ALLIANCE HIGH YIELD FUND INC, 497, 1997-04-25

ALLIANCE HIGH YIELD FUND INC
497, 1997-04-25

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This is filed pursuant to Rule 497(c).
File Nos. 333-18505 and 811-09160

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ALLIANCE
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HIGH YIELD
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FUND
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C/O ALLIANCE FUND SERVICES, INC.
P.O. BOX 1520, SECAUCUS, NEW JERSEY 07096-1520
TOLL FREE (800) 221-5672
FOR LITERATURE: TOLL FREE (800) 227-4618

PROSPECTUS AND APPLICATION

APRIL 21, 1997

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<TABLE>
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Table of Contents Page
<S> <C>
The Fund at a Glance ...................................................... 2
Expense Information ....................................................... 3
Glossary .................................................................. 4
Description of the Fund ................................................... 5
Investment Objective ................................................... 5
Investment Policies .................................................... 5
Additional Investment Practices ........................................ 5
Certain Fundamental Investment Policies ................................ 11
Certain Risk Considerations ............................................ 11
Purchase and Sale of Shares ............................................... 13
Management of the Fund .................................................... 15
Dividends, Distributions and Taxes ........................................ 17
General Information ....................................................... 18
</TABLE>
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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 April 21, 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.

The Fund 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 ("Class A
shares"), (ii) with a contingent deferred sales charge imposed on most
redemptions made within four years of purchase ("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 ("Class C shares"). 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.

[LOGO]
ALLIANCE(R)
INVESTING WITHOUT THE MYSTERY.(SM)

(R)/(SM) These are registered marks used under licenses from the owner, Alliance
Capital Management L.P.
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THE FUND AT A GLANCE

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

The Fund's Investment Adviser Is . . .
Alliance Capital Management L.P. ("Alliance"), a global investment adviser
providing diversified services to institutions and individuals through a broad
line of investments including more than 100 mutual funds. Since 1971, Alliance
has earned a reputation as a leader in the investment world with over $182
billion in assets under management as of December 31, 1996. Alliance provides
investment management services to employee benefit plans for 34 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 and most
banks, insurance companies and brokerage firms nationwide. Shares 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 Fund offers
several time and money saving services to investors. Be sure to ask your
financial representative about:

AUTOMATIC DIVIDEND REINVESTMENT
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AUTOMATIC INVESTMENT PROGRAM
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RETIREMENT PLANS
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SHAREHOLDER COMMUNICATIONS
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DIVIDEND DIRECTION PLANS
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AUTO EXCHANGE
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SYSTEMATIC WITHDRAWALS
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A CHOICE OF PURCHASE PLANS
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TELEPHONE TRANSACTIONS
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24-HOUR INFORMATION
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[LOGO]
Alliance(R)
Investing without the Mystery.(SM)

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

2
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EXPENSE INFORMATION
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SHAREHOLDER TRANSACTION EXPENSES are one of several factors to consider when you
invest in the Fund. The following table summarizes your maximum transaction
costs and estimated annual expenses for each class of shares. The Example
following the table shows the cumulative expenses attributable to a hypothetical
$1,000 investment in each class for the periods specified.

<TABLE>
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CLASS A SHARES CLASS B SHARES CLASS C SHARES
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<S> <C> <C> <C>
SHARES
Maximum sales charge imposed on purchases
(as a percentage of offering price) ............................ 4.25%(a) None None
Sales charge imposed on dividend reinvestments .................... None None None
Deferred sales charge (as a percentage of original purchase price
or redemption proceeds, whichever is lower) .................... None 4.0% during the 1% during the
first year, decreasing first year,
1.0% annually to 0% thereafter
0% after the
fourth year(b)
Exchange fee ...................................................... None None None
</TABLE>

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(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 13.
(b) Class B shares automatically convert to Class A shares after eight years.
See "Purchase and Sale of Shares--How to Buy Shares"--page 13.

