ALLIANCE BOND FUND INC, 485BPOS, 1995-10-31

ALLIANCE BOND FUND INC
485BPOS, 1995-10-31

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<PAGE>

As filed with the Securities and Exchange
Commission on October 31, 1995

File No. 2-48227

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________________________

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF l933

Pre-Effective Amendment No.

Post-Effective Amendment No. 61 X

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF l940

Amendment No. 40 X

ALLIANCE BOND FUND, INC.

(Exact Name of Registrant as Specified in Charter)

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

Registrant's Telephone Number, including Area Code:
(800) 221-5672

EDMUND P. BERGAN, JR.
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, New York l0105
(Name and address of agent for service)

It is proposed that this filing will become effective (check
appropriate box)
__X__immediately upon filing pursuant to paragraph (b)
_____on (date) pursuant to paragraph (b)
_____60 days after filing pursuant to paragraph (a)(1)
_____on (date) pursuant to paragraph (a)(1)
_____75 days after filing pursuant to paragraph (a)(2)

<PAGE>

_____on (date) pursuant to paragraph (a)(2) of Rule 485.

If appropriate, check the following box:

_____This post-effective amendment designates a new
effective date for a previously filed post-effective
amendment.

Registrant has registered an indefinite number of shares of
Capital Stock pursuant to Rule 24f-2 under the Investment Company
Act of 1940. Registrant's Rule 24f-2 notice for its fiscal year
ended June 30, 1995 was filed on August 29, 1995.

<PAGE>

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

N-1A ITEM NO. LOCATION IN PROSPECTUS
(Caption)

PART A

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

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

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

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

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

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

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

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

Item 9. Pending Legal Proceedings . . Not Applicable

<PAGE>

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

N-1A ITEM NO. LOCATION IN STATEMENT
OF ADDITIONAL
INFORMATION
(Caption)

PART B

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

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

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

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

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

Item 15. Control Persons and Principal
Holders of Securities . . . . Management of the
Fund; General
Information

Item 16. Investment Advisory and
Other Services . . . . . . . . Management of the
Fund

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

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

<PAGE>

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

N-1A ITEM NO. LOCATION IN STATEMENT
OF ADDITIONAL
INFORMATION
(Caption)

PART B
(Continued)

Item 19. Purchase, Redemption and
Pricing of Securities Being
Offered . . . . . . . . . . . Purchase,
Redemption and
Repurchase of Shares

Item 20. Tax Status . . . . . . . . . . Dividends,
Distributions and
Taxes

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

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

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

00250123.AH5

<PAGE>

THE ALLIANCE BOND FUNDS
_______________________________________________________________________________

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

PROSPECTUS AND APPLICATION

NOVEMBER 1, 1995

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

MORTGAGE FUNDS CORPORATE BOND FUND
- -ALLIANCE MORTGAGE -CORPORATE BOND PORTFOLIO
STRATEGY TRUST
- -ALLIANCE MORTGAGE SECURITIES
INCOME FUND

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

TABLE OF CONTENTS PAGE
- -------------------------------------------------------
The Funds at a Glance 2
Expense Information 4
Financial Highlights 7
Glossary 13
Description of the Funds 14
Investment Objectives and Policies 14
Additional Investment Practices 20
Certain Fundamental Investment Policies 31
Risk Considerations 32
Purchase and Sale of Shares 37
Management of the Funds 39
Dividends, Distributions and Taxes 41
General Information. 42
Appendix A: Bond Ratings A-1
Appendix B: General Information About Canada,
Mexico and Argentina B-1

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

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

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

Each Fund offers three classes of shares that may be purchased at the
investor's choice at a price equal to their net asset value (i) plus an initial
sales charge imposed at the time of purchase (the 'Class A shares'), (ii) with
a contingent deferred sales charge imposed on most redemptions made within
three years of purchase (the 'Class B shares'), or (iii) without any initial or
contingent deferred sales charge (the 'Class C shares'), except that Alliance
World Income Trust offers only one class of shares which may be purchased at a
price equal to its net asset value without any initial or contingent deferred
sales charge. See 'Purchase and Sale of Shares.'

AN INVESTMENT IN THESE SECURITIES IS NOT A DEPOSIT OR OBLIGATION OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK AND IS NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.

INVESTORS ARE ADVISED TO READ THIS PROSPECTUS CAREFULLY AND TO RETAIN IT FOR
FUTURE REFERENCE.

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

ALLIANCE
MUTUAL FUNDS WITHOUT THE MYSTERY

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

THE FUNDS AT A GLANCE
The following summary is qualified in its entirety by the more detailed
information contained in this Prospectus.

THE FUNDS' INVESTMENT ADVISER IS . . .
Alliance Capital Management L.P. ('Alliance'), a global investment manager
providing diversified services to institutions and individuals through a broad
line of investments including 105 mutual funds. Since 1971, Alliance has earned
a reputation as a leader in the investment world with over $135 billion in
assets under management. Alliance provides investment management services to 29
of the FORTUNE 100 companies.

U.S. GOVERNMENT FUNDS

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

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

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

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

MORTGAGE FUNDS

MORTGAGE STRATEGY TRUST
SEEKS . . . The highest level of current income, consistent with low volatility
of net asset value, that is available from a portfolio of mortgage-related
securities of the highest quality.

INVESTS PRIMARILY IN . . . A diversified portfolio of adjustable and fixed-rate
mortgage-related securities that are U.S. Government securities or rated AAA by
S&P or Aaa by Moody's or, if not rated, are of equivalent investment quality.
The Fund's portfolio is structured to achieve low volatility of net asset value
approximating that of a portfolio investing exclusively in two-year U.S.
Treasury securities.

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

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

MULTI-MARKET FUNDS

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

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

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

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

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

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

GLOBAL BOND FUNDS

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

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

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

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

CORPORATE BOND FUND

CORPORATE BOND PORTFOLIO
SEEKS . . . Primarily to maximize income over the long term consistent with
providing reasonable safety in the value of each shareholder's investment;
secondarily, the Fund will attempt to increase its capital through appreciation
of its investments in order to preserve and, if possible, increase the
purchasing power of each shareholder's investment.

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

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

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

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

ALLIANCE
MUTUAL FUNDS WITHOUT THE MYSTERY

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

EXPENSE INFORMATION
_______________________________________________________________________________

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

CLASS A SHARES CLASS B SHARES CLASS 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 3.0% None
during the
first year,
decreasing 1.0%
annually to 0%
after the
third year (b)
Exchange fee None None None
_______________________________________________________________________________

(A) REDUCED FOR LARGER PURCHASES. SEE 'PURCHASE AND SALE OF SHARES-HOW TO BUY
SHARES' -PAGE 36.
(B) CLASS B SHARES OF EACH FUND AUTOMATICALLY CONVERT TO CLASS A SHARES AFTER
SIX YEARS. SEE 'PURCHASE AND SALE OF SHARES-HOW TO BUY SHARES' -PAGE 36.

<TABLE>
<CAPTION>
ANNUAL OPERATING EXPENSES EXAMPLES
- -------------------------------------------------------------- -------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SHORT-TERM U.S. GOVERNMENT CLASS A CLASS B CLASS C CLASS A CLASS B+ CLASS B++ CLASS C
------- ------- ------- ------- -------- --------- -------
Management fees(b)(after
waiver) None None None After 1 year $ 56 $ 51 $ 21 $ 21
12b-1 fees .30% 1.00% 1.00% After 3 years $ 85 $ 76 $ 66 $ 66
Other expenses(a)(b)(after After 5 years $116 $113 $113 $113
reimbursement) 1.10% 1.10% 1.10% After 10 years $203 $209 $209 $243
Total fund operating
expenses(b) 1.40% 2.10% 2.10%

U.S. GOVERNMENT CLASS A CLASS B CLASS C CLASS A CLASS B+ CLASS B++ CLASS C
------- ------- ------- ------- -------- --------- -------
Management fees .53% .53% .53% After 1 year $ 52 $ 47 $ 17 $ 17
12b-1 fees .30% 1.00% 1.00% After 3 years $ 73 $ 64 $ 54 $ 54
Other expenses(a) .18% .19% .18% After 5 years $ 96 $ 93 $ 93 $ 93
Total fund operating After 10 years $161 $167 $167 $202
expenses 1.01% 1.72% 1.71%

MORTGAGE STRATEGY CLASS A CLASS B CLASS C CLASS A CLASS B+ CLASS B++ CLASS C
------- ------- ------- ------- -------- --------- -------
Management fees .65% .65% .65% After 1 year $ 61 $ 57 $ 27 $ 27
12b-1 fees .30% 1.00% 1.00% After 3 years $101 $ 93 $ 83 $ 83
Other expenses After 5 years $143 $141 $141 $142
Interest expense .65% .66% .69% After 10 years $259 $266 $266 $301
Other operating expenses(a) .34% .35% .34%
Total other expenses .99% 1.01% 1.03%
Total fund operating expenses(h) 1.94% 2.66% 2.68%

MORTGAGE SECURITIES INCOME CLASS A CLASS B CLASS C CLASS A CLASS B+ CLASS B++ CLASS C
------- ------- ------- ------- -------- --------- -------
Management fees .51% .51% .51% After 1 year $ 57 $ 52 $ 22 $ 22
12b-1 fees .30% 1.00% 1.00% After 3 years $ 87 $ 78 $ 68 $ 68
Other expenses After 5 years $119 $117 $117 $116
Interest expense .43% .43% .43% After 10 years $211 $217 $217 $250
Other operating expenses(a) .23% .24% .23%
Total other expenses .66% .67% .66%
Total fund operating expenses(i) 1.47% 2.18% 2.17%
</TABLE>

PLEASE REFER TO THE FOOTNOTES ON PAGE 5.

<TABLE>
<CAPTION>
ANNUAL OPERATING EXPENSES EXAMPLES
- -------------------------------------------------------------- -------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
WORLD INCOME
Management fees(c)(after waiver) .49% After 1 year $19
12b-1 fees(c)(after waiver) .68% After 3 years $60
Other expenses(a) .73% After 5 years $103
Total fund operating expenses(c) 1.90% After 10 years $222

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

MULTI-MARKET STRATEGY CLASS A CLASS B CLASS C CLASS A CLASS B+ CLASS B++ CLASS C
------- ------- ------- ------- -------- --------- -------
Management fees .60% .60% .60% After 1 year $ 58 $ 53 $ 23 $ 23
12b-1 fees .30% 1.00% 1.00% After 3 years $ 91 $ 82 $ 72 $ 72
Other expenses After 5 years $125 $123 $123 $123
Interest expense .07% .07% .07% After 10 years $223 $230 $230 $264
Other operating expenses(a) .62% .63% .63%
Total other expenses .69% .70% .70%
Total fund operating expenses(d) 1.59% 2.30% 2.30%

NORTH AMERICAN
GOVERNMENT INCOME CLASS A CLASS B CLASS C CLASS A CLASS B+ CLASS B++ CLASS C
------- ------- ------- ------- -------- --------- -------
Management fees(e) .65% .65% .65% After 1 year $ 69 $ 64 $ 34 $ 34
12b-1 fees .30% 1.00% 1.00% After 3 years $123 $114 $104 $104
Other expenses After 5 years $179 $177 $177 $177
Interest expense 1.16% 1.15% 1.15% After 10 years $333 $338 $338 $368
Other operating expenses(a) .59% .60% .60%
Total other expenses 1.75% 1.75% 1.75%
Total fund operating expenses(f) 2.70% 3.40% 3.40%

GLOBAL DOLLAR GOVERNMENT CLASS A CLASS B CLASS C CLASS A CLASS B+ CLASS B++ CLASS C
------- ------- ------- ------- -------- --------- -------
Management fees(g) .75% .75% .75% After 1 year $ 61 $ 57 $ 27 $ 27
12b-1 fees .30% 1.00% 1.00% After 3 years $101 $ 92 $ 82 $ 82
Other expenses(a) After 5 years $142 $140 $140 $140
.88% .89% .88 After 10 years $258 $264 $264 $296
Total fund operating expenses 1.93% 2.64% 2.63%

CORPORATE BOND CLASS A CLASS B CLASS C CLASS A CLASS B+ CLASS B++ CLASS C
------- ------- ------- ------- -------- --------- -------
Management fees(h) .63% .63% .63% After 1 year $ 55 $ 50 $ 20 $ 20
12b-1 fees .30% 1.00% 1.00% After 3 years $ 80 $ 72 $ 62 $ 61
Other expenses(a) .32% .36% .32% After 5 years $108 $107 $107 $105
Total fund operating expenses 1.25% 1.99% 1.95% After 10 years $187 $195 $195 $227
</TABLE>

+ ASSUMES REDEMPTION AT END OF PERIOD AND, WITH RESPECT TO SHARES HELD TEN
YEARS, CONVERSION OF CLASS B SHARES TO CLASS A SHARES AFTER SIX YEARS.
++ ASSUMES NO REDEMPTION AT END OF PERIOD AND, WITH RESPECT TO SHARES HELD
TEN YEARS, CONVERSION OF CLASS B SHARES TO CLASS A SHARES AFTER SIX YEARS.
(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. NET OF VOLUNTARY
(B) FEE WAIVERS AND EXPENSE REIMBURSEMENTS. ABSENT SUCH WAIVERS AND
REIMBURSEMENTS, MANAGEMENT FEES WOULD HAVE BEEN .55%, OTHER EXPENSES
WOULD HAVE BEEN 2.86% FOR CLASS A, 2.78% FOR CLASS B AND 2.68% FOR CLASS
C AND TOTAL FUND OPERATING EXPENSES WOULD HAVE BEEN 3.71% FOR CLASS A,
4.33% FOR CLASS B AND 4.23% FOR CLASS C.
(C) NET OF VOLUNTARY FEE WAIVERS. ABSENT SUCH WAIVERS, ANNUALIZED MANAGEMENT
FEES WOULD HAVE BEEN .65%, ANNUALIZED RULE 12B-1 FEES WOULD HAVE BEEN
.90% AND ANNUALIZED TOTAL FUND OPERATING EXPENSES WOULD HAVE BEEN 2.28%.
(D) EXCLUDING INTEREST EXPENSE, TOTAL FUND OPERATING EXPENSES WOULD HAVE BEEN
FOR CLASS A, 1.52%, FOR CLASS B, 2.23% AND FOR CLASS C, 2.23%.
(E) REPRESENTS .65 OF 1% OF THE AVERAGE DAILY VALUE OF THE FUND'S ADJUSTED
TOTAL NET ASSETS.
(F) EXCLUDING INTEREST EXPENSE, TOTAL FUND OPERATING EXPENSES WOULD HAVE BEEN
FOR CLASS A, 1.54%, FOR CLASS B, 2.25% AND FOR CLASS C, 2.25%.
(G) EXCLUDING INTEREST EXPENSE, TOTAL FUND OPERATING EXPENSES WOULD HAVE BEEN
FOR CLASS A, 1.29%, FOR CLASS B, 2.00%, FOR CLASS C, 1.99%.
(H) EXCLUDING INTEREST EXPENSE, TOTAL FUND OPERATING EXPENSES WOULD HAVE BEEN
FOR CLASS A, 1.04%, FOR CLASS B, 1.75%, FOR CLASS C, 1.74%

The purpose of the tables on pages 4 and 5 is to assist the investor in
understanding the various costs and expenses that an investor in a Fund will
bear directly or indirectly. Long-term shareholders of a Fund may pay aggregate
sales charges totaling more than the economic equivalent of the maximum initial
sales charges permitted by the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. See 'Management of the
Funds-Distribution Services Agreements.' The Rule 12b-1 fee for each class
comprises a service fee not exceeding .25% of the aggregate average daily net
assets of the Fund attributable to the class and an asset-based sales charge
equal to the remaining portion of the Rule 12b-1 fee. With respect to each of
MULTI-MARKET STRATEGY and NORTH AMERICAN GOVERNMENT INCOME, 'interest expense'
represents interest paid by the Fund on borrowings for the purpose of making
additional portfolio investments. Such borrowings are intended to enable each
of those Funds to produce higher net yields to shareholders than the Funds
could pay without such borrowings. See 'Risk Considerations-Effects of
Borrowing.' Excluding interest expense, total fund operating expenses of each
of MULTI-MARKET STRATEGY and NORTH AMERICAN GOVERNMENT INCOME would be lower
(see notes (e) and (g) above) and the cumulative expenses shown in the
Examples above with respect to those Funds would be lower. The management fee
rate of GLOBAL DOLLAR GOVERNMENT is higher than that paid by most other
investment companies, but Alliance believes the fee is comparable to those paid
by investment companies of similar investment orientation. The expense ratios
for Class B and Class C shares of MULTI-MARKET STRATEGY and NORTH AMERICAN
GOVERNMENT INCOME are higher than the expense ratios of most other mutual
funds, but are comparable to the expense ratios of mutual funds whose shares
are similarly priced. The Examples set forth above assume reinvestment of all
dividends and distributions and utilize a 5% annual rate of return as mandated
by Commission regulations. THE EXAMPLES SHOULD NOT BE CONSIDERED
REPRESENTATIVE OF PAST OR FUTURE EXPENSES; ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN.

FINANCIAL HIGHLIGHTS
_______________________________________________________________________________

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

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

SHORT-TERM U.S. GOVERNMENT
CLASS A
Year Ended 8/31/95 $9.67 $.42 $.05 $.47 $(.41) $0.00
Period Ended 8/31/94** 9.77 .14 (.09) .05 (.12) 0.00
Year Ended 4/30/94 10.22 .35 (.29) .06 (.42) 0.00
5/4/92+ to 4/30/93 10.00 .46 .34 .80 (.46) (.12)

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

CLASS C
Year Ended 8/31/95 $9.77 $.34 $.06 $.40 $(.34) $0.00
Period Ended 8/31/94** 9.87 .10 (.07) .03 (.11) 0.00
8/2/93++ to 4/30/94 10.34 .26 (.42) (.16) (.25) 0.00

U.S. GOVERNMENT
CLASS A
Year Ended 6/30/95 $7.84 $.64 $.13) $.77 $(.65) $0.00
Year Ended 6/30/94 8.64 .65 (.80) (.15) (.65) 0.00
Year Ended 6/30/93 8.34 .69 .29 .98 (.68) 0.00
Year Ended 6/30/92 8.01 .70 .35 1.05 (.72) 0.00
Year Ended 6/30/91 8.14 .81 (.11) .70 (.83) 0.00
Year Ended 6/30/90 8.49 .86 (.38) .48 (.83) 0.00
Year Ended 6/30/89 8.51 .89 (.03) .86 (.88) 0.00
Year Ended 6/30/88 8.90 .93 (.39) .54 (.93) 0.00
Year Ended 6/30/87 9.24 .98 (.34) .64 (.98) 0.00
12/1/85+ to 6/30/86 9.45 .63 (.21) .42 (.63) 0.00

CLASS B
Year Ended 6/30/95 $7.84 $.58 $.13 $.71 $(.59) $0.00
Year Ended 6/30/94 8.64 .59 (.80) (.21) (.59) 0.00
Year Ended 6/30/93 8.34 .62 .30 .92 (.62) 0.00
9/30/91++ to 6/30/92 8.25 .49 .09 .58 (.49) 0.00

CLASS C
Year Ended 6/30/95 $7.83 $.58 $.14 $.72 $(.59) $0.00
Year Ended 6/30/94 8.64 .59 (.81) (.22) (.59) 0.00
4/30/93++ to 6/30/93 8.56 .10 .08 .18 (.10) 0.00

MORTGAGE SECURITIES INCOME
CLASS A
Six Months Ended 6/30/95
(unaudited) $8.13 $.28 $.49 $.77 $(.30) $0.00
Year Ended 12/31/94 9.29 .57 (1.13) (.56) (.58) 0.00
Year Ended 12/31/93 9.08 .67 .23 .90 (.67) 0.00
Year Ended 12/31/92 9.21 .77 (.09) .68 (.81) 0.00
Year Ended 12/31/91 8.79 .88 .41 1.29 (.87) 0.00
Year Ended 12/31/90 8.76 .87 .03 .90 (.87) 0.00
Year Ended 12/31/89 8.81 .97 (.05) .92 (.97) 0.00
Year Ended 12/31/88 9.03 .99 (.23) .76 (.98) 0.00
Year Ended 12/31/87 9.74 1.00 (.68) .32 (1.00) (.03)
Year Ended 12/31/86 9.97 1.06 (.02) 1.04 (1.06) (.21)
Year Ended 12/31/85 9.54 1.22 .43 1.65 (1.22) 0.00

CLASS B
Six Months Ended 6/30/95
(unaudited) $8.13 $.28 $.46 $.74 $(.26) $0.00
Year Ended 12/31/94 9.29 .51 (1.14) (.63) (.51) 0.00
Year Ended 12/31/93 9.08 .61 .22 .83 (.60) 0.00
1/30/92++ to 12/31/92 9.16 .68 (.08) .60 (.68) 0.00

CLASS C
Six Months Ended 6/30/95
(unaudited) $8.13 $.29 $.45 $.74 $(.26) $0.00
Year Ended 12/31/94 9.29 .51 (1.14) (.63) (.51) 0.00
5/3/93++ to 12/31/93 9.30 .40 0.00 .40 (.40) 0.00

MORTGAGE STRATEGY
CLASS A
Six Months Ended 5/31/95
(unaudited) $9.51 $.28 $(.03) $.25 $(.27) $(.00)
Year Ended 11/30/94 9.94 .42 (.32) .10 (.48) (.01)
Year Ended 11/30/93 9.84 .57 .11 .68 (.58) 0.00
6/1/92+ to 11/30/92 10.00 .35 (.17) .18 (.34) 0.00

CLASS B
Six Months Ended 5/31/95
(unaudited) $9.52 $.24 $(.03) $(.21) $(.23) $0.00
Year Ended 11/30/94 9.94 .39 (.35) .04 (.42) (.01)
Year Ended 11/30/93 9.84 .49 .12 .61 (.51) 0.00
6/1/92+ to 11/30/92 10.00 .31 (.17) .14 (.30) 0.00

CLASS C
Six Months Ended 5/31/95
(unaudited) $9.52 $.25 $(.04) $.21 $(.23) $0.00
Year Ended 11/30/94 9.94 .37 (.33) .04 (.42) (.01)
5/3/93++ to 11/30/93 9.98 .27 (.03) .24 (.28) 0.00

WORLD INCOME
Six Months Ended 4/30/95
(unaudited) $1.88 $.06 $(.22) $(.16) $(.05) $0.00
Year Ended 10/31/94 1.90 .18 (.12) .06 (.05) 0.00
Year Ended 10/31/93 1.91 .22 (.16) .06 (.07) 0.00
Year Ended 10/31/92 1.98 .19 (.17) .02 (.09) 0.00
12/3/90+ to 10/31/91 2.00 .14 (.03) .11 (.13) 0.00
</TABLE>

PLEASE REFER TO THE FOOTNOTES ON PAGE 12.

$(.03) $0.00 $(.37) $ 9.81 4.32% $ 6,380 2.10%(d) 3.80% 15%
(.02)(a) 0.00 (.13)(c) 9.78 .28 6,281 2.10(d) 3.22 144
(.09)(a) 0.00 (.44)(c) 9.88 .03 7,184 2.05(d) 3.12 55
0.00 0.00 (.40)(c) 10.31 7.22 1,292 1.75*(d) 3.36* 294

$(.03) $0.00 $(.37) $ 9.80 4.33% $ 5,180 2.10%(d) 3.80% 15%
(.02)(a) 0.00 (.13)(c) 9.77 .28 7,128 2.10(d) 3.26 144
(.06)(a) 0.00 (.31)(c) 9.87 (1.56) 8,763 2.10*(d) 2.60* 55

$0.00 $0.00 $(.65) $ 7.96 10.37% $ 463,660 1.01% 8.27% 190%
0.00 0.00 (.65) 7.84 (1.93) 482,595 1.02 7.76 188
0.00 0.00 (.68) 8.64 12.23 527,968 1.10 8.04 386
0.00 0.00 (.72) 8.34 13.52 492,448 1.12 8.43 418
0.00 0.00 (.83) 8.01 8.97 491,910 1.07 10.02 402
0.00 0.00 (.83) 8.14 5.99 510,675 1.09 10.35 455
0.00 0.00 (.88) 8.49 10.87 532,525 1.11 10.70 148
0.00 0.00 (.93) 8.51 6.41 529,909 1.14 10.70 149
0.00 0.00 (.98) 8.90 7.00 496,600 1.07(d) 10.36 255
0.00 0.00 (.63) 9.24 4.53 128,870 1.01*(d) 9.30* 193

$0.00 $0.00 $(.59) $ 7.96 9.52% $ 774,097 1.72% 7.57% 190%
0.00 0.00 (.59) 7.84 (2.63) 756,282 1.72 7.04 188
0.00 .00 (.62) 8.64 11.45 552,471 1.81 7.25 386
0.00 .00 (.49) 8.34 6.95 32,227 1.80* 7.40* 418

$0.00 $0.00 $(.59) $ 7.96 9.67% $ 181,948 1.71% 7.59% 190%
0.00 0.00 (.59) 7.83 (2.75) 231,859 1.70 6.97 188
0.00 .00 (.10) 8.64 2.12 67,757 1.80* 6.00* 386

$0.00 $0.00 $(.30) $ 8.60 9.54% $ 535,191 1.47%* 6.86%* 158%
0.00 (.02) (.60) 8.13 (6.14) 553,889 1.29 6.77 438
(.02) 0.00 (.69) 9.29 10.14 848,069 1.00 7.20 622
0.00 0.00 (.81) 9.08 7.73 789,898 1.18 8.56 555
0.00 0.00 (.87) 9.21 15.44 544,171 1.16 9.92 439
0.00 0.00 (.87) 8.79 11.01 495,353 1.12 10.09 393
0.00 0.00 (.97) 8.76 10.98 556,077 1.13 11.03 328
0.00 0.00 (.98) 8.81 8.64 619,572 1.11 10.80 239
0.00 0.00 (1.03) 9.03 3.49 682,650 1.15 10.79 211
0.00 0.00 (1.27) 9.74 11.18 756,730 1.00 10.86 190
0.00 0.00 (1.22) 9.97 18.35 609,566 .87 12.30 164

$0.00 $0.00 $(.26) $ 8.61 9.26% $ 850,246 2.18%* 6.15%* 158%
0.00 (.02) (.53) 8.13 (6.84) 921,418 2.00 6.05 438
(.02) 0.00 (.62) 9.29 9.38 1,454,303 1.70 6.47 622
0.00 0.00 (.68) 9.08 7.81 1,153,957 1.67* 5.92* 555

$0.00 $0.00 $(.26) $ 8.61 9.26% $ 51,991 2.17%* 6.16%* 158%
0.00 (.02) (.53) 8.13 (6.84) 58,338 1.97 6.06 438
(.01) 0.00 (.41) 9.29 4.34 91,724 1.67* 5.92* 622

$0.00 $0.00 $(.27) $ 9.49 2.64% $ 34,094 1.94%*(e) 5.53%* 197%
0.00 (.04) (.53) 9.51 1.03 43,173 1.34(e) 4.78 375
0.00 0.00 (.58) 9.94 7.02 59,215 1.54(e) 5.66 499
0.00 0.00 (.34) 9.84 1.84 24,186 1.44*(d)(e) 6.58*(d) 101

$0.00 $0.00 $(.23) $ 9.50 2.28% $ 109,749 2.66%*(e) 4.83%* 197%
0.00 (.03) (.46) 9.52 .42 136,458 2.08(e) 4.12 375
0.00 0.00 (.51) 9.94 6.27 168,157 2.26(e) 4.98 499
0.00 0.00 (.30) 9.84 1.50 149,188 2.13*(d)(e) 6.01*(d) 101

$0.00 $0.00 $(.23) $ 9.50 2.28% $92,940 2.68%*(e) 4.84%* 197%
0.00 (.03) (.46) 9.52 .42 141,838 2.04(e) 4.10 375
0.00 0.00 (.28) 9.94 2.40 228,703 1.58*(e) 3.70* 499

$0.00 $0.00 $(.05) $ 1.67 (8.60)% $ 66,180 1.90%(d) 6.39%(d) N/A
0.00 (.03) (.08) 1.88 3.27 103,310 1.70(d) 3.96(d) N/A
0.00 0.00 (.07) 1.90 3.51 149,623 1.54 (d) 5.14(d) N/A
0.00 0.00 (.09) 1.91 1.26 318,716 1.59(d) 7.21(d) N/A
0.00 0.00 (.13) 1.98 6.08 1,059,222 1.85*(d) 7.29*(d) N/A
</TABLE>

PLEASE REFER TO THE FOOTNOTES ON PAGE 12.

<TABLE>
<CAPTION>
NET NET
NET REALIZED AND INCREASE
ASSET NET UNREALIZED (DECREASE) DIVIDENDS DISTRIBUTIONS
VALUE INVESTMENT GAIN IN NET ASSET FROM NET FROM NET
BEGINNING INCOME (LOSS) ON VALUE FROM INVESTMENT REALIZED
FISCAL YEAR OR PERIOD OF PERIOD (LOSS) INVESTMENTS OPERATIONS INCOME GAINS
- --------------------- --------- ---------- ----------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
SHORT-TERM MULTI-MARKET
CLASS A
Six Months Ended 4/30/95
(unaudited) $8.71 $.27 $(1.18) $(.91) $(.36) $0.00
Year Ended 10/31/94 9.25 .93 (.86) .07 0.00 0.00
Year Ended 10/31/93 9.25 .92 (.32) .60 (.60) 0.00
Year Ended 10/31/92 9.94 .91 (.86) .05 (.72) (.02)
Year Ended 10/31/91 9.89 .97 .06 1.03 (.97) (.01)
Year Ended 10/31/90 9.69 1.09 .19 1.28 (1.08) 0.00
5/5/89+ to 10/31/89 9.70 .53 (.01) .52 (.53) 0.00

CLASS B
Six Months Ended 4/30/95
(unaudited) $8.71 $.25 $(1.18) $(.93) $(.33) $0.00
Year Ended 10/31/94 9.25 .94 (.93) .01 0.00 0.00
Year Ended 10/31/93 9.25 .87 (.34) .53 (.53) 0.00
Year Ended 10/31/92 9.94 .84 (.86) (.02) (.65) (.02)
Year Ended 10/31/91 9.89 .89 .07 .96 (.90) (.01)
2/5/90++ to 10/31/90 9.77 .74 .12 .86 (.74) 0.00

CLASS C
Six Months Ended 4/30/95
(unaudited) $8.71 $.23 $(1.16) $(.93) $(.33) $0.00
Year Ended 10/31/94 9.25 .58 (.57) .01 0.00 0.00
5/3/93++ to 10/31/93 9.18 .28 .05 .33 (.26) 0.00

MULTI-MARKET STRATEGY
CLASS A
Six Months Ended 4/30/95
(unaudited) $8.04 $.27 $(1.22) $(.95) $(.33) $0.00
Year Ended 10/31/94 8.94 .85 (1.08) (.23) (.09) 0.00
Year Ended 10/31/93 8.85 1.02 (.26) .76 (.67) 0.00
Year Ended 10/31/92 9.91 1.00 (1.23) (.23) (.81) (.02)
5/29/91+ to 10/28/91 10.00 .42 (.09) .33 (.42) 0.00

CLASS B
Six Months Ended 4/30/95
(unaudited) $8.04 $.24 $(1.21) $(.97) $(.30) $0.00
Year Ended 10/31/94 8.94 .88 (1.18) (.30) (.08) 0.00
Year Ended 10/31/93 8.85 .92 (.22) .70 (.61) 0.00
Year Ended 10/31/92 9.91 1.04 (1.34) (.30) (.74) (.02)
5/29/91+ to 10/28/91 10.00 .39 (.09) .30 (.39) 0.00

CLASS C
Six Months Ended 4/30/95
(unaudited) $8.04 $.25 $(1.23) $(.98) $(.30) $0.00
Year Ended 10/31/94 8.94 .46 (.75) (.29) (.09) 0.00
5/3/93++ to 10/31/93 8.76 .32 .16 .48 (.30) 0.00

NORTH AMERICAN GOVERNMENT INCOME
CLASS A
Six Months Ended 5/31/95
(unaudited) $ 8.13 $ .54 $(1.21) $(.67) $(.48) $0.00
Year Ended 11/30/94 10.35 1.02 (2.12) (1.10) (.91) 0.00
Year Ended 11/30/93 9.70 1.09 .66 1.75 (1.09) (.01)
3/27/92+ to 11/30/92 10.00 .69 (.31) .38 (.68) 0.00

CLASS B
Six Months Ended 5/31/95
(unaudited) $ 8.13 $ .51 $(1.21) $(.70) $(.45) $0.00
Year Ended 11/30/94 10.35 .96 (2.13) (1.17) (.84) 0.00
Year Ended 11/30/93 9.70 1.01 .67 1.68 (1.02) (.01)
3/27/92+ to 11/30/92 10.00 .64 (.31) .33 (.63) 0.00

CLASS C
Six Months Ended 5/31/95
(unaudited) $ 8.13 $ .51 $(1.21) $(.70) $(.45) $0.00
Year Ended 11/30/94 10.34 .96 (2.12) (1.16) (.84) 0.00
5/3/93++ to 11/30/93 10.04 .58 .30 .88 (.58) 0.00

GLOBAL DOLLAR GOVERNMENT
CLASS A
Year Ended 8/31/95 $ 9.14 $ .86 $(1.10) $(.24) $(.88) $0.00
2/25/94+ to 8/31/94 10.00 .45 (.86) (.41) (.45) 0.00

CLASS B
Year Ended 8/31/95 $ 9.14 $ .80 $(1.11) $(.31) $(.81) $0.00
2/25/94+ to 8/31/94 10.00 .42 (.86) (.44) (.42) 0.00

CLASS C
Year Ended 8/31/95 $ 9.14 $ .79 $(1.10) $(.31) $(.81) $0.00
2/25/94+ to 8/31/94 10.00 .42 (.86) (.44) (.42) 0.00

CORPORATE BOND
CLASS A
Year Ended 6/30/95 $12.51 $1.19 $ .36 $1.55 $(1.14) $0.00
Year Ended 6/30/94 14.15 1.11 (1.36) (.25) (1.11) (.25)
Year Ended 6/30/93 12.01 1.25 2.13 3.38 (1.24) 0.00
Year Ended 6/30/92 11.21 1.06 .82 1.88 (1.08) 0.00
Year Ended 6/30/91 11.39 1.11 (.06) 1.05 (1.23) 0.00
Year Ended 6/30/90 12.15 1.24 (.86) .38 (1.14) 0.00
Year Ended 6/30/89 11.82 1.12 .32 1.44 (1.11) 0.00
Year Ended 6/30/88 12.24 1.10 (.38) .72 (1.14) 0.00
Nine Months Ended 6/30/87 12.25 .86 (.06) .80 (.81) 0.00
Year Ended 9/30/86 11.52 1.20 .73 1.93 (1.20) 0.00
Year Ended 9/30/85 10.50 1.24 1.04 2.28 (1.26) 0.00

CLASS B
Year Ended 6/30/95 $12.50 $1.11 $ .36 $1.47 $(1.05) $0.00
Year Ended 6/30/94 14.15 1.02 (1.37) (.35) (1.04) (.25)
1/8/93++ to 6/30/93 12.47 .49 1.69 2.18 (.50) 0.00

CLASS C
Year Ended 6/30/95 $12.50 $1.10 $ .38 $1.48 $(1.05) $0.00
Year Ended 6/30/94 14.15 1.02 (1.37) (.35) (1.05) (.25)
5/30/93++ to 6/30/93 13.63 .16 .53 .69 (.17) 0.00
</TABLE>

PLEASE REFER TO THE FOOTNOTES ON PAGE 12.

<TABLE>
<CAPTION>
TOTAL RATIO OF NET
DISTRIBUTIONS INVESTMENT NET ASSETS INVESTMENT
IN EXCESS TOTAL RETURN AT END OF RATIO INCOME
OF NET RETURN DIVIDENDS NET ASSET BASED ON PERIOD OF EXPENSES (LOSS) PORTFOLIO
INVESTMENT OF AND VALUE END NET ASSET (000'S TO AVERAGE TO AVERAGE TURNOVER
NCOME CAPITAL DISTRIBUTIONS OF PERIOD VALUE (B) OMITTED) NET ASSETS NET ASSETS RATE
- -------------- -------- ------------- ---------- ---------- ------------ ------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$0.00 $0.00 $(.36) $ 7.44 (10.52)% $ 377,025 1.29%* 7.32%* 119%
0.00 (.61) (.61) 8.71 .84 593,677 1.13 7.28 109
0.00 0.00 (.60) 9.25 6.67 953,571 1.16 8.26 182
0.00 0.00 (.74) 9.25 .49 1,596,903 1.10 9.00 133
0.00 0.00 (.98) 9.94 10.91 2,199,393 1.09 9.64 146
0.00 0.00 (1.08) 9.89 13.86 1,346,035 1.18 10.81 152
0.00 0.00 (.53) 9.69 5.57 210,294 1.14* 10.83* 10
$0.00 $0.00 $(.33) $ 7.45 (10.76)% $633,287 2.00%* 6.62%* 119%
0.00 (.55) (.55) 8.71 .12 1,003,633 1.85 6.58 109
0.00 0.00 (.53) 9.25 5.91 1,742,703 1.87 7.57 182
0.00 0.00 (.67) 9.25 (.24) 2,966,071 1.81 8.28 133
0.00 0.00 (.91) 9.94 10.11 3,754,003 1.81 8.87 146
0.00 0.00 (.74) 9.89 9.07 1,950,330 1.86* 9.90* 152
$0.00 $0.00 $(.33) $ 7.45 (10.76)% $4,168 1.98%* 6.59%* 119%
0.00 (.55) (.55) 8.71 .12 8,136 1.83 6.50 109
0.00 0.00 (.26) 9.25 3.66 5,538 1.82* 7.19* 182

$0.00 $0.00 $(.33) $ 6.76 (11.83)% $ 33,998 1.59%*(f) 7.80%* 156%
0.00 (.58) (.67) 8.04 (2.64) 52,385 1.41(f) 7.17 605
0.00 0.00 (.67) 8.94 9.01 82,977 1.94(f) 9.17(g) 200
0.00 0.00 (.83) 8.85 (2.80) 141,526 2.53(f) 10.58(g) 239
0.00 0.00 (.42) 9.91 3.68 143,594 2.81*(f) 10.17*(g) 121
$0.00 $0.00 $(.30) $ 6.77 (12.09)% $ 141,783 2.30%*(f) 7.10%* 156%
0.00 (.52) (.60) 8.04 (3.35) 233,896 2.11(f) 6.44 605
0.00 0.00 (.61) 8.94 8.25 431,186 2.64(f) 8.46(g) 200
0.00 0.00 (.76) 8.85 (3.51) 701,465 3.24(f) 9.83(g) 239
0.00 0.00 (.39) 9.91 3.36 662,981 3.53*(f) 9.40*(g) 121
$0.00 $0.00 $(.30) $ 6.76 (12.22)% $856 2.30%*(f) 7.15%* 156%
0.00 (.52) (.61) 8.04 (3.34) 1,252 2.08(f) 6.10% 605%
0.00 0.00 (.30) 8.94 5.54 718 2.44*(f) 7.17*(g) 200

$0.00 $0.00 $(.48) $ 6.98 (7.18)% $ 236,421 2.70%*(f) 17.21%* 60%
0.00 (.21) (1.12) 8.13 (11.32) 303,538 1.70(f) 11.22 131
0.00 0.00 (1.10) 10.35 18.99 268,233 1.61(f) 10.77 254
0.00 0.00 (.68) 9.70 3.49 61,702 2.45*(d)(f) 10.93*(d) 86
$0.00 $0.00 $(.45) $ 6.98 (7.81)% $1,157,639 3.40%*(f) 16.44%* 60%
0.00 (.21) (1.05) 8.13 (11.89) 1,639,602 2.41(f) 10.53 131
0.00 0.00 (1.03) 10.35 18.15 1,313,591 2.31(f) 10.01 254
0.00 0.00 (.63) 9.70 3.30 216,317 3.13*(d)(f) 10.16*(d) 86
$0.00 $0.00 $(.45) $ 6.98 (7.69)% $ 232,577 3.40%*(f) 16.44%* 60%
0.00 (.21) (1.05) 8.13 (11.89) 369,714 2.39(f) 10.46 131
0.00 0.00 (.58) 10.34 9.00 310,230 2.21*(f) 9.74* 254

$0.00 $0.00 $(.88) $ 8.02 (1.48)% $ 12,020 1.93% 11.25% 301%
0.00 0.00 (.45) 9.14 (3.77) 10,995 .75*(d) 9.82* 100
$0.00 $0.00 $(.81) $ 8.02 (2.40)% $ 62,406 2.64%* 10.52% 301%
0.00 0.00 (.42) 9.14 (4.17) 47,030 1.45*(d) 9.11* 100
$0.00 $0.00 $(.81) $ 8.02 (2.36)% $ 9,330 2.63%* 10.46% 301%
0.00 0.00 (.42) 9.14 (4.16) 10,404 1.45*(d) 9.05* 100

$0.00 $0.00 $(1.14) $12.92 13.26% $ 230,750 1.24% 9.70% 387%
(.03) 0.00 (1.39) 12.51 (2.58) 219,182 1.30 7.76 372
0.00 0.00 (1.24) 14.15 29.62 216,171 1.39 9.29 579
0.00 0.00 (1.08) 12.01 17.43 60,356 1.48 8.98 610
0.00 0.00 (1.23) 11.21 9.71 62,268 1.44 9.84 357
0.00 0.00 (1.14) 11.39 3.27 68,049 1.51 10.70 480
0.00 0.00 (1.11) 12.15 12.99 52,381 1.84 9.53 104
0.00 0.00 (1.14) 11.82 6.24 37,587 1.81 9.24 98
0.00 0.00 (.81) 12.24 7.32 41,072 1.27 9.17 95
0.00 0.00 (1.20) 12.25 17.19 45,178 1.08 9.80 240
0.00 0.00 (1.26) 11.52 22.66 40,631 1.15 11.00 142
0.00 0.00 (1.26) 10.50 6.44 36,435 1.18 11.88 10
$0.00 $0.00 $(1.05) $12.92 12.54% $ 241,393 1.99% 9.07% 387%
(.01) 0.00 (1.30) 12.50 (3.27) 184,129 2.00 7.03 372
0.00 0.00 (50) 14.15 17.75 55,508 2.10* 7.18* 579
$0.00 $0.00 $(1.05) $12.93 12.62% $ 51,028 1.84% 8.95% 387%
0.00 0.00 (1.30) 12.50 (3.27) 50,860 1.99 6.98 372
0.00 0.00 (.17) 14.15 5.08 5,115 2.05* 5.51* 579
</TABLE>

PLEASE REFER TO THE FOOTNOTES ON PAGE 12.

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

+ COMMENCEMENT OF OPERATIONS.

++ COMMENCEMENT OF DISTRIBUTION.

* ANNUALIZED.

** REFLECTS NEWLY ADOPTED FISCAL YEAR END.

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

(B) TOTAL INVESTMENT RETURN IS CALCULATED ASSUMING AN INITIAL INVESTMENT MADE
AT THE NET ASSET VALUE AT THE BEGINNING OF THE PERIOD, REINVESTMENT OF ALL
DIVIDENDS AND DISTRIBUTIONS AT THE NET ASSET VALUE DURING THE PERIOD, AND A
REDEMPTION ON THE LAST DAY OF THE PERIOD. INITIAL SALES CHARGE OR CONTINGENT
DEFERRED SALES CHARGE IS NOT REFLECTED IN THE CALCULATION OF TOTAL INVESTMENT
RETURN. TOTAL INVESTMENT RETURNS CALCULATED FOR PERIODS OF LESS THAN ONE YEAR
ARE NOT ANNUALIZED.

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

(D) NET OF EXPENSES ASSUMED AND/OR WAIVED/REIMBURSED. IF SHORT-TERM U.S.
GOVERNMENT HAD BORNE ALL EXPENSES, THE EXPENSE RATIOS WOULD HAVE BEEN WITH
RESPECT TO CLASS A SHARES, 2.20% (ANNUALIZED) FOR 1993, 2.17% FOR THE YEAR
ENDED APRIL 30, 1994, 2.95% (ANNUALIZED) FOR THE PERIOD ENDED AUGUST 31,
1994, 3.71% FOR THE YEAR ENDED AUGUST 31, 1995; WITH
RESPECT TO CLASS B SHARES, 4.81% (ANNUALIZED) FOR 1993, 3.21% FOR THE YEAR
ENDED APRIL 30, 1994, 3.60% (ANNUALIZED) FOR THE PERIOD ENDED AUGUST 31,
1994, 4.33% FOR THE YEAR ENDED AUGUST 31, 1995; AND WITH
RESPECT TO CLASS C SHARES, 3.10% (ANNUALIZED) FOR THE YEAR ENDED APRIL 30,
1994, 3.64% (ANNUALIZED) FOR THE PERIOD ENDED AUGUST 31, 1994, 4.23% FOR THE
YEAR ENDED AUGUST 31, 1995. IF U.S. GOVERNMENT HAD BORNE ALL
EXPENSES, THE EXPENSE RATIOS WOULD HAVE BEEN 1.22% FOR 1986 AND 1.09% FOR 1987.
IF MORTGAGE STRATEGY HAD BORNE ALL EXPENSES, THE EXPENSE RATIOS WOULD HAVE BEEN
WITH RESPECT TO CLASS A SHARES, 1.55% (ANNUALIZED) FOR 1992; AND WITH RESPECT
TO CLASS B SHARES, 2.28% (ANNUALIZED) FOR 1992. THE RATIO OF NET INVESTMENT
INCOME TO AVERAGE NET ASSETS WOULD HAVE BEEN WITH RESPECT TO CLASS A SHARES,
6.47% (ANNUALIZED) FOR 1992; AND WITH RESPECT TO CLASS B SHARES, 5.86%
(ANNUALIZED) FOR 1992. IF WORLD INCOME HAD BORNE ALL EXPENSES, THE EXPENSE
RATIOS WOULD HAVE BEEN 1.87% FOR 1992, 1.92% FOR 1993, 2.08% FOR 1994, AND
3.36% (ANNUALIZED) FOR THE SIX MONTHS ENDED APRIL 30, 1995. IF NORTH AMERICAN
GOVERNMENT INCOME HAD BORNE ALL EXPENSES, THE EXPENSE RATIOS WOULD HAVE BEEN
WITH RESPECT TO CLASS A SHARES, 2.49% (ANNUALIZED) FOR 1992; AND WITH RESPECT
TO CLASS B SHARES, 3.16% (ANNUALIZED) FOR 1992. IF GLOBAL DOLLAR GOVERNMENT HAD
BORNE ALL EXPENSES FOR THE PERIOD FEBRUARY 25, 1994 TO AUGUST 31, 1994, THE
EXPENSE RATIOS WOULD HAVE BEEN WITH RESPECT TO CLASS A SHARES, 1.91%
(ANNUALIZED); WITH RESPECT TO CLASS B SHARES, 2.63% (ANNUALIZED); AND WITH
RESPECT TO CLASS C SHARES, 2.59% (ANNUALIZED).

(E) INCLUDES INTEREST EXPENSES. IF MORTGAGE STRATEGY HAD NOT BORNE INTEREST
EXPENSES, THE RATIO OF EXPENSES TO AVERAGE NET ASSETS WOULD HAVE BEEN WITH
RESPECT TO CLASS A SHARES, 1.42% (ANNUALIZED) FOR 1992, 1.33% FOR 1993, 1.20%
FOR 1994, AND 1.29% (ANNUALIZED) FOR THE SIX MONTHS ENDED APRIL 30, 1995; WITH
RESPECT TO CLASS B SHARES, 2.10% (ANNUALIZED) FOR 1992, 2.07% FOR 1993, 1.91%
FOR 1994, AND 2.00% (ANNUALIZED) FOR THE SIX MONTHS ENDED APRIL 30, 1995; AND
WITH RESPECT TO CLASS C SHARES, 1.74% (ANNUALIZED) FOR 1993 AND 1.89% FOR 1994,
1.99% (ANNUALIZED) FOR THE SIX MONTHS ENDED APRIL 30, 1995.

(F) INCLUDES INTEREST EXPENSES. IF MULTI-MARKET STRATEGY HAD NOT BORNE
INTEREST EXPENSES OR LOAN FEES, THE RATIO OF EXPENSES TO AVERAGE NET ASSETS
WOULD HAVE BEEN WITH RESPECT TO CLASS A SHARES, 1.33% (ANNUALIZED) FOR 1991,
1.33% FOR 1992, 1.40% FOR 1993 AND 1.30% FOR 1994, 1.52% (ANNUALIZED) FOR THE
SIX MONTHS ENDED APRIL 30, 1995; WITH RESPECT TO CLASS B SHARES, 2.05%
(ANNUALIZED) FOR 1991, 2.05% FOR 1992, 2.11% FOR 1993 AND 2.01% FOR 1994, 2.23%
(ANNUALIZED) FOR THE SIX MONTHS ENDED APRIL 30, 1995; AND WITH RESPECT TO CLASS
C SHARES, 2.11% (ANNUALIZED) FOR 1993 AND 1.99% FOR 1994, 2.23% (ANNUALIZED)
FOR THE SIX MONTHS ENDED APRIL 30, 1995. IF NORTH AMERICAN GOVERNMENT INCOME
HAD NOT BORNE INTEREST EXPENSES, THE RATIO OF EXPENSES (NET OF INTEREST
EXPENSES) TO AVERAGE NET ASSETS WOULD HAVE BEEN WITH RESPECT TO CLASS A
SHARES, 1.66% (ANNUALIZED) FOR 1992, 1.33% FOR 1993 AND 1.37% FOR 1994,
1.54% (ANNUALIZED) FOR THE SIX MONTHS ENDED APRIL 30, 1995; WITH RESPECT TO
CLASS B SHARES, 2.35% (ANNUALIZED) FOR 1992, 2.04% FOR 1993 AND 2.07% FOR
1994, 2.25% (ANNUALIZED) FOR THE SIX MONTHS ENDED APRIL 30, 1995; AND WITH
RESPECT TO CLASS C SHARES, 2.04% (ANNUALIZED) FOR 1993 AND 2.06% FOR 1994,
2.25% (ANNUALIZED) FOR THE SIX MONTHS ENDED APRIL 30, 1995.

