This is filed pursuant to Rule 497(c).
File Nos. 033-18647 and 811-05398.



[LOGO]                     ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND, INC.
                           -ALLIANCEBERNSTEIN DYNAMIC ASSET ALLOCATION PORTFOLIO

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                 c/o AllianceBernstein Investor Services, Inc.
                 P.O. Box 786003, San Antonio, Texas 78278-6003
                           Toll Free: (800) 221-5672
                    For Literature: Toll Free (800) 227-4618

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                      STATEMENT OF ADDITIONAL INFORMATION
                                 April 4, 2011

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            This Statement of Additional Information ("SAI") is not a prospectus
but supplements, and should be read in conjunction with, the current prospectus,
dated April 4, 2011, for the AllianceBernstein Dynamic Asset Allocation
Portfolio (the "Portfolio") of AllianceBernstein Variable Products Series Fund,
Inc. (the "Fund") that offers Class A shares of the Portfolio and the prospectus
dated April 4, 2011 of the Portfolio that offers Class B shares of the Portfolio
(each a "Prospectus" and together, the "Prospectuses"). Copies of the
Prospectuses may be obtained by contacting AllianceBernstein Investor Services,
Inc., ("ABIS") at the address or the "For Literature" telephone number shown
above or on the Internet at www.AllianceBernstein.com.



                               TABLE OF CONTENTS
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INFORMATION ABOUT THE PORTFOLIO AND ITS INVESTMENTS............................2
INVESTMENT RESTRICTIONS.......................................................39
MANAGEMENT OF THE FUND........................................................41
PURCHASE AND REDEMPTION OF SHARES.............................................60
NET ASSET VALUE...............................................................66
PORTFOLIO TRANSACTIONS........................................................69
DIVIDENDS, DISTRIBUTIONS AND TAXES............................................72
GENERAL INFORMATION...........................................................73
FINANCIAL STATEMENTS AND REPORT OF
     INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM............................76
APPENDIX A: STATEMENT OF POLICIES AND PROCEDURES
     FOR VOTING PROXIES......................................................A-1

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AllianceBernstein(R) and the AB Logo are registered trademarks and service marks
used by permission of the owner, AllianceBernstein L.P.



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              INFORMATION ABOUT THE PORTFOLIO AND ITS INVESTMENTS

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Introduction to the Fund
------------------------

            The Fund's shares are offered in separate series referred to as
portfolios. Each portfolio is a separate pool of assets constituting, in effect,
a separate open-end management investment company with its own investment
objective and policies. A shareholder in a portfolio will be entitled to his or
her pro-rata share of all dividends and distributions arising from that
Portfolio's assets and, upon redeeming shares of that portfolio, the shareholder
will receive the then current net asset value ("NAV") of that portfolio
represented by the redeemed shares. The Portfolio is a portfolio of the Fund,
which is described in the SAI.

The Portfolio
-------------

            Except as otherwise indicated, the Portfolio's investment objectives
and policies described below are not "fundamental policies" within the meaning
of the Investment Company Act of 1940, as amended (the "1940 Act"), and may,
therefore, be changed by the Board of Directors of the Fund (the "Board" or the
"Directors") with respect to the Portfolio without approval of the shareholders
of the Portfolio. However, the Portfolio will not change its investment
objective without at least 60 days' prior written notice to shareholders. There
is no guarantee that the Portfolio will achieve its investment objective.
Whenever any investment policy or restriction states a percentage of the
Portfolio's assets that may be invested in any security or other asset, it is
intended that such percentage limitation be determined immediately after and as
a result of the Portfolio's acquisition of such securities or other assets.
Accordingly, any later increases or decreases in percentage beyond the specified
limitation resulting from a change in values or net assets will not be
considered a violation of this percentage

Additional Investment Policies and Practices
--------------------------------------------

            The following information about the Portfolio's investment policies
and practices supplements the information set forth in the Portfolio's
Prospectuses.

Convertible Securities
----------------------

            Convertible securities include bonds, debentures, corporate notes
and preferred stocks. Convertible securities are instruments that are
convertible at a stated exchange rate into common stock. Prior to their
conversion, convertible securities have the same general characteristics as
non-convertible securities that provide a stable stream of income with generally
higher yields than those of equity securities of the same or similar issuers.
The market value of convertible securities tends to decrease as interest rates
rise and, conversely, to increase as interest rates decline. While convertible
securities generally offer lower interest yields than non-convertible debt
securities of similar quality, they offer investors the potential to benefit
from increases in the market price of the underlying common stock. Convertible
debt securities that are rated Baa3 or lower by Moody's or BBB- or lower by S&P,
or Fitch and comparable unrated securities as determined by AllianceBernstein
L.P., the Portfolio's adviser (the "Adviser"), may share some or all of the risk
of non-convertible debt securities with those ratings.

            When the market price of the common stock underlying a convertible
security increases, the price of the convertible security increasingly reflects
the value of the underlying common stock and may rise accordingly. As the market
price of the underlying common stock declines, the convertible security tends to
trade increasingly on a yield basis, and thus may not depreciate to the same
extent as the underlying common stock. Convertible securities rank senior to
common stocks in an issuer's capital structure. They are consequently of higher
quality and entail less risk than the issuer's common stock, although the extent
to which such risk is reduced depends in large measure upon the degree to which
the convertible security sells above its value as a fixed-income security.

Depositary Receipts
-------------------

            The Portfolio may invest in American Depositary Receipts ("ADRs"),
European Depositary Receipts ("EDRs"), Global Depositary Receipts ("GDRs") or
other securities representing securities of companies based in countries other
than the U.S. Transactions in these securities may not necessarily be settled in
the same currency as transactions in the securities into which they represent.
Generally, ADRs, in registered form, are designed for use in the U.S. securities
markets, EDRs, in bearer form, are designed for use in European securities
markets and GDRs, in bearer form, are designed for use in two or more securities
markets, such as Europe and Asia.

Derivatives
-----------

            The Portfolio may, but is not required to, use derivatives for risk
management purposes or as part of its investment practices. Derivatives are
financial contracts whose value depends on, or is derived from, the value of an
underlying asset, reference rate or index. These assets, rates, and indices may
include bonds, stocks, mortgages, commodities, interest rates, currency exchange
rates, bond indices and stock indices.

            There are four principal types of derivatives, including options,
futures, forwards and swaps. The four principal types of derivative instruments,
as well as the methods in which they may be used by the Portfolio are described
below. Derivatives may be (i) standardized, exchange-traded contracts or (ii)
customized, privately-negotiated contracts. Exchange-traded derivatives tend to
be more liquid and subject to less credit risk than those that are privately
negotiated. The Portfolio may use derivatives to earn income and enhance
returns, to hedge or adjust the risk profile of a portfolio and either to
replace more traditional direct investments or to obtain exposure to otherwise
inaccessible markets.

            Forward Contracts. A forward contract, which may be standardized and
exchange-traded or customized and privately negotiated, is an agreement for one
party to buy, and the other party to sell, a specific quantity of an underlying
commodity or other tangible asset for an agreed-upon price at a future date. A
forward contract generally is settled by physical delivery of the commodity or
other tangible asset underlying the forward contract to an agreed upon location
at a future date (rather than settled by cash) or will be rolled forward into a
new forward contract. Non-deliverable forwards ("NDFs") specify a cash payment
upon maturity. NDFs are normally used when the market for physical settlement of
the currency is underdeveloped, heavily regulated or highly taxed.

            Futures Contracts and Options on Futures Contracts. A futures
contract is an agreement that obligates the buyer to buy and the seller to sell
a specified quantity of an underlying asset (or settle for cash the value of a
contract based on an underlying asset, rate or index) at a specific price on the
contract maturity date. Options on futures contracts are options that call for
the delivery of futures contracts upon exercise. Futures contracts are
standardized, exchange-traded instruments and are fungible (i.e., considered to
be perfect substitutes for each other). This fungibility allows futures
contracts to be readily offset or cancelled through the acquisition of equal but
opposite positions, which is the primary method in which futures contracts are
liquidated. A cash-settled futures contract does not require physical delivery
of the underlying asset but instead is settled for cash equal to the difference
between the values of the contract on the date it is entered into and its
maturity date.

            Options. An option, which may be standardized and exchange-traded or
customized and privately negotiated, is an agreement that, for a premium payment
or fee, gives the option holder (the buyer) the right but not the obligation to
buy (a "call") or sell (a "put") the underlying asset (or settle for cash an
amount based on an underlying asset, rate or index) at a specified price (the
exercise price) during a period of time or on a specified date. Likewise, when
an option is exercised the writer of the option is obligated to sell (in the
case of a call option) or to purchase (in the case of a put option) the
underlying asset (or settle for cash an amount based on an underlying asset,
rate or index).

            Swaps. A swap, which may be standardized and exchange-traded or
customized and privately negotiated, is an agreement that obligates two parties
to exchange a series of cash flows at specified intervals (payment dates) based
upon or calculated by reference to changes in specified prices or rates
(interest rates in the case of interest rate swaps, currency exchange rates in
the case of currency swaps) for a specified amount of an underlying asset (the
"notional" principal amount). Swaps are entered into on a net basis (i.e., the
two payment streams are netted out, with the Portfolio receiving or paying, as
the case may be, only the net amount of the two payments). Except for currency
swaps, the notional principal amount is used solely to calculate the payment
streams but is not exchanged. With respect to currency swaps, actual principal
amounts of currencies may be exchanged by the counterparties at the initiation,
and again upon the termination, of the transaction.

            Risks of Derivatives. Investment techniques employing such
derivatives involve risks different from, and, in certain cases, greater than,
the risks presented by more traditional investments. Following is a general
discussion of important risk factors and issues concerning the use of
derivatives.

                  -- Market Risk. This is the general risk attendant to all
                  investments that the value of a particular investment will
                  change in a way detrimental to the Portfolio's interest.

                  -- Management Risk. Derivative products are highly specialized
                  instruments that require investment techniques and risk
                  analyses different from those associated with stocks and
                  bonds. The use of a derivative requires an understanding not
                  only of the underlying instrument but also of the derivative
                  itself, without the benefit of observing the performance of
                  the derivative under all possible market conditions. In
                  particular, the use and complexity of derivatives require the
                  maintenance of adequate controls to monitor the transactions
                  entered into, the ability to assess the risk that a derivative
                  adds to the Portfolio's investment portfolio, and the ability
                  to forecast price, interest rate or currency exchange rate
                  movements correctly.

                  -- Credit Risk. This is the risk that a loss may be sustained
                  by the Portfolio as a result of the failure of another party
                  to a derivative (usually referred to as a "counterparty") to
                  comply with the terms of the derivative contract. The credit
                  risk for exchange-traded derivatives is generally less than
                  for privately negotiated derivatives, since the clearinghouse,
                  which is the issuer or counterparty to each exchange-traded
                  derivative, provides a guarantee of performance. This
                  guarantee is supported by a daily payment system (i.e., margin
                  requirements) operated by the clearinghouse in order to reduce
                  overall credit risk. For privately negotiated derivatives,
                  there is no similar clearing agency guarantee. Therefore, the
                  Portfolio considers the creditworthiness of each counterparty
                  to a privately negotiated derivative in evaluating potential
                  credit risk.

                  -- Liquidity Risk. Liquidity risk exists when a particular
                  instrument is difficult to purchase or sell. If a derivative
                  transaction is particularly large or if the relevant market is
                  illiquid (as is the case with many privately negotiated
                  derivatives), it may not be possible to initiate a transaction
                  or liquidate a position at an advantageous price.

                  -- Leverage Risk. Since many derivatives have a leverage
                  component, adverse changes in the value or level of the
                  underlying asset, rate or index can result in a loss
                  substantially greater than the amount invested in the
                  derivative itself. In the case of swaps, the risk of loss
                  generally is related to a notional principal amount, even if
                  the parties have not made any initial investment. Certain
                  derivatives have the potential for unlimited loss, regardless
                  of the size of the initial investment.

                  -- Risk of Potential Governmental Regulation of Derivatives.
                  Recent legislation and regulatory developments will eventually
                  require the clearing and exchange trading of most
                  over-the-counter derivatives investments. It is possible that
                  new regulation of various types of derivative instruments,
                  including futures and swap agreements, may affect the
                  Portfolio's ability to use such instruments as a part of its
                  investment strategy.

                  -- Other Risks. Other risks in using derivatives include the
                  risk of mispricing or improper valuation of derivatives and
                  the inability of derivatives to correlate perfectly with
                  underlying assets, rates and indices. Many derivatives, in
                  particular privately negotiated derivatives, are complex and
                  often valued subjectively. Improper valuations can result in
                  increased cash payment requirements to counterparties or a
                  loss of value to the Portfolio. Derivatives do not always
                  perfectly or even highly correlate or track the value of the
                  assets, rates or indices they are designed to closely track.
                  Consequently, the Portfolio's use of derivatives may not
                  always be an effective means of, and sometimes could be
                  counterproductive to, furthering the Portfolio's investment
                  objective.

Use of Options, Futures, Forwards and Swaps by the Portfolio
------------------------------------------------------------

            - Forward Currency Exchange Contracts. A forward currency exchange
contract is an obligation by one party to buy, and the other party to sell, a
specific amount of a currency for an agreed-upon price at a future date. A
forward currency exchange contract may result in the delivery of the underlying
asset upon maturity of the contract in return for the agreed-upon payment. NDFs
specify a cash payment upon maturity. NDFs are normally used when the market for
physical settlement of the currency is underdeveloped, heavily regulated or
highly taxed.

            The Portfolio may, for example, enter into forward currency exchange
contracts to attempt to minimize the risk to the Portfolio from adverse changes
in the relationship between the U.S. Dollar and other currencies. The Portfolio
may purchase or sell forward currency exchange contracts for hedging purposes
similar to those described below in connection with its transactions in foreign
currency futures contracts. The Portfolio may also purchase or sell forward
currency exchange contracts for non-hedging purposes as a means of making direct
investments in foreign currencies, as described below under "Currency
Transactions".

            If a hedging transaction in forward currency exchange contracts is
successful, the decline in the value of portfolio securities or the increase in
the cost of securities to be acquired may be offset, at least in part, by
profits on the forward currency exchange contract. Nevertheless, by entering
into such forward currency exchange contracts, the Portfolio may be required to
forego all or a portion of the benefits which otherwise could have been obtained
from favorable movements in exchange rates.

            The Portfolio may also use forward currency exchange contracts to
seek to increase total return when the Adviser anticipates that a foreign
currency will appreciate or depreciate in value but securities denominated in
that currency are not held by the Portfolio and do not present attractive
investment opportunities. For example, the Portfolio may enter into a foreign
currency exchange contract to purchase a currency if the Adviser expects the
currency to increase in value. The Portfolio would recognize a gain if the
market value of the currency is more than the contract value of the currency at
the time of settlement of the contract. Similarly, the Portfolio may enter into
a foreign currency exchange contract to sell a currency if the Adviser expects
the currency to decrease in value. The Portfolio would recognize a gain if the
market value of the currency is less than the contract value of the currency at
the time of settlement of the contract.

            The cost of engaging in forward currency exchange contracts varies
with such factors as the currencies involved, the length of the contract period
and the market conditions then prevailing. Since transactions in foreign
currencies are usually conducted on a principal basis, no fees or commissions
are involved.

            - Options on Securities. The Portfolio may write and purchase call
and put options on securities. In purchasing an option on securities, the
Portfolio would be in a position to realize a gain if, during the option period,
the price of the underlying securities increased (in the case of a call) or
decreased (in the case of a put) by an amount in excess of the premium paid;
otherwise the Portfolio would experience a loss not greater than the premium
paid for the option. Thus, the Portfolio would realize a loss if the price of
the underlying security declined or remained the same (in the case of a call) or
increased or remained the same (in the case of a put) or otherwise did not
increase (in the case of a put) or decrease (in the case of a call) by more than
the amount of the premium. If a put or call option purchased by the Portfolio
were permitted to expire without being sold or exercised, its premium would
represent a loss to the Portfolio.

            The Portfolio may also purchase call options to hedge against an
increase in the price of securities that the Portfolio anticipates purchasing in
the future. If such increase occurs, the call option will permit the Portfolio
to purchase the securities at the exercise price, or to close out the options at
a profit. The premium paid for the call option plus any transaction costs will
reduce the benefit, if any, realized by the Portfolio upon exercise of the
option, and, unless the price of the underlying security rises sufficiently, the
option may expire worthless to the Portfolio and the Portfolio will suffer a
loss on the transaction to the extent of the premium paid.

            The Portfolio may purchase or write options on securities of the
types in which it is permitted to invest in privately negotiated (i.e.,
over-the-counter) transactions. The Portfolio may write a put or call option in
return for a premium, which is retained by the Portfolio whether or not the
option is exercised. The Portfolio may write covered options or uncovered
options. A call option written by the Portfolio is "covered" if the Portfolio
owns the underlying security, has an absolute and immediate right to acquire
that security upon conversion or exchange of another security it holds, or holds
a call option on the underlying security with an exercise price equal to or less
than the call option it has written. A put option written by the Portfolio is
covered if the Portfolio holds a put option on the underlying securities with an
exercise price equal to or greater than the put option it has written. Uncovered
options or "naked options" are riskier than covered options. For example, if the
Portfolio wrote a naked call option and the price of the underlying security
increased, the Portfolio would have to purchase the underlying security for
delivery to the call buyer and sustain a loss equal to the difference between
the option price and the market price of the security.

            The Portfolio may also, as an example, write combinations of put and
call options on the same security, known as "straddles", with the same exercise
and expiration date. By writing a straddle, the Portfolio undertakes a
simultaneous obligation to sell and purchase the same security in the event that
one of the options is exercised. If the price of the security subsequently rises
above the exercise price, the call will likely be exercised and the Portfolio
will be required to sell the underlying security at or below market price. This
loss may be offset, however, in whole or part, by the premiums received on the
writing of the two options. Conversely, if the price of the security declines by
a sufficient amount, the put will likely be exercised. The writing of straddles
will likely be effective, therefore, only where the price of the security
remains stable and neither the call nor the put is exercised. In those instances
where one of the options is exercised, the loss on the purchase or sale of the
underlying security may exceed the amount of the premiums received.

            By writing a call option, the Portfolio limits its opportunity to
profit from any increase in the market value of the underlying security above
the exercise price of the option. By writing a put option, the Portfolio assumes
the risk that it may be required to purchase the underlying security for an
exercise price above its then current market value, resulting in a capital loss
unless the security subsequently appreciates in value. Where options are written
for hedging purposes, such transactions constitute only a partial hedge against
declines in the value of portfolio securities or against increases in the value
of securities to be acquired, up to the amount of the premium. The Portfolio may
purchase put options to hedge against a decline in the value of portfolio
securities. If such decline occurs, the put options will permit the Portfolio to
sell the securities at the exercise price or to close out the options at a
profit. By using put options in this way, the Portfolio will reduce any profit
it might otherwise have realized on the underlying security by the amount of the
premium paid for the put option and by transaction costs.

            By writing a call option, the Portfolio limits its opportunity to
profit from any increase in the market value of the underlying security above
the exercise price of the option. By writing a put option, the Portfolio assumes
the risk that it may be required to purchase the underlying security for an
exercise price above its then current market value, resulting in a capital loss
unless the security subsequently appreciates in value. Where options are written
for hedging purposes, such transactions constitute only a partial hedge against
declines in the value of portfolio securities or against increases in the value
of securities to be acquired, up to the amount of the premium. The Portfolio may
purchase put options to hedge against a decline in the value of portfolio
securities. If such decline occurs, the put options will permit the Portfolio to
sell the securities at the exercise price or to close out the options at a
profit. By using put options in this way, the Portfolio will reduce any profit
it might otherwise have realized on the underlying security by the amount of the
premium paid for the put option and by transaction costs.

            The Portfolio will effect such transactions only with investment
dealers and other financial institutions (such as commercial banks or savings
and loan institutions) deemed creditworthy by the Adviser, and the Adviser has
adopted procedures for monitoring the creditworthiness of such entities. Options
purchased or written in negotiated transactions may be illiquid and it may not
be possible for the Portfolio to effect a closing transaction at a time when the
Adviser believes it would be advantageous to do so.

            --Options on Securities Indices. An option on a securities index is
similar to an option on a security except that, rather than taking or making
delivery of a security at a specified price, an option on a securities index
gives the holder the right to receive, upon exercise of the option, an amount of
cash if the closing level of the chosen index is greater than (in the case of a
call) or less than (in the case of a put) the exercise price of the option.

            The Portfolio may write (sell) call and put options and purchase
call and put options on securities indices. If the Portfolio purchases put
options on securities indices to hedge its investments against a decline in the
value of portfolio securities, it will seek to offset a decline in the value of
securities it owns through appreciation of the put option. If the value of the
Portfolio's investments does not decline as anticipated, or if the value of the
option does not increase, the Portfolio's loss will be limited to the premium
paid for the option. The success of this strategy will largely depend on the
accuracy of the correlation between the changes in value of the index and the
changes in value of the Portfolio's security holdings.

            The purchase of call options on securities indices may be used by
the Portfolio to attempt to reduce the risk of missing a broad market advance,
or an advance in an industry or market segment, at a time when the Portfolio
holds uninvested cash or short-term debt securities awaiting investment. When
purchasing call options for this purpose, the Portfolio will also bear the risk
of losing all or a portion of the premium paid if the value of the index does
not rise. The purchase of call options on stock indices when the Portfolio is
substantially fully invested is a form of leverage, up to the amount of the
premium and related transaction costs, and involves risks of loss and of
increased volatility similar to those involved in purchasing call options on
securities the Portfolio owns.

            --Options on Foreign Currencies. The Portfolio may purchase and
write options on foreign currencies for hedging purposes. For example, a decline
in the dollar value of a foreign currency in which portfolio securities are
denominated will reduce the dollar value of such securities, even if their value
in the foreign currency remains constant. In order to protect against such
diminutions in the value of portfolio securities, the Portfolio may purchase put
options on the foreign currency. If the value of the currency does decline, the
Portfolio will have the right to sell such currency for a fixed amount in
dollars and could thereby offset, in whole or in part, the adverse effect on its
portfolio which otherwise would have resulted.

            Conversely, where a rise in the dollar value of a currency in which
securities to be acquired are denominated is projected, thereby increasing the
cost of such securities, the Portfolio may purchase call options thereon. The
purchase of such options could offset, at least partially, the effects of the
adverse movements in exchange rates. As in the case of other types of options,
however, the benefit to the Portfolio from purchases of foreign currency options
will be reduced by the amount of the premium and related transaction costs. In
addition, where currency exchange rates do not move in the direction or to the
extent anticipated, the Portfolio could sustain losses on transactions in
foreign currency options which would require it to forego a portion or all of
the benefits of advantageous changes in such rates.

            The Portfolio may write options on foreign currencies for hedging
purposes or to increase return. For example, where the Portfolio anticipates a
decline in the dollar value of non-U.S. Dollar-denominated securities due to
adverse fluctuations in exchange rates it could, instead of purchasing a put
option, write a call option on the relevant currency. If the expected decline
occurs, the option will most likely not be exercised, and the diminution in
value of portfolio securities could be offset by the amount of the premium
received.

            Similarly, instead of purchasing a call option to hedge against an
anticipated increase in the dollar cost of securities to be acquired, the
Portfolio could write a put option on the relevant currency, which, if rates
move in the manner projected, will expire unexercised and allow the Portfolio to
hedge such increased cost up to the amount of the premium. As in the case of
other types of options, however, the writing of a foreign currency option will
constitute only a partial hedge up to the amount of the premium, and only if
rates move in the expected direction. If this does not occur, the option may be
exercised and the Portfolio will be required to purchase or sell the underlying
currency at a loss which may not be offset by the amount of the premium. Through
the writing of options on foreign currencies, the Portfolio also may be required
to forego all or a portion of the benefits that might otherwise have been
obtained from favorable movements in exchange rates.

            In addition to using options for the hedging purposes described
above, the Portfolio may also invest in options on foreign currencies for
non-hedging purposes as a means of making direct investments in foreign
currencies. The Portfolio may use options on currency to seek to increase total
return when the Adviser anticipates that a foreign currency will appreciate or
depreciate in value but securities denominated in that currency are not held by
the Portfolio and do not present attractive investment opportunities. For
example, the Portfolio may purchase call options in anticipation of an increase
in the market value of a currency. The Portfolio would ordinarily realize a gain
if, during the option period, the value of such currency exceeded the sum of the
exercise price, the premium paid and transaction costs. Otherwise, the Portfolio
would realize no gain or a loss on the purchase of the call option. Put options
may be purchased by the Portfolio for the purpose of benefiting from a decline
in the value of a currency that the Portfolio does not own. The Portfolio would
normally realize a gain if, during the option period, the value of the
underlying currency decreased below the exercise price sufficiently to more than
cover the premium and transaction costs. Otherwise, the Portfolio would realize
no gain or loss on the purchase of the put option. For additional information on
the use of options on foreign currencies for non-hedging purposes, see "Currency
Transactions" below.

            Special Risks Associated with Options on Currency. An
exchange-traded options position may be closed out only on an options exchange
that provides a secondary market for an option of the same series. Although the
Portfolio will generally purchase or sell options for which there appears to be
an active secondary market, there is no assurance that a liquid secondary market
on an exchange will exist for any particular option, or at any particular time.
For some options, no secondary market on an exchange may exist. In such event,
it might not be possible to effect closing transactions in particular options,
with the result that the Portfolio would have to exercise its options in order
to realize any profit and would incur transaction costs on the sale of the
underlying currency.

            --Futures Contracts and Options on Futures Contracts. Futures
contracts that the Portfolio may buy and sell may include futures contracts on
fixed-income or other securities, and contracts based on interest rates, foreign
currencies or financial indices, including any index of U.S. Government
securities. The Portfolio may, for example, purchase or sell futures contracts
and options thereon to hedge against changes in interest rates, securities
(through index futures or options) or currencies.

