ALLIANCE GLOBAL STRATEGIC INCOME TRUST INC
497, 1997-06-09
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This is filed pursuant to Rule 497(e).
File Nos. 33-63797 and 811-07391.



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<PAGE>
 
                                   Alliance
- --------------------------------------------------------------------------------
                               Global Strategic
- --------------------------------------------------------------------------------
                                 Income Trust
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                       c/o Alliance Fund Services, Inc.
                P.O. Box 1520, Secaucus, New Jersey 07096-1520
                           Toll Free (800) 221-5672
                   For Literature: Toll Free (800) 227-4618

                          Prospectus and Application
                                (Advisor Class)
                            
                                 June 6, 1997

<TABLE>  
<CAPTION> 

Table of Contents                          Page
<S>                                        <C> 
The Fund at a Glance........................  2
Expense Information.........................  3
Glossary....................................  4
Description of the Fund.....................  6
     Investment Objectives and Policies.....  6
     Additional Investment Practices........  6
     Certain Fundamental Investment 
      Policies.............................. 16
     Certain Risk Considerations............ 17
Purchase and Sale of Shares................. 20
Management of the Fund...................... 22
Dividends, Distributions and Taxes.......... 23
Conversion Feature.......................... 24
Financial Highlights........................ 25
General Information......................... 26
Appendix A: Bond Ratings....................A-1
</TABLE>

Adviser
Alliance Capital Management L.P.
1345 Avenue Of The Americas
New York, New York 10105

Alliance Global Strategic Income Trust Inc. (the "Fund") seeks primarily a high
level of current income and secondarily capital appreciation. The Fund pursues
its investment objectives by investing primarily in a portfolio of fixed-income
securities of U.S. and non-U.S. companies and U.S. Government and foreign
government securities and supra-national entities, including lower-rated
securities.

The Fund is a non-diversified open-end management investment company. This
Prospectus sets forth concisely the information that a prospective investor
should know about the Fund before investing. The "Statement of Additional
Information" for the Fund, which provides further information regarding certain
matters discussed in this Prospectus and other matters which may be of interest
to some investors, has been filed with the Securities and Exchange Commission
and is incorporated herein by reference. For a free copy, call or write Alliance
Fund Services, Inc. at the indicated address or call the "For Literature"
telephone number shown above.

This Prospectus offers the Advisor Class shares of the Fund, which may be
purchased at net asset value without any initial or contingent deferred sales
charges and without ongoing distribution expenses. Advisor Class shares are
offered solely to (i) investors participating in fee-based programs meeting
certain standards established by Alliance Fund Distributors, Inc., the Fund's
principal underwriter, (ii) participants in self-directed defined contribution
employee benefit plans (e.g., 401(k) plans) that meet certain minimum standards
and (iii) certain other categories of investors described in the Prospectus,
including investment advisory clients of, and certain other persons associated
with, Alliance Capital Management L.P. and its affiliates or the Fund. See
"Purchase and Sale of Shares."

An investment in these securities is not a deposit or obligation of, or
guaranteed or endorsed by, any bank and is not federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board or any other agency.

Investors are advised to read this Prospectus carefully and to retain it for
future reference.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

                                                                   Alliance/(R)/
                                            Investing without the Mystery./(SM)/

/(SM)/ These are registered marks used under license from the owner, Alliance
       Capital Management L.P.
<PAGE>
 
The Fund At A Glance

The following summary is qualified in its entirety by the more detailed
information contained in this Prospectus.

The Fund's Investment Adviser Is . . .

Alliance Capital Management L.P. ("Alliance"), a global investment adviser
providing diversified services to institutions and individuals through a broad
line of investments including more than 100 mutual funds. Since 1971, Alliance
has earned a reputation as a leader in the investment world with over $182
billion in assets under management as of March 31, 1997. Alliance provides
investment management services to employee benefit plans for 31 of the FORTUNE
100 companies.

The Fund

Seeks . . . Primarily a high level of current income and secondarily capital
appreciation.

Invests principally in . . . A non-diversified portfolio of fixed-income
securities of U.S. and non-U.S. issuers.

A Word About Risk . . .

The price of the Fund's shares will fluctuate as the daily prices of the
individual bonds in which it invests fluctuate, so that your shares, when
redeemed, may be worth more or less than their original cost. Price fluctuations
may be caused by changes in the general level of interest rates or changes in
bond credit quality ratings. Changes in interest rates have a greater effect on
bonds with longer maturities than those with shorter maturities. The Fund
invests in high-yield, high-risk bonds that are rated below investment grade and
are considered to have predominantly speculative characteristics. The prices of
non-U.S. Dollar denominated bonds also fluctuate with changes in foreign
exchange rates. Because the Fund invests a significant amount of its assets in
non-U.S. securities an investment in the Fund involves risks not associated with
Funds that invest primarily in securities of U.S. issuers. While the Fund
invests principally in fixed-income securities, in order to achieve its
investment objectives, the Fund may at times use certain types of derivative
instruments, such as options, futures, forwards and swaps. These instruments
involve risks different from, and, in certain cases, greater than, the risks
presented by more traditional investments. These risks are fully discussed in
this Prospectus. See "Description of the Fund--Additional Investment Practices"
and "Certain Risk Considerations."

Getting Started. . .

Shares of the Fund are available through your financial representative. The Fund
offers multiple classes of shares, of which only the Advisor Class is offered by
this Prospectus. Advisor Class shares may be purchased at net asset value
without any initial or contingent deferred sales charges and are not subject to
ongoing distribution expenses. Advisor Class shares may be purchased and held
solely (i) through accounts established under a fee-based program, sponsored and
maintained by a registered broker-dealer or other financial intermediary and
approved by Alliance Fund Distributors, Inc. ("AFD"), the Fund's principal
underwriter, (ii) through a self-directed defined contribution employee benefit
plan (e.g., a 401(k) plan) that has at least 1,000 participants or $25 million
in assets, (iii) by investment advisory clients of, and certain other persons
associated with, Alliance and its affiliates or the Fund and (iv) through
registered investment advisers or other financial intermediaries who charge a
management, consulting or other fee for their service and who purchase shares
through a broker or agent approved by AFD and clients of such registered
investment advisers or financial intermediaries whose accounts are linked to the
master account of such investment adviser or financial intermediary on the books
of such approved broker or agent. A shareholder's Advisor Class shares will
automatically convert to Class A shares of the Fund under certain circumstances.
See "Conversion Feature-- Conversion to Class A Shares." Generally, a fee-based
program must charge an asset-based or other similar fee and must invest at least
$250,000 in Advisor Class shares of the Fund in order to be approved by AFD for
investment in Advisor Class shares. For more detailed information about who may
purchase and hold Advisor Class shares see the Statement of Additional
Information. Fee-based and other programs through which Advisor Class shares may
be purchased may impose different requirements with respect to investment in
Advisor Class shares than described above. For detailed information about
purchasing and selling shares, see "Purchase and Sale of Shares."

                                                                   Alliance/(R)/
                                            Investing without the Mystery./(SM)/

/(R)/ These are registered marks used under license from the owner, Alliance
       Capital Management L.P.

                                       2
<PAGE>
 
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                              Expense Information
- --------------------------------------------------------------------------------
 
Shareholder Transaction Expenses are one of several factors to consider when you
invest in the Fund. The following table summarizes your maximum transaction
costs from investing in the Advisor Class shares of the Fund and estimated
annual expenses for Advisor Class shares of the Fund. The "Example" following
the table below shows the cumulative expenses attributable to a hypothetical
$1,000 investment in Advisor Class shares for the periods specified.

<TABLE>  
<CAPTION> 
                                                                       Advisor
                                                                    Class Shares
                                                                    ------------
<S>                                                                     <C> 
Maximum sales charge imposed on
     purchases (as a percentage of offering price)................      None
Sales charge imposed on dividend reinvestments....................      None
Deferred sales charge.............................................      None
Exchange fee......................................................      None
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Operating Expenses                                                 Advisor Class
                                                                   -------------
Management fees (after waiver) (a)................................      None
12b-1 fees........................................................      None
Other expenses (after reimbursement) (b)(c).......................      1.60%
                                                                        ----
Total fund operating expenses (after waiver/reimbursement) (c)(d).      1.60%
                                                                        ====

Operating Expenses                                                 Advisor Class
                                                                   -------------
After 1 year......................................................      $ 16
After 3 years.....................................................      $ 50
</TABLE> 
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(a)  Net of voluntary fee waiver. Absent such waiver, management fees would be
     .75%.
(b)  These expenses include a transfer agency fee payable to Alliance Fund
     Services, Inc., an affiliate of Alliance, based on a fixed dollar amount
     charged to the Fund for each shareholder's account.
(c)  Net of voluntary fee waiver and expense reimbursement. Absent such waiver
     and reimbursement, other expenses would be 18.15% and total fund operating
     expenses would be 18.90%.
(d)  The expense information does not reflect any charges or expenses imposed by
     your financial representative or your employee benefit plan.

The purpose of the foregoing table is to assist the investor in understanding
the various costs and expenses that an investor in the Fund will bear directly
or indirectly. The Example set forth above assumes reinvestment of all dividends
and distributions and utilizes a 5% annual rate of return as mandated by
Commission regulations. "Other Expenses" are based on estimated amounts for the
Fund's current fiscal year. The Example should not be considered representative
of past or future expenses; actual expenses may be greater or less than those
shown.

                                       3
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                                   Glossary
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The following terms are used in this Prospectus. Many of these terms are
explained in greater detail under "Description of the Fund---Additional
Investment Practices."

Bonds are fixed, floating and variable rate debt obligations.
Debt Securities are bonds, debentures, notes, bills and repurchase agreements.

Fixed-Income Securities are debt securities, convertible securities and
preferred stocks and include floating rate and variable rate instruments. Fixed-
income securities may be rated (or if unrated, for purposes of the Fund's
investment policies may be determined by Alliance to be of equivalent quality to
those rated) Triple-A (Aaa or AAA), High Quality (Aa or AA or above), High Grade
(A or above) or Investment Grade (Baa or BBB or above) by, as the case may be,
Moody's, S&P, Duff & Phelps or Fitch, or may be lower-rated securities, as
defined below. In the case of "split-rated" fixed-income securities (i.e.,
securities assigned non-equivalent credit quality ratings, such as Baa by
Moody's but BB by S&P, or, to take another example, Ba by Moody's and BB by S&P
but B by Fitch), the Fund will use the rating deemed by Alliance to be the most
appropriate under the circumstances.

Lower-Rated Securities are fixed-income securities rated Ba or BB or below, or
determined by Alliance to be of equivalent quality, and are commonly referred to
as "junk bonds."

Equity Securities are common and preferred stocks, securities convertible into
common and preferred stocks, and rights and warrants to subscribe for the
purchase of common and preferred stocks.

Convertible Securities are bonds, debentures, corporate notes and preferred
stocks that are convertible into common and preferred stock.

U.S. Government Securities are securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities. These securities include
securities backed by the full faith and credit of the United States, those
supported by the right of the issuer to borrow from the U.S. Treasury and those
backed only by the credit of the issuing agency itself. The first category
includes U.S. Treasury Securities (which are U.S. Treasury bills, notes and
bonds) and certificates issued by GNMA (see below). U.S. Government securities
not backed by the full faith and credit of the United States include
certificates issued by FNMA and FHLMC (see below).

Mortgage-Related Securities are pools of mortgage loans that are assembled for
sale to investors (such as mutual funds) by various governmental, government-
related and private organizations. These securities include:

     ARMS, which are adjustable-rate mortgage securities;
     SMRS, which are stripped mortgage-related securities;
     CMOS, which are collateralized mortgage obligations;
     GNMA CERTIFICATES, which are securities issued by the Government National
     Mortgage Association;
     FNMA CERTIFICATES, which are securities issued by the Federal National
     Mortgage Association; and
     FHLMC CERTIFICATES, which are securities issued by the Federal Home Loan
     Mortgage Corporation.

Interest-only or IO securities are debt securities that receive only the
interest payments on an underlying debt that has been structured to have two
classes, one of which is the IO class and the other of which is the principal-
only or PO class, which class receives only the principal payments on the
underlying debt obligation. POs are similar to, and are sometimes referred to
as, zero coupon securities, which are debt securities issued without interest
coupons.

Foreign government securities are securities issued or guaranteed, as to payment
of principal and interest, by a foreign government or any of its political
subdivisions, authorities, agencies or instrumentalities.

Sovereign debt obligations are foreign government debt securities, loan
participations between foreign governments and financial institutions and
interests in entities organized and operated for the purpose of restructuring
the investment characteristics of foreign government securities.

World Bank is the commonly used name for the International Bank for
Reconstruction and Development.

LIBOR is the London Interbank Offered Rate.

Moody's is Moody's Investors Service, Inc.

S&P is Standard & Poor's Ratings Group.

Duff & Phelps is Duff & Phelps Credit Rating Co.

                                       4
<PAGE>
 
Fitch is Fitch Investors Service, L.P.

Rule 144A Securities are securities that may be resold pursuant to Rule 144A
under the Securities Act of 1933, as amended (the "Securities Act").

1940 Act is the Investment Company Act of 1940, as amended.

Code is the Internal Revenue Code of 1986, as amended.

Commission is the Securities and Exchange Commission.

Exchange is the New York Stock Exchange, Inc.

                                       5
<PAGE>
 
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                            Description Of The Fund
- --------------------------------------------------------------------------------

The Fund is a non-diversified investment company. The Fund's investment
objective is "fundamental" and cannot be changed without a shareholder vote.
Except as otherwise noted, the Fund's investment policies are not fundamental
and thus can be changed without a shareholder vote. The Fund will not change
these policies without notifying its shareholders. There is no guarantee that
the Fund will achieve its investment objectives.

Investment Objectives and Policies

The Fund seeks primarily a high level of current income and secondarily capital
appreciation. The Fund pursues its investment objectives by investing primarily
in a portfolio of fixed-income securities of U.S. and non-U.S. companies and
U.S. Government and foreign government securities and supranational entities,
including lower-rated securities. The Fund may also use derivative instruments
to attempt to enhance income. The average weighted maturity of the Fund's
portfolio of fixed-income securities is expected to vary between five years and
30 years in accordance with Alliance's changing perceptions of the relative
attractiveness of various maturity ranges.

Under normal market conditions, at least 65% of the value of the Fund's total
assets will be invested in the fixed-income securities of issuers located in
three countries one of which may be the United States. No more than 25% of the
value of its total assets, however, will be invested in the securities of any
one foreign government. U.S. Government securities in which the Fund may invest
include mortgage-related securities and zero coupon securities. Fixed-income
securities in which the Fund may invest include preferred stock, mortgage-
related and other asset-backed securities, and zero coupon securities. The Fund
may also invest in rights and warrants (for debt securities or for equity
securities that are acquired in connection with debt instruments), and loan
participations and assignments.

The Fund will maintain at least 65% of the value of its total assets in
investment grade securities and may maintain not more than 35% of the value of
its total assets in lower-rated securities. See "Risk Considerations--Securities
Ratings" and "---Investment in Lower-Rated Fixed-Income Securities." Unrated
securities will be considered for investment by the Fund when Alliance believes
that the financial condition of the issuers of such obligations and the
protection afforded by the terms of the obligations themselves limit the risk to
the Fund to a degree comparable to that of rated securities which are consistent
with the Fund's investment objectives and policies. Lower-rated securities in
which the Fund may invest include Brady Bonds and fixed-income securities of
issuers located in emerging markets. There is no minimum rating requirement
applicable to the Fund's investments in lower-rated fixed-income securities.

The Fund may also: (i) invest in foreign currencies, (ii) purchase and write put
and call options on securities and foreign currencies, (iii) purchase or sell
forward foreign exchange contracts, (iv) invest in variable, floating and
inverse floating rate instruments, (v) invest in indexed commercial paper, (vi)
invest in structured securities, (vii) lend portfolio securities amounting to
not more than 25% of its total assets, (viii) enter into repurchase agreements
pertaining to the types of securities in which it invests, (ix) use reverse
repurchase agreements and dollar rolls, (x) purchase and sell securities on a
forward commitment basis, (xi) enter into standby commitments, (xii) enter into
contracts for the purchase or sale for future delivery of fixed-income
securities or foreign currencies, or contracts based on financial indices,
including any index of U.S. Government securities, foreign government securities
or common stock, and purchase and write options on futures contracts, (xiii)
invest in Eurodollar instruments, (xiv) enter into interest rate swaps, caps and
floors, and (xv) make short sales of securities or maintain a short position.
For additional information on the use, risks and costs of these policies and
practices see "Additional Investment Practices" and "Risk Consideration." The
Fund may borrow in order to purchase securities or make other investments,
although it currently intends to limit its ability to borrow to an amount not to
exceed 25% of its total assets. See "Risk Considerations---Effects of
Borrowing."

Additional Investment Practices

Derivatives. The Fund may use derivatives in furtherance of its investment
objectives. 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.
Derivatives can be used to earn income or protect against risk, or both. For
example, one party with unwanted risk may agree to pass that risk to another
party who is willing to accept the risk, the second party being motivated, for
example, by the desire either to earn income in the form of a fee or premium
from the first party, or to reduce its own unwanted risk by attempting to pass
all or part of that risk to the first party.

Derivatives can be used by investors such as the Fund 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. Each of these uses entails greater risk than if
derivatives were used solely for hedging purposes. Derivatives are a valuable
tool which, when used properly, can provide significant benefit to Fund
shareholders. The Fund may take a significant position in those derivatives that
are within its investment policies if, in Alliance's judgment, this represents
the most effective response to current or anticipated market conditions. The
Fund makes extensive use of carefully selected forwards and other derivatives to
achieve the currency hedging that is an integral part of its investment
strategy. Alliance's use of derivatives is subject to continuous risk assessment
and control from the standpoint of the Fund's investment objectives and
policies.

                                       6
<PAGE>
 
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.

There are four principal types of derivative instruments-- options, futures,
forwards and swaps--from which virtually any type of derivative transaction can
be created.

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 or
sell 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. A call option entitles the holder to purchase,
and a put option entitles the holder to sell, the underlying asset (or settle
for cash an amount based on an underlying asset, rate or index). 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).

Futures. 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. 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.

Forwards. A forward contract is an obligation by 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. Forward contracts are
customized, privately negotiated agreements designed to satisfy the objectives
of each party. A forward contract usually results in the delivery of the
underlying asset upon maturity of the contract in return for the agreed upon
payment.

Swaps. A swap is a customized, privately negotiated 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). The payment flows are netted against
each other, with the difference being paid by one party to the other. 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.

Debt instruments that incorporate one or more of these building blocks for the
purpose of determining the principal amount of and/or rate of interest payable
on the debt instruments are often referred to as "structured securities." An
example of this type of structured security is indexed commercial paper. The
term is also used to describe certain securities issued in connection with the
restructuring of certain foreign obligations. See "Indexed Commercial Paper" and
"Structured Securities" below. The term "derivative" is also sometimes used to
describe securities involving rights to a portion of the cash flows from an
underlying pool of mortgages or other assets from which payments are passed
through to the owner of, or that collateralize, the securities. These securities
are described below under "Additional Investment Practices--Mortgage-Related
Securities."

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 that investors should understand before investing in the Fund.

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

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

Credit Risk. This is the risk that a loss may be sustained by the Fund as a
result of the failure of another party to a derivative (usually referred to as a
"counterparty") to comply with the terms of the derivative contract. The credit
risk for exchange-traded derivatives is generally less than for privately
negotiated derivatives, since the clearing house, 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 clearing house in order to reduce overall credit
risk. For privately negotiated derivatives, there is no similar clearing agency
guarantee. Therefore, the Fund considers the creditworthiness of each
counterparty to a privately negotiated derivative in evaluating potential credit
risk.

                                       7
<PAGE>
 
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.
Certain derivatives have the potential for unlimited loss, regardless of the
size of the initial investment.

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

Derivatives That May Be Used By the Fund

Following is a description of specific derivatives which the Fund may use.

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

The Fund may write a put or call option in return for a premium, which is
retained by the Fund whether or not the option is exercised. Except with respect
to uncovered call options written for cross-hedging purposes, the Fund will not
write uncovered call or put options in securities. A call option written by the
Fund is "covered" if the Fund owns the underlying security, has an absolute and
immediate right to acquire that security upon conversion or exchange of another
security it holds, or holds a call option on the underlying security with an
exercise price equal to or less than that of the call option it has written. A
put option written by the Fund is covered if the Fund holds a put option on the
underlying securities with an exercise price equal to or greater than that of
the put option it has written.

The risk involved in writing an uncovered put option is that there could be a
decrease in the market value of the underlying securities. If this occurred, the
Fund could be obligated to purchase the underlying security at a higher price
than its current market value. Conversely, the risk involved in writing an
uncovered call option is that there could be an increase in the market value of
the underlying security, and the Fund could be obligated to acquire the
underlying security at its current price and sell it at a lower price. The risk
of loss from writing an uncovered put option is limited to the exercise price of
the option, whereas the risk of loss from writing an uncovered call option is
potentially unlimited.

The Fund may write a call option on a security that it does not own in order to
hedge against a decline in the value of a security that it owns or has the right
to acquire, a technique referred to as "cross-hedging." The Fund would write a
call option for cross-hedging purposes, instead of writing a covered call
option, when the premium to be received from the cross-hedge transaction exceeds
that to be received from writing a covered call option, while at the same time
achieving the desired hedge. The correlation risk involved in cross-hedging may
be greater than the correlation risk involved with either hedging strategies.

The Fund generally purchases or writes privately negotiated options on
securities. If the Fund does so, it will effect such transactions only with
investment dealers and other financial institutions (such as commercial banks or
savings and loan institutions) deemed creditworthy by Alliance. Alliance has
adopted procedures for monitoring the creditworthiness of such counterparties.
Privately negotiated options purchased or written by the Fund may be illiquid,
and it may not be possible for the Fund to effect a closing transaction at an
advantageous time. See "Illiquid Securities" below.

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

Options On Foreign Currencies. The Fund invests in options on foreign currencies
that are privately negotiated or traded on U.S. or foreign exchanges for the
purpose of protecting against declines in the U.S. Dollar value of foreign
currency denominated securities held by the Fund and against increases in the
U.S. Dollar cost of such securities to be acquired. The purchase of an option on
a foreign currency may constitute an effective hedge against fluctuations in
exchange rates, although if rates move adversely, the Fund may forfeit the
entire amount of the premium plus related transaction costs.

                                       8
<PAGE>
 
Rights And Warrants. The Fund may invest in rights and warrants, which are
option securities permitting their holders to subscribe for other securities.
The Fund may invest in rights and warrants for debt securities or for equity
securities that are acquired in connection with debt instruments. Rights are
similar to warrants except that they have a substantially shorter duration.
Rights and warrants do not carry with them dividend or voting rights with
respect to the underlying securities, or any rights in the assets of the issuer.
As a result, an investment in rights and warrants may be considered more
speculative than certain other types of investments. In addition, the value of a
right or a warrant does not necessarily change with the value of the underlying
securities, and a right or a warrant ceases to have value if it is not exercised
prior to its expiration date. The Fund may invest up to 20% of its total assets
in rights and warrants.

Futures Contracts And Options On Futures Contracts. Futures contracts that the
Fund may buy and sell may include futures contracts on fixed-income or other
securities or foreign currencies, and contracts based on interest rates or
financial indices, including any index of U.S. Government securities, foreign
government securities or corporate debt securities. Options on futures contracts
are options that call for the delivery of futures contracts upon exercise.
Options on futures contracts written or purchased by the Fund will be traded on
U.S. or foreign exchanges.

The Fund will not enter into a futures contract or write or purchase an option
on a futures contract if immediately thereafter the market values of the
outstanding futures contracts of the Fund and the currencies and futures
contracts subject to outstanding options written by the Fund would exceed 50% of
its total assets. Nor will the Fund enter into a futures contract or, if
otherwise permitted, write or purchase an option on a futures contract, if
immediately thereafter the aggregate of initial margin deposits on all the
outstanding futures contracts of the Fund and premiums paid on outstanding
options on futures contracts would exceed 5% of the market value of the total
assets of the Fund. In addition, the Fund will not enter into any futures
contract (i) other than one on fixed-income securities or based on interest
rates, or (ii) if immediately thereafter the sum of the then aggregate futures
market prices of financial instruments required to be delivered under open
futures contract sales and the aggregate futures market prices of instruments
required to be delivered under open futures contract purchases would exceed 30%
of the value of the Fund's total assets.

Eurodollar Instruments. Eurodollar instruments are essentially U.S. Dollar-
denominated futures contracts or options thereon that are linked to LIBOR.
Eurodollar futures contracts enable purchasers to obtain a fixed rate for the
lending of funds and sellers to obtain a fixed rate for borrowings. The Fund
intends to use Eurodollar futures contracts and options thereon to hedge against
changes in LIBOR (to which many short-term borrowings and floating rate
securities in which the Fund invests are linked).

Forward Foreign Currency Exchange Contracts. In purchasing or selling forward
contracts on foreign currencies ("forward contracts"), the Fund attempts to
minimize the risk to it from adverse changes in the relationship between the
U.S. Dollar and other currencies. The Fund may enter into a forward contract,
for example, 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 (a "transaction hedge"). When the Fund believes that a
foreign currency may suffer a substantial decline against the U.S. Dollar, it
may enter into a forward sale contract to sell an amount of that foreign
currency approximating the value of some or all of the Fund's portfolio
securities denominated in such foreign currency, or when the Fund believes that
the U.S. Dollar may suffer a substantial decline against a foreign currency, it
may enter into a forward purchase contract to buy that foreign currency for a
fixed dollar amount (a "position hedge"). Instead of entering into a position
hedge, the Fund may, in the alternative, enter into a forward contract to sell a
different foreign currency for a fixed U.S. Dollar amount where the Fund
believes that the U.S. Dollar value of the currency to be sold pursuant to the
forward contract will fall whenever there is a decline in the U.S. Dollar value
of the currency in which portfolio securities of the Fund are denominated (a
"cross-hedge").

Forward Commitments. Forward commitments are forward contracts for the purchase
or sale of securities, including purchases on a "when-issued" basis or purchases
or sales on a "delayed delivery" basis. When forward commitments with respect to
fixed-income securities are negotiated, the price, which is generally expressed
in yield terms, is fixed at the time the commitment is made, but payment for and
delivery of the securities take place at a later date. Normally, the settlement
date occurs within two months after the transaction, but settlements beyond two
months may be negotiated. Securities purchased or sold under a forward
commitment are subject to market fluctuation, and no interest or dividends
accrues to the purchaser prior to the settlement date. At the time the Fund
enters into a forward commitment, it records the transaction and thereafter
reflects the value of the security purchased or, if a sale, the proceeds to be
received, in determining its net asset value. Any unrealized appreciation or
depreciation reflected in such valuation would be canceled if the required
conditions did not occur and the trade were canceled.

The use of forward commitments helps the Fund to protect against anticipated
changes in interest rates and prices. For instance, in periods of rising
interest rates and falling bond prices, the Fund might sell securities in its
portfolio on a forward commitment basis to limit its exposure to falling bond
prices. In periods of falling interest rates and rising bond prices, the Fund
might sell a security in its portfolio and purchase the same or a similar
security on a when-issued or forward commitment basis, thereby obtaining the
benefit of currently higher cash yields. No forward commitments will be made by
the Fund if, as a result, the Fund's aggregate forward

                                       9
<PAGE>
 
commitments under such transactions would be more than 25% of the total assets
of the Fund.

The Fund's right to receive or deliver a security under a forward commitment may
be sold prior to the settlement date. The Fund enters into forward commitments,
however, only with the intention of actually receiving securities or delivering
them, as the case may be. If the Fund, however, 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 realize a gain
or incur a loss.

Interest Rate Transactions (Swaps, Caps And Floors). The Fund expects to enter
into interest rate swap, cap or floor transactions primarily for hedging
purposes, 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 Fund anticipates purchasing at a later date. The Fund
does not intend to use these transactions in a speculative manner.

Interest rate swaps involve the exchange by the Fund with another party of their
respective commitments to pay or receive interest (e.g., an exchange of floating
rate payments for fixed rate payments) computed based on a contractually-based
principal (or "notional") amount. Interest rate swaps are entered into on a net
basis (i.e., the two payment streams are netted out, with the Fund receiving or
paying, as the case may be, only the net amount of the two payments). 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. The Fund may enter
into interest rate swaps, caps and floors on either an asset- based or
liability-based basis, depending upon whether it is hedging its assets or
liabilities.

There is no limit on the amount of interest rate transactions that may be
entered into by the Fund. The Fund may enter into interest rate swaps involving
payments to the same currency or in different currencies. The Fund will not
enter into an interest rate swap, cap or floor transaction unless the unsecured
senior debt or the claims-paying ability of the other party thereto is then
rated in the highest rating category of at least one nationally recognized
rating organization. The Fund will enter into interest rate swap, cap or floor
transactions with its respective custodian, and with other counterparties, but
only if: (i) for transactions with maturities under one year, such other
counterparts has outstanding prime commercial paper; or (ii) for transactions
with maturities greater than one year, the counterparts has outstanding high
quality debt securities.

The swap market has grown substantially in recent years, with a large number of
banks and investment banking firms acting both as principals and as agents
utilizing standardized swap documentation. As a result, the swap market has
become well established and relatively liquid. Caps and floors are less liquid
than swaps. These transactions do not involve the delivery of securities or
other underlying assets or principal. Accordingly, unless there is a
counterparts default, the risk of loss to the Fund from interest rate
transactions is limited to the net amount of interest payments that the Fund is
contractually obligated to make.

Standby Commitment Agreements. Standby commitment agreements are similar to put
options that commit the Fund, for a stated period of time, to purchase a stated
amount of a security that may be issued and sold to the Fund 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 Fund is paid a
commitment fee regardless of whether the security ultimately is issued. The Fund
will enter into such agreements only for the purpose of investing in the
security underlying the commitment at a yield and price considered advantageous
and unavailable on a firm commitment basis. The Fund will not enter into a
standby commitment with a remaining term in excess of 45 days. The Fund will
limit its investments in standby commitments so that the aggregate purchase
price of the securities subject to the commitments does not exceed 25% of its
assets.

There is no guarantee that the security subject to a standby commitment will be
issued. In addition, 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
is at the option of the issuer, the Fund 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 Fund.

Indexed Commercial Paper. Indexed commercial paper may have its principal linked
to changes in foreign currency exchange rates whereby its principal amount is
adjusted upwards or downwards (but not below zero) at maturity to reflect
changes in the referenced exchange rate. The Fund may invest in such commercial
paper without limitation. The Fund will receive interest and principal payments
on such commercial paper in the currency in which such commercial paper is
denominated, but the amount of principal payable by the issuer at maturity will
change in proportion to the change (if any) in the exchange rate between the two
specified currencies between the date the instrument is issued and the date the
instrument matures. While such commercial paper entails the risk of loss of
principal, the potential for realizing gains as a result of changes in foreign
currency exchange rates enables the Fund to hedge (or cross-hedge) against a
decline in the U.S. Dollar value of investments denominated in foreign
currencies while providing an attractive money market rate of return. The Fund
will purchase such commercial paper for hedging purposes only, not for
speculation.

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

                                       10
<PAGE>
 
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; and

(iii) obligations issued or guaranteed by U.S. Government agencies and
instrumentalities that are not supported by the full faith and credit of the
U.S. Government, such as securities issued by FNMA and FHLMC, and governmental
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
amounts with principal payments at maturity or specified call dates. For
information regarding GNMA, FNMA and FHLMC certificates and CMOs, see "Mortgage-
Related Securities" below.

U.S. Government securities also include zero coupon securities and principal-
only securities and certain SMRS. In addition, other U.S. Government agencies
and instrumentalities have issued stripped securities that are similar to SMRS.
Such securities include those that are issued with an IO class and a PO class.
See Mortgage-Related Securities" below and "Zero Coupon and Principal-Only
Securities below. Although these stripped securities are purchased and sold by
institutional investors through several investment banking firms acting as
brokers or dealers these securities were only recently developed. As a result,
established trading markets have not yet developed and, accordingly, these
securities may be illiquid.

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 Fund.

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.

Mortgage-Related Securities. The mortgage-related securities in which the Fund
may invest typically are securities representing interests in pools of mortgage
loans made to home owners. The mortgage loan pools may be assembled for sale to
investors (such as the Fund) by governmental or private organizations. Mortgage-
related securities issued by GNMA are backed by the full faith and credit of the
United States; those issued by FNMA and FHLMC are not so backed. Mortgage-
related securities bear interest at either a fixed rate or an adjustable rate
determined by reference to an index rate. Mortgage-related securities frequently
provide for monthly payments that consist of both interest and principal, unlike
more traditional debt securities, which normally do not provide for periodic
repayments of principal.

Securities representing interests in pools created by 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 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. A Fund may buy mortgage-related securities without credit
enhancement if the securities meet the Fund's investment standards. Although the
market for mortgage-related securities is becoming increasingly liquid, those of
certain private organizations may not be readily marketable.

One type of mortgage-related security is of the "pass-through" variety. The
holder of a pass-through security is considered to own an undivided beneficial
interest in the underlying pool of mortgage loans and receives a pro rata share
of the monthly payments made by the borrowers on their mortgage loans, net of
any fees paid to the issuer or guarantor of the securities. Prepayments of
mortgages resulting from the sale, refinancing or foreclosure of the underlying
properties are also paid to the holders of these securities, which, as discussed
below, frequently causes these securities to experience significantly greater
price and yield volatility than experienced by traditional fixed-income
securities. Some mortgage-related securities, such as securities issued by GNMA,
are referred to as "modified pass-through" securities. The holders of these
securities are entitled to the full and timely payment of principal and
interest, net of certain fees, regardless of whether payments are actually made
on the underlying mortgages.

Another form of mortgage-related security is a "pay-through" security, which is
a debt obligation 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. Collateralized
mortgage obligations (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.

                                       11
<PAGE>
 
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 principal. The principal and interest on the
underlying mortgages may be allocated among several classes of a series of a CMO
in many ways. In a common structure, payments of principal, including any
principal prepayments, on the underlying mortgages are applied to the classes of
the series of a CMO in the order of their respective stated maturities or final
distribution dates, so that no payment of principal will be made on any class of
a CMO until all other classes having an earlier stated maturity or final
distribution date have been paid in full. One or more tranches of a CMO may have
coupon rates that reset periodically, or "float," at a specified increment over
an index such as LIBOR. Floating-rate CMOs may be backed by fixed or adjustable
rate mortgages. To date, fixed-rate mortgages have been more commonly utilized
for this purpose. Floating-rate CMOs are typically issued with lifetime caps on
the coupon rate thereon. These caps, similar to the caps on adjustable-rate
mortgages described below, represent a ceiling beyond which the coupon rate on a
floating-rate CMO may not be increased regardless of increases in the interest
rate index to which the floating-rate CMO is tied. The collateral securing the
CMOs may consist of a pool of mortgages, but may also consist of mortgage-backed
bonds or pass-through securities. CMOs may be issued by a U.S. Government
instrumentality or agency or by a private issuer. 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.

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. There are two main categories of rates or
indices: (i) rates based on the yield on U.S. Treasury securities and (ii)
indices derived from a calculated measure such as a cost of funds index or a
moving average of mortgage rates. Some rates and indices closely mirror changes
in market interest rate levels, while others tend to lag changes in market rate
levels and tend to be somewhat less volatile.

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.

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 Fund 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 experienced by traditional fixed-income securities. The occurrence of
mortgage prepayments is affected by the level of general interest rates, general
economic conditions and other social and demographic factors. 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 Fund may not
be able to realize the rate of return it expected.

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. Although the negative effect could be
lessened if the mortgage-related securities were to be paid earlier (thus
permitting the Fund to reinvest the prepayment proceeds in investments yielding
the higher current interest rate), as described above the rates of mortgage
prepayments and early payments of mortgage-related securities tend to decline
during periods of rising interest rates.

Although the values of ARMS may not be affected by rising interest rates as much
as such rates affect the value of fixed-rate mortgage securities, ARMS may still
decline in value as a result of rising interest rates. Although, as described
above, the yields on ARMS vary with changes in the applicable interest rate or
indices, there is often a lag between increases in general interest rates and
increases in the yield on ARMS as a result of relatively infrequent interest
rate reset dates. In addition, adjustable-rate mortgages and ARMS often have

                                       12
<PAGE>
 
interest rate or payment caps that limit the ability of the adjustable-rate
mortgages or ARMS to fully reflect increases in the general level of interest
rates.

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. These
asset-backed securities are subject to risks associated with changes in interest
rates and prepayment of underlying obligations 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.