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

GLOSSARY
_______________________________________________________________________________

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

BONDS are fixed, floating and variable rate debt obligations.

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

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

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

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

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

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

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

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

INTEREST-ONLY or IO securities are debt securities that receive only the
interest payments on an underlying debt that has been structured to have two
classes, one of which is the IO class and another of which is the
PRINCIPAL-ONLY or PO class, which class receives only the principal payments on
the underlying debt obligation. POs are similar to, and are sometimes referred
to as, ZERO COUPON SECURITIES, which are debt securities issued without
interest coupons.

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

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

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

LIBOR is the London Interbank Offered Rate.

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

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

DUFF & PHELPS is Duff & Phelps Credit Rating Co.

FITCH is Fitch Investors Service, Inc.

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

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

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

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

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

COMMISSION is the Securities and Exchange Commission.

DESCRIPTION OF THE FUNDS
_______________________________________________________________________________

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

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

ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
Alliance Short-Term U.S. Government Fund ('Short-Term U.S. Government') seeks
high current income consistent with preservation of capital by investing
primarily in a portfolio of U.S. Government securities. Under normal
circumstances, the Fund maintains an average dollar-weighted portfolio maturity
of not more than three years and invests at least 65% of its total assets in
U.S. Government securities and repurchase agreements and forward commitments
relating to U.S. Government securities. The Fund's investment objective is not
fundamental.

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

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

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

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

MORTGAGE FUNDS
The Mortgage Funds are diversified investment companies that have been designed
to offer investors high current income from investment in mortgage-related
securities.

ALLIANCE MORTGAGE STRATEGY TRUST
Alliance Mortgage Strategy Trust, Inc. ('Mortgage Strategy') seeks the highest
level of current income, consistent with low volatility of net asset value,
that is available from a portfolio of mortgage-related securities of the
highest quality. As a matter of fundamental policy the Fund normally has at
least 65% of the value of its total assets invested in mortgage-related
securities. The Fund will purchase only those mortgage-related securities that
are triple-A securities or U.S. Government securities. The Fund's portfolio is
structured to achieve low volatility of net asset value approximating that of a
portfolio investing exclusively in two-year U.S. Treasury securities. The Fund
invests primarily in ARMS and fixed-rate

mortgage securities and is designed to provide a more consistent and less
volatile net asset value than that characteristic of a mutual fund investing
primarily in fixed-rate mortgage securities and a higher yield than that of a
mutual fund investing in ARMS.

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

Mortgage-related securities in which the Fund may invest include (i)
pass-through mortgage-related securities, including pass-through securities
backed by ARMS and issued by GNMA, FNMA, FHLMC and by private organizations,
(ii) CMOs and multi-class pass-through securities, including floating rate CMOs
that are ARMS, (iii) SMRS, (iv) high coupon fixed-rate mortgage securities, and
(v) foreign mortgage-related securities. For a description of these
mortgage-related securities, see 'Additional Investment Practices-Mortgage-
Related Securities.' The Fund expects that new types of ARMS, other mortgage-
related securities, asset-backed securities and other securities in which the
Fund may invest will be developed from time to time and will consider investing
in such new types of securities.

The Fund may invest up to 35% of its total assets in (i) triple-A asset-backed
securities, (ii) non-mortgage-related U.S. Government securities, including
certain zero coupon Treasury securities, (iii) Treasury securities issued by
private corporate issuers, (iv) qualifying bank deposits, (v) prime commercial
paper or, if not rated, issued by companies which have outstanding triple-A
debt issues and (vi) triple-A debt securities secured by mortgages on
commercial real estate or residential rental properties.

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

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

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

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

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

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

ALLIANCE WORLD INCOME TRUST
ALLIANCE SHORT-TERM MULTI-MARKET TRUST
ALLIANCE MULTI-MARKET STRATEGY TRUST
Alliance World Income Trust, Inc. ('World Income'), Alliance Short-Term Multi-
Market Trust, Inc. ('Short-Term Multi-Market') and Alliance Multi-Market
Strategy Trust, Inc. ('Multi-Market Strategy') each seek the highest level of
current income, consistent with what Alliance considers to be prudent
investment risk, that is available from a portfolio of high quality debt
securities having remaining maturities of not more than, with respect to WORLD
INCOME, one year, with respect to SHORT-TERM MULTI-MARKET, three years, and
with respect to MULTI-MARKET STRATEGY, five years. Each Fund seeks high current
yields by investing in a portfolio of debt securities denominated in the U.S.
Dollar and selected foreign currencies. The Multi-

Market Funds seek investment opportunities in foreign, as well as domestic,
securities markets. WORLD INCOME, which is not a money market fund, will
maintain at least 35% of its net assets in U.S. Dollar-denominated securities.
SHORT-TERM MULTI-MARKET will normally maintain a substantial portion of its
assets in debt securities denominated in foreign currencies but will invest at
least 25% of its net assets in U.S. Dollar-denominated securities. MULTI-MARKET
STRATEGY normally expects to maintain at least 70% of its assets in debt
securities denominated in foreign currencies.

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

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

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

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

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

Each Multi-Market Fund may invest in debt securities issued by supranational
organizations including the World Bank, which was chartered to finance
development projects in developing member countries; the European Union; the
European Coal and Steel Community, which is an economic union of various
European nations' steel and coal industries; and the Asian Development Bank,
which is an international development bank established to lend funds, promote
investment and provide technical assistance to member nations in the Asian and
Pacific regions.

Each Multi-Market Fund seeks to minimize investment risk by limiting its
portfolio investments to debt securities of high quality, and WORLD INCOME will
invest 65% (and normally substantially all) of its total assets in high quality
income-producing debt securities. Accordingly, the Multi-Market Funds'
portfolio securities will consist of (i) U.S. Government securities, (ii) high
quality foreign government securities, (iii) obligations issued by
supranational entities and corporate debt securities having a triple-A rating,
with respect to WORLD INCOME, or a high quality rating, with respect to
SHORT-TERM

MULTI-MARKET and MULTI-MARKET STRATEGY, (iv) certificates of deposit and
bankers' acceptances issued or guaranteed by, or time deposits maintained at,
banks (including foreign branches of foreign banks) having total assets of more
than $1 billion, with respect to WORLD INCOME, or $500 million, with respect to
SHORT-TERM MULTI-MARKET and MULTI-MARKET STRATEGY, and determined by Alliance
to be of high quality, and (v) prime commercial paper or, if not rated,
determined by Alliance to be of equivalent quality and issued by U.S. or
foreign companies having outstanding: in the case of WORLD INCOME, triple-A
rated debt securities; in the case of MULTI-MARKET STRATEGY, high quality debt
securities; and in the case of SHORT-TERM MULTI-MARKET, high grade debt
securities.

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

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

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

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

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

Alliance will actively manage the Fund's assets in relation to market
conditions and general economic conditions and adjust the Fund's investments in
an effort to best enable the Fund to achieve its investment objective. Thus,
the percentage of the Fund's assets invested in a particular country or
denominated in a particular currency will vary in accordance with Alliance's
assessment of the relative yield and appreciation potential of such securities
and the relationship of the country's currency to the U.S. Dollar. The Fund
invests at least, and normally substantially more than, 65% of its total assets
in Government securities. To the extent that its assets are not invested in
Government securities, however, the Fund may invest the balance of its total
assets in investment grade debt securities issued by the governments of
countries located in Central and South America or any of their political
subdivisions, agencies, instrumentalities or authorities, provided that such
securities are denominated in their local currencies. The Fund will not invest
more than 10% of its total assets in debt securities issued by the governmental
entities of any one such country, except that the Fund may invest up to 25% of
its total assets in Argentine Government securities. The Fund will normally
invest at least 65% of its total assets in income-producing securities. For a
general description of Canada, Mexico and Argentina, see Appendix B and the
Fund's Statement of Additional Information.

Canadian Government securities include the sovereign debt of

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

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

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

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

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

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

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

Substantially all of the Fund's assets will be invested in lower-rated
securities, which may include securities having the lowest rating for
non-subordinated debt instruments (i.e., rated C by Moody's or CCC or lower by
S&P, Duff & Phelps and Fitch) and unrated securities of comparable investment
quality. These securities are considered to have extremely poor prospects of
ever attaining any real investment standing, to have a current identifiable
vulnerability to default, to be unlikely to have the capacity to pay interest
and repay principal when due in the event of adverse business, financial or
economic conditions, and/or to be in default or not current in the payment of
interest or principal. For a description of bond ratings, see Appendix A.

The Fund may also invest in investment grade securities. Unrated securities
will be considered for investment by the Fund when Alliance believes that the
financial condition of the issuers of such obligations and the protection
afforded by the terms of the obligations themselves limit the risk to the Fund
to a degree comparable to that of rated securities which are consistent with
the Fund's investment objectives and policies. As of August 31, 1995, the
percentages of the Fund's assets invested in securities rated (or considered by
Alliance to be of equivalent quality to securities rated) in particular rating
categories were ____% in A and above, ____% in Baa or BBB, ____% in Ba or BB,
____% in B, ____% in Caa or CCC, and ____% in non-rated. See 'Risk
Considerations-Securities Ratings,' '-Investment in Fixed-Income Securities
Rated Baa and BBB,' '-Investment in Lower-Rated Fixed-Income Securities' and
Appendix A.

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

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

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

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

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

There is no minimum rating requirement applicable to the Fund's investments in
fixed-income securities, except the Fund expects that it will not retain a
security that is downgraded below B, or if unrated, determined by Alliance to
have undergone similar credit quality deterioration subsequent to purchase.
Currently, the Fund believes its objectives and policies may best be
implemented by investing at least 65% of its total assets in fixed-income
securities considered

investment grade or higher. The remainder of the Fund's assets may be invested
in lower-rated fixed-income securities. See 'Risk Considerations-Securities
Ratings,' '-Investment in Fixed-Income Securities Rated Baa and BBB,'
'-Investment in Lower-Rated Fixed-Income Securities' and Appendix A. During the
fiscal year ended June 30, 1995, on a weighted average basis, the percentages
of the Fund's assets invested in securities rated (or considered by Alliance to
be of equivalent quality to securities rated) in particular rating categories
were ____% in A and above, ____% in Baa or BBB, ____% in Ba or BB, and ____% in
B. The Fund did not invest in securities rated below B by each of Moody's, S&P,
Duff & Phelps and Fitch or, if not rated, considered by Alliance to be of
equivalent quality to securities so rated.

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

The Fund may invest up to 50% of the value of its total assets in foreign debt
securities which will consist primarily of corporate fixed-income securities
and sovereign debt obligations. Not more than 15% of the Fund's total assets
may be invested in these other sovereign debt obligations, which may be lower
rated and considered to be predominantly speculative as regards the issuer's
capacity to pay interest and repay principal.

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

DERIVATIVES. The Funds may use derivatives in furtherance of their investment
objectives. Derivatives are financial contracts whose value depends on, or is
derived from, the value of an underlying asset, reference rate or index. These
assets, rates, and indices may include bonds, stocks, mortgages, commodities,
interest rates, currency exchange rates, bond indices and stock indices.
Derivatives can be used to earn income or protect against risk, or both. For
example, one party with unwanted risk may agree to pass that risk to another
party who is willing to accept the risk, the second party being motivated, for
example, by the desire either to earn income in the form of a fee or premium
from the first party, or to reduce its own unwanted risk by attempting to pass
all or part of that risk to the first party.

Derivatives can be used by investors such as the Funds to earn income and
enhance returns, to hedge or adjust the risk profile of a portfolio, and either
in place of more traditional direct investments or to obtain exposure to
otherwise inaccessible markets. Each of the Funds is permitted to use
derivatives for one or more of these purposes, although most of the Funds
generally use derivatives primarily as direct investments in order to enhance
yields and broaden portfolio diversification. Each of these uses entails
greater risk than if derivatives were used solely for hedging purposes.
Derivatives are a valuable tool which, when used properly, can provide
significant benefit to Fund shareholders. Alliance is not an aggressive user of
derivatives with respect to any of the Funds. However, a Fund may take a
significant position in those derivatives that are within its investment
policies if, in Alliance's judgement, this represents the most effective
response to current or anticipated market conditions. The MULTI-MARKET FUNDS in
particular generally make extensive use of carefully selected forwards and
other derivatives to achieve the currency hedging that is an integral part of
their investment strategy. Alliance's use of derivatives is subject to
continuous risk assessment and control from the standpoint of each Fund's
investment objectives and policies.

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

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

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

the underlying asset (or settle for cash an amount based on an underlying
asset, rate or index).

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

. FORWARDS-A forward contract is an obligation by one party to buy, and the
other party to sell, a specific quantity of an underlying commodity or other
tangible asset for an agreed upon price at a future date. Forward contracts are
customized, privately negotiated agreements designed to satisfy the objectives
of each party. A forward contract usually results in the delivery of the
underlying asset upon maturity of the contract in return for the agreed upon
payment.

. SWAPS-A swap is a customized, privately negotiated agreement that obligates
two parties to exchange a series of cash flows at specified intervals (payment
dates) based upon or calculated by reference to changes in specified prices or
rates (interest rates in the case of interest rate swaps, currency exchange
rates in the case of currency swaps) for a specified amount of an underlying
asset (the 'notional' principal amount). The payment flows are netted against
each other, with the difference being paid by one party to the other. Except
for currency swaps, the notional principal amount is used solely to calculate
the payment streams but is not exchanged. With respect to currency swaps,
actual principal amounts of currencies may be exchanged by the counterparties
at the initiation, and again upon the termination, of the transaction.

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

While the judicious use of derivatives by highly experienced investment
managers such as Alliance can be quite beneficial, derivatives also involve
risks different from, and, in certain cases, greater than, the risks presented
by more traditional investments. Following is a general discussion of important
risk factors and issues concerning the use of derivatives that investors should
understand before investing in a Fund.

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

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

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

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

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

. OTHER RISKS-Other risks in using derivatives include the risk

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

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

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

A Fund may write a put or call option in return for a premium, which is
retained by the Fund whether or not the option is exercised. Except with
respect to uncovered call options written for cross-hedging purposes, none of
the Funds will write uncovered call or put options on securities. A call option
written by a Fund is 'covered' if the Fund owns the underlying security, has an
absolute and immediate right to acquire that security upon conversion or
exchange of another security it holds, or holds a call option on the underlying
security with an exercise price equal to or less than that of the call option
it has written. A put option written by a Fund is covered if the Fund holds a
put option on the underlying securities with an exercise price equal to or
greater than that of the put option it has written.

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

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

SHORT-TERM U.S. GOVERNMENT, MORTGAGE SECURITIES INCOME, NORTH AMERICAN
GOVERNMENT INCOME, GLOBAL DOLLAR GOVERNMENT and CORPORATE BOND generally
purchase or write privately negotiated options on securities. A Fund that
purchases or writes privately negotiated options on securities 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, and Alliance has adopted procedures for monitoring the
creditworthiness of such counterparties. Privately negotiated options purchased
or written by a Fund may be illiquid, and it may not be possible for the Fund
to effect a closing transaction at an advantageous time. See 'Illiquid
Securities' below. Neither MORTGAGE SECURITIES INCOME nor CORPORATE BOND will
purchase an option on a security if, immediately thereafter, the aggregate cost
of all outstanding options purchased by such Fund would exceed 2% of the Fund's
total assets. Nor will either such Fund write an option if, immediately
thereafter, the aggregate value of the Fund's portfolio securities subject to
outstanding options would exceed 15% of the Fund's total assets.

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

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

WARRANTS. GLOBAL DOLLAR GOVERNMENT may invest in warrants, which are option
securities permitting their holders to subscribe for other securities. GLOBAL
DOLLAR GOVERNMENT may invest in warrants for debt securities or for equity
securities that are acquired in connection with debt instruments. Warrants do
not carry with them dividend or voting rights with respect to the underlying
securities, or any rights in the assets

of the issuer. As a result, an investment in warrants may be considered more
speculative than certain other types of investments. In addition, the value of
a warrant does not necessarily change with the value of the underlying
securities, and a warrant ceases to have value if it is not exercised prior to
its expiration date.

FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. Futures contracts that a
Fund may buy and sell may include futures contracts on fixed-income or other
securities or foreign currencies, and contracts based on interest rates or
financial indices, including any index of U.S. Government securities, foreign
government securities or corporate debt securities.

Options on futures contracts are options that call for the delivery upon
exercise of futures contracts. Options on futures contracts written or
purchased by a Fund will be traded on U.S. or foreign exchanges and, except
with respect to SHORT-TERM U.S. GOVERNMENT, will be used only for hedging
purposes.

MORTGAGE STRATEGY, WORLD INCOME, SHORT-TERM MULTI-MARKET, MULTI-MARKET STRATEGY
and NORTH AMERICAN GOVERNMENT INCOME will not enter into a futures contract or
option on a futures contract if immediately thereafter the market values of the
outstanding futures contracts of the Fund and the currencies and futures
contracts subject to outstanding options written by the Fund would exceed 50%
of its total assets. Nor will MORTGAGE STRATEGY, MORTGAGE SECURITIES INCOME,
WORLD INCOME, SHORT-TERM MULTI-MARKET, MULTI-MARKET STRATEGY or NORTH AMERICAN
GOVERNMENT INCOME do so if immediately thereafter the aggregate of initial
margin deposits on all the outstanding futures contracts of the Fund and
premiums paid on outstanding options on futures contracts would exceed 5% of
the market value of the total assets of the Fund. In addition, MORTGAGE
SECURITIES INCOME will not enter into (i) any futures contract other than one
on fixed-income securities or based on interest rates, (ii) any futures
contract if immediately thereafter the sum of the then aggregate futures market
prices of financial instruments required to be delivered under open futures
contract sales and the aggregate futures market prices of instruments required
to be delivered under open futures contract purchases would exceed 30% of the
value of the Fund's total assets, or (iii) options on futures contracts.

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

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. Each Fund that purchases or sells
forward contracts on foreign currencies ('forward contracts') attempts to
minimize the risk to it from adverse changes in the relationship between the
U.S. Dollar and other currencies. A Fund may enter into a forward contract, for
example, when it enters into a contract for the purchase or sale of a security
denominated in a foreign currency in order to 'lock in' the U.S. Dollar price
of the security ('transaction hedge'). When a Fund believes that a foreign
currency may suffer a substantial decline against the U.S. Dollar, it may enter
into a forward sale contract to sell an amount of that foreign currency
approximating the value of some or all of the Fund's portfolio securities
denominated in such foreign currency, or when the Fund believes that the U.S.
Dollar may suffer a substantial decline against a foreign currency, it may
enter into a forward purchase contract to buy that foreign currency for a fixed
dollar amount ('position hedge'). Instead of entering into a position hedge, a
Fund may, in the alternative, enter into a forward contract to sell a different
foreign currency for a fixed U.S. Dollar amount where the Fund believes that
the U.S. Dollar value of the currency to be sold pursuant to the forward
contract will fall whenever there is a decline in the U.S. Dollar value of the
currency in which portfolio securities of the Fund are denominated
('cross-hedge').

FORWARD COMMITMENTS. Forward commitments are forward contracts for the purchase
or sale of securities, including purchases on a 'when-issued' basis or
purchases or sales on a 'delayed delivery' basis. In some cases, a forward
commitment may be conditioned upon the occurrence of a subsequent event, such
as approval and consummation of a merger, corporate reorganization or debt
restructuring or approval of a proposed financing by appropriate authorities
(i.e., a 'when, as and if issued' trade).

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

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

forward commitments under such transactions would be more than 30% of its total
assets.

A Fund's right to receive or deliver a security under a forwaPrd commitment may
be sold prior to the settlement date. The Funds enter into forward commitments,
however, only with the intention of actually receiving securities or delivering
them, as the case may be. If a Fund, however, chooses to dispose of the right
to acquire a when-issued security prior to its acquisition or dispose of its
right to deliver or receive against a forward commitment, it may incur a gain
or loss.

INTEREST RATE TRANSACTIONS (SWAPS, CAPS AND FLOORS). Each Fund that may enter
into interest rate swap, cap or floor transactions expects to do so primarily
for hedging purposes, which may include preserving a return or spread on a
particular investment or portion of its portfolio or protecting against an
increase in the price of securities the Fund anticipates purchasing at a later
date. The Funds do not intend to use these transactions in a speculative manner.

Interest rate swaps involve the exchange by a Fund with another party of their
respective commitments to pay or receive interest (e.g., an exchange of
floating rate payments for fixed rate payments) computed based on a
contractually-based principal (or 'notional') amount. Interest rate swaps are
entered into on a net basis (i.e., the two payment streams are netted out, with
the Fund receiving or paying, as the case may be, only the net amount of the
two payments). Interest rate caps and floors are similar to options in that the
purchase of an interest rate cap or floor entitles the purchaser, to the extent
that a specified index exceeds (in the case of a cap) or falls below (in the
case of a floor) a predetermined interest rate, to receive payments of interest
on a notional amount from the party selling the interest rate cap or floor. A
Fund may enter into interest rate swaps, caps and floors on either an
asset-based or liability-based basis, depending upon whether it is hedging its
assets or liabilities.

There is no limit on the amount of interest rate transactions that may be
entered into by a Fund that is permitted to enter into such transactions.
SHORT-TERM MULTI-MARKET, MULTI-MARKET STRATEGY and NORTH AMERICAN GOVERNMENT
INCOME may enter into interest rate swaps involving payments to the same
currency or in different currencies. SHORT-TERM U.S. GOVERNMENT, MORTGAGE
STRATEGY, MORTGAGE SECURITIES INCOME, GLOBAL DOLLAR GOVERNMENT and CORPORATE
BOND will not enter into an interest rate swap, cap or floor transaction unless
the unsecured senior debt or the claims-paying ability of the other party
thereto is then rated in the highest rating category of at least one nationally
recognized rating organization. Each of SHORT-TERM MULTI-MARKET, MULTI-MARKET
STRATEGY and NORTH AMERICAN GOVERNMENT INCOME will enter into interest rate
swap, cap or floor transactions with its respective custodian, and with other
counterparties, but only if: (i) for transactions with maturities under one
year, such other counterparty has outstanding prime commercial paper; or (ii)
for transactions with maturities greater than one year, the counterparty has
outstanding high quality debt securities.

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

STANDBY COMMITMENT AGREEMENTS. Standby commitment agreements are similar to put
options that commit a Fund, for a stated period of time, to purchase a stated
amount of a security that may be issued and sold to the Fund at the option of
the issuer. The price and coupon of the security are fixed at the time of the
commitment. At the time of entering into the agreement, the Fund is paid a
commitment fee regardless of whether the security ultimately is issued. The
Funds will enter into such agreements only for the purpose of investing in the
security underlying the commitment at a yield and price considered advantageous
and unavailable on a firm commitment basis. The Funds will not enter into
standby commitments with a remaining term in excess of 45 days and will limit
their investments in such commitments so that the aggregate purchase price of
the securities subject to the commitments does not exceed 20% of their
respective assets.

There is no guarantee that the security subject to a standby commitment will be
issued. In addition, the value of the security, if issued, on the delivery date
may be more or less than its purchase price. Since the issuance of the security
is at the option of the issuer, a Fund will bear the risk of capital loss in
the event the value of the security declines and may not benefit from an
appreciation in the value of the security during the commitment period if the
issuer decides not to issue and sell the security to the Fund.

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

purchase such commercial paper for hedging purposes only, not for speculation.

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

Securities representing interests in pools created by private issuers generally
offer a higher rate of interest than securities representing interests in pools
created by governmental issuers because there are no direct or indirect
governmental guarantees of the underlying mortgage payments. However, private
issuers sometimes obtain committed loan facilities, lines of credit, letters of
credit, surety bonds or other forms of liquidity and credit enhancement to
support the timely payment of interest and principal with respect to their
securities if the borrowers on the underlying mortgages fail to make their
mortgage payments. The ratings of such non-governmental securities are
generally dependent upon the ratings of the providers of such liquidity and
credit support and would be adversely affected if the rating of such an
enhancer were downgraded. A Fund may buy mortgage-related securities without
credit enhancement if the securities meet the Fund's investment standards.
Although the market for mortgage-related securities is becoming increasingly
liquid, those of certain private organizations may not be readily marketable.

One type of mortgage-related security is of the 'pass-through' variety. The
holder of a pass-through security is considered to own an undivided beneficial
interest in the underlying pool of mortgage loans and receives a pro rata share
of the monthly payments made by the borrowers on their mortgage loans, net of
any fees paid to the issuer or guarantor of the securities. Prepayments of
mortgages resulting from the sale, refinancing or foreclosure of the underlying
properties are also paid to the holders of these securities, which, as
discussed below, 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 it to be retired substantially earlier
than the stated maturities or final distribution dates. The principal and
interest on the underlying mortgages may be allocated among several classes
of a series of a CMO in many ways. In a common structure, payments of
principal, including any principal prepayments, on the underlying mortgages
are applied to the classes of the series of a CMO in the order of their
respective stated maturities or final distribution dates, so that no payment
of principal will be made on any class of a CMO until all other classes
having an earlier stated maturity or final distribution date have been paid
in full. One or more tranches of a CMO may have coupon rates that reset
periodically, or "float", at a specified increment over an index such as
LIBOR. Floating-rate CMOs may be backed by fixed or adjustable rate
mortgages. To date, fixed-rate mortgages have been more commonly utilized
for this purpose. Floating-rate CMOs are typically issued with lifetime caps
on the coupon rate thereon. These caps, similar to the caps on
adjustable-rate mortgages described below, represent a ceiling beyond which
the coupon rate on a floating-rate CMO may not be increased regardless of
increases in the interest rate index to which the floating-rate CMO is tied.
The collateral securing the CMOs may consist of a pool of mortgages, but may
also consist of mortgage-backed bonds or pass-through securities. CMOs may
be issued by a U.S. Government instrumentality or agency or by a private
issuer. Although payment of the principal of, and interest on, the underlying
collateral securing privately issued CMOs may be guaranteed by GNMA, FNMA or
FHLMC, these CMOs represent obligations solely of the private issuer and are
not insured or guaranteed by GNMA, FNMA, FHLMC, any other governmental
agency or any other person or entity.

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

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

Stripped mortgage-related securities (SMRS) are mortgage-related securities
that are usually structured with two classes of securities collateralized by a
pool of mortgages or a pool of mortgaged-backed bonds or pass-through
securities, with each class receiving different proportions of the principal
and interest payments from the underlying assets. A common type of SMRS has one
class of interest-only securities (IOs) receiving all of the interest payments
from the underlying assets, while the other class of securities, principal-only
securities (POs), receives all of the principal payments from the underlying
assets. IOs and POs are extremely sensitive to interest rate changes and are
more volatile than mortgage-related securities that are not stripped. IOs tend
to decrease in value as interest rates decrease, while POs generally increase
in value as interest rates decrease. If prepayments of the underlying mortgages
are greater than anticipated, the amount of interest earned on the overall pool
will decrease due to the

decreasing principal balance of the assets. Changes in the values of IOs and
POs can be substantial and occur quickly, such as occurred in the first half of
1994 when the value of many POs dropped precipitously due to increases in
interest rates. For this reason, none of the Funds relies on IOs and POs as the
principal means of furthering its investment objective.

The value of mortgage-related securities is affected by a number of factors.
Unlike traditional debt securities, which have fixed maturity dates,
mortgage-related securities may be paid earlier than expected as a result of
prepayment of the underlying mortgages. If property owners make unscheduled
prepayments of their mortgage loans, these prepayments will result in the early
payment of the applicable mortgage-related securities. In that event a Fund may
be unable to invest the proceeds from the early payment of the mortgage-related
securities in an investment that provides as high a yield as the
mortgage-related securities. Consequently, early payment associated with
mortgage-related securities causes 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. During periods of rising interest rates, the rate
of mortgage prepayments usually decreases, thereby tending to increase the life
of mortgage-related securities. If the life of a mortgage-related security is
inaccurately predicted, a Fund may not be able to realize the rate of return it
expected.

As with fixed-income securities generally, the value of mortgage-related
securities can also be adversely affected by increases in general interest
rates relative to the yield provided by such securities. Such adverse effect is
especially possible with fixed-rate mortgage securities. If the yield available
on other investments rises above the yield of the fixed-rate mortgage
securities as a result of general increases in interest rate levels, the value
of the mortgage-related securities will decline. Although the negative effect
could be lessened if the mortgage-related securities were to be paid earlier
(thus permitting a Fund to reinvest the prepayment proceeds in investments
yielding the higher current interest rate), as described above the rate of
mortgage prepayments and early payment of mortgage-related securities generally
tends to decline during a period of rising interest rates.

Although the value of ARMS may not be affected by rising interest rates as much
as the value of fixed-rate mortgage securities is affected by rising interest
rates, ARMS may still decline in value as a result of rising interest rates.
Although, as described above, the yield on ARMS varies with changes in the
applicable interest rate or index, there is often a lag between increases in
general interest rates and increases in the yield on ARMS as a result of
relatively infrequent interest rate reset dates. In addition, adjustable-rate
mortgages and ARMS often have interest rate or payment caps that limit the
ability of the adjustable-rate mortgages or ARMS to fully reflect increases in
the general level of interest rates.

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

OTHER ASSET-BACKED SECURITIES. The securitization techniques used to develop
mortgage-related securities are being applied to a broad range of financial
assets. Through the use of trusts and special purpose corporations, various
types of assets, including automobile loans and leases, credit card
receivables, home equity loans, equipment leases and trade receivables, are
being securitized in structures similar to the structures used in mortgage
securitizations. These asset-backed securities are subject to risks associated
with changes in interest rates and prepayment of underlying obligations similar
to the risks of investment in mortgage-related securities discussed above.

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

U.S. GOVERNMENT SECURITIES. U.S. Government securities may be backed by the
full faith and credit of the United States, supported only by the right of the
issuer to borrow from the U.S. Treasury or backed only by the credit of the
issuing agency itself. These securities include:

(i) the following U.S. Treasury securities, which are backed by the full
faith and credit of the United States and differ only in their interest rates,
maturities and times of issuance: U.S. Treasury bills (maturities of one year
or less with no interest paid and hence issued at a discount and repaid at full
face value upon maturity), U.S. Treasury notes (maturities of one to ten years
with interest payable

every six months) and U.S. Treasury bonds (generally maturities of greater than
ten years with interest payable every six months);

(ii) obligations issued or guaranteed by U.S. Government agencies and
instrumentalities that are supported by the full faith and credit of the U.S.
Government, such as securities issued by GNMA, the Farmers Home Administration,
the Department of Housing and Urban Development, the Export-Import Bank, the
General Services Administration and the Small Business Administration; and

(iii) obligations issued or guaranteed by U.S. Government agencies and
instrumentalities that are not supported by the full faith and credit of the
U.S. Government, such as securities issued by FNMA and FHLMC, and governmental
CMOs.

The maturities of the U.S. Government securities listed in paragraphs (i) and
(ii) above usually range from three months to 30 years. Such securities, except
GNMA certificates, normally provide for periodic payments of interest in fixed
amounts with principal payments at maturity or specified call dates. For
information regarding GNMA, FNMA and FHLMC certificates and CMOs, see
'Mortgage-Related Securities' above.

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

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

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

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

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

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

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

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

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

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

STRUCTURED SECURITIES. Structured securities in which GLOBAL DOLLAR GOVERNMENT
and CORPORATE BOND may invest represent interests in entities organized and
operated solely for the purpose of restructuring the investment characteristics
of sovereign debt obligations, with respect to GLOBAL DOLLAR GOVERNMENT, or
foreign government securities, with respect to CORPORATE BOND. This type of
restructuring involves the deposit with or purchase by an entity, such as a
corporation or trust, of specified instruments (such as commercial bank loans
or Brady Bonds) and the issuance by that entity of one or more classes of
structured securities backed by, or representing interests in, the underlying
instruments. The cash flow on the underlying instruments may be apportioned
among the newly issued structured securities to create securities with
different investment characteristics such as varying maturities, payment
priorities and interest rate provisions, and the extent of the payments made
with respect to structured securities is dependent on the extent of the cash
flow on the underlying instruments. Because structured securities typically
involve no credit enhancement, their credit risk generally will be equivalent
to that of the underlying instruments. Structured securities of a given class
may be either subordinated or unsubordinated to the right of payment of another
class. Subordinated structured securities typically have higher yields and
present greater risks than unsubordinated structured securities. GLOBAL DOLLAR
GOVERNMENT may invest up to 25% of its total assets, and CORPORATE BOND may
invest without limit, in these types of structured securities.

LOAN PARTICIPATIONS AND ASSIGNMENTS. A Fund's investments in loans are expected
in most instances to be in the form of participations in loans and assignments
of all or a portion of loans from third parties. A Fund's investment in loan
participations typically will result in the Fund having a contractual
relationship only with the lender and not with the borrower. A Fund will
acquire participations only if the lender interpositioned between the Fund and
the borrower is a lender having total assets of more than $25 billion and whose
senior unsecured debt is rated investment grade or higher. When a Fund
purchases a loan assignment from a lender it will acquire direct rights against
the borrower on the loan. Because loan assignments are arranged through private
negotiations between potential assignees and potential assignors, however, the
rights and obligations acquired by a Fund as the purchaser of an assignment may
differ from, and be more limited than, those held by the assigning lender. The
assignability of certain sovereign debt obligations, with respect to GLOBAL
DOLLAR GOVERNMENT, or foreign government securities, with respect to CORPORATE
BOND, is restricted by the governing documentation as to the nature of the
assignee such that the only way in which the Fund may acquire an interest in a
loan is through a participation and not an assignment. A Fund may have
difficulty disposing of assignments and participations because to do so it will
have to assign such securities to a third party. Because there is no liquid
market for such securities, such securities 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 securities and a Fund's
ability to dispose of particular assignments or participations 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 assignments and participations 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.

GLOBAL DOLLAR GOVERNMENT may invest up to 25%, and CORPORATE BOND may invest up
to 15%, of their total assets, in loan participations and assignments. The
government that is the borrower on the loan will be considered by a Fund to be
the issuer of a loan participation or assignment for purposes of its
fundamental investment policy that it may not invest 25% or more of its total
assets in securities of issuers conducting their principal business activities
in the same industry (i.e., foreign government).

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

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

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

SHORT SALES. A short sale is effected by selling a security that a Fund does
not own, or if the Fund owns the security, it is not to be delivered upon
consummation of the sale. A short sale is 'against the box' if a Fund owns or
has the right to obtain without payment securities identical to those sold
short. SHORT-TERM U.S. GOVERNMENT and GLOBAL DOLLAR GOVERNMENT each may make
short sales only against the box and only for the purpose of deferring
realization of gain or loss for U.S. federal income tax purposes. In addition,
each of these Funds may not make a short sale if, as a result, more than 10% of
net assets (taken at market value), with respect to GLOBAL DOLLAR GOVERNMENT,
and 10% of total assets, with respect to SHORT-TERM U.S. GOVERNMENT, would be
held as collateral for short sales. If the price of the security sold short
increases between the time of the short sale and the time a Fund replaces the
borrowed security, the Fund will incur a loss; conversely, if the price
declines, the Fund will realize a capital gain. Certain special federal income
tax considerations may apply to short sales entered into by a Fund. See
'Dividends, Distributions and Taxes' in the relevant Fund's Statement of
Additional Information.

REPURCHASE AGREEMENTS. A repurchase agreement arises when a buyer purchases a
security and simultaneously agrees to resell it to the vendor at an agreed-upon
future date, normally a day or a few days later. The resale price is greater
than the purchase price, reflecting an agreed-upon interest rate for the period
the buyer's money is invested in the security. Such agreements permit a Fund to
keep all of its assets at work while retaining 'overnight' flexibility in
pursuit of investments of a longer-term nature. A Fund requires continual
maintenance of collateral in an amount equal to, or in excess of, the resale
price. If a vendor defaults on its repurchase obligation, a Fund would suffer a
loss to the extent that the proceeds from the sale of the collateral were less
than the repurchase price. If a vendor goes bankrupt, a Fund might be delayed
in, or prevented from, selling the collateral for its benefit. There is no
percentage restriction on any Fund's ability to enter into repurchase
agreements, except that SHORT-TERM U.S. GOVERNMENT may enter into repurchase
agreements on not more than 25% of its total assets. The Funds may enter into
repurchase agreements with member banks of the Federal Reserve System or
'primary dealers' (as designated by the Federal Reserve Bank of New York),
although MORTGAGE STRATEGY, WORLD INCOME, SHORT-TERM MULTI-MARKET, MULTI-MARKET
STRATEGY, NORTH AMERICAN GOVERNMENT INCOME and GLOBAL DOLLAR GOVERNMENT
currently enter into repurchase agreements only with their custodians and such
primary dealers.

REVERSE REPURCHASE AGREEMENTS AND DOLLAR ROLLS. Reverse repurchase agreements
involve sales by a Fund of portfolio assets concurrently with an agreement by
the Fund to repurchase the same assets at a later date at a fixed price. During
the reverse repurchase agreement period, the Fund continues to receive
principal and interest payments on these securities. Generally, the effect of
such a transaction is that a Fund can recover all or most of the cash invested
in the

portfolio securities involved during the term of the reverse repurchase
agreement, while it will be able to keep the interest income associated with
those portfolio securities. Such transactions are only advantageous if the
interest cost to a Fund of the reverse repurchase transaction is less than the
cost of otherwise obtaining the cash.

Dollar rolls involve sales by a Fund of securities for delivery in the current
month and the Fund's simultaneously contracting to repurchase substantially
similar (same type and coupon) securities on a specified future date. During
the roll period, a Fund forgoes principal and interest paid on the securities.
A Fund is compensated by the difference between the current sales price and the
lower forward price for the future purchase (often referred to as the 'drop')
as well as by the interest earned on the cash proceeds of the initial sale.

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

Reverse repurchase agreements and dollar rolls are speculative techniques and
are considered borrowings by the Funds. SHORT-TERM U.S. GOVERNMENT may enter
into reverse repurchase agreements with commercial banks and registered
broker-dealers in order to increase income, in an amount up to 33-1/3% of its
total assets. Under normal circumstances, MORTGAGE STRATEGY does not expect to
engage in reverse repurchase agreements and dollar rolls with respect to
greater than 50% of its total assets. Reverse repurchase agreements and dollar
rolls together with any borrowings by GLOBAL DOLLAR GOVERNMENT will not exceed
33% of its total assets less liabilities (other than amounts borrowed). See
'Risk Considerations-Effects of Borrowing.'

LOANS OF PORTFOLIO SECURITIES. A Fund may make secured loans of portfolio
securities to brokers, dealers and financial institutions, provided that cash,
liquid high-grade debt securities or bank letters of credit equal to at least
100% of the market value of the securities loaned is deposited and maintained
by the borrower with the Fund. The risks in lending portfolio securities, as
with other extensions of credit, consist of possible loss of rights in the
collateral should the borrower fail financially. In determining whether to lend
securities to a particular borrower, Alliance will consider all relevant facts
and circumstances, including the creditworthiness of the borrower. While
securities are on loan, the borrower will pay the Fund any income earned
thereon and the Fund may invest any cash collateral in portfolio securities,
thereby earning additional income, or receive an agreed upon amount of income
from a borrower who has delivered equivalent collateral. Each Fund will have
the right to regain record ownership of loaned securities or equivalent
securities in order to exercise ownership rights such as voting rights,
subscription rights and rights to dividends, interest or distributions. A Fund
may pay reasonable finders', administrative and custodial fees in connection
with a loan. A Fund will not lend portfolio securities in excess of 25%, with
respect to SHORT-TERM U.S. GOVERNMENT, and 20%, with respect to each of
MORTGAGE STRATEGY, MORTGAGE SECURITIES INCOME, WORLD INCOME, SHORT-TERM
MULTI-MARKET, MULTI-MARKET STRATEGY, NORTH AMERICAN GOVERNMENT INCOME and
GLOBAL DOLLAR GOVERNMENT, of its total assets, nor will a Fund lend portfolio
securities to any officer, director, employee or affiliate of the Fund or
Alliance.

ILLIQUID SECURITIES. Subject to any more restrictive applicable investment
policies, none of the Funds will maintain more than 15% of its net assets in
illiquid securities. Illiquid securities generally include (i) direct
placements or other securities that are subject to legal or contractual
restrictions on resale or for which there is no readily available market (e.g.,
when trading in the security is suspended or, in the case of unlisted
securities, when market makers do not exist or will not entertain bids or
offers), including many currency swaps and any assets used to cover currency
swaps, (ii) over-the-counter options and assets used to cover over-the-counter
options, and (iii) repurchase agreements not terminable within seven days. Rule
144A securities that have legal or contractual restrictions on resale but have
a readily available market are not deemed illiquid. Alliance will monitor the
liquidity of each Fund's Rule 144A portfolio securities under the supervision
of the Directors of that Fund. A Fund that invests in illiquid securities may
not be able to sell such securities and may not be able to realize their full
value upon sale.

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

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

DEFENSIVE POSITION. For temporary defensive purposes, each Fund may invest in
certain types of short-term, liquid, high grade or high quality (depending on
the Fund) debt securities.

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

PORTFOLIO TURNOVER. Portfolio turnover rates are set forth under 'Financial
Highlights.' These rates of portfolio turnover are greater than those of most
other investment companies. A high rate of portfolio turnover involves
correspondingly greater brokerage and other expenses than a lower rate, which
must be borne by the Fund and its shareholders. High portfolio turnover also
may result in the realization of substantial net short-term capital gains. See
'Dividends, Distributions and Taxes' in each Fund's Statement of Additional
Information.

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

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

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

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

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

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

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

MULTI-MARKET STRATEGY may not (i) invest 25% or more of its total assets in
securities of companies engaged principally in any one industry other than the
banking industry, except that this restriction does not apply to U.S.
Government securities, (ii) borrow money, except the Fund may, in accordance
with provisions of the 1940 Act, (a) borrow from a bank, if after such
borrowing, there is asset coverage of at least 300% as defined in the 1940 Act,
and (b) borrow for temporary or emergency purposes in an amount not exceeding
5% of the value of the total assets of the Fund, or (iii) pledge, hypothecate,
mortgage or otherwise encumber its assets, except to secure permitted
borrowings.

NORTH AMERICAN GOVERNMENT INCOME may not (i) invest 25% or more of its total
assets in securities of companies engaged principally in any one industry
except that this restriction does not apply to U.S. Government securities, (ii)
borrow money, except that the Fund may, in accordance with provisions of the
1940 Act, (a) borrow from a bank, if after such borrowing, there is asset
coverage of at least 300% as defined in the 1940 Act, and (b) borrow for
temporary or emergency purposes in an amount not exceeding 5% of the value of
the total assets of the Fund, or (iii) pledge, hypothecate, mortgage or
otherwise encumber its assets, except to secure permitted borrowings.

GLOBAL DOLLAR GOVERNMENT may not (i) invest 25% or more of its total assets in
the securities of issuers conducting their principal business activities in any
one industry, except that this restriction does not apply to U.S. Government
securities, (ii) purchase more than 10% of any class of the voting securities
of any one issuer, (iii) borrow money, except the Fund may, in accordance with
provisions of the 1940 Act, (a) borrow from a bank, if after such borrowing,
there is asset coverage of at least 300% as defined in the 1940 Act, and (b)
borrow for temporary or emergency purposes in an amount not exceeding 5% of the
value of the total assets of the Fund, (iv) pledge, hypothecate, mortgage or
otherwise encumber its assets, except to secure permitted borrowings, or (v)
purchase a security if, as a result (unless the security is acquired pursuant
to a plan of reorganization or an offer of exchange), the Fund would own more
than 3% of the total outstanding voting stock of any investment company or more
than 5% of the value of the Fund's net assets would be invested in securities
of any one or more investment companies.

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

RISK CONSIDERATIONS
FIXED-INCOME SECURITIES. The value of each Fund's shares will fluctuate with
the value of its investments. The value of each Fund's investments will change
as the general level of interest rates fluctuates. During periods of falling
interest rates, the values of a Fund's securities generally rise. Conversely,
during periods of rising interest rates, the values of a Fund's securities
generally decline.

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

U.S. CORPORATE FIXED-INCOME SECURITIES. The U.S. corporate fixed-income
securities in which GLOBAL DOLLAR GOVERNMENT 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. Finally, 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, a Fund whose investment portfolio includes such
securities may experience greater price volatility and significantly lower
liquidity than a portfolio invested solely in securities of U.S. companies.
These markets may be subject to greater influence by adverse events
generally affecting the market, and by large investors trading significant
blocks of securities, than is usual in the United States. Securities
settlements may in some instances be subject to

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

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

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

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

CURRENCY CONSIDERATIONS. Those Funds that invest some portion of their assets
in securities denominated in, and receive revenues in, foreign currencies will
be adversely affected by reductions in the value of those currencies relative
to the U.S. Dollar. These changes will affect a Fund's net assets,
distributions and income. If the value of the foreign currencies in which a
Fund receives income falls relative to the U.S. Dollar between receipt of the
income and the making of Fund distributions, a Fund may be required to
liquidate securities in order to make distributions if the Fund has
insufficient cash in U.S. Dollars to meet the distribution requirements that
the Fund must satisfy to qualify as a regulated investment company for federal
income tax purposes. Similarly, if an exchange rate declines between the time a
Fund incurs expenses in U.S. Dollars and the time cash expenses are paid, the
amount of the currency required to be converted into U.S. Dollars in order to
pay expenses in U.S. Dollars could be greater than the equivalent amount of
such expenses in the currency at the time they were incurred. In light of these
risks, a Fund may engage in certain currency hedging transactions, which
themselves, involve certain special risks. See 'Additional Investment
Practices' above.

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

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

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

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

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

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

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

In the event of an increase in rates on U.S. Government securities or other
changed market conditions, to the point where leverage by either MULTI-MARKET
STRATEGY or NORTH

AMERICAN GOVERNMENT INCOME could adversely affect the Funds' shareholders, as
noted above, or in anticipation of such changes, either Fund may increase the
percentage of its investment portfolio invested in U.S. Government securities,
which would tend to offset the negative impact of leverage on Fund
shareholders. Either Fund may also reduce the degree to which it is leveraged
by repaying amounts borrowed.

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

Each of MULTI-MARKET STRATEGY, NORTH AMERICAN GOVERNMENT INCOME and GLOBAL
DOLLAR GOVERNMENT may also borrow to repurchase its shares or to meet
redemption requests. In addition, each Fund may borrow for temporary purposes
(including the purposes mentioned in the preceding sentence) in an amount not
exceeding 5% of the value of the assets of the Fund. Borrowings for temporary
purposes are not subject to the 300% asset average limit described above. See
'Certain Fundamental Investment Policies.' SHORT-TERM U.S. GOVERNMENT,
MULTI-MARKET STRATEGY, NORTH AMERICAN GOVERNMENT INCOME and GLOBAL DOLLAR
GOVERNMENT may also borrow through the use of reverse repurchase agreements,
and GLOBAL DOLLAR GOVERNMENT also through the use of dollar rolls to the extent
permitted by the 1940 Act. See 'Investment Objectives and Policies-Reverse
Repurchase Agreements and Dollar Rolls.'

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

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

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

INVESTMENT IN LOWER-RATED FIXED-INCOME SECURITIES. Lower-rated securities are
subject to greater risk of loss of principal and interest than higher-rated
securities. They are also generally considered to be subject to greater market
risk than higher-rated securities, and the capacity of issuers of lower-rated
securities to pay interest and repay principal is more likely to weaken than is
that of issuers of higher-rated securities in times of deteriorating economic
conditions or rising interest rates. In addition, lower-rated securities may be
more susceptible to real or perceived adverse economic conditions than
investment grade securities, although the market values of securities rated
below investment grade and comparable unrated securities tend to react less to
fluctuations in interest rate levels than do those of higher-rated securities.

Securities rated Ba or BB are judged to have speculative elements or to be
predominantly speculative with respect to the issuer's ability to pay interest
and repay principal. Securities rated B are judged to have highly speculative
elements or to be predominantly speculative. Such securities may have small
assurance of interest and principal payments. Securities rated Baa by Moody's
are also judged to have speculative characteristics.

The market for lower-rated securities may be thinner and less active than that
for higher-rated securities, which can adversely affect the prices at which
these securities can be sold. To the extent that there is no established
secondary market for lower-rated securities, a Fund may experience difficulty
in valuing such securities and, in turn, the Fund's assets. Under the Financial
Institutions Reform, Recovery, and Enforcement Act of 1989, federally-insured
savings and loan associations were required to have divested their investments
in non-investment grade corporate debt securities by July 1, 1994. Such
divestiture and continuing restrictions on the ability of such associations to
acquire lower-rated securities could have a material adverse effect on the
market and prices of such securities.

