ALLIANCE HIGH YIELD FUND INC, 485BPOS, 1997-10-31

ALLIANCE HIGH YIELD FUND INC
485BPOS, 1997-10-31

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<PAGE>

As filed with the Securities and Exchange
Commission on October 31, 1997
File Nos. 333-18505
811-09160

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

__________________________

FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

Pre-Effective Amendment No.

Post-Effective Amendment No. 2

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940

Amendment No. 2
_______________________________

Alliance High Yield Fund, Inc.
(Exact Name of Registrant as Specified in Charter)

1345 Avenue of the Americas, New York, New York 10105
(Address of Principal Executive Office) (Zip Code)

Registrant's Telephone Number, including Area Code:(212) 969-1000

_____________________________

EDMUND P. BERGAN, JR.
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, New York 10105
(Name and address of agent for service)

Copies of communications to:
Bruce D. Senzel
Seward & Kissel
One Battery Park Plaza
New York, New York 10004

<PAGE>

It is proposed that this filing will become effective (check
appropriate box)

X immediately upon filing pursuant to paragraph (b)
on (date) pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)(1)
on (date) pursuant to paragraph (a)(1)
75 days after filing pursuant to paragraph (a)(2)
on (date) pursuant to paragraph (a)(2) of Rule 485.

If appropriate, check the following box:
This post-effective amendment designates a new effective
date for a previously filed post-effective amendment.

<PAGE>

CROSS REFERENCE SHEET
(as required by Rule 404(c))

Location in Prospectus
N-1A Item No. (Caption)
_____________ _______________________

PART A

Item 1. Cover Page........................ Cover Page

Item 2. Synopsis.......................... The Funds at a
Glance

Item 3. Condensed Financial
Information....................... Financial Highlights

Item 4. General Description
of Registrant..................... Description of the
Funds; General
Information

Item 5. Management of the Fund............ Management of the
Funds; General
Information

Item 6. Capital Stock and Other
Securities........................ Dividends,
Distributions and
Taxes; General
Information

Item 7. Purchase of Securities
Being Offered..................... Purchase and Sale of
Shares; General
Information

Item 8. Redemption or Repurchase.......... Purchase and Sale of
Shares

Item 9. Pending Legal Proceedings......... Not Applicable

Location in Statement of
Additional Information
PART B (Caption)
______ ________________________

Item 10. Cover Page........................ Cover Page

Item 11. Table of Contents................. Cover Page

<PAGE>

Item 12. General Information
and History....................... Description of the
Fund; General
Information

Item 13. Investment Objectives and
Policies.......................... Description of the
Fund

Item 14. Management of the Registrant ..... Management of the
Fund

Item 15. Control Persons and
Principal Holders of
Securities ....................... Not Applicable

Item 16. Investment Advisory and
Other Services.................... Management of the
Fund; Expenses of
the Fund; General
Information

Item 17. Brokerage Allocation and
Other Practices................... Portfolio
Transactions

Item 18. Capital Stock and Other
Securities........................ General Information

Item 19. Purchase, Redemption and Pricing
of Securities Being Offered....... Purchase of Shares;
Redemption and
Repurchase of
Shares; Dividends,
Distributions and
Taxes; Shareholder
Services

Item 20. Tax Status........................ Description of the
Fund, Dividends,
Distributions and
Taxes

Item 21. Underwriters...................... General Information

Item 22. Calculation of Performance
Data.............................. General Information

<PAGE>

Item 23. Financial Statements.............. Financial
Statements; Report
of Independent
Auditors

<PAGE>

THE ALLIANCE BOND FUNDS
_______________________________________________________________________________

P.O. BOX 1520, SECAUCUS, NEW JERSEY 07096-1520
TOLL FREE (800) 221-5672
FOR LITERATURE: TOLL FREE (800) 227-4618

PROSPECTUS AND APPLICATION

OCTOBER 31, 1997

U.S. GOVERNMENT FUNDS GLOBAL BOND FUNDS
- -ALLIANCE SHORT-TERM U.S. -ALLIANCE NORTH AMERICAN
GOVERNMENT FUND GOVERNMENT INCOME TRUST
- -U.S. GOVERNMENT -ALLIANCE GLOBAL DOLLAR
PORTFOLIO GOVERNMENT FUND
- -ALLIANCE LIMITED MATURITY -ALLIANCE GLOBAL STRATEGIC
GOVERNMENT FUND INCOME TRUST

MORTGAGE FUND CORPORATE BOND FUNDS
- -ALLIANCE MORTGAGE -CORPORATE BOND PORTFOLIO
SECURITIES INCOME FUND -ALLIANCE HIGH YIELD FUND

MULTI-MARKET FUNDS
- -ALLIANCE WORLD INCOME TRUST
- -ALLIANCE SHORT-TERM
MULTI-MARKET TRUST
- -ALLIANCE MULTI-MARKET
STRATEGY TRUST

TABLE OF CONTENTS PAGE
The Funds at a Glance 2
Expense Information 4
Financial Highlights 7
Glossary 15
Description of the Funds 16
Investment Objectives and Policies 16
Additional Investment Practices 24
Certain Fundamental Investment Policies 35
Risk Considerations 37
Purchase and Sale of Shares 41
Management of the Funds 44
Dividends, Distributions and Taxes 46
General Information. 48
Appendix A: Bond Ratings A-1
Appendix B: General Information About Canada,
Mexico and Argentina B-1

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

The Alliance Bond Funds provide a broad selection of investment alternatives to
investors seeking high current income. The U.S. Government Funds invest mainly
in U.S. Government securities and the Mortgage Fund invests in mortgage-related
securities, while the Multi-Market Funds diversify their investments among debt
markets around the world and the Global Bond Funds invest primarily in foreign
government securities. The Corporate Bond Funds invest primarily in corporate
debt securities.

Each fund or portfolio (each a "Fund") is, or is a series of, an open-end
management investment company. This Prospectus sets forth concisely the
information which a prospective investor should know about each Fund before
investing. A "Statement of Additional Information" for each Fund that provides
further information regarding certain matters discussed in this Prospectus and
other matters that 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, write Alliance Fund Services, Inc. at the indicated address or
call the "For Literature" telephone number shown above.

Each Fund (except Alliance World Income Trust) offers three classes of shares
through this Prospectus. These shares may be purchased, at the investor's
choice, at a price equal to their net asset value (i) plus an initial sales
charge imposed at the time of purchase (the "Class A shares"), (ii) with a
contingent deferred sales charge imposed on most redemptions made within three
years of purchase (four years of purchase for Alliance Global Strategic Income
Trust and Alliance High Yield Fund) (the "Class B shares"), or (iii) without
any initial or contingent deferred sales charge, as long as the shares are held
for one year or more (the "Class C shares"). Alliance World Income Trust offers
only one class of shares, which may be purchased at a price equal to its net
asset value without any initial or contingent deferred sales charge. 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
INVESTING WITHOUT THE MYSTERY.SM

(r)/SM These are registered marks used under licenses from the owner, Alliance
Capital Management L.P.

THE FUNDS AT A GLANCE

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

THE FUNDS' INVESTMENT ADVISER IS . . .
Alliance Capital Management L.P. ("Alliance"), a global investment manager
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 $199
billion in assets under management as of June 30, 1997. Alliance provides
investment management services to 29 of the FORTUNE 100 companies.

U.S. GOVERNMENT FUNDS

SHORT-TERM U.S. GOVERNMENT FUND
SEEKS . . . High current income consistent with preservation of capital.

INVESTS PRIMARILY IN . . . A diversified portfolio of U.S. Government
securities.

U.S. GOVERNMENT PORTFOLIO
SEEKS . . . As high a level of current income as is consistent with safety of
principal.

INVESTS SOLELY IN . . . A diversified portfolio of U.S. Government securities
backed by the full faith and credit of the United States.

LIMITED MATURITY GOVERNMENT FUND
SEEKS . . . The highest level of current income, consistent with low volatility
of net asset value.

INVESTS PRIMARILY IN . . . A diversified portfolio of U.S. Government
securities, including mortgage-related securities, and repurchase agreements
relating to U.S. Government securities.

MORTGAGE FUND

MORTGAGE SECURITIES INCOME FUND
SEEKS . . . A high level of current income consistent with prudent investment
risk.

INVESTS PRIMARILY IN . . . A diversified portfolio of mortgage-related
securities.

MULTI-MARKET FUNDS

WORLD INCOME TRUST
SEEKS . . . The highest level of current income that is available from a
portfolio of high-quality debt securities having remaining maturities of not
more than one year.

INVESTS PRIMARILY IN . . . A non-diversified portfolio of debt securities
denominated in the U.S. Dollar and selected foreign currencies. The Fund
maintains at least 35% of its net assets in U.S. Dollar-denominated securities.

SHORT-TERM MULTI-MARKET TRUST
SEEKS . . . The highest level of current income through investment in a
portfolio of high-quality debt securities having remaining maturities of not
more than three years.

INVESTS PRIMARILY IN . . . A non-diversified portfolio of debt securities
denominated in the U.S. Dollar and selected foreign currencies. While the Fund
normally will maintain a substantial portion of its assets in debt securities
denominated in foreign currencies, the Fund will invest at least 25% of its net
assets in U.S. Dollar-denominated securities.

MULTI-MARKET STRATEGY TRUST
SEEKS . . . The highest level of current income that is available from a
portfolio of high-quality debt securities having remaining maturities of not
more than five years.

INVESTS PRIMARILY IN . . . A non-diversified portfolio of debt securities
denominated in the U.S. Dollar and selected foreign currencies. The Fund
expects to maintain at least 70% of its assets in debt securities denominated
in foreign currencies, but not more than 25% of the Fund's total assets may be
invested in debt securities denominated in a single currency other than the
U.S. Dollar.

GLOBAL BOND FUNDS

NORTH AMERICAN GOVERNMENT INCOME TRUST
SEEKS . . . The highest level of current income that is available from a
portfolio of investment grade debt securities issued or guaranteed by the
governments of the United States, Canada and Mexico.

INVESTS PRIMARILY IN . . . A non-diversified portfolio of government securities
denominated in the U.S. Dollar, the Canadian Dollar and the Mexican Peso. The
Fund expects to maintain at least 25% of its assets in securities denominated
in the U.S. Dollar. In addition, the Fund may invest up to 25% of its total
assets in debt securities issued by governmental entities in Argentina.

GLOBAL DOLLAR GOVERNMENT FUND
SEEKS . . . Primarily a high level of current income and, secondarily, capital
appreciation.

INVESTS PRIMARILY IN . . . A non-diversified portfolio of sovereign debt
obligations and in U.S. and non-U.S. corporate fixed-income securities.
Substantially all of the Fund's assets are invested in lower-rated securities.

GLOBAL STRATEGIC INCOME TRUST
SEEKS . . . Primarily a high level of current income and secondarily capital
appreciation.

INVESTS PRIMARILY IN . . . A non-diversified portfolio of fixed-income
securities of U.S. and non-U.S. issuers.

CORPORATE BOND FUNDS

CORPORATE BOND PORTFOLIO
SEEKS . . . Primarily to maximize income over the long term; secondarily, the
Fund will attempt to increase its capital through appreciation of its
investments.

INVESTS PRIMARILY IN . . . A diversified portfolio of U.S. Dollar-denominated
corporate bonds issued by domestic and foreign issuers that give promise of
relatively attractive yields.

HIGH YIELD FUND
SEEKS . . . A high total return by maximizing current income and, to the extent
consistent with that objective, capital appreciation.

INVESTS PRIMARILY IN . . . A diversified mix of high yield, below investment
grade fixed-income securities involving greater volatility of price and risk of
principal and income than higher quality fixed-income securities.

A WORD ABOUT RISK . . .
The prices of the shares of the Alliance Bond Funds will fluctuate daily as the
prices of the individual bonds in which they invest 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. Some of the Funds invest 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. Investment in the Global
Bond Funds, the Multi-Market Funds and any other Fund that may invest a
significant amount of its assets in non-U.S. securities involves risks not
associated with Funds that invest primarily in securities of U.S. issuers.
While the Funds invest principally in fixed-income securities, in order to
achieve their investment objectives, the Funds 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 Funds-Additional
Investment Practices" and "-Risk Considerations."

GETTING STARTED . . .
Shares of the Funds are available through your financial representative and
most banks, insurance companies and brokerage firms nationwide. Shares of each
Fund (except WORLD INCOME) can be purchased for a minimum initial investment of
$250, and subsequent investments can be made for as little as $50. For detailed
information about purchasing and selling shares, see "Purchase and Sale of
Shares." In addition, the Funds offer several time and money saving services to
investors. Be sure to ask your financial representative about:

AUTOMATIC REINVESTMENT
AUTOMATIC INVESTMENT PROGRAM
RETIREMENT PLANS
SHAREHOLDER COMMUNICATIONS
DIVIDEND DIRECTION PLANS
AUTO EXCHANGE
SYSTEMATIC WITHDRAWALS
CHECK-WRITING
A CHOICE OF PURCHASE PLANS
TELEPHONE TRANSACTIONS
24 HOUR INFORMATION

ALLIANCE
INVESTING WITHOUT THE MYSTERY.SM

(r)/SM These are registered marks used under licenses from the owner, Alliance
Capital Management L.P.

EXPENSE INFORMATION
_______________________________________________________________________________

SHAREHOLDER TRANSACTION EXPENSES are one of several factors to consider when
you invest in a Fund. The following tables summarize your maximum transaction
costs from investing in a Fund, other than WORLD INCOME, and annual operating
expenses for each class of shares of each Fund. WORLD INCOME, which has only
one class of shares, has no sales charge on purchases or reinvested dividends,
no deferred sales charge, and no redemption fee or exchange fee. For each Fund,
the "Examples" below show the cumulative expenses attributable to a
hypothetical $1,000 investment, assuming a 5% annual return, in each class for
the periods specified.

<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES(B) CLASS B SHARES(D) CLASS C SHARES
-------------- ----------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Maximum sales charge imposed on purchases
(as a percentage of offering price) 4.25%(a) None None None

Sales charge imposed on dividend reinvestments None None None None
Deferred sales charge (as a percentage of
original purchase price or redemption
proceeds, whichever is lower) None 3.0% during 4.0% during 1.0% during
the first year, the first year, the first year,
decreasing 1.0% decreasing 1.0% 0% thereafter
annually to 0% annually to 0%
after the third after the fourth
year (c) year (e)

Exchange fee None None None None
</TABLE>

(A) REDUCED FOR LARGER PURCHASES. PURCHASES OF $1,000,000 OR MORE ARE NOT
SUBJECT TO AN INITIAL SALES CHARGE BUT MAY BE SUBJECT TO A 1% DEFERRED SALES
CHARGE ON REDEMPTIONS WITHIN ONE YEAR OF PURCHASE. SEE "PURCHASE AND SALE OF
SHARES-HOW TO BUY SHARES" -PAGE 41.

(B) FOR ALL FUNDS EXCEPT GLOBAL STRATEGIC INCOME AND HIGH YIELD.

(C) CLASS B SHARES OF EACH FUND, OTHER THAN GLOBAL STRATEGIC INCOME AND HIGH
YIELD, AUTOMATICALLY CONVERT TO CLASS A SHARES AFTER SIX YEARS. SEE "PURCHASE
AND SALE OF SHARES-HOW TO BUY SHARES" -PAGE 41.

(D) FOR GLOBAL STRATEGIC INCOME AND HIGH YIELD ONLY.

(E) SHARES OF GLOBAL STRATEGIC INCOME AND HIGH YIELD AUTOMATICALLY CONVERT TO
CLASS A SHARES AFTER EIGHT YEARS. SEE "PURCHASE AND SALE OF SHARES-HOW TO BUY
SHARES"-PAGE 41.

<TABLE>
<CAPTION>
ANNUAL OPERATING EXPENSES EXAMPLES
- ---------------------------------------------------------------- -----------------------------------------------------------------
SHORT-TERM U.S. GOVERNMENT CLASS A CLASS B CLASS C CLASS A CLASS B+ CLASS B++ CLASS C+ CLASS C++
- ------------------------------------- ------- ------- ------- ------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees(b)(after waiver) None None None After 1 year $ 56 $ 51 $ 21 $ 31 $ 21
12b-1 fees .30% 1.00% 1.00% After 3 years $ 85 $ 76 $ 66 $ 66 $ 66
Other expenses After 5 years $116 $113 $113 $113 $113
Interest expense .01% .01% .01% After 10 years $204 $210 $210 $244 $244
Other operating expenses (a)(b)
(after reimbursement) 1.10% 1.10% 1.10%
Total other expenses 1.11% 1.11% 1.10%
Total fund operating expenses(b)(j)
(after waiver/reimbursement) 1.41% 2.11% 2.11%

U.S. GOVERNMENT CLASS A CLASS B CLASS C CLASS A CLASS B+ CLASS B++ CLASS C+ CLASS C++
- ------------------------------------- ------- ------- ------- ------- -------- --------- -------- ---------
Management fees .53% .53% .53% After 1 year $ 52 $ 48 $ 18 $ 27 $ 17
12b-1 fees .30% 1.00% 1.00% After 3 years $ 74 $ 64 $ 54 $ 54 $ 54
Other expenses(a) .19% .20% .19% After 5 years $ 96 $ 94 $ 94 $ 93 $ 93
Total fund operating expenses 1.02% 1.73% 1.72% After 10 years $162 $168 $168 $203 $203

LIMITED MATURITY GOVERNMENT CLASS A CLASS B CLASS C CLASS A CLASS B+ CLASS B++ CLASS C+ CLASS C++
- ------------------------------------- ------- ------- ------- ------- -------- --------- -------- ---------
Management fees .65% .65% .65% After 1 year $ 64 $ 60 $ 30 $ 40 $ 30
12b-1 fees .30% 1.00% 1.00% After 3 years $109 $101 $ 91 $ 90 $ 90
Other expenses After 5 years $156 $155 $155 $154 $154
Interest expense .64% .64% .63% After 10 years $287 $294 $294 $324 $324
Other operating expenses(a) .63% .65% .64%
Total other expenses 1.27% 1.29% 1.27%
Total fund operating expenses(h) 2.22% 2.94% 2.92%
</TABLE>

PLEASE REFER TO THE FOOTNOTES ON PAGE 6.

<TABLE>
<CAPTION>
ANNUAL OPERATING EXPENSES EXAMPLES
- ---------------------------------------------------------------- -----------------------------------------------------------------
MORTGAGE SECURITIES INCOME CLASS A CLASS B CLASS C CLASS A CLASS B+ CLASS B++ CLASS C+ CLASS C++
- ------------------------------------- ------- ------- ------- ------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees .50% .50% .50% After 1 year $ 59 $ 54 $ 24 $ 34 $ 24
12b-1 fees .30% 1.00% 1.00% After 3 years $ 93 $ 84 $ 74 $ 74 $ 74
Other expenses After 5 years $130 $127 $127 $127 $127
Interest expense .65% .63% .65% After 10 years $233 $238 $238 $272 $272
Other operating expenses(a) .23% .24% .23%
Total other expenses .88% .87% .88%
Total fund operating expenses(g) 1.68% 2.37% 2.38%

WORLD INCOME
Management fees(c)(after waiver) .49% After 1 year $ 21
12b-1 fees(c)(after waiver) .68% After 3 years $ 66
Other expenses(a) .93% After 5 years $113
Total fund operating After 10 years $243
expenses(c)(after waiver) 2.10%

SHORT-TERM MULTI-MARKET CLASS A CLASS B CLASS C CLASS A CLASS B+ CLASS B++ CLASS C+ CLASS C++
- ------------------------------------- ------- ------- ------- ------- -------- --------- -------- ---------
Management fees .55% .55% .55% After 1 year $ 55 $ 50 $ 20 $ 30 $ 20
12b-1 fees .30% 1.00% 1.00% After 3 years $ 82 $ 73 $ 63 $ 62 $ 62
Other expenses(a) .44% .45% .43% After 5 years $110 $108 $108 $107 $107
Total fund operating expenses 1.29% 2.00% 1.98% After 10 years $192 $198 $198 $231 $231

MULTI-MARKET STRATEGY CLASS A CLASS B CLASS C CLASS A CLASS B+ CLASS B++ CLASS C+ CLASS C++
- ------------------------------------- ------- ------- ------- ------- -------- --------- -------- ---------
Management fees .60% .60% .60% After 1 year $ 58 $ 54 $ 24 $ 34 $ 24
12b-1 fees .30% 1.00% 1.00% After 3 years $ 92 $ 83 $ 73 $ 73 $ 73
Other expenses After 5 years $128 $126 $126 $125 $125
Interest expense .04% .04% .04% After 10 years $229 $235 $235 $268 $268
Other operating expenses(a) .70% .71% .70%
Total other expenses .74% .75% .74%
Total fund operating expenses(d) 1.64% 2.35% 2.34%

NORTH AMERICAN GOVERNMENT INCOME CLASS A CLASS B CLASS C CLASS A CLASS B+ CLASS B++ CLASS C+ CLASS C++
- ------------------------------------- ------- ------- ------- ------- -------- --------- -------- ---------
Management fees(e) .74% .74% .74% After 1 year $ 65 $ 61 $ 31 $ 41 $ 31
12b-1 fees .30% 1.00% 1.00% After 3 years $112 $104 $ 94 $ 94 $ 94
Other expenses After 5 years $162 $160 $160 $160 $160
Interest expense .93% .93% .92% After 10 years $299 $305 $305 $336 $336
Other operating expenses(a) .37% .38% .38%
Total other expenses 1.30% 1.31% 1.30%
Total fund operating expenses(f) 2.34% 3.05% 3.04%

GLOBAL DOLLAR GOVERNMENT CLASS A CLASS B CLASS C CLASS A CLASS B+ CLASS B++ CLASS C+ CLASS C++
- ------------------------------------- ------- ------- ------- ------- -------- --------- -------- ---------
Management fees .75% .75% .75% After 1 year $ 58 $ 53 $ 23 $ 33 $ 23
12b-1 fees .30% 1.00% 1.00% After 3 years $ 89 $ 81 $ 71 $ 70 $ 70
Other expenses(a) .50% .51% .50% After 5 years $123 $121 $121 $120 $120
Total fund operating expenses 1.55% 2.26% 2.25% After 10 years $219 $225 $225 $258 $258

GLOBAL STRATEGIC INCOME CLASS A CLASS B CLASS C CLASS A CLASS B+ CLASS B++ CLASS C+ CLASS C++
- ------------------------------------- ------- ------- ------- ------- -------- --------- -------- ---------
Management fees(i)(after waiver) None None None After 1 year $ 61 $ 56 $ 26 $ 36 $ 26
12b-1 fees .30% 1.00% 1.00% After 3 years $100 $ 91 $ 81 $ 81 $ 81
Other expenses(a)(i) After 5 years $141 $138 $138 $138 $138
(after reimbursement) 1.60% 1.60% 1.60% After 10 years $255 $261 $261 $293 $293
Total fund operating
expenses(i)(after waiver/
reimbursement) 1.90% 2.60% 2.60%
</TABLE>

PLEASE REFER TO THE FOOTNOTES ON PAGE 6.

<TABLE>
<CAPTION>
ANNUAL OPERATING EXPENSES EXAMPLES
- ---------------------------------------------------------------- -----------------------------------------------------------------
CORPORATE BOND CLASS A CLASS B CLASS C CLASS A CLASS B+ CLASS B++ CLASS C+ CLASS C++
- ------------------------------------- ------- ------- ------- ------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees .57% .57% .57% After 1 year $ 53 $ 48 $ 18 $ 29 $ 18
12b-1 fees .30% 1.00% 1.00% After 3 years $ 77 $ 67 $ 57 $ 57 $ 57
Other expenses(a) .25% .25% .25% After 5 years $102 $ 99 $ 99 $ 99 $ 99
Total fund operating expenses 1.12% 1.82% 1.82% After 10 years $173 $179 $179 $214 $214

HIGH YIELD CLASS A CLASS B CLASS C CLASS A CLASS B+ CLASS B++ CLASS C+ CLASS C++
- ------------------------------------- ------- ------- ------- ------- -------- --------- -------- ---------
Management fees (k) (after waiver) None None None After 1 year $[ ] $[ ] $[ ] $[ ] $[ ]
12b-1 fees .30% 1.00% 1.00% After 3 years $[ ] $[ ] $[ ] $[ ] $[ ]
Other expenses(a) 1.40% 1.40% 1.40% After 5 years $[ ] $[ ] $[ ] $[ ] $[ ]
Total fund operating expenses 1.70% [ ]% [ ]% After 10 years $[ ] $[ ] $[ ] $[ ] $[ ]
</TABLE>

+ ASSUMES REDEMPTION AT END OF PERIOD AND, WITH RESPECT TO SHARES HELD TEN
YEARS, CONVERSION OF CLASS B SHARES TO CLASS A SHARES AFTER SIX YEARS (EIGHT
YEARS IN THE CASE OF GLOBAL STRATEGIC INCOME AND HIGH YIELD).

++ ASSUMES NO REDEMPTION AT END OF PERIOD AND, WITH RESPECT TO SHARES HELD TEN
YEARS, CONVERSION OF CLASS B SHARES TO CLASS A SHARES AFTER SIX YEARS. (EIGHT
YEARS IN THE CASE OF GLOBAL STRATEGIC INCOME AND HIGH YIELD)

(A) THESE EXPENSES INCLUDE A TRANSFER AGENCY FEE PAYABLE TO ALLIANCE FUND
SERVICES, INC., AN AFFILIATE OF ALLIANCE.

(B) NET OF VOLUNTARY FEE WAIVERS AND EXPENSE REIMBURSEMENTS. ABSENT SUCH
WAIVERS AND REIMBURSEMENTS, MANAGEMENT FEES WOULD HAVE BEEN .55%, OTHER
EXPENSES WOULD HAVE BEEN 1.57% FOR CLASS A, 1.55% FOR CLASS B AND 1.54% FOR
CLASS C AND TOTAL FUND OPERATING EXPENSES WOULD HAVE BEEN 2.42% FOR CLASS A,
3.10% FOR CLASS B AND 3.09% FOR CLASS C.

(C) NET OF VOLUNTARY FEE WAIVERS. ABSENT SUCH WAIVERS, ANNUALIZED MANAGEMENT
FEES WOULD HAVE BEEN .65%, ANNUALIZED RULE 12B-1 FEES WOULD HAVE BEEN .90% AND
ANNUALIZED TOTAL FUND OPERATING EXPENSES WOULD HAVE BEEN 2.48%.

(D) EXCLUDING INTEREST EXPENSE, TOTAL FUND OPERATING EXPENSES WOULD HAVE BEEN
FOR CLASS A, 1.60%, FOR CLASS B, 2.31% AND FOR CLASS C, 2.30%.

(E) REPRESENTS .65 OF 1% OF THE FUND'S AVERAGE DAILY ADJUSTED TOTAL NET ASSETS.

(F) EXCLUDING INTEREST EXPENSE, TOTAL FUND OPERATING EXPENSES WOULD HAVE BEEN
FOR CLASS A, 1.41%, FOR CLASS B, 2.12%, AND FOR CLASS C, 2.12%.

(G) EXCLUDING INTEREST EXPENSE, TOTAL FUND OPERATING EXPENSES WOULD HAVE BEEN
FOR CLASS A, 1.03%, FOR CLASS B, 1.74%, AND FOR CLASS C, 1.73%.

(H) EXCLUDING INTEREST EXPENSE, TOTAL FUND OPERATING EXPENSES WOULD HAVE BEEN
FOR CLASS A, 1.58%, FOR CLASS B, 2.30%, AND FOR CLASS C, 2.29%.

(I) NET OF VOLUNTARY FEE WAIVERS AND EXPENSE REIMBURSEMENT. ABSENT SUCH WAIVERS
AND REIMBURSEMENTS, MANAGEMENT FEES WOULD HAVE BEEN .75%, OTHER EXPENSES WOULD
HAVE BEEN 18.15% FOR CLASS A, 17.82% FOR CLASS B, AND 17.74% FOR CLASS C AND
TOTAL OPERATING EXPENSES WOULD HAVE BEEN 19.20% FOR CLASS A, 19.57% FOR
CLASS B, AND 19.49% FOR CLASS C.

(J) EXCLUDING INTEREST EXPENSE, TOTAL FUND OPERATING EXPENSES WOULD HAVE BEEN
FOR CLASS A, 1.40% FOR CLASS B, 2.10% AND FOR CLASS C, 2.10%.

(K) NET OF VOLUNTARY FEE WAIVERS AND EXPENSE REIMBURSEMENTS. ABSENT SUCH
WAIVERS AND REIMBURSEMENTS, MANAGEMENT FEES WOULD HAVE BEEN .75, OTHER
EXPENSES WOULD HAVE BEEN 3.11% (ANNUALIZED) FOR CLASS A, 3.85% (ANNUALIZED)
FOR CLASS B, AND 3.84% (ANNUALIZED) FOR CLASS C; AND TOTAL OPERATING EXPENSES
WOULD HAVE BEEN 3.86% (ANNUALIZED) FOR CLASS A, 4.60% (ANNUALIZED) FOR
CLASS B, AND 4.59% (ANNUALIZED) FOR CLASS C.

The purpose of the tables on pages 4 and 5 is to assist the investor in
understanding the various costs and expenses that shareholders of a Fund will
bear directly or indirectly. Long-term shareholders of a Fund may pay aggregate
sales charges totaling more than the economic equivalent of the maximum initial
sales charges permitted by the Conduct Rules of the National Association of
Securities Dealers, Inc. See "Management of the Funds-Distribution Services
Agreements." The Rule 12b-1 fee for each class comprises a service fee not
exceeding .25% of the aggregate average daily net assets of the Fund
attributable to the class and an asset-based sales charge equal to the
remaining portion of the Rule 12b-1 fee. With respect to each of SHORT-TERM
U.S. GOVERNMENT, MULTI-MARKET STRATEGY, NORTH AMERICAN GOVERNMENT INCOME,
MORTGAGE SECURITIES INCOME and LIMITED MATURITY GOVERNMENT, "interest expense"
represents interest paid by the Fund on borrowings for the purpose of making
additional portfolio investments. Such borrowings are intended to enable each
of those Funds to produce higher net yields to shareholders than the Funds
could pay without such borrowings. See "Description of Funds-Risk
Considerations-Effects of Borrowing." Excluding interest expense, total fund
operating expenses of each of SHORT-TERM U.S. GOVERNMENT, MULTI-MARKET
STRATEGY, NORTH AMERICAN GOVERNMENT INCOME, MORTGAGE SECURITIES INCOME and
LIMITED MATURITY GOVERNMENT would be lower (see notes (b), (d), (f), (g),
(h) and (j) above) and the cumulative expenses shown in the Examples above
with respect to those Funds would be lower. The Examples set forth above
assume reinvestment of all dividends and distributions and utilize a 5%
annual rate of return as mandated by Commission regulations. "Other Expenses"
are based on estimated amounts for High Yield's current fiscal year. THE
EXAMPLES SHOULD NOT BE CONSIDERED REPRESENTATIVE OF PAST OR FUTURE EXPENSES;
ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. ACTUAL RETURNS WILL
VARY.

FINANCIAL HIGHLIGHTS
_______________________________________________________________________________

The tables on the following pages present, for each Fund, per share income and
capital changes for a share outstanding throughout each period indicated. The
information in the tables relating to SHORT-TERM U.S. GOVERNMENT has been
audited by Price Waterhouse LLP, the independent accountants for the Fund, and
the information in the tables relating to U.S. GOVERNMENT, LIMITED MATURITY
GOVERNMENT, MORTGAGE SECURITIES INCOME, WORLD INCOME, SHORT-TERM MULTI-MARKET,
MULTI-MARKET STRATEGY, NORTH AMERICAN GOVERNMENT INCOME, GLOBAL DOLLAR
GOVERNMENT, GLOBAL STRATEGIC INCOME, CORPORATE BOND and HIGH YIELD has been
audited by Ernst & Young LLP, the independent auditors for these Funds. A
report of Price Waterhouse LLP or Ernst & Young LLP, as the case may be, on the
information with respect to each Fund appears in the Fund's Statement of
Additional Information. The following information for each Fund 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 a 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.

CLASS B
Year Ended 8/31/97 $ 9.77 $.41(h) $.02 $.43 $(.39) $0.00
Year Ended 8/31/96 9.81 .41 (.03) .38 (.42) 0.00
Year Ended 8/31/95 9.78 .36 .04 .40 (.34) 0.00
Period Ended 8/31/94** 9.88 .10 (.07) .03 (.11) 0.00
Year Ended 4/30/94 10.31 .40 (.39) .01 (.35) 0.00
5/4/92+ to 4/30/93 10.00 .38 .33 .71 (.38) (.02)

CLASS C
Year Ended 8/31/97 $ 9.76 $.41(h) $.02 $.43 $(.39) $0.00
Year Ended 8/31/96 9.80 .40 (.02) .38 (.42) 0.00
Year Ended 8/31/95 9.77 .34 .06 .40 (.34) 0.00
Period Ended 8/31/94** 9.87 .10 (.07) .03 (.11) 0.00
8/2/93++ to 4/30/94 10.34 .26 (.42) (.16) (.25) 0.00

U.S. GOVERNMENT
CLASS A
Year Ended 6/30/97 $ 7.52 $.57(h) $(.10) $.47 $(.57) $0.00
Year Ended 6/30/96 7.96 .58 (.44) .14 (.58) 0.00
Year Ended 6/30/95 7.84 .64 .13 .77 (.65) 0.00
Year Ended 6/30/94 8.64 .65 (.80) (.15) (.65) 0.00
Year Ended 6/30/93 8.34 .69 .29 .98 (.68) 0.00
Year Ended 6/30/92 8.01 .70 .35 1.05 (.72) 0.00
Year Ended 6/30/91 8.14 .81 (.11) .70 (.83) 0.00
Year Ended 6/30/90 8.49 .86 (.38) .48 (.83) 0.00
Year Ended 6/30/89 8.51 .89 (.03) .86 (.88) 0.00
Year Ended 6/30/88 8.90 .93 (.39) .54 (.93) 0.00

CLASS B
Year Ended 6/30/97 $ 7.52 $.52(h) $(.10) $.42 $(.52) $0.00
Year Ended 6/30/96 7.96 .52 (.44) .08 (.52) 0.00
Year Ended 6/30/95 7.84 .58 .13 .71 (.59) 0.00
Year Ended 6/30/94 8.64 .59 (.80) (.21) (.59) 0.00
Year Ended 6/30/93 8.34 .62 .30 .92 (.62) 0.00
9/30/91++ to 6/30/92 8.25 .49 .09 .58 (.49) 0.00

CLASS C
Year Ended 6/30/97 $ 7.52 $.52(h) $(.10) $.42 $(.52) $0.00
Year Ended 6/30/96 7.96 .52 (.44) .08 (.52) 0.00
Year Ended 6/30/95 7.83 .58 .14 .72 (.59) 0.00
Year Ended 6/30/94 8.64 .59 (.81) (.22) (.59) 0.00
5/3/93++ to 6/30/93 8.56 .10 .08 .18 (.10) 0.00

LIMITED MATURITY GOVERNMENT
CLASS A
Six Months Ended 5/31/97
unaudited $ 9.45 $.26(h) $(.14) $.12 $(.27) $0.00
Year Ended 11/30/96 9.52 .51(h) (.04) .47 (.51) 0.00
Year Ended 11/30/95 9.51 .52(h) .02 .54 (.50) 0.00
Year Ended 11/30/94 9.94 .42 (.32) .10 (.48) (.01)
Year Ended 11/30/93 9.84 .57 .11 .68 (.58) 0.00
6/1/92+ to 11/30/92 10.00 .35 (.17) .18 (.34) 0.00

CLASS B
Six Months Ended 5/31/97
unaudited $ 9.45 $.24(h) $(.15) $.09 $(.24) $0.00
Year Ended 11/30/96 9.52 .44(h) (.04) .40 (.44) 0.00
Year Ended 11/30/95 9.52 .46(h) .01 .47 (.44) 0.00
Year Ended 11/30/94 9.94 .39 (.35) .04 (.42) (.01)
Year Ended 11/30/93 9.84 .49 .12 .61 (.51) 0.00
6/1/92+ to 11/30/92 10.00 .31 (.17) .14 (.30) 0.00

CLASS C
Six Months Ended 5/31/97
unaudited) $ 9.45 $.24(h) $(.15) $.09 $(.24) $0.00
Year Ended 11/30/96 9.52 .45(h) (.05) .40 (.45) 0.00
Year Ended 11/30/95 9.52 .46(h) .01 .47 (.44) 0.00
Year Ended 11/30/94 9.94 .37 (.33) .04 (.42) (.01)
5/3/93++ to 11/30/93 9.98 .27 (.03) .24 (.28) 0.00
</TABLE>

PLEASE REFER TO THE FOOTNOTES ON PAGE 14.

<TABLE>
<CAPTION>
DISTRIBUTIONS TOTAL NET ASSETS RATIO OF NET
IN EXCESS TOTAL INVESTMENT AT END OF RATIO INVESTMENT
OF NET RETURN DIVIDENDS NET ASSET RETURN PERIOD OF EXPENSES INCOME (LOSS) PORTFOLIO
INVESTMENT OF AND VALUE END BASED ON NET (000'S TO AVERAGE TO AVERAGE TURNOVER
INCOME CAPITAL DISTRIBUTIONS OF PERIOD ASSET VALUE(B) OMITTED) NET ASSETS NET ASSETS RATE
------------ -------- ------------- ---------- -------------- ---------- ------------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>

$0.00 $(0.07) $(.53) $9.63 5.29% $3,901 1.41%(d)(e) 4.90% 65%
0.00 0.00 (.49) 9.66 4.71 3,455 1.53(d)(e) 4.85 110
(.03) 0.00 (.44) 9.70 5.14 2,997 1.40(d) 4.56 15
(.03)(a) 0.00 (.15)(c) 9.67 .53 2,272 1.40(d) 3.98 144
(.09)(a) 0.00 (.51)(c) 9.77 .52 2,003 1.27(d) 4.41 55
0.00 0.00 (.58)(c) 10.22 8.20 6,081 1.00*(d) 4.38* 294

$0.00 $(0.07) $(.46) $9.74 4.45% $6,458 2.11%(d)(e) 4.13% 65%
0.00 0.00 (.42) 9.77 3.89 6,781 2.23(d)(e) 4.11 110
(.03) 0.00 (.37) 9.81 4.32 6,380 2.10(d) 3.82 15
(.02)(a) 0.00 (.13)(c) 9.78 .28 6,281 2.10(d) 3.22 144
(.09)(a) 0.00 (.44)(c) 9.88 .03 7,184 2.05(d) 3.12 55
0.00 0.00 (.40)(c) 10.31 7.22 1,292 1.75*(d) 3.36* 294

$0.00 $(0.07) $(.46) $9.73 4.45% $5,012 2.11%(d)(e) 4.15% 65%
0.00 0.00 (.42) 9.76 3.90 4,850 2.22(d)(e) 4.11 110
(.03) 0.00 (.37) 9.80 4.33 5,180 2.10(d) 3.80 15
(.02)(a) 0.00 (.13)(c) 9.77 .28 7,128 2.10(d) 3.26 144
(.06)(a) 0.00 (.31)(c) 9.87 (1.56) 8,763 2.10*(d) 2.60* 55

$0.00 $(0.01) $(.58) $7.41 6.49% $354,782 1.02% 7.66% 330%
0.00 0.00 (.58) 7.52 1.74 397,894 1.01 7.38 334
0.00 0.00 (.65) 7.96 10.37 463,660 1.01 8.27 190
0.00 0.00 (.65) 7.84 (1.93) 482,595 1.02 7.76 188
0.00 0.00 (.68) 8.64 12.23 527,968 1.10 8.04 386
0.00 0.00 (.72) 8.34 13.52 492,448 1.12 8.43 418
0.00 0.00 (.83) 8.01 8.97 491,910 1.07 10.02 402
0.00 0.00 (.83) 8.14 5.99 510,675 1.09 10.35 455
0.00 0.00 (.88) 8.49 10.87 532,525 1.11 10.70 148
0.00 0.00 (.93) 8.51 6.41 529,909 1.14 10.70 149

$0.00 $(0.01) $(.53) $7.41 5.69% $471,889 1.73% 6.95% 330%
0.00 0.00 (.52) 7.52 1.01 628,628 1.72 6.67 334
0.00 0.00 (.59) 7.96 9.52 774,097 1.72 7.57 190
0.00 0.00 (.59) 7.84 (2.63) 756,282 1.72 7.04 188
0.00 0.00 (.62) 8.64 11.45 552,471 1.81 7.25 386
0.00 0.00 (.49) 8.34 6.95 32,227 1.80* 7.40* 418

$0.00 $(0.01) $(.53) $7.41 5.69% $115,607 1.72% 6.96% 330%
0.00 0.00 (.52) 7.52 1.01 166,075 1.71 6.68 334
0.00 0.00 (.59) 7.96 9.67 181,948 1.71 7.59 190
0.00 0.00 (.59) 7.83 (2.75) 231,859 1.70 6.97 188
0.00 0.00 (.10) 8.64 2.12 67,757 1.80* 6.00* 386

$0.00 $0.00 $(.27) $9.30 1.30% $18,100 2.38%*(e) 5.38%* 67%
0.00 (.03) (.54) 9.45 5.11 16,248 2.22(e) 5.44 159
0.00 (.03) (.53) 9.52 5.91 27,887 2.14(e) 5.53 293
0.00 (.04) (.53) 9.51 1.03 43,173 1.34(e) 4.78 375
0.00 0.00 (.58) 9.94 7.02 59,215 1.54(e) 5.66 499
0.00 0.00 (.34) 9.84 1.84 24,186 1.44*(d)(e) 6.58*(d) 101

$0.00 $0.00 $(.24) $9.30 .94% $40,862 3.12%*(e) 4.64%* 67%
0.00 (.03) (.47) 9.45 4.36 50,386 2.94(e) 4.73 159
0.00 (.03) (.47) 9.52 5.05 84,362 2.85(e) 4.83 293
0.00 (.03) (.46) 9.52 .42 136,458 2.08(e) 4.12 375
0.00 0.00 (.51) 9.94 6.27 168,157 2.26(e) 4.98 499
0.00 0.00 (.30) 9.84 1.50 149,188 2.13*(d)(e) 6.01*(d) 101

$0.00 $0.00 $(.24) $9.30 .94% $35,558 3.10%*(e) 4.66%* 67%
0.00 (.02) (.47) 9.45 4.38 43,457 2.92(e) 4.75 159
0.00 (.03) (.47) 9.52 5.06 68,459 2.85(e) 4.84 293
0.00 (.03) (.46) 9.52 .42 141,838 2.04(e) 4.10 375
0.00 0.00 (.28) 9.94 2.40 228,703 1.74*(e) 3.70* 499
</TABLE>

PLEASE REFER TO THE FOOTNOTES ON PAGE 14.

<TABLE>
<CAPTION>
NET NET NET
ASSET REALIZED AND INCREASE
VALUE UNREALIZED (DECREASE) IN DIVIDENDS FROM DISTRIBUTIONS
BEGINNING OF NET INVESTMENT GAIN (LOSS) ON NET ASSET VALUE NET INVESTMENT FROM NET
FISCAL YEAR OR PERIOD PERIOD INCOME (LOSS) INVESTMENTS FROM OPERATIONS INCOME REALIZED GAINS
--------------------- ------------ -------------- -------------- --------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
MORTGAGE SECURITIES INCOME
CLASS A
Six Months Ended 6/30/97
unaudited $8.51 $ .28(h) $ .02 $ .30 $ (.29) $0.00
Year Ended 12/31/96 8.75 .54(h) (.19) .35 (.51) 0.00
Year Ended 12/31/95 8.13 .57(h) .64 1.21 (.57) 0.00
Year Ended 12/31/94 9.29 .57 (1.13) (.56) (.58) 0.00
Year Ended 12/31/93 9.08 .67 .23 .90 (.67) 0.00
Year Ended 12/31/92 9.21 .77 (.09) .68 (.81) 0.00
Year Ended 12/31/91 8.79 .88 .41 1.29 (.87) 0.00
Year Ended 12/31/90 8.76 .87 .03 .90 (.87) 0.00
Year Ended 12/31/89 8.81 .97 (.05) .92 (.97) 0.00
Year Ended 12/31/88 9.03 .99 (.23) .76 (.98) 0.00
Year Ended 12/31/87 9.74 1.00 (.68) .32 (1.00) (.03)
CLASS B
Six Months Ended 6/30/97
unaudited $8.51 $ .24(h) $ .02 $ .26 $ (.25) $0.00
Year Ended 12/31/96 8.75 .48(h) (.19) .29 (.46) 0.00
Year Ended 12/31/95 8.13 .51(h) .64 1.15 (.51) 0.00
Year Ended 12/31/94 9.29 .51 (1.14) (.63) (.51) 0.00
Year Ended 12/31/93 9.08 .61 .22 .83 (.60) 0.00
1/30/92++ to 12/31/92 9.16 .68 (.08) .60 (.68) 0.00
CLASS C
Six Months Ended 6/30/97
unaudited $8.51 $ .25(h) $ .01 $ .26 $ (.25) $0.00
Year Ended 12/31/96 8.75 .48(h) (.19) .29 (.46) 0.00
Year Ended 12/31/95 8.13 .51(h) .64 1.15 (.51) 0.00
Year Ended 12/31/94 9.29 .51 (1.14) (.63) (.51) 0.00
5/3/93++ to 12/31/93 9.30 .40 0.00 .40 (.40) 0.00
WORLD INCOME
Six Months Ended 4/30/97
unaudited $1.67 $ .04(h) $ (.02) $ .02 $ (.05) $0.00
Year Ended 10/31/96 1.66 .09(h) .02 .11 (.10) 0.00
Year Ended 10/31/95 1.88 .11(h) (.23) (.12) 0.00 0.00
Year Ended 10/31/94 1.90 .18 (.12) .06 (.05) 0.00
Year Ended 10/31/93 1.91 .22 (.16) .06 (.07) 0.00
Year Ended 10/31/92 1.98 .19 (.17) .02 (.09) 0.00
12/3/90+ to 10/31/91 2.00 .14 (.03) .11 (.13) 0.00
SHORT-TERM MULTI-MARKET
CLASS A
Six Months Ended 4/30/97
unaudited $7.73 $ .26(h) $ .01 $ .27 $ (.31) $0.00
Year Ended 10/31/96 7.47 .60(h) .35 .95 (.69) 0.00
Year Ended 10/31/95 8.71 .46(h) (.98) (.52) 0.00 0.00
Year Ended 10/31/94 9.25 .93 (.86) .07 0.00 0.00
Year Ended 10/31/93 9.25 .92 (.32) .60 (.60) 0.00
Year Ended 10/31/92 9.94 .91 (.86) .05 (.72) (.02)
Year Ended 10/31/91 9.89 .97 .06 1.03 (.97) (.01)
Year Ended 10/31/90 9.69 1.09 .19 1.28 (1.08) 0.00
5/5/89+ to 10/31/89 9.70 .53 (.01) .52 (.53) 0.00
CLASS B
Six Months Ended 4/30/97
unaudited $7.73 $ .23(h) $ .01 $ .24 $ (.28) $0.00
Year Ended 10/31/96 7.47 .54(h) .35 .89 (.63) 0.00
Year Ended 10/31/95 8.71 .41(h) (.99) (.58) 0.00 0.00
Year Ended 10/31/94 9.25 .94 (.93) .01 0.00 0.00
Year Ended 10/31/93 9.25 .87 (.34) .53 (.53) 0.00
Year Ended 10/31/92 9.94 .84 (.86) (.02) (.65) (.02)
Year Ended 10/31/91 9.89 .89 .07 .96 (.90) (.01)
2/5/90++ to 10/31/90 9.77 .74 .12 .86 (.74) 0.00

CLASS C
Six Months Ended 4/30/97
unaudited $7.73 $ .24(h) $ 0.00 $ .24 $ (.28) $0.00
Year Ended 10/31/96 7.47 .51(h) .38 .89 (.63) 0.00
Year Ended 10/31/95 8.71 .39(h) (.97) (.58) 0.00 0.00
Year Ended 10/31/94 9.25 .58 (.57) .01 0.00 0.00
5/3/93++ to 10/31/93 9.18 .28 .05 .33 (.26) 0.00

MULTI-MARKET STRATEGY
CLASS A
Six Months Ended 4/30/97
unaudited $7.23 $ .24(h) $ .04 $ .28 $ (.33) $0.00
Year Ended 10/31/96 6.83 .59(h) .48 1.07 (.67) 0.00
Year Ended 10/31/95 8.04 .77(h) (1.31) (.54) 0.00 0.00
Year Ended 10/31/94 8.94 .85 (1.08) (.23) (.09) 0.00
Year Ended 10/31/93 8.85 1.02 (.26) .76 (.67) 0.00
Year Ended 10/31/92 9.91 1.00 (1.23) (.23) (.81) (.02)
5/29/91+ to 10/28/91 10.00 .42 (.09) .33 (.42) 0.00

CLASS B
Six Months Ended 4/30/97
unaudited $7.23 $ .22(h) $ .03 $ .25 $ (.30) $0.00
Year Ended 10/31/96 6.83 .53(h) .47 1.00 (.60) 0.00
Year Ended 10/31/95 8.04 .44(h) (1.05) (.61) 0.00 0.00
Year Ended 10/31/94 8.94 .88 (1.18) (.30) (.08) 0.00
Year Ended 10/31/93 8.85 .92 (.22) .70 (.61) 0.00
Year Ended 10/31/92 9.91 1.04 (1.34) (.30) (.74) (.02)
5/29/91+ to 10/28/91 10.00 .39 (.09) .30 (.39) 0.00

CLASS C
Six Months Ended 4/30/97
unaudited $7.23 $ .21(h) $ .04 $ .25 $ (.30) $0.00
Year Ended 10/31/96 6.83 .54(h) .47 1.01 (.61) 0.00
Year Ended 10/31/95 8.04 .44(h) (1.04) (.60) 0.00 0.00
Year Ended 10/31/94 8.94 .46 (.75) (.29) (.09) 0.00
5/3/93++ to 10/31/93 8.76 .32 .16 .48 (.30) 0.00
</TABLE>

PLEASE REFER TO THE FOOTNOTES ON PAGE 14.

<TABLE>
<CAPTION>
DISTRIBUTIONS TOTAL NET ASSETS RATIO OF NET
IN EXCESS TOTAL INVESTMENT AT END OF RATIO INVESTMENT
OF NET RETURN DIVIDENDS NET ASSET RETURN PERIOD OF EXPENSES INCOME (LOSS) PORTFOLIO
INVESTMENT OF AND VALUE END BASED ON NET (000'S TO AVERAGE TO AVERAGE TURNOVER
INCOME CAPITAL DISTRIBUTIONS OF PERIOD ASSET VALUE(B) OMITTED) NET ASSETS NET ASSETS RATE
- ------------ ----------- ------------- ---------- -------------- ---------- ------------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>

$0.00 $0.00 $(.29) $8.52 3.54% $380,439 1.56%*(e) 6.55%* 66%
0.00 (.08) (.59) 8.51 4.23 412,899 1.68(e) 6.38 208
0.00 (.02) (.59) 8.75 15.34 502,390 1.66(e) 6.77 285
0.00 (.02) (.60) 8.13 (6.14) 553,889 1.29(e) 6.77 438
(.02) 0.00 (.69) 9.29 10.14 848,069 1.00 7.20 622
0.00 0.00 (.81) 9.08 7.73 789,898 1.18 8.56 555
0.00 0.00 (.87) 9.21 15.44 544,171 1.16 9.92 439
0.00 0.00 (.87) 8.79 11.01 495,353 1.12 10.09 393
0.00 0.00 (.97) 8.76 10.98 556,077 1.13 11.03 328
0.00 0.00 (.98) 8.81 8.64 619,572 1.11 10.80 239
0.00 0.00 (1.03) 9.03 3.49 682,650 1.15 10.79 211

$0.00 $0.00 $(.25) $8.52 3.16% $383,923 2.28%*(e) 5.83%* 66%
0.00 (.07) (.53) 8.51 3.46 477,196 2.37(e) 5.66 208
0.00 (.02) (.53) 8.75 14.48 737,593 2.37(e) 6.06 285
0.00 (.02) (.53) 8.13 (6.84) 921,418 2.00(e) 6.05 438
(.02) 0.00 (.62) 9.29 9.38 1,454,303 1.70 6.47 622
0.00 0.00 (.68) 9.08 7.81 1,153,957 1.67* 5.92* 555

$0.00 $0.00 $(.25) $8.52 3.16% $31,079 2.26%*(e) 5.84%* 66%
0.00 (.07) (.53) 8.51 3.46 35,355 2.38(e) 5.67 208
0.00 (.02) (.53) 8.75 14.46 45,558 2.35(e) 6.07 285
0.00 (.02) (.53) 8.13 (6.84) 58,338 1.97(e) 6.06 438
(.01) 0.00 (.41) 9.29 4.34 91,724 1.67* 5.92* 622

$0.00 $0.00 $(.05) $1.64 1.73% $41,024 2.29%*(d) 4.43% N/A
0.00 0.00 (.10) 1.67 6.98 44,890 2.10(d) 5.37 N/A
0.00 (.10) (.10) 1.66 (6.35) 55,778 1.97(d) 6.46 N/A
0.00 (.03) (.08) 1.88 3.27 103,310 1.70(d) 3.96 N/A
0.00 0.00 (.07) 1.90 3.51 149,623 1.54 (d) 5.14 N/A
0.00 0.00 (.09) 1.91 1.26 318,716 1.59(d) 7.21 N/A
0.00 0.00 (.13) 1.98 6.08 1,059,222 1.85*(d) 7.29* N/A

$0.00 $0.00 $(.31) $7.69 3.51% $402,165 1.28%* 6.82%* 143%
0.00 0.00 (.69) 7.73 13.23 386,545 1.29 7.85 208
0.00 (.72) (.72) 7.47 (5.74) 320,333 1.23 7.39 230
0.00 (.61) (.61) 8.71 .84 593,677 1.13 7.28 109
0.00 0.00 (.60) 9.25 6.67 953,571 1.16 8.26 182
0.00 0.00 (.74) 9.25 .49 1,596,903 1.10 9.00 133
0.00 0.00 (.98) 9.94 10.91 2,199,393 1.09 9.64 146
0.00 0.00 (1.08) 9.89 13.86 1,346,035 1.18 10.81 152
0.00 0.00 (.53) 9.69 5.57 210,294 1.14* 10.83* 10

$0.00 $0.00 $(.28) $7.69 3.13% $185,161 1.99%* 6.05%* 143%
0.00 0.00 (.63) 7.73 12.34 273,109 2.00 7.14 208
0.00 (.66) (.66) 7.47 (6.50) 523,530 1.95 6.69 230
0.00 (.55) (.55) 8.71 .12 1,003,633 1.85 6.58 109
0.00 0.00 (.53) 9.25 5.91 1,742,703 1.87 7.57 182
0.00 0.00 (.67) 9.25 (.24) 2,966,071 1.81 8.28 133
0.00 0.00 (.91) 9.94 10.11 3,754,003 1.81 8.87 146
0.00 0.00 (.74) 9.89 9.07 1,950,330 1.86* 9.90* 152

$0.00 $0.00 $(.28) $7.69 3.13% $7,002 1.97%* 6.09%* 143%
0.00 0.00 (.63) 7.73 12.35 10,031 1.98 7.15 208
0.00 (.66) (.66) 7.47 (6.49) 3,416 1.92 6.66 230
0.00 (.55) (.55) 8.71 .12 8,136 1.83 6.50 109
0.00 0.00 (.26) 9.25 3.66 5,538 1.82* 7.19* 182

$0.00 $0.00 $(.33) $7.18 3.94% $64,439 1.59%* 6.71%* 200%
0.00 0.00 (.67) 7.23 16.37 68,776 1.64(f) 8.40 215
0.00 (.67) (.67) 6.83 (6.47) 76,837 1.60(f) 8.56 400
0.00 (.58) (.67) 8.04 (2.64) 52,385 1.41(f) 7.17 605
0.00 0.00 (.67) 8.94 9.01 82,977 1.94(f) 9.17(g) 200
0.00 0.00 (.83) 8.85 (2.80) 141,526 2.53(f) 10.58(g) 239
0.00 0.00 (.42) 9.91 3.68 143,594 2.81*(f) 10.17*(g) 121

$0.00 $0.00 $(.30) $7.18 3.50% $77,031 2.30%* 6.00%* 200%
0.00 0.00 (.60) 7.23 15.35 88,427 2.35(f) 7.69 215
0.00 (.60) (.60) 6.83 (7.31) 116,551 2.29(f) 7.53 400
0.00 (.52) (.60) 8.04 (3.35) 233,896 2.11(f) 6.44 605
0.00 0.00 (.61) 8.94 8.25 431,186 2.64(f) 8.46(g) 200
0.00 0.00 (.76) 8.85 (3.51) 701,465 3.24(f) 9.83(g) 239
0.00 0.00 (.39) 9.91 3.36 662,981 3.53*(f) 9.40*(g) 121

$0.00 $0.00 $(.30) $7.18 3.51% $1,292 2.29%* 5.97%* 200%
0.00 0.00 (.61) 7.23 15.36 1,076 2.34(f) 7.62 215
0.00 (.61) (.61) 6.83 (7.29) 786 2.29(f) 7.55 400
0.00 (.52) (.61) 8.04 (3.34) 1,252 2.08(f) 6.10 605
0.00 0.00 (.30) 8.94 5.54 718 2.44*(f) 7.17*(g) 200
</TABLE>

PLEASE REFER TO THE FOOTNOTES ON PAGE 14.

