<PAGE>
As filed with the Securities and Exchange
Commission on April 23, 1996
File No.033-07812
811-04791
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF l933
Pre-Effective Amendment No. X
Post-Effective Amendment No. 21 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF l940
Amendment No. 22 X
_________________________________________
ALLIANCE MUNICIPAL INCOME 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)
immediately upon filing pursuant to paragraph (b)
on (date) pursuant to paragraph (b)
X 60 days after filing pursuant to paragraph (a)
on (date) pursuant to paragraph (a) of rule 485.
75 days after filing pursuant to paragraph (a)(2)
on (date) pursuant to paragraph (a)(2) of rule 485.
<PAGE>
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. Registrants filed a notice pursuant to such Rule
for its fiscal year ending October 31, 1995 on December 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 Portfolios at a
Glance
Item 3. Condensed Financial Information.... Expense Information
Item 4. General Description of Registrant.. Description of the
Portfolios
Item 5. Management of the Fund............. Management of the
Funds; General
Information
Item 6. Capital Stock and Other
Securities......................... General
Information;
Dividends,
Distributions and
Federal Income
Taxes
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
PART B Location in Statement
of Additional Information
(Caption)
Item 10. Cover Page......................... Cover Page
Item 11. Table of Contents.................. Cover Page
Item 12. General Information................ Management of the
Fund; General
Information
<PAGE>
Item 13. Investment Objectives and
Policies........................... Investment Policies
and Restrictions
Item 14. Management of the Registrant....... Management of the
Fund
Item 15. Control Persons and Principal
Holders of Securities.............. Management of the
Fund
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
Item 19. Purchase, Redemption and Pricing
of Securities Being Offered........ Purchase,
Redemption and
Repurchase of
Shares; Net Asset
Value
Item 20. Tax Status......................... Dividends,
Distributions and
Federal Income
Taxes
Item 21. Underwriters....................... General Information
Item 22. Calculation of Performance Data.... General Information
Item 23. Financial Statements............... Financial
Statements; Report
of Independent
Auditors
<PAGE>
<PAGE>
ALLIANCE MUNICIPAL
- --------------------------------------------------------------------------------
INCOME PORTFOLIOS
- --------------------------------------------------------------------------------
P.O. Box 1520, Secaucus, New Jersey 07096-1520
Toll Free (800) 221-5672
For Literature: Toll Free (800) 227-4618
Prospectus and Application
(Advisor Class)
June [ ], 1996
National Portfolio Michigan Portfolio
Insured National Portfolio Minnesota Portfolio
Arizona Portfolio New Jersey Portfolio
California Portfolio New York Portfolio
Insured California Portfolio Ohio Portfolio
Florida Portfolio Pennsylvania Portfolio
Massachusetts Portfolio Virginia Portfolio
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Table of Contents Page
<S> <C>
The Portfolios At A Glance ............................................. 2
Expense Information .................................................... 3
Financial Highlights ................................................... 4
Description of the Portfolios .......................................... 5
Investment Objective ................................................ 5
How the Portfolios Pursue Their Objective ........................... 5
Additional Investment Practices ..................................... 8
Certain Fundamental Investment Policies ............................. 13
Risk Considerations ................................................. 13
Purchase and Sale of Shares ............................................ 14
Management of the Funds ................................................ 16
Dividends, Distributions and Taxes ..................................... 16
General Information .................................................... 19
</TABLE>
- --------------------------------------------------------------------------------
Adviser
Alliance Capital Management L.P.
1345 Avenue Of The Americas
New York, New York 10105
The fourteen Alliance Municipal Income Portfolios, by investing principally in
high-yielding, predominantly medium-quality municipal securities, seek to
provide their shareholders with the highest level of income exempt from Federal
and state tax that is available without assuming undue risk. These securities
generally offer current yields above those of higher quality municipal
obligations.
Each Portfolio is a series of Alliance Municipal Income Fund, Inc. or Alliance
Municipal Income Fund II (each a "Fund"), which are open-end management
investment companies. 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 which provides further
information regarding certain matters discussed in this Prospectus and other
matters which may be of interest to some investors has been filed with the
Securities and Exchange Commission and is incorporated herein by reference. For
a free copy, write Alliance Fund Services, Inc. at the indicated address or call
the "For Literature" telephone number shown above.
This Prospectus offers the Advisor Class shares of each Portfolio which may be
purchased at net asset value without any initial or contingent deferred sales
charges and without ongoing distribution expenses. Advisor Class shares are
offered solely to (i) investors participating in fee-based programs meeting
certain standards established by Alliance Fund Distributors, Inc., each Fund's
principal underwriter, and (ii) participants in self-directed defined
contribution employee benefit plans (e.g., 401(k) plans) that meet certain
minimum standards. See "Purchase and Sale of Shares."
An investment in these securities is not a deposit or obligation of, or
guaranteed or endorsed by, any bank and is not federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board or any other agency.
Investors are advised to read this Prospectus carefully and to retain it for
future reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Alliance(R)
Mutual funds without the Mystery(SM)
(R)/SM These are registered marks used under licenses from the owner, Alliance
Capital Management L.P.
<PAGE>
The Portfolios At A Glance
The following summary is qualified in its entirety by the more detailed
information contained in this Prospectus.
- --------------------------------------------------------------------------------
ALLIANCE MUNICIPAL
INCOME PORTFOLIOS
National Portfolio
Insured National Portfolio
Arizona Portfolio
California Portfolio
Insured California Portfolio
Florida Portfolio
Massachusetts Portfolio
Michigan Portfolio
Minnesota Portfolio
New Jersey Portfolio
New York Portfolio
Ohio Portfolio
Pennsylvania Portfolio
Virginia Portfolio
- --------------------------------------------------------------------------------
The Portfolios Seek...
High current tax-free income.
The National Portfolios Invest Principally in...
Diversified portfolios of medium-quality and investment grade municipal
securities.
The State Portfolios Invest Principally in...
Non-diversified portfolios of medium-quality and investment grade municipal
securities.
The Funds' Investment Manager 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 107 mutual funds. Since 1971, Alliance has earned
a reputation as a leader in the investment world with over $156 billion in
assets under management as of March 1, 1996. Alliance provides investment
management services to 34 of the FORTUNE 100 companies.
The Type Of Investor Who May Want To Invest In These Portfolios Is...
An investor who wants tax-free income or is interested in the advantage of
tax-free investing. An investment in one of the Portfolios may soften the "tax
bite" because the income an investor earns is tax-free. Of course, bond prices
and yields will fluctuate with market conditions, so that your shares, when
redeemed, may be worth more or less than their original cost.
A Word About Risk...
The prices of the shares of the Alliance Municipal Income Portfolios 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. While the Portfolios invest principally in bonds and
other fixed-income securities, in order to achieve their investment objectives,
the Portfolios may at times use certain types of derivative instruments, such as
options, futures, forwards and swaps. These 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 Portfolios--Additional Investment Practices" and "--Risk
Considerations."
Getting Started...
Shares of the Portfolios are available through your financial representative.
Each Portfolio offers multiple classes of shares, of which only the Advisor
Class is offered by this Prospectus. Advisor Class shares may be purchased at
net asset value without any initial or contingent deferred sales charges and
without distribution expenses. Advisor Class shares may be purchased solely by
investors (i) through accounts established under a fee-based program, sponsored
and maintained by a registered broker-dealer or other financial intermediary and
approved by Alliance Fund Distributors, Inc., each Fund's principal underwriter,
pursuant to which each investor pays an asset-based fee at an annual rate of at
least .50% of the assets in the investor's account, to the broker-dealer or
financial intermediary, or its affiliate or agent, for investment advisory or
administrative services, or (ii) through a self-directed defined contribution
employee benefit plan (e.g., a 401(k) plan) that has at least 1,000 participants
or $25 million in assets. Shares can be purchased for a minimum initial
investment of $250, and subsequent investments can be made for as little as $50.
Fee-based programs through which Advisor Class shares may be purchased may
impose different requirements with respect to minimum initial and subsequent
investment levels than described above. For detailed information about
purchasing and selling shares, see "Purchase and Sale of Shares." Be sure to ask
your financial representative about:
- --------------------------------------------------------------------------------
AUTOMATIC REINVESTMENT
- --------------------------------------------------------------------------------
AUTOMATIC INVESTMENT PROGRAM
- --------------------------------------------------------------------------------
SHAREHOLDER COMMUNICATIONS
- --------------------------------------------------------------------------------
DIVIDEND DIRECTION PLANS
- --------------------------------------------------------------------------------
AUTO EXCHANGE
- --------------------------------------------------------------------------------
SYSTEMATIC WITHDRAWALS
- --------------------------------------------------------------------------------
CHECKWRITING
- --------------------------------------------------------------------------------
TELEPHONE TRANSACTIONS
- --------------------------------------------------------------------------------
24 HOUR INFORMATION
- --------------------------------------------------------------------------------
Alliance(R)
Mutual funds without the Mystery(SM)
(R)/SM These are registered marks used under licenses from the owner, Alliance
Capital Management L.P.
2
<PAGE>
- --------------------------------------------------------------------------------
EXPENSE INFORMATION
- --------------------------------------------------------------------------------
Shareholder Transaction Expenses are one of several factors to consider when you
invest in a Portfolio. The following table summarizes your maximum transaction
costs from investing in the Advisor Class shares of each Portfolio and annual
expenses for Advisor Class shares of each Portfolio. For each Portfolio, the
"Examples" to the right of the table below show the cumulative expenses
attributable to a hypothetical $1,000 investment in Advisor Class shares for the
periods specified.
<TABLE>
<CAPTION>
Advisor Class Shares
--------------------
<S> <C>
Maximum sales charge imposed on purchases ............. None
Sales charge imposed on dividend reinvestments ........ None
Deferred sales charge ................................. None
Exchange fee .......................................... None
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Operating Expenses Examples
- ---------------------------------------------------------- -----------------------------------------
National Portfolio Advisor Class Advisor Class
------------- -------------
<S> <C> <C> <C>
Management fees (after waiver) .24% After 1 year $ 4
Other expenses (a) .17% After 3 years $13
---
Total Portfolio
Operating expenses (b) .41%
===
Insured National Portfolio Advisor Class Advisor Class
------------- -------------
Management fees (after waiver) .49% After 1 year $ 7
Other expenses (a) .22% After 3 years $23
---
Total Portfolio
Operating expenses (b) .71%
===
Arizona Portfolio Advisor Class Advisor Class
------------- -------------
Management fees (after waiver) .00% After 1 year $ 5
Other expenses (after After 3 years $15
reimbursement) (a) .48%
---
Total Portfolio
Operating expenses (b) .48%
===
California Portfolio Advisor Class Advisor Class
------------- -------------
Management fees (after waiver) .32% After 1 year $ 5
Other expenses (a) .12% After 3 years $14
---
Total Portfolio
Operating expenses (b) .44%
===
Insured California Portfolio Advisor Class Advisor Class
------------- -------------
Management fees .55% After 1 year $ 8
Other expenses (a) .24% After 3 years $25
---
Total Portfolio
Operating expenses (b) .79%
===
Florida Portfolio Advisor Class Advisor Class
------------- -------------
Management fees (after waiver) .14% After 1 year $ 4
Other expenses (a) .29% After 3 years $14
---
Total Portfolio
Operating expenses (b) .43%
===
</TABLE>
- --------------------------------------------------------------------------------
Please refer to the footnotes on page [ ] and the discussion following these
tables on page [ ].
3
<PAGE>
<TABLE>
<CAPTION>
Operating Expenses Examples
- ---------------------------------------------------------- -----------------------------------------
<S> <C> <C> <C>
Massachusetts Portfolio Advisor Class Advisor Class
------------- -------------
Management fees (after waiver) .00% After 1 year $ 3
Other expenses (after After 3 years $10
reimbursement (a) .30%
---
Total Portfolio
Operating expenses (b) .30%
===
Michigan Portfolio Advisor Class Advisor Class
------------- -------------
Management fees (after waiver) .00% After 1 year $ 7
Other expenses (after After 3 years $21
reimbursement (a) .66%
---
Total Portfolio
Operating expenses (b) .66%
===
Minnesota Portfolio Advisor Class Advisor Class
------------- -------------
Management fees (after waiver) .00% After 1 year $ 4
Other expenses (after After 3 years $13
reimbursement (a) .41%
---
Total Portfolio
Operating expenses (b) .41%
===
New Jersey Portfolio Advisor Class Advisor Class
------------- -------------
Management fees (after waiver) .20% After 1 year $ 5
Other expenses (a) .32% After 3 years $17
---
Total Portfolio
Operating expenses .52%
===
New York Portfolio Advisor Class Advisor Class
------------- -------------
Management fees (after waiver) .25% After 1 year $ 5
Other expenses (a) .20% After 3 years $14
---
Total Portfolio
Operating expenses (b) .45%
===
Ohio Portfolio Advisor Class Advisor Class
------------- -------------
Management fees (after waiver) .00% After 1 year $ 5
Other expenses (a) .45% After 3 years $14
---
Total Portfolio
Operating expenses (b) .45%
===
Pennsylvania Portfolio Advisor Class Advisor Class
------------- -------------
Management fees (after waiver) .30% After 1 year $ 7
Other expenses (a) .40% After 3 years $22
---
Total Portfolio
Operating expenses (b) .70%
===
Virginia Portfolio Advisor Class Advisor Class
------------- -------------
Management fees (after waiver) .00% After 1 year $ 4
Other expenses (after After 3 years $12
reimbursement) (a) .37%
---
Total Portfolio
Operating expenses (b) .37%
===
</TABLE>
- --------------------------------------------------------------------------------
(a) These expenses include a transfer agency fee payable to Alliance Fund
Services, Inc., an affiliate of Alliance, based on a fixed dollar amount
charged to the Portfolio for each shareholder's account.
(b) Net of any voluntary fee waiver and expense reimbursement.
4
<PAGE>
The purpose of the foregoing table is to assist the investor in understanding
the various costs and expenses that an investor in a Portfolio will bear
directly or indirectly. The examples do not reflect any charges or expenses
imposed by your financial representative or your employee benefit plan. The
management fees listed in the above tables are net of voluntary fee waivers and
total expenses are, for certain funds, net of expense reimbursements. Absent
such waivers and reimbursements, (i) the management fees for the National,
Insured National, California and New York Portfolios would have been .625%,
.604%, .625% and .625% of daily average net assets, respectively, and total
portfolio operating expenses would have been .79%, .82%, .74%, .79% and .82% of
average daily net assets, respectively, (ii) the management fees for the
Arizona, Florida, Massachusetts, Michigan, Minnesota, New Jersey, Ohio,
Pennsylvania and Virginia Portfolios would have been .625% of daily average net
assets for each Portfolio, and total operating expenses would have been 4.04%,
1.04%, 3.09%, 2.62%, 2.00%, 1.06%, 1.25%, 1.18% and 6.10% of average daily net
assets, respectively. "Other Expenses" are based on estimated amounts for each
Portfolio's current fiscal year. 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 future expenses; actual expenses may be greater or
less than those shown.
5
<PAGE>
- --------------------------------------------------------------------------------
DESCRIPTION OF THE PORTFOLIOS
- --------------------------------------------------------------------------------
Each Portfolio is a separate pool of assets constituting, in effect, a separate
fund. Except as otherwise indicated, the Portfolios' investment policies are not
"fundamental policies" and may, therefore, be changed without a shareholder
vote. However, no Portfolio will change its investment policies without
contemporaneous written notice to its shareholders. There is no guarantee that
any Portfolio will achieve its investment objective.
INVESTMENT OBJECTIVE
The investment objective of each Portfolio (other than the Insured California
Portfolio, as discussed below) is to earn the highest level of current income,
exempt from Federal and state taxation to the extent described, that is
available without assuming what Alliance considers to be undue risk by investing
principally in high-yielding, predominantly medium-quality, intermediate and
long-term debt obligations issued by: (i) in the case of the National and
Insured National Portfolios, states, territories and possessions of the United
States and the District of Columbia, and their political subdivisions, duly
constituted authorities and corporations and, (ii) in the case of each of the
State Portfolios, the named state, and its political subdivisions, agencies and
instrumentalities. These securities are generally known as "municipal
securities." The average weighted maturity of the securities in each Portfolio
normally will range between 10 and 25 years.
Current Federal tax law distinguishes between municipal securities issued to
finance certain "private activities" and other municipal securities. Such
private activity bonds include bonds issued to finance such projects as
airports, housing projects, resource recovery programs, solid waste disposal
facilities, student loan programs, and water and sewage projects. Interest from
such "private activity bonds" ("AMT-Subject Bonds") becomes an item of "tax
preference" which is subject to the alternative minimum tax ("AMT") when
received by a person in a tax year during which the person is subject to that
tax. Because interest on AMT-Subject Bonds is taxable to certain investors, it
is expected, although there can be no guarantee, that such municipal securities
generally will provide somewhat higher yields than other municipal securities
("AMT-Exempt Bonds") of comparable quality and maturity.
HOW THE PORTFOLIOS PURSUE THEIR OBJECTIVE
The National Portfolio invests principally in a diversified portfolio of
municipal securities, the interest from which is wholly exempt from Federal
income taxes except when received by a shareholder who will be subject to the
AMT. The National Portfolio may invest without limit in AMT-Subject Bonds. As of
October 31, 1995, 82% of the National Portfolio's total net assets was invested
in AMT-Subject Bonds.
The Insured National Portfolio invests principally in AMT-Exempt Bonds that are
insured as to the payment of principal and interest ("insured securities"). The
investment policies of the Insured National Portfolio differ from those of the
National Portfolio in two respects: (i) whereas the National Portfolio invests
principally in AMT-Subject Bonds, the Insured National Portfolio invests
principally in a diversified portfolio of AMT-Exempt Bonds; and (ii) as a matter
of fundamental policy, the Insured National Portfolio, under normal market
conditions, invests at least 65% of its total assets in insured securities. (See
page 14 for a further discussion of the insurance feature.) The Insured National
Portfolio may be suitable for an investor who will be subject to the AMT to the
extent that the after-tax yield of the National Portfolio to such an investor is
less than the yield of the Insured National Portfolio. From time to time, the
National and Insured National Portfolios may invest 25% or more of their
respective total assets in municipal securities whose issuers are located in the
same state.
Each of the twelve State Portfolios invests in a non-diversified portfolio of
municipal securities the interest from which, in the opinion of bond counsel to
the issuer, is exempt from Federal income tax and from personal income tax in
the named state, or in the case of the Florida Portfolio, from the Florida
intangible tax (Florida currently imposes no income taxes on individuals.)
Normally, substantially all of the total assets of each State Portfolio will be
invested in municipal securities of the indicated state. Each Portfolio other
than the Insured National and Insured California Portfolios may invest without
limit in AMT-Subject Bonds.
The Insured California Portfolio seeks to provide as high a level of current
income exempt from Federal income tax and California personal income tax as is
consistent with the preservation of capital. As a matter of fundamental policy,
the Insured California Portfolio normally invests at least 80% of its total
assets in municipal bonds, at least 80% of its total assets in AMT-Exempt Bonds
and at least 65% of its total assets in insured securities. The Insured
California Portfolio's current policy is to invest at least 65% of its total
assets in municipal bonds issued by California or its political subdivisions
("California Bonds"), at least 80% of its total assets in insured bonds, and not
to invest in AMT-Subject Bonds. The remainder of the Insured California
Portfolio's total assets may be invested in uninsured California Bonds.
The California Portfolio invests in AMT-Subject Bonds issued by California and
its political subdivisions. As a matter of fundamental policy, at least 80% of
the California Portfolio's total assets normally will be invested in municipal
securities and at least 65% of its total assets normally will be invested in
AMT-Subject Bonds. The California Portfolio normally will invest at least 65% of
its total assets in California Bonds. As of October 31, 1995, 69% of the
California Portfolio's total net assets was invested in AMT-Subject Bonds.
6
<PAGE>
The New York Portfolio invests in AMT-Subject Bonds issued by New York State and
its political subdivisions. As a matter of fundamental policy, at least 65% of
the New York Portfolio's total assets normally will be so invested. In addition,
the Portfolio will invest in at least 80% of its net assets in municipal
securities the interest on which is exempt from Federal income tax. As of
October 31, 1995, 81% of the Portfolio's total net assets was invested in
AMT-Subject Bonds.
As of September 30, 1995, 36% of the Arizona Portfolio's total net assets, 63%
of the Florida Portfolio's total net assets, 34% of the Massachusetts
Portfolio's total net assets, 25% of the Michigan Portfolio's total assets, 29%
of the Minnesota Portfolio's total net assets, 55% of the New Jersey Portfolio`s
total net assets, 40% of the Ohio Portfolio's total net assets, 52% of the
Pennsylvania Portfolio`s total net assets and 38% of the Virginia Portfolio's
total net assets were invested in AMT-Subject Bonds.
As a matter of fundamental policy, each of the Arizona, Florida, Massachusetts,
Michigan, Minnesota, New Jersey, Ohio, Pennsylvania and Virginia Portfolios will
normally invest (i) at least 65% of its total assets in municipal securities of
the named state, and (ii) at least 80% of its net assets in municipal securities
the interest on which is exempt from Federal income tax. In addition, the New
Jersey Portfolio will invest at least 80% of its net assets in securities the
interest on which is exempt from New Jersey personal income tax (i.e., New
Jersey municipal securities and obligations of the U.S. government, its agencies
and instrumentalities ("U.S. Government Securities")). Where consistent with
applicable state law, each State Portfolio may also invest in municipal
securities issued by governmental entities (for example, U.S. territories)
outside the named state if such municipal securities generate interest exempt
from Federal income tax and personal income tax (or the Florida intangible tax)
in the named state. When Alliance believes that municipal securities of the
named state that meet the Portfolio's quality standards are not available, any
State Portfolio may invest in securities whose interest payments are only
federally tax-exempt.
Municipal Securities--Further Information. The two principal classifications of
municipal securities are bonds and notes. Municipal bonds, which are intended to
meet longer-term capital needs, are typically classified as either "general
obligation" or "revenue" (or "special tax") bonds. General obligation bonds are
secured by the issuer's pledge of its full faith, credit and taxing power for
the payment of principal and interest. Revenue or special tax bonds are payable
only from the revenues derived from a particular facility or class of facilities
or, in some cases, from the proceeds of a special excise or other tax, but not
from general tax revenues. Each Portfolio may invest more than 25% of its assets
in tax-exempt private activity bonds, which in most cases are revenue bonds and
generally do not have the pledge of the credit of the issuer. The payment of the
principal and interest on such private activity bonds is dependent solely on the
ability of the user of the facilities financed by the bonds to meet its
financial obligations and the pledge, if any, of real and personal property so
financed as security for such payment. Each Portfolio may invest more than 25%
of its total assets in securities or obligations which are related in such a way
that business or political developments or changes affecting one such security
could also affect the others (for example, securities the interest on which is
paid from projects of a similar type.)
Municipal notes, which may be either "general obligation" or "revenue"
securities, are intended to fulfill short-term capital needs and generally have
original maturities not exceeding one year. They include tax anticipation notes,
revenue anticipation notes, bond anticipation notes, construction loan notes and
tax-exempt commercial paper.
The yields of municipal securities depend on, among other things, conditions in
the municipal bond market and fixed income markets generally, the size of a
particular offering, the maturity of the obligation, and the rating of the
issue. Normally, lower-rated municipal securities provide yields superior to
those of more highly rated securities, but involve greater risks. When the
spread between the yields of lower-rated obligations and those of more highly
rated issues is relatively narrow, a Portfolio may invest in the latter since
they will provide optimal yields with somewhat less risk.
The high tax-free yields sought by the Portfolios are generally obtainable from
medium-quality municipal securities rated A or Baa by Moody's Investors Service,
Inc. ("Moody's"), or A or BBB by Standard & Poor's Ratings Services (S&P), Duff
& Phelps Credit Rating Co. ("Duff & Phelps") or Fitch Investors Service, Inc.
("Fitch"). Each Portfolio may maintain up to 25% of its net assets, in municipal
securities rated below Baa by Moody's and below BBB by S&P, Duff & Phelps and
Fitch or, if non-rated, determined by Alliance to be of comparable quality. At
least 75% of the total assets of each Portfolio will be invested in municipal
securities rated at the time of purchase Baa or higher by Moody's or BBB or
higher by S&P, Duff & Phelps or Fitch. It is expected that no Portfolio will
retain a municipal security downgraded below Caa by Moody's and CCC by S&P, Duff
& Phelps and Fitch, or if unrated, determined by Alliance to have undergone
similar credit quality deterioration.
Non-rated municipal securities may be purchased by a Portfolio when Alliance
believes that the financial condition of the issuers of such obligations and the
protection afforded by their terms limit risk to a level comparable to that of
rated securities that are consistent with the Portfolio's investment policies.
During the fiscal year ended October 31, 1995, the Insured National and Insured
California Portfolios invested all of their assets in securities rated A and
above by S&P, or if unrated by S&P, considered by Alliance to be of equivalent
quality to securities rated A or above. During the following Portfolios'
7
<PAGE>
fiscal years ended in 1995, on a weighted average basis, the percentages of the
assets invested in securities rated in particular rating categories by S&P or,
if not rated by S&P, considered by Alliance to be of equivalent quality to such
ratings, were as follows:
<TABLE>
<CAPTION>
Portfolio A and above BBB BB B
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
National 84% 16% -- --
Arizona 95 5 -- --
California 81 11 7 1%
Florida 75 25 -- --
Massachusetts 91 9 -- --
Michigan 81 19 -- --
Minnesota 79 21 -- --
New Jersey 81 19 -- --
New York 92 8 -- --
Ohio 79 15 6 --
Pennsylvania 78 22 -- --
Virginia 95 5 -- --
</TABLE>
Each Portfolio may invest up to 35% of its total assets in zero coupon municipal
securities. Each Portfolio also may invest in municipal securities that have
fixed, variable, floating or inverse floating rates of interest. See "Additional
Investment Practices--Zero Coupon Securities" and "--Variable, Floating and
Inverse Floating Rate Investments." Each Portfolio normally will invest at least
65% of its total assets in income-producing securities (including zero coupon
securities).
Insurance Feature of the Insured National and Insured California Portfolios. The
Insured National and Insured California Portfolios normally will invest at least
65% and 80%, respectively, of their total assets in insured securities. At the
time of purchase by a Portfolio, insured securities are either (i) insured under
an insurance policy that relates to the specific municipal security in question
(a "Specific Issue Insurance Policy") or (ii) insured under a Mutual Fund
Insurance Policy issued to the Portfolio's Fund by an appropriate insurer. If a
municipal security is already covered by a Specific Issue Insurance Policy when
acquired by the Portfolio, then coverage will not be duplicated by a Mutual Fund
Insurance Policy. Based upon the expected composition of each of the Insured
National and Insured California Portfolios, Alliance estimates that the annual
premiums for a Mutual Fund Insurance Policy and/or Special Issue Insurance
Policy will range from .12 of 1% to .75 of 1% of the average net assets of each
Portfolio. Although the insurance feature reduces certain financial risks, the
premiums for a Mutual Fund Insurance Policy, and for many Specific Issue
Insurance Policies, which are paid from each of the Insured National and Insured
California Portfolio's assets, will reduce each Portfolio's current yield.