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

NON-RATED SECURITIES. Non-rated securities will also be considered for
investment by NORTH AMERICAN GOVERNMENT INCOME, GLOBAL DOLLAR GOVERNMENT and
CORPORATE BOND when Alliance believes that the financial condition of the
issuers of such securities, or the protection afforded by the terms of the
securities themselves, limits the risk to the Fund to a degree comparable to
that of rated securities which are consistent with the Fund's objective and
policies.

NON-DIVERSIFIED STATUS. Each of WORLD INCOME, SHORT-TERM MULTI-MARKET,
MULTI-MARKET STRATEGY, NORTH AMERICAN GOVERNMENT INCOME and GLOBAL DOLLAR
GOVERNMENT is a 'non-diversified' investment company, which means the Fund is
not limited in the proportion of its assets that may be invested in the
securities of a single issuer. However, each Fund intends to conduct its
operations so as to qualify to be taxed as a 'regulated investment company' for
purposes of the Code, which will relieve the Fund of any liability for federal
income tax to the extent its earnings are distributed to shareholders. See
'Dividends, Distributions and Taxes' in each Fund's Statement of Additional
Information. To so qualify, among other requirements, each Fund will limit its
investments so that, at the close of each quarter of the taxable year, (i) not
more than 25% of the Fund's total assets will be invested in the securities of
a single issuer, and (ii) with respect to 50% of its total assets, not more
than 5% of its total assets will be invested in the securities of a single
issuer and the Fund will not own more than 10% of the outstanding voting
securities of a single issuer. A Fund's investments in U.S. Government
securities are not subject to these limitations. Because each of WORLD INCOME,
SHORT-TERM MULTI-MARKET, MULTI-MARKET STRATEGY, NORTH AMERICAN GOVERNMENT
INCOME and GLOBAL DOLLAR GOVERNMENT is a non-diversified investment company, it
may invest in a smaller number of individual issuers than a diversified
investment company, and an investment in such Fund may, under certain
circumstances, present greater risk to an investor than an investment in a
diversified investment company.

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

PURCHASE AND SALE OF SHARES
_______________________________________________________________________________

HOW TO BUY SHARES
You can purchase shares of any of the Funds through broker-dealers, banks or
other financial intermediaries, or directly through Alliance Fund Distributors,
Inc. ('AFD'), each Fund's principal underwriter. The minimum initial investment
in each Fund is $250. The minimum for subsequent investments in each Fund is
$50. Investments of $25 or more are allowed under the automatic investment
program of each Fund. Share certificates are issued only upon request. See the
Subscription Application and Statements of Additional Information for more
information.

Each Fund offers three classes of shares, Class A, Class B and Class C, except
that WORLD INCOME offers only one class of

shares that you can purchase without any initial sales charge or contingent
deferred sales charge ('CDSC').

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

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

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

CLASS B SHARES-DEFERRED SALES CHARGE ALTERNATIVE
You can purchase Class B shares at net asset value without an initial sales
charge. However, you may pay a CDSC if you redeem shares within three years
after purchase. Shares obtained from dividend or distribution reinvestment are
not subject to the CDSC. The amount of the CDSC (expressed as a percentage of
the lesser of the current net asset value or original cost) will vary according
to the number of years from the purchase of Class B shares until the redemption
of those shares. The amount of the CDSC for each Fund is as set forth below.
Class B shares of a Fund purchased prior to the date of this Prospectus may be
subject to a different CDSC schedule, which was disclosed in the Fund's
prospectus in use at the time of purchase and is set forth in the Fund's
current Statement of Additional Information.

Year Since Purchase CDSC
-----------------------------
First 3.0%
Second 2.0%
Third 1.0%
Thereafter None

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

CLASS C SHARES-ASSET-BASED SALES CHARGE ALTERNATIVE
You can purchase Class C shares without any initial sales charge or a CDSC. A
Fund will thus receive the full amount of your purchase, and 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.

APPLICATION OF THE CDSC
Shares obtained from dividend or distribution reinvestment are not subject to
the CDSC on Class A and Class B shares. 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
systematic withdrawal plan. See the Statements of
Additional Information.

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

GENERAL
The decision as to which class of shares is more 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 are no initial or contingent deferred sales charges. Consult your
financial agent. Dealers and agents may receive differing compensation for
selling Class A, Class B or Class C shares. There is no size limit on purchases
of Class A shares. The maximum purchase of Class B shares is $250,000. The
maximum purchase of Class C shares is $5,000,000. The Funds may refuse any
order to purchase shares.

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 Equico Securities, Inc., an affiliate of AFD, in connection with the
sale of shares of the Funds. Such additional amounts may be utilized, in whole
or in part, in some cases together with other revenues of such dealers or
agents, to provide additional compensation to registered representatives who
sell shares of the Funds. On some occasions, such cash or other incentives will
be conditioned upon the sale of a specified minimum dollar amount of the shares
of a Fund and/or other Alliance Mutual Funds during a specific period of time.
Such incentives may

take the form of payment for attendance at seminars, meals, sporting events or
theater performances, or payment for travel, lodging and entertainment incurred
in connection with travel by persons associated with a dealer or agent and
their immediate family members to urban or resort locations within or outside
the United States. Such dealer or agent may elect to receive cash incentives of
equivalent amount in lieu of such payments.

HOW TO SELL SHARES
You may 'redeem', i.e., sell your shares in a Fund to the Fund on any day the
Exchange is open, either directly or through your financial intermediary. The
price you will receive is the net asset value (less any applicable CDSC for
Class B shares) next calculated after the Fund receives your request in proper
form. Proceeds generally will be sent to you within seven days. However, for
shares recently purchased by check or electronic funds transfer, a Fund will
not send proceeds until it is reasonably satisfied that the check or electronic
funds transfer has been collected (which may take up to 15 days).

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

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

Alliance Fund Services
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 by
a shareholder who has completed the Subscription Application or an 'Autosell'
application obtained from AFS. Telephone redemption requests must be for at
least $500 and may not exceed $100,000, and must be made between 9 a.m. and 4
p.m. Eastern time on a Fund business day. Proceeds of telephone redemptions
will be sent by electronic funds transfer. Proceeds of telephone redemptions
also may be sent by check to a shareholder's address of record, but only once
in any 30-day period and in an amount not exceeding $50,000. Telephone
redemption by check is not available for shares purchased within 15 calendar
days prior to the redemption request, 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, a Fund may suspend redemptions or postpone payment for
up to seven days or longer, as permitted by federal securities law. The Funds
reserve the right to close an account that through redemption has remained
below $200 for 90 days. Shareholders will receive 60 days' written notice to
increase the account value before the account is closed.

During drastic economic or market developments, you might have difficulty
reaching AFS by telephone, in which event you should issue written instructions
to AFS. AFS is not responsible for the authenticity of telephonic requests to
purchase, sell or exchange shares. AFS will employ reasonable procedures to
verify that telephone requests are genuine, and could be liable for losses
resulting from unauthorized transactions if it failed to do so. Dealers and
agents may charge a commission for handling telephonic requests. The telephone
service may be suspended or terminated at any time without notice.

SHAREHOLDER SERVICES
AFS offers a variety of shareholder services. For more information about these
services or your account, call AFS's toll-free number, 800-221-5672. Some
services are described in the attached Application. A shareholder's manual
explaining all available services will be provided upon request. To request a
shareholder manual, call 800-227-4618.

HOW TO EXCHANGE SHARES
You may exchange your shares of WORLD INCOME for Class A shares of other
Alliance Mutual Funds and shares of most Alliance money market funds. You may
exchange your shares of any other Fund for shares of the same class of other
Alliance Mutual Funds (including AFD Exchange Reserves, a money market fund
managed by Alliance). Exchanges of shares are made at the net asset values next
determined, without sales or service charges. Exchanges may be made by
telephone or written request.

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

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

MANAGEMENT OF THE FUNDS
_______________________________________________________________________________

ADVISER

Alliance, which is a Delaware limited partnership with principal offices at
1345 Avenue of the Americas, New York, New York 10105, has been retained under
an advisory agreement (the 'Advisory Agreement') to provide investment advice
and, in general, to conduct the management and investment program of each Fund,
subject to the general supervision and control of the Directors or Trustess of
the Fund.

Alliance is a leading international investment manager supervising client
accounts with assets as of September 30, 1995 totaling more than $140 billion
(of which more than $44 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 51 registered investment companies managed by Alliance
comprising 105 separate investment portfolios currently have over two million
shareholders. As of September 30, 1995, Alliance was retained as an investment
manager for 29 of the Fortune 100 companies.

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

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

Principal occupation
Employee; time period; during the past
Fund title with ACMC five years
- -------------------------------------------------------------------------------

Short-Term Patricia J. Young since 1995 Associated with
Government -Senior Vice President Alliance since
March 1992;
prior thereto, a
managing director
and portfolio
manager for
Hyperion Capital
since March
1991 and a
managing director
with Fischer, Francis,
Trees & Watts

Paul A. Ullman Associated with
since 1995 Alliance since
March 1992; prior
thereto, a director and
portfolio manager for
Hyperion Capital since
July 1990 and a
Vice President at
Salomon Brothers Inc.

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

Paul J. DeNoon since Associated with Alliance
January 1992- since January 1992;
Vice President prior thereto, a
Vice President at
Manufacturers
Hanover Trust

Mortgage Strategy Patricia J. Young since (see above)
inception-(see above)

Paul A. Ullman (see ablve)
since inception-
(see above)

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

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

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

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

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

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

Corporate Bond Wayne D. Lyski since (see above)
1987-(see above)
Paul J. DeNoon since (see above)
January 1992-(see above)

DISTRIBUTION SERVICES AGREEMENTS

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

assets, for distribution expenses. The Trustees of SHORT-TERM U.S. GOVERNMENT
currently limit payments with respect to Class A shares under the Plan to .30%
of the Fund's aggregate average daily net assets attributable to Class A
shares. The Plans provide that a portion of the distribution services fee in an
amount not to exceed .25% of the aggregate average daily net assets of each
Fund attributable to each class of shares constitutes a service fee used for
personal service and/or the maintenance of shareholder accounts.

The Plans provide that AFD will use the distribution services fee received from
a Fund in its entirety for payments (i) to compensate broker-dealers or other
persons for providing distribution assistance, (ii) to otherwise promote the
sale of shares of the Fund, and (iii) to compensate broker-dealers, depository
institutions and other financial intermediaries for providing administrative,
accounting and other services with respect to the Fund's shareholders. In this
regard, some payments under the Plans are used to compensate financial
intermediaries with trail or maintenance commissions in an amount equal to,
with respect to each Fund other than WORLD INCOME, .25%, annualized, with
respect to Class A shares and Class B shares, and 1.00%, annualized, with
respect to Class C shares, and, with respect to WORLD INCOME, .90%, annualized,
of the assets maintained in a Fund by their customers. Distribution services
fees received from WORLD INCOME and the other Funds, except SHORT-TERM U.S.
GOVERNMENT, with respect to Class A shares will not be used to pay any interest
expenses, carrying charges or other financing costs or allocation of overhead
of AFD. Distribution services fees received from the Funds, with respect to
Class B and Class C shares, may be used for these purposes. The Plans also
provide that Alliance may use its own resources to finance the distribution of
each Fund's shares.

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

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

Amount of Unreimbursed Distribution Expenses
(as % of Net Assets of Class)
------------------------------------------------------
Class B Class C
- --------------------------------------------------------------------------------
Short-Term U.S. Government $ 348,789 (5.47%) $ 500,617 (9.67%)
U.S. Government $13,511,108 (1.74%) $2,224,264 (1.22%)
Mortgage Strategy. $ 1,042,848 (.76%) $1,875,176 (1.32%)
Mortgage Securities Income $16,372,116 (1.78%) $1,459,018 (2.50%)
Short-Term Multi-Market $12,115,694 (1.20%) $ 798,673 (9.82%)
Multi-Market Strategy $ 7,254,301 (3.10%) $ 286,168 (22.90%)
North American Government Income $29,558,594 (1.80%) $2,355,558 (.64%)
Global Dollar Government $ 1,832,297 (2.94%) $ 174,111 (1.86%)
Corporate Bond $ 5,476,418 (2.27%) $ 607,167 (1.19%)

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

The Glass-Steagall Act and other applicable laws may limit the ability of a
bank or other depository institution to become an underwriter or distributor of
securities. However, in the opinion of the Funds' management, based on the
advice of counsel, these laws do not prohibit such depository institutions from
providing services for investment companies such as the administrative,
accounting and other services referred to in the Agreements. In the event that
a change in these laws prevented a bank from providing such services, it is
expected that other service arrangements would be made and that shareholders
would not be adversely affected. The State of Texas requires that shares of a
Fund may be sold in that state only by dealers or other financial institutions
that are registered there as broker-dealers.

DIVIDENDS, DISTRIBUTIONS AND TAXES
_______________________________________________________________________________

DIVIDENDS AND DISTRIBUTIONS

Dividends on shares of a Fund will be declared on each Fund business day from
the Fund's net investment income. Dividends on shares for Saturdays, Sundays
and holidays will be declared on the previous business day. Each Fund pays
dividends on its shares after the close of business on the 20th

day of each month or, if such day is not a business day, the first business day
thereafter. At your election (which you may change at least 30 days prior to
the record date for a particular dividend or distribution), dividends and
distributions are paid in cash or reinvested in additional shares without
charge.

If you receive an income dividend or capital gains distribution in cash you
may, within 30 days following the date of its payment, reinvest the dividend or
distribution in additional shares of that Fund 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 that Fund.

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

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

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

U.S. FEDERAL INCOME TAXES
Each Fund intends to qualify to be taxed as a 'regulated investment company'
under the Code. To the extent that a Fund distributes its taxable income and
net capital gain to its shareholders, qualification as a regulated investment
company relieves that 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 from certain
Funds may be eligible for the dividends-received deduction, except that the
amount eligible for the deduction is limited to the amount of qualifying
dividends received by the Fund. A corporation's dividends-received deduction
will be disallowed unless the corporation holds shares in the Fund at least 46
days. Furthermore, the dividends-received deduction will be disallowed to the
extent a corporation's investment in shares of a Fund is financed with
indebtedness.

The excess of net long-term capital gains over the net short-term capital
losses realized and distributed by each 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 a Fund during October, November or December of a
year to shareholders of record as of a specified date in such a month that is
paid during January of the following year is includable in the prior year's
taxable income of shareholders that are calendar year taxpayers.

Any dividend or distribution received by a shareholder on shares of a Fund will
have the effect of reducing the net asset value of such shares by the amount of
such dividend or distribution. Furthermore, a dividend or distribution made
shortly after the purchase of such shares by a shareholder, although in effect
a return of capital to that particular shareholder, would be taxable to him or
her as described above. 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 a Fund held
by a tax-deferred or qualified plan, such as an individual retirement account,
403(b)(7) retirement plan or corporate pension or profit-sharing plan, will not
be taxable to the plan. Distributions from such plans will be taxable to
individual participants under applicable tax rules without regard to the
character of the income earned by the qualified plan.

Distributions by a Fund may be subject to state and local taxes. U.S.
GOVERNMENT, MORTGAGE STRATEGY, MORTGAGE SECURITIES INCOME, WORLD INCOME,
SHORT-TERM MULTI-MARKET, MULTI-MARKET STRATEGY, NORTH AMERICAN GOVERNMENT
INCOME and CORPORATE BOND are qualified to do business in the Commonwealth of
Pennsylvania and, therefore, are subject to the Pennsylvania foreign franchise
and corporate net income tax in respect of their business activities in
Pennsylvania. Accordingly, shares of such Funds are exempt from Pennsylvania
personal property taxes. These Funds anticipate continuing such business
activities but reserve the right to

suspend them at any time, resulting in the termination of the exemptions.

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

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

GENERAL INFORMATION
_______________________________________________________________________________

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

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

It is anticipated that annual shareholder meetings will not be held;
shareholder meetings will be held only when required by federal, or in the case
of the Funds organized as Maryland corporations, state law. Shareholders have
available certain procedures for the removal of Directors.

A shareholder in a Fund will be entitled to his or her pro rata share of all
dividends and distributions arising from the Fund's assets and, upon redeeming
shares, will receive the then current net asset value of the Fund represented
by the redeemed shares less any applicable CDSC. The Funds are empowered to
establish, without shareholder approval, additional portfolios, which may have
different investment objectives, and additional classes of shares. If an
additional portfolio or class were established in a Fund, each share of the
portfolio or class would normally be entitled to one vote for all purposes.
Generally, shares of each portfolio and class would vote together as a single
class on matters, such as the election of Directors, that affect each portfolio
and class in substantially the same manner. Class A, Class B and Class C shares
have identical voting, dividend, liquidation and other rights, except that each
class bears its own distribution and transfer agency expenses. Each class of
shares votes separately with respect to a Fund's Rule 12b-1 distribution plan
and other matters for which separate class voting is appropriate under
applicable law. Shares are freely transferable, are entitled to dividends as
determined by the Directors and, in liquidation of a Fund, are entitled to
receive the net assets of the Fund. Since this Prospectus sets forth
information about all the Funds, it is theoretically possible that a Fund might
be liable for any materially inaccurate or incomplete disclosure in this
Prospectus concerning another Fund. Based on the advice of counsel, however,
the Funds believe that the potential liability of each Fund with respect to the
disclosure in this Prospectus extends only to the disclosure relating to that
Fund. Certain additional matters relating to a Fund's organization are
discussed in its Statement of Additional Information.

PENDING LEGAL PROCEEDINGS INVOLVING NORTH AMERICAN GOVERNMENT INCOME
On July 25, 1995; a Consolidated and Supplemental Class Action Complaint
('Complaint') styled IN RE ALLIANCE NORTH AMERICAN GOVERNMENT INCOME TRUST,
INC. SECURITIES LITIGATION was filed in the United States District Court for
the Southern District of New York against the Fund, Alliance, ACMC, AFD, The
Equitable Companies Incorporated, a parent of Alliance, certain officers of the
Fund, certain current and former directors of the Fund, certain current and
former officers of ACMC and certain directors of ACMC; alleging violations of
federal securities laws, fraud and breach of fiduciary duty in connection with
the Fund's investments in Mexican and Argentine securities. The Complaint seeks
certification of a plaintiff class of all persons who purchased or owned Class
A, B or C shares of the Fund from March 27, 1992 through December 23, 1994. The
Complaint alleges that as of the date of the Complaint, the Fund's losses
exceeded $750,000,000. The Complaint seeks as relief unspecified damages,
costs and attorneys' fees.

The principal allegations of the Complaint are that upon the advice of Alliance
the Fund purchased debt securities issued by the Mexican and Argentine
governments in amounts that were not permitted by the Fund's investment
objective, and that there was no shareholder vote to change the investment
objective to permit purchases in such amounts. The Complaint further alleges
that the decline in the value of the Mexican and Argentine securities held by
the Fund caused the Fund's net asset value to decline to the detriment of the
Fund's shareholders.
On September 26, 1995, defendants jointly filed a motion to dismiss the
Complaint in its entirety. The Fund and Alliance believe that the allegations
in the Complaint are without merit and intend to vigorously defend against
these claims.

REGISTRAR, TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT
AFS, an indirect wholly-owned subsidiary of Alliance, located at 500 Plaza
Drive, Secaucus, New Jersey 07094, acts as each Fund's registrar, transfer
agent and dividend-disbursing agent for a fee based upon the number of
shareholder accounts maintained for the Fund. The transfer agency fee with
respect to Class B shares will be higher than the transfer agency fee with
respect to Class A shares or Class C shares.

PRINCIPAL UNDERWRITER
AFD, an indirect wholly-owned subsidiary of Alliance, located at 1345 Avenue of
the Americas, New York, New York 10105, is the principal underwriter of shares
of the Funds.

PERFORMANCE INFORMATION
From time to time, the Funds advertise their 'yield' and 'total return,' which
are computed separately for Class A, Class B and Class C shares. A Fund's yield
for any 30-day (or one-month) period is computed by dividing the net investment
income per share earned during such period by the maximum public offering price
per share on the last day of the period, and then annualizing such 30-day (or
one-month) yield in accordance with a formula prescribed by the Commission
which provides for compounding on a semi-annual basis. A Fund may also state in
sales literature an 'actual distribution rate' for each class which is computed
in the same manner as yield except that actual income dividends declared per
share during the period in question are substituted for net investment income
per share. The actual distribution rate is computed separately for Class A,
Class B and Class C shares. Advertisements of a Fund's total return disclose
its average annual compounded total return for the periods prescribed by the
Commission. A Fund's total return for each such period is computed by finding,
through the use of a formula prescribed by the Commission, the average annual
compounded rate of return over the period that would equate an assumed initial
amount invested to the value of the investment at the end of the period. For
purposes of computing total return, income dividends and capital gains
distributions paid on shares of a Fund are assumed to have been reinvested when
paid and the maximum sales charges applicable to purchases and redemptions of a
Fund's shares are assumed to have been paid. A Fund will include performance
data for each class of its shares in any advertisement or sales literature
using performance data of that Fund. These advertisements may quote performance
rankings or ratings of a Fund by financial publications or independent
organizations such as Lipper Analytical Services, Inc. and Morningstar, Inc. or
compare a Fund's performance to various indices.

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

APPENDIX A:

BOND RATINGS

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

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

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

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

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

B-Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa-Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.

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

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

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

Should no rating be assigned, the reason may be one of the following:
1. An application for rating was not received or accepted.

2. The issue or issuer belongs to a group of securities or companies that are
not rated as a matter of policy.

3. There is a lack of essential data pertaining to the issue or issuer.

4. The issue was privately placed, in which case the rating is not published
in Moody's publications.

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

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

STANDARD & POOR'S RATINGS SERVICES

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

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

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

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

BB, B, CCC, CC, C-Debt rated BB, B, CCC, CC and C is regarded as having
predominantly speculative characteristics with respect to capacity to pay
interest and repay principal. BB indicates the least degree of speculation A-1
and CCC the highest. While such debt will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or
major exposures to adverse conditions.

A-1

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 claims paying ability. Risk factors are negligible.

AA+, AA, AA-Very high claims paying ability. Protection factors are strong.
Risk is modest, but may vary slightly over time due to economic and/or
underwriting conditions.

A+, A, A--High claims paying ability. Protection factors are average and there
is an expectation of variability in risk over time due to economic and/or
underwriting conditions.

BBB+, BBB, BBB--Adequate claims paying ability. Protection factors are
adequate. There is considerable variability in risk over time due to economic
and/or underwriting conditions.

BB+, BB, BB--Uncertain claims paying ability and less than investment-grade
quality. However, the company is deemed likely to meet these obligations when
due. Protection factors will vary widely with changes in economic and/or
underwriting conditions.

B+, B, B--Possessing risk that policy holder and contract-holder obligations
will not be paid when due. Protection factors will vary widely with changes in
economic and/or underwriting conditions or company fortunes.

CCC-There is substantial risk that policy holder and contract holder
obligations will not be paid when due. Company has been or is likely to be
placed under state insurance department supervision.

DD-Company is under an order of liquidation.

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

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

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

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

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

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

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

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

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

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

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

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

A-2

APPENDIX B:

GENERAL INFORMATION ABOUT CANADA, MEXICO AND ARGENTINA

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

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

Canadian Dollars are fully exchangeable into U.S. Dollars without foreign
exchange controls or other legal restriction. Since the major developed country
currencies were permitted to float freely against one another, the range of
fluctuation in the U.S. Dollar/Canadian Dollar exchange rate has been narrower
than the range of fluctuation between the U.S. Dollar and most other major
currencies. During the last several years, Canada has experienced a weakening
of its currency. In January 1995, the Canadian Dollar fell to a nine-year low
against the U.S. dollar, decreasing in value compared to the U.S. Dollar by
approximately 25% from October 1991. From January 31, 1995, through September
29, 1995, the Canadian Dollar increased in value by approximately 5%.
The range of fluctuation that occurred in the past is not necessarily
indicative of the range of fluctuation that will occur in the future. Future
rates of exchange cannot be predicted.

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

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

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

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

While the Mexican economy has stabilized, it is still in a recession and
suffers from high inflation and high interest rates. Mexico's economy may
also be influenced by international economic conditions, particularly those
in the United States, and by world prices for oil and other commodities.
The recovery of the economy will require continued economic and fiscal
discipline as well as stable political and social conditions.

There is no assurance that Mexico's economic policy
initiatives will be successful or that succeeding administrations will continue
these initiatives.

In August 1976, the Mexican government established a policy of allowing the
Mexican Peso to float against the U.S. Dollar and other currencies. Under this
policy, the value of the Mexican Peso consistently declined against the U.S.
Dollar. Under economic policy initiatives implemented since December

B-1

1987, the Mexican government introduced a series of schedules allowing for the
gradual devaluation of the Mexican Peso against the U.S. Dollar. These gradual
devaluations continued until December 1994. On December 20, 1994, the Mexican
government announced a new policy that would allow a more substantial yet still
controlled devaluation of the Mexican Peso. On December 22, 1994, the Mexican
government announced that it would not continue with the policy announced two
days earlier and would instead permit the Peso to float against other
currencies, resulting in a continued decline against the U.S. Dollar.

In 1982, Mexico imposed strict foreign exchange controls which shortly
thereafter were relaxed and were eliminated in 1991. There is no assurance that
future regulatory actions in Mexico would not affect the Fund's ability to
obtain U.S. Dollars in exchange for Mexican Pesos.

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

The military has intervened in the political process on several occasions since
the 1930's and has ruled the country for 22 of the past 62 years. The most
recent military government ruled the country from 1976 to 1983. Four
unsuccessful military uprisings have occurred since 1983, the most recent in
December 1990.

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

In the decade prior to the current announcement of a new economic plan in March
1991, the Argentine economy was characterized by low and erratic growth,
declining investment rates and rapidly worsening inflation. Despite its
strengths, which include a well-balanced natural resource base and a high
literacy rate, the Argentine economy failed to respond to a series of economic
plans in the 1980's. The Economy Minister's plan represented a pronounced
departure from its predecessors in calling for raised revenues, reduced
expenditures and a reduced public deficit. The extensive privatization program
commenced in 1989 was accelerated, the domestic economy deregulated and opened
up to foreign trade and the frame-work for foreign investment reformed.
As a result of the economic stabilization reforms, gross domestic product has
increased and inflation has decreased.

Significant progress was also made in 1992 in rescheduling Argentina's debt
with both external and domestic creditors, which improved fiscal cash flows in
the medium terms and allowed a return to voluntary credit markets. Further
reforms are currently being implemented in order to sustain and continue the
progress to date. There is no assurance that Argentina's economic policy
initiatives will be successful or that succeeding administrations will continue
these initiatives.

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

The Argentine Peso has been the Argentine currency since January 1, 1992.
Since that date, the rate of exchange from the Argentine Peso to the U.S.
Dollar has remained approximately one to one. However, the historic range
is not necessarily indicative of fluctuations that may occur in the exchange
rate over time and there can be no assurance that future rates of exchange can
be accurately predicted. The Argentine foreign exchange market was highly
controlled until December 1989, when a free exchange rate was established for
all foreign currency transactions. Argentina has eliminated restrictions on
foreign direct investment and capital repatriation. On September 8, 1993,
legislation was adopted abolishing previous requirements of a three-year
waiting period for capital repatriation. Under the new legislation, foreign
investors will be permitted to remit profits at any time.

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

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

B-2

ALLIANCE SUBSCRIPTION APPLICATION
_______________________________________________________________________________

ALLIANCE BOND FUNDS

SHORT-TERM U.S. GOVERNMENT FUND SHORT-TERM MULTI-MARKET TRUST
U.S. GOVERNMENT PORTFOLIO MULTI-MARKET STRATEGY TRUST
MORTGAGE STRATEGY TRUST NORTH AMERICAN GOVERNMENT INCOME TRUST
MORTGAGE SECURITIES INCOME FUND GLOBAL DOLLAR GOVERNMENT FUND
WORLD INCOME TRUST CORPORATE BOND PORTFOLIO

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

SIGNATURES-PLEASE BE SURE TO SIGN THE APPLICATION (SECTION 7)
If shares are registered in the name of:
. an individual, the individual should sign.
. joint tenants, both should sign.
. a custodian for a minor, the custodian should sign.
. a corporation or other organization, an authorized officer should sign
(please indicate corporate office or title).
. a trustee or other fiduciary, the fiduciary or fiduciaries should sign
(please indicate capacity).

REGISTRATION
To ensure proper tax reporting to the IRS:
. Individuals, Joint Tenants and Gift/Transfer to a Minor:
- Indicate your name exactly as it appears on your social security card.
. Trust/Other:
- Indicate the name of the entity exactly as it appeared on the notice you
received from the IRS when your Employer Identification number was
assigned.

PLEASE NOTE:
. Certain legal documents will be required from corporations or other
organizations, executors and trustees, or if a redemption is requested by
anyone other than the shareholder of record. If you have any questions
concerning a redemption, contact the Fund at the number below.

. In the case of redemptions or repurchases of shares recently purchased by
check, redemption proceeds will not be made available until the Fund is
reasonably assured that the check has cleared, normally up to 15 calendar days
following the purchase date.

IF WE CAN ASSIST YOU IN ANY WAY, PLEASE DO NOT HESITATE TO CALL US AT:
1-(800) 221-5672.

SUBSCRIPTION APPLICATION
_______________________________________________________________________________

ALLIANCE BOND FUNDS
(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 OTHERWISE INDICATED

[ ]GIFT/TRANSFER TO A MINOR

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

|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Minor's (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 or other Entity

|_|_|_|_|_|_|_|_|_|
Tax ID Number

2. 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

3. INITIAL INVESTMENT
_______________________________________________________________________________

MINIMUM: $250; MAXIMUM: CLASS B ONLY - $250,000; CLASS C ONLY - $5,000,000.
MAKE ALL CHECKS PAYABLE TO THE ALLIANCE BOND FUND IN WHICH YOU ARE INVESTING.

I hereby subscribe for shares of the following Alliance Bond Fund(s):

Class B Class C
Class A (CONTINGENT (ASSET-
(INITIAL DEFERRED BASED
SALES DOLLAR SALES DOLLAR SALES DOLLAR
CHARGE) AMOUNT CHARGE) AMOUNT CHARGE) AMOUNT
-------- ------- -------- ------- -------- ------
[ ]Short-Term U.S. Government [ ] (37) [ ] (51) [ ] (337)
[ ]U.S. Government [ ] (46) [ ] (76) [ ] (346)
[ ]Mortgage Strategy [ ] (88) [ ] (89) [ ] (388)
[ ]Mortgage Securities Income [ ] (52) [ ] (63) [ ] (352)
[ ]World Income [ ] (54) not offered not offered
[ ]Short-Term Multi-Market [ ] (70) [ ] (68) [ ] (370)
[ ]Multi-Market Strategy [ ] (22) [ ] (23) [ ] (322)
[ ]North American Government [ ] (55) [ ] (56) [ ] (355)
[ ]Global Dollar Government [ ] (166) [ ] (266) [ ] (366)
[ ]Corporate Bond [ ] (95) [ ] (295) [ ] (395)

to be purchased with the enclosed check or draft for $ _______________
+ NO CHECKWRITING AVAILABLE ON THESE FUNDS.

4. 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 list below any existing
accounts to be considered and complete the Right of Accumulation section or the
Statement of Intent section.

____________________ _______________ _____________________ _________________
Fund Account Number Fund Account Number

A. RIGHT OF ACCUMULATION
[ ] Please link the accounts listed above 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 an
additional sales charge must be paid from my account

___________________ ________________ ___________________ ____________________
Name on Account Account Number Name on Account Account Number

5. DISTRIBUTION OPTIONS
_______________________________________________________________________________

IF NO BOX IS CHECKED, ALL DISTRIBUTIONS WILL BE REINVESTED IN ADDITIONAL SHARES
OF THE FUND

INCOME DIVIDENDS:(elect one) [ ] Reinvest dividends
[ ] Pay dividends in cash
[ ] Use Dividend Direction Plan
CAPITAL GAINS DISTRIBUTION:(elect one) [ ] Reinvest capital gains
[ ] Pay capital gains in cash
[ ] Use Dividend Direction Plan

If you elect to receive your income dividends or capital gains distributions in
cash, please enclose a PREPRINTED VOIDED CHECK from the bank account you wish
to have your dividends deposited into.**

If you wish to utilize the Dividend Direction Plan, please designate the
Alliance account you wish to have your dividends reinvested in:

_____________________________________ ________________________________________
Name Existing Account No.

SPECIAL DISTRIBUTION INSTRUCTIONS:
[ ] Please pay my distributions via check and send to the address
indicated in Section 2.
[ ] Please mail my distributions to the person and/or address
designated below:

_____________________________________ ________________________________________
Name Address

_____________________________________ ____________________ __________________
City State Zip

6. SHAREHOLDER OPTIONS
_______________________________________________________________________________

A. AUTOMATIC INVESTMENT PROGRAM (AIP) **
I hereby authorize Alliance Fund Services, Inc. to draw on my bank account, on
or about the ______ day of each month for a monthly investment in my Fund
account in the amount of $____________ (minimum $25 per month). Please attach a
PREPRINTED VOIDED CHECK from the bank account you wish to use. NOTE: If your
bank is not a member of the NACHA, your Alliance account will be credited on or
about the 20th of each month.

The Fund requires signatures of bank account owners exactly as they appear on
bank records.

______________________ _____________ _________________________ _____________
Individual Account Date Joint Account Date

**YOUR BANK MUST BE A MEMBER OF THE NATIONAL AUTOMATED CLEARING HOUSE
ASSOCIATION (NACHA).

B. TELEPHONE TRANSACTIONS
You can call our toll-free number 1-800-221-5672 and instruct Alliance Fund
Services, Inc. in a recorded conversation to purchase, redeem or exchange
shares for your account. Purchase and redemption requests will be processed via
electronic funds transfer (EFT) to and from your bank account.
Instructions: .Review the information in the Prospectus about telephone
transaction services.
.Check the box next to the telephone transaction service(s) you
desire.
.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 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.

The fund requires signatures of bank account owners exactly as they appear on
bank records.

_________________________ ______________ ____________________ ______________
Individual Account Owner Date Joint Account Owner Date

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
per check. 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.

C. SYSTEMATIC WITHDRAWAL PLAN (SWP) **
In order to establish a SWP, an investor must own or purchase shares of the
Fund having a current net asset value of at least:
. $10,000 for monthly payments; . $5,000 for bi-monthly payments;
. $4,000 for quarterly or less frequent payments

[ ] I authorize this service to begin in ___________, 19____, for the amount of
Month
$_____________($50.00 MINIMUM)

Frequency: (Please select one) [ ] Monthly [ ] Bi-Monthly
[ ] Quarterly [ ] Annually
[ ] In the months circled: JFMAMJJASOND

Please send payments to: (please select one)
[ ] My checking account. Select the date of the month on or about which you
wish the EFT payments to be made: _______________. Please enclose a
preprinted voided check to ensure accuracy.
[ ] My address of record designated in Section 2.
[ ] The payee and address specified below:

______________________________________ _______________________________________
Name of Payee Address

______________________________________ ____________________ _________________
City State Zip

D. AUTO EXCHANGE
[ ] I authorize Alliance Fund Services, Inc. to initiate a monthly exchange for
$__________ ($25.00 minimum) on the _______ day of the month, into the
Alliance Fund noted below:

Fund Name: _____________________________________

[ ] Existing account number:____________________ [ ] New account

Shares exchanged will be redeemed at net asset value computed on the date of
the month selected. (If the date selected is not a fund business day the
transaction will be processed on the next fund business day.) Certificates
must remain unissued.

7. SHAREHOLDER AUTHORIZATION THIS SECTION MUST BE COMPLETED
_______________________________________________________________________________

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 its Investment Adviser, Principal Underwriter, Transfer Agent 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.

____________________________________________ _________________________________
Signature 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 7, as well as the legal capacity of the
shareholder.

Dealer/Agent Firm _____________________________________________________________
Authorized Signature __________________________________________________________
Representative First Name _________________MI ________ Last Name ______________
Representative NumberBranch Office Address
City ________________________________ State ________ Zip Code _________________
Branch Number _______________________ Branch Phone (_____)_____________________

** YOUR BANK MUST BE A MEMBER OF THE NATIONAL AUTOMATED CLEARING HOUSE
ASSOCIATION (NACHA). 50136GEN-BFApp

<PAGE>

(LOGO)(R) ALLIANCE BOND FUND, INC.
-CORPORATE BOND PORTFOLIO
________________________________________________________________

P. O. Box 1520, Secaucus, New Jersey 07096-1520
Toll Free (800) 221-5672
For Literature Toll Free (800) 227-4681
________________________________________________________________

STATEMENT OF ADDITIONAL INFORMATION
November 1, 1995
________________________________________________________________

This Statement of Additional Information is not a prospectus but
supplements and should be read in conjunction with the current
Prospectus for the Fund's Corporate Bond Portfolio dated November 1,
1995. A copy of such Prospectus may be obtained by contacting
Alliance Fund Services, Inc. at the address or telephone numbers
shown above.

TABLE OF CONTENTS

Page
Description of the Portfolio. . . . . . . . . . . . . . .

Management of the Fund . . . . . . . . . . . . . . . . .

Purchase of Shares . . . . . . . . . . . . . . . . . . .

Redemption and Repurchase of Shares . . . . . . . . . . .

Shareholder Services. . . . . . . . . . . . . . . . . . .

Net Asset Value . . . . . . . . . . . . . . . . . . . . .

Portfolio Transactions . . . . . . . . . . . . . . . . .

Taxes . . . . . . . . . . . . . . . . . . . . . . . . . .

General Information . . . . . . . . . . . . . . . . . . .

Financial Statements and Report of Independent
Auditors . . . . . . . . . . . . . . . . . . . . . . .
________________________________________________________________

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

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_____________________________________________________________

DESCRIPTION OF THE PORTFOLIO
_____________________________________________________________

INTRODUCTION TO THE FUND

Alliance Bond Fund, Inc. (the "Fund") is an open-end
management investment company commonly known as a "mutual fund" whose
shares are offered in separate series referred to as "Portfolios."
Each Portfolio is a separate pool of assets constituting, in effect,
a separate fund with its own investment objectives and policies. A
shareholder in a Portfolio will be entitled to his or her pro-rata
share of all dividends and distributions arising from that
Portfolio's assets and, upon redeeming shares of that Portfolio, the
shareholder will receive the then current net asset value of that
Portfolio represented by the redeemed shares. (See "Purchase of
Shares" and "Redemption and Repurchase of Shares," in the Portfolio's
Prospectus.) The Fund is empowered to establish, without shareholder
approval, additional Portfolios which may have different investment
objectives.

The Fund currently has two portfolios: the Corporate Bond
Portfolio and the U.S. Government Portfolio.

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

THE CORPORATE BOND PORTFOLIO

INVESTMENT OBJECTIVE

GENERAL. The primary investment objective of the Portfolio
is to maximize income over the long term consistent with providing
reasonable safety in the value of each shareholder's investment. As
a secondary objective, the Portfolio will attempt to increase its
capital through appreciation of its investments in order to preserve
and, if possible, increase the purchasing power of each shareholder's
investment.

HOW THE PORTFOLIO PURSUES ITS OBJECTIVES

In pursuing these objectives, the Portfolio's policy is to
invest in readily marketable securities which give promise of
relatively attractive yields, but which do not involve substantial

<PAGE>

risk of loss of capital. The Portfolio follows a policy of
maintaining at least 65% of its net assets invested in debt
securities. Such objectives and policies cannot be changed without
the approval of the holders of a majority of the Portfolio's voting
securities. The Portfolio also follows a policy of maintaining at
least 65% of its net assets invested in corporate bonds. Moreover,
the Portfolio intends to manage its portfolio actively by taking
advantage of such trading opportunities as swaps to higher yielding
bonds of similar quality and swaps to different types of bonds which
are more attractive investments due to distortions in normal yield
differentials.

There is no minimum rating requirement applicable to the
Portfolio's investments in fixed-income securities. Currently, the
Portfolio believes its objectives and policies may best be
implemented by investing at least 65% of its total assets in fixed-
income securities considered investment grade or higher (securities
rated at least Baa by Moody's Investors Services, Inc. ("Moody's") or
BBB by Standard & Poor's Ratings Services ("S&P")). During the
fiscal year ended June 30, 1995, on a weighted average basis, the
percentages of the Portfolio's assets invested in securities rated in
particular rating categories by Moody's or if unrated by Moody's,
considered by Alliance Capital Management L.P. the Fund's investment
adviser (the "Investment Adviser") to be of equivalent quality to
such ratings, were as follows: 21% in A and above, 44% in Baa, 10% in
Ba, and 8% in B. The Portfolio did not invest in securities rated
below B by Moody's, or if unrated by Moody's, considered by the
Investment Adviser to be of equivalent quality to such a rating.
Securities rated Ba or below by Moody's or BB or below by S&P are
often referred to as junk bonds. (See "Special Risk Considerations"
below). The Portfolio expects that it will not retain a security
which is downgraded below B, or if unrated, determined by the
Investment Adviser to have undergone similar credit quality
deterioration subsequent to purchase.

The Portfolio will not invest more than 5% of its total
assets in the securities of any one issuer, excepting U.S. Government
obligations. Further, the Portfolio will not own more than 10% of
the outstanding voting securities of any issuer. The Portfolio has
complete flexibility as to the types of securities in which it will
invest and the relative proportions thereof, and the Portfolio plans
to vary the proportions of its holdings of long- and short-term
fixed-income securities (including debt securities, convertible debt
securities, U.S. Government (full faith and credit) obligations) and
of common and preferred stocks in order to reflect its assessment of
prospective cyclical changes even if such action may adversely affect
current income. However, substantially all of the Portfolio's
investments will be income-producing. (See "Investment
Restrictions", below, for additional restrictions which are
fundamental policies of the Portfolio and which cannot be changed
without shareholder approval).

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The Portfolio may invest up to 50% of the value of its total
assets in foreign debt securities which will consist primarily of
corporate fixed income securities and instruments issued or
guaranteed by foreign governments ("Sovereign Debt Obligations").
Sovereign Debt Obligations may include, as described below,
securities issued in connection with foreign government debt
restructurings as well as foreign government loan participations and
assignments. Not more than 15% of the Portfolio's total assets may
be invested in these other Sovereign Debt Obligations, substantially
all of which may be high-yield, high-risk debt securities that are
low-rated (i.e., below investment grade) or of comparable quality and
unrated, and that are considered to be predominantly speculative as
regards the issuer's capacity to pay interest and repay principal.
Investors should be aware that there are risks associated with
investment by the Portfolio in foreign securities. See "Special Risk
Considerations."

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

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

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

Dollar-denominated, Collateralized Brady Bonds may be fixed
rate bonds or floating rate bonds. Interest payments on Brady Bonds
are often collateralized by cash or securities in an amount that, in
the case of fixed rate bonds, is equal to at least one year of
rolling interest payments or, in the case of floating rate bonds,
initially is equal to at least one year's rolling interest payments
based on the applicable interest rate at that time and is adjusted at
regular intervals thereafter. Certain Brady Bonds are entitled to
"value recovery payments" in certain circumstances, which in effect
constitute supplemental interest payments but generally are not

<PAGE>

collateralized. Brady Bonds are often viewed as having three or four
valuation components: (i) collateralized repayment of principal at
final maturity; (ii) collateralized interest payments;
(iii) uncollateralized interest payments; and (iv) any
uncollateralized repayment of principal at maturity (these
uncollateralized amounts constitute the "residual risk"). In the
event of a default with respect to Collateralized Brady Bonds as a
result of which the payment obligations of the issuer are
accelerated, the U.S. Treasury zero coupon obligations held as
collateral for the payment of principal will not be distributed to
investors, nor will such obligations be sold and the proceeds
distributed. The collateral will be held by the collateral agent to
the scheduled maturity of the defaulted Brady Bonds, which will
continue to be outstanding, at which time the face amount of the
collateral will equal the principal payments which would have been
due on the Brady Bonds in the normal course. In addition, in light
of the residual risk of Brady Bonds and, among other factors, the
history of defaults with respect to commercial bank loans by public
and private entities of countries issuing Brady Bonds, investments in
Brady Bonds are to be viewed as speculative.

STRUCTURED SECURITIES. The Portfolio may invest in
interests in entities organized and operated solely for the purpose
of restructuring the investment characteristics of Sovereign Debt
Obligations and loan participations and assignments. This type of
restructuring involves the deposit with or purchase by an entity,
such as a corporation or trust, of specified instruments (such as
commercial bank loans or Brady Bonds) and the issuance by that entity
of one or more classes of securities ("Structured Securities") backed
by, or representing interests in, the underlying instruments. The
cash flow on the underlying instruments may be apportioned among the
newly issued Structured Securities to create securities with
different investment characteristics such as varying maturities,
payment priorities and interest rate provisions, and the extent of
the payments made with respect to Structured Securities is dependent
on the extent of the cash flow on the underlying instruments. Because
Structured Securities of the type in which the Portfolio anticipates
it will invest typically involve no credit enhancement, their credit
risk generally will be equivalent to that of the underlying
instruments.

The Portfolio is permitted to invest in a class of
Structured Securities that is either subordinated or unsubordinated
to the right of payment of another class. Subordinated Structured
Securities typically have higher yields and present greater risks
than unsubordinated Structured Securities.

Certain issuers of Structured Securities may be deemed to be
"investment companies" as defined in the Investment Company Act of
1940, as amended (the "1940 Act"). As a result, the Portfolio's
investment in these Structured Securities may be limited by the

<PAGE>

restrictions contained in the 1940 Act. Under the 1940 Act, the
Portfolio may not own more than 3% of the total outstanding voting
stock of any investment company and not more than 5% of the value of
the Portfolio's total assets may be invested in the securities of any
investment company. If the Portfolio acquires shares in investment
companies, shareholders would bear both their proportionate shares of
expenses in the Portfolio (including management and advisory fees)
and,indirectly, the expenses of such investment companies (including
the management and advisory fees).

LOAN PARTICIPATIONS AND ASSIGNMENTS. The Portfolio may
invest in fixed and floating rate loans ("Loans") arranged through
private negotiations between an issuer of Sovereign Debt Obligations
and one or more financial institutions ("Lenders"). The Portfolio's
investments in Loans are expected in most instances to be in the form
of participations in Loans ("Participations") and assignments of all
or a portion of Loans ("Assignments") from third parties. The
Portfolio may invest up to 15% of its total assets in Participations
and Assignments. The government that is the borrower on the Loan will
be considered by the Portfolio to be the issuer of a Participation or
Assignment for purposes of the Portfolio's fundamental investment
policy that it will not invest 25% or more of its total assets in
securities of issuers conducting their principal business activities
in the same industry (i.e., foreign government). The Portfolio's
investment in Participations typically will result in the Portfolio
having a contractual relationship only with the Lender and not with
the borrower. The Portfolio will have the right to receive payments
of principal, interest and any fees to which it is entitled only from
the Lender selling the Participation and only upon receipt by the
Lender of the payments from the borrower. The Portfolio will acquire
Participations only if the Lender interpositioned between the
Portfolio 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 (i.e., Baa or higher by Moody's or BBB or higher by
S&P).

In connection with purchasing Participations, the Portfolio
generally will have no right to enforce compliance by the borrower
with the terms of the loan agreement relating to the Loan, nor any
rights of set-off against the borrower, and the Portfolio may not
directly benefit from any collateral supporting the Loan in which it
has purchased the Participation. As a result, the Portfolio may be
subject to the credit risk of both the borrower and the Lender that
is selling the Participation. In the event of the insolvency of the
Lender selling a Participation, the Portfolio may be treated as a
general creditor of the Lender and may not benefit from any set-off
between the Lender and the borrower. Certain Participations may be
structured in a manner designed to avoid purchasers of Participations
being subject to the credit risk of the Lender with respect to the
Participation, but even under such a structure, in the event of the

<PAGE>

Lender's insolvency, the Lender's servicing of the Participation may
be delayed and the assignability of the Participation impaired.

When the Portfolio purchases Assignments from Lenders it
will acquire direct rights against the borrower on the Loan. Because
Assignments are arranged through private negotiations between
potential assignees and potential assignors, however, the rights and
obligations acquired by the Portfolio as the purchaser of an
Assignment may differ from, and be more limited than, those held by
the assigning Lender.

The Portfolio may have difficulty disposing of Assignments
and Participations because to do so it will have to assign such
securities to a third party. Because there is no liquid market for
such securities, the Portfolio anticipates that such securities could
be sold only to a limited number of institutional investors. The
lack of a liquid secondary market may have an adverse impact on the
value of such securities and the Portfolio's ability to dispose of
particular Assignments or Participations when necessary to meet the
Portfolio's liquidity needs or 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 Assignments and
Participations also may make it more difficult for the Portfolio to
assign a value to these securities for purposes of valuing the
Portfolio and calculating its net asset value. Further, the
assignability of certain Sovereign Debt Obligations is restricted by
the governing documentation as to the nature of the assignee such
that the only way in which the Portfolio may acquire an interest in a
Loan is through a Participation and not an Assignment.

OPTIONS. The Portfolio may purchase put and call options
written by others and write covered put and call options overlying
the types of securities in which the Portfolio may invest. A put
option (sometimes called a "standby commitment") gives the purchaser
of the option, upon payment of a premium, the right to deliver a
specified amount of a security to the writer of the option on or
before a fixed date at a predetermined price. A call option
(sometimes called a "reverse standby commitment") gives the purchaser
of the option, upon payment of a premium, the right to call upon the
writer to deliver a specified amount of a security on or before a
fixed date at a predetermined price. The Portfolio will not purchase
any option if, immediately thereafter, the aggregate cost of all
outstanding options purchased by the Portfolio would exceed 2% of the
value of its total assets; the Portfolio will not write any option
if, immediately thereafter, the aggregate value of the Portfolio's
securities subject to outstanding options would exceed 15% of its
total assets.