CLASS B
Six Months Ended 5/31/97
unaudited $ 8.01 $ .53(h) $ (.11) $ .42 $ (.45) $ 0.00
Year Ended 11/30/96 6.75 1.04(h) 1.12 2.16 (.69) 0.00
Year Ended 11/30/95 8.13 1.13(h) (1.61) (.48) 0.00 0.00
Year Ended 11/30/94 10.35 .96 (2.13) (1.17) (.84) 0.00
Year Ended 11/30/93 9.70 1.01 .67 1.68 (1.02) (.01)
3/27/92+ to 11/30/92 10.00 .64 (.31) .33 (.63) 0.00

CLASS C
Six Months Ended 5/31/97
unaudited $ 8.01 $ .53(h) $ (.11) $ .42 $ (.45) $ 0.00
Year Ended 11/30/96 6.75 1.05(h) 1.11 2.76 (.69) 0.00
Year Ended 11/30/95 8.13 1.13(h) (1.61) (.48) 0.00 0.00
Year Ended 11/30/94 10.34 .96 (2.12) (1.16) (.84) 0.00
5/3/93++ to 11/30/93 10.04 .58 .30 .88 (.58) 0.00

GLOBAL DOLLAR GOVERNMENT
CLASS A
Year Ended 8/31/97 $10.01 $ .88(h) $ 1.85 $ 2.73 $ (.95) $(1.15)
Year Ended 8/31/96 8.02 .84 2.10 2.94 (.95) 0.00
Year Ended 8/31/95 9.14 .86 (1.10) (.24) (.88) 0.00
2/25/94+ to 8/31/94 10.00 .45 (.86) (.41) (.45) 0.00

CLASS B
Year Ended 8/31/97 $10.01 $ .81(h) $ 1.84 $ 2.65 $ (.87) $(1.15)
Year Ended 8/31/96 8.02 .78 2.08 2.86 (.87) 0.00
Year Ended 8/31/95 9.14 .80 (1.11) (.31) (.81) 0.00
2/25/94+ to 8/31/94 10.00 .42 (.86) (.44) (.42) 0.00

CLASS C
Year Ended 8/31/97 $10.01 $ .82(h) $ 1.84 $ 2.66 $ (.88) $(1.15)
Year Ended 8/31/96 8.02 .77 2.10 2.87 (.88) 0.00
Year Ended 8/31/95 9.14 .79 (1.10) (.31) (.81) 0.00
2/25/94+ to 8/31/94 10.00 .42 (.86) (.44) (.42) 0.00

GLOBAL STRATEGIC INCOME
CLASS A
Six Months Ended 4/30/97
unaudited $10.83 $ .35 $ .50 $ .85 $ (.51) $ (.10)
1/9/96+ to 10/31/96 10.00 .69 .95 1.64 (.81) 0.00

CLASS B
Six Months Ended 4/30/97
unaudited $10.83 $ .30 $ .52 $ .82 $ (.48) $ (.10)
3/25/96++ to 10/31/96 9.97 .41 1.01 1.42 (.56) 0.00

CLASS C
Six Months Ended 4/30/97
unaudited $10.83 $ .32 $ .50 $ .82 $ (.48) $ (.10)
3/25/96++ to 10/31/96 9.97 .39 1.03 1.42 (.56) 0.00

CORPORATE BOND
CLASS A
Year Ended 6/30/97 $13.29 $1.15(h) $ .97 $ 2.12 $(1.22) $ 0.00
Year Ended 6/30/96 12.92 1.26 .27 1.53 (1.16) 0.00
Year Ended 6/30/95 12.51 1.19 .36 1.55 (1.14) 0.00
Year Ended 6/30/94 14.15 1.11 (1.36) (.25) (1.11) (.25)
Year Ended 6/30/93 12.01 1.25 2.13 3.38 (1.24) 0.00
Year Ended 6/30/92 11.21 1.06 .82 1.88 (1.08) 0.00
Year Ended 6/30/91 11.39 1.11 (.06) 1.05 (1.23) 0.00
Year Ended 6/30/90 12.15 1.24 (.86) .38 (1.14) 0.00
Year Ended 6/30/89 11.82 1.12 .32 1.44 (1.11) 0.00
Year Ended 6/30/88 12.24 1.10 (.38) .72 (1.14) 0.00
Nine Months Ended 6/30/87 12.25 .86 (.06) .80 (.81) 0.00
Year Ended 9/30/86 11.52 1.20 .73 1.93 (1.20) 0.00

CLASS B
Year Ended 6/30/97 $13.29 $1.05(h) $ .98 $ 2.03 $(1.13) $ 0.00
Year Ended 6/30/96 12.92 1.15 .29 1.44 (1.07) 0.00
Year Ended 6/30/95 12.50 1.11 .36 1.47 (1.05) 0.00
Year Ended 6/30/94 14.15 1.02 (1.37) (.35) (1.04) (.25)
1/8/93++ to 6/30/93 12.47 .49 1.69 2.18 (.50) 0.00

CLASS C
Year Ended 6/30/97 $13.29 $1.04(h) $ .99 $ 2.03 $(1.13) $ 0.00
Year Ended 6/30/96 12.93 1.14 .29 1.43 (1.07) 0.00
Year Ended 6/30/95 12.50 1.10 .38 1.48 (1.05) 0.00
Year Ended 6/30/94 14.15 1.02 (1.37) (.35) (1.05) (.25)
5/3/93++ to 6/30/93 13.63 .16 .53 .69 (.17) 0.00

HIGH YIELD
CLASS A
4/22/97+ to 8/31/97 $10.00 $ .37(h) $1.15 $ 1.52 $ (.35) $ 0.00

CLASS B
4/22/97+ to 8/31/97 $10.00 $ .31(h) $1.19 $ 1.50 $ (.33) $ 0.00

CLASS C
4/22/97+ to 8/31/97 $10.00 $ .32(h) $1.18 $ 1.50 $ (.33) $ 0.00
</TABLE>

PLEASE REFER TO THE FOOTNOTES ON PAGE 14.

<TABLE>
<CAPTION>
DISTRIBUTIONS TOTAL NET ASSETS RATIO OF NET
IN EXCESS TOTAL INVESTMENT AT END OF RATIO INVESTMENT
OF NET RETURN DIVIDENDS NET ASSET RETURN PERIOD OF EXPENSES INCOME (LOSS) PORTFOLIO
INVESTMENT OF AND VALUE END BASED ON NET (000'S TO AVERAGE TO AVERAGE TURNOVER
INCOME CAPITAL DISTRIBUTIONS OF PERIOD ASSET VALUE(B) OMITTED) NET ASSETS NET ASSETS RATE
- ------------ ----------- ------------- ---------- -------------- ----------- ------------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>

$0.00 $0.00 $ (.49) $ 7.98 5.91% $ 430,758 2.23%*(f) 14.06%* 142%
0.00 (.22) (.97) 8.01 35.22 385,784 2.34(f) 14.82 166
0.00 (.97) (.97) 6.75 (3.59) 252,608 2.62(f) 18.09 180
0.00 (.21) (1.12) 8.13 (11.32) 303,538 1.70(f) 11.22 131
0.00 0.00 (1.10) 10.35 18.99 268,233 1.61(f) 10.77 254
0.00 0.00 (.68) 9.70 3.49 61,702 2.45*(d)(f) 10.93* 86

$0.00 $0.00 $ (.45) $ 7.98 5.44% $1,342,657 2.94%*(f) 13.36%* 142%
0.00 (.21) (.90) 8.01 33.96 1,329,719 3.05(f) 14.20 166
0.00 (.90) (.90) 6.75 (4.63) 1,123,074 3.33(f) 17.31 180
0.00 (.21) (1.05) 8.13 (11.89) 1,639,602 2.41(f) 10.53 131
0.00 0.00 (1.03) 10.35 18.15 1,313,591 2.31(f) 10.01 254
0.00 0.00 (.63) 9.70 3.30 216,317 3.13*(d)(f) 10.16* 86

$0.00 $0.00 $ (.45) $ 7.98 5.44% $ 261,454 2.93%*(f) 13.37%* 142%
$0.00 (.21) (.90) 8.01 33.96 250,676 3.04(f) 14.22 166
0.00 (.90) (.90) 6.75 (4.63) 219,009 3.33(f) 17.32 180
0.00 (.21) (1.05) 8.13 (11.89) 369,714 2.39(f) 10.46 131
0.00 0.00 (.58) 10.34 9.00 310,230 2.21*(f) 9.74* 254

$0.00 $0.00 $(2.10) $10.64 30.04% $ 37,416 1.55% 8.49% 314%
0.00 0.00 (.95) 10.01 38.47 23,253 1.65 9.23 315
0.00 0.00 (.88) 8.02 (1.48) 12,020 1.93 11.25 301
0.00 0.00 (.45) 9.14 (3.77) 10,995 .75*(d) 9.82* 100

$0.00 $0.00 $(2.02) $10.64 29.14% $ 93,377 2.26% 7.81% 314%
0.00 0.00 (.87) 10.01 37.36 84,295 2.37 8.57 315
0.00 0.00 (.81) 8.02 (2.40) 62,406 2.64 10.52 301
0.00 0.00 (.42) 9.14 (4.17) 47,030 1.45*(d) 9.11* 100

$0.00 $0.00 $(2.03) $10.64 29.17% $ 25,130 2.25% 7.82% 314%
0.00 0.00 (.88) 10.01 37.40 14,511 2.35 8.52 315
0.00 0.00 (.81) 8.02 (2.36) 9,330 2.63 10.46 301
0.00 0.00 (.42) 9.14 (4.16) 10,404 1.45*(d) 9.05* 100

$0.00 $0.00 $ (.61) $11.07 7.71% $ 5,649 1.90%*(d) 6.57%* 730%
0.00 0.00 (.81) 10.83 17.31 2,295 1.90*(d) 8.36* 282

$0.00 $0.00 $ (.58) $11.07 7.63 $ 10,212 2.60 5.79 730
0.00 0.00 (.56) 10.83 14.47 800 2.60*(d) 7.26* 282

$0.00 $0.00 $ (.58) $11.07 7.64 $ 2,470 2.60 5.86 730
0.00 0.00 (.56) 10.83 14.47 750 2.60*(d) 7.03* 282

$0.00 $0.00 $(1.22) $14.19 16.59% $ 370,845 1.12% 8.34% 307%
0.00 0.00 (1.16) 13.29 12.14 277,369 1.20 9.46 389
0.00 0.00 (1.14) 12.92 13.26 230,750 1.24 9.70 387
(.03) 0.00 (1.39) 12.51 (2.58) 219,182 1.30 7.76 372
0.00 0.00 (1.24) 14.15 29.62 216,171 1.39 9.29 579
0.00 0.00 (1.08) 12.01 17.43 60,356 1.48 8.98 610
0.00 0.00 (1.23) 11.21 9.71 62,268 1.44 9.84 357
0.00 0.00 (1.14) 11.39 3.27 68,049 1.51 10.70 480
0.00 0.00 (1.11) 12.15 12.99 52,381 1.84 9.53 104
0.00 0.00 (1.14) 11.82 6.24 37,587 1.81 9.24 98
0.00 0.00 (.81) 12.24 7.32 41,072 1.27 9.17 95
0.00 0.00 (1.20) 12.25 17.19 45,178 1.08 9.80 240

$0.00 $0.00 $(1.13) $14.19 15.80% $ 480,326 1.82% 7.62% 307%
0.00 0.00 (1.07) 13.29 11.38 338,152 1.90 8.75 389
0.00 0.00 (1.05) 12.92 12.54 241,393 1.99 9.07 387
(.01) 0.00 (1.30) 12.50 (3.27) 184,129 2.00 7.03 372
0.00 0.00 (.50) 14.15 17.75 55,508 2.10* 7.18* 579

$0.00 $0.00 $(1.13) $14.19 15.80% $ 174,762 1.82% 7.61% 307%
0.00 0.00 (1.07) 13.29 11.30 83,095 1.90 8.74 389
0.00 0.00 (1.05) 12.93 12.62 51,028 1.84 8.95 387
0.00 0.00 (1.30) 12.50 (3.27) 50,860 1.99 6.98 372
0.00 0.00 (.17) 14.15 5.08 5,115 2.05* 5.51* 579

$0.00 $0.00 $ (.35) $11.17 15.33% $ 5,889 1.70%*(d) 8.04%* 73%

$0.00 $0.00 $ (.33) $11.17 15.07% $ 43,297 2.40*(d) 7.19* 73%

$0.00 $0.00 $ (.33) $11.17 15.07% $ 7,575 2.40*(d) 7.24* 73%
</TABLE>

PLEASE REFER TO THE FOOTNOTES ON PAGE 14.

# PRIOR TO JULY 22, 1993, EQUITABLE CAPITAL MANAGEMENT CORPORATION
("EQUITABLE") SERVED AS THE INVESTMENT ADVISER TO THE ALLIANCE PORTFOLIOS (THE
"TRUST"), OF WHICH SHORT-TERM U.S. GOVERNMENT IS A SERIES. ON JULY 22, 1993,
ALLIANCE ACQUIRED THE BUSINESS AND SUBSTANTIALLY ALL OF THE ASSETS OF EQUITABLE
AND BECAME INVESTMENT ADVISER TO THE TRUST.

+ COMMENCEMENT OF OPERATIONS.

++ COMMENCEMENT OF DISTRIBUTION.

* ANNUALIZED.

** REFLECTS NEWLY ADOPTED FISCAL YEAR END.

(A) INCLUDES WITH RESPECT TO SHORT-TERM U.S. GOVERNMENT A RETURN OF CAPITAL FOR
THE YEAR ENDED APRIL 30, 1994 OF $(0.08) FOR CLASS A, $(0.08) FOR CLASS B AND
$(0.05) FOR CLASS C AND FOR THE PERIOD ENDED AUGUST 31, 1994 OF $(0.03) FOR
CLASS A AND $(0.02) FOR CLASS B AND CLASS C.

(B) 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.

(C) "TOTAL DIVIDENDS AND DISTRIBUTIONS" INCLUDES DIVIDENDS IN EXCESS OF NET
INVESTMENT INCOME AND RETURN OF CAPITAL. SHORT-TERM U.S. GOVERNMENT HAD
DIVIDENDS IN EXCESS OF NET INVESTMENT INCOME, FOR THE YEAR ENDED APRIL 30,
1994, WITH RESPECT TO CLASS A SHARES OF $(.01); WITH RESPECT TO CLASS B SHARES,
$(.01); AND WITH RESPECT TO CLASS C SHARES, $(.01).

(D) NET OF EXPENSES ASSUMED AND/OR WAIVED/REIMBURSED. IF SHORT-TERM U.S.
GOVERNMENT HAD BORNE ALL EXPENSES, THE EXPENSE RATIOS WOULD HAVE BEEN WITH
RESPECT TO CLASS A SHARES, 2.20% (ANNUALIZED) FOR 1993, 2.17% FOR THE YEAR
ENDED APRIL 30, 1994, 2.95% (ANNUALIZED) FOR THE PERIOD ENDED AUGUST 31, 1994,
3.71% FOR THE YEAR ENDED AUGUST 31, 1995, 3.04% FOR THE YEAR ENDED AUGUST 31,
1996 AND 2.42% FOR THE YEAR ENDED AUGUST 31, 1997; WITH RESPECT TO CLASS B
SHARES, 4.81% (ANNUALIZED) FOR 1993, 3.21% FOR THE YEAR ENDED APRIL 30, 1994,
3.60% (ANNUALIZED) FOR THE PERIOD ENDED AUGUST 31, 1994, 4.33% FOR THE YEAR
ENDED AUGUST 31, 1995, 3.74% FOR THE YEAR ENDED AUGUST 31, 1996 AND 3.10% FOR
THE YEAR ENDED AUGUST 31, 1997; WITH RESPECT TO CLASS C SHARES, 3.10%
(ANNUALIZED) FOR THE YEAR ENDED APRIL 30, 1994, 3.64% (ANNUALIZED) FOR THE
PERIOD ENDED AUGUST 31, 1994 (ANNUALIZED), 4.23% FOR THE YEAR ENDED AUGUST 31,
1995, 3.72% FOR THE YEAR ENDED AUGUST 31, 1996 AND 3.10% FOR THE YEAR ENDED
AUGUST 31, 1997. IF LIMITED MATURITY GOVERNMENT HAD BORNE ALL EXPENSES, THE
EXPENSE RATIOS WOULD HAVE BEEN WITH RESPECT TO CLASS A SHARES, 1.55%
(ANNUALIZED) FOR 1992; AND WITH RESPECT TO CLASS B SHARES, 2.28% (ANNUALIZED)
FOR 1992. THE RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS FOR LIMITED
MATURITY GOVERNMENT WOULD HAVE BEEN WITH RESPECT TO CLASS A SHARES, 6.47%
(ANNUALIZED) FOR 1992; AND WITH RESPECT TO CLASS B SHARES, 5.86% (ANNUALIZED)
FOR 1992. IF WORLD INCOME HAD BORNE ALL EXPENSES, THE EXPENSE RATIOS WOULD HAVE
BEEN 1.87% FOR 1992, 1.92% FOR 1993, 2.08% FOR 1994, 2.35% FOR 1995, 2.48% FOR
1996 AND 2.67% (ANNUALIZED) FOR THE SIX MONTHS ENDED APRIL 30, 1997. IF NORTH
AMERICAN GOVERNMENT INCOME HAD BORNE ALL EXPENSES, THE EXPENSE RATIOS WOULD
HAVE BEEN WITH RESPECT TO CLASS A SHARES, 2.49% (ANNUALIZED) FOR 1992; AND WITH
RESPECT TO CLASS B SHARES, 3.16% (ANNUALIZED) FOR 1992. IF GLOBAL DOLLAR
GOVERNMENT HAD BORNE ALL EXPENSES FOR THE PERIOD FEBRUARY 25, 1994 TO AUGUST
31, 1994, THE EXPENSE RATIOS WOULD HAVE BEEN WITH RESPECT TO CLASS A SHARES,
1.91% (ANNUALIZED); WITH RESPECT TO CLASS B SHARES, 2.63% (ANNUALIZED); AND
WITH RESPECT TO CLASS C SHARES, 2.59% (ANNUALIZED). IF GLOBAL STRATEGIC INCOME
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) AND 5.07% (ANNUALIZED) FOR THE SIX MONTHS ENDED APRIL 30, 1997;
WITH RESPECT TO CLASS B SHARES, FOR THE PERIOD MARCH 25, 1996 TO OCTOBER 31,
1996, 19.57% (ANNUALIZED); AND WITH RESPECT TO CLASS C SHARES, 19.49%
(ANNUALIZED). IF HIGH YIELD HAD BORNE ALL EXPENSES, THE EXPENSE RATIOS WOULD
HAVE BEEN WITH RESPECT TO CLASS A SHARES, 3.11% (ANNUALIZED); WITH RESPECT
TO CLASS B SHARES, 3.85% (ANNUALIZED); AND WITH RESPECT TO CLASS C SHARES,
3.84% (ANNUALIZED).

(E) IF SHORT-TERM U.S. GOVERNMENT HAD NOT BORNE INTEREST EXPENSES, THE RATIO OF
EXPENSES TO AVERAGE NET ASSETS WOULD HAVE BEEN WITH RESPECT TO CLASS A SHARES
1.40% FOR 1996 AND 1997; WITH RESPECT TO CLASS B SHARES, 2.10% FOR 1996 AND
1997; AND WITH RESPECT TO CLASS C SHARES 2.10% FOR 1996 AND 1997. IF LIMITED
MATURITY GOVERNMENT HAD NOT BORNE INTEREST EXPENSES, THE RATIO OF EXPENSES TO
AVERAGE NET ASSETS WOULD HAVE BEEN WITH RESPECT TO CLASS A SHARES, 1.42%
(ANNUALIZED) FOR 1992, 1.33% FOR 1993, 1.20% FOR 1994, 1.41% FOR 1995, 1.58%
FOR 1996, AND 1.62% (ANNUALIZED) FOR THE SIX MONTHS ENDED MAY 31, 1997; WITH
RESPECT TO CLASS B SHARES, 2.10% (ANNUALIZED) FOR 1992, 2.07% FOR 1993, 1.91%
FOR 1994, 2.11% FOR 1995, 2.30% FOR 1996 AND 2.36% (ANNUALIZED) FOR THE SIX
MONTHS ENDED MAY 31, 1997; WITH RESPECT TO CLASS C SHARES, 1.58% (ANNUALIZED),
FOR 1993, 1.89% FOR 1994, 2.10% FOR 1995, 2.29% FOR 1996 AND 2.34% (ANNUALIZED)
FOR THE SIX MONTHS ENDED MAY 31, 1997. IF MORTGAGE SECURITIES INCOME FUND HAD
NOT BORNE INTEREST EXPENSE THE RATIO OF EXPENSES TO AVERAGE NET ASSETS WOULD
HAVE BEEN WITH RESPECT TO CLASS A SHARES .97% FOR 1994, 1.03% FOR 1995, 1.03%
FOR 1996 AND 1.07% (ANNUALIZED) FOR THE PERIOD ENDED JUNE 30, 1997; WITH
RESPECT TO CLASS B SHARES, 1.68% FOR 1994, 1.74% FOR 1995, 1.74% FOR 1996 AND
1.77% (ANNUALIZED) FOR THE PERIOD ENDED JUNE 30, 1997; WITH RESPECT TO CLASS C
SHARES 1.69% FOR 1994, 1.73% FOR 1995, 1.73% FOR 1996, AND 1.76% (ANNUALIZED)
FOR THE SIX MONTHS ENDED JUNE 30, 1997.

(F) INCLUDES INTEREST EXPENSES. IF MULTI-MARKET STRATEGY HAD NOT BORNE INTEREST
EXPENSES OR LOAN FEES, THE RATIO OF EXPENSES TO AVERAGE NET ASSETS WOULD HAVE
BEEN WITH RESPECT TO CLASS A SHARES, 1.33% (ANNUALIZED) FOR 1991, 1.33% FOR
1992, 1.40% FOR 1993, 1.30% FOR 1994, 1.55% FOR 1995, AND 1.60% FOR 1996; WITH
RESPECT TO CLASS B SHARES, 2.05% (ANNUALIZED) FOR 1991, 2.05% FOR 1992, 2.11%
FOR 1993, 2.01% FOR 1994, 2.22% FOR 1995, AND 2.31% FOR 1996; WITH RESPECT TO
CLASS C SHARES, 2.11% (ANNUALIZED) FOR 1993, 1.99% FOR 1994, 2.24% FOR 1995,
AND 2.30% FOR 1996. IF NORTH AMERICAN GOVERNMENT INCOME HAD NOT BORNE INTEREST
EXPENSES, THE RATIO OF EXPENSES (NET OF INTEREST EXPENSES) TO AVERAGE NET
ASSETS WOULD HAVE BEEN WITH RESPECT TO CLASS A SHARES, 1.66% (ANNUALIZED) FOR
1992, 1.33% FOR 1993, 1.37% FOR 1994, 1.51% FOR 1995, 1.41% FOR 1996 AND 1.41%
(ANNUALIZED) FOR THE PERIOD ENDED MAY 31, 1997; WITH RESPECT TO CLASS B SHARES,
2.35% (ANNUALIZED) FOR 1992, 2.04% FOR 1993, 2.07% FOR 1994, 2.22% FOR 1995,
2.12% FOR 1996 AND 2.12% (ANNUALIZED) FOR THE PERIOD ENDED MAY 31, 1997; AND
WITH RESPECT TO CLASS C SHARES, 2.04% (ANNUALIZED) FOR 1993, 2.06% FOR 1994,
2.21% FOR 1995, 2.12% FOR 1996, AND 2.12% (ANNUALIZED) FOR THE PERIOD ENDED MAY
31, 1997.

(G) INCLUDES LOAN FEES. IF MULTI-MARKET STRATEGY HAD NOT INCURRED LOAN FEES,
THE RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS WOULD HAVE BEEN WITH
RESPECT TO CLASS A SHARES, 11.65% (ANNUALIZED) FOR 1991, 11.78% FOR 1992 AND
9.73% FOR 1993; WITH RESPECT TO CLASS B SHARES, 10.88% (ANNUALIZED) FOR 1991,
11.02% FOR 1992 AND 8.99% FOR 1993; AND WITH RESPECT TO CLASS C SHARES, 7.50%
(ANNUALIZED) FOR 1993.

(H) BASED ON AVERAGE SHARES OUTSTANDING.

GLOSSARY
_______________________________________________________________________________

The following terms are frequently used in this Prospectus. Many of these terms
are explained in greater detail under "Description of the Funds-Additional
Investment Practices" and in Appendix A.

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 Funds'
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), a 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.

NRSRO is a nationally recognized securities rating organization.

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

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

DUFF & PHELPS is Duff & Phelps Credit Rating Co.

FITCH is Fitch Investors Service, L.P.

PRIME COMMERCIAL PAPER is commercial paper rated Prime-1 or higher by Moody's,
A-1 or higher by S&P, Fitch-1 by Fitch or Duff 1 by Duff & Phelps. HIGHER
QUALITY COMMERCIAL PAPER is commercial paper rated at least Prime-2 by Moody's,
A-2 by S&P, Fitch-2 by Fitch or Duff 2 by Duff & Phelps.

QUALIFYING BANK DEPOSITS are certificates of deposit, bankers' acceptances and
interest-bearing savings deposits of banks having total assets of more than $1
billion and which are members of the Federal Deposit Insurance Corporation.

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.

DESCRIPTION OF THE FUNDS
_______________________________________________________________________________

Except as noted, (i) the Funds' investment objectives are "fundamental" and
cannot be changed without a shareholder vote, and (ii) the Funds' investment
policies are not fundamental and thus can be changed without a shareholder
vote. No Fund will change a non-fundamental objective or policy without
notifying its shareholders. There is no guarantee that any Fund will achieve
its investment objective.

INVESTMENT OBJECTIVES AND POLICIES

U.S. GOVERNMENT FUNDS
The U.S. Government Funds are diversified investment companies that have been
designed to offer investors high current income consistent with preservation of
capital by investing primarily in U.S. Government securities.

ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
Alliance Short-Term U.S. Government Fund ("Short-Term U.S. Government") seeks
high current income consistent with preservation of capital by investing
primarily in a portfolio of U.S. Government securities. Under normal
circumstances, the Fund maintains an average dollar-weighted portfolio maturity
of not more than three years and invests at least 65% of its total assets in
U.S. Government securities and repurchase agreements and forward commitments
relating to U.S. Government securities. In periods of rising interest rates the
Fund may, to the extent it invests in mortgage-related securities, be subject
to the risk that its average dollar-weighted portfolio maturity may be extended
as a result of lower than anticipated prepayment rates. See "Additional
Investment Practices-Mortgage-Related Securities." The Fund's investment
objective is not fundamental.

In addition to investing in U.S. Government securities, the Fund may invest a
portion of its assets in securities of non-governmental issuers. Although these
investments will be of high quality at the time of purchase, they generally
involve higher levels of credit risk than do U.S. Government securities, as
well as the risk (present with all fixed-income securities) of fluctuations in
value as interest rates change. The Fund will not be obligated to dispose of
any security whose credit quality falls below high quality.

The Fund may also (i) invest in certain SMRS, (ii) invest in variable, floating
and inverse floating rate instruments, (iii) make short sales "against the
box," (iv) enter into various hedging transactions, such as interest rate
swaps, caps and floors, (v) enter into reverse repurchase agreements, (vi)
purchase and sell futures contracts for hedging purposes, (vii) purchase and
sell call and put options on futures contracts or on securities, for hedging
purposes or to earn additional income, (viii) make secured loans of portfolio
securities, (ix) enter into repurchase agreements, and (x) purchase securities
for future delivery. The Fund may not invest more than 5% of its total assets
in securities the disposition of which is restricted under Federal securities
laws (excluding, to the extent permitted by applicable law, Rule 144A
securities). For additional information on the use, risks and costs of these
practices, see "Additional Investment Practices."

U.S. GOVERNMENT PORTFOLIO
U.S. Government Portfolio ("U.S. Government") seeks as high a level of current
income as is consistent with safety of principal. As a matter of fundamental
policy, the Fund pursues its objective by investing solely in U.S. Government
securities that are backed by the full faith and credit of the U.S. Government.
These include U.S. Treasury securities, including zero coupon Treasury
securities, and GNMA certificates, including certain SMRS and variable and
floating rate instruments. The average weighted maturity of the Fund's
portfolio of U.S. Government securities is expected to vary between one year or
less and 30 years. For additional information on the use, risks and cost of
these practices, see "Additional Investment Practices." The Fund's investment
objective is not fundamental.

Counsel to the Fund has advised the Fund that, in their view, shares of the
Fund are a legal investment for, among other investors, (i) savings and loan
associations and commercial banks chartered under the laws of the United
States, (ii) savings and loan associations chartered under the laws of
Arkansas, California, Colorado, Connecticut*, Delaware, Florida, Hawaii*,
Illinois, Indiana, Kansas, Louisiana, Maine, Mississippi, Nebraska, Nevada, New
Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, Oklahoma,
Pennsylvania, South Carolina, South Dakota*, Texas, Utah and Virginia, (iii)
credit unions chartered under the laws of California, Florida*, Georgia,
Illinois, Kentucky, Maine, Maryland*, Nevada*, New Hampshire, Ohio*, Oregon*,
Pennsylvania*, South Carolina, Utah, Washington and West Virginia, and (iv)
commercial banks chartered under the laws of Alabama, Alaska, Arizona,
California, Colorado, Connecticut*, Delaware, Florida, Georgia, Hawaii*, Idaho,
Illinois, Indiana, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts,
Minnesota, Mississippi, Nebraska, Nevada, New Hampshire, New Jersey, New
Mexico, New York, North Carolina*, North Dakota, Ohio, Oklahoma, Oregon,
Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas,
Utah, Vermont, Virginia, Washington, West Virginia and Wyoming. Institutions in
the asterisked(*) states should obtain prior state regulatory approval before
investing in shares of the Fund. In addition, the Fund believes that it is
currently a legal investment for savings and loan associations, credit unions
and commercial banks chartered under the laws of certain other states.

ALLIANCE LIMITED MATURITY GOVERNMENT FUND
Alliance Limited Maturity Government Fund, Inc. ("Limited Maturity Government")
seeks the highest level of current income, consistent with low volatility of
net asset value. As a matter of fundamental policy, the Fund normally has at
least 65% of the value of its total assets invested in U.S. Government
securities, including mortgage-related securities, and repurchase agreements
relating to U.S. Government securities. For a description of these securities,
see "Additional Investment Practices."

In pursuing its investment objective and policies, the Fund takes advantage of
a wide range of maturities of debt securities and adjusts the dollar-weighted
average maturity of its portfolio from time to time, depending on its
assessment of relative yields on securities of different maturities and the
expected effect of future changes in interest rates on the market value of the
Fund's portfolio. At all times, however, each security held by the Fund has
either a remaining maturity of not more than ten years or a duration not
exceeding that of a ten-year Treasury note. Duration is a measure that relates
the price volatility of a security to changes in interest rates. The duration
of a debt security is the weighted average term to maturity, expressed in
years, of the present value of all future cash flows, including coupon payments
and principal repayments. Thus, by definition, duration is always less than or
equal to full maturity.

The Fund believes that because of the nature of its assets, it is not exposed
to any material risk of loss as a result of default on its portfolio
securities. The Fund is, however, exposed to the risk that the prices of such
securities will fluctuate, in some cases significantly, as interest rates
change.

The Fund may invest up to 35% of its total assets in (i) high quality
asset-backed securities, including mortgage-related securities that are not
U.S. Government securities, (ii) Treasury securities issued by private
corporate issuers, (iii) certificates of deposit, bankers' acceptances and
interest-bearing savings deposits of domestic and foreign banks having total
assets of more than $1 billion, (iv) higher quality commercial paper or, if not
rated, issued by companies that have high quality debt issues outstanding and
(v) high quality debt securities of corporate issuers.

The Fund may also (i) enter into futures contracts and purchase and write
options on futures contracts, (ii) enter into forward commitments for the
purchase or sale of securities, (iii) enter into interest rate swaps, caps and
floors, (iv) invest in Eurodollar instruments, (v) purchase and write put and
call options on foreign currencies, (vi) invest in variable, floating and
inverse floating rate instruments, (vii) enter into repurchase agreements
pertaining to the types of securities in which it invests, (viii) use reverse
repurchase agreements and dollar rolls and (ix) make secured loans of its
portfolio securities. For additional information on the use, risks and costs of
these investment practices, see "Additional Investment Practices."

The Fund may invest up to 15% of the value of its total assets in debt
securities denominated in U.S. Dollars or in foreign currencies and issued or
guaranteed by foreign governments or issued by foreign non-governmental
issuers, provided that such foreign debt securities are of high quality. The
percentage of the Fund's assets invested in foreign debt securities will vary
and its portfolio of foreign debt securities may include those of a number of
foreign countries or, depending upon market conditions, those of a single
country. See "Risk Considerations-Foreign Investment."

MORTGAGE FUND

ALLIANCE MORTGAGE SECURITIES INCOME FUND
Alliance Mortgage Securities Income Fund, Inc. ("Mortgage Securities Income")
is a diversified investment company that seeks a high level of current income
to the extent consistent with prudent investment risk. The Fund invests
primarily in a diversified portfolio of mortgage-related securities, including
CMOs, and, as a matter of fundamental policy, maintains at least 65% of its
total assets in mortgage-related securities.

The Fund expects that governmental, government-related or private entities may
create mortgage loan pools offering pass-through investments in addition to
those described in this Prospectus. The mortgages underlying these securities
may be instruments whose principal or interest payments may vary or whose terms
to maturity may differ from customary long-term fixed-rate mortgages. As new
types of mortgage-related securities are developed and offered to investors,
the Fund will consider making investments in such new types of securities. The
Fund may invest up to 20% of its total assets in lower-rated mortgage-related
securities. See "Risk Considerations-Securities Ratings" and "-Investment in
Lower-Rated Fixed-Income Securities." The average weighted maturity of the
Fund's portfolio of fixed-income securities is expected to vary between two and
ten years.

The Fund may invest up to 35% of the value of its total assets in (i) U.S.
Government securities, (ii) qualifying bank deposits, (iii) prime commercial
paper or, if not rated, issued by companies which have an outstanding high
quality debt issue, (iv) high grade debt securities secured by mortgages on
commercial real estate or residential rental properties, and (v) high grade
asset-backed securities.

The Fund may also (i) invest in repurchase agreements pertaining to the types
of securities in which it invests, (ii) enter into forward commitments for the
purchase or sale of securities, (iii) purchase put and call options written by
others and write covered put and call options on the types of securities in
which the Fund may invest for hedging purposes, (iv) enter into interest rate
swaps, caps and floors, (v) enter into interest rate futures contracts, (vi)
invest in variable floating and inverse floating rate instruments, and (vii)
lend portfolio securities. The Fund will not invest in illiquid securities if,
as a result, more than 10% of its total assets would be illiquid. For
additional information on the use, risk and costs of these practices, see
"Additional Investment Practices."

MULTI-MARKET FUNDS

The Multi-Market Funds are non-diversified investment companies that have been
designed to offer investors a higher yield than a money market fund and less
fluctuation in net asset value than a longer-term bond fund.

ALLIANCE WORLD INCOME TRUST

ALLIANCE SHORT-TERM MULTI-MARKET TRUST

ALLIANCE MULTI-MARKET STRATEGY TRUST

Alliance World Income Trust, Inc. ("World Income"), Alliance Short-Term
Multi-Market Trust, Inc. ("Short-Term Multi-Market") and Alliance Multi-Market
Strategy Trust, Inc. ("Multi-Market Strategy") each seek the highest level of
current income, consistent with what Alliance considers to be prudent
investment risk, that is available from a portfolio of high quality debt
securities having remaining maturities of not more than, with respect to WORLD
INCOME, one year, with respect to SHORT-TERM MULTI-MARKET, three years, and
with respect to MULTI-MARKET STRATEGY, five years. Each Fund seeks high current
yields by investing in a portfolio of debt securities denominated in the U.S.
Dollar and selected foreign currencies. The Multi-Market Funds seek investment
opportunities in foreign, as well as domestic, securities markets. WORLD
INCOME, which is not a money market fund, will maintain at least 35% of its net
assets in U.S. Dollar-denominated securities. SHORT-TERM MULTI-MARKET will
normally maintain a substantial portion of its assets in debt securities
denominated in foreign currencies, but will invest at least 25% of its net
assets in U.S. Dollar-denominated securities. MULTI-MARKET STRATEGY normally
expects to maintain at least 70% of its assets in debt securities denominated
in foreign currencies.

In pursuing their investment objectives, the Multi-Market Funds seek to
minimize credit risk and fluctuations in net asset value by investing only in
short-term debt securities. Normally, a high proportion of these Funds'
portfolios consists of money market instruments. Alliance actively manages the
Multi-Market Funds' portfolios in accordance with a multi-market investment
strategy, allocating a Fund's investments among securities denominated in the
U.S. Dollar and the currencies of a number of foreign countries and, within
each such country, among different types of debt securities. Alliance adjusts
each Multi-Market Fund's exposure to each currency such that the percentage of
assets invested in securities of a particular country or denominated in a
particular currency varies in accordance with Alliance's assessment of the
relative yield and appreciation potential of such securities and the relative
strength of a country's currency. Fundamental economic strength, credit quality
and interest rate trends are the principal factors considered by Alliance in
determining whether to increase or decrease the emphasis placed upon a
particular type of security or industry sector within a Fund's investment
portfolio. None of the Multi-Market Funds invests more than 25% of its net
assets in debt securities denominated in a single currency other than the U.S.
Dollar.

The returns available from short-term foreign currency-denominated debt
instruments can be adversely affected by changes in exchange rates. Alliance
believes that the use of foreign currency hedging techniques, including
"cross-hedges" (see "Additional Investment Practices-Forward Foreign Currency
Exchange Contracts"), can help protect against declines in the U.S. Dollar
value of income available for distribution to shareholders and declines in the
net asset value of a Fund's shares resulting from adverse changes in currency
exchange rates. For example, the return available from securities denominated
in a particular foreign currency would diminish in the event the value of the
U.S. Dollar increased against such currency. Such a decline could be partially
or completely offset by an increase in value of a cross-hedge involving a
forward exchange contract to sell a different foreign currency, where such
contract is available on terms more advantageous to a Fund than a contract to
sell the currency in which the position being hedged is denominated. It is
Alliance's belief that cross-hedges can therefore provide significant
protection of net asset value in the event of a general rise in the U.S. Dollar
against foreign currencies. However, a cross-hedge cannot protect against
exchange rate risks perfectly, and if Alliance is incorrect in its judgment of
future exchange rate relationships, a Fund could be in a less advantageous
position than if such a hedge had not been established.

Each Multi-Market Fund invests in debt securities denominated in the currencies
of countries whose governments are considered stable by Alliance. In addition
to the U.S. Dollar, such currencies include, among others, the Australian
Dollar, Austrian Schilling, British Pound Sterling, Canadian Dollar, Danish
Krone, Dutch Guilder, European Currency Unit ("ECU"), French Franc, Irish
Pound, Italian Lira, Japanese Yen, Mexican Peso, New Zealand Dollar, Norwegian
Krone, Spanish Peseta, Swedish Krona, Swiss Franc and German Mark.

An issuer of debt securities purchased by a Multi-Market Fund may be domiciled
in a country other than the country in whose currency the instrument is
denominated. In addition, the Funds may purchase debt securities (sometimes
referred to as "linked" securities) that are denominated in one currency while
the principal amounts of, and value of interest payments on, such securities
are determined with reference to another currency. In this regard, as of the
date of this Prospectus each Fund has invested in U.S. Dollar denominated
securities issued by Mexican issuers and/or Peso-linked securities. The value
of these investments may fluctuate inversely in correlation with changes in the
Peso-U.S. Dollar exchange rate and with the general level of interest rates in
Mexico. For a general description of Mexico, see Appendix B and each
Multi-Market Fund's Statement of Additional Information.

Each Multi-Market Fund may invest in debt securities denominated in the ECU,
which is a "basket" consisting of specified amounts of the currencies of
certain of the member states of the European Union, a fifteen-nation
organization engaged in cooperative economic activities. The specific amounts
of currencies comprising the ECU may be adjusted by the Council of Ministers of
the European Union to reflect changes in relative values of the underlying
currencies.

Each Multi-Market Fund may invest in debt securities issued by supranational
organizations including the World Bank, which was chartered to finance
development projects in developing member countries; the European Union; the
European Coal and Steel Community, which is an economic union of various
European nations' steel and coal industries; and the Asian

Development Bank, which is an international development bank established to
lend funds, promote investment and provide technical assistance to member
nations in the Asian and Pacific regions.

Each Multi-Market Fund seeks to minimize investment risk by limiting its
portfolio investments to debt securities of high quality, and WORLD INCOME will
invest 65% (and normally substantially all) of its total assets in high quality
income-producing debt securities. Accordingly, the Multi-Market Funds'
portfolio securities will consist of (i) U.S. Government securities, (ii) high
quality foreign government securities, (iii) obligations issued by
supranational entities and corporate debt securities having a triple-A rating,
with respect to WORLD INCOME, or a high quality rating, with respect to
SHORT-TERM MULTI-MARKET and MULTI-MARKET STRATEGY, (iv) certificates of deposit
and bankers' acceptances issued or guaranteed by, or time deposits maintained
at, banks (including foreign branches of foreign banks) having total assets of
more than $1 billion, with respect to WORLD INCOME, or $500 million, with
respect to SHORT-TERM MULTI-MARKET and MULTI-MARKET STRATEGY, and determined by
Alliance to be of high quality, and (v) prime commercial paper or unrated
commercial paper determined by Alliance to be of equivalent quality and issued
by U.S. or foreign companies having outstanding: in the case of WORLD INCOME,
triple-A debt securities; in the case of MULTI-MARKET STRATEGY, high quality
debt securities; and in the case of SHORT-TERM MULTI-MARKET, high grade debt
securities.

As a matter of fundamental policy, each Multi-Market Fund concentrates at least
25% of its total assets in debt instruments issued by domestic and foreign
companies engaged in the banking industry, including bank holding companies.
Such investments may include certificates of deposit, time deposits, bankers'
acceptances, and obligations issued by bank holding companies, as well as
repurchase agreements entered into with banks (as distinct from non-banks) in
accordance with the policies set forth with respect to the Funds in "Additional
Investment Practices-Repurchase Agreements." See "Risk
Considerations-Investment in the Banking Industry."

Each Multi-Market Fund may also (i) invest in indexed commercial paper, (ii)
enter into futures contracts and purchase and write options on futures
contracts, (iii) purchase and write put and call options on foreign currencies,
(iv) purchase or sell forward foreign currency exchange contracts, (v) with
respect to SHORT-TERM MULTI-MARKET and MULTI-MARKET STRATEGY, enter into
interest rate swaps, caps and floors, (vi) invest in variable, floating and
inverse floating rate instruments, (vii) make secured loans of its portfolio
securities, and (viii) enter into repurchase agreements. A Multi-Market Fund
will not invest in illiquid securities if, as a result, more than 10% of its
assets would be so invested. For additional information on the use, risks and
costs of these practices, see "Additional Investment Practices." MULTI-MARKET
STRATEGY maintains borrowings of approximately 25% of its total assets less
liabilities (other than the amount borrowed). See "Risk Considerations-Effects
of Borrowing."

GLOBAL BOND FUNDS

The Global Bond Funds are non-diversified investment companies that have been
designed to offer investors a high level of current income through investments
primarily in foreign government securities.

ALLIANCE NORTH AMERICAN GOVERNMENT INCOME TRUST
Alliance North American Government Income Trust, Inc. ("North American
Government Income") seeks the highest level of current income, consistent with
what Alliance considers to be prudent investment risk, that is available from a
portfolio of debt securities issued or guaranteed by the United States, Canada
and Mexico, their political subdivisions (including Canadian provinces but
excluding states of the United States), agencies, instrumentalities or
authorities ("Government securities"). The Fund invests in investment grade
securities denominated in the U.S. Dollar, the Canadian Dollar and the Mexican
Peso and expects to maintain at least 25% of its assets in securities
denominated in the U.S. Dollar. In addition, the Fund may invest up to 25% of
its total assets in debt securities issued by governmental entities of
Argentina ("Argentine Government securities"). The Fund expects that it will
not retain a debt security which is down graded below BBB or Baa, or, if
unrated, determined by Alliance to have undergone similar credit quality
deterioration, subsequent to purchase by the Fund. There may be circumstances,
however, such as the downgrading to below investment grade of all of the
securities of a governmental issuer in one of the countries in which the Fund
has substantial investments, under which the Fund, after considering all the
circumstances, would conclude that it is in the best interests of the
shareholders to retain its holdings in securities of that issuer. The average
weighted maturity of the Fund's portfolio of fixed-income securities is
expected to vary between one year or less and 30 years.

Alliance believes that the increasingly integrated economic relationship among
the United States, Canada and Mexico, characterized by the reduction and
projected elimination of most barriers to free trade among the three nations
and the growing coordination of their fiscal and monetary policies, will over
the long term benefit the economic performance of all three countries and
promote greater correlation of currency fluctuation among the U.S. and Canadian
Dollars and the Mexican Peso. See, however, Appendix B and the Fund's Statement
of Additional Information with respect to the current state of the Mexican
economy.

Alliance will actively manage the Fund's assets in relation to market
conditions and general economic conditions and adjust the Fund's investments in
an effort to best enable the Fund to achieve its investment objective. Thus,
the percentage of the Fund's assets invested in a particular country or
denominated in a particular currency will vary in accordance with Alliance's
assessment of the relative yield and appreciation potential of such securities
and the relationship of the country's currency to the U.S. Dollar. The Fund
invests at least, and normally substantially more than, 65% of its total assets
in Government securities. To the extent that its assets are not invested in
Government securities, however, the Fund may invest the

balance of its total assets in investment grade debt securities issued by the
governments of countries located in Central and South America or any of their
political subdivisions, agencies, instrumentalities or authorities, provided
that such securities are denominated in their local currencies. The Fund will
not invest more than 10% of its total assets in debt securities issued by the
governmental entities of any one such country, except that the Fund may invest
up to 25% of its total assets in Argentine Government securities. The Fund will
normally invest at least 65% of its total assets in income-producing
securities. For a general description of Canada, Mexico and Argentina, see
Appendix B and the Fund's Statement of Additional Information.

Canadian Government securities include the sovereign debt of Canada or any of
its provinces and Government of Canada bonds and Government of Canada Treasury
bills. Canada Treasury bills are debt obligations with maturities of less than
one year. A new issue of Government of Canada bonds frequently consists of
several different bonds with maturities ranging from one to 25 years.

All Canadian provinces have outstanding bond issues and several provinces also
guarantee bond issues of provincial authorities, agents and Crown corporations.
Each new issue yield is based upon a spread from an outstanding Government of
Canada issue of comparable term and coupon. Many Canadian municipalities,
municipal financial authorities and Crown corporations raise funds through the
bond market in order to finance capital expenditures. Unlike U.S. municipal
securities, which have special tax status, Canadian municipal securities have
the same tax status as other Canadian Government securities and trade similarly
to such securities. The Canadian municipal market may be less liquid than the
provincial bond market.

Canadian Government securities in which the Fund may invest include a modified
pass-through vehicle issued pursuant to the program established under the
National Housing Act of Canada. Certificates issued pursuant to this program
benefit from the guarantee of the Canada Mortgage and Housing Corporation, a
federal Crown corporation that is (except for certain limited purposes) an
agency of the Government of Canada whose guarantee is an unconditional
obligation of the Government of Canada in most circumstances (similar to that
of GNMA in the United States).

Mexican Government securities denominated and payable in the Mexican Peso
include (i) Cetes, which are book-entry securities sold directly by the Mexican
Government on a discount basis and with maturities that range from seven to 364
days, (ii) Bonds, which are long-term development bonds issued directly by the
Mexican Government with a minimum term of 364 days, and (iii) Ajustabonos,
which are adjustable-rate bonds with a minimum three-year term issued directly
by the Mexican Government with the face amount adjusted each quarter by the
quarterly inflation rate.

The Fund may invest up to 25% of its total assets in Argentine Government
securities that are denominated and payable in the Argentine Peso. Argentine
Government securities include (i) Bono de Inversion y Crecimiento ("BIC"),
which are investment and growth bonds issued directly by the Argentine
Government with maturities of up to ten years, (ii) Bono de Consolidacion
Economica ("BOCON"), which are economic consolidation bonds issued directly by
the Argentine Government with maturities of up to ten years and (iii) Bono de
Credito a la Exportacion ("BOCREX"), which are export credit bonds issued
directly by the Argentine government with maturities of up to four years.
Although not all Argentine Government securities are rated investment grade
quality by S&P, Moody's, Duff & Phelps or Fitch, Alliance believes that there
are unrated Argentine Government securities that are of investment grade
quality.

The Fund may also (i) enter into futures contracts and purchase and write
options on futures contracts for hedging purposes, (ii) purchase and write put
and call options on foreign currencies, (iii) purchase or sell forward foreign
currency exchange contracts, (iv) write covered put and call options and
purchase put and call options on U.S. Government and foreign government
securities traded on U.S. and foreign securities exchanges, and write put and
call options for cross-hedging purposes, (v) enter into interest rate swaps,
caps and floors, (vi) enter into forward commitments for the purchase or sale
of securities, (vii) invest in variable, floating and inverse floating rate
instruments, (viii) make secured loans of its portfolio securities, and (ix)
enter into repurchase agreements. The Fund will not invest in illiquid
securities if, as a result, 10% of its net assets would be so invested. For
additional information on the use, risks and costs of these practices, see
"Additional Investment Practices." The Fund also maintains borrowings of
approximately one-third of the Fund's total assets less liabilities (other than
the amount borrowed). See "Risk Considerations-Effects of Borrowing."

ALLIANCE GLOBAL DOLLAR GOVERNMENT FUND

Alliance Global Dollar Government Fund, Inc. ("Global Dollar Government") seeks
primarily a high level of current income, and secondarily capital appreciation.
In seeking to achieve these objectives, the Fund invests at least 65% of its
total assets in sovereign debt obligations. The Fund's investments in sovereign
debt obligations will emphasize obligations of a type customarily referred to
as "Brady Bonds" that are issued as part of debt restructurings and that are
collateralized in full as to principal due at maturity by zero coupon U.S.
Government securities ("collateralized Brady Bonds"). See "Additional
Investment Practices-Brady Bonds" and "Risk Considerations-Sovereign Debt
Obligations." The Fund may also invest up to 35% of its total assets in U.S.
and non-U.S. corporate fixed-income securities. See "Risk Considerations-U.S.
Corporate Fixed-Income Securities." The Fund will limit its investments in
sovereign debt obligations and U.S. and non-U.S. corporate fixed-income
securities to U.S. Dollar-denominated securities. Alliance expects that, based
upon current market conditions, the Fund's portfolio of U.S. fixed-income
securities will have an average maturity range of approximately nine to 15
years and the Fund's portfolio of non-U.S. fixed-income securities will have an
average maturity range of approximately 15 to 25 years. Alliance anticipates
that the Fund's portfolio of sovereign debt obligations will have a longer
average maturity.

Substantially all of the Fund's assets will be invested in lower-rated
securities, which may include securities having the lowest rating for
non-subordinated debt instruments (i.e., rated C by Moody's or CCC or lower by
S&P, Duff & Phelps and Fitch) and unrated securities of comparable investment
quality. These securities are considered to have extremely poor prospects of
ever attaining any real investment standing, to have a current identifiable
vulnerability to default, to be unlikely to have the capacity to pay interest
and repay principal when due in the event of adverse business, financial or
economic conditions, and/or to be in default or not current in the payment of
interest or principal. For a description of bond ratings, see Appendix A. The
Fund may also invest in investment grade 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. As of August 31, 1997, the percentages of
the Fund's assets invested in securities rated (or considered by Alliance to be
of equivalent quality to securities rated) in particular rating categories were
5% in A and above, 67% in Ba or BB, 9% in B, 2% in CCC and 5% in non-rated. See
"Risk Considerations-Securities Ratings," "-Investment in Fixed-Income
Securities Rated Baa and BBB," "-Investment in Lower-Rated Fixed-Income
Securities" and Appendix A.

With respect to its investments in sovereign debt obligations and non-U.S.
corporate fixed-income securities, the Fund will emphasize investments in
countries that are considered at the time of purchase to be emerging or
developing countries by the World Bank. A substantial part of the Fund's
investment focus is expected to be in securities or obligations of Argentina,
Brazil, Mexico, Morocco, the Philippines, Russia and Venezuela because these
countries are now, or are expected by Alliance at a future date to be, the
principal participants in debt restructuring programs (including, in the case
of Argentina, Mexico, the Philippines and Venezuela, issuers of currently
outstanding Brady Bonds) that, in Alliance's opinion, will provide the most
attractive investment opportunities for the Fund. Alliance anticipates that
other countries that will provide investment opportunities for the Fund
include, among others, Bolivia, Costa Rica, the Dominican Republic, Ecuador,
Jordan, Nigeria, Panama, Peru, Poland, Thailand, Turkey and Uruguay. See
"Additional Investment Practices-Brady Bonds."

The Fund may invest up to 30% of its total assets in the sovereign debt
obligations and corporate fixed-income securities of issuers in any one of
Argentina, Brazil, Mexico, Morocco, the Philippines, Russia or Venezuela, each
of which is an emerging market country, and the Fund will limit investments in
the sovereign debt obligations of each such country (or of any other single
foreign country) to less than 25% of its total assets. The Fund expects that it
will not invest more than 10% of its total assets in the sovereign debt
obligations and corporate fixed-income securities of issuers in any other
single foreign country and is not required to invest any minimum amount of its
assets in the securities or obligations of issuers located in any particular
country.

A substantial portion of the Fund's investments will be in (i) securities which
were initially issued at discounts from their face values ("Discount
Obligations") and (ii) securities purchased by the Fund at a price less than
their stated face amount or, in the case of Discount Obligations, at a price
less than their issue price plus the portion of "original issue discount"
previously accrued thereon, i.e., purchased at a "market discount."

The Fund may also (i) invest in structured securities, (ii) invest in fixed and
floating rate loans that are arranged through private negotiations between an
issuer of sovereign debt obligations and one or more financial institutions and
in participations in and assignments of these types of loans, (iii) invest in
other investment companies, (iv) invest in warrants, (v) enter into interest
rate swaps, caps and floors, (vi) enter into forward commitments for the
purchase or sale of securities, (vii) make secured loans of its portfolio
securities, (viii) enter into repurchase agreements pertaining to the types of
securities in which it invests, (ix) use reverse repurchase agreements and
dollar rolls, (x) enter into standby commitment agreements, (xi) make short
sales of securities or maintain a short position, (xii) write put and call
options on securities of the types in which it is permitted to invest and write
call options for cross-hedging purposes, (xiii) purchase and sell
exchange-traded options on any securities index composed of the types of
securities in which it may invest, and (xiv) invest in variable, floating and
inverse floating rate instruments. The Fund may also at any time, with respect
to up to 35% of its total assets, temporarily invest funds awaiting
reinvestment or held for reserves for dividends and other distributions to
shareholders in U.S. Dollar-denominated money market instruments. For
additional information on the use, risks and costs of these practices, see
"Additional Investment Practices." While the Fund does not currently intend to
do so, it reserves the right to borrow an amount not to exceed one-third of the
Fund's assets less liabilities (other than the amount borrowed). See "Risk
Considerations-Effects of Borrowing."

ALLIANCE GLOBAL STRATEGIC INCOME TRUST

Alliance Global Strategic Income Trust, Inc. ("Global Strategic Income") is a
non-diversified investment company that 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."

CORPORATE BOND FUNDS

CORPORATE BOND PORTFOLIO
Corporate Bond Portfolio ("Corporate Bond") is a diversified investment company
that seeks primarily to maximize income over the long term consistent with
providing reasonable safety in the value of each shareholder's investment, and
secondarily to increase its capital through appreciation of its investments in
order to preserve and, if possible, increase the purchasing power of each
shareholder's investment. In pursuing these objectives, the Fund's policy is to
invest in readily marketable securities which give promise of relatively
attractive yields, but which do not involve substantial risk of loss of
capital. The Fund follows a policy of maintaining at least 65% of its net
assets invested in debt securities. Such objectives and policies cannot be
changed without the approval of the shareholders. Although the Fund also
follows a policy of maintaining at least 65% of its total assets invested in
corporate bonds, it is permitted to invest in securities of non-corporate
issuers.

The Fund follows an investment strategy which in certain respects can be
regarded as more aggressive than the strategies of many other funds investing
primarily in corporate bonds. In this regard, the Fund's investment portfolio
normally tends to have a relatively long average maturity and duration, and to
place significant emphasis on both foreign corporate and sovereign debt
obligations and corporate bonds that are expected to benefit from improvement
in their issuers' credit fundamentals. Consequently, in recent years the Fund
frequently has experienced greater net asset value volatility than most other
corporate bond funds. Prospective investors in the Fund should therefore be
prepared to accept the degree of volatility associated with its investment
strategy. See "Risk Considerations."

There is no minimum rating requirement applicable to the Fund's investments in
fixed-income securities, except the Fund expects that it will not retain a
security that is downgraded below B, or if unrated, determined by Alliance to
have undergone similar credit quality deterioration subsequent to purchase.
Currently, the Fund believes its objectives and policies may best be
implemented by investing at least 65% of its total assets in fixed-income
securities considered investment grade or higher. The remainder of the Fund's
assets may be invested in lower-rated fixed-income securities. See "Risk
Considerations-Securities Ratings," "-Investment in Fixed-Income Securities
Rated Baa and BBB," "-Investment in Lower-Rated Fixed-Income Securities" and
Appendix A. During the fiscal year ended June 30, 1997, on a weighted average
basis, the percentages of the Fund's assets invested in securities rated (or
considered by Alliance to be of equivalent quality to securities rated) in
particular rating categories were 29% in A and above, 41% in Baa or BBB, 14% in
Ba or BB, and 12% in B. The Fund did not invest in securities rated below B by
each of Moody's, S&P, Duff & Phelps and Fitch or, if not rated, considered by
Alliance to be of equivalent quality to securities so rated.

The Fund may invest up to 50% of the value of its total assets in foreign debt
securities which will consist primarily of corporate fixed-income securities
and sovereign debt obligations. Not more than 15% of the Fund's total assets
may be invested in sovereign debt obligations in the form of foreign
government loan participations and assignments, which may be lower rated and
considered to be predominantly speculative as regards the issuer's capacity to
pay interest and repay principal. All of the Fund's investments, whether
foreign or domestic, are U.S. Dollar-denominated.

Within the foregoing limitations, the Fund has complete flexibility as to the
types of securities in which it will invest and the relative proportions
thereof, and the Fund plans to vary the proportions of its holdings of long-
and short-term fixed-income securities and of equity securities in order to
reflect its assessment of prospective cyclical changes even if such action may
adversely affect current income. However, substantially all of the Fund's
investments will be income producing. The average weighted maturity of the
Fund's portfolio of fixed-income securities is expected to vary between one
year or less and 30 years.

ALLIANCE HIGH YIELD FUND

ALLIANCE HIGH YIELD FUND, INC. ("High Yield") is a diversified management
investment company that seeks primarily to achieve high total return by
maximizing current income and, to the extent consistent with that objective,
capital appreciation. The Fund will pursue this objective by investing
primarily in a diversified mix of high yield, below investment grade
fixed-income securities involving greater volatility of price and risk of
principal and income than higher quality fixed-income securities. The below
investment grade debt securities in which the Fund may invest are known as
"junk bonds."

The Fund attempts to achieve its objective by investing primarily in a
diversified mix of high yield, below investment grade fixed-income securities
involving greater volatility of price and risk of principal and income than
higher fixed-income securities. The Fund will be managed to maximize current
income by taking advantage of market developments, yield disparities and
variations in the creditworthiness of issuers. The Fund will use various
strategies in attempting to achieve its objective.

Under normal circumstances, at least 65% of the Fund's total assets will be
invested in high yield fixed-income securities rated below investment grade by
two or more NRSROs (i.e., rated lower than Baa by Moody's or lower than BBB or
lower by S&P) or unrated but deemed by Alliance to be equivalent to such
lower-rated securities. The Fund will not, however, invest more than 10% of its
total assets in (i) fixed-income securities which are rated lower than B3 or B-
or their equivalents by two or more NRSROs or if unrated are of equivalent
quality as determined by Alliance, and (ii) money market instruments of any
entity which has an outstanding issue of unsecured debt that is rated lower
than B3 or B- or their equivalents by two or more NRSROs or if unrated is of
equivalent quality as determined by Alliance.