            Interest rate futures contracts are purchased or sold for hedging
purposes to attempt to protect against the effects of interest rate changes on
the Portfolio's current or intended investments in fixed-income securities. For
example, if the Portfolio owned long-term bonds and interest rates were expected
to increase, the Portfolio might sell interest rate futures contracts. Such a
sale would have much the same effect as selling some of the long-term bonds in
the Portfolio's portfolio. However, since the futures market is more liquid than
the cash market, the use of interest rate futures contracts as a hedging
technique allows the Portfolio to hedge its interest rate risk without having to
sell its portfolio securities. If interest rates were to increase, the value of
the debt securities in the portfolio would decline, but the value of the
Portfolio's interest rate futures contracts would be expected to increase at
approximately the same rate, thereby keeping the NAV of the Portfolio from
declining as much as it otherwise would have. On the other hand, if interest
rates were expected to decline, interest rate futures contracts could be
purchased to hedge in anticipation of subsequent purchases of long-term bonds at
higher prices. Because the fluctuations in the value of the interest rate
futures contracts should be similar to those of long-term bonds, the Portfolio
could protect itself against the effects of the anticipated rise in the value of
long-term bonds without actually buying them until the necessary cash becomes
available or the market has stabilized. At that time, the interest rate futures
contracts could be liquidated and the Portfolio's cash reserves could then be
used to buy long-term bonds on the cash market.

            The Portfolio may purchase and sell foreign currency futures
contracts for hedging purposes in order to protect against fluctuations in
currency exchange rates. Such fluctuations could reduce the dollar value of
portfolio securities denominated in foreign currencies, or increase the cost of
non-U.S. Dollar-denominated securities to be acquired, even if the value of such
securities in the currencies in which they are denominated remains constant. The
Portfolio may sell futures contracts on a foreign currency, for example, when it
holds securities denominated in such currency and it anticipates a decline in
the value of such currency relative to the dollar. If such a decline were to
occur, the resulting adverse effect on the value of foreign-denominated
securities may be offset, in whole or in part, by gains on the futures
contracts. However, if the value of the foreign currency increases relative to
the dollar, the Portfolio's loss on the foreign currency futures contract may or
may not be offset by an increase in the value of the securities because a
decline in the price of the security stated in terms of the foreign currency may
be greater than the increase in value as a result of the change in exchange
rates.

            Conversely, the Portfolio could protect against a rise in the dollar
cost of non-U.S. Dollar-denominated securities to be acquired by purchasing
futures contracts on the relevant currency, which could offset, in whole or in
part, the increased cost of such securities resulting from a rise in the dollar
value of the underlying currencies. When the Portfolio purchases futures
contracts under such circumstances, however, and the price in dollars of
securities to be acquired instead declines as a result of appreciation of the
dollar, the Portfolio will sustain losses on its futures position which could
reduce or eliminate the benefits of the reduced cost of portfolio securities to
be acquired.

            The Portfolio may also engage in currency "cross hedging" when, in
the opinion of the Adviser, the historical relationship among foreign currencies
suggests that the Portfolio may achieve protection against fluctuations in
currency exchange rates similar to that described above at a reduced cost
through the use of a futures contract relating to a currency other than the U.S.
Dollar or the currency in which the foreign security is denominated. Such "cross
hedging" is subject to the same risks as those described above with respect to
an unanticipated increase or decline in the value of the subject currency
relative to the U.S. Dollar.

            The Portfolio may also use foreign currency futures contracts and
options on such contracts for non-hedging purposes. Similar to options on
currencies described above, the Portfolio may use foreign currency futures
contracts and options on such contracts to seek to increase total return when
the Adviser anticipates that a foreign currency will appreciate or depreciate in
value but securities denominated in that currency are not held by the Portfolio
and do not present attractive investment opportunities. The risks associated
with foreign currency futures contracts and options on futures are similar to
those associated with options on foreign currencies, as described above. For
additional information on the use of options on foreign currencies for
non-hedging purposes, see "Currency Transactions" below.

            Purchases or sales of stock or bond index futures contracts may be
used for hedging purposes to attempt to protect the Portfolio's current or
intended investments from broad fluctuations in stock or bond prices. For
example, the Portfolio may sell stock or bond index futures contracts in
anticipation of or during a market decline to attempt to offset the decrease in
market value of the Portfolio's portfolio securities that might otherwise
result. If such decline occurs, the loss in value of portfolio securities may be
offset, in whole or part, by gains on the futures position. When the Portfolio
is not fully invested in the securities market and anticipates a significant
market advance, it may purchase stock or bond index futures contracts in order
to gain rapid market exposure that may, in whole or in part, offset increases in
the cost of securities that the Portfolio intends to purchase. As such purchases
are made, the corresponding positions in stock or bond index futures contracts
will be closed out.

            The Portfolio has claimed an exclusion from the definition of the
term "commodity pool operator" under the Commodity Exchange Act and therefore is
not subject to registration or regulation as a pool operator under that Act.

            Options on futures contracts are options that call for the delivery
of futures contracts upon exercise. Options on futures contracts written or
purchased by the Portfolio will be traded on U.S. exchanges.

            The writing of a call option on a futures contract constitutes a
partial hedge against declining prices of the securities in the Portfolio's
portfolio. If the futures price at expiration of the option is below the
exercise price, the Portfolio will retain the full amount of the option premium,
which provides a partial hedge against any decline that may have occurred in the
Portfolio's portfolio holdings. The writing of a put option on a futures
contract constitutes a partial hedge against increasing prices of the securities
or other instruments required to be delivered under the terms of the futures
contract. If the futures price at expiration of the put option is higher than
the exercise price, the Portfolio will retain the full amount of the option
premium, which provides a partial hedge against any increase in the price of
securities which the Portfolio intends to purchase. If a put or call option the
Portfolio has written is exercised, the Portfolio will incur a loss which will
be reduced by the amount of the premium it receives. Depending on the degree of
correlation between changes in the value of its portfolio securities and changes
in the value of its options on futures positions, the Portfolio's losses from
exercised options on futures may to some extent be reduced or increased by
changes in the value of portfolio securities.

            The Portfolio may purchase options on futures contracts for hedging
purposes instead of purchasing or selling the underlying futures contracts. For
example, where a decrease in the value of portfolio securities is anticipated as
a result of a projected market-wide decline or changes in interest or exchange
rates, the Portfolio could, in lieu of selling futures contracts, purchase put
options thereon. In the event that such decrease were to occur, it may be
offset, in whole or part, by a profit on the option. If the anticipated market
decline were not to occur, the Portfolio will suffer a loss equal to the price
of the put. Where it is projected that the value of securities to be acquired by
the Portfolio will increase prior to acquisition due to a market advance or
changes in interest or exchange rates, the Portfolio could purchase call options
on futures contracts, rather than purchasing the underlying futures contracts.
If the market advances, the increased cost of securities to be purchased may be
offset by a profit on the call. However, if the market declines, the Portfolio
will suffer a loss equal to the price of the call, but the securities that the
Portfolio intends to purchase may be less expensive.

            - Credit Default Swap Agreements. The "buyer" in a credit default
swap contract is obligated to pay the "seller" a periodic stream of payments
over the term of the contract in return for a contingent payment upon the
occurrence of a credit event with respect to an underlying reference obligation.
Generally, a credit event means bankruptcy, failure to pay, obligation
acceleration or modified restructuring. The Portfolio may be either the buyer or
seller in the transaction. As a seller, the Portfolio receives a fixed rate of
income throughout the term of the contract, which typically is between one month
and five years, provided that no credit event occurs. If a credit event occurs,
the Portfolio typically must pay the contingent payment to the buyer, which is
typically the "par value" (full notional value) of the reference obligation. The
contingent payment may be a cash settlement or by physical delivery of the
reference obligation in return for payment of the face amount of the obligation.
If the Portfolio is a buyer and no credit event occurs, the Portfolio it will
lose its periodic stream of payments over the term of the contract. However, if
a credit event occurs, the buyer typically receives full notional value for a
reference obligation that may have little or no value.

            Credit default swaps may involve greater risks than if the Portfolio
had invested in the reference obligation directly. Credit default swaps are
subject to general market risk, liquidity risk and credit risk.

            - Currency Swaps. The Portfolio may enter into currency swaps for
hedging purposes in an attempt to protect against adverse changes in exchange
rates between the U.S. Dollar and other currencies or for non-hedging purposes
as a means of making direct investments in foreign currencies, as described
below under "Currency Transactions". Currency swaps involve the exchange by the
Portfolio with another party of a series of payments in specified currencies.
Actual principal amounts of currencies may be exchanged by the counterparties at
the initiation and again upon termination of the transaction. Since currency
swaps are individually negotiated, the Portfolio expects to achieve an
acceptable degree of correlation between its portfolio investments and its
currency swaps positions. Therefore, the entire principal value of a currency
swap is subject to the risk that the other party to the swap will default on its
contractual delivery obligations. The Portfolio will not enter into any currency
swap unless the credit quality of the unsecured senior debt or the claims-paying
ability of the other party thereto is rated in the highest rating category of at
least one nationally recognized statistical rating organization at the time of
entering into the transaction. If there is a default by the other party to such
a transaction, the Portfolio will have contractual remedies pursuant to the
agreements related to the transactions.

            --Swaps: Interest Rate Transactions. The Portfolio may enter into
interest rate swap, swaptions and cap or floor transactions, which may include
preserving a return or spread on a particular investment or portion of its
portfolio or protecting against an increase in the price of securities the
Portfolio anticipates purchasing at a later date. Unless there is a counterparty
default, the risk of loss to the Portfolio from interest rate transactions is
limited to the net amount of interest payments that the Portfolio is
contractually obligated to make. If the counterparty to an interest rate
transaction defaults, the Portfolio's risk of loss consists of the net amount of
interest payments that the Portfolio is contractually entitled to receive.

            Interest rate swaps involve the exchange by the Portfolio with
another party of payments calculated by reference to specified interest rates
(e.g., an exchange of floating rate payments for fixed rate payments) computed
based on a contractually based principal (or "notional") amount.

            An option on a swap agreement, also called a "swaption", is an
option that gives the buyer the right, but not the obligation, to enter into a
swap on a future date in exchange for paying a market-based "premium". A
receiver swaption gives the owner the right to receive the total return of a
specified asset, reference rate, or index. A payer swaption gives the owner the
right to pay the total return of a specified asset, reference rate, or index.
Swaptions also include options that allow an existing swap to be terminated or
extended by one of the counterparties.

            Interest rate caps and floors are similar to options in that the
purchase of an interest rate cap or floor entitles the purchaser, to the extent
that a specified index exceeds (in the case of a cap) or falls below (in the
case of a floor) a predetermined interest rate, to receive payments of interest
on a notional amount from the party selling the interest rate cap or floor.

            Caps and floors are less liquid than swaps. These transactions do
not involve the delivery of securities or other underlying assets or principal.
The Portfolio will enter into interest rate swap, swaptions, cap or floor
transactions only with counterparties who have credit ratings of at least A- (or
the equivalent) from any one Nationally Recognized Statistical Ratings
Organization or counterparties with guarantors with debt securities having such
a rating.

            - Inflation (CPI) Swaps. Inflation swap agreements are contracts in
which one party agrees to pay the cumulative percentage increase in a price
index (the Consumer Price Index with respect to CPI swaps) over the term of the
swap (with some lag on the inflation index), and the other pays a compounded
fixed rate. Inflation swap agreements may be used to protect the NAV of the
Portfolio against an unexpected change in the rate of inflation measured by an
inflation index since the value of these agreements is expected to increase if
unexpected inflation increases.

            - Eurodollar Instruments. Eurodollar instruments are essentially
U.S. Dollar-denominated futures contracts or options thereon that are linked to
the London Interbank Offered Rate and are subject to the same limitations and
risks as other futures contracts and options.

            - Currency Transactions. The Portfolio may invest in non-U.S.
Dollar-denominated securities on a currency hedged or un-hedged basis. The
Adviser will actively manage the Strategy's currency exposures and may seek
investment opportunities by taking long or short positions in currencies through
the use of currency-related derivatives, including forward currency exchange
contracts, futures and options on futures, swaps and options. The Adviser may
enter into transactions for investment opportunities when it anticipates that a
foreign currency will appreciate or depreciate in value but securities
denominated in that currency are not held by the Portfolio and do not present
attractive investment opportunities. Such transactions may also be used when the
Adviser believes that it may be more efficient than a direct investment in a
foreign currency-denominated security. The Portfolio may also conduct currency
exchange contracts on a spot basis (i.e., for cash at the spot rate prevailing
in the currency exchange market for buying or selling currencies).

            - Commodity-Linked Derivative Instruments and Hybrid Instruments.
The Portfolio may seek to gain exposure to the commodities markets primarily
through investments in hybrid instruments. Hybrid instruments are either equity
or debt derivative securities with one or more commodity-dependent components
that have payment features similar to a commodity futures contract, a commodity
option contract, or a combination of both. Therefore, these instruments are
"commodity-linked". They are considered "hybrid" instruments because they have
both commodity-like and security-like characteristics. Hybrid instruments are
derivative instruments because at least part of their value is derived from the
value of an underlying commodity, futures contract, index or other readily
measurable economic variable.

            The prices of commodity-linked derivative instruments may move in
different directions than investments in traditional equity and debt securities
when the value of those traditional securities is declining due to adverse
economic conditions. As an example, during periods of rising inflation, debt
securities have historically tended to decline in value due to the general
increase in prevailing interest rates. Conversely, during those same periods of
rising inflation, the prices of certain commodities, such as oil and metals,
have historically tended to increase. Of course, there cannot be any guarantee
that these investments will perform in that manner in the future, and at certain
times the price movements of commodity-linked instruments have been parallel to
those of debt and equity securities. Commodities have historically tended to
increase and decrease in value during different parts of the business cycle than
financial assets. Nevertheless, at various times, commodities prices may move in
tandem with the prices of financial assets and thus may not provide overall
portfolio diversification benefits. Under favorable economic conditions, the
Portfolio's investments may be expected to under-perform an investment in
traditional securities. Over the long term, the returns on the Portfolio's
investments are expected to exhibit low or negative correlation with stocks and
bonds.

Bank Obligations
----------------

            Bank obligations in which the Portfolio may invest include
certificates of deposit, bankers' acceptances, and fixed time deposits.
Certificates of deposit are negotiable certificates issued against funds
deposited in a commercial bank for a definite period of time and earning a
specified return. Bankers' acceptances are negotiable drafts or bills of
exchange, normally drawn by an importer or exporter to pay for specific
merchandise, which are "accepted" by a bank, meaning, in effect, that the bank
unconditionally agrees to pay the face value of the instrument on maturity.
Fixed time deposits are bank obligations payable at a stated maturity date and
bearing interest at a fixed rate. Fixed time deposits may be withdraw on demand
by the investor, but may be subject to early withdrawal penalties which vary
depending upon market conditions and the remaining maturity of the obligation.
There are no contractual restrictions on the right to transfer a beneficial
interest in a fixed time deposit to a third party, although there is no market
for such deposits. The Portfolio will not invest in fixed time deposits which
(1) are not subject to prepayment or (2) provide for withdrawal penalties upon
prepayment (other than overnight deposits) if, in the aggregate, more than 15%
of its net assets would be invested in such deposits, repurchase agreements
maturing in more than seven days and other illiquid assets.

            Obligations of foreign banks involve somewhat different investment
risks than those affecting obligations of U.S. banks, including the
possibilities that their liquidity could be impaired because of future political
and economic developments, that their obligations may be less marketable than
comparable obligations of U.S. banks, that a foreign jurisdiction might impose
withholding taxes on interest income payable on those obligations, that foreign
deposits may be seized or nationalized, that foreign governmental restrictions
such as exchange controls may be adopted which might adversely affect the
payment of principal and interest on those obligations and that the selection of
those obligations may be more difficult because there may be less publicly
available information concerning foreign banks or the accounting, auditing and
financial reporting standards, practices and requirements applicable to foreign
banks may differ from those applicable to U.S. banks. Foreign banks are not
generally subject to examination by any U.S. Government agency or
instrumentality.

Forward Commitments and When-Issued and Delayed Delivery Securities
-------------------------------------------------------------------

            Forward commitments for the purchase or sale of securities may
include purchases on a "when-issued" basis or purchases or sales on a "delayed
delivery" basis. In some cases, a forward commitment may be conditioned upon the
occurrence of a subsequent event, such as approval and consummation of a merger,
corporate reorganization or debt restructuring (i.e., a "when, as and if issued"
trade). When forward commitment transactions are negotiated, the price is fixed
at the time the commitment is made and the Portfolio assumes the rights and
risks of ownership of the security but the Portfolio does not pay for the
securities until they are received. If the Portfolio is fully invested when
forward commitment purchases are outstanding, such purchases may result in a
form of leverage. Leveraging the Portfolio in this manner may increase the
Portfolio's volatility of returns.

            The use of forward commitments enables a Portfolio to protect
against anticipated changes in exchange rates, interest rates and/or prices. For
instance, a Portfolio may enter into a forward contract when it enters into a
contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. Dollar price of the security
("transaction hedge"). In addition, when a Portfolio believes that a foreign
currency may suffer a substantial decline against the U.S. Dollar, it may enter
into a forward sale contract to sell an amount of that foreign currency
approximating the value of some or all of that Portfolio's securities
denominated in such foreign currency, or when the Portfolio believes that the
U.S. Dollar may suffer a substantial decline against a foreign currency, it may
enter into a forward purchase contract to buy that foreign currency for a fixed
dollar amount ("position hedge"). If the Adviser were to forecast incorrectly
the direction of exchange rate movements, a Portfolio might be required to
complete such when-issued or forward transactions at prices inferior to the then
current market values. When-issued securities and forward commitments may be
sold prior to the settlement date, but the Portfolios enter into when-issued and
forward commitments only with the intention of actually receiving securities or
delivering them, as the case may be. If the Portfolio chooses to dispose of the
right to acquire a when-issued security prior to its acquisition or dispose of
its right to deliver or receive against a forward commitment, it may incur a
gain or loss. Any significant commitment of a Portfolio's assets to the purchase
of securities on a "when, as and if issued" basis may increase the volatility of
the Portfolio's NAV.

            At the time the Portfolio intends to enter into a forward
commitment, it will record the transaction and thereafter reflect the value of
the security purchased or, if a sale, the proceeds to be received, in
determining its NAV. Any unrealized appreciation or depreciation reflected in
such valuation of a "when, as and if issued" security would be canceled in the
event that the required conditions did not occur and the trade was canceled.

            Purchases of securities on a forward commitment or when-issued basis
may involve more risk than other types of purchases. For example, by committing
to purchase securities in the future, the Portfolio subject itself to a risk of
loss on such commitments as well as on their portfolio securities. Also, the
Portfolio may have to sell assets which have been set aside in order to meet
redemptions. In addition, if the Portfolio determines it is advisable as a
matter of investment strategy to sell the forward commitment or "when-issued" or
"delayed delivery" securities before delivery, the Portfolio may incur a gain or
loss because of market fluctuations since the time the commitment to purchase
such securities was made. Any such gain or loss would be treated as a capital
gain or loss for tax purposes. When the time comes to pay for the securities to
be purchased under a forward commitment or on a "when-issued" or "delayed
delivery" basis, the Portfolio will meet its obligations from the then available
cash flow or the sale of securities, or, although it would not normally expect
to do so, from the sale of the forward commitment or "when-issued" or "delayed
delivery" securities themselves (which may have a value greater or less than the
Portfolio's payment obligation). In addition, no interest or dividends accrue to
the purchaser prior to the settlement date for securities purchased or sold
under a forward commitment. In addition, in the event the other party to the
transaction files for bankruptcy, becomes insolvent, or defaults on its
obligation, the Portfolio may be adversely affected.

Illiquid Securities
-------------------

            The Portfolio will not invest in illiquid securities if immediately
after such investment more than 15% or such other amount permitted by guidance
regarding the 1940 Act of the Portfolio's net assets would be invested in such
securities. For this purpose, illiquid securities include, among others, (a)
direct placements or other securities which are subject to legal or contractual
restrictions on resale or for which there is no readily available market (e.g.,
trading in the security is suspended or, in the case of unlisted securities,
market makers do not exist or will not entertain bids or offers), (b) options
purchased by the Portfolio over-the-counter and the cover for options written by
the Portfolio over-the-counter, and (c) repurchase agreements not terminable
within seven days. Securities that have legal or contractual restrictions on
resale but have a readily available market are not deemed illiquid for purposes
of this limitation.

            Mutual funds do not typically hold a significant amount of
restricted securities (securities that are subject to restrictions on resale to
the general public) or other illiquid securities because of the potential for
delays on resale and uncertainty in valuation. Limitations on resale may have an
adverse effect on the marketability of portfolio securities and a mutual fund
might be unable to dispose of restricted or other illiquid securities promptly
or at reasonable prices and might thereby experience difficulty satisfying
redemptions within seven days. A mutual fund may also have to take certain steps
or wait a certain amount of time in order to remove the transfer restrictions
for such restricted securities in order to dispose of them, resulting in
additional expense and delay.

            Rule 144A under the Securities Act of 1933, as amended (the
"Securities Act"), allows a broader institutional trading market for securities
otherwise subject to restriction on resale to the general public. Rule 144A
establishes a "safe harbor" from the registration requirements of the Securities
Act for resales of certain securities to qualified institutional buyers. An
insufficient number of qualified institutional buyers interested in purchasing
certain restricted securities held by the Portfolio, however, could affect
adversely the marketability of such portfolio securities and the Portfolio might
be unable to dispose of such securities promptly or at reasonable prices.

            The Adviser, acting under the oversight of the Board, will monitor
the liquidity of restricted securities in the Portfolio that are eligible for
resale pursuant to Rule 144A. In reaching liquidity decisions, the Adviser will
consider, among others, the following factors: (1) the frequency of trades and
quotes for the security; (2) the number of dealers issuing quotations to
purchase or sell the security; (3) the number of other potential purchasers of
the security; (4) the number of dealers undertaking to make a market in the
security; (5) the nature of the security (including its unregistered nature) and
the nature of the marketplace for the security (e.g., the time needed to dispose
of the security, the method of soliciting offers and the mechanics of the
transfer); and (6) any applicable Securities and Exchange Commission ("SEC")
interpretation or position with respect to such type of securities.

Investment in Other Investment Companies
----------------------------------------

            The Portfolio may invest in securities of other investment companies
to the extent permitted by the 1940 Act or the rules and regulations thereunder
(as such statute, rules or regulations may be amended from time to time) or by
guidance regarding, interpretations of, or exemptive orders under, the 1940 Act
or the rules or regulations thereunder published by appropriate regulatory
authorities. If the Portfolio acquires shares in investment companies,
shareholders would bear, indirectly, the expenses of such investment companies
(which may include management and advisory fees), which are in addition to the
Portfolio's expenses. The Portfolio may also invest in exchange-traded funds,
subject to the restrictions and limitations of the 1940 Act or any applicable
rules, exemptive orders or regulatory guidance.

Lending of Portfolio Securities
-------------------------------

            The Portfolio may seek to increase income by lending portfolio
securities. A principal risk in lending portfolio securities, as with other
extensions of credit, consists of the possible loss of rights in the collateral
should the borrower fail financially. In addition, the Portfolio may be exposed
to the risk that the sale of any collateral realized upon the borrower's default
will not yield proceeds sufficient to replace the loaned securities. In
determining whether to lend securities to a particular borrower, the Adviser
(subject to oversight by the Directors) will consider all relevant facts and
circumstances, including the creditworthiness of the borrower. The loans would
be made only to firms deemed by the Adviser to be of good standing, and when, in
the judgment of the Adviser, the consideration that can be earned currently from
securities loans of this type justifies the attendant risk. The Portfolio may
lend portfolio securities to the extent permitted under the 1940 Act or the
rules and regulations thereunder (as such statute, rules or regulations may be
amended from time to time) or by guidance regarding, interpretations of, or
exemptive orders under, the 1940 Act.

            Under present regulatory policies, including those of the Board of
Governors of the Federal Reserve System and the SEC, such loans may be made only
to member firms of the New York Stock Exchange (the "Exchange") and will be
required to be secured continuously by collateral in cash, cash equivalents, or
U.S. Treasury Bills maintained on a current basis at an amount at least equal to
the market value of the securities loaned. The Portfolio will have the right to
call a loan and obtain the securities loaned at any time on five days' notice.
While securities are on loan, the borrower will pay the Portfolio any income
from the securities. The Portfolio may invest any cash collateral in portfolio
securities and earn additional income or receive an agreed-upon amount of income
from a borrower who has delivered equivalent collateral. Any such investment of
cash collateral will be subject to the Portfolio's investment risks.

            The Portfolio will not have the right to vote any securities having
voting rights during the existence of the loan. The Portfolio will have the
right to regain record ownership of loaned securities or equivalent securities
in order to exercise ownership rights such as voting rights, subscription rights
and rights to dividends, interest, or distributions.

            The Portfolio may pay reasonable finders', administrative and
custodial fees in connection with a loan.

Mortgage-Related Securities and Other Asset-Backed Securities
-------------------------------------------------------------

            The mortgage-related securities in which the Portfolio may invest
typically are securities representing interests in pools of mortgage loans made
by lenders such as savings and loan associations, mortgage bankers and
commercial banks and are assembled for sale to investors (such as the Portfolio)
by governmental, government-related or private organizations. Private
organizations include commercial banks, savings associations, mortgage
companies, investment banking firms, finance companies, special purpose finance
entities (called special purpose vehicles or SPVs) and other entities that
acquire and package loans for resales as mortgage-related securities.
Specifically, these securities may include pass-through mortgage-related
securities, collateralized mortgage obligations ("CMOs"), CMO residuals,
adjustable-rate mortgage securities ("ARMS"), stripped mortgage-backed
securities ("SMBSs"), commercial mortgage-backed securities, mortgage dollar
rolls, collateralized obligations and other securities that directly or
indirectly represent a participation in or are secured by and payable from
mortgage loans on real property and other assets.

            Pass-Through Mortgage-Related Securities. Interests in pools of
mortgage-related securities differ from other forms of debt securities, which
normally provide for periodic payment of interest in fixed amounts with
principal payments at maturity or specified call dates. Instead, these
securities provide a monthly payment consisting of both interest and principal
payments. In effect, these payments are a "pass-through" of the monthly payments
made by the individual borrowers on their residential mortgage loans, net of any
fees paid to the issuer or guarantor of such securities. Additional payments are
caused by repayments of principal resulting from the sale of the underlying
residential property, refinancing or foreclosure, net of fees or costs that may
be incurred. Some mortgage-related securities, such as securities issued by
GNMA, are described as "modified pass-through." These securities entitle the
holder to receive all interest and principal payments owed on the mortgage pool,
net of certain fees, regardless of whether or not the mortgagor actually makes
the payment.