The Portfolio may purchase put and call options to provide
protection against adverse price or yield effects from anticipated
changes in prevailing interest rates. For instance in periods of

<PAGE>

rising interest rates and falling bond prices, the Portfolio might
purchase a put option to limit its exposure to falling prices. In
periods of falling interest rates and rising bond prices, the
Portfolio might purchase a call option. In purchasing a call option,
the Portfolio would be in a position to realize a gain if, during the
option period, the price of the security increased by an amount in
excess of the premium paid. It would realize a loss if the price of
the security declined or remained the same or did not increase during
the period by more than the amount of the premium. By purchasing a
put option, the Portfolio would be in a position to realize a gain
if, during the option period, the price of the security declined by
an amount in excess of the premium paid. It would realize a loss if
the price of the security increased or remained the same or did not
decrease during that period by more than the amount of the premium.
If a put or call option purchased by the Portfolio were permitted to
expire without being sold or exercised, its premium would represent a
loss to the Portfolio.

When the Portfolio writes a put option it must either own at
all times during the option period an offsetting put option on the
same security or maintain in a segregated account cash or high-grade
debt securities in an amount adequate to purchase the underlying
security should the put be exercised. When the Portfolio writes a
call option it must own at all times during the option period either
the underlying securities or an offsetting call option on the same
securities. If a put option written by the Portfolio were exercised
the Portfolio would be obligated to purchase the underlying security
at the exercise price. If a call option written by the Portfolio
were exercised the Portfolio would be obligated to sell the
underlying security at the exercise price.

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

The Portfolio may also write call options for cross-hedging
purposes. A call option is for cross-hedging purposes if it is
designed to provide a hedge against a decline in value in another
security which the Portfolio owns or has the right to acquire. In
such circumstances, the Portfolio collateralizes the option by

<PAGE>

maintaining, in a segregated account with the Custodian, cash or
liquid high-grade debt securities in an amount not less than the
market value of the underlying security, marked to market daily.

The Portfolio may dispose of an option which it has
purchased by entering into a "closing sale transaction" with the
writer of the option. A closing sale transaction terminates the
obligation of the writer of the option and does not result in the
ownership of an option. The Portfolio realizes a profit or loss from
a closing sale transaction if the premium received from the
transaction is more than or less than the cost of the option.

The Portfolio may terminate its obligation to the holder of
an option written by the Portfolio through a "closing purchase
transaction." The Portfolio may not, however, effect a closing
purchase transaction with respect to such an option after it has been
notified of the exercise of such option. The Portfolio realizes a
profit or loss from a closing purchase transaction if the cost of the
transaction is more than or less than the premium received by the
Portfolio from writing the option.

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

INTEREST RATE TRANSACTIONS. In order to attempt to protect
the value of the Portfolio's investments from interest rate
fluctuations, the Portfolio may enter into various hedging
transactions, such as interest rate swaps and the purchase or sale of
interest rate caps and floors. The Portfolio expects to enter into
these transactions primarily to preserve a return or spread on a
particular investment or portion of its portfolio. The Portfolio may
also enter into these transactions to protect against any increase in
the price of securities the Portfolio anticipates purchasing at a
later date. The Portfolio intends to use these transactions as a
hedge and not as a speculative investment. Interest rate swaps
involve the exchange by the Portfolio with another party of their
respective commitments to pay or receive interest, e.g., an exchange
of floating rate payments for fixed rate payments. The purchase of
an interest rate cap entitles the purchaser, to the extent that a
specified index exceeds a predetermined interest rate, to receive
payments on a notional principal amount from the party selling such
interest rate cap. The purchase of an interest rate floor entitles
the purchaser, to the extent that a specified index falls below a

<PAGE>

predetermined interest rate, to receive payments of interest on a
notional principal amount from the party selling such interest rate
floor.

The Portfolio may enter into interest rate swaps, caps and
floors on either an asset-based or liability-based basis depending on
whether it is hedging its assets or its liabilities, and will only be
entered into on a net basis, i.e., the two payment streams are netted
out, with the Portfolio receiving or paying, as the case may be, only
the net amount of the two payments. Inasmuch as these hedging
transactions are entered into for good faith hedging purposes, the
Investment Adviser and the Portfolio believe such obligations do not
constitute senior securities and, accordingly, will not treat them as
being subject to its borrowing restrictions. The net amount of the
excess, if any, of the Portfolio's obligations over its entitlements
with respect to each interest rate swap will be accrued on a daily
basis and an amount of cash or liquid securities having an aggregate
net asset value at least equal to the accrued excess will be
maintained in a segregated account by the Custodian. The Portfolio
will not enter into any interest rate swap, cap or floor transaction
unless the unsecured senior debt or the claims- paying ability of the
other party thereto is rated in the highest rating category of at
least one nationally recognized rating organization at the time of
entering into such transaction. If there is a default by the other
party to such a transaction, the Portfolio will have contractual
remedies pursuant to the agreements related to the transaction. The
swap market has grown substantially in recent years with a large
number of banks and investment banking firms acting both as
principals and agents utilizing standardized swap documentation. As
a result, the swap market has become well established and provides a
degree of liquidity. Caps and floors are more recent innovations for
which documentation is not as standardized and, accordingly, they are
less liquid than swaps.

ZERO COUPON SECURITIES. To the extent consistent with its
investment objectives, the Portfolio may invest without limit in
"zero coupon" securities, which are debt securities that have been
stripped of their unmatured interest coupons and receipts or
certificates representing interests in such stripped debt obligations
and coupons. A zero coupon security pays no interest to its holder
during its life. Its value to an investor consists of the difference
between its face value at the time of maturity and the price for
which it was acquired, which is generally an amount significantly
less than its face value (sometimes referred to as a "deep discount"
price). Accordingly, such securities usually trade at a deep
discount from their face or par value and will be subject to greater
fluctuations of market value in response to changing interest rates
than debt obligations of comparable maturities that make current
distributions of interest. On the other hand, because there are no
periodic interest payments to be reinvested prior to maturity, zero
coupon securities eliminate reinvestment risk and lock in a rate of

<PAGE>

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

COLLATERALIZED MORTGAGE OBLIGATIONS AND MULTI-CLASS PASS-
THROUGH SECURITIES. Mortgage-related securities in which the
Portfolio may invest may also include collateralized mortgage
obligations ("CMOs") and multi-class pass-through securities. CMOs
are debt obligations issued by special purpose entities that are
secured by mortgage-backed certificates, including, in many cases,
certificates issued by governmental and government-related
guarantors, including GNMA, FNMA and FHLMC, together with certain
funds and other collateral. Multi-class pass-through securities are
equity interests in a trust composed of mortgage loans or other
mortgage-related securities. Payments of principal and interest on
underlying collateral provide the funds to pay debt service on the
CMO or make scheduled distributions on the multi- class pass-through
security. CMOs and multi-class pass-through securities (collectively
CMOs unless the context indicates otherwise) may be issued by
agencies or instrumentalities of the United States Government or by
private organizations. The issuer of a CMO may elect to be treated
as a Real Estate Mortgage
Investment Conduit ("REMIC").

In a CMO, a series of bonds or certificates is issued in
multiple classes. Each class of CMOs, 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 it to be retired substantially
earlier than the stated maturities or final distribution dates.
Interest is paid or accrues on all classes of a CMO on a monthly,
quarterly or semi-annual basis. The principal and interest on the
underlying mortgages may be allocated among the 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 which
reset periodically at a specified increment over an index such as the
London Interbank Offered Rate ("LIBOR"). These adjustable rate
tranches are known as "floating rate CMOs". 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 represent a ceiling beyond which the
coupon rate on a floating rate CMO may not be increased regardless of

<PAGE>

increases in the interest rate index to which the floating rate CMO
is geared.

The staff of the Securities and Exchange Commission (the
"Commission") has determined that certain issuers of CMOs are
investment companies for purposes of the 1940 Act. In reliance on a
1991 staff interpretation, the Portfolio's investments in certain
qualifying CMOs, including REMICs, are not subject to the 1940 Act's
limitation on acquiring interests in other investment companies. In
order to be able to rely on the staff's interpretation, the CMOs must
be unmanaged, fixed-asset issuers that (i) invest primarily in
mortgage-backed securities, (ii) do not issue redeemable securities,
(iii) operate under general exemptive orders exempting them from all
provisions of the 1940 Act, and (iv) are not registered or regulated
under the 1940 Act as investment companies. To the extent that the
Portfolio selects CMOs that do not meet the above requirements, the
Portfolio may not invest more than 10% of its assets in all such
entities and may not acquire more than 3% of the voting securities of
any single such entity.

LENDING OF PORTFOLIO SECURITIES. Consistent with applicable
regulatory requirements, the Portfolio may loan its portfolio
securities where such loans are continuously secured by cash
collateral equal to no less than the market value, determined daily,
of the securities loaned. In loaning its portfolio securities, the
Portfolio will require that interest or dividends on securities
loaned be paid to the Portfolio. Where voting or consent rights with
respect to loaned securities pass to the borrower, the Portfolio will
follow the policy of calling the loan, in whole or in part as may be
appropriate, to permit it to exercise such voting or consent rights
if the exercise of such rights involves issues having a material
effect on the Portfolio's investment in the securities loaned.
Although the Portfolio cannot at the present time determine the types
of borrowers to whom it may lend its portfolio securities, the
Portfolio anticipates that such loans will be made primarily to bond
dealers.

ILLIQUID SECURITIES. The Fund will not invest in securities
for which there is no public market (i.e., illiquid securities). For
this purpose, illiquid securities include, among others, securities
that are illiquid by virtue of the absence of a readily available
market or legal or contractual restriction on resale.

Historically, illiquid securities have included securities
subject to contractual or legal restrictions on resale because they
have not been registered under the Securities Act of 1933, as amended
("Securities Act"), securities which are otherwise not readily
marketable and repurchase agreements having a maturity of longer than
seven days. Securities which have not been registered under the
Securities Act are referred to as private placements or restricted
securities and are purchased directly from the issuer or in the

<PAGE>

secondary market. Mutual funds do not typically hold a significant
amount of these restricted or other illiquid securities because of
the potential for delays on resale and uncertainty in valuation.
Limitations on resale may have an adverse effect on the marketability
of portfolio securities and a mutual fund might be unable to dispose
of restricted or other illiquid securities promptly or at reasonable
prices and might thereby experience difficulty satisfying redemptions
within seven days. A mutual fund might also have to register such
restricted securities in order to dispose of them resulting in
additional expense and delay. Adverse market conditions could impede
such a public offering of securities.

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

Rule 144A under the Securities Act allows a broader
institutional trading market for securities otherwise subject to
restriction on resale to the general public. Rule 144A establishes a
"safe harbor" from the registration requirements of the Securities
Act for resales of certain securities to qualified institutional
buyers. An insufficient number of qualified institutional buyers
interested in purchasing certain restricted securities held by the
Fund, however, could affect adversely the marketability of such
portfolio securities and the Fund might be unable to dispose of such
securities promptly or at reasonable prices. Rule 144A has already
produced enhanced liquidity for many restricted securities, and
market liquidity for such securities may continue to expand as a
result of this regulation and the consequent inception of the PORTAL
System sponsored by the National Association of Securities Dealers,
Inc., an automated system for the trading, clearance and settlement
of unregistered securities of domestic and foreign issuers.

The Investment Adviser, acting under the supervision of the
Board of Directors, will monitor the liquidity of restricted
securities in the Fund's portfolio that are eligible for resale
pursuant to Rule 144A. In reaching liquidity decisions, the
Investment Adviser will consider, INTER ALIA, the following factors:
(1) the frequency of trades and quotes for the security; (2) the
number of dealers issuing quotations to purchase or sell the
security; (3) the number of other potential purchasers of the
security; (4) the number of dealers undertaking to make a market in
the security; (5) the nature of the security (including its
unregistered nature) and the nature of the marketplace for the

<PAGE>

security (e.g., the time needed to dispose of the security, the
method of soliciting offers and the mechanics of the transfer); and
(6) any applicable Securities and Exchange Commission (the
"Commission") interpretation or position with respect to such type of
securities.

SPECIAL RISK CONSIDERATIONS. Securities rated Baa are
considered by Moody's to have speculative characteristics. Sustained
periods of deteriorating economic conditions or 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. Securities rated below investment grade, i.e., Ba or BB
and lower, ("lower-rated securities") are subject to greater risk of
loss of principal and interest than higher-rated securities and are
considered to be predominantly speculative with respect to the
issuer's capacity to pay interest and repay principal, which may in
any case decline during sustained periods of deteriorating economic
conditions or rising interest rates. They are also generally
considered to be subject to greater market risk than higher-rated
securities in times of deteriorating economic conditions. In
addition, lower-rated securities may be more susceptible to real or
perceived adverse economic and competitive industry conditions than
investment grade securities, although the market values of securities
rated below investment grade and comparable unrated securities tend
to react less to fluctuations in interest rate levels than do those
of higher-rated securities.

The market for lower-rated securities may be thinner and
less active than that for higher-quality securities, which can
adversely affect the prices at which these securities can be sold.
To the extent that there is no established secondary market for
lower-rated securities, the Portfolio may experience difficulty in
valuing such securities and, in turn, the Portfolio's assets. In
addition, adverse publicity and investor perceptions about lower-
rated securities, whether or not based on fundamental analysis, may
tend to decrease the market value and liquidity of such lower-rated
securities.

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

The Investment Adviser will try to reduce the risk inherent
in the Portfolio's investment approach through credit analysis,
diversification and attention to current developments and trends in

<PAGE>

interest rates and economic conditions. However, there can be no
assurance that losses will not occur. Since the risk of default is
higher for lower-quality securities, the Investment Adviser's
research and credit analysis are a correspondingly important aspect
of its program for managing the Portfolio's securities. In
considering investments for the Portfolio, the Investment Adviser
will attempt to identify those high-yielding securities whose
financial condition is adequate to meet future obligations, has
improved, or is expected to improve in the future. The Investment
Adviser's analysis focuses on relative values based on such factors
as interest or dividend coverage,
asset coverage, earnings prospects, and the experience and managerial
strength of the issuer.

Non-rated securities will also be considered for investment
by the Portfolio when the Investment Adviser believes that the
financial condition of the issuers of such securities, or the
protection afforded by the terms of the securities themselves, limits
the risk to the Portfolio to a degree comparable to that of rated
securities which are consistent with the Portfolio's objectives and
policies.

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

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

ECONOMIC AND POLITICAL FACTORS. By investing in Sovereign
Debt Obligations, the Portfolio will be exposed to the direct or
indirect consequences of political, social and economic change in

<PAGE>

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

Many countries providing investment opportunities for the
Portfolio have experienced substantial, and in some periods extremely
high, rates of inflation for many years. Inflation and rapid
fluctuations in inflation rates have had and may continue to have
adverse effects on the economies and securities of certain of these
countries. In an attempt to control inflation, wage and price
controls have been imposed in certain countries.

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

Central banks and other governmental authorities which
control the servicing of Sovereign Debt Obligations may not be
willing or able to permit the payment of the principal or interest
when due in accordance with the terms of the obligations. As a
result, the issuers of Sovereign Debt Obligations may default on
their obligations. Defaults on certain Sovereign Debt Obligations
have occurred in the past. Holders of certain Sovereign Debt
Obligations may be requested in the restructuring and rescheduling of
these obligations to extend further loans to the issuers. The
interests of holders of Sovereign Debt Obligations could be adversely
affected in the course of restructuring arrangements or by certain
other factors referred to below. Furthermore, some of the
participants in the secondary market for Sovereign Debt Obligations
may also be directly involved in negotiating the terms of these
arrangements; and may therefore have access to information not
available to other market participants.

<PAGE>

The ability of governments to make timely payments on their
obligations is likely to be influenced strongly by the issuer's
balance of payments, including export performance, and its access to
international credits and investments. A country whose exports are
concentrated in a few commodities could be vulnerable to a decline in
the international prices of one or more of those commodities.
Increased protectionism on the part of a country's trading partners
could also adversely affect the country's exports and diminish its
trade account surplus, if any. To the extent that a country receives
payments for its exports in currencies other than dollars, its
ability to make debt payments denominated in dollars could be
adversely affected.

To the extent that a country develops a trade deficit, it
will need to depend on continuing loans from foreign governments,
multilateral organizations or private commercial banks, aid payments
from foreign governments and on inflows of foreign investment. The
access of a country to those forms of external funding may not be
certain, and a withdrawal of external funding could adversely affect
the capacity of a government to make payments on its obligations. In
addition, the cost of servicing debt obligations can be affected by a
change in international interest rates since the majority of these
obligations carry interest rates that are adjusted periodically based
upon international rates.

Another factor bearing on the ability of a country to repay
Sovereign Debt Obligations is the level of the country's
international reserves. Fluctuations in the level of these reserves
can affect the amount of foreign exchange readily available for
external debt payments and, thus, could have a bearing on the
capacity of the country to make payments on its Sovereign Debt
Obligations.

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

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

<PAGE>

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

OTHER CHARACTERISTICS OF INVESTMENT IN FOREIGN ISSUES.
Foreign securities investments are affected by changes in currency
rates or exchange control regulations as well as by changes in
governmental administration, economic or monetary policy (in the
United States or abroad) and changed circumstances in dealings
between nations. Currency exchange rate movements will increase or
reduce the U.S. dollar value of the Portfolio's net assets and income
attributable to foreign securities. Costs are incurred in connection
with conversion of currencies held by the Portfolio.

There may be less publicly available information about
foreign issuers than about domestic issuers, and foreign issuers may
not be subject to accounting, auditing and financial reporting
standards and requirements comparable to those of domestic issuers.
Securities of some foreign issuers are less liquid and more volatile
than securities of comparable domestic issuers, and foreign brokerage
commissions are generally higher than in the United States. Foreign
securities markets may be less liquid, more volatile and less subject
to governmental supervision than in the United States. Investments
in foreign countries could be affected by other factors not present
in the United States, including expropriation, confiscatory taxation
and potential difficulties in enforcing contractual obligations.

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

<PAGE>

inflation and may not accurately reflect the real condition of those
issuers and securities markets. Substantially less information is
publicly available about certain non-U.S. issuers than is available
about U.S. issuers.

FUNDAMENTAL INVESTMENT POLICIES. The following restrictions
supplement those already discussed. These restrictions may not be
changed without shareholder approval which means the vote of (1) 67%
or more of the shares of the Portfolio represented at a meeting at
which more than 50% of the outstanding shares are represented or (2)
more than 50% of the outstanding shares of the Portfolio, whichever
is less.

The following restrictions provide that the Portfolio may
not:

1. Purchase any security of any issuer (other than United
States Government securities) if as a result more than 5% of the
value of its total assets would consist of the securities of such
issuer or the Portfolio would own more than 10% of the outstanding
voting securities of any issuer;

2. Purchase the securities of any other investment company
except in a regular transaction in the open market or as part of a
merger, consolidation or purchase of assets;

3. Invest more than 5% of the value of its total assets in
the securities of any issuer, the business of which has been in
continuous operation for less than three years;

4. Purchase or retain the securities of any issuer if those
officers and directors of the Fund or of the Investment Adviser
beneficially owning individually more than 1/2 of 1% of the
securities of such issuer together beneficially own more than 5% of
the securities of such issuer;

5. Invest in other companies for the purpose of exercising
control of management;

6. Purchase securities on margin, except that the Portfolio
may borrow in an amount up to 10% of its total assets to meet
redemption requests and for the clearance of purchases and sales of
portfolio securities (this borrowing provision is not for investment
leverage but solely to facilitate management of the Portfolio to
enable the Portfolio to meet redemption requests where the
liquidation of portfolio securities is deemed to be disadvantageous
or inconvenient and to obtain such short-term credits as may be
necessary for the clearance of purchases and sales of portfolio
securities; all borrowings at any time outstanding will be repaid
before any additional investments are made; the Portfolio will not
mortgage, pledge or hypothecate any assets in connection with any

<PAGE>

such borrowing in excess of 15% of the Portfolio's total assets) or
sell securities short;

7. Borrow money except as previously set forth in 6 above;

8. Make loans to other persons except loans of securities
collateralized in cash at 100% each business day (the acquisition of
publicly distributed bonds, debentures and other debt securities is
not considered a loan);

9. Purchase any security (other than United States
Government securities) if as a result more than 25% of the value of
its total assets would be invested in any one industry;

10. Underwrite securities issued by other persons;

11. Purchase any securities as to which it would be deemed a
statutory underwriter under the Securities Act of 1933, as amended,
or any securities having no public market;

12. Purchase or sell commodities or commodity contracts;

13. Purchase or sell real estate, except that the Portfolio
may invest in marketable securities secured by real estate or
interests therein or issued by companies including real estate
investment trusts, which deal in real estate or interests therein;

14. Participate in a joint, or a joint and several, trading
account in securities;

15. Invest in interests in oil, gas or other mineral leases
exploration or development programs;

16. Issue any securities senior to the capital stock offered
hereby; or

17. Invest in warrants (other than warrants acquired by the
Portfolio as a part of a unit or attached to securities at the time
of purchase) if, as a result, such warrants valued at the lower of
cost or market would exceed 5% of the value of the Portfolio's net
assets at the time of purchase provided that not more than 2% of the
Portfolio's net assets at the time of purchase may be invested in
warrants not listed on the New York Stock Exchange or the American
Stock Exchange.

The foregoing percentage limitations will apply at the time
of the purchase of a security and shall not be considered violated
unless an excess or deficiency occurs or exists immediately after and
as a result of an acquisition of such security.

<PAGE>

PORTFOLIO TURNOVER. Because the Portfolio will actively use
trading to benefit from yield disparities among different issues of
fixed-income securities or otherwise to achieve its investment
objective and policies, the Portfolio may be subject to a greater
degree of turnover and, thus, a higher incidence of short-term
capital gain taxable as ordinary income than might be expected from
investment companies which invest substantially all of their funds on
a long-term basis and, correspondingly, larger mark-up charges can be
expected to be borne by the Portfolio in such cases. Management
anticipates that the annual turnover in the Portfolio may be in
excess of 600% in future years but is not expected to exceed 700%.
An annual turnover rate of 600% occurs, for example, when all of the
securities in the Portfolio are replaced six times in a period of one
year. The portfolio turnover rates for the fiscal years ended
June 30, 1994 and 1995 were 372% and 387%, respectively.

The value of the Portfolio's shares will be influenced by
the factors which generally affect securities, such as the economic
and political outlook, earnings, dividends and the supply and demand
for various classes of securities. There can be, of course, no
assurance that the Portfolio's investment objectives will be
achieved.

<PAGE>

________________________________________________________________

MANAGEMENT OF THE FUND
________________________________________________________________

DIRECTORS AND OFFICERS

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

DIRECTORS

JOHN D. CARIFA*, 50, Chairman of the Board of Directors and
President of the Fund, is the President and the Chief Operating
Officer and a Director of Alliance Capital Management Corporation
("ACMC")** with which he has been associated since prior to 1990.

RUTH BLOCK, 64, is a Director of Ecolab Incorporated
(specialty chemicals) and Amoco Corporation (oil and gas).
Previously, she was an Executive Vice President and the Chief
Insurance Officer of The Equitable Life Assurance Society of the
United States since prior to 1990. Her address is Box 4653,
Stamford, Connecticut 06903.

DAVID H. DIEVLER, 66, was formerly Chairman of the Board and
President of the Fund, and a Senior Vice President of ACMC with which
he had been associated since prior to 1990 through 1994. He is
currently an independent consultant. His address is P.O. Box 167,
Spring Lake, New Jersey 07762.

JAMES R. GREENE, 74, is an independent financial consultant
since prior to 1990. He is also a Director of ASARCO, Incorporated
(metals smelting and refining), Bank Leumi Trust Co., Buck
Engineering Company (manufacturing), American Reliance Insurance Co.
(insurance) and United Tote (computer software). His address is 134
Buttonwood Drive, Fair Haven, New Jersey 07701.

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

** For purposes of this Statement of Additional Information, ACMC
refers to Alliance Capital Management Corporation, the sole
general partner of the Investment Adviser, and to the
predecessor general partner of the Investment Adviser of the
same name.

<PAGE>

DR. JAMES M. HESTER, 71, is President of the Harry Frank
Guggenheim Foundation and a Director of Union Carbide Corporation
with which he has been associated since prior to 1990. He was
formerly President of New York University, the New York Botanical
Garden and Rector of the United Nations University. His address
is 45 East 89th Street, New York, New York 10128.

CLIFFORD L. MICHEL, 56, is a partner in the law firm of
Cahill Gordon & Reindel with which he has been associated since
prior to 1990. He is Chief Executive Officer of Wenonah
Development Company (investments) and a Director of Placer Dome,
Inc. (mining) and Faber-Castell Corporation (writing products).
His address is 80 Pine Street, New York, New York 10005.

EUGENE F. O'NEIL, 71, is Managing Director of O'Neil
Asset Management (private investments) with which he has been
associated since prior to 1990. His address is 24 Byfield Lane,
Greenwich, Connecticut 06830.

ROBERT C. WHITE, 75, was formerly Vice President and the
Chief Financial Officer of the Howard Hughes Medical Institute
since prior to 1990. Prior thereto, he was an Assistant
Treasurer of the Ford Motor Company. He is currently an
independent consultant. His address is 30825 River Crossing,
Bingham Farms, Michigan 48025.

OFFICERS

JOHN D. CARIFA, CHAIRMAN AND PRESIDENT (see biography,
above).

WAYNE D. LYSKI, SENIOR VICE PRESIDENT, 54, is an
Executive Vice President of ACMC with which he has been
associated since prior to 1990.

KATHLEEN A. CORBET, SENIOR VICE PRESIDENT, 35, has been
a Senior Vice President of ACMC since July 1993. Prior thereto,
she was employed by Equitable Capital since prior to 1990.

PAUL J. DENOON, VICE PRESIDENT, 33, is a Vice President
of ACMC with which he has been associated since January 1992.
Previously, he was a Vice President at Manufacturers Hanover
Trust since prior to 1990.

EDMUND P. BERGAN, JR., SECRETARY, 45, is a Senior Vice
President and the General Counsel of Alliance Fund Distributors,
Inc. with which he has been associated since prior to 1990.

DOMENICK PUGLIESE, ASSISTANT SECRETARY, 34, is Vice
President and Associate General Counsel of Alliance Fund
Distributors, Inc. with which he has been associated since May

<PAGE>

1995. Previously, he was Vice President and Counsel of Concord
Financial Holding Corporation since 1994, Vice President and
Associate General Counsel of Prudential Securities since 1991 and
an associate with Battle Fowler since prior to 1990.

MARK D. GERSTEN, TREASURER AND CHIEF FINANCIAL OFFICER,
45, is a Vice President of Alliance Fund Distributors, Inc. and a
Senior Vice President of Alliance Fund Services, Inc. with which
he has been associated since prior to 1990.

PATRICK J. FARRELL, CONTROLLER, 36, is a Vice President
of Alliance Fund Services, Inc. with which he has been associated
since prior to 1990.

JOSEPH J. MANTINEO, ASSISTANT CONTROLLER, 36, is a Vice
President of Alliance Fund Services, Inc. with which he has been
associated since prior to 1990.

STEPHEN M. ATKINS, ASSISTANT CONTROLLER, 30, has been a
Manager of Mutual Fund Accounting of Alliance Fund Services, Inc.
with which he has been associated since prior to 1990.

The aggregate compensation paid by the Fund to each of
the Directors during its fiscal year ended June 30, 1995, the
aggregate compensation paid to each of the Directors during
calendar year 1994 by all of the funds to which the Investment
Adviser provides investment advisory services (collectively, the
"Alliance Fund Complex") and the total number of registered
investment companies in the Alliance Fund Complex with respect to
which each of the Directors serves as a director or trustee are
set forth below. Neither the Fund nor any other fund in the
Alliance Fund Complex provides compensation in the form of
pension or retirement benefits to any of its directors or
trustees. Each of the Directors is a director or trustee of one
or more other registered investment companies in the Alliance
Fund Complex.

<PAGE>

Total Number of Funds
in the Alliance Fund
Total Compensation Complex, Including
Aggregate from the Alliance the Fund, as to which
Name of Director Compensation Fund Complex, the Director is a
of the Fund from the Fund Including the Fund Director or Trustee
________________ _____________ __________________ _______________________

John D. Carifa $-0- $-0- 49
Ruth Block 1,761 157,000 36
David H. Dievler 761 -0- 42
James R. Greene 1,750 77,500 11
Dr. James M. Hester 1,761 154,500 37
Clifford L. Michel 1,386 120,500 36
Eugene F. O'Neil 1,750 20,500 5
Robert C. White 1,761 133,500 36

As of October 13, 1995, the Directors and officers of
the Fund as a group owned less than 1% of the shares of the Fund.

INVESTMENT ADVISER

Alliance Capital Management L.P. (the "Investment
Adviser"), a New York Stock Exchange listed company with
principal offices at 1345 Avenue of the Americas, New York, New
York 10105, has been retained under an investment advisory
contract (the "Investment Advisory Contract") to provide
investment advice and, in general, to conduct the management and
investment program of the Fund under the supervision and control
of the Fund's Board of Directors.

The Investment Adviser is a leading international
investment manager supervising client accounts with assets as of
September 30, 1995 of more than $140 billion (of which
approximately $44 billion represented the assets of investment
companies). The Investment Adviser's clients are primarily major
corporate employee benefit funds, public employee retirement
systems, investment companies, foundations and endowment funds
and included, as of September 30, 1995, 29 of the FORTUNE 100
Companies. As of that date, the Investment Adviser and its
subsidiaries employed approximately 1,350 employees who operated
out of domestic offices and the overseas offices of subsidiaries
in Bombay, Istanbul, London, Sydney, Tokyo, Toronto, Bahrain,
Luxembourg and Singapore. The 51 registered investment companies
comprising 105 separate investment portfolios managed by the
Investment Adviser currently have more than two million
shareholders.

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

<PAGE>

interest in, the Investment Adviser, is an indirect wholly-owned
subsidiary of The Equitable Life Assurance Society of the United
States ("Equitable"), one of the largest life insurance companies
in the United States and a wholly-owned subsidiary of The
Equitable Companies Incorporated ("ECI"), a holding company
controlled by AXA, a French insurance holding company. As of
June 30, 1995, ACMC, Inc. and Equitable Capital Management
Corporation, each a wholly-owned direct or indirect subsidiary of
Equitable, owned in the aggregate approximately 59% of the issued
and outstanding units representing assignments of beneficial
ownership of limited partnership interests in the Investment
Adviser ("Units"). As of June 30, 1995, approximately 3% and 9%
of the Units were owned by the public and employees of the
Investment Adviser and its subsidiaries, respectively, including
employees of the Investment Adviser who serve as Directors of the
Fund.

AXA owns approximately 60% of the outstanding voting
shares of common stock of ECI. AXA is the holding company for an
international group of insurance and related financial services
companies. AXA's insurance operations are comprised of
activities in life insurance, property and casualty insurance and
reinsurance. The insurance operations are diverse geographically
with activities in France, the United States, the United Kingdom,
Canada and other countries, principally in Europe. AXA is also
engaged in asset management, investment banking and brokerage,
real estate and other financial services activities in the United
States and Europe. Based on information provided by AXA, as of
January 1, 1995, 42.3% of the issued shares (representing 54.7%
of the voting power) of AXA were owned by Midi Participations, a
French corporation that is a holding company. The voting shares
of Midi Participations are in turn owned 60% by Finaxa, a French
corporation that is a holding company, and 40% by subsidiaries of
Assicurazioni Generali S.p.A., an Italian corporation
("Generali") (one of which, Belgica Insurance Holding S.A., a
Belgian corporation, owned 34.1%). As of January 1, 1995, 62.1%
of the issued shares (representing 75.7% of the voting power) of
Finaxa were owned by five French mutual insurance companies (the
"Mutuelles AXA") (one of which, AXA Assurances I.A.R.D. Mutuelle,
owned 31.8% of the issued shares) (representing 39.0% of the
voting power), and 26.5% of the issued shares (representing 16.6%
of the voting power) of Finaxa were owned by Banque Paribas, a
French bank ("Paribas"). Including the shares owned by Midi
Participations, as of January 1, 1995, the Mutuelles AXA directly
or indirectly owned 51.3% of the issued shares (representing
65.8% of the voting power) of AXA. In addition, certain
subsidiaries of AXA own 0.4% of the shares of AXA which are not
entitled to be voted. Acting as a group, the Mutuelles AXA
control AXA, Midi Participations and Finaxa.

<PAGE>

Under the Investment Advisory Contract, the Investment
Adviser provides investment advisory services and order placement
facilities for the Fund and pays all compensation of Directors
and officers of the Fund who are affiliated persons of the
Investment Adviser. The Investment Adviser or its affiliates
also furnishes the Fund, without charge, management supervision
and assistance and office facilities and provide persons
satisfactory to the Fund's Board of Directors to serve as the
Fund's officers.

The Investment Adviser pays the Fund on the first
business day of July, October, January and April the amount, if
any, by which the Portfolio's operating expenses for the
preceding quarter (exclusive of interest, taxes, brokerage
expenditures pursuant to the Distribution Services Agreement
described below, and extraordinary expenses, all to the extent
permitted by applicable state securities laws and regulations)
which in any year exceed the limits prescribed by any state in
which the Fund's shares are qualified for sale. The Fund
believes that presently the most restrictive expense ratio
limitations imposed by any state in which the Fund has qualified
its shares for sale is 2.5% of the first $30 million of the
Fund's aggregate average daily net assets, 2.0% of the next $70
million of its average daily net assets and 1.5% of its average
daily net assets in excess of $100 million. Expense
reimbursements, if any, are accrued daily and paid monthly. No
such reimbursement was required for the year ended June 30, 1995.

For the fiscal years ended June 30, 1993, 1994 and 1995,
the Investment Adviser received under the advisory agreement then
in effect, $864,579, $2,565,102 and $2,989,872, respectively, as
advisory fees from the Portfolio.

The Investment Advisory Contract became effective on
July 22, 1992. The Investment Advisory Contract replaced an
earlier, substantially identical agreement (the "First Advisory
Agreement") that terminated because of its technical assignment
as a result of AXA's acquisition of control over Equitable. In
anticipation of the assignment of the First Advisory Agreement,
the Investment Advisory Contract was approved by the unanimous
vote, cast in person, of the Fund's Directors, including the
Directors who are not parties to the Investment Advisory Contract
or "interested persons" as defined in the 1940 Act of any such
party, at a meeting called for such purpose and held on
September 11, 1991. At a meeting held on June 11, 1992, a
majority of the outstanding voting securities of the Portfolio
approved the Investment Advisory Contract. An amendment to the
Investment Advisory Contract to increase the rate of the advisory
fee paid by the Portfolio was approved by the Board of Directors
at a Special Meeting held on October 20, 1992 and by a majority

<PAGE>

of the outstanding voting securities of the Portfolio at a
Special Meeting held on December 29, 1992.

The Investment Advisory Contract continues in effect for
successive twelve-month periods computed from each July 1,
provided that such continuance is specifically approved at least
annually by a vote of a majority of the Portfolio's outstanding
voting securities or by the Fund's Board of Directors, including
in either case approval by a majority of the Directors who are
not parties to the Investment Advisory Contract or interested
persons of any such party. Most recently, continuance of the
Investment Advisory Contract until June 30, 1996 was approved by
vote, cast in person, by the Board of Directors, including a
majority of the Directors who are not "interested persons" as
defined in the 1940 Act, at their meeting held on June 13, 1995.

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

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

<PAGE>

Fund, Alliance Developing Markets Fund, Inc., Alliance Global
Dollar Government Fund, Inc., Alliance Global Small Cap Fund,
Inc., Alliance Government Reserves, Alliance Growth and Income
Fund, Inc., Alliance Income Builder Fund, Inc., Alliance
International Fund, Alliance Money Market Fund, Alliance Mortgage
Securities Income Fund, Inc., Alliance Mortgage Strategy Trust,
Inc., Alliance Multi-Market Strategy Trust, Inc., Alliance
Municipal Income Fund, Inc., Alliance Municipal Income Fund II,
Alliance Municipal Trust, Alliance New Europe Fund, Inc.,
Alliance North American Government Income Trust, Inc., Alliance
Premier Growth Fund, Inc., Alliance Quasar Fund, Inc., Alliance
Short-Term Multi-Market Trust, Inc., Alliance Technology Fund,
Inc., Alliance Utility Income Fund, Inc., Alliance Variable
Products Series Fund, Inc., Alliance World Income Trust, Inc.,
Alliance Worldwide Privatization Fund, Inc., Fiduciary Management
Associates, The Alliance Portfolios and The Hudson River Trust,
all registered open-end investment companies; and to ACM
Government Income Fund, Inc., ACM Government Securities Fund,
Inc., ACM Government Spectrum Fund, Inc., ACM Government
Opportunity Fund, Inc., ACM Managed Income Fund, Inc., ACM
Managed Dollar Income Fund, Inc., ACM Municipal Securities Income
Fund, Inc., Alliance All-Market Advantage Fund, Inc., Alliance
Global Environment Fund, Inc., Alliance World Dollar Government
Fund, Inc., Alliance World Dollar Government Fund II, Inc., The
Austria Fund, Inc., The Global Privatization Fund, Inc., The
Korean Investment Fund, Inc., The Southern Africa Fund, Inc. and
The Spain Fund, Inc., all registered closed-end investment
companies.

DISTRIBUTION SERVICES AGREEMENT

The Fund has entered into a Distribution Services
Agreement (the "Agreement") with Alliance Fund Distributors,
Inc., the Fund's principal underwriter (the "Principal
Underwriter"), to permit the Fund directly or indirectly to pay
expenses associated with the distribution of its shares in
accordance with a plan of distribution which is included in the
Agreement and has been duly adopted and approved in accordance
with Rule 12b-1 adopted by the Commission under the 1940 Act (the
"Rule 12b-1 Plan").

Under the Agreement, the Treasurer of the Fund reports
the amounts expended under the Rule 12b-1 Plan and the purposes
for which such expenditures were made to the Directors of the
Fund for their review on a quarterly basis. Also, the Agreement
provides that the selection and nomination of Directors (as
defined in the 1940 Act) are committed to the discretion of such
disinterested Directors then in office.

The Agreement became effective on July 22, 1992, and was
amended as of April 30, 1993 to permit the distribution of an

<PAGE>

additional class of shares, Class C shares. The amendment to the
Agreement was approved by the unanimous vote, cast in person, of
the disinterested Directors at a meeting called for that purpose
held on February 23, 1993, and by the initial holder of Class C
shares of the Fund on April 30, 1993.

The Investment Adviser may, from time to time and from
its own funds or such other resources as may be permitted by
rules of the Commission, make payments for distribution services
to the Principal Underwriter; the latter may in turn pay part or
all of such compensation to brokers or other persons for their
distribution assistance.

During the Portfolio's fiscal year ended June 30, 1995,
with respect to Class A shares, the distribution services fees
for expenditure payable to the Principal Underwriter amounted to
$658,962, which constituted .30 of 1% of the Portfolio's average
daily net assets during the period, and the Investment Adviser
made payments from its own resources aggregating $175,191. Of
the $834,153 paid by the Portfolio and the Investment Adviser
under the Plan with respect to Class A shares, $36,982 was spent
on advertising, $17,374 on the printing and mailing of
prospectuses for persons other than current shareholders,
$587,905 for compensation to broker-dealers and other financial
intermediaries (including $82,254 to the Fund's Principal
Underwriter), $29,532 for compensation paid to wholesalers of the
Principal Underwriter in respect of sales of shares of the
Portfolio, and $162,360 was spent on printing of sales
literature, travel, entertainment, due diligence and other
promotional expenses.

During the Portfolio's fiscal year ended June 30, 1995,
with respect to Class B shares, distribution services fees for
expenditures payable to the Principal Underwriter amounted to
$2,081,926, which constituted 1% of the Portfolio's average daily
net assets during such period, and the Investment Adviser made
payments from its own resources aggregating $1,396,137. Of the
$3,478,063 paid by the Portfolio and the Investment Adviser under
the Plan with respect to Class B shares, $79,449 was spent on
advertising, $37,565 on the printing and mailing of prospectuses
for persons other than current shareholders, $2,291,667 for
compensation to broker-dealers and other financial intermediaries
(including $174,044 to the Fund's Principal Underwriter), $50,280
for compensation paid to wholesalers of the Principal Underwriter
in respect of sales of shares of the Portfolio, and $288,919 was
spent on printing of sales literature, travel, entertainment, due
diligence and other promotional expenses, and $730,183 was spent
on financing of interest relating to Class B shares.

During the Portfolio's fiscal year ended June 30, 1995,
with respect to Class C shares, distribution services fees for

<PAGE>

expenditures payable to the Principal Underwriter amounted to
$505,105, which constituted 1% of the Portfolio's average daily
net assets during such period, and the Investment Adviser made
payments from its own resources aggregating $215,479. Of the
$720,584 paid by the Portfolio and the Investment Adviser under
the Plan with respect to Class C shares, $27,919 was spent on
advertising, $12,389 on the printing and mailing of prospectuses
for persons other than current shareholders, $564,833 for
compensation to broker-dealers and other financial intermediaries
(including $61,213 to the Fund's Principal Underwriter), $17,253
for compensation paid to wholesalers of the Principal Underwriter
in respect of sales of shares of the Portfolio, and $98,190 was
spent on printing of sales literature, travel, entertainment, due
diligence and other promotional expenses.

The Agreement will continue in effect for successive
twelve- month periods (computed from each July 1) with respect to
each class of the Fund, provided, however, that such continuance
is specifically approved at least annually by the Directors of
the Fund or by vote of the holders of a majority of the
outstanding voting securities (as defined in the 1940 Act) of
that class, and in either case, by a majority of the Directors of
the Fund who are not parties to this Agreement or interested
persons, as defined in the 1940 Act, of any such party (other
than as directors of the Fund) and who have no direct or indirect
financial interest in the operation of the Rule 12b-1 Plan or any
agreement related thereto. Most recently the Directors approved
the continuance of the Agreement until June 30, 1996 at their
meeting held on June 13, 1995.

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

<PAGE>

any time by a majority vote of the disinterested Directors who
have no direct or indirect financial interest in the Rule 12b-1
Plan, the Agreement or any related agreement or by a majority
vote of the outstanding shares of the Fund, voting separately by
class, or (b) by the Principal Underwriter. To terminate the
Agreement, either party must give the other party 60 days'
written notice; to terminate the Rule 12b-1 Plan only, the Fund
is not required to give prior written notice to the Principal
Underwriter. The Rule 12b-1 Plan will terminate automatically in
the event of its assignment.

TRANSFER AGENCY AGREEMENT

Alliance Fund Services, Inc., an indirect wholly-owned
subsidiary of the Investment Adviser, receives a transfer agency
fee per account holder for each of the Class A, Class B and
Class C shares of the Portfolio, plus reimbursement for out-of-
pocket expenses. The transfer agency fee with respect to the
Class B shares is higher than the transfer agency fee with
respect to the Class A shares or the Class C shares, reflecting
the additional costs associated with Class B contingent deferred
sales charge. For the fiscal year ended June 30, 1995, the Fund
paid Alliance Fund Services, Inc. $627,480 for transfer agency
services.

________________________________________________________________

PURCHASE OF SHARES
________________________________________________________________

The following information supplements that set forth in
the Portfolio's Prospectus under the headings "Purchase and Sale
of Shares -- How To Buy Shares, How To Sell Shares, and
Shareholder Services."

GENERAL

<PAGE>

Principal Underwriter. The minimum for initial investments is
$250; subsequent investments (other than reinvestments of
dividends and capital gains distributions in shares) must be in
the minimum amount of $50. As described under "Shareholder
Services," the Portfolio offers an automatic investment program
and a 403(b)(7) retirement plan which permit investments of $25
or more. The subscriber may use the Subscription Application
found in the Prospectus for his or her initial investment. Sales
personnel of selected dealers and agents distributing the
Portfolio's shares may receive differing compensation for selling
Class A, Class B or Class C shares.

Investors may purchase shares of the Portfolio in the
United States either through selected dealers or agents or
directly through the Principal Underwriter. Shares may also be
sold in foreign countries where permissible. The Fund may refuse
any order for the purchase of shares. The Fund reserves the
right to suspend the sale of the Portfolio's shares to the public
in response to conditions in the securities markets or for other
reasons.

The public offering price of shares of the Portfolio is
their net asset value, plus, in the case of most purchases of
Class A shares, a sales charge which will vary depending on the
purchase alternative chosen by the investor and the amount of the
purchase, as shown in the table below under "Initial Sales Charge
Alternative -- Class A Shares." On each Fund business day on
which a purchase or redemption order is received by the Fund and
trading in the types of securities in which the Portfolio invests
might materially affect the value of Portfolio shares, the per
share net asset value is computed in accordance with the Fund's
Articles of Incorporation and By-Laws as of the next close of
regular trading on the New York Stock Exchange (the "Exchange")
(currently 4:00 p.m. New York time) by dividing the value of the
Portfolio's total assets, less its liabilities, by the total
number of its shares then outstanding. The respective per share
net asset values of the Class A, Class B and Class C shares are
expected to be substantially the same. Under certain
circumstances, however, the per share net asset values of the
Class B and Class C shares may be lower than the per share net
asset value of the Class A shares as a result of the daily
expense accruals of the distribution and transfer agency fees
applicable with respect to the Class B and Class C shares. Even
under those circumstances, the per share net asset values of the
three classes eventually will tend to converge immediately after
the payment of dividends, which will differ by approximately the
amount of the expense accrual differential among the classes. A
Fund business day is any weekday, exclusive of national holidays
on which the Exchange is closed and Good Friday. For purposes of
this computation, the securities in the Portfolio are valued at
their current market value determined on the basis of market

<PAGE>

quotations or, if such quotations are not readily available, such
other methods as the Directors believe would accurately reflect
fair market value.

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

Following the initial purchase of Portfolio shares, a
shareholder may place orders to purchase additional shares by
telephone if the shareholder has completed the appropriate
portion of the Subscription Application or an "Autobuy"
application obtained by calling the "Literature" telephone number
shown on the cover of this Statement of Additional Information.
Payment for shares purchased by telephone can be made only by
Electronic Funds Transfer from a bank account maintained by the
shareholder at a bank that is a member of the National Automated
Clearing House Association ("NACHA"). If a shareholder's
telephone purchase request is received before 3:00 p.m. New York
time on a Fund business day, the order to purchase shares is
automatically placed the following Fund business day, and the
applicable public offering price will be the public offering
price determined as of the close of business on such following
business day.

<PAGE>

agent. This facilitates later redemption and relieves the
shareholder of the responsibility for and inconvenience of lost
or stolen certificates. No certificates are issued for
fractional shares, although such shares remain in the
shareholder's account on the books of the Fund.

In addition to the discount or commission amount paid to
dealers or agents, the Principal Underwriter from time to time
pays additional cash bonuses or other incentives to dealers or
agents, including Equico Securities, Inc., an affiliate of the
Principal Underwriter, in connection with the sale of shares of
the Portfolio. Such additional amounts may be utilized, in whole
or in part, to provide additional compensation to registered
representatives who sell shares of the Portfolio. 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 Portfolio and/or other Alliance Mutual Funds, as defined
below, during a specific period of time. On some occasions, such
cash or other incentives may take the form of payment for
attendance at seminars, meals, sporting events or theater
performances, or payment for travel, lodging and entertainment
incurred in connection with travel 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.

ALTERNATIVE PURCHASE ARRANGEMENTS

The Portfolio issues three classes of shares: Class A
shares are sold to investors choosing the initial sales charge
alternative, Class B shares are sold to investors choosing the
deferred sales charge alternative, and Class C shares are sold to
investors choosing the asset-based sales charge alternative. The
three classes of shares each represent an interest in the same
portfolio of investments of the Portfolio, have the same rights
and are identical in all respects, except that (i) Class A shares
bear the expense of the initial sales charge (or contingent
deferred sales charge, when applicable) and Class B shares bear
the expense of the contingent deferred sales charge, (ii) Class B
shares and Class C shares each bear the expense of a higher
distribution services fee and in the case of Class B shares,
higher transfer agency costs, (iii) each class has exclusive
voting rights with respect to provisions of the Rule 12b-1 Plan
pursuant to which its distribution services fee is paid which
relates to a specific class and other matters for which separate
class voting is appropriate under applicable law, provided that,
if the Portfolio submits to a vote of both the Class A
shareholders and the Class B shareholders an amendment to the
Rule 12b-1 Plan that would materially increase the amount to be
paid thereunder with respect to the Class A shares, the Class A

<PAGE>

shareholders and the Class B shareholders will vote separately by
Class, and (iv) only the Class B shares are subject to a
conversion feature. Each class has different exchange privileges
and certain different shareholder service options available.

