TABLE OF CONTENTS
Section Title Page
----
VOTING INFORMATION.............................................................1
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS......................................8
PROSPECTUS/PROXY STATEMENT....................................................11
OVERVIEW OF MERGER............................................................14
Proposed Transaction......................................................14
Operating Expenses........................................................15
Federal Income Tax Consequences...........................................26
Comparison of Investment Objectives, Policies and Restrictions............26
Comparison of Distribution Policies and Purchase, Exchange and
Redemption Procedures.....................................................34
Investment Advisors.......................................................35
SUMMARY OF PRINCIPAL RISKS....................................................36
Interest Rate Risk........................................................36
Credit Risk...............................................................36
Market Risk...............................................................37
Industry/Sector Risk......................................................37
Capitalization Risk.......................................................37
Foreign Risk..............................................................37
Currency Risk.............................................................37
Country or Geographic Risk................................................37
Leveraging Risk...........................................................38
Derivatives Risk..........................................................38
Liquidity Risk............................................................38
Management Risk...........................................................38
Focused Portfolio Risk....................................................38
Allocation Risk...........................................................38
Chart of Principal Risks by Portfolio.....................................39
SPECIAL MEETING OF SHAREHOLDERS...............................................40
THE PROPOSAL..................................................................41
Approval or Disapproval of Agreement and Plan of Acquisition and
Termination...............................................................41
Trustees' Recommendations.................................................42
Required Shareholder Vote.................................................42
Background and Reasons for the Proposed Merger............................42
INFORMATION ABOUT THE MERGERS.................................................44
Agreement and Plan of Reorganization......................................44
Description of the Merger Shares..........................................45
Organization..............................................................45
Meetings of Shareholders..................................................46
Quorums...................................................................46
Number of Directors.......................................................46
Removal of Trustees or Directors..........................................46
-i-
Indemnification...........................................................46
Personal Liability........................................................48
Termination...............................................................48
Federal income tax consequences...........................................48
Capitalization............................................................50
VOTING INFORMATION............................................................53
Record date, quorum and method of tabulation..............................53
Shares outstanding and beneficial ownership...............................53
Soliciation of instructions...............................................53
Revocation of Instructions................................................54
Shareholder Proposals At Future Meetings of Shareholders..................54
Adjournment...............................................................54
INFORMATION ABOUT THE PORTFOLIOS..............................................55
APPENDIX A: FORM OF AGREEMENT AND PLAN OF ACQUISITION AND TERMINATION..........1
International Portfolio....................................................4
Global Bond Portfolio......................................................8
Growth & Income Portfolio.................................................10
Growth Portfolio..........................................................13
U.S./High Grade Portfolio.................................................16
High Yield Portfolio......................................................19
Quasar Portfolio..........................................................21
APPENDIX B: EXCERPTS FROM THE ALLIANCE FUND ANNUAL REPORT 75
-ii-
[LOGO]
August 27, 2001
Dear Variable Annuity Contract Owner:
[________________] Insurance Company has been offering variable annuity
contracts Separate Account [__] (the "Separate Account"), a unit investment
trust, since ____. The Separate Account consists of [_________](_#_) investment
divisions (the "Divisions"), each of which is available under an annuity
contract funded through the Separate Account (the "Contracts"). If you've had
your Contract for some time, you'll recall that we periodically ask you to tell
us how you would like us to represent your interests at meetings of shareholders
of Brinson Series Trust (the "Brinson Trust"). The issues that are considered at
shareholder meetings generally have to do with the management of the Brinson
Trust and/or the various portfolios within the Brinson Trust. The Brinson Trust
is a family of portfolios, some of which underlie the investment options in your
Contract, and it includes the Balanced Portfolio, the Global Equity Portfolio,
the Global Income Portfolio, the Growth and Income Portfolio, the Growth
Portfolio, the High Grade Fixed Income Portfolio, the High Income Portfolio, the
Small Cap Portfolio, and the Strategic Income Portfolio.
Included in this booklet is information about the upcoming shareholders' meeting
(the "Special Meeting"):
o A NOTICE OF A SPECIAL MEETING OF THE SHAREHOLDERS OF EACH OF THE BRINSON
Portfolios, which summarizes the issues for which you are being asked to
provide voting instructions;
o AN INFORMATION STATEMENT, which outlines the voting procedures; and
o A PROSPECTUS/PROXY STATEMENT FOR THE SPECIAL MEETING, which provides
comprehensive information on the specific issues being considered at the
Special Meeting.
ALSO ENCLOSED ARE YOUR BALLOT AND POSTAGE-PAID RETURN ENVELOPE.
We encourage you to review each of these items thoroughly. Once you've
determined how you would like us to vote your shares at the Special Meeting,
please mark your preferences on your ballot, making sure that you sign and date
your ballot before mailing it to us in the postage-paid return envelope. [You
may also provide voting instructions by phone at ________ or via the internet at
our website at www.______.com.] A prompt response on your part will help to
ensure that your interests are represented.
Sincerely,
[ ]
-----------------
[ Title ]
-----------------
[INSURANCE COMPANY]
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
OF BRINSON SERIES TRUST
[BALANCED PORTFOLIO]
[GLOBAL EQUITY PORTFOLIO]
[GLOBAL INCOME PORTFOLIO]
[GROWTH AND INCOME PORTFOLIO]
[GROWTH PORTFOLIO]
[HIGH GRADE FIXED INCOME PORTFOLIO]
[HIGH INCOME PORTFOLIO]
[SMALL CAP PORTFOLIO]
[STRATEGIC INCOME PORTFOLIO]
To be held on [October 9, 2001]
Dear [Insurance Company] Client:
The net purchase payments made under your [Insurance Company ("____")] variable
annuity contract (a "Contract") have been allocated at your direction to
investment divisions ("Divisions") of Separate Account [__] (the "Separate
Account"). The Divisions of the Separate Account invest in one or more
corresponding series of Brinson Series Trust (the "Brinson Trust"), an open end
management investment company, including [the Balanced Portfolio (the "Brinson
Balanced Portfolio")], [the Global Equity Portfolio (the "Brinson Global Equity
Portfolio")], [the Global Income Portfolio (the "Brinson Global Income
Portfolio")], [the Growth and Income Portfolio (the "Brinson Growth and Income
Portfolio")], [the Growth Portfolio (the "Brinson Growth Portfolio")], [the High
Grade Fixed Income Portfolio (the "Brinson High Grade Portfolio")], [the High
Income Portfolio (the "Brinson High Income Portfolio")], [the Small Cap
Portfolio (the "Brinson Small Cap Portfolio")], [and] [the Strategic Income
Portfolio (the "Brinson Strategic Income Portfolio")] (each a "Brinson
Portfolio").
As a contract owner of record at the close of business on [August 10, 2001] (the
"Record Date")(a "Contract Owner"), you are entitled to instruct [__] as to how
it should vote on certain proposals to be considered at a Special Meeting of
each Portfolio's shareholders.
The Special Meeting of Shareholders of each Brinson Portfolio will be held on
[October 9, 2001,] at 10:00 a.m. at [the offices of UBS PaineWebber Inc., 1285
Avenue of the Americas, New York, New York 10019] to consider the following, on
which you are entitled to provide [___] with voting instructions:
[1. To approve or disapprove an Agreement and Plan of Acquisition
and Termination providing for the transfer of all of the assets of the
Brinson Balanced Portfolio to the Total Return Portfolio (the "Alliance
Total Return Portfolio") of Alliance Variable Products Series Fund, Inc.
(the "Alliance Fund"), in exchange for shares of the Alliance Total Return
Portfolio and the assumption by the Alliance Total Return Portfolio
-2-
of the stated liabilities of the Brinson Balanced Portfolio, and the
distribution of such shares to the shareholders of the Brinson Balanced
Portfolio in liquidation and dissolution of the Brinson Balanced
Portfolio. (To be voted upon by the shareholders of the Brinson Balanced
Portfolio only.)]
[2. To approve or disapprove an Agreement and Plan of Acquisition
and Termination providing for the transfer of all of the assets of the
Brinson Global Equity Portfolio to the International Portfolio of the
Alliance Fund (the "Alliance International Portfolio"), in exchange for
shares of the Alliance International Portfolio and the assumption by the
Alliance International Portfolio of the stated liabilities of the Brinson
Global Equity Portfolio, and the distribution of such shares to the
shareholders of the Brinson Global Equity Portfolio in liquidation and
dissolution of the Brinson Global Equity Portfolio. (To be voted upon by
the shareholders of the Brinson Global Equity Portfolio only.)]
[3. To approve or disapprove an Agreement and Plan of Acquisition
and Termination providing for the transfer of all of the assets of the
Brinson Global Income Portfolio to the Global Bond Portfolio of the
Alliance Fund (the "Alliance Global Bond Portfolio"), in exchange for
shares of the Alliance Global Bond Portfolio and the assumption by the
Alliance Global Bond Portfolio of the stated liabilities of the Brinson
Global Income Portfolio, and the distribution of such shares to the
shareholders of the Brinson Global Income Portfolio in liquidation and
dissolution of the Brinson Global Income Portfolio. (To be voted upon by
the shareholders of the Brinson Global Income Portfolio only.)]
[4. To approve or disapprove an Agreement and Plan of Acquisition
and Termination providing for the transfer of all of the assets of the
Brinson Growth and Income Portfolio to the Growth and Income Portfolio of
the Alliance Fund (the "Alliance Growth and Income Portfolio"), in
exchange for shares of the Alliance Growth and Income Portfolio and the
assumption by the Alliance Growth and Income Portfolio of the stated
liabilities of the Brinson Growth and Income Portfolio, and the
distribution of such shares to the shareholders of the Brinson Growth and
Income Portfolio in liquidation and dissolution of the Brinson Growth and
Income Portfolio. (To be voted upon by the shareholders of the Brinson
Growth and Income Portfolio only.)]
[5. To approve or disapprove an Agreement and Plan of Acquisition
and Termination providing for the transfer of all of the assets of the
Brinson Growth Portfolio to the Growth Portfolio of the Alliance Fund (the
"Alliance Growth Portfolio"), in exchange for shares of the Alliance
Growth Portfolio and the assumption by the Alliance Growth Portfolio of
the stated liabilities of the Brinson Growth Portfolio, and the
distribution of such shares to the shareholders of the Brinson Growth
Portfolio in liquidation and dissolution of the Brinson Growth Portfolio.
(To be voted upon by the shareholders of the Brinson Growth Portfolio
only.)]
[6. To approve or disapprove an Agreement and Plan of Acquisition
and Termination providing for the transfer of all of the assets of the
Brinson High Grade
-3-
Portfolio to the U.S. Government/High Grade Securities Portfolio of the
Alliance Fund (the "Alliance U.S./High Grade Portfolio"), in exchange for
shares of the Alliance U.S./High Grade Portfolio and the assumption by the
Alliance U.S./High Grade Portfolio of the stated liabilities of the
Brinson High Grade Portfolio, and the distribution of such shares to the
shareholders of the Brinson High Grade Portfolio in liquidation and
dissolution of the Brinson High Grade Portfolio. (To be voted upon by the
shareholders of the Brinson High Grade Portfolio only.)]
[7. To approve or disapprove an Agreement and Plan of Acquisition
and Termination providing for the transfer of all of the assets of the
Brinson High Income Portfolio to the High Yield Portfolio of the Alliance
Fund (the "Alliance High Yield Portfolio"), in exchange for shares of the
Alliance High Yield Portfolio and the assumption by the Alliance High
Yield Portfolio of the stated liabilities of the Brinson High Income
Portfolio, and the distribution of such shares to the shareholders of the
Brinson High Income Portfolio in liquidation and dissolution of the
Brinson High Income Portfolio. (To be voted upon by the shareholders of
the Brinson High Income Portfolio only.)]
[8. To approve or disapprove an Agreement and Plan of Acquisition
and Termination providing for the transfer of all of the assets of the
Brinson Small Cap Portfolio to the Quasar Portfolio of the Alliance Fund
(the "Alliance Quasar Portfolio"), in exchange for shares of the Alliance
Quasar Portfolio and the assumption by the Alliance Quasar Portfolio of
the stated liabilities of the Brinson Small Cap Portfolio, and the
distribution of such shares to the shareholders of the Brinson Small Cap
Portfolio in liquidation and dissolution of the Brinson Small Cap
Portfolio. (To be voted upon by the shareholders of the Brinson Small Cap
Portfolio only.)]
[9. To approve or disapprove an Agreement and Plan of Acquisition
and Termination providing for the transfer of all of the assets of the
Brinson Strategic Income Portfolio to the Alliance Global Bond Portfolio,
in exchange for shares of the Alliance Global Bond Portfolio and the
assumption by the Alliance Global Bond Portfolio of the stated liabilities
of the Brinson Strategic Income Portfolio, and the distribution of such
shares to the shareholders of the Brinson Strategic Income Portfolio in
liquidation and dissolution of the Brinson Strategic Income Portfolio. (To
be voted upon by the shareholders of the Brinson Strategic Income
Portfolio only.)]
10. To transact such other business as may properly come before the
meeting.
Attached to this notice are the Information Statement of [insurance company] and
the Prospectus/Proxy Statement of the Alliance Fund. You are urged to read both
of these statements before completing your ballot.
-------------------------
Amy R. Doberman
Secretary
Brinson Series Trust
-4-
August 27, 2001
- --------------------------------------------------------------
It is important that your contract be represented. Please promptly mark your
voting instructions on the enclosed ballot; then, sign, date and mail it in the
accompanying envelope, which is addressed for your convenience. No postage is
required if mailed in the United States. Your prompt response will help avoid
the unnecessary expense of a further solicitation of ballots. [You may also
provide voting instructions by phone at ________ or via the internet at our
website at www.________.com]
- --------------------------------------------------------------
[________________] INSURANCE COMPANY
--------------------------------
INFORMATION STATEMENT
REGARDING A SPECIAL MEETING OF THE
SHAREHOLDERS OF BRINSON SERIES TRUST
[BALANCED PORTFOLIO]
[GLOBAL EQUITY PORTFOLIO]
[GLOBAL INCOME PORTFOLIO]
[GROWTH AND INCOME PORTFOLIO]
[GROWTH PORTFOLIO]
[HIGH GRADE FIXED INCOME PORTFOLIO]
[HIGH INCOME PORTFOLIO]
[SMALL CAP PORTFOLIO]
[STRATEGIC INCOME PORTFOLIO]
------------------------------
August 27, 2001
GENERAL
This information statement is furnished by [___________________] Insurance
Company ("[___]"), a [State] life insurance company, to owners ("Contract
Owners") of its variable annuity contracts ("Contracts") who had net purchase
payments allocated to any of the Balanced Portfolio, the Global Equity
Portfolio, the Global Income Portfolio, the Growth and Income Portfolio, the
Growth Portfolio, the High Grade Fixed Income Portfolio, the High Income
Portfolio, the Small Cap Portfolio, and the Strategic Income Portfolio
investment divisions of [___]'s Separate Account [__] (the "Separate Account")
as of [August 10, 2001] (the "Record Date"). The assets in each such investment
division of the Separate Account (the "Divisions") are invested in the shares of
beneficial interest of [the Balanced Portfolio (the "Brinson Balanced
Portfolio")], [the Global Equity Portfolio (the "Brinson Global Equity
Portfolio")], [the Global Income Portfolio (the "Brinson Global Income
Portfolio")], [the Growth and Income Portfolio
-5-
(the "Brinson Growth and Income Portfolio")], [the Growth Portfolio (the
"Brinson Growth Portfolio")], [the High Grade Fixed Income Portfolio (the
"Brinson High Grade Portfolio")], [the High Income Portfolio (the "Brinson High
Income Portfolio")], [the Small Cap Portfolio (the "Brinson Small Cap
Portfolio")] [and] [the Strategic Income Portfolio (the "Brinson Strategic
Income Portfolio")], (each/both a "Brinson Portfolio") each a series of Brinson
Series Trust (the "Brinson Trust").
[Insurance Company] is required to offer Contract Owners the opportunity to
instruct [___], as owner of all Brinson Trust shares held by the Separate
Account, as to how it should vote on the proposals to be considered at the
Special Meeting of the shareholders of each Brinson Portfolio referred to in the
preceding notice and at any adjournments (collectively, the "Special Meeting").
The proposals to be considered at the Special Meeting are discussed in the
enclosed Prospectus/Proxy Statement. Contract Owners are urged to read the
enclosed Prospectus/Proxy Statement prior to completing the ballot.
[Insurance Company] is a[n indirect, wholly owned] subsidiary of
[__________________]. The home office of [___] is located at
[___________________], and the mailing address is [___________________].
This Information Statement and the accompanying ballot are being mailed to
Contract Owners on or about August __, 2001.
HOW TO INSTRUCT [____]
To instruct [____] as to how to vote their shares of beneficial interest of the
Brinson Trust (the "Shares") held in the Divisions, Contract Owners are asked to
promptly mark their voting instructions on the enclosed ballot; then, sign, date
and mail it in the accompanying postage-paid envelope. [Contract Owners may also
provide voting instructions by phone at ____________ or via the internet at our
website at www.________.com.]
IF A BALLOT IS NOT MARKED TO INDICATE VOTING
INSTRUCTIONS BUT IS SIGNED, DATED AND RETURNED,
IT WILL BE TREATED AS AN INSTRUCTION TO
VOTE THE SHARES IN FAVOR OF EACH OF THE PROPOSALS.
The number of Shares held in the Divisions for which a Contract Owner may
provide voting instructions (in the aggregate, "Shares Attributable to Contract
Owners") was determined for each Division as of the Record Date by dividing (i)
a Contract's account value (minus any contract indebtedness) allocable to the
Division by (ii) the net asset value of one share of the respective Brinson
Portfolio.
At any time prior to [___]'s voting of the Shares held in the Divisions at the
Special Meeting, a Contract Owner may revoke his or her ballot with respect to
any of the Divisions by written notice to [__________] [or proper telephonic or
internet instructions to _________] or by
-6-
properly executing a later-dated ballot, [or by properly providing later
telephonic or internet instructions.]
HOW [____] WILL VOTE
[___________] will vote the Shares for which [_________] receives timely voting
instructions from Contract Owners in accordance with those instructions. The
Shares attributable to Contract Owners in each Division for which [______]
receives no timely voting instructions will be voted by [___] for and against
approval of a proposal, and as an abstention, in the same proportion as the
Shares attributable to Contract Owners for which [___] receives voting
instructions. Shares attributable to amounts retained by [___] in each Division
will be voted in the same proportion as votes cast by Contract Owners in respect
of each Division.
OTHER MATTERS
[___] is not aware of any matters, other than the specified proposals, to be
acted upon at the Special Meeting. If any other matters come before the Special
Meeting, [___] will vote the Shares upon such matters in its discretion. Ballots
may be solicited by employees of [___] and its subsidiaries. The solicitation
will be by mail and may also be by telephone, telegram or personal interview.
[__] reserves the right to vote for Adjournment of the Special Meeting for the
purpose of further solicitation of ballots. [___________ has been retained to
assist with solicitation activities (including assembly and mailing of materials
to Contract Owners).]
If the necessary quorum to transact business or the vote required to approve or
reject the proposal is not obtained at the Special Meeting, the persons named as
proxies may propose one or more adjournments at the Special Meeting, in
accordance with applicable law, to permit further solicitation of voting
instructions. The persons named as proxies will vote in favor of such
adjournment with respect to those voting instructions which have been voted in
favor of the proposals and will vote against any such adjournment those voting
instructions which have been voted against the proposal.
[-------------------]
[Secretary]
PLEASE PROMPTLY MARK YOUR VOTING INSTRUCTIONS ON THE ENCLOSED BALLOT; THEN SIGN,
DATE AND MAIL IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE. [YOU MAY ALSO PROVIDE
YOUR VOTING INSTRUCTIONS BY TELEPHONE AT _____________ OR BY INTERNET AT OUR
WEBSITE AT WWW._______.COM.] IT IS IMPORTANT THAT YOUR CONTRACT BE REPRESENTED.
-7-
BRINSON SERIES TRUST
Balanced Portfolio
Global Equity Portfolio
Global Income Portfolio
Growth and Income Portfolio
Growth Portfolio
High Grade Fixed Income Portfolio
High Income Portfolio
Small Cap Portfolio
Strategic Income Portfolio
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON
October 9, 2001
To the Shareholders:
This is to notify you that a Special Meeting of Shareholders of the
Balanced Portfolio (the "Brinson Balanced Portfolio"), the Global Equity
Portfolio (the "Brinson Global Equity Portfolio"), the Global Income Portfolio
(the "Brinson Global Income Portfolio"), the Growth and Income Portfolio (the
"Brinson Growth and Income Portfolio"), the Growth Portfolio (the "Brinson
Growth Portfolio"), the High Grade Fixed Income Portfolio (the "Brinson High
Grade Portfolio"), the High Income Portfolio (the "Brinson High Income
Portfolio"), the Small Cap Portfolio (the "Brinson Small Cap Portfolio"), and
the Strategic Income Portfolio (the "Brinson Strategic Income Portfolio"), each
a series of Brinson Series Trust (the "Brinson Trust"), will be held on October
9, 2001 at 10:00 a.m. Eastern Time, at the offices of UBS PaineWebber Inc., 1285
Avenue of the Americas, New York, New York 10019, for the following purposes:
1. To approve or disapprove an Agreement and Plan of Acquisition and
Termination providing for the transfer of all of the assets of the
Brinson Balanced Portfolio to the Total Return Portfolio (the
"Alliance Total Return Portfolio") of Alliance Variable Products
Series Fund, Inc. (the "Alliance Fund"), in exchange for shares of
the Alliance Total Return Portfolio and the assumption by the
Alliance Total Return Portfolio of the stated liabilities of the
Brinson Balanced Portfolio, and the distribution of such shares to
the shareholders of the Brinson Balanced Portfolio in liquidation
and dissolution of the Brinson Balanced Portfolio. (To be voted upon
by the shareholders of the Brinson Balanced Portfolio only.)
2. To approve or disapprove an Agreement and Plan of Acquisition and
Termination providing for the transfer of all of the assets of the
Brinson Global Equity Portfolio to the International Portfolio of
the Alliance Fund (the "Alliance International Portfolio"), in
exchange for shares of the Alliance International Portfolio and the
assumption by the Alliance International Portfolio of the stated
liabilities of the Brinson Global Equity Portfolio, and the
distribution of such shares to the shareholders of the Brinson
Global
-8-
Equity Portfolio in liquidation and dissolution of the Brinson
Global Equity Portfolio. (To be voted upon by the shareholders of
the Brinson Global Equity Portfolio only.)
3. To approve or disapprove an Agreement and Plan of Acquisition and
Termination providing for the transfer of all of the assets of the
Brinson Global Income Portfolio to the Global Bond Portfolio of the
Alliance Fund (the "Alliance Global Bond Portfolio"), in exchange
for shares of the Alliance Global Bond Portfolio and the assumption
by the Alliance Global Bond Portfolio of the stated liabilities of
the Brinson Global Income Portfolio, and the distribution of such
shares to the shareholders of the Brinson Global Income Portfolio in
liquidation and dissolution of the Brinson Global Income Portfolio.
(To be voted upon by the shareholders of the Brinson Global Income
Portfolio only.)
4. To approve or disapprove an Agreement and Plan of Acquisition and
Termination providing for the transfer of all of the assets of the
Brinson Growth and Income Portfolio to the Growth and Income
Portfolio of the Alliance Fund (the "Alliance Growth and Income
Portfolio"), in exchange for shares of the Alliance Growth and
Income Portfolio and the assumption by the Alliance Growth and
Income Portfolio of the stated liabilities of the Brinson Growth and
Income Portfolio, and the distribution of such shares to the
shareholders of the Brinson Growth and Income Portfolio in
liquidation and dissolution of the Brinson Growth and Income
Portfolio. (To be voted upon by the shareholders of the Brinson
Growth and Income Portfolio only.)
5. To approve or disapprove an Agreement and Plan of Acquisition and
Termination providing for the transfer of all of the assets of the
Brinson Growth Portfolio to the Growth Portfolio of the Alliance
Fund (the "Alliance Growth Portfolio"), in exchange for shares of
the Alliance Growth Portfolio and the assumption by the Alliance
Growth Portfolio of the stated liabilities of the Brinson Growth
Portfolio, and the distribution of such shares to the shareholders
of the Brinson Growth Portfolio in liquidation and dissolution of
the Brinson Growth Portfolio. (To be voted upon by the shareholders
of the Brinson Growth Portfolio only.)
6. To approve or disapprove an Agreement and Plan of Acquisition and
Termination providing for the transfer of all of the assets of the
Brinson High Grade Portfolio to the U.S. Government/High Grade
Securities Portfolio of the Alliance Fund (the "Alliance U.S./High
Grade Portfolio"), in exchange for shares of the Alliance U.S./High
Grade Portfolio and the assumption by the Alliance U.S./High Grade
Portfolio of the stated liabilities of the Brinson High Grade
Portfolio, and the distribution of such shares to the shareholders
of the Brinson High Grade Portfolio in liquidation and dissolution
of the Brinson High Grade Portfolio. (To be voted upon by the
shareholders of the Brinson High Grade Portfolio only.)
7. To approve or disapprove an Agreement and Plan of Acquisition and
Termination providing for the transfer of all of the assets of the
Brinson High Income Portfolio to the High Yield Portfolio of the
Alliance Fund (the "Alliance High Yield Portfolio"), in exchange for
shares of the Alliance High Yield Portfolio and the assumption by
the Alliance High Yield Portfolio of the stated liabilities of the
Brinson High Income
-9-
Portfolio, and the distribution of such shares to the shareholders
of the Brinson High Income Portfolio in liquidation and dissolution
of the Brinson High Income Portfolio. (To be voted upon by the
shareholders of the Brinson High Income Portfolio only.)
8. To approve or disapprove an Agreement and Plan of Acquisition and
Termination providing for the transfer of all of the assets of the
Brinson Small Cap Portfolio to the Quasar Portfolio of the Alliance
Fund (the "Alliance Quasar Portfolio"), in exchange for shares of
the Alliance Quasar Portfolio and the assumption by the Alliance
Quasar Portfolio of the stated liabilities of the Brinson Small Cap
Portfolio, and the distribution of such shares to the shareholders
of the Brinson Small Cap Portfolio in liquidation and dissolution of
the Brinson Small Cap Portfolio. (To be voted upon by the
shareholders of the Brinson Small Cap Portfolio only.)
9. To approve or disapprove an Agreement and Plan of Acquisition and
Termination providing for the transfer of all of the assets of the
Brinson Strategic Income Portfolio to the Alliance Global Bond
Portfolio, in exchange for shares of the Alliance Global Bond
Portfolio and the assumption by the Alliance Global Bond Portfolio
of the stated liabilities of the Brinson Strategic Income Portfolio,
and the distribution of such shares to the shareholders of the
Brinson Strategic Income Portfolio in liquidation and dissolution of
the Brinson Strategic Income Portfolio. (To be voted upon by the
shareholders of the Brinson Strategic Income Portfolio only.)
10. To transact such other business as may properly come before the
meeting.
The Trustees of the Brinson Trust have fixed the close of business
on August 10, 2001 as the record date for determination of shareholders entitled
to notice of, and to vote at, the Special Meeting.
By order of the Board of Trustees,
----------------------------
Amy R. Doberman
Secretary
New York, New York
August__, 2001
- --------------------------------------------------------------------------------
WE URGE YOU TO MARK, SIGN, DATE AND MAIL THE ENCLOSED PROXY IN THE POSTAGE-PAID
RETURN ENVELOPE PROVIDED SO THAT YOU WILL BE REPRESENTED AT THE SPECIAL MEETING.
[YOU MAY ALSO PROVIDE YOUR VOTING INSTRUCTIONS BY TELEPHONE AT _______ OR VIA
THE INTERNET AT OUR WEBSITE AT WWW._________.COM
- --------------------------------------------------------------------------------
-10-
PROSPECTUS/PROXY STATEMENT
August 27, 2001
Acquisition of the assets of: By and in exchange for shares of:
- ---------------------------- --------------------------------
Balanced Portfolio................. Total Return Portfolio
Global Equity Portfolio............ International Portfolio
Global Income Portfolio............ Global Bond Portfolio
Growth and Income Portfolio........ Growth and Income Portfolio
Growth Portfolio................... Growth Portfolio
High Grade Fixed Income Portfolio.. U.S. Government/High Grade Securities
Portfolio
High Income Portfolio.............. High Yield Portfolio
Small Cap Portfolio................ Quasar Portfolio
Strategic Income Portfolio......... Global Bond Portfolio
each a series of each a series of
Brinson Series Trust Alliance Variable Products Series Fund, Inc.
51 West 52nd Street 1345 Avenue of the Americas
New York, New York 10019-6114 New York, New York 10105
This Prospectus/Proxy Statement relates to the proposed mergers (each a
"Merger" and, collectively, the "Mergers") of the Balanced Portfolio (the
"Brinson Balanced Portfolio"), the Global Equity Portfolio (the "Brinson Global
Equity Portfolio"), the Global Income Portfolio (the "Brinson Global Income
Portfolio"), the Growth and Income Portfolio (the "Brinson Growth and Income
Portfolio"), the Growth Portfolio (the "Brinson Growth Portfolio"), the High
Grade Fixed Income Portfolio (the "Brinson High Grade Portfolio"), the High
Income Portfolio (the "Brinson High Income Portfolio"), the Small Cap Portfolio
(the "Brinson Small Cap Portfolio"), and the Strategic Income Portfolio (the
"Brinson Strategic Income Portfolio") (each an "Acquired Portfolio" or a
"Brinson Portfolio"), each a series of Brinson Series Trust ("Brinson Trust")
into, respectively, the Total Return Portfolio (the "Alliance Total Return
Portfolio"), the International Portfolio (the "Alliance International
Portfolio"), the Global Bond Portfolio (the "Alliance Global Bond Portfolio"),
the Growth and Income Portfolio (the "Alliance Growth and Income Portfolio"),
the Growth Portfolio (the "Alliance Growth Portfolio), the U.S. Government/High
Grade Securities Portfolio (the "Alliance U.S./High Grade Portfolio"), the High
Yield Portfolio (the "Alliance High Yield Portfolio"), the Quasar Portfolio (the
"Alliance Quasar Portfolio"), and the Alliance Global Bond Portfolio (each an
"Acquiring Portfolio" or an "Alliance Portfolio" and, collectively, together
with the Brinson Portfolios, the "Portfolios"), each a series of Alliance
Variable Products Series Fund, Inc. (the "Alliance Fund"). The Mergers are to be
effected through the transfer of all of the assets of each Acquired Portfolio to
the corresponding Acquiring Portfolio in
-11-
exchange for shares of common stock of that Acquiring Portfolio (the "Merger
Shares") and the assumption by that Acquiring Portfolio of the stated
liabilities of the Acquired Portfolio. This will be followed by the distribution
of the relevant Merger Shares to the shareholders of the Acquired Portfolio and
the liquidation and dissolution of the Acquired Portfolio. As a result of the
proposed transaction, each shareholder of an Acquired Portfolio will receive in
exchange for his or her Acquired Portfolio shares a number of Merger Shares of
the corresponding class equal in aggregate net asset value at the date of the
exchange to the aggregate net asset value of the shareholder's Acquired
Portfolio shares. This means that you may end up with a different number of
shares than you originally held, but the total dollar value of your shares will
remain the same.
Because shareholders of each Acquired Portfolio are being asked to approve
transactions which will result in their receiving shares of the Acquiring
Portfolio, this Proxy Statement also serves as a Prospectus for the Merger
Shares of each Acquiring Portfolio.
The Alliance Fund is an open-end series management investment company
organized as a Maryland corporation with principal executive offices at 1345
Avenue of the Americas, New York, New York 10105.
The investment objective of each Acquiring Portfolio is as follows:
1. Alliance Total Return Portfolio's investment objective is to achieve a
high return through a combination of current income and capital
appreciation.
2. Alliance International Portfolio's investment objective is to seek to
obtain a total return on its assets from long-term growth of capital
principally through a broad portfolio of marketable securities of
established international companies, companies participating in foreign
economies with prospects for growth, including U.S. companies having their
principal activities and interests outside the U.S., and in foreign
government securities. As a secondary objective, the Alliance
International Portfolio attempts to increase its current income without
assuming undue risk.
3. Alliance Global Bond Portfolio's investment objective is to seek a high
level of return from a combination of current income and capital
appreciation by investing in a globally diversified portfolio of
high-quality debt securities denominated in the U.S. dollar and a range of
foreign currencies.
4. Alliance Growth and Income Portfolio's investment objective is to seek
reasonable current income and reasonable opportunity for appreciation
through investments primarily in dividend-paying common stocks of good
quality.
5. Alliance Growth Portfolio's investment objective is to provide long-term
growth of capital. Current income is incidental to the Alliance Growth
Portfolio's objective.
6. Alliance U.S./High Grade Portfolio's investment objective is high current
income consistent with preservation of capital.
7. Alliance High Yield Portfolio's investment objective is to earn the
-12-
highest level of current income available without assuming undue risk by
investing principally in high-yielding fixed-income securities rated Baa
or lower by Moody's Investors Service, Inc. ("Moody's") or BBB or lower by
Standard & Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P"),
Duff & Phelps or Fitch or, if unrated, of comparable quality as determined
by Alliance Capital Management, L.P. ("Alliance Capital"), the Alliance
Portfolios' investment adviser. As a secondary objective, the Alliance
High Yield Portfolio seeks capital appreciation.
8. Alliance Quasar Portfolio's investment objective is growth of capital by
pursuing aggressive investment policies. Current income is incidental to
the Quasar Portfolio's objective.
This Prospectus/Proxy Statement explains concisely what you should know
before investing in an Acquiring Portfolio. Please read it carefully and keep it
for future reference.
The following documents have been filed with the Securities and Exchange
Commission (the "SEC" or the "Commission") and are incorporated into this
Prospectus/Proxy Statement by reference:
o the current Prospectus of the Brinson Trust, dated May 1, 2001 (the
"Brinson Prospectus");
o The current Class A or Class B Prospectus of the Alliance Fund, as
applicable, dated May 1, 2001 (each an "Alliance Prospectus"); and
o the Statement of Additional Information relating to this Prospectus/Proxy
Statement dated August 27, 2001 (the "Merger SAI").
This Prospectus/Proxy Statement is accompanied by a copy of the Class A or
Class B Alliance Prospectus, as applicable. For a free copy of the current
Statement of Additional Information of the Alliance Fund, dated May 1, 2001 (the
"Alliance SAI"); the Annual Reports to Shareholders of the Alliance Portfolios,
including the Report of Independent Auditors and financial statements in respect
of each Alliance Portfolio, for the year ended December 31, 2000 (the "Alliance
Fund Annual Reports"); or the Merger SAI, please call 800-277-4618 or write to
the Alliance Fund at:
Alliance Variable Products Series Fund, Inc.
1345 Avenue of the Americas
New York, New York 10105
For a free copy of the Brinson Prospectus or the current Statement of
Additional Information of the Brinson Trust dated May 1, 2001 (the "Brinson
SAI"), please call 800-986-0088 or write to the Brinson Fund at:
Brinson Series Trust
51 West 52nd Street
New York, New York 10019-6114
You may lose money by investing in an Acquiring Portfolio. Any Acquiring
Portfolio may not achieve its goals, and none of the Acquiring Portfolios is
intended as a complete investment program. An investment in an Acquiring
Portfolio is not a deposit in a bank and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
-13-
================================================================================
OVERVIEW OF MERGER
Proposed Transaction
Alliance Capital, the adviser and administrator to each Acquiring
Portfolio, has served as sub-adviser to each Acquired Portfolio since October
10, 2000 pursuant to sub-advisory contracts with Brinson Advisors, Inc.