<TABLE>
<CAPTION>
OPERATING EXPENSES CLASS A SHARES CLASS B SHARES CLASS C SHARES
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<S> <C> <C> <C>
Management fees .75% .75% .75%
12b-1 fees .30% 1.00% 1.00%
Other expenses(a) .88% .88% .88%
---- ---- ----
Total fund operating expenses 1.93% 2.63% 2.63%
==== ==== ====
</TABLE>

<TABLE>
<CAPTION>
EXAMPLE CLASS A CLASS B+ CLASS B++ CLASS C+ CLASS C++
- ------- ------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C>
After 1 year $61 $67 $27 $37 $27
After 3 years $101 $102 $82 $82 $82
</TABLE>
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+ ASSUMES REDEMPTION AT END OF PERIOD.
++ ASSUMES NO REDEMPTION AT END OF PERIOD.
(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 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 the 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 Fund--Distribution Services Agreement." 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.
"Other expenses" 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 Securities
and Exchange Commission regulations. THE EXAMPLE SHOULD NOT BE CONSIDERED
REPRESENTATIVE OF PAST OR FUTURE EXPENSES; ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN.

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

BONDS are fixed, floating and variable rate debt obligations.

DEBT SECURITIES are bonds, debentures, notes, bills and repurchase agreements.

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

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

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

CONVERTIBLE SECURITIES are bonds, debentures, corporate notes and preferred
stocks that are convertible into common and preferred stock.

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

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

ARMS, which are adjustable-rate mortgage securities;

SMRS, which are stripped mortgage-related securities;

CMOS, which are collateralized mortgage obligations;

GNMA CERTIFICATES, which are securities issued by the Government
National Mortgage Association;

FNMA CERTIFICATES, which are securities issued by the Federal National
Mortgage Association; and

FHLMC CERTIFICATES, which are securities issued by the Federal Home
Loan Mortgage Corporation.

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
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DESCRIPTION OF THE FUND
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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
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.

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, "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

5
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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.

Derivatives may be (i) standardized, exchange-traded contracts or (ii)
customized, privately negotiated contracts. Exchange-traded derivatives tend to
be more liquid and subject to less credit risk than those that are privately
negotiated.

The 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 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."

Derivatives involve risks different from, and, in certain cases, greater than,
the risks presented by more traditional investments. Following is a general
discussion of important risk factors and issues concerning the use of
derivatives that investors should understand before investing in the Fund.

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

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

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

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.

6
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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.

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 SECURITIES. 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

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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 COMMITIMENTS. 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 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

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CMO until all other classes having an earlier stated maturity or final
distribution date have been paid in full. One or more tranches of a CMO may have
coupon rates that reset periodically, or "float," at a specified increment over
an index such as LIBOR. Floating-rate CMOs may be backed by fixed or adjustable
rate mortgages. To date, fixed-rate mortgages have been more commonly utilized
for this purpose. Floating-rate CMOs are typically issued with lifetime caps on
the coupon rate thereon. These caps, similar to the caps on adjustable-rate
mortgages described below, represent a ceiling beyond which the coupon rate on a
floating-rate CMO may not be increased regardless of increases in the interest
rate index to which the floating-rate CMO is tied. The collateral securing the
CMOs may consist of a pool of mortgages, but may also consist of mortgage-backed
bonds or pass-through securities. CMOs may be issued by a U.S. Government
instrumentality or agency or by a private issuer. Although payment of the
principal of, and interest on, the underlying collateral securing privately
issued CMOs may be guaranteed by GNMA, FNMA or FHLMC, these CMOs represent
obligations solely of the private issuer and are not insured or guaranteed by
GNMA, FNMA, FHLMC, any other governmental agency or any other person or entity.

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

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

The value of mortgage-related securities is affected by a number of factors.
Unlike traditional debt securities, which have fixed maturity dates,
mortgage-related securities may be paid earlier than expected as a result of
prepayments of underlying mortgages. Such prepayments generally occur during
periods of falling mortgage interest rates. If property owners make unscheduled
prepayments of their mortgage loans, these prepayments will result in the early
payment of the applicable mortgage-related securities. In that event, the Fund
may be unable to invest the proceeds from the early payment of the
mortgage-related securities in 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.

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<PAGE>

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 investment to a
third party. Because there may not be a liquid market for such investments, they
can probably be sold only to a limited number of institutional investors. The
lack of a liquid secondary market may have an adverse effect on the value of
such investments and the Fund's ability to dispose of particular participations
and assignments when necessary to meet its liquidity needs in response to a
specific economic event such as a deterioration in the creditworthiness of the
borrower. The lack of a liquid secondary market for participations and
assignments also may make it more difficult for the Fund to assign a value to
these securities for purposes of valuing the Fund's portfolio and calculating
its net asset value.

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.