            The average life of pass-through pools varies with the maturities of
the underlying mortgage instruments. In addition, a pool's term may be shortened
by unscheduled or early payments of principal and interest on the underlying
mortgages. The occurrence of mortgage prepayments is affected by factors
including the level of interest rates, general economic conditions, the location
and age of the mortgage and other social and demographic conditions. As
prepayment rates of individual pools vary widely, it is not possible to
accurately predict the average life of a particular pool. For pools of
fixed-rate 30-year mortgages, common industry practice is to assume that
prepayments will result in a 12-year average life. Pools of mortgages with other
maturities or different characteristics will have varying average life
assumptions. The assumed average life of pools of mortgages having terms of less
than 30 years, is less than 12 years, but typically not less than 5 years. The
average life of pass through pools varies. Yields on pass-through securities are
typically quoted by investment dealers and vendors based on the maturity of the
underlying instruments and the associated average life assumption.

            The principal governmental (i.e., backed by the full faith and
credit of the U.S. Government) guarantor of mortgage-related securities is GNMA.
GNMA is a wholly-owned U.S. Government corporation within the Department of
Housing and Urban Development. GNMA is authorized to guarantee, with the full
faith and credit of the U.S. Government, the timely payment of principal and
interest on securities issued by institutions approved by GNMA (such as savings
and loan institutions, commercial banks and mortgage bankers) and backed by
pools of FHA-insured or VA-guaranteed mortgages.

            Government-related (i.e., not backed by the full faith and credit of
the U.S. Government) guarantors include FNMA and FHLMC. FNMA and FHLMC are a
government-sponsored corporation or corporate instrumentality of the U.S.
Government respectively (government-sponsored entities or "GSEs"), which were
owned entirely by private stockholders until 2008 when they were placed in
conservatorship by the U.S. Government. After being placed in conservatorship,
the GSEs issued senior preferred stock and common stock to the U.S. Treasury in
an amount equal to 79.9% of each GSE in return for certain funding and liquidity
arrangements. The GSEs continue to operate as going concerns while in
conservatorship and each remains liable for all of its obligations associated
with its mortgage-backed securities. The U.S. Treasury has provided additional
funding to the GSEs and their future is unclear as Congress is considering
whether to adopt legislation that would severely restrict or even terminate
their operations. FNMA purchases residential mortgages from a list of approved
seller/servicers which include state and federally-chartered savings and loan
associations, mutual savings banks, commercial banks and credit unions and
mortgage bankers. Pass-through securities issued by FNMA are guaranteed as to
timely payment of principal and interest by FNMA and are now, in effect, backed
by the full faith and credit of the U.S. Government. Participation certificates
issued by FHLMC, which represent interests in mortgages from FHLMC's national
portfolio, are guaranteed by FHLMC as to the timely payment of interest and
ultimate collection of principal and are now, in effect, backed by the full
faith and credit of the U.S. Government.

            Commercial banks, savings and loan associations, private mortgage
insurance companies, mortgage bankers and other secondary market issuers create
pass-through pools of conventional residential mortgage loans. Securities
representing interests in pools created by non-governmental private issuers
generally offer a higher rate of interest than securities representing interests
in pools created by governmental issuers because there are no direct or indirect
governmental guarantees of the underlying mortgage payments. However, private
issuers sometimes obtain committed loan facilities, lines of credit, letters of
credit, surety bonds or other forms of liquidity and credit enhancement to
support the timely payment of interest and principal with respect to their
securities if the borrowers on the underlying mortgages fail to make their
mortgage payments. The ratings of such non-governmental securities are generally
dependent upon the ratings of the providers of such liquidity and credit support
and would be adversely affected if the rating of such an enhancer were
downgraded.

            The structuring of the pass-through pool may also provide credit
enhancement. Examples of such credit support arising out of the structure of the
transaction include the issue of senior and subordinated securities (e.g., the
issuance of securities by a SPV in multiple classes or "tranches", with one or
more classes being senior to other subordinated classes as to payment of
principal and interest, with the result that defaults on the underlying mortgage
loans are borne first by the holders of the subordinated class); creation of
"reserve funds" (in which case cash or investments sometimes funded from a
portion of the payments on the underlying mortgage loans, are held in reserve
against future losses); and "overcollateralization" (in which case the scheduled
payments on, or the principal amount of, the underlying mortgage loans exceeds
that required to make payment of the securities and pay any servicing or other
fees). There can be no guarantee the credit enhancements, if any will be
sufficient to prevent losses in the event of defaults on the underlying mortgage
loans.

            In addition, mortgage-related securities that are issued by private
issuers are not subject to the underwriting requirements for the underlying
mortgages that are applicable to those mortgage-related securities that have a
government or government-sponsored entity guaranteed. As a result, the mortgage
loans underlying private mortgage-related securities may, and frequently do,
have less favorable collateral, credit risk or other underwriting
characteristics than government or government-sponsored mortgage-related
securities and have wider variances in a number of terms, including interest
rate, term, size, purposes and borrower characteristics. Privately issued pools
more frequently include second mortgages, high loan-to-value mortgages and
manufactured housing loans. The coupon rates and maturities of the underlying
mortgage loans in a private-label mortgage-related pool may vary to a greater
extent than those included in a government guaranteed pool, and the pool may
include subprime mortgage loans. Subprime loans refer to loans made to borrowers
with weakened credit histories or with a lower capacity to make timely payments
on their loans. For these reasons, the loans underlying these securities have
had in many cases higher default rates than those loans that meet government
underwriting requirements.

            Collateralized Mortgage Obligations. Another form of
mortgage-related security is a "pay-through" security, which is a debt
obligation. A Portfolio may invest in other forms of mortgage-related securities
including CMOs, which are debt obligations of the issuer secured by a pool of
mortgage loans pledged as collateral that is legally required to be paid by the
issuer, regardless of whether payments are actually made on the underlying
mortgages. CMOs are the predominant type of "pay-through" mortgage-related
security. In a CMO, a series of bonds or certificates is issued in multiple
classes. Each class of a CMO, often referred to as a "tranche," is issued at a
specific coupon rate and has a stated maturity or final distribution date.
Principal prepayments on collateral underlying a CMO may cause one or more
tranches of the CMO to be retired substantially earlier than the stated
maturities or final distribution dates of the collateral. Although payment of
the principal of, and interest on, the underlying collateral securing privately
issued CMOs may be guaranteed by GNMA, FNMA or FHLMC, these CMOs represent
obligations solely of the private issuer and are not insured or guaranteed by
GNMA, FNMA, FHLMC, any other governmental agency or any other person or entity.

            Adjustable-Rate Mortgage Securities. Another type of
mortgage-related security, known as adjustable-rate mortgage securities
("ARMS"), bears interest at a rate determined by reference to a predetermined
interest rate or index. ARMS may be secured by fixed-rate mortgages or
adjustable-rate mortgages. ARMS secured by fixed-rate mortgages generally have
lifetime caps on the coupon rates of the securities. To the extent that general
interest rates increase faster than the interest rates on the ARMS, these ARMS
will decline in value. The adjustable-rate mortgages that secure ARMS will
frequently have caps that limit the maximum amount by which the interest rate or
the monthly principal and interest payments on the mortgages may increase. These
payment caps can result in negative amortization (i.e., an increase in the
balance of the mortgage loan). Furthermore, since many adjustable-rate mortgages
only reset on an annual basis, the values of ARMS tend to fluctuate to the
extent that changes in prevailing interest rates are not immediately reflected
in the interest rates payable on the underlying adjustable-rate mortgages.

            Stripped Mortgage-Related Securities. Stripped mortgage-related
securities (SMRS) are mortgage related securities that are usually structured
with separate classes of securities collateralized by a pool of mortgages or a
pool of mortgage backed bonds or pass-through securities, with each class
receiving different proportions of the principal and interest payments from the
underlying assets. A common type of SMRS has one class of interest-only
securities (IOs) receiving all of the interest payments from the underlying
assets and one class of principal-only securities (POs) receiving all of the
principal payments from the underlying assets. IOs and POs are extremely
sensitive to interest rate changes and are more volatile than mortgage-related
securities that are not stripped. IOs tend to decrease in value as interest
rates decrease and are extremely sensitive to the rate of principal payments
(including prepayments) on the related underlying mortgage assets, and a rapid
rate of principal prepayments may have a material adverse effect on the yield to
maturity of the IO class. POs generally increase in value as interest rates
decrease. If prepayments of the underlying mortgages are greater than
anticipated, the amount of interest earned on the overall pool will decrease due
to the decreasing principal balance of the assets. Due to their structure and
underlying cash flows, SMRS may be more volatile than mortgage-related
securities that are not stripped. Changes in the values of IOs and POs can be
substantial and occur quickly, such as occurred in the first half of 1994 when
the value of many POs dropped precipitously due to increases in interest rates.

            The Portfolio will only invest in SMRS that are issued by the U.S.
Government, its agencies or instrumentalities and supported by the full faith
and credit of the U.S. Although SMRS are purchased and sold by institutional
investors through several investment banking firms acting as brokers or dealers,
the complexity of these instruments and the smaller number of investors in the
sector can lend to illiquid markets in the sector.

            Commercial Mortgage-Backed Securities. Commercial mortgage-backed
securities are securities that represent an interest in, or are secured by,
mortgage loans secured by multifamily or commercial properties, such as
industrial and warehouse properties, office buildings, retail space and shopping
malls, and cooperative apartments, hotels and motels, nursing homes, hospitals
and senior living centers. Commercial mortgage-backed securities have been
issued in public and private transactions by a variety of public and private
issuers using a variety of structures, some of which were developed in the
residential mortgage context, including multi-class structures featuring senior
and subordinated classes. Commercial mortgage-backed securities may pay fixed or
floating-rates of interest. The commercial mortgage loans that underlie
commercial mortgage-related securities have certain distinct risk
characteristics. Commercial mortgage loans generally lack standardized terms,
which may complicate their structure, tend to have shorter maturities than
residential mortgage loans and may not be fully amortizing. Commercial
properties themselves tend to be unique and are more difficult to value than
single-family residential properties. In addition, commercial properties,
particularly industrial and warehouse properties, are subject to environmental
risks and the burdens and costs of compliance with environmental laws and
regulations.

            Certain Risks. The value of mortgage-related securities is affected
by a number of factors. Unlike traditional debt securities, which have fixed
maturity dates, mortgage-related securities may be paid earlier than expected as
a result of prepayments of underlying mortgages. Such prepayments generally
occur during periods of falling mortgage interest rates. If property owners make
unscheduled prepayments of their mortgage loans, these prepayments will result
in the early payment of the applicable mortgage-related securities. In that
event, the Portfolio may be unable to invest the proceeds from the early payment
of the mortgage-related securities in investments that provide as high a yield
as the mortgage-related securities. Early payments associated with
mortgage-related securities cause these securities to experience significantly
greater price and yield volatility than is experienced by traditional
fixed-income securities. The level of general interest rates, general economic
conditions and other social and demographic factors affect the occurrence of
mortgage prepayments. During periods of falling interest rates, the rate of
mortgage prepayments tends to increase, thereby tending to decrease the life of
mortgage-related securities. Conversely, during periods of rising interest
rates, a reduction in prepayments may increase the effective life of
mortgage-related securities, subjecting them to greater risk of decline in
market value in response to rising interest rates. If the life of a
mortgage-related security is inaccurately predicted, the Portfolio may not be
able to realize the rate of return it expected.

            As with other fixed-income securities, there is also the risk of
nonpayment of mortgage-related securities, particularly for those securities
that are backed by mortgage pools that contain subprime loans. Market factors
adversely affecting mortgage loan repayments include a general economic
downturn, high unemployment, a general slowdown in the real estate market, a
drop in the market prices of real estate, or higher mortgage payments required
to be made by holders of adjustable rate mortgages due to scheduled increases or
increases due to higher interest rates.

            Subordinated mortgage-related securities may have additional risks.
The subordinated mortgage-related security may serve as credit support for the
senior securities purchased by other investors. In addition, the payments of
principal and interest on these subordinated securities generally will be made
only after payments are made to the holders of securities senior to the
subordinated securities. Therefore, if there are defaults on the underlying
mortgage loans, the holders of subordinated mortgage-related securities will be
less likely to receive payments of principal and interest and will be more
likely to suffer a loss.

            Commercial mortgage-related securities, like all fixed-income
securities, generally decline in value as interest rates rise. Moreover,
although generally the value of fixed-income securities increases during periods
of falling interest rates, this inverse relationship is not as marked in the
case of single-family residential mortgage-related securities, due to the
increased likelihood of prepayments during periods of falling interest rates,
and may not be as marked in the case of commercial mortgage-related securities.
The process used to rate commercial mortgage-related securities may focus on,
among other factors, the structure of the security, the quality and adequacy of
collateral and insurance, and the creditworthiness of the originators, servicing
companies and providers of credit support.

            Although the market for mortgage-related securities is becoming
increasingly liquid, those issued by certain private organizations may not be
readily marketable. There may be a limited market for these securities,
especially when there is a perceived weakness in the mortgage and real estate
market sectors. In particular, the secondary markets for CMOs, IOs and POs may
be more volatile and less liquid than those for other mortgage-related
securities, thereby potentially limiting the Portfolio's ability to buy or sell
those securities at any particular time. Without an active trading market,
mortgage-related securities held in the Portfolio's portfolio may be
particularly difficult to value because of the complexities involved in the
value of the underlying mortgages. In addition, the rating agencies may have
difficulties in rating commercial mortgage-related securities through different
economic cycles and in monitoring such ratings on a longer-term basis.

            As with fixed-income securities generally, the value of
mortgage-related securities can also be adversely affected by increases in
general interest rates relative to the yield provided by such securities. Such
an adverse effect is especially possible with fixed-rate mortgage securities. If
the yield available on other investments rises above the yield of the fixed-rate
mortgage securities as a result of general increases in interest rate levels,
the value of the mortgage-related securities will decline.

            Other Asset-Backed Securities. The Portfolio may invest in other
asset-backed securities. The securitization techniques used to develop
mortgage-related securities are being applied to a broad range of financial
assets. Through the use of trusts and special purpose corporations, various
types of assets, including automobile loans and leases, credit card receivables,
home equity loans, equipment leases and trade receivables, are being securitized
in structures similar to the structures used in mortgage securitizations. For
example, the Portfolio may invest in collateralized debt obligations ("CDOs"),
which include collateralized bond obligations ("CBOs"), collateralized loan
obligations ("CLOs"), and other similarly structured securities. CBOs and CLOs
are types of asset-backed securities. A CBO is a trust, which is backed by a
diversified pool of high-risk, below investment grade fixed-income securities. A
CLO is a trust typically collateralized by a pool of loans, which may include,
among others, domestic and foreign senior secured loans, senior unsecured loans,
and subordinate corporate loans, including loans that may be rated below
investment grade or equivalent unrated loans. These asset-backed securities are
subject to risks associated with changes in interest rates, prepayment of
underlying obligations and defaults similar to the risks of investment in
mortgage-related securities discussed above.

            Each type of asset-backed security also entails unique risks
depending on the type of assets involved and the legal structure used. For
example, credit card receivables are generally unsecured obligations of the
credit card holder and the debtors are entitled to the protection of a number of
state and federal consumer credit laws, many of which give such debtors the
right to set off certain amounts owed on the credit cards, thereby reducing the
balance due. There have also been proposals to cap the interest rate that a
credit card issuer may charge. In some transactions, the value of the
asset-backed security is dependent on the performance of a third party acting as
credit enhancer or servicer. Furthermore, in some transactions (such as those
involving the securitization of vehicle loans or leases) it may be
administratively burdensome to perfect the interest of the security issuer in
the underlying collateral and the underlying collateral may become damaged or
stolen.

Preferred Stock
---------------

            The Portfolio may invest in preferred stock. Preferred stock is an
equity security that has features of debt because it generally entitles the
holder to periodic payments at a fixed rate of return. Preferred stock is
subordinated to any debt the issuer has outstanding but has liquidation
preference over common stock. Accordingly, preferred stock dividends are not
paid until all debt obligations are first met. Preferred stock may be subject to
more fluctuations in market value, due to changes in market participants'
perceptions of the issuer's ability to continue to pay dividends, than debt of
the same issuer.

Real Estate Investment Trusts
-----------------------------

            Real Estate Investment Trusts ("REITs") are pooled investment
vehicles that invest primarily in income producing real estate or real estate
related loans or interests. REITs are generally classified as equity REITs,
mortgage REITs or a combination of equity and mortgage REITs. Equity REITs
invest the majority of their assets directly in real property and derive income
primarily from the collection of rents. Equity REITs can also realize capital
gains by selling properties that have appreciated in value. Mortgage REITs
invest the majority of their assets in real estate mortgages and derive income
from the collection of interest payments. Similar to investment companies, REITs
are not taxed on income distributed to shareholders provided they comply with
several requirements of the U.S. Internal Revenue Code of 1986, as amended (the
"Code"). The Portfolio will indirectly bear its proportionate share of expenses
incurred by REITs in which the Portfolio invests in addition to the expenses
incurred directly by the Portfolio.

            Investing in REITs involves certain unique risks in addition to
those risks associated with investing in the real estate industry in general.
Equity REITs may be affected by changes in the value of the underlying property
owned by the REITs, while mortgage REITs may be affected by the quality of any
credit extended. REITs are dependent upon management skills, are not
diversified, and are subject to heavy cash flow dependency, default by borrowers
and self-liquidation.

            Investing in REITs involves risks similar to those associated with
investing in small capitalization companies. REITs may have limited financial
resources, may trade less frequently and in a limited volume and may be subject
to more abrupt or erratic price movements than larger company securities.
Historically, small capitalization stocks, such as REITs, have had more price
volatility than larger capitalization stocks.

            REITs are subject to the possibilities of failing to qualify for
tax-free pass-through of income under the Code and failing to maintain their
exemptions from registration under the 1940 Act. REITs (especially mortgage
REITs) also are subject to interest rate risks. When interest rates decline, the
value of a REIT's investment in fixed-rate obligations can be expected to rise.
Conversely, when interest rates rise, the value of a REIT's investment in
fixed-rate obligations can be expected to decline. In contrast, as interest
rates on adjustable rate mortgage loans are reset periodically, yields on a
REIT's investments in such loans will gradually align themselves to reflect
changes in market interest rates, causing the value of such investments to
fluctuate less dramatically in response to interest rate fluctuations than would
investments in fixed rate obligations.

Repurchase Agreements and Buy/Sell Back Transactions
----------------------------------------------------

            A repurchase agreement is an agreement by which the Portfolio
purchases a security and obtains a simultaneous commitment from the seller to
repurchase the security at an agreed-upon price and date, normally one or a week
later. The purchase and repurchase obligations are transacted under one
document. The resale price is greater than the purchase price, reflecting an
agreed-upon "interest rate" that is effective for the period of the time the
buyer's money is invested in the security and which is related to the current
market rate of the purchased security rather than its coupon rate. During the
term of the repurchase agreement, the Portfolio monitors on a daily basis the
market value of the securities subject to the agreement and, if the market value
of the securities falls below the resale amount provided under the repurchase
agreement, the seller under the repurchase agreement is required to provide
additional securities or cash equal to the amount by which the market value of
the securities falls below the resale amount. Because a repurchase agreement
permits the Portfolio to invest temporarily available cash on a
fully-collateralized basis, repurchase agreements permit the Portfolio to earn a
return on temporarily available cash while retaining "overnight" flexibility in
pursuit of investments of a longer-term nature. Repurchase agreements may
exhibit the characteristics of loans by the Portfolio.

            The obligation of the seller under the repurchase agreement is not
guaranteed, and there is a risk that the seller may fail to repurchase the
underlying security, whether because of the seller's bankruptcy or otherwise. In
such event, the Portfolio would attempt to exercise its rights with respect to
the underlying security, including possible sale of the securities. The
Portfolio may incur various expenses in connection with the exercise of its
rights and may be subject to various delays and risks of loss, including (a)
possible declines in the value of the underlying securities, (b) possible
reduction in levels of income and (c) lack of access to the securities (if they
are held through a third-party custodian) and possible inability to enforce the
Portfolio's rights. The Board has established procedures, which are periodically
reviewed by the Board, pursuant to which the Adviser monitors the
creditworthiness of the dealers with which the Portfolio enters into repurchase
agreement transactions.

            The Portfolio may enter into repurchase agreements pertaining to
U.S. Government securities with member banks of the Federal Reserve System or
"primary dealers" (as designated by the Federal Reserve Bank of New York) in
such securities. There is no percentage restriction on the Portfolio's ability
to enter into repurchase agreements. Currently, the Portfolio intends to enter
into repurchase agreements only with its custodian and such primary dealers.

            The Portfolio may enter into buy/sell back transactions, which are
similar to repurchase agreements. In this type of transaction, the Portfolio
enters a trade to buy securities at one price and simultaneously enters a trade
to sell the same securities at another price on a specified date. Similar to a
repurchase agreement, the repurchase price is higher than the sale price and
reflects current interest rates. Unlike, a repurchase agreement, however, the
buy/sell back transaction, though done simultaneously, is two separate legal
agreements. A buy/sell back transaction also differs from a repurchase agreement
in that the seller is not required to provide margin payments if the value of
the securities falls below the repurchase price because the transaction is two
separate transactions. The Portfolio has the risk of changes in the value of the
purchased security during the term of the buy/sell back agreement although these
agreements typically provide for the repricing of the original transaction at a
new market price if the value of the security changes by a specific amount.

Reverse Repurchase Agreements
-----------------------------

            Reverse repurchase agreements are identical to repurchase agreements
except that rather than buying securities for cash subject to their repurchase
by the seller, the Portfolio sells portfolio assets concurrently with an
agreement by the Portfolio to repurchase the same assets at a later date at a
fixed price slightly higher than the sale price. During the reverse repurchase
agreement period, the Portfolio continues to receive principal and interest
payments on these securities. Generally, the effect of a reverse repurchase
agreement is that the Portfolio can recover all or most of the cash invested in
the portfolio securities involved during the term of the reverse repurchase
agreement, while it will be able to keep the interest income associated with
those portfolio securities. Such transactions are advantageous only if the
"interest cost" to the Portfolio of the reverse repurchase transaction, i.e.,
the difference between the sale and repurchase price for the securities, is less
than the cost of otherwise obtaining the cash.

            Reverse repurchase agreements involve the risk that the market value
of the securities the Portfolio is obligated to repurchase under the agreement
may decline below the repurchase price. In the event the buyer of securities
under a reverse repurchase agreement files for bankruptcy or becomes insolvent,
the Portfolio's use of the proceeds of the agreement may be restricted pending a
determination by the other party, or its trustee or receiver, whether to enforce
the Portfolio's obligation to repurchase the securities. In addition, the use of
these investments results in leveraging the Portfolio's common stocks because
the Portfolio uses the proceeds to make investments in other securities. See
"Borrowing and Use of Leverage" below.

Rights and Warrants
-------------------

            The Portfolio may invest in rights and warrants, which entitle the
holder to buy equity securities at a specific price for a specific period of
time, but will do so only if the equity securities themselves are deemed
appropriate by the Adviser for inclusion in the Portfolio's portfolio. Rights
and warrants may be considered more speculative than certain other types of
investments in that they do not entitle a holder to dividends or voting rights
with respect to the securities which may be purchased nor do they represent any
rights in the assets of the issuing company. Also, the value of a right or
warrant does not necessarily change with the value of the underlying securities
and a right or warrant ceases to have value if it is not exercised prior to the
expiration date.

Short Sales
-----------

            A short sale is effected by selling a security that the Portfolio
does not own, or if the Portfolio does own such security, it is not to be
delivered upon consummation of sale. A short sale is against the box to the
extent that the Portfolio contemporaneously owns or has the right to obtain
securities identical to those sold. A short sale of a security involves the risk
that, instead of declining, the price of the security sold short will rise. If
the price of the securities sold short increases between the time of a short
sale and the time the Portfolio replaces the borrowed security, the Portfolio
will incur a loss; conversely, if the price declines, the Portfolio will realize
a gain. The potential for the price of a fixed-income security sold short to
rise is a function of both the remaining maturity of the obligation, its
creditworthiness and its yield. Unlike short sales of equities or other
instruments, potential for the price of a fixed-income security to rise may be
limited due to the fact that the security will be no more than par at maturity.
However, the short sale of other instruments or securities generally, including
fixed-income securities convertible into equities or other instruments, a
fixed-income security trading at a deep discount from par or which pays a coupon
that is high in relative or absolute terms, or which is denominated in a
currency other than the U.S. Dollar, involves the possibility of a theoretically
unlimited loss since there is a theoretically unlimited potential for the market
price of the security sold short to increase. Short sales may be used in some
cases by the Portfolio to defer the realization of gain or loss for federal
income tax purposes on securities then owned by the Portfolio. See "Dividends,
Distributions and Taxes-Tax Straddles" for a discussion of certain special
federal income tax considerations that may apply to short sales which are
entered into by the Portfolio.

Standby Commitment Agreements
-----------------------------

            The Portfolio may from time to time enter into standby commitment
agreements. Such agreements commit the Portfolio, for a stated period of time,
to purchase a stated amount of a security that may be issued and sold to the
Portfolio at the option of the issuer. The price and coupon of the security are
fixed at the time of the commitment. At the time of entering into the agreement
the Portfolio is paid a commitment fee, regardless of whether or not the
security is ultimately issued, which is typically approximately 0.5% of the
aggregate purchase price of the security which the Portfolio has committed to
purchase. The fee is payable whether or not the security is ultimately issued.
The Portfolio will enter into such agreements only for the purpose of investing
in the security underlying the commitment at a yield and price which are
considered advantageous to the Portfolio and which are unavailable on a firm
commitment basis.

            There can be no assurance that the securities subject to a standby
commitment will be issued and the value of the security, if issued, on the
delivery date may be more or less than its purchase price. Since the issuance of
the security underlying the commitment is at the option of the issuer, the
Portfolio will bear the risk of capital loss in the event the value of the
security declines and may not benefit from an appreciation in the value of the
security during the commitment period if the issuer decides not to issue and
sell the security to the Portfolio. The purchase of a security subject to a
standby commitment agreement and the related commitment fee will be recorded on
the date on which the security can reasonably be expected to be issued and the
value of the security will thereafter be reflected in the calculation of the
Portfolio's NAV. The cost basis of the security will be adjusted by the amount
of the commitment fee. In the event the security is not issued, the commitment
fee will be recorded as income on the expiration date of the standby commitment.

U.S. Corporate Fixed-Income Securities
--------------------------------------

            The Portfolio may invest in U.S. corporate fixed-income securities
that may include securities issued in connection with corporate restructurings
such as takeovers or leveraged buyouts, which may pose particular risks.
Securities issued to finance corporate restructurings may have special credit
risks due to the highly leveraged conditions of the issuer. In addition, such
issuers may lose experienced management as a result of the restructuring.
Finally, the market price of such securities may be more volatile to the extent
that expected benefits from the restructuring do not materialize. The Portfolio
may also invest in U.S. corporate fixed-income securities that are not current
in the payment of interest or principal or are in default, so long as the
Adviser believes such investment is consistent with the Portfolio's investment
objectives. The Portfolio's rights with respect to defaults on such securities
will be subject to applicable U.S. bankruptcy, moratorium and other similar
laws.

