimizes the potential for conflicts of interest
relating to the allocation of investment opportunities. Nevertheless, investment
opportunities may be allocated differently among accounts due to the particular
characteristics of an account, such as size of the account, cash position, tax
status, risk tolerance and investment restrictions or for other reasons.
The Adviser's procedures are also designed to address potential
conflicts of interest that may arise when the Adviser has a particular financial
incentive, such as a performance-based management fee, relating to an account.
An investment professional may perceive that he or she has an incentive to
devote more time to developing and analyzing investment strategies and
opportunities or allocating securities preferentially to accounts for which the
Adviser could share in investment gains.
To address these conflicts of interest, the Adviser's policies and
procedures require, among other things, the prompt dissemination to investment
professionals of any initial or changed investment recommendations by analysts;
the aggregation of orders to facilitate best execution for all accounts; price
averaging for all aggregated orders; objective allocation for limited investment
opportunities (e.g., on a rotational basis) to ensure fair and equitable
allocation among accounts; and limitations on short sales of securities. These
procedures also require documentation and review of justifications for any
decisions to make investments only for select accounts or in a manner
disproportionate to the size of the account.
Portfolio Manager Compensation
The Adviser's compensation program for investment professionals is
designed to be competitive and effective in order to attract and retain the
highest caliber employees. The compensation program for investment professionals
is designed to reflect their ability to generate long-term investment success
for our clients, including shareholders of the AllianceBernstein Mutual Funds.
Investment professionals do not receive any direct compensation based upon the
investment returns of any individual client account, nor is compensation tied
directly to the level or change in level of assets under management. Investment
professionals' annual compensation is comprised of the following:
(i) Fixed base salary: This is generally the smallest portion of
compensation. The base salary is a relatively low, fixed salary within a
similar range for all investment professionals. The base salary is
determined at the outset of employment based on level of experience, does
not change significantly from year-to-year and hence, is not particularly
sensitive to performance.
(ii) Discretionary incentive compensation in the form of an annual
cash bonus: the Adviser's overall profitability determines the total
amount of incentive compensation available to investment professionals.
This portion of compensation is determined subjectively based on
qualitative and quantitative factors. In evaluating this component of an
investment professional's compensation, the Adviser considers the
contribution to his/her team or discipline as it relates to that team's
overall contribution to the long-term investment success, business results
and strategy of the Adviser. Quantitative factors considered include,
among other things, relative investment performance (e.g., by comparison
to competitor or peer group funds or similar styles of investments, and
appropriate, broad-based or specific market indices), and consistency of
performance. There are no specific formulas used to determine this part of
an investment professional's compensation and the compensation is not tied
to any pre-determined or specified level of performance. The Adviser also
considers qualitative factors such as the complexity and risk of
investment strategies involved in the style or type of assets managed by
the investment professional; success of marketing/business development
efforts and client servicing; seniority/length of service with the firm;
management and supervisory responsibilities; and fulfillment of the
Adviser's leadership criteria.
(iii) Discretionary incentive compensation in the form of awards
under the Adviser's Partners Compensation Plan ("deferred awards"): the
Adviser's overall profitability determines the total amount of deferred
awards available to investment professionals. The deferred awards are
allocated among investment professionals based on criteria similar to
those used to determine the annual cash bonus. There is no fixed formula
for determining these amounts. Deferred awards, for which, prior to 2009,
there were various investment options, vest over a four-year period and
are generally forfeited if the employee resigns or the Adviser terminates
his/her employment. Prior to 2009, investment options under the deferred
awards plan included many of the same AllianceBernstein Mutual Funds
offered to mutual fund investors. Beginning in 2009, all deferred awards
are in the form of the Adviser's publicly traded equity securities. Prior
to 2002, investment professional compensation also included discretionary
long-term incentive in the form of restricted grants of the Adviser's
Master Limited Partnership Units.
(iv) Contributions under the Adviser's Profit Sharing/401(k) Plan:
The contributions are based on the Adviser's overall profitability. The
amount and allocation of the contributions are determined at the sole
discretion of the Adviser.
(v) Compensation under the Adviser's Special Option Program: Under
this Program, certain investment professionals may be permitted to
allocate a portion of their deferred awards to options to buy the
Adviser's publicly traded equity securities, and to receive a two-for-one
match of such allocated amount. The determination of who may be eligible
to participate in the Special Option Program is made at the sole
discretion of the Adviser.
--------------------------------------------------------------------------------
EXPENSES OF THE FUND
--------------------------------------------------------------------------------
Transfer Agency Agreement
ABIS, P.O. Box 786003, San Antonio, TX 78278-6003, is the Fund's
Transfer Agent. ABIS, an indirect wholly-owned subsidiary of the Adviser, acts
as the Fund's registrar, transfer agent and dividend disbursing agent. ABIS
registers the transfer, issuance and redemption of Fund shares.
Code of Ethics
The Fund, the Adviser and ABI have each adopted codes of ethics
pursuant to Rule 17j-1 of the 1940 Act. These codes of ethics permit personnel
subject to the codes to invest in securities, including securities that may be
purchased or held by the Fund.
--------------------------------------------------------------------------------
PURCHASE OF SHARES
--------------------------------------------------------------------------------
The following information supplements that set forth in the
Prospectus under the heading "Investing in the Fund -- How to Buy Shares".
General
Shares of the Fund are offered on a continuous basis at a price
equal to its NAV. Investors may purchase shares of the Fund exclusively through
registered investment advisers approved by the Adviser. In most cases, purchase
orders are made based on instructions from your registered investment adviser to
the broker-dealer who executes trades for your account. To make a purchase, your
broker-dealer must submit a purchase order to the Fund's transfer agent, ABIS,
either directly or through an appropriate clearing agency (e.g. the National
Securities Clearing Corporation - Fund/SERV). A "wrap fee" will typically be
charged by your investment adviser with respect to investments made through the
investment adviser. The Fund is not responsible for, and has no control over,
the decision of any investment adviser to impose such differing requirements.
Accounts can be opened only through your investment adviser. In
order to open your account, the Fund, or your investment adviser, is required to
obtain certain information from you for identification purposes. This
information may include name, date of birth, permanent residential address and
social security/taxpayer identification number. It will not be possible to
establish your account without this information. If the Fund or your investment
adviser is unable to verify the information provided, your account may be closed
and other appropriate action may be taken as permitted by law. Please contact
your registered investment adviser for more details.
The Fund may refuse any order for the purchase of shares. The Fund
reserves the right to suspend the sale of its shares to the public in response
to conditions in the securities markets or for other reasons. If the Fund
suspends the sale of its shares, shareholders will not be able to acquire its
shares, including through an exchange.
The public offering price of shares of the Fund is their NAV. On
each Fund business day on which a purchase or redemption order is received by
the Fund and trading in the types of securities in which the Fund invests might
materially affect the value of Fund shares, the per share NAV is computed as of
the next close of regular trading on the Exchange (currently 4:00 p.m., Eastern
time) by dividing the value of the Fund's total assets, less its liabilities, by
the total number of its shares then outstanding. A Fund business day is any day
on which the Exchange is open for trading.
The Fund will accept unconditional orders for shares to be executed
at the public offering price equal to their NAV next determined, as described
below. Orders received by the ABI prior to the close of regular trading on the
Exchange on each day the Exchange is open for trading are priced at the NAV
computed as of the close of regular trading on the Exchange on that day. Your
investment adviser is responsible for transmitting any orders by a prescribed
time to the Fund or its transfer agent. If the investment adviser fails to do
so, the investor will not receive that day's NAV. If the investment adviser
receives the order after the close of regular trading on the Exchange, the price
received by the investor will be based on the NAV determined as of the close of
regular trading on the Exchange on the next day it is open for trading.
Full and fractional shares are credited to a shareholder's account
in the amount of his or her subscription. As a convenience, and to avoid
unnecessary expense to the Fund, the Fund will not issue share certificates
representing shares of the Fund. Ownership of the Fund's shares will be shown on
the books of the Fund's transfer agent. Lost certificates will not be replaced
with another certificate, but will be shown on the books of the Fund's transfer
agent. This facilitates later redemption and relieves the shareholder of the
responsibility for and inconvenience of lost or stolen certificates.
Shares of the Fund may be purchased and held solely through accounts
established under wrap-fee programs, sponsored and maintained by registered
investment advisers approved by the Adviser. A wrap fee may be charged by your
investment adviser. You should read carefully the wrap-fee brochure provided to
you by your investment adviser. The brochure is required to include information
about the fees charged by your adviser and the fees paid by your adviser to the
Adviser.
Frequent Purchases and Sales of Fund Shares
The Board has adopted policies and procedures designed to detect and
deter frequent purchases and redemptions of Fund shares or excessive or
short-term trading that may disadvantage long-term Fund shareholders. These
policies are described below. There is no guarantee that the Fund will be able
to detect excessive or short-term trading and to identify shareholders engaged
in such practices, particularly with respect to transactions in omnibus
accounts. Shareholders should be aware that application of these policies may
have adverse consequences, as described below, and avoid frequent trading in
Fund shares through purchases, sales and exchanges of shares. The Fund reserves
the right to restrict, reject or cancel, without any prior notice, any purchase
or exchange order for any reason, including any purchase or exchange order
accepted by any shareholder's financial intermediary.
Risks Associated With Excessive Or Short-Term Trading Generally.
While the Fund will try to prevent market timing by utilizing the procedures
described below, these procedures may not be successful in identifying or
stopping excessive or short-term trading in all circumstances. By realizing
profits through short-term trading, shareholders that engage in rapid purchases
and sales or exchanges of the Fund's shares dilute the value of shares held by
long-term shareholders. Volatility resulting from excessive purchases and sales
or exchanges of Fund shares, especially involving large dollar amounts, may
disrupt efficient portfolio management and cause the Fund to sell shares at
inopportune times to accommodate redemptions relating to short-term trading. In
particular, the Fund may have difficulty implementing its long-term investment
strategies if it is forced to maintain a higher level of its assets in cash to
accommodate significant short-term trading activity. In addition, the Fund may
incur increased administrative and other expenses due to excessive or short-term
trading, including increased brokerage costs and realization of taxable capital
gains.
A shareholder engaging in a short-term trading strategy may also
target a fund that does not invest primarily in foreign securities. Any fund
that invests in securities that are, among other things, thinly traded, traded
infrequently or relatively illiquid has the risk that the current market price
for the securities may not accurately reflect current market values. A
shareholder may seek to engage in short-term trading to take advantage of these
pricing differences (referred to as "price arbitrage"). The Fund may be
adversely affected by price arbitrage.
Funds that may invest significantly in foreign securities may be
particularly susceptible to short-term trading strategies. This is because
foreign securities are typically traded on markets that close well before the
time a Fund calculates its NAV at 4:00 p.m., Eastern time, which gives rise to
the possibility that developments may have occurred in the interim that would
affect the value of these securities. The time zone differences among
international stock markets can allow a shareholder engaging in a short-term
trading strategy to exploit differences in Fund share prices that are based on
closing prices of foreign securities established some time before a Fund
calculates its own share price (referred to as "time zone arbitrage"). The Funds
have procedures, referred to as fair value pricing, designed to adjust closing
market prices of foreign securities to reflect what is believed to be the fair
value of those securities at the time a Fund calculates its NAV. While there is
no assurance, the Fund expects that the use of fair value pricing, in addition
to the short-term trading policies discussed below, will significantly reduce a
shareholder's ability to engage in time zone arbitrage to the detriment of other
Fund shareholders.