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<PAGE>

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

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

DEFENSIVE POSITION. For temporary defensive purposes, the Fund may invest in
certain types of short-term, liquid, high grade debt securities. These
securities may include U.S. Government securities, qualifying bank deposits,
money market instruments, prime commercial paper, and other types of short-term
debt securities, including notes and bonds. Such securities may also include
short-term, foreign-currency denominated securities of the type mentioned above
issued by foreign governmental entities, companies and supranational
organizations. For a complete description of the types of securities in which
the Fund may invest while in a temporary defensive position, see the Fund's
Statement of Additional Information.

PORTFOLIO TURNOVER. 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.

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<PAGE>

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

Issuers of securities in foreign jurisdictions are generally not subject to the
same degree of regulation as are U.S. issuers with respect to such matters as
insider trading rules, restrictions on market manipulation, shareholder proxy
requirements and timely disclosure of information. The reporting, accounting and
auditing standards of foreign countries may differ, in some cases significantly,
from U.S. standards in important respects, and less information may be available
to investors in foreign securities than to investors in U.S. securities.
Substantially less information is publicly available about certain non-U.S.
issuers than is available about most U.S. issuers.

The economies of individual foreign countries may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross domestic
product or gross national product, rate of inflation, capital reinvestment,
resource self-sufficiency and balance of payments position. Nationalization,
expropriation or confiscatory taxation, currency blockage, political changes,
government regulation, political or social instability or diplomatic
developments could affect adversely the economy of a foreign country or the
Fund's investments in that country. In the event of 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

12
<PAGE>

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

The Fund offers three classes of shares through this Prospectus, Class A, Class
B and Class C. The Fund may refuse any order to purchase shares. In this regard,
the Fund reserves 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:

<TABLE>
<CAPTION>
Initial Sales Charge
as % of Commission to
Net Amount as % of Dealer/Agent as %
Amount Purchased Invested Offering Price of Offering Price
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
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
- --------------------------------------------------------------------------------
</TABLE>

On purchases of $1,000,000 or more, you pay no initial sales charge but may pay
a contingent deferred sales charge (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 the 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 Statement 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 four years 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 on Class B shares is set forth below.

<TABLE>
<CAPTION>
Year Since Purchase CDSC
- --------------------------------------------------------------------------------
<S> <C>
First 4.0%
Second 3.0%
Third 2.0%
Fourth 1.0%
Thereafter None
</TABLE>

Class B shares are subject to higher distribution fees than Class A shares for a
period of eight years (after which they convert to Class A shares). The higher
fees mean a higher expense ratio,

13
<PAGE>

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. The Fund thus
receives 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, bi-monthly or quarterly systematic
withdrawal plan. See the Statement of Additional Information.

HOW THE FUND VALUES ITS SHARES
The net asset value of each class of shares in the 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 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 accurately reflect fair
market value.

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 different 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.

The Fund offers a fourth class of shares, Advisor Class shares, by means of a
separate prospectus. 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 prospectus for the
Advisor Class, including investment advisory clients of, and certain other
persons associated with, Alliance and its affiliates or the Fund. 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.

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 Fund. 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 Fund. On some occasions, such 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 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 the 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, 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).

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 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 AFS, along with
certificates, if any, that represent the shares you want to sell. For your
protection, signatures must be

14
<PAGE>

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 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. 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 the 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 purposes of
determining the CDSC, if any, upon redemption and, in the case of Class B
shares, for the purposes 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 FUND
- --------------------------------------------------------------------------------

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

Alliance is a leading international investment manager supervising client
accounts with assets as of December 31, 1996 of more than $182 billion (of which
more than $63 billion represented the assets of investment companies).
Alliance's clients are primarily major corporate employee benefit funds, public
employee retirement systems, investment companies, foundations and endowment
funds. The 52 registered investment companies managed by Alliance comprising 110
separate investment portfolios currently have over two million shareholders. As
of December 31, 1996 Alliance was an investment manager of employee benefit plan
assets for 34 of the Fortune 100 companies.

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

15
<PAGE>

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

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

The 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 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 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.

<TABLE>
<CAPTION>
Annualized Rates of Return
Periods Ended February 28, 1997
- --------------------------------------------------------------------------------
Portfolio/Benchmark 1 Year 3 Years 5 Years 10 Years Inception(2)
------ ------- ------- -------- ------------
<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
</TABLE>

<TABLE>
<CAPTION>
Cumulative Rates of Return
Periods Ending February 28, 1997
- --------------------------------------------------------------------------------
Portfolio/Benchmark 1 Year 3 Years 5 Years 10 Years Inception(2)
------ ------- ------- -------- ------------
<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>
- ----------
(2) 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 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.