U.S. Government Securities
--------------------------

            U.S. Government securities may be backed by the full faith and
credit of the United States, supported only by the right of the issuer to borrow
from the U.S. Treasury or backed only by the credit of the issuing agency
itself. These securities include: (i) the following U.S. Treasury securities,
which are backed by the full faith and credit of the United States and differ
only in their interest rates, maturities and times of issuance: U.S. Treasury
bills (maturities of one year or less with no interest paid and hence issued at
a discount and repaid at full face value upon maturity), U.S. Treasury notes
(maturities of one to ten years with interest payable every six months) and U.S.
Treasury bonds (generally maturities of greater than ten years with interest
payable every six months); (ii) obligations issued or guaranteed by U.S.
Government agencies and instrumentalities that are supported by the full faith
and credit of the U.S. Government, such as securities issued by GNMA, the
Farmers Home Administration, the Department of Housing and Urban Development,
the Export-Import Bank, the General Services Administration and the Small
Business Administration, including obligations that are issued by private
issuers that are guaranteed as to principal or interest by the U.S. Government,
its agencies or instrumentalities; and (iii) obligations issued or guaranteed by
U.S. government agencies and instrumentalities that were historically not
supported by the full faith and credit of the U.S. Government or a right to
borrow from the U.S. Treasury, such as securities issued by the FNMA and FHLMC
(which are, as described above, now in effect, backed by the full faith and
credit of the U.S. Government due to the conservatorship of the agencies), and
governmental collateralized mortgage obligations ("CMOs"). The maturities of the
U.S. Government securities listed in paragraphs (i) and (ii) above usually range
from three months to 30 years. Such securities, except GNMA certificates,
normally provide for periodic payments of interest in fixed amount with
principal payments at maturity or specified call dates.

            U.S. Government securities also include zero coupon securities and
principal-only securities and certain stripped mortgage-related securities. Zero
coupon securities are described in more detail in "Zero Coupon Securities"
below, and stripped mortgage-related securities and principal-only securities
are described in more detail in "Mortgage-Related Securities and Other
Asset-Backed Securities -Stripped Mortgage-Related Securities" above. In
addition, other U.S. Government agencies and instrumentalities have issued
stripped securities that are similar to SMRS.

            Inflation-protected securities, or IPS, such as Treasury
Inflation-Protected Securities, or TIPS, are fixed income securities whose
principal value is periodically adjusted according to the rate of inflation. If
the index measuring inflation falls, the principal value of these securities
will be adjusted downward, and consequently the interest payable on these
securities (calculated with respect to a smaller principal amount) will be
reduced. Repayment of the original bond principal upon maturity (as adjusted for
inflation) is guaranteed in the case of U.S. Treasury inflation-protected
securities. For bonds that do not provide a similar guarantee, the adjusted
principal value of the bond repaid at maturity may be less than the original
principal.

            Inflation-protected securities tend to react to changes in real
interest rates. In general, the price of an inflation-protected security can
fall when real interest rates rise, and can rise when real interest rates fall.
In addition, the value of inflation-protected securities may be vulnerable to
changes in expectations of inflation. Interest payments on inflation-protected
securities can be unpredictable and will vary as the principal and/or interest
is adjusted for inflation.

            TIPS, which are issued by the U.S Treasury, use the Consumer Price
Index for Urban Consumers, or the CPI, as the inflation measure. The principal
of a TIPS increases with inflation and decreases with deflation, as measured by
the CPI. When a TIPS matures, the holder is paid the adjusted principal or
original principal, whichever is greater. TIPS pay interest twice a year, at a
fixed rate, which is determined by auction at the time the TIPS are issued. The
rate is applied to the adjusted principal; so, like the principal, interest
payments rise with inflation and fall with deflation. TIPS are issued in terms
of 5, 10, and 20 years.

            Guarantees of securities by the U.S. Government or its agencies or
instrumentalities guarantee only the payment of principal and interest on the
securities, and do not guarantee the securities' yield or value or the yield or
value of the shares of the Portfolio that holds the securities.

            U.S. Government securities are considered among the safest of
fixed-income investments. As a result, however, their yields are generally lower
than the yields available from other fixed-income securities.

General
-------

             The Fund has voluntarily agreed that the Portfolio will adhere to
the foreign security diversification guidelines promulgated by certain State
Insurance Departments. Pursuant to these guidelines, the Portfolio will invest
in issuers from a minimum of five different foreign countries. This minimum will
be reduced to four different foreign countries when securities of foreign
issuers comprise less than 80% of the Portfolio's NAV, three different foreign
countries when securities of foreign issuers comprise less than 60% of the
Portfolio's NAV, two different foreign countries when securities of foreign
issuers comprise less than 40% of the Portfolio's NAV and one foreign country
when securities of foreign issuers comprise less than 20% of the Portfolio's
NAV. The Fund has also voluntarily agreed that the Portfolio will limit its
investment in the securities of issuers located in any one country to 20% of the
Portfolio's NAV, except that the Portfolio may have an additional 15% of its NAV
invested in securities of issuers located in Australia, Canada, France, Japan,
the United Kingdom or Germany.

             In addition, the Fund has adopted an investment policy, which is
not designated a "fundamental policy" within the meaning of the 1940 Act, of
intending to have the Portfolio comply at all times with the diversification
requirements prescribed in Section 817(h) of the Code or any successor thereto
and the applicable Treasury Regulations thereunder. This policy may be changed
upon notice to shareholders of the Fund, but without their approval. For more
information, see Dividends, Distributions and Taxes below.

Certain Risk and Other Considerations
-------------------------------------

            Borrowing and Use of Leverage. The Portfolio may use borrowings for
investment purposes subject to the restrictions of the 1940 Act. The Portfolio
may also use leverage for investment purposes by entering into transactions such
as reverse repurchase agreements, forward contracts and dollar rolls. This means
that the Portfolio uses the cash proceeds made available during the term of
these transactions to make investments in other securities.

            Borrowings by the Portfolio result in leveraging of the Portfolio's
shares of common stock. The proceeds of such borrowings will be invested in
accordance with the Portfolio's investment objective and policies. The Adviser
anticipates that the difference between the interest expense paid by the
Portfolio on borrowings and the rates received by the Portfolio from its
investment portfolio issuers will provide the Portfolio's shareholders with a
potentially higher yield.

            Utilization of leverage, which is usually considered speculative,
however, involves certain risks to the Portfolio's shareholders. These include a
higher volatility of the NAV of the Portfolio's shares of common stock and the
relatively greater effect on the NAV of the shares caused by favorable or
adverse changes in market conditions or interest rates. So long as the Portfolio
is able to realize a net return on the leveraged portion of its investment
portfolio that is higher than the interest expense paid on borrowings or the
carrying costs of leveraged transactions, the effect of leverage will be to
cause the Portfolio's shareholders to realize higher current net investment
income than if the Portfolio were not leveraged. However, to the extent that the
interest expense on borrowings or the carrying costs of leveraged transactions
approaches the net return on the leveraged portion of the Portfolio's investment
portfolio, the benefit of leverage to the Portfolio's shareholders will be
reduced, and if the interest expense on borrowings or the carrying costs of
leveraged transactions were to exceed the net return to shareholders, the
Portfolio's use of leverage would result in a lower rate of return than if the
Portfolio were not leveraged. Similarly, the effect of leverage in a declining
market could be a greater decrease in NAV per share than if the Portfolio were
not leveraged. In an extreme case, if the Portfolio's current investment income
were not sufficient to meet the interest expense on borrowings or the carrying
costs of leveraged transactions, it could be necessary for the Portfolio to
liquidate certain of its investments, thereby reducing the NAV of the
Portfolio's shares.

            Certain transactions, such as derivatives transactions, forward
commitments, reverse repurchase agreements and short sales, involve leverage and
may expose the Portfolio to potential losses that, in some cases, may exceed the
amount originally invested by the Portfolio. When the Portfolio engages in such
transactions, it will, in accordance with guidance provided by the SEC or its
staff in, among other things, regulations, interpretative releases and no-action
letters, deposit in a segregated account certain liquid assets with a value at
least equal to the Portfolio's exposure, on a marked-to-market or other relevant
basis, to the transaction. Transactions for which assets have been segregated
will not be considered "senior securities" for purposes of the Portfolio's
investment restriction concerning senior securities. The segregation of assets
is intended to enable the Portfolio to have assets available to satisfy its
obligations with respect to these transactions, but will not limit the
Portfolio's exposure to loss.

            Investments in Lower-Rated and Unrated Instruments. The Portfolio
may invest in lower-rated securities ("junk bonds"), which may include
securities having the lowest rating for non-subordinated debt securities (i.e.,
rated C by Moody's or CCC or lower by S&P & Fitch) and unrated securities of
equivalent investment quality. Debt securities with such a rating are considered
by the rating organizations to be subject to greater risk of loss of principal
and interest than higher-rated securities and are considered to be predominantly
speculative with respect to the issuer's capacity to pay interest and repay
principal, which may in any case decline during sustained periods of
deteriorating economic conditions or rising interest rates. These securities are
considered to have extremely poor prospects of ever attaining any real
investment standing, to have a current identifiable vulnerability to default, to
be unlikely to have the capacity to pay interest and repay principal when due in
the event of adverse business, financial or economic conditions, and/or to be in
default or not current in the payment of interest or principal.

            Lower-rated securities generally are considered to be subject to
greater market risk than higher-rated securities in times of deteriorating
economic conditions. In addition, lower-rated securities may be more susceptible
to real or perceived adverse economic and competitive industry conditions than
investment grade securities, although the market values of securities rated
below investment grade and comparable unrated securities tend to react less to
fluctuations in interest rate levels than do those of higher-rated securities.
The market for lower-rated securities may be thinner and less active than that
for higher-quality securities, which can adversely affect the prices at which
these securities can be sold. To the extent that there is no established
secondary market for lower-rated securities, the Adviser may experience
difficulty in valuing such securities and, in turn, the Portfolio's assets. In
addition, adverse publicity and investor perceptions about lower-rated
securities, whether or not based on fundamental analysis, may tend to decrease
the market value and liquidity of such lower-rated securities. Transaction costs
with respect to lower-rated securities may be higher, and in some cases
information may be less available, than is the case with investment grade
securities.

            Many fixed-income securities, including certain U.S. corporate
fixed-income securities in which the Portfolio may invest, contain call or
buy-back features that permit the issuer of the security to call or repurchase
it. Such securities may present risks based on payment expectations. If an
issuer exercises such a "call option" and redeems the security, the Portfolio
may have to replace the called security with a lower yielding security,
resulting in a decreased rate of return for the Portfolio.

            In seeking to achieve the Portfolio's investment objectives, there
will be times, such as during periods of rising interest rates, when
depreciation and realization of capital losses on securities in the Portfolio's
portfolio will be unavoidable. Moreover, medium and lower rated securities and
non-rated securities of comparable quality may be subject to wider fluctuations
in yield and market values than higher-rated securities under certain market
conditions. Such fluctuations after a security is acquired do not affect the
cash income received from that security but are reflected in the NAV of the
Portfolio.

            Risks of Investments in Foreign Securities. Investors should
understand and consider carefully the substantial risks involved in securities
of foreign companies and governments of foreign nations, some of which are
referred to below, and which are in addition to the usual risks inherent in
domestic investments. Investing in securities of non-U.S. companies which are
generally denominated in foreign currencies, and utilization of derivative
investment products denominated in, or the value of which is dependent upon
movements in the relative value of, a foreign currency, involve certain
considerations comprising both risk and opportunity not typically associated
with investing in U.S. companies. These considerations include changes in
exchange rates and exchange control regulations, political and social
instability, expropriation, imposition of foreign taxes, less liquid markets and
less available information than are generally the case in the U.S., higher
transaction costs, less government supervision of exchanges, brokers and
issuers, difficulty in enforcing contractual obligations, lack of uniform
accounting and auditing standards and greater price volatility.

            There is generally less publicly available information about foreign
companies comparable to reports and ratings that are published about companies
in the U.S .. Foreign issuers are subject to accounting and financial standards
and requirements that differ, in some cases significantly, from those applicable
to U.S. issuers. In particular, the assets and profits appearing on the
financial statements of a foreign issuer may not reflect its financial position
or results of operations in the way they would be reflected had the financial
statement been prepared in accordance with U.S. generally accepted accounting
principles. In addition, for an issuer that keeps accounting records in local
currency, inflation accounting rules in some of the countries in which the
Portfolio may invest require, for both tax and accounting purposes, that certain
assets and liabilities be restated on the issuer's balance sheet in order to
express items in terms of currency of constant purchasing power. Inflation
accounting may indirectly generate losses or profits. Consequently, financial
data may be materially affected by restatements for inflation and may not
accurately reflect the real condition of those issuers and securities markets.
Substantially less information is publicly available about certain non-U.S.
issuers than is available about U.S. issuers.

            It is contemplated that foreign securities will be purchased in
over-the-counter markets or on stock exchanges located in the countries in which
the respective principal offices of the issuers of the various securities are
located, if that is the best available market. Foreign securities markets are
generally not as developed or efficient as those in the U.S .. While growing in
volume, they usually have substantially less volume than the Exchange, and
securities of some foreign companies are less liquid and more volatile than
securities of comparable U.S. companies. Similarly, volume and liquidity in most
foreign bond markets is less than in the U.S. and, at times, volatility of price
can be greater than in the U.S .. Fixed commissions on foreign stock exchanges
are generally higher than negotiated commissions on U.S. exchanges, although the
Portfolio will endeavor to achieve the most favorable net results on its
portfolio transactions. There is generally less government supervision and
regulation of stock exchanges, brokers and listed companies than in the U.S.

            Expropriation, confiscatory taxation, nationalization, political,
economic or social instability or other similar developments, such as military
coups, have occurred in the past in countries in which the Portfolio may invest
and could adversely affect the Portfolio's assets should these conditions or
events recur.

            Foreign investment in certain foreign securities is restricted or
controlled to varying degrees. These restrictions or controls may at times limit
or preclude foreign investment in certain foreign securities and increase the
costs and expenses of the Portfolio. Certain countries in which the Portfolio
may invest require governmental approval prior to investments by foreign
persons, limit the amount of investment by foreign persons in a particular
issuer, limit the investment by foreign persons only to a specific class of
securities of an issuer that may have less advantageous rights than the classes
available for purchase by domiciliaries of the countries and/or impose
additional taxes on foreign investors.

            Certain countries may require governmental approval for the
repatriation of investment income, capital or the proceeds of sales of
securities by foreign investors. In addition, if a deterioration occurs in a
country's balance of payments, the country could impose temporary restrictions
on foreign capital remittances.

            Income from certain investments held by the Portfolio could be
reduced by foreign income taxes, including withholding taxes. It is impossible
to determine the effective rate of foreign tax in advance. The Portfolio's NAV
may also be affected by changes in the rates or methods of taxation applicable
to the Portfolio or to entities in which the Portfolio has invested. The Adviser
generally will consider the cost of any taxes in determining whether to acquire
any particular investments, but can provide no assurance that the tax treatment
of investments held by the Portfolio will not be subject to change. A
shareholder otherwise subject to U.S. federal income taxes may, subject to
certain limitations, be entitled to claim a credit or deduction for U.S. federal
income tax purposes for his or her proportionate share of such foreign taxes
paid by the Portfolio. See "U.S. Federal Income Taxes."

            Although the Portfolio may value its assets in terms of U.S.
Dollars, the Portfolio does not intend to convert its holdings of foreign
currencies into U.S. Dollars on a daily basis. The Portfolio will do so from
time to time, and investors should be aware of the costs of currency conversion.
Although foreign exchange dealers do not charge a fee for conversion, they do
realize a profit based on the difference (commonly known as the "spread")
between the price at which they are buying and selling various currencies. Thus,
a dealer may offer to sell a foreign currency to the Portfolio at one rate,
while offering a lesser rate of exchange should that Portfolio desire to resell
that currency to the dealer. Investors should understand that the expense ratio
of a fund investing in foreign securities may be higher than investment
companies investing only in domestic securities since, among other things, the
cost of maintaining the custody of foreign securities is higher and the purchase
and sale of portfolio securities may be subject to higher transaction charges,
such as stamp duties and turnover taxes.

            Investors should understand that the expense ratio of a fund
investing in foreign securities may be higher than investment companies
investing only in domestic securities since, among other things, the cost of
maintaining the custody of foreign securities is higher and the purchase and
sale of portfolio securities may be subject to higher transaction charges, such
as stamp duties and turnover taxes.

            For many foreign securities, there are U.S. Dollar-denominated ADRs
which are traded in the U.S. on exchanges or over-the-counter and are issued by
domestic banks or trust companies and for which market quotations are readily
available. ADRs do not lessen the foreign exchange risk inherent in investing in
the securities of foreign issuers. However, by investing in ADRs rather than
directly in stock of foreign issuers, the Portfolio can avoid currency risks
which might occur during the settlement period for either purchases or sales.
The Portfolio may purchase foreign securities directly, as well as through ADRs.

            Foreign Currency Transactions. The Portfolio may invest in
securities denominated in foreign currencies and a corresponding portion of the
Portfolio's revenues will be received in such currencies. In addition, the
Portfolio may conduct foreign currency transactions for hedging and non-hedging
purposes on a spot (i.e., cash) basis or through the use of derivatives
transactions, such as forward currency exchange contracts, currency futures and
options thereon, and options on currencies as described above. The dollar
equivalent of the Portfolio's net assets and distributions will be adversely
affected by reductions in the value of certain foreign currencies relative to
the U.S. Dollar. Such changes will also affect the Portfolio's income. The
Portfolio will, however, have the ability to attempt to protect itself against
adverse changes in the values of foreign currencies by engaging in certain of
the investment practices listed above. While the Portfolio has this ability,
there is no certainty as to whether and to what extent the Portfolio will engage
in these practices.

            Currency exchange rates may fluctuate significantly over short
periods of time causing, along with other factors, the Portfolio's NAV to
fluctuate. Currency exchange rates generally are determined by the forces of
supply and demand in the foreign exchange markets and the relative merits of
investments in different countries, actual or anticipated changes in interest
rates and other complex factors, as seen from an international perspective.
Currency exchange rates also can be affected unpredictably by the intervention
of U.S. or foreign governments or central banks, or the failure to intervene, or
by currency controls or political developments in the U.S. or abroad. To the
extent the Portfolio's total assets adjusted to reflect the Portfolio's net
position after giving effect to currency transactions is denominated or quoted
in the currencies of foreign countries, the Portfolio will be more susceptible
to the risk of adverse economic and political developments within those
countries.

            The Portfolio will incur costs in connection with conversions
between various currencies. The Portfolio may hold foreign currency received in
connection with investments when, in the judgment of the Adviser, it would be
beneficial to convert such currency into U.S. Dollars at a later date, based on
anticipated changes in the relevant exchange rate. If the value of the foreign
currencies in which the Portfolio receives its income falls relative to the U.S.
Dollar between receipt of the income and the making of Portfolio distributions,
the Portfolio may be required to liquidate securities in order to make
distributions if the Portfolio has insufficient cash in U.S. Dollars to meet
distribution requirements.

            If the value of the foreign currencies in which the Portfolio
receives income falls relative to the U.S. Dollar between receipt of the income
and the making of Portfolio distributions, the Portfolio may be required to
liquidate securities in order to make distributions if the Portfolio has
insufficient cash in U.S. Dollars to meet the distribution requirements that the
Portfolio must satisfy to qualify as a regulated investment company for federal
income tax purposes. Similarly, if the value of a particular foreign currency
declines between the time the Portfolio incurs expenses in U.S. Dollars and the
time cash expenses are paid, the amount of the currency required to be converted
into U.S. Dollars in order to pay expenses in U.S. Dollars could be greater than
the equivalent amount of such expenses in the currency at the time they were
incurred. In light of these risks, the Portfolio may engage in certain currency
hedging transactions, which themselves, involve certain special risks.

            Risks of Forward Currency Exchange Contracts, Foreign Currency
Futures Contracts and Options thereon, Options on Foreign Currencies and
Over-the-Counter Options on Securities. Transactions in forward currency
exchange contracts, as well as futures and options on foreign currencies, are
subject to all of the correlation, liquidity and other risks outlined above. In
addition, however, such transactions are subject to the risk of governmental
actions affecting trading in or the prices of currencies underlying such
contracts, which could restrict or eliminate trading and could have a
substantial adverse effect on the value of positions held by the Portfolio. In
addition, the value of such positions could be adversely affected by a number of
other complex political and economic factors applicable to the countries issuing
the underlying currencies.

            Further, unlike trading in most other types of instruments, there is
no systematic reporting of last sale information with respect to the foreign
currencies underlying contracts thereon. As a result, the available information
on which trading decisions will be based may not be as complete as the
comparable data on which the Portfolio makes investment and trading decisions in
connection with other transactions. Moreover, because the foreign currency
market is a global, twenty-four hour market, events could occur on that market
but will not be reflected in the forward, futures or options markets until the
following day, thereby preventing the Portfolio from responding to such events
in a timely manner.

            Settlements of exercises of over-the-counter forward currency
exchange contracts or foreign currency options generally must occur within the
country issuing the underlying currency, which in turn requires traders to
accept or make delivery of such currencies in conformity with any U.S. or
foreign restrictions and regulations regarding the maintenance of foreign
banking relationships and fees, taxes or other charges.

            Unlike transactions entered into by the Portfolio in futures
contracts and exchange-traded options, options on foreign currencies, forward
currency exchange contracts and over-the-counter options on securities and
securities indices may not be traded on contract markets regulated by the
Commodity Futures Trading Commission or (with the exception of certain foreign
currency options) the SEC. Such instruments are instead traded through financial
institutions acting as market-makers, although foreign currency options are also
traded on certain national securities exchanges, such as the Philadelphia Stock
Exchange and the Chicago Board Options Exchange, that are subject to SEC
regulation. In an over-the-counter trading environment, many of the protections
afforded to exchange participants will not be available. For example, there are
no daily price fluctuation limits, and adverse market movements could therefore
continue to an unlimited extent over a period of time. Although the purchaser of
an option cannot lose more than the amount of the premium plus related
transaction costs, this entire amount could be lost. Moreover, the option writer
could lose amounts substantially in excess of the initial investment due to the
margin and collateral requirements associated with such positions.

            In addition, over-the-counter transactions can be entered into only
with a financial institution willing to take the opposite side, as principal, of
the Portfolio's position unless the institution acts as broker and is able to
find another counterparty willing to enter into the transaction with the
Portfolio. Where no such counterparty is available, it will not be possible to
enter into a desired transaction. There also may be no liquid secondary market
in the trading of over-the-counter contracts, and the Portfolio could be
required to retain options purchased or written, or forward currency exchange
contracts entered into, until exercise, expiration or maturity. This in turn
could limit the Portfolio's ability to profit from open positions or to reduce
losses experienced, and could result in greater losses.

            Further, over-the-counter transactions are not subject to the
guarantee of an exchange clearinghouse, and the Portfolio will therefore be
subject to the risk of default by, or the bankruptcy of, the financial
institution serving as its counterparty. The Portfolio will enter into an
over-the-counter transaction only with parties whose creditworthiness has been
reviewed and found to be satisfactory by the Adviser.

            Transactions in over-the-counter options on foreign currencies are
subject to a number of conditions regarding the commercial purpose of the
purchaser of such option. The Portfolio is not able to determine at this time
whether or to what extent additional restrictions on the trading of
over-the-counter options on foreign currencies may be imposed at some point in
the future, or the effect that any such restrictions may have on the hedging
strategies to be implemented by them.

            Options on foreign currencies traded on national securities
exchanges are within the jurisdiction of the SEC, as are other securities traded
on such exchanges. As a result, many of the protections provided to traders on
organized exchanges will be available with respect to such transactions. In
particular, all foreign currency option positions entered into on a national
securities exchange are cleared and guaranteed by the Options Clearing
Corporation ("OCC"), thereby reducing the risk of counterparty default. Further,
a liquid secondary market in options traded on a national securities exchange
may be more readily available than in the over-the-counter market, potentially
permitting the Portfolio to liquidate open positions at a profit prior to
exercise or expiration, or to limit losses in the event of adverse market
movements.

            The purchase and sale of exchange-traded foreign currency options,
however, is subject to the risks of the availability of a liquid secondary
market described above, as well as the risks regarding adverse market movements,
the margining of options written, the nature of the foreign currency market,
possible intervention by governmental authorities and the effects of other
political and economic events. In addition, exchange-traded options on foreign
currencies involve certain risks not presented by the over-the-counter market.
For example, exercise and settlement of such options must be made exclusively
through the OCC, which has established banking relationships in applicable
foreign countries for this purpose. As a result, if the OCC determines that
foreign governmental restrictions or taxes would prevent the orderly settlement
of foreign currency option exercises, or would result in undue burdens on the
OCC or its clearing member, the OCC may impose special procedures on exercise
and settlement, such as technical changes in the mechanics of delivery of
currency, the fixing of dollar settlement prices or prohibitions on exercise.

--------------------------------------------------------------------------------

                            INVESTMENT RESTRICTIONS

--------------------------------------------------------------------------------

Fundamental Investment Policies
-------------------------------

            The following investment restrictions may not be changed without
approval by the vote of a majority of the Portfolio's outstanding voting
securities, which means the affirmative vote of (i) 67% or more of the shares of
the Portfolio represented at a meeting at which more than 50% of the outstanding
shares are present in person or by proxy, or (ii) more than 50% of the
outstanding shares of the Portfolio, whichever is less.