As of August 31, 1997, on a weighted average basis, the percentages of the
Fund's assets invested in securities rated (or considered by Alliance to be of
equivalent quality to securities rated) in particular rating categories were
12% in A and above, 3% in Ba or BB, 53% in B 2% in CCC and 13% in unrated
securities. The Fund did not invest in securities rated below CCC by each of
Moody's, S&P, Duff & Phelps and Fitch or, if not rated, considered by
Alliance to be of equivalent quality to securities so rated.

Certain of the Fund's investments will be in fixed-income securities which are
providing high current yields because of risks other than credit. For example,
the Fund may invest in securities which have prepayment risks, and non-U.S.
dollar denominated foreign securities, which have currency risks.

See Appendix A, "Bond Ratings," for a description of each rating category. In
the event that any securities held by the Fund fall below those ratings, the
Fund will not be obligated to dispose of such securities and may continue to
hold such securities if, in the opinion of Alliance, such investment is
considered appropriate under the circumstances.

A portion of the Fund's assets are also expected to be invested in foreign
securities, and the Fund may buy and sell foreign currencies principally for
the purpose of preserving the value of foreign securities or in anticipation of
purchasing foreign securities. See "Risk Considerations-Foreign Investment" and
"-Currency Considerations."

In addition, and although not to be emphasized, in furtherance of its
investment objective, the Fund may (i) invest in mortgage-backed and
asset-backed securities, (ii) enter into repurchase agreements, (iii) invest in
loan participations and assignments of loans to corporate, governmental, or
other borrowers originally made by institutional lenders or lending syndicates,
(iv) enter into forward commitments for the purchase or sale of securities and
purchase and sell securities on a when-issued or delayed delivery basis, (v)
write covered put and call options on fixed-income securities, securities
indices and foreign currencies and purchase put or call options on fixed-income
securities, securities indices and foreign curencies, (vi) purchase and sell
futures contracts and related options on debt securities and on indices of debt
securities, (vii) enter into contracts for the purchase or sale of a specific
currency for hedging purposes only, and (viii) lend portfolio securities. For
additional information on the uses, risks and costs of these practices, see
"Additional Investment Practices."

In addition to the foregoing, the Fund may from time to time make investments
in (i) U.S. Government securities, (ii) certificates of deposit, bankers'
acceptances, bank notes, time deposits and interest bearing savings deposits
issued or guaranteed by certain domestic and foreign banks, (iii) commercial
paper (rated at least A-1 by S&P or Prime-1 by Moody's or, if not rated, issued
by domestic or foreign companies having high quality outstanding debt
securities) and participation interests in loans extended by banks to such
companies, (iv) corporate debt obligations with remaining maturities of less
than one year rated at least high quality as well as corporate debt obligations
rated at least high grade provided the corporation also has outstanding an
issue of commercial paper rated at least A-1 by S&P or Prime-1 Moody's, and
(v) floating rate or master demand notes.

ADDITIONAL INVESTMENT PRACTICES

Some or all of the Funds may engage in the following investment practices to
the extent described in this Prospectus. See the Statement of Additional
Information of each Fund for a further discussion of the uses, risks and costs
of engaging in these practices.

DERIVATIVES. The Funds may use derivatives in furtherance of their 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 Funds 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 the Funds is permitted to use
derivatives for one or more of these purposes, although most of the Funds
generally use derivatives primarily as direct investments in order to enhance
yields and broaden portfolio diversification. 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. A Fund may take a significant
position in those derivatives that are within its investment policies if, in
Alliance's judgement, this represents the most effective response to current or
anticipated market conditions. The MULTI-MARKET FUNDS, HIGH YIELD and GLOBAL
STRATEGIC INCOME in particular generally make extensive use of carefully
selected forwards and other derivatives to achieve the currency hedging that is
an integral part of their investment strategy. Alliance's use of derivatives is
subject to continuous risk assessment and control from the standpoint of each
Fund's investment objectives and policies.

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 "Mortgage-Related Securities" and "Other
Asset-Backed 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 a 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 a 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 a 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 Funds consider the creditworthiness of each
counterparty to a privately negotiated derivative in evaluating potential
credit risk.

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

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

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 a 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, a 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 USED BY THE FUNDS. Following is a description of specific
derivatives currently used by one or more of the Funds.

OPTIONS ON SECURITIES. In purchasing an option on securities, a 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,
a 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 a Fund were permitted to expire without being
sold or exercised, its premium would represent a loss to the Fund.

A 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, none of
the Funds will write uncovered call or put options on securities. A call option
written by a 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 a 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, a
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 a 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.

A 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." A 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 other
hedging strategies.

SHORT-TERM U.S. GOVERNMENT, MORTGAGE SECURITIES INCOME, NORTH AMERICAN
GOVERNMENT INCOME, GLOBAL DOLLAR GOVERNMENT, GLOBAL STRATEGIC INCOME, CORPORATE
BOND and HIGH YIELD generally purchase or write privately negotiated options on
securities. A Fund that does so 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 a 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. Neither MORTGAGE SECURITIES
INCOME nor CORPORATE BOND will purchase an option on a security if, immediately
thereafter, the aggregate cost of all outstanding options purchased by such
Fund would exceed 2% of the Fund's total assets. Nor will either such Fund
write an option if, immediately thereafter, the aggregate value of the Fund's
portfolio securities subject to outstanding options would exceed 15% of the
Fund's total assets.

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. A 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 a Fund and against increases in the
U.S. Dollar cost of securities to be acquired. The purchase of an option on a
foreign currency may constitute an effective hedge against fluctuations in
exchange rates, although if rates move adversely, a Fund may forfeit the entire
amount of the premium plus related transaction costs.

RIGHTS AND WARRANTS. GLOBAL DOLLAR GOVERNMENT may invest in warrants, and
GLOBAL STRATEGIC INCOME may invest in rights and warrants, which are option
securities permitting their holders to subscribe for other securities. GLOBAL
DOLLAR GOVERNMENT may invest in warrants, and GLOBAL STRATEGIC INCOME 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. GLOBAL STRATEGIC INCOME may invest up
to 20% of its total assets in rights and warrants.

FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. Futures contracts that a
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 a
Fund will be traded on U.S. or foreign exchanges and, except with respect to
SHORT-TERM U.S. GOVERNMENT and GLOBAL STRATEGIC INCOME, will be used only for
hedging purposes.

LIMITED MATURITY GOVERNMENT, WORLD INCOME, SHORT-TERM MULTI-MARKET,
MULTI-MARKET STRATEGY, NORTH AMERICAN GOVERNMENT INCOME and GLOBAL STRATEGIC
INCOME 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. MORTGAGE SECURITIES INCOME will
not write or purchase options on futures contracts. Nor will LIMITED MATURITY
GOVERNMENT, MORTGAGE SECURITIES INCOME, WORLD INCOME, SHORT-TERM MULTI-MARKET,
MULTI-MARKET STRATEGY, NORTH AMERICAN GOVERNMENT INCOME or GLOBAL STRATEGIC
INCOME 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,
MORTGAGE SECURITIES INCOME and GLOBAL STRATEGIC INCOME 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.

HIGH YIELD will not purchase or sell futures contracts or options on futures
contracts unless either (i) the futures contracts or options thereon are for
"bona fide hedging" purposes (as that term is defined under the Commodities
Futures Trading Commission regulations) or (ii) if for other purposes, the sum
of amounts of initial margin deposits and premiums required to establish
non-hedging positions would not exceed 5% of the Fund's liquidation value.

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.
LIMITED MATURITY GOVERNMENT and GLOBAL STRATEGIC INCOME intend 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 each Fund invests are linked).

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. Each Fund that purchases or sells
forward contracts on foreign currencies ("forward contracts") attempts to
minimize the risk to it from adverse changes in the relationship between the
U.S. Dollar and other currencies. A 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 a 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,
a 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. In some cases, a forward
commitment may be conditioned upon the occurrence of a subsequent event, such
as approval and consummation of a merger, corporate reorganization or debt
restructuring or approval of a proposed financing by appropriate authorities
(i.e., a "when, as and if issued" trade).

When forward commitments with respect to fixed-income securities are
negotiated, the price, which is generally expressed in yield terms, is fixed at
the time the commitment is made, but payment for and delivery of the securities
take place at a later date. 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 a 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 a Fund to protect against anticipated
changes in interest rates and prices. For instance, in periods of rising
interest rates and falling bond prices, a 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, a 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
LIMITED MATURITY GOVERNMENT, NORTH AMERICAN GOVERNMENT INCOME, GLOBAL DOLLAR
GOVERNMENT or GLOBAL STRATEGIC INCOME if, as a result, the Fund's aggregate
forward commitments under such transactions would be more than 25% of the total
assets of GLOBAL STRATEGIC INCOME and 30% of the total assets of each of the
other Funds.

A Fund's right to receive or deliver a security under a forward commitment may
be sold prior to the settlement date. The Funds enter into forward commitments,
however, only with the intention of actually receiving securities or delivering
them, as the case may be. If a 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). Each Fund that may enter
into interest rate swap, cap or floor transactions expects to do so 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 Funds do not intend to use these transactions in a speculative manner.

Interest rate swaps involve the exchange by a 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. A
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 a Fund that is permitted to enter into such transactions.
SHORT-TERM MULTI-MARKET, MULTI-MARKET STRATEGY, NORTH AMERICAN GOVERNMENT
INCOME and GLOBAL STRATEGIC INCOME may enter into interest rate swaps involving
payments to the same currency or in different currencies. SHORT-TERM U.S.
GOVERNMENT, LIMITED MATURITY GOVERNMENT, MORTGAGE SECURITIES INCOME, GLOBAL
DOLLAR GOVERNMENT, GLOBAL STRATEGIC INCOME and CORPORATE BOND 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 NRSRO. Each of SHORT-TERM
MULTI-MARKET, MULTI-MARKET STRATEGY, NORTH AMERICAN GOVERNMENT INCOME and
GLOBAL STRATEGIC INCOME 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
counterparty has outstanding prime commercial paper; or (ii) for transactions
with maturities greater than one year, the counterparty has high quality debt
securities outstanding.

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
counterparty default, the risk of loss to a 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 a 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
Funds 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. No Fund will enter into a standby
commitment with a remaining term in excess of 45 days. The Funds will limit
their investments in standby commitments so that the aggregate purchase price
of the securities subject to the commitments does not exceed 20% or 25% with
respect to GLOBAL STRATEGIC INCOME, of their respective 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, a 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. Each Fund that invests in such
commercial paper may do so without limitation. A 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 a 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. A 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

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 a Fund that holds the securities.

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

MORTGAGE-RELATED SECURITIES. The mortgage-related securities in which a 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 a 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 the borrowers on the underlying mortgages fail to make their
mortgage payments. The ratings of such non-governmental securities are
generally dependent upon the ratings of the providers of such liquidity and
credit support and would be adversely affected if the rating of such an
enhancer were downgraded. 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.

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. Each class of a CMO, often referred
to as a "tranche," is issued at a specific coupon rate and has a stated
maturity or final distribution date. Principal prepayments on collateral
underlying a CMO may cause one or more tranches of the CMO to be retired
substantially earlier than the stated maturities or final distribution dates of
the collateral. 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.

Stripped mortgage-related securities (SMRS) are mortgage-related securities
that are usually structured with two classes of securities collateralized by a
pool of mortgages or a pool of mortgaged-backed bonds or pass-through
securities, with each class receiving different proportions of the principal
and interest payments from the underlying assets. A common type of SMRS has one
class of interest-only securities (IOs) receiving all of the interest payments
from the underlying assets; while the other class of securities, principal-only
securities (POs), receives all of the principal payments from the underlying
assets. IOs and POs are extremely sensitive to interest rate changes and are
more volatile than mortgage-related securities that are not stripped. IOs tend
to decrease in value as interest rates decrease, while POs generally increase
in value as interest rates decrease. If prepayments of the underlying mortgages
are greater than anticipated, the amount of interest earned on the overall pool
will decrease due to the decreasing principal balance of the assets. Changes in
the values of IOs and POs can be substantial and occur quickly, such as
occurred in the first half of 1994 when the value of many POs dropped
precipitously due to increases in interest rates. For this reason, none of the
Funds relies on IOs and POs as the principal means of furthering its investment
objective.

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, a 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 causes these securities to experience significantly greater price
and yield volatility than is 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, a 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 a Fund to reinvest the prepayment proceeds in investments
yielding the higher current interest rate), as described above the rate of
mortgage prepayments and early payments of mortgage-related securities
generally tend to decline during a period of rising interest rates.

Although the values of ARMS may not be affected as much as the values of
fixed-rate mortgage securities by rising interest rates, 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 index,
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 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 a Fund's categorization of U.S. Government securities. The
Funds disagree 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 a 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 a 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. Each 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 each Fund
that is permitted to invest in such securities.

GLOBAL STRATEGIC INCOME and CORPORATE BOND 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 AND 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.

A 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 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 GLOBAL DOLLAR GOVERNMENT,
GLOBAL STRATEGIC INCOME and CORPORATE BOND may invest represent interests in
entities organized and operated solely for the purpose of restructuring the
investment characteristics of sovereign debt obligations, with respect to
GLOBAL DOLLAR GOVERNMENT and GLOBAL STRATEGIC INCOME, or foreign government
securities, with respect to CORPORATE BOND. 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. GLOBAL DOLLAR GOVERNMENT may invest
up to 25% of its total assets, and GLOBAL STRATEGIC INCOME and CORPORATE BOND
may invest without limit, in these types of structured securities.

LOAN PARTICIPATIONS AND ASSIGNMENTS. A 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. A 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. A 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 a 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 a 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, with respect to GLOBAL
DOLLAR GOVERNMENT and GLOBAL STRATEGIC INCOME, or foreign government
securities, with respect to CORPORATE BOND and HIGH YIELD, 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 securities 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 a 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 investments for purposes of valuing the Fund's
portfolio and calculating its net asset value.

GLOBAL DOLLAR GOVERNMENT and GLOBAL STRATEGIC INCOME may invest up to 25%, and
CORPORATE BOND may invest up to 15%, of their total assets, in loan
participations and assignments.

The government that is the borrower on the loan will be considered by a 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"). 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 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 non-convertible debt securities, which provide a stable
stream of income with generally higher yields than those of equity securities
of the same or similar issuers. 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 from increases in the market price of
the underlying common stock. Convertible debt securities that are rated Baa or
lower by Moody's or BBB 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 a 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 a Fund owns or
has the right to obtain without payment securities identical to those sold
short. SHORT-TERM U.S. GOVERNMENT and GLOBAL DOLLAR GOVERNMENT each may make
short sales only against the box and only for the purpose of deferring
realization of gain or loss for U.S. federal income tax purposes. In addition,
each of these Funds may not make a short sale if, as a result, more than 10% of
net assets (taken at market value), with respect to GLOBAL DOLLAR GOVERNMENT,
and 10% of total assets, with respect to SHORT-TERM U.S. GOVERNMENT, would be
held as collateral for short sales.

GLOBAL STRATEGIC INCOME 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, GLOBAL STRATEGIC INCOME 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 a 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 a 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 a Fund. See "Dividends, Distributions and Taxes" in the
relevant 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 a Fund to
keep all of its assets at work while retaining "overnight" flexibility in
pursuit of investments of a longer-term nature. A 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, a 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, a Fund might be delayed
in, or prevented from, selling the collateral for its benefit. There is no
percentage restriction on any Fund's ability to enter into repurchase
agreements, except that SHORT-TERM U.S. GOVERNMENT may enter into repurchase
agreements on not more than 25% of its total assets. The Funds may enter into
repurchase agreements with member banks of the Federal Reserve System or
"primary dealers" (as designated by the Federal Reserve Bank of New York),
although LIMITED MATURITY GOVERNMENT, WORLD INCOME, SHORT-TERM MULTI-MARKET,
MULTI-MARKET STRATEGY, NORTH AMERICAN GOVERNMENT INCOME and GLOBAL DOLLAR
GOVERNMENT currently enter into repurchase agreements only with their
custodians and such primary dealers.

REVERSE REPURCHASE AGREEMENTS AND DOLLAR ROLLS. Reverse repurchase agreements
involve sales by a 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 a 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 a Fund of the reverse repurchase transaction is less than the
cost of otherwise obtaining the cash.

Dollar rolls involve sales by a 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, a Fund forgoes principal and interest paid on the securities.
A 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 a 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, a 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 Funds. SHORT-TERM U.S. GOVERNMENT may enter
into reverse repurchase agreements with commercial banks and registered
broker-dealers in order to increase income, in an amount up to 33-1/3% of its
total assets. Under normal circumstances, LIMITED MATURITY GOVERNMENT does not
expect to engage in reverse repurchase agreements and dollar rolls with respect
to greater than 50% of its total assets. Reverse repurchase agreements and
dollar rolls together with any borrowings by GLOBAL DOLLAR GOVERNMENT will not
exceed 33% of its total assets less liabilities (other than amounts borrowed).
GLOBAL STRATEGIC INCOME 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 GLOBAL STRATEGIC INCOME will not
exceed 25% of its total assets. See "Risk Considerations-Effects of Borrowing."

LOANS OF PORTFOLIO SECURITIES. A Fund may make secured loans of portfolio
securities to brokers, dealers and financial institutions, provided that cash,
liquid high grade debt securities or bank letters of credit 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 who has delivered equivalent collateral. Each 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. A Fund
may pay reasonable finders', administrative and custodial fees in connection
with a loan. A Fund will not lend portfolio securities in excess of 50%, with
respect to HIGH YIELD, 25%, with respect to SHORT-TERM U.S. GOVERNMENT and
GLOBAL STRATEGIC INCOME, and 20%, with

respect to each of LIMITED MATURITY GOVERNMENT, MORTGAGE SECURITIES INCOME,
WORLD INCOME, SHORT-TERM MULTI-MARKET, MULTI-MARKET STRATEGY, NORTH AMERICAN
GOVERNMENT INCOME and GLOBAL DOLLAR GOVERNMENT, of its total assets, nor will a
Fund lend portfolio securities to any officer, director, employee or affiliate
of the Fund or Alliance.

ILLIQUID SECURITIES. Subject to any more restrictive applicable investment
policies, none of the Funds will 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 each Fund's Rule 144A portfolio securities under the supervision
of the Directors of that Fund. A Fund that invests in illiquid securities may
not be able to sell such securities and may not be able to realize their full
value upon sale.

INVESTMENT IN OTHER INVESTMENT COMPANIES. GLOBAL DOLLAR GOVERNMENT may invest
in other investment companies whose investment objectives and policies are
consistent with those of the Fund. Under the 1940 Act, the Fund may invest not
more than 10% of its total assets in securities of other investment companies.
In addition, under the 1940 Act the Fund may not own more than 3% of the total
outstanding voting stock of any investment company and not more than 5% of the
value of the Fund's total assets may be invested in the securities of any
investment company. If the Fund acquired shares in investment companies,
shareholders would bear both their proportionate share of expenses in the Fund
(including management and advisory fees) and, indirectly, the expenses of such
investment companies (including management and advisory fees).

FUTURE DEVELOPMENTS. A 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, each Fund may invest in
certain types of short-term, liquid, high grade or high quality (depending on
the Fund) 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. For Funds that may invest in foreign countries, 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 a Fund may invest while in a temporary defensive position,
see the Fund's Statement of Additional Information.

PORTFOLIO TURNOVER. Portfolio turnover rates are set forth under "Financial
Highlights." These rates of portfolio turnover are greater than those of most
other investment companies. A high rate of portfolio turnover involves
correspondingly greater brokerage and other 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 each Fund's Statement of Additional
Information.

CERTAIN FUNDAMENTAL INVESTMENT POLICIES
Each Fund has adopted certain fundamental investment policies listed below,
which may not be changed without the approval of its shareholders. Additional
investment restrictions with respect to a Fund are set forth in its Statement
of Additional Information.

SHORT-TERM U.S. GOVERNMENT may not (i) invest more than 5% of its total assets
in the securities of any one issuer (other than U.S. Government securities and
repurchase agreements relating thereto), although up to 25% of the Fund's total
assets may be invested without regard to this restriction, or (ii) invest 25%
or more of its total assets in the securities of any one industry.

U.S. GOVERNMENT may not (i) borrow money except from banks for temporary or
emergency purposes and then only in an amount not exceeding 5% of the value of
its total assets at the time the borrowing is made, (ii) make loans to other
persons, (iii) effect a short sale of any security, (iv) purchase securities on
margin, but it may obtain such short-term credits as may be necessary for the
clearance of purchases and sales of securities, or (v) write, purchase or sell
puts, calls or combinations thereof.

LIMITED MATURITY GOVERNMENT may not (i) invest more than 5% of its total assets
in the securities of any one issuer or own more than 10% of the outstanding
voting securities of such issuer (other than U.S. Government securities),
except that up to 25% of the value of the Fund's total assets may be invested
without regard to the 5% and 10% limitations, (ii) invest 25% or more of its
total assets in securities of companies engaged principally in any one
industry, except that this restriction does not apply to investments in the
mortgage and mortgage-financed industry (in which more than 25% of the value of
the Fund's total assets will, except for temporary defensive positions, be
invested) or U.S. Government securities, (iii) borrow money except from banks
for emergency or temporary purposes in an amount not exceeding 5% of the value
of the total assets of the Fund, except that the Fund may engage in reverse
repurchase agreements and dollar rolls in an amount up to 50% of the Fund's
total assets, and (iv) pledge, hypothecate, mortgage or otherwise encumber its
assets, except to secure permitted borrowings.

MORTGAGE SECURITIES INCOME may not (i) invest more than 5% of the value of its
total assets in the securities of any one issuer (other than U.S. Government
securities), except that up to 25% of the value of the Fund's total assets may
be invested without regard to this limitation, (ii) invest more than 25% of the
value of its total assets in the securities of issuers conducting their
principal business activities in a single industry, except that this limitation
shall not apply to investments in the mortgage and mortgage-financed industry
(in which more than 25% of the value of the Fund's total assets will, except
for temporary defensive positions, be invested) or U.S. Government securities,
(iii) borrow money except from banks for temporary or emergency purposes,
including the meeting of redemption requests which might require the untimely
disposition of securities, borrowing in the aggregate may not exceed 15%, and
borrowing for purposes other than meeting redemptions may not exceed 5% of the
value of the Fund's total assets (including the amount borrowed) less
liabilities (not including the amount borrowed) at the time the borrowing is
made, outstanding borrowings in excess of 5% of the value of the Fund's total
assets will be repaid before any subsequent investments are made, (iv) pledge,
hypothecate, mortgage or otherwise encumber its assets, except in an amount of
not more than 15% of the value of its total assets to secure borrowings for
temporary or emergency purposes and except as provided in (vi) below, provided,
however, that this limitation does not apply to deposits made in connection
with the entering into and holding of interest rate futures contracts, (v)
invest more than 10% of the value of its total assets in the aggregate in
illiquid securities or other illiquid investments and repurchase agreements
maturing in more than seven days, or (vi) lend its portfolio securities if
immediately after such a loan more than 20% of the value of the Fund's total
assets would be subject to such loans.

WORLD INCOME may not (i) invest 25% or more of its total assets in securities
of companies engaged principally in any one industry other than the banking
industry except that this restriction does not apply to U.S. Government
securities, (ii) borrow money except from banks for temporary or emergency
purposes, including the meeting of redemption requests which might require the
untimely disposition of securities; borrowing in the aggregate may not exceed
15%, and borrowing for purposes other than meeting redemptions may not exceed
5% of the value of the Fund's total assets (including the amount borrowed) less
liabilities (not including the amount borrowed) at the time the borrowing is
made; securities will not be purchased while borrowings in excess of 5% of the
value of the Fund's total assets are outstanding, or (iii) pledge, hypothecate,
mortgage or otherwise encumber its assets, except to secure permitted
borrowings.

SHORT-TERM MULTI-MARKET may not (i) invest 25% or more of its total assets in
securities of companies engaged principally in any one industry other than the
banking industry, except that this restriction does not apply to U.S.
Government securities, (ii) borrow money except from banks for temporary or
emergency purposes, including the meeting of redemption requests which might
require the untimely disposition of securities; borrowing in the aggregate may
not exceed 15%, and borrowing for purposes other than meeting redemptions may
not exceed 5% of the value of the Fund's total assets (including the amount
borrowed) less liabilities (not including the amount borrowed) at the time the
borrowing is made; securities will not be purchased while borrowings in excess
of 5% of the value of the Fund's total assets are outstanding, or (iii) pledge,
hypothecate, mortgage or otherwise encumber its assets, except to secure
permitted borrowings.

MULTI-MARKET STRATEGY may not (i) invest 25% or more of its total assets in
securities of companies engaged principally in any one industry other than the
banking industry, except that this restriction does not apply to U.S.
Government securities, (ii) 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 (iii) pledge, hypothecate,
mortgage or otherwise encumber its assets, except to secure permitted
borrowings.

NORTH AMERICAN GOVERNMENT INCOME may not (i) invest 25% or more of its total
assets in securities of companies engaged principally in any one industry
except that this restriction does not apply to U.S. Government securities, (ii)
borrow money, except that 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 (iii) pledge, hypothecate, mortgage or
otherwise encumber its assets, except to secure permitted borrowings.

GLOBAL DOLLAR GOVERNMENT may not (i) invest 25% or more of its total assets in
the securities of issuers conducting their principal business activities in any
one industry, except that this restriction does not apply to U.S. Government
securities, (ii) purchase more than 10% of any class of the voting securities
of any one issuer, (iii) 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, (b) borrow
for temporary or emergency purposes in an amount not exceeding 5% of the value
of the total assets of the Fund, and (c) enter into reverse repurchase
agreements and dollar rolls, (iv) pledge, hypothecate, mortgage or otherwise
encumber its assets, except to secure permitted borrowings, or (v) purchase a
security if, as a result (unless the security is acquired pursuant to a plan of
reorganization or an offer of exchange), the Fund would own more than 3% of the
total outstanding voting stock of any investment company or more than 5% of the
value of the Fund's net assets would be invested in securities of any one or
more investment companies.

GLOBAL STRATEGIC INCOME 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, (b) borrow for temporary or emergency purposes in an amount not exceeding
5% of the value of the total assets of the Fund, and (c) enter into reverse
repurchase agreements and dollar rolls, or (ii) pledge, hypothecate, mortgage
or otherwise encumber its assets, except to secure permitted borrowings.

CORPORATE BOND may not (i) invest more than 5% of its total assets in the
securities of any one issuer other than U.S. Government securities, or (ii) own
more than 10% of the outstanding voting securities of any issuer.

HIGH YIELD may not (i) invest in any one industry if that investment would make
the Fund's holding in that industry exceed 25% of the Fund's total assets and
(ii) will not make an investment unless, when considering all its other
investments, 75% of the value of its assets would consist of cash, cash items,
U.S. Government Securities, securities of other investment companies and other
securities.

RISK CONSIDERATIONS

FIXED-INCOME SECURITIES. The value of each Fund's shares will fluctuate with
the value of its investments. The value of each Fund's investments will change
as the general level of interest rates fluctuates. During periods of falling
interest rates, the values of a Fund's securities will generally rise, although
if falling interest rates are viewed as a precursor to a recession, the values
of a Fund's securities may fall along with interest rates. Conversely, during
periods of rising interest rates, the values of a 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 a 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 a 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 a
Fund.

U.S. CORPORATE FIXED-INCOME SECURITIES. The U.S. corporate fixed-income
securities in which GLOBAL DOLLAR GOVERNMENT and HIGH YIELD invest 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 Funds 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 Funds' 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, a Fund whose investment portfolio includes such
securities 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 a
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. A 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 a Fund to adopt special
procedures or seek local governmental approvals or other actions, any of which
may involve additional costs to a Fund. The liquidity of a 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 a 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, a Fund could lose its entire investment in
securities in the country involved. In addition, laws in foreign countries
governing business organizations, bankruptcy and insolvency may provide less
protection to security holders such as the Fund than that provided by U.S. laws.

WORLD INCOME may invest a portion of its net assets in securities denominated
in the ECU. There are risks associated with concentration of investments in a
particular region of the world such as Western Europe since the economies and
markets of the countries in the region tend to be interrelated and may be
adversely affected by political, economic and other events in a similar manner.

Alliance believes that, except for currency fluctuations between the U.S.
Dollar and the Canadian Dollar, the matters described above are not likely to
have a material adverse effect on NORTH AMERICAN GOVERNMENT INCOME'S
investments in the securities of Canadian issuers or investments denominated in
Canadian Dollars. The factors described above are more likely to have a
material adverse effect on the Fund's investments in the securities of Mexican
and other non-Canadian foreign issuers, including investments in securities
denominated in Mexican Pesos or other non-Canadian foreign currencies. If not
hedged, however, currency fluctuations could affect the unrealized appreciation
and depreciation of Canadian Government securities as expressed in U.S. Dollars.

CURRENCY CONSIDERATIONS. Those Funds that invest some portion of their assets
in securities denominated in, and receive revenues in, foreign currencies will
be adversely affected by reductions in the value of those currencies relative
to the U.S. Dollar. These changes will affect a Fund's net assets,
distributions and income. If the value of the foreign currencies in which a
Fund receives income falls relative to the U.S. Dollar between receipt of the
income and the making of Fund distributions, a 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 a
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, a 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 GLOBAL DOLLAR GOVERNMENT and GLOBAL
STRATEGIC INCOME will invest. Reduced secondary market liquidity may have an
adverse effect on the market price and a 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 a 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 Funds 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 Funds 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 Funds are 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 Funds' investment objectives.
The Funds 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. A Fund's loan agreements provide for additional
borrowings and for repayments and reborrowings from time to time, and each Fund
that may borrow 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 a 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 a Fund's shareholders. These include a higher
volatility of the net asset value of a Fund's shares of common stock and the
relatively greater effect on the net asset value of the shares. So long as a
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
a 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, a Fund's use of leverage would result in
a lower rate of return than if a 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 a
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 a 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 MULTI-MARKET
STRATEGY, GLOBAL STRATEGIC INCOME or NORTH AMERICAN GOVERNMENT INCOME could
adversely affect the Funds' shareholders, as noted above, or in anticipation of
such changes, each 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. Each Fund may also reduce the degree
to which it is leveraged by repaying amounts borrowed.

Under the 1940 Act, a 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%, a 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 a 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%. A 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 a Fund to
sell portfolio securities at times considered disadvantageous by Alliance and
such sales could cause the Fund to incur related transaction costs and to
realize gains on securities held for less than three months. Until the start
of a Fund's first tax year beginning after August 5, 1997, not more than 30%
of a 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. Such gains would limit the ability
of a Fund to sell other securities held for less than three months that a 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."

Each of MULTI-MARKET STRATEGY, NORTH AMERICAN GOVERNMENT INCOME, GLOBAL
STRATEGIC INCOME and GLOBAL DOLLAR GOVERNMENT may borrow to repurchase its
shares or to meet redemption requests. In addition, each 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."
SHORT-TERM U.S. GOVERNMENT, LIMITED MATURITY GOVERNMENT, MULTI-MARKET STRATEGY,
NORTH AMERICAN GOVERNMENT INCOME, GLOBAL DOLLAR GOVERNMENT and GLOBAL STRATEGIC
INCOME may also borrow through the use of reverse repurchase agreements, and
GLOBAL DOLLAR GOVERNMENT, LIMITED MATURITY GOVERNMENT and GLOBAL STRATEGIC
INCOME also through the use of dollar rolls to the extent permitted by the 1940
Act. See "Investment Objectives and Policies-Reverse Repurchase Agreements and
Dollar Rolls."

INVESTMENT IN THE BANKING INDUSTRY. Due to the investment policies of
MULTI-MARKET STRATEGY, WORLD INCOME and SHORT-TERM MULTI-MARKET with respect to
investments in the banking industry, those Funds will have greater exposure to
the risk factors which are characteristic of such investments. In particular,
the value of and investment return on each Fund's shares will be affected by
economic or regulatory developments in or related to the banking industry.
Sustained increases in interest rates can adversely affect the availability and
cost of funds for a bank's lending activities, and a deterioration in general
economic conditions could increase the exposure to credit losses. The banking
industry is also subject to the effects of: the concentration of loan
portfolios in particular business such as real estate, energy, agriculture or
high technology-related companies; national and local regulation; and
competition within those industries as well as with other types of financial
institutions. In addition, each Fund's investments in commercial banks located
in several foreign countries are subject to additional risks due to the
combination in such banks of commercial banking and diversified securities
activities. As discussed above, however, the Funds will seek to minimize their
exposure to such risks by investing only in debt securities which are
determined to be of high quality.

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 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, a 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 a Fund's securities than would be the case if a 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 prospects, and the experience and managerial strength of the issuer.

NON-RATED SECURITIES. Non-rated securities will also be considered for
investment by NORTH AMERICAN GOVERNMENT INCOME, GLOBAL DOLLAR GOVERNMENT,
GLOBAL STRATEGIC INCOME, CORPORATE BOND and HIGH YIELD 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. Each of WORLD INCOME, SHORT-TERM MULTI-MARKET,
MULTI-MARKET STRATEGY, NORTH AMERICAN GOVERNMENT INCOME, GLOBAL DOLLAR
GOVERNMENT and GLOBAL STRATEGIC INCOME 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, each 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 each Fund's
Statement of Additional Information. To so qualify, among other requirements,
each 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. A Fund's investments in U.S.
Government securities are not subject to these limitations. Because each of
WORLD INCOME, SHORT-TERM MULTI-MARKET, MULTI-MARKET STRATEGY, NORTH AMERICAN
GOVERNMENT INCOME, GLOBAL DOLLAR GOVERNMENT and GLOBAL STRATEGIC INCOME 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
such 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, each of GLOBAL STRATEGIC INCOME and NORTH AMERICAN GOVERNMENT INCOME
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

You can purchase shares of any of the Funds at a price based on the next
calculated net asset value after receipt of a proper purchase order either
through broker-dealers, banks or other financial intermediaries, or directly
through Alliance Fund Distributors, Inc. ("AFD"), each Fund's principal
underwriter. The minimum initial investment in each Fund (except WORLD INCOME)
is $250. The minimum for subsequent investments in each Fund is $50.
Investments of $25 or more are allowed under the automatic investment program
of each Fund. Share certificates are issued only upon request. See the
Subscription Application and Statements of Additional Information for more
information.

Existing shareholders may make subsequent purchases by electronic funds
transfer if they have completed the Telephone Transactions section of the
Subscription Application or the Shareholder Options form obtained from Alliance
Fund Services, Inc. ("AFS"), each Fund's registrar, transfer agent and dividend
disbursing agent. Telephone purchase orders can be made by calling (800)
221-5672 and may not exceed $500,000.

Each Fund (except WORLD INCOME) offers three classes of shares through this
Prospectus, Class A, Class B and Class C. WORLD INCOME offers only one class of
shares, which may be purchased without any initial sales charge or contingent
deferred sales charge ("CDSC"). The Funds may refuse any order to purchase
shares. In this regard, the Funds reserve the right to restrict purchases of
Fund shares (including through exchanges) when they appear to evidence a
pattern of frequent purchases and sales made in response to short-term
considerations.

CLASS A SHARES-INITIAL SALES CHARGE ALTERNATIVE
You can purchase Class A shares at net asset value plus an initial sales
charge, as follows:

Initial Sales Charge
as % of Commission to
Net Amount as % of Dealer/Agent as %
Amount Purchased Invested Offering Price of Offering Price
- -------------------------------------------------------------------------------
Less than $100,000 4.44% 4.25% 4.00%
$100,000 to less than $250,000 3.36 3.25 3.00
$250,000 to less than $500,000 2.30 2.25 2.00
$500,000 to less than $1,000,000 1.78 1.75 1.50

On purchases of $1,000,000 or more, you pay no initial sales charge but may pay
a CDSC equal to 1% of the lesser of net asset value at the time of redemption
or original cost if you redeem within one year; Alliance may pay the dealer or
agent a fee of up to 1% of the dollar amount purchased. Certain purchases of
Class A shares may qualify for reduced or eliminated sales charges in
accordance with a Fund's Combined Purchase Privilege, Cumulative Quantity
Discount, Statement of Intention, Privilege for Certain Retirement Plans,
Reinstatement Privilege and Sales at Net Asset Value programs. Consult the
Subscription Application and Statements of Additional Information.

CLASS B SHARES-DEFERRED SALES CHARGE ALTERNATIVE

You can purchase Class B shares at net asset value without an initial sales
charge. However, you may pay a CDSC if you redeem shares within three years
(four years in the case of GLOBAL STRATEGIC INCOME and HIGH YIELD) after
purchase. The amount of the CDSC (expressed as a percentage of the lesser of
the current net asset value or original cost) will vary according to the number
of years from the purchase of Class B shares until the redemption of those
shares.

The amount of the CDSC for each Fund is as set forth below. Class B shares of a
Fund purchased prior to the date of this Prospectus may be subject to a
different CDSC schedule, which was disclosed in the Fund's prospectus in use at
the time of purchase and is set forth in the Fund's current Statement of
Additional Information.

GLOBAL STRATEGIC INCOME and HIGH YIELD:
Year Since Purchase CDSC
First 4.00%
Second 3.00%
Third 2.00%
Fourth 1.00%
Fifth and thereafter None

ALL OTHER FUNDS:
Year Since Purchase CDSC
First 3.0%
Second 2.0%
Third 1.0%
Fourth and thereafter None

Class B shares are subject to higher distribution fees than Class A shares for
a period of six years, eight years in the case of GLOBAL STRATEGIC INCOME and
HIGH YIELD, (after which they convert to Class A shares). The higher fees mean
a higher expense ratio, so Class B shares pay correspondingly lower dividends
and may have a lower net asset value than Class A shares.

CLASS C SHARES-ASSET-BASED SALES CHARGE ALTERNATIVE

You can purchase Class C shares without any initial sales charge. A Fund will
thus receive the full amount of your purchase, and, if you hold your shares for
one year or more, you will receive the entire net asset value of your shares
upon redemption. Class C shares incur higher distribution fees than Class A
shares and do not convert to any other class of shares of the Fund. The higher
fees mean a higher expense ratio, so Class C shares pay correspondingly lower
dividends and may have a lower net asset value than Class A shares.
Class C shares redeemed within one year of purchase will be subject to a CDSC
equal to 1% of the lesser of their original cost or net asset value at the time
of redemption.

APPLICATION OF THE CDSC

Shares obtained from dividend or distribution reinvestment are not subject to
the CDSC. The CDSC is deducted from the amount of the redemption and is paid to
AFD. The CDSC will be waived on redemptions of shares following the death or
disability of a shareholder, to meet the requirements of certain qualified
retirement plans or pursuant to a monthly, bimonthly or quarterly systematic
withdrawal plan. See the Statements of Additional Information.

HOW THE FUNDS VALUE THEIR SHARES

The net asset value of each class of shares of a Fund is calculated by dividing
the value of the Fund's net assets allocable to that class by the outstanding
shares of that 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
a 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 or Trustees believe accurately reflect fair
market value.

EMPLOYEE BENEFIT PLANS
Certain employee benefit plans, including employer-sponsored tax-qualified
401(k) plans and other defined contribution retirement plans ("Employee Benefit
Plans"), may establish requirements as to the purchase, sale or exchange of
shares of the Funds, including maximum and minimum initial investment
requirements, that are different from those described in this Prospectus. Such
Employee Benefit Plans may also not offer all Classes of shares of the Funds.
In addition, the Class A, Class B and Class C CDSC may be waived for
investments made through such Employee Benefit Plans.

GENERAL

The decision as to which class of shares is most beneficial to you depends on
the amount and intended length of your investment. If you are making a large
investment, thus qualifying for a reduced sales charge, you might consider
Class A shares. If you are making a smaller investment, you might consider
Class B shares because 100% of your purchase is invested immediately. If you
are unsure of the length of your investment, you might consider Class C shares
because there is no initial sales charge and, as long as the shares are held
for one year or more, no CDSC. Consult your financial agent. Dealers and agents
may receive differing compensation for selling Class A, Class B or Class C
shares. There is no size limit on purchases of Class A shares. The maximum
purchase of Class B shares is $250,000. The maximum purchase of Class C shares
is $1,000,000.

GLOBAL STRATEGIC INCOME and HIGH YIELD FUND offer a fourth class of shares,
Advisor Class shares, by means of separate prospectuses. Advisor Class shares
may be purchased and held solely by (i) accounts established under a fee-based
program sponsored and maintained by a registered broker-dealer or other
financial intermediary and approved by AFD, (ii) 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 and (iii) certain other categories
of investors described in the prospectuses for the Advisor Class, including
investment advisory clients of, and certain other persons associated with,
Alliance and its affiliates or the Funds. Advisor Class shares are offered
without any initial sales charge or CDSC and without an ongoing distribution
fee and are expected, therefore, to have different performance than Class A,
Class B or Class C shares. You may obtain more information about Advisor Class
shares by contacting AFS at (800) 221-5672 or by contacting your financial
representative.

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 or Class C 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 a Fund, including requirements as to the minimum initial
and subsequent investment amounts.

In addition to the discount or commission paid to dealers or agents, AFD from
time to time pays additional cash or other incentives to dealers or agents,
including EQ Financial Consultants Inc., an affiliate of AFD, in connection
with the sale of shares of the Funds. Such additional amounts may be utilized,
in whole or in part, in some cases together with other revenues of such dealers
or agents, to provide additional compensation to registered representatives who
sell shares of

the Funds. On some occasions, such cash or other incentives will be conditioned
upon the sale of a specified minimum dollar amount of the shares of a Fund
and/or other Alliance Mutual Funds during a specific period of time. Such
incentives may 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 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.

HOW TO SELL SHARES

You may "redeem", i.e., sell your shares in a Fund to the Fund on any day the
Exchange is open, either directly or through your financial intermediary. The
price you will receive is the net asset value (less any applicable CDSC) 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, a 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).

SELLING SHARES THROUGH YOUR BROKER
Your broker must receive your request before 4:00 p.m. Eastern time, and your
broker must transmit your request to the Fund by 5:00 p.m. Eastern time, for
you to receive that day's net asset value (less any applicable CDSC). Your
broker is responsible for furnishing all necessary documentation to a Fund and
may charge you for this service.

SELLING SHARES DIRECTLY TO A FUND
Send a signed letter of instruction or stock power form to 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 intermediary, 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, Inc.
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. 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 nominees 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, a Fund may suspend redemptions or postpone payment for
up to seven days or longer, as permitted by federal securities law. The Funds
reserve 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
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's toll-free number, (800) 221-5672. Some
services are described in the attached Subscription Application. A shareholder
manual explaining all available services will be provided upon request. To
request a shareholder manual, call (800) 227-4618.

HOW TO EXCHANGE SHARES

You may exchange your shares of WORLD INCOME for Class A shares of other
Alliance Mutual Funds and shares of most Alliance money market funds. You may
exchange your shares of any other Fund for shares of the same class 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 values next
determined, 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.

Shares will continue to age without regard to exchanges for the purpose 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 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.

MANAGEMENT OF THE FUNDS
_______________________________________________________________________________

ADVISER

Alliance, which is a Delaware limited partnership with principal offices at
1345 Avenue of the Americas, New York, New York 10105, 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 each Fund,
subject to the general supervision and control of the Directors or Trustees of
the Fund.

Alliance is a leading international investment manager supervising client
accounts with assets as of June 30, 1997 totaling more than $199 billion (of
which more than $71 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 54 registered investment companies managed by Alliance comprising
116 separate investment portfolios currently have over two million
shareholders. As of June 30, 1997, Alliance was retained as an investment
manager for 29 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 each Fund's Statement of Additional Information under
"Management of the Fund."

The following table lists the person or persons who are primarily responsible
for the day-to-day management of each Fund's portfolio, the length of time that
each person has been primarily responsible, and each person's principal
occupation during the past five years.

Principal occupation
Employee; time period; during the past
Fund title with ACMC five years
- -------------------------------------------------------------------------------
Short-Term U.S. Patricia J. Young since 1995 Associated with
Government -Senior Vice President Alliance.

Jeffrey S. Phlegar (see above)
since 1997-(see above)

U.S. Government Wayne D. Lyski since 1983 Associated with
-Executive Vice President Alliance.

Patricia J. Young since 1997 (see above)
-(see above)

Jeffrey S. Phlegar Associated with
since 1997-Vice President Alliance.

Limited Maturity Patricia J. Young (see above)
Government since inception-(see above)

Jeffrey S. Phlegar (see above)
since 1997-(see above)

Mortgage Securities Patricia J. Young since (see above)
Income 1992-(see above)

Jeffrey S. Phlegar (see above)
since 1997-(see above)

World Income Douglas J. Peebles since Associated with
inception-Vice President Alliance.

Short-Term Douglas J. Peebles since (see above)
Multi-Market 1995-(see above)

Multi-Market Strategy Douglas J. Peebles since (see above)
inception-(see above)

North American Wayne D. Lyski since inception (see above)
Government Income -(see above)

Global Dollar Wayne D. Lyski since inception (see above)
Government -(see above)

Global Strategic Wayne D. Lyski since inception (see above)
Income -(see above)

Douglas J. Peebles since (see above)
inception-(see above)

Corporate Bond Wayne D. Lyski since (see above)
1987-(see above)

Paul J. DeNoon since (see above)
January 1992-(see above)

High Yield Wayne C. Tappe Associated with
since 1991-Vice President* Alliance.

Nelson Jantzen Associated with
since 1991-Senior Alliance.
Vice President*

* ASSOCIATED WITH EQUITABLE CAPITAL MANAGEMENT CORPORATION ("EQUITABLE
CAPITAL") PRIOR TO JULY 22, 1993. ON THAT DATE ALLIANCE ACQUIRED THE BUSINESS
AND SUBSTANTIALLY ALL THE ASSETS OF EQUITABLE CAPITAL.

PERFORMANCE OF A SIMILARLY MANAGED PORTFOLIO
Alliance is the investment adviser of a portfolio (the "Historical Portfolio")
of a registered investment company, sold only to separate accounts of insurance
companies in connection with variable life insurance contracts and variable
annuities certificates and contracts (the "Contracts"), that has substantially
the same investment objective and policies and has been managed in accordance
with essentially the same

investment strategies and techniques as those contemplated for the HIGH YIELD
FUND. See "Description of the Funds." Alliance since July 22, 1993, and prior
thereto, Equitable Capital, whose advisory business Alliance acquired on that
date, have served as investment adviser to the Historical Portfolio since its
inception in 1987.

The following tables set forth performance results for the Historical Portfolio
since its inception (January 2, 1987), together with those of the Lipper High
Current Yield Mutual Funds Average as a comparative benchmark. As of February
28, 1997, the assets in the Historical Portfolio totalled approximately $234
million. The data below does not represent the performance of the Fund.

The performance data does not reflect account charges applicable to the
Contracts or imposed at the insurance company separate account level. In
addition, the performance data does not reflect the Fund's estimated higher
expenses, which, if reflected, would lower the performance of the Historical
Portfolio. The performance data have not been adjusted for taxes, if any,
payable with respect to the Historical Portfolio. The rates of return shown for
the Historical Portfolio are not an estimate or guarantee of future investment
performance of the Fund.

The Lipper High Current Yield Bond Funds Average is a survey of the performance
of a large number of mutual funds the investment objective of each of which is
similar to that of the Fund. This survey is published by Lipper Analytical
Services, Inc. ("Lipper"), a firm recognized for its reporting of performance
of actively managed funds. According to Lipper, performance data are presented
net of investment management fees, operating expenses and, for funds with Rule
12b-1 plans, asset-based sales charges.

The performance results presented below are based on percent changes in net
asset values of the Historical Portfolio with dividends and capital gains
reinvested. Cumulative rates of return reflect performance over a stated period
of time. Annualized rates of return represent the rate of growth that would
have produced the corresponding cumulative return had performance been constant
over the entire period.

ANNUALIZED RATES OF RETURN
PERIODS ENDED FEBRUARY 28, 1997
-------------------------------
PORTFOLIO/BENCHMARK 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION*
- -------------------------------------------------------------------------------
Historical Portfolio 21.06% 13.25% 14.85% 11.78% 11.62%
Lipper High Current Yield
Mutual Funds Average 13.38 8.47 11.42 9.27 9.57

CUMULATIVE RATES OF RETURN
PERIODS ENDING FEBRUARY 28, 1997
--------------------------------
PORTFOLIO/BENCHMARK 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION*
- -------------------------------------------------------------------------------
Historical Portfolio 21.06% 45.24% 99.87% 204.39% 205.67%
Lipper High Current Yield
Mutual Funds Average 13.38 27.72 71.98 144.71 153.00

* JANUARY 2, 1987

EXPENSES OF THE FUND

In addition to the payments to Alliance under the Advisory Agreement with HIGH
YIELD, HIGH YIELD 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
stationary and supplies, (ix) expenses and fees related to registration and
filing with the Commission and with state regulatory authorities, and (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 Distribution Services Agreement, described below.

DISTRIBUTION SERVICES AGREEMENTS

Rule 12b-1 adopted by the Commission under the 1940 Act permits an investment
company to pay expenses associated with the distribution of its shares in
accordance with a duly adopted plan. Each Fund has adopted one or more "Rule
12b-1 plans" (for each Fund, a "Plan") and has entered into a Distribution
Services Agreement (the "Agreement") with AFD. Pursuant to its Plan, a Fund
pays to AFD a Rule 12b-1 distribution services fee, which may not exceed for
each Fund other than WORLD INCOME an annual rate of .30% (.50% with respect to
SHORT-TERM U.S. GOVERNMENT) of the Fund's aggregate average daily net assets
attributable to the Class A shares, 1.00% of the Fund's aggregate average daily
net assets attributable to the Class B shares and 1.00% of the Fund's aggregate
average daily net assets attributable to the Class C shares, and for WORLD
INCOME may not exceed an annual rate of .90% of the Fund's aggregate average
daily net assets, for distribution expenses. The Trustees of SHORT-TERM U.S.
GOVERNMENT currently limit payments with respect to Class A shares under the
Plan to .30% of the Fund's aggregate average daily net assets attributable to
Class A shares. The Plans provide that a portion of the distribution services
fee in an amount not to exceed .25% of the aggregate average daily net assets
of each Fund attributable to each class of shares constitutes a service fee
used for personal service and/or the maintenance of shareholder accounts.

The Plans provide that AFD will use the distribution services fee received from
a Fund in its entirety for payments (i) to compensate broker-dealers or other
persons for providing distribution assistance, (ii) to otherwise promote the
sale of shares of the Fund, and (iii) to compensate broker-dealers, depository
institutions and other financial intermediaries for providing administrative,
accounting and other services with respect to the Fund's shareholders. In this
regard, some payments under the Plans are used to compensate financial
intermediaries with trail or maintenance commissions in an amount equal to,
with respect to each Fund other than WORLD INCOME, .25%, annualized, with
respect to Class A shares and

Class B shares, and 1.00%, annualized, with respect to Class C shares, and,
with respect to WORLD INCOME, .90%, annualized, of the assets maintained in a
Fund by their customers. Distribution services fees received from the Funds,
except SHORT-TERM U.S. GOVERNMENT, with respect to Class A shares will not
be used to pay any interest expenses, carrying charges or other financing
costs or allocation of overhead of AFD. Distribution services fees received
from the Funds, with respect to Class B and Class C shares, may be used for
these purposes. The Plans also provide that Alliance may use its own
resources to finance the distribution of each Fund's shares.

The Funds are not obligated under the Plans to pay any distribution services
fee in excess of the amounts set forth above. Except as noted below for
SHORT-TERM U.S. GOVERNMENT, with respect to Class A shares of each Fund,
distribution expenses accrued by AFD in one fiscal year may not be paid from
distribution services fees received from the Fund in subsequent fiscal years.
AFD's compensation with respect to Class B and Class C shares under the Plans
of the other Funds is directly tied to the expenses incurred by AFD. Actual
distribution expenses for Class B and Class C shares for any given year,
however, will probably exceed the distribution services fees payable under the
applicable Plan with respect to the class involved and, in the case of Class B
and Class C shares, payments received from CDSCs. The excess will be carried
forward by AFD and reimbursed from distribution services fees payable under the
Plan with respect to the class involved and, in the case of Class B and Class C
shares, payments subsequently received through CDSCs, so long as the Plan is in
effect. Since AFD's compensation under the Plan of SHORT-TERM U.S. GOVERNMENT
is not directly tied to its expenses incurred, the amount of compensation
received by it during any year may be more or less than its actual expenses.

Unreimbursed distribution expenses incurred as of the end of each Fund's most
recently completed fiscal year, and carried over for reimbursement in future
years in respect of the Class B and Class C shares for all Funds (except
SHORT-TERM U.S. GOVERNMENT), were, as of that time, as follows:

Amount of Unreimbursed Distribution Expenses
(as % of Net Assets of Class)
-----------------------------------------------
Class B Class C
- -----------------------------------------------------------------------------
U.S. Government $ 8,593,091 (1.56%) $3,589,130 (2.63%)
Limited Maturity Government $ 472,895 (.73%) $2,677,214 (4.92%)
Mortgage Securities Income $12,491,371 (2.79%) $2,688,747 (6.50%)
Short-Term Multi-Market $26,166,892 (6.40%) $1,343,129 (20.59%)
Multi-Market Strategy $ 9,610,982 (9.58%) $ 454,910 (57.38%)
North American
Government Income $35,196,166 (2.88%) $3,291,519 (1.40%)
Global Dollar Government $ 2,214,590 (2.54%) $ 460,747 (2.29%)
Corporate Bond $ 9,163,392 (2.23%) $2,093,526 (1.77%)
Global Strategic Income $ 131,691 (53.37%) $ 84,063 (37.53%)
High Yield* $ 1,679,237 (8.5%) $ 79,092 (2.36%)

* FOR THE FISCAL PERIOD APRIL 22, 1997 (COMMENCEMENT OF OPERATIONS) THROUGH
AUGUST 31, 1997.

The Plans are in compliance with rules of the National Association of
Securities Dealers, Inc. which effectively limit the annual asset-based sales
charges and service fees that a mutual fund may pay on a class of shares to
.75% and .25%, respectively, of the average annual net assets attributable to
that class. The rules also limit the aggregate of all front-end, deferred and
asset-based sales charges imposed with respect to a class of shares by a mutual
fund that also charges a service fee to 6.25% of cumulative gross sales of
shares of that class, plus interest at the prime rate plus 1% per annum.

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 Funds' 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 Agreements. 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. The State of Texas requires that shares of a
Fund may be sold in that state only by dealers or other financial institutions
that are registered there as broker-dealers.

DIVIDENDS, DISTRIBUTIONS AND TAXES
_______________________________________________________________________________

DIVIDENDS AND DISTRIBUTIONS

Dividends on shares of a Fund will be declared on each Fund business day from
the Fund's net investment income. Dividends on shares for Saturdays, Sundays
and holidays will be declared on the previous business day. Each Fund pays
dividends on its shares after the close of business on the twentieth day of
each month or, if such 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 are 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.

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 a 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 each 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 such Fund of income and capital
gains from investments. There is no fixed dividend rate, and there can be no
assurance that a Fund will pay any dividends or realize any capital gains.

If you buy shares just before a 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 a Fund from sources within foreign countries may
be subject to foreign income taxes withheld at the source. To the extent that
any Fund is liable for foreign income taxes withheld at the source, each 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 any Fund will be able to
do so.

U.S. FEDERAL TAXES

Each Fund intends to qualify to be taxed as a "regulated investment company"
under the Internal Revenue Code. So long as a Fund distributes at least 90% of
its income, qualification as a regulated investment company relieves that Fund
of Federal income 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, except that the amount eligible for the deduction is limited to the
amount of qualifying dividends received by the Fund. A corporation's
dividends-received deduction will be disallowed with respect to a dividend
unless the corporation holds shares in the Fund on the ex-dividend rate and for
at least 45 more days during the 90-day period surrounding the ex-dividend
rate. Furthermore, the dividends-received deduction will be disallowed to the
extent that a corporation's investment in shares of a Fund is financed with
indebtedness.

Pursuant to the Taxpayer Relief Act of 1997, two different tax rates apply to
net capital gains-that is, the excess of net gains from capital assets held for
more than one year ("long-term capital assets") over net losses from capital
assets held for not more than one year ("short-term capital assets"). One rate
(generally 28%) applies to net gains on capital assets held for more than one
year but not more than 18 months ("mid-term gains") and a second, preferred
rate (generally 20%) applies to the balance of such net capital gains
("adjusted net capital gains"). Distributions of net capital gains will be
treated in the hands of shareholders as mid-term gains to the extent designated
by the Fund as deriving from net gains from assets held for more than one year
but not more than 18 months, and the balance will be treated as adjusted net
capital gains. Distributions of mid-term gains and adjusted net capital gains
will be taxable to shareholders as such, regardless of how long a shareholder
has held the shares in the Fund.

Under current federal tax law, the amount of income dividend or capital gains
distribution declared by a 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 a 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 or
her as described above. Any loss realized on the sale of shares held six months
or less will be a long-term capital loss to the extent of any capital gain
distributions received by the shareholder with respect to such shares.

A dividend or capital gains distribution with respect to shares of a Fund held
by a tax-deferred or qualified plan, such as an individual retirement account,
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 a Fund may be subject to state and local taxes. U.S.
GOVERNMENT, LIMITED MATURITY GOVERNMENT, MORTGAGE SECURITIES INCOME, WORLD
INCOME, SHORT-TERM MULTI-MARKET, MULTI-MARKET STRATEGY, NORTH AMERICAN
GOVERNMENT INCOME and CORPORATE BOND are qualified to do business in the
Commonwealth of Pennsylvania and, therefore, are subject to the Pennsylvania
foreign franchise and corporate net income tax in respect of their business
activities in Pennsylvania. Accordingly, shares of such Funds are exempt from
Pennsylvania personal property taxes. These Funds anticipate continuing such
business activities but reserve the right to suspend them at any time,
resulting in the termination of the exemptions.

A 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 a 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 a 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 Statements of Additional
Information.

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

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, a Fund may
consider sales of its shares as a factor in the selection of dealers to enter
into portfolio transactions with the Fund.