16
<PAGE>

DISTRIBUTION SERVICES AGREEMENT
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. The Fund has adopted a "Rule 12b-1 plan"
(the "Plan") and has entered into a Distribution Services Agreement (the
"Agreement") with AFD. Pursuant to the Plan, the Fund pays to AFD for
distribution expenses a Rule 12b-1 distribution services fee, which may not
exceed an annual rate of .30% 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. The Plan provides
that a portion of the distribution services fee in an amount not to exceed .25%
of the aggregate average daily net assets of the Fund attributable to each of
Class A, Class B and Class C shares constitutes a service fee used for personal
service and/or the maintenance of shareholder accounts.

The Plan provides that AFD will use the distribution services fee received from
the 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 Plan are used to compensate financial
intermediaries with trail or maintenance commissions in an amount equal to .25%,
annualized, with respect to Class A shares and Class B shares, and 1.00%,
annualized, with respect to Class C shares, of the assets maintained in the Fund
by its customers. Distribution services fees received from the Fund 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 Fund with respect to Class B and Class C shares
may be used for these purposes. The Plan also provides that Alliance may use its
own resources to finance the distribution of the Fund's shares.

The Fund is not obligated under the Plan to pay any distribution services fee in
excess of the amounts set forth above. With respect to Class A shares of the
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
Plan is directly tied to the expenses incurred by AFD. Actual distribution
expenses for such Class B and Class C shares for any given year, however, will
probably exceed the 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 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 and the Agreement are
in effect.

The Plan is 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 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.

17
<PAGE>

any, with respect to Class A, Class B and Class C shares will be calculated in
the same manner at the same time on the same day and will be in the same amount,
except that the higher distribution services fees applicable to Class B and
Class C shares, and any incremental transfer agency costs relating to Class B
shares, will be borne exclusively by the class to which they relate.

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

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

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

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

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

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

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

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

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

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

- --------------------------------------------------------------------------------
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.

18
<PAGE>

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

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

PERFORMANCE INFORMATION
From time to time, the Fund advertises its "total return", which is computed
separately for Class A, Class B and Class C 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.

19
<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.

A-1
<PAGE>

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 fluctuate widely according
to economic cycles, industry conditions and/or company fortunes. Potential
exists for frequent changes in the rating within this category or into a
higher or lower rating grade.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

A-2
<PAGE>

SUBSCRIPTION APPLICATION
- --------------------------------------------------------------------------------
ALLIANCE HIGH YIELD FUND

(see instructions at the front of the application)

- --------------------------------------------------------------------------------
1. YOUR ACCOUNT REGISTRATION (Please Print)
- --------------------------------------------------------------------------------

|_| INDIVIDUAL OR JOINT ACCOUNT

|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Owner's Name (First Name) (MI) (Last Name)

|_|_|_|-|_|_|-|_|_|_|_|
Social Security Number (Required to open account)

|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Joint Owner's Name* (First Name) (MI) (Last Name)

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

|_| GIFT/TRANSFER TO A MINOR

|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Custodian - One Name Only (First Name) (MI) (Last Name)

|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Minor (First Name) (MI) (Last Name)

|_|_|_|-|_|_|-|_|_|_|_|
Minor's Social Security Number (Required to open account)

Under the State of __________ (Minor's Residence) Uniform Gifts/Transfer to
Minor's Act

|_| TRUST ACCOUNT

|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Name of Trustee

|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Name of Trust

|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Name of Trust (cont'd)

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

|_| OTHER

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

|_|_|_|_|_|_|_|_|_| |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Tax ID Number Trustee Name (Retirement Plans Only)

- --------------------------------------------------------------------------------
2. YOUR ADDRESS
- --------------------------------------------------------------------------------

|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Street

|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
City State Zip Code

|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
If Non-U.S., Specify Country

|_|_|_|-|_|_|_|-|_|_|_|_| |_|_|_|-|_|_|_|-|_|_|_|_|
Daytime Phone Evening Phone

I am a: |_| U.S. Citizen |_| Non-Resident Alien |_| Resident Alien
|_| Other

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

For Alliance Use Only

---------------------------------------------------
<PAGE>

- --------------------------------------------------------------------------------
3. YOUR INITIAL INVESTMENT
- --------------------------------------------------------------------------------

THE MINIMUM INVESTMENT IS $250. THE MAXIMUM INVESTMENT IN CLASS B IS
$250,000; CLASS C IS $1,000,000.