Insurance is not a substitute for the basic credit of an issuer, but supplements
the existing credit and provides additional security therefor. While insurance
coverage for municipal securities held by the Insured National and Insured
California Portfolios reduces credit risk by insuring that the Portfolios will
receive payment of principal and interest, it does not protect against market
fluctuations caused by changes in interest rates or other factors.
The Insured National and Insured California Portfolios may obtain insurance on
their municipal bonds or purchase insured municipal bonds covered by policies
issued by any insurer having a claims-paying ability rated AA by S&P or Aaa by
Moody's. Alliance is familiar with five such insurers, Municipal Bond Investors
Assurance Corporation ("MBIA"), Financial Guaranty Insurance Company ("FGIC"),
AMBAC Indemnity Corporation ("AMBAC"), Financial Security Assurance Inc. ("FSA")
and Capital Guaranty Insurance Company ("CGIC"). S&P has rated AAA the
claims-paying ability of MBIA, FGIC, AMBAC, FSA and CGIC, and the municipal
bonds insured by these organizations. Further information with respect to MBIA,
FGIC, AMBAC, FSA and CGIC is provided in the Statement of Additional Information
of Alliance Municipal Income Fund, Inc.
ADDITIONAL INVESTMENT PRACTICES
Some or all of the Portfolios 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 Portfolios 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, 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 Portfolios to earn income and
enhance returns, to hedge or adjust the risk profile of an investment portfolio,
and in place of more traditional direct investments. Each of the Portfolios is
permitted to use derivatives for one or more of these purposes, although most of
the Portfolios 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 Portfolio shareholders. A Portfolio 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.
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.
8
<PAGE>
o 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).
o 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.
o 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.
o 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 (e.g., interest rates in the case of interest
rate 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. The notional principal
amount is used solely to calculate the payment streams but is not
exchanged.
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."
Examples of this type of structured security include certain securities
described below under "Variable, Floating and Inverse Floating Rate
Instruments."
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 Portfolio.
o Market Risk--This is the general risk attendant to all investments that the
value of a particular investment will change in a way detrimental to the
Portfolio's interest.
o 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 Portfolio's portfolio and the ability to forecast
price and interest rate movements correctly.
o Credit Risk--This is the risk that a loss may be sustained by a Portfolio
as a result of the failure of another party to a derivative (usually
referred to as a "counterparty") to comply with the terms of the derivative
contract. The credit risk for exchange-traded derivatives is generally less
than for privately negotiated derivatives, since the 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 Portfolios consider
the creditworthiness of each counterparty to a privately negotiated
derivative in evaluating potential credit risk.
o 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.
o 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.
9
<PAGE>
o 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 Portfolio. Derivatives do not always perfectly or even highly
correlate or track the value of the assets, rates or indices they are
designed to closely track. Consequently, a Portfolio's use of derivatives
may not always be an effective means of, and sometimes could be
counterproductive to, furthering the Portfolio's investment objective.
Derivatives Used by the Portfolios. Following is a description of specific
derivatives currently used by one or more of the Portfolios.
Options on Municipal and U.S. Government Securities. In an effort to increase
current income and to reduce fluctuations in net asset value, the Portfolios
intend to write covered put and call options and purchase put and call options
on municipal securities and U.S. Government securities that are traded on U.S.
exchanges. There are no specific limitations on the writing and purchasing of
options by the Portfolios. In purchasing an option on securities, a Portfolio
would be in a position to realize a gain if, during the option period, the price
of the underlying securities increased (in the case of a call) or decreased (in
the case of a put) by an amount in excess of the premium paid; otherwise the
Portfolio would experience a loss not greater than the premium paid for the
option. Thus, a Portfolio would realize a loss if the price of the underlying
security declined or remained the same (in the case of a call) or increased or
remained the same (in the case of a put) or otherwise did not increase (in the
case of a put) or decrease (in the case of a call) by more than the amount of
the premium. If a put or call option purchased by a Portfolio were permitted to
expire without being sold or exercised, its premium would represent a loss to
the Portfolio.
A Portfolio may write a put or call option in return for a premium, which is
retained by the Portfolio whether or not the option is exercised. Except with
respect to uncovered call options written for cross-hedging purposes, none of
the Portfolios will write uncovered call or put options. A call option written
by a Portfolio is "covered" if the Portfolio owns the underlying security, has
an absolute and immediate right to acquire that security upon conversion or
exchange of another security it holds, or holds a call option on the underlying
security with an exercise price equal to or less than that of the call option it
has written. A put option written by a Portfolio is covered if the Portfolio
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
Portfolio 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 Portfolio 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 Portfolio 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 Portfolio 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.
The Portfolios may purchase or write privately negotiated options on securities.
A Portfolio 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 Portfolio may be illiquid, and it may not be possible for the
Portfolio to effect a closing transaction at an advantageous time. See "Illiquid
Securities" below.
Futures Contracts and Options on Futures Contracts. Futures contracts that a
Portfolio may buy and sell may include futures contracts on municipal securities
or U.S. Government Securities and contracts based on any index of municipal
securities or U.S. Government 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 Portfolio will be traded on U.S. exchanges and will be used only for
hedging purposes.
A Portfolio 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 Portfolio and the futures contracts subject to outstanding
options written by the Portfolio would exceed 50% of its total assets.
Forward Commitments. Each Portfolio may purchase or sell municipal securities on
a forward commitment basis. 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
10
<PAGE>
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 accrue to the purchaser prior to the settlement
date. At the time a Portfolio 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 Portfolio to protect against anticipated
changes in interest rates and prices. For instance, in periods of rising
interest rates and falling bond prices, a Portfolio 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 Portfolio
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
a Portfolio if, as a result, the Portfolio's aggregate forward commitments under
such transactions would be more than 20% of its total assets.
A Portfolio's right to receive or deliver a security under a forward commitment
may be sold prior to the settlement date. The Portfolios enter into forward
commitments, however, only with the intention of actually receiving securities
or delivering them, as the case may be. If a Portfolio, 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 Portfolio may enter
into interest rate swap, cap or floor transactions primarily for hedging
purposes, which may include preserving a return or spread on a particular
investment or portion of its portfolio or protecting against an increase in the
price of securities the Portfolio anticipates purchasing at a later date. The
Portfolios do not intend to use these transactions in a speculative manner.
Interest rate swaps involve the exchange by a 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) 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 Portfolio 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 Portfolio 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 Portfolio that is permitted to enter into such transactions. A
Portfolio will not enter into an interest rate swap, cap or floor transaction
unless the unsecured senior debt or the claims-paying ability of the other party
thereto is then rated in the highest rating category of at least one nationally
recognized rating organization.
The 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 Portfolio from interest rate
transactions is limited to the net amount of interest payments that the
Portfolio is contractually obligated to make.
Zero Coupon Securities. Zero coupon 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.
Current federal tax law requires that a holder (such as a 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 distributions necessary for a 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. Each
Portfolio believes, however, that it is highly unlikely
11
<PAGE>
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.
Variable, Floating and Inverse Floating Rate Instruments. Municipal 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 Portfolio 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.
Each Portfolio may invest in municipal securities, the interest rate on which
has been divided into two different and variable components, which together
result in a fixed interest rate. These are generally known as inverse floaters.
Typically, the first of the components (the "auction component") pays an
interest rate that is reset periodically through an auction process, while the
second of the components (the "residual component") pays a current residual
interest rate based on the difference between the total interest paid by the
issuer on the municipal securities and the auction rate paid on the auction
component. A Portfolio may purchase both auction and residual components. When
an inverse floater is in the residual mode the interest rate typically resets in
the opposite direction from the variable or floating market rate of interest on
which the inverse floater is based. 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 such variable or floating rate of
interest. The degree of leverge inherent in inverse floaters is associated with
a greater degree of volatility in terms of market value, such that the market
values of inverse floaters will tend to decrease more rapidly during periods of
rising interest rates, and increase more rapidily in periods of falling interest
rates, than those of fixed rate municipal securities.
Repurchase Agreements. A Portfolio may seek additional income by investing in
repurchase agreements pertaining only to U.S. Government securities. 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 Portfolio to keep all of its
assets at work while retaining "overnight" flexibility in pursuit of investments
of a longer-term nature. A Portfolio 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 Portfolio 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 Portfolio might be delayed in, or
prevented from, selling the collateral for its benefit. There is no percentage
restriction on any Portfolio's ability to enter into repurchase agreements. The
Portfolios 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).
Illiquid Securities. Subject to any applicable fundamental investment policy,
each Portfolio may not maintain more than 15% of its net assets in illiquid
securities. These securities include, among others, securities for which there
is no readily available market, options purchased by a Portfolio
over-the-counter, the cover for such options and repurchase agreements not
terminable within seven days.
Because of the absence of a trading market for illiquid securities, a Portfolio
may not be able to realize their full value upon sale. With respect to each
Portfolio that may invest in such securities, Alliance will monitor their
illiquidity under the supervision of the Directors or Trustees of the Fund. To
the extent permitted by applicable law, Rule 144A securities will not be treated
as "illiquid" for purposes of the foregoing restriction so long as such
securities meet liquidity guidelines established by a Fund's Directors or
Trustees.
Defensive Position. Under normal circumstances, substantially all of the total
assets of each Portfolio will be invested in the types of municipal securities
described in "How The Portfolios Pursue Their Objective" above. However, when
business or financial conditions warrant, each Portfolio may assume a temporary
defensive position and invest without limit in other municipal securities that
are in all other respects consistent with the Portfolio's investment policies.
For temporary defensive purposes, each Portfolio may also invest without limit
in high-quality municipal notes, rated SP-2 or higher by S&P, MIG-2 (or VMIG-2)
or higher by Moody's, D-1 or higher by Duff & Phelps or FIN-2 or higher by
Fitch, or in taxable cash equivalents (limited, in the case of the Florida
Portfolio, to short-term U.S. Government Securities or repurchase agreements).
Portfolio Turnover. From time to time, the Portfolios may engage in active
short-term trading to benefit from yield disparities among different issues of
municipal securities, to seek short-term profits during periods of fluctuating
interest rates, or for other reasons. Such trading will increase a Portfolio's
rate of turnover and the incidence of short-term capital gain taxable as
ordinary income. Management anticipates that the annual turnover in each
Portfolio will not exceed 250%. An annual turnover rate of 200% occurs, for
example, when all of the securities in a Portfolio are replaced twice in a
period of one year. A high rate of portfolio turnover involves correspondingly
greater expenses than a lower rate, which expenses must be borne by a Portfolio
and its shareholders.
12
<PAGE>
However, the execution costs for municipal securities are substantially less
than those for equivalent dollar values of equity securities. See "Dividends,
Distributions and Taxes."
CERTAIN FUNDAMENTAL INVESTMENT POLICIES
Each Portfolio 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 Portfolio are set forth in the
Statements of Additional Information.
No Portfolio other than the Insured California Portfolio may: (i) invest more
than 5% of its total assets in the securities of any one issuer except the U.S.
Government, although with respect to 25% of the total assets of the National and
Insured National Portfolios and 50% of the total assets of the State Portfolios
(other than the Insured California Portfolio) each such Portfolio may invest in
any number of issuers; (ii) invest 25% or more of its total assets in the
securities of issuers conducting their principal business activities in any one
industry, provided that for purposes of this policy (a) there is no limitation
with respect to investments in municipal securities issued by governmental users
(including private activity bonds issued by governmental users), U.S. Government
Securities and (b) consumer finance companies, industrial finance companies and
gas, electric, water and telephone utility companies are each considered to be
separate industries (for purposes of this restriction, the Portfolio will regard
the entity with the primary responsibility for the payment of interest and
principal as the issuer); (iii) purchase more than 10% of any class of the
voting securities of any one issuer; (iv) have more than 5% of its assets
invested in repurchase agreements with the same dealer; (v) borrow money except
from banks for temporary or emergency purposes and then in amounts not exceeding
20% of its total assets; or (vi) in the case of the National, Insured National,
New York and California Portfolios, invest more than 10% of its total assets in
repurchase agreements not terminable within seven days (whether or not illiquid)
or other illiquid investments.
The Insured California Portfolio may not: (i) except when investing for
temporary defensive purposes, invest more than 35% of its total assets in
securities not covered by insurance which provides for the payment of principal
of and interest on such securities or invest more than 20% of its total assets
in securities the interest from which is subject to Federal income tax and
California personal income tax (there is no limit on the amount of securities
that may be insured by a single insurance company); (ii) invest more than 5% of
its total assets in the securities of any one issuer or invest in more than 10%
of the voting securities of any one issuer except that up to 50% of the Insured
California Portfolio's total assets may be invested without regard to this
limitation and except that this does not limit the amount of the Insured
California Portfolio's assets that may be invested in U.S. Government
Securities; (iii) invest more than 25% of its total assets in a single industry,
except that there is no limit on the amount of its assets which may be invested
in municipal securities issued by governments or political subdivisions thereof,
in a particular segment of the municipal securities market or (subject to (ii)
above) in U.S. Government Securities; (iv) invest more than 10% of its total
assets in repurchase agreements not terminable within seven days (whether or not
illiquid) or other illiquid investments; or (v) borrow money, except from banks
for temporary purposes and then in amounts not in excess of 10% of the value of
its total assets at the time of such borrowing; or mortgage, pledge or
hypothecate any assets except in connection with any such borrowing in amounts
not in excess of 15% of its total assets at the time of such borrowing.
RISK CONSIDERATIONS
Municipal Securities. The value of each Portfolio's shares will fluctuate with
the value of its investments. The value of each Portfolio's investments will
change as the general level of interest rates fluctuates. During periods of
falling interest rates, the values of a Portfolio's securities generally rise.
Conversely, during periods of rising interest rates, the values of a Portfolio's
securities generally decline.
In seeking to achieve a Portfolio'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 Portfolio's portfolio will be
unavoidable. Moreover, medium- and lower-rated securities and non-rated
securities of comparable quality may be subject to wider fluctuations in yield
and market values than higher-rated securities under certain market conditions.
Such fluctuations after a security is acquired do not affect the cash income
received from that security but are reflected in the net asset value of a
Portfolio.
Securities Ratings. The ratings of 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.
Securities rated Aaa by Moody's and AAA by S&P, Duff & Phelps and Fitch are
considered to be of the highest quality; capacity to pay interest and repay
principal is extremely strong. Securities rated Aa by Moody's and AA by S&P,
Duff & Phelps and Fitch are considered to be high quality; capacity to repay
principal is considered very strong, although elements may exist that make risks
appear somewhat larger than exist with securities rated Aaa or AAA. Securities
rated A are considered by Moody's to possess adequate factors giving security to
principal and interest. S&P, Duff & Phelps and Fitch consider such securities to
have a strong capacity to pay interest and repay principal. Such securities are
more susceptible to
13
<PAGE>
adverse changes in economic conditions and circumstances than higher-rated
securities.
Securities rated Baa by Moody's and BBB by S&P, Duff & Phelps and Fitch are
considered to have an adequate capacity to pay interest and repay principal.
Such securities are considered to have speculative characteristics and share
some of the same characteristics as lower-rated securities. 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. Securities rated Ba by Moody's and
BB by S&P, Duff & Phelps and Fitch are considered to have speculative
characteristics with respect to capacity to pay interest and repay principal
over time; their future cannot be considered as well-assured. Securities rated B
by Moody's, S&P, Duff & Phelps and Fitch are considered to have highly
speculative characteristics with respect to capacity to pay interest and repay
principal. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Securities rated Caa by Moody's and CCC by S&P, Duff & Phelps and Fitch are of
poor standing and there is a present danger with respect to payment of principal
or interest. See the Statements of Additional Information for a description of
the ratings used by Moody's, S&P, Duff & Phelps and Fitch.
Investments in Lower-Rated Securities. Lower-rated securities, i.e., those rated
Ba and lower by Moody's or BB and lower by S&P, Duff & Phelps and Fitch
(commonly known as "junk bonds"), 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.
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 Portfolio may experience
difficulty in valuing such securities and, in turn, the Portfolio's assets.
Alliance will try to reduce the risk inherent in investment in lower-rated
securities through credit analysis, diversification and attention to current
developments and trends in interest rates and economic and political conditions.
However, there can be no assurance that losses will not occur. Since the risk of
default is higher for lower-rated securities, Alliance's research and credit
analysis are a correspondingly more important aspect of its program for managing
a Portfolio's securities than would be the case if a Portfolio did not invest in
lower-rated securities.
Non-rated Securities. Non-rated securities will also be considered for
investment by a Portfolio 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 Portfolio to a degree comparable
to that of rated securities which are consistent with the Portfolio's objective
and policies.
Non-diversified Status. Each of the State Portfolios is a "non-diversified"
investment company, which means the Portfolio is not limited in the proportion
of its assets that may be invested in the securities of a single issuer. Because
each State Portfolio will normally invest solely or substantially in municipal
securities of a particular state, it is more susceptible than a geographically
diversified municipal securities portfolio to local risk factors. Such risks
arise from the financial condition of the state involved and its municipalities.
To the extent such state or local governmental entities are unable to meet their
financial obligations, the income derived by the State Portfolios, their ability
to preserve or realize appreciation of their portfolio assets and their
liquidity could be impaired. The Statements of Additional Information of the
Funds provide certain information about the particular states.
Each Portfolio, however, intends to conduct its operations so as to qualify to
be taxed as a "regulated investment company" for purposes of the Internal
Revenue Code, which will relieve the Portfolio of any liability for federal
income tax to the extent its earnings are distributed to shareholders. See
"Dividends, Distributions and Taxes" in the Statements of Additional
Information. To so qualify, among other requirements, each Portfolio will limit
its investments so that, at the close of each quarter of the taxable year, (i)
not more than 25% of the Portfolio'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 Portfolio will not own more than 10% of the outstanding
voting securities of any such single issuer. A Portfolio's investments in U.S.
Government securities are not subject to these limitations.
- --------------------------------------------------------------------------------
PURCHASE AND SALE OF SHARES
- --------------------------------------------------------------------------------
HOW TO BUY SHARES
Each Portfolio offers multiple classes of shares, of which only the Advisor
Class is offered by this Prospectus. Advisor Class shares of each Portfolio may
be purchased through your financial representative at net asset value without
any initial or contingent deferred sales charges and without distribution
expenses. Advisor Class shares may be purchased solely by investors (i) through
accounts established under a fee-based
14
<PAGE>
program, sponsored and maintained by a registered broker-dealer or other
financial intermediary and approved by Alliance Fund Distributors, Inc. ("AFD"),
each Fund's principal underwriter, pursuant to which each investor pays an
asset-based fee at an annual rate of at least .50% of the assets in the
investor's account, to the broker-dealer or financial intermediary, or its
affiliate or agent, for investment advisory or administrative services, or (ii)
through a self directed defined contribution employee benefit plan (e.g., a
401(k) plan) that has at least 1,000 participants or $25 million in assets. The
minimum initial investment in each Portfolio is $250. The minimum for subsequent
investments in each Portfolio is $50. Investments of $25 or more are allowed
under the automatic investment program in each Portfolio and under a 403(b)(7)
retirement plan. Share certificates are issued only upon request. Under certain
conditions, the Funds may suspend purchases of shares. See the Subscription
Application and Statements of Additional Information for more information. In
the case of the State Portfolios, each Portfolio is available only to residents
of the indicated state.
The Portfolios may refuse any order to purchase Advisor Class shares. In this
regard, the Portfolios reserve the right to restrict purchases of Advisor Class
shares (including exchanges) when there appears to be evidenced of a pattern of
frequent purchases and sales made in response to short-term fluctuations in
share price.
How The Portfolios Value Their Shares
The net asset value of Advisor Class shares of a Portfolio is calculated by
dividing the value of the Portfolio's net assets allocable to the Advisor Class
by the outstanding shares of the Advisor 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 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 Fund's Directors or Trustees believe would accurately reflect fair market
value.
HOW TO SELL SHARES
You may "redeem", i.e., sell your shares in a Portfolio to a Fund on any day the
Exchange is open, either directly or through your financial representative. The
price you will receive is the net asset value next calculated after the Fund
receives your request in proper form. Proceeds generally will be sent to you
within seven days. However, for shares recently purchased by check or electronic
funds transfer, 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). If you are in doubt about what documents are required by your
fee-based program or employee retirement plan, you should consult your financial
representative.
Selling Shares Through Your Financial Representative
Your financial representative must receive your request before 4:00 p.m. Eastern
time, and your financial representative must transmit your request to the Fund
by 5:00 p.m. Eastern time, for you to receive that day's net asset value. Your
financial representative is responsible for furnishing all necessary
documentation to the Funds, 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
Serivces, Inc. ("AFS") along with your certificates, if any, that represent the
shares you want to sell. For your protection, signatures must be guaranteed by a
bank, a member firm of a national stock exchange or other eligible guarantor
institution. Stock power forms are available from your financial representative,
AFS, and many commercial banks. Additional documentation is required for the
sale of shares by corporations, intermediaries, fiduciaries and surviving joint
owners. For details contact:
Alliance Fund Services
P.O. Box 1520
Secaucus, NJ 07096-1520
1-800-221-5672
Alternatively, a request for redemption of shares for which no stock
certificates have been issued can also be made by telephone to 800-221-5672.
Telephone redemption requests must be made by 4 p.m. Eastern time on a Fund
business day in order to receive that day's net asset value and, except for
certain omnibus accounts, may be made only once in any 30-day period. A
shareholder who has completed the Telephone Transactions section of the
Subscription Application, or the Shareholder Options form obtained from AFS, can
elect to have the proceeds of their redemption sent to their bank via an
electronic funds transfer. Proceeds of telephone redemptions also may be sent by
check to a shareholder's address of record. Except for certain omnibus accounts,
redemption requests by electronic funds transfer may not exceed $100,000 and
redemption requests by check may not exceed $50,000. Telephone redemption is not
available for shares held in nominee or "street name" accounts or retirement
plan accounts or shares held by a shareholder who has changed his or her address
of record within the previous 30 calendar days.
General
The sale of shares is a taxable transaction for federal tax purposes. Under
unusual circumstances, 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 in
reaching AFS by telephone, in which event you should issue written instructions
to AFS. AFS is not responsible for the authenticity of telephonic requests to
purchase, sell or exchange shares. AFS will employ reasonable procedures to
verify that telephone requests are genuine, and could be liable for losses
resulting from unauthorized transactions if it failed to do so. Dealers and
agents may charge a commission for handling telephonic requests. The telephone
service may be suspended or terminated at any time without notice.
SHAREHOLDER SERVICES
AFS offers a variety of shareholder services. For more information about these
services or your account, call AFS's toll-free number, 800-221-5672.
15
<PAGE>
HOW TO EXCHANGE SHARES
You may exchange your Advisor Class shares of any Portfolio for Advisor Class
shares of other Alliance Mutual Funds (which include AFD Exchange Reserves, a
money market fund managed by Alliance). Exchanges of shares are made at the net
asset values next determined, without sales or service charges. Exchanges may be
made by telephone or written request. Telephone exchange request must be
received by AFS by 4:00 p.m. Eastern time on a Fund business day in order to
receive that day's net asset value.
Please read carefully the Prospectus of the mutual fund into which you are
exchanging before submitting the request. Call AFS at 800-221-5672 to exchange
uncertificated shares. An exchange is a taxable capital transaction for federal
tax purposes. The exchange service may be changed, suspended, or terminated on
60 days' written notice.
GENERAL
If you are a Fund shareholder through an account established under a fee-based
program, your fee-based program may impose requirements with respect to the
purchase, sale or exchange of Advisor Class shares of a Fund that are different
from those described in this Prospectus. A transaction fee may be charged by
your financial representative with respect to the purchase, sale or exchange of
Advisor Class shares made through such financial representative.
Each Portfolio offers three classes of shares other than the Advisor Class,
which are Class A, Class B and Class C. All classes of shares of a Portfolio
have a common investment objective and investment portfolio. Class A shares are
offered with an initial sales charge and pay a distribution services fee. Class
B shares have a contingent deferred sales charge (a "CDSC") and also pay a
distribution services fee. Class C shares have no initial sales charge or CDSC
but pay a distribution services fee. Because Advisor Class shares have no
initial sales charge or CDSC and pay no distribution services fee, Advisor Class
shares are expected to have different performance from Class A, Class B or Class
C shares. You may obtain more information about Class A, Class B and Class C
shares, which are not offered by this Prospectus, by contacting AFS by telephone
at 1-800-221-5672 or by contacting your financial representative.
- --------------------------------------------------------------------------------
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 Portfolio
of each Fund, subject to the general supervision and control of the Board of
Directors or Trustees of that Fund.
The employees of Alliance principally responsible for each Portfolio's
investment program are Mrs. Susan P. Keenan, Mr. David M. Dowden and Mr.
Terrance T. Hults. Mrs. Keenan has served in this capacity for each Portfolio
since it commenced operations. Messrs. Dowden and Hults have served in this
capacity for each Portfolio since 1994 and 1995, respectively. Mrs. Keenan is a
Senior Vice President of Alliance Capital Management Corporation ("ACMC"), with
which she has been associated since prior to 1990. Mr. Dowden is an Assistant
Vice President of ACMC with which he has been associated since 1994. Previously
he was an analyst in the Municipal Strategy Group at Merrill Lynch Capital
Markets. Mr. Hults has been an Assistant Vice President of ACMC since 1995.
Previously he was an associate and trader in the Municipal Derivative Products
department at Merrill Lynch Capital Markets.
Alliance is a leading international investment manager supervising client
accounts with assets as of March 1, 1996 totaling more than $156 billion (of
which approximately $48 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 50 registered investment companies managed by Alliance comprising 107
separate investment portfolios currently have over two million shareholders. As
of March 1, 1996, Alliance was retained as an investment manager for 34 of the
Fortune 100 companies.
ACMC, the sole general partner of, and the owner of a 1% general partnership
interest in, Alliance, is an indirect wholly-owned subsidiary of The Equitable
Life Assurance Society of the United States ("Equitable"), one of the largest
life insurance companies in the United States, which is a wholly-owned
subsidiary of The Equitable Companies Incorporated, a holding company controlled
by AXA, a French insurance holding company. Certain information concerning the
ownership and control of Equitable by AXA is set forth in the Statements of
Additional Information under "Management of the Fund."
DISTRIBUTION SERVICES AGREEMENTS
Each Fund has entered into a Distribution Services Agreement with AFD with
respect to Advisor Class shares. The Glass-Steagall Act and other applicable
laws may limit the ability of a bank or other depository institution to become
an underwriter or distributor of securities. However, in the opinion of the
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 the National and Insured National Portfolio 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 Portfolio will be declared on each Fund business day
from the Portfolio's net investment income.
16
<PAGE>
Dividends on shares for Saturdays, Sundays and holidays will be declared on the
previous business day. The Funds pay dividends on shares of each Portfolio after
the close of business on the twentieth day of each month or, if such day is not
a business day, the first business day thereafter. At your election (which you
may change at least 30 days prior to the record date for a particular dividend
or distribution), dividends and distributions are paid in cash or reinvested
without charge in additional shares of the same class having an aggregate net
asset value as of the payment date of the dividend or distribution equal to the
cash amount thereof.