            As a matter of fundamental policy, the Portfolio:

            (a) may not concentrate investments in an industry, as concentration
may be defined under the 1940 Act or the rules and regulations thereunder (as
such statute, rules or regulations may be amended from time to time) or by
guidance regarding, interpretations of, or exemptive orders under, the 1940 Act
or the rules or regulations thereunder published by appropriate regulatory
authorities;

            (b) may not issue any senior security (as that term is defined in
the 1940 Act) or borrow money, except to the extent permitted by the 1940 Act or
the rules and regulations thereunder (as such statute, rules or regulations may
be amended from time to time) or by guidance regarding, or interpretations of,
or exemptive orders under, the 1940 Act or the rules or regulations thereunder
published by appropriate regulatory authorities. For purposes of this
restriction, margin and collateral arrangements, including, for example, with
respect to permitted borrowings, options, futures contracts, options on futures
contracts and other derivatives such as swaps are not deemed to involve the
issuance of a senior security;

            (c) may not make loans except through (i) the purchase of debt
obligations in accordance with its investment objective and policies; (ii) the
lending of portfolio securities; (iii) the use of repurchase agreements; or (iv)
the making of loans to affiliated funds as permitted under the 1940 Act, the
rules and regulations thereunder (as such statutes, rules or regulations may be
amended from time to time), or by guidance regarding, and interpretations of, or
exemptive orders under, the 1940 Act;

            (d) may not purchase or sell real estate except that it may dispose
of real estate acquired as a result of the ownership of securities or other
instruments. This restriction does not prohibit the Portfolio from investing in
securities or other instruments backed by real estate or in securities of
companies engaged in the real estate business;

            (e) may purchase and sell commodities to the extent allowed by
applicable law; or

            (f) may not act as an underwriter of securities, except that the
Portfolio may acquire restricted securities under circumstances in which, if
such securities were sold, the Portfolio might be deemed to be an underwriter
for purposes of the Securities Act.

            As a fundamental policy, the Portfolio is diversified (as that term
is defined in the 1940 Act). This means that at least 75% of the Portfolio's
assets consist of:

            o     Cash or cash items;
            o     Government securities;
            o     Securities of other investment companies; and
            o     Securities of any one issuer that represent not more than 10%
                  of the outstanding voting securities of the issuer of the
                  securities and not more than 5% of the total assets of the
                  Portfolio.

Non-Fundamental Investment Policy
---------------------------------

            As a matter of non-fundamental policy, the Portfolio has adopted a
policy that provides that the Portfolio may not purchase securities on margin,
except (i) as otherwise provided under rules adopted by the SEC under the 1940
Act or by guidance regarding the 1940 Act, or interpretations thereof, and (ii)
that the Portfolio may obtain such short-term credits as are necessary for the
clearance of portfolio transactions, and the Portfolio may make margin payments
in connection with futures contracts, options, forward contracts, swaps, caps,
floors, collars and other financial instruments.



--------------------------------------------------------------------------------

                             MANAGEMENT OF THE FUND

--------------------------------------------------------------------------------

Directors Information
---------------------

            The business and affairs of the Fund are managed under the direction
of the Board. Certain information concerning the Directors is set forth below.



                                                                                           Other Public Company
                                       Principal                      Portfolios in Fund      Directorships
   Name, Address*, Age         Occupation(s) During the              Complex Overseen by   Held by Director in
and (Year First Elected**)     Past Five Years or Longer                   Director        the Past Five Years
--------------------------     -------------------------              ------------------   --------------------
                                                                                  
Independent Directors

Chairman of the Board
William H. Foulk, Jr.,#,##     Investment Adviser and an                      97                  None
78                             Independent Consultant since prior
(1998)                         to 2006.  Previously, he was Senior
                               Manager of Barrett Associates, Inc.,
                               a registered investment adviser. He
                               was formerly Deputy Comptroller and
                               Chief Investment Officer of the
                               State of New York and, prior
                               thereto, Chief Investment Officer of
                               the New York Bank for Savings. He
                               has served as a director or trustee
                               of various AllianceBernstein Funds
                               since 1983 and has been Chairman of
                               the AllianceBernstein Funds and of
                               the Independent Directors Committee
                               of such Funds since 2003.

John H. Dobkin,#               Independent Consultant since prior             96                  None
69                             to 2006.  Formerly, President of
(1998)                         Save Venice, Inc. (preservation
                               organization) from 2001-2002; Senior
                               Advisor from June 1999-June 2000 and
                               President of Historic Hudson Valley
                               (historic preservation) from
                               December 1989-May 1999. Previously,
                               Director of the National Academy of
                               Design. He has served as a director
                               or trustee of various
                               AllianceBernstein Funds since 1992.

Michael J. Downey,#            Private Investor since prior to                96           Asia Pacific Fund,
67                             2006. Formerly, managing partner of                         Inc., and The
(2005)                         Lexington Capital, LLC (investment                          Merger Fund since
                               advisory firm) from December 1997                           prior to 2006, and
                               until December 2003. From 1987 until                        Prospect
                               1993, Chairman and CEO of Prudential                        Acquisition Corp.
                               Mutual Fund Management, director of                         (financial
                               the Prudential Mutual Funds, and                            services) since
                               member of the Executive Committee of                        prior to 2006 until
                               Prudential Securities Inc. He has                           2009
                               served as a director or trustee of
                               the AllianceBernstein Funds since
                               2005.

D. James Guzy,#                Chairman of the Board of PLX                   96           Cirrus Logic
75                             Technology (semi-conductors) and of                         Corporation
(2005)                         SRC Computers Inc., with which he                           (semi-conductors)
                               has been associated since prior to                          and PLX Technology,
                               2006.  He was a director of Intel                           Inc.
                               Corporation (semi-conductors) from                          (semi-conductors)
                               1969 until 2008, and served as                              since prior to 2006
                               Chairman of the Finance Committee of                        and Intel
                               such company for several years until                        Corporation
                               May 2008. He has served as a                                (semi-conductors)
                               director or trustee of one or more                          since prior to 2006
                               of the AllianceBernstein Funds since                        until 2008
                               1982.

Nancy P. Jacklin,#             Professorial Lecturer at the Johns             96           None
62                             Hopkins School of Advanced
(2006)                         International Studies since 2008.
                               Formerly, U.S. Executive Director of
                               the International Monetary Fund
                               (December 2002-May 2006); Partner,
                               Clifford Chance (1992-2002); Sector
                               Counsel, International Banking and
                               Finance, and Associate General
                               Counsel, Citicorp (1985-1992);
                               Assistant General Counsel
                               (International), Federal Reserve
                               Board of Governors (1982-1985); and
                               Attorney Advisor, U.S. Department of
                               the Treasury (1973-1982). Member of
                               the Bar of the District of Columbia
                               and New York; and member of the
                               Council on Foreign Relations. She
                               has served as a director or trustee
                               of the AllianceBernstein Funds since
                               2006.

Garry L. Moody,#               Independent Consultant. Formerly,              96           None
59                             Partner, Deloitte & Touche LLP
(2008)                         (1995-2008) where he held a number
                               of senior positions, including Vice
                               Chairman, and U.S. and Global
                               Investment Management Practice
                               Managing Partner; President,
                               Fidelity Accounting and Custody
                               Services Company (1993-1995); and
                               Partner, Ernst & Young LLP
                               (1975-1993), where he served as the
                               National Director of Mutual Fund Tax
                               Services. He has served as a
                               director or trustee, and as Chairman
                               of the Audit Committee, of most of
                               the AllianceBernstein Funds since
                               2008.

Marshall C. Turner,#           Private Investor since prior to                96           Xilinx, Inc.
69                             2006. Interim CEO of MEMC Electronic                        (programmable logic
(2005)                         Materials, Inc. (semi-conductor and                         semi-conductors)
                               solar cell substrates) from November                        and MEMC Electronic
                               2008 until March 2009.  He was                              Materials, Inc.
                               Chairman and CEO of Dupont                                  (semi-conductor and
                               Photomasks, Inc. (components of                             solar cell
                               semi-conductor manufacturing),                              substrates) since
                               2003-2005, and President and CEO,                           prior to 2006
                               2005-2006, after the company was
                               acquired and renamed Toppan
                               Photomasks, Inc. He has served as a
                               director or trustee of one or more
                               of the AllianceBernstein Funds since
                               1992.

Earl D. Weiner,#               Of Counsel, and Partner prior to               96           None
71                             January 2007, of the law firm
(2007)                         Sullivan & Cromwell LLP and member
                               of ABA Federal Regulation of
                               Securities Committee Task Force to
                               draft editions of the Fund
                               Director's Guidebook. He has served
                               as a director or trustee of the
                               AllianceBernstein Funds since 2007
                               and is Chairman of the Governance
                               and Nominating Committee of most of
                               the Funds.

Interested Director

Robert M. Keith,+,++           Senior Vice President of the                   97           None
1345 Avenue of the Americas,   Adviser+++ and head of
New York, NY 10105             AllianceBernstein Investments, Inc.
50                             ("ABI")+++ since July 2008; Director
                               of ABI and President of the
                               AllianceBernstein Mutual Funds.
                               Previously, he served as Executive
                               Managing Director of ABI from
                               December 2006 to June 2008.  Prior
                               to joining ABI in 2006, Executive
                               Managing Director of Bernstein
                               Global Wealth Management, and prior
                               thereto, Senior Managing Director
                               and Global Head of Client Service
                               and Sales of the Adviser's
                               institutional investment management
                               business since 2004.  Prior thereto,
                               Managing Director and Head of North
                               American Client Service and Sales in
                               the Adviser's institutional
                               investment management business, with
                               which he had been associated since
                               prior to 2004.


--------

*     The address for each of the Fund's Directors is c/o AllianceBernstein
      L.P., Attention: Philip L. Kirstein, 1345 Avenue of the Americas, New
      York, NY 10105.
**    There is no stated term of office for the Fund's Directors.
#     Member of the Audit Committee, the Governance and Nominating Committee and
      the Independent Directors Committee.
##    Member of the Fair Value Pricing Committee.
+     Mr. Keith became a Director of the Fund as of December 16, 2010.
++    Mr. Keith is an "interested person", as defined in Section 2(a)(19) of the
      1940 Act, of the Fund due to his position as a Senior Vice President of
      the Adviser.
+++   The Adviser and ABI are affiliates of the Fund.

            The business and affairs of the Fund are managed under the direction
of the Board. Directors who are not "interested persons" of the Fund as defined
in the 1940 Act, are referred to as "Independent Directors", and Directors who
are "interested persons" of the Fund are referred to as "Interested Directors".
Certain information concerning the Fund's governance structure and each Director
is set forth below.

            Experience, Skills, Attributes, and Qualifications of the Fund's
Directors. The Governance and Nominating Committee of the Board, which is
composed of Independent Directors, reviews the experience, qualifications,
attributes, and skills of potential candidates for nomination or election by the
Board, and conducts a similar review in connection with the proposed nomination
of current Directors for re-election by stockholders at any annual or special
meeting of stockholders. In evaluating a candidate for nomination or election as
a Director the Governance and Nominating Committee takes into account the
contribution that the candidate would be expected to make to the diverse mix of
experience, qualifications, attributes and skills that the Governance and
Nominating Committee believes contributes to good governance for the Fund.
Additional information concerning the Governance and Nominating Committee's
consideration of nominees appears in the description of the Committee below.

            The Board believes that, collectively, the Trustees have balanced
and diverse experience, qualifications, attributes and skills, which allow the
Board to operate effectively in governing the Fund and protecting the interests
of stockholders. The Board has concluded that, based on each Director's
experience, qualifications, attributes or skills on an individual basis and in
combination with those of the other Directors, each Director is qualified and
should continue to serve as such.

            In determining that a particular Director was and continues to be
qualified to serve as a Director, the Board has considered a variety of
criteria, none of which, in isolation, was controlling. In addition, the Board
has taken into account the actual service and commitment of each Director during
his or her tenure (including the Director's commitment and participation in
Board and committee meetings, as well as his or her current and prior leadership
of standing and ad hoc committees) in concluding that each should continue to
serve. Additional information about the specific experience, skills, attributes
and qualifications of each Director, which in each case led to the Board's
conclusion that the Director should serve (or continue to serve) as trustee or
director of the Fund, is provided in the table above and in the next paragraph.

            Among other attributes and qualifications common to all Directors
are their ability to review critically, evaluate, question and discuss
information provided to them (including information requested by the Directors),
to interact effectively with the Adviser, other service providers, counsel and
the Fund's independent registered public accounting firm, and to exercise
effective business judgment in the performance of their duties as Directors. In
addition to his or her service as a Director of the Fund and other
AllianceBernstein Funds as noted in the table above: Mr. Dobkin has experience
as an executive of a number of organizations and served as Chairman of the Audit
Committee of many of the AllianceBernstein Funds from 2001 to 2008; Mr. Downey
has experience in the investment advisory business including as Chairman and
Chief Executive Officer of a large fund complex and as director of a number of
non-AllianceBernstein funds and as Chairman of a non-AllianceBernstein
closed-end fund; Mr. Foulk has experience in the investment advisory and
securities businesses, including as Deputy Controller and Chief Investment
Officer of the State of New York (where his responsibilities included bond
issuances, cash management and oversight of the New York Common Retirement
Fund), has served as Chairman of the AllianceBernstein Funds and of the
Independent Directors Committee since 2003, and is active in a number of mutual
fund related organizations and committees; Mr. Guzy has experience as a
corporate director including as Chairman of a public company and Chairman of the
Finance Committee of a large public technology company; Ms. Jacklin has
experience as a financial services regulator including as U.S. Executive
Director of the International Monetary Fund, which is responsible for ensuring
the stability of the international monetary system, and as a financial services
lawyer in private practice; Mr. Keith has experience as an executive of the
Adviser with responsibility for, among other things, the AllianceBernstein
Funds; Mr. Moody has experience as a certified public accountant including
experience as Vice Chairman and U.S. and Global Investment Management Practice
Partner for a major accounting firm, is a member of the governing council of an
organization of independent directors of mutual funds, and has served as
Chairman of the Audit Committee of most of the AllianceBernstein Funds since
2008; Mr. Turner has experience as a director (including as Chairman and Chief
Executive officer of a number of companies) and as a venture capital investor
including prior service as general partner of three institutional venture
capital partnerships; and Mr. Weiner has experience as a securities lawyer whose
practice includes registered investment companies and as Chairman, director or
trustee of a number of boards, and has served as Chairman of the Governance and
Nominating Committee of most of the AllianceBernstein Funds since 2007. The
disclosure herein of a trustee's experience, qualifications, attributes and
skills does not impose on such trustee any duties, obligations, or liability
that are greater than the duties, obligations and liability imposed on such
trustee as a member of the Board and any committee thereof in the absence of
such experience, qualifications, attributes and skills.

            Board Structure and Oversight Function. The Board is responsible for
oversight of the Fund. The Fund has engaged the Adviser to manage the Fund on a
day-to-day basis. The Board is responsible for overseeing the Adviser and the
Fund's other service providers in the operations of the Fund in accordance with
the Fund's investment objective and policies and otherwise in accordance with
its prospectus, the requirements of the 1940 Act and other applicable Federal,
state and other securities and other laws, and the Fund's charter and bylaws.
The Board typically meets in-person at regularly scheduled meetings eight times
throughout the year. In addition, the Directors may meet in-person or by
telephone at special meetings or on an informal basis at other times. The
Independent Directors also regularly meet without the presence of any
representatives of management. As described below, the Board has established
four standing committees - the Audit, Governance and Nominating, Independent
Directors, and Fair Value Pricing Committees - and may establish ad hoc
committees or working groups from time to time, to assist the Board in
fulfilling its oversight responsibilities. Each committee is composed
exclusively of Independent Directors. The responsibilities of each committee,
including its oversight responsibilities, are described further below. The
Independent Directors have also engaged independent legal counsel, and may from
time to time engage consultants and other advisors, to assist them in performing
their oversight responsibilities.

            An Independent Director serves as Chairman of the Board. The
Chairman's duties include setting the agenda for each Board meeting in
consultation with management, presiding at each Board meeting, meeting with
management between Board meetings, and facilitating communication and
coordination between the Independent Directors and management. The Directors
have determined that the Board's leadership by an Independent Director and its
committees composed exclusively of Independent Directors is appropriate because
they believe it sets the proper tone to the relationships between the Fund, on
the one hand, and the Adviser and other service providers, on the other, and
facilitates the exercise of the Board's independent judgment in evaluating and
managing the relationships. In addition, the Fund is required to have an
Independent Director as Chairman pursuant to certain 2003 regulatory settlements
involving the Adviser.

            Risk Oversight. The Fund is subject to a number of risks, including
investment, compliance and operational risks. Day-to-day risk management with
respect to the Fund resides with the Adviser or other service providers
(depending on the nature of the risk), subject to supervision by the Adviser.
The Board has charged the Adviser and its affiliates with (i) identifying events
or circumstances the occurrence of which could have demonstrable and material
adverse effects on the Fund; (ii) to the extent appropriate, reasonable or
practicable, implementing processes and controls reasonably designed to lessen
the possibility that such events or circumstances occur or to mitigate the
effects of such events or circumstances if they do occur; and (iii) creating and
maintaining a system designed to evaluate continuously, and to revise as
appropriate, the processes and controls described in (i) and (ii) above.

            Risk oversight forms part of the Board's general oversight of the
Fund's investment program and operations and is addressed as part of various
regular Board and committee activities. The Fund's investment management and
business affairs are carried out by or through the Adviser and other service
providers. Each of these persons has an independent interest in risk management
but the policies and the methods by which one or more risk management functions
are carried out may differ from the Fund's and each other's in the setting of
priorities, the resources available or the effectiveness of relevant controls.
Oversight of risk management is provided by the Board and the Audit Committee.
The Directors regularly receive reports from, among others, management
(including the Global Heads of Investment Risk and Trading Risk of the Adviser),
the Fund's Senior Officer (who is also the Fund's chief compliance officer), its
independent registered public accounting firm, counsel, and internal auditors
for the Adviser, as appropriate, regarding risks faced by the Fund and the
Adviser's risk management programs.

            Not all risks that may affect the Fund can be identified, nor can
controls be developed to eliminate or mitigate their occurrence or effects. It
may not be practical or cost-effective to eliminate or mitigate certain risks,
the processes and controls employed to address certain risks may be limited in
their effectiveness, and some risks are simply beyond the reasonable control of
the Fund or the Adviser, its affiliates or other service providers. Moreover, it
is necessary to bear certain risks (such as investment-related risks) to achieve
the Fund's goals. As a result of the foregoing and other factors the Fund's
ability to manage risk is subject to substantial limitations.

            The Board has four standing committees -- an Audit Committee, a
Governance and Nominating Committee, a Fair Value Pricing Committee and an
Independent Directors Committee. The members of the Audit, Governance and
Nominating, Fair Value Pricing and Independent Directors Committees are
identified above. None of these Committees have met in connection with the
Portfolio because it only recently commenced operations except the Independent
Directors Committee met on February 1-2, 2011 to approve the Advisory and
Distribution Services Agreements for the Portfolio.

            The function of the Audit Committee is to assist the Board in its
oversight of the Portfolio's financial reporting process. The Audit Committee
has not yet met.

            The function of the Governance and Nominating Committee includes the
nomination of persons to fill any vacancies or newly created positions on the
Board. The Governance and Nominating Committee does not currently consider for
nomination candidates proposed by stockholders for election as Directors. The
Governance and Nominating Committee has not yet met.

            The Board has adopted a charter for its Governance and Nominating
Committee, which is available at www.alliancebernstein.com (click on
AllianceBernstein Mutual Fund Investors then U.S. then Investment
Products/Mutual Funds/Equity). Pursuant to the charter of the Governance and
Nominating Committee, the Committee assists the Board in carrying out its
responsibilities with respect to governance of the Fund and identifies,
evaluates, selects and nominates candidates for the Board. The Committee may
also set standards or qualifications for Directors and reviews at least annually
the performance of each Director, taking into account factors such as attendance
at meetings, adherence to Board policies, preparation for and participation at
meetings, commitment and contribution to the overall work of the Board and its
committees, and whether there are health or other reasons that might affect the
Director's ability to perform his or her duties. The Committee may consider
candidates as Directors submitted by the Fund's current Board members, officers,
the Adviser, stockholders and other appropriate sources.

            The Governance and Nominating Committee will consider candidates for
nomination as a Director submitted by a shareholder or group of shareholders who
have beneficially owned at least 5% of the Portfolio's common stock or shares of
beneficial interest for at least two years prior to the time of submission and
who timely provide specified information about the candidates and the nominating
shareholder or group. To be timely for consideration by the Governance and
Nominating Committee, the submission, including all required information, must
be submitted in writing to the attention of the Secretary at the principal
executive offices of the Fund no less than 120 days before the date of the proxy
statement for the previous year's annual meeting of shareholders. If the Fund
did not hold an annual meeting of shareholders in the previous year, the
submission must be delivered or mailed and received within a reasonable amount
of time before the Portfolio begins to print and mail its proxy materials.
Public notice of such upcoming annual meeting of shareholders may be given in a
shareholder report or other mailing to shareholders or by other means deemed by
the Governance and Nominating Committee or the Board to be reasonably calculated
to inform shareholders.

            Shareholders submitting a candidate for consideration by the
Governance and Nominating Committee must provide the following information to
the Governance and Nominating Committee: (i) a statement in writing setting
forth (A) the name, date of birth, business address and residence address of the
candidate; (B) any position or business relationship of the candidate, currently
or within the preceding five years, with the shareholder or an associated person
of the shareholder as defined below; (C) the class or series and number of all
shares of the Portfolio owned of record or beneficially by the candidate; (D)
any other information regarding the candidate that is required to be disclosed
about a nominee in a proxy statement or other filing required to be made in
connection with the solicitation of proxies for election of Directors pursuant
to Section 20 of the 1940 Act and the rules and regulations promulgated
thereunder; (E) whether the shareholder believes that the candidate is or will
be an "interested person" of the Fund (as defined in the 1940 Act) and, if
believed not to be an "interested person", information regarding the candidate
that will be sufficient for the Fund to make such determination; and (F)
information as to the candidate's knowledge of the investment company industry,
experience as a director or senior officer of public companies, directorships on
the boards of other registered investment companies and educational background;
(ii) the written and signed consent of the candidate to be named as a nominee
and to serve as a Director if elected; (iii) the written and signed agreement of
the candidate to complete a directors' and officers' questionnaire if elected;
(iv) the shareholder's consent to be named as such by the Fund; (v) the class or
series and number of all shares of each portfolio of the Fund owned beneficially
and of record by the shareholder and any associated person of the shareholder
and the dates on which such shares were acquired, specifying the number of
shares owned beneficially but not of record by each, and stating the names of
each as they appear on the Fund's record books and the names of any nominee
holders for each; and (vi) a description of all arrangements or understandings
between the shareholder, the candidate and/or any other person or persons
(including their names) pursuant to which the recommendation is being made by
the shareholder. "Associated Person of the shareholder" means any person who is
required to be identified under clause (vi) of this paragraph and any other
person controlling, controlled by or under common control with, directly or
indirectly, (a) the shareholder or (b) the associated person of the shareholder.

            The Governance and Nominating Committee may require the shareholder
to furnish such other information as it may reasonably require or deem necessary
to verify any information furnished pursuant to the nominating procedures
described above or to determine the qualifications and eligibility of the
candidate proposed by the shareholder to serve on the Board. If the shareholder
fails to provide such other information in writing within seven days of receipt
of written request from the Governance and Nominating Committee, the
recommendation of such candidate as a nominee will be deemed not properly
submitted for consideration, and will not be considered, by the Committee.

            The Governance and Nominating Committee will consider only one
candidate submitted by such a shareholder or group for nomination for election
at an annual meeting of shareholders. The Governance and Nominating Committee
will not consider self-nominated candidates. The Governance and Nominating
Committee will consider and evaluate candidates submitted by shareholders on the
basis of the same criteria as those used to consider and evaluate candidates
submitted from other sources. These criteria include the candidate's relevant
knowledge, experience, and expertise, the candidate's ability to carry out his
or her duties in the best interests of the Fund, the candidate's ability to
qualify as an Independent Director. When assessing a candidate for nomination,
the Committee considers whether the individual's background, skills, and
experience will complement the background, skills, and experience of other
nominees and will contribute to the diversity of the Board.

            The function of the Fair Value Pricing Committee is to consider, in
advance if possible, any fair valuation decision of the Adviser's Valuation
Committee relating to a security held by the Fund made under unique or highly
unusual circumstances not previously addressed by the Valuation Committee that
would result in a change in the Fund's NAV by more than $0.01 per share. The
Fair Value Pricing Committee has not yet met.

            The function of the Independent Directors Committee is to consider
and take action on matters that the Board or Committee believes should be
addressed in executive session of the Independent Directors, such as review and
approval of the Advisory and Distribution Services Agreements. The Independent
Directors Committee met on February 1, 2011.

            The dollar range of the Fund's securities owned by each Director and
the aggregate dollar range of securities owned by each Director in all the
registered investment companies to which the Adviser provides investment
advisory services (collectively, the "AllianceBernstein Fund Complex") owned by
each Director are set forth below.

                                         AGGREGATE DOLLAR
                                         RANGE OF EQUITY
                                         SECURITIES IN THE
                                         ALLIANCEBERNSTEIN
                                         FUND COMPLEX AS OF
                                         DECEMBER 31, 2010
                                         -----------------

John H. Dobkin                           Over $100,000
Michael J. Downey                        Over $100,000
William H. Foulk, Jr.                    Over $100,000
D. James Guzy                            Over $100,000
Nancy P. Jacklin                         Over $100,000
Robert M. Keith                              None
Garry L. Moody                           Over $100,000
Marshall C. Turner, Jr.                  Over $100,000
Earl D. Weiner                           Over $100,000

Officer Information
-------------------

Certain information concerning the Fund's officers is set forth below.

                         Position(s) Held        Principal Occupation
Name, Address* and Age      with Fund            During Past Five Years
----------------------   ----------------        ----------------------

Robert M. Keith,         President and Chief     See above.
50                       Executive Officer

Philip L. Kirstein,      Senior Vice President   Senior Vice President and
66                       and Independent         Independent Compliance Officer
                         Compliance Officer      of the AllianceBernstein Funds,
                                                 with which he has been
                                                 associated since October 2004.
                                                 Prior thereto, he was Of
                                                 Counsel to Kirkpatrick &
                                                 Lockhart, LLP from October 2003
                                                 to October 2004, and General
                                                 Counsel of Merrill Lynch
                                                 Investment Managers, L.P. since
                                                 prior to March 2003.

Daniel J. Loewy,         Vice President          Senior Vice President of the
36                                               Adviser,** with which he has
                                                 been associated since prior to
                                                 2006.

Seth J. Masters,         Vice President          Senior Vice President of the
51                                               Adviser,** with which he has
                                                 been associated since prior to
                                                 2006.

Emilie D. Wrapp,         Secretary               Senior Vice President,
55                                               Assistant General Counsel, and
                                                 Assistant Secretary of ABI,**
                                                 with which she has been
                                                 associated since prior to 2006.

Joseph J. Mantineo,      Treasurer and Chief     Senior Vice President of
52                       Financial Officer       ABIS,** with which he has been
                                                 associated since prior to 2006.