I hereby subscribe for shares of Alliance High Yield Fund and elect
distribution options as indicated.

DIVIDEND AND CAPITAL GAIN DISTRIBUTION OPTIONS: R REINVEST DISTRIBUTIONS
into my fund account.
- --------------------------
BROKER/DEALER USE ONLY C SEND MY DISTRIBUTIONS IN
WIRE CONFIRM # CASH to the address I
- -------------------------- have provided in Section
2. (Complete Section 4D
- -------------------------- for direct deposit to
your bank account.
Complete Section 4E for
payment to a third
party).

D DIRECT MY DISTRIBUTIONS
TO ANOTHER ALLIANCE FUND.
Complete the appropriate
portion of Section 4A to
direct your distributions
(dividends and capital
gains) to another
Alliance Fund (the $250
minimum investment
requirement applies to
Funds into which
distributions are
directed).

- --------------------------------------------------------------------------------
MAKE ALL CHECKS PAYABLE TO: CLASS OF SHARES
ALLIANCE FUND SERVICES ------------------------------ DISTRIBUTIONS
CONTINGENT ASSET- OPTIONS
INITIAL DEFERRED BASED *CIRCLE*
SALES SALES SALES ---------------------
CHARGE CHARGE CHARGE CAPITAL
ALLIANCE FUND NAME A B C DIVIDENDS GAINS
- --------------------------------------------------------------------------------
Alliance High Yield Fund $ $ $ R C D R C D
- --------------------------------------------------------------------------------
R C D R C D
- --------------------------------------------------------------------------------
R C D R C D
- --------------------------------------------------------------------------------
R C D R C D
- --------------------------------------------------------------------------------
R C D R C D
- --------------------------------------------------------------------------------
TOTAL INVESTMENT $ $ $
==========================================================
<PAGE>

MY SOCIAL SECURITY (TAX IDENTIFICATION) NUMBER IS: |_|_|_|_|_|_|_|_|_|

- --------------------------------------------------------------------------------
4. YOUR SHAREHOLDER OPTIONS
- --------------------------------------------------------------------------------

- ---------------------------------------
A. AUTOMATIC INVESTMENT PLANS (AIP)
- ---------------------------------------

|_| WITHDRAW FROM MY BANK ACCOUNT

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

<TABLE>
<CAPTION>
Monthly Dollar Amount Day of Withdrawal*
Fund Name ($25 minimum) (1st thru 31st) Circle "all" or applicable months

<S> <C> <C> <C>
All J F M A M J J A S O N D
- ----------------------- ---------------------------- ----------------------- -----------------------------------
All J F M A M J J A S O N D
- ----------------------- ---------------------------- ----------------------- -----------------------------------
All J F M A M J J A S O N D
- ----------------------- ---------------------------- ----------------------- -----------------------------------
All J F M A M J J A S O N D
- ----------------------- ---------------------------- ----------------------- -----------------------------------
</TABLE>
*Your bank must be a member of the National Automated Clearing House Association
(NACHA).

|_| DIRECT MY DISTRIBUTIONS

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

<TABLE>
<CAPTION>
"From" Fund Account #
"From" Fund Name (if existing) "To" Fund Name "To" Fund Account # (if existing)

<S> <C> <C> <C>
|_| New
|_| Existing
- ----------------------- ---------------------------- ----------------------- -----------------------------------
|_| New
|_| Existing
- ----------------------- ---------------------------- ----------------------- -----------------------------------
|_| New
|_| Existing
- ----------------------- ---------------------------- ----------------------- -----------------------------------
|_| New
|_| Existing
- ----------------------- ---------------------------- ----------------------- -----------------------------------
</TABLE>

|_| EXCHANGE SHARES MONTHLY

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

<TABLE>
<CAPTION>
"From" Fund Account # Dollar Amount Day of Exchange* "To" Fund Account #
"From" Fund Name (if existing) ($25 minimum) (1st thru 31st) "To" Fund Name (if existing)
<S> <C> <C> <C> <C> <C>
|_| New
|_| Existing
- ------------------ ----------------------- ------------------ ------------------ ------------------ --------------------
|_| New
|_| Existing
- ------------------ ----------------------- ------------------ ------------------ ------------------ --------------------
|_| New
|_| Existing
- ------------------ ----------------------- ------------------ ------------------ ------------------ --------------------
|_| New
|_| Existing
- ------------------ ----------------------- ------------------ ------------------ ------------------ --------------------
</TABLE>

* Shares exchanged will be redeemed at the net asset value on the "Day of
Exchange" (If the "Day of Exchange" is not a fund business day, the
exchange transaction will be processed on the next fund business day). The
exchange privilege is not available if stock certificates have been issued.