Zero Coupon and Principal-Only Securities. Zero coupon securities and principal
only (PO) securities are debt securities that have been issued without interest
coupons or stripped of their unmatured interest coupons, and include receipts or
certificates representing interests in such stripped debt obligations and
coupons. Such a security pays no interest to its holder during its life. Its
value to an investor consists of the difference between its face value at the
time of maturity and the price for which it was acquired, which is generally an
amount significantly less than its face value. Such securities usually trade at
a deep discount from their face or par value and are subject to greater
fluctuations in market value in response to changing interest rates than debt
obligations of comparable maturities and credit quality that make current
distributions of interest. On the other hand, because there are no periodic
interest payments to be reinvested prior to maturity, these securities eliminate
reinvestment risk and "lock in" a rate of return to maturity.

Zero coupon Treasury securities are U.S. Treasury bills issued without interest
coupons. Principal only Treasury securities are U.S. Treasury notes and bonds
that have been stripped of their unmatured interest coupons, and receipts or
certificates representing interests in such stripped debt obligations and
coupons. Currently the only U.S. Treasury security issued without coupons is the
Treasury bill. Although the U.S. Treasury does not itself issue Treasury notes
and bonds without coupons, under the U.S. Treasury STRIPS program interest and
principal payments on certain long-term Treasury securities may be maintained
separately in the Federal Reserve book entry system and may be separately traded
and owned. In addition, in the last few years a number of banks and brokerage
firms have separated ("stripped") the principal portions from the coupon
portions of U.S. Treasury bonds and notes and sold them separately in the form
of receipts or certificates representing undivided interests in these
instruments (which instruments are generally held by a bank in a custodial or
trust account). The staff of the Commission has indicated that, in its view,
these receipts or certificates should be considered as securities issued by the
bank or brokerage firm involved and, therefore, should not be included in the
Fund's categorization of U.S. Government securities. The Fund disagrees with the
staff's position but will not treat such securities as U.S. Government
securities until final resolution of the issue.

Current federal tax law requires that a holder (such as the Fund) of a zero
coupon security accrue a portion of the discount at which the security was
purchased as income each year even though the holder receives no interest
payment in cash on the security during the year. As a result, in order to make
the distributions necessary for the Fund not to be subject to federal income or
excise taxes, the Fund might be required to pay out as an income distribution
each year an amount, obtained by liquidation of portfolio securities or
borrowings if necessary, greater than the total amount of cash that the Fund has
actually received as interest during the year. The Fund believes, however, that
it is highly unlikely that it would be necessary to liquidate portfolio
securities or borrow money in order to make such required distributions or to
meet its investment objective. For a discussion of the tax treatment of zero
coupon Treasury securities, see "Dividends, Distributions and Taxes---Zero
Coupon Treasury Securities" in the Statement of Additional Information of the
Fund.

The Fund may also invest in "pay-in-kind" debentures (i.e., debt obligations the
interest on which may be paid in the form of obligations of the same type rather
than cash), which have characteristics similar to zero coupon securities.

Variable, Floating Inverse Floating Rate Instruments. Fixed-income securities
may have fixed, variable or floating rates of interest. Variable and floating
rate securities pay interest at rates that are adjusted periodically, according
to a specified formula. A "variable" interest rate adjusts at predetermined
intervals (e.g., daily, weekly or monthly), while a "floating interest rate
adjusts whenever a specified benchmark rate (such as the bank prime lending
rate) changes.

The Fund may invest in fixed-income securities that pay interest at a coupon
rate equal to a base rate, plus additional interest for a certain period of time
if short-term interest rates rise above a predetermined level or "cap." The
amount of such an additional interest payment typically is calculated under a

                                       13
<PAGE>
 
formula based on a short-term interest rate index multiplied by a designated
factor.

Leveraged inverse floating rate debt instruments are sometimes known as inverse
floaters. The interest rate on an inverse floater resets in the opposite
direction from the market rate of interest to which the inverse floater is
indexed. An inverse floater may be considered to be leveraged to the extent that
its interest rate varies by a magnitude that exceeds the magnitude of the change
in the index rate of interest. The higher degree of leverage inherent in inverse
floaters is associated with greater volatility in market value, such that,
during periods of rising interest rates, the market values of inverse floaters
will tend to decrease more rapidly than those of fixed rate securities.

Structured Securities. Structured securities in which the Fund may invest
represent interests in entities organized and operated solely for the purpose of
restructuring the investment characteristics of sovereign debt obligations. This
type of restructuring involves the deposit with or purchase by an entity, such
as a corporation or trust, of specified instruments (such as commercial bank
loans or Brady Bonds) and the issuance by that entity of one or more classes of
structured securities backed by, or representing interests in, the underlying
instruments. The cash flow on the underlying instruments may be apportioned
among the newly issued structured securities to create securities with different
investment characteristics such as varying maturities, payment priorities and
interest rate provisions, and the extent of the payments made with respect to
structured securities is dependent on the extent of the cash flow on the
underlying instruments. Because structured securities typically involve no
credit enhancement, their credit risk generally will be equivalent to that of
the underlying instruments. Structured securities of a given class may be either
subordinated or unsubordinated to the right of payment of another class.
Subordinated structured securities typically have higher yields and present
greater risks than unsubordinated structured securities. The Fund may invest
without limit in these types of structured securities.

Loan Participations and Assignments. The Fund's investments in loans are
expected in most instances to be in the form of participations in loans and
assignments of all or a portion of loans from third parties. The Fund's
investment in loan participations typically will result in the Fund having a
contractual relationship only with the lender and not with the borrower. The
Fund will acquire participations only if the lender interpositioned between the
Fund and the borrower is a lender having total assets of more than $25 billion
and whose senior unsecured debt is rated investment grade or higher. When the
Fund purchases a loan assignment from a lender it will acquire direct rights
against the borrower on the loan. Because loan assignments are arranged through
private negotiations between potential assignees and potential assignors,
however, the rights and obligations acquired by the Fund as the purchaser of an
assignment may differ from, and be more limited than, those held by the
assigning lender.

The assignability of certain sovereign debt obligations is restricted by the
governing documentation as to the nature of the assignee such that the only way
in which the Fund may acquire an interest in a loan is through a participation
and not an assignment. A Fund may have difficulty disposing of assignments and
participations because to do so it will have to assign such investments to a
third party. Because there may not be a liquid market for such investments, they
can probably be sold only to a limited number of institutional investors. The
lack of a liquid secondary market may have an adverse effect on the value of
such investments and the Fund's ability to dispose of particular participations
and assignments when necessary to meet its liquidity needs in response to a
specific economic event such as a deterioration in the creditworthiness of the
borrower. The lack of a liquid secondary market for participations and
assignments also may make it more difficult for the Fund to assign a value to
these securities for purposes of valuing the Fund's portfolio and calculating
its net asset value.

The Fund may invest up to 25% of its total assets in loan participations and
assignments. The government that is the borrower on the loan will be considered
by the Fund to be the issuer of a loan participation or assignment for purposes
of its fundamental investment policy that it may not invest 25% or more of its
total assets in securities of issuers conducting their principal business
activities in the same industry (i.e., foreign government).

Brady Bonds. Brady Bonds are created through the exchange of existing commercial
bank loans to foreign entities for new obligations in connection with debt
restructurings under a plan introduced by former U.S. Secretary of the Treasury,
Nicholas F. Brady ("The Brady Plan"). Brady Bonds have been issued only
recently, and, accordingly, do not have a long payment history. They may be
collateralized or uncollateralized and issued in various currencies (although
most are U.S. Dollar-denominated) and they are actively traded in the over-the-
counter secondary market.

U.S. Dollar-denominated, collateralized Brady Bonds, which may be fixed-rate par
bonds or floating rate discount bonds, are generally collateralized in full as
to principal due at maturity by U.S. Treasury zero coupon obligations that have
the same maturity as the Brady Bonds. Interest payments on these Brady Bonds
generally are collateralized by cash or securities in an amount that, in the
case of fixed rate bonds, is equal to at least one year of rolling interest
payments based on the applicable interest rate at that time and is adjusted at
regular intervals thereafter. Certain Brady Bonds are entitled to "value
recovery payments" in certain circumstances, which in effect constitute
supplemental interest payments but generally are not collateralized. Brady Bonds
are often viewed as having up to four valuation components: (i) collateralized
repayment of principal at final maturity, (ii) collateralized interest payments,
(iii) uncollateralized interest payments, and (iv) any uncollateralized
repayment of principal at maturity (these uncollateralized amounts constitute
the "residual risk").

                                       14
<PAGE>
 
In the event of a default with respect to collateralized Brady Bonds as a result
of which the payment obligations of the issuer are accelerated, the U.S.
Treasury zero coupon obligations held as collateral for the payment of principal
will not be distributed to investor, nor will such obligations be sold and the
proceeds distributed. The collateral will be held by the collateral agent to the
scheduled maturity of the defaulted Brady Bonds, which will continue to be
outstanding, at which time the face mount of the collateral will equal the
principal payments that would have then been due on the Brady Bonds in the
normal course. In addition, in light of the residual risk of Brady Bonds and,
among other factors, the history of defaults with respect to commercial bank
loans by public and private entities of countries issuing Brady Bonds,
investments in Brady Bonds are to be viewed as speculative.

Convertible Securities. Convertible securities include bonds, debentures,
corporate notes and preferred stocks that are convertible into common stock.
Prior to conversion, convertible securities have the same general
characteristics as nonconvertible debt securities, which provide a stable stream
of income with generally higher yields than those of equity securities of the
same or similar issuers. The price of a convertible security will normally vary
with changes in the price of the underlying stock, although the higher yield
tends to make the convertible security less volatile than the underlying common
stock. As with debt securities, the market value of convertible securities tends
to decline as interest rates increase and increase as interest rates decline.
While convertible securities generally offer lower interest or dividend yields
than non-convertible debt securities of similar quality, they enable investors
to benefit form increases in the market price of the underlying common stock.
Convertible debt securities that are rated Baa or lower by Moody's or BB or
lower by S&P, Duff & Phelps or Fitch and comparable unrated securities may share
some or all of the risks of debt securities with those ratings. For a
description of these risks, see "Risk Considerations--Investment in Lower-Rated
Fixed-Income Securities."

Short Sales. A short sale is effected by selling a security that the Fund does
not own, or if the Fund owns the security, it is not to be delivered upon
consummation of the sale. A short sale is "against the box" if the Fund owns or
has the right to obtain without payment securities identical to those sold
short.

The Fund may make a short sale in anticipation that the market price of that
security will decline. When the Fund makes a short sale of a security that it
does not own, it must borrow from a broker-dealer the security sold short and
deliver the security to the broker-dealer upon conclusion of the short sale. The
Fund may be required to pay a fee to borrow particular securities and is often
obligated to pay over any payments received on such borrowed securities. The
Fund's obligation to replace the borrowed security will be secured by collateral
deposited with a broker-dealer qualified as a custodian. Depending on the
arrangements the Fund makes with the broker-dealer from which it borrowed the
security regarding remittance of any payments received by the Fund on such
security, the Fund may not receive any payments (including interest) on its
collateral deposited with the broker-dealer.

In order to defer realization of gain or loss for U.S. federal income tax
purposes, the Fund may also make short sales "against the box." The Fund may not
make a short sale, if as a result, more than 25% of its total assets would be
held as collateral for short sales.

If the price of the security sold short increases between the time of the short
sale and the time the Fund replaces the borrowed security, the Fund will incur a
loss; conversely, if the price declines, the Fund will realize a short-term
capital gain. Any gain will be decreased, and any loss increased, by the
transaction costs described above. Although the Fund's gain is limited to the
price at which it sold the security short, its potential loss is theoretically
unlimited.

Certain special federal income tax considerations may apply to short sales
entered into by the Fund. See "Dividends, Distributions and Taxes" in the Fund's
Statement of Additional Information.

Repurchase Agreements. A repurchase agreement arises when a buyer purchases a
security and simultaneously agrees to resell it to the vendor at an agreed-upon
future date, normally a day or a few days later. The resale price is greater
than the purchase price, reflecting an agreed-upon interest rate for the period
the buyer's money is invested in the security. Such agreements permit the Fund
to keep all of its assets at work while retaining "overnight" flexibility in
pursuit of investments of a longer-term nature. The Fund requires continual
maintenance of collateral in an amount equal to, or in excess of, the resale
price. If a vendor defaults on its repurchase obligation, the Fund would suffer
a loss to the extent that the proceeds from the sale of the collateral were less
than the repurchase price. If a vendor goes bankrupt, the Fund might be delayed
in, or prevented from, selling the collateral for its benefit.
 
Reverse Repurchase Agreements and Dollar Rolls. Reverse repurchase agreements
involve sales by the Fund of portfolio assets concurrently with an agreement by
the Fund to repurchase the same assets at a later date at a fixed price. During
the reverse repurchase agreement period, the Fund continues to receive principal
and interest payments on these securities. Generally, the effect of such a
transaction is that the Fund can recover all or most of the cash invested in the
portfolio securities involved during the term of the reverse repurchase
agreement, while it will be able to keep the interest income associated with
those portfolio securities. Such transactions are advantageous only if the
interest cost to the Fund of the reverse repurchase transaction is less than the
cost of otherwise obtaining the cash.

Dollar rolls involve sales by the Fund of securities for delivery in the current
month and the Fund's simultaneously contracting to repurchase substantially
similar (same type and coupon) securities on a specified future date. During the
roll period, the

                                       15
<PAGE>
 
Fund forgoes principal and interest paid on the securities. The Fund is
compensated by the difference between the current sales price and the lower
forward price for the future purchase (often referred to as the "drop") as well
as by the interest earned on the cash proceeds of the initial sale.

Reverse repurchase agreements and dollar rolls involve the risk that the market
value of the securities the Fund is obligated to repurchase under the agreement
may decline below the repurchase price. In the event the buyer of securities
under a reverse repurchase agreement or dollar roll files for bankruptcy or
becomes insolvent, the Fund's use of the proceeds of the agreement may be
restricted pending a determination by the other party, or its trustee or
receiver, whether to enforce the Fund's obligation to repurchase the securities.

Reverse repurchase agreements and dollar rolls are speculative techniques and
are considered borrowings by the Fund. The Fund may enter into reverse
repurchase agreements with commercial banks and registered broker-dealers in
order to increase income, in an amount up to 25% of its total assets. Reverse
repurchase agreements and dollar rolls together with any borrowings by the Fund
will not exceed 25% of its total assets. See "Risk Considerations---Effects of
Borrowing."

Loans of Portfolio Securities. The Fund may make secured loans of portfolio
securities to brokers, dealers and financial institutions, provided that liquid
assets equal to at least 100% of the market value of the securities loaned is
deposited and maintained by the borrower with the Fund. The risks in lending
portfolio securities, as with other secured extensions of credit, consist of
possible loss of rights in the collateral should the borrower fail financially.
In determining whether to lend securities to a particular borrower, Alliance
will consider all relevant facts and circumstances, including the
creditworthiness of the borrower. While securities are on loan, the borrower
will pay the Fund any income earned thereon and the Fund may invest any cash
collateral in portfolio securities, thereby earning additional income, or
receive an agreed upon amount of income from a borrower that has delivered
equivalent collateral. The Fund will have the right to regain record ownership
of loaned securities or equivalent securities in order to exercise ownership
rights such as voting rights, subscription rights and rights to dividends,
interest or distributions. The Fund may pay reasonable finders', administrative
and custodial fees in connection with a loan. The Fund may lend securities with
a value of up to 25% of its total assets to broker-dealers approved by the
Fund's Board of Directors. The Fund will not lend portfolio securities to any
officer, director, employee or affiliate of the Fund or Alliance.

Illiquid Securities. The Fund will not maintain more than 15% of its net assets
in illiquid securities. Illiquid securities generally include (i) direct
placements or other securities that are subject to legal or contractual
restrictions on resale or for which there is no readily available market (e.g.,
when trading in the security is suspended or, in the case of unlisted
securities, when market makers do not exist or will not entertain bids or
offers), including many currency swaps and any assets used to cover currency
swaps, (ii) over-the-counter options and assets used to cover over-the-counter
options, and (iii) repurchase agreements not terminable within seven days. Rule
144A securities that have legal or contractual restrictions on resale but have a
readily available market are not deemed illiquid. Alliance will monitor the
liquidity of the Fund's Rule 144A portfolio securities under the supervision of
the Directors of the Fund. The Fund may not be able to sell such securities and
may not be able to realize their full value upon sale.

Future Developments. The Fund may, following written notice to its shareholders,
take advantage of other investment practices that are not currently contemplated
for use by the Fund, or are not available but may yet be developed, to the
extent such investment practices are consistent with the Fund's investment
objective and legally permissible for the Fund. Such investment practices, if
they arise, may involve risks that are different from or exceed those involved
in the practices described above.

Defensive Position. For temporary defensive purposes, the Fund may invest in
certain types of short-term, liquid, high grade debt securities. These
securities may include U.S. Government securities, qualifying bank deposits,
money market instruments, prime commercial paper, and other types of short-term
debt securities, including notes and bonds. Such securities may also include
short-term, foreign-currency denominated securities of the type mentioned above
issued by foreign governmental entities, companies and supranational
organizations. For a complete description of the types of securities in which
the Fund may invest while in a temporary defensive position, see the Fund's
Statement of Additional Information.
 
Portfolio Turnover. The portfolio turnover rate for the existing classes of
shares of the Fund is set forth in the table on page 25. The portfolio turnover
rate is greater than that of most other investment companies. A high rate of
portfolio turnover involves correspondingly greater expenses than a lower rate,
which must be borne by the Fund and its shareholders. High portfolio turnover
also may result in the realization of substantial net short-term capital gains.
See "Dividends, Distributions and Taxes" in the Statement of Additional
Information.

Certain Fundamental Investment Policies

The Fund may not (i) borrow money, except the Fund may, in accordance with
provisions of the 1940 Act, (a) borrow from a bank, if after such borrowing
there is asset coverage of at least 300% as defined in the 1940 Act, and (b)
borrow for temporary or emergency purposes in an amount not exceeding 5% of the
value of the total assets of the Fund, or (ii) pledge, hypothecate, mortgage or
otherwise encumber its assets, except to secure permitted borrowings. These
policies are fundamental and may not be changed without the approval of the
Fund's shareholders. Additional investment restrictions with respect to the Fund
are set forth in the Statement of Additional Information.

                                       16
<PAGE>
 
Certain Risk Considerations

Fixed-Income Securities. The value of the Fund's shares will fluctuate with the
value of its investments. The value of the Fund's investments will change as the
general level of interest rates fluctuates. During periods of falling interest
rates, the values of the Fund's securities will generally rise, although if
falling interest rates are viewed as precursor to a recession, the values of the
Fund's securities may fall along with interest rates. Conversely, during periods
of rising interest rates, the values of the Fund's securities will generally
decline. Changes in interest rates have a greater effect on fixed-income
securities with longer maturities and durations than those with shorter
maturities and durations.

In seeking to achieve the Fund's investment objective, there will be times, such
as during periods of rising interest rates, when depreciation and realization of
capital losses on securities in the Fund'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 will be reflected in the net asset value of the Fund.

U.S. Corporate Fixed-Income Securities. The U.S. corporate fixed-income
securities in which the Fund invests 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. Furthermore, the market price of such securities may be more
volatile to the extent that expected benefits from the restructuring do not
materialize. The Fund 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 Alliance believes such investment is consistent with the Fund's
investment objectives. The Fund's rights with respect to defaults on such
securities will be subject to applicable U.S. bankruptcy, moratorium and other
similar laws.

Foreign Investment. The securities markets of many foreign countries are
relatively small, with the majority of market capitalization and trading volume
concentrated in a limited number of companies representing a small number of
industries. Consequently, if the Funds investment portfolio includes such
securities, the Fund may experience greater price volatility and significantly
lower liquidity than a portfolio invested solely in securities of U.S.
companies. These markets may be subject to greater influence by adverse events
generally affecting the market, and by large investors trading significant
blocks of securities, than is usual in the United States. Securities
registration, custody and settlements may in some instances be subject to delays
and legal and administrative uncertainties. Furthermore, foreign investment in
the securities markets of certain foreign countries is restricted or controlled
to varying degrees. These restrictions or controls may at times limit or
preclude investment in certain securities and may increase the cost and expenses
of the Fund. In addition, the repatriation of investment income, capital or the
proceeds of sales of securities from certain of the countries is controlled
under regulations, including in some cases the need for certain advance
government notification or authority, and if a deterioration occurs in a
country's balance of payments, the country could impose temporary restrictions
on foreign capital remittances. The Fund could also be adversely affected by
delays in, or a refusal to grant, any required governmental approval for
repatriation, as well as by the application to it of other restrictions on
investment. Investing in local markets may require the Fund to adopt special
procedures or seek local governmental approvals or other actions, any of which
may involve additional costs to the Fund. The liquidity of the Fund's
investments in any country in which any of these factors exists could be
affected, and Alliance will monitor the effect of any such factor or factors on
the Fund's investments. Furthermore, transaction costs including brokerage
commissions for transactions both on and off the securities exchanges in many
foreign countries are generally higher than in the U.S.

Issuers of securities in foreign jurisdictions are generally not subject to the
same degree of regulation as are U.S. issuers with respect to such matters as
insider trading rules, restrictions on market manipulation, shareholder proxy
requirements and timely disclosure of information. The reporting, accounting and
auditing standards of foreign countries may differ, in some cases significantly,
from U.S. standards in important respects, and less information may be available
to investors in foreign securities than to investors in U.S. securities.
Substantially less information is publicly available about certain non-U.S.
issuers than is available about most U.S. issuers.
 
The economies of individual foreign countries may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross
domestic product or gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payments position.
Nationalization, expropriation or confiscatory taxation, currency blockage,
political changes, government regulation, political or social instability or
diplomatic developments could affect adversely the economy of a foreign country
or the Fund's investments in that country. In the event of nationalization,
expropriation or other confiscation, the Fund could lose its entire investment
in the country involved. In addition, laws in foreign countries governing
business organizations, bankruptcy and insolvency may provide less protection to
security holders such as the Fund than that provided by U.S. laws.

Currency Considerations. Because the Fund may invest some portion of its assets
in securities denominated in, and which receive revenues in, foreign currencies,
the Fund will be adversely affected by reductions in the value of those
currencies relative to the U.S. Dollar. These changes will affect the Fund's net
assets, distributions and income. If the value of

                                       17
<PAGE>
 
the foreign currencies in which the Fund receives income falls relative to the
U.S. Dollar between receipt of the income and the making of Fund distributions,
the Fund may be required to liquidate securities in order to make distributions
if the Fund has insufficient cash in U.S. Dollars to meet the distribution
requirements that the Fund must satisfy to qualify as a regulated investment
company for federal income tax purposes. Similarly, if an exchange rate declines
between the time the Fund incurs expenses in U.S. Dollars and the time cash
expenses are paid, the amount of the currency required to be converted into U.S.
Dollars in order to pay expenses in U.S. Dollars could be greater than the
equivalent amount of such expenses in the currency at the time they were
incurred. In light of these risks, the Fund may engage in certain currency
hedging transactions, which themselves, involve certain special risks. See
"Additional Investment Practices" above.

Sovereign Debt Obligations. No established secondary markets may exist for many
of the sovereign debt obligations in which the Fund will invest. Reduced
secondary market liquidity may have an adverse effect on the market price and
the Fund's ability to dispose of particular instruments when necessary to meet
its liquidity requirements or in response to specific economic events such as a
deterioration in the creditworthiness of the issuer. Reduced secondary market
liquidity for certain sovereign debt obligations may also make it more difficult
for the Fund to obtain accurate market quotations for the purpose of valuing its
portfolio. Market quotations are generally available on many sovereign debt
obligations only from a limited number of dealers and may not necessarily
represent firm bids of those dealers or prices for actual sales.

By investing in sovereign debt obligations, the Fund will be exposed to the
direct or indirect consequences of political, social and economic changes in
various countries. Political changes in a country may affect the willingness of
a foreign government to make or provide for timely payments of its obligations.
The country's economic status, as reflected, among other things, in its
inflation rate, the amount of its external debt and its gross domestic product,
will also affect the government's ability to honor its obligations.

The sovereign debt obligations in which the Fund will invest in many cases
pertain to countries that are among the world's largest debtors to commercial
banks, foreign governments, international financial organizations and other
financial institutions. In recent years, the governments of some of these
countries have encountered difficulties in servicing their external debt
obligations, which led to defaults on certain obligations and the restructuring
of certain indebtedness. Restructuring arrangements have included, among other
things, reducing and rescheduling interest and principal payments by negotiating
new or amended credit agreements or converting outstanding principal and unpaid
interest to Brady Bonds, and obtaining new credit to finance interest payments.
Certain governments have not been able to make payments of interest on or
principal of sovereign debt obligations as those payments have come due.
Obligations arising from past restructuring agreements may affect the economic
performance and political and social stability of those issuers.

The ability of governments to make timely payments on their obligations is
likely to be influenced strongly by the issuer's balance of payments, including
export performance, and its access to international credits and investments. To
the extent that a country receives payment for its exports in currencies other
than dollars, its ability to make debt payments denominated in dollars could be
adversely affected. To the extent that a country develops a trade deficit, it
will need to depend on continuing loans from foreign governments, multi-lateral
organizations or private commercial banks, aid payments from foreign governments
and on inflows of foreign investment. The access of a country to these forms of
external funding may not be certain, and a withdrawal of external funding could
adversely affect the capacity of a government to make payments on its
obligations. In addition, the cost of servicing debt obligations can be affected
by a change in international interest rates since the majority of these
obligations carry interest rates that are adjusted periodically based upon
international rates.

The Fund is permitted to invest in sovereign debt obligations that are not
current in the payment of interest or principal or are in default so long as
Alliance believes it to be consistent with the Fund's investment objectives. The
Fund may have limited legal recourse in the event of a default with respect to
certain sovereign debt obligations it holds. For example, remedies from defaults
on certain sovereign debt obligations, unlike those on private debt, must, in
some cases, be pursued in the courts of the defaulting party itself. Legal
recourse therefore may be significantly diminished. Bankruptcy, moratorium and
other similar laws applicable to issuers of sovereign debt obligations may be
substantially different from those applicable to issuers of private debt
obligations. The political context, expressed as the willingness of an issuer of
sovereign debt obligations to meet the terms of the debt obligation, for
example, is of considerable importance. In addition, no assurance can be given
that the holders of commercial bank debt will not contest payments to the
holders of securities issued by foreign governments in the event of default
under commercial bank loan agreements.

Effects of Borrowing. The Fund's loan agreements provide for additional
borrowings and for repayments and reborrowings from time to time, and the Fund
expects to effect borrowings and repayments at such times and in such amounts as
will maintain investment leverage in an amount approximately equal to its
borrowing target. The loan agreements provide for a selection of interest rates
that are based on the bank's short-term funding costs in the U.S. and London
markets.

Borrowings by the Fund result in leveraging of the Fund's shares of common
stock. Utilization of leverage, which is usually considered speculative,
however, involves certain risks to the Fund's shareholders. These include a
higher volatility of the net asset value of the Fund's shares of common stock
and the relatively greater effect on the net asset value of the

                                       18
<PAGE>
 
shares. So long as the Fund is able to realize a net return on its investment
portfolio that is higher than the interest expense paid on borrowings, the
effect of leverage will be to cause the Fund's shareholders to realize a higher
current net investment income than if the Fund were not leveraged. On the other
hand, interest rates on U.S. Dollar-denominated and foreign currency-denominated
obligations change from time to time as does their relationship to each other,
depending upon such factors as supply and demand forces, monetary and tax
policies within each country and investor expectations. Changes in such factors
could cause the relationship between such rates to change so that rates on U.S.
Dollar-denominated obligations may substantially increase relative to the
foreign currency denominated obligations in which the Fund may be invested. To
the extent that the interest expense on borrowings approaches the net return on
the Fund's investment portfolio, the benefit of leverage to the Fund's
shareholders will be reduced, and if the interest expense on borrowings were to
exceed the net return to shareholders, the Fund's use of leverage would result
in a lower rate of return than if the Fund were not leveraged. Similarly, the
effect of leverage in a declining market could be a greater decrease in net
asset value per share than if the Fund were not leveraged. In an extreme case if
the Fund's current investment income were not sufficient to meet the interest
expense on borrowings, it could be necessary for the Fund to liquidate certain
of its investments, thereby reducing the net asset value of the Fund's shares.

In the event of an increase in rates on U.S. Government securities or other
changed market conditions, to the point where leverage by the Fund could
adversely affect its shareholders, as noted above, or in anticipation of such
changes, the Fund may increase the percentage of its investment portfolio
invested in U.S. Government securities, which would tend to offset the negative
impact of leverage on Fund shareholders. The Fund may also reduce the degree to
which it is leveraged by repaying amounts borrowed.

Under the 1940 Act, the Fund is not permitted to borrow unless immediately after
such borrowing there is "asset coverage," as that term is defined and used in
the 1940 Act, of at least 300% for all borrowings of the Fund. In addition,
under the 1940 Act, in the event asset coverage falls below 300%, the Fund must
within three days reduce the amount of its borrowing to such an extent that the
asset coverage of its borrowings is at least 300%. Assuming, for example,
outstanding borrowings representing not more than one-third of the Fund's total
assets less liabilities (other than such borrowings), the asset coverage of the
Fund's portfolio would be 300%; while outstanding borrowings representing 25% of
the Fund's total assets less liabilities (other than such borrowings), the asset
coverage of the Fund's portfolio would be 400%. The Fund will maintain asset
coverage of outstanding borrowings of at least 300% and if necessary will, to
the extent possible, reduce the amounts borrowed by making repayments from time
to time in order to do so. Such repayments could require the Fund to sell
portfolio securities at times considered disadvantageous by Alliance. In the
event that the Fund is required to sell portfolio securities in order to make
repayments, such sales of portfolio securities could cause the Fund to incur
related transaction costs and might cause the Fund to realize gains on
securities held for less than three months. Because not more than 30% of the
Fund's gross income may be derived from the sale or disposition of stocks and
securities held for less than three months to maintain the Fund's tax status as
a regulated investment company, the gains would limit the agility of the Fund to
sell other securities held for less than three months that the Fund might wish
to sell in the ordinary course of its portfolio management and thus might
adversely affect the Fund's yield. See "Dividends, Distributions and Taxes."

The Fund may borrow to repurchase its shares or to meet redemption requests. In
addition, the Fund may borrow for temporary purposes (including the purposes
mentioned in the preceding sentence) in an amount not exceeding 5% of the value
of the assets of the Fund. Borrowings for temporary purposes are not subject to
the 300% asset average limit described above. See "Certain Fundamental
Investment Policies." The Fund may also borrow through the use of reverse
repurchase agreements and the use of dollar rolls to the extent permitted by the
1940 Act. See "Investment Objectives and Policies--Reverse Repurchase Agreements
and Dollar Rolls.

Securities Ratings. The ratings of fixed-income securities by S&P, Moody's, Duff
& Phelps and Fitch are a generally accepted barometer of credit risk. They are,
however, subject to certain limitations from an investor's standpoint. The
rating of an issuer is heavily weighted by past developments and does not
necessarily reflect probable future conditions. There is frequently a lag
between the time a rating is assigned and the time it is updated. In addition,
there may be varying degrees of difference in credit risk of securities within
each rating category.

Investment in Fixed-Income Securities Rated BAA and BBB. Securities rated Baa or
BBB are considered to have speculative characteristics and share some of the
same characteristics as lower-rated securities, as described below. Sustained
periods of deteriorating economic conditions or of rising interest rates are
more likely to lead to a weakening in the issuer's capacity to pay interest and
repay principal than in the case of higher-rated securities.

Investment in Lower-Rated Fixed-Income Securities. Lower-rated securities are
subject to greater risk of loss of principal and interest than higher-rated
securities. They are also generally considered to be subject to greater market
risk than higher-rated securities, and the capacity of issuers of lower-rated
securities to pay interest and repay principal is more likely to weaken than is
that of issuers of higher-rated securities in times of deteriorating economic
conditions or rising interest rates. In addition, lower-rated securities may be
more susceptible to real or perceived adverse economic conditions than
investment grade securities. Securities rated Ba or BB are judged to have
speculative elements or to be predominantly speculative with respect to the
issuer's ability to

                                       19
<PAGE>
 
pay interest and repay principal. Securities rated B are judged to have highly
speculative elements or to be predominantly speculative. Such securities may
have small assurance of interest and principal payments. Securities rated Baa by
Moody's are also judged to have speculative characteristics.

The market for lower-rated securities may be thinner and less active than that
for higher-rated 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 Fund may experience difficulty
in valuing such securities and, in turn, the Fund's assets.

Alliance will try to reduce the risk inherent in investment in lower-rated
securities through credit analysis, diversification and attention to current
developments and trends in interest rates and economic and political conditions.
However, there can be no assurance that losses will not occur. Since the risk of
default is higher for lower-rated securities, Alliance's research and credit
analysis are a correspondingly more important aspect of its program for managing
the Fund's securities than would be the case if the Fund did not invest in
lower-rated securities. In considering investments for the Fund, Alliance will
attempt to identify those high-yielding securities whose financial condition is
adequate to meet future obligations, has improved, or is expected to improve in
the future. Alliance's analysis focuses on relative values based on such factors
as interest or dividend coverage, asset coverage, earnings and cash flow
prospects, and the experience and managerial strength of the issuer.

Non-Rated Securities. Non-rated securities will also be considered for
investment by the Fund when Alliance believes that the financial condition of
the issuers of such securities, or the protection afforded by the terms of the
securities themselves, limits the risk to the Fund to a degree comparable to
that of rated securities which are consistent with the Fund's objective and
policies.
 
Non-diversified Status. The Fund is a "non-diversified" investment company,
which means the Fund is not limited in the proportion of its assets that may be
invested in the securities of a single issuer. However, the Fund intends to
conduct its operations so as to qualify to be taxed as a "regulated investment
company" for purposes of the Code, which will relieve the Fund of any liability
for federal income tax to the extent its earnings are distributed to
shareholders. See "Dividends, Distributions and Taxes" in the Statement of
Additional Information. To so qualify, among other requirements, the Fund will
limit its investments so that at the close of each quarter of the taxable year,
(i) not more than 25% of the Fund's total assets will be invested in the
securities of a single issuer, and (ii) with respect to 50% of its total assets,
not more than 5% of its total assets will be invested in the securities of a
single issuer and the Fund will not own more than 10% of the outstanding voting
securities of a single issuer. The Fund's investments in U.S. Government
securities are not subject to these limitations. Because the Fund is a non-
diversified investment company, it may invest in a smaller number of individual
issuers than a diversified investment company, and an investment in the Fund
may, under certain circumstances, present greater risk to an investor than an
investment in a diversified investment company.

Foreign government securities are not treated like U.S. Government securities
for purposes of the diversification tests described in the preceding paragraph,
but instead are subject to these tests in the same manner as the securities of
non- governmental issuers. In this regard sovereign debt obligations issued by
different issuers located in the same country are often treated as issued by a
single issuer for purposes of these diversification tests. Certain issuers of
structured securities and loan participations may be treated as separate issuers
for the purposes of these tests. Accordingly, in order to meet the
diversification tests and thereby maintain its status as a regulated investment
company, the Fund will be required to diversify its portfolio of foreign
government securities in a manner which would not be necessary if the Fund had
made similar investments in U.S. Government securities.

- --------------------------------------------------------------------------------
                                 Purchase And
- --------------------------------------------------------------------------------
                                Sale Of Shares
- --------------------------------------------------------------------------------

HOW TO BUY SHARES
 
The Fund offers multiple classes of shares, of which only the Advisor Class is
offered by this Prospectus. Advisor Class shares of the Fund may be purchased
through your financial representative at net asset value without any initial or
contingent deferred sales charges and are not subject to ongoing distribution
expenses. Advisor Class shares may be purchased and held solely (i) through
accounts established under a fee-based program, sponsored and maintained by a
registered broker-dealer or other financial intermediary and approved by AFD,
(ii) through a self-directed defined contribution employee benefit plan (e.g., a
401(k) plan) that has at least 1,000 participants or $25 million in assets,
(iii) by investment advisory clients of, and certain other persons associated
with, Alliance and its affiliates or the Fund and (iv) through registered
investment advisers or other financial intermediaries who charge a management,
consulting or other fee for their service and who purchase shares through a
broker or agent approved by AFD and clients of such registered investment
advisers or financial intermediaries whose accounts are linked to the master
account of such investment adviser or financial intermediary on the books of
such approved broker or agent. For more detailed information about who may
purchase and hold Advisor Class shares see the Statement of Additional
Information. A shareholder's Advisor Class shares will automatically convert to
Class A shares of the Fund under certain circumstances. For a more detailed
description of the conversion feature and Class A shares, see "Conversion
Feature."