ORGANIZATION

Each of the following Funds is a Maryland corporation organized in the year
indicated: U.S. GOVERNMENT PORTFOLIO and CORPORATE BOND PORTFOLIO (each a
series of Alliance Bond Fund, Inc.) (1973), ALLIANCE LIMITED MATURITY
GOVERNMENT FUND, INC. (1992), ALLIANCE MORTGAGE SECURITIES INCOME FUND, INC.
(1983), ALLIANCE WORLD INCOME TRUST, INC. (1990), ALLIANCE SHORT-TERM
MULTI-MARKET TRUST, INC. (1989), ALLIANCE MULTI-MARKET STRATEGY TRUST, INC.
(1991), ALLIANCE NORTH AMERICAN GOVERNMENT INCOME TRUST, INC. (1992), ALLIANCE
GLOBAL DOLLAR GOVERNMENT FUND, INC. (1993), ALLIANCE GLOBAL STRATEGIC INCOME
TRUST, INC. (1995) and ALLIANCE HIGH YIELD FUND, INC. (1996). Prior to March 1,
1996, ALLIANCE LIMITED MATURITY GOVERNMENT FUND, INC. was known as Alliance
Mortgage Strategy Trust, Inc. Prior to January 4, 1993, CORPORATE BOND
PORTFOLIO was known as Monthly Income Portfolio. ALLIANCE SHORT-TERM U.S.
GOVERNMENT FUND is a series of The Alliance Portfolios, a Massachusetts
business trust that was organized in 1987. Prior to August 2, 1993, The
Alliance Portfolios was known as The Equitable Funds and SHORT-TERM U.S.
GOVERNMENT was known as The Equitable Short-Term U.S. Government Fund.

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 or
Trustees.

A shareholder in a 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 Funds are 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 a 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 together as a single class on matters, such as the election of
Directors or Trustees, that affect each portfolio and class in substantially
the same manner. Class A, Class B and Class C shares have identical voting,
dividend, liquidation and other rights, except that each class bears its own
distribution and transfer agency expenses. Each class of shares votes
separately with respect to a 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 Trustees and, in liquidation of a Fund, are entitled to receive
the net assets of the Fund. Since this Prospectus sets forth information about
all the Funds, it is theoretically possible that a Fund might be liable for any
materially inaccurate or incomplete disclosure in this Prospectus concerning
another Fund. Based on the advice of counsel, however, the Funds believe that
the potential liability of each Fund with respect to the disclosure in this
Prospectus extends only to the disclosure relating to that Fund. Certain
additional matters relating to a Fund's organization are discussed in its
Statement of Additional Information.

PENDING LEGAL PROCEEDINGS INVOLVING NORTH AMERICAN GOVERNMENT INCOME

On July 25, 1995, a Consolidated and Supplemental Class Action Complaint
("Complaint") styled In re ALLIANCE NORTH AMERICAN GOVERNMENT INCOME TRUST,
INC. LITIGATION was filed in the U.S. District Court for the Southern District
of New York against the Fund, Alliance, ACMC, AFD, The Equitable Companies
Incorporated ("ECI"), a parent of the Adviser, and certain current and former
officers and directors of the Fund and ACMC, alleging violations of the federal
securities laws, fraud and breach of fiduciary duty in connection with the
Fund's investments in Mexican and Argentine securities. The Complaint sought
certification of a plaintiff class of all persons who purchased or owned Class
A, B or C shares of the Fund from March 27, 1992 through December 23, 1994.
Plaintiffs alleged that during 1995 the Fund's losses exceeded $750,000,000 and
sought as relief unspecified damages, costs and attorney's fees. On September
26, 1996, the District Court granted defendants' motion to dismiss the
Complaint as to all claims.

On October 29, 1996, plaintiffs filed a motion for leave to file an amended
complaint. In the proposed amended complaint ("Amended Complaint"), plaintiffs
asserted claims against the Fund, Alliance, ACMC, AFD, ECI, and certain current
and former officers and directors of the Fund and ACMC alleging violations of
federal securities laws, fraud and breach of fiduciary duty. The principal
allegations of the Amended Complaint related to the Fund's hedging practices,
the Fund's investments in certain mortgage-backed securities, and the risks and
objectives of the Fund as described in the Fund's marketing materials. The
Amended Complaint made similar request for class certification and damages as
the Complaint. On July 15, 1997, the District Court denied plaintiffs' motion
to file the Amended Complaint and dismissed the case. On August 13, 1997,
plaintiffs filed a Notice of Appeal of the District Court's denial of their
motion to file the Amended Complaint to the U.S. Court of Appeals for the
Second Circuit.

The Fund and Alliance believe that the allegations in the Complaint and the
Amended Complaint are without merit and intend to defend vigorously against
those claims.

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 each Fund's registrar, transfer
agent and dividend-disbursing agent for a fee based upon the number of
shareholder accounts maintained for the Fund. The transfer agency fee with
respect to Class B shares will be higher than the transfer agency fee with
respect to Class A shares or Class C shares.

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 Funds.

PERFORMANCE INFORMATION

From time to time, the Funds advertise their "yield" and "total return," which
are computed separately for Class A, Class B and Class C shares. A 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. A Fund may also state in
sales literature an "actual distribution rate" for each class which is computed
in the same manner as yield except that actual income dividends declared per
share during the period in question are substituted for net investment income
per share. The actual distribution rate is computed separately for Class A,
Class B and Class C shares. Advertisements of a Fund's total return disclose
its average annual compounded total return for the periods prescribed by the
Commission. A 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 a Fund are assumed to have been reinvested when
paid and the maximum sales charges applicable to purchases and redemptions of a
Fund's shares are assumed to have been paid. A Fund's advertisements may quote
performance rankings or ratings of a Fund by financial publications or
independent organizations such as Lipper Analytical Services, Inc. and
Morningstar, Inc. or compare a Fund's performance to various indices.

ADDITIONAL INFORMATION

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

THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY STATE IN WHICH SUCH
OFFERING MAY NOT LAWFULLY BE MADE.

THIS PROSPECTUS IS INTENDED TO CONSTITUTE AN OFFER BY EACH FUND ONLY OF THE
SECURITIES OF WHICH IT IS THE ISSUER AND IS NOT INTENDED TO CONSTITUTE AN OFFER
BY ANY FUND OF THE SECURITIES OF ANY OTHER FUND WHOSE SECURITIES ARE ALSO
OFFERED BY THIS PROSPECTUS. NO FUND INTENDS TO MAKE ANY REPRESENTATION AS TO
THE ACCURACY OR COMPLETENESS OF THE DISCLOSURE IN THIS PROSPECTUS RELATING TO
ANY OTHER FUND. SEE "GENERAL INFORMATION-ORGANIZATION."

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 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 fluctutate 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

APPENDIX B: GENERAL INFORMATION
ABOUT CANADA, MEXICO AND ARGENTINA
_______________________________________________________________________________

GENERAL INFORMATION ABOUT CANADA

Canada consists of a federation of ten Provinces and two federal territories
(which generally fall under federal authority) with a constitutional division
of powers between the federal and Provincial governments. The Parliament of
Canada has jurisdiction over all areas not assigned exclusively to the
Provincial legislatures, and has jurisdiction over such matters as the federal
public debt and property, the regulation of trade and commerce, currency and
coinage, banks and banking, national defense, the postal services, navigation
and shipping and unemployment insurance.

The Canadian economy is based on the free enterprise system, with business
organizations ranging from small owner-operated businesses to large
multinational corporations. Manufacturing and resource industries are large
contributors to the country's economic output, but as in many other highly
developed countries, there has been a gradual shift from a largely
goods-producing economy to a predominantly service-based one. Agriculture and
other primary production play a small but key role in the economy. Canada is
also an exporter of energy to the United States in the form of natural gas (of
which Canada has substantial reserves) and hydroelectric power, and has
significant mineral resources.

Canadian Dollars are fully exchangeable into U.S. Dollars without foreign
exchange controls or other legal restriction. Since the major developed-country
currencies were permitted to float freely against one another, the range of
fluctuation in the U.S. Dollar/Canadian Dollar exchange rate generally has been
narrower than the range of fluctuation between the U.S. Dollar and most other
major currencies. Between 1991 and 1995, Canada experienced a weakening of its
currency. In January 1995, the Canadian Dollar fell to a nine-year low against
the U.S. Dollar, decreasing in value compared to the U.S. Dollar by
approximately 20% from October 1991. Since January 1996, however, the Canadian
Dollar has remained steady in value against the U.S. Dollar at a level
approximately 3% to 4% above that low. The range of fluctuation that occurred
in the past is not necessarily indicative of the range of fluctuation that
will occur in the future. Future rates of exchange cannot be accurately
predicted.

GENERAL INFORMATION ABOUT THE UNITED MEXICAN STATES

The United Mexican States ("Mexico") is a nation formed by 31 states and a
Federal District (Mexico City). The Political Constitution of Mexico, which
took effect on May 1, 1917, established Mexico as a Federal Republic and
provides for the separation of executive, legislative and judicial branches.
The President and the members of the General Congress are elected by popular
vote.

Over the past decade, the Mexican economy has experienced improvement in a
number of areas, including eight consecutive years (1987-1994) of growth in
gross domestic product and a substantial reduction in the rate of inflation and
in public sector financial deficit. In 1994, Mexico experienced an economic
crisis that led to the devaluation of the Peso in December 1994. Much of the
past improvement in the Mexican economy has been attributable to a series of
economic policy initiatives initiated by the Mexican government over the past
decade, which seek to modernize and reform the Mexican economy, control
inflation, reduce the financial deficit, increase public revenues through the
reform of the tax system, establish a competitive and stable currency exchange
rate, liberalize trade restrictions and increase investment and productivity,
while reducing the government's role in the economy. In this regard, the
Mexican government has been proceeding with a program for privatizing certain
state owned enterprises, developing and modernizing the securities markets,
increasing investment in the private sector and permitting increased levels of
foreign investment. The adoption effective January 1, 1994 by Canada, the
United States and Mexico of the North American Free Trade Agreement could also
contribute to the growth of the Mexican economy.

In 1994 Mexico faced internal and external conditions that resulted in an
economic crisis that continues to affect the Mexican economy adversely. Growing
trade and current account deficits, which could no longer be financed by
inflows of foreign capital, were factors contributing to the crisis. A
weakening economy and unsettling political and social developments caused
investors to lose confidence in the Mexican economy. This resulted in a large
decline in foreign reserves followed by a sharp and rapid devaluation of the
Mexican Peso. The ensuing economic and financial crisis resulted in higher
inflation and domestic interest rates, a contraction in real gross domestic
product and a liquidity crisis.

In response to the adverse economic conditions that developed at the end of
1994, the Mexican government instituted a new economic program; and a new
accord among the government and the business and labor sectors of the economy
was entered into in an effort to stabilize the economy and the financial
markets. To help relieve Mexico's liquidity crisis and restore financial
stability to Mexico's economy, the Mexican government also obtained financial
assistance from the United States, other countries and certain international
agencies conditioned upon the implementation and continuation of the economic
reform program.

B-1

In October 1995, and again in October 1996, the Mexican government
announced new accords designed to encourage economic growth and reduce
inflation. While it cannot be accurately predicted whether these accords will
achieve their objectives, the Mexican economy has stabilized since the
economic crisis of 1994, and the high inflation and high interest rates that
continued to be a factor after 1994 have subsided as well. After declining for
five consecutive quarters beginning with the first quarter of 1995, Mexico's
gross domestic product began to grow in the second quarter of 1996. That
growth was sustained in 1996, resulting in a 5.1% increase from 1995, and,
according to preliminary estimates, continued at the same rate during the
first quarter of 1997, compared with the first quarter of 1996. In addition,
inflation dropped from a 52% annual rate in 1995 to a 27.7% annual rate in
1996. In May 1997, the monthly inflation rate was 0.9%, the first time since
December 1994 that the monthly inflation rate was below 1%. The inflation rate
for the first half of 1997 was 8.7%, compared with 15.3% for the first half of
1996. Mexico's economy may also be influenced by international economic
conditions, particularly those in the United States, and by world prices for
oil and other commodities. The recovery of the economy will require continued
economic and fiscal discipline as well as stable political and social
conditions. There is no assurance that Mexico's economic policy initiatives
will be successful or that succeeding administrations will continue these
initiatives.

In August 1976, the Mexican government established a policy of allowing the
Mexican Peso to float against the U.S. Dollar and other currencies. Under this
policy, the value of the Mexican Peso consistently declined against the U.S.
Dollar. Under economic policy initiatives implemented since December 1987, the
Mexican government introduced a series of schedules allowing for the gradual
devaluation of the Mexican Peso against the U.S. Dollar. These gradual
devaluations continued until December 1994. On December 22, 1994, the Mexican
government announced that it would permit the Peso to float against other
currencies, resulting in a precipitous decline against the U.S. Dollar. By
December 31, 1996, the Peso-Dollar exchange rate had decreased approximately
40% from that on December 22, 1994. In 1996, the average annual Peso-Dollar
exchange rate decreased approximately 15% from that in 1995, which itself had
decreased approximately 47% from that in 1994. The Peso-Dollar exchange rate
has been relatively stable in 1997. On September 30, 1997, the Peso-Dollar
exchange rate was 7.77.

Mexico has in the past imposed strict foreign exchange controls. There is no
assurance that future regulatory actions in Mexico would not affect the Fund's
ability to obtain U.S. Dollars in exchange for Mexican Pesos.

GENERAL INFORMATION ABOUT THE REPUBLIC OF ARGENTINA

The Republic of Argentina ("Argentina") consists of 23 provinces and the
federal capital of Buenos Aires. Its federal constitution provides for an
executive branch headed by a President, a legislative branch and a judicial
branch. Each province has its own constitution, and elects its own governor,
legislators and judges, without the intervention of the federal government.

The military has intervened in the political process on several occasions since
the 1930's and has ruled the country for 22 of the past 65 years. The most
recent military government ruled the country from 1976 to 1983. Four
unsuccessful military uprisings have occurred since 1983, the most recent in
December 1990.

Shortly after taking office in 1989, the country's current President adopted
market-oriented and reformist policies, including a large privatization
program, a reduction in the size of the public sector and an opening of the
economy to international competition.

In the decade prior to the announcement of a new economic plan in March 1991,
the Argentine economy was characterized by low and erratic growth, declining
investment rates and rapidly worsening inflation. Despite its strengths, which
include a well-balanced natural resource base and a high literacy rate, the
Argentine economy failed to respond to a series of economic plans in the
1980's. The 1991 economic plan represented a pronounced departure from its
predecessors in calling for raising revenues, cutting expenditures and reducing
the public deficit. The extensive privatization program commenced in 1989 was
accelerated, the domestic economy deregulated and opened up to foreign trade
and the frame-work for foreign investment reformed. As a result of the economic
stabilization reforms, gross domestic product increased for four consecutive
years before declining in 1995. During 1996, however, gross domestic product
increased 4.3% from 1995. During the first quarter of 1997, gross domestic
product increased 8.1% compared to the first quarter of 1996, and preliminary
data for the third quarter of 1997 indicate an 8.4% increase from the second
quarter of 1996. The rate of inflation is generally viewed to be under control.

Significant progress was also made between 1991 and 1994 in rescheduling
Argentina's debt with both external and domestic creditors, which improved
fiscal cash flows in the medium terms and allowed a return to voluntary credit
markets. Further reforms are currently being implemented in order to sustain
and continue the progress to date. There is no assurance that Argentina's
economic policy initiatives will be successful or that succeeding
administrations will continue these initiatives.

In 1995 economic policy was directed toward the effects of the Mexican currency
crisis. The Mexican currency crisis led to a run on bank deposits, which has
been brought under control by a series of measures designed to strengthen the
financial system. The measures included the "dollarization" of banking
reserves, the establishment of two trust funds and strengthening bank reserve
requirements.

In 1991 the Argentine government enacted currency reforms, which required the
domestic currency to be fully backed by international reserves, in an effort to
make the Argentine Peso fully convertible into the U.S. Dollar at a rate of one
to one.

The Argentine Peso has been the Argentine currency since January 1, 1992. Since
that date, the rate of exchange from the Argentine Peso to the U.S. Dollar has
remained approximately one to one. The fixed exchange rate has been

B-2

instrumental in stabilizing the economy, but has not reduced pressures from
high rates of unemployment. It is not clear that the government will be able to
resist pressure to devalue the currency. However, the historic range is not
necessarily indicative of fluctuations that may occur in the exchange rate over
time and future rates of exchange cannot be accurately predicted. The Argentine
foreign exchange market was highly controlled until December 1989, when a free
exchange rate was established for all foreign currency transactions. Argentina
has eliminated restrictions on foreign direct investment and capital
repatriation. In 1993, legislation was adopted abolishing previous requirements
of a three-year waiting period for capital repatriation. Under the legislation,
foreign investors are permitted to remit profits at any time.

B-3

<PAGE>

- -------------------------------------------------------------------------------
ALLIANCE
- -------------------------------------------------------------------------------
HIGH YIELD
- -------------------------------------------------------------------------------
FUND
- -------------------------------------------------------------------------------

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)

October 31, 1997

- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Table of Contents Page
<S> <C>
The Fund at a Glance ................................................. 2
Expense Information .................................................. 3
Glossary ............................................................. 4
Financial Highlights ................................................. 5
Description of the Fund .............................................. 5
Investment Objective .............................................. 5
Investment Policies ............................................... 5
Additional Investment Practices ................................... 6
Certain Risk Considerations ....................................... 12
Purchase and Sale of Shares .......................................... 14
Management of the Fund ............................................... 15
Dividends, Distributions and Taxes ................................... 17
Conversion Feature ................................................... 18
General Information .................................................. 19
- --------------------------------------------------------------------------------

</TABLE>

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

Alliance High Yield Fund, Inc. (the "Fund") seeks high total return by
maximizing current income and, to the extent consistent with that objective,
capital appreciation. The Fund will pursue this objective by investing primarily
in a diversified mix of high yield, below investment grade fixed-income
securities involving greater volatility of price and risk of loss of principal
and income than higher quality fixed income securities.

The Fund is a diversified open-end management investment company. This
Prospectus sets forth concisely the information that a prospective investor
should know about the Fund before investing. A "Statement of Additional
Information" for the Fund dated October 31, 1997, 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.

[LOGO] 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 $99
billion in assets under management as of June 30, 1997. Alliance provides
investment management services to employee benefit plans for 29 of the FORTUNE
100 companies.

The Fund

Seeks . . . high total return by maximizing current income and, to the extent
consistent with that objective, capital appreciation.

Invests principally in . . . high yield, below investment grade fixed-income
securities.

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 portion 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 and forwards. 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."

[LOGO] 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>

- --------------------------------------------------------------------------------
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. For 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

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

Operating Expenses Advisor Class
-------------
Management fees ............................................ .75%
12b-1 fees ................................................. None
Other expenses (a) ......................................... .88%
----

Total Fund operating expenses (b) .......................... 1.63%
====

Example Advisor Class
-------------
After 1 year ............................................... $ 17
After 3 years .............................................. $ 51
</TABLE>

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

(a) 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.

(b) 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
<PAGE>

- --------------------------------------------------------------------------------
GLOSSARY
- --------------------------------------------------------------------------------

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.

NRSRO is a nationally recognized securities rating organization.

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

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

Duff & Phelps is Duff & Phelps Credit Rating Co.

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.

4
<PAGE>

- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------

The following table presents per share income and capital changes for an Advisor
Class share outstanding throughout the period indicated. The information in the
table has been audited by Ernst & Young LLP, the independent auditors of the
Fund. A report of Ernst & Young 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. ("AFS") at the address or "For
Literature" telephone number shown on the cover of this Prospectus.

<TABLE>
<CAPTION>
ADVISOR CLASS
April 22, 1997(a)
to
August 31, 1997
---------------

<S> <C>
Net asset value, beginning of period .................... $ 10.00

Income From Investment Operations
Net investment income (b) ............................... .40
Net realized and unrealized gain on investments ......... 1.13
-------
Net increase in net asset value from operations ......... 1.53

Less: Dividends
Dividends from net investment income .................... (.36)
-------
Net asset value, end of period .......................... $ 11.17
=======
Total Return
Total investment return based on net asset value (c) .... 15.44%

Ratios/Supplemental Data
Net assets, end of period (000's omitted) .................. $ 321
Ratio to average net assets:
Expenses, net of waivers/reimbursements (d) ........... 1.40%
Expenses, before waivers/reimbursements (d) ........... 2.82%
Net investment income,
net of waivers/reimbursements (d) ................... 8.20%
Portfolio turnover rate ............................... 73%
</TABLE>

- ----------

(a) Commencement of operations.

(b) Based on average shares outstanding.

(c) 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 net asset value during the period, and
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 return calculated for a period of
less than one year is not annualized.

(d) Annualized.

- --------------------------------------------------------------------------------
DESCRIPTION OF THE FUND
- --------------------------------------------------------------------------------

The Fund is a diversified management 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 objective.

INVESTMENT OBJECTIVE

The Fund's Fundamental investment objective is to achieve high total return by
maximizing current income and, to the extent consistent with that objective,
capital appreciation. The Fund will pursue this objective by investing primarily
in a diversified mix of high yield, below investment grade fixed-income
securities involving greater volatility of price and risk of principal and
income than higher quality fixed-income securities. The below investment grade
debt securities in which the Fund may invest are known as "junk bonds."

INVESTMENT POLICIES

Under normal circumstances, at least 65% of the Fund's total assets will be
invested in high yield fixed-income securities rated below investment grade by
two or more NRSROs (i.e., rated lower than Baa by Moody's or lower than BBB by
S&P) or unrated but deemed by Alliance to be equivalent to such lower-rated
securities. The Fund will not, however, invest more than 10% of its total assets
in (i) fixed-income securities which are rated lower than B3 or B- or their
equivalents by two or more NRSROs or if unrated are of equivalent quality as
determined by Alliance, and (ii) money market instruments of any entity which
has an outstanding issue of unsecured debt that is rated lower than B3 or B- or
their equivalents by two or more NRSROs or if unrated is of equivalent quality
as determined by Alliance.

As of August 31, 1997, on a weighted average basis, the percentages of the
Fund's assets invested in securities rated (or consistered by Alliance to be of
equivalent quality to securities rated) in particular rating categories
were[ ]% in A and above, [ ]% in Baa or BBB, [ ]% in Ba or BB, and [ ]% in B.
The Fund did not invest in securities rated below [ ] by each of Moody's, S&P,
Duff & Phelps and Fitch or, if not rated, considered by Alliance to be of
equivalent quality to securities so rated.

5
<PAGE>

See Appendix A, "Description of Bond Ratings," for a description of each rating
category. In the event that any securities held by the Fund fall below those
ratings, the Fund will not be obligated to dispose of such securities and may
continue to hold such securities if, in the opinion of Alliance, such investment
is considered appropriate under the circumstances.

A portion of the Fund's assets are also expected to be invested in foreign
securities, and the Fund may buy and sell foreign currencies principally for the
purpose of preserving the value of foreign securities or in anticipation of
purchasing foreign securities. See "Certain Risk Considerations--Foreign
Investment" and "--Currency Considerations."

In addition, and although not to be emphasized, in furtherance of its investment
objective, the Fund may (i) invest in mortgage-backed and asset-backed
securities, (ii) enter into repurchase agreements, (iii) invest in loan
participations and assignments of loans to corporate, governmental, or other
borrowers originally made by institutional lenders or lending syndicates, (iv)
enter into forward commitments for the purchase or sale of securities and
purchase and sell securities on a when-issued or delayed delivery basis, (v)
write covered put and call options on fixed-income securities, securities
indices and foreign currencies and purchase put or call options on fixed-income
securities, securities indices and foreign currencies, (vi) purchase and sell
futures contracts and related options on debt securities and on indices of debt
securities, (vii) enter into contracts for the purchase or sale of a specific
currency for hedging purposes only, and (viii) lend portfolio securities. For
additional information on the uses, risks and costs of these practices, see
"Additional Investment Practices."

In addition to the foregoing, the Fund may from time to time make investments in
(1) U.S. Government Securities, (2) certificates of deposit, bankers'
acceptances, bank notes, time deposits and interest bearing savings deposits
issued or guaranteed by certain domestic and foreign banks, (3) commercial paper
(rated at least A-1 by S&P or Prime-1 by Moody's or, if not rated, issued by
domestic or foreign companies having high quality outstanding debt securities)
and participation interests in loans extended by banks to such companies, (4)
corporate debt obligations with remaining maturities of less than one year rated
at least high quality as well as corporate debt obligations rated at least high
grade provided the corporation also has outstanding an issue of commercial paper
rated at least A-1 by S&P or Prime-1 by Moody's, and (5) floating rate or master
demand notes. For a description of these investments, see the Fund's Statement
of Additional Information.

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.
Alliance's use of derivatives is subject to continuous risk assessment and
control from the standpoint of the Fund's investment objectives and policies.

The basic types of derivative instruments in which the Fund may invest are
options, futures and forwards.

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

6
<PAGE>

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.

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."

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.

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. 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.

7
<PAGE>

The Fund may purchase or write 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.

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.

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 purchase or sell futures contracts or options on futures
contracts unless either (i) the futures contracts or options thereon are for
"bona fide hedging" purposes (as that term is defined under the Commodities
Futures Trading Commission regulations) or (ii) if for other purposes, the sum
of amounts of initial margin deposits and premiums required to establish
non-hedging positions would not exceed 5% of the Fund's liquidation value.

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.

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.

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

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<PAGE>

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. 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

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<PAGE>

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 an 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
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.

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 loans to foreign governments 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

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<PAGE>

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.

Convertible Securities. Prior to conversion, convertible securities have the
same general characteristics as non-convertible debt securities, which provide a
stable stream of income with generally higher yields than those of equity
securities of the same or similar issuers. 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 from increases in the market price of
the underlying common stock. Convertible debt securities that are rated baa or
lower by Moody's or BBB 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 "Certain Risk
Considerations--Investment in Lower-Rated Fixed-Income Securities."

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.

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 50% 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.

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<PAGE>

Portfolio Turnover. Alliance anticipates that the Fund's annual turnover rate
will not exceed 500%. A 500% annual turnover rate would occur if all the
securities in the Fund's portfolio are replaced five times in a period of one
year. 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) invest in any one industry if that investment would make
the Fund's holding in that industry exceed 25% of the Fund's total assets and
(ii) will not make an investment unless, when considering all its other
investments, 75% of the value of its assets would consist of cash, cash items,
U.S. Government Securities, securities of other investment companies and other
securities. 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 its Statement of Additional Information.

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 Fund's 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

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<PAGE>

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 nationalizations,
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 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.

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 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.

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PURCHASE AND SALE
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OF SHARES
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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."

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

14
<PAGE>

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's toll-free number, 800-221-5672.

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, 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 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 a Fund,
including requirements as to the minimum initial and subsequent investment
amounts.

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, which is a Delaware limited partnership with principal offices at 1345
Avenue of the Americas, New York, New York 10105 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 June 30, 1997 of more than $199 billion (of which
more than $71 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 54 registered investment companies managed by Alliance comprising 116
separate investment portfolios currently have over two million shareholders. As
of June 30, 1996 Alliance was an investment manager of employee benefit plan
assets for 29 of the Fortune 100 companies.

15
<PAGE>

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-UAP, a French insurance
holding company. Certain information concerning the ownership and control of
Equitable by AXA-UAP 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 employees who will be primarily responsible for the day-to-day management of
the Fund's portfolio are Wayne C. Tappe and Nelson Jantzen. Mr. Tappe is a Vice
President of Alliance, with which he has been associated since prior to 1991.
Mr. Jantzen is a Senior Vice President of Alliance, with which he has been
associated since prior to 1991.(1)

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

(1) Prior to July 22, 1993, both Mr. Tappe and Mr. Jantzen were associated with
Equitable Capital Management Corporation ("Equitable Capital"). On that
date Alliance acquired the business and substantially all of the assets of
Equitable Capital.

PERFORMANCE OF A SIMILARLY MANAGED PORTFOLIO

Alliance is the investment adviser of a portfolio (the "Historical Portfolio")
of a registered investment company, sold only to separate accounts of insurance
companies in connection with variable life insurance contracts and variable
annuities certificates and contracts (the "Contracts"), that has substantially
the same investment objective and policies and has been managed in accordance
with essentially the same investment strategies and techniques as those
contemplated for the Fund. See "Description of the Fund." Alliance since July
22, 1993, and prior thereto, Equitable Capital, whose advisory business Alliance
acquired on that date, have served as investment adviser to the Historical
Portfolio since its inception in 1987.

The Lipper High Current Yield Bond Funds Average is a survey of the performance
of a large number of mutual funds the investment objective of each of which is
similar to that of the Fund. This survey is published by Lipper Analytical
Services, Inc. ("Lipper"), a firm recognized for its reporting of performance of
actively managed funds. According to Lipper, performance data are presented net
of investment management fees, operating expenses and, for funds with Rule 12b-1
plans, asset-based sales charges.

The performance results presented below are based on percent changes in net
asset values of the Historical Portfolio with dividends and capital gains
reinvested. Cumulative rates of return reflect performance over a stated period
of time. Annualized rates of return represent the rate of growth that would have
produced the corresponding cumulative return had performance been constant over
the entire period.

<TABLE>
<CAPTION>
Annualized Rates of Return
Periods Ended February 28, 1997
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio/Benchmark 1 Year 3 Years 5 Years 10 Years Inception(1)
------ ------- ------- -------- ------------
<S> <C> <C> <C> <C> <C>
Historical Portfolio ................. 21.06% 13.25% 14.85% 11.78% 11.62%

Lipper High Current Yield
Mutual Funds Average ............... 13.38 8.47 11.42 9.27 9.57

Cumulative Rates of Return
Periods Ended February 28, 1997
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio/Benchmark 1 Year 3 Years 5 Years 10 Years Inception(1)
------ ------- ------- -------- ------------
<S> <C> <C> <C> <C> <C>
Historical Portfolio ................ 21.06% 45.24% 99.87% 204.39% 205.67%
Lipper High Current Yield
Mutual Funds Average .............. 13.38 27.72 71.98 144.71 153.00
</TABLE>

- -----------------
(1) January 2, 1987

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 filings 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.

16
<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.

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.

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. The investment objective of the Fund is such that only a small portion,
if any, of the Fund's distributions is expected to qualify for the
dividends-received deduction for corporate shareholders.

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 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 of net capital gains, any loss
realized on the sale of such shares during such

17
<PAGE>

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,
generally will not be taxable to the plan. Distributions from such plans will be
taxable to individual participants under applicable tax rules without regard to
the character of the income earned by the qualified plan. 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
situation.

- --------------------------------------------------------------------------------
CONVERSION FEATURE
- --------------------------------------------------------------------------------

CONVERSION 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 and Sale of
Shares--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
"Purchase and Sale of Shares--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>
<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 ............................ .75%
12b-1 fees ................................. .30%
Other expenses (b) ......................... .88%
----
Total fund operating expenses .............. 1.93%
====

Example(a) Class A
-------
After 1 year ............................... $ 20
After 3 years .............................. $ 61
</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) 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.

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 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

18
<PAGE>

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 auditor of the Fund. 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 AFS at the address or "For Literature" telephone number shown on the
cover of the current prospectus.

<TABLE>
<CAPTION>
CLASS A
April 22, 1997(a)
to
August 31, 1997
---------------
<S> <C>
Net asset value, beginning of period ................. $10.00
Income From Investment Operations
Net investment income (b) ............................ .37

Net realized and unrealized gain on investments ...... 1.15
------
Net increase in net asset value from operations ...... 1.52
Less: Dividends
Dividends from net investment income ................. (.35)
------
Net asset value, end of period ....................... $11.17
======

Total Return
Total investment return based on net asset value (c).. 15.33%

Ratios/Supplemental Data
Net assets, end of period (000's omitted) ............ $5,889
Ratio to average net assets:
Expenses, net of waivers/reimbursements (d) ........ 1.70%
Expenses, before waivers/reimbursements (d) ........ 3.11%
Net investment income,
net of waivers/reimbursements (d) ................ 8.04%

Portfolio turnover rate ............................ 73%
</TABLE>

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

(a) Commencement of operations.

(b) Based on average shares outstanding.

(d) Annualized.

- --------------------------------------------------------------------------------
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 on December 19, 1996. 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 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.

19
<PAGE>

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 Advisor Class shares. 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.

20
<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
protective characteristics, these are outweighed by large uncertainties or
major exposures to adverse conditions.

A-1
<PAGE>

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>

(LOGO) ALLIANCE HIGH YIELD FUND, 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
April 21, 1997
(as amended October 22, 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 Alliance High Yield Fund, Inc. (the "Fund"), and
the Prospectus that offers the Advisor Class shares of the
Fund (the "Advisor Class Prospectus" and, together with the
Prospectus that offers the Class A, Class B and Class C
shares, the "Prospectus"). Copies of such Prospectuses 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. . . . . . . . . . . . . . . .
Management of the Fund . . . . . . . . . . . . . . . .
Expenses of the Fund . . . . . . . . . . . . . . . . .
Purchase of Shares . . . . . . . . . . . . . . . . . .
Redemption and Repurchase of Shares . . . . . . . . .
Shareholder Services . . . . . . . . . . . . . . . . .
Net Asset Value . . . . . . . . . . . . . . . . . . .
Dividends, Distributions and Taxes . . . . . . . . . .
Portfolio Transactions . . . . . . . . . . . . . . . .
General Information . . . . . . . . . . . . . . . . .
Report of Independent Auditors and
Financial Statement . . . . . . . . . . . . . . . .
Financial Statements . . . . . . . . . . . . . . . . .
Appendix A: Options . . . . . . . . . . . . . . . . . A-1
Appendix B: Bond Ratings . . . . . . . . . . . . . . B-1

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

<PAGE>

_________________________________________________________________

DESCRIPTION OF THE FUND
_________________________________________________________________

Except as otherwise indicated, the investment policies
of the Fund are not "fundamental policies" and may, therefore, be
changed by the Board of Directors without a shareholder vote.
However, the Fund will not change its investment policies without
contemporaneous written notice to its shareholders. The Fund's
investment objectives may not be changed without shareholder
approval. There can be, of course, no assurance that the Fund
will achieve its investment objectives.

Investment Objective

The Fund is a diversified, open-end management
investment company whose fundamental investment objective is to
achieve high total return by maximizing current income and, to
the extent consistent with that objective, capital appreciation.
The Fund will pursue this objective by investing primarily in a
diversified mix of high yield, below investment grade fixed-
income securities involving greater volatility of price and risk
of principal and income than higher quality fixed-income
securities. The below investment grade debt securities in which
the Fund may invest are known as "junk bonds."

Investment Policies

The Fund attempts to achieve its objective by investing
primarily in a diversified mix of high yield, below investment
grade fixed-income securities involving greater volatility of
price and risk of principal and income than higher fixed-income
securities. The Fund will be managed to maximize current income
by taking advantage of market developments, yield disparities and
variations in the creditworthiness of issuers. The Fund will use
various strategies in attempting to achieve its objective.

Under normal circumstances, at least 65% of the Fund's
total assets will be invested in high yield fixed-income
securities rated below investment grade by two or more NRSROs
(i.e., rated lower than Baa by Moody's Investors Services, Inc.
("Moody's") or lower than BBB by Standard & Poor's Ratings
Services ("S&P")) or unrated but deemed by the Alliance Capital
Management L.P., the Fund's investment adviser (the "Adviser"),
to be equivalent to such lower-rated securities. The Fund will
not, however, invest more than 10% of its total assets in (i)
fixed-income securities which are rated lower than B3 or B- or
their equivalents by two or more NRSROs or if unrated are of
equivalent quality as determined by the Adviser, and (ii) money
market instruments of any entity which has an outstanding issue

<PAGE>

of unsecured debt that is rated lower than B3 or B- or their
equivalents by two or more NRSROs or if unrated is of equivalent
quality as determined by the Adviser.

Certain of the Fund's investments will be in fixed-
income securities which are providing high current yields because
of risks other than credit. For example, the Fund may invest in
securities which have prepayment risks, and non-U.S. dollar
denominated foreign securities, which may have currency risks.

See Appendix B, "Bond Ratings," for a description of
each rating category. In the event that any securities held by
the Fund fall below those ratings, the Fund will not be obligated
to dispose of such securities and may continue to hold such
securities if, in the opinion of the Adviser, such investment is
considered appropriate under the circumstances.

Although not to be emphasized, in furtherance of its
investment objective, the Fund may (i) invest in mortgage-backed
and other asset-backed securities, (ii) enter into repurchase
agreements, (iii) invest in loan participations and assignments
of loans to corporate, governmental, or other borrowers
originally made by institutional lenders or lending syndicates,
(iv) enter into forward commitments for the purchase or sale of
securities and purchase and sell securities on a when-issued or
delayed delivery basis, (v) write covered put and call options on
fixed-income securities, securities indices and foreign
currencies and purchase put or call options on fixed-income
securities, securities indices and foreign currencies,
(vi) purchase and sell futures contracts and related options on
debt securities and on indices of debt securities, (vii) enter
into contracts for the purchase or sale of a specific currency
for hedging purposes only, (viii) invest in foreign securities
and buy and sell foreign currencies principally for the purpose
of preserving the value of foreign securities or in anticipation
or purchasing foreign securities provided, however, that the
value of foreign issues denominated in foreign currencies shall
not exceed 20% of the Fund's total assets and the value of
foreign issues denominated in United States currency shall not
exceed 25% of the Fund's total assets, and (ix) lend portfolio
securities.

<PAGE>

obligations with remaining maturities of less than one year rated
at least high quality as well as corporate debt obligations rated
at least high grade provided the corporation also has outstanding
an issue of commercial paper rated at least A-1 by S&P or Prime-1
by Moody's, and (5) floating rate or master demand notes.

Additional Investment Policies and Practices

The following additional investment policies supplement
those set forth above.

Options. The Fund may (a) write covered call options on
fixed-income securities or securities indices for the purpose of
increasing its return or to provide a partial hedge against a
decline in the value of its portfolio securities or both, (b)
write covered put options on fixed-income securities or
securities indices in order to earn additional income or (in the
case of put options written on individual securities) to purchase
the underlying securities at a price below the current market
price, (c) purchase put or call options on fixed-income
securities and securities indices in order to hedge against
changes in interest rates or stock prices which may adversely
affect the prices of securities that the Fund wants to purchase
at a later date, to hedge its existing investments against a
decline in value, or to attempt to reduce the risk of missing a
market or industry segment advance, and (d) purchase put and call
options and write covered put and call options against declines
in the dollar value of portfolio securities and against increases
in the dollar cost of securities to be acquired (i.e. as a hedge
and not for speculation).

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
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 liquid
assets in a segregated account with the Custodian. A put option
written by the Fund is "covered" if the Fund maintains liquid

<PAGE>

assets with a value equal to the exercise price in a segregated
account with the 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. 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.

A call option is for cross-hedging purposes if the Fund
does not own the underlying security, and is designed 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 Custodian liquid
assets 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
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

<PAGE>

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. The Fund retains the premium
received from writing a put or call option whether or not the
option is exercised. See Appendix A for a discussion of the use,
risks and costs of option trading.

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.
See "Illiquid Securities."

Options on Securities Indices. The Fund may purchase
and sell exchange-traded options on any securities index composed
of the types of securities in which it may invest. 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 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. There are
no specific limitations on the Fund's purchasing and selling of
options on securities indices.

Through the purchase of listed index options, the Fund
could achieve many of the same objectives as through the use of
options on individual securities. Price movements in the Fund's
portfolio securities probably will not correlate perfectly with
movements in the level of the index and, therefore, the Fund
would bear a risk of loss on index options purchased by it if
favorable price movements of the hedged portfolio securities do
not equal or exceed losses on the options or if adverse price
movements of the hedged portfolio securities are greater than
gains realized from the options.

<PAGE>

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 is generally 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 accrues to the purchaser
prior to the settlement date. At the time the Fund enters 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 condition did not occur
and the trade was canceled.

The use of forward commitments enables 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 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. However, if the Adviser were to forecast incorrectly the
direction of interest rate movements, the Fund might be required
to complete such when-issued or forward transactions at prices
inferior to the then current market values.

<PAGE>

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.

Futures Contracts and Options on Futures Contracts. The
Fund may invest in futures contracts and options thereon in order
to hedge against anticipated changes in interest rates that might
otherwise have an adverse effect on the value of the Fund's
assets or assets it intends to acquire, sell stock index futures
contracts and related options to hedge the equity portion of the
Fund's assets or equity assets it intends to acquire with regard
to market as distinguished from stock-specific risk, and enter
into futures contracts and related options on foreign currencies
in order to limit its exchange risk.

Mortgage-Related Securities. The mortgage-related
securities in which the Fund principally invests provide funds
for mortgage loans made to residential home buyers. These
include securities which represent interests in pools of mortgage
loans made by lenders such as savings and loan institutions,
mortgage bankers, commercial banks and others. Pools of mortgage
loans are assembled for sale to investors (such as the Fund) by
various governmental, government-related and private
organizations.

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

The average life of pass-through pools varies with the
maturities of the underlying mortgage instruments. In addition,
a pool's term may be shortened by unscheduled or early payments
of principal and interest on the underlying mortgages. The
occurrence of mortgage prepayments is affected by factors

<PAGE>

including the level of interest rates, general economic
conditions, the location and age of the mortgage and other social
and demographic conditions. As prepayment rates of individual
pools vary widely, it is not possible to accurately predict the
average life of a particular pool. For pools of fixed-rate
30-year mortgages, common industry practice is to assume that
prepayments will result in a 12-year average life. Pools of
mortgages with other maturities or different characteristics will
have varying average life assumptions. The assumed average life
of pools of mortgages having terms of less than 30 years, is less
than 12 years, but typically not less than 5 years.

Yields on pass-through securities are typically quoted
by investment dealers and vendors based on the maturity of the
underlying instruments and the associated average life
assumption. In periods of falling interest rates the rate of
prepayment tends to increase, thereby shortening the actual
average life of a pool of mortgage-related securities.
Conversely, in periods of rising interest rates the rate of
prepayment tends to decrease, thereby lengthening the actual
average life of the pool. Historically, actual average life has
been consistent with the 12-year assumption referred to above.
Actual prepayment experience may cause the yield to differ from
the assumed average life yield. Reinvestment of prepayments may
occur at higher or lower interest rates than the original
investment, thus affecting the yield of the Fund. The
compounding effect from reinvestment of monthly payments received
by the Fund will increase the yield to shareholders compared with
bonds that pay interest semi-annually.

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

Government-related (i.e., not backed by the full faith
and credit of the United States Government) guarantors include
the Federal National Mortgage Association and the Federal Home
Loan Mortgage Corporation. The Federal National Mortgage
Association ("FNMA") is a government-sponsored corporation owned
entirely by private stockholders. It is subject to general
regulation by the Secretary of Housing and Urban Development.
FNMA purchases residential mortgages from a list of approved
seller/servicers which include state and federally-chartered
savings and loan associations, mutual savings banks, commercial

<PAGE>

banks and credit unions and mortgage bankers. Pass-through
securities issued by FNMA are guaranteed as to timely payment of
principal and interest by FNMA but are not backed by the full
faith and credit of the United States Government. The Federal
Home Loan Mortgage Corporation ("FHLMC") is a corporate
instrumentality of the United States Government whose stock is
owned by the twelve Federal Home Loan Banks. Participation
certificates issued by FHLMC, which represent interests in
mortgages from FHLMC's national portfolio, are guaranteed by
FHLMC as to the timely payment of interest and ultimate
collection of principal but are not backed by the full faith and
credit of the United States Government.

Commercial banks, savings and loan institutions, private
mortgage insurance companies, mortgage bankers and other
secondary market issuers also create pass-through pools of
conventional residential mortgage loans. Such issuers may also
be the originators of the underlying mortgage loans as well as
the guarantors of the mortgage-related securities. Pools created
by such non-governmental issuers generally offer a higher rate of
interest than government and government-related pools because
there are no direct or indirect government guarantees of payments
in the former pools. However, timely payment of interest and
principal of these pools is supported by various forms of
insurance or guarantees, including individual loan, title, pool
and hazard insurance. The insurance and guarantees are issued by
government entities, private insurers and the mortgage poolers.
Such insurance and guarantees and the creditworthiness of the
issuers thereof will be considered in determining whether a
mortgage-related security meets the Fund's investment quality
standards. There can be no assurance that the private insurers
can meet their obligations under the policies. The Fund may buy
mortgage-related securities without insurance or guarantees if
through an examination of the loan experience and practices of
the poolers the Adviser determines that the securities meet the
Fund's quality standards. Although the market for such
securities is becoming increasingly liquid, securities issued by
certain private organizations may not be readily marketable. The
Fund will not maintain more than 15% of its net assets in
illiquid securities.

Mortgage-related securities in which the Fund may invest
may also include collateralized mortgage obligations ("CMOs").
CMOs are debt obligations issued generally by finance
subsidiaries or trusts that are secured by mortgage-backed
certificates, including, in many cases, certificates issued by
government-related guarantors, including GNMA, FNMA and FHLMC,
together with certain funds and other collateral. Although
payment of the principal of and interest on the mortgage-backed
certificates pledged to secure the CMOs may be guaranteed by
GNMA, FNMA or FHLMC, the CMOs represent obligations solely of the

<PAGE>

issuer and are not insured or guaranteed by GNMA, FNMA, FHLMC or
any other governmental agency, or by any other person or entity.
The issuers of CMOs typically have no significant assets other
than those pledged as collateral for the obligations.

The Fund also expects that governmental, government-
related or private entities may create mortgage loan pools
offering pass-through investments in addition to those described
above. The mortgages underlying these securities may be
alternative mortgage instruments, that is, mortgage instruments
whose principal or interest payments may vary or whose terms to
maturity may differ from customary long-term fixed rate
mortgages. As new types of mortgage-related securities are
developed and offered to investors, the Adviser will, consistent
with the Fund's investment objective, policies and quality
standards, consider making investments in such new types of
securities.

Other Asset-Backed Securities. In general, the
collateral supporting asset-backed securities is of shorter
maturity than mortgage loans and is less likely to experience
unexpected levels of prepayments. As with mortgage-related
securities, asset-backed securities are often backed by a pool of
assets representing the obligations of a number of different
parties and use similar credit enhancement techniques.

Repurchase Agreements. The Fund may enter into
repurchase agreements pertaining to the types of securities in
which it invests 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. The Fund may enter into repurchase agreements with
the 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. 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

<PAGE>

reviewed by the Board, pursuant to which the Adviser monitors the
creditworthiness of the dealers with which the Fund enters into
repurchase agreement transactions.

Illiquid Securities. The Fund has adopted the following
investment policy which may be changed by the vote of the Board
of Directors.

The Fund will not maintain more than 15% of its net
assets (taken at market value) in illiquid securities. For this
purpose, illiquid securities include, among others (a) direct
placements or other securities which are subject to legal or
contractual restrictions on resale or for which there is no
readily available market (e.g., trading in the security is
suspended or, in the case of unlisted securities, market makers
do not exist or will not entertain bids or offers), (b) over-the-
counter options purchased or written by the Fund and all assets
used to cover written over-the-counter options, and
(c) repurchase agreements not terminable within seven days.

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 ("Securities Act") and securities which are
otherwise not readily marketable. 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, foreign
securities and corporate bonds. 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.

<PAGE>

The Fund may invest up to 5% of its net assets (taken at
market value) in restricted securities, other than securities
issued under Rule 144A, 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 be resold
only in transactions that are exempt from the registration
requirements of the Securities Act and only to institutional
investors; they cannot be resold to the general public without
registration.

Securities eligible for resale under Rule 144A of the
Securities Act that have legal or contractual restrictions on
resale but have a readily available market are not deemed
illiquid for purposes of this limitation. More specifically,
Rule 144A allows a broader institutional trading market for
securities otherwise subject to restriction on resale to the
general public. Rule 144A establishes a "safe harbor" from the
registration requirements of the Securities Act for resales of
certain securities to qualified institutional buyers. An
insufficient number of qualified institutional buyers interested
in purchasing certain restricted securities held by the Fund,
however, could affect adversely the marketability of such
portfolio securities and the Fund might be unable to dispose of
such securities promptly or at reasonable prices. 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 sponsored by the National
Association of Securities Dealers, Inc., an automated system for
the trading, clearance and settlement of unregistered securities
of domestic and foreign issuers.

The Adviser, acting under the supervision of the Board
of Directors, will monitor the liquidity of restricted securities
in the Fund's portfolio that are eligible for resale pursuant to
Rule 144A. In reaching liquidity decisions, the Adviser will
consider, inter alia, the following factors: (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 securities.

<PAGE>

Loans of Portfolio Securities. The Fund may make
secured loans of its portfolio securities to brokers, dealers and
financial institutions provided that liquid assets, or bank
letters of credit equal to at least 100% of the market value of
the securities loaned are deposited and maintained by the
borrower with the Fund. 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 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 or equivalent securities in
order to exercise ownership rights such as voting rights,
subscription rights and rights to dividends, interest or other
distributions. The Fund may pay reasonable finders,
administrative and custodial fees in connection with a loan. The
Fund will not lend its portfolio securities to any officer,
director, employee or affiliate of the Fund or the Adviser. The
Board of Directors will monitor the Fund's lending of portfolio
securities.

U.S. Government Securities. U.S. Government securities
include: (i) U.S. Treasury obligations, which differ only in
their interest rates, maturities and times of issuance as
follows: U.S. Treasury bills (maturity of one year or less), U.S.
Treasury notes (maturities of one to ten years) and U.S. Treasury
bonds (generally maturities of greater than ten years); and
(ii) obligations issued or guaranteed by U.S. Government agencies
and instrumentalities that are supported by the full faith and
credit of the United States (such as securities issued by the
Farmers Home Administration, the Government National Mortgage
Association ("GNMA"), the Department of Housing and Urban
Development, the Export-Import Bank, the General Services
Administration and the Maritime Administration and certain
securities issued by the Federal Housing Administration and the
Small Business Administration). The maturities of U.S.
Government securities usually range from three months to 30
years.

Securities issued by GNMA ("GNMA Certificates")
differ in certain respects from other U.S. Government securities,
which normally provide for periodic payment of interest in fixed
amounts with principal payments at maturity or specified call
dates. GNMA Certificates are mortgage-backed securities
representing part ownership of a pool of mortgage loans. These

<PAGE>

loans -- issued by lenders such as mortgage bankers, commercial
banks and savings and loan-associations -- are either insured by
the Federal Housing Administration or guaranteed by the Veterans
Administration. A "pool" or group of such mortgages is assembled
and, after being approved by GNMA, is offered to investors
through securities dealers. Once approved by GNMA, the timely
payment of interest and principal on each mortgage is guaranteed
by the full faith and credit of the United States. GNMA
Certificates also differ from other U.S. Government securities in
that principal is paid back monthly by the borrower over the term
of the loan rather than returned in a lump sum at maturity. GNMA
Certificates are called "pass-through" securities because both
interest and principal payments (including pre-payments) are
passed through to the holder of the Certificate. Upon receipt,
principal payments are used by the Portfolio to purchase
additional U.S. Government securities.

General. The successful use of the foregoing investment
practices, all of which are highly specialized investment
activities, draws upon the Adviser's special skills and
experience with respect to such instruments and usually depends
on the Adviser's ability to forecast interest rate movements
correctly. Should interest rates move in an unexpected manner,
the Fund may not achieve the anticipated benefits of these
practices or may realize losses and, thus be in an worse position
than if such strategies had not been used. In addition, the
correlation between movements in the prices of such instruments
and movements in the prices of the securities hedged or used for
cover will not be perfect and could produce unanticipated losses.

The Fund's ability to dispose of its position in
options, interest rate transactions and forward commitment
contracts will depend on the availability of liquid markets in
such instruments. Markets for all these vehicles with respect to
a number of fixed-income securities are relatively new and still
developing. If, for example, 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 portfolio securities
covering an option written by the Fund until the option expires.
Therefore, no assurance can be given that the Fund will be able
to utilize these instruments effectively for the purposes set
forth 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
periods of fluctuating interest rates or for other reasons. Such

<PAGE>

trading will increase the Fund's rate of turnover and the
incidence of short-term capital gain taxable as ordinary income.
The Adviser 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. Such
high 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. The portfolio turnover rate for the fiscal period April
22, 1997 (commencement of operations) through August 31, 1997 was
73%. See "Dividends, Distributions and Taxes" and "General
Information--Portfolio Transactions."

Certain Risk Considerations

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
Commission. To the contrary, such instruments are traded through
financial institutions acting as market-makers, although foreign
currency options are also traded on certain national securities
exchanges, such as the Philadelphia Stock Exchange and the
Chicago Board Options Exchange, subject to 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
Commission, 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

<PAGE>

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.

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

<PAGE>

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 assets 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 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).

<PAGE>

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 cancelled in the event that the
required conditions did not occur and the trade was cancelled.

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,
liquid assets having value equal 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.

Investments in Lower-Rated and Unrated Instruments.
Substantially all of the Fund's assets will be invested in high
yield, high risk debt securities that are rated in the lower
rating categories (i.e., below investment grade) or which are
unrated but are of comparable quality as determined by the
Adviser. Debt securities rated below investment grade are those
rated Ba or lower by Moody's or BB or lower by S&P and are
considered by those organizations to be subject to greater risk
of loss of principal and interest than higher-rated securities
and are considered to be predominantly speculative with respect
to the issuer's capacity to pay interest and repay principal,
which may in any case decline during sustained periods of
deteriorating economic conditions or rising interest rates. The
Fund may invest in securities having the lowest ratings for non-
subordinated debt instruments assigned by Moody's or S&P (i.e.,
rated C by Moody's or CCC or lower by S&P) and in unrated

<PAGE>

securities of comparable investment quality. These securities
are considered to have extremely poor prospects of ever attaining
any real investment standing, to have a current identifiable
vulnerability to default, to be unlikely to have the capacity to
pay interest and repay principal when due in the event of adverse
business, financial or economic conditions, and/or to be in
default or not current in the payment of interest or principal.

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

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

Ratings of fixed-income securities by Moody's and S&P
are a generally accepted barometer of credit risk. They are,
however, subject to certain limitations from an investor's
standpoint. The rating of a security 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 the credit risk of securities
within each rating category.

<PAGE>

Non-rated securities will also be considered for
investment by the Fund when the Adviser 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 objectives
and policies.

The Adviser will try to reduce the risk inherent in its
investment approach 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-quality securities, the Adviser'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, the Adviser 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. The Adviser's analysis
focuses on relative values based on such factors as interest or
dividend coverage, asset coverage, earnings prospects, and the
experience and managerial strength of the issuer.

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

Risks of Investments In Foreign Securities. Foreign
issuers are subject to accounting and financial standards and
requirements that differ, in some cases significantly, from those
applicable to U.S. issuers. In particular, the assets and
profits appearing on the financial statements of a foreign issuer
may not reflect its financial position or results of operations
in the way they would be reflected had the financial statement
been prepared in accordance with U.S. generally accepted
accounting principles. In addition, for an issuer that keeps
accounting records in local currency, inflation accounting rules
in some of the countries in which the Fund will invest require,
for both tax and accounting purposes, that certain assets and
liabilities be restated on the issuer's balance sheet in order to
express items in terms of currency of constant purchasing power.
Inflation accounting may indirectly generate losses or profits.

<PAGE>

Consequently, financial data may be materially affected by
restatements for inflation and may not accurately reflect the
real condition of those issuers and securities markets.
Substantially less information is publicly available about
certain non-U.S. issuers than is available about U.S. issuers.

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

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

Certain countries other than those on which the Fund
will focus it investments may require governmental approval for
the repatriation of investment income, capital or the proceeds of
sales of securities by foreign investors. In addition, if a
deterioration occurs in a country's balance of payments, the
country could impose temporary restrictions on foreign capital
remittances. The Fund could be adversely affected by delays in,
or a refusal to grant, any required governmental approval for
repatriation of capital, as well as by the application to the
Fund of any restrictions on investments. Investing in local
markets may require the portfolio to adopt special procedures,
seek local governmental approvals or take other actions, each of
which may involve additional costs to the Fund.

Income from certain investments held by the Fund could
be reduced by foreign income taxes, including withholding taxes.
It is impossible to determine the effective rate of foreign tax
in advance. The Fund's net asset value may also be affected by
changes in the rates or methods of taxation applicable to the
Fund or to entities in which the Fund has invested. The Adviser
generally will consider the cost of any taxes in determining
whether to acquire any particular investments, but can provide no
assurance that the tax treatment of investments held by the Fund
will not be subject to change.

<PAGE>

Debt Securities. The net asset value of the Fund's
shares will change as the general levels of interest rates
fluctuate. When interest rates decline, the value of a portfolio
primarily invested in debt securities can be expected to rise.
Conversely, when interest rates rise, the value of a portfolio
primarily invest in debt securities can be expected to decline.
Certain debt securities in which the Fund may invest are
floating-rate debt securities. To the extent that the Fund does
not enter into interest rate swaps with respect to such floating-
rate debt securities, the Fund may be subject to greater risk
during periods of declining interest rates.

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 anticipates that the net return on the Fund's investment
portfolio will exceed the interest expense by the Fund on
borrowing.

Fundamental Investment Policies

There are several fundamental investment restrictions
which apply. These restrictions, may not be changed without
shareholder approval, 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. Whenever any investment restriction states a maximum
percentage of the Fund's assets which may be invested in any
security or other asset, it is intended that such maximum
percentage limitation be determined immediately after and as a
result of the Fund's acquisition of such securities or other
assets. Accordingly, any later increases or decreases in
percentage beyond the specified limitation resulting from a
change in values or net assets will not be considered a
violation.

The Fund may not:

(1) underwrite securities issued by other persons except
to the extent that, in connection with the disposition of its
portfolio investments, it may be deemed to be an underwriter
under certain federal securities laws;

(2) make short sales of securities, except when it has,
by reason of ownership of other securities, the right to obtain
securities of equivalent kind and amount that will be held so
long as it is in a short position;

(3) issue senior securities;

<PAGE>

(4) purchase real estate or mortgages; however, the Fund
may, as appropriate and consistent with its investment policies
and other investment restrictions (a) buy securities of issuers
which engage in real estate operations and securities which are
secured by interests in real estate (including partnership
interests and shares of real estate investment trusts) and
(b) may hold and sell real estate acquired as a result of
ownership of such securities;

(5) purchase any security on margin or borrow money,
except that this restriction shall not apply to (a) borrowing
from banks for temporary purposes, (b) the pledging of assets to
banks in order to transfer funds for various purposes as required
without interfering with the orderly liquidation of securities in
the Fund (but not for leveraging purposes), or (c) margin
payments or pledges in connection with options, futures
contracts, options on futures contracts, forward contracts or
options on foreign currencies;

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

(7) purchase or sell commodities (except that the Fund
may purchase and sell futures contracts and related options on
debt securities and on indices of debt securities).

Non-Fundamental Restrictions

The following investment restrictions are not fundamental. They
may be changed without a vote of that Fund's shareholders.

The Fund will not:

(1) invest more than 15% of its assets in securities
restricted as to disposition under federal securities laws, or
securities otherwise considered illiquid or not readily
marketable, including repurchase agreements having a maturity of
more than seven days; however, this restriction will not apply to
securities sold pursuant to Rule 144A under the Securities Act,
so long as such securities meet liquidity guidelines to be
established by the Fund's Board of Directors;

(2) trade in foreign exchange (except transactions
incidental to the settlement of purchases or sales of securities
for the Fund) except in connection with its foreign currency
hedging strategies, provided the amount of foreign exchange
underlying such a currency hedging transactions does not exceed
10% of such the Fund's net assets;

<PAGE>

(3) acquire securities of any company that is a
securities broker or dealer,a securities underwriter, an
investment adviser of an investment company, or an investment
adviser registered under the Investment Advisers Act of 1940
(other than any such company that derives no more than 15% of its
gross revenues from securities related activities), except the
Fund may purchase bank, trust company, and bank holding company
stock, and except that the Fund may invest, in accordance with
Rule 12d3-1 under the Investment Company Act of 1940, as amended
(the "1940 Act"), up to 5% of its total assets in any such
company provided that it owns no more than 5% of the outstanding
equity securities of any class plus 10% of the outstanding debt
securities of such company; or

(4) make an investment in order to exercise control or
management over a company.