("Brinson Advisors", formerly known as Mitchell Hutchins Asset Management Inc.),
the investment manager and administrator for each Acquired Portfolio. Both the
interim sub-advisory contract dated October 10, 2000 and the subsequent
sub-advisory contract dated March 1, 2001 were approved by the Brinson Trust's
Board of Trustees (the "Brinson Trustees"), and the subsequent sub-advisory
contract was also approved by the shareholders of each Acquired Portfolio on
March 1, 2001. Brinson Advisors proposed the Mergers to the Brinson Trustees at
a meeting on July 25, 2001 because it believed that the relatively small size of
each Acquired Portfolio made it difficult to manage it efficiently and no
Acquired Portfolio was likely to achieve the asset growth needed to assure its
economic viability in the near future. As a result, Brinson Advisors believed
that continuing to operate each Acquired Portfolio as a stand-alone fund was no
longer consistent with the best interests of the each Acquired Portfolio's
shareholders. In addition, Brinson Advisors believed that each Acquired
Portfolio's shareholders would benefit from the proposed Merger because each
combined Portfolio would have a larger asset base to invest, which should
provide greater opportunities for diversifying investments and realizing
economies of scale. In addition, while there can be no assurance that the
Mergers will result in savings in operating expenses to shareholders, each
Merger is expected to result in lower aggregate operating expenses than those
currently borne by the Acquired Portfolios
The Brinson Trustees and the Directors of the Alliance Fund (the "Alliance
Directors") have approved the proposed mergers on behalf of their respective
Portfolios. Each Merger is proposed to be accomplished pursuant to an Agreement
and Plan of Acquisition and Termination providing for the transfer of all of the
assets of the relevant Acquired Portfolio to the corresponding Acquiring
Portfolio in exchange for shares of the Acquiring Portfolio and the assumption
by the Acquiring Portfolio of stated liabilities of the Acquired Portfolio,
followed by the liquidation and dissolution of the Acquired Portfolio.
As a result of the proposed Mergers, each Acquired Portfolio will receive
a number of Class A or Class B Merger Shares of the corresponding Acquiring
Portfolio equal in aggregate net asset value to the aggregate net asset value of
the Acquired Portfolio being transferred that are attributable to the Class H or
Class I shares of the Acquired Portfolio, respectively, as the case may be.
Following the transfer, (i) the Acquired Portfolio will distribute to each of
its Class H and Class I shareholders a number of full and fractional Class A or
Class B Merger Shares equal in aggregate net asset value at the date of the
exchange to the aggregate net asset value of the shareholder's Class H and Class
I Acquired Portfolio shares, respectively, as the case may be and (ii) the
Acquired Portfolio will be liquidated and dissolved.
-14-
Shares of both the Acquired and the Acquiring Portfolios are sold without
a front-end sales charge and are not subject to a contingent deferred sales
charge ("CDSC"). You will not be charged a front-end sales load on the issuance
of the Merger Shares, or a CDSC on Acquired Portfolio shares exchanged for
Merger Shares.
The Class H and Class I shares of the Acquired Portfolios have
characteristics substantially similar to those of the corresponding classes of
shares of the Acquiring Portfolios, as described in the Alliance Prospectus and
the Brinson Prospectus. Class A and Class H shares are sold and redeemed at net
asset value and do not pay 12b-1 fees. Class B and Class I shares are also sold
and redeemed at net asset value and, pursuant to separate Rule 12b-1 Plans
adopted by the respective Portfolio, Class B and Class I shares each pay an
annual distribution fee of 0.25% of average daily net assets. The level of
annual distribution fees payable by Class B shares could be increased to 0.50%
of the average daily net assets attributable to such class without a vote of the
shareholders.
As described more fully below, the Brinson Trustees have approved, and
recommends that shareholders of each Acquired Portfolio approve, the Mergers.
For more information about the factors considered by the Brinson Trustees, see
"Proposals -- Background and Reasons for the Proposed Mergers."
Operating Expenses
As the following tables suggest, each Merger should result in the relevant
Acquired Portfolio shareholders experiencing lower portfolio expenses. Of
course, there can be no assurance that the Mergers will result in expense
savings for shareholders. These tables summarize expenses for Class H and Class
I shares, as applicable, for the Acquired Portfolios and Class A shares and
Class B shares, as applicable, for the Acquiring Portfolios:
o that each Acquired Portfolio incurred during its fiscal year ended
December 31, 2000;
o that each corresponding Acquiring Portfolio incurred during its fiscal
year ended December 31, 2000; and
o that each corresponding Acquiring Portfolio would have incurred during
such fiscal year, after giving effect on a pro forma combined basis to the
proposed Merger, as if the Merger had occurred as of the beginning of such
fiscal year.(1)
The tables are provided to help you understand your share of the operating
expenses that each Portfolio incurs. The examples show the estimated cumulative
expenses attributable to a hypothetical $10,000 investment in each Portfolio,
and in each Acquiring Portfolio on a pro forma basis, over the specified
periods. By translating "Total Annual Fund Operating Expenses" into dollar
amounts, these examples help you compare the costs of investing in a Portfolio,
or in a particular class of shares, with the costs of investing in other mutual
funds.
Please note that neither the tables nor the examples reflect any charges
or expenses that may be applicable
- ----------
(1) The pro forma information for the High Income Portfolio and the Strategic
Income Portfolio reflect the expected redemptions, in connection with the
Mergers, of Brinson's investment in the relevant Acquired Portfolio.
-15-
to your insurance contract. If such charges or expenses were reflected, the
costs shown would be higher.
-16-
Annual Fund Operating Expenses
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses as of 12/31/00 Expenses as of 12/31/00 Pro Forma Expenses
Brinson Balanced Alliance Total Return Alliance Total Return
Portfolio Portfolio Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Annual Fund Operating Expenses Class H Class I Class A Class B Class A Class B
(as a percentage of average net assets)
- ------------------------------------------------------------------------------------------------------------------------------------
Management Fees 0.75% 0.75% 0.63% 0.63% 0.63% 0.63%
- ------------------------------------------------------------------------------------------------------------------------------------
12b-1 Fees 0.00% 0.25% 0.00% 0.25% 0.00% 0.25%
- ------------------------------------------------------------------------------------------------------------------------------------
Other Expenses 0.59% 0.57% 0.24% 0.24%** 0.19% 0.19%**
- ------------------------------------------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.34% 1.57% 0.87% 1.12% 0.82% 1.07%
- ------------------------------------------------------------------------------------------------------------------------------------
Waiver/Expense Reimbursement 0.00% 0.03%* 0.00% 0.00% 0.00% 0.00%
- ------------------------------------------------------------------------------------------------------------------------------------
Net Expenses 1.34% 1.54%* 0.87% 1.12% 0.82% 1.07%
- ------------------------------------------------------------------------------------------------------------------------------------
* Pursuant to a voluntary fee waiver which was terminated during the 2000 fiscal
year.
** Because Class B is being established in connection with the merger, Other
Expenses shown are estimates based on the Alliance Total Return Portfolio's
Class A Shares.
Example of Fund Expenses:
An investment of $10,000 would incur the following expenses, assuming 5%
annual return, constant expenses and, except as indicated, redemption at the end
of each time period:
- ------------------------------------------------------------------------------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------------------------------------------------------------
Current Expenses
Brinson Balanced
Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Class H $136 $425 $734 $1,613
- ------------------------------------------------------------------------------------------------------------------------------------
Class I $157 $493 $852 $1,865
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Total Return
Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Class A $ 89 $278 $482 $1,073
- ------------------------------------------------------------------------------------------------------------------------------------
Class B $114 $356 $617 $1,363
- ------------------------------------------------------------------------------------------------------------------------------------
Pro Forma Expenses
Alliance Total Return
Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Class A $ 84 $262 $455 $1,014
- ------------------------------------------------------------------------------------------------------------------------------------
Class B $109 $340 $590 $1,306
- ------------------------------------------------------------------------------------------------------------------------------------
-17-
Annual Fund Operating Expenses
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses as of 12/31/00 Expenses as of 12/31/00 Pro Forma Expenses
Brinson Global Equity Alliance International Alliance International
Portfolio Portfolio Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Annual Fund Operating Expenses Class H Class I Class A Class B Class A Class B
(as a percentage of average net assets)
- ------------------------------------------------------------------------------------------------------------------------------------
Management Fees 0.75% 0.75% 1.00% 1.00% 1.00% 1.00%
- ------------------------------------------------------------------------------------------------------------------------------------
12b-1 Fees 0.00% 0.25% 0.00% 0.25% 0.00% 0.25%
- ------------------------------------------------------------------------------------------------------------------------------------
Other Expenses 0.99% 1.01% 0.34% 0.34%*** 0.34% 0.34%***
- ------------------------------------------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.74% 2.01% 1.34% 1.59% 1.34% 1.59%
- ------------------------------------------------------------------------------------------------------------------------------------
Waiver/Expense Reimbursement 0.00% 0.03%* 0.39%** 0.39% 0.39%** 0.39%
- ------------------------------------------------------------------------------------------------------------------------------------
Net Expenses 1.74% 1.98%* 0.95%** 1.20% 0.95%** 1.20%
- ------------------------------------------------------------------------------------------------------------------------------------
* Pursuant to a voluntary fee waiver which was terminated during the 2000 fiscal
year.
** Reflects Alliance's contractual waiver of a portion of its advisory fee
and/or reimbursement of a portion of the Fund's operating expenses. This waiver
was terminated during the 2000 fiscal year.
*** Because Class B is being established in connection with the merger, Other
Expenses shown are estimates based on the Alliance International Portfolio's
Class A Shares.
Example of Fund Expenses:
An investment of $10,000 would incur the following expenses, assuming 5%
annual return, constant expenses (reflecting, for the first year only, the
contractual waiver described above) and, except as indicated, redemption at the
end of each time period:
- ------------------------------------------------------------------------------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------------------------------------------------------------
Current Expenses
Brinson Global Equity
Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Class H $177 $548 $ 944 $2,052
- ------------------------------------------------------------------------------------------------------------------------------------
Class I $201 $628 $1,080 $2,335
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance International
Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Class A $ 97 $386 $ 697 $1,579
- ------------------------------------------------------------------------------------------------------------------------------------
Class B $122 $465 $ 834 $1,888
- ------------------------------------------------------------------------------------------------------------------------------------
Pro Forma Expenses
Alliance International
Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Class A $ 97 $386 $ 697 $1,579
- ------------------------------------------------------------------------------------------------------------------------------------
Class B $122 $465 $ 834 $1,888
- ------------------------------------------------------------------------------------------------------------------------------------
-18-
Annual Fund Operating Expenses
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses as of 12/31/00 Expenses as of 12/31/00 Pro Forma Expenses
Brinson Global Income Alliance Global Bond Alliance Global Bond
Portfolio Portfolio Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Annual Fund Operating Expenses Class H Class A Class A
(as a percentage of average net assets)
- ------------------------------------------------------------------------------------------------------------------------------------
Management Fees 0.75% 0.65% 0.65%
- ------------------------------------------------------------------------------------------------------------------------------------
12b-1 Fees 0.00% 0.00% 0.00%
- ------------------------------------------------------------------------------------------------------------------------------------
Other Expenses 1.80% 0.41% 0.30%
- ------------------------------------------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 2.55% 1.06% 0.95%
- ------------------------------------------------------------------------------------------------------------------------------------
Waiver/Expense Reimbursement 0.00% 0.04%** 0.00%
- ------------------------------------------------------------------------------------------------------------------------------------
Net Expenses 2.55% 1.02%** 0.95%
- ------------------------------------------------------------------------------------------------------------------------------------
** Reflects Alliance's contractual waiver of a portion of its advisory fee
and/or reimbursement of a portion of the Fund's operating expenses. This waiver
extends through the Fund's current fiscal year and may be extended by Alliance
for additional one-year terms.
Example of Fund Expenses:
An investment of $10,000 would incur the following expenses, assuming 5%
annual return, constant expenses (reflecting, for the first year only, the
contractual waiver described above) and, except as indicated, redemption at the
end of each time period:
- ------------------------------------------------------------------------------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------------------------------------------------------------
Current Expenses
Brinson Global Income
Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Class H $258 $793 $1,355 $2,885
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Global Bond
Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Class A $104 $325 $ 563 $1,248
- ------------------------------------------------------------------------------------------------------------------------------------
Pro Forma Expenses
Alliance Global Bond
Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Class A $ 97 $303 $ 525 $1,166
- ------------------------------------------------------------------------------------------------------------------------------------
-19-
Annual Fund Operating Expenses
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses as of 12/31/00 Expenses as of 12/31/00 Pro Forma Expenses
Brinson Growth and Alliance Growth and Alliance Growth and
Income Portfolio Income Portfolio Income Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Annual Fund Operating Expenses Class H Class I Class A Class B Class A Class B
(as a percentage of average net assets)
- ------------------------------------------------------------------------------------------------------------------------------------
Management Fees 0.70% 0.70% 0.63% 0.63% 0.63% 0.63%
- ------------------------------------------------------------------------------------------------------------------------------------
12b-1 Fees 0.00% 0.25% 0.00% 0.25% 0.00% 0.25%
- ------------------------------------------------------------------------------------------------------------------------------------
Other Expenses 0.44% 0.42% 0.06% 0.07% 0.05% 0.05%
- ------------------------------------------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.14% 1.37% 0.69% 0.95% 0.68% 0.93%
- ------------------------------------------------------------------------------------------------------------------------------------
Waiver/Expense Reimbursement 0.00% 0.04%* 0.00% 0.00% 0.00% 0.00%
- ------------------------------------------------------------------------------------------------------------------------------------
Net Expenses 1.14% 1.33%* 0.69% 0.95% 0.68% 0.93%
- ------------------------------------------------------------------------------------------------------------------------------------
* Pursuant to a voluntary fee waiver which was terminated during the 2000 fiscal
year.
Example of Fund Expenses:
An investment of $10,000 would incur the following expenses, assuming 5%
annual return, constant expenses and, except as indicated, redemption at the end
of each time period:
- ------------------------------------------------------------------------------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------------------------------------------------------------
Current Expenses
Brinson Growth and
Income Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Class H $116 $362 $628 $1,386
- ------------------------------------------------------------------------------------------------------------------------------------
Class I $135 $430 $746 $1,643
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Growth and
Income Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Class A $ 70 $221 $384 $ 859
- ------------------------------------------------------------------------------------------------------------------------------------
Class B $ 97 $303 $525 $1,167
- ------------------------------------------------------------------------------------------------------------------------------------
Pro Forma Expenses
Alliance Growth and
Income Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Class A $ 69 $218 $379 $ 847
- ------------------------------------------------------------------------------------------------------------------------------------
Class B $ 95 $296 $515 $1,143
- ------------------------------------------------------------------------------------------------------------------------------------
-20-
Annual Fund Operating Expenses
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses as of 12/31/00 Expenses as of 12/31/00 Pro Forma Expenses
Brinson Growth Portfolio Alliance Growth Portfolio Alliance Growth Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Annual Fund Operating Expenses Class H Class I Class A Class B Class A Class B
(as a percentage of average net assets)
- ------------------------------------------------------------------------------------------------------------------------------------
Management Fees 0.75% 0.75% 0.75% 0.75% 0.75% 0.75%
- ------------------------------------------------------------------------------------------------------------------------------------
12b-1 Fees 0.00% 0.25% 0.00% 0.25% 0.00% 0.25%
- ------------------------------------------------------------------------------------------------------------------------------------
Other Expenses 0.36% 0.41% 0.06% 0.08% 0.07% 0.07%
- ------------------------------------------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.11% 1.41% 0.81% 1.08% 0.82% 1.07%
- ------------------------------------------------------------------------------------------------------------------------------------
Waiver/Expense Reimbursement 0.00% 0.04%* 0.00% 0.00% 0.00% 0.00%
- ------------------------------------------------------------------------------------------------------------------------------------
Net Expenses 1.11% 1.37%* 0.81% 1.08% 0.82% 1.07%
- ------------------------------------------------------------------------------------------------------------------------------------
* Pursuant to a voluntary fee waiver which was terminated during the 2000 fiscal
year.
Example of Fund Expenses:
An investment of $10,000 would incur the following expenses, assuming 5%
annual return, constant expenses and, except as indicated, redemption at the end
of each time period:
- ------------------------------------------------------------------------------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------------------------------------------------------------
Current Expenses
Brinson Growth Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Class H $113 $353 $612 $1,352
- ------------------------------------------------------------------------------------------------------------------------------------
Class I $139 $442 $767 $1,687
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Growth
Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Class A $ 83 $259 $450 $1,002
- ------------------------------------------------------------------------------------------------------------------------------------
Class B $110 $343 $595 $1,318
- ------------------------------------------------------------------------------------------------------------------------------------
Pro Forma Expenses
Alliance Growth
Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Class A $ 84 $262 $455 $1,014
- ------------------------------------------------------------------------------------------------------------------------------------
Class B $109 $340 $590 $1,306
- ------------------------------------------------------------------------------------------------------------------------------------
-21-
Annual Fund Operating Expenses
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses as of 12/31/00 Expenses as of 12/31/00 Pro Forma Expenses
Brinson High Grade Alliance U.S./High Grade Alliance U.S./High Grade
Portfolio Portfolio Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Annual Fund Operating Expenses Class H Class A Class A
(as a percentage of average net assets)
- ------------------------------------------------------------------------------------------------------------------------------------
Management Fees 0.50% 0.60% 0.60%
- ------------------------------------------------------------------------------------------------------------------------------------
12b-1 Fees 0.00% 0.00% 0.00%
- ------------------------------------------------------------------------------------------------------------------------------------
Other Expenses 2.23% 0.35% 0.32%
- ------------------------------------------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 2.73% 0.95% 0.92%
- ------------------------------------------------------------------------------------------------------------------------------------
Waiver/Expense Reimbursement 0.00% 0.00% 0.00%
- ------------------------------------------------------------------------------------------------------------------------------------
Net Expenses 2.73% 0.95% 0.92%
- ------------------------------------------------------------------------------------------------------------------------------------
Example of Fund Expenses:
An investment of $10,000 would incur the following expenses, assuming 5%
annual return, constant expenses and, except as indicated, redemption at the end
of each time period:
- ------------------------------------------------------------------------------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------------------------------------------------------------
Current Expenses
Brinson High Grade
Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Class H $276 $847 $1,445 $3,061
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance U.S./High
Grade Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Class A $ 97 $303 $ 525 $1,166
- ------------------------------------------------------------------------------------------------------------------------------------
Pro Forma Expenses
Alliance U.S./High
Grade Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Class A $ 94 $293 $ 509 $1,131
- ------------------------------------------------------------------------------------------------------------------------------------
-22-
Annual Fund Operating Expenses
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses as of 12/31/00 Expenses as of 12/31/00 Pro Forma Expenses
Brinson High Income Alliance High Yield Alliance High Yield
Portfolio Portfolio Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Annual Fund Operating Expenses Class H Class A Class A
(as a percentage of average net assets)
- ------------------------------------------------------------------------------------------------------------------------------------
Management Fees 0.50% 0.75% 0.75%
- ------------------------------------------------------------------------------------------------------------------------------------
12b-1 Fees 0.00% 0.00% 0.00%
- ------------------------------------------------------------------------------------------------------------------------------------
Other Expenses 0.78% 0.67% 0.51%
- ------------------------------------------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.28% 1.42% 1.26%
- ------------------------------------------------------------------------------------------------------------------------------------
Waiver/Expense Reimbursement 0.00% 0.47%** 0.31%**
- ------------------------------------------------------------------------------------------------------------------------------------
Net Expenses 1.28% 0.95%** 0.95%**
- ------------------------------------------------------------------------------------------------------------------------------------
** Reflects Alliance's contractual waiver of a portion of its advisory fee
and/or reimbursement of a portion of the Fund's operating expenses. This waiver
extends through the Fund's current fiscal year and may be extended by Alliance
for additional one-year terms.
Example of Fund Expenses:
An investment of $10,000 would incur the following expenses, assuming 5%
annual return, constant expenses (reflecting, for the first year only, the
contractual waiver described above) and, except as indicated, redemption at the
end of each time period:
- ------------------------------------------------------------------------------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------------------------------------------------------------
Current Expenses
Brinson High Income
Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Class H $130 $406 $702 $1,545
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance High Yield
Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Class A $ 97 $403 $732 $1,661
- ------------------------------------------------------------------------------------------------------------------------------------
Pro Forma Expenses
Alliance High Yield
Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Class A $ 97 $369 $662 $1,495
- ------------------------------------------------------------------------------------------------------------------------------------
-23-
Annual Fund Operating Expenses
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses as of 12/31/00 Expenses as of 12/31/00 Pro Forma Expenses
Brinson Small Cap Alliance Quasar Alliance Quasar
Portfolio Portfolio Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Annual Fund Operating Expenses Class H Class I Class A Class B Class A Class B
(as a percentage of average net assets)
- ------------------------------------------------------------------------------------------------------------------------------------
Management Fees 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
- ------------------------------------------------------------------------------------------------------------------------------------
12b-1 Fees 0.00% 0.25% 0.00% 0.25% 0.00% 0.25%
- ------------------------------------------------------------------------------------------------------------------------------------
Other Expenses 1.21% 1.21% 0.14% 0.16% 0.11% 0.11%
- ------------------------------------------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 2.21% 2.46% 1.14% 1.41% 1.11% 1.36%
- ------------------------------------------------------------------------------------------------------------------------------------
Waiver/Expense Reimbursement 0.00% 0.02%* 0.19%** 0.21%** 0.16%** 0.16%**
- ------------------------------------------------------------------------------------------------------------------------------------
Net Expenses 2.21% 2.44%* 0.95%** 1.20%** 0.95%** 1.20%**
- ------------------------------------------------------------------------------------------------------------------------------------
* Pursuant to a voluntary fee waiver which was terminated during the 2000 fiscal
year.
** Reflects Alliance's contractual waiver of a portion of its advisory fee
and/or reimbursement of a portion of the Fund's operating expenses. This waiver
extends through the Fund's current fiscal year and may be extended by Alliance
for additional one-year terms.
Example of Fund Expenses:
An investment of $10,000 would incur the following expenses, assuming 5%
annual return, constant expenses (reflecting, for the first year only, the
contractual waiver described above), and, except as indicated, redemption at
the end of each time period:
- ------------------------------------------------------------------------------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------------------------------------------------------------
Current Expenses
Brinson Small Cap
Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Class H $224 $691 $1,185 $2,544
- ------------------------------------------------------------------------------------------------------------------------------------
Class I $247 $765 $1,309 $2,795
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Quasar
Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Class A $116 $322 $544 $1,184
- ------------------------------------------------------------------------------------------------------------------------------------
Class B $144 $401 $678 $1,460
- ------------------------------------------------------------------------------------------------------------------------------------
Pro Forma Expenses
Alliance Quasar
Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Class A $ 97 $337 $596 $1,337
- ------------------------------------------------------------------------------------------------------------------------------------
Class B $122 $415 $731 $1,632
- ------------------------------------------------------------------------------------------------------------------------------------
-24-
Annual Fund Operating Expenses
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses as of 12/31/00 Expenses as of 12/31/00 Pro Forma Expenses
Brinson Strategic Income Alliance Global Bond Alliance Global Bond
Portfolio Portfolio Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Annual Fund Operating Expenses Class H Class I Class A Class B Class A Class B
(as a percentage of average net assets)
- ------------------------------------------------------------------------------------------------------------------------------------
Management Fees 0.75% 0.75% 0.65% 0.65% 0.65% 0.65%
- ------------------------------------------------------------------------------------------------------------------------------------
12b-1 Fees 0.00% 0.25% 0.00% 0.25% 0.00% 0.25%
- ------------------------------------------------------------------------------------------------------------------------------------
Other Expenses 0.84% 0.83% 0.41% 0.41% 0.30% 0.30%
- ------------------------------------------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.59% 1.83% 1.06% 1.35% 0.95% 1.20%
- ------------------------------------------------------------------------------------------------------------------------------------
Waiver/Expense Reimbursement 0.00% 0.03%* 0.04%** 0.04%** 0.00% 0.00%
- ------------------------------------------------------------------------------------------------------------------------------------
Net Expenses 1.59% 1.80%* 1.02%** 1.31%** 0.95% 1.20%
- ------------------------------------------------------------------------------------------------------------------------------------
* Pursuant to a voluntary fee waiver which was terminated during the 2000 fiscal
year.
** Reflects Alliance's contractual waiver of a portion of its advisory fee
and/or reimbursement of a portion of the Fund's operating expenses. This waiver
extends through the Fund's current fiscal year and may be extended by Alliance
for additional one-year terms.
Example of Fund Expenses:
An investment of $10,000 would incur the following expenses, assuming 5%
annual return, constant expenses (reflecting, for the first year only, the
contractual waiver described above) and, except as indicated, redemption at the
end of each time period:
- ------------------------------------------------------------------------------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------------------------------------------------------------
Current Expenses
Brinson Strategic Income
Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Class H $162 $502 $866 $1,889
- ------------------------------------------------------------------------------------------------------------------------------------
Class I $183 $573 $988 $2,145
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Global Bond
Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Class A $104 $333 $581 $1,291
- ------------------------------------------------------------------------------------------------------------------------------------
Class B $133 $424 $736 $1,623
- ------------------------------------------------------------------------------------------------------------------------------------
Pro Forma Expenses
Alliance Global Bond
Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Class A $ 97 $333 $581 $1,291
- ------------------------------------------------------------------------------------------------------------------------------------
Class B $122 $424 $736 $1,623
- ------------------------------------------------------------------------------------------------------------------------------------
-25-
Federal Income Tax Consequences
As long as the contracts funded through the separate accounts of the
insurance company shareholders (the "Contracts") qualify as annuity contracts
under Section 72 of the Internal Revenue Code of 1986, as amended (the "Code"),
the Mergers will not create any tax liability for owners of Contracts ("Contract
Owners").
For federal income tax purposes, all of the Mergers are expected to be
tax-free reorganizations. Accordingly, no gain or loss is expected to be
recognized by the Acquired Portfolio or its shareholders as a result of each
Merger, and the aggregate tax basis of the Merger Shares received by each
Acquired Portfolio shareholder will be the same as the aggregate tax basis of
the shareholder's Acquired Portfolio shares.
For more information about the federal income tax consequences of the
Merger, see "Information about the Mergers--Federal Income Tax Consequences."
Comparison of Investment Objectives, Policies and Restrictions
At meetings held on November 7, 2000, and February 14, 2001, the Brinson
Trustees approved changes in the non-fundamental investment policies (the
policies that can be changed without shareholder approval) of each Brinson
Portfolio to conform to those of the corresponding Alliance Portfolio to the
extent practical.
Exceptions to this general rule concern the Brinson Small Cap Portfolio,
the Brinson Global Equity Portfolio and the Brinson Strategic Income Portfolio.
The name of the Brinson Small Cap Portfolio requires it to invest at least 65%
of its total assets in equity securities of small capitalization companies,
which it defines as companies having market capitalizations of up to $1.5
billion at the time of purchase. The Alliance Quasar Portfolio has no
corresponding restriction, although at present it emphasizes investments in
small cap companies, which it defines as companies having market capitalizations
of up to $1.5 billion. The Brinson Global Equity Portfolio's name
permits it to include securities of U.S. issuers as part of its normal portfolio
investments. The Alliance International Portfolio in general, may not invest in
the securities of U.S. issuers. The Brinson Strategic Income Portfolio's policy
of allocating its investments among three different market sectors, while not
required by its name, also has not been changed. The Alliance Global Bond
Portfolio is not require to make such an allocation of investments.
To the extent that a Brinson Portfolio has fundamental policies (policies
that cannot be changed without the approval of shareholders) that are less
restrictive than the fundamental policies of the corresponding Alliance
Portfolio, the Brinson Trustees adopted as non-fundamental policies the more
restrictive policies of the corresponding Alliance Portfolio. To the extent that
the fundamental restrictions of a Brinson Portfolio were more restrictive than
those of the corresponding Alliance Portfolio, such differences remain.
Each Acquired Portfolio's investment objective, while not identical to, is
generally similar to that of the corresponding Acquiring Portfolio. As a result
of the actions of the Brinson Trustees described above, most of the Acquired
Portfolios now have investment policies that are substantially similar to those
of the corresponding Acquiring Portfolio. The investment objectives of each
Acquired
-26-
Portfolio and its corresponding Acquiring Portfolio, and certain differences in
their fundamental restrictions, are summarized below.(2) Comparisons of the
Portfolios' average annual total returns are also provided. For a more detailed
description of the investment strategies, policies and restrictions of each
Acquiring Portfolio, please see the Alliance Prospectus. For a more detailed
description of the investment strategies, policies, and restrictions of each
Acquired Portfolio, please see the Brinson Prospectus. For information
concerning the risks associated with investments in the various Portfolios, see
"Risk Factors," below.
Brinson Balanced Portfolio vs. Alliance Total Return Portfolio
The Brinson Balanced Portfolio and the Alliance Total Return Portfolio
have similar investment objectives. The Alliance Total Return Portfolio's
investment objective is to achieve a high return through a combination of
current income and capital appreciation. The Brinson Balanced Portfolio's
investment objective is high total return with low volatility. Both Portfolios
invest in common and preferred stocks, U.S. government and agency obligations,
bonds and fixed-income senior securities (including short- and long-term debt
securities and preferred stocks to the extent their value is attributable to
their fixed-income characteristics) in such proportions and of such type as
Alliance Capital deems best adapted to its current economic and market outlooks.
The percentage of each Portfolio's assets invested in each type of security at
any time is determined by Alliance Capital, except that the Brinson Balanced
Portfolio maintains a fixed income allocation (including bonds and cash) of at
least 25%.
The average annual total return for the Brinson Balanced Portfolio and the
Alliance Total Return Portfolio for certain periods is set forth in the chart
below.
Average Annual Total Return Comparison
As of 12/31/00*
Since
1 Year 5 Years 10 Years 12/28/92**
------ --------- -------- --------
Brinson Balanced
Portfolio................ 0.34% 11.73% 10.86% 10.07%
Alliance Total
Return Portfolio......... 12.52% 14.36% N/A 12.42%
* Performance shown is for Class H shares of the Brinson Balanced Portfolio and
Class A shares of the Alliance Total Return Portfolio and does not reflect any
insurance account related charges or expenses. For further information about the
Alliance Total Return Portfolio's performance, including information about
waivers/reimbursements that affect the Portfolio's performance, see the Alliance
Prospectus.
** The commencement of operations of the Alliance Total Return Portfolio.
The Brinson Balanced Portfolio may not make loans except through loans of
portfolio securities or through repurchase agreements; or invest in real estate.
The Alliance Total Return Portfolio has no such restrictions.
Brinson Global Equity Portfolio vs. Alliance International Portfolio
The Brinson Global Equity Portfolio and the Alliance International
Portfolio both
- ----------
(2) One difference is that the Brinson Portfolios may invest in the securities
of other investment companies and certain of the Brinson Portfolios in
connection with their securities lending activities invest in Brinson Private
Money Fund LLC. Certain Alliance Portfolios' (the Alliance Global Bond
Portfolio, the Alliance U.S./High Grade Portfolio and the Alliance High Yield
Portfolio) fundamental restrictions prohibit such investments.
-27-
seek long-term growth of capital. The two Portfolios, however, have different
specific investment objectives and use different strategies with respect to
their investments in U.S. companies in seeking to achieve their objectives.
The Alliance International Portfolio's investment objective is to seek to
obtain a total return on its assets from long-term growth of capital principally
through a broad portfolio of marketable securities of established international
companies, companies participating in foreign economies with prospects for
growth, including U.S. companies having their principal activities and interests
outside the U.S., and in foreign government securities. As a secondary
objective, the Alliance International Portfolio attempts to increase its current
income without assuming undue risk. The Portfolio also may invest in other types
of securities, including debt securities of foreign issuers when Alliance
believes that the total return on these types of securities may equal or exceed
the return on equity securities.
The Brinson Global Equity Portfolio's investment objective is long-term
capital appreciation. The Brinson Global Equity Portfolio's investments are
similar to those of the Alliance International Portfolio, except that the
Brinson Global Equity Portfolio also invests in equity securities of U.S.
companies and, under normal circumstances, invests at least 65% of its total
assets in common stocks and securities convertible into common stocks.
The average annual total return for the Brinson Global Equity Portfolio
and the Alliance International Portfolio for certain periods is set forth in the
chart below.
Average Annual Total Return Comparison
As of 12/31/00*
Since
1 Year 5 Years 10 Years 12/28/92**
------ --------- -------- --------
Brinson Global Equity
Portfolio................ (9.69)% 8.42% 5.64% 6.52%
Alliance International
Portfolio................ (19.86)% 7.08% N/A 9.08%
* Performance shown is for Class H shares of the Brinson Global Equity Portfolio
and Class A shares of the Alliance International Portfolio and does not reflect
any insurance account related charges or expenses. For further information about
the Alliance International Portfolio's performance, including information about
waivers/reimbursements that affect the Portfolio's performance, see the Alliance
Prospectus.
** The commencement of operations of the Alliance International Portfolio.
The Alliance International Portfolio has a fundamental restriction
prohibiting investment in other investment companies, whereas Brinson Global
Equity Portfolio has no such fundamental restriction.
The Brinson Global Equity Portfolio may not make loans except through
loans of portfolio securities or through repurchase agreements. The Alliance
International Portfolio has no such restrictions.
Brinson Global Income Portfolio vs. Alliance Global Bond Portfolio
The Brinson Global Income Portfolio and the Alliance Global Bond Portfolio
have similar investment objectives in that both seek high current income and
capital appreciation. The Alliance Global Bond Portfolio's investment objective
is to seek a high level of return from a combination of current income and
capital appreciation by investing in a globally diversified portfolio of
high-quality debt securities denominated in the U.S. dollar and a range of
foreign currencies. The Brinson Global Income Portfolio's investment objective
is high
-28-
current income consistent with prudent investment risk; capital appreciation is
a secondary objective.
Both Portfolios invest in debt securities of U.S. or non-U.S. governments,
supranational entities, U.S. and non-U.S. companies and commercial paper of
banks and bank holding companies. Both Portfolios' foreign investments are
generally denominated in foreign currencies, including the Euro. Normally, each
Portfolio invests at least 65% of its total assets in debt securities of at
least three (and usually considerably more) countries and invests approximately
25% of its total assets in U.S. dollar denominated debt securities. The average
weighted maturity of each Portfolio's investments in fixed-income securities is
expected to vary between one year or less and 10 years.
AIGAM International Limited ("AIGAM") serves as sub-adviser for the
Alliance Global Bond Portfolio. More information about AIGAM is set forth in the
Alliance Prospectus that accompanies this Prospectus/Proxy Statement.
The average annual total return for the Brinson Global Income Portfolio
and the Alliance Global Bond Portfolio for certain periods is set forth in the
chart below.
Average Annual Total Return Comparison
As of 12/31/00*
Since
1 Year 5 Years 10 Years 07/15/91**
------ --------- -------- --------
Brinson Global Income
Portfolio................ 4.87% 3.86% 5.40% 6.49%
Alliance Global
Bond Portfolio........... 1.17% 2.99% N/A 6.24%
* Performance shown is for Class H shares of the Brinson Global Income Portfolio
and Class A shares of the Alliance Global Bond Portfolio and does not reflect
any insurance account related charges or expenses. For further information about
the Alliance Global Bond Portfolio's performance, including information about
waivers/reimbursements that affect the Portfolio's performance, see the Alliance
Prospectus.
** The commencement of operations of the Alliance Global Bond Portfolio.
Both Portfolios are "non-diversified." This means that each Portfolio may
invest more of its assets in the securities of fewer companies than a
diversified portfolio. This increases each Portfolio's vulnerability to factors
affecting a single investment and can result in greater losses and volatility.
The Alliance Global Bond Portfolio has a fundamental restriction
prohibiting investment in a security if, as a result, it would own any
securities of an open-end investment company, whereas Brinson Global Income
Portfolio has no such fundamental restriction.
Brinson Growth and Income Portfolio vs. Alliance Growth and Income Portfolio
The Brinson Growth and Income Portfolio and the Alliance Growth and Income
Portfolio have similar investment objectives. The Alliance Growth and Income
Portfolio's investment objective is to seek reasonable current income and
reasonable opportunity for appreciation through investments primarily in
dividend-paying common stocks of good quality. The Brinson Growth and Income
Portfolio's investment objective is current income and capital growth.