If you receive an income dividend or capital gains distribution in cash, you
may, within 120 days following the date of its payment, reinvest the dividend or
distribution in additional shares of that Portfolio 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 Portfolio.
There is no fixed dividend rate and there can be no assurance that a Portfolio
will pay any dividends. The amount of any dividend or distribution paid on
shares of a Portfolio must necessarily depend upon the realization of income and
capital gains from the Portfolio's investments.
TAXES
Generally. Each Portfolio intends to qualify for each taxable year to be taxed
as a regulated investment company under the Internal Revenue Code (the "Code")
and, as such, will not be liable for federal income and excise taxes on the
investment company taxable income and net capital gains distributed to its
shareholders.
Distributions to shareholders out of tax-exempt interest income earned by a
Portfolio are not subject to Federal income tax. However, under current tax law,
some individuals and corporations may be subject for Federal income tax purposes
to the AMT on distributions to shareholders out of income from the AMT-Subject
Bonds in which all Portfolios (other than the Insured National and Insured
California Portfolios) principally invest. Further, under current tax law,
certain corporate taxpayers may be subject to the AMT based on their "adjusted
current earnings." Distributions from a Portfolio that are excluded from gross
income and from AMT taxable income will be included in such corporation's
"adjusted current earnings" for purposes of computation of the AMT.
Distributions out of taxable interest, other investment income, and net realized
short-term capital gains are taxable to shareholders as ordinary income, and
distributions to shareholders of net realized long-term capital gains are
taxable to shareholders as long-term capital gains irrespective of the length of
time a shareholder has held his or her Portfolio shares. Since a Portfolio's
investment income is derived from interest rather than dividends, no portion of
such distributions is eligible for the dividends-received deduction available to
corporations.
Interest on indebtedness incurred by shareholders to purchase or carry shares of
a Portfolio is not deductible for Federal income tax purposes. Further, persons
who are "substantial users" (or related persons) of facilities financed by
AMT-Subject Bonds should consult their tax advisers before purchasing shares of
a Portfolio.
If a shareholder holds shares for six months or less and during that time
receives 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. If a shareholder
holds shares for six months or less and during that time receives a distribution
of tax-exempt interest income, any loss realized on the sale of such shares
would be disallowed to the extent of such distribution.
Substantially all of the dividends paid by a Portfolio are anticipated to be
exempt from regular federal income taxes. Shareholders may be subject to state
and local taxes on distributions from a Portfolio, including distributions which
are exempt from federal income taxes. The Funds will report annually to
shareholders the percentage and source of interest earned by a Portfolio which
is exempt from federal income tax and, except in the case of the National and
Insured National Portfolios, relevant state and local personal income taxes,
and, in the case of the Florida Portfolio, the portion of the net asset value of
such Portfolio which is exempt from Florida intangible tax.
Each investor should consult his or her own tax adviser to determine the tax
status, with regard to his or her tax situation, of distributions from the
Portfolios.
Arizona Portfolio. It is anticipated that substantially all of the dividends
paid by the Portfolio will be exempt from the Arizona income tax imposed on
individuals, corporations, estates and trusts. Such dividends will be exempt
from Arizona income tax to the extent they are derived from Arizona municipal
securities and U.S. Government Securities. Arizona law does not permit a
deduction for interest paid or accrued on indebtedness incurred or continued to
purchase or carry obligations the interest of which is exempt from Arizona state
income taxes.
California and Insured California Portfolios. Distributions of interest income
by the California Portfolio and by the Insured California Portfolio, to the
extent derived from California tax-exempt obligations, will be exempt from
California personal income tax.
Florida Portfolio. Dividends paid by the Portfolio to individual Florida
shareholders will not be subject to Florida income tax, which is imposed only on
corporations. However, Florida currently imposes an intangible personal property
tax at the rate of $2.00 per $1,000 taxable value of certain securities, such as
shares of the Portfolio, and other intangible assets owned by Florida residents.
U.S. Government Securities and Florida municipal securities are exempt from this
intangible tax. It is anticipated that the Portfolio's shares will qualify for
exemption from the Florida intangible tax. In order to so qualify, the Portfolio
must, among other things, have its entire portfolio invested in U.S. Government
Securities and Florida municipal securities on December 31 of any year.
Exempt-interest dividends paid by the
17
<PAGE>
Portfolio to corporate shareholders will be subject to Florida corporate income
tax.
Massachusetts Portfolio. It is anticipated that substantially all of the
dividends paid by the Portfolio will be exempt from the Massachusetts personal
income tax. Such dividends will be exempt from Massachusetts personal income tax
to the extent attributable to interest from Massachusetts municipal securities
exempt from the Massachusetts personal income tax or U.S. Government Securities
and are so designated. Dividends designated as attributable to capital gains
will be subject to the Massachusetts personal income tax at capital gains tax
rates except to the extent designated as attributable to gains on certain
Massachusetts municipal securities. Dividends paid by the Portfolio to a
corporate shareholder will be subject to Massachusetts corporate excise tax.
Michigan Portfolio. It is anticipated that substantially all of the dividends
paid by the Portfolio will be exempt from Michigan income, intangibles and
single business taxes. Such dividends will be exempt from Michigan personal
income tax, the Michigan intangible personal property tax and the Michigan
single business tax to the extent that such distributions are derived from
Michigan municipal securities and U.S. Government Securities, and provided that
at least 50% of the total assets of the Portfolio consist of Michigan municipal
securities at the close of each quarter of the Fund's taxable year. To the
extent the distributions are not subject to Michigan income tax, they are not
subject to the uniform city income tax imposed by certain Michigan cities. For
Michigan income, intangibles and single business tax purposes, distributions
representing income derived by the Portfolio from sources other than Michigan
municipal securities and U.S. Government Securities will be included in Michigan
taxable income and will be included in the taxable bases of the Michigan single
business and intangibles taxes, except that distributions from capital gains
which are reinvested in Portfolio shares are exempt from intangibles taxes.
Minnesota Portfolio. It is anticipated that substantially all of the dividends
paid by the Portfolio to individuals will be exempt from Minnesota personal
income tax. However, at least 95% of the exempt-interest dividends paid by the
Portfolio during a Fund fiscal year must be derived from Minnesota municipal
securities in order for any portion of the exempt-interest dividends paid by the
Portfolio to be exempt from the Minnesota personal income tax. Under current
Minnesota tax law, some individuals may be subject to the Minnesota AMT on
distributions to shareholders out of the income from AMT-Subject Bonds in which
the Portfolio invests. Exempt-interest dividends paid by the Portfolio to
shareholders that are corporations are subject to Minnesota franchise tax.
New Jersey Portfolio. It is anticipated that substantially all of the dividends
paid by the Portfolio to individuals will be exempt from New Jersey personal
income tax. In order to pass through tax-exempt interest for New Jersey personal
income tax purposes, the Portfolio must, among other things, invest only in
interest bearing obligations, obligations issued at a discount, and cash and
cash items including receivables and financial options, futures, forward
contracts and other similar financial instruments related to such obligations or
to bond indices. In addition, it must have not less than 80% of the aggregate
principal amount of its investments, excluding certain financial options and
similar financial instruments described above and cash and cash items, invested
in New Jersey municipal securities or U.S. Government Securities at the close of
each quarter of the tax year. Distributions attributable to gains from New
Jersey municipal securities also will be exempt from New Jersey personal income
tax, provided the Portfolio satisfies the above requirements. Exempt-interest
dividends paid by the Portfolio to a corporate shareholder will be subject to
New Jersey corporation business (franchise) tax and the New Jersey corporation
income tax.
New York Portfolio. Distributions of interest income by the Portfolio, to the
extent derived from New York State municipal securities, or from obligations
issued by the government of Puerto Rico or by its authority, will be exempt from
New York State and New York City personal income taxes.
Ohio Portfolio. Distributions of interest income and gain by the Portfolio, to
the extent such distributions are derived from Ohio municipal securities, will
be exempt from the Ohio personal income tax, Ohio school district income taxes
and Ohio municipal income taxes, and will not be includable in the net income
base of the Ohio corporate franchise tax; provided that at all times at least
50% of the value of the total assets of the Portfolio consists of Ohio municipal
securities or similar obligations of other states or their subdivisions. Shares
of the Portfolio will be included in a corporation's tax base for purposes of
computing the Ohio corporate franchise tax on a net worth basis.
Pennsylvania Portfolio. Dividends paid by the Portfolio will not be subject to
the Pennsylvania personal income tax or the Philadelphia School District
investment net income tax to the extent that the dividends are attributable to
interest received by the Portfolio from its investments in Pennsylvania
municipal securities or U.S. Government Securities. Exempt-interest dividends
paid by the Portfolio and dividends attributable to interest on U.S. Government
securities also are not subject to the Pennsylvania Corporate Net Income Tax.
Portfolio shares are not considered exempt assets for the purposes of
determining a corporation's capital stock value subject to the Pennsylvania
Capital Stock/Franchise Tax. Shares of the Portfolio also are exempt from
Pennsylvania county personal property taxes to the extent that the Portfolio
consists of Pennsylvania municipal securities or U.S. Government Securities.
Virginia Portfolio. Shareholders may be subject to state and local taxes on
distributions from the Portfolio, including distributions which are exempt from
Federal income taxes. It is anticipated that substantially all of the dividends
paid by the Portfolio will be exempt from Virginia income taxes. So long as the
Portfolio qualifies as a regulated investment company under the Code and at
least 50% of the value of the total assets of the
18
<PAGE>
Portfolio at the end of each quarter of its taxable year consists of obligations
whose interest is exempt from Federal income taxes, dividends paid by the
Portfolio will be exempt from Virginia individual, estate, trust, and corporate
income taxes to the extent such distributions are either (i) exempt from regular
Federal income tax and attributable to interest on Virginia municipal securities
or obligations issued by Puerto Rico, the United States Virgin Islands, or Guam
or (ii) attributable to interest on obligations of the United States or any
authority, commission or instrumentality of the United States. As a general
rule, distributions attributable to gains of the Portfolio and gains recognized
on the sale or other disposition of shares of the Portfolio (including the
redemption or exchange of shares) will be subject to Virginia income taxes.
Interest on indebtedness incurred (directly or indirectly) by shareholders to
purchase or carry shares of the Portfolio generally will not be deductible for
Virginia income tax purposes.
- --------------------------------------------------------------------------------
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 of a Portfolio as a factor in the
selection of dealers to enter into portfolio transactions with the Funds.
ORGANIZATION
Alliance Municipal Income Fund, Inc. is a Maryland corporation organized on July
30, 1986. Alliance Municipal Income Fund II is a Massachusetts business trust
organized on April 2, 1993. 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 Alliance Municipal Income Fund, Inc., state law.
Shareholders have available certain procedures for the removal of Directors or
Trustees.
A shareholder in a Portfolio will be entitled to his pro rata share of all
dividends and distributions arising from that Portfolio's assets and, upon
redeeming shares, will receive the then current net asset value of that
Portfolio represented by the redeemed shares. 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 Fund vote together as a single class on matters, such
as the election of Directors or Trustees, that affect each Portfolio in
substantially the same manner. Advisor Class, Class A, Class B and Class C
shares of a Portfolio have identical voting, dividend, liquidation and other
rights, except that each class bears its own transfer agency expenses and each
of Class A, Class B and Class C shares bears its own distribution expenses. Each
class of shares votes separately with respect to matters for which separate
class voting is appropriate under applicable law. Shares are freely
transferable, are entitled to dividends as determined by the Board of Directors
or Trustees and, in liquidation of a Portfolio, are entitled to receive the net
assets of that Portfolio. Since this Prospectus sets forth information about
both Funds, it is theoretically possible that one Fund might be liable for any
materially inaccurate or incomplete disclosure in this Prospectus concerning the
other 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 the organization of a Fund are discussed in its
Statement of Additional Information.
REGISTRAR, TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT
AFS, an indirect wholly-owned subsidiary of Alliance, located at 500 Plaza
Drive, Secaucus, New Jersey 07094, acts as the Funds' registrar, transfer agent
and dividend-disbursing agent for a fee based upon the number of shareholder
accounts maintained for the Funds.
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 Portfolios advertise their "yield" and "total return",
which are computed separately for each class of shares, including Advisor Class
shares. A 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 Portfolios may also state a "taxable equivalent yield" that is
calculated by assuming that net investment income per share is increased by an
amount sufficient to offset the benefit of tax exemptions at the stated income
tax rate. The Portfolios 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 each class of shares,
including Advisor Class shares. Advertisements of a Portfolio's total return
disclose the Portfolio's average annual compounded total return for the periods
prescribed by the Commission. A 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 the investment at the end of
the
19
<PAGE>
period. For purposes of computing total return, income dividends and capital
gains distributions paid on shares of a Portfolio are assumed to have been
reinvested when paid and the maximum sales charges applicable to purchases and
redemptions of the Portfolio's shares are assumed to have been paid.
Advertisements may quote performance rankings or ratings of the Portfolios by
financial publications or independent organizations such as Lipper Analytical
Services, Inc. and Morningstar, Inc. or compare a Portfolio'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 Statement filed by each Fund with the Commission under the
Securities Act. Copies of the Registration Statements may be obtained at a
reasonable charge from the Commission or may be examined, without charge, at the
offices of the Commission in Washington, D.C.
This prospectus does not constitute an offering in any state in which such
offering may not lawfully be made.
This prospectus is intended to constitute an offer by each Fund only of the
securities of which it is the issuer and is not intended to constitute an offer
by a Fund of the securities of the other Fund whose securities are also offered
by this prospectus. Neither Fund intends to make any representation as to the
accuracy or completeness of the disclosure in this prospectus relating to the
other Fund. See "General Information--Organization."
20
<PAGE>
(LOGO) ALLIANCE MUNICIPAL INCOME FUND, INC.
P.O. Box 1520, Secaucus, New Jersey 07096-1520
Toll Free (800) 221-5672
For Literature: Toll Free (800) 227-4618
________________________________________________________________
STATEMENT OF ADDITIONAL INFORMATION
(Advisor Class)
June [ ], 1996
________________________________________________________________
This Statement of Additional Information relating to Advisor
Class shares of the Fund is not a prospectus but supplements and
should be read in conjunction with the current Prospectus
relating to Advisor Class shares for the Fund. A copy of the
Prospectus relating to Advisor Class shares may be obtained by
contacting Alliance Fund Services, Inc. at the address or the
"Literature" telephone number shown above.
TABLE OF CONTENTS
Page
Investment Policies and Restrictions................
Management of the Fund..............................
Expenses of the Fund................................
Purchase of Shares..................................
Redemption and Repurchase of Shares.................
Shareholder Services................................
Net Asset Value.....................................
Dividends, Distributions and Taxes..................
Portfolio Transactions..............................
General Information.................................
Report of Independent Auditors and Financial
Statements........................................
Appendix A: Bond and Commercial Paper Ratings....... A-1
Appendix B: Futures Contracts and Related Options... B-1
<PAGE>
Appendix C: Options on Municipal and U.S.
Government Securities............................. C-1
__________________________
(R): This registered service mark used under license from the
owner, Alliance Capital Management L.P.
<PAGE>
____________________________________________________________
INVESTMENT POLICIES AND RESTRICTIONS
____________________________________________________________
Incorporated by reference from the section "Investment
Policies and Restrictions" contained in the Statement of
Additional Information of Alliance Municipal Income Fund, Inc.
(the "Fund") dated February 1, 1996 relating to Class A, Class B
and Class C shares of the Fund as filed with the Securities and
Exchange Commission pursuant to Rule 497(c) on February 12, 1996,
file nos. 33-7812 and 811-4791 (the "Rule 497 SAI").
Capitalized terms used herein that are not otherwise
defined herein are used as defined in the Rule 497 SAI.
________________________________________________________________
MANAGEMENT OF THE FUND
________________________________________________________________
Incorporated by reference from the section "Management
of the Fund" contained in the Rule 497 SAI, except that the
second, third, fourth, fifth and fifteenth paragraphs of the sub-
section "Adviser" and the officer biographies and the last
paragraph of the sub-section "Officers" are restated as set forth
below:
Adviser
The Adviser is a leading international investment
manager supervising client accounts with assets as of March 1,
1996 of more than $156 billion (of which more than $48 billion
represented the assets of investment companies). The Adviser's
clients are primarily major corporate employee benefit funds,
public employee retirement systems, investment companies,
foundations and endowment funds and included, as of March 1,
1996, 34 of the FORTUNE 100 Companies. As of that date, the
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 50
registered investment companies comprising 107 separate
investment portfolios managed by the Adviser currently have more
than two million shareholders.
Alliance Capital Management Corporation, the sole
general partner of, and the owner of a 1% general partnership
interest in, the Adviser, is an indirect wholly-owned subsidiary
of The Equitable Life Assurance Society of the United States
("Equitable"), one of the largest life insurance companies in the
2
<PAGE>
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 March 1, 1996,
ACMC, Inc. and Equitable Capital Management Corporation, each a
wholly-owned direct or indirect subsidiary of Equitable, together
with Equitable, owned in the aggregate approximately 57.6% of the
issued and outstanding units representing assignments of
beneficial ownership of limited partnership interests in the
Adviser ("Units"). As of March 1, 1996, approximately 32.4% and
10.0% of the Units were owned by the public and employees of the
Adviser and its subsidiaries, respectively, including employees
of the Adviser who serve as Directors of the Fund.
AXA and its subsidiaries own approximately 63.9% of the
issued and outstanding shares of capital stock of ECI. AXA is
the holding company for an international group of insurance and
related financial services companies. AXA's insurance operations
include activities in life insurance, property and casualty
insurance and reinsurance. The insurance operations are diverse
geographically, with activities in France, the United States,
Australia, the United Kingdom, Canada and other countries,
principally in Europe and the Asia Pacific area. AXA is also
engaged in asset management, investment banking, securities
trading, brokerage, real estate and other financial services
activities in the United States, Europe and the Asia Pacific
area. Based on information provided by AXA, as of March 1, 1996,
42.1% of the issued ordinary shares (representing 53.4% of the
voting power) of AXA were owned by Midi Participations, a French
holding company ("Midi"). The shares of Midi were, in turn,
owned 61.4% (representing 62.5% of the voting power) by Finaxa, a
French holding company, and 38.6% (representing 37.5% of the
voting power) by subsidiaries of Assicurazioni Generali S.p.A.,
an Italian corporation (one of which, Belgica Insurance Holding
S.A., a Belgian corporation, owned 30.8%, representing 33.1% of
the voting power). As of March 1, 1996, 61.1% of the voting
shares (representing 73.4% of the voting power) of Finaxa were
owned by five French mutual insurance companies (the "Mutuelles
AXA") (one of which, AXA Assurances I.A.R.D. Mutuelle, owned
34.7% of the voting shares representing 40.4% of the voting
power), and 25.5% of the voting shares (representing 16% of the
voting power) of Finaxa were owned by Banque Paribas, a French
bank. Including the ordinary shares owned by Midi, as of
March 1, 1996, the Mutuelles AXA directly or indirectly owned 51%
of the issued ordinary shares (representing 64.7% of the voting
power) of AXA. Acting as a group, the Mutuelles AXA control AXA,
Midi and Finaxa.
The Adviser may act as an investment adviser to other
persons, firms or corporations, including investment companies,
and is investment adviser to the following registered investment
companies: ACM Institutional Reserves, Inc., AFD Exchange
3
<PAGE>
Reserves, Alliance All-Asia Investment Fund, Inc., The Alliance
Fund, Inc., Alliance Balanced Shares, Inc., Alliance Bond Fund,
Inc., Alliance Capital Reserves, Alliance Developing Markets
Fund, Inc., Alliance Global Dollar Government Fund, Inc.,
Alliance Global Small Cap Fund, Inc., Alliance Global Strategic
Income Trust, Inc., Alliance Government Reserves, Alliance Growth
and Income Fund, Inc., Alliance Income Builder Fund, Inc.,
Alliance International Fund, Alliance Limited Maturity Government
Fund, Inc., Alliance Money Market Fund, Alliance Mortgage
Securities Income Fund, Inc., Alliance Multi-Market Strategy
Trust, Inc., Alliance Municipal Income Fund, Inc., Alliance
Municipal Income Fund II, Alliance Municipal Trust, Alliance New
Europe Fund, Inc., Alliance North American Government Income
Trust, Inc., Alliance Premier Growth Fund, Inc., Alliance Quasar
Fund, Inc., Alliance Short-Term Multi-Market Trust, Inc.,
Alliance Technology Fund, Inc., Alliance Utility Income Fund,
Inc., Alliance Variable Products Series Fund, Inc., Alliance
World Income Trust, Inc., Alliance Worldwide Privatization Fund,
Inc., The Alliance Portfolios, Fiduciary Management Associates
and The Hudson River Trust, all 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 Dollar
Income Fund, Inc., ACM Managed 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.
Officers
JOHN D. CARIFA, Chairman and President, (see biography
above).
WAYNE D. LYSKI, 54, Senior Vice President, is an
Executive Vice President of ACMC with which he has been
associated since prior to 1991.
KATHLEEN A. CORBET, 56, Senior Vice President, has been
a Senior Vice President of ACMC since July 1993. Previously, she
held various responsibilities as head of Equitable Capital
Management Corporation's Fixed Income Management Department,
Private Placement Secondary Trading and Fund Management since
prior to 1991.
SUSAN P. KEENAN, 37, Senior Vice President, is a Senior
Vice President of ACMC, with which she has been associated since
prior to 1991.
4
<PAGE>
WILLIAM E. OLIVER, 45, Vice President, has been a Vice
President of ACMC, since May 1993. Previously, he was a Vice
President and Director of Investment Grade Municipal Research
with the Prudential Capital Management Group.
DAVID M. DOWDEN, 29, Vice President, is an Assistant
Vice President of ACMC, with which he has been associated since
1993. Previously, he was an analyst in the Municipal Strategy
Group at Merrill Lynch Capital Markets.
TERRANCE T. HULTS, 29, Vice President, is an Assistant
Vice President of ACMC, with which he has been associated since
1993. Previously, he was an Associate and trader in the
Municipal Derivative Products Department at Merrill Lynch Capital
Markets.
EDMUND P. BERGAN, JR., 45, Secretary, is a Senior Vice
President and the General Counsel of Alliance Fund Distributors,
Inc. and Alliance Fund Services, Inc. and Vice President and
Associate General Counsel of ACMC, with which he has been
associated since prior to 1991.
DOMENICK PUGLIESE, 34, Assistant Secretary, 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, 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, 44, Treasurer and Chief Financial
Officer, is a Vice President of Alliance Fund Distributors, Inc.
and Senior Vice President of Alliance Fund Services, Inc., with
which he has been associated since prior to 1991.
JUAN J. RODRIGUEZ, 38, Controller, is an Assistant Vice
President of Alliance Fund Services, Inc., with which he has been
associated since prior to 1991.
JOSEPH J. MANTINEO, 36, Assistant Controller, has been a
Vice President of Alliance Fund Services, Inc. since July 1989;
prior thereto he was Manager of Fixed Income Mutual Fund
Accounting for Alliance Fund Services, Inc. since prior to 1991.
VINCENT S. NOTO, 31, Assistant Controller, is an
Assistant Vice President of Alliance Fund Services, Inc., with
which he has been associated since prior to 1991.
MELVIN J. OLIVER, 37, Assistant Controller, is an
Accounting Manager of Mutual Funds for Alliance Fund Services,
Inc., with which he has been associated with since prior to 1991.
5
<PAGE>
As of April 5, 1996, the Directors and officers of the
Fund as a group owned less than 1% of the shares of the Fund.
________________________________________________________________
EXPENSES OF THE FUND
________________________________________________________________
Distribution Services Agreement
The Fund has entered into a Distribution Services
Agreement (the "Agreement") with Alliance Fund Distributors,
Inc., the Fund's principal underwriter (the "Principal
Underwriter"), to permit the Principal Underwriter to distribute
the Fund's Advisor Class shares.
The Agreement became effective on July 22, 1992, and was
amended as of [ ], 1996 to permit the distribution of the
Advisor Class shares. The amendment to the Agreement was
approved by the vote of the Directors on [ ], 1996.
The Agreement will continue in effect for successive
twelve-month periods with respect to Advisor Class shares
(computed from each October 1), provided, however, that such
continuance is specifically approved at least annually by the
Directors of the Fund or by vote of the holders of a majority of
the outstanding voting securities (as defined in the 1940 Act) of
that class, and in either case, by a majority of the Directors of
the Fund who are not parties to the Agreement or interested
persons, as defined in the 1940 Act, of any such party (other
than as directors of the Fund). All amendments to the Agreement
must be approved by a vote of the Directors of the Fund.
Transfer Agency Agreement
Alliance Fund Services, Inc., an indirect wholly-owned
subsidiary of the Adviser, receives a transfer agency fee per
account holder of each Class A, Class B, Class C and Advisor
Class share of each Portfolio of the Fund, plus reimbursement for
out-of-pocket expenses. For the fiscal year ended October 31,
1995, the Fund paid Alliance Fund Services, Inc. $1,689,509 for
transfer agency services.
________________________________________________________________
PURCHASE OF SHARES
________________________________________________________________
The following information supplements that set forth in
the Fund's Prospectus under the heading "Purchase and Sale of
6
<PAGE>
Shares -- How To Buy Shares; -- How to Sell Shares; -- and
Shareholder Services."
General
If you are a Fund shareholder through an account
established under a fee-based program, your fee-based program may
impose requirements with respect to the purchase, sale or
exchange of Advisor Class shares of the Fund that are different
from those described in the Prospectus and this Statement of
Additional Information. A transaction fee may be charged by your
financial representative with respect to the purchase, sale or
exchange of Advisor Class shares made through such financial
representative.
Advisor Class shares of each Portfolio are offered on a
continuous basis at a price equal to their net asset value. 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," each Portfolio offers
an automatic investment program which permits investments of $25
or more.
Investors may purchase Advisor Class shares of a
Portfolio solely through (i) accounts established under a fee-
based program, sponsored and maintained by registered broker-
dealers or other financial intermediaries and approved by the
Principal Underwriter, pursuant to which each investor pays an
asset-based fee at an annual rate of at least .50% of the assets
in the investor's account, to the broker-dealer or financial
intermediary, or its affiliate or agent, for investment advisory
or administrative services, or (ii) a self-directed defined
contribution employee benefit plan (e.g., a 401(k) plan) that has
at least 1,000 participants or $25 million in assets. The Fund
may refuse any order for the purchase of Advisor Class shares.
The Fund reserves the right to suspend the sale of each
Portfolio's Advisor Class shares to the public in response to
conditions in the securities markets or for other reasons.
The public offering price of Advisor Class shares of
each Portfolio is their net asset value. 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 Advisor
Class 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.
7
<PAGE>
A Fund business day is any weekday, exclusive of days on which
the Exchange is closed (most national holidays and Good Friday).
For purposes of this computation, Exchange-listed securities and
over-the-counter securities admitted to trading on the NASDAQ
National List are valued at the last quoted sale or, if there is
no such sale, at the mean of closing bid and asked prices and
portfolio bonds are presently valued by a recognized pricing
service. If accurate quotations are not available, securities
will be valued at fair value determined in good faith by the
Board of Directors.