                                       20
<PAGE>
 
  
Generally, a fee-based program must charge an asset-based or other similar fee
and must invest at least $250,000 in Advisor Class shares of the Fund in order
to be approved by AFD for investment in Advisor Class shares. Share certificates
are issued only upon request. See the Subscription Application and the Statement
of Additional Information for more information.

The Fund may refuse any order to purchase Advisor Class shares. In this regard,
the Fund reserves the right to restrict purchases of Advisor Class shares
(including through exchanges) when there appears to be evidence of a pattern of
frequent purchases and sales made in response to short-term considerations.

How the Fund Values its Shares

The net asset value of Advisor Class shares of the Fund is calculated by
dividing the value of the Fund's net assets allocable to the Advisor Class by
the outstanding shares of the Advisor Class. Shares are valued each day the
Exchange is open as of the close of regular trading (currently 4:00 p.m. Eastern
time). The securities in the Fund are valued at their current market value
determined on the basis of market quotations or, if such quotations are not
readily available, such other methods as the Fund's Directors believe would
accurately reflect fair market value.

HOW TO SELL SHARES

You may "redeem," i.e., sell your shares in the Fund to the Fund on any day the
Exchange is open, either directly or through your financial representative. The
price you will receive is the net asset value next calculated after the Fund
receives your request in proper form. Proceeds generally will be sent to you
within seven days. However, for shares recently purchased by check or electronic
funds transfer, the Fund will not send proceeds until it is reasonably satisfied
that the check or electronic funds transfer has been collected (which may take
up to 15 days). If you are in doubt about what documents are required by your
fee based program or employee benefit plan, you should contact your financial
representative.

Selling Shares Through Your Financial Representative

Your financial representative must receive your request before 4:00 p.m. Eastern
time, and your financial representative must transmit your request to the Fund
by 5:00 p.m. Eastern time, for you to receive that day's net asset value. Your
financial representative is responsible for furnishing all necessary
documentation to the Fund and may charge you for this service.

Selling Shares Directly To the Fund

Send a signed letter of instruction or stock power form to Alliance Fund
Services, Inc. ("AFS"), along with certificates, if any, that represent the
shares you want to sell. For your protection, signatures must be guaranteed by a
bank, a member firm of a national stock exchange or other eligible guarantor
institution. Stock power forms are available from your financial representative,
AFS and many commercial banks. Additional documentation is required for the sale
of shares by corporations, intermediaries, fiduciaries and surviving joint
owners. For details contact:

                            Alliance Fund Services
                                 P.O. Box 1520
                            Secaucus, NJ 07096-1520
                                 800-221-5672

Alternatively, a request for redemption of shares for which no stock
certificates have been issued can also be made by telephone to 800-221-5672.
Telephone redemption requests must be made by 4:00 p.m. Eastern time on a Fund
business day in order to receive that day's net asset value and, except for
certain omnibus accounts, may be made only once in any 30-day period. A
shareholder who has completed the Telephone Transactions section of the
Subscription Application, or the Shareholder Options form obtained from AFS, can
elect to have the proceeds of his or her redemption sent to his or her bank via
an electronic funds transfer. Proceeds of telephone redemptions also may be sent
by check to a shareholder's address of record. Except for certain omnibus
accounts, redemption requests by electronic funds transfer may not exceed
$100,000 and redemption requests by check may not exceed $50,000. Telephone
redemption is not available for shares held in nominee or "street name" accounts
or retirement plan accounts or shares held by a shareholder who has changed his
or her address of record within the previous 30 calendar days.

General
The sale of shares is a taxable transaction for federal tax purposes. Under
unusual circumstances, the Fund may suspend redemptions or postpone payment for
up to seven days or longer, as permitted by federal securities law. The Fund
reserves the right to close an account that through redemption has remained
below $200 for 90 days. Shareholders will receive 60 days' written notice to
increase the account value before the account is closed. During drastic economic
or market developments, you might have difficulty in reaching AFS by telephone,
in which event you should issue written instructions to AFS. AFS is not
responsible for the authenticity of telephonic requests to purchase, sell or
exchange shares. AFS will employ reasonable procedures to verify that telephone
requests are genuine, and could be liable for losses resulting from unauthorized
transactions if it failed to do so. Dealers and agents may charge a commission
for handling telephonic requests. The telephone service may be suspended or
terminated at any time without notice.

SHAREHOLDER SERVICES
AFS offers a variety of shareholder services. For more information about these
services or your account, call AFS' toll-free number, 800-221-5672.

                                       21
<PAGE>
 
HOW TO EXCHANGE SHARES

You may exchange your Advisor Class shares of the Fund for Advisor Class shares
of other Alliance Mutual Funds (including AFD Exchange Reserves, a money market
fund managed by Alliance). Exchanges of shares are made at the net asset value
next determined and without sales or service charges. Exchanges may be made by
telephone or written request. Telephone exchange requests must be received by
AFS by 4:00 p.m. Eastern time on a Fund business day in order to receive that
day's net asset value.

Please read carefully the prospectus of the mutual fund into which you are
exchanging before submitting the request. Call AFS at 800-221-5672 to exchange
uncertificated shares. An exchange is a taxable capital transaction for federal
tax purposes. The exchange service may be changed, suspended, or terminated on
60 days' written notice.

General

If you are a Fund shareholder through an account established under a fee-based
program, your fee-based program may impose requirements with respect to the
purchase, sale or exchange of Advisor Class shares of the Fund that are
different from those described in this Prospectus. A transaction fee may be
charged by your financial representative with respect to the purchase, sale or
exchange of Advisor Class shares made through such financial representative.
 
The Fund offers three classes of shares other than the Advisor Class, which are
Class A, Class B and Class C. All classes of shares of the Fund have a common
investment objective and investment portfolio. Class A shares are offered with
an initial sales charge and pay a distribution services fee. Class B shares have
a contingent deferred sales charge (a "CDSC") and also pay a distribution
services fee. Class C shares have no initial sales charge or CDSC as long as
they are not redeemed within one year of purchase, but pay a distribution
services fee. Because Advisor Class shares have no initial sales charge or CDSC
and pay no distribution services fee, Advisor Class shares are expected to have
different performance from Class A, Class B or Class C shares. You may obtain
more information about Class A, Class B and Class C shares, which are not
offered by this Prospectus, by contacting AFS by telephone at 800-221-5672 or by
contacting your financial representative.

- --------------------------------------------------------------------------------
                            Management Of The Fund
- --------------------------------------------------------------------------------
ADVISER
 
Alliance has been retained under an Advisory Agreement (the "Advisory
Agreement") to provide investment advice and, in general, to conduct the
management and investment program of the Fund, subject to the general
supervision and control of the Directors of the Fund.

Alliance is a leading international investment manager supervising client
accounts with assets as of March 31, 1997 of more than $182 billion (of which
more than $66 billion represented the assets of investment companies).
Alliance's clients are primarily major corporate employee benefit funds, public
employee retirement systems, investment companies, foundations and endowment
funds. The 52 registered investment companies managed by Alliance comprising 110
separate investment portfolios currently have over two million shareholders. As
of March 31, 1997 Alliance was an investment manager of employee benefit plan
assets for 31 of the Fortune 100 companies.

Alliance Capital Management Corporation ("ACMC") the sole general partner of,
and the owner of a 1% general partnership interest in, Alliance, is an indirect
wholly-owned subsidiary of The Equitable Life Assurance Society of the United
States ("Equitable"), one of the largest life insurance companies in the United
States, which is a wholly-owned subsidiary of the Equitable Companies
Incorporated, a holding company controlled by AXA, a French insurance holding
company. Certain information concerning the ownership and control of Equitable
by AXA is set forth in the Fund's Statement of Additional Information under
"Management of the Fund."

Under the Advisory Agreement, the Fund pays Alliance a fee at the annual rate of
 .75% of the Fund's average daily net assets. The fee is accrued daily and paid
monthly. The Fund has entered into a distribution services agreement with
Alliance Fund Distributors, Inc. The agreement provides that Alliance may use
its own resources to finance the distribution of the Fund's shares.

The employee who is primarily responsible for the day-to-day management of the
Fund's portfolio is Wayne D. Lyski. Mr. Lyski is an Executive Vice President of
Alliance, with which he has been associated since prior to 1992.

Expenses of the Fund

In addition to the payments to Alliance under the Advisory Agreement described
above, the Fund pays certain other costs, including (i) custody, transfer and
dividend disbursing expenses, (ii) fees of the Directors who are not affiliated
with Alliance, (iii) legal and auditing expenses, (iv) clerical, accounting and
other office costs, (v) costs of printing the Fund's prospectuses and
shareholder reports, (vi) costs of maintaining the Fund's existence, (vii)
interest charges, taxes, brokerage fees and commissions, (viii) costs of
stationery and supplies, (ix) expenses and fees related to registration and
filing with the Commission and with state regulatory authorities, (x) upon the
approval of the Board of Directors, costs of personnel of Alliance or its
affiliates rendering clerical, accounting and other office services and (xi)
such promotional, shareholder servicing and other expenses as may be
contemplated by the Distributions Services Agreement, described below.

                                       22
<PAGE>
 
DISTRIBUTION SERVICES AGREEMENT

The Fund has entered into a Distribution Services Agreement with AFD with
respect to the Advisor Class Shares. The Glass-Steagall Act and other applicable
laws may limit the ability of a bank or other depository institution to become
an underwriter or distributor of securities. However, in the opinion of the
Fund's management, based on the advice of counsel, these laws do not prohibit
such depository institutions from providing services for investment companies
such as the administrative, accounting and other services referred to in the
Agreement. In the event that a change in these laws prevented a bank from
providing such services, it is expected that other service arrangements would be
made and that shareholders would not be adversely affected.

- --------------------------------------------------------------------------------
                           Dividends, Distributions
- --------------------------------------------------------------------------------
                                   And Taxes
- --------------------------------------------------------------------------------

Dividends and Distributions

Dividends on shares of the Fund from the Fund's net investment income, if any,
will be declared on each Fund business day. Dividends on shares for Saturdays,
Sundays and holidays will be declared on the previous business day. The Fund
pays dividends on its shares after the close of business on the twentieth day of
each month or, if that day is not a business day, the first business day
thereafter. At your election (which you may change at least 30 days prior to the
record date for a particular dividend or distribution), dividends and
distributions will be paid in cash or reinvested without charge in additional
shares of the same class having an aggregate net asset value as of the payment
date of the dividend or distribution equal to the cash amount thereof.

If you receive an income dividend or capital gains distribution in cash you may,
within 120 days following the date of its payment, reinvest the dividend or
distribution in additional shares without charge by returning to Alliance, with
appropriate instructions, the check representing such dividend or distribution.
Thereafter, unless you otherwise specify, you will be deemed to have elected to
reinvest all subsequent dividends and distributions in shares of the Fund.

Cash dividends can be paid by check or, if the shareholder so elects,
electronically via the ACH network. There is no sales or other charge in
connection with the reinvestment of dividends and capital gains distributions.
Dividends paid by the Fund, if any, with respect to Class A, Class B and Class C
shares will be calculated in the same manner at the same time on the same day
and will be in the same amount, except that the higher distribution services
fees applicable to Class B and Class C shares, and any incremental transfer
agency costs relating to Class B shares, will be borne exclusively by the class
to which they relate.

While it is the intention of the Fund to distribute to its shareholders
substantially all of each fiscal year's net income and net realized capital
gains, if any, the amount and timing of any such dividend or distribution must
necessarily depend upon the realization by the Fund of income and capital gains
from investments. There is no fixed dividend rate, and there can be no assurance
that the Fund will pay any dividends or realize any capital gains. If you buy
shares just before the Fund deducts a distribution from its net asset value, you
will pay the full price for the shares and then receive a portion of the price
back as a taxable distribution.

FOREIGN INCOME TAXES

Investment income received by the Fund from sources within foreign countries may
be subject to foreign income taxes withheld at the source. To the extent that
the Fund is liable for such foreign income taxes the Fund intends, if possible,
to operate so as to meet the requirements of the Code to "pass through" to the
Fund's shareholders credits or deductions for foreign income taxes paid, but
there can be no assurance that the Fund will be able to do so.

U.S. FEDERAL INCOME TAXES

The Fund intends to qualify to be taxed as a "regulated investment company"
under the Code. To the extent that the Fund distributes its taxable income and
net capital gain to its shareholders, qualification as a regulated investment
company relieves the Fund of federal income and excise taxes on that part of its
taxable income, including net capital gains, which it pays out to its
shareholders. Dividends out of net ordinary income and distributions of net
short-term capital gains are taxable to the recipient shareholders as ordinary
income. In the case of corporate shareholders, such dividends may be eligible
for the dividends-received deduction, but only to the extent of qualifying
dividends received by the Fund.

The excess of net long-term capital gains over the net short-term capital losses
realized and distributed by the Fund to its shareholders as capital gains
distributions is taxable to the shareholders as long-term capital gains,
irrespective of the length of time a shareholder may have held his or her stock.
Long-term capital gains distributions are not eligible for the dividends-
received deduction referred to above.

Under the current federal tax law the amount of an income dividend or capital
gains distribution declared by the Fund during October, November or December of
a year to shareholders of record as of a specified date in such a month that is
paid during January of the following year is includable in the prior year's
taxable income of shareholders that are calendar year taxpayers.

Any dividend or distribution received by a shareholder on shares of the Fund
will have the effect of reducing the net

                                       23
<PAGE>
 
asset value of such shares by the amount of such dividend or distribution.
Furthermore, a dividend or distribution made shortly after the purchase of such
shares by a shareholder, although in effect a return of capital to that
particular shareholder, would be taxable to him or her as described above. If a
shareholder held shares six months or less and during that period received a
distribution taxable to such shareholder as long-term capital gain, any loss
realized on the sale of such shares during such six-month period would be a
long-term capital loss to the extent of such distribution.

A dividend or capital gains distribution with respect to shares of the Fund held
by a tax-deferred or qualified plan, such as an individual retirement account, a
section 403(b)(7) retirement plan or corporate pension or profit-sharing plan,
will not be taxable to the plan. Distributions from such plans will be taxable
to individual participants under applicable tax rules without regard to the
character of the income earned by the qualified plan. Distributions by the Fund
may be subject to state and local taxes.

The Fund will be required to withhold 31% of any payments made to a shareholder
if the shareholder has not provided a certified taxpayer identification number
to the Fund, or the Secretary of the Treasury notifies the Fund that a
shareholder has not reported all interest and dividend income required to be
shown on the shareholder's Federal income tax return.

Under certain circumstances, if the Fund realizes losses from fluctuations in
currency exchange rates after paying a dividend, all or a portion of the
dividend may subsequently be characterized as a return of capital. See
"Dividends, Distributions and Taxes" in the Statement of Additional Information.

Shareholders will be advised annually as to the federal tax status of dividends
and capital gains distributions made by the Fund for the preceding year.
Shareholders are urged to consult their tax advisers regarding their own tax
situations.
- --------------------------------------------------------------------------------
                              Conversion Feature
- --------------------------------------------------------------------------------

CONVERSION TO CLASS A SHARES
 
Advisor Class shares may be held solely through the fee-based program accounts
and employee benefit plans and registered investment advisory or other financial
intermediary relationships described above under "--How to Buy Shares," and by
investment advisory clients of, and certain other persons associated with,
Alliance and its affiliates or the Fund. If (i) a holder of Advisor Class shares
ceases to participate in a fee-based program or plan, or to be associated with
an investment adviser or financial intermediary, in each case that satisfies the
requirements to purchase shares set forth under "---How to Buy Shares" or (ii)
the holder is otherwise no longer eligible to purchase Advisor Class shares as
described in this Prospectus (each, a "Conversion Event"), then all Advisor
Class shares held by the shareholder will convert automatically and without
notice to the shareholder, other than the notice contained in this Prospectus,
to Class A shares of the Fund during the calendar month following the month in
which the Fund is informed of the occurrence of the Conversion Event. The
failure of a shareholder or a fee-based program to satisfy the minimum
investment requirements to purchase Advisor Class shares will not constitute a
Conversion Event. The conversion would occur on the basis of the relative net
asset values of the two classes without the imposition of any sales load, fee or
other charge.

DESCRIPTION OF CLASS A SHARES

The following sets forth maximum transaction costs, annual expenses, per share
income and capital charges for Class A shares of the Fund. Class A shares are
subject to a distribution fee that may not exceed an annual rate of .30%. The
higher fees mean a higher expense ratio, so Class A shares pay correspondingly
lower dividends and may have a lower net asset value than Advisor Class shares.

Shareholder Transaction Expenses are one of several factors to consider when you
invest in the Fund. The following table summarizes your maximum transaction
costs from investing in Class A shares of the Fund and estimated annual expenses
for Class A shares of the Fund. The "Example" following the table below shows
the cumulative expenses attributable to a hypothetical $1,000 investment in
Class A shares for the periods specified.

<TABLE> 
<CAPTION> 
<S>                                                                                   <C> 
Class A Shares
     Maximum sales charge imposed on purchase
     (as a percentage of offering price) (a)..........................................      None
                                                                                        (sales charge
                                                                                           waived)
     Sales charge imposed on dividend reinvestments...................................      None
     Deferred sales charge (as a percentage of
     original purchase price or redemption
     proceeds, whichever is lower)....................................................      None

Operating Expenses                                                                         Class A
                                                                                           -------
     Management fees (after waiver)(b)................................................       None
     12b-1 fees.......................................................................       .30%
     Other expenses(after reimbursement) (c)(d).......................................      1.60%
                                                                                            ----
     Total fund operating expenses (after waiver/reimbursement)(d)....................       1.90%
                                                                                            ====

Example (d)                                                                               Class A 
                                                                                          -------
     After 1 year.....................................................................      $ 19
     After 3 years....................................................................      $ 60
</TABLE> 
- --------------------------------------------------------------------------------
 
(a) Advisor Class shares convert to Class A shares at net asset value and
    without the imposition of any sales charge and accordingly the maximum sales
    charge of 4.25% on most purchases of Class A shares for cash does not apply.
(b) Net of voluntary fee waiver. Absent such waiver, management fees would have
    been .75%.
(c) These expenses include a transfer agency fee payable to Alliance Fund
    Services, Inc., an affiliate of Alliance, based on a fixed dollar amount
    charged to the Fund for each shareholder's account.
(d) Net of voluntary fee waiver and/or expense reimbursement. In the absence of
    such waiver and/or expense reimbursement, other expenses would have been
    18.15% and total fund operating expenses would have been 19.20%.

The purpose of the foregoing table is to assist the investor in understanding
the various costs and expenses that an investor in the Fund will bear directly
or indirectly. Long-term

                                       24
<PAGE>
 
shareholders of Class A shares of the Fund may pay aggregate sales charges
totaling more than the economic equivalent of the maximum initial sales charges
totaling permitted by the Conduct Rules of the National Association of
Securities Dealers, Inc. The Rule 12b-1 fee for Class A comprises a service fee
not exceeding .25% of the aggregate average daily net assets of the Fund
attributable to Class A and an asset-based sales charge equal to the remaining
portion of the Rule 12b-1 fee. "Other Expenses" for Class A shares are based on
estimated amounts for the Fund's current fiscal year. The Example set forth
above assumes reinvestment of all dividends and distributions and utilizes a 5%
annual rate of return as mandated by Commission regulations. The Example should
not be considered representative of past or future expenses; actual expenses may
be greater or less than those shown.

- --------------------------------------------------------------------------------
                             Financial Highlights
- --------------------------------------------------------------------------------

The following table presents per share income and capital changes for a Class A
share of the Fund outstanding throughout the period indicated. The information
in the table has been audited by Ernst & Young LLP, the independent auditors for
the Fund. A report of Ernst & Young LLP on the information appears in the Fund's
Statement of Additional Information. The following information should be read in
conjunction with the financial statements and related notes which are included
in the Fund's Statement of Additional Information.

Further information about the Fund's performance is contained in the Fund's
annual report to shareholders, which may be obtained without charge by
contacting Alliance Fund Services, Inc. at the address or the "For Literature"
telephone number shown on the cover of this Prospectus.

<TABLE> 
<CAPTION>
                                                               Fiscal Year or Period
                                                                      Class A
                                                               1/9/96+ to 10/31/96
                                                               --------------------
<S>                                                           <C>
Net Asset Value Beginning Of Period.............................     10.00
Net Investment Income (Loss)....................................       .69
Net Realized and Unrealized Gain (Loss) On Investments..........       .95
Net Increase (Decrease) In Net Asset Value From Operations......      1.64
Dividends From Net Investment Income............................      (.81)
Distributions From Net Realized Gains...........................      0.00
Distributions In Excess of Net Investment Income................      0.00
Return of Capital...............................................      0.00
Total Dividends and Distributions...............................      (.81)
Net Asset Value End of Period...................................     10.83
Total Investment Return Based on Net Asset Value (a)............     17.31%
Net Assets At End Of Period (000's omitted).....................     2,295
Ratio of Expenses To Average Net Assets.........................      1.90%*(b)
Ratio of Net Investment Income (Loss) To Average Net Assets.....      8.36%*
Portfolio Turnover Rate.........................................       282%
</TABLE> 
- ------------------------------------------------------------------------------
 + Commencement of operations.
 * Annualized.

(a) Total investment return is calculated assuming an initial investment made at
    the net asset value at the beginning of the period, reinvestment of all
    dividends and distributions at the net asset value during the period, and a
    redemption on the last day of the period. Initial sales charge or contingent
    deferred sales charge is not reflected in the calculation of total
    investment return. Total investment returns calculated for periods of less
    than one year are not annualized.
 
(b) Net of expenses assumed and/or waived/reimbursed. If the Fund had borne all
    expenses for the period January 9, 1996 to October 31, 1996, the expense
    ratio would have been with respect to Class A shares, 19.20%
    (annualized).
                                       25
<PAGE>
 
- --------------------------------------------------------------------------------
                              General Information
- --------------------------------------------------------------------------------

PORTFOLIO TRANSACTIONS

Consistent with the Conduct Rules of the National Association of Securities
Dealers, Inc., and subject to seeking best price and execution, the Fund may
consider sales of its shares as a factor in the selection of dealers to enter
into portfolio transactions with the Fund.

ORGANIZATION

 
The Fund is a Maryland corporation organized in 1995. It is anticipated that
annual shareholder meetings will not be held; shareholder meetings will be held
only when required by Federal or state law. Shareholders have available certain
procedures for the removal of Directors.


A shareholder in the Fund will be entitled to share pro rata with other holders
of the same class of shares all dividends and distributions arising from the
Fund's assets and, upon redeeming shares, will receive the then current net
asset value of the Fund represented by the redeemed shares less any applicable
CDSC. The Fund is empowered to establish, without shareholder approval,
additional portfolios, which may have different investment objectives, and
additional classes of shares. If an additional portfolio or class were
established in the Fund, each share of the portfolio or class would normally be
entitled to one vote for all purposes. Generally, shares of each portfolio and
class would vote as a single series or class on matters, such as the election of
Directors, that affect each portfolio and class in substantially the same
manner. Class A, Class B, Class C and Advisor Class shares have identical
voting, dividend, liquidation and other rights, except that each class bears its
own transfer agency expenses, each of Class A, Class B and Class C shares bears
its own distribution expenses and Class B shares and Advisor Class shares
convert to Class A shares under certain circumstances. Each class of shares
votes separately with respect to the Fund's Rule 12b-1 distribution plan and
other matters for which separate class voting is appropriate under applicable
law. Shares are freely transferable, are entitled to dividends as determined by
the Directors and, in liquidation of the Fund, are entitled to receive the net
assets of the Fund. Certain additional matters relating to the Fund's
organization are discussed in its Statement of Additional Information.

REGISTRAR, TRANSFER AGENT AND
DIVIDEND-DISBURSING AGENT

AFS, an indirect wholly-owned subsidiary of Alliance, located at 500 Plaza
Drive, Secaucus, New Jersey 07094, acts as the Fund's registrar, transfer agent
and dividend-disbursing agent for a fee based upon the number of shareholder
accounts maintained for the Fund.

PRINCIPAL UNDERWRITER

AFD, an indirect wholly-owned subsidiary of Alliance, located at 1345 Avenue of
The Americas, New York, New York 10105, is the Principal Underwriter of shares
of the Fund.

PERFORMANCE INFORMATION

From time to time, the Fund advertises its "total return", which is computed
separately for each class of shares including the Advisor Class. Such
advertisements disclose the Fund's average annual compounded total return for
the periods prescribed by the Commission. The Fund's total return for each such
period is computed by finding, through the use of a formula prescribed by the
Commission, the average annual compounded rate of return over the period that
would equate an assumed initial amount invested to the value of the investment
at the end of the period. For purposes of computing total return, income
dividends and capital gains distributions paid on shares of the Fund are assumed
to have been reinvested when paid and the maximum sales charges applicable to
purchases and redemptions of Fund shares are assumed to have been paid. The
Fund's advertisements may quote performance rankings or ratings of the Fund by
financial publications or independent organizations such as Lipper and
Morningstar, Inc. or compare the Fund's performance to various indices.

ADDITIONAL INFORMATION

This Prospectus and the Statement of Additional Information, which is
incorporated by reference herein, do not contain all the information set forth
in the Registration Statement filed by the Fund with the Commission under the
Securities Act. Copies of the Registration Statement may be obtained at a
reasonable charge from the Commission or may be examined, without charge, at the
offices of the Commission in Washington, D.C.

                                       26
<PAGE>
 
- --------------------------------------------------------------------------------
Appendix A: Bond Ratings
- --------------------------------------------------------------------------------
MOODY'S INVESTORS SERVICE, INC.

Aaa--Bonds which are rated Aaa are judged to be of the best quality. They carry
  the smallest degree of investment risk and are generally referred to as "gilt
  edge." Interest payments are protected by a large or by an exceptionally
  stable margin and principal is secure. While the various protective elements
  are likely to change, such changes as can be visualized are most unlikely to
  impair the fundamentally strong position of such issues.

Aa--Bonds which are rated Aa are judged to be of high quality by all standards.
  Together with the Aaa group they comprise what are generally known as high
  grade bonds. They are rated lower than the best bonds because margins of
  protection may not be as large as in Aaa securities or fluctuation of
  protective elements may be of greater amplitude or there may be other elements
  present which make the long-term risks appear somewhat larger than the Aaa
  securities.

A--Bonds which are rated A possess many favorable investment attributes and are
  to be considered as upper-medium-grade obligations. Factors giving security to
  principal and interest are considered adequate but elements may be present
  which suggest a susceptibility to impairment some time in the future.

Baa--Bonds which are rated Baa are considered as medium-grade obligations, i.e.,
  they are neither highly protected nor poorly secured. Interest payment and
  principal security appear adequate for the present but certain protective
  elements may be lacking or may be characteristically unreliable over any great
  length of time. Such bonds lack outstanding investment characteristics and in
  fact have speculative characteristics as well.

Ba--Bonds which are rated Ba are judged to have speculative elements; their
  future cannot be considered as well-assured. Often the protection of interest
  and principal payments may be very moderate and thereby not well safeguarded
  during both good and bad times over the future. Uncertainty of position
  characterizes bonds in this class.

B--Bonds which are rated B generally lack characteristics of the desirable
  investment. Assurance of interest and principal payments or of maintenance of
  other terms of the contract over any long period of time may be small.

Caa--Bonds which are rated Caa are of poor standing. Such issues may be in
  default or there may be present elements of danger with respect to principal
  or interest.

Ca--Bonds which are rated Ca represent obligations which are speculative in a
  high degree. Such issues are often in default or have other marked
  shortcomings.

C--Bonds which are rated C are the lowest rated class of bonds and issues so
  rated can be regarded as having extremely poor prospects of ever attaining
  any real investment standing. 

Absence of Rating--When no rating has been assigned or where a rating has been
  suspended or withdrawn, it may be for reasons unrelated to the quality of the
  issue.

 Should no rating be assigned, the reason may be one of the following:

        1. An application for rating was not received or accepted.
        2. The issue or issuer belongs to a group of securities or companies
           that are not rated as a matter of policy.
        3. There is a lack of essential data pertaining to the issue or issuer.
        4. The issue was privately placed, in which case the rating is not
           published in Moody's publications.

Suspension or withdrawal may occur if new and material circumstances arise, the
effects of which preclude satisfactory analysis; if there is no longer available
reasonable up-to-date data to permit a judgment to be formed; if a bond is
called for redemption; or for other reasons.

Note--Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.

STANDARD & POOR'S RATINGS SERVICES

AAA--Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
  interest and repay principal is extremely strong.

AA--Debt rated AA has a very strong capacity to pay interest and repay principal
  and differs from the highest rated issues only in small degree.

A--Debt rated A has a strong capacity to pay interest and repay principal
  although it is somewhat more susceptible to the adverse effects of changes in
  circumstances and economic conditions than debt in higher rated categories.

BBB--Debt rated BBB is regarded as having an adequate capacity to pay interest
  and repay principal. Whereas it normally exhibits adequate protection
  parameters, adverse economic conditions or changing circumstances are more
  likely to lead to a weakened capacity to pay interest and repay principal for
  debt in this category than in higher rated categories.

BB, B, CCC, CC, C--Debt rated BB, B, CCC, CC and C is regarded as having
  predominantly speculative characteristics with respect to capacity to pay
  interest and repay principal. BB indicates the least degree of speculation
  and CCC the highest. While such debt will likely have some quality and

                                      A-1
<PAGE>
 
protective characteristics, these are outweighed by large uncertainties or major
exposures to adverse conditions.

CI--The rating CI is reserved for income bonds on which no interest is being
  paid.

D--Debt rated D is in payment default. The D rating category is used when
  interest payments or principal payments are not made on the date due even if
  the applicable grace period has not expired, unless S&P believes that such
  payments will be made during such grace period. The D rating also will be used
  upon the filing of a bankruptcy petition if debt service payments are
  jeopardized.

Plus (+) or Minus (-)--The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories. 

NR--Not rated.

DUFF & PHELPS CREDIT RATING CO.

AAA--Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.

AA+, AA, AA---High credit quality. Protection factors are strong. Risk is modest
but may vary slightly from time to time because of economic conditions.

A+, A, A---Protection factors are average but adequate. However, risk factors
are more variable and greater in periods of economic stress.

BBB+, BBB, BBB---Below average protection factors but still considered
sufficient for prudent investment. Considerable variability in risk during
economic cycles.

BB+, BB, BB---Below investment grade but deemed likely to meet obligations when
  due. Present or prospective financial protection factors fluctuate according
  to industry conditions or company fortunes. Overall quality may move up or
  down frequently within this category.

B+, B, B---Below investment grade and possessing risk that obligations will not
  be met when due. Financial protection factors will fluctuate widely according
  to economic cycles, industry conditions and/or company fortunes. Potential
  exists for frequent changes in the rating within this category or into a
  higher or lower rating grade.

CCC--Well below investment grade securities. Considerable uncertainty exists as
  to timely payment of principal or interest. Protection factors are narrow and
  risk can be substantial with unfavorable economic/industry conditions, and/or
  with unfavorable company developments.

DD--Defaulted debt obligations. Issuer failed to meet scheduled principal
  and/or interest payments.

FITCH INVESTORS SERVICE, L.P.

AAA--Bonds considered to be investment grade and of the highest credit quality.
   The obligor has an exceptionally strong ability to pay interest and repay
   principal, which is unlikely to be affected by reasonably foreseeable events.

AA--Bonds considered to be investment grade and of very high credit quality. The
  obligor's ability to pay interest and repay principal is very strong, although
  not quite as strong as bonds rated AAA. Because bonds rated in the AAA and AA
  categories are not significantly vulnerable to foreseeable future
  developments, short-term debt of these issuers is generally rated F-1+.

A--Bonds considered to be investment grade and of high credit quality. The
  obligor's ability to pay interest and repay principal is considered to be
  strong, but may be more vulnerable to adverse changes in economic conditions
  and circumstances than bonds with higher ratings.

BBB--Bonds considered to be investment grade and of satisfactory credit quality.
  The obligor's ability to pay interest and repay principal is considered to be
  adequate. Adverse changes in economic conditions and circumstances, however,
  are more likely to have adverse impact on these bonds, and therefore impair
  timely payment. The likelihood that the ratings of these bonds will fall below
  investment grade is higher than for bonds with higher ratings.

BB--Bonds are considered speculative. The obligor's ability to pay interest and
  repay principal may be affected over time by adverse economic changes.
  However, business and financial alternatives can be identified which could
  assist the obligor in satisfying its debt service requirements.

B--Bonds are considered highly speculative. While bonds in this class are
  currently meeting debt service requirements, the probability of continued
  timely payment of principal and interest reflects the obligor's limited margin
  of safety and the need for reasonable business and economic activity
  throughout the life of the issue. 

CCC--Bonds have certain identifiable characteristics which, if not remedied, may
  lead to default. 

The ability to meet obligations requires an advantageous business and economic
environment.

CC--Bonds are minimally protected. Default in payment of interest and/or
  principal seems probable over time.

C--Bonds are in imminent default in payment of interest or principal.

DDD, DD, D--Bonds are in default on interest and/or principal payments.
  Such bonds are extremely speculative and should be valued on the basis of
  their ultimate recovery value in liquidation or reorganization of the obligor.
  DDD represents the highest potential for recovery on these bonds, and D
  represents the lowest potential for recovery.

Plus (+) Minus (-)--Plus and minus signs are used with a rating symbol to
  indicate the relative position of a credit within the rating category. Plus
  and minus signs, however, are not used in the AAA, DDD, DD or D categories.

NR--Indicates that Fitch does not rate the specific issue.

                                      A-2
<PAGE>
 
                           Subscription Application
- --------------------------------------------------------------------------------
                    Alliance Global Strategic Income Trust
                                 Advisor Class
              (see instructions at the front of the application)


- --------------------------------------------------------------------------------
                 1. Your Account Registration   (Please Print)
- --------------------------------------------------------------------------------

[_] Individual or Joint Account

    [_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_]
    Owner's Name (First Name)              (MI)           (Last Name)

    [_][_][_]-[_][_]-[_][_][_][_]
    Social Security Number 
    (Required to open account)
    
    [_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_]
    Joint Owner's Name*   (First Name )     (MI)    (Last Name)

    *Joint Tenants with right of survivorship unless Alliance Fund Services is
     informed otherwise.

[_] Gift/Transfer To A Minor

    [_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_]
    Custodian - One Name Only  (First Name)    (MI)            (Last Name)

    [_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_]
    Minor (First Name)    (MI)   (Last Name)

    [_][_][_]-[_][_]-[_][_][_][_]
    Minor's Social Security Number (Required to open account)     
  
    Under the State of________(Minor's Residence) Uniform Gifts/Transfer to
    Minor's Act

[_] Trust Account

    [_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_]
    Name of Trustee

    [_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_]
    Name of Trust

    
    [_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_]
    Name of Trust (cont'd)

    
    [_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_]
    Trust Dated    Tax ID or Social Security Number (Required to open account)

[_] Other

    [_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_]
    Name of Corporation, Partnership, Investment Only Retirement Plan, or other
    Entity

    [_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_]
    Tax ID Number                          Trustee Name (Retirement Plans only)

- --------------------------------------------------------------------------------
                                2. Your Address
- --------------------------------------------------------------------------------

    [_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_]
    Street

    [_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_]
    City  State  Zip Code

    [_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_]
    If Non-U.S., Specify Country

    [_][_][_][_][_][_][_][_][_][_][_]      [_][_][_][_][_][_][_][_][_][_][_][_]
    Daytime Phone                                   Evening Phone

    [_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_]

    I am a:               [_]  U.S. Citizen             [_]  Non-Resident Alien

   [_]  Resident Alien             [_]  Other

                             For Alliance Use Only
<PAGE>
 
- --------------------------------------------------------------------------------
                          3. Your Initial Investment
- --------------------------------------------------------------------------------

 
I hereby subscribe for shares of Alliance Global Strategic Income Trust and
elect distribution options as indicated.

Dividend and Capital Gain Distribution Options:  

R  Reinvest distributions into my fund account.
   ----------------------

C  Send my distributions in cash to the address I have provided in Section 2.
   -----------------------------
   (Complete Section 4D for direct deposit to your bank account. Complete
   Section 4E for payment to a third party).

D  Direct my distributions to another Alliance fund.  Complete the
   ------------------------------------------------
   appropriate portion of Section 4A to direct your distributions (dividends and
   capital gains) to the Advisor Class Shares of another Alliance Fund.