A shareholder engaging in a short-term trading strategy may also
target a fund that does not invest primarily in foreign securities. Any fund
that invests in securities that are, among other things, thinly traded, traded
infrequently, or relatively illiquid has the risk that the current market price
for the securities may not accurately reflect current market values. A
shareholder may seek to engage in short term trading to take advantage of these
pricing differences (referred to as "price arbitrage"). The Fund may be
adversely affected by price arbitrage.
Policy Regarding Short-Term Trading. Purchases and exchanges of
shares of the Fund should be made for investment purposes only. The Fund will
seek to prevent patterns of excessive purchases and sales or exchanges of Fund
shares. The Fund seeks to prevent such practices to the extent they are detected
by the procedures described below. The Fund reserves the right to modify this
policy, including any surveillance or account blocking procedures established
from time to time to effectuate this policy, at any time without notice.
o Transaction Surveillance Procedures. The Fund, through its agents, ABI,
and ABIS, maintains surveillance procedures to detect excessive or
short-term trading in Fund shares. This surveillance process involves
several factors, which include scrutinizing transactions in Fund shares
that exceed certain monetary thresholds or numerical limits within a
specified period of time. Generally, more than two exchanges of Fund
shares during any 90-day period or purchases of shares followed by a
sale within 90 days will be identified by these surveillance
procedures. For purposes of these transaction surveillance procedures,
the Fund may consider trading activity in multiple accounts under
common ownership, control, or influence. Trading activity identified by
either, or a combination, of these factors, or as a result of any other
information available at the time, will be evaluated to determine
whether such activity might constitute excessive or short-term trading.
These surveillance procedures may be modified from time to time, as
necessary or appropriate to improve the detection of excessive or
short-term trading or to address specific circumstances.
o Account Blocking Procedures. If the Fund determines, in its sole
discretion, that a particular transaction or pattern of transactions
identified by the transaction surveillance procedures described above
is excessive or short-term trading in nature, the relevant Fund
account(s) will be immediately "blocked" and no future purchase or
exchange activity will be permitted. However, sales of Fund shares back
to the Fund or redemptions will continue to be permitted in accordance
with the terms of the Fund's current Prospectus. As a result, unless
the shareholder redeems his or her shares, which may have consequences
if the shares have declined in value, a CDSC is applicable or adverse
tax consequences may result, the shareholder may be "locked" into an
unsuitable investment. In the event an account is blocked, certain
account-related privileges, such as the ability to place purchase, sale
and exchange orders over the internet or by phone, may also be
suspended. A blocked account will generally remain blocked unless and
until the account holder or the associated broker, dealer or other
financial intermediary provides evidence or assurance acceptable to the
Fund that the account holder did not or will not in the future engage
in excessive or short-term trading.
o Applications of Surveillance Procedures and Restrictions to Omnibus
Accounts. Omnibus account arrangements are common forms of holding
shares of the Fund, particularly among certain brokers, dealers and
other financial intermediaries, including sponsors of retirement plans
and variable insurance products. The Fund applies its surveillance
procedures to these omnibus account arrangements. As required by SEC
rules, the Fund has entered into agreements with all of its financial
intermediaries that require the financial intermediaries to provide the
Fund, upon the request of the Fund or its agents, with individual
account level information about their transactions. If the Fund detects
excessive trading through its monitoring of omnibus accounts, including
trading at the individual account level, the financial intermediaries
will also execute instructions from the Fund to take actions to curtail
the activity, which may include applying blocks to accounts to prohibit
future purchases and exchanges of Fund shares. For certain retirement
plan accounts, the Fund may request that the retirement plan or other
intermediary revoke the relevant participant's privilege to effect
transactions in Fund shares via the internet or telephone, in which
case the relevant participant must submit future transaction orders via
the U.S. Postal Service (i.e., regular mail).
Risks to Shareholders Resulting From Imposition of Account Blocks in
Response to Excessive or Short-Term Trading Activity. A shareholder identified
as having engaged in excessive or short-term trading activity whose account is
"blocked" and who may not otherwise wish to redeem his or her shares effectively
may be "locked" into an investment in the Fund that the shareholder did not
intend to hold on a long-term basis or that may not be appropriate for the
shareholder's risk profile. To rectify this situation, a shareholder with a
"blocked" account may be forced to redeem Fund shares, which could be costly if,
for example, these shares have declined in value, the shareholder recently paid
a front-end sales charge or the shares are subject to a CDSC, or the sale
results in adverse tax consequences to the shareholder. To avoid this risk, a
shareholder should carefully monitor the purchases, sales, and exchanges of Fund
shares and avoid frequent trading in Fund shares.
Limitations on Ability to Detect and Curtail Excessive Trading
Practices. Shareholders seeking to engage in excessive short-term trading
activities may deploy a variety of strategies to avoid detection and, despite
the efforts of the Fund and its agents to detect excessive or short duration
trading in Fund shares, there is no guarantee that the Fund will be able to
identify these shareholders or curtail their trading practices. In particular,
the Fund may not be able to detect excessive or short-term trading in Fund
shares attributable to a particular investor who effects purchase and/or
exchange activity in Fund shares through omnibus accounts. Also, multiple tiers
of these entities may exist, each utilizing an omnibus account arrangement,
which may further compound the difficulty of detecting excessive or short
duration trading activity in Fund shares.
Combined Purchase Privilege. Purchases of Fund shares do not count
towards combined purchase privileges of other AllianceBernstein funds.
--------------------------------------------------------------------------------
REDEMPTION AND REPURCHASE OF SHARES
--------------------------------------------------------------------------------
The following information supplements that set forth in the Fund's
Prospectus under the heading "Investing in the Fund--How to Sell Shares". Your
wrap-fee program may impose requirements with respect to the purchase, sale or
exchange of shares of the Fund that are different from those described herein. A
"wrap fee" may be charged by your investment adviser with respect to the
purchase, sale or exchange of Fund shares made through such investment adviser.
Redemption
Subject only to the limitations described below, the Fund will
redeem the shares of the Fund tendered to it, as described below, at a
redemption price equal to their NAV as next computed following the receipt of
shares tendered for redemption in proper form. There is no redemption charge.
Payment of the redemption price will be made within seven days after the Fund's
receipt of such tender for redemption. If you are in doubt about what documents
are required, you should contact your investment adviser.
The right of redemption may not be suspended or the date of payment
upon redemption postponed for more than seven days after shares are tendered for
redemption, except for any period during which the Exchange is closed (other
than customary weekend and holiday closings) or during which the SEC determines
that trading thereon is restricted, or for any period during which an emergency
(as determined by the SEC) exists as a result of which disposal by the Fund of
securities owned by it is not reasonably practicable or as a result of which it
is not reasonably practicable for the Fund fairly to determine the value of its
net assets, or for such other periods as the SEC may by order permit for the
protection of security holders of the Fund.
Redemption proceeds will be sent by wire only. Payment of the
redemption price will ordinarily be wired within one business day of the
redemption request, but may take up to three business days. 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
Fund's portfolio securities at the time of such redemption or repurchase.
Payment received by a shareholder upon redemption or repurchase of his or her
shares, assuming the shares constitute capital assets in his or her 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.
Repurchase
The Fund may repurchase shares through ABI or your investment
adviser. The repurchase price will be the NAV next determined after ABI receives
the request, except that requests placed through selected dealers or agents
before the close of regular trading on the Exchange on any day will be executed
at the NAV determined as of such close of regular trading on that day if
received by ABI prior to its close of business on that day (normally 5:00 p.m.,
Eastern time). The investment adviser is responsible for transmitting the
request to ABI by 5:00 p.m., Eastern time, (certain financial intermediaries may
enter into operating agreements permitting them to transmit purchase information
that was received prior to the close of business to ABI after 5:00 p.m., Eastern
time, and receive that day's NAV). If the investment adviser fails to do so, the
shareholder's right to receive that day's closing price must be settled between
the shareholder and the dealer or agent. A shareholder may offer shares of the
Fund to ABI either directly or through a selected dealer or agent. Neither the
Fund nor ABI charges a fee or commission in connection with the repurchase of
shares. Normally, repurchases are settled by the shareholder as an ordinary
transaction with or through the shareholders' investment adviser, who may charge
the shareholder for this service. The repurchase of shares of the Fund as
described above is a voluntary service of the Fund and the Fund may suspend or
terminate this practice at any time.
General
The Fund reserves the right to close out an account that through
redemption has remained below $1,000 for at least 90 days. Shareholders will
receive 60 days' written notice to increase the account value before the account
is closed.
--------------------------------------------------------------------------------
SHAREHOLDER SERVICES
--------------------------------------------------------------------------------
The following information supplements that set forth in the Fund's
Prospectus.
Statements and Reports
Each shareholder of the Fund will receive semi-annual and annual
reports which include a portfolio of investments, financial statements and, in
the case of the annual report, the report of the Fund's independent registered
public accounting firm, [__________], as well as a periodic distribution
statement and a confirmation of each purchase and redemption. By contacting his
or her investment adviser or ABIS, a shareholder can arrange for copies of his
or her account statements to be sent to another person.
--------------------------------------------------------------------------------
NET ASSET VALUE
--------------------------------------------------------------------------------
The NAV of the Fund is computed at the next close of regular trading on
the Exchange (ordinarily 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 on such other days as the Board deems appropriate or
necessary in order to comply with Rule 22c-1 under the 1940 Act. The Fund's per
share NAV is calculated by dividing the value of the Fund's total assets, less
its liabilities, by the total number of its shares then outstanding. A Fund
business day is any weekday on which the Exchange is open for trading.
In accordance with applicable rules under the 1940 Act and the Fund's
pricing policies and procedures adopted by the Board ("Pricing Policies"),
portfolio securities are valued at current market value or at fair value as
determined in accordance with procedures established by and under the general
supervision of the Board. The Board has delegated to the Adviser, subject to the
Board's continuing oversight, certain of its duties with respect to the Pricing
Policies.
Whenever possible, securities are valued based on market information on
the business day as of which the value is being determined as follows:
(a) a security listed on the Exchange, on other national or foreign
exchange (other than securities listed on the Nasdaq Stock Exchange ("NASDAQ")),
is valued at the last sale price reflected on the consolidated tape at the close
of the exchange. If there has been no sale on the relevant business day, the
security is valued at the mean of the closing bid and asked prices on such day.