Both Portfolios invest primarily in dividend-paying common stocks of
large, well-established "blue-chip" companies. When the economic outlook is
unfavorable for common stocks, each Portfolio may invest in other types of
securities, such as bonds, convertible bonds, preferred stocks and convertible
preferred stocks. Each
-29-
Portfolio may invest in foreign securities, although the Brinson Growth and
Income Portfolio is more limited in that it may invest only up to 25% of its
total assets in U.S. dollar denominated equity securities and bonds of foreign
issuers that are traded on recognized U.S. exchanges or in the U.S.
over-the-counter market. Because investing in foreign securities entails certain
political and economic risks, both Portfolios restrict investments in these
securities to issues of high quality.
The average annual total return for the Brinson Growth and Income
Portfolio and the Alliance Growth and Income Portfolio for certain periods is
set forth in the chart below.
Average Annual Total Return Comparison
As of 12/31/00*
Since
1 Year 5 Years 01/02/92**
------ --------- --------
Brinson Growth and
Income Portfolio...... (4.87)% 14.58% 10.44%
Alliance Growth and
Income Portfolio...... 13.89% 19.63% 16.64%
* Performance shown is for Class H shares of the Brinson Growth and Income
Portfolio and Class A shares of the Alliance Growth and Income Portfolio and
does not reflect any insurance account related charges or expenses. For further
information about the Alliance Growth and Income Portfolio's performance,
including information about waivers/reimbursements that affect the Portfolio's
performance, see the Alliance Prospectus.
** The commencement of operations of the Brinson Growth and Income Portfolio.
Performance shown in this column for the Alliance Growth and Income Portfolio is
from 12/31/91, the month end closest to the Brinson Growth and Income
Portfolio's inception date. The performance of the Alliance Growth and Income
Portfolio from its inception, on January 14, 1991, is 15.30%.
The Brinson Growth and Income Portfolio may not make loans except through
loans of portfolio securities or through repurchase agreements; engage in the
business of underwriting securities; or invest in commodities or real estate.
The Alliance Growth and Income Portfolio has no such restrictions, although its
investments in repurchase agreements are limited to 10% of its total assets.
Brinson Growth Portfolio vs. Alliance Growth Portfolio
The Brinson Growth Portfolio and the Alliance Growth Portfolio have very
similar investment objectives. The Alliance Growth Portfolio's investment
objective is to provide long-term growth of capital. Current income is only an
incidental consideration. The Brinson Growth Portfolio's investment objective is
long-term capital appreciation. Both Portfolios invest primarily in equity
securities of companies with favorable earnings outlooks and whose long-term
growth rates are expected to exceed that of the U.S. economy over time. Both
Portfolios emphasize investments in large- and mid-cap companies.
The average annual total return for the Brinson Growth Portfolio and the
Alliance Growth Portfolio for certain periods is set forth in the chart below.
Average Annual Total Return Comparison
As of 12/31/00*
Since
1 Year 5 Years 10 Years 09/15/94**
------ --------- -------- --------
Brinson Growth
Portfolio ............... (20.17)% 13.79% 14.92% 13.59%
Alliance Growth
Portfolio ............... (17.51)% 18.99% N/A 21.42%
* Performance shown is for Class H shares of the Brinson Growth Portfolio and
Class A shares of the Alliance Growth Portfolio and does not reflect any
insurance account related charges or expenses. For further information about the
Alliance Growth Portfolio's performance, including information about
waivers/reimbursements that affect the Portfolio's performance, see the Alliance
Prospectus.
-30-
** The commencement of operations of the Alliance Growth Portfolio.
The Brinson Growth Portfolio may not invest in commodities. The Alliance
Growth Portfolio has no such restriction.
Brinson High Grade Portfolio vs. Alliance U.S./High Grade Portfolio
The Brinson High Grade Portfolio and the Alliance U.S./High Grade
Portfolio have very similar investment objectives. The Alliance U.S./High Grade
Portfolio's investment objective is high current income consistent with
preservation of capital. The Brinson High Grade Portfolio's primary investment
objective is current income; capital appreciation is a secondary investment
objective. Both Portfolios invest primarily in U.S. government securities
(including those backed by mortgages), repurchase agreements and forward
contracts relating to U.S. government securities and other high-grade debt
securities (including non-U.S. government mortgage- and asset-backed securities)
that are, at the time of purchase, rated within one of the three highest grades
assigned by S&P, or Moody's, comparably rated by another rating agency or, if
unrated, determined by Alliance Capital to be of comparable quality.
The average annual total return for the Brinson High Grade Portfolio and
the Alliance U.S./High Grade Portfolio for certain periods is set forth in the
chart below.
Average Annual Total Return Comparison
As of 12/31/00*
Since
1 Year 5 Years 11/08/93**
------ --------- --------
Brinson High Grade
Portfolio.... 8.48% 4.10% 3.39%
Alliance U.S./High
Grade Securities
Portfolio..... 11.08% 5.50% 5.54%
* Performance shown is for Class H shares of the Brinson High Grade Portfolio
and Class A shares of the Alliance U.S./High Grade Portfolio and does not
reflect any insurance account related charges or expenses. For further
information about the Alliance U.S./High Grade Portfolio's performance,
including information about waivers/reimbursements that affect the Portfolio's
performance, see the Alliance Prospectus.
** The commencement of operations of the Brinson High Grade Portfolio.
Performance shown in this column for the Alliance U.S./High Grade Securities
Portfolio is from 10/31/98, the month end closest to the Brinson High Grade
Portfolio's inception date. The performance of the Alliance U.S./High Grade
Portfolio from its inception, on September 17, 1992, is 5.95%.
The Alliance U.S./High Grade Portfolio has a fundamental restriction
prohibiting investment in a security if, as a result, it would own any
securities of any other investment company, whereas Brinson High Grade Portfolio
has no such fundamental restriction.
The Brinson High Grade Portfolio may not make loans except through loans
of portfolio securities or through repurchase agreements; or engage in the
business of underwriting securities. The Alliance U.S./High Grade Portfolio has
no such restrictions.
Brinson High Income Portfolio vs. Alliance High Yield Portfolio
The Brinson High Income Portfolio and the Alliance High Yield Portfolio
have similar investment objectives in that both focus primarily on high current
income. The Alliance High Yield Portfolio's investment objective is to earn the
highest level of current income available without assuming undue risk by
investing principally in high-yielding fixed income securities rated Baa or
lower by Moody's or BBB or lower by S&P, Duff & Phelps or Fitch or, if unrated,
of comparable quality as determined by
-31-
Alliance Capital. As a secondary objective, the Alliance High Yield Portfolio
seeks capital appreciation. The Brinson High Income Portfolio's investment
objective is to provide high income. Both Portfolios invest in a diversified mix
of high-yield, high-risk debt securities rated below investment grade (commonly
known as "junk bonds"). Each Portfolio normally invests at least 65% of its
total assets in high-yield corporate bonds that, at the time of purchase, are
rated at least BBB or lower by S&P, Baa or lower by Moody's, are comparably
rated by another rating agency or, if unrated, of comparable quality as
determined by Alliance Capital. The Portfolios normally do not invest in bonds
that are rated below CCC by S&P, Caa by Moody's, comparably rated by another
rating agency or, if unrated, of comparable quality as determined by Alliance
Capital.
The average annual total return for the Brinson High Income Portfolio and
the Alliance High Yield Portfolio for certain periods is set forth in the chart
below.
Average Annual Total Return Comparison
As of 12/31/00*
Since
1 Year 09/28/98**
------ --------
Brinson High Income
Portfolio.... (15.14)% (2.67)%
Alliance High
Yield Portfolio..... (5.15)% (3.27)%
* Performance shown is for Class H shares of the Brinson High Income Portfolio
and Class A shares of the Alliance High Yield Portfolio and does not reflect any
insurance account related charges or expenses. For further information about the
Alliance U.S. High Yield Portfolio's performance, including information about
waivers/reimbursements that affect the Portfolio's performance, see the Alliance
Prospectus.
** The commencement of operations of the Brinson High Income Portfolio.
Performance shown in this column for the Alliance High Yield Portfolio is from
9/30/98, the month end closest to the Brinson High Income Portfolio's inception
date. The performance of the Alliance High Yield Portfolio from its inception,
on October 27, 1997, is (2.61)%.
The Alliance High Yield Portfolio has a fundamental restriction
prohibiting investment in a security if, as a result, it would own any
securities of any other investment company, whereas Brinson High Income
Portfolio has no such fundamental restriction.
The Brinson High Income Portfolio may not make loans except through loans
of portfolio securities or through repurchase agreements; or invest in
commodities. In addition, the Brinson Portfolio may only invest 25% of its
portfolio in U.S. dollar denominated securities of foreign issuers and 20% of
its total assets in securities denominated in foreign currencies. The Alliance
High Yield Portfolio has no such restrictions.
The Brinson High Income Portfolio may write covered call options provided
that the amount does not exceed 25% of its total assets and may write covered
put options provided that the amount does not exceed 15% of its total assets.
The Alliance High Yield Portfolio may write call and put options provided that
the aggregate value of its portfolio securities subject to outstanding options
does not exceed 15% of its total assets.
Brinson Small Cap Portfolio vs. Alliance Quasar Portfolio
The Brinson Small Cap Portfolio and the Alliance Quasar Portfolio have
similar investment objectives in that both seek long-term growth of capital. The
Alliance Quasar Portfolio's investment objective is growth of capital by
pursuing aggressive investment policies. The Brinson Small Cap Portfolio's
investment objective is long-term capital
-32-
appreciation. The Brinson Small Cap Portfolio's name requires that it normally
invest at least 65% of its total assets in equity securities of small
capitalization ("small cap") companies, which it defines as companies having
market capitalizations of up to $1.5 billion at the time of purchase. The
Alliance Quasar Portfolio has no corresponding restriction, although at present
it emphasizes investments in small cap companies, which it defines as companies
having market capitalizations of up to $1.5 billion. As of June 30, 2001,
approximately 96.8% of the Alliance Quasar Portfolio's total assets were
invested in small cap companies. Current income is only an incidental
consideration in selecting investments for both Portfolios.
The Alliance Quasar Portfolio generally invests in a widely diversified
portfolio of equity securities spread among many industries that offer the
possibility of above-average earnings growth and may invest in both well-known,
established companies and new, unseasoned companies. The Alliance Quasar
Portfolio also may invest in non-convertible bonds, preferred stocks and foreign
securities. The Brinson Small Cap Portfolio, subject to the requirement that it
normally invest at least 65% of its total assets in equity securities of small
cap companies, has similar investment policies. Both Portfolios may invest in
securities of foreign issuers, although the Brinson Small Cap Portfolio limits
these investments to no more than 25% of its total assets and further limits
such investments to U.S. dollar denominated securities of foreign issuers that
are traded on recognized U.S. exchanges or in the U.S. over-the-counter market.
Both Portfolios may invest in special situations which occur when the securities
of a company are expected to appreciate due to a development particularly or
uniquely applicable to that company regardless of general business conditions or
movements of the market as a whole.
The average annual total return for the Brinson Small Cap Portfolio and
the Alliance Quasar Portfolio for certain periods is set forth in the chart
below.
Average Annual Total Return Comparison
As of 12/31/00*
Since
1 Year 09/28/98**
------ --------
Brinson Small Cap
Portfolio.... 14.21% 22.40%
Alliance Quasar
Portfolio..... (6.09)% 11.18%
* Performance shown is for Class H shares of the Brinson Small Cap Portfolio and
Class A shares of the Alliance Quasar Portfolio and does not reflect any
insurance account related charges or expenses. For further information about the
Alliance Quasar Portfolio's performance, including information about
waivers/reimbursements that affect the Portfolio's performance, see the Alliance
Prospectus.
** The commencement of operations of the Brinson Small Cap Portfolio.
Performance shown in this column for the Alliance Quasar Portfolio is from
9/30/98, the month end closest to the Brinson Small Cap Portfolio's inception
date. The performance of the Alliance Quasar Portfolio from its inception, on
August 15, 1996, is 6.59%.
Brinson Strategic Income Portfolio vs. Alliance Global Bond Portfolio
The Brinson Strategic Income Portfolio and the Alliance Global Bond
Portfolio have similar investment objectives in that both seek current income
and capital appreciation. The Alliance Global Bond Portfolio's investment
objective is to seek a high level of return from a combination of current income
and capital appreciation by investing in a globally diversified portfolio of
high-quality debt securities denominated in the U.S. dollar and a range of
foreign
-33-
currencies. The Brinson Strategic Income Portfolio's investment objective is to
achieve a high level of current income. As a secondary objective, the Portfolio
seeks capital appreciation.
Both Portfolios invest in debt securities of U.S. or non-U.S. governments,
supranational entities, and U.S. and non-U.S. companies. The Portfolios' foreign
investments are generally denominated in foreign currencies, including the Euro.
Both Portfolios limit their investments to high-quality bonds and also normally
invest at least 65% of their total assets in debt securities of at least three
(and usually considerably more) countries and approximately 25% of their total
assets in U.S. dollar denominated debt securities. Both Portfolios also normally
maintain an average weighted maturity for fixed-income investments of between
one year or less and ten years.
AIGAM serves as sub-adviser for the Alliance Global Bond Portfolio. More
information about AIGAM is set forth in the Alliance Prospectus that accompanies
this Prospectus/Proxy Statement.
The average annual total return for the Brinson Strategic Income Portfolio
and the Alliance Global Bond Portfolio for certain periods is set forth in the
chart below.
Average Annual Total Return Comparison
As of 12/31/00*
Since
1 Year 5 Years 9/28/98**
------ ------- -------
Brinson Strategic
Income Portfolio.... 1.00% N/A 2.54%
Alliance Global
Bond Portfolio...... 1.17% 2.99% (1.62)%
* Performance shown is for Class H shares of the Brinson Strategic Income
Portfolio and Class A shares of the Alliance Global Bond Portfolio and does not
reflect any insurance account related charges or expenses. For further
information about the Alliance Global Bond Portfolio's performance, including
information about waivers/ reimbursements that affect the Portfolio's
performance, see the Alliance Prospectus.
** The commencement of operations of the Brinson Strategic Income Portfolio.
Performance shown in this column for the Alliance Global Bond Portfolio is from
9/30/98, the month end closest to the Brinson Strategic Income Portfolio's
inception date. The performance of the Alliance Global Bond Portfolio from its
inception, on July 15, 1991, is 6.24%.
Both Portfolios are non-diversified. This means that each Portfolio may
invest more of its assets in the securities of fewer companies than a
diversified portfolio. This increases each Portfolio's vulnerability to factors
affecting a single investment and can result in greater losses and volatility.
The Alliance Global Bond Portfolio has a fundamental restriction
prohibiting investment in a security if, as a result, it would own any
securities of an open-end investment company, whereas Brinson Strategic Income
Portfolio has no such fundamental restriction.
Comparison of Distribution Policies and Purchase, Exchange and Redemption
Procedures
Each of the Portfolios declares and pays dividends and net realized
capital gains at least annually. Both the Brinson Trust and the Alliance Fund
make income and capital gains distributions in shares of each Portfolio. It is
expected that, shortly prior to the closing date of each Agreement and Plan of
Acquisition and Termination (the "Closing Date"), each of the Acquired
Portfolios will declare and distribute as a special dividend any investment
company taxable income (computed without regard to the deduction for dividends
paid) and any net realized capital gains through the Closing Date not previously
distributed.
-34-
The Acquired Portfolios and the Acquiring Portfolios have substantially
the same procedures for purchasing shares. Each of the Portfolios offers its
shares to the separate accounts of life insurance companies ("Accounts"). Each
day on which a Portfolio's net asset value is calculated, the Accounts transmit
to that Portfolio any orders to purchase or redeem shares of that Portfolio
based upon the purchase payments, redemption (surrender) requests and transfer
requests from Contract Owners which are priced as of that day. The Portfolios
may also suspend redemptions, if permitted under the Investment Company Act of
1940, as amended (the "1940 Act"), for any period during which the New York
Stock Exchange ("NYSE") is closed or during which trading is restricted by the
SEC for the protection of a Portfolio's shareholders. Each Account purchases
either Class H or Class I shares of a Brinson Portfolio, or Class A or Class B
shares of an Alliance Portfolio as applicable. Class H and Class A shares are
sold and redeemed at net asset value and do not pay any 12b-1 fees. Class I and
Class B shares are also sold and redeemed at net asset value and pay annual
distribution fees of 0.25% of their average daily net assets. The level of
annual distribution fees payable by Class B shares could be increased to 0.50%
of the average daily net assets attributable to such shares without a vote of
the shareholders.
Shares of each Brinson Portfolio can be exchanged for shares of the same
class of any other Brinson Portfolio, provided that the relevant separate
account invests in both Portfolios. Although the shares of the Alliance
Portfolios cannot be exchanged for shares of the same class of another Alliance
Portfolio, the shareholders can redeem shares of one Alliance Portfolio and
purchase shares of another Alliance Portfolio.
See the Alliance Prospectus and Alliance SAI and the Brinson Prospectus
and the Brinson SAI for further information.
Investment Advisors
Brinson Advisors is the investment manager and administrator for each of
the Brinson Portfolios. Alliance Capital is the sub-adviser for each Brinson
Portfolio.
Alliance Capital is the investment adviser of each of the Alliance
Portfolios. AIGAM, is the sub-adviser for the Alliance Global Bond Portfolio.
-35-
================================================================================
SUMMARY OF PRINCIPAL RISKS
Certain risks associated with an investment in the Acquiring Portfolios
are summarized below. As described above under "Comparison of Investment
Objectives, Policies and Restrictions", the investment policies of the Acquired
Portfolios, with some exceptions, have generally been conformed to those of the
corresponding Acquiring Portfolios. Therefore, subject to such limited
exceptions, the risks of an investment in an Acquiring Portfolio are
substantially similar to the risks of an investment in the corresponding
Acquired Portfolio. More detailed descriptions of the risks associated with an
investment in an Acquiring Portfolio can be found in the Alliance Prospectus and
the Alliance SAI. The value of your investment in an Acquiring Portfolio will
change with changes in the values of that Portfolio's investments. Many factors
can affect those values. In this Summary, we describe the principal risks that
may affect a Portfolio's investments as a whole. These risks and the Portfolios
particularly subject to each risk are summarized in a chart at the end of this
section. Each of the Acquiring Portfolios could be subject to additional
principal risks because the types of investments made by each Portfolio can
change over time.
Interest Rate Risk This is the risk that changes in interest rates will affect
the value of a Portfolio's investments in debt securities, such as bonds, notes,
and asset-backed securities, or other income-producing securities. Debt
securities are obligations of the issuer to make payments of principal and/or
interest on future dates. Interest rate risk is particularly applicable to
Portfolios that invest in fixed-income securities. Increases in interest rates
may cause the value of a Portfolio's investments in such securities to decline.
Even Portfolios that invest a substantial portion of their assets in the
highest quality debt securities, including U.S. Government securities, are
subject to interest rate risk. Interest rate risk is, however, generally greater
for those Portfolios that invest a significant portion of their assets in
lower-rated securities or comparable unrated securities. Interest rate risk is
also generally greater for Portfolios that invest in debt securities with longer
maturities. Such risk may also be greater for the Portfolios that invest a
substantial portion of their assets in mortgage-related or other asset-backed
securities. The value of these securities is affected more by changes in
interest rates because when interest rates rise, the maturities of these types
of securities tend to lengthen and the value of the securities decreases more
significantly. In addition, these types of securities are subject to prepayment
when interest rates fall, which generally results in lower returns because the
Portfolios must reinvest their assets in debt securities with lower interest
rates. Increased interest rate risk is also likely for a Portfolio that invests
in debt securities paying no current interest, such as zero coupon,
principal-only, and interest-only securities, or paying non-cash interest in the
form of other debt securities (payment-in-kind securities).
Credit Risk This is the risk that the issuer or the guarantor of a debt
security, or the counterparty to a derivatives contract, will be unable or
unwilling to make timely payments of interest or principal, or to otherwise
honor its obligations. The degree of risk for a particular security may be
reflected in its credit rating. Credit risk is greater for Portfolios that
invest in lower-
-36-
rated securities. High-yield, high-risk debt securities and similar unrated
securities (commonly known as "junk bonds") have speculative elements and are
predominately speculative credit risks.
Credit risk is greater for Portfolios that invest in debt securities
issued in connection with corporate restructurings by highly leveraged issuers
and in debt securities not current in the payment of interest or principal or
which are in default. Portfolios that invest in foreign debt securities are also
subject to increased credit risk because of the difficulties of requiring
foreign entities, including issuers of sovereign debt obligations, to honor
their contractual commitments, and because a number of foreign governments and
other issuers are already in default.
Market Risk This is the risk that the value of a Portfolio's investments will
fluctuate as the stock or bond markets fluctuate and that prices overall will
decline over shorter or longer-term periods. All of the Portfolios are subject
to this risk.
Industry Risk This is the risk of investing in a particular industry. Market or
economic factors affecting that industry could have a major effect on the value
of a Portfolio's investments.
Business Sector Risk This is the risk of investing in a particular business
sector. Market or economic factors affecting that sector could have a major
effect on the value of a Portfolio's investments.
Capitalization Risk This is the risk of investments in small- to
mid-capitalization companies. Investments in small-to-mid-cap companies may be
more volatile than investments in large-cap companies. In addition, a
Portfolio's investments in smaller capitalization stocks may have additional
risks because these companies often have limited product lines, markets, or
financial resources.
Foreign Risk This is the risk of investing in issuers located in foreign
countries. All Portfolios that invest in foreign securities are subject to this
risk. A Portfolio's investments in foreign securities may experience more rapid
and extreme changes in value than investments in securities of U.S. companies.
This is because the securities markets of many foreign countries are relatively
small, with a limited number of companies representing a small number of
industries. Additionally, foreign securities issuers are not usually subject to
the same degree of regulation as are U.S. issuers. Reporting, accounting, and
auditing standards of foreign countries differ, in some cases significantly,
from U.S. standards. Also, nationalization, expropriation or confiscatory
taxation, currency blockage, political changes, or diplomatic developments could
adversely affect a Portfolio's investments in a foreign country. In the event of
nationalization, expropriation, or other confiscation, a Portfolio could lose
its entire investment.
Currency Risk This is the risk that fluctuations in the exchange rates between
the U.S. dollar and foreign currencies may negatively affect the value of a
Portfolio's investments. Portfolios with foreign currency denominated
investments are subject to this risk.
Country or Geographic Risk This is the risk of investing in issuers located in
a particular country or geographic region. Market changes or other factors
affecting that country or region, including political instability and
unpredictable economic
-37-
conditions, may have a particularly significant effect on a Portfolio's net
asset value.
Political, social, and economic changes in a particular country could
result in increased risks for a Portfolio that invests a substantial portion of
its assets in sovereign debt obligations, such as Brady Bonds. Investments in
emerging market countries are likely to involve significant risks. These
countries, such as Mexico, Argentina, Brazil, Morocco, the Philippines, Russia
and Venezuela, have a history of political and economic instability.
Leveraging Risk When a Portfolio borrows money or otherwise leverages its
assets, the value of an investment in that Portfolio will be more volatile and
all other risks will tend to be compounded. Portfolios may create leverage by
using reverse repurchase agreements, inverse floating rate instruments or
derivatives, or by borrowing money.
Derivatives Risk The Portfolios may use derivatives, which are financial
contracts whose value depends on, or is derived from, the value of an underlying
asset, reference rate or index. Alliance Capital will sometimes use derivatives
as part of a strategy designed to reduce other risks. Generally, however, the
Portfolios use derivatives as direct investments to earn income, enhance yield,
and broaden portfolio diversification, which entail greater risks than if used
solely for hedging purposes. In addition to other risks, such as the credit risk
of the counterparty, derivatives involve the risk of difficulties in pricing and
valuation and the risk that changes in the value of the derivative may not
correlate perfectly with the underlying assets, rates or indices.
Liquidity Risk Liquidity risk exists when particular investments are difficult
to purchase or sell, possibly preventing a Portfolio from selling these illiquid
securities at an advantageous price. The Portfolios may be subject to greater
liquidity risk if they use derivatives or invest in securities having
substantial interest rate and credit risk. In addition, liquidity risk tends to
increase to the extent a Portfolio invests in securities whose sale may be
restricted by law or contract.
Management Risk Each Portfolio is subject to management risk because it is an
actively managed investment portfolio. Alliance Capital will apply its
investment techniques and risk analyses in making investment decisions for the
Portfolios, but there can be no guarantee that its decisions will produce the
desired results. In some cases, the use of derivative and other investment
techniques may be unavailable or Alliance Capital may determine not to use them,
possibly even under market conditions where their use could benefit a Portfolio.
Focused Portfolio Risk Portfolios that invest 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 Portfolio's net
asset value. Similarly, a Portfolio may have more risk if it is
"non-diversified," meaning that it can invest more of its assets in a smaller
number of companies than can a "diversified" fund.
Allocation Risk Those Portfolios that allocate their investments between equity
and debt securities may have a more significant risk that poor performance of
one asset class will have a greater effect on the Portfolio's net asset value.
-38-
Chart of Principal Risks by Portfolio
The following chart summarizes the principal risks of each Alliance Portfolio.
Risks not marked for a particular Portfolio may, however, still apply to some
extent to that Portfolio at various times.
PORTFOLIO Interest Credit Market Industry/ Capital- Foreign Currency Country or Lever- Derivatives
Rate Risk Risk Sector ization Risk Risk Geographic aging Risk
Risk Risk Risk Risk Risk
- ------------------------------------------------------------------------------------------------------------------------------------
Growth and X X X X X
Income
Portfolio
US X X X X
Government/
High Grade
Securities
Portfolio
High Yield X X X X X X X
Portfolio
Total Return X X X
Portfolio
International X X X X
Portfolio
Global Bond X X X X X X X
Portfolio
Growth X X X X X X
Portfolio
Quasar X X X X X X
Portfolio
PORTFOLIO Liquidity Manage- Focused Alloca-
Risk ment Portfolio tion
Risk Risk Risk
- ---------------------------------------------------------------------
Growth and X
Income
Portfolio
US X
Government/
High Grade
Securities
Portfolio
High Yield X X
Portfolio
Total Return X X
Portfolio
International X
Portfolio
Global Bond X X X
Portfolio
Growth X
Portfolio
Quasar X
Portfolio
-39-
================================================================================
SPECIAL MEETING OF SHAREHOLDERS
This Prospectus/Proxy Statement is being furnished in connection with a
Special Meeting of Shareholders of each Acquired Portfolio to be held on October
9, 2001 or at such later time as may be made necessary by adjournment (the
"Meeting") and the solicitation of proxies by and on behalf of the shareholders
of the Acquired Portfolios for use at the Meeting. The Meeting is being held to
consider the proposed Merger of each Acquired Portfolio with the corresponding
Acquiring Portfolio by the transfer of all of the Acquired Portfolio's assets
and its stated liabilities to the Acquiring Portfolio (Proposals 1 through 9).
This Prospectus/Proxy Statement and the enclosed form of proxy are initially
being mailed to shareholders on or about August __, 2001.
The Brinson Trustees know of no matters other than those set forth herein
to be brought before the Meeting. If, however, any other matters properly come
before the Meeting, it is the Brinson Trustees' intention that proxies will be
voted on such matters in accordance with the judgment of the persons named in
the enclosed form of proxy.
If a Reorganization is not approved by shareholders at the Meeting, each
applicable Acquired Portfolio will continue to operate as a series of Brinson
Trust and the Brinson Trustees will then consider other options and alternatives
for the future of the Acquired Portfolio, including the liquidation of the
Acquired Portfolio, resubmitting the proposal for shareholder approval or other
appropriate action.
-40-
================================================================================
THE PROPOSALS
Approval or Disapproval of Agreement and Plan of Acquisition and Termination
The shareholders of the Brinson Balanced Portfolio are being asked to
approve or disapprove a Merger between the Brinson Balanced Portfolio and the
Alliance Total Return Portfolio (Proposal 1); the shareholders of the Brinson
Global Equity Portfolio are being asked to approve or disapprove a Merger
between the Brinson Global Equity Portfolio and the Alliance International
Portfolio (Proposal 2); the shareholders of the Brinson Global Income Portfolio
are being asked to approve or disapprove a Merger between the Brinson Global
Income Portfolio and the Alliance Global Bond Portfolio (Proposal 3); the
shareholders of the Brinson Growth and Income Portfolio are being asked to
approve or disapprove a Merger between the Brinson Growth and Income Portfolio
and the Alliance Growth and Income Portfolio (Proposal 4); the shareholders of
the Brinson Growth Portfolio are being asked to approve or disapprove a Merger
between the Brinson Growth Portfolio and the Alliance Growth Portfolio (Proposal
5); the shareholders of the Brinson High Grade Portfolio are being asked to
approve or disapprove a Merger between the Brinson High Grade Portfolio and the
Alliance U.S./High Grade Portfolio (Proposal 6); the shareholders of the Brinson
High Income Portfolio are being asked to approve or disapprove a Merger between
the Brinson High Income Portfolio and the Alliance High Yield Portfolio
(Proposal 7); the shareholders of the Brinson Small Cap Portfolio are being
asked to approve or disapprove a Merger between the Brinson Small Cap Portfolio
and the Alliance Quasar Portfolio (Proposal 8); and the shareholders of the
Brinson Strategic Income Portfolio are being asked to approve or disapprove a
Merger between the Brinson Strategic Income Portfolio and the Alliance Global
Bond Portfolio (Proposal 9). Each Merger is proposed to take place pursuant to
an Agreement and Plan of Acquisition and Termination between the Acquired
Portfolio and the Acquiring Portfolio (the "Agreement"), each of which is in the
form attached to this Prospectus/Proxy Statement as Appendix A.
Each Agreement provides, among other things, for the transfer of all of
the assets of the relevant Acquired Portfolio to the corresponding Acquiring
Portfolio in exchange for (i) the issuance to the Acquired Portfolio of the
Class A and Class B Merger Shares, the number of which will be calculated by
dividing the value of the net assets attributable to the Class H and Class I
shares, respectively, of the Acquired Portfolio acquired by the Acquiring
Portfolio by the net asset value per Class A and Class B share of the relevant
Acquiring Portfolio and (ii) the assumption by the relevant Acquiring Portfolio
of all of the stated liabilities of the Acquired Portfolio, all as more fully
described below under "Information About the Mergers."
After receipt of the Merger Shares, each Acquired Portfolio will cause the
Class A Merger Shares to be distributed to its Class H shareholders, and the
Class B Merger Shares to be distributed to its Class I shareholders, in
termination of the Acquired Portfolio. Each shareholder of an Acquired Portfolio
will receive a number of full and fractional Class A and Class B Merger Shares
equal in value as of Closing Date to the aggregate value of the shareholder's
Class H and Class I Acquired Portfolio shares.
-41-
Trustees' Recommendations
The Brinson Trustees have voted unanimously to approve each Merger and to
recommend that shareholders of each Acquired Portfolio also approve the
applicable Merger.
Required Shareholder Vote
Approval of each Merger requires the approval of a "majority of the
outstanding voting securities" of the Portfolio, which, as defined in the 1940
Act, means the lesser of (A) 67% or more of the shares of the Portfolio present
at a meeting, if the holders of more than 50% of the outstanding shares of the
Portfolio are present or represented by proxy, or (B) more than 50% of the
outstanding shares of the Portfolio.
Background and Reasons for the Proposed Merger
The Brinson Trustees, including all of the Brinson Trustees who are not
"interested persons" of the Brinson Portfolios (the "Independent Trustees"),
have unanimously determined that each Merger would be in the best interests of
the relevant Acquired Portfolio, and that the interests of each Acquired
Portfolio's shareholders would not be diluted as a result of effecting its
Merger. At a meeting held on July 25, 2001, the Brinson Trustees unanimously
approved each proposed Merger and recommended approval by shareholders. In
determining whether to approve each Merger and to recommend its approval to
shareholders, the Brinson Trustees, including the Independent Trustees,
considered the potential impact of the Mergers on Brinson Trust shareholders and
a variety of factors relating thereto, including among others: 1) the expertise,
resources and historical performance of Alliance; 2) the viability of, and
expense involved in operating, each Acquired Portfolio on a stand-alone basis;
3) the fact that the Acquired Portfolios are currently being subadvised by
Alliance; 4) the terms and conditions of the Agreements and Plans of Acquisition
and Termination, including provisions intended to avoid any dilution of
shareholder interests; 5) the compatibility of the investment objectives,
policies and limitations of each Acquired Portfolio and corresponding Acquiring
Portfolio; 6) the historical and projected operating expenses of the Acquired
Portfolios and the Acquiring Portfolios; 7) the historical performance of the
Acquired Portfolios and the Acquiring Portfolios; 8) the fact that Alliance and
Brinson will share equally all of the expenses associated with the Mergers,
other than portfolio transfer costs (if any), brokerage and other similar
expenses, all of which will be borne by the relevant Brinson Portfolio; 9) any
direct or indirect costs to be incurred by the Acquired Portfolios or Acquiring
Portfolios as a result of each Merger; 10) the tax consequences of each Merger;
11) the fact that seed capital will be redeemed from the High Income Portfolio
and the Strategic Income Portfolio prior to the consummation of the Merger; and
12) possible alternatives to the Merger.
[Furthermore, the Brinson Trustees took into account the capital loss
carry-forwards for each Acquired Portfolio and each Acquiring Portfolio, and the
unrealized capital appreciation in each Acquired Portfolio and each Acquiring
Portfolio, in each case as a percentage of each Portfolio's total net assets.]
In reaching the decision to recommend approval of each Merger, the Brinson
Trustees concluded that each Merger is in the
-42-
best interests of each Acquired Portfolios and its respective shareholders. The
principal reasons why the Brinson Trustees recommend each Merger are as follows:
(i) Sustainable decreases in overall expenses. The Mergers are expected to
result in aggregate operating expenses that would be lower than those expected
to be borne by the Acquired Portfolios as described more fully in the Overview
under "Operating Expenses." Of course, there can be no assurance that the
Mergers will result in savings in operating expenses to shareholders.
(ii) Appropriate investment objectives, diversification, etc. The investment
objective, policies, and restrictions of each Acquiring Portfolio are, in
general, substantially similar to those of each corresponding Acquired
Portfolio. Although the investment objectives and policies of certain of the
Acquired Portfolios are different from those of the corresponding Acquiring
Portfolios (as described above in "Comparison of Investment Objectives, Policies
and Restrictions"), because of the similarity between the broader goals of each
Acquiring Portfolio and those of its respective Acquired Portfolio, the Brinson
Trustees believe that an investment in shares of each Acquiring Portfolio will
provide Acquired Portfolio shareholders with an investment opportunity
comparable to that currently afforded by the corresponding Acquired Portfolio.
(iii) Economics of Scale. The Brinson Trustees further believe that the greater
size of each combined Portfolio will offer Brinson shareholders greater
prospects for efficient Portfolio management and economic viability, as well as
the potential for reduced investment risk because of the opportunities for
additional diversification of portfolio investments.
-43-
================================================================================
INFORMATION ABOUT THE MERGERS
Agreement and Plan of Acquisition and Termination
Each proposed Agreement and Plan of Acquisition and Termination provides
that the relevant Acquiring Portfolio will acquire all of the assets of the
corresponding Acquired Portfolio in exchange for the issuance of Class A and
Class B Merger Shares and for the assumption by the Acquiring Portfolio of the
stated liabilities of the Acquired Portfolio, all as of the Effective Time
(defined in each Agreement to be 4:00 p.m. on the Closing Date). The following
discussion of the Agreements is qualified in its entirety by the full text of
each Agreement, the form of which is attached as Appendix A to this
Prospectus/Proxy Statement.
At the Effective Time, each Acquired Portfolio will sell all of its assets
to the corresponding Acquiring Portfolio, and, in exchange, the Acquiring
Portfolio will assume the stated liabilities of the Acquired Portfolio and
deliver to the Acquired Portfolio (i) a number of full and fractional Class A
Merger Shares having an aggregate net asset value equal to the aggregate net
asset value of the Acquired Portfolio attributable to its Class H shares, less
the value of the liabilities of the Acquired Portfolio assumed by the Acquiring
Portfolio attributable to the Class H shares of the Acquired Portfolio, and (ii)
a number of full and fractional Class B Merger Shares having an aggregate net
asset value equal to the aggregate net asset value of the Acquired Portfolio
attributable to its Class I shares, less the value of the liabilities of the
Acquired Portfolio assumed by the Acquiring Portfolio attributable to the Class
I shares of the Acquired Portfolio.