Broker/Dealer Use Only
Wire Confirm #

Make all checks payable to:
Alliance Fund Services
Alliance Fund Name
Alliance Global Strategic Income Trust
Total Investment

Advisor Class

$
$

Distributions Options *Circle*
Dividends

R  C  D

Capital Gains

R  C  D
<PAGE>
 
MY SOCIAL SECURITY (TAX IDENTIFICATION) NUMBER IS: [_][_][_][_][_][_][_][_][_]

- --------------------------------------------------------------------------------
                          4. Your Shareholder Options
- --------------------------------------------------------------------------------
A.  AUTOMATIC INVESTMENT PLANS (AIP)
 
[_] WITHDRAW FROM MY BANK ACCOUNT

I authorize Alliance to draw on my bank account for investment in my fund
account(s) as indicated below (Complete Section 4D also for the bank account you
wish to use).

<TABLE>
<CAPTION>
                                             Monthly Dollar Amount    Day of Withdrawal
Fund Name                                    ($25 minimum)           (1st thru 31st)        Circle "all" or applicable months 
<S>                                          <C>                     <C>                   <C>  
                                                                                            All  J F M A M J J A S O N D
- -----------------------------------------------------------------------------------------------------------------------------
                                                                                            All  J F M A M J J A S O N D
- -----------------------------------------------------------------------------------------------------------------------------
                                                                                            All  J F M A M J J A S O N D
- ----------------------------------------------------------------------------------------------------------------------------- 
                                                                                            All  J F M A M J J A S O N D
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE> 
Your bank must be a member of the National Automated Clearing House Association
(NACHA).

[_] DIRECT MY DISTRIBUTIONS

As indicated in Section 3, I would like my dividends and/or capital gains
directed to the same class of shares of another Alliance fund.

<TABLE>
<CAPTION>                                                                                                                     
                                             "From" Fund Account #                                                             
"From" Fund Name                             (if existing)           "To" Fund Name        "To" Fund Account # (if existing)  
<S>                                          <C>                     <C>                   <C>                                 
                                                                                           [_] New                             
                                                                                           [_] Existing                        
- -----------------------------------------------------------------------------------------------------------------------------  
                                                                                           [_] New                             
                                                                                           [_] Existing                        
- -----------------------------------------------------------------------------------------------------------------------------  
                                                                                           [_] New                             
                                                                                           [_] Existing                        
- -----------------------------------------------------------------------------------------------------------------------------  
                                                                                           [_] New                             
                                                                                           [_] Existing                        
- -----------------------------------------------------------------------------------------------------------------------------  
</TABLE> 

[_] EXCHANGE SHARES MONTHLY 

I authorize Alliance to transact monthly exchanges within the same class of
shares between my fund accounts as listed below.

<TABLE> 
<CAPTION> 
                              "From" Fund Account #   Dollar Amount     Day of Exchange*                    "To" Fund Account #
"From" Fund Name              (if existing)           ($25 Minimum)     (1st thru 31st)    "To" Fund Name   (if existing)
<S>                           <C>                     <C>                   <C>            <C>              <C>         
                                                                                                            [_] New 
                                                                                                            [_] Existing     
- -----------------------------------------------------------------------------------------------------------------------------
                                                                                                            [_] New          
                                                                                                            [_] Existing     
- -----------------------------------------------------------------------------------------------------------------------------
                                                                                                            [_] New          
                                                                                                            [_] Existing     
- -----------------------------------------------------------------------------------------------------------------------------
                                                                                                            [_] New          
                                                                                                            [_] Existing     
- -----------------------------------------------------------------------------------------------------------------------------  
</TABLE> 
*Shares exchanged will be redeemed at the net asset value on the "Day of
Exchange" (If the "Day of Exchange" is not a fund business day, the exchange
transaction will be processed on the next fund business day). The exchange
privilege is not available if stock certificates have been issued.

B.  SYSTEMATIC WITHDRAWAL PLANS (SWP)

In order to establish a SWP, you must reinvest all dividends and capital gains
and own or purchase shares of the Fund having a current net asset value of at
least:

 .$10,000 for monthly payments,                  .$5,000 for bi-monthly payments,
                .$4,000 for quarterly or less frequent payments

Your bank must be a member of the National Automated Clearing House Association
(NACHA) in order for you to receive SWP proceeds directly into your checking
account.

[_] I authorize Alliance to transact periodic redemptions from my fund account
    and send the proceeds to me as indicated below.

<TABLE>
<CAPTION>
                                                                      Dollar Amount    
Fund Name                                                            ($50 minimum)          Circle "all" or applicable months 
<S>                                                                  <C>                   <C>  
                                                                                            All  J F M A M J J A S O N D
- -----------------------------------------------------------------------------------------------------------------------------
                                                                                            All  J F M A M J J A S O N D
- -----------------------------------------------------------------------------------------------------------------------------
                                                                                            All  J F M A M J J A S O N D
- ----------------------------------------------------------------------------------------------------------------------------- 
                                                                                            All  J F M A M J J A S O N D
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE> 

                                                           (1st-31st)
I would like to have these payments occur on or about the [          ] of the 
months circled above.

PLEASE SEND MY SWP PROCEEDS TO:

  [_] MY CHECKING ACCOUNT (via EFT)  (Complete Section 4D)
  [_] MY ADDRESS OF RECORD (via CHECK)
  [_] THE PAYEE AND ADDRESS SPECIFIED IN SECTION 4E (via CHECK)


                                                            60698GEN-REIT-AC-App
<PAGE>
 
C.  PURCHASES AND REDEMPTIONS VIA EFT

You can call our toll-free number 1-800-221-5672 and instruct Alliance Fund
Services, Inc. in a recorded conversation to purchase, redeem or exchange shares
for your account. Purchase and redemption requests will be processed via
electronic funds transfer (EFT) to and from your bank account.
Instructions:    .  Review the information in the Prospectus about telephone 
                    transaction services.
                 .  If you select the telephone purchase or redemption
                    privilege, you must write "VOID" across the face of a check
                    from the bank account you wish to use and attach it to
                    Section 4D of this application.
 
Purchases and Redemptions via EFT

[_]  I hereby authorize Alliance Fund Services, Inc. to effect the purchase
     and/or redemption of Fund shares for my account according to my telephone
     instructions or telephone instructions from my Broker/Agent, and to
     withdraw money or credit money for such shares via EFT from the bank
     account I have selected. In the case of shares purchased by check,
     redemption proceeds may not be made available until the Fund is reasonably
     assured that the check has cleared, normally 15 calendar days after the
     purchase date.

D.  BANK INFORMATION

This bank account information will be used for:

[_] Distributions (Section 3)            [_] Automatic Investments (Section 4A)
[_] Systematic Withdrawals (Section 4B)  [_] Telephone Transactions (Section 4C)

Please attach a voided check:




[                      Tape Preprinted Voided Check Here.                      ]
                We Cannot Establish These Services Without it.



 
Your bank must be a member of the National Automated Clearing House Association
(NACHA) in order to have EFT transactions processed to your fund account. For
EFT transactions, the Fund requires signatures of bank account owners exactly as
they appear on bank records.

E.  THIRD PARTY PAYMENT DETAILS

This third party payee information will be used for:

[_]  Distributions (Section 3)            [_]  Withdrawals (Section 4B)

[_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_]
Name
[_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_]
Address - Line 1
[_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_]
Address - Line 2
[_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_]
Address - Line 3
<PAGE>
 
- --------------------------------------------------------------------------------
          5. SHAREHOLDER AUTHORIZATION This section MUST be completed
- --------------------------------------------------------------------------------

Telephone Exchanges and Redemptions by Check

Unless I have checked one or both boxes below, these privileges will
automatically apply, and by signing this application, I hereby authorize
Alliance Fund Services, Inc. to act on my telephone instructions, or on
telephone instructions from any person representing himself to be an authorized
employee of an investment dealer or agent requesting a redemption or exchange on
my behalf.  (NOTE: Telephone exchanges may only be processed between accounts
that have identical registrations.)  Telephone redemption checks will only be
mailed to the name and address of record; and the address must have no change
within the last 30 days.  The maximum telephone redemption amount is $50,000.
This service can be enacted once every 30 days.

[_] I do not elect the telephone exchange service.       
[_] I do not elect the telephone redemption by check service.

I certify under penalty of perjury that the number shown in Section 1 of this
form is my correct tax identification number or social security number and that
I have not been notified that this account is subject to backup withholding.

By selecting any of the above telephone privileges, I agree that neither the
Fund nor Alliance, Alliance Fund Distributors, Inc., Alliance Fund Services,
Inc. or other Fund Agent will be liable for any loss, injury, damage or expense
as a result of acting upon telephone instructions purporting to be on my behalf,
that the Fund reasonably believes to be genuine, and that neither the Fund nor
any such party will be responsible for the authenticity of such telephone
instructions.  I understand that any or all of these privileges may be
discontinued by me or the Fund at any time.  I understand and agree that the
Fund reserves the right to refuse any telephone instructions and that my
investment dealer or agent reserves the right to refuse to issue any telephone
instructions I may request.

For non-residents only:  Under penalties of perjury, I certify that to the best
of my knowledge and belief, I qualify as a foreign person as indicated in
Section 2.

I am of legal age and capacity and have received and read the Prospectus and
agree to its terms.

The Internal Revenue Service does not require your consent to any provision of
this document other than the certificate required to avoid backup withholding.


- --------------------------------------  ---------------
Signature                               Date

- --------------------------------------  ---------------  -----------------------
Signature                               Date             Acceptance Date

- --------------------------------------------------------------------------------
        DEALER/AGENT AUTHORIZATION For selected Dealers or Agents ONLY.
- --------------------------------------------------------------------------------

We hereby authorize Alliance Fund Services, Inc. to act as our agent in
connection with transactions under this authorization form; and we guarantee the
signature(s) set forth in Section 5, as well as the legal capacity of the
shareholder.

- --------------------------------------  ----------------------------------------
Dealer/Agent Firm                       Authorized Signature

- --------------------------------------  ------  --------------------------------
Representative First Name               MI      Last Name

- --------------------------------------------------------------------------------
Representative Number

- --------------------------------------------------------------------------------
Branch Office Address

- --------------------------------------------------------------------------------
City                                    State           Zip Code

                                        (   )
- --------------------------------------------------------------------------------
Branch Number                           Branch Phone
<PAGE>
 
                       ALLIANCE SUBSCRIPTION APPLICATION
- --------------------------------------------------------------------------------
                    ALLIANCE GLOBAL STRATEGIC INCOME TRUST
                                 ADVISOR CLASS

- --------------------------------------------------------------------------------
                         Information And Instructions
- --------------------------------------------------------------------------------

To Open Your New Alliance Account...

Please complete the application        For certified or overnight 
and mail it to:                        deliveries, send to:
     Alliance Fund Services, Inc.      Alliance Fund Services, Inc.
     P.O. Box 1520                     500 Plaza Drive
     Secaucus, New Jersey 07096-1520   Secaucus, New Jersey  07094

SECTION 1   YOUR ACCOUNT REGISTRATION (REQUIRED)

Complete one of the available choices. To ensure proper tax reporting to 
the IRS:

     . Individuals, Joint Tenants and Gift/Transfer to a Minor:
           .  Indicate your name(s) exactly as it appears on your social 
              security card.

     . Trust/Other:
           .  Indicate the name of the entity exactly as it appeared on the 
              notice you received from the IRS when your Employer 
              Identification number was assigned.

SECTION 2   YOUR ADDRESS (REQUIRED)
Complete in full.

SECTION 3   YOUR INITIAL INVESTMENT (REQUIRED)
 
1) Write the dollar amount of your initial purchase  2) Circle a distribution
option for your dividends  3) Circle a distribution option for your capital
gains.  All distributions (dividends and capital gains) will be reinvested into
your fund account unless you direct otherwise.  If you want distributions sent
directly to your bank account, then you must complete Section 4D and attach a
voided check for that account.  If you want your distributions sent to a third
party you must complete Section 4E.

SECTION 4   YOUR SHAREHOLDER OPTIONS (COMPLETE ONLY THOSE OPTIONS YOU WANT)
A.  Automatic Investment Plans (AIP) - You can make periodic investments into
    any of your Alliance Funds in one of three ways. First, by a periodic
    withdrawal ($25 minimum) directly from your bank account and invested into
    an Alliance Fund. Second, you can direct your distributions (dividends and
    capital gains) from one Alliance Fund into another Fund. Or third, you can
    automatically exchange monthly ($25 minimum) shares of one Alliance Fund for
    shares of another Fund. To elect one of these options, complete the
    appropriate portion of Section 4A.

B.  Systematic Withdrawal Plans (SWP) - Complete this option if you wish to
    periodically redeem dollars from one of your fund accounts. Payments can be
    made via Electronic Funds Transfer (EFT) to your bank account or by check.

C.  Telephone Transactions via EFT - Complete this option if you would like to
    be able to transact via telephone between your fund account and your bank
    account.

D.  Bank Information - If you have elected any options that involve transactions
    between your bank account and your fund account or have elected cash
    distribution options and would like the payments sent to your bank account,
    please tape a voided check of the account you wish to use to this section of
    the application.

E.  Third Party Payment Details - If you have chosen cash distributions and/or a
    Systematic Withdrawal Plan and would like the payments sent to a person
    and/or address other than those provided in section 1 or 2, complete this
    option.

SECTION 5   SHAREHOLDER AUTHORIZATION (REQUIRED)

All owners must sign.  If it is a custodial, corporate, or trust account, the
custodian, an authorized officer, or the trustee respectively must sign.

If We Can Assist You In Any Way, Please Do Not Hesitate To Call Us At: 
(800) 221-5672.




<PAGE>

This is filed pursuant to Rule 497(e).
File Nos. 33-63797 and 811-07391.



<PAGE>

(Logo)                       ALLIANCE GLOBAL STRATEGIC
                             INCOME TRUST, INC.
_________________________________________________________________

P.O. Box 1520, Secaucus, New Jersey  07096-1520
Toll Free (800) 221-5672
For Literature:  Toll Free (800) 227-4618
_________________________________________________________________

              STATEMENT OF ADDITIONAL INFORMATION 
         February 28, 1997 (as amended on April 21, 1997
                       and June 6, 1997).

_________________________________________________________________

This Statement of Additional Information is not a prospectus but
supplements and should be read in conjunction with the current
Prospectus that offers Class A, Class B and Class C shares of the
Fund dated February 28, 1997, as supplemented on April 21, 1997,
and, the current Prospectus for the Fund that offers the Advisor
Class shares of the Fund dated June 6, 1997 (the "Advisor Class
Prospectus" and, together with the Prospectus that offers the
Class A, Class B and Class C shares, the "Prospectus").  Copies
of the Prospectus of the Fund may be obtained by contacting
Alliance Fund Services, Inc. at the address or the "For
Literature" telephone number shown above.

                        TABLE OF CONTENTS

                                                             Page

Description of the Fund..................................    2
Management of the Fund...................................    11
Expenses of the Fund.....................................    19
Purchase of Shares.......................................    23
Redemption and Repurchase of Shares......................    40
Shareholder Services.....................................    44
Net Asset Value .........................................    51
Dividends, Distributions and Taxes.......................    52
Portfolio Transactions...................................    61
General Information......................................    62
Financial Statements.....................................    67
Appendix:  Certain Investment Practices..................    A-1

(R): This registered service mark used under license from the
     owner, Alliance Capital Management L.P.



<PAGE>

________________________________________________________________

                     DESCRIPTION OF THE FUND
________________________________________________________________

         Alliance Global Strategic Income Trust, Inc. (the
"Fund") is a non-diversified investment company.  The Fund's
investment objectives are "fundamental" and cannot be changed
without a shareholder vote.  Except as noted, the Fund's
investment policies are not fundamental and thus can be changed
without a shareholder vote.  The Fund will not change these
policies without notifying its shareholders.  There is no
guarantee that the Fund will achieve its investment objectives.

Investment Objectives and Policies

         The Fund is a non-diversified open-end investment
management company.  Its primary investment objective is to seek
a high level of current income.  Its secondary investment
objective is capital appreciation.  The Fund pursues its
investment objectives by investing primarily in a portfolio of
fixed-income securities of U.S. and non-U.S. companies and U.S.
Government and foreign government securities and supranational
entities, including lower-rated securities.  The Fund may also
use derivative instruments to enhance income.  The average
weighted maturity of the Fund's portfolio of fixed-income
securities is expected to vary between 5 years and 30 years in
accordance with the Adviser's changing perceptions of the
relative attractiveness of various maturity ranges.

         Under normal market conditions, at least 65% of the
value of the Fund's total assets will be invested in the fixed-
income securities of issuers located in three countries, one of
which may be the United States.  No more than 25% of the value of
its total assets, however, will be invested in the securities of
any one foreign government.  U.S. Government securities in which
the Fund may invest include mortgage-related securities and zero
coupon securities.  Fixed-income securities in which the Fund may
invest include preferred stock, mortgage-related and other asset-
backed securities, and zero coupon securities.  The Fund may also
invest in rights and warrants (for debt securities or for equity
securities that are acquired in connection with debt
instruments), and loan participations and assignments.

         The Fund will maintain at least 65% of the value of its
total assets in investment grade securities and may maintain not
more than 35% of the value of its total assets in lower-rated
securities.  See "Risk Considerations -- Securities Ratings" and
"-- Investment in Lower-Rated Fixed-Income Securities" sections
in the Fund's Prospectus.  Unrated securities will be considered
for investment by the Fund when Alliance Capital Management L.P.,


                                2



<PAGE>

the Fund's investment adviser (the "Adviser") believes that the
financial condition of the issuers of such obligations and the
protection afforded by the terms of the obligations themselves
limit the risk to the Fund to a degree comparable to that of
rated securities which are consistent with the Fund's investment
objectives and policies.  Lower-rated securities in which the
Fund may invest include Brady Bonds and fixed-income securities
of issuers located in emerging markets.  There is no minimum
rating requirement applicable to the Fund's investments in lower-
rated fixed-income securities.

Additional Investment Policies and Practices

         To the extent not described in the Prospectus, set forth
below and in Appendix A hereto is additional information
regarding the Fund's investment policies and practices.  Except
as otherwise noted, the Fund's investment policies are not
designated "fundamental policies" within the meaning of the
Investment Company Act of 1940 (the "1940 Act") and, therefore,
may be changed by the Directors of the Fund without a shareholder
vote.  However, the Fund will not change its investment policies
without contemporaneous written notice to shareholders.

         Loan Participations.  In a typical corporate loan
syndication, a number of lenders, usually banks ("co-lenders"),
lend a corporate borrower a specified sum pursuant to the terms
and conditions of a loan agreement.  One of the co-lenders
usually agrees to act as the agent bank with respect to the loan.
The loan agreement among the corporate borrower and the co-
lenders identifies the agent bank as well as sets forth the
rights and duties of the parties.  The agreement often (but not
always) provides for the collateralization of the corporate
borrower's obligations thereunder and includes various types of
restrictive covenants which must be met by the borrower.

         The participation interests acquired by the Fund may,
depending on the transaction, take the form of a direct co-
lending relationship with the corporate borrower, an assignment
of an interest in the loan by a co-lender or another participant,
or a participation in the seller's share of the loan.  Typically,
the Fund will look to the agent bank to collect principal of and
interest on a participation interest, to monitor compliance with
loan covenants, to enforce all credit remedies, such as
foreclosures on collateral, and to notify co-lenders of any
adverse changes in the borrower's financial condition or
declarations of insolvency.  The agent bank in such cases will be
qualified under the 1940 Act to serve as a custodian for a
registered investment company such as the Fund.  The agent bank
is compensated for these services by the borrower pursuant to the
terms of the loan agreement.



                                3



<PAGE>

         When the Fund acts as co-lender in connection with a
participation interest or when the Fund acquires a participation
interest the terms of which provide that the Fund will be in
primarily with the corporate borrower, the Fund will have direct
recourse against the borrower in the event the borrower fails to
pay scheduled principal and interest.  In cases where the Fund
lacks such direct recourse, the Fund will look to the agent bank
to enforce appropriate credit remedies against the borrower.

         The Fund believes that the principal credit risk
associated with acquiring participation interests from a co-
lender or another participant is the credit risk associated with
the underlying corporate borrower.  The Fund may incur additional
credit risk, however, when the Fund is in the position of a
participant rather than a co-lender because the Fund must assume
the risk of insolvency of the co-lender from which the
participation interest was acquired and that of any person
interpositioned between the Fund and the co-lender.  However, in
acquiring participation interests the Fund will conduct analysis
and evaluation of the financial condition of each such co-lender
and participant to ensure that the participation interest meets
the Fund's high quality standard and will continue to do so as
long as it holds a participation.

         Brady Bonds.  The Portfolio may invest in certain debt
obligations customarily referred to as "Brady Bonds," which are
created through the exchange of existing commercial bank loans to
foreign securities for new obligations in connection with debt
restructurings under a plan introduced by former U.S. Secretary
of the Treasury, Nicholas F. Brady (the "Brady Plan").

         Brady Plan debt restructurings totalling more than
$120 billion have been implemented to date in Argentina, Bolivia,
Brazil, Costa Rica, the Dominican Republic, Ecuador, Mexico,
Nigeria, the Philippines, Uruguay and Venezuela, with the largest
proportion of Brady Bonds having been issued to date by
Argentina, Brazil, Mexico and Venezuela.

         Brady Bonds have been issued only recently, and,
accordingly, do not have a long payment history.  They may be
collateralized or uncollateralized and issued in various
currencies (although most are dollar-denominated) and they are
actively traded in the over-the-counter secondary market. Certain
Brady Bonds are collateralized in full as to principal due at
maturity by zero coupon obligations issued or guaranteed by the
U.S. government, its agencies or instrumentalities having the
same maturity ("Collateralized Brady Bonds").

         Dollar-denominated, Collateralized Brady Bonds may be
fixed rate bonds or floating rate bonds.  Interest payments on
Brady Bonds are often collateralized by cash or securities in an


                                4



<PAGE>

amount that, in the case of fixed rate bonds, is equal to at
least one year of rolling interest payments or, in the case of
floating rate bonds, initially is equal to a least one year's
rolling interest payments based on the applicable interest rate
at that time and is adjusted at regular intervals thereafter.
Certain Brady Bonds are entitled to "value recovery payments" in
certain circumstances, which in effect constitute supplemental
interest payments but generally are not collateralized.  Brady
Bonds are often viewed as having three or four valuation
components: (i) collateralized repayment of principal at final
maturity; (ii) collateralized interest payments;
(iii) uncollateralized interest payments; and (iv) any
uncollateralized repayment of principal at maturity (these
uncollateralized amounts constitute the "residual risk").  In the
event of a default with respect to Collateralized Brady Bonds as
a result of which the payment obligations of the issuer are
accelerated, the U.S. Treasury zero coupon obligations held as
collateral for the payment of principal will not be distributed
to investors, nor will such obligations be sold and the proceeds
distributed.  The collateral will be held by the collateral agent
to the scheduled maturity of the defaulted Brady Bonds, which
will continue to be outstanding, at which time the face amount of
the collateral will equal the principal payments which would have
been due on the Brady Bonds in the normal course.  In addition,
in light of the residual risk of Brady Bonds and, among other
factors, the history of defaults with respect to commercial bank
loans by public and private entitles of countries issuing Brady
Bonds, investments in Brady Bonds are to be viewed as
speculative.

         Standby Commitment Agreements.  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 Fund's net asset value.  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.

         Eurodollar Instruments.  Eurodollar instruments are
essentially U.S. Dollar-denominated further 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 thereon, which are described in Appendix A.

         Repurchase Agreements.  The Fund's Board of Directors
has established procedures, which are periodically reviewed by
the Board, pursuant to which the Adviser monitors the
creditworthiness of the dealers with which the Fund enters into
repurchase agreement transactions.


                                5



<PAGE>

         Illiquid Securities.  Historically, illiquid securities
have included securities subject to contractual or legal
restrictions on resale because they have not been registered
under the Securities Act of 1933, as amended (the "Securities
Act"), securities which are otherwise not readily marketable and
repurchase agreements having a maturity of longer than seven
days.  Securities which have not been registered under the
Securities Act are referred to as private placements or
restricted securities and are purchased directly from the issuer
or in the secondary market.  Mutual funds do not typically hold a
significant amount of these restricted 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 might also have to register such restricted
securities in order to dispose of them resulting in additional
expense and delay.  Adverse market conditions could impede such a
public offering of securities.

         In recent years, however, a large institutional market
has developed for certain securities that are not registered
under the Securities Act, including repurchase agreements,
commercial paper, foreign securities, municipal securities and
corporate bonds and notes.  Institutional investors depend on an
efficient institutional market in which the unregistered security
can be readily resold or on an issuer's ability to honor a demand
for repayment.  The fact that there are contractual or legal
restrictions on resale to the general public or to certain
institutions may not be indicative of the liquidity of such
investments.

         During the coming year, the Fund may invest up to 5% of
its total assets in restricted securities issued under
Section 4(2) of the Securities Act, which exempts from
registration "transactions by an issuer not involving any public
offering."  Section 4(2) instruments are restricted in the sense
that they can only be resold through the issuing dealer to
institutional investors and in private transactions; they cannot
be resold to the general public without registration.

         Rule 144A under the Securities Act allows a broader
institutional trading market for securities otherwise subject to
restriction on resale to the general public.  Rule 144A
establishes a "safe harbor" from the registration requirements of
the Securities Act for resales of certain securities to qualified
institutional buyers.  An insufficient number of qualified
institutional buyers interested in purchasing certain restricted
securities held by the Fund, however, could affect adversely the


                                6



<PAGE>

marketability of such portfolio securities and the Fund might be
unable to dispose of such securities promptly or at reasonable
prices.  Rule 144A has already produced enhanced liquidity for
many restricted securities, and market liquidity for such
securities may continue to expand as a result of this regulation
and the consequent inception of the PORTAL System, an automated
system for the trading, clearance and settlement of unregistered
securities of domestic and foreign issuers sponsored by the
National Association of Securities Dealers, Inc.  The Fund's
investments in Rule 144A eligible securities are not subject to
the limitations described above on securities issued under
Section 4(2).

         The Adviser, under the supervision of the Board of
Directors, will monitor the liquidity of restricted securities in
the Fund's portfolio.  In reaching liquidity decisions, the
Adviser will consider, among other factors, the following:
(1) the frequency of trades and quotes for the security; (2) the
number of dealers making 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 (the
"Commission") interpretation or position with respect to such
type of security.

         General.  The successful use of the foregoing investment
practices draws upon the Adviser's special skills and experience
with respect to such instruments and usually depends on the
Adviser's ability to forecast price movements or currency
exchange rate movements correctly.  Should exchange rates move in
an unexpected manner, the Fund may not achieve the anticipated
benefits of futures contracts, options or forward contracts or
may realize losses and thus be in a worse position than if such
strategies had not been used.  Unlike many exchange-traded
futures contracts and options on futures contracts, there are no
daily price fluctuation limits with respect to options on
currencies and forward contracts, and adverse market movements
could therefore continue to an unlimited extent over a period of
time.  In addition, the correlation between movements in the
prices of such instruments and movements in the prices of the
securities and currencies hedged or used for cover will not be
perfect and could produce unanticipated losses.

         The Fund's ability to dispose of its position in futures
contracts, options and forward contracts will depend on the
availability of liquid markets in such instruments.  Markets in
options and futures with respect to a number of types of


                                7



<PAGE>

securities and currencies are relatively new and still
developing, and there is no public market for forward contracts.
It is impossible to predict the amount of trading interest that
may exist in various types of futures contracts, options and
forward contracts.  If a secondary market does not exist with
respect to an option purchased or written by the Fund over-the-
counter, it might not be possible to effect a closing transaction
in the option (i.e., dispose of the option) with the result that
(i) an option purchased by the Fund would have to be exercised in
order for the Fund to realize any profit and (ii) the Fund may
not be able to sell currencies or portfolio securities covering
an option written by the Fund until the option expires or it
delivers the underlying futures contract or currency upon
exercise.  Therefore, no assurance can be given that the Fund
will be able to utilize these instruments effectively for the
purposes set forth above.  Furthermore, the Fund's ability to
engage in options and futures transactions may be limited by tax
considerations.  See "Dividends, Distributions and Taxes--U.S.
Federal Income Taxes."

         Defensive Position.  For temporary defensive purposes,
the Fund may vary from its investment objectives during periods
in which conditions in securities markets or other economic or
political conditions warrant.  During such periods, the Fund may
increase without limit its position in short-term, liquid, high-
grade debt securities, which may include securities issued by the
U.S. government, its agencies and, instrumentalities ("U.S.
Government Securities"), bank deposit, money market instruments,
short-term (for this purpose, securities with a remaining
maturity of one year or less) debt securities, including notes
and bonds, and short-term foreign currency denominated debt
securities rated A or higher by Moody's Investors Service, Inc.
("Moody's"), Standard & Poor's Ratings Services ("S&P"), Duff &
Phelps Credit Rating Co. ("Duff & Phelps") or Fitch Investors
Service, Inc. ("Fitch") or, if not so rated, of equivalent
investment quality as determined by the Adviser.  For this
purpose, the fund will limit its investments in foreign currency
denominated debt securities to securities that are denominated in
currencies in which the Fund anticipates its subsequent
investments will be denominated.

         Subject to its policy of investing at least 65% of its
total assets in fixed-income securities of issuers located in
three countries, the Fund may also at any time temporarily invest
funds awaiting reinvestment or held as reserves for dividends and
other distributions to shareholders in money market instruments
referred to above.

         Portfolio Turnover.  The Fund may engage in active
short-term trading to benefit from yield disparities among
different issues of securities, to seek short-term profits during


                                8



<PAGE>

periods of fluctuating interest rates, or for other reasons. Such
trading will increase the Fund's rate of turnover and the
incidence of short-term capital gain taxable as ordinary income.
The portfolio turnover rate of securities of the Fund for the
fiscal period January 9, 1996 (commencement of operations)
through October 31, 1996 was 282%.  Management anticipates that
the annual turnover in the Fund will not be in excess of 500%.
An annual turnover rate of 500% occurs, for example, when all of
the securities in the Fund's portfolio are replaced five times in
a period of one year.  A higher rate of portfolio turnover
involves correspondingly greater expenses than a lower rate,
which expenses must be borne by the Fund and its shareholders.
High portfolio turnover also may result in the realization of
substantial net short-term capital gains.  In order to continue
to qualify as a regulated investment company for Federal tax
purposes, less than 30% of the annual gross income of the Fund
must be derived from the sale of securities held by the Fund for
less than three months.  See "Dividends, Distributions and
Taxes".

         U.S. and Foreign Taxes. Foreign taxes paid by the Fund
may be creditable or deductible by U.S. shareholders for U.S.
income tax purposes.  No assurance can be given that applicable
tax laws and interpretations will not change in the future.
Moreover, non-U.S. investors may not be able to credit or deduct
such foreign taxes.  Investors should review carefully the
information discussed under the heading "Dividends, Distributions
and Taxes" and should discuss with their tax advisers the
specific tax consequences of investing in the Fund.

Certain Fundamental Investment Policies

         The following restrictions, which supplement those set
forth in the Fund's Prospectus, may not be changed without
approval by the vote of a majority of the Fund's outstanding
voting securities, which means the affirmative vote of the
holders of (i) 67% or more or the shares represented at a meeting
at which more than 50% of the outstanding shares are represented,
or (ii) more than 50% of the outstanding shares, whichever is
less.

         To reduce investment risk, as a matter of fundamental
policy the Fund may not:

         (i)    invest 25% or more of its total assets in
         securities of issuers conducting their principal
         business activities in the same industry, except that
         this restriction does not apply to U.S. Government
         Securities;




                                9



<PAGE>

         (ii)   borrow money or issue any senior security within
         the meaning of the 1940 Act, except the Fund may, in
         accordance with provisions of the 1940 Act, (a) borrow
         from a bank if after such borrowing there is asset
         coverage of at least 300% as defined in the 1940 Act,
         and (b) borrow for temporary or emergency purposes in an
         amount not exceeding 5% of the value of the total assets
         of the Fund;

         (iii)  pledge, hypothecate, mortgage or otherwise
         encumber its assets, except to secure permitted
         borrowings;

         (iv)   make loans except through (a) the purchase of
         loan assignments and participations and other debt
         obligations in accordance with its investment objectives
         and policies; (b) the lending of portfolio securities;
         or (c) the use of repurchase agreements;

         (v)    participate on a joint or joint and several basis
         in any securities trading account;

         (vi)   invest in companies for the purpose of exercising
         control;

         (vii)  make short sales of securities or maintain a
         short position, unless not more than 25% of the Fund's
         net assets (taken at market value) are held as
         collateral for such sales at any one time; or

         (viii) (a) purchase or sell real estate, except that it
         may purchase and sell securities of companies which deal
         in real estate or interests therein; (b) purchase or
         sell commodities or commodity contracts including
         futures contracts (except foreign currencies, foreign
         currency options and futures, options and futures on
         securities and securities indices and forward contracts
         or contracts for the future acquisition or delivery of
         securities and foreign currencies and related options on
         futures contracts and similar contracts); (c) invest in
         interests in oil, gas, or other mineral exploration or
         development programs; (d) purchase securities on margin,
         except for such short-term credits as may be necessary
         for the clearance of transactions; and (e) act as an
         underwriter of securities, except that the Fund may
         acquire restricted securities under circumstances in
         which, if such securities were sold, the Fund might be
         deemed to be an underwriter for purposes of the
         Securities Act.




                               10



<PAGE>

         In connection with the qualification or registration of
the Funds shares for sale under the securities laws of certain
states, the Fund has agreed, in addition to the foregoing
investment restrictions, that it will not (i) invest more than
10% of its total assets in warrants, except for warrants acquired
by the Fund as a part of a unit or attached to securities, (ii)
make short sales in the securities of any one issuer in excess of
the lesser of 5% of the Funds net assets or 5% of the securities
of any class of such issuer, except for short sales against the
box, (iii) purchase puts, calls, straddles, spreads or any
combination thereof in excess of 5% of the Funds total assets,
(iv) purchase securities of other investment companies except for
purchases in the open market where no commission or profit to the
sponsor results, other than customary brokers commission, or
except as part of a plan of merger, consolidation, reorganization
or liquidation, (v) purchase the securities of any company that
has a record of less than three years of continuous operation
(including that of predecessors) if such purchase would cause
more than 5% of its total assets to be invested in such
securities, and (vi) purchase the securities of any issuer if, as
to 75% of the Funds portfolio, more than 10% of the issuer's
voting securities would be held by the Fund.

________________________________________________________________

                     MANAGEMENT OF THE FUND
________________________________________________________________

DIRECTORS AND OFFICERS

         The Directors and officers of the Fund, their ages and
their principal occupations during the past five years are set
forth below.  Each such Director and officer is also a trustee,
director or officer of other registered investment companies
sponsored by the Adviser.  Unless otherwise specified, the
address of each such persons is 1345 Avenue of the Americas, New
York, New York 10105.

Directors

         JOHN D. CARIFA,* 51, Chairman of the Board and
President, is the President, Chief Operating Officer and a
Director of ACMC,** with which he has been associated since prior
to 1992.
____________________

*      An interested person of the Fund as defined in the 1940
       Act.

**     For purposes of this Statement of Additional Information,
       ACMC refers to Alliance Capital Management Corporation,
                             (footnote continued)

                               11



<PAGE>

         RUTH BLOCK, 66, was formerly an Executive Vice President
and the Chief Insurance Officer of The Equitable Life Assurance
Society of the United States ("Equitable").  She is a Director of
Ecolab Incorporated (specialty chemicals) and Amoco Corporation
(oil and gas).  Her address is P.O. Box 4653, Stamford,
Connecticut 06903.

         DAVID H. DIEVLER, 67, was formerly a Senior Vice
President of ACMC with which he had been associated since prior
to 1992 through 1994. He is currently an independent consultant.
His address is P.O. Box 167, Spring Lake, New Jersey 07762.

         JOHN H. DOBKIN, 54, has been the President of Historic
Hudson Valley (historic preservation) since 1992.  Previously, he
was Director of the National Academy of Design.  From 1988 to
1992 he was a Director of ACMC.  His address is 150 White Plains
Road, Tarrytown, New York 10591.

         WILLIAM H. FOULK, JR., 64, is an Investment Advisor and
an Independent Consultant.  He was formerly Senior Manager of
Barrett Associates, Inc., a registered investment adviser, with
which he had been associated since prior to 1992.  His address is
2 Hekma Road, Greenwich, Connecticut 06831.

         DR. JAMES M. HESTER, 72, is President of the Harry Frank
Guggenheim Foundation and a Director of Union Carbide
Corporation.  He was formerly President of New York University,
the New York Botanical Garden and Rector of the United Nations
University.  His address is 45 East 89th Street, New York, New
York 10128.

         CLIFFORD L. MICHEL, 57, is a member of the law firm of
Cahill Gordon & Reindel since prior to 1992.  He is President and
Chief Executive Officer of Wenonah Development Company
(investments) and a Director of Placer Dome, Inc. (mining).  His
address is St. Bernard's Road, Gladstone, New Jersey 07934.