If no bid or asked prices are quoted on that day, the security is valued in good
faith at fair value by, or in accordance with procedures approved by, the Board;
(b) a security traded on NASDAQ is valued at the NASDAQ Official Closing
Price;
(c) a security traded on more than one exchange is valued in accordance
with paragraph (a) above by reference to the principal exchange on which the
securities are traded;
(d) a listed put or call option is valued at the last sale price. If there
has been no sale on the relevant business day, the security is valued at the
closing bid price on that day;
(e) a currency option is valued using third party pricing models;
(f) an open futures contract and any option thereon is valued at the
closing settlement price or, in the absence of such a price, the most recent
quoted bid price. If there are no quotations available for the relevant business
day, the security is valued at the last available closing settlement price;
(g) a security traded in the over-the-counter market, including a security
listed on a national securities exchange whose principal market is
over-the-counter (as determined by the Adviser) is valued at the mean of the
current bid and asked prices as reported by the National Quotation Bureau or
other comparable source(s);
(h) a right is valued at the last traded price provided by pricing
services;
(i) a warrant is valued at the last traded price provided by pricing
services. In instances when a price can not be obtained through such pricing
services warrants will be valued using the last traded price if available or
broker bids;
(j) a U.S. Government security and any other debt instrument having 60
days or less remaining until maturity generally is valued at amortized cost if
its original maturity was 60 days or less, or by amortizing its fair value as of
the 61st day prior to maturity if the original term to maturity exceeded 60
days, unless in either case the Adviser determines that this method does not
represent fair value;
(k) a fixed-income security is valued on the basis of bid prices provided
by a pricing service when the Adviser believes that such prices reflect the fair
market value of the security. The prices provided by a pricing service may take
into account many factors, including institutional size trading in similar
groups of securities and any developments related to specific securities. If the
Adviser determines that an appropriate pricing service does not exist for a
security or prices for a security are not available from a pricing source, the
security is valued on the basis of a quoted bid price or spread over the
applicable yield curve (a bid spread) by a broker/dealer in such security. The
second highest price will be utilized whenever two or more quoted bid prices are
obtained;
(l) a mortgage-backed or asset-backed security is valued on the basis of
bid prices obtained from pricing services or bid prices obtained from multiple
major broker-dealers in the security when the Adviser believes that these prices
reflect the market value of the security. In cases in which broker-dealer quotes
are obtained, the Adviser has procedures for using changes in market yields or
spreads to adjust, on a daily basis, a recently obtained quoted bid price on a
security. The second highest price will be utilized whenever two or more quoted
bid prices are obtained; and
(m) bank loans are valued on the basis of bid prices provided by a pricing
service;
(n) forward and spot currency pricing is provided by pricing services;
(o) a swap is valued by the Adviser utilizing various external sources to
obtain inputs for variables in pricing models; and
(p) open-end mutual funds are valued at the closing NAV per share and
closed-end funds and exchange-traded funds are valued at the closing market
price per share.
The Fund values its securities at their current market value determined on
the basis of market quotations or, if market quotations are not readily
available or are unreliable, at "fair value" as determined in accordance with
procedures established by and under the general supervision of the Funds' Board.
When the Fund uses fair value pricing, it may take into account any factors it
deems appropriate. The Fund may determine fair value based upon developments
related to a specific security, current valuations of foreign stock indices (as
reflected in U.S. futures markets) and/or U.S. sector or broader stock market
indices. The prices of securities used by the Fund to calculate its NAV may
differ from quoted or published prices for the same securities. Fair value
pricing involves subjective judgments and it is possible that the fair value
determined for a security is materially different than the value that could be
realized upon the sale of that security.
The Fund expects to use fair value pricing for securities primarily traded
on U.S. exchanges only under very limited circumstances, such as the early
closing of the exchange on which a security is traded or suspension of trading
in the security. The Fund may use fair value pricing more frequently for
securities primarily traded in non-U.S. markets because, among other things,
most foreign markets close well before the Fund values its securities at 4:00
p.m., Eastern time. The earlier close of these foreign markets gives rise to the
possibility that significant events, including broad market moves, may have
occurred in the interim. For example, the Fund believes that foreign security
values may be affected by events that occur after the close of foreign
securities markets. To account for this, the Fund may frequently value many of
its foreign equity securities using fair value prices based on third party
vendor modeling tools to the extent available.
Subject to its oversight, the Board has delegated responsibility for
valuing the Fund's assets to the Adviser. The Adviser has established a
Valuation Committee, which operates under the policies and procedures approved
by the Board, to value the Fund's assets on behalf of the respective Fund. The
Valuation Committee values Fund assets as described above.
The Fund may suspend the determination of its NAV(and the offering and
sales of shares), subject to the rules of the SEC and other governmental rules
and regulations, at a time when: (1) the Exchange is closed, other than
customary weekend and holiday closings, (2) an emergency exists as a result of
which it is not reasonably practicable for the Fund to dispose of securities
owned by it or to determine fairly the value of its net assets, or (3) for the
protection of shareholders, the SEC by order permits a suspension of the right
of redemption or a postponement of the date of payment on redemption.
For purposes of determining the Fund's NAV per share, all assets and
liabilities initially expressed in a foreign currency will be converted into
U.S. Dollars at the mean of the current bid and asked prices of such currency
against the U.S. Dollar last quoted by a major bank that is a regular
participant in the relevant foreign exchange market or on the basis of a pricing
service that takes into account the quotes provided by a number of such major
banks. If such quotations are not available as of the close of the Exchange, the
rate of exchange will be determined in good faith by, or under the direction of,
the Board.
--------------------------------------------------------------------------------
FUND TRANSACTIONS
--------------------------------------------------------------------------------
Subject to the general oversight of the Board, the Adviser is
responsible for the investment decisions and the placing of the orders for
portfolio transactions of the Fund. The Fund's portfolio transactions occur
primarily with issuers, underwriters or major dealers acting as principals. Such
transactions are normally on a net basis, which does not involve payment of
brokerage commissions. The cost of securities purchased from an underwriter
usually includes a commission paid by the issuer to the underwriter;
transactions with dealers normally reflect the spread between bid and asked
prices. Premiums are paid with respect to options purchased by the Fund, and
brokerage commissions are payable with respect to transactions in
exchange-traded interest rate futures contracts.
The Adviser makes the decisions for the Fund and determines the
broker or dealer to be used in each specific transaction. Most transactions for
the Fund, including transactions in listed securities, are executed in the
over-the counter market by approximately fifteen (15) principal market maker
dealers with whom the Adviser maintains regular contact. Most transactions made
by the Fund will be principal transactions at net prices and the Fund will incur
little or no brokerage costs. Where possible, securities will be purchased
directly from the issuer or from an underwriter or market maker for the
securities unless the Adviser believes a better price and execution is available
elsewhere. Purchases from underwriters of newly-issued securities for inclusion
in the Fund usually will include a concession paid to the underwriter by the
issuer and purchases from dealers serving as market makers will include the
spread between the bid and asked price.
The Fund has no obligation to enter into transactions in 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. Where best price and execution may be obtained from more than one
broker or dealer, the Adviser may, in its discretion, purchase and sell
securities through brokers and dealers who provide research, statistical and
other information to the Adviser. Such services may be used by the Adviser for
all of its investment advisory accounts and, accordingly, not all such services
may be used by the Adviser in connection with the Fund. In connection with
seeking best price and execution, the Fund does not consider sales of shares of
the Fund or other investment companies managed by the Adviser as a factor in the
selection of brokers and dealers to effect portfolio transactions and has
adopted a policy and procedures reasonably designed to preclude such
considerations.
The investment information provided to the Adviser is of the type
described in Section 28(e) of the Securities Exchange Act of 1934 and is
designed to augment the Adviser's own internal research and investment strategy
capabilities. Research 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.
The extent to which commissions that will be charged by
broker-dealers selected by the Fund may reflect an element of value for research
cannot presently be determined. To the extent that research services of value
are provided by broker-dealers with or through whom the Fund places portfolio
transactions, the Adviser may be relieved of expenses which it might otherwise
bear. Research services furnished by broker-dealers could be useful and of value
to the Adviser in servicing its other clients as well as the Fund; on the other
hand, certain research services obtained by the Adviser as a result of the
placement of portfolio brokerage of other clients could be useful and of value
to it in servicing the Fund.
Investment decisions for the Fund are made independently from those
for other investment companies and other advisory accounts managed by the
Adviser. It may happen, on occasion, that the same security is held in the
portfolio of the Fund and one or more of such other companies or accounts.
Simultaneous transactions are likely when several funds or accounts are managed
by the same Adviser, particularly when a security is suitable for the investment
objectives of more than one of such companies or accounts. When two or more
companies or accounts managed by the Adviser are simultaneously engaged in the
purchase or sale of the same security, the transactions are allocated to the
respective companies or accounts both as to amount and price, in accordance with
a method deemed equitable to each company or account. In some cases this system
may adversely affect the price paid or received by the Fund or the size of the
position obtainable for the Fund.
Allocations are made by the officers of the Fund or of the Adviser.
Purchases and sales of portfolio securities are determined by the Adviser and
are placed with broker-dealers by the order department of the Adviser.
The Fund may from time to time place orders for the purchase or sale
of securities (including listed call options) with SCB & Co., an affiliate of
the Adviser (the "Affiliated Broker"). In such instances, the placement of
orders with such broker would be consistent with the Fund's objective of
obtaining best execution and would not be dependent upon the fact that the
Affiliated Broker is an affiliate of the Adviser. With respect to orders placed
with the Affiliated Broker for execution on a securities exchange, commissions
received must conform to Section 17(e)(2)(A) of the 1940 Act and Rule 17e-1
there under, 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 company provided that such commission
is reasonable and fair compared to the commission received by other brokers in
connection with comparable transactions involving similar securities during a
comparable period of time.
Over-the-counter transactions generally do not involve the payment
of a stated commission, but the price usually includes an undisclosed commission
or markup. The prices of underwritten offerings, however, generally include a
stated underwriter's discount. U.S. Government or other U.S. securities
constituting permissible investments will be purchased and sold through U.S.
brokers, dealers or underwriters.
Disclosure of Portfolio Holdings
The Fund believes that the ideas of the Adviser's investment staff
should benefit the Fund and its shareholders, and does not want to afford
speculators an opportunity to profit by anticipating Fund trading strategies or
using Fund information for stock picking. However, the Fund also believes that
knowledge of the Fund's portfolio holdings can assist shareholders in monitoring
their investment, making asset allocation decisions, and evaluating portfolio
management techniques.
The Adviser has adopted, on behalf of the Fund, policies and
procedures relating to disclosure of the Fund's portfolio securities. The
policies and procedures relating to disclosure of the Fund's portfolio
securities are designed to allow disclosure of portfolio holdings information
where necessary to the Fund's operation or useful to the Fund's shareholders
without compromising the integrity or performance of the Fund. Except when there
are legitimate business purposes for selective disclosure and other conditions
(designed to protect the Fund and its shareholders) are met, the Fund does not
provide or permit others to provide information about the Fund's portfolio
holdings on a selective basis.
The Fund includes portfolio holdings information as required in
regulatory filings and shareholder reports, discloses portfolio holdings
information as required by federal or state securities laws and may disclose
portfolio holdings information in response to requests by governmental
authorities. In addition, the Adviser posts portfolio holdings information on
the Adviser's website (www.AllianceBernstein.com). The Adviser posts on the
website a complete schedule of the Fund's portfolio securities, as of the last
day of each calendar month, approximately 30 days after the end of that month.
This posted information generally remains accessible on the website for three
months. For each portfolio security, the posted information includes its name,
the number of shares held by the Fund, the market value of the Fund's holdings,
and the percentage of the Fund's assets represented by the Fund's holdings. In
addition to the schedule of portfolio holdings, the Investment Adviser may post
information about the number of securities the Fund holds, a summary of the
Fund's top ten holdings (including name and the percentage of the Fund's assets
invested in each holding), and a percentage breakdown of the Fund's investments
by country, sector and industry, as applicable approximately 10-15 days after
the end of the month. The day after portfolio holdings information is publicly
available on the website, it may be mailed, e-mailed or otherwise transmitted to
any person.