In addition, the Fund will not invest more than 5% of its assets
in the securities of any one investment company, own more than 3%
of any one investment company's outstanding voting securities, or
have total holdings of investment company securities in excess of
10% of the value of the Fund's assets.

_________________________________________________________________

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 director,
trustee or officer of other registered investment companies
sponsored by the Adviser. Unless otherwise specified, the
address of each of the following persons is 1345 Avenue of the
Americas, New York, New York 10105.

Directors

JOHN D. CARIFA,* 52, Chairman of the Board and
President, is the President, Chief Operating Officer and a
Director of Alliance Capital Management Corporation ("ACMC"),with
which he has been associated since prior to 1992.

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") since prior to 1992.
____________________

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

<PAGE>

She is a Director of Ecolab Incorporated (specialty chemicals)
and Amoco Corporation (oil and gas). Her address is P.O. Box
4623, Stamford, Connecticut 06903.

DAVID H. DIEVLER, 68, was formerly a Senior Vice
President of ACMC with which he had been associated since prior
to 1992. He is currently an independent consultant. His address
is P.O. Box 167, Spring Lake, New Jersey 07762.

JOHN H. DOBKIN, 55, has been the President of Historic
Hudson Valley (historic preservation) since prior to 1992.
Previously, he was Director of the National Academy of Design.
His address is 105 West 55th Street, New York, New York
10019.

WILLIAM H. FOULK, JR., 65, is an Investment Adviser 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, 73, is President of the Harry Frank
Guggenheim Foundation and a Director of Union Carbide Corporation
with which he has been associated since prior to 1992. 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, 58, is a member of the law firm of
Cahill Gordon & Reindel with which he has been associated since
prior to 1992. He is President and Chief Executive Officer of
Wenonah Development Company (investment holding company)and a
Director of Placer Dome Inc. (mining). His address is St
Bernard's Road, Gladstone, New Jersey 07934.

DONALD J. ROBINSON, 63, was formerly a partner of
Orrick, Herrington & Sutcliffe and is currently Senior Counsel to
that firm. He was also a Trustee of the Museum of the City of
New York from 1977 to 1995. His address is 98 Hell's Peak Road,
Weston, Vermont 05161.

Officers

JOHN D. CARIFA, PRESIDENT, see biography above.

KATHLEEN A. CORBET, SENIOR VICE PRESIDENT, 37, is a
Senior Vice President of ACMC since July 1993. Prior thereto,
she was employed by Equitable Capital since prior to 1992.

NELSON JANTZEN, SENIOR VICE PRESIDENT, 52, is a Senior
Vice President and Portfolio Manager of ACMC since July 1993.

<PAGE>

Mr. Jantzen is head of the High Yield Group and is responsible
for the management of domestic high yield assets. Prior thereto,
he was employed by Equitable Capital since prior to 1992.

WAYNE C. TAPPE, VICE PRESIDENT, 34, is a Vice President
and Portfolio Manager of ACMC since July 1993. Prior thereto, he
was employed by Equitable Capital since prior to 1992.

MARK D. GERSTEN, TREASURER and CHIEF FINANCIAL OFFICER,
46, is a Senior Vice President of AFS, with which he has been
associated since prior to 1992.

JUAN RODRIGUEZ, CONTROLLER, 40, is an Assistant Vice
President of Alliance Fund Services, Inc. with which he has been
associated since prior to 1992.

CARLA LaROSE, ASSISTANT CONTROLLER, 34, is a Manager of
Alliance fund Services, Inc., with which she has been associated
since prior to 1992.

JOSEPH J. MANTINEO, ASSISTANT CONTROLLER, 38, is a vice
President of Alliance Fund Services, Inc. with which he has been
associated since prior to 1992.

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

EDMUND P. BERGAN, JR., SECRETARY, 47, is a Senior Vice
President and the General Counsel of Alliance Fund Distributors,
Inc. ("AFD") and Alliance Fund Services, Inc. ("AFS") and a Vice
President and Assistant General Counsel of ACMC, with which he
has been associated since prior to 1992.

ANDREW L. GANGOLF, ASSISTANT SECRETARY, 43, has been a
Vice President and Assistant General Counsel of AFD since
December 1994. Prior thereto he was a Vice President and
Assistant Secretary of Delaware Management Company, Inc. since
October 1992 and a Vice President and Counsel to Equitable since
prior to 1992.

The aggregate compensation paid by the Fund to each of
the Directors during its fiscal year ended August 31, 1997, and
the aggregate compensation paid to each of the Directors during
calendar year 1996 by all of the registered investment companies
to which the Adviser provides investment advisory services
(collectively, the "Alliance Fund Complex"), and the total number
of registered investment companies (and separate investment
portfolios within those companies) in the Alliance Fund Complex
with respect to which each of the Directors serves as a director
or trustee, are set forth below. Neither the Fund nor any other

<PAGE>

fund in the Alliance Fund Complex provides compensation in the
form of pensions or retirement benefits to any of its directors
or trustees. All of the Directors is a director or trustee of
one or more other registered investment companies in the Alliance
Fund Complex.

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

John D. Carifa $0 $0 50 114
Ruth Block $2,000 $157,500 37 76
David H. Dievler $2,000 $182,000 43 79
John H. Dobkin $2,000 $121,250 30 52
William H. Foulk, Jr. $2,000 $144,250 32 70
Dr. James M. Hester $2,000 $148,500 38 73
Clifford L. Michel $2,000 $146,068 38 88
Donald J. Robinson $2,000 $137,250 38 102

As of October 27, 1997, the Directors and officers of
the Fund as a group owned less than 1% of the shares of the Fund.

Adviser

Alliance Capital Management L.P., a Delaware
limited partnership with principal offices at 1345 Avenue of the
Americas, New York, New York 10105, has been retained under an
investment advisory agreement (the "Advisory Agreement") to
provide investment advice and, in general, to conduct the
management and investment program of the Fund under the
supervision of the Fund's Board of Directors (see "Management of
the Fund" in the Prospectus).

Alliance is a leading international investment
manager supervising client accounts with assets as of June 30,
1997 of more than $199 billion (of which more than $71 billion
represented the assets of investment companies). The Adviser's
clients are primarily major corporate employee benefit funds,
public employee retirement systems, investment companies,
foundation and endowment funds. As of June 30, 1997, the Adviser
was an investment manager of employee benefit fund assets for 29
of the FORTUNE 100 companies. As of that date, the Adviser and

<PAGE>

its subsidiaries employed approximately 1,500 employees who
operated out of domestic offices and the offices of subsidiaries
in Bahrain, Bangalore, Chennai, Istanbul, London, Madrid, Mumbai,
Paris, Singapore, Tokyo and Toronto and affiliate offices located
in Vienna, Warsaw, Hong Kong, Sao Paulo and Moscow. The 54
registered investment companies comprising more than 116 separate
investment portfolios managed by the Adviser currently have more
than two million shareholders.

Alliance Capital Management Corporation, the sole
general partner of, and the owner of a 1% general partnership
interest in, the Adviser, is an indirect wholly-owned subsidiary
of The Equitable Life Assurance Society of the United States
("Equitable"), one of the largest life insurance companies in the
United States and a wholly-owned subsidiary of The Equitable
Companies Incorporated ("ECI"). ECI is a holding company
controlled by AXA-UAP, a French insurance holding company which
at September 30, 1997, beneficially owned approximately 59% of
the outstanding voting shares of ECI. As of June 30, 1997, 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.

AXA-UAP is a holding company for an international
group of insurance and related financial services companies.
AXA-UAP's insurance operations include activities in life
insurance, property and casualty insurance and reinsurance. The
insurance operations are diverse geographically, with activities
principally in Western Europe, North America and the Asia/Pacific
area. AXA-UAP is also engaged in asset management, investment
banking, securities trading, brokerage, real estate and other
financial services activities principally in the United States,
as well as in Western Europe and the Asia/Pacific area.

Based on information provided by AXA-UAP, as of
September 30, 1997 more than 25% of the voting power of AXA-UAP
was controlled directly and indirectly by FINAXA, a French
holding company. As of September 30, 1997 more than 25% of the
voting power of FINAXA was controlled directly and indirectly by
four French mutual insurance companies (the "Mutuelles AXA"), one
of which, AXA Assurances I.A.R.D. Mutuelle, itself controlled
directly and indirectly more than 25% of the voting power of
FINAXA. Acting as a group, the Mutuelles AXA control AXA-UAP and
FINAXA.

Certain other clients of the Adviser may have investment
objectives and policies similar to those of the Fund. The Adviser
may, from time to time, make recommendations which result in the
purchase or sale of a particular security by its other clients

<PAGE>

simultaneously with the Fund. If transactions on behalf of more
than one client during the same period increase the demand for
securities being purchased or the supply of securities being
sold, there may be an adverse effect on price or quantity. It is
the policy of the Adviser to allocate advisory recommendations
and the placing of orders in a manner 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.

Under the Advisory Agreement, the Adviser provides
investment advisory services and order 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
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. For the fiscal period of the Fund
ended August 31, 1997, the Adviser received from the Fund
advisory fees of $ [ ].

The Fund has, under the Advisory Agreements, assumed the
obligation for payment of all its other expenses. As to the
obtaining of services other than those specifically provided to
the Fund by the Adviser, the Fund may employ its own personnel.
For such services, it also may utilize personnel employed by the
Adviser or its affiliates and, in such event, the services will
be provided to the Fund at cost and the payments therefor must be
specifically approved by the Fund's Directors. The Fund paid to
the Adviser a total of $[ ] in respect of such services
during the fiscal period April 22, 1997 (commencement of
operations) through August 31, 1997.

The Advisory Agreement is terminable without penalty by
a vote of a majority of the Fund's outstanding voting securities
(as defined in the 1940 Act) 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 became effective on February 25,
1997. The Advisory Agreement will continue in effect until
December 31, 1998 and thereafter for successive twelve-month
periods (computed from each January 1), provided, however, that

<PAGE>

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.

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 Environment Fund, Inc., Alliance Global Small Cap
Fund, Inc., Alliance Global Strategic Income Trust, Inc.,
Alliance Government Reserves, Alliance Greater China '97 Fund,
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., 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
World Dollar Government Fund, Inc., Alliance World Dollar
Government Fund II, Inc., The Austria Fund, Inc., The Korean
Investment Fund, Inc., The Spain Fund, Inc. and The Southern
Africa Fund, Inc. all closed-end investment companies.

<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 the 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 1940 Act (the
"Rule 12b-1 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 combined respective contingent deferred sales
charges and respective distribution services fees on the Class B
shares, and the distribution services fee on the Class C shares
are the same as those of the initial sales charge and/or
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 was initially approved by the
Directors of the Fund at a meeting held on February 25, 1997, and
by the Fund's initial shareholder on March 28, 1997.

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

<PAGE>

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 Agreement became effective on February 25, 1997.
The Agreement will continue in effect until December 31, 1997 and
thereafter for successive twelve-month periods (computed from
each January 1) with respect to each class of the Fund, 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 outstanding voting securities (as defined in
the Act) of that class, and in either case, by a majority of the
Directors of the Fund who are not parties to this agreement or
interested persons, as defined in the Act, of any such party
(other than as trustees 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.

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 April 22, 1997
(commencement of operations) through August 31, 1997, with
respect to Class A shares, the Fund paid distribution services
fees for expenditures under the Agreement, in the aggregate
amount of $3,447 which constituted approximately .30% of the
Fund's average daily net assets attributable to the Class A
shares during the period, and the Adviser made payments from its
own resources as described above, aggregating $49,043. Of the
$52,490 paid by the Fund and the Adviser under the Plan, with
respect to the Class A shares, $2,635 was spent on advertising,
$2,475 on the printing and mailing of prospectuses for persons
other than current shareholders, $9,853 for compensation to
broker-dealers and other financial intermediaries (including,
$5,249 to the Fund's Principal Underwriter), $17,552 for
compensation to sales personnel and, $19,975 was spent on
printing of sales literature, travel, entertainment, due
diligence and other promotional expenses.

During the Fund's fiscal period April 22, 1997
(commencement of operations) through August 31, 1997, with

<PAGE>

respect to Class B shares, the Fund paid distribution services
fees for expenditures under the Agreement in the aggregate amount
of $71,444, which constituted 1.00% of the Fund's average daily
net assets attributable to Class B shares during the period, and
the Adviser made payments from its own resources, as described
above, aggregating $1,679,237. Of the $1,750,681 paid by the
Fund and the Adviser under the Plan, with respect to Class B
shares, $25,156 was spent on advertising, $24,427 on the printing
and mailing of prospectuses for persons other than current
shareholders, $1,555,103 for compensation to broker-dealers and
other financial intermediaries (including, $47,839 to the Fund's
Principal Underwriter), $56,446 for compensation to sales
personnel, $79,345 was spent on printing of sales literature,
travel, entertainment, due diligence and other promotional
expenses and $10,204 on interest on Class B shares financing.

During the Fund's fiscal period April 22, 1997
(commencement of operations) through August 31, 1997, with
respect to Class C shares, the Fund paid distribution services
fees for expenditures under the Agreement, in the aggregate
amount of $12,098 which constituted approximately 1.00%
annualized, of the Fund's average daily net assets attributable
to Class C shares during the period, and the Adviser made
payments from its own resources, as described above, aggregating
$79,092. Of the $91,190 paid by the Fund and the Adviser under
the Plan, with respect to Class C shares, $3,162 was spent on
advertising, $3,624 on the printing and mailing of prospectuses
for persons other than current shareholders, $63,082 for
compensation to broker-dealers and other financial intermediaries
(including, $6,160 to the Fund's Principal Underwriter), $8,679
for compensation to sales personnel, and $10,196 was spent on
printing of sales literature, travel, entertainment, due
diligence and other promotional expenses.

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 will become
effective only upon approval as provided in the preceding
paragraph; and the Agreement may not be amended in order to
increase materially the costs that the Fund or a particular class
of the Fund may bear pursuant to the Agreement without the
approval of a majority of the holders of the outstanding voting

<PAGE>

shares of the Fund or the class or classes of the Fund affected.
The Agreement may be terminated (a) by the Fund without penalty
at any time by a majority vote of the holders of the Fund's
outstanding voting securities, voting separately by class, or by
a majority vote of the disinterested Directors 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 not give 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 April 22,
1997 (commencement of operations) to August 31,1997 the Fund paid
Alliance Fund Services, Inc. $ for transfer agency services.

_________________________________________________________________

PURCHASE OF SHARES
_________________________________________________________________

The following information supplements that set forth in
the Fund's Prospectus(es) under the heading "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"), 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

<PAGE>

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 CB
Commercial Real Estate Group, Inc. 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 the Principal Underwriter for investment
in Advisor Class shares.

Investors may purchase shares of the Fund either through
selected broker-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 representative 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.

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

<PAGE>

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
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.

<PAGE>

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
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 amount 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 may 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.

<PAGE>

Class A, Class B, 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 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, Class B and 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 charge 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
____________________

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

<PAGE>

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.

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 four-
year 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
four-year period during which Class B shares are subject to a

<PAGE>

contingent deferred sales charge may find it more advantageous to
purchase Class C shares.

During the Fund's fiscal period April 22, 1997
(commencement of operations) to August 31, 1997, the aggregate
amounts of underwriting commission payable with respect to shares
of the Fund were $ . Of that amount, the Principal
Underwriter received $ , representing that portion of the
sales charge paid on shares of the Fund sold during the fiscal
period which was not reallowed to selected dealers (and was,
accordingly, retained by the Principal Underwriter). During the
Fund's fiscal period ended in 1997, the Principal Underwriter
received contingent deferred sales charges of $ , $ and
$ , respectively, on Class A, Class B and Class C shares of
the Fund.

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 Public or Agents
Amount of Net Amount Offering As % of
Purchase Invested Price Offering 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

<PAGE>

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, as 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 were acquired upon the reinvestment of dividends and
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

<PAGE>

charge may be deemed to be an "underwriter" under the Securities
Act.

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
$100,000 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 August 31, 1997.

Net Asset Value per Class A
Share at August 31, 1997 $11.17

Per Share Sales Charge - 4.25%
of offering price (4.44% of
net asset value per share) $ .50

Class A Per Share Offering Price
to the Public $11.67
=======

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

<PAGE>

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.
-Corporate Bond Portfolio
-U.S. Government Portfolio
Alliance Developing Markets Fund, Inc.
Alliance Global Dollar Government Fund, Inc.
Alliance Global Environment Fund, Inc.
Alliance Global Small Cap Fund, Inc.
Alliance Global Strategic Income Trust, Inc.
Alliance Greater China '97 Fund, Inc.
Alliance Growth and Income Fund, Inc.
Alliance Income Builder Fund, Inc.
Alliance International Fund
Alliance Limited Maturity Government Fund, Inc.
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 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 World Income Trust, Inc.
Alliance Worldwide Privatization Fund, Inc.

<PAGE>

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
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

<PAGE>

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 the 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.

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 only 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 the sales charge
will be used to purchase additional shares of the Fund subject to
the rate of the 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

<PAGE>

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 the 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 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. 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 an 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

<PAGE>

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
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,
certain employee benefit plans for employees of the Adviser, the
Principal Underwriter, Alliance Fund Services, Inc. and their
affiliates; (iv) registered investment advisers or financial
intermediaries who charge a management, consulting or other fee
for their services 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 or 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 financial intermediary, or its
affiliate or agent, for service 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.

<PAGE>

Proceeds from the contingent deferred sales charge on
the Class B 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 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 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 2.0% (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.

<PAGE>

Contingent Deferred Sales Charge as
Year Since Purchase a % of Dollar Amount Subject to Charge
First 4.0%
Second 3.0%
Third 2.0%
Fourth 1.0%
Fifth and thereafter None

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

<PAGE>

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.

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 shares 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
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."

<PAGE>

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 and Advisor Class shares.

Conversion of Advisor Class Shares 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 "Purchase of Shares--General," and by
investment advisory clients of, and by 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
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

<PAGE>

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 require 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 shares, Class B shares 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
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

<PAGE>

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 permit 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 received by a shareholder upon
redemption or repurchase of his or her shares, assuming the
shares constitute capital assets in his or her hands, will result
in long-term or short-term capital gain (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 stock
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 stock
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
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 share

<PAGE>

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
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.

<PAGE>

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
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.

<PAGE>

________________________________________________________________

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
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 service charges.
Exchanges may be made by telephone or written request. Telephone

<PAGE>

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. Except with respect to exchanges of Class
A shares of the Fund for Advisor Class shares of the Fund,
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
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

<PAGE>

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 Fund 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.

<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 "For 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 a 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.

<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 the
shareholder's Class A, Class B, Class C or Advisor Class Fund
account, a Class A, Class B, Class C or Advisor Class account
with one or more other Alliance Mutual Funds may direct that
income dividends and/or capital gains paid on the shareholder's
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

<PAGE>

from the Fund automatically reinvested in additional shares of
the Fund.

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 Shares 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 (or, in the case of shares acquired
through one or more exchanges of shares, the original shares)
acquired after July 1, 1995. Class B shares that are not subject
to a contingent deferred sales charge (such as shares acquired

<PAGE>

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.

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.

Checkwriting

A new Class A or Class C investor may fill out the
Signature Card which is included in the 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

<PAGE>

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
to close his or her account by use of a check. In this regard,
the Bank has the right to return checks (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

<PAGE>

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
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, Class B, Class C
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
________________________________________________________________

General

The Fund intends for each taxable year to qualify as a
"regulated investment company" under the Internal Revenue Code of
1986, as amended (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) 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, cash items, 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 total
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).

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.,

<PAGE>

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

The information set forth in the following discussion
relates solely to the significant United States federal income
tax consequences of dividends and distributions by the Fund and
of sales or redemptions of Fund shares, and assumes that the Fund
qualifies to be taxed as a regulated investment company.
Investors should consult their own tax counsel with respect to
the specific tax consequences of their being shareholders of the
Fund, including the effect and applicability of federal, state
and local tax laws to their own particular situation and the
possible effects of changes therein.

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.

Until the Directors of the Fund otherwise determine,
each income dividend and capital gains distribution, if any,
declared by the Fund on its outstanding shares will, at the
election of each shareholder, be paid in cash or reinvested in
additional full or fractional shares of the Fund. Election to

<PAGE>

receive dividends and distributions in cash or full or fractional
shares is made at the time the shares are initially purchased and
may be changed at any time prior to the record date for a
particular dividend or distribution. 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, Class C and Advisor Class shares will be
calculated in the same manner, at the same time, on the same day
and will be in the same amount, except as a result of the
differential daily expense accruals of the distribution and
transfer agency fees applicable with respect to those classes.

Pursuant to the Taxpayer Relief Act of 1997, two
different tax rates apply to net capital gains--that is, the
excess of net gains from capital assets held for more than one
year over net losses from capital assets held for not more than
one year. One rate (generally 28%) applies to net gains on
capital assets held for more than one year but not more than 18
months ("mid-term gains"), and a second rate (generally 20%)
applies to the balance of such net capital gains ("adjusted net
capital gains"). Except as noted below, distributions of net
capital gains will be treated in the hands of shareholders as
mid-term gains to the extent designated by the Fund as deriving
from net gains from assets held for more than one year but not
more than 18 months, and the balance will be treated as adjusted
net capital gains. Gains derived from assets sold before May 7,
1997 and held for more than 18 months will be treated as mid-term
gains. Gains derived from assets sold after May 6, 1997 and
before July 29, 1997 and held for more than one year will be
treated as adjusted net capital gains. Distributions of mid-term
gains and adjusted net capital gains will be taxable to
shareholders as such, regardless of how long a shareholder has
held shares in the Fund. 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.

Sales and Redemptions. Any gain or loss arising from a
sale or redemption of Fund shares generally will be capital gain

<PAGE>

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. In the case of an individual shareholder,
the applicable tax rate imposed on long-term capital gains
differs depending on whether the shares were held at the time of
the sale or redemption for more than 18 months, or for more than
one year but not more than 18 months. If a shareholder has held
shares in the Fund for six months or less and during that period
has received a distribution of net capital gains, any loss
recognized by the shareholder on the sale of those shares during
the six-month period will be treated as a long-term capital loss
to the extent of the distribution. In determining the holding
period of such shares for this purpose, any period during which a
shareholder's risk of loss is offset by means of options, short
sales or similar transactions is not counted.

Any loss realized by a shareholder on a sale 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.

Backup Withholding. The Fund may be required to
withhold United States federal income tax at the rate of 31% of
all 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 types of
shareholders specified in the Code are exempt from such backup
withholding. Backup withholding is not an additional tax; any
amounts so withheld may be credited against a shareholder's
United States federal income tax liability or refunded.

Foreign Taxes. Income received by the Fund also may be
subject to foreign income taxes, including taxes withheld at the
source. 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.

<PAGE>

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 United States 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 percent
of its gross income from "passive income" (including, but not
limited to, interest, dividends, royalties, rents and annuities),
or (ii) on average, at least 50 percent of the value (or adjusted
tax basis, if elected) of the assets held by the corporation
produce "passive income." Pursuant to the Taxpayer Relief Act of
1997, the Fund could elect for taxable years beginning after 1997
to "mark-to market" stock in a PFIC. Under such an election, the
Fund would include in income each year an amount equal to the
excess, if any, of the fair market value of the PFIC stock as of
the close of the taxable year over the Fund's adjusted basis in
the PFIC stock. The Fund would be allowed a deduction for the
excess, if any, of the adjusted basis of the PFIC stock over the
fair market value of the PFIC stock as of the close of the
taxable year, but only to the extent of any net mark-to-market
gains included by the Fund for prior taxable years. The Fund's
adjusted basis in the PFIC stock would be adjusted to reflect the
amounts included in, or deducted from, income under this
election. Amounts included in income pursuant to this election,
as well as gain realized on the sale or other disposition of the
PFIC stock, would be treated as ordinary income. The deductible
portion of any mark-to-market loss, as well as loss realized on
the sale or other disposition of the PFIC stock to the extent
that such loss does not exceed the net mark-to-market gains
previously included by the Fund, would be treated as ordinary
loss. The Fund generally would not be subject to the deferred
tax and interest charge provisions discussed above with respect

<PAGE>

to PFIC stock for which a mark-to-market election has been made.
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 percent and calendar year distribution requirements described
above.

Discount Obligations. Under current federal tax law,
the Fund will include in income as interest each year, in
addition to stated interest received on obligations held by the
Fund, amounts attributable to the Fund from holding (i) Discount
Obligations and (ii) securities purchased by the Fund at a price
less than their stated face amount or, in the case of Discount
Obligations, at a price less than their issue price plus the
portion of "original issue discount" previously accrued thereon,
i.e., purchased at a "market discount." Current federal tax law
requires that a holder (such as the Fund) of a Discount
Obligation accrue as income each year a portion of the discount
at which the obligation was purchased by the Fund even though the
Fund does not receive interest payments in cash on the security
during the year which reflect the accrued discount. The Fund
will elect to likewise accrue and include in income each year a
portion of the market discount with respect to a Discount
Obligation or other obligation even though the Fund does not
receive interest payments in cash on the securities which reflect
that accrued discount.

As a result of the applicable rules, in order to make
the distributions necessary for the Fund not to be subject to
federal income or excise taxes, the Fund may be required to pay
out as an income distribution each year an amount significantly
greater than the total amount of cash which the Fund has actually
received as interest during the year. Such distributions will be
made from the cash assets of the Fund, from borrowings or by
liquidation of portfolio securities, if necessary. If a
distribution of cash necessitates the liquidation of portfolio
securities, the Adviser will select which securities to sell. The
Fund may realize a gain or loss from such sales. In the event
the Fund realizes net capital gains from such sales, its
shareholders may receive a larger capital gain distribution, if
any, than they would have in the absence of such sales.

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

<PAGE>

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. If such
distributions exceed such shareholder's basis, such excess 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
generally 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.

<PAGE>

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
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 swap, 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

<PAGE>

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 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.

Other Taxation

As noted above, the Fund may be subject to other state
and local taxes.

Taxation of Foreign Shareholders

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

_________________________________________________________________

PORTFOLIO TRANSACTIONS
_________________________________________________________________

Subject to the general supervision of the Board of
Directors of the Fund, the Adviser is responsible for the
investment decisions and the placing of the orders for portfolio
transactions of the Fund. The Fund's portfolio transactions
occur primarily with the issuers, underwriters or major dealers
acting as principals. Such transactions are normally on a net
basis which do not involve payment of brokerage commissions. The

<PAGE>

cost of securities purchased from an underwriter usually includes
a commission paid by the issuer to the underwriters; transactions
with dealers normally reflect the spread between bid and ask
prices. Premiums are paid with respect to options purchased by
the Fund and brokerage commissions are payable with respect to
transactions in exchange-traded futures contracts.

The Fund has no obligation to enter into transactions in
portfolio securities with any dealer, issuer, underwriter or
other entity. In placing orders, it is the policy of the Fund to
obtain the best price and execution for its transactions. Where
best price and execution may be obtained from more than one
dealer, the Adviser may, in its discretion, purchase and sell
securities through 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.

Portfolio securities will not be purchased from or sold
to Donaldson, Lufkin & Jenrette Securities Corporation, an
affiliate of the Adviser or any other subsidiary or affiliate of
the Equitable Life Assurance Society of the United States.

_________________________________________________________________

GENERAL INFORMATION
_________________________________________________________________

Capitalization

The authorized capital stock of the Fund consists of
3,000,000,000 shares of Class A Common Stock, $.001 par value,
3,000,000,000 shares of Class B Common Stock, $.001 par value,
3,000,000,000 shares of Class C Common Stock, $.001 par value and
3,000,000,000 shares of Advisor Class Common Stock, $.001 par
value. All shares of the Fund, when issued, are fully paid and
non-assessable. The Board of Directors are authorized to
reclassify and issue any unissued shares to any number of
additional series and classes without shareholder approval.
Accordingly, the Board in the future, for reasons such as the
desire to establish one or more additional 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

<PAGE>

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 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.

At October 27, 1997 there were 6,799,109 shares of
common stock of the Fund outstanding, including 817,035 Class A
shares, 5,121,794 Class B shares, 820,818 Class C shares and
39,462 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 October 27, 1997:

<PAGE>

No. of % of
Shares % of % of % of Advisor
Class Class A Class B Class C Class
Name and Address

MLPF&S 68,776 8.42%
For the Sole Benefit of
its Customers
Attn: Fund Administration
4800 Deer Lake Dr. East,
3rd Floor

PaineWebber for the Benefit 49,048 6.00%
of Gerald E. Connor
1365 York Avenue, Apt 21-D
New York, NY 10021-4045

Cotia USA LTD Inc. 68,549 8.39%
375 Park Avenue Ste 2504
New York, NY 10152-2599

MLPF&S 1,737,752 33.93%
For the sole Benefit of
its Customers
Attn: Fund Administration
4800 Deer Lake Dr. East,
3rd Floor
Jacksonville, FL 32246-6484

MLPF&S 252,474 30.76%
For the Sole Benefit of
its Customers
Attn: Fund Administration
4800 Deer Lake Dr. East,
3rd Floor
Jacksonville, FL 32246-6484

Donaldson Lufkin Jenrette 45,000 5.48%
Securities Corporation, Inc.
P.O. Box 2052
Jersey City, NJ 07303-2052

Dominic J. Saccullo & Gertrude 2,531 6.42%
Styles Saccullo
Ttees F/T Dominick & Gertrude
Saccullo TR DTD
12-12-94
220 Archer Drive
Santa Cruz, CA 95060-2445

<PAGE>

Alliance Plans Div/F.T.C 3,054 7.74%
C/F Adrienne Kopelakis
IRA Rollover
167-05 12th Avenue
Beechhurst, NY 11357-2262

Wayne C. Tappe 10,069 25.52%
1775 York Avenue
New York, NY 10128-6921

Middleton Place Foundation 8,569 21.72%
Reserve Fund
Ashley River Road
Charleston, SC 29414

Alliance Capital Management LP 10,000 25.34%
Attn: Anne Drennan, Treasurer
1345 Avenue of the Americas
New York, NY 10105-0302

Procedures for calling a shareholders' meeting for the
removal of Directors of the Fund, similar to those set forth in
Section 16(c) of the 1940 Act are available to shareholders of
the Fund. Meetings of shareholders may be called by 10% of the
Fund's outstanding shareholders. 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.

Custodian

Bank of New York acts as custodian for the assets of the
Fund but plays no part in deciding the purchase or sale of
portfolio securities. Subject to the supervision of the Fund's
Directors, Bank of New York may enter into sub-custodial
agreement for the holding of the Fund's foreign securities.

Principal Underwriter

Alliance Fund Distributors, Inc., 1345 Avenue of the
Americas, New York, New York 10105, serves as the Fund's
Principal Underwriter, and as such may solicit orders from the
public to purchase shares of the Fund. Under the Distribution
Services Agreement, the Fund has agreed to indemnify the
distributors, 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.

<PAGE>

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, have been
appointed as independent auditors for the Fund.

Yield and Total Return Quotations

From time to time the Fund states its "yield," "actual
distribution rate" and "total return." Computed separately for
each class, 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 stated in sales literature, is computed in the same manner
as yield except that actual income dividends declared per share
during the period in question are substituted for net investment
income per share. The actual distribution rate is compounded
separately for each class of shares. Computed separately for
each class, the Fund's "total return" is its average annual
compounded total return for its most recently completed one-,
five- and ten-year periods (or, if shorter, the period since the
Fund's inception). The Fund's total return for such a 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 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 paid and the maximum sales charge
applicable to purchases of Fund shares is assumed to have been
paid.

Yield and total return are calculated separately for
Class A, Class B, Class C and Advisor Class 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, its 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

<PAGE>

Fund is not fixed and will fluctuate in response to prevailing
market conditions.

The Fund's yield for the month ended August 31, 1997 was
8.31% for Class A shares, 8.01% for Class B shares, 8.01% for
Class C shares and 8.01% for Advisor Class shares. The Fund's
actual distribution rates for such period for Class A, Class B,
Class C and Advisor Class shares were 8.34%, 8.09%, 8.09% and
8.98%, respectively. The Fund's average annual total returns for
the period April 22, 1997 (commencement of operations) to
August 31, 1997 for Class A, Class B, Class C, and Advisor Class
shares were 10.47%, 11.07%, 14.07% and 15.44%, respectively.

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 Barrons, Business Week, Changing
Times, Forbes, Investor's Daily, Money Magazine, The New York
Times and The Wall Street Journal or other media on behalf of the
Fund.

Additional Information

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
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.

<PAGE>

_________________________________________________________________

FINANCIAL STATEMENTS
_________________________________________________________________

<PAGE>

PORTFOLIO OF INVESTMENTS
AUGUST 31, 1997 ALLIANCE HIGH YIELD FUND
_______________________________________________________________________________

PRINCIPAL
AMOUNT
(000) U.S. $ VALUE
- -------------------------------------------------------------------------

CORPORATE DEBT OBLIGATIONS-88.0%
BANKING-0.9%
Bay View Capital Corp.
9.125%, 8/15/07 $ 500 $ 505,000

BUILDING / REAL ESTATE-2.7%
Falcon Building Products, Inc.
9.50%, 6/15/07 (a) 500 511,250
Reliant Building Products
10.875%, 5/01/04 (a) 1,000 1,027,500
------------
1,538,750

CABLE-10.2%
Digital Television Services LLC
12.50%, 8/01/07 (a) 1,000 1,000,000
Echostar DBS Corp.
12.50%, 7/01/02 (a) 750 766,875
General Communications, Inc.
9.75%, 8/01/07 1,000 1,030,000
Innova S de R.L.
12.875%, 4/01/07 (a) 1,000 1,057,500
James Cable Partners - LP
10.75%, 8/15/04 (a) 1,000 1,020,000
OpTel, Inc., Series B
13.00%, 2/15/05 (b) 1,000 970,000
------------
5,844,375

CHEMICALS-0.9%
Harris Chemical North America, Inc.
10.75%, 10/15/03 500 516,250

COMMUNICATIONS-23.2%
American Communications Services, Inc.
13.75%, 7/15/07 (a) 1,500 1,593,750
Econophone, Inc.
13.50%, 7/15/07 (a)(c) 750 783,750
GST Equipment Funding
13.25%, 5/01/07 (a) 750 825,000
Globalstar LP/Globalstar Capital
11.25%, 6/15/04 750 748,125
Hyperion Telecommunications
12.25%, 9/01/04 (a) 1,000 1,030,000
Iridium LLC/Capital Corp.
14.00%, 7/15/05 (a) 1,500 1,590,000
ITC Deltacom, Inc.
11.00%, 6/01/07 (a) 500 531,250
Metronet Communications
12.00%, 8/15/07 (a)(d) 1,500 1,612,500
Microcell Telecommunications
14.00%, 6/01/06 (e) 1,000 640,000
Price Communications Wireless, Inc.
11.75%, 7/15/07 (a) 1,250 1,309,375
Primus Telecommunications Group, Inc.
11.75%, 8/01/04 (f) 1,000 1,037,500
Talton Holdings, Inc.
11.00%, 6/30/07 (a) 500 525,000
WinStar Equipment
12.50%, 3/15/04 (a) 1,000 1,015,000
------------
13,241,250

CONGLOMERATES-1.8%
Insilco Corp.
10.25%, 8/15/07 (a) 1,000 1,016,250

CONSUMER MANUFACTURING-4.4%
Drypers Corp.
10.25%, 6/15/07 (a) 500 501,250
Hedstrom Corp.
10.00%, 6/01/07 (a) 1,000 1,017,500
Sweetheart Cup
9.625%, 9/01/00 1,000 1,005,000
------------
2,523,750

ENERGY-4.0%
ICO, Inc.
10.375%, 6/01/07 (a) 600 625,500

PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE HIGH YIELD FUND
_______________________________________________________________________________

PRINCIPAL
AMOUNT
(000) U.S. $ VALUE
- -------------------------------------------------------------------------
Transamerican Energy
11.50%, 6/15/02 (a) $ 500 $ 488,750
13.00%, 6/15/02 (a)(e) 1,500 1,151,250
------------
2,265,500

FINANCIAL-1.8%
Wilshire Financial Services Group, Inc.
13.00%, 8/15/04 (a) 1,000 1,006,250

FOOD / BEVERAGES / TOBACCO-5.3%
Colorado Prime Corp.
12.50%, 5/01/04 (a)(g) 500 502,500
North Atlantic Trading Co.
11.00%, 6/15/04 (a) 500 517,500
SC International Services, Inc.
9.25%, 9/01/07 (a) 500 503,125
Southern Foods Group
9.875%, 9/01/07 (a) 1,000 1,006,250
Specialty Foods Corp.
Series B 11.125%, 10/01/02 500 502,500
------------
3,031,875

INDUSTRIAL-4.9%
Glasstech, Inc.
12.75%, 7/01/04 (a) 750 795,000
High Voltage Engineering Corp.
10.50%, 8/15/04 (a) 500 506,250
Nortek, Inc.
9.125%, 9/01/07 (a) 500 499,375
Safety Components International, Inc.
10.125%, 7/15/07 (a) 1,000 1,015,000
------------
2,815,625

LEISURE / ENTERTAINMENT-3.0%
Coleman Escrow Corp.
11.94%, 5/15/01 (a) 1,000 660,000
Hollywood Theaters, Inc.
10.625%, 8/01/07 (a) $ 500 $518,750
Riddell Sports, Inc.
10.50%, 7/15/07 (a) 500 522,500
------------
1,701,250

MEDIA-3.2%
Azteca Holdings SA
11.00%, 6/15/02 (a) 500 525,000
Central European Media Enterprises, Ltd.
9.375%, 8/15/04 500 500,000
Citadel Broadcasting Co.
10.25%, 7/01/07 (a) 750 791,250
------------
1,816,250

METALS / MINERALS-1.8%
Murrin Murrin Holdings Property
9.375%, 8/31/07 (a) 1,000 1,010,000

PAPER / PACKAGING-6.1%
Burke Industries, Inc.
10.00%, 8/15/07 (a) 500 507,500
Gaylord Container Corp.
9.75%, 6/15/07 (a) 500 510,000
Precise Technology, Inc.
11.125%, 6/15/07 (a) 750 735,000
Riverwood International Corp.
10.625%, 8/01/07 (a) 1,000 1,017,500
10.875%, 4/01/08 750 720,000
------------
3,490,000

RETAIL-3.6%
Discovery Zone, Inc.
13.50%, 8/01/02 (a) 500 517,500
Leslie's Poolmart
10.375%, 7/15/04 (a) 500 518,750
United Auto Group, Inc.
11.00%, 7/15/07 (a) 1,000 1,015,000
------------
2,051,250

ALLIANCE HIGH YIELD FUND
_______________________________________________________________________________

PRINCIPAL
AMOUNT
(000) U.S. $ VALUE
- -------------------------------------------------------------------------

SUPERMARKETS-1.8%
Fleming Companies, Inc.
10.50%, 12/01/04 (a) $ 500 $ 507,500
Shoppers Food Warehouse Corp.
9.75%, 6/15/04 (a) 500 515,000
------------
1,022,500

TECHNOLOGY-1.8%
Federal Data Corp.
10.125%, 8/01/05 (a) 500 512,500
Viasystems, Inc.
9.75%, 6/01/07 (a) 500 512,500
------------
1,025,000

TRANSPORTATION-6.6%
Atlas Air, Inc.
10.75%, 8/01/05 (a) 1,000 1,025,000
Chemical Leaman Corp.
10.375%, 6/15/05 (a) 750 775,313
GS Superhighway Holdings
10.25%, 8/15/07 (a) 1,000 980,000
Navigator Gas Transport PLC
10.50%, 6/30/07 (a) 500 512,500
12.00%, 6/30/07 (a) 500 513,750
------------
3,806,563

Total Corporate Debt Obligations
(cost $48,870,151) 50,227,688

SHARES OR
PRINCIPAL
AMOUNT
(000) U.S. $ VALUE
- -------------------------------------------------------------------------

PREFERRED STOCK-5.2%
Adelphia Communications Corp.
13.00% (a) 7,500 $ 808,125
IXC Communications, Inc.
12.50% (a)(h) 1,000 1,056,250
Nextel Communications, Inc.
13.00% (a)(h) 1,000 1,082,500
Total Preferred Stock
(cost $2,781,250) 2,946,875

TIME DEPOSIT-6.2%
Bank of New York
5.25%, 9/02/97 (cost $3,553,216) $ 3,553 3,553,216

TOTAL INVESTMENTS-99.4%
(cost $55,204,617) 56,727,779
Other assets less liabilities-0.6% 354,254

NET ASSETS-100% $ 57,082,033

(a) Securities are exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At August 31, 1997,
these securities amounted to $45,000,188 or 78.8% of net assets.

(b) Consists of $1,000,000 senior notes and 1,000 shares of common stock.

(d) Security trades with warrants expiring August 15, 2007.

(e) Indicates a security that has a zero coupon that remains in effect until a
predetermined date at which time the stated coupon rate becomes effective until
final maturity.

(f) Security trades with warrants expiring August 1, 2004.

(g) Security trades with warrants expiring May 1, 2004.

(h) PIK preferred, quarterly stock payments.

See notes to financial statements.

STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1997 ALLIANCE HIGH YIELD FUND
_______________________________________________________________________________

ASSETS
Investments in securities, at value (cost $55,204,617) $ 56,727,779
Receivable for capital stock sold 1,858,852
Interest receivable 728,881
Deferred organization expenses 264,942
Total assets 59,580,454

LIABILITIES
Payable for investment securities purchased 2,005,000
Dividends payable 130,366
Payable for capital stock redeemed 52,069
Distribution fee payable 39,477
Advisory fee payable 16,850
Accrued expenses 254,659
Total liabilities 2,498,421

NET ASSETS $ 57,082,033

COMPOSITION OF NET ASSETS
Capital stock, at par $ 5,112
Additional paid-in capital 55,325,341
Distributions in excess of net investment income (79,329)
Accumulated net realized gain on investment transactions 307,747
Net unrealized appreciation of investments 1,523,162
$ 57,082,033

CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share ($5,888,806/
527,399 shares of capital stock issued and outstanding) $11.17
Sales charge--4.25% of public offering price .50
Maximum offering price $11.67

CLASS B SHARES
Net asset value and offering price per share ($43,297,235/
3,877,745 shares of capital stock issued and outstanding) $11.17

CLASS C SHARES
Net asset value and offering price per share ($7,575,413/
678,454 shares of capital stock issued and outstanding) $11.17

ADVISOR CLASS SHARES
Net asset value, redemption and offering price per share
($320,579 / 28,711 shares of capital stock issued and
outstanding $11.17

See notes to financial statements.

STATEMENT OF OPERATIONS
APRIL 22, 1997* TO AUGUST 31, 1997 ALLIANCE HIGH YIELD FUND
_______________________________________________________________________________

INVESTMENT INCOME
Interest $ 922,823

EXPENSES
Advisory fee $ 72,014
Distribution fee - Class A 3,447
Distribution fee - Class B 71,444
Distribution fee - Class C 12,098
Administrative 66,750
Audit and legal 51,845
Amortization of organization expenses 20,658
Directors' fees 18,565
Custodian 17,799
Registration 13,371
Transfer agency 11,428
Printing 3,005
Miscellaneous 1,068
Total expenses 363,492
Less: expenses waived and reimbursed by the
Adviser (see note B) (142,073)
Net expenses 221,419
Net investment income 701,404

REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investment transactions 307,747
Net unrealized appreciation of investments 1,523,162
Net gain on investments 1,830,909

NET INCREASE IN NET ASSETS FROM OPERATIONS $ 2,532,313

* Commencement of operations.
See notes to financial statements.

STATEMENT OF CHANGES IN NET ASSETS ALLIANCE HIGH YIELD FUND
_______________________________________________________________________________

APRIL 22, 1997*
TO
AUGUST 31, 1997
---------------
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income $ 701,404
Net realized gain on investment transactions 307,747
Net unrealized appreciation of investments 1,523,162
Net increase in net assets from operations 2,532,313

DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income
Class A (100,429)
Class B (573,256)
Class C (97,883)
Advisor Class (9,165)

CAPITAL STOCK TRANSACTIONS
Net increase 55,230,153
Total increase 56,981,733

NET ASSETS
Beginning of period 100,300
End of period $ 57,082,033

* Commencement of operations.
See notes to financial statements.

NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1997 ALLIANCE HIGH YIELD FUND
_______________________________________________________________________________

NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance High Yield Fund, Inc. (the "Fund") was incorporated in the state of
Maryland on December 19, 1996 as a diversified, open-end management investment
company. Prior to commencement of operations on April 22, 1997, the Fund had no
operations other than the sale to Alliance Capital Management L.P. (the
"Adviser") of 10 shares each of Class A, Class B and Class C and 10,000 shares
of Advisor Class for the aggregate amount of $100 each on Class A, Class B and
Class C shares and $100,000 on the Advisor Class shares on February 26, 1997.
The Fund offers Class A, Class B, Class C and Advisor Class shares. Class A
shares are sold with a front-end sales charge of up to 4.25% for purchases not
exceeding $1,000,000. 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 of 1%. Class B shares are currently sold with a
contingent deferred sales charge which declines from 4% to zero depending on
the period of time the shares are held. Class B shares will automatically
convert to Class A shares eight years after the end of the calendar month of
purchase. Class C shares are subject to a contingent deferred sales charge of
1% on redemptions made within the first year after purchase. Advisor Class
shares are sold without an initial or contingent deferred sales charge and are
not subject to ongoing distribution expenses. Advisor Class shares are offered
to investors participating in fee based programs and to certain retirement plan
accounts. All four classes of shares have identical voting, dividend,
liquidation and other rights, except that each class bears different
distribution expenses and has exclusive voting rights with respect to its
distribution plan. The following is a summary of significant accounting
policies followed by the Fund.

1. SECURITY VALUATION
Portfolio securities traded on a national securities exchange are valued at the
last reported sales price on such exchange. Listed securities not traded and
securities traded in the over-the-counter market, including listed debt
securities whose primary market is believed to be over-the-counter, are valued
at the mean of the closing bid and asked price as obtained from a recognized
pricing service and brokers. Securities which mature in 60 days or less are
valued at amortized cost, which approximates market value unless this method
does not represent fair value. Securities for which market quotations are not
readily available and restricted securities are valued in good faith at fair
value using methods determined by the Board of Directors. In determining fair
value, consideration is given to cost, operating and other financial data.

2. TAXES
It is the Fund's policy to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if applicable, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required.

3. ORGANIZATION EXPENSES
Organization costs of $285,600 have been deferred and are being amortized on a
straight-line basis through April, 2002.

4. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Interest income is accrued daily. Dividend income is recorded on ex-dividend
date. Investment transactions are accounted for on the date the securities are
purchased or sold. Investment gains and losses are determined on the identified
cost basis. The Fund accretes discount as adjustment to interest income.

5. INCOME AND EXPENSES
All income earned and expenses incurred by the Fund are borne on a pro-rata
basis by each outstanding class of shares, based on the proportionate interest
in the Fund represented by the shares of such class, except that the Fund's
Class B and Class C shares bear higher distribution and transfer agent fees
than Class A shares and the Advisory Class shares have no distribution fees.
Expenses of the Fund are charged to the Fund in proportion to net assets.

6. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex-dividend
date.

Income and capital gains distributions are determined in accordance with
federal tax regulations and may differ from those determined in accordance with
generally accepted accounting principles. To the extent these differences are
permanent, such amounts are reclassified within the capital accounts based on
their federal tax basis treatment; temporary differences do not require

NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE HIGH YIELD FUND
_______________________________________________________________________________

such reclassification. During the current fiscal year, permanent differences,
primarily due to short-term capital gains, resulted in a net decrease in
accumulated net realized gain on investment transactions and a corresponding
increase in undistributed net investment income. This reclassification had no
affect on net assets.

NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of an Investment Advisory Agreement, the Fund pays Alliance
Capital Management L.P. (the "Adviser"), an advisory fee at an annual rate of
.75% of 1% of the average daily net assets of the Fund. Such fee is accrued
daily and paid monthly.

The Investment Adviser has agreed to voluntarily waive its fees and bear
certain expenses so that total expenses do not exceed on an annual basis 1.70%,
2.40%, 2.40% and 1.40% of the daily average net assets for the Class A, Class
B, Class C and Adviser Class shares, respectively. For the period ended August
31, 1997, such reimbursement amounted to $3,309. In addition, the Adviser has
waived its fees in the amount of $72,014.

Pursuant to the advisory agreement, the Adviser provides certain legal and
accounting services for the Fund. For the period ended August 31, 1997, the
Adviser voluntarily agreed to waive its fees in the amount of $66,750 for such
services.

The Fund compensates Alliance Fund Services, Inc. (a wholly-owned subsidiary of
the Adviser) under a Transfer Agency Agreement for providing personnel and
facilities to perform transfer agency services for the Fund. Such compensation
amounted to $3,060 for the period ended August 31, 1997.

Alliance Fund Distributors, Inc. (a wholly-owned subsidiary of the Adviser)
serves as the Distributor of the Fund's shares. The Distributor received
front-end sales charges of $7,095 from the sale of Class A shares, and $14,342
and $2,565 in contingent deferred sales charges imposed upon redemptions by
shareholders of Class B and Class C shares, respectively, for the period ended
August 31, 1997.

NOTE C: DISTRIBUTION SERVICES AGREEMENT
The Fund has adopted a Distribution Services Agreement (the "Agreement")
pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the
Agreement, the Fund pays a distribution fee to the Distributor at an annual
rate of up to .30 of 1% of the Fund's average daily net assets attributable to
Class A shares and 1% of the Fund's average daily net assets attributable to
the Class B and Class C shares. There is no distribution fee on the Advisor
Class shares. Such fee is accrued daily and paid monthly. The Agreement
provides that the Distributor will use such payments in their entirety for
distribution assistance and promotional activities. The Distributor has
incurred expenses in excess of the distribution costs reimbursed by the Fund in
the amount of $1,679,237 and $79,092, for Class B and Class C shares,
respectively; such costs may be recovered from the Fund in future periods so
long as the Agreement is in effect. In accordance with the Agreement, there is
no provision for recovery of unreimbursed distribution costs, incurred by the
Distributor, beyond the current fiscal year for Class A shares. The Agreement
also provides that the Adviser may use its own resources to finance the
distribution of the Fund's shares.

NOTE D: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments
and U.S. government obligations) aggregated $67,120,953 and $15,818,608,
respectively, for the period ended August 31, 1997. There were no purchases or
sales of U.S. government or government agency obligations for the period ended
August 31, 1997.

At August 31, 1997, the cost of investments for federal income tax purposes was
the same as the cost for financial reporting purposes. Accordingly, gross
unrealized appreciation of investments was $1,606,831 and gross unrealized
depreciation of investments was $83,669, resulting in net unrealized
appreciation of $1,523,162.

ALLIANCE HIGH YIELD FUND
_______________________________________________________________________________

NOTE E: CAPITAL STOCK
There are 12,000,000,000 shares of $.001 par value capital stock authorized,
divided into four classes, designated Class A, Class B, Class C and Advisor
Class shares. Each class consists of 3,000,000,000 authorized shares.
Transactions in capital stock were as follows:

SHARES AMOUNT
--------------- ---------------
APRIL 22, 1997* APRIL 22, 1997*
TO TO
AUG. 31, 1997 AUG. 31, 1997
--------------- ---------------
CLASS A
Shares sold 662,265 $ 7,166,202
Shares issued in reinvestment of dividends 5,192 57,153
Shares converted from Class B 800 8,899
Shares redeemed (140,868) (1,561,101)
Net increase 527,389 $ 5,671,153

CLASS B
Shares sold 3,983,130 $ 43,164,351
Shares issued in reinvestment of dividends 13,930 153,591
Shares converted to Class A (800) (8,899)
Shares redeemed (118,525) (1,302,901)
Net increase 3,877,735 $ 42,006,142

CLASS C
Shares sold 708,988 $ 7,691,629
Shares issued in reinvestment of dividends 3,959 43,572
Shares redeemed (34,503) (378,081)
Net increase 678,444 $ 7,357,120

ADVISOR CLASS
Shares sold 18,485 $ 193,285
Shares issued in reinvestment of dividends 380 4,153
Shares redeemed (154) (1,700)
Net increase 18,711 $ 195,738

* Commencement of operations.

FINANCIAL HIGHLIGHTS ALLIANCE HIGH YIELD FUND
_______________________________________________________________________________

SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT THE PERIOD

<TABLE>
<CAPTION>
CLASS A CLASSB CLASS C ADVISOR CLASS
----------------- ----------------- ---------------- -----------------
APRIL 22, 1997(A) APRIL 22, 1997(A) APRIL 22, 1997(A) APRIL 22, 1997(A)
TO TO TO TO
AUGUST 31, 1997 AUGUST 31, 1997 AUGUST 31, 1997 AUGUST 31, 1997
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Net asset value, beginning
of period $10.00 $10.00 $10.00 $10.00

INCOME FROM INVESTMENT OPERATIONS
Net investment income (b) .37 .31 .32 .40
Net realized and unrealized
gain on investments 1.15 1.19 1.18 1.13
Net increase in net asset
value from operations 1.52 1.50 1.50 1.53

LESS: DIVIDENDS
Dividends from net investment income (.35) (.33) (.33) (.36)
Net asset value, end of period $11.17 $11.17 $11.17 $11.17

TOTAL RETURN
Total investment return based
on net asset value (c) 15.33% 15.07% 15.07% 15.44%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $5,889 $43,297 $7,575 $321
Ratio to average net assets:
Expenses, net of waivers/
reimbursements (d) 1.70% 2.40% 2.40% 1.40%
Expenses, before waivers/
reimbursements (d) 3.11% 3.85% 3.84% 2.82%
Net investment income, net
of waivers/reimbursements (d) 8.04% 7.19% 7.24% 8.20%
Portfolio turnover rate 73% 73% 73% 73%
</TABLE>

(a) Commencement of operations.

(b) Based on average shares outstanding.

(c) 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 net asset value during the period, and
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 return calculated for a period of less than one year
is not annualized.

(d) Annualized.

REPORT OF ERNST & YOUNG LLP
INDEPENDENT AUDITORS ALLIANCE HIGH YIELD FUND
_______________________________________________________________________________

TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
ALLIANCE HIGH YIELD FUND, INC.

We have audited the accompanying statement of assets and liabilities of
Alliance High Yield Fund, Inc. (the "Fund"), including the portfolio of
investments, as of August 31, 1997, and the related statements of operations
and changes in net assets and financial highlights for the period from April
22, 1997 (commencement of operations) to August 31, 1997. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1997, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Alliance High Yield Fund, Inc. at August 31, 1997, and the results of its
operations, the changes in its net assets and the financial highlights for the
period from April 22, 1997 to August 31, 1997, in conformity with generally
accepted accounting principles.

New York, New York
October 7, 1997

<PAGE>

_________________________________________________________________

APPENDIX A: OPTIONS
_________________________________________________________________

Options

The Fund will only write "covered" put and call options,
unless such options are written for cross-hedging purposes. The
manner in which such options will be deemed "covered" is
described in the Prospectus under the heading "Investment
Objective and Policies -- Investment Practices -- Options."

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

The writer of a listed option that wishes to terminate
its obligation may effect a "closing purchase transaction." This
is accomplished by buying an option of the same series as the
option previously written. The effect of the purchase is that
the writer's position will be 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 is no guarantee that
either a closing purchase or a closing sale transaction can be
effected.

Effecting a closing transaction in the case of a written
call option will permit the 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

A-1

<PAGE>

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
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

A-2

<PAGE>

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.

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.

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

A-3

<PAGE>

price of the underlying security rises sufficiently, the option
may expire worthless to the Fund.

A-4

<PAGE>

_________________________________________________________________
APPENDIX B

BOND RATINGS
_________________________________________________________________

STANDARD & POOR'S

A Standard & Poor's corporate debt rating is a current
assessment of the creditworthiness of an obligor with respect to
a specific obligation. Debt rated "AAA" has the highest rating
assigned by Standard & Poor's. Capacity to pay interest and
repay principal is extremely strong. Debt rated "AA" has a very
strong capacity to pay interest and to repay principal and
differs from the highest rated issues only in small degree. 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
a debt of a higher rated category.

The ratings from "AA" and "A" may be modified by the
addition of a plus or minus sign to show relative standing within
the major rating categories.

MOODY'S

Excerpts from Moody's description of its corporate bond
ratings: Aaa - judged to be the best quality, carry the smallest
degree of investment risk; Aa - judged to be of high quality by
all standards; A - possess many favorable investment attributes
and are to be considered as higher medium grade obligations; Baa
- - considered as medium grade obligations, i.e., they are neither
highly protected nor poorly secured.

FITCH INVESTORS SERVICE

AAA. Securities of this rating are regarded as strictly
high-grade, broadly marketable, suitable for investment by
Directors and fiduciary institutions, and liable to but slight
market fluctuation other than through changes in the money rate.
The factor last named is of importance varying with the length of
maturity. Such securities are mainly senior issues of strong
companies, and are most numerous in the railway and public
utility fields, though some industrial obligations have this
rating. The prime feature of an AAA rating is showing of
earnings several times or many times interest requirements with
such stability of applicable earnings that safety is beyond
reasonable question whatever changes occur in conditions. Other
features may enter in, such as a wide margin of protection
through collateral security or direct lien on specific property
as in the case of high class equipment certificates or bonds that

B-1

<PAGE>

are first mortgages on valuable real estate. Sinking funds or
voluntary reduction of the debt by call or purchase are often
factors, while guarantee or assumption by parties other than the
original debtor may also influence the rating.

AA. Securities in this group are of safety virtually
beyond question, and as a class are readily salable while many
are highly active. Their merits are not greatly unlike those of
the AAA class, but a security so rated may be of junior through
strong lien--in many cases directly following an AAA security--or
the margin of safety is less strikingly broad. The issue may be
the obligation of a small company, strongly secured but
influenced as to ratings by the lesser financial power of the
enterprise and more local type of market.

A. A securities are strong investments and in many cases
of highly active market, but are not so heavily protected as the
two upper classes or possibly are of similar security but less
quickly salable. As a class they are more sensitive in standing
and market to material changes in current earnings of the
company. With favoring conditions such securities are likely to
work into a high rating, but in occasional instances changes
cause the rating to be lowered.

B-2

<PAGE>

PART C

OTHER INFORMATION

ITEM 24. Financial Statements and Exhibits.

(a) Financial Statements

Included in the Prospectus:

Financial Highlights.