At or as soon as reasonably practical after the Effective Time, each
Acquired Portfolio will terminate by transferring to its shareholders of record
as of the Effective Time the full and fractional Merger Shares received by the
Acquired Portfolio, with Class A Merger Shares being distributed to holders of
Class H shares of the Acquired Portfolio and Class B Merger Shares being
distributed to holders of Class I shares of the Acquired Portfolio. As a result
of the proposed transaction, each holder of Class H and Class I shares of the
Acquired Portfolio will receive a number of Class A and Class B Merger Shares
equal in aggregate net asset value at the Effective Time to the aggregate net
asset value of the Class H and Class I shares, respectively, of the Acquired
Portfolio held by the shareholder. Each Acquiring Portfolio shall record on its
books the ownership by the corresponding Acquired Portfolio's shareholders of
the Class A and Class B Merger Shares, and the Acquired Portfolio shall
simultaneously redeem and cancel on its books all of its issued and outstanding
Class H and Class I shares.
The consummation of each Merger is subject to the conditions set forth in
the Agreement, any of which may be waived by the party entitled to its
protections, except for the condition requiring shareholder approval of the
Agreement. The Agreement may be terminated and the Merger abandoned at any time,
before or after approval by the shareholders of the Acquired Portfolio, prior to
the Effective Time, by a majority of either the Alliance Directors or the
Brinson Trustees if (i) any of the Portfolio's conditions precedent set forth in
the Agreement has not been fulfilled or (ii)
-44-
the Alliance Directors or the Brinson Trustees determine that the consummation
of the Acquisition is not in the best interests of the Portfolio or its
shareholders and gives notice of such termination to the other party.
All expenses incurred in connection with the Agreement, and all
transactions contemplated thereby, (other than portfolio transfer cost (if any),
brokerage and other similar expenses, all of which will be borne by the relevant
Portfolio, except that such expenses, if any, incurred in connection with the
redemption of seed capital from the High Income Portfolio and the Strategic
Income Portfolio will not be excluded) will be borne equally by Alliance and
Brinson Advisors. Notwithstanding the foregoing, expenses will in any event be
paid by the party directly incurring such expenses if and to the extent that the
payment by any other party of such expenses would result in the disqualification
of the first party as a "regulated investment company" within the meaning of
Section 851 of the Code. Neither Brinson Advisors nor the Brinson Trust is
currently aware of any such expenses and neither Brinson Advisors nor the
Brinson Trust believe that any will be incurred in connection with the Mergers.
Indemnification of Acquiring Funds
In connection with the Mergers, Brinson Advisors has agreed to indemnify
each Acquiring Fund and its affiliates from and against losses which it may
suffer as a result of any undisclosed liabilities, whether absolute, accrued,
contingent or otherwise, and to reimburse such Acquiring Fund and its affiliates
for any reasonable legal or other costs and expenses incurred by it or its
affiliates in connection with discharging, investigating or defending against
any such liability.
Description of the Merger Shares
Full and fractional Merger Shares will be issued to each Acquired
Portfolio's shareholders in accordance with the procedure under the Agreement as
described above. The Merger Shares are Class A and Class B shares of the
Acquiring Portfolio, which have characteristics substantially similar to,
respectively, those of the Class H and Class I shares of each Acquired Portfolio
with respect to 12b-1 servicing and/or distribution fees. Class H and Class A
shares are purchased at net asset value. Class I and Class B shares are also
sold and redeemed at net asset value and, pursuant to separate Rule 12b-1 Plans
adopted by the respective Portfolio, Class B and Class I shares each pay an
annual distribution fee of 0.25% of average daily net assets. The level of
annual distribution fees payable by Class B shares could be increased to 0.50%
of the average daily net assets attributable to such class without a vote of the
shareholders.
Each of the Merger Shares will be fully paid and nonassessable by the
Acquiring Portfolio when issued, will be transferable without restriction, and
will have no preemptive or conversion rights.
See the Alliance Prospectus for more information about the characteristics
of Class A and Class B shares of the Acquiring Portfolios.
Organization
The following is a summary of the major differences between the governing
documents and laws applicable to each of the Acquiring Funds and the Acquired
Funds.
The Brinson Trust is organized as a Massachusetts business trust and the
Alliance Fund is organized as a Maryland corporation. Except as otherwise noted
-45-
below, the provisions of Maryland law and the Articles of Incorporation (the
"Alliance Articles") and Bylaws (the "Alliance Bylaws") of the Alliance Fund are
substantially similar to those of Massachusetts law, the Declaration of Trust
(the "Brinson Declaration of Trust") and the Bylaws (the "Brinson Bylaws") of
the Brinson Trust. All of the Acquiring Portfolios and the Acquired Portfolios
are subject to the 1940 Act.
Meetings of Shareholders
The Brinson Declaration of Trust gives the Brinson Trustees and
shareholders holding at least 10% of the shares then outstanding the right to
call (or cause to be called) a special meeting of shareholders. By contrast, the
Alliance Bylaws enable a special meeting of the shareholders to be called by the
chairman of the board, the president, the Board of Directors, or upon the
written request of shareholders entitled to cast 25% of the votes at such
special meeting, by the secretary.
Quorums
The Brinson Declaration of Trust provides that a majority of shares
entitled to vote constitutes a quorum at a shareholders' meeting. The Alliance
Articles provide that one-third of the shares entitled to vote constitutes a
quorum at shareholder meetings. Unlike the Brinson Declaration of Trust, which
provide that a majority of Trustees constitutes a quorum for a meeting of
Trustees, the Alliance Bylaws provide that one-third of the Directors (but no
fewer than two) constitutes a quorum for a meeting of Directors.
Number of Directors
The Brinson Declaration of Trust provides for a minimum of one and a
maximum of 15 Trustees. The Alliance Articles provide that the number of
Directors shall initially be one and may be increased or decreased by a majority
of the entire board of directors, but shall not be greater than 20.
Removal of Trustees or Directors
The Brinson Declaration of Trust provides that a Trustee may be removed
(i) with or without cause at any time by written instrument signed by at least
two-thirds of the Trustees, or (ii) at any special meeting of shareholders of
the Brinson Trust by a vote of at least two-thirds of the outstanding shares.
Pursuant to Maryland law and the Alliance Bylaws, any Director may be removed
with or without cause at any meeting of shareholders at which a quorum is
present by the affirmative vote of a majority of the votes entitled to be cast.
Indemnification of Trustees, Directors and Officers
The Brinson Declaration of Trust provides that every person who is or has
been a Trustee or an officer shall be indemnified to the fullest extent
permitted by Massachusetts law against all liabilities and against all expenses
reasonably incurred in connection with any indemnifiable claim. However, no
indemnification is provided (i) to any person who is adjudicated by a court (a)
to be liable to the Brinson Trust by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of such person's duties, or (b) not to
have acted in good faith in the reasonable belief that his action was in the
best interest of the Brinson Trust, or (ii) in the event of a settlement, unless
there is a determination that the Trustee or officer did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office, (a) by the court
-46-
approving the settlement, (b) by a majority of the disinterested Trustees, or
(c) by written opinion of independent legal counsel.
Similarly, the Alliance Articles indemnify current and former directors
and officers and those persons who, at the Alliance Fund's request serve or have
served another organization as a director or officer to the maximum extent
permitted under Maryland Law. Under Maryland law, a corporation may indemnify
any director against liabilities for acts incurred by reason of service as a
director unless it is established that (i) the act or omission was material to
the matter giving rise to the proceeding and (a) was committed in bad faith or
(b) was the result of active and deliberate dishonesty, (ii) the director
actually received an improper personal benefit or (iii) in the case of a
criminal proceeding, the director had reasonable cause to believe the act or
omission was unlawful. In addition, indemnification may not be made (i) in a
proceeding by or in the right of the corporation where the director is found
liable to the corporation (a "Corporate Liability") or (ii) in a proceeding
charging improper personal benefit where the director is found to be liable
because such benefit was improperly received, whether or not involving action in
the director's official capacity (a "Personal Liability").
Maryland law also provides that indemnification is not payable by a
corporation unless a determination has been made that the director has met the
standard of conduct noted in the foregoing paragraph. Such determination may be
made by (i) a vote of a majority of a quorum of directors consisting of
directors not, at the time, parties to the proceedings, or, if such a quorum
cannot be obtained, then by a majority vote of a committee of the board
(designated by a majority of the board in which directors who are parties may
participate) consisting solely of two or more directors not, at the time,
parties to such proceedings, (ii) special legal counsel selected by the board or
a committee as set forth in (i) above, or if the quorum of the full board cannot
be obtained and the committee cannot be established, by a majority vote of the
full board in which directors who are parties may participate, or (iii) the
stockholders. Upon the application of a director, a court may order
indemnification if it determines that (i) a director is entitled to
reimbursement because such director has been successful, on the merits or
otherwise, in the defense of a proceeding in which such director has been
determined to have met the applicable standards of conduct or (ii) whether or
not the director has met the applicable standards of conduct, the director is
entitled to indemnification in view of all the relevant circumstances, provided
that the indemnification payment shall be limited to the director's expenses in
cases involving Corporate Liability or Personal Liability.
The Brinson Declaration of Trust provides that indemnification expenses
may be paid in advance only if (i) there is an undertaking to repay the advance
and appropriate security for such undertaking is given, (ii) the relevant
Portfolio is insured against losses arising from any such advance payments, or
(iii) either a majority of the disinterested Trustees, or independent legal
counsel, in a written opinion, determines that there is reason to believe that
the indemnified persons will be found to be entitled to indemnification. Under
Maryland law, indemnification expenses may be paid in advance of the final
disposition if a director provides (i) a written affirmation of
-47-
his good faith belief that the standard of conduct necessary for indemnification
has been met, and (ii) a written undertaking to repay the amount if it is
determined that the standard of conduct has not been met. This undertaking need
not be secured.
Personal Liability
Under Massachusetts law, shareholders of a Massachusetts business trust
could, under certain circumstances, be held personally liable for the
obligations of the trust. However, the Brinson Declaration of Trust disclaims
shareholder liability for acts or obligations of the Brinson Trust and requires
that notice of such disclaimer be given in each agreement, undertaking, or
obligation entered into or executed by the Brinson Trust, the Acquired
Portfolios or the Brinson Trustees. The Brinson Declaration of Trust provides
for indemnification out of Acquired Portfolio property for all loss and expense
of any shareholder held personally liable for the obligations of the Acquired
Portfolio. Thus, the risk of a shareholder's incurring financial loss from
shareholder liability is limited to circumstances in which the Acquired
Portfolio would be unable to meet its obligations. The likelihood of such a
circumstance is considered remote. Under Maryland law, shareholders have no
personal liability for acts or obligations of the corporation.
Termination
The Brinson Declaration of Trust provides that the Brinson Trust or any
series thereof may be terminated by a "majority of the outstanding voting
securities" (which, as defined in the 1940 Act, means the lesser of (A) 67% or
more of the shares of the portfolio present at a meeting, if the holders of more
than 50% of the outstanding shares of the portfolio are present or represented
by proxy, or (B) more than 50% of the outstanding shares of the portfolio) of
the series or the Trust, or by the Trustees without obtaining a "majority of the
outstanding voting securities" if a majority of the Trustees makes a
determination that the continuation of a Series or the Trust is not in the best
interests of such Series or Trust or their respective shareholders. Under
Maryland law, a corporation may be dissolved by vote of the majority of the
Directors.
Amendments
The Brinson Declaration of Trust may be amended by a majority of the Brinson
Trustees, as long as the amendment does not adversely affect the rights of any
shareholder. If an Amendment adversely affects the rights of shareholders, it
may be adopted by a majority of the Brinson Trustees when authorized to do so by
a "majority of the outstanding voting securities." The Brinson Bylaws may be
amended by a majority of the Brinson Trustees. The Alliance Articles may be
amended by a vote of two-thirds of all the votes entitled to be cast by the
shareholders. The Alliance Bylaws may only be amended by the Directors.
Federal income tax consequences
As long as the Contracts funded through the separate accounts of the
insurance company shareholders qualify as annuity contracts under Section 72 of
the Internal Revenue Code, the Mergers will not create any tax liability for
Contract Owners.
Each Acquired Portfolio and each Acquiring Portfolio will receive an
opinion from Ropes & Gray, special counsel to the Alliance Fund, to the effect
that, on the basis
-48-
of the existing provisions of the Code, current administrative rules and court
decisions, for federal income tax purposes: (i) under Section 361 of the Code,
no gain or loss will* be recognized by the Acquired Portfolio as a result of the
Merger; (ii) under Section 354 of the code, no gain or loss will* be recognized
by shareholders of the Acquired Portfolio on the distribution of Merger Shares
to them in exchange for their shares of the Acquired Portfolio; (iii) under
Section 358 of the Code, the aggregate tax basis of the Merger Shares that the
Acquired Portfolio's shareholders receive in exchange for their Acquired
Portfolio shares will* be the same as the aggregate tax basis of the Acquired
Portfolio shares exchanged; (iv) under Section 1223(1) of the Code, an Acquired
Portfolio's shareholder's holding period for the Merger Shares received pursuant
to the Agreement will* be determined by including the holding period for the
Acquired Portfolio shares exchanged for the Merger Shares, provided that the
shareholder held the Acquired Portfolio shares as a capital asset; (v) under
Section 1032 of the Code, no gain or loss will* be recognized by the Acquiring
Portfolio as a result of the reorganization; (vi) under Section 362(b) of the
Code, the Acquiring Portfolio's tax basis in the assets that the Acquiring
Portfolio receives from the Acquired Portfolio will* be the same as the Acquired
Portfolio's tax basis in such assets; and (vii) under Section 1223(2) of the
Code, the Acquiring Portfolio's holding period in such assets will* include the
Acquired Portfolio's holding period in such assets. The opinion will be based on
certain factual certifications made by officers of Brinson Advisors and Alliance
Capital and will also be based on customary assumptions and qualifications.
A substantial portion of the assets of [each Acquired Portfolio] has been
or will be sold in connection with the Mergers of those Portfolios into the
respective Acquiring Portfolios. The actual tax impact of such sales will depend
on the difference between the price at which such portfolio assets are sold and
the selling Portfolio's basis in such assets. Any capital gains recognized in
these sales will be distributed to the selling Portfolio's shareholders (but not
Contract Owners) as capital gain dividends (to the extent of the excess of net
realized long-term capital gains over net realized short-term capital losses)
and ordinary dividends (to the extent of net realized short-term capital gains)
during or with respect to the year of sale, and such distributions will be
taxable to shareholders (but not to the Contract Owners).
For all of the Mergers, prior to the Exchange Date, the Acquired Portfolio
will declare a distribution to its shareholders which, together with all
previous distributions, will have the effect of distributing to its shareholders
all of its investment company taxable income (computed without regard to the
deduction for dividends paid) and net realized capital gains, if any, through
the Exchange Date.
The foregoing description of the federal income tax consequences of the
Mergers is made without regard to the particular circumstances of any
shareholder.
- ----------
* The word "should" applies in place of the word "will" where indicated in the
case of the Mergers involving the Brinson Balanced Portfolio, the Brinson Global
Equity Portfolio and the Brinson High Income Portfolio.
-49-
Shareholders are therefore urged to consult their tax advisers as to the
specific consequences to them of the Mergers, including the applicability and
effect of state, local, foreign and other taxes.
Capitalization
The following tables show the capitalization of each Acquired Portfolio
and each Acquiring Portfolio as of December 31, 2000 and of each Acquiring
Portfolio on a pro forma basis as of that date, giving effect to the proposed
acquisition by the Acquiring Portfolio of the assets and stated liabilities of
the corresponding Acquired Portfolio at net asset value, and in the case of the
High Income Portfolio and the Strategic Income Portfolio, the redemption by
Brinson of its shares of such Portfolio in connection with the merger:
-50-
Capitalization Tables
12/31/00
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
Brinson Balanced Alliance Total Return Pro Forma Combined
Portfolio Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Class H Class I Class A Class A Class B
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets (000's omitted) 13,941 1,719 90,736 104,677 1,719
- ------------------------------------------------------------------------------------------------------------------------------------
Shares outstanding (000's omitted) 1,403 173 5,039 5,812 173
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value per share ($) 9.94 9.91 18.01 18.01 [9.91]
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Brinson Global Equity Alliance International Pro Forma Combined
Portfolio Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Class H Class I Class A Class A Class B
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets (000's omitted) 8,129 616 78,990 87,119 616
- ------------------------------------------------------------------------------------------------------------------------------------
Shares outstanding (000's omitted) 618 47 4,935 5,442 47
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value per share ($) 13.15 13.12 16.01 16.01 [13.12]
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Brinson Global Brinson Strategic Alliance Global Pro Forma
Income Portfolio Income Portfolio* Bond Portfolio Combined
- ------------------------------------------------------------------------------------------------------------------------------------
Class H Class H Class I Class A Class B Class A Class B
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets (000's omitted) 6,295 10,899 2,089 50,325 6,145 67,515 8,234
- ------------------------------------------------------------------------------------------------------------------------------------
Shares outstanding (000's omitted) 587 964 185 4,593 563 6,160 754
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value per share ($) 10.72 11.31 11.31 10.96 10.92 10.96 10.92
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Brinson Growth and Alliance Growth and Pro Forma Combined
Income Portfolio Income Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Class H Class I Class A Class B Class A Class B
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets (000's omitted) 17,471 8,045 596,547 151,739 614,018 159,784
- ------------------------------------------------------------------------------------------------------------------------------------
Shares outstanding (000's omitted) 1,203 555 25,765 6,580 26,523 6,929
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value per share ($) 14.52 14.50 23.15 23.06 23.15 23.06
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Brinson Growth Alliance Growth Pro Forma Combined
Portfolio Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Class H Class I Class A Class B Class A Class B
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets (000's omitted) 21,521 1,853 357,664 54,127 379,185 55,980
- ------------------------------------------------------------------------------------------------------------------------------------
Shares outstanding (000's omitted) 1,436 124 14,252 2,166 15,107 2,240
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value per share ($) 14.99 14.95 25.10 24.99 25.10 24.99
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Brinson High Grade Alliance U.S./High Pro Forma Combined
Fixed Income Portfolio Grade Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Class H Class A Class B Class A Class B
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets (000's omitted) 2,449 58,170 3,627 60,619 3,627
- ------------------------------------------------------------------------------------------------------------------------------------
Shares outstanding (000's omitted) 274 4,979 312 5,190 312
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value per share ($) 8.93 11.68 11.64 11.68 11.64
- ------------------------------------------------------------------------------------------------------------------------------------
* Includes seed capital that will be withdrawn before consummation of the
Acquisition.
-51-
- ------------------------------------------------------------------------------------------------------------------------------------
Brinson High Income Alliance High Yield Pro Forma Combined
Portfolio* Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Class H Class A Class A
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets (000's omitted) 9,042 22,333 31,375
- ------------------------------------------------------------------------------------------------------------------------------------
Shares outstanding (000's omitted) 1,019 2,823 3,966
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value per share ($) 8.88 7.91 7.91
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Brinson Small Cap Alliance Quasar Pro Forma Combined
Portfolio* Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Class H Class I Class A Class B Class A Class B
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets (000's omitted) 4,599 655 232,239 435 236,838 1,090
- ------------------------------------------------------------------------------------------------------------------------------------
Shares outstanding (000's omitted) 333 48 19,617 37 20,003 92
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value per share ($) 13.82 13.76 11.84 11.82 11.84 11.82
- ------------------------------------------------------------------------------------------------------------------------------------
* Includes seed capital that will be withdrawn before consummation of the
Acquisition.
-52-
================================================================================
VOTING INFORMATION
Record date, quorum and method of tabulation
Shareholders of record of each Acquired Portfolio at the close of business on
August 10, 2001 (the "Record Date") will be entitled to notice of and to vote at
the Meeting or any adjournment thereof. The holders of a majority of the shares
of each Acquired Portfolio outstanding at the close of business on the Record
Date present in person or represented by proxy will constitute a quorum for the
Meeting. Shareholders are entitled to one vote for each share held, with
fractional shares voting proportionally. Class H and Class I shareholders of
each Acquired Portfolio will vote together as a single class in connection with
the approval or disapproval of the Mergers. Shareholders of each Acquired
Portfolio will vote only on the approval or disapproval of that Portfolio's
Merger.
Votes cast by proxy or in person at the Meeting will be counted by persons
appointed by the Brinson Trustees as tellers for the Meeting. The tellers will
count the total number of votes cast "for" approval of each Proposal for
purposes of determining whether sufficient affirmative votes have been cast.
Proxies with respect to which an Account has not received instructions will be
voted for, voted against, or withheld from voting on each proposal in the same
proportion as the other outstanding shares of the same Portfolio held by such
Account are voted. The tellers will count broker non-votes as shares that are
present and entitled to vote on the matter for purposes of determining the
presence of a quorum. So long as a quorum is present, abstentions and broker
non-votes have the effect of negative votes on the Merger.
[Insert language re voting of seed capital shares redeemed in connection
with the Mergers - confirming applicable provisions of Mixed and Shared Funding
Order.]
Shares outstanding and beneficial ownership.
As of the Record Date, as shown on the books of the Acquired Portfolio,
there were issued and outstanding the following number of shares of beneficial
interest of each class of each Acquired Portfolio.
Class H Class I
Brinson Balanced Portfolio
Brinson Global Equity Portfolio
Brinson Global Income Portfolio N/A
Brinson Growth and Income Portfolio
Brinson Growth Portfolio
Brinson High Grade Portfolio N/A
Brinson High Income Portfolio N/A
Brinson Small Cap Portfolio
Brinson Strategic Income Portfolio
To the knowledge of the Trust's management, as of the Record Date, there
were no Contract Owners with the ability to provide voting instructions with
respect to more than 5% of a class of an Acquired Portfolio's shares. However,
the proportionate voting by the insurance companies of shares for which no
voting instruction cards are returned may result in certain Contract Owners'
instructions affecting the vote of 5% or more of the outstanding shares of a
class. Brinson Advisors and the following insurance company separate accounts
are shown on the Brinson Trust's records as owning 5% or more of a class of a
Portfolio's shares as of the Record Date: [table of record 5% shareholders
follows]
Solicitation of instructions.
-53-
Solicitation of instructions by personal interview, mail, or telephone,
may be made by officers and Brinson Trustees and employees of Brinson Advisors
and Alliance and their affiliates. The costs for solicitation of instructions,
like the other costs associated with the Mergers, will be borne by Brinson
Advisors and Alliance. See "Information About The Merger."
Revocation of Instructions
Any Contract Owner giving instructions has the power to revoke such
instructions by mail by executing superseding instructions or by voting in
person. All properly executed instructions received in time for the Meeting will
be voted as specified in the instructions.
Shareholder Proposals At Future Meetings of Shareholders
The Brinson Declaration of Trust does not provide for annual meetings of
shareholders and the Brinson Trust does not currently intend to hold such a
meeting in 2001. Shareholder proposals to be considered at any subsequent
meeting of any Acquired Portfolio's shareholders must be received by the Brinson
Trust within a reasonable period of time prior to any such meeting. If the
Merger of an Acquired Portfolio is consummated, that Portfolio's existence will
terminate on the Closing Date, or shortly thereafter, after which there would be
no meetings of the shareholders of that Brinson Portfolio.
Adjournment
If sufficient votes in favor of any Proposal are not received by the time
scheduled for the Meeting, the persons named as proxies may propose one or more
adjournments of the Meeting to permit further solicitation of proxies. Any
adjournment will require the affirmative vote of a majority of the votes cast on
the question in person or by proxy at the session of the Meeting to be
adjourned. If the Meeting is adjourned only with respect to one Proposal, any
other Proposal may still be acted upon by the shareholders. The persons named as
proxies will vote in favor of such adjournment those proxies, which they are
entitled to vote in favor of the Proposal. They will vote against any such
adjournment those proxies required to be voted against the Proposal. Brinson
Advisors and Alliance will pay the costs of any additional solicitation and of
any adjourned session.
[Third Party Proxy Solicitation
As noted above, ___________ has been retained to assist with solicitation
activities in connection with the Mergers (including assembly and mailing of
materials to Contract Owners). Brinson Advisors and Alliance have estimated the
cost of these services to be approximately $___.]
-54-
INFORMATION ABOUT THE PORTFOLIOS
Other information regarding the Acquired and Acquiring Portfolios,
including information with respect to their investment objectives, policies and
restrictions and financial histories, may be found in, respectively, the Brinson
Prospectus, the Brinson SAI and the Brinson Trust Annual Report, which are
available free of charge upon request by calling 1-800-986-0088; and in the
Alliance Prospectus which accompanies this Prospectus/Proxy Statement, the
Merger SAI, the Alliance SAI and the Alliance Fund Annual Reports, which are
available free of charge upon request by calling 1-800-277-4618.
Proxy materials, reports and other information filed by the Brinson Trust
with respect to the Brinson Portfolios and by the Alliance Fund with respect to
the Alliance Portfolios can be inspected and copied at the SEC's public
reference room, located at 450 5th Street NW, Room 1200, Washington DC 20549.
You may call the Commission at 1-202-942-8090 for information about the
operation of the public reference rooms. You may also access reports and other
information about the Trusts on the EDGAR database or the Commission's Internet
site at http://www.sec.gov. You may also obtain copies of this information, with
payment of a duplication fee, by electronic request at the following email
address: publicinfo@sec.gov or by writing the Public Reference Section of the
Commission, Washington, D.C. 20549-6009. You may need to refer to the following
file numbers:
File No. 811-4919: Brinson Series Trust
File No. 811-05398: Alliance Variable Products Series Fund, Inc.
Certain information and commentary from the Acquiring Portfolios' most
recent annual reports relating to the Acquiring Portfolios' recent investment
performance is set forth in Appendix B to this Prospectus/Proxy Statement.
August 27, 2001
-55-
Appendix A
FORM OF AGREEMENT AND PLAN OF ACQUISITION AND TERMINATION
As of
[ ], 2001
This Agreement and Plan of Acquisition and Termination (the "Plan") is made as
of this [__] day of [__________], 2001, by and between ________________
Portfolio (the "Acquiring Fund"), a series of Alliance Variable Products Series
Fund, Inc., a Maryland corporation ("AVP"), and [___________] Portfolio (the
"Acquired Fund"), a series of Brinson Series Trust, a Massachusetts business
trust ("BST"). All agreements, representations, actions and obligations herein
that are made or to be taken or undertaken by the Acquiring Fund or the
Acquired Fund are made and shall be taken or undertaken by AVP or BST,
respectively, on its behalf.
WHEREAS, the Acquiring Fund and the Acquired Fund are open-end management
investment companies registered with the Securities and Exchange Commission
(the "SEC") under the Investment Company Act of 1940, as amended (the "1940
Act");
WHEREAS, the parties desire that the Acquiring Fund acquire the assets and
assume the Liabilities of the Acquired Fund in exchange for shares of equal net
asset value of the Acquiring Fund and the distribution of such shares of the
Acquiring Fund to the shareholders of the Acquired Fund (the "Acquisition") and
that the Acquired Fund thereafter liquidate and dissolve; and
WHEREAS, the parties intend that the Acquisition qualify as a "reorganization"
within the meaning of section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"), and that with respect to the Acquisition, the Acquiring
Fund and the Acquired Fund will each be a "party to a reorganization" within
the meaning of section 368(b) of the Code;
Now, therefore, the Acquiring Fund and the Acquired Fund agree as follows:
A-1
1. Definitions.
In addition to the terms elsewhere defined herein, each of the following terms
shall have the meaning indicated for that term as follows:
1933 Act Securities Act of 1933, as amended.
1934 Act Securities Exchange Act of 1934, as amended.
Assets All assets of any kind and all interests,
rights, privileges and powers of or
attributable to the Acquired Fund or any
class of the Acquired Fund's shares, as
appropriate, at the Effective Time (or, for
purposes of Section 4(d) hereof, the time
of delivery of the list referred to
therein), whether or not determinable at
the Effective Time and wherever located,
including, without limitation, all cash,
cash equivalents, securities, claims
(whether absolute or contingent, known or
unknown, accrued or unaccrued or conditional
or unmatured), contract rights and
receivables (including dividend and interest
receivables) owned by the Acquired Fund or
attributable to any class of the Acquired
Fund's shares and any deferred or prepaid
expense shown as an asset on the Acquired
Fund's books.
Closing Date Such date prior to December 31, 2001 as the
parties agree to.
A-2
Effective Time 4:00 p.m. Eastern time on the Closing Date,
or such other time as the parties may agree
to in writing.
Financial Statements The audited financial statements of the
relevant Fund for its most recently
completed fiscal year and, if applicable,
the unaudited financial statements of that
Fund for its most recently completed semi-
annual period.
Fund The Acquiring Fund and/or the Acquired
Fund, as the case may be.
Liabilities All liabilities of the Acquired Fund at the
Effective Time, whether accrued or unaccrued,
absolute or contingent or conditional or
unmatured, but only to the extent disclosed
or provided for in the most recent Financial
Statements of the Acquired Fund referred to
in paragraph 6(i) and not identified by the
Acquired Fund to the Acquiring Fund as
having been paid or provided for on or prior
to the Closing Date, or otherwise disclosed
in writing to, and accepted by, the Acquiring
Fund as of the Valuation Time.
N-14 Registration Statement The Registration Statement of the Acquiring
Fund on Form N-14 under the 1940 Act that
will register the shares of the Acquiring
Fund to be issued in the Acquisition and
will include the proxy materials necessary
for the shareholders of the Acquired Fund
to approve the Acquisition.
A-3
Valuation Time The time on the Closing Date, or the
business day immediately preceding the
Closing Date if the Closing Date is not a
business day or such other date as the
parties may agree to in writing, when for
purposes of this Plan the Acquiring Fund
determines its net asset value per share
and the Acquired Fund determines the net
value of the Assets.
2. Regulatory Filings.
The Acquiring Fund shall promptly prepare and file the N-14 Registration
Statement with the SEC, and each Fund also shall make any other required or
appropriate filings with respect to the actions contemplated hereby. Each
Fund, if requested, shall use reasonable commercial efforts to cooperate in
such filings.
3. Shareholder Action
As soon as practicable after the effective date of the N-14 Registration
Statement, the Acquired Fund shall hold a shareholder meeting to consider and
approve the Acquisition and this Plan, and such other matters as the Trustees
of BST may determine. Such approval by the shareholders of the Acquired Fund
shall, to the extent necessary to permit the consummation of the transactions
contemplated herein without violating any investment objective, policy or
restriction of the Acquired Fund, be deemed to constitute approval by the
shareholders of a temporary amendment of any investment objective, policy or
restriction that would otherwise be inconsistent with or violated upon the
consummation of such transactions solely for the purpose of consummating such
transactions.
A-4
4. Transfer of the Acquired Fund's Assets. Each Fund shall take the following
steps with respect to the Acquisition, as applicable:
(a) Prior to the Effective Time, the Acquired Fund shall declare and pay to its
shareholders a dividend and/or other distribution in an amount such that it
will have distributed substantially all of its theretofore undistributed
investment company taxable income, (as defined in section 852 of the Code, if
any, and net capital gain (as defined in Code section 1222), if any.
(b) At the Effective Time, the Acquired Fund shall assign, transfer, deliver
and convey the Assets to the Acquiring Fund, subject to the Liabilities. The
Acquiring Fund shall then accept the Assets and assume the Liabilities such
that at and after the Effective Time (i) the Assets at or after the Effective
Time shall become and be assets of the Acquiring Fund, and (ii) the Liabilities
at the Effective Time shall attach to the Acquiring Fund, enforceable against
the Acquiring Fund to the same extent as if initially incurred by the Acquiring
Fund.
(c) Within a reasonable time prior to the Closing Date, the Acquired Fund shall
provide, if requested, a list of the Assets to the Acquiring Fund. The
Acquired Fund may sell any Asset on such list prior to the Effective Time.
After the Acquired Fund provides such list, the Acquired Fund will not acquire
any additional securities or permit to exist any encumbrances, rights,
restrictions or claims not reflected on such list, without the approval of the
Acquiring Fund. Within a reasonable time after receipt of the list and prior
to the Closing Date, the Acquiring Fund will advise the Acquired Fund in
writing of any investments shown on the list that the Acquiring Fund has
determined to be inconsistent with its investment objective, policies and
restrictions. The Acquired Fund will dispose of any such securities prior to
A-5
the Closing Date to the extent practicable and consistent with applicable legal
requirements, including the Acquired Fund's investment objectives, policies and
restrictions. In addition, if the Acquiring Fund determines that, as a result
of the Acquisition, the Acquiring Fund would own an aggregate amount of an
investment that would exceed a percentage limitation applicable to the
Acquiring Fund, the Acquiring Fund will advise the Acquired Fund in writing of
any such limitation and the Acquired Fund shall dispose of a sufficient amount
of such investment as may be necessary to avoid the limitation as of the
Effective Time, to the extent practicable and consistent with applicable legal
requirements, including the Acquired Fund's investment objectives, policies and
restrictions.
(d) The Acquired Fund shall assign, transfer, deliver and convey the Assets to
the Acquiring Fund at the Effective Time on the following basis:
(1) the Acquiring Fund shall simultaneously issue and deliver to the
Acquired Fund that number of full and fractional shares of common stock
of each class of the Acquiring Fund, rounded to the third decimal place
or such other decimal place as the parties may agree to in writing,
determined by dividing the value of the Assets less the amount of the
Liabilities attributable to a class of the Acquired Fund by the net asset
value per share of the corresponding class of the Acquiring Fund.
(2) For purposes of paragraph (1), the net asset value per share of each
class of the Acquiring Fund shall be determined as of the Valuation Time
in accordance with the Acquiring Fund's then applicable valuation
procedures, and the value of the Assets and the amount of the Liabilities
shall be determined as of the Valuation Time in accordance with the then
applicable valuation procedures of the Acquired Fund.
A-6
(3) The Acquired Fund shall deliver or make arrangements to deliver the
Assets with good and marketable title to the custodian for the account of
the Acquiring Fund. All cash shall be transferred in the form of
immediately available funds payable to the order of the Acquiring Fund's
custodian.
(e) Promptly after the Closing Date, the Acquired Fund will deliver to the
Acquiring Fund a statement of Assets and Liabilities of the Acquired Fund as of
the Closing Date.
5. Termination and Dissolution of the Acquired Fund, Registration of Shares of
the Acquiring Fund and Access to Records. Each Fund also shall take the
following steps, as applicable:
(a) At or as soon as reasonably practical after the Effective Time, the
Acquired Fund shall terminate by transferring to shareholders of record of each
class of the Acquired Fund full and fractional shares of common stock of the
corresponding class of the Acquiring Fund equal in value to the shares of the
class of the Acquired Fund held by the shareholder. Each shareholder also
shall have the right to receive any unpaid dividends or other distributions
that the Acquired Fund declared with respect to the class of the Acquired
Fund's shares held by the shareholder before the Effective Time. The Acquiring
Fund shall record on its books the ownership by the Acquired Fund's
shareholders of the Acquiring Fund shares so transferred to such shareholders
and the Acquired Fund shall simultaneously redeem and cancel on its books all
of the issued and outstanding shares of each class of the Acquired Fund. The
Acquiring Fund shall issue certificates representing the Acquiring Fund shares
A-7
in accordance with the then current Acquiring Fund prospectus; provided,
however, that the Acquiring Fund shall not issue certificates representing the
Acquiring Fund shares to replace certificates representing Acquired Fund shares
unless the Acquired Fund share certificates are first surrendered to the
Acquiring Fund. Following distribution by the Acquired Fund to its
shareholders of all of the shares of the Acquiring Fund delivered to the
Acquired Fund, the Acquired Fund shall wind up its affairs and shall take all
steps as are necessary and proper to dissolve as soon as is reasonably
practical after the Effective Time.
(b) At and after the Closing Date, the Acquired Fund shall provide the
Acquiring Fund and its transfer agent with immediate access to: (i) all records
containing the names, addresses and taxpayer identification numbers of all of
the Acquired Fund's shareholders and the number and percentage ownership of the
outstanding shares of each class of the Acquired Fund owned by shareholders as
of the Effective Time, and (ii) all original documentation (including all
applicable Internal Revenue Service forms, certificates, certifications and
correspondence) relating to the Acquired Fund shareholders' taxpayer
identification numbers and their liability for or exemption from back-up
withholding. The Acquired Fund shall preserve and maintain, or shall direct
its service providers to preserve and maintain, records with respect to the
Acquired Fund as required by Section 31 of, and Rules 31a-1 and 31a-2 under,
the 1940 Act.