The Adviser may distribute or authorize the distribution of
information about the Fund's portfolio holdings that is not publicly available,
on the website or otherwise, to the Adviser's employees and affiliates that
provide services to the Fund. In addition, the Adviser may distribute or
authorize distribution of information about the Fund's portfolio holdings that
is not publicly available, on the website or otherwise, to the Fund's service
providers who require access to the information in order to fulfill their
contractual duties relating to the Fund, to facilitate the review of the Fund by
rating agencies, for the purpose of due diligence regarding a merger or
acquisition, or for the purpose of effecting in-kind redemption of securities to
facilitate orderly redemption of portfolio assets and minimal impact on
remaining Fund shareholders. The Adviser does not expect to disclose information
about the Fund's portfolio holdings that is not publicly available to the Fund's
individual or institutional investors or to intermediaries that distribute the
Fund's shares. Information may be disclosed with any frequency and any lag, as
appropriate.
Before any non-public disclosure of information about the Fund's
portfolio holdings is permitted, however, the Adviser's Chief Compliance Officer
(or his or her designee) must determine that the Fund has a legitimate business
purpose for providing the portfolio holdings information, that the disclosure is
in the best interests of the Fund's shareholders, and that the recipient agrees
or has a duty to keep the information confidential and agrees not to trade
directly or indirectly based on the information or to use the information to
form a specific recommendation about whether to invest in the Fund or any other
security. Under no circumstances may the Adviser or its affiliates receive any
consideration or compensation for disclosing the information.
The Adviser has established procedures to ensure that the Fund's
portfolio holdings information is only disclosed in accordance with these
policies. Only the Adviser's Chief Fund Compliance Officer (or his or her
designee) may approve the disclosure, and then only if he or she and a
designated senior officer in the Adviser's product management group determines
that the disclosure serves a legitimate business purpose of the Fund and is in
the best interest of the Fund's shareholders. The Adviser's Chief Compliance
Officer (or his or her designee) approves disclosure only after considering the
anticipated benefits and costs to the Fund and its shareholders, the purpose of
the disclosure, any conflicts of interest between the interests of the Fund and
its shareholders and the interests of the Adviser or any of its affiliates, and
whether the disclosure is consistent with the policies and procedures governing
disclosure. Only someone approved by the Adviser's Chief Compliance Officer (or
his or her designee) may make approved disclosures of portfolio holdings
information to authorized recipients. The Adviser reserves the right to request
certifications from senior officers of authorized recipients that the recipient
is using the portfolio holdings information only in a manner consistent with the
Adviser's policy and any applicable confidentiality agreement. The Adviser's
Chief Compliance Officer (or his or her designee) or another member of the
compliance team reports all arrangements to disclose portfolio holdings
information to the Board on a quarterly basis. If the Board determines that
disclosure was inappropriate, the Adviser will promptly terminate the disclosure
arrangement.
In accordance with these procedures, each of the following third
parties have been approved to receive information concerning the Fund's
portfolio holdings: (i) the Fund's independent registered public accounting
firm, for use in providing audit opinions; (ii) RR Donnelly Financial, Data
Communique International and, from time to time, other financial printers, for
the purpose of preparing Fund regulatory filings; (iii) the Fund's custodian in
connection with its custody of the Fund's assets; (iv) [Institutional
Shareholder Services, Inc.] [Risk Metrics] for proxy voting services; and (v)
data aggregators, such as Vestek. Information may be provided to these parties
at any time with no time lag. Each of these parties is contractually and
ethically prohibited from sharing the Fund's portfolio holdings information
unless specifically authorized.
--------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES
--------------------------------------------------------------------------------
United States Federal Income Taxation of Dividends, Distributions, and the Fund
The following discussion addresses certain U.S. federal income tax
issues concerning the Fund and the purchase, ownership, and disposition of Fund
shares. This discussion does not purport to be complete or to address all
aspects of federal income taxation that may be relevant to shareholders in light
of their particular circumstances, nor to certain types of shareholders subject
to special treatment under the federal income tax laws (for example, banks and
life insurance companies). The following discussion also provides only limited
information about the U.S. federal income tax treatment of shareholders that are
not U.S. shareholders. This discussion is based upon present provision of the
Code, the regulations promulgated thereunder, and judicial and administrative
rulings, all of which are subject to change, which change may be retroactive.
Prospective investors should consult their own tax advisors with regard to the
federal income tax consequences of the purchase, ownership, or disposition of
Fund shares, as well as the tax consequences arising under the laws of any
state, foreign country, or other taxing jurisdiction.
Qualification of the Fund as Regulated Investment Company
The Fund intends for each taxable year to qualify to be taxed as a
"regulated investment company" under the Code. In order to qualify for the
special tax treatment accorded regulated investment companies and their
shareholders, the Fund must, among other things:
(a) derive at least 90% of its gross income for each taxable year
from (i) dividends, interest, payments with respect to certain securities loans,
and gains from the sale or other disposition of stock, securities or foreign
currencies, or other income (including but not limited to gains from options,
futures, or forward contracts) derived with respect to its business of investing
in such stock, securities, or currencies and (ii) net income derived from
interests in "qualified publicly traded partnerships" (as defined below);
(b) distribute with respect to each taxable year at least 90% of the
sum of its investment company taxable income (as that term is defined in the
Code without regard to the deduction for dividends paid--generally, taxable
ordinary income and the excess, if any, of net short-term capital gains over net
long-term capital losses) and net tax-exempt interest income, for such year; and
(c) diversify its holdings so that, at the end of each quarter of
the Fund's taxable year, (i) at least 50% of the market value of the Fund's
total assets is represented by cash and cash items, U.S. Government securities,
securities of other regulated investment companies, and other securities limited
in respect of any one issuer to a value not greater than 5% of the value of the
Fund's total assets and not more than 10% of the outstanding voting securities
of such issuer, and (ii) not more than 25% of the value of the Fund's total
assets is invested (x) in the securities (other than those of the U.S.
Government or other regulated investment companies) of any one issuer or of two
or more issuers which the Fund controls and which are engaged in the same,
similar, or related trades or businesses, or (y) in the securities of one or
more qualified publicly traded partnerships (as defined below). In the case of
the Fund's investments in loan participations, the Fund shall treat a financial
intermediary as an issuer for the purposes of meeting this diversification
requirement.
In general, for purposes of the 90% gross income requirement
described in paragraph (a)(i) above, income derived from a partnership will be
treated as qualifying income only to the extent such income is attributable to
items of income of the partnership which would be qualifying income if realized
by the regulated investment company. However, 100% of the net income derived
from an interest in a "qualified publicly traded partnership" (defined as a
partnership (i) interests in which are traded on an established securities
market or readily tradable on a secondary market or the substantial equivalent
thereof and (ii) that derives less than 90% of its income from the qualifying
income described in paragraph (a) above) will be treated as qualifying income.
In addition, although in general the passive loss rules of the Code do not apply
to regulated investment companies, such rules do apply to a regulated investment
company with respect to items attributable to an interest in a qualified
publicly traded partnership. Finally, for purposes of paragraph (c) above, the
term "outstanding voting securities of such issuer" will include the equity
securities of a qualified publicly traded partnership.
If the Fund qualifies as a regulated investment company that is
accorded special tax treatment, the Fund will not be subject to federal income
tax on income distributed in a timely manner to its shareholders in the form of
dividends (including Capital Gain Dividends, as defined below).
It is the present policy of the Fund to declare dividends from net
investment income daily and distribute monthly and to distribute net realized
capital gains, if any, annually. The amount of any such distributions must
necessarily depend upon the realization by the Fund of income and capital gains
from investments. However, investors should note that the Fund may in certain
circumstances be required to liquidate portfolio investments to make sufficient
distributions to avoid excise tax liability.
The Fund will also avoid the 4% federal excise tax that would
otherwise apply to certain undistributed income for a given calendar year if it
makes timely distributions to shareholders equal to the sum of (i) 98% of its
ordinary income for such year, (ii) 98% of its capital gain net income and
foreign currency gains for the twelve-month period ending on October 31 of such
year (or later, if the Fund is permitted to elect and so elects), and (iii) any
ordinary income or capital gain net income from the preceding calendar year that
was not distributed during such year. For this purpose, income or gain retained
by the Fund that is subject to corporate income tax will be considered to have
been distributed by the Fund during such year. For federal income and excise tax
purposes, dividends declared and payable to shareholders of record as of a date
in October, November or December but actually paid during the following January
will be treated as if paid by the Fund on December 31 of such earlier calendar
year, and will be taxable to these shareholders in the year declared, and not in
the year in which the shareholders actually receive the dividend.
Dividends and Distributions. The Fund intends to make timely
distributions of the Fund's taxable income (including any net capital gain) so
that the Fund will not be subject to federal income and excise taxes. Dividends
of the Fund's net ordinary income and distributions of any net realized
short-term capital gain are taxable to shareholders as ordinary income.
For tax years beginning on or before December 31, 2010,
distributions from the Fund that are designated as "qualified dividend income"
will generally be taxable to non-corporate shareholders at a maximum rate of 15%
(5% for non-corporate shareholders in lower tax brackets), provided that both
the Fund and the shareholder satisfy certain holding period and other
requirements. Based upon the investment policies of the Fund, it is expected
that only a small portion, if any, of the Fund's distributions would be treated
as "qualified dividend income".
Distributions of net capital gain from the sale of investments that
the Fund owned for more than one year and are properly designated by the Fund as
capital gain dividends ("Capital Gain Dividend") are taxable as long-term
capital gain, regardless of how long a shareholder has held shares in the Fund.
Distributions of net capital gain are not eligible for the dividends-received
deduction in the case of corporate shareholders. Any dividend or distribution
received by a shareholder on shares of the Fund will have the effect of reducing
the NAV of such shares by the amount of such dividend or distribution.
Furthermore, a dividend or distribution made shortly after the purchase of such
shares by a shareholder, although in effect a return of capital to that
particular shareholder would be taxable to him or her as described above. The
investment objective of the Fund is such that only a small portion, if any, of
the Fund's distributions is expected to qualify for the dividends-received
deduction for corporate shareholders.
Long-term capital gain rates applicable to individuals have been
temporarily reduced-in general, to 15% with lower rates applying to taxpayers in
the 10% and 15% rate brackets-for taxable years beginning on or before December
31, 2010.
After the end of the calendar year, the Fund will notify
shareholders of the federal income tax status of any distributions made by the
Fund to shareholders during such year.
Return of Capital Distributions. If the Fund makes a distribution in
excess of its current and accumulated "earnings and profits" in any taxable
year, the excess distribution will be treated as a return of capital to the
extent of your tax basis in your shares, and thereafter as capital gain. A
return of capital is not taxable, but it reduces your tax basis in your shares,
thus reducing any loss or increasing any gain on a subsequent taxable
disposition by you of your shares.
Dividends and distributions on the Fund's shares are generally
subject to federal income tax as described herein to the extent they do not
exceed the Fund's realized income and gains, even though such dividends and
distributions may economically represent a return of a particular U.S.
shareholder's investment. Such distributions are likely to occur in respect of
shares purchased at a time when the Fund's NAV reflects gains that are either
unrealized, or realized but not distributed. Such realized gains may be required
to be distributed, even when the Fund's NAV also reflects unrealized losses.