Included in the Statement of Additional
Information:

Portfolio of Investments - August 31, 1997.
Statement of Assets and Liabilities - August 31, 1997.
Statement of Operations - April 22, 1997 (commencement
of operations) to August 31, 1997.
Statement of Changes in Net Assets - April 22, 1997
(commencement of operations) to August 31, 1997.
Notes to Financial Statements - August 31, 1997.
Financial Highlights - For Class A, Class B, Class C and
Advisor Class shares the period April 22, 1997
(commencement of operations) to August 31, 1997.
Report of Independent Auditors.

Included in Part C of the Registration Statement:

All other financial statements or schedules are not
required or the required information is shown in the
Financial Statements.

(b) Exhibits

(1) (a) Articles of Incorporation.*

(2) By-Laws of the Registrant.*

(3) Not applicable.

(4) (a) Not applicable.

(5) Advisory Agreement between the Registrant and
Alliance Capital Management L.P. - filed herewith.

________________________
* Incorporated by reference from Registrant's Registration
Statement on Form N-1A (File Nos. 333-18505 and 811-09160)
filed with the Securities and Exchange Commission on
December 20, 1996.

C-1

<PAGE>

(6) (a) Distribution Services Agreement between the
Registrant and Alliance Fund Distributors,
Inc. - filed herewith.

(b) Form of Selected Dealer Agreement between
Alliance Fund Distributors, Inc. and selected
dealers offering shares of Registrant.**

(c) Form of Selected Agent Agreement between
Alliance Fund Distributors, Inc. and selected
agents making available shares of
Registrant.**

(7) Not applicable.

(8) Custodian Contract between the Registrant and The
Bank of New York - filed herewith.

(9) Transfer Agency Agreement between the Registrant
and Alliance Fund Services, Inc. - filed herewith.

(10) (a) Opinion and Consent of Seward & Kissel.**

(b) Opinion and Consent of Venable, Baetjer and
Howard, LLP.**

(11) Consent of Independent Auditors - filed herewith.

(12) Not applicable.

(13) Investment representation letter of Alliance
Capital Management L.P.**

(14) Not applicable.

(15) Rule 12b-1 Plan - See Exhibit 6(a) hereto.

(16) Schedule for computation of performance
quotations.**

(17) Financial data Schedule - Incorporated by reference
to the (i) Financial Data Schedule contained in the
Registrant's most recent Semi-Annual Report on Form
N-SAR with respect to a fiscal year ended and
(ii) Financial Data Schedule contained in any more
recent such report of the Registrant with respect
to a six-month period ended.

(18) Rule 18f-3 Plan.**

___________________________

C-2

<PAGE>

** Incorporated by Reference from Registrant's Registration
Statement on Form N-1A (File Nos. 333-18505 and 811-09160)
filed with the Securities and Exchange Commission on April 3,
1997.

C-3

<PAGE>

Other Exhibits: Powers of Attorney for Ms. Block and Messrs.
Carifa, Dievler, Dobkin, Foulk, Jr., Hester,
Michel and Robinson.**

ITEM 25. Persons Controlled by or under Common Control with
Registrant.

None.

ITEM 26. Number of Holders of Securities.

As of October 27, 1997, the Registrant had 350 record
holders of Class A shares of common stock, 1602 record
holders of Class B shares of common stock, 291 record
holders of Class C shares of common stock and 23 record
holders of Advisor Class Shares of common stock.

ITEM 27. Indemnification.

It is the Registrant's policy to indemnify its directors
and officers, employees and other agents to the maximum
extent permitted by Section 2-418 of the General
Corporation Law of the State of Maryland, which is
incorporated by reference herein, and as set forth in
Article EIGHTH of Registrant's Articles of
Incorporation, filed as Exhibit 1 hereto, Article VII
and Article VIII of Registrant's By-Laws, filed as
Exhibit 2 hereto, and Section 10 of the proposed
Distribution Services Agreement, to be filed by Pre-
Effective Amendment as Exhibit 6(a) hereto. The
Adviser's liability for any loss suffered by the
Registrant or its shareholders is set forth in Section 4
of the proposed Advisory Agreement, to be filed by Pre-
Effective Amendment as Exhibit 5 hereto.

Insofar as indemnification for liabilities arising under
the Securities Act may be permitted to directors,
officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that, in the opinion of the
Securities and Exchange Commission, such indemnification
is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that

___________________________

** Incorporated by Reference from Registrant's Registration
Statement on Form N-1A (File Nos. 333-18505 and 811-09160)
filed with the Securities and Exchange Commission on April 3,
1997.

C-4

<PAGE>

a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection
with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question of
whether such indemnification by it is against public
policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.

In accordance with Release No. IC-11330 (September 2,
1980), the Registrant will indemnify its directors,
officers, investment manager and principal underwriters
only if (1) a final decision on the merits was issued by
the court or other body before whom the proceeding was
brought that the person to be indemnified (the
"indemnitee") was not liable by reason or willful
misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his
office ("disabling conduct") or (2) a reasonable
determination is made, based upon a review of the facts,
that the indemnitee was not liable by reason of
disabling conduct, by (a) the vote of a majority of a
quorum of the directors who are neither "interested
persons" of the Registrant as defined in section
2(a)(19) of the Investment Company Act of 1940 nor
parties to the proceeding ("disinterested, non-party
directors"), or (b) an independent legal counsel in a
written opinion. The Registrant will advance attorneys
fees or other expenses incurred by its directors,
officers, investment adviser or principal underwriters
in defending a proceeding, upon the undertaking by or on
behalf of the indemnitee to repay the advance unless it
is ultimately determined that he is entitled to
indemnification and, as a condition to the advance,
(1) the indemnitee shall provide a security for his
undertaking, (2) the Registrant shall be insured against
losses arising by reason of any lawful advances, or
(3) a majority of a quorum of disinterested, non-party
directors of the Registrant, or an independent legal
counsel in a written opinion, shall determine, based on
a review of readily available facts (as opposed to a
full trial-type inquiry), that there is reason to
believe that the indemnitee ultimately will be found
entitled to indemnification.

C-5

<PAGE>

The Registrant participates in a joint
trustees/directors and officers liability insurance
policy issued by the ICI Mutual Insurance Company.
Coverage under this policy has been extended to
directors, trustees and officers of the investment
companies managed by Alliance Capital Management L.P.
Under this policy, outside trustees and directors are
covered up to the limits specified for any claim against
them for acts committed in their capacities as trustee
or director. A pro rata share of the premium for this
coverage is charged to each investment company and to
the Adviser.

ITEM 28. Business and Other Connections of Investment Adviser.

The descriptions of Alliance Capital Management L.P.
under the captions "Management of the Fund" in the
Prospectus and in the Statement of Additional
Information constituting Parts A and B, respectively, of
this Registration Statement are incorporated by
reference herein.

The information as to the directors and executive
officers of Alliance Capital Management Corporation, the
general partner of Alliance Capital Management L.P., set
forth in Alliance Capital Management L.P.'s Form ADV
filed with the Securities and Exchange Commission on
April 21, 1988 (File No. 801-32361) and amended through
the date hereof, is incorporated by reference.

ITEM 29. Principal Underwriters.

(a) Alliance Fund Distributors, Inc. is the
Registrant's Principal Underwriter in
connection with the sale of shares of the
Registrant. Alliance Fund Distributors, Inc.
also acts as Principal Underwriter or
Distributor for the following investment
companies:

ACM Institutional Reserves, Inc.
AFD Exchange Reserves
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 Environment Fund, Inc.
Alliance Global Small Cap Fund, Inc.

C-6

<PAGE>

Alliance Global Strategic Income Trust, Inc.
Alliance Government Reserves
Alliance Greater China '97 Fund, 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.
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
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.
Fiduciary Management Associates
The Alliance Fund, Inc.
The Alliance Portfolios

(b) The following are the Directors and officers of Alliance
Fund Distributors, Inc., the principal place of business
of which is 1345 Avenue of the Americas, New York, New
York, 10105.

Positions
Position and Offices and Offices
Name With Underwriter With Registrant

Michael J. Laughlin Chairman

Robert L. Errico President

Edmund P. Bergan, Jr. Senior Vice President, Secretary
General Counsel, and
Secretary

James S. Comforti Senior Vice President

James L. Cronin Senior Vice President

C-7

<PAGE>

Daniel J. Dart Senior Vice President

Richard A. Davies Senior Vice President
and Managing Director

Byron M. Davis Senior Vice President

Anne S. Drennan Senior Vice President
and Treasurer

Mark J. Dunbar Senior Vice President

Bradley F. Hanson Senior Vice President

Geoffrey L. Hyde Senior Vice President

Robert H. Joseph, Jr. Senior Vice President
and Chief Financial Officer

Richard E. Khaleel Senior Vice President

Stephen R. Laut Senior Vice President

Daniel D. McGinley Senior Vice President

Ryne A. Nishimi Senior Vice President

Antonios G. Poleondakis Senior Vice President

Robert E. Powers Senior Vice President

Richard K. Saccullo Senior Vice President

Gregory K. Shannahan Senior Vice President

Joseph F. Sumanski Senior Vice President

Peter J. Szabo Senior Vice President

Nicholas K. Willett Senior Vice President

Richard A. Winge Senior Vice President

Jamie A. Atkinson Vice President

Benji A. Baer Vice President

Kenneth F. Barkoff Vice President

Casimir Bolanowski Vice President

C-8

<PAGE>

Timothy W. Call Vice President

Kevin T. Cannon Vice President

John R. Carl Vice President

William W. Collins, Jr. Vice President

Leo H. Cook Vice President

Richard W. Dabney Vice President

John F. Dolan Vice President

Sohaila S. Farsheed Vice President

William C. Fisher Vice President

Gerard J. Friscia Vice President &
Controller

Andrew L. Gangolf Vice President Secretary
& Assistant General
Counsel

Mark D. Gersten Vice President Treasurer and
Chief Financial
Officer

Joseph W. Gibson Vice President

Charles M. Greenberg Vice President

Alan Halfenger Vice President

William B. Hanigan Vice President

Daniel M. Hazard Vice President

George R. Hrabovsky Vice President

Valerie J. Hugo Vice President

Scott Hutton Vice President

Thomas K. Intoccia Vice President

Larry P. Johns Vice President

Richard D. Keppler Vice President

C-9

<PAGE>

Gwenn M. Kessler Vice President

Donna M. Lamback Vice President

James M. Liptrot Vice President

James P. Luisi Vice President

Christopher J. MacDonald Vice President

Michael F. Mahoney Vice President

Lori E. Master Vice President

Shawn P. McClain Vice President

Maura A. McGrath Vice President

Thomas F. Monnerat Vice President

Joanna D. Murray Vice President

Jeanette M. Nardella Vice President

Nicole Nolan-Koester Vice President

John C. O'Connell Vice President

John J. O'Connor Vice President

Robert T. Pigozzi Vice President

James J. Posch Vice President

Domenick Pugliese Vice President & Assistant
Assistant General Secretary
Counsel

Bruce W. Reitz Vice President

Dennis A. Sanford Vice President

Karen C. Satterberg Vice President

Robert C. Schultz Vice President

Raymond S. Sclafani Vice President

Richard J. Sidell Vice President

Andrew D. Strauss Vice President

C-10

<PAGE>

Michael J. Tobin Vice President

Joseph T. Tocyloski Vice President

Martha D. Volcker Vice President

Patrick E. Walsh Vice President

William C. White Vice President

Emilie D. Wrapp Vice President & Assistant
Special Counsel Secretary

Charles M. Barrett Assistant Vice
President

Robert F. Brendli Assistant Vice
President

Maria L. Carreras Assistant Vice
President

John P. Chase Assistant Vice
President

Russell R. Corby Assistant Vice
President

John W. Cronin Assistant Vice
President

Ralph A. DiMeglio Assistant Vice
President

Faith C. Dunn Assistant Vice
President

John C. Endahl Assistant Vice
President

John E. English Assistant Vice
President

Duff C. Ferguson Assistant Vice
President

John Grambone Assistant Vice
President

Brian S. Hanigan Assistant Vice
President

C-11

<PAGE>

James J. Hill Assistant Vice
President

Edward W. Kelly Assistant Vice
President

Michael Laino Assistant Vice
President

Nicholas J. Lapi Assistant Vice
President

Patrick Look Assistant Vice
President &
Assistant Treasurer

Richard F. Meier Assistant Vice
President

Catherine N. Peterson Assistant Vice
President

Carol H. Rappa Assistant Vice
President

Clara Sierra Assistant Vice
President

Vincent T. Strangio Assistant Vice
President

Wesley S. Williams Assistant Vice
President

Christopher J. Zingaro Assistant Vice
President

Mark R. Manley Assistant Secretary

ITEM 30. Location of Accounts and Records.

The majority of the accounts, books and other documents
required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and the rules thereunder
are maintained as follows: journals, ledgers,
securities records and other original records are
maintained principally at the offices of Alliance Fund
Services, Inc., 500 Plaza Drive, Secaucus, New Jersey,
07094 and at the offices of The Bank of New York, the

C-12

<PAGE>

Registrant's custodian, 48 Wall Street, New York, New
York 10286. All other records so required to be
maintained are maintained at the offices of Alliance
Capital Management L.P., 1345 Avenue of the Americas,
New York, New York, 10105.

ITEM 31. Management Services.

Not applicable.

ITEM 32. Undertakings.

The Registrant undertakes to provide assistance to
shareholders in communications concerning the removal of
any Director of the Fund in accordance with Section 16
of the Investment Company Act of 1940.

(c) The Registrant undertakes to furnish each person to whom
a prospectus is delivered with a copy of the
Registrant's latest annual report to shareholders upon
request and without charge.

C-13

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of
1933, as amended, and the Investment Company Act of 1940, as
amended, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in The City of New York and the State
of New York, on the 27th day of October 1997.

Alliance High Yield
Fund, Inc.

/s/ John D. Carifa
__________________________________
John D. Carifa
Chairman and President

Pursuant to the requirements of the Securities Act of
1933, as amended, this Registration Statement has been signed
below by the following persons in the capacities and on the date
indicated.

Signature Title Date
_____________ __________ ________

(1) Principal Executive Officer:

/s/ John D. Carifa Chairman and October 27, 1997
______________________ President
John D. Carifa

(2) Principal Financial
and Accounting Officer:

/s/ Mark D. Gersten Treasurer October 27, 1997
_____________________ and Chief
Mark D. Gersten Financial
Officer

(3) All of the Directors:

John D. Carifa
Ruth Block
David H. Dievler
John H. Dobkin
W.H. Foulk, Jr.
James M. Hester
Clifford L. Michel
Donald J. Robinson

C-14

<PAGE>

By:/s/ Edmund P. Bergan, Jr.
_________________________
Edmund P. Bergan, Jr. October 27, 1997
Attorney-in-Fact

C-15

<PAGE>

Index to Exhibits

(5) Advisory Agreement

(6)(a) Distribution Services Agreement

(8) Custodian Contract

(9) Transfer Agency Agreement

(11) Consent of Independent Auditors

C-16

00250233.AI8

<PAGE>

ADVISORY AGREEMENT

ALLIANCE HIGH YIELD FUND, INC.
1345 Avenue Of The Americas
New York, New York 10105

February 25, 1997

Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, New York 10105

Dear Sirs:

We, the undersigned Alliance High Yield Fund, Inc.

herewith confirm our agreement with you as follows:

1. We are an open-end, non-diversified management

investment company registered under the Investment Company Act of

1940, as amended (the "Act"). We are currently authorized to

issue separate classes of shares and our Directors are authorized

to reclassify and issue any unissued shares to any number of

additional classes or series (portfolios) each having its own

investment objective, policies and restrictions, all as more

fully described in the prospectus and the statement of additional

information constituting parts of the Registration Statement

filed on our behalf under the Securities Act of 1933, as amended,

and the Act. We propose to engage in the business of investing

and reinvesting the assets of each of our portfolios in

securities ("the portfolio assets") of the type and in accordance

with the limitations specified in our Charter, By-Laws,

<PAGE>

Registration Statement on Form N-1A filed with the Securities and

Exchange Commission under the Securities Act of 1933 and the Act

("Registration Statement"), and any representations made in our

prospectus and statement of additional information, all in such

manner and to such extent as may from time to time be authorized

by our Board of Directors. We enclose copies of the documents

listed above and will from time to time furnish you with any

amendments thereof.

2. (a) We hereby employ you to manage the investment

and reinvestment of the portfolio assets as above specified and,

without limiting the generality of the foregoing, to provide

management and other services specified below.

(b) You will make decisions with respect to all

purchases and sales of the portfolio assets. To carry out such

decisions, you are hereby authorized, as our agent and attorney-

in-fact, for our account and at our risk and in our name, to

place orders for the investment and reinvestment of the portfolio

assets. In all purchases, sales and other transactions in the

portfolio assets you are authorized to exercise full discretion

and act for us in the same manner and with the same force and

effect as we might or could do with respect to such purchases,

sales or other transactions, as well as with respect to all other

things necessary or incidental to the furtherance or conduct of

such purchases, sales or other transactions.

<PAGE>

each meeting thereof all changes in the portfolio assets since

the prior report, and will also keep us in touch with important

developments affecting the portfolio assets and on your own

initiative will furnish us from time to time with such

information as you may believe appropriate for this purpose,

whether concerning the individual issuers whose securities are

included in the portfolio assets, the industries in which they

engage, or the conditions prevailing in the economy generally.

You will also furnish us with such statistical and analytical

information with respect to the portfolio assets as you may

believe appropriate or as we reasonably may request. In making

such purchases and sales of the portfolio assets, you will bear

in mind the policies set from time to time by our Board of

Directors as well as the limitations imposed by our Charter and

in our Registration Statement, the limitations in the Act and of

the Internal Revenue Code of 1986, as amended, in respect of

regulated investment companies and the investment objective,

policies and restrictions applicable to each of our portfolios.

(d) It is understood that you will from time to

time employ or associate with yourselves such persons as you

believe to be particularly fitted to assist you in the execution

of your duties hereunder, the cost of performance of such duties

to be borne and paid by you. No obligation may be incurred on

our behalf in any such respect. During the continuance of this

<PAGE>

agreement and at our request you will provide to us persons

satisfactory to our Board of Directors to serve as our officers.

You or your affiliates will also provide persons, who may be our

officers, to render such clerical, accounting and other services

to us as we may from time to time request of you. Such personnel

may be employees of you or your affiliates. We will pay to you

or your affiliates the cost of such personnel for rendering such

services to us, provided that all time devoted to the investment

or reinvestment of the portfolio assets shall be for your

account. Nothing contained herein shall be construed to restrict

our right to hire our own employees or to contract for services

to be performed by third parties. Furthermore, you or your

affiliates shall furnish us without charge with such management

supervision and assistance and such office facilities as you may

believe appropriate or as we may reasonably request subject to

the requirements of any regulatory authority to which you may be

subject. You or your affiliates shall also be responsible for

the payment of any expenses incurred in promoting the sale of our

shares (other than the portion of the promotional expenses to be

borne by us in accordance with an effective plan pursuant to Rule

12b-1 under the Act and the costs of printing our prospectuses

and other reports to shareholders and fees related to

registration with the Securities and Exchange Commission and with

state regulatory authorities).

<PAGE>

3. We hereby confirm that we shall be responsible and

hereby assume the obligation for payment of all of our expenses,

including: (a) payment of the fee payable to you under

paragraph 5 hereof; (b) custody, transfer and dividend disbursing

expenses; (c) fees of directors who are not your affiliated

persons; (d) legal and auditing expenses; (e) clerical,

accounting and other office costs; (f) the cost of personnel

providing services to us, as provided in subparagraph (d) of

paragraph 2 above; (g) costs of printing our prospectuses and

shareholder reports; (h) cost of maintenance of our corporate

existence; (i) interest charges, taxes, brokerage fees and

commissions; (j) costs of stationery and supplies; (k) expenses

and fees related to registration and filing with the Securities

and Exchange Commission and with state regulatory authorities;

and (l) such promotional shareholder servicing and other expenses

as may be contemplated by an effective plan pursuant to Rule 12b-

1 under the Act, provided, however, that our payment of such

promotional expenses shall be in the amounts, and in accordance

with the procedures, set forth in such plan.

4. We shall expect of you, and you will give us the

benefit of, your best judgment and efforts in rendering these

services to us, and we agree as an inducement to your undertaking

these services that you shall not be liable hereunder for any

mistake of judgment or in any event whatsoever, except for lack

of good faith, provided that nothing herein shall be deemed to

<PAGE>

protect, or purport to protect, you against any liability to us

or to our security holders to which you would otherwise be

subject by reason of willful misfeasance, bad faith or gross

negligence in the performance of your duties hereunder, or by

reason of your reckless disregard of your obligations and duties

hereunder.

5. In consideration of the foregoing, we will pay you

a monthly fee at an annualized rate of .75% of our average daily

net assets. Such fee shall be payable in arrears on the last day

of each calendar month for services performed hereunder during

such month. If our initial Registration Statement is declared

effective by the Securities and Exchange Commission after the

beginning of a month or this agreement terminates prior to the

end of a month, such fee shall be prorated according to the

proportion which such portion of the month bears to the full

month.

6. This agreement shall become effective on the date

hereof and shall remain in effect until December 31, 1998 and may

be continued for successive twelve-month periods (computed from

each January 1 thereafter) with respect to each portfolio

provided that such continuance is specifically approved at least

annually by the Board of Directors or by the vote of a majority

of the outstanding voting securities of such portfolio (as

defined in the Act), and, in either case, by a majority of the

Board of Directors who are not parties to this agreement or

<PAGE>

interested persons, as defined in the Act, of any party to this

agreement (other than as Directors of our corporation), provided

further, however, that if the continuation of this agreement is

not approved as to a portfolio, you may continue to render to

such portfolio the services described herein in the manner and to

the extent permitted by the Act and the rules and regulations

thereunder. Upon the effectiveness of this agreement, it shall

supersede all previous agreements between us covering the subject

matter hereof. This agreement may be terminated with respect to

any portfolio at any time, without the payment of any penalty, by

vote of a majority of the outstanding voting securities (as so

defined) of such portfolio, or by a vote of the Board of

Directors on 60 days' written notice to you, or by you with

respect to any portfolio on 60 days' written notice to us.

7. This agreement may not be transferred, assigned,

sold or in any manner hypothecated or pledged by you and this

agreement shall terminate automatically in the event of any such

transfer, assignment, sale, hypothecation or pledge by you. The

terms "transfer", "assignment" and "sale" as used in this

paragraph shall have the meanings ascribed thereto by governing

law and any interpretation thereof contained in rules or

regulations promulgated by the Securities and Exchange Commission

thereunder.

8. (a) Except to the extent necessary to perform your

obligations hereunder, nothing herein shall be deemed to limit or

<PAGE>

restrict your right, or the right of any of your employees, or

any of the officers or directors of Alliance Capital Management

Corporation, your general partner, who may also be a Director,

officer or employee of ours, or persons otherwise affiliated with

us (within the meaning of the Act) to engage in any other

business or to devote time and attention to the management or

other aspects of any other business, whether of a similar or

dissimilar nature, or to render services of any kind to any other

trust, corporation, firm, individual or association.

(b) You will notify us of any change in the general

partners of your partnership within a reasonable time after such

change.

9. If you cease to act as our investment adviser, or,

in any event, if you so request in writing, we agree to take all

necessary action to change our name to a name not including the

term "Alliance." You may from time to time make available

without charge to us for our use such marks or symbols owned by

you, including marks or symbols containing the term "Alliance" or

any variation thereof, as you may consider appropriate. Any such

marks or symbols so made available will remain your property and

you shall have the right, upon notice in writing, to require us

to cease the use of such mark or symbol at any time.

10. This Agreement shall be construed in accordance

with the laws of the State of New York, provided, however, that

<PAGE>

nothing herein shall be construed as being inconsistent with the

Act.

If the foregoing is in accordance with your

understanding, will you kindly so indicate by signing and

returning to us the enclosed copy hereof.

Very truly yours,

ALLIANCE HIGH YIELD FUND, INC.

By /s/ Nelson Jantzen
__________________________
Senior Vice President

Agreed to and accepted
as of the date first set forth above

ALLIANCE CAPITAL MANAGEMENT L.P.

By ALLIANCE CAPITAL MANAGEMENT
CORPORATION, its general
partner

By /s/ John D. Carifa
_______________________________
John D. Carifa

9
00250233.AC9

<PAGE>

DISTRIBUTION SERVICES AGREEMENT

AGREEMENT made as of February 25, 1997 between ALLIANCE
HIGH YIELD FUND, INC., a Maryland corporation (the "Fund"), and
ALLIANCE FUND DISTRIBUTORS, INC., a Delaware corporation (the
"Underwriter").

WITNESSETH

WHEREAS, the Fund is registered under the Investment
Company Act of 1940, as amended (the "Investment Company Act"),
as a non-diversified, open-end management investment company and
it is in the interest of the Fund to offer its shares for sale
continuously;

WHEREAS, the Underwriter is a securities firm engaged in
the business of selling shares of investment companies either
directly to purchasers or through other securities dealers;

WHEREAS, the Fund and the Underwriter wish to enter into
an agreement with each other with respect to the continuous
offering of the Fund's shares in order to promote the growth of
the Fund and facilitate the distribution of its shares;

NOW, THEREFORE, the parties agree as follows:

SECTION 1. Appointment of the Underwriter. The Fund
hereby appoints the Underwriter as the principal underwriter and
distributor of the Fund to sell to the public shares of its Class
A Common Stock (the "Class A shares"), Class B Common Stock (the
"Class B shares"), Class C Common Stock (the "Class C shares"),
Advisor Class Common Stock (the "Advisor Class shares") and
shares of such other class or classes as the Fund and the
Underwriter shall from time to time mutually agree in writing
shall become subject to this Agreement (the "New shares") (the
Class A shares, the Class B shares, the Class C shares, the
Advisor Class shares and New shares being collectively referred
to herein as the "shares") and hereby agrees during the term of
this Agreement to sell shares to the Underwriter upon the terms
and conditions herein set forth."

SECTION 2. Exclusive Nature of Duties. The Underwriter
shall be the exclusive representative of the Fund to act as
principal underwriter and distributor of the shares except that
the rights given under this Agreement to the Underwriter shall
not apply to shares issued in connection with (a) the merger or
consolidation of any other investment company with the Fund, (b)
the Fund's acquisition by purchase or otherwise of all or
substantially all of the assets or stock of any other investment

<PAGE>

company or (c) the reinvestment in shares by the Fund's
shareholders of dividends or other distributions.

SECTION 3. Purchase of Shares from the Fund.

(a) The Underwriter shall have the right to buy from
the Fund the shares needed to fill unconditional orders for
shares of the Fund placed with the Underwriter by investors or
securities dealers, depository institutions or other financial
intermediaries acting as agent for their customers. The price
which the Underwriter shall pay for the shares so purchased from
the Fund shall be the net asset value, determined as set forth in
Section 3(d) hereof, used in determining the public offering
price on which such orders are based.

(b) The shares are to be resold by the Underwriter to
investors at a public offering price, as set forth in Section
3(c) hereof, or to securities dealers, depository institutions or
other financial intermediaries acting as agent for their
customers having agreements with the Underwriter upon the terms
and conditions set forth in Section 8 hereof.

(c) The public offering price of the shares, i.e., the
price per share at which the Underwriter or selected dealers or
selected agents (each as defined in Section 8(a) below) may sell
shares to the public, shall be the public offering price
determined in accordance with the then current Prospectus and
Statement of Additional Information of the Fund (the "Prospectus"
and "Statement of Additional Information," respectively) under
the Securities Act of 1933, as amended (the "Securities Act"),
relating to such shares, but not to exceed the net asset value at
which the Underwriter is to purchase such shares, plus, in the
case of Class A shares, an initial sales charge equal to a
specified percentage or percentages of the public offering price
of the Class A shares as set forth in the Prospectus. Class A
shares may be sold without such a sales charge to certain classes
of persons as from time to time set forth in the Prospectus and
Statement of Additional Information. All payments to the Fund
hereunder shall be made in the manner set forth in Section 3(f)
hereof.

(d) The net asset value of shares of the Fund shall be
determined by the Fund, or any agent of the Fund, as of the close
of regular trading on the New York Stock Exchange on each Fund
business day in accordance with the method set forth in the
Prospectus and Statement of Additional Information and guidelines
established by the Directors of the Fund.

(e) The Fund reserves the right to suspend the offering
of its shares at any time in the absolute discretion of its
Directors.

<PAGE>

(f) The Fund, or any agent of the Fund designated in
writing to the Underwriter by the Fund, shall be promptly advised
by the Underwriter of all purchase orders for shares received by
the Underwriter. Any order may be rejected by the Fund;
provided, however, that the Fund will not arbitrarily or without
reasonable cause refuse to accept or confirm orders for the
purchase of shares. The Fund (or its agent) will confirm orders
upon their receipt, will make appropriate book entries and upon
receipt by the Fund (or its agent) of payment thereof, will
deliver deposit receipts or certificates for such shares pursuant
to the instructions of the Underwriter. Payment shall be made to
the Fund in New York Clearing House funds. The Underwriter
agrees to cause such payment and such instructions to be
delivered promptly to the Fund (or its agent).

SECTION 4. Repurchase or Redemption of
Shares by the Fund.

(a) Any of the outstanding shares may be tendered for
redemption at any time, and the Fund agrees to redeem or
repurchase the shares so tendered in accordance with its
obligations as set forth in Section 8(d) of ARTICLE FIFTH of its
Articles of Incorporation and in accordance with the applicable
provisions set forth in the Prospectus and Statement of
Additional Information. The price to be paid to redeem or
repurchase the shares shall be equal to the net asset value
calculated in accordance with the provisions of Section 3(c)
hereof, less any applicable sales charge. All payments by the
Fund hereunder shall be made in the manner set forth below. The
redemption or repurchase by the Fund of any of the Class A shares
purchased by or through the Underwriter will not affect the
initial sales charge secured by the Underwriter or any selected
dealer or compensation paid to any selected agent (unless such
selected dealer or selected agent has otherwise agreed with the
Underwriter), in the course of the original sale, regardless of
the length of the time period between purchase by an investor and
his tendering for redemption or repurchase.

The Fund (or its agent) shall pay the total amount of
the redemption price and, except as may be otherwise required by
the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. (the "NASD") and any interpretations
thereof ("NASD rules and interpretations"), the deferred sales
charges, if any, pursuant to the instructions of the Underwriter
in New York Clearing House funds on or before the seventh
business day subsequent to its having received the notice of
redemption in proper form.

(b) Redemption of shares or payment may be suspended at
times when the New York Stock Exchange is closed, when trading
thereon is closed, when trading thereon is restricted, when an

<PAGE>

emergency exists as a result of which disposal by the Fund of
securities owned by it is not reasonably practicable or it is not
reasonably practicable for the Fund fairly to determine the value
of its net assets, or during any other period when the Securities
and Exchange Commission, by order, so permits.

SECTION 5. Plan of Distribution.

(a) It is understood that Sections 5, 12, and 16 hereof
together constitute a plan of distribution (the "Plan") within
the meaning of Rule 12b-1 adopted by the Securities and Exchange
Commission under the Investment Company Act ("Rule 12b-1").

(b) Except as may be required by NASD rules and
interpretations, the Fund will pay to the Underwriter each month
a distribution services fee with respect to each portfolio of the
Fund ("Portfolio") that will not exceed, on an annualized basis,
.30% of the aggregate average daily net assets of the Fund
attributable to the Class A shares, 1.00% of the aggregate
average daily net assets of the Fund attributable to the Class B
shares and 1.00% of the aggregate average daily net assets of the
Fund attributable to the Class C shares. With respect to each
Portfolio, the distribution services fee will be used in its
entirety by the Underwriter to make payments (i) to compensate
broker-dealers or other persons for providing distribution
assistance, (ii) to otherwise promote the sale of shares of each
Portfolio, including payment for the preparation, printing and
distribution of prospectuses and sales literature or other
promotional activities, and (iii) to compensate broker-dealers,
depository institutions and other financial intermediaries for
providing administrative, accounting and other services with
respect to each Portfolio's shareholders. A portion of the
distribution services fee that will not exceed, on an annualized
basis, .25% of the aggregate average daily net assets of the Fund
attributable to each of the Class A shares, Class B shares and
Class C shares will constitute a service fee that will be used by
the Underwriter for personal service and/or the maintenance of
shareholder accounts within the meaning of NASD rules and
interpretations.

(c) Alliance Capital Management L.P., the Fund's
investment adviser (the "Adviser"), may make payments from time
to time from its own resources for the purposes described in
Section 5(b) hereof.

(d) Payments to broker-dealers, depository institutions
and other financial intermediaries for the purposes set forth in
Section 5(b) are subject to the terms and conditions of the
written agreements between the Underwriter and each broker-
dealer, depository institution or other financial intermediary.

<PAGE>

Such agreements will be in a form satisfactory to the Directors
of the Fund.

(e) The Treasurer of the Fund will prepare and furnish
to the Fund's Directors, and the Directors will review, at least
quarterly, a written report complying with the requirements of
Rule 12b-1 setting forth all amounts expended hereunder and the
purposes for which such expenditures were made.

(f) The Fund is not obligated to pay any distribution
expense in excess of the distribution services fee described
above in Section 5(b) hereof. Any expenses of distribution of
the Fund's Class A shares accrued by the Underwriter in one
fiscal year of the Fund may not be paid from distribution
services fees received from the Fund in respect of Class A shares
in another fiscal year. Any expenses of distribution of the
Fund's Class B shares or Class C shares accrued by the
Underwriter in one fiscal year of the Fund may be carried forward
and paid from distribution services fees received from the Fund
in respect of such class of shares in another fiscal year. No
portion of the distribution services fees received from the Fund
in respect of Class A shares may be used to pay any interest
expense, carrying charges or other financing costs or allocation
of overhead of the Underwriter. The distribution services fees
received from the Fund in respect of Class B shares and Class C
shares may be used to pay interest expenses, carrying charges and
other financing costs or allocation of overhead of the
Underwriter to the extent permitted by Securities and Exchange
Commission rules, regulations or Securities and Exchange
Commission staff no-action or interpretative positions in effect
from time to time. In the event this Agreement is terminated by
either party or is not continued with respect to a class as
provided in Section 12 below: (i) no distribution services fees
(other than current amounts accrued but not yet paid) will be
owed by the Fund to the Underwriter with respect to that class,
and (ii) the Fund will not be obligated to pay the Underwriter
for any amounts expended hereunder not previously reimbursed by
the Fund from distribution services fees in respect of shares of
such class or recovered through deferred sales charges. The
distribution services fee of a particular class may not be used
to subsidize the sale of shares of any other class.

SECTION 6. Duties of the Fund.

(a) The Fund shall furnish to the Underwriter copies of
all information, financial statements and other papers that the
Underwriter may reasonably request for use in connection with the
distribution of shares of the Fund, and this shall include one
certified copy, upon request by the Underwriter, of all financial
statements prepared for the Fund by independent public
accountants. The Fund shall make available to the Underwriter

<PAGE>

such number of copies of the Prospectus as the Underwriter shall
reasonably request.

(b) The Fund shall take, from time to time, but subject
to the necessary approval of its shareholders, all necessary
action to fix the number of authorized shares and such steps as
may be necessary to register the same under the Securities Act,
to the end that there will be available for sale such number of
shares as the Underwriter reasonably may be expected to sell.

(c) The Fund shall use its best efforts to qualify and
maintain the qualification of an appropriate number of its shares
under the securities laws of such states as the Underwriter and
the Fund may approve. Any such qualification may be withheld,
terminated or withdrawn by the Fund at any time in its
discretion. As provided in Section 9(b) hereof, the expense of
qualification and maintenance of qualification shall be borne by
the Fund. The Underwriter shall furnish such information and
other material relating to its affairs and activities as may be
required by the Fund in connection with such qualification.

(d) The Fund will furnish, in reasonable quantities
upon request by the Underwriter, copies of annual and interim
reports of the Fund.

SECTION 7. Duties of the Underwriter.

(a) The Underwriter shall devote reasonable time and
effort to effect sales of shares of the Fund, but shall not be
obligated to sell any specific number of shares. The services of
the Underwriter to the Fund hereunder are not to be deemed
exclusive and nothing in this Agreement shall prevent the
Underwriter from entering into like arrangements with other
investment companies so long as the performance of its
obligations hereunder is not impaired thereby.

(b) In selling shares of the Fund, the Underwriter
shall use its best efforts in all material respects duly to
conform with the requirements of all federal and state laws
relating to the sale of such securities. Neither the
Underwriter, any selected dealer, any selected agent nor any
other person is authorized by the Fund to give any information or
to make any representations, other than those contained in the
Fund's Registration Statement on Form N-1A (the "Registration
Statement"), as amended from time to time, under the Securities
Act and the Investment Company Act or the Prospectus and
Statement of Additional Information or any sales literature
specifically approved in writing by the Fund.

<PAGE>

sales to investors and selected dealers, the collection of
amounts payable by investors and selected dealers on such sales,
and the cancellation of unsettled transactions, as may be
necessary to comply with the requirements of the NASD, as such
requirements may from time to time exist.

SECTION 8. Selected Dealer and Agent Agreements.

(a) The Underwriter shall have the right to enter into
selected dealer agreements with securities dealers of its choice
("selected dealers") and selected agent agreements with
depository institutions and other financial intermediaries of its
choice ("selected agents") for the sale of shares and fix therein
the portion of the sales charge that may be allocated to the
selected dealers and selected agents; provided, that the Fund
shall approve the forms of agreements with selected dealers and
selected agents and the selected dealer and selected agent
compensation set forth therein and shall evidence such approval
by filing said forms and amendments thereto as exhibits to its
then currently effective Registration Statement. Shares sold to
selected dealers or through selected agents shall be for resale
by such selected dealers and selected agents only at the public
offering price set forth in the Prospectus and Statement of
Additional Information.

(b) Within the United States, the Underwriter shall
offer and sell shares only to such selected dealers as are
members in good standing of the NASD.

SECTION 9. Payment of Expenses.

(a) The Fund shall bear all costs and expenses of the
Fund, including fees and disbursements of its counsel and
auditors, in connection with the preparation and filing of its
Registration Statement and Prospectus and Statement of Additional
Information, and all amendments and supplements thereto, and
preparing and mailing annual and interim reports and proxy
materials to shareholders (including but not limited to the
expense of setting in type any such registration statements,
prospectuses, annual or interim reports or proxy materials).

(b) The Fund shall bear the cost of expenses of
qualification of shares for sale, and, if necessary or advisable
in connection therewith, of qualifying the Fund as an issuer or
as a broker or dealer, in such states of the United States or
other jurisdiction as shall be selected by the Fund and the
Underwriter pursuant to Section 6(c) hereof and the cost and
expenses payable to each such state for continuing qualification
therein until the Fund decides to discontinue such qualification
pursuant to Section 6(c) hereof.

<PAGE>

SECTION 10. Indemnification.

(a) The Fund agrees to indemnify, defend and hold the
Underwriter, and any person who controls the Underwriter within
the meaning of Section 15 of the Securities Act, free and
harmless from and against any and all claims, demands,
liabilities and expenses (including the cost of investigating or
defending such claims, demands or liabilities and any counsel
fees incurred in connection therewith) which the Underwriter or
any such controlling person may incur, under the Securities Act,
or under common law or otherwise, arising out of or based upon
any alleged untrue statement of a material fact contained in the
Fund's Registration Statement, Prospectus or Statement of
Additional Information in effect from time to time under the
Securities Act or arising out of or based upon any alleged
omission to state a material fact required to be stated in any
one thereof or necessary to make the statements in any one
thereof not misleading; provided, however, that in no event shall
anything herein contained be so construed as to protect the
Underwriter against any liability to the Fund or its security
holders to which the Underwriter would otherwise be subject by
reason of willful misfeasance, bad faith or gross negligence in
the performance of its duties, or by reason of the Underwriter's
reckless disregard of its obligations and duties under this
Agreement. The Fund's agreement to indemnify the Underwriter and
any such controlling person as aforesaid is expressly conditioned
upon the Fund's being notified of the commencement of any action
brought against the Underwriter or any such controlling person,
such notification to be given by letter or by telegram addressed
to the Fund at its principal office in New York, New York, and
sent to the Fund by the person against whom such action is
brought within ten days after the summons or other first legal
process shall have been served. The failure to so notify the
Fund of the commencement of any such action shall not relieve the
Fund from any liability which it may have to the person against
whom such action is brought by reason of any such alleged untrue
statement or omission otherwise than on account of the indemnity
agreement contained in this Section 10. The Fund will be
entitled to assume the defense of any suit brought to enforce any
such claim, and to retain counsel of good standing chosen by the
Fund and approved by the Underwriter. In the event the Fund does
not elect to assume the defense of any such suit and retain
counsel of good standing approved by the Underwriter, the
defendant or defendants in such suit shall bear the fees and
expenses of any additional counsel retained by any of them; but
in case the Fund does not elect to assume the defense of any such
suit, or in case the Underwriter does not approve of counsel
chosen by the Fund, the Fund will reimburse the Underwriter or
the controlling person or persons named as defendant or
defendants in such suit, for the fees and expenses of any counsel
retained by the Underwriter or such persons. The indemnification

<PAGE>

agreement contained in this Section 10 shall remain operative and
in full force and effect regardless of any investigation made by
or on behalf of the Underwriter or any controlling person and
shall survive the sale of any of the Fund's shares made pursuant
to subscriptions obtained by the Underwriter. This agreement of
indemnity will inure exclusively to the benefit of the
Underwriter, to the benefit of its successors and assigns, and to
the benefit of any controlling persons and their successors and
assigns. The Fund agrees promptly to notify the Underwriter of
the commencement of any litigation or proceeding against the Fund
in connection with the issue and sale of any of its shares.

(b) The Underwriter agrees to indemnify, defend and
hold the Fund, its several officers and directors, and any person
who controls the Fund within the meaning of Section 15 of the
Securities Act, free and harmless from and against any and all
claims, demands, liabilities, and expenses (including the cost of
investigating or defending such claims, demands or liabilities
and any counsel fees incurred in connection therewith) which the
Fund, its officers or directors, or any such controlling person
may incur under the Securities Act or under common law or
otherwise, but only to the extent that such liability, or expense
incurred by the Fund, its officers, directors or such controlling
person resulting from such claims or demands shall arise out of
or be based upon any alleged untrue statement of a material fact
contained in information furnished in writing by the Underwriter
to the Fund for use in its Registration Statement, Prospectus or
Statement of Additional Information in effect from time to time
under the Securities Act, or shall arise out of or be based upon
any alleged omission to state a material fact in connection with
such information required to be stated in the Registration
Statement, Prospectus or Statement of Additional Information or
necessary to make such information not misleading. The
Underwriter's agreement to indemnify the Fund, its officers and
directors, and any such controlling person as aforesaid is
expressly conditioned upon the Underwriter being notified of the
commencement of any action brought against the Fund, its officers
or directors or any such controlling person, such notification to
be given by letter or telegram addressed to the Underwriter at
its principal office in New York, and sent to the Underwriter by
the person against whom such action is brought, within ten days
after the summons or other first legal process shall have been
served. The Underwriter shall have a right to control the
defense of such action, with counsel of its own choosing,
satisfactory to the Fund, if such action is based solely upon
such alleged misstatement or omission on its part, and in any
other event the Underwriter and the Fund, and their officers and
directors or such controlling person, shall each have the right
to participate in the defense or preparation of the defense of
any such action. The failure so to notify the Underwriter of the
commencement of any such action shall not relieve the Underwriter

<PAGE>

from any liability which it may have to the Fund, to its officers
and trustees, or to such controlling person by reason of any such
untrue statement or omission on the part of the Underwriter
otherwise than on account of the indemnity agreement contained in
this Section 10.

SECTION 11. Notification by the Fund.

The Fund agrees to advise the Underwriter immediately:

(a) of any request by the Securities and Exchange
Commission for amendments to the Fund's Registration
Statement, Prospectus or Statement of Additional Information
or for additional information,

(b) in the event of the issuance by the Securities
and Exchange Commission of any stop order suspending the
effectiveness of the Fund's Registration Statement,
Prospectus or Statement of Additional Information or the
initiation of any proceeding for that purpose,

(c) of the happening of any material event which
makes untrue any statement made in the Fund's Registration
Statement, Prospectus or Statement of Additional Information
or which requires the making of a change in any one thereof
in order to make the statements therein not misleading, and

(d) of all actions of the Securities and Exchange
Commission with respect to any amendments to the Fund's
Registration Statement, Prospectus or Statement of
Additional Information which may from time to time be filed
with the Securities and Exchange Commission under the
Securities Act.

SECTION 12. Term of Agreement.

(a) This Agreement shall become effective on the
date hereof and shall continue in effect until December 31,
1997 and thereafter for successive twelve-month periods
(computed from each January 1) with respect to each class;
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 outstanding
voting securities (as defined in the Investment Company Act)
of that class, and, in either case, by a majority of the
Directors of the Fund who are not parties to this Agreement
or interested persons, as defined in the Investment Company
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;
provided further, however, that if the continuation of this

<PAGE>

Agreement is not approved as to a class or a Portfolio, the
Underwriter may continue to render to such class or
Portfolio the services described herein in the manner and to
the extent permitted by the Act and the rules and
regulations thereunder. Upon effectiveness of this
Agreement, it shall supersede all previous agreements
between the parties hereto covering the subject matter
hereof. This Agreement may be terminated (i) by the Fund
with respect to any class or Portfolio at any time, without
the payment of any penalty, by the vote of a majority of the
outstanding voting securities (as so defined) of such class
or Portfolio, or by a vote of a majority of the Directors of
the Fund who are not interested persons, as defined in the
Investment Company Act, of the Fund (other than as directors
of the Fund) and have no direct and indirect financial
interest in the operation of the Plan or any agreement
related thereto, in any such event on sixty days' written
notice to the Underwriter; provided, however, that no such
notice shall be required if such termination is stated by
the Fund to relate only to Sections 5 and 16 hereof (in
which event Sections 5 and 16 shall be deemed to have been
severed herefrom and all other provisions of this Agreement
shall continue in full force and effect), or (ii) by the
Underwriter with respect to any Portfolio on sixty days'
written notice to the Fund.

(b) This Agreement may be amended at any time with
the approval of the Directors of the Fund, provided that (i)
any material amendments of the terms hereof will become
effective only upon approval as provided in the first
proviso of the first sentence of Section 12(a) hereof, and
(ii) any amendment to increase materially the amount to be
expended for distribution services fees pursuant to Section
5(b) hereof will be effective only upon the additional
approval by a vote of a majority of the outstanding voting
securities as defined in the Investment Company Act of the
class or Portfolio affected.

SECTION 13. No Assignment. This Agreement may not
be transferred, assigned, sold or in any manner hypothecated
or pledged by either party hereto and this Agreement shall
terminate automatically in the event of any such transfer,
assignment, sale, hypothecation or pledge. The terms
"transfer", "assignment", and "sale" as used in this
paragraph shall have the meanings ascribed thereto by
governing law and any interpretation thereof contained in
rules or regulations promulgated by the Securities and
Exchange Commission thereunder.

SECTION 14. Notices. Any notice required or
permitted to be given hereunder by either party to the other

<PAGE>

shall be deemed sufficiently given if sent by registered
mail, postage prepaid, addressed by the party giving such
notice to the other party at the last address furnished by
such other party to the party given notice, and unless and
until changed pursuant to the foregoing provisions hereof
addressed to the Fund or the Underwriter.

SECTION 15. Governing Law. The provisions of this
Agreement shall be, to the extent applicable, construed and
interpreted in accordance with the laws of the State of New
York.

SECTION 16. Disinterested Directors of the Fund.
While the Agreement is in effect, the selection and
nomination of the Directors who are not "interested persons"
of the Fund (as defined in the Investment Company Act) will
be committed to the discretion of such disinterested
Directors.

<PAGE>

IN WITNESS WHEREOF, the parties hereto have
executed this Agreement.

ALLIANCE HIGH YIELD FUND, INC.

By /s/ Nelson Jantzen
_________________________
Senior Vice President

ALLIANCE FUND DISTRIBUTORS,
INC.

By /s/ Robert L. Errico
_________________________
President

Accepted as to
Sections 5, 12 and 16
as of February 25, 1997:

ALLIANCE CAPITAL MANAGEMENT L.P.
By Alliance Capital Management Corporation,
General Partner

By /s/ John D. Carifa
_____________________________
President and Chief Operating
Officer

13
00250233.AD0

<PAGE>

CUSTODY AGREEMENT

Agreement made as of this 25th day of February, 1997,
between ALLIANCE HIGH YIELD FUND, INC., a Maryland corporation
organized and existing under the laws of the State of Maryland,
having its principal office and place of business at 1345 Avenue
of the Americas, New York, New York 10105 (hereinafter called the
"Fund"), and THE BANK OF NEW YORK, a New York corporation
authorized to do a banking business, having its principal office
and place of business at 48 Wall Street, New York, New York 10286
(hereinafter called the "Custodian").

W I T N E S S E T H :

that for and in consideration of the mutual promises hereinafter
set forth, the Fund and the Custodian agree as follows:

ARTICLE I.

DEFINITIONS

Whenever used in this Agreement, the following words and
phrases, unless the context otherwise requires, shall have the
following meanings:

1. "Book-Entry System" shall mean the Federal
Reserve/Treasury book-entry system for United States and federal
agency securities, its successor or successors and its nominee or
nominees.

2. "Call Option" shall mean an exchange traded option
with respect to Securities other than Stock Index Options,
Futures Contracts, and Futures Contract Options entitling the
holder, upon timely exercise and payment of the exercise price,
as specified therein, to purchase from the writer thereof the
specified underlying Securities.

3. "Certificate" shall mean any notice, instruction,
or other instrument in writing, authorized or required by this
Agreement to be given to the Custodian which is actually received
by the Custodian and signed on behalf of the Fund by any two
Officers, and the term Certificate shall also include
Instructions.

4. "Clearing Member" shall mean a registered broker-
dealer which is a clearing member under the rules of O.C.C. and a
member of a national securities exchange qualified to act as a
custodian for an investment company, or any broker-dealer
reasonably believed by the Custodian to be such a clearing
member.

<PAGE>

5. "Collateral Account" shall mean a segregated
account so denominated which is specifically allocated to a
Series and pledged to the Custodian as security for, and in
consideration of, the Custodian's issuance of (a) any Put Option
guarantee letter or similar document described in paragraph 8 of
Article herein, or (b) any receipt described in Article V or VIII
herein.

6. "Covered Call Option" shall mean an exchange traded
option entitling the holder, upon timely exercise and payment of
the exercise price, as specified therein, to purchase from the
writer thereof the specified underlying Securities (excluding
Futures Contracts) which are owned by the writer thereof and
subject to appropriate restrictions.

7. "Composite Currency Unit" shall mean the European
Currency Unit or any other composite unit consisting of the
aggregate of specified amounts of specified Currencies as such
unit may be constituted from time to time.

8. "Currency" shall mean money denominated in a lawful
currency of any country or the European Currency Unit.

9. "Depository" shall mean The Depository Trust
Company ("DTC"), a clearing agency registered with the Securities
and Exchange Commission, its successor or successors and its
nominee or nominees. The term "Depository" shall further mean
and include any other person authorized to act as a depository
under the Investment Company Act of 1940, its successor or
successors and its nominee or nominees, specifically identified
in a certified copy of a resolution of the Fund's Board of
Directors specifically approving deposits therein by the
Custodian.

10. "Financial Futures Contract" shall mean the firm
commitment to buy or sell fixed income securities including,
without limitation, U.S. Treasury Bills, U.S. Treasury Notes,
U.S. Treasury Bonds, domestic bank certificates of deposit, and
Eurodollar certificates of deposit, during a specified month at
an agreed upon price.

11. "Futures Contract" shall mean a Financial Futures
Contract and/or Stock Index Futures Contracts.

12. "Futures Contract Option" shall mean an option with
respect to a Futures Contract.

13. "FX Transaction" shall mean any transaction for the
purchase by one party of an agreed amount in one Currency against
the sale by it to the other party of an agreed amount in another
Currency.

<PAGE>

14. "Instructions" shall mean instructions
communications transmitted by electronic or telecommunications
media including S.W.I.F.T., computer-to-computer interface,
dedicated transmission line, facsimile transmission (which may be
signed by an Officer or unsigned) and tested telex.

15. "Margin Account" shall mean a segregated account in
the name of a broker, dealer, futures commission merchant, or a
Clearing Member, or in the name of the Fund for the benefit of a
broker, dealer, futures commission merchant, or Clearing Member,
or otherwise, in accordance with an agreement between the Fund,
the Custodian and a broker, dealer, futures commission merchant
or a Clearing Member (a "Margin Account Agreement"), separate and
distinct from the custody account, in which certain Securities
and/or money of the Fund shall be deposited and withdrawn from
time to time in connection with such transactions as the Fund may
from time to time determine. Securities held in the Book-Entry
System or the Depository shall be deemed to have been deposited
in, or withdrawn from, a Margin Account upon the Custodian's
effecting an appropriate entry in its books and records.

16. "Money Market Security" shall be deemed to
include,without limitation, certain Reverse Repurchase
Agreements, debt obligations issued or guaranteed as to interest
and principal by the government of the United States or agencies
or instrumentalities thereof, any tax, bond or revenue
anticipation note issued by any state or municipal government or
public authority, commercial paper, certificates of deposit and
bankers' acceptances, repurchase agreements with respect to the
same and bank time deposits, where the purchase and sale of such
securities normally requires settlement in federal funds on the
same day as such purchase or sale.

17. "O.C.C." shall mean the Options Clearing
Corporation, a clearing agency registered under Section 17A of
the Securities Exchange Act of 1934, its successor or successors,
and its nominee or nominees.

18. "Officers" shall be deemed to include the
President,any Vice President, the Secretary, the Treasurer, the
Controller, any Assistant Secretary, any Assistant Treasurer,and
any other person or persons, whether or not any such other person
is an officer of the Fund, duly authorized by the Board of
Directors of the Fund to execute any Certificate,instruction,
notice or other instrument on behalf of the Fund and listed in
the Certificate annexed hereto as Appendix A or such other
Certificate as may be received by the Custodian from time to
time.

19. "Option" shall mean a Call Option, Covered Call
Option, Stock Index Option and/or a Put Option

<PAGE>

20. "Oral Instructions" shall mean verbal instructions
actually received by the Custodian from an Officer or from a
person reasonably believed by the Custodian to be an Officer.

21. "Put Option" shall mean an exchange traded option
with respect to Securities other than Stock Index Options,Futures
Contracts, and Futures Contract Options entitling the holder,
upon timely exercise and tender of the specified underlying
Securities, to sell such Securities to the writer thereof for the
exercise price.

22. "Reverse Repurchase Agreement" shall mean an
agreement pursuant to which the Fund sells Securities and agrees
to repurchase such Securities at a described or specified date
and price.

23. "Security" shall be deemed to include, without
limitation, Money Market Securities, Call Options, Put Options,
Stock Index Options, Stock Index Futures Contracts, Stock Index
Futures Contract Options, Financial Futures Contracts, Financial
Futures Contract Options, Reverse Repurchase Agreements, common
stocks and other securities having characteristics similar to
common stocks, preferred stocks, debt obligations issued by state
or municipal governments and by public authorities, (including,
without limitation, general obligation bonds, revenue bonds,
industrial bonds and industrial development bonds), bonds,
debentures, notes, mortgages or other obligations, and any
certificates, receipts, warrants or other instruments
representing rights to receive, purchase, sell or subscribe for
the same, or evidencing or representing any other rights or
interest therein, or any property or assets.

24. "Senior Security Account" shall mean an account
maintained and specifically allocated to a Series under the terms
of this Agreement as a segregated account, by recordation or
otherwise, within the custody account in which certain Securities
and/or other assets of the Fund specifically allocated to such
Series shall be deposited and withdrawn from time to time in
accordance with Certificates received by the Custodian in
connection with such transactions as the Fund may from time to
time determine.

25. "Series" shall mean the various portfolios, if
any,of the Fund listed on Appendix B hereto as amended from time
to time.

26. "Shares" shall mean the shares of capital stock of
the Fund, each of which is, in the case of a Fund having Series,
allocated to a particular Series.

<PAGE>

27. "Stock Index Futures Contract" shall mean an
bilateral agreement pursuant to which the parties agree to take
or make delivery of an amount of cash equal to a specified dollar
amount times the difference between the value of a particular
stock index at the close of the last business day of the contract
and the price at which the futures contract is originally struck.

28. "Stock Index Option" shall mean an exchange traded
option entitling the holder, upon timely exercise, to receive an
amount of cash determined by reference to the difference between
the exercise price and the value of the index on the date of
exercise.

ARTICLE II.

APPOINTMENT OF CUSTODIAN

1. The Fund hereby constitutes and appoints the
Custodian as custodian of the Securities and moneys at any time
owned by the Fund during the period of this Agreement.

2. The Custodian hereby accepts appointment as such
custodian and agrees to perform the duties thereof as hereinafter
set forth.

ARTICLE III.

CUSTODY OF CASH AND SECURITIES

1. Except as otherwise provided in paragraph 7 of this
Article and in Article VIII, the Fund will deliver or cause to be
delivered to the Custodian all Securities and all moneys owned by
it, at any time during the period of this Agreement, and shall
specify with respect to such Securities and money the Series to
which the same are specifically allocated. The Custodian shall
segregate, keep and maintain the assets of the Series separate
and apart. The Custodian will not be responsible for any
Securities and moneys not actually received by it. The Custodian
will be entitled to reverse any credits made on the Fund's behalf
where such credits have been previously made and moneys are not
finally collected. The Fund shall deliver to the Custodian a
certified resolution of the Board of Directors of the Fund,
substantially in the form of Exhibit A hereto, approving,
authorizing and instructing the Custodian on a continuous and
on-going basis to deposit in the Book-Entry System all Securities
eligible for deposit therein, regardless of the Series to which
the same are specifically allocated and to utilize the Book-Entry
System to the extent possible in connection with its performance
hereunder, including, without limitation, in connection with
settlements of purchases and sales of Securities, loans of
Securities and deliveries and returns of Securities collateral.

<PAGE>

Prior to a deposit of Securities specifically allocated to a
Series in the Depository, the Fund shall deliver to the Custodian
a certified resolution of the Board of Directors of the Fund,
substantially in the form of Exhibit B hereto, approving,
authorizing and instructing the Custodian on a continuous and
ongoing basis until instructed to the contrary by a Certificate
actually received by the Custodian to deposit in the Depository
all Securities specifically allocated to such Series eligible for
deposit therein, and to utilize the Depository to the extent
possible with respect to such Securities in connection with its
performance hereunder, including, without limitation, in
connection with settlements of purchases and sales of Securities,
loans of Securities, and deliveries and returns of Securities
collateral. Securities and moneys deposited in either the Book-
Entry System or the Depository will be represented in accounts
which include only assets held by the Custodian for customers,
including, but not limited to, accounts in which the Custodian
acts in a fiduciary or representative capacity and will be
specifically allocated on the Custodian's books to the separate
account for the applicable Series. Prior to the Custodian's
accepting, utilizing and acting with respect to Clearing Member
confirmations for Options and transactions in Options for a
Series as provided in this Agreement, the Custodian shall have
received a certified resolution of the Fund's Board of Directors,
substantially in the form of Exhibit C hereto, approving,
authorizing and instructing the Custodian on a continuous and
on-going basis, until instructed to the contrary by a Certificate
actually received by the Custodian, to accept, utilize and act in
accordance with such confirmations as provided in this Agreement
with respect to such Series.