6. Certain Representations and Warranties of the Acquired Fund. BST, on behalf
of the Acquired Fund, represents and warrants to the Acquiring Fund as follows:
(a) The Acquired Fund is a series of BST, a business trust duly formed, validly
existing and in good standing under the laws of the Commonwealth of
A-8
Massachusetts, and has the power to own all of its properties and assets and to
carry out its obligations under this Plan. BST is qualified as a foreign
association in every jurisdiction where required, except to the extent that
failure to so qualify would not have a material adverse effect on BST. The
Board of Trustees of BST duly established and designated each class of the
Acquired Fund as a class of the Acquired Fund. BST is registered with the SEC
as an open-end management investment company under the 1940 Act, and such
registration will be in full force and effect as of the Effective Time.
(b) BST, on behalf of the Acquired Fund has the power and all necessary
federal, state and local qualifications and authorizations to own all its
assets, to carry on its business as now being conducted, to enter into and
carry out this Plan, and to consummate the transactions contemplated herein.
(c) The Board of Trustees of BST has duly authorized the execution and delivery
of this Plan by BST on behalf of the Acquired Fund and the transactions
contemplated herein. Duly authorized officers of BST have executed and
delivered this Plan on behalf of the Acquired Fund. Assuming that this Plan
has been duly authorized and executed by AVP on behalf of the Acquiring Fund,
this Plan represents a valid and binding contract, enforceable in accordance
with its terms, subject as to enforcement to bankruptcy, insolvency,
reorganization, arrangement, moratorium, and other similar laws of general
applicability relating to or affecting creditors' rights and to general equity
principles. The execution and delivery of this Plan does not, and, subject to
the approval of its shareholders referred to in Section 3 hereof, the
consummation of the transactions contemplated by this Plan will not, violate
BST's Declaration of Trust, its By-Laws or any material agreement to which the
Acquired Fund is subject. Except for the approval of the Acquired Fund's
shareholders, BST does not need to take any other action to authorize its
A-9
officers to effectuate this Plan and the transactions contemplated herein on
behalf of the Acquired Fund.
(d) The Acquired Fund has qualified as a regulated investment company under
Part I of Subchapter M of Subtitle A, Chapter 1, of the Code, in respect of
each taxable year since the commencement of its operations and intends to
continue to qualify as a regulated investment company thereunder for its
taxable year ending upon the transfer of Acquiring Fund shares pursuant to
Section 5(a) hereof.
(e) The information pertaining to the Acquired Fund included within the N-14
Registration Statement when filed with the SEC, when Part A of the N-14
Registration Statement is distributed to shareholders, at the time of the
shareholder meeting of the Acquired Fund for approval of the Acquisition and at
the Effective Time shall (i) comply in all material respects with the
applicable provisions of the 1933 Act, the 1934 Act and the 1940 Act, and the
rules and regulations thereunder and applicable state securities laws, and (ii)
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements made
therein not misleading.
(f) On behalf of the Acquired Fund, BST has duly authorized and validly issued
all of the issued and outstanding shares of beneficial interest in the Acquired
Fund, and all such shares are fully paid and non-assessable and were offered
for sale and sold in conformity with the registration requirements of all
applicable federal and state securities laws. There are no outstanding options,
warrants or other rights to subscribe for or purchase any of the shares of the
Acquired Fund, nor are there any securities convertible into shares of the
Acquired Fund.
A-10
(g) The Acquired Fund shall operate its business in the ordinary course between
the date hereof and the Effective Time. Such ordinary course of business will
include the declaration and payment of customary dividends and distributions
and any other dividends and distributions referred to in Section 4(b) hereof.
(h) At the Effective Time, the Acquired Fund will have good and marketable
title to the Assets and full right, power and authority to assign, transfer,
deliver and convey the Assets free and clear of all liens, security interests
and other encumbrances.
(i) The Financial Statements of the Acquired Fund, copies of which have been
previously delivered to the Acquiring Fund, fairly present the financial
position of the Acquired Fund as of the Acquired Fund's most recent fiscal
year-end and, if applicable, as of the most recently completed semi-annual
period, and the results of the Acquired Fund's operations and changes in the
Acquired Fund's net assets for the periods indicated in accordance with
generally accepted accounting principles.
(j) To the knowledge of the Acquired Fund, the Acquired Fund has no
liabilities, whether or not determined or determinable, other than the
Liabilities disclosed or provided for in its Financial Statements or
liabilities incurred in the ordinary course of business subsequent to the date
of the most recent Financial Statement referencing Liabilities.
(k) The Acquired Fund does not know of any claims, actions, suits,
investigations or proceedings of any type pending or threatened against it.
There are no facts that the Acquired Fund has reason to believe are likely to
form the basis for the institution of any such claim, action, suit,
investigation or proceeding against it. The Acquired Fund is not a party to or
subject to the provisions of any order, decree or judgment of any court or
A-11
governmental body that adversely affects, or is reasonably likely to adversely
affect, its financial condition, results of operations, or the Assets or its
ability to consummate the transactions contemplated by this Plan.
(l) Except for agreements entered into or granted in the ordinary course of its
business, in each case under which no material default exists, the Acquired
Fund is not a party to or subject to any material contract, debt instrument,
employee benefit plan, lease, franchise, license or permit of any kind or
nature whatsoever.
(m) The Acquired Fund has filed its federal income tax returns, copies of which
have been previously made available to the Acquiring Fund, for all taxable
years for which such returns are due and has paid all taxes payable pursuant to
such returns. No such return is currently under audit and no unpaid assessment
has been asserted with respect to such returns. The Acquired Fund will timely
file its federal income tax return for each subsequent taxable year including
its current taxable year.
(n) Since the date of the Financial Statements of the Acquired Fund, there has
been no material adverse change in its financial condition, results of
operations, business or Assets. For this purpose, negative investment
performance shall not be considered a material adverse change.
(o) No consent, approval, authorization or order of any court or governmental
authority is required for the consummation by the Acquired Fund of the
transactions contemplated by this Agreement.
7. Certain Representations and Warranties of the Acquiring Fund. AVP, on
behalf of the Acquiring Fund, represents and warrants to the Acquired Fund as
follows:
A-12
(a) AVP is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Maryland and has the power to own all
of its assets and to carry out its obligations under this Plan. The Board of
Directors of AVP duly established and designated the Acquiring Fund as a series
of AVP and each class of shares of the Acquiring Fund as a class of the
Acquiring Fund. AVP is registered with the SEC as an open-end management
investment company under the 1940 Act, and such registration will be in full
force and effect as of the Effective Time.
(b) On behalf of the Acquiring Fund, AVP has the power and all necessary
federal, state and local qualifications and authorizations to own all of its
assets, to carry on its business, to enter into and carry out this Plan, and to
consummate the transactions contemplated herein.
(c) The Board of Directors of AVP has duly authorized the execution and
delivery of this Plan and the transactions contemplated herein by AVP on behalf
of the Acquiring Fund. Duly authorized officers of AVP have executed and
delivered this Plan. Assuming that this Plan has been duly authorized and
executed by BST on behalf of the Acquired Fund, this Plan represents a valid
and binding contract, enforceable in accordance with its terms, subject as to
enforcement to bankruptcy, insolvency, reorganization, arrangement, moratorium
and other similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles. The execution and delivery
of this Plan does not, and the consummation of the transactions contemplated by
this Plan will not, violate the Articles of Incorporation of AVP, its By-Laws
or any material agreement to which the Acquiring Fund is subject. AVP does not
need to take any other action to authorize its officers to effectuate this Plan
and the transactions contemplated herein.
A-13
(d) The Acquiring Fund has qualified as a regulated investment company under
Part I of Subchapter M of Subtitle A, Chapter 1, of the Code in respect of each
taxable year since the commencement of its operations and qualifies and intends
to continue to qualify as a regulated investment company thereunder for its
current taxable year.
(e) The N-14 Registration Statement, when filed with the SEC, when Part A of
the N-14 Registration Statement is distributed to shareholders, at the time of
the shareholder meeting of the Acquired Fund for the approval of the
Acquisition and at the Effective Time, insofar as it relates to the Acquiring
Fund shall (i) comply in all material respects with the applicable provisions
of the 1933 Act, the 1934 Act and the 1940 Act, and the rules and regulations
thereunder and applicable state securities laws, and (ii) not contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements made therein not
misleading.
(f) On behalf of the Acquiring Fund, AVP has duly authorized and validly issued
all of the issued and outstanding shares of common stock of the Acquiring Fund,
and all such shares are fully paid and non-assessable and were offered for sale
and sold in conformity with the registration requirements of all applicable
federal and state securities laws. AVP has duly authorized shares of the
Acquiring Fund to be issued and delivered to the Acquired Fund as of the
Effective Time. When issued and delivered, such shares of the Acquiring Fund
shall be validly issued, fully paid and non-assessable, and no stockholder of
the Acquiring Fund shall have any preemptive right of subscription or purchase
in respect of any such share. There are no outstanding options, warrants or
other rights to subscribe for or purchase any shares of the Acquiring Fund, nor
are there any securities convertible into shares of the Acquiring Fund.
A-14
(g) The Acquiring Fund does not know of any claims, actions, suits,
investigations or proceedings of any type pending or threatened against it.
There are no facts that the Acquiring Fund currently has reason to believe are
likely to form the basis for the institution of any such claim, action, suit,
investigation or proceeding against it. The Acquiring Fund is not a party to
or subject to the provisions of any order, decree or judgment of any court or
governmental body that adversely affects, or is reasonably likely to adversely
affect, its financial condition, results of operations, its assets or its
ability to consummate the transactions contemplated by this Plan.
(h) Except for agreements entered into or granted in the ordinary course of its
business, in each case under which no material default exists, the Acquiring
Fund is not a party to or subject to any material contract, debt instrument,
employee benefit plan, lease, franchise, license or permit of any kind or
nature whatsoever.
(i) AVP, on behalf of the Acquiring Fund, has filed its federal income tax
returns, copies of which have been previously made available to the Acquired
Fund, for all taxable years for which such returns are due and has paid all
taxes payable pursuant to such returns. No such return is currently under audit
and no unpaid assessment has been asserted with respect to such returns. AVP,
on behalf of the Acquiring Fund, will timely file its federal income tax return
for each subsequent taxable year including its current taxable year.
(j) Since the date of the Financial Statements of the Acquiring Fund, there has
been no material adverse change in its financial condition, results of
operations, business or assets. For this purpose, negative investment
performance shall not be considered a material adverse change.
A-15
(k) No consent, approval, authorization or order of any court or governmental
authority is required for the consummation by the Acquiring Fund of the
transactions contemplated by this Plan, other than the effectiveness of the
N-14 Registration Statement.
8. Conditions to the Obligations of each Fund. The obligations of each Fund
with respect to the Acquisition shall be subject to the following conditions
precedent:
(a) The shareholders of the Acquired Fund shall have approved the Acquisition
in the manner required by BST's Declaration of Trust, its By-Laws and
applicable law. If shareholders of the Acquired Fund fail to approve the
Acquisition, that failure shall release the Funds of their obligations under
this Plan.
(b) Each of AVP and BST shall have delivered to the other party a certificate
dated as of the Closing Date and executed in its name by its President, in a
form reasonably satisfactory to the receiving party, stating that the
representations and warranties of the Acquiring Fund or the Acquired Fund, as
applicable, in this Plan are true and correct in all material respects at and
as of the Effective Time.
(c) AVP, on behalf of the Acquiring Fund, and BST, on behalf of the Acquired
Fund, shall have performed and complied in all material respects with each of
its representations and warranties required by this Plan to be performed or
complied with by it prior to or at the Valuation Time and the Effective Time.
(d) There shall have been no material adverse change in the financial
condition, results of operations, business, properties or assets of the
Acquired Fund or the Acquiring Fund since December 31, 2000. For this purpose,
negative investment performance shall not be considered a material adverse
change.
A-16
(e) The Acquiring Fund and the Acquired Fund shall have received an opinion of
Ropes & Gray, in form and substance reasonably satisfactory to each of them,
based upon representations made in certificates provided by the Funds, their
affiliates and/or principal stockholders and dated as of the Closing Date,
substantially to the effect that, based on facts and assumptions stated
therein, for federal income tax purposes:
(1) the Acquisition will constitute a "reorganization" within the meaning
of section 368(a) of the Code and that the Acquiring Fund and the Acquired
Fund will each be "a party to a reorganization" within the meaning of
section 368(b) of the Code;
(2) each stockholder of the Acquired Fund will recognize no gain or loss
on such stockholder's receipt of shares of the Acquiring Fund (including
any fractional share to which the stockholder may be entitled) in exchange
for the stockholder's shares of the Acquired Fund in connection with the
Acquisition;
(3) neither the Acquired Fund nor the Acquiring Fund will recognize any
gain or loss upon the transfer of all of the Assets to the Acquiring Fund
in exchange for shares of the Acquiring Fund and the assumption by the
Acquiring Fund of the Liabilities pursuant to this Plan or upon the
distribution of shares of the Acquiring Fund to stockholders of the
Acquired Fund in exchange for their respective shares of Acquired Fund;
A-17
(4) the holding period and tax basis of the Assets acquired by the
Acquiring Fund will be the same as the holding period and tax basis that
the Acquired Fund had in such Assets immediately prior to the Acquisition;
(5) the aggregate tax basis of the Acquiring Fund shares received in
connection with the Acquisition by each stockholder of the Acquired Fund
(including any fractional share to which the stockholder may be entitled)
will be the same as the aggregate tax basis of the shares of the Acquired
Fund surrendered in exchange therefor;
(6) the holding period of the Acquiring Fund shares received in connection
with the Acquisition by each stockholder of the Acquired Fund (including
any fractional share to which the stockholder may be entitled) will
include the holding period of the shares of the Acquired Fund surrendered
in exchange therefor, provided that such Acquired Fund shares constitute
capital assets in the hands of the stockholder as of the Closing Date; and
the Acquiring Fund will succeed to the capital loss carryovers of the Acquired
Fund, if any, under Section 381 of the Code, but the use by the Acquiring Fund
of any such capital loss carryovers (and of capital loss carryovers of the
Acquiring Fund) may be subject to limitation under section 383 of the Code.
(f) The N-14 Registration Statement shall have become effective under the 1933
Act as to the shares of the Acquiring Fund, and the SEC shall not have
A-18
instituted and to the knowledge of the Acquiring Fund shall not be
contemplating instituting, any stop order suspending the effectiveness of the
N-14 Registration Statement.
(g) No action, suit or other proceeding shall be threatened or pending before
any court or governmental agency in which it is sought to restrain or prohibit,
or obtain damages or other relief in connection with, the Acquisition.
(h) The SEC shall not have issued any unfavorable advisory report under Section
25(b) of the 1940 Act nor instituted any proceeding seeking to enjoin
consummation of the Acquisition under Section 25(c) of the 1940 Act.
(i) Neither party shall have terminated this Plan pursuant to Section 12 of
this Plan.
9. Additional Conditions to the Obligations of the Acquired Fund. The
obligations of the Acquired Fund with respect to the Acquisition shall be
subject to the following additional conditions precedent:
(a) The Acquired Fund shall have received an opinion of counsel to AVP in form
and substance reasonably satisfactory to the Acquired Fund and dated as of the
Closing Date, substantially to the effect that:
(1) AVP is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Maryland and is an open-end,
management investment company registered under the 1940 Act, and the
Acquiring Fund is a duly established series thereof;
A-19
(2) This Plan has been duly authorized, executed and delivered by AVP, on
behalf of the Acquiring Fund, and, assuming due authorization, execution
and delivery of this Plan by BST, on behalf of the Acquired Fund,
represents a legal, valid and binding contract, enforceable in accordance
with its terms, subject to the effect of bankruptcy, insolvency,
moratorium, fraudulent conveyance and transfer and similar laws relating
to or affecting creditors' rights generally and court decisions with
respect thereto, and further subject to the application of equitable
principles in any proceeding, whether at law or in equity or with respect
to the enforcement of provisions of this Plan and the effect of judicial
decisions which have held that certain provisions are unenforceable when
their enforcement would violate an implied covenant of good faith and
fair dealing or would be commercially unreasonable or when default under
this Plan is not material;
(3) The shares of the Acquiring Fund to be delivered as provided for by
this Plan are duly authorized and upon delivery will be validly issued,
fully paid and non-assessable by the Acquiring Fund;
(4) The execution and delivery of this Plan did not, and the consummation
of the Acquisition will not, violate the Articles of Incorporation of
AVP, its By-Laws or any agreement of the Acquiring Fund known to such
counsel, after reasonable inquiry; and
A-20
(5) To the knowledge of such counsel, no consent, approval, authorization
or order of any federal or state court or administrative or regulatory
agency is required for the Acquiring Fund to enter into this Plan or carry
out its terms, except those that have been obtained under the 1933 Act,
the 1940 Act and the rules and regulations under those Acts or that may
be required under state securities laws, or subsequent to the Effective
Time or when the failure to obtain the consent, approval, authorization
or order would not have a material adverse effect on the operation of the
Acquiring Fund.
In rendering such opinion, counsel to AVP may (i) rely on the opinion of
Maryland counsel to the extent set forth in such opinion, (ii) make assumptions
regarding the authenticity, genuineness and/or conformity of documents and
copies thereof without independent verification thereof, (iii) limit such
opinion to applicable federal and state law, (iv) define the word "knowledge"
and related terms to mean the knowledge of attorneys then with such firm who
have devoted substantive attention to matters directly related to this Plan and
(v) rely on certificates of officers or directors of AVP as to factual matters.
10. Additional Conditions to the Obligations of the Acquiring Fund. The
obligations of the Acquiring Fund with respect to the Acquisition shall be
subject to the following additional conditions precedent:
A-21
(a) The Acquiring Fund shall have received an opinion of Kirkpatrick & Lockhart
LLP, as counsel to the Acquired Fund, in form and substance reasonably
satisfactory to the Acquiring Fund and dated as of the Closing Date,
substantially to the effect that:
(1) BST is a business trust duly organized, validly existing and in good
standing under the laws of the Commonwealth of Massachusetts and is an
open-end, management investment company registered under the 1940 Act,
and the Acquired Fund is a duly established series thereof;
(2) This Plan has been duly authorized, executed and delivered by the
Acquired Fund and, assuming due authorization, execution and delivery of
this Plan by AVP, on behalf of the Acquiring Fund, represents a legal,
valid and binding contract, enforceable in accordance with its terms,
subject to the effect of bankruptcy, insolvency, moratorium, fraudulent
conveyance and transfer and similar laws relating to or affecting
creditors' rights generally and court decisions with respect thereto, and
further subject to the application of equitable principles in any
proceeding, whether at law or in equity or with respect to the enforcement
of provisions of this Plan and the effect of judicial decisions which have
held that certain provisions are unenforceable when their enforcement
would violate an implied covenant of good faith and fair dealing or would
be commercially unreasonable or when default under this Plan is not
material;
A-22
(3) The execution and delivery of this Plan did not, and the consummation
of the Acquisition will not, violate the Declaration of Trust of BST, its
By-Laws or any agreement of the Acquired Fund, known to such counsel, after
reasonable inquiry; and
(4) To the knowledge of such counsel, no consent, approval, authorization
or order of any federal or state court or administrative or regulatory
agency is required for the Acquired Fund to enter into this Plan or carry
out its terms, except those that have been obtained under the 1933 Act,
the 1940 Act and the rules and regulations under those Acts or that may be
required under state securities laws or subsequent to the Effective Time
or when the failure to obtain the consent, approval, authorization or
order would not have a material adverse effect on the operation of the
Acquired Fund.
In rendering such opinion, Kirkpatrick & Lockhart, LLP may (i) rely on the
opinion of other counsel to the extent set forth in such opinion, (ii) make
assumptions regarding the authenticity, genuineness and/or conformity of
documents and copies thereof without independent verification thereof, (iii)
limit such opinion to applicable federal and state law, (iv) define the word
"knowledge" and related terms to mean the knowledge of attorneys then with such
firm who have devoted substantive attention to matters directly related to this
Plan and (v) rely on certificates of officers or Trustees of BST as to factual
matters.
A-23
(b) Except to the extent prohibited by Rule 19b-1 under the 1940 Act, the
Acquired Fund shall have declared a dividend or dividends that, together with
all previous such dividends, shall have the effect of distributing to the
shareholders of the Acquired Fund substantially all of its investment company
taxable income, (as defined in Code section 852), if any, and all of its net
capital gain (as defined in Code section 1222), if any.
(c) The Acquiring Fund shall have received a letter from Brinson Advisors, Inc.
in which Brinson Advisors, Inc. agrees to indemnify the Acquiring Fund and its
affiliates in respect of any and all liabilities of the Acquired Fund that are
not reflected in the net asset value of the Acquired Fund as of the Valuation
Time, such agreement to be in a form satisfactory to the Acquiring Fund.
11. Survival of Representations and Warranties. No representations, warranties
or covenants in or pursuant to this Plan (including certificates of officers)
shall survive the completion of the transactions contemplated herein.
12. Termination of Plan. A majority of the Board of Directors of AVP or the
Board of Trustees of BST may terminate this Plan at any time before the
applicable Effective Time if: (i) the conditions precedent to the Fund's
obligations set forth in Sections 8, 9 or 10, as appropriate, are not
satisfied; or (ii) the Board of Directors of AVP or the Board of Trustees of
BST determines that the consummation of the Acquisition is not in the best
interests of the relevant Fund or its shareholders and gives notice of such
termination to the other party.
13. Governing Law. This Plan and the transactions contemplated hereby shall be
governed, construed and enforced in accordance with the laws of the State of
New York, except to the extent preempted by federal law, without regard to
conflicts of law principles.
A-24
14. Brokerage Fees. Each party represents and warrants that there are no
brokers or finders entitled to receive any payments in connection with the
transactions provided for in this Plan.
15. Amendments. The parties may, by agreement in writing authorized by its
respective Board, amend this Plan at any time before or after the shareholders
of the Acquired Fund approve the Acquisition. However, after shareholders of
the Acquired Fund approve the Acquisition, the parties may not amend this Plan
in a manner that materially alters the obligations of either party. This
Section shall not preclude the parties from changing the Closing Date or the
Effective Time by mutual agreement.
16. Waivers. At any time prior to the Closing Date, either party may by written
instrument signed by it (i) waive the effect of any inaccuracies in the
representations and warranties made to it contained herein and (ii) waive
compliance with any of the agreements, covenants or conditions made for its
benefit contained herein. Any waiver shall apply only to the particular
inaccuracy or requirement for compliance waived, and not any other or future
inaccuracy or lack of compliance.
17. Cooperation and Further Assurances. Each party will cooperate with the
other in fulfilling its obligations under this Plan and will provide such
information and documentation as is reasonably requested by the other in
carrying out this Plan's terms. Each party will provide such further
assurances concerning the performance of its obligations hereunder and execute
all documents for or in connection with the consummation of the Acquisition as,
with respect to such assurances or documents, the other shall deem necessary or
appropriate.
A-25
18. Updating of N-14 Registration Statement. If at any time prior to the
Effective Time, a party becomes aware of any untrue statement of a material
fact or omission to state a material fact required to be stated therein or
necessary to make the statements made not misleading in the N-14 Registration
Statement, the party discovering the item shall notify the other party and the
parties shall cooperate in promptly preparing, filing and clearing with the SEC
and, if appropriate, distributing to shareholders appropriate disclosure with
respect to the item.
19. Limitation on Liabilities. The obligations of each Fund shall not bind
any of the directors, trustees, shareholders, nominees, officers, employees or
agents of BST or AVP personally or any series of either AVP or BST except the
parties hereto, but shall bind only the Acquired Fund or the Acquiring Fund, as
appropriate. The execution and delivery of this Plan by an officer of either
party shall not be deemed to have been made by the officer individually or to
impose any liability on the officer personally, but shall bind only BST, on
behalf of the Acquired Fund, or AVP, on behalf of the Acquiring Fund, as
applicable.
20. Termination of the Acquired Fund. If the parties complete the Acquisition,
the Acquired Fund shall terminate and dissolve.
21. Notices. Any notice, report, statement, certificate or demand required or
permitted by any provision of this Plan shall be in writing and shall be given
in person or by telecopy, certified mail or overnight express courier to:
For the Acquired Fund:
[Acquired Fund] of Brinson Series Trust
51 West 52nd St.
New York, New York 10019
Attention: Secretary
A-26
For the Acquiring Fund:
[Acquiring Fund] of Alliance Variable Products Series Fund, Inc.
1345 Avenue of the Americas
New York, New York 10105
Attention: Secretary
22. Expenses. Alliance Capital Management L.P., the investment adviser to the
Acquiring Fund, and Brinson Advisors, Inc., the investment manager to the
Acquired Fund, will share equally all expenses incurred in connection with this
Plan, and all transactions contemplated hereby, whether or not the Acquisition
is consummated.
23. General. This Plan supersedes all prior agreements between the parties
with respect to the subject matter hereof and may be amended only in writing
signed by both parties. The headings contained in this Plan are for reference
only and shall not affect in any way the meaning or interpretation of this
Plan. Whenever the context so requires, the use in this Plan of the singular
will be deemed to include the plural and vice versa. Nothing in this Plan,
expressed or implied, confers upon any other person any rights or remedies
under or by reason of this Plan. Neither party may assign or transfer any right
or obligation under this Plan without the written consent of the other party.
A-27
In Witness Whereof, the parties hereto have executed this Plan as of the day
and year first above written.
BRINSON SERIES TRUST, on behalf of
[Acquired Fund]
Attest:
By:______________________________ By:______________________________
Name: Name:
Title: Title:
A-28
Alliance Variable Products Series
Fund, Inc., on behalf of [Acquiring
Fund]
Attest:
By:______________________________ By:______________________________
Name: Name:
Title: Title:
Accepted and agreed with respect to Section 22 only:
Alliance Capital Management L.P.
By: Alliance Capital Management
Corporation, its General Partner
By:________________________________
Name_______________________________
Title:_____________________________
Accepted and agreed with respect to Section 22 only:
Brinson Advisors, Inc.
By:________________________________
Name_______________________________
Title:_____________________________
A-29
Appendix B
Excerpts from Alliance Fund Annual Report Dated [December 31, 2000]
Management Discussion and Analysis
Alliance Total Return Portfolio
Investment Objective
The Total Return Portfolio seeks to achieve a high return through a
combination of current income and capital appreciation by investing in a
diversified portfolio of common and preferred stocks, senior corporate debt
securities, and U.S. government and agency obligations, bonds and senior debt
securities.
Market Review
In stark contrast to the beginning of the year "New Millennium fanfare,"
the U.S. economy hobbled through year-end in rather tired shape. In 2000, bold
"New Era" proclamations succumbed to the laws of financial gravity and the
Internet was deemed not to be ready for prime time. The NASDAQ imploded (down
39% for the year and 54% off its March high), taking consumer confidence down
with it. As the trajectory of economic growth became less certain, fixed income
and equity investors sharpened their pencils and concluded that the economics of
many a "New Era" business model just would not work. Against this backdrop of
heightened sensitivity to financial risk, conservative assets performed better
than risky assets, reversing the trend of the prior two years (at least in
equities). Generally, global capital markets saw high quality assets perform
better than low quality assets and fixed investments perform better than
equities.
Over the six- and 12-month periods ended December 31, 2000, the Lehman
Government/Credit Index returned 7.36% and 11.85%, respectively. Corporate bonds
underperformed, returning 9.39% for the 12-month period. During 2000, investors
were challenged to avoid problem situations in rapidly deteriorating credits,
both operationally (Bank of America, Conseco, Finova, Xerox, auto part firms and
most retailers) and special situations (Owens Corning and other Asbestos exposed
companies). Decelerating corporate earnings growth, escalating defaults, tighter
credit availability, and expectations of weaker economic growth in 2001 argue
for caution. Many industries continue to be plagued by over-capacity and are
wrestling with short-term pressures from higher energy costs and tight labor
markets.
As for equities, smaller and more mid-sized companies performed better
than large companies, and value stocks significantly outperformed growth stocks.
For the full calendar year,
B-1
value stocks delivered their best returns ever when compared to growth stocks as
the extreme disconnect in last year's market, between the underlying economic
values of businesses as compared to their equity market valuations, appears to
have undergone a substantial adjustment. As measured by the Russell 1000 Value
Index, value stocks were up 7.1%, while growth stocks, as measured by the
Russell 1000 Growth Index, were down 22.4%.
Equities
The Portfolio's equity investments meaningfully outperformed the S&P 500
during the past six- and 12-month periods ended December 31, 2000. Our strong
performance was driven in large part by the success of our value style
philosophy and the outsized returns generated from some of our largest equity
holdings. On a more thematic note, the Portfolio's performance benefited from
the preference shift undertaken by investors as they reduced their holdings of
risky assets in favor of more conservative ones. The attractive relationship
between our investments and their underlying economic values provided great
resiliency and positive impetus to Portfolio results in 2000.
The extreme success of growth strategies in 1998 and 1999 peaked in March
of last year as an unprecedented valuation anomaly opened between growth and
value style securities. As evidence of slower economic growth became more
prevalent through 2000, the high valuation structure of growth stocks succumbed
to the pressure of downward earnings revisions and high profile, richly valued
growth stocks dramatically underperformed.
One cannot help but sit in awe of the dramatic swings in investor
sentiment and stock prices that have become this market's signature feature. The
combination of lower corporate profit growth expectations, partly engineered by
the Federal Reserve, and the apparent lack of investor conviction underpinning
the price structure of individual securities conspired to create one of the most
elevated periods of market volatility ever observed. By staying focused on the
economics of individual company businesses, the increase in market volatility
generated many opportunities for the Portfolio to respond.
Equity investments favorably impacting last year's performance were mainly
in companies where earnings were believed to be relatively insensitive to the
overall level of economic activity. In fact, many of this year's winners would
have been characterized as "out-of-favor" earlier on this year. Securities
negatively impacting performance were concentrated in technology and
telecommunications, areas where fortunately, we were meaningfully underweighted
versus the S&P 500.
Fixed Income
Performance of the fixed income portion of the Portfolio modestly
underperformed its benchmark (the Lehman Brother's Government Corporate Index)
as widened corporate spreads negatively impacted the Portfolio's BBB rated
bonds. The Portfolio's shorter-than-market duration, relatively high cash
position, and lack of government agencies also contributed to the
B-2
shortfall. During December, cash was deployed to increase duration, agencies,
and corporate bonds. At year-end, the Portfolio's positions were more closely
aligned to our fixed income benchmark. Duration was lengthened to 5.5 years
(comparable to the index) in expectation of lower Treasury yields in 2001.
Investments in non-investment grade securities remained moderate and relatively
high in quality. These actions allowed the Portfolio to narrow its performance
differential relative to its benchmark in December and positioned it for
outperformance in 2001.
Our fixed-income investments are positioned to benefit from lower interest
rates and greater demand for spread product in 2001 as risk spreads revert to
more normal levels in the wake of the Fed's efforts to increase system
liquidity. We will continue to closely monitor economic developments and, as
long as a recession is not envisioned, selectively add corporate bonds to the
Portfolio. We shall continue to actively trade positions when securities reach
fairly valued prices and will strive to minimize exposure to weakening credits.
Investment Results(3)
Over the six- and 12-month periods ended December 31, 2000, the Total
Return Portfolio significantly outperformed its composite benchmark (40% Lehman
Brothers Government/Credit Bond Index and 60% S&P 500 Stock Index). The Total
Return Portfolio returned 7.91% for the six-month period and 12.52% for the
12-month period, respectively.
Investment Outlook
The Federal Reserve's policy to slow U.S. economic activity to relieve
potential inflation pressure appears to have achieved its desired intent. With
the recent surge in disappointing corporate earnings pre-announcements
confirming the perception of a slower U.S. economy, it appears the Federal
Reserve has embraced a more liberal policy directive committed to engineering
interest rates lower to support the economy.
Our outlook for the economy and financial markets assume that the level of
U.S. business activity will continue slowing into the first half of 2001. More
determined easing by the Federal Reserve of another 100-150 basis points should
help to cushion the downturn, and a reacceleration of growth to 3% is possible
later this year. Elsewhere the slowdown will be less pronounced. However, we
expect moderating growth to become a more consistent global theme for at least
the next few quarters. Central banks will adopt more accommodative rhetoric and
policies, and bond yields are more likely to move lower than higher. Slower U.S.
profit growth over the next 12-18 months should keep broad stock market gains in
single-digit territory.
Investment Results As Of December 31, 2000(4)
- ----------
(3) Average annual total returns are for the Portfolio's Class A shares.
B-3
Listed below are the Portfolio's average annual total returns for Class A
shares for the one-year, five-year (where applicable) and since inception
periods ended December 31, 2000.
Total Return Portfolio
1 Year 12.52%
5 Years 4.36%
Since Inception (12/92) 12.42%
Performance Update
12/31/92* 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
- -----------------------------------------------------------------------------
Fund $10,000 $10,970 $10,557 $13,055 $15,036 $18,210
Composite $10,000 $11,045 $10,976 $14,311 $16,311 $16,571
12/31/98 12/31/99 12/31/00
- --------------------------------------------
Fund $21,304 $22,695 $25,536
Composite $20,857 $25,718 $29,662
Past performance is no guarantee of future results.
These charts illustrate the total value of an assumed $10,000 investment
in each Portfolio as compared to the performance of an appropriate broad-based
index for the time frames indicated for each Portfolio. Performance results for
each Portfolio represent the Portfolio's total
- --------------------------------------------------------------------------------
(4) Total returns are based on net asset value (NAV) performance for Class A
shares and reflect reinvestment of dividends and/or capital gains distributions
in additional shares. these figures do not reflect insurance company separate
account or annuity contract charges, which would reduce total return to a
contract owner. Past performance does not guarantee future results. Investment
return and principal value will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
B-4
return at net asset value (NAV). An investor cannot invest directly in an index
or average, and its results are not indicative of the performance for any
Alliance mutual fund.
International Portfolio
Investment Objective
The International Portfolio seeks to obtain a total return on its assets
from long-term growth of capital principally through a broad portfolio of
marketable securities of established non-United States companies (or United
States companies having their principal activities and interests outside the
United States), companies participating in foreign economies with prospects for
growth, and foreign government securities.
Market Review
The Year 2000 began with much fanfare. The world had entered into a new
decade, a new century and a new millennium. Global markets continued their "race
to the moon" with a 1% gain in the world markets, a 3% gain in the Standard &
Poor's (S&P) 500 Stock Index and a powerful 10.7% gain in the NASDAQ in the
first quarter of 2000. Technology, media and telecommunication (TMT) stocks
maintained their reign of superior performance. We had entered the world of the
"new" economy, a new way of life.
What a difference a year makes. The great engine of global growth, the
U.S. economy, began to sputter and subsequently slow, the technology revolution
lost its fire and technology stocks began to crumble under the weight of
overextended valuations. Global markets nose-dived, the euro touched new lows,
the Japanese recovery became unconvincing and the U.S. finally ended a heated
and chaotic election.
Despite the triumphant beginning and great expectations for 2000, global
markets returned the worst results seen in a decade. The Morgan Stanley Capital
World Index and the Morgan Stanley Capital Index (MSCI) Europe, Australasia and
Far East (EAFE) Index were down 13.2% and 14.2%, respectively. The S&P 500
declined 9.1% and the NASDAQ dropped 39.3%. The euro declined 6.3% versus the
U.S. dollar and hit a low of .827 per U.S. dollar in November. The Japanese yen
fell 10.5% against the greenback.
The swing in market sentiment towards economic growth was swift this past
year. Only 12 months prior, annualized fourth quarter growth for U.S. gross
domestic product (GDP) was over 8%. That compares with a 2.7% consensus forecast
for fourth quarter 2000. Certainly, the continuous increasing of interest rates
around the world by central banks had a dampening effect on global economies.