Sales, Exchanges and Redemptions. Any gain or loss arising from a
sale, exchange or redemption of Fund shares generally will be capital gain or
loss if the Fund shares are held as a capital asset, and will be long-term
capital gain or loss if the shareholder has held such shares for more than one
year at the time of the sale, exchange or redemption; otherwise it will be
short-term capital gain or loss. If a shareholder has held shares in the Fund
for six months or less and during that period has received a distribution of net
capital gain, any loss recognized by the shareholder on the sale of those shares
during the six-month period will be treated as a long-term capital loss to the
extent of the distribution. In determining the holding period of such shares for
this purpose, any period during which a shareholder's risk of loss is offset by
means of options, short sales or similar transactions is not counted.
Any loss realized by a shareholder on a sale, exchange or redemption
of shares of the Fund will be disallowed to the extent the shares disposed of
are reacquired within a period of 61 days beginning 30 days before and ending 30
days after the shares are sold or exchanged. If a loss is disallowed, then such
loss will be reflected in an upward adjustment to the basis of the shares
acquired.
Qualified Plans. A dividend or capital gains distribution with
respect to shares of the Fund held by a tax deferred or qualified plan, such as
an individual retirement account, section 403(b)(7) retirement plan or corporate
pension or profit-sharing plan, generally will not be taxable to the plan.
Distributions from such plans will be taxable to individual participants under
applicable tax rules without regard to the character of the income earned by the
qualified plan. Because special tax rules apply to investment through defined
contribution plans and other tax-qualified plans, U.S. shareholders should
consult their tax advisors to determine the suitability of shares of the Fund as
an investment through such plans and the precise effect of an investment on
their particular tax situation.
Backup Withholding. Any distributions and redemption proceeds
payable to a shareholder may be subject to "backup withholding" tax (currently
at a rate of 28% through 2012) if such shareholder fails to provide the Fund
with his or her correct taxpayer identification number, fails to make certain
required certifications, or is notified by the Internal Revenue Service (the
"IRS") that he or she is subject to backup withholding. Corporate shareholders
and certain other shareholders specified in the Code are exempt from such backup
withholding. Backup withholding is not an additional tax; any amounts so
withheld may be credited against a shareholder's U.S. federal income tax
liability or refunded by filing a refund claim with the IRS, provided that the
required information is furnished to the IRS.
The backup withholding tax rate will be 28% for amounts paid through
December 31, 2012. The backup withholding rate is currently scheduled to
increase to 31% for amounts paid after December 31, 2012.
Zero Coupon Treasury Securities and Certain Other Debt Obligations.
The Fund may make investments in zero coupon Treasury securities and certain
other debt obligations that will produce income under the original issue
discount rules of the Code. Such income may not be matched with a corresponding
cash receipt by the Fund. Accordingly, the Fund may be required to pay out as an
income distribution each year an amount that is greater than the total amount of
cash interest the Fund actually received. Such distributions will be made from
the cash assets of the Fund or by liquidation of portfolio securities, if
necessary. If a distribution of cash necessitates the liquidation of portfolio
securities, the Adviser will select which securities to sell. The Fund may
realize a gain or loss from such sales. In the event the Fund realizes net
capital gains from such transactions, its shareholders may receive a larger
capital gain distribution, if any, than they would have in the absence of such
transactions.
Options, Futures, Forward Contracts and Swap Agreements. The Fund's
transactions in futures contacts, options, swaps, CFDs, foreign currencies and
other derivatives will be subject to special tax rules (including mark to
market, constructive sale, straddle, wash sale and short sale rules), the effect
of which may be to accelerate income to the Fund, defer losses to the Fund,
cause adjustments in the holding periods of the Fund's securities, convert
long-term capital gains into short-term capital gains and convert short-term
capital losses into long-term capital losses. These rules could therefore affect
the amount, timing and character of distributions to shareholders. The Fund's
use of these types of transactions may result in the Fund realizing more
short-term capital gains and ordinary income subject to tax at ordinary income
tax rates than it would if it did not engage in such transactions. The Fund will
endeavor to make any available elections pertaining to such transactions in a
manner believed to be in the best interest of the Fund.
Passive Foreign Investment Companies. Equity investments by the Fund
in certain "passive foreign investment companies" ("PFICs") could potentially
subject the Fund to a U.S. federal income tax (including interest charges) on
distributions received from the company or on proceeds received from the
disposition of shares in the company, which tax cannot be eliminated by making
distributions to Fund shareholders. However, the Fund may elect to avoid the
imposition of that tax. For example, the Fund may elect to treat a PFIC as a
"qualified electing fund" (a "QEF election"), in which case the Fund will be
required to include its share of the company's income and net capital gains
annually, regardless of whether it receives any distribution from the company.
The Fund also may make an election to mark the gains (and to a limited extent
losses) in such holdings "to the market" as though it had sold and repurchased
its holdings in those PFICs on the last day of the Fund's taxable year. Such
gains and losses are treated as ordinary income and loss. The QEF and
mark-to-market elections may accelerate the recognition of income (without the
receipt of cash) and increase the amount required to be distributed by the Fund
to avoid taxation. Making either of these elections therefore may require the
Fund to liquidate other investments (including when it is not advantageous to do
so) to meet its distribution requirement, which also may accelerate the
recognition of gain and affect the Fund's total return. As mentioned above,
dividends paid by PFICs are not eligible to be treated as "qualified dividend
income".
State and Local Taxation. Depending on the residence of the
shareholders for tax purposes, distributions may also be subject to state and
local taxes. Rules of state and local taxation regarding qualified dividend
income, ordinary income dividends and capital gain dividends from regulated
investment companies may differ from the U.S. federal income tax rules in other
respects. Shareholders are urged to consult their tax advisers as to the
consequences of these and other state and local tax rules affecting investment
in the Fund.
Most states provide that a regulated investment company may pass
through (without restriction) to its shareholders state and local income tax
exemptions available to direct owners of certain types of U.S. government
securities (such as U.S. Treasury obligations). Thus, for residents of these
states, distributions derived from the Fund's investment in certain types of
U.S. government securities should be free from state and local income taxes to
the extent that the interest income from such investments would have been exempt
from state and local taxes if such securities had been held directly by the
respective shareholders. Certain states, however, do not allow a regulated
investment company to pass through to its shareholders the state and local
income tax exemptions available to direct owners of certain types of U.S.
government securities unless the Fund holds at least a required amount of U.S.
government securities. Accordingly, for residents of these states, distributions
derived from the Fund's investment in certain types of U.S. government
securities may not be entitled to the exemptions from state and local income
taxes that would be available if the shareholders had purchased U.S. government
securities directly. The exemption from state and local income taxes does not
preclude states from asserting other taxes on the ownership of U.S. government
securities. To the extent that the Fund invests to a substantial degree in U.S.
government securities which are subject to favorable state and local tax
treatment, shareholders of the Fund will be notified as to the extent to which
distributions from the Fund are attributable to interest on such securities.
Taxation of Qualified Plans
The following discussion relates only to investments in the Fund by
or through certain tax deferred or qualified plans.
A dividend or capital gains distribution with respect to shares of
the Fund held by a tax deferred or qualified plan, such as an individual
retirement account, section 403(b)(7) retirement plan or corporate pension or
profit-sharing plan, generally will not be taxable to the plan. Distributions
from such plans will be taxable to individual participants under applicable tax
rules without regard to the character of the income earned by the qualified
plan. Because special tax rules apply to investment through defined contribution
plans and other tax-qualified plans, U.S. shareholders should consult their tax
advisors to determine the suitability of shares of the Fund as an investment
through such plans and the precise effect of an investment on their particular
tax situation.
Taxation of Foreign Shareholders
The foregoing discussion relates only to United States federal
income tax law as it affects shareholders who are United States citizens or
residents or United States corporations. The effects of federal income tax law
on a shareholder which is a non-resident alien individual or foreign corporation
may be substantially different. A foreign investor should therefore consult his
or her own tax adviser for further information as to the United States federal
income tax consequences of being a shareholder in the Fund.
In general, dividends (other than Capital Gain Dividends) paid by
the Fund to a shareholder that is not a "U.S. person" within the meaning of the
Code (such shareholder, a "foreign person") are subject to withholding of U.S.
federal income tax at a rate of 30% (or lower applicable treaty rate) even if
they are funded by income or gains (such as portfolio interest, short-term
capital gains, or foreign-source dividend and interest income) that, if paid to
a foreign person directly, would not be subject to withholding. However, for
taxable years of the Fund beginning before January 1, 2010, the Fund will not be
required to withhold any amounts (i) with respect to distributions (other than
distributions to a foreign person (w) that has not provided a satisfactory
statement that the beneficial owner is not a U.S. person, (x) to the extent that
the dividend is attributable to certain interest on an obligation if the foreign
person is the issuer or is a 10% shareholder of the issuer, (y) that is within
certain foreign countries that have inadequate information exchange with the
United States, or (z) to the extent the dividend is attributable to interest
paid by a person that is a related person of the foreign person and the foreign
person is a controlled foreign corporation) from U.S.-source interest income
that would not be subject to U.S. federal income tax if earned directly by an
individual foreign person, to the extent such distributions are properly
designated by the Fund ("Interest-Related Dividends"), and (ii) with respect to
distributions (other than distributions to an individual foreign person who is
present in the United States for a period or periods aggregating 183 days or
more during the year of the distribution) of net short-term capital gains in
excess of net long-term capital losses ("Short-Term Capital Gains Dividends"),
in each case to the extent such distributions are properly designated by the
Fund. Legislation is currently pending in the U.S. Congress to extend these
exemptions from withholding tax for taxable years beginning before January 1,
2011. In the absence of the enactment of such legislation, U.S. withholding tax
will be imposed on Interest-Related Dividends and Short-Term Capital Gains
Dividends for taxable years of the Fund beginning on or after January 1, 2010.
There can be no assurance that such legislation will be enacted.
Depending on the circumstances, the Fund may make such designations
with respect to all, some or none of its potentially eligible dividends and/or
treat such dividends, in whole or in part, as ineligible for this exemption from
withholding. In order to qualify for this exemption from withholding, a foreign
person will need to comply with applicable certification requirements relating
to its non-U.S. status (including, in general, furnishing an IRS Form W-8BEN or
substitute Form). In the case of shares held through an intermediary, the
intermediary may withhold even if the Fund makes a designation with respect to a
payment. Foreign persons should contact their intermediaries with respect to the
application of these rules to their accounts. In addition, as indicated above,
Capital Gain Dividends will not be subject to withholding of U.S. federal income
tax.
If a beneficial holder who is a foreign person has a trade or
business in the United States, and the dividends are effectively connected with
the conduct by the beneficial holder of a trade or business in the United
States, the dividend will be subject to U.S. federal net income taxation at
regular income tax rates.
--------------------------------------------------------------------------------
GENERAL INFORMATION
--------------------------------------------------------------------------------
Description of the Fund
AllianceBernstein International Focus Income Shares is a series
company of AllianceBernstein Corporate Shares, a Massachusetts business trust
organized on January 26, 2004.
The Fund is authorized to issue an unlimited number of shares of
beneficial interest. All shares participate equally in dividends and
distributions of the Fund, including any distributions in the event of a
liquidation and upon redeeming shares, will receive the then current NAV of the
Fund represented by the redeemed shares. Each Fund share is entitled to one vote
for all purposes. There are no conversion or preemptive rights in connection
with any shares of the Fund. All shares of the Fund when duly issued will be
fully paid and non-assessable.