Phyllis J. Clarke,       Controller              Vice President of ABIS,** with
59                                               which she has been associated
                                                 since prior to 2006.

--------

*     The address for each of the Fund's Officers is 1345 Avenue of the
      Americas, New York, NY 10105.
**    The Adviser, ABI and ABIS are affiliates of the Fund.

            The Fund does not pay any fees to, or reimburse expenses of, its
Directors who are considered "interested persons" (as defined in Section
2(a)(19) of the 1940 Act) of the Fund. The aggregate compensation paid to the
Directors by the Fund for the fiscal year ended December 31, 2010, the aggregate
compensation paid to each of the Directors during calendar year 2010 by the
AllianceBernstein Fund Complex, and the total number of registered investment
companies (and separate investment portfolios within those companies) in the
AllianceBernstein Fund Complex with respect to which each of the Directors
serves as a director or trustee, are set forth below. Neither the Fund nor any
other registered investment company in the AllianceBernstein Fund Complex
provides compensation in the form of pension or retirement benefits to any of
its directors or trustees. Each of the Directors is a director or trustee of one
or more other registered investment companies in the AllianceBernstein Fund
Complex.



                                                                                     Total Number of
                                                             Total Number of         Investment
                                                             Registered Investment   Portfolios within
                                                             Companies in the        the
                                                             AllianceBernstein       AllianceBernstein
                                        Total Compensation   Fund Complex,           Fund Complex,
                                        from the             Including the Fund,     Including the Fund,
                        Aggregate       AllianceBernstein    as to which the         as to which the
                        Compensation    Fund Complex,        Director is a           Director is a
Name of Director        from the Fund   Including the Fund   Director or Trustee     Director or Trustee
----------------       --------------   -------------------  --------------------    --------------------
                                                                               

John H. Dobkin            $ 5,587         $236,900                  33                     96
Michael J. Downey         $ 5,587         $236,900                  33                     96
William H. Foulk, Jr.     $10,510         $482,300                  34                     97
D. James Guzy             $ 5,587         $236,900                  33                     96
Nancy P. Jacklin          $ 5,587         $236,900                  33                     96
Robert M. Keith*          $     0         $      0                  34                     97
Garry L. Moody            $ 6,410         $264,900                  33                     96
Marshall C. Turner        $ 5,587         $236,900                  33                     96
Earl D. Weiner            $ 6,003         $254,900                  33                     96



--------

*     Mr. Keith was elected as a Director of the Fund effective December 16,
      2010.

            As of March 4, 2011, the Directors and officers of the Fund as a
group owned less than 1% of the shares of the Portfolio.

Investment Adviser
------------------

            The Adviser, a Delaware limited partnership with principal offices
at 1345 Avenue of the Americas, New York, New York 10105, has been retained
under an investment advisory agreement (the "Advisory Agreement") to provide
investment advice and, in general, to conduct the management and investment
program of the Portfolio under the supervision of the Board (see "Management of
the Portfolio" in the Prospectuses). The Adviser is an investment adviser
registered under the Investment Advisers Act of 1940, as amended.


           The Adviser is a leading global investment management firm
supervising client accounts with assets as of December 31, 2010, totaling
approximately $478 billion. The Adviser provides management services for many of
the largest U.S. public and private employee benefit plans, endowments,
foundations, public employee retirement funds, banks, insurance companies and
high net worth individuals worldwide. The Adviser is also one of the largest
mutual fund sponsors, with a diverse family of globally distributed mutual fund
portfolios. As one of the world's leading global investment management
organizations, the Adviser is able to compete for virtually any portfolio
assignment in any developed capital market in the world.

            As of December 31, 2010, AXA, a societe anonyme organized under the
laws of France and the holding company for an international group of insurance
and related financial services companies, through certain of its subsidiaries
("AXA and its subsidiaries") owned approximately 1.4% of the issued and
outstanding assignments of beneficial ownership of limited partnership interests
("Holding Units") in AllianceBernstein Holding L.P., a Delaware limited
partnership ("Holding"). Holding Units trade publicly on the New York Stock
Exchange under the ticker symbol "AB".

            As of December 31, 2010, the ownership structure of the Adviser,
expressed as a percentage of general and limited partnership interests, was as
follows:

                  AXA and its subsidiaries              60.9%
                  Holding                               37.4
                  Unaffiliated holders                   1.7
                                                      ---------
                                                       100.0%
                                                      =========

            AllianceBernstein Corporation (an indirect wholly-owned subsidiary
of AXA) is the general partner of both Holding and the Adviser.
AllianceBernstein Corporation owns 100,000 general partnership units in Holding
and a 1% general partnership interest in the Adviser. Including both the general
partnership and limited partnership interests in Holding and the Adviser, AXA
and its subsidiaries had an approximate 61.4% economic interest in the Adviser
as of December 31, 2010.

            AXA, a French company, is the holding company for an international
group of companies and a worldwide leader in financial protection and wealth
management. AXA operates primarily in Western Europe, North America and the
Asia/Pacific region and, to a lesser extent, in other regions including the
Middle East, Africa and South America. AXA has five operating business segments:
life and savings, property and casualty insurance, international insurance
(including reinsurance), asset management and other financial services. AXA
Financial, Inc. ("AXA Financial") is a wholly-owned subsidiary of AXA. AXA
Equitable is an indirect wholly-owned subsidiary of AXA Financial.

Advisory Agreements and Expenses
--------------------------------

            The Adviser serves as investment manager and adviser of the
Portfolio, continuously furnishes an investment program for the Portfolio, and
manages, supervises and conducts the affairs of the Portfolio, subject to the
Board's oversight.

            Under the Portfolio's Advisory Agreement, the Adviser furnishes
advice and recommendations with respect to the Portfolio's portfolios of
securities and investments, and provides persons satisfactory to the Board to
act as officers of the Portfolio. Such officers or employees may be employees of
the Adviser or of its affiliates.

            The Adviser is, under the Portfolio's Advisory Agreement,
responsible for certain expenses incurred by the Portfolio, including, for
example, office facilities and certain administrative services, and any expenses
incurred in promoting the sale of shares of the Portfolio (other than the
portion of the promotional expenses borne by the Portfolio in accordance with an
effective plan pursuant to Rule 12b-1 under the 1940 Act, and the costs of
printing prospectuses of the Fund and other reports to shareholders and fees
related to registration with the SEC and with state regulatory authorities).

            Any material amendment to the Advisory Agreement must be approved by
the vote of a majority of the outstanding securities of the Portfolio and by the
vote of a majority of the Directors who are not interested persons of the
Portfolio or the Adviser. The Advisory Agreement is terminable without penalty
on 60 days' written notice by a vote of a majority of the outstanding voting
securities of the Portfolio, by a vote of a majority of the Directors, or by the
Adviser on 60 days' written notice, and will automatically terminate in the
event of its assignment. The Advisory Agreement provides that in the absence of
willful misfeasance, bad faith or gross negligence on the part of the Adviser,
or of reckless disregard of its obligations thereunder, the Adviser shall not be
liable for any action or failure to act in accordance with its duties
thereunder.

            Certain other clients of the Adviser may have investment objectives
and policies similar to those of the Portfolio. The Adviser may, from time to
time, make recommendations that result in the purchase or sale of the particular
security by its other clients simultaneously with the Portfolio. If transactions
on behalf of more than one client during the same period increase the demand for
securities being purchased or the supply of securities being sold, there may be
an adverse effect on price. It is the policy of the Adviser to allocate advisory
recommendations and the placing of orders in a manner that is deemed equitable
by the Adviser to the accounts involved, including the Portfolio. When two or
more of the clients of the Adviser (including the Portfolio) are purchasing or
selling the same security on a given day from the same broker or dealer, such
transactions may be averaged as to price.

            The Advisory Agreement for the Fund became effective on July 22,
1992. The Advisory Agreement was amended as of April 1, 2011 to provide for the
addition of the Portfolio. The amendment to the Advisory Agreement was approved
by the unanimous vote, cast in person, of the disinterested Directors at a
meeting called for that purpose and held on February 1-2, 2011.

            The Advisory Agreement provides that it will continue in effect for
two years from its effective date and thereafter from year to year provided that
its continuance is specifically approved at least annually by majority vote of
the holders of the outstanding voting securities of the Portfolio or by the
Directors, and, in either case, by a majority of the Directors who are not
parties to the Advisory Agreement or "interested persons" of any such party at a
meeting in person called for the purpose of voting on such matter.

            The Portfolio has, under the Advisory Agreement, assumed obligation
to payment of all other expenses. As to the obtaining of services other than
those specifically provided to the Portfolio by the Adviser, the Portfolio may
employ its own personnel. For such services, the Portfolio may also utilize
personnel employed by the Adviser or its affiliates and, in such event, the
services will be provided to the Portfolio at cost and the payments therefore
must be specifically approved by the Board. The Portfolio has not yet paid the
Adviser in respect of such services because the Portfolio has not yet commenced
operations.

            The Adviser may act as an investment adviser to other persons, firms
or corporations, including investment companies, and is investment adviser to
the following registered investment companies: AllianceBernstein Balanced
Shares, Inc., AllianceBernstein Blended Style Series, Inc., AllianceBernstein
Bond Fund, Inc., AllianceBernstein Cap Fund, Inc., AllianceBernstein Core
Opportunities Fund, Inc., AllianceBernstein Corporate Shares, AllianceBernstein
Equity Income Fund, Inc., AllianceBernstein Exchange Reserves, AllianceBernstein
Fixed-Income Shares, Inc., AllianceBernstein Global Bond Fund, Inc.,
AllianceBernstein Global Growth Fund, Inc., AllianceBernstein Global Real Estate
Investment Fund, Inc., AllianceBernstein Global Thematic Growth Fund, Inc.,
AllianceBernstein Greater China '97 Fund, Inc., AllianceBernstein Growth and
Income Fund, Inc., AllianceBernstein High Income Fund, Inc., AllianceBernstein
Institutional Funds, Inc., AllianceBernstein International Growth Fund, Inc.,
AllianceBernstein Large Cap Growth Fund, Inc., AllianceBernstein Municipal
Income Fund, Inc., AllianceBernstein Municipal Income Fund II, AllianceBernstein
Small/Mid-Cap Growth Fund, Inc., AllianceBernstein Trust, AllianceBernstein
Unconstrained Bond Fund, Inc., Sanford C. Bernstein Fund, Inc., Sanford C.
Bernstein Fund II, Inc., The AllianceBernstein Pooling Portfolios, and The
AllianceBernstein Portfolios, all registered open-end investment companies; and
to Alliance California Municipal Income Fund, Inc., Alliance New York Municipal
Income Fund, Inc., AllianceBernstein Global High Income Fund, Inc.,
AllianceBernstein Income Fund, Inc., AllianceBernstein National Municipal Income
Fund, Inc., and The Ibero-America Fund, Inc., all registered closed-end
investment companies.

Additional Information About the Portfolio's Portfolio Managers
---------------------------------------------------------------

            The management of, and investment decisions for, the Portfolio's
portfolio are made by the Adviser's Dynamic Asset Allocation Team. Seth J.
Masters and Daniel J. Loewy are the investment professionals(1) primarily
responsible for the day-to-day management of the Portfolio's portfolio. For
additional information about the portfolio management of the Portfolio, see
"Management of the Portfolio - Portfolio Managers" in the Portfolio's
prospectuses.

--------
(1)   Investment professionals at the Adviser include portfolio managers and
      research analysts. Investment professionals are part of investment groups
      (or teams) that service individual fund portfolios. The number of
      investment professionals assigned to a particular fund will vary from fund
      to fund.

            None of the investment professionals identified below owned any
equity securities of the Portfolio directly or indirectly because shares of the
Portfolio are held through the separate accounts of certain life insurance
companies (the "Insurers").

            The following tables provide information regarding registered
investment companies other than the Portfolio, other pooled investment vehicles
and other accounts over which the Portfolio's portfolio managers also have
day-to-day management responsibilities. The tables provide the numbers of such
accounts, the total assets in such accounts and the number of accounts and total
assets whose fees are based on performance. The information is provided as of
December 31, 2010.


----------------------------------------------------------------------------------------
                            REGISTERED INVESTMENT COMPANIES
                                  (excluding the Fund)
----------------------------------------------------------------------------------------

                                                           Number of      Total Assets
                                                           Registered     of Registered
                                                           Investment     Investment
                    Total Number of    Total Assets of     Companies      Companies
                    Registered         Registered          Managed with   Managed with
                    Investment         Investment          Performance-   Performance-
Portfolio Manager   Companies Managed  Companies Managed   based Fees     based Fees
----------------------------------------------------------------------------------------
                                                                 

Daniel J. Loewy            18           $ 7,865,000,000        None          None
Seth J. Masters            77           $45,967,000,000        None          None

----------------------------------------------------------------------------------------



------------------------------------------------------------------------------------------------

                                OTHER POOLED INVESTMENT VEHICLES
------------------------------------------------------------------------------------------------

                    Total                                                     Total Assets of
                    Number of                           Number of Pooled      Pooled Investment
                    Pooled                              Investment Vehicles   Vehicles Managed
                    Investment   Total Assets of        Managed with          with
                    Vehicles     Pooled Investment      Performance-based     Performance-based
Portfolio Manager   Managed      Vehicles Managed       Fees                  Fees
------------------------------------------------------------------------------------------------
                                                                     

Daniel J. Loewy        1          $     6,000,000               None                 None
Seth J. Masters       448         $13,673,000,000                13              $634,000,000

------------------------------------------------------------------------------------------------



------------------------------------------------------------------------------------

                                   OTHER ACCOUNTS
------------------------------------------------------------------------------------

                    Total                          Number of        Total Assets of
                    Number of                      Other Accounts   Other Accounts
                    Other       Total Assets       Managed with     Managed with
                    Accounts    of Other           Performance-     Performance-
Portfolio Manager   Managed     Accounts Managed   based Fees       based Fees
------------------------------------------------------------------------------------
                                                         

Daniel J. Loewy       4          $   131,000,000      None                 None
Seth J. Masters       49         $30,896,000,000       18             $3,503,000,000

------------------------------------------------------------------------------------


Investment Professional Conflict of Interest Disclosure
-------------------------------------------------------

            As an investment adviser and fiduciary, the Adviser owes its clients
and shareholders an undivided duty of loyalty. We recognize that conflicts of
interest are inherent in our business and accordingly have developed policies
and procedures (including oversight monitoring) reasonably designed to detect,
manage and mitigate the effects of actual or potential conflicts of interest in
the area of employee personal trading, managing multiple accounts for multiple
clients, including AllianceBernstein Mutual Funds, and allocating investment
opportunities. Investment professionals, including portfolio managers and
research analysts, are subject to the above-mentioned policies and oversight
monitoring to ensure that all clients are treated equitably. We place the
interests of our clients first and expect all of our employees to meet their
fiduciary duties.

            Employee Personal Trading. The Adviser has adopted a Code of
Business Conduct and Ethics that is designed to detect and prevent conflicts of
interest when investment professionals and other personnel of the Adviser own,
buy or sell securities which may be owned by, or bought or sold for, clients.
Personal securities transactions by an employee may raise a potential conflict
of interest when an employee owns or trades in a security that is owned or
considered for purchase or sale by a client, or recommended for purchase or sale
by an employee to a client. Subject to the reporting requirements and other
limitations of its Code of Business Conduct and Ethics, the Adviser permits its
employees to engage in personal securities transactions, and also allows them to
acquire investments in the AllianceBernstein Mutual Funds through direct
purchase and/or notionally in connection with deferred incentive compensation
awards. The Adviser's Code of Ethics and Business Conduct requires disclosure of
all personal accounts and maintenance of brokerage accounts with designated
broker-dealers approved by the Adviser. The Code also requires preclearance of
all securities transactions (except transactions in open-end mutual funds) and
imposes a 90 day holding period for securities purchased by employees to
discourage short-term trading.

            Managing Multiple Accounts for Multiple Clients. The Adviser has
compliance policies and oversight monitoring in place to address conflicts of
interest relating to the management of multiple accounts for multiple clients.
Conflicts of interest may arise when an investment professional has
responsibilities for the investments of more than one account because the
investment professional may be unable to devote equal time and attention to each
account. The investment professional or investment professional teams for each
client may have responsibilities for managing all or a portion of the
investments of multiple accounts with a common investment strategy, including
other registered investment companies, unregistered investment vehicles, such as
hedge funds, pension plans, separate accounts, collective trusts and charitable
foundations. Among other things, the Adviser's policies and procedures provide
for the prompt dissemination to investment professionals of initial or changed
investment recommendations by analysts so that investment professionals are
better able to develop investment strategies for all accounts they manage. In
addition, investment decisions by investment professionals are reviewed for the
purpose of maintaining uniformity among similar accounts and ensuring that
accounts are treated equitably. No investment professional that manages client
accounts carrying performance fees is compensated directly or specifically for
the performance of those accounts. Investment professional compensation reflects
a broad contribution in multiple dimensions to long-term investment success for
our clients and is not tied specifically to the performance of any particular
client's account, nor is it directly tied to the level or change in level of
assets under management.

            Allocating Investment Opportunities. The Adviser has policies and
procedures intended to address conflicts of interest relating to the allocation
of investment opportunities. These policies and procedures are designed to
ensure that information relevant to investment decisions is disseminated
promptly within its portfolio management teams and investment opportunities are
allocated equitably among different clients. The investment professionals at the
Adviser routinely are required to select and allocate investment opportunities
among accounts. Portfolio holdings, position sizes, and industry and sector
exposures tend to be similar across similar accounts, which minimizes the
potential for conflicts of interest relating to the allocation of investment
opportunities. Nevertheless, investment opportunities may be allocated
differently among accounts due to the particular characteristics of an account,
such as size of the account, cash position, tax status, risk tolerance and
investment restrictions or for other reasons.

            The Adviser's procedures are also designed to prevent potential
conflicts of interest that may arise when the Adviser has a particular financial
incentive, such as a performance-based management fee, relating to an account.
An investment professional may perceive that he or she has an incentive to
devote more time to developing and analyzing investment strategies and
opportunities or allocating securities preferentially to accounts for which the
Adviser could share in investment gains.

            To address these conflicts of interest, the Adviser's policies and
procedures require, among other things, the prompt dissemination to investment
professionals of any initial or changed investment recommendations by analysts;
the aggregation of orders to facilitate best execution for all accounts; price
averaging for all aggregated orders; objective allocation for limited investment
opportunities (e.g., on a rotational basis) to ensure fair and equitable
allocation among accounts; and limitations on short sales of securities. These
procedures also require documentation and review of justifications for any
decisions to make investments only for select accounts or in a manner
disproportionate to the size of the account.

Portfolio Manager Compensation
------------------------------

            The Adviser's compensation program for investment professionals is
designed to be competitive and effective in order to attract and retain the
highest caliber employees. The compensation program for investment professionals
is designed to reflect their ability to generate long-term investment success
for our clients, including shareholders of the AllianceBernstein Mutual Funds.
Investment professionals do not receive any direct compensation based upon the
investment returns of any individual client account, nor is compensation tied
directly to the level or change in level of assets under management. Investment
professionals' annual compensation is comprised of the following:

            (i) Fixed base salary: This is generally the smallest portion of
compensation. The base salary is a relatively low, fixed salary within a similar
range for all investment professionals. The base salary is determined at the
outset of employment based on level of experience, does not change significantly
from year-to-year and hence, is not particularly sensitive to performance.

            (ii) Discretionary incentive compensation in the form of an annual
cash bonus: The Adviser's overall profitability determines the total amount of
incentive compensation available to investment professionals. This portion of
compensation is determined subjectively based on qualitative and quantitative
factors. In evaluating this component of an investment professional's
compensation, the Adviser considers the contribution to his/her team or
discipline as it relates to that team's overall contribution to the long-term
investment success, business results and strategy of the Adviser. Quantitative
factors considered include, among other things, relative investment performance
(e.g., by comparison to competitor or peer group funds or similar styles of
investments, and appropriate, broad-based or specific market indices), and
consistency of performance. There are no specific formulas used to determine
this part of an investment professional's compensation and the compensation is
not tied to any pre-determined or specified level of performance. The Adviser
also considers qualitative factors such as the complexity and risk of investment
strategies involved in the style or type of assets managed by the investment
professional; success of marketing/business development efforts and client
servicing; seniority/length of service with the firm; management and supervisory
responsibilities; and fulfillment of the Adviser's leadership criteria.

            (iii) Discretionary incentive compensation in the form of awards
under the Adviser's Partners Compensation Plan ("deferred awards"): The
Adviser's overall profitability determines the total amount of deferred awards
available to investment professionals. The deferred awards are allocated among
investment professionals based on criteria similar to those used to determine
the annual cash bonus. There is no fixed formula for determining these amounts.
Deferred awards, for which there are various investment options, vest over a
four-year period and are generally forfeited if the employee resigns or the
Adviser terminates his/her employment. Investment options under the deferred
awards plan include many of the same AllianceBernstein Mutual Funds offered to
mutual fund investors, thereby creating a close alignment between the financial
interests of the investment professionals and those of the Adviser's clients and
mutual fund shareholders with respect to the performance of those mutual funds.
The Adviser also permits deferred award recipients to allocate up to 50% of
their award to investments in the Adviser's publicly traded equity securities.
Prior to 2002, investment professional compensation also included discretionary
long-term incentive in the form of restricted grants of the Adviser's Master
Limited Partnership Units.

            (iv) Contributions under the Adviser's Profit Sharing/401(k) Plan:
The contributions are based on the Adviser's overall profitability. The amount
and allocation of the contributions are determined at the sole discretion of the
Adviser.

Distribution Services Agreement
-------------------------------

            The Fund has entered into a Distribution Services Agreement (the
"Agreement") with AllianceBernstein Investments, Inc. ("ABI"), the Fund's
principal underwriter, to permit ABI to distribute the Fund's shares and to
permit each Portfolio of the Fund to pay distribution services fees to defray
expenses associated with distribution of its Class B shares in accordance with a
plan of distribution that is included in the Agreement and that has been duly
adopted and approved in accordance with Rule 12b-1 adopted by the SEC under the
1940 Act (the "Plan").

            In approving the Plan, the Directors determined that there was a
reasonable likelihood that the Plan would benefit the Fund and its shareholders.
The distribution services fee of a particular class will not be used to
subsidize the provision of distribution services with respect to any other
class.

            The Plan will continue in effect with respect to the Fund for
successive one-year periods, provided that each such continuance is approved at
least annually by the vote of a majority of the Independent Directors who have
no direct or indirect financial interest in the Plan or in any agreement
relating to the Plan ("Qualified Directors") and by the vote of a majority of
the entire Board cast in person at a meeting called for that purpose.

            All material amendments to the Agreement will become effective only
on approval as specified in the preceding paragraph and the Plan may not be
amended in order to materially increase the costs that the Portfolio may bear
pursuant to the Plan without the approval of a majority of the holders of the
outstanding voting shares of the Portfolio or the class or classes affected.

            The Agreement may be terminated with respect to a Portfolio or class
of shares thereof at any time on 60 days' written notice by ABI or by vote of a
majority of the outstanding voting securities of a Portfolio or that class (as
appropriate) or by vote of a majority of the Qualified Directors without payment
of any penalty. The Agreement will terminate automatically in the event of an
assignment. The Plan is of a type known as a "compensation plan", which means
that it compensates the distributor for services rendered even if the amount
paid exceeds the distributor's expenses.

            In the event that the Agreement is terminated or not continued with
respect to the Class B shares of the Portfolio, (i) no distribution services
fees (other than current amounts accrued but not yet paid) would be owed by the
Fund to ABI with respect to Class B shares of the Portfolio and (ii) the Fund
would not be obligated to pay ABI for any amounts expended under the Agreement
not previously recovered by ABI from distribution services fees in respect of
shares of such class.

            The Adviser may from time to time and from its own funds or such
other resources as may be permitted by rules of the SEC make payments for
distribution services to ABI; the latter may in turn pay part or all of such
compensation to brokers or other persons for their distribution assistance. ABI
will pay for printing and distributing prospectuses or reports prepared for its
use in connection with the offering of the Class B shares to the public and
preparing, printing and mailing any other literature or advertising in
connection with the offering of the Class B shares to the public. ABI will pay
all fees and expenses in connection with its qualification and registration as a
broker or dealer under federal and state laws and of any activity which is
primarily intended to result in the sale of Class B shares issued by the Fund,
unless the plan of distribution in effect for Class B shares provides that the
Fund shall bear some or all of such expenses.



--------------------------------------------------------------------------------

                       PURCHASE AND REDEMPTION OF SHARES

--------------------------------------------------------------------------------

            The following information supplements that set forth in the
Portfolio's Prospectuses under the heading "Investing in the Portfolio".

      Shares of the Portfolio are offered at NAV on a continuous basis to the
separate accounts of the Insurers without any sales or other charge. The
separate accounts of insurance companies place orders to purchase shares based
on, among other things, the amount of premium payments to be invested and
surrendered and transfer requests to be effected pursuant to variable contracts
funded by shares of the Portfolio. The Fund reserves the right to suspend the
sale of its shares in response to conditions in the securities markets or for
other reasons. See the prospectus of the separate account of the participating
insurance company for more information on the purchase of shares.

            The Insurers maintain omnibus account arrangements with the Fund in
respect of the Portfolio and place aggregate purchase, redemption and exchange
orders for shares of the Portfolio corresponding to orders placed by the
Insurer's customers ("Contractholders") who have purchased contracts from the
Insurers, in each case, in accordance with the terms and conditions of the
relevant contract. Omnibus account arrangements maintained by the Insurers are
discussed below under "Limitations on Ability to Detect and Curtail Excessive
Trading Practices."

Frequent Purchases and Sales of Portfolio Shares
------------------------------------------------

            The Fund's Board has adopted policies and procedures designed to
detect and deter frequent purchases and redemptions of Portfolio shares or
excessive or short-term trading that may disadvantage long-term Contractholders.
These policies are described below. The Portfolio reserves the right to
restrict, reject or cancel, without any prior notice, any purchase or exchange
order for any reason, including any purchase or exchange order accepted by any
Insurer or a Contractholder's financial intermediary.