High energy prices also served as a brake on economic growth. In addition, the
stockpiling of inventories, particularly in the technology arena, in order to
ameliorate earlier problems of drastic component shortages, may have exacerbated
the situation, causing growth to decline more rapidly. Signs of growing
inventories and shorter lead times upset the markets, and technology stocks
tumbled as a result.
B-5
With concerns over economic growth and slowing demand, the easy capital
flows for internet-related investments during the prior two years suddenly
ceased, and certain credit markets around the world tightened rapidly. As a
result, those companies with shaky and/or extended business models and no
immediate cash flow soon fell by the wayside. With continuous news of dot.com
bankruptcies, technology companies' earnings misses and market declines, the
consumer has taken a rather sober view of the world recently, and has in turn,
affected global growth negatively. This year's holiday spending may have been
the lowest in years.
Investment Results(5)
With a growth bias, the Portfolio underperformed the MSCI EAFE Index for
the year 2000. The overweight position in TMT stocks hurt performance of the
Portfolio on a relative basis, leading to a -19.86% return for the year.
Mitigating the negative results vis-a-vis the Index were the Portfolio's large
positions in financial and pharmaceutical stocks. Relative to global growth
indices, such as the MSCI EAFE Growth Index, the Portfolio returned superior
results given the holdings in these latter groups.
Investment Outlook
Our investment process has always stressed valuation as well as growth and
we continue to focus on those stocks where the most exciting growth is available
at the best price. The Portfolio is diversified among industries and
concentrated in those companies offering the best earning visibility over the
next year. We remain fully invested and believe the focus on strong relative
earnings fundamentals will be rewarded by the markets in the future and over the
long-term.
Portfolio Strategy
In Europe, media and telecommunication stocks were the hardest hit sectors
in the Portfolio as the market grasped for clarity on valuations. As mobile
phone providers bid colossal amounts for third generation licenses, investors
began to question the ultimate returns expected. Concerns over balance sheet
strength and ballooning capital expenditures replaced last year's fascination
with subscriber growth and monumental mergers. In Europe, as in the U.S., cable
companies lost their luster, and the promise of interactive television moved
realistically further into the future. Again, similar to the U.S., the largest
contributors to performance in Europe were financial and health care-related
stocks.
Despite Japan's weak showing this year (the MSCI Japan Index was down
28.2% in 2000), the Portfolio's holdings in the region contributed positively to
performance. The increase in value of the pharmaceutical, financial, and
consumer stock positions more than offset the decline in technology-related
holdings.
- ----------
(5) Average annual total returns are for the Portfolio's Class A shares.
B-6
Asia Pacific performance was mixed for the year. Positions in China and
Hong Kong added to performance, while positions in Australia and Korea detracted
from performance.
The shift in psychology has been very rapid and has spread to almost all
sectors of the economy. With the exception of financials, energy/utilities,
pharmaceutical and consumer staples, all other industry sectors underperformed
the world markets during 2000. Investor concerns are myopic in nature with
extreme focus on the upcoming quarter's results with little or no value ascribed
to growth prospects over the next 12-18 months. Despite the obvious change in
global growth fundamentals, we believe the pendulum is beginning to swing too
far to the other side. Global markets seem to be discounting a rather negative
earnings scenario. With the decline in earnings estimates around the world
complemented by numerous analyst-rating downgrades, global markets have settled
into more realistic expectations, which we believe is favorable for the market.
Although timing is very difficult, we believe 2001 can bring recovery to global
markets. With the recent shift in focus from inflation to economic growth by the
Federal Reserve, the U.S. will likely see the Fed lower rates further in the
year 2001. In addition, there are signs of growing concerns of central bank
members over an economic slowdown in both the Europe/UK and the Japan regions,
which may result in lower rates outside the U.S. as well.
Investment Results As Of December 31, 2000(6)
Listed below are the Portfolios' average annual total returns for Class A
shares for the one-year, five-year (where applicable) and since inception
periods ended December 31, 2000.
International Portfolio
1 Year 19.86%
5 Years 7.08%
Since Inception (12/92) 9.08%
Performance Update
- ----------
(6) Total returns are based on net asset value (NAV) performance for Class A
shares and reflect reinvestment of dividends and/or capital gains distributions
in additional shares. These figures do not reflect insurance company separate
account or annuity contract charges, which would reduce total return to a
contract owner. Past performance does not guarantee future results. Investment
return and principal value will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
B-7
12/31/92* 12/31/93 12/31/94 12/31/95 12/31/96
- -----------------------------------------------------------------------------
Fund $10,000 $12,160 $12,975 $14,254 $15,287
MSCI EAFE Index $10,000 $13,294 $14,366 $16,026 $17,045
Lipper International
Funds Avg $10,000 $13,625 $13,572 $15,049 $17,014
12/31/97 12/31/98 12/31/99 12/31/00
- ------------------------------------------------------------------
Fund $15,796 $17,852 $25,034 20,062
MSCI EAFE Index $17,396 $20,933 $26,647 22,928
Lipper International
Funds Avg $18,044 $20,521 $28,151 23,629
Past performance is no guarantee of future results.
These charts illustrate the total value of an assumed $10,000 investment
in each Portfolio as compared to the performance of an appropriate broad-based
index for the time frames indicated for each Portfolio. Performance results for
each Portfolio represent the Portfolio's total return at net asset value (NAV).
An investor cannot invest directly in an index or average, and its results are
not indicative of the performance for any Alliance mutual fund.
Global Bond Portfolio
Investment Objective
The Global Bond Portfolio (the "Portfolio") seeks a high level of return
from a combination of current income and capital appreciation by investing in a
globally diversified portfolio of high-quality debt securities denominated in
the U.S. dollar and a range of foreign securities.
Market Review
After a strong first half of the year, the global economy lost some
momentum during the third quarter. Past interest rate increases, stable-to-lower
stock prices, and higher oil prices dampened global growth. Monetary policy
makers retained their tightening bias, but appeared to be nearing the end of
their tightening cycle.
B-8
In the U.S., economic growth moderated with a downshift in consumer
spending. In May, the U.S. Federal Reserve raised interest rates by 50 basis
points from 6.00% to 6.50%. Faced with a growing budget surplus, the Treasury
began a long-term project to reduce the supply of outstanding government debt.
Therefore, even in the face of higher official rates, the two-year Treasury
yields fell from 6.72% to 5.91%, while 30-year Treasury yields fell from 5.99%
to 5.79%. Stable growth allowed the Federal Reserve to hold rates steady thus
far and their focus remains on inflationary imbalances in the labor market and
inflation threats from higher oil prices.
In the euro region, a weaker euro currency and higher oil prices dampened
consumer confidence. Similar to the U.S., European monetary policy makers have
also retained their aggressive attitudes.
In Japan, the economy remains fragile and dependent on public spending and
exports. There appears to be a moderation in private demand and a substantial
decline in public spending. The Bank of Japan (BOJ) abandoned its "zero-rate"
policy in August and raised its short-term rates to 0.25%.
Global economic growth remained strong, as most individual country returns
were positive toward the end of 2000. Ecuador posted the largest gain as a
result of its progress in the dollarization process and debt restructuring
reforms (Dollarization is the official adoption of the U.S. dollar as the
currency of choice in a foreign country). Within the Latin American region,
performance of Venezuelan debt remained positive, helped by rising oil prices
(Venezuela is very dependent on oil exports). Other individual outperformers
included Mexico and Brazil. Peru was among the worst performers on the back of
growing political and economic uncertainties.
The external environment has been very supportive of Mexican debt over the
past six months as it benefited from a strong U.S. economy and robust oil
prices. Internal factors such as sound fiscal policy, a credit rating upgrade to
investment quality and a peaceful election also enhanced the performance of
Mexican bonds. These positive credit events led to the lowering of the yield
premium over Treasuries that investors demand from their Mexican holdings. The
July election marked the first time that Mexico has seen a peaceful and
democratic transfer of power between political parties. In Argentina, economic
growth remains anemic, and the country has been severely hampered by external
shocks--restrictive U.S. monetary policy, a weak euro currency and low
agricultural commodity prices.
Investment Results(7)
During the reporting period ended December 31, 2000, the Portfolio
underperformed the benchmark, as represented by the Salomon Smith Barney World
Government Bond Index (unhedged), over the 12-month period posting a return of
1.17% as compared to 1.59%,
- ----------
(7) Average annual total returns are for the Portfolio's Class A shares.
B-9
respectively. However, over the six-month reporting period, the Portfolio
outperformed the benchmark with a return of 1.86% as compared to 1.56%,
respectively.
Investment Outlook
Although we expect the U.S. economy to slow further during the first half
of 2001, we do not anticipate an outright recession. Further aggressive easing
by the Federal Reserve--as much as another 100 to 150 basis points--should help
cushion the downturn and make a re-acceleration of growth to 3% later this year
possible. In our view, the Federal Reserve will continue to lower rates, the
yield curve will steepen further, and volatility will likely remain high. The
fundamental economic causes of the current slowdown are harder for the Federal
Reserve to ameliorate than the more purely financial challenges of 1995 and
1998. As a result, rates are likely to fall further and stay low for a sustained
period of time.
Although the prospects of an easier monetary policy in the U.S. and a
likely end to global tightening should benefit emerging markets, a hard landing
for the U.S. would probably cancel those gains, while the effects of further
declines in oil prices will vary from country to country. On balance, we look
for oil-importing countries to benefit, while oil exporters will be negatively
affected.
Despite the inevitable variation across countries, we believe that most
emerging-market governments remain committed to necessary economic and financial
reforms. Going forward, we believe emerging-market debt will continue to produce
attractive returns, albeit with considerable volatility over the medium term.
Average annual total returns are for the Portfolio's Class A shares.
Investment Results as of December 31, 2000(8)
Listed below are the Portfolios' average annual total returns for Class A
shares for the one-year, five-year (where applicable) and since inception
periods ended December 31, 2000.
Global Bond Portfolio
1 Year 1.17%
5 Years 2.99%
Since Inception (7/91) 6.24%
- ----------
8) Total returns are based on net asset value (NAV) performance for Class A
shares and reflect reinvestment of dividends and/or capital gains distributions
in additional shares. These figures do not reflect insurance company separate
account or annuity contract charges, which would reduce total return to a
contract owner. Past performance does not guarantee future results. Investment
return and principal value will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
B-10
Performance Update
7/31/91* 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95
- ------------------------------------------------------------------------------
Fund $10,000 $11,100 $11,641 $12,939 $12,272 $15,306
Salomon
Brothers
World Gov't
Bond Index
(unhedged) $10,000 $11,436 $12,068 $13,670 $13,991 $16,655
12/31/96 12/31/97 12/31/98 12/31/99 12/31/00
- -------------------------------------------------------------------
Fund $16,257 $16,366 $18,676 $17,534 $17,740
Salomon
Brothers
World Gov't
Bond Index
(unhedged) $17,258 $17,298 $19,944 $19,093 $19,396
Past performance is no guarantee of future results.
These charts illustrate the total value of an assumed $10,000 investment
in each Portfolio as compared to the performance of an appropriate broad-based
index for the time frames indicated for each Portfolio. Performance results for
each Portfolio represent the Portfolio's total return at net asset value (NAV).
An investor cannot invest directly in an index or average, and its results are
not indicative of the performance for any Alliance mutual fund.
Growth & Income Portfolio
Investment Objective
The Growth & Income Portfolio seeks reasonable current income and
reasonable opportunities for appreciation through investments primarily in
dividend-paying common stocks of good quality.
Market Review
For the full calendar year, value stocks delivered their best returns ever
as compared to growth stocks at the extreme disconnect in last year's market.
Between the underlying economic values of businesses compared to their equity
market valuations, a substantial adjustment appears
B-11
to have occurred. As measured by the Russell 1000 Value Index, value stocks were
up 7.1%, while growth stocks, as measured by the Russell 1000 Growth Index, were
down 22.4%.
The extreme success of growth strategies in 1998 and 1999 peaked in March
of 2000 as an unprecedented valuation anomaly opened between growth and value
style securities. As evidence of slower economic growth became more prevalent
through the calendar year, the high multiple structure of growth succumbed to
the pressure of downward earnings revisions, and expensive growth stocks
dramatically underperformed.
One cannot help but sit in awe of the dramatic swings in investor
sentiment and stock prices that have become this market's signature feature. The
combination of lower corporate profit growth expectations, partly engineered by
the Federal Reserve, and the apparent lack of investor conviction underpinning
the price structure of individual securities conspired to create one of the most
elevated periods of market volatility ever observed. By staying focused on the
economics of individual company businesses, the increase in market volatility
generated many opportunities for the Portfolio.
The Federal Reserve's policy to slow U.S. economic activity and relieve
potential inflation pressure appears to have achieved its desired intent. As
always, the key questions for investors relate to the levels of interest rates
and earnings. With the recent surge in disappointing corporate earnings
pre-announcements confirming the perception of a slower U.S. economy, it seems
appropriate to conclude that the Federal Reserve's policy focus will continue to
be more hospitable than was the case in 1999 and 2000.
Investment Results(9)
For the 12-month period ended December 31, 2000, the Alliance Variable
Products Series Growth & Income Portfolio generated a 13.89% return, compared
with a return of -9.10% for the S&P 500 Index and -0.59% for the Lipper Growth
and Income Funds Average (using 1546 funds from Lipper's Variable Annuity
Universe). The broad market declined sharply in 2000 as evidenced by the S&P
500's decline and NASDAQ's 39.3% plunge. Generally, small and mid-sized
companies performed better than large companies, and value stocks significantly
outperformed growth stocks.
Portfolio Strategy
The Portfolio's performance benefited from the preference shift undertaken
by investors as they reduced their holdings of risky assets in favor of more
conservative ones. The attractive relationship between our investments and their
underlying economic values provided great resiliency and positive impetus to the
Portfolio's results in this year's difficult market. Securities favorably
impacting the Portfolio's performance were mainly investments in companies where
company earnings are believed to be relatively insensitive to overall economic
activity.
- ----------
(9) Average annual total returns are for the Portfolio's Class A shares.
B-12
Securities negatively impacting performance were concentrated in the
technology and telecommunications sectors.
Average annual total returns are for the Portfolio's Class A shares.
Investment Results as of December 31, 2000(10)
Listed below are the Portfolios' average annual total returns for Class A
shares for the one-year, five-year (where applicable) and since inception
periods ended December 31, 2000.
Growth & Income Portfolio
1 Year 13.89%
5 Years 19.63%
Since Inception (1/91) 15.30%
Performance Update
- ----------
(10) Total returns are based on net asset value (NAV) performance for Class A
shares and reflect reinvestment of dividends and/or capital gains distributions
in additional shares. These figures do not reflect insurance company separate
account or annuity contract charges, which would reduce total return to a
contract owner. Past performance does not guarantee future results. Investment
return and principal value will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
B-13
1/31/91* 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95
- -------------------------------------------------------------------------------
Fund $10,000 $10,350 $11,171 $12,477 $12,434 $16,879
S&P 500
Stock Index $10,000 $12,497 $13,448 $14,800 $14,995 $20,623
Lipper G&I
Funds Avg $10,000 $12,264 $13,145 $14,734 $14,614 $19,143
12/31/96 12/31/97 12/31/98 12/31/99 12/31/00
- --------------------------------------------------------------------
Fund $20,945 $26,976 $32,611 $36,319 $41,362
S&P 500
Stock Index $25,355 $33,811 $43,480 $52,626 $47,836
Lipper G&I
Funds Avg $23,018 $29,268 $34,685 $38,858 $37,242
Past performance is no guarantee of future results.
These charts illustrate the total value of an assumed $10,000 investment
in each Portfolio as compared to the performance of an appropriate broad-based
index for the time frames indicated for each Portfolio. Performance results for
each Portfolio represent the Portfolio's total return at net asset value (NAV).
An investor cannot invest directly in an index or average, and its results are
not indicative of the performance for any Alliance mutual fund.
Growth Portfolio
Investment Objective
The Growth Portfolio (the "Portfolio") seeks long-term growth of capital
by investing primarily in common stocks and other equity securities of companies
with favorable earnings outlooks and long-term growth rates that are expected to
exceed that of the U.S. economy over time. The Portfolio emphasizes investments
in large- and mid-cap companies. The Portfolio also may invest up to 25% of its
total assets in lower-rated, fixed income securities and convertible bonds and
generally up to 20% of its total assets in foreign securities.
Market Review
The market was nervous throughout 2000 as high valuations and rising
interest rates created an unstable environment for equities. Rotation among
sectors was dramatic between defensive groups, health care particularly, and
more aggressive sectors such as
B-14
telecommunications and technology. In the fourth quarter, a serious correction
in the technology sector and related industries occurred as concerns about a
slowing economy raised fears of earnings disappointments. This sell-off reduced
a great deal of overvaluation but exacerbated investor fears regarding the rate
of earnings growth in 2001.
Investment Results(11)
During the six- and 12-month periods ended December 31, 2000, the
Portfolio returned -16.08% and -17.51%, respectively. The Portfolio's
benchmarks, as represented by the Russell 1000 Growth Stock Index and the
Standard and Poor's (S&P) 500 Stock Index, posted returns of -25.57% and -8.71%,
respectively, for the six-month period, and -22.42% and -9.10% for the 12-month
period, respectively.
Higher volatility characterized the equity market in 2000. Dramatic price
swings were particularly intense during the fourth quarter. Evidence that the
economy was slowing made investors cautious about future earnings growth.
Pre-announcements from technology companies as well as Home Depot, Inc. and
consumer durables companies increased investor nervousness. The decline was
particularly adverse for technology stocks, which were selling at significant
price-to-earnings ratio premiums to the market. The correction was
indiscriminate, taking companies with intact fundamentals down as much as those
with questionable business models. The Portfolio was underweighted in the
technology sector versus growth indices throughout the year - representation
focused on leading companies was appropriate. This helped performance relative
to the Russell 1000 Growth Stock Index, but hurt results relative to the S&P 500
Stock Index.
Investment Outlook
For some time, we have been expecting a slowdown in the economy led by the
consumer where spending has been unsustainably strong. We were convinced that
the Federal Reserve would keep real short-term rates high until slower growth
was apparent. However, deceleration of growth was remarkably abrupt in the
fourth quarter. Not only were investors taken aback by the severity of the
slowdown, but the Federal Reserve was as well. The 50 basis point reduction in
the Federal Funds Rate only three days into January signaled that the Federal
Reserve did not want a recession. Going forward, we look for further rate cuts
during the first half of the year depending on the tone of the economy. Slower
consumer spending and reduction of excess inventories will likely subdue gross
domestic product (GDP) growth in the first half of this year. Further, cutbacks
in capital spending are generally expected. Inflation is expected to remain
subdued, reflecting continued good productivity experience. An absence of any
inflation threats gives the Federal Reserve latitude in further reducing rates.
In the environment described above, profits are expected to be flat. To
summarize, we look for GDP to grow around 2% in the first half of 2001, and to
accelerate to 3% in the second half. Long term rates are likely to fluctuate
- ----------
(11) Average annual total returns are for the Portfolio's Class A shares.
B-15
between 5.0% and 6.0%. Inflation is estimated at 2.0% to 3.0%. In this
environment, equities with intact earnings are likely to do well. Time will be
required, however, before investors become comfortable with slower growth.
Areas of Opportunity
Clearly, we believe this year will require even greater diligence in stock
selection. We are constructive regarding equities, but believe the positive
response to lower interest rates probably will be gradual. We believe the broad
market indices have experienced most of the correction likely, and that stocks
generally are priced attractively. The obvious exception is the technology
sector, where concerns about disappointing earnings continue to create
unprecedented price volatility. Patience will be required for the next one to
two quarters, as investors assess the impact of lower interest rates and
restoration of appropriate inventory levels. During this time, some of the
Portfolio's more defensive holdings in health care and staples probably will
continue to outperform. We intend to use the expected volatility in technology
to consolidate holdings in those companies with unique products and undiminished
leadership positions. We believe these stocks will respond strongly when
investors become more comfortable about the prospect of growth resuming.
Finally, financial services will continue to be an important position of the
Portfolio for all the reasons previously cited: they are beneficiaries of
consolidation both domestically and abroad; merger and acquisition activity
likely will pick up as interest rates decline; and valuation levels are
compelling. The proposed change by the Financial Accounting Standards Board
(FASB) to eliminate goodwill in corporate combinations also would be an added
positive if passed.
Average annual total returns are for the Portfolio's Class A shares.
Investment Results as of December 31, 2000(12)
Listed below are the Portfolios' average annual total returns for Class A
shares for the one-year, five-year (where applicable) and since inception
periods ended December 31, 2000.
Growth Portfolio
1 Year 17.51%
5 Years 18.99%
Since Inception (9/94) 21.42%
- ----------
(12) Total returns are based on net asset value (NAV) performance for Class A
shares and reflect reinvestment of dividends and/or capital gains distributions
in additional shares. These figures do not reflect insurance company separate
account or annuity contract charges, which would reduce total return to a
contract owner. Past performance does not guarantee future results. Investment
return and principal value will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
B-16
Performance Update
9/30/94* 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
- -------------------------------------------------------------------------------
Fund $10,000 $10,530 $14,239 $18,295 $23,788 $30,621
Russell 1000
Growth Index $10,000 $10,075 $13,821 $17,017 $22,205 $30,800
S&P 500
Stock Index $10,000 $9,998 $13,751 $16,906 $22,545 $28,992
12/31/99 12/31/00
- -----------------------------------
Fund $41,176 $33,967
Russell 1000
Growth Index $41,012 $31,815
S&P 500
Stock Index $35,090 $31,896
Past performance is no guarantee of future results.
These charts illustrate the total value of an assumed $10,000 investment
in each Portfolio as compared to the performance of an appropriate broad-based
index for the time frames indicated for each Portfolio. Performance results for
each Portfolio represent the Portfolio's total return at net asset value (NAV).
An investor cannot invest directly in an index or average, and its results are
not indicative of the performance for any Alliance mutual fund.
U.S./High Grade Portfolio
Investment Objective
The U.S. Government/High Grade Securities Portfolio (the "Portfolio")
seeks a high level of current income consistent with the preservation of capital
by investing principally in a portfolio of U.S. government securities and other
high-grade debt securities.
Market Review
Following a strong first half of the year, the U.S. economy lost momentum
during the third and fourth quarters. U.S. gross domestic product (GDP) growth
slowed from 5.2% in the first half of the year to 1.8% in the second half. Past
interest-rate increases, lower stock prices
B-17
and higher oil prices contributed to the slowdown. The Federal Reserve removed
its tightening bias late in the year in response to slower economic growth.
The U.S. bond market as measured by the Lehman Brothers Aggregate Bond
Index (the "Index") returned 11.63% during 2000 - its best annual return since
1995. In general, fixed-income securities benefited from slowing economic growth
and weak equity markets in 2000. Among the traditional sectors of the Index,
U.S. Treasuries posted the strongest result at 13.52%, followed by commercial
mortgage-backed securities (CMBS) at 13.47%, U.S. agencies at 12.18%,
mortgage-backed securities (MBS) at 11.16%, asset-backed securities (ABS) at
10.84% and investment-grade corporates at 9.39%. Higher-quality securities
outperformed lower-quality securities as the economy slowed and investors sought
out less risky instruments. U.S. Treasuries also benefited from the government's
plan to use the fiscal surplus to reduce outstanding government debt.
Longer-maturity issues outperformed shorter issues as expectations for interest
rate cuts rose.
The CMBS sector benefited from increased investor interest due to credit
deterioration in other fixed-income sectors, as well as from sound commercial
real estate fundamentals. Real estate markets in general remained healthy, and
capital market participation in commercial real estate finance should mitigate
some of the valuation fluctuations that have occurred in the past. In addition,
the Department of Labor finally declared all investment-grade classes of CMBS to
be ERISA eligible, which increased demand incrementally for double A through
triple B rated CMBS securities. Rising prepayment expectations dampened MBS
performance, though less so than we had anticipated. Because mortgage interest
rates stand at their lowest level since the spring of 1999, more of the sector
is subject to refinancing risk than at any time in the past three years. The
investment-grade corporate sector posted relatively weak results because of
deteriorating corporate earnings, rising defaults, tighter credit availability
and expectations of weaker economic growth in 2000.
Investment Results(13)
For the 12-month period ended December 31, 2000, the Portfolio returned
11.08%, compared with 12.78% for its composite benchmark (a blend of 67% Lehman
Brothers (LB) Government Bond Index and 33% LB Credit Bond Index). In the first
half of the year, our maturity structure detracted from our relative
performance: our Treasury holdings were in a barbell structure, between short
and long maturities when the Treasury yield curve became less inverted during
the second quarter. However, our subsequent repositioning of our maturity
structure in anticipation of a steepening yield curve added significantly to our
relative returns in the second half of the year. In fact, our concern regarding
a slowing economy and the resulting decline in interest rates proved well
justified.
- ----------
(13) Average annual total returns are for the Portfolio's Class A shares.
B-18
The stock market weakened, consumers scaled back and the Treasury yield
curve steepened as a result of slowing economic growth. The Portfolio also
benefited from our underweighting of the corporate sector in light of slowing
economic growth, and from our focus on higher-quality corporates in a
deteriorating credit environment. The agency sector, in which we gradually
increased holdings to an overweight position, also contributed to performance.
Our mortgage security selection had the greatest negative impact on the
Portfolio's relative returns. As interest rates declined and the Federal Reserve
prepared to cut rates late in the year, the risk increased that homeowners would
begin to refinance their higher-interest home loans. In response, we shifted
into lower-coupon mortgage pass-throughs, which are better protected from this
prepayment risk. When prepayment risk depressed mortgage performance less than
we had anticipated in the fourth quarter, our holdings of lower-coupon mortgages
dampened the Portfolio's relative performance.
Investment Outlook
While the odds of a "hard landing" for the U.S. economy have risen in
recent months, the fact that the Federal Reserve moved so quickly in the new
year to lower interest rates should help to ensure a "soft landing." We believe
that the economy will slow in 2001 to a 2.5% to 3% growth rate, with most of the
slowing coming in the first half.
In our view, the Federal Reserve will likely continue to lower rates, the
yield curve will steepen further and volatility will remain high. In
anticipation of a steepening yield curve, we are concentrating the Portfolio in
intermediate maturities. Within the government sector, we expect to remain
overweighted in both Treasury and agency debt. On the one hand, lower rates and
a steeper yield curve bode well for the corporate sector; on the other hand, the
credit cycle is clearly in a downtrend, and earnings disappointments abound.
Therefore, over the near term, we plan to maintain a neutral exposure to the
sector. Falling interest rates and the rising prepayments that accompany them
cause us to remain underweighted in mortgages and to focus our holdings on
lower-coupon securities, which will be less subject to a wave of mortgage
refinancings.
Average annual total returns are for the Portfolio's Class A shares.
Investment Results as of December 31, 2000(14)
Listed below are the Portfolios' average annual total returns for Class A
shares for the one-year, five-year (where applicable) and since inception
periods ended December 31, 2000.
- ----------
(14) Total returns are based on net asset value (NAV) performance for Class A
shares and reflect reinvestment of dividends and/or capital gains distributions
in additional shares. These figures do not reflect insurance company separate
account or annuity contract charges, which would reduce total return to a
contract owner. Past performance does not guarantee future results. Investment
return and principal value will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
B-19
U.S. Government/High Grade Securities Portfolio
1 Year 11.08%
5 Years 5.50%
Since Inception (9/92) 5.95%
Performance Update
9/30/92* 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96
- -------------------------------------------------------------------------------
Fund $10,000 $9,890 $10,800 $10,364 $12,360 $12,675
Composite $10,000 $9,988 $11,069 $10,721 $12,711 $13,114
12/31/97 12/31/98 12/31/99 12/31/00
- --------------------------------------------------------
Fund $13,776 $14,907 14,542 16,153
Composite $14,317 $15,653 15,427 17,275
Past performance is no guarantee of future results.
These charts illustrate the total value of an assumed $10,000 investment
in each Portfolio as compared to the performance of an appropriate broad-based
index for the time frames indicated for each Portfolio. Performance results for
each Portfolio represent the Portfolio's total return at net asset value (NAV).
An investor cannot invest directly in an index or average, and its results are
not indicative of the performance for any Alliance mutual fund.
High Yield Portfolio
Investment Objective
The High Yield Portfolio (the "Portfolio") seeks the highest level of
current income available by investing principally in high-yield fixed-income
securities without assuming undue risk. The Portfolio invests a substantial
portion of its assets in higher-yielding, higher-risk fixed-
B-20
income securities (commonly known as "junk bonds") that are rated below
investment grade and are considered to have predominantly speculative
characteristics.
Market Review
During 2000, the high-yield market recorded its third consecutive year of
weak performance, returning -5.21%, as represented by the Credit Suisse First
Boston (CSFB) High Yield Index. This negative performance reflected the Federal
Reserve's long-held tightening bias, as well as fundamental concerns about
credit quality and weakening sentiment toward the telecommunications and
technology sectors. Higher-than-average default levels supported these concerns.
Although credit availability dried up across all investment grades, it was felt
most acutely in the high-yield market, as investors avoided lending to the
riskier issuers.
In keeping with investors' preference for better quality high-yield debt,
double B issuers outperformed single B issuers by more than 1200 basis points.
The energy, gaming, utility and financial sectors posted the strongest returns,
while entertainment, fixed communications, automotive and metals posted the
weakest returns. The yield difference between the high-yield market and
risk-free Treasuries reached 9.5% at year-end--the largest yield advantage in a
decade, and nearly 4% higher than levels just one year ago. Money continued to
flow out of high-yield mutual funds, with outflows totaling approximately $10
billion in 2000. Not surprisingly, high-yield debt issuance declined during the
year.
Investment Results(15)
The Portfolio returned -5.15% for the 12-month period ended December 31,
2000, modestly outperforming the -5.21% return of its benchmark, the CSFB High
Yield Index. Given the increasingly negative tone of the market, we moved to a
more defensive posture during the year, adding double B securities. We also
shortened the Portfolio's duration and acquired an overweight position in cash
and in traditionally defensive sectors, such as cable and energy. As a result,
the Portfolio outperformed both the index and the Lipper average high-yield
fund. Our outlook for 2001 is more positive. We expect to lengthen duration,
while remaining selective with regard to cyclical industries. In our analysis,
single B debt will continue to be more attractive over the long term. The
Portfolio will continue to be well diversified.
Investment Outlook
We believe the Federal Reserve will aggressively lower interest rates,
easing in excess of an additional 100 basis points by spring of 2001. This
should lead to a "soft landing" for the U.S. economy: we estimate the year 2001
U.S. economic growth rate to be approximately 3%, with the second half of 2001
outpacing the first. Slower U.S. profit growth over the next 12 months should
mute stock price gains. We expect to see positive returns in high yield over the
near term, reflecting interest rate stability and continued modest economic
growth. Substantial returns
- ----------
(15) Average annual total returns are for the Portfolio's Class A shares.
B-21
remain dependent on increased retail and institutional demand. Prospects for the
high-yield market should improve as the rate of economic growth slows and the
Federal Reserve shifts to an accommodative monetary policy. With a healthy
economy, a more relaxed monetary policy and high-yield securities yielding more
than 13%, we believe the high-yield market offers significant value.
Average annual total returns are for the Portfolio's Class A shares.
Investment Results as of December 31, 2000(16)
Listed below are the Portfolio's average annual total returns for Class A
shares for the one-year, five-year (where applicable) and since inception
periods ended December 31, 2000.
High Yield Portfolio
1 Year -5.15%
Since Inception (10/97) -2.61%
Performance Update
- ----------
(16) Total returns are based on net asset value (NAV) performance for Class A
shares and reflect reinvestment of dividends and/or capital gains distributions
in additional shares. These figures do not reflect insurance company separate
account or annuity contract charges, which would reduce total return to a
contract owner. Past performance does not guarantee future results. Investment
return and principal value will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
B-22
10/31/97* 12/31/97 12/31/98 12/31/99 12/31/00
- ------------------------------------------------------------------------
Fund $10,000 $10,330 $9,949 $9,692 $9,193
CS First Boston
High Yield Index $10,000 $10,163 $10,222 $10,557 $10,007
Past performance is no guarantee of future results.
These charts illustrate the total value of an assumed $10,000 investment
in each Portfolio as compared to the performance of an appropriate broad-based
index for the time frames indicated for each Portfolio. Performance results for
each Portfolio represent the Portfolio's total return at net asset value (NAV).
An investor cannot invest directly in an index or average, and its results are
not indicative of the performance for any Alliance mutual fund.
Quasar Portfolio
Investment Objective
The Quasar Portfolio seeks growth of capital by pursuing aggressive
investment policies. While it invests primarily in the equity securities of
small-capitalization companies, it may invest in any type of securities issues,
by any company, in any industry that we believe to offer possibilities for
capital appreciation. The Portfolio may also pursue investment opportunities
outside of the United States.
Market Review
While perhaps not the global meltdown that many doomsayers had forecasted,
Y2K certainly posed many challenges to small-cap growth stock investors. 2000
was a year marked by ongoing economic uncertainty, enormous volatility, massive
sector rotation and, ultimately, disappointing small-cap growth stock returns.
In fact, the Russell 2000 Growth Index turned in its single worst calendar year
performance since its inception in 1979.
B-23
Investment Results(17)
The Quasar Portfolio finished out the year with strong second half
relative performance. For the six-month period ended December 31, 2000, the
Portfolio decreased in value by 12.5% versus a 23.5% decline in the Russell 2000
Growth Index. This brings the Portfolio's full-year return to -6.1%, which
compares favorably to the Russell 2000 Growth Index's -22.4% return.
As for the environment, year 2000 was filled with ups and downs. The run
from January 1 to March 10 was one of the most powerful, euphoric rides ever
experienced by small-cap investors. Over this timeframe, the Russell 2000 Growth
Index gained more than 30%, as investors aggressively bid up new-economy stocks
to unprecedented levels. The good news did not last long. Over the course of the
next 25 trading sessions, the Russell 2000 Growth Index would give up all of its
year-to-date gains, and then some, as it declined an astonishing 34%. Although
small-cap growth stocks would stage periodic rallies of varying intensity, the
Russell 2000 Growth Index ultimately went on to decline another 18% before
finding a hitting bottom on December 21, 46% below the March 10 high.
Consistent with the portfolio management team's historical discipline, the
Portfolio's sector bets during the six- and 12-month periods were kept to a
minimum. A modest overweight in health care and a modest underweight in
technology did favorably impact relative performance for the six-month period.
Overall, stock selection proved to be by far the single largest contributor to
outperformance for both the six- and 12-month periods. In fact, for the year,
all four-sectors significantly outperformed the Russell 2000 Growth Index.
Investment Outlook
Looking forward, we believe that small-cap growth stocks are well
positioned for strong relative performance. Coming off what was obviously a
disappointing year, relative valuations have improved to near-historical lows.
As is the case when looking at specific stocks, however, cheap is never reason
enough to expect outperformance. In the case of small-cap growth stocks, we
believe a more accommodating Federal Reserve will provide the catalyst for
small-cap outperformance.
Reviewing the past 11 declining interest rate cycles, small-cap stocks
have outperformed nearly 75% of the time. While performance during a Fed easing
can vary dramatically, small-caps have on average outperformed large-caps by
nearly 400 basis points and 700 basis points, respectively, over the six- and
12- month periods following an initial cut.
We do not expect the road to outperformance to be without speed bumps. As
is typically the case around inflection points, increased investor uncertainty
is likely to keep volatility high. This will clearly pose unique challenges to
small-cap investors. However, cognizant of the changes underway, the Alliance
Small Cap Team is very focused on making appropriate
- ----------
(17) Average annual total returns are for the Portfolio's Class A shares.
B-24
adjustments to the Portfolio with a view toward improvements in economic
activity likely later in the year.
Average annual total returns are for the Portfolio's Class A shares.
Investment Results as of December 31, 2000(18)
Listed below are the Portfolios' average annual total returns for Class A
shares for the one-year, five-year (where applicable) and since inception
periods ended December 31, 2000.