2. The Custodian shall establish and maintain separate
accounts, in the name of each Series, and shall credit to the
separate account for each Series all moneys received by it for
the account of the Fund with respect to such Series. Money
credited to a separate account for a Series shall be disbursed by
the Custodian only:

(a) As hereinafter provided;

(b) Pursuant to Certificates setting forth the
name and address of the person to whom the payment is to be made,
the Series account from which payment is to be made and the
purpose for which payment is to be made; or

(c) In payment of the fees and in reimbursement of
the expenses and liabilities of the Custodian attributable to
such Series.

3. Promptly after the close of business on each day,
the Custodian shall furnish the Fund with confirmations and a

<PAGE>

summary, on a per Series basis, of all transfers to or from the
account of the Fund for a Series, either hereunder or with any
co-custodian or sub-custodian appointed in accordance with this
Agreement during said day. Where Securities are transferred to
the account of the Fund for a Series, the Custodian shall also by
book-entry or otherwise identify as belonging to such Series a
quantity of Securities in a fungible bulk of Securities
registered in the name of the Custodian (or its nominee) or shown
on the Custodian's account on the books of the Book-Entry System
or the Depository. At least monthly and from time to time, the
Custodian shall furnish the Fund with a detailed statement, on a
per Series basis, of the Securities and moneys held by the
Custodian for the Fund.

4. Except as otherwise provided in paragraph 7 of this
Article and in Article VIII, all Securities held by the Custodian
hereunder, which are issued or issuable only in bearer form,
except such Securities as are held in the Book-Entry System,
shall be held by the Custodian in that form; all other Securities
held hereunder may be registered in the name of the Fund, in the
name of any duly appointed registered nominee of the Custodian as
the Custodian may from time to time determine, or in the name of
the Book-Entry System or the Depository or their successor or
successors, or their nominee or nominees. The Fund agrees to
furnish to the Custodian appropriate instruments to enable the
Custodian to hold or deliver in proper form for transfer, or to
register in the name of its registered nominee or in the name of
the Book-Entry System or the Depository any Securities which it
may hold hereunder and which may from time to time be registered
in the name of the Fund. The Custodian shall hold all such
Securities specifically allocated to a Series which are not held
in the Book-Entry System or in the Depository in a separate
account in the name of such Series physically segregated at all
times from those of any other person or persons.

5. Except as otherwise provided in this Agreement and
unless otherwise instructed to the contrary by a Certificate, the
Custodian by itself, or through the use of the Book-Entry System
or the Depository with respect to Securities held hereunder and
therein deposited, shall with respect to all Securities held for
the Fund hereunder in accordance with preceding paragraph 4:

(a) Collect all income, dividends and
distributions due or payable;

(b) Give notice to the Fund and present payment
and collect the amount payable upon such Securities which are
called, but only if either (i) the Custodian receives a written
notice of such call, or (ii) notice of such call appears in one
or more of the publications listed in Appendix C annexed hereto,

<PAGE>

which may be amended at any time by the Custodian without the
prior notification or consent of the Fund;

(d) Surrender Securities in temporary form for
definitive Securities;

(e) Execute, as custodian, any necessary
declarations or certificates of ownership under the Federal
Income Tax Laws or the laws or regulations of any other taxing
authority now or hereafter in effect;

(f) Hold directly, or through the Book-Entry
System or the Depository with respect to Securities therein
deposited, for the account of a Series, all rights and similar
securities issued with respect to any Securities held by the
Custodian for such Series hereunder; and

(g) Deliver to the Fund all notices, proxies,
proxy soliciting materials, consents and other written
information (including, without limitation, notices of tender
offers and exchange offers, pendency of calls, maturities of
Securities and expiration of rights) relating to Securities held
pursuant to this Agreement which are actually received by the
Custodian, such proxies and other similar materials to be
executed by the registered owner (if Securities are registered
otherwise than in the name of the Fund), but without indicating
the manner in which proxies or consents are to be voted.

6. Upon receipt of a Certificate and not otherwise,
the Custodian, directly or through the use of the Book-Entry
System or the Depository, shall:

(a) Execute and deliver to such persons as may be
designated in such Certificate proxies, consents, authorizations,
and any other instruments whereby the authority of the Fund as
owner of any Securities held by the Custodian hereunder for the
Series specified in such Certificate may be exercised;

(b) Deliver any Securities held by the Custodian
hereunder for the Series specified in such Certificate in
exchange for other Securities or cash issued or paid in
connection with the liquidation, reorganization, refinancing,
merger, consolidation or recapitalization of any corporation, or
the exercise of any conversion privilege and receive and hold
hereunder specifically allocated to such Series any cash or other
Securities received in exchange;

<PAGE>

(c) Deliver any Securities held by the Custodian
hereunder for the Series specified in such Certificate to any
protective committee, reorganization committee or other person n
connection with the reorganization, refinancing, merger,
consolidation, recapitalization or sale of assets of any
corporation, and receive and hold hereunder specifically
allocated to such Series such certificates of deposit, interim
receipts or other instruments or documents as may be issued to it
to evidence such delivery;

(d) Make such transfers or exchanges of the assets
of the Series specified in such Certificate, and take such other
steps as shall be stated in such Certificate to be for the
purpose of effectuating any duly authorized plan of liquidation,
reorganization, merger, consolidation or recapitalization of the
Fund; and

(e) Present for payment and collect the amount
payable upon Securities not described in preceding paragraph 5(b)
of this Article which may be called as specified in the
Certificate.

7. Notwithstanding any provision elsewhere contained
herein, the Custodian shall not be required to obtain possession
of any instrument or certificate representing any Futures
Contract, any Option, or any Futures Contract Option until after
it shall have determined, or shall have received a Certificate
from the Fund stating, that any such instruments or certificates
are available. The Fund shall deliver to the Custodian such a
Certificate no later than the business day preceding the
availability of any such instrument or certificate. Prior to
such availability, the Custodian shall comply with Section 17(f)
of the Investment Company Act of 1940, as amended, in connection
with the purchase, sale, settlement, closing out or writing of
Futures Contracts, Options, or Futures Contract Options by making
payments or deliveries specified in Certificates received by the
Custodian in connection with any such purchase, sale, writing,
settlement or closing out upon its receipt from a broker, dealer,
or futures commission merchant of a statement or confirmation
reasonably believed by the Custodian to be in the form
customarily used by brokers, dealers, or future commission
merchants with respect to such Futures Contracts, Options, or
Futures Contract Options, as the case may be, confirming that
such Security is held by such broker, dealer or futures
commission merchant, in book-entry form or otherwise, in the name
of the Custodian (or any nominee of the Custodian) as custodian
for the Fund, provided, however, that notwithstanding the
foregoing, payments to or deliveries from the Margin Account, and
payments with respect to Securities to which a Margin Account
relates, shall be made in accordance with the terms and
conditions of the Margin Account Agreement. Whenever any such

<PAGE>

instruments or certificates are available, the Custodian shall,
notwithstanding any provision in this Agreement to the contrary,
make payment for any Futures Contract, Option, or Futures
Contract Option for which such instruments or such certificates
are available only against the delivery to the Custodian of such
instrument or such certificate, and deliver any Futures Contract,
Option or Futures Contract Option for which such instruments or
such certificates are available only against receipt by the
Custodian of payment therefor. Any such instrument or
certificate delivered to the Custodian shall be held by the
Custodian hereunder in accordance with, and subject to, the
provisions of this Agreement.

ARTICLE IV.

PURCHASE AND SALE OF INVESTMENTS OF THE FUND
OTHER THAN OPTIONS, FUTURES CONTRACTS
AND FUTURES CONTRACT OPTIONS

1. Promptly after each purchase of Securities by the
Fund, other than a purchase of an Option, a Futures Contract, or
a Futures Contract Option, the Fund shall deliver to the
Custodian (i) with respect to each purchase of Securities which
are not Money Market Securities, a Certificate, and (ii) with
respect to each purchase of Money Market Securities, a
Certificate or Oral Instructions, specifying with respect to each
such purchase: (a) the Series to which such Securities are to be
specifically allocated; (b) the name of the issuer and the title
of the Securities; (c) the number of shares or the principal
amount purchased and accrued interest, if any; (d) the date of
purchase and settlement; (e) the purchase price per unit; (f) the
total amount payable upon such purchase; (g) the name of the
person from whom or the broker through whom the purchase was
made, and the name of the clearing broker, if any; and (h) the
name of the broker to whom payment is to be made. The Custodian
shall, upon receipt of Securities purchased by or for the Fund,
pay to the broker specified in the Certificate out of the moneys
held for the account of such Series the total amount payable upon
such purchase, provided that the same conforms to the total
amount payable as set forth in such Certificate or Oral
Instructions.

2. Promptly after each sale of Securities by the Fund,
other than a sale of any Option, Futures Contract, Futures
Contract Option, or any Reverse Repurchase Agreement, the Fund
shall deliver to the Custodian (i) with respect to each sale of
Securities which are not Money Market Securities, a Certificate,
and (ii) with respect to each sale of Money Market Securities, a
Certificate or Oral Instructions, specifying with respect to each
such sale: (a) the Series to which such Securities were
specifically allocated; (b) the name of the issuer and the title

<PAGE>

of the Security; (c) the number of shares or principal amount
sold, and accrued interest, if any; (d) the date of sale; (e) the
sale price per unit; (f) the total amount payable to the Fund
upon such sale; (g) the name of the broker through whom or the
person to whom the sale was made, and the name of the clearing
broker, if any; and (h) the name of the broker to whom the
Securities are to be delivered. The Custodian shall deliver the
Securities specifically allocated to such Series to the broker
specified in the Certificate against payment of the total amount
payable to the Fund upon such sale, provided that the same
conforms to the total amount payable as set forth in such
Certificate or Oral Instructions.

ARTICLE V.

OPTIONS

1. Promptly after the purchase of any Option by the
Fund, the Fund shall deliver to the Custodian a Certificate
specifying with respect to each Option purchased: (a) the Series
to which such Option is specifically allocated; (b) the type of
Option (put or call); (c) the name of the issuer and the title
and number of shares subject to such Option or, in the case of a
Stock Index Option, the stock index to which such Option relates
and the number of Stock Index Options purchased; (d) the
expiration date; (e) the exercise price; (f) the dates of
purchase and settlement; (g) the total amount payable by the Fund
in connection with such purchase; (h) the name of the Clearing
Member through whom such Option was purchased; and (i) the name
of the broker to whom payment is to be made. The Custodian shall
pay, upon receipt of a Clearing Member's statement confirming the
purchase of such Option held by such Clearing Member for the
account of the Custodian (or any duly appointed and registered
nominee of the Custodian) as custodian for the Fund, out of
moneys held for the account of the Series to which such Option is
to be specifically allocated, the total amount payable upon such
purchase to the Clearing Member through whom the purchase was
made, provided that the same conforms to the total amount payable
as set forth in such Certificate.

2. Promptly after the sale of any Option purchased by
the Fund pursuant to paragraph 1 hereof, the Fund shall deliver
to the Custodian a Certificate specifying with respect to each
such sale: (a) the Series to which such Option was specifically
allocated; (b) the type of Option (put or call); (c) the name of
the issuer and the title and number of shares subject to such
Option or, in the case of a Stock Index Option, the stock index
to which such Option relates and the number of Stock Index
Options sold; (d) the date of sale; (e) the sale price; (f) the
date of settlement; (g) the total amount payable to the Fund upon
such sale; and (h) the name of the Clearing Member through whom

<PAGE>

the sale was made. The Custodian shall consent to the delivery
of the Option sold by the Clearing Member which previously
supplied the confirmation described in preceding paragraph 1 of
this Article with respect to such Option against payment to the
Custodian of the total amount payable to the Fund, provided that
the same conforms to the total amount payable as set forth in
such Certificate.

3. Promptly after the exercise by the Fund of any Call
Option purchased by the Fund pursuant to paragraph 1 hereof, the
Fund shall deliver to the Custodian a Certificate specifying with
respect to such Call Option: (a) the Series to which such Call
Option was specifically allocated; (b) the name of the issuer and
the title and number of shares subject to the Call Option;
(c) the expiration date; (d) the date of exercise and settlement;
(e) the exercise price per share; (f) the total amount to be paid
by the Fund upon such exercise; and (g) the name of the Clearing
Member through whom such Call Option was exercised. The
Custodian shall, upon receipt of the Securities underlying the
Call Option which was exercised, pay out of the moneys held for
the account of the Series to which such Call Option was
specifically allocated the total amount payable to the Clearing
Member through whom the Call Option was exercised, provided that
the same conforms to the total amount payable as set forth in
such Certificate.

4. Promptly after the exercise by the Fund of any Put
Option purchased by the Fund pursuant to paragraph 1 hereof, the
Fund shall deliver to the Custodian a Certificate specifying with
respect to such Put Option: (a) the Series to which such Put
Option was specifically allocated; (b) the name of the issuer and
the title and number of shares subject to the Put Option; (c) the
expiration date; (d) the date of exercise and settlement; (e) the
exercise price per share; (f) the total amount to be paid to the
Fund upon such exercise; and (g) the name of the Clearing Member
through whom such Put Option was exercised. The Custodian shall,
upon receipt of the amount payable upon the exercise of the Put
Option, deliver or direct the Depository to deliver the
Securities specifically allocated to such Series, provided the
same conforms to the amount payable to the Fund as set forth in
such Certificate.

5. Promptly after the exercise by the Fund of any
Stock Index Option purchased by the Fund pursuant to paragraph 1
hereof, the Fund shall deliver to the Custodian a Certificate
specifying with respect to such Stock Index Option: (a) the
Series to which such Stock Index Option was specifically
allocated; (b) the type of Stock Index Option (put or call);
(c) the number of Options being exercised; (d) the stock index to
which such Option relates; (e) the expiration date; (f) the
exercise price; (g) the total amount to be received by the Fund

<PAGE>

in connection with such exercise; and (h) the Clearing Member
from whom such payment is to be received.

6. Whenever the Fund writes a Covered Call Option, the
Fund shall promptly deliver to the Custodian a Certificate
specifying with respect to such Covered Call Option: (a) the
Series for which such Covered Call Option was written; (b) the
name of the issuer and the title and number of shares for which
the Covered Call Option was written and which underlie the same;
(c) the expiration date; (d) the exercise price; (e) the premium
to be received by the Fund; (f) the date such Covered Call Option
was written; and (g) the name of the Clearing Member through whom
the premium is to be received. The Custodian shall deliver or
cause to be delivered, in exchange for receipt of the premium
specified in the Certificate with respect to such Covered Call
Option, such receipts as are required in accordance with the
customs prevailing among Clearing Members dealing in Covered Call
Options and shall impose, or direct the Depository to impose,
upon the underlying Securities specified in the Certificate
specifically allocated to such Series such restrictions as may be
required by such receipts. Notwithstanding the foregoing, the
Custodian has the right, upon prior written notification to the
Fund, at any time to refuse to issue any receipts for Securities
in the possession of the Custodian and not deposited with the
Depository underlying a Covered Call Option.

7. Whenever a Covered Call Option written by the Fund
and described in the preceding paragraph of this Article is
exercised, the Fund shall promptly deliver to the Custodian a
Certificate instructing the Custodian to deliver, or to direct
the Depository to deliver, the Securities subject to such Covered
Call Option and specifying: (a) the Series for which such Covered
Call Option was written; (b) the name of the issuer and the title
and number of shares subject to the Covered Call Option; (c) the
Clearing Member to whom the underlying Securities are to be
delivered; and (d) the total amount payable to the Fund upon such
delivery. Upon the return and/or cancellation of any receipts
delivered pursuant to paragraph 6 of this Article, the Custodian
shall deliver, or direct the Depository to deliver, the
underlying Securities as specified in the Certificate against
payment of the amount to be received as set forth in such
Certificate.

8. Whenever the Fund writes a Put Option, the Fund
shall promptly deliver to the Custodian a Certificate specifying
with respect to such Put Option: (a) the Series for which such
Put Option was written; (b) the name of the issuer and the title
and number of shares for which the Put Option is written and
which underlie the same; (c) the expiration date; (d) the
exercise price; (e) the premium to be received by the Fund;
(f) the date such Put Option is written; (g) the name of the

<PAGE>

Clearing Member through whom the premium is to be received and to
whom a Put Option guarantee letter is to be delivered; (h) the
amount of cash, and/or the amount and kind of Securities, if any,
specifically allocated to such Series to be deposited in the
Senior Security Account for such Series; and (i) the amount of
cash and/or the amount and kind of Securities specifically
allocated to such Series to be deposited into the Collateral
Account for such Series. The Custodian shall, after making the
deposits into the Collateral Account specified in the
Certificate, issue a Put Option guarantee letter substantially in
the form utilized by the Custodian on the date hereof, and
deliver the same to the Clearing Member specified in the
Certificate against receipt of the premium specified in said
Certificate. Notwithstanding the foregoing, the Custodian shall
be under no obligation to issue any Put Option guarantee letter
or similar document if it is unable to make any of the
representations contained therein.

9. Whenever a Put Option written by the Fund and
described in the preceding paragraph is exercised, the Fund shall
promptly deliver to the Custodian a Certificate specifying:
(a) the Series to which such Put Option was written; (b) the name
of the issuer and title and number of shares subject to the Put
Option; (c) the Clearing Member from whom the underlying
Securities are to be received; (d) the total amount payable by
the Fund upon such delivery; (e) the amount of cash and/or the
amount and kind of Securities specifically allocated to such
Series to be withdrawn from the Collateral Account for such
Series and (f) the amount of cash and/or the amount and kind of
Securities, specifically allocated to such Series, if any, to be
withdrawn from the Senior Security Account. Upon the return
and/or cancellation of any Put Option guarantee letter or similar
document issued by the Custodian in connection with such Put
Option, the Custodian shall pay out of the moneys held for the
account of the Series to which such Put Option was specifically
allocated the total amount payable to the Clearing Member
specified in the Certificate as set forth in such Certificate
against delivery of such Securities, and shall make the
withdrawals specified in such Certificate.

10. Whenever the Fund writes a Stock Index Option, the
Fund shall promptly deliver to the Custodian a Certificate
specifying with respect to such Stock Index Option: (a) the
Series for which such Stock Index Option was written; (b) whether
such Stock Index Option is a put or a call; (c) the number of
options written; (d) the stock index to which such Option
relates; (e) the expiration date; (f) the exercise price; (g) the
Clearing Member through whom such Option was written; (h) the
premium to be received by the Fund; (i) the amount of cash and/or
the amount and kind of Securities, if any, specifically allocated
to such Series to be deposited in the Senior Security Account for

<PAGE>

such Series; (j) the amount of cash and/or the amount and kind of
Securities, if any, specifically allocated to such Series to be
deposited in the Collateral Account for such Series; and (k) the
amount of cash and/or the amount and kind of Securities, if any,
specifically allocated to such Series to be deposited in a Margin
Account, and the name in which such account is to be or has been
established. The Custodian shall, upon receipt of the premium
specified in the Certificate, make the deposits, if any, into the
Senior Security Account specified in the Certificate, and either
(1) deliver such receipts, if any, which the Custodian has
specifically agreed to issue, which are in accordance with the
customs prevailing among Clearing Members in Stock Index Options
and make the deposits into the Collateral Account specified in
the Certificate, or (2) make the deposits into the Margin Account
specified in the Certificate.

11. Whenever a Stock Index Option written by the Fund
and described in the preceding paragraph of this Article is
exercised, the Fund shall promptly deliver to the Custodian a
Certificate specifying with respect to such Stock Index Option:
(a) the Series for which such Stock Index Option was written;
(b) such information as may be necessary to identify the Stock
Index Option being exercised; (c) the Clearing Member through
whom such Stock Index Option is being exercised; (d) the total
amount payable upon such exercise, and whether such amount is to
be paid by or to the Fund; (e) the amount of cash and/or amount
and kind of Securities, if any, to be withdrawn from the Margin
Account; and (f) the amount of cash and/or amount and kind of
Securities, if any, to be withdrawn from the Senior Security
Account for such Series; and the amount of cash and/or the amount
and kind of Securities, if any, to be withdrawn from the
Collateral Account for such Series. Upon the return and/or
cancellation of the receipt, if any, delivered pursuant to the
preceding paragraph of this Article, the Custodian shall pay out
of the moneys held for the account of the Series to which such
Stock Index Option was specifically allocated to the Clearing
Member specified in the Certificate the total amount payable, if
any, as specified therein.

12. Whenever the Fund purchases any Option identical to
a previously written Option described in paragraphs 6, 8 or 10 of
this Article in a transaction expressly designated as a "Closing
Purchase Transaction" in order to liquidate its position as a
writer of an Option, the Fund shall promptly deliver to the
Custodian a Certificate specifying with respect to the Option
being purchased: (a) that the transaction is a Closing Purchase
Transaction; (b) the Series for which the Option was written;
(c) the name of the issuer and the title and number of shares
subject to the Option, or, in the case of a Stock Index Option,
the stock index to which such Option relates and the number of
Options held; (d) the exercise price; (e) the premium to be paid

<PAGE>

by the Fund; (f) the expiration date; (g) the type of Option (put
or call); (h) the date of such purchase; (i) the name of the
Clearing Member to whom the premium is to be paid; and (j) the
amount of cash and/or the amount and kind of Securities, if any,
to be withdrawn from the Collateral Account, a specified Margin
Account, or the Senior Security Account for such Series. Upon
the Custodian's payment of the premium and the return and/or
cancellation of any receipt issued pursuant to paragraphs 6, 8 or
10 of this Article with respect to the Option being liquidated
through the Closing Purchase Transaction, the Custodian shall
remove, or direct the Depository to remove, the previously
imposed restrictions on the Securities underlying the Call
Option.

13. Upon the expiration, exercise or consummation of a
Closing Purchase Transaction with respect to any Option purchased
or written by the Fund and described in this Article, the
Custodian shall delete such Option from the statements delivered
to the Fund pursuant to paragraph 3 Article III herein, and upon
the return and/or cancellation of any receipts issued by the
Custodian, shall make such withdrawals from the Collateral
Account, and the Margin Account and/or the Senior Security
Account as may be specified in a Certificate received in
connection with such expiration, exercise, or consummation.

ARTICLE VI.

FUTURES CONTRACTS

1. Whenever the Fund shall enter into a Futures
Contract, the Fund shall deliver to the Custodian a Certificate
specifying with respect to such Futures Contract, (or with
respect to any number of identical Futures Contract(s)): (a) the
Series for which the Futures Contract is being entered; (b) the
category of Futures Contract (the name of the underlying stock
index or financial instrument); (c) the number of identical
Futures Contracts entered into; (d) the delivery or settlement
date of the Futures Contract(s); (e) the date the Futures
Contract(s) was (were) entered into and the maturity date;
(f) whether the Fund is buying (going long) or selling (going
short) on such Futures Contract(s); (g) the amount of cash and/or
the amount and kind of Securities, if any, to be deposited in the
Senior Security Account for such Series; (h) the name of the
broker, dealer, or futures commission merchant through whom the
Futures Contract was entered into; and (i) the amount of fee or
commission, if any, to be paid and the name of the broker,
dealer, or futures commission merchant to whom such amount is to
be paid. The Custodian shall make the deposits, if any, to the
Margin Account in accordance with the terms and conditions of the
Margin Account Agreement. The Custodian shall make payment out of
the moneys specifically allocated to such Series of the fee or

<PAGE>

commission, if any, specified in the Certificate and deposit in
the Senior Security Account for such Series the amount of cash
and/or the amount and kind of Securities specified in said
Certificate.

2. (a) Any variation margin payment or similar
payment required to be made by the Fund to a broker, dealer, or
futures commission merchant with respect to an outstanding
Futures Contract, shall be made by the Custodian in accordance
with the terms and conditions of the Margin Account Agreement.

(b) Any variation margin payment or similar
payment from a broker, dealer, or futures commission merchant to
the Fund with respect to an outstanding Futures Contract, shall
be received and dealt with by the Custodian in accordance with
the terms and conditions of the Margin Account Agreement.

3. Whenever a Futures Contract held by the Custodian
hereunder is retained by the Fund until delivery or settlement is
made on such Futures Contract, the Fund shall deliver to the
Custodian a Certificate specifying: (a) the Futures Contract and
the Series to which the same relates; (b) with respect to a Stock
Index Futures Contract, the total cash settlement amount to be
paid or received, and with respect to a Financial Futures
Contract, the Securities and/or amount of cash to be delivered or
received; (c) the broker, dealer, or futures commission merchant
to or from whom payment or delivery is to be made or received;
and (d) the amount of cash and/or Securities to be withdrawn from
the Senior Security Account for such Series. The Custodian shall
make the payment or delivery specified in the Certificate, and
delete such Futures Contract from the statements delivered to the
Fund pursuant to paragraph 3 of Article III herein.

4. Whenever the Fund shall enter into a Futures
Contract to offset a Futures Contract held by the Custodian
hereunder, the Fund shall deliver to the Custodian a Certificate
specifying: (a) the items of information required in a
Certificate described in paragraph 1 of this Article, and (b) the
Futures Contract being offset. The Custodian shall make payment
out of the money specifically allocated to such Series of the fee
or commission, if any, specified in the Certificate and delete
the Futures Contract being offset from the statements delivered
to the Fund pursuant to paragraph 3 of Article III herein, and
make such withdrawals from the Senior Security Account for such
Series as may be specified in such Certificate. The withdrawals,
if any, to be made from the Margin Account shall be made by the
Custodian in accordance with the terms and conditions of the
Margin Account Agreement.

<PAGE>

ARTICLE VII.

FUTURES CONTRACT OPTIONS

1. Promptly after the purchase of any Futures Contract
Option by the Fund, the Fund shall promptly deliver to the
Custodian a Certificate specifying with respect to such Futures
Contract Option: (a) the Series to which such Option is
specifically allocated; (b) the type of Futures Contract Option
(put or call); (c) the type of Futures Contract and such other
information as may be necessary to identify the Futures Contract
underlying the Futures Contract Option purchased; (d) the
expiration date; (e) the exercise price; (f) the dates of
purchase and settlement; (g) the amount of premium to be paid by
the Fund upon such purchase; (h) the name of the broker or
futures commission merchant through whom such option was
purchased; and (i) the name of the broker, or futures commission
merchant, to whom payment is to be made. The Custodian shall pay
out of the moneys specifically allocated to such Series, the
total amount to be paid upon such purchase to the broker or
futures commissions merchant through whom the purchase was made,
provided that the same conforms to the amount set forth in such
Certificate.

2. Promptly after the sale of any Futures Contract
Option purchased by the Fund pursuant to paragraph 1 hereof, the
Fund shall promptly deliver to the Custodian a Certificate
specifying with respect to each such sale: (a) Series to which
such Futures Contract Option was specifically allocated; (b) the
type of Future Contract Option (put or call); (c) the type of
Futures Contract and such other information as may be necessary
to identify the Futures Contract underlying the Futures Contract
Option; (d) the date of sale; (e) the sale price; (f) the date of
settlement; (g) the total amount payable to the Fund upon such
sale; and (h) the name of the broker of futures commission
merchant through whom the sale was made. The Custodian shall
consent to the cancellation of the Futures Contract Option being
closed against payment to the Custodian of the total amount
payable to the Fund, provided the same conforms to the total
amount payable as set forth in such Certificate.

3. Whenever a Futures Contract Option purchased by the
Fund pursuant to paragraph 1 is exercised by the Fund, the Fund
shall promptly deliver to the Custodian a Certificate specifying:
(a) the Series to which such Futures Contract Option was
specifically allocated; (b) the particular Futures Contract
Option (put or call) being exercised; (c) the type of Futures
Contract underlying the Futures Contract Option; (d) the date of
exercise; (e) the name of the broker or futures commission
merchant through whom the Futures Contract Option is exercised;
(f) the net total amount, if any, payable by the Fund; (g) the

<PAGE>

amount, if any, to be received by the Fund; and (h) the amount of
cash and/or the amount and kind of Securities to be deposited in
the Senior Security Account for such Series. The Custodian shall
make, out of the moneys and Securities specifically allocated to
such Series, the payments, if any, and the deposits, if any, into
the Senior Security Account as specified in the Certificate. The
deposits, if any, to be made to the Margin Account shall be made
by the Custodian in accordance with the terms and conditions of
the Margin Account Agreement.

4. Whenever the Fund writes a Futures Contract Option,
the Fund shall promptly deliver to the Custodian a Certificate
specifying with respect to such Futures Contract Option: (a) the
Series for which such Futures Contract Option was written;
(b) the type of Futures Contract Option (put or call); (c) the
type of Futures Contract and such other information as may be
necessary to identify the Futures Contract underlying the Futures
Contract Option; (d) the expiration date; (e) the exercise price;
(f) the premium to be received by the Fund; (g) the name of the
broker or futures commission merchant through whom the premium is
to be received; and (h) the amount of cash and/or the amount and
kind of Securities, if any, to be deposited in the Senior
Security Account for such Series. The Custodian shall, upon
receipt of the premium specified in the Certificate, make out of
the moneys and Securities specifically allocated to such Series
the deposits into the Senior Security Account, if any, as
specified in the Certificate. The deposits, if any, to be made
to the Margin Account shall be made by the Custodian in
accordance with the terms and conditions of the Margin Account
Agreement.

5. Whenever a Futures Contract Option written by the
Fund which is a call is exercised, the Fund shall promptly
deliver to the Custodian a Certificate specifying: (a) the Series
to which such Futures Contract Option was specifically allocated;
(b) the particular Futures Contract Option exercised; (c) the
type of Futures Contract underlying the Futures Contract Option;
(d) the name of the broker or futures commission merchant through
whom such Futures Contract Option was exercised; (e) the net
total amount, if any, payable to the Fund upon such exercise;
(f) the net total amount, if any, payable by the Fund upon such
exercise; and (g) the amount of cash and/or the amount and kind
of Securities to be deposited in the Senior Security Account for
such Series. The Custodian shall, upon its receipt of the net
total amount payable to the Fund, if any, specified in such
Certificate make the payments, if any, and the deposits, if any,
into the Senior Security Account as specified in the Certificate.
The deposits, if any, to be made to the Margin Account shall be
made by the Custodian in accordance with the terms and conditions
of the Margin Account Agreement.

<PAGE>

6. Whenever a Futures Contract Option which is written
by the Fund and which is a put is exercised, the Fund shall
promptly deliver to the Custodian a Certificate specifying:
(a) the Series to which such Option was specifically allocated;
(b) the particular Futures Contract Option exercised; (c) the
type of Futures Contract underlying such Futures Contract Option;
(d) the name of the broker or futures commission merchant through
whom such Futures Contract Option is exercised; (e) the net total
amount, if any, payable to the Fund upon such exercise; (f) the
net total amount, if any, payable by the Fund upon such exercise;
and (g) the amount and kind of Securities and/or cash to be
withdrawn from or deposited in, the Senior Security Account for
such Series, if any. The Custodian shall, upon its receipt of
the net total amount payable to the Fund, if any, specified in
the Certificate, make out of the moneys and Securities
specifically allocated to such Series, the payments, if any, and
the deposits, if any, into the Senior Security Account as
specified in the Certificate. The deposits to and/or withdrawals
from the Margin Account, if any, shall be made by the Custodian
in accordance with the terms and conditions of the Margin Account
Agreement.

7. Whenever the Fund purchases any Futures Contract
Option identical to a previously written Futures Contract Option
described in this Article in order to liquidate its position as a
writer of such Futures Contract Option, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to
the Futures Contract Option being purchased: (a) the Series to
which such Option is specifically allocated; (b) that the
transaction is a closing transaction; (c) the type of Future
Contract and such other information as may be necessary to
identify the Futures Contract underlying the Futures Option
Contract; (d) the exercise price; (e) the premium to be paid by
the Fund; (f) the expiration date; (g) the name of the broker or
futures commission merchant to whom the premium is to be paid;
and (h) the amount of cash and/or the amount and kind of
Securities, if any, to be withdrawn from the Senior Security
Account for such Series. The Custodian shall effect the
withdrawals from the Senior Security Account specified in the
Certificate. The withdrawals, if any, to be made from the Margin
Account shall be made by the Custodian in accordance with the
terms and conditions of the Margin Account Agreement.

8. Upon the expiration, exercise, or consummation of a
closing transaction with respect to, any Futures Contract Option
written or purchased by the Fund and described in this Article,
the Custodian shall (a) delete such Futures Contract Option from
the statements delivered to the Fund pursuant to paragraph 3 of
Article III herein and, (b) make such withdrawals from and/or in
the case of an exercise such deposits into the Senior Security
Account as may be specified in a Certificate. The deposits to

<PAGE>

and/or withdrawals from the Margin Account, if any, shall be made
by the Custodian in accordance with the terms and conditions of
the Margin Account Agreement.

9. Futures Contracts acquired by the Fund through the
exercise of a Futures Contract Option described in this Article
shall be subject to Article VI hereof.

ARTICLE VIII.

SHORT SALES

1. Promptly after any short sales by any Series of the
Fund, the Fund shall promptly deliver to the Custodian a
Certificate specifying: (a) the Series for which such short sale
was made; (b) the name of the issuer and the title of the
Security; (c) the number of shares or principal amount sold, and
accrued interest or dividends, if any; (d) the dates of the sale
and settlement; (e) the sale price per unit; (f) the total amount
credited to the Fund upon such sale, if any, (g) the amount of
cash and/or the amount and kind of Securities, if any, which are
to be deposited in a Margin Account and the name in which such
Margin Account has been or is to be established; (h) the amount
of cash and/or the amount and kind of Securities, if any, to be
deposited in a Senior Security Account, and (i) the name of the
broker through whom such short sale was made. The Custodian
shall upon its receipt of a statement from such broker confirming
such sale and that the total amount credited to the Fund upon
such sale, if any, as specified in the Certificate is held by
such broker for the account of the Custodian (or any nominee of
the Custodian) as custodian of the Fund, issue a receipt or make
the deposits into the Margin Account and the Senior Security
Account specified in the Certificate.

2. In connection with the closing-out of any short
sale, the Fund shall promptly deliver to the Custodian a
Certificate specifying with respect to each such closing out:
(a) the Series for which such transaction is being made; (b) the
name of the issuer and the title of the Security; (c) the number
of shares or the principal amount, and accrued interest or
dividends, if any, required to effect such closing-out to be
delivered to the broker; (d) the dates of closing-out and
settlement; (e) the purchase price per unit; (f) the net total
amount payable to the Fund upon such closing-out; (g) the net
total amount payable to the broker upon such closing-out; (h) the
amount of cash and the amount and kind of Securities to be
withdrawn, if any, from the Margin Account; (i) the amount of
cash and/or the amount and kind of Securities, if any, to be
withdrawn from the Senior Security Account; and (j) the name of
the broker through whom the Fund is effecting such closing-out.
The Custodian shall, upon receipt of the net total amount payable

<PAGE>

to the Fund upon such closing-out, and the return and/or
cancellation of the receipts, if any, issued by the Custodian
with respect to the short sale being closed-out, pay out of the
moneys held for the account of the Fund to the broker the net
total amount payable to the broker, and make the withdrawals from
the Margin Account and the Senior Security Account, as the same
are specified in the Certificate.

ARTICLE IX.

REVERSE REPURCHASE AGREEMENTS

1. Promptly after the Fund enters a Reverse Repurchase
Agreement with respect to Securities and money held by the
Custodian hereunder, the Fund shall deliver to the Custodian a
Certificate, or in the event such Reverse Repurchase Agreement is
a Money Market Security, a Certificate or Oral Instructions
specifying: (a) the Series for which the Reverse Repurchase
Agreement is entered; (b) the total amount payable to the Fund in
connection with such Reverse Repurchase Agreement and
specifically allocated to such Series; (c) the broker or dealer
through or with whom the Reverse Repurchase Agreement is entered;
(d) the amount and kind of Securities to be delivered by the Fund
to such broker or dealer; (e) the date of such Reverse Repurchase
Agreement; and (f) the amount of cash and/or the amount and kind
of Securities, if any, specifically allocated to such Series to
be deposited in a Senior Security Account for such Series in
connection with such Reverse Repurchase Agreement. The Custodian
shall, upon receipt of the total amount payable to the Fund
specified in the Certificate or Oral Instructions make the
delivery to the broker or dealer, and the deposits, if any, to
the Senior Security Account, specified in such Certificate or
Oral Instructions.

2. Upon the termination of a Reverse Repurchase
Agreement described in preceding paragraph 1 of this Article, the
Fund shall promptly deliver a Certificate or, in the event such
Reverse Repurchase Agreement is a Money Market Security, a
Certificate or Oral Instructions to the Custodian specifying:
(a) the Reverse Repurchase Agreement being terminated and the
Series for which same was entered; (b) the total amount payable
by the Fund in connection with such termination; (c) the amount
and kind of Securities to be received by the Fund and
specifically allocated to such Series in connection with such
termination; (d) the date of termination; (e) the name of the
broker or dealer with or through whom the Reverse Repurchase
Agreement is to be terminated; and (f) the amount of cash and/or
the amount and kind of Securities to be withdrawn from the Senior
Securities Account for such Series. The Custodian shall, upon
receipt of the amount and kind of Securities to be received by
the Fund specified in the Certificate or Oral Instructions, make

<PAGE>

the payment to the broker or dealer, and the withdrawals, if any,
from the Senior Security Account, specified in such Certificate
or Oral Instructions.

ARTICLE X.

LOAN OF PORTFOLIO SECURITIES OF THE FUND

1. Promptly after each loan of portfolio Securities
specifically allocated to a Series held by the Custodian
hereunder, the Fund shall deliver or cause to be delivered to the
Custodian a Certificate specifying with respect to each such
loan: (a) the Series to which the loaned Securities are
specifically allocated; (b) the name of the issuer and the title
of the Securities, (c) the number of shares or the principal
amount loaned, (d) the date of loan and delivery, (e) the total
amount to be delivered to the Custodian against the loan of the
Securities, including the amount of cash collateral and the
premium, if any, separately identified, and (f) the name of the
broker, dealer, or financial institution to which the loan was
made. The Custodian shall deliver the Securities thus designated
to the broker, dealer or financial institution to which the loan
was made upon receipt of the total amount designated as to be
delivered against the loan of Securities. The Custodian may
accept payment in connection with a delivery otherwise than
through the Book-Entry System or Depository only in the form of a
certified or bank cashier's check payable to the order of the
Fund or the Custodian drawn on New York Clearing House funds and
may deliver Securities in accordance with the customs prevailing
among dealers in securities.

2. Promptly after each termination of the loan of
Securities by the Fund, the Fund shall deliver or cause to be
delivered to the Custodian a Certificate specifying with respect
to each such loan termination and return of Securities: (a) the
Series to which the loaned Securities are specifically allocated;
(b) the name of the issuer and the title of the Securities to be
returned, (c) the number of shares or the principal amount to be
returned, (d) the date of termination, (e) the total amount to be
delivered by the Custodian (including the cash collateral for
such Securities minus any offsetting credits as described in said
Certificate), and (f) the name of the broker, dealer, or
financial institution from which the Securities will be returned.
The Custodian shall receive all Securities returned from the
broker, dealer, or financial institution to which such Securities
were loaned and upon receipt thereof shall pay, out of the moneys
held for the account of the Fund, the total amount payable upon
such return of Securities as set forth in the Certificate.

<PAGE>

ARTICLE XI.

CONCERNING MARGIN ACCOUNTS, SENIOR SECURITY
ACCOUNTS, AND COLLATERAL ACCOUNTS

1. The Custodian shall, from time to time, make such
deposits to, or withdrawals from, a Senior Security Account as
specified in a Certificate received by the Custodian. Such
Certificate shall specify the Series for which such deposit or
withdrawal is to be made and the amount of cash and/or the amount
and kind of Securities specifically allocated to such Series to
be deposited in, or withdrawn from, such Senior Security Account
for such Series. In the event that the Fund fails to specify in
a Certificate the Series, the name of the issuer, the title and
the number of shares or the principal amount of any particular
Securities to be deposited by the Custodian into, or withdrawn
from, a Senior Securities Account, the Custodian shall be under
no obligation to make any such deposit or withdrawal and shall so
notify the Fund.

2. The Custodian shall make deliveries or payments
from a Margin Account to the broker, dealer, futures commission
merchant or Clearing Member in whose name, or for whose benefit,
the account was established as specified in the Margin Account
Agreement.

3. Amounts received by the Custodian as payments or
distributions with respect to Securities deposited in any Margin
Account shall be dealt with in accordance with the terms and
conditions of the Margin Account Agreement.

4. The Custodian shall have a continuing lien and
security interest in and to any property at any time held by the
Custodian in any Collateral Account described herein. In
accordance with applicable law the Custodian may enforce its lien
and realize on any such property whenever the Custodian has made
payment or delivery pursuant to any Put Option guarantee letter
or similar document or any receipt issued hereunder by the
Custodian. In the event the Custodian should realize on any such
property net proceeds which are less than the Custodian's
obligations under any Put Option guarantee letter or similar
document or any receipt, such deficiency shall be a debt owed the
Custodian by the Fund within the scope of Article XIV herein.

5. On each business day the Custodian shall furnish
the Fund with a statement with respect to each Margin Account in
which money or Securities are held specifying as of the close of
business on the previous business day: (a) the name of the Margin
Account; (b) the amount and kind of Securities held therein; and
(c) the amount of money held therein. The Custodian shall make
available upon request to any broker, dealer, or futures

<PAGE>

commission merchant specified in the name of a Margin Account a
copy of the statement furnished the Fund with respect to such
Margin Account.

6. Promptly after the close of business on each
business day in which cash and/or Securities are maintained in a
Collateral Account for any Series, the Custodian shall furnish
the Fund with a statement with respect to such Collateral Account
specifying the amount of cash and/or the amount and kind of
Securities held therein. No later than the close of business
next succeeding the delivery to the Fund of such statement, the
Fund shall furnish to the Custodian a Certificate specifying the
then market value of the Securities described in such statement.
In the event such then market value is indicated to be less than
the Custodian's obligation with respect to any outstanding Put
Option guarantee letter or similar document, the Fund shall
promptly specify in a Certificate the additional cash and/or
Securities to be deposited in such Collateral Account to
eliminate such deficiency.

ARTICLE XII.

PAYMENT OF DIVIDENDS OR DISTRIBUTIONS

1. The Fund shall furnish to the Custodian a copy of
the resolution of the Board of Directors of the Fund, certified
by the Secretary or any Assistant Secretary, either (i) setting
forth with respect to the Series specified therein the date of
the declaration of a dividend or distribution, the date of
payment thereof, the record date as of which shareholders
entitled to payment shall be determined, the amount payable per
Share of such Series to the shareholders of record as of that
date and the total amount payable to the Dividend Agent and any
sub-dividend agent or co-dividend agent of the Fund on the
payment date, or (ii) authorizing with respect to the Series
specified therein the declaration of dividends and distributions
on a daily basis and authorizing the Custodian to rely on Oral
Instructions or a Certificate setting forth the date of the
declaration of such dividend or distribution, the date of payment
thereof, the record date as of which shareholders entitled to
payment shall be determined, the amount payable per Share of such
Series to the shareholders of record as of that date and the
total amount payable to the Dividend Agent on the payment date.

2. Upon the payment date specified in such resolution,
Oral Instructions or Certificate, as the case may be, the
Custodian shall pay out of the moneys held for the account of
each Series the total amount payable to the Dividend Agent and
any sub-dividend agent or co-dividend agent of the Fund with
respect to such Series.

<PAGE>

ARTICLE XIII.

SALE AND REDEMPTION OF SHARES

1. Whenever the Fund shall sell any Shares, it shall
deliver to the Custodian a Certificate duly specifying:

(a) The Series, the number of Shares sold, trade
date, and price; and

(b) The amount of money to be received by the
Custodian for the sale of such Shares and specifically allocated
to the separate account in the name of such Series.

2. Upon receipt of such money from the Transfer Agent,
the Custodian shall credit such money to the separate account in
the name of the Series for which such money was received.

3. Upon issuance of any Shares of any Series described
in the foregoing provisions of this Article, the Custodian shall
pay, out of the money held for the account of such Series, all
original issue or other taxes required to be paid by the Fund in
connection with such issuance upon the receipt of a Certificate
specifying the amount to be paid.

4. Except as provided hereinafter, whenever the Fund
desires the Custodian to make payment out of the money held by
the Custodian hereunder in connection with a redemption of any
Shares, it shall furnish to the Custodian a Certificate
specifying:

(a) The number and Series of Shares redeemed; and

(b) The amount to be paid for such Shares.

5. Upon receipt from the Transfer Agent of an advice
setting forth the Series and number of Shares received by the
Transfer Agent for redemption and that such Shares are in good
form for redemption, the Custodian shall make payment to the
Transfer Agent out of the moneys held in the separate account in
the name of the Series the total amount specified in the
Certificate issued pursuant to the foregoing paragraph 4 of this
Article.

6. Notwithstanding the above provisions regarding the
redemption of any Shares, whenever any Shares are redeemed
pursuant to any check redemption privilege which may from time to
time be offered by the Fund, the Custodian, unless otherwise
instructed by a Certificate, shall, upon receipt of an advice
from the Fund or its agent setting forth that the redemption is
in good form for redemption in accordance with the check

<PAGE>

redemption procedure, honor the check presented as part of such
check redemption privilege out of the moneys held in the separate
account of the Series of the Shares being redeemed.

ARTICLE XIV.

OVERDRAFTS OR INDEBTEDNESS

1. If the Custodian, should in its sole discretion
advance funds on behalf of any Series which results in an
overdraft because the moneys held by the Custodian in the
separate account for such Series shall be insufficient to pay the
total amount payable upon a purchase of Securities specifically
allocated to such Series, as set forth in a Certificate or Oral
Instructions, or which results in an overdraft in the separate
account of such Series for some other reason, or if the Fund is
for any other reason indebted to the Custodian with respect to a
Series, including any indebtedness to The Bank of New York under
the Fund's Cash Management and Related Services Agreement,
(except a borrowing for investment or for temporary or emergency
purposes using Securities as collateral pursuant to a separate
agreement and subject to the provisions of paragraph 2 of this
Article), such overdraft or indebtedness shall be deemed to be a
loan made by the Custodian to the Fund for such Series payable on
demand and shall bear interest from the date incurred at a rate
per annum (based on a 360-day year for the actual number of days
involved) equal to 1/2% over Custodian's prime commercial lending
rate in effect from time to time, such rate to be adjusted on the
effective date of any change in such prime commercial lending
rate but in no event to be less than 6% per annum. In addition,
the Fund hereby agrees that the Custodian shall have a continuing
lien and security interest in and to any property specifically
allocated to such Series at any time held by it for the benefit
of such Series or in which the Fund may have an interest which is
then in the Custodian's possession or control or in possession or
control of any third party acting in the Custodian's behalf. The
Fund authorizes the Custodian, in its sole discretion, at any
time to charge any such overdraft or indebtedness together with
interest due thereon against any balance of account standing to
such Series' credit on the Custodian's books. In addition, the
Fund hereby covenants that on each Business Day on which either
it intends to enter a Reverse Repurchase Agreement and/ or
otherwise borrow from a third party, or which next succeeds a
Business Day on which at the close of business the Fund had
outstanding a Reverse Repurchase Agreement or such a borrowing,
it shall prior to 9 a.m., New York City time, advise the
Custodian, in writing, of each such borrowing, shall specify the
Series to which the same relates, and shall not incur any
indebtedness not so specified other than from the Custodian.

<PAGE>

2. The Fund will cause to be delivered to the
Custodian by any bank (including, if the borrowing is pursuant to
a separate agreement, the Custodian) from which it borrows money
for investment or for temporary or emergency purposes using
Securities held by the Custodian hereunder as collateral for such
borrowings, a notice or undertaking in the form currently
employed by any such bank setting forth the amount which such
bank will loan to the Fund against delivery of a stated amount of
collateral. The Fund shall promptly deliver to the Custodian a
Certificate specifying with respect to each such borrowing:
(a) the Series to which such borrowing relates, (b) the name of
the bank, (c) the amount and terms of the borrowing, which may be
set forth by incorporating by reference an attached promissory
note, duly endorsed by the Fund, or other loan agreement, (d) the
time and date, if known, on which the loan is to be entered into,
(e) the date on which the loan becomes due and payable, (f) the
total amount payable to the Fund on the borrowing date, (g) the
market value of Securities to be delivered as collateral for such
loan, including the name of the issuer, the title and the number
of shares or the principal amount of any particular Securities,
and (h) a statement specifying whether such loan is for
investment purposes or for temporary or emergency purposes and
that such loan is in conformance with the Investment Company Act
of 1940 and the Fund's prospectus. The Custodian shall deliver
on the borrowing date specified in a Certificate the specified
collateral and the executed promissory note, if any, against
delivery by the lending bank of the total amount of the loan
payable, provided that the same conforms to the total amount
payable as set forth in the Certificate. The Custodian may, at
the option of the lending bank, keep such collateral in its
possession, but such collateral shall be subject to all rights
therein given the lending bank by virtue of any promissory note
or loan agreement. The Custodian shall deliver such Securities
as additional collateral as may be specified in a Certificate to
collateralize further any transaction described in this
paragraph. The Fund shall cause all Securities released from
collateral status to be returned directly to the Custodian, and
the Custodian shall receive from time to time such return of
collateral as may be tendered to it. In the event that the Fund
fails to specify in a Certificate the Series, the name of the
issuer, the title and number of shares or the principal amount of
any particular Securities to be delivered as collateral by the
Custodian, the Custodian shall not be under any obligation to
deliver any Securities.

<PAGE>

ARTICLE XV.

INSTRUCTIONS

1. With respect to any software provided by the
Custodian to a Fund in order for the Fund to transmit
Instructions to the Custodian (the "Software"), the Custodian
grants to such Fund a personal, nontransferable and nonexclusive
license to use the Software solely for the purpose of
transmitting Instructions to, and receiving communications from,
the Custodian in connection with its account(s). The Fund agrees
not to sell, reproduce, lease or otherwise provide, directly or
indirectly, the Software or any portion thereof to any third
party without the prior written consent of the Custodian.

2. The Fund shall obtain and maintain at its own cost
and expense all equipment and services, including but not limited
to communications services, necessary for it to utilize the
Software and transmit Instructions to the Custodian. The
Custodian shall not be responsible for the reliability,
compatibility with the Software or availability of any such
equipment or services or the performance or nonperformance by any
nonparty to this Custody Agreement.

3. The Fund acknowledges that the Software, all data
bases made available to the Fund by utilizing the Software
9_other than data bases relating solely to the assets of the Fund
and transactions with respect thereto), and any proprietary data,
processes, information and documentation (other than which are or
become part of the public domain or are legally required to be
made available to the public) (collectively, the "Information"),
are the exclusive and confidential property of the Custodian.
The Fund shall keep the Information confidential by using the
same care and discretion that the Fund uses with respect to its
own confidential property and trade secrets and shall neither
make nor permit any disclosure without the prior written consent
of the Custodian. Upon termination of this Agreement or the
Software license granted hereunder for any reason, the Fund shall
return to the Custodian all copies of the Information which are
in its possession or under its control or which the Fund
distributed to third parties.

4. The Custodian reserves the right to modify the
Software from time to time upon reasonable prior notice and the
Fund shall install new releases of the Software as the Custodian
may direct. The Fund agrees not to modify or attempt to modify
the Software without the Custodian's prior written consent. The
Fund acknowledges that any modifications to the Software, whether
by the Fund or the Custodian and whether with or without the
Custodian's consent, shall become the property of the Custodian.

<PAGE>

5. The Custodian makes no warranties or
representations of any kind with regard to the Software or the
method(s) by which the Fund may transmit Instructions to the
Custodian, express or implied, including but not limited to any
implied warranties or merchantability or fitness for a particular
purpose.

6. Where the method for transmitting Instructions by
the Fund involves an automatic systems acknowledgment by the
Custodian of its receipt of such Instructions, then in the
absence of such acknowledgment the Custodian shall not be liable
for any failure to act pursuant to such Instructions, the Fund
may not claim that such Instructions were received by the
Custodian, and the Fund shall deliver a Certificate by some other
means.

7. (a) The Fund agrees that where it delivers to the
Custodian Instructions hereunder, it shall be the Fund's sole
responsibility to ensure that only persons duly authorized by the
Fund transmit such Instructions to the Custodian. The Fund will
cause all persons transmitting Instructions to the Custodian to
treat applicable user and authorization codes, passwords and
authentication keys with extreme care, and irrevocably authorizes
the Custodian to act in accordance with and rely upon
Instructions received by it pursuant hereto.

(b) The Fund hereby represents, acknowledges and
agrees that it is fully informed of the protections and risks
associated with the various methods of transmitting Instructions
to the Custodian and that there may be more secure methods of
transmitting instructions to the Custodian than the
method(s) selected by the Fund. The Fund hereby agrees that the
security procedures (if any) to be followed in connection with
the Fund's transmission of Instructions provide to it a
commercially reasonable degree of protection in light of its
particular needs and circumstances.

8. The Fund hereby presents, warrants and covenants to
the Custodian that this Agreement has been duly approved by a
resolution of its Board of Directors, and that its transmission
of Instructions pursuant hereto shall at all times comply with
the Investment Company Act of 1940, as amended.

9. The Fund shall notify the Custodian of any errors,
omissions or interruptions in, or delay or unavailability of, its
ability to send Instructions as promptly as practicable, and in
any event within 24 hours after the earliest of (i) discovery
thereof, (ii) the Business Day on which discovery should have
occurred through the exercise of reasonable care and (iii) in the
case of any error, the date of actual receipt of the earliest
notice which reflects such error, it being agreed that discovery

<PAGE>

and receipt of notice may only occur on a business day. The
Custodian shall promptly advise the Fund whenever the Custodian
learns of any errors, omissions or interruption in, or delay or
unavailability of, the Fund's ability to send Instructions.

ARTICLE XVI.

DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY
OF ANY SERIES HELD OUTSIDE OF THE UNITED STATES

1. The Custodian is authorized and instructed to
employ, as sub-custodian for each Series' Foreign Securities (as
such term is defined in paragraph (c)(1) of Rule 17f-5 under the
Investment Company Act of 1940, as amended) and other assets, the
foreign banking institutions and foreign securities depositories
and clearing agencies designated on Schedule I hereto ("Foreign
Sub-Custodians") to carry out their respective responsibilities
in accordance with the terms of the sub-custodian agreement
between each such Foreign Sub-Custodian and the Custodian, copies
of which have been previously delivered to the Fund and receipt
of which is hereby acknowledged (each such agreement, a "Foreign
Sub-Custodian Agreement"). Upon receipt of a Certificate,
together with a certified resolution substantially in the form
attached as Exhibit E of the Fund's Board of Directors, the Fund
may designate any additional foreign sub-custodian with which the
Custodian has an agreement for such entity to act as the
Custodian's agent, as its sub-custodian and any such additional
foreign sub-custodian shall be deemed added to Schedule I. Upon
receipt of a Certificate from the Fund, the Custodian shall cease
the employment of any one or more Foreign Sub-Custodians for
maintaining custody of the Fund's assets and such Foreign Sub-
Custodian shall be deemed deleted from Schedule I.

2. Each Foreign Sub-Custodian Agreement shall be
substantially in the form previously delivered to the Fund and
will not be amended in a way that materially adversely affects
the Fund without the Fund's prior written consent.

3. The Custodian shall identify on its books as
belonging to each Series of the Fund the Foreign Securities of
such Series held by each Foreign Sub-Custodian. At the election
of the Fund, it shall be entitled to be subrogated to the rights
of the Custodian with respect to any claims by the Fund or any
Series against a Foreign Sub-Custodian as a consequence of any
loss, damage, cost, expense, liability or claim sustained or
incurred by the Fund or any Series if and to the extent that the
Fund or such Series has not been made whole for any such loss,
damage, cost, expense, liability or claim.

4. Upon request of the Fund, the Custodian will,
consistent with the terms of the applicable Foreign Sub-Custodian

<PAGE>

Agreement, use reasonable efforts to arrange for the independent
accountants of the Fund to be afforded access to the books and
records of any Foreign Sub-Custodian insofar as such books and
records relate to the performance of such Foreign Sub-Custodian
under its agreement with the Custodian on behalf of the Fund.

5. The Custodian will supply to the Fund from time to
time, as mutually agreed upon, statements in respect of the
securities and other assets of each Series held by Foreign Sub-
Custodians, including but not limited to, an identification of
entities having possession of each Series' Foreign Securities and
other assets, and advices or notifications of any transfers of
Foreign Securities to or from each custodial account maintained
by a Foreign Sub-Custodian for the Custodian on behalf of the
Series.

6. The Custodian shall furnish annually to the Fund,
as mutually agreed upon, information concerning the Foreign Sub-
Custodians employed by the Custodian. Such information shall be
similar in kind and scope to that furnished to the Fund in
connection with the Fund's initial approval of such Foreign Sub-
Custodians and, in any event, shall include information
pertaining to (i) the Foreign Custodians' financial strength,
general reputation and standing in the countries in which they
are located and their ability to provide the custodial services
required, and (ii) whether the Foreign Sub-Custodians would
provide a level of safeguards for safekeeping and custody of
securities not materially different form those prevailing in the
United States. The Custodian shall monitor the general operating
performance of each Foreign Sub-Custodian. The Custodian agrees
that it will use reasonable care in monitoring compliance by each
Foreign Sub-Custodian with the terms of the relevant Foreign Sub-
Custodian Agreement and that if it learns of any breach of such
Foreign Sub-Custodian Agreement believed by the Custodian to have
a material adverse effect on the Fund or any Series it will
promptly notify the Fund of such breach. The Custodian also
agrees to use reasonable and diligent efforts to enforce its
rights under the relevant Foreign Sub-Custodian Agreement.

7. The Custodian shall transmit promptly to the Fund
all notices, reports or other written information received
pertaining to the Fund's Foreign Securities, including without
limitation, notices of corporate action, proxies and proxy
solicitation materials.

8. Notwithstanding any provision of this Agreement to
the contrary, settlement and payment for securities received for
the account of any Series and delivery of securities maintained
for the account of such Series may be effected in accordance with
the customary or established securities trading or securities
processing practices and procedures in the jurisdiction or market

<PAGE>

in which the transaction occurs, including, without limitation,
delivery of securities to the purchaser thereof or to a dealer
therefor (or an agent for such purchaser or dealer) against a
receipt with the expectation of receiving later payment for such
securities from such purchaser or dealer.

9. Notwithstanding any other provision in this
Agreement to the contrary, with respect to any losses or damages
arising out of or relating to any actions or omissions of any
Foreign Sub-Custodian the sole responsibility and liability of
the Custodian shall be to take appropriate action at the Fund's
expense to recover such loss or damage from the Foreign Sub-
Custodian. It is expressly understood and agreed that the
Custodian's sole responsibility and liability shall be limited to
amounts so recovered from the Foreign Sub-Custodian.