The alternative purchase arrangements permit an investor
to choose the method of purchasing shares that is most beneficial
given the amount of the purchase, the length of time the investor
expects to hold the shares, and other circumstances. Investors
should consider whether, during the anticipated life of their
investment in the Portfolio, the accumulated distribution
services fee and contingent deferred sales charges on Class B
shares prior to conversion, or the accumulated distribution
services fee on Class C shares, would be less than the initial
sales charge and accumulated distribution services fee on Class A
shares purchased at the same time, and to what extent such
differential would be offset by the higher return of Class A
shares. Class A shares will normally be more beneficial than
Class B shares to the investor who qualifies for reduced initial
sales charges on Class A shares, as described below. In this
regard, the Principal Underwriter will reject any order (except
orders from certain retirement plans) for more than $250,000 for
Class B shares. Class C shares will normally not be suitable for
the investor who qualifies to purchase Class A shares at net
asset value. In addition, the Principal Underwriter will reject
any order for more than $5,000,000 for Class C shares.

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

<PAGE>

investment approximately seven years for the Class C distribution
services fee to exceed the initial sales charge plus the
accumulated distribution services fee of Class A shares. In this
example, an investor intending to maintain his or her investment
for a longer period might consider purchasing Class A shares.
This example does not take into account the time value of money,
which further reduces the impact of the Class C distribution
services fees on the investment, fluctuations in net asset value
or the effect of different performance assumptions.

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

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

During the Fund's fiscal periods ended June 30, 1995,
1994 and 1993, the aggregate amount of underwriting commission
payable with respect to shares of the Portfolio in each year was
$1,563,728, $3,198,135 and $3,678,200, respectively, and of that
amount, the Principal Underwriter received amounts of $62,554,
$118,140 and $30,676, respectively, representing that portion of
the Class A sales charges paid on Class A shares of the Portfolio
sold during the year which was not reallowed to selected dealers
(and was, accordingly, retained by the Principal Underwriter).
During the fiscal period ended June 30, 1995, the Principal
Underwriter received $482,577 in contingent deferred sales
charges from the redemption of Class B shares.

INITIAL SALES CHARGE ALTERNATIVE--CLASS A SHARES

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

<PAGE>

Initial Sales Charge
____________________
Discount or
Commission
As % of to Dealers
As % of the or Agents
Net Public As % of
Amount of Amount Offering Offering
Purchase Invested Price Price
__________________ ________ ________ __________

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

____________________

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

With respect to purchases of $1,000,000 or more, Class A
shares redeemed within one year of purchase will be subject to a
contingent deferred sales charge equal to 1% of the lesser of the
cost of the shares being redeemed or their net asset value at the
time of redemption. Accordingly, no sales charge will be imposed
on increases in net asset value above the initial purchase price.
In addition, no charge will be assessed on shares derived from
reinvestment of dividends or capital gains distributions. The
contingent deferred sales charge on Class A shares will be waived
on certain redemptions, and such charge will be applied to
redemptions of shares by shareholders who hold both Class A and
Class B shares, as described below under "Deferred Sales Charge
Alternative--Class B Shares." Proceeds from the contingent
deferred sales charge on Class A shares are paid to the Principal
Underwriter and are used by the Principal Underwriter to defray
the expenses of the Principal Underwriter related to providing
distribution-related services to the Fund in connection with the
sales of Class A shares, such as the payment of compensation to
selected dealers and agents for selling Class A shares. With
respect to purchases of $1,000,000 or more made through selected
dealers or agents, the Investment Adviser may, pursuant to the
Agreement described above, pay such dealers or agents from its
own resources a fee of up to .25 of 1% of the amount invested to

<PAGE>

compensate such dealers or agents for their distribution
assistance in connection with such purchases.

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

Set forth below is an example of the method of computing
the offering price of the Class A shares. The example assumes a
purchase of Class A shares of the Portfolio aggregating less than
$100,000 subject to the schedule of sales charges set forth in
the Prospectus at a price based upon the net asset value of
Class A shares of the Portfolio on June 30, 1995.

Net Asset Value per Class A Share
at June 30, 1995 $12.92

Per Share Sales Charge - 4.25%
of offering price (4.44% .57
of net asset value per share)

Class A Per Share Offering Price
to the Public $13.49

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

<PAGE>

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

AFD Exchange Reserves
Alliance All-Asia Investment Fund, Inc.
Alliance Balanced Shares, Inc.
Alliance Bond Fund, Inc.
-Corporate Bond Portfolio
-U.S. Government Portfolio
Alliance Counterpoint Fund
Alliance Developing Markets Fund, Inc.
Alliance Global Dollar Government Fund, Inc.
Alliance Global Small Cap Fund, Inc.
Alliance Growth and Income Fund, Inc.
Alliance Income Builder Fund, Inc.
Alliance International Fund
Alliance Mortgage Securities Income Fund, Inc.
Alliance Mortgage Strategy Trust, Inc.
Alliance Multi-Market Strategy Trust, Inc.
Alliance Municipal Income Fund II
-Arizona Portfolio
-Florida Portfolio
-Massachusetts Portfolio
-Michigan Portfolio
-Minnesota Portfolio
-New Jersey Portfolio

<PAGE>

-Ohio Portfolio
-Pennsylvania Portfolio
-Virginia Portfolio
Alliance Municipal Income Fund, Inc.
-California Portfolio
-Insured California Portfolio
-Insured National Portfolio
-National Portfolio
-New York Portfolio
Alliance New Europe Fund, Inc.
Alliance North American Government Income Trust, Inc.
Alliance Premier Growth Fund, Inc.
Alliance Quasar Fund, Inc.
Alliance Short-Term Multi-Market Trust, Inc.
Alliance Technology Fund, Inc.
Alliance Utility Income Fund, Inc.
Alliance World Income Trust, Inc.
Alliance Worldwide Privatization Fund, Inc.
The Alliance Fund, Inc.
The Alliance Portfolios
-The Alliance Growth Fund
-The Alliance Conservative Investors Fund
-The Alliance Growth Investors Fund
-The Alliance Short-Term U.S. Government Fund
-The Alliance Strategic Balanced Fund

Prospectuses for the Alliance Mutual Funds may be
obtained without charge by contacting Alliance Fund Services,
Inc. at the address or the "Literature" telephone number shown on
the front cover of this Statement of Additional Information.

CUMULATIVE QUANTITY DISCOUNT (RIGHT OF ACCUMULATION). An
investor's purchase of additional Class A shares of the Portfolio
may qualify for a Cumulative Quantity Discount. The applicable
sales charge will be based on the total of:

(i) the investor's current purchase;

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

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

<PAGE>

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

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

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

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

<PAGE>

sales charge applicable to the shares actually purchased if the
full amount indicated is not purchased, and such escrowed shares
will be involuntarily redeemed to pay the additional sales
charge, if necessary. Dividends on escrowed shares, whether paid
in cash or reinvested in additional Portfolio shares, are not
subject to escrow. When the full amount indicated has been
purchased, the escrow will be released. To the extent that an
investor purchases more than the dollar amount indicated on the
Statement of Intention and qualifies for a further reduced sales
charge, the initial sales charge will be adjusted for the entire
amount purchased at the end of the 13-month period. The
difference in the initial sales charge will be used to purchase
additional shares of the Portfolio subject to the rate of the
initial sales charge applicable to the actual amount of the
aggregate purchases.

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

CERTAIN RETIREMENT PLANS. Multiple participant payroll
deduction retirement plans may also purchase shares of the
Portfolio or any other Alliance Mutual Fund at a reduced initial
sales charge on a monthly basis during the 13-month period
following such a plan's initial purchase. The initial sales
charge applicable to such initial purchase of shares of the
Portfolio will be that normally applicable, under the schedule of
the initial sales charges set forth in this Statement of
Additional Information, to an investment 13 times larger than
such initial purchase. The sales charge applicable to each
succeeding monthly purchase will be that normally applicable,
under such schedule, to an investment equal to the sum of (i) the
current month's purchase multiplied by the number of months
(including the current month) remaining in the 13-month period,
and (ii) the total purchase previously made during the 13-month
period. Sales charges previously paid during such period will
not be retroactively adjusted on the basis of later purchases.

REINSTATEMENT PRIVILEGE. A shareholder who has caused
any or all of his or her Class A shares of the Portfolio to be
redeemed or repurchased may reinvest all or any portion of the
redemption or repurchase proceeds in Class A shares of the
Portfolio at net asset value without any sales charge, provided
that such reinvestment is made within 120 calendar days after the
redemption or repurchase date. Shares are sold to a reinvesting
shareholder at the net asset value next determined as described

<PAGE>

above. A reinstatement pursuant to this privilege will not
cancel the redemption or repurchase transaction; therefore, any
gain or loss so realized will be recognized for Federal tax
purposes except that no loss will be recognized to the extent
that the proceeds are reinvested in shares of the Portfolio. The
reinstatement privilege may be used by the shareholder only once,
irrespective of the number of shares redeemed or repurchased,
except that the privilege may be used without limit in connection
with transactions whose sole purpose is to transfer a
shareholder's interest in the Portfolio to his or her individual
retirement account or other qualified retirement plan account.
Investors may exercise the reinstatement privilege by written
request sent to the Fund at the address shown on the cover of
this Statement of Additional Information.

SALES AT NET ASSET VALUE. The Portfolio may sell its
Class A shares at net asset value (i.e., without an initial sales
charge) and without any contingent deferred sales charge to
certain categories of investors, including: (i) investment
advisory clients of the Investment Adviser or its affiliates;
(ii) officers and present or former Directors of the Fund;
present or former directors and trustees of other investment
companies managed by the Investment Adviser; present or retired
full-time employees of the Investment Adviser, the Principal
Underwriter, Alliance Fund Services, Inc. and their affiliates;
officers and directors of ACMC, the Principal Underwriter,
Alliance Fund Services, Inc. and their affiliates; officers,
directors and present and full-time employees of selected dealers
or agents; or the spouse, sibling, direct ancestor or direct
descendant (collectively "relatives") of any such person; or any
trust, individual retirement account or retirement plan account
for the benefit of any such person or relative; or the estate of
any such person or relative, if such shares are purchased for
investment purposes (such shares may not be resold except to the
Fund); (iii) certain employee benefit plans for employees of the
Investment Adviser, the Principal Underwriter, Alliance Fund
Services, Inc. and their affiliates; (iv) persons participating
in a fee-based program, sponsored and maintained by a registered
broker-dealer and approved by the Principal Underwriter, pursuant
to which such persons pay an asset-based fee to such broker-
dealer, or its affiliate or agent, for services in the nature of
investment advisory or administrative services; (v) persons who
establish to the Principal Underwriter's satisfaction that they
are investing, within such time period as may be designated by
the Principal Underwriter, proceeds of redemption of shares of
such other registered investment companies as may be designated
from time to time by the Principal Underwriter; and (vi)
employer-sponsored qualified pension or profit-sharing plans
(including Section 401(k) plans), custodial accounts maintained
pursuant to Section 403(b)(7) retirement plans and individual
retirement accounts (including individual retirement accounts to

<PAGE>

which simplified employee pension (SEP) contributions are made),
if such plans or accounts are established or administered under
programs sponsored by administrators or other persons that have
been approved by the Principal Underwriter.

DEFERRED SALES CHARGE ALTERNATIVE--CLASS B SHARES

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

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

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

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

<PAGE>

per share. Therefore, $400 of the $600 redemption proceeds will
be charged at a rate of 2.0% (the applicable rate in the second
year after purchase as set forth below).

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

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

First 3.0%
Second 2.0%
Third 1.0%
Thereafter None

In determining the contingent deferred sales charge
applicable to a redemption, it will be assumed that the
redemption is first of any shares in the shareholder's Portfolio
account that are not subject to a contingent deferred sales
charge, second of Class B shares held for over three years and
third of Class A shares that are subject to contingent deferred
sales charge held shortest during the one-year period during
which such shares are subject to the sales charge. When Class B
shares acquired in an exchange are redeemed, the applicable
contingent deferred sales charge and conversion schedules will be
the schedules that applied to Class B shares of the Alliance
Mutual Fund originally purchased by the shareholder at the time
of their purchase.

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

CONVERSION FEATURE. At the end of the period ending six
years after the end of the calendar month in which the

<PAGE>

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

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

The conversion of Class B shares to Class A shares is
subject to the continuing availability of an opinion of counsel
to the effect that (i) the assessment of the higher distribution
services fee and transfer agency costs with respect to Class B
shares does not result in the Portfolio's dividends or
distributions constituting "preferential dividends" under the
Code, and (ii) the conversion of Class B shares to Class A shares
does not constitute a taxable event under federal income tax law.
The conversion of Class B shares to Class A shares may be
suspended if such an opinion is no longer available at the time
such conversion is to occur. In that event, no further
conversions of Class B shares would occur, and shares might
continue to be subject to the higher distribution services fee
for an indefinite period which may extend beyond the period
ending six years after the end of the calendar month in which the
shareholder's purchase order was accepted.

ASSET-BASED SALES CHARGE ALTERNATIVE--CLASS C SHARES

Investors choosing the asset-based sales charge
alternative purchase Class C shares at the public offering price
equal to the net asset value per share of the Class C shares on
the date of purchase without the imposition of a sales charge
either at the time of purchase or upon redemption. Class C
shares are sold without an initial sales charge so that the
Portfolio will receive the full amount of the investor's purchase
payment and without a contingent deferred sales charge so that
the investor will receive as proceeds upon redemption the entire
net asset value of his or her Class C shares. The Class C
distribution services fee enables the Portfolio to sell Class C
shares without either an initial or contingent deferred sales

<PAGE>

charge. Class C shares do not convert to any other class of
shares of the Portfolio and incur higher distribution services
fees than Class A shares, and will thus have a higher expense
ratio and pay correspondingly lower dividends than Class A
shares.

________________________________________________________________

REDEMPTION AND REPURCHASE OF SHARES
________________________________________________________________

The following information supplements that set forth in
the Portfolio's Prospectus under the heading "Purchase and Sale
of Share--How to Sell Shares."

REDEMPTION

Subject only to the limitations described below, the
Fund's Articles of Incorporation require that the Fund redeem the
shares of the Portfolio tendered to it, as described below, at a
redemption price equal to their net asset value as next computed
following the receipt of shares tendered for redemption in proper
form. Except for any contingent deferred sales charge which may
be applicable to Class A shares or Class B shares, there is no
redemption charge. Payment of the redemption price will be made
within seven days after the Fund's receipt of such tender for
redemption.

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

<PAGE>

securities) received by a shareholder upon redemption or
repurchase of his or her shares, assuming the shares constitute
capital assets in his or her hands, will result in long-term or
short-term capital gains (or loss) depending upon the
shareholder's holding period and basis in respect of the shares
redeemed.

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

TELEPHONE REDEMPTION BY ELECTRONIC FUNDS TRANSFER.
Requests for redemption of shares for which no stock certificates
have been issued can also be made by telephone at (800) 221-5672
by a shareholder who has completed the appropriate portion of the
Subscription Application or, in the case of an existing
shareholder, an "Autosell" application obtained from Alliance
Fund Services, Inc. A telephone redemption request must be for
at least $500 and may not exceed $100,000, and must be made
between 9:00 a.m. and 4:00 p.m. New York time on a Fund business
day as defined above. Proceeds of telephone redemptions will be
sent by Electronic Funds Transfer to a shareholder's designated
bank account at a bank selected by the shareholder that is a
member of the NACHA.

TELEPHONE REDEMPTION BY CHECK. Except as noted below,
each Portfolio shareholder is eligible to request redemption,
once in any 30-day period, of Portfolio shares by telephone at
(800) 221- 5672 before 4:00 p.m. New York time on a Fund business
day in an amount not exceeding $50,000. Proceeds of such
redemptions are remitted by check to the shareholder's address of
record. Telephone redemption by check is not available with
respect to shares (i) for which certificates have been issued,
(ii) held in nominee or "street name" accounts, (iii) purchased
within 15 calendar days prior to the redemption request,
(iv) held by a shareholder who has changed his or her address of
record within the preceding 30 calendar days or (v) held in any
retirement plan account. A shareholder otherwise eligible for
telephone redemption by check may cancel the privilege by written
instruction to Alliance Fund Services, Inc., or by checking the
appropriate box on the Subscription Application found in the
Prospectus.

<PAGE>

difficulty was apparent at any time in connection with the 1987
market break). If a shareholder were to experience such
difficulty, the shareholder should issue written instructions to
Alliance Fund Services, Inc. at the address shown on the cover of
this Statement of Additional Information. The Fund reserves the
right to suspend or terminate its telephone redemption service at
any time without notice. Neither the Fund nor the Investment
Adviser, the Principal Underwriter or Alliance Fund Services,
Inc. will be responsible for the authenticity of telephone
requests for redemptions that the Fund reasonably believes to be
genuine. The Fund will employ reasonable procedures in order to
verify that telephone requests for redemptions are genuine,
including, among others, recording such telephone instructions
and causing written confirmations of the resulting transactions
to be sent to shareholders. If the Fund did not employ such
procedures, it could be liable for losses arising from
unauthorized or fraudulent telephone instructions. Selected
dealers or agents may charge a commission for handling telephone
requests for redemptions.

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

REPURCHASE

The Portfolio may repurchase shares through the
Principal Underwriter or selected dealers or agents. The
repurchase price will be the net asset value next determined
after the Principal Underwriter receives the request (less the
contingent deferred sales charge, if any, with respect to the
Class A shares and Class B shares), except that requests placed
through selected dealers or agents before the close of regular
trading on the Exchange on any day will be executed at the net
asset value determined as of such close of regular trading on
that day if received by the Principal Underwriter prior to its
close of business on that day (normally 5:00 p.m. New York time).
The selected dealer or agent is responsible for transmitting the
request to the Principal Underwriter by 5:00 p.m. If the
selected dealer or agent fails to do so, the shareholder's right

<PAGE>

to receive that day's closing price must be settled between the
shareholder and the dealer or agent. A shareholder may offer
shares of the Portfolio to the Principal Underwriter either
directly or through a selected dealer or agent. Neither the Fund
nor the Principal Underwriter charges a fee or commission in
connection with the repurchase of shares (except for the
contingent deferred sales charge, if any, with respect to Class A
shares and Class B shares). Normally, if shares of the Portfolio
are offered through a selected dealer or agent, the repurchase is
settled by the shareholder as an ordinary transaction with or
through the selected dealer or agent, who may charge the
shareholder for this service. The repurchase of shares of the
Portfolio as described above is a voluntary service of the Fund
and the Fund may suspend or terminate this practice at any time.

GENERAL

The Fund reserves the right to close out an account that
through redemption has remained below $200 for at least 60 days
after at least 30 days' written notice to the shareholder
subsequent to such period. No contingent deferred sales charge
will be deducted from the proceeds of this redemption. In the
case of a redemption or repurchase of shares of the Portfolio
recently purchased by check, redemption proceeds will not be made
available until the Fund is reasonably assured that the check has
cleared, normally up to 15 calendar days following the purchase
date.

________________________________________________________________

SHAREHOLDER SERVICES
________________________________________________________________

The following information supplements that set forth in
the Portfolio's Prospectus under the heading "Purchase and Sale
of Shares--Shareholder Services."

SHAREHOLDER SERVICES APPLICABLE TO ALL THREE CLASSES

AUTOMATIC INVESTMENT PROGRAM

<PAGE>

normally made on the 20th day of each month, or the next business
day thereafter. If made in electronic form, drafts can be made
on or about a date each month selected by the shareholder.
Investors wishing to establish an automatic investment program in
connection with their initial investment should complete the
appropriate portion of the Subscription Application found in the
Prospectus. Current shareholders should contact Alliance Fund
Services, Inc. at the address or telephone numbers shown on the
cover of this Statement of Additional Information to establish an
automatic investment program.

EXCHANGE PRIVILEGE

Class A shareholders of the Portfolio can exchange their
Class A shares for Class A shares of any other Alliance Mutual
Fund that offers Class A shares and for shares of Alliance World
Income Trust, Inc. without the payment of any sales or service
charges. For purposes of applying applicable contingent deferred
sales charge upon the newly acquired Class A shares, the period
of time the Class A shares surrendered in the exchange have been
held is added to the period of time the newly acquired shares
have been held. Prospectuses for each Alliance Mutual Fund may
be obtained by contacting Alliance Fund Services, Inc. at the
address shown on the cover of this Statement of Additional
Information or by telephone at (800) 227-4618 or, in Illinois,
(800) 227-4170.

Class B shareholders of the Portfolio can exchange their
Class B shares ("original Class B shares") for Class B shares of
any other Alliance Mutual Fund that offers Class B
shares ("new Class B shares") without the payment of any
contingent deferred sales or service charges. For purposes of
computing both the time remaining before the new Class B shares
convert to Class A shares of that fund and the contingent
deferred sales charge payable upon disposition of the new Class B
shares, the period of time for which the original Class B shares
have been held is added to the period of time for which the new
Class B shares have been held. After an exchange, new Class B
shares will automatically convert into Class A shares in
accordance with the conversion schedule applicable to the
Alliance Mutual Fund Class B shares originally purchased for
cash, and when redemption occurs, the contingent deferred sales
charge schedule applicable to the Class B shares originally
purchased for cash is applied.

Class C shareholders of the Portfolio can exchange their
Class C shares for Class C shares of any other Alliance Mutual
Fund that offers Class C shares.

All exchanges are subject to the minimum investment
requirements and any other applicable terms set forth in the

<PAGE>

Prospectus for the Alliance Mutual Fund whose shares are being
acquired. An exchange is effected through the redemption of the
shares tendered for exchange and the purchase of shares being
acquired at their respective net asset values as next determined
following receipt by the Alliance Mutual Fund whose shares are
being exchanged of (i) proper instructions and all necessary
supporting documents as described in such fund's Prospectus, or
(ii) a telephone request for such exchange in accordance with the
procedures set forth in the following paragraph. Exchanges
involving the redemption of shares recently purchased by check
will be permitted only after the Alliance Mutual Fund whose
shares have been tendered for exchange is reasonably assured that
the check has cleared, normally up to 15 calendar days following
the purchase date. Exchanges of shares of Alliance Mutual Funds
will generally result in the realization of a capital gain or
loss for Federal income tax purposes.

Each Portfolio shareholder, and the shareholder's
selected dealer or agent, are authorized to make telephone
requests for exchanges unless Alliance Fund Services, Inc.
receives written instruction to the contrary from the
shareholder, or the shareholder declines the privilege by
checking the appropriate box on the Subscription Application
found in the Prospectus. Such telephone requests cannot be
accepted with respect to shares then represented by stock
certificates. Shares acquired pursuant to a telephone request
for exchange will be held under the same account registration as
the shares redeemed through such exchange.

Eligible shareholders desiring to make an exchange
should telephone Alliance Fund Services, Inc. with their account
number and other details of the exchange, at (800) 221-5672
between 9:00 a.m. and 4:00 p.m., New York time, on a Fund
business day as defined above. Telephone requests for exchange
received before 4:00 p.m. New York time on a Fund business day
will be processed as of the close of business on that day.
During periods of drastic economic or market developments, such
as the market break of October 1987, it is possible that
shareholders would have difficulty in reaching Alliance Fund
Services, Inc. by telephone (although no such difficulty was
apparent at any time in connection with the 1987 market break).
If a shareholder were to experience such difficulty, the
shareholder should issue written instructions to Alliance Fund
Services, Inc. at the address shown on the cover of this
Statement of Additional Information.

A shareholder may elect to initiate a monthly "Auto
Exchange" whereby a specified dollar amount's worth of his or her
Fund shares (minimum $25) is automatically exchanged for shares
of another Alliance Mutual Fund. Auto Exchange transactions

<PAGE>

normally occur on the 12th day of each month, or the following
Fund business day.

Neither the Alliance Funds nor the Investment Adviser,
the Principal Underwriter or Alliance Fund Services, Inc. will be
responsible for the authenticity of telephone requests for
exchanges that the Fund reasonably believes to be genuine. The
Fund will employ reasonable procedures in order to verify that
telephone requests for exchanges are genuine, including, among
others, recording such telephone instructions and causing written
confirmations of the resulting transactions to be sent to
shareholders. If the Fund did not employ such procedures, it
could be liable for losses arising from unauthorized or
fraudulent telephone instructions. Selected dealers or agents
may charge a commission for handling telephone requests for
exchanges.

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

RETIREMENT PLANS

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

Alliance Fund Services, Inc.
Retirement Plans
P.O. Box 1520
Secaucus, N.J. 07096-1520

INDIVIDUAL RETIREMENT ACCOUNT ("IRA"). Individuals who
receive compensation, including earnings from self-employment,
are entitled to establish and make contributions to an IRA.
Taxation of the income and gains paid to an IRA by the Portfolio
is deferred until distribution from the IRA. An individual's
eligible contributions to an IRA will be deductible if neither
the individual nor his or her spouse is an active participant in
an employer-sponsored retirement plan. If the individual or his
or her spouse is an active participant in an employer-sponsored
retirement plan, the individual's contributions to an IRA may be

<PAGE>

deductible, in whole or in part, depending on the amount of the
adjusted gross income of the individual and his or her spouse.

EMPLOYER-SPONSORED QUALIFIED RETIREMENT PLANS. Sole
proprietors, partnerships and corporations may sponsor qualified
money purchase pension and profit-sharing plans, including
Section 401(k) plans ("qualified plans"), under which annual tax-
deductible contributions are made within prescribed limits based
on compensation paid to participating individuals.

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

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

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

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

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

SYSTEMATIC WITHDRAWAL PLAN

<PAGE>

than $50 on a selected date. Systematic withdrawal plan
participants must elect to have their dividends and distributions
from the Portfolio automatically reinvested in additional shares
of the Portfolio.

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

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

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

<PAGE>

Remaining Class B shares acquired after July 1, 1995 that are
held the longest will be redeemed next. Redemptions of Class B
shares acquired after July 1, 1995 in excess of the foregoing
limitations and redemptions of Class B shares acquired before
July 1, 1995 will be subject to any otherwise applicable
contingent deferred sales charge.

DIVIDEND DIRECTION PLAN

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

STATEMENTS AND REPORTS

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

________________________________________________________________

NET ASSET VALUE
________________________________________________________________

The net asset value of shares of the Portfolio on which
the subscription and redemption prices are based is computed in
accordance with the Fund's Articles of Incorporation and By-Laws
as of the next close of regular trading on the Exchange next
following receipt of a purchase or redemption order (and on any
other day on which trading in the types of securities in which
the Portfolio invests might materially affect the value of
Portfolio shares) and, is the quotient obtained by dividing the

<PAGE>

value of the net assets of the Portfolio (i.e., the value of the
securities and other assets of the Portfolio, less its
liabilities, including expenses payable or accrued but excluding
capital stock and surplus) by the total number of shares of the
Portfolio outstanding. For purposes of this computation,
portfolio securities listed on the Exchange are valued, except as
indicated below, at the last sale price reflected in the
consolidated tape at the close of the Exchange on the business
day as of which such value is being determined. If there has
been no sale on such day, then the security is valued at the
quoted bid price thereof at the close of the Exchange on such
day. If no bid is quoted on such day, then the securities are
valued at the mean of the bid and asked prices at the close of
the Exchange on the day such valuation is made as obtained from
two dealers regularly making a market in such security, except
that where a bid and asked price can be obtained from only one
such dealer, such security is valued at the mean of the bid and
asked price obtained from such dealer.

Securities not listed on the Exchange but listed on
other national securities exchanges are valued in like manner.
Portfolio securities traded on more than one national securities
exchange are valued at the last sale price on the business day as
of which such value is being determined as reflected on the tape
at the close of the exchange representing the principal market
for such securities. Securities traded over-the-counter,
including listed debt securities whose primary market is believed
by the Fund's management to be over-the-counter, are valued at
the mean of the bid and asked prices at the close of the Exchange
on the days such valuation is made as obtained from two dealers
regularly making a market in such securities, except that where a
bid and asked price can be obtained from only one such dealer,
such securities are valued at the mean of the bid and asked price
obtained from such dealer. Securities for which no bid and asked
price quotations are readily available are valued by such methods
as the Directors of the Fund determine in good faith to reflect
the fair market value thereof. Restricted securities and all
other assets of the Portfolio are valued in such manner as the
Directors of the Fund in good faith deem appropriate to reflect
fair market value thereof.

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

<PAGE>

________________________________________________________________

PORTFOLIO TRANSACTIONS
________________________________________________________________

Subject to the general supervision of the Board of
Directors of the Fund, the Investment Adviser is responsible for
the investment decisions and the placing of the orders for
portfolio transactions for the Portfolio. The Portfolio's
portfolio transactions occur primarily with issuers, underwriters
or major dealers acting as principals. Such transactions are
normally on a net basis which do not involve payment of brokerage
commissions. The cost of securities purchased from an
underwriter usually includes a commission paid by the issuer to
the underwriter; transactions with dealers normally reflect the
spread between bid and asked prices. Premiums are paid with
respect to options purchased by the Portfolio, and brokerage
commissions are payable with respect to transactions in exchange-
traded interest rate futures contracts.

The Investment Adviser makes the decisions for the
Portfolio and determines the broker or dealer to be used in each
specific transaction. Most transactions for the Portfolio,
including transactions in listed securities, are executed in the
over-the-counter market by approximately fifteen (15) principal
market maker dealers with whom the Investment Adviser maintains
regular contact. Most transactions made by the Portfolio will be
principal transactions at net prices and the Portfolio will incur
little or no brokerage costs. Where possible, securities will be
purchased directly from the issuer or from an underwriter or
market maker for the securities unless the Investment Adviser
believes a better price and execution is available elsewhere.
Purchases from underwriters of newly-issued securities for
inclusion in the Portfolio usually will include a concession paid
to the underwriter by the issuer and purchases from dealers
serving as market makers will include the spread between the bid
and asked price.

The Portfolio has no obligation to enter into
transactions in securities with any broker, dealer, issuer,
underwriter or other entity. In placing orders, it is the policy
of the Fund to obtain the best price and execution for its
transactions. Where best price and execution may be obtained
from more than one broker or dealer, the Investment Adviser may,
in its discretion, purchase and sell securities through brokers
and dealers who provide research, statistical and other
information to the Investment Adviser. Such services may be used
by the Investment Adviser for all of its investment advisory
accounts and, accordingly, not all such services may be used by
the Investment Adviser in connection with the Portfolio. There
may be occasions where the transaction cost charged by a broker

<PAGE>

may be greater than that which another broker may charge if the
Fund determines in good faith that the amount of such transaction
cost is reasonable in relationship to the value of the brokerage
and research and statistical services provided by the executing
broker.

No transactions for the Portfolio are executed through
any broker or dealer affiliated with the Fund's Investment
Adviser, or with Donaldson, Lufkin & Jenrette Securities
Corporation, an affiliate of the Investment Adviser. During the
fiscal years ended June 30, 1993, 1994 and 1995, the Portfolio
incurred no brokerage commissions.

________________________________________________________________

TAXES
________________________________________________________________

The Fund advises the Portfolio's shareholders annually
as to the Federal income tax status of dividends and
distributions made to the Portfolio's shareholders during each
calendar year.

GENERAL. The Portfolio intends for each taxable year to
qualify as a "regulated investment company" under the Internal
Revenue Code of 1986, as amended (the "Code"). To so qualify,
the Portfolio must, among other things, (i) derive at least 90%
of its gross income in each taxable year from dividends,
interest, payments with respect to securities loans, gains from
the sale or other disposition of stock or securities or foreign
currency, or certain other income (including, but not limited to,
gains from options, futures and forward contracts) derived with
respect to its business of investing in stock, securities or
currency; (ii) derive less than 30% of its gross income in each
taxable year from the sale or other disposition within three
months of their acquisition by the Portfolio of stocks,
securities, options, futures or forward contracts and foreign
currencies (or options, futures or forward contracts on foreign
currencies) that are not directly related to the Portfolio's
principal business of investing in stocks or securities (or
options and futures with respect to stocks or securities); and
(iii) diversify its holdings so that, at the end of each quarter
of its taxable year, the following two conditions are met: (a) at
least 50% of the value of the Portfolio's assets is represented
by cash, U.S. Government Securities, securities of other
regulated investment companies and other securities with respect
to which the Portfolio's investment is limited, in respect of any
one issuer, to an amount not greater than 5% of the Portfolio's
total assets and 10% of the outstanding voting securities of such
issuer and (b) not more than 25% of the value of the Portfolio's

<PAGE>

assets is invested in securities of any one issuer (other than
U.S. Government Securities or securities of other regulated
investment companies). These requirements, among other things,
may limit the Portfolio's ability to write and purchase options,
to enter into interest rate swaps and to purchase or sell
interest rate caps or floors.

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

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

The Portfolio intends to make timely distributions of
the Portfolio's income so that the Portfolio will not be subject
to federal income or excise taxes.

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

<PAGE>

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

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

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

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

Any loss realized by a shareholder on a sale or exchange
of shares of the Portfolio will be disallowed to the extent the
shares disposed of are replaced within a period of 61 days
beginning 30 days before and ending 30 days after the shares are
sold or exchanged. For this purpose, acquisitions pursuant to

<PAGE>

the Dividend Reinvestment Plan would constitute a replacement if
made within the period. If disallowed, the loss will be
reflected in an upward adjustment to the basis of the shares
acquired.

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

UNITED STATES FEDERAL INCOME TAXATION OF THE FUND. The
following discussion relates to certain significant United States
federal income tax consequences to the Portfolio with respect to
the determination of its "investment company taxable income" each
year. This discussion assumes that the Portfolio will be taxed
as a regulated investment company for each of its taxable years.

PASSIVE FOREIGN INVESTMENT COMPANIES. Certain of the
Portfolio's investments in Structured Securities may constitute,
for federal income tax purposes, investments in shares of foreign
corporations. If the Portfolio owns shares in a foreign
corporation that constitutes a "passive foreign investment
company" (a "PFIC") for federal income tax purposes and the
Portfolio does not elect to treat the foreign corporation as a
"qualified electing fund" within the meaning of the Code, the
Portfolio may be subject to United States federal income taxation
on a portion of any "excess distribution" it receives from the
PFIC or any gain it derives from the disposition of such shares,
even if such income is distributed as a taxable dividend by the
Portfolio to its United States shareholders. The Portfolio may
also be subject to additional interest charges in respect of
deferred taxes arising from such distributions or gains. Any tax
paid by the Portfolio as a result of its ownership of shares in a
PFIC will not give rise to any deduction or credit to the
Portfolio or to any shareholder. A PFIC means any foreign
corporation if, for the taxable year involved, either (i) it
derives at least 75 percent of its gross income from "passive
income" (including, but not limited to, interest, dividends,
royalties, rents and annuities), or (ii) on average, at least 50
percent of the value (or adjusted tax basis, if elected) of the
assets held by the corporation produce "passive income." The
Treasury has issued proposed regulations which would provide a
"mark-to-market" election solely with respect to gain inherent in
PFIC stock held by a regulated investment company, such as the

<PAGE>

Portfolio, which does not elect to treat the PFIC as a "qualified
electing fund." If the proposed regulations are adopted in final
form and the election provided therein were to be made by the
Portfolio, the Portfolio would recognize a gain as of the last
business day of its taxable year the excess of the fair market
value of each share of stock in the PFIC over the Portfolio's
adjusted tax basis in that share. This gain, which would be
treated as derived from securities held by the Portfolio for at
least three months, generally would not be subject to the
deferred tax and interest charge amounts to which it might
otherwise be subject, as discussed above, in the event of an
"excess distribution" or gain with regard to shares of a PFIC.
If the Portfolio purchases shares in a PFIC and the Portfolio
does elect to treat the foreign corporation as a "qualified
electing fund" under the Code, the Portfolio may be required to
include in its income each year a portion of the ordinary income
and net capital gains of the foreign corporation, even if this
income is not distributed to the Portfolio. Any such income
would be subject to the 90 percent and calendar year distribution
requirements described above.

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

As a result of the applicable rules, in order to make
the distributions necessary for the Portfolio not to be subject
to federal income or excise taxes, the Portfolio may be required
to pay out as an income distribution each year an amount
significantly greater than the total amount of cash which the
Portfolio has actually received as interest during the year. Such
distributions will be made from the cash assets of the Portfolio,

<PAGE>

from borrowings or by liquidation of portfolio securities, if
necessary. If a distribution of cash necessitates the
liquidation of portfolio securities, the Investment Adviser will
select which securities to sell. The Portfolio may realize a
gain or loss from such sales. In the event the Portfolio
realizes net capital gains from such sales, its shareholders may
receive a larger capital gain distribution, if any, than they
would have in the absence of such sales.

OPTIONS. Certain listed options are considered "section
1256 contracts" for federal income tax purposes. Section 1256
contracts held by the Portfolio at the end of each taxable year
will be "marked to market" and treated for federal income tax
purposes as though sold for fair market value on the last
business day of such taxable year. Gain or loss realized by the
Portfolio on section 1256 contracts generally will be considered
60% long-term and 40% short-term capital gain or loss. The
Portfolio can elect to exempt its section 1256 contracts which
are part of a "mixed straddle" (as described below) from the
application of section 1256.

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

TAX STRADDLES. Any option or other position entered
into or held by the Portfolio in conjunction with any other
position held by the Portfolio may constitute a "straddle" for
federal income tax purposes. The Treasury Department has issued
proposed regulations which, if adopted, would treat interest rate
swaps, caps and floors entered into or purchased by the Portfolio
as positions which may also constitute part of a straddle for
federal income tax purposes. In general, straddles are subject
to certain rules that may affect the character and timing of the
Portfolio's gains and losses with respect to straddle positions.

OTHER TAXES. Income received by the Portfolio also may
be subject to state, local and foreign income taxes, including
taxes withheld at the source. The United States has entered into
tax treaties with many foreign countries which entitle the
Portfolio to a reduced rate of such taxes or exemption from taxes

<PAGE>

on such income. It is impossible to determine the effective rate
of foreign tax in advance since the amount of the Portfolio's
assets to be invested within various countries is not known.

________________________________________________________________

GENERAL INFORMATION
________________________________________________________________

The Portfolio is formally designated in the Charter of
the Fund as the Monthly Income Portfolio. Class A shares of the
Portfolio are classified in the Charter of the Fund as shares of
Monthly Income Portfolio Common Stock, Class B shares of the
Portfolio are classified in the Charter of the Fund as shares of
Monthly Income Portfolio Class B Common Stock and Class C shares
of the Portfolio are classified in the Charter of the Fund as
shares of Monthly Income Portfolio Class C Common Stock. The
Portfolio began conducting business as the Corporate Bond
Portfolio as of January 4, 1993.

CAPITALIZATION

The authorized capital stock of the Fund consists solely
of 950,000,000 shares of Common Stock having a par value of $.001
per share. All shares of each Portfolio participate equally in
dividends and distributions from that Portfolio, including any
distributions in the event of a liquidation. Each share of the
Portfolio is entitled to one vote for all purposes. Shares of
both Portfolios vote for the election of Directors and on any
other matter that affects both Portfolios in substantially the
same manner as a single class, except as otherwise required by
law. As to matters affecting each Portfolio differently, such as
approval of the Investment Advisory Contract and changes in
investment policy, shares of each Portfolio would vote as a
separate class. There are no conversion or preemptive rights in
connection with any shares of the Portfolio. All shares of the
Portfolio when duly issued will be fully paid and non-assessable.

<PAGE>

voting rights with respect to provisions of the Fund's Rule 12b-1
distribution plan which pertain to a particular class and other
matters for which separate class voting is appropriate under
applicable law, provided that, if the Fund submits to a vote of
both the Class A shareholders and the Class B shareholders an
amendment to the Rule 12b-1 distribution plan that would
materially increase the amount to be paid thereunder with respect
to the Class A shares, the Class A shareholders and the Class B
shareholders will vote separately by class. The Fund has
received an order from the Commission permitting issuance and
sale of the three classes of shares representing interests in the
Portfolio. The issuance and sale of any additional classes will
require an additional order from the Commission.

There is no assurance that such exemptive relief would
be granted. The Fund's Board of Directors may, without
shareholder approval, increase or decrease the number of
authorized but unissued shares of the Portfolio's Class A,
Class B and Class C Common Stock.

The Board of Directors is authorized to reclassify and
issue any unissued shares to any number of additional series
without shareholder approval. Accordingly, the Directors in the
future,for reasons such as the desire to establish one or more
additional portfolios with different investment objectives,
policies or restrictions, may create additional series of shares.
Any issuance of shares of another series would be governed by the
1940 Act and Maryland law. If shares of another series were
issued in connection with the creation of a second portfolio,
each share of either portfolio would normally be entitled to one
vote for all purposes. Generally, shares of both portfolios
would vote as a single series for the election of Directors and
on any other matter that affected both portfolios in
substantially the same manner.

Procedures for calling a shareholders' meeting for the
removal of Directors of the Fund, similar to those set forth in
Section 16(c) of the 1940 Act, are available to shareholders of
the Fund. Meetings of shareholders may be called by 10% of the
Fund's outstanding shareholders. The rights of the holders of
shares of a series may not be modified except by the vote of a
majority of the outstanding shares of such series.

As of the close of business on October 13, 1995, there
were 42,670,250 shares of common stock of the Portfolio
outstanding. Of this amount, 18,240,388 shares were Class A,
20,158,744 shares were Class B and 4,271,118 shares were Class C.
To the knowledge of the Portfolio, the following persons owned of
record, and no person owned beneficially, 5% or more of the
outstanding shares the Portfolio as of October 13, 1995:

<PAGE>

No of % of % of % of
Name and Address Shares Class A Class B Class C
________________ ______ _______ _______ _______

Merrill Lynch 1,471,218 8.07%
Mutual Fund Operations
4800 Deer Lake Dr. East,
3rd Floor
Jacksonville, FL 32244-6486

Merrill Lynch 3,820,620 19.00%
Mutual Fund Operations
4800 Deer Lake Dr. East,
3rd Floor
Jacksonville, FL 32244-6486

Merrill Lynch 1,901,785 44.53%
Mutual Fund Operations
4800 Deer Lake Dr. East,
3rd Floor
Jacksonville, FL 32244-6486

CUSTODIAN

State Street Bank and Trust Company, 225 Franklin
Street, Boston, Massachusetts 02110, acts as Custodian for the
securities and cash of the Fund, but plays no part in deciding on
the purchase or sale of portfolio securities.

PRINCIPAL UNDERWRITER

Alliance Fund Distributors, Inc., 1345 Avenue of the
Americas, New York, New York 10105, serves as the Fund's
Principal Underwriter, and as such may solicit orders from the
public to purchase shares of the Portfolio. Under the Agreement
between the Fund and the Principal Underwriter, the Fund has
agreed to indemnify the Principal Underwriter, in the absence of
its willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations thereunder, against certain civil
liabilities, including liabilities under the Securities Act of
1933, as amended.

COUNSEL

Legal matters in connection with the issuance of the
shares of the Fund offered hereby are passed upon by Seward &
Kissel, One Battery Park Plaza, New York, New York 10004. Seward
& Kissel has relied upon the opinion of Venable, Baetjer and
Howard, LLP, 1800 Mercantile Bank & Trust Building, 2 Hopkins
Plaza, Baltimore, Maryland 21201, for matters relating to
Maryland law.

<PAGE>

INDEPENDENT AUDITORS

Ernst & Young LLP, 787 Seventh Avenue, New York, New
York, 10019 have been appointed as independent auditors for the
Fund.

YIELD AND TOTAL RETURN QUOTATIONS

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

On January 4, 1993, the Portfolio reclassified its
outstanding shares as Class A shares. No Class B shares were
outstanding prior to January 8, 1993. No Class C shares were
outstanding prior to April 30, 1993. The yield for the month
ended June 30, 1995 for the Class A shares of the Portfolio was
7.65%, for Class B shares was 7.27% and for Class C shares was
7.28%. The actual distribution rate for such period for the
Portfolio for Class A shares was 8.45%, for Class B shares was
8.13% and for Class C shares was 8.13%. The Portfolio's average
annual total return for the one-year period ended June 30, 1995,
was 8.41%, for the five-year period ended June 30, 1995, was
11.99% and for the ten-year period ended June 30, 1995, was
10.79% for Class A shares of the Portfolio; the average annual
total return for the one year ended June 30, 1995 was 9.54% and

<PAGE>

for the period January 3, 1993 (commencement of distribution)
through June 30, 1995, was 10.18% for Class B shares of the
Portfolio; and the average annual total return for the one-year
period ended June 30, 1995, was 12.62% and for the period May 3,
1993 (commencement of distribution) through June 30, 1995, was
6.43% for Class C shares of the Portfolio.

Yield and total return are computed separately for the
Portfolio's Class A, Class B and Class C shares. The Portfolio's
yield and total return are not fixed and will fluctuate in
response to prevailing market conditions or as a function of the
type and quality of the securities held by the Portfolio, its
average portfolio maturity and its expenses. Yield and total
return information is useful in reviewing the Portfolio's
performance and such information may provide a basis for
comparison with other investments. Such other investments may
include certificates of deposit, money market funds and corporate
debt securities. However, an investor should know that
investment return and principal value of an investment in the
Portfolio will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost. In
addition, the Portfolio's shares are not insured or guaranteed by
the U.S. Government. In comparison, certificates of deposit are
guaranteed and pay a fixed rate of return; money market funds
seek a stable net asset value; and corporate debt securities may
provide a higher yield than those available from the Portfolio.

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

In addition, Lipper has ranked the Portfolio #57 for
Class A shares, #65 for Class B shares and #65 Class C shares,
respectively, out of 77 corporate debt funds rated BBB for the
period ended September 30, 1995. The Morningstar ratings and the
Lipper rankings may be used in advertisements and sales
literature relating to such Portfolio.

ADDITIONAL INFORMATION

Any shareholder inquiries may be directed to the
shareholder's broker or other financial adviser or to Alliance
Fund Services, Inc. at the address or telephone numbers shown on

<PAGE>

the front cover of this Statement of Additional Information.
This Statement of Additional Information does not contain all the
information set forth in the Registration Statement filed by the
Fund with the Commission under the Securities Act of 1933. 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.

71
00250123.AH5

<PAGE>

PORTFOLIO OF INVESTMENTS
JUNE 30, 1995 ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
- -------------------------------------------------------------------------------

STANDARD PRINCIPAL
& POOR'S AMOUNT
RATINGS(C) (000) VALUE
- ------------------------------------------------------------------
COPORATE DEBT OBLIGATIONS-72.0%
FINANCIAL-32.3%
NR Commonwealth Savings Assn.
14.875%, 7/01/95 *(a) $ 1,000 $ -0-
BB- Home Holdings, Inc.
7.75%, 12/15/98 6,250 5,203,125
8.625%, 12/15/03 26,000 18,915,000
NR John Hancock Mutual Life Insurance Co.
Surplus Note
7.375%, 2/15/24 (b) 27,750 25,925,770
A Lehman Brothers Holdings, Inc.
8.50%, 5/01/07 25,000 26,638,700
BBB Leucadia National Corp.
Senior Subordinated Note
8.25%, 6/15/05 25,000 25,208,888
A+ Liberty Mutual Insurance Co.
Surplus Note 144A
8.20%, 5/04/07 (b) 21,000 22,049,979
A Mc Cuernavaca Trust
9.25%, 7/25/01 (b) 23,218 17,007,442
NR New England Mutual Life Insurance Co.
Surplus Note 144A
7.875%, 2/15/24 (b) 30,000 28,026,000
168,974,904

INDUSTRIAL-20.6%
BBB- Borden, Inc.
7.875%, 2/15/23 13,100 12,474,986
BB+ P T Alatief Freeport Finance
Guaranteed Senior Note
9.75%, 4/15/01 15,000 16,143,750
BBB- RJR Nabisco, Inc.
7.625%, 9/15/03 27,555 26,557,729
BB+ Viacom, Inc.
Senior Note
7.75%, 6/01/05 25,000 25,250,000
AA- Walt Disney Co.
7.55%, 7/15/2093 28,000 27,371,400
107,797,865

TRANSPORTATION-5.4%
BB United Airlines, Inc.
11.21%, 5/01/14 $23,000 $28,016,553

MEDIA-5.2%
BBB- Time Warner Entertainment
9.15%, 2/01/23 26,000 27,222,000

UTILITIES-5.2%
BB+ Beaver Valley Power Station
8.33%, 12/01/07 23,250 22,980,300
NR Hidroelectrica Alicura
8.375%, 3/15/99 5,000 4,200,000
27,180,300

YANKEES-3.3%
NR Consorcio Grupo Dina
10.50%, 11/18/97 10,000 7,000,000
NR Grupo Mexicano de Desarrollo
8.25%, 2/17/01 25,200 10,458,000
17,458,000

Total Coporate Debt Obligations
(cost $387,622,940) 376,649,622

PREFERRED STOCK-13.0%
BBB Central Hispano Capital Ltd.
Series A
pfd. 10.50% 645 17,253,750
BBB Credit Lyonnais Capital
9.50% (b) 1,300 30,355,000
A+ Grand Metropolitan Delaware
Series A
pfd. 9.42% 739 20,507,250

Total Preferred Stock
(cost $65,171,515) 68,116,000

U.S. GOVERNMENT/AGENCY OBLIGATIONS-9.1%
FEDERAL NATIONAL MORTGAGE ASSOCIATION-3.4%
AAA Federal National Mortgage Assn.
Zero coupon, 10/09/19 $100,000 17,687,000

PORTFOLIO OF INVESTMENTS (CONTINUED)
ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
- -------------------------------------------------------------------------------

STANDARD PRINCIPAL
& POOR'S AMOUNT
RATINGS(C) (000) VALUE
- -----------------------------------------------------------------
U.S. TREASURY SECURITIES-5.7%
AAA U.S. Treasury Bond Strip
Zero coupon, 11/15/21 $88,000 $14,619,440
AAA U.S. Treasury Strip
Zero coupon, 2/15/11 43,000 15,120,090
29,739,530

Total U.S. Government/
Agency Obligations
(cost $47,435,612) 47,426,530

SOVEREIGN DEBT-7.0%
ARGENTINA-2.4%
NR Repackaged Argentina
Domestic Security Trust
14.75%, 9/01/02 (b) 18,000 12,555,000

POLAND-4.6%
NR Republic of Poland
3.25%, 10/27/14 40,000 24,000,000

Total Other Sovereign
Debt (cost $41,608,200) 36,555,000

STRUCTURED NOTE-1.3%
AAA Morgan Guaranty Trust CD
Argentina Par vs Treasury Spread Note
9.00%, 7/14/95 (d)
(cost $15,000,000) 15,000 6,667,500

STANDARD
& POOR'S
RATINGS(C) CONTRACTS VALUE
- -----------------------------------------------------------------
CALL OPTION PURCHASED-0.0%
NR Republic of Argentina FRB
expiring September 1995
@ $72.50
(cost $2,400) 24,000 $ 49,560

TOTAL INVESTMENTS-102.4%
(cost $556,840,667) 535,464,212

PUT OPTION WRITTEN-(0.4%)
NR Republic of Argentina FRB
expiring September 1995
@ $68.50
(premium received $2,354,400) 24,000 (1,934,736)

TOTAL INVESTMENTS NET OF OPTION
WRITTEN-102.0% 533,529,476
Other assets less
liabilities-(2.0%) (10,358,122)

NET ASSETS-100% $523,171,354

* Non income producing security.