The Board may, without shareholder approval, increase or decrease
the number of authorized but unissued shares of the Fund.
The Board is authorized to reclassify and issue any unissued shares
to any number of future portfolios of the Company without shareholder approval.
Accordingly, the Trustees 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 another series would be governed by the 1940 Act and
the laws of the Commonwealth of Massachusetts. If shares of another series were
issued in connection with the creation of one or more additional portfolios,
each share of any series would normally be entitled to one vote for all
purposes. Generally, shares of all series would vote as a single series for the
election of Trustees and on any other matter that affected both series in
substantially the same manner. As to matters affecting each series differently,
such as approval of the Investment Advisory Agreement and changes in investment
policy, shares of each portfolio would vote as separate series.
It is anticipated that annual shareholder meetings will not be held;
shareholder meetings will be held when required by federal or state law.
Shareholders have available certain procedures for the removal of Trustees.
Shareholder and Trustee Liability
Under Massachusetts law shareholders could, under certain
circumstances, be held personally liable for the obligations of the Company.
However, the Declaration of Trust disclaims shareholder liability for acts or
obligations of the Company and requires that notice of such disclaimer be given
in each agreement, obligation, or instrument entered into or executed by the
Company or the Trustees. The Declaration of Trust provides for indemnification
out of the Fund's property for all loss and expense of any shareholder of the
Fund held liable on account of being or having been a shareholder. Thus, the
risk of a shareholder incurring financial loss on account of shareholder
liability is limited to circumstances in which the Fund of which he or she was a
shareholder would be unable to meet its obligations.
Custodian and Accounting Agent
State Street Bank and Trust Company ("State Street"), One Lincoln
Street, Boston, Massachusetts 02111, acts as the Fund's Custodian and Accounting
Agent for the assets of the Fund but plays no part in deciding on the purchase
or sale of portfolio securities.
Principal Underwriter
ABI, an indirect wholly-owned subsidiary of the Adviser, located at
1345 Avenue of the Americas, New York, NY 10105, is the principal underwriter of
shares of the Fund, and as such may solicit orders from the public to purchase
shares of the Fund. Under the Distribution Agreement, the Fund has agreed to
indemnify the ABI, 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 are passed upon by Seward & Kissel LLP.
Independent Registered Public Accounting Firm
[______________], [__________________________], has been appointed
as the independent registered public accounting firm for the Fund.
Additional Information
Any shareholder inquiries may be directed to the shareholder's
broker or other investment adviser or to ABIS at the address or telephone
numbers shown on the front cover of this SAI. This SAI does not contain all the
information set forth in the Registration Statement filed by the Fund with the
SEC under the Securities Act. Copies of the Registration Statement may be
obtained at a reasonable charge from the SEC or may be examined, without charge,
at the offices of the SEC in Washington, D.C.
--------------------------------------------------------------------------------
FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
--------------------------------------------------------------------------------
The financial statements of the Fund for the fiscal year end are not
available because the Fund has not yet commenced operations.
SK 00250 0454 1176613v1
PART C
OTHER INFORMATION
ITEM 28. Exhibits
(a) (1) Amended and Restated Agreement and Declaration of Trust
dated May 3, 2006 - Incorporated by reference to Exhibit
(a)(2) to Pre-Effective Amendment No. 3 of the
Registrant's Registration Statement on Form N-1A (File
Nos. 333-112207 and 811-21497), filed with the
Securities and Exchange Commission on May 22, 2006.
(2) Amendment No. 1 to Amended and Restated Agreement and
Declaration of Trust, dated May 6, 2010 and filed May 7,
2010 - Incorporated by reference to Exhibit (a)(2) to
Post-Effective Amendment No. 4 of the Registrant's
Registration Statement on Form N-1A (File Nos.
333-112207 and 811-21497), filed with the Securities and
Exchange Commission on May 14, 2010.
(3) Amendment No. 2 to Amended and Restated Agreement and
Declaration of Trust, filed June 17, 2010 - Incorporated
by reference to Exhibit (a)(3) to Post-Effective
Amendment No. 5 of the Registrant's Registration
Statement on Form N-1A (File Nos. 333-112207 and
811-21497), filed with the Securities and Exchange
Commission on June 17, 2010.
(4) Amendment No. 3 to Amended and Restated Agreement and
Declaration of Trust, dated February 2, 2011 -
Incorporated by reference to Exhibit (a)(4) to
Post-Effective Amendment No. 9 of the Registrant's
Registration Statement on Form N-1A (File Nos.
333-112207 and 811-21497), filed with the Securities and
Exchange Commission on February 8, 2011.
(b) By-Laws of the Registrant - Incorporated by reference to
Exhibit 23(b) to Registrant's Registration Statement on Form
N-1A (File Nos. 333-112207 and 811-21497), filed with the
Securities and Exchange Commission on January 26, 2004.
(c) Not applicable.
(d) Form of Advisory Agreement between the Registrant and
AllianceBernstein L.P., dated September 7, 2004, as amended
May 7, 2010 and June 10, 2010 - Incorporated by reference to
Exhibit (d) to Post-Effective Amendment No. 5 of the
Registrant's Registration Statement on Form N-1A (File Nos.
333-112207 and 811-21497), filed with the Securities and
Exchange Commission on June 17, 2010.
(e) Form of Distribution Services Agreement between the Registrant
and AllianceBernstein Investments, Inc., (formerly,
AllianceBernstein Investment Research and Management, Inc.) -
Incorporated by reference to Exhibit 23(e) to Registrant's
Registration Statement on Form N-1A (File Nos. 333-112207 and
811-21497), filed with the Securities and Exchange Commission
on January 26, 2004.
(f) Not applicable.
(g) Master Custodian Agreement between the Registrant and State
Street Bank and Trust Company, effective August 3, 2009 -
Incorporated by reference to Exhibit (g) to Post-Effective
Amendment No. 51 of the Registration Statement on Form N-1A of
AllianceBernstein Variable Products Series Fund, Inc. (File
Nos. 33-18647 and 811-5398), filed with the Securities and
Exchange Commission on April 29, 2010.
(h) Form of Transfer Agency Agreement between the Registrant and
AllianceBernstein Investor Services, Inc. - Incorporated by
reference to Exhibit (h)(1) to Pre-Effective Amendment No. 3
of the Registrant's Registration Statement on Form N-1A (File
Nos. 333-112207 and 811-21497), filed with the Securities and
Exchange Commission on May 22, 2006.
(i) Opinion and Consent of Seward & Kissel LLP - To be filed by
amendment.
(j) Consent of Independent Registered Public Accounting Firm - To
be filed by amendment.
(k) Not applicable.
(l) Investment representation letter of AllianceBernstein L.P.-
Incorporated by reference to Exhibit (h)(1) to Pre-Effective
Amendment No. 3 of the Registrant's Registration Statement on
Form N-1A (File Nos. 333-112207 and 811-21497), filed with the
Securities and Exchange Commission on May 22, 2006.
(m) Not applicable.
(n) Not applicable.
(o) Reserved.
(p) (1) Code of Ethics for the Registrant - Incorporated by
reference to Exhibit 23(p)(1) to Registrant's
Registration Statement on Form N-1A (File Nos.
333-112207 and 811-21497), filed with the Securities and
Exchange Commission on January 26, 2004.
(2) Code of Ethics for the AllianceBernstein L.P. -
Incorporated by reference to Exhibit 23(p)(2) to
Post-Effective Amendment No. 39 of the AllianceBernstein
Large Cap Growth Fund, Inc. Registration Statement on
Form N-1A (File Nos. 33-49530 and 811-06730), filed with
the Securities and Exchange Commission on October 15,
2009.
OTHER EXHIBITS
Powers of Attorney for: David H. Dobkin, Michael J. Downey, William
H. Foulk, Jr., D. James Guzy, Nancy P. Jacklin, Robert M. Keith,
Garry L. Moody, Marshall C. Turner, Jr. and Earl D. Weiner -
Incorporated by reference to Other Exhibits to Post-Effective
Amendment No. 9 of the Registrant's Registration Statement on Form
N-1A (File Nos. 333-112207 and 811-21497), filed with the Securities
and Exchange Commission on February 8, 2011.
ITEM 29. Persons Controlled by or under Common Control with Registrant.
None.
ITEM 30. Indemnification.
Paragraph (l) of Section 3, Article IV of the Registrant's Agreement
and Declaration of Trust provides in relevant part that the Trustees
of the Trust have the power: "(l) to purchase and pay for entirely
out of Trust property such insurance as they may deem necessary or
appropriate for the conduct of the business of the Trust, including,
without limitation, insurance policies insuring the assets of the
Trust and payment of distributions and principal on its portfolio
investments, and insurance policies insuring the Shareholders,
Trustees, officers, employees, agents, investment advisers,
principal underwriters or independent contractors of the Trust
individually against all claims and liabilities of every nature
arising by reason of holding, being or having held any such office
or position, or by reason of any action alleged to have been taken
or omitted by any such person as Trustee, officer, employee, agent,
investment adviser, principal underwriter or independent contractor,
including any action taken or omitted that may be determined to
constitute negligence, whether or not the Trust would have the power
to indemnify such person against liability;"
Section 2 of Article SEVENTH of the Registrant's Agreement and Declaration of
Trust provides in relevant part:
"Limitation of Liability. No Trustee, officer, employee or agent of the
Trust shall be subject to any liability whatsoever to any person in connection
with Trust property or the affairs of the Trust, and no Trustee shall be
responsible or liable in any event for any neglect or wrong-doing of any
officer, agent, employee, Manager or principal underwriter of the Trust or for
the act or omission of any other Trustee. For the sake of clarification and
without limiting the foregoing, the appointment, designation or identification
of a Trustee as the chairman of the Board, the lead or assistant lead
independent Trustee, a member or chairman of a committee of the Board, an expert
on any topic or in any area (including an audit committee financial expert) or
as having any other special appointment, designation or identification shall not
(a) impose on that person any duty, obligation or liability that is greater than
the duties, obligations and liabilities imposed on that person as a Trustee in
the absence of the appointment, designation or identification or (b) affect in
any way such Trustee's rights or entitlement to indemnification, and no Trustee
who has special skills or expertise, or is appointed, designated or identified
as aforesaid, shall (x) be held to a higher standard of care by virtue thereof
or (y) be limited with respect to any indemnification to which such Trustee
would otherwise be entitled. Nothing in this Declaration of Trust, including
without limitation anything in this Article VII, Section 2, shall protect any
Trustee, officer, employee or agent of the Trust against any liabilities to the
Trust or its Shareholders to which he, she or it would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his, her or its office or position with
or on behalf of the Trust.
Every note, bond, contract, instrument, certificate or undertaking and
every other act or thing whatsoever issued, executed or done by or on behalf of
the Trust or the Trustees or any of them in connection with the Trust shall be
conclusively deemed to have been issued, executed or done only in or with
respect to their or his or her capacity as Trustees or Trustee, and such
Trustees or Trustee shall not be personally liable thereon."
Section 2 of Article EIGHTH of the Registrant's Agreement and Declaration of
Trust provides in relevant part:
"Trustee's Good Faith Action, Expert Advice, No Bond or Surety. The
exercise by the Trustees of their powers and discretions hereunder shall be
binding upon everyone interested. A Trustee shall be liable for his or her own
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of the office of Trustee, and for nothing else,
and shall not be liable for errors of judgment or mistakes of fact or law. The
Trustees may take advice of counsel or other experts with respect to the meaning
and operation of this Declaration of Trust, and shall be under no liability for
any act or omission in accordance with such advice or for failing to follow such
advice. The Trustees shall not be required to give any bond as such, nor any
surety if a bond is required."