Quasar Portfolio
1 Year -6.09%
Since Inception (8/96) 6.59%
Performance Update
8/31/96* 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00
- -----------------------------------------------------------------------------
Fund $10,000 $10,640 $12,619 $12,052 $14,111 $13,252
Russell 2000
Growth Index $10,000 $10,543 $11,908 $12,054 $17,248 $13,380
- ----------
(18) Total returns are based on net asset value (NAV) performance for Class A
shares and reflect reinvestment of dividends and/or capital gains distributions
in additional shares. These figures do not reflect insurance company separate
account or annuity contract charges, which would reduce total return to a
contract owner. Past performance does not guarantee future results. Investment
return and principal value will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
B-25
Past performance is no guarantee of future results.
These charts illustrate the total value of an assumed $10,000 investment
in each Portfolio as compared to the performance of an appropriate broad-based
index for the time frames indicated for each Portfolio. Performance results for
each Portfolio represent the Portfolio's total return at net asset value (NAV).
An investor cannot invest directly in an index or average, and its results are
not indicative of the performance for any Alliance mutual fund.
B-26
FORM N-14
PART B
STATEMENT OF ADDITIONAL INFORMATION
August 27, 2000
This Prospectus/Proxy Statement relates to the proposed mergers
(each a "Merger" and, collectively, the "Mergers") of the Balanced Portfolio
(the "Brinson Balanced Portfolio"), the Global Equity Portfolio (the "Brinson
Global Equity Portfolio"), the Global Income Portfolio (the "Brinson Global
Income Portfolio"), the Growth and Income Portfolio (the "Brinson Growth and
Income Portfolio"), the Growth Portfolio (the "Brinson Growth Portfolio"), the
High Grade Fixed Income Portfolio (the "Brinson High Grade Portfolio"), the High
Income Portfolio (the "Brinson High Income Portfolio"), the Small Cap Portfolio
(the "Brinson Small Cap Portfolio"), and the Strategic Income Portfolio (the
"Brinson Strategic Income Portfolio") (each an "Acquired Portfolio" or a
"Brinson Portfolio"), each a series of Brinson Series Trust ("Brinson Trust")
into, respectively, the Total Return Portfolio (the "Alliance Total Return
Portfolio"), the International Portfolio (the "Alliance International
Portfolio"), the Global Bond Portfolio (the "Alliance Global Bond Portfolio"),
the Growth and Income Portfolio (the "Alliance Growth and Income Portfolio"),
the Growth Portfolio (the "Alliance Growth Portfolio), the U.S. Government/High
Grade Securities Portfolio (the "Alliance U.S./High Grade Portfolio"), the High
Yield Portfolio (the "Alliance High Yield Portfolio"), the Quasar Portfolio (the
"Alliance Quasar Portfolio"), and the Alliance Global Bond Portfolio (each an
"Acquiring Portfolio" or an "Alliance Portfolio" and, collectively, together
with the Brinson Portfolios, the "Portfolios"), each a series of Alliance
Variable Products Series Fund, Inc. (the "Alliance Fund").
This SAI contains information which may be of interest to
shareholders but which is not included in the Prospectus/Proxy Statement dated
July 26, 2001 (the "Prospectus/Proxy Statement") of the Acquiring Funds which
relates to the Merger. As described in the Prospectus/Proxy Statement, the
Merger would involve the transfer of all the assets of each Acquired Fund in
exchange for shares of the relevant Acquiring Fund and the assumption of certain
liabilities of such Acquired Fund. Each Acquired Fund would distribute the
relevant Acquiring Fund shares it receives to its shareholders in complete
liquidation of such Acquired Fund.
This SAI is not a prospectus and should be read in conjunction with
the Prospectus/Proxy Statement. The Prospectus/Proxy Statement has been filed
with the Securities and Exchange Commission and is available upon request and
without charge by writing to Alliance Variable Products Series Fund, Inc., [1345
Avenue of the Americas, New York, New York 10105].
Table of Contents
I. Additional Information about the Acquiring Funds and the Acquired Funds....
II. Financial Statements.......................................................
I. Additional Information about the Acquiring Fund and the Acquired
Fund.
Incorporated by reference (1) to Post-Effective Amendment No. 32 to
the Registrant's Registration Statement on Form N-1A (filed on April 27, 2001)
(Registration Nos. 33-21677 and 811-05547), and (2) to Post-Effective Amendment
No. 32 to the Registration Statement of the Brinson Series Trust on Form N-1A
(filed on _________, 2001) (Registration Nos. [ ] and [ ]).
II. Financial Statements.
This SAI is accompanied by the Semi-Annual Reports for the six
months ended June 30, 2001 and the Annual Reports for the year ended December
31, 2000 of each Acquiring Fund and Acquired Fund, which contain historical
financial information regarding such Funds. Such reports have been filed with
the Securities and Exchange Commission and are incorporated herein by reference.
Such financial statements have been audited by Ernst & Young LLP, independent
auditors, and have been incorporated herein by reference in reliance upon
the report of said firm, which report has been given upon their authority as
experts in auditing and accounting.
Pro forma financial statements of the Acquiring Fund for the
Acquisition are provided on the following page.
PRO-FORMA COMBINED
--------------------------
FINANCIAL STATEMENTS
--------------------------
BRINSON SERIES TRUST--
GLOBAL EQUITY PORTFOLIO
ALLIANCE VARIABLE PRODUCTS SERIES FUND--
INTERNATIONAL PORTFOLIO
DECEMBER 31, 2000
(UNAUDITED)
PORTFOLIO OF INVESTMENTS
PRO-FORMA COMBINED Brinson Series Trust--Global Equity Portfolio
December 31, 2000 (unaudited) Alliance Variable Products Series Fund--
International Portfolio
================================================================================
Brinson Alliance
Global Equity International Pro-Forma
Combined Portfolio Portfolio Adjustment(s) Combined
Shares (Value) (Value) (Value) (Value)
- -----------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS-99.9%
AUSTRALIA-0.9%
National Australia Bank, Ltd..................... 1,954 $ 31,320 $ -0- $ 0 $ 31,320
News Corp., Ltd. (ADR)........................... 22,270 60,307 657,900 -0- 718,207
----------------- ------------- ------------ ------------
91,627 657,900 -0- 749,527
----------------- ------------- ------------ ------------
AUSTRIA-0.0%
OMV AG........................................... 448 34,705 -0- -0- 34,705
----------------- ------------- ------------ ------------
CANADA-0.1%
Nortel Networks Corp............................. 370 11,899 -0- -0- 11,899
Potash Corp. of Saskatchewan, Inc................ 511 40,018 -0- -0- 40,018
Royal Bank of Canada............................. 1,032 34,978 -0- -0- 34,978
----------------- ------------- ------------ ------------
86,895 -0- -0- 86,895
----------------- ------------- ------------ ------------
FINLAND-2.4%
Elisa Communications............................. 1,035 22,285 -0- -0- 22,285
Nokia AB Corp.................................... 46,428 94,914 1,975,890 -0- 2,070,804
----------------- ------------- ------------ ------------
117,199 1,975,890 -0- 2,093,089
----------------- ------------- ------------ ------------
FRANCE-12.2%
Alcatel, SA Cl.A................................. 28,830 132,366 1,505,452 -0- 1,637,818
Alstom........................................... 570 14,719 -0- -0- 14,719
Ass Gen De France................................ 269 18,692 -0- -0- 18,692
AXA.............................................. 671 97,030 -0- -0- 97,030
BNP Paribas, SA.................................. 28,840 64,969 2,467,081 -0- 2,532,050
Cap Gemini, SA................................... 165 26,618 -0- -0- 26,618
Lafarge, SA...................................... 556 46,622 -0- -0- 46,622
Lyonnaise Des Eaux, SA........................... 280 51,138 -0- -0- 51,138
Rhodia Inc., SA.................................. 2,630 40,748 -0- -0- 40,748
Rhone Poulenc, SA (a)............................ 1,889 165,848 -0- -0- 165,848
Sanofi-Synthelabo, SA............................ 39,140 -0- 2,609,424 -0- 2,609,424
STMicroelectronics NV............................ 41,900 -0- 1,829,500 -0- 1,829,500
Total Fina Elf, SA Cl.B.......................... 10,564 125,534 1,445,729 -0- 1,571,263
Vivendi Universal................................ 700 46,077 -0- -0- 46,077
----------------- ------------- ------------ ------------
830,361 9,857,186 -0- 10,687,547
----------------- ------------- ------------ ------------
GERMANY-0.6%
Deutsche Bank AG................................. 620 52,111 -0- -0- 52,111
Direkt Anlage Bank............................... 528 19,137 -0- -0- 19,137
Dresdner Bank AG................................. 1,490 64,989 -0- -0- 64,989
Ergo Versicherungs............................... 220 37,184 -0- -0- 37,184
Metro AG ........................................ 1,400 65,467 -0- -0- 65,467
Munchener Ruckvers AG............................ 364 130,245 -0- -0- 130,245
Schering AG...................................... 500 28,405 -0- -0- 28,405
Siemens AG....................................... 580 75,811 -0- -0- 75,811
Veba AG.......................................... 800 48,678 -0- -0- 48,678
----------------- ------------- ------------ ------------
522,027 -0- -0- 522,027
----------------- ------------- ------------ ------------
GREECE-0.0%
Hellenic Telecommunications (ADR)................ 1,460 10,585 -0- -0- 10,585
----------------- ------------- ------------ ------------
1
PORTFOLIO OF INVESTMENTS
PRO-FORMA COMBINED Brinson Series Trust--Global Equity Portfolio
(continued) Alliance Variable Products Series Fund--International Portfolio
================================================================================
Brinson Alliance
Global Equity International Pro-Forma
Combined Portfolio Portfolio Adjustment(s) Combined
Shares (Value) (Value) (Value) (Value)
- -----------------------------------------------------------------------------------------------------------------------------------
HONG KONG-3.6%
Cheung Kong Holdings, Ltd........................ 89,000 $ -0- $ 1,138,217 $ -0- $ 1,138,217
China Mobile (Hong Kong) Ltd. (a)................ 96,000 -0- 524,328 -0- 524,328
Citic Pacific, Ltd............................... 299,000 -0- 1,059,957 -0- 1,059,957
Li & Fung, Ltd. (a).............................. 224,000 -0- 406,375 -0- 406,375
----------------- ------------- ------------ ------------
-0- 3,128,877 -0- 3,128,877
----------------- ------------- ------------ ------------
IRELAND-1.3%
Bank of Ireland.................................. 3,919 39,038 -0- -0- 39,038
CRH Plc.......................................... 59,600 -0- 1,109,214 -0- 1,109,214
----------------- ------------- ------------ ------------
39,038 1,109,214 -0- 1,148,252
----------------- ------------- ------------ ------------
ISRAEL-0.0%
Orbotech, Ltd. (a)............................... 597 22,276 -0- -0- 22,276
----------------- ------------- ------------ ------------
ITALY-6.4%
Alleanza Assicurazioni........................... 233,000 -0- 3,712,815 -0- 3,712,815
Ras.............................................. 3,410 53,185 -0- -0- 53,185
San Paolo-IMI SpA................................ 4,000 64,678 -0- -0- 64,678
UniCredito Italiano SpA.......................... 338,195 -0- 1,768,837 -0- 1,768,837
----------------- ------------- ------------ ------------
117,863 5,481,652 -0- 5,599,515
----------------- ------------- ------------ ------------
JAPAN-22.2%
Asahi Bank....................................... 5,000 17,014 -0- -0- 17,014
Bank of Fukuoka, Ltd............................. 181,000 -0- 772,638 -0- 772,638
Bank of Tokyo-Mitsubishi, Ltd.................... 69,000 -0- 686,258 -0- 686,258
Banyu Pharmaceutical Co., Ltd.................... 31,000 -0- 700,971 -0- 700,971
Canon, Inc....................................... 76,200 6,998 2,659,202 -0- 2,666,200
Chugai Pharmaceutical Co......................... 2,000 33,240 -0- -0- 33,240
Daiwa Securities Group, Inc...................... 56,000 -0- 584,395 -0- 584,395
Fast Retailing Co., Ltd.......................... 6,600 39,153 1,252,904 -0- 1,292,057
Fujitsu, Ltd..................................... 1,000 14,731 -0- -0- 14,731
Furukawa Electric................................ 1,000 17,451 -0- -0- 17,451
Hoya Corp........................................ 9,000 -0- 661,302 -0- 661,302
Kao Corp......................................... 84,000 -0- 2,439,468 -0- 2,439,468
Kyocera Corp..................................... 200 21,816 -0- -0- 21,816
Matsushita Electric Industrial Co., Ltd.......... 1,000 23,880 -0- -0- 23,880
NEC Corp......................................... 60,000 36,564 1,060,357 -0- 1,096,921
Nikko Securities Co., Ltd........................ 4,000 30,966 -0- -0- 30,966
Nippon Telephone & Telegraph Co.................. 4 28,797 -0- -0- 28,797
Nomura Securities Co., Ltd....................... 58,000 35,952 1,006,648 -0- 1,042,600
NTT Docomo, Inc.................................. 111 -0- 1,912,789 -0- 1,912,789
NTT Mobile Communication......................... 1 17,232 -0- -0- 17,232
Rohm Co., Ltd.................................... 1,000 -0- 189,818 -0- 189,818
Sanwa Bank....................................... 4,000 28,026 -0- -0- 28,026
Sony Corp........................................ 700 48,373 -0- -0- 48,373
Sumitomo Trust & Banking Co., Ltd................ 241,000 -0- 1,638,007 -0- 1,638,007
Takeda Chemical Industries, Ltd.................. 48,500 29,566 2,838,349 -0- 2,867,915
Tokyo Electron, Ltd.............................. 10,000 -0- 549,335 -0- 549,335
Toshiba Corp..................................... 6,000 40,098 -0- -0- 40,098
Yamada Denki Co.................................. 400 32,575 -0- -0- 32,575
----------------- ------------- ------------ ------------
502,432 18,952,441 -0- 19,454,873
----------------- ------------- ------------ ------------
2
Brinson Series Trust--Global Equity Portfolio
Alliance Variable Products Series Fund--International Portfolio
================================================================================
Brinson Alliance
Global Equity International Pro-Forma
Combined Portfolio Portfolio Adjustment(s) Combined
Shares (Value) (Value) (Value) (Value)
- -----------------------------------------------------------------------------------------------------------------------------------
KOREA-0.0%
Korea Telecom Corp............................... 479 $ 14,849 $ -0- $ -0- $ 14,849
Samsung Electronic............................... 200 24,980 -0- -0- 24,980
----------------- ------------- ------------ ------------
39,829 -0- -0- 39,829
----------------- ------------- ------------ ------------
MEXICO-0.4%
Telefonos de Mexico, SA de CV (ADR).............. 8,500 -0- 383,562 -0- 383,562
----------------- ------------- ------------ ------------
NETHERLANDS-3.5%
Ahold Kon NV..................................... 912 29,425 -0- -0- 29,425
Akzo Nobel NV.................................... 938 50,381 -0- -0- 50,381
ASM Lithography Holding NV (a)................... 41,900 -0- 951,734 -0- 951,734
Buhrmann NV...................................... 2,117 56,754 -0- -0- 56,754
Getronics NV..................................... 2,150 12,638 -0- -0- 12,638
ING Groep NV..................................... 2,080 166,171 -0- -0- 166,171
Kon KPN NV....................................... 1,568 18,051 -0- -0- 18,051
Koninklijke Philips Electronics NV............... 2,722 99,733 -0- -0- 99,733
Numico Kon NV.................................... 812 40,868 -0- -0- 40,868
Unilever NV...................................... 660 41,771 -0- -0- 41,771
United Pan-Europe Communications NV
Series A (a).................................. 156,530 17,572 1,581,588 -0- 1,599,160
----------------- ------------- ------------ ------------
533,364 2,533,322 -0- 3,066,686
----------------- ------------- ------------ ------------
NORWAY-0.0%
Petroleum Geo Services (a)....................... 1,394 18,380 -0- -0- 18,380
----------------- ------------- ------------ ------------
PORTUGAL-0.1%
Brisa Auto Estrada............................... 9,285 82,827 -0- -0- 82,827
----------------- ------------- ------------ ------------
SINGAPORE-1.0%
DBS Group Holdings, Ltd.......................... 75,038 -0- 849,160 -0- 849,160
----------------- ------------- ------------ ------------
SOUTH KOREA-2.0%
Samsung Electronics Co., Ltd..................... 4,620 -0- 577,043 -0- 577,043
SK Telecom Co., Ltd (ADR)........................ 50,750 -0- 1,195,797 -0- 1,195,797
----------------- ------------- ------------ ------------
-0- 1,772,840 -0- 1,772,840
----------------- ------------- ------------ ------------
SPAIN-3.5%
Banco Bilbao Vizcaya Argentaria, SA.............. 149,900 -0- 2,230,984 -0- 2,230,984
Telefonica, SA (a)............................... 700 11,568 776,740 -0- 788,308
Telefonica, SA Cl.A.............................. 827 41,350 -0- -0- 41,350
----------------- ------------- ------------ ------------
52,918 3,007,724 -0- 3,060,642
----------------- ------------- ------------ ------------
SWEDEN-4.9%
Atlas Copco AB Series A.......................... 44,820 -0- 980,541 -0- 980,541
Ericsson LM B Shares............................. 8,384 95,485 -0- -0- 95,485
Investor AB...................................... 6,910 103,222 -0- -0- 103,222
Nordbanken Holding............................... 12,264 92,899 -0- -0- 92,899
Securitas AB Series B............................ 73,460 -0- 1,361,956 -0- 1,361,956
Skandia Forsakrings AB........................... 101,600 -0- 1,652,251 -0- 1,652,251
----------------- ------------- ------------ ------------
291,606 3,994,748 -0- 4,286,354
----------------- ------------- ------------ ------------
3
PORTFOLIO OF INVESTMENTS
PRO-FORMA COMBINED Brinson Series Trust--Global Equity Portfolio
(continued) Alliance Variable Products Series Fund--International Portfolio
================================================================================
Brinson Alliance
Global Equity International Pro-Forma
Combined Portfolio Portfolio Adjustment(s) Combined
Shares (Value) (Value) (Value) (Value)
- -----------------------------------------------------------------------------------------------------------------------------------
SWITZERLAND-2.8%
ABB, Ltd ........................................ 14,250 $ -0- $ 1,518,717 $ -0- $ 1,518,717
Novartis AG...................................... 61 107,820 -0- -0- 107,820
Serono, SA Cl.B (a).............................. 617 -0- 593,818 -0- 593,818
Syngenta AG...................................... 20 1,073 -0- -0- 1,073
UBS AG........................................... 542 88,444 -0- -0- 88,444
Zurich Financial Services Group.................. 231 139,236 -0- -0- 139,236
----------------- ------------- ------------ ------------
336,573 2,112,535 -0- 2,449,108
----------------- ------------- ------------ ------------
TAIWAN-0.4%
Taiwan Semiconductor Manufacturing
Co., Ltd...................................... 99,840 -0- 239,652 -0- 239,652
Taiwan Semiconductor Manufacturing
Co., Ltd. (ADR)............................... 5,700 -0- 98,325 -0- 98,325
----------------- ------------- ------------ ------------
-0- 337,977 -0- 337,977
----------------- ------------- ------------ ------------
UNITED KINGDOM-27.7%
Aegis Group Plc.................................. 17,191 35,474 -0- -0- 35,474
Amvescap Plc..................................... 3,936 80,867 -0- -0- 80,867
AstraZeneca Group Plc............................ 39,339 11,901 1,973,236 -0- 1,985,137
BG Group ........................................ 6,630 25,974 -0- -0- 25,974
BP Amoco Plc..................................... 273,886 89,515 2,122,011 -0- 2,211,526
British Aerospace Plc............................ 204,900 -0- 1,170,398 -0- 1,170,398
British Sky Broadcasting Group Plc............... 193,910 -0- 3,250,381 -0- 3,250,381
British Telecommunications Plc................... 4,500 38,489 -0- -0- 38,489
Cable & Wireless Plc............................. 3,500 47,259 -0- -0- 47,259
Carlton Communications Plc....................... 5,001 45,691 -0- -0- 45,691
Centrica Plc..................................... 112,000 -0- 434,175 -0- 434,175
CGNU Plc ........................................ 179,500 -0- 2,904,157 -0- 2,904,157
Commercial Union Plc............................. 19,000 307,404 -0- -0- 307,404
Diageo Plc....................................... 214,263 166,685 2,236,222 -0- 2,402,907
Dixons Group Plc................................. 238,557 -0- 799,040 -0- 799,040
GlaxoSmithKline Plc.............................. 3,690 104,284 -0- -0- 104,284
Lattice Group.................................... 6,630 14,970 -0- -0- 14,970
Logica Plc....................................... 8,600 -0- 225,043 -0- 225,043
Marconi.......................................... 2,940 31,609 -0- -0- 31,609
Misys............................................ 2,470 24,376 -0- -0- 24,376
National Grid Group Plc.......................... 27,000 -0- 245,670 -0- 245,670
Prudential Plc................................... 15,700 -0- 252,839 -0- 252,839
Reckitt & Colman Plc............................. 5,015 69,140 -0- -0- 69,140
Reuters Group Plc................................ 142,400 -0- 2,412,505 -0- 2,412,505
RMC Group........................................ 3,200 28,183 -0- -0- 28,183
Rolls Royce...................................... 11,900 35,277 -0- -0- 35,277
Royal & Sun Alliance............................. 11,300 96,819 -0- -0- 96,819
Royal Bank of Scotland Group Plc................. 10,000 -0- 236,556 -0- 236,556
Spirent Plc...................................... 3,630 33,110 -0- -0- 33,110
Standard Chartered Plc........................... 80,493 -0- 1,160,884 -0- 1,160,884
Unilever ........................................ 3,380 28,960 -0- -0- 28,960
United News & Media Plc.......................... 5,355 67,902 -0- -0- 67,902
Vodafone Group Plc............................... 949,091 113,605 3,370,472 -0- 3,484,077
WPP Group Plc.................................... 2,800 36,509 -0- -0- 36,509
----------------- ------------- ------------ ------------
1,534,003 22,793,589 -0- 24,327,592
----------------- ------------- ------------ ------------
4
Brinson Series Trust--Global Equity Portfolio
Alliance Variable Products Series Fund--International Portfolio
================================================================================
Brinson Alliance
Global Equity International Pro-Forma
Combined Portfolio Portfolio Adjustment(s) Combined
Shares (Value) (Value) (Value) (Value)
- -----------------------------------------------------------------------------------------------------------------------------------
UNITED STATES-3.9%
Alcoa, Inc....................................... 2,006 $ 67,201 $ -0- $ -0- $ 67,201
AMBAC Financial Group, Inc....................... 1,467 85,544 -0- -0- 85,544
American Home Products Corp...................... 1,200 76,260 -0- -0- 76,260
American Online, Inc. (a)........................ 598 20,810 -0- -0- 20,810
AMR Corp. (a).................................... 800 31,350 -0- -0- 31,350
Applied Materials, Inc. (a)...................... 1,025 39,142 -0- -0- 39,142
Baxter International, Inc........................ 610 53,871 -0- -0- 53,871
Boeing Co........................................ 1,251 82,566 -0- -0- 82,566
Borg Warner Automotive, Inc...................... 1,116 44,640 -0- -0- 44,640
Centex Corp...................................... 1,303 48,944 -0- -0- 48,944
Chase Manhattan Corp............................. 2,651 120,455 -0- -0- 120,455
Chevron Corp..................................... 961 81,144 -0- -0- 81,144
Circuit City Stores, Inc......................... 974 11,201 -0- -0- 11,201
Cisco Systems, Inc. (a).......................... 2,233 85,412 -0- -0- 85,412
Citigroup, Inc................................... 1,780 90,891 -0- -0- 90,891
Comcast Corp. CL.A (a)........................... 711 29,684 -0- -0- 29,684
Conoco, Inc...................................... 694 20,083 -0- -0- 20,083
Dell Computer Corp. (a).......................... 1,768 30,830 -0- -0- 30,830
Delphi Automotive Systems Corp................... 649 7,301 -0- -0- 7,301
Delta Air Lines, Inc............................. 699 35,081 -0- -0- 35,081
Dow Chemical Co.................................. 1,760 64,460 -0- -0- 64,460
Duke Energy Corp................................. 221 18,840 -0- -0- 18,840
El Paso Energy Corp.............................. 1,231 88,170 -0- -0- 88,170
Emerson Electric Co.............................. 544 42,874 -0- -0- 42,874
Energy East Corp................................. 1,210 23,822 -0- -0- 23,822
Exxon Mobil Corp................................. 1,886 163,964 -0- -0- 163,964
Federal Home Loan Mortgage Corp.................. 810 55,789 -0- -0- 55,789
Federated Department Stores, Inc. (a)............ 1,861 65,135 -0- -0- 65,135
FleetBoston Financial Corp....................... 1,200 45,075 -0- -0- 45,075
Halliburton Co................................... 1,499 54,339 -0- -0- 54,339
Honeywell, Inc................................... 696 32,929 -0- -0- 32,929
Household International, Inc..................... 1,000 55,000 -0- -0- 55,000
IBM Corp......................................... 850 72,250 -0- -0- 72,250
Ingersoll Rand Co................................ 716 29,983 -0- -0- 29,983
Intel Corp....................................... 1,342 40,595 -0- -0- 40,595
International Paper Co........................... 534 21,794 -0- -0- 21,794
JDS Uniphase Corp. (a)........................... 747 31,141 -0- -0- 31,141
Johnson Controls, Inc............................ 466 24,232 -0- -0- 24,232
Knight-Ridder, Inc............................... 1,225 69,672 -0- -0- 69,672
Lear Corp. (a)................................... 1,210 30,023 -0- -0- 30,023
MBNA Corp........................................ 1,286 47,501 -0- -0- 47,501
Mettler-Toledo International, Inc. (a)........... 734 39,911 -0- -0- 39,911
Microsoft Corp. (a).............................. 1,548 67,145 -0- -0- 67,145
Morgan Stanley Dean Witter & Co.................. 1,303 103,263 -0- -0- 103,263
Motorola, Inc.................................... 2,395 48,499 -0- -0- 48,499
New York Times Co. Cl.A.......................... 849 34,013 -0- -0- 34,013
Pfizer, Inc...................................... 2,398 110,308 -0- -0- 110,308
Phillips Petroleum Co............................ 713 40,552 -0- -0- 40,552
Providian Corp................................... 706 40,595 -0- -0- 40,595
5
PORTFOLIO OF INVESTMENTS
PRO-FORMA COMBINED Brinson Series Trust--Global Equity Portfolio
(continued) Alliance Variable Products Series Fund--International Portfolio
================================================================================
Combined
Shares or Brinson Alliance
Principal Global Equity International Pro-Forma
Amount Portfolio Portfolio Adjustment(s) Combined
(000) (Value) (Value) (Value) (Value)
- -----------------------------------------------------------------------------------------------------------------------------------
Royal Dutch Petroleum Co......................... 1,583 $ 95,871 $ -0- $ -0- $ 95,871
Schering-Plough Corp............................. 2,229 126,496 -0- -0- 126,496
Target Corp...................................... 2,978 96,041 -0- -0- 96,041
Texas Instruments, Inc........................... 1,000 47,375 -0- -0- 47,375
Tosco Corp....................................... 908 30,815 -0- -0- 30,815
Transocean Sedco Forex, Inc...................... 463 21,298 -0- -0- 21,298
TRW, Inc......................................... 663 25,691 -0- -0- 25,691
Tyco International, Ltd.......................... 1,021 56,666 -0- -0- 56,666
United Technologies Corp......................... 930 73,121 -0- -0- 73,121
Verizon Communications........................... 1,000 50,125 -0- -0- 50,125
Viacom, Inc. Cl.B (a)............................ 559 26,133 -0- -0- 26,133
Weyerhaeuser Co.................................. 1,467 74,450 -0- -0- 74,450
Worldcom, Inc. (a)............................... 2,176 30,464 -0- -0- 30,464
----------------- ------------- ------------ ------------
3,378,830 -0- -0- 3,378,830
----------------- ------------- ------------ ------------
Total Common Stocks
(cost $85,691,924).......................... 8,643,338 78,948,617 -0- 87,591,955
----------------- ------------- ------------ ------------
SHORT-TERM INVESTMENTS-4.3%
TIME DEPOSIT-4.1%
State Street Euro Dollar
6.00%, 1/02/01
(amortized cost $3,636,000)................... $3,636 -0- 3,636,000 -0- 3,636,000
REPURCHASE AGREEMENT-0.2%
Repurchase Agreement dated 12/29/00 with
State Street Bank & Trust Co., collaterized
by $65,086 U.S. Treasury Notes, 6.250% to
6.875% due 06/30/02 to 05/15/06 (value-
$66,396); and $95,914 U.S. Treasury Bonds,
5.25% due 11/15/28 (value-$97,836);
proceeds: $161,105 (cost-$161,000)............ 161 161,000 -0- -0- 161,000
----------------- ------------- ------------ ------------
161,000 3,636,000 -0- 3,797,000
----------------- ------------- ------------ ------------
TOTAL INVESTMENTS-104.2%
(cost $89,488,924)............................ 8,804,338 82,584,617 -0- 91,388,955
Other assets less liabilities-(4.2%)............. (58,898) (3,594,608) 0 (3,653,506)
----------------- ------------- ------------ ------------
NET ASSETS-100%.................................. $ 8,745,440 $ 78,990,009 $ -0- $ 87,735,449
================= ============= ============ ============
- --------------------------------------------------------------------------------
(a) Non-income producing security.
Glossary:
ADR - American Depositary Receipt
See notes to financial statements.
6
SECTOR DIVERSIFICATION
PRO-FORMA COMBINED Brinson Series Trust--Global Equity Portfolio
December 31, 2000 (unaudited) Alliance Variable Products Series Fund--
International Portfolio
================================================================================
Brinson Alliance Pro-Forma
Global Equity International Pro-Forma Combined
Portfolio Portfolio Adjustments Combined (Percent of
(Value) (Value) (Value) (Value) Net Assets)
--------------- --------------- ------------ ------------ -----------
Aerospace & Defense.......................... $ 117,941 $ -0- $ -0- $ 117,941 0.1%
Basic Industry............................... 433,518 -0- -0- 433,518 0.5
Capital Goods................................ 340,489 2,499,258 -0- 2,839,747 3.2
Consumer Manufacturing....................... 343,442 1,109,214 -0- 1,452,656 1.7
Consumer Services............................ 916,748 20,962,257 -0- 21,879,005 24.9
Consumer Staples............................. 376,109 2,439,468 -0- 2,815,577 3.2
Energy....................................... 866,311 3,567,740 -0- 4,434,051 5.1
Finance...................................... 2,555,132 23,061,727 -0- 25,616,859 29.2
Health Care.................................. 847,848 8,715,798 -0- 9,563,646 10.9
Multi Industry............................... 211,490 1,059,957 -0- 1,271,447 1.4
Technology................................... 1,152,193 13,693,051 -0- 14,845,244 16.9
Utilities.................................... 482,117 1,840,147 -0- 2,322,264 2.7
--------------- --------------- ------------ ------------ -----------
Total Investments*........................... 8,643,338 78,948,617 -0- 87,591,955 99.8
Cash and receivables, net of liabilities..... 102,102 41,392 -0- 143,494 0.2
--------------- --------------- ------------ ------------ -----------
Net Assets................................... $ 8,745,440 $ 78,990,009 $ -0- $ 87,735,449 100.0%
=============== =============== ============ ============ ===========
- --------------------------------------------------------------------------------
* Excludes short-term obligations.
7
STATEMENT OF ASSETS
AND LIABILITIES Brinson Series Trust--Global Equity Portfolio
December 31, 2000 (unaudited) Alliance Variable Products Series Fund--
International Portfolio
================================================================================
Alliance
Brinson Global International Pro-Forma
Equity Portfolio Portfolio Adjustments Combined
---------------- --------------- ------------- ---------------
ASSETS
Investments in securities, at value
(cost $89,488,924)..................... $ 8,804,338 $ 82,584,617 $ -0- $ 91,388,955
Cash, including foreign cash at
value (cost $2,806).................... 991 1,849 -0- 2,840
Collateral held for securities
loaned................................. 37,800 -0- -0- 37,800
Receivable for foreign taxes
withheld............................... 10,891 -0- -0- 10,891
Dividends and interest
receivable............................. 7,107 93,491 -0- 100,598
Receivable for capital stock sold........ -0- 3,686 -0- 3,686
Other assets............................. 3,040 -0- -0- 3,040
------------------ ----------------- ---------------- ------------------
Total assets............................. 8,864,167 82,683,643 -0- 91,547,810
------------------ ----------------- ---------------- ------------------
LIABILITIES
Payable for collateral received
on securities loaned................... 37,800 -0- -0- 37,800
Advisory fee payable..................... 5,823 38,062 -0- 43,885
Payable for capital stock
redeemed............................... -0- 3,606,951 -0- 3,606,951
Accrued expenses and other
liabilities............................ 75,104 48,621 -0- 123,725
------------------ ----------------- ---------------- ------------------
Total liabilities........................ 118,727 3,693,634 -0- 3,812,361
------------------ ----------------- ---------------- ------------------
NET ASSETS................................. $ 8,745,440 $ 78,990,009 $ -0- $ 87,735,449
================== ================= ================ ==================
Class H Shares Class A Shares Class A Shares
Net assets............................... $ 8,129,451 $ 78,990,009 $ 87,119,460
================== ================= ==================
Shares of capital stock
outstanding (a)........................ 618,153 4,934,662 (111,250) 5,441,565
================== ================= ==================
Net asset value per share................ $ 13.15 $ 16.01 $ 16.01
================== ================= ==================
Class I Shares Class B Shares
Net assets............................... $ 615,989 $ 615,989
================== ==================
Shares of capital stock
outstanding (a)........................ 46,959 (8,484) 38,475
================== ==================
Net asset value per share................ $ 13.12 $ 16.01
================== ==================
- --------------------------------------------------------------------------------
(a) The Class H and Class I shares of the Global Equity Portfolio have
characteristics substantially similar to the Class A and Class B shares of
the International Portfolio, respectively. Class A and Class H shares are
sold and redeemed at net asset value and do not pay 12b-1 fees. Class B
and Class I shares are also sold and redeemed at net asset value. However,
under a Rule 12b-1 plan adopted by each Portfolio, Class B and Class I
shares pay annual distribution fees equal to 0.25% of the average daily
net assets attributable to such respective class. Class B shares is being
established in connection with the proposed merger.
See notes to financial statements.
8
STATEMENT OF OPERATIONS
Twelve Months Ended Brinson Series Trust--Global Equity Portfolio
December 31, 2000 (unaudited) Alliance Variable Products Series Fund--
International Portfolio
================================================================================
Alliance
Brinson Global International Pro-Forma
Equity Portfolio Portfolio Adjustments Combined*
---------------- ----------------- --------------- --------------
INVESTMENT INCOME
Dividends (net of foreign
witholding taxes of $123,037)...... $ 133,324 $ 687,691 $ -0- $ 821,015
Interest.............................. 69,085 195,915 -0- 265,000
---------------- ------------------ ---------------- ---------------
Total investment income............... 202,409 883,606 -0- 1,086,015
---------------- ------------------ ---------------- ---------------
EXPENSES
Advisory fee.......................... 81,207 870,332 27,070 978,609 (a)
Distribution fee - Class B............ 1,451 -0- -0- 1,451 (b)
Audit and legal....................... 34,290 23,533 (18,947) 38,876 (c)
Printing.............................. 31,000 8,989 (27,844) 12,145 (c)
Custodian............................. 29,288 185,474 (13,384) 201,378 (d)
Directors' fees....................... 7,500 1,426 (7,500) 1,426 (c)
Transfer agency....................... 3,000 945 (3,000) 945 (c)
Administrative........................ -0- 66,000 -0- 66,000 (c)
Miscellaneous......................... 1,905 6,052 (571) 7,386 (c)
---------------- ------------------ ---------------- ---------------
Total expenses........................ 189,641 1,162,751 (44,176) 1,308,216
Expenses waived and reimbursed........ (229) (335,935) (40,755) (376,919)
---------------- ------------------ ---------------- ---------------
Net expenses.......................... 189,412 826,816 (84,931) 931,297
---------------- ------------------ ---------------- ---------------
Net investment income................. 12,997 56,790 84,931 154,718
---------------- ------------------ ---------------- ---------------
REALIZED AND UNREALIZED
LOSS ON INVESTMENTS
Net realized gain on investment
transactions....................... 1,253,387 3,983,044 -0- 5,236,431
Net realized loss on futures
transactions....................... (117,268) -0- -0- (117,268)
Net realized loss on foreign
currency transactions.............. (11,784) (120,198) -0- (131,982)
Net change in unrealized
appreciation/depreciation of:
Investments........................ (2,193,110) (20,977,391) -0- (23,170,501)
Futures............................ (8,138) -0- -0- (8,138)
Foreign currency denominated
assets and liabilities........... 11 (2,240) -0- (2,229)
---------------- ------------------ ---------------- ---------------
Net loss on investments............... (1,076,902) (17,116,785) -0- (18,193,687)
---------------- ------------------ ---------------- ---------------
NET INCREASE (DECREASE)
IN NET ASSETS FROM
OPERATIONS............................ $ (1,063,905) $ (17,059,995) $ 84,931 $ (18,038,969)
================ ================== ================ ===============
- --------------------------------------------------------------------------------
* Based on combined net assets for the twelve months ended December 31, 2000.