            Risks Associated with Excessive or Short-Term Trading Generally.
While the Fund will try to prevent market timing by utilizing the procedures
described below, these procedures may not be successful in identifying or
stopping excessive or short-term trading in all circumstances. By realizing
profits through short-term trading, Contractholders that engage in rapid
purchases and sales or exchanges of the Portfolio's shares dilute the value of
shares held by long-term Contractholders. Volatility resulting from excessive
purchases and sales or exchanges of shares of the Portfolio, especially
involving large dollar amounts, may disrupt efficient portfolio management and
cause the Portfolio to sell shares at inopportune times to accommodate
redemptions relation to short-term trading. In particular, the Portfolio may
have difficulty implementing its long-term investment strategies if it is forced
to maintain a higher level of its assets in cash to accommodate significant
short-term trading activity. Excessive purchases and sales or exchanges of
shares of the Portfolio may force the Portfolio to sell portfolio securities at
inopportune times to raise cash to accommodate short-term trading activity. In
addition, the Portfolio may incur increased administrative and other expenses
due to excessive or short-term trading, including increased brokerage costs and
realization of taxable capital gains.

            Portfolios that may invest significantly in foreign securities may
be particularly susceptible to short-term trading strategies. This is because
foreign securities are typically traded on markets that close well before the
time the Portfolio calculates its NAV at 4:00 p.m., Eastern time, which gives
rise to the possibility that developments may have occurred in the interim that
would affect the value of these securities. The time zone differences among
international stock markets can allow a Contractholder engaging in a short-term
trading strategy to exploit differences in Portfolio share prices that are based
on closing prices of foreign securities established some time before the Fund
calculates its own share price (referred to as "time zone arbitrage"). The
Portfolio has procedures, referred to as fair value pricing, designed to adjust
closing market prices of foreign securities to reflect what is believed to be
the fair value of those securities at the time the Portfolio calculates it NAV.
While there is no assurance, the Portfolio expects that the use of fair value
pricing, in addition to the short-term trading policies discussed below, will
significantly reduce a Contractholder's ability to engage in time zone arbitrage
to the detriment of other Contractholders.

            Contractholders engaging in a short-term trading strategy may also
target a Portfolio that does not invest primarily in foreign securities. Any
Portfolio that invests in securities that are, among other things, thinly
traded, traded infrequently, or relatively illiquid has the risk that the
current market price for the securities may not accurately reflect current
market values. Contractholders may seek to engage in short-term trading to take
advantage of these pricing differences (referred to as "price arbitrage"). The
Portfolio may be adversely affected by price arbitrage.

            Policy Regarding Short-Term Trading. Purchases and exchanges of
shares of the Portfolio should be made for investment purposes only. The Fund
will seek to prevent patterns of excessive purchases and sales or exchanges of
shares of the Portfolio. The Fund seeks to prevent such practices to the extent
they are detected by the procedures described below. The Portfolio reserves the
right to modify this policy, including any surveillance or account blocking
procedures established from time to time to effectuate this policy, at any time
without notice.

      o     Transaction Surveillance Procedures. The Fund, through its agents,
            ABI and ABIS, maintains surveillance procedures to detect excessive
            or short-term trading in Portfolio shares. This surveillance process
            involves several factors, which include scrutinizing transactions in
            Portfolio shares that exceed certain monetary thresholds or
            numerical limits within a specified period of time. Generally, more
            than two exchanges of Portfolio shares during any 90-day period or
            purchases of shares followed by a sale within 90 days will be
            identified by these surveillance procedures. For purposes of these
            transaction surveillance procedures, the Portfolio may consider
            trading activity in multiple accounts under common ownership,
            control, or influence. Trading activity identified by either, or a
            combination, of these factors, or as a result of any other
            information available at the time, will be evaluated to determine
            whether such activity might constitute excessive or short-term
            trading. These surveillance procedures may be modified from time to
            time, as necessary or appropriate to improve the detection of
            excessive or short-term trading or to address specific
            circumstances.

      o     Account Blocking Procedures. If the Fund determines, in its sole
            discretion, that a particular transaction or pattern of transactions
            identified by the transaction surveillance procedures described
            above is excessive or short-term trading in nature, the relevant
            Insurers' omnibus account(s) will be immediately "blocked" and no
            future purchase or exchange activity will be permitted. However,
            sales of Portfolio shares back to the Portfolio or redemptions will
            continue to be permitted in accordance with the terms of the
            Portfolio's current Prospectus. As a result, unless the
            Contractholder redeems his or her shares, which may have
            consequences if the shares have declined in value or adverse tax
            consequences may result, the Contractholder may be "locked" into an
            unsuitable investment. In the event an account is blocked, certain
            account-related privileges, such as the ability to place purchase,
            sale and exchange orders over the internet or by phone, may also be
            suspended. An Insurer's omnibus account that is blocked will
            generally remain blocked unless and until the Insurer provides
            evidence or assurance acceptable to the Fund that one or more
            Contractholders did not or will not in the future engage in
            excessive or short-term trading.

      o     Applications of Surveillance Procedures and Restrictions to Omnibus
            Accounts. Omnibus account arrangements are common forms of holding
            shares of the Portfolio, particularly among certain financial
            intermediaries, including sponsors of variable insurance products.
            The Fund applies its surveillance procedures to these omnibus
            account arrangements. As required by SEC rules, the Fund has entered
            into agreements with all of its financial intermediaries that
            require the financial intermediaries to provide the Fund, upon the
            request of the Fund or its agents, with individual account level
            information about their transactions. If the Fund detects excessive
            trading through its monitoring of omnibus accounts, including
            trading at the individual account level, the financial
            intermediaries will also execute instructions from the Fund to take
            actions to curtail the activity, which may include applying blocks
            to accounts to prohibit future purchases and exchanges of Fund
            shares.

            Risks to Contractholders Resulting From Imposition of Account Blocks
in Response to Excessive Short-Term Trading Activity. A Contractholder
identified as having engaged in excessive or short-term trading activity whose
account is "blocked" and who may not otherwise wish to redeem his or her shares
effectively may be "locked" into an investment in shares of the Portfolio that
the Contractholder did not intend to hold on a long-term basis or that may not
be appropriate for the Contractholder's risk profile. To rectify this situation,
a Contractholder with a "blocked" account may be forced to redeem Portfolio
shares, which could be costly if, for example, these shares have declined in
value, the Contractholder recently paid an initial sales charge or the sale
results in adverse tax consequences to the shareholder. To avoid this risk, a
Contractholder should carefully monitor the purchases, sales, and exchanges of
Portfolio shares and avoid frequent trading in Portfolio shares.

Limitations on Ability to Detect and Curtail Excessive Trading Practices
------------------------------------------------------------------------

            Contractholders seeking to engage in excessive or short-term trading
activities may deploy a variety of strategies to avoid detection and, despite
the efforts of the Fund and its agents to detect excessive or short duration
trading in Portfolio shares, there is no guarantee that the Fund will be able to
identify these Contractholders or curtail their trading practices. In
particular, the Fund may not be able to detect excessive or short-term trading
in shares of the Portfolio attributable to a particular Contractholder who
effects purchase and/or exchange activity in shares of the Portfolio through an
Insurer acting in an omnibus capacity. Also, multiple tiers of these entities
may exist, each utilizing an omnibus account arrangement, which may further
compound the difficulty of detecting excessive or short duration trading
activity in Portfolio Shares.

Redemption Of Shares
--------------------

            An insurance company separate account may redeem all or any portion
of the shares in its account at any time at the NAV next determined after a
redemption request in the proper form is furnished to the Fund. Any certificates
representing shares being redeemed must be submitted with the redemption
request. Shares do not earn dividends on the day they are redeemed, regardless
of whether the redemption request is received before or after the time of
computation of NAV that day. There is no redemption charge. The redemption
proceeds will normally be sent within seven days.

            The right of redemption may be suspended or the date or payment may
be postponed for any period during which the Exchange is closed (other than
customary weekend and holiday closings) or during which the SEC determines that
trading thereon is restricted, or for any period during which an emergency (as
determined by the SEC) exists as a result of which disposal by the Fund of
securities owned by the Portfolio is not reasonably practicable or as a result
of which it is not reasonably practicable for the Fund fairly to determine the
value of the Portfolio's net assets, or for such other periods as the SEC may by
order permit for the protection of security holders of the Portfolio. For
information regarding how to redeem shares in the Portfolio, please see your
insurance company's separate account prospectus.

            The value of a shareholder's shares on redemption or repurchase may
be more or less than the cost of such shares to the shareholder, depending upon
the market value of the Portfolio's securities at the time of such redemption or
repurchase. Payment either in cash or in portfolio securities received by a
shareholder upon redemption or repurchase of his shares, assuming the shares
constitute capital assets in his hands, will result in long-term or short-term
capital gains (or loss) depending upon the shareholder's holding period and
basis in respect of the shares redeemed.

Payments To Financial Intermediaries
------------------------------------

            Financial intermediaries, such as the Insurers, market and sell
shares of the Portfolio and typically receive compensation for selling shares of
the Portfolio. This compensation is paid from various sources, including any
Rule 12b-1 fee that you or the Portfolio may pay.

            In the case of Class B shares, up to 100% of the Rule 12b-1 fee
applicable to Class B shares each year may be paid to the financial intermediary
that sells Class B shares. Insurers or your financial intermediary receives
compensation from the Portfolio, ABI and/or the Adviser in several ways from
various sources, which include some or all of the following:

            o     Rule 12b-1 fees;

            o     defrayal of costs for educational seminars and training;

            o     additional distribution support; and

            o     payments related to providing Contractholder record-keeping
                  and/or administrative services.

            Please read your Portfolio's Prospectus carefully for information on
this compensation.

            ABI and/or the Adviser may pay Insurers or other financial
intermediaries to perform record-keeping and administrative services in
connection with the Portfolio. Such payments will generally not exceed 0.35% of
the average daily net assets of the Portfolio attributable to the Insurer.

            Other Payments for Educational Support and Distribution Assistance.
In addition to the fees described above, ABI, at its expense, currently provides
additional payments to the Insurers. These sums include payments to reimburse
directly or indirectly the costs incurred by the Insurers and their employees in
connection with educational seminars and training efforts about the Portfolio
for the Insurers' employees and/or their clients and potential clients. The
costs and expenses associated with these efforts may include travel, lodging,
entertainment and meals.

            For 2011, ABI's additional payments to these firms for distribution
services and educational support related to the AllianceBernstein Mutual Funds
are expected to be approximately 0.04% of the average monthly assets of the
AllianceBernstein Mutual Funds, or approximately $18.0 million. In 2010, ABI
paid approximately 0.04% of the average monthly assets of the AllianceBernstein
Mutual Funds or approximately $16.5 million, for distribution services and
education support related to the AllianceBernstein Mutual Funds.

            If one mutual fund sponsor that offers shares to separate accounts
of an Insurer makes greater distribution assistance payments than another, the
Insurer may have an incentive to recommend or offer the shares of funds of one
fund sponsor over another.

            Please speak with your financial intermediary to learn more about
the total amounts paid to your financial intermediary by the Funds, the Adviser,
ABI and by other mutual fund sponsors that offer shares to Insurers that may be
recommended to you. You should also consult disclosures made by your financial
intermediary at the time of purchase.

            ABI anticipates that the Insurers or their affiliates that will
receive additional payments for educational support include:

      AXA Advisors
      Genworth Financial
      Lincoln Financial Distributors
      Pacific Life Insurance Co.
      Prudential
      RiverSource Distributors
      SunLife Financial
      Transamerica Capital
      The Hartford

ABI expects that additional firms may be added to this list from time to time.

Although the Portfolio may use brokers and dealers who sell shares of the
Portfolio to effect portfolio transactions, the Portfolio does not consider the
sale of AllianceBernstein Mutual Fund Shares as a factor when selecting brokers
or dealers to effect portfolio transactions.



--------------------------------------------------------------------------------

                                NET ASSET VALUE

--------------------------------------------------------------------------------

            The Portfolio's NAV is computed at the next close of regular trading
on the Exchange (ordinarily 4:00 p.m., Eastern time) following receipt of a
purchase or redemption order by the Portfolio on each Fund business day on which
such an order is received and on such other days as the Board deems appropriate
or necessary in order to comply with Rule 22c-1 under the 1940 Act. The
Portfolio's NAV is calculated by dividing the value of the Portfolio's total
assets, less its liabilities, by the total number of its shares then
outstanding. As noted above, a Fund business day is any weekday on which the
Exchange is open for trading.

            In accordance with applicable rules under the 1940 Act and the
Fund's pricing policies and procedures adopted by the Board (the "Pricing
Policies"), portfolio securities are valued at current market value or at fair
value as determined in accordance with procedures established by, and under the
general supervision of, the Board. The Board has delegated to the Adviser,
subject to the Board's continuing oversight, certain of its duties with respect
to the Pricing Policies.

                   Whenever possible, securities are valued based on market
information on the business day as of which the value is being determined, as
follows:

            (a) a security listed on the Exchange or another national or foreign
exchange (other than securities listed on the Nasdaq Stock Exchange ("NASDAQ"))
is valued at the last sale price reflected on the consolidated tape at the close
of the exchange. If there has been no sale on the relevant business day, the
security is valued at the mean of the closing bid and asked prices on that day.
If no bid or asked prices are quoted on that day, the security is valued in good
faith at fair value by, or in accordance with procedures approved by the Board;

            (b) a security traded on NASDAQ is valued at the NASDAQ Official
Closing Price;

            (c) a security traded on more than one exchange is valued in
accordance with paragraph (a) above by reference to the principal exchange (as
determined by the Adviser) on which the security is traded;

            (d) a listed put or call option is valued at the last sale price. If
there has been no sale on the relevant business day, the security is valued at
the closing bid price on that day;

            (e) a currency option is valued using third party pricing models;

            (f) an open futures contract and any option thereon is valued at the
closing settlement price or, in the absence of such a price, the most recent
quoted bid price. If there are no quotations available for the relevant business
day, the security is valued at the last available closing settlement price;

            (g) a security traded in the over-the-counter market, including a
security listed on a national securities exchange whose principal market is
over-the-counter (as determined by the Adviser) is valued at the mean of the
current bid and asked prices as reported by the National Quotation Bureau or
other comparable source(s);

            (h) a right is valued at the last traded price provided by pricing
services;

            (i) a warrant is valued at the last traded price provided by pricing
services. In instances when a price can not be obtained through such pricing
services warrants will be valued using the last traded price if available or
broker bids;

            (j) a U.S. Government security and any other debt instrument having
60 days or less remaining until maturity generally is valued at amortized cost
if its original maturity was 60 days or less, or by amortizing its fair value as
of the 61st day prior to maturity if the original term to maturity exceeded 60
days, unless in either case the Adviser determines that this method does not
represent fair value;

            (k) a fixed-income security is valued on the basis of bid prices
provided by a pricing service when the Adviser believes that such prices reflect
the market value of the security. The prices provided by a pricing service may
take into account many factors, including institutional size, trading in similar
groups of securities and any developments related to specific securities. If the
Adviser determines that an appropriate pricing service does not exist for a
security, the security is valued on the basis of a quoted bid price or spread
over the applicable yield curve (a bid spread) by a broker dealer in such
security. The second highest price will be utilized whenever two or more quoted
bid prices are obtained;

            (l) a mortgage-backed or asset-backed security is valued on the
basis of bid prices obtained from pricing services or bid prices obtained from
multiple major broker/dealers in the security when the Adviser believes that
these prices reflect the market value of the security. In cases in which
broker/dealer quotes are obtained, the Adviser has procedures for using changes
in market yields or spreads to adjust, on a daily basis, a recently obtained
quoted bid price on a security. The second highest price will be utilized
whenever two or more quoted bid prices are obtained;

            (m) bank loans are valued on the basis of bid prices provided by a
pricing service;

            (n) forward and spot currency pricing is provided by pricing
services;

            (o) a swap is valued by the Adviser utilizing various external
sources to obtain inputs for variables in pricing models; and

            (p) open end mutual funds are valued at the closing NAV per share
and closed end funds are valued at the closing market price per share.

            The Portfolio values its securities at their current market value
determined on the basis of market quotations or, if market quotations are not
readily available or are unreliable, at "fair value" as determined in accordance
with procedures established by and under the general supervision of the Board.
When the Portfolio uses fair value pricing, it may take into account any factors
it deems appropriate. The Portfolio may determine fair value based upon
developments related to a specific security and/or U.S. sector or broader stock
market indices. The prices of securities used by the Portfolio to calculate its
NAV may differ from quoted or published prices for the same securities. Fair
value pricing involves subjective judgments and it is possible that the fair
value determined for a security is materially different than the value that
could be realized upon the sale of that security.

            Securities for which market quotations are not readily available or
deemed unreliable are valued at fair market value. Factors considered in making
this determination may include, but not limited to, information obtained by
contacting the issuer or analysts, or by analysis of the issuer's financial
statements. The Portfolio may use fair value pricing more frequently for
securities primarily traded in non-U.S. markets because, among other things,
most foreign markets close well before the Portfolio values its securities at
4:00 p.m., Eastern Time. The earlier close of these foreign markets gives rise
to the possibility that significant events, including broad market moves, may
have occurred in the interim and may materially affect the value of these
foreign securities. The Portfolio may value these securities using fair value
prices based on independent pricing services or third party vendor modeling
tools to the extent available.

            Subject to its oversight, the Fund's Board has delegated
responsibility for valuing the Portfolio's assets to the Adviser. The Adviser
has established a Valuation Committee, which operates under the policies and
procedures approved by the Board, to value the Portfolio's assets on behalf of
the Portfolio. The Valuation Committee values Portfolio assets as described
above.

            The Board may suspend the determination of its NAV (and the offering
and sale of shares), subject to the rules of the SEC and other governmental
rules and regulations, at a time when: (1) the Exchange is closed, other than
customary weekend and holiday closings, (2) an emergency exists as a result of
which it is not reasonably practicable for the Portfolio to dispose of
securities owned by it or to determine fairly the value of its net assets, or
(3) for the protection of shareholders, the SEC by order permits a suspension of
the right of redemption or a postponement of the date of payment on redemption.

            For purposes of determining the Portfolio's NAV per share, all
assets and liabilities initially expressed in a foreign currency will be
converted into U.S. Dollars at the mean of the current bid and asked prices of
such currency against the U.S. Dollar last quoted by a major bank that is a
regular participant in the relevant foreign exchange market or on the basis of a
pricing service that takes into account the quotes provided by a number of such
major banks. If such quotations are not available as of the close of the
Exchange, the rate of exchange will be determined in good faith by, or under the
direction of, the Board.

            The assets attributable to the Class A shares and Class B shares
will be invested together in a single portfolio. The NAV of each class will be
determined separately by subtracting the liabilities allocated to that class
from the assets belonging to that class in conformance with the provisions of a
plan adopted by the Fund in accordance with Rule 18f-3 under the 1940 Act (the
"18f-3 Plan").

--------------------------------------------------------------------------------

                             PORTFOLIO TRANSACTIONS

--------------------------------------------------------------------------------

            Subject to the general oversight of the Board of the Fund, the
Adviser is responsible for the investment decisions and the placing of the
orders for portfolio transactions for the Portfolio. The Adviser determines the
broker or dealer to be used in each specific transaction with the objective of
negotiating a combination of the most favorable commission (for transactions on
which a commission is payable) and the best price obtainable on each transaction
(generally defined as best execution). In connection with seeking best price and
execution, the Fund does not consider sales of shares of the Portfolio or other
investment companies managed by the Adviser as a factor in the selection of
brokers and dealers to effect portfolio transactions and has adopted a policy
and procedures reasonably designed to preclude such considerations.

            When consistent with the objective of obtaining best execution,
brokerage may be directed to persons or firms supplying investment information
to the Adviser. There may be occasions where the transaction cost charged by a
broker may be greater than that which another broker may charge if the Portfolio
determines in good faith that the amount of such transaction cost is reasonable
in relation to the value of the brokerage, research and statistical services
provided by the executing broker.

            Neither the Fund nor the Adviser entered into agreements or
understandings with any brokers regarding the placement of securities
transactions because of research or statistical services they provide. To the
extent that such persons or firms supply investment information to the Adviser
for use in rendering investment advice to the Portfolio, such information may be
supplied at no cost to the Adviser and, therefore, may have the effect of
reducing the expenses of the Adviser in rendering advice to the Portfolio. While
it is impracticable to place an actual dollar value on such investment
information, its receipt by the Adviser probably does not reduce the overall
expenses of the Adviser to any material extent.

            The investment information provided to the Adviser is of the type
described in Section 28(e) of the Securities Exchange Act of 1934 and is
designed to augment the Adviser's own internal research and investment strategy
capabilities. Research services furnished by brokers through which the Fund
effects securities transactions are used by the Adviser in carrying out its
investment management responsibilities with respect to all its client accounts
but all such services may be used by the Adviser in connection with the
Portfolio.

            The extent to which commissions that will be charged by
broker-dealers selected by the Portfolio may reflect an element of value for
research cannot presently be determined. To the extent that research services of
value are provided by broker-dealers with or through whom the Portfolio places
portfolio transactions, the Adviser may be relieved of expenses which it might
otherwise bear. Research services furnished by broker-dealers could be useful
and of value to the Adviser in servicing its other clients as well as the
Portfolio; but, on the other hand, certain research services obtained by the
Adviser as a result of the placement of portfolio brokerage of other clients
could be useful and of value to it in servicing the Portfolio.

            The Portfolio may deal in some instances in securities that are not
listed on a national stock exchange but are traded in the over-the-counter
market. The Fund may also purchase listed securities through the third market,
i.e., from a dealer that is not a member of the Exchange on which a security is
listed. Where transactions are executed in the over-the-counter market or third
market, the Fund will seek to deal with the primary market makers; but when
necessary in order to obtain the best price and execution, it will utilize the
services of others. In all cases, the Fund will attempt to negotiate best
execution.

            Investment decisions for the Portfolio are made independently from
those for other investment companies and other advisory accounts managed by the
Adviser. It may happen, on occasion, that the same security is held in the
portfolio of the Portfolio and one or more of such other companies or accounts.
Simultaneous transactions are likely when several funds or accounts are managed
by the same Adviser, particularly when a security is suitable for the investment
objectives of more than one of such companies or accounts. When two or more
companies or accounts managed by the Adviser are simultaneously engaged in the
purchase or sale of the same security, the transactions are allocated to the
respective companies or accounts both as to amount and price, in accordance with
a method deemed equitable to each company or account. In some cases this system
may adversely affect the price paid or received by the Portfolio or the size of
the position obtainable for the Portfolio.

            Allocations are made by the officers of the Portfolio or of the
Adviser. Purchases and sales of portfolio securities are determined by the
Adviser and are placed with broker-dealers by the order department of the
Adviser.

            The Portfolio's portfolio transactions in equity securities may
occur on foreign stock exchanges. Transactions on stock exchanges involve the
payment of brokerage commissions. On many foreign stock exchanges these
commissions are fixed. Securities traded in foreign over-the-counter markets
(including most fixed-income securities) are purchased from and sold to dealers
acting as principal. Over-the-counter transactions generally do not involve the
payment of a stated commission, but the price usually includes an undisclosed
commission or markup. The prices of underwritten offerings, however, generally
include a stated underwriter's discount. The Adviser expects to effect the bulk
of its transactions in securities of companies based in foreign countries
through brokers, dealers or underwriters located in such countries. U.S.
Government or other U.S. securities constituting permissible investments will be
purchased and sold through U.S. brokers, dealers or underwriters.

            The Fund may from time to time place orders for the purchase or sale
of securities (including listed call options) with SCB & Co., an affiliate of
the Adviser. In such instances, the placement of orders with such brokers would
be consistent with the Fund's objective of obtaining best execution and would
not be dependent upon the fact that SCB & Co. is an affiliate of the Adviser.
With respect to orders placed with SCB & Co. for execution on a national
securities exchange, commissions received must conform to Section 17(e)(2)(A) of
the 1940 Act and Rule 17e-1 thereunder, which permit an affiliated person of a
registered investment company (such as the Fund), or any affiliated person of
such person, to receive a brokerage commission from such registered investment
company provided that such commission is reasonable and fair compared to the
commissions received by other brokers in connection with comparable transactions
involving similar securities during a comparable period of time.

Disclosure of Portfolio Holdings
--------------------------------

            The Fund believes that the ideas of the Adviser's investment staff
should benefit the Portfolio and its shareholders, and does not want to afford
speculators an opportunity to profit by anticipating Portfolio trading
strategies or using Portfolio information for stock picking. However, the Fund
also believes that knowledge of the Portfolio's portfolio holdings can assist
shareholders in monitoring their investment, making asset allocation decisions,
and evaluating portfolio management techniques.

            The Adviser has adopted, on behalf of the Portfolio, policies and
procedures relating to disclosure of the Portfolio's portfolio securities. The
policies and procedures relating to disclosure of the Portfolio's portfolio
securities are designed to allow disclosure of portfolio holdings information
where necessary to the Portfolio's operation or useful to the Portfolio's
shareholders without compromising the integrity or performance of the Portfolio.
Except when there are legitimate business purposes for selective disclosure and
other conditions (designed to protect the Portfolio and its shareholders) are
met, the Fund does not provide or permit others to provide information about the
Portfolio's portfolio holdings on a selective basis.

            The Portfolio includes portfolio holdings information as required in
regulatory filings and shareholder reports, discloses portfolio holdings
information as required by federal or state securities laws and may disclose
portfolio holdings information in response to requests by governmental
authorities. In addition, the Adviser posts portfolio holdings information on
the Adviser's website (www.AllianceBernstein.com). For each portfolio security,
the posted information includes its name, the number of shares held by the
Portfolio, the market value of the Portfolio's holdings, and the percentage of
the Portfolio's assets represented by the portfolio security. The day after
portfolio holdings information is publicly available on the website, it may be
mailed, e-mailed or otherwise transmitted to any person.

            The Adviser may distribute or authorize the distribution of
information about the Portfolio's portfolio holdings that is not publicly
available, on the website or otherwise, to the Adviser's employees and
affiliates that provide services to the Fund. In addition, the Adviser may
distribute or authorize distribution of information about the Portfolio's
portfolio holdings that is not publicly available, on the website or otherwise,
to the Fund's service providers who require access to the information in order
to fulfill their contractual duties relating to the Portfolio (including,
without limitation, pricing services and proxy voting services), and to
facilitate the review of the Portfolio by rating agencies, for the purpose of
due diligence regarding a merger or acquisition, or for the purpose of effecting
in-kind redemption of securities to facilitate orderly redemption of portfolio
assets and minimal impact on remaining Portfolio shareholders. The Adviser does
not expect to disclose information about the Portfolio's portfolio holdings that
is not publicly available to the Portfolio's individual or institutional
investors or to intermediaries that distribute the Fund's shares. Information
may be disclosed with any frequency and any lag, as appropriate.