Article TENTH of the Registrant's Bylaws provides in relevant part:
1. Indemnification
10.1 Trustees, Officers, etc. The Trust shall indemnify each
of its Trustees and officers (including persons who serve at the
Trust's request as directors, officers or trustees of another
organization in which the Trust has any interest as a shareholder,
creditor or otherwise) (hereinafter referred to as a "Covered
Person") against all liabilities and expenses, including but not
limited to amounts paid in satisfaction of judgments, in compromise
or as fines and penalties, and counsel fees reasonably incurred by
any Covered Person in connection with the defense or disposition of
any action, suit or other proceeding, whether civil or criminal,
before any court or administrative or legislative body, in which
such Covered Person may be or may have been involved as a party or
otherwise or with which such Covered Person may be or may have been
threatened, while in office or thereafter, by reason of any alleged
act or omission as a Trustee or officer or by reason of his or her
being or having been such a Trustee or officer, except with respect
to any matter as to which such Covered Person shall have been
finally adjudicated in any such action, suit or other proceeding not
to have acted in good faith in the reasonable belief that such
Covered Person's action was in the best interest of the Trust and
except that no Covered Person shall be indemnified against any
liability to the Trust or its shareholders to which such Covered
Person would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of such Covered Person's office. Expenses,
including counsel fees so incurred by any such Covered Person, may
be paid from time to time by the Trust in advance of the final
disposition of any such action, suit or proceeding on the condition
that the amounts so paid shall be repaid to the Trust if it is
ultimately determined that indemnification of such expenses is not
authorized under this Article; provided, however, that (1) such
Covered Person shall provide a security for his undertaking to repay
the advance if it is ultimately determined that indemnification is
not authorized under this Article, (2) the Trust shall be insured
against losses arising by reason of any lawful advances, or (3) a
majority of a quorum of disinterested, non-party directors of the
Trust, or an independent legal counsel in a written opinion, shall
determine, based on a review of readily available facts, that there
is reason to believe that such Covered Person ultimately will be
found entitled to indemnification under this Article. In the case of
such a determination or opinion, the relevant disinterested,
non-party directors or independent legal counsel, as the case may
be, shall afford the Covered Person a rebuttable presumption that he
has not engaged in willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of such
Covered Person's office.
10.2 Compromise Payment. As to any matter disposed of by a
compromise payment by any such Covered Person referred to in Section
4.1 above, pursuant to a consent decree or otherwise, no such
indemnification either for said payment or for any other expenses
shall be provided unless such compromise shall be approved as in the
best interests of the Trust, after notice that it involved such
indemnification, (a) by a disinterested majority of the Trustees
then in office; or (b) by a majority of the disinterested Trustees
then in office; or (c) by any disinterested person or persons to
whom the question may be referred by the Trustees, provided that in
the case of approval pursuant to clause (b) or (c) there has been
obtained an opinion in writing of independent legal counsel to the
effect that such Covered Person appears to have acted in good faith
in the reasonable belief that his or her action was in the best
interests of the Trust and that such indemnification would not
protect such person against any liability to the Trust or its
shareholders to which such person would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of office;
or (d) by vote of shareholders holding a majority of the Shares
entitled to vote thereon, exclusive of any Shares beneficially owned
by any interested Covered Person. Approval by the Trustees pursuant
to clause (a) or (b) or by any disinterested person or persons
pursuant to clause (c) of this Section shall not prevent the
recovery from any Covered Person of any amount paid to such Covered
Person in accordance with any of such clauses as indemnification if
such Covered Person is subsequently adjudicated by a court of
competent jurisdiction not to have acted in good faith in the
reasonable belief that such Covered Person's action was in the best
interests of the Trust or to have been liable to the Trust or its
shareholders by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
conduct of such Covered Person's office.
10.3 Indemnification Not Exclusive. The right of
indemnification hereby provided shall not be exclusive of or affect
any other rights to which any such Covered Person may be entitled.
As used in this Article 4, the term "Covered Person" shall include
such person's heirs, executors and administrators; an "interested
Covered Person" is one against whom the action, suit or other
proceeding in question or another action, suit or other proceeding
on the same or similar grounds is then or has been pending; and a
"disinterested Trustee" or "disinterested person" is a Trustee or a
person against whom none of such actions, suits or other proceedings
or another action, suit or other proceeding on the same or similar
grounds is then or has been pending. Nothing contained in this
Article shall affect any rights to indemnification to which
personnel of the Trust, other than Trustees and officers, and other
persons may be entitled by contract or otherwise under law, nor the
power of the Trust to purchase and maintain liability insurance on
behalf of any such person."
The foregoing summaries are qualified by the entire text of Registrant's
Agreement and Declaration of Trust and Bylaws. Insofar as indemnification for
liabilities arising under the Securities Act of 1933 (the "Act") may be
permitted to Trustees, Officers and controlling persons of the Trust pursuant to
the foregoing provisions, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Act, and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Trust of expenses incurred or paid by a Trustee, Officer
or controlling person of the Trust in the successful defense of any action, suit
or proceeding) is asserted by such Trustee, Officer or controlling person in
connection with the securities being registered, the Trust will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
ITEM 31. Business and Other Connections of Adviser.
The descriptions of AllianceBernstein L.P. under the captions "Management
of the Fund" in the Prospectus and in the Statement of Additional Information
constituting Parts A and B, respectively, of this Registration Statement are
incorporated by reference herein. The information as to the directors and
executive officers of AllianceBernstein Corporation, the general partner of
AllianceBernstein L.P., set forth in AllianceBernstein L.P.'s Form ADV filed
with the Securities and Exchange Commission on April 21, 1988 (File No.
801-32361) and amended through the date hereof, is incorporated by reference.
ITEM 32. Principal Underwriters.
(a) AllianceBernstein Investments, Inc., the Registrant's Principal
Underwriter in connection with the sale of shares of the Registrant.
AllianceBernstein Investments, Inc. also acts as Principal
Underwriter or Distributor for the following investment companies:
AllianceBernstein Balanced Shares, Inc.*
AllianceBernstein Blended Style Series, Inc.*
AllianceBernstein Bond Fund, Inc.*
AllianceBernstein Cap Fund, Inc.*
AllianceBernstein Core Opportunities Fund, Inc.*
AllianceBernstein Equity Income Fund, Inc.*
AllianceBernstein Exchange Reserves*
AllianceBernstein Fixed-Income Shares, Inc.
AllianceBernstein Global Bond Fund, Inc.*
AllianceBernstein Global Growth Fund, Inc.*
AllianceBernstein Global Real Estate Investment Fund, Inc.*
AllianceBernstein Global Thematic Growth Fund, Inc.*
AllianceBernstein Greater China '97 Fund, Inc.
AllianceBernstein Growth and Income Fund, Inc.*
AllianceBernstein High Income Fund, Inc.*
AllianceBernstein Institutional Funds, Inc.
AllianceBernstein Intermediate California Municipal Portfolio(1)
AllianceBernstein Intermediate Diversified Municipal Portfolio(1)
AllianceBernstein Intermediate New York Municipal Portfolio(1)
AllianceBernstein International Portfolio(1)
AllianceBernstein International Growth Fund, Inc.*
AllianceBernstein Large Cap Growth Fund, Inc.*
AllianceBernstein Municipal Income Fund, Inc.
AllianceBernstein Municipal Income Fund II
AllianceBernstein Short Duration Portfolio(1)
AllianceBernstein Small/Mid Cap Growth Fund, Inc.*
AllianceBernstein Tax-Managed International Portfolio(1)
AllianceBernstein Trust*
AllianceBernstein Unconstrained Bond Fund, Inc.*
AllianceBernstein Variable Products Series Fund, Inc.
Sanford C. Bernstein Fund II, Inc.
The AllianceBernstein Pooling Portfolios
The AllianceBernstein Portfolios**
--------
(1) This is a retail Portfolio of Sanford C. Bernstein Fund, Inc. which
consists of Classes A, B and C shares.
* This Fund also offers Class R, K and I Shares.
** The AllianceBernstein Portfolio funds that also offer Class R, K and I
Shares are AllianceBernstein Growth Fund, AllianceBernstein Balanced
Wealth Strategy; AllianceBernstein Wealth Appreciation Strategy; and
AllianceBernstein Wealth Preservation Strategy.
(b) The following are the Directors and Officers of
AllianceBernstein Investments, Inc., the principal place of business
of which is 1345 Avenue of the Americas, New York, New York, 10105.