ARTICLE XVII.

FX TRANSACTIONS

1. Whenever the Fund shall enter into an FX
Transaction, the Fund shall promptly deliver to the Custodian a
Certificate or Oral Instructions specifying with respect to such
FX Transaction: (a) the Series to which such FX Transaction is
specifically allocated; (b) the type and amount of Currency to be
purchased by the Fund; (c) the type and amount of Currency to be
sold by the Fund; (d) the date on which the Currency to be
purchased is to be delivered; (e) the date on which the Currency
to be sold is to be delivered; and (f) the name of the person
from whom or through whom such currencies are to be purchased and
sold. Unless otherwise instructed by a Certificate or Oral
Instructions, the Custodian shall deliver, or shall instruct a
Foreign Sub-Custodian to deliver, the Currency to be sold on the
date on which such delivery is to be made, as set forth in the
Certificate, and shall receive, or instruct a Foreign Sub-
Custodian to receive, the Currency to be purchased on the date as
set forth in the Certificate.

2. Where the Currency to be sold is to be delivered on
the same day as the Currency to be purchased, as specified in the
Certificate or Oral Instructions, the Custodian or a Foreign Sub-
Custodian may arrange for such deliveries and receipts to be made
in accordance with the customs prevailing from time to time among
brokers or dealers in Currencies, and such receipt and delivery
may not be completed simultaneously. The Fund assumes all
responsibility and liability for all credit risks involved in
connection with such receipts and deliveries, which
responsibility and liability shall continue until the Currency to
be received by the Fund has been received in full.

<PAGE>

3. Any FX Transaction effected by the Custodian in
connection with this Agreement may be entered with the Custodian,
any office, branch or subsidiary of The Bank of New York Company,
Inc., or any Foreign Sub-Custodian acting as principal or
otherwise through customary banking channels. The Fund may issue
a standing Certificate with respect to FX Transaction but the
Custodian may establish rules or limitations concerning any
foreign exchange facility made available to the Fund. The Fund
shall bear all risks of investing in Securities or holding
Currency. Without limiting the foregoing, the Fund shall bear
the risks that rules or procedures imposed by a Foreign Sub-
Custodian or foreign depositories, exchange controls, asset
freezes or other laws, rules, regulations or orders shall
prohibit or impose burdens or costs on the transfer to, by or for
the account of the Fund of Securities or any cash held outside
the Fund's jurisdiction or denominated in Currency other than its
home jurisdiction or the conversion of cash from one Currency
into another currency. The Custodian shall not be obligated to
substitute another Currency for a Currency (including a Currency
that is a component of a Composite Currency Unit) whose
transferability, convertibility or availability has been affected
by such law, regulation, rule or procedure. Neither the
Custodian nor any Foreign Sub-Custodian shall be liable to the
Fund for any loss resulting from any of the foregoing events.

ARTICLE XVIII.

CONCERNING THE CUSTODIAN

1. Except as hereinafter provided, or as provided in
Article XVI, neither the Custodian nor its nominee shall be
liable for any loss or damage, including counsel fees, resulting
from its action or omission to act or otherwise, either hereunder
or under any Margin Account Agreement, except for any such loss
or damage arising out of its own negligence or willful
misconduct. In no event shall the Custodian be liable to the
Fund or any third party for special, indirect or consequential
damages or lost profits or loss of business, arising under or in
connection with this Agreement, even if previously informed of
the possibility of such damages and regardless of the form of
action. The Custodian may, with respect to questions of law
arising hereunder or under any Margin Account Agreement, apply
for and obtain the advice and opinion of counsel to the Fund or
of its own counsel, at the expense of the Fund, and shall be
fully protected with respect to anything done or omitted by it in
good faith in conformity with such advice or opinion. The
Custodian shall be liable to the Fund for any loss or damage
resulting from the use of the Book-Entry System or any Depository
arising by reason of any negligence or willful misconduct on the
part of the Custodian or any of its employees or agents.

<PAGE>

2. Without limiting the generality of the foregoing,
the Custodian shall be under no obligation to inquire into, and
shall not be liable for:

(a) The validity of the issue of any Securities
purchased, sold, or written by or for the Fund, the legality of
the purchase, sale or writing thereof, or the propriety of the
amount paid or received therefor;

(b) The legality of the sale or redemption of any
Shares, or the propriety of the amount to be received or paid
therefor;

(d) The legality of any borrowing by the Fund
using Securities as collateral;

(e) The legality of any loan of portfolio
Securities, nor shall the Custodian be under any duty or
obligation to see to it that any cash collateral delivered to it
by a broker, dealer, or financial institution or held by it at
any time as a result of such loan of portfolio Securities of the
Fund is adequate collateral for the Fund against any loss it
might sustain as a result of such loan. The Custodian
specifically, but not by way of limitation, shall not be under
any duty or obligation periodically to check or notify the Fund
that the amount of such cash collateral held by it for the Fund
is sufficient collateral for the Fund, but such duty or
obligation shall be the sole responsibility of the Fund. In
addition, the Custodian shall be under no duty or obligation to
see that any broker, dealer or financial institution to which
portfolio Securities of the Fund are lent pursuant to Article X
of this Agreement makes payment to it of any dividends or
interest which are payable to or for the account of the Fund
during the period of such loan or at the termination of such
loan, provided, however, that the Custodian shall promptly notify
the Fund in the event that such dividends or interest are not
paid and received when due; or

(f) The sufficiency or value of any amounts of
money and/or Securities held in any Margin Account, Senior
Security Account or Collateral Account in connection with
transactions by the Fund. In addition, the Custodian shall be
under no duty or obligation to see that any broker, dealer,
futures commission merchant or Clearing Member makes payment to
the Fund of any variation margin payment or similar payment which
the Fund may be entitled to receive from such broker, dealer,
futures commission merchant or Clearing Member, to see that any
payment received by the Custodian from any broker, dealer,

<PAGE>

futures commission merchant or Clearing Member is the amount the
Fund is entitled to receive, or to notify the Fund of the
Custodian's receipt or non-receipt of any such payment.

3. The Custodian shall not be liable for, or
considered to be the Custodian of, any money, whether or not
represented by any check, draft, or other instrument for the
payment of money, received by it on behalf of the Fund until the
Custodian actually receives and collects such money directly or
by the final crediting of the account representing the Fund's
interest at the Book-Entry System or the Depository.

4. The Custodian shall have no responsibility and
shall not be liable for ascertaining or acting upon any calls,
conversions, exchange offers, tenders, interest rate changes or
similar matters relating to Securities held in the Depository,
unless the Custodian shall have actually received timely notice
from the Depository. In no event shall the Custodian have any
responsibility or liability for the failure of the Depository to
collect, or for the late collection or late crediting by the
Depository of any amount payable upon Securities deposited in the
Depository which may mature or be redeemed, retired, called or
otherwise become payable. However, upon receipt of a Certificate
from the Fund of an overdue amount on Securities held in the
Depository the Custodian shall make a claim against the
Depository on behalf of the Fund, except that the Custodian shall
not be under any obligation to appear in, prosecute or defend any
action suit or proceeding in respect to any Securities held by
the Depository which in its opinion may involve it in expense or
liability, unless indemnity satisfactory to it against all
expense and liability be furnished as often as may be required.

5. The Custodian shall not be under any duty or
obligation to take action to effect collection of any amount due
to the Fund from the Transfer Agent of the Fund nor to take any
action to effect payment or distribution by the Transfer Agent of
the Fund of any amount paid by the Custodian to the Transfer
Agent of the Fund in accordance with this Agreement.

6. The Custodian shall not be under any duty or
obligation to take action to effect collection of any amount if
the Securities upon which such amount is payable are in default,
or if payment is refused after due demand or presentation, unless
and until (i) it shall be directed to take such action by a
Certificate and (ii) it shall be assured to its satisfaction of
reimbursement of its costs and expenses in connection with any
such action.

7. The Custodian may in addition to the employment of
Foreign Sub-Custodians pursuant to Article XVI appoint one or
more banking institutions as Depository or Depositories, as Sub-

<PAGE>

Custodian or Sub-Custodians, or as Co-Custodian or Co-Custodians
including, but not limited to, banking institutions located in
foreign countries, of Securities and moneys at any time owned by
the Fund, upon such terms and conditions as may be approved in a
Certificate or contained in an agreement executed by the
Custodian, the Fund and the appointed institution.

8. The Custodian shall not be under any duty or
obligation (a) to ascertain whether any Securities at any time
delivered to, or held by it or by any Foreign Sub-Custodian, for
the account of the Fund and specifically allocated to a Series
are such as properly may be held by the Fund or such Series under
the provisions of its then current prospectus, or (b) to
ascertain whether any transactions by the Fund, whether or not
involving the Custodian, are such transactions as may properly be
engaged in by the Fund.

9. The Custodian shall be entitled to receive and the
Fund agrees to pay to the Custodian all out-of-pocket expenses
and such compensation as may be agreed upon from time to time
between the Custodian and the Fund. The Custodian may charge
such compensation and any expenses with respect to a Series
incurred by the Custodian in the performance of its duties
pursuant to such agreement against any money specifically
allocated to such Series. Unless and until the Fund instructs
the Custodian by a Certificate to apportion any loss, damage,
liability or expense among the Series in a specified manner, the
Custodian shall also be entitled to charge against any money held
by it for the account of a Series such Series' pro rata share
(based on such Series net asset value at the time of the charge
to the aggregate net asset value of all Series at that time) of
the amount of any loss, damage, liability or expense, including
counsel fees, for which it shall be entitled to reimbursement
under the provisions of this Agreement. The expenses for which
the Custodian shall be entitled to reimbursement hereunder shall
include, but are not limited to, the expenses of sub-custodians
and foreign branches of the Custodian incurred in settling
outside of New York City transactions involving the purchase and
sale of Securities of the Fund.

10. The Custodian shall be entitled to rely upon any
Certificate, notice or other instrument in writing received by
the Custodian and reasonably believed by the Custodian to be a
Certificate. The Custodian shall be entitled to rely upon any
Oral Instructions actually received by the Custodian hereinabove
provided for. The Fund agrees to forward to the Custodian a
Certificate or facsimile thereof confirming such Oral
Instructions in such manner so that such Certificate or facsimile
thereof is received by the Custodian, whether by hand delivery,
telecopier or other similar device, or otherwise, by the close of
business of the same day that such Oral Instructions are given to

<PAGE>

the Custodian. The Fund agrees that the fact that such
confirming instructions are not received, or that contrary
instructions are received, by the Custodian shall in no way
affect the validity of the transactions or enforceability of the
transactions hereby authorized by the Fund. The Fund agrees that
the Custodian shall incur no liability to the Fund in acting upon
Oral Instructions given to the Custodian hereunder concerning
such transactions provided such instructions reasonably appear to
have been received from an Officer.

11. The Custodian shall be entitled to rely upon any
instrument, instruction or notice received by the Custodian and
reasonably believed by the Custodian to be given in accordance
with the terms and conditions of any Margin Account Agreement.
Without limiting the generality of the foregoing, the Custodian
shall be under no duty to inquire into, and shall not be liable
for, the accuracy of any statements or representations contained
in any such instrument or other notice including, without
limitation, any specification of any amount to be paid to a
broker, dealer, futures commission merchant or Clearing Member.

12. The books and records pertaining to the Fund which
are in the possession of the Custodian shall be the property of
the Fund. Such books and records shall be prepared and maintained
as required by the Investment Company Act of 1940, as amended,
and other applicable securities laws and rules and regulations.
The Fund, or the Fund's authorized representatives, shall have
access to such books and records during the Custodian's normal
business hours. Upon the reasonable request of the Fund, copies
of any such books and records shall be provided by the Custodian
to the Fund or the Fund's authorized representative, and the Fund
shall reimburse the Custodian its expenses of providing such
copies. Upon reasonable request of the Fund, the Custodian shall
provide in hard copy or on micro-film, whichever the Custodian
elects, any records included in any such delivery which are
maintained by the Custodian on a computer disc, or are similarly
maintained, and the Fund shall reimburse the Custodian for its
expenses of providing such hard copy or micro-film.

13. The Custodian shall provide the Fund with any
report obtained by the Custodian on the system of internal
accounting control of the Book-Entry System, the Depository or
O.C.C., and with such reports on its own systems of internal
accounting control as the Fund may reasonably request from time
to time.

14. The Fund agrees to indemnify the Custodian against
and save the Custodian harmless from all liability, claims,
losses and demands whatsoever, including attorney's fees,
howsoever arising or incurred because of or in connection with
this Agreement, including the Custodian's payment or non-payment

<PAGE>

of checks pursuant to paragraph 6 of Article XIII as part of any
check redemption privilege program of the Fund, except for any
such liability, claim, loss and demand arising out of the
Custodian's own negligence or willful misconduct.

15. Subject to the foregoing provisions of this
Agreement, including, without limitation, those contained in
Article XVI and XVII the Custodian may deliver and receive
Securities, and receipts with respect to such Securities, and
arrange for payments to be made and received by the Custodian in
accordance with the customs prevailing from time to time among
brokers or dealers in such Securities. When the Custodian is
instructed to deliver Securities against payment, delivery of
such Securities and receipt of payment therefor may not be
completed simultaneously. The Fund assumes all responsibility
and liability for all credit risks involved in connection with
the Custodian's delivery of Securities pursuant to instructions
of the Fund, which responsibility and liability shall continue
until final payment in full has been received by the Custodian.

16. The Custodian shall have no duties or responsibili-
ties whatsoever except such duties and responsibilities as are
specifically set forth in this Agreement, and no covenant or
obligation shall be implied in this Agreement against the
Custodian.

ARTICLE XIX.

TERMINATION

1. Either of the parties hereto may terminate this
Agreement by giving to the other party a notice in writing
specifying the date of such termination, which shall be not less
than ninety (90) days after the date of giving of such notice.
In the event such notice is given by the Fund, it shall be
accompanied by a copy of a resolution of the Board of Directors
of the Fund, certified by the Secretary or any Assistant
Secretary, electing to terminate this Agreement and designating a
successor custodian or custodians, each of which shall be a bank
or trust company having not less than $2,000,000 aggregate
capital, surplus and undivided profits. In the event such notice
is given by the Custodian, the Fund shall, on or before the
termination date, deliver to the Custodian a copy of a resolution
of the Board of Directors of the Fund, certified by the Secretary
or any Assistant Secretary, designating a successor custodian or
custodians. In the absence of such designation by the Fund, the
Custodian may designate a successor custodian which shall be a
bank or trust company having not less than $2,000,000 aggregate
capital, surplus and undivided profits. Upon the date set forth
in such notice this Agreement shall terminate, and the Custodian
shall upon receipt of a notice of acceptance by the successor

<PAGE>

custodian on that date deliver directly to the successor
custodian all Securities and moneys then owned by the Fund and
held by it as Custodian, after deducting all fees, expenses and
other amounts for the payment or reimbursement of which it shall
then be entitled.

2. If a successor custodian is not designated by the
Fund or the Custodian in accordance with the preceding paragraph,
the Fund shall upon the date specified in the notice of
termination of this Agreement and upon the delivery by the
Custodian of all Securities (other than Securities held in the
Book-Entry System which cannot be delivered to the Fund) and
moneys then owned by the Fund be deemed to be its own custodian
and the Custodian shall thereby be relieved of all duties and
responsibilities pursuant to this Agreement, other than the duty
with respect to Securities held in the Book Entry System which
cannot be delivered to the Fund to hold such Securities hereunder
in accordance with this Agreement.

ARTICLE XX.

MISCELLANEOUS

1. If a successor custodian is not designated by the
Annexed hereto as Appendix A is a Certificate signed by two of
the present Officers of the Fund under its seal, setting forth
the names and the signatures of the present Officers of the Fund.
The Fund agrees to furnish to the Custodian a new Certificate in
similar form in the event that any such present Officer ceases to
be an Officer of the Fund, or in the event that other or
additional Officers are elected or appointed. Until such new
Certificate shall be received, the Custodian shall be fully
protected in acting under the provisions of this Agreement or
Oral Instructions upon the signatures of the Officers as set
forth in the last delivered Certificate.

2. If a successor custodian is not designated by the
Any notice or other instrument in writing, authorized or required
by this Agreement to be given to the Custodian, shall be
sufficiently given if addressed to the Custodian and mailed or
delivered to it at its offices at 90 Washington Street, New York,
New York 10286, or at such other place as the Custodian may from
time to time designate in writing.

3. If a successor custodian is not designated by the
Any notice or other instrument in writing, authorized or required
by this Agreement to be given to the Fund shall be sufficiently
given if addressed to the Fund and mailed or delivered to it at
its office at the address for the Fund first above written, or at
such other place as the Fund may from time to time designate in
writing.

<PAGE>

4. If a successor custodian is not designated by the
This Agreement may not be amended or modified in any manner
except by a written agreement executed by both parties with the
same formality as this Agreement and approved by a resolution of
the Board of Directors of the Fund.

5. If a successor custodian is not designated by the
This Agreement shall extend to and shall be binding upon the
parties hereto, and their respective successors and assigns;
provided, however, that this Agreement shall not be assignable by
the Fund without the written consent of the Custodian, or by the
Custodian without the written consent of the Fund, authorized or
approved by a resolution of the Fund's Board of Directors.

6. If a successor custodian is not designated by the
This Agreement shall be construed in accordance with the laws of
the State of New York without giving effect to conflict of laws
principles thereof. Each party hereby consents to the
jurisdiction of a state or federal court situated in New York
City, New York in connection with any dispute arising hereunder
and hereby waives its right to trial by jury.

7. If a successor custodian is not designated by the
This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original, but such
counterparts shall, together, constitute only one instrument.

<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective Officers, thereunto
duly authorized and their respective seals to be hereunto
affixed, as of the day and year first above written.

ALLIANCE HIGH YIELD FUND

[SEAL] By: /s/ Edmund P. Bergan, Jr.
_________________________

Attest:

/s/ Lisette Rivera
_______________________

THE BANK OF NEW YORK

[SEAL] By: /s/ Jorge Ramos
__________________________
Name: Jorge Ramos
Title: Vice President

Attest:

/s/ Michael A. Cecero
_______________________

42
00250233.AE6

<PAGE>

APPENDIX A

I, _________________, and I, __________________ of
ALLIANCE HIGH YIELD FUND, a Maryland corporation (the "Fund"), do
hereby certify that:

The following individuals serve in the following
positions with the Fund and each has been duly elected or
appointed by the Board of Directors of the Fund to each such
position and qualified therefor in conformity with the Fund's
Articles of Incorporation and By-Laws, and the signatures set
forth opposite their respective names are their true and correct
signatures:

Name Position Signature

_________________ ________________ ________________

00250233.AE6

<PAGE>

APPENDIX B

SERIES

00250233.AE6

<PAGE>

APPENDIX C

I, Jorge Ramos, a Vice President with THE BANK OF NEW
YORK do hereby designate the following publications:

The Bond Buyer
Depository Trust Company Notices
Financial Daily Card Service
JJ Kenney Municipal Bond Service
London Financial Times
New York Times
Standard & Poor's Called Bond Record
Wall Street Journal

00250233.AE6

<PAGE>

EXHIBIT A

CERTIFICATION

The undersigned,_________________, hereby certifies that
he or she is the duly elected and acting _________________ of
ALLIANCE HIGH YIELD FUND, a Maryland corporation (the "Fund"),
and further certifies that the following resolution was adopted
by the Board of Directors of the Fund at a meeting duly held on
___________, 1997, at which a quorum was at all times present and
that such resolution has not been modified or rescinded and is in
full force and effect as of the date hereof.

RESOLVED, that The Bank of New York, as
Custodian pursuant to a Custody Agreement between
The Bank of New York and the Fund dated as of
________, 1997, (the "Custody Agreement") is
authorized and instructed on a continuous and
ongoing basis to deposit in the Book Entry System,
as defined in the Custody Agreement, all securities
eligible for deposit therein, regardless of the
Series to which the same are specifically
allocated, and to utilize the Book-Entry System to
the extent possible in connection with its
performance thereunder, including, without
limitation, in connection with settlements of
purchases and sales of securities, loans of
securities, and deliveries and returns of
securities collateral.

IN WITNESS WHEREOF, I have hereunto set my hand and the
seal of ALLIANCE HIGH YIELD FUND, as of the ____ day of _______,
1997.

[SEAL]

00250233.AE6

<PAGE>

EXHIBIT B

CERTIFICATION

The undersigned, ________________, hereby certifies that
he or she is the duly elected and acting ______________ of
ALLIANCE HIGH YIELD FUND, a Maryland corporation (the "Fund"),
and further certifies that the following resolution was adopted
by the Board of Directors of the Fund at a meeting duly held on
____________, 1997, at which a quorum was at all times present
and that such resolution has not been modified or rescinded and
is in full force and effect as of the date hereof.

RESOLVED, that The Bank of New York, as
Custodian pursuant to a Custody Agreement between
The Bank of New York and the Fund dated as of
_________, 1997, (the "Custody Agreement") is
authorized and instructed on a continuous and
ongoing basis until such time as it receives a
Certificate, as defined in the Custody Agreement,
to the contrary to deposit in the Depository, as
defined in the Custody Agreement, all securities
eligible for deposit therein, regardless of the
Series to which the same are specifically
allocated, and to utilize the Depository to the
extent possible in connection with its performance
thereunder, including, without limitation, in
connection with settlements of purchases and sales
of securities, loans of securities, and deliveries
and returns of securities collateral.

IN WITNESS WHEREOF, I have hereunto set my hand and the
seal of ALLIANCE HIGH YIELD FUND, as of the ____ day of
_________, 1997.

[SEAL]

00250233.AE6

<PAGE>

EXHIBIT B-1

CERTIFICATION

The undersigned, _________________, hereby certifies
that he or she is the duly elected and acting _____________ of
ALLIANCE HIGH YIELD FUND, a Maryland corporation (the "Fund"),
and further certifies that the following resolution was adopted
by the Board of Directors of the Fund at a meeting duly held on
__________, 1997, at which a quorum was at all times present and
that such resolution has not been modified or rescinded and is in
full force and effect as of the date hereof.

RESOLVED, that The Bank of New York, as
Custodian pursuant to a Custody Agreement between
The Bank of New York and the Fund dated as of
_________, 1997, (the "Custody Agreement") is
authorized and instructed on a continuous and
ongoing basis until such time as it receives a
Certificate, as defined in the Custody Agreement,
to the contrary to deposit in the Participants
Trust Company as Depository, as defined in the
Custody Agreement, all securities eligible for
deposit therein, regardless of the Series to which
the same are specifically allocated, and to utilize
the Participants Trust Company to the extent
possible in connection with its performance
thereunder, including, without limitation, in
connection with settlements of purchases and sales
of securities, loans of securities, and deliveries
and returns of securities collateral.

IN WITNESS WHEREOF, I have hereunto set my hand and the
seal of ALLIANCE HIGH YIELD FUND, as of the ____ day of _______,
1997.

[SEAL]

00250233.AE6

<PAGE>

EXHIBIT C

CERTIFICATION

The undersigned, ___________________, hereby certifies
that he or she is the duly elected and acting ______________ of
ALLIANCE HIGH YIELD FUND, a Maryland corporation (the "Fund"),
and further certifies that the following resolution was adopted
by the Board of Directors of the Fund at a meeting duly held on
__________, 1997, at which a quorum was at all times present and
that such resolution has not been modified or rescinded and is in
full force and effect as of the date hereof.

RESOLVED, that The Bank of New York, as
Custodian pursuant to a Custody Agreement between
The Bank of New York and the Fund dated as of
_________, 1997, (the "Custody Agreement") is
authorized and instructed on a continuous and
ongoing basis until such time as it receives a
Certificate, as defined in the Custody Agreement,
to the contrary, to accept, utilize and act with
respect to Clearing Member confirmations for
Options and transaction in Options, regardless of
the Series to which the same are specifically
allocated, as such terms are defined in the Custody
Agreement, as provided in the Custody Agreement.

IN WITNESS WHEREOF, I have hereunto set my hand and the
seal of ALLIANCE HIGH YIELD FUND, as of the ____ day of
_________, 1997.

[SEAL]

00250233.AE6

<PAGE>

EXHIBIT D

The undersigned, _______________, hereby certifies that
he or she is the duly elected and acting _____________ of
ALLIANCE HIGH YIELD FUND, a Maryland corporation (the "Fund"),
further certifies that the following resolutions were adopted by
the Board of Directors of the Fund at a meeting duly held on
___________, 1997, at which a quorum was at all times present and
that such resolutions have not been modified or rescinded and are
in full force and effect as of the date hereof.

RESOLVED, that The Bank of New York, as
Custodian pursuant to the Custody Agreement between
The Bank of New York and the Fund dated as of
________, 1997 (the "Custody Agreement") is
authorized and instructed on a continuous and
ongoing basis to act in accordance with, and to
rely on Instructions (as defined in the Custody
Agreement).

RESOLVED, that the Fund shall establish access
codes and grant use of such access codes only to
Officers of the Fund as defined in the Custody
Agreement, shall establish internal safekeeping
procedures to safeguard and protect the
confidentiality and availability of user and access
codes, passwords and authentication keys, and shall
use Instructions only in a manner that does not
contravene the Investment Company Act of 1940, as
amended, or the rules and regulations thereunder.

IN WITNESS WHEREOF, I have hereunto set my hand and the
seal of ALLIANCE HIGH YIELD FUND, as of the ____ day of ______,
1997.

[SEAL]

00250233.AE6

<PAGE>

EXHIBIT E

The undersigned, ________________, hereby certifies that
he or she is the duly elected and acting ______________ of
ALLIANCE HIGH YIELD FUND, a Maryland corporation (the "Fund"),
further certifies that the following resolutions were adopted by
the Board of Directors of the Fund at a meeting duly held on
____________, 1997, at which a quorum was at all times present
and that such resolutions have not been modified or rescinded and
are in full force and effect as of the date hereof.

RESOLVED, that the maintenance of the Fund's
assets in each country listed in Schedule I hereto
be, and hereby is, approved by the Board of
Directors as consistent with the best interests of
the Fund and its shareholders; and further

RESOLVED, that the maintenance of the Fund's
assets with the foreign branches of The Bank of New
York (the "Bank") listed in Schedule I located in
the countries specified therein, and with the
foreign sub-custodians and depositories listed in
Schedule I located in the countries specified
therein be, and hereby is, approved by the Board of
Directors as consistent with the best interest of
the Fund and its shareholders; and further

RESOLVED, that the Sub-Custodian Agreements
presented to this meeting between the Bank and each
of the foreign sub-custodians and depositories
listed in Schedule I providing for the maintenance
of the Fund's assets with the applicable entity, be
and hereby are, approved by the Board of Directors
as consistent with the best interests of the Fund
and its shareholders; and further

RESOLVED, that the appropriate officers of the
Fund are hereby authorized to place assets of the
Fund with the aforementioned foreign branches and
foreign sub custodians and depositories as
hereinabove provided; and further

<PAGE>

RESOLVED, that the appropriate officers of the
Fund, or any of them, are authorized to do any and
all other acts, in the name of the Fund and on its
behalf, as they, or any of them, may determine to
be necessary or desirable and proper in connection
with or in furtherance of the foregoing
resolutions.

IN WITNESS WHEREOF, I hereunto set my hand and the seal
of ALLIANCE HIGH YIELD FUND, as of the day of ________, 1997.

[SEAL]

2
00250233.AE6

<PAGE>

ALLIANCE HIGH YIELD FUND, INC.

TRANSFER AGENCY AGREEMENT

AGREEMENT, dated as of February 25, 1997, between

ALLIANCE HIGH YIELD FUND, INC., a Maryland Corporation and an

open-end investment company registered with the Securities and

Exchange Commission (the "SEC") under the Investment Company Act

of 1940 (the "Investment Company Act"), having its principal

place of business at 1345 Avenue of Americas, New York, New York

10105 (the "Fund"), and ALLIANCE FUND SERVICES, INC., a Delaware

corporation registered with the SEC as a transfer agent under the

Securities Exchange Act of 1934, having its principal place of

business at 500 Plaza Drive, Secaucus, New Jersey 07094 ("Fund

Services"), provides as follows:

WHEREAS, Fund Services has agreed to act as transfer

agent to the Fund for the purpose of recording the transfer,

issuance and redemption of shares of each series of the shares of

[common stock] of the Fund ("Shares" or "Shares of a Series"),

transferring the Shares, disbursing dividends and other

distributions to shareholders of the Fund, and performing such

other services as may be agreed to pursuant hereto;

NOW THEREFORE, for and in consideration of the mutual

covenants and agreements contained herein, the parties do hereby

agree as follows:

SECTION 1. The Fund hereby appoints Fund Services as

its transfer agent, dividend disbursing agent and shareholder

<PAGE>

servicing agent for the Shares, and Fund Services agrees to act

in such capacities upon the terms set forth in this Agreement.

Capitalized terms used in this Agreement and not otherwise

defined shall have the meanings assigned to them in SECTION 30.

SECTION 2.

(a) The Fund shall provide Fund Services with copies

of the following documents:

(1) Specimens of all forms of certificates for Shares;

(2) Specimens of all account application forms and

other documents relating to Shareholders' accounts;

(3) Copies of each Prospectus;

(4) Specimens of all documents relating to withdrawal

plans instituted by the Fund, as described in SECTION 16; and

(5) Specimens of all amendments to any of the

foregoing documents.

(b) The Fund shall furnish to Fund Services a supply

of blank Share Certificates for the Shares and, from time to

time, will renew such supply upon Fund Services' request. Blank

Share Certificates shall be signed manually or by facsimile

signatures of officers of the Fund authorized to sign by law or

pursuant to the by-laws of the Fund and, if required by Fund

Services, shall bear the Fund's seal or a facsimile thereof.

SECTION 3. Fund Services shall make original issues of

Shares in accordance with SECTIONS 13 and 14 and the Prospectus

upon receipt of (i) written Instructions requesting the issuance,

<PAGE>

(ii) a certified copy of a resolution of the Fund's Directors

authorizing the issuance, (iii) necessary funds for the payment

of any original issue tax applicable to such Shares, and (iv) an

opinion of the Fund's counsel as to the legality and validity of

the issuance, which opinion may provide that it is contingent

upon the filing by the Fund of an appropriate notice with the

SEC, as required by Rule 24f-2 of the Investment Company Act, as

amended from time to time.

SECTION 4. Transfers of Shares shall be registered and,

subject to the provisions of SECTION 10 in the case of Shares

evidenced by Share Certificates, new Share Certificates shall be

issued by Fund Services upon surrender of outstanding Share

Certificates in the form deemed by Fund Services to be properly

endorsed for transfer, which form shall include (i) all necessary

endorsers' signatures guaranteed by a member firm of a national

securities exchange or a domestic commercial bank or through

other procedures mutually agreed to between the Fund and Fund

Services, (ii) such assurances as Fund Services may deem

necessary to evidence the genuineness and effectiveness of each

endorsement and (iii) satisfactory evidence of compliance with

all applicable laws relating to the payment or collection of

taxes.

SECTION 5. Fund Services shall forward Share

Certificates in "non-negotiable" form by first-class or

registered mail, or by whatever means Fund Services deems equally

<PAGE>

reliable and expeditious. While in transit to the addressee, all

deliveries of Share Certificates shall be insured by Fund

Services as it deems appropriate. Fund Services shall not mail

Share Certificates in "negotiable" form, unless requested in

writing by the Fund and fully indemnified by the Fund to Fund

Services' satisfaction.

SECTION 6. In registering transfers of Shares, Fund

Services may rely upon the Uniform Commercial Code as in effect

from time to time in the State in which the Fund is incorporated

or organized or, if appropriate, in the State of New Jersey;

provided, that Fund Services may rely in addition or

alternatively on any other statutes in effect in the State of New

Jersey or in the state under the laws of which the Fund is

incorporated or organized that, in the opinion of Fund Services'

counsel, protect Fund Services and the Fund from liability

arising from (i) not requiring complete documentation in

connection with an issuance or transfer, (ii) registering a

transfer without an adverse claim inquiry, (iii) delaying

registration for purposes of an adverse claim inquiry or

(iv) refusing registration in connection with an adverse claim.

SECTION 7. Fund Services may issue new Share

Certificates in place of those lost, destroyed or stolen, upon

receiving indemnity satisfactory to Fund Services; and may issue

new Share Certificates in exchange for, and upon surrender of,

mutilated Share Certificates as Fund Services deems appropriate.

<PAGE>

SECTION 8. Unless otherwise directed by the Fund, Fund

Services may issue or register Share Certificates reflecting the

signature, or facsimile thereof, of an officer who has died,

resigned or been removed by the Fund. The Fund shall file

promptly with Fund Services' approval, adoption or ratification

of such action as may be required by law or by Fund Services.

SECTION 9. Fund Services shall maintain customary stock

registry records for Shares of each Series noting the issuance,

transfer or redemption of Shares and the issuance and transfer of

Share Certificates. Fund Services may also maintain for Shares

of each Series an account entitled "Unissued Certificate

Account," in which Fund Services will record the Shares, and

fractions thereof, issued and outstanding from time to time for

which issuance of Share Certificates has not been requested.

Fund Services is authorized to keep records for Shares of each

Series containing the names and addresses of record of

Shareholders, and the number of Shares, and fractions thereof,

from time to time owned by them for which no Share Certificates

are outstanding. Each Shareholder will be assigned a single

account number for Shares of each Series, even though Shares for

which Certificates have been issued will be accounted for

separately.

SECTION 10. Fund Services shall issue Share

Certificates for Shares only upon receipt of a written request

from a Shareholder and as authorized by the Fund. If Shares are

<PAGE>

purchased or transferred without a request for the issuance of a

Share Certificate, Fund Services shall merely note on its stock

registry records the issuance or transfer of the Shares and

fractions thereof and credit or debit, as appropriate, the

Unissued Certificate Account and the respective Shareholders'

accounts with the Shares. Whenever Shares, and fractions

thereof, owned by Shareholders are surrendered for redemption,

Fund Services may process the transactions by making appropriate

entries in the stock transfer records, and debiting the Unissued

Certificate Account and the record of issued Shares outstanding;

it shall be unnecessary for Fund Services to reissue Share

Certificates in the name of the Fund.

SECTION 11. Fund Services shall also perform the usual

duties and function required of a stock transfer agent for a

corporation, including but not limited to (i) issuing Share

Certificates as treasury Shares, as directed by Written

Instructions, and (ii) transferring Share Certificates from one

Shareholder to another in the usual manner. Fund Services may

rely conclusively and act without further investigation upon any

list, instruction, certification, authorization, Share

Certificate or other instrument or paper reasonably believed by

it in good faith to be genuine and unaltered, and to have been

signed, countersigned or executed or authorized by a duly-

authorized person or persons, or by the Fund, or upon the advice

of counsel for the Fund or for Fund Services. Fund Services may

<PAGE>

record any transfer of Share Certificates which it reasonably

believes in good faith to have been duly authorized, or may

refuse to record any transfer of Share Certificates if, in good

faith, it reasonably deems such refusal necessary in order to

avoid any liability on the part of either the Fund or Fund

Services.

SECTION 12. Fund Services shall notify the Fund of any

request or demand for the inspection of the Fund's share records.

Fund Services shall abide by the Fund's instructions for granting

or denying the inspection; provided, however, Fund Services may

grant the inspection without such instructions if it is advised

by its counsel that failure to do so will result in liability to

Fund Services.

SECTION 13. Fund Services shall observe the following

procedures in handling funds received:

(a) Upon receipt at the office designated by the Fund

of any check or other order drawn or endorsed to the Fund or

otherwise identified as being for the account of the Fund, and,

in the case of a new account, accompanied by a new account

application or sufficient information to establish an account as

provided in the Prospectus, Fund Services shall stamp the

transmittal document accompanying such check or other order with

the name of the Fund and the time and date of receipt and shall

forthwith deposit the proceeds thereof in the custodial account

of the Fund.

<PAGE>

(b) In the event that any check or other order for the

purchase of Shares is returned unpaid for any reason, Fund

Services shall, in the absence of other instructions from the

Fund, advise the Fund of the returned check and prepare such

documents and information as may be necessary to cancel promptly

any Shares purchased on the basis of such returned check and any

accumulated income dividends and capital gains distributions paid

on such Shares.

or at such other times as the Fund may specify in Written or Oral

Instructions for any Series (the "Valuation Time") on each

Business Day, Fund Services shall obtain from the Fund's Adviser

a quotation (on which it may conclusively rely) of the net asset

value, determined as of the Valuation Time on that day. On each

Business Day, Fund Services shall use the net asset value(s)

determined by the Fund's Adviser to compute the number of Shares

and fractional Shares to be purchased and the aggregate purchase

proceeds to be deposited with the Custodian. As necessary but no

more frequently than daily (unless a more frequent basis is

agreed to by Fund Services), Fund Services shall place a purchase

order with the Custodian for the proper number of Shares and

fractional Shares to be purchased and promptly thereafter shall

send written confirmation of such purchase to the Custodian and

the Fund.

<PAGE>

SECTION 14. Having made the calculations required by

SECTION 13, Fund Services shall thereupon pay the Custodian the

aggregate net asset value of the Shares purchased. The aggregate

number of Shares and fractional Shares purchased shall then be

issued daily and credited by Fund Services to the Unissued

Certificate Account. Fund Services shall also credit each

Shareholder's separate account with the number of Shares

purchased by such Shareholder. Fund Services shall mail written

confirmation of the purchase to each Shareholder or the

Shareholder's representative and to the Fund if requested. Each

confirmation shall indicate the prior Share balance, the new

Share balance, the Shares for which Stock Certificates are

outstanding (if any), the amount invested and the price paid for

the newly-purchased Shares.

SECTION 15. Prior to the Valuation Time on each

Business Day, as specified in accordance with SECTION 13, Fund

Services shall process all requests to redeem Shares and, with

respect to each Series, shall advise the Custodian of (i) the

total number of Shares available for redemption and (ii) the

number of Shares and fractional Shares requested to be redeemed.

Upon confirmation of the net asset value by the Fund's Adviser,

Fund Services shall notify the Fund and the Custodian of the

redemption, apply the redemption proceeds in accordance with

SECTION 16 and the Prospectus, record the redemption in the stock

registry books, and debit the redeemed Shares from the Unissued

<PAGE>

Certificates Account and the individual account of the

Shareholder.

In lieu of carrying out the redemption procedures

described in the preceding paragraph, Fund Services may, at the

request of the Fund, sell Shares to the Fund as repurchases from

Shareholders, provided that the sale price is not less than the

applicable redemption price. The redemption procedures shall

then be appropriately modified.

SECTION 16. Fund Services will carry out the following

procedures with respect to Share redemptions:

(a) As to each request received by the Fund from or on

behalf of a Shareholder for the redemption of Shares, and unless

the right of redemption has been suspended as contemplated by the

Prospectus, Fund Services shall, within seven days after receipt

of such redemption request, either (i) mail a check in the amount

of the proceeds of such redemption to the person designated by

the Shareholder or other person to receive such proceeds or,

(ii) in the event redemption proceeds are to be wired through the

Federal Reserve Wire System or by bank wire pursuant to

procedures described in the Prospectus, cause such proceeds to be

wired in Federal funds to the bank or trust company account

designated by the Shareholder to receive such proceeds. Fund

Services shall also prepare and send a confirmation of such

redemption to the Shareholder. Redemptions in kind shall be made

only in accordance with such Written Instructions as Fund

<PAGE>

Services may receive from the Fund. The requirements as to

instruments of transfer and other documentation, the

determination of the appropriate redemption price and the time of

payment shall be as provided in the Prospectus, subject to such

additional requirements consistent therewith as may be

established by mutual agreement between the Fund and Fund

Services. In the case of a request for redemption that does not

comply in all respects with the requirements for redemption, Fund

Services shall promptly so notify the Shareholder and shall

effect such redemption at the price in effect at the time of

receipt of documents complying with such requirements. Fund

Services shall notify the Fund's Custodian and the Fund on each

Business Day of the amount of cash required to meet payments made

pursuant to the provisions of this paragraph and thereupon the

Fund shall instruct the Custodian to make available to Fund

Services in timely fashion sufficient funds therefor.

(b) Procedures and standards for effecting and

accepting redemption orders from Shareholders by telephone or by

such check writing service as the Fund may institute may be

established by mutual agreement between Fund Services and the

Fund consistent with the Prospectus.

been purchased by check within fifteen (15) days prior to receipt

of the redemption request, the Fund shall provide Fund Services

<PAGE>

with Written Instructions concerning the time within which such

requests may be honored.

(d) Fund Services shall process withdrawal orders duly

executed by Shareholders in accordance with the terms of any

withdrawal plan instituted by the Fund and described in the

Prospectus. Payments upon such withdrawal orders and redemptions

of Shares held in withdrawal plan accounts in connection with

such payments shall be made at such times as the Fund may

determine in accordance with the Prospectus.

(e) The authority of Fund Services to perform its

responsibilities under SECTIONS 15 and 16 with respect to the

Shares of any Series shall be suspended if Fund Services receives

notice of the suspension of the determination of the net asset

value of the Series.

SECTION 17. Upon the declaration of each dividend and

each capital gains distribution by the Fund's Directors, the Fund

shall notify Fund Services of the date of such declaration, the

amount payable per Share, the record date for determining the

Shareholders entitled to payment, the payment and the

reinvestment date price.

SECTION 18. Upon being advised by the Fund of the

declaration of any income dividend or capital gains distribution

on account of its Shares, Fund Services shall compute and prepare

for the Fund records crediting such distributions to

Shareholders. Fund Services shall, on or before the payment date

<PAGE>

of any dividend or distribution, notify the Fund and the

Custodian of the estimated amount required to pay any portion of

a dividend or distribution which is payable in cash, and

thereupon the Fund shall, on or before the payment date of such

dividend or distribution, instruct the Custodian to make

available to Fund Services sufficient funds for the payment of

such cash amount. Fund Services will, on the designated payment

date, reinvest all dividends in additional shares and promptly

mail to each Shareholder at his address of record a statement

showing the number of full and fractional Shares (rounded to

three decimal places) then owned by the Shareholder and the net

asset value of such Shares; provided, however, that if a

Shareholder elects to receive dividends in cash, Fund Services

shall prepare a check in the appropriate amount and mail it to

the Shareholder at his address of record within five (5) business

days after the designated payment date, or transmit the

appropriate amount in Federal funds in accordance with the

Shareholder's agreement with the Fund.

SECTION 19. Fund Services shall prepare and maintain

for the Fund records showing for each Shareholder's account the

following:

A. The name, address and tax identification number of

the Shareholder;

B. The number of Shares of each Series held by the

Shareholder;

<PAGE>

C. Historical information including dividends paid

and date and price for all transactions;

D. Any stop or restraining order placed against such

account;

E. Information with respect to the withholding of any

portion of income dividends or capital gains distributions as are

required to be withheld under applicable law;

F. Any dividend or distribution reinvestment

election, withdrawal plan application, and correspondence

relating to the current maintenance of the account;

G. The certificate numbers and denominations of any

Share Certificates issued to the Shareholder; and

H. Any additional information required by Fund

Services to perform the services contemplated by this Agreement.

Fund Services agrees to make available upon request by

the Fund or the Fund's Adviser and to preserve for the periods

prescribed in Rule 31a-2 of the Investment Company Act any

records related to services provided under this Agreement and

required to be maintained by Rule 31a-1 of that Act, including:

(i) Copies of the daily transaction register for each

Business Day of the Fund;

(ii) Copies of all dividend, distribution and

reinvestment blotters;

(iii) Schedules of the quantities of Shares of each

Series distributed in each state for purposes of any state's laws

<PAGE>

or regulations as specified in Oral or Written Instructions given

to Fund Services from time to time by the Fund or its agents; and

(iv) Such other information, including Shareholder

lists, and statistical information as may be agreed upon from

time to time by the Fund and Fund Services.

SECTION 20. Fund Services shall maintain those records

necessary to enable the Fund to file, in a timely manner, form

N-SAR (Semi-Annual Report) or any successor report required by

the Investment Company Act or rules and regulations thereunder.

SECTION 21. Fund Services shall cooperate with the

Fund's independent public accountants and shall take reasonable

action to make all necessary information available to such

accountants for the performance of their duties.

SECTION 22. In addition to the services described

above, Fund Services will perform other services for the Fund as

may be mutually agreed upon in writing from time to time, which

may include preparing and filing Federal tax forms with the

Internal Revenue Service, and, subject to supervisory oversight

by the Fund's Adviser, mailing Federal tax information to

Shareholders, mailing semi-annual Shareholder reports, preparing

the annual list of Shareholders, mailing notices of Shareholders'

meetings, proxies and proxy statements and tabulating proxies.

Fund Services shall answer the inquiries of certain Shareholders

related to their share accounts and other correspondence

requiring an answer from the Fund. Fund Services shall maintain

<PAGE>

dated copies of written communications from Shareholders, and

replies thereto.

SECTION 23. Nothing contained in this Agreement is

intended to or shall require Fund Services, in any capacity

hereunder, to perform any functions or duties on any day other

than a Business Day. Functions or duties normally scheduled to

be performed on any day which is not a Business Day shall be

performed on, and as of, the next Business Day, unless otherwise

required by law.

SECTION 24. For the services rendered by Fund Services

as described above, the Fund shall pay to Fund Services an

annualized fee at a rate to be mutually agreed upon from time to

time. Such fee shall be prorated for the months in which this

Agreement becomes effective or is terminated. In addition, the

Fund shall pay, or Fund Services shall be reimbursed for, all

out-of-pocket expenses incurred in the performance of this

Agreement, including but not limited to the cost of stationery,

forms, supplies, blank checks, stock certificates, proxies and

proxy solicitation and tabulation costs, all forms and statements

used by Fund Services in communicating with Shareholders of the

Fund or especially prepared for use in connection with its

services hereunder, specific software enhancements as requested

by the Fund, costs associated with maintaining withholding

accounts (including non-resident alien, Federal government and

state), postage, telephone, telegraph (or similar electronic

<PAGE>

media) used in communicating with Shareholders or their

representatives, outside mailing services, microfiche/microfilm,

freight charges and off-site record storage. It is agreed in

this regard that Fund Services, prior to ordering any form in

such supply as it estimates will be adequate for more than two

years' use, shall obtain the written consent of the Fund. All

forms for which Fund Services has received reimbursement from the

Fund shall be the property of the Fund.

SECTION 25. Fund Services shall not be liable for any

taxes, assessments or governmental charges that may be levied or

assessed on any basis whatsoever in connection with the Fund or

any Shareholder, excluding taxes assessed against Fund Services

for compensation received by it hereunder.

SECTION 26.

(a) Fund Services shall at all times act in good faith

and with reasonable care in performing the services to be

provided by it under this Agreement, but shall not be liable for

any loss or damage unless such loss or damage is caused by the

negligence, bad faith or willful misconduct of Fund Services or

its employees or agents.

(b) The Fund shall indemnify and hold Fund Services

harmless from all loss, cost, damage and expense, including

reasonable expenses for counsel, incurred by it resulting from

any claim, demand, action or suit in connection with the

performance of its duties hereunder, or as a result of acting

<PAGE>

upon any instruction reasonably believed by it to have been

properly given by a duly authorized officer of the Fund, or upon

any information, data, records or documents provided to Fund

Services or its agents by computer tape, telex, CRT data entry or

other similar means authorized by the Fund; provided that this

indemnification shall not apply to actions or omissions of Fund

Services in cases of its own bad faith, willful misconduct or

negligence, and provided further that if in any case the Fund may

be asked to indemnify or hold Fund Services harmless pursuant to

this Section, the Fund shall have been fully and promptly advised

by Fund Services of all material facts concerning the situation

in question. The Fund shall have the option to defend Fund

Services against any claim which may be the subject of this

indemnification, and in the event that the Fund so elects it will

so notify Fund Services, and thereupon the Fund shall retain

competent counsel to undertake defense of the claim, and Fund

Services shall in such situations incur no further legal or other

expenses for which it may seek indemnification under this

paragraph. Fund Services shall in no case confess any claim or

make any compromise in any case in which the Fund may be asked to

indemnify Fund Services except with the Fund's prior written

consent.

<PAGE>

Without limiting the foregoing:

(i) Fund Services may rely upon the advice of the Fund

or counsel to the Fund or Fund Services, and upon statements of

accountants, brokers and other persons believed by Fund Services

in good faith to be expert in the matters upon which they are

consulted. Fund Services shall not be liable for any action

taken in good faith reliance upon such advice or statements;

(ii) Fund Services shall not be liable for any action

reasonably taken in good faith reliance upon any Written

Instructions or certified copy of any resolution of the Fund's

Directors, including a Written Instruction authorizing Fund

Services to make payment upon redemption of Shares without a

signature guarantee; provided, however, that upon receipt of a

Written Instruction countermanding a prior Instruction that has

not been fully executed by Fund Services, Fund Services shall

verify the content of the second Instruction and honor it, to the

extent possible. Fund Services may rely upon the genuineness of

any such document, or copy thereof, reasonably believed by Fund

Services in good faith to have been validly executed;

(iii) Fund Services may rely, and shall be protected by

the Fund in acting, upon any signature, instruction, request,

letter of transmittal, certificate, opinion of counsel,

statement, instrument, report, notice, consent, order, or other

paper or document reasonably believed by it in good faith to be

<PAGE>

genuine and to have been signed or presented by the purchaser,

the Fund or other proper party or parties; and

(d) Fund Services may, with the consent of the Fund,

subcontract the performance of any portion of any service to be

provided hereunder, including with respect to any Shareholder or

group of Shareholders, to any agent of Fund Services and may

reimburse the agent for the services it performs at such rates as

Fund Services may determine; provided that no such reimbursement

will increase the amount payable by the Fund pursuant to this

Agreement; and provided further, that Fund Services shall remain

ultimately responsible as transfer agent to the Fund.

SECTION 27. The Fund shall deliver or cause to be

delivered over to Fund Services (i) an accurate list of

Shareholders, showing each Shareholder's address of record,

number of Shares of each Series owned and whether such Shares are

represented by outstanding Share Certificates or by non-

certificated Share accounts and (ii) all Shareholder records,

files, and other materials necessary or appropriate for proper

performance of the functions assumed under this Agreement

(collectively referred to as the "Materials"). The Fund shall

indemnify Fund Services and hold it harmless from any and all

expenses, damages, claims, suits, liabilities, actions, demands

and losses arising out of or in connection with any error,

omission, inaccuracy or other deficiency of such Materials, or

out of the failure of the Fund to provide any portion of the

<PAGE>

Materials or to provide any information in the Fund's possession

needed by Fund Services to knowledgeably perform its functions;

provided the Fund shall have no obligation to indemnify Fund

Services or hold it harmless with respect to any expenses,

damages, claims, suits, liabilities, actions, demands or losses

caused directly or indirectly by acts or omissions of Fund

Services or the Fund's Adviser.

SECTION 28. This Agreement may be amended from time to

time by a written supplemental agreement executed by the Fund and

Fund Services and without notice to or approval of the

Shareholders; provided this Agreement may not be amended in any

manner which would substantially increase the Fund's obligations

hereunder unless the amendment is first approved by the Fund's

Directors, including a majority of the Directors who are not a

party to this Agreement or interested persons of any such party,

at a meeting called for such purpose, and thereafter is approved

by the Fund's Shareholders if such approval is required under the

Investment Company Act or the rules and regulations thereunder.

The parties hereto may adopt procedures as may be appropriate or

practical under the circumstances, and Fund Services may

conclusively rely on the determination of the Fund that any

procedure that has been approved by the Fund does not conflict

with or violate any requirement of its Articles of Incorporation

or Declaration of Trust, By-Laws or Prospectus, or any rule,

regulation or requirement of any regulatory body.

<PAGE>

SECTION 29. The Fund shall file with Fund Services a

certified copy of each operative resolution of its Directors

authorizing the execution of Written Instructions or the

transmittal of Oral Instructions and setting forth authentic

signatures of all signatories authorized to sign on behalf of the

Fund and specifying the person or persons authorized to give Oral

Instructions on behalf of the Fund. Such resolution shall

constitute conclusive evidence of the authority of the person or

persons designated therein to act and shall be considered in full

force and effect, with Fund Services fully protected in acting in

reliance therein, until Fund Services receives a certified copy

of a replacement resolution adding or deleting a person or

persons authorized to give Written or Oral Instructions. If the

officer certifying the resolution is authorized to give Oral

Instructions, the certification shall also be signed by a second

officer of the Fund.

SECTION 30. The terms, as defined in this Section,

whenever used in this Agreement or in any amendment or supplement

hereto, shall have the meanings specified below, insofar as the

context will allow.

(a) Business Day: Any day on which the Fund is open

for business as described in the Prospectus.

(b) Custodian: The term Custodian shall mean the

Fund's current custodian or any successor custodian acting as

such for the Fund.

<PAGE>

mean Alliance Capital Management L.P. or any successor thereto

who acts as the investment adviser or manager of the Fund.

(d) Oral Instructions: The term Oral Instructions

shall mean an authorization, instruction, approval, item or set

of data, or information of any kind transmitted to Fund Services

in person or by telephone, vocal telegram or other electronic

means, by a person or persons reasonably believed in good faith

by Fund Services to be a person or persons authorized by a

resolution of the Directors of the Fund to give Oral Instructions

on behalf of the Fund. Each Oral Instruction shall specify

whether it is applicable to the entire Fund or a specific Series

of the Fund.

(e) Prospectus: The term Prospectus shall mean a

prospectus and related statement of additional information

forming part of a currently effective registration statement

under the Investment Company Act and, as used with the respect to

Shares or Shares of a Series, shall mean the prospectuses and

related statements of additional information covering the Shares

or Shares of the Series.

(f) Securities: The term Securities shall mean bonds,

debentures, notes, stocks, shares, evidences of indebtedness, and

other securities and investments from time to time owned by the

Fund.

<PAGE>

(g) Series: The term Series shall mean any series of

Shares of the common stock of the Fund that the Fund may

establish from time to time.

(h) Share Certificates: The term Share Certificates

shall mean the stock certificates for the Shares.

(i) Shareholders: The term Shareholders shall mean

the registered owners from time to time of the Shares, as

reflected on the stock registry records of the Fund.

(j) Written Instructions: The term Written

Instructions shall mean an authorization, instruction, approval,

item or set of data, or information of any kind transmitted to

Fund Services in original writing containing original signatures,

or a copy of such document transmitted by telecopy, including

transmission of such signature, or other mechanical or

documentary means, at the request of a person or persons

reasonably believed in good faith by Fund Services to be a person

or persons authorized by a resolution of the Directors of the

Fund to give Written Instruction shall specify whether it is

applicable to the entire Fund or a specific Series of the Fund.

SECTION 31. Fund Services shall not be liable for the

loss of all or part of any record maintained or preserved by it

pursuant to this Agreement or for any delays or errors occurring

by reason of circumstances beyond its control, including but not

limited to acts of civil or military authorities, national

emergencies, fire, flood or catastrophe, acts of God,

<PAGE>

insurrection, war, riot, or failure of transportation,

communication or power supply, except to the extent that Fund

Services shall have failed to use its best efforts to minimize

the likelihood of occurrence of such circumstances or to mitigate

any loss or damage to the Fund caused by such circumstances.

SECTION 32. The Fund may give Fund Services sixty (60)

days and Fund Services may give the Fund (90) days written notice

of the termination of this Agreement, such termination to take

effect at the time specified in the notice. Upon notice of

termination, the Fund shall use its best efforts to obtain a

successor transfer agent. If a successor transfer agent is not

appointed within ninety (90) days after the date of the notice of

termination, the Directors of the Fund shall, by resolution,

designate the Fund as its own transfer agent. Upon receipt of

written notice from the Fund of the appointment of the successor

transfer agent and upon receipt of Oral or Written Instructions

Fund Services shall, upon request of the Fund and the successor

transfer agent and upon payment of Fund Services reasonable

charges and disbursements, promptly transfer to the successor

transfer agent the original or copies of all books and records

maintained by Fund Services hereunder and cooperate with, and

provide reasonable assistance to, the successor transfer agent in

the establishment of the books and records necessary to carry out

its responsibilities hereunder.

<PAGE>

SECTION 33. Any notice or other communication required

by or permitted to be given in connection with this Agreement

shall be in writing, and shall be delivered in person or sent by

first-class mail, postage prepaid, to the respective parties.

Notice to the Fund shall be given as follows until

further notice:

Alliance High Yield Fund, Inc.
1345 Avenue of the Americas
New York, New York 10105
Attention: Secretary

Notice to Fund Services shall be given as follows until

further notice:

Alliance Fund Services, Inc.
500 Plaza Drive
Secaucus, New Jersey 07094

SECTION 34. The Fund represents and warrants to Fund

Services that the execution and delivery of this Agreement by the

undersigned officer of the Fund has been duly and validly

authorized by resolution of the Fund's Directors. Fund Services

represents and warrants to the Fund that the execution and

delivery of this Agreement by the undersigned officer of Fund

Services has also been duly and validly authorized.

SECTION 35. This Agreement may be executed in more than

one counterpart, each of which shall be deemed to be an original,

and shall become effective on the last date of signature below

unless otherwise agreed by the parties. Unless sooner terminated

pursuant to SECTION 32, this Agreement will continue until

December 31, 1997 and will continue in effect thereafter for

<PAGE>

successive 12 month periods only if such continuance is

specifically approved at least annually by the Directors or by a

vote of the stockholders of the Fund and in either case by a

majority of the Directors who are not parties to this Agreement

or interested persons of any such party, at a meeting called for

the purpose of voting on this Agreement.

SECTION 36. This Agreement shall extend to and shall

bind the parties hereto and their respective successors and

assigns; provided, however, that this Agreement shall not be

assignable by the Fund without the written consent of Fund

Services or by Fund Services without the written consent of the

Fund, authorized or approved by a resolution of the Fund's

Directors. Notwithstanding the foregoing, either party may

assign this Agreement without the consent of the other party so

long as the assignee is an affiliate, parent or subsidiary of the

assigning party and is qualified to act under the Investment

Company Act, as amended from time to time.

SECTION 38. This Agreement shall be governed by the

laws of the State of New Jersey.

<PAGE>

WITNESS the following signatures:

ALLIANCE HIGH YIELD FUND, INC.

BY: /s/ John D. Carifa
__________________
John D. Carifa

TITLE: President

ALLIANCE FUND SERVICES, INC.

BY: /s/ George Hrabovsky
____________________
George Hrabovsky

TITLE: President

28
00250233.AE3

<PAGE>

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the captions
"Financial Highlights", "Conversion Feature - Description of
Class A Shares", "Shareholder Services - Statements and Reports"
and "General Information - Independent Auditors" and to the use
of our report dated October 7, 1997 included in this Registration
Statement (Form N-1A No. 333-18505) of Alliance High Yield Fund,
Inc.

/s/ Ernst & Young LLP

ERNST & YOUNG LLP

New York, New York
October 28, 1997

00250233.AJ6