The Board of Directors has further determined that the
value of certain debt securities in the National, Insured
National, California and Insured California Portfolios, other
than temporary investments in short-term securities, be
determined by reference to valuations obtained from a pricing
service which takes into account appropriate factors such as
institution-size trading in similar groups of securities, yield,
quality, coupon rate, maturity, type of issue, trading
characteristics and other market data in determining valuations
of such securities, without exclusive reliance upon quoted
prices, since such valuations are believed by the Board to more
accurately reflect the fair value of such securities. At the
present time, the Fund is employing a pricing service offered by
Muller Data Corporation, a wholly-owned subsidiary of The
Thompson Corporation. However, other pricing services are
available, and the Board of Directors may authorize the use of
another such service. The Adviser may decide, subject to
guidelines established by the Board of Directors of the Fund, to
retain in the Insured National and Insured California Portfolios
municipal securities which are insured under the Portfolio Policy
or any other Mutual Fund Insurance Policy and which are in
default or in significant risk of default in the payment of
principal or interest until the default has been cured or the
principal and interest are paid by the issuer or the insurer. In
establishing fair value for these securities the Board of
Directors will give recognition to the value of the insurance
feature as well as the market value of the securities. Absent
any unusual or unforeseen circumstances, the Adviser will
recommend valuing these securities at the same price as similar
securities of a minimum investment grade (i.e., a "BBB" rating).
The Fund will accept unconditional orders for Advisor
Class shares of each Portfolio to be executed at the public
offering price equal to their net asset value next determined, 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. In the case of orders for purchase of Advisor Class
shares placed through a shareholder's financial intermediary, the
8
<PAGE>
applicable public offering price will be the net asset value as
so determined, but only if the financial representative 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. Eastern time). The
financial representative is responsible for transmitting such
orders by 5:00 p.m. If the financial representative fails to do
so, the investor's right to that day's closing price must be
settled between the investor and the financial representative.
If the financial representative 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 Advisor Class Exchange on the next day it is open
for trading.
Following the initial purchase of Advisor Class shares,
a shareholder may place orders to purchase additional Advisor
Class shares by telephone if the shareholder has completed the
appropriate portion of the Subscription Application. Except with
respect to certain omnibus accounts, a telephone purchase order
may not exceed $500,000. Payment for Advisor Class shares
purchased by telephone can be made only by Electronic Funds
Transfer from a bank account maintained by the shareholder at a
bank that is a member of the National Automated Clearing House
Association ("NACHA"). If a shareholder's telephone purchase
request is received before 3:00 p.m. Eastern time on a Fund
business day, the order to purchase Advisor Class 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 Advisor Class 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 a Portfolio, stock certificates representing Advisor
Class shares of a Portfolio are not issued except upon written
request to the Fund by the shareholder or his or her authorized
financial representative. 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 Advisor Class shares, although such
Advisor Class shares remain in the shareholder's account on the
books of the Fund.
9
<PAGE>
________________________________________________________________
REDEMPTION AND REPURCHASE OF SHARES
________________________________________________________________
The following information supplements that set forth in
the Fund'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
Advisor Class shares of each Portfolio tendered to it, as
described below, at a redemption price equal to their net asset
value as next computed following the receipt of Advisor Class
shares tendered for redemption in proper form. Payment of the
redemption price will be made within seven days after the Fund's
receipt of such tender for redemption. If a shareholder is in
doubt about what documents are required by his or her fee-based
program or employee benefit plan, the shareholder should contact
his or her financial representative.
The right of redemption may not be suspended or the date
of payment upon redemption postponed for more than seven days
after Advisor Class shares are tendered for redemption, except
for any period during which the Exchange is closed (other than
customary weekend and holiday closings) or during which the
Securities and Exchange Commission determines that trading
thereon is restricted, or for any period during which an
emergency (as determined by the Securities and Exchange
Commission) exists as a result of which disposal by the Fund of
securities owned by it is not reasonably practicable or as a
result of which it is not reasonably practicable for the Fund
fairly to determine the value of its net assets, or for such
other periods as the Securities and Exchange Commission may by
order permit for the protection of security holders of the Fund.
Payment of the redemption price will be made in cash.
The value of a shareholder's Advisor Class shares on redemption
or repurchase may be more or less than the cost of such Advisor
Class shares to the shareholder, depending upon the market value
of the Fund's portfolio securities at the time of such redemption
or repurchase. Payment (either in cash or in portfolio
securities) received by a shareholder upon redemption or
repurchase of his or her Advisor Class shares, assuming the
Advisor Class 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 Advisor Class shares redeemed.
10
<PAGE>
To redeem Advisor Class shares of a Portfolio for which
no stock certificates have been issued, the registered owner or
owners should forward a letter to the Fund containing a request
for redemption. The signature or signatures on the letter must
be guaranteed by an institution that is an "eligible guarantor"
as defined in Rule 17Ad-15 under the Securities Exchange Act of
1934, as amended.
To redeem Advisor Class shares of a 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 Fund with the
request that the Advisor Class shares represented thereby, or a
specified portion thereof, be redeemed. The stock assignment
form on the reverse side of each stock certificate surrendered to
the Fund for redemption must be signed by the registered owner or
owners exactly as the registered name appears on the face of the
certificate or, alternatively, a stock power signed in the same
manner may be attached to the stock certificate or certificates
or, where tender is made by mail, separately mailed to the Fund.
The signature or signatures on the assignment form must be
guaranteed in the manner described above.
Telephone Redemption By Electronic Funds Transfer. Each
Fund shareholder is entitled to request redemption by electronic
funds transfer, once in any 30-day period (except from certain
omnibus accounts), of Advisor Class 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. A telephone redemption
request may not exceed $100,000, and must be made by 4:00 p.m.
Eastern time on a Fund business day as defined above. Proceeds
of telephone redemptions will be sent by Electronic Funds
Transfer to a shareholder's designated bank account at a bank
selected by the shareholder that is a member of the NACHA.
Telephone Redemption By Check. Except for certain
omnibus accounts or as otherwise noted below, each Fund
shareholder is eligible to request redemption by check, once in
any 30-day period, of Advisor Class shares for which no stock
certificates have been issued by telephone at (800) 221-5672
before 4:00 p.m. Eastern time on a Fund business day in an amount
not exceeding $50,000 per check. 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
Advisor Class shares (i) for which certificates have been issued,
(ii) held in nominee or "street name" accounts, (iii) held by a
shareholder who has changed his or her address of record within
the preceding 30 calendar days or (iv) held in any retirement
plan account. A shareholder otherwise eligible for telephone
redemption by check may cancel the privilege by written
11
<PAGE>
instruction to Alliance Fund Services, Inc., or by checking the
appropriate box on the Subscription Application.
Telephone Redemptions--General. During periods of
drastic economic or market developments, such as the market break
of October 1987, it is possible that shareholders would have
difficulty in reaching Alliance Fund Services, Inc. by telephone
(although no such difficulty was apparent at any time in
connection with the 1987 market break). If a shareholder were to
experience such difficulty, the shareholder should issue written
instructions to Alliance Fund Services, Inc. at the address shown
on the cover of this Statement of Additional Information. The
Fund reserves the right to suspend or terminate its telephone
redemption service at any time without notice. Neither the Fund
nor the Adviser, the Principal Underwriter or Alliance Fund
Services, Inc. will be responsible for the authenticity of
telephone requests for redemptions that the Fund reasonably
believes to be genuine. The Fund will employ reasonable
procedures in order to verify that telephone requests for
redemptions are genuine, including, among others, recording such
telephone instructions and causing written confirmations of the
resulting transactions to be sent to shareholders. If the Fund
did not employ such procedures, it could be liable for losses
arising from unauthorized or fraudulent telephone instructions.
A shareholder's financial representative may charge a fee for
handling telephone requests for redemptions.
Repurchase
The Fund may repurchase Advisor Class shares through the
Principal Underwriter or selected financial intermediaries. The
repurchase price will be the net asset value next determined
after the Principal Underwriter receives the request, except that
requests placed through selected financial intermediaries before
the close of regular trading on the Exchange on any day will be
executed at the net asset value determined as of such close of
regular trading on that day if received by the Principal
Underwriter prior to its close of business on that day (normally
5:00 p.m. Eastern time). The financial intermediary is
responsible for transmitting the request to the Principal
Underwriter by 5:00 p.m. If the financial intermediary fails to
do so, the shareholder's right to receive that day's closing
price must be settled between the shareholder and the financial
intermediary. A shareholder may offer Advisor Class shares of a
Portfolio to the Principal Underwriter either directly or through
a financial intermediary. Neither the Fund nor the Principal
Underwriter charges a fee or commission in connection with the
repurchase of Advisor Class shares. Normally, if Advisor Class
shares of a Portfolio are offered through a financial
intermediary, the repurchase is settled by the shareholder as an
ordinary transaction with or through the financial intermediary,
12
<PAGE>
who may charge the shareholder for this service. The repurchase
of Advisor Class shares of a 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 90 days.
Shareholders will receive 60 days' written notice to increase the
account value before the account is closed. In the case of a
redemption or repurchase of Advisor Class shares of a 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 Fund's Prospectus under the heading "Purchase and Sale of
Shares -- Shareholder Services."
Automatic Investment Program
Investors may purchase Advisor Class shares of a
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 Advisor Class
shares through the financial intermediary 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. 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.
13
<PAGE>
Exchange Privilege
Advisor Class shareholders of a Portfolio can exchange
their Advisor Class shares for Advisor Class shares of any other
Alliance Mutual Fund that offers Advisor Class 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 Advisor Class
shares are being acquired. An exchange is effected through the
redemption of the Advisor Class shares tendered for exchange and
the purchase of Advisor Class shares being acquired at their
respective net asset values as next determined following receipt
by the Alliance Mutual Fund whose Advisor Class 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 Advisor Class shares recently
purchased by check will be permitted only after the Alliance
Mutual Fund whose Advisor Class 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 Advisor Class 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
financial representative, 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.
Such telephone requests cannot be accepted with respect to
Advisor Class shares then represented by stock certificates.
Advisor Class shares acquired pursuant to a telephone request for
exchange will be held under the same account registration as the
Advisor Class shares redeemed through such exchange.
Eligible shareholders desiring to make an exchange
should telephone Alliance Fund Services, Inc. with their account
number and other details of the exchange, at (800) 221-5672
before 4:00 p.m., Eastern time, on a Fund business day as defined
above. Telephone requests for exchange received before 4:00 p.m.
Eastern time on a Fund business day will be processed as of the
close of business on that day. During periods of drastic
economic or market developments, such as the market break of
October 1987, it is possible that shareholders would have
difficulty in reaching Alliance Fund Services, Inc. by telephone
(although no such difficulty was apparent at any time in
connection with the 1987 market break). If a shareholder were to
14
<PAGE>
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
Advisor Class shares (minimum $25) is automatically exchanged for
Advisor Class 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 Mutual Funds nor the Adviser, the
Principal Underwriter or Alliance Fund Services, Inc. will be
responsible for the authenticity of telephone requests for
exchanges that the Fund reasonably believes to be genuine. The
Fund will employ reasonable procedures in order to verify that
telephone requests for exchanges are genuine, including, among
others, recording such telephone instructions and causing written
confirmations of the resulting transactions to be sent to
shareholders. If the Fund did not employ such procedures, it
could be liable for losses arising from unauthorized or
fraudulent telephone instructions. A shareholder's financial
intermediary may charge a fee for handling telephone requests for
exchanges.
The exchange privilege is available only in states where
Advisor Class 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 Advisor Class shares through
exchange or otherwise to modify, restrict or terminate the
exchange privilege.
Dividend Direction Plan
A shareholder who already maintains, in addition to his
or her Advisor Class Portfolio account, an Advisor Class account
with one or more other Alliance Mutual Funds may direct that
income dividends and/or capital gains paid on his or her Advisor
Class Fund shares be automatically reinvested, in any amount,
without the payment of any service charges, in Advisor Class
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. Current
shareholders should contact Alliance Fund Services, Inc. to
establish a dividend direction plan.
15
<PAGE>
Systematic Withdrawal Plan
General. Any shareholder who owns or purchases Advisor
Class shares of a 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 a Portfolio automatically reinvested in
additional Advisor Class shares of such Portfolio.
Advisor Class shares of a 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. See "Dividends, Distributions and Taxes--Sales and
Redemptions." Advisor Class shares acquired with reinvested
dividends and distributions will be liquidated first to provide
such withdrawal payments and thereafter other Advisor Class
shares will be liquidated to the extent necessary, and depending
upon the amount withdrawn, the investor's principal may be
depleted. A systematic withdrawal plan may be terminated at any
time by the shareholder or the Fund.
Withdrawal payments will not automatically end when a
shareholder's account reaches a certain minimum level. Therefore,
redemptions of Advisor Class shares under the plan may reduce or
even liquidate a shareholder's account and may subject the
shareholder to the Fund's involuntary redemption provisions. See
"Redemption and Repurchase of Shares--General."
Payments under a systematic withdrawal plan may be made
by check or electronically via the Automated Clearing House
network. Investors wishing to establish a systematic withdrawal
plan in conjunction with their initial investment in Advisor
Class shares of a Portfolio should complete the appropriate
portion of the Subscription Application, 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.
Statements and Reports
Each shareholder of a 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
16
<PAGE>
confirmation of each purchase and redemption. By contacting his
or her broker or Alliance Fund Services, Inc., a shareholder can
arrange for copies of his or her account statements to be sent to
another person.
Checkwriting
An Advisor Class investor may fill out the Signature
Card to authorize the Fund to arrange for a checkwriting service
through State Street Bank and Trust Company (the "Bank") to draw
against Advisor Class shares of a 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 Advisor Class shares
in the investor's account (excluding for this purpose the current
month's accumulated dividends and shares for which certificates
have been issued). An Advisor Class shareholder wishing to
establish this checkwriting service subsequent to the opening of
his or her Portfolio account should contact the Fund by telephone
or mail. Corporations, fiduciaries and institutional investors
are required to furnish a certified resolution or other evidence
of authorization. This checkwriting service will be subject to
the Bank's customary rules and regulations governing checking
accounts, and the Fund and the Bank each reserve the right to
change or suspend the checkwriting service. There is no charge
to the shareholder for the initiation and maintenance of this
service or for the clearance of any checks.
When a check is presented to the Bank for payment, the
Bank, as the shareholder's agent, causes the Fund to redeem, at
the net asset value next determined, a sufficient number of full
and fractional Advisor Class shares of a 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. Cancelled
(paid) checks are returned to the shareholder. The checkwriting
service enables the shareholder to receive the daily dividends
declared on the Advisor Class shares to be redeemed until the day
that the check is presented to the Bank for payment.
17
<PAGE>
________________________________________________________________
NET ASSET VALUE
________________________________________________________________
Incorporated by reference from the section "Net Asset
Value" contained in the Rule 497 SAI.
________________________________________________________________
DIVIDENDS, DISTRIBUTIONS AND TAXES
________________________________________________________________
Incorporated by reference from the section "Dividends,
Distributions and Taxes" contained in the Rule 497 SAI.
________________________________________________________________
PORTFOLIO TRANSACTIONS
________________________________________________________________
Incorporated by reference from the section "Portfolio
Transactions" contained in the Rule 409 SAI.
________________________________________________________________
GENERAL INFORMATION
________________________________________________________________
Incorporated by reference from the section "General
Information" contained in the Rule 497 SAI, except that the sub-
sections entitled "Capitalization" and "Yield and Total Return
Quotations" are restated as set forth below:
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, of which 250,000,000 shares are presently designated
for each of the Insured National and National Portfolios and
150,000,000 shares are presently designated for each of the
California, Insured California and New York Portfolios. Shares
issued are fully paid and non-assessable. 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 a Portfolio is entitled to one vote
for all purposes. Shares of all series vote for the election of
Directors and on any other matter that affects all Portfolios in
substantially the same manner as a single series, except as
otherwise required by law. As to matters affecting each
Portfolio differently, such as approval of the Advisory Agreement
18
<PAGE>
and changes in investment policy, shares of each Portfolio vote
as a separate series. There are no conversion or pre-emptive
rights in connection with any shares of the Fund. Since voting
rights are noncumulative, holders of more than 50% of the shares
voting for the election of Directors can elect all of the
Directors. 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 Act and in the Fund's By-Laws, will be
available to shareholders of the Fund. All shares of the Fund
when duly issued will be fully paid and non-assessable. 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.
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
Act and Maryland law.
The following is a list of all persons who owned of
record or beneficially 5% or more of each class of shares of each
Portfolio at April 5, 1996.
No. of % of % of % of
Name and Address Shares Class A Class B Class C
National Portfolio
Merrill Lynch 1,831,431 5.78
Mutual Fund Operations 2,592,984 11.24
4800 Deer Lake Dr. East 5,223,747 52.35
Jacksonville, FL 32246
Insured National Portfolio
Merrill Lynch 463,050 8.28
Mutual Fund Operations 1,405,772 57.06
4800 Deer Lake Dr. East
Jacksonville, FL 32246
Robinson Trust DTD 11-1-73 309,854 12.57
P.O. Box 362
Brenham, TX 77834
19
<PAGE>
California Portfolio
Merrill Lynch 6,229,319 13.85
Mutual Fund Operations 3,612,372 22.64
4800 Deer Lake Dr. East 5,565,914 63.12
Jacksonville, FL 32246
Insured California Portfolio
Merrill Lynch 482,968 6.29
Mutual Fund Operations 606,095 24.74
4800 Deer Lake Dr. East 424,861 39.51
Jacksonville, FL 32246
The Berton Living Trust 74,717 6.95
Peter A. Berton
320 South Rodeo Drive
Beverly Hills, CA 90212
Prudential Securities 54,118 5.03
Raken C. Gupta
FBO Supta Family
Living Trust
Hemet, CA 92544
New York Portfolio
Merrill Lynch 1,909,485 18.84
Mutual Fund Operations 1,951,696 55.26
4800 Deer Lake Dr. East
Jacksonville, FL 32246
Yield and Total Return Quotations
From time to time a Portfolio states its "yield,"
"actual distribution rate" and "total return." Computed
separately for each class, a 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 Securities and Exchange Commission
which provides for compounding on a semi-annual basis. A
Portfolio may advertise a "taxable equivalent yield" that is
calculated by assuming that net investment income per share is
increased by an amount sufficient to offset the benefit of tax
exemptions at the stated income tax rate. For example, under
1995 federal individual income tax rates and assuming that there
are no applicable state income taxes, a tax-exempt yield of 5%
would equal a tax equivalent yield of 6.94% (28% tax bracket),
7.25% (31% tax bracket), 7.81% (36% tax bracket), and 8.28%
20
<PAGE>
(39.6% tax bracket), respectively; 6% would equal 8.33% (28% tax
bracket), 8.70% (31% tax bracket), 9.38% (36% tax bracket) and
9.93% (39.6% tax bracket), respectively; and 7% would equal 9.72%
(28% tax bracket), 10.14% (31% tax bracket), 10.94% (36% tax
bracket), and 11.59% (39.6% tax bracket), respectively. A
Portfolio's "actual distribution rate," which may be stated in
sales literature, is computed in the same manner as yield except
that actual income dividends declared per share during the period
in question are substituted for net investment income per share.
The actual distribution rate is compounded separately for
Class A, Class B, and Class C and Advisor Class shares. Computed
separately for each class, a Portfolio's "total return" is its
average annual compounded total return for recent one year, five
year and ten year periods (or the period since the Portfolio's
inception). A Portfolio's total return for such a period is
computed by finding, through the use of a formula prescribed by
the Securities and Exchange 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 a Portfolio are assumed to have been reinvested when
paid and the maximum sales charge applicable to purchases of such
Portfolio's shares is assumed to have been paid.
The yield for the month ended October 31, 1995 for the
Insured National Portfolio was 4.71% for the Class A shares,
4.21% for the Class B shares and 4.22% for Class C shares; for
the National Portfolio, 5.31% for the Class A shares, 4.83% for
Class B shares and 4.84% for Class C shares; for the New York
Portfolio, 5.47% for the Class A shares, 5.01% for Class B shares
and 5.02% for Class C shares; for the California Portfolio, 5.53%
for the Class A shares, 5.07% for Class B shares and 5.07% for
Class C shares; and for the Insured California Portfolio, 4.91%
for the Class A shares, 4.42% for Class B shares and 4.43% for
Class C shares. The tax equivalent yield for such period for the
Insured National Portfolio was 7.70% for the Class A shares,
6.88% for Class B shares and 6.90% for Class C shares; for the
National Portfolio, 8.64% for the Class A shares, 7.86% for Class
B shares and 7.88% for Class C shares; for the New York
Portfolio, 9.72% for the Class A shares, 8.90% for Class B shares
and 8.92% for Class C shares; computed without taking into
account the effects New York City income taxes, and 10.55%, 9.67%
and 9.69% for Class A, B and C shares, respectively, computed
assuming the effects of New York City income taxes; for the
California Portfolio, 10.24% for the Class A shares, 9.39% for
Class B shares and 9.39% for Class C shares; and for the Insured
California Portfolio, 9.02% for Class A shares, 8.12% for Class B
shares and 8.14% for Class C shares. The tax equivalent yield
calculations assume that the taxpayer is an individual in the
highest federal and state (and, if applicable, New York City)
21
<PAGE>
income tax bracket, who is not subject to federal or state
alternative minimum taxes and who is able to fully deduct state
(and, if applicable, New York City) taxes in computing federal
taxable income. The tax rates used in these calculations were:
federal--39.6%, New York State--7.594%, New York City--4.46% and
California--11%. The tax equivalent yield is computed by
dividing that portion of the yield of a Portfolio that is tax-
exempt by one minus the applicable marginal income tax rate
(39.6% in the case of the National and the Insured National
Portfolios; the combined effective federal and state (and, if
applicable, New York City) marginal income tax rates in the case
of the New York, California, and Insured California Portfolios)
and adding the quotient to that portion, if any, of the yield of
the Portfolio that is not tax-exempt. The actual distribution
rate for the Insured National Portfolio was 4.92% for the Class A
shares, 4.49% for Class B shares and 4.49% for Class C shares;
for the National Portfolio, 5.30% for the Class A shares, 4.87%
for Class B shares and 4.88% for Class C shares; for the New York
Portfolio, 5.44% for the Class A shares, 4.94% for Class B shares
and 4.94% for Class C shares; for the California Portfolio, 5.36%
for Class A shares, 4.86% for Class B shares and 4.86% for Class
C shares and for the Insured California Portfolio, 4.87% for
Class A shares, 4.32% for Class B shares and 4.32% for Class C
shares. The average annual total return for the one-year period
ended October 31, 1995 for the Class A shares of the Insured
National Portfolio was 18.72%; for the National Portfolio,
17.73%; for the New York Portfolio, 17.10%; for the California
Portfolio, 17.55% and for the Insured California Portfolio,
19.29%. The average annual total return for the one-year period
ended October 31, 1995 was for Class B shares of the Insured
National Portfolio was 17.91%; for the National Portfolio,
16.91%; for the New York Portfolio, 16.19%; for the California
Portfolio, 16.64% and for the Insured California Portfolio,
18.35%. The average annual total return for the one-year period
ended October 31, 1995 for Class C shares of the Insured National
Portfolio was 17.91%; for the National Portfolio, 16.93%; for the
New York Portfolio, 16.19%; for the California Portfolio, 16.64%
and for the Insured California Portfolio, 18.35%. For the five-
year period ended October 31, 1995 and the period since inception
to October 31, 1995, the average annual total return for Class A
shares of the Insured National Portfolio was 8.71% and 7.81%; for
Class A shares of the National Portfolio, 9.04% and 8.34%; for
Class A shares of the New York Portfolio, 8.73% and 7.20%; for
Class A shares of the California Portfolio, 8.45% and 8.10%; and
for Class A shares of the Insured California Portfolio, 8.37% and
8.09%.
A 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 such
Portfolio, its average portfolio maturity and its expenses.
22
<PAGE>
Yield and total return information is useful in reviewing a
Portfolio's performance but such information may not provide a
basis for comparison with bank deposits or other investments
which pay a fixed yield for a stated period of time. An
investor's principal invested in a Portfolio is not fixed and
will fluctuate in response to prevailing market conditions.
Advertisements quoting performance ratings of the
Portfolios as measured by financial publications or by
independent organizations such as Lipper Analytical Services,
Inc. ("Lipper") and Morningstar, Inc. and advertisements
presenting the historical record of payments of income dividends
by the Portfolios may also from time to time be sent to investors
or placed in newspapers, magazines such as BARRONS, BUSINESS
WEEK, CHANGING TIMES, FORBES, INVESTOR'S DAILY, MONEY MAGAZINE,
THE NEW YORK TIMES and THE WALL STREET JOURNAL or other media on
behalf of the Fund.
The Morningstar ratings and the Lipper rankings may be
used in advertisements and sales literature relating to such
Portfolios.