(a) Advisory fee based on an annual rate of 1.00% of the total combined average
net assets for the twelve months ended December 31, 2000.
(b) Distribution fee based on an annual rate of .25% of the total combined
average net assets for the twelve months ended December 31, 2000.
(c) Expenses are based on one fund.
(d) Custodian fees are based on monthly fixed fees and on average net assets.
See notes to financial statements.
9
NOTES TO PRO-FORMA COMBINED
FINANCIAL STATEMENTS Brinson Series Trust--Global Equity Portfolio
December 31, 2000 (unaudited) Alliance Variable Products Series Fund--
International Portfolio
================================================================================
NOTE A: General
The Pro-Forma Financial Statements give effect to the proposed acquisition of
the assets of Brinson Series Trust - Global Equity Portfolio by Alliance
Variable Products Series Fund - International Portfolio (the "Portfolio")
pursuant to an Agreement and Plan of Acquisition and Termination. The
acquisition would be accomplished by a tax-free exchange of the assets of
Brinson Series Trust - Global Equity Portfolio for shares of the Portfolio.
The unaudited Pro-Forma Statements of Investments, of Assets and Liabilities and
of Operations have been prepared as though the acquisition had been effective
December 31, 2000 and should be read in conjunction with the historical
financial statements and schedules of investments of the Portfolio, included in
the Statement of Additional information. The Pro-Forma Statement of Operations
has been prepared under the assumption that certain expenses would be lower for
the combined entity as a result of the acquisition. The expense of the
acquisition, including the cost of proxy solicitation, will be borne by Alliance
Capital Management L.P.
- --------------------------------------------------------------------------------
NOTE B: Significant Accounting Policies
The financial statements have been prepared in accordance with accounting
principles generally accepted in the United States, which require management to
make certain estimates and assumptions that affect the reported amounts of
assets and liabilities in the financial statements and amounts of income and
expenses during the reporting period. Actual results could differ from those
estimates.
1. Security Valuation
Portfolio securities traded on a national securities exchange or on a foreign
securities exchange (other than foreign securities exchanges whose operations
are similar to those of the United States over-the-counter market) or on The
Nasdaq Stock Market, Inc., are generally valued at the last reported sales price
or if no sale occurred, at the mean of the closing bid and asked prices on that
day. Readily marketable securities traded in the over-the-counter market,
securities listed on a foreign securities exchange whose operations are similar
to the U.S. over-the-counter market, and securities listed on a national
securities exchange whose primary market is believed to be over-the-counter (but
excluding securities traded on The Nasdaq Stock Market, Inc.), are valued at the
mean of the current bid and asked prices. U.S. government and fixed income
securities which mature in 60 days or less are valued at amortized cost, unless
this method does not represent fair value. Securities for which current market
quotations are not readily available are valued at their fair value as
determined in good faith by, or in accordance with procedures adopted by, the
Board of Directors. Fixed income securities may be valued on the basis of prices
obtained from a pricing service when such prices are believed to reflect the
fair market value of such securities.
2. Currency Translation
Assets and liabilities denominated in foreign currencies and commitments under
forward exchange currency contracts are translated into U.S. dollars at the mean
of the quoted bid and asked price of such currencies against the U.S. dollar.
Purchases and sales of portfolio securities are translated at the rates of
exchange prevailing when such securities were acquired or sold. Income and
expenses are translated at rates of exchange prevailing when accrued.
Net realized gains and losses on foreign currency transactions represent foreign
exchange gains and losses from sales and maturities of securities and forward
exchange currency contracts, holdings of foreign currencies, exchange gains and
losses realized between the trade and settlement dates on investment
transactions, and the difference between the amounts of interest, dividends and
foreign withholding tax reclaims recorded on the Portfolio's books and the U.S.
dollar equivalent amounts actually received or paid. Net unrealized currency
gains and losses from valuing foreign currency denominated assets and
liabilities at period end exchange rates are reflected as a component of net
unrealized appreciation or depreciation of investments and foreign currency
denominated assets and liabilities.
3. Taxes
It is the Portfolio's policy to meet the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if any, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
10
NOTES TO PRO-FORMA COMBINED
FINANCIAL STATEMENTS Brinson Series Trust--Global Equity Portfolio
(continued) Alliance Variable Products Series Fund--International Portfolio
================================================================================
4. Investment Income and Investment Transactions
Dividend income is recorded on the ex-dividend date. Interest income is accrued
daily. Investment transactions are accounted for on the date securities are
purchased or sold. The Portfolio accretes discounts as adjustments to interest
income. Investment gains and losses are determined on the identified cost basis.
5. Dividends and Distributions
The Portfolio declares and distributes dividend and distributions from net
investment income and net realized gains, respectively, if any, at least
annually. Income dividends and capital gains distributions to shareholders are
recorded on the ex-dividend date.
Income dividends and capital gains distributions are determined in accordance
with federal tax regulations and may differ from those determined in accordance
with accounting principles generally accepted in the United States. To the
extent these differences are permanent, such amounts are reclassified within the
capital accounts based on their federal tax basis treatment; temporary
differences do not require such reclassification.
- --------------------------------------------------------------------------------
NOTE C: Advisory Fee and Other Transactions with Affiliates
Under the terms of an investment advisory agreement, the Portfolio pays Alliance
Capital Management L.P. (the "Adviser"), an investment advisory fee at an
annualized rate of 1% of the Portfolio's average daily net assets.
During the year ended December 31, 2000, the Adviser agreed to waive its fee and
to reimburse the additional operating expenses to the extent necessary to limit
total operating expenses on an annual basis to .95% of the average daily net
assets for Class A shares. Expense waivers/reimbursements, if any, are accrued
daily and paid monthly. For the year ended December 31, 2000, such
waivers/reimbursements would amounted to $376,919.
NOTE D: Distribution Plan
The Portfolio has adopted a Plan for Class B shares pursuant to Rule 12b-1 under
the Investment Company Act of 1940 (the "Plan"). Under the Plan, the Portfolio
pays distribution and servicing fees to the Distributor at an annual rate of up
to .50% of each portfolio's average daily net assets attributable to the Class B
shares. The fees are accrued daily and paid monthly. The Board of Directors
currently limit payments under the Plan to .25% of the Portfolio's average daily
net assets attributable to Class B shares. The Plan provides that the
Distributor will use such payments in their entirety for distribution assistance
and promotional activities.
11
PART C. OTHER INFORMATION
Item 15 Indemnification
It is the Registrant's policy to indemnify its directors and officers,
employees and other agents to the maximum extent permitted by Section 2-418 of
the General Corporation Law of the State of Maryland and as set forth in Article
EIGHTH of Registrant's Articles of Incorporation, filed as Exhibit (a), Article
VII of the Registrants By-Laws filed as Exhibit (b) and Section 9 of the
Distribution Services Agreement filed as Exhibit (e)(1) and Class B Distribution
Services Agreement filed as Exhibit (e)(2). The Adviser's liability for any loss
suffered by the Registrant or its shareholders is set forth in Section 4 of the
Advisory Agreement filed as Exhibit (d)(1) in response to Item 23.
Section 2-418 of the Maryland General Corporation Law reads as follows:
2-418 INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS.--(a)
In this section the following words have the meaning indicated.
(1) Directors means any person who is or was a director of a corporation
and any person who, while a director of a corporation, is or was serving at the
request of the corporation as a director, officer, partner, trustee, employee,
or agent of another foreign or domestic corporation, partnership, joint venture,
trust, other enterprise, or employee benefit plan.
(2) Corporation includes any domestic or foreign predecessor entity of a
corporation in a merger, consolidation, or other transaction in which the
predecessors existence ceased upon consummation of the transaction.
(3) Expenses include attorneys fees.
(4) Official capacity means the following:
(i) When used with respect to a director, the office of director in
the corporation; and
(ii) When used with respect to a person other than a director as
contemplated in subsection (i), the elective or appointive office in
the corporation held by the officer, or the employment or agency
relationship undertaken by the employee or agent in behalf of the
corporation.
(iii) Official capacity does not include service for any other
foreign or domestic corporation or any partnership, joint venture,
trust, other enterprise, or employee benefit plan.
(5) Party includes a person who was, is, or is threatened to be made a
named defendant or respondent in a proceeding.
(6) Proceeding means any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative, or investigative.
(b)(1) A corporation may indemnify any director made a party to any
proceeding by reason of service in that capacity unless it is
established that:
(i) The act or omission of the director was material to the matter
giving rise to the proceeding; and 1. Was committed in bad faith; or
2. Was the result of active and deliberate dishonesty; or
(ii) The director actually received an improper personal benefit in
money, property, or services; or
(iii) In the case of any criminal proceeding, the director had
reasonable cause to believe that the act or omission was unlawful.
(2) (i) Indemnification may be against judgments, penalties, fines,
settlements, and reasonable expenses actually incurred by the
director in connection with the proceeding.
(ii) However, if the proceeding was one by or in the right of the
corporation, indemnification may not be made in respect of any
proceeding in which the director shall have been adjudged to be
liable to the corporation.
(3) (i) The termination of any proceeding by judgment, order or
settlement does not create a presumption that the director did not
meet the requisite standard of conduct set forth in this subsection.
(ii) The termination of any proceeding by conviction, or a plea of
nolo contendere or its equivalent, or an entry of an order of
probation prior to judgment, creates a rebuttable presumption that
the director did not meet that standard of conduct.
(c) A director may not be indemnified under subsection (b) of this
section in respect of any proceeding charging improper personal
benefit to the director, whether or not involving action in the
directors official capacity, in which the director was adjudged to
be liable on the basis that personal benefit was improperly
received.
(d) Unless limited by the charter:
(1) A director who has been successful, on the merits or
otherwise, in the defense of any proceeding referred to in
subsection (b) of this section shall be indemnified against
reasonable expenses incurred by the director in connection with the
proceeding.
(2) A court of appropriate jurisdiction upon application of a
director and such notice as the court shall require, may order
indemnification in the following circumstances:
(i) If it determines a director is entitled to reimbursement under
paragraph (1) of this subsection, the court shall order
indemnification, in which case the director shall be entitled to
recover the expenses of securing such reimbursement; or
(ii) If it determines that the director is fairly and reasonably
entitled to indemnification in view of all the relevant
circumstances, whether or not the director has met the standards of
conduct set forth in subsection (b) of this section or has been
adjudged liable under the circumstances described in subsection (c)
of this section, the court may order such indemnification as the
court shall deem proper. However, indemnification with respect to
any proceeding by or in the right of the corporation or in which
liability shall have been adjudged in the circumstances described in
subsection (c) shall be limited to expenses.
(3) A court of appropriate jurisdiction may be the same court
in which the proceeding involving the directors liability took
place.
(e) (1) Indemnification under subsection (b) of this section may not
be made by the corporation unless authorized for a specific
proceeding after a determination has been made that indemnification
of the director is permissible in the circumstances because the
director has met the standard of conduct set forth in subsection (b)
of this section.
(2) Such determination shall be made:
(i) By the board of directors by a majority vote of a quorum
consisting of directors not, at the time, parties to the proceeding,
or, if such a quorum cannot be obtained, then by a majority vote of
a committee of the board consisting solely of two or more directors
not, at the time, parties to such proceeding and who were duly
designated to act in the matter by a majority vote of the full board
in which the designated directors who are parties may participate;
(ii) By special legal counsel selected by the board or a committee
of the board by vote as set forth in subparagraph (i) of this
paragraph, or, if the requisite quorum of the full board cannot be
obtained therefor and the committee cannot be established, by a
majority vote of the full board in which directors who are parties
may participate; or
(iii) By the stockholders.
(3) Authorization of indemnification and determination as to
reasonableness of expenses shall be made in the same manner as the
determination that indemnification is permissible. However, if the
determination that indemnification is permissible is made by special
legal counsel, authorization of indemnification and determination as
to reasonableness of expenses shall be made in the manner specified
in subparagraph (ii) of paragraph (2) of this subsection for
selection of such counsel.
(4) Shares held by directors who are parties to the proceeding
may not be voted on the subject matter under this subsection.
(f) (1) Reasonable expenses incurred by a director who is a party to
a proceeding may be paid or reimbursed by the corporation in advance
of the final disposition of the proceeding, upon receipt by the
corporation of:
(i) A written affirmation by the director of the directors good
faith belief that the standard of conduct necessary for
indemnification by the corporation as authorized in this section has
been met; and
(ii) A written undertaking by or on behalf of the director to repay
the amount if it shall ultimately be determined that the standard of
conduct has not been met.
(2) The undertaking required by subparagraph (ii) of paragraph
(1) of this subsection shall be an unlimited general obligation of
the director but need not be secured and may be accepted without
reference to financial ability to make the repayment.
(3) Payments under this subsection shall be made as provided
by the charter, bylaws, or contract or as specified in subsection
(e) of this section.
(g) The indemnification and advancement of expenses provided or
authorized by this section may not be deemed exclusive of any other
rights, by indemnification or otherwise, to which a director may be
entitled under the charter, the bylaws, a resolution of stockholders
or directors, an agreement or otherwise, both as to action in an
official capacity and as to action in another capacity while holding
such office.
(h) This section does not limit the corporations power to pay or
reimburse expenses incurred by a director in connection with an
appearance as a witness in a proceeding at a time when the director
has not been made a named defendant or respondent in the proceeding.
(i) For purposes of this section:
(1) The corporation shall be deemed to have requested a
director to serve an employee benefit plan where the performance of
the directors duties to the corporation also imposes duties on, or
otherwise involves services by, the director to the plan or
participants or beneficiaries of the plan:
(2) Excise taxes assessed on a director with respect to an
employee benefit plan pursuant to applicable law shall be deemed
fines; and
(3) Action taken or omitted by the director with respect to an
employee benefit plan in the performance of the directors duties for
a purpose reasonably believed by the director to be in the interest
of the participants and beneficiaries of the plan shall be deemed to
be for a purpose which is not opposed to the best interests of the
corporation.
(j) Unless limited by the charter:
(1) An officer of the corporation shall be indemnified as and
to the extent provided in subsection (d) of this section for a
director and shall be entitled, to the same extent as a director, to
seek indemnification pursuant to the provisions of subsection (d);
(2) A corporation may indemnify and advance expenses to an
officer, employee, or agent of the corporation to the same extent
that it may indemnify directors under this section; and
(3) A corporation, in addition, may indemnify and advance
expenses to an officer, employee, or agent who is not a director to
such further extent, consistent with law, as may be provided by its
charter, bylaws, general or specific action of its board of
directors or contract.
(k) (1) A corporation may purchase and maintain insurance on behalf
of any person who is or was a director, officer, employee, or agent
of the corporation, or who, while a director, officer, employee, or
agent of the corporation, is or was serving at the request, of the
corporation as a director, officer, partner, trustee, employee, or
agent of another foreign or domestic corporation, partnership, joint
venture, trust, other enterprise, or employee benefit plan against
any liability asserted against and incurred by
such person in any such capacity or arising out of such persons
position, whether or not the corporation would have the power to
indemnify against liability under the provisions of this section.
(2) A corporation may provide similar protection, including a
trust fund, letter of credit, or surety bond, not inconsistent with
this section.
(3) The insurance or similar protection may be provided by a
subsidiary or an affiliate of the corporation.
(l) Any indemnification of, or advance of expenses to, a
director in accordance with this section, if arising out of a
proceeding by or in the right of the corporation, shall be reported
in writing to the stockholders with the notice of the next
stockholders meeting or prior to the meeting.
Article EIGHTH of the Registrants Articles of Incorporation reads as
follows:
EIGHTH: To the maximum permitted by the General Corporation Law of
the State of Maryland as from time to time amended, the Corporation
shall indemnify its currently acting and its former directors and
officers and those persons who, at the request of the Corporation,
serve or have served another Corporation, partnership, joint
venture, trust or other enterprise in one or more of such
capacities. The Advisory Agreement between the Registrant and
Alliance Capital Management L.P. provides that Alliance Capital
Management L.P. will not be liable under such agreements for any
mistake of judgment or in any event whatsoever except for lack of
good faith and that nothing therein shall be deemed to protect, or
purport to protect, Alliance Capital Management L.P. against any
liability to Registrant or its security holders to which it would
otherwise be subject by reason of willful misfeasance, bad faith or
gross negligence in the performance of its duties thereunder, or by
reason of reckless disregard of its obligations or duties
thereunder.
The Distribution Services Agreement between the Registrant and
Alliance Fund Distributors, Inc. provides that the Registrant will
indemnify, defend and hold Alliance Fund Distributors, Inc., and any
person who controls it within the meaning of Section 15 of the
Investment Company Act of 1940, free and harmless from and against
any and all claims, demands, liabilities and expenses which Alliance
Fund Distributors, Inc. or any controlling person may incur arising
out of or based upon any alleged untrue statement of a material fact
contained in Registrants Registration Statement or Prospectus or
Statement of Additional Information or arising out
of, or based upon any alleged omission to state a material fact
required to be stated in either thereof or necessary to make the
statements in any thereof not misleading, provided that nothing
therein shall be so construed as to protect Alliance Fund
Distributors against any liability to Registrant or its security
holders to which it would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of its
duties, or be reason of reckless disregard of its obligations or
duties thereunder. The foregoing summaries are qualified by the
entire text of Registrants Articles of Incorporation, the Advisory
Agreement between the Registrant and Alliance Capital Management
L.P. and the Distribution Services Agreement between the Registrant
and Alliance Fund Distributors, Inc.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended (the Securities Act) may be
permitted to directors, officers and controlling persons of the
Registrant 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 Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of
expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being
registered, the Registrant 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 of whether such
indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of
such issue.
In accordance with Release No. IC-11330 (September 2, 1980), the
Registrant will indemnify its directors, officers, investment
manager and principal underwriters only if (1) a final decision on
the merits was issued by the court or other body before whom the
proceeding was brought that the person to be indemnified (the
indemnitee) was not liable by reason or willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved
in the conduct of his office (disabling conduct) or (2) a reasonable
determination is made, based upon a review of the facts, that the
indemnitee was not liable by reason of disabling conduct, by (a) the
vote of a majority of a quorum of the directors who are neither
interested persons of the Registrant as defined in section 2(a)(19)
of the Investment Company Act of 1940 nor parties to the
proceeding (disinterested, non-party directors), or (b) an
independent legal counsel in a written opinion. The Registrant will
advance attorneys fees or other expenses incurred by its directors,
officers, investment adviser or principal underwriters in defending
a proceeding, upon the undertaking by or on behalf of the indemnitee
to repay the advance unless it is ultimately determined that he is
entitled to indemnification and, as a condition to the advance, (1)
the indemnitee shall provide a security for his undertaking, (2) the
Registrant 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 Registrant, or an independent legal
counsel in a written opinion, shall determine, based on a review of
readily available facts (as opposed to a full trial-type inquiry),
that there is reason to believe that the indemnitee ultimately will
be found entitled to indemnification.
ARTICLE VII, Section 1 through Section 6 of the Registrants By-laws reads
as follows:
Section 1. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The
Corporation shall indemnify its directors to the fullest extent that
indemnification of directors is permitted by the Maryland General
Corporation Law. The Corporation shall indemnify its officers to the
same extent as its directors and to such further extent as is
consistent with law. The Corporation shall indemnify its directors
and officers who while serving as directors or officers also serve
at the request of the Corporation as a director, officer, partner,
trustee, employee, agent or fiduciary of another corporation,
partnership, joint venture, trust, other enterprise or employee
benefit plan to the fullest extent consistent with law. The
indemnification and other rights provided by this Article shall
continue as to a person who has ceased to be a director or officer
and shall inure to the benefit of the heirs, executors and
administrators of such a person. This Article shall not protect any
such person against any liability to the Corporation or any
stockholder thereof to which such person would otherwise be subject
by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his
office (disabling conduct).
Section 2. ADVANCES. Any current or former director or officer of
the Corporation seeking indemnification within the scope of this
Article shall be entitled to advances from the Corporation for
payment of the reasonable expenses incurred by him in connection
with the matter as to which he is seeking indemnification in the
manner and to the fullest extent permissible under the Maryland
General Corporation Law. The person seeking indemnification shall
provide to the Corporation a written affirmation of his good
faith belief that the standard of conduct necessary for
indemnification by the Corporation has been met and a written
undertaking to repay any such advance if it should ultimately be
determined that the standard of conduct has not been met. In
addition, at least one of the following additional conditions shall
be met: (a) the person seeking indemnification shall provide a
security in form and amount acceptable to the Corporation for his
undertaking; (b) the Corporation is insured against losses arising
by reason of the advance; or (c) a majority of a quorum of directors
of the Corporation who are neither interested persons as defined in
Section 2(a)(19) of the Investment Company Act of 1940, as amended,
nor parties to the proceeding (disinterested non-party directors),
or independent legal counsel, in a written opinion, shall have
determined, based on a review of facts readily available to the
Corporation at the time the advance is proposed to be made, that
there is reason to believe that the person seeking indemnification
will ultimately be found to be entitled to indemnification.
Section 3. PROCEDURE. At the request of any person claiming
indemnification under this Article, the Board of Directors shall
determine, or cause to be determined, in a manner consistent with
the Maryland General Corporation Law, whether the standards required
by this Article have been met. Indemnification shall be made only
following: (a) a final decision on the merits by a court or other
body before whom the proceeding was brought that the person to be
indemnified was not liable by reason of disabling conduct or (b) in
the absence of such a decision, a reasonable determination, based
upon a review of the facts, that the person to be indemnified was
not liable by reason of disabling conduct by (i) the vote of a
majority of a quorum of disinterested non- party directors or (ii)
an independent legal counsel in a written opinion.
Section 4. INDEMNIFICATION OF EMPLOYEES AND AGENTS. Employees and
agents who are not officers or directors of the Corporation may be
indemnified, and reasonable expenses may be advanced to such
employees or agents, as may be provided by action of the Board of
Directors or by contract, subject to any limitations imposed by the
Investment Company Act of 1940.
Section 5. OTHER RIGHTS. The Board of Directors may make further
provision consistent with law for indemnification and advance of
expenses to directors, officers, employees and agents by resolution,
agreement or otherwise. The indemnification provided by this Article
shall not be deemed exclusive of any other right, with respect to
indemnification or otherwise, to which those seeking indemnification
may be entitled under any insurance or other agreement or resolution
of stockholders or disinterested
directors or otherwise. The rights provided to any person by this
Article shall be enforceable against the Corporation by such person
who shall be presumed to have relied upon it in serving or
continuing to serve as a director, officer, employee, or agent as
provided above.
Section 6. AMENDMENTS. References in this Article are to the
Maryland General Corporation Law and to the Investment Company Act
of 1940 as from time to time amended. No amendment of these By-laws
shall effect any right of any person under this Article based on any
event, omission or proceeding prior to the amendment.
The Registrant participates in a joint directors and officers
liability insurance policy issued by the ICI Mutual Insurance
Company. Coverage under this policy has been extended to directors,
trustees and officers of the investment companies managed by
Alliance Capital Management L.P. Under this policy, outside trustees
and directors are covered up to the limits specified for any claim
against them for acts committed in their capacities as trustee or
director. A pro rata share of the premium for this coverage is
charged to each investment company and to the Adviser
Item 16 Exhibits.
The number of each exhibit relates to the exhibit designation in
Form N-14
1. (a) Articles of Incorporation of the Registrant - Incorporated by
reference to Exhibit (1)(a) to Post-Effective Amendment No. 22 of
Registrant's Registration Statement on Form N-1A (File Nos. 33-
18647 and 811-5398) filed with the Securities and Exchange
Commission on April 29, 1998.
(b) Articles Supplementary to the Articles of Incorporation of the
Registrant dated September 26, 1990 and filed September 28, 1990 -
Incorporated by reference to Exhibit (1)(b) to Post-Effective
Amendment No. 22 of Registrant's Registration Statement on Form N-1A
(File Nos. 33-18647 and 811- 5398) filed with the Securities and
Exchange Commission on April 29, 1998.
(c) Articles Supplementary to the Articles of Incorporation of the
Registrant dated June 25 1991 and filed June 26, 1991 - Incorporated
by reference to Exhibit (1)(c) to Post-Effective Amendment No. 22 of
Registrant's Registration Statement on Form N-1A (File Nos. 33-18647
and 811-5398) filed with the Securities and Exchange Commission on
April 29, 1998.
(d) Articles Supplementary to the Articles of Incorporation of the
Registrant dated February 16 1994 and filed February 22, 1994 -
Incorporated by reference to Exhibit (1)(d) to Post-Effective
Amendment No. 22 of Registrant's Registration Statement on Form N-1A
(File Nos. 33-18647 and 811- 5398) filed with the Securities and
Exchange Commission on April 29, 1998.
(e) Articles Supplementary to the Articles of Incorporation of the
Registrant dated August 23 1994 and filed August 24, 1994 -
Incorporated by reference to Exhibit 1(d) to Post-Effective
Amendment No. 13 of Registrant's Registration Statement on Form N-1A
(File Nos. 33-18647 and 811- 5398) with the Securities and Exchange
Commission filed on May 1, 1995.
(f) Articles of Amendment to the Articles of Incorporation of the
Registrant dated October 21, 1994 and filed November 7, 1994 -
Incorporated by reference to Exhibit 1(e) to Post-Effective
Amendment No. 13 of Registrant's Registration Statement on Form N-1A
(File Nos. 33-18647 and 811- 5398) filed with the Securities and
Exchange Commission on May 1, 1995.
(g) Articles Supplementary to the Articles of Incorporation dated
December 26, 1995 and filed December 28, 1995 - Incorporated by
reference to Exhibit 1(f) to Post-Effective Amendment No. 15 of
Registrant's Registration Statement on Form N-1A (File Nos. 33-18647
and 811-5398) filed with the Securities and Exchange Commission on
April 30, 1996.
(h) Articles Supplementary to the Articles of Incorporation dated
March 29, 1996 and filed April 12, 1996 - Incorporated by reference
to Exhibit 1(g) to Post-Effective Amendment No. 15 of Registrant's
Registration Statement on Form N-1A (File Nos. 33-18647 and
811-5398) filed with the Securities and Exchange Commission on April
30, 1996.
(i) Articles Supplementary to the Articles of Incorporation dated
July 18, 1996 and filed July 19, 1996 - Incorporated by reference to
Exhibit 1(h) to Post-Effective Amendment No. 17 of Registrant's
Registration Statement on Form N-1A (File Nos. 33-18647 and
811-5398) filed with the Securities and Exchange Commission on July
22, 1996.
(j) Articles Supplementary to the Articles of Incorporation dated
December 26, 1996 and filed December 30, 1996 - Incorporated by
reference to Exhibit 1(i) to Post-Effective Amendment No. 20 of
Registrant's Registration Statement on Form
N-1A (File Nos. 33-18647 and 811-5398) filed with the Securities and
Exchange Commission on February 18, 1997.
(k) Articles of Amendment to the Articles of Incorporation of the
Registrant dated January 6, 1999 and filed January 8, 1999 -
Incorporated by reference to Exhibit 1(k) to Post-Effective
Amendment No. 25 of Registrant's Registration Statement on Form N-1A
(File Nos. 33-18647 and 811- 5398) filed with the Securities and
Exchange Commission on January 11, 1999.
(l) Articles Supplementary to the Articles of Incorporation of the
Registrant dated January 6, 1999 and filed January 8, 1999 -
Incorporated by reference to Exhibit 1(l) to Post-Effective
Amendment No. 25 of Registrant's Registration Statement on Form N-1A
(File Nos. 33-18647 and 811- 5398) filed with the Securities and
Exchange Commission on January 11, 1999.
(m) Articles Supplementary to the Articles of Incorporation of the
Registrant dated January 31, 2001 and filed April 12, 2001 -
Incorporated by reference to Post-Effective Amendment No. 32 of
Registrant's Registration Statement on Form N-1A (File Nos. 33-18647
and 811- 5398) filed with the Securities and Exchange Commission on
April 27, 2001.
(m) Articles of Amendment to the Articles of Incorporation of the
Registrant dated April 6, 2001 - Incorporated by reference to
Post-Effective Amendment No. 32 of Registrant's Registration
Statement on Form N-1A (File Nos. 33-18647 and 811- 5398) filed with
the Securities and Exchange Commission on April 27, 2001.
2. By-Laws of the Registrant - Incorporated by reference to Exhibit (2)
to Post-Effective Amendment No. 22 of Registrant's Registration
Statement on Form N-1A (File Nos. 33-18647 and 811- 5398) filed with
the Securities and Exchange Commission on April 29, 1998.
3. Not applicable.
4. From of Agreement and Plan of Acquisition and Termination - see
Appendix A to Part A.
5. Not applicable.
6. (a) Investment Advisory Agreement between Registrant and Alliance
Capital Management L.P. amended as of May 1, 1997 - Incorporated by
reference to Exhibit (5)(a) to Post-Effective Amendment No. 21 of
Registrant's Registration Statement on Form N-1A (File Nos. 33-18647
and 811-5398) filed with the Securities and Exchange Commission on
May 1, 1997.
(b) Investment Advisory Agreement between Registrant and Alliance
Capital Management L.P. amended as of May 1, 2001 - Incorporated by
reference to Post-Effective Amendment No. 32 of Registrant's
Registration Statement on Form N-1A (File Nos. 33-18647 and 811-
5398) filed with the Securities and Exchange Commission on April 27,
2001.
(c) Sub-Advisory Agreement between Alliance Capital Management L.P.
and Law, Dempsey & Company Limited, relating to the Global Bond
Portfolio - Incorporated by reference to Exhibit (5)(b) to
Post-Effective Amendment No. 22 of Registrant's Registration
Statement on Form N-1A (File Nos. 33- 18647 and 811-5398) filed with
the Securities and Exchange Commission on April 29, 1998.
7. (a) Distribution Services Agreement between the Registrant and
Alliance Fund Distributors, Inc. - Incorporated by reference to
Exhibit (6) to Post-Effective Amendment No. 22 of Registrant's
Registration Statement on Form N-1A (File Nos. 33- 18647 and
811-5398) filed with the Securities and Exchange Commission on April
29, 1998.
(b) Class B Distribution Services Agreement between the Registrant
and Alliance Fund Distributors, Inc. - Incorporated by reference to
Exhibit (c)(2) to Post-Effective Amendment No. 27 of Registrant's
Registration Statement on Form N-1A (File Nos. 33- 18647 and
811-5398) filed with the Securities and Exchange Commission on May
3, 1999.
8. Not applicable.
9. (a) Custodian Contract between the Registrant and State Street Bank
and Trust Company - Incorporated by reference to Exhibit (8)(a) to
Post-Effective Amendment No. 21 of Registrant's Registration
Statement on Form N-1A (File Nos. 33-18647 and 811- 5398) filed with
the Securities and Exchange Commission on May 1, 1997.
(b) Amendment to Custodian Agreement dated June 4, 1996 -
Incorporated by reference to Exhibit (8)(b) to Post-Effective
Amendment No. 21 of Registrant's Registration Statement on Form N-1A
(File Nos. 33- 18647 and 811-5398) filed with the Securities and
Exchange Commission on May 1, 1997.
(c) [New custodian agreement under revised rules?]
10. Rule 12b-1 Class B Distribution Plan - Incorporated by reference to
Exhibit (m) to Post-Effective Amendment No. 27 of Registrant's
Registration Statement on Form N-1A (File Nos. 33- 18647 and
811-5398) filed with the Securities and Exchange Commission on May
3, 1999.
11. (a) Opinion and consent of Seward & Kissell LLP - Filed herewith.
(b) Opinion and consent of Venable, Baetjer and Howard, LLP -
Filed herewith.
12. Opinion and consent of Ropes & Gray - to be filed by amendment.
13. Transfer Agency Agreement between the Registrant and Alliance Fund
Services, Inc. - Incorporated by reference to Exhibit (9) to
Post-Effective Amendment No. 22 of Registrant's Registration
Statement on Form N-1A (File Nos. 33-18647 and 811- 5398) filed with
the Securities and Exchange Commission on April 29, 1998.
14. Consent of Ernst & Young LLP - Filed herewith.
15. Not applicable.
16. (a) Power of attorney for William Foulk, Jr. - Filed herewith.
(b) Power of attorney for Clifford Michel - Filed herewith.
(c) Power of attorney for Ruth Block - Filed herewith.
(d) Power of attorney for John Dobkin - Filed herewith.
(e) Power of attorney for Donald Robinson - Filed herewith.
(f) Power of attorney for David Dievler - Filed herewith.
(g) Power of attorney for John D. Carifa - Filed herewith.
17. Not applicable.
Item 17 Undertakings
1. The undersigned Registrant agrees that prior to any public
reoffering of the securities registered through the use of a
prospectus which is a part of this Registration Statement by any
person or party who is deemed to be an underwriter within the
meaning of Rule 145(c) under the Securities Act of 1933, the
reoffering prospectus will contain the information called for by the
applicable registration form for the reofferings by persons who may
be deemed underwriters, in addition to the information called for by
the other items of the applicable form.
2. The undersigned Registrant agrees that every prospectus that is
filed under paragraph (a) above will be filed as a part of an
amendment to this Registration Statement and will not be used until
the amendment is effective, and that, in determining any liability
under the Securities Act of 1933, each post-effective amendment
shall be deemed to be a new Registration Statement for the
securities
offered therein, and the offering of the securities at that time
shall be deemed to be the initial bona fide offering of them.
3. The Registrant agrees to file, by post-effective amendment, an
opinion of counsel or a copy of an Internal Revenue Service ruling
supporting the tax consequences of the proposed mergers described in
this Registration Statement within a reasonable time after receipt
of such opinion or ruling.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant has duly caused this Amendment to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of New York and State of New York, on the 25th day of July 2001.
ALLIANCE VARIABLE PRODUCTS
SERIES FUND, INC.
By: John D. Carifa*
Chairman and President
Pursuant to the requirements of the Securities Act of 1933, as amended,
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
John C. Carifa* Chairman and July 25, 2001
President (Principal
Executive Officer)
MARK D. GERSTEN Treasurer and Chief July 25, 2001
- --------------- Financial Officer
Mark D. Gersten (Principal Financial
and Accounting Officer)
Ruth Block* Director July 25, 2001
John D. Carifa* Director July 25, 2001
David H. Dievler* Director July 25, 2001
John H. Dobkin* Director July 25, 2001
William H. Foulk, Jr.* Director July 25, 2001
James M. Hester* Director July 25, 2001
Clifford L. Michel* Director July 25, 2001
Donald J. Robinson* Director July 25, 2001
*By: ANDREW L. GANGOLF
---------------------
Andrew L. Gangolf
Attorney-in-Fact
Date: July 25, 2001
EXHIBIT LIST
Exhibit No. Exhibit Name
- ----------- ------------
11(a) Opinion and Consent of
Seward & Kissell LLP
11(b) Opinion and Consent of Venable,
Baetjer and Howard, LLP
14 Consent of Ernst & Young LLP
16(a) Power of Attorney for
William Foulk, Jr.
16(b) Power of Attorney for
Clifford Michel
16(c) Power of Attorney for
Ruth Block
16(d) Power of Attorney for
John Dobkin
16(e) Power of Attorney for
Donald Robinson
16(f) Power of Attorney for
David Dievler
16(g) Power of Attorney for
John Carifa