(a) Currently non-salable and accordingly has no market value.

(b) Securities exempt from Registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified buyers. At June 30, 1995 the aggregate
market value of these securities amounted to $135,919,191 representing 26.0% of
net assets.

(d) Redemption value is linked to the change in the spread between Argentina
Par Bonds, 4.25% due 2023 and U.S. Treasury Bonds, 6.25% due 2023.

Glossary of Terms:
FRB - Floating Rate Bond.
NR - Not rated.

See notes to financial statements.

STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1995 ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
- -------------------------------------------------------------------------------

ASSETS
Investments in securities, at value (cost $556,840,667) $535,464,212
Cash 13,406,666
Interest receivable 10,875,645
Receivable for investment securities sold 6,745,000
Dividends receivable 1,129,596
Receivable for capital stock sold 1,064,855
Other assets 85,556
Total assets 568,771,530

LIABILITIES
Option written, at value (premium received $2,354,400) 1,934,736
Payable for investment securities purchased 38,339,911
Dividends payable 3,271,673
Payable for capital stock redeemed 1,106,504
Distribution fee payable 296,619
Advisory fee payable 267,733
Accrued expenses 383,000
Total liabilities 45,600,176

NET ASSETS $523,171,354

COMPOSITION OF NET ASSETS
Capital stock, at par $40,493
Additional paid-in capital 548,492,365
Undistributed net investment income 945,496
Accumulated net realized loss on investments, options and
other assets (5,350,209)
Net unrealized depreciation of investments and options (20,956,791)
$523,171,354

CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share ($230,750,139 /
17,860,095 shares of capital stock issued and outstanding) $12.92
Sales charge-4.25% of public offering price .57
Maximum offering price $13.49

CLASS B SHARES
Net asset value and offering price per share ($241,393,089 /
18,684,070 shares of capital stock issued and outstanding) $12.92

CLASS C SHARES
Net asset value, redemption and offering price per share($51,028,126
/ 3,947,953 shares of capital stock issued and outstanding) $12.93

See notes to financial statements.

STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 1995 ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
- -------------------------------------------------------------------------------

INVESTMENT INCOME
Interest $50,304,695
Dividends 2,197,599
$52,502,294
EXPENSES
Advisory fee 2,989,872
Distribution fee-Class A 659,086
Distribution fee-Class B 2,081,787
Distribution fee-Class C 505,058
Transfer agency 951,682
Administrative 132,707
Registration 110,306
Audit and legal 85,142
Printing 82,097
Taxes 65,791
Custodian 60,426
Directors' fees 13,829
Miscellaneous 58,476
Total expenses 7,796,259
Net investment income 44,706,035

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on investment transactions (4,810,533)
Net realized loss on option transactions (3,042,631)
Net change in unrealized appreciation (depreciation) of:
Investments 21,545,851
Options and other assets 757,122
Net gain on investments 14,449,809

NET INCREASE IN NET ASSETS FROM OPERATIONS $59,155,844

See notes to financial statements.

STATEMENT OF CHANGES IN NET ASSETS ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
- -------------------------------------------------------------------------------

YEAR ENDED YEAR ENDED
JUNE 30, 1995 JUNE 30, 1994
------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $44,706,035 $30,576,660
Net realized loss on investments and options
transactions (7,853,164) (6,811,103)
Net change in unrealized appreciation(depreciation)
of investments, options, and other assets 22,302,973 (50,493,638)
Net increase (decrease) in net assets from
operations 59,155,844 (26,728,081)

DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A (20,387,693) (18,127,011)
Class B (17,840,438) (9,665,798)
Class C (4,314,460) (2,834,458)
Distributions in excess of net investment income
Class A -0- (720,853)
Class B -0- (384,378)
Class C -0- (112,717)
Net realized gain on investments
Class A -0- (4,062,857)
Class B -0- (2,221,716)
Class C -0- (637,584)

CAPITAL STOCK TRANSACTIONS
Net increase 52,386,982 242,871,795
Total increase 69,000,235 177,376,342

NET ASSETS
Beginning of year 454,171,119 276,794,777
End of year (including undistributed net
investment income of $945,496 in 1995) $523,171,354 $454,171,119

See notes to financial statements.

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995 ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
- -------------------------------------------------------------------------------

NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Bond Fund, Inc. (the 'Fund') is registered under the Investment
Company Act of 1940 as a diversified open-end management investment company.
The Fund, which is a Maryland corporation operates as a series company
currently comprised of two portfolios: the Corporate Bond Portfolio and the
U.S. Government Portfolio. Each series is considered to be a separate entity
for financial reporting and tax purposes. The financial statements and notes
include the operations of the Corporate Bond Portfolio (the 'Portfolio') only.
The Portfolio offers three classes of shares; Class A, Class B and Class C
shares. Class A shares are sold with a front-end sales charge of up to 4.25%.
Class B shares are sold with a contingent deferred sales charge which declines
from 3% to zero depending on the period of time the shares are held. Class B
shares will automatically convert to Class A shares six years after the end of
the calendar month of purchase. Class C shares are sold without an initial or
contingent deferred sales charge. All three classes of shares have identical
voting, dividend, liquidation and other rights, except that each class bears
different distribution expenses and has exclusive voting rights with respect to
its distribution plan. The following is a summary of the significant accounting
policies followed by the Portfolio.

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

Securities which mature in 60 days or less are valued at amortized cost, which
approximates market value.

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

3. INVESTMENT INCOME AND SECURITY TRANSACTIONS
Interest income is accrued daily. Dividend income is recorded on ex-dividend
date. Security transactions are accounted for on the date the securities are
purchased or sold. Security gains and losses are determined on the identified
cost basis. The Portfolio accretes original issue discount as adjustments to
interest income.

4. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex-dividend
date. Income dividends and capital gain distributions are determined in
accordance with income tax regulations, which may differ from generally
accepted accounting principles.

ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
- -------------------------------------------------------------------------------

NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of an investment advisory agreement, the Portfolio pays
Alliance Capital Management L.P., (the 'Adviser'), an advisory fee at a annual
rate of .625 of 1% of the first $500 million and .50 of 1% in excess of $500
million of the Portfolio's average daily net assets. Such fee is accrued daily
and paid monthly. The Adviser has agreed to reimburse the Portfolio pursuant to
the securities laws of certain states to the extent its aggregate annual
expenses (exclusive of interest, taxes, brokerage, distribution fees and
extraordinary expenses) exceed 2.5% of the first $30 million of its average
daily net assets, 2% of the next $70 million of its average daily net assets
and 1.5% of its average daily net assets in excess of $100 million. No such
reimbursement was required for the year ended June 30, 1995.

Pursuant to the advisory agreement, the Portfolio paid $132,707 to the Adviser
representing the cost of certain legal and accounting services provided to the
Portfolio by the Adviser for the year ended June 30, 1995.

The Portfolio compensates Alliance Fund Services, Inc. (a wholly-owned
subsidiary of the Adviser) under a Transfer Agency Agreement for providing
personnel and facilities to perform transfer agency services for the Portfolio.
Such compensation amounted to $627,480 for the year endedJune 30, 1995.
Alliance Fund Distributors, Inc. (a wholly-owned subsidiary of the Adviser)
serves as the Distributor of the Portfolio's shares. The Distributor received
front-end sales charges of $62,554 from the sale of Class A shares and $482,577
in contingent deferred sales charges imposed upon redemptions by shareholders
of Class B shares for the year ended June 30, 1995.

NOTE C: DISTRIBUTION SERVICES AGREEMENT
The Portfolio has adopted a Distribution Services Agreement (the 'Agreement')
pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the
Agreement, the Portfolio pays a distribution fee to the Distributor at an
annual rate of up to .30 of 1% of the Portfolio's average daily net assets
attributable to Class A shares and 1% of the Portfolio's average daily net
assets attributable to the Class B and Class C shares. Such fee is accrued
daily and paid monthly. The Agreement provides that the Distributor will use
such payments in their entirety for distribution assistance and promotional
activities. The Distributor has incurred expenses in excess of the distribution
costs reimbursed by the Portfolio in the amount of $5,476,418 and $607,167, for
Class B and Class C shares, respectively; such costs may be recovered from the
Portfolio in future periods so long as the Agreement is in effect. In
accordance with the Agreement, there is no provision for recovery of
unreimbursed distribution costs, incurred by the Distributor, beyond the
current fiscal year for Class A shares. The Agreement also provides that the
Adviser may use its own resources to finance the distribution of the
Portfolio's shares.

NOTES TO FINANCIAL STATEMENTS (CONT.)
ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
- -------------------------------------------------------------------------------

NOTE D: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments)
aggregated $1,947,345,106 and $1,935,820,629, respectively, for the year
endedJune 30, 1995. At June 30, 1995, the cost of securities for federal income
tax purposes was $558,492,410. Accordingly, gross unrealized appreciation of
investments was $13,554,884 and gross unrealized depreciation of investments
was $36,163,418, resulting in net unrealized depreciation of $22,608,534. At
June 30, 1995, the Portfolio had a capital loss carryforward for federal income
tax purposes of approximately $131,606,190 of which $8,836,071 expires in 1996;
$93,188,575 in 1997; $14,295,126 in 1998; $258,361 in 2000 and $15,028,057 in
2003.

NOTEE: DERIVATIVES
1. OPTIONS TRANSACTIONS
For hedging purposes, the Fund purchases and writes (sells) put and call
options on U.S. and foreign government securities and foreign currencies that
are traded on U.S. and foreign securities exchanges and over-the-counter
markets.

The risk associated with purchasing an option is that the Fund pays a premium
whether or not the option is exercised. Additionally, the Fund bears the risk
of loss of premium and change in market value should the counterparty not
perform under the contract. Put and call options purchased are accounted for in
the same manner as portfolio securities. The cost of securities acquired
through the exercise of call options is increased by premiums paid. The
proceeds from securities sold through the exercise of put options are decreased
by the premiums paid.

When the Fund writes an option, the premium received by the Fund is recorded as
a liability and is subsequently adjusted to the current market value of the
option written. Premiums received from writing options which expire unexercised
are recorded by the Fund on the expiration date as realized gains from option
transactions. The difference between the premium and the amount paid on
effecting a closing purchase transaction, including brokerage commissions, is
also treated as a realized gain, or if the premium is less than the amount paid
for the closing purchase transaction, as a realized loss. If a call option is
exercised, the premium is added to the proceeds from the sale of the underlying
security or currency in determining whether the Fund has realized a gain or
loss. If a put option is exercised, the premium reduces the cost basis of the
security or currency purchased by the Fund. In writing an option, the Fund
bears the market risk of an unfavorable change in the price of the security or
currency underlying the written option. Exercise of an option written by the
Fund could result in the Fund selling or buying a security or currency at a
price different from the current market value.

Transactions in options written for the year ended June 30, 1995 were as
follows:

NUMBER OF
CONTRACTS PREMIUMS
--------- ------------
Options outstanding at beginning of year 0 $ -0-
Options written 5 6,402,175
Options terminated in closing purchase transactions (3) (3,603,775)
Options expired (1) (444,000)
Options outstanding at June 30, 1995 1 $ 2,354,400

2. INTEREST RATE SWAPAGREEMENTS
The Fund enters into interest rate swaps on sovereign debt obligations to
protect itself from interest rate fluctuations on the underlying floating rate
debt instruments. A swap is an agreement that obligates two parties to exchange
a series of cash flows at specified intervals based upon or calculated by
reference to changes in specified prices or rates for a specified amount of an

ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
- -------------------------------------------------------------------------------

underlying asset. The payment flows are usually netted against each other, with
the difference being paid by one party to the other.

Risks may arise as a result of the failure of another party to the swap
contract to comply with the terms of the swap contract. The loss incurred by
the failure of a counterparty is genrally limited to the net interest payment
to be received by the Fund and/or the termination value at the end of the
contract. Therefore the Fund considers the creditworthiness of each
counterparty to a swap contract in evaluating potential credit risk.
Additionally, risks may arise from unanticipated movements in interest rates or
in the value of the underlying securities.

The Fund records a net receivable or payable on a daily basis for the net
interest income or expense expected to be received or paid in the interest
period. Net interest received or paid on these contracts is recorded as
interest income (or as an offset to interest income). Fluctuations in the value
of swap contracts are recorded for financial statement purposes as unrealized
appreciation or depreciation on interest rate swap contracts.

For the year ended June 30, 1995, net realized gain on swap terminations
amounted to $981,292.

NOTE F: CAPITAL STOCK
There are 350,000,000 shares of $.001 par value capital stock authorized for
the Portfolio, of which 250,000,000 shares are designated as Class A and
50,000,000 each for Class B and Class C shares. Transactions in capital stock
were as follows:

SHARES AMOUNT
------------------------- ----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1995 1994 1995 1994
----------- ------------ ------------- -------------
CLASS A
Shares sold 4,080,977 5,742,930 $ 50,484,798 $ 82,239,666
Shares issued in
reinvestment
of dividends and
distributions 793,256 872,225 9,725,083 12,392,066
Shares redeemed (4,535,928) (4,368,745) (55,998,676) (62,049,224)
Net increase 338,305 2,246,410 $4,211,205 $32,582,508

CLASS B
Shares sold 8,208,751 12,349,016 $100,252,498 $176,907,149
Shares issued in
reinvestment
of dividends and
distributions 613,407 494,813 7,530,010 6,963,228
Shares redeemed (4,864,645) (2,041,176) (58,632,382) (28,339,156)
Net increase 3,957,513 10,802,653 $ 49,150,126 $155,531,221

CLASS C
Shares sold 2,047,757 5,917,632 $ 25,280,601 $ 85,653,634
Shares issued in
reinvestment
of dividends and
distributions 168,260 153,436 2,081,504 2,154,714
Shares redeemed (2,335,384) (2,365,354) (28,336,454) (33,050,282)
Net increase (decrease) (119,367) 3,705,714 $ (974,349) $ 54,758,066

* Commencement of distribution.

FINANCIAL HIGHLIGHTS ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
- -------------------------------------------------------------------------------

SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR

<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------
YEAR ENDED JUNE 30,
-------------------------------------------------
1995 1994 1993 1992 1991
--------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $12.51 $14.15 $12.01 $11.21 $11.39

INCOME FROM INVESTMENT OPERATIONS
Net investment income 1.19 1.11 1.25 1.06 1.11
Net realized and unrealized gain (loss) on
investments .36 (1.36) 2.13 .82 (.06)
Net increase (decrease) in net asset
value from operations 1.55 (.25) 3.38 1.88 1.05

LESS: DISTRIBUTIONS
Dividends from net investment income (1.14) (1.11) (1.24) (1.08) (1.23)
Dividends in excess of net investment income -0- (.03) -0- -0- -0-
Distributions from net realized gains -0- (.25) -0- -0- -0-
Total dividends and distributions (1.14) (1.39) (1.24) (1.08) (1.23)
Net asset value, end of year $12.92 $12.51 $14.15 $12.01 $11.21

TOTAL RETURN
Total investment return based on net asset value (a) 13.26% (2.58)% 29.62% 17.43% 9.71%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $230,750 $219,182 $216,171 $60,356 $62,268
Ratio of expenses to average net assets 1.24% 1.30% 1.39% 1.48% 1.44%
Ratio of net investment income to average net assets 9.70% 7.76% 9.29% 8.98% 9.84%
Portfolio turnover rate 387% 372% 579% 610% 357%
</TABLE>

See footnote summary on page 16.

ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
- -------------------------------------------------------------------------------

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

CLASS B
-----------------------------
JANUARY 8,
1993**
YEAR ENDED JUNE 30, TO
------------------- JUNE 30,
1995 1994 1993
-------- -------- ---------
Net asset value, beginning of period $12.50 $14.15 $12.47

INCOME FROM INVESTMENT OPERATIONS
Net investment income 1.11 1.02 .49
Net realized and unrealized gain (loss) on
investments .36 (1.37) 1.69
Net increase (decrease) in net asset
value from operations 1.47 (.35) 2.18

LESS: DISTRIBUTIONS
Dividends from net investment income (1.05) (1.04) (.50)
Dividends in excess of net investment income -0- (.01) -0-
Distribution from net realized gains -0- (.25) -0-
Total dividends and distributions (1.05) (1.30) (.50)
Net asset value, end of period $12.92 $12.50 $14.15

TOTAL RETURN
Total investment return based on
net asset value (a) 12.54% (3.27)% 17.75%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $241,393 $184,129 $55,508
Ratio of expenses to average net assets 1.99% 2.00% 2.10%*
Ratio of net investment income to
average net assets 9.07% 7.03% 7.18%*
Portfolio turnover rate 387% 372% 579%

See footnote summary on page 16.

FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
- -------------------------------------------------------------------------------

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

CLASS C
-----------------------------
MAY 3,
1993**
YEAR ENDED JUNE 30, TO
------------------- JUNE 30,
1995 1994 1993
-------- -------- ---------
Net asset value, beginning of period $12.50 $14.15 $13.63

INCOME FROM INVESTMENT OPERATIONS
Net investment income 1.10 1.02 .16
Net realized and unrealized gain (loss) on
investments .38 (1.37) .53
Net increase (decrease) in net asset
value from operations 1.48 (.35) .69

LESS: DISTRIBUTIONS
Dividends from net investment income (1.05) (1.05) (.17)
Dividends in excess of net investment income -0- -0- -0-
Distribution from net realized gains -0- (.25) -0-
Total dividends and distributions (1.05) (1.30) (.17)
Net asset value, end of period $12.93 $12.50 $14.15

TOTAL RETURN
Total investment return based on
net asset value (a) 12.62% (3.27)% 5.08%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $51,028 50,860 $5,115
Ratio of expenses to average net assets 1.84% 1.99% 2.05%*
Ratio of net investment income to
average net assets 8.95% 6.98% 5.51%*
Portfolio turnover rate 387% 372% 579%

* Annualized.
** Commencement of distribution.

(a) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Initial sales charge or contingent
deferred sales charge is not reflected in the calculation of total investment
return. Total investment return calculated for a period less than one year is
not annualized.

REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
- -------------------------------------------------------------------------------

TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO

We have audited the accompanying statement of assets and liabilities of
Alliance Bond Fund Corporate Bond Portfolio (one of the portfolios comprising
the Alliance Bond Fund, Inc.), including the portfolio of investments, as of
June 30, 1995, and the related statement of operations for the year then ended,
the statement of changes in net assets for each of the two years in the period
then ended, and the financial highlights for each of the periods indicated
therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1995, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Alliance Bond Fund Corporate Bond Portfolio at June 30, 1995, the results of
its operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended, and the financial highlights for
each of the indicated periods, in conformity with generally accepted accounting
principles.

Ernst & Young LLP
New York, New York
August 11, 1995

<PAGE>

ALLIANCE BOND FUND, INC. -
(LOGO)(R) U.S. GOVERNMENT PORTFOLIO
________________________________________________________________

P. O. Box 1520, Secaucus, New Jersey 07096-1520
Toll Free (800) 221-5672
For Literature Toll Free (800) 227-4681
________________________________________________________________

STATEMENT OF ADDITIONAL INFORMATION
November 1, 1995

________________________________________________________________

This Statement of Additional Information is not a prospectus but
supplements and should be read in conjunction with the current
Prospectus for the U.S. Government Portfolio dated November 1,
1995. A copy of such Prospectus may be obtained by contacting
Alliance Fund Services, Inc. at the address or telephone numbers
shown above.

TABLE OF CONTENTS

Page
Description of the Portfolio

Management of the Fund

Purchase of Shares

Redemption and Repurchase of Shares

Shareholder Services

Net Asset Value

Portfolio Transactions

Taxes

General Information

Financial Statements and Report of Independent
Auditors
________________________________________________________________

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

<PAGE>

________________________________________________________________

DESCRIPTION OF THE PORTFOLIO
________________________________________________________________

INTRODUCTION TO THE FUND

Alliance Bond Fund, Inc. (the "Fund") is an open-end
management investment company whose shares are offered in
separate series referred to as "Portfolios." Each Portfolio is a
separate pool of assets constituting, in effect, a separate fund
with its own investment objectives policies. A shareholder in a
Portfolio will be entitled to his or her pro-rata share of all
dividends and distributions arising from that Portfolio's assets
and, upon redeeming shares of that Portfolio, the shareholder
will receive the then current net asset value of that Portfolio
represented by the redeemed shares. (See "Purchase Shares" and
"Redemption and Repurchase Shares," in the Portfolio's
Prospectus.) The Fund is empowered to establish, without
shareholder approval, additional Portfolios which may have
different investment objectives.

The Fund currently has two portfolios: the U.S.
Government Portfolio (the "Portfolio"), which is described in
this Statement of Additional Information, and the Corporate Bond
Portfolio, which is described in a separate Statement of
Additional Information. Copies of Corporate Bond Portfolio's
Prospectus and Statement of Additional Information can be
obtained by contacting Alliance Fund Services, Inc. at the
address or the "Literature" telephone number shown on the cover
of this Prospectus.

THE U.S. GOVERNMENT PORTFOLIO

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

INVESTMENT OBJECTIVE

The investment objective of the Portfolio is to seek as
high a level of current income as is consistent with safety of
principal. As a matter of fundamental policy, which cannot be
changed without approval of the Portfolio's shareholders, the
Portfolio pursues its objective by investing solely in securities
that are issued or guaranteed by the U.S. Government or its

<PAGE>

instrumentalities and backed by the full faith and credit of the
United States ("U.S. Government Securities").

HOW THE PORTFOLIO PURSUES ITS OBJECTIVE

The Portfolio pursues its investment objective by
investing in U.S. Government Securities.

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

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

The Portfolio may invest in zero coupon Treasury
securities, which consist of Treasury bills or the principal
components of U.S. Treasury bonds or notes. The Portfolio may

<PAGE>

also invest in zero coupon securities issued by U.S. Government
agencies or instrumentalities that are supported by the full
faith and credit of the United States, which consist of the
principal components of securities of U.S. Government agencies or
instrumentalities. A zero coupon security pays no interest to
its holder during its life. An investor acquires a zero coupon
security at a price which is generally an amount based upon its
present value, and which, depending upon the time remaining until
maturity, may be significantly less than its face value
(sometimes referred to as a "deep discount" price). Upon
maturity of the zero coupon security, the investor receives the
face value of the security.

Currently, the only U.S. Treasury security issued
without coupons is the Treasury bill. The zero coupon securities
purchased by the Portfolio may consist of principal components
held in STRIPS form issued through the U.S. Treasury's STRIPS
program, which permits the beneficial ownership of the component
to be recorded directly in the Treasury book-entry system. In
addition, in the last few years a number of banks and brokerage
firms have separated ("stripped") the principal portions
("corpus") from the coupon portions of the U.S. Treasury bonds
and notes and sold them separately in the form of receipts or
certificates representing undivided interests in these
instruments (which instruments are generally held by a bank in a
custodial or trust account). The staff of the Securities and
Exchange commission has indicated that, in its view, these
receipts or certificates should be considered as securities
issued by the bank or brokerage firm involved and, therefore,
unlike those obligations issued under the U.S. Treasury's STRIPS
program, should not be included in the Fund's categorization of
U.S. Government securities. The Fund disagrees with the staff's
interpretation but has undertaken that it will not invest in such
securities until final resolution of the issue. However, if such
securities are deemed to be U.S. Government Securities, the
Portfolio will not be subject to any limitations on their
purchase.

Zero coupon securities do not entitle the holder to any
periodic payments of interest prior to maturity. Accordingly,
such securities usually trade at a deep discount from their face
or par value and will be subject to greater fluctuations of
market value in response to changing interest rates than debt
obligations of comparable maturities which make periodic
distributions of interest.

Current federal tax law requires that a holder (such as
the Portfolio) of a zero coupon security accrue a portion of the
discount at which the security was purchased as income each year
even though the holder receives no interest payment in cash on
the security during the year. As a result, in order to make the

<PAGE>

distributions necessary for the Portfolio not to be subject to
federal income or excise taxes, the Portfolio might be required
to pay out as an income distribution each year an amount,
obtained by liquidation of portfolio securities or borrowings if
necessary, greater than the total amount of cash that the
Portfolio has actually received as interest during the year. The
Portfolio believes, however, that it is highly unlikely that it
would be necessary to liquidate portfolio securities or borrow
money in order to make such required distributions or to meet its
investment objective.

The Portfolio may invest in stripped mortgage-related
securities ("SMRS") which are derivative multi-class mortgage-
related securities. The Portfolio will only invest in SMRS that
are issued by the U.S. Government, its agencies or
instrumentalities and supported by the full faith and credit of
the United States. SMRS in which the Portfolio may invest are
usually structured with two classes that receive different
proportions of the interest and principal distributions on a pool
of GNMA Certificates ("Mortgage Assets"). A common type of SMRS
will have one class receiving some of the interest and most of
the principal from the Mortgage Assets, while the other class
will receive most of the interest and the remainder of the
principal. In the most extreme case, one class will receive all
of the interest (the interest-only or "IO" class), while the
other class will receive all of the principal (the principal-only
or "PO" class). The yield to maturity on an IO class is
extremely sensitive to the rate of principal payments (including
prepayments) on the related underlying Mortgage Assets, and a
rapid rate of principal prepayments may have a material adverse
effect on the yield to maturity of the IO class. The rate of
principal prepayment will change as the general level of interest
rates fluctuates. If the underlying Mortgage Assets experience
greater than anticipated principal prepayments, the Portfolio may
fail to fully recoup is initial investment in these securities.
Due to their structure and underlying cash flows, SMRS, may be
more volatile than mortgage-related securities that are not
stripped.

In addition, other U.S. Government agencies and
instrumentalities have issued stripped securities that are
similar to SMRS. Such securities include those that are issued
with an IO class and a PO class. Although these stripped
securities are purchased and sold by institutional investors
through several investment banking firms acting as brokers or
dealers, these securities were only recently developed. As a
result, established trading markets have not yet developed and,
accordingly, these securities may be illiquid. However, these
securities will be treated as liquid provided they are so
determined by, or under procedures approved by, the Board of
Directors.

<PAGE>

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

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

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

<PAGE>

a maturity of longer than seven days. Securities which have not
been registered under the Securities Act are referred to as
private placements or restricted securities and are purchased
directly from the issuer or in the secondary market. Mutual
funds do not typically hold a significant amount of these
restricted or other illiquid securities because of the potential
for delays on resale and uncertainty in valuation. Limitations
on resale may have an adverse effect on the marketability of
portfolio securities and a mutual fund might be unable to dispose
of restricted or other illiquid securities promptly or at
reasonable prices and might thereby experience difficulty
satisfying redemptions within seven days. A mutual fund might
also have to register such restricted securities in order to
dispose of them resulting in additional expense and delay.
Adverse market conditions could impede such a public offering of
securities.

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

Rule 144A under the Securities Act allows a broader
institutional trading market for securities otherwise subject to
a restriction on resale to the general public. Rule 144A
establishes a "safe harbor" from the registration requirements of
the Securities Act for resales of certain securities to qualified
institutional buyers. An insufficient number of qualified
institutional buyers interested in purchasing certain restricted
securities held by the Fund, however, could affect adversely the
marketability of such portfolio securities and the Fund might be
unable to dispose of such securities promptly or at reasonable
prices. Rule 144A has already produced enhanced liquidity for
many restricted securities, and market liquidity for such
securities may continue to expand as a result of this regulation
and the consequent inception of the PORTAL System sponsored by
the National Association of Securities Dealers, Inc., an
automated system for the trading, clearance and settlement of
unregistered securities of domestic and foreign issuers.

Alliance Capital Management L.P., the Fund's investment
adviser (the "Investment Adviser"), acting under the supervision
of the Board of Directors, will monitor the liquidity of
restricted securities in the Fund's portfolio that are eligible

<PAGE>

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

PORTFOLIO TURNOVER. Because the Portfolio will actively use
trading to benefit from yield disparities among different issues
of U.S. Government securities or otherwise to achieve its
investment objective and policies, the Portfolio may be subject
to a greater degree of turnover and, thus, a higher incidence of
short-term capital gains taxable as ordinary income than might be
expected from investment companies which invest substantially all
of their funds on a long-term basis, and correspondingly larger
mark-up charges can be expected to be borne by the Portfolio.
Management anticipates that the annual turnover in the Portfolio
may be in excess of 400% in future years (but is not expected to
exceed 500%). An annual turnover rate of 400% occurs, for
example, when all of the securities in the Portfolio are replaced
four times in a period of one year. The portfolio turnover rates
for the fiscal years ended June 30, 1994 and 1995 were 188% and
190%, respectively.

The value of the Portfolio's shares will be influenced
by the factors which generally affect securities, such as the
economic and political outlook, earnings, dividends and the
supply and demand for various classes of securities. There can
be, of course, no assurance that the Portfolio's investment
objective will be achieved.

FUNDAMENTAL INVESTMENT POLICIES

The following restrictions supplement those set forth in
the Prospectus for the Portfolio. These restrictions may not be
changed without shareholder approval which means the vote of (1)
67% or more of the shares of the Portfolio represented at a
meeting at which more than 50% of the outstanding shares are
represented or (2) more than 50% of the outstanding shares of the
Portfolio, whichever is less.

The following restrictions provide that the Portfolio
may not:

<PAGE>

1. Invest in companies for the purpose of
exercising control of management;

2. Issue any senior securities as defined in
the Investment Company Act of 1940, as amended,
(except to the extent that when-issued securities
transactions, forward commitments or stand-by
commitments may be considered senior securities);

3. Participate on a joint or a joint and
several basis in any trading account in securities;

4. Effect a short sale of any security;

5. Purchase securities on margin, but it may
obtain such short-term credits as may be necessary
for the clearance of purchase and sales of
securities;

6. Invest in the securities of any other
investment company except in connection with a
merger, consolidation, acquisition of assets or
other reorganization approved by the Fund's
shareholders; or

7. Write, purchase or sell puts, calls or
combinations thereof;

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

In addition to the restrictions set forth above in connection
with the qualification of its shares for sale in certain states,
the following restrictions apply and provide that the Portfolio
may not:

1. Invest more than 15% of average net
assets at the time of purchase in securities which
are not readily marketable including restricted
securities;

2. Invest in warrants (other than warrants
acquired by the Portfolio as a part of a unit or

<PAGE>

attached to securities at the time of purchase) if,
as a result such warrants valued at the lower of
cost or market would exceed 5% of the value of the
Portfolio's net assets provided that not more than
2% of the Portfolio's net assets may be in warrants
not listed on the New York or American Stock
Exchanges;

3. Engage in the purchase of real estate
(including limited partnership interests) excluding
readily marketable interests in real estate
investment trusts or readily marketable securities
of companies which invest in real estate;

4. Invest in oil, gas or other mineral
leases; or

5. Invest more than 15% of the Portfolio's
total assets in securities of issuers which
together with any predecessors have a record of
less than three years continuous operation or
securities of issuers which are restricted as to
disposition.

The foregoing percentage limitations will apply at the time
of the purchase of a security and shall not be considered
violated unless an excess or deficiency occurs or exists
immediately after and as a result of an acquisition of such
security.

________________________________________________________________

MANAGEMENT OF THE FUND
________________________________________________________________

DIRECTORS AND OFFICERS

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

DIRECTORS

<PAGE>

DAVID H. DIEVLER, 66, was formerly Chairman of the Board and
President of the Fund, and a Senior Vice President of ACMC with
which he had been associated since prior to 1990 through 1994.
He is currently an independent consultant. His address is P.O.
Box 167, Spring Lake, New Jersey 07762.

JAMES R. GREENE, 74, is an independent financial consultant
since prior to 1990. He is also a Director of ASARCO,
Incorporated (metals smelting and refining), Bank Leumi Trust
Co., Buck Engineering Company (manufacturing), American Reliance
Insurance Co. (insurance) and United Tote (computer software).
His address is 134 Buttonwood Drive, Fair Haven, New Jersey
07701.

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

<PAGE>

EUGENE F. O'NEIL, 71, is Managing Director of O'Neil Asset
Management (private investments) with which he has been
associated since prior to 1990. His address is 24 Byfield Lane,
Greenwich, Connecticut 06830.

OFFICERS

JOHN D. CARIFA, CHAIRMAN AND PRESIDENT (see biography,
above).

WAYNE D. LYSKI, SENIOR VICE PRESIDENT, 54, is an Executive
Vice President of ACMC with which he has been associated since
prior to 1990.

KATHLEEN A. CORBET, SENIOR VICE PRESIDENT, 35, has been a
Senior Vice President of ACMC since July 1993. Prior thereto,
she was employed by Equitable Capital since prior to 1990.

PAUL J. DENOON, VICE PRESIDENT, 33, is a Vice President of
ACMC with which he has been associated since January 1992.
Previously, he was a Vice President at Manufacturers Hanover
Trust since prior to 1990.

EDMUND P. BERGAN, JR., SECRETARY, 45, is a Senior Vice
President and the General Counsel of Alliance Fund Distributors,
Inc. with which he has been associated since prior to 1990.

DOMENICK PUGLIESE, ASSISTANT SECRETARY, 34, is Vice President
and Associate General Counsel of Alliance Fund Distributors, Inc.
with which he has been associated since May 1995. Previously, he
was Vice President and Counsel of Concord Financial Holding
Corporation since 1994, Vice President and Associate General
Counsel of Prudential Securities since 1991 and an associate with
Battle Fowler since prior to 1990.

MARK D. GERSTEN, TREASURER AND CHIEF FINANCIAL OFFICER, 45,
is a Vice President of Alliance Fund Distributors, Inc. and a
Senior Vice President of Alliance Fund Services, Inc. with which
he has been associated since prior to 1990.

PATRICK J. FARRELL, CONTROLLER, 36, is a Vice President of
Alliance Fund Services, Inc. with which he has been associated
since prior to 1990.

<PAGE>

JOSEPH J. MANTINEO, ASSISTANT CONTROLLER, 36, is a Vice
President of Alliance Fund Services, Inc. with which he has been
associated since prior to 1990.

STEPHEN M. ATKINS, ASSISTANT CONTROLLER, 30, has been a
Manager of Mutual Fund Accounting of Alliance Fund Services, Inc.
with which he has been associated since prior to 1990.

The aggregate compensation paid by the Fund to each of the
Directors during its fiscal year ended June 30, 1995, the
aggregate compensation paid to each of the Directors during
calendar year 1994 by all of the funds to which the Investment
Adviser provides investment advisory services (collectively, the
"Alliance Fund Complex") and the total number of registered
investment companies in the Alliance Fund Complex with respect to
which each of the Directors serves as a director or trustee are
set forth below. Neither the Fund nor any other fund in the
Alliance Fund Complex provides compensation in the form of
pension or retirement benefits to any of its directors or
trustees. Each of the Directors is a director or trustee of one
or more other registered investment companies in the Alliance
Fund Complex.

As of October 13, 1995, the Directors and officers of the
Fund as a group owned less than 1% of the shares of the Fund.

INVESTMENT ADVISER

Alliance Capital Management L.P., a New York Stock Exchange
listed company with principal offices at 1345 Avenue of the
Americas, New York, New York 10105, has been retained under an
investment advisory contract (the "Investment Advisory Contract")

<PAGE>

to provide investment advice and, in general, to conduct the
management and investment program of the Fund under the
supervision and control of the Fund's Board of Directors.

The Investment Adviser is a leading international investment
manager supervising client accounts with assets as of
September 30, 1995 of more than $140 billion (of which
approximately $44 billion represented the assets of investment
companies). The Investment Adviser's clients are primarily major
corporate employee benefit funds, public employee retirement
systems, investment companies, foundations and endowment funds
and included, as of September 30, 1995, 29 of the FORTUNE 100
Companies. As of that date, the Investment Adviser and its
subsidiaries employed approximately 1,350 employees who operated
out of domestic offices and the overseas offices of subsidiaries
in Bombay, Istanbul, London, Sydney, Tokyo, Toronto, Bahrain,
Luxembourg and Singapore. The 51 registered investment companies
comprising 105 separate investment portfolios managed by the
Investment Adviser currently have more than two million
shareholders.

Alliance Capital Management Corporation, the sole general
partner of, and the owner of a 1% general partnership interest
in, the Investment Adviser, is an indirect wholly-owned
subsidiary of The Equitable Life Assurance Society of the United
States ("Equitable"), one of the largest life insurance companies
in the United States and a wholly-owned subsidiary of The
Equitable Companies Incorporated ("ECI"), a holding company
controlled by AXA, a French insurance holding company. As of
June 30, 1995, ACMC, Inc. and Equitable Capital Management
Corporation, each a wholly-owned direct or indirect subsidiary of
Equitable, owned in the aggregate approximately 59% of the issued
and outstanding units representing assignments of beneficial
ownership of limited partnership interests in the Investment
Adviser ("Units"). As of June 30, 1995, approximately 3% and 9%
of the Units were owned by the public and employees of the
Investment Adviser and its subsidiaries, respectively, including
employees of the Investment Adviser who serve as Directors of the
Fund.

<PAGE>

January 1, 1995, 42.3% of the issued shares (representing 54.7%
of the voting power) of AXA were owned by Midi Participations, a
French corporation that is a holding company. The voting shares
of Midi Participations are in turn owned 60% by Finaxa, a French
corporation that is a holding company, and 40% by subsidiaries of
Assicurazioni Generali S.p.A., an Italian corporation
("Generali") (one of which, Belgica Insurance Holding S.A., a
Belgian corporation, owned 34.1%). As of January 1, 1995, 62.1%
of the issued shares (representing 75.7% of the voting power) of
Finaxa were owned by five French mutual insurance companies (the
"Mutuelles AXA") (one of which, AXA Assurances I.A.R.D. Mutuelle,
owned 31.8% of the issued shares) (representing 39.0% of the
voting power), and 26.5% of the issued shares (representing 16.6%
of the voting power) of Finaxa were owned by Banque Paribas, a
French bank ("Paribas"). Including the shares owned by Midi
Participations, as of January 1, 1995, the Mutuelles AXA directly
or indirectly owned 51.3% of the issued shares (representing
65.8% of the voting power) of AXA. In addition, certain
subsidiaries of AXA own 0.4% of the shares of AXA which are not
entitled to be voted. Acting as a group, the Mutuelles AXA
control AXA, Midi Participations and Finaxa.

The Investment Adviser pays the Fund on the first business
day of July, October, January and April the amount, if any, by
which the Portfolio's operating expenses for the preceding
quarter (exclusive of interest, taxes, brokerage expenditures
pursuant to the Distribution Services Agreement described below,
and extraordinary expenses, all to the extent permitted by
applicable state securities laws and regulations) which in any
year exceed the limits prescribed by any state in which the
Fund's shares are qualified for sale. The Fund believes that
presently the most restrictive state expense ratio limitations
imposed by any state in which the Fund has qualified its shares
for sale is 2.5% of the first $30 million of the Fund's aggregate
average daily net assets, 2.0% of the next $70 million of its
average daily net assets and 1.5% of its average daily net assets
in excess of $100 million. Expense reimbursements, if any, are
accrued daily and paid monthly. No such reimbursement was
required for the year ended June 30, 1995.

<PAGE>

For the fiscal years ended June 30, 1993, 1994 and 1995, the
Investment Adviser received under the advisory agreement then in
effect, $4,786,909, $8,098,159 and $7,422,436, respectively, as
advisory fees from the Portfolio.

The Investment Advisory Contract became effective on July 22,
1992. The Investment Advisory Contract replaced an earlier,
substantially identical agreement (the "First Advisory
Agreement") that terminated because of its technical assignment
as a result of AXA's acquisition of control over Equitable. In
anticipation of the assignment of the First Advisory Agreement,
the Investment Advisory Contract was approved by the unanimous
vote, cast in person, of the Fund's Directors, including the
Directors who are not parties to the Investment Advisory Contract
or "interested persons" as defined in the 1940 Act of any such
party, at a meeting called for such purpose and held on September
11, 1991. At a meeting held on June 11, 1992, a majority of the
outstanding voting securities of the Portfolio approved the
Investment Advisory Contract.

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

<PAGE>

the same period increase the demand for securities being
purchased or the supply of securities being sold, there may be an
adverse effect on price or quantity. It is the policy of the
Investment Adviser to allocate advisory recommendations and the
placing of orders in a manner which is deemed equitable by the
Investment Adviser to the accounts involved, including the Fund.
When two or more of the clients of the Investment Adviser
(including the Fund) are purchasing or selling the same security
on a given day from the same broker-dealer, such transactions may
be averaged as to price.

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

DISTRIBUTION SERVICES AGREEMENT

The Fund has entered into a Distribution Services Agreement
(the "Agreement") with Alliance Fund Distributors, Inc., the
Fund's principal underwriter (the "Principal Underwriter"), to

<PAGE>

permit the Fund directly or indirectly to pay expenses associated
with the distribution of its shares in accordance with a plan of
distribution which is included in the Agreement and has been duly
adopted and approved in accordance with Rule 12b-1 adopted by the
Commission under the 1940 Act (the "Rule 12b-1 Plan").

Under the Agreement, the Treasurer of the Fund reports the
amounts expended under the Rule 12b-1 Plan and the purposes for
which such expenditures were made to the Directors of the Fund
for their review on a quarterly basis. Also, the Agreement
provides that the selection and nomination of Directors (as
defined in the 1940 Act) are committed to the discretion of such
disinterested Directors then in office.

The Agreement became effective on July 22, 1992, and was
amended as of April 30, 1993 to permit the distribution of an
additional class of shares, Class C shares. The amendment to the
Agreement was approved by the unanimous vote, cast in person, of
the disinterested Directors, at a meeting called for that purpose
held on February 23, 1993, and by the initial holder of Class C
shares of the Fund on April 30, 1993.

The Investment Adviser may, from time to time and from its
own funds or such other resources as may be permitted by rules of
the Commission, make payments for distribution services to the
Principal Underwriter; the latter may in turn pay part or all of
such compensation to brokers or other persons for their
distribution assistance.

During the Portfolio's fiscal year ended June 30, l995, with
respect to Class A shares, the distribution services fees for
expenditure payable to the Principal Underwriter amounted to
$1,367,925, which constituted .30 of 1.00% of the Portfolio's
average daily net assets during the fiscal year, and the
Investment Adviser made payments from its own resources
aggregating $299,082. Of the $1,667,007 paid by the Portfolio
and the Investment Adviser under the Plan with respect to Class A
shares, $69,065 was spent on advertising, $23,678 on the printing
and mailing of prospectuses for persons other than current
shareholders, $1,225,709 for compensation to broker-dealers and
other financial intermediaries (including $153,927 to the Fund's
Principal Underwriter), $39,432 for compensation paid to
wholesalers of the Principal Underwriter in respect of sales of
shares of the Portfolio, and $309,123 was spent on printing of
sales literature, travel, entertainment, due diligence and other
promotional expenses.

During the Portfolio's fiscal year ended June 30, 1995 with
respect to Class B shares, the distribution services fees for
expenditures payable to the Principal Underwriter amounted to
$7,380,056, which constituted 1% of the Portfolio's average daily

<PAGE>

net assets during the fiscal year, and the Investment Adviser
made payments from its own resources aggregating $1,602,308. Of
the $8,982,364 paid by the Portfolio and the Investment Adviser
under the Plan with respect to Class B shares, $178,945 was spent
on advertising, $53,079 on the printing and mailing of
prospectuses for persons other than current shareholders,
$5,111,685 for compensation to broker-dealers and other financial
intermediaries (including $391,439 to the Fund's Principal
Underwriter), $103,517 for compensation paid to wholesalers of
the Principal Underwriter in respect of sales of shares of the
Portfolio, $622,350 was spent on printing of sales literature,
travel, entertainment, due diligence and other promotional
expenses, and $2,912,788 was spent on the financing of interest
relating to Class B shares.

During the Portfolio's fiscal year ended June 30, 1995, with
respect to Class C shares, distribution services fees for
expenditures payable to the Principal Underwriter amounted to
$1,985,717, which constituted 1% of the Portfolio's average daily
net assets during the fiscal year, and the Investment Adviser
made payments from its own resources aggregating $462,502. Of
the $2,448,219 paid by the Portfolio and the Investment Adviser
under the Plan with respect to Class C shares, $57,950 was spent
on advertising, $20,411 on the printing and mailing of
prospectuses for persons other than current shareholders,
$2,112,691 for compensation to broker-dealers and other financial
intermediaries (including $127,899 to the Fund's Principal
Underwriter), $38,210 for compensation paid to wholesalers of the
Principal Underwriter in respect of sales of shares of the
Portfolio, and $218,957 was spent on printing of sales
literature, travel, entertainment, due diligence and other
promotional expenses.

The Agreement will continue in effect for successive twelve-
month periods (computed from each July 1) with respect to each
class of the Fund, provided, however, that such continuance is
specifically approved at least annually by the Directors of the
Fund or by vote of the holders of a majority of the outstanding
voting securities (as defined in the 1940 Act) of that class, and
in either case, by a majority of the Directors of the Fund who
are not parties to this Agreement or interested persons, as
defined in the 1940 Act, of any such party (other than as
directors of the Fund) and who have no direct or indirect
financial interest in the operation of the Rule 12b-1 Plan or any
agreement related thereto. Most recently the Directors approved
the continuance of the Agreement until June 30, 1996 at their
meeting held on June 13, 1995.

In the event that the Agreement is terminated or not
continued with respect to the Class A shares, Class B shares or
Class C shares, (i) no distribution services fees (other than

<PAGE>

current amounts accrued but not yet paid) would be owed by the
Fund to the Principal Underwriter with respect to that class, and
(ii) the Fund would not be obligated to pay the Principal
Underwriter for any amounts expended under the Agreement not
previously recovered by the Principal Underwriter from
distribution services fees in respect of shares of such class or
through deferred sales charges.

All material amendments to the Agreement must be approved by
a vote of the Directors or the holders of the Fund's outstanding
voting securities, voting separately by class, and in either
case, by a majority of the disinterested Directors, cast in
person at a meeting called for the purpose of voting on such
approval; and the Agreement may not be amended in order to
increase materially the costs that the Fund may bear pursuant to
the Agreement without the approval of a majority of the
outstanding shares of the Fund, voting separately by class. The
Agreement may be terminated (a) by the Fund without penalty at
any time by a majority vote of the disinterested Directors who
have no direct or indirect financial interest in the Rule 12b-1
Plan, the Agreement or any related agreement or by a majority
vote of the outstanding shares of the Fund, voting separately by
class, or (b) by the Principal Underwriter. To terminate the
Agreement, either party must give the other party 60 days'
written notice; to terminate the Rule 12b-1 Plan only, the Fund
is not required to give prior written notice to the Principal
Underwriter. The Rule 12b-1 Plan will terminate automatically in
the event of its assignment.

TRANSFER AGENCY AGREEMENT

Alliance Fund Services, Inc., an indirect wholly-owned
subsidiary of the Investment Adviser, receives a transfer agency
fee per account holder for each of the Class A, Class B and
Class C shares of the Portfolio, plus reimbursement for out-of-
pocket expenses. The transfer agency fee with respect to the
Class B shares is higher than the transfer agency fee with
respect to the Class A shares or Class C shares, reflecting the
additional costs associated with the Class B contingent deferred
sales charge. For the fiscal year ended June 30, 1995, the Fund
paid Alliance Fund Services, Inc. $1,129,663 for transfer agency
services.

________________________________________________________________

PURCHASE OF SHARES
________________________________________________________________

The following information supplements that set forth in the
Portfolio's Prospectus under the headings "Purchase and Sale of

<PAGE>

Shares--How To Buy Shares, How To Sell Shares, and Shareholder
Services."

GENERAL

Shares of the Portfolio are offered on a continuous basis at
a price equal to their net asset value plus an initial sales
charge at the time of purchase (the "initial sales charge
alternative"), with a contingent deferred sales charge (the
"deferred sales charge alternative"), or without any initial or
contingent deferred sales charge (the "asset-based sales charge
alternative"), as described below. Shares of the Portfolio are
offered on a continuous basis through (i) investment dealers that
are members of the National Association of Securities Dealers,
Inc. and have entered into selected dealer agreements with the
Principal Underwriter ("selected dealers"), (ii) depository
institutions and other financial intermediaries or their
affiliates, that have entered into selected agent agreements with
the Principal Underwriter ("selected agents"), or (iii) the
Principal Underwriter. The minimum for initial investments is
$250; subsequent investments (other than reinvestments of
dividends and capital gains distributions in shares) must be in
the minimum amount of $50. As described under "Shareholder
Services," the Portfolio offers an automatic investment program
and a 403(b)(7) retirement plan which permit investments of $25
or more. The subscriber may use the Subscription Application
found in the Prospectus for his or her initial investment. Sales
personnel of selected dealers and agents distributing the
Portfolio's shares may receive differing compensation for selling
Class A, Class B or Class C shares.