- -----------------------------------------
B. SYSTEMATIC WITHDRAWAL PLANS (SWP)
- -----------------------------------------

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

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

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

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

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

(1st-31st)
I would like to have these payments occur on or about the | | of the
months circled above. (Complete Section 4D).

PLEASE SEND MY PROCEEDS TO:

|_| MY CHECKING ACCOUNT (via EFT) (Complete Section 4D.)

|_| MY ADDRESS OF RECORD (via CHECK)

|_| THE PAYEE AND ADDRESS SPECIFIED IN SECTION 4E (via CHECK)

<PAGE>

- -----------------------------------------
C. PURCHASES AND REDEMPTIONS VIA EFT
- -----------------------------------------

You can call our toll-free number 1-800-221-5672 and instruct Alliance Fund
Services, Inc. in a recorded conversation to purchase, redeem or exchange shares
for your account. Purchase and redemption requests will be processed via
electronic funds transfer (EFT) to and from your bank account.

Instructions: o Review the information in the Prospectus about telephone
transaction services.

o If you select the telephone purchase or redemption
privilege, you must write "VOID" across the face of a check
from the bank account you wish to use and attach it to
Section 4D of this application.

PURCHASES AND REDEMPTIONS VIA EFT

|_| I hereby authorize Alliance Fund Services, Inc. to effect the purchase
and/or redemption of Fund shares for my account according to my telephone
instructions or telephone instructions from my Broker/Agent, and to
withdraw money or credit money for such shares via EFT from the bank
account I have selected.

In the case of shares purchased by check or EFT, redemption proceeds may
not be made available until the Fund is reasonably assured that the check
has cleared, normally 15 calendar days after the purchase date.

- ------------------------
D. BANK INFORMATION
- ------------------------

This bank account information will be used for:

|_| Distributions (Section 3) |_| Automatic Investments
(Section 4A)

|_| Systematic Withdrawals (Section 4B) |_| Telephone Transactions
(Section 4C)

Please attach a voided check:

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

Tape Pre-Printed Voided Check Here.
We Cannot Establish These Services Without it.

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

Your bank must be a member of the National Automated Clearing House Association
(NACHA) in order to have EFT transactions processed to your fund account.

For EFT transactions, the fund requires signatures of bank account owners
exactly as they appear on bank records.

- -----------------------------------
E. THIRD PARTY PAYMENT DETAILS
- -----------------------------------

This third party payee information will be used for:

|_| Distributions (Section 3) |_| Systematic Withdrawals (Section 4B)

|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Name

|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Address - Line 1

|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Address - Line 2

|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Address - Line 3

- -------------------------------------
F. REDUCED CHARGES (CLASS A ONLY)
- -------------------------------------

If you, your spouse or minor children own shares in other Alliance Funds, you
may be eligible for a reduced sales charge. Please complete the Right of
Accumulation section or the Statement of Intent section.

A. RIGHT OF ACCUMULATION

|_| Please link the tax identification numbers or account numbers listed below
for Right of Accumulation privileges, so that this and future purchases
will receive any discount for which they are eligible.

B. STATEMENT OF INTENT

|_| I want to reduce my sales charge by agreeing to invest the following amount
over a 13-month period:

|_| $100,000 |_| $250,000 |_| $500,000 |_| $1,000,000

If the full amount indicated is not purchased within 13 months, I
understand that an additional sales charge must be paid from my account.

- ---------------------------- ---------------------------- --------------------
Tax ID or Account # Tax ID or Account # Tax ID or Account #
<PAGE>

- --------------------------------------------------------------------------------
5. SHAREHOLDER AUTHORIZATION This section MUST be completed
- --------------------------------------------------------------------------------

TELEPHONE EXCHANGES AND REDEMPTIONS BY CHECK

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

|_| I do not elect the telephone exchange service.

|_| I do not elect the telephone redemption by check service.