         DONALD J. ROBINSON, 62, was formerly a partner at
Orrick, Herrington & Sutcliffe and is currently senior counsel to
that firm.  His address is 666 Fifth Avenue, 19th Floor, New
York, New York 10103.




____________________

(footnote continued)
       the sole general partner of the Adviser, and to the
       predecessor general partner of the Adviser of the same
       name.


                               12



<PAGE>

Officers

         JOHN D. CARIFA, President, see biography, above.

         WAYNE D. LYSKI, 55, Senior Vice President, is an
Executive Vice President of ACMC, with which he has been
associated since prior to 1992.

         DOUGLAS J. PEEBLES, 31, Vice President, is a Vice
President of ACMC with which he has been associated since prior
to 1992.

         EDMUND P. BERGAN, JR., 46, Secretary, is a Senior Vice
President and the General Counsel of Alliance Fund Distributors,
Inc. with which he has been associated since prior to 1992.

         ANDREW L. GANGOLF, 42, Assistant Secretary, has been a
Vice President and Assistant General Counsel of Alliance Fund
Distributors, Inc. since December 1994.  Prior thereto he was a
Vice President and Assistant Secretary of Delaware Management
Company, Inc. since October 1992 and a Vice President and Counsel
to Equitable Life Assurance Society of the United States since
prior to 1992.

         MARK D. GERSTEN, 46, Treasurer and Chief Financial
Officer, is a Senior Vice President of AFS, with which he has
been associated since prior to 1992.

         JUAN J. RODRIGUEZ, 39, Controller, is an Assistant Vice
President of Alliance Fund Services, Inc. with which he has been
associated since prior to 1992.

         CARLA LAROSE, 33, Assistant Controller, is a Manager of
Alliance Fund Services, Inc., with which she has been associated
since 1992.

         JOSEPH J. MANTINEO, 37, Assistant Controller, has been a
Vice President of AFS since prior to 1992.

         VINCENT S. NOTO, 32, Assistant Controller, is an
Assistant Vice President of Alliance Fund Services, Inc., with
which he has been associated since prior to 1992.

         The aggregate compensation paid by the Fund to each of
the Directors during its fiscal period January 9, 1996
(commencement of operations) through October 31, 1996, the
aggregate compensation paid to each of the Directors during
calendar year 1996 by all of the Funds to which the Adviser
provides investment advisory services (collectively, the
"Alliance Fund Complex"), and the total number of registered
investment companies in the Alliance Fund Complex with respect to


                               13



<PAGE>

which each of the Directors serves as a director or trustee, are
set forth below.  Neither the Fund nor any other fund in the
Alliance Fund Complex provides compensation in the form of
pensions or retirement benefits to any of its directors or
trustees.  Each of the Directors is a director or trustee of one
or more other registered investment companies in the Alliance
Fund Complex.














































                               14



<PAGE>

                                                    Total Number
                                                    of Funds in
                                                    the Alliance
                                     Total          Complex,
                                     Compensation   Including the
                                     From the       Fund, as to
                                     Alliance Fund  which the 
                      Aggregate      Complex,       Director is a
Name of Director      Compensation   Including the  Director or
of the Fund           From the Fund  Fund           Trustee      

John D. Carifa        $ -0-          $  -0-         50
Ruth Block            $2,327         $157,500       37
David H. Dievler      $2,307         $182,000       43
John H. Dobkin        $2,341         $121,250       30
William H. Foulk, Jr. $2,368         $144,250       32
Dr. James M. Hester   $2,334         $148,500       38
Clifford L. Michel    $2,334         $146,068       38
Donald J. Robinson    $367           $137,250       38

         As of February 7, 1997, the Directors and officers of
the Fund as a group owned 10% of the Class A shares of the Fund.

Adviser

         Alliance Capital Management L.P., a New York Stock
Exchange listed company 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 Fund under the
supervision and control of the Fund's Board of Directors.

         The Adviser is a leading international investment
manager supervising client accounts with assets as of March
31, 1997 of more than $182 billion (of which more than
$66 billion represented the assets of investment companies).  The
Adviser's clients are primarily major corporate employee benefit
funds, public employee retirement systems, investment companies,
foundations and endowment funds and included as of March 31,
1997, 31 of the FORTUNE 100 companies.  As of that date, the
Adviser and its subsidiaries employed approximately 1,450
employees who operated out of domestic offices and the overseas
offices of subsidiaries in Bombay, Istanbul, London, Paris, Sao
Paulo, Sydney, Tokyo, Toronto, Bahrain, Luxembourg and Singapore.
The 52 registered investment companies comprising 110 separate
investment portfolios managed by the Adviser currently have more
than two million shareholders.

         Alliance Capital Management Corporation, the sole
general partner of, and the owner of a 1% general partnership


                               15



<PAGE>

interest in, the Adviser, is an indirect wholly-owned subsidiary
of The Equitable Life Assurance Society of the United States
("Equitable"), one of the largest life insurance companies in the
United States and a wholly-owned subsidiary of The Equitable
Companies Incorporated ("ECI"), a holding company controlled by
AXA, a French insurance holding company.  As of June 30, 1996,
ACMC, Inc. and Equitable Capital Management Corporation, each a
wholly-owned direct or indirect subsidiary of Equitable, together
with Equitable, owned in the aggregate approximately 57% of the
issued and outstanding units representing assignments of
beneficial ownership of limited partnership interests in the
Adviser ("Units").  As of June 30, 1996, approximately 33% and
10% of the Units were owned by the public and employees of the
Adviser and its subsidiaries, respectively, including employees
of the Adviser who serve as Directors of the Fund.

         As of September 6, 1996, AXA and its subsidiaries own
approximately 60.7% of the issued and outstanding shares of
capital stock of ECI.  AXA is the holding company for an
international group of insurance and related financial services
companies.  AXA's insurance operations include activities in life
insurance, property and casualty insurance and reinsurance.  The
insurance operations are diverse geographically with activities
in France, the United States, Australia, the United Kingdom,
Canada and other countries, principally in Europe and the
Asia/Pacific area.  AXA is also engaged in asset management,
investment banking, securities trading, brokerage, real estate
and other financial services activities in the United States,
Europe and the Asia/Pacific area.  Based on information provided
by AXA, as of September 9, 1996, 36.3% of the issued ordinary
shares (representing 49.1% of the voting power) of AXA were owned
directly or indirectly by Finaxa, a French holding company
("Finaxa").  As of September 6, 1996, 61.3% of the voting shares
(representing 73.5% of the voting power) of Finaxa were owned by
five French mutual insurance companies (the "Mutuelles AXA") (one
of which, AXA Assurances I.A.R.D. Mutuelle, owned 34.8% of the
voting shares representing 40.6% of the voting power), and 23.7%
of the voting shares of Finaxa (representing 10.5% of the voting
power) of Finaxa were owned by Banque Paribas, a French bank.
Including the ordinary shares directly or indirectly owned by
Finaxa, the Mutuelles AXA directly or indirectly owned 42.0% of
the issued ordinary shares (representing 56.8% of the voting
power) of AXA as of September 9, 1996.  Acting as a group, the
Mutuelles AXA control AXA and Finaxa.  In addition, as of
September 9, 1996, 7.8% of the issued ordinary shares of the AXA
without the power to vote were owned by subsidiaries of AXA.

         Under the Advisory Agreement, the Adviser provides
investment advisory services and other placement facilities for
the Fund and pays all compensation of Directors and officers of
the Fund who are affiliated persons of the Adviser.  The Adviser


                               16



<PAGE>

or its affiliates also furnishes the Fund, without charge,
management supervision and assistance and office facilities and
provides persons satisfactory to the Fund's Board of Directors to
serve as the Fund's officers.

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

         The Advisory Agreement provides that the Adviser will
reimburse the Fund for its expenses (exclusive of interest,
taxes, brokerage, expenditures pursuant to the Distribution
Services Agreement described below, and extraordinary expenses as
to the extent permitted by applicable state securities laws and
regulations) which in any year exceed the limits prescribed by
any state in which the Fund's shares are qualified for sale.  The
Fund may not qualify its shares for the sale in every state.  The
Fund believes that presently the most restrictive expense ratio
limitation imposed by any state in which the Fund has qualified
its shares for sale is 2.5% of the first $30 million of the
Fund's average net assets, 2.0% of the next $70 million of its
average net assets and 1.5% of its average net assets in excess
of $100 million.  Expense reimbursements, if any, are accrued
daily and paid monthly.  The Fund was reimbursed by the Adviser
in the amount of $289,911 for the fiscal period January 9, 1996
(commencement of operations) through October 31, 1996.

         The Advisory Agreement became effective on January 2,
1996.  The Advisory Agreement will continue in effect until
December 31, 1997 and thereafter for successive twelve-month
periods (computed from each January 1), provided, however, that
such continuance is specifically approved at least annually by a
vote of a majority of the Fund's outstanding voting securities or
by the Fund's Board of Directors, including in either case
approval by a majority of the Directors who are not parties to
the Advisory Agreement or interested persons of any such party as
defined by the 1940 Act.

         For the fiscal period January 9, 1996 (commencement of
operations) through October 31, 1996, the Adviser received from
the Fund advisory fees of $12,613.

         Certain other clients of the Adviser may have investment
objectives and policies similar to those of the Fund. The Adviser


                               17



<PAGE>

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

         The Adviser may act as an investment adviser to other
persons, firms or corporations, including investment companies,
and is investment adviser to the following registered investment
companies:  ACM Institutional Reserves, Inc., AFD Exchange
Reserves, The Alliance Fund, Inc., Alliance All-Asia Investment
Fund, Inc., Alliance Balanced Shares, Inc., Alliance Bond Fund,
Inc., Alliance Capital Reserves, Alliance Developing Markets
Fund, Inc., Alliance Global Dollar Government Fund, Inc.,
Alliance Global Small Cap Fund, Inc., Alliance Global Strategic
Income Trust, Inc., Alliance Government Reserves, Alliance Growth
and Income Fund, Inc., Alliance Income Builder Fund, Inc.,
Alliance International Fund, Alliance Money Market Fund, Alliance
Mortgage Securities Income Fund, Inc., Alliance Limited Maturity
Government Fund, Inc., Alliance Multi-Market Strategy Trust,
Inc., Alliance Municipal Income Fund, Inc., Alliance Municipal
Income Fund II, Alliance Municipal Trust, Alliance New Europe
Fund, Inc., Alliance North American Government Income Trust,
Inc., Alliance Premier Growth Fund, Inc., Alliance Quasar Fund,
Inc., Alliance Real Estate Investment Fund, Inc., Alliance/Regent
Sector Opportunity Fund, Inc., Alliance Short-Term Multi-Market
Trust, Inc., Alliance Technology Fund, Inc., Alliance Utility
Income Fund, Inc., Alliance Variable Products Series Fund, Inc.,
Alliance World Income Trust, Inc., Alliance Worldwide
Privatization Fund, Inc., The Alliance Portfolios, Fiduciary
Management Associates and The Hudson River Trust, all open-end
investment companies; and to ACM Government Income Fund, Inc.,
ACM Government Securities Fund, Inc., ACM Government Spectrum
Fund, Inc., ACM Government Opportunity Fund, Inc., ACM Managed
Income Fund, Inc., ACM Managed Dollar Income Fund, Inc., ACM
Municipal Securities Income Fund, Inc., Alliance All-Market
Advantage Fund, Inc., Alliance Global Environment Fund, Inc.,
Alliance World Dollar Government Fund, Inc., Alliance World
Dollar Government Fund II, Inc., The Austria Fund, Inc., The
Korean Investment Fund, Inc., The Southern Africa Fund, Inc. and
The Spain Fund, Inc., all closed-end investment companies.





                               18



<PAGE>

________________________________________________________________

                      EXPENSES OF THE FUND
________________________________________________________________

Distribution Services Agreement

         The Fund has entered into a Distribution Services
Agreement (the "Agreement") with Alliance Fund Distributors,
Inc., the Fund's principal underwriter (the "Principal
Underwriter"), to permit the Principal Underwriter to distribute
the Fund's shares and to permit the Fund to pay distribution
services fees to defray expenses associated with distribution of
its Class A shares, Class B shares and Class C shares in
accordance with a plan of distribution which is included in the
Agreement and has been duly adopted and approved in accordance
with Rule 12b-1 adopted by the Commission under the Act (the
"Plan").

         Distribution services fees are accrued daily and paid
monthly and are charged as expenses of the Fund as accrued.  The
distribution services fees attributable to the Class B shares and
Class C shares are designed to permit an investor to purchase
such shares through broker-dealers without the assessment of an
initial sales charge, and at the same time to permit the
Principal Underwriter to compensate broker-dealers in connection
with the sale of such shares.  In this regard, the purpose and
function of the respective contingent deferred sales charges and
respective distribution services fees on the Class B shares and
Class C shares, are the same as those of the initial sales charge
and distribution services fee with respect to the Class A shares
in that in each case the sales charge and distribution services
fee provide for the financing of the distribution of the relevant
class of the Fund's shares.

         Under the Agreement, the Treasurer of the Fund reports
the amounts expended under the Rule 12b-1 Plan and the purposes
for which such expenditures were made to the Directors of the
Fund for their review on a quarterly basis.  Also, the Agreement
provides that the selection and nomination of Directors who are
not "interested persons" of the Fund, as defined in the 1940 Act,
are committed to the discretion of such disinterested Directors
then in office. 

         The Agreement became effective on January 2, 1996 with
respect to Class A shares, Class B shares and Class C shares and
September 30, 1996 with respect to Advisor Class shares.  The
Agreement will continue in effect until December 31, 1997 and
thereafter for successive twelve-month periods (computed from
each January 1), provided, however, that such continuance is
specifically approved at least annually by the Directors of the


                               19



<PAGE>

Fund or by vote of the holders of a majority of the outstanding
voting securities (as defined in the 1940 Act) of that class,
and, in either case, by a majority of the Directors of the Fund
who are not parties to the Agreement or interested persons, as
defined in the 1940 Act, of any such party (other than as
directors of the Fund) and who have no direct or indirect
financial interest in the operation of the Plan or any agreement
related thereto.

         In approving the Agreement, the Directors of the Fund
determined that there was a reasonable likelihood that the
Agreement would benefit the Fund and its shareholders.
Information with respect to distribution services fees and other
revenues and expenses of the Principal Underwriter will be
presented to the Directors each year for their consideration in
connection with their deliberations as to the continuance of the
Agreement.  In their review of the Agreement, the Directors will
be asked to take into consideration separately with respect to
each class the distribution expenses incurred with respect to
such class.  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 Adviser may from time to time and from its own funds
or such other resources as may be permitted by rules of the
Commission make payments for distribution services to the
Principal Underwriter; the latter may in turn pay part or all of
such compensation to brokers or other persons for their
distribution assistance.

         During the Fund's fiscal period January 9, 1996
(commencement of operations) through October 31, 1996,
distribution services fees for expenditures payable to the
Principal Underwriter amounted to, with respect to Class A
shares, an amount aggregating $4,196 which constituted .30 of 1%,
annualized, of the Fund's average daily net assets attributable
to Class A shares during such fiscal year, and the Adviser made
payments from its own resources as described above aggregating
$79,938.  Of the $84,134 paid by the Fund and the Adviser under
the Plan with respect to Class A shares, $17,672 was spent on
advertising, $490 on the printing and mailing of prospectuses for
persons other than current shareholders, $29,449 for compensation
to broker-dealers and other financial intermediaries (including,
$26,403 to the Fund's Principal Underwriter), $353 for
compensation to sales personnel and $36,170 was spent on the
printing of sales literature, travel, entertainment, due
diligence and other promotional expenses.

         During the fiscal period January 9, 1996 (commencement
of operations) through October 31, 1996, distribution services
fees for expenditures payable to the Principal Underwriter


                               20



<PAGE>

amounted to, with respect to Class B shares, an amount
aggregating $1,483 which constituted 1.00% of the Fund's average
daily net assets attributable to Class B shares during such
fiscal year and the Adviser made payments from its own resources
aggregating $131,691.  Of the $133,174 paid by the Fund and the
Adviser under the Plan with respect to Class B shares, $23,335
was spent on advertising, $4,408 on the printing and mailing of
prospectuses for persons other than current shareholders, $59,900
for compensation to broker-dealers and other financial
intermediaries (including, $35,520 to the Fund's Principal
Underwriter), $585 for compensation to sales personnel and
$44,688 was spent on the printing of sales literature, travel,
entertainment, due diligence and other promotional expenses, and
$258 on interest on Class B financing.

         During the fiscal period January 9, 1996 (commencement
of operations) through October 31, 1996, distribution services
fees for expenditures payable to the Principal Underwriter
amounted to, with respect to Class C shares, an amount
aggregating $1,346 which constituted 1.00% of the Fund's average
daily net assets attributable to Class C shares during such
fiscal year, and the Adviser made payments from its own resources
as described above aggregating $84,064.  Of the $85,410 paid by
the Fund and the Adviser under the Plan with respect to Class C
shares, $15,345 was spent on advertising, $2,198 on the printing
and mailing of prospectuses for persons other than current
shareholders, $39,003 for compensation to broker-dealers and
other financial intermediaries (including, $27,473 to the Fund's
Principal Underwriter), $405 for compensation to sales personnel
and $28,459 was spent on the printing of sales literature,
travel, entertainment, due diligence and other promotional
expenses.

         The Agreement will continue in effect for successive
twelve-month periods (computed from each January  1), provided,
however, that such continuance is specifically approved at least
annually by the Directors of the Fund, or by vote of the holders
of a majority of the Fund's outstanding voting securities (as
defined in the 1940 Act) of that class, and, in either case,
approval by a majority of the Directors of the Fund who are not
parties to the Agreement or interested persons, as defined in the
1940 Act, of any such party (other than as directors of the Fund)
and who have no direct or indirect financial interest in the
operation of the Rule 12b-1 Plan or any agreement related
thereto.  Most recently, continuance of the Agreement was
approved for the period ending December 31, 1997 by the Board of
Directors, including a majority of the Directors who are not
interested persons, as defined in the 1940 Act, at their Regular
Meeting held on December 17, 1996.




                               21



<PAGE>

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

         All material amendments to the Agreement must be
approved by a vote of the Directors or the holders of the Fund's
outstanding voting securities, voting separately by class, and in
either case, by a majority of the disinterested Directors, cast
in person at a meeting called for the purpose of voting on such
approval; and the Agreement may not be amended in order to
increase materially the costs that a particular class may bear
pursuant to the Agreement without the approval of a majority of
the holders of the outstanding voting shares of the class or
classes affected.  The Agreement may be terminated (a) by the
Fund without penalty at any time by a majority vote of the
holders of the outstanding voting securities of the Fund, voting
separately by class or by a majority vote of the Directors who
are not "interested persons" as defined in the 1940 Act, or
(b) by the Principal Underwriter.  To terminate the Agreement,
any party must give the other parties 60 days' written notice; to
terminate the Rule 12b-1 Plan only, the Fund need give no notice
to the Principal Underwriter.  The Agreement will terminate
automatically in the event of its assignment.

Transfer Agency Agreement

         Alliance Fund Services, Inc., an indirect wholly-owned
subsidiary of the Adviser, receives a transfer agency fee per
account holder of each of the Class A shares, Class B shares,
Class C shares and Advisor Class shares of the Fund, plus
reimbursement for out-of-pocket expenses.  The transfer agency
fee with respect to the Class B shares and Class C shares is
higher than the transfer agency fee with respect to the Class A
shares and Advisor Class shares.  For the fiscal period January
9, 1996 (commencement of operations) through October 31, 1996 the
Fund paid Alliance Fund Services, Inc. $16,098 for transfer
agency services.  









                               22



<PAGE>

                                                             

                       PURCHASE OF SHARES
                                                             

         The following information supplements that set forth in
the Fund's Prospectus under "Purchase and Sale of Shares -- How
To Buy Shares."

General

         Shares of the Fund are offered on a continuous basis at
a price equal to their net asset value plus an initial sales
charge at the time of purchase ("Class A Shares"), with a
contingent deferred sales charge ("Class B Shares"), or without
any initial sales charge and, as long as the shares are held for
one year or more, without any contingent deferred sales charge
("Class C Shares"), or, to investors eligible to purchase Advisor
Class shares, without any initial, contingent deferred or asset-
based sales-charge, in each case as described below.  Shares of
the Fund that are offered subject to a sales charge are offered
through (i) investment dealers that are members of the National
Association of Securities Dealers, Inc. and have entered into
selected dealer agreements with the Principal Underwriter
("selected dealers"), (ii) depository institutions and other
financial intermediaries or their affiliates, that have entered
into selected agent agreements with the Principal Underwriter
("selected agents"), and (iii) the Principal Underwriter.  

         Advisor Class shares of the Fund may be purchased and
held solely (i) through accounts established under fee-based
programs, sponsored and maintained by registered broker-dealers
or other financial intermediaries and approved by the Principal
Underwriter, (ii) through self-directed defined contribution
employee benefit plans (e.g., 401(k) plans) that have at least
1,000 participants or $25 million in assets, or (iii)  by the
categories of investors described in clauses (i) through (iv)
below under "--Sales at Net Asset Value" (other than officers,
directors and present and full-time employees of selected dealers
or agents, or relatives of such person, or any trust, individual
retirement account or retirement plan account for the benefit of
such relative, none of whom is eligible on the basis solely of
such status to purchase and hold Advisor Class shares), or (iv)
by directors and present or retired full-time employees of Koll
Real Estate Services.

         Generally, a fee-based program must charge an asset-
based or other similar fee and must invest at least $250,000 in
Advisor Class shares of each Fund in which the program invests in
order to be approved by AFD for investment in Advisor Class
shares.


                               23



<PAGE>

         If you are a Fund shareholder through an account
established under a fee-based program, your fee-based program may
impose requirements with respect to the purchase, sale or
exchange of Advisor Class shares of the Fund that are different
from those described in the Advisor Class Prospectus and this
Statement of Additional Information.  A transaction fee may be
charged by your financial representative with respect to the
purchase, sale or exchange of Advisor Class shares made through
such financial representative.

         Investors may purchase shares of the Fund either through
selected dealers, agents, financial intermediaries or other
financial representatives or directly through the Principal
Underwriter.  A transaction, service, administrative or other
similar fee may be charged by your broker-dealer, agent,
financial intermediary or other financial representative with
respect to the purchase, sale or exchange of Class A, Class B,
Class C or Advisor Class shares made through such financial
representative.  Such financial intermediaries may also impose
requirements with respect to the purchase, sale or exchange of
shares that are different from, or in addition to, those imposed
by the Fund, including requirements as to the minimum initial and
subsequent investment amounts.  Sales personnel of selected
dealers and agents distributing the Fund's shares may receive
differing compensation for selling Class A, Class B, Class C or
Advisor Class shares.

         Shares of the Fund may also be sold in foreign countries
where permissible.  The Fund may refuse any order for the
purchase of shares.  The Fund reserves the right to suspend the
sale of its shares to the public in response to conditions in the
securities markets or for other reasons.

         The public offering price of shares of the Fund is their
net asset value, plus, in the case of Class A shares, a sales
charge which will vary depending on the purchase alternative
chosen by the investor, as shown in the table below under "Class
A Shares".  On each Fund business day on which a purchase or
redemption order is received by the Fund and trading in the types
of securities in which the Fund invests might materially affect
the value of Fund shares, the per share net asset value is
computed in accordance with the Fund's Articles of Incorporation
and By-Laws as of the next close of regular trading on the New
York Stock Exchange (the "Exchange") (currently 4:00 p.m. Eastern
time) by dividing the value of the Fund's total assets, less its
liabilities, by the total number of its shares then outstanding.
A Fund business day is any day on which the Exchange is open for
trading.  

         The respective per share net asset values of the
Class A, Class B, Class C and Advisor Class shares are expected


                               24



<PAGE>

to be substantially the same.  Under certain circumstances,
however, the per share net asset values of the Class B and
Class C shares may be lower than the per share net asset values
of the Class A and Advisor Class shares as a result of the
differential daily expense accruals of the distribution and
transfer agency fees applicable with respect to those classes of
shares.  Even under those circumstances, the per share net asset
values of the four classes eventually will tend to converge
immediately after the payment of dividends, which will differ by
approximately the amount of the expense accrual differential
among the classes.

         The Fund will accept unconditional orders for its shares
to be executed at the public offering price equal to their net
asset value next determined (plus applicable Class A sales
charges), as described below.  Orders received by the Principal
Underwriter prior to the close of regular trading on the Exchange
on each day the Exchange is open for trading are priced at the
net asset value computed as of the close of regular trading on
the Exchange on that day (plus applicable Class A sales charges).
In the case of orders for purchase of shares placed through
selected dealers, agents or financial representatives, as
applicable, the applicable public offering price will be the net
asset value as so determined, but only if the selected dealer,
agent or financial representative receives the order prior to the
close of regular trading on the Exchange and transmits it to the
Principal Underwriter prior to 5:00 p.m. Eastern time.  The
selected dealer, agent or financial representative, as
applicable, is responsible for transmitting such orders by 5:00
p.m.  If the selected dealer, agent, or financial representative
fails to do so, the investor's right to that day's closing price
must be settled between the investor and the selected dealer,
agent or financial representative, as applicable.  If the
selected dealer, agent or financial representative, as
applicable, receives the order after the close of regular trading
on the Exchange, the price will be based on the net asset value
determined as of the close of regular trading on the Exchange on
the next day it is open for trading.

         Following the initial purchase of Fund shares, a
shareholder may place orders to purchase additional shares by
telephone if the shareholder has completed the appropriate
portion of the Subscription Application or an "Autobuy"
application obtained by calling the "For Literature" telephone
number shown on the cover of this Statement of Additional
Information.  Except with respect to certain omnibus accounts,
telephone purchase orders may not exceed $500,000.  Payment for
shares purchased by telephone can be made only by Electronic
Funds Transfer from a bank account maintained by the shareholder
at a bank that is a member of the National Automated Clearing
House Association ("NACHA").  If a shareholder's telephone


                               25



<PAGE>

purchase request is received before 3:00 p.m. Eastern time on a
Fund business day, the order to purchase shares is automatically
placed the following Fund business day, and the applicable public
offering price will be the public offering price determined as of
the close of business on such following business day.

         Full and fractional shares are credited to a
subscriber's account in the amount of his or her subscription. As
a convenience to the subscriber, and to avoid unnecessary expense
to the Fund, stock certificates representing shares of the Fund
are not issued except upon written request to the Fund by the
shareholder or his or her authorized selected dealer or agent.
This facilitates later redemption and relieves the shareholder of
the responsibility for and inconvenience of lost or stolen
certificates.  No certificates are issued for fractional shares,
although such shares remain in the shareholder's account on the
books of the Fund.

         In addition to the discount or commission paid to
dealers or agents, the Principal Underwriter from time to time
pays additional cash or other incentives to dealers or agents,
including EQ Financial Consultants, Inc., formerly Equico
Securities, Inc., an affiliate of the Principal Underwriter, in
connection with the sale of shares of the Fund. Such additional
amounts may be utilized, in whole or in part, to provide
additional compensation to registered representatives who sell
shares of the Fund.  On some occasions, cash or other incentives
will be conditioned upon the sale of a specified minimum dollar
amount of the shares of the Fund and/or other Alliance Mutual
Funds, as defined below, during a specific period of time.  On
some occasions, such cash or other incentives will take the form
of payment for attendance at seminars, meals, sporting events or
theater performances, or payment for travel, lodging and
entertainment incurred in connection with travel taken by persons
associated with a dealer or agent and their immediate family
members to urban or resort locations within or outside the United
States.  Such dealer or agent may elect to receive cash
incentives of equivalent amount in lieu of such payments.

         Class A, Class B and Class C and Advisor Class shares
each represent an interest in the same portfolio of investments
of the Fund, have the same rights and are identical in all
respects, except that (i) Class A shares bear the expense of the
initial sales charge (or contingent deferred sales charge, when
applicable) and Class B and Class C shares bear the expense of
the deferred sales charge, (ii) Class B shares and Class C shares
each bear the expense of a higher distribution services fee than
that borne by Class A shares and Advisor Class shares do not bear
such a fee, (iii) Class B and Class C shares bear higher transfer
agency costs than that borne by Class A and Advisor Class shares;
(iv) each of Class A, Class B and Class C shares has exclusive


                               26



<PAGE>

voting rights with respect to provisions of the Rule 12b-1 Plan
pursuant to which its distribution services fee is paid and other
matters for which separate class voting is appropriate under
applicable law, provided that, if the Fund submits to a vote of
the Class A shareholders, an amendment to the Rule 12b-1 Plan
that would materially increase the amount to be paid thereunder
with respect to the Class A shares, then such amendment will also
be submitted to the Class B and Advisor Class shareholders and
the Class A shareholders, the Class B shareholders and the
Advisor Class shareholders will vote separately by class, and
(v) Class B and Advisor Class shares are subject to a conversion
feature.  Each class has different exchange privileges and
certain different shareholder service options available.

         The Directors of the Fund have determined that currently
no conflict of interest exists between or among the Class A,
Class B, Class C and Advisor Class shares.  On an ongoing basis,
the Directors of the Fund, pursuant to their fiduciary duties
under the 1940 Act and state law, will seek to ensure that no
such conflict arises.

Alternative Retail Purchase Arrangements --
Class A, Class B, and Class C Shares***      

         The alternative purchase arrangements available with
respect to Class A shares, Class B shares and Class C shares
permit an investor to choose the method of purchasing shares that
is most beneficial given the amount of the purchase, the length
of time the investor expects to hold the shares, and other
circumstances.  Investors should consider whether, during the
anticipated life of their investment in the Fund, the accumulated
distribution services fee and contingent deferred sales charges
on Class B shares prior to conversion, or the accumulated
distribution services fee and contingent deferred sales charge on
Class C shares, would be less than the initial sales charge and
accumulated distribution services fee on Class A shares purchased
at the same time, and to what extent such differential would be
offset by the higher return of Class A shares.  Class A shares
will normally be more beneficial than Class B shares to the
investor who qualifies for reduced initial sales charges on Class
A shares, as described below.  In this regard, the Principal
Underwriter will reject any order (except orders from certain
retirement plans) for more than $250,000 for Class B shares.
Class C shares will normally not be suitable for the investor who
qualifies to purchase Class A shares at net asset value.  For
this reason, the Principal Underwriter will reject any order for
more than $1,000,000 for Class C shares.
____________________

***    Advisor Class shares are sold only to investors described
       above in this section under "-- General."


                               27



<PAGE>

         Class A shares are subject to a lower distribution
services fee and, accordingly, pay correspondingly higher
dividends per share than Class B shares or Class C shares.
However, because initial sales charges are deducted at the time
of purchase, investors purchasing Class A shares would not have
all their funds invested initially and, therefore, would
initially own fewer shares.  Investors not qualifying for reduced
initial sales charges who expect to maintain their investment for
an extended period of time might consider purchasing Class A
shares because the accumulated continuing distribution charges on
Class B shares or Class C shares may exceed the initial sales
charge on Class A shares during the life of the investment.
Again, however, such investors must weigh this consideration
against the fact that, because of such initial sales charges, not
all their funds will be invested initially.

         Other investors might determine, however, that it would
be more advantageous to purchase Class B shares or Class C shares
in order to have all their funds invested initially, although
remaining subject to higher continuing distribution charges and,
being subject to a contingent deferred sales charge for a three-
year period and one-year period, respectively.  For example,
based on current fees and expenses, an investor subject to the
4.25% initial sales charge would have to hold his or her
investment approximately seven years for the Class C distribution
services fee to exceed the initial sales charge plus the
accumulated distribution services fee of Class A shares.  In this
example, an investor intending to maintain his or her investment
for a longer period might consider purchasing Class A shares.
This example does not take into account the time value of money,
which further reduces the impact of the Class C distribution
services fees on the investment, fluctuations in net asset value
or the effect of different performance assumptions.

         Those investors who prefer to have all of their funds
invested initially but may not wish to retain Fund shares for the
three-year period during which Class B shares are subject to a
contingent deferred sales charge may find it more advantageous to
purchase Class C shares.

         During the fiscal period January  9, 1996 (commencement
of operations) through October 31, 1996, the aggregate amount of
underwriting commission payable with respect to shares of the
Fund was $9,434.  Of that amount, the Principal Underwriter
received the amounts of $240 representing that portion of the
sales charges paid on shares of the Fund sold during the year
which was not reallowed to selected dealers (and was,
accordingly, retained by the Principal Underwriter).  During the
Fund's fiscal period January 9, 1996 (commencement of operations)
through October 31, 1996, the Principal Underwriter received $743



                               28



<PAGE>

in contingent deferred sales charges with respect to Class B
shares.

Class A Shares

         The public offering price of Class A shares is the net
asset value plus a sales charge, as set forth below.


                          Sales Charge

                                                   Discount or
                                                   Commission
                                     As % of       to Dealers
                         As % of     the           or Agents
                         Net         Public        As % of
Amount of                Amount      Offering      Offering
Purchase                 Invested    Price         Price

Less than
   $100,000. . .         4.44%       4.25%         4.00%
$100,000 but
    less than
    $250,000. . .        3.36        3.25          3.00
250,000 but
    less than
    $500,000. . .        2.30        2.25          2.00
500,000 but
    less than
    $1,000,000*. . .     1.78        1.75          1.50

____________________
*    There is no initial sales charge on transactions of
$1,000,000 or more.

         With respect to purchases of $1,000,000 or more, Class A
shares redeemed within one year of purchase will be subject to a
contingent deferred sales charge equal to 1% of the lesser of the
cost of the shares being redeemed or their net asset value at the
time of redemption.  Accordingly, no sales charge will be imposed
on increases in net asset value above the initial purchase price.
In addition, no charge will be assessed on shares derived from
reinvestment of dividends or capital gains distributions.  The
contingent deferred sales charge on Class A shares will be waived
on certain redemptions, described below under "--Class B Shares."
In determining the contingent deferred sales charge applicable to
a redemption of Class A shares, it will be assumed that the
redemption is, first, of any shares that are not subject to a
contingent deferred sales charge (for example, because an initial
sales charge was paid with respect to the shares, or they have
been held beyond the period during which the charge applies or


                               29



<PAGE>

were acquired upon the reinvestment of dividends or
distributions) and, second, of shares held longest during the
time they are subject to the sales charge.  Proceeds from the
contingent deferred sales charge on Class A shares are paid to
the Principal Underwriter and are used by the Principal
Underwriter to defray the expenses of the Principal Underwriter
related to providing distribution-related services to the Fund in
connection with the sales of Class A shares, such as the payment
of compensation to selected dealers or agents for selling Class A
shares.  With respect to purchases of $1,000,000 or more made
through selected dealers or agents, the Adviser may, pursuant to
the Distribution Services Agreement described above, pay such
dealers or agents from its own resources a fee of up to 1% of the
amount invested to compensate such dealers or agents for their
distribution assistance in connection with such purchases.

         No initial sales charge is imposed on Class A shares
issued (i) pursuant to the automatic reinvestment of income
dividends or capital gains distributions, (ii) in exchange for
Class A shares of other "Alliance Mutual Funds" (as that term is
defined under "Combined Purchase Privilege" below), except that
an initial sales charge will be imposed on Class A shares issued
in exchange for Class A shares of AFD Exchange Reserves ("AFDER")
that were purchased for cash without the payment of an initial
sales charge and without being subject to a contingent deferred
sales charge or (iii) upon the automatic conversion of Class B
shares or Advisor Class shares as described below under "--
Class B Shares Conversion Feature" and "--Conversion of Advisor
Class Shares to Class A Shares".  The Fund receives the entire
net asset value of its Class A shares sold to investors.  The
Principal Underwriter's commission is the sales charge shown
above less any applicable discount or commission "reallowed" to
selected dealers and agents.  The Principal Underwriter will
reallow discounts to selected dealers and agents in the amounts
indicated in the table above.  In this regard, the Principal
Underwriter may elect to reallow the entire sales charge to
selected dealers and agents for all sales with respect to which
orders are placed with the Principal Underwriter.  A selected
dealer who receives reallowance in excess of 90% of such a sales
charge may be deemed to be an "underwriter" under the Securities
Act of 1933, as amended.

         Set forth below is an example of the method of computing
the offering price of the Class A shares.  The example assumes a
purchase of Class A shares of the Fund aggregating less than
$50,000 subject to the schedule of sales charges set forth above
at a price based upon the net asset value of Class A shares of
the Fund on October 31, 1996.