Investors may purchase shares of the Portfolio in the United
States either through selected dealers or agents or directly
through the Principal Underwriter. Shares may also be sold in
foreign countries where permissible. The Fund may refuse any
order for the purchase of shares. The Fund reserves the right to
suspend the sale of the Portfolio's shares to the public in
response to conditions in the securities markets or for other
reasons.

<PAGE>

regular trading on the New York Stock Exchange (the "Exchange")
(currently 4:00 p.m. New York time) by dividing the value of the
Portfolio's total assets, less its liabilities, by the total
number of its shares then outstanding. The respective per share
net asset values of the Class A, Class B and Class C shares are
expected to be substantially the same. Under certain
circumstances, however, the per share net asset values of the
Class B and Class C shares may be lower than the per share net
asset value of the Class A shares as a result of the daily
expense accruals of the distribution and transfer agency fees
applicable with respect to the Class B and Class C shares. Even
under those circumstances, the per share net asset values of the
three classes eventually will tend to converge immediately after
the payment of dividends, which will differ by approximately the
amount of the expense accrual differential among the classes. A
Fund business day is any weekday, exclusive of national holidays
on which the Exchange is closed and Good Friday. For purposes of
this computation, the securities in the Portfolio 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 Directors believe would accurately reflect
fair market value.

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

<PAGE>

application obtained by calling the "Literature" telephone number
shown on the cover of this Statement of Additional Information.
Payment for shares purchased by telephone can be made only by
Electronic Funds Transfer from a bank account maintained by the
shareholder at a bank that is a member of the National Automated
Clearing House Association ("NACHA"). If a shareholder's
telephone purchase request is received before 3:00 p.m. New York
time on a Fund business day, the order to purchase shares is
automatically placed the following Fund business day, and the
applicable public offering price will be the public offering
price determined as of the close of business on such following
business day.

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

ALTERNATIVE PURCHASE ARRANGEMENTS

The Portfolio issues three classes of shares: Class A shares
are sold to investors choosing the initial sales charge
alternative, Class B shares are sold to investors choosing the

<PAGE>

deferred sales charge alternative, and Class C shares are sold to
investors choosing the asset-based sales charge alternative. The
three classes of shares each represent an interest in the same
portfolio of investments of the Portfolio, have the same rights
and are identical in all respects, except that (i) Class A shares
bear the expense of the initial sales charge (or contingent
deferred sales charge, when applicable) and Class B shares bear
the expense of the contingent deferred sales charge, (ii) Class B
shares and Class C shares each bear the expense of a higher
distribution services fee and in the case of Class B shares,
higher transfer agency costs, (iii) each class has exclusive
voting rights with respect to provisions of the Rule 12b-1 Plan
pursuant to which its distribution services fee is paid which
relates to a specific class and other matters for which separate
class voting is appropriate under applicable law, provided that,
if the Portfolio submits to a vote of both the Class A
shareholders and the Class B shareholders an amendment to the
Rule 12b-1 Plan that would materially increase the amount to be
paid thereunder with respect to the Class A shares, the Class A
shareholders and the Class B shareholders will vote separately by
Class, and (iv) only the Class B shares are subject to a
conversion feature. Each class has different exchange privileges
and certain different shareholder service options available.

The alternative purchase arrangements permit an investor to
choose the method of purchasing shares that is most beneficial
given the amount of the purchase, the length of time the investor
expects to hold the shares, and other circumstances. Investors
should consider whether, during the anticipated life of their
investment in the Portfolio, the accumulated distribution
services fee and contingent deferred sales charges on Class B
shares prior to conversion, or the accumulated distribution
services fee on Class C shares, would be less than the initial
sales charge and accumulated distribution services fee on Class A
shares purchased at the same time, and to what extent such
differential would be offset by the higher return of Class A
shares. Class A shares will normally be more beneficial than
Class B shares to the investor who qualifies for reduced initial
sales charges on Class A shares, as described below. In this
regard, the Principal Underwriter will reject any order (except
orders from certain retirement plans) for more than $250,000 for
Class B shares. Class C shares will normally not be suitable for
the investor who qualifies to purchase Class A shares at net
asset value. In addition, the Principal Underwriter will reject
any order for more than $5,000,000 for Class C shares.

<PAGE>

funds invested initially and, therefore, would initially own
fewer shares. Investors not qualifying for reduced initial sales
charges who expect to maintain their investment for an extended
period of time might consider purchasing Class A shares because
the accumulated continuing distribution charges on Class B shares
or Class C shares may exceed the initial sales charge on Class A
shares during the life of the investment. Again, however, such
investors must weigh this consideration against the fact that,
because of such initial sales charges, not all their funds will
be invested initially.

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

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

During the Fund's fiscal periods ended June 30, 1995, 1994
and 1993, the aggregate amount of underwriting commission payable
with respect to shares of the Portfolio in each year was
$1,895,104, $4,514,499 and $3,678,200, respectively, and of that
amount, the Principal Underwriter received amounts of $68,408,
$98,340 and $30,676, respectively, representing that portion of
the Class A sales charges paid on Class A shares of the Portfolio
sold during the year which was not reallowed to selected dealers
(and was, accordingly, retained by the Principal Underwriter).
During the fiscal period ended June 30, 1995, the Principal

<PAGE>

Underwriter received $2,043,087 in contingent deferred sales
charges from the redemption of Class B shares.

INITIAL SALES CHARGE ALTERNATIVE--CLASS A SHARES

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

Initial Sales Charge

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

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

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

<PAGE>

the expenses of the Principal Underwriter related to providing
distribution-related services to the Fund in connection with the
sales of Class A shares, such as the payment of compensation to
selected dealers and agents for selling Class A shares. With
respect to purchases of $1,000,000 or more made through selected
dealers or agents, the Investment Adviser may, pursuant to the
Agreement described above, pay such dealers or agents from its
own resources a fee of up to .25 of 1% of the amount invested to
compensate such dealers or agents for their distribution
assistance in connection with such purchases.

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

Set forth below is an example of the method of computing the
offering price of the Class A shares. The example assumes a
purchase of Class A shares of the Portfolio aggregating less than
$100,000 subject to the schedule of sales charges set forth in
the Prospectus at a price based upon the net asset value of
Class A shares of the Portfolio on June 30, 1995.

Net Asset Value per Class A Share
at June 30, 1995 $ 7.96

Per Share Sales Charge - 4.25%
of offering price (4.44% .35
of net asset value per share) ______

Class A Per Share Offering Price
to the Public $ 8.31
======

<PAGE>

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

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

<PAGE>

Alliance Municipal Income Fund II
-Arizona Portfolio
-Florida Portfolio
-Massachusetts Portfolio
-Michigan Portfolio
-Minnesota Portfolio
-New Jersey Portfolio
-Ohio Portfolio
-Pennsylvania Portfolio
-Virginia Portfolio
Alliance Municipal Income Fund, Inc.
-California Portfolio
-Insured California Portfolio
-Insured National Portfolio
-National Portfolio
-New York Portfolio
Alliance New Europe Fund, Inc.
Alliance North American Government Income Trust, Inc.
Alliance Premier Growth Fund, Inc.
Alliance Quasar Fund, Inc.
Alliance Short-Term Multi-Market Trust, Inc.
Alliance Technology Fund, Inc.
Alliance Utility Income Fund, Inc.
Alliance World Income Trust, Inc.
Alliance Worldwide Privatization Fund, Inc.
The Alliance Fund, Inc.
The Alliance Portfolios
-The Alliance Growth Fund
-The Alliance Conservative Investors Fund
-The Alliance Growth Investors Fund
-The Alliance Short-Term U.S. Government Fund
-The Alliance Strategic Balanced Fund

Prospectuses for the Alliance Mutual Funds may be obtained
without charge by contacting Alliance Fund Services, Inc. at the
address or the "Literature" telephone number shown on the front
cover of this Statement of Additional Information.

(i) the investor's current purchase;

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

<PAGE>

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

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

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

<PAGE>

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

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

REINSTATEMENT PRIVILEGE. A shareholder who has caused any or
all of his or her Class A shares of the Portfolio to be redeemed

<PAGE>

or repurchased may reinvest all or any portion of the redemption
or repurchase proceeds in Class A shares of the Portfolio at net
asset value without any sales charge, provided that such
reinvestment is made within 120 calendar days after the
redemption or repurchase date. Shares are sold to a reinvesting
shareholder at the net asset value next determined as described
above. A reinstatement pursuant to this privilege will not
cancel the redemption or repurchase transaction; therefore, any
gain or loss so realized will be recognized for Federal tax
purposes except that no loss will be recognized to the extent
that the proceeds are reinvested in shares of the Portfolio. The
reinstatement privilege may be used by the shareholder only once,
irrespective of the number of shares redeemed or repurchased,
except that the privilege may be used without limit in connection
with transactions whose sole purpose is to transfer a
shareholder's interest in the Portfolio to his or her individual
retirement account or other qualified retirement plan account.
Investors may exercise the reinstatement privilege by written
request sent to the Fund at the address shown on the cover of
this Statement of Additional Information.

SALES AT NET ASSET VALUE. The Portfolio may sell its Class A
shares at net asset value (i.e., without an initial sales charge)
and without a contingent deferred sales charge to certain
categories of investors, including: (i) investment advisory
clients of the Investment Adviser or its affiliates;
(ii) officers and present or former Directors of the Fund;
present or former directors and trustees of other investment
companies managed by the Investment Adviser; present or retired
full-time employees of the Investment Adviser, the Principal
Underwriter, Alliance Fund Services, Inc. and their affiliates;
officers and directors of ACMC, the Principal Underwriter,
Alliance Fund Services, Inc. and their affiliates; officers,
directors and present and full-time employees of selected dealers
or agents; or the spouse, sibling, direct ancestor or direct
descendant (collectively "relatives") of any such person; or any
trust, individual retirement account or retirement plan account
for the benefit of any such person or relative; or the estate of
any such person or relative, if such shares are purchased for
investment purposes (such shares may not be resold except to the
Fund); (iii) certain employee benefit plans for employees of the
Investment Adviser, the Principal Underwriter, Alliance Fund
Services, Inc. and their affiliates; (iv) persons participating
in a fee-based program, sponsored and maintained by a registered
broker-dealer and approved by the Principal Underwriter, pursuant
to which such persons pay an asset-based fee to such broker-
dealer, or its affiliate or agent, for services in the nature of
investment advisory or administrative services; (v) persons who
establish to the Principal Underwriter's satisfaction that they
are investing, within such time period as may be designated by
the Principal Underwriter, proceeds of redemption of shares of

<PAGE>

such other registered investment companies as may be designated
from time to time by the Principal Underwriter; and (vi)
employer-sponsored qualified pension or profit-sharing plans
(including Section 401(k) plans), custodial accounts maintained
pursuant to Section 403(b)(7) retirement plans and individual
retirement accounts (including individual retirement accounts to
which simplified employee pension (SEP) contributions are made),
if such plans or accounts are established or administered under
programs sponsored by administrators or other persons that have
been approved by the Principal Underwriter.

DEFERRED SALES CHARGE ALTERNATIVE--CLASS B SHARES

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

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

<PAGE>

shares upon dividend reinvestment. If at such time the investor
makes his or her first redemption of 50 Class B shares (proceeds
of $600), 10 Class B shares will not be subject to charge because
of dividend reinvestment. With respect to the remaining 40
Class B shares, the charge is applied only to the original cost
of $10 per share and not to the increase in net asset value of $2
per share. Therefore, $400 of the $600 redemption proceeds will
be charged at a rate of 2.0% (the applicable rate in the second
year after purchase as set forth below).

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

Contingent Deferred
Sales Charge as a % of
Dollar Amount Subject to Charge
Shares Purchased Shares Purchased
Year before On or After
Since Purchase May 1, 1992 May 1, 1992
______________ ________________ ________________
First 4.75% 3.0%
Second 3.75% 2.0%
Third 2.75% 1.0%
Fourth 1.75% None
Fifth .75% None
Sixth None None

In determining the contingent deferred sales charge
applicable to a redemption, it will be assumed that the
redemption is first of any shares in the shareholder's Fund
account that are not subject to a contingent deferred sales
charge, second of Class B shares held for over three years and
third of Class A shares that are subject to a contingent deferred
sales charge held shortest during the one-year period during
which such shares are subject to the sales charge. When Class B
shares acquired in an exchange are redeemed, the applicable
contingent deferred sales charge and conversion schedules will be
the schedules that applied to Class B shares of the Alliance
Mutual Fund originally purchased by the shareholder at the time
of their purchase.

<PAGE>

retirement plan to a shareholder who has attained the age of 70-
1/2, (iii) that had been purchased by present or former Directors
or Trustees of the Fund, by the relative of any such person, by
any trust, individual retirement account or retirement plan
account for the benefit of any such person or relative, or by the
estate of any such person or relative, or (iv) pursuant to a
systematic withdrawal plan (see "Shareholder Services -
Systematic Withdrawal Plan" below).

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

The conversion of Class B shares to Class A shares is subject
to the continuing availability of an opinion of counsel to the
effect that (i) the assessment of the higher distribution
services fee and transfer agency costs with respect to Class B
shares does not result in the Portfolio's dividends or
distributions constituting "preferential dividends" under the
Code, and (ii) the conversion of Class B shares to Class A shares
does not constitute a taxable event under federal income tax law.
The conversion of Class B shares to Class A shares may be
suspended if such an opinion is no longer available at the time
such conversion is to occur. In that event, no further
conversions of Class B shares would occur, and shares might
continue to be subject to the higher distribution services fee
for an indefinite period which may extend beyond the period
ending six years after the end of the calendar month in which the
shareholder's purchase order was accepted.

<PAGE>

ASSET-BASED SALES CHARGE ALTERNATIVE--CLASS C SHARES

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

________________________________________________________________

REDEMPTION AND REPURCHASE OF SHARES
________________________________________________________________

The following information supplements that set forth in the
Portfolio's Prospectus under the heading "Purchase and Sale of
Share--How to Sell Shares."

REDEMPTION

Subject only to the limitations described below, the Fund's
Articles of Incorporation require that the Fund redeem the shares
of the Portfolio tendered to it, as described below, at a
redemption price equal to their net asset value as next computed
following the receipt of shares tendered for redemption in proper
form. Except for any contingent deferred sales charge which may
be applicable to Class B shares, there is no redemption charge.
Payment of the redemption price will be made within seven days
after the Fund's receipt of such tender for redemption.

The right of redemption may not be suspended or the date of
payment upon redemption postponed for more than seven days after
shares are tendered for redemption, except for any period during
which the New York Stock Exchange (the "Exchange") is closed
(other than customary weekend and holiday closings) or during
which the Commission determines that trading thereon is
restricted, or for any period during which an emergency (as
determined by the Commission) exists as a result of which
disposal by the Portfolio of securities owned by it is not
reasonably practicable or as a result of which it is not
reasonably practicable for the Portfolio fairly to determine the

<PAGE>

value of its net assets, or for such other periods as the
Commission may by order permit for the protection of security
holders of the Portfolio.

Payment of the redemption price will be made in cash. The
value of a shareholder's shares on redemption or repurchase may
be more or less than the cost of such shares to the shareholder,
depending upon the market value of the Portfolio's portfolio
securities at the time of such redemption or repurchase.
Redemption proceeds on Class A shares and Class B shares will
reflect the deduction of the contingent deferred sales charge, if
any. Payment (either in cash or in portfolio securities)
received by a shareholder upon redemption or repurchase of his or
her shares, assuming the shares constitute capital assets in his
or her hands, will result in long-term or short-term capital
gains (or loss) depending upon the shareholder's holding period
and basis in respect of the shares redeemed.

TELEPHONE REDEMPTION BY ELECTRONIC FUNDS TRANSFER. Requests
for redemption of shares for which no stock certificates have
been issued can also be made by telephone at (800) 221-5672 by a
shareholder who has completed the appropriate portion of the
Subscription Application or, in the case of an existing
shareholder, an "Autosell" application obtained from Alliance
Fund Services, Inc. A telephone redemption request must be for
at least $500 and may not exceed $100,000, and must be made
between 9:00 a.m. and 4:00 p.m. New York time on a Fund business
day as defined above. Proceeds of telephone redemptions will be
sent by Electronic Funds Transfer to a shareholder's designated
bank account at a bank selected by the shareholder that is a
member of the NACHA.

<PAGE>

the preceding 30 calendar days or (v) held in any retirement plan
account. A shareholder otherwise eligible for telephone
redemption by check may cancel the privilege by written
instruction to Alliance Fund Services, Inc., or by checking the
appropriate box on the Subscription Application found in the
Prospectus.

GENERAL. During periods of drastic economic or market
developments, such as the market break of October 1987, it is
possible that shareholders would have difficulty in reaching
Alliance Fund Services, Inc. by telephone (although no such
difficulty was apparent at any time in connection with the 1987
market break). If a shareholder were to experience such
difficulty, the shareholder should issue written instructions to
Alliance Fund Services, Inc. at the address shown on the cover of
this Statement of Additional Information. The Fund reserves the
right to suspend or terminate its telephone redemption service at
any time without notice. Neither the Fund nor the Investment
Adviser, the Principal Underwriter or Alliance Fund Services,
Inc. will be responsible for the authenticity of telephone
requests for redemptions that the Fund reasonably believes to be
genuine. The Fund will employ reasonable procedures in order to
verify that telephone requests for redemptions are genuine,
including, among others, recording such telephone instructions
and causing written confirmations of the resulting transactions
to be sent to shareholders. If the Fund did not employ such
procedures, it could be liable for losses arising from
unauthorized or fraudulent telephone instructions. Selected
dealers or agents may charge a commission for handling telephone
requests for redemptions.

REPURCHASE

The Portfolio may repurchase shares through the Principal
Underwriter or selected dealers or agents. The repurchase price
will be the net asset value next determined after the Principal

<PAGE>

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

GENERAL

________________________________________________________________

SHAREHOLDER SERVICES
________________________________________________________________

The following information supplements that set forth in the
Portfolio's Prospectus under the heading "Purchase and Sale of
Shares --Shareholder Services."

<PAGE>

SHAREHOLDER SERVICES APPLICABLE TO ALL THREE CLASSES

AUTOMATIC INVESTMENT PROGRAM

Investors may purchase shares of the Portfolio through an
automatic investment program utilizing "pre-authorized check"
drafts drawn on the investor's own bank account. Under such a
program, pre-authorized monthly drafts for a fixed amount (at
least $25) are used to purchase shares through the selected
dealer or selected agent designated by the investor at the public
offering price next determined after the Principal Underwriter
receives the proceeds from the investor's bank. Drafts may be
made in paper form or, if the investor's bank is a member of the
NACHA, in electronic form. If made in paper form, the draft is
normally made on the 20th day of each month, or the next business
day thereafter. If made in electronic form, drafts can be made
on or about a date each month selected by the shareholder.
Investors wishing to establish an automatic investment program in
connection with their initial investment should complete the
appropriate portion of the Subscription Application found in the
Prospectus. Current shareholders should contact Alliance Fund
Services, Inc. at the address or telephone numbers shown on the
cover of this Statement of Additional Information to establish an
automatic investment program.

EXCHANGE PRIVILEGE

<PAGE>

been held. After an exchange, new Class B shares will
automatically convert into Class A shares in accordance with the
conversion schedule applicable to the Alliance Mutual Fund
Class B shares originally purchased for cash, and when redemption
occurs, the contingent deferred sales charge schedule applicable
to the Class B shares originally purchased for cash is applied.

Class C shareholders of the Portfolio can exchange their
Class C shares for Class C shares of any other Alliance Mutual
Fund that offers Class C shares.

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

Each Portfolio shareholder, and the shareholder's selected
dealer or agent, are authorized to make telephone requests for
exchanges unless Alliance Fund Services, Inc. receives written
instruction to the contrary from the shareholder, or the
shareholder declines the privilege by checking the appropriate
box on the Subscription Application found in the Prospectus.
Such telephone requests cannot be accepted with respect to shares
then represented by stock certificates. Shares acquired pursuant
to a telephone request for exchange will be held under the same
account registration as the shares redeemed through such
exchange.

<PAGE>

difficulty in reaching Alliance Fund Services, Inc. by telephone
(although no such difficulty was apparent at any time in
connection with the 1987 market break). If a shareholder were to
experience such difficulty, the shareholder should issue written
instructions to Alliance Fund Services, Inc. at the address shown
on the cover of this Statement of Additional Information.

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

Neither the Alliance Funds nor the Investment Adviser, the
Principal Underwriter or Alliance Fund Services, Inc. will be
responsible for the authenticity of telephone requests for
exchanges that the Fund reasonably believes to be genuine. The
Fund will employ reasonable procedures in order to verify that
telephone requests for exchanges are genuine, including, among
others, recording such telephone instructions and causing written
confirmations of the resulting transactions to be sent to
shareholders. If the Fund did not employ such procedures, it
could be liable for losses arising from unauthorized or
fraudulent telephone instructions. Selected dealers or agents
may charge a commission for handling telephone requests for
exchanges.

RETIREMENT PLANS

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

Alliance Fund Services, Inc.
Retirement Plans
P.O. Box 1520
Secaucus, N.J. 07096-1520

<PAGE>

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

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

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

Distributions from retirement plans are subject to certain
Code requirements in addition to normal redemption procedures.

<PAGE>

For additional information please contact Alliance Fund Services,
Inc.

SYSTEMATIC WITHDRAWAL PLAN

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

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

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

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

<PAGE>

the address or the "Literature" telephone number shown on the
cover of this Statement of Additional Information.

CLASS B CDSC WAIVER FOR SHARES ACQUIRED AFTER JULY 1, 1995.
Under a systematic withdrawal plan, up to 1% monthly, 2% bi-
monthly or 3% quarterly of the value at the time of redemption of
the Class B shares in a shareholder's account acquired after July
1, 1995 may be redeemed free of any contingent deferred sales
charge. Class B shares acquired after July 1, 1995 that are not
subject to a contingent deferred sales charge (such as shares
acquired with reinvested dividends or distributions) will be
redeemed first and will count toward these limitations. Remaining
Class B shares acquired after July 1, 1995 that are held the
longest will be redeemed next. Redemptions of Class B shares
acquired after July 1, 1995 in excess of the foregoing
limitations and redemptions of Class B shares acquired before
July 1, 1995 will be subject to any otherwise applicable
contingent deferred sales charge.

DIVIDEND DIRECTION PLAN

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

STATEMENTS AND REPORTS

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

<PAGE>

SHAREHOLDER SERVICES APPLICABLE TO
CLASS A AND CLASS C SHAREHOLDERS ONLY

CHECKWRITING

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

When a check is presented to the Bank for payment, the Bank,
as the shareholder's agent, causes the Fund to redeem, at the net
asset value next determined, a sufficient number of full and
fractional shares of the Portfolio in the shareholder's account
to cover the check. Because the level of net assets in a
shareholder's account constantly changes due, among various
factors, to market fluctuations, a shareholder should not attempt
to close his or her account by use of a check. In this regard,
the Bank has the right to return checks (marked "insufficient
funds") unpaid to the presenting bank if the amount of the check
exceeds 90% of the assets in the account. Canceled (paid) checks
are returned to the shareholder. The checkwriting service
enables the shareholder to receive the daily dividends declared
on the shares to be redeemed until the day that the check is
presented to the Bank for payment.

________________________________________________________________

NET ASSET VALUE
________________________________________________________________

The net asset value of shares of the Portfolio on which the
subscription and redemption prices are based is computed in
accordance with the Fund's Articles of Incorporation and By-Laws

<PAGE>

as of the next close of regular trading on the Exchange next
following receipt of a purchase or redemption order (and on any
other day on which trading in the types of securities in which
the Portfolio invests might materially affect the value of
Portfolio shares) and, is the quotient obtained by dividing the
value of the net assets of the Portfolio (i.e., the value of the
securities and other assets of the Portfolio, less its
liabilities, including expenses payable or accrued but excluding
capital stock and surplus) by the total number of shares of the
Portfolio outstanding. For purposes of this computation,
portfolio securities listed on the Exchange are valued, except as
indicated below, at the last sale price reflected in the
consolidated tape at the close of the Exchange on the business
day as of which such value is being determined. If there has
been no sale on such day, then the security is valued at the
quoted bid price thereof at the close of the Exchange on such
day. If no bid is quoted on such day, then the securities are
valued at the mean of the bid and asked prices at the close of
the Exchange on the day such valuation is made as obtained from
two dealers regularly making a market in such security, except
that where a bid and asked price can be obtained from only one
such dealer, such security is valued at the mean of the bid and
asked price obtained from such dealer.

Securities not listed on the Exchange but listed on other
national securities exchanges are valued in like manner.
Portfolio securities traded on more than one national securities
exchange are valued at the last sale price on the business day as
of which such value is being determined as reflected on the tape
at the close of the exchange representing the principal market
for such securities. Securities traded over-the-counter,
including listed debt securities whose primary market is believed
by the Fund's management to be over-the-counter, are valued at
the mean of the bid and asked prices at the close of the Exchange
on the days such valuation is made as obtained from two dealers
regularly making a market in such securities, except that where a
bid and asked price can be obtained from only one such dealer,
such securities are valued at the mean of the bid and asked price
obtained from such dealer. Securities for which no bid and asked
price quotations are readily available are valued by such methods
as the Directors of the Fund determine in good faith to reflect
the fair market value thereof. Restricted securities and all
other assets of the Portfolio are valued in such manner as the
Directors of the Fund in good faith deem appropriate to reflect
fair market value thereof.

<PAGE>

allocated to that class from the assets belonging to that class
pursuant to an order issued by the Commission.

________________________________________________________________

PORTFOLIO TRANSACTIONS
________________________________________________________________

Subject to the general supervision of the Board of Directors
of the Fund, the Investment Adviser is responsible for the
investment decisions and the placing of the orders for portfolio
transactions for the Portfolio. The Portfolio's portfolio
transactions occur primarily with issuers, underwriters or major
dealers acting as principals. Such transactions are normally on
a net basis which do not involve payment of brokerage
commissions. The cost of securities purchased from an
underwriter usually includes a commission paid by the issuer to
the underwriter; transactions with dealers normally reflect the
spread between bid and asked prices. Premiums are paid with
respect to options purchased by the Portfolio, and brokerage
commissions are payable with respect to transactions in exchange-
traded interest rate futures contracts.

The Investment Adviser makes the decisions for the Portfolio
and determines the broker or dealer to be used in each specific
transaction. Most transactions for the Portfolio, including
transactions in listed securities, are executed in the over-the-
counter market by approximately fifteen (15) principal market
maker dealers with whom the Investment Adviser maintains regular
contact. Most transactions made by the Portfolio will be
principal transactions at net prices and the Portfolio will incur
little or no brokerage costs. Where possible, securities will be
purchased directly from the issuer or from an underwriter or
market maker for the securities unless the Investment Adviser
believes a better price and execution is available elsewhere.
Purchases from underwriters of newly-issued securities for
inclusion in the Portfolio usually will include a concession paid
to the underwriter by the issuer and purchases from dealers
serving as market makers will include the spread between the bid
and asked price.

The Portfolio has no obligation to enter into transactions in
securities with any broker, dealer, issuer, underwriter or other
entity. In placing orders, it is the policy of the Fund to
obtain the best price and execution for its transactions. Where
best price and execution may be obtained from more than one
broker or dealer, the Investment Adviser may, in its discretion,
purchase and sell securities through brokers and dealers who
provide research, statistical and other information to the
Investment Adviser. Such services may be used by the Investment
Adviser for all of its investment advisory accounts and,

<PAGE>

accordingly, not all such services may be used by the Investment
Adviser in connection with the Portfolio. There may be occasions
where the transaction cost charged by a broker may be greater
than that which another broker may charge if the Fund determines
in good faith that the amount of such transaction cost is
reasonable in relationship to the value of the brokerage and
research and statistical services provided by the executing
broker.

No transactions for the Portfolio are executed through any
broker or dealer affiliated with the Fund's Investment Adviser,
or with Donaldson, Lufkin & Jenrette Securities Corporation, an
affiliate of the Investment Adviser. During the fiscal years
ended June 30, 1993, 1994 and 1995, the Portfolio incurred no
brokerage commissions.

________________________________________________________________

TAXES
________________________________________________________________

The Fund advises the Portfolio's shareholders annually as to
the Federal income tax status of dividends and distributions made
to a Portfolio's shareholders during each calendar year.

Since the Portfolio expects to derive substantially all of
its gross income (exclusive of capital gains) from sources other
than dividends, it is expected that none of the Portfolio's
dividends or distributions will qualify for the dividends-
received deduction for corporations.

Any dividend or distribution received by a shareholder on
shares of the Portfolio will have the effect of reducing the net
asset value of such shares by the amount of such dividend or
distribution. Furthermore, a dividend or distribution made
shortly after the purchase of such shares by a shareholder,
although in effect a return of capital to that particular
shareholder, would be taxable to him as described in the
Prospectus. All dividends and distributions will be made to
shareholders of the Portfolio solely from assets of the
Portfolio.

A dividend or capital gains distribution with respect to
shares of the Portfolio held by a tax-deferred or qualified
retirement plan, such as an IRA, 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.

<PAGE>

ZERO COUPON TREASURY SECURITIES. Under current federal tax
law, the Portfolio will receive net investment income in the form
of interest by virtue of holding Treasury bills, notes and bonds,
and will recognize interest attributable to it under the original
issue discount rules of the Code from holding zero coupon
Treasury securities. Current federal tax law requires that a
holder (such as the Portfolio) of a zero coupon security accrue a
portion of the discount at which the security was purchased as
income each year even though the Portfolio receives no interest
payment in cash on the security during the year. Accordingly,
the Portfolio may be required to pay out as an income
distribution each year an amount which is greater than the total
amount of cash interest the Portfolio actually received. Such
distributions will be made from the cash assets of the Portfolio
or by liquidation of portfolio securities, if necessary. If a
distribution of cash necessitates the liquidation of portfolio
securities, the Investment Adviser will select which securities
to sell. The Portfolio may realize a gain or loss from such
sales. In the event the Portfolio realizes net capital gains
from such transactions, its shareholders may receive a larger
capital gain distribution, if any, than they would have in the
absence of such transactions.

STRIPPED MORTGAGE-RELATED SECURITIES. Certain classes of
SMRS which are issued at a discount, the payments of which are
subject to acceleration by reason of prepayments of the
underlying Mortgage Assets securing such classes, are subject to
special rules for determining the portion of the discount at
which the class was issued which must be accrued as income each
year. Under Code section 1272(a)(6), a principal-only class or a
class which receives a portion of the interest and a portion of
the principal from the underlying Mortgage Assets is subject to
rules which require accrual of interest to be calculated and
included in the income of a holder (such as the Portfolio) based
on the increase in the present value of the payments remaining on
the class, taking into account payments includable in the class'
stated redemption price at maturity which are received during the
accrual period. For this purpose, the present value calculation
is made at the beginning of each accrual period (i) using the
yield to maturity determined for the class at the time of its
issuance (determined on the basis of compounding at the close of
each accrual period and properly adjusted for the length of the
accrual period), calculated on the assumption that certain
prepayments will occur, and (ii) taking into account any
prepayments that have occurred before the close of the accrual
period. Since interest included in the Portfolio's income as a
result of these rules will have been accrued and not actually
paid, the Portfolio may be required to pay out as an income
distribution each year an amount which is greater than the total
amount of cash interest the Portfolio actually received, with
possible results as described above.

<PAGE>

Code section 1272(a)(6) does not apply to interest-only SMRS.
Under proposed regulations governing contingent payment
obligations such as interest-only classes, interest payments made
prior to maturity on such a class would be treated as payments of
interest to the extent that interest has been deemed to accrue on
the class' issue price, and then as payments of principal.
Interest payments made at maturity would be treated as payments
of principal to the extent of the "outstanding principal balance"
of the class, and then as payments of interest to the extent of
any excess.

<PAGE>

________________________________________________________________

GENERAL INFORMATION
________________________________________________________________

CAPITALIZATION

The authorized capital stock of the Fund consists solely of
950,000,000 shares of Common Stock having a par value of $.001
per share. All shares of each Portfolio participate equally in
dividends and distributions from that Portfolio, including any
distributions in the event of a liquidation. Each share of the
Portfolio is entitled to one vote for all purposes. Shares of
both Portfolios vote for the election of Directors and on any
other matter that affects both Portfolios in substantially the
same manner as a single class, except as otherwise required by
law. As to matters affecting each Portfolio differently, such as
approval of the Investment Advisory Contract and changes in
investment policy, shares of each Portfolio would vote as a
separate class. There are no conversion or preemptive rights in
connection with any shares of the Portfolio. All shares of the
Portfolio when duly issued will be fully paid and non-assessable.

The authorized capital stock of the Fund consists solely of
950,000,000 shares of Common Stock having a par value of $.001
per share. The authorized capital stock of the Portfolio
currently consists of 200,000,000 shares of Class A Common Stock,
$.001 par value, 200,000,000 shares of Class B Common Stock,
$.001 par value, and 200,000,000 shares of Class C Common Stock,
$.001 par value. Class A, Class B and Class C shares each
represent interests in the assets of the Portfolio and have
identical voting, dividend, liquidation and other rights on the
same terms and conditions, except that expenses related to the
distribution of each class and transfer agency expenses of each
class are borne solely by each class and each class of shares has
exclusive voting rights with respect to provisions of the Fund's
Rule 12b-1 distribution plan which pertain to a particular class
and other matters for which separate class voting is appropriate
under applicable law, provided that, if the Fund submits to a
vote of both the Class A shareholders and the Class B
shareholders an amendment to the Rule 12b-1 distribution plan
that would materially increase the amount to be paid thereunder
with respect to the Class A shares, the Class A shareholders and
the Class B shareholders will vote separately by class. The Fund
has received an order from the Commission permitting issuance and
sale of the three classes of shares representing interests in the
Portfolio. The issuance and sale of any additional classes will
require an additional order from the Commission.

There is no assurance that such exemptive relief would be
granted. The Fund's Board of Directors may, without shareholder

<PAGE>

approval, increase or decrease the number of authorized but
unissued shares of the Portfolio's Class A, Class B and Class C
Common Stock.

The Board of Directors is authorized to reclassify and issue
any unissued shares to any number of additional series without
shareholder approval. Accordingly, the Directors in the future,
for reasons such as the desire to establish one or more
additional portfolios with different investment objectives,
policies or restrictions, may create additional series of shares.
Any issuance of shares of another series would be governed by the
1940 Act and the laws of the State of Maryland. If shares of
another series were issued in connection with the creation of a
second portfolio, each share of either portfolio would normally
be entitled to one vote for all purposes. Generally, shares of
both portfolios would vote as a single series for the election of
Directors and on any other matter that affected both portfolios
in substantially the same manner.

As of the close of business on October 13, l995, there were
173,117,470 shares of common stock of the Portfolio outstanding.
Of this amount, 56,652,389 shares were Class A shares, 94,793,529
shares were Class B shares and 21,671,552 shares were Class C
shares. To the knowledge of the Portfolio, the following persons
owned of record, and no person owned beneficially, 5% or more of
the outstanding shares of the Portfolio as of October 13, 1995:

<PAGE>

No of % of % of % of
Name and Address Shares Class A Class B Class C
________________ ______ _______ _______ _______

Merrill Lynch 3,387,545 5.98%
Mutual Fund Operations
4800 Deer Lake Dr. East,
3rd Floor
Jacksonville, FL 32244-6486

Merrill Lynch 21,027,100 22.18%
Mutual Fund Operations
4800 Deer Lake Dr. East,
3rd Floor
Jacksonville, FL 32244-6486

Merrill Lynch 13,547,873 62.51%
Mutual Fund Operations
4800 Deer Lake Dr. East,
3rd Floor
Jacksonville, FL 32244-6486

CUSTODIAN

PRINCIPAL UNDERWRITER

Alliance Fund Distributors, Inc., 1345 Avenue of the
Americas, New York, New York 10105, serves as the Fund's
Principal Underwriter, and as such may solicit orders from the
public to purchase shares of the Portfolio. Alliance Fund
Distributors, Inc. is not obligated to sell any specific amount
of shares and will purchase shares for resale only against orders
for shares. Under the Agreement between the Fund and the
Principal Underwriter, the Fund has agreed to indemnify the
Principal Underwriter, in the absence of its willful misfeasance,
bad faith, gross negligence or reckless disregard of its
obligations thereunder, against certain civil liabilities,
including liabilities under the Securities Act of 1933, as
amended.

COUNSEL

Legal matters in connection with the issuance of the
shares of common stock of the Portfolio offered hereby are passed
upon by Seward & Kissel, One Battery Park Plaza, New York, New
York 10004. Seward & Kissel has relied upon the opinion of

<PAGE>

Venable, Baetjer and Howard, LLP, 1800 Mercantile Bank & Trust
Building, 2 Hopkins Plaza, Baltimore, Maryland 21201, for matters
relating to Maryland law.

INDEPENDENT AUDITORS

Ernst & Young LLP, 787 Seventh Avenue, New York, New
York, 10019, have been appointed as independent auditors for the
Fund.

YIELD AND TOTAL RETURN QUOTATIONS

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

The yield for the month ended June 30, 1995 for the
Class A shares of the Portfolio was 6.74%, for Class B shares was
6.32% and for Class C shares was 6.33%. The actual distribution
rate for such period for the Portfolio for Class A shares was
7.00%, for Class B shares was 6.60% and for Class C shares was
6.60%. The Portfolio's average annual total return for the one-
year period ended June 30, 1995 was 5.65%, for the five-year
period ended June 30, 1995 was 7.54% and for the ten-year period
ended June 30, 1995 was 7.56% for Class A shares of the

<PAGE>

Portfolio; the average annual total return for the one year ended
June 30, 1995 was 6.52% and for the period September 30, 1991
(commencement of distribution) through June 30, 1995, was 6.67%
for Class B shares of the Portfolio; and the average annual total
return for the one-year period ended June 30, 1995, was 9.67% and
for the period May 3, 1993 (commencement of distribution) through
June 30, 1995 was 4.02% for Class C shares of the Portfolio.

In addition, Lipper has ranked the Portfolio #130 for
Class A shares, #126 for Class B shares and #126 for Class C
shares out of 164 U.S. Government bond funds for the period ended
September 30, 1995. The Morningstar ratings and the Lipper
rankings may be used in advertisements and sales literature
relating to such Portfolio.

<PAGE>

ADDITIONAL INFORMATION

Any shareholder inquiries may be directed to the
shareholder's broker or other financial adviser or to Alliance
Fund Services, Inc. at the address or telephone numbers shown on
the front cover of this Statement of Additional Information. This
Statement of Additional Information does not contain all the
information set forth in the Registration Statement filed by the
Fund with the Commission under the Securities Act of 1933. 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.

57
00250123.AH5

<PAGE>

PORTFOLIO OF INVESTMENTS
JUNE 30, 1995 ALLIANCE BOND FUND U.S. GOVERNMENT PORTFOLIO
- -------------------------------------------------------------------------------

PRINCIPAL
AMOUNT
(000) VALUE
- ------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS-99.3%
U.S. TREASURY SECURITIES-46.8%
U.S. TREASURY BONDS-33.7%
7.125%, 2/15/23 $ 32,300 $34,030,957
7.625%, 2/15/25 24,000 27,104,880
11.25%, 2/15/15 20,000 30,006,200
13.375%, 8/15/01 10,000 13,709,400
14.00%, 11/15/11 233,100 374,197,761
479,049,198

U.S. TREASURY NOTES-9.1%
5.875%, 2/15/04 13,000 12,681,110
9.25%, 1/15/96 44,000 44,783,640
9.375%, 4/15/96 69,600 71,525,136
128,989,886

U.S. TREASURY STRIP-4.0%
Zero coupon, 5/15/14 204,000 56,367,240
Total U.S. Treasury Securities
(cost $649,652,948) 664,406,324

GOVERNMENT NATIONAL MORTGAGE ASSOCIATION-39.1%
Construction Loan
7.50%, 8/15/95 6,300 6,205,500

Mobile Homes
8.00%, 10/15/12 384 394,304
8.25%, 6/15/05-9/15/12 1,961 2,021,088
8.50%, 5/15/08-1/15/12 1,381 1,441,135
8.75%, 11/15/00-1/15/12 6,098 6,390,363
9.00%, 10/15/11-1/15/12 1,724 1,822,267
9.25%, 3/15/05-2/15/10 475 503,258
9.50%, 2/15/05 296 315,045
9.75%, 5/15/99-1/15/13 9,845 10,489,969
10.00%, 8/15/02-6/15/05 855 914,486
10.25%, 4/15/98-6/15/13 8,684 9,350,136
11.25%, 3/15/98-5/15/98 57 61,358
33,703,409

Project Loans
7.00%, 1/15/96-3/15/35 $ 23,732 $22,879,280
7.05%, 9/15/25 7,111 6,855,816
7.50%, 2/15/23-2/15/29 3,231 3,182,954
7.55%, 3/15/28 4,493 4,425,808
7.625%, 9/15/28 3,349 3,298,651
7.75%, 4/15/28-6/15/28 22,605 22,675,522
7.80%, 11/15/34 15,143 15,459,922
8.00%, 4/15/23-2/15/34 23,806 24,133,054
8.125%, 10/15/29 27,448 27,825,894
8.375%, 1/15/30-7/15/32 15,605 15,932,184
8.43%, 7/15/27 4,949 5,099,307
8.50%, 11/15/12-7/15/32 50,440 51,984,456
8.75%, 1/15/33 2,518 2,609,974
9.00%, 4/15/29-5/15/35 8,163 8,473,431
9.25%, 4/15/32 6,991 7,291,802
9.50%, 8/15/31 10,330 10,871,147
10.50%, 8/15/29 5,804 6,477,207
10.75%, 5/15/28 5,007 5,610,262
245,086,671

Single Family Homes
7.50%, 7/16/24 23,500 23,118,125
8.00%, 8/15/22-1/15/24 55,467 56,784,199
8.50%, 1/15/17-9/15/24 15,380 15,965,845
9.00%, 7/15/20-4/15/25 149,565 156,891,586
10.00%, 1/15/25 15,813 17,210,934
11.00%, 8/15/15-9/15/19 371 411,819
270,382,508

Total Government National Mortgage
Association (cost $552,195,863) 555,378,088

PORTFOLIO OF INVESTMENTS (CONT.) ALLIANCE BOND FUND U.S. GOVERNMENT PORTFOLIO
- -------------------------------------------------------------------------------

PRINCIPAL
AMOUNT
(000) VALUE
- ------------------------------------------------------------
FEDERAL AGENCY SECURITIES-8.6%
Federal Housing Authority
11.93%, 1/01/29 $ 7,939 $8,137,109
Financial Assistance Corp.
9.45%, 11/21/03 26,000 28,475,200
9.50%, 4/16/04 31,506 34,842,485
Small Business Administration
BS92-1E (I/O) FRN
9.75%, 4/15/17 (a)(b) 21,390 22,433,465
BS93-2A (I/O) FRN
8.40%, 3/15/18 (a)(b) 15,398 16,766,560
BS93-5A (I/O) FRN
7.00%, 6/15/18 (a)(b) 12,481 11,903,629
Total Federal Agency Securities
(cost $125,336,965) 122,558,448

COLLATERALIZED MORTGAGE OBLIGATIONS-4.8%
Vendee Mortgage Trust
1992-2 FRN
10.00%, 9/15/22 (I/O)(a) 10,953 8,706,702
1992-2E FRN
7.00%, 2/15/17 $23,374 $23,147,506
1993-1 FRN
10.00%, 2/15/23 (I/O)(a) 11,126 9,742,345
1993-2 FRN
9.50%, 6/15/23 (I/O)(a) 8,303 6,561,016
1993-3 FRN
10.29%, 10/15/23 (I/O)(a) 12,985 10,964,109
1994-1 FRN
9.00%, 2/15/24 (I/O)(a) 5,101 4,919,388
1995-1C FRN
13.16%, 2/15/25 (I/O)(a) 5,062 4,078,151
Total Collateralized Mortgage
Obligations (cost $76,069,330) 68,119,217

TOTAL INVESTMENTS-99.3%
(cost $1,403,255,106) $1,410,462,077
Other assets less liabilities-0.7% 9,243,594

NET ASSETS-100% $1,419,705,671

(a) Interest rate represents yield to maturity, and principal amount
represents amortized cost.

(b) Illiquid security (see Notes A & F).

Glossary of Terms:
FRN - Floting rate note.
I/O - Interest only.

See notes to financial statements.

STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1995 ALLIANCE BOND FUND U.S. GOVERNMENT PORTFOLIO
- -------------------------------------------------------------------------------

ASSETS
Investments in securities, at value (cost $1,403,255,106) $1,410,462,077
Cash 2,765,615
Receivable for investment securities sold 28,606,529
Interest receivable 16,497,867
Receivable for capital stock sold 1,689,500
Prepaid expenses and other assets 75,671
Total assets 1,460,097,259

LIABILITIES
Payable for investment securities purchased 30,313,324
Dividends payable 5,322,084
Payable for capital stock redeemed 2,322,618
Advisory fee payable 1,899,631
Distribution fee payable 120,554
Accrued expenses 413,377
Total liabilities 40,391,588

NET ASSETS $1,419,705,671

COMPOSITION OF NET ASSETS
Capital stock, at par $ 178,353
Additional paid-in capital 1,582,625,600
Distributions in excess of net investment income (1,087,945)
Accumulated net realized loss (169,217,308)
Net unrealized appreciation of investments 7,206,971
$1,419,705,671

CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share ($463,659,926 /
58,247,102 shares of capital stock issued and outstanding) $ 7.96
Sales charge-4.25% of public offering price .35
Maximum offering price $ 8.31

CLASS B SHARES
Net asset value and offering price per share ($774,097,691 /
97,250,041 shares of capital stock issued and outstanding) $ 7.96

CLASS C SHARES
Net asset value, redemption and offering price per share
($181,948,054 / 22,855,890 shares of capital stock issued
and outstanding) $ 7.96

See notes to financial statements.

STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 1995 ALLIANCE BOND FUND U.S. GOVERNMENT PORTFOLIO
- -------------------------------------------------------------------------------

INVESTMENT INCOME
Interest $129,279,543

EXPENSES
Advisory fee $7,422,436
Distribution fee - Class A 1,367,963
Distribution fee - Class B 7,380,145
Distribution fee - Class C 1,985,768
Transfer agency 1,701,719
Registration 187,060
Administrative 146,519
Custodian 141,989
Printing 115,603
Audit and legal 78,273
Taxes 48,294
Directors' fees 15,123
Miscellaneous 56,527
Total expenses 20,647,419
Net investment income 108,632,124

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on investments (64,741,614)
Net change in unrealized depreciation of investments 87,484,438
Net gain on investments 22,742,824

NET INCREASE IN NET ASSETS FROM OPERATIONS $131,374,948

See notes to financial statements.

STATEMENT OF CHANGES
IN NET ASSETS ALLIANCE BOND FUND U.S. GOVERNMENT PORTFOLIO
- -------------------------------------------------------------------------------

YEAR ENDED YEAR ENDED
JUNE 30, 1995 JUNE 30, 1994
-------------- ---------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $108,632,124 $108,609,389
Net realized loss on investments (64,741,614) (62,573,582)
Net change in unrealized appreciation
(depreciation) of investments 87,484,438 (92,105,470)
Net increase (decrease) in net assets
from operations 131,374,948 (46,069,663)

DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income
Class A (38,253,548) (40,491,765)
Class B (56,201,323) (51,587,050)
Class C (15,168,018) (16,448,913)

CAPITAL STOCK TRANSACTIONS
Net increase (decrease) (72,782,075) 477,136,349
Total increase (decrease) (51,030,016) 322,538,958

NET ASSETS
Beginning of year 1,470,735,687 1,148,196,729
End of year $1,419,705,671 $1,470,735,687

See notes to financial statements.

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995 ALLIANCE BOND FUND U.S. GOVERNMENT PORTFOLIO
- -------------------------------------------------------------------------------

NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Bond Fund, Inc. (the "Fund") is registered under the Investment
Company Act of 1940 as a diversified open end management investment company.
The Fund, which is a Maryland corporation operates as a series company
currently comprised of two portfolios: Corporate Bond Portfolio and U.S.
Government Portfolio. Each series is considered to be a separate entity for
financial reporting and tax purposes. The financial statements and notes
include the operations of the U.S. Government Portfolio (the 'Portfo1io') only.
The Portfolio offers three classes of shares; Class A, Class B and Class C
shares. Class A shares are sold with a front-end sales charge of up to 4.25%.
Class B shares are sold with a contingent deferred sales charge which declines
from 3.00% to zero depending on the period of time the shares are held. Class B
shares will automatically convert to Class A shares six years after the end of
the calendar month of purchase. Class C shares are sold without an initial or
contingent deferred sales charge. All three classes of shares have identical
voting, dividend, liquidation and other rights, except that each class bears
different distribution expenses and has exclusive voting rights with respect to
its distribution plan. The following is a summary of the significant accounting
policies followed by the Portfolio.