23
00250011.AG1
<PAGE>
NATIONAL PORTFOLIO
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995 ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
STANDARD & PRINCIPAL
POOR'S AMOUNT
RATINGS+ (000) VALUE
- ---------------------------------------------------------------------------
MUNICIPAL BONDS-99.6%
LONG TERM MUNICIPAL BONDS-99.0%
ALASKA-0.9%
AAA Alaska International Arpt
MBIA Ser 1 AMT
5.50%, 10/01/15 $ 6,500 $ 6,271,070
ARIZONA-3.5%
AAA Mohave Cnty IDA
Util Rev (Citizen's Util) Ser 93B AMT
5.80%, 11/15/28 2,000 1,982,500
AA Mohave Cnty IDA
(Cargill/No Star Steel Proj) Ser 95A AMT
6.70%, 3/01/20 10,240 10,821,939
BBB Navajo Cnty PCR
(Arizona Pub Serv) Ser A
5.875%, 8/15/28 3,640 3,504,119
AA+ Phoenix Civic Plaza
Bldg Corp Ser 94 (Senior Lien Excise Tax)
6.00%, 7/01/12 3,720 3,874,268
AA Phoenix IDA
MFHR (Woodstone & Silver Springs)
6.25%, 4/01/23 2,715 2,751,381
AA Salt River Proj
(Agri Imp & Pwr Dist Elec Sys)
5.75%, 1/01/19 1,700 1,700,714
24,634,921
CALIFORNIA-14.8%
A+ California HFA
MFHR (Multi-Unit Rental Hsg) Ser 92A AMT
6.50%, 2/01/14 4,865 4,976,214
A California Poll Ctl Fin Auth
PCR (Pacific Gas & Elec) Ser 92A AMT
6.625%, 6/01/09 5,350 5,740,710
A California Poll Ctl Fin Auth
PCR (Pacific Gas & Elec) Ser 93A AMT
5.875%, 6/01/23 48,345 47,024,215
A+ California Poll Ctl Fin Auth
PCR (San Diego Gas & Elec) Ser 93A-C AMT
5.85%, 6/01/21 35,335 35,147,371
AA- Long Beach Harbor Rev
Ser 93 AMT
5.125%, 5/15/18 12,000 10,848,600
103,737,110
COLORADO-9.7%
NR Arapahoe Cnty
Public Highway Auth
7.00%, 8/31/26 7,000 7,394,310
AAA Denver City & Cnty
(Arpt System Rev) MBIA Ser 91D AMT
Zero coupon, 11/15/04 13,140 8,242,328
7.75%, 11/15/21 17,435 19,821,503
AAA Denver City & Cnty
(Arpt System Rev) MBIA Ser 92B AMT
7.25%, 11/15/23 6,375 7,105,320
AAA Denver City & Cnty
(Arpt System Rev) Ser 91A AMT
Zero coupon, 11/15/02 7,015 4,929,370
BB Denver City & Cnty
Arpt Auth (United Airlines) Ser 92A AMT
6.875%, 10/01/32 20,000 20,310,600
67,803,431
DISTRICT OF COLUMBIA-0.7%
AAA Metro Wash Arpt Auth
Arpt Rev MBIA Ser 94A AMT
5.75%, 10/01/20 4,835 4,734,480
FLORIDA-5.8%
AAA Dade Cnty Arpt Rev
(Miami Int'l Arpt) MBIA Ser 95B AMT
6.00%, 10/01/24 5,650 5,716,783
BBB Escambia Cnty PCR
(Champion Int'l Corp) Ser 94
6.90%, 8/01/22 2,020 2,137,564
AAA Florida HFA
SFMR (Home Mtg) Ser 95A AMT
6.65%, 7/01/24 4,300 4,492,511
AAA Florida HFA
SFMR (Mtg Hsg Fin Agy Rev) Ser 94B AMT
6.65%, 7/01/26 4,855 5,065,367
6
ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
STANDARD & PRINCIPAL
POOR'S AMOUNT
RATINGS+ (000) VALUE
- ---------------------------------------------------------------------------
AAA Hillsborough Cnty Aviation
Arpt Rev (Tampa Int'l) FGIC Ser 93D AMT
5.40%, 10/01/13 $ 2,960 $ 2,860,958
BBB+ Lake Cnty Res Rec
(NRG Recovery Grp) Ser 93A AMT
5.95%, 10/01/13 1,750 1,677,428
AA- Orlando Util Comm
(Wtr & Elec Sub Rev) Ser 93B
5.60%, 10/01/17 (a) 18,900 18,633,888
40,584,499
GEORGIA-4.8%
AAA Atlanta Arpt Facilities Rev
MBIA AMT
Zero coupon, 1/01/10 75,535 33,705,983
INDIANA4.3%
AAA Indiana Dev Fin Auth
PCR (PSI Energy) MBIA Ser 93B AMT
5.75%, 2/15/28 11,245 11,243,875
AAA Indianapolis Arpt, Port & Marina
AMT MBIA
5.875%, 1/01/13 6,000 6,035,280
AA Warrick Cnty
PCR (So Indiana Gas & Elec Co) Ser 93B AMT
6.00%, 5/01/23 12,290 12,458,496
29,737,651
MARYLAND-0.2%
NR Maryland Ind Dev Fin Auth Eco Dev
(Med Waste Assoc) Ser 89 AMT
8.75%, 11/15/10 1,475 1,545,092
MASSACHUSETTS-3.1%
A+ Massachusetts Bay Trans Auth
Ser 92C
6.10%, 3/01/23 1,990 2,032,745
AAA Massachusetts Ed Fin Auth
Education Loan Rev AMBAC Ser 94E AMT
6.00%, 1/01/12 4,730 4,755,400
A+ Massachusetts HFA
SFMR Ser 40 AMT
6.65%, 12/01/27 8,770 8,932,333
AA- Massachusetts Wtr Pollution Abatement
(South Essex Prog) Ser 94A
6.375%, 2/01/15 2,735 2,882,964
A Massachusetts Wtr Res Auth
Ser 92B
5.50%, 11/01/15 3,460 3,365,957
21,969,399
MICHIGAN-4.5%
AAA Detroit Eco Dev Ctr
Res Rec Rev FSA Ser 91A AMT
6.875%, 5/01/09 3,765 4,041,200
BBB Detroit GO
Ser 93
6.35%, 4/01/14 2,970 2,986,484
AAA Kent Cnty GO Arpt Rev
(Kent Cnty Int'l) Ser 95 AMT
6.10%, 1/01/25 4,480 4,559,386
A1* Michigan Hosp Fin Auth Hosp Rev
(Crittenton Hosp) Ser 93A
5.25%, 3/01/14 4,420 3,994,884
A Michigan Hosp Fin Auth Hosp Rev
(Detroit Med Ctr) Ser 93B
5.50%, 8/15/23 5,250 4,791,203
A+ Michigan HDA
MFHR (Rental Hsg) Ser 94B
5.80%, 4/01/19 2,000 1,942,560
AA Michigan Muni Bond Auth
Revolving Fund Ser 93
5.40%, 10/01/14 4,460 4,356,483
AAA Wayne Cnty Arpt Rev
(Detroit Metro) MBIA AMT
5.50%, 12/01/21 5,000 4,728,800
31,401,000
7
NATIONAL PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
STANDARD & PRINCIPAL
POOR'S AMOUNT
RATINGS+ (000) VALUE
- ---------------------------------------------------------------------------
MINNESOTA-3.2%
A- Bass Brook PCR
(Minnesota Pwr & Light)
6.00%, 7/01/22 $ 1,400 $ 1,379,714
AA+ Duluth GO
Arpt Lease Rev Ser 95C AMT
6.25%, 8/01/14 4,200 4,370,436
A2* Fairbault GO
(Ind Sch Dist #656)
6.20%, 6/01/12 1,730 1,804,615
AAA Minneapolis GO
SFMR (Home Ownership/Renovation)
Ser 93 Stage III AMT
5.70%, 12/01/23 5,375 5,087,437
AA+ Minnesota Hsg Fin
Home Mortgage Ser 93-C2 AMT
6.15%, 7/01/23 2,530 2,523,043
AA+ Rochester Hosp Rev
(Mayo Med Ctr) Ser D
6.25%, 11/15/21 1,300 1,349,894
BBB- South St Paul Hosp Rev
(Hlth East Proj) Ser 94
6.75%, 11/01/09 800 831,456
A+ Southern Minnesota Muni Pwr Auth
Pwr Supply System Ser 92A
5.75%, 1/01/18 2,870 2,855,506
A Western Minnesota Muni Pwr Auth
Ser 87A
5.50%, 1/01/15 2,190 2,116,854
22,318,955
NEBRASKA-1.6%
A Nebraska Higher Ed
Student Loan Rev Ser 93B AMT
5.875%, 6/01/14 11,705 11,477,572
NEW JERSEY-2.4%
AAA New Jersey Eco Dev Auth
(Public Svc Elec & Gas) PCR
MBIA Ser 94A AMT
6.40%, 5/01/32 5,000 5,229,350
AAA New Jersey Eco Dev Auth
Wtr Fac (American Wtr Co.) FGIC AMT
5.95%, 11/01/29 $5,000 $4,999,950
AAA New Jersey Eco Dev Auth
Wtr Fac (Hackensack Wtr) MBIA Ser 94B AMT
5.90%, 3/01/24 1,850 1,854,070
BBB New Jersey Hlth Care Fac Fin Auth Hosp Rev
(Englewood Hosp & Med Ctr) Ser 94
6.75%, 7/01/24 1,000 1,029,740
A+ New Jersey Hsg & Mtg Fin Agy MFHR
Ser 1 Section 8
6.70%, 11/01/28 1,500 1,566,855
AAA New Jersey Hsg & Mtg Fin Agy Rev
SFMR (Home Buyer Rev) MBIA AMT
6.35%, 10/01/27 1,800 1,829,952
16,509,917
NEW YORK-9.7%
BBB+ New York City GO
Ser 93A
6.25%, 8/01/18 6,000 6,047,460
BBB+ New York City GO
Ser 95B
7.25%, 8/15/19 6,000 6,485,700
BBB+ New York City GO
Ser 95F
6.625%, 2/15/14 10,000 10,397,700
AAA Niagara Frontier Trans Auth Arpt Rev
(Gtr Buffalo Int'l) AMBAC Ser 94A AMT
6.25%, 4/01/24 1,500 1,549,725
AAA NYS Energy Res & Dev Auth Gas Fac
(Brooklyn Union Gas) MBIA AMT
5.60%, 6/01/25 4,000 3,849,000
AAA NYS Energy Res & Dev Auth Gas Fac
(Brooklyn Union Gas) MBIA Ser 91D AMT
5.635%, 7/08/26 (a) 6,000 5,697,900
8
ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
STANDARD & PRINCIPAL
POOR'S AMOUNT
RATINGS+ (000) VALUE
- ---------------------------------------------------------------------------
AAA NYS Energy Res & Dev Auth Solid Waste
(NYS Elec & Gas) MBIA Ser 93A AMT
5.70%, 12/01/28 $25,050 $24,287,979
BBB NYS Envir Fac Auth IDR
(Occidental Petroleum) Ser 93A AMT
5.70%, 9/01/28 2,450 2,253,192
Aa* NYS Mtg Agy Rev
(Homeowner Mtg) Ser 30-C1 AMT
5.85%, 10/01/25 5,150 4,932,670
AAA Port Auth of NY & NJ
Cons (96th Ser) FGIC AMT
6.60%, 10/01/23 2,250 2,388,847
67,890,173
OHIO-5.6%
Aaa* Cincinnati Student Loan Funding Corp
Ser 86A AMT
5.50%, 12/01/01 3,000 3,057,180
AAA Cleveland Arpt Rev
(Cleveland Int'l) FGIC Ser 94A
6.25%, 1/01/20 7,800 8,065,824
AAA Columbus Arpt Rev
(PT Columbus Int'l) MBIA Ser 94A
6.25%, 1/01/24 4,000 4,139,440
A Cuyahoga Cnty Hosp Rev
(Meridia Hlth Sys) Ser 95
6.25%, 8/15/24 2,500 2,584,000
AAA Ohio Air Quality Dev Auth
(JMG Funding/Ohio Pwr Co) AMBAC Ser 94B AMT
6.375%, 4/01/29 7,850 8,172,007
Baa3* Ohio Air Quality Dev Auth
PCR (Columbus So Pwr) Ser 85B
6.25%, 12/01/20 1,000 1,008,860
AA- Ohio Air Quality Dev Auth
PCR (Dayton Power & Light Proj) Ser 92B
6.40%, 8/15/27 1,900 1,989,357
AA- Ohio Turnpike Commission Turnpike Rev
Ser 94A
5.75%, 2/15/24 5,000 5,014,850
Aa3* Toledo-Lucas Cnty
Port Auth (Cargill Inc. Proj)
5.90%, 12/01/15 5,000 5,054,350
39,085,868
PENNSYLVANIA-3.2%
AAA Allegheny Cnty Arpt Rev
(Gtr Pittsburgh Int'l) FGICSer 92B AMT
6.625%, 1/01/22 2,500 2,617,450
A Allegheny Cnty Hosp Rev
(St. Francis) FHA Ser 88
8.25%, 8/01/28 3,505 3,844,074
AAA Pennsylvania Higher Ed Student Loan Rev
Ser 88D AMT
AMBAC 6.05%, 1/01/19 5,435 5,521,851
AA Pennsylvania Hsg Fin Agy
SFMR (Home Mortgage) Ser 94-41B AMT
6.65%, 4/01/25 3,000 3,095,220
AAA Philadelphia Aprt Sys Rev
Ser 95A AMT
6.10%, 6/15/25 7,400 7,516,328
22,594,923
RHODE ISLAND-2.6%
AA+ Rhode Island Hsg & Mtg Fin Corp
SFMR ( Home Ownership) Ser 91-8
9.987%, 4/01/24 7,000 7,657,370
AA+ Rhode Island Hsg & Mtg Fin Corp
SFMR (Home Ownership) Ser 92-7A AMT
6.75%, 10/01/25 10,000 10,254,600
17,911,970
SOUTH DAKOTA-1.6%
AA+ South Dakota HDA
(Home Ownership) Ser 91D AMT
6.25%, 5/01/26 1,440 1,446,120
9
NATIONAL PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
STANDARD & PRINCIPAL
POOR'S AMOUNT
RATINGS+ (000) VALUE
- ---------------------------------------------------------------------------
AA+ South Dakota HDA
SFMR (Home Ownership Mtg) Ser 93II AMT
6.15%, 5/01/26 $ 9,600 $ 9,547,488
10,993,608
TENNESSEE-1.8%
BBB Memphis Shelby Cnty Spec Fac
(Federal Express) Ser 93 AMT
6.20%, 7/01/14 8,000 8,103,520
A* Volunteer Student Funding
Educational Loan Rev
Ser 93C AMT
5.85%, 12/01/08 4,100 4,151,578
12,255,098
TEXAS-6.1%
BB+ Alliance Arpt Auth Fac Imp
(American Airlines) Ser 90 AMT
7.50%, 12/01/29 21,690 22,966,240
BB+ Dallas-Ft. Worth Arpt Fac Imp
(American Airlines) AMT
7.25%, 11/01/30 3,715 3,902,496
BB+ Dallas-Ft. Worth Arpt Fac Imp
(American Airlines) Ser 90 AMT
7.50%, 11/01/25 15,000 15,941,250
42,809,986
UTAH-2.1%
AAA Emery Cnty
PCR (Pacific Project) AMBAC AMT
5.625%, 11/01/23 11,400 10,912,764
Aaa* Utah Board of Regents
Student Loan Rev Ser 93 AMT
5.90%, 11/01/13 3,600 3,552,876
14,465,640
VIRGINIA-4.2%
A- Hampton Museum Rev
Ser 94
5.25%, 1/01/14 2,320 2,205,160
AA Henrico Cnty IDR
(Henrico Cnty Reg Jail)
7.125%, 8/01/21 3,730 4,293,454
A- Isle of Wight Cnty IDA
Solid Waste (Union Camp Corp) Ser 94 AMT
6.55%, 4/01/24 3,845 4,009,720
BBB+ Peninsula Port Auth Hlth Fac
(Mary Immaculate Proj) Ser 94
7.00%, 8/01/17 1,850 1,949,733
A1* Prince William Cnty IDA
Hosp Rev (Potomac Hosp Grp)
6.75%, 10/01/15 1,910 2,005,615
AA Richmond GO
6.25%, 1/15/21 1,060 1,078,285
AAA Richmond Redev & Hsg Auth
MFHR (Jefferson)
6.50%, 4/01/27 3,250 3,250,000
AA Virginia Beach Hlth Care
Hosp Rev (Sentara Bayside)
6.30%, 11/01/21 1,000 1,030,970
A* Virginia Ed Loan Auth
(Student Loan Prog) Ser 93G AMT
6.15%, 9/01/09 3,340 3,363,180
AA+ Virginia HDA
SFMR (Commonwealth Mtg) Ser 93G AMT
5.35%, 7/01/16 5,490 5,045,749
AA Virginia Res Auth Swr Rev
(Hopewell Fac) Ser 95A AMT
6.00%, 10/01/25 1,355 1,371,016
29,602,882
WASHINGTON-2.6%
BBB Pierce Cnty Eco Dev
PCR (Occidental Petroleum) Ser 93 AMT
5.80%, 9/01/29 6,755 6,170,220
10
ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
STANDARD & PRINCIPAL
POOR'S AMOUNT
RATINGS+ (000) VALUE
- ---------------------------------------------------------------------------
BBB Pilchuck Dev Pub Corp.Spec Fac
(BF Goodrich) Ser 93 AMT
6.00%, 8/01/23 $12,250 $11,707,815
17,878,035
Total Long Term Municipal Bonds
(cost $661,169,907) 691,919,263
SHORT TERM MUNICIPAL NOTES-0.6%
NEW YORK-0.1%
AAA New York City Mun Wtr Fin Auth
Wtr & Swr Sys Rev FGIC Ser 94C VRDN
4.00%, 6/15/23 500 500,000
OREGON-0.4%
A-1* Port Morrow
(Portland General Elec)
VRDN LOC: The Industrial Bank of Japan
4.05%, 10/01/13 $3,000 $3,000,000
TEXAS-0.1%
A-1+* Gulf Coast Waste Disp Auth
(Amoco Oil Co. Proj) Ser 94 AMT VRDN
4.05%, 8/01/23 (b) 500 500,000
Total Short Term Municipal Notes
(cost $4,000,000) 4,000,000
TOTAL INVESTMENTS-99.6%
(cost $665,169,907) 695,919,263
Other assets less liabilities-0.4% 2,816,814
NET ASSETS-100% $698,736,077
+ Unaudited.
* Moody's or Fitch Rating.
(a) Inverse floater security-the interest rate is subject to change
periodically.
Airport Revenue Bonds represent 28% of net assets at October 31, 1995.
See Glossary of Terms on page 21.
See notes to financial statements.
11
INSURED NATIONAL PORTFOLIO
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995 ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
STANDARD & PRINCIPAL
POOR'S AMOUNT
RATINGS+ (000) VALUE
- ---------------------------------------------------------------------------
MUNICIPAL BONDS-98.7%
ALABAMA-7.8%
AAA West Jefferson PCR
(Alabama Power) MBIA Ser 93C
6.05%, 5/01/23 $19,000 $19,185,440
ARIZONA-5.9%
AAA Maricopa Cnty GO
Chandler Sch Imp #80 FGIC Ser 95
6.00%, 7/01/13 1,215 1,247,708
AAA Maricopa Cnty GO
Kyrene Elem Sch Imp #28 FGIC Ser 95B
6.00%, 7/01/14 1,715 1,751,975
AAA Maricopa Cnty GO
Sch Dist #28 FGIC Ser 93C
Zero coupon, 7/01/11 6,000 2,530,200
AAA Maricopa Cnty Hlth Fac
(Samaritan Hlth) MBIA Ser 90A
7.00%, 12/01/13 335 364,711
AAA Pima Cnty Hosp
(Tucson Med Ctr) MBIA Ser 93A
5.00%, 4/01/15 1,185 1,093,518
AAA Tempe IDR
(Mtg-Quadrangles) FHA
6.25%, 6/01/26 4,865 4,913,504
AAA Tucson GO FGIC
Zero coupon, 7/01/13 3,800 1,410,712
AAA Yavapai Cnty
Humboldt Sch Imp #22 FGIC Ser 95A
5.95%, 7/01/14 1,210 1,246,845
14,559,173
CALIFORNIA-7.3%
Aa* California Statewide Comm Dev Hosp
(Cedars-Sinai Med Ctr) Ser 93
5.40%, 11/01/15 12,500 11,841,875
AAA Northern Calif Trans Agy Elec Rev
(Calif-Oregon Trans) MBIA Ser 93A
6.062%, 4/29/24 (a) 6,550 6,097,460
17,939,335
COLORADO-2.5%
AAA Denver City & Cnty Arpt System Rev
MBIA Ser 95A
5.70%, 11/15/25 6,375 6,284,603
FLORIDA-2.2%
AAA Florida Trpk Auth Rev
Ser 95A
5.625%, 7/01/25 1,800 1,783,170
Aaa* Venice Hlth Fac
(Venice Hosp) Ser 94 Pre-refunded
6.00%, 12/01/14 3,350 3,673,376
5,456,546
ILLINOIS-3.3%
AAA Illinois Health Fac Auth Hosp Rev
(Alexian Brothers) FSA Ser 90
7.125%, 1/01/21 4,860 5,229,020
AAA Metro Pier & Expo Auth
(McCormick Place Expo) FGIC Ser 93A
Zero coupon, 6/15/19 12,150 2,973,348
8,202,368
MARYLAND-3.2%
AAA Baltimore Cnty MFHR
(Dunfield Township Proj) FHA Ser 92A
6.90%, 8/01/28 7,500 7,848,075
MASSACHUSETTS-18.8%
AAA Chelsea GO
AMBAC
6.00%, 6/15/14 1,965 2,009,743
AAA Essex Cnty
(South Essex Swr Dist) MBIA Ser 94B
7.00%, 6/01/24 2,435 2,735,722
AAA Holyoke GO
FSA Ser B
6.125%, 8/01/13 1,195 1,241,497
AAA Lowell GO
FSA Ser 93A
5.50%, 1/15/10 3,735 3,680,432
AAA Massachusetts GO
MBIA Ser 95A
5.75%, 2/01/15 4,715 4,753,333
12
ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
STANDARD & PRINCIPAL
POOR'S AMOUNT
RATINGS+ (000) VALUE
- ---------------------------------------------------------------------------
AAA Massachusetts HFA
MFHR (Residential Dev) AMBAC Ser 93A
6.15%, 10/01/15 $ 9,220 $ 9,265,086
AAA Massachusetts HFA
MFHR (Residential Dev) FNMA Ser 92F
6.25%, 11/15/12 5,000 5,142,150
AAA Massachusetts HFA
SFMR (Residential Dev) FNMA Ser 92
6.90%, 11/15/24 2,500 2,641,650
AAA Massachusetts Hlth & Ed Fac Auth Rev
(New England Med Ctr) MBIA Ser D
5.38%, 7/01/18 9,770 9,214,185
AAA Massachusetts Muni Wholesale
(Elec Pwr Supply Sys) MBIA Ser 92A
6.00%, 7/01/18 5,675 5,764,608
46,448,406
MICHIGAN-18.2%
AAA Brighton GO AMBAC
Area Sch Dist Ser 92II
Zero coupon, 5/01/20 5,000 1,217,800
AAA Detroit Swr Disp Rev Sys
FGIC Ser 93A
5.70%, 7/01/23 (a) 17,850 17,531,556
AAA Grand Rapids Swr Sys Rev
MBIA
6.00%, 1/01/22 2,500 2,527,050
AAA Kalamazoo Hosp Fin Auth Hosp Rev
(Borgess Med Ctr) FGIC Ser 94A
5.244%, 6/01/11 15,000 14,500,350
AAA Lowell Area Schools GO
FGIC
Zero coupon, 5/01/19 5,050 1,291,133
AAA Michigan Hosp Fin Auth Hosp Rev
(St. John's Hospital) AMBAC Ser A
6.00%, 5/15/13 480 492,240
AAA Michigan Strategic Fund PCR
(Detroit Edison Co.) MBIA Ser 95A
6.40%, 9/01/25 5,000 5,249,300
AAA Yale Pub Sch Dist GO
AMBAC
5.50%, 5/01/23 2,150 2,067,569
44,876,998
MINNESOTA-5.7%
AAA Buffalo Hanover Montrose GO
(Ind Sch Dist #877) CGIC Ser 94
6.15%, 2/01/22 2,500 2,571,700
AAA Burnsville-Eagan-Savage GO
(Ind Sch Dist #191) CGIC Ser 95A
6.20%, 2/01/17 1,400 1,464,960
AAA Lakeville GO
(Ind Sch Dist #194) FGIC
5.60%, 2/01/18 3,710 3,709,629
AAA Minnesota Pub Fac Auth
(Wtr Poll Ctr Rev) Ser 95A
6.25%, 3/01/15 1,225 1,309,660
AAA No Minnesota Muni Pwr Agy
AMBAC Ser 92B
5.50%, 1/01/18 1,200 1,186,272
AAA Robbinsdale Hosp Rev
(No Memorial Med Ctr) AMBAC Ser 93A
5.45%, 5/15/13 2,500 2,452,925
AAA St. Francis GO
(Ind Sch Dist #15) CGIC Ser 95A
6.375%, 2/01/16 1,200 1,279,332
13,974,478
NEBRASKA-1.4%
AAA Nebraska Inv Fin Auth Hosp Rev
(Bishop Clarkson Mem) MBIA Ser 91
9.141%, 12/08/16 (a) 3,000 3,324,120
13
INSURED NATIONAL PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
STANDARD & PRINCIPAL
POOR'S AMOUNT
RATINGS+ (000) VALUE
- ---------------------------------------------------------------------------
NEW JERSEY-4.2%
AAA Burlington Cnty Wtr Rev
(Evesham Muni Util Auth) MBIA
5.60%, 7/01/15 $ 3,750 $ 3,752,438
AAA Passaic Valley Swr Comm
Ser 92D AMBAC
5.75%, 12/01/15 3,400 3,438,114
AAA Vineyard Swr Rev
(Landis Sewage Auth) FGIC Ser 93C
5.65%, 9/19/19 3,100 3,089,305
10,279,857
OHIO-3.9%
AAA Clermont Cnty Wtr Sys Rev
(Clermont Cnty Swr) AMBAC Ser 93
5.70%, 12/01/13 2,750 2,780,965
AAA Hamilton Cnty Swr Rev
(Met Swr Gtr Cincinnati) FGIC Ser 93A
5.25%, 12/01/16 2,000 1,913,920
AAA Lucas Cnty Hosp Rev
(St. Vincent Med Ctr) MBIA
5.45%, 8/15/14 2,650 2,570,977
AAA Ohio Muni Generating Auth
(Belleville Hydro Elec) AMBAC
5.375%, 2/15/13 2,500 2,462,450
9,728,312
PENNSYLVANIA-5.5%
AAA Berks Cnty
Swr Rev (Exeter Twp) MBIA Ser 93
6.20%, 7/15/22 8,495 8,737,447
AAA Butler Cnty Hosp Rev
(Butler Mem Hosp)
Ser 93A FSA
5.25%, 7/01/12 2,500 2,377,225
AAA Pennsylvania Intergov Coop Auth
Special Tax Rev FGIC Ser 94
7.00%, 6/15/14 2,200 2,429,878
13,544,550
TEXAS-2.7%
AAA Amarillo Hosp Rev
(High Plains Baptist) FSA Ser 92B
6.562%, 1/03/22 (a) 6,400 6,660,928
VIRGINIA-3.3%
AAA Chesapeake Bay Bridge & Tunnel Auth
MBIA
5.75%, 7/01/25 1,465 1,460,722
AAA Loudoun Cnty IDA
(Loudoun Hosp Ctr) FSA
5.80%, 6/01/20 2,340 2,343,767
AAA Richmond Met Auth
(Expressway Revenue) FGIC Ser. B
6.25%, 7/15/22 1,000 1,032,360
AA Virginia College Bldg Auth Ed Fac Rev
(Washington & Lee Univ)
5.80%, 1/01/24 3,350 3,408,860
8,245,709
WEST VIRGINIA-2.8%
AAA West Virginia Eco Dev
Pkwy Auth Rev Ser 93 FGIC
5.831%, 5/16/19 7,000 7,015,470
TOTAL INVESTMENTS-98.7%
(cost $231,900,997) 243,574,368
Other assets less liabilities-1.3% 3,229,267
NET ASSETS-100% $246,803,635
+ Unaudited.
* Moody's or Fitch Rating.
(a) Inverse floater security-the interest rate is subject to change
periodically.
See Glossary of Terms on page 21.
See notes to financial statements.