                               30



<PAGE>

         Net Asset Value per Class A Share at              $10.83
              October 31, 1996

         Class A Per Share Sales Charge
              4.25% of offering price 4.44% of
              net asset value per share)                      .48
                   ______
         Class A Per Share Offering Price to
              the public                                   $11.31
                                                           ======

         Investors choosing the initial sales charge alternative
may under certain circumstances be entitled to pay (i) no initial
sales charge (but be subject in most such cases to a contingent
deferred sales charge) or (ii) a reduced initial sales charge.
The circumstances under which such investors may pay a reduced
initial sales charge are described below.

         Combined Purchase Privilege.  Certain persons may
qualify for the sales charge reductions indicated in the schedule
of such charges above by combining purchases of shares of the
Fund into a single "purchase," if the resulting "purchase" totals
at least $100,000. The term "purchase" refers to:  (i) a single
purchase by an individual, or to concurrent purchases, which in
the aggregate are at least equal to the prescribed amounts, by an
individual, his or her spouse and their children under the age of
21 years purchasing shares of the Fund for his, her or their own
account(s); (ii) a single purchase by a trustee or other
fiduciary purchasing shares for a single trust, estate or single
fiduciary account although more than one beneficiary is involved;
or (iii) a single purchase for the employee benefit plans of a
single employer.  The term "purchase" also includes purchases by
any "company," as the term is defined in the 1940 Act, but does
not include purchases by any such company which has not been in
existence for at least six months or which has no purpose other
than the purchase of shares of the Fund or shares of other
registered investment companies at a discount.  The term
"purchase" does not include purchases by any group of individuals
whose sole organizational nexus is that the participants therein
are credit card holders of a company, policy holders of an
insurance company, customers of either a bank or broker-dealer or
clients of an investment adviser.  A "purchase" may also include
shares, purchased at the same time through a single selected
dealer or agent, of any other "Alliance Mutual Fund."  Currently,
the Alliance Mutual Funds include:

AFD Exchange Reserves
The Alliance Fund, Inc.
Alliance All-Asia Investment Fund, Inc.
Alliance Balanced Shares, Inc.
Alliance Bond Fund, Inc.


                               31



<PAGE>

  -Corporate Bond Portfolio
  -U.S. Government Portfolio
Alliance Developing Markets Fund, Inc.
Alliance Global Dollar Government Fund, Inc.
Alliance Global Small Cap Fund, Inc.
Alliance Global Strategic Income Trust, Inc.
Alliance Growth and Income Fund, Inc.
Alliance Income Builder Fund, Inc.
Alliance International Fund
Alliance Limited Maturity Government Fund, Inc.
Alliance Money Market Fund
Alliance Mortgage Securities Income Fund, Inc.
Alliance Multi-Market Strategy Trust, Inc.
Alliance Municipal Income Fund, Inc.
  -California Portfolio
  -Insured California Portfolio
  -Insured National Portfolio
  -National Portfolio
  -New York Portfolio
Alliance Municipal Income Fund II
  -Arizona Portfolio
  -Florida Portfolio
  -Massachusetts Portfolio
  -Michigan Portfolio
  -Minnesota Portfolio
  -New Jersey Portfolio
  -Ohio Portfolio
  -Pennsylvania Portfolio
  -Virginia Portfolio
Alliance New Europe Fund, Inc.
Alliance North American Government Income Trust, Inc.
Alliance Premier Growth Fund, Inc.
Alliance Real Estate Investment Fund, Inc.
Alliance/Regent Sector Opportunity Fund, Inc.
Alliance Quasar Fund, Inc.
Alliance Short-Term Multi-Market Trust, Inc.
Alliance Technology Fund, Inc.
Alliance Utility Income Fund, Inc.
Alliance World Income Trust, Inc.
Alliance Worldwide Privatization Fund, Inc.
The Alliance Portfolios
  -Alliance Growth Fund
  -Alliance Conservative Investors Fund
  -Alliance Growth Investors Fund
  -Alliance Strategic Balanced Fund
  -Alliance Short-Term U.S. Government Fund

         Prospectuses for the Alliance Mutual Funds may be
obtained without charge by contacting Alliance Fund Services,
Inc. at the address or the "For Literature" telephone number



                               32



<PAGE>

shown on the front cover of this Statement of Additional
Information.

         Cumulative Quantity Discount (Right of Accumulation). An
investor's purchase of additional Class A shares of the Fund may
qualify for a Cumulative Quantity Discount.  The applicable sales
charge will be based on the total of:

       (i)   the investor's current purchase;

       (ii)  the net asset value (at the close of business on the
             previous day) of (a) all shares of the Fund held by
             the investor and (b) all shares of any other
             Alliance Mutual Fund held by the investor; and

       (iii) the net asset value of all shares described in
             paragraph (ii) owned by another shareholder eligible
             to combine his or her purchase with that of the
             investor into a single "purchase" (see above).

         For example, if an investor owned shares of an Alliance
Mutual Fund worth $200,000 at their then current net asset value
and, subsequently, purchased Class A shares of the Fund worth an
additional $100,000, the sales charge for the $100,000 purchase
would be at the 2.25% rate applicable to a single $300,000
purchase of shares of the Fund, rather than the 3.25% rate.

         To qualify for the Combined Purchase Privilege or to
obtain the Cumulative Quantity Discount on a purchase through a
selected dealer or agent, the investor or selected dealer or
agent must provide the Principal Underwriter with sufficient
information to verify that each purchase qualifies for the
privilege or discount.

         Statement of Intention.  Class A investors may also
obtain the reduced sales charges shown in the table above by
means of a written Statement of Intention, which expresses the
investor's intention to invest not less than $100,000 within a
period of 13 months in Class A shares (or Class A, Class B, Class
C and/or Advisor Class shares) of the Fund or any other Alliance
Mutual Fund. Each purchase of shares under a Statement of
Intention will be made at the public offering price or prices
applicable at the time of such purchase to a single transaction
of the dollar amount indicated in the Statement of Intention.  At
the investor's option, a Statement of Intention may include
purchases of shares of the Fund or any other Alliance Mutual Fund
made not more than 90 days prior to the date that the investor
signs a Statement of Intention; however, the 13-month period
during which the Statement of Intention is in effect will begin
on the date of the earliest purchase to be included.



                               33



<PAGE>

         Investors qualifying for the Combined Purchase Privilege
described above may purchase shares of the Alliance Mutual Funds
under a single Statement of Intention.  For example, if at the
time an investor signs a Statement of Intention to invest at
least $100,000 in Class A shares of the Fund, the investor and
the investor's spouse each purchase shares of the Fund worth
$20,000 (for a total of $40,000), it will only be necessary to
invest a total of $60,000 during the following 13 months in
shares of the Fund or any other Alliance Mutual Fund, to qualify
for the 3.25% sales charge on the total amount being invested
(the sales charge applicable to an investment of $100,000).

         The Statement of Intention is not a binding obligation
upon the investor to purchase the full amount indicated.  The
minimum initial investment under a Statement of Intention is 5%
of such amount.  Shares purchased with the first 5% of such
amount will be held in escrow (while remaining registered in the
name of the investor) to secure payment of the higher sales
charge applicable to the shares actually purchased if the full
amount indicated is not purchased, and such escrowed shares will
be involuntarily redeemed to pay the additional sales charge, if
necessary.  Dividends on escrowed shares, whether paid in cash or
reinvested in additional Fund shares, are not subject to escrow.
When the full amount indicated has been purchased, the escrow
will be released.  To the extent that an investor purchases more
than the dollar amount indicated on the Statement of Intention
and qualifies for a further reduced sales charge, the sales
charge will be adjusted for the entire amount purchased at the
end of the 13-month period.  The difference in sales charge will
be used to purchase additional shares of the Fund subject to the
rate of sales charge applicable to the actual amount of the
aggregate purchases.

         Investors wishing to enter into a Statement of Intention
in conjunction with their initial investment in Class A shares of
the Fund should complete the appropriate portion of the
Subscription Application found in the Prospectus while current
Class A shareholders desiring to do so can obtain a form of
Statement of Intention by contacting Alliance Fund Services, Inc.
at the address or telephone numbers shown on the cover of this
Statement of Additional Information.

         Certain Retirement Plans.  Multiple participant payroll
deduction retirement plans may also purchase shares of the Fund
or any other Alliance Mutual Fund at a reduced sales charge on a
monthly basis during the 13-month period following such a plan's
initial purchase.  The sales charge applicable to such initial
purchase of shares of the Fund will be that normally applicable,
under the schedule of sales charges set forth in this Statement
of Additional Information, to an investment 13 times larger than
such initial purchase.  The sales charge applicable to each


                               34



<PAGE>

succeeding monthly purchase will be that normally applicable,
under such schedule, to an investment equal to the sum of (i) the
total purchase previously made during the 13-month period, and
(ii) the current month's purchase multiplied by the number of
months (including the current month) remaining in the 13-month
period.  Sales charges previously paid during such period will
not be retroactively adjusted on the basis of later purchases.

         Reinstatement Privilege.  A shareholder who has caused
any or all of his or her Class A or Class B shares of the Fund to
be redeemed or repurchased may reinvest all or any portion of the
redemption or repurchase proceeds in Class A shares of the Fund
at net asset value without any sales charge, provided that
(i) such reinvestment is made within 120 calendar days after the
redemption or repurchase date, and (ii) for Class B shares, a
contingent deferred sales charge has been paid and the Principal
Underwriter has approved, at its discretion, the reinvestment of
such shares.  Shares are sold to a reinvesting shareholder at the
net asset value next determined as described above.  A
reinstatement pursuant to this privilege will not cancel the
redemption or repurchase transaction; therefore, any gain or loss
so realized will be recognized for federal income tax purposes
except that no loss will be recognized to the extent that the
proceeds are reinvested in shares of the Fund within 30 calendar
days after the redemption or repurchase transaction.  The
reinstatement privilege may be used by the shareholder only once,
irrespective of the number of shares redeemed or repurchased,
except that the privilege may be used more than once in
connection with transactions whose sole purpose is to transfer a
shareholder's interest in the Fund to his or her individual
retirement account or other qualified retirement plan account.
Investors may exercise the reinstatement privilege by written
request sent to the Fund at the address shown on the cover of
this Statement of Additional Information.

         Sales at Net Asset Value.  The Fund may sell its Class A
shares at net asset value (i.e., without any initial sales
charge) and without a contingent deferred sales charge to certain
categories of investors including:  (i) investment management
clients of the Adviser or its affiliates; (ii) officers and
present or former Directors of the Fund; present or former
directors and trustees of other investment companies managed by
the Adviser; present or retired full-time employees of the
Adviser, the Principal Underwriter, Alliance Fund Services, Inc.
and their affiliates; officers and directors of ACMC, the
Principal Underwriter, Alliance Fund Services, Inc. and their
affiliates; officers, directors and present full-time employees
of selected dealers or agents; or the spouse, sibling, direct
ancestor or direct descendant (collectively "relatives") of any
such person; or any trust, individual retirement account or
retirement plan account for the benefit of any such person or


                               35



<PAGE>

relative; or the estate of any such person or relative, if such
shares are purchased for investment purposes (such shares may not
be resold except to the Fund); (iii) the Adviser, the Principal
Underwriter, Alliance Fund Services, Inc. and their affiliates;
and certain employee benefit plans for employees of the Adviser,
the Principal Underwriter, Alliance Fund Services, Inc. and their
affiliates; (iv) registered investment advisers or other
financial intermediaries who charge a management, consulting or
other fee for their service and who purchase shares through a
broker or agent approved by the Principal Underwriter and clients
of such registered investment advisers or financial
intermediaries whose accounts are linked to the master account of
such investment adviser of financial intermediary on the books of
such approved broker or agent; (v) persons participating in a
fee-based program, sponsored and maintained by a registered
broker-dealer or other financial intermediary and approved by the
Principal Underwriter, pursuant to which such persons pay an
asset-based fee to such broker- dealer, or its affiliate or
agent, for services in the nature of investment advisory or
administrative services; (vi) persons who establish to the
Principal Underwriter's satisfaction that they are investing,
within such time period as may be designated by the Principal
Underwriter, proceeds of redemption of shares of such other
registered investment companies as may be designated from time to
time by the Principal Underwriter; and (vii) employer-sponsored
qualified pension or profit-sharing plans (including Section
401(k) plans), custodial accounts maintained pursuant to Section
403(b)(7) retirement plans and individual retirement accounts
(including individual retirement accounts to which simplified
employee pension (SEP) contributions are made), if such plans or
accounts are established or administered under programs sponsored
by administrators or other persons that have been approved by the
Principal Underwriter.

Class B Shares

         Investors may purchase Class B shares at the public
offering price equal to the net asset value per share of the
Class B shares on the date of purchase without the imposition of
a sales charge at the time of purchase.  The Class B shares are
sold without an initial sales charge so that the Fund will
receive the full amount of the investor's purchase payment.

         Proceeds from the contingent deferred sales charge are
paid to the Principal Underwriter and are used by the Principal
Underwriter to defray the expenses of the Principal Underwriter
related to providing distribution-related services to the Fund in
connection with the sale of the Class B shares, such as the
payment of compensation to selected dealers and agents for
selling Class B shares.  The combination of the contingent
deferred sales charge and the distribution services fee enables


                               36



<PAGE>

the Fund to sell the Class B shares without a sales charge being
deducted at the time of purchase.  The higher distribution
services fee incurred by Class B shares will cause such shares to
have a higher expense ratio and to pay lower dividends than those
related to Class A shares.

         Contingent Deferred Sales Charge.  Class B shares that
are redeemed within four years of purchase will be subject to a
contingent deferred sales charge at the rates set forth below
charged as a percentage of the dollar amount subject thereto. The
charge will be assessed on an amount equal to the lesser of the
cost of the shares being redeemed or their net asset value at the
time of redemption.  Accordingly, no sales charge will be imposed
on increases in net asset value above the initial purchase price.
In addition, no charge will be assessed on shares derived from
reinvestment of dividends or capital gains distributions.

         To illustrate, assume that an investor purchased 100
Class B shares at $10 per share (at a cost of $1,000) and in the
second year after purchase, the net asset value per share is $12
and, during such time, the investor has acquired 10 additional
Class B shares upon dividend reinvestment.  If at such time the
investor makes his or her first redemption of 50 Class B shares
(proceeds of $600), 10 Class B shares will not be subject to the
charge because of dividend reinvestment.  With respect to the
remaining 40 Class B shares, the charge is applied only to the
original cost of $10 per share and not to the increase in net
asset value of $2 per share.  Therefore, $400 of the $600
redemption proceeds will be charged at a rate of 3.0% (the
applicable rate in the second year after purchase, as set forth
below).

         The amount of the contingent deferred sales charge, if
any, will vary depending on the number of years from the time of
payment for the purchase of Class B shares until the time of
redemption of such shares.

             Contingent Deferred Sales Charge as a %
                of Dollar Amount Subject to Charge  

                          Shares Purchased       Shares Purchased
                              prior to              on or after  
Years Since Purchase       April 12, 1997         April 12, 1997 

First                         3.00%                    4.00%
Second                        2.00%                    3.00%
Third                         1.00%                    2.00%
Fourth                        None                     1.00%
Fifth                         None                     None




                               37



<PAGE>

         In determining the contingent deferred sales charge
applicable to a redemption of Class B shares, it will be assumed
that the redemption is, first, of any shares that were acquired
upon the reinvestment of dividends or distributions, and, second,
of shares held longest during the time they are subject to the
sales charge.  When shares acquired in an exchange are redeemed,
the applicable contingent deferred sales charge and conversion
schedules will be the schedules that applied at the time of the
purchase of shares of the corresponding class of the Alliance
Mutual Fund originally purchased by the shareholder. 

         The contingent deferred sales charge is waived on
redemptions of shares (i) following the death or disability, as
defined in the Internal Revenue Code of 1986, as amended (the
"Code"), of a shareholder, (ii) to the extent that the redemption
represents a minimum required distribution from an individual
retirement account or other retirement plan to a shareholder who
has attained the age of 70-1/2, (iii) that had been purchased by
present or former Directors of the Fund, by the relative of any
such person, by any trust, individual retirement account or
retirement plan account for the benefit of any such person or
relative, or by the estate of any such person or relative, or
(iv) pursuant to a systematic withdrawal plan (see "Shareholder
Services-Systematic Withdrawal Plan" below).

         Conversion Feature.  Eight years** after the end of the
calendar month in which the shareholder's purchase order was
accepted, Class B shares will automatically convert to Class A
shares and will no longer be subject to a higher distribution
services fee.  Such conversion will occur on the basis of the
relative net asset values of the two classes, without the
imposition of any sales load, fee or other charge.  The purpose
of the conversion feature is to reduce the distribution services
fee paid by holders of Class B shares that have been outstanding
long enough for the Principal Underwriter to have been
compensated for distribution expenses incurred in the sale of
such shares.

         For purposes of conversion to Class A, Class B shares
purchased through the reinvestment of dividends and distributions
paid in respect of Class B shares in a shareholder's account will
be considered to be held in a separate sub-account.  Each time
any Class B shares in the shareholder's account (other than those
in the sub-account) convert to Class A, an equal pro-rata portion
of the Class B shares in the sub-account will also convert to
Class A.

___________________
**  Six years in the case of Class B shares purchased prior to
    April 12, 1997.



                               38



<PAGE>

         The conversion of Class B shares to Class A shares is
subject to the continuing availability of an opinion of counsel
to the effect that the conversion of Class B shares to Class A
shares does not constitute a taxable event under federal income
tax law.  The conversion of Class B shares to Class A shares may
be suspended if such an opinion is no longer available at the
time such conversion is to occur.  In that event, no further
conversions of Class B shares would occur, and shares might
continue to be subject to the higher distribution services fee
for an indefinite period which may extend beyond the period
ending eight** years after the end of the calendar month in which
the shareholder's purchase order was accepted.

Class C Shares

         Investors may purchase Class C shares at the public
offering price equal to the net asset value per share of the
Class C shares on the date of purchase without the imposition of
a sales charge either at the time of purchase or, as long as the
shares are held for one year or more, upon redemption.  Class C
shares are sold without an initial sales charge so that the Fund
will receive the full amount of the investor's purchase payment
and, as long as the shares are held for one year or more, without
a contingent deferred sales charge so that the investor will
receive as proceeds upon redemption the entire net asset value of
his or her Class C shares.  The Class C distribution services fee
enables the Fund to sell Class C shares without either an initial
or contingent deferred sales charge, as long as the shares are
held for one year or more. Class C shares do not convert to any
other class of shares of the Fund and incur higher distribution
services fees and transfer agency costs than Class A and Advisor
Class shares, and will thus have a higher expense ratio and pay
correspondingly lower dividends than Class A shares and Advisor
Class shares.

         Class C shares that are redeemed within one year of
purchase will be subject to a contingent deferred sales charge of
1% charged as a percentage of the dollar amount subject thereto.
The charge will be assessed on an amount equal to the lesser of
the cost of the shares being redeemed or their net asset value at
the time of redemption.  Accordingly, no sales charge will be

___________________
**  Six years in the case of Class B shares purchased prior to
    April 12, 1997.








                               39



<PAGE>

imposed on increases in net asset value above the initial
purchase price.  In addition, no charge will be assessed on
shares derived from reinvestment of dividends or capital gains
distributions.  The contingent deferred sales charge on Class C
shares will be waived on certain redemptions, as described above
under "--Class B Shares."

         In determining the contingent deferred sales charge
applicable to a redemption of Class C shares, it will be assumed
that the redemption is, first, of any shares that are not subject
to a contingent deferred sales charge (for example, because the
shares have been held beyond the period during which the charge
applies or were acquired upon the reinvestment of dividends or
distributions) and, second, of shares held longest during the
time they are subject to the sales charge.

         Proceeds from the contingent deferred sales charge are
paid to the Principal Underwriter and are used by the Principal
Underwriter to defray the expenses of the Principal Underwriter
related to providing distribution-related services to the Fund in
connection with the sale of the Class C shares, such as the
payment of compensation to selected dealers and agents for
selling Class C shares.  The combination of the contingent
deferred sales charge and the distribution services fee enables
the Fund to sell the Class C shares without a sales charge being
deducted at the time of purchase.  The higher distribution
services fee incurred by Class C shares will cause such shares to
have a higher expense ratio and to pay lower dividends than those
related to Class A shares.

Conversion of Advisor Class Shares to Class A Shares

         Advisor Class shares may be held solely through the fee-
based program accounts, employee benefit plans and registered
investment advisory or other financial intermediary relationships
described above under "Purchase of Shares--General," and by
investment advisory clients of, and certain other persons
associated with, the Adviser and its affiliates or the Fund.  If
(i) a holder of Advisor Class shares ceases to participate in the
fee-based program or plan, or to be associated with the
investment adviser or financial intermediary that satisfies the
requirements to purchase shares set forth under "Purchase of
Shares--General" or (ii) the holder is otherwise no longer
eligible to purchase Advisor Class shares as described in the
Advisor Class Prospectus and this Statement of Additional
Information (each, a "Conversion Event"), then all Advisor Class
shares held by the shareholder will convert automatically and
without notice to the shareholder, other than the notice
contained in the Advisor Class Prospectus and this Statement of
Additional Information, to Class A shares of the Fund during the
calendar month following the month in which the Fund is informed


                               40



<PAGE>

of the occurrence of the Conversion Event.  The failure of a
shareholder or a fee-based program to satisfy the minimum
investment requirements to purchase Advisor Class shares will not
constitute a Conversion Event.  The conversion would occur on the
basis of the relative net asset values of the two classes and
without the imposition of any sales load, fee or other charge.
Class A shares currently bear a .30% distribution services fee
and have a higher expense ratio than Advisor Class shares.  As a
result, Class A shares may pay correspondingly lower dividends
and have a lower net asset value than Advisor Class shares.

         The conversion of Advisor Class shares to Class A shares
is subject to the continuing availability of an opinion of
counsel to the effect that the conversion of Advisor Class shares
to Class A shares does not constitute a taxable event under
federal income tax law.  The conversion of Advisor Class shares
to Class A shares may be suspended if such an opinion is no
longer available at the time such conversion is to occur.  In
that event, the Advisor Class shareholder would be required to
redeem his Advisor Class shares, which would constitute a taxable
event under federal income tax law.

________________________________________________________________

               REDEMPTION AND REPURCHASE OF SHARES
________________________________________________________________

         The following information supplements that set forth in
the Fund's Prospectus under the heading "Purchase and Sale of
Shares -- How to Sell Shares."  If you are an Advisor Class
shareholder through an account established under a fee-based
program your fee-based program may impose requirements with
respect to the purchase, sale or exchange of Advisor Class shares
of the Fund that are different from those described herein.  A
transaction fee may be charged by your financial representative
with respect to the purchase, sale or exchange of Advisor Class
shares made through such financial representative.

Redemption

         Subject only to the limitations described below, the
Fund's Articles of Incorporation requires that the Fund redeem
the shares tendered to it, as described below, at a redemption
price equal to their net asset value as next computed following
the receipt of shares tendered for redemption in proper form.
Except for any contingent deferred sales charge which may be
applicable to Class A, Class B or Class C shares, there is no
redemption charge.  Payment of the redemption price will be made
within seven days after the Fund's receipt of such tender for
redemption.  If a shareholder is in doubt about what documents
are required by his or her fee-based program or employee benefit


                               41



<PAGE>

plan, the shareholder should contact his or her financial
representative.

         The right of redemption may not be suspended or the date
of payment upon redemption postponed for more than seven days
after shares are tendered for redemption, except for any period
during which the Exchange is closed (other than customary weekend
and holiday closings) or during which the Commission determines
that trading thereon is restricted, or for any period during
which an emergency (as determined by the Commission) exists as a
result of which disposal by the Fund of securities owned by it is
not reasonably practicable or as a result of which it is not
reasonably practicable for the Fund fairly to determine the value
of its net assets, or for such other periods as the Commission
may by order permits for the protection of security holders of
the Fund.

         Payment of the redemption price will be made in cash.
The value of a shareholder's shares on redemption or repurchase
may be more or less than the cost of such shares to the
shareholder, depending upon the market value of the Fund's
portfolio securities at the time of such redemption or
repurchase.  Redemption proceeds on Class A, Class B and Class C
shares will reflect the deduction of the contingent deferred
sales charge, if any.  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.

         To redeem shares of the Fund for which no share
certificates have been issued, the registered owner or owners
should forward a letter to the Fund containing a request for
redemption.  The signature or signatures on the letter must be
guaranteed by an "eligible guarantor institution" as defined in
Rule 17Ad-15 under the Securities Exchange Act of 1934, as
amended.

         To redeem shares of the Fund represented by share
certificates, the investor should forward the appropriate stock
certificate or certificates, endorsed in blank or with blank
stock powers attached, to the Fund with the request that the
shares represented thereby, or a specified portion thereof, be
redeemed.  The stock assignment form on the reverse side of each
stock certificate surrendered to the Fund for redemption must be
signed by the registered owner or owners exactly as the
registered name appears on the face of the certificate or,
alternatively, a stock power signed in the same manner may be
attached to the stock certificate or certificates or, where
tender is made by mail, separately mailed to the Fund.  The


                               42



<PAGE>

signature or signatures on the assignment form must be guaranteed
in the manner described above.

         Telephone Redemption By Electronic Funds Transfer. Each
Fund shareholder is entitled to request redemption by electronic
funds transfer once in any 30 day period (except for certain
omnibus accounts), of shares for which no stock certificates have
been issued by telephone at (800) 221-5672 by a shareholder who
has completed the appropriate portion of the Subscription
Application or, in the case of an existing shareholder, an
"Autosell" application obtained from Alliance Fund Services, Inc.
A telephone redemption request may not exceed $100,000 (except
for certain omnibus accounts), and must be made by 4:00 p.m.
Eastern time on a Fund business day as defined above.  Proceeds
of telephone redemptions will be sent by Electronic Funds
Transfer to a shareholder's designated bank account at a bank
selected by the shareholder that is a member of the NACHA.

         Telephone Redemption By Check.  Except for certain
omnibus accounts or as noted below, each Fund shareholder is
eligible to request redemption by check, once in any 30-day
period, of Fund shares for which no stock certificates have been
issued by telephone at (800) 221-5672 before 4:00 p.m. Eastern
time on a Fund business day in an amount not exceeding $50,000.
Proceeds of such redemptions are remitted by check to the
shareholder's address of record.  Telephone redemption by check
is not available with respect to shares (i) for which
certificates have been issued, (ii) held in nominee or "street
name" accounts, (iii) held by a shareholder who has changed his
or her address of record within the preceding 30 calendar days or
(iv) held in any retirement plan account.  A shareholder
otherwise eligible for telephone redemption by check may cancel
the privilege by written instruction to Alliance Fund Services,
Inc., or by checking the appropriate box on the Subscription
Application found in the Prospectus.

         Telephone Redemptions - General.  During periods of
drastic economic or market developments, such as the market break
of October 1987, it is possible that shareholders would have
difficulty in reaching Alliance Fund Services, Inc. by telephone
(although no such difficulty was apparent at any time in
connection with the 1987 market break).  If a shareholder were to
experience such difficulty, the shareholder should issue written
instructions to Alliance Fund Services, Inc. at the address shown
on the cover of this Statement of Additional Information.  The
Fund reserves the right to suspend or terminate its telephone
redemption service at any time without notice.  Neither the Fund
nor the Adviser, the Principal Underwriter or Alliance Fund
Services, Inc. will be responsible for the authenticity of
telephone requests for redemptions that the Fund reasonably
believes to be genuine.  The Fund will employ reasonable


                               43



<PAGE>

procedures in order to verify that telephone requests for
redemptions are genuine, including, among others, recording such
telephone instructions and causing written confirmations of the
resulting transactions to be sent to shareholders.  If the Fund
did not employ such procedures, it could be liable for losses
arising from unauthorized or fraudulent telephone instructions.
Selected dealers or agents may charge a commission for handling
telephone requests for redemptions.

Repurchase

         The Fund may repurchase shares through the Principal
Underwriter, selected financial intermediaries or selected
dealers or agents.  The repurchase price will be the net asset
value next determined after the Principal Underwriter receives
the request (less the contingent deferred sales charge, if any,
with respect to the Class A, Class B and Class C shares), except
that requests placed through selected dealers or agents before
the close of regular trading on the Exchange on any day will be
executed at the net asset value determined as of such close of
regular trading on that day if received by the Principal
Underwriter prior to its close of business on that day (normally
5:00 p.m. Eastern time).  The financial intermediary or selected
dealer or agent is responsible for transmitting the request to
the Principal Underwriter by 5:00 p.m.  If the financial
intermediary or selected dealer or agent fails to do so, the
shareholder's right to receive that day's closing price must be
settled between the shareholder and the dealer or agent.  A
shareholder may offer shares of the Fund to the Principal
Underwriter either directly or through a selected dealer or
agent.  Neither the Fund nor the Principal Underwriter charges a
fee or commission in connection with the repurchase of shares
(except for the contingent deferred sales charge, if any, with
respect to Class A, Class B and Class C shares).  Normally, if
shares of the Fund are offered through a financial intermediary
or selected dealer or agent, the repurchase is settled by the
shareholder as an ordinary transaction with or through the
selected dealer or agent, who may charge the shareholder for this
service.  The repurchase of shares of the Fund as described above
is a voluntary service of the Fund and the Fund may suspend or
terminate this practice at any time.

General

         The Fund reserves the right to close out an account that
through redemption has remained below $200 for 90 days.
Shareholders will receive 60 days' written notice to increase the
account value before the account is closed.  No contingent
deferred sales charge will be deducted from the proceeds of this
redemption.  In the case of a redemption or repurchase of shares
of the Fund recently purchased by check, redemption proceeds will


                               44



<PAGE>

not be made available until the Fund is reasonably assured that
the check has cleared, normally up to 15 calendar days following
the purchase date.

________________________________________________________________

                      SHAREHOLDER SERVICES
________________________________________________________________

         The following information supplements that set forth in
the Fund's Prospectus under the heading "Purchase and Sale of
Shares--Shareholder Services."  The shareholder services set
forth below are applicable to Class A, Class B, Class C and
Advisor Class shares unless otherwise indicated. If you are an
Advisor Class shareholder through an account established under a
fee-based program your fee-based program may impose requirements
with respect to the purchase, sale or exchange of Advisor Class
shares of the Fund that are different from those described
herein.  A transaction fee may be charged by your financial
representative with respect to the purchase, sale or exchange of
Advisor Class shares made through such financial representative.

Automatic Investment Program

         Investors may purchase shares of the Fund through an
automatic investment program utilizing Electronic Funds Transfer
drawn on the investor's own bank account.  Under such a program,
pre-authorized monthly drafts for a fixed amount (at least $25)
are used to purchase shares through the selected dealer or
selected agent designated by the investor at the public offering
price next determined after the Principal Underwriter receives
the proceeds from the investor's bank.  In electronic form,
drafts can be made on or about a date each month selected by the
shareholder. Investors wishing to establish an automatic
investment program in connection with their initial investment
should complete the appropriate portion of the Subscription
Application found in the Prospectus.  Current shareholders should
contact Alliance Fund Services, Inc. at the address or telephone
numbers shown on the cover of this Statement of Additional
Information to establish an automatic investment program.

Exchange Privilege

         You may exchange your investment in the Fund for shares
of the same class of other Alliance Mutual Funds (including AFD
Exchange Reserves, a money market fund managed by Alliance).  In
addition, (i) present officers and full-time employees of the
Adviser, (ii) present Directors or Trustees of any Alliance
Mutual Fund and (iii) certain employee benefit plans for
employees of the Adviser, the Principal Underwriter, Alliance
Fund Services, Inc. and their affiliates may, on a tax-free


                               45



<PAGE>

basis, exchange Class A shares of the Fund for Advisor Class
shares of the Fund.  Exchanges of shares are made at the net
asset value next determined and without sales or services
charges. 

         Exchanges may be made by telephone or written request.
Telephone exchange requests must be received by Alliance Fund
Services, Inc. by 4:00 p.m. Eastern time on a Fund business day
in order to receive that day's net asset value.

         Shares will continue to age without regard to exchanges
for purposes of determining the CDSC, if any, upon redemption
and, in the case of Class B shares, for the purpose of conversion
to Class A Shares.  After an exchange, your Class B shares will
automatically convert to Class A shares in accordance with the
conversion schedule applicable to the Class B shares of the
Alliance Mutual Fund you originally purchased for cash ("original
shares").  When redemption occurs, the CDSC applicable to the
original shares is applied.

         Please read carefully the prospectus of the mutual fund
into which you are exchanging before submitting the request.
Call Alliance Fund Services, Inc. at (800) 221-5672 to exchange
uncertificated shares.  Exchanges of shares as described above in
this section are taxable transactions for federal income tax
purposes.  The exchange service may be changed, suspended, or
terminated on 60 days' written notice.

         All exchanges are subject to the minimum investment
requirements and any other applicable terms set forth in the
Prospectus for the Alliance Mutual Fund whose shares are being
acquired.  An exchange is effected through the redemption of the
shares tendered for exchange and the purchase of shares being
acquired at their respective net asset values as next determined
following receipt by the Alliance Mutual Fund whose shares are
being exchanged of (i) proper instructions and all necessary
supporting documents as described in such Fund's Prospectus, or
(ii) a telephone request for such exchange in accordance with the
procedures set forth in the following paragraph.  Exchanges
involving the redemption of shares recently purchased by check
will be permitted only after the Alliance Mutual Fund whose
shares have been tendered for exchange is reasonably assured that
the check has cleared, normally up to 15 calendar days following
the purchase date.  

         Each Fund shareholder, and the shareholder's selected
dealer, agent or financial representative, as applicable, are
authorized to make telephone requests for exchanges unless
Alliance Fund Services, Inc., receives written instruction to the
contrary from the shareholder, or the shareholder declines the
privilege by checking the appropriate box on the Subscription


                               46



<PAGE>

Application found in the Prospectus. Such telephone requests
cannot be accepted with respect to shares then represented by
stock certificates.  Shares acquired pursuant to a telephone
request for exchange will be held under the same account
registration as the shares redeemed through such exchange.

         Eligible shareholders desiring to make an exchange
should telephone Alliance Fund Services, Inc. with their account
number and other details of the exchange, at (800) 221-5672
before 4:00 p.m., Eastern time, on a Fund business day as defined
above.  Telephone requests for exchange received before 4:00 p.m.
Eastern time on a Fund business day will be processed as of the
close of business on that day.  During periods of drastic
economic or market developments, such as the market break of
October 1987, it is possible that shareholders would have
difficulty in reaching Alliance Fund Services, Inc. by telephone
(although no such difficulty was apparent at any time in
connection with the 1987 market break).  If a shareholder were to
experience such difficulty, the shareholder should issue written
instructions to Alliance Fund Services, Inc. at the address shown
on the cover of this Statement of Additional Information.

         A shareholder may elect to initiate a monthly "Auto
Exchange" whereby a specified dollar amount's worth of his or her
Fund shares (minimum $25) is automatically exchanged for shares
of another Alliance Mutual Fund.  Auto Exchange transactions
normally occur on the 12th day of each month, or the Fund
business day prior thereto.

         None of the Alliance Mutual Funds, the Adviser, the
Principal Underwriter or Alliance Fund Services, Inc. will be
responsible for the authenticity of telephone requests for
exchanges that the Fund reasonably believes to be genuine.  The
Fund will employ reasonable procedures in order to verify that
telephone requests for exchanges are genuine, including, among
others, recording such telephone instructions and causing written
confirmations of the resulting transactions to be sent to
shareholders.  If the Fund did not employ such procedures, it
could be liable for losses arising from unauthorized or
fraudulent telephone instructions.  Selected dealers, agents or
financial representatives, as applicable, may charge a commission
for handling telephone requests for exchanges.

         The exchange privilege is available only in states where
shares of the Alliance Mutual Funds being acquired may be legally
sold.  Each Alliance Mutual Fund reserves the right, at any time
on 60 days' notice to its shareholders, to reject any order to
acquire its shares through exchange or otherwise to modify,
restrict or terminate the exchange privilege.




                               47



<PAGE>

Retirement Plans

         The Fund may be a suitable investment vehicle for part
or all of the assets held in various types of retirement plans,
such as those listed below.  The Fund has available forms of such
plans pursuant to which investments can be made in the Fund and
other Alliance Mutual Funds.  Persons desiring information
concerning these plans should contact Alliance Fund Services,
Inc. at the "Literature" telephone number on the cover of this
Statement of Additional Information, or write to:

              Alliance Fund Services, Inc.
              Retirement Plans
              P.O. Box 1520
              Secaucus, New Jersey  07096-1520

         Individual Retirement Account ("IRA").  Individuals who
receive compensation, including earnings from self-employment,
are entitled to establish and make contributions to an IRA.
Taxation of the income and gains paid to an IRA by the Fund is
deferred until distribution from the IRA.  An individual's
eligible contribution to an IRA will be deductible if neither the
individual nor his or her spouse is an active participant in an
employer-sponsored retirement plan.  If the individual or his or
her spouse is an active participant in an employer-sponsored
retirement plan, the individual's contributions to an IRA may be
deductible, in whole or in part, depending on the amount of the
adjusted gross income of the individual and his or her spouse.