I CERTIFY UNDER PENALTY OF PERJURY THAT THE NUMBER SHOWN IN SECTION 1 OF THIS
FORM IS MY CORRECT TAX IDENTIFICATION NUMBER OR SOCIAL SECURITY NUMBER AND THAT
I HAVE NOT BEEN NOTIFIED THAT THIS ACCOUNT IS SUBJECT TO BACKUP WITHHOLDING.

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

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

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

THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION OF
THIS DOCUMENT OTHER THAN THE CERTIFICATION REQUIRED TO AVOID BACK-UP
WITHHOLDING.

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

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

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

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

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

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

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

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

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

- --------------------------------(--------)--------------------------------------
Branch Number Branch Phone
<PAGE>

ALLIANCE SUBSCRIPTION APPLICATION
- --------------------------------------------------------------------------------
THE ALLIANCE HIGH YIELD FUND

- --------------------------------------------------------------------------------
INFORMATION AND INSTRUCTIONS
- --------------------------------------------------------------------------------

TO OPEN YOUR NEW ALLIANCE ACCOUNT...

Please complete the application and mail it to:
ALLIANCE FUND SERVICES, INC.
P.O. BOX 1520
SECAUCUS, NEW JERSEY 07096-1520

For certified or overnight deliveries, send to:
ALLIANCE FUND SERVICES, INC.
500 PLAZA DRIVE
SECAUCUS, NEW JERSEY 07094

- -----------
SECTION 1 YOUR ACCOUNT REGISTRATION (REQUIRED)
- -----------

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

-- Individuals, Joint Tenants and Gift/Transfer to a Minor:

o Indicate your name(s) exactly as it appears on your social
security card.

-- Trust/Other:

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

- -----------
SECTION 2 YOUR ADDRESS (REQUIRED)
- -----------
Complete in full.

- -----------
SECTION 3 YOUR INITIAL INVESTMENT (REQUIRED)
- -----------

1) Write the dollar amount of your initial purchase in the column corresponding
to the class of shares you have chosen (If you are eligible for a reduced sales
charge, you must also complete Section 4F) 2) Circle a distribution option for
your dividends 3) Circle a distribution option for your capital gains. All
distributions (dividends and capital gains) will be reinvested into your fund
account unless you direct otherwise. If you want distributions sent directly to
your bank account, then you must complete Section 4D and attach a voided check
for that account. If you want your distributions sent to a third party you must
complete Section 4E.

- -----------
SECTION 4 YOUR SHAREHOLDER OPTIONS (COMPLETE ONLY THOSE OPTIONS YOU WANT)
- -----------

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

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

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

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

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

F. REDUCED CHARGES (CLASS A ONLY) - Complete if you would like to link fund
accounts that have combined balances that might exceed $100,000 so that
future purchases will receive discounts. Complete if you intend to purchase
over $100,000 within 13 months.

- -----------
SECTION 5 SHAREHOLDER AUTHORIZATION (REQUIRED)
- -----------

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

IF WE CAN ASSIST YOU IN ANY WAY, PLEASE DO NOT HESITATE TO CALL US AT:
(800) 221-5672.

<PAGE>

This is filed pursuant to Rule 497(c).
File Nos. 333-18505 and 811-09160.

<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)

APRIL 21, 1997

<TABLE>
<CAPTION>
================================================================================
Table of Contents Page
<S> <C>
The Fund at a Glance .................................................... 2
Expense Information ..................................................... 3
Glossary ................................................................ 4
Description of the Fund ................................................. 5
Investment Objective ................................................. 5
Investment Policies .................................................. 5
Additional Investment Practices ...................................... 5
Certain Risk Considerations .......................................... 11
Purchase and Sale of Shares ............................................. 13
Management of the Fund .................................................. 15
Dividends, Distributions and Taxes ...................................... 16
Conversion Feature ...................................................... 17
General Information ..................................................... 18
================================================================================
</TABLE>
Adviser
Alliance Capital Management L.P.
1345 Avenue Of The Americas
New York, New York 10105

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."

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 $182
billion in assets under management as of December 31, 1996. Alliance provides
investment management services to employee benefit plans for 34 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

- --------------------------------------------------------------------------------
<CAPTION>
OPERATING EXPENSES ADVISOR CLASS
-------------
<S> <C>
Management fees ................................................... .75%
12b-1 fees ........................................................ None
Other expenses (a) ................................................ .88%
---

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

<CAPTION>
EXAMPLE ADVISOR CLASS
-------------
<S> <C>
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.