14
NEW YORK PORTFOLIO
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995 ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
STANDARD & PRINCIPAL
POOR'S AMOUNT
RATINGS+ (000) VALUE
- ---------------------------------------------------------------------------
NEW YORK MUNICIPAL BONDS-98.9%
Aaa* Cohoes IDR
(Norlite Corp Proj) Ser 92B AMT
LOC: Dresdner Bank
6.75%, 5/01/09 $ 8,500 $ 9,000,480
AAA Glen Cove IDR
(The Regency At Glen Cove) ETM Ser 92B
Zero coupon, 10/15/19 60,010 14,396,999
AAA Islip Res Rec Agy
AMBAC Ser 94B AMT
6.125%, 7/01/12 2,020 2,084,438
AAA Monroe Cnty Airport Auth
(Greater Rochester Int'l) MBIA Ser 93 AMT
5.50%, 1/01/13 4,450 4,362,513
BBB+ New York City GO
Ser 93D
6.00%, 8/01/14 9,750 9,721,822
7.702%, 8/29/14 (a) 10,000 9,961,300
BBB+ New York City GO
Ser 93E
6.00%, 5/15/11 10,000 9,920,000
BBB+ New York City GO
Series 95B
7.25%, 8/15/19 9,000 9,728,550
A2 New York City HDC
MFHR (So Williamsburg Coop) Ser 90A AMT
7.90%, 2/01/23 3,860 4,056,513
BB+ New York City IDR
(American Airlines) Ser 94 AMT
6.90%, 8/01/24 6,000 6,281,940
A New York City IDR
(Terminal One L.P.) Ser 94 AMT
6.125%, 1/01/24 21,500 21,199,645
AAA Niagara Frontier Trans Auth Arpt
(Gtr Buffalo Int'l) AMBAC Ser 94A AMT
6.25%, 4/01/24 14,625 15,109,819
A+ NYS Energy Res & Dev
(Consolidated Edison) Ser 94A AMT
7.125%, 12/01/29 27,000 29,877,660
AAA NYS Energy Res & Dev Auth PCR
(Brooklyn Union Gas) MBIA AMT
5.60%, 6/01/25 6,000 5,773,500
AAA NYS Energy Res & Dev Auth PCR
(Brooklyn Union Gas) MBIA Ser 89B AMT
6.75%, 2/01/24 7,500 7,972,875
AAA NYS Energy Res & Dev Auth PCR
(NYS Elec & Gas) MBIA Ser 87A AMT
6.15%, 7/01/26 15,000 15,260,850
AAA NYS Energy Res & Dev Auth PCR
(NYS Elec & Gas) MBIA Ser 88A AMT
5.95%, 12/01/27 11,700 11,760,840
AAA NYS Energy Res & Dev Auth PCR
(Rochester Gas & Elec) MBIA AMT
6.50%, 5/15/32 6,460 6,673,051
BBB NYS Envir Fac Auth IDR
(Occidental Petroleum) Ser 93A AMT
5.70%, 9/01/28 15,000 13,795,050
NR NYS Envir Fac Corp Wtr Fac
(Long Island Wtr Corp) Ser 87A AMT
10.00%, 10/01/17 3,200 3,466,560
AAA NYS Envir Fac Corp Wtr Fac
(Spring Valley Wtr) AMBAC Ser 94A AMT
6.30%, 8/01/24 11,800 12,179,724
AAA NYS HFA
MFHR (Erie/Monroe Cnty Proj)
AMBAC Ser 89B AMT
7.55%, 11/01/29 9,585 10,148,406
Aa* NYS HFA SONYMA
MFHR (Syracuse/Springville Proj) Ser 93A AMT
5.85%, 8/15/13 3,000 2,967,030
5.95%, 8/15/24 5,650 5,535,079
15
NEW YORK PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
STANDARD & PRINCIPAL
POOR'S AMOUNT
RATINGS+ (000) VALUE
- ---------------------------------------------------------------------------
Aa* NYS HFA SONYMA
MFHR (Westchester/Onondaga/Rock-land Proj)
Ser 92F AMT
6.70%, 8/15/25 $ 6,000 $ 6,208,560
Aa* NYS Mtg Agy
SFMR Homeowner Mtg Ser 42 AMT
6.65%, 4/01/26 4,500 4,650,300
Aa* NYS Mtg Agy
SFMR Homeowner Mtg Ser 46 AMT
6.65%, 10/01/25 19,995 20,602,248
AAA Onondaga Cnty PCR
(Bristol-Myers Squibb) AMT
5.75%, 3/02/24 8,000 8,203,280
AA- Port Auth of NY & NJ
Cons (95th Ser) AMT
6.125%, 7/15/29 7,000 7,100,660
AAA Port Auth of NY & NJ
Cons (96th Ser) FGIC AMT
6.60%, 10/01/23 7,750 8,228,252
Baa* St. Lawrence Cnty Res Rec
(Solid Waste Disposal) Ser 88 AMT
8.375%, 1/01/11 2,500 2,794,200
AAA Troy HDC
MFHR (Ninth St #2) FHA Ser 90B
8.10%, 2/01/24 3,535 3,991,227
AAA Troy HDC
MFHR FHA Ser 90C
8.10%, 2/01/24 3,820 4,297,615
TOTAL INVESTMENTS-98.9%
(cost $292,429,199) 307,310,986
Other assets less liabilities-1.1% 3,335,053
NET ASSETS-100% $310,646,039
+ Unaudited.
* Moody's or Fitch Rating.
(a) Inverse floater security-the interest rate is subject to change
periodically.
See Glossary of Terms on page 21.
See notes to financial statements.
16
CALIFORNIA PORTFOLIO
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995 ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
STANDARD & PRINCIPAL
POOR'S AMOUNT
RATINGS+ (000) VALUE
- ---------------------------------------------------------------------------
CALIFORNIA MUNICIPAL BONDS-98.8%
A+ California GO
(Veterans Hsg) Ser 95 AMT
6.40%, 2/01/20 $35,000 $35,565,950
A+ California HFA
MFHR (Multi-Unit Rental) Ser 93A AMT
5.60%, 8/01/25 12,000 11,210,880
AA- California HFA
SFMR (Home Mtg Rev) Ser 91G AMT
7.05%, 8/01/27 5,570 5,839,532
AA- California HFA
SFMR (Home Mtg Rev) Ser 93D AMT
5.75%, 8/01/22 10,500 9,924,810
5.85%, 2/01/23 7,920 7,586,806
AA- California HFA
SFMR (Home Mtg Rev) Ser 94H AMT
7.50%, 8/01/25 12,435 13,443,976
AAA California HFA
SFMR (Home Mtg Rev) Ser 95A-2 AMT
6.45%, 8/01/25 9,000 9,175,500
AA- California HFA
SFMR (Home Mtg Rev) Ser E AMT
6.70%, 8/01/25 10,000 10,423,900
A California Poll Ctl Fin Auth
Browning-Ferris Ind (Keller Canyon) AMT
6.875%, 11/01/27 5,000 5,258,100
A+ California Poll Ctl Fin Auth
Res Rec (West Cnty Res Rec) AMT
LOC:Union Bank
5.55%, 1/01/09 5,490 5,199,908
A California Poll Ctl Fin Auth PCR
(Pacific Gas & Elec) Ser 93B AMT
5.85%, 12/01/23 75,000 72,686,250
A+ California Poll Ctl Fin Auth PCR
(San Diego Gas & Elec) Ser 93A-C AMT
5.85%, 6/01/21 3,000 2,984,070
A+ California Poll Ctl Fin Auth PCR
(Southern Calif Edison) Ser 92B AMT
6.40%, 12/01/24 46,030 47,075,341
A1* California Statewide Comm Dev Hosp
(Cedars-Sinai Med Ctr) Ser 93
5.40%, 11/01/15 28,000 26,525,800
A+ Chula Vista PCR
(San Diego Gas & Electric) Ser 92A AMT
6.40%, 12/01/27 28,240 29,259,746
AAA Contra Costa Cnty
MFHR (Byron Park Proj) GNMA Ser 93A AMT
6.40%, 1/20/31 11,860 12,138,473
NR Fairfield Assess Dist
(No Cordelia Imp Dist) Ser 93
7.375%, 9/02/18 2,560 2,636,570
NR Fontana Redev Agy
(Jurupa Hills Proj) Ser 94
8.00%, 1/01/98 5,000 5,107,800
AAA Garden Grove
MFHR (Tudor Grove) GNMA Collat AMT
7.25%, 5/20/32 7,300 7,550,828
AA- Long Beach Harbor Rev
Ser 93 AMT
5.125%, 5/15/13 26,150 24,087,550
5.125%, 5/15/18 36,325 32,839,616
NR Los Angeles Cnty Comm Fac Dist #4
(Calabasas Area) Ser 92A
7.65%, 9/01/17 7,500 7,756,950
7.70%, 9/01/17 5,750 5,967,522
NR Los Angeles Cnty Comm Fac Dist #92-1
(Castaic Union SD Northlake Proj) Ser 92
9.00%, 10/01/19 8,710 9,060,316
BBB+ Los Angeles Comm Redev
MFHR (Grand Ctrl Proj) Ser 93A AMT
5.85%, 12/01/26 7,030 6,701,488
17
CALIFORNIA PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
STANDARD & PRINCIPAL
POOR'S AMOUNT
RATINGS+ (000) VALUE
- ---------------------------------------------------------------------------
AA Los Angeles Harbor Rev
Ser 95A AMT
6.625%, 8/01/25 $15,600 $16,460,184
AAA Northern Calif Trans Agy Elec Rev
(Calif-Oregon Trans) MBIA
5.50%, 4/29/24 15,000 14,293,950
NR Ontario Assess Dist #107
(CA Commerce Ctr So)
7.70%, 9/02/10 6,255 6,450,719
BBB-* Orange Cnty
Foothill/Eastern Trans Corridor Agy Ser 95A
Zero coupon, 1/01/15 18,500 5,042,730
AAA Orange Cnty Airport Rev
(John Wayne Int'l) MBIA Ser 93 AMT
5.50%, 7/01/13 11,000 10,473,980
5.50%, 7/01/18 16,500 15,406,215
A- Orange Cnty Airport Rev
(John Wayne Int'l) Ser 87 AMT
6.625%, 7/01/18 6,780 6,780,746
NR Orange Cnty Comm Fac Dist #87-2
(Portola Hills) Ser 91A
9.30%, 8/15/16 8,950 9,427,393
NR Orange Cnty Ltd Ob Assess Dist #88-1
(Irvine Coast Pelican Hill Proj) Ser 92A
8.25%, 9/02/18 3,990 4,090,229
BBB* Orange Cnty Sr Lien
San Joaquin Hills Transportation Corridor
Zero coupon, 1/01/17 16,000 3,983,200
Zero coupon, 1/01/18 29,400 6,853,728
Zero coupon, 1/01/19 20,000 4,365,800
Zero coupon, 1/01/20 20,000 4,069,200
Zero coupon, 1/01/21 20,000 3,809,600
Zero coupon, 1/01/22 50,000 8,962,000
Zero coupon, 1/01/23 35,000 5,843,600
Zero coupon, 1/01/25 33,100 4,843,854
7.00%, 1/01/30 15,000 15,593,700
AAA Palm Springs COP
Ser 91B ETM
Zero coupon, 4/15/21 50,575 10,431,600
AAA Palm Springs Fin Auth Airport Rev
(Palm Springs Regional) MBIA Ser 92 AMT
6.00%, 1/01/22 6,860 6,885,656
A- Placer Cnty
(Western Placer Waste Mgmt Auth) Ser 94 AMT
6.75%, 7/01/14 6,900 7,105,206
AAA Port of Oakland
MBIA Ser 92E AMT
6.40%, 11/01/22 23,370 24,275,354
6.50%, 11/01/16 11,000 11,580,910
A+ Port of Oakland Spec Fac
(Mitsui O.S.K. Lines) Ser 92A AMT
LOC: Bank of Japan
6.80%, 1/01/19 3,700 3,887,072
NR Riverside Comm Fac Dist #90-1
(Highlander Proj) Ser 91A
8.50%, 9/01/15 3,000 3,198,570
NR Rocklin Spec Tax Comm Fac Dist #3
(Stanford Ranch) Ser 90
7.70%, 11/01/15 4,000 4,238,720
AAA Sacramento Cnty Airport Systems
FGIC Ser 92A AMT
6.00%, 7/01/20 11,750 11,756,697
NR Saddleback Valley Comm Fac Dist #89-1
(Robinson Ranch) Ser 91A
7.70%, 9/01/16 4,000 4,280,320
NR Salinas Assess Dist #90-1
(Harden Ranch) Ser A
6.875%, 9/02/11 5,735 5,698,755
AAA San Francisco City & Cnty Int'l Airport
AMBAC Ser 94 II-6 AMT
6.60%, 5/01/24 5,000 5,315,150
AAA San Francisco City & Cnty Int'l Airport
FGIC Ser 94 II-5 AMT
6.50%, 5/01/24 11,000 11,607,750
18
ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
STANDARD & PRINCIPAL
POOR'S AMOUNT
RATINGS+ (000) VALUE
- ---------------------------------------------------------------------------
AAA San Francisco City & Cnty Int'l Airport
MBIA Ser 93 II-3 AMT
6.10%, 5/01/13 $ 7,990 $ 8,168,896
6.20%, 5/01/20 14,500 14,770,425
AAA San Jose Airport FGIC Ser 93 AMT
5.625%, 3/01/13 6,480 6,328,821
5.70%, 3/01/18 8,825 8,564,045
NR San Marcos
Comm Fac Dist Ser 88-1
7.625%, 9/01/19 1,595 1,623,535
AAA Southern Calif HFA
SFMR Ser 91B AMT GNMA/FNMA Collat
6.90%, 10/01/24 1,665 1,751,747
AAA Southern Calif HFA
SFMR Ser 92A AMT GNMA/FNMA Collat
6.75%, 9/01/22 1,445 1,509,288
NR Tracy Pub Fac Fin Agy
Comm Fac Dist #87-1 Ser 89B
7.50%, 10/01/15 5,000 5,204,800
NR Tracy Pub Fac Fin Agy
Comm Fac Dist #87-1 Ser 92E
7.50%, 10/01/18 3,500 3,647,630
A+ Yolo Cnty Hsg Auth
MFHR (Waggener Ranch Apts) FHA Ser 91 AMT
7.00%, 10/01/33 9,000 9,615,870
TOTAL INVESTMENTS-98.8%
(cost $702,386,495) 724,205,327
Other assets less liabilities-1.2% 8,881,608
NET ASSETS-100% $733,086,935
+ Unaudited.
* Moody's or Fitch Rating.
(a) Inverse floater security-the interest rate is subject to change
periodically.
See Glossary of Terms on page 21.
See notes to financial statements.
19
INSURED CALIFORNIA PORTFOLIO
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995 ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
STANDARD & PRINCIPAL
POOR'S AMOUNT
RATINGS+ (000) VALUE
- ---------------------------------------------------------------------------
CALIFORNIA MUNICIPAL BONDS-102.4%
LONG TERM MUNICIPAL BONDS-100.5%
AAA Alhambra COP
Assess Dist #91-1: Police Fac AMBAC Ser 92
6.75%, 9/01/23 $ 5,000 $ 5,357,100
AAA Brea Pub Fin Auth
Tax Alloc Redev Proj B MBIA Ser 91A
7.00%, 8/01/15 1,470 1,610,899
AAA California HFA
MFHR (Home Mtg Rev) AMBAC Ser 95A
6.25%, 2/01/37 5,000 4,992,000
Aa* California Statewide Comm Dev Hosp
(Cedars-Sinai Med Ctr) Ser 93
5.40%, 11/01/15 14,500 13,736,575
AAA Contra Costa Cnty
Sanitation Dist (Delta Diablo) MBIA
Zero coupon, 12/01/16 3,210 934,688
AAA Coronado Comm Dev Proj
Tax Alloc MBIA Ser 90
7.25%, 9/01/12 2,000 2,196,000
AAA Fairfield Cnty Pub Fin
Auth Tax Alloc (Fairfield Proj) CGIC Ser 93C
5.50%, 8/01/23 9,000 8,581,230
AAA Fontana Pub Fin Auth
Tax Alloc (Fontana Redev) MBIA Ser 93A
5.625%, 9/01/24 9,805 9,578,603
AAA Los Angeles Cnty
Met Trans Auth Ser 93A MBIA
5.625%, 7/01/18 8,000 7,933,520
AAA Los Angeles Cnty
Transportation Comm FGIC Ser 91B
6.50%, 7/01/15 5,000 5,248,150
AAA Los Angeles Cnty Community Redev Tax Alloc
(Bunker Hill Project) FSA Ser 93H
5.60%, 12/01/28 10,000 9,579,200
AAA Madera Cnty COP
Hosp Rev (Valley Childrens Hosp)
MBIA Ser 95
6.125%, 3/15/23 4,000 4,093,360
AAA Mt. Diablo School Dist
Comm Fac FGIC Ser 90
7.05%, 8/01/20 5,000 5,475,600
AAA Northern Calif Trans Agy Elec Rev
(Calif-Oregon Trans) MBIA
5.50%, 4/29/24 5,000 4,764,650
6.062%, 4/29/24 (a) 2,700 2,513,457
AAA Orange Cnty COP
(Loma Ridge Data Ctr Proj) AMBAC
6.00%, 6/01/21 1,000 1,000,540
AAA Palm Springs ETM COP
Ser 91B Zero coupon, 4/15/21 35,925 7,409,890
AAA Rancho Wtr Dist Fin Auth
AMBAC Ser 91
6.427%, 8/17/21 (a) 6,000 6,741,840
AAA Redding Elec Sys Rev COP
MBIA Ser 92A
6.368%, 7/01/22 (a) 4,000 4,314,840
AAA Sacramento Muni Util Dist Elec Rev
FGIC Ser 92A
6.30%, 8/01/18 5,000 5,204,150
AAA San Bernardino Cnty
Joint Pwr Fin Auth CGIC Ser 95A
5.75%, 9/01/25 5,000 4,936,400
AAA San Bernardino Cnty
Redev (Ontario Red Proj 1) MBIA Ser 93
5.80%, 8/01/23 10,000 9,796,300
20
ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
STANDARD & PRINCIPAL
POOR'S AMOUNT
RATINGS+ (000) VALUE
- ---------------------------------------------------------------------------
AAA San Dimas Redev Agy
(Creative Growth) CGIC Ser 91A
6.75%, 9/01/16 $ 1,000 $ 1,068,840
AAA San Francisco City & Cnty Int'l Arpt
MBIA Ser 93 II-4
6.00%, 5/01/14 5,000 5,094,100
AAA Stockton Cnty Wastewater Treatment COP
FGIC Ser 95A
6.80%, 9/01/24 5,000 5,477,950
AAA Univ of California Regents Hosp Rev
(UCLA Med Ctr) MBIA Ser 94
5.50%, 12/01/20 8,685 8,353,494
AAA Yorba Linda Redev Agy
Tax Alloc Bonds MBIA Ser 93A
Zero coupon, 9/01/19 3,300 799,326
Total Long Term Municipal Bonds
(cost $140,784,034) 146,792,702
SHORT TERM MUNICIPAL NOTES-1.9%
A-1 Chula Vista IDR
(San Diego Gas & Elec) Series '92B AMT VRDN
3.75%, 12/01/27 1,400 1,400,000
A-1 Irvine Ranch Wtr Dist
VRDN LOC: The Industrial Bank of Japan
4.10%, 6/01/15 1,000 1,000,000
A-1 Irvine Ranch Wtr Imp Dist
Swr Imp #284 VRDN LOC: The Sumitomo Bank, Ltd.
4.10%, 11/15/13 400 400,000
Total Short Term Municipal Notes
(cost $2,800,000) 2,800,000
TOTAL INVESTMENTS-102.4%
(cost $143,584,034) 149,592,702
Other assets less liabilities-(2.4%) (3,513,470)
NET ASSETS-100% $146,079,232
+ Unaudited.
* Moody's or Fitch Rating.
(a) Inverse floater security-the interest rate is subject to change
periodically.
See notes to financial statements.
Glossary of Terms:
AMBAC American Municipal Bond Assurance Corporation
AMT Alternative Minimum Tax - (subject to)
CGIC Capital Guaranty Insurance Corporation
COP Certificate of Participation
ETM Escrowed to Maturity
FGIC Financial Guaranty Insurance Company
FHA Federal Housing Administration
FNMA Federal National Mortgage Association
FSA Financial Security Assurance, Inc.
GNMA Government National Mortgage Association
GO General Obligation
HDA Housing Development Authority
HDC Housing Development Corporation
HFA Housing Finance Authority
IDA Industrial Development Authority
IDR Industrial Development Revenue
LOC Letter of Credit
MBIA Municipal Bond Investors Assurance
MFHR Multi-Family Housing Revenue
NR Rating not applied for
PCR Pollution Control Revenue
SFMR Single Family Mortgage Revenue
SONYMA State of New York Mortgage Agency
VRDN Variable Rate Demand Note
2
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1995 ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
<TABLE>
<CAPTION>
INSURED INSURED
NATIONAL NATIONAL NEW YORK CALIFORNIA CALIFORNIA
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments in securities, at value (cost:
National-$665,169,907; Ins. National-
$231,900,997; New York-$292,429,199;
California-$702,386,495; Ins. California
-$143,584,034, respectively) $695,919,263 $243,574,368 $307,310,986 $724,205,327 $149,592,702
Cash -0- -0- 2,478,627 -0- -0-
Receivable for investment securities sold 13,400,355 4,508,651 -0- 15,000 -0-
Interest receivable 12,632,324 3,700,937 5,084,938 13,874,613 1,916,670
Receivable for capital stock sold 1,721,949 256,519 574,894 532,007 676,941
Prepaid expenses and other assets 23,838 17,217 -0- -0- -0-
Total assets 723,697,729 252,057,692 315,449,445 738,626,947 152,186,313
LIABILITIES
Due to custodian 1,555,031 2,186,423 -0- 3,400,411 319,127
Payable for investment securities purchased 21,551,054 2,553,368 4,256,569 -0- 5,039,931
Payable for capital stock redeemed 1,154,637 225,216 269,028 1,476,615 452,810
Distribution fee payable 391,457 110,724 153,122 336,830 61,382
Advisory fee payable 118,460 104,012 39,292 124,007 67,588
Accrued expenses and other liabilities 191,013 74,314 85,395 202,149 166,243
Total liabilities 24,961,652 5,254,057 4,803,406 5,540,012 6,107,081
NET ASSETS $698,736,077 $246,803,635 $310,646,039 $733,086,935 $146,079,232
CLASS A SHARES
Net assets $338,311,466 $165,548,283 $183,986,827 $478,534,916 $103,940,326
Shares of capital stock outstanding 32,371,886 16,440,035 19,130,133 45,807,699 7,805,988
CLASS B SHARES
Net assets $252,356,966 $ 58,989,972 $ 94,399,998 $166,758,707 $ 27,815,741
Shares of capital stock outstanding 24,148,680 5,859,651 9,811,101 15,951,828 2,088,924
CLASS C SHARES
Net assets $108,067,645 $ 22,265,380 $ 32,259,214 $ 87,793,312 $ 14,323,165
Shares of capital stock outstanding 10,341,745 2,211,718 3,352,670 8,399,074 1,075,626
COMPOSITION OF NET ASSETS
Capital stock, at par $ 66,862 $ 24,511 $ 32,294 $ 70,159 $ 10,971
Additional paid-in capital 703,446,823 240,610,985 307,843,679 726,768,254 143,968,518
Accumulated net realized loss (35,526,964) (5,505,232) (12,111,721) (15,570,310) (3,908,925)
Net unrealized appreciation of investments 30,749,356 11,673,371 14,881,787 21,818,832 6,008,668
$698,736,077 $246,803,635 $310,646,039 $733,086,935 $146,079,232
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share $10.45 $10.07 $ 9.62 $10.45 $13.32
Sales charge-4.25% of public offering price .46 .45 .43 .46 .59
Maximum offering price $10.91 $10.52 $10.05 $10.91 $13.91
CLASS B SHARES
Net asset value and offering price per share 10.45 10.07 9.62 10.45 13.32
CLASS C SHARES
Net asset value, redemption and offering price
per share $10.45 $10.07 $ 9.62 $10.45 $13.32
</TABLE>
See notes to financial statements.
22
STATEMENT OF OPERATIONS
OCTOBER 31, 1995 ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
<TABLE>
<CAPTION>
INSURED INSURED
NATIONAL NATIONAL NEW YORK CALIFORNIA CALIFORNIA
------------- ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Interest $ 45,682,704 $15,292,085 $20,054,551 $ 47,637,267 $8,791,624
EXPENSES
Advisory Fee 4,357,009 1,448,694 1,878,376 4,482,864 758,429
Distribution fee - Class A 999,923 481,707 543,333 1,401,092 301,648
Distribution fee - Class B 2,497,692 561,860 874,980 1,612,482 251,539
Distribution fee - Class C 1,140,444 229,840 319,313 889,794 121,930
Transfer agency 665,819 182,595 283,979 473,894 81,222
Custodian 119,117 70,483 75,194 114,662 59,095
Administrative 104,778 103,693 103,667 108,547 104,215
Printing 90,258 20,574 33,569 24,800 11,482
Registration 72,244 64,818 4,920 7,786 6,877
Taxes 67,668 23,458 23,925 60,299 11,429
Audit and legal 45,130 44,077 44,904 41,197 38,562
Directors' fees 4,442 5,288 5,006 5,166 4,462
Miscellaneous 21,298 15,699 17,401 31,022 15,256
Total expenses 10,185,822 3,252,786 4,208,567 9,253,605 1,766,146
Less advisory fees waived (see note B) (2,685,230) (273,143) (1,126,920) (2,183,908) (71,127)
Net expenses 7,500,592 2,979,643 3,081,647 7,069,697 1,695,019
Net investment income 38,182,112 12,312,442 16,972,904 40,567,570 7,096,605
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain (loss) on investments (16,742,673) (1,551,031) (8,599,808) (10,675,369) 47,999
Net change in unrealized depreciation
of investments 88,985,630 29,609,236 37,571,643 83,053,467 16,442,245
Net gain on investments 72,242,957 28,058,205 28,971,835 72,378,098 16,490,244
NET INCREASE IN NET ASSETS FROM OPERATIONS $110,425,069 $40,370,647 $45,944,739 $112,945,668 $23,586,849
</TABLE>
See notes to financial statements.
23
STATEMENT OF CHANGES IN NET ASSETS ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
<TABLE>
<CAPTION>
NATIONAL INSURED NATIONAL
---------------------------- ----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCT. 31,1995 OCT. 31,1994 OCT. 31,1995 OCT. 31,1994
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS
Net investment income $ 38,182,112 $ 41,336,843 $ 12,312,442 $ 13,270,616
Net realized loss on investments (16,742,673) (18,784,294) (1,551,031) (3,954,200)
Net change in unrealized
appreciation (depreciation)
of investments 88,985,630 (90,162,931) 29,609,236 (33,116,428)
Net increase (decrease) in net
assets from operations 110,425,069 (67,610,382) 40,370,647 (23,800,012)
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income
Class A (19,579,195) (20,925,782) (8,620,766) (9,399,632)
Class B (12,886,174) (12,416,937) (2,612,853) (2,448,147)
Class C (5,920,496) (7,994,124) (1,078,823) (1,422,837)
Distributions in excess of net
investment income
Class A -0- (913,522) (239,073) (105,638)
Class B -0- (542,066) (72,460) (27,513)
Class C -0- (348,986) (29,919) (15,991)
Net realized gain on investments
Class A -0- (8,514,421) -0- (6,773,608)
Class B -0- (5,076,543) -0- (1,677,888)
Class C -0- (3,549,000) -0- (1,176,244)
CAPITAL STOCK TRANSACTIONS
Net increase (decrease) (95,757,376) 96,419,820 (10,119,842) 18,362,280
Total increase (decrease) (23,718,172) (31,471,943) 17,596,911 (28,485,230)
NET ASSETS
Beginning of year 722,454,249 753,926,192 229,206,724 257,691,954
End of year $698,736,077 $722,454,249 $246,803,635 $229,206,724
</TABLE>
See notes to financial statements.