         Employer-Sponsored Qualified Retirement Plans.  Sole
proprietors, partnerships and corporations may sponsor qualified
money purchase pension and profit-sharing plans, including
Section 401(k) plans ("qualified plans"), under which annual tax-
deductible contributions are made within prescribed limits based
on compensation paid to participating individuals.  The minimum
initial investment requirement may be waived with respect to
certain of these qualified plans.

         If the aggregate net asset value of shares of the
Alliance Mutual Funds held by the qualified plan reaches $5
million on or before December 15 in any year, all Class B or
Class C shares of the Fund held by the plan can be exchanged, at
the Plan's request, without any sales charge, for Class A shares
of the Fund.

         Simplified Employee Pension Plan ("SEP").  Sole
proprietors, partnerships and corporations may sponsor a SEP
under which they make annual tax-deductible contributions to an
IRA established by each eligible employee within prescribed
limits based on employee compensation.



                               48



<PAGE>

         403(b)(7) Retirement Plan.  Certain tax-exempt
organizations and public educational institutions may sponsor
retirement plans under which an employee may agree that monies
deducted from his or her compensation (minimum $25 per pay
period) may be contributed by the employer to a custodial account
established for the employee under the plan.

         The Alliance Plans Division of Frontier Trust Company, a
subsidiary of Equitable which serves as custodian or trustee
under the retirement plan prototype forms available from the
Fund, charges certain nominal fees for establishing an account
and for annual maintenance.  A portion of these fees is remitted
to Alliance Fund Services, Inc. as compensation for its services
to the retirement plan accounts maintained with the Fund.

         Distributions from retirement plans are subject to
certain Code requirements in addition to normal redemption
procedures.  For additional information please contact Alliance
Fund Services, Inc.

Dividend Direction Plan

         A shareholder who already maintains, in addition to his
or her Class A, Class B, Class C or Advisor Class Fund account, a
Class A, Class B, Class C or Advisor Class account(s) with one or
more other Alliance Mutual Funds may direct that income dividends
and/or capital gains paid on his or her Class A, Class B, Class C
or Advisor Class Fund shares be automatically reinvested, in any
amount, without the payment of any sales or service charges, in
shares of the same class of such other Alliance Mutual Fund(s).
Further information can be obtained by contacting Alliance Fund
Services, Inc. at the address or the "For Literature" telephone
number shown on the cover of this Statement of Additional
Information.  Investors wishing to establish a dividend direction
plan in connection with their initial investment should complete
the appropriate section of the Subscription Application found in
the Prospectus.  Current shareholders should contact Alliance
Fund Services, Inc. to establish a dividend direction plan.

Systematic Withdrawal Plan

         General.  Any shareholder who owns or purchases shares
of the Fund having a current net asset value of at least $4,000
(for quarterly or less frequent payments), $5,000 (for bi-monthly
payments) or $10,000 (for monthly payments) may establish a
systematic withdrawal plan under which the shareholder will
periodically receive a payment in a stated amount of not less
than $50 on a selected date.  Systematic withdrawal plan
participants must elect to have their dividends and distributions
from the Fund automatically reinvested in additional shares of
the Fund.


                               49



<PAGE>

         Shares of the Fund owned by a participant in the Fund's
systematic withdrawal plan will be redeemed as necessary to meet
withdrawal payments and such payments will be subject to any
taxes applicable to redemptions and, except as discussed below,
any applicable contingent deferred sales charge.  Shares acquired
with reinvested dividends and distributions will be liquidated
first to provide such withdrawal payments and thereafter other
shares will be liquidated to the extent necessary, and depending
upon the amount withdrawn, the investor's principal may be
depleted.  A systematic withdrawal plan may be terminated at any
time by the shareholder or the Fund.

         Withdrawal payments will not automatically end when a
shareholder's account reaches a certain minimum level. Therefore,
redemptions of shares under the plan may reduce or even liquidate
a shareholder's account and may subject the shareholder to the
Fund's involuntary redemption provisions.  See "Redemption and
Repurchase of Shares - General."  Purchases of additional shares
concurrently with withdrawals are undesirable because of sales
charges when purchases are made.  While an occasional lump-sum
investment may be made by a holder of Class A shares who is
maintaining a systematic withdrawal plan, such investment should
normally be an amount equivalent to three times the annual
withdrawal or $5,000, whichever is less.

         Payments under a systematic withdrawal plan may be made
by check or electronically via the Automated Clearing House
("ACH") network.  Investors wishing to establish a systematic
withdrawal plan in conjunction with their initial investment in
shares of the Fund should complete the appropriate portion of the
Subscription Application found in the Prospectus, while current
Fund shareholders desiring to do so can obtain an application
form by contacting Alliance Fund Services, Inc. at the address or
the "For Literature" telephone number shown on the cover of this
Statement of Additional Information.

         CDSC Waiver for Class B and Class C Shares.  Under a
systematic withdrawal plan, up to 1% monthly, 2% bi-monthly or 3%
quarterly of the value at the time of redemption of the Class B
or Class C shares in a shareholder's account may be redeemed free
of any contingent deferred sales charge.  

         With respect to Class B shares, the waiver applies only
with respect to shares acquired after July 1, 1995.  Class B
shares that are not subject to a contingent deferred sales charge
(such as shares acquired with reinvested dividends or
distributions) will be redeemed first and will count toward the
foregoing limitations.  Remaining Class B shares that are held
the longest will be redeemed next.  Redemptions of Class B shares
in excess of the foregoing limitations will be subject to any
otherwise applicable contingent deferred sales charge.


                               50



<PAGE>

         With respect to Class C shares, shares held the longest
will be redeemed first and will count toward the foregoing
limitations.  Redemptions in excess of those limitations will be
subject to any otherwise applicable contingent deferred sales
charge.  

Statements and Reports

         Each shareholder of the Fund receives semi-annual and
annual reports which include a portfolio of investments,
financial statements and, in the case of the annual report, the
report of the Fund's independent auditors, Ernst & Young LLP, as
well as a confirmation of each purchase and redemption.  By
contacting his or her broker or Alliance Fund Services, Inc., a
shareholder can arrange for copies of his or her account
statements to be sent to another person.

SHAREHOLDER SERVICES APPLICABLE TO
CLASS A AND CLASS C SHAREHOLDERS ONLY

Checkwriting

         A Class A or Class C investor may fill out the Signature
Card which is included in this Prospectus to authorize the Fund
to arrange for a checkwriting service through State Street Bank
and Trust Company (the "Bank") to draw against Class A or Class C
shares of the Fund redeemed from the investor's account. Under
this service, checks may be made payable to any payee in any
amount not less than $500 and not more than 90% of the net asset
value of the Class A or Class C shares in the investor's account
(excluding for this purpose the current month's accumulated
dividends and shares for which certificates have been issued). A
Class A or Class C shareholder wishing to establish this
checkwriting service subsequent to the opening of his or her fund
account should contact the Fund by telephone or mail.
Corporations, fiduciaries and institutional investors are
required to furnish a certified resolution or other evidence of
authorization.  This checkwriting service will be subject to the
Bank's customary rules and regulations governing checking
accounts, and the Fund and the Bank each reserve the right to
change or suspend the checkwriting service. There is no charge to
the shareholder for the initiation and maintenance of this
service or for the clearance of any checks.

         When a check is presented to the Bank for payment, the
Bank, as the shareholder's agent, causes the Fund to redeem, at
the net asset value next determined, a sufficient number of full
and fractional shares of the Fund in the shareholder's account to
cover the check. Because the level of net assets in a
shareholder's account constantly changes, due, among various
factors, to market fluctuations, a shareholder should not attempt


                               51



<PAGE>

to close his or her account by use of a check. In this regard,
the Bank has the right to return check (marked "insufficient
funds") unpaid to the presenting bank if the amount of the check
exceeds 90% of the assets in the account.  Canceled (paid) checks
are returned to the shareholder.  The checkwriting service
enables the shareholder to receive the daily dividends declared
on the shares to be redeemed until the day that the check is
presented to the Bank for payment.

________________________________________________________________

                         NET ASSET VALUE
________________________________________________________________

         The per share net asset value is computed in accordance
with the Fund's Articles of Incorporation and By-Laws at the next
close of regular trading on the Exchange following receipt of a
purchase or redemption order (and on such other days as the
Directors of the Fund deem necessary in order to comply with Rule
22c-1 under the 1940 Act).  The Fund's per share net asset value
is calculated by dividing the value of the Fund's total assets,
less its liabilities, by the total number of its shares then
outstanding.  The net asset value is calculated at the close of
business on each Fund business day.

         For purposes of this computation, portfolio securities
that are actively traded in the over-the-counter market,
including listed securities for which the primary market is
believed to be over-the-counter, are valued at the mean between
the most recently quoted bid and asked prices provided by the
principal market makers.  Publicly traded portfolio securities
are typically traded on an over-the-counter market.  Because of
the nature of the markets for the securities in which the Fund
will invest, quotations from several sources will be obtained so
that the Fund's investment portfolio will not generally be priced
by a single source.  Any security for which the primary market is
on an exchange is valued at the last sale price on such exchange
on the day of valuation or, if there was no sale on such day, the
last bid price quoted on such day.  Options will be valued at
market value or fair value if no market exists.  Securities and
assets for which market quotations are not readily available are
valued at fair value as determined in good faith by or under the
direction of the Board of Directors of the Fund.  However,
readily marketable portfolio securities may be valued on the
basis of prices provided by a pricing service when such prices
are believed by the Adviser to reflect the fair market value of
such securities.  The prices provided by a pricing service take
into account institutional size trading in similar groups of
securities and any developments related to specific securities.
U.S. Government Securities and other debt instruments having 60
days or less remaining until maturity are stated at amortized


                               52



<PAGE>

cost if their original maturity was 60 days or less, or by
amortizing their fair value as of the 61st day prior to maturity
if their original term to maturity exceeded 60 days (unless in
either case the Fund's Board of Directors determines that this
method does not represent fair value).

         The assets belonging to the Class A shares, Class B
shares, Class C shares and Advisor Class shares will be invested
together in a single portfolio.  The net asset value of each
class will be determined separately by subtracting the expenses
and liabilities allocated to that class from the assets belonging
to that class.

________________________________________________________________

               DIVIDENDS, DISTRIBUTIONS AND TAXES
________________________________________________________________

United States Federal Income Taxes

         General.  The Fund intends for each taxable year to be
qualified as a "regulated investment company" under sections 851
through 855 of the Code.  To so qualify, the Fund must, among
other things, (i) derive at least 90% of its gross income in each
taxable year from dividends, interest, payments with respect to
securities loans, gains from the sale or other disposition of
stock or securities or foreign currency, or certain other income
(including, but not limited to, gains from options, futures and
forward contracts) derived with respect to its business of
investing in stock, securities or currency; (ii) derive less than
30% of its gross income in each taxable year from the sale or
other disposition within three months of their acquisition by the
Fund of stocks, securities, options, futures or forward contracts
and foreign currencies (or options, futures or forward contracts
on foreign currencies) that are not directly related to the
Fund's principal business of investing in stock or securities (or
options and futures with respect to stocks or securities); and
(iii) diversify its holdings so that, at the end of each quarter
of its taxable year, the following two conditions are
met:  (a) at least 50% of the value of the Fund's assets is
represented by cash, U.S. Government Securities, securities of
other regulated investment companies and other securities with
respect to which the Fund's investment is limited, in respect of
any one issuer, to an amount not greater than 5% of the Fund's
assets and 10% of the outstanding voting securities of such
issuer, and (b) not more than 25% of the value of the Fund's
assets is invested in securities of any one issuer (other than
U.S. Government Securities or securities of other regulated
investment companies).  These requirements, among other things,
may limit the Fund's ability to sell securities short and write



                               53



<PAGE>

and purchase options, futures and forward foreign currency
contracts.

         If the Fund qualifies as a regulated investment company
for any taxable year and makes timely distributions to its
shareholders of 90% or more of its net investment income for that
year (calculated without regard to its net capital gain, i.e.,
the excess of its net long-term capital gain over its net short-
term capital loss), it will not be subject to federal income tax
on the portion of its taxable income for the year (including any
net capital gain) that it distributes to shareholders.

         The Fund intends to also avoid the 4% federal excise tax
that would otherwise apply to certain undistributed income for a
given calendar year if it makes timely distributions to the
shareholders equal to the sum of (i) 98% of its ordinary income
for that year; (ii) 98% of its capital gain net income and
foreign currency gains for the twelve-month period ending on
October 31 of that year; and (iii) any ordinary income or capital
gain net income from the preceding calendar year that was not
distributed during that year.  For this purpose, income or gain
retained by the Fund that is subject to corporate income tax will
be considered to have been distributed by the Fund by year-end.
For federal income and excise tax purposes, dividends declared
and payable to shareholders of record as of a date in October,
November or December of a given year but actually paid during the
immediately following January will be treated as if paid by the
Fund on December 31 of that calendar year, and will be taxable to
these shareholders for the year declared, and not for the year in
which the shareholders actually receive the dividend.

         The Fund intends to make timely distributions of the
Fund's taxable income (including any net capital gain) so that
the Fund will not be subject to federal income or excise taxes.
However, exchange control or other regulations on the
repatriation of investment income, capital or the proceeds of
securities sales, if any exist or are enacted in the future, may
limit the Fund's ability to make distributions sufficient in
amount to avoid being subject to one or both of such federal
taxes.

         Dividends and Distributions.  The Fund intends to make
timely distributions of the Fund's taxable income (including any
net capital gain) so that the Fund will not be subject to federal
income and excise taxes.  Dividends of the Fund's net ordinary
income and distributions of any net realized short-term capital
gain are taxable to shareholders as ordinary income.

         The excess of net long-term capital gains over the net
short-term capital losses realized and distributed by the Fund to
its shareholders will be taxable to the shareholders as long-term


                               54



<PAGE>

capital gains, irrespective of the length of time a shareholder
may have held his Fund shares.  Any dividend or distribution
received by a shareholder on shares of the Fund will have the
effect of reducing the net asset value of such shares by the
amount of such dividend or distribution.  Furthermore, a dividend
or distribution made shortly after the purchase of such shares by
a shareholder, although in effect a return of capital to that
particular shareholder, would be taxable to him as described
above.  Dividends are taxable in the manner discussed regardless
of whether they are paid to the shareholder in cash or are
reinvested in additional shares of the Fund.

         After the end of the taxable year, the Fund will notify
shareholders of the federal income tax status of any
distributions made by the Fund to shareholders during such year.

         It is the present policy of the Fund to distribute to
shareholders all net investment income and to distribute realized
capital gains, if any, annually.  There is no fixed dividend rate
and there can be no assurance that the Fund will pay any
dividends.  The amount of any dividend or distribution paid on
shares of the Fund must necessarily depend upon the realization
of income and capital gains from the Fund's investments.

         Sales and Redemptions.  Any gain or loss arising from a
sale or redemption of Fund shares generally will be capital gain
or loss except in the case of a dealer or a financial
institution, and will be long-term capital gain or loss if such
shareholder has held such shares for more than one year at the
time of the sale or redemption; otherwise it will be short-term
capital gain or loss.  However, if a shareholder has held shares
in the Fund for six months or less and during that period has
received a distribution taxable to the shareholder as a long-term
capital gain, any loss recognized by the shareholder on the sale
of those shares during the six-month period will be treated as a
long-term capital loss to the extent of the dividend.  In
determining the holding period of such shares for this purpose,
any period during which a shareholder's risk of loss is offset by
means of options, short sales or similar transactions is not
counted.

         Any loss realized by a shareholder on a sale or exchange
of shares of the Fund will be disallowed to the extent the shares
disposed of are replaced within a period of 61 days beginning 30
days before and ending 30 days after the shares are sold or
exchanged.  For this purpose, acquisitions pursuant to the
Dividend Reinvestment Plan would constitute a replacement if made
within the period.  If disallowed, the loss will be reflected in
an upward adjustment to the basis of the shares acquired.




                               55



<PAGE>

         Foreign Taxes.  Income received by the Fund may also be
subject to foreign income taxes, including withholding taxes. The
United States has entered into tax treaties with many foreign
countries which entitle the Fund to a reduced rate of such taxes
or exemption from taxes on such income.  It is impossible to
determine the effective rate of foreign tax in advance since the
amount of the Fund's assets to be invested within various
countries is not known.  If more than 50% of the value of the
Fund's total assets at the close of its taxable year consists of
stocks or securities of foreign corporations, the Fund will be
eligible and intends to file an election with the Internal
Revenue Service to pass through to its shareholders the amount of
foreign taxes paid by the Fund.  However, there can be no
assurance that the Fund will be able to do so.  Pursuant to this
election a United States shareholder will be required to
(i) include in gross income (in addition to taxable dividends
actually received) his pro rata share of foreign taxes paid by
the Fund, (ii) treat his pro rata share of such foreign taxes as
having been paid by him, and (iii) either deduct such pro rata
share of foreign taxes in computing his taxable income or treat
such foreign taxes as a credit against United States federal
income taxes.  Shareholders who are not liable for federal income
taxes, such as retirement plans qualified under section 401 of
the Code, will not be affected by any such pass through of taxes
by the Fund.  No deduction for foreign taxes may be claimed by an
individual United States shareholder who does not itemize
deductions.  In addition, certain individual United States
shareholders may be subject to rules which limit or reduce their
availability to fully deduct their pro rata share of the foreign
taxes paid by the Fund.  Each shareholder will be notified within
60 days after the close of the Fund's taxable year whether the
foreign taxes paid by the Fund will pass through for that year
and, if so, such notification will designate (i) the
shareholder's portion of the foreign taxes paid to each such
country and (ii) the portion of dividends that represents income
derived from sources within each such country.

         Generally, a credit for foreign taxes may not exceed the
shareholder's United States tax attributable to the shareholder's
total foreign source taxable income. Generally, the source of the
Fund's income flows through to its shareholders. The overall
limitation on a foreign tax credit is also applied separately to
specific categories of foreign source income, including foreign
source passive income, including dividends, interest and capital
gains. Further, the foreign tax credit is allowed to offset only
90% of any alternative minimum tax to which a shareholder may be
subject.  As a result of these rules, certain shareholders may be
unable to claim a credit for the full amount of their
proportionate share of the foreign taxes paid by the Fund.  If a
shareholder could not credit his full share of the foreign tax
paid, double taxation of such income could be mitigated only by


                               56



<PAGE>

deducting the foreign tax paid, which may be subject to
limitation as described above.

         The federal income tax status of each year's
distributions by the Fund will be purported to shareholders and
to the Internal Revenue Service.  The foregoing is only a general
description of the treatment of foreign taxes under the United
States federal income tax laws. Because the availability of a
foreign tax credit or deduction will depend on the particular
circumstances of each shareholder, potential investors are
advised to consult their own tax advisers.

         Backup Withholding.  The Fund may be required to
withhold United States federal income tax at the rate of 31% of
all taxable distributions payable to shareholders who fail to
provide the Fund with their correct taxpayer identification
numbers or to make required certifications, or who have been
notified by the Internal Revenue Service that they are subject to
backup withholding.  Corporate shareholders and certain other
shareholders specified in the Code are exempt from such backup
withholding.  Backup withholding is not an additional tax; any
amounts so withheld may be credited against a United States
Shareholder's United States federal income tax liability or
refunded.

United States Federal Income Taxation of the Fund

         The following discussion relates to certain significant
United States federal income tax consequences to the Fund with
respect to the determination of its "investment company taxable
income" each year.  This discussion assumes that the Fund will be
taxed as a regulated investment company for each of its taxable
years.

         Passive Foreign Investment Companies.  If the Fund owns
shares in a foreign corporation that constitutes a "passive
foreign investment company" (a "PFIC") for federal income tax
purposes and the Fund does not elect to treat the foreign
corporation as a "qualified electing fund" within the meaning of
the Code, the Fund may be subject to United States federal income
taxation on a portion of any "excess distribution" it receives
from the PFIC or any gain it derives from the disposition of such
shares, even if such income is distributed as a taxable dividend
by the Fund to its shareholders.  The Fund may also be subject to
additional interest charges in respect of deferred taxes arising
from such distributions or gains.  Any tax paid by the Fund as a
result of its ownership of shares in a PFIC will not give rise to
any deduction or credit to the Fund or to any shareholder.  A
PFIC means any foreign corporation if, for the taxable year
involved, either (i) it derives at least 75% of its gross income
from "passive income" (including, but not limited to, interest,


                               57



<PAGE>

dividends, royalties, rents and annuities), or (ii) on average,
at least 50% of the value (or adjusted tax basis, if elected ) of
the assets held by the corporation produce "passive income."  The
Treasury has issued proposed regulations which would provide a
"marked to market" election solely with respect to gain inherent
in PFIC stock held by a regulated investment company, such as the
Fund, which does not elect to treat the PFIC as a "qualified
electing fund."  If the proposed regulations are adopted in final
form and the election provided therein were to be made by the
Fund, the Fund would recognize a gain as of the last business day
of its taxable year equal to the excess of the fair market value
of each share of stock in the PFIC over the Fund's adjusted tax
basis in that share.  This gain, which would be treated as
derived from securities held by the Fund for at least three
months, generally would not be subject to the deferred tax and
interest charge amounts to which it might otherwise be subject,
as discussed above, in the event of an "excess distribution" or
gain with regard to shares of a PFIC.  If the Fund purchases
shares in a PFIC and the Fund does elect to treat the foreign
corporation as a "qualified electing fund" under the Code, the
Fund may be required to include in its income each year a portion
of the ordinary income and net capital gains of the foreign
corporation, even if this income is not distributed to the Fund.
Any such income would be subject to the 90% and calendar year
distribution requirements described above.

         Currency Fluctuations-"Section 988" Gains or Losses.
Under the Code, gains or losses attributable to fluctuations in
exchange rates which occur between the time the Fund accrues
interest or other receivables or accrues expenses or other
liabilities denominated in a foreign currency and the time the
Fund actually collects such receivables or pays such liabilities
are treated as ordinary income or ordinary loss.  Similarly,
gains or losses from the disposition of foreign currencies, from
the disposition of debt securities denominated in a foreign
currency, or from the disposition of a forward contract
denominated in a foreign currency which are attributable to
fluctuations in the value of the foreign currency between the
date of acquisition of the asset and the date of disposition also
are treated as ordinary gain or loss.  These gains or losses,
referred to under the Code as "section 988" gains or losses,
increase or decrease the amount of the Fund's investment company
taxable income available to be distributed to its shareholders as
ordinary income, rather than increasing or decreasing the amount
of the Fund's net capital gain.  Because section 988 losses
reduce the amount of ordinary dividends the Fund will be allowed
to distribute for a taxable year, such section 988 losses may
result in all or a portion of prior dividend distributions for
such year being recharacterized as a non-taxable return of
capital to shareholders, rather than as an ordinary dividend,
reducing each shareholder's basis in his Fund shares.  To the


                               58



<PAGE>

extent that such distributions exceed such shareholder's basis,
each distribution will be treated as a gain from the sale of
shares.

         Options, Futures and Forward Contracts.  Certain listed
options, regulated futures contracts, and forward foreign
currency contracts are considered "section 1256 contracts" for
federal income tax purposes.  Section 1256 contracts held by the
Fund at the end of each taxable year will be "marked to market"
and treated for federal income tax purposes as though sold for
fair market value on the last business day of such taxable year.
Gain or loss realized by the Fund on section 1256 contracts other
than forward foreign currency contracts will be considered 60%
long-term and 40% short-term capital gain or loss.  Gain or loss
realized by the Fund on forward foreign currency contracts will
be treated as section 988 gain or loss and will therefore be
characterized as ordinary income or loss and will increase or
decrease the amount of the Fund's net investment income available
to be distributed to shareholders as ordinary income, as
described above.  The Fund can elect to exempt its section 1256
contracts which are part of a "mixed straddle" (as described
below) from the application of section 1256.

         The Treasury Department has the authority to issue
regulations that would permit or require the Fund either to
integrate a foreign currency hedging transaction with the
investment that is hedged and treat the two as a single
transaction, or otherwise to treat the hedging transaction in a
manner that is consistent with the hedged investment.  The
regulations issued under this authority generally should not
apply to the type of hedging transactions in which the Fund
intends to engage.

         With respect to equity options or options traded over-
the-counter or on certain foreign exchanges, gain or loss
realized by the Fund upon the lapse or sale of such options held
by the Fund will be either long-term or short-term capital gain
or loss depending upon the Fund's holding period with respect to
such option.  However, gain or loss realized upon the lapse or
closing out of such options that are written by the Fund will be
treated as short-term capital gain or loss.  In general, if the
Fund exercises an option, or an option that the Fund has written
is exercised, gain or loss on the option will not be separately
recognized but the premium received or paid will be included in
the calculation of gain or loss upon disposition of the property
underlying the option.

         Gain or loss realized by the Fund on the lapse or sale
of put and call options on foreign currencies which are traded
over-the-counter or on certain foreign exchanges will be treated
as section 988 gain or loss and will therefore be characterized


                               59



<PAGE>

as ordinary income or loss and will increase or decrease the
amount of the Fund's net investment income available to be
distributed to shareholders as ordinary income, as described
above.  The amount of such gain or loss shall be determined by
subtracting the amount paid, if any, for or with respect to the
option (including any amount paid by the Fund upon termination of
an option written by the Fund) from the amount received, if any,
for or with respect to the option (including any amount received
by the Fund upon termination of an option held by the Fund).  In
general, if the Fund exercises such an option on a foreign
currency, or such an option that the Fund has written is
exercised, gain or loss on the option will be recognized in the
same manner as if the Fund had sold the option (or paid another
person to assume the Fund's obligation to make delivery under the
option) on the date on which the option is exercised, for the
fair market value of the option.  The foregoing rules will also
apply to other put and call options which have as their
underlying property foreign currency and which are traded over-
the-counter or on certain foreign exchanges to the extent gain or
loss with respect to such options is attributable to fluctuations
in foreign currency exchange rates.

         Tax Straddles.  Any option, futures contract, forward
foreign currency contract, currency swaps, short sale or other
position entered into or held by the Fund in conjunction with any
other position held by the Fund may constitute a "straddle" for
federal income tax purposes.  A straddle of which at least one,
but not all, the positions are section 1256 contracts may
constitute a "mixed straddle".  In general, straddles are subject
to certain rules that may affect the character and timing of the
Fund's gains and losses with respect to straddle positions by
requiring, among other things, that (i) loss realized on
disposition of one position of a straddle not be recognized to
the extent that the Fund has unrealized gains with respect to the
other position in such straddle; (ii) the Fund's holding period
in straddle positions be suspended while the straddle exists
(possibly resulting in gain being treated as short-term capital
gain rather than long-term capital gain); (iii) losses recognized
with respect to certain straddle positions which are part of a
mixed straddle and which are non-section 1256 positions be
treated as 60% long-term and 40% short-term capital loss;
(iv) losses recognized with respect to certain straddle positions
which would otherwise constitute short-term capital losses be
treated as long-term capital losses; and (v) the deduction of
interest and carrying charges attributable to certain straddle
positions may be deferred.  The Treasury Department is authorized
to issue regulations providing for the proper treatment of a
mixed straddle where at least one position is ordinary and at
least one position is capital.  No such regulations have yet been
issued.  Various elections are available to the Fund which may
mitigate the effects of the straddle rules, particularly with


                               60



<PAGE>

respect to mixed straddles.  In general, the straddle rules
described above do not apply to any straddles held by the Fund
all of the offsetting positions of which consist of section 1256
contracts.

         Short Sales.  In general, gain or loss realized by the
Fund on the closing of a short sale will be considered to be
short-term capital gain or loss.  In addition, with regard to the
requirement discussed above that the Fund derive less than 30% of
its gross income from the disposition of certain types of
property within three months of their acquisition by the Fund,
any gain from the closing of a short sale will be treated as gain
from the sale of property held three months or less, regardless
of how long the position has been kept open by the Fund, unless
the Fund closes the short sale with securities that were held by
the Fund for more than three months at the time of the short
sale.

Taxation of Foreign Stockholders

         The foregoing discussion relates only to United States
federal income tax law as it affects shareholders who are United
States citizens or residents or United States corporations.  The
effects of federal income tax law on shareholders who are non-
resident alien individuals or foreign corporations may be
substantially different.  Foreign investors should therefore
consult their counsel for further information as to the United
States tax consequences of receipt of income from the Fund.

                                                              

                     PORTFOLIO TRANSACTIONS
                                                              

         Subject to the general supervision of the Directors of
the Fund, the Adviser makes the investment decisions and places
the orders for portfolio securities for the Fund and determines
the broker or dealer to be used in each specific transaction.
Most transactions made by the Fund will be principal transactions
at net prices and the Fund will incur little or no brokerage
costs.  Where possible, securities will be purchased directly
from the issuer or from an underwriter or market maker for the
securities unless the Adviser believes a better price and
execution is available elsewhere.  Purchases from underwriters of
newly-issued securities for inclusion in the Fund's portfolio
usually will include a concession paid to the underwriter by the
issuer and purchases from dealers serving as market makers will
include the spread between the bid and asked price.

         The Fund has no obligation to enter into transactions in
portfolio securities with any broker, dealer, issuer, underwriter


                               61



<PAGE>

or other entity.  In placing orders, it is the policy of the Fund
to obtain the best price and execution for its transactions.
Where best price and execution may be obtained from more than one
broker or dealer, the Adviser may, in its discretion, purchase
and sell securities through brokers and dealers who provide
research, statistical and other information to the Adviser.  Such
services may be used by the Adviser for all of its investment
advisory accounts and, accordingly, not all such services may be
used by the Adviser in connection with the Fund.  The
supplemental information received from a dealer is in addition to
the services required to be performed by the Adviser under the
Advisory Agreement, and the expenses of the Adviser will not
necessarily be reduced as a result of the receipt of such
information.  Consistent with the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., and subject to
seeking best price and execution, the Fund may consider sales of
shares of the Fund as a factor in the selection of dealers to
enter into portfolio transactions with the Fund.

         No transactions for the Fund will be executed through
any broker or dealer affiliated with the Fund's Adviser, Alliance
Capital Management L.P., or with Donaldson, Lufkin & Jenrette
Securities Corporation, an affiliate of the Adviser.

________________________________________________________________

                       GENERAL INFORMATION
________________________________________________________________

Capitalization

         The authorized capital stock of the Fund currently
consists of 3,000,000,000 shares of Class A Common Stock,
3,000,000,000 shares of Class B Common Stock, 3,000,000,000
shares of Class C Common Stock and 3,000,000,000 shares of
Advisor Class Common Stock, each having a par value of $.001 per
share.  All shares of the Fund, when issued, are fully paid and
non-assessable.  The Directors are authorized to reclassify and
issue any unissued shares to any number of additional series and
classes without shareholder approval.  Accordingly, the Directors
in the future, for reasons such as the desire to establish one or
more additional portfolios with different investment objectives,
policies or restrictions, may create additional classes or series
of shares.  Any issuance of shares of another class or series
would be governed by the 1940 Act and the law of the State of
Maryland.  If shares of another series were issued in connection
with the creation of a second portfolio, each share of either
portfolio would normally be entitled to one vote for all
purposes.  Generally, shares of both portfolios would vote as a
single series on matters, such as the election of Directors, that
affected both portfolios in substantially the same manner.  As to


                               62



<PAGE>

matters affecting each portfolio differently, such as approval of
the Advisory Agreement and changes in investment policy, shares
of each portfolio would vote as a separate series.

         Procedures for calling a shareholders' meeting for the
removal of Directors of the Fund, similar to those set forth in
Section 16(c) of the 1940 Act will be available to shareholders
of the Fund.  The rights of the holders of shares of a series may
not be modified except by the vote of a majority of the
outstanding shares of such series.

         As of the close of business on February 7, 1997, there
were 853,736 shares of common stock of the Fund outstanding,
including 290,247 Class A shares, 415,766 Class B shares, 147,723
Class C shares and no Advisor Class shares.  To the knowledge of
the Fund, the following persons owned of record or beneficially
5% or more of the outstanding shares of the Fund as of
February 7, 1997. 

Name and Address                 No. of Shares   % of Class


Class A

Alliance Capital Mgmt. L.P.          110,000        37.90%
Attn: Paul Greenberg
1345 Avenue of the Americas
New York, NY 10105

Merrill Lynch                         21,652         7.46%
Attn: Fund Administration
4800 Deer Lake Drive East - 3rd Flr.
Jacksonville, FL 32246-6484

Alliance Plans Div                    30,744        10.59%
FBO David H. Dievler
PO Box 167
Spring Lake, NJ 07762-0167

Trust for Profit Sharing Plan         32,563        11.22%
For Employees of Alliance
Capital Mgmt. L.P. Plan Z
Attn: R. Richmond - 32nd FL.
1345 Avenue of the Americas
New York, NY 10105








                               63



<PAGE>

Class B

Merrill Lynch                        124,364        29.91%
Attn: Fund Administration
4800 Deer Lake Drive East - 3rd Flr.
Jacksonville, FL 32246-6484

Class C

Merrill Lynch                         56,958        38.56%
Attn: Fund Administration
4800 Deer Lake Drive East - 3rd Flr.
Jacksonville, FL 32246-6484

Prudential Securities, Inc.           13,211         8.94%
Alice Yamammoto ADM
Est Chris G. Gong
8606 S Mendocino Avenue
Parlier, CA 93648-2214

Custodian

         Brown Brothers Harriman & Co., 40 Wall Street, Boston,
Massachusetts 02109 ("Brown Brothers") will act as the Fund's
custodian.  The Fund's securities and cash are held under a
custodian agreement by Brown Brothers.  Rules adopted under the
1940 Act permit the Fund to maintain its securities and cash in
the custody of certain eligible banks and securities
depositories.  Pursuant to those rules, the Fund's portfolio of
securities and cash, when invested in securities of foreign
countries, will be held by its subcustodians, subject to approval
by the Board of Directors of the Fund as and when appropriate in
accordance with the rules of the Commission.  Selection of the
subcustodians will be made by the Board of Directors of the Fund
following a consideration of a number of factors, including, but
not limited to, the reliability and financial stability of the
institution, the ability of the institution to capably perform
custodial services of the Fund, the reputation of the institution
in its national market, the political and economic stability of
the countries in which the subcustodians will be located, and
risks of potential nationalization or exportation of Fund assets.
In addition, the 1940 Act requires that foreign bank
subcustodians, among other things, have shareholder equity in
excess of $200,000,000, have no lien on the Fund's assets and
maintain adequate and accessible records.

Principal Underwriter

         Alliance Fund Distributors, Inc., 1345 Avenue of the
Americas, New York, New York 10105, serves as the Fund's
Principal Underwriter, and as such may solicit orders from the


                               64



<PAGE>

public to purchase shares of the Fund.  Under the Distribution
Services Agreement, the Fund has agreed to indemnify the
Principal Underwriter, in the absence of its willful misfeasance,
bad faith, gross negligence or reckless disregard of its
obligations thereunder, against certain civil liabilities,
including liabilities under the Securities Act.

Counsel

         Legal matters in connection with the issuance of the
shares offered hereby are passed upon by Seward & Kissel, New
York, New York.  Seward & Kissel has relied upon the opinion of
Venable, Baetjer and Howard, LLP, Baltimore, Maryland, for
matters relating to Maryland law.

Independent Auditors

         Ernst & Young LLP, New York, New York has been appointed
as independent auditors for the Fund.

Yield and Total Return Quotations

         From time to time the Fund advertises its "yield,"
"actual distribution rate" and "total return".  The Fund's yield
for any 30-day (or one-month) period is computed by dividing the
net investment income per share earned during such period by the
maximum public offering price per share on the last day of the
period, and then annualizing such 30-day (or one-month) yield in
accordance with a formula prescribed by the Commission which
provides for compounding on a semi-annual basis.  The Fund's
actual distribution rate, which may be advertised in items of
sales literature, is computed in the same manner as yield except
that actual income dividends declared per share during the period
in question is substituted for net investment income per share.
The actual distribution rate is computed separately for each
class of shares.  Advertisements of the Fund's total return
disclose the Fund's average annual compounded total return for
its most recently completed one, five and ten year periods (or
the period since the Fund's inception).  The Fund's total return
for each such period is computed by finding, through the use of a
formula prescribed by the Commission, the average annual
compounded rate of return over the period that would equate an
assumed initial amount invested in the value of such investment
at the end of the period.  For purposes of computing total
return, income dividends and capital gains distributions paid on
shares of the Fund are assumed to have been reinvested when
received and the maximum sales charge applicable to purchases of
Fund shares is assumed to have been paid.