POSITIONS AND POSITIONS AND
NAME OFFICES WITH UNDERWRITER OFFICES WITH REGISTRANT
---- ------------------------ -----------------------
Directors
---------
Robert M. Keith Director and President President and Chief
Executive Officer
Mark R. Manley Director and Secretary
Officers
--------
Emilie D. Wrapp Senior Vice President, Clerk
Assistant General Counsel
and Assistant Secretary
Audie G. Apple Senior Vice President
Kenneth F. Barkoff Senior Vice President
Steven R. Barr Senior Vice President and
Assistant Secretary
Amy I. Belew Senior Vice President
Laurence H. Bertan Senior Vice President and
Assistant Secretary
Peter G. Callahan Senior Vice President
Kevin T. Cannon Senior Vice President
Russell R. Corby Senior Vice President
John W. Cronin Senior Vice President
Richard A. Davies Senior Vice President
John C. Endahl Senior Vice President
Adam E. Engelhardt Senior Vice President
John Edward English Senior Vice President
Edward J. Farrell Senior Vice President and
Controller
Michael Foley Senior Vice President
Brian D. Gallary Senior Vice President
Mark D. Gersten Senior Vice President
Kenneth L. Haman Senior Vice President
Joseph P. Healy Senior Vice President
Mary V. Kralis Hoppe Senior Vice President
Harold Hughes Senior Vice President
Scott Hutton Senior Vice President
Robert H. Joseph, Jr. Senior Vice President and
Chief Financial Officer
Ajai M. Kaul Senior Vice President
Georg Kyd-Rebenburg Senior Vice President
Eric L. Levinson Senior Vice President
James M. Liptrot Senior Vice President and
Assistant Controller
William Marsalise Senior Vice President
Matthew P. Mintzer Senior Vice President
Joanna D. Murray Senior Vice President
Daniel A. Notto Senior Vice President,
Counsel and Assistant
Secretary
Jeffrey A. Nye Senior Vice President
John J. O'Connor Senior Vice President
Suchet Padhye (Pandurang) Senior Vice President
Mark A. Pletts Senior Vice President
Miguel A. Rozensztroch Senior Vice President
Stephen C. Scanlon Senior Vice President
John P. Schmidt Senior Vice President
Gregory K. Shannahan Senior Vice President
Elizabeth M. Smith Senior Vice President
Mark Sullivan Senior Vice President
Peter J. Szabo Senior Vice President
Joseph T. Tocyloski Senior Vice President
Suzanne Ton Senior Vice President
Derek Yung Senior Vice President
Albert J. Angelus Vice President
William G. Beagle Vice President
DeAnna D. Beedy Vice President
Christopher M. Berenbroick Vice President
Chris Boeker Vice President
Brandon W. Born Vice President
James J. Bracken Vice President
Richard A. Brink Vice President
Shaun D. Bromley Vice President
Brian Buehring Vice President
Michael A. Capella Vice President
Alice L. Chan Vice President
Laura A. Channell Vice President
Nelson Kin Hung Chow Vice President
Flora Chuang Vice President
Peter T. Collins Vice President
Joseph D. Connell, Jr. Vice President
Michael C. Conrath Vice President
Dwight P. Cornell Vice President
Robert A. Craft Vice President
Silvio Cruz Vice President
John D. Curry Vice President
Walter F. Czaicki Vice President
John M. D'Agostino Vice President
Christine M. Dehil Vice President
Giuliano De Marchi Vice President
Darren K. DeSimone Vice President
Daniel A. Dean Vice President
Ralph A. DiMeglio Vice President
Joseph T. Dominguez Vice President
Kilie A. Donahue Vice President
Barbara Anne Donovan Vice President
Robert Dryzgula Vice President
Daniel Ennis Vice President
Gregory M. Erwinski Vice President
Hollie G. Fagan Vice President
Michael J. Ferraro Vice President
Matthew G. Fetchko Vice President
Michael F. Foy Vice President
Yuko Funato Vice President
Kevin T. Gang Vice President
Mark A. Gessner Vice President
Mark C. Glatley Vice President
Stefanie M. Gonzalez Vice President
Kimberly A. Collins Gorab Vice President
Tetsuya Hada Vice President
Brian P. Hanna Vice President
Kenneth Handler Vice President
John G. Hansen Vice President
Terry L. Harris Vice President
Michael S. Hart Vice President
Daniel R. Hemberger Vice President
Oliver Herson Vice President
Lia A. Horii Vice President
Vincent Huang Vice President
Eric S. Indovina Vice President
Kumar Jagdeo II Vice President
Tina Kao Vice President
Hiroshi Kimura Vice President
Joseph B. Kolman Vice President
Scott M. Krauthamer Vice President
Jeffrey J. Lamb Vice President
Christopher J. Larkin Vice President
Chang Hyun Lee Vice President
Jonathan M. Liang Vice President
Karen (Yeow Ping) Lim Vice President
Laurel E. Lindner Vice President
Edward R. Lupo Vice President
Jennifer L. Magill Vice President
Todd Mann Vice President
Silvia Manz Vice President
Osama Mari Vice President
Russell B. Martin Vice President
Joseph R. McLean Vice President
Nicola Meotti Vice President
Yuji Mihashi Vice President
Bart D. Miller Vice President
David Mitchell Vice President
Thomas F. Monnerat Vice President
Hiroyuki Morishita Vice President
Troy E. Mosconi Vice President
Paul S. Moyer Vice President
Juan Mujica Vice President
Jennifer A. Mulhall Vice President
John F. Multhauf Vice President
Robert D. Nelms Vice President
Jamie A. Nieradka Vice President
Suzanne E. Norman Vice President
Ian J. O'Brien-Rupert Vice President
Alex E. Pady Vice President
David D. Paich Vice President
Kimchu Perrington Vice President
Leo J. Peters IV Vice President
Thomas C. Pfeifer Vice President
Jeffrey Pietragallo Vice President
Andrew Prescott Vice President
Joseph J. Proscia Vice President
John D. Prosperi Vice President
Carol H. Rappa Vice President
Jessie A. Reich Vice President
Heidi A. Richardson Vice President
James A. Rie Vice President
Lauryn A. Rivello Vice President
Patricia A. Roberts Vice President
Claudio Rondolini Vice President
Gregory M. Rosta Vice President and
Assistant Secretary
Craig Schorr Vice President
Kristin M. Seabold Vice President
William D. Shockley Vice President
Praveen K. Singh Vice President
Karen Sirett Vice President
John F. Skahan Vice President
Orlando Soler Vice President
Daniel L. Stack Vice President
Jason P. Stevens Vice President
Peter Stiefel Vice President
Sharon Su Vice President
Atsuko Takeuchi Vice President
Scott M. Tatum Vice President
Christopher R. Thabet Vice President
Jay D. Tini Vice President
William Tohme Vice President
Keri-Ann S. Toritto Vice President
Laura L. Tocchet Vice President
Louis L. Tousignant Vice President
Ming (Ming Kai) Tung Vice President
Christian G. Wilson Vice President
Stephen M. Woetzel Vice President
Chapman Tsan Man Wong Vice President
Joanna Wong (Chun-Yen) Vice President
Yoshinari Yagi Vice President
Isabelle (Hsin-I) Yen Vice President
Scott D. Zambon Vice President
Oscar Zarazua Vice President
Martin J. Zayac Vice President
Constantin L. Andreae Assistant Vice President
Steven D. Barbesh Assistant Vice President
Claudio Roberto Bello Assistant Vice President
Roy C. Bentzen Assistant Vice President
Michael A. Bosi Assistant Vice President
James M. Broderick Assistant Vice President
Erik Carell Assistant Vice President
Christopher J. Carrelha Assistant Vice President
Helena Carvalho Assistant Vice President
Naji Choueri Assistant Vice President
Daisy (Sze Kie) Chung Assistant Vice President
Christine M. Crowley Assistant Vice President
Jamila Dalia Assistant Vice President
Francesca Dattola Assistant Vice President
Marc J. Della Pia Assistant Vice President
Arend J. Elston Assistant Vice President
Robert A. Fiorentino Assistant Vice President
Cecilia N. Gomes Assistant Vice President
Friederike Grote Assistant Vice President
Joseph Haag Assistant Vice President
Brian M. Horvath Assistant Vice President
Sylvia Hsu Assistant Vice President
Isabelle Husson Assistant Vice President
Jang Joong Kim Assistant Vice President
Junko Kimura Assistant Vice President
Aaron S. Kravitz Assistant Vice President
Stephen J. Laffey Assistant Vice President Assistant Clerk
and Counsel
Edward G. Lamsback Assistant Vice President
Ginnie Li Assistant Vice President
Jim Liu Assistant Vice President
David Lyons Assistant Vice President
Mark J. Maier Assistant Vice President
Matthew J. Malvey Assistant Vice President
David G. Mitchell Assistant Vice President
William N. Parker Assistant Vice President
Brian W. Paulson Assistant Vice President
Steven Pavlovic Assistant Vice President
Pablo Perez Assistant Vice President
Anthony W. Piccola Assistant Vice President
Jared M. Piche Assistant Vice President
Cameron V. Polek Assistant Vice President
Mark A. Quarno Assistant Vice President
Jennifer B. Robinson Assistant Vice President
Jennifer R. Rolf Assistant Vice President
Richard A. Schwam Assistant Vice President
Michael J. Shavel Assistant Vice President
Chizu Soga Assistant Vice President
Chang Min Song Assistant Vice President
Susanne Stallkamp Assistant Vice President
Matthew M. Stebner Assistant Vice President
Michiyo Tanaka Assistant Vice President
Miyako Taniguchi Assistant Vice President
Damaris Torres Assistant Vice President
Laurence Vandecasteele Assistant Vice President
Annabelle C. Watson Assistant Vice President
Wendy Weng Assistant Vice President
Jeffrey Western Assistant Vice President
William Wielgolewski Assistant Vice President
Colin T. Burke Assistant Secretary
(c) Not Applicable.
ITEM 33. Location of Accounts and Records.
The accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the rules thereunder are
maintained as follows: journals, ledgers, securities records and other original
records are maintained principally at the offices of AllianceBernstein Investor
Services, Inc., 500 Plaza Drive, Secaucus, New Jersey, 07094 and at the offices
of State Street Bank and Trust Company, the Registrant's custodian, One Lincoln
Street, Boston, Massachusetts 02111; all other records so required to be
maintained are maintained at the offices of AllianceBernstein L.P., 1345 Avenue
of the Americas, New York, New York, 10105.
ITEM 34. Management Services.
Not applicable.
ITEM 35. Undertakings.
Not applicable.
********************
A copy of the Agreement and Declaration of Trust of AllianceBernstein
Corporate Shares (the "Trust"), as amended, is on file with the Secretary of
State of The Commonwealth of Massachusetts and notice is hereby given that this
Registration Statement has been executed on behalf of the Trust by an officer of
the Trust as an officer and by its Trustees as trustees and not individually and
the obligations of or arising out of this Registration Statement are not binding
upon any of the Trustees, officers and shareholders individually but are binding
only upon the assets and property of the Trust.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Amendment to
its Registration Statement to be signed on its behalf by the undersigned, duly
authorized, in the City of New York and the State of New York, on the 11th day
of March, 2011.
ALLIANCEBERNSTEIN CORPORATE SHARES
By: Robert M. Keith*
------------------
Robert M. Keith
President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below by the following persons in
the capacities and on the date indicated.
Signature Title Date
--------- ----- -----
(1) Principal Executive
Officer:
Robert M. Keith* President and March 11, 2011
------------------------ Chief Executive Officer
Robert M. Keith
(2) Principal Financial and
Accounting Officer:
/s/ Joseph J. Mantineo Treasurer and Chief March 11, 2011
------------------------ Financial Officer
Joseph J. Mantineo
(3) The Trustees:
John H. Dobkin*
Michael J. Downey*
William H. Foulk, Jr.*
D. James Guzy*
Nancy P. Jacklin*
Robert M. Keith*
Garry L. Moody*
Marshall C. Turner, Jr.*
Earl D. Weiner*
*By /s/ Stephen J. Laffey March 11, 2011
-------------------------
Stephen J. Laffey
(Attorney-in-fact)
Index to Exhibits
------------------
Exhibit No. Description of Exhibits
----------- ------------------------
SK 00250 0454 1171308
Seward & Kissel LLP
1200 G Street, N.W.
Suite 350
Washington, DC 20005
Telephone: (202) 737-8833
Facsimile: (202) 737-5184
March 11, 2011
Securities and Exchange Commission
100 F Street, N.E.
Washington, DC 20549
Re: AllianceBernstein Corporate Shares
- AllianceBernstein International Focus Income Shares
File Nos. 333-112207 and 811-21497
--------------------------------------------------------
Dear Sir or Madam:
Pursuant to Rule 485(a) under the Securities Act of 1933, we are filing
Post-Effective Amendment No. 10 under the Securities Act of 1933 and Amendment
No. 13 under the Investment Company Act of 1940 to the Registration Statement on
Form N-1A of AllianceBernstein Corporate Shares. We are making this filing for
the purpose of registering a new portfolio, the AllianceBernstein International
Focus Income Shares.
Please direct any comments or questions to Kathleen K. Clarke or the
undersigned at (202) 737-8833.
Sincerely,
/s/ Young Seo
--------------
Young Seo
Attachment
cc: Kathleen K. Clarke
SK 00250 0466 1171343
Corporate Filings
Other Documents
©
Twitter Accounts: Latest IPO Filings and Amendments @IPOFilings | Latest Form D Filings @StartupsFormD
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither MarketBrief, Inc. nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the MarketBrief site, you agree not to redistribute the information found therein.
MarketBrief has no affiliation with the U.S. Securities and Exchange Commission (SEC).
Information on MarketBrief is deemed reliable but not guaranteed. A very small percentage of SEC Filings contain errors by the filer. The systems at MarketBrief catch the majority of these filer errors, please report any suspicious statistics or filings to [email protected].