24
ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
NEW YORK
-----------------------------
YEAR ENDED YEAR ENDED
OCT. 31,1995 OCT. 31,1994
------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 16,972,904 $ 17,556,621
Net realized loss on investments (8,599,808) (3,511,913)
Net change in unrealized appreciation
(depreciation) of investments 37,571,643 (44,342,566)
Net increase (decrease) in net assets
from operations 45,944,739 (30,297,858)
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A (10,790,213) (11,785,597)
Class B (4,577,754) (3,814,288)
Class C (1,680,454) (1,956,736)
Distributions in excess of net investment income
Class A -0- (124,081)
Class B -0- (40,157)
Class C -0- (20,601)
Net realized gain on investments
Class A -0- (768,907)
Class B -0- (227,299)
Class C -0- (141,225)
CAPITAL STOCK TRANSACTIONS
Net increase (decrease) (17,006,966) 36,925,744
Total increase (decrease) 11,889,352 (12,251,005)
NET ASSETS
Beginning of year 298,756,687 311,007,692
End of year $310,646,039 $298,756,687
See notes to financial statements.
25
STATEMENT OF CHANGES IN NET ASSETS (CONT.) ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
<TABLE>
<CAPTION>
CALIFORNIA INSURED CALIFORNIA
---------------------------- ----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCT. 31,1995 OCT. 31,1994 OCT. 31,1995 OCT. 31,1994
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS
Net investment income $ 40,567,570 $ 43,929,351 $ 7,096,605 $ 7,640,236
Net realized gain (loss)
on investments (10,675,369) (4,867,241) 47,999 (3,956,924)
Net change in unrealized
appreciation (depreciation)
of investments 83,053,467 (106,275,455) 16,442,245 (19,452,385)
Net increase (decrease) in net
assets from operations 112,945,668 (67,213,345) 23,586,849 (15,769,073)
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income
Class A (27,565,247) (29,886,237) (5,371,233) (5,838,387)
Class B (8,365,628) (7,898,002) (1,159,355) (1,139,688)
Class C (4,642,175) (6,145,112) (566,017) (662,161)
Distributions in excess of net
investment income
Class A -0- (80,974) (102,666) -0-
Class B -0- (21,399) (22,160) -0-
Class C -0- (16,650) (10,819) -0-
Net realized gain on investments
Class A -0- (3,190,803) -0- (3,968,017)
Class B -0- (818,667) -0- (717,043)
Class C -0- (731,099) -0- (392,156)
CAPITAL STOCK TRANSACTIONS
Net increase (decrease) (74,094,906) 75,451,013 (2,195,497) 2,467,385
Total increase (decrease) (1,722,288) (40,551,275) 14,159,102 (26,019,140)
NET ASSETS
Beginning of year 734,809,223 775,360,498 131,920,130 157,939,270
End of year $733,086,935 $734,809,223 $146,079,232 $131,920,130
</TABLE>
See notes to financial statements.
26
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1995 ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Municipal Income 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 five portfolios: National Portfolio, Insured
National Portfolio, New York Portfolio, California Portfolio and Insured
California Portfolio (the 'Portfolios'). Each series is considered to be a
separate entity for financial reporting and tax purposes. Each 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 and the same terms and conditions, 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 Fund.
1. SECURITY VALUATION
The Fund values municipal securities at fair value based on prices provided by
a recognized pricing service which uses information with respect to
transactions in bonds, quotations from bond dealers, market transactions in
comparable securities and various relationships between securities. Securities
for which market quotations are not readily available and restricted securities
which are subject to limitations as to their resale are valued in good faith at
fair value by the Fund's Adviser under procedures established by the Fund's
Board of Directors. Short-term securities which mature in 60 days or less are
valued at amortized cost, which approximates market value.
2. TAXES
It is the intention of each Portfolio 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 its 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 Fund amortizes premiums and
accrues original issue discounts and market discounts as adjustments to
interest income.
The New York, Insured California and California Portfolios follow an investment
policy of investing primarily in municipal obligations of one state. Economic
changes affecting the state and certain of its public bodies and municipalities
may affect the ability of issuers within the state to pay interest on, or repay
principal of, municipal obligations held by the Portfolios.
4. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex-dividend
date and are determined in accordance with income tax regulations, which may
differ from generally accepted accounting principles. These 'book/tax'
differences are either temporary or permanent in nature. Permanent differences
are reclassified within the capital accounts based on their federal tax-basis
treatment:temporary differences do not require reclassification.
27
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
5. RECLASSIFICATION OF COMPONENTS OF NET ASSETS
The following represent reclassifications of components of net assets at
October 31, 1995:
ACCUMULATED
UNDISTRIBUTED
NET INVESTMENT PAID-IN-
INCOME CAPITAL
-------------- ------------
National Portfolio $2,006,965 $(2,006,965)
Insured National Portfolio 491,459 (491,459)
New York Portfolio 261,154 (261,154)
California Portfolio 126,411 (126,411)
Insured California Portfolio 135,461 (135,461)
These reclassifications were the result of permanent book-to-tax differences
resulting from distributions in excess of net tax-exempt income. These
reclassifications had no effect on net investment income, net realized gains or
net assets.
NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of an investment advisory agreement, the National, New York and
California Portfolios pay Alliance Capital Management L.P., (the 'Adviser') an
advisory fee at an annual rate of up to .625 of 1% of each Portfolio's average
daily net assets. For the Insured National Portfolio, the Agreement provides
for a fee at an annual rate of up to .625 of 1% of the first $200 million, .50
of 1% of the next $200 million and .45 of 1% in excess of $400 million of the
Portfolio's average daily net assets. For the Insured California Portfolio, the
Agreement provides for a fee at an annual rate of up to .55 of 1% of the first
$200 million, .50 of 1% of the next $200 million and .45 of 1% in excess of
$400 million of the Portfolio's average daily net assets.
Such fees are accrued daily and paid monthly. The Adviser has agreed, under the
terms of the investment advisory agreement, to reimburse the Fund to the extent
that the expenses of each of its Portfolios (exclusive of interest, taxes,
brokerage, distribution fees, and extraordinary expenses) exceed the limits
prescribed by any state in which that Portfolio's shares are qualified for
sale. The most restrictive expense limitation is believed to be 2.5% of the
first $30 million, 2% of the next $70 million, and 1.5% of the excess over $100
million of each Portfolio's average daily net assets. No such reimbursement was
required for the year ended October31, 1995. For the year ended October 31,
1995 the Adviser voluntarily agreed to waive part of its advisory fee for the
National, Insured National, New York, California and Insured California
Portfolios.
The aggregate amounts of such fee waivers were: National Portfolio, $2,685,230;
Insured National Portfolio, $273,143; New York Portfolio, $1,126,920;
California Portfolio, $2,183,908; and Insured California, $71,127. Pursuant to
the Advisory Agreement, the Fund paid $524,900 to the Adviser representing the
cost of certain legal and accounting services provided to each Portfolio by the
Adviser.
Each Portfolio compensates Alliance Fund Services, Inc. (a wholly-owned
subsidiary of the Adviser) under a Services Agreement for providing personnel
and facilities to perform transfer agency services for each Portfolio. Such
compensation amounted to $414,164 for the National Portfolio, $107,804 for the
Insured National Portfolio, $170,159 for the New York Portfolio, $295,422 for
the California Portfolio and $46,974 for the Insured California Portfolio.
Alliance Fund Distributors, Inc. (a wholly-owned subsidiary of the Adviser)
serves as the Distributor of the Fund's capital stock. The amount of front-end
sales charges received by the Distributor from sales of the respective
Portfolio's Class A shares for the year ended October 31, 1995 were: National
Portfolio, $53,831; Insured National Portfolio, $24,091; New York Portfolio,
$25,809; California Portfolio, $62,269; and Insured California Portfolio,
$23,459. The amount of contingent deferred sales charge imposed upon
redemptions by shareholders of Class B shares were: National Portfolio,
$541,300; Insured National Portfolio, $117,707; New York Portfolio, $186,889;
California Portfolio, $466,603; and Insured California Portfolio, $61,832.
28
ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
NOTE C: DISTRIBUTION SERVICES AGREEMENT
Each Portfolio has adopted a Distribution Services Agreement (the 'Agreement')
pursuant to Rule 12b-1 under the Investment Company Act of 1940 for Class A,
Class B and Class C shares. Under the Agreement, each Portfolio pays a
distribution fee to the Distributor at an annual rate of up to .30 of 1% of
each Portfolio's average daily net assets attributable to the Class A shares
and 1% of each Portfolio's average daily net assets attributable to the Class B
and Class C shares. 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 each Portfolio as follows:
PORTFOLIO CLASS B CLASS C
- ------------------ ---------- ----------
National $4,580,693 $1,735,266
Insured National 1,879,251 582,379
New York 2,854,710 614,470
California 4,648,912 1,398,507
Insured California 1,235,161 379,783
Such costs may be recovered from each 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 each Portfolio's shares.
NOTE D: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term securities)
for the year ended October 31, 1995 were:
PORTFOLIO PURCHASES SALES
- ------------------- ------------ ------------
National $820,502,524 $927,705,612
Insured National 406,379,755 422,533,212
New York 207,293,535 231,156,932
California 278,480,824 348,033,596
Insured California 145,424,337 139,179,922
At October 31, 1995, the cost of securities for federal income tax purposes,
gross unrealized appreciation, gross unrealized depreciation and net unrealized
appreciation of investments for each Portfolio were as follows:
GROSS UNREALIZED NET
---------------------------- UNREALIZED
TAX COST APPRECIATION (DEPRECIATION) APPRECIATION
------------ ------------ -------------- ------------
National $665,218,675 $34,065,198 $(3,364,613) $30,700,585
Insured National 231,993,980 11,704,812 (124,424) 11,580,388
New York 292,444,938 15,478,345 (612,297) 14,866,048
California 702,410,507 28,674,454 (6,879,634) 21,794,820
Insured California 143,584,034 6,507,768 (499,100) 6,008,668
NOTE E: TAXES
For Federal income tax purposes at October 31, 1995, the Fund had capital loss
carryforwards for the following Portfolios: $17,246,158 expiring in 2002 and
$18,232,038 expiring in 2003 for the National Portfolio; $3,946,364 expiring in
2002 and $1,465,884 expiring in 2003 for the Insured National Portfolio;
$1,550,512 expiring in 2002 and $10,545,470 expiring in 2003 for the New York
Portfolio; $4,748,470 expiring in 2002 and $10,797,828 expiring in 2003 for the
California Portfolio; and $3,908,925 expiring in 2002 for the Insured
California Portfolio.
29
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
NOTE F: CAPITAL STOCK
There are 3,000,000,000 shares of $.001 par value capital stock authorized,
designated Class A, Class B and Class C shares. There are 200,000,000
authorized shares for each Class.
NATIONAL PORTFOLIO
-------------------------------------------------------
SHARES AMOUNT
------------------------- ----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1995 1994 1995 1994
----------- ------------ ------------- -------------
CLASS A
Shares sold 4,787,898 8,763,506 $ 47,317,764 $ 91,292,397
Shares issued in
reinvestment of
dividends and
distributions 1,139,057 1,912,150 11,273,668 19,811,794
Shares redeemed (9,571,534) (9,648,259) (93,714,112) (98,831,346)
Net increase(decrease) (3,644,579) 1,027,397 $(35,122,680) $ 12,272,845
CLASS B
Shares sold 3,237,841 11,186,358 $ 31,671,965 $117,243,703
Shares issued in
reinvestment of
dividends and
distributions 840,798 1,232,690 8,326,644 12,747,638
Shares redeemed (6,546,335) (5,399,812) (63,976,163) (55,318,876)
Net increase(decrease) (2,467,696) 7,019,236 $(23,977,554) $ 74,672,465
CLASS C
Shares sold 2,513,404 13,213,233 $ 24,850,658 $139,780,039
Shares issued in
reinvestment of
dividends and
distributions 506,602 962,250 5,001,846 10,071,107
Shares redeemed (6,842,684) (13,675,221) (66,509,646) (140,376,636)
Net increase(decrease) (3,822,678) 500,262 $(36,657,142) $ 9,474,510
30
ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
INSURED NATIONAL PORTFOLIO
------------------------------------------------------
SHARES AMOUNT
------------------------- ---------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1995 1994 1995 1994
----------- ------------ ------------ -------------
CLASS A
Shares sold 2,109,319 1,451,617 $19,729,676 $ 14,585,949
Shares issued in
reinvestment of
dividends and
distributions 463,475 973,251 4,426,013 9,757,292
Shares redeemed (3,272,946) (2,555,318) (30,921,711) (25,044,847)
Net decrease (700,152) (130,450) $(6,766,022) $ (701,606)
CLASS B
Shares sold 1,180,257 2,319,991 $11,132,100 $ 23,387,769
Shares issued in
reinvestment of
dividends and
distributions 173,416 303,499 1,661,573 3,033,047
Shares redeemed (1,232,039) (876,614) (11,659,140) (8,468,612)
Net increase 121,634 1,746,876 $ 1,134,533 $ 17,952,204
CLASS C
Shares sold 488,859 3,170,564 $ 4,578,511 $ 32,420,564
Shares issued in
reinvestment of
dividends and
distributions 107,163 203,843 1,023,246 2,055,363
Shares redeemed (1,074,063) (3,366,643) (10,090,110) (33,364,245)
Net increase(decrease) (478,041) 7,764 $(4,488,353) $ 1,111,682
31
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
NEW YORK PORTFOLIO
--------------------------------------------------------
SHARES AMOUNT
-------------------------- ----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1995 1994 1995 1994
------------ ------------ ------------- -------------
CLASS A
Shares sold 1,541,732 3,168,916 $ 14,097,320 $ 30,501,075
Shares issued in
reinvestment of
dividends and
distributions 730,643 897,711 6,699,094 8,532,886
Shares redeemed (4,026,816) (4,249,500) (36,382,127) (39,961,104)
Net decrease (1,754,441) (182,873) $(15,585,713) $ (927,143)
CLASS B
Shares sold 1,765,580 4,324,083 $ 16,166,559 $ 41,717,290
Shares issued in
reinvestment of
dividends and
distributions 330,093 303,825 3,029,271 2,878,860
Shares redeemed (1,678,380) (986,606) (15,223,910) (9,238,391)
Net increase 417,293 3,641,302 $ 3,971,920 $ 35,357,759
CLASS C
Shares sold 774,912 3,280,476 $ 7,137,932 $ 32,182,546
Shares issued in
reinvestment of
dividends and
distributions 145,723 161,628 1,332,925 1,545,458
Shares redeemed (1,539,788) (3,230,822) (13,864,030) (31,232,876)
Net increase(decrease) (619,153) 211,282 $ (5,393,173) $ 2,495,128
CALIFORNIA PORTFOLIO
--------------------------------------------------------
SHARES AMOUNT
-------------------------- ----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1995 1994 1995 1994
------------ ------------ ------------- -------------
CLASS A
Shares sold 4,608,607 8,326,422 $ 45,697,476 $ 86,206,380
Shares issued in
reinvestment of
dividends and
distributions 1,354,247 1,695,587 12,936,654 17,454,436
Shares redeemed (10,053,974) (8,870,972) (97,704,751) (89,991,938)
Net increase(decrease) (4,091,120) 1,151,037 $(39,070,621) $ 13,668,878
CLASS B
Shares sold 2,379,727 7,617,761 $ 23,517,537 $ 79,269,903
Shares issued in
reinvestment of
dividends and
distributions 477,127 481,615 4,724,963 4,900,749
Shares redeemed (3,973,996) (2,654,651) (38,724,734) (26,837,236)
Net increase(decrease) (1,117,142) 5,444,725 $(10,482,234) $ 57,333,416
32
ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
CALIFORNIA PORTFOLIO
------------------------------------------------------
SHARES AMOUNT
------------------------ ----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1995 1994 1995 1994
----------- ----------- ------------- -------------
CLASS C
Shares sold 1,828,084 8,683,048 $ 18,294,426 $ 91,364,593
Shares issued in
reinvestment of
dividends and
distributions 335,322 523,322 3,304,549 5,406,737
Shares redeemed (4,758,478) (8,982,706) (46,141,026) (92,322,611)
Net increase(decrease) (2,595,072) 223,664 $(24,542,051) $ 4,448,719
INSURED CALIFORNIA PORTFOLIO
------------------------------------------------------
SHARES AMOUNT
------------------------ ----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1995 1994 1995 1994
----------- ----------- ------------- -------------
CLASS A
Shares sold 1,612,641 1,853,715 $ 19,702,408 $ 24,454,733
Shares issued in
reinvestment of
dividends and
distributions 201,630 409,982 2,542,607 5,430,477
Shares redeemed (2,051,864) (2,689,879) (25,275,836) (34,914,619)
Net decrease (237,593) (426,182) $ (3,030,821) $ (5,029,409)
CLASS B
Shares sold 812,573 939,403 $ 10,053,570 $ 12,556,744
Shares issued in
reinvestment of
dividends and
distributions 50,558 101,345 638,689 1,350,667
Shares redeemed (859,461) (445,132) (10,363,603) (5,789,369)
Net increase 3,670 595,616 $ 328,656 $ 8,118,042
CLASS C
Shares sold 474,208 1,151,303 $ 5,898,558 $ 15,496,034
Shares issued in
reinvestment of
dividends and
distributions 29,986 59,428 379,781 790,742
Shares redeemed (486,148) (1,273,601) (5,771,671) (16,908,024)
Net increase (decrease) 18,046 (62,870) $ 506,668 $ (621,248)
33
FINANCIAL HIGHLIGHTS ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR
<TABLE>
<CAPTION>
A NATIONAL PORTFOLIO
----------------------------------------------------------
CLASS A
----------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 9.41 $11.05 $10.19 $ 9.96 $ 9.47
INCOME FROM INVESTMENT OPERATIONS
Net investment income .58** .57** .61** .65** .66**
Net realized and unrealized gain
(loss) on investments 1.04 (1.37) .88 .28 .49
Net increase (decrease) in net asset
value from operations 1.62 (.80) 1.49 .93 1.15
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.58) (.57) (.62) (.65) (.66)
Distributions in excess of net
investment income -0- (.03) -0- -0- -0-
Distributions from net realized gains -0- (.24) (.01) (.05) -0-
Total dividends and distributions (.58) (.84) (.63) (.70) (.66)
Net asset value, end of year $10.45 $ 9.41 $11.05 $10.19 $ 9.96
TOTAL RETURN
Total investment return based on net
asset value(b) 17.73% (7.65)% 14.94% 9.60% 12.55%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year(000's omitted) $338,311 $338,814 $386,484 $261,895 $207,167
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements .71% .62% .65% .83% .75%
Expenses, before waivers/
reimbursements 1.09% 1.09% 1.08% 1.11% 1.14%
Net investment income, net of
waivers/reimbursements 5.84% 5.61% 5.69% 6.35% 6.81%
Portfolio turnover rate 118% 110% 233% 86% 64%
</TABLE>
See footnote summary on page 43.
34
ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
NATIONAL PORTFOLIO
--------------------------------------------------------------------------
CLASS B CLASS C
------------------------------------ ------------------------------------
JAN. 4,1993* MAY 3,1993*
YEAR ENDED OCTOBER 31, TO YEAR ENDED OCTOBER 31, TO
---------------------- OCTOBER 31, ---------------------- OCTOBER 31,
1995 1994 1993 1995 1994 1993
---------- ---------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $9.41 $11.05 $10.43 $9.41 $11.05 $10.70
INCOME FROM INVESTMENT OPERATIONS
Net investment income .51** .50** .44** .51** .50** .26**
Net realized and unrealized gain
(loss) on investments 1.04 (1.38) .63 1.04 (1.38) .36
Net increase (decrease) in net asset
value from operations 1.55 (.88) 1.07 1.55 (.88) .62
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.51) (.50) (.45) (.51) (.50) (.27)
Distributions in excess of net
investment income -0- (.02) -0- -0- (.02) -0-
Distributions from net realized gains -0- (.24) -0- -0- (.24) -0-
Total dividends and distributions (.51) (.76) (.45) (.51) (.76) (.27)
Net asset value, end of period $10.45 $9.41 $11.05 $10.45 $9.41 $11.05
TOTAL RETURN
Total investment return based on net
asset value(b) 16.91% (8.34)% 10.43% 16.93% (8.33)% 5.84%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period(000's omitted) $252,357 $250,391 $216,489 $108,068 $133,249 $150,953
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements 1.42% 1.32% 1.36%(a) 1.41% 1.31% 1.36%(a)
Expenses, before waivers/
reimbursements 1.80% 1.80% 1.78%(a) 1.78% 1.79% 1.78%(a)
Net investment income, net of
waivers/reimbursements 5.13% 4.91% 4.59%(a) 5.16% 4.89% 4.17%(a)
Portfolio turnover rate 118% 110% 233% 118% 110% 233%
</TABLE>
See footnote summary on page 43.
35
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR
<TABLE>
<CAPTION>
INSURED NATIONAL PORTFOLIO
A ----------------------------------------------------------
CLASS A
----------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 8.96 $10.76 $ 9.87 $ 9.88 $ 9.39
INCOME FROM INVESTMENT OPERATIONS
Net investment income .51** .53** .56** .60** .61**
Net realized and unrealized gain
(loss) on investments 1.13 (1.40) .96 .15 .49
Net increase (decrease) in net asset
value from operations 1.64 (.87) 1.52 .75 1.10
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.51) (.53) (.57) (.60) (.61)
Distributions in excess of net
investment income (.02) (.01) -0- -0- -0-
Distributions from net realized gains -0- (.39) (.06) (.16) -0-
Total dividends and distributions (.53) (.93) (.63) (.76) (.61)
Net asset value, end of year $10.07 $ 8.96 $10.76 $ 9.87 $ 9.88
TOTAL RETURN
Total investment return based on net
asset value(b) 18.72% (8.69)% 15.82% 7.88% 12.08%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year(000's omitted) $165,548 $153,656 $185,876 $149,632 $130,723
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements 1.01% .66% .73% .81% .92%
Expenses, before waivers/
reimbursements 1.12% 1.11% 1.11% 1.12% 1.17%
Net investment income, net of
waivers/reimbursements 5.37% 5.40% 5.40% 6.04% 6.34%
Portfolio turnover rate 171% 149% 165% 105% 96%
</TABLE>
See footnote summary on page 43.
36
ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
INSURED NATIONAL PORTFOLIO
--------------------------------------------------------------------------
CLASS B CLASS C
------------------------------------ ------------------------------------
JAN. 4,1993* MAY 3,1993*
YEAR ENDED OCTOBER 31, TO YEAR ENDED OCTOBER 31, TO
---------------------- OCTOBER 31, ---------------------- OCTOBER 31,
1995 1994 1993 1995 1994 1993
---------- ---------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 8.96 $10.76 $10.10 $ 8.96 $10.76 $10.41
INCOME FROM INVESTMENT OPERATIONS
Net investment income .45** .46** .40** .45** .46** .24**
Net realized and unrealized gain
(loss) on investments 1.12 (1.40) .66 1.12 (1.40) .35
Net increase (decrease) in net asset
value from operations 1.57 (.94) 1.06 1.57 (.94) .59
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.45) (.46) (.40) (.45) (.46) (.24)
Distributions in excess of net
investment income (.01) (.01) -0- (.01) (.01) -0-
Distributions from net realized gains -0- (.39) -0- -0- (.39) -0-
Total dividends and distributions (.46) (.86) (.40) (.46) (.86) (.24)
Net asset value, end of period $10.07 $ 8.96 $10.76 $10.07 $ 8.96 $10.76
TOTAL RETURN
Total invesment return based on net
asset value(b) 17.91% (9.38)% 10.68% 17.91% (9.38)% 5.75%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period(000's omitted) $58,990 $51,439 $42,954 $22,265 $24,112 $28,862
Ratio to average net assets of
Expenses, net of waivers/
reimbursements 1.72% 1.37% 1.45%(a) 1.71% 1.36% 1.45%(a)
Expenses, before waivers/
reimbursements 1.83% 1.82% 1.83%(a) 1.82% 1.81% 1.83%(a)
Net investment income, net of
waivers/reimbursements 4.65% 4.71% 4.31%(a) 4.69% 4.68% 3.98%(a)
Portfolio turnover rate 171% 149% 165% 171% 149% 165%
</TABLE>
See footnote summary on page 43.
37
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR
<TABLE>
<CAPTION>
NEW YORK PORTFOLIO
----------------------------------------------------------
CLASS A
----------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 8.72 $10.17 $ 9.53 $ 9.30 $ 8.78
INCOME FROM INVESTMENT OPERATIONS
Net investment income .55** .55** .57** .60** .62**
Net realized and unrealized gain
(loss) on investments .90 (1.40) .79 .24 .52
Net increase (decrease) in net asset
value from operations 1.45 (.85) 1.36 .84 1.14
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.55) (.55) (.58) (.60) (.62)
Distributions in excess of net
investment income -0- (.01) -0- -0- -0-
Distributions from net realized gains -0- (.04) (.14) (.01) -0-
Total dividends and distributions (.55) (.60) (.72) (.61) (.62)
Net asset value, end of year $ 9.62 $ 8.72 $10.17 $ 9.53 $ 9.30
TOTAL RETURN
Total investment return based on net
asset value(b) 17.10% (8.76)% 14.71% 9.39% 13.36%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year(000's omitted) $183,987 $182,170 $214,259 $162,549 $136,484
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements .75% .66% .68% .70% .65%
Expenses, before waivers/
reimbursements 1.12% 1.11% 1.13% 1.13% 1.20%
Net investment income, net of
waivers/reimbursements 5.93% 5.75% 5.76% 6.37% 6.81%
Portfolio turnover rate 69% 69% 63% 69% 48%
</TABLE>
See footnote summary on page 43.