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>

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

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

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 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.

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

5
<PAGE>

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.

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

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.

LIQUIDITY RISK. Liquidity risk exists when a particular instrument is difficult
to purchase or sell. If a derivative transaction is

6
<PAGE>

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.

DERIVATIVES THAT MAY BE USED BY THE FUND

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

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.

7
<PAGE>

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.

8
<PAGE>

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.

9
<PAGE>

adjustable-rate mortgages or ARMS to fully reflect increases in the general
level of interest rates.

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 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.

10
<PAGE>

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.

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.

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.

11
<PAGE>

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.

INVESTMENT IN FIXED-INCOME SECURITIES RATED BAA AND BBB. Securities rated Baa or
BBB are considered to have

12
<PAGE>

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.

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

13
<PAGE>

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

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

SELLING SHARES THROUGH YOUR FINANCIAL REPRESENTATIVE

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

SELLING SHARES DIRECTLY TO THE FUND

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

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

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

GENERAL

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

SHAREHOLDER SERVICES

AFS offers a variety of shareholder services. For more information about these
services or your account, call AFS'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.

14
<PAGE>

GENERAL

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

The Fund offers three classes of shares other than the Advisor Class, which are
Class A, Class B and Class C. All classes of shares of the Fund have a common
investment objective and investment portfolio. Class A shares are offered with
an initial sales charge and pay a distribution services fee. Class B shares have
a contingent deferred sales charge (a "CDSC") and also pay a distribution
services fee. Class C shares have no initial sales charge or CDSC as long as
they are not redeemed within one year of purchase, but pay a distribution
services fee. Because Advisor Class shares have no initial sales charge or CDSC
and pay no distribution services fee, Advisor Class shares are expected to have
different performance from Class A, Class B or Class C shares. You may obtain
more information about Class A, Class B and Class C shares, which are not
offered by this Prospectus, by contacting AFS by telephone at 800-221-5672 or by
contacting your financial representative.

- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUND
- --------------------------------------------------------------------------------

ADVISER

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

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

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.

15
<PAGE>

<TABLE>
<CAPTION>
ANNUALIZED RATES OF RETURN
PERIODS ENDED FEBRUARY 28, 1997
- --------------------------------------------------------------------------------------
Portfolio/Benchmark 1 Year 3 Years 5 Years 10 Years Inception1
------ ------- ------- -------------------
<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

<CAPTION>
CUMULATIVE RATES OF RETURN
PERIODS ENDING FEBRUARY 28, 1997
- --------------------------------------------------------------------------------------
Portfolio/Benchmark 1 Year 3 Years 5 Years 10 Years Inception1
------ ------- ------- -------------------
<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 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.

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 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.

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

16
<PAGE>

relating to Class B shares, will be borne exclusively by the class to which they
relate.

FOREIGN INCOME TAXES

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

U.S. FEDERAL INCOME TAXES

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

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

17
<PAGE>

program to satisfy the minimum investment requirements to purchase Advisor Class
shares will not constitute a Conversion Event. The conversion would occur on the
basis of the relative net asset values of the two classes without the imposition
of any sales load, fee or other charge.

DESCRIPTION OF CLASS A SHARES

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

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

<TABLE>
<CAPTION>
Class A Shares
<S> <C>
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

<CAPTION>
Operating Expenses CLASS A
-------
<S> <C>
Management fees .............................................. .75%
12b-1 fees ................................................... .30%
Other expenses (b) ........................................... .88%
-------

Total fund operating expenses ................................ 1.93%
=======

<CAPTION>
Example(a) CLASS A
-------
<S> <C>
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 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.

- --------------------------------------------------------------------------------
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.

18
<PAGE>

REGISTRAR, TRANSFER AGENT AND
DIVIDEND-DISBURSING AGENT

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

PRINCIPAL UNDERWRITER

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

PERFORMANCE INFORMATION

From time to time, the Fund advertises its "total return", which is computed
separately for each class of shares, including 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.

19
<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.

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.

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.

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.

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.

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.

A-1
<PAGE>

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.

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.

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.

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

A-2
<PAGE>

SUBSCRIPTION APPLICATION
- --------------------------------------------------------------------------------
ALLIANCE HIGH YIELD FUND

ADVISOR CLASS