         The Fund's yields for the month ended October 31, 1996
were 7.22%, 6.82% and 6.82% for Class A shares, Class B shares


                               65



<PAGE>

and Class C shares, respectively.  The Fund's actual distribution
rates for the month ended October 31, 1996 were 9.06%, 8.82%, and
8.82% for Class A shares, Class B shares and Class C shares,
respectively.  The Fund's total returns for Class A and Class B
shares for the period from January 9, 1996 (commencement of
operations) through October 31, 1996 were 12.33%, 11.47% and
13.47%, respectively.

         Yield and total return are computed separately for each
class of shares.  Yield and total return are not fixed and will
fluctuate in response to prevailing market conditions or as a
function of the type, and quality of the securities in the Fund's
portfolio, the Fund's average portfolio maturity and its
expenses.  Quotations of yield and total return do not include
any provision for the effect of individual income taxes.  An
investor's principal invested in the Fund is not fixed and will
fluctuate in response to prevailing market conditions. The Fund
may advertise the fluctuation of its net asset value over certain
time periods and compare its performance to that available from
other investments, including money market funds and certificates
of deposit, the later of which, unlike the Fund, are insured and
have fixed rates of return.

         Advertisements quoting performance rankings of the Fund
as measured by financial publications or by independent
organizations such as Lipper Analytical Services, Inc. ("Lipper")
and Morningstar, Inc., and advertisements presenting the
historical record of payments of income dividends by the Fund may
also from time to time be sent to investors or placed in
newspapers, magazines such as The Wall Street Journal, The New
York Times, Barrons, Investor's Daily, Money Magazine, Changing
Times, Business Week and Forbes or other media on behalf of the
Fund.

Additional Information

         Any shareholder inquiries may be directed to the
shareholder's broker or to Alliance Fund Services, Inc. at the
address or telephone numbers shown on the front cover of this
Statement of Additional Information.  This Statement of
Additional Information does not contain all the information set
forth in the Registration Statement filed by the Fund with the
Securities and Exchange Commission under the Securities Act of
1933.  Copies of the Registration Statement may be obtained at a
reasonable charge from the Securities and Exchange Commission or
may be examined, without charge, at the offices of the Securities
and Exchange Commission in Washington, D.C.






                               66



<PAGE>

________________________________________________________________

                            APPENDIX:

                  CERTAIN INVESTMENT PRACTICES
________________________________________________________________

         The following investment practices in which the Fund is
authorized to engage may not be currently permitted under the
laws or regulations or may otherwise be unavailable in many
countries.  The Fund intends to engage in these investment
practices to the extent such practices become available and
permissible in the future.

Options

         The Fund may write covered put and call options and
purchase put and call options on securities of the types in which
it is permitted to invest that are traded on U.S. and foreign
securities exchanges and over-the-counter, including options on
market indices.  The Fund will only write "covered" put and call
options unless such options are written for cross-hedging
purposes.  There are no specific limitations on the Fund's
writing and purchasing of options.

         The Fund may purchase put options to hedge against a
decline in the value of its portfolio.  By using put options in
this way, the Fund will reduce any profit it might otherwise have
realized in the underlying security by the amount of the premium
paid for the put option and by transaction costs.  The Fund may
purchase call options to hedge against an increase in the price
of securities that the Fund anticipates purchasing in the future.
The premium paid for the call option plus any transaction costs
will reduce the benefit, if any, realized by the Fund upon
exercise of the option, and, unless the price of the underlying
security rises sufficiently, the option may expire worthless to
the Fund.

         A put option gives the purchaser of such option, upon
payment of a premium, the right to deliver a specified amount of
a security to the writer of the option on or before a fixed date
at a predetermined price.  A call option gives the purchaser of
the option, upon payment of a premium, the right to call upon the
writer to deliver a specified amount of a security on or before a
fixed date at a predetermined price.  A call option written by
the Fund is "covered" if the Fund owns the underlying security
covered by the call or has an absolute and immediate right to
acquire that security without additional cash consideration (or
for additional cash consideration held in a segregated account by
its custodian) upon conversion or exchange of other securities
held in its portfolio.  A call option is also covered if the Fund


                               A-1



<PAGE>

holds a call on the same security and in the same principal
amount as the call written where the exercise price of the call
held (i) is equal to or less than the exercise price of the call
written or (ii) is greater than the exercise price of the call
written if the difference is maintained by the Fund in cash and
liquid high-grade debt securities in a segregated account with
its custodian.  A put option written by the Fund is "covered" if
the Fund maintains cash or liquid high-grade debt securities with
a value equal to the exercise price in a segregated account with
its custodian, or else holds a put on the same security and in
the same principal amount as the put written where the exercise
price of the put held is equal to or greater than the exercise
price of the put written.  The premium paid by the purchaser of
an option will reflect, among other things, the relationship of
the exercise price to the market price and volatility of the
underlying security, the remaining term of the option, supply and
demand and interest rates.

         A call option is for cross-hedging purposes if the Fund
does not own the underlying security but seeks to provide a hedge
against a decline in value in another security which the Fund
owns or has the right to acquire.  In such circumstances, the
Fund collateralizes its obligation under the option by
maintaining in a segregated account with the Fund's custodian
cash or liquid high-grade debt securities in an amount not less
than the market value of the underlying security, marked to
market daily.  The Fund would write a call option for cross-
hedging purposes, instead of writing a covered call option, when
the premium to be received from the cross-hedge transaction would
exceed that which would be received from writing a covered call
option, while at the same time achieving the desired hedge.

         In purchasing a call option, the Fund would be in a
position to realize a gain if, during the option period, the
price of the underlying security increased by an amount in excess
of the premium paid.  It would realize a loss if the price of the
underlying security declined or remained the same or did not
increase during the period, by more than the amount of the
premium.  In purchasing a put option, the Fund would be in a
position to realize a gain if, during the option period, the
price of the underlying security declined by an amount in excess
of the premium paid.  It would realize a loss if the price of the
underlying security increased or remained the same or did not
decrease during that period by more than the amount of the
premium.  If a put or call option purchased by the Fund were
permitted to expire without being sold or exercised, its premium
would be lost by the Fund.

         If a put option written by the Fund were exercised, the
Fund would be obligated to purchase the underlying security at
the exercise price.  If a call option written by the Fund were


                               A-2



<PAGE>

exercised, the Fund would be obligated to sell the underlying
security at the exercise price.  The risk involved in writing a
put option is that there could be a decrease in the market value
of the underlying security caused by rising interest rates or
other factors.  If this occurred, the option could be exercised
and the underlying security would then be sold by the option
holder to the Fund at a higher price than its current market
value.  The risk involved in writing a call option is that there
could be an increase in the market value of the underlying
security caused by declining interest rates or other factors.  If
this occurred, the option could be exercised and the underlying
security would then be sold by the Fund at a lower price than its
current market value.  These risks could be reduced by entering
into a closing transaction prior to the option expiration dates
if a liquid market is available.  The Fund retains the premium
received from writing a put or call option whether or not the
option is exercised.

         The Fund may purchase or write options on securities of
the types in which it is permitted to invest in privately
negotiated (i.e., over-the-counter) transactions.  The Fund will
effect such transactions only with investment dealers and other
financial institutions (such as commercial banks or savings and
loan institutions) deemed creditworthy by the Adviser, and the
Adviser has adopted procedures for monitoring the
creditworthiness of such entities.  Options purchased or written
by the Fund in negotiated transactions are illiquid and it may
not be possible for the Fund to effect a closing transaction at a
time when the Adviser believes it would be advantageous to do so.

         An option on a securities index is similar to an option
on a security except that, rather than the right to take or make
delivery of a security at a specified price, an option on a
securities index gives the holder the right to receive, upon
exercises 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.  There are no specific limitations on the Fund's
purchasing and selling of options on securities indices.

         The writer of an option may have no control over when
the underlying securities must be sold, in the case of a call
option, or purchased, in the case of a put option, since with
regard to certain options, the writer may be assigned an exercise
notice at any time prior to the termination of the obligation.
Whether or not an option expires unexercised, the writer retains
the amount of the premium.  This amount, of course, may, in the
case of a covered call option, be offset by a decline in the
market value of the underlying security during the option period.
If a call option is exercised, the writer experiences a profit or
loss from the sale of the underlying security.  If a put option


                               A-3



<PAGE>

is exercised, the writer must fulfill the obligation to purchase
the underlying security at the exercise price, which will usually
exceed the then market value of the underlying security.

         The writer of a listed option that wishes to terminate
its obligation may effect a "closing purchase  transaction." This
is accomplished by buying an option of the same series as the
option previously written.  The effect of the purchase is that
the writer's position will be canceled by the clearing
corporation.  However, a writer may not effect a closing purchase
transaction after being notified of the exercise of an option.
Likewise, an investor who is the holder of a listed option may
liquidate its position by effecting a "closing sale transaction."
This is accomplished by selling an option of the same series as
the option previously purchased.  There can be no guarantee that
either a closing purchase or a closing sale transaction can be
effected in any particular situation.

         Effecting a closing transaction in the case of a written
call option will permit the Fund to write another call option on
the underlying security with either a different exercise price or
expiration date or both, or in the case of a written put option
will permit the Fund to write another put option to the extent
that the exercise price thereof is secured by deposited cash or
short-term securities.  Also, effecting a closing transaction
will permit the cash or proceeds from the concurrent sale of any
securities subject to the option to be used for other Fund
investments.  If the Fund desires to sell a particular security
from its portfolio on which it has written a call option, it will
effect a closing transaction prior to or concurrent with the sale
of the security.

         The Fund will realize a profit from a closing
transaction if the price of the transaction is less than the
premium received from writing the option or is more than the
premium paid to purchase the option; the Fund will realize a loss
from a closing transaction if the price of the transaction is
more than the premium received from writing the option or is less
than the premium paid to purchase the option.  Because increases
in the market price of a call option will generally reflect
increases in the market price of the underlying security, any
loss resulting from the repurchase of a call option is likely to
be offset in whole or in part by appreciation of the underlying
security owned by the Fund.

         An option position may be closed out only where there
exists a secondary market for an option of the same series.  If a
secondary market does not exist, it might not be possible to
effect closing transactions in particular options with the result
that the Fund would have to exercise the options in order to
realize any profit.  If the Fund is unable to effect a closing


                               A-4



<PAGE>

purchase transaction in a secondary market, it will not be able
to sell the underlying security until the option expires or it
delivers the underlying security upon exercise.  Reasons for the
absence of a liquid secondary market include the following:
(i) there may be insufficient trading interest in certain
options, (ii) restrictions may be imposed by a national
securities exchange ("Exchange") on opening transactions or
closing transactions or both, (iii) trading halts, suspensions or
other restrictions may be imposed with respect to particular
classes or series of options or underlying securities,
(iv) unusual or unforeseen circumstances may interrupt normal
operations on an Exchange, (v) the facilities of an Exchange or
the Options Clearing Corporation may not at all times be adequate
to handle current trading volume, or (vi) one or more Exchanges
could, for economic or other reasons, decide or be compelled at
some future date to discontinue the trading of options (or a
particular class or series of options), in which event the
secondary market on that Exchange (or in that class or series of
options) would cease to exist, although outstanding options on
that Exchange that had been issued by the Options Clearing
Corporation as a result of trades on that Exchange would continue
to be exercisable in accordance with their terms.

         The Fund may write options in connection with buy-and-
write transactions; that is, the Fund may purchase a security and
then write a call option against that security.  The exercise
price of the call the Fund determines to write will depend upon
the expected price movement of the underlying security.  The
exercise price of a call option may be below ("in-the-money"),
equal to ("at-the-money") or above ("out-of-the-money") the
current value of the underlying security at the time the option
is written.  Buy-and-write transactions using in-the-money call
options may be used when it is expected that the price of the
underlying security will remain flat or decline moderately during
the option period.  Buy-and-write transactions using at-the-money
call options may be used when it is expected that the price of
the underlying security will remain fixed or advance moderately
during the option period.  Buy-and-write transactions using out-
of-the-money call options may be used when it is expected that
the premiums received from writing the call option plus the
appreciation in the market price of the underlying security up to
the exercise price will be greater than the appreciation in the
price of the underlying security alone.  If the call options are
exercised in such transactions, the Fund's maximum gain will be
the premium received by it for writing the option, adjusted
upwards or downwards by the difference between the Fund's
purchase price of the security and the exercise price.  If the
options are not exercised and the price of the underlying
security declines, the amount of such decline will be offset in
part, or entirely, by the premium received.



                               A-5



<PAGE>

         The writing of covered put options is similar in terms
of risk/return characteristics to buy-and-write transactions.  If
the market price of the underlying security rises or otherwise is
above the exercise price, the put option will expire worthless
and the Fund's gain will be limited to the premium received.  If
the market price of the underlying security declines or otherwise
is below the exercise price, the Fund may elect to close the
position or take delivery of the security at the exercise price
and the Fund's return will be the premium received from the put
option minus the amount by which the market price of the security
is below the exercise price.  Out-of-the-money, at-the-money, and
in-the-money put options may be used by the Fund in the same
market environments that call options are used in equivalent buy-
and-write transactions.

Futures Contracts and Options on Futures Contracts

         The Fund may enter into contracts for the purchase or
sale for future delivery of foreign currencies, or contracts
based on financial indices, including any index of U.S.
Government Securities, securities issued by foreign government
entities, or common stocks ("futures contracts") and may purchase
and write put and call options to buy or sell futures contracts
("options on futures contracts").  A "sale" of a futures contract
means the acquisition of a contractual obligation to deliver the
securities or foreign currencies called for by the contract at a
specified price on a specified date.  A "purchase" of a futures
contract means the incurring of a contractual obligation to
acquire the securities or foreign currencies called for by the
contract at a specified price on a specified date.  The purchaser
of a futures contract on an index agrees to take or make delivery
of an amount of cash equal to the difference between a specified
dollar multiple of the value of the index on the expiration date
of the contract ("current contract value") and the price at which
the contract was originally struck.  No physical delivery of the
securities underlying the index is made.

         Options on futures contracts written or purchased by the
Fund will be traded on U.S. or foreign exchanges or over-the-
counter.  These investment techniques will be used only to hedge
against anticipated future changes in market conditions and
interest or exchange rates which otherwise might either adversely
affect the value of the Fund's portfolio securities or adversely
affect the prices of securities which the Fund intends to
purchase at a later date.  

         The purchase of a call option on a futures contract is
similar in some respects to the purchase of a call option on an
individual security.  Depending on the pricing of the option
compared to either the price of the futures contract upon which
it is based or the price of the underlying debt securities, it


                               A-6



<PAGE>

may or may not be less risky than ownership of the futures
contract or underlying debt securities.  As with the purchase of
futures contracts, when the Fund is not fully invested it may
purchase a call option on a futures contract to hedge against
adverse market conditions.

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

         The purchase of a put option on a futures contract is
similar in some respects to the purchase of protective put
options on portfolio securities.  For example, the Fund may
purchase a put option on a futures contract to hedge the Fund's
portfolio against the risk of rising interest rates.

         The amount of risk the Fund assumes when it purchases an
option on a futures contract is the premium paid for the option
plus related transaction costs.  In addition to the correlation
risks discussed above, the purchase of an option also entails the
risk that changes in the value of the underlying futures contract
will not be fully reflected in the value of the option purchased.

         U.S. futures contracts have been designed by exchanges
which have been designated "contracts markets" by the Commodity
Futures Trading Commission ("CFTC"), and must be executed through
a futures commission merchant, or brokerage firm, which is a
member of the relevant contract market.  Futures contracts trade
on a number of exchange markets, and, through their clearing
corporations, the exchanges guarantee performance of the


                               A-7



<PAGE>

contracts as between the clearing members of the exchange.  The
Fund is not a commodity pool and all transactions in futures
contracts and options on futures contracts engaged in by the Fund
must constitute bona fide hedging or other permissible
transactions in accordance with the rules and regulations
promulgated by the CFTC.

         At the same time a futures contract is purchased or
sold, the Fund must allocate cash or securities as a deposit
payment ("initial deposit").  It is expected that the initial
deposit would be approximately 1 l/2% to 5% of a contract's face
value.  Daily thereafter, the futures contract is valued and the
payment of "variation margin" may be required, since each day the
Fund would provide or receive cash that reflects any decline or
increase in the contract's value.

         At the time of delivery of securities pursuant to such a
contract, adjustments are made to recognize differences in value
arising from the delivery of securities with a different price or
interest rate from that specified in the contract.  In some (but
not many) cases, securities called for by a futures contract may
not have been issued when the contract was written.

         Although futures contracts by their terms call for the
actual delivery or acquisition of securities, in most cases the
contractual obligation is fulfilled before the date of the
contract without having to make or take delivery of the
securities.  The offsetting of a contractual obligation is
accomplished by buying (or selling, as the case may be) on a
commodities exchange an identical futures contract calling for
delivery in the same month.  Such a transaction, which is
effected through a member of an exchange, cancels the obligation
to make or take delivery of the securities.  Since all
transactions in the futures market are made, offset or fulfilled
through a clearinghouse associated with the exchange on which the
contracts are traded, the Fund will incur brokerage fees when it
purchases or sells futures contracts.

         The Fund's Custodian will place cash not available for
investment or liquid high grade debt securities in a separate
account of the Fund having a value equal to the aggregate amount
of the Fund's commitments under futures contracts.

Options on Foreign Currencies

         The Fund may purchase and write put and call options on
foreign currencies for the purpose of protecting against declines
in the U.S. dollar value of foreign currency-denominated
portfolio securities and against increases in the U.S. dollar
cost of such securities to be acquired.  For example, a decline
in the dollar value of a foreign currency in which portfolio


                               A-8



<PAGE>

securities are denominated will reduce the dollar value of such
securities, even if their value in the foreign currency remains
constant.  In order to protect against such diminutions in the
value of portfolio securities, the Fund may purchase put options
on the foreign currency.  If the value of the currency does
decline, the Fund will have the right to sell such currency for a
fixed amount in dollars and will thereby offset, in whole or in
part, the adverse effect on its portfolio which otherwise would
have resulted.  As in the case of other kinds of options,
however, the writing of an option on a foreign currency
constitutes only a partial hedge, up to the amount of the premium
received, and the Fund could be required to purchase or sell
foreign currencies at disadvantageous exchange rates, thereby
incurring losses.  The purchase of an option on a foreign
currency may constitute an effective hedge against fluctuations
in exchange rates although, in the event of rate movements
adverse to the Fund's position, it may forfeit the entire amount
of the premium plus related transaction costs.  Options on
foreign currencies to be written or purchased by the Fund are
traded on U.S. and foreign exchanges or over-the-counter.

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

         The Fund may write options on foreign currencies for the
same types of hedging purposes.  For example, where the Fund
anticipates a decline in the dollar value of foreign currency
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 will be offset by the amount of
the premium received.

         Similarly, instead of purchasing a call option to hedge
against an anticipated increase in the dollar cost of securities
to be acquired, the Fund could write a put option on the relevant
currency which, if rates move in the manner projected, will
expire unexercised and allow the Fund to hedge such increased


                               A-9



<PAGE>

cost up to the amount of the premium.  As in the case of other
types of options, however, the writing of a foreign currency
option will constitute only a partial hedge up to the amount of
the premium, and only if rates move in the expected direction. If
this does not occur, the option may be exercised and the Fund
would be required to purchase or sell the underlying currency at
a loss which may not be offset by the amount of the premium.
Through the writing of options on foreign currencies, the Fund
also may be required to forego all or a portion of the benefits
which might otherwise have been obtained from favorable movements
in exchange rates.

         The Fund intends to write covered call options on
foreign currencies.  A call option written on a foreign currency
by the Fund is "covered" if the Fund owns the underlying foreign
currency covered by the call or has an absolute and immediate
right to acquire that foreign currency without additional cash
consideration (or for additional cash consideration held in a
segregated account by its custodian) upon conversion or exchange
of other foreign currency held in its portfolio.  A call option
is also covered if the Fund has a call on the same foreign
currency and in the same principal amount as the call written
where the exercise price of the call held (a) is equal to or less
than the exercise price of the call written or (b) is greater
than the exercise price of the call written if the difference is
maintained by the Fund in cash and high-grade liquid debt
securities in a segregated account with its custodian.

         The Fund also intends to write call options on foreign
currencies for cross-hedging purposes.  An option that is cross-
hedged is not covered, but is designed to provide a hedge against
a decline in the U.S. dollar value of a security which the Fund
owns or has the right to acquire and which is denominated in the
currency underlying the option due to an adverse change in the
exchange rate.  In such circumstances, the Fund collateralizes
the option by maintaining in a segregated account with the Fund's
custodian, cash or high-grade liquid debt securities in an amount
not less than the value of the underlying foreign currency in
U.S. dollars marked to market daily.  There is no specific
percentage limitation on the Fund's investment in options on
foreign currencies.

Additional Risks of Options on Futures Contracts, Forward
Contracts and Options on Foreign Currencies

         Unlike transactions entered into by the Fund in futures
contracts, options on foreign currencies and forward contracts
are not traded on contract markets regulated by the CFTC or (with
the exception of certain foreign currency options) by the
Securities and Exchange Commission.  To the contrary, such
instruments are traded through financial institutions acting as


                              A-10



<PAGE>

market-makers, although foreign currency options are also traded
on certain national securities exchanges, such as the
Philadelphia Stock Exchange and the Chicago Board Options
Exchange, subject to Securities and Exchange Commission
regulation.  Similarly, options on securities may be traded over-
the-counter.  In an over-the-counter trading environment, many of
the protections afforded to exchange participants will not be
available.  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
and a trader of forward contracts could lose amounts
substantially in excess of their initial investments, due to the
margin and collateral requirements associated with such
positions.

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

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




                              A-11



<PAGE>

         In addition, futures contracts, options on futures
contracts, forward contracts and options on foreign currencies
may be traded on foreign exchanges.  Such transactions are
subject to the risk of governmental actions affecting trading in
or the prices of foreign currencies or securities.  The value of
such positions also could be adversely affected by (i) other
complex foreign political and economic factors, (ii) lesser
availability than in the United States of data on which to make
trading decisions, (iii) delays in the Fund's ability to act upon
economic events occurring in foreign markets during nonbusiness
hours in the United States, (iv) the imposition of different
exercise and settlement terms and procedures and margin
requirements than in the United States, and (v) lesser trading
volume.

Forward Foreign Currency Exchange Contracts

         The Fund may purchase or sell forward foreign currency
exchange contracts ("forward contracts") to attempt to minimize
the risk to the Fund from adverse changes in the relationship
between the U.S. dollar and foreign currencies.  A forward
contract is an obligation to purchase or sell a specific currency
for an agreed price at a future date, and is individually
negotiated and privately traded by currency traders and their
customers.  The Fund may enter into a forward contract, for
example, 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").
The Fund may not engage in transaction hedges with respect to the
currency of a particular country to an extent greater than the
aggregate amount of the Fund's transactions in that currency.
Additionally, for example, when the Fund believes that a foreign
currency may suffer a substantial decline against the U.S.dollar,
it may enter into a forward sale contract to sell an amount of
that foreign currency approximating the value of some or all of
the Fund's portfolio securities denominated in such foreign
currency, or when the Fund believes that the U.S. dollar may
suffer a substantial decline against a foreign currency, it may
enter into a forward purchase contract to buy that foreign
currency for a fixed dollar amount ("position hedge").  In this
situation the Fund may, in the alternative, enter into a forward
contract to sell a different foreign currency for a fixed U.S.
dollar amount where the Fund believes that the U.S. dollar value
of the currency to be sold pursuant to the forward contract will
fall whenever there is a decline in the U.S. dollar value of the
currency in which portfolio securities of the Fund are
denominated ("cross-hedge").  The Fund's custodian will place
cash not available for investment or liquid high-grade debt
securities in a segregated account of the Fund having a value
equal to the aggregate amount of the Fund's commitments under
forward contracts entered into with respect to position hedges


                              A-12



<PAGE>

and cross-hedges.  If the value of the securities placed in a
segregated account declines, additional cash or securities will
be placed in the account on a daily basis so that the value of
the account will equal the amount of the Fund's commitments with
respect to such contracts.  As an alternative to maintaining all
or part of the segregated account, the Fund may purchase a call
option permitting the Fund to purchase the amount of foreign
currency being hedged by a forward sale contract at a price no
higher than the forward contract price or the Fund may purchase a
put option permitting the Fund to sell the amount of foreign
currency subject to a forward purchase contract at a price as
high or higher than the forward contract price.  Unanticipated
changes in currency prices may result in poorer overall
performance for the Fund than if it had not entered into such
contracts.

Forward Commitments

         The Fund may enter into forward commitments for the
purchase or sale of securities.  Such transactions 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, which generally is expressed in yield terms, is fixed at
the time the commitment is made, but delivery and payment for the
securities take place at a later date.  Normally, the settlement
date occurs within two months after the transaction, but delayed
settlements beyond two months may be negotiated. Securities
purchased or sold under a forward commitment are subject to
market fluctuation, and no interest or dividends accrue to the
purchaser prior to the settlement date.  At the time the Fund
intends to enter into a forward commitment, it will record the
transaction and thereafter reflect the value of the security
purchased or, if a sale, the proceeds to be received, in
determining its net asset value.  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.

         The Fund's right to receive or deliver a security under
a forward commitment may be sold prior to the settlement date,
but the Fund will enter into forward commitments only with the
intention of actually receiving or delivering the securities, as
the case may be.  To facilitate such transactions, the Fund's
custodian will maintain, in a segregated account of the Fund,
cash and/or liquid high grade debt securities having value equal


                              A-13



<PAGE>

to, or greater than, any commitments to purchase securities on a
forward commitment basis and, with respect to forward commitments
to sell portfolio securities of the Fund, the portfolio
securities themselves.  If the Fund, however, chooses to dispose
of the right to receive or deliver a security subject to a
forward commitment prior to the settlement date of the
transaction, it may incur a gain or loss.  In the event the other
party to a forward commitment transaction were to default, the
Fund might lose the opportunity to invest money at favorable
rates or to dispose of securities at favorable prices.

Repurchase Agreements

         The Fund may enter into agreements pertaining to U.S.
Government Securities with member banks of the Federal Reserve
System or "primary dealers" (as designated by the Federal Reserve
Bank of New York) in such securities.  There is no percentage
restriction on the Fund's ability to enter into repurchase
agreements.  Currently, the Fund intends to enter into repurchase
agreements only with its custodian and such primary dealers.  A
repurchase agreement arises when a buyer purchases a security and
simultaneously agrees to resell it to the vendor at an agreed-
upon future date, normally one day or a few days later.  The
resale price is greater than the purchase price, reflecting an
agreed-upon interest rate which is effective for the period of
time the buyer's money is invested in the security and which is
related to the current market rate rather than the coupon rate on
the purchased security.  Such agreements permit the Fund to keep
all of its assets at work while retaining "overnight" flexibility
in pursuit of investments of a longer-term nature.  The Fund
requires continual maintenance by its custodian for its account
in the Federal Reserve/Treasury Book Entry System of collateral
in an amount equal to, or in excess of, the resale price.  In the
event a vendor defaulted on its repurchase obligation, the Fund
might suffer a loss to the extent that the proceeds from the sale
of the collateral were less than the repurchase price.  In the
event of a vendor's bankruptcy, the Fund might be delayed in, or
prevented from, selling the collateral for its benefit.  The
Fund's Board of Directors has established procedures, which are
periodically reviewed by the Board, pursuant to which the Fund's
Adviser monitors the creditworthiness of the dealers with which
the Fund enters into repurchase agreement transactions.

Reverse Repurchase Agreements and Dollar Rolls

         The Fund may use reverse repurchase agreements and
dollar rolls as part of its investment strategy.  Reverse
repurchase agreements involve sales by the Fund of portfolio
assets concurrently with an agreement by the Fund to repurchase
the same assets at a later date at a fixed price.  Generally, the
effect of such a transaction is that the Fund can recover all or


                              A-14



<PAGE>

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 only advantageous if
the interest cost to the Fund of the reverse repurchase
transaction is less than the cost of otherwise obtaining the
cash.

         The Fund may enter into dollar rolls in which the Fund
sells securities for delivery in the current month and
simultaneously contracts to repurchase substantially similar
(same type and coupon) securities on a specified future date.
During the roll period, the Fund forgoes principal and interest
paid on the securities.  The Fund is compensated by the
difference between the current sales price and the lower forward
price for the future purchase (often referred to as the "drop")as
well as by the interest earned on the cash proceeds of the
initial sale.

         The Fund will establish a segregated account with its
custodian in which it will maintain cash and/or liquid high grade
debt securities equal in value to its obligations in respect of
reverse repurchase agreements and dollar rolls.  Reverse
repurchase agreements and dollar rolls involve the risk that the
market value of the securities the Fund is obligated to
repurchase under the agreement may decline below the repurchase
price.  In the event the buyer of securities under a reverse
repurchase agreement or dollar roll files for bankruptcy or
becomes insolvent, the Fund's use of the proceeds of the
agreement may be restricted pending a determination by the other
party, or its trustee or receiver, whether to enforce the Fund's
obligation to repurchase the securities.

Standby Commitment Agreements

         The Fund may from time to time enter into standby
commitment agreements.  Such agreements commit the Fund, for a
stated period of time, to purchase a stated amount of a security
which may be issued and sold to the Fund 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 Fund is paid a commitment fee, regardless of
whether or not the security ultimately is issued, which is
typically approximately 0.5% of the aggregate purchase price of
the security which the Fund has committed to purchase.  The Fund
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 Fund and which are
unavailable on a firm commitment basis.  The Fund will at all
times maintain a segregated account with its custodian of cash
and/or liquid high grade debt securities in an aggregate amount


                              A-15



<PAGE>

equal to the purchase price of the securities underlying the
commitment.

         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
Fund 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 Fund.

         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 Fund's net
asset value.  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.

Currency Swaps

         The Fund may enter into currency swaps for hedging
purposes.  Currency swaps involve the exchange by the Fund with
another party of a series of payments in specified currencies.
Since currency swaps are individually negotiated, the Fund
expects to achieve an acceptable degree of correlation between
its portfolio investments and its currency swaps positions.  A
currency swap may involve the delivery at the end of the exchange
period of a substantial amount of one designated currency in
exchange for the other designated currency.  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 net amount of the excess, if any, of
the Fund's obligations over its entitlements with respect to each
currency swap will be accrued on a daily basis and an amount of
cash or high-grade liquid debt securities having an aggregate net
asset value at least equal to the accrued excess will be
maintained in a segregated account by the Fund's custodian.  The
Fund will not enter into any currency swap unless the credit
quality of the unsecured senior debt or the claims-paying ability
of the other party thereto is rated in the highest rating
category of at least one nationally recognized rating
organization at the time of entering into the transaction.  If
there is a default by the other party to such a transaction, the
Fund will have contractual remedies pursuant to the agreements
related to the transactions.



                              A-16



<PAGE>

Interest Rate Transactions (Swaps, Caps and Floors)

         The Fund may enter into interest rate swap, cap or floor
transactions primarily for hedging purposes, 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 Fund anticipates purchasing at a later
date.  The Fund does not intend to use these transactions in a
speculative manner.

         Interest rate swaps involve the exchange by the Fund
with another party of their respective commitments to pay or
receive interest (e.g., an exchange of floating rate payments for
fixed rate payments) computed based on a contractually-based
principal (or "notional") amount.  Interest rate swaps are
entered into on a net basis (i.e., the two payment streams are
netted out, with the Fund receiving or paying, as the case may
be, only the net amount of the two payments).  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.  The Fund may enter into
interest rate swaps, caps and floors on either an asset-based or
liability-based basis, depending upon whether it is hedging its
assets or liabilities.

         The net amount of the excess, if any, of the Fund's
obligations over its entitlements with respect to each interest
rate swap is accrued daily, and an amount of cash or liquid high-
grade debt securities having an aggregate net asset value at
least equal to the accrued excess is maintained in a segregated
account by the Fund's custodian.  To the extent the Fund sells
(i.e., writes) caps and floors, it will maintain segregated
account assets having an aggregate value at least equal to the
full amount, accrued daily, of its obligations with respect to
any caps or floors.

Loans of Portfolio Securities

         The Fund may make secured loans of its portfolio
securities to entities with which it can enter into repurchase
agreements, provided that cash and/or liquid high grade debt
securities equal to at least 100% of the market value of the
securities loaned are deposited and maintained by the borrower
with the Fund.  See "Repurchase Agreements" above.  The risks in
lending portfolio securities, as with other extensions of credit,
consist of possible loss of rights in the collateral should the
borrower fail financially.  In determining whether to lend
securities to a particular borrower, the Adviser (subject to


                              A-17



<PAGE>

review by the Board of Directors) will consider all relevant
facts and circumstances, including the creditworthiness of the
borrower.  While securities are on loan, the borrower will pay
the Fund any income earned thereon and the Fund may invest any
cash collateral in portfolio securities, thereby earning
additional income, or receive an agreed upon amount of income
from a borrower who has delivered equivalent collateral.  The
Fund will have the right to regain record ownership of loaned
securities to exercise beneficial rights such as voting rights,
subscription rights and rights to dividends, interest or
distributions.  The Fund may pay reasonable finders',
administrative and custodial fees in connection with a loan.  

Short Sales

         When engaging in a short sale, in addition to depositing
collateral with a broker-dealer, the Fund is currently required
under the 1940 Act to establish a segregated account with its
custodian and to maintain therein cash or liquid high grade debt
securities in an amount that, when added to cash or liquid high
grade debt securities deposited with the broker-dealer, will at
all times equal at least 100% of the current market value of the
security sold short.  The Securities and Exchange Commission (the
"Commission") is currently reviewing whether equity securities
deposited with a broker-dealer as collateral or held by a fund's
custodian may be used to satisfy this obligation.  Until the
Commission has approved the use of equity securities for such
purpose, the Fund will maintain cash or liquid high grade debt
securities with the broker-dealer and/or in a segregated account
with its custodian in an aggregate amount equal to the market
value of the securities sold short. To the extent that in the
future the Fund is permitted to satisfy all or part of its
segregation obligation with equity securities, the Fund intends
to utilize securities that are similar to those borrowed,
including, to the extent practicable, equity securities of
companies from the same industry that have comparable
characteristics.

General

         The successful use of the foregoing investment practices
draws upon the Adviser's special skills and experience with
respect to such instruments and usually depends on the Adviser's
ability to forecast price movements or currency exchange rate
movements correctly.  Should exchange rates move in an unexpected
manner, the Fund may not achieve the anticipated benefits of
futures contracts, options or forward contracts or may realize
losses and thus be in a worse position than if such strategies
had not been used.  Unlike many exchange-traded futures contracts
and options on futures contracts, there are no daily price
fluctuation limits with respect to options on currencies and


                              A-18



<PAGE>

forward contracts, and adverse market movements could therefore
continue to an unlimited extent over a period of time.  In
addition, the correlation between movements in the prices of such
instruments and movements in the prices of the securities and
currencies hedged or used for cover will not be perfect and could
produce unanticipated losses.

         The Fund's ability to dispose of its position in futures
contracts, options and forward contracts will depend on the
availability of liquid markets in such instruments.  Markets in
options and futures with respect to a number of fixed income
securities and currencies are relatively new and still
developing.  It is impossible to predict the amount of trading
interest that may exist in various types of futures contracts,
options and forward contracts.  If a secondary market does not
exist with respect to an option purchased or written by the Fund
over-the-counter, it might not be possible to effect a closing
transaction in the option (i.e., dispose of the option) with the
result that (i) an option purchased by the Fund would have to be
exercised in order for the Fund to realize any profit and
(ii) the Fund may not be able to sell currencies or portfolio
securities covering an option written by the Fund until the
option expires or it delivers the underlying futures contract or
currency upon exercise.  Therefore, no assurance can be given
that the Fund will be able to utilize these instruments
effectively for the purposes set forth above.  Furthermore, the
Fund's ability to engage in options and futures transactions may
be limited by tax considerations.  See "Taxation--United States
Federal Income Taxes--General."

Future Developments

         The Fund may, following written notice to its
shareholders, take advantage of other investment practices which
are not at present contemplated for use by the Fund or which
currently are not available but which may be developed, to the
extent such investment practices are both consistent with the
Fund's investment objective and legally permissible for the Fund.
Such investment practices, if they arise, may involve risks which
exceed those involved in the activities described above.

         The following document is incorporated herein by
reference:

         1.  The Statement of Additional Information relating to
Advisor Class shares of Alliance Global Strategic Income Trust,
Inc. (the "Fund") contained in Post-Effective Amendment No. 1 to
the Fund's Registration Statement (File Nos. 33-63797 and 811-
07391) filed on April 23, 1996.




                              A-19
00250223.AQ4



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