38
ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
NEW YORK PORTFOLIO
--------------------------------------------------------------------------
CLASS B CLASS C
------------------------------------ ------------------------------------
JAN. 4,1993* MAY 3,1993*
YEAR ENDED OCTOBER 31, TO YEAR ENDED OCTOBER 31, TO
---------------------- OCTOBER 31, ---------------------- OCTOBER 31,
1995 1994 1993 1995 1994 1993
---------- ---------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 8.72 $10.17 $ 9.61 $ 8.72 $10.17 $ 9.89
INCOME FROM INVESTMENT OPERATIONS
Net investment income .48** .48** .41** .48** .48** .24**
Net realized and unrealized gain
(loss) on investments .90 (1.41) .56 .90 (1.41) .29
Net increase (decrease) in net asset
value from operations 1.38 (.93) .97 1.38 (.93) .53
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.48) (.47) (.41) (.48) (.47) (.25)
Distributions in excess of net
investment income -0- (.01) -0- -0- (.01) -0-
Distributions from net realized gains -0- (.04) -0- -0- (.04) -0-
Total dividends and distributions (.48) (.52) (.41) (.48) (.52) (.25)
Net asset value, end of period $ 9.62 $ 8.72 $10.17 $ 9.62 $ 8.72 $10.17
TOTAL RETURN
Total investment return based on net
asset value(b) 16.19% (9.44)% 10.29% 16.19% (9.44)% 5.37%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year(000's omitted) $94,400 $81,941 $58,504 $32,259 $34,646 $38,245
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements 1.45% 1.36% 1.39%(a) 1.44% 1.36% 1.38%(a)
Expenses, before waivers/
reimbursements 1.83% 1.82% 1.84%(a) 1.82% 1.81% 1.84%(a)
Net investment income, net of
waivers/reimbursements 5.21% 5.05% 4.70%(a) 5.24% 5.03% 4.42%(a)
Portfolio turnover rate 69% 69% 63% 69% 69% 63%
</TABLE>
See footnote summary on page 43.
39
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR
<TABLE>
<CAPTION>
CALIFORNIA PORTFOLIO
----------------------------------------------------------
CLASS A
----------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 9.43 $10.90 $10.06 $ 9.97 $ 9.58
INCOME FROM INVESTMENT OPERATIONS
Net investment income .59** .59** .61** .65** .67**
Net realized and unrealized gain
(loss) on investments 1.02 (1.41) .85 .13 .39
Net increase (decrease) in net asset
value from operations 1.61 (.82) 1.46 .78 1.06
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.59) (.59) (.61) (.65) (.67)
Distributions from net realized gains -0- (.06) (.01) (.04) -0-
Total dividends and distributions (.59) (.65) (.62) (.69) (.67)
Net asset value, end of year $10.45 $ 9.43 $10.90 $10.06 $ 9.97
TOTAL RETURN
Total investment return based on net
asset value(b) 17.55% (7.73)% 14.90% 8.05% 11.42%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year(000's omitted) $478,535 $470,308 $531,293 $361,661 $228,755
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements .74% .64% .74% .59% .39%
Expenses, before waivers/
reimbursements 1.04% 1.05% 1.06% 1.07% 1.11%
Net investment income, net of
waivers/reimbursements 5.90% 5.78% 5.74% 6.38% 6.80%
Portfolio turnover rate 39% 45% 83% 77% 106%
</TABLE>
See footnote summary on page 43.
40
ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CALIFORNIA PORTFOLIO
--------------------------------------------------------------------------
CLASS B CLASS C
------------------------------------ ------------------------------------
JAN. 4,1993* MAY 3,1993*
YEAR ENDED OCTOBER 31, TO YEAR ENDED OCTOBER 31, TO
---------------------- OCTOBER 31, ---------------------- OCTOBER 31,
1995 1994 1993 1995 1994 1993
---------- ---------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.43 $10.90 $10.27 $ 9.43 $10.90 $10.54
INCOME FROM INVESTMENT OPERATIONS
Net investment income .51** .52** .44** .51** .52** .26**
Net realized and unrealized gain
(loss) on investments 1.02 (1.41) .63 1.02 (1.41) .36
Net increase (decrease) in net asset
value from operations 1.53 (.89) 1.07 1.53 (.89) .62
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.51) (.52) (.44) (.51) (.52) (.26)
Distributions from net realized gains -0- (.06) -0- -0- (.06) -0-
Total dividends and distributions (.51) (.58) (.44) (.51) (.58) (.26)
Net asset value, end of period $10.45 $ 9.43 $10.90 $10.45 $ 9.43 $10.90
TOTAL RETURN
Total investment return based on net
asset value(b) 16.64% (8.43)% 10.60% 16.64% (8.43)% 5.98%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period(000's omitted) $166,759 $160,879 $126,688 $87,793 $103,622 $117,379
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements 1.45% 1.35% 1.44%(a) 1.44% 1.34% 1.44%(a)
Expenses, before waivers/
reimbursements 1.75% 1.75% 1.78%(a) 1.74% 1.75% 1.78%(a)
Net investment income, net of
waivers/reimbursements 5.19% 5.07% 4.66%(a) 5.22% 5.06% 4.42%(a)
Portfolio turnover rate 39% 45% 83% 39% 45% 83%
</TABLE>
See footnote summary on page 43.
41
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR
<TABLE>
<CAPTION>
INSURED CALIFORNIA PORTFOLIO
----------------------------------------------------------
CLASS A
----------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $11.79 $14.25 $12.99 $12.80 $12.19
INCOME FROM INVESTMENT OPERATIONS
Net investment income .68** .69** .70** .76** .77**
Net realized and unrealized gain
(loss) on investments 1.54 (1.99) 1.30 .18 .61
Net increase (decrease) in net asset
value from operations 2.22 (1.30) 2.00 .94 1.38
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.68) (.69) (.71) (.75) (.77)
Dividends in excess of net
investment income (.01) -0- -0- -0- -0-
Distributions from net realized gains -0- (.47) (.03) -0- -0-
Total dividends and distributions (.69) (1.16) (.74) (.75) (.77)
Net asset value, end of year $13.32 $11.79 $14.25 $12.99 $12.80
TOTAL RETURN
Total investment return based on net
asset value(b) 19.29% (9.73)% 15.64% 7.52% 11.62%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year(000's omitted) $103,940 $94,857 $120,734 $90,477 $69,757
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements 1.04% .82% .94% .78% .79%
Expenses, before waivers/
reimbursements 1.09% 1.08% 1.08% 1.09% 1.20%
Net investment income, net of
waivers/reimbursements 5.34% 5.29% 5.06% 5.77% 6.13%
Portfolio turnover rate 103% 100% 186% 60% 59%
</TABLE>
See footnote summary on page 43.
42
ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
INSURED CALIFORNIA PORTFOLIO
--------------------------------------------------------------------------
CLASS B CLASS C
------------------------------------ ------------------------------------
JAN. 4,1993* MAY 3,1993*
YEAR ENDED OCTOBER 31, TO YEAR ENDED OCTOBER 31, TO
---------------------- OCTOBER 31, ---------------------- OCTOBER 31,
1995 1994 1993 1995 1994 1993
---------- ---------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $11.79 $14.25 $13.37 $11.79 $14.25 $13.78
INCOME FROM INVESTMENT OPERATIONS
Net investment income .58** .60** .49** .58** .60** .29**
Net realized and unrealized gain
(loss) on investments 1.54 (2.00) .89 1.54 (2.00) .48
Net increase (decrease) in net asset
value from operations 2.12 (1.40) 1.38 2.12 (1.40) .77
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.58) (.59) (.50) (.58) (.59) (.30)
Distributions in excess of net
investment income (.01) -0- -0- (.01) -0- -0-
Distributions from net realized gains -0- (.47) -0- -0- (.47) -0-
Total dividends and distributions (.59) (1.06) (.50) (.59) (1.06) (.30)
Net asset value, end of period $13.32 $11.79 $14.25 $13.32 $11.79 $14.25
TOTAL RETURN
Total investment return based on net
asset value(b) 18.35% (10.43)% 10.43% 18.35% (10.43)% 5.63%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period(000's omitted) $27,816 $24,591 $21,234 $14,323 $12,472 $15,971
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements 1.74% 1.53% 1.65%(a) 1.74% 1.52% 1.65%(a)
Expenses, before waivers/
reimbursements 1.80% 1.78% 1.79%(a) 1.79% 1.77% 1.79%(a)
Net investment income, net of
waivers/reimbursements 4.61% 4.60% 3.85%(a) 4.64% 4.59% 3.74%(a)
Portfolio turnover rate 103% 100% 186% 103% 100% 186%
</TABLE>
* Commencement of distribution.
** Net of fee waived and expenses reimbursed by the Adviser.
(a) Annualized
(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 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.
43
REPORT OF ERNST & YOUNG LLP
INDEPENDENT AUDITORS ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
ALLIANCE MUNICIPAL INCOME FUND, INC.
We have audited the accompanying statement of assets and liabilities, including
the portfolios of investments, of Alliance Municipal Income Fund, Inc.
(comprising, respectively, the National, Insured National, New York,
California, and Insured California Portfolios) as of October 31, 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
October 31, 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 each
of the respective portfolios constituting the Alliance Municipal Income Fund,
Inc. at October 31, 1995, the results of their operations for the year then
ended, the changes in their 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
December 8, 1995
FEDERAL TAX INFORMATION (UNAUDITED)
_______________________________________________________________________________
In accordance with Federal Requirements, the Fund designates substantially all
the dividends paid from investment income-net during the fiscal year ended
October 31, 1995 as 'exempt-interest dividends.'
As required by Federal regulations, shareholders will receive notification of
their portion of the Fund's taxable ordinary dividends and capital gains
distributions paid (if any) for the 1995 calendar year early in 1996.
<PAGE>
APPENDIX A
BOND AND COMMERCIAL PAPER RATINGS
Incorporated by reference from "Appendix A" contained in
the Rule 497 SAI.
A-1
<PAGE>
APPENDIX B
FUTURES CONTRACTS AND RELATED OPTIONS
Incorporated by reference from "Appendix B" contained in
the Rule 497 SAI.
B-1
<PAGE>
APPENDIX C
OPTIONS ON MUNICIPAL AND U.S. GOVERNMENT SECURITIES
Incorporated by reference from "Appendix C" contained in
the Rule 497 SAI.
C-1
00250011.AG1
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. Financial Statements and Exhibits
(a) Financial Statements
Included in the Prospectus:
Included in the Statement of Additional Information:
Portfolio of Investments - October 31, 1995
- National Portfolio
- Insured National Portfolio
- New York Portfolio
- California Portfolio
- Insured California Portfolio
Statements of Assets and Liabilities - October 31, 1995.
Statements of Operations for the year ended October 31,
1995.
Statements of Changes in Net Assets for the year ended
October 31, 1995 and October 31, 1994.
Notes to Financial Statements - October 31, 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) Articles of Incorporation of the Registrant
-Incorporated herein by reference as Exhibit 1
to Post-Effective Amendment No. 4 to
Registrant's Registration Statement on Form
N-1A, filed on November 16, 1987 (File Nos.
33-7812 and 811-4791).
(2) By-Laws of the Registrant - Incorporated
herein by reference as Exhibit 2 to
Post-Effective Amendment No. 4 to Registrant's
Registration Statement on Form N-1A, filed on
November 16, 1987 (File Nos. 33-7812 and 811-
4791).
C-1
<PAGE>
(4) (a) Form of certificate for shares of Common
Stock of Registrant's High Income Tax-Free
Portfolio, predecessor to the National
Portfolio - Incorporated herein by reference
as Exhibit 4(a) to Post-Effective Amendment
No. 5 to Registrant's Registration Statement
on Form N-1A, filed on March 7, 1988 (File
Nos. 33-7812 and 811-4791).
(b) Form of certificate for shares of Common
Stock of Registrant's High Bracket Tax-Free
Portfolio, predecessor to the Insured National
Portfolio - Incorporated herein by reference
as Exhibit 4(b) to Post-Effective Amendment
No. 5 to Registrant's Registration Statement
on Form N-1A, filed on March 7, 1988 (File
Nos. 33-7812 and 811-4791).
(c) Form of certificate for shares of Common
Stock of Registrant's New York Portfolio -
Incorporated herein by reference as Exhibit
4(c) to Post-Effective Amendment No. 5 to
Registrant's Registration Statement on Form
N-1A, filed on March 7, 1988 (File Nos. 33-
7812 and 811-4791).
(d) Form of certificate for shares of Common
Stock of Registrant's California Portfolio -
Incorporated herein by reference as Exhibit
4(d) to Post-Effective Amendment No. 5 to
Registrant's Registration Statement on Form
N-1A, filed on March 7, 1988 (File Nos. 33-
7812 and 811-4791).
(e) Form of certificate for shares of Common
Stock of Registrant's Insured California
Portfolio -Incorporated herein by reference as
Exhibit 4(e) to Post-Effective Amendment No. 5
to Registrant's Registration Statement on Form
N-1A, filed on March 7, 1988 (File Nos. 33-
7812 and 811-4791).
(5)(a) Advisory Agreement between the Registrant and
Alliance Capital Management L.P. dated July
22, 1992 - Incorporated by reference as
Exhibit 5 to Post-Effective Amendment No. 12
to Registrant's Registration Statement on Form
N-1A, filed on November 27, 1992 (File Nos.
33-7812 and 811-4791).
C-2
<PAGE>
(6)(a) Distribution Services Agreement between
and (15) the Registrant and Alliance Fund Distributors,
Inc. dated July 22, 1992, as amended April 30,
1993 - Incorporated herein by reference as
Exhibit 6(a) to Post-Effective Amendment No.
16 to Registrant's Registration Statement on
Form N-1A, filed on October 29, 1993 (File
Nos. 33-7812 and 811-4791).
(b) 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. 16 to
Registrant's Registration Statement on Form
N-1A, filed on October 29, 1993 (File Nos. 33-
7812 and 811-4791).
(c) 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. 16 to
Registrant's Registration Statement on Form
N-1A, filed on October 29, 1993 (File Nos. 33-
7812 and 811-4791).
(8)(a) Custodian Contract with State Street Bank and
Trust Company as assigned to Registrant by
Alliance Tax-Free Income Fund, the predecessor
of the Registrant - Incorporated herein by
reference as Exhibit 8 to Post-Effective
Amendment No. 5 to Registrant's Registration
Statement on Form N-1A, filed on March 7, 1988
(File Nos. 33-7812 and 811-4791).
(b) Assignment to Registrant of the then existing
Custodian Agreement between Alliance Tax-Free
Income Fund, the predecessor of the
Registrant, and State Street Bank and Trust
Company - Incorporated herein by reference as
Exhibit 8 to Post-Effective Amendment No. 4 to
Registrant's Registration Statement on Form
N-1A, filed on November 16, 1987 (File Nos.
33-7812 and 811-4791).
(9) Transfer Agency Agreement between Registrant and
Alliance Fund Services, Inc - Incorporated herein
by reference as Exhibit 9 to Post-Effective
Amendment No. 7 to Registrant's Registration
C-3
<PAGE>
Statement on Form N-1A, filed on February 28, 1989
(File Nos. 33-7812 and 811-4791).
(11) Consent of Independent Auditors - Filed herewith.
(15) Rule 12b-1 Plan - See Exhibit 6(a) hereto.
(16) Schedule for computation of each Yield and Total
Return Performance quotation - Incorporated herein
by reference as Exhibit 16 to Post-Effective
Amendment No. 6 to Registrant's Registration
Statement on Form N-1A, filed on July 29, 1988
(File Nos. 33-7812 and 811-4791).
(18) Rule 18f-3 Plan - Incorporated herein by reference
as Exhibit 16 to Post-Effective Amendment No. 20 to
Registrant's Registration Statement on Form N-1A,
filed on January 31, 1996 (File Nos. 33-7812 and
811-4791).
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 herein by reference as "Other Exhibits
to Post-Effective Amendment No. 6 to Registrant's
Registration Statement on Form N-1A, filed on July
29, 1988 (File Nos. 33-7812 and 811-4791).
Power of Attorney of James R. Greene - Incorporated
herein by reference as "Other Exhibits" to
Post-Effective Amendment No. 9 to Registrant's
Registration Statement on Form N-1A, filed on
February 28, 1990 (File Nos. 33-7812 and 811-4791).
ITEM 25. Persons Controlled by or under Common Control with
Registrant
None.
ITEM 26. Number of Holders of Securities
Registrant had, as of April 5, 1996, record holders
of shares of Capital Stock as follows:
National Portfolio -
- Class A............................... 9,866
- Class B............................... 7,790
- Class C............................... 1,969
C-4
<PAGE>
Insured National Portfolio -
- Class A .............................. 3,524
- Class B ............................... 1,553
- Class C ............................... 263
New York Portfolio -
- Class A .............................. 5,269
- Class B .............................. 3,093
- Class C .............................. 695
California Portfolio -
- Class A .............................. 9,137
- Class B .............................. 3,930
- Class C .............................. 1,126
Insured California Portfolio -
- Class A .............................. 1,739
- Class B .............................. 480
- Class C .............................. 167
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, filed as Exhibit 1, and Section 10 of the
proposed Distribution Services Agreement filed as
Exhibit 6, all as set forth below. The liability of the
Registrant's directors and officers is dealt with in
Article EIGHTH of Registrant's Articles of
Incorporation, as set forth below. The Adviser's
liability for any loss suffered by the Registrant or its
shareholders is set forth in Section 4 of the Advisory
Agreement filed as Exhibit 5 to this Registration
Statement, 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) "Director" 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.
C-5
<PAGE>
(2) "Corporation" includes any domestic or
foreign predecessor entity of a corporation in a
merger, consolidation, or other transaction in
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 matter giving rise to 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
C-6
<PAGE>
(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:
C-7
<PAGE>
(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 cannot be
C-8
<PAGE>
obtained therefor and the committee cannot be
established, by a majority vote of the full board
in which director 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.
C-9
<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 of the
C-10
<PAGE>
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."
"EIGHTH: A director or officer of the
Corporation shall not be liable to the Corporation
or its stockholders for monetary damages for breach
of fiduciary duty as a director or officer, except
to the extent such exemption from liability or
limitation thereof is not permitted by law
(including the Investment Company Act of 1940) as
currently in effect or as the same may hereafter be
C-11
<PAGE>
amended. No amendment, modification or repeal of
this Article EIGHTH shall adversely affect any
right or protection of a director or officer that
exists at the time of such amendment, modification
or repeal."
The Advisory Agreement between the Registrant
and Alliance Capital Management L.P. provides that
Alliance Capital Management L.P. will not be liable
under such agreements for any mistake of judgment
or in any event whatsoever except for lack of good
faith and that nothing therein shall be deemed to
protect Alliance Capital Management L.P. against
any liability to Registrant or its security holders
to which it would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence
in the performance of its duties thereunder, or by
reason of reckless disregard of its duties or
obligations thereunder.
The Distribution Services Agreement between
the Registrant and Alliance Fund Distributors, Inc.
provides that the Registrant will indemnify, defend
and hold Alliance Fund Distributors, Inc., and any
person who controls it within the meaning of
Section 15 of the Investment Company Act of 1940,
free and harmless from and against any and all
claims, demands, liabilities and expenses which
Alliance Fund Distributors, Inc. or any controlling
person may incur arising out of or based upon any
alleged untrue statement of a material fact
contained in Registrant's Registration Statement,
Prospectus or Statement of Additional Information
or arising out of, or based upon any alleged
omission to state a material fact required to be
stated in any one of the foregoing or necessary to
make the statements in any one of the foregoing not
misleading, provided that nothing therein shall be
so construed as to protect Alliance Fund
Distributors, Inc. against any liability to the
Registrant or its security holders to which it
would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence in the
performance of its duties thereunder or by reason
of reckless disregard of its obligations and duties
thereunder.
The foregoing summaries are qualified by the
entire text of Registrant's Articles of
Incorporation, the Advisory Agreement between the
Registrant and Alliance Capital Management L.P. and
C-12
<PAGE>
the Distribution Services Agreement between the
Registrant and Alliance Fund Distributors, Inc.
which are filed herewith as Exhibits 5, and 6,
respectively, in response to Item 24 and each of
which are incorporated by reference herein.
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
successful defense of any action, suit or
proceeding) is asserted by such director, officer
or controlling person in connection with the
securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question of
whether such indemnification by it is against
public policy as expressed in the Securities Act
and will be governed by the final adjudication of
such issue.
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 are covered up to the limits specified
for any claim against them for acts committed in
their capacities as trustee or director. A pro
rata share of the premium for this coverage is
charged to each investment company and to the
Adviser.
ITEM 28. Business and Other Connections of Adviser.
The descriptions of Alliance Capital Management L.P.
under the caption "Management of the Fund" in the
Prospectus and in the Statement of Additional
C-13
<PAGE>
Information constituting Parts A and B, respectively, of
this Registration Statement are incorporated by
reference herein.
The information as to the directors and 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, also acts as Principal
Underwriter or Distributor for the following
investment companies:
ACM Institutional Reserves Inc.
AFD Exchange Reserves Inc.
Alliance All-Asia Investment Fund, Inc.
Alliance Balanced Shares, Inc.
Alliance Bond Fund, Inc.
Alliance Capital Reserves
Alliance Developing Markets Fund, Inc.
Alliance Global Dollar Government Fund, Inc.
Alliance Global Small Cap Fund, Inc.
Alliance Global Strategic Income Trust, Inc.
Alliance Government Reserves
Alliance Growth and Income Fund, Inc.
Alliance Income Builder Fund, Inc.
Alliance International Fund
Alliance Limited Maturity Government Fund,
Inc.
Alliance Money Market Fund
Alliance Mortgage Securities Income Fund, Inc.
Alliance Multi-Market Strategy Trust, Inc.
Alliance Municipal Income Fund, Inc.
Alliance Municipal Income Fund II
Alliance Municipal Trust
Alliance New Europe Fund, Inc.
Alliance North American Government Income
Trust, Inc.
Alliance Premier Growth Fund, Inc.
Alliance Quasar Fund, Inc.
Alliance Short-Term Multi-Market Trust, Inc.
Alliance Technology Fund, Inc.
Alliance Utility Income Fund, Inc.
Alliance Variable Products Series Fund, Inc.
C-14
<PAGE>
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.
C-15
<PAGE>
Positions and Offices Positions and Offices
Name With Underwriter With Registrant
Michael J. Laughlin Chairman
Robert L. Errico President
Kimberly A. Gardner Senior Vice President
Edmund P. Bergan, Jr. Senior Vice President, Secretary
General Counsel &
Secretary
Daniel J. Dart Senior Vice President
Richard A. Davies Senior Vice President
Byron M. Davis Senior Vice President
Geoffrey L. Hyde Senior Vice President
Barbara J. Krumsiek Senior Vice President
Stephen R. Laut Senior Vice President
Daniel D. McGinley Senior Vice President
Dusty W. Paschall Senior Vice President
Antonios G. Poleonadkis Senior Vice President
Gregory K. Shannahan Senior Vice President
Joseph F. Sumanski Senior Vice President
Peter J. Szabo Senior Vice President
Nicholas K. Willett Senior Vice President
Richard A. Winge Senior Vice President
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
C-16
<PAGE>
Casimir F. Bolanowski Vice President
Kevin T. Cannon Vice President
William W. Collins, Jr. Vice President
Leo H. Cook Vice President
Richard W. Dabney Vice President
John F. Dolan Vice President
Mark J. Dunbar Vice President
Sohaila S. Farsheed Vice President
Linda A. Finnerty Vice President
William C. Fisher Vice President
Robert M. Frank Vice President
Gerard J. Friscia Vice President & Controller
Andrew L. Gangolf Vice President & Associate
General Counsel
Mark D. Gersten Vice President Treasurer and
Chief Financial
Officer
Joseph W. Gibson Vice President
Herbert H. Goldman Vice President
James E. Gunter Vice President
Alan Halfenger Vice President
Daniel M. Hazard Vice President
George R. Hrabovsky Vice President
Valerie J. Hugo Vice President
Robert H. Joseph, Jr. Vice President & Treasurer
Richard D. Keppler Vice President
Sheila F. Lamb Vice President
C-17
<PAGE>
Thomas Leavitt, III Vice President
Donna M. Lamback Vice President
James M. Liptrot Vice President
James P. Luisi Vice President
Christopher J. MacDonald Vice President
Michael F. Mahoney Vice President
Maura A. McGrath Vice President
Matthew P. Mintzer Vice President
Joanna D. Murray Vice President
Nicole Nolan-Koester Vice President
Daniel J. Phillips Vice President
Robert T. Pigozzi Vice President
James J. Posch Vice President
Robert E. Powers Vice President
Domenick Pugliese Vice President & Assistant
Associate General Secretary
Counsel
Bruce W. Reitz Vice President
Dennis A. Sanford Vice President
Raymond S. Scalfani Vice President
Richard J. Sidell Vice President
J. William Strott, Jr. Vice President
Richard E. Tambourine Vice President
Joseph T. Tocyloski Vice President
Neil S. Wood Vice President
C-18
<PAGE>
Emilie D. Wrapp Vice President &
Special Counsel
Maria L. Carreras Assistant Vice President
Sarah A. Chodera Assistant Vice President
John W. Cronin Assistant Vice President
Leon M. Fern Assistant Vice President
William B. Hanigan Assistant Vice President
Vicky M. Hayes Assistant Vice President
John C. Hershock Assistant Vice President
James J. Hill Assistant Vice President
Thomas K. Intoccia Assistant Vice President
Edward W. Kelly Assistant Vice President
Patrick Look Assistant Vice President
& Assistant Treasurer
Shawn P. McClain Assistant Vice President
Thomas F. Monnerat Assistant Vice President
Jeanette M. Nardella Assistant Vice President
Carol H. Rappa Assistant Vice President
Lisa Robinson-Cronin Assistant Vice President
Karen C. Satterberg Assistant Vice President
Robert M. Smith Assistant Vice President
Wesley S. Williams Assistant Vice President
Mark R. Manley Assistant Secretary
(c) Not applicable.
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
C-19
<PAGE>
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
Director of the Fund in accordance with Section 16 of the
Investment Company Act of 1940.
C-20
<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 has duly caused this Amendment to its
Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in The City of New York
and the State of New York on the 22nd day of April, 1996.
ALLIANCE MUNICIPAL INCOME FUND, INC.
By: /S/ John D. Carifa
___________________________
John D. Carifa
Chairman and President
Pursuant to the requirements of the Securities Act of
l933, this 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 April 22, 1996
___________________
John D. Carifa President
Principal Financial
and Accounting Officer
/s/ Mark D. Gersten Treasurer and Chief April 22, 1996
___________________
Mark D. Gersten Financial Officer
C-21
<PAGE>
2) All of the Directors
David H. Dievler
Ruth S. Block
John D. Carifa
James R. Greene
James M. Hester
Clifford L. Michel
Eugene F. O'Neil
Robert C. White
By: /s/ Edmund P. Bergan, Jr. April 22, 1996
________________________________
(Attorney-in-fact)
Edmund P. Bergan, Jr.
C-22
<PAGE>
Index to Exhibits
Page
(11) Consent of Independent Auditors
C-23
00250011.AG1
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption
"Shareholder Services - Statements and Reports" and to the use of
our report dated December 8, 1995 included in this Amendment to
the Registration Statement (Form N-1A No. 33-7812) of Alliance
Municipal Income Fund, Inc.
We also consent to the reference to our firm under the caption
"General Information - Independent Auditors" included in the
Statement of Additional Information of Alliance Municipal Income
Fund, Inc. filed pursuant to Rule 497(c) on February 12, 1996
which is incorporated by reference in this Registration
Statement.
ERNST & YOUNG LLP
New York, New York
April 19, 1996
00250011.AG7