            Before any non-public disclosure of information about the
Portfolio's portfolio holdings is permitted, however, the Adviser's Chief
Compliance Officer (or his designee) must determine that the Portfolio has a
legitimate business purpose for providing the portfolio holdings information,
that the disclosure is in the best interests of the Portfolio's shareholders,
and that the recipient agrees or has a duty to keep the information confidential
and agrees not to trade directly or indirectly based on the information or to
use the information to form a specific recommendation about whether to invest in
the Portfolio or any other security. Under no circumstances may the Adviser or
its affiliates receive any consideration or compensation for disclosing the
information.

            The Adviser has established procedures to ensure that the
Portfolio's portfolio holdings information is only disclosed in accordance with
these policies. Only the Adviser's Chief Compliance Officer (or his designee)
may approve the disclosure, and then only if he or she and a designated senior
officer in the Adviser's product management group determines that the disclosure
serves a legitimate business purpose of the Portfolio and is in the best
interest of the Portfolio's shareholders. The Adviser's Chief Compliance Officer
(or his designee) approves disclosure only after considering the anticipated
benefits and costs to the Portfolio and its shareholders, the purpose of the
disclosure, any conflicts of interest between the interests of the Portfolio and
its shareholders and the interests of the Adviser or any of its affiliates, and
whether the disclosure is consistent with the policies and procedures governing
disclosure. Only someone approved by the Adviser's Chief Compliance Officer (or
his designee) may make approved disclosures of portfolio holdings information to
authorized recipients. The Adviser reserves the right to request certifications
from senior officers of authorized recipients that the recipient is using the
portfolio holdings information only in a manner consistent with the Adviser's
policy and any applicable confidentiality agreement. The Adviser's Chief
Compliance Officer or another member of the compliance team reports all
arrangements to disclose portfolio holdings information to the Board on a
quarterly basis. If the Board determines that disclosure was inappropriate, the
Adviser will promptly terminate the disclosure arrangement.

            In accordance with these procedures, each of the following third
parties have been approved to receive information concerning the Portfolio's
portfolio holdings: (i) the Fund's independent registered public accounting
firm, for use in providing audit opinions; (ii) RR Donnelley Financial, Data
Communique International and, from time to time, other financial printers, for
the purpose of preparing Fund regulatory filings; (iii) the Fund's custodian in
connection with its custody of the Portfolio's assets; (iv) Risk Metrics for
proxy voting services; and (v) data aggregators, such as Vestek. Information may
be provided to these parties at any time with no time lag. Each of these parties
is contractually and ethically prohibited from sharing the Portfolio's portfolio
holdings information unless specifically authorized.

--------------------------------------------------------------------------------

                       DIVIDENDS, DISTRIBUTIONS AND TAXES

--------------------------------------------------------------------------------

            The Portfolio qualified and intends to continue to qualify to be
taxed as a regulated investment company under the Code. If so qualified, the
Portfolio will not be subject to federal income and excise taxes on its
investment company taxable income and net capital gain to the extent such
investment company taxable income and net capital gain are distributed to the
separate accounts of insurance companies which hold its shares. Under current
tax law, capital gains or dividends from the Portfolio are not currently taxable
to the holder of a variable annuity or variable life insurance contract when
left to accumulate within such variable annuity or variable life insurance
contract. Distributions of net investment income and net short-term capital
gains will be treated as ordinary income and distributions of net long-term
capital gains will be treated as long-term capital gain in the hands of the
insurance companies.

            Investment income received by the Portfolio from sources within
foreign countries may be subject to foreign income taxes withheld at the source.
If more than 50% of the value of the Portfolio's total assets at the close of
its taxable year consists of stocks or securities of foreign corporations (which
for this purpose should include obligations issued by foreign governments), the
Portfolio will be eligible to file an election with the Internal Revenue Service
to pass through to its shareholders the amount of foreign taxes paid by the
Portfolio. If eligible, the Portfolio intends to file such an election, although
there can be no assurance that the Portfolio will be able to do so.

            Section 817(h) of the Code requires that the investments of a
segregated asset account of an insurance company be adequately diversified, in
accordance with Treasury Regulations promulgated thereunder, in order for the
holders of the variable annuity contracts or variable life insurance policies
underlying the account to receive the tax-deferred or tax-free treatment
generally afforded holders of annuities or life insurance policies under the
Code. The Department of the Treasury has issued Regulations under section 817(h)
that, among other things, provide the manner in which a segregated asset account
will treat investments in a regulated investment company for purposes of the
applicable diversification requirements. Under the Regulations, an insurance
company segregated account is permitted to look-through a Portfolio to satisfy
asset diversification tests and treat its underlying securities, rather than the
Portfolio, as investments subject to certain diversification limits. A Portfolio
will be considered adequately diversified if no more than 55% of its assets are
represented by any one investment, no more than 70% of its assets are
represented by any two investments, no more than 80% of its assets are
represented by any three investments and no more than 90% of its assets are
represented by any four investments. For this purpose, all securities issued by
an issuer are treated as a single investment. The Portfolio plans to satisfy
these conditions at all times so that the shares of the Portfolio owned by a
segregated asset account of a life insurance company will be subject to this
treatment under the Code.

            For information concerning the federal income tax consequences for
the holders of variable annuity contracts and variable life insurance policies,
such holders should consult the prospectus used in connection with the issuance
of their particular contracts or policies.

--------------------------------------------------------------------------------

                              GENERAL INFORMATION

--------------------------------------------------------------------------------

Description of the Portfolio
----------------------------

            The Fund was organized as a Maryland corporation in 1987 under the
name "Alliance Variable Products Series Fund, Inc." The name of the Fund became
"AllianceBernstein Variable Products Series Fund, Inc." on May 1, 2003. The
Portfolio is a series of the Fund.

            The Fund's shares have non-cumulative voting rights, which means
that the holders of more than 50% of the shares voting for the election of
Directors can elect 100% of the Directors if they choose to do so, and in such
election of Directors will not be able to elect any person or persons to the
Board.

            The Portfolio offers its shares through the separate accounts of
life insurance companies or Insurers. Under current SEC interpretations, the
Insurers, which are the recordholders of shares of the Portfolio, are required
to provide pass-through voting privileges to all Contractholders. In the event
that an Insurer does not receive voting instructions from Contractholders, the
Insurer is obligated to vote the shares corresponding to the uninstructed
Contractholders in the same proportion as instructions received from
Contractholders who provided voting instructions. Due to the proportional voting
of shares corresponding to uninstructed Contractholders, a small proportion of
Contractholders may determine the outcome of a vote of the Portfolio's
shareholders.

            All shares of the Fund when duly issued will be fully paid and
nonassessable. The Board is authorized to reclassify any unissued shares into
any number of additional series and classes without shareholder approval.
Accordingly, the Board in the future, for reasons such as the desire to
establish one or more additional Portfolio's with different investment
objectives, policies or restrictions or to establish additional channels of
distribution, may create additional series and classes of shares. Any issuance
of shares of such additional series and classes would be governed by the 1940
Act and the laws of the State of Maryland.

            If shares of another series were issued in connection with the
creation of the new portfolio, each share of any of the Fund's Portfolios would
normally be entitled to one vote for all purposes. Generally, shares of each
Portfolio would vote as a single series for the election of directors and on any
other matter that affected each Portfolio in substantially the same manner. As
to matters affecting each Portfolio differently, such as approval of the
Advisory Agreement and changes in investment policy, shares of each Portfolio
would vote as separate series. Moreover, the Class B shares of each Portfolio
will vote separately with respect to matters relating to the 12b-1 Plan(s)
adopted in accordance with Rule 12b-1 under the 1940 Act. Meetings of
shareholders may be called by 10% of the Fund's outstanding shareholders.

Code Of Ethics And Proxy Voting Policies And Procedures
-------------------------------------------------------

            The Fund, the Adviser and ABI have each adopted codes of ethics
pursuant to Rule 17j-1 of the 1940 Act. These codes of ethics permit personnel
subject to the codes to invest in securities, including securities that may be
purchased or held by the Fund.

            The Fund has adopted the Adviser's proxy voting policies and
procedures. The Adviser's proxy voting policies and procedures are attached as
Appendix C.

            Information regarding how the Portfolio voted proxies related to
portfolio securities during the most recent 12-month period ended June 30, is
available (1) without charge, upon request, by calling (800) 227-4618; or on or
through the Fund's website at www.AllianceBernstein.com; or both; and (2) on the
SEC's website at www.sec.gov.

Custodian
---------

            State Street Bank and Trust Company ("State Street"), One Lincoln
Street, Boston, Massachusetts 02111, acts as custodian for the securities and
cash of the Portfolio but plays no part in deciding the purchase or sale of
portfolio securities. Subject to the supervision of the Fund's Directors, State
Street may enter into sub-custodial agreements for the holding of the Fund's
foreign securities.

Principal Underwriter
---------------------

            AllianceBernstein Investments, Inc., 1345 Avenue of the Americas,
New York, New York 10105, serves as the Fund's principal underwriter.

Counsel
-------

            Legal matters in connection with the issuance of the shares of the
Fund offered hereby are passed upon by Seward & Kissel LLP, New York, New York.

Independent Registered Public Accounting Firm
---------------------------------------------

            Ernst & Young LLP, 5 Times Square, New York, New York 10036, has
been appointed as the independent registered public accounting firm for the
Fund.

Additional Information
----------------------

            Any shareholder inquiries may be directed to the shareholder's
financial intermediary or to ABIS at the address or telephone numbers shown on
the front cover of this SAI. This SAI does not contain all the information set
forth in the Registration Statement filed by the Fund with the SEC under the
Securities Act. Copies of the Registration Statement may be obtained at a
reasonable charge from the SEC or may be examined, without charge, at the
offices of the SEC in Washington, D.C. or on the Internet at
www.AllianceBernstein.com.



--------------------------------------------------------------------------------

        FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT REGISTERED PUBLIC
                                ACCOUNTING FIRM

--------------------------------------------------------------------------------

The financial statements of the Portfolio for the fiscal year end are not
available because the Portfolio has not yet commenced operations.



--------------------------------------------------------------------------------

                                  APPENDIX A:
                           STATEMENT OF POLICIES AND
                         PROCEDURES FOR VOTING PROXIES

--------------------------------------------------------------------------------

1.    Introduction

      As a registered investment adviser, AllianceBernstein L.P. (the
      "AllianceBernstein", "we" or "us") has a fiduciary duty to act solely in
      the best interests of our clients. We recognize that this duty requires us
      to vote client securities in a timely manner and make voting decisions
      that intended to maximize shareholder value. We consider ourselves
      shareholder advocates and take this responsibility very seriously.
      Consistent with these obligations, we will disclose our clients' voting
      records only to them and as required by mutual fund vote disclosure
      regulations. In addition, the proxy committees may, after careful
      consideration, choose to respond to surveys regarding past votes.

      This statement is intended to comply with Rule 206(4)-6 of the Investment
      Advisers Act of 1940. It sets forth our policies and procedures for voting
      proxies for our discretionary investment advisory clients, including
      investment companies registered under the Investment Company Act of 1940.
      This statement applies to AllianceBernstein's investment groups investing
      on behalf of clients in both U.S. and non-U.S. securities.

2.    Proxy Policies

      Our proxy voting policies are principle-based rather than rules-based. We
      adhere to a core set of principles that are described in this Statement
      and in our Proxy Voting Manual. We assess each proxy proposal in light of
      those principles. Our proxy voting "litmus test" will always be what we
      view as most likely to maximize shareholder value. We believe that
      authority and accountability for setting and executing corporate policies,
      goals and compensation should generally rest with the board of directors
      and senior management. In return, we support strong investor rights that
      allow shareholders to hold directors and management accountable if they
      fail to act in the best interests of shareholders. In addition, when a
      company engages in illegal activities or other anti-social behavior, we
      exercise our proxy voting rights considering such behavior.

      This statement is designed to be responsive to the wide range of proxy
      voting subjects that can have a significant effect on the investment value
      of the securities held in our clients' accounts. These policies are not
      exhaustive due to the variety of proxy voting issues that we may be
      required to consider. AllianceBernstein reserves the right to depart from
      these guidelines in order to make voting decisions that are in our
      clients' best interests. In reviewing proxy issues, we will apply the
      following general policies:

      2.1.  Corporate Governance

            AllianceBernstein's proxy voting policies recognize the importance
            of good corporate governance in ensuring that management and the
            board of directors fulfill their obligations to the shareholders. We
            favor proposals promoting transparency and accountability within a
            company. We support the appointment of a majority of independent
            directors on key committees and generally support separating the
            positions of chairman and chief executive officer, except in cases
            where a company has sufficient counter-balancing governance in
            place. Because we believe that good corporate governance requires
            shareholders to have a meaningful voice in the affairs of the
            company, we generally will support shareholder proposals which
            request that companies amend their by-laws to provide that director
            nominees be elected by an affirmative vote of a majority of the
            votes cast. Furthermore, we have written to the U.S. Securities and
            Exchange Commission ("SEC") in support of shareholder access to
            corporate proxy statements under specified conditions with the goal
            of serving the best interests of all shareholders.

      2.2.  Elections of Directors

            Unless there is a proxy fight for seats on the Board or we determine
            that there are other compelling reasons for withholding votes for
            directors, we will vote in favor of the management proposed slate of
            directors. That said, we believe that directors have a duty to
            respond to shareholder actions that have received significant
            shareholder support. Therefore, we may withhold votes for directors
            (or vote against directors in non-U.S. markets) who fail to act on
            key issues such as failure to implement proposals to declassify
            boards, failure to implement a majority vote requirement, failure to
            submit a rights plan to a shareholder vote or failure to act on
            tender offers where a majority of shareholders have tendered their
            shares. (We may vote against directors under these circumstances if
            the company has adopted a majority voting policy because, if a
            company has adopted such a policy, withholding votes from directors
            is not possible.) In addition, we will withhold votes for directors
            who fail to attend at least seventy-five percent of board meetings
            within a given year without a reasonable excuse and we may abstain
            or vote against directors of non-U.S. issuers where there is
            insufficient information about the nominees disclosed in the proxy
            statement. Also, we will generally not withhold votes for directors
            who meet the definition of independence promulgated by the primary
            exchange on which the company's shares are traded or set forth in
            the code we determine to be best practice in the country where the
            subject company is domiciled. Finally, because we believe that
            cumulative voting in single shareholder class structures provides a
            disproportionately large voice to minority shareholders in the
            affairs of a company, we will generally vote against such proposals
            and vote for management proposals seeking to eliminate cumulative
            voting. However, in dual class structures (such as A&B shares) where
            the shareholders with a majority economic interest have a minority
            voting interest, we will generally vote in favor of cumulative
            voting.

      2.3.  Appointment of Auditors

            AllianceBernstein believes that the company is in the best position
            to choose its auditors, so we will generally support management's
            recommendation. However, we recognize that there are inherent
            conflicts when a company's independent auditor performs substantial
            non-audit services for the company. The Sarbanes-Oxley Act of 2002
            prohibits certain categories of services by auditors to U.S.
            issuers, making this issue less prevalent in the U.S. Nevertheless,
            in reviewing a proposed auditor, we will consider the fees paid for
            non-audit services relative to total fees and whether there are
            other reasons to question the independence or performance of the
            auditors.

      2.4.  Changes in Legal and Capital Structure

            Changes in a company's charter, articles of incorporation or by-laws
            are often technical and administrative in nature. Absent a
            compelling reason to the contrary, AllianceBernstein will cast its
            votes in accordance with management's recommendations on such
            proposals. However, we will review and analyze on a case-by-case
            basis any non-routine proposals that are likely to affect the
            structure and operation of the company or have a material economic
            effect on the company. For example, we will generally support
            proposals to increase authorized common stock when it is necessary
            to implement a stock split, aid in a restructuring or acquisition,
            or provide a sufficient number of shares for an employee savings
            plan, stock option plan or executive compensation plan. However, a
            satisfactory explanation of a company's intentions must be disclosed
            in the proxy statement for proposals requesting an increase of
            greater than 100% of the shares outstanding. We will oppose
            increases in authorized common stock where there is evidence that
            the shares will be used to implement a poison pill or another form
            of anti-takeover device. We will support shareholder proposals that
            seek to eliminate dual class voting structures.

      2.5.  Corporate Restructurings, Mergers and Acquisitions

            AllianceBernstein believes proxy votes dealing with corporate
            reorganizations are an extension of the investment decision.
            Accordingly, we will analyze such proposals on a case-by-case basis,
            weighing heavily the views of our research analysts that cover the
            company and our investment professionals managing the portfolios in
            which the stock is held.

      2.6.  Proposals Affecting Shareholder Rights

            AllianceBernstein believes that certain fundamental rights of
            shareholders must be protected. We will generally vote in favor of
            proposals that give shareholders a greater voice in the affairs of
            the company and oppose any measure that seeks to limit those rights.
            However, when analyzing such proposals we will weigh the financial
            impact of the proposal against the impairment of shareholder rights.

      2.7.  Anti-Takeover Measures

            AllianceBernstein believes that measures that impede corporate
            transactions (such as takeovers) or entrench management not only
            infringe on the rights of shareholders but may also have a
            detrimental effect on the value of the company. Therefore, we will
            generally oppose proposals, regardless of whether they are advanced
            by management or shareholders, when their purpose or effect is to
            entrench management or excessively or inappropriately dilute
            shareholder ownership. Conversely, we support proposals that would
            restrict or otherwise eliminate anti-takeover or anti-shareholder
            measures that have already been adopted by corporate issuers. For
            example, we will support shareholder proposals that seek to require
            the company to submit a shareholder rights plan to a shareholder
            vote. We will evaluate, on a case-by-case basis, proposals to
            completely redeem or eliminate such plans. Furthermore, we will
            generally oppose proposals put forward by management (including the
            authorization of blank check preferred stock, classified boards and
            supermajority vote requirements) that appear to be anti-shareholder
            or intended as management entrenchment mechanisms.

      2.8.  Executive Compensation

            AllianceBernstein believes that company management and the
            compensation committee of the board of directors should, within
            reason, be given latitude to determine the types and mix of
            compensation and benefits offered to company employees. Whether
            proposed by a shareholder or management, we will review proposals
            relating to executive compensation plans on a case-by-case basis to
            ensure that the long-term interests of management and shareholders
            are properly aligned. In general, we will analyze the proposed plan
            to ensure that shareholder equity will not be excessively diluted
            taking into account shares available for grant under the proposed
            plan as well as other existing plans. We generally will oppose plans
            that allow stock options to be granted with below market value
            exercise prices on the date of issuance or permit re-pricing of
            underwater stock options without shareholder approval. Other factors
            such as the company's performance and industry practice will
            generally be factored into our analysis. In markets where
            remuneration reports are not required for all companies (for
            instance, in the U.S. such reports are required only for companies
            that received funds from the Troubled Asset Relief Program ("TARP")
            but not other companies), we will generally support shareholder
            proposals asking the board to adopt a policy (i.e., "say on pay")
            that the company's shareholders be given the opportunity to vote on
            an advisory resolution to approve the compensation committee's
            report. Although "say on pay" votes are by nature only broad
            indications of shareholder views, they do lead to more
            compensation-related dialogue between management and shareholders
            and help ensure that the important common objective of management
            and shareholders is met, which is maximizing the value of the
            company. In markets where votes to approve remuneration reports are
            required, we review the reports on a case-by-case basis. With
            respect to companies that have received governmental assistance
            through government programs such as TARP, we will generally oppose
            shareholder proposals that seek to impose greater executive
            compensation restrictions on subject companies than are required
            under the applicable program because such restrictions could create
            a competitive disadvantage for the subject company. We believe the
            SEC took appropriate steps to ensure more complete and transparent
            disclosure of executive compensation when it issued modified
            executive compensation and corporate governance disclosure rules in
            2006 and February 2010. Therefore, while we will consider them on a
            case-by-case basis, we generally vote against shareholder proposals
            seeking additional disclosure of executive and director
            compensation, including proposals that seek to specify the
            measurement of performance-based compensation, if the company is
            subject to SEC rules. Finally, we will support requiring a
            shareholder vote on management proposals to provide severance
            packages that exceed 2.99 times the sum of an executive officer's
            base salary plus bonus that are triggered by a change in control.
            Finally, we will support shareholder proposals requiring a company
            to expense compensatory employee stock options (to the extent the
            jurisdiction in which the company operates does not already require
            it) because we view this form of compensation as a significant
            corporate expense that should be appropriately accounted for.

      2.9.  Social and Corporate Responsibility

            These types of shareholder proposals often raise complex and
            controversial issues that may have both a financial and
            non-financial effect on the company. They reflect increasing
            shareholder concern about Socially Responsible Investing, which may
            include environmental, social and governance-related issues, as well
            as other forms of responsible investing and proxy voting. These
            proposals present a special set of challenges because, beyond
            distinctions between legal and illegal activity, perspectives on
            social good vary widely, not only across borders but also from
            shareholder to shareholder.

            Maximizing long-term shareholder value is the overriding concern in
            considering these proposals, so AllianceBernstein will review and
            analyze them on a case-by-case basis to determine what effect, if
            any, they will have on the future earnings of the company. We will
            vote against proposals that are unduly burdensome or result in
            unnecessary and excessive costs to the company with no discernable
            benefits to shareholders. We may abstain from voting on social
            proposals that do not have a readily determinable financial impact
            on shareholder value.

3.    Proxy Voting Procedures

      3.1.  Proxy Voting Committees

            Our growth and value investment groups have formed separate proxy
            voting committees to establish general proxy policies for
            AllianceBernstein and consider specific proxy voting matters as
            necessary. These committees periodically review these policies and
            new types of corporate governance issues, and decide how we should
            vote on proposals not covered by these policies. When a proxy vote
            cannot be clearly decided by an application of our stated policy,
            the proxy committee will evaluate the proposal. In addition, the
            committees, in conjunction with the analyst that covers the company,
            may contact corporate management, interested shareholder groups and
            others as necessary to discuss proxy issues. Members of the
            committees include senior investment personnel and representatives
            of the Legal and Compliance Department. The committees may also
            evaluate proxies where we face a potential conflict of interest (as
            discussed below). Finally, the committees monitor adherence to these
            policies.

      3.2.  Conflicts of Interest

            AllianceBernstein recognizes that there may be a potential conflict
            of interest when we vote a proxy solicited by an issuer whose
            retirement plan we manage, or administer, who distributes
            AllianceBernstein-sponsored mutual funds, or with whom we have, or
            one of our employees has, a business or personal relationship that
            may affect (or may be reasonably viewed as affecting) how we vote on
            the issuer's proxy. Similarly, AllianceBernstein may have a
            potentially material conflict of interest when deciding how to vote
            on a proposal sponsored or supported by a shareholder group that is
            a client. We believe that centralized management of proxy voting,
            oversight by the proxy voting committees and adherence to these
            policies ensures that proxies are voted based solely on our clients'
            best interests. Additionally, we have implemented procedures to
            ensure that our votes are not the product of a material conflict of
            interest, including: (i) on an annual basis, the proxy committees
            taking reasonable steps to evaluate (A) the nature of
            AllianceBernstein's and our employees' material business and
            personal relationships (and those of our affiliates) with any
            company whose equity securities are held in client accounts and (B)
            any client that has sponsored or has a material interest in a
            proposal upon which we will be eligible to vote; (ii) requiring
            anyone involved in the decision making process to disclose to the
            chairman of the appropriate proxy committee any potential conflict
            that he or she is aware of (including personal relationships) and
            any contact that he or she has had with any interested party
            regarding a proxy vote; (iii) prohibiting employees involved in the
            decision making process or vote administration from revealing how we
            intend to vote on a proposal in order to reduce any attempted
            influence from interested parties; and (iv) where a material
            conflict of interests exists, reviewing our proposed vote by
            applying a series of objective tests and, where necessary,
            considering the views of third party research services to ensure
            that our voting decision is consistent with our clients' best
            interests.

            Because under certain circumstances AllianceBernstein considers the
            recommendation of third party research services, the proxy
            committees take reasonable steps to verify that any third party
            research service is, in fact, independent taking into account all of
            the relevant facts and circumstances. This includes reviewing the
            third party research service's conflict management procedures and
            ascertaining, among other things, whether the third party research
            service (i) has the capacity and competency to adequately analyze
            proxy issues, and (ii) can make recommendations in an impartial
            manner and in the best interests of our clients.

      3.3.  Proxies of Certain Non-U.S. Issuers

            Proxy voting in certain countries requires "share blocking."
            Shareholders wishing to vote their proxies must deposit their shares
            shortly before the date of the meeting with a designated depositary.
            During this blocking period, shares that will be voted at the
            meeting cannot be sold until the meeting has taken place and the
            shares are returned to the clients' custodian banks. Absent
            compelling reasons to the contrary, AllianceBernstein believes that
            the benefit to the client of exercising the vote outweighed by the
            cost of voting (i.e., not being able to sell the shares during this
            period). Accordingly, if share blocking is required we generally
            choose not to vote those shares.

            In addition, voting proxies of issuers in non-U.S. markets may give
            rise to a number of administrative issues that may prevent
            AllianceBernstein from voting such proxies. For example,
            AllianceBernstein may receive meeting notices without enough time to
            fully consider the proxy or after the cut-off date for voting. Other
            markets require AllianceBernstein to provide local agents with power
            of attorney prior to implementing AllianceBernstein's voting
            instructions. Although it is the Adviser's policy to seek to vote
            all proxies for securities held in client accounts for which we have
            proxy voting authority, in the case of non-U.S. issuers, we vote
            proxies on a best efforts basis.

      3.4.  Loaned Securities

            Many clients of AllianceBernstein have entered into securities
            lending arrangements with agent lenders to generate additional
            revenue. AllianceBernstein will not be able to vote securities that
            are on loan under these types of arrangements. However, under rare
            circumstances, for voting issues that may have a significant impact
            on the investment, we may request that clients recall securities
            that are on loan if we determine that the benefit of voting
            outweighs the costs and lost revenue to the client or fund and the
            administrative burden of retrieving the securities.

      3.5.  Proxy Voting Records

            Clients may obtain information about how we voted proxies on their
            behalf by contacting their AllianceBernstein administrative
            representative. Alternatively, clients may make a written request
            for proxy voting information to: Mark R. Manley, Senior Vice
            President & Chief Compliance Officer, AllianceBernstein L.P., 1345
            Avenue of the Americas, New York, NY 10105.

            [ALTERNATIVE LANGUAGE FOR U.S. MUTUAL FUNDS]

            You may obtain information regarding how the Portfolios voted
            proxies relating to portfolio securities during the most recent
            12-month period ended June 30, without charge. Simply visit
            AllianceBernstein's web site at www.alliancebernstein.com, or go to
            the SEC's web site at www.sec.gov, or call AllianceBernstein at
            (800) 227-4618.




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