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

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

3. INVESTMENT INCOME AND SECURITY TRANSACTIONS
Interest income is accrued daily. Security transactions are accounted for on
the date the securities are purchased or sold. Security gains and losses are
determined on the identified cost basis. The portfolio accretes original issue
discount as adjustments to income.

NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the investment advisory agreement, the Portfolio pays
Alliance Capital Management L.P., (the "Adviser"), an advisory fee equal to .60
of 1% of the first $500 million, and .50 of 1% in excess of $500 million on an
annualized basis, of its net assets at the end of each quarter. The Adviser has
agreed to reimburse the Portfolio pursuant to the securities laws of certain
states to the extent its aggregate annual expenses (exclusive of interest,
taxes, brokerage, distribution fees and extraordinary expenses) exceed 2.5% of
the first $30 million of its average daily net assets, 2% of the next $70
million of its average daily net assets and 1.5% of its average daily net

ALLIANCE BOND FUND U.S. GOVERNMENT PORTFOLIO
- -------------------------------------------------------------------------------

assets in excess of $100 million. No such reimbursement was required for the
year ended June 30, 1995. Pursuant to the advisory agreement the Portfolio paid
$146,519 to the Adviser representing the cost of certain legal and accounting
services provided to the Portfolio by the Adviser for the year ended June 30,
1995.

Alliance Fund Distributors, Inc. (a wholly-owned subsidiary of the Adviser)
serves as the Distributor of the Portfolio's shares. The Distributor received
front-end sales charges of $68,408 from the sale of Class A shares and
$2,043,087 in contingent deferred sales charges imposed upon redemptions by
shareholders of Class B shares for the year ended June 30, 1995.

NOTE C: DISTRIBUTION SERVICES AGREEMENT
The Portfolio has adopted a Distribution Services Agreement (the "Agreement")
pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the
Agreement, the Portfolio pays a distribution fee to the Distributor at an
annual rate of up to .30 of 1% of the Portfolio's average daily net assets
attributable to the Class A shares and 1% of the Portfolio's average daily net
assets attributable to the Class B and Class C shares. Such fee is accrued
daily and paid monthly. The Agreement provides that the Distributor will use
such payments in their entirety for distribution assistance and promotional
activities. The Distributor has incurred expenses in excess of the distribution
costs reimbursed by the Portfolio in the amount of $13,511,108, and $2,224,264
for Class B and Class C shares, respectively; such costs may be recovered from
the Portfolio in future periods, so long as the Agreement is in effect. In
accordance with the Agreement, there is no provision for recovery of
unreimbursed distribution costs, incurred by the Distributor, beyond the
current fiscal year for Class A shares. The Agreement also provides that the
Adviser may use its own resources to finance the distribution of the
Portfolio's shares.

NOTE D: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term
investments), aggregated $2,720,103,592 and $2,817,030,800, respectively, for
year ended June 30, 1995. At June 30, 1995, the cost of securities for federal
income tax purposes was $1,406,072,147. Accordingly, gross unrealized
appreciation of investments was $26,593,927 and gross unrealized depreciation
of investments was $22,203,997, resulting in net unrealized appreciation of
$4,389,930. For federal income tax purposes, the Portfolio had a capital loss
carryforward at June 30, 1995 of approximately $111,119,347 of which
$19,845,081 expires in 1998, $8,257,319 in 1999, and $83,016,947 in 2003.

NOTES TO FINANCIAL STATEMENTS
(CONTINUED) ALLIANCE BOND FUND U.S. GOVERNMENT PORTFOLIO
- -------------------------------------------------------------------------------

NOTE E: CAPITAL STOCK
There are 600,000,000 shares of $.001 par value capital stock authorized, for
the Portfolio of which 200,000,000 shares are designated for Class A, Class B
and Class C shares, respectively. Transactions in capital stock were as follows:

SHARES AMOUNT
-------------------------- ----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1995 1994 1995 1994
------------ ------------ ------------- -------------
CLASS A
Shares sold 9,001,368 11,274,893 $69,178,564 $95,684,533
Shares issued in
reinvestment of
dividends 2,226,877 2,421,056 17,158,946 20,303,561
Shares issued in
connection with the
acquisition of the
Equitable Government
Securities Fund -0- 698,394 -0- 5,976,599
Shares redeemed (14,571,760) (13,901,306) (112,341,061) (117,389,120)
Net increase(decrease) (3,343,515) 493,037 $(26,003,551) $ 4,575,573

CLASS B
Shares sold 25,073,085 46,811,290 $192,424,585 $398,854,640
Shares issued in
reinvestment of
dividends 2,907,922 3,240,130 22,420,168 27,132,335
Shares issued in
connection with the
acquisition of the
Equitable Government
Securities Fund -0- 2,472,984 -0- 21,318,288
Shares redeemed (27,250,780) (19,937,249) (209,527,642) (166,259,442)
Net increase 730,227 32,587,155 $ 5,317,111 $281,045,821

CLASS C
Shares sold 6,046,572 47,418,974 $ 46,423,819 $407,386,564
Shares issued in
reinvestment of
dividends 836,828 1,327,359 6,463,373 11,125,450
Shares redeemed (13,632,303) (26,983,500) (104,982,827) (226,997,059)
Net increase(decrease) (6,748,903) 21,762,833 $(52,095,635) $191,514,955

ALLIANCE BOND FUND U.S. GOVERNMENT PORTFOLIO
- -------------------------------------------------------------------------------

NOTE F: ILLIQUID SECURITIES

DATE
SECURITY ACQUIRED COST
- -------- -------- -----------
Small Business Administration
BS92-IE (I/O)
9.75%, 4/15/17 FRN 5/07/92 $21,389,656
BS93-2A (I/O)
8.40%, 3/15/18 FRN 1/28/93 15,397,933
BS93-5A (I/O)
7.00%, 6/15/18 FRN 1/26/94 12,481,219
$49,268,808

The securities shown above are illiquid and have been valued at fair value in
accordance with the procedures described in Note A. The value of these
securities at June 30, 1995 aggregated $51,103,654, representing 3.6% of net
assets.

NOTE G: ACQUISITION OF EQUITABLE GOVERNMENT SECURITIES FUND
On August 27, 1993, the Portfolio acquired all the net assets of The Equitable
Government Securities Fund ("Government Securities") pursuant to a plan of
reorganization approved by the Government Securities shareholders on August 20,
1993. The acquisition was accomplished by a tax-free exchange of 3,171,378
shares of the Portfolio for 2,757,070 shares of Government Securities on August
27, 1993. The aggregate net assets of the Portfolio and Government Securities
immediately before the acquisition were $1,349,787,767 and $27,718,855
(including unrealized appreciation of $423,968), respectively. Immediately
after the acquisition, the combined net assets of the Portfolio amounted to
$1,377,506,622.

FINANCIAL HIGHLIGHTS ALLIANCE BOND FUND U.S. GOVERNMENT PORTFOLIO
- -------------------------------------------------------------------------------

SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR

<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------------
YEAR ENDED JUNE 30,
-------------------------------------------------------------
1995 1994 1993 1992 1991
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $7.84 $8.64 $8.34 $8.01 $8.14

INCOME FROM INVESTMENT OPERATIONS
Net investment income .64 .65 .69 .70 .81
Net realized and unrealized
gain (loss)on investments .13 (.80) .29 .35 (.11)
Net increase (decrease) in net asset
value from operations .77 (.15) .98 1.05 .70

LESS: DISTRIBUTIONS
Dividends from net investment income (.65) (.65) (.68) (.72) (.83)
Net asset value, end of year $7.96 $7.84 $8.64 $8.34 $8.01

TOTAL RETURN
Total investment return based on net
asset value (a) 10.37% (1.93)% 12.23% 13.52% 8.97%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of year
(000's omitted) $463,660 $482,595 $527,968 $492,448 $491,910
Ratio of expenses to average net assets 1.01% 1.02% 1.10% 1.12% 1.07%
Ratio of net investment income
to average net assets 8.27% 7.76% 8.04% 8.43% 10.02%
Portfolio turnover rate 190% 188% 386% 418% 402%
</TABLE>

See footnote summary on page 16.

ALLIANCE BOND FUND U.S. GOVERNMENT PORTFOLIO
- -------------------------------------------------------------------------------

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

CLASS B
-------------------------------------------
YEAR ENDED JUNE 30, SEPT. 30,
------------------------------- 1991** TO
1995 1994 1993 JUNE 30,1992
--------- --------- --------- ----------
Net asset value, beginning of period $7.84 $8.64 $8.34 $8.25

INCOME FROM INVESTMENT OPERATIONS
Net investment income .58 .59 .62 .49
Net realized and unrealized
gain (loss) on investments .13 (.80) .30 .09
Net increase (decrease) in net
asset value from operations .71 (.21) .92 .58

LESS: DISTRIBUTIONS
Dividends from net investment income (.59) (.59) (.62) (.49)
Net asset value, end of period $7.96 $7.84 $8.64 $8.34

TOTAL RETURN
Total investment return based
on net asset value (a) 9.52% (2.63)% 11.45% 6.95%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $774,097 $756,282 $552,471 $32,227
Ratio of expenses to
average net assets 1.72% 1.72% 1.81% 1.80%*
Ratio of net investment income
to average net assets 7.57% 7.04% 7.25% 7.40%*
Portfolio turnover rate 190% 188% 386% 418%

See footnote summary on page 16.

FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE BOND FUND U.S. GOVERNMENT PORTFOLIO
- -------------------------------------------------------------------------------

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

CLASS C
----------------------------------
YEAR ENDED JUNE 30, MAY 3,1993**
--------------------- TO
1995 1994 JUNE 30,1993
--------- --------- ----------
Net asset value, beginning of period $7.83 $8.64 $8.56

INCOME FROM INVESTMENT OPERATIONS
Net investment income .58 .59 .10
Net realized and unrealized
gain (loss) on investments .14 (.81) .08
Net increase (decrease) in net asset
value from operations .72 (.22) .18

LESS: DISTRIBUTIONS
Dividends from net investment income (.59) (.59) (.10)
Net asset value, end of period $7.96 $7.83 $8.64

TOTAL RETURN
Total investment return based on net
asset value (a) 9.67% (2.75)% 2.12%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $181,948 $231,859 $67,757
Ratio of expenses to average net assets 1.71% 1.70% 1.80%*
Ratio of net investment income
to average net assets 7.59% 6.97% 6.00%*
Portfolio turnover rate 190% 188% 386%

* Annualized.
** Commencement of distribution.

REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS ALLIANCE BOND FUND U.S. GOVERNMENT PORTFOLIO
- -------------------------------------------------------------------------------

TO THE SHAREHOLDER AND BOARD OF DIRECTORS
ALLIANCE BOND FUND U.S. GOVERNMENT PORTFOLIO

We have audited the accompanying statement of assets and liabilities of
Alliance Bond Fund U.S. Government Portfolio (one of the portfolios comprising
the Alliance Bond Fund, Inc.) including the portfolio of investments, as of
June 30, 1995, and the related statement of operations for the year then ended,
the statement of changes in net assets for each of the two years in the period
then ended, and the financial highlights for each of the periods indicated
therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.

We conducted our audits in accordance with generally accepted auditing
standards. These standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1995, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Alliance Bond Fund U.S. Government Portfolio at June 30, 1995, the results of
its operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended, and the financial highlights for
each of the indicated periods, in conformity with generally accepted accounting
principles.

Ernst & Young LLP
New York, New York
August 11, 1995

<PAGE>

PART C
OTHER INFORMATION

ITEM 24. Financial Statements and Exhibits

(a) FINANCIAL STATEMENTS

Included in each Prospectus:

Financial Highlights

Included in the Statement of Additional
Information:

Portfolio of Investments - June 30, 1995.
- Corporate Bond Portfolio
- U.S. Government Portfolio

Statements of Assets and Liabilities - June
30, 1995.

Statements of Operations - year ended June 30,
1995.

Statements of Changes in Net Assets - years
ended June 30, 1995 and June 30, 1994.

Notes to Financial Statements - June 30, 1995.

Financial Highlights.

Report of Independent Auditors.

Included in Part C of the Registration Statement:

All other schedules are either inapplicable,
or the required information is contained in
the financial statements.

(b) EXHIBITS:

(1)(a) Articles of Incorporation of the
Registrant - Incorporated herein by
reference as Exhibit 1 to Post-Effective
Amendment No. 36 to Registrant's
Registration Statement on Form N-1A,
filed on December 28, 1987 (File Nos. 2-
48227 and 811-2383).

C-1

<PAGE>

(b) Articles Supplementary to the Articles of
Incorporation of the Registrant -
Incorporated herein by reference as
Exhibit 1(b) to Post-Effective Amendment
No. 46 to Registrant's Registration
Statement on Form N-1A, filed on August
29, 1991 (File Nos. 2-48227 and 811-
2383).

(c) Articles Supplementary to the Articles of
Incorporation of the Registrant -
Incorporated herein by reference as
Exhibit 1(c) to Post-Effective Amendment
No. 49 to Registrant's Registration
Statement on Form N-1A, filed on August
31, 1992 (File Nos. 2-48227 and 811-
2383).

(d) Articles of Amendment to the Articles of
Incorporation of the Registrant -
Incorporated herein by reference as
Exhibit 1(d) to Post-Effective Amendment
No. 56 to Registrant's Registration
Statement on Form N-1A, filed on October
31, 1993 (File Nos. 2-48227 and 811-
2383).

(2) By-Laws of the Registrant - Incorporated
herein by reference as Exhibit 2 to
Pre-Effective Amendment No. 36 to
Registrant's Registration Statement on
Form N-1A, filed on December 28, 1987
(File Nos. 2-48227 and 811-2383).

(3) Not applicable.

(4)(a) Certificate for shares of Common Stock of
Registrant's High Yield Portfolio, U.S.
Government Portfolio and Monthly Income
Portfolio - Incorporated herein by
reference as Exhibit 4 to Post-Effective
Amendment No. 37 to Registrant's
Registration Statement on Form N-1A,
filed October 28, 1988 (File Nos. 2-48227
and 811-2383).

(b) Certificate for shares of Common Stock of
Registrant's U.S. Government Portfolio
Class A Common Stock - Incorporated
herein by reference as Exhibit 4(b) to
Post-Effective Amendment No. 46 to

C-2

<PAGE>

Registrant's Registration Statement on
Form N-1A, filed on August 29, 1991 (File
Nos. 2-48227 and 811- 2383).

(c) Certificate for shares of Common Stock of
Registrant's U.S. Government Portfolio
Class B Common Stock - Incorporated
herein by reference as Exhibit 4(c) to
Post-Effective Amendment No.46 to
Registrant's Registration Statement on
Form N-1A, filed on August 29, 1991 (File
Nos. 2-48227 and 811- 2383).

(d) Certificate for Shares of Common Stock of
Registrant's U.S. Government Portfolio
Class C Common Stock - Incorporated
herein by reference as Exhibit 4(d) to
Post-Effective Amendment No. 56 to
Registrant's Registration Statement on
Form N-1A,filed on October 31, 1993 (File
Nos: 2-48227 and 811-2383).

(e) Certificate for Shares of Common Stock of
Registrant's Corporate Bond Portfolio
Class B Common Stock - Incorporated
herein by reference as Exhibit 4(e) to
Post-Effective Amendment No. 56 to
Registrant's Registration Statement on
Form N-1A, filed on October 31, 1993
(File Nos. 2-48227 and 811- 2383).

(f) Certificate for Shares of Common Stock of
Registrant's Corporate Bond Portfolio
Class C Common Stock - Incorporated
herein by reference as Exhibit 4(f) to
Post-Effective Amendment No. 56 to
Registrant's Registration Statement on
Form N-1A, filed on October 31, 1993
(File Nos. 2-48227 and 811- 2383).

(5) Investment Advisory Contract between the
Registrant and Alliance Capital
Management L.P. - Incorporated herein by
reference as Exhibit 5 to Post-Effective
Amendment No. 37 to Registrant's
Registration Statement on Form N-1A,
filed on October 28, 1988 (File Nos. 2-
48227 and 811-2383).

(5)(a) Investment Advisory Contract between the
Registrant and Alliance Capital

C-3

<PAGE>

Management L.P. - Incorporated herein by
reference as Exhibit 5(a) to
Post-Effective Amendment No. 49 to
Registrant's Registration Statement on
Form N-1A, filed on August 31, 1992 (File
Nos. 2-48227 and 811-2383).

(b) Investment Advisory Contract between the
Registrant and Alliance Capital
Management L.P. - Incorporated herein by
reference as Exhibit 5(b) to
Post-Effective Amendment No. 56 to
Registrant's Registration Statement on
Form N-1A, filed on October 31, 1993
(File Nos. 2-48227 and 811-2383).

(6)(a) Distribution Services Agreement between
the Registrant and Alliance Fund
Distributors, Inc. - and 15) Incorporated
herein by reference as Exhibits 6(a) and
15 to Post-Effective Amendment No. 37 to
Registrant's Registration Statement on
Form N-1A, filed on October 28, 1988
(File Nos. 2-48227 and 811-2383).

(b) Amended Distribution Services Agreement
between the Registrant and Alliance Fund
Distributors, Inc. - Incorporated herein
by reference as Exhibit 6(b) to Post-
Effective Amendment No. 46 to
Registrant's Registration Statement on
Form N-1A, filed on August 29, 1991 (File
Nos. 2-48227 and 811-2383).

(c) Distribution Services Agreement between
the Registrant and Alliance Fund
Distributors, Inc. - Incorporated herein
by reference as Exhibit 6(c) to Post-
Effective Amendment No. 52 to
Registrant's Registration Statement on
Form N-1A, filed on March 2, 1993 (File
Nos. 2-48227 and 811-2383).

(d) Distribution Services Agreement between
the Registrant and Alliance Fund
Distributors, Inc. - Incorporated herein
by reference as Exhibit 6(d) to Post-
Effective Amendment No. 56 to
Registrant's Registration Statement on
Form N-1A, filed on October 31, 1993
(File Nos. 2-48227 and 811-2383).

C-4

<PAGE>

(e) Distribution Services Agreement between
the Registrant and Alliance Fund
Distributors, Inc. - Incorporated herein
by reference as Exhibit 6(e) to Post-
Effective Amendment No. 56 to
Registrant's Registration Statement on
Form N-1A, filed on October 31, 1993
(File Nos. 2-48227 and 811-2383).

(f) Selected Dealer Agreement between
Alliance Fund Distributors, Inc. and
selected dealers offering shares of
Registrant - Incorporated herein by
reference as Exhibit 6(b) to
Post-Effective Amendment No. 41 to
Registrant's Registration Statement on
Form N-1A, filed on October 26, 1990
(File Nos. 2-48227 and 811-2383).

(g) Selected Dealer Agreement between
Alliance Fund Distributors, Inc. and
selected dealers offering shares of
Registrant - Incorporated herein by
reference as Exhibit 6(f) to
Post-Effective Amendment No. 52 to
Registrant's Registration Statement on
Form N-1A, filed on March 2, 1993 (File
Nos. 2-48227 and 811-2383).

(h) Selected Agent Agreement between Alliance
Fund Distributors, Inc. and selected
agents making available shares of
Registrant - Incorporated herein by
reference as Exhibit 6(c) to
Post-Effective Amendment No. 41 to
Registrant's Registration Statement on
Form N-1A, filed on October 26, 1990
(File Nos. 2-48227 and 811-2383).

(i) Amended Selected Dealer Agreement between
Alliance Fund Distributors, Inc. and
selected dealers offering shares to
Registrant - Incorporated herein by
reference as Exhibit 6(e) to Post-
Effective Amendment No. 51 to
Registrant's Registration Statement on
Form N-1A, filed on November 5, 1992
(File Nos. 2-48227 and 811-2383).

(j) Amended to Selected Agent Agreement
between Alliance Fund Distributors, Inc.

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and selected agents making available
shares to Registrant - Incorporated
herein by reference as Exhibit 6(f) to
Post-Effective Amendment No. 51 to
Registrant's Registration Statement on
Form N-1A, filed on November 5, 1992
(File Nos. 2-48227 and 811-2383).

(k) Selected Agent Agreement between Alliance
Fund Distributors, Inc. and selected
agents making available shares of
Registrant - Incorporated herein by
reference as Exhibit 6(j) to Post-
Effective Amendment No. 52 to
Registrant's Registration Statement on
Form N-1A, filed on March 2, 1993 (File
Nos. 2-48227 and 811-2383).

(l) Not applicable.

(8) Custodian Contract between the Registrant and
State Street Bank and Trust Company -
Incorporated herein by reference as Exhibit 8
to Post-Effective Amendment No. 37 to
Registrant's Registration Statement on Form
N-1A, filed on October 28, 1988 (File Nos.
2-48227 and 811-2383).

(9) Transfer Agency Agreement between Registrant
and Alliance Fund Services, Inc. -
Incorporated herein by reference as Exhibit 9
to Post-Effective Amendment No. 39 to
Registrant's Registration Statement on Form
N-1A, filed on August 28, 1989 (File Nos.
2-48227 and 811-2383).

(10) Not applicable.

(11) Consent of Independent Auditors - Filed
herewith.

Consent of Morningstar, Inc. - Incorporated
herein by reference as Exhibit 11 to
Post-Effective Amendment No. 49 to
Registrant's Registration Statement on Form
N-1A, filed on August 31, 1992 (File Nos.
2-48227 and 811-2383).

(12) Not applicable.

(13) Not applicable.

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(14) Not applicable.

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

(b) Amended Rule 12b-1 Plan - See Exhibit
6(b) above.

(16) Schedule for computation of each Yield and
Total Return Performance quotation -
Incorporated herein by reference as Exhibit 16
to Post-Effective Amendment No. 37 to
Registrant's Registration Statement on Form
N-1A, filed on October 28, 1988 (File Nos.
2-48227 and 811-2383).

(27) Financial Data Schedule - Filed herewith.

Other Exhibits:
Powers of Attorney of Ruth S. Block, John D.
Carifa, David H. Dievler, James M. Hester,
Clifford L. Michel, Eugene F. O'Neil and
Robert C. White - Incorporated by reference as
"Other Exhibits" to Post-Effective Amendment
No. 37 to Registrant's Registration Statement
on Form N-1A, filed on October 28, 1988 (File
Nos. 2-48227 and 811-2383).

Power of Attorney of James R. Greene -
Incorporated herein by reference as "Other
Exhibits" to Post-Effective Amendment No. 41
to Registrant's Registration Statement on Form
N-1A, filed on October 26, 1990 (File Nos.
2-48227 and 811-2383).

ITEM 25. Persons Controlled by or under Common Control with
Registrant.
None.

ITEM 26. Number of Holders of Securities.

Registrant had, as of October 13, 1995, record
holders of shares of Common Stock as follows:

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Corporate Bond Portfolio:
Class A - 14,475
Class B - 12,711
Class C - 2,065

U.S. Government Portfolio:
Class A - 16,159
Class B - 26,269
Class C - 3,045

ITEM 27. Indemnification

It is the Registrant's policy to indemnify its
directors and officers, employees and other agents
to the maximum extent permitted by Section 2-418 of
the General Corporation Law of the State of
Maryland and as set forth in Article EIGHTH of
Registrant's Articles of Incorporation as set forth
below and Section 10(a) of the Distribution
Services Agreement filed as Exhibit 6 as set forth
below.

The liability of the Registrant's directors and
officers is dealt with in Article SEVENTH, Section
(f) of Registrant's Articles of Incorporation, as
set forth below. The Investment Adviser's
liability for any loss suffered by the Registrant
or its shareholders is set forth in Section 4 of
the Investment Advisory Contract filed as Exhibit 5
as set forth below.

SECTION 2-418 OF THE MARYLAND GENERAL CORPORATION LAW READS
AS FOLLOWS:

"2-418 INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES AND AGENTS.--(a) In this section the
following words have the meaning indicated.

(1) "Directors" means any person who is or
was a director of a corporation and any person who,
while a director of a corporation, is or was
serving at the request of the corporation as a
director, officer, partner, trustee, employee, or
agent of another foreign or domestic corporation,
partnership, joint venture, trust, other
enterprise, or employee benefit plan.

(2) "Corporation" includes any domestic or
foreign predecessor entity of a corporation in a
merger, consolidation, or other transaction in

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which the predecessor's existence ceased upon
consummation of the transaction.

(3) "Expenses" include attorney's fees.

(4) "Official capacity" means the following

(i) When used with respect to a
director, the office of director in the
corporation; and

(ii) When used with respect to a person
other than a director as contemplated in subsection
(j), the elective or appointive office in the
corporation held by the officer, or the employment
or agency relationship undertaken by the employee
or agent in behalf of the corporation.

(iii) "Official capacity" does not
include service for any other foreign or domestic
corporation or any partnership, joint venture,
trust, other enterprise, or employee benefit plan.

(5) "Party" includes a person who was, is, or
is threatened to be made a named defendant or
respondent in a proceeding.

(6) "Proceeding" means any threatened,
pending or completed action, suit or proceeding,
whether civil, criminal, administrative, or
investigative.

(b)(1) A corporation may indemnify any
director made a party to any proceeding by reason
of service in that capacity unless it is
established that:

(i) The act or omission of the director was
material to the cause of action adjudicated in the
proceeding; and

1. Was committed in bad faith; or

2. Was the result of active and deliberate
dishonesty; or

(ii) The director actually received an
improper personal benefit in money, property, or
services; or

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(iii) In the case of any criminal
proceeding, the director had reasonable cause to
believe that the act or omission was unlawful.

(2)(i) Indemnification may be against
judgments, penalties, fines, settlements, and
reasonable expenses actually incurred by the
director in connection with the proceeding.

(ii) However, if the proceeding was one by
or in the right of the corporation, indemnification
may not be made in respect of any proceeding in
which the director shall have been adjudged to be
liable to the corporation.

(3)(i) The termination of any proceeding by
judgment, order or settlement does not create a
presumption that the director did not meet the
requisite standard of conduct set forth in this
subsection.

(ii) The termination of any proceeding by
conviction, or a plea of nolo contendere or its
equivalent, or an entry of an order of probation
prior to judgment, creates a rebuttable presumption
that the director did not meet that standard of
conduct.

(c) A director may not be indemnified
under subsection (b) of this section in respect of
any proceeding charging improper personal benefit
to the director, whether or not involving action in
the director's official capacity, in which the
director was adjudged to be liable on the basis
that personal benefit was improperly received.

(d) Unless limited by the charter:

(1) A director who has been successful,
on the merits or otherwise, in the defense of any
proceeding referred to in subsection (b) of this
section shall be indemnified against reasonable
expenses incurred by the director in connection
with the proceeding.

(2) A court of appropriate jurisdiction
upon application of a director and such notice as
the court shall require, may order indemnification
in the following circumstances:

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(i) If it determines a director is
entitled to reimbursement under paragraph (1) of
this subsection, the court shall order
indemnification, in which case the director shall
be entitled to recover the expenses of securing
such reimbursement; or

(ii) If it determines that the director is
fairly and reasonably entitled to indemnification
in view of all the relevant circumstances, whether
or not the director has met the standards of
conduct set forth in subsection (b) of this section
or has been adjudged liable under the circumstances
described in subsection (c) of this section, the
court may order such indemnification as the court
shall deem proper. However, indemnification with
respect to any proceeding by or in the right of the
corporation or in which liability shall have been
adjudged in the circumstances described in
subsection (c) shall be limited to expenses.

(3) A court of appropriate jurisdiction
may be the same court in which the proceeding
involving the director's liability took place.

(e)(1) Indemnification under subsection (b)
of this section may not be made by the corporation
unless authorized for a specific proceeding after a
determination has been made that indemnification of
the director is permissible in the circumstances
because the director has met the standard of
conduct set forth in subsection (b) of this
section.

(2) Such determination shall be made:

(i) By the board of directors by a
majority vote of a quorum consisting of directors
not, at the time, parties to the proceeding, or, if
such a quorum cannot be obtained, then by a
majority vote of a committee of the board
consisting solely of two or more directors not, at
the time, parties to such proceeding and who were
duly designated to act in the matter by a majority
vote of the full board in which the designated
directors who are parties may participate;

(ii) By special legal counsel selected by
the board or a committee of the board by vote as
set forth in subparagraph (i) of this paragraph,
or, if the requisite quorum of the full board

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<PAGE>

cannot be obtained therefor and the committee
cannot be established, by a majority vote of the
full board in which directors who are parties may
participate; or

(iii) By the stockholders.

(3) Authorization of indemnification and
determination as to reasonableness of expenses
shall be made in the same manner as the
determination that indemnification is permissible.
However, if the determination that indemnification
is permissible is made by special legal counsel,
authorization of indemnification and determination
as to reasonableness of expenses shall be made in
the manner specified in subparagraph (ii) of
paragraph (2) of this subsection for selection of
such counsel.

(4) Shares held by directors who are
parties to the proceeding may not be voted on the
subject matter under this subsection.

(f)(1) Reasonable expenses incurred by a
director who is a party to a proceeding may be paid
or reimbursed by the corporation in advance of the
final disposition of the proceeding, upon receipt
by the corporation of:

(i) A written affirmation by the director
of the director's good faith belief that the
standard of conduct necessary for indemnification
by the corporation as authorized in this section
has been met; and

(ii) A written undertaking by or on behalf
of the director to repay the amount if it shall
ultimately be determined that the standard of
conduct has not been met.

(2) The undertaking required by
subparagraph (ii) of paragraph (1) of this
subsection shall be an unlimited general obligation
of the director but need not be secured and may be
accepted without reference to financial ability to
make the repayment.

(3) Payments under this subsection shall
be made as provided by the charter, bylaws, or
contract or as specified in subsection (e) of this
section.

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<PAGE>

(g) The indemnification and advancement
of expenses provided or authorized by this section
may not be deemed exclusive of any other rights, by
indemnification or otherwise, to which a director
may be entitled under the charter, the bylaws, a
resolution of stockholders or directors, an
agreement or otherwise, both as to action in an
official capacity and as to action in another
capacity while holding such office.

(h) This section does not limit the
corporation's power to pay or reimburse expenses
incurred by a director in connection with an
appearance as a witness in a proceeding at a time
when the director has not been made a named
defendant or respondent in the proceeding.

(i) For purposes of this section:

(1) The corporation shall be deemed to
have requested a director to serve an employee
benefit plan where the performance of the
director's duties to the corporation also imposes
duties on, or otherwise involves services by, the
director to the plan or participants or
beneficiaries of the plan:

(2) Excise taxes assessed on a director
with respect to an employee benefit plan pursuant
to applicable law shall be deemed fines; and

(3) Action taken or omitted by the
director with respect to an employee benefit plan
in the performance of the director's duties for a
purpose reasonably believed by the director to be
in the interest of the participants and
beneficiaries of the plan shall be deemed to be for
a purpose which is not opposed to the best
interests of the corporation.

(j) Unless limited by the charter:

(1) An officer of the corporation shall
be indemnified as and to the extent provided in
subsection (d) of this section for a director and
shall be entitled, to the same extent as a
director, to seek indemnification pursuant to the
provisions of subsection (d);

(2) A corporation may indemnify and
advance expenses to an officer, employee, or agent

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<PAGE>

of the corporation to the same extent that it may
indemnify directors under this section; and

(3) A corporation, in addition, may
indemnify and advance expenses to an officer,
employee, or agent who is not a director to such
further extent, consistent with law, as may be
provided by its charter, bylaws, general or
specific action of its board of directors or
contract.

(k)(1) A corporation may purchase and
maintain insurance on behalf of any person who is
or was a director, officer, employee, or agent of
the corporation, or who, while a director, officer,
employee, or agent of the corporation, is or was
serving at the request, of the corporation as a
director, officer, partner, trustee, employee, or
agent of another foreign or domestic corporation,
partnership, joint venture, trust, other
enterprise, or employee benefit plan against any
liability asserted against and incurred by such
person in any such capacity or arising out of such
person's position, whether or not the corporation
would have the power to indemnify against liability
under the provisions of this section.

(2) A corporation may provide similar
protection, including a trust fund, letter of
credit, or surety bond, not inconsistent with this
section.

(3) The insurance or similar protection
may be provided by a subsidiary or an affiliate of
the corporation.

(l) Any indemnification of, or advance of
expenses to, a director in accordance with this
section, if arising out of a proceeding by or in
the right of the corporation, shall be reported in
writing to the stockholders with the notice of the
next stockholders' meeting or prior to the
meeting."

ARTICLE EIGHTH OF THE REGISTRANT'S ARTICLES OF
INCORPORATION READS AS FOLLOWS:

EIGHTH: To the maximum extent permitted by
the General Corporation Law of the State of
Maryland as from time to time amended, the
Corporation shall indemnify its currently acting

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<PAGE>

and its former directors and officers and those
persons who, at the request of the Corporation,
serve or have served another corporation,
partnership, joint venture, trust or other
enterprise in one or more of such capacities.

Section 10(a) of the Distribution Services
Agreement reads as follows:

Section 10. Indemnification.

(a) The Fund agrees to indemnify, defend and
hold the Underwriter, and any person who control's
the Underwriter within the meaning of Section 15 of
the Securities Act, free and harmless form and
against any and all claims, demands, liabilities
and expenses (including the cost of investigating
or defending such claims, demands or liabilities
and any counsel fees incurred in connection
therewith) which the Underwriter or any such
controlling person may incur, under the Securities
Act, or under common law or otherwise, arising out
of or based upon any alleged untrue statements of a
material fact contained in the Fund's Registration
Statement or Prospectus or Statement of Additional
Information in effect from time to time under the
Securities Act or arising out of or based upon any
alleged omission to state a material fact required
to be stated in either thereof or necessary to make
the statements in either thereof not misleading;
provided, however, that in no event shall anything
therein contained by so construed as to protect the
Underwriter against any liability to the Fund or
its security holders to which the Underwriter would
otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the
performance of its duties, or by reason of the
Underwriter's reckless disregard of its obligations
and duties under this agreement. The Fund's
agreement to indemnify the Underwriter or any such
controlling person, such notification to be given
by letter or by telegram addressed to the Fund at
its principal office in New York, New York, and
sent to the Fund by the person against whom such
action is brought within ten days after the summons
or other first legal process shall have been
served. The failure so to notify the Fund of the
commencement of any such action shall not relieve
the Fund from any liability which it may have to
the person against whom such action is brought by
reason of any such alleged untrue statement or

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<PAGE>

omission otherwise than on account of the indemnity
agreement contained in this Section 10. The Fund
will be entitled to assume the defense of any such
suit brought to enforce any such claim, and to
retain counsel of good standing chosen by the Fund
and approved by the Underwriter. In the event the
Fund does elect to assume the defense of any such
suit and retain counsel of good standing approved
by the Underwriter, the defendant or defendants in
such suit shall bear the fees and expenses of any
additional counsel retained by any of them; but in
case the Fund does not elect to assume the defense
of any such suit, or in case the Underwriter does
not approve of counsel chosen by the Fund, the Fund
will reimburse the Underwriter or the controlling
person or persons named as defendant or defendants
in such suit, for the fees and expenses of any
counsel retained by the Underwriter or such
persons. The indemnification agreement contained
in this Section 10 shall remain operative and in
full force and effect regardless of any
investigation made by or on behalf of the
Underwriter or any controlling person and shall
survive the sale of any of the Fund's shares made
pursuant to subscriptions obtained by the
Underwriter. This agreement of indemnity will
inure exclusively to the benefit of the
Underwriter, to the benefit of its successors and
assigns, and to the benefit of any controlling
persons and their successors and assigns. The Fund
agrees promptly to notify the Underwriter of the
commencement of any litigation or proceeding
against the Fund in connection with the issue and
sale of any of its shares."

Article SEVENTH, Section (f) of the Registrant's
Articles of Incorporation reads as follows:

(f) Specifically and without limitation of
subsection (e) of this Article Seventh but subject
to the exception therein prescribed, the
Corporation may enter into management or advisory,
underwriting, distribution and administration
contracts, and may otherwise do business, with
Alliance Capital Management Corporation, and any
parent, subsidiary or affiliate of such firm or any
affiliate of any such affiliate, or the
stockholders, directors, officers and employees
thereof, and may deal freely with one another
notwithstanding that the Board of Directors of the
Corporation may be composed in part of directors,

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<PAGE>

officers or employees of such firm and/or its
parents, subsidiaries or affiliates shall be
invalidated or in any way affected thereby, nor
shall any director or officer of the Corporation be
liable to the Corporation or to any stockholder or
creditor thereof or to any person for any loss
incurred by it or him under or by reason of such
contract or transaction; provided that nothing
herein shall protect any director or officer of the
Corporation against any liability to the
Corporation or to its security holders to which he
would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the
conduct of his office; and provided always that
such contract or transaction shall have been on
terms that were not unfair to the Corporation at
the time at which it was entered into."

Section 4 of the Investment Advisory
Contract reads as follows:

"4. We shall expect of you, and you will give us
the benefit of, your best judgment and efforts in
rendering these services to us, and we agree as an
inducement to your undertaking these services that
you shall not be liable hereunder for any mistake
of judgment or in any event whatsoever, except for
lack of good faith, provided that nothing herein
shall be deemed to protect, or purport to protect,
you against any liability to us or to our security
holders to which you would otherwise be subject by
reason of willful misfeasance, bad faith or gross
negligence in the performance of your duties
hereunder, or by reason of your reckless disregard
of your obligations and duties hereunder."

Insofar as indemnification for liabilities arising
under the Securities Act of 1933 (the "Securities
Act") may be permitted to directors, officers and
controlling persons of the Registrant pursuant to
the foregoing provisions, or otherwise, the
Registrant has been advised that, in the opinion of
the Securities and Exchange Commission, such
indemnification is against public policy as
expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for
indemnification against such liabilities (other
than the payment by the Registrant of expenses
incurred or paid by a director, officer or
controlling person of the Registrant in the

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<PAGE>

successful defense of any action, suit or
proceeding) is asserted by such director, officer
of controlling person in connection with the
securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question of
whether such indemnification by it is against
public policy as expressed in the Securities Act
and will be governed by the final adjudication of
such issue.

In accordance with Release No. IC-11330 (September
2, 1980), the Registrant will indemnify its
directors, officers, investment manager and
principal underwriters only if (1) a final decision
on the merits was issued by the court or other body
before whom the proceeding was brought that the
person to be indemnified (the "indemnitee") was not
liable by reason or willful misfeasance, bad faith,
gross negligence or reckless disregard of the
duties involved in the conduct of his office
("disabling conduct") or (2) a reasonable
determination is made, based upon a review of the
facts, that the indemnitee was not liable by reason
of disabling conduct, by (a) the vote of a majority
of a quorum of the directors who are neither
"interested persons" of the Registrant as defined
in section 2(a)(19) of the Investment Company Act
of 1940 nor parties to the proceeding
("disinterested, non-party directors"), or (b) an
independent legal counsel in a written opinion.
The Registrant will advance attorneys fees or other
expenses incurred by its directors, officers,
investment adviser or principal underwriters in
defending a proceeding, upon the undertaking by or
on behalf of the indemnitee to repay the advance
unless it is ultimately determined that he is
entitled to indemnification and, as a condition to
the advance, (1) the indemnitee shall provide a
security for his undertaking, (2) the Registrant
shall be insured against losses arising by reason
of any lawful advances, or (3) a majority of a
quorum of disinterested, non-party directors of the
Registrant, or an independent legal counsel in a
written opinion, shall determine, based on a review
of readily available facts (as opposed to a full
trial-type inquiry), that there is reason to
believe that the indemnitee ultimately will be
found entitled to indemnification.

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<PAGE>

The Registrant participates in a joint directors
and officers liability insurance policy issued by
the ICI Mutual Insurance Company. Coverage under
this policy has been extended to directors,
trustees and officers of the investment companies
managed by Alliance Capital Management L.P. Under
this policy, outside trustees and directors would
be covered up to the limits specified for any claim
against them for acts committed in their capacities
as trustee or director. A pro rata share of the
premium for this coverage is charged to each
investment company and to the Investment Adviser.

ITEM 28. Business and Other Connections of Investment
Adviser.

The descriptions of Alliance Capital Management
L.P. under the captions "Management of the Fund" in
the Prospectuses and in the Statements of
Additional Information constituting Parts A and B,
respectively, of this Registration Statement are
incorporated by reference herein.

The information as to the directors and executive
officers of Alliance Capital Management
Corporation, the general partner of Alliance
Capital Management L.P., set forth in Alliance
Capital Management L.P.'s Form ADV filed with the
Securities and Exchange Commission on April 21,
1988 (File No. 801-32361) and amended through the
date hereof, is incorporated by reference.

ITEM 29. Principal Underwriters.

(a) Alliance Fund Distributors, Inc., the
Registrant's Principal Underwriter in
connection with the sale of shares of the
Registrant. Alliance Fund Distributors, Inc.
also acts as Principal Underwriter or
Distributor for the following investment
companies:

ACM Institutional Reserves, Inc.
AFD Exchange Reserves
Alliance All-Asia Investment Fund, Inc.
Alliance Balanced Shares, Inc.
Alliance Capital Reserves
Alliance Counterpoint Fund
Alliance Developing Markets Fund, Inc.
Alliance Global Dollar Government Fund, Inc.
Alliance Global Small Cap Fund, Inc.

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<PAGE>

Alliance Government Reserves
Alliance Growth and Income Fund, Inc.
Alliance Income Builder Fund, Inc.
Alliance International Fund
Alliance Money Market Fund
Alliance Mortgage Securities Income Fund, Inc.
Alliance Mortgage Strategy Trust, Inc.
Alliance Multi-Market Strategy Trust, Inc.
Alliance Municipal Income Fund, Inc.
Alliance Municipal Income Fund II
Alliance Municipal Trust
Alliance New Europe Fund, Inc.
Alliance North American Government Income
Trust, Inc.
Alliance Premier Growth Fund, Inc.
Alliance Quasar Fund, Inc.
Alliance Short-Term Multi-Market Trust, Inc.
Alliance Technology Fund, Inc.
Alliance Utility Income Fund, Inc.
Alliance Variable Products Series Fund, Inc.
Alliance World Income Trust, Inc.
Alliance Worldwide Privatization Fund, Inc.
Fiduciary Management Associates
The Alliance Fund, Inc.
The Alliance Portfolios

(b) The following are the Directors and Officers of
Alliance Fund Distributors, Inc., the principal
place of business of which is 1345 Avenue of the
Americas, New York, New York, 10105.

POSITIONS AND POSITIONS AND
OFFICES WITH OFFICES
NAME UNDERWRITER WITH REGISTRANT

Michael J. Laughlin Chairman

Robert L. Errico President

Kimberly A. Baumgardner Senior Vice President

Edmund P. Bergan, Jr. Senior Vice President, Secretary
General Counsel
and Secretary

Daniel J. Dart Senior Vice President

Byron M. Davis Senior Vice President

Geoffrey L. Hyde Senior Vice President
Barbara J. Krumsiek Senior Vice President

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<PAGE>

Stephen R. Laut Senior Vice President

Dusty W. Paschall Senior Vice President

Antonios G. Poleondakis Senior Vice President

Gregory K. Shannahan Senior Vice President

Joseph F. Sumanski Senior Vice President

James P. Syrett Senior Vice President

Peter J. Szabo Senior Vice President

Richard A. Winge Senior Vice President

Benji A. Baer Vice President

Warren W. Babcock III Vice President

Kenneth F. Barkoff Vice President

William P. Beanblossom Vice President

Jack C. Bixler Vice President

Casimir F. Bolanowski Vice President

Kevin T. Cannon Vice President

Leo H. Cook Vice President

Richard W. Dabney Vice President

Mark J. Dunbar Vice President

Linda A. Finnerty Vice President

William C. Fisher Vice President

Robert M. Frank Vice President

Gerard J. Friscia Vice President &
Controller

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<PAGE>

POSITIONS AND POSITIONS AND
OFFICES WITH OFFICES
NAME UNDERWRITER WITH REGISTRANT

Andrew L. Gangolf Vice President and Assistant
Assistant General Secretary
Counsel

Mark D. Gersten Vice President Treasurer and
Chief Financial
Officer
Joseph W. Gibson Vice President

Troy L. Glawe Vice President

Herbert H. Goldman Vice President

James E. Gunter Vice President

Alan Halfenger Vice President

George R. Hrabovsky Vice President

Valerie J. Hugo Vice President

Robert H. Joseph, Jr. Vice President
and Treasurer

Richard D. Keppler Vice President

Sheila F. Lamb Vice President

Donna M. Lamback Vice President

Thomas Leavitt, III Vice President

James M. Liptrot Vice President

Christopher J. MacDonald Vice President

Mark R. Manley Vice President, Counsel
and Assistant Secretary

Daniel D. McGinley Vice President

Maura A. McGrath Vice President

Matthew P. Mintzer Vice President

Nicole Nolan-Koester Vice President

C-22

<PAGE>

Robert T. Pigozzi Vice President

Robert E. Powers Vice President

Domenick Pugliese Vice President and Assistant
Associate General Secretary
Counsel

Bruce W. Reitz Vice President

Dennis A. Sanford Vice President

Raymond S. Sclafani Vice President

J. William Strott, Jr. Vice President

Richard E. Tambourine Vice President

Nicholas K. Willett Vice President

Neil S. Wood Vice President

Emilie D. Wrapp Vice President and Assistant
Special Counsel Secretary

Maria L. Carreras Assistant Vice President

Sarah A. Chodera Assistant Vice President

John W. Cronin Assistant Vice President

Sohaila S. Farsheed Assistant Vice President

Leon M. Fern Assistant Vice President

William B. Hanigan Assistant Vice President

Vicky M. Hayes Assistant Vice President

Daniel M. Hazard Assistant Vice President

John C. Hershock Assistant Vice President

James J. Hill Assistant Vice President

Kalen H. Holliday Assistant Vice President

Thomas K. Intoccia Assistant Vice President

Edward W. Kelly Assistant Vice President

C-23

<PAGE>

Patrick Look Assistant Vice President &
Assistant Treasurer

Michael F. Mahoney Assistant Vice President

Shawn P. McClain Assistant Vice President

Thomas F. Monnerat Assistant Vice President

Joanna D. Murray Assistant Vice President

Jeanette M. Nardella Assistant Vice President

Camilo R. Pedraza Assistant Vice President

Carol H. Rappa Assistant Vice President

Karen C. Satterberg Assistant Vice President

Robert M. Smith Assistant Vice President

Joseph T. Tocyloski Assistant Vice President

ITEM 30. Location of Accounts and Records.

The majority of the accounts, books and other documents
required to be maintained by Section 31(a) of the Investment
Company Act of 1940 and the Rules thereunder are maintained as
follows: journals, ledgers, securities records and other original
records are maintained principally at the offices of Alliance
Fund Services, Inc., 500 Plaza Drive, Secaucus, New Jersey 07094,
and at the offices of State Street Bank and Trust Company, the
Registrant's Custodian, 225 Franklin Street, Boston,
Massachusetts 02110. All other records so required to be
maintained are maintained at the offices of Alliance Capital
Management L.P., 1345 Avenue of the Americas, New York, New York
10105.

ITEM 31. Management Services.

Not applicable.

ITEM 32. Undertakings

The Registrant undertakes to furnish each person to whom
a prospectus is delivered with a copy of the Registrant's latest
report to shareholders, upon request and without charge.

The Registrant undertakes to provide assistance to
shareholders in communications concerning the removal of any

C-24

<PAGE>

Director of the Fund in accordance with Section 16 of the
Investment Company Act of 1940.

C-25

<PAGE>

SIGNATURE

Pursuant to the requirements of the Securities Act of
1933, as amended, and the Investment Company Act of 1940, as
amended, the Registrant certifies that it meets all requirements
for effectiveness of this Amendment to its Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has
duly caused this Amendment to its Registration Statement to be
signed on its behalf by the undersigned, thereunto duly
authorized, in the City and State of New York, on the 30th day of
October, 1995.

ALLIANCE BOND FUND, INC.

by /s/ John D. Carifa Chairman

Pursuant to the requirements of the Securities Act of 1933
this Amendment to the Registration Statement has been signed
below by the following persons in the capacities and on the dates
indicated:

Signature Title Date

1) Principal
Executive Officer

/s/ John D. Carifa Chairman and
President October 30, 1995

Principal Financial
and Accounting Officer

/s/ Mark D. Gersten Treasurer and Chief
Financial Officer October 30, 1995

3) All of the Directors

Ruth Block
John D. Carifa
David H. Dievler
James R. Greene
James M. Hester
Clifford L. Michel
Eugene F. O'Neil
Robert C. White

by /s/Edmund P. Bergan, Jr. October 30, 1995
(Attorney-in-fact)

C-26

<PAGE>

INDEX TO EXHIBITS

PAGE

11 Consent of Independent Auditors

27 Financial Data Schedule

C-27
00250123.AH5

<PAGE>

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the captions
"Financial Highlights", "Shareholder Services - Statements and
Reports" and "General Information - Independent Auditors" and to
the use of our reports dated August 11, 1995, in this
Registration Statement (Form N-1A 2-48227) of Alliance Bond Fund,
Inc.

/s/ Ernst & Young LLP

ERNST & YOUNG LLP

New York, New York
October 25, 1995

00250123.AH4

WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.

<PAGE>

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<NAME> ALLIANCE BOND FUND, INC.
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<PAGE>

<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2989872
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<GROSS-EXPENSE> 7796259
<AVERAGE-NET-ASSETS> 478405880
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00250123.AH9

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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.

<PAGE>

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<CIK> 0000808263
<NAME> ALLIANCE BOND FUND, INC.
<SERIES>
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<PAGE>

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00250123.